21/11/21 22:59 Midterm Exam REDO

Here are the Redo rules:

The Redo questions can be found below.
The Redo is due 11/22 before 11:59PM, via PDF upload. The file name format is
TOM3010-32_ME_REDO_Firstname_Lastname.pdf
The extra credits for the Redo are 5 points (fixed).
For Questions 1-10, just make a list of 1 through 10 and write the correct answer letters
(A/B/C/D). For each question, please give a short sentence to explain the correct answer.
For each of Questions 11 through 12, no matter what scores you got, please handwrite
calculation steps and results.
For each of Questions 13 through 14, if you originally had 16 points or more, you only need to do the
missed/wrong parts; and if you got lower than 16 points, you would need to redo the whole question.

Question 01 (2 points)
Which of the following is lowest in goods content and highest in service content?
A. Dining at a fast-food restaurant
B. Attending a theater production
C. Getting an oil change for your car
D. Filling a medical prescription

Question 02 (2 points)
Which one of the following helps increase customer value?
A. Decrease the perceived benefits and keep the purchase cost the same
B. Decrease the purchase cost and decrease the perceived benefits even more
C. Increase the perceived benefits and keeps the purchase cost the same
D. Increase the perceived benefits and increase the purchase cost even more

Question 03 (2 points)
Which of these is the LEAST appropriate flow unit for analyzing a large airline’s operations?
A. Number of operating hubs per day
B. Total of ticket sales dollars in a quarter
C. Number of passengers served per day
D. Number of pilots employed in a year

Question 04 (2 points)
Which of the following factors is relevant to Little’s Law?
A. Average customer flow time
B. Processing time at resources
C. Customer sequencing
D. Customer arrival times

Question 05 (2 points)
Higher days of supply means _________ inventory. Higher turns means ______ inventory.
A. more, more
B. more, less
C. less, more
D. less, less

Question 06 (2 points)
Customers can easily find a parking place at a supermarket. In addition, for any car that exits the
parking lot, there is another car that arrives. The parking process currently is:
21/11/21 22:59 Midterm Exam REDO

A. demand constrained.
B. capacity constrained.
C. not constrained by input.
D. not constrained by demand.

Question 07 (2 points)
When will the utilization of a bottleneck resource be equal to 100%?
A. When the process is input constrained
B. When both input and demand are higher than process capacity
C. When the process is demand constrained
D. Utilization will never be 100%

Question 08 (2 points)
Lead time or fulfillment time of an ordering process
will increase _________ A. if the cycle time
doubles and the inventory is cut by half.
B. if the inventory remains the same and the cycle
time decreases.
C. if the cycle time is cut by half and the inventory
triples.
D. if the inventory doubles and the cycle time is cut
down to a fourth of its original value.

Question 09 (2 points)
Which of the following is an input variable for a Pizza Hut restaurant?
A. The amount of pepperoni purchased from the supplier
B. The weather condition
C. The delivery time of the pizza
D. The number of customer orders per day

Question 10 (2 points)
If the sigma level of a process decreases, _____.
A. the process’s defect probability increases
B. the process’s defect probability stays unchanged
C. the process’s defect probability decreases
D. change direction of the process’s defect probability cannot be determined
21/11/21 22:59 Midterm Exam REDO

Question 11 (20 points)

A production line manufactures basic electronic parts. If an electronic part does not work, it will be
considered as one defect and scrapped. A simple random sample of 12,000 parts is tested to assess
the production line. Fifty four defects were found. In answering the following questions, you would need
to use the specified number of decimal places. In addition, to calculate the sigma level, you can use
Excel by typing in =Norm.S.INV(1-DPU)+1.5 where DPU is the value you get earlier. And, to calculate
the number of expected defects, you need to rely on the lookup table below.
(a)[6] What is the DPU of the production line? (use 7 decimal places if applicable)
(b)[4] What is the corresponding DPMO? (use 1 decimal place if applicable)
(c)[6] What is the sigma level? (use 2 decimal places)
(d)[4] For a sigma level of 3.0, what would be the number of defects? (use 2 decimal places)

