operation managment midterm exam

Operations Management
Midterm Exam1.
Why do we study Operations Management? What two words do I use consistently to
describe the benefits?

2.
In December, General
Motors produced 6600 customized trucks at their Flint plant. The labor productivity at the plant is known
to have been 0.10 trucks per labor-hour during the month. There were 300 laborers employed at the plant
that month.
a) How
many hours did the average laborer work that month?
b) If
productivity can be increased to 0.11 trucks per hour, how many hours would the
average laborer work that month?
3.
Rod Jacobson operates a
bakery in downtown Lyndonville Vermont.
Due to an excellent product and high traffic location, demand has
increased by 25% in the past year. On
far too many days, Rod’s bakery ran out of bread before all customers could be
served. Due to the size of the bakery,
no new ovens can be added without a very costly addition. One of the staff bakers suggested ways to
load the ovens differently so that more loaves of bread can be baked at one
time. This new process will require the
ovens be loaded by hand, requiring additional man power. This is the only thing to be changed. Each baker works 160 per month. If the bakery
makes 1500 loaves per month with a labor productivity of 2.344 loaves per
labor-hour, how many workers will Rod need to add?
4.
Brandon Production is a small firm
focused on the assembly and sale of custom computers. The firm is facing stiff competition from
low-priced alternatives, and is looking at various solutions to remain
competitive and profitable. Current
financials for the firm are shown in the table below. In the first option, marketing will increase
sales by 50%. The next option is Vendor
(Supplier) changes, which would result in a decrease of 10% in the cost of
inputs. Finally there is an OM option,
which would reduce production costs 25%.
Which of the options would you recommend to the firm if it can only
pursue one option? In addition, comment
on the feasibility of each option.
Business
Function Current Value
Cost
of Inputs $50,000
Production
Costs $25,000
Revenue $80,000
5.
Starbucks is one of the best known
coffeehouse chains in the world. Each
store sells a variety of innovative products to complement the array of coffee
choices available. However, 75% of
current stores are located in the United States and the expensive nature of the
coffee leaves Starbucks vulnerable to changes in consumer spending behavior
(such as recessions). Recently Starbucks
has begun initiatives to sell its specialty coffee beans for home use,
presenting a chance for a large increase in revenue and diversification. However, Starbucks faces fierce competition
seeking a piece of its lucrative market share and the threat of consumer behavior
changes, given its reputation rides on a singular product. Perform a SWOT analysis for Starbucks.
6.
Identify and explain the four basic
global operations strategies. Give an
example of each strategy.
A
network consists of the activities in the following list. Times are given in
weeks.

Activity

Preceding

Time

A

—

8

B

—

3

C

A

7

D

A, B

3

E

C

4

a.
Draw the network diagram.
b.
Calculate the ES, EF, LS, LF, and Slack
for each activity.
c.
What is project completion time?
.
7.
The network below represents a project
being analyzed by Critical Path Methods. Activity durations are A=5, B=2, C=12,
D=3, E=5, F=1, G=7, H=2, I=10, and J=6.
a. What
task must be on the critical path, regardless of activity durations?
b. What
is the duration of path A-B-E-H-J?
c. What
is the critical path of this network?
d. What
is the length of the critical path?
e. What
is slack time at activity H?
f. What
is the Late Finish of activity H?
g. If
activity C were delayed by two time units, what would happen to the project
duration?
The project duration
would not change because the slack time of C is 5 so it can be delayed up to 5
days without affecting the project.

9. A partially solved PERT problem is detailed
in the table below. Times are given in weeks.

Activity

Preceding

Optimistic
Time

Probable
Time

Pessimistic
Time

Expected
Time

Variance

A

—

7

9

14

9.5

1.361

B

A

2

2

8

3

0

C

A

8

12

16

12

0

D

A

3

5

10

5.5

1.361

E

B

4

6

8

6

0

F

B

6

8

10

8

0

G

C, F

2

3

4

3

0

H

D

2

2

8

3

1.000

I

H

6

8

16

9

2.778

J

G, I

4

6

14

7

2.778

K

E, J

2

2

5

2.5

0.250

a. Calculate the expected time for each
activity. Enter these values in the appropriate column in the table above.
b.
Which activities form the critical
path?
c.
What is the estimated time of the
critical path?
d. What
are the project variance and the project standard deviation?

e.
What is the probability of
completion of the project after week 40?

