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Agg.PlanningTutorialSolution

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3 views

Agg.PlanningTutorialSolution

Uploaded by

Mohamed Amine Zouaghi
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Aggregate Planning Tutorial P1,P2 and P3

Problem1:

Plan A: Vary the workforce level to execute a strategy that produces exactly the
forecasted demand for each month. (we should use layoff and hiring)

Note: Row 7, production capacity is of previous month


1- Labor cost = monthly produced units * monthly labor cost per unit
Labor cost (Jan) = 1200 units * 50$ = 60,000 $
(Feb) = 1600 units * 50$ = 80,000 $ …etc.
2- Layoff cost = units decreased * 7500$ per 100 units (7500/100)
Layoff cost (Jan) = 400 units * (7500 / 100) = 30,000 $
(Jul) = 400 units * (7500 / 100) = 30,000 $ …etc.

3- Hiring Cost = units increased * 5000$ per 100 units (5000/100)


Hiring cost (Feb) = 400 units * (5000 / 100) = 90,000 $
(Mar) = 200 units * (5000 / 100) = 10,000 $ …etc.
Monthly total cost= Labor cost + Layoff cost + Hiring cost

Note: Units decreased and Units increased are variation in production capacity.
Plan B: Produce a constant rate of 1400 units per month, which will meet
minimum demands. Then use subcontracting, with additional units at a premium
price of 75$ per unit.

Subcontracted units = Demanded units – (Production units + Inventory units)


Subcontracted units (Feb) = 1600 – (1400+200) = 0
Subcontracted units (March) = 1800 – (1400+0) = 400 units
Note: we calculate subcontracted units when Demand > Production

1- Labor cost = monthly production units * monthly labor cost per unit
Labor cost (Jan) = 1400 units * 50$ = 70,000 $
(Feb) = 1400 units * 50$ = 70,000 $ …etc.

2- Holding cost = Inventory holding units * holding cost per unit per month
Holding cost (Jan) = 200 * 20$ per unit per month= 4,000 $

3- Subcontracting cost = Subcontracted units * Subcontract cost per unit


Subcontracting cost (March) = 400 units * 75$ per unit = 30,000 $
Subcontracting cost (May) = 800 units * 75$ per unit = 60,000 $
Monthly total cost= Labor cost + Holding cost + Subcontracting cost
Plan C: Keep a stable workforce by maintaining a constant production rate equal
to the average requirements and allowing varying inventory levels. (Average
Requirements= Total requirements / 8 months) (Total requirements = Total
demand)

1- Labor cost = monthly production units * monthly labor cost per unit
Labor cost (Jan) = 1825 units * 50$ = 91,250 $

2- Holding cost = Inventory holding units * holding cost per unit per month
Holding cost (Jan) = 625 units * 20$ = 12,500 $
(Feb) = 850 units *20$ = 17,000 $

3- Stockout cost = No stockout cost because we always meet the units demanded.

Monthly total cost= Labor cost + Holding cost + Stockout cost


Problem2:

Note: Do not produce overtime if production or inventory are adequate to cover


demand.
Plan D: Keep the current workforce stable at production 1,600 units per month.
Permit a maximum of 20% overtime at an additional cost of 20$ per unit.
A warehouse now constrains the maximum allowable inventory on hand to 400
units or less.

Maximum Overtime Production = 20%*1600= 320 units

Overtime production units (max of 320 units) = Demanded units – Regular Production Units

Stockout units = Units demanded – All Production Units (Regular Production + Overtime Production)

1- Regular Prod-Cost = monthly production units * monthly labor cost per unit
Regular Prod-Cost (Jan) = 1600 units * 50 $ per unit = 80,000 $ (Regular Labor Cost)
2- Overtime Period Cost = overtime units * overtime cost per unit (50$+20$)
Overtime period cost (May) = 320 units * 70$ = 22,400 $
3- Holding Cost = Inventory Units * Holding cost per unit per month
Holding Cost (March) = 200 units * 20 $ = 4,000 $
4- Stockout Cost = Stockout units * Stockout cost per unit
Stockout Cost (May) = 280 units * 100 $ per unit = 28,000 $
Monthly total cost=Regular Labor cost + Overtime period cost +Holding cost + Stockout
cost
Plan E: Keep the current workforce, which is producing 1,600 units per month, and
subcontract to meet the rest of the demand.

Monthly total cost=Regular Labor cost + Subcontracting cost +Holding cost + Stockout
cost
Problem3:
1) & 2)
Cohen & 3 CPAs

Notes:
 Cohen and his 3 CPAs can together bill 640 hours per month.
(each one bills 160 hours) (Regular billed hours)
 Cohen strongly discourages any CPA from working (billing) more
than 240 hours in any given month. --> Each one can bills regular
160 bills + 80 bills as overtime when needed.
 Total Regular Capacity = 160*4=640 hours
 Total Overtime Capacity = 80*4= 320 hours

1. Regular time cost = Monthly Salary * 4 = 5,000$ * 4 = 20,000 $


2. Overtime cost = overtime hours * overtime hour cost
Overtime cost (March) = 320 * 62.5 $ = 20,000 $
3. Sub-cost = subcontracted hours * subcontracted hour cost
Sub-cost (March) = 40 * 125 $ = 5,000$
Monthly total cost=Regular time cost + Overtime cost +
Subcontracting cost
3) Cohen & 4 CPA

Total Regular Capacity = 160* 5 = 800 hours


Total Overtime Capacity = 80*5= 400 hours
1. Regular time cost = Monthly Salary * 5 = 5,000$ * 5 = 25,000 $
2. Overtime cost = overtime hours * overtime hour cost
Overtime cost (March) = 200 * 62.5 $ = 12,500 $
Monthly total cost=Regular time cost + Overtime cost +
Subcontracting cost.

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