Operations Management Exam Solutions
Operations Management Exam Solutions
1. (a) The demand for sewing machine was estimated as 1000 per month for 5 months. Later
on the actual demand was found as 900, 1050, 1000, 1100 and 950 respectively.
Workout Bias. [2]
(b) A workshop operates on 2 shifts of 8 hours per day. It has 10 machines. It works for 5 days
in a week. Machine utilization is 90% and the efficiency of the machines is 85%.
Calculate the rated capacity of the workshop in standard hours. [2]
(c) Define Critical Path. [2]
(d) What does the word KAIZEN mean? [2]
(e) When Corrective Maintenance occurs? [2]
(f) A manufacturing company has a product line consisting of four work stations in series.
The individual workstation capacities are given. The actual output of the line is 500 units
per shift.
Calculate Efficiency of the production line
Workstation No. A B C D
Capacity / Shift 600 650 650 550
[2]
Answer:
(b) Rated capacity of the workshop = No. of Shifts x No. of hour’s in each shift x No. of days /
week x No. of Machines x Utilization factor x Efficiency
= 2 x 8 x 5 x 10 x 0.90 x 0.85
= 612 Standard hour per week
(c) A critical path is a chain of sequential activities beginning with the project start and
ending with its completion. So, the path through the network that has the longest
expected completion time and is expected to determine the completion date of the
project is called the critical path.
(d) KAI means change and ZEN means better. Thus KAIZEN means change for the better. It
implies continuous improvement done consistently.
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Answer to PTP_Intermediate_Syllabus 2012_Jun2014_Set 3
(e) As the name suggests, corrective maintenance occurs when there is a work stoppage
because of machine breakdown. In this sense, maintenance becomes repair work.
Repairs are made after the equipment is out of order – an electric motor will not start, a
conveyor belt is ripped, or a shift has broken. In cases such as these, the maintenance
department checks into the difficulty and makes the necessary repairs.
(f) The capacity of the system is decided by the workstation with minimum capacity / shift,
i.e., the bottleneck. In the given example, the work station ‘D’ is having a capacity of 550
units / shift which is a minimum.
So the system capacity = 550 units / shift.
The actual output of the line = 500 units/shift.
Actual capacity 500
Therefore, the system efficiency = x 100 = x 100 = 90.91%.
System capacity 550
b) An industrial engineer deputed to conduct a time study for job,has after observation,
divided the job into 5 elements. He had noted the timings for four cycles of the job as
below:
Time in minutes
Element Cycle 1 Cycle 2 Cycle 3 Cycle 4 Performance
rating (%)
1 1.246 1.328 1.298 1.306 90%
2 0.972 0.895 0.798 0.919 100%
3 0.914 1.875 1.964 1.972 100%
4 2.121 2.198 2.146 2.421 110%
5 1.253 1.175 1.413 2.218 100%
(i) Are there any outliers in the data i.e. probable errors in reading or recording data
which should not be included in the analysis?
(ii) Compute the basic time for the job and the standard time if a relaxation allowance
of 12%, a contingency allowance of 3% and an incentive of 20% are applicable for
the job. [1+5]
Answer:
2. (a)
Particulars A B C
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Answer to PTP_Intermediate_Syllabus 2012_Jun2014_Set 3
Unit produced 10 10 10
Wage rate/hr. 5.00 5.50 5.25
Time taken 26 hours 30 hours 16 hours
Wage payable 130.00 165.00 84.00
Overhead recovery 650.00 825.00 420.00
Materials 400.00 400.00 400.00
Total cost of production 1,180.00 1,390.00 904.00
Standard cost of production 1,600.00 1,600.00 1,600.00
Saving in cost of production 420.00 210.00 696.00
% of savings 26.25% 13.13% 43.50%
Bonus slab 30% 15% 40%
Bonus Amount 126.00 31.50 278.40
Actual cost of production 1,306.00 1,421.50 1,182.40
Cost / unit (`) 130.60 142.15 118.24
(b) (i) The times for element No. 3 in cycle 1 and for element No. 5 in cycle 4 are suspected
and should be disregarded as they vary very much as compared with time values for
these elements in other cycles.
