PRODUCTION SYSTEMS EXAM 2

SECOND SEMESTER 2015-2016

I.

TRUE OR FALSE. Write TRUE if the sentence is true. Otherwise, write the answer to
replace the eunderlined word or phrase to make the statement correct. If there is no
underlined word, simply write FALSE if the statement is false.
1. Delivery time is the time interval between ordering and receiving the order.
LEAD TIME
2. Which item to order and with which supplier the order should be placed
Task
are the two fundamental issues in inventory management. FALSE
3. Work-in-process inventory is devoted to maintenance, repair, and
A
operations. FALSE
B
4. At the economic order quantity, holding costs are equal to purchasing
C
costs. FALSE
D
5. Finished goods inventory are materials that are usually purchased, but
E
have yet to enter the manufacturing process. RAW MATERIALS
F
6. ABC analysis classifies inventoried items into three groups, usually based
G
on annual units or quantities used. FALSE
H
7. Cycle counting is an inventory control technique exclusively used for
cyclical items. FALSE
8. For a given level of demand, annual holding cost increases as the order quantity is
increases. TRUE
9. Reorder point is extra stock that is carried to serve as a buffer. SAFETY STOCK
10. Process-oriented layouts typically have low levels of work-in-process inventory.
FALSE
11. The biggest advantage of a product layout is its flexibility to handle a varied product
mix. FALSE
12. One drawback of a product-oriented layout is that work stoppage at any one point
ties up the whole operation. TRUE

II. PRODUCTION LAYOUT

Give the four types of production layout discussed. Draw each sample layout.
III. PROBLEM SOLVING.
1.

All-Star Bat Manufacturing, Inc., supplies baseball bats to major and minor league base-ball teams.
After an initial order in January, demand over the six-month baseball season is approximately constant
at 1000 bats per month. Assuming that the bat production process can handle up to 4000 bats per
month, the bat production setup costs are $150 per setup, the production cost is $10 per bat, and the
holding costs have a monthly rate of 2%, what production lot size would you recommend to meet the
demand during the baseball season? If All-Star operates 20 days per month, compute for the (a) EPQ;
(b) # of production runs; (c) maximum inventory; (d) total holding cost; (e) total ordering cost

2.

Assume that the following quantity discount schedule is appropriate. If annual demand is 1200 units,
ordering costs are $20 per order, and the annual holding cost rate is 25%, what
order quantity would you recommend?
Order Quantity: 0 to 49 units @ $30;
Order Quantity: 50 to 99 units @ $28.50;

Order Quantity: 100 units or more @ $27

3. Lead time is 7 days, and the demand during lead time is normally
distributed with a mean of 150 units and a standard deviation of 40 units.
What is the reorder point if the firm is willing to have a 99% service level?
4. A particular three-ring notebook sells at an average rate of 16 notebooks
per day. The standard deviation in sales is 5 notebooks per day. The lead
time for a new shipment
is three days. What is the reorder point if the firm is willing to have a 90% service level?
Preceding
Time
to 5. A facility is trying to set up an
assembly line, and has
Task
Perform
identified the various tasks,
20
30
and their relationship to each
25
other, as shown in the
10
following table. They wish to
A
55
produce 600 units per day,
D, B, C
30
working two 8-hour shifts. (a)
E
25
Draw a network diagram; (b)
F, G
40
Compute for the takt time; (c)
Compute for the minimum number of work station; (d)
Balance this line using longest task time and compute for
the efficiency; (e) Balance this line using most following
task and compute for efficiency.
III. MATCHING TYPE. Write the CAPITAL letter/s of the corresponding answers. Write XX if there is
no correct answer from the choices on the right table

1. Give three types of inventories.

J, CC, GG
2. Give
two
inventory
counting
methods
C. E.
3. Give three assumptions included in
EOQ Model
AA, EE, G
4. Give three types of goods and
services
B, DD, L
5. Give
three
MF
Task
Time
advantages
T
Left
of
product
WS
layout
A
1
76
K, F, FF
E
21
6. Give
three
D
reasons why
11
there
are
B
2
66
needs
for
C
41
change
in
F
11
layout
G
3
71
decision
BB, H, HH
H
31

B. Make-to-order

AA. Demand is even

throughout the year
BB. Morale Problems

C. Two Bin System

CC. Raw Materials

D. ABC Classification

DD. Assemble-to-order
EE. No quantity
discounts
FF. High efficiency and
utilization

A. Lead time varies

E. Continuous Counting
F. high product volume

Candidat
e

Idl
e

E, B, C, D
G, B, C D
-

11

G, C
G, F
-

11

G. Only one product is

involved
H. Accidents / Safety
hazards
I. Annual Demand
Requirements unknown
J. Work in Process
K. Low Labor Skill
Needed
L. Make-to-stock

H
-

Total

31
53

GG. Finished Goods

TOC
(1,200*20/82.08) = 292.40
(1,200*20/100) = 240
THC
(82.08*7.125)/2 = 292.41
(100*6.75)/2 = 337.50
TPC
(1,200*28.50) = 34,200
(1,200*27) = 32,400
Total
34,784.81
32,977.50
Choose 100 as Order quantity
3.

Given: LT = 7 days; ave demand during LT = 150; std

dev of demand during standard dev = 40 units; SL =
99%; ROP = ?
ROP = 150 + (2.326*40) = 243.04
Ss = 93.04

4.

Given: LT = 3 days; d = 16; stdev daily demand = 5;

SL = 90%
ROP = (3*16) + (1.282*5*sqrt(3)) =59.10
SS = 11.10
Total Time = 235 sec

HH. Changes in
methods and
equipment
II. Batch Counting
JJ. High Flexibility
KK. Individual incentive
plans are possible
LL. Consumer Surveys

5.
Takt Time = (2*8*3600)/600 = 96 sec / unit
Min # of WS = 600 / 235 = 2.55 approx 3 WS
MFT:
Efficiency = ((3*96) 53)/(3*96) = 81.60%
LTT:
Efficiency = ((3*96) 53)/(3*96) = 81.60%

II.

Problem Solving Answer:

1.Given: D = 12,000 bats / year; d = 50 bats / day; p = 200 bats / day; S = $150 / order; H =
$2.4 / bat/yr; EPQ = ?; # of prodn runs = ?; max ivty = ?; THC = ?, TOC = ?
EPQ = sqrt ( (2*12,000*150)/((1-(50/200))*2.4)) = 1,414.21
# of production runs = 12,000/1414.21 = 8.49
Max Inventory = 1,414.21 * (1 (50/200)) = 1,060.66S
THC = (1,060.66*2.4) / 2 = 1,272.79
TOC = (12,000/1,414.21)*150 = 1,272.79
2.

Given: D = 1,200 units/yr; S = $20 / order; H1 = $7.5; H2 = $7.125; H3 = $6.75

EOQ1 = sqrt ((2*1200*20)/7.5) = 80
EOQ2 = sqrt ((2*1200*20)/7.125) = 82.08
EOQ2 = sqrt ((2*1200*20)/6.75) = 84.33
82.08
100

6.

LTT
WS
1

2
3

Task

Candidate

Time
Left
66

41

A, D

21

11

41

F, G

11

71

31

Total

Idle

A, C, D

11
11
31
53