Winter Semester 2023-2024

MBA 1st Year

Operations Management
Practice Numerical

Students who got less than 20 marks in CAT1 or CAT2, need to solve and
submit the practice numerical on or before 14th March 2024.

Productivity:

1. At Symtecks, the output of a specific process is valued at $100 per unit. The cost of
labor is $50 per hour including benefits. The accounting department provided the
following information about the process for the past four weeks:

a. Use the multifactor productivity ratio to see whether recent process improvements
had any effect and, if so, when the effect was noticeable.
b. Has labor productivity changed? Use the labor productivity ratio to support your
answer.

2. Lori Cook produces “Final Exam Care Packages” for resale by her sorority. She is
currently working a total of 5 hours per day to produce 100 care packages.
a. What is Lori’s productivity?
b. Lori thinks that by redesigning the package, she can increase her total productivity
to 133 care packages per day. What will be her new productivity?
c. What will be the percentage increase in productivity if Lori makes the change?

Location Problem:

3. A small producer of machine tools wants to move to a larger building, and has identified
two alternatives. Location A has annual fixed costs of $800,000 and variable costs of
$14,000 per unit; location B has annual fixed costs of $920,000 and variable costs of
$13,000 per unit. The finished items sell for $17,000 each.

a. At what volume of output would the two locations have the same total cost?
 b. For what range of output would location A be superior? For what range would B
be superior?
4. A chain of home health care firms in Louisiana needs to locate a central office from
which to conduct internal audits and other periodic reviews of its facilities. These
facilities are scattered throughout the state, as detailed in the following table. Each site,
except for Houma, will be visited three times each year by a team of workers, who will
drive from the central office to the site. Houma will be visited five times a year.

a. Which coordinates represent a good central location for this office? What other
factors might influence the office location decision? Where would you place
this office? Explain.
b. If only Opelousas and Ruston city’s locations are available. Which locations is
better.

5. A British hospital chain wishes to make its first entry into the U.S. market by building
a medical facility in the Midwest, a region with which its director, Doug Moodie, is
comfortable because he got his medical degree at Northwestern University. After a
preliminary analysis, four cities are chosen for further consideration. They are rated
and weighted according to the factors shown below:

Which city should Moodie select?

MPS and MRP

6. Based on the following data calculate MPS, Projected-on-hand inventory and ATP.

7. One hundred twenty units of end item Z are needed at the beginning of week 7. Prepare
a material requirements plan for component C. Take into account that on hand there are
40 units of Z, 70 units of A, 100 units of B, and 30 units of C. Also, there is a scheduled
receipt of 20 units of component C in week 4. Lead times are two weeks for Z and B,
and one week for the other components. Lot-for-lot ordering will be used for all items.

Reliability:

8. The guidance system of a ship is controlled by a computer that has three major modules.
In order for the computer to function properly, all three modules must function. Two of
the modules have reliabilities of .97, and the other has a reliability of .99.
a. What is the reliability of the computer?
b. A backup computer identical to the one being used will be installed to improve
overall reliability. Assuming the new computer automatically functions if the
main one fails, determine the resulting reliability.

Maintenance:

9. The cost of an equipment is Rs.20,000. The annual operation and maintenance cost; and
resale values are given below:
 Year 1 2 3 4 5 6
O&M Cost 1500 1700 1900 2200 2600 3100
Resale 16000 14000 12000 7000 3000 0
Value

Determine at what time it could be replaced?

10. A machine costs Rs 2000. The operations and maintenance costs are zero for the 1st
year and increase by Rs 500 every year. If the money value is 10% worth every year,
determine the best age at which the machine should be replaced. The resale value of the
machine is negligibly small. What is the mean cost of owning and operating the
machine?

Forecasting:

11. Forecasts based on averages. Given the following data:

Prepare a forecast for period 6 using each of these approaches:

a. The appropriate naive approach.
b. A three-period moving average.
c. A weighted average using weights of .50 (most recent), .30, and .20.
d. Exponential smoothing with a smoothing constant of .40.

12. National Scan, Inc., sells radio frequency inventory tags. Monthly sales for a seven-
month period were as follows:
 Forecast September sales volume using each of the following:
a. The naive approach
b. A five-month moving average
c. A weighted average using .60 for August, .30 for July, and .10 for June
d. Exponential smoothing with a smoothing constant equal to .20, assuming a
March forecast of 19(000)
e. A linear trend equation
f. Calculate the forecast error and identify the best method.

13. The manager of a seafood restaurant was asked to establish a pricing policy on lobster
dinners. Experimenting with prices produced the following data:

Plot the data and a regression line on the same graph. Determine the sales if the price
of the product is $11

SPC:

14. Processing times for new accounts at a bank are shown in the following table. Five
samples of four observations each have been taken. Use the sample data in conjunction
 with Table to construct upper and lower control limits for both a mean chart and a range
chart. Do the results suggest that the process is in control?

15. The operations manager of the booking services department of Hometown Bank is
concerned about the number of wrong customer account numbers recorded by
Hometown personnel. Each week a random sample of 2,500 deposits is taken, and the
number of incorrect account numbers is recorded. The results for the past 12 weeks are
shown in the following table. Is the booking process out of statistical control? Use three-
sigma control limits.

