Department of Decision Science

Quantitative Techniques in Management: MBAOM 10101

Module - 5
Questions for Practice

1. The doll computer Company makes its own computers and delivers them directly
to the customers who order them via the Internet. Doll competes primarily on
price and speed of
delivery. To achieve its Applications in Operations Management: Assembly line
objective of speed, Balancing
Doll makes each of its
five most popular
computers and transports them to warehouses across the country. The
computers are stored in the warehouses from which it generally takes 1 day to
deliver a computer to the customer. This strategy requires high levels of inventory
that add considerably to the cost. To lower these costs, the operations manager
wants to use an inventory model. He notes that both daily demand and lead time
are random variables. He concludes that demand during lead time is normally
distributed, and he needs to know the mean to compute the optimum inventory
level. He observes 25 lead time periods and records the demand during each
period. These data are listed here. The manager would like a 95% confidence
interval estimate of the mean demand during lead time. From long experience the
manager knows that the standard deviation is 75 computers.

Demand during Lead Time

235 374 309 499 253 421 361 514 462 369 394 439 348
344 330 261 374 302 466 535 386 316 296 332 334
Solution:

To ultimately determine the optimum inventory level, the manager

must know the mean demand during lead time. Thus, the parameter to
be estimated is . At this point we have described only one estimator.
The confidence interval estimator that we intend to use is.

We need four values to construct the confidence interval estimate of .

They are
, , and n
Using a calculator, we determine

From this we find

the confidence level is set at 95%; thus 1 – α = .95, α = 1 -.95 = .05, and
α/2 = .025.
we know that the tabulated value of = 1.96 at α/2 = .025
the population standard deviation is σ = 75 and the sample size n = 25.
Substituting all the above values into the confidence interval estimator,
we find.

Therefore, the lower and upper confidence limits are;

LCL = 340.76 and UCL = 399.56 respectively.
 2. The supervisor of a production line that assembles computer keyboards has been
experiencing problems since a new process was instituted. He notes that there
has been an increase in the number of defective units and occasional backlogs
when the productivity of a station does not match that of others. Upon reviewing
the operation of the assembly line, he discovered that there have been a number
of changes in the sequence and time of the operation’s stations. To redo the
setup, he needs an accurate estimate of the mean assembly time for all the
stations at 90%
confidence level. He
ESTIMATING A MEAN ASSEMBLY TIME
starts by drawing a
sample of 75
completion times (in seconds) of the operation at the point where the problems
have been occurring. From the past experience the manager knows that the
standard deviation is 10 seconds.

Time
100.8 86.8 99.5 99.6 94.3 112.7 75.8 90.3 75.1
85.1 86.8 105.1 106.2 86 91 101.9 90.6 125.7
98.2 80 88.8 53.7 82.2 83.8 97.3 92.1 100.6
83.8 96.1 97 103.9 89 87.8 81 78.2
74.4 94.9 95.9 94.5 73.4 96.9 85.2 95.3
104.1 77.4 92.8 95.6 84.1 80.6 72.9 97.1
101 93.4 89.5 88.3 92.4 108.9 79.5 92.8
103.1 100.1 92.9 84.6 100.6 85.9 89.7 68.7
100.7 84.5 103.1 91.1 99.2 104.1 93.6 91

Solution:

We need to produce an estimate of the mean assembly time.

The confidence interval estimator that we will use is:
We need four values to construct the confidence interval estimate of .
They are
, , and n
Using a calculator, we determine

From this we find

the confidence level is set at 90%; thus 1 – α = .90, α = 1 -.90 = .10, and
α/2 = .05

we know that the tabulated value of = 1.645 at α/2 = .05

the population standard deviation is σ = 10 and the sample size n = 75.

The 90% confidence interval estimate of the mean assembly time is

Therefore, the lower and upper confidence limits are;

LCL = 89.57 and UCL = 93.37 respectively.
We estimate that the mean assembly time lies between 89.57 and
93.37 seconds. The operations manager can use this estimate to help
balance the assembly line.