chap011 - tb

Chapter 11 Aggregate Planning and Master Scheduling

Chapter 11 - Aggregate Planning and Master Scheduling

Chapter 11

Aggregate Planning and Master Scheduling

True / False Questions

1.Aggregate planning is intermediate-range capacity planning that typically covers a time horizon of one to three months.TrueFalse

2.The goal of aggregate planning is to achieve a production plan that attempts to balance the organization's resources and meet expected demand.TrueFalse

3.Aggregate planners are concerned with the quality and quantity of expected demand.TrueFalse

4.Aggregate planning is used to establish general levels of employment, output, and inventories over an intermediate-range of time.TrueFalse

5.The assignment of work to specific machines and people are examples of aggregate planning.TrueFalse

6.The output from aggregate planning is a detailed business plan covering the next 2 to 12 months.TrueFalse

7.Demand can be altered in aggregate planning by promotion and producing additional product using overtime.TrueFalse

8.Capacity can be modified in aggregate planning by promotion and producing additional product using overtime.TrueFalse

9.Organizations facing seasonal changes in demand are prevented from using aggregate planning techniques.TrueFalse

10.Seasonality in demand has the advantage of leveling out requirements for our product or service.TrueFalse

11.A level capacity strategy is also known as a chase demand strategy.TrueFalse

12.An advantage of a "chase" strategy for aggregate planning is that inventories can be kept relatively low.TrueFalse

13.Linear programming models yield the optimal solution.TrueFalse

14.Ultimately the overriding factor in choosing a strategy in aggregate planning is overall cost.TrueFalse

15.Aggregate planners commonly use trial-and-error methods in developing aggregate plans.TrueFalse

16.The use of tables and charts in aggregate planning usually enables planners to arrive at an optimal plan.TrueFalse

17.Aggregate planners typically use mathematical techniques such as linear programming and linear decision rules for planning.TrueFalse

18.Disaggregating an aggregate plan leads to a master schedule.TrueFalse

19.The master schedule indicates the quantity and timing for delivery of a product, but not the dates production will need to start.TrueFalse

20.Departmental budgeting is an example of aggregate planning.TrueFalse

21.Master schedulers are employed primarily by service organizations.TrueFalse

22.Subcontracting 'in' would apply to periods in which our organization has excess capacity.TrueFalse

23.Available-to-promise in the first week is equal to beginning inventory plus MPS quantity, if any, less committed customer orders before the next MPS quantity.TrueFalse

24.A time fence in the master schedule is used to prevent unauthorized people from making changes to the schedule.TrueFalse

25.After the first period of the planning horizon, available-to-promise is computed only for those periods in which there is an MPS quantity.TrueFalse

26.In the master production schedule, production is planned for the next period whenever the available-to-promise quantity becomes negative.TrueFalse

Multiple Choice Questions

27.Which of the following best describes aggregate planning?A.the link between intermediate term planning and short term operating decisionsB.a collection of objective planning toolsC.make or buy decisionsD.an attempt to respond to predicted demand within the constraints set by product, process and location decisionsE.manpower planning

28.Accommodating peak demands and effectively using labor resources during periods of low demand would be the goal of aggregate planners in (A.ManufacturingB.MilitaryC.ArcheologyD.LibrariesE.Financial Services

29.Aggregate planning is capacity planning for:A.the long rangeB.the intermediate rangeC.the short rangeD.typically one to three monthsE.typically one or more years

30.One area to which aggregate planning decisions relate is:A.job sequencingB.customer order quantitiesC.inventory levelsD.locationE.layout

31.Which of the following is an input to aggregate planning?A.beginning inventoryB.forecasts for each period of the scheduleC.customer ordersD.all of the aboveE.quantity discounts

32.Essentially, the output of aggregate planning is the:A.marketing planB.production planC.rough-cut capacity planD.assignment planE.material requirements plan

33.In doing "aggregate planning" for a firm producing paint, the aggregate planners would most likely deal with:A.just gallons of paint, without concern for the different colors and sizesB.gallons of paint, but be concerned with the different colors to be producedC.gallons, quarts, pints, and all the different sizes to be producedD.all the different sizes and all the different colors by sizeE.none of the above