10. Pirmin’s Bike Shop is behind on a
custom bike and needs to crash 8 hours of time from the 8-step project. Given the project table below calculate the
crash cost for 8 hours of time-savings.
Suppose Pirmin calls the customer and asks for a project extension,
reducing the amount of time he needs to crash.
Calculate both the maximum time-savings available on a $25 crash budget
and the cost to crash four hours of savings.

11.
Weekly sales of ten-grain bread
at the local organic food market are in the table below. Based on the following
data, forecast week 9 using a five-week moving average.
WeekSales
1 415
2 389
3 420
4 382
5 410
6 432
7 405
8 421
12.
A management analyst is using
exponential smoothing to predict merchandise returns at an upscale branch of a
department store chain. Given an actual number of returns of 154 items in the
most recent period completed, a forecast of 172 items for that period, and a
smoothing constant of 0.3, what is the forecast for the next period? How would
the forecast be changed if the smoothing constant were 0.6? Explain the
difference in terms of alpha and responsiveness

13.
Jim’s department at a local department store
has tracked the sales of a product over the last ten weeks. Forecast demand using exponential smoothing
with an alpha of 0.4, and an initial forecast of 28.0 for period 1. Calculate the MAD. What do you recommend?

14.
A firm has modeled its experience with
industrial accidents and found that the number of accidents per year (Y) is
related to the number of employees (X) by the regression equation Y = 3.3 +
0.049*X. R-Square is 0.68. The regression is based on 20 annual observations.
The firm intends to employ 480 workers next year. How many accidents do you
project? How much confidence do you have in that forecast?

15.
A company is deciding if it
should do design of a product in-house or outsource the design. If outsourced
the cost for a low bidder would be $40,000 and the cost for an expensive bidder
$100,000. To do the design in-house
would require over-time for an already stretched design team with total costs
of $70,000. If all three designs
(in-house, low bid, high bid) are equal in quality and the likelihood of
finding a low bidder is 60% (meaning that 40% of the time the firm will have to
hire the expensive bidder), should the company outsource design or do it
in-house?

16.
A company is deciding if it
should design an advertising system for use on Twitter©. The first option is to skip out on designing,
with no net costs or gains. The second
option is System A, which would result in additional sales of either $50,000
under good conditions or $10,000 under bad conditions. The final choice is System B, which would
increase sales by $20,000 under both good and bad conditions. Suppose that good conditions are twice as
likely as bad conditions. Which option
should the company pursue if developing a system costs $25,000?
Based on this
decision tree I would suggest system B because it has the highest EMV which in
this case is the potential increase in sales from the system.

17.
JDI, Inc. is trying to decide
whether to make-or-buy a part (#J-45FPT).
Purchasing the part would cost them $1.50 each. If they design and produce it themselves, it
will result in a per unit cost of $0.75.
However, the design investment would be $50,000. Further, they realize that for this type of
part, there is a 30% chance that the part will need to be redesigned at an
additional cost of $50,000. Regardless
of whether they make-or-buy the part, JDI will need 100,000 of these
parts. Using decision trees analysis and
EMV, what should JDI do? Show the
decision tree.

18.
Construct a cause and effect diagram for
why students arrive to class late.
Include at least three reasons for each of the M’s.

19.
Management is concerned that
workers create more product defects at the very beginning and end of a work
shift than at other times of their eight hour workday. Construct a scatter
diagram with the following data, collected last week. Is management justified
in its belief?
20.
Mary is considering purchasing a
machine from two suppliers. Supplier A’s
machine has an annual fixed cost of $10,000 and a unit variable cost of
$2.10. Supplier B’s machine has an
annual fixed cost of $16,000 and a unit variable cost of $3.00. How large should Mary’s annual demand be in
order to make Supplier B’s machine the better choice?

21.
A non-profit organization is
planning a raffle to raise money. It has
two options for tickets. The first
option is to do the tickets by hand, with fixed costs of $50 and variable costs
of $.05 per ticket. The second option is
to outsource production. This would
result in fixed costs of $500 and variable costs of $.01. If the organization plans to sell 10,000
tickets which option should it choose?
.

22.
Brandon’s computer shop is
considering two different configuration options. The first one is to have each computer built
by the sales associates when they have free time. The second option is to hire a dedicated
assembly technician. Option A has
variable costs of $50 per computer and no fixed costs. Option B has a fixed cost of $1,000 but
variable costs of only $5 per computer.
What is the cross-over point?

23.
How is benchmarking data used in the quality
analysis of our own products and services?

What is the highest level quality belt anyone can obtain?
24.
What
does APICS stand for…..and how many certification exams must you take?