Washburn University School of Business

Washburn University School of Business Fall 2006 BU 347: Production / Operations Management Instructor: Bill Roach Exam 1 A Student Name ______

Fill-ins (20 points) Write in the appropriate word from the text. The test does not supply a list of words to work from, but the test does indicate which chapter the term is from.

1. ______a process that identifies, attracts, builds relationships with external customers, and facilitates the placement of orders by customers, sometimes referred to as customer relationship management (CRM) 2. ______one or more employees or processes that rely on inputs from other employees or processes in order to perform their work 3. ______the systematic design, direction and control of processes that transform inputs into products and services for internal, as well as external, customers 4. ______a process that selects the suppliers of services, materials, and information and facilitates the timely and efficient flow of these items into the firms 5. ______a general approach to decision making when the outcomes associated with alternatives are often in doubt. 6. ______the portion of the total cost that remains constant regardless of changes in levels of output 7. ______a table that allows the manager to rate an alternative according to several performance criteria. 8. ______the amount by which the expected payoff will improve if the manager knows which event will occur. 9. ______the critical dimensions that a process must possess to satisfy its internal or external customers, both now and in the future. 10. ______satisfying the unique needs of each customer by changing product or service designs. 11. ______a strategy whereby a firm's flexible processes generate a wide variety of services or products at reasonably low costs. 12. ______a means of translating customer requirements into the appropriate technical requirements for each stage of service or product development and production. 13. ______the maximum length of time that an activity can be delayed without delaying the entire project. 14. ______the sequence of activities between a project's start and finish that takes the longest time to complete. 15. ______the earliest finish time of the immediately preceding activity. 16. ______a relationship that determines a sequence for undertaking activities; it specifies that one actively cannot start until a preceding activity has been completed. 17. ______the mix of equipment and human skills in a process. 18. ______economies that reflect the ability to produce multiple products more cheaply in combination than separately. 19. ______a process with high customer contact where the service provider interacts directly with the internal or external customer.

1 20. ______a process decision that determines how processes are designed relative to the kinds of resources needed, how resources are partitioned between them, and their key characteristics.

Word Bank: Activity slack, Capital intensity, Competitive priorities, Critical path , Customer Relationship Process, Customization, Decision theory, Decision tree, Earliest start time (ES), Economies of scope, Fixed cost, Front office, Gantt chart, Internal Customers, Mass customization, Network diagram, On time delivery, Order Fulfillment Process, Operations management, Plants within plants (PWPs), Precedence relationship, Preference matrix, Process divergence, Process structure, Quality function deployment (QFD), Service package, Supplier Relationship Process, Support Process, Value of perfect information, Variable cost

2 21. Chapter 1. MP3 players are produced on an automated assembly line process, The standard cost of the MP3 player is $50 per unit (labor $5, $20 materials, and $25 overhead). The sales price is $100 per unit. Next year’s strategic plan calls for a 5 percent increase in productivity. The productivity increase is to be achieved by a cost decrease rather than a price increase. The budget calculations are given below. They show the new cost level, the new labor cost if labor is the only cost which changes, the new material cost if the material cost is the only cost which changes, and the new overhead cost if the overhead cost is the only cost which changes. Explain how the circled costs are calculated. Note: you must read the narrative to figure out the order of the calculations.

Last Next Year Year Labor $5.00 Material $20.00 Overhead $25.00 Total Cost $50.00 $47.62

P)rice $100.00 MF Productivity 2 2.1 Budgeted Productivity Increase 5.00%

Cost Change ($2.38)

Cost change is Percent One factor alone Change Labor $2.62 -47.60% Material $17.62 -11.90% Overhead $22.62 -9.50%

3 Supplement A. Build Rite Construction Company has received favorable publicity from guest appearances on a public TV home improvement program. Public TV programming decisions seem to be unpredictable, so Build Rite cannot predict the probability of continued benefits from its relationship with the show. Demand for home improvements next year may be low, moderate, or high. However, Build Rite must decide now whether to hire more employees, do nothing, or develop subcontracts with other home improvement contractors. Build Rite has developed the following payoff table:

Build Rite Row Row Row Alternative Low Moderate High Max Min Average Hire ($250,000) $100,000 $625,000 $625,000 ($250,000) $158,333 Subcontract $100,000 $150,000 $415,000 $415,000 $100,000 $221,667 Do Nothing $50,000 $80,000 $300,000 $300,000 $50,000 $143,333

Col Max $100,000 $150,000 $625,000 Maximax $625,000 Maximin $100,000 LaPlace $221,667

Opportunity Loss (Regret) Row Alternative Low Moderate High Max $ Hire $350,000 $50,000 - $350,000 $ Subcontract $ - - $210,000 $210,000 Do Nothing $50,000 $70,000 $325,000 $325,000

Minimax $210,000

1) Interpret the circled figures and 2) show how they were calculated.

4 Chapter 2. Pick four of the following competitive priorities and explain what they would mean in the context of a CONOCO gas station /quick shop: . low cost operations . top quality . consistent quality . delivery speed . on time delivery . development speed . customization . variety . volume flexibility Indicate whether a CONOCO / quick shop implements the competitive priorities you discuss.

5 Chapter 3 Recently, you were assigned to manage a project for your company. You have constructed the network diagram below depicting the various activities in the project. In addition, you have asked your team to estimate the amount of time that they would expect each of the activities to take. Their responses and calculations are shown below. Explain the circled calculations. Your explanation should include both formulas and numbers. If the circled item comes from a forward calculation, your explanation should be a forward calculation. If the circled item comes from a backward calculation, your explanation should be a backward calculation.

Label Duration Slack ES EF LS LF

Start A C Finish

8 5 6 5 0 8 8 14 5 13 13 19

B D

8 0 4 0 0 8 8 12 0 8 8 12

E 7 0 12 19 12 19

Most Activity Optimistic Likely Pessimist Expected Variance Expected Variance A 5 8 11 8 1 B 4 8 12 8 1.78 8 1.78 C 5 6 7 6 0.11 D 2 4 6 4 0.44 4 0.44 E 4 7 10 7 1 7 1

Critical Path 19 3.22 Standard Deviation 1.8 Pr{X<= 22} 0.952665

6 Chapter 4. Discuss the design of the Washburn University Mabee Library experience. Include the following items in your discussion:

process structure

customer involvement

capital intensity

resource flexibility

7 Washburn University School of Business Fall 2006 BU 347: Production / Operations Management Instructor: Bill Roach Exam ! B Student Name ______

Fill-ins (20 points) Write in the appropriate word from the text. The test does not supply a list of words to work from, but the test does indicate which chapter the term is from.

1. ______the maximum length of time that an activity can be delayed without delaying the entire project. 2. ______the sequence of activities between a project's start and finish that takes the longest time to complete. 3. ______the earliest finish time of the immediately preceding activity. 4. ______a relationship that determines a sequence for undertaking activities; it specifies that one actively cannot start until a preceding activity has been completed. 5. ______the mix of equipment and human skills in a process. 6. ______economies that reflect the ability to produce multiple products more cheaply in combination than separately. 7. ______a process with high customer contact where the service provider interacts directly with the internal or external customer. 8. ______a process decision that determines how processes are designed relative to the kinds of resources needed, how resources are partitioned between them, and their key characteristics. 9. ______a process that identifies, attracts, builds relationships with external customers, and facilitates the placement of orders by customers, sometimes referred to as customer relationship management (CRM) 10. ______one or more employees or processes that rely on inputs from other employees or processes in order to perform their work 11. ______the systematic design, direction and control of processes that transform inputs into products and services for internal, as well as external, customers 12. ______a process that selects the suppliers of services, materials, and information and facilitates the timely and efficient flow of these items into the firms 13. ______a general approach to decision making when the outcomes associated with alternatives are often in doubt. 14. ______the portion of the total cost that remains constant regardless of changes in levels of output 15. ______a table that allows the manager to rate an alternative according to several performance criteria. 16. ______the amount by which the expected payoff will improve if the manager knows which event will occur. 17. ______the critical dimensions that a process must possess to satisfy its internal or external customers, both now and in the future. 18. ______satisfying the unique needs of each customer by changing product or service designs. 19. ______a strategy whereby a firm's flexible processes generate a wide variety of services or products at reasonably low costs.