34.Aggregate planning requires which of the following information?A.a forecast of expected demandB.current levels of inventoryC.(a) and (b)D.policies regarding employment levelsE.all of the above

35.Aggregate planners attempt to balance:A.demand and inventoriesB.demand and costsC.capacity and inventoriesD.capacity and costsE.capacity and demand

36.Which of the following is not an input to the aggregate planning process?A.resources availableB.demand forecastC.policies on work force changesD.master production schedulesE.cost information

37.Which one of the following would not be considered a decision option for purposes of aggregate planning?A.inventory levelsB.manpower levelsC.pricingD.production costsE.promotion

38.Which of the following is not a basic option for altering the availability of capacity in a service environment?A.overtimeB.hiring/layoffC.part timeD.inventoryE.All of these are basic capacity options.

39.Which one of the following is not a basic option for altering demand?A.promotionB.backorderingC.pricingD.subcontractingE.All are demand options.

40.One option for altering the pattern of demand is:A.backordersB.overtimeC.part-time workersD.inventoriesE.subcontracting

41.Which of the following would not be a strategy associated with adjusting aggregate capacity to meet expected demand?A.subcontractB.vary the size of the workforceC.vary the intensity of workforce utilizationD.allow inventory levels to varyE.use backorders

42.One option for altering the availability of manufacturing capacity is:A.pricingB.promotionC.backordersD.inventoriesE.none of the above apply to manufacturing capacity

43.One option for altering the availability of capacity is:A.use of overtime or slack timeB.pricingC.promotionD.backordersE.none of the above

44.In order to use the "level capacity strategy," variations in demand are met by:A.varying output during regular time without changing employment levelsB.varying output during regular time by changing employment levelsC.(a) and (b)D.using combination of inventories, overtime, part time, and back ordersE.price adjustments

45.In using the "chase strategy" variations in demand could be met by:A.varying output during regular time without changing employment levelsB.varying output during regular time by changing employment levelsC.(a) and (b)D.varying inventory levelsE.price increases

46.Uncommitted inventory is called (A.Available-to-promise inventoryB.Free inventoryC.Safety stockD.Lead time inventoryE.Obsolete inventory

47.Aggregate planners seek to match supply and demand:A.at minimum overall costB.by staying within company policyC.(a) and (b)D.keeping inventories at a minimumE.all of the above

48.In practice, the more commonly used techniques for aggregate planning are:A.mathematical techniquesB.informal trial-and-error techniquesC.(a) and (b) about equallyD.simulation modelsE.linear programming optimization

49.The main disadvantage(s) of informal techniques used for aggregate planning is(are):A.they are expensive to doB.they may not result in the best planC.they take a long time to doD.they require use of a computerE.lack of formal education of the planners

50.Inventory information for firm ABC:What is the expected inventory at the end of April, 1999?A.350B.250C.150D.50E.none of the above

51.Inventory information for firm ABC:What was the inventory at the end of March, 1999?A.350B.250C.150D.50E.none of the above

52.Linear programming to produce an aggregate plan:A.will produce the best plan if accurate inputs are usedB.is the most widely used techniqueC.(a) and (b)D.will produce a plan that may not be the best planE.requires an excel spread sheet

53.Simulation to produce an aggregate plan:A.will produce the best planB.is the most widely used techniqueC.both (a) and (b)D.will produce a plan that may not be the best planE.requires a minimum of 4 iterations to be accurate

54.Which term is most closely associated with the term disaggregation?A.subcontractingB.master scheduleC.diversityD.varying inventory levelsE.firing and laying off

55.The direct result of disaggregating the aggregate plan is the:A.marketing planB.production planC.rough-cut capacity planD.master scheduleE.material requirements plan

56.Moving from the aggregate plan to a master production schedule requires:A.rough cut capacity planningB.disaggregationC.sub-optimizationD.strategy formulationE.chase strategies

57.That portion of projected inventory which enables marketing to make realistic commitments about delivery dates for new orders is:A.beginning inventoryB.safety stock inventoryC.available-to-promise inventoryD.high margin inventoryE.none of the above

