CHAPTER 1: Operations and Supply Chain Management

Problems
1. Posey Ceramics makes ceramic vases for a chain of department stores. The output and cost
figures over the past four weeks are shown here. Labor costs $10 an hour, and materials are $4 a
pound. Calculate the (a) labor productivity (in hrs), (b) material productivity (in lbs), and (c)
multifactor productivity for each week. Comment on the results.

Week 1 2 3 4
Units of output 2,000 4,000 5,000 7,000
# workers 4 4 5 6
Hours per week 40 48 56 70
Material (lbs.) 286 570 720 1,000

2. The director of career advising at Grand Valley Community College wants to use decision
analysis to provide information to help students decide which two-year degree program they
should pursue. The director has set up the following payoff table for six of the most popular and
successful degree programs at GVCC that shows the estimated five-year gross income ($) from
each degree for four future economic conditions:

Determine the best degree program in terms of projected income, using the following
decision criteria:
a. Maximax
b. Maximin
c. Equal likelihood
d. Hurwicz ( .25)
 e. In Problem S1-22 the director of career advising at Grand Valley Community College has
paid a local economic forecasting firm to indicate a probability for each future economic
condition over the next five years. The firm estimates that there is a .15 probability of a
recession, a .50 probability that the economy will be average, a .25 probability that the
economy will be good, and a .10 probability that it will be robust. Using expected value
determine the best degree program in terms of projected income. If you were the director of
career advising which degree program would you recommend?
.
Solutions to Problems

1. Material productivity is stable over the 4 weeks. Labor productivity increases in week 2 and
decreases in weeks 3 and 4.
Week 1 2 3 4
Units of output 2,000 4,000 5,000 7,000
# workers 4 4 5 6
Hours per week 40 48 56 70
Labor cost per hour $10 $10 $10 $10
Material (lbs.) 286 570 720 1,000
Material cost per lb. $4 $4 $4 $4

Labor productivity 1.25 2.08 1.79 1.67

Material productivity 1.75 1.75 1.74 1.75
Multifactor 0.73 0.95 0.88 0.85
productivity

2. a. Maximax = Real Estate

b. Maximin = Nursing

c. Equal Likelihood: select Real Estate

Graphic design = $170,000
Nursing = $187,500
Real Estate = $202,500
Medical Technology = $195,000
Culinary technology = $170,000
Computer information technology = $186,250

d. Hurwicz (alpha = 0.25): select Nursing

Graphic design = $141,250
Nursing = $161,250
Real Estate = $158,750
Medical Technology = $157,500
Culinary technology = $136,250
Computer information technology = $158,750
e. EV(Graphic design) = $164,250
EV(Nursing) = $183,500
EV(Real Estate) = $174,400
EV(Medical Technology) = $187,500
EV(Culinary technology) = $149,250
EV(Computer information technology) = $174,750