1. 1 of 5
TUTORIAL / EXERCISE
QUESTION 5
Global Rubber manufactures rubber gloves for export. The company is currently
developing an aggregate production plan for six-month period from July to December
2021. The company expects the demand for the period to be as follows:
Month Forecast Demand (Units)
July 8,000
August 8,000
Septmber 10,000
October 10,000
November 12,000
December 10,000
Total 58,000
Additional Information:
Current Workforce 20 Direct Workers
Inventory Carrying Cost RM 1 / unit / month
Regular wage rate RM 5/unit
Overtime rate RM 7.50
Standard output 20 units/worker/day
Working days 25 days/month
Global Rubber wants an additional production of 1,000 units each month to anticipate
uncertainty in demand.
a) Develop an aggregate production plan for the company using the constant workforce
strategy by changing production rates through overtime.
2. 2 of 5
ANSWER:
STEP 1:
Actual Production:
20 workers x 25 days/month x 20 units/worker/day = 10,000 units
Month Forecast Demand (Units) New Forecast Demands
(Units)
July 8,000 + 1,000 9,000
August 8,000 + 1,000 9,000
Septmber 10,000 + 1,000 11,000
October 10,000 + 1,000 11,000
November 12,000 + 1,000 13,000
December 10,000 + 1,000 11,000
Total 64,000
STEP 2:
July August Sep October Nov Dec Total
Numbers of
Workers
20 20 20 20 20 20 120
Productive
Days
25 25 25 25 25 25
Beginning
Inventory
0 1,000 (1,000+ 1,000)
2,000
1,000 0 0
Unit Produced 10,000 10,000 10,000 10,000 10,000 10,000 60,000
Actual
Production
(Units)
9,000 9,000 11,000 11,000 13,000 11,000 64,000
Surplus/Short
age
1000 (1000+100
0)
2000
(-1000+2000)
1000
(-1000+1000)
0
(3000) (1000)
Ending
Inventory
1000 2000 1000 0 0 0 4000
Overtime 3000 1000 4000
Surplus = Actual production – Unit Produced
3. 3 of 5
b) Calculate the total cost of the plan
A. Wages
Jul = 25 days x 20 Workers x 20 units/day x RM 5 50,000
Aug = 25 days x 20 Workers x 20 units/day x RM 5 50,000
Sep = 25 days x 20 Workers x 20 units/day x RM 5 50,000
Oct = 25 days x 20 Workers x 20 units/day x RM 5 50,000
Nov = 25 days x 20 Workers x 20 units/day x RM 5 50,000
Dec = 25 days x 20 Workers x 20 units/day x RM 5 50,000
TOTAL WAGES FOR 6 MONTHS RM 300,000
B. Overtime Carrying Cost
Nov= 3000 units x RM 7.50 / hour 22,500
Dec = 1000 units x RM 7.50 / hour 7,500
TOTAL OVERTIME COST RM 30,000
C. Inventory Carrying Cost
Jul = 1000 units x RM 1 1000
Aug = 2000 units x RM 1 2000
Sep = 1000 units x RM 1 1000
TOTAL INVENTORY COST RM 4,000
TOTAL COST RM 334,000
END OF QUESTION