58.Proactive and Reactive aggregate planning strategies are best associated with:A.Input and OutputB.Make and BuyC.Quantitative and QualitativeD.Exact and ApproximateE.Demand and Capacity options

Essay Questions

59.A manager has prepared a forecast of expected aggregate demand for the next six months. Develop an aggregate plan to meet this demand given this additional information: A level production rate of 100 units per month will be used. Backorders are allowed, and they are charged at the rate of $8 per unit per month. Inventory holding costs are $1 per unit per month in ending inventory. Determine the cost of this plan if regular time cost is $20 per unit and beginning inventory is zero.

60.Given the projected demands for the next six months, prepare an aggregate plan that uses inventory, regular time and overtime, and backorders. The plan must wind up with no units in ending inventory in Period 6. Regular time capacity is 150 units per month. Overtime capacity is 20 units per month. Overtime cost is $30 per unit, backorder cost is $20 per unit, inventory holding cost is $5 per unit, regular time cost of $20 per unit, and beginning inventory is zero.

61.Use either the transportation method or linear programming to develop an optimum aggregate plan, given the following data:

62.Prepare a master schedule based on the following information:Currently there are 145 units in inventory. Policy calls for a fixed order quantity of 250 units.

63.What is total forecasted demand?

64.What is total regular time capacity?

65.How should overtime capacity be utilized?

66.What are total regular time costs?

67.What are total overtime costs?

68.What are total carrying costs?

69.What are total backorder costs?

70.What are total costs for each period?

71.What are total costs for the six periods?


A firm has 43 units of a certain product on hand. Forecasts for the first two planning periods are 20 units each. A production quantity of 80 units is planned to be available in period 3. Customer orders are 22 for period 1 and 17 for period 2.

72.What is the projected on-hand inventory at the end of period 2?A.21B.1C.12D.20E.impossible to say without more information

73.What quantity is available for commitment to new customers in either of the first two periods?A.21B.1C.20D.4E.impossible to say without more information

A firm has 56 units of product X on hand. Forecasts of demand are for 20 units per week. An MPS quantity of 100 units is planned to arrive in period 3. Customer orders are 24 for period 1, 18 for period 2, and 15 for period 3.

74.What is the projected on hand inventory at the end of period 2?A.14B.32C.12D.20E.impossible to say without additional information

75.What quantity is available for commitment to new customers prior to the receipt of the MPS quantity in week 3?A.14B.32C.12D.20E.impossible to say without additional information.

76.When the opportunity cost of lost revenue is relatively high, _________ become(s) relatively more attractive.A.LayoffsB.BackordersC.Excess capacityD.DisaggregationE.Both B and C

77.The more __________ demand is, the more the aggregate plan will tend to reflect the ____________ strategy.A.Stable; LevelB.Aggregated; OutsourcingC.Variable; ChaseD.Complex; UncommittedE.Both A and C

78.In a service setting, the aggregate plan results in a time-phased projection of __________ requirements.A.customerB.staffC.inventoryD.subcontractingE.outsourcing

79.Which of the following differs between aggregate planning in services and aggregate planning in manufacturing?A.uncertainty in demandB.costs of storing inventoryC.the perishability of capacityD.cost of overtimeE.cost of hiring

80.At XYZ Corp., the aggregate planning unit reflects the fact that 50% of its output is product version A, 30% is version B, and 20% is version C. Suppose that over the coming year forecasted total demand (in planning units) is for 10,400 units. Once the production plan is disaggregated, what will the weekly forecast for version A be (assume 52 weeks per year)?A.1000B.200C.400D.100E.50

81.A master production schedule quantity of 300 units will arrive in week 6. Weekly demand over weeks 3 through 10 is forecasted at 50 units. At present, orders have been booked in various quantities in weeks 1, 2, 3 and 4. What is the available to promise for week 6?A.50B.6C.300D.100E.Cannot be determined without projected on-hand information

82.Which of the following steps is necessary to ensure that a master schedule is valid?A.worker schedulingB.order promisingC.inventory countingD.order bookingE.rough-cut capacity planning

