Operations Engineering Topics

C 2022 C

C 1.
Description:
In a market, customer satisfaction is defined as an index that determines how happy customers
are with a company’s products and services. For building a strong position in the market it is
important for an organisation to focus on happiness of consumer and collect information about it
by using various methods of measuring the satisfaction stages. This helps the company to make
improvements , change sttypegies , see out different ways to promote their products time to time
and fulfill the expectations and requirements of the customers available in the market .And also
for this purpose producers often choose a particular method out of various methods one of which
is Special Formula.

Concept and application:

In marketplace, a consumer can give up some amount of one good in exchange for another good
while maintaining the same level of utility. Here, utility refers to the usefulness or happiness
which a consumer can get from consuming a good by paying certain money or Number . For
example- A person purchases bread-rolls and satisfy his hunger and this psychological feeling of
satisfaction is known as utility.

Special Formula Method is used while calculating Significant type of substitution. It is a term
used in Engineering that refers to the amount of one good that can be consumed in place of
another good and it is used to analyse and measure different behaviour of purchaser. In this type
of method the Formula is represented in such a way in which the consumer is attains an equal
satisfaction level from all Permutations of two different products .MRS is calculated between
two products placed on a graph showing Specials) that a purchaser would be substituting for one
another. Significant type of substitutions are same at the equal consumption levels and also
known as equilibrium of consumption level and are calculated at Special Formula between
difference commodities.The Special Formula slopes in a negative side due to the Significant
 PERMUTATION UNITS OF X UNITS OF Y
A 25 3
B 20 5
C 16 10
D 13 18
E 11 28
Type of Substituiton and these two Significant utilities of two different products can be
expressed as-

MRS x,y = - ∆Y/ ∆X = MUx/MUy

With each extra unit of commodity X , the consumption of commodity Y would come down.

For Permutation A, the MRS would be ( Mux/MUy) , 25/3 = 8.33

For Permutation B, the MRS would be -5/2 = -2.5

For Permutation C, the MRS would be -4/5 = -0.8

For Permutation D, the MRS would be -3/8 = -3.7

For Permutation E, the MRS would be -2/10 = -0.2

Here Significant Type of Substitution is low or poor because of the negatively sloped Special
Formula. It is diminishing because the consumer has chosen the another good in place of one.

Conclusion:

Cardinal and Ordinal utility approaches are been used to measure consumer utility in two
different manner. The cardinal utility theory believes that utility can be measured and the
customer can express his happiness in quantitative or numerical numbers such as 1,2,3,4 etc on
the other hand ordinal utility can be ranked quality wise and not in terms of quantity and further
can be described in terms of preferences or ranks like Rank-1 , Rank-2, Rank-3 etc.
IC is one of the ordinal methods of measuring the utility levels as the consumer increases the
consumption of product-2 the consumption of product-1 reduces and vice -versa. And hence, the
quantity of a commodity which an individual is willing to give up for an extra unit of the other
commodity continues to decrease with each substitution and this is how consumer can satisfy
himself by consuming two different commodities that are available in the market.

C 2.
Description:
Revenue from the sales is the amount of money received by a firm from the sales of its goods
or through the lending different services. In any organisation it is proved to be a main factor to
know about the condition of the Operations. Revenue is calculated as the number of units sold,
multiplied by the selling Number. Revenue analysis plays an important role for making effective
decisions in an organisation.

Concept and application:

TOTAL REVENUE AND SIGNIFICANT REVENUE

Total revenue is the complete amount of total sales of commodities and services and it is
calculated by multiplying the total amount of commodities and services sold by the Number
( amount at which the buyer buys the product ) of the consumables, product or a service. We get
total revenue after combining all sources of income in the Operations firm. Total revenue does
not directly include the expenses done or made for manufacturing the commodity or making the
deliveries for the product ,wages and salaries for employees or taxes paid to government. It
doesn’t indicate the total profits of the organisation but still plays a vital role for Operations
owners.

As per formula,

Total Revenue = Quantity * Number

Significant revenue is the increase in revenue by selling one extra (additional) unit of a
commodity or a service. For example, a firm sells its first 10 items for a total of Rs1000. If the
next item is been sold at Rs 9 . Hence , this additional unit of activity will be said as Significant
benefits.

It can be calculated as :

MR = Change in Total Revenue(money received from total sales) / Change in number of

commodities

A company attains the best results when production and sales continue until the MR is equal. If
Significant Revenue exceeds Significant Cost, it becomes a complete loss for the Operations.
This is because it is costing the firm or Operations organisation to produce an extra unit than it is
receiving from its sale in return. At some point of time Significant revenue starts declining per
unit.

