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Aggregate Aggregate Production Production Example Example
Aggregate Aggregate Production Production
ExampleExample
Aggregate Aggregate Production Production
ExampleExample
From the following information prepare aggregate plan using:
1- Pure Chase Strategy1- Pure Chase Strategy
2- Pure Level Strategy.2- Pure Level Strategy.
3- Minimum Workforce with 3- Minimum Workforce with Subcontracting.Subcontracting.
Which is the best plan (calculate costs)?Which is the best plan (calculate costs)?
From the following information prepare aggregate plan using:
1- Pure Chase Strategy1- Pure Chase Strategy
2- Pure Level Strategy.2- Pure Level Strategy.
3- Minimum Workforce with 3- Minimum Workforce with Subcontracting.Subcontracting.
Which is the best plan (calculate costs)?Which is the best plan (calculate costs)?
DEMAND, WORKING DAYS PER MONTHDEMAND, WORKING DAYS PER MONTHDEMAND, WORKING DAYS PER MONTHDEMAND, WORKING DAYS PER MONTH
JAN JAN FEB FEB MAR MAR APR APR MAY MAY JUNE JUNE TOTALTOTAL
DEMAND FORECAST DEMAND FORECAST 2200 2200 1500 1500 1100 1100 900 900 1100 1100 1600 1600 8400 8400
WORKING DAYS PER MONTH WORKING DAYS PER MONTH 22 22 19 19 21 21 21 21 22 22 20 20 125 125
COST INFORMATIONCOST INFORMATIONCOST INFORMATIONCOST INFORMATION
COSTS MATERIAL COSTS $ 100/UNIT INVENTORY HOLDING COST $I.5/UNIT-MONTH STOCKOUT COST $5/UNIT-MONTHSUBCONTRACTING COST $125/UNITHIRING AND TRAINING COST $200/WORKER LAYOFF COST $250/WORKER LABOR REQUIRED PER UNIT 5 HOURS5 HOURSLABOR COST( FIRST 8 HOURS EACH DAY) $4/HOUR OVERTIME COST (TIME AND A HALF) $6/HOUR
BEGINNING INVENTORY, CURRENT WORKERSBEGINNING INVENTORY, CURRENT WORKERSBEGINNING INVENTORY, CURRENT WORKERSBEGINNING INVENTORY, CURRENT WORKERS
INVENTORYINVENTORY
400 UNITS400 UNITS
NUMBER OF WORKERS CURRENTLY EMPLOYED
3030
1- Pure Chase 1- Pure Chase StrategyStrategy
1- Pure Chase 1- Pure Chase StrategyStrategy
1- Pure Chase Strategy1- Pure Chase Strategy 1- Pure Chase Strategy1- Pure Chase Strategy
MONTH MONTH DEMANDEMAND D
PRODUCTION PRODUCTION WORKING WORKING DAYS DAYS
PER MONTHPER MONTH
CURRENT CURRENT WORKFORCEWORKFORCE
REQUIRED REQUIRED WORK FORCEWORK FORCE
HIREDHIRED FIRED FIRED
JAN JAN 22002200 18001800 (2200- (2200-BI)BI)
2222 30 (GIVEN)30 (GIVEN) 5151 2121 --
FEB FEB 15001500 15001500 1919 51(FROM 51(FROM JAN)JAN)
4949 -- 22
MAR MAR 11001100 11001100 2121 4949 3333 -- 1616
APR APR 900900 900900 2121 3333 2727 -- 66
MAY MAY 11001100 11001100 2222 2727 3131 44 --
JUNE JUNE 16001600 16001600 2020 3131 5050 1919 --
TOTAL TOTAL 84008400 8OOO8OOO 125125 4444 2424
CHASE STRATEGY REQUIRED CALCULATIONS – CHASE STRATEGY REQUIRED CALCULATIONS – REQUIRED REQUIRED WORKERSWORKERS
CHASE STRATEGY REQUIRED CALCULATIONS – CHASE STRATEGY REQUIRED CALCULATIONS – REQUIRED REQUIRED WORKERSWORKERS
(1)(1)
MONTH MONTH
(2)(2)
PRODUCTION PRODUCTION
(3)(3)
TIME TIME REQUIRED TO REQUIRED TO
PRODUCE PRODUCE ONE UNITONE UNIT
(4)(4)
TOTAL REQUIRED TOTAL REQUIRED PRODUCTION PRODUCTION
TIMETIME
(2)*(3)(2)*(3)
(5)(5)
WORK WORK DAYS DAYS
PER PER MONTH MONTH
(6)(6)
REGULARREGULAR
