Question

Aggregate Planning

Given the projected demands for the next six months, prepare an aggregate plan that uses inventory, regular time, overtime, subcontract and backorders. Regular time is limited to 150 units per month (Cost per Unit = $20 ). Overtime is limited to a maximum of 30 units per month (Cost per Unit =$30). Units purchased from the subcontractor (Cost per Unit = $26 ) cannot exceed 40 per month and the total purchases from the subcontractor over the 6 month period cannot be over 150 units. Backorders cannot exceed 70 units in any given month (Cost per Unit = $1 ) and must be no more than 10 in Period 6. Average Inventory Holding cost per Unit = $4. Forecasted Demand as well as Beginning and desired Ending Inventory are listed in the table below.

Month	1	2	3	4	5	6	Total
Regular Output
Overtime Output
Subcontract
Beginning Inventory	40
Total Available for Sale
Less Forecast	200	190	290	190	160	160
Plus Backlog-Current Period
Less Backlog-Previous Period
Ending Inventory						10
Average Inventory

Required:
Find the Minimum Cost Production Plan by Creating a Spreadsheet in Excel. Use Solver to find the Minimum Cost Solution. Leave a copy of your Spreadsheet in the DropBox.

Total Cost Month 1 =

Hint: Range (3300 ,3380 )
Total Cost Month 2 =

Hint: Range (3970 ,4050 )
Total Cost Month 3 =

Total Cost Month 4 =

Total Cost Month 5 =

Hint: Range (4350 ,4510 )
Total Cost Month 6 =

Total Cost All Periods =

Hint: Range (24220 ,26120 )
Answer Format: No Dollar ($) signs or commas --- Answers should be whole numbers.

Answer 1

Solution:

Month	1	2	3	4	5	6	Total
Regular Output	150	150	150	150	150	150	900
Overtime Output	10	0	30	30	30	0	100
Subcontract	0	40	40	40	20	10	150
Beginning Inventory	40	0	0	0	0	0	40
Total Available for Sale	200	190	220	220	200	160	1190
Less: Forecast	200	190	290	190	160	160	1190
Plus: Backlog current period	0	0	70	40	0	10	120
Less: Backlog previous period	0	0	0	70	40	0	110
Ending Inventory	0	0	0	0	0	10	10
Average Inventory	20	0	0	0	0	5	25
Cost Estimates
Month	1	2	3	4	5	6	Total
Regular time cost	$3,000	$3,000	$3,000	$3,000	$3,000	$3,000	$18,000
Overtime cost	$300	$0	$900	$900	$900	$0	$3,000
Subcontracting	$0	$1,040	$1,040	$1,040	$520	$260	$3,900
Backordering cost	$0	$0	$70	$40	$0	$10	$120
Holding cost	$80	$0	$0	$0	$0	$20	$100
Total costs	$3,380	$4,040	$5,010	$4,980	$4,420	$3,290	$25,120

All answers are there in the last row.