Question Bank

Productivity
1. A company that processes fruits and vegetables is able to produce 400 cases of canned
peaches in one-half hour with four workers. What is labour productivity?
2. A wrapping-paper company produced 2,000 rolls of paper one day. Labour cost was $160,
material cost was $50, and overhead was $320. Determine the multifactor productivity.
3. Compute the multifactor productivity measure for an eight-hour day in which the usable
output was 300 units, produced by three workers who used 600 pounds of materials. Workers
have an hourly wage of $20, and material cost is $1 per pound. Overhead is 1.5 times labour
cost.

Process Analysis
A toy manufacturer receives crafted toys from local carpenters and performs the final
operations before stocking it for sale. The process consists of five steps. The first step is to
arrange a set of four toys in a pallet (8 minutes). After this, the pallet moves to the next station
where the toys are pre-treated (12 minutes). This is to increase the toys’ life, prevent them from
attacks of pests in the future, and also to improve the effectiveness of the painting operation.
The next step is to send it to the spray-painting chamber, where it is painted as per specifications
(20 minutes). At present, there is one spray painting machine. After painting, it is left in an
open area for drying (10 minutes). The painting process and the pre-treatment process are
specialised so the paint dries quickly. Finally, the toys are inspected and packed (5 minutes).

a) What is the throughput time for this manufacturing process?

b) Identify the bottleneck for this process.
c) What is the cycle time for this process?
d) What is the productive capacity of the process?

Break-even Analysis
1. A firm’s manager must decide whether to make or buy a certain item used in the production
of vending machines. Making the item would involve annual lease costs of $150,000. Cost
and volume estimates are as follows:
 Make Buy
Annual fixed cost $150,000 None
Variable cost/unit $60 $80
Annual volume (units) 12,000 12,000
a. Given these numbers, should the firm buy or make this item?
b. There is a possibility that volume could change in the future. At what volume would the
manager be indifferent between making and buying?
2. A small firm produces and sells automotive items in a five-state area. The firm expects to
consolidate assembly of its battery chargers line at a single location. Currently, operations are
in three widely scattered locations. The leading candidate for location will have a monthly
fixed cost of $42,000 and variable costs of $3 per charger. Chargers sell for $7 each. Prepare
a table that shows total profits, fixed costs, variable costs, and revenues for monthly volumes
of 10,000, 12,000, and 15,000 units. What is the break-even point?
3. Refer to Problem 2. Determine profit when volume equals 22,000 units.
4. A manager must decide which type of equipment to buy, Type A or Type B. Type A
equipment costs $15,000 each, and Type B costs $11,000 each. The equipment can be
operated eight hours a day, 250 days a year.
Either machine can be used to perform two types of chemical analysis, C1 and C2. Annual
service requirements and processing times are shown in the following table. Which type of
equipment should be purchased, and how many of that type will be needed? The goal is to
minimize total purchase cost.

Forecasting
1. Forecasts based on averages. Given the following data:

Period Number of Complaints

1 60
2 65
3 55
4 58
5 64
Prepare a forecast for period 6 using each of these approaches:
a. The appropriate naive approach.
b. A three-period moving average.
 c. A weighted average using weights of .50 (most recent), .30, and .20.
d. Exponential smoothing with a smoothing constant of .40.
2. Using seasonal relatives. Apple’s Citrus Fruit Farm ships boxed fruit anywhere in the world.
Using the following information, a manager wants to forecast shipments for the first four
months of next year.
Month Seasonal Relative Month Seasonal Relative
January 1.2 July 0.8
February 1.3 August 0.6
March 1.3 September 0.7
April 1.1 October 1.0
May 0.8 November 1.1
June 0.7 December 1.4
The monthly forecast equation being used is:
Ft = 402 + 3t
where
t0 = January of last year
Ft = Forecast of shipments for month t

3. Accuracy of forecasts. The manager of a large manufacturer of industrial pumps must choose
between two alternative forecasting techniques. Both techniques have been used to prepare
forecasts for a six-month period. Using MAD as a criterion, which technique has the better
performance record?

4. Control chart. Given the demand data that follow, prepare a naive forecast for periods 2
through 10. Then determine each forecast error, and use those values to obtain 2s control
limits. If demand in the next two periods turns out to be 125 and 130, can you conclude that
the forecasts are in control?
 Aggregate Planning and Master Scheduling
1. A manager is attempting to put together an aggregate plan for the coming nine months. She
has obtained a forecast of expected demand for the planning horizon. The plan must deal with
highly seasonal demand; demand is relatively high in periods 3 and 4 and again in period 8,
as can be seen from the following forecasts:

Period 1 2 3 4 5 6 7 8 9 Total
Forecast 190 230 260 280 210 170 160 260 180 1,940

The department now has 20 full-time employees, each of whom produces 10 units of output
per period at a cost of $6 per unit. Beginning inventory for period 1 is zero. Inventory carrying
cost is $5 per unit per period, and backlog cost is $10 per unit per period.
a. Will the current work force be able to handle the forecast demand?
b. Determine the total cost of the plan, including production, inventory, and backorder costs.
2. Spring and Summer Fashions, a clothing producer, has generated a forecast for the next eight
weeks. Demand is expected to be fairly steady, except for periods 3 and 4, which have higher
demands:

Period 1 2 3 4 5 6 7 8 Total
Forecast 1,200 1,200 1,400 3,000 1,200 1,200 1,200 1,200 11,600

The company typically hires seasonal workers to handle the extra workload in periods 3 and
4. The cost for hiring and training a seasonal worker is $50 per worker, and the company
plans to hire two additional workers and train them in period 3, for work in period 4, and then
lay them off (no cost for layoff). Develop an aggregate plan that uses steady output from
regular workers with added output from the two seasonal workers in period 4. The output rate
for the seasonal workers is slightly less than that of regular workers, so their cost per unit is
higher. The cost per unit for regular workers is $4 per unit, while cost per unit for the seasonal
workers is $5 per unit. Backlog cost is $1 per unit per period.
3. Prepare an MPS schedule for the following situation: The forecast for each period is 70 units.
The starting inventory is zero. The MPS rule is to schedule production if the projected
 inventory on hand is negative. The production lot size is 100 units. The following table shows
committed orders.

