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.
True False

. The goal of aggregate planning is to achieve a production plan that attempts to !alance the
organization"s resources and meet e#pected demand.
True False

$. Aggregate planners are concerned %ith the &uality and &uantity of e#pected demand.
True False

'. Aggregate planning is used to esta!lish general levels of employment( output( and
inventories over an intermediate-range of time.
True False

). The assignment of %or* to specific machines and people are e#amples of aggregate
planning.
True False

+. The output from aggregate planning is a detailed !usiness plan covering the ne#t to 1
months.
True False
11-1
,. -emand can !e altered in aggregate planning !y promotion and producing additional
product using overtime.
True False

.. Capacity can !e modified in aggregate planning !y promotion and producing additional
True False

/. 0rganizations facing seasonal changes in demand are prevented from using aggregate
planning techni&ues.
True False

11. Seasonality in demand has the advantage of leveling out re&uirements for our product or
service.
True False

11. A level capacity strategy is also *no%n as a chase demand strategy.
True False

1. An advantage of a 2chase2 strategy for aggregate planning is that inventories can !e *ept
relatively lo%.
True False

1$. 3inear programming models yield the optimal solution.
True False

1'. 4ltimately the overriding factor in choosing a strategy in aggregate planning is overall
cost.
True False

11-
1). Aggregate planners commonly use trial-and-error methods in developing aggregate plans.
True False

1+. The use of ta!les and charts in aggregate planning usually ena!les planners to arrive at an
optimal plan.
True False

1,. Aggregate planners typically use mathematical techni&ues such as linear programming
and linear decision rules for planning.
True False

1.. -isaggregating an aggregate plan leads to a master schedule.
True False

1/. The master schedule indicates the &uantity and timing for delivery of a product( !ut not
the dates production %ill need to start.
True False

1. -epartmental !udgeting is an e#ample of aggregate planning.
True False

1. Master schedulers are employed primarily !y service organizations.
True False

. Su!contracting "in" %ould apply to periods in %hich our organization has e#cess capacity.
True False

11-$
$. Availa!le-to-promise in the first %ee* is e&ual to !eginning inventory plus MPS &uantity(
if any( less committed customer orders !efore the ne#t MPS &uantity.
True False

'. A time fence in the master schedule is used to prevent unauthorized people from ma*ing
changes to the schedule.
True False

). After the first period of the planning horizon( availa!le-to-promise is computed only for
those periods in %hich there is an MPS &uantity.
True False

+. 5n the master production schedule( production is planned for the ne#t period %henever the
availa!le-to-promise &uantity !ecomes negative.
True False

Multiple Choice Questions

,. 6hich of the follo%ing !est descri!es aggregate planning7
A. the lin* !et%een intermediate term planning and short term operating decisions
8. a collection of o!9ective planning tools
C. ma*e or !uy decisions
-. an attempt to respond to predicted demand %ithin the constraints set !y product( process
and location decisions
:. manpo%er planning

11-'
.. Accommodating pea* demands and effectively using la!or resources during periods of
lo% demand %ould !e the goal of aggregate planners in
A. Manufacturing
8. Military
C. Archeology
-. 3i!raries
:. Financial Services

/. Aggregate planning is capacity planning for;
A. the long range
8. the intermediate range
C. the short range
-. typically one to three months
:. typically one or more years

$1. 0ne area to %hich aggregate planning decisions relate is;
A. 9o! se&uencing
8. customer order &uantities
C. inventory levels
-. location
:. layout

$1. 6hich of the follo%ing is an input to aggregate planning7
A. !eginning inventory
8. forecasts for each period of the schedule
C. customer orders
-. all of the a!ove
:. &uantity discounts

11-)
$. :ssentially( the output of aggregate planning is the;
A. mar*eting plan
8. production plan
C. rough-cut capacity plan
-. assignment plan
:. material re&uirements plan

$$. 5n doing 2aggregate planning2 for a firm producing paint( the aggregate planners %ould
most li*ely deal %ith;
A. 9ust gallons of paint( %ithout concern for the different colors and sizes
8. gallons of paint( !ut !e concerned %ith the different colors to !e produced
C. gallons( &uarts( pints( and all the different sizes to !e produced
-. all the different sizes and all the different colors !y size
:. none of the a!ove

$'. Aggregate planning re&uires %hich of the follo%ing information7
A. a forecast of e#pected demand
8. current levels of inventory
C. <a= and <!=
-. policies regarding employment levels
:. all of the a!ove

$). Aggregate planners attempt to !alance;
A. demand and inventories
8. demand and costs
C. capacity and inventories
-. capacity and costs
:. capacity and demand

11-+
$+. 6hich of the follo%ing is not an input to the aggregate planning process7
A. resources availa!le
8. demand forecast
C. policies on %or* force changes
-. master production schedules
:. cost information

$,. 6hich one of the follo%ing %ould not !e considered a decision option for purposes of
aggregate planning7
A. inventory levels
8. manpo%er levels
C. pricing
-. production costs
:. promotion

$.. 6hich of the follo%ing is not a !asic option for altering the availa!ility of capacity in a
service environment7
A. overtime
8. hiring>layoff
C. part time
-. inventory
:. All of these are !asic capacity options.

