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Which aggregate planning method will yield an optimal solution in terms of minimizing total costs?

Which aggregate planning method will yield an optimal solution in terms of minimizing total costs?
Select one:
a. a chase demand
b. a level capacity plan
c. a linear programming method
d. either A or B


c. a linear programming method


Chase strategies reduce inventory costs while level strategies reduce smoothing costs. On the other hand, linear programming provides an optimal solution by reducing both the smoothing costs and inventory costs. Among the three listed above, linear programming provides the user with an easier way to find the maximum profit or minimum cost by considering the amount of available resources. Although few real-world aggregate planning decisions are compatible with this model, it is apparent that using it can produce a balanced capacity and demand, as well as reducing the costs.


Sales and Operations planning is also known as aggregate planning because:

All of the above, i.e. all of the other answers.

  • demand is forecasted roughly by aggregating opinions from industry experts.
  • supply is aggregated into annual production for each manufacturing facility.
  • *demand is combined or aggregated into product lines or families.*
  • several forecasting models are used with demand being an aggregate combination of those forecasts.

The primary cost (other than the cost of production) of a pure level production strategy is:

  • Inventory Cost

The primary cost (other than the cost of production) of a pure chase demand strategy is:

  • hiring and firing costs

Most companies typically use one of the pure production strategies (i.e. level production or chase demand) and rarely use some sort of combination of the two:

  • False

Strategies for managing demand include all of the following except:

  • offering complimentary products and services.

Disaggregation is the process of breaking down the aggregate plan into greater detail in order to create the Master Production schedule for individual products:

  • True

The amount of a product that is available to deliver to a customer at a later date in the future is known as:

  • available – to – promise

Available-to-promise can be calculated as:

  • the difference between planned production and customer orders already received for any period.

All of the following are true concerning aggregate planning for services except:

  • service capacity is easy to predict.

Linear Programming will always yield the most optimal solution (i.e. cheapest cost) of all of the aggregate planning techniques and methodologies:

  • True

The process of multiplying the number of end items by the quantity of each lower level item required to produce one unit of that end item is known as:

  • Explosion

For Material Requirements Planning to occur, we need all of the following information components contained in our ERP system except:

  • customer service file

For Material Requirements Planning, the ERP system will generate as outputs all of the following information components except:

  • escheduling notices.
  • You Answered
  • planned order releases.
  • *All of the above, i.e. all of the other answers.*
  • work orders.
  • purchase orders.

The best lot sizing method to use when attempting to minimize total inventory costs is the Lot-for-lot ordering policy method:

  • False

Rated capacity differs from effective capacity in that effective capacity takes into account both efficiency and utilization:

  • True

With Capacity Requirements Planning, all of the following are methods to reduce overloading except:

  • decrease process efficiency.

A load profile is a graph that can be used to compare load to customer forecasts:

  • False

A software system that facilitates product design and keeps track of design changes throughout the lifecycle of the product is known as:

  • a PLM software system.

A bill-of-materials that shows the structure of a product along with all of the possible options or variations of that product is known as:

  • a modular bill-of-materials.

No changes can be made to the Master Production Schedule inside of the specified date of the time fence:

  • True

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