In a multi-product, flexible manufacturing environment, line capacity of printed wiring board (PWB) assembly systems may need to be designed at the beginning of each aggregate planning period because of demand #uctuation over multiple periods. A model of line capacity design problem and production planning at the aggregate level is developed, in which production and subcontracting are assumed to be two options for a firm to meet market demand. The model presented is a large-scale integer programming roblem, it cannot be solved by using standard-or mixed-integer programming codes. Under the ssumption that each machine line is dedicated to produce one product family, the model can be decomposed as a relatively small subproblem, and each subproblem has good properties by which the subproblems can be further simplified and decomposed over multiple planning periods. As the result, the original large-scale two-stage integer programming problem can be approximately solved by solving a series of small-scale mixed-integer programming, which can be implemented on a workstation or a PC. Computational studies show that the solution method is developed which gives near-optimal solutions with much less computational errort.