PRODUCTION AND OPERATIONS MANAGEMENT

Preliminary Examination

Name:_____________________________________________Date:______________Professor: Dr. Leonardo C. Medina, Jr.

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

1) What are the three key functions of a firm and what is each responsible for?

2) How has global competition affected productivity? Cite specific examples and reference the productivity
equation to support your thesis.

3) Consider the information in Table 1.3.

Table 1.3
The Abco Company manufactures electrical assemblies. The current process uses 10 workers and produces 200
units per hour. You are considering changing the process with new assembly methods that increase output to
300 units per hour, but will require 14 workers. Particulars are as follows:

CURRENT PROCESS NEW PROCESS

OUTPUT (UNITS / HOUR) 200 300
NUMBER OF WORKERS 10 14
MATERIAL COST / HOUR $120 $150

Workers are paid at a rate of $10 per hour, and overhead is charged at 140% (or 1.4 times) labor costs. Finished
switches sell for $20/unit.

a. Calculate the multifactor productivity for the current process.

b. Calculate the multifactor productivity for the new process.
c. Determine if the new process should be implemented.

4) Why should a decision maker engage in sensitivity analysis?

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 5) The site selection team you formed last quarter meets with you in the conference room to present the results of
their thoughtful analysis. They have collectively logged 200,000 frequent flyer miles while conducting their
investigation. The conference room table sags under the weight of their massive report and all team members
sport deep tans. As the leader drones on about their completely objective approach to the problem he projects a
slide containing the following information about their location of choice.

What questions do you, a conscientious vice-president level executive, have for the team about this portion of
their analysis?

6) Pops has a cost function of 3x2-25x + 34,374.74 and a revenue function of 5x2 . Using Excel (or algebra),
determine a breakeven point. What is their fixed cost? What is their break-even point in both units and dollar
sales?

7) The time added to adjust for factors such as fatigue or equipment malfunction is called ________.

8) Because a telephone customer service center has experienced several problems, it has begun to analyze the data
from customer complaints. The first step was to construct the following table. Use this data to build a Pareto
chart to help identify the "vital few" problems.

Process Failure Total Failures

Person not available 5
Incorrect information given 12
Phone line busy 7
Long delay 39
Phone tree confusing 20
People unfriendly 17

9) Develop a process chart for one of the following:

1) Researching and writing a paper for your Operations Management class
2) Managing, developing and completing a team project for a Finance (or other) class
3) Planning for your job interview process as you approach graduation (including resume preparation,
developing interview skills, researching company backgrounds, etc.)
4) Studying and developing a process improvement plan for a business or other process you are familiar with
(e.g., fast food restaurant, obtaining tickets to a university-sponsored event, dry cleaners, book purchases for
next term, and the like)

10) Provide examples of the three main tenets of total quality management as applied to this operations
management course.

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11) What are any three dimensions of quality and which one accurately describes how you assess education?

12) Capacity planning requires a demand forecast for an extended period of time into the future. What concerns
would you have regarding an extended forecast as a capacity planner?

13) What is a waiting line model, and what information can it provide?

14) Comment on the tension between cost management and customer satisfaction management in a call center
situation.

15) You drive your car into the parking lot of your favorite fast food establishment and get in the line for drive
through service. After placing your order into the speaker, you proceed to the first window to pay, and then to
the second window to pick up your meal. Since you just studied waiting lines that day in your Operations
Management class, you quickly realize as you drive away that this was an example of a ________ channel
________ phase queuing system.

16) What are five of the seven key principles of the Theory of Constraints?

17) Champion Cooling Company uses a kanban system at their location in the Oklahoma City Metroplex. The daily
demand for fans is 2000 and management insists on using an alpha level of 0.1. They use containers that hold 24
items and takes 0.02 of a day to process. It takes 0.08 of a day to get a container filled and for it to wait during its
cycle. How many containers should they use? If they use the nearest integer value number of containers, what is
the actual system alpha?

18) Explain what an operations strategy is and the importance of competitive priorities. Give an example from an
organization (public or private, manufacturing or service).

19) A manufacturing firm is considering whether to produce or outsource the production of a new product. If they
produce the item themselves, they will incur a fixed cost of $950,000 per year, but if they outsource overseas
there will be a $1.5 million cost per year. The advantage of outsourcing overseas is the variable cost of 95¢ per
unit, which is a fraction of their $43/unit cost in their own union shop. Regardless of where these devices are
made, they will sell for $98 each. What is the break-even quantity for each alternative? Solve this problem
graphically and algebraically.

20) Develop a process chart for a manual car wash.

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21) The management of a line that fills cereal boxes wants the box filled at 32.2 ounces. When the process is in
control, the standard deviation is .1 ounces.
a. Construct the upper and lower control limits for a 3-sigma x-bar chart using a sample size of five.
b. The results from the last 10 samples follow. Is the process in control?

22) Give four principal reasons economies of scale can occur when output increases. Provide examples of each for a
service firm.

23) The delivery wagon that the hominy man had used for the last three decades was beyond repair, so he decided
to open a hominy stand at a busy intersection in downtown Luther. Customers arrive at the rate of 8 per hour
and it takes 5 minutes on average to fill their buckets with hominy.
a. What is the likelihood that the line is longer than three people?
b. What is the average waiting time in line?
c. What is the average number of customers in line?

24) Balance the line in order to achieve maximum output for this eight-activity product. Then balance the line to
maximize the efficiency of the operation. How do the levels of output (assume an eight hour day) and line
efficiencies compare?

Task Time (min) Predecessor

1 10 ---
2 8 Task 1
3 9 Task 1
4 2 Task 2
5 6 Task 3
6 12 Task 4, Task 5
7 7 Task 5
8 5 Task 6, Task 7

25) What is schedule stability and why is it important in a lean system?

26) What are some disadvantages of globalization?

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27) A new minor league baseball team is coming to town and the owners have decided to build a new stadium,
either small or large. The success of the team with regard to ticket sales will be either high or low with
probabilities of 0.75 and 0.25, respectively. If demand for tickets is high, the large stadium would provide a
payoff of approximately $20 million. If ticket sales are low, the loss on the large stadium would be $5 million. If
a small stadium is constructed, and ticket sales are low, the payoff is $500,000 after deducting the cost of
construction. If ticket sales are high, the team can choose to build an upper deck, or to maintain the existing
facility. Expanding the stadium in this scenario has a payoff of $10 million, whereas maintaining the same
number of seats has a payoff of only $3 million.
a. Draw a decision tree for this problem.
b. What should management do to achieve the highest expected payoff?

28) The authors discuss seven mistakes when managing processes, arguing that failure to manage processes is
ultimately a failure to manage the business. What are any four of those mistakes?

29) Discuss the situations under which each of the following charts would be best: x chart, p-chart, and c-chart.

30) The single milling machine at Fred's Manufacturing was severely overloaded last year. The plant operates 8
hours per day, 5 days per week, and 50 weeks per year. Management prefers a capacity cushion of 20 percent.
Two major types of products are routed through the milling machine. The annual demand for product A is 4000
units and 3000 units for product B. The batch size for A is 20 units and 30 units for B. The standard processing
time for A is 0.5 hours/unit and 0.8 for B. The standard setup time for product A is 2 hours and 8 hours for
product B. How many new milling machines are required if Fred's does not resort to any short-term capacity
options?