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Boston University School of Management

OM441 Midterm Exam: SAMPLE 1
Please confine your responses to the boxes provided; that is all the space you need to answer the question.
Nothing here is meant to trick you, but some of the questions absolutely require you to think before you write. If
you know the answer, answer it and move on. If you dont know the answer, skip it and come back; there are
only 80 minutes for the exam so time is a consideration you should not lose sight of.
1. YourSweaterCo (YSC) sells two types of sweaters per season: finished and unfinished. The finished sweater
comes in a single color YSC chooses to be the popular color for the season. Unfinished sweaters include a dye
pack allowing the buyer to make the final color. YSC buys either sweater for $60. An unfinished sweater
costs $50 and the dye pack costs $10. A finished sweater costs $60 because it consists of an unfinished
sweater (costing $50) and the single dye and labor (costing $10) to complete it. Before each season, YSC
buys finished and unfinished sweaters from China and sells them from its single US location. Finished
sweaters have a retail price of $200 and a salvage value of $10 because they cannot be used the following
season. Unfinished sweaters have a retail price of $180 and a salvage value of $35 since they can be used the
following season. Both sweaters are estimated to have Normally distributed demand over the entire season.
For finished, mean is 60 and standard deviation 20 while unfinished has mean 400 and standard deviation 90.
Use the following table to translate a critical fractile (denoted CF in the table) into a z-score. For example,
this table is saying that if the critical fractile falls between 0.8 and 0.9 you should set z equal to 1.0.
Range for CF
Z-score

0.0 0.1
-1.6

0.1 0.2
-1.0

0.2 0.3
-0.7

0.3 0.4
-0.4

0.4 0.5
-0.1

0.5 0.6
0.1

0.6 0.7
0.4

a. Calculate the optimal order quantity for unfinished sweaters. Show your work.

0.7 0.8
0.7

0.8 0.9
1.0

0.9 1.0
1.6

(6 points)

_______ units

b. Calculate the optimal order quantity for finished sweaters. Show your work.

(6 points)

_______ units

c. If you were a consultant advising YSC, what is the single most important change you would make to this
process for next year? Answer this question and justify your response in three sentences or less.
(6 points)

Name:
2. Dan and Sal run a successful donut shop. The store opens at 5 a.m. and from 5 a.m. until 10 a.m. customers
arrive at a rate of 60 customers per hour. From 10 a.m. to 2 p.m. customers arrive at a rate of 30 customers per
hour. No customers arrive after 2 p.m. Dan processes 30 customers per hour. Sal processes 25 customers per
hour when he feels like working. Sadly, Sal gets overwhelmed easily. Sal quits work as soon as the line of
customers waiting reaches 20 customers and he does not come back until 5 a.m. the next morning. Dan works
until the last customer leaves the store. You can assume customers arrive uniformly over an hour, the shop
can hold all customers, customers take zero time to order, dont block the exit on the way out, etc.
a. Draw the inventory buildup diagram for this process. Label everything clearly and completely.

b. When does the last customer leave the store?

(10 points)

(6 points)

_________ p.m.

c. What is the average number of customers waiting in line? Show your work.

(6 points)

_________ customers

d. What is the average throughput rate of customers when they enter the store? Show your work.
_________ customers/hour

(6 points)

Name:
3. Benjamin and Samantha operate a custom t-shirt business. For new business, there is a two-step process
consisting of order entry and shirt design. Samantha is completely responsible for order entry and Benjamin
is completely responsible for shirt design. If the order is by phone data entry takes 30 minutes and if the order
is submitted via the web data entry only takes 10 minutes. Easy designs take 10 minutes and complex designs
take 30 minutes. On average, 20% of the orders are placed by phone with 80% by web. 50% of the designs
are complex and 50% are simple. Benjamin and Samantha each work 8 hours a day, five days a week,
starting at the same time each day.
a. What is Benjamins weekly capacity available, in orders per week? Show your work.

(6 points)

_________ orders/week

b. What is Samanthas weekly capacity available, in orders per week? Show your work.

(6 points)

_________ orders/week

c. If they receive 10 orders per week on average, what is Benjamins capacity utilization? Show your work.(6 points)
_________ %

d. If they receive 10 orders per week on average, what is Samanthas capacity utilization? Show your work.(6 points)
_________ %

e. Currently there is only a single phone line and no call-waiting. Samantha wonders if they are losing sales
because potential customers might get a busy signal when they call. Will potential customers ever get a busy
signal when they call?
(6 points)

No

Yes
Briefly explain (in three sentences or less):

Name:
4. Samantha Williams developed an argument-creation program to equip children with negotiating skills to
outsmart adults. Students graduate the program as Exceptional, Average, Okay, or Failures. The training can
take as many as three seminar steps. Everyone goes through the one-hour Immersion Step that separates
high-potential candidates from weaker candidates. If a student successfully passes Immersion, and only 20%
of entrants pass Immersion, they move on to the four-hour Vulcan Mind Meld training where they learn all
Samanthas skills. If they succeed here, then they are true Exceptional graduates. If they do not succeed, they
learned enough to be Average graduates. Among all students that enter the program only 10% are
Exceptional. If a student failed Immersion, they go to the two-hour Mental Horsepower Step where Samantha
determines if they can be Average or not. If they pass they go to the six-hour Borg class. If they pass the
Borg class they graduate as Average. If they fail they graduate as Okay. For the 70 percent that fail the
Mental Horsepower Step they take the 1 hour Consolation Step. In this class Samantha teaches students to
avoid gambling, smoking, and Ponzi schemes. If they pass this class there are Okay. If they fail they are
Failures. On average, 42% of all entrants leave as Failures and 25% of the entrants are Average.
a. Draw the process flow diagram. Label everything clearly and completely.

b. What is the average throughput time of an entrant? Show your work.

(12 points)

(6 points)

_________ hours

c. Assuming Samantha can work 40 hours a week, she runs one entire argument-creation program a week, and
she can teach an unlimited number of students in any seminar step, what is Samanthas capacity utilization?
Show your work and make any assumptions clear.
(6 points)
_________ %