$/. 6hich one of the follo%ing is not a !asic option for altering demand7
A. promotion
8. !ac*ordering
C. pricing
-. su!contracting
:. All are demand options.

11-,
'1. 0ne option for altering the pattern of demand is;
A. !ac*orders
8. overtime
C. part-time %or*ers
-. inventories
:. su!contracting

'1. 6hich of the follo%ing %ould not !e a strategy associated %ith ad9usting aggregate
capacity to meet e#pected demand7
A. su!contract
8. vary the size of the %or*force
C. vary the intensity of %or*force utilization
-. allo% inventory levels to vary
:. use !ac*orders

'. 0ne option for altering the availa!ility of manufacturing capacity is;
A. pricing
8. promotion
C. !ac*orders
-. inventories
:. none of the a!ove apply to manufacturing capacity

'$. 0ne option for altering the availa!ility of capacity is;
A. use of overtime or slac* time
8. pricing
C. promotion
-. !ac*orders

11-.
''. 5n order to use the 2level capacity strategy(2 variations in demand are met !y;
A. varying output during regular time %ithout changing employment levels
8. varying output during regular time !y changing employment levels
C. <a= and <!=
-. using com!ination of inventories( overtime( part time( and !ac* orders
:. price ad9ustments

'). 5n using the 2chase strategy2 variations in demand could !e met !y;
C. <a= and <!=
-. varying inventory levels
:. price increases

'+. 4ncommitted inventory is called
A. Availa!le-to-promise inventory
8. Free inventory
C. Safety stoc*
-. 3ead time inventory
:. 0!solete inventory

',. Aggregate planners see* to match supply and demand;
A. at minimum overall cost
8. !y staying %ithin company policy
C. <a= and <!=
-. *eeping inventories at a minimum
:. all of the a!ove

'.. 5n practice( the more commonly used techni&ues for aggregate planning are;
A. mathematical techni&ues
8. informal trial-and-error techni&ues
C. <a= and <!= a!out e&ually
-. simulation models
:. linear programming optimization

11-/
'/. The main disadvantage<s= of informal techni&ues used for aggregate planning is<are=;
A. they are e#pensive to do
8. they may not result in the !est plan
C. they ta*e a long time to do
-. they re&uire use of a computer
:. lac* of formal education of the planners

)1. 5nventory information for firm A8C;

6hat is the e#pected inventory at the end of April( 1///7
A. $)1
8. )1
C. 1)1
-. )1


6hat %as the inventory at the end of March( 1///7
A. $)1
8. )1
C. 1)1
-. )1

). 3inear programming to produce an aggregate plan;
A. %ill produce the !est plan if accurate inputs are used
8. is the most %idely used techni&ue
C. <a= and <!=
-. %ill produce a plan that may not !e the !est plan
:. re&uires an e#cel spread sheet

11-11
)$. Simulation to produce an aggregate plan;
A. %ill produce the !est plan
C. !oth <a= and <!=
:. re&uires a minimum of ' iterations to !e accurate

)'. 6hich term is most closely associated %ith the term disaggregation7
A. su!contracting
8. master schedule
C. diversity
:. firing and laying off

)). The direct result of disaggregating the aggregate plan is the;
A. mar*eting plan
8. production plan
-. master schedule

)+. Moving from the aggregate plan to a master production schedule re&uires;
A. rough cut capacity planning
8. disaggregation
C. su!-optimization
-. strategy formulation
:. chase strategies

11-11
),. That portion of pro9ected inventory %hich ena!les mar*eting to ma*e realistic
commitments a!out delivery dates for ne% orders is;
8. safety stoc* inventory
C. availa!le-to-promise inventory
-. high margin inventory

).. Proactive and ?eactive aggregate planning strategies are !est associated %ith;
A. 5nput and 0utput
8. Ma*e and 8uy
C. @uantitative and @ualitative
-. :#act and Appro#imate
:. -emand and Capacity options

Essay Questions

)/. A manager has prepared a forecast of e#pected aggregate demand for the ne#t si# months.
-evelop an aggregate plan to meet this demand given this additional information; A level
production rate of 111 units per month %ill !e used. 8ac*orders are allo%ed( and they are
charged at the rate of A. per unit per month. 5nventory holding costs are A1 per unit per month
in ending inventory. -etermine the cost of this plan if regular time cost is A1 per unit and
!eginning inventory is zero.

