70.2K

Verified Solution

Link Copied!

Amid the disrupting economy, Manager David Smith of Fabric Mills, Inc., has to redevelop the aggregate planning. He has updated demand forecast and available regular capacity for regular fabric in Table 1. Demand for regular fabric is expected to drop significantly due to a huge sales drop in the apparel sector. Available normal capacity also dropped due to the temporal workforce shrinkage, reduced working hours and plant closures.

Table 1: Demand Forecast and Capacity for Regular Fabric (in Hundreds of Bolts)

Month	5	6	7	8	9	10	11
Forecast	140	140	180	180	180	200	200
Regular Capacity	140	190	250	250	250	250	250

He has also updated cost information shown in the table below. The subcontract cost has increased by 10% due to the increase in logistics costs. The cost of carrying inventory has doubled due to the increased risk of obsolescence. That is, carrying large inventory when demand is rapidly shrinking slows down the movement of inventory and thus increases the risk of product obsolescence.

Regular output	$40 per hundred bolts
Overtime	$60 per hundred bolts
Subcontract	$55 per hundred bolts
Inventory carrying cost	$4 per hundred bolts

Now David is ready to develop aggregate planning. Given the highly uncertain environment, he is going to try a number of different scenarios for aggregate planning. David is certain that workers can be assigned to other jobs if production is less than normal.

QUESTION 1

Although it may be a little too optimistic, David first assumes that all bolts of regular fabric produced in Month 4 will be sold. That is, the ending inventory at the end of Month 4 will be zero. For simplicity, he also assumes that backlog at the end of Month 4 will be zero. Under this scenario, develop a chase plan. Backlog is not allowed. How much is the total cost?

• Use the worksheet in the Excel file.
• Enter 0 in Cell D9 and Cell D11 in the excel file.
• In a chase plan, you can reduce regular output if available regular output exceeds demand.

1. $48,800
2. $52.080
3. $67,640
4. $81,820

QUESTION 2

Under the scenario in QUESTION 1, now develop a level plan. Backlog is not allowed. How much is the total cost?

• In a level plan, you cannot reduce regular outputs. You need to use all available regular outputs.

1. $48,800
2. $52.080
3. $67,640
4. $81,820

QUESTION 3

In the level plan developed in QUESTION 2, how many bolts will be carried over to Month 12?

1. 0 bolts
2. 310(00) bolts
3. 360(00) bolts
4. 1,110(00) bolts

QUESTION 4

David next considers a more realistic scenario. Given the weak demand, he is afraid that a significant amount of regular fabric will remain unsold. He estimates that the amount of unsold regular fabric at the end of Month 4 to be 200(00) bolts. The positive ending inventory implies that backlog will be zero at the end of Month 4. Under this scenario, develop a chase plan. Backlog is not allowed. How many bolts of regular outputs are required in Month 6?

Enter 200 in Cell D9 and 0 in Cell D11 in the excel worksheet

• Use the ending inventory from the previous period, if any, to satisfy the current demand and adjust regular outputs accordingly.
  • If the ending inventory from the previous period exceeds the current demand, regular outputs are not required in the current period.
  • If the ending inventory falls short of the current demand, use regular outputs to fill the gap.

1. 0 bolt
2. 80(00) bolts
3. 140(00) bolts
4. 190(00) bolts

QUESTION 5

In the chase plan developed in QUESTION 4, how much is the total cost?

1. $38,240
2. $41,440
3. $42,240
4. $46,000

A B C D E F G H I J K L M N 5 6 7 8 9 10 11 Total 0 | | | | 0 0 0 Month Forecast Output Regular Overtime Subcontract Output - Forecast Inventory Beginning Ending Average Backlog Output Regular @ Overtime @ Subcontract @ Inventory Backlog @ Total 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O O O 0 0 0 0 O $0 $0 $0 $0 O O 0 0 0 0 0 O $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 A B C D E F G H I J K L M N 5 6 7 8 9 10 11 Total 0 | | | | 0 0 0 Month Forecast Output Regular Overtime Subcontract Output - Forecast Inventory Beginning Ending Average Backlog Output Regular @ Overtime @ Subcontract @ Inventory Backlog @ Total 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O O O 0 0 0 0 O $0 $0 $0 $0 O O 0 0 0 0 0 O $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

Answer & Explanation Solved by verified expert

See Answer