Aggregate Planning | Assignment

Aggregate Planning 1
AGGREGATE PLANNING
By (Name)
Course
Professor’s Name
Institution
Date

Aggregate Planning 2
Aggregate Planning
Production Cost Using Level Plan
Since Red tomato starts with 1000 Units and needs to have at least 500 in stock at the end
of the business, and demand is 1600 units, it means the company must produce at least 15500
units in the 6 months. The level plan means equal production each month. Therefore, 2584 units
must be produced every month, and the starting inventory on hand is added to the production
amount of the first month.
Level Strategy
Month Sales
Forecast
Production
Plan
inventory- Hand,
Ending
January 1600 2584 1984
February 3000 2584 1568
March 3200 2584 952
April 3800 2584 -264
May 2200 2584 120
June 2200 2584 504
Total 16000 15504 4864
Inventory Carrying Cost = 4864 * 2 = $ 9728
Production Labor Cost
Production labor cost = Number of units * hours/unit 8 cost of labor per hour

Aggregate Planning 3
Required production volume = 15504 units
Required production hours = 15504 * 4 = 62016
Available production hours = No of employees * days * daily working hours * months
Assuming a regular working day of 8 hours
Production hours available = 80 * 20 * 8 * 6 = 76800 hrs.
Since employees are paid a regular pay irrespective of whether they are producing or not,
the cost of production labor = hours * Hourly rate = 76800 * 4 = $ 307200.
Cost of stock out = Number units stocked out * marginal cost of stock out = 264 * 5 =
1320.
Cost of materials = Unit cost * No of Units = 10 * 15504 = $ 155040
Total production cost = Labor cost + Holding cost + Cost of stockout + Materials Cost
155040 + 307200 + 1320 + 9728 = $ 473288
Production Cost Using Chase Plan
The chase strategy assumes workers are hired and fired as needed. The company starts
with 80 workers and 1000 units of stock on hand (Jamalnia et al., 2017; Jamalnia and Feili,
2013).
Since there are already 1000 Units of Inventory on hand, production for the first month is
1600- 1000 = 600. Since the company must remain with 500 units, production for the last month
= 2200 + 500= 2700 and workers needed = Units * Hours/unit/hours done by each worker. In a
month, each worker does 20 * 8 = 160 hrs.