Heizerom10ism13 141023093350 Conversion Gate02

180
CHAPTER 13A G G R E G AT E P L A N N I N G
C H A P T E R
Aggregate Planning
DISCUSSION QUESTIONS
1.Aggregate planning is concerned with the quantity and
timing of production for the intermediate future; typically
encompassesatimehorizonofthreetoeighteenmonths.
2.Aggregate means combining the appropriate products and
resourcesintogeneral,oroverall,terms.
3.Strategicobjectives:minimizecostovertheplanningperiod,
smoothfluctuationsinworkforce,drivedowninventorylevelsfor
timesensitivestock,andmeetahighlevelofserviceregardlessof
cost.Costminimizationisthemostoftentreatedquantitatively
andisgenerallythemostimportant.
4.Withachasestrategyproductionratesorworkforcelevelsare
adjustedtomatchdemandrequirementsovertheplanninghorizon.
5.A pure strategy is one that varies only one factorfor
example, maintain a constant work force level or maintain a
constantinventory.Tradeoffsareignored.
6.Levelschedulingisanaggregateplaninwhichdailycapaci
tiesareuniformfrommonthtomonth.Theunderlyingphilosophy
isthatstableemploymentleadstobetterquality,lessturnover,
lessabsenteeism,andmoreemployeecommitment.
7.Mixedstrategyisaplanningapproachinwhichtwoormore
options,suchasovertime,subcontracting,hiringandlayoff,etc.,
areused.Therearebothinventorychangesandworkforceandpro
ductionratechangesovertheplanninghorizon.Typically,mixed
strategiesarebetter(resultinlowercosts)thanpurestrategies.
8.Theadvantageofvaryingthesizeoftheworkforceasre
quiredtoadjustproductioncapacityisthatonehasafundamental
ability to change production capacity in relatively small and
preciseincrements.Thedisadvantagesarethatareadysupplyof
skilledlaborisnotalwaysavailable,newlyhiredpersonnelmust
betrained,andlayoffsunderminethemoraleofallemployeesand
canleadtoawidespreaddecreaseinoverallproductivity.
9.Mathematicalmodelsarenotmorewidelyusedbecausethey
tendtoberelativelycomplexandareseldomunderstoodbythose
personsperformingtheaggregateplanningactivities.
10.Aggregate planning in services differs from aggregate
planninginmanufacturinginthefollowingways:
Most services are perishable and cannot be inventoried.
Itisvirtuallyimpossibletoproducetheserviceearlyin
anticipationofhigherdemandatalatertime.
Demandforservicesisoftendifficulttopredict.Demand
variationsmaybemoresevereandmorefrequent.
Services are more customized than manufactured goods

and can be offered in many different forms. This
variabilitymakesitdifficulttoallocatecapacity.Unitsof
capacitymayalsobehardtodefine.
Because most services cannot be transported, service
capacitymustbeavailableattheappropriateplaceaswell
asattheappropriatetime.
Servicecapacityisgenerallyalteredbychangesinlabor,
ratherthanbyequipmentorspace,andlaborisahighly
flexibleresource.
11.The master production schedule (MPS) is produced by

disaggregatingtheaggregateplan.
12.Graphicalaggregateplanningmethods,whilebasedontrial
and error, are useful because they require only limited
computationsandusuallyleadtooptimalsolutions.
13.Limitationsofthetransportationmethodincludethatitdoes
notworkwellwhenoneattemptstoincludetheeffectofhiring
andlayoffsinthemodel.
14.Yield management adds another set of decisions to the
aggregateplan,tocapacityplanning,andtoscheduling.However,
oftheseyieldmanagementissues,theaggregateplanmaybethe
oneleastaffected.Autorentalcompanies,airlines,andhotelsnow
all vary inventory (autos, seats, rooms) and prices to reflect
waystomaximizetheiryield(profit).Leadtime(vacationersprice
shopmoreandarewillingtodosoearlier),daysoftheweek,
seasons,holidays,andconventionsallimpacttheyield.Inmany
cases,theaggregatesupplyistheleastaffected.
ETHICAL DILEMMA
1. From the airlines point of view, revenue (yield)
managementiscrucial.Moreover,manyfirms,includ
inghotels,restaurants,anduniversitiespracticerevenue
management.Agoodclassdiscussioncanbegenerated
byaskingstudentstodiscusshowotherorganizations
practiceyieldmanagementwithoutallofthepublicity
(oftenadversepublicity)thatairlinesreceive.
Hotels have various approaches, from weekend
specials,topoints,tocomputerizedpricingtoadjust
todailyvolumechanges.
Restaurantshavecoupons,earlybirdspecials,and
specialpricesonslownights.Hugeportionsofrestaurant
customershavesomesortofdiscount.Theauthorshave
seenonefigurethatashighas30percentofrestaurant
customers use coupons (the figure varies substantially
dependingonthetypeofrestaurantincluded.).
Copyright2011PearsonEducation,Inc.publishingasPrenticeHall.
181
Universitieshavesomanygrants,scholarships,and
loansthatinmanyuniversitiesmostofthestudentshave
somesortofdeal;thisisrevenuemanagementforthe
university.
Theseyieldmanagementtechniquesaredesignedto
appealtovariousmarketsegments.Andthepervasive
nessofthetechniquesprovesthatitdoeswork.
From the customers perspective there is often
resentmentatsittingnexttosomeoneontheairplane
whohaspaidhalfasmuchforthesameflightasyou
paidorgoingtoarestaurantandhavingthecustomer
whoarrived15minutesearlierthanyouorwhohasa
coupon,payhalfthepriceforthesamemeal.Asenseof
fairness suggests that something is wrong and some
customersresentthedifference.
2. Mostcustomershavecometoacceptyieldmanagement
andtakefulladvantageoftheopportunitiesitaffords.
Themultiplepricingofyieldmanagementbydefinition
satisfies more customers (customers use the services)
andthefirmutilizesresourcesmoreeffectively.
3. Manycustomersdotakeexceptiontothevariationin
pricingdifferent prices for the same service seem
inherentlywrongtomanypeopleandmanagementneed
tobepreparedfortheiratecustomer.
4. Somecustomerswillmanipulatethesystembybooking
ticketsonflightsthathaveastopoverinacitythey
travelto,butwhichhasahigherfarethanthedestination
flight.Theyexittheplaneatthestopovercitysaving
money. For instance, if the flight from New York to
Chicagoislessthantheflighttothestopovercitysay
Pittsburgh,acustomercanbooktheflighttoChicago
but get off in Pittsburgh. You might ask students to
discusstheethicsofthismanipulation.
And, of course, customers use the system by
finding the positions on the yield management curve
thatworksforthem.Sometimesthismeansshoppingfor
ticketsweeksinadvanceandtakingtheriskofachange
inplans,orgoingtotherestaurantearly,orfinding
andusingthosediscountcoupons.Howmuchworkdo
youwanttodoforadiscount?Itturnsoutthatsome
peoplewillnotdotheworknecessarytousethesystem
totheiradvantage.
ACTIVE MODEL EXERCISE

