• • 1.10 Munson Performance Auto, Inc., modifies 375 autos per year.

The
manager, Adam Munson, is interested in obtaining a measure of overall
performance. He has asked you to provide him with a multifactor measure of
last year’s performance as a benchmark for future comparison. You have
assembled the following data. Resource inputs were labor, 10,000 hours; 500
suspension and engine modification kits; and energy, 100,000 kilowatt-
hours. The average labor cost last year was $20 per hour, kits cost $1,000
each, and energy costs were $3 per kilowatt-hour. What do you tell Mr.
Munson?

• • 1.11 Lake Charles Seafood makes 500 wooden packing boxes for fresh
seafood per day, working in two 10-hour shifts. Due to increased demand,
plant managers have decided to operate three 8-hour shifts instead. The
plant is now able to produce 650 boxes per day. a) Calculate the company’s
productivity before the change in work rules and after the change. b) What is
the percentage increase in productivity? c) If production is increased to 700
boxes per day, what is the new productivity?

••• 1.12 Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of
its excellent product and excellent location, demand increased by 25% in the
last year. On far too many occasions, customers have not been able to
purchase the bread of their choice. Because of the size of the store, no new
ovens can be added. At a staff meeting, one employee suggested ways to
load the ovens differently so that more loaves of bread can be baked at one
time. This new process will require that the ovens be loaded by hand,
requiring additional manpower. This is the only thing to be changed. If the
bakery makes 1,500 loaves per month with a labor productivity of 2.344
loaves per labor-hour, how many workers will Lackey need to add? (Hint:
Each worker works 160 hours per month.)

••• 2.6 Identify how changes within an organization affect the OM strategy
for a company. For instance, discuss what impact the following internal
factors might have on OM strategy: a) Maturing of a product. b) Technology
innovation in the manufacturing process. c) Changes in laptop computer
design that builds in wireless technology. Problem 2.7 relates to Strategy
Development and Implementation

••• 2.7 Identify how changes in the external environment affect the OM
strategy for a company. For instance, discuss what impact the following
external factors might have on OM strategy:

a) Major increases in oil prices.

b) Water- and air-quality legislation.

c) Fewer young prospective employees entering the labor market. d) Inflation

versus stable prices.

e) Legislation moving health insurance from a pretax benefit to taxable

income.

• 3.6 Given the activities whose sequence is described by the following table,
draw the appropriate activity-on-arrow (AOA) network diagram.

a) Which activities are on the critical path?

b) What is the length of the critical path?

• • 3.8 Roger Ginde is developing a program in supply chain management

certification for managers. Ginde has listed a number of activities that must
be completed before a training program of this nature could be conducted.
The activities, immediate predecessors, and times appear in the

accompanying table:

a) Develop an AON network for this problem.

b) What is the critical path?

c) What is the total project completion time? d) What is the slack time for
each individual activity? PX

• • 4.5 The Carbondale Hospital is considering the purchase of a new

ambulance. The decision will rest partly on the anticipated mileage to be
driven next year. The miles driven during the past 5 years are as follows:

a) Forecast the mileage for next year (6th year) using a 2-year moving
average.

b) Find the MAD based on the 2-year moving average. ( Hint: You will have
only 3 years of matched data.)

c) Use a weighted 2-year moving average with weights of .4 and .6 to

forecast next year’s mileage. (The weight of .6 is for the most recent year.)
What MAD results from using this approach to forecasting? ( Hint: You will
have only 3 years of matched data.)

d) Compute the forecast for year 6 using exponential smoothing, an initial

forecast for year 1 of 3,000 miles, and a = .5.
• • 4.6 The monthly sales for Yazici Batteries, Inc., were as follows:

a) Plot the monthly sales data.

b) Forecast January sales using each of the following:

i) Naive method.

ii) A 3-month moving average.

iii) A 6-month weighted average using .1, .1, .1, .2, .2, and .3, with the
heaviest weights applied to the most recent months.

iv) Exponential smoothing using an a = .3 and a September forecast of

18. v) A trend projection.

c) With the data given, which method would allow you to forecast next
March’s sales?

• • 4.7 The actual demand for the patients at Omaha Emergency Medical
Clinic for the first 6 weeks of this year follows:
Clinic administrator Marc Schniederjans wants you to forecast patient
demand at the clinic for week 7 by using this data. You decide to use a
weighted moving average method to find this forecast. Your method uses
four actual demand levels, with weights of 0.333 on the present period, 0.25
one period ago, 0.25 two periods ago, and 0.167 three periods ago.

a) What is the value of your forecast?

b) If instead the weights were 20, 15, 15, and 10, respectively, how would
the forecast change? Explain why.

c) What if the weights were 0.40, 0.30, 0.20, and 0.10, respectively? Now
what is the forecast for week 7?

• 4.8 Daily high temperatures in St. Louis for the last week were as follows:
93, 94, 93, 95, 96, 88, 90 (yesterday).

a) Forecast the high temperature today, using a 3-day moving average.

b) Forecast the high temperature today, using a 2-day moving average.

c) Calculate the mean absolute deviation based on a 2-day moving average.

d) Compute the mean squared error for the 2-day moving average.

e) Calculate the mean absolute percent error for the 2-day moving average.

• • 5.21 The product design group of Iyengar Electric Supplies, Inc., has
determined that it needs to design a new series of switches. It must decide
on one of three design strategies. The market forecast is for 200,000 units.
The better and more sophisticated the design strategy and the more time
spent on value engineering, the less will be the variable cost. The chief of
engineering design, Dr. W. L. Berry, has decided that the following costs are a
good estimate of the initial and variable costs connected with each of the
three strategies:
a) Low-tech: A low-technology, low-cost process consisting of hiring several
new junior engineers. This option has a fixed cost of $45,000 and variable-
cost probabilities of .3 for $.55 each, .4 for $.50, and .3 for $.45.

b) Subcontract: A medium-cost approach using a good outside design staff.

This approach would have a fixed cost of $65,000 and variable-cost
probabilities of .7 of $.45, .2 of $.40, and .1 of $.35.

c) High-tech: A high-technology approach using the very best of the inside

staff and the latest computer-aided design technology. This approach has a
fixed cost of $75,000 and variablecost probabilities of .9 of $.40 and .1 of
$.35. What is the best decision based on an expected monetary value (EMV)
criterion? ( Note: We want the lowest EMV, as we are dealing with costs in
this problem.)

• • 5.22 MacDonald Products, Inc., of Clarkson, New York, has the option of
(a) proceeding immediately with production of a new top-of-the-line stereo
TV that has just completed prototype testing or (b) having the value analysis
team complete a study. If Ed Lusk, VP for operations, proceeds with the
existing prototype (option a), the firm can expect sales to be 100,000 units
at $550 each, with a probability of .6, and a .4 probability of 75,000 at $550.
If, however, he uses the value analysis team (option b), the firm expects
sales of 75,000 units at $750, with a probability of .7, and a .3 probability of
70,000 units at $750. Value analysis, at a cost of $100,000, is only used in
option b. Which option has the highest expected monetary value (EMV)?