FINAL EXAM PREP

OPERATIONS MANAGEMENT

1. FORMAT: FIVE PROBLEMS, ALL NUMERICAL IN NATURE

2. TOPICS COVERED

a. QUAILTY MANAGEMENT – CALCULATION OF PROCESS CAPABILITY, PERCENT

REJECTS ETC
b. WAITING LINES: CALCULATING AVERAGE WAITING TIMES AND CUSTOMERS
WAITING IN LINE
c. PROJECT MANAGEMENT: CRITICAL PATH METHOD
d. INVENTORY MANAAGEMENT
i. SINGLE PERIOD MODEL
ii. EOQ MODEL
iii. QUANTITY DISCOUNTS
3. THE EXAM WILL BE OPEN NOTES AND OPEN BOOK. LAPTOPS ARE ALLOWED.
MOBILE PHONES WILL NOT BE ALLOWED.

Practice Sample Problems attached

 Practice Problem Set : Process Capability

1) The specifications from the manufacturer of a particular type of metal coating call for the
temperature of the drying oven to be 370 ± 10oF. The company that is considering using the
coating has run tests by taking a large number of temperature readings from various parts of its oven
at random times. The standard deviation of the readings about the mean temperature setting was
found to be 2.06oF. What is the capability ratio of the process.

2) Care was taken to operate a metal casting process so that no assignable causes of variation were
introduces, and randomly selected castings were weighed. The target weight of the castings was 28
pounds. The following weights came from 30 random observations:

28.00 28.03 28.01 28.03 28.04

27.98 27.94 28.01 28.03 28.02
28.01 27.99 28.01 28.00 27.98
28.02 27.99 27.98 28.00 27.96
27.96 28.02 28.02 27.96 28.03
28.05 27.99 27.98 28.04 28.03

a) Estimate the standard deviation of the process.

b) What is the process capability index, if the specification limits are 28.00 ± 0.1 pounds.

Solutions

Problem 1:

Capability Index = min { (380 – 370) / (3* 2.06) , (370 – 360)/(3*2.06) } = 1.618

Problem 2:

a) Standard Deviation, s = 0.027139

b) Capability Index = 1.228

 Practice Problem Set: Waiting Line Theory

1) The barber of a one-man shop finds that sometimes customers are waiting, but sometimes he
has nothing to do and can therefore read sports magazines. He prefers to keep a rather steady
pace when he is working, hoping to get blocks of time for reading and keeping up on sports.
In the hope of improving his situation, he kept records for several weeks and found that an
average of one customer per hour comes in for haircuts. It takes him an average of 20
minutes per haircut.

a) What is the average number of customers waiting for service?

b) What is the average customer waiting time in the queue?
c) How much of the time does the barber have to read sports magazines?
d) The other barber in town has fallen ill, and our barber's business increases to an average of
two customers per hour. What happens to the average number of customers waiting, the
average waiting time, and the time available for reading sports magazines?

2) Arrivals at an ATM machine are considered to be Poisson, with an average time of 10

minutes between one arrival and the next. The length of a transaction is assumed to be
exponentially distributed, with a mean of 3 minutes.

a. What is the probability that a person arriving at the ATM will have to wait?
b. What is the probability that a person arriving at the ATM will not have to wait?
c. What is the average number of people waiting in line?

3) A branch of Seaside bank is continuously concerned about its level of service and operating
costs. A study of customer arrivals revealed that the average time between arrivals of
customers is 3 minutes. Each customer requires on average two minutes of service.

a) Find the average waiting time (in minutes) in the queue if a single teller window is open.
b) What is the probability of having more than 2 people in the system?

Solutions
1):
 l = 1 per hour, = 3 per hour

a) = 1/6 customers

b)
c) Fraction of time barber has to read sport magazines

= 2/3 rd of the time = 40 minutes per hour.

d) With l = 2 per hour; Lq = 4/3 customers, Wq = 4/6 hour; P0 = 1/3

2)
l = 6 per hour; µ = 20 per hour.

a) Probability that a person arriving to the ATM will have to wait

= = 1 - (1 - 6/20) = 0.3

b) Probability that a person arriving at the ATM will not have to wait
= P(n = 0) = P0 = (1 - 6/20) = 0.7

c) = 36/280 = 0.1285 customers

3): l = 20 per hour, = 30 per hour

a) = 4/3 customers, therefore

Wq on calculation will give you 4 mins

b) Probability of having more than two in the system =

= 1 – 1/3 – 2/9 – 4/27 = 0.296

 Project Management (CPM Practice Problems)

1) A small consulting project is defined below. Determine the minimum duration of the
project and identify the critical activities.