Period Customer Orders

1 80
2 50
3 30
4 10

Product Structure – MRP

1. Given the following diagram for a product, determine the quantity of each component
required to assemble one unit of the finished product.

2. Draw a tree diagram for a stapler given the following bill of materials:
Item Components
Stapler Top assembly, base assembly
Top assembly Cover, spring, slide assembly
Cover
Spring
Slide assembly Slide, spring
Slide
Spring
Base assembly Base, strike plate, rubber pad (2)
Base
Strike plate
Rubber pad (2)

Inventory Management
1. Basic EOQ. A toy manufacturer uses approximately 32,000 silicon chips annually. The chips
are used at a steady rate during the 240 days a year that the plant operates. Annual holding
cost is $3 per chip, and ordering cost is $120. Determine
 a. The optimal order quantity.
b. The number of workdays in an order cycle.
2. Economic production quantity. The Dine Corporation is both a producer and a user of brass
couplings. The firm operates 220 days a year and uses the couplings at a steady rate of 50 per
day. Couplings can be produced at a rate of 200 per day. Annual storage cost is $2 per
coupling, and machine setup cost is $70 per run.
a. Determine the economic run quantity.
b. Approximately how many runs per year will there be?
c. Compute the maximum inventory level.
d. What is the average inventory on hand?
e. Determine the length of the pure consumption portion of the cycle.
3. Reorder Point for variable demand and constant lead time. The housekeeping department of
a motel uses approximately 400 washcloths per day. The actual number tends to vary with
the number of guests on any given night. Usage can be approximated by a normal distribution
that has a mean of 400 and a standard deviation of nine washcloths per day. A linen supply
company delivers towels and washcloths with a lead time of three days. If the motel policy is
to maintain a stockout risk of 2 percent, what is the minimum number of washcloths that must
be on hand at reorder time, and how much of that amount can be considered safety stock?
4. Reorder Point for constant demand and variable lead time. The motel in the preceding
example uses approximately 600 bars of soap each day, and this tends to be fairly constant.
Lead time for soap delivery is normally distributed with a mean of six days and a standard
deviation of two days. A service level of 90 percent is desired.
a. Find the ROP.
b. How many days of supply are on hand at the ROP?
5. Reorder Point for variable demand rate and variable lead time. The motel replaces broken
glasses at a rate of 25 per day. In the past, this quantity has tended to vary normally and have
a standard deviation of three glasses per day. Glasses are ordered from a Cleveland supplier.
Lead time is normally distributed with an average of 10 days and a standard deviation of 2
days. What ROP should be used to achieve a service level of 95 percent?
6. Fixed-order-interval. A lab orders a number of chemicals from the same supplier every 30
days. Lead time is five days. The assistant manager of the lab must determine how much of
one of these chemicals to order. A check of stock revealed that eleven 25-milliliter (ml) jars
are on hand. Daily usage of the chemical is approximately normal with a mean of 15.2 ml per
 day and a standard deviation of 1.6 ml per day. The desired service level for this chemical is
95 percent.
a. How many jars of the chemical should be ordered?
b. What is the average amount of safety stock of the chemical?
7. Single-period. A firm that installs cable TV systems uses a certain piece of equipment for
which it carries two spare parts as optimal. The parts cost $500 each and have no salvage
value or useful life after one period. Part failures can be modelled by a Poisson distribution
with a mean of two failures during the useful life of the equipment. Holding and disposal
costs are negligible. Estimate the apparent range of shortage cost.

Quality Control
1. Control charts for means and ranges. Processing times for new accounts at a bank are shown
in the following table. Five samples of four observations each have been taken. Use the
sample data to construct upper and lower control limits for both a mean chart and a range
chart. Do the results suggest that the process is in control?

2. Process capability. Determine which of these three processes are capable:

Scheduling
1. Priority rules. Job times (including processing and setup) are shown in the following table
for five jobs waiting to be processed at a work center:
 Job Job Time Due Date
(hours) (hours)
A 12 15
B 6 24
C 14 20
D 3 8
E 7 6
Determine the processing sequence that would result from each of these priority rules:
a. SPT b. EDD
2. Priority rules. Using the job times and due dates from above problem, determine each of the
following performance measures for first-come, first-served processing order: Assume jobs
listed in order of arrival.
a. Makespan.
b. Average flow time.
c. Average tardiness.
d. Average number of jobs at the workstation.

Project Management
1. The following table contains information related to the major activities of a research project.

Activity Immediate Predecessor Expected Time (days)

A — 5
C A 8
D C 2
B A 7
E — 3
F E 6
I B, D 10
M F, I 8
G — 1
H G 2
K H 17
End K, M

Use the information to do the following:

a. Draw a precedence diagram
b. Find the critical path.
c. Determine the expected length of the project.