Chapter 11 Aggregate Planning and Master Scheduling Answer Key

True / False Questions

1.Aggregate planning is intermediate-range capacity planning that typically covers a time horizon of one to three months.FALSE

Aggregate planning covers the mid-term, typically two to 12 months.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction2.The goal of aggregate planning is to achieve a production plan that attempts to balance the organization's resources and meet expected demand.TRUE

This is the goal of aggregate planning.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction3.Aggregate planners are concerned with the quality and quantity of expected demand.FALSE

Aggregate planners are concerned with the quantity and timing of expected demand.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction4.Aggregate planning is used to establish general levels of employment, output, and inventories over an intermediate-range of time.TRUE

This is the domain of aggregate planning.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction5.The assignment of work to specific machines and people are examples of aggregate planning.FALSE

Assigning work to specific machines or people is an example of detailed scheduling.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction6.The output from aggregate planning is a detailed business plan covering the next 2 to 12 months.FALSE

The output is an aggregate production plan.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction7.Demand can be altered in aggregate planning by promotion and producing additional product using overtime.FALSE

These are supply options.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Introduction8.Capacity can be modified in aggregate planning by promotion and producing additional product using overtime.FALSE

Promotions do not modify capacity.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Introduction9.Organizations facing seasonal changes in demand are prevented from using aggregate planning techniques.FALSE

Aggregate planning can accommodate seasonal changes in demand.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Introduction10.Seasonality in demand has the advantage of leveling out requirements for our product or service.FALSE

Seasonality increases variation in requirements.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Introduction11.A level capacity strategy is also known as a chase demand strategy.FALSE

Level and chase strategies are opposite approaches.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Basic Strategies for Meeting Uneven Demand12.An advantage of a "chase" strategy for aggregate planning is that inventories can be kept relatively low.TRUE

The chase strategy keeps inventories low.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Basic Strategies for Meeting Uneven Demand13.Linear programming models yield the optimal solution.TRUE

Linear programming models can find an optimal solution if one exists.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-03 Describe some of the graphical and quantitative techniques planners use.Topic Area: Techniques for Aggregate Planning14.Ultimately the overriding factor in choosing a strategy in aggregate planning is overall cost.TRUE

The task of aggregate planning is to strike a balance between demand and capacity at minimum cost.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Basic Strategies for Meeting Uneven Demand15.Aggregate planners commonly use trial-and-error methods in developing aggregate plans.TRUE

Trial-and-error approaches can lead to good solutions.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-03 Describe some of the graphical and quantitative techniques planners use.Topic Area: Techniques for Aggregate Planning16.The use of tables and charts in aggregate planning usually enables planners to arrive at an optimal plan.FALSE

Such solutions may be good solutions, but they're usually not optimal.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-03 Describe some of the graphical and quantitative techniques planners use.Topic Area: Techniques for Aggregate Planning17.Aggregate planners typically use mathematical techniques such as linear programming and linear decision rules for planning.FALSE

Both qualitative and quantitative approaches are used in aggregate planning.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-03 Describe some of the graphical and quantitative techniques planners use.Topic Area: Techniques for Aggregate Planning18.Disaggregating an aggregate plan leads to a master schedule.TRUE

This is an output of the aggregate planning process.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Disaggregating the Aggregate Plan19.The master schedule indicates the quantity and timing for delivery of a product, but not the dates production will need to start.TRUE

Required start dates depend on products' lead times.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Disaggregating the Aggregate Plan20.Departmental budgeting is an example of aggregate planning.TRUE

The challenge is to get requirements into balance with resources.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction21.Master schedulers are employed primarily by service organizations.FALSE

Master schedulers are primarily employed in manufacturing.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: Disaggregating the Aggregate Plan22.Subcontracting 'in' would apply to periods in which our organization has excess capacity.TRUE

Subcontracting in would be selling some available capacity.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Basic Strategies for Meeting Uneven Demand23.Available-to-promise in the first week is equal to beginning inventory plus MPS quantity, if any, less committed customer orders before the next MPS quantity.TRUE