HOURS HOURS
PER DAYPER DAY
(7)(7)
REQUIRED WORK REQUIRED WORK FORCEFORCE
(4)/{(5)*(6)}(4)/{(5)*(6)}
JAN JAN 18001800 5 HOURS5 HOURS 1800*5 = 1800*5 = 9000 9000
2222 88 9000/(22*8)= 9000/(22*8)= 51 51
FEB FEB 15001500 5 HOURS5 HOURS 7500 7500 1919 88 49 49
MAR MAR 11001100 5 HOURS5 HOURS 5500 5500 2121 88 33 33
APR APR 900900 5 HOURS5 HOURS 4500 4500 2121 88 27 27
MAY MAY 11001100 5 HOURS5 HOURS 5500 5500 2222 88 31 31
JUNE JUNE 16001600 5 HOURS5 HOURS 8000 8000 2020 88 50 50
TOTATOTAL L
1- Pure Chase Strategy 1- Pure Chase Strategy Cost($)Cost($) 1- Pure Chase Strategy 1- Pure Chase Strategy Cost($)Cost($)
MONTHMONTH REGULAR REGULAR PRODUCTIONPRODUCTION
MATERIAL MATERIAL COSTCOST
HIRING HIRING COSTCOST
FIRING FIRING COSTCOST
TOTAL TOTAL COSTCOST
JAN JAN 3600036000 180000180000 42004200 00 220200220200
FEB FEB 3000030000 150000150000 00 500500 180500180500
MAR MAR 2200022000 110000110000 00 40004000 136000136000
APR APR 1800018000 9000090000 00 15001500 109500109500
MAY MAY 2200022000 110000110000 800800 00 132800132800
JUNE JUNE 3200032000 160000160000 38003800 00 195800195800
TOTAL TOTAL 160000160000 800000800000 88008800 60006000 974800974800
2- Pure Level 2- Pure Level StrategyStrategy
2- Pure Level 2- Pure Level StrategyStrategy
2- Pure Level Strategy2- Pure Level Strategy 2- Pure Level Strategy2- Pure Level Strategy
(1)
MONTH
(2)
DEMAND
(3)
PRODUCTION
REQUIRED
(4)
UNITS PRODUCED
(5)
MONTHLY
INVENTORY
(4) – (3)
(6)
CUMULATIVE
INVENTORY
(7)
WORKERS REQUIRED
(8)
HIRED
(9)
FIRED
JAN JAN 22002200 18001800 1408 1408 (392) (392) (392) (392) 40 40 10 10 --FEB FEB 15001500 15001500 1216 1216 (284) (284) (676) (676)
(JAN+FEB)(JAN+FEB)40 40 -- --
MAR MAR 11001100 11001100 1344 1344 244 244 (432) (432) 40 40 -- --APR APR 900900 900900 1344 1344 444 444 12 12 40 40 -- --MAY MAY 11001100 11001100 1408 1408 308 308 320 320 40 40 -- --JUNE JUNE 16001600 16001600 1280 1280 (320) (320) 0 0 40 40 -- --TOTAL TOTAL 84008400 80008000 8000 8000 1010
LVEL STRATEGY REQUIRED CALCULATIONS – LVEL STRATEGY REQUIRED CALCULATIONS – WORKERS WORKERS REQUIREDREQUIRED
LVEL STRATEGY REQUIRED CALCULATIONS – LVEL STRATEGY REQUIRED CALCULATIONS – WORKERS WORKERS REQUIREDREQUIRED
Total net demand =8000- 400= 8000 units Total working days (6 months)= 125 DAYS Required workers=
total net demandtotal net demand** time required to produce time required to produce a unita unit
Total working days** daily working hours per day
8000*58000*5//(125*8) = (125*8) = 40 workers40 workers
OrOrDaily production = 8000/ 125= 64 unitsDaily production = 8000/ 125= 64 units
Units produced= Units produced= Daily production * working days per monthDaily production * working days per monthJan= 64 units*22 days= 1408 unitsJan= 64 units*22 days= 1408 units
Total net demand =8000- 400= 8000 units Total working days (6 months)= 125 DAYS Required workers=
total net demandtotal net demand** time required to produce time required to produce a unita unit
Total working days** daily working hours per day
8000*58000*5//(125*8) = (125*8) = 40 workers40 workers
OrOrDaily production = 8000/ 125= 64 unitsDaily production = 8000/ 125= 64 units
