VERY IMPORTANT NOTES ABOUT OPM , NUMERICALS

Attribution Non-Commercial (BY-NC)

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OM Numerical 2012

VERY IMPORTANT NOTES ABOUT OPM , NUMERICALS

Attribution Non-Commercial (BY-NC)

- MARKETING PLAN
- 2. Cost of Quality
- Coors solution
- Lecture 5 Break Even Analysis
- Business Plan to start up new business
- BA12A_ch06.ppt
- Hallstead Case
- Prestige Telecoms
- LAB3
- Chap 4 - CVP Relationships.3
- Chapter 9 (English)
- Chapter 2- Cost Concept
- Hospital Supply Inc.
- BREAK (Autosaved)
- 2010-09-10_121329_emalone_2-1
- MEFA IMP+ ARRYASRI GUIDE.pdf
- Assignment 2
- Break Even Analysis
- Pizzeria Business Plan
- Bep Analysis

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1. Two types of passenger cars Deluxe & Limited versions - were produced by a car manufacturer in 2004.Quantities sold, price per unit and labour hours are as follows. What is the labour productivity for each car?

Type of Car Deluxe car Limited car Labour, Deluxe Labour, Limited

Quantity 4000 units sold 6000 units sold 20,000 hours 30,000 hours

Rupees per unit Rs. 300,000 Rs. 225,000 Rs. 250 per Hr Rs. 100 per Hr

2. Student Tuition at ABC University is Rs. 100.00 per semester credit hour. The ABC Foundation supplements school revenue by matching student tuition, rupee for rupee. Average class size for a typical three-credit course is 50 students. Labour costs are Rs 4000.00 per class, material costs are Rs 20.00 per student per class, and overhead costs are Rs 25000.00 per class. (a) What is the multifactor productivity ratio? (b) If instructors work an average of 14 hours per week for 16 weeks for each three-credit class of 50 students, what is the labour productivity ratio? (Ans: Multifactor productivity 1.00; Labour Rs. 133.93 per Hour) 3. During a particular week workers at a garment-manufacturing unit worked for 360 hours to produce a batch of 132 garments, of which 52 were seconds (meaning that they were flawed). Seconds are sold for Rs 90.00 each at the factory outlet store. The remaining 80 garments are sold to retail distribution at Rs 200.00 each. What is the labour productivity ratio? (Ans: Rs. 57.44 sales/hour)

Breakeven Analysis

4. The operations manager of a renowned brand of fruit Juice Company has narrowed the search for a new facility location to three towns. Annual fixed costs (land, property taxes, insurance, equipment and building) and variable costs (labour, materials, transportation and variable overhead) are shown in following table Fixed & variable costs of the fruit juice company Fixed Cost per Variable cost Town year (Rs. per crate (Rs.) 000) Meerut 2000 12 Delhi 3000 10 Ludhiana 1200 15 Plot the total cost curves for the three towns on a single graph. Identify on the graph the approximate range over which each town provides the lowest cost.

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Using break-even analysis, calculate the break-even quantities to determine the range over which each town provides the lowest cost. 5. An orthodontist estimates that adding two new chairs will increase fixed costs by Rs 140000, including the annual equivalent cost of the capital investment and the salary of one more technician. Each new patient is expected to bring in Rs 2500 per year in additional revenue, with variable costs estimated at Rs 500 per patient. The two new chairs will allow the orthodontist to expand the practice by as many as 200 patients annually. How many patients would have to be added for the new process to break even? 6. Two different processes are being considered for making a new product. The first process is less capital intensive, with fixed cost of only Rs 60000 per year and variable cost of Rs 650 per unit. The second process has fixed costs of Rs 300000 but variable costs of only Rs 2.50 per unit (a) What is the break-even quantity beyond which the second process becomes more attractive than the first? (b) If the expected annual sale for the product were 800 units, which process would you choose? 7. Calculate the break even product value of using Blue Dart Express Mail (overnight delivery) versus Government Speed Post Service (three day delivery) for sending a package from New Delhi to Mumbai. The following table contains appropriate costs. Assume that the inventory cost is 25% per year of the product value and that there are 365 days in a year. Weight 500 gms 1 Kg 5 Kg Cost - Blue Dart Express Mail Overnight delivery 180.00 290.00 600.00 Cost - Government Speed Post Service Three day delivery 25.00 45.00 150.00

8. JAIPUR Express is setting up a delivery service near or in Delhi. JAIPUR is unsure whether to locate in the city, in the near suburb, or the far suburb. The city requires higher rent (fixed cost) but lower transportation expenses (variable costs). The costs are as follows: City Fixed Cost, 1000 (Rs) Variable cost Rs/job 1000 10 Near Suburbs 800 25 Far Suburbs 500 50

(i) Find the break-even point. (ii) JAIPUR estimates the distribution of jobs for the coming year as follows Number of Jobs Probability 4000 0.2 12000 0.4 16000 0.3 20000 0.1