This is the ATP calculation for the first week.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: The Master Scheduling Process24.A time fence in the master schedule is used to prevent unauthorized people from making changes to the schedule.FALSE

Time fences are used to ensure that full consideration is given when schedule changes are being considered.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: The Master Scheduling Process25.After the first period of the planning horizon, available-to-promise is computed only for those periods in which there is an MPS quantity.TRUE

After the first week, ATP values will only occur in periods in which there are MPS quantities.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: The Master Scheduling Process26.In the master production schedule, production is planned for the next period whenever the available-to-promise quantity becomes negative.FALSE

Production is planned to be complete in the period in which the projected on-hand becomes negative.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: HardLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: The Master Scheduling Process


27.Which of the following best describes aggregate planning?A.the link between intermediate term planning and short term operating decisionsB.a collection of objective planning toolsC.make or buy decisionsD.an attempt to respond to predicted demand within the constraints set by product, process and location decisionsE.manpower planning

A workable balance between demand and these constraints is sought.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction28.Accommodating peak demands and effectively using labor resources during periods of low demand would be the goal of aggregate planners in (A.ManufacturingB.MilitaryC.ArcheologyD.LibrariesE.Financial Services

These are the considerations in aggregate planning for service firms.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Aggregate Planning in Services29.Aggregate planning is capacity planning for:A.the long rangeB.the intermediate rangeC.the short rangeD.typically one to three monthsE.typically one or more years

The intermediate range typically runs from two to 12 months.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction30.One area to which aggregate planning decisions relate is:A.job sequencingB.customer order quantitiesC.inventory levelsD.locationE.layout

Different aggregate planning strategies affect inventory levels differently.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction31.Which of the following is an input to aggregate planning?A.beginning inventoryB.forecasts for each period of the scheduleC.customer ordersD.all of the aboveE.quantity discounts

All except quantity discounts are aggregate planning inputs.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Introduction32.Essentially, the output of aggregate planning is the:A.marketing planB.production planC.rough-cut capacity planD.assignment planE.material requirements plan

The production plan largely results from the aggregate planning effort.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction33.In doing "aggregate planning" for a firm producing paint, the aggregate planners would most likely deal with:A.just gallons of paint, without concern for the different colors and sizesB.gallons of paint, but be concerned with the different colors to be producedC.gallons, quarts, pints, and all the different sizes to be producedD.all the different sizes and all the different colors by sizeE.none of the above

The principle of aggregation is reflected in this answer.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Introduction34.Aggregate planning requires which of the following information?A.a forecast of expected demandB.current levels of inventoryC.(a) and (b)D.policies regarding employment levelsE.all of the above

All of these are inputs into the aggregate planning process.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Introduction35.Aggregate planners attempt to balance:A.demand and inventoriesB.demand and costsC.capacity and inventoriesD.capacity and costsE.capacity and demand

Capacity and demand are roughly balanced in aggregate planning.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction36.Which of the following is not an input to the aggregate planning process?A.resources availableB.demand forecastC.policies on work force changesD.master production schedulesE.cost information

The master production schedule is an output of the aggregate planning process.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Introduction37.Which one of the following would not be considered a decision option for purposes of aggregate planning?A.inventory levelsB.manpower levelsC.pricingD.production costsE.promotion

Production costs would be a critical variable, but they would not be a decision variable.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Basic Strategies for Meeting Uneven Demand38.Which of the following is not a basic option for altering the availability of capacity in a service environment?A.overtimeB.hiring/layoffC.part timeD.inventoryE.All of these are basic capacity options.

Inventory is typically not an option in services.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Aggregate Planning in Services39.Which one of the following is not a basic option for altering demand?A.promotionB.backorderingC.pricingD.subcontractingE.All are demand options.

