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Problem 1: Develop a production aggregate plan and calculate the corresponding cost, given the following forecast:
Month
1
2
3
4
5
6
Forecast
380
400
420
440
460
480
Use steady regular output of 400 units per month, use overtime as needed for up to 40 units per month, and use subcontracting to make up any needed output to match the forecast. Assume that no backorder is allowed. Hint: compare all possible production plans and select the best with the lowest total cost.
Unit costs are: Regular output = $25/unit, Overtime = $40/unit, Subcontract = $60/unit, Inventory cost = $15/unit/average inventory.
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