Revised Nov 2012 2 Dr. A. K. Dey

9. Backwoods American Inc., produces expensive water repellent, down-lined parkas. Company implemented a total quality management program in 2000. Following are quality related accounting data that have been accumulated for the five year period after the programs start. Year 2000 2001 Quality Costs (000s) in USD Prevention 3.2 10.7 Appraisal 26.3 29.2 Internal 39.1 51.3 Failure External 118.6 110.5 Failure Accounting Measures (000s) in USD Sales 2700.6 2690.1 Manufacturing 420.9 423.4 Cost 2002 28.3 30.6 48.4 105.2 2705.3 424.7 2003 42.6 24.1 35.9 91.3 2810.2 436.1 2004 50.0 19.6 32.1 65.2 2880.7 435.5

i) Compute the companys total failure costs as a percentage of total quality costs for each of the five years. Does there appear to be trend to this result? If so, speculate on what might have caused the trend. ii) Compute prevention costs and appraisal costs, each as a percentage of total costs, during each of the five years. Speculate on what the companys quality strategy appears to be. iii) Compute quality sales indices and quality cost indices for each of the five years. Is it possible to assess the effectiveness of the companys quality management program from these index values? 10. The Colonial House Furniture Company manufactures two-drawer oak file cabinets that are sold unassembled through catalogues. The company initiates production of 150 cabinet packages each week. The percentage of good quality cabinets averages 83% per week, and the percentage of poor quality cabinets that can be reworked is 60%. i) Determine the weekly product yield of the file cabinets. ii) If the company desires a product yield of 145 units per week, what increase in the percentage of good quality products must result? 11. Burger Doodle is fast food restaurant that processes an average of 680 food orders each day. The average cost of each order is USD 6.15. Four percent of the orders are incorrect, and only 10% of the defective orders can be corrected with additional food items at an average cost of USD 1.75. The remaining defective orders have to be thrown out.

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i) Compute the average product cost. ii) In order to reduce the number of wrong orders, Burger Doodle is going to invest in a computerized ordering and cash register system. The cost of the system will increase the average order cost by USD 0.05 and will reduce defective orders to 1%. What is the annual net cost effect of this quality improvement initiative? iii) What other indirect effects on quality might be realized by the new computerized order system? 12. From the data of 16 Kg rice filling operations displayed in the table below, compute lower and upper control limits of x bar and R charts. After the process has settled down, hourly samples of 20 sacks have been drawn, averages and ranges were computed. Total 12 times samples were drawn. Values of A = 0.180, D1 = 0.414 and D2 = 1.586 are collected from tables. Sample No. 1 2 3 4 5 6 Sample Mean Kgs 16.20 15.90 16.30 16.40 15.80 15.90 Sample Range Kgs 2.00 2.10 1.80 3.00 3.50 3.10 Sample No. 7 8 9 10 11 12 Sample Mean Kgs 16.00 16.10 16.30 16.30 16.40 16.50 Sample Range Kgs 2.90 1.80 1.50 1.00 1.00 0.90

13. An automated production process consists of assembling four components to make a 5 amp fuse. Every two hours a sample of 75 fuses is collected and each fuse is tested. Typically in the past, 1.8 fuses on average have failed the test. Compute 3 sigma control limits for a p chart. 14. From the data of 300 ml bottle filling operations displayed in the table below, compute lower and upper control limits of x bar and R charts. After the process has settled down, hourly samples of 20 bottles have been drawn, averages and ranges were computed. Total 12 times samples were drawn. Values of A = 0.180, D3 = 0.414 and D4 = 1.586 are collected from tables. Sample No. 1 2 3 4

Revised Nov 2012 4 Dr. A. K. Dey

Sample No. 7 8 9 10

5 6

300.5 300.8

1.5 1.0

11 12

298.8 298.1

1.0 0.9

15. An automated production process consists of assembling three components to make a sub assembly. Every two hours a sample of 100 sub assemblies is collected and each sub assembly is tested. Typically in the past, 2.8 sub assemblies on average have failed the test. Compute 3 sigma control limits for a p chart. 16. Dept of Transport must accept sections of paving constructed by private contractors. These sections are usually 10 KM long. They are accepted based on the cores drilled on the concrete pavement at a random interval. The standard specification requires a compression strength of 12500 kg per square cm. The head of inspection wishes to establish a statistical acceptance plan wherein sections of pavement would be accepted based on the mean compression strength of a sample of 50 cores removed from each section. He knows from experience that the standard deviation of compression strength of thousands of cores from hundreds of KMs is 1625 Kg/Sq cm. i) Set an acceptance criterion if one tailed alpha is 0.005. ii) Fifty cores are pulled from a 10KM section. The mean compression strength of the sample is 11500 Kgs/Sq cm. Should the section of pavement be accepted?

