Question

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 Quarters Output	1,500 units
Beginning Inventory	100 units
Stock-out	$50 per unit
Inventory Holding Costs	$10 per unit
Hiring Workers	$40 per unit
Layoff Workers	$80 per unit
Unit Cost	$30 per unit
Overtime Cost	$15 extra per unit
Subcontracting	$60 per unit

Your job is to develop an aggregate plan for the next four quarters.

1. Plan A - First, try hiring and layoffs based on the prior quarter (to meet the forecast) as necessary. What is the cost of this plan? $                            [ Select ]                       ["215,900", "220,500", "178,000", "214,000"]      

2. Plan B - Then try a plan that holds employment steady. What is the cost of this plan? $                            [ Select ]                       ["178,000", "169,500", "195,600", "212,225"]      

3. Plan C - Then utilize a mixed strategy, first producing at a level production rate of 900 per quarter, then utilizing overtime with a cap of 200 units, then subcontracting. What is the cost of this plan? $                            [ Select ]                       ["246,000", "257,300", "151,900", "250,000"]      

Answer 1

Plan A

Result:

Quarter	Forecast	Output	Hire	Layoff
		1,500
1	1,400	1,400	0	100
2	1,200	1,200	0	200
3	1,500	1,500	300	0
4	1,300	1,300	0	200
Totals		5,400	300	500
Cost/ unit		$30	$40	$80
Costs		$162,000	$12,000	$40,000
				$214,000

Plan B

Quarter	Forecast	Output	Hire	Layoff	Ending inventory
		1,500			100
1	1,400	1,350	0	150	50
2	1,200	1,350	0	0	200
3	1,500	1,350	0	0	50
4	1,300	1,350	0	0	100
Totals		5,400	0	150	400
Cost/ unit		$30	$40	$80	$10
Costs		$162,000	$0	$12,000	$4,000
					$178,000

Plan C

Quarter	Forecast	Regular output	Hire	Layoff	Overtime output	Subcontracted output
		1,500
1	1,400	900	0	600	200	200
2	1,200	900	0	0	200	100
3	1,500	900	0	0	200	400
4	1,300	900	0	0	200	200
Totals		3,600	0	600	800	900
Cost/ unit		$30	$40	$80	$45	$60
Costs		$108,000	$0	$48,000	$36,000	$54,000
						$246,000