MGT 3110: Exam 3 Study Guide

DO NOT RELY ONLY ON THIS STUDY GUIDE ALONETO PREAPRE FOR THE
EXAM

Discussion questions
1. Define independent and dependent demand items.
2. What is Master Production Schedule?
3. What is Bill of Materials?
4. What is Low-Level coding and what how is it used?
5. What are the benefits of MRP?
6. What are the inputs required for MRP?
7. What is “Lot Sizing” in MRP?
8. What are the reasons for using a lot sizing method other than Lot-for-lot?
9. What does the part-period balancing lot-sizing technique attempt to do in deciding the lot
sizes?
10. Explain the terms flowtime and lateness.
11. What are the advantages and disadvantages of shortest processing time (SPT) rule?
12. What is the Critical Ratio? To what jobs does Critical Ratio give priority to?
13. What can be said about the jobs if CR < 1, or =1, or > 1?
14. What is input-output control?
15. Define maintenance.
16. Define reliability.
17. What is FR(%)? Define it.
18. Define FR(N). How is computed?
19. Define MTBF. How is related to FR(N)?
20. What is redundancy?
21. What is the impact on system reliability of adding parts or components in parallel?
22. Increasing the number of parts or components in a product tends to reduce its reliability. Why
is this true only when adding components in series?
23. Explain carefully how redundancy improves product reliability.
24. What is breakdown maintenance?
25. Is there an optimal amount of preventive maintenance? What caution should be exercised
before calculating this optimal amount?
Problems
1. Consider the following Solver model for an aggregate planning problem.
 a. Determine the excel formula for the following cells:

B18
B19
B20
B23
E23
F23
B24
B31
C31
F31
G31
H31
B32
B37
B38
B39
B40
B41
B42
B43

b. What is the Solver Target cell?

c. What are the Solver changing cells?
d. What are the Solver constraints?
e. What options of Solver must be checked?

2. A Bill of Materials is desired for a bracket (A) that is made up of a base (B), two springs
(C) and four clamps (D). The base is assembled from one clamp (D) and two housings (E).
Each clamp has one handle (F) and one casting (G). Each housing has two bearings (H)
and one shaft (I).
a. Develop a product structure tree.
b. The lead time for the parts are given below. Develop a time-phased product structure.
c. The available inventory for each part is given in the table below. Determine the net
requirement quantities of all parts required to assemble 50 units of bracket A.

Item Lead time Available

A 1 5
B 2 5
C 3 10
D 2 20
E 1 50
F 2 150
G 1 50
 H 1 5
I 2 0

3. A product (A) consists of a base (B) and a casting (C). The base consists of a plate (P) and
three fasteners (F). The lead time, current on-hand inventory and scheduled receipts are
given below. All components are lot for lot. The MPS requires start of production of 100
units of product A in week 4 and 150 in week 6. Produce the MRP for the upcoming six
weeks. Produce a list of all planned order releases.

Part Lead time On-hand Scheduled receipts

B 1 100 50 in week 1
C 3 30 20 in week 1, 30 in week 2
P 2 0 50 in week 1
F 4 0 30 in week 1, 40 in week 3

4. For the following item the inventory holding cost is $0.80 per week and the setup cost is
$300. Determine the lot sizes and total cost for this item under (i) Lot-for-Lot, (ii) EOQ,
and (iii) PPB methods

Item LT = 1
Week: 1 2 3 4 5 6 7 8
Gross requirement 100 250 200 150 250 200 200 150
Scheduled receipts
Projected on-hand 100
Net Requirement
Planned receipts
Planned order releases

5. Consider the following planned and actual hours of input and output.

Week ending 1 2 3 4 5 6 7 8
Planned input 500 800 700 600 600 800 700 800
Actual input 700 700 700 800 600 500 500 800
Planned output 650 650 650 650 650 700 700 700
Actual output 600 700 800 700 650 500 600 800

Prepare the Input/Output Control chart for this workstation. Assume an initial actual
backlog of 120 hours.

6. A company wishes to assign a set of jobs to a set of machines. The following table provides
data on the profit margin of each job when performed on a specific machine. Setup an
Excel Solver model to determine the set of assignments that maximizes production value.
a. Fill out the Excel formulas for the following cells:

G13
G14
G15
G16
C17
D17
E17
F17
G19

b. What is the Solver Target cell?

c. What are the Solver changing cells?
d. What are the Solver constraints?
e. What options of Solver must be checked?
7. The following jobs are waiting to be processed on day 250
Job Date Job received Production days needed Date job due
A 215 30 290
B 220 20 415
C 225 40 375
D 240 50 315
E 245 20 420
F 250 35 380

Sequence the jobs in the order of SPT, EDD, and Critical Ratio, and compute (i) Average
flow time, (ii) Average lateness, (iii) Average no. of jobs in the system, and (iv)
Utilization, for each of the three schedule of jobs.

