Assignment

Question 1: Discuss the expression below if it is true or false. Please briefly explain your answer. "A process can be effective without being efficient."

Question 2: A company has recently implemented an automated online billing and payment processing system for orders it ships to customers. As a result, it has reduced the average number of days between billing a customer and receiving payment by 10 days. How will this affect the receivables turnover ratio?

Question 3: RSG is a company that produces refrigerator. Below is information about the inputs and outputs for one model. (Hint: You should first find the sales)

a. Calculate the partial productivity in labor expense.
b. Calculate the total productivity.

Question 4: If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units what is the capacity utilization rate?

Question 5: A company is considering a plan to construct an additional factory that would produce new products. There are two options that the company is considering.

First: Construct a small facility that costs of $7.1 million to build. If demand for new products is low, the company expects to receive $10.5 million in revenues with the small facility. If demand is high $13 million in revenues are expected using the small facility.

Second: Construct a large factory at a cost of $9.3 million. If demand for the new products is low, the company expects to receive $10.4 million in revenues. If demand is high $15 million in revenues are estimated.

Probability of demand being high is 0.45 and probability of demand being low is 0.55. (For both options probabilities are the same). Not constructing a new factory would result in no additional revenue since they cannot produce the new products. Construct a decision tree and find the best decision for this company.

Question 6: Discuss the expressions below if they are true or false. Please briefly explain your answers for all choices.

a. "Cycle time is the ratio of the time that a resource is actually activated relative to the time that it is available for use."
b. "A bottleneck occurs when a stage in a production process is starving."
c. "When a make-to-order production process is used, production is based on forecasts."

Question 7: A firm redesigned its production process so that now it takes 9.5 hours for a unit to be made. Using the old process, it took 14 hours to make a unit. If the process makes one unit each hour, on average, and each unit is worth $1,500, what is the reduction in work-in-process value?

Question 8: I-mart is a discount optical shop that can fill most prescription orders in around 1 hour. The management is analyzing the processes at the store. There currently is one person assigned to each task below. The optometrist assigned to task B takes an hour off for lunch and the other employees work the entire day.

For a typical 10-hour retail day (10 a.m.-8 p.m.), the manager would like to calculate the following:

a. What is the current maximum output of the process per day (assuming every patient requires glasses)?
b. If another person were added, where would be the logical place?
c. What effect would a mail order lab (where the glasses are made off-site and returned into five or seven days) have on the process?

Question 9: Assume a company is producing calculators. A fixed cost for a process of $17,000. The variable cost to produce each unit of product is $9, and the selling price for the finished product is $23. What is the number of units that has to be produced and sold to break even?

Question 10: The Goodparts Company produces a component that is subsequently used in the aerospace industry. The component consists of three parts (A, B, C) that are purchased from outside and cost 40, 35, and 15 cents per piece, respectively. Parts A and B are assembled first on an assembly line 1, which produces 140 components per hour. Part C undergoes a drilling operation before being finally assembled with the output from assembly line 1. There are in total six drilling machines, but at present only three of them are operational. Each drilling machine drills part C at a rate of 50 parts per hour. In the final assembly, the output from assembly line 1 is assembled with the drilled part C. The final assembly line produces at a rate of 160 components per hour. At present, components are produced eight hours per day and five days per week. Management believes that if need arises, it can add a second shift of eight hours for the assembly lines.

The cost of assembly labor is 30 cents per part for each assembly line; the cost of drilling labor is 15 cents per part. For drilling, the cost of electricity is one cent per part. The total overhead cost has been calculated as $1,200 per week. The depreciation cost for equipment has been calculated as $30 per week.

a. Determine the process capacity (number of components produced per week) of the entire process.

b. Suppose a second shift of eight hours is run for assembly line 1 and the same is done for the final assembly line. In addition, four of the six drilling machines are made operational. The drilling machines, however, operate for just eight hours a day. What is the new process capacity (number of components produced per week)? Which of the three operations limits the capacity?

c. Management decides to run a second shift of eight hours for assembly line 1 plus a second shift of only four hours for the final assembly line. Five of the six drilling machines operate for eight hours a day. What is the new capacity? Which of the three operations limits the capacity?

d. Determine the cost per unit output for questions (b) and (c).