ACTIVEMODEL13.1:AggregatePlanning
1.Each worker makes five units per day. If the number of
workersisreducedfrom10to9,droppingthedailycapacity,what
happenstothecost?
Thecostactuallydropsto$54,465.Thisisduetodropsin
theamountofinventorythatismaintained.
2.Whatregulartimelevelminimizesthetotalcost?
39units
3.Howlowcantheregulardailycapacitygetbeforeovertime
willberequired?
At22unitsperday(4.4workers),overtimeisrequired.
4.Howlowcantheregulardailycapacitygetbeforetherewill
notbeenoughcapacitytomeetthedemand?
At12unitsperday(2.4workers),demandcannotbemet.
END-OF-CHAPTER PROBLEMS
13.1
Production
Month
Days
Jan
Feb
Mar
Apr
May
Jun
July
Aug
Sep
Oct
Nov
Dec
22
18
22
21
22
21
21
22
21
22
20
20
252
Forecast
Demand
1,000
1,100
1,200
1,300
1,350
1,350
1,300
1,200
1,100
1,100
1,050
900
13,950
Needed
Production
Each Day
45.5
61.1
54.5
61.9
61.4
64.3
61.9
54.5
52.4
50.0
52.5
45.0
55.4
(on average)
13.2(a)Plan5
Month
Jan
Feb
Mar
Apr
May
Jun
Expected
Demand
Production
Days
900
700
800
1,200
1,500
1,100
6,20
0
Productionrate/day = Persons
Demand
Per Day
22
18
21
21
22
20
124
Mont
h
41
39
38
57
68
55
Jan
Feb
Mar
Apr
May
Jun
6,200
124
=50units/day
Constantworkforce of6 persons;subcontract tomeet
extrademand:Subcontractcost=$20/unit
Jan
Feb
Mar
Apr
May
Jun
900
700
800
1,200
1,500
1,100
770
630
735
735
770
700
1.6
Subcontract
35 units /day
130
70
65
465
730
400
1,86
0
Subcontracting:
C SC 1,860units $20 $37,200
Totalcost:
CT 69,440 37,200= $106,640
Plan2isstillpreferable,butPlan6haslowercostthanPlan5.
Production
(@ 30/day) Subcontrac
t
660
540
630
630
660
600
900
700
800
1,200
1,500
1,100
Hours /day
Hours /unit
C R 7 persons $80 124 $69,440
Hours/day
Productionrate/day Persons
Hours/unit
8
6
30units/day
1.6
Month
Production
(@ 35/day)
8
Plan6Costanalysis:
Regularproduction:
Averagedailyproductionrequirement
Expected
Demand
Expected
Demand
182
240
160
170
570
840
500
2,48
0
Comparing:
Plan 1 Plan 2 Plan 3 Plan 4 Plan 5 Plan 6
Carrying
cost
Reg. time
Overtime
Subcont.
Hire
Layof
Total cost
9,250
0
0
400
0
0
99,200 75,392 99,200 79,360 59,520 69,440
0
0
0 33,728 49,600
0
0 29,870
0
0
0 37,200
0
0 9,000
0
0
0
0
0 9,600
0
0
0
108,45 105,15 117,800 113,48 109,12 106,64
0
2
8
0
0
Totalcost:
Basedsimplyupontotalcost,Plan2ispreferable.Fromapracti
calviewpoint,Plans1,5,and6willlikelyhaveequivalentcosts.
PracticalimplementationofPlan2may,forexample,requirethe
employmentofeightfulltimeemployees,ratherthansevenfull
time and one parttime employee. When several plans have
roughlyequivalentcosts,otherparametersgainimportancesuch
astheamountofcontrolonewouldhaveoverproductionandex
cesswearonequipmentandpersonnel.Plan3shouldbeavoided.
CT $59,520 $49,600 $109,120 (notpreferable

toPlan2at$105,152,butpreferabletoPlan4at$113,488).
13.3
Plan5Costanalysis:
Regularproduction:
C R 6 persons $80 124 $59,520
Subcontractcost@$10/unit:
C SC 2,480units $20 / unit $49,600
(b)
Plan6Constantworkforceof7persons;subcontract
tomeetextrademand:Labor1.6hours/unit
Period
1
2
3
4
5
6
7
8
Expected Demand
1,400
1,600
1,800
1,800
2,200
2,200
1,800
1,400
14,20
0
183
13.3(contd)
Period
Demand
Productio
n
(Result of
Previous Inventory Stockout Hire Layof
Month)
(Units)
(Units) (Units (Units)
)
1 (Jan)
1,400
1,600
400
2 (Feb)
1,600
1,400
200
3
4
5
6
7
8
1,800
1,800
2,200
2,200
1,800
1,400
1,600
1,800
1,800
2,200
2,200
1,800
(Mar)
(Apr)
(May)
(June)
(July)
(Aug)
200
200
200
400
400
400
800
1,800
@ $20
=$36,000
400
400
$400 Total
@ $100 Personnel Cost
=$40,0
00
Note:Decemberdemandwas1,600,andbecauseourstrategyischasingpriorperioddemand,ourJanuaryproductionis1,600.So200unitsremainin
13.4
Plan
B
inventory,andJanuaryproductionadds200unitstothisinventory,foratotalof400units.Inventoryunits:Jan.400+Feb.200+July400+Aug.800
Period
Demand
Production
Ending Inv.
Subcon (Units)
Extra
(400fromJulyand400fromAugust)=1,800unitsat$20=$36,000.Stockoutunits:May400unitsat$100=$40,000.Hiringandlayoffcosts=
Cost
$115,000.Totalcosts=$36,000+$40,000+$115,000=$191,000.
0
1
2
3
4
5
6
7
8
1,400
1,600
1,800
1,800
2,200
2,200
1,800
1,400
200
200
0
0
0
0
0
0
0
1,400
1,400
1,400
1,400
1,400
1,400
1,400
1,400
400
400
800
800
400
$4,000
30,000
30,000
60,000
60,000
30,000
Plan C
Period
0
1
2
3
4
5
6
7
8
Demand Production*
13.5(a)
1,400
1,600
1,800
1,800
2,200
2,200
1,800
1,400
1,775
1,775
1,775
1,775
1,775
1,775
1,775
1,775
Ending Inv.
200
575
750
725
700
275
0
0
375
Stockouts (Units)
150
25
Extra
Cost
$11,500
15,000
14,500
14,000
5,500
15,000
2,500
7,500
Total Extra Cost:
*(14,200/8)=1,775average.Allotherthingsbeing
equal, it would appear that Plan C, with a cost of
$85,500andstockoutcostsignored,shouldberecom
mended over Plan A (cost = $224,000) or Plan B
(cost=$214,000).
184
185
(b)GraphofPlanC
13.6(a)PlanD:Maximumunitsinovertime=0.201,600=320
Plan D
Period
Demand
Reg.
(Units)
0
1
2
3
4
5
6
7
8
1,400
1,600
1,800
1,800
2,200
2,200
1,800
1,400
1,600
1,600
1,600
1,600
1,600
1,600
1,600
1,600
O.T.
(Units)
End Inv.
(Units)
320
320
200
200
400
400
200
200
Stockouts
(Units)
Extra
Cost
$8,000
8,000
4,000
0
280
44,000
280
44,000
10,000
4,000
Total Extra Cost:
$122,000
Noting that the additional cost of a stockout is much

