MGT508 Assignment 1

Question1 (25 marks)

a)
Sample
1
2
3
4
5
6
7
8
9
10
11
12

Factors
n
5

1
2
5
4
6
2
5
2
1
6
6
6
5

Delivery Time (days)

2
3
4
3
3
4
3
6
2
3
3
2
1
5
3
4
1
4
1
3
3
3
3
2
1
3
1
3
3
3
7
5
5
1
1
3
5
3
1

A2
0.58

D3
0

Control Limits, X-bar Chart

LCL
UCL
Mean
1.28
5.05
3.17
1.28
5.05
3.17
1.28
5.05
3.17
1.28
5.05
3.17
1.28
5.05
3.17
1.28
5.05
3.17
1.28
5.05
3.17
1.28
5.05
3.17
1.28
5.05
3.17
1.28
5.05
3.17
1.28
5.05
3.17
1.28
5.05
3.17

5
3
1
2
3
4
3
1
2
3
6
2
3
Mean

D4
2.11

Sample Mean
3.00
3.40
2.80
3.60
3.00
3.00
2.20
1.60
3.60
5.80
2.60
3.40
3.17

Range
2.00
5.00
2.00
5.00
3.00
4.00
2.00
2.00
3.00
2.00
5.00
4.00
3.25

Control Limits, R Chart

UCL
R-bar
6.86
3.25
6.86
3.25
6.86
3.25
6.86
3.25
6.86
3.25
6.86
3.25
6.86
3.25
6.86
3.25
6.86
3.25
6.86
3.25
6.86
3.25
6.86
3.25

LCL
0
0
0
0
0
0
0
0
0
0
0
0

Range
2.00
5.00
2.00
5.00
3.00
4.00
2.00
2.00
3.00
2.00
5.00
4.00

DELIVERY TIME (DAYS)

X-bar Chart for the delivery process

7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
1

10

11

12

SAMPLE

Sample Mean

LCL

UCL

Mean

DELIVERY TIME (DAYS)

R Chart for the delivery process

8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
1

10

11

SAMPLE

LCL

UCL

R-bar

Range

12

b)

3 = A2 R
= (0.58) (3.25)
= 1.89
Therefore, 6 = 2 (1.89) = 3.78

Cp =
=
=

tolerance range
process range
upper specification limitlower specification limit
6

(3+1)(31)
3.78

= 0.53

xlower specification upper specificationx

Cpk = minimum [

= minimum [

3.172 43.17
1.89

1.89

= minimum [0.62, 0.44] = 0.44

Since the acceptability limit are based on 3sigma from the mean of a normalized
process distribution. The minimum acceptable cutoff limit should not below 1.00. A Cpk of
less than 1.00 indicated that the natural process spread is wider than the specification limits
and process mean has moved closer to one of the upper or lower design specification, and it
will generate defect. In conclusion, the capability of the process is not capable of meeting
the companys delivery commitment.

Question2 (25 marks)

a)
i)
Cd =

=
=

production time available

desired units of output
(35 hours x 60 minutes/hour)

300
2100
300

= 7 minutes

The cycle time necessary to complete 300 cedar chests in a 35-hour week is 7 minutes
ii)

=1 t i
N =
Cd

=
=

2+4+5+5+3+1+2+4
7
26
7

= 3.714 4 workstations

The minimum number of workstations that can be used on the assembly line and still
reach the production quota is 4 workstations.

iii)

A
2

B
4
C
5
F
1

H
4
G
2

=1 t i
E =
nCa

=
=

2+4+5+5+3+1+2+4
6 (6)
26
36

= 72.22 %

The assembly line has an efficiency of 72.22 %

D
E
3

iv)

A
2

B
4
5
C

4
H

F
1

N =

=
=

D
5

3
G
2

=1 t i
Cd
2+4+5+5+3+1+2+4
26
9

= 2.889 3 workstations

The minimum number of workstations that can be used on the assembly line and still
reach the production quota is 3 workstations.
=

=
=

production time available

Cd

(35 hours x 60 minutes/hour)

2100
9

= 233.33 233 cedar chests

The number of output that can be produced is 233 cedar chests.

