</pclass=”msonormal”>.Nowjuice, Inc., produces Shakewell fruit juice. A planner has developed an aggregate forecast for demand (in cases) for the next eight months.
Use the following information to develop aggregate plans.
Regular production cost: $10.00 per case
Regular production capacity: 5,000 cases
Overtime production cost: $16 per case
Subcontracting cost: $20 per case
Holding cost: $1 per case per month
Beginning inventory: 0
Develop an aggregate plan using each of the following guidelines and compute the total cost for each plan. Which plan has the lowest total cost?
(a) Use level production of 5,000 case per month. Supplement using overtime as needed. (Ans. Total cost = $529,600)
(b) Use a combination of overtime (500 cases per month for the first five months), inventory, and subcontracting (500 cases per month from September due to the staff shortage) to handle variations in demand. Note that a proper amount of overtime for the last three months should be found to determine the total cost. (Ans. Total cost = $539,200)
(c) Which one is better?