Presented by:

Avash Man Shrestha 13520

This case is taken from the chapter

Aggregate Planning and Master Scheduling
The technique used to solve this case is
through spreadsheet

Month

May

June

July

Aug

Sep

Oct

Total

Forecast

50

60

70

90

80

70

420

Other information been provided by the production manager

as follow:

Regular production cost

Regular production capacity
Overtime production cost
Subcontracting cost
Holding cost
Back-ordering cost
Beginning inventory

$10 per unit

60 units
$16 per unit
$18 per unit
$2 per unit per month
$50 per month per unit
0 units

PERIOD
MAY
Forecast
50
Output
Regular
60
Overtime
10
Subcontract
Output - Forecast
20
Inventory
Beginning
0
Ending
20
Average
10
Backlog
0
Costs:
Regular @ $10
600,000.00
Overtime @ $16
160,000.00
Subcontract @18
Inventory
20,000.00
Backlog
Total
780,000.00

JUNE

JULY
60

SENARIO 1
AUG
70

SEP

OCT

TOTAL

90

80

70

420
360
60

60
10

60
10

60
10

60
10

60
10

10

-20

-10

20
30
25
0

30
30
30
0

30
10
20
0

10
0
5
0

0
0
0
0

600,000.00
160,000.00
50,000.00
810,000.00

600,000.00
160,000.00
60,000.00
820,000.00

600,000.00
160,000.00
40,000.00
800,000.00

600,000.00
160,000.00
10,000.00
770,000.00

600,000.00
160,000.00
760,000.00

90

3,600,000.00
960,000.00
180,000.00
4,740,000.00

PERIOD
MAY
Forecast
50
Output
Regular
60
Overtime
0
Subcontract
Output - Forecast
10
Inventory
Beginning
0
Ending
10
Average
5
Backlog
0
Costs:
Regular @ $10
600,000.00
Overtime @ $16
Subcontract @18
Inventory
10,000.00
Backlog
Total
610,000.00

JUNE

JULY
60

SENARIO 2
AUG
70

SEP

OCT

90

80

70

420

60
10

360
50

0
0
0
0

60
10

60
10

60
10

10

-20

60
10
10
0

10
20
15
0

20
20
20
0

20
0
10
0

0
0
0
0

600,000.00
160,000.00
30,000.00
790,000.00

600,000.00
160,000.00
40,000.00
800,000.00

TOTAL

600,000.00
160,000.00
20,000.00
780,000.00

600,000.00
160,000.00
180,000.00
940,000.00

600,000.00
160,000.00
760,000.00

50

3,600,000.00
800,000.00
100,000.00
4,680,000

PERIOD
MAY
JUNE
Forecast
50
60
Output
Regular
60
60
Overtime
0
5
Subcontract
Output - Forecast
10
5
Inventory
Beginning
0
10
Ending
10
15
Average
5
12.5
Backlog
0
0
Costs:
Regular @ $10
600,000.00 600,000.00
Overtime @ $16
80,000.00
Subcontract @18
Inventory
10,000.00
25,000.00
Backlog
Total
610,000.00 705,000.00

JULY

SENARIO 3
AUG
70

SEP

OCT

TOTAL

90

80

70

420

60
15

60
15

60
10

360
60

-15

60
15
0
-5

15
20
17.5
0

20
5
12.5
0

5
0
2.5
0

0
0
0
0

600,000.00
240,000.00
35,000.00
875,000.00

600,000.00
240,000.00
25,000.00
865,000.00

600,000.00
240,000.00
5,000.00
845,000.00

600,000.00
160,000.00
760,000.00

50

3,600,000.00
960,000.00
100,000.00
4,660,000

As Scenario 3 is the lowest in cost this is

chosen

Total Cost

Scenario 1

Scenario 2

Scenario 3

4,740,000.00

4,680,000.00

4,660,000.00

For smooth supply of raw materials as well as

finished goods to the customers
Due to change in demand additional
production is required for which additional
raw materials would be required
To efficiently manage inventory and cost
related to it