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1. Deb Bishop Health and Beauty Products has developed a new shampoo, and you need to develop its aggregate schedule. The cost accounting department has supplied you the costs relevant to the aggregate plan, and the marketing department has provided a four-quarter forecast. All are shown as follows:
Quarter Forecast
1 1,450
2 1,250
3 1,400
4 1,350
COSTS
Previous quarter’s output 1,500 units
Beginning inventory 0 units
Stockout cost for backorders $45 per unit
Inventory holding cost $10 per unit for every unit held at the end of the quarter
Hiring workers $40 per unit
Layoff workers $75 per unit
Per unit cost of labor $30 per unit
Overtime $45 per unit
Subcontracting Not available
Your job is to develop an aggregate plan for the next four quarters.
a. First, try hiring and layoffs (to meet the forecast) as necessary.
b. Then try a plan that holds employment steady at a constant production rate with no overtime and no subcontracting.
c. Next try a plan that uses a constant workforce to meet the lowest demand quarter and overtime to meet additional needs in higher demand quarters.
d. Which is the more economical plan for Deb Bishop Health and Beauty Products?
NOTE: Don’t forget to change employment from the previous quarter’s output on the chart. Also, you do not need daily production rates, just quarterly production rates for this problem
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