11-1
+1. Biven the pro9ected demands for the ne#t si# months( prepare an aggregate plan that uses
inventory( regular time and overtime( and !ac*orders. The plan must %ind up %ith no units in
ending inventory in Period +. ?egular time capacity is 1)1 units per month. 0vertime capacity
is 1 units per month. 0vertime cost is A$1 per unit( !ac*order cost is A1 per unit( inventory
holding cost is A) per unit( regular time cost of A1 per unit( and !eginning inventory is zero.

+1. 4se either the transportation method or linear programming to develop an optimum
aggregate plan( given the follo%ing data;

11-1$
+. Prepare a master schedule !ased on the follo%ing information;

Currently there are 1') units in inventory. Policy calls for a fi#ed order &uantity of )1 units.

+$. 6hat is total forecasted demand7

11-1'
+'. 6hat is total regular time capacity7

+). Co% should overtime capacity !e utilized7

++. 6hat are total regular time costs7

11-1)
+,. 6hat are total overtime costs7

+.. 6hat are total carrying costs7

+/. 6hat are total !ac*order costs7

,1. 6hat are total costs for each period7

11-1+
,1. 6hat are total costs for the si# periods7


A firm has '$ units of a certain product on hand. Forecasts for the first t%o planning periods
are 1 units each. A production &uantity of .1 units is planned to !e availa!le in period $.
Customer orders are for period 1 and 1, for period .

,. 6hat is the pro9ected on-hand inventory at the end of period 7
A. 1
8. 1
C. 1
-. 1
:. impossi!le to say %ithout more information

,$. 6hat &uantity is availa!le for commitment to ne% customers in either of the first t%o
periods7
A. 1
8. 1
C. 1
-. '

A firm has )+ units of product D on hand. Forecasts of demand are for 1 units per %ee*. An
MPS &uantity of 111 units is planned to arrive in period $. Customer orders are ' for period
1( 1. for period ( and 1) for period $.

11-1,
,'. 6hat is the pro9ected on hand inventory at the end of period 7
A. 1'
8. $
C. 1
-. 1
:. impossi!le to say %ithout additional information

,). 6hat &uantity is availa!le for commitment to ne% customers prior to the receipt of the
MPS &uantity in %ee* $7
A. 1'
8. $
C. 1
-. 1
:. impossi!le to say %ithout additional information.

,+. 6hen the opportunity cost of lost revenue is relatively high( EEEEEEEEE !ecome<s=
relatively more attractive.
A. 3ayoffs
8. 8ac*orders
C. :#cess capacity
-. -isaggregation
:. 8oth 8 and C
11-1.
,,. The more EEEEEEEEEE demand is( the more the aggregate plan %ill tend to reflect the
EEEEEEEEEEEE strategy.
A. Sta!leF 3evel
8. AggregatedF 0utsourcing
C. Garia!leF Chase
-. Comple#F 4ncommitted
:. 8oth A and C

,.. 5n a service setting( the aggregate plan results in a time-phased pro9ection of EEEEEEEEEE
re&uirements.
A. customer
8. staff
C. inventory
-. su!contracting
:. outsourcing

,/. 6hich of the follo%ing differs !et%een aggregate planning in services and aggregate
planning in manufacturing7
A. uncertainty in demand
8. costs of storing inventory
C. the perisha!ility of capacity
-. cost of overtime
:. cost of hiring
11-1/
.1. At DHI Corp.( the aggregate planning unit reflects the fact that )1J of its output is
product version A( $1J is version 8( and 1J is version C. Suppose that over the coming
year forecasted total demand <in planning units= is for 11('11 units. 0nce the production plan
is disaggregated( %hat %ill the %ee*ly forecast for version A !e <assume ) %ee*s per year=7
A. 1111
8. 11
C. '11
-. 111
:. )1

.1. A master production schedule &uantity of $11 units %ill arrive in %ee* +. 6ee*ly demand
over %ee*s $ through 11 is forecasted at )1 units. At present( orders have !een !oo*ed in
various &uantities in %ee*s 1( ( $ and '. 6hat is the availa!le to promise for %ee* +7
A. )1
8. +
C. $11
-. 111
:. Cannot !e determined %ithout pro9ected on-hand information

.. 6hich of the follo%ing steps is necessary to ensure that a master schedule is valid7
A. %or*er scheduling
8. order promising
C. inventory counting
-. order !oo*ing
:. rough-cut capacity planning

11-1
Chapter 11 Aggregate Planning and Master Scheduling Ans%er 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 t%o to 1 months.

AACSB: Reflective Thinking
Bloom's: Remember
Difficulty: Medium
Lerning !b"ective: ##$%# &'(lin )ht ggregte (lnning is nd ho) it is useful*
To(ic Are: +ntroduction

. The goal of aggregate planning is to achieve a production plan that attempts to !alance the
organization"s resources and meet e#pected demand.
TRUE
This is the goal of aggregate planning.