Capacity

17. Mehta & Mehta own a small accounting service and one computer. If their customers keep organized records, either of the owners can use the computer to prepare one tax return per hour, on average. During the first two weeks of April, both Mehtas work seven twelve-hour shifts. This allows them to use their computer around the clock. (a) What is the peak capacity, measured in tax returns per week? (168) (b) The Mehtas normally operate from 9 A. M. to 7 P. M., five days per week. What is their effective capacity, measured in tax returns per week? (50) (c) During the last week of December, the Mehtas processed 40 tax returns. What is their utilization, as a percentage of effective capacity? (80%) 18. A unit manufacturing voltage stabilizers expects the annual demand in the next four years to be: Year Demand Probability 1 10,000 0.4 2 12,000 0.3 3 16,000 0.2 4 20,000 0.1

Sales revenue per stabilizer is Rs. 300. The existing unit has fixed one time operating cost of Rs. 6,00,000. Existing variable costs & estimated variable cost after expansion are as follows: Annual Output level 10,000 12,000 16,000 20,000

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Variable costs ( Rs. Per unit) Existing After capacity expansion 200 250 150 155 160 130 190 145

Fixed one time operating cost after affecting capacity expansion is Rs. 8,00,000. To maximize net profit, should the unit go in for expansion of capacity or continue with existing capacity? (Ans: Capacity should not be expanded) 19. An automobile brake supplier operates on two eight-hour shifts, five days per week, fifty-two weeks per year. Following table shows the time standards, lot sizes and demand forecasts for three components. Because of demand uncertainties, the operations manager obtained three demand forecasts (pessimistic, expected & optimistic). The manager believes that a 20 percent capacity cushion is best.

(a) What is the minimum number of machines needed? The expected number? The maximum

(b) If the operation currently has three machines and the manger is willing to expand capacity by

20 percent through short-term options in the event that the optimistic demand occurs, what is the capacity gap? Time Standard Processing Set up Hr/unit Hr/lot 0.05 1.0 0.20 4.5 0.05 8.2 Lot Size Units/lot 60 80 120 Demand Forecast Expected Optimistic 18000 25000 13000 17000 25000 40000

Component A B C

20. Manvinder Singh operates Singhs Garage & Manhole Cover Recycling Center at Okhla Phase II. The Garage has one bay dedicated to wheel alignments. Although the recycling center is open at night, the garage normally is open only on weekdays from 7 am to 6 pm and on Saturdays from 7 am to noon. An alignment takes an average of 40 mins to complete, although Singh charges customers for two hours according to the norms set by the association. During May, before the rains set in, the road repairs and man hole cover demand peaks and Singh garage is open from 7 am to 9 pm on weekdays and from 7 am to 5 pm on Saturdays. (a) What are the garages peak and effective capacities in wheel alignments per week? (120 & 90) (b) During the second week of May Singhs Garage completed 90 alignments. What is the utilization as a percentage of effective capacity? As a percentage of peak capacity? (Ans: Utilization as a percentage of Effective capacity is 100% and as a percentage of peak capacity is 75%) 21. Create a capacity plan for a critical bottleneck operation at the Akash Footwear Company. You have to decide the number of machines required. Three products (mens, womens childrens footwear) are manufactured. The time standards (processing & set up), lot sizes and demand forecasts are given in the following table. The firm operates two eight-hour shifts, 5days per week, 50 weeks per year. Experience shows that a capacity cushion of 5% is sufficient. Product Mens Footwear Womens Footwear

Revised Nov 2012 6 Dr. A. K. Dey

Time Standards Processing Set up (Hrs/pair) (Hrs/lot) 0.05 0.5 0.10 2.2

Childrens Footwear

0.02

3.8

360

120,000

(a) How many machines are needed? (Ans: 3.83 i.e., 4 machines) (b) If the operation currently has two machines, what is the capacity gap? ( 2 machines) 22. Given the following information on maximum production rate and hours worked for an oven that cooks pizzas, determine the capacity per week. Description Maximum production rate Number of hours Overtime Preventive maintenance (performed after closing) Equipment failure (Unplanned downtime) Value 40 84 Zero Zero 2% Unit Pizzas/hour Hours/Week Hours/Week Hours/Week Of planned hours

(Ans: 3292.8 pizzas per week) 23. Assume that each contact for life insurance takes three hours, house insurance takes two hours, and automobile insurance takes one hour. What are the capacities of an agent that works 40 hours per week under Mix 1 and Mix 2? Type Life Insurance House Insurance Auto Insurance Mix 1 0.20 0.30 0.50 Mix 2 0.40 0.40 0.20

