BMGT 311: Exam 1 Study Guide
Discussion questions: Review all the assigned discussion questions from the back of the chapters.
1.
Name three major contributors to Operations Management and describe their contribution.
2.
What are the basic functions of all firms?
3.
What are the ways in which productivity can be improved?
4.
What are the competitive priorities a firm may pursue?
5.
Describe the characteristics of a Job Shop and an Assembly line.
6.
How would you describe a critical path of a project?
7.
How is slack time of an activity calculated?
8.
What are the three activity times used in a PERT project? How are they used?
9.
How is project variance calculated in a PERT project?
10. List the qualitative forecasting methods and describe each.
11. What are advantages and disadvantages of associative forecasting methods?
12. List and describe the four components of a time series.
13. Under what condition would exponential smoothing forecast be the same as a naive forecast?
14. What is the primary purpose of the mean absolute deviation (MAD) in forecasting?
15. What is the difference between MAD and MAPE?
PROBLEMS
1.
Mabel's Ceramics spent $3000 on a new kiln last year, in the belief that it would cut energy usage 25%
over the old kiln. This kiln is an oven that turns "greenware" into finished pottery. Mabel is concerned
that the new kiln requires extra labor hours for its operation. Mabel wants to check the energy savings of
the new oven, and also to look over other measures of their productivity to see if the change really was
beneficial. Mabel has the following data to work with:
Production (finished units)
Labor (hrs)
Capital ($)
Energy (kWh)
The year before
4000
350
15000
3000
Year just ended
4100
375
18000
2600
Also, suppose that the average labor cost is $12 per hour and cost of energy is $0.40 per kwh.
a. Were the modifications beneficial? (Compute labor, energy, and capital productivity for the two
years and compare.)
b. Compute percentage change in multi-factor productivity of the year just ended from that of year
before.
c. If the multifactor productivity must be restored next year to what is was the year before, assuming the
same output next year as the year just ended, by how the input must be reduced from what it is this
year?
2.
An Appliance Service company made house calls and repaired 10 lawn-mowers, 2 refrigerators, and 3
washers in an 8-hour day with his standard crew of 3 workers. The retail price for each respective service
is $50, $200, and $120. The average wage for the workers is $12 per hour. The materials cost for a day
was $200 while the overhead cost was $50.
a. What is the company’s labor productivity?
b. What is the multifactor productivity?
c. How much of a reduction in input is necessary for a 5% increase in multifactor productivity?
3.
Consider the tasks, durations, and predecessor relationships in the following network. Draw the AON
network and answer the questions that follow.
Activity Description
A
B
C
D
E
F
G
H
I
J
a.
b.
c.
d.
4.
Immediate
Predecessor(s)
--A
A
B
D, C
C
F
F
E, G
I
Optimistic
(Weeks)
4
2
8
1
6
2
2
6
4
1
Most Likely
(Weeks)
7
8
12
2
8
3
2
8
8
2
Pessimistic
(Weeks)
10
20
16
3
22
4
2
10
12
3
Schedule the activities of this project and determine (i) the expected project completion time, (ii)
the earliest and latest start and finish times, and the slack for all the activities, and (iii) all the
critical paths.
What is the probability of completion of the project before week 42?
What is the probability of completion of the project before week 35?
With 99% confidence what is your estimate for the project completion time.
Consider the following project. All activity times are in weeks.
Activity
A
B
C
D
E
F
G
H
I
a.
b.
c.
d.
e.
Immediate
Predecessor(s)
A
A, B
B
C
D, E
E
F, G
Normal
Time
7
8
9
8
9
10
5
10
5
Crash
time
4
5
7
8
8
8
5
8
4
Normal
cost
20000
50000
80000
30000
10000
90000
25000
32000
28000
Crash
cost
38000
74000
110000
30000
12000
124000
25000
40000
35000
Draw an AON network.
Identify all the unique paths from start to finish and determine the critical path, normal
project completion time, and normal project cost.
Compute MTR, Cost of crashing/week.
Which activity would you crash first and by how many weeks?
Determine the project time and cost after crashing the activity selected in (d).
5.
Consider the following CPM Solver model.
a) Determine the successor activities in cells I2 to I10.
b) Determine the Excel formulas for the following cells: F2, G2, C15, C18, D18, D21, C25, G19, G16,
G15, H15, B27, B28, and B29.
c) What is the Solver Target cell for minimizing the project completion time?
d) What is the Solver changing cell range?
e) What are the Solver constraints?
6.
What is the forecast for May based on a 3-period MA and a weighted 3-period moving average
applied to the following past demand data? Let the weights be, 3, 3, and 4 (last weight is for
most recent data). Compute MAD and MAPE for both cases and compare.
Nov.
37
7.
Dec.
36
Jan.
40
Feb.
42
Mar.
47
April
43
Sales of music stands at the local music store over the past ten days are shown in the table below.
Forecast demand using exponential smoothing with an  of .6 (initial forecast = 16).
a) Compute the forecast for period 11 and the MAD.
b) Compute the tracking signal for periods 1 to 10. What do you recommend for this forecasting
process?
t
Demand
1
13
2
21
3
28
4
37
5
25
6
29
7
36
8
22
9
25
10
28
8.
