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# Mgmt 120 Management of Operations Problem Review for Unit 1 - Fundamentals

This section contains study problems for the following topics. Time, Rate, and Productivity Inventory Measures Answers for all the problems are found in the back of this section.

## Review Problems for Fundamentals

1. A 3 person crew of telemarketing employees made 200 phone calls in a 4 hour time block. What was their individual average productivity in calls per hour? What was the crew productivity?

2. In an assembly operation at a furniture factory, six employees assembled an average of 450 standard dining chairs per 5-day week. What is the labor productivity of this operation?

3. The weekly output of a fabrication process is shown below together with data for labor and material inputs. Standard selling price is \$125 per unit. Overhead is charged at a rate of \$1500 plus .5 times direct labor cost. Assume a 40 hour work week and an hourly wage of \$16 per hour. Material cost is \$10 per linear foot. What is the multifactor productivity? Output (units) 392 Number of workers 5 Material (ft) 2720

4. A company has introduced a process improvement that reduces processing time for each unit so that output is increased by 25% with less material but one additional worker required. Under the old process, five workers could produce 60 units per hour. Labor costs are \$12/hour and material input was previously \$16/unit. For the new process, material is now \$10/unit. Overhead is charged at 1.6 times direct labor cost. Finished units sell for \$31 each. What increase in productivity is associated with the process improvement? (Use a per-hour cost basis)

## Review Problems for Exam 1

5. Compute time and rate for each of the following. a. 10 customers are served in 2 hours b. a machine can process 296 parts per hour c. it takes 37 minutes to process a loan application d. Three employees each spent 4 hours and altogether they cleaned 8 apartments.

## Review Problems for Fundamentals

6. Joan Pontius, the materials manager at Money Enterprises, is beginning to look for ways to reduce inventory. A recent accounting statement shows inventories at the following levels. Raw materials: \$2,345,000 Work-in-progress: \$5,670,000 Finished Goods: \$2,161,000 This year's cost of goods sold should be about \$29.4 million. Assuming 52 business weeks per year, express total inventory as: a. weeks of supply

b. inventory turns

7. One product line is experiencing 7 turns per year, and its annual sales volume (at cost) is \$750,200. How much inventory is being held, on the average?

8. MINC, Inc. keeps 4 items in stock, three machines and a repair kit. The current inventory level and last years demand are shown below along with the value of the items. (Assume 52 weeks per year.) Last year's Currently Value demand on hand of item Model 1 17,000 2500 \$200 Model 2 15,000 1500 \$300 Model 3 8,500 2000 \$150 Repair kits 450 100 \$24.00 a. How many weeks of supply do they currently have on hand? b. If the current inventory level is characteristic, how many turns per year does MINC Inc. have? Answers: Answers - 3

## Review Problems for Exam 1

1. individual: = = 16.7 calls/hr crew: = 50 calls/hr 2. = = 15 chairs/day 3. Labor cost = 40 x 16 x 5 = 3200 multifactor productivity = = = = 1.46 4. Use a per hour cost basis. Old method: labor cost = \$12/ worker x 5 workers = \$60/hr

## prod. = = = 1.667 New method: labor cost = \$12/worker x 6 workers = \$72 / hr

prod. = = = 2.48 Improvement in productivity = = 48.8% 5. a. time = 12 minutes per customer or .2 hours/customer rate = 5 customers/hr or .08333 customer/s per minute b. time = .0034 hrs per part or .203 minutes per part rate = 296 parts/hr or 4.933 parts per minute c. time = 37 minutes per application or .617 hrs/app rate = 1.62 apps/hr or .027 apps/min. d. time = 1.5 hrs/apt or 90 min/apt rate = .667 apts/hr or .011 apts/min

6. average aggregate inventory value = \$10,176,000 weekly sales = = .565 mill/week weeks of supply = = 17.99 18 weeks of supply inventory turns = = 2.89 2.9 turns per year 7. turns = 7= Thus ave. aggr. inventory value = = 107,171 107,000 8. Last year's demand Model 1 Model 2 17,000 15,000 Currently on hand 2500 1500 Value of item \$200 \$300 Value on hand \$500,000 \$450,000 Yearly value in sales \$3.4 mill \$4.5 mill

8,500 450

2000 100

\$150 \$24.00

\$300,000 \$2400

## \$1.275 mill \$.0108 mill

Ave. aggr. inventory value = \$1.2524 mill. Annual sales = \$9.185 mill. weekly sales = = \$.176650 mill weeks of supply = = 7.09 7 weeks of supply turns = = 7.33 turns per year