=1 t i
E =
nCa

2+4+5+5+3+1+2+4
3 (9)

26
27

= 96.30 %

The assembly line has an efficiency of 96.30 %

b)
If you look at the process layout you typically produce customized product there, whereas in
the product layout, you typically produce standardize product.
In the process layout you have functional grouping of activities. That is a dedicated area. But
in the product layout, there is a sequential arrangement of activities. For example, in
McDonald drive-up service, if you go in your car and you want to buy something in
McDonald you have to go to the same sequence of steps. You order the food, pay the money
in the second window, third window you pick up a food, it doesnt matter you are buying five
burgers, five nuggets and two fries or you just speak upon one drink. You have to go to the
set of activities and it is like the assembly line.
The process layout is acceptable and required when the demand is low, you cannot afford to
have an assembly line when you have a very low demand or the demand is fluctuated a lot.
But if once you know that you have a high demand and stable demand, you can justify having
a product layout in an assembly line.
In the process layout, the facility and equipment will be more general purpose because you
are making products. Where as in an assembly line, it is going to be special purpose
equipment, specially made for that particular product. When you change the product a lot,
like a new kind of car that the design and process is completely, then you have to change to
special purpose equipment.
In the process layout, the fixed costs are low but the variable cost are high. On the other hand,
in the process layout, the fixed costs are high because you are using special propose
equipment. The initial investment for the product layout will be high but the advantages is the
variable cost are low. That is what made Henry Ford model T so popular. Henry Ford was
able to pay the highest wages during that time, but he still was able to make the least
expensive vehicle. The single most for important reason for that was the variable cost are
low. Of course however, the product line was only one. He did not make different kind of
product.
The labor skill require in a process layout are much higher and much varied as compared to
the product layout, where most of the assembly line workers are working in one workstation
and they are focusing on one thing. But the skill level required is not as high as in the process
layout.
Last, in the process layout, the work in process inventory is higher. You have a lot of
inventory within the facility. But as in a product layout, you design the layout in such a way
that the work in process inventory is zero to very little.

Question3 (25 marks)

a)
$ 1,600

$ 128

1
$0
$ 500

$ 830

$ 1,600
$ 108.72

$ 46
5

$0
$ 230

$ 98.80

-$ 1,600

$ 64

6
$ 830

$0
$ 500
$ 1,600

$ 50

$ 1,250
$0

$ 81.20

4
8
Strategy 1 (Cost = $0.00)
EV1 = (0.08) (1,600) + (0.92) (0)

= $128.00

 Strategy 2 (Cost = $40.00)

EV5 = (0.7) (500) + (0.3) (1,600)
EV6 = (0.2) (230) + (0.8) (0)
EV2 = (0.08) (830) + (0.92) (46)

= $830.00
= $46.00
= $108.72

Strategy 3 (Cost = $34.80)

EV3 = (0.04) (1,600) + (0.96) (0)

= $ 64.00

Strategy 4 (Cost = $74.80)

EV7 = (0.7) (500) + (0.3) (1,600)
EV8 = (0.2) (250) + (0.8) (0)
EV4 = (0.04) (830) + (0.96) (50)

= $830.00
= $0
= $ 81.20

Now the final decision at the square must be made.

Strategy 1
Strategy 2
Strategy 3
Strategy 4

(0.08) (1,600) + (0.92) (0)

= $128.00
[(0.08) (830) + (0.92) (46)] + 40.00 = $148.72
[(0.04) (1,600) + (0.96) (0)] + 34.80 = $ 98.80
[(0.04) (830) + (0.96) (50)] + 74.80 = $156.00

Since the lowest cost is $ 98.80, the decision is to changing the oil and sampling (strategy 3)
b)
$ 15,000

$ 1,200

1
$0
$ 2,000
$ 5,900
$ 15,000

5
$ 692.80

$ 240

$0

2
$ 716.40

$ 1,200
-$ 15,000

$ 600

6
$0
$ 2,000
$ 15,000
$ 240

$ 1,200
$0

3
$ 5,900
$ 466.40

4
8
Strategy 1 (Cost = $0.00)
EV1 = (0.08) (15,000) + (0.92) (0)
Strategy 2 (Cost = $50.00)
EV5 = (0.7) (2,000) + (0.3) (15,000)
EV6 = (0.2) (1,200) + (0.8) (0)
EV2 = (0.08) (5,900) + (0.92) (240)
Strategy 3 (Cost = $200.00)
EV3 = (0.04) (15,000) + (0.96) (0)
Strategy 4 (Cost = $250.00)
EV7 = (0.7) (2,000) + (0.3) (15,000)
EV8 = (0.2) (1,200) + (0.8) (0)
EV4 = (0.04) (5,900) + (0.96) (240)

= $1,200.00

= $5,900
= $240
= $692.80
= $ 600.00

= $5,900
= $240
= $466.40

Now the final decision at the square must be made.

