1. Use the sales data given below to determine the predicted value for 2008 sales.

Yea 200 200 200 200 200 200 200

r 1 2 3 4 5 6 7

Sale 100 110 122 130 139 152 164

s
(Uni
ts)

Year Time Sales X2 XY

Period (Units)
(X) (Y)

2001 1 100 1 100

2002 2 110 4 220

2003 3 122 9 366

2004 4 130 16 520

2005 5 139 25 695

2006 6 152 36 912

2007 7 164 49 1148

  S X = 28 S Y S X2=140 S XY =
=917 3961

x
 x  28  4
n 7

y
 y  917  131
n 7

b
 xy  nxy  3961  (7)(4)(131)  293  10.46
 x  nx
2
140  (7)( 4 )
2
28 2

a  y  bx  131  (10.46  4)  89.16

To project demand in 2008, we denote the year 2008 as x = 8, and:

Sales in 2008 = 89.16 + 10.46 * 8 = 172.84

2. A small regional trucking company has experienced steady growth. Use time series
regression to forecast capital needs for the next 2 years. The company's recent capital needs
have been:
══════════════════════════════════════════════

Capital Needs Capital Needs

(Thousands Of (Thousands Of
 Year Dollars) Year Dollars)

------------------------------------------- --------------------------------------------

1 100 3 130

2 110 4 140

5 160

══════════════════════════════════════════════

3. The top management of Computer Products Corporation (CPC) in San Jose is now going through
the preliminary steps of its annual planning process to develop an operating plan for next year. Jane
Billingsley is one of the staff analysts charged with the responsibility of estimating the level of
revenues for next year. Her approach is to develop individual product line forecasts and then
combine the product line forecasts into an aggregate sales forecast for CPC. She is now in the
process of examining the most recent six years of sales data for CPC's line of Personal Computers:

════════════════════════════════════
Sales Revenues Sales Revenues

Year (Millions of Dollars) Year (Millions of Dollars)

────────────────────────────────────

1 1.4 4 26.8

2 6.9 5 34.9

3 16.5 6 39.1

════════════════════════════════════

a. Assuming that the sales data above are representative of sales expected next year, use
time series regression analysis to forecast next year's (Year 7's) sales revenues for the line of
Personal Computers.
b. Determine the correlation coefficient for the data and interpret its meaning.

c. Find the coefficient of determination for the data and interpret its meaning.
Solution

a.

YEAR SALES

x y x2 xy y2

1 1.4 1 1.4 1.96

2 6.9 4 13.8 47.61

3 16.5 9 49.5 272.25

 4 26.8 16 107.2 718.24

5 34.9 25 174.5 1,218.01

6 39.1 36 234.6 1,528.81

x=21 y=125.6 x2=91 xy=581.0 y2=3,786.88

x2y - xxy 91(125.6) - 21(581) -771.4

a = ────────── = ───────────── = ───── = - 7.3467

nx2 - (x)2 6(91) - (21)2 105

nxy - xy 6(581) - 21(125.6) 848.4

b = ───────── = ──────────── = ───── = 8.08

nx2 - (x)2 105 105

Y = a + bX = - 7.3467 + 8.08(X)

Y9 = - 7.3467 + 8.08(7) = -7.3467 + 56.56 = 49.21 or $49.21 million

1. The Boston plant of Computer Products Corporation (CPC) manufactures a line of resins that is
shipped to other CPC plants and other firms in the electronics and computer-manufacturing
industries. Lynda McDonald, production-planning manager at the plant, is planning the aggregate
production capacity required at the plant to produce next year's sales forecast that was just issued
from CPC's corporate headquarters in San Jose. The plant manufactures three lines of resin (Wopac,
Ziptite, and Lockit), each line with several variations but each one requiring the same amount of
labor- and machine-hours to manufacture one pound. For example, the only difference between
Wopac 3599 and Wopac 3674 is in the ingredients used for each. The same amount of production
time is required by each.

═════════════════════════════════════════════════

Sales Forecast (Thousands of Tons)

Resin 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

─────────────────────────────────────────────────
Wopac 10.3 11.4 13.9 9.3

Ziptite 6.1 5.4 7.8 6.7

Lockit 3.0 1.4 4.2 5.7

═════════════════════════════════════════════════

Ample machine capacity exists to produce the forecast and each ton of resin requires 5 labor hours.

a. Compute the aggregate demand for resins in each quarter.

b. Compute the aggregate number of labor-hours in each quarter.

c. If each worker works 520 hours per quarter, how many workers will be required
in each quarter?

