2, 2017/2018

BBA 2-4

2.30 p.m. – 5.30 p.m. 7/06/2018

MGT 4010 1-2

Operations Management

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A Answer ALL. TRUE or FALSE Questions.

B Answer ALL Questions.

C Answer ALL Questions

PART A: TRUE or FALSE Questions. Each question carries one (1) mark.

1. Flow diagrams are drawings used to analyze movement of people or material.

2. Often called human factors, the study of work is known as ergonomics.

3. Flextime is a system that allows employees, within limits, to determine their own work
schedules.

4. A process is said to be in statistical control when assignable causes are the only sources of
variation.

5. A process range chart illustrates the amount of dispersion within the samples.

6. An x-bar chart is used when we are sampling attributes.

7. Factor rating is limited to quantitative information concerning location decisions.

8. The center of gravity method of location planning is accurate only when the quantities to
be shipped to each location are equal.

9. An example of an intangible cost, as it relates to location decisions, is the quality of

education.

10. Professional services typically require low levels of labor intensity.

11. An example of the postponement strategy for improving service productivity is having the
customer wait until you have sufficient time to serve the customer.

12. As a general rule, continuous processing systems produce products for inventory rather than
for customer order.

13. A cafeteria line would be an example of a process focused layout.

14. MRP works best if the inventory items have dependent demand.

15. The bill of materials contains information on lead times and current inventory position on
every component required to produce the end item.

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PART B: Multiple Choice Questions. Each Question carries one (1) mark.

16) The objective of a human resource strategy is to:

A) produce the demand forecast at the lowest possible labor cost.
B) match employment levels with demand.
C) achieve a reasonable quality of work life at low cost.
D) manage labor and design jobs so people are effectively and efficiently utilized.
E) hire the most diversified workforce possible.

17) Flow diagrams are used to analyze:

A) movement of people or material.
B) utilization of an operator and machine.
C) body movements.
D) time taken by various activities.
E) unnecessary micro-motions.

18) Which of the following statements describes job rotation?

A) The job contains a larger number of similar tasks.
B) The job includes some planning and control necessary for job accomplishment.
C) The operator works on different shifts on a regular basis.
D) The operator's schedule is flexible.
E) The operator is allowed to move, for example, from one type of CNC machine to
another.

19) Which of the following is not a method used to set labor standards?
A) historical experience
B) time studies
C) predetermined time standards
D) work sampling
E) government laws and regulations

20) If a sample of items is taken and the mean of the sample is outside the control limits, the
process is:
A) likely out of control and the cause should be investigated.
B) in control, but not capable of producing within the established control limits.
C) within the established control limits with only natural causes of variation.
D) monitored closely to see if the next sample mean will also fall outside the control
limits.
E) producing high quality products.

21) Jars of pickles are sampled and weighed. Sample measures are plotted on control charts.
The ideal weight should be precisely 11 oz. Which type of chart(s) would you recommend?
A) p-chart
B) c-chart
C) both an x-bar chart and an R-chart
D) an x-bar chart, but not an R-chart
E) both a p-chart and a c-chart

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22) The number of late insurance claim payouts per 100 should be measured with what type of
control chart?
A) x-bar chart
B) R-chart
C) p-chart
D) c-chart
E) either p-chart or c-chart

23) Describe the following diagram:

Upper control limit

Target

Lower control limit

A) The process is in control, no corrective action is necessary

B) The process is not in control, corrective action is necessary
C) The process may not be in control, corrective action is necessary
D) The process is capable, no corrective action is necessary
E) The process is not capable, corrective action is necessary

24) Which of the following is true regarding the process capability index Cpk?
A) A Cpk index value of 1 is the highest possible.
B) The larger the Cpk, the more units meet specifications.
C) The Cpk index can only be used when the process centerline is also the specification
centerline.
D) Positive values of the Cpk index are good; negative values are bad.
E) Its value will always be at least as large as the Cp value for the same process.

25) The center of gravity method is used to ___________ travel time, distance and costs.
A. normalize
B. eliminate
C. average
D. minimize
E. document

26) On the crossover chart where the costs of two or more location alternatives have been
plotted, the quantity at which two cost curves cross is the quantity at which:
A) fixed costs are equal for two alternative locations.
B) variable costs are equal for two alternative locations.
C) total costs are equal for all alternative locations.
D) fixed costs equal variable costs for one location.
E) total costs are equal for two alternative locations.

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27) Which of the following is NOT among the eight determinants of revenue and volume for a
service firm?
A) quality of management
B) shipment cost of finished goods
C) purchasing power of the customer-drawing area
D) uniqueness of the firm's and the competitors' locations
E) competition in the area

28) Traffic counts and demographic analysis of drawing area are associated with:
A) the center-of-gravity method.
B) manufacturing location decisions.
C) service location decisions.
D) the transportation model.
E) locational cost-volume analysis.

29) Which of the following are all strategies for improving productivity in services?
A) separation, self-service, automation, and scheduling
B) lean production, strategy-driven investments, automation, and process focus
C) reduce inventory, reduce waste, reduce inspection, and reduce rework
D) high interaction, mass customization, service factory, and just-in-time
E) process focus, repetitive focus, product focus, and mass customization focus

30) Three of the four types of processes are:

A) goods, services, and hybrids.
B) manual, automated, and service.
C) process focus, repetitive focus, and product focus.
D) modular, continuous, and technological.
E) input, transformation, and output.

31) Which of the following industries is most likely to have low equipment utilization?
A) auto manufacturing
B) commercial baking
C) television manufacturing
D) steel manufacturing
E) restaurants

32) The crossover point is that production quantity where:

A) variable costs of one process equal the variable costs of another process.
B) fixed costs of a process are equal to its variable costs.
C) total costs equal total revenues for a process.
D) total costs for one process equal total costs for another process.
E) the process no longer loses money.

