INDIAN INSTITUTE OF MANAGEMENT RANCHI

Post-graduate Programme in Management

END-TERM EXAMINATION
Operations management I (Sec C and D)
MAX. MARKS: 70
TERM-II
Time: 120 mins.
INSTRUCTIONS
1. This is a Closed-book book examination.
2. This question paper contains ‘3’ pages and 5 questions.
3. All questions are compulsory.

Q1) Emergency calls to the 911 system of Durham, North Carolina, for the past 24 weeks are shown
in the following table: (5*4=20
marks)
WEEK 1 2 3 4 5 6 7 8 9 10 11 12
CALLS 50 35 25 40 45 35 20 30 35 20 15 40
WEEK 13 14 15 16 17 18 19 20 21 22 23 24
CALLS 55 35 25 55 55 40 35 60 75 50 40 65
a) Compute the exponentially smoothed forecast of calls for each week. Assume an initial
forecast of 50 calls in the first week, and use alpha = 0.2. What is the forecast for week 25?
b) Reforecast each period using alpha = 0.6.
c) Actual calls during week 25 were 85. Calculate tracking signal for each period.
d) Which smoothing constant provides a superior forecast? Explain and justify the measure of
error you used.

Q2) (a) A Missouri job shop has four departments—machining (M), dipping in a chemical bath (D),
finishing (F), and plating (P)—assigned to four work areas. The operations manager, Mary Marrs, has
gathered the following data for this job shop as it is currently laid out. It costs $0.50 to move 1
workpiece 1 foot in the job shop. Determine cost of material handling in the current layout. Further,
suggest a revised layout that has the lowest material handling cost. (10
marks)
100s of Workpieces Moved Between Work Areas Distances Between Work Areas in Feet
M D F P M D F P
M — 6 18 2 — 20 12 8
D — — 4 2 — — 6 10
F — — — 18 — — — 4

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 P — — — — — — — —
(b) What were the different types of facility layouts used in the ABC shipyard case study and provide
justification for using each type? Explain how facility layout improvement was used in the ABC
shipyard case study to improve its productivity. (10 marks)

Q3) Regal Marine, one of the U.S.’s 10 largest power-boat manufacturers, achieves its mission—
providing luxury performance boats to customers worldwide—using the strategy of differentiation. It
differentiates its products through constant innovation, unique features, and high quality. Increasing
sales at the Orlando, Florida, family-owned firm suggest that the strategy is working. As a quality
boat manufacturer, Regal Marine starts with continuous innovation, as reflected in computer-aided
design (CAD), high-quality molds, and close tolerances that are controlled through both defect charts
and rigorous visual inspection. In-house quality is not enough, however. Because a product is only as
good as the parts put into it, Regal has established close ties with a large number of its suppliers to
ensure both flexibility and perfect parts. With the help of these suppliers, Regal can profitably
produce a product line of 22 boats, ranging from the $14,000 19-foot boat to the $500,000 44-foot
Commodore yacht. “We build boats,” says VP Tim Kuck, “but we’re really in the ‘fun’ business. Our
competition includes not only 300 other boat, canoe, and yacht manufacturers in our $17 billion
industry, but home theaters, the Internet, and all kinds of alternative family Regal has also joined with
scores of other independent boat makers in the American Boat Builders Association. Through
economies of scale in procurement, Regal is able to navigate against billion-dollar competitor
Brunswick (makers of the Sea
Ray and Bayliner brands). (10 marks)
1. What constitutes the mission of Regal Marine?
2. How does the Regal Marine’s operations strategy provide competitive advantage?
3) How would each of the 10 operations management decisions (Product, Quality, Process, Location,
Layout, Human resources, Supply chain, Inventory, Schedule, Maintenance) apply to operations
decision making at Regal Marine?

Q4) (a) What is the difference between economies of scale and economies of scope and in which
competitive priorities do they fit? (5 marks)
2 2
(b) A firm has cost function given by C=860−0.25 Q 1 Q2 +Q 1 +Q 2. The firm has following
options: (5 marks)
1) Produce 10 units of product 1 only
2) Produce 14 units of product 2 only
3) Produce 10 units of product 1 and 14 units of product 2.
Which option should the firm choose? Do economies of scope exist for this firm?

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Q5) Metters Cabinets, Inc., needs to choose a production method for its new office shelf, the
Maxistand. To help accomplish this, the firm has gathered the following production cost data. Metters
Cabinets projects an annual demand of 24,000 units for the Maxistand. The Maxistand will sell for
$120 per unit. Which process type will maximize the annual profit from
producing the Maxistand? What is the value of this annual profit?
(10 marks)
Variable costs (per unit) ($)
Annualized fixed
cost of plant & LABO MATERIA ENERG
Process type equip. R L Y
Mass
Customization $1,260,000 30 18 12
Intermittent $1,000,000 24 26 20
Repetitive $1,625,000 28 15 12
Continuous $1,960,000 25 15 10