greaterthanthesumoftheadditionalcostsforovertime
plus inventory storage, one might look ahead and
schedule overtime where possible. The resulting
aggregateplanwouldbe:
Period
Demand
Reg.
(Units)
O.T.
(Units)
End Inv.
(Units)
0
1
2
3
4
5
6
7
8
1,400
1,600
1,800
1,800
2,200
2,200
1,800
1,400
1,600
1,600
1,600
1,600
1,600
1,600
1,600
1,600
80
320
320
320
200
200
400
400
280
400
120
200
Stockouts
(Units)
Extra
Cost
$8,000
8,000
9,600
24,000
18,400
160
32,000
10,000
4,000
Total Extra Cost:
$114,000
(b)
186
Plan E
Period
Demand
Production
0
1
2
3
4
5
6
7
8
1,400
1,600
1,800
1,800
2,200
2,200
1,800
1,400
1,600
1,600
1,600
1,600
1,600
1,600
1,600
1,600
Subcont (Units)
Ending Inv.
Extra
Cost
200
400
400
200
$8,000
8,000
4,000
0
600
45,000
600
45,000
200
15,000
200
4,000
Total Extra Cost: $129,000
Allotherthingsbeingequal,itwouldappearthatPlanD,
withacostof$122,000,shouldberecommendedover
PlanE(cost=$129,000).
Notethatofalltheplansdiscussed,itwouldappear
thatPlanC,withacostof$85,500,shouldberecom
mendedoverallothers.
13.7
Month
Expected
Demand
Jul
Aug
Sep
Oct
Nov
400
500
550
700
800
Productionperpersonperday:8hr/person4hours/ d i s k
Therefore,eachpersoncanproduce2disksperday,
or40diskspermonth.
(a)Aggregateplan,hiring/layoffonly:
Unit
Beg.
Inventor
y
Over
Perio Demand
(or
d
Short)
Jun
Jul
Aug
Sep
Oct
Nov
Hours
Productio
n
Over
Require at 20 days Personnel Units

d
Require at 4
at 8 hrs
on staf Produce (or Short)
d
each
d
150
150
10
10
20
0
400
500
550
700
800
Personnel
Required
Units
250
510
540
680
800
1,000
2,040
2,160
2,720
3,200
6.25
12.75
13.50
17.00
20.00
8
6
13
14
17
20
240
520
560
680
800
10
10*
20*
0
0
Costs
Layof Hire: 40
Hire
$40
7
1
3
3
$80
Layof: 80
$160
$280
$40
$120
$120
*Inventory(August=10andSept.=20)=308=$240
InventoryCost=308=$240
Hiring/LayoffCost=960
$1,200
Note:Incomputingcost,weassumedthat,ifthecapacityofafractionofaworkerwasneeded(wasexcess),oneworkerwashired
(layedoff).SolutionbyPOMforWindows,inwhichtheincreasecostis$1perunitandthedecreasecostis$2perunit,yieldsa
similarresult,withatotalextracostof$890.
(b)Aggregateplan,overtimeonly:
Period
Production
Production
Ending
Demand
(Regular)
(Overtime)
Inv.
400
500
550
700
800
700
320
320
320
320
320
320
Jun
Jul
Aug
Sep
Oct
Nov
Dec
150
70
110
230
380
480
380
Inventory Holding
Cost
@ $8/unit/month
560
1,580($72$48)=$37,920=Extratotal(OT)cost$560holdingcost=$38,480
Unitsmadeon $72=4hr
overtime(OT) each$18
$48=4hr
each$12
187
13.8Calculating added costs for various planning options to