Subcontracting is an option for altering capacity.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Introduction40.One option for altering the pattern of demand is:A.backordersB.overtimeC.part-time workersD.inventoriesE.subcontracting

Backordering shifts demand to later time periods.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Introduction41.Which of the following would not be a strategy associated with adjusting aggregate capacity to meet expected demand?A.subcontractB.vary the size of the workforceC.vary the intensity of workforce utilizationD.allow inventory levels to varyE.use backorders

Backorders do not involve adjusting capacity.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Basic Strategies for Meeting Uneven Demand42.One option for altering the availability of manufacturing capacity is:A.pricingB.promotionC.backordersD.inventoriesE.none of the above apply to manufacturing capacity

Inventory involves using capacity from earlier periods to satisfy demand in later periods.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Basic Strategies for Meeting Uneven Demand43.One option for altering the availability of capacity is:A.use of overtime or slack timeB.pricingC.promotionD.backordersE.none of the above

Overtime or slack time alters the availability of capacity.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Introduction44.In order to use the "level capacity strategy," variations in demand are met by:A.varying output during regular time without changing employment levelsB.varying output during regular time by changing employment levelsC.(a) and (b)D.using combination of inventories, overtime, part time, and back ordersE.price adjustments

A combination of inventories, overtime, part time, and back orders is the level strategy.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Basic Strategies for Meeting Uneven Demand45.In using the "chase strategy" variations in demand could be met by:A.varying output during regular time without changing employment levelsB.varying output during regular time by changing employment levelsC.(a) and (b)D.varying inventory levelsE.price increases

Changing employment levels to vary output is representative of a chase strategy.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Basic Strategies for Meeting Uneven Demand46.Uncommitted inventory is called (A.Available-to-promise inventoryB.Free inventoryC.Safety stockD.Lead time inventoryE.Obsolete inventory

Uncommitted inventory is available-to-promise.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: The Master Scheduling Process47.Aggregate planners seek to match supply and demand:A.at minimum overall costB.by staying within company policyC.(a) and (b)D.keeping inventories at a minimumE.all of the above

Aggregate plans minimize costs but conform to company policies.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Introduction48.In practice, the more commonly used techniques for aggregate planning are:A.mathematical techniquesB.informal trial-and-error techniquesC.(a) and (b) about equallyD.simulation modelsE.linear programming optimization

Trial-and-error techniques are more commonly used.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-03 Describe some of the graphical and quantitative techniques planners use.Topic Area: Techniques for Aggregate Planning49.The main disadvantage(s) of informal techniques used for aggregate planning is(are):A.they are expensive to doB.they may not result in the best planC.they take a long time to doD.they require use of a computerE.lack of formal education of the planners

Informal solutions may not be costly or difficult, but they may be less likely to offer up the best plan.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: EasyLearning Objective: 11-03 Describe some of the graphical and quantitative techniques planners use.Topic Area: Techniques for Aggregate Planning50.Inventory information for firm ABC:What is the expected inventory at the end of April, 1999?A.350B.250C.150D.50E.none of the above

The ending inventory equals the beginning plus production minus expected demand.

AACSB: AnalyticBloom's: ApplyDifficulty: EasyLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Techniques for Aggregate Planning51.Inventory information for firm ABC:What was the inventory at the end of March, 1999?A.350B.250C.150D.50E.none of the above

Beginning inventory equals the ending inventory plus demand minus production.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Techniques for Aggregate Planning52.Linear programming to produce an aggregate plan:A.will produce the best plan if accurate inputs are usedB.is the most widely used techniqueC.(a) and (b)D.will produce a plan that may not be the best planE.requires an excel spread sheet

If inputs are valid and accurate, linear programming will give an optimal solution.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-03 Describe some of the graphical and quantitative techniques planners use.Topic Area: Techniques for Aggregate Planning53.Simulation to produce an aggregate plan:A.will produce the best planB.is the most widely used techniqueC.both (a) and (b)D.will produce a plan that may not be the best planE.requires a minimum of 4 iterations to be accurate

Simulation is not guaranteed to produce an optimal plan.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-03 Describe some of the graphical and quantitative techniques planners use.Topic Area: Techniques for Aggregate Planning54.Which term is most closely associated with the term disaggregation?A.subcontractingB.master scheduleC.diversityD.varying inventory levelsE.firing and laying off

The aggregate plan is disaggregated into the master schedule.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: Disaggregating the Aggregate Plan55.The direct result of disaggregating the aggregate plan is the:A.marketing planB.production planC.rough-cut capacity planD.master scheduleE.material requirements plan


AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: Disaggregating the Aggregate Plan56.Moving from the aggregate plan to a master production schedule requires:A.rough cut capacity planningB.disaggregationC.sub-optimizationD.strategy formulationE.chase strategies


AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: Disaggregating the Aggregate Plan57.That portion of projected inventory which enables marketing to make realistic commitments about delivery dates for new orders is:A.beginning inventoryB.safety stock inventoryC.available-to-promise inventoryD.high margin inventoryE.none of the above

Available-to-promise values are calculated to help marketing make realistic commitments.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: The Master Scheduling Process58.Proactive and Reactive aggregate planning strategies are best associated with:A.Input and OutputB.Make and BuyC.Quantitative and QualitativeD.Exact and ApproximateE.Demand and Capacity options

Demand and capacity are the targets of proactive and reactive aggregate planning strategies.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Basic Strategies for Meeting Uneven Demand

Essay Questions

59.A manager has prepared a forecast of expected aggregate demand for the next six months. Develop an aggregate plan to meet this demand given this additional information: A level production rate of 100 units per month will be used. Backorders are allowed, and they are charged at the rate of $8 per unit per month. Inventory holding costs are $1 per unit per month in ending inventory. Determine the cost of this plan if regular time cost is $20 per unit and beginning inventory is zero.

The aggregate plan should look like this:With costs as follows:Total cost of this plan is $12,200.

Feedback: Production remains constant in a level aggregate plan.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Basic Strategies for Meeting Uneven Demand60.Given the projected demands for the next six months, prepare an aggregate plan that uses inventory, regular time and overtime, and backorders. The plan must wind up with no units in ending inventory in Period 6. Regular time capacity is 150 units per month. Overtime capacity is 20 units per month. Overtime cost is $30 per unit, backorder cost is $20 per unit, inventory holding cost is $5 per unit, regular time cost of $20 per unit, and beginning inventory is zero.

The aggregate plan should look like this:With costs as follows:Total cost of this plan is $20,200.

Feedback: Overtime and backordering are used to work around demand capacity imbalances in this scenario.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Basic Strategies for Meeting Uneven Demand61.Use either the transportation method or linear programming to develop an optimum aggregate plan, given the following data:

The optimum aggregate plan for this scenario is as follows:The total cost for this plan is $5,320

Feedback: This is an optimal solution found through linear programming.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Techniques for Aggregate Planning62.Prepare a master schedule based on the following information:Currently there are 145 units in inventory. Policy calls for a fixed order quantity of 250 units.

Feedback: There are units available-to-promise in several time periods.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: The Master Scheduling Process

63.What is total forecasted demand?

1,800 units

Feedback: Simply add up demand forecasts across the six periods.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Basic Strategies for Meeting Uneven Demand64.What is total regular time capacity?

1,680 units

Feedback: Multiply the per-period regular-time capacity (280) by six.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Basic Strategies for Meeting Uneven Demand

65.How should overtime capacity be utilized?

40 units each in periods 3, 4, and 5

Feedback: This represents the best use of overtime capacity.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Basic Strategies for Meeting Uneven Demand66.What are total regular time costs?

$33,600

Feedback: Multiply units produced on regular time by their regular time cost.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Basic Strategies for Meeting Uneven Demand67.What are total overtime costs?

$3,600

Feedback: Multiply the units produced on overtime by their per-unit overtime cost.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Basic Strategies for Meeting Uneven Demand68.What are total carrying costs?

$520

Feedback: For every unit in inventory at the end of a period, multiply by the per-unit per-period holding cost.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Basic Strategies for Meeting Uneven Demand69.What are total backorder costs?

$400

Feedback: For every unit backordered, multiply by the per-unit backorder cost.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Basic Strategies for Meeting Uneven Demand70.What are total costs for each period?

$5,680; $5,760; $6,980; $6,900; $7,200; $5,600

Feedback: Use appropriate costs to calculate these totals.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Basic Strategies for Meeting Uneven Demand71.What are total costs for the six periods?