Sigma Level 2.0 3.0 4.0

DPMO 308,537.5 66,807.2 6,209.7

Total Number of Defects 54

DPU = = =0 . 0045
Total Units 12,000

Sigma Level = Norm.S.INV(1-0.0045) + 1.5 = 4.1121

The corresponding DMPO = 6,209.7

Norm.S.INV(1-DPU)+1.5 = 3.0
Norm.S.INV(1-DPU) = 3.0 – 1.5
Norm.S.INV(1-DPU) = 1.5
n
DPU =0.07= →n=12000∗0.07=840 defects
12,000
21/11/21 22:59 Midterm Exam REDO

Question 12 (20 points)

Below are data on cost of quality at an automobile manufacturing plant for last year. You need to classify
this cost items according to the cost-of-quality model (P/A/I/E) and answer the following questions. Just
use one decimal place throughout your calculations.

Components under assembly product quality program Cost ($million)

Voluntary-recall repairs and reworks 0.1
Scheduled overhaul of critical machines 0.2
Random tests on critical components at arrival 0.2
Assembly-line downtime due to step errors or breakdowns 0.3
Inspection specialist training programs 0.1
Re-testing of repairs and remakes due to returns & recalls 0.1
Reworks due to production errors 0.2
Final-product testing programs 0.4

(a)[5] What is the total of prevention costs? (1 decimal)

Scheduled overhaul of critical machines 0.2

Inspection specialist training programs 0.1
TOTAL $ 0.3 MM

(b)[5] What is the total of appraisal costs? (1 decimal)

Random tests on critical components at arrival 0.2

Final-product testing programs 0.4
TOTAL $ 0.6 MM

(c)[5] What is the total of internal failure costs? (1 decimal)

Assembly-line downtime due to step errors or breakdowns 0.3

Reworks due to production errors 0.2
TOTAL $ 0.5 MM

(d)[5] What is the total of external failure costs? (1 decimal)

Voluntary-recall repairs and reworks 0.1

Re-testing of repairs and remakes due to returns & recalls 0.1
TOTAL $ 0.2 MM
21/11/21 22:59 Midterm Exam REDO

Question 13 (20 points)

Target is a large retail company based in Minneapolis, Minnesota. With some indicators in fiscal year
2020-2021, we analyze its retail performance. The annual inventory holding cost rate is given in the
table. The company carries a winter coat style at the unit cost of $70.

To answer the question: (1) copy only Parts 2 and 3 onto your papers; (2) show numeric equations and
final results; and (3) follow the units and decimal places specified.

Part 1 - Information Target

Net sales (thousands of $) 92,400.0
COGS (thousands of $) 66,177.0
Merchandise inventories (thousands of $) 10,653.0
Annual inventory holding cost rate (assumed) 27.00%

Part 2 - Overall Retail Performance Target

(a)[4] Flow time (years, 5 decimal places) ?

FlowTime = Inventory/COGS = 10,653.3/66,177.0 = 0.16098

(b)[4] Days of supply (days, 2 decimal places) ?

DOS = FlowTime *365

DOS=0.16098∗365=58.76

(c)[4] Inventory turns (turns per year, 5 decimal places) ?

1 1
Inventory Turns= = =0 .0170 2
Flowtime 58.76

Part 3 - Item Retail Performance Target

Cost of a winter coat ($) 70
(d)[4] Per-unit inventory holding cost rate (%, 2 decimals) ?

AIHCR 0.27
PUIHCR= = ∗100=15.86 %
Annual Inventory turn 0.01702

(e)[4] Inventory holding cost of the item ($, 2 decimals) ?

HC=C∗PUIHCR=70∗15.86 %=$ 11.10

21/11/21 22:59 Midterm Exam REDO

Question 14 (20 points)

A car wash process for generic cars has three stations and information as in the table below. You
would need to draw the table on your answer papers, show calculations, and give final results. Dashed
cells are to be kept blank. You need to show the specified number of decimal places whenever
applicable. You can choose one out of 3 learned methods to find the average labor utilization (ALU).
Statements and long calculations can be presented outside of the table.