Weekly sales of copy paper at Cubicle Suppliers are in the table below. Forecast week 8 with a trend
projection model.
Week
Sales (cases)
1
17
2
22
3
27
4
32
5
35
6
37
7
41
9.
The quarterly sales for specific educational software over the past three years are given in the following
table. Compute the four seasonal indices and find forecast for Year 4 if the annual demand for year 4 is
estimated to be 10% more than that of year 3.
Quarter 1
Quarter 2
Quarter 3
Quarter 4
10.
YEAR 1
1690
940
2625
2500
YEAR 2
1800
900
2900
2360
YEAR 3
1850
1100
2930
2615
Arnold Tofu owns and operates a chain of 12 vegetable protein "hamburger" restaurants in northern
Louisiana. Sales figures and profits for the stores are in the table below. Sales are given in millions of
dollars; profits are in hundred thousand dollars. Calculate a regression line for the data. What is your
forecast of profit for a store with sales of $24 million? $30 million?
Store
1
2
3
4
5
6
7
8
9
10
11
12
Sales
7
2
6
4
14
15
16
12
14
20
15
7
Profits
15
10
13
15
25
27
24
20
27
44
34
17
Answers:
1.
The energy modifications did not generate the expected savings; labor and capital productivity
decreased.
Given data
Last year
4000
350
15000
3000
Production
Labor
Capital =
Energy =
Now
4100
375
18000
2600
Labor productivity (Units/hr) =
11.4286
10.9333
Change
-0.4952
Capital productivity (units/$) =
0.2667
0.2278
-0.0389
-14.58%
Energy productivity (Units/KWH) =
1.3333
1.5769
0.2436
18.27%
Labor cost = Hours x $12 =
4200
4500
Capital $ =
15000
18000
Energy $ = $0.40 x Energy =
1200
1040
Total input $ =
20400
23540
Multifactor productivity (Units/$) =
0.1961
0.1742
Target productivity =
0.1961
Target input =
20910
Reduction in input needed = 23540 – 20910 =
2630
-0.0219
-11.17%
#2
Number serviced
Dollar value/unit
Production in $
Labor hours = 3 workers x 8 hrs. =
Labor productivity = 1260/24 =
Multifactor productivity
Labor cost = 3x8x$12 =
Material =
Overhead =
Total input cost =
Productivity = 1260/538 =
5% improvement in MF productivity =
Target productivity after 5% improvement =
Input for improved productivity =
Reduction in input needed =
LM
10
50
500
24
52.50
$
$
$
$
288
200
50
538
2.3420
0.1171
2.4591
512.38
25.62
R
W
2
3
200
120
400
360
per day
per hour of labor
Change %
-4.33%
1260
<-- Total $
= 288 + 200 + 50
per $ input
<-- Output/Productivity = 1260/2.4591
<-- 538 – 512.38
3. (a)
D
B
E
A
Start
I
G
C
J
F
H
Task
A
B
C
D
E
F
G
H
I
J
Task
Start
A
B
C
D
E
F
G
H
I
J
Finish
a
4
2
8
1
6
2
2
6
4
1
m
7
8
12
2
8
3
2
8
8
2
t
ES
7
9
12
2
10
3
2
8
8
2
0
7
7
16
19
19
22
22
29
37
39
B
10
20
16
3
22
4
2
10
12
3
EF
0
7
16
19
18
29
22
24
30
37
39
t
7
9
12
2
10
3
2
8
8
2
LS
0
8
7
17
19
24
27
31
29
37
39
Variance
1.0000
64/36
256/36
64/36
4/36
LF
0
7
17
19
19
29
27
29
39
37
39
Slack
0
1
0
1
0
5
5
9
0
0
Critical
Critical
Critical
Critical
Critical
Critical path = A-C-E-I-J, Project completion time TE = 39
Variance for project completion time = 2p = 1 + 388/36 = 11.7778; p =3.4319
b. For P(T <=42), Z = (42 – 39)/3.4319 = 0.87, Table area = 0.80785, Probability = 0.80785
c. For P(T <=35), Z = (35 – 39)/3.4319 = -1.17, Table area = .879; Probability = 1 - .879 = 0.121
d. Z for 99% confidence = 2.325, T = 39 + 2.325(3.4319) = 46.98
Fin
ish
4.
C
A
F
I
Finish
Start
G
B
D
H
E
Normal
Time
Crash
time
Normal
cost
Crash
cost
MTR
Crashing
cost/week
A
7
4
20000
38000
3
6000
B
8
5
50000
74000
3
8000
C
9
7
80000
110000
2
15000
D
8
8
30000
30000
0
E
9
8
10000
12000
1
2000
F
10
8
90000
124000
2
17000
G
5
5
25000
25000
0
H
10
8
32000
40000
2
4000
I
5
4
28000
35000
1
7000
Sum =
365,000
Activity
Paths
A-C-F-I
A-D-G-I
B-D-G-I
B-E-G-I
B-E-H
Path time
31
25
26
27
27
Predecessor(s)
A
A, B
B
C
D, E
E
F, G
Critical path
Normal project time = 31 weeks
Normal project cost = 365,000
Activity to crash = A – among the critical activities (A, C, F, I) the crashing cost/week for A is the smallest.
