Name (print, please) _______________________________________________ ID ___________________________

Production Management 73-604 Fall 2007

Odette School of Business
University of Windsor
Midterm Exam 2 Solution
Thursday, November 22, 5:30 6:50 pm
Instructor: Mohammed Fazle Baki
Aids Permitted: Calculator, straightedge, and a one-sided one-page note.
Time available: 1 hour 20 minutes
Instructions:
This exam has 10 pages including this cover page and excluding a one-page table
Please be sure to put your name and student ID number on each page.
Show your work.

Grading:
Question
1

/10

/7

/8

/10

/10

/10

/10

Total:

Marks:

/65

Name:_________________________________________________

ID:_________________________

Question 1: (10 points) Multiple Choice Questions

1.1 The costs of quality include which of the following?
a. Appraisal costs
b. Prevention costs
c. Internal and external failure costs
d. All of the above
1.2 (i) The objective of the Johnsons Rule for job sequencing is to minimize the length of time from
the beginning of the first job until the finish of the last. (ii) Johnsons Rule is used only in
production situations where we are dealing with one machine or one stage of production activity.
a. (i) true (ii) false
b. (i) false (ii) true
c. Both true
d. Both false
1.3 The Assignment Method is appropriate in solving scheduling problems that have which of the
following characteristics?
a. There are

n things to be distributed to n destinations

b. Each thing must be assigned to one and only one destination

c. Only one criterion can be used
d. All of the above
1.4 (i) One of the necessary inputs into the MRP system is Exception Reports. (ii) MRP is used in a
variety of industries with a job-shop environment.
a. (i) true (ii) false
b. (i) false (ii) true
c. Both true
d. Both false
1.5 Which of the following statements hold true for Kanban Production Control Systems?
a. The authority to produce or supply additional parts comes from upstream operations
b. The cards or containers make up the Kanban Push System
c. In a paperless control system, containers can be used instead of cards
d. All of the above

Name:_________________________________________________

ID:_________________________

1.6 (i) In a Two-Bin System for inventory you actually have to use four bins to make it work. (ii) IN a
Two-Bin System for inventory items are used from one bin, and the second bin provides an amount
large enough to ensure that the stock can be replenished.
a. (i) true (ii) false
b. (i) false (ii) true
c. Both true
d. Both false
1.7 (i) The Fixed-Order Quantity inventory model requires more time to maintain because every
addition or withdrawal is logged. (ii) Safety stock is not necessary in any Fixed-Time Period model.
a. (i) true (ii) false
b. (i) false (ii) true
c. Both true
d. Both false
1.8 Which of the following assumptions are used in the Basic Fixed-Order Quantity inventory model?
a. Lead time is averaged
b. Ordering costs are variable
c. Price per unit of product is constant
d. None of the above
1.9 Holding Costs include which of the following?
a. Breakage
b. Order placing
c. Typing up an order
d. All of the above
1.10 The major functions of Shop-Floor Control are which of the following?
a. Load labor into workstations
b. Load machine hours into work stations
c. Providing measurement of efficiency, utilization, and productivity of manpower and
machines
d. All of the above
Question 2: (7 points) Jumbos restaurant is trying to create a consecutive days off schedule that
uses the fewest workers. Use the following information to create a consecutive days off schedule:
Day
M
Tu
W
Th
F
S
Su
Requirements
3
2
4
2
2
3
4
Worker 1
Worker 2
Worker 3
Worker 4

3
2
2
1

2
1
1
0

4
3
2
1

2
2
1
1

2
2
1
1

3
2
1
0

4
3
2
1

2
1
1
0

4
3
2
1

2
2
1
0

2
2
1
1

3
2
1
1

4
3
2
1

or
Worker 1
3
Worker 2
2
Worker 3
2
Worker 4
1
Days off:
Worker 1: Thursday, Friday

