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6. A manufacturer has the following information on its major product. Regular time production capacity is 2600 units /period
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Answer #1
Aggregate plan for 3 periods to achieve demand of total 8700 units (i.e. 4000, 2300 and 2400 units for period 1, 2 and 3 respectively) is as given below:
Beginning Inventory 400 units
Add: Regular time production for period 1 as per capacity 2600 units
Add: Regular time production for period 1 as per capacity 2600 units
Total units production during regular time for period 1 5600 units
Less: Demand for period 1 i.e. 4000 units 4000 units x Rs. 100 per unit = Rs. 400,000
Ending / Beginning Inventory for Period 2 1600 units
Add: Regular time production for period 2 as per capacity 2600 units
Total units production during regular time for period 2 4200 units
Less: Demand for period 2 i.e. 2300 units 2300 units x Rs. 100 per unit = Rs. 230,000
Ending / Beginning Inventory for Period 3 1900 units
Add: Regular time production for period 3 as per requirement 500 units
Total units production during regular time for period 2 2400 units
Less: Demand for period 3 i.e. 2400 units 2400 units x Rs. 100 per unit = Rs. 240,000
Ending Inventory for Period 3 0 units
Cost of unutilized capacity during regular time production 2600 units - 500 units (production of   period 3) = 2100 units x Rs. 50 per unit = Rs. 105,000
Therefore, an aggregate plan and total cost of the plan Rs 400,000 (cost of production as per demand for period 1 as calculated above) + Rs. 230,000 (cost of production as per demand for period 2 as calculated above) + Rs. 240,000 (cost of production as per demand for period 3 as calculated above) + Rs. 105,000 (cost of unutilized capacity during regular time production as calculated above) = Rs. 975,000
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