Case Study on Cool Engineering Company – Aggregate Planning Assignment Answer

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Cool Engineering Company has asked you and your team to develop an aggregate plan for January through June for its refrigerator production based on the following data:

 

Cost Data

Holding cost               RM8/ refrigerator /month

Subcontracting            RM80/ refrigerator

Regular-time labor      RM12/hour

Overtime labor            RM18/hour for hours above

8 hours/worker/day

Hiring cost                  RM40/ worker

Layoff cost                  RM80/ worker

Stock-out cost RM60/refrigerator

 

Capacity Data

Current workforce (December)          8 people

Labor hours/ refrigerator                    4 hours

Workdays/month                                20 days

Beginning inventory               250 refrigerators

 

Month

Month	Demand
January	400
February	500
March	550
April	700
May	800
June	700

 

What will each of the following strategies cost?

 

Plan I: Vary the workforce so that production meets the forecasted demand. Cool Engineering had eight employees in December.

Plan II: Vary overtime only and use a constant workforce of ten.

Plan III: Vary overtime and allowing stock-out and use a constant workforce of ten

Plan IV: Vary overtime and subcontracting

The objective is to choose the plan that has the lowest cost. Which plan is best and why?