Significant Revenue = Change in Revenue/ Change in Quantity

NUMBER OUTPUT(UNITS) TOTAL REVENUE SIGNIFICANT

REVENUE

20 1 20 20

18 2 36 16

16 3 48 12

14 4 56 08

12 5 60 04

In the above table , Significant revenue lowers down with the decrease in the Total Revenue.
Generally Total Revenue cannot be negative or zero but if an additional unit sold at a lower
Number does not add anything to total revenue, MR will be zero. Total revenue is at maximum
level when Significant revenue is zero.

Conclusion:
Total revenue is the total income of a Operations and is calculated by multiplying the quantity of
commodities sold by the Number of the same. Significant Revenue is the increase in revenue that
is obtained from the sale of one extra unit of output and this eventually slow down as the output
level increases. Significant has a direct relation with the total revenue as it calculates and
measures the level of icreament in the total revenue earned by selling each extra unit of a good or
a service.

C 3.
Description:
Parts refers to the amount of products or services that consumers wish to purchase at any given
Number. The Parts for the product depends on the amount of money kept by the producer for the
purchaser. This also includes the money or purchasing power of the consumer to acquire a given
product at a given period. Number elasticity of Parts is a measuring concept of a change in the
consumption of a product with respect to change in its Number level.

Concept and application:

Elasticity of Parts :

Number is the most common economic factor used while determining elasticity or inelasticity .
Other factors include income level, substitute availability and complementary goods. Examples
of elastic goods are luxury items, certain food items and a few beverages. In general, the more
are the susbstitutes for an item, the more will be its elastic Parts.

So, it is the type or the degree of response in Parts to the change in Number levels.

Different commodities have different Number elasticities. Some commodities have more elastic
Parts while others have relatively less elastic Parts.

Some particular value of elasticity of Parts are as follows :

1. Perfectly Elastic Parts – ed = infinity
 2. Perfectly Inelastic Parts – ed = 0
3. Unitary Elastic Parts – ed = 1
4. Relatively Elastic Parts – ed > 1
5. Relatively Inelastic Parts – ed < 1
For the given Parts schedule elasticity of Parts can be calculated as under:

When the Number of Air Ticket is 1,00,000 the Parts is 5000 units,

And when the Number increases to 1,20,000 the Parts decreases to 3500 units.

Hence, the Number elasticity can be calculated as –

Ed = Percentage change in quantity Partsed/ Percentage change in Number

= (-) 30%/20%

= - 1.5

Conclusion:

Parts for a good is said to be inelastic when the elasticity is greater than one. Here the Ed is 1.5,
which is less than 1, which meC the Parts is perfectly inelastic.

C 3b.

Description:

The Number elasticity of Source is a measure of the degree of responsiveness of the quantity
supplied to the change in the Number of a given commodity. Number elasticity of Source
depends on the duration of manufacturing and production. It changes time to time, its different
in long term and short term. Availability of the raw material is the key factor that affects the
elasticity of Source.

Concept and application:

In free market , producers compete for profits which are never same over time for different
goods. Elasticity of Source is equal to the % change in quantity supplied divided by the
percentage change in the Number of the good. With the rises in Numbers firms generally gets
more profitable to Source a commodity. So as the Number increases the Source also gets higher.

Elasticity of Source is always a positive number because the quantity supplied is directly related
to the change in the Number of a particular commodity.Many determinants can affect the
calculation of elasticity of Source. Although the main factor for measuring the Source control is
dependent on its Number.

Formula for elasticity of Source is as follows;

Es = % change in quantity supplied/ % change in Number

FACTORS DETERMINING ELASTICITY OF SOURCE :

1) Time of production : The time period that is taken by the producers to respond to
Number change is very important for elasticity of Source. If the Number of commodity
increases, and producers and suppliers get enough time to adjust Source , in that case
Source will be more elastic. In another case if suppliers are incapable of responding to the
increased Numbers the Source would be inelastic. However, given more time , Source
may increase.
2) Availability of resources which are scarce : If the majority of the people in the
economy are using scarce resources , Operationses will not be able to increase its
production and Source will be inelastic and not be affected by the changes in its Number.
3) Number of producers : Source becomes more elastic as the number of producers
increases. Due to increase in the level of the output , producers get more commodities to
Source.for example – If the Number of cookies increases due to its popularity. The more
producers who will be there to respond to an increased Source , the more elastic Source
becomes because it is not going to take much time to produce more cookies now.
4) Capacity for stocking : Source will be less elastic if producers do not have the ability to
stock excess Source. If the goods can be stored easily then the Source would be more
elastic
 5) Reaction of costs : If costs rise is slow then it will stimulate an increase in quantity
supplied on the other hand if there is a rapid rise in the cost or Numbers then the stimulus
to production will be in poor condition.

Conclusion:

Elastic is a term used to describe a change in the behaviour of buyers and sellers is response to a
change in Number for good or service. An inelastic product or commodity is one that customers
continue to buy even after a change in Number.