Full Name: Vũ Thị Hoàng Diệu

ID: 20198064

INDIVIDUAL ASSIGNMENT 9

CHAPTER 13: AGGREGATE PLANNING AND S&OP

5. List the strategic objectives of aggregate planning. Which one of these is most often addressed by the quantitative techniques of
aggregate planning? Which one of these is generally the most important?
The strategic objectives of aggregate planning is usually to meet forecast demand while minimizing cost over the planning period,
smooth employment, drive down inventory levels, meet a high level of service, regardless of cost.
Minimizing cost is most often addressed by the quantitive techniques of aggregate planning and is the ganerally the most important.

6. Define chase strategy.

A chase strategy typically attempts to achieve output rates for each period that match the demand forecast for that period. This strategy
can be accomplised in a variety of ways.
For example, the operations manager can vary workforce levels by hiring or lying off or can vary output by means of overtime, idle
time, part-time employees or subcontracting. Many service organizations favor the chase strategy because the changing inventory
levels option is difficult or impossible to adopt. Industries that have moved toward a chase strategy include education, hospitality and
construction.

7. What is level scheduling? What is the basic philosophy underlying it?

A level strategy (or level scheduling) is an aggregate plan in which production is uniform from period to period.
The philosophy is that a stable workforce leads to a better-quality product, less turnover and absenteeism and more employee
commitment to corporate goals

13.11 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:
Your job is to develop an aggregate plan for the next four quarters.
a) First, try hiring and layoffs (to meet the forecast) as necessary.
b) Then try a plan that holds employment steady.
c) Which is the more economical plan for Deb Bishop Health and Beauty Products?
 Solve:
a)

Quarte Forecast Production Production cost Hiring Layoff Total cost

r (=Production×$30
)
1,500
1 1,400 1,400 $42,000 - $8,000 (=100×$80) 50,000
2 1,200 1,200 36,000 - $16,000 (=200×$80) 52,000
3 1,500 1,500 45,000 $12,000 (=300×$40) - 57,000
4 1,300 1,300 39,000 - $16,000 (=200×$80) 55,000

Total cost = $50,000 + $52,000 + $57,000 + $55,000 = $214,000

b)
Inventory
Quarter Production Forecast Ending inventory
change
1,500
1 1,400 1,400 + 100 100
2 1,200 1,200 + 200 300
3 1,500 1,500 - 300 0
4 1,300 1,300 + 200 200
600

Cost Calculations
Inventory Holding Cost $6,000 = 600 × $10
Production Cost $162,000 = $42,000 + 36,000 + 45,000 + 39,000
Total cost = $168,000

c) A plan that holds employment steady is the more economical plan for Deb Bishop Health and Beauty Products.
13.19 Dwayne Cole, owner of a Florida firm that manufactures display cabinets, develops an 8-month aggregate plan. Demand and
capacity (in units) are forecast as follows:

The cost of producing each unit is $1,000 on regular time, $1,300 on overtime, and $1,800 on a subcontract. Inventory carrying cost is
$200 per unit per month. There is no beginning or ending inventory in stock, and no backorders are permitted from period to period.
Let the production (workforce) vary by using regular time first, then overtime, and then subcontracting.
a) Set up a production plan that minimizes cost by producing exactly what the demand is each month. This plan allows no backorders
or inventory. What is this plan’s cost?
b) Through better planning, regular-time production can be set at exactly the same amount, 275 units, per month. If demand cannot be
met there is no cost assigned to shortages and they will not be filled. Does this alter the solution?
c) If overtime costs per unit rise from $1,300 to $1,400, will your answer to (a) change? What if overtime costs then fall to $1,200?

Solve:
a)
 Cost
Regular time 2,260 $2,260,000 (= 2,260 × $1,000)
Over time 189 $245,700 (= 189 × $1,300)
Subcontract 57 $102,600 (= 57 * $1,800)
$2,608,300

=> This plan’s cost is $2,608,300

b) Regular-time production can be set at exactly the same amount, 275 units, per month. Demand is not met because no over time or
subcontract. In January, demand is smaller than regular time so 20 units will plus February but not enough. From Mar to Aug, no
inventory to make up for the shortage => This alter does not solution.

c)
Cost
Regular time 2,260 $2,260,000 (= 2,260 × $1,000)
Over time 189 $264,600 (= 189 × $1,400)
Subcontract 57 $102,600 (= 57 * $1,800)
$2,627,200

=> If overtime cost per unit rise to $1,400, this plan’s cost rises to $2,627,200
Cost
Regular time 2,260 $2,260,000 (= 2,260 × $1,000)
Over time 189 $226,800 (= 189 × $1,200)
Subcontract 57 $102,600 (= 57 * $1,800)
$2,589,400

=> If overtime costs per uint fall down $1,200, this plan’s cost is $2,589,400
13.26 Southeastern Airlines’s daily flight from Atlanta to Charlotte uses a Boeing 737, with all-coach seating for 120 people. In the
past, the airline has priced every seat at $140 for the one-way flight. An average of 80 passengers are on each flight. The variable cost
of a filled seat is $25. Aysajan Eziz, the new operations manager, has decided to try a yield revenue approach, with seats priced at $80
for early bookings and at $190 for bookings within 1 week of the flight. He estimates that the airline will sell 65 seats at the lower
price and 35 at the higher price. Variable cost will not change. Which approach is preferable to Mr. Eziz?

Solve:
All coach seating: 120 people
Past: $140 for the one way flight; 80 passengers/ fllight; VC = $25
Now: $80 - early booking – 65 seats; $190 – bookings withing 1 week – 35 seats; VC = $25
Past: The total Contribution = ($140 - $25) × 80 = $9,200
Now: the total Contribution = ($80 - $25 ) × 65 + ($190 - $25) × 35 = $9,350
=> A yield revenue approach is preferable to Mr Eziz.