Practice Problem: Chapter 13, Aggregate Planning Problem 1: Set the following problem up in transportation format and solve

for the minimum cost plan.

Period Feb Demand 55 Mar 7 Apr 75

!apacit" #egular $vertime Subcontract 5 5 %& 5 5 %& 5 5 %

'eginning (nventor"

!osts #egular time $vertime Subcontract (nventor" carr"ing cost )* per unit )+ per unit ), per unit )% per unit per month

'ac- order cost

). per unit per month

ANSWERS Problem 1:

(n the above problem please note 'ac- order cost is more than inventor" cost. /et us understand this problem step b" step. First !ome to Feb !ol (n this alread" % units are there in hand and actual demand is 55 so ( need to produce onl" 05. So ( produced 05. Met the demand !ome to Mar col Demand is 7 and regularl" ( can produce 5 . So & short. 1hat means 5 overtime and %& outsource.1hat means . short. !ostwise ( will be %&2, dollars for sub contracting. 'ut sub contracting should be the last option.% ( can product in the previous month itself. 'ut still % short. So ( will produce 5 overtime and 5 ( will sub contract. So demand for March is met. !ome to April !ol M" capacit" is 5 353% 4*5. 'ut ( need 75.So there is shortage of +. (f ( carr" to ne5t month there will charges of ).2% 4 )&0.

&

1here for ( afford to ta-e e5tra from perivous month because inventor" cost is less than bac-order cost. 1here ( produce % e5tra in previous month. 6hen ( ta-e % e5tra from previous month then automaticall" march sub contracting will come down to &. 1here will be a short of .. 1hat can pushed to feb Month. 1hat is how we arrive at the solution. !oming to the cost. (f "ou are producing in the same month for the same order it will be * 7+ and , . 'ut if there is carr"over then )% e5tra. (f "ou are not meeting the demand "ou have to pa" e5tra ). as bac-order cost.