It costs $2,000 to hire a worker and $1,000 to lay off a worker, and inventory carrying cost is $150
per ton of resin. (This means that if one ton of resin were held in inventory for a year, it would cost
$150 for finance charges, insurance, warehousing expense, etc.) CPC's Boston plant works the same
number of days in each quarter, 13 five-day weeks. Evaluate two aggregate plans for next year: (a)
matching demand and (b) level capacity with inventory. Which plan would you recommend? Why?
Assume that the pattern of quarterly demand repeats from year to year and that beginning
inventory is zero.

Solution

a. Compute the aggregate demand for resins in each quarter.

═══════════════════════════════════════════════════════

AGGREGATE DEMAND (000 TONS)

Q1 Q2 Q3 Q4

───────────────────────────────────────────────────────

19.4 18.2 25.9 21.7

═══════════════════════════════════════════════════════
13.4 Continued

b. Compute the aggregate number of labor-hours in each quarter.

The labor hours required in each quarter is computed by multiplying the

aggregate demand for resin in tons by 5:

═══════════════════════════════════════════════════════

AGGREGATE LABOR HOURS (000 HOURS)

───────────────────────────────────────────────────────

Q1 Q2 Q3 Q4

───────────────────────────────────────────────────────

97 91 129.5 108.5

═══════════════════════════════════════════════════════

c. If each worker works 520 hours per quarter, how many workers will be
required in each quarter?

The number of workers in each quarter is computed by dividing the number of

aggregate labor hours in each quarter by 520:

═══════════════════════════════════════════════════════

NUMBER OF WORKERS REQUIRED

───────────────────────────────────────────────────────

Q1 Q2 Q3 Q4

───────────────────────────────────────────────────────

186.5 175.0 249.0 208.7

═══════════════════════════════════════════════════════
 13.5 In Problem 13.4 above, it costs $2,000 to hire a worker and $1,000 to lay off a
worker, and inventory carrying cost is $150 per ton of resin. (This means that if one ton
of resin were held in inventory for a year, it would cost $150 for finance charges,
insurance, warehousing expense, etc.) CPC's Boston plant works the same number of
days in each quarter, 13 five-day weeks. Evaluate two aggregate plans for next year: (a)
matching demand and (b) level capacity with inventory. Which plan would you
recommend? Why? Assume that the pattern of quarterly demand repeats from year to
year and that beginning inventory is zero.

Solution

From Problem 13.4, evaluate two aggregate capacity plans for next year, matching
demand, and level capacity with inventory. Which plan would you recommend?
Why?

════════════════════════════════════════════════════════════════

(1) (2) (3) (4) (5) (6)

AGGREGATE PLANNED WORKERS WORKERS

AGGREGATE DEMAND PRODUCTION NEEDED* WORKERS LAID

PLAN (000 tons) (000 tons) [(3)x5/520] HIRED OFF

─────────────────────────────────────────────────────────────────

Level 19.4 21.3 205 0 0

Capacity/ 18.2 21.3 205 0 0

Inventory 25.9 21.3 205 0 0

21.7 21.3 205 0 0

─────────────────────────────────────────────────────────────────

19.4 19.4 187 0 22

Matching 18.2 18.2 175 0 12

Demand 25.9 25.9 250 75 0

21.7 21.7 209 0 41

═════════════════════════════════════════════════════════════════

* Rounded to the next whole number of workers.

 Compute the average inventory per year for the level capacity plan. Refer to the table
above for the aggregate demand and planned production in each quarter:
═════════════════════════════════════════════════════════════════

(7) (8) (9) (10) (11) (12)

INVENTORY

ADDITIONS AVERAGE AVERAGE

OR QUARTERLY ANNUAL

(SUBTRACTIONS) BEGINNING ENDING INVENTORY INVENTORY

(000 tons) INVENTORY INVENTORY (000 tons) (000 tons)

QUARTER [(3) - (2)] (000 tons) (000 tons) [(9)+(10)/2] [Σ(11)/4]

─────────────────────────────────────────────────────────────────

1 1.9 0* 1.90 .95

2 3.1 1.90 5.00 3.45

3 (4.6) 5.00 .40 2.70

4 ( .4) .40 0* .20 1.825

═════════════════════════════════════════════════════════════════

* Assume that there is no beginning inventory in Q1.