(Ans: Mix - 1 28.67 contacts/week & Mix - 2 21.33 contacts/week; As the mix shifts away from auto to life and house, which require more time per contact, the capacity declines) 24. To assemble the frames of 25 rocker/recliner chairs, each assembler takes his or her work order to the inventory clerk to pick the parts required to make the chairs. This takes about thirty minutes. After returning to the work area, each assembler completes twenty-five chair frames in three an a half hours. To increase the capacity of assembling chair frames, a separate stock picker could be hired to gather inventory for all the assemblers. Then each assembler would be able to increase production by one-seventh because the thirty minutes out of every four hours formerly used to pick stocks could now be used to assemble chairs. Determine the percentage increase in the capacity per assembler. (Ans 14.28%) 25. Annual demand for a manufacturing company is expected as follows: Units demanded Probability 8000 0.5 10000 0.2 15000 0.2 20000 0.1

Revenues are Rs. 35 per unit. The existing manufacturing facility has annual fixed operating costs of Rs. 200,000. Variable manufacturing costs are Rs. 7.75 per unit at the 8000 unit output level; Rs. 5.00 per unit at the level of 10000 units; Rs. 5.53 per unit at the 15000 unit level and Rs. 7.42 at the 20000 unit output level.

An expanded facility under consideration would require Rs. 250,000 fixed operating cost annually. Variable costs would average Rs. 9.40 per unit at 8000 unit level; Rs. 5.20 at 10000; Rs. 3.80 at 15000 and Rs. 4.90 at the 20000 level. To maximize net earnings which size facility should be selected? 26. Integrated manufacturing company is a producer of kites and windsocks. Relevant data on a bottleneck operation in the shop floor for the next year are given in the following table Item Demand forecast Lot size Standard processing time Standard set up time Kites 30000 units/year 20 units 0.3 hour/unit 3.0 hours/lot Windsocks 12000 units/year 70 units 1.0 hour/unit 4.0 hours/lot

The shop works two shifts per day, eight hours per shift, 200 days per year. There currently are four machines, and a 25 percent capacity cushion is desired. How many machines should be purchased to meet next years demand without resorting to any short term capacity solution?

Location

27. The following table gives the map coordinates and the shipping loads for a set of cities that we wish to connect though a central hub. Near what map coordinates should the hub be located?

City A B C D E F G

Map Coordinate (x,y) (5,10) (6,8) (4,9) (9,5) (7,9) (3,2) (2,6)

Shipping Load 5 10 15 5 15 10 5

28. Our main distribution center in Phoenix, AZ is due to be replaced with a much larger, more modern facility that can handle the tremendous needs that have developed with the citys growth. Fresh produce travels to the seven store locations several times a day making site selection critical for efficient distribution. Using the data in the following table, determine the map coordinates for the proposed new distribution center.

Store Locations

Map Coordinates (x,y) (10,5) (3,8) (4,7) (15,10) (13,3) (1,12) (5,5)

29. A multinational company has to take decision regarding the location of its production capacity in India. It can choose from five possible alternatives. Data for these five locations are given below: Economic factors Particulars Labour costs Tranportation cost Local Taxes Cost of power Other costs Other Factors Attitude of community Availability of labour Transport arrangement Quality of life Locations C 160 7 25 25 12 C Good Fair Outstanding Good

A 120 10 17 21 16

D 85 12 19 18 16

(a) Which site would you recommend on the basis of operating costs? (b) Devise a method of quantifying the other factors and determine the best site on the basis of both the operating costs & other factors. 30. An electronics manufacturer must expand by building a second facility. The search has been narrowed to four locations; all acceptable to management in terms of dominant factors Assessment of theses sites in terms of seven location factors is shown below. For example location A has a factor score of 5 (excellent) for labour climate; the weight for this factor (20) is the highest of any. Sr. Location Factor No.

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Factor weight

1 2 3 4 5 6 7

Labour Climate Quality of life Transportation system Proximity to market Proximity to materials Taxes Utilities

20 16 16 14 12 12 10

5 2 3 5 2 2 5

4 3 4 3 3 5 4

4 4 3 4 3 5 3

5 1 2 4 4 4 3

Calculate the weighted score for each location. Which location should be recommended? 31. Cost data in Rupees for two sites Cochin and Chennai are given below: Descriptions Variable costs Annual overheads Initial investments Incentives one time Cochin 100.46 2,100,000 175,000,000 25,000,000 Chennai 95.77 1,900,000 168,000,000 10,500,000

(a) If the facility is scheduled to produce 45,000 units per year, over a five year period determine which site has a lower total cost? (b) At what point of time will the costs of two sites be equal? (Ans: (a) Total costs Cochin 183,103,500 and Chennai 188,548,250 (b) 18.25 years)

Facility Layout

32. A manufacturing company wishes to put up a new production facility, which would have seven departments. Two alternative layouts are being considered as per data given below: Distance between departments 1 to 7 Trips between Distance between departments Departments Layout A Layout B 1-2 28 52 1-3 24 32 1-4 40 50 2-3 45 20 2-4 25 60 3-4 40 48 4-5 48 36 5-6 52 46 5-7 54 66 6-7 50 50 Sequence of processing of products through departments and production batches per year are given below: Sr. No. A B C

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D E

1-3-4-5-7 1-3-4-5-6-7

400 1400

Use load distance analysis to determine which layout minimizes the total annual distance that the batches of products travel through the proposed production facilities. (Layout B 851000 & Layout A 858000; B is preferred) 33. Following figure shows two layout options of a facility. The distance between any two adjacent departments is 10 m. No diagonal movement is possible, e.g., if a load has to be moved from department 7 to department 5 in layout A, it can be either through departments 8, 9 & 6 or through departments 3, 1 & 2 by traveling a distance of 40 m. Accompanying table shows the department processing sequence of various products and their quantity produced per month. Which layout is better in terms of lower total load-distance value?

