Chapter 13 - Aggregate Planning

Chapter 13
Aggregate Planning

True / False Questions

 

1. Aggregate planning is intermediate-range capacity planning that typically covers a time

horizon of one to three months. 
FALSE

Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
 

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

Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
 

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

Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

4. Aggregate planning is used to establish general levels of employment, output, and

inventories over an intermediate-range of time. 
TRUE

Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
 

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

Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
 

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

Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
 

7. Demand can be altered in aggregate planning by promotion and producing additional

product using overtime. 
FALSE

Difficulty: Hard
TLO: 2
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

8. Capacity can be modified in aggregate planning by promotion and producing additional

product using overtime. 
FALSE

Difficulty: Hard
TLO: 2
Taxonomy: Knowledge
 

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

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

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

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

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

FALSE

Difficulty: Easy
TLO: 2
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

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

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

13. Linear programming models yield the optimal solution. 

TRUE

Difficulty: Medium
TLO: 3
Taxonomy: Knowledge
 

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

cost. 
TRUE

Difficulty: Hard
TLO: 2
Taxonomy: Knowledge
 

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

Difficulty: Easy
TLO: 3
Taxonomy: Knowledge
 

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

Difficulty: Hard
TLO: 3
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

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Chapter 13 - Aggregate Planning

17. Aggregate planners typically use mathematical techniques such as linear programming

and linear decision rules for planning. 
FALSE

Difficulty: Medium
TLO: 3
Taxonomy: Knowledge
 

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

TRUE

Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
 

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

AACSB: AS
Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
 

20. Departmental budgeting is an example of aggregate planning. 

TRUE

Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
 

21. Master schedulers are employed primarily by service organizations. 

FALSE

Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

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

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

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. 
TRUE

Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
 

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

Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
 

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. 
TRUE

Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

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

Difficulty: Hard
TLO: 1
Taxonomy: Knowledge
 
 

Multiple Choice Questions

 

27. Which of the following best describes aggregate planning? 

A. the link between intermediate term planning and short term operating decisions
B. a collection of objective planning tools
C. make or buy decisions
D. an attempt to respond to predicted demand within the constraints set by product, process
and location decisions
E. manpower planning

Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
 

28. Accommodating peak demands and effectively using labor resources during periods of
low demand would be the goal of aggregate planners in ¼ 
A. Manufacturing
B. Military
C. Archeology
D. Libraries
E. Financial Services

Difficulty: Hard
TLO: 1
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

29. Aggregate planning is capacity planning for: 

A. the long range
B. the intermediate range
C. the short range
D. typically one to three months
E. typically one or more years

Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
 

30. One area to which aggregate planning decisions relate is: 

A. job sequencing
B. customer order quantities
C. inventory levels
D. location
E. layout

Difficulty: Hard
TLO: 1
Taxonomy: Knowledge
 

31. Which of the following is an input to aggregate planning? 

A. beginning inventory
B. forecasts for each period of the schedule
C. customer orders
D. all of the above
E. quantity discounts

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

32. Essentially, the output of aggregate planning is the: 

A. marketing plan
B. production plan
C. rough-cut capacity plan
D. assignment plan
E. material requirements plan

Difficulty: Hard
TLO: 1
Taxonomy: Knowledge
 

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 sizes
B. gallons of paint, but be concerned with the different colors to be produced
C. gallons, quarts, pints, and all the different sizes to be produced
D. all the different sizes and all the different colors by size
E. none of the above

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

34. Aggregate planning requires which of the following information? 

A. a forecast of expected demand
B. current levels of inventory
C. (a) and (b)
D. policies regarding employment levels
E. all of the above

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

35. Aggregate planners attempt to balance: 

A. demand and inventories
B. demand and costs
C. capacity and inventories
D. capacity and costs
E. capacity and demand

Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
 

36. Which of the following is not an input to the aggregate planning process: 

A. resources available
B. demand forecast
C. policies on work force changes
D. master production schedules
E. cost information

Difficulty: Hard
TLO: 2
Taxonomy: Knowledge
 

37. Which one of the following would not be considered a decision option for purposes of
aggregate planning? 
A. inventory levels
B. manpower levels
C. pricing
D. production costs
E. promotion

Difficulty: Hard
TLO: 2
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

38. Which of the following is not a basic option for altering the availability of capacity in a
service environment? 
A. overtime
B. hiring/layoff
C. part time
D. inventory
E. All of these are basic capacity options.

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

39. Which one of the following is not a basic option for altering demand? 
A. promotion
B. backordering
C. pricing
D. subcontracting
E. All are demand options.

