a) Which strategy is the lowest-cost plan? Try hiring and layoffs (to meet the forecast) as necessary (enter your responses as whole numbers). Hiring and Layoff Plan Hire Layoff (Units) Quarter Forecast Production (Units) 1,300 1 1,700

Marketing
20th Edition
ISBN:9780357033791
Author:Pride, William M
Publisher:Pride, William M
Chapter19: Pricing Concepts
Section: Chapter Questions
Problem 6DRQ
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Southeast Soda Pop, Inc., has a new fruit drink for which it has high hopes. John Mittenthal, the production planner, has assembled the
following cost data and demand forecast:
Click the icon to view the demand forecast.
E Click the icon to view the cost data.
John's job is to develop an aggregate plan. The three initial options he wants to evaluate are:
• Plan A: a strategy that hires and fires personnel as necessary to meet the forecast.
• Plan B: a level strategy.
• Plan C: a level strategy that produces 1,000 cases per quarter and meets the forecast demand with inventory and subcontracting.
a) Which strategy is the lowest-cost plan?
Try hiring and layoffs (to meet the forecast) as necessary (enter your responses as whole numbers).
Hiring and Layoff Plan
Layoff
(Units)
Hire
Quarter
Forecast
Production
Inits)
1,300
1
1,700
Costs/Other Data
Previous quarter's output = 1,300 cases
Beginning inventory = 0 cases
Stockout cost of backorders = $140 per case
Inventory holding cost = $45 per case at end of quarter
Hiring employees = $40 per case
Terminating employees = $70 per case
Subcontracting cost = $65 per case
Unit cost on regular time = $25 per case
Overtime cost = $20 extra per case
%3D
%3D
Quarter
Forecast
%3D
1
1,700
%3D
1,100
3
1,500
4
1,000
Capacity on regular time = 1,700 cases per quarter
%3D
Transcribed Image Text:Southeast Soda Pop, Inc., has a new fruit drink for which it has high hopes. John Mittenthal, the production planner, has assembled the following cost data and demand forecast: Click the icon to view the demand forecast. E Click the icon to view the cost data. John's job is to develop an aggregate plan. The three initial options he wants to evaluate are: • Plan A: a strategy that hires and fires personnel as necessary to meet the forecast. • Plan B: a level strategy. • Plan C: a level strategy that produces 1,000 cases per quarter and meets the forecast demand with inventory and subcontracting. a) Which strategy is the lowest-cost plan? Try hiring and layoffs (to meet the forecast) as necessary (enter your responses as whole numbers). Hiring and Layoff Plan Layoff (Units) Hire Quarter Forecast Production Inits) 1,300 1 1,700 Costs/Other Data Previous quarter's output = 1,300 cases Beginning inventory = 0 cases Stockout cost of backorders = $140 per case Inventory holding cost = $45 per case at end of quarter Hiring employees = $40 per case Terminating employees = $70 per case Subcontracting cost = $65 per case Unit cost on regular time = $25 per case Overtime cost = $20 extra per case %3D %3D Quarter Forecast %3D 1 1,700 %3D 1,100 3 1,500 4 1,000 Capacity on regular time = 1,700 cases per quarter %3D
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ISBN:
9780357033791
Author:
Pride, William M
Publisher:
South Western Educational Publishing