(ii) The basic time or normal time is calculated on the basis of data excluding the outliers
as below:
Element Mean actual time Performance rating Normal or basic
(Minutes) (%) time
(minutes)
1 1.295 90 1.295 x 90
1.246 + 1.328 + 1.298 + 1.306
=1.166
= 100
4
2 0.896 100 0.896 x 100
= 0.896
0.972 + 0.895 + 0.798 + 0.919 100
=
4
3 1.937 100 1.937 x 100
1.875 + 1.964 + 1.972
= 1.937
= 100
3
4 2.222 110 2.222 x 110
2.121+ 2.198 + 2.146 + 2.421 = 2.444
= 100
4
5 1.280 100 1.280 x 100
1.253 + 1.175 + 1.413 = 1.280
= 100
3
Normal time for the total job which include all five elements = 7.723 minutes
Calculation of standard time
Standard time for the job = Normal time + Allowances
12 3
= 7.723 + x 7.723 + x 7.723
100 100
= 7.723 + 0.927 + 0.231 = 8.881 minutes
If 20% incentive allowance is given, total time allowed under incentive scheme
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Answer to PTP_Intermediate_Syllabus 2012_Jun2014_Set 3
20
= 8.881 + x 8.881
100
= 8.881 + 1.776 = 10.657 minutes
Answer:
3. (a) Value engineering or value analysis is concerned with the improvement of design and
specifications at various stages such as research, development, design and product
development. Benefits of value engineering are:
(i) Cost reduction.
(ii) Less complex products.
(iii) Use of standard parts / components.
(iv) Improvement in functions of the product.
(v) Better job design and job safety.
(vi) Better maintainability and serviceability.
(vii) Robust design.
Value engineering aims at cost reduction at equivalent performance. It can reduce
costs to the extent of 15% to 70% without reducing quality. While value engineering
focuses on preproduction design improvement, value analysis, a related technique
seeks improvements during the production process.
(b) Total demand 98. Total supply 76. Introduce dummy source with supply as 22 and
transportation cost per unit to be zero.
Store 1 Store 2 Store 3 Store 4 Total supplies
Source 1 48 60 56 14 58 14
Source 2 45 20 55 53 6 60 26
Source 3 50 65 10 60 5 62 21 36
Source 4 0 0 22 0 0 22
Total Demand 20 32 25 21 98
Initial Solution
From Source 1 Source 2 Source 2 Source 2 Source 3 Source 3 Source 4
To Store 3 Store 1 Store 3 Store 2 Store 3 Store 4 Store 2
Units 14 20 6 10 5 21 Dummy
Feasibility test m+n–1=7 No. of allocations = 7 The solution is feasible
(b) The Secretary of a school is taking bids on city’s four school bus routes. Four companies
have made the bids as detailed in the following table:
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Bids
Route 1 Route 2 Route 3 Route 4
Company 1 `4000 `5000
Company 2 `4000 `4000
Company 3 `3000 `2000
Company 4 `4000 `5000
Suppose each bidder can be assigned only one route. Use the assignment model to
minimize the school’s cost of running the four bus routes. [10]
Answer:
4. (a) The sigma value indicates how often defects are likely to occur. The higher the sigma
value, the less likely a process will produce defects. As sigma value increases, costs go
down, cycle time goes down, and customer satisfaction goes up.
(b)
Bids
Route 1 Route 2 Route 3 Route 4
Company 1 `4000 `5000 M M
Company 2 M `4000 M `4000
Company 3 `3000 M `2000 M
Company 4 M M `4000 `5000
Row reduction
Route 1 Route 2 Route 3 Route 4
Company 1 0 1000 M - 4000 M - 4000
Company 2 M - 4000 0 M - 4000 0
Company 3 1000 M - 2000 0 M - 2000
Company 4 M - 4000 M - 4000 0 1000
As the minimum number of lines are not equal to order of matrix, let’s take step to
increase the number of zeros.
Route 1 Route 2 Route 3 Route 4
Company 1 0 1000 M - 3000 M - 4000
Company 2 M - 4000 0 M - 3000 0
Company 3 0 M - 3000 0 M - 3000
Company 4 M - 5000 M - 5000 0 0
As the minimum number of lines are equal to order of matrix, optimal assignment should
be made
Optimal Assignment
Route 1 Route 2 Route 3 Route 4
Company 1 0 1000 M - 3000 M - 4000
Company 2 M - 4000 0 M - 3000 0
Company 3 0 M - 3000 0 M - 3000
Company 4 M - 5000 M - 5000 0 0
Company 1 2 3 4
Route 1 2 3 4
Cost 4000 4000 2000 5000 Total cost `15,000
5. (a) The output of production line is checked by an inspector for one or more of three
different types of defects A, B, and C. If defect A occurs, the item is scrapped. If defect B
or C occurs, the item must be reworked. The time required to rework a B defect is 15
minutes and the time required to rework a C defect is 30 minutes. The probabilities of an
A, B and C defects are 0.15, 0.20 and 0.10 respectively. For ten items coming off the
assembly line, determine the number of items without any defects, the number scrapped
and total minutes of rework time. Use the following random numbers:
RN for defects A:
48 55 91 40 93 01 83 63 47 52
RN for defects B:
47 36 57 04 79 55 10 13 57 09
RN for defects C:
82 95 18 96 20 84 56 11 52 03
[3+3+3]
(b) What are the basic scheduling problems the production planner may face? [3]
Answer:
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Event Prob. Cum. Prob. Probability range Probability range for simulation
Defect 0.10 0.10 0-0.10 0-0.09
No defect 0.90 1.00 0.10-1.00 0.10-0.99
6. (a) The data on the operating costs per year and resale prices of equipment A whose
purchase price is `10,000 are given below:
Year 1 2 3 4 5 6 7
Operating Cost (`) 1500 1900 2300 2900 3600 4500 5500
Resale Value (`) 5000 2500 1250 600 400 400 400
(i) What is the optimum period for replacement?
