1 BUSQOM 1070

Operations Management
Sample Exam I

Dr. Jennifer Shang

Spring, 2012

Multiple Choice (1.5 point each) 1. a. b. c. d. e. 2. a. b. c. d. e. 1. Boeing's new 787 Dreamliner (ch2) is assembled in Washington, D.C. uses engines from Japan has its fuselage sections built in Australia has increased efficiency from new engine technology results from a partnership of about a dozen companies Many services maintain records of sales noting(ch4) the day of the week unusual events weather holidays all of the above The "Father of Scientific Management" is a. Lillian Gilbreth b. Frederick W. Taylor c. W. Edwards Deming d. Frank Gilbreth e. just a figure of speech, not a reference to a person Which of the following is not a typical service attribute?(ch1) a. intangible product b. often easy to automate c. customer interaction is high d. simultaneous production and consumption e. difficult to inventory The Dulac Box plant produces 500 cypress packing boxes in two 10-hour shifts. What is the productivity of the plant?(ch1) a. 5000 boxes/hr b. 50 boxes/hr c. 25 boxes/hr d. none of the above e. not enough data to determine
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Productivity can be improved by(ch1) a. increasing inputs while holding outputs steady b. decreasing outputs while holding inputs steady c. increasing inputs and outputs in the same proportion d. decreasing inputs while holding outputs steady Which of the following will more likely locate near their customers? (ch2)

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a. b. c. d. e. 6.

an automobile manufacturer a medical clinic an aluminum manufacturer an insurance company headquarters all of the above

Pruning the production line to eliminate items not returning good profits margin are best introduced in the ______stage in the product life cycle a. introduction b. growth c. maturity d. decline e. incubation The two internal elements of SWOT analysis are (ch2) a. opportunities and threats b. strengths and opportunities c. weaknesses and threats d. strengths and weaknesses e. strengths and threats One purpose of short-range forecasts is to determine (ch.4) a. production plans b. cash budgeting c. job scheduling d. research and development plans e. facility location Forecasts (ch.4) a. become more accurate with longer time horizons b. are more accurate for individual items than for groups of items c. are rarely perfect d. all of the above e. none of the above Given forecast errors of -1, 4, 8, and -3, what is the mean absolute deviation? (ch.4) a. 2 b. 3 c. 4 d. 8 The degree or strength of a linear relationship is shown by the (ch4) a. alpha b. correlation coefficient c. mean d. mean absolute deviation A six-month moving average forecast may be better than a three-month moving average forecast if a. demand is rather stable

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b. demand has been changing due to recent promotional efforts c. demand follows a downward trend d. demand follows a seasonal pattern that repeats itself twice a year e. demand follows an upward trend
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Which of the following forecasting techniques generates trend forecasts?(ch3) Delphi method Sales force composites Moving averages Exponential smoothing None of the above 16. What is the most frequently used strategic options managers use to gain competitive advantage? a. b. c. d. e. Quality/Service Financial resources Operations Management Marketing and Distribution none of the above

17. Which one of the following would not generally be considered an aspect of operations management? (ch.1) a. Schedule work b. Secure financial resources c. Maintain quality d. Oversee the transformation process e. Manage inventories 18. Activities that are not on a PERT critical path but have little slack need to be monitored closely because a. PERT treats all activities as equally important b. near-critical paths could become critical paths with small delays in these activities c. they are causing the entire project to be delayed d. slack is undesirable and needs to be eliminated e. they have a high risk of not being completed 19. Cost cutting in international operations can take place because of a. lower taxes and tariffs b. lower wage scales c. lower indirect costs d. less stringent regulations e. all of the above True/False (1 point each)
T 20. The World Trade Organization helps provide governments and industries around the world with protection from firms that engage in unethical conduct. 21. The PERT optimistic time estimate is an estimate of the minimum time an activity will require.

22. In PERT analysis, the identification of the critical path can be mistaken if a non-

critical activity takes substantially longer than its probable time.

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23. Both moving average and exponential smoothing approaches should be used when there is a significant trend exhibited in the data. 24. NAFTA seeks to phase out all trade and tariff barriers among Canada, Mexico, and the United States. 25. The mission of a firm should be designed to support the firm's overall strategy.

Short Answer (2.5 points each) 1. List the qualitative forecasting methods. Jury of Executive Sales force Composite Delphi Method Customer market Survey 2. Explain in your own words, the meaning of the coefficient of determination. The percentage of variation in the response variable can be explained by the independent variable(s) 3. 4. __________ is a free trade agreement among Canada, Mexico, and the United States. Answer: NAFTA--North American Free Trade Agreement 1) Nike is the world's largest athletic brand. Its innovative and broad product line helps drive sales, however a large majority of those sales are in the footwear business. Most of Nike's goods are produced overseas in low-cost factories and then imported to the final market. Nike currently has many of the top U.S. athletes under contract (Michael Jordon, Tiger Woods, Dwayne Wade) but international sales are still small in emerging markets. However, many competitors have attempted to copy Nike's business model (high-value branded products manufactured at low-cost), including Adidas and Reebok, while many retailers have attempted to pass on the low-cost pressure of retail consumers. Perform a SWOT analysis for Nike. Answer: Strengths- Innovative products, athletes under contract Weakness- Much of revenue is from footwear, eroding market share could cost Nike its profitability Opportunities- Sales can be increased in emerging markets using well-known athletes, broad product line can be expanded into high profit sectors (jewelry, sunglasses, golf, etc) Threats- International business makes Nike vulnerable to currency changes, low-cost pressure from retailers can decrease profit per item, competition could erode existing market share. Athletes personal lives could weaken Nike's reputation. List three common characteristics great projects have in common? (Hint: go to Course Documents>Current Affairs Related to Ch1-4> Ch 3> 1st article)