8 20. ______a means of translating customer requirements into the appropriate technical requirements for each stage of service or product development and production.

9 Chapter 2. Pick four of the following competitive priorities and explain what they would mean in the context of a CONOCO gas station /quick shop: . low cost operations . top quality . consistent quality . delivery speed . on time delivery . development speed . customization . variety . volume flexibility Indicate whether a CONOCO / quick shop implements the competitive priorities you discuss.

10 Chapter 3 Recently, you were assigned to manage a project for your company. You have constructed the network diagram below depicting the various activities in the project. In addition, you have asked your team to estimate the amount of time that they would expect each of the activities to take. Their responses and calculations are shown below. Explain the circled calculations. Your explanation should include both formulas and numbers. If the circled item comes from a forward calculation, your explanation should be a forward calculation. If the circled item comes from a backward calculation, your explanation should be a backward calculation.

Label Duration Slack ES EF LS LF

Start A C Finish

8.00 5.00 6.00 5.00 0 8.00 8.00 14.00 5.00 13.00 13.00 19.00

B D

8.00 0.00 4.00 0.00 0 8.00 8.00 12.00 0.00 8.00 8.00 12.00

E 7.00 0.00 12.00 19.00 12.00 19.00

Most Activity Optimistic Likely Pessimist Expected Variance Expected Variance A 5 8 11 8.00 1.00 B 4 8 12 8.00 1.78 8.00 1.78 C 5 6 7 6.00 0.11 D 2 4 6 4.00 0.44 4.00 0.44 E 4 7 10 7.00 1.00 7.00 1.00

Critical Path 19.00 3.22 Standard Deviation 1.80 Pr{X<= 22} 0.952665

11 Chapter 4. Discuss the design of the Washburn University Mabee Library experience. Include the following items in your discussion:

process structure

customer involvement

resource flexibility

capital intensity

12 Chapter 1. MP3 players are produced on an automated assembly line process, The standard cost of the MP3 player is $50 per unit (labor $5, $20 materials, and $25 overhead). The sales price is $100 per unit. Next year’s strategic plan calls for a 5 percent increase in productivity. The productivity increase is to be achieved by a cost decrease rather than a price increase. The budget calculations are given below. They show the new cost level, the new labor cost if labor is the only cost which changes, the new material cost if the material cost is the only cost which changes, and the new overhead cost if the overhead cost is the only cost which changes. Explain how the circled costs are calculated. Note: you must read the narrative to figure out the order of the calculations.

Last Next Year Year Labor $ 5.00 Material $ 20.00 Overhead $ 25.00 Total Cost $ 50.00 $ 47.62

P)rice $ 100.00 MF Productivity 2.00 2.10 Budgeted Productivity Increase 5.0%

Cost Change $ (2.38)

Cost change is Percent One factor alone Change Labor $ 2.62 -47.6% Material $ 17.62 -11.9% Overhead $ 22.62 -9.5%

13 Supplement A. Build Rite Construction Company has received favorable publicity from guest appearances on a public TV home improvement program. Public TV programming decisions seem to be unpredictable, so Build Rite cannot predict the probability of continued benefits from its relationship with the show. Demand for home improvements next year may be low, moderate, or high. However, Build Rite must decide now whether to hire more employees, do nothing, or develop subcontracts with other home improvement contractors. Build Rite has developed the following payoff table:

Build Rite Row Row Row Alternative Low Moderate High Max Min Average Hire $ (250,000) $ 100,000 $ 625,000 $625,000 $(250,000) $158,333 Subcontract $ 100,000 $ 150,000 $ 415,000 $415,000 $ 100,000 $221,667 Do Nothing $ 50,000 $ 80,000 $ 300,000 $300,000 $ 50,000 $143,333

Col Max $ 100,000 $ 150,000 $ 625,000 Maximax $625,000 Maximin $ 100,000 LaPlace $221,667 Opportunity Loss (Regret) Row Alternative Low Moderate High Max Hire $ 350,000 $ 50,000 $ - $350,000 Subcontract $ - $ - $ 210,000 $210,000 Do Nothing $ 50,000 $ 70,000 $ 325,000 $325,000

Minimax $210,000 1) Interpret the circled figures and 2) show how they were calculated.