Southeast Soda Pop, Inc., has a new fruit drink for which it has high hopes. John...
Southeast Soda Pop, Inc., has a new fruit drink for which it has high hopes. John Mittenthal, the production planner, has assembled the following cost data and demand forecast:
|
QUARTER |
FORECAST |
|
1 |
1,800 |
|
2 |
1,100 |
|
3 |
1,600 |
|
4 |
900 |
|
COSTS/OTHER DATA |
|
|
Previous quarter’s output = 1,300 cases |
|
|
Beginning inventory = 0 cases |
|
|
Stock-out cost = $150 per case |
|
|
Inventory holding cost = $40 per case at end of quarter |
|
|
Hiring employees = $40 per case |
|
|
Terminating employees = $80 per case |
|
|
Subcontracting cost = $60 per case |
|
|
Unit cost on regular time = $30 per case |
|
|
Overtime cost = $15 extra per case |
|
|
Capacity on regular time = 1,800 cases per quarter |
|
John’s job is to develop an aggregate plan. The three initial options he wants to evaluate are:
- Plan A: a strategy that hires and fires personnel as necessary to meet the forecast. Total cost = $
- Plan B: a level strategy. Cost = $
- Plan C: a level strategy that produces 1,200 cases per quarter and meets the forecast demand with inventory and subcontracting. $
- Which strategy is the lowest-cost plan?
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Southeast Soda Pop, Inc., has a new
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