complementProblem13.7:
Holding:$8/unit/month
Subcontracting:$80/unit
Overtime:$24/unit($18/hourover8hours:
$72$48=$24)
Hiring:$1/unit
Layoff:$2/unit
Yourstrategyisonethatinvolveshiring5workersin
Augustand5moreinOctober,asfollows:
Beg.
Unit
Personne
l
Hours Required
Inventor
y
Over
Units
Require
at 20
d
days
Perio Deman
(or
Require
at 4
at 8 hrs
d
d
Short)
d
each
Costs
Productio
Inventory = $8
n
Personnel Units
Over
Hire Layof
Hire: 40
on staf Produce (or Short) $40
d
Jun
Jul
Aug
400
500
150
150
70
250
430
1,000
1,720
8.00
13.00
8
8
13
320
520
70
90
Sep
Oct
550
700
90
60
460
640
1,840
2,560
13.00
18.00
13
18
520
720
60
80
0
5
Studentsshouldbeencouragedtoconsiderthelongrange
implicationsofanyaggregateplanningstrategyinvolving
plannedhiring/firingwithrespecttothedevelopmentofan
appropriatelaborpool,etc.
13.9
Month
Jul
Aug
Sep
Oct
Nov
Dec
Expected Demand
1,000
1,200
1,400
1,800
1,800
1,600
(a)PlanA:Minimumrateof1,000/month,subcontractfor
additional.
Plan A
Period
Jul
Aug
Sep
Oct
Nov
Dec
Demand
Production
Ending Inv.
1,000
1,200
1,400
1,800
1,800
1,600
1,000
1,000
1,000
1,000
1,000
1,000
0
0
0
0
0
0
Subcont. (Units) Extra Cost
200
400
800
800
600
0
12,000
24,000
48,000
48,000
36,000
Total Extra Cost: $168,000
$80
Layof: 80
$560
$920
200
$480
$840
= (70 8)
= (90 8) +
= (60 8)
= (80 8) +
188
PlanB:Varyworkforce.
Plan B
Period
Jul
Aug
Sep
Oct
Nov
Dec
Demand
Production
(Existing)
Hire (Units)
Layofs
(Units)
1,000
1,200
1,400
1,800
1,800
1,600
1,300
1,000
1,200
1,400
1,800
1,800
200
200
400
300
$18,000
6,000
6,000
12,000
200
12,000
Total Extra Cost:$54,000
(b)PlanBisbestbecauseofcost.Butnotethatproductionisonly8,500units.
13.10(a)
Extra Cost
Hiring:$30/unit
Plan C
Period
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Demand
Production
(Units)
1,000
1,200
1,400
1,800
1,800
1,600
1,300
1,300
1,300
1,300
1,300
1,300
Subcont.
(Units)
400
300
Ending Inv.
Extra Cost
300
600
$15,000
700
17,500
600
15,000
100
2,500
0
24,000
0
18,000
Total Extra Cost:$92,000
(b)PlanD:Maximumunitsinovertime=0.201,300=260
Plan D
Month Demand Reg. (Units) O.T. (Units) End Inv.
Subcont. Idle Time

Units
(Units) Extra Cost
Jul
1,000
1,300
180
120
Aug
1,200
1,300
180
100
Sep
1,400
1,300
80
Oct
1,800
1,300
260
If our object in comparing the plans is to identify

theelementsofanoptimalplan,wemustconsiderthe
following:
PlansA,B,andDbeginwithzeroinitialinventory,
PlanCbeginswithaninitialinventoryof300units.It
is therefore inappropriate to compare directly the
resultsofPlanCwiththoseofPlansA,B,andD.
In addition, we can assume that the warehouse
constraintintroducedinPlanDwouldhaveaffected
thecostsofPlanAandPlanChaditbeenineffectin
thoseplans.
Whatonecansayisthattheaggregateplanning
options should be utilized as available, in the
followingorder:
160
$11,700
10,500
2,000
Layoff:$60/unit
Subcontracting:$60/unit
Stockout:$100/unit
13.11Initialdata:
Costs (per unit)
Reg Time
Overtime
Subcontract
Holding
Stockout
Hiring
Layofs
=
=
=
=
=
=
=
Initial inventory
0
$ 30
Units last period = 1,500
$ 15 extra per unit
not available
10
50
40
80
Carryoverofinventory:$25/unit
Overtime:$40/unit
189
(a)TheChaseplan:
Period
Demand
Quarter
Quarter
Quarter
Quarter
1
2
3
4
Total
Reg.
Time
Producti
on
1,400
1,200
1,500
1,300
1,400
1,200
1,500
1,300
5,400
5,40
0
@$30/unit
Change
100
200
300
200
Hiring
Layofs
0
0
300
0
300
100
200
0
200
@$40/unit
@$80/unit
Overtimeproduction=$0
Subcontract=$0and
Inventoryholdingandshortagecost=$0
500
(b)TheLevelplan:
Period
Demand
Quarter
Quarter
Quarter
Quarter
Total
1
2
3
4
1,400
1,200
1,500
1,300
5,40*
0
Cost
Reg. Time
Production
1,350
1,350
1,350
1,350
5,40
0
$162,00
0
Inventory
50
100
50
0
Holding
0
100
0
0
10
0
$1,00
0
Shortage
50
0
50
0
10
0
$5,00
0
Change
Hiring
150
0
0
0
0
0
0
0
0
$0
Total Cost:
(c)ALevelplanwillcost$180,000,whileaChaseplan
willcost$214,000.
13.12Initialdata:
Costs (per case)
Reg time
Overtime
Subcontract
Holding
$3
0
45
60
40
Initial inventory
=
0
Production
last = 130
period
0
Quarter Forecast Demand

1
1,800 cases
1,100 cases
1,600 cases
900 cases
(a)PlanA:Chaseplan
Period
Quarter
Quarter
Quarter
Quarter
Total
Demand
1
2
3
4
1,800
1,100
1,600
900
5,40
0
Cost
Reg. Time
Production
1,800
1,100
1,600
900
5,40
0
$162,00
0
Change
500
700
500
700
Hiring
(Increase)
Layofs
(Decrease)
500
0
500
0
1,00
0
0
700
0
700
1,400
$40,00
0
$112,00
0
Total Cost: $314,000
Layofs
150
0
0
15
0
$12,00
0
190
(b)PlanB:LevelStrategyof1,350cases
Period
Quarter
Quarter
Quarter
Quarter
Total
Forecast
1
2
3
4
1,800
1,100
1,600
900
5,40
0
Cost
Reg. Time
Production
Inventory Holding
1,350
1,350
1,350
1,350
5,400
450
200
450
0
$162,000
0
0
0
0
0
$0
An alternativeway ofviewing thisproblem assigns