Units produced= Units produced= Daily production * working days per monthDaily production * working days per monthJan= 64 units*22 days= 1408 unitsJan= 64 units*22 days= 1408 units
LVEL STRATEGY REQUIRED CALCULATIONS LVEL STRATEGY REQUIRED CALCULATIONS UNITS UNITS PRODUCEDPRODUCED
LVEL STRATEGY REQUIRED CALCULATIONS LVEL STRATEGY REQUIRED CALCULATIONS UNITS UNITS PRODUCEDPRODUCED
MONTH MONTH WORKERS WORKERS REQUIRED REQUIRED
WORK DAYS WORK DAYS
PER MONTH PER MONTH
REGULARREGULAR
HOURS HOURS
PER DAY PER DAY
UNITS PRODUCEDUNITS PRODUCED
JAN JAN 40 40 2222 88 (40*22*8/5) = 1408 (40*22*8/5) = 1408 FEB FEB 40 40 1919 88 (40*19*8/5) = 1216 (40*19*8/5) = 1216 MAR MAR 40 40 2121 88 (40*21*8/5) = 1344 (40*21*8/5) = 1344 APR APR 40 40 2121 88 (40*21*8/5) = 1344 (40*21*8/5) = 1344 MAY MAY 40 40 2222 88 (40*22*8/5) = 1408 (40*22*8/5) = 1408 JUNE JUNE 40 40 2020 88 (40*20*8/5) = 1280 (40*20*8/5) = 1280
TOTAL TOTAL 8000 8000
2- Pure Level Strategy 2- Pure Level Strategy Cost($)Cost($) 2- Pure Level Strategy 2- Pure Level Strategy Cost($)Cost($)
MONTH MONTH REGULAR REGULAR PRODUCTION PRODUCTION
COSTCOST
MATERIAL MATERIAL COST COST
HIRING HIRING
COST COST
FIRING FIRING COST COST
INVENTORY INVENTORY CARRYING CARRYING
COST COST
STOCKOUT STOCKOUT COST COST
TOTAL TOTAL COST COST
JAN JAN 28160 28160 140800 140800 2000 2000 -- -- 1960 1960 172920172920
FEB FEB 24320 24320 121600 121600 -- -- -- 3380 3380 149300 149300
MAR MAR 26880 26880 134400 134400 -- -- -- 2160 2160 163440 163440
APR APR 26880 26880 134400 134400 -- -- 18 18 00 161298161298
MAY MAY 28160 28160 140800 140800 -- -- 480 480 00 169440169440
JUNE JUNE 25600 25600 128000 128000 -- -- -- 00 153600 153600
TOTAL TOTAL 160000 160000 800000 800000 2000 2000 498 498 7500 7500 969998969998
3- Minimum Workforce with 3- Minimum Workforce with SubcontractingSubcontracting
3- Minimum Workforce with 3- Minimum Workforce with SubcontractingSubcontracting
3- Minimum Workforce with Subcontracting3- Minimum Workforce with Subcontracting3- Minimum Workforce with Subcontracting3- Minimum Workforce with Subcontracting
MONTH MONTH DEMAND DEMAND PRODUCTION PRODUCTION
REQUIREDREQUIRED
WORKERS WORKERS REQUIRED REQUIRED
HIREDHIRED FIRED FIRED UNITS UNITS PRODUCEDPRODUCED
UNITS UNITS
SUBCONTRACTSUBCONTRACT
JAN JAN 22002200 18001800 2727 -- 33 950950 850850 FEB FEB 15001500 15001500 2727 -- -- 821821 679679 MAR MAR 11001100 11001100 2727 -- -- 907907 193193 APR APR 900900 900900 2727 -- -- 907907 -- MAY MAY 11001100 11001100 2727 -- -- 950950 143143JUNE JUNE 16001600 16001600 2727 -- -- 864864 736736 TOTAL TOTAL 84008400 80008000 53995399 26012601
3- Minimum Workforce with Subcontracting3- Minimum Workforce with Subcontracting3- Minimum Workforce with Subcontracting3- Minimum Workforce with Subcontracting SUBCONTRACT+ UNITS PRODUCED = REQUIRED PRODUCTIONSUBCONTRACT+ UNITS PRODUCED = REQUIRED PRODUCTION Minimum Workforce = (APRIL DEMAND ((LOWEST)) :-Minimum Workforce = (APRIL DEMAND ((LOWEST)) :-
900*5/ (21 DAYS* 8 HOURS) = 26.8 = 27 WORKERS.900*5/ (21 DAYS* 8 HOURS) = 26.8 = 27 WORKERS.