Bloom's: Remember
Difficulty: &sy

11-1
$. Aggregate planners are concerned %ith the &uality and &uantity of e#pected demand.
FALSE
Aggregate planners are concerned %ith the &uantity and timing of e#pected demand.

Bloom's: Remember
Difficulty: &sy

'. Aggregate planning is used to esta!lish general levels of employment( output( and
inventories over an intermediate-range of time.
TRUE
This is the domain of aggregate planning.

Bloom's: Remember
Difficulty: &sy

). The assignment of %or* to specific machines and people are e#amples of aggregate
planning.
FALSE
Assigning %or* to specific machines or people is an e#ample of detailed scheduling.

Bloom's: Remember
Difficulty: Medium

11-
+. The output from aggregate planning is a detailed !usiness plan covering the ne#t to 1
months.
FALSE
The output is an aggregate production plan.

Bloom's: Remember
Difficulty: &sy

,. -emand can !e altered in aggregate planning !y promotion and producing additional
FALSE
These are supply options.

Bloom's: Remember
Difficulty: ,rd
Lerning !b"ective: ##$%- +dentify the vribles decision mkers hve to )ork )ith in ggregte (lnning nd some of the (ossible
strtegies they cn use*

.. Capacity can !e modified in aggregate planning !y promotion and producing additional
FALSE
Promotions do not modify capacity.

Bloom's: Remember
Difficulty: ,rd

11-$
/. 0rganizations facing seasonal changes in demand are prevented from using aggregate
planning techni&ues.
FALSE
Aggregate planning can accommodate seasonal changes in demand.

Bloom's: Remember
Difficulty: Medium

11. Seasonality in demand has the advantage of leveling out re&uirements for our product or
service.
FALSE
Seasonality increases variation in re&uirements.

Bloom's: Remember
Difficulty: Medium

11. A level capacity strategy is also *no%n as a chase demand strategy.
FALSE
3evel and chase strategies are opposite approaches.

Bloom's: Remember
Difficulty: &sy
To(ic Are: Bsic Strtegies for Meeting .neven Demnd

11-'
1. An advantage of a 2chase2 strategy for aggregate planning is that inventories can !e *ept
relatively lo%.
TRUE
The chase strategy *eeps inventories lo%.

Bloom's: .nderstnd
Difficulty: Medium

1$. 3inear programming models yield the optimal solution.
TRUE
3inear programming models can find an optimal solution if one e#ists.

Bloom's: Remember
Difficulty: Medium
Lerning !b"ective: ##$%/ Describe some of the gr(hicl nd 0untittive techni0ues (lnners use*
To(ic Are: Techni0ues for Aggregte 1lnning

1'. 4ltimately the overriding factor in choosing a strategy in aggregate planning is overall
cost.
TRUE
The tas* of aggregate planning is to stri*e a !alance !et%een demand and capacity at
minimum cost.

Bloom's: Remember
Difficulty: ,rd

11-)
1). Aggregate planners commonly use trial-and-error methods in developing aggregate plans.
TRUE
Trial-and-error approaches can lead to good solutions.

Bloom's: Remember
Difficulty: &sy

1+. The use of ta!les and charts in aggregate planning usually ena!les planners to arrive at an
optimal plan.
FALSE
Such solutions may !e good solutions( !ut they"re usually not optimal.

Bloom's: Remember
Difficulty: ,rd

1,. Aggregate planners typically use mathematical techni&ues such as linear programming
and linear decision rules for planning.
FALSE
8oth &ualitative and &uantitative approaches are used in aggregate planning.

Bloom's: Remember
Difficulty: Medium

11-+
1.. -isaggregating an aggregate plan leads to a master schedule.
TRUE
This is an output of the aggregate planning process.

Bloom's: Remember
Difficulty: Medium
To(ic Are: Disggregting the Aggregte 1ln

1/. The master schedule indicates the &uantity and timing for delivery of a product( !ut not
the dates production %ill need to start.
TRUE
?e&uired start dates depend on products" lead times.

Bloom's: Remember
Difficulty: &sy

1. -epartmental !udgeting is an e#ample of aggregate planning.
TRUE
The challenge is to get re&uirements into !alance %ith resources.

Bloom's: Remember
Difficulty: &sy

11-,
1. Master schedulers are employed primarily !y service organizations.
FALSE
Master schedulers are primarily employed in manufacturing.

Bloom's: Remember
Difficulty: &sy
Lerning !b"ective: ##$%2 Describe the mster scheduling (rocess nd e'(lin its im(ortnce*

. Su!contracting "in" %ould apply to periods in %hich our organization has e#cess capacity.
TRUE
Su!contracting in %ould !e selling some availa!le capacity.