16. The Woodland Paper Company produces paper for the newspaper industry. As a final
step in the process, the paper passes through a machine that measures various product
quality characteristics. When the paper production process is in control, it averages 20
defects per roll.
a. Set up a control chart for the number of defects per roll. For this example, use
two-sigma control limits.
b. Five rolls had the following number of defects: 16, 21, 17, 22, and 24,
respectively. The sixth roll, using pulp from a different supplier, had 5 defects.
Is the paper production process in control
Graphical Method and Simplex Method:

17. firm that assembles computers and computer equipment is about to start production of
two new types of microcomputers. Each type will require assembly time, inspection
time, and storage space. The amounts of each of these resources that can be devoted to
the production of the microcomputers is limited. The manager of the firm would like to
determine the quantity of each microcomputer to produce in order to maximize the
profit generated by sales of these microcomputers.

In order to develop a suitable model of the problem, the manager has met with design
and production personnel. As a result of those meetings, the manager has obtained the
following information

The manager also has acquired information on the availability of company resources.
These (daily) amounts are as follows.

The manager met with the firm’s marketing manager and learned that demand for the
microcomputers was such that whatever combination of these two types of
microcomputers is produced, all of the output can be sold. Use graphical and simplex
method to get the solution.

18. A person must contain at least 3,000 units of vitamin A, 100 units of vitamin B and
1,400 calories. Two foods A and B are available at a cost of Rs. 10 and Rs. 12 per unit,
respectively. If one of A contains 300 units of vitamin A, 3 units of vitamin B and 50
calories and one unit of food B contains 100 units of vitamin A, 4 units of vitamin B
and 50 calories. Formulate this problem as an LP model and solve it by graphical
method to find combination of foods to be used to have least cost?

Assignment Problem:
19. A manufacturing firm employs labor on hourly manufacturing rate basis for their daily
work. There are four labor and their charges are different. According to manufacturing
policy, only one job was given to one labor and paid for full hour, even if he worked
for a fraction of an hour. Find the least cost allocation for the following data:

Labor cost per No. of Product

Labor
hour (Rs.) produced per hour
A 40 10
B 50 14
C 45 8
D 60 15

Job No of units need to manufacture

W 179
X 165
Y 176
Z 278

20. A company is producing a single product and selling it through five agencies situated
in different cities. All of a sudden, there is a demand for the product in five more cities
that do not have any agency of the company. The company is faced with the problem
of deciding on how to assign the existing agencies to dispatch the product to the
additional cities in such a way that the travelling distance is minimised. The distances
(in km) between the surplus and deficit cities are given in the following distance matrix
Project Management:

21. An insurance company has decided to modernize and refit one of its branch offices.
Some of the existing office equipments will be disposed of but the remaining will be
returned to the branch after the completion of the renovation work. Tenders are invited
from a number of selected contractors. The contractors would be responsible for all the
activities in connection with the renovation work excepting the prior removal of the old
equipment and its subsequent replacement. The major elements of the project have been
identified, as follows, along with their durations and immediately preceding elements.
a. Draw the network diagram showing the interrelations between the various
activitiy
b. Calculate the minimum time that the renovation can take from the design
stage.

22. Milwaukee Paper Manufacturing had long delayed the expense of installing advanced
computerized air pollution control equipment in its facility. But when the board of
directors adopted a new proactive policy on sustainability, it did not just authorize the
budget for the state-of-the art equipment. It directed the plant manager, Julie Ann
Williams, to complete the installation in time for a major announcement of the policy,
on Earth Day, exactly 16 weeks away! Under strict deadline from her bosses, Williams
needs to be sure that installation of the filtering system progresses smoothly and on
 time. Given the following information, develop a table showing activity precedence
relationships. Based on the duration of the activity calculate the least time and critical
path.

IMMEDIATE Activity Duration

ACTIVITY DESCRIPTION
PREDECESSORS (Weeks)
STRAT - 0
A Build internal components STRAT 2
B Modify roof and floor STRAT 3
C Construct collection stack A 2
D Pour concrete and install frame A, B 4
E Build high-temperature burner C 4
F Install pollution control system C 3
G Install air pollution device D, E 5
H Inspect and test F, G 2
Finish H 0

Inventory:

23. Boreki Enterprises has the following 10 items in inventory. Theodore Boreki asks
you, a recent OM graduate, to divide these items into ABC classifications.

a. Develop an ABC classification system for the 10 items.

b. How can Boreki use this information?
c. Boreki reviews the classification and then places item A2 into the A category.
Why might he do so?
24. William Beville’s computer training school, in Richmond, stocks workbooks with the
following characteristics:
Demand D = 19,500 units/year
Ordering cost S = $25/order
Holding cost H = $4/unit/year
a. Calculate the EOQ for the workbooks.
b. What are the annual holding costs for the workbooks?
c. What are the annual ordering costs?

25. Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights for
toys. The company operates its production facility 300 days per year. It has orders for
about 12,000 flashing lights per year and has the capability of producing 100 per day.
Setting up the light production costs $50. The cost of each light is $1. The holding cost
is $0.10 per light per year. What is the optimal size of the production run?