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Ch19 Aggregate Planning

The document provides information on production planning for a manufacturing company including: 1) Beginning inventory levels, demand forecasts, and number of working days by month from January to June. 2) Various production costs such as materials, inventory holding, stockouts, and labor. 3) Four production plans are presented with varying workforce levels and use of overtime, subcontracting, and inventory. 4) The production plans provide calculations for production requirements, workforce needs, inventory levels, and associated costs. 5) The most cost effective plan is identified as maintaining a constant low workforce and subcontracting excess production requirements.

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nurul_azizah01
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163 views

Ch19 Aggregate Planning

The document provides information on production planning for a manufacturing company including: 1) Beginning inventory levels, demand forecasts, and number of working days by month from January to June. 2) Various production costs such as materials, inventory holding, stockouts, and labor. 3) Four production plans are presented with varying workforce levels and use of overtime, subcontracting, and inventory. 4) The production plans provide calculations for production requirements, workforce needs, inventory levels, and associated costs. 5) The most cost effective plan is identified as maintaining a constant low workforce and subcontracting excess production requirements.

Uploaded by

nurul_azizah01
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Beginning Inventory

Demand Forecast
Number of Working Days by Month

January
400
1800
22

February
450
1500
19

March
375
1100
21

April
275
900
21

May
225
1100
22

June
275
1600
20

Costs
Materials
Inventory holding cost
Marginal cost of stockout
Marginal cost of subcontracting
Hiring and training cost
Layoff cost
Labor hours required per unit
Straight-line cost (first eight hours each day)
Overtime cost (time and a half)

$100.00 $ per unit


$1.50 $ per unit per month
$5.00 $ per unit per month
$20.00 $ per unit ($120 less $100 material cost)
$200.00 $ per worker
$250.00 $ per worker
5.0 $ per unit
$4.00 $ per hour
$6.00 $ per hour

April
275
900
225
850
225

May
225
1,100
275
1,150
275

June
275
1,600
400
1,725
400

Production Plan 1: Exact Production; Vary Workforce


January February
March
April
Production Requirement
1,850
1,425
1,000
850
Production Hours Required
9,250
7,125
5,000
4,250
Working Days per Month
22
19
21
21
Hours per Month per Worker
176
152
168
168
Workers Required
53
47
30
25
New Workers Hired
0
0
0
0
Hiring Cost
$0
$0
$0
$0
Workers Laid Off
0
6
17
5
Layoff Cost (Workers Laid Off x $250)
$0
$1,500
$4,250
$1,250
Straight Time Cost
$37,000
$28,500
$20,000
$17,000

May
1,150
5,750
22
176
33
8
$1,600
0
$0
$23,000

June
1,725
8,625
20
160
54
21
$4,200
0
$0
$34,500
Total Cost

Totals
8000
125

Aggregate Production Planning Requirements

Beginning Inventory
Demand Forecast
Safety Stock (.25 x Demand Forecast)
Production Requirement
Ending Inventory

January
400
1,800
450
1,850
450

February
450
1,500
375
1,425
375

March
375
1,100
275
1,000
275

Exhibits 19.4 - Costs of Four Production Plans

Total

$5,800
$7,000
$160,000
$172,800

Production Plan 2: Constant Workforce; Vary Inventory and Stockout


Beginning Inventory
Working Days per Month
Production Hours Available (Working Days per
Month x 8 Hr./Day x 40 Workers)*

Actual Production (Production Hours Available/5


Hr./Unit)

Demand Forecast (From Exhibit 16.3)


Ending Inventory (Beginning Inventory + Actual
Production - Demand Forecast)

Shortage Cost (Units Short x $5)


Safety Stock (From Exhibit 16.4)
Units Excess (Ending Inventory - Safety Stock)
Inventory Cost (Units Excess x $1.50)
Straight Time Cost

January February
400
8
22
19

March
-276
21

April
-32
21

May
412
22

June
720
20

Total

7040

6080

6720

6720

7040

6400

1408

1216

1344

1344

1408

1280

1800

1500

1100

900

1100

1600

-276

-32

412

720

400

$0
450
0
$0
$28,160

$1,380
375
0
$0
$24,320

$160
275
0
$0
$26,880

$0
225
187
$281
$26,880

$0
275
445
$668
$28,160

$0
400
0
$0
$25,600

$948
$160,000

Total Cost

162,488

*(Sum of Production Requirement in Exhibit 16.3 x 5


hr./unit)/(Sum of Production Hours Available x 8 hr./day)
= (8,000 x 5)/(125 x 8) = 40

$1,540

Production Plan 3: Constant Low Workforce; Subcontract


Production Requirement
Working Day per Month
Production Hours Available (Working Day x 8
Hrs./Day x 25 Workers)*
Actual Production (Production Hours Available/5
hr.per Unit)
Units Subcontracted (Production Requirement Actual Production)

January February
1,850
1,425
22
19

March
1,000
21

April
850
21

May
1,150
22

June
1,725
20

Total

4,400

3,800

4,200

4,200

4,400

4,000

880

760

840

840

880

800

970

665

160

10

270

925

Subcontracting Cost (Units Subcontracted x $20)

