Exam #2 BA 2110 Spring 2010

Excel models should be in the same Excel file, with a different sheet for each problem. The essay should submitted as a separate file. All files should be turned in via Blackboard by noon, Friday, April 30. The work on this exam must be done individually, any evidence of collaboration will result in a 0 on the exam for all parties involved. I will not accept any late work.

100 points total

This exam is setup to test your ability to apply the concepts we have learned in chapters 2,3,5,6 and 13. All 7 questions relate to a fictional business that has recently hired you because of your extensive Management Science background. Please contact me if you have any questions concerning the exam.

Problem Possible Score 1 10 2 15 3 15 4 15 5 15 6 15 7 15 Total 100

You have recently been hired by Midwest Loan Services in downtown Houghton. Midwest originates and services home loans for credit unions across the country and internationally. They have following problems they would like you to model and solve. Question 1: 10 points Midwest has an internal customer service call center that receives calls from credit union members who have questions or issues concerning their loans. The call center operates from 8am to 8pm. The call center software has been tracking the average arrival rates during the following days and times. The arrival rates follow a Poisson distribution.
Sunday 4 12 Monday 16 24 Arrival Rate per hour Tuesday Wednesday Thursday 8 22 10 17 15 29 Friday 12 14 Saturday 9 15

8am-2pm 2pm-8pm

Staff can complete a call in an average of 8 minutes per call, actual service times follow an exponential distribution. Management wants to determine how many people should be working during each day and time period to have the average wait time to be <= 3 minutes. Use the M/M/s model in the Q.xls file to determine the minimum number of servers during each day and time period. Summarize the results in Excel and provide a recommendation. Question 2: 15 points Management needs to translate your recommendation from question 1 into a staffing plan. They staff part-time people on shifts that are four consecutive mornings or afternoons. They work from either 8am to 2pm or 2pm to 8pm. (They dont work both morning and afternoon, just morning or afternoon.) They also have full-time people staffed on shifts that are three consecutive days from 8am to 8pm. Part-timers who work either morning or afternoon shifts get $8.50 hour and full-time get $13 per hour. For hours worked on Saturday or Sunday workers receive an additional 15% per hour. Management wants to staff at least 1 full-time worker on any given morning or afternoon of any given day. Develop an Excel model to determine the optimum number of people to hire.

Question 3: 15 points The Loan Origination team at Midwest works with credit union members to process all the necessary paperwork to get the member a home loan. The team consists of 3 loan officers, two processors (Jean and Lynn), and 3 closers. Loans go through the following processes in order close a loan for a member. The tasks done by the different members of the team are noted in areas outlined below. For example, the Loan Officers are responsible for getting loan information from the phone calls to Genesis. 25% of loans come via phone, 50% via web applications and 25% through a network called Prime Alliance.
Processing Team Phone Credit Score

Rewor k

Processing

Appraisal & Title Loan Officers Web Genesi s Desktop Underwriter (DU) Homeowners Insurance

Closers

Prime Alliance

Rejected

Flood Insurance

Closin g

The table to the right describes the time required and any percentage of the total flow that go to various operations. For example, 10% of the loans that are processed through Desktop Underwriter (DU) are rejected. Either Jean or Lynn can do the necessary DU work, only Jean handles the rework required, Lynn gets all credit scores and either Jean or Lynn can process the loans. The 3 loan officers work 5 days a week for 8 hours per day. The 3 closers work 5 days a week for 8 hours per day. Lynn and Jean also work 5 days a week for 8 hours per day.

Task Phone Web Prime Alliance Jean DU Lynn DU Jean Rework Lynn Credit Score Rejected Jean Process Lynn Process Appr and title Insurance Flood Insurance

% of flow 25% 50% 25%

20% 10% 100% 100% 100% 100% 25%

Time required (min per loan) 60 10 40 10 15 20 4 0 18 25 30 20 5

Management wants to determine the max number of loans the origination team can process per week. Develop an Excel model to solve this problem. Question 4: 15 points The accounting department is forecasting a cash flow issue in the next 6 weeks. They project the following cash inflows and outflows.
Week ($Millions) Cash Inflows Cash Outflows 1 9.8 11.2 2 9 9.1 3 10.8 12 4 13.2 13.5 5 10.5 8.2 6 14.7 14

They are working with a bank to provide the following loan options that can be taken out at any time period required.
Investment A B C D Rate 0.85% 1.50% 2.36% 2.92% Term (wk) 1 2 3 4 Setup Cost $1,200 $1,600 $1,600 $2,000

Since each loan requires a large amount of paperwork, each loan incurs a fixed setup cost when the loan is taken out. This must be accounted for in the cash flow at the time of the loan starting. Midwest does receive interest of %0.30 on the weekly ending balance. Management would like to have a minimum of $500,000

on hand at the end of each week. Create an Excel model to determine the optimum loan strategy. Question 5: 15 points Midwest produces a large amount of mailings on a weekly basis. They have been working with three local printers to provide outsourcing options to meet the weekly demand. Each week the purchasing manager contacts the 3 printers to get their current daily capacity in batches and cost per batch of mailings. Each printer runs mailings in certain size batches. All this information is located in the Question5 worksheet in your Excel file. They can currently produce up to 1,250 mailings internally at Midwest each day at a cost of $0.26 each. Midwest needs to send out 23,432 mailings this week. To simplify the weekly printing strategy, management has asked you to make your Excel model rely on the included excel file so that they can simply copy and paste the weekly outsourced printing costs. Use the Excel file to create a model that will minimize printing cost while meeting the constraints. Question 6: 15 points One of Midwests major customers is Baxter Federal Credit Union, which is tied to Baxter Healthcare. The management team at Baxter Healthcare (not the credit union) is very interested in the tools and techniques you covered in your Quantitative Problem Solving class. Your manager has asked to you write a 1 to 2 page double spaced paper outlining some of the tools and techniques they could use to model and answer their business problems. Research Baxter (http://www.baxter.com/) and give 2 specific examples of how concepts covered in this class would apply to that business (not examples covered in this exam.) Make sure to note how these examples would impact their financial or operational performance (costs, profits, etc.) Question 7: 15 points Midwest made the mistake of hiring a NMU student to create some spreadsheets to analyze their loan servicing capacity and profitability. Management cant figure out the resulting spreadsheet and would like you to update it so it is understandable and useful. They currently believe that it is incorrect and suggest you dont believe the current solution. Use the concepts and techniques you learned in BA2110 to fix the Question7 worksheet in your Excel file.