Layout A 1 3 7 2 4 8 5 6 9 Layout B 5 9 2 3 6 7 4 1 8

Sr. No. 1 2 3 4 5

Product V W X Y Z

34. As in most kitchens, the baking ovens in Loris Kitchen in New Orleans are located in one area near the cooking burners. The refrigerators are located next to each other as are the dishwashing facilities. A work area of tabletops is set aside for cutting, mixing, dough rolling, and assembling of final servings, although different table areas may be reserved for each of these functions. Given the following Interdepartmental Activity Matrix, develop an appropriate layout for Loris Kitchen. Interdepartmental Activity Matrix Cooking Burners (A) Cooking burners (A) Refrigerator (B)

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Refrigerators (B) 7 -

222 -

With a distance of 10 feet between adjacent areas the present layout is:

A to B A to C A to D B to C B to D C to D Total

Develop a preferred layout. What is the sum of the loads * distance of your new layout? 35. The activity matrix of a research laboratory is exhibited below: The explanations of different departments are: A Executive offices, B Stress laboratory, C Group Dynamics laboratory, D Research report writing office, E - Marketing Office and F Word processing and mail room. All departments are of equal area. To departments A A From departments B C D E F 1 0 1 5 1 0 3 0 5 0 B 1 5 C 3 5 2 0 3 0 4 0 0 D 2 0 2 0 4 0 1 0 0 3 0 E 4 0 5 0 4 0 1 0 F 50 10 20 10 10

0 1 5 0 2 0

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Layout A B D Layout B B D E A C F C A E F

(Ans: Layout B is preferred) 36. An initial solution has been given to the following process layout problem. Given the flows described and a cost of Rs. 20 per unit per meter, compute the total cost for the layout. Each location is 100 meter long and 50 meter wide as shown in the following figure. Use centers of departments for distances and measure distances using rectilinear method.

100x50 mts

C

100x50 mts

D

(Ans Rs. 4,45,000)

PERT/CPM

29. In the interest of serving the public in Benjamin County, St. Adolfs Hospital has decided

to relocate from Christofer to Northville, a large suburb that at present has no primary medical facility. The move to Northville will involve constructing a new hospital and making it operational. Judy Kramer, executive director of the board of St. Adolfs Hospital, must prepare for a hearing that is scheduled for next week, before the Central Ohio Hospital Board on the proposed project, including time & cost estimates for its completion. With the help of her staff Kramer has identified 11 major project activities. She also has specified the immediate predecessors for each activity, as shown in the following table: Activity A B C D

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Description Select Administrative & Medical staff Select site & do site survey Select Equipment Prepare final construction plans &

E F G H I J K

layout Bring utilities to the site Interview applicants & fill positions in nursing & support staff Purchase & take delivery of equipment Construct the hospital Develop an information system Install the equipment Train nurses & support staff

B A C D A E, G, H F, I, J

24 10 35 40 15 4 6

Draw the network diagram. Determine the critical path. Calculate the slack for the activities.

30. For the St Adolfs Hospital project the indirect costs are $ 8000 per week. After week 65,

St Adolfs Hospital incurs a penalty cost of $ 20,000 per week if the hospital is not fully operational. With critical path completion time of 69 weeks the hospital faces potentially large penalty costs. Judy wants to calculate estimated cost by considering all possible measures of time reduction. She has collected following data. Help her to estimate the minimum cost schedule.

Activity

Crash Time

Crash Cost

A B C D E F G H I J

Revised Nov 2012

12 9 10 10 24 10 35 40 15 4

12,000 50,000 4,000 16,000 120,000 10,000 500,000 1,200,00 0 40,000 10,000

11 7 5 8 14 6 25 35 10 1

15

Max Time Cost of Reduction crashing (wk) per week 13,000 1 1,000 64,000 7,000 20,000 2 5 2 10 4 10 5 5 3 7,000 600 2,000 8,000 1,500 3,000 12,000 2,500 1,000

Dr. A. K. Dey

6 Totals

30,000 1,992,00 0

34,000 2,209,50 0

4,000

31. For the same hospital project as given in question numbers 1 & 2 the probabilistic time

(a) (b)

Optimistic Time

Pessimistic Time

a

11 7 5 8 14 6 25 35 10 1 5

m

12 8 10 9 25 9 36 40 13 2 6

b

13 15 15 16 30 18 41 45 28 15 7

Calculate the probability that the hospital will become operational in 72 weeks What is the probability that the project will be completed in 65 weeks?

