Practice Problem: Aggregate Planning

Problem 1:
Set the following problem up in transportation format and solve for the minimum cost
plan.

Period

Feb Mar Apr

Demand 55 70 75

Capacity

Regular 50 50 50

Overtime 5 5 5

Subcontract 12 12 10

Beginning Inventory 10

Costs

Regular time $60 per unit

Overtime $80 per unit

Subcontract $90 per unit

Inventory carrying $1 per unit per month

cost

Back order cost $3 per unit per month

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 ANSWER

Problem 1:

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Problem 2

Hiway Trucking Company hauls commercial freight in Maricopa County, Arizona.

Hiway estimates the aggregate quarterly demand for next year at 5100, 4900, 9500, and
5000 Ton-Miles. Trucking equipment owned by the company, rented trucks, and
subcontracting can be used to supply capacity to meet Hiway’s aggregate demand.

Sources of Capacity Ton-Miles per Quarter Cost per Ton-Mile

Company Trucks:
Straight Time 4000 $ 0.25
Over Time 1000 $0.30
Rented Trucks:
(including drivers and 1500 $ 0.35
freight handlers)
Subcontracting 1500 $0.40

Back ordering is possible with an additional cost of three cents per period for Ton-Mile.
Determine the low-cost schedule to meet the demand.