SUBCONTRACT+ UNITS PRODUCED = REQUIRED PRODUCTIONSUBCONTRACT+ UNITS PRODUCED = REQUIRED PRODUCTION Minimum Workforce = (APRIL DEMAND ((LOWEST)) :-Minimum Workforce = (APRIL DEMAND ((LOWEST)) :-
900*5/ (21 DAYS* 8 HOURS) = 26.8 = 27 WORKERS.900*5/ (21 DAYS* 8 HOURS) = 26.8 = 27 WORKERS.
3- Minimum Workforce with3- Minimum Workforce with Subcontractingubcontracting- CALCULATING UNIT PRODUCEDCALCULATING UNIT PRODUCED 3- Minimum Workforce with3- Minimum Workforce with Subcontractingubcontracting- CALCULATING UNIT PRODUCEDCALCULATING UNIT PRODUCED
JAN 27WORKERS*22 WORKING DAYS PER MONTH* 8 AVAILABLE HOURS PER DAY 27*22*8/5 4752/5= 950.4= 950 UNIT
FEB 27* 19*8/5= 4104/5= 820.8= 821
MAR 27* 21*8/5 = 4536 /5= 907.2 = 907
APR 27* 21*8/5 = 4536 /5= 907.2 = 907
MAY 27*22*8/5 4752/5= 950.4= 950
JUNE 27*20*8/5 4320/5= 864
3- Minimum Workforce with3- Minimum Workforce with Subcontractingubcontracting- - HOW INVENTORY RESULTS IN APRIL?- HOW INVENTORY RESULTS IN APRIL?
3- Minimum Workforce with3- Minimum Workforce with Subcontractingubcontracting- - HOW INVENTORY RESULTS IN APRIL?- HOW INVENTORY RESULTS IN APRIL?
AFTER CALCULATING UNITS PRODUCED, WE SEE THAT IN PRODUCTION IN THIS MONTH IS MORE THAN DEMAND (907-900), SO THE DIFFERENCE (7 UNITS ONLY) IS THE MONTHLY INVENTORY.
AFTER CALCULATING UNITS PRODUCED, WE SEE THAT IN PRODUCTION IN THIS MONTH IS MORE THAN DEMAND (907-900), SO THE DIFFERENCE (7 UNITS ONLY) IS THE MONTHLY INVENTORY.
3- Minimum Workforce with Subcontracting-3- Minimum Workforce with Subcontracting- COST($)COST($)3- Minimum Workforce with Subcontracting-3- Minimum Workforce with Subcontracting- COST($)COST($)
MONTH MONTH REGULAR REGULAR
PRODUCTION PRODUCTION
COSTCOST
MATERIALMATERIAL COST COST
HIRING HIRING COSTCOST
FIRING FIRING COSTCOST
INVENTORY INVENTORY
CARRYINGCARRYING COST COST
SUBCONTRACTINSUBCONTRACTING COST G COST
TOTAL TOTAL
COSTCOST
JAN JAN 1900019000 9500095000 00 750750 00 106250 106250 221000 221000
FEB FEB 1642016420 8210082100 00 00 00 84875 84875 183395 183395
MAR MAR 1814018140 9070090700 00 00 00 24125 24125 132965 132965
APR APR 1814018140 9070090700 00 00 1111 0 0 108851 108851
MAY MAY 1900019000 9500095000 00 00 00 17875 17875 131875 131875
JUNE JUNE 1728017280 8640086400 00 00 00 92000 92000 195680 195680
TOTAL TOTAL 107980107980 539900539900 750750 1111 325125 325125 973766 973766
Which is the best plan ?Which is the best plan ?Which is the best plan ?Which is the best plan ?
STRATEGYSTRATEGY TOTAL COST($)TOTAL COST($)
Pure Chase StrategyPure Chase Strategy 974800974800
Pure Level StrategyPure Level Strategy 969998969998
Minimum Workforce Minimum Workforce with Subcontractingwith Subcontracting
973766973766
LEVEL IS THE BEST STRATEGYLEVEL IS THE BEST STRATEGY
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