Exam practice
Chapter 1
1.1
-
75000 + 20000/1.2 + 25000/(1.2^2) + 30000/(1.2^3) + 50000/(1.2^4) = 501.54
A = 20 + 40 + 20 + 30 + 20 + 25 + 10 = 165
B = 40 + 60 + 10 + 30 + 10 + 50 + 10 = 210
C = 60 + 20 + 30 + 20 + 10 + 75 + 10 = 225
-65000 + 20000/1.2 + 25000/(1.2^2) + 30000/(1.2^3) + 35000/(1.2^4) = 3267.75
DPI = NPV / Io = 3267.75 / 65000 = 0.05
Exercise 4.1
4.1: Your firm designs PowerPoint slides for computer training classes, and you have just
received a request to bid on a special project to produce the slides for an 8‐session class.
From previous experience, you know that your firm follows an 85 percent learning rate. For
this contract it appears the effort will be substantial, running 50 hours for the first session.
Your firm bills at the rate of $100/hour and the overhead is expected to run a fixed $600 per
session. The customer will pay you a flat fixed rate per session. If your nominal profit margin
is 20 percent, what will be the total bid price, the per session price, and at what session will
you break even?
𝑇𝑛 = 𝑇1𝑛𝑟
R = log(0.85)/log(2) = -0.23446525363
Session 1 = 50
Session 2 = 50 * 1^ -0.23446525363 = 42.5
Session 3 = 38.6457418352
4: 36.1250000004
5: 34.2835530784
6: 32.8488805601
7: 31.6828235058
8: 30.7062500004
Total bid price is total cost * 1.2 = 41400
Total bid price / 8 = total session price
Total cost / total session price = 6.66 whatever
Chapter 7
7.1
-
Earned value (EV) of a task (or project) = The budgeted cost of the work actually performed
Cost performance Index (CPI)= Earned value (EV) / Actual cost (AC)
Scheduled Performance Index (SPI)= Earned value (EV) / Planned cost (PV)
Cost spending Variance = Earned value (EV) – Actual cost (AC) of the work performed
Schedule Variance= Earned value (EV) - the planned cost (PV) of the work budgeted
272 – 270 = 2000 variance
272 – 261 = 9000 schedule variance
SPI = 272 / 261 = 1.042
CPI = 272 / 270 = 1.007
7.2
EV = 162000
AC = 156000
PV = 168000
Spending variance = 6000
Schedule variance = -6000
SPI = 162000 / 168000 = 0.964
CPI = 162000 / 156000 = 1.038
Estimated (remaining cost) to completion (ETC) = (Budget at completion (BAC) – Earned value (EV)) / Cost performance index (CPI)
Projected (total cost) estimated to completion (EAC) = Estimated (remaining cost) to completion ETC + Actual cost (AC)
Variance at completion (VAC)= Budget at completion (BAC) – Projected (total cost) estimated to completion (EAC)
Critical Ratio= (actual progress/schedules progress) x (budgeted cost/actual cost)
Cost Ratio= Budgeted cost/ Actual cost
 If earned value data is available, then it is Cost Ratio= EV/AC
EV = 950
AC = 1480
PV = 750 + 480 + 200 = 1430
950 – 1430 = -480 = cost variance
950 – 1480 = -530 = schedule variance
SPI = 950 / 1430 = 0.664
CPI = 950 / 1480 = 0.642
CR = SPI * CPI = 0.664 * 0.642 = 0.426
(1750 – 950) / 0.642 = 1246,11 = ETC
1246,11 + 1480 = 2726,11
AC = 12000
PV = 13000
EV = 13000 * 0.80 = 10400
/
3.2
R = 1.5 cars per minute
I = 10 cars
T=
I=R*T
T = I / R = 6 2/3 minutes
3.3
I = 3000
R=
T = 2 months
3000 / 2 = 1500 per month
1. 25 / 100 = ¼ day
2. 14 / 70 + ¼ =
Check
R = 200 laptops per day
I = 21
Iref = 16
T = 37 / 200 = 0.185 days per laptop
b.
R = 140
Iref = 16
21 / 200 = 0.105
16 / 140 = 0.114 days per laptop
Ttotal = 0.219
Yes
3.8 Jasper Valley Motors (JVM) is a family-run auto deal- ership selling both new and used vehicles. In an average month, JVM sells a total of 160 vehicles. New vehicles represent 60 percent of sales, and used vehi- cles
represent 40 percent of sales. Max has recently taken over the business from his father. His father always
emphasized the importance of carefully man- aging the dealership’s inventory. Inventory financing was a
significant expense for JVM. Max’s father con- sequently taught him to keep inventory turns as high as possible.
a)
b)
c)
Examining the dealership’s performance over recent years, Max discovered that JVM had been
turning its inventory (including both new and used vehicles) at a rate of 8 times per year. What is
JVM’s average inventory (including both new and used vehicles)?
Drilling down into the numbers, Max has deter- mined that the dealership’s new and used businesses appear to behave differently. He has determined that turns of new vehicles are 7.2 per year,
while turns of used vehicles are 9.6 per year. Holding a new vehicle in inventory for a month costs
JVM roughly $175. Holding the average used vehicle in inventory for a month costs roughly $145.
What are JVM’s average monthly financing costs per vehicle?
A consulting firm has suggested that JVM sub- scribe to its monthly market analysis service. They
claim that their program will allow JVM to main- tain its current sales rate of new cars while
reducing the amount of time a new car sits in inventory before being sold by 20 percent. Assuming
the con- sulting firm’s claim is true, how much should Max be willing to pay for the service?
a. R = 160 cars per month
T = 1.5 month per inventory
I = 240 cars
b. Tnew = 12/7.2 = 1.667
Tused = 12/9.6 = 1.25
$175 per month T new
$145 per month T used
160 * 0.6 = Rnew = 96
160 * 0.4 = Rused = 64
Inew = 1.667 * 96 = 160
Iused = 80
Cost new = 160* 175 = 28000
Cost used = 80 * 145 = 11600
39600 / 240 = 165 per vehicle
C: 28000 * 0,2 = 5600
4.2 WonderShedInc.(Example4.3)produces,inaddition to the standard model, a deluxe version for the discriminating customer. The production process for the two models is identical and is depicted in Figure 4.1. The
activity times for deluxe models is listed in Table 4.8. All the times mentioned represent flow time at the various
activities, and include the effects of waiting.
1.
2.
3.
Compute the process flow time for producing a deluxe shed.
What is the impact on flow time of the process if the flow time of Activity 2 is increased to
40 minutes?
What is the impact on flow time of the process if the flow time of Activity 3 is reduced to 40
minutes?
5.4
A company makes two products A and B, using a sin- gle resource pool. The resource is available for 900 minutes
per day. The contribution margins for A and B are $20 and $35 per unit respectively. The unit loads are 10 and 20
minutes per unit.
1.
2.
Which product is more profitable?
The company wishes to produce a mix of 60% As
and 40% Bs. What is the effective capacity (units
per day)?
3.
At the indicated product mix, what is the financial
capacity (profit per day)?
900 / 10 = 90
90 * 20= 1800
90 / 20 = 45
45 * 35 = 1575
A is more profitable
0.6* 10 + 0.4*20 = 14
900 / 14 = 64.3
0.6* 20 + 0.4*35 = 26
64.3 * 26 = answer
5.7 Reexamine Exercise 5.1. Assume that the capacity waste factors of the paralegals, tax lawyers, and senior partners are 20%, 30%, 35%, respectively.
a. What is the theoretical capacity of the process?