Name:_________________________________________________

ID:_________________________

Worker 2: Monday, Tuesday

Worker 3: Thursday, Friday
Worker 4: Tuesday, Saturday
or
Worker 1: Thursday, Friday
Worker 2: Monday, Tuesday
Worker 3: Friday, Saturday
Worker 4: Tuesday, Thursday
Question 3: (8 points) Design specifications require that a key dimension on a product measure
120 11 units. A process being considered for producing this product has a standard deviation of 3
units.
a. (4 points) Is the process capable? Justify your answer.
UTL X X LTL
131 120 120 109
,
,
min
min1.22,1.22 1.22 1 ,
3
3
3 3
3 3

C pk min

process capable.

b. (4 points) Suppose that the process average shifts to 125. Redo part a
UTL X X LTL
131 125 125 109
,
,
min
min 0.67,1.78 0.67 1 ,
3

3 3
3 3

C pk min

process

not

capable.
Question 4: (10 points) Irwin sells a particular model of fan, with most of the sales being made in
the summer months. Irwin makes a one-time purchase of the fans prior to each summer season at a
cost of $40 each and sells each fan for $65. Any fans unsold at the end of summer season are
marked down to $25 and sold in a special fall sale.
a. (2 points) What is the marginal loss per unit? ML = 40-25 =15
b. (2 points) What is the marginal profit per unit? MP = 65-40 = 25
c. (6 points) If the demand is uniformly distributed between 500 to 1700 units, find the optimal order
quantity.
p

ML
15

0.375
ML MP 15 25

Q b p b a 1700 0.375 1700 500 1250 units

Question 5: (10 points) The annual demand for a product is 26,000 units. The weekly demand is
500 units with a standard deviation of 50 units. The cost to place an order is $52, and the time from
ordering to receipt is four weeks. The annual inventory carrying cost is $1.6 per unit.
a. (4 points) Compute the optimal order quantity.
Q

2 26000 52
1300 units
1.6

b. (6 points) Compute the reorder point necessary to provide a 97 percent service probability.
R L Z 0.03 L L Z 0.03

L 500 4 1.88 50 4 2188 units

Question 6: (10 points) Charlies Pizza orders all of its pepperoni, olives, anchovies, and
mozzarella cheese to be shipped directly from Italy. An American distributor stops by every three
4

Name:_________________________________________________

ID:_________________________

weeks to take orders. Because the orders are shipped directly from Italy, they take one week to
arrive. Charlies Pizza uses an average of 150 pounds of pepperoni each week, with a standard
deviation of 25 pounds. Charlies prides itself on offering only the best-quality ingredients and a high
level of service, so it wants to ensure a 99 percent probability of not stocking out on pepperoni.
Assume that the sales representative just walked in the door and there are currently 200 pounds of
pepperoni in the walk-in cooler. How many pounds of pepperoni must be ordered?
M T L Z 0.01 T L T L Z 0.01 T L 150 3 1 2.33 25 3 1 716.5 pounds
Q M I 716.5 200 516.5 pounds

Question 7: (10 points)

A single inventory item is ordered from an outside supplier. The anticipated demand for this item over
the next 7 months is 14, 16, 15, 17, 11, 18, 9. Current inventory of this item is 2, and the ending
inventory should be 4. Assume a holding cost of $2 per unit per month and a setup cost of $75.
Assume a zero lead time. Determine the order policy for this item over the next 7 months. Use the
least total cost heuristic.
r1 14 2 12, r7 9 4 13 . So, r 12,16,15,17,11,18,13 .
Months
Q
I1
I2
I3
I4
I5
I6
I7
Holding
Order
Difference
cost
cost
1-1

12

1-2

28

16

1-3

43

31

4-4

17

4-5

28

11

4-6

46

29

7-7

15

18

75

75

32

75

43

92

75

17 stop

75

75

22

75

53

94

75

19 stop

75

75

a. (6 points) Use the table above to show your computation and summarize your order policy here:
Month
1
4
7

Order
43
46
13

Name:_________________________________________________

ID:_________________________

b. (4 points) Use the table below to show the ending inventory that results from your order policy at
the end of each of the 7 months:
Month

Gross Requirements

14

16

15

17

11

18

Beginning Inventory

31

15

29

18

Net Requirements

12

17

Time-phased Net Requirements

12

17

Planned order Release

43

46

13

Planned Deliveries

43

46

13

Ending Inventory

31

15

29

18