Problem: Jason Enterprises (JE) is producing video telephones for the home market. Quality is not quite as good as it could be at this point, but the selling price is low and Jason can study market response while spending more time on R&D.
At this stage, however, JE needs to develop an aggregate production plan for the six months from January through June. As you can guess, you have been commissioned to create the plan.
We are given the following information.
|
Month
|
Demand Forecast
|
Number of Working Days
|
|
January
|
500
|
22
|
|
February
|
600
|
19
|
|
March
|
650
|
21
|
|
April
|
800
|
21
|
|
May
|
900
|
22
|
|
June
|
800
|
20
|
|
|
4,250 units
|
125 days
|
|
Materials
|
$100/unit
|
|
Inventory holding cost
|
$10/unit/month
|
|
Marginal cost of stockout
|
$20/unit/month
|
|
Marginal cost of subcontracting
|
$100/unit ($200 subcontracting cost less $100 material savings)
|
|
Hiring and training cost
|
$50/worker
|
|
Layoff cost
|
$100/worker
|
|
Labor hours required
|
4/unit
|
|
Straight-line cost (first eight hours each day)
|
$12.50/hour
|
|
Overtime cost (time and a half)
|
$18.75/hour
|
|
Current workforce
|
10
|
Costs
If the beginning inventory is 200 units and no safety stock is allowed, please construct the following.
a. Produce exactly to meet demand: vary workforce (assuming opening workforce equal to first month’s requirements).
b. Constant workforce; vary inventory and allow shortages only (assuming a starting workforce of 10).
c. Constant workforce of 10; use subcontracting.