EV1 = (0.08) (15,000) + (0.92) (0)
= $1,200.00
EV2 = [(0.08) (5,900) + (0.92) (240)] + 50.00 = $742.80
EV3 = [(0.04) (15,000) + (0.96) (0)] + 200.00 = $ 800.00
EV4 = [(0.04) (5,900) + (0.96) (240)] + 250.00 = $716.40
Since the lowest cost is $ 716.40, the decision is to changing the oil and sampling
(strategy4)
c)
The strategy for maintaining heavy construction equipment is different to that of autos and
light trucks because emergency maintenance of heavy construction equipment is much
more expensive than autos and light trucks. Thus, you should put more effort to preclude
the emergency maintenances cost, as the English proverb saying Prevention is better than
cure.

Question 4 (25 marks)

The Transportation Method of Aggregate Planning
Period of Use
Period of Production

0
50,000

50

Overtime

75

Subcontracting

85

Regular

Regular
Overtime
Subcontracting

2
0

Beg. Inventory
1

3
0

53

50,000

78

88

50,000

50

50,000

75

85

Regular
Overtime
Subcontracting

Units
4
0

56

81

20,000

91

53

78

40,000

88

50,000

50

50,000

75

40,000

85

Regular
Overtime
Subcontracting

Unused

Produced

Capacity

0
0

0
0

59

50,000

50,000

84

50,000

50,000

94

20,000

40,000

20,000

56

50,000

50,000

81

50,000

50,000

91

40,000

40,000

53

50,000

50,000

78

50,000

50,000

88

40,000

40,000

50,000

50

50,000

50,000

2,000

75

2,000

50,000

48,000

85

40,000

40,000

452,000

68,000

Total Cost =

$30,290,000

Units Produced

50,000

150,000

200,000

52,000

452,000

Demand

50,000

150,000

200,000

52,000

452,000

Unmet Demand

Capacity

*small number is accumulated carrying cost.

Production Plan

Period
1
2
3
4
Total

Expected
Demand (pairs)
50,000
150,000
200,000
52,000
452,000

Regular
capacity (pairs)
50,000
50,000
50,000
50,000
200,000
Total Cost =

Overtime
capacity (pairs)
50,000
50,000
50,000
2,000
152,000

Subcontract
capacity (pairs)
20,000
40,000
40,000
0
100,000

Ending
Inventory
(pairs)
70,000
60,000
0
0
130,000

$30,290,000

a) Minimizing equation
Minimum Z =

$50 (Pr1 + Pr2 + Pr3 + P r4)

+ $75 (Po1 + Po2 + Po3 + Po4)
+ $85 (Ps1 + Ps2 + Ps3 + Ps4)
+ $3 (I1 + I2 + I3 + I4)

where
Pr x(y) = Regular Production at period of production x (and period of use y)
Po x(y) = Overtime Production at period of production x (and period of use y)
Ps x(y) = Subcontracting Production at period of production x (and period of use y)
I x = Inventory at period of production x
x
= Period of production
y
= Period of use
b) All the constraint equation showing both the capacity constraints and demand
constraints.
Capacity constrains
Pr11 + Pr12 + Pr13 + P r14 50,000
Po11 + Po12 + Po13 + Po14 50,000
Ps11 + Ps12 + Ps13 + Ps14 40,000
Pr22 + Pr23 + P r24 50,000
Po22 + Po23 + Po24 50,000
Ps22 + Ps23 + Ps24 40,000

Pr33 + P r34 50,000

Po33 + Po34 50,000
Ps33 + Ps34 40,000
P r44 50,000
Po44 50,000
Ps44 40,000
I1 + I2 + I3 + I4= 0
where
Pr x(y) = Regular Production at period of production x (and period of use y)
Po x(y) = Overtime Production at period of production x (and period of use y)
Ps x(y) = Subcontracting Production at period of production x (and period of use y)
I x = Inventory at period of production x
x
= Period of production
y
= Period of use

Demand constrains
Pr1 + Po1 + Ps1 = 50,000
I1 + Pr2 + Po2 + Ps2 I2 = 150,000
I2 + Pr3 + Po3 + Ps3 I3 = 200,000
I3 + Pr4 + Po4 + Ps4 I4 = 52,000
where
Pr x(y) = Regular Production at period of production x (and period of use y)
Po x(y) = Overtime Production at period of production x (and period of use y)
Ps x(y) = Subcontracting Production at period of production x (and period of use y)
I x = Inventory at period of production x
x
= Period of production
y
= Period of use