Kathmandu University School of Management

Mid-term Examination

Subject: Fundamental of Operation Management

BBA Hons/Emphasis 2017 (Year III, Semester II) - FALL 2020

Full marks: 100

(Covers 20 + 10 =30%) weight

Group A

Long Answer Questions [8x10= 80]

1. What recent challenging factors are to be considered while managing operation activities in
modern competitive environment?
2. XYZ Company is thinking to develop new product. You recently selected as an Operation
manager in this Company. How you develop new product? Explain.
3. A manufacturing Company and B manufacturing Company produce and sell identical
product. The annual output and various inputs used in production by these Companies are
given in the following table
Company A Company B
Output units 1500 2000
Component per unit 2 1.90
Labor hour per unit 3 3.1
Cost per component Rs. 5 Rs. 5.25
Cost per hour Rs.4.25 Rs. 4.5
Selling price per unit Rs.25 Rs. 24
Depreciation and interest Rs 5000 Rs.7000
Energy cost Rs.1000 Rs.1200
Compare the performance of each Company by using various productivity measures and suggest
which Company’s performance is best.

4. What considerations are considered while planning labor? Explain with suitable example.
5. X Company asked to evaluate two machines. After some investigation, Company determines
that they have costs shown in the following table. It also told to assume that:
The life of each machine is 5 years.
The company thinks it knows how to make 10% on investments
Labor and maintenance are paid at the end of the year.
Machine X Machine Y
Original cost Rs 10000 Rs 20000
Labor per year 2000 4000
Maintenance per year 4000 1000
Salvage value 2000 7000
Which machine is recommended under net present value method?

6. What is the product design? Describe the product development process.

7. What do you mean by waiting line? What are different goals and characteristics of waiting
line? Explain.
 8. Y Company likes to evaluate four types of process i.e. process A, process B, Process C and
process D. The costs associated with different process is summarized as:
Processes Total Fixed Cost Unit Variable Cost
Process A Rs 100000 Rs 60
Process B 150000 50
Process C 200000 30
Process D 300000 20
Find the cross over point for process A and B, B and C, C and D. Also prepare a graph.

Group B: Case Analysis

Read the following case below and answered the following questions. [1x20= 20]

Design for Quality Ltd. (DQL) is a consulting firm that specializes in the design and implementation of
quality management programs for service companies and organizations. It has had success designing quality
programs for retail stores and catalogue order services. Recently, DQL was approached by a catalogue order
company, Book Tek Media Incorporation, with the offer of a job. Book Tek sells books, CDs, DVDs, and
videos through its mail order catalogue operation. Book Tek has decided to expand its service to the internet.
Book Tek is experienced in catalogue telephone sales and has a successful quality management program in
place. Thus, the company is confident that it can process orders and make deliveries on time with virtually
few errors.

A key characteristic of Book Tek’s quality management program is the company’s helpful, courteous, and
informative phone representatives. These operations can answer virtually any customer question about Book
Tek’s product, with the help of an information system. Their demeanor toward customers is constantly
monitored and graded. Their telephone system is so quick that customers rarely have to wait for a
representative to assist them. However, the proposed internet ordering system virtually eliminates direct
human contract with the customers. Since there will be no human contract, Book Tek is concerned about
how it will be able to customers feel that they are receiving high-quality service. Furthermore, the company
is unsure how its employees can monitor and evaluate the service to know if the customer thinks it is good or
poor. The primary concern is how to make customers feel good about the company in such an impersonal,
segregated environment. At this point Book Tek is unconcerned with costs, management simply wants to
develop the highest-quality, friendliest Web site possible.

DQL indicated that it would like to take on the job, but while it is familiar with Book Tek’s type of catalogue
order system, it is relatively unfamiliar with how things are ordered on the internet for this kind of retail
book business. It suggested that its first order of business might be to investigate what other companies were
doing on the internet.

Questions for discussion:

a) Help DQL for quality management plan including quality dimensions and characteristics of
internet ordering system.
b) What are some ways for achieving customer satisfaction?
c) How to evaluate the success of the order system in terms of quality