8. A control rod mechanism is a nuclear reactor has 15 critical components with an average
reliability of 99.5% for each component. Determine the overall reliability of the
mechanism.
9. Determine the system reliability for the following systems.

(a)
R = 90%

R = 98% R = 92% R = 90%

R = 90%

R = 98% R = 99% R = 98% R = 95%

(b)
R = 95% R = 90% R = 94%

R = 95% R = 90% R = 94%

R = 95% R = 90% R = 94%

10. Fifty components of a safety system were tested for reliability, each for 200 hours of
operation. Of the 50, 2 failed after 50 hours of operation, 3 after 75 hours, 1 after 120
hours, and 1 after 150 hours. The rest of the components did not fail. Determine the
following failure rate statistics.
a. Percentage of failures.
b. Number of failures per unit-hour of operation.
c. Mean time between failures.
d. What is the expected number of failures over 1000 hours of operation?

11. In a mining operation an electoral exhaust system is used to pump out the fumes. The
break down data over the past 200 weeks is shown in the table below. Each time the
system breaks down the mining operation must be shut down. The estimated cost to repair
the system and the lost production amounted to $12,000. Routine maintenance service for
the exhaust system may be purchased at a cost of $6,000 per week. With this contract the
number of breakdowns is expected to average only 1.2 per week. Then, the cost to bring
the system back on line is $5,000 in lost production. Determine whether it is economical to
purchase the preventive maintenance contract.

No. of breakdowns No. of weeks that many breakdowns occurred (Frequency)

0 75
1 35
2 50
3 20
4 10
5 10
Answers to discussion questions

1. Define independent and dependent demand items.

Finished products whose demand is independent of production decisions are called
“Independent demand” items. Items for which demand can be directly calculated from
production decisions are called “Dependent demand” items. These are raw-materials and
parts required for the production of the finished goods.

2. What is Master Production Schedule?

Master Production Schedule specifies production quantities of each Independent Demand
item for a planning horizon of 12 to 15 weeks. Total of MPS quantities must be in
accordance with the aggregate production plan.

3. What is Bill of Materials?

Bill of materials is structured list of components, ingredients, and materials needed to make
an end product. Items needed to produce a given part are called components or “children”.
The part into which the components go us called “Parent”. The BOM also gives the number
of units of a child item needed to produce one unit of the parent item.

4. What is Low-Level coding and what how is it used?

A level code starting from zero at the top of the BOM tree and incremented by 1 going down
each level of the BOM tree is assigned. Then, the lowest level at which an item appears is
called Low-Level code. The MRP computations are processed one level at a time, starting
from level zero.

5. What are the benefits of MRP?

 Better response to customer orders
 Faster response to market changes
 Improved utilization of facilities and labor
 Reduced inventory levels

6. What are the inputs required for MRP?

 Master Production Schedule
 Bill of Materials
 Inventory status

7. What is “Lot Sizing” in MRP?

The process of combining net requirements into production lots is called lot sizing.

8. What are the reasons for using a lot sizing method other than Lot-for-lot?
 Lot-for-lot often requires too many lots that may not be economically justifiable
 Sometime lot-for-lot generates absurdly small lots

9. What does the part-period balancing lot-sizing technique attempt to do in deciding the lot
sizes?
It balances the setup and holding costs. PPB uses additional information by changing the lot
size to reflect requirements of the next lot size in the future.

10. Explain the terms flowtime and lateness.

 Flow time is the length of time a job is in the system; lateness is completion time minus due
date.

11. What are the advantages and disadvantages of shortest processing time (SPT) rule?
SPT minimizes the average flow time, average lateness, and average number of jobs in the
system. It maximizes the number of jobs completed at any point. The disadvantage is that
long jobs are pushed back in the schedule.
12. What is the Critical Ratio? To what jobs does Critical Ratio give priority to?
The Critical Ratio (CR) is an index number computed by diving the time until due date by
the working time remaining. The CR gives priority to jobs that must be done to keep
shipping on schedule.

