Final Exam - Module 2

TOTAL POINTS 11
1.
Question 1
Smooth Chin Device Company
The Smooth Chin Device Company is a manufacturer of
high-end electric razors. These razors are produced
using a machine-paced process. For each razor, a tray
with components enters the process at the beginning of
a conveyor belt. The tray then passes through the six
steps (consisting of various tasks) explained in the
table below. Workers perform the assembly operations
on the moving tray. The last step consists of an
inspection of the then fully assembled razor. The
activity times of the process are as follows:
There are six workers, one at each of the six stations
(A-F). They begin their workday at 8:00 a.m. and work
steadily until 4:00 pm. (They are replaced with other
workers for breaks and lunches, but the production is
not slowed or stopped during these times.) Their hourly
wage rate is $25 per hour. You can assume unlimited
demand.
Which station is the bottleneck of the process?

1 point
2.
Question 2
Smooth Chin Device Company
The Smooth Chin Device Company is a manufacturer of
high-end electric razors. These razors are produced
using a machine-paced process. For each razor, a tray
with components enters the process at the beginning of
a conveyor belt. The tray then passes through the six
steps (consisting of various tasks) explained in the
table below. Workers perform the assembly operations
on the moving tray. The last step consists of an
inspection of the then fully assembled razor. The
activity times of the process are as follows:
There are six workers, one at each of the six stations
(A-F). They begin their workday at 8:00 a.m. and work
steadily until 4:00 pm. (They are replaced with other
workers for breaks and lunches, but the production is
not slowed or stopped during these times.) Their hourly
wage rate is $25 per hour. You can assume unlimited
demand.
What is the process capacity (you can ignore any start-
up or empty system effects), in razors/hour?

1 point
3.
Question 3
Smooth Chin Device Company
The Smooth Chin Device Company is a manufacturer of
high-end electric razors. These razors are produced
using a machine-paced process. For each razor, a tray
with components enters the process at the beginning of
a conveyor belt. The tray then passes through the six
steps (consisting of various tasks) explained in the
table below. Workers perform the assembly operations
on the moving tray. The last step consists of an
inspection of the then fully assembled razor. The
activity times of the process are as follows:
There are six workers, one at each of the six stations
(A-F). They begin their workday at 8:00 a.m. and work
steadily until 4:00 pm. (They are replaced with other
workers for breaks and lunches, but the production is
not slowed or stopped during these times.) Their hourly
wage rate is $25 per hour. You can assume unlimited
demand.
What are the direct labor costs (you can ignore any
start-up or empty system effects)associated with
producing one razor, in dollars?

1 point
4.
Question 4
Smooth Chin Device Company
The Smooth Chin Device Company is a manufacturer of
high-end electric razors. These razors are produced
using a machine-paced process. For each razor, a tray
with components enters the process at the beginning of
a conveyor belt. The tray then passes through the six
steps (consisting of various tasks) explained in the
table below. Workers perform the assembly operations
on the moving tray. The last step consists of an
inspection of the then fully assembled razor. The
activity times of the process are as follows:
There are six workers, one at each of the six stations
(A-F). They begin their workday at 8:00 a.m. and work
steadily until 4:00 pm. (They are replaced with other
workers for breaks and lunches, but the production is
not slowed or stopped during these times.) Their hourly
wage rate is $25 per hour. You can assume unlimited
demand.
What is the average labor utilization (you can ignore any
start-up or empty system effects)of the six workers?
Please give your answer in decimal form (e.g. 0.5 for
50% utilization).

1 point
5.
Question 5
Strohrmann, a large-scale bakery in Pennsylvania, is
laying out a new production process for their packaged
bread, which they sell to several grocery chains. It
takes 12 minutes to bake the bread.
How large an oven is required so that the company is
able to produce 4,000 units of bread per hour (give your
answer in terms of the number of units that can be
baked simultaneously)?

1 point
6.
Question 6
The following table shows financial data (year 2009) for
two US retailers: Save-A-Lot Retailers and Wally’s Mart.
Assume that both companies have an average annual
holding cost rate of 20% (i.e. it costs both retailers $2
to hold an item for one entire year that they procured
for $10).
How many days, on average, does a product stay in
Save-A-Lot’s inventory before it is sold? Assume that
stores operate 365 days a year.

1 point
7.
Question 7
The following table shows financial data (year 2009) for
two US retailers: Save-A-Lot Retailers and Wally’s Mart.
Assume that both companies have an average annual
holding cost rate of 20% (i.e. it costs both retailers $2
to hold an item for one entire year that they procured
for $10).