Bloom's: Remember
Difficulty: Medium

$. Availa!le-to-promise in the first %ee* is e&ual to !eginning inventory plus MPS &uantity(
if any( less committed customer orders !efore the ne#t MPS &uantity.
TRUE
This is the ATP calculation for the first %ee*.

Bloom's: Remember
Difficulty: Medium
To(ic Are: The Mster Scheduling 1rocess

11-.
'. A time fence in the master schedule is used to prevent unauthorized people from ma*ing
changes to the schedule.
FALSE
Time fences are used to ensure that full consideration is given %hen schedule changes are
!eing considered.

Bloom's: Remember
Difficulty: Medium

). After the first period of the planning horizon( availa!le-to-promise is computed only for
those periods in %hich there is an MPS &uantity.
TRUE
After the first %ee*( ATP values %ill only occur in periods in %hich there are MPS &uantities.

Bloom's: Remember
Difficulty: Medium

+. 5n the master production schedule( production is planned for the ne#t period %henever the
availa!le-to-promise &uantity !ecomes negative.
FALSE
Production is planned to !e complete in the period in %hich the pro9ected on-hand !ecomes
negative.

Bloom's: .nderstnd
Difficulty: ,rd

11-/

,. 6hich of the follo%ing !est descri!es aggregate planning7
A. the lin* !et%een intermediate term planning and short term operating decisions
8. a collection of o!9ective planning tools
C. ma*e or !uy decisions
! an attempt to respond to predicted demand %ithin the constraints set !y product( process
and location decisions
:. manpo%er planning
A %or*a!le !alance !et%een demand and these constraints is sought.

Bloom's: Remember
Difficulty: &sy

.. Accommodating pea* demands and effectively using la!or resources during periods of
lo% demand %ould !e the goal of aggregate planners in
A. Manufacturing
8. Military
C. Archeology
-. 3i!raries
E! Financial Services
These are the considerations in aggregate planning for service firms.

Bloom's: Remember
Difficulty: ,rd
To(ic Are: Aggregte 1lnning in Services

11-$1
/. Aggregate planning is capacity planning for;
A. the long range
"! the intermediate range
C. the short range
-. typically one to three months
:. typically one or more years
The intermediate range typically runs from t%o to 1 months.

Bloom's: Remember
Difficulty: &sy

$1. 0ne area to %hich aggregate planning decisions relate is;
A. 9o! se&uencing
8. customer order &uantities
C! inventory levels
-. location
:. layout
-ifferent aggregate planning strategies affect inventory levels differently.

Bloom's: Remember
Difficulty: ,rd

11-$1
$1. 6hich of the follo%ing is an input to aggregate planning7
8. forecasts for each period of the schedule
C. customer orders
! all of the a!ove
:. &uantity discounts
All e#cept &uantity discounts are aggregate planning inputs.

Bloom's: Remember
Difficulty: Medium

$. :ssentially( the output of aggregate planning is the;
A. mar*eting plan
"! production plan
-. assignment plan
The production plan largely results from the aggregate planning effort.

Bloom's: Remember
Difficulty: ,rd

11-$
$$. 5n doing 2aggregate planning2 for a firm producing paint( the aggregate planners %ould
most li*ely deal %ith;
A! 9ust gallons of paint( %ithout concern for the different colors and sizes
8. gallons of paint( !ut !e concerned %ith the different colors to !e produced
C. gallons( &uarts( pints( and all the different sizes to !e produced
-. all the different sizes and all the different colors !y size
The principle of aggregation is reflected in this ans%er.

Bloom's: Remember
Difficulty: Medium

$'. Aggregate planning re&uires %hich of the follo%ing information7
A. a forecast of e#pected demand
8. current levels of inventory
C. <a= and <!=
-. policies regarding employment levels
E! all of the a!ove
All of these are inputs into the aggregate planning process.

Bloom's: Remember
Difficulty: Medium

11-$$
$). Aggregate planners attempt to !alance;
A. demand and inventories
8. demand and costs
C. capacity and inventories
-. capacity and costs
E! capacity and demand
Capacity and demand are roughly !alanced in aggregate planning.

Bloom's: Remember
Difficulty: &sy

$+. 6hich of the follo%ing is not an input to the aggregate planning process7
A. resources availa!le
8. demand forecast
C. policies on %or* force changes
! master production schedules
:. cost information
The master production schedule is an output of the aggregate planning process.

Bloom's: Remember
Difficulty: ,rd

11-$'
$,. 6hich one of the follo%ing %ould not !e considered a decision option for purposes of
aggregate planning7
A. inventory levels
8. manpo%er levels
C. pricing
! production costs
:. promotion
Production costs %ould !e a critical varia!le( !ut they %ould not !e a decision varia!le.