13. What can be said about the jobs if CR < 1, or =1, or > 1?
If CR < 1, then the job has fallen behind, the work remaining exceeds the time until due date.
If CR = 1, then the job is on schedule, the work remaining exactly equals the time until due
date. If CR > 1, then there is slack, the time until due date exceeds the work remaining.

14. What is input-output control?

Input/output control keeps track of planned versus actual inputs and outputs, highlighting
deviations and indicating bottlenecks using cumulative backlog.

15. Define maintenance.

Maintenance consists of all activities involved in keeping a system's equipment in working
order.

16. Define reliability.

Reliability is the probability that a machine part or product will function properly for a
specified time under stated conditions.

17. What is FR(%)? Define it.

FR(%) refers to product failure rate. It measures the percent of failures among the total
number of products tested.

18. Define FR(N). How is computed?

FR(N) refers to the number of failures during a period of time. It measures the number of
failures over the total unit-hours the products operated without failing. it is the ratio of failed
units to total operating hours.

19. Define MTBF. How is related to FR(N)?

MTBF stands for Mean time between failures. It is the expected time between a repair and
the next failure of a component, machine, process, or product. MTBF is the reciprocal of
FR(N)

20. What is redundancy?

Redundancy is the use of a component in parallel to raise reliabilities.

21. What is the impact on system reliability of adding parts or components in parallel?
 This will increase the reliability of the system by introducing redundancy.

22. Increasing the number of parts or components in a product tends to reduce its reliability. Why
is this true only when adding components in series?
Adding parts in series involves an additional multiplication by a value less than one, so that
reliability must fall. Adding parts in parallel (the redundancy concept) increases reliability
because only one part of the parallel system must function.

23. Explain carefully how redundancy improves product reliability.

A redundant part or component is connected in parallel with the primary part or component.
"In parallel" means that either the original part or its backup needs to work, not that both
must work at the same time. Redundancy increases reliability by providing an additional path
(through the redundant part) to provide system reliability.

24. What is breakdown maintenance?

Breakdown maintenance is the remedial maintenance that occurs when equipment fails and
must be repaired on an emergency or priority basis.

25. Is there an optimal amount of preventive maintenance? What caution should be exercised
before calculating this optimal amount?
Too little preventive maintenance causes breakdown costs to rise sharply, adding more to
cost than is saved by less preventive maintenance; too much preventive maintenance reduces
breakdowns, but by an amount insufficient to offset the added cost of preventive
maintenance. Operations managers should assure that all costs of breakdowns have been
properly included in the calculations. There is a history of not including indirect and
subjective breakdown cost elements, which leads to performing too little preventive
maintenance.
Answers to problems

1.

B18 =B14/B13
B19 =B14*B5 b. B43
B20 =B13*B6
B23 =E13 c. C23:D26, D31:E34
E23 =B23+C23-D23
F23 =E23*F6*$B$18 d. D31:D34 <= H31:H34
B24 =E23 G31:G34 >= E15
B31 =E14 C23:D26 = Integer (if needed)
C31 =F23 D31:E34 = Integer (if needed)
F31 =E6
e. Assume linear model
G31 =B31+SUM(C31:E31)-F31
Assume non-negative
H31 =C31*$B$15
B32 =G31
B37 =SUMPRODUCT(E23:E26,F6:F9)*B19
B38 =D35*B20
B39 =E35*B7
B40 =C27*B9
B41 =D27*B10
B42 =G35*B8
B43 =SUM(B37:B42)

2.
A

B C2

D1 E2 D4

F G H2 I F G
 F

C A

1 2 3 4 5 6 7

Lead time = 7 weeks

Part Gross Available Net

A 50 5 50 – 5 = 45
B 1 x A = 45 5 45 – 5 = 40
C 2 x A = 2 x 45 = 90 10 90 – 10 = 80
D 4 x A + 1 x B = 4 x 45 + 40 = 220 20 220 – 20 = 200
E 2 x B = 80 50 80 – 50 = 30
F 1 x D = 200 150 200 – 150 = 50
G 1 x D = 200 50 200 – 50 = 150
H 2 x E = 2 x 30 = 60 5 60 – 5 = 55
I 1 x E = 30 0 30 – 0 = 30
3. A has releases of 100 in 4, 150 in 7; B has a release of 150 in 6, but on hand inventory accounted
for all other needs; C has releases of 150 in 4, 70 in 1; P has a release of 150 in 5 and F has a release of
450 in 5 (the beginning inventory of B leads to no other gross requirements of P or F).