How much lower, on average, is the inventory cost for

Save-A-Lot compared to Wally’s Mart of a household
cleaner valued at $50 COGS? Give your answer in terms
of dollars. Assume that the unit cost of the household
cleaner is the same for both companies and that the
price and the inventory turns of an item are
independent.
1 point
8.
Question 8
Great Valley Income Tax Advice
GV is a small accounting firm supporting wealthy
individuals in their preparation of annual income tax
statements. Every December, GV sends out a short
survey to their customers, asking for the information
required for preparing the tax statements. Based on 50
years of experience, GV categorizes their cases into the
following groups:
• Group 1 (new customers, easy): 15 percent of cases
• Group 2 (new customers, complex): 5 percent of cases
• Group 3 (repeat customers, easy): 50 percent of cases
• Group 4 (repeat customers, complex): 30 percent of
cases
Here, “easy” versus “complex” refers to the complexity
of the customer’s earning situation.
In order to prepare the income tax statement, GV needs
to complete the following set of activities. Processing
times (and even which activities need to be carried out)
depend on which group a tax statement falls into. All of
the following processing times are expressed in
minutes per income tax statement.
The activities are carried out by the following three
people:
• Administrative support person: filing and writing.
• Senior accountant (who is also the owner): initial
meeting, review by senior accountant.
• Junior accountant: preparation.
Assume that all three people work eight hours per day
and 20 days a month. For the following questions,
assume the product mix as described above. Assume
that there are 50 income tax statements arriving each
month.
Which person is the bottleneck?

a. Administrator

b. Senior accountant

c. Junior accountant

1 point
9.
Question 9
Great Valley Income Tax Advice
GV is a small accounting firm supporting wealthy
individuals in their preparation of annual income tax
statements. Every December, GV sends out a short
survey to their customers, asking for the information
required for preparing the tax statements. Based on 50
years of experience, GV categorizes their cases into the
following groups:
• Group 1 (new customers, easy): 15 percent of cases
• Group 2 (new customers, complex): 5 percent of cases
• Group 3 (repeat customers, easy): 50 percent of cases
• Group 4 (repeat customers, complex): 30 percent of
cases
Here, “easy” versus “complex” refers to the complexity
of the customer’s earning situation.
In order to prepare the income tax statement, GV needs
to complete the following set of activities. Processing
times (and even which activities need to be carried out)
depend on which group a tax statement falls into. All of
the following processing times are expressed in
minutes per income tax statement.

The activities are carried out by the following three

people:
• Administrative support person: filing and writing.
• Senior accountant (who is also the owner): initial
 meeting, review by senior accountant.
• Junior accountant: preparation.
Assume that all three people work eight hours per day
and 20 days a month. For the following questions,
assume the product mix as described above. Assume
that there are 50 income tax statements arriving each
month.
What is the (implied) utilization of the senior
accountant?

1 point
10.
Question 10
Great Valley Income Tax Advice
GV is a small accounting firm supporting wealthy
individuals in their preparation of annual income tax
statements. Every December, GV sends out a short
survey to their customers, asking for the information
required for preparing the tax statements. Based on 50
years of experience, GV categorizes their cases into the
following groups:
• Group 1 (new customers, easy): 15 percent of cases
• Group 2 (new customers, complex): 5 percent of cases
• Group 3 (repeat customers, easy): 50 percent of cases
• Group 4 (repeat customers, complex): 30 percent of
cases
Here, “easy” versus “complex” refers to the complexity
of the customer’s earning situation.
In order to prepare the income tax statement, GV needs
to complete the following set of activities. Processing
times (and even which activities need to be carried out)
depend on which group a tax statement falls into. All of
the following processing times are expressed in
minutes per income tax statement.

The activities are carried out by the following three

people:
• Administrative support person: filing and writing.
• Senior accountant (who is also the owner): initial
meeting, review by senior accountant.
• Junior accountant: preparation.
Assume that all three people work eight hours per day
and 20 days a month. For the following questions,
assume the product mix as described above. Assume
that there are 50 income tax statements arriving each
month.
What is the (implied) utilization of the junior
accountant?

1 point
11.
Question 11
Great Valley Income Tax Advice
GV is a small accounting firm supporting wealthy
individuals in their preparation of annual income tax
statements. Every December, GV sends out a short
survey to their customers, asking for the information
required for preparing the tax statements. Based on 50
years of experience, GV categorizes their cases into the
following groups:
• Group 1 (new customers, easy): 15 percent of cases
• Group 2 (new customers, complex): 5 percent of cases
• Group 3 (repeat customers, easy): 50 percent of cases
• Group 4 (repeat customers, complex): 30 percent of
cases
Here, “easy” versus “complex” refers to the complexity
of the customer’s earning situation.
In order to prepare the income tax statement, GV needs
to complete the following set of activities. Processing
times (and even which activities need to be carried out)
depend on which group a tax statement falls into. All of
the following processing times are expressed in
minutes per income tax statement.

The activities are carried out by the following three

people:
• Administrative support person: filing and writing.
• Senior accountant (who is also the owner): initial
meeting, review by senior accountant.
• Junior accountant: preparation.
Assume that all three people work eight hours per day
and 20 days a month. For the following questions,
assume the product mix as described above. Assume
that there are 50 income tax statements arriving each
month.
What is the (implied) utilization of the administrative
support person?

1 point