Suppose you have been given responsibility for developing thesix-month aggregate production plan at Soda Galore, a manufacturerof soft drinks. Your company makes three types of soft drinks:regular, diet, and super-caffeinated. Fortunately, all three typesare made using the same production process, and the costs relatedto switching between the three types are so minimal that they canbe ignored. Thus, you can treat your problem as an aggregateplanning exercise where the planning unit is cases of soft drinks,regardless of what types of drinks they are.

The S&OP team has developed a forecast of demand for the firstsix months of the year as shown in Table 13-3. The S&OP teamhas also provided you with the cost data shown in Table 13-4.

The material cost of a case of soda is the same regardless ofwhether it is produced in regular time or overtime.

TABLE 13-3 Monthly Demand at Soda Galore

Month	Demand Forecast
January	16,000	cases
February	32,000	cases
March	32,000	cases
April	32,000	cases
May	24,000	cases
June	80,000	cases
TotalDemand	216,000	cases
AverageMonthly Demand	36,000	cases

TABLE 13-4 Soda Galore Planning Data

Current workforce		10	workers
Averagemonthly output per worker		2,000	cases per month
Inventoryholding cost	$	0.40	per case per month
Regular wagerate	$	36	per hour
Regularproduction hours/month/worker		235	hours
Overtime wagerate	$	54.00	per hour
Hiringcost	$	1,000	per worker
Subcontractingcost	$	7.00	per case
Firing/layoffcost	$	1,500	per worker
Beginninginventory		5,000	(all safety stock)

Assume that employees negotiate an increase in the regularproduction wage rate to $40 per hour and $60 per hour for overtime.Also assume that Soda Galore always plans to hold at least 5,000cases of safety stock to meet unanticipated customer demand. Assumethat hiring and layoff/firing, if necessary, occur at the beginningof the month.

a. Using the planning information and the newlynegotiated wage rates, develop a six-month production plan based onlevel production. (Leaveno cells blank - be certain to enter "0" whereverrequired.)

	Level Production Plan Month Demand Regular Production Overtime or Subcontract Production Ending Inventory Workers Required (2,000 cases/worker) Hire Fire layoff Jan. Feb. March April May June Total

b. Determine the cost of the level productionplan.

c. Using the planning information and the newlynegotiated wage rates, develop a six-month production plan based onchase production. For the Overtime or Subcontract Plan, use thelowest monthly demand value to compute the size of the fixedworkforce. (Leave nocells blank - be certain to enter "0" whereverrequired.)

	ChaseProduction Plan : Adjust Workforce Size Month Demand Regular Production Overtime or Subcontract Production Ending Inventory Workers Required (2,000 cases/worker) Hire Fire layoff Jan. Feb. March April May June Total

	Overtimeor Subcontract Month Demand Regular Production Overtime or Subcontract Production Ending Inventory Workers Required (2,000 cases/worker) Hire Fire layoff Jan. Feb. March April May June Total

d. Determine the cost of the chase productionplan.

	Totalcost if workforce size adjusted Totalcost if overtime production used Total cost if subcontracting used

e. After much internal discussion, the companydecides to maintain a permanent workforce of 10 production workers.Given the same planning information and this new requirement,develop a six-month production plan based on hybridproduction.(Leave no cells blank - be certain to enter "0" whereverrequired.)

	HybridPlan Month Demand Regular Production Overtime or Subcontract Production Ending Inventory Workers Required (2,000 cases/worker) Hire Fire layoff Jan. Feb. March April May June Total

  
f. Determine the cost of the hybrid productionplan. Use the overtimecost.