thesamecoststoregulartimeproductionandtohiring
(i.e.,$162,000and$2,000)butplacesholdingcostat
$28,000 and shortage cost at $67,500. Total cost is
then$259,500.
Hiring
Layofs
Shortage Change (Increase) (Decrease
)
450
200
450
0
1,10
0
$165,00
0
50
0
0
0
50
0
0
0
50
0
0
0
0
0
$2,00
0
$0
(c)PlanC:LevelStrategyat1200,plussubcontracting:
Reg. Time Overtime Subcontract
Hiring
Layofs
Forecast Production Production Production Inventor Holding Change (Increas (Decrease)
y
e)
Period
Quarter
Quarter
Quarter
Quarter
Total
1
2
3
4
1,800
1,100
1,600
900
5,40
0
Cost
1,200
1,200
1,200
1,200
4,80
0
$144,00
600
300
0
900
$54,00
0
100
0
300
0
100
0
300
40
0
$16,00
(d,e)ThebossimplementsPlanCbecauseitisnotonly
the lowest cost, but has the added advantage of
providing steady employment for the employees
aftertheinitialfirstquarterlayoff.
13.13Assumingthatbackordersarenotpermitted,thesolutionis:
Totalcost=$11,790
100
0
0
0
0
0
0
0
0
100
0
0
0
100
$0
$8,00
191
Totalcost=$1,186,810
Totalcost=$627,100
Analternativesolutionis:
Totalcost=$627,100
Totalcost=$100,750
192
193
13.17(a)Thecostmatrixandtheoptimalplanareshownbelow:
Cost Matrix:
Quarter 1
Quarter 2
Beg. inv.
0.2
0.4
0.6
0.8
Reg. time 1
Overtime 1
Subcontract 1
1
1.5
2
1.2
1.7
2.2
1.4
1.9
2.4
Reg. time 2
Overtime 2
Subcontract 2
1.5
2
2.5
1
1.5
2
Reg. time 3
Overtime 3
Subcontract 3
2
2.5
3
Reg. time 4
Overtime 4
Subcontract 4
Demand
2.5
3
3.5
500
Optimal Plan:
Quarter 3
Quarter 4
Ending Inv.
Supply
250
1.6
2.1
2.6
1.8
2.3
2.8
400
80
100
1.2
1.7
2.2
1.4
1.9
2.4
1.6
2.1
2.6
400
80
100
1.5
2
2.5
1
1.5
2
1.2
1.7
2.2
1.4
1.9
2.4
800
160
100
2
2.5
3
750
1.5
2
2.5
900
1
1.5
2
450
1.2
1.7
2.2
400
80
100
2600/305
Quarter 1
Quarter 2
Beg. inv.
100
150
Reg. time 1
Overtime 1
Subcontract 1
400
Quarter 3
Quarter 4
Ending Inv.
Dummy
80
100
Reg. time 2
Overtime 2
Subcontract 2
400
80
100
Reg. time 3
Overtime 3
Subcontract 3
40
800
100
Reg. time 4
Overtime 4
Subcontract 4
20
100
400
50
500
750
900
450
Optimalcost=$2,641
(b)Thecostoftheoptimalplanis$2,641.Alternateopti
malsolutionsarepossible.
(c)Allregulartimeisused.
(d)40unitsarebackorderedinQuarter2andproducedon
overtimeinQuarter3atacostof$.50eachforatotal
costof$20.
30
100
194
13.18Assumingthatbackordersarenotpermitted,onesolution,
ofmultipleoptionalsolutions,is:
Totalcost=$90,850
Note: Endinginventoryof20unitsheldtoperiod6
eachrequiretheadditionalcarryingcostof$3ifproduced
onregularorovertime.Becausetheyareoptimallypro
ducedbysubcontracting(whichisavailable,atanytime),
noadditionalcarryingcostisincurred.
13.19(a) Method Produce to demand (let workforce vary)
Shortages: Lost sales Shortages not carried from month to month

All months
$1,000 $1,300 $1,800
$200
Units
$0
$0
$0
Capacities
Month Demnd Regtm Ovrtm Subcon
Regtm
Ovrtm
Subcon Holdng Shortg Increas Decreas

e
e
Init
Jan
Feb
Mar
Apr
May
June
July
Aug
0
255
294
321
301
330
320
345
340
0
235
255
290
300
300
290
300
290
235
255
290
300
300
290
300
290
20
24
26
1
30
28
30
30
0
15
5
0
0
2
15
20
Tot
2,506
2,260
0
20
24
26
24
30
28
30
30
0
12
16
15
17
17
19
19
20
212
135
Subtotal Costs
2,260 189 57
2,260,00
245,70
102,60
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
20
35
10
0
0
10
0
0
0
10
0
10
0
0
0
0
75
0
20
0
0
0
195
Type
Summary Table
Units
Cost
2,260
189
57
0
0
75
20
$2,260,000
$245,700
$102,600
$0
$0
$0
$0
Regtm
Ovrtm
Subcon
Holdng
Shortg
Increase
Decreas
e
Total cost = $2,608,300
(b) Method Produce to demand (let workforce vary)

All pds
$1,000
$1,300 $1,800
$200
Capacities
Units
Month Demnd Regtm Ovrtm Subcon Regtm
Ovrtm Subcon Holdng
Init
Jan
Feb
Mar
Apr
May
June
July
Aug
0
255
294
321
301
330
320
345
340
0
275
275
275
275
275
275
275
275
Tot
2,506
2,200
Type
0
20
24
26
24
30
28
30
30
0
12
16
15
17
17
19
19
20
212
135
Subtotal Costs
Summary Table
Units
255
275
275
275
275
275
275
275
2,180
2,180,00
0
0
19
26
24
30
28
30
30
$0
$0
$0
Shortg Increase Decreas

e
0
0
15
2
17
17
19
20
0
0
0
0
0
0
0
0
0
0
5
0
8
0
21
15
0
20
0
0
0
0
0
0
0
0
0
0
0
0
0
0
187 90
243,100 162,000
0
0
49
0
20
0
0
0
Cost
Regtm
2,180
$2,180,000
Ovrtm
187
$243,100
Subcon
90
$162,000
Holdng
0
$0
Shortg
49
$0
Increase
20
$0
Decrease
0
$0
Total cost = $2,585,100, or about $50,000
savings
(c) Method Produce to demand (let workforce vary)

All months
$1,000 $1,400 $1,800
Month Demnd
Capacities
Regtm Ovrtm Subcon
Init
Jan
Feb
Mar
Apr
May
June
July
Aug
0
255
294
321
301
330
320
345
340
0
235
255
290
300
300
290
300
290
Tot
2,506
2,260
0
20
24
26
24
30
28
30
30
0
12
16
15
17
17
19
19
20
212
135
Subtotal Costs
$200
$0
$0
$0
Units
Holdng Shortg Increas Decreas
e
e
Regtm
Ovrtm
Subcon
235
255
290
300
300
290
300
290
20
24
26
1
30
28
30
30
0
15
5
0
0
2
15
20
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
20
35
10
0
0
10
0
0
0
0
0
0
10
0
10
2,260 189
2,260,00 264,600
57
102,600
0
0
0
0
75
0
20
0
Summary TableOvertime Costs: $1400