Activity Immediate Time (Week) predecessors A 4 -B 3 -C 5 -D 3 A,B E 6 B F 4 D,C G 8 E,C H 12 F,G (a) Draw the network diagram for this project. (b) Specify the critical path(s). (c) Calculate the total slack for the activities A & D. Activity

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33. An advertising manager has developed the network diagram shown below for a new

advertising campaign. In addition the manager has gathered time estimates for each activity as shown in the table below.

Finish

D

A

E C

Start

Activity A B C D E F G

(a) (b)

Calculate the expected time and variance for each activity. Calculate the activity slacks and determine the critical path using the expected activity times. (c) What is the probability of completing the project within 23 weeks?

34. Your company has just received an order from a good customer for a specially designed

electric motor. The contract states that, starting on the thirteenth day from now, your firm will experience a penalty of Rs 100 per day until the job is completed. Indirect project costs amount to Rs 200 per day. The data on direct costs and activity precedence relationships are given in the following table:

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Sr. No. 1 2 3 4 5 6 7 8

Activity A B C D E F G H

Normal cost (Rs) 1000 1400 2000 1200 900 2500 800 300

Crash cost (Rs) 1300 2000 2700 1400 1100 3750 1450 500

(a) Draw the network project diagram. (b) What completion time would you recommend? 35. You have constructed a network diagram depicting the various activities in the project

that you are managing. In addition, you have asked various managers and subordinates to estimate the amount of time that they would expect each of the activities to take. Their responses are shown in the following table: Sr. No. 1 2 3 4 5 Activity A B C D E Time Estimates (days) Optimistic Most likely Pessimistic 5 8 11 4 8 11 5 6 7 2 4 6 4 7 10

C

A

Start

D B E

Finish

(a) (b)

What is the expected completion time of the project? What is the probability of completing the project in 21 days?

36. A project consists of nine activities whose time estimates (in weeks) and other

Activity A B C D E F G H I

(a) (b) (c)

Show the PERT network for the project. Identify the critical activities. (A-D-F-H : 35 weeks) What are the expected project completion time and its variance? (Expected 35 weeks; SD 3.23) (d) What is the probability of completing the project one week before the expected time? (0.3783) (e) If the project is required to be completed by December 31 of given year and the manager wants to be 95% sure of meeting the deadline, when should he start the project work? (X= 282 days; Start date 25th March) (f) A penalty of Rs 15000 per week is to be imposed on the contractor if the project is not completed in 36 weeks. What is the probability that he has to pay a penalty? (P = 0.378) What is the probability that he has to pay a penalty of Rs 45000? (P = 0.0687)

37. The following table gives the activities in a construction project and other relevant

information: Immediate predecessors ---A C A D, B, E Time (Days) Normal Crash 4 3 6 4 2 1 5 3 2 2 7 5 4 2 Direct Cost (Rs) Normal Crash 60 90 150 250 38 60 150 250 100 100 115 175 100 240

Activity A B C D E F G

(a)

14 500

13 400

12 250

11 175

10 100

9 75

8 50

7 35

6 25

19 Dr. A. K. Dey

(b)

Determine the project duration, which will return in minimum total project cost. (10 Days, Rs 943)

Activity A B C D E F G H I

(a) (b)

Cost (in Rupees) Normal Crash 18,000 19,000 600 1,000 10,000 12,000 4,000 10,000 3,000 9,000 15,000 15,000 1,200 1,400 3,500 4,500 7,000 8,000

Draw a project network diagram and find the critical path. If a deadline of 17 weeks is imposed for completion of the project, which activities will be crashed? What would be the additional costs? What would be the critical activities of the network after crashing? (Ans: Activities to be crashed: A-one week, B-one week, E-two weeks and H-two weeks Total cost = Normal + Crashing = 62,300 + 6,200 = Rs 68,500 Activities that are critical after crashing = A, B, C, E & H)

39. The following table lists the activities of a maintenance project:

(a) (b)

Duration Duration Activity (months) (months) 2 4-7 3 2 5-8 1 1 6-8 4 4 7-9 5 5 8-9 3 8

Draw the project network. Find the critical path & duration of the project.

Activity A B C D

Revised Nov 2012

Time 4 8 12 6

20

Activity G H I J

Time 10 8 6 12

Dr. A. K. Dey

E F

2-6 3-7

6 4

K L

6-8 7-8

14 8

The firm loses Rs. 500.00 every week beyond a total of 34 weeks. Consider each of the proposals given here individually and state whether the firm should accept it. (a) Activity J can be reduced to 9 weeks by taking resources from activity K, thereby raising its expected time to seventeen weeks, at no extra cost. (b) Activity H can be reduced to 5 weeks by using overtime, and extra labour at a cost of Rs. 1000. (c) Activity G can be reduced to 7 weeks at a total cost of Rs 500. (d) Activity L can be reduced to 5 weeks by taking resources from activity K, thereby raising its expected time to sixteen weeks, at no additional cost.

