For Q1 to Q7, answer any 4 out of 7
1. Describe three important differences between goods production and service operations.
2. Why is it important for the various functional areas of a business organization to collaborate?
3. Explain some key ways that organizations compete through their operations function.
4. Explain the trade-off between responsiveness and stability in a forecasting system that uses
time-series data.
5. Why is capacity planning for services more challenging than it is for goods production?
6. Any increase in efficiency also increases utilization. Although the upper limit on efficiency is
100%, what can be done to achieve still higher levels of utilization?
7. Explain the four process types, and indicate the kinds of situations in which each are used.
Total: [16]
8. A company offers ID theft protection using leads obtained from client banks. Three employees
work 40 hours a week on the leads, at a pay rate of $25 per hour per employee. Each employee
identifies an average of 3,000 potential leads a week from a list of 5,000. An average of 4
percent actually sign up for the service, paying a one-time fee of $70. Material costs are $1,000
per week, and overhead costs are $9,000 per week. Calculate the multifactor productivity for
this operation in fees generated per dollar of input. [5]
9. An electrical contractor’s records during the last five weeks indicate the number of job requests:
Week 1 2 3 4
Requests 20 22 18 21
Predict the number of requests for week 5 using each of these methods:
a. Exponential smoothing with α = 0.30. Use 20 for week 2 forecast.
b. Linear trend.
c. The actual value of requests in week 5 turns out to be 22. Using the forecasted values from
both methods in (a) and (b), compute MSE for both set of forecasts from week 2 to week 5.
Which forecast appears to be more accurate?
d. Plot a control chart for the less accurate forecast from (c) with 2s limits to check whether the
errors of that forecast are in control.
Total: [10]
10. A manager must decide how many machines of a certain type to purchase. Each machine can
process 100 customers per day. One machine will result in a fixed cost of $2,000 per day, while
two machines will result in a fixed cost of $3,800 per day. Variable costs will be $20 per
customer for 1 machine, $15 per customer for 2 machines, and revenue will be $45 per
customer for both machines.
a. Determine the break-even point for each range.
b. If estimated demand is 90 to 120 customers per day, how many machines should be
purchased?
c. At what volume of output would the two alternatives yield the same profit?
d. The manager also has to make a decision about which type of machine to buy, A or B, for use
in the production of products. Machine costs are as follows:
Machine Cost
A $10,000
B $14,000
Product forecasts and processing times on the machines are as follows:
Processing time per
unit (minutes)
Product Annual Demand A B
1 12,000 4 6
2 10,000 9 9
3 18,000 5 3
Assume that only purchasing costs are being considered. How many units of each machine
would be needed, and which machine would have the lowest total cost? Machines operate 8
hours a day, 250 days a year.
Total: [9]
Answers:
8. 1.94
9.
a. 20.17
b. 20
c. MSE (Exp) = 5.16, MSE (Lin) = 4.18
d. UCL = 4.55, LCL = -4.55
10.
a. 1 machine Q(BEP) = 80, 2 machines Q(BEP) = 126.7
b. 1 machine should be purchased
c. 360
d. 2 units of machine A, 2 units of machine B, machine A has the lowest total cost
Formula Sheet
Productivity Measure
Output
Multifactor Productivity =
Multiple inputs
Forecast Accuracy
MSE=
∑ ( A−F )2
n−1
Exponential Smoothing
F t=F t −1 +α ( A t −1 −F t −1)
Linear Trend
F t=a+bt
n ∑ ( ty )−∑ t ∑ y
b=
n ∑ t 2− ( ∑ t )
2
a=
∑ y−b ∑ t
n
Control Chart
UCL=0+ z √ MSE
LCL=0−z √ MSE
Cost-Volume Analysis
P=Q ( r −v ) −FC
FC
QBEP =
r −v