M1 Written Assignment

M1
Written Assignment
Submit
your solutions to the following problems. Write your solutions clearly and
neatly.
Show all your work to get credit!
1. (Chapter 1)
Woodland Furniture is a small manufacturer of kitchen chairs with 5 workers.
The cost of labor is $15 per hour and workers work 40 hours in a week. The
overhead cost is assumed to be 1.2 times the weekly total labor cost. Material
cost is $10 per chair. Last year, on average, Woodland produced 250 chairs per
week, and of the items produced 16% were defective. The non-defective chairs
were sold for $100 each and the defective chairs were sold for an average of $40
per chair. Woodland recently installed a new assembly process, including a new
sander and polisher. With this new system, production has increased to 280
chairs per week and the defective rate decreased to 10%. Assume the same sale
prices for defective and non-defective chairs.
a)
Calculate the multifactor productivity for the old
and new production systems and compute the percentage change in multifactor
productivity between the two systems.
b)
Calculate the labor productivity for the old and new production
systems and compute the percentage change in labor productivity between the two
systems.
2. (Supplement A)
Richard Winchester, owner of Winchester Products, is considering whether to
produce a new product. He has considered the operations requirements for the
product as well as the market potential. Richard estimates the fixed costs per
year to be $40,000 and variable cost for each unit produced to be approximately
$20.
a)
If Richard sells the
product at a price of $30, how many units of product does he have to produce
and sell in order to break even? Solve both graphically and
algebraically.
b)
Richard forecasts sales
of 4,800 units if the selling price is set at $30, and 6,500 units if the
selling price is set at $27. Which pricing strategy would you recommend to
Richard? Why?

3. (Supplement A)Submit
a solution.
Questions 1: A firm that plans to expand its product line
must decide whether to build a small, medium, or large production facility. A
consultant’s report indicates a 0.75 probability that demand will high and a
0.25 probability that demand will be low.
If the firm builds a small facility and demand is low, the
firm is expected to earn $40 million. If demand turns out to be high, the firm
can either subcontract and earn $46 million or expand the facility to earn $48
million.
If the firm builds a medium-size facility and demand is low,
then the firm is expected to earn $22 million. If demand turns out to be high, the
firm can either do nothing and earn $50 million or can expand the facility to
earn $60 million.
If the firm builds a large facility and demand is low, the
firm is expected to lose an estimated value of $20 million. If demand is high,
earnings are expected to be $70 million.
a)
Draw a complete decision
tree for this problem. Clearly present the decision and event nodes, the
associated probabilities, and the payoffs.
b)
What should the management
do to achieve the highest expected payoff?
Question 2:An engineer who works
for a company that produces equipment for the food-processing industry has been
asked to consider the development of a new type of processor and to make a
recommendation to the company’s board. Two alternative power sources could be
used for the processor, namely gas and electricity, but for technical reasons
each power source would require a fundamentally different design. Resource
constraints mean that the company will only be able to pursue one of the
designs and, because the processor would be more advanced than others that have
been developed, it is by no means certain that either design would be a
success. The engineer estimates that there is a 80% chance the
electricity-powered design would be successful and only a 60% chance that the
gas-powered design would be successful. If either design fails, then the
company would still consider modifying the design, although this would involve
more involvement and would still not guarantee success.
If the electric-powered design is selected and it’s a success, then the
company is estimated to earn $12 million. If the electrical design fails, the
engineer estimates that the probability that it could be successfully modified
is only 40%. If the modification is a success, then the company will earn $7
million. However, if it’s a failure, then the firm will lose $8 million. On the
other hand, if the electrical design is not a success and the company decides
to abandon the project, then this will cost the company $4 million.
If the gas-powered design is selected and it’s a success, then the company
is estimated to earn $16 million. If the gas design fails, the engineer
estimates that the probability that it could be successfully modified is 75%.
If the modification is a success, then the company will earn $11 million.
However, if it’s a failure, then the firm will lose $12 million. On the other
hand, if the gas design is not a success and the company decides to abandon the
project, then this will cost the company $8 million.
c)
Draw a complete decision
tree for this problem. Clearly present the decision and event nodes, the
associated probabilities, and the payoffs.
d)
What should the management
do to achieve the highest expected payoff?
4. (Chapter 2)
Read and watch the video case “Project Management at the Phoenician” on page 86
of the textbook and answer the following questions.
a)
Construct a network
diagram for the spa selection process.
b)
How soon can The
Phoenician management make a decision on the spa?
c)
Calculate the slack for
each activity. Why is it important for a project manager to identify slack of
activities?
d)
Many times, project
decision makers do not rely solely on financial hurdles, such as return on
investment or internal rates of return, but place a lot of emphasis on
intangible factors. Which are the salient intangible factors associated with
selecting one of the three options for the spa?

5. (Chapter 3)
A department store chain is designing a layout for a new store. The store
manager wants to provide as much convenience as possible for her customers.
Based on historical data, the number of trips between departments per hour is
given in the following closeness matrix. A block plan showing a preliminary
layout is also shown.
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Customer travel
between departments is restricted to the aisles shown in the block plan as dotted
lines.
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a) Calculate
the weighted-distance score for the given layout (assume 20 feet distance
between adjacent store).
b) Use
trial and error to find a better layout. How much better is your layout than
the current layout in terms of weighted-distance score?

6.
(Chapter 4)Submit a solution to either
part a OR part b, not both.
a)
Develop a cause-and-effect
(fishbone) diagram to diagnose the possible causes of a process problem that you
have experienced. Make sure your diagram includes at least four bones and ten
ribs.
b)
Think of a simple process
that you observe/do at home or at work (e.g. making coffee). Make a process
chart to depict the process. See Figure 4.8 on page 130 of the textbook for an
example of a process chart.
7.
(Chapter 4) Watch the video for the case
“Process Analysis at Starwood” on page 152 of the textbook and answer the
following questions.
e)
How can the management
specifically improve the stewarding
process at The Phoenician?
f)
Create a flowchart (similar
to the one presented in the case) illustrating the new stewarding process with the improvements you suggested in
part a.