$38,120

Feedback: Use appropriate costs to calculate these totals.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: Basic Strategies for Meeting Uneven Demand


A firm has 43 units of a certain product on hand. Forecasts for the first two planning periods are 20 units each. A production quantity of 80 units is planned to be available in period 3. Customer orders are 22 for period 1 and 17 for period 2.

72.What is the projected on-hand inventory at the end of period 2?A.21B.1C.12D.20E.impossible to say without more information

The POH at end of period 1 is 21. Subtract from this the forecasted demand for period 2.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: The Master Scheduling Process73.What quantity is available for commitment to new customers in either of the first two periods?A.21B.1C.20D.4E.impossible to say without more information

Subtract from the beginning on-hand inventory (43) the booked orders until the third week (39).

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: The Master Scheduling ProcessA firm has 56 units of product X on hand. Forecasts of demand are for 20 units per week. An MPS quantity of 100 units is planned to arrive in period 3. Customer orders are 24 for period 1, 18 for period 2, and 15 for period 3.

74.What is the projected on hand inventory at the end of period 2?A.14B.32C.12D.20E.impossible to say without additional information

Subtract the week 2 forecast (20) from the week 1 projected ending on-hand (32).

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: The Master Scheduling Process75.What quantity is available for commitment to new customers prior to the receipt of the MPS quantity in week 3?A.14B.32C.12D.20E.impossible to say without additional information.

There are 56 units in beginning inventory, and booked orders for 42 units until the next MPS quantity receipt.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-04 Prepare aggregate plans and compute their costs.Topic Area: The Master Scheduling Process76.When the opportunity cost of lost revenue is relatively high, _________ become(s) relatively more attractive.A.LayoffsB.BackordersC.Excess capacityD.DisaggregationE.Both B and C

The excess capacity costs diminish in relation to the potential lost revenue.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Basic Strategies for Meeting Uneven Demand77.The more __________ demand is, the more the aggregate plan will tend to reflect the ____________ strategy.A.Stable; LevelB.Aggregated; OutsourcingC.Variable; ChaseD.Complex; UncommittedE.Both A and C

These pure strategies reflect particular underlying demand patterns.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: MediumLearning Objective: 11-02 Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Topic Area: Basic Strategies for Meeting Uneven Demand78.In a service setting, the aggregate plan results in a time-phased projection of __________ requirements.A.customerB.staffC.inventoryD.subcontractingE.outsourcing

Staff requirements are the focus of aggregate planning in services.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Aggregate Planning in Services79.Which of the following differs between aggregate planning in services and aggregate planning in manufacturing?A.uncertainty in demandB.costs of storing inventoryC.the perishability of capacityD.cost of overtimeE.cost of hiring

Capacity is inherently perishable in services.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: MediumLearning Objective: 11-01 Explain what aggregate planning is and how it is useful.Topic Area: Aggregate Planning in Services80.At XYZ Corp., the aggregate planning unit reflects the fact that 50% of its output is product version A, 30% is version B, and 20% is version C. Suppose that over the coming year forecasted total demand (in planning units) is for 10,400 units. Once the production plan is disaggregated, what will the weekly forecast for version A be (assume 52 weeks per year)?A.1000B.200C.400D.100E.50

Divide 5,200 (annual demand) by 52 weeks.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: Disaggregating the Aggregate Plan81.A master production schedule quantity of 300 units will arrive in week 6. Weekly demand over weeks 3 through 10 is forecasted at 50 units. At present, orders have been booked in various quantities in weeks 1, 2, 3 and 4. What is the available to promise for week 6?A.50B.6C.300D.100E.Cannot be determined without projected on-hand information

No orders are booked after week 4, so all 300 units arriving in week 6 are available-to-promise in week 6.

AACSB: AnalyticBloom's: ApplyDifficulty: MediumLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: Introduction82.Which of the following steps is necessary to ensure that a master schedule is valid?A.worker schedulingB.order promisingC.inventory countingD.order bookingE.rough-cut capacity planning

Rough-cut capacity planning insures that the master schedule is reasonably feasible.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-05 Describe the master scheduling process and explain its importance.Topic Area: Introduction11-1