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Assignment On Aggregate Planning

The document discusses two aggregate planning strategies - chase strategy and level production strategy - for a company called RGY that manufactures jeans. For the chase strategy, the plan uses regular production, overtime up to 30 units, and unlimited subcontracting with no inventories allowed. This results in a total cost of Php 312,500. For the level production strategy, the plan uses regular production, inventory, overtime up to 30 units, and no subcontracting or backlogs allowed. This strategy has the lowest total cost of Php 312,200 but requires maintaining inventory.

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Yskael Lee
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102 views3 pages

Assignment On Aggregate Planning

The document discusses two aggregate planning strategies - chase strategy and level production strategy - for a company called RGY that manufactures jeans. For the chase strategy, the plan uses regular production, overtime up to 30 units, and unlimited subcontracting with no inventories allowed. This results in a total cost of Php 312,500. For the level production strategy, the plan uses regular production, inventory, overtime up to 30 units, and no subcontracting or backlogs allowed. This strategy has the lowest total cost of Php 312,200 but requires maintaining inventory.

Uploaded by

Yskael Lee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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ASSIGMEENT ON AGGREGATE PLANNING

RGY manufactures a variety of jeans. A planner has developed an aggregate forecast for
demand for the next six months (quantities are in thousands, but use the values below for
computation purposes).

Month February March April May June July Total


Forecast 150 180 190 160 170 170 1020
Forecast Total Units=150+180+190+160+170+170=1020

Additional information are as follow:

Regular production cost Php 300 per unit

Regular production capacity 150 units

Overtime production cost Php 350 per unit

Subcontracting cost Php 400 per unit

Holding cost Php 10

Backlog cost Php 450 per unit

Beginning inventory 0

Develop an aggregate plan using each of the following guidelines and compute the total cost of
each plan. Which plan has the lowest cost?

a. Use chase strategy. Supplement using overtime (maximum = 30 units) and subcontract
no limit, inventories not allowed.
b. Use level production. Supplement using inventory, overtime (maximum = 30 units),
subcon and backlogs are not allowed.

Strategy: For letter A


Total
Month February March April May June July Cost/Unit T. Cost
Units
Forecast 150 180 190 160 170 170 1020    
Output                  
Regular 150 150 150 150 150 150 900 300 900*300=270000
O/T   30 30 10 20 20 110 350 110*350=38500
SC     10       10 400 10*400=4000

Output-Fc 0 0 0 0 0 0      

Inventory                  

Beginning                  

Ending                  
Ave.                  
Backlog                  
270000+38500+4000
  Total Cost
=312500

 Forecast Total Units=150+180+190+160+170+170=1020

 Regular Total Units=150+150+150+150+150+150=900

 O/T Total Units=30+30+10+20+20+110=350

 SC Total Units=10=10

 Output-Fc= (SC+O/T+Regular)-Forecast (the same solution was applied to all the


periods.)

Examples:

 February Output-Fc= (0+0+150)-150=0 since it is not negative the answer will


remain on the Output-Fc row of February

 March Output-Fc= (0+0+150)-180=-30 since it is negative, there is a need to


overtime for 30 units, that’s why in the table the -30 was removed from the Output-Fc
row and it was inserted to the output row of March.

Strategy: For letter B


Total
Month February March April May June July Cost/Unit T. Cost
Units
Forecast 150 180 190 160 170 170 1020    
Output                  
Regular 150 150 150 150 150 150 900 300 900*300=270000
O/T 10 30 30 10 20 20 120 350 120*350=42000
SC               400  
Output-Fc 10 0 -10 0 0 0      
Inventory                  
Beginning 0 10 10 0 0 0      
Ending 10 10 0 0 0 0      
Ave. 5 10 5 0 0 0 20 10 20*10=200
Backlog               450  
Total 270000+42000+200
               
Cost =312200
 Forecast Total Units=150+180+190+160+170+170=1020

 Regular Total Units=150+150+150+150+150+150=900

 O/T Total Units=10+30+30+10+20+20=120

 Ave. Total Units=5+10+5+0+0+0=20

 Output-Fc= (SC+O/T+Regular)-Forecast (the same solution was applied to all the


periods.) Example: February Output-Fc= (0+10+150)-150=10

 Ending Inventory= (Beginning Inventory) + (Output-Fc) (the same solution was applied
to all the periods.) Example: February Ending Inventory= 0+10= 10

 Average Inventory= Beginning Inventory+ Ending Inventory/2 (the same solution was
applied to all the periods.) Example: February Average Inventory=0+10/2=5

 The plan with the lowest cost is the “level strategy” with the cost of 312200. However
even though this has a low cost we must remember that it has consequences because with
the use of level strategy there is inventory which means there is a need for a warehouse to
hold the inventory,

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