Deb Bishop Health and Beauty Products has developed a new shampoo, and you need to develop its aggregate schedule. The cost accounting department has supplied you the costs relevant to the aggregate plan, and the marketing department has provided a four-quarter forecast. All are shown as follows:
|
QUARTER
|
FORECAST
|
|
1
|
1,400
|
|
2
|
1,200
|
|
3
|
1,500
|
|
4
|
1,300
|
|
COSTS
|
|
Previous quarter's output
|
1,500 units
|
|
Beginning inventory
|
0 units
|
|
Stockout cost for backorders
|
$50 per unit
|
|
Inventory holding cost
|
$10 per unit for every unit held at the end of the quarter
|
|
Hiring workers
|
$40 per unit
|
|
Layoff workers
|
$80 per unit
|
|
Unit cost
|
$30 per unit
|
|
Overtime
|
$15 extra per unit
|
|
Subcontracting
|
Not available
|
Your job is to develop an aggregate plan for the next four quarters.
a) First, try a chase plan by hiring and layoffs (to meet the forecast) as necessary.
b) Then try a plan that holds employment steady.
c) Which is the more economical plan for Deb Bishop Health and Beauty Products?