Shoney Video Concepts produces a line of video streaming servers that are linked to computers for storing movies. These devices have very fast access and large storage capacity.
Shoney is trying to determine a production plan for the next 12 months. The main
criterion for this plan is that the employment level is to be held constant over the period.
Shoney is continuing in its R&D efforts to develop new applications and prefers not to
cause any adverse feelings with the local workforce. For the same reason, all employees
should put in full workweeks, even if that is not the lowest-cost alternative. The forecast
for servers for the next 12 months is
Manufacturing cost is $200 per server, equally divided between materials and labor.
Inventory storage cost is $5 per month. A shortage of servers results in lost sales and is
estimated to cost an overall $20 per unit short.
The inventory on hand at the beginning of the planning period is 200 units. Ten labor
hours are required per DVD player. The workday is eight hours.
Develop an aggregate production schedule for the year using a constant workforce. For
simplicity, assume 22 working days each month except July, when the plant closes down
for three weeks’ vacation (leaving seven working days). Assume that total production
capacity is greater than or equal to total demand.