Reference no: EM132138936

Sales & Operational Planning, Flynn Commercial Freezer Ltd. (FCF Ltd), makes commercial and industrial freezers (the kind hotels and restaurants use, and has the aggregate demand requirements for the next six months as given in the table below as are the costs and other necessary data. The firm has regular capacity for 820 units, and overtime capacity for 40 more. Currently, subcontracting can supply up to 100 units per month and this is unlikely to change in the near future.9 Month Demand Costs and other data 1 440 Previous output level 460 units 2 480 Beginning inventory 0 units 3 520 Stockout cost €800 per unit 4 500 Inventory holding cost €400 per unit at end of month 5 420 Unit Cost, regular time €1,500 per unit 6 400 Subcontracting €2,100 per unit Unit Cost, overtime €1,800 per unit Hiring workers €200 per unit Firing workers €500 per unit FCF Ltd is considering one of the following three aggregate plans: Plan A is to produce level quantity, incurring back orders and inventory charges, Plan B is to produce a base quantity of 800, using first, overtime, then subcontracting, to meet demand and Plan C, a chase plan, using overtime and then subcontracting if regular capacity is insufficient to cover monthly demand. The company wishes to minimise costs. Note: there is no need to start and end on the same output level. FCF Ltd has asked you to recommend one of the plans. Prepare each of the plans, calculate the costs associated with each plan and make a recommendation.