Type
Units
Cost
Regtm
2,260
$2,260,00
0
Ovrtm
189
$264,600
Subcon
57
$102,600
Holdng
0
$0
Shortg
0
$0
Increase
75
$0
Decrease
20
$0
Total cost = $2,627,200
Thereisnochangeinthesolutionotherthanhigher
cost.
196
(c)Theaccountingbusiness,aseveryonerecognizes,has
oneextremelybusyseason(duringMarchandApril
taxpreparationtime),andseverallesshecticbutstill
veryactivemonths(suchaswhenquarterlypayments
aredue).CouldanotherCPAbejustifiedat$60,000
peryearinsalary?Basedsolelyonsavingsinovertime
costsandthecostof Forrester,itwouldappeartobe
unclear, as savingstotal only $30,625. On theother
hand,currentemployeesaredrawingovertimepayof
$40,000(averaging$10,000each)duringMarchand
April, and may be very unhappy over the loss of
income.Wewouldhavetocarefullyexaminetheother
6monthstoseeifhiringismerited.
Method
Produce
to demand (let workforce
vary)
13.21
(a)
Estimated
Reg.
Shortages: Lost sales Shortages not
carried from month to month
Time
All months Billable
$1,200
$1,800 Overtime
$200
$0 Forrester
$0
$0
Billable $1,000
Reg. Time
Overtime
Forrester
Units
Month
hours Capacities
CPAs
Hours
Cost
Hours
Cost
Hours
Cost
Month Demnd Regtm Ovrtm Subcon Regtm Ovrtm Subcon Holdng Shortg Increase Decrea
Jan
660
5
800
$25,000
0
$0
0
$0
se
Feb
550
5
800
$25,000
0
$0
0
$0
Init Mar 0 1,100
0
05
0
800
$25,000
300
$18,750
0
$0
Jan
255
235
20
12
235 20 0
0
0
0
0
Apr
1,320
5
800
$25,000
400
$25,000
120
$15,000
Feb
294
255
24
16
255 24 15
0
0
20
0
May
715
5
800
$25,000
0
$0
0
$0
Mar
321
290
26
15
290 26 5
0
0
35
0
June
649
5
800
$25,000
0
$0
0
$0
Apr
301
300
24
17
300 1 0
0
0
10
0
$150,00
70
$43,75
12
$15,00
May
330
300
30
17
300 30 0
0
0
0
0
0
0
0
0
0
June
320
290
28
19
290 28 2
0
0
0
10
July
345
300
30
19
300 30
15
0
0
10
0
(b)Withtheincreaseinbusiness,5accountantsappearto
Aug
340
290
30
20
290 30 benecessary.Thereisstillaneedforovertimeduring
20
0
0
0
10
Tot
2,506
2,260
212
135
Subtotal
2,260 189 thetaxseason(aboutthesameasinProblem13.20),

57
0
0
75
20
$2,260,00 $226,80 butthereisabigsavingsinForresterspay(which
$102,60
0
0
0
0
is double that of overtime for a regular employee).

WhatCohenneedstodoisfindadditionalaccounting
activities that his staff can work on during the
offpeakseason.
Summary TableOvertime Costs: $1,200

Type
Units
Cost
Regtm
Ovrtm
Subcon
Holdng
Shortg
Increase
Decrease
2,260
$2,260,000
189
$226,800
57
$102,600
0
$0
0
$0
75
$0
20
$0
Total cost = $2,589,400
13.22(a)CurrentmodelSinglepriceatSoutheasternAirlines
Sales 80passengers (Netprice/ seat)
=80 ($140 25) $9,200
(b)Proposedmodeltwopricepoints
Sales 65passengers ($80 $25) 35passengers ($190 $25)
(65)($55) (35)($165)
$3,575 $5,775
$9,350
Again thereis nochange inthe solutionother than

alowercost.
13.20(a,b)Aggregateplananditscosts
Estimate
d
Billable
Month
hours
Jan
Feb
Mar
Apr
May
June
600
500
1,000
1,200
650
590
Reg. time
CPAs
billable
hours
Reg. Time
cost
4
4
4
4
4
4
640
640
640
640
640
640
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$120,00
0
The newapproach isonly slightlybetter in

terms of sales but provides a more compli
Overtime
Overtime
Forrester
Forrester
catedticketingsystem.Theissueoffairnessis
hours
cost
0 alwaysparamount.
$0
0
$0
320
$20,000
320
$20,000
10
$625
0
$0
650
$40,62
5
Totalcost=$120,000+$40,625+$35,000=$195,625
hours
cost
0
0
40
240
0
0
28
0
0
$0
$5,000
$30,000
$0
$0
$35,00
0
197
ADDITIONAL HOMEWORK PROBLEMS

Herearesolutionstoadditionalhomeworkproblems
(13.2313.26)thatappearonourWebsite,at
www.myomlab.com.
13.23Theintentoftheauthorsisthatthisproblembesolved
using the transportation problem format. Assuming that back
ordersarenotpermitted,thesolutionis:
Totalcost=$20,400
Totalcost=$874,320
198
13.25Eventhoughbackordersarepermitted,notetheyarenot
used.Oneofthemultipleoptimalsolutionsis:
Totalcost=$308,125
Note:Endinginventoryof3unitsheldtoperiod5each
require the additional carrying cost of $200. You may
wishtoconveythishinttostudentswhenassigningthe
problem.
13.26Costs (per refrigerator)
Reg time =
Overtime =
Subcontrac =
t
Holding
=
Stockout
=
Hiring
=
Layof
=
(a)
Period
Jan
Feb
Mar
Apr
May
June
Total
Cost
Forecast
$48 = 4 hr $12/hr.
72 = 4 hr $18/hr.
80
8
0
40
80
Jan
Feb
Mar
Apr
May
June
Reg Time
Demand Production Inventory
400
500
550
700
800
700
365
0
400
500
550
700
800
700
365
0
$175,20
250
250
250
250
250
250
Demand
Initial inventory
Units last period
400
500
550
700
800
700
250
320
Holding
Shortage
Change
Increase
Decreas
e
250
250
250
250
250
250
150
0
0
0
0
0
0
0
0
80
100
50
150
100
100
$12,00
$0
80
100
50
150
100
0
48
0
$19,20
0
0
0
0
0
0
100
10
0
$8,00
0
0
0
199
(b)Each employee produces 2 units per day. So,