41. The following table gives the list of various activities involved in the production of

wireless communication equipment, their immediate predecessor, their normal time and cost estimates and their crash time and cost estimates. Act Id A B C D E F G H I J Activity Description System Calculation Release of Drawing Procure PSU Procurement of RM Documentation Time study PCB Manufacture Mechanical parts Electronics assembly Testing Time (Months) Normal Crash 3 1 2 12 8 4 3 6 7 2 4 1 10 6 3 1 5 6 2 2 Cost (Rs) Normal Crash 45000 63000 15000 85000 450000 40000 25000 50000 200000 43000 50500 23000 105000 500000 49500 41000 59000 220000 43000 75000 Immediate Predecessor --A,B A,B A,B E D,F D,F C,G,H I

Indirect costs per month are Rs 20,000. Determine the optimal time versus cost schedule.

42. A company is about to begin a project to design a new product. Management has

estimated that the project should require 45 days to complete. Although 45 days seemed to be very short to the process engineers at first, after some discussions it was concluded that they probably could meet the deadline because the product and the processes were so similar to the present processing technologies in use at their plant. These activities, their precedence relationships, and their durations were estimated by the engineers: Act Id

Revised Nov 2012 21 Dr. A. K. Dey

Activity Description

Immediate Predecesso r

A B C D E F G H I

(a) (b) (c)

Initial study Process Tech study Vendor capability survey Modification of facility Intermediate facility redesign Intermediate product redesign Specific process machinery design Vendor involvement & integration Final facility, product & process design

12 10 8 14 6 18 11 21 7

Construct a CPM network. Compute & display ES, EF, LS & LF and slack values in a table Calculate the critical path and estimate the duration of completion.

43. A government tender that appeared on page four of todays newspaper has caught the

attention of Mr. R. Mathur, the General Manager of Rosset Manufacturing Company. The tender calls for short listing of vendors for possible supply of Space Signaling systems. Vendors who can successfully demonstrate a Space Signaling system, would be considered. In a staff meeting it is unanimously decided to bid for the tender. Only problem being whether there would be sufficient time to prepare a model without delaying any of the existing commitments and how much money should be spent? Mr. Mathur estimated that if the project can be completed in 41 days and within Rs 2,00,000, it is worth the try. A project team is formed by drawing persons with suitable skills from different departments. It is felt that in case the company succeeds in executing some orders for the signaling system, these project team members will go back to their departments with adequate knowledge. The team developed the following list of project activities, time estimates, and precedence relationships as part of the project plan: Present duration (Days) 7 9 6 12 11 14 16 16 12

22

Activity A B C D E F G H I

Revised Nov 2012

Accelerated Present Accelerated Duration Cost Cost (Rs) (Days) (Rs) 5 14000 14800 7 18000 24000 4 20000 30000 8 10000 12000 10 13000 15000 13 15000 19000 10 25000 31000 15 23000 25700 10 27000 31000

Dr. A. K. Dey

E,F,G

18

18

29000

29000

If the time of completion is of utmost importance, will Mr. Mathur take up the project? What will be the total cost? (Show detailed calculations to justify your decision.)

44. A company is about to begin a project to design a new product. Management has

estimated that the project should require 45 days to complete. Although 45 days seemed to be very short to the process engineers at first, after some discussions it was concluded that they probably could meet the deadline because the product and the processes were so similar to the present processing technologies in use at their plant. These activities, their precedence relationships, and their optimistic, most likely & pessimistic time durations were estimated by the engineers: Optimisti c Time (t 0 ) 10 10 6 10 3 14 10 18 5 Most likely time (t m ) 12 10 8 14 6 18 11 21 7 Pessimisti Immediate c time Predecess (t p ) or 14 -10 -10 -18 B 9 C 22 B,A 12 D,E 24 9 C F,G

Act Id A B C D E F G H I

Activity Description Initial study Process Tech study Vendor capability survey Modification of facility Intermediate facility redesign Intermediate product redesign Specific process machinery design Vendor involvement & integration Final facility, product & process design

Construct a PERT/CPM network. Compute & display ES, EF, LS & LF and slack values in a table Calculate the critical path and estimate the duration of completion. What is the probability that the project will take longer than 45 days? How confident are you that the team can complete the project within 45 days? 45. A work project consists of twelve activities labeled A through L. Upon being asked to specify the order in which the jobs had to be done, the manager answered as follows: A, B & C are the first activities of the project and can start simultaneously and immediately; A & B precede D while B precedes E, F & H. Activities F & C precede G while E & H precede I & J. C,D,F & J precede K, which in turn, precedes L. Further, I,G & L are the terminal activities of the project. The completion times of various activities are listed here:

(a) (b) (c) (d)

Act Day s

Revised Nov 2012

A 6

B 4

C 10

D 1

E 1

23

F 3

G 14

H 6

I 9

J 2

K 7

L 5

Dr. A. K. Dey

(c) (d)

Draw a network diagram corresponding to this project Obtain lengths of all the paths and determine critical path.