13.5 Continued

═════════════════════════════════════════════════════════════════

(13) (14) (15) (16) (17)

ANNUAL ANNUAL ANNUAL ANNUAL

HIRING LAYOFF CARRYING OPERATING

AGGREGATE COST COST COST COSTS

PLAN [Σ(5)x2,000] [Σ(6)x1,000] [(12)x150] [(14+(15)+(16)]

─────────────────────────────────────────────────────────────────

LEVEL

CAPACITY 0 0 $273,750 $273,750

─────────────────────────────────────────────────────────────────
MATCHING

DEMAND $150,000 $75,000 0 $225,000

═════════════════════════════════════════════════════════════════

A product has this product structure tree:

B(2) C(1)

D(2)

Inventory records show this information:

Lead
Item Level Lot Time On Safety
Code Code Size (weeks) Hand Stock Allocated
A 0 LFL 1 2,000 1,500

B 1 LFL 1 1,200 700 500

C 1 1,500+ 1 1,500 500 500

D 2 3,000+ 2 2,000 500 1,000

Product A is the only item currently with a Scheduled Receipt. 1,000 units of Product A are
expected to be completed during Week 1.

The gross requirements for Product A are: 2,000 units in Week 4, 1,000 units in Week 5, and
2,000 units in Week 6.

Develop the MRP tables for this problem using a 6-week planning horizon.
Develop the MRP tables for this problem using a 6-week planning horizon.

═════════════════════════════════════════════════════════════════

Compo- ───────────────WEEKS────────────────

nent 1 2 3 4 5 6

─────────────────────────────────────────────────────────────────

Gross requirements 2000 1000 2000

Scheduled receipts 1000

A Available 1500 1500 1500 1500 2000

Net requirements 500 1000 2000

Planned order receipts 500 1000 2000

Planned order releases 500 1000 2000

─────────────────────────────────────────────────────────────────

Gross requirements 1000 2000 4000

Scheduled receipts

B Available

Net requirements 1000 2000 4000

Planned order receipts 1000 2000 4000

Planned order releases 1000 2000 4000

─────────────────────────────────────────────────────────────────

Gross requirements 500 1000 2000

Scheduled receipts

C Available 500 500 500 500

Net requirements 1000 1500

Planned order receipts 1500 1500

Planned order releases 1500 1500

─────────────────────────────────────────────────────────────────

Gross requirements 3000 3000

Scheduled receipts

D Available 500 500 500 500 500 500

 Net requirements 2500 2500

Planned order receipts 3000 3000

Planned order releases 3000 3000

═════════════════════════════════════════════════════════════════

. You are the MPS planner at MM Motors and you use a time-phased records for planning
end-term production. You are currently working on a schedule for MM24, one of the
company’s top selling motors. You have decided to use a lot size of 70 and a safety stock of 5
for the MM24 motor.

MM24 On 1 2 3 4 5 6 7 8
hand
20
Forecast 30 30 30 40 40 40 45 45
Orders 13 8 4
Projected available balance
MPS 70
Available-to-promise

a. Complete the MPS time-phased record for MM24.

Week 1 2 3 4 5 6 7 8

Forecast 30 30 30 40 40 40 45 45

Orders 13 8 4

Projected Available
Balance 20 60 30 70 30 60 20 45 70

Available to Promise 69 66 70 70 70

MPS 70 70 70 70 70

b. MPS lot size = 70

Order Amount Desired Week Accept (Y or N)

1 40 4 Y

2 30 6 Y
 3 30 2 Y

4 25 3 Y

Updated Record

Item: P24
Week 1 2 3 4 5 6 7 8

Forecast 30 30 30 40 40 40 45 45

Orders 13 38 29 40 30

Projected Available
Balance 20 60 30 70 30 60 20 45 70

Available to Promise 39 1 40 70 70

MPS 70 70 70 70 70

MPS lot size = 70

24. A furniture manufacturer makes a bookcase from two (2) end panels, four (4) shelves,
fasteners, and hangers. The end panels and shelves have the following data:

End Panel
Operation Machine Run Time Setup Time
Saw 5 minutes 0.6 hour
Planer 3 minutes 0.3 hour
Router 4 minutes 0.8 hour

Shelf
Operation Machine Run Time Setup Time
Saw 4 minutes 0.5 hour
Moulder 5 minutes 1.3 hour
Router 5 minutes 0.7 hour
Sander 1 minutes 0.1 hour
The master schedule for the next three weeks is 35, 50 and 40 bookcases, respectively. Each
MPS requires a setup.

a. What is the total number of hours required on each of the five machine centres for
each week?
b. If each one of the two parts is started into production one week (five days) before they
are needed in assembly, and it takes one day per operation, generate the week-by-
week load on the routing machine.
 c. If, in part b the two parts arrive at the router on the same day, which would process
first? Why?
Week 1 2 3
MPS (bookcases) 35 50 40
MPS (panels) 70 100 80
MPS (shelves) 140 200 160

Machine Setup Run Time

End Panel Center Time Per Unit
Operation 1 Saw 36 min. 5 min.
Operation 2 Planer 18 min. 3 min.
Operation 3 Router 48 min. 4 min.

