Southeast Soda Pop, Inc., has a new fruit drink for which it has high hopes. John Mittenthal, the production planner, has assembled the following cost data and demand forecast:
John's job is to develop an aggregate plan. The three initial options he wants to evaluate are:
? Plan A: a strategy that hires and fi res personnel as necessary to meet the forecast.
? Plan B: a level strategy.
? Plan C: a level strategy that produces 1,200 cases per quarter and meets the forecast demand with inventory and subcontracting.
a) Which strategy is the lowest-cost plan?
b) If you are John's boss, the VP for operations, which plan do you implement and why.