1 2 3 4 5 6
MPS start for A 100 150

Item B Lead time = 1

Week: 1 2 3 4 5 6
Gross requirement 0 0 0 100 0 150
Scheduled receipts 50
Projected on-hand 100 100 150 150 150 50 50
Planned receipts 0 0 0 0 0 100
Planned order releases 0 0 0 0 100 0

Item C Lead time = 3

Week: 1 2 3 4 5 6
Gross requirement 0 0 0 100 0 150
Scheduled receipts 20 30
Projected on-hand 30 30 50 80 80 0 0
Planned receipts 0 0 0 20 0 150
Planned order releases 20 0 150 0 0 0

Item P Lead time = 2

Week: 1 2 3 4 5 6
Gross requirement 0 0 0 0 100 0
Scheduled receipts 50
Projected on-hand 0 0 50 50 50 50 0
Planned receipts 0 0 0 0 50 0
Planned order releases 0 0 50 0 0 0

Item F Lead time = 4

Week 1 2 3 4 5 6
Gross requirement 0 0 0 0 300 0
Scheduled receipts 30 40
Projected on-hand 0 0 30 30 70 70 0
Planned receipts 0 0 0 0 230 0
Planned order releases 230 0 0 0 0 0
4.

(i) L-4-L

Item LT = 1
Week: 1 2 3 4 5 6 7 8
Gross requirement 100 250 200 150 250 200 200 150
Scheduled receipts
Projected on-hand 100 100 0 0 0 0 0 0 0
Net Requirement 0 250 200 150 250 200 200 150
Planned receipts 0 250 200 150 250 200 200 150
Planned order releases 250 200 150 250 200 200 150 0

No. of setup = 7
Carrying cost = 0
Setup cost = 7 x $300 = 2100
Total cost = 2100

(ii) EOQ:
Total demand for 8 weeks = 1500
D (1 year) = (1500/8) x 52 weeks/year = 9750
H (for 52 weeks) = $0.80/week x 52 weeks = $41.60
S = 300
2(9750)300
Q=√ = 375
41.6

Item LT = 1
Week: 1 2 3 4 5 6 7 8
Gross requirement 100 250 200 150 250 200 200 150
Scheduled receipts 0 0 0 0 0 0 0 0
Projected on-hand 100 100 0 125 300 150 275 75 250
Net Requirement 0 250 75 0 100 0 125 0
Planned receipts 0 375 375 0 375 0 375 0
Planned order releases 375 375 0 375 0 375 0 0

Annual setup cost = (D/Q) S = (9750/375) x 300 = 7800

Annual holding cost = (Q/2)H per year = (375/2) x 41.60 = 7800
Annual cost = Annual setup cost + Annual holding cost = 7800 + 7800 = 15600
Weekly cost = Annual cost/52 = 15600/52 = 300
Cost for 8 weeks = Cost per week x 8 weeks = 300 x 8 = 2400

(iii) PPB

EPP = 300/0.80 = 375

Item LT = 1
Week: 1 2 3 4 5 6 7 8
Gross requirement 100 250 200 150 250 200 200 150
Scheduled receipts 0 0 0 0 0 0 0 0
Projected on-hand 100 100 0 350 150 0 200 0
Net Requirement 0 250 250 200
Planned receipts 0 600 450
Planned order releases 600 450

Periods Quantities Periods brought New Part- Total combined part-

combined combined forward – last qty periods periods
Lot #1 Receipt in week #2
2 250 0 0 0
2, 3 250 + 200 = 450 1 1x 200 = 200 0 + 200 = 200
200 + 300 = 500
2, 3, 4 450 + 150 = 550 2 2 x 150 = 300 (Close to 375)
Lot #2 Receipt in week #5
5 250 0 0 0
0 + 200 = 200
5, 6 250 + 200 = 450 1 1 x 200 = 200 (Close to 375)
5, 6, 7 450 + 200 = 650 2 2 x 200 = 400 200 + 400 = 600
Lot #3 Receipt in week #7
7 200 0 0 0
7, 8 200 + 150 = 350 1 1x 150 = 150 0 + 150 = 150

Summary:
Lot # in Week Lot size Lot PP Setup cost = 3 setups x $300 = $900
Total Lot PP = 850
Lot #1 Receipt in week #2 550 500
Total holding cost = 850 x $0.80 = $680
Lot #2 Receipt in week #5 450 200
Total cost = 900 + 680 = $1,580
Lot #3 Receipt in week #7 350 150