$19,400

$13,300

$3,200

$200

$5,400

$18,500

$60,000

Straight Time Cost

$17,600

$15,200

$16,800

$16,800

$17,600

$16,000

$100,000

Total Cost

$160,000

*Minimum production requirement. In this example,


April is minimum of 850 units. Number of workers
required for April is (850 x 5)/(21 x 8) = 25

Production Plan 4: Constant Workforce; Overtime


Beginning Inventory
Working Days per Month
Production Hours Available (Working Days x 8
Hr./Day x 38 Workers)

Regular Shift Production (Production Hours


Available / 5 hrs. per Unit)

Demand Forecast (From Exhibit 16.3)


Units Available before Overtime (Beginning
Inventory + Regular Shift Production - Demand
Forecast)

Units Overtime

January February
400
0
22
19

March
0
21

April
177
21

May
553
22

June
791
20

6,688

5,776

6,384

6,384

6,688

6,080

1,338

1,155

1,277

1,277

1,338

1,216

1,800

1,500

1,100

900

1,100

1,600

-62

-345

177

553

791

407

62

345

Overtime Cost (Units Overtime x $6/Hr x 5 hr./Unit)

$1,860

$10,350

$0

$0

$0

$0

Safety Stock (From Exhibit 16.3)


Units Excessive (Units Available before Overtime -

450

375

275

225

275

400

Safety Stock)

Inventory Cost (Units Excessive x $1.50)


Straight Time Cost

328

516

$0
$26,752

$0
$23,104

$0
$25,536

$493
$25,536

$774
$26,752

$10
$24,320
Total Cost

Total
125

8000

$12,210

$1,277
$152,000
$165,487

Exhibit 19.7 Actual Demand Requirement for Full-Time Direct Employees and Full-Time-Equivalent (FTE) Part-Time Employees

Days
Full-time employees
Full-time days*
Full-time-equivalent
part-time employees
FTE days

Jan.
22
66
1,452

Feb.
20
28
560

Mar.
21
130
2,730

Apr.
22
90
1,980

May
21
195
4,095

Jun
20
290
5,800

Jul
21
325
6,825

Aug
21
92
1,932

Sep
21
45
945

Oct
23
32
736

Nov
18
29
522

Dec
22
60
1,320

41

75

72

68

72

302

576

72

68

84

27

902

1,500

1,512

1,496

1,512

6,040

12,096

1,512

1,564

1,512

594

* Full-time Days are derived by multiplying the number of days in each month by the number of workers.

Monthly Requirement for Full-Time Direct-Labor Employees (Other than Key Personnel) and Full-Time-Equivalent Part-Time Employees

600equivalent employees required


Full-time
500
400
300
200
100
0
Jan.

Feb.

Mar.

Apr.

May

Jun

Jul

PTE part-time

Aug

Sep

Oct

Nov

Dec

Full-time

Exhibit 19.8 Three Possible Plans for the Parks and Recreation Department
Alternative 1: Maintain 116 full-time regular direct workers, Schedule work during off-seasons to level workload throught the
year. Continue to use 120 full-time-equivalent (FTE) part-time employees to meet high demand periods.

Costs
116 full-time regular employees
120 part-time employees
Total cost = $2,751,619

Days per Year


Hours (Employees
(Exhibit 14.8)
x Days x 8 hours)
252
233,856
252
241,920

Wages
(FT, $4.45; PT,
Fringe Benefits
Adm. Cost
$4.03)
(FT, 17%; PT, 11%) (FT, 20%; PT, 25%)
$1,040,659
$176,912
$208,132
$974,938
$107,243
$243,734
$2,015,597
$284,155
$451,866

Alternative 2: Maintain 50 full-time regular direct workers and the present 120 FTE part-time employees. Subcontract jobs
releasing 66 full-time regular employees. Subcontract cost, $1,100,000

Total
252
28,897

30,240

Costs
50 full-time employees
120 FTE part-time employees
Subconstracting Cost
Total Cost = $3,040,443

Days per Year


Hours (Employees
(Exhibit 14.8)
x Days x 8 hours)
252
100,800
252

241,920

Wages
(FT, $4.45; PT,
Fringe Benefits
Adm. Cost
Subcontract
$4.03)
(FT, 17%; PT, 11%) (FT, 20%; PT, 25%)
Cost
$448,560
$76,255
$89,712
$1,100,000
$974,938
$1,423,498

$107,243
$183,498

Alternative 3: Subcontract all jobs previously by 116 full-time regular employees. Subcontract cost $ 1,600,000.
Subcontract all jobs previously performed by 120 full-time-equivalent part-time employees. Subcontract cost $1,850,000
Costs
0 full-time employees
0 part-time employees
Subcontract full-time jobs
Subcontract part-time jobs
Total Cost

Subcontract Cost

$1,600,000
$1,850,000
$3,450,000

$243,734
$333,446

$1,100,000

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