Final Exam

MBA 661 Final Examination
April 28, 2012
Notes:
1. Please write your name on the answer booklet. No name, no marks.
2. Please staple your 8 21 x11 note sheets with the answer booklet.
3. Exam is closed books, lecture notes, and neighbors.
4. You have exactly three hours to complete the exam. Hence, answer easy ques-
tions first and good luck!
I. A computer software firm has experienced the following demand for its “Personal
Finance” software package, summarized in Table 1.
Table 1: Demand data for software

Period Units
1 56
2 61
3 55
4 70
5 66
6 65
7 72
8 75
1. (10 points) Develop an exponential smoothing forecast using α = 0.40 and an

adjusted exponential smoothing forecast using α = 0.40 and β = 0.20. Using
the methods, predict the units demanded separately.
2. (5 points) Compare the accuracy of the two forecasts and identify the better
performing method. Usually the differences between the actual and predicted
values are used cumulatively to get an estimate of forecast error. The magnitude
of the cumulated error usually gets averaged out for such analysis; for easy
comparison purposes.
II.(15 points) Vultex Fibers produces a line of sweat clothes that exhibits a varying
demand pattern. Given the demand forecasts in Table 2, production costs, and con-
straints; design a production plan for Vultex using the transportation method of LP.
Also, calculate the cost of the production plan. It is given that the maximum regular
production is 100 units/month, maximum overtime production is 50 units/month,
maximum subcontracting is 50 units/month, regular production costs are $10/unit,
overtime production costs are $25/unit, subcontracting costs are $35/unit, Inventory
holding costs are $5/unit/month, and beginning inventory is zero.
Table 2: Demand Forecast
Period Demand
September 100
October 130
November 200
December 300
III. Padmini Auto Company is a small manufacturer of cars, vans, and auto-
rickshaws in India. Demand for each of Padmini’s three product lines has been
healthy in recent months, but an impending labor strike threatens to slow down
production. Padmini’s data on forecasted demand, labor requirements, and profit for
each product line are shown in Table 3. The production engineer of Padmini Auto
estimates that even if the workers striks next month, the company can maintain a
core of 75 workers, giving a maximum of 3000 hours per week, or 12000 hours per
month. The strategy of the production engineer is that - if the strike occurs, absorb
the reduced labor hours by decreasing production of those product lines that yield
the least profit. Padmini Auto owner’s ward has been studying management at one of
the top management institutes and has been requested to manage the situation. The
ward has no clue on how to manage the situation, and approaches you for consultancy.
You, upon understanding the efficacy of the production engineer’s plan and decide to
follow the plan and pocket the consulting fees.
Table 3: Padmini Auto data by Production Engineer
Product Monthly Labor Profit

Line Demand per Unit per Unit
Cars 500 6 hours Rs. 50000
Vans 100 4 hours Rs. 25000
Auto-rickshaws 200 2 hours Rs. 20000
1. (5 points) Generate a new production plan for Padmini Auto using the produc-
tion engineer’s logic.
2. (8 points) How much projected profit will be lost next month if the strike
materializes and the production engineer’s logic is followed?
IV.(12 points) A manufacturing firm has been offered a particular component

part it uses according to the discount pricing schedule provided by the supplier,
summarized in Table 4. The manufacturing company uses 700 of the components
annually, the annual carrying cost is $14 per unit, and the ordering cost is $275.
Determine the quantity the firm should order and the associated total inventory
costs.
Table 4: Pricing schedule
Quantity Price
1-199 $65
200-599 $59
600+ $56
V.(10 points) A company has five jobs waiting to be processed. The data on
these jobs are given in Table 5, with all time values are in days. In which order
the company should process the jobs so that the deviations from the due dates are
minimized. The company uses EDD, SPT, Least Slack, and Critical Ratio methods
for developing the schedule. Also the company calculates Critical Ratio as CR =
days until due
remaining processing time , and the jobs with the lowest CR are scheduled first.
Table 5: Job Details

Job Due Date Process Time
A 30 35
B 20 15
C 25 25
D 10 12
E 15 10
VI.(5 points) Kleenway Supermarket maintains a continuous review inventory

system and reorders based on an order-point calculation. The company has found
that demand for canned tomatoes averages fifty cases per week and has calculated
and EOQ of 200 cases. The lead time for these tomatoes averages one week, with a
standard deviation of ten cases during the lead time. If Kleenway wants to maintain
a service level of at least 95 percent, what re-order point should be used for canned
tomatoes?
VII.(15 points) The final assembly of Noname personal computers require a total
of 12 tasks. The assembly is done at a plant using various components imported
from China. The job times and precedence relationships are summarized in Table 6.
Noname computers needs to produce 152 computers per 38 hour week to meet the
demand. Construct the precedence diagram, and use it to design the assembly line.
Balance the line using ranked positional weight technique, and calculate the line
efficiency.
Table 6: Precedence Details

Precedence Time (mins)
1 - 12
2 1 6
3 2 6
4 2 2
5 2 2
6 2 12
7 3, 4 7
8 7 5
9 5 1
10 9, 6 4
11 8, 10 6
12 11 7
VIII.(10 points) Consider the following LP formulation of the transportation prob-
lem. Using this information, and the least-cost method discussed in the class; solve
the problem. Find the cost of transportation for your solution as well.
M inZ = 80x11 + 215x12 + 108x22 + 100x21 + 102x31 + 68x32
Subject to:
x11 + x12 = 1000
x21 + x22 = 1500
x31 + x32 = 1200
x11 + x21 + x31 = 2300
x12 + x22 + x32 = 1400
xij ≥ 0, for all i and j
IX.(5 points) A local hardware store has accumulated sales data of pipe fittings,
which is considered to be dependent upon the number of building permits issued in
the area. The summary information was calculated from the data: x̄ = 9.2, ȳ = 12.86,
xy = 1170.3, and x2 = 932. Using this information develop the linear regression
P P
equation that can be used to predict the demand of pipe fittings, if the number of
building permits (x) issued is 10.

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MBA 661 Final Examination

April 28, 2012

1. Please write your name on the answer booklet. No name, no marks.

3. Exam is closed books, lecture notes, and neighbors.

Table 1: Demand data for software

1. (10 points) Develop an exponential smoothing forecast using α = 0.40 and an

Table 3: Padmini Auto data by Production Engineer

Product Monthly Labor Profit

IV.(12 points) A manufacturing firm has been offered a particular component

Table 4: Pricing schedule

Table 5: Job Details

VI.(5 points) Kleenway Supermarket maintains a continuous review inventory

Table 6: Precedence Details

M inZ = 80x11 + 215x12 + 108x22 + 100x21 + 102x31 + 68x32

x21 + x22 = 1500

x31 + x32 = 1200

x11 + x21 + x31 = 2300

x12 + x22 + x32 = 1400

xij ≥ 0, for all i and j

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