210employees20days=400unitsperperiod
Period
Jan
Feb
Mar
Apr
May
June
Total
Forecast
Demand
Reg Time
Production Inventory
400
500
550
700
800
700
365
0
Cost
400
400
400
400
400
400
240
0
$115,20
250
150
0
300
700
1000
(c)Plan B is certainly less expensive, but over the six

months Bell Refrigeration has a shortage of 2000
refrigerators . . . about half of its sales. The loss
suggeststhisisnotagoodplan
CASE STUDIES
1
SOUTHWESTERNUNIVERSITY:G
This caseprovides thestudent withquantitative informationto

develop an aggregate capacity plan, but, as often occurs in
services, demand is so variable that there are not many viable
staffingalternatives.Studentsmayalsobefrustratedbythelack
ofdetaileddataonthenatureofservicedemandandtheresources
requiredtomeetdemand.Evenwiththesedrawbacks,thestudent
shouldbeabletogaininsightintotheaggregateplanningproblem
andhelpthechiefjustifyhispersonnelrequests. Studentsmay
wanttotalkwiththepolicedepartmentattheirownuniversityto
seehowithandlessimilarproblems.
1.Whichvariationsindemandforpoliceservicesshouldbecon
sideredinanaggregateplanforresources?Whichvariations
canbehandledwithshorttermschedulingadjustments?
Anaggregateplanshouldsetfulltimestaffinglevels;esti
mate parttime and overtime needs for budget purposes;
determinetimesoftheyearfortraining,vacations,andother
nonessential duties; and establish an agreedupon level of
policeservicesfortheuniversitycommunity(i.e.,Whatrole
isthepoliceofficertoplay?Whatresponsetimetocallsfor
serviceisappropriate?Whatservicesshouldbeprovided?).
Shorttermschedulingadjustmentscanbemadefordifferent
daysoftheweek,shifts,andspecialevents.
2.Evaluate the current staffing plan. What does it cost? Are
26officerssufficienttohandlethenormalworkload?
Costofcurrentstaffingplan:
Salaries:
26 officers $28,000 per year
Overtime:
2,400 hours per year $18 per hour
Subcontractors:
40 officers 9 hours $18 per hour
5 football games per year
25 part-timers 9 hours $9 per hour
5 football games per year
=
$728,000
= $43,200
= $32,400
Holding
Shortage
Change
Increase
Decreas
e
250
150
0
0
0
0
40
0
$3,20
0
0
0
300
700
1000
200
0
$0
80
0
0
0
0
0
80
0
0
0
0
0
80
0
0
0
0
0
0
0
$3,20
$0
Normalworkloadduringfallandspringsemesters:
1st shift
2nd shift
3rd shift
Weekday
Weekend
7-day Average
5
5
6
4
6
8
4.7
5.3
6.6
16.
6
Numberof24hourpositionseachweek=16.6/3=5.5
Numberofpersonsrequired=5.5positions
5persons/position
=27.6persons
Normalworkloadduringthesummer:
1st shift
2nd shift
3rd shift
Weekday
Weekend
7-day Average
2.5
2.5
3
2
3
4
2.4
2.7
3.3
8.
4
Numberof24hourpositionseachweek=8.4/3=2.8
Numberofpersonsrequired=2.8positions5persons/position
=14persons
Twentysixofficersismorethanenoughtohandlethenormal
workloadduringthethreesummermonths.However,duringthe
remainingninemonthsoftheyear,thepolicedepartmentisal
mosttwopersonsshort.Obviously,someovertimeiscurrently
beingusedtomeetthedemandsofthenormalworkweek.
3.Whatwouldbetheadditionalcostofthechiefsproposal?
Howwouldyousuggestthatthechiefjustifyhisrequest?
Salary:4officers$28,000peryear=$112,000
Overtime:noadditionalcost,assubcontractingandover
timecostsarethesame.
Tojustifyhisproposal,thechiefshouldpointoutthattwo
positions(representing$56,000)areneededtopursuetheuni
versitysrequestformorecrimeprevention,safety,andhealth
programs.Theothertwopositionscouldsaveupto$18,720in
overtimepremiums(totalOTof2,400hoursminusfootball
gameOTof1,360hourstimes$18perhour)andareneeded
tomaintainthedesiredlevelofpoliceservices.Onaperhour
basis,thesalariedservicesaremorecosteffectivethanusing
overtimeorsubcontracting(@$18/hour).
= $10,125
$813,72
4.How much does it currently cost the university to provide

policeservicesforfootballgames?Whatwouldbethepros
andconsofsubcontractingthisworkcompletelytooutside
lawenforcementagencies?
Costofpoliceofficersforfootballgames:
18officerswork8hoursovertime@$18/hr
8officerswork16hoursovertime@$18/hr
40outsideofficerswork9hours@$18/hr
25parttimerswork9hours@$9/hr
5footballgamesperyear
Cost [(18 8 18) (8 16 18) (40 9 18)
(25 9 9)] 5
[2,592 2,304 6,480 2,025] 5
[13,401] 5 $67,005
Subcontractingsecurityforfootballgameswouldrelievethe
wearycampuspoliceandallowthemtoperformtheirnormal
dutiesmoreeffectively.However,footballsecurityishighly
visible, and the absence of campus police may hurt their
image in the university community and rob them of the
opportunitytoworkcloselywithlawenforcementpersonnel
fromagenciesinanoncrisissituation.Itmayalsobedifficult
fortheuniversitytomaintainthesamelevelofcontrolover
subcontracted work, especially in terms of discretionary
treatmentofstudentsandalumni.
Intermsofcost,itisdoubtfulthattheworkcouldbe
subcontractedascheaplyasitiscurrentlyperformedbecause
thecostofsupervisoryandmanagerialpersonnelwouldhave
tobeincludedinthepackage(andcurrentlynosupervisorsor
managersarepaidovertimefortheirwork).
5.Canyouproposeanyotheralternatives?
Many of the innovative suggestions for handling the
variability in demand for services involve using parttime
workers. Police officers require extensive training, so this
alternativeusuallymeanshiringoffdutypoliceofficersfrom
otheragencies.Underthesecircumstances,thehoursthatoff
duty officers can moonlight are limited, and, except for
footballSaturdays,maybehardtoschedule(i.e.,allparttime
agenciesarebusyatthesametime).Anotherwaytohandle
parttime or seasonal requirements for work is to find
complementaryworkforthefulltimeemployeesthatfollows
adifferentdemandpattern.Inthiscase,thenonpeakperiod
for police services falls during the summer months. What
other university services increase during those months?
Perhapstheidledofficerscouldbeusedascampusguides
duringsummerorientation,asaidesforthesummercamps
andothersummerprogramsheldoncampus,oraspartofthe
groundscrew.Atleastonesmallprivatecollegeutilizesits
policeofficersinthisexpandedfashion.Itcertainlyincreases
theofficersinvolvementwiththeuniversitycommunity.
2
ANDREWCARTER,INC.
This case presents some of the basic concepts of aggregate

planningbythetransportationmethod.Thecaseinvolvessolvinga
200
rather complex set of transportation problems. Four different