(ii) When equipment A is 2 years old, equipment B, which is a new model for the same
usage, is available. The optimum period for replacement is 4 years with an average
cost of `3600. Should you change equipment A with that of B? If so, when? [5+3]
(b) What is TPM? What are the requirements for specific actions of TPM? [4]
Answer:
6. (a) (i) The determination of the optimal period of replacement of equipment A is given in
Table below:
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Answer to PTP_Intermediate_Syllabus 2012_Jun2014_Set 3
(ii) As the minimum average cost for equipment B is smaller than that for equipment A, it
is prudent to change the equipment. To decide the time of change, we would
determine the cost of keeping the equipment in its 3rd, 4th and 5th year of life and
compare each of these values with ` 3,600 (the average cost for equipment B). The
equipment A shall be held as long as the marginal cost of holding it would be smaller
than the minimum average cost for equipment B. The calculations are given here:
Year Operating Cost Depreciation Total Cost
3 2300 1250(=2500-1250) 3550
4 2900 650 (=1250-600) 3550
5 3600 200(=600-400) 3800
Since the cost incurred in keeping the equipment A in the third and the fourth years is
less than the average cost for equipment B, the replacement should be done after 2
years.
(b) Total Productive Maintenance (TPM) is an approach which brings the concept of total
quality management in the practice of preventive maintenance. It involves the concept
of reducing variability through employee involvement and excellent maintenance
records.
Total productive maintenance is a method designed to eliminate the losses caused by
breakdown of machines and equipments by identifying and attacking all causes of
equipment breakdowns and system down-time. It places a high value on teamwork,
consensus building and continuous improvement.
Answer:
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Answer to PTP_Intermediate_Syllabus 2012_Jun2014_Set 3
Answer:
(b) The factors upon which "Make or Buy" decision of an application software depends:
(a) Availability of skilled manpower: If sufficient number of programmers is not available,
the organization may purchase packages.
(b) Cost of programming: If the cost of developing the software is more than the price
of pre-written software, the organization may decide to buy the software.
(c) Suitability of software: Many times the available software may not be suitable for the
particular needs of the organization. Hence, it may be better to develop software in
such instances.
(d) Time frame available for implementation: If the time available for implementation of
the new computerized system is very short, the organization may go for buying the
software.
(e) Availability of sophisticated software: In many instances, the programs available for
purchase are more sophisticated than the organization would probably develop.
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For example, many of the applications programs are fully integrated with other-
application programs. This integration forces for purchasing rather than developing
programs.
Answer:
10. (a) What are the special features of an Executive Information System? [5]
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(b) Discuss the various reporting tools available in Data Warehouse [3]
Answer:
(b) Various reporting tools available in Data Warehouse are discussed below.
(i) Business Intelligence tools: These are software applications that simplify the process
of development and production of business reports based on warehousing data.
(ii) Executive Information System tools: These are software applications that are used to
display complex business metrics and information in a graphical way to allow rapid
understanding of the overall process.
(iii) Online Analytical Processing (OLAP) tools: They form data into logical multi-
dimensional structures and allow users to select dimensions to view data.
(iv) Data Mining tools: They are software that allows users to perform detailed
mathematical and statistical calculations on detailed warehousing data to detect
trends, identify patterns and analyze data.
11. (a) Discuss the tangible and intangible benefits of ERP [3+3]
(b) Define the Master Data Management of an ERP System. [2]
Answer:
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Answer to PTP_Intermediate_Syllabus 2012_Jun2014_Set 3
(iii) Improved customer service, on time shipment, shorter order to shipment cycle.
(iv) Establishment of standardized procedures.
(v) Improved accounting control and shorter sales to cash cycle.
(vi) Legal and regulatory compliance.
12. (a) Describe the constitution and power of Cyber Appellate Tribunal. [2+3]
(b) Explain different dimensions of E-commerce security [3]
Answer:
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