(a) (b)

Duration Duration Activity (months) (months) 2 4-7 3 2 5-8 1 1 6-8 4 4 7-9 5 5 8-9 3 8

Draw the project network. Find the critical path & duration of the project. 47. Given an auditing project with following activities: Standard Deviation 2 1 0 3 1 2 2 0 Duration Weeks 2 3 4 2 1 6 4 2

Activity a. Add b. Balance c. Count d. Deduct e. Edit f. Finance g. Group h. Hold Find:

(a) The probability of completing this project in 12 weeks (or less) as the client desires (b) The probability of completing this project in 13 weeks (or less). (c) The probability of completing this project in 16 weeks (or less), the clients drop dead date. (d) The number of weeks required to assure a 92.5 percent chance of completion, as guaranteed by the auditing firm. (Ans: a. 0.369, b. 0.500, c. 0.841 & d. 17.32)

48. Before erection of a building, the project manager evaluated the project using PERT/CPM

analysis. The activities with their corresponding times were recorded in the following table. Find the critical path, the slack times and the expected completion time. Sr.

Revised Nov 2012 24 Dr. A. K. Dey

Activity

Times

Preceding

No. 1 2 3 4 5 6 7 8 9

Lay foundation Dig hole for scale Insert scale bases Erect frames Complete building Insert scales Insert display cases Put in office equip Finishing touches

Optimistic 8 5 13 10 11 4 2 4 2

Most Likely 10 6 15 12 20 5 3 6 3

Pessimistic 13 8 21 14 30 8 4 10 4

(Ans: Critical path 2 3 4 5 7 8 9; Activity 1 is 11.66, activity 6 is 4, all others are zero; 66.34)

49. Given a network for an engineering project with normal times and crash times (in

parentheses), find the lowest cost time-cost plan. Assume indirect costs for facilities and equipment are Rs. 10,000 per day. The data are: Activity 1-2 2-3 3-4 2-4 6(4) Time Reduction, Direct Cost per day Rs 3000 first day, Rs 5000 second day Rs 8000 Rs 2500 first day, Rs 6000 second day Rs 3000 first day, Rs 7000 second day, Rs 9000 third day

4 3

(Ans: Completion days Total Cost: 17 days Rs 170,000; 16 days 162,500; 15 days 155,500; 14 days 150,500; 13 days 146,500 and 12 days 144,500)

50. The events of the project below are designated as 1, 2, and so on. Find the critical path.

Activity A B C D E F G H

Revised Nov 2012

Preceding Event 1 1 1 2 3 4 4 5

Succeeding Event 2 3 4 5 5 5 6 7

25

Dr. A. K. Dey

The project must be completed in 16 weeks. The activities C, F, H & I may be crashed as follows. Assume partial crashing. Find the best schedule and its cost. Crash Time (weeks) 7 6 2 3 Additional cost per week (Rs.) 4000 2000 1000 3000

Activity C F H I

(Ans: Critical path 1- 4 5 7, Crash C by 1 week, F by 3, H by 3 & I by 1 for a cost of Rs 16000 extra)

51. Rajivs dilemma

Rajiv is bidding for a market research project. He has prepared a list of activities and made a network diagram. The organization for which he is preparing the bid is in a great hurry to finish the market research project. They can not wait because the selling season has almost started. Rajiv is facing a dilemma whether to quote 1. The duration of the project with minimum total cost or 2. The minimum possible duration of the project Help him to find out the time & cost for the above two alternatives. Data for the project are as given below: Activity A B C D E F G H I J Nodes 1-2 1-3 1-4 2-3 4-3 2-5 3-5 3-6 4-6 5-6 Normal duration (days) 5 4 7 4 3 2 7 3 4 6 Crash duration (days) 3 2 5 2 2 2 5 1 3 5 Incremental cost of crashing (Rs/day) 40 10 20 30 50 20 10 30 40

The total normal cost is Rs. 500, cost of supervision is Rs. 20 per day, penalty is Rs. 10 per day over 20 days, reward is Rs. 10 per day below or equal to 18 days.

Revised Nov 2012 26 Dr. A. K. Dey

52. Following are the manpower requirements for each of the activity in a project: Manpower required per day 2 3 4 3 1 3 3 5 8 11

Activity 1-2 1-3 2-4 2-6 3-4 4-5 4-6 5-7 6-7 7-8

The contractor stipulates that during the first 26 days only 5 men and for the remaining 8 days maximum 11 men can be made available. Re arrange the activities suitably for leveling the manpower resources, satisfying the above condition.

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