configurationsofoperatingplantshavetobetested.Thesolutions,
althoughrequiringrelativelyfewiterationstooptimality,involve
degeneracyifsolvedmanually.
Thecostsare:
Configuration
All plants operating
1 & 2 operating, 3
closed
1 & 3 operating, 2
Total
Variable
Cost
Total
Fixed
Cost
Total
Cost
$179,730
188,930
$41,000 $220,730
33,500 222,430
183,430
34,000
217,430
Thelowestweeklytotalcost,operatingplants1and3with2
closed,is$217,430.Thisis$3,300perweek($171,600peryear)
or1.5%lessthanthenextmosteconomicalsolution,operatingall
3 plants. Closing a plant without expanding capacity of the
remaining plants means unemployment. The optimum solution,
usingplants1and3,indicatesovertimeproductionof4,000units
at3and0overtimeat1.Theallplantoptimahavenouseof
overtime and include substantial idle regular time capacity:
11,000units(55%)inplant2andeither5,000unitsin1(19%of
capacity) or 5,000 in 3 (20% of capacity). The idled capacity
versusunemploymentquestionisaninteresting,nonquantitative
aspectofthecaseandcouldleadtodiscussionoftheforecastsfor
thehousingmarketandthustheplantsproduct.
Theoptimumproducingandshippingpatternis:
From
To (Amount)
Plant 1 (R.T.)
Plant 3 (R.T.)
W2 (13,000); W4 (14,000)
W1 (5,000); W3 (11,000); W4 (1,000); W5
(8,000)
W1 (4,000)
Plant 3 (O.T.)
Therearethreealternativeoptimalproducingandshipping
patterns.
Getting the solution manually should not be attempted.
ItwilltakeeighttableauxtodotheAllPlantsconfiguration,
withdegeneracyappearingintheseventhtableau;the1&2
configurationtakesfivetableaux,etc.Itisstronglysuggestedthat
POMforWindows,Excel,orothersoftwarebeused.
ADDITIONAL CASE STUDY*

CORNWELLGLASS
Enteringthedataprovidedintosoftware,thentogglingthepure
strategiesandtryingthemyieldsthefollowingcosts:
Plan1(smoothproduction):$849,077
Plan2(meetdemandexactly):$104,575
Plan3(produce1,900asbase,thenuse
OTandsubcontracting):$82,858
Atthispoint,thequestionis,canwedobetterwithtrialand
error?Abettersolutionfollows.
*ThiscaseisfoundonourCompanionWebsite,
www.pearsonhighered.com/heizer.
201
Aggregate Planning
Time periods 52
Shortages: Back ordersCarry shortages from period to
period
All pds
1,900
0
0
$0
$8.00
Pd
Init
April 15
22
29
May 6
13
20
27
June 3
10
17
24
July 1
8
15
22
29
Aug. 5
12
19
26
Sept. 2
9
16
23
30
Oct. 7
14
21
28
Nov. 4
11
18
25
Dec. 2
9
16
23
30
Jan. 6
13
20
27
Feb. 3
10
17
24
Mar. 3
10
17
24
31
Apr. 7
Total
Demnd
Regtm
73
1,829
1,820
1,887
1,958
2,011
2,063
2,104
2,161
2,258
2,307
2,389
2,434
2,402
2,385
2,330
2,323
2,317
2,222
2,134
2,065
1,973
1,912
1,854
1,763
1,699
1,620
1,689
1,754
1,800
1,864
1,989
2,098
2,244
2,357
2,368
2,387
2,402
2,418
2,417
2,324
2,204
2,188
2,168
2,086
1,954
1,877
1,822
1,803
1,777
1,799
1,803
1,805
107,544
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
98,800
Schedule
Ovrtm
Subcon Regtm
0
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
15
250
173
250
167
250
72
234
0
165
0
73
0
12
0
0
0
0
0
0
0
0
0
0
0
0
0
207
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
250
0
186
0
54
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
8,931
427
Subtotal Costs
$10
$0.12
$20.0
$5.63 $15.7
3
Units
Ovrtm Subcon Holdng Shortg Incres Decre
s
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 250
1,900 234
1,900 165
1,900
73
1,900
12
1,900
0
1,900
0
1,900
0
1,900
0
1,900
0
1,900
0
1,900
207
1,900
250
1,900
250
1,900
250
1,900
250
1,900
250
1,900
250
1,900
250
1,900
250
1,900
250
1,900
250
1,900
250
1,900
250
1,900 250
1,900 250
1,900 186
1,900
54
1,900
0
1,900
0
1,900
0
1,900
0
1,900
0
1,900
0
1,900
0
98,800 8,931
0 71,448
0
0
0
0
0
0
0
0
0
0
0
0
0
0
15
173
167
72
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
427
4,27
394
724
987
1,179
1,318
1,405
1,451
1,440
1,332
1,175
936
652
400
165
0
0
0
0
0
0
0
0
46
183
384
664
875
1,021
1,328
1,614
1,775
1,827
1,733
1,526
1,308
1,071
819
551
284
110
56
18
0
0
0
23
101
198
321
422
519
614
32,949
3,953.9
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

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180

Services are more customized than manufactured goods

11.The master production schedule (MPS) is produced by

ACTIVE MODEL EXERCISE

C R 7 persons $80 124 $69,440

CT $59,520 $49,600 $109,120 (notpreferable

Noting that the additional cost of a stockout is much

Require at 20 days Personnel Units

13.8Calculating added costs for various planning options to

Subcont. (Units) Extra Cost

Total Extra Cost: $168,000

Subcont. Idle Time

If our object in comparing the plans is to identify

Quarter Forecast Demand

Total Cost: $314,000

An alternativeway ofviewing thisproblem assigns

Shortages: Lost sales Shortages not carried from month to month

Subcon Holdng Shortg Increas Decreas

Total cost = $2,608,300

(b) Method Produce to demand (let workforce vary)

Shortg Increase Decreas

(c) Method Produce to demand (let workforce vary)

Summary TableOvertime Costs: $1400

2,260 189 thetaxseason(aboutthesameasinProblem13.20),

is double that of overtime for a regular employee).

Summary TableOvertime Costs: $1,200

Again thereis nochange inthe solutionother than

The newapproach isonly slightlybetter in

ADDITIONAL HOMEWORK PROBLEMS

(b)Each employee produces 2 units per day. So,

(c)Plan B is certainly less expensive, but over the six

This caseprovides thestudent withquantitative informationto

4.How much does it currently cost the university to provide

This case presents some of the basic concepts of aggregate

rather complex set of transportation problems. Four different

ADDITIONAL CASE STUDY*

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