Operations Management Midterm 2011

REVIEW QUESTIONS FOR THE MIDTERM EXAM

In the midterm review class, we will solve the following questions and, if time permits, solve questions from the 1st assignment.

QUESTION 1 (PRODUCTIVITY)

A company has introduced a process improvement that reduces processing time for each unit so that output is increased by 25%, but one additional worker is required. Under the old process, five workers could produce 60 units per hour and material input was $16/unit. For the new process, material input is now $10/unit. Overhead is charged at 1.6 times direct labor cost. Finished units sell for $31 each and labor costs are $12/hour. What increase in total productivity is associated with the process improvement?

QUESTION 2 (FORECASTING: DOUBLE EXPONENTIAL SMOOTHING, MAD, MSE)

A manager has been using a qualitative technique to forecast demand for word processing units for the past six periods. Actual and predicted amounts are shown below. Would double-exponential smoothing forecasts with ( = 0.4 and ( = 0.1 have produced better results with respect to MAD and MSE? (Assume that F1 = 85 and T1 = 2).

Period 1 2 3 4 5 6

Demand 80 85 91 92 95 90

Forecast 87 80 85 91 92 95

Calculate forecast for periods 7, 8, and 9 by using double exponential technique.

QUESTION 3 (PROJECT MANAGEMENT)

Consider the following data of a project.

|Activity |Predecessor |Normal Time |Expedited Time |Normal cost |Expedited cost (in $) |

| | |(weeks) |(weeks) |In $ | |

|A |- |12 |10 |8,000 |10,000 |

|B |- |14 |10 |5,000 |7,500 |

|C |- |8 |8...