Bloom's: Remember
Difficulty: ,rd

$.. 6hich of the follo%ing is not a !asic option for altering the availa!ility of capacity in a
service environment7
A. overtime
8. hiring>layoff
C. part time
! inventory
:. All of these are !asic capacity options.
5nventory is typically not an option in services.

Bloom's: .nderstnd
Difficulty: Medium

11-$)
$/. 6hich one of the follo%ing is not a !asic option for altering demand7
A. promotion
8. !ac*ordering
C. pricing
! su!contracting
:. All are demand options.
Su!contracting is an option for altering capacity.

Bloom's: Remember
Difficulty: Medium

'1. 0ne option for altering the pattern of demand is;
A! !ac*orders
8. overtime
C. part-time %or*ers
-. inventories
:. su!contracting
8ac*ordering shifts demand to later time periods.

Bloom's: Remember
Difficulty: Medium

11-$+
'1. 6hich of the follo%ing %ould not !e a strategy associated %ith ad9usting aggregate
capacity to meet e#pected demand7
A. su!contract
8. vary the size of the %or*force
C. vary the intensity of %or*force utilization
-. allo% inventory levels to vary
E! use !ac*orders
8ac*orders do not involve ad9usting capacity.

Bloom's: Remember
Difficulty: Medium

'. 0ne option for altering the availa!ility of manufacturing capacity is;
A. pricing
8. promotion
C. !ac*orders
! inventories
:. none of the a!ove apply to manufacturing capacity
5nventory involves using capacity from earlier periods to satisfy demand in later periods.

Bloom's: .nderstnd
Difficulty: Medium

11-$,
'$. 0ne option for altering the availa!ility of capacity is;
A! use of overtime or slac* time
8. pricing
C. promotion
-. !ac*orders
0vertime or slac* time alters the availa!ility of capacity.

Bloom's: Remember
Difficulty: Medium

''. 5n order to use the 2level capacity strategy(2 variations in demand are met !y;
C. <a= and <!=
! using com!ination of inventories( overtime( part time( and !ac* orders
:. price ad9ustments
A com!ination of inventories( overtime( part time( and !ac* orders is the level strategy.

Bloom's: Remember
Difficulty: Medium

11-$.
'). 5n using the 2chase strategy2 variations in demand could !e met !y;
"! varying output during regular time !y changing employment levels
C. <a= and <!=
:. price increases
Changing employment levels to vary output is representative of a chase strategy.

Bloom's: Remember
Difficulty: Medium

'+. 4ncommitted inventory is called
A! Availa!le-to-promise inventory
8. Free inventory
C. Safety stoc*
-. 3ead time inventory
:. 0!solete inventory
4ncommitted inventory is availa!le-to-promise.

Bloom's: Remember
Difficulty: Medium

11-$/
',. Aggregate planners see* to match supply and demand;
A. at minimum overall cost
8. !y staying %ithin company policy
C! <a= and <!=
-. *eeping inventories at a minimum
:. all of the a!ove
Aggregate plans minimize costs !ut conform to company policies.

Bloom's: Remember
Difficulty: &sy

'.. 5n practice( the more commonly used techni&ues for aggregate planning are;
A. mathematical techni&ues
"! informal trial-and-error techni&ues
C. <a= and <!= a!out e&ually
-. simulation models
:. linear programming optimization
Trial-and-error techni&ues are more commonly used.

Bloom's: Remember
Difficulty: &sy

11-'1
'/. The main disadvantage<s= of informal techni&ues used for aggregate planning is<are=;
A. they are e#pensive to do
"! they may not result in the !est plan
C. they ta*e a long time to do
-. they re&uire use of a computer
:. lac* of formal education of the planners
5nformal solutions may not !e costly or difficult( !ut they may !e less li*ely to offer up the
!est plan.

Bloom's: .nderstnd
Difficulty: &sy


6hat is the e#pected inventory at the end of April( 1///7
A. $)1
"! )1
C. 1)1
-. )1
The ending inventory e&uals the !eginning plus production minus e#pected demand.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: &sy
Lerning !b"ective: ##$%3 1re(re ggregte (lns nd com(ute their costs*

11-'1

6hat %as the inventory at the end of March( 1///7
A. $)1
8. )1
C! 1)1
-. )1
8eginning inventory e&uals the ending inventory plus demand minus production.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

). 3inear programming to produce an aggregate plan;
A! %ill produce the !est plan if accurate inputs are used
C. <a= and <!=
:. re&uires an e#cel spread sheet
5f inputs are valid and accurate( linear programming %ill give an optimal solution.

Bloom's: Remember
Difficulty: ,rd

11-'
)$. Simulation to produce an aggregate plan;
A. %ill produce the !est plan
C. !oth <a= and <!=
! %ill produce a plan that may not !e the !est plan
:. re&uires a minimum of ' iterations to !e accurate
Simulation is not guaranteed to produce an optimal plan.

