Aggregate Planning

Demand Per
Expected Production Day
Month Demand Days (computed)
Jan 900 22 40.91
Feb 700 18 38.89
Mar 800 21 38.10
Apr 1,200 21 57.14
May 1,500 22 68.18
Jun 1,100 20 55.00

Total 6,200 124 50.00

Average
50
requirement

Plan A- Constant Workforce

Monthly
Expected Production Production at Inventory
Month Demand Days 50 Units/day change
Jan 900 22 1100 200
Feb 700 18 900 200
Mar 800 21 1050 250
Apr 1200 21 1050 -150
May 1500 22 1100 -400
Jun 1100 20 1000 -100

Labour hours
80
Total
Number of
10
labours
 Costs Heads Costs
Inventory
$ 9,250.00
Carrying
Regular labour
$ 49,600.00
hours
Other costs $ -
Total Cost $ 58,850.00

Plan B: Subcontracting

Inhouse
4723.81
production
Subcontracted
1476.19
units
Units
38.10
requirement/day
labours hrs total 60.95
Number of
7.62
labours

Costs Heads Costs

Regular time
$ 37,790
labour
Subcontracting
$ 14,761.90
cost
Other costs $ -
Total Cost $ 52,552.38

Plan C: Hiring & Firing

 Basic Extra cost
Production of
cost increasing
Demand Per Demand X 1.6 production
Expected Day Hrs/unit X (Hiring
Month Demand (computed) $5/hr) cost)
Jan 900 40.91 $ 7,200.0 $ -
Feb 700 38.89 $ 5,600.0 $ -
Mar 800 38.10 $ 6,400.0 $ -
Apr 1200 57.14 $ 9,600.0 $ 5,714.3
May 1500 68.18 $ 12,000.0 $ 3,311.7
Jun 1100 55.00 $ 8,800.0 $ -
Total 6,200 $ 49,600.0 $ 9,026.0

Hence Lowest is Plan B

 Cost Information

Inventory carrying cost 5 per unit per month

Subcontracting cost per unit 10 per unit
Average pay rate 40 5
7 $ per hour
Overtime pay rate
8 (above 8 hours per day
Labor-hours to produce a unit 1.6 hours per unit
Cost of increasing daily production rate
300
(hiring and training) $ per unit
Cost of decreasing daily production rate
600
(layoffs) $ per unit
Basic Hours 8 Hrs/day

Ending Inventory
200
400
650
500
100
0
1850
 Extra cost for decreasing production
Total Cost
(Layoff cost)

$ - $ 7,200.0
$ 1,212.1 $ 6,812.1
$ 476.2 $ 6,876.2
$ - $ 15,314.3
$ - $ 15,311.7
$ 7,909.1 $ 16,709.1
$ 9,597.4 $ 68,223.4
 Chart Title
per unit per month
80.00

70.00

60.00
$ 5 per hour ($40 per day)
50.00
$ per hour
40.00

(above 8 hours per day) 30.00

20.00
hours per unit
10.00

0.00
$ per unit 1 2 3 4 5 6

$ per unit
Hrs/day
5 6