33) Demand for a given item is said to be dependent if:

A) it originates from the external customer.
B) there is a deep bill of material.
C) the finished products are mostly services (rather than goods).
D) there is a clearly identifiable parent.
E) the item has several children.

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34) In MRP, the number of units projected to be available at the beginning of each time period
refers to:
A) net requirements.
B) scheduled receipts.
C) planned order releases.
D) projected on hand.
E) the amount necessary to cover a shortage.

35. The output of MRP is:

A. gross requirements
B. net requirements
C. a schedule of requirements for all parts and end items
D. inventory reorder points
E. economic order quantities and reorder points

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PART C: Problems.
QUESTION 1
The data below represent time study observations for an assembly operation. The work pace of
the employee being observed was given based on typical performance of adequately trained
workers.
Performance Observations (times in minutes)
Element
Rating 1 2 3 4 5 6
1 100% 1.5 1.6 1.4 1.5 3.8 1.5
2 90% 2.3 1.1 2.1 2.2 2.2 2.4
3 115% 1.7 1.9 2.9 1.4 1.9 1.6
4 100% 3.5 3.6 3.6 3.6 3.5 3.2

a. What is the normal time for this task based on this employee performance?
b. What is standard time for this task if allowances sum to 15% of the job time?
[8+2 = 10 marks]

QUESTION 2

Part a:
Cartons of Plaster of Paris are supposed to weigh exactly 32 oz. Inspectors want to develop
process control charts. They take ten samples of six boxes each and weigh them. Based on the
following data, compute the lower and upper control limits and determine whether the process
is in control.

Sample Mean Range

1 33.8 1.1
2 34.6 0.3
3 34.7 0.4
4 34.1 0.7
5 34.2 0.3
6 34.3 0.4
7 33.9 0.5
8 34.1 0.8
9 34.2 0.4
10 34.4 0.3

Part b:
The specification for a plastic liner for concrete highway projects calls for a thickness of 6.0
mm ± 0.1 mm. The standard deviation of the process is estimated to be 0.02 mm.
a. What are the upper and lower specification limits for this product?
b. The process is known to operate at a mean thickness of 6.03 mm. What is the Cp and Cpk
for this process?
[10+5 = 15 marks]
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QUESTION 3

A company is planning on expanding and building a new plant in one of three Southeast Asian
countries. The manager in charge has determined that five key success can be used to evaluate
the prospective countries. He used a rating of 1 (least desirable country) to 5 (most desirable) to
evaluate each factor.

CANDIDATE COUNTRY RATINGS

KEY SUCCESS FACTOR WEIGHT
TAIWAN THAILAND SINGAPORE
Technology 0.2 4 5 1
Level of education 0.1 4 1 5
Political and legal aspects 0.4 1 3 3
Social and cultural aspects 0.1 4 2 3
Economic factors 0.2 3 3 2

Which country should be selected for the new plant?

[5 marks]

QUESTION 4

A product is currently made in a process-focused shop, where fixed costs are $9,000 per year
and variable costs are $50 per unit. The firm is considering a fundamental shift in process, to
repetitive manufacturing. The new process would have fixed costs of $90,000, and variable
costs of $5. What is the crossover point for these processes? For what range of outputs is each
process appropriate?
[10 marks]

QUESTION 5

The master production plan for Faizah Manufacturing Corp is given below:
Period (Week, day)
1 2 3 4 5 6 7 8 9 10 11 12
Gross Requirements 15 20 25 20 20 15 15
Scheduled Receipts
Projected On Hand 10
Net Requirements
Planned Order Receipts
Planned Order Releases

If their suppliers take 2 weeks to deliver the supplies, the set up costs for their production is
$175, their holding cost is $15 per week, develop an ordering plan and costs for the factory
using these techniques:
a. Lot-for-lot model
b. EOQ model
c. POQ model
d. Which model gives the lowest cost production plan?
[5+9+7+4 = 25 marks]

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 FORMULA SHEET

BEPx = FC
P – VC

∑ 𝑡𝑡
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 = 𝑇𝑇𝑇𝑇 − 𝑇𝑇𝑇𝑇 𝐸𝐸 =
𝑁𝑁𝑁𝑁.𝑜𝑜𝑜𝑜 𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊 𝑥𝑥 𝐶𝐶𝐶𝐶

2𝐷𝐷𝐶𝐶𝑂𝑂
𝐸𝐸𝐸𝐸𝐸𝐸 = �
𝐶𝐶ℎ

If assuming 99.73% = c ± 3 c

∑ (x − x )
2

s= i

n −1

UCL = x + zσ x UCL = x + A2 R UCL = D4 R

LCL = x − zσ x LCL = x − A2 R LCL = D3 R

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 TABLE S6.1 Factors for Computing Control Chart Limits (3 sigma)

SAMPLE MEAN UPPER RANGE, LOWER RANGE,

SIZE, FACTOR, D4 D3
n A2

2 1.880 3.268 0

3 1.023 2.574 0

4 .729 2.282 0

5 .577 2.115 0

6 .483 2.004 0

7 .419 1.924 0.076

8 .373 1.864 0.136

9 .337 1.816 0.184

10 .308 1.777 0.223

12 .266 1.716 0.284

TABLE S6.2 Common z Values

Z-VALUE (STANDARD
DEVIATION REQUIRED FOR
DESIRED CONTROL DESIRED LEVEL OF
LIMIT (%) CONFIDENCE
90.0 1.65
95.0 1.96
95.45 2.00
99.0 2.58
99.73 3.00

Upper Specification - Lower Specification If assuming 99.73% = c ± 3 c

Cp =
6σ

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