Weeks to crash = Minimum{MTR of A, Project time – time of second longest path}
i.e. = Minimum{3, 31-27} = 3
Project time after crashing A 3 weeks = 31 – 3 = 28 weeks
Project cost after crashing A = 365,000 + 3 x 6,000 = 383,000
5.
(a)
Activity
Successors(s)
A
C, D
B
D, E
C
F
D
G
E
G, H
F
I
G
I
H
Finish
I
Finish
(b)
F2
G2
C15
D18
E18
D21
C25
G19
F19
G16
G15
H15
B27
B2-C2
(E2-D2)/F2
B2-B15
Max(E15,E16)
D18+C18
Max(E18,E19)
Max(E22,E23)
Min(F21,F22)
G19-C19
Min(F18,F19)
Min(F17,F18)
F15-D15 or G15-E15
Sum(D2:D10)
B28
B29
Sumproduct(BG15:B23,G2:G10)
B27+B28
(c)
(d)
(e)
Solver Target cell for minimizing the project completion time = C25
Changing cell range = B15:B23
What are the Solver constraints?
B15:B23 <= F2:F10
B15:B23 = Integer (Optional)
6.
Month
Demand
(At)
Nov.
Dec.
Jan.
Feb.
Mar.
April
37
36
40
42
47
43
3-MA
Forecast
|Et|
|Et|/At
Weight
Weighted
3-MA
|Et|
|Et|/At
3
3
4
Forecast =
37.67
4.33
0.1031
37.90
4.1
0.0976
39.33
7.67
0.1632
39.60
7.4
0.1574
43.00
0
MAD =
4
43.40
0.4
MAD
= 3.97
0.0093
MAPE =
8.81%
44.00
0.0000
MAPE =
8.88%
Forecast
=
43.90
7.
Period
1
2
3
4
5
6
7
8
9
10
Demand
13
21
28
37
25
29
36
22
25
28
F11 =
Ft
Et
|Et|
CFEt
CAEt
MADt
TS
16.00
-3.00
3.00
-3.00
3.00
3
-1
14.20
6.80
6.80
3.80
18.28
9.72
9.72
13.52
9.80
4.9
0.78
19.52
6.51
2.08
24.11
12.89
12.89
26.41
32.41
8.1
3.26
31.84
-6.84
6.84
19.57
39.25
7.85
2.49
27.74
1.26
28.50
7.50
1.26
20.83
40.51
6.75
3.09
7.50
28.33
48.01
6.86
4.13
33.00
-11.00
11.00
17.33
59.01
7.38
2.35
26.40
-1.40
1.40
15.93
60.41
6.71
2.37
25.56
2.44
2.44
18.37
62.85
6.29
2.92
27.02
MAD =
6.29
8.
Week
1
2
3
4
5
6
7
Sales
17
22
27
32
35
37
41
28
b
211
 XY  n X Y
 X  nX
2
a  Y  bX
2
b
XY
X2
17
1
n=
44
4
81
9
128
7
X2 =
X =
28
XY = 
Y =
211
b=
3.9286
16
=
4.0000
a=
14.4286
175
25
=
30.14
222
36
287
954
49
140
954  7(4)(30.14)
 3.9286
140  7(4) 2
a  30.14  3.9286(4)  14.4286
140
954
Regression equation: Ŷ = 14.4286 + 3.9286t
F8 = 14.4286 + 3.9286(8) =
45.8571
9.
Quarter
1
2
3
4
Year 1
Demand
Year 2
Year 3
1690
940
2625
2500
1800
900
2900
2360
1850
1100
2930
2615
Overall average =
Average
Index
1780.00
0.8823
980.00
0.4857
2818.33
1.3969
2491.67
2017.50
1.2350
Year 3 sum =
8495
Annual demand for year 4 = 1.1 x 8495 = 9345
Demand/season = 2336
Forecast for year 4
Quarter
1
2
3
4
Average demand
2336
2336
2336
2336
Seasonal Index
0.8823
0.4857
1.3969
1.2350
Forecast
2061
1135
3263
2885
10.
Store
1
2
3
4
5
6
7
8
9
10
11
12
Sum =
X
24
30
Sales (X)
7
2
6
4
14
15
16
12
14
20
15
7
132
Profits (Y)
15
10
13
15
25
27
24
20
27
44
34
17
271
Y
43.2923
52.8503
Estimated
profit
$ 4,329,230
$ 5,285,030
XY
105
20
78
60
350
405
384
240
378
880
510
119
3529
X2
49
4
36
16
196
225
256
144
196
400
225
49
1796
n=
12
1796
X2 =
132
3529
X =
XY = 
271
b = 1.5930
Y =
=
11
a = 5.0601
= 22.5833
Ft = 5.0601 + 1.593 X