Total cost = 700 + 460 + 420 = $1,580

#5.
Week ending 1 2 3 4 5 6 7 8
Planned input 500 800 700 600 600 800 700 800
Actual input 700 700 700 800 600 500 500 800
Cumulative deviation 200 100 100 300 300 0 -200 -200
Planned output 650 650 650 650 650 700 700 700
Actual output 600 700 800 700 650 500 600 800
Cumulative deviation -50 0 150 200 200 0 -100 0
Backlog 120 220 220 120 220 170 170 70 70
#6.
G13 =SUM(C13:F13)
G14 =SUM(C14:F14)
G15 =SUM(C15:F15)
G16 =SUM(C16:F16)
C17 =SUM(C13:C16)
D17 =SUM(D13:D16)
E17 =SUM(E13:E16)
F17 =SUM(F13:F16)
G19 =SUMPRODUCT(C5:F8,C13:F16)

Solver parameters
Set Target Cell G19 MAX
Changing cells C13:F16
Constraints G13:G17 <= 1
C17:F17 = 1

Options: □ Assume linear model □ Assume non-negative

#7. SPT
Processing Days till due Completion
Job time (Days) date time (Flowtime) Lateness
B 20 165 20 0
E 20 170 40 0
A 30 40 70 30
F 35 130 105 0
C 40 125 145 20
D 50 65 195 130
195 575 180

Average flow time = 95.833

Average lateness = 30
Average WIP = 2.949
Utilization = 0.339
EDD
Processing Days till due Completion
Job time (Days) date time (Flowtime) Lateness
A 30 40 30 0
D 50 65 80 15
C 40 125 120 0
F 35 130 155 25
B 20 165 175 10
E 20 170 195 25
195 755 75

Average flow time = 125.83

Average lateness = 12.50
Average no. of jobs in the system = 3.87
Utilization = 0.26

CR
Processing Days till due Completion
Job time (Days) date time (Flowtime) Lateness CR
D 50 65 50 0 1.30
A 30 40 80 40 1.33
C 40 125 120 0 3.13
F 35 130 155 25 3.71
B 20 165 175 10 8.25
E 20 170 195 25 8.50
195 775 100

Average flow time = 129.17

Average lateness = 16.67
Average no. of jobs in the system = 3.97
Utilization = 0.25

#8. 0.99515 = 0.9257569 or 92.7569%

#9.
(a)
RRow 1= 0.98 x 0.92 x {1 – (1-.9) (1-.9) (1-.9)} = 0.900698
RRow 2 = 0.98 x 0.92 x 0.98 x 0.95 = 0.903256
RS = 1 – (1 - RRow 1)( 1 - RRow 2) = 1 – (1 – 0.900698)(1 – 0.903256) = 0.990393, or 99.0393%

(b)
R1 = 1 – (1 – 0.95) (1 – 0.95) (1 – 0.95) = 0.999875
R2 = 1 – (1 – 0.90) (1 – 0.90) (1 – 0.90) = 0.999
R3 = 1 – (1 – 0.94) (1 – 0.94) (1 – 0.94) = 0.998659

Rs = R1 x R2 x R3 = .998659 = 99.8659%
#10.
(a) Failed = 7
FR(%) = 14.0%
Total tested unit-hours = 10000
Operating Non-operating Non-operating
Failed time time/unit time
2 50 150 300
3 75 125 375
1 120 80 80
1 150 50 50
Total non-operating time = 805
Operating time = 10000 – 805 = 9195
(b) 7/9195 = 0.000761283
(c) 1/0.000761283 = 1313.57
(d) 1000* 0.000761283 = 0.761283306

#11.
No. of weeks that many
breakdowns occurred Relative Expected
No. of breakdowns (Frequency) frequency breakdowns
0 75 0.375 0.000
1 35 0.175 0.175
2 50 0.250 0.500
3 20 0.100 0.300
4 10 0.050 0.200
5 10 0.050 0.250
200 1.000 1.425

Expected number of failures/week = 1.425

Average breakdown with routine maintenance = 1.2

Repair cost/breakdown without routine maintenance = 12000

Routine maintenance cost/week = 6000
Repair cost/breakdown with routine maintenance = 5000

Cost without routine maintenance/week = 1.425 x $12,000 = $17,100

Cost with routine maintenance/week = 6000 + 5000 x 1.2 = $13,200

Total cost/week with routine maintenance is less expensive compared to without it. Therefore,
purchase routine maintenance contract.