AACSB: AS
Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

40. One option for altering the pattern of demand is: 

A. backorders
B. overtime
C. part-time workers
D. inventories
E. subcontracting

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

41. Which of the following would not be a strategy associated with adjusting aggregate
capacity to meet expected demand? 
A. subcontract
B. vary the size of the workforce
C. vary the intensity of workforce utilization
D. allow inventory levels to vary
E. use backorders

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

42. One option for altering the availability of manufacturing capacity is: 

A. pricing
B. promotion
C. backorders
D. inventories
E. none of the above apply to manufacturing capacity

AACSB: AS
Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

43. One option for altering the availability of capacity is: 

A. use of overtime or slack time
B. pricing
C. promotion
D. backorders
E. none of the above

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

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

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

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

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

46. Uncommitted Inventory is called ¼ 

A. Available to promise inventory
B. Free inventory
C. Safety stock
D. Lead time inventory
E. Obsolete inventory

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

47. Aggregate planners seek to match supply and demand: 

A. at minimum overall cost
B. by staying within company policy
C. (a) and (b)
D. keeping inventories at a minimum
E. all of the above

Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
 

48. In practice, the more commonly used techniques for aggregate planning are: 
A. mathematical techniques
B. informal trial-and-error techniques
C. (a) and (b) about equally
D. simulation models
E. linear programming optimization

Difficulty: Easy
TLO: 3
Taxonomy: Knowledge
 

49. The main disadvantage(s) of informal techniques used for aggregate planning is(are): 
A. they are expensive to do
B. they may not result in the best plan
C. they take a long time to do
D. they require use of a computer
E. lack of formal education of the planners

Difficulty: Easy
TLO: 3
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

50. Inventory information for firm ABC:

What is the expected inventory at the end of April, 1999? 

A. 350
B. 250
C. 150
D. 50
E. none of the above

AACSB: AS
Difficulty: Easy
TLO: 4
Taxonomy: Application
 

51. Inventory information for firm ABC:

What was the inventory at the end of March, 1999? 

A. 350
B. 250
C. 150
D. 50
E. none of the above

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

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Chapter 13 - Aggregate Planning

52. Linear programming to produce an aggregate plan: 

A. will produce the best plan if accurate inputs are used
B. is the most widely used technique
C. (a) and (b)
D. will produce a plan that may not be the best plan
E. requires an excel spread sheet

Difficulty: Hard
TLO: 3
Taxonomy: Knowledge
 

53. Simulation to produce an aggregate plan: 

A. will produce the best plan
B. is the most widely used technique
C. both (a) and (b)
D. will produce a plan that may not be the best plan
E. requires a minimum of 4 iterations to be accurate

Difficulty: Hard
TLO: 3
Taxonomy: Knowledge
 

54. Which term is most closely associated with the term disaggregation? 

A. subcontracting
B. master schedule
C. diversity
D. varying inventory levels
E. firing and laying off

Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

55. The direct result of disaggregating the aggregate plan is the: 

A. marketing plan
B. production plan
C. rough-cut capacity plan
D. master schedule
E. material requirements plan

Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
 

56. Moving from the aggregate plan to a master production schedule requires: 

A. rough cut capacity planning
B. disaggregation
C. sub-optimization
D. strategy formulation
E. chase strategies

Difficulty: Hard
TLO: 1
Taxonomy: Knowledge
 

57. That portion of projected inventory which enables marketing to make realistic

commitments about delivery dates for new orders is: 
A. beginning inventory
B. safety stock inventory
C. available-to-promise inventory
D. high margin inventory
E. none of the above

AACSB: CA
Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
 

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Chapter 13 - Aggregate Planning

58. Proactive and Reactive aggregate planning strategies are best associated with: 
A. Input and Output
B. Make and Buy
C. Quantitative and Qualitative
D. Exact and Approximate
E. Demand and Capacity options

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 
 

Essay Questions
 

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Chapter 13 - Aggregate Planning

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.

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

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Chapter 13 - Aggregate Planning

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.

The aggregate plan should look like this:

With costs as follows:

Total cost of this plan is $20,200.

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

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Chapter 13 - Aggregate Planning

61. 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

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

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Chapter 13 - Aggregate Planning

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. 

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

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Chapter 13 - Aggregate Planning

63. What is total forecasted demand? 

1,800 units

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

64. What is total regular time capacity? 

1,680 units

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

65. How should overtime capacity be utilized?

Refer To: 13-65 

40 units each in periods 3, 4, and 5

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

66. What are total regular time costs?

Refer To: 13-65 

$33,600

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

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Chapter 13 - Aggregate Planning

67. What are total overtime costs?

Refer To: 13-65 

$3,600

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

68. What are total carrying costs?

Refer To: 13-65 

$520

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

69. What are total backorder costs?

Refer To: 13-65 

$400

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

70. What are total costs for each period?

Refer To: 13-65 

Error! Hyperlink reference not valid.

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

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Chapter 13 - Aggregate Planning

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Chapter 13 - Aggregate Planning

71. What are total costs for the six periods?

Refer To: 13-65 

$38,120

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 
 

Multiple Choice Questions

 

 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. 21
B. 1
C. 12
D. 20
E. impossible to say without more information

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

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Chapter 13 - Aggregate Planning

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

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

 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. 14
B. 32
C. 12
D. 20
E. impossible to say without additional information

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

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Chapter 13 - Aggregate Planning

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

AACSB: AS
Difficulty: Medium
TLO: 4
Taxonomy: Application
 

76. When the opportunity cost of lost revenue is relatively high, _________ become(s)
relatively more attractive. 
A. Layoffs
B. Backorders
C. Excess capacity
D. Disaggregation
E. Both B and C

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

77. The more __________ demand is, the more the aggregate plan will tend to reflect the
____________ strategy. 
A. Stable; Level
B. Aggregated; Outsourcing
C. Variable; Chase
D. Complex; Uncommitted
E. Both A and C

Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
 

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