Production Management IA Questions

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OMIS 302

INTRODUCTION TO PRODUCTION MANAGEMENT


2022/2023 ACADEMIC YEAR
IA QUESTIONS

Question 1
Merrifield Post Office is evaluating the productivity of its mail processing centres. The centres differ
in the degree of automation, the type of work that can be performed, and the skill of the workers.
Centre No. of workers/hr Hourly wage rate Overhead rate Pieces
processed/hr
1 10 $5.5 $10 1000
2 5 $10 $25 2000
3 8 $12 $50 3000
Calculate the labour productivity for each centre.

Question 2
A property title search firm is contemplating using online software to increase its search
productivity. Currently, an average of 50 minutes is needed to do a title search. The researcher’s
cost is ₵3 per minute. Clients are charged a fee of ₵500. Company A’s software would reduce the
average search time by 10 minutes, at a cost of ₵3.50 per search. Company B’s software would
reduce the average search time by 12 minutes at a cost of ₵4 per search.
Option 1: What is the productivity of the property title search firm?
Option 2: What will be the productivity of the property title search firm if Company A’s software is
used for the search?
Option 3: What will be the productivity of the property title search firm if Company B’s software is
used for the search?
Based on the productivity calculated for the three options, which option would you recommend?

Question 3
Fiesta Royale’s Custom Cakes currently sells 5 birthdays, 6 wedding, and 2 specialty cakes each
month for ₵55, ₵185, and ₵115 each, respectively. The cost of labour is ₵60 per hour (including
benefits) and it takes 80 minutes to produce a birthday cake, 270 minutes to produce a wedding
cake, and 100 minutes to produce a specialty cake. Fiesta Royale’s current multifactor productivity
ratio is 1.50.
a. Determine the total output in Cedis for Fiesta Royale.
b. What is the total number of labour hours spent on the indicated outputs?
c. What is the total cost of labour input in the cake production?
d. Use the multifactor productivity ratio provided to calculate the average cost of the cakes
produced.
Question 4
Fiesta Royale’s Custom Cakes currently sells 5 birthday, 6 wedding, and 2 specialty cakes each
month for ₵55, ₵185, and ₵115 each, respectively. The cost of labour is ₵70 per hour (including
benefits) and it takes 90 minutes to produce a birthday cake, 270 minutes to produce a wedding
cake, and 120 minutes to produce a specialty cake. Fiesta Royale’s current multifactor productivity
ratio is 1.50. Overhead cost is estimated to be ₵455 for the production of the cakes. (Leave your
answers to 2 decimal places where applicable)
a. Calculate Fiesta Royale’s labour productivity ratio in Cedis per hour for each type of cake.
i. Birthday cake
ii. Wedding cake
iii. Specialty cake
b. What is the total cost of the inputs used for this production?
c. The multifactor productivity for this production is?

Question 5
Sweet Tooth Inc., a leading chocolatier, can produce 150 lbs of chocolate powder from 1000 lbs of
cocoa beans in 10 hours of processing. Not satisfied with this output, the company is contemplating
switching to a more automated process that would yield 260 lbs of chocolate powder per 1800 lbs
of cocoa beans and take 15 hours to process. The cost of processing is $25 per hour. Cocoa beans
cost $6.80 per lb. Calculate:
a. The labor productivity of the current process
b. The labor productivity of the proposed process.
c. The multifactor productivity of the existing process.
d. The multifactor productivity of the proposed process.

Question 6
A property title search firm is contemplating using online software to increase its search
productivity. Currently an average of 50 minutes is needed to do a title search. The researcher cost
is ₵5 per minute. Clients are charged a fee of ₵600. Company A’s software would reduce the average
search time by 12 minutes, at a cost of ₵5.50 per search. Company B’s software would reduce the
average search time by 15 minutes at a cost of ₵5 per search.
Option 1: What is the productivity of the property title search firm?
Option 2: What will be the productivity of the property title search firm if Company A’s software is
used for the search?
Option 3: What will be the productivity of the property title search firm if Company B’s software is
used for the search?
Based on the productivity calculated for the three options, which option would you recommend?
Option
Question 7
Atongo Guitar Factory located at Ashaiman New York produces low-cost, highly durable guitars for
beginners. Typically, out of the 120 guitars that begin production each month, only 80 percent are
considered good enough to sell. The other 20 percent are scrapped due to quality problems that are
identified after they have completed the production process. Each guitar sells for ₵350. Because
some of the production process is automated, each guitar only requires 10 labour hours. Each
employee works an average 160 hours per month. Labour is paid at ₵10/hour, materials cost is ₵45
per guitar, and overhead is ₵4,000.
a. Calculate the total value of output for each month.
b. How many employees are engaged by Atongo Guitars?
c. Calculate the labour productivity ratio for this operation in Cedis.
d. Calculate the labour productivity ratio for this operation in units per hour.

Question 8
Atongo Guitar Factory located at Ashaiman New York produces low-cost, highly durable guitars for
beginners. Typically, out of the 120 guitars that begin production each month, only 90 percent are
considered good enough to sell. The other 10 percent are scrapped due to quality problems that are
identified after they have completed the production process. Each guitar sells for ₵500. Because
some of the production process is automated, each guitar only requires 12 labour hours. Each
employee works an average 140 hours per month. Labour is paid at ₵30/hour, materials cost is ₵50
per guitar, and overhead is ₵4,000.
a. Calculate the total loss of output for each month.
b. How many employees are engaged by Atongo Guitars?
c. Calculate the labour productivity ratio for this operation in Cedis.
d. Calculate the labour productivity ratio for this operation in units per worker.
e. Calculate the total input cost for this production.

Question 9
A company that makes shopping carts for supermarkets and other stores recently purchased some
new equipment that reduces the labour content of the jobs needed to produce the shopping carts.
Prior to buying the new equipment, the company used ten workers, who produced an average of
120 carts per hour. Workers receive $15 per hour, and machine cost was $45 per hour. With the
new equipment, it was possible to transfer two of the workers to another department, and
equipment cost increased by $12 per hour while output increased by 40 carts per hour. (Leave your
answers to 2 decimal places where applicable)
a. The labor productivity under the old system is? and the new system is?
b. Compute the total factor productivity under each of the systems.
c. What is the percentage change in total factor productivity between the old and the new system?
Question 10
Fiesta Royale’s Custom Cakes currently sells 4 birthday, 3 wedding, and 2 specialty cakes each
month for ₵45, ₵155, and ₵105 each, respectively. The cost of labour is ₵50 per hour (including
benefits) and it takes 90 minutes to produce a birthday cake, 240 minutes to produce a wedding
cake, and 60 minutes to produce a specialty cake. Fiesta Royale’s current multifactor productivity
ratio is 1.30.
a. Determine the total output in Cedis for Fiesta Royale.
b. What is the total number of hours spent on the indicated outputs?
c. What is the total cost of labour input in the cake production?
d. Use the multifactor productivity ratio provided to calculate the average cost of the cakes
produced.

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