ABC Company uses overtime, inventory and subcontracting to absorb the fluctuations in demand for its playgrounds for children. An aggregate production plan is devised annually and updated quarterly. Cost data, expected demand, and available capacities in units for the next four quarters are given here. Demand must be satisfied in the periods it occurs; that is, no backordering is allowed. Design a production plan that will satisfy demand at minimum cost.

                        Expected      Regular         Overtime       Subcontract

Quarter         Demand        Capacity       Capacity       Capacity

     1                      650                750                 100                 500

     2                    1250                950                 150                 500

     3                    1350              1050                 200                 500

     4                    2750              1050                 200                 500

Regular production cost per unit                         $200

Overtime production cost per unit $250

Subcontracting production cost per unit $300

Inventory holding cost per unit per period $30

Beginning Inventory 300 units