SummerFun Inc., produces a variety of recreation and leisure products. The production manager has developed an aggregate forecast:

Month Mar April May Jun Jul Aug Sep
Forecast 50 44 55 60 50 40 51

Use the following information to develop aggregate plans.

Regular production cost $80 per unit Back-order cost $20 per unit
Overtime production cost $120 per unit Beginning inventory 0 units
Regular capacity 40 units per month
Overtime capacity 8 units per month
Subcontracting cost $140 per unit
Subcontracting capacity 12 units per month
Holding cost $10 per unit per mont

Develop an aggregate plan using each of the following guidelines and compute the total cost for each plan. Which plan has the lowest total cost?

a. Use regular production. Supplement using inventory, overtime, and subcontracting as needed. No backlogs allowed.
b. Use a level strategy. Use a combination of backlogs, subcontracting, and inventory to handle variations in demand.

Wormwood, Ltd., produces a variety of furniture products. The planning committee wants to prepare an aggregate plan for the next six months using the following information:

Month
1 2 3 4 5 6
Demand 160 150 160 180 170 140
Capacity
Regular 150 150 150 150 160 160
Overtime 10 10 0 10 10 10

Cost per Unit
Regular time $50
Overtime 75
Subcontract 80
Inventory per period 4

Subcontracting can handle a maximum of 10 units per month. Beginning inventory is zero. Develop a plan that minimizes total cost. No back orders are allowed.