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A great project involves creating a unique competitive advantage these projects started with a long period of product definition they have highly qualified project leaders

Problem Solving (50 points) 1. (10 points) A management analyst is using exponential smoothing to predict merchandise returns at Kaufmanns department store chain. Given an actual return of 150 items in the most recent period completed. A forecast of 160 items for that period, and a smoothing constant of 0.3, what is the forecast for the next period? How would the forecast be changed if the smoothing constant were 0.8? Explain the difference in terms of alpha and responsiveness. A1=150 =0.3 =0.8
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F1=160 Larger is more responsive to the most recent data F2=160+0.3*(150-160)=157 F2=160+0.8*(150-160)=152

(15 points) CompuUSA is a large computer discount chain store that sells computers and ancillary
equipment and software. The Monroeville store in Pittsburgh has collected historical data on computer sales and printer sales for the past ten years. Year 1 2 3 4 5 6 7 8 9 10 Personal Computer Sales 1045 1610 860 1211 975 1117 1066 1310 1517 1246 Printers Sold 326 510 296 478 305 506 612 560 590 676

Use the information on next page to answer the following question. Assuming Printer sales in Period 11 is 650. a. Use trend analysis to forecast personal computer sales in year 11. PC Sales=1091.867+18.88*(11)=1300 b. Use linear regression to forecast personal computer sales in year 11. PC Sales=687.82+1.045*(650)=1367

c. Which Model (trend analysis or linear regression model) appears to be more accurate in predicting the personal computer sales for the company? Why? From the Excel output in next page, we found Trend Analysis: r2 = 5.9%; Linear Regression : r2 = .36

Linear Regression is more accurate since it has larger r2 more explanatory power d. What is the MSE of the linear regression model. 39864.57 (intersection of MS column and Residual row)
Trend Analysis SUMMARY OUTPUT Regression Statistics Multiple R 0.243029 R Square 0.059063 Adjusted R Square -0.058554 Standard Error 241.9794 Observations 10 ANOVA df Regression Residual Total SS MS F Significance F 1 29403.71 29403.71 0.502164 0.498677 8 468432.4 58554.05 9 497836.1

Intercept Year

Coefficients Standard Error t Stat P-value Lower 95%Upper 95% 1091.867 165.3034 6.605227 0.000168 710.676 1473.057 18.87879 26.64106 0.708635 0.498677 -42.55564 80.31322

7 Linear Regression Model SUMMARY OUTPUT Regression Statistics Multiple R 0.599495 R Square 0.359395 Adjusted R Square 0.279319 Standard Error 199.6611 Observations 10 ANOVA df Regression Residual Total SS MS F Significance F 1 178919.6 178919.6 4.488186 0.066978 8 318916.5 39864.57 9 497836.1

Coefficients Standard Error t Stat P-value Lower 95%Upper 95% Intercept 687.8212 247.9063 2.774521 0.024128 116.1478 1259.495 Printers Sold1.045233 0.493376 2.118534 0.066978 -0.092494 2.182961

3. (15 points) A project has an expected completion time of 40 weeks and a standard deviation of 5 weeks. It is assumed that the project completion time is normally distributed. (a) What is the probability of finishing the project in 40 weeks or less? P(X<=40)=p(z<=0)=0.5 (b) What is the probability of finishing the project in 38 to 42 weeks or less?

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X 2 = = 0.4 5

P (X 38) = P(Z 0.4) = 0.34458 P(x>=42)=0.34458 Therefore, P(38<=x<=42) = 1-.34458-.34458=0.3108

4. (15 points) Development of a new deluxe version of a particular software product is being considered. The activities necessary for the completion of this project are listed in the table below along with their costs and completion times in weeks.

Activity A B C D E F G

Normal Time 4 2 3 8 6 3 4

Crash Time 3 1 3 4 3 2 2

Normal Cost 2,000 2,200 500 2,300 900 3,000 1,400

Crash Cost 2,600 2,800 500 2,600 1,200 4,200 2,000

Immediate Predecessor A A A B, D C, E F

(a) What is the project expected completion date?

Project completion time is therefore t A + t D + t E + t F + t G = 4 + 8 + 6 + 3 + 4 = 25 (b) What is the total cost required for completing this project on normal time? Ans: Total cost=12,900 (c) If you wish to reduce the time required to complete this project by 1 week, which activity should be crashed, and how much will this increase the total cost? Crash D 1 week at an additional cost of $2, 600 $2,300 $300 = = $75 84 4