1. A small company manufactures bicycles in two different sizes. David, the company's owner-manager, has just received the following forecasts for demands for the next six months. (LO2)
16-inch 20-inch
Nov. 1,000 units 500 units
Dec. 900 500
Jan. 600 300
Feb. 700 500
Mar. 1,100 400
Apr. 1,100 600
a. Under what circumstances is it appropriate to develop just one aggregate production plan rather than two (one for each size bike)?
b. Suppose the forecasted demands for the two sizes of bikes are summed to obtain one aggregate forecast for each month. Currently David employs 27 full-time, highly skilled employees, each of whom can produce 50 bikes per month. Because skilled labour is in short supply in the area, David would like to keep his 27 workers permanently. There is no inventory of finished bikes on hand at present, but David would like to have 300 on hand at the end of April. A maximum of 200 bikes can be produced during overtime each month. Determine the minimum cost aggregate plan and compute the total cost of your plan using these costs:
Regular $50 per unit Inventory $2.00 per unit per month
Overtime $75 per unit Backorder $10.00 per unit per month