Bloom's: Remember
Difficulty: ,rd

)'. 6hich term is most closely associated %ith the term disaggregation7
A. su!contracting
"! master schedule
C. diversity
:. firing and laying off
The aggregate plan is disaggregated into the master schedule.

Bloom's: Remember
Difficulty: Medium

11-'$
)). The direct result of disaggregating the aggregate plan is the;
A. mar*eting plan
8. production plan
! master schedule

Bloom's: Remember
Difficulty: Medium

)+. Moving from the aggregate plan to a master production schedule re&uires;
A. rough cut capacity planning
"! disaggregation
C. su!-optimization
-. strategy formulation
:. chase strategies

Bloom's: Remember
Difficulty: ,rd

11-''
),. That portion of pro9ected inventory %hich ena!les mar*eting to ma*e realistic
commitments a!out delivery dates for ne% orders is;
8. safety stoc* inventory
C! availa!le-to-promise inventory
-. high margin inventory
Availa!le-to-promise values are calculated to help mar*eting ma*e realistic commitments.

Bloom's: Remember
Difficulty: &sy

).. Proactive and ?eactive aggregate planning strategies are !est associated %ith;
A. 5nput and 0utput
8. Ma*e and 8uy
C. @uantitative and @ualitative
-. :#act and Appro#imate
E! -emand and Capacity options
-emand and capacity are the targets of proactive and reactive aggregate planning strategies.

Bloom's: Remember
Difficulty: Medium

11-')
Essay Questions

)/. A manager has prepared a forecast of e#pected aggregate demand for the ne#t si# months.
-evelop an aggregate plan to meet this demand given this additional information; A level
production rate of 111 units per month %ill !e used. 8ac*orders are allo%ed( and they are
charged at the rate of A. per unit per month. 5nventory holding costs are A1 per unit per month
in ending inventory. -etermine the cost of this plan if regular time cost is A1 per unit and
!eginning inventory is zero.

The aggregate plan should loo* li*e this;

6ith costs as follo%s;

Total cost of this plan is A1(11.
Feed!ac*; Production remains constant in a level aggregate plan.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

11-'+
+1. Biven the pro9ected demands for the ne#t si# months( prepare an aggregate plan that uses
inventory( regular time and overtime( and !ac*orders. The plan must %ind up %ith no units in
ending inventory in Period +. ?egular time capacity is 1)1 units per month. 0vertime capacity
is 1 units per month. 0vertime cost is A$1 per unit( !ac*order cost is A1 per unit( inventory
holding cost is A) per unit( regular time cost of A1 per unit( and !eginning inventory is zero.

The aggregate plan should loo* li*e this;

6ith costs as follo%s;

Total cost of this plan is A1(11.
Feed!ac*; 0vertime and !ac*ordering are used to %or* around demand capacity im!alances
in this scenario.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

11-',
+1. 4se either the transportation method or linear programming to develop an optimum
aggregate plan( given the follo%ing data;

The optimum aggregate plan for this scenario is as follo%s;

The total cost for this plan is A)($1
Feed!ac*; This is an optimal solution found through linear programming.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

11-'.
+. Prepare a master schedule !ased on the follo%ing information;

Currently there are 1') units in inventory. Policy calls for a fi#ed order &uantity of )1 units.

Feed!ac*; There are units availa!le-to-promise in several time periods.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

11-'/
+$. 6hat is total forecasted demand7
1(.11 units
Feed!ac*; Simply add up demand forecasts across the si# periods.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

+'. 6hat is total regular time capacity7
1(+.1 units
Feed!ac*; Multiply the per-period regular-time capacity <.1= !y si#.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

11-)1
+). Co% should overtime capacity !e utilized7
'1 units each in periods $( '( and )
Feed!ac*; This represents the !est use of overtime capacity.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

++. 6hat are total regular time costs7
A$$(+11
Feed!ac*; Multiply units produced on regular time !y their regular time cost.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

+,. 6hat are total overtime costs7
A$(+11
Feed!ac*; Multiply the units produced on overtime !y their per-unit overtime cost.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

11-)1
+.. 6hat are total carrying costs7
A)1
Feed!ac*; For every unit in inventory at the end of a period( multiply !y the per-unit per-
period holding cost.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

+/. 6hat are total !ac*order costs7
A'11
Feed!ac*; For every unit !ac*ordered( multiply !y the per-unit !ac*order cost.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

,1. 6hat are total costs for each period7
A)(+.1F A)(,+1F A+(/.1F A+(/11F A,(11F A)(+11
Feed!ac*; 4se appropriate costs to calculate these totals.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

11-)
,1. 6hat are total costs for the si# periods7
A$.(11
Feed!ac*; 4se appropriate costs to calculate these totals.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium


A firm has '$ units of a certain product on hand. Forecasts for the first t%o planning periods
are 1 units each. A production &uantity of .1 units is planned to !e availa!le in period $.
Customer orders are for period 1 and 1, for period .