Shelf
Operation 1 Saw 30 min. 4 min.
Operation 2 Molder 78 min. 5 min.
Operation 3 Router 42 min. 5 min.
Operation 4 Sander 6 min. 1 min.

Week
Machine center 1 2 3
Saw 36+(35x5x2)=386 36+(50x5x2)=536 36+(40x5x2)=436
30+(35x4x4)=590 30+(50x4x4)=830 30+(40x4x4)=670
Minutes 976 1366 1106
Hours 16.3 22.77 18.43

Planer
Minutes 18+(35x3x2)=228 18+(50x3x2)=318 18+(40x3x2)=258
Hours 3.8 5.3 4.3

Router
48+(35x4x2)=328 48+(50x4x2)=448 48+(40x4x2)=368
42+(35x5x4)=742 42+(50x5x4)=1042 42+(40x5x4)=842
Minutes 1070 1490 1210
 Hours 17.83 24.83 20.17

Molder
Minutes 78+(35x5x4)=778 78+(50x5x4)=1078 78+(40x5x4)=878
Hours 12.97 17.97 14.63

Sander
Minutes 6+(35x1x4)=136 6+(50x1x4)=206 6+(40x1x4)=166
Hours 2.27 3.43 2.77

b.
Weekly Router Machine Load
Setup Run Total
Week Hours Hours Hours MPS
Past Due 1.5 16.33 17.83
1 1.5 23.33 24.83 35
2 1.5 18.67 20.17 50
3 40

c. Since the shelves must be processed at the sanding operation after routing they
should be processed first at the router if the two parts arrived at the router on the same
day. This way both parts would be in their final operation at the same time and the
complete component sets would be available for assembly sooner.

The Jailbound Tax Service processes industrial customers' tax jobs on a first-come first-
served basis but wonders if shortest processing time would be better. The jobs that are
now waiting to be produced are listed in the order in which they arrived, with their
estimated production times, time to promised delivery, and the necessary computations:

═══════════════════════════════════════════════════════════════════════════
══
Estimated Time To Late- Late-
Production Promised Job Flow ness Job Flow ness

Time Delivery Se- Time (Days) Se- Time (Days)

Job (Days) (Days) quence (Days) [(5)-(3)] quence (Days) [(8)-
(3)]

───────────────────────────────────────────────────────────────────────────
──

A 5 8 1 5 -- 2 8 --

B 3 6 2 8 2 1 3 --

C 10 24 3 18 -- 4 26 2

D 8 22 4 26 4 3 16 --

═══════════════════════════════════════════════════════════════════════════
══

a. Rank the two sequencing rules on three evaluation criteria--average flow time,

average number of jobs in the system, and average job lateness.

b. Which sequencing rule would you recommend? Why?

Seven jobs are waiting to be produced at a workstation. Their code numbers, estimated

production times, and promised delivery times are given below:

Time to
Production Promised
Job Code Time Delivery
Number (Hours) (Hours)

A590 6.0 3.0

B640 3.1 8.0

C420 8.4 14.0

D310 9.1 26.0

E225 2.7 6.0

F480 5.3 10.0

G580 7.0 21.0

a. Use the shortest processing time rule and determine the sequence of producing

the jobs.
 b. Use the critical ratio rule and determine the sequence of producing the jobs.

Solution

a. Rank the two sequencing rules on three evaluation criteria--average flow time,

average number of jobs in the system, and average job lateness.

═════════════════════════════════════════════════════════════════

───────────────SEQUENCING RULES──────────────────

EVALUATION FIRST COME, SHORTEST

CRITERIA FIRST SERVED PROCESSING TIME

═════════════════════════════════════════════════════════════════

Average (5 + 8 + 18 + 26)/4 (3 + 8 + 16 + 26)/4

completion = 14.25 Days = 13.25 Days

time

RANK = 2 RANK = 1
─────────────────────────────────────────────────────────────────

Average [5(4)+3(3)+10(2)+8(1)]/26 [3(4)+5(3)+8(2)+10(1)]/26

Number of = 2.19 Jobs = 2.04 Jobs

jobs
in system RANK = 2 RANK = 1
─────────────────────────────────────────────────────────────────

Average (0 + 2 + 0 + 4)/4 (0 + 0 + 2 + 0)/4

job = 1.50 Days = .5 Days

lateness

RANK = 2 RANK = 1

═════════════════════════════════════════════════════════════════
16.2 Continued

First come, first served ranks 2nd on all three criteria. Shortest processing time
ranks 1st.

b. Which sequencing rule would you recommend? Why?

The shortest processing time rule should result in quicker turnaround on most

customer jobs, fewer jobs in the system, and less job lateness on average. One difficulty

with the rule is the long flow time of long jobs; however, this effect can be mitigated by

promising later completion times for these jobs.