Description Task ID Predecessors Duration (weeks)

Access Customer Needs A None 2
Write and Submit Proposal B A 1
Obtain Approval C B 1
Develop Service Vision and Goals D C 2
Train Employees E C 5
Quality Improvement Pilot Groups F D, E 5
Write Assessment Report G F 1

2) Consider the following AON project network. Assume that the time required (in
weeks) for each activity is known; these durations are indicated in each node. Develop a
chart for the activities in this project indicating the early start and finish times, latest start
and finish times, and total slack for each activity. Indicate clearly which activities are on the
critical path(s).

3) Demand at the American Widget Company (AWC) has recently been slowed down
due to an increase of imported widgets from Japan. In response, the managers of AWC
have shut down on of their production lines. However, management is concerned about
how long it would take to restart the line when (and if) demand increases. They have come
to you for help.

After completing a careful study of the production process, you have determined
from your work breakdown structure that there are ten distinct tasks which must be
completed before the line begins production again. These tasks are indicated below, along
with their estimated duration (in days) and their immediate predecessors.

Task ID Predecessors Duration (Days)

A - 5
 B A 2
C A 4
D C 2
E C 8
F B 6
G E, H 5
H D, F 1
I G 3
J G 6

The production manager understands the basic concept of a critical path but has posed
some additional questions below:

a) What are the slacks associated with each tasks and which tasks are critical?

b) How much does the duration of task D have to increase in order to change
(i) the early start time of D?
(ii) the early start time of I?
(iii) the earliest possible completion time of the project?

c) The production manager feels that you've made an error and that task C should also be a
predecessor to activity F.
(i) Which activity will their earliest start times changed? By how much?
(ii) Which activities will have their latest start times changed? By how much?

Solutions
1.
Task ES EF LS LF Slack
A 0 2 0 2 0
B 2 3 2 3 0
C 3 4 3 4 0
D 4 6 7 9 3
E 4 9 4 9 0
F 9 14 9 14 0
G 14 15 14 15 0
The project duration is 15 weeks and all tasks are critical except D

2.
Slack = LS – ES
Task ES EF LS LF
Start 0 0 0 0 0
A 0 3 1 4 1
B 3 7 4 8 1
C 8 10 8 10 0
 D 0 4 4 8 4
E 0 8 0 8 0
F 10 15 10 15 0
G 0 9 1 10 1
H 9 14 10 15 1
End 15 15 15 15 0

3. Times are as follows:

Task ES EF LS LF TS
A 0 5 0 5 0
B 5 7 8 10 3
C 5 9 5 9 0
D 9 11 14 16 5
E 9 17 9 17 0
F 7 13 10 16 3
G 17 22 17 22 0
H 13 14 16 17 3
I 22 25 25 28 3
J 22 28 22 28 0

b) i) No effect
ii) > 5 days
iii) > 5 days
c) i) F and H, increases by 2 days
ii) No change
 Problem Set: Inventory Models

1) The Great Newsstand stocks copies of the Sunday Newspaper published in a large city in
the region. The paper cost the newsstand $0.50 and are sold for $1.50 per copy. If they are
not sold during the week, the papers are sold as scrap paper for approximately $0.03 per
copy. Weekly demand for the paper is distributed according to a normal distribution with a
mean of 60 and standard deviation of 15. How many papers should the newsstand stock?

2) Extended play Stereo, Inc. sells 600 Super Power amplifiers per year and expects to
continue at that rate. The holding cost is 25 percent of the unit cost per year, and the
amplifiers cost $180 per year. The cost to process a purchase order is $15 per order.

a) What is the EOQ?

b) How much will the company spend each year to order and hold the amplifiers?

3) Jack and Jill's appliance store sells approximately 1500 VCR's per year. It costs the store
$20 just to place an order and receive delivery (the cost of paperwork, truck delivery, etc.)
and takes 10 days between an order and a deliveryThe cost per VCR is $250. Determine the
optimal reorder quantity Q, and the optimal reorder point, R. Assume that the store operates
300 days in a year. The annual holding cost rate per unit is 32%.

Solutions:

1)

Purchase Price = $0.50 per copy

Selling Price = $1.50 per copy
Salvage value = $0.03 per copy

Co = $0.47
Cu = $1.00

Hence a= Cu / (Co + Cu) = 1.00/ 1.47 = .6802

From standard normal tables, corresponding z value = 0.47

Hence D = 15 * 0.47 + 60 = 67 newspapers

Optimal stocking level = 67 newspapers

2)
 a) EOQ = = 20 amplifiers

b) TC = SD/Q + i C Q/2 = 15* 600/20 + 45*10 = $900 per year

3)

D = 1500 per year, S = $20 per order, i =32% per year, C - $250

EOQ = 28 units

TC (Q=28) = 20*1500/28 + 0.32 * 250 *28/2 + 250 * 1500 = $377,191.43 per year

Reorder point = 1500 *10 / 300 = 50