,. 6hat is the pro9ected on-hand inventory at the end of period 7
A. 1
"! 1
C. 1
-. 1
The P0C at end of period 1 is 1. Su!tract from this the forecasted demand for period .

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

11-)$
,$. 6hat &uantity is availa!le for commitment to ne% customers in either of the first t%o
periods7
A. 1
8. 1
C. 1
! '
Su!tract from the !eginning on-hand inventory <'$= the !oo*ed orders until the third %ee*
<$/=.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

A firm has )+ units of product D on hand. Forecasts of demand are for 1 units per %ee*. An
MPS &uantity of 111 units is planned to arrive in period $. Customer orders are ' for period
1( 1. for period ( and 1) for period $.

,'. 6hat is the pro9ected on hand inventory at the end of period 7
A. 1'
8. $
C! 1
-. 1
:. impossi!le to say %ithout additional information
Su!tract the %ee* forecast <1= from the %ee* 1 pro9ected ending on-hand <$=.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

11-)'
,). 6hat &uantity is availa!le for commitment to ne% customers prior to the receipt of the
MPS &uantity in %ee* $7
A! 1'
8. $
C. 1
-. 1
:. impossi!le to say %ithout additional information.
There are )+ units in !eginning inventory( and !oo*ed orders for ' units until the ne#t MPS
&uantity receipt.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

,+. 6hen the opportunity cost of lost revenue is relatively high( EEEEEEEEE !ecome<s=
relatively more attractive.
A. 3ayoffs
8. 8ac*orders
C! :#cess capacity
-. -isaggregation
:. 8oth 8 and C
The e#cess capacity costs diminish in relation to the potential lost revenue.

Bloom's: .nderstnd
Difficulty: Medium

11-))
,,. The more EEEEEEEEEE demand is( the more the aggregate plan %ill tend to reflect the
EEEEEEEEEEEE strategy.
A. Sta!leF 3evel
8. AggregatedF 0utsourcing
C. Garia!leF Chase
-. Comple#F 4ncommitted
E! 8oth A and C
These pure strategies reflect particular underlying demand patterns.

Bloom's: .nderstnd
Difficulty: Medium

,.. 5n a service setting( the aggregate plan results in a time-phased pro9ection of EEEEEEEEEE
re&uirements.
A. customer
"! staff
C. inventory
-. su!contracting
:. outsourcing
Staff re&uirements are the focus of aggregate planning in services.

Bloom's: Remember
Difficulty: Medium

11-)+
,/. 6hich of the follo%ing differs !et%een aggregate planning in services and aggregate
planning in manufacturing7
A. uncertainty in demand
8. costs of storing inventory
C! the perisha!ility of capacity
-. cost of overtime
:. cost of hiring
Capacity is inherently perisha!le in services.

Bloom's: .nderstnd
Difficulty: Medium

.1. At DHI Corp.( the aggregate planning unit reflects the fact that )1J of its output is
product version A( $1J is version 8( and 1J is version C. Suppose that over the coming
year forecasted total demand <in planning units= is for 11('11 units. 0nce the production plan
is disaggregated( %hat %ill the %ee*ly forecast for version A !e <assume ) %ee*s per year=7
A. 1111
8. 11
C. '11
! 111
:. )1
-ivide )(11 <annual demand= !y ) %ee*s.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

11-),
.1. A master production schedule &uantity of $11 units %ill arrive in %ee* +. 6ee*ly demand
over %ee*s $ through 11 is forecasted at )1 units. At present( orders have !een !oo*ed in
various &uantities in %ee*s 1( ( $ and '. 6hat is the availa!le to promise for %ee* +7
A. )1
8. +
C! $11
-. 111
:. Cannot !e determined %ithout pro9ected on-hand information
Lo orders are !oo*ed after %ee* '( so all $11 units arriving in %ee* + are availa!le-to-
promise in %ee* +.

AACSB: Anlytic
Bloom's: A((ly
Difficulty: Medium

.. 6hich of the follo%ing steps is necessary to ensure that a master schedule is valid7
A. %or*er scheduling
8. order promising
C. inventory counting
-. order !oo*ing
E! rough-cut capacity planning
?ough-cut capacity planning insures that the master schedule is reasona!ly feasi!le.

Bloom's: Remember
Difficulty: Medium

11-).

Chapter 11 - Aggregate Planning and Master Scheduling

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What is aggregate planning and what is its goal?

What are some inputs used for aggregate planning?

Chapter 11 - Aggregate Planning and Master Scheduling

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