Operations Management Assignment

Topics: Costs, Variable cost, Cost accounting Pages: 15 (3639 words) Published: November 2, 2010
ASSIGNMENT # 1 (Total 100 points)
Due on 7th October (Thursday) by 5pm
Make sure to write the name, student # and section #
for each student in the group on the cover page of the assignment 1. Suppose you/your group is the owner of a company that produces e-readers. The present production rate is 1000 e-readers /day and the selling price is $210/unit. It requires 200 workers working 8 hours/day to produce the e-readers and they are paid $20/hour. The material cost is $100/unit and overhead cost is $50,000/day. a)What is the unitless multi-factor (labor + material + overhead) productivity ratio? b)What is the labor productivity ratio (both unitless and in terms of units/labor hour)?

You/your group is thinking about buying a new expensive machine that is quite complex to handle but will improve the quality of the product. The production rate will increase to 1200 e-readers /day, material cost will reduce to $90/unit and the overhead cost will increase to $100,000/day (to pay for the depreciation of the machine). It will still require 200 workers working 8 hours per day (now to produce 1200 units); however the labor rate will be $30/hour. c)What will be the unitless multi-factor (labor + material + overhead) productivity ratio with the new machine?

2.An e-retailer of energy saving devices is able to collect the data for customer demand (in mil $) from its website for a new product. However, due to shortage in inventory, it is not able to fulfill all the requests. Demand and actual sales for the first nine months of 2009 are given below.

MonthDemand (in mil $)Sales (in mil $)
Jan 60 54
Feb 86 80
March 96 83
April 111 83
May 150 107
June 139 113
July 157 150
August 164 159
September 171 165

a)Which data, sales or demand, should be used if the e-retailer wants to forecast its demand for Oct 2009 – Dec 2009? Argue briefly. b)Use a 3-month moving average to forecast demand from October 2009 to December 2009. c)Use exponential smoothing with α = 0.25 to forecast demand for October 2009 – December 2009. Assume that the initial forecast for January is equal to the actual of sales or receipts (depending on your answer in (a)) for January.

Demand and sales in October, November and December turned out as follows:

MonthRequests (in mil $)Sales (in mil $)
October 176 170
November 191 188
December 130 125

d)Based on this new information, recalculate demand forecast for November 2009 – December 2009 for both 3-month moving average and exponential smoothing (α = 0.25) techniques. e)Based on actual and forecasts for April-December 2009, compute MAD and MSE for 3-month moving average and exponential smoothing (α = 0.25) techniques (Hint: Use the forecasting result up to October calculated in parts (b) and (c) and the forecasting result for November 2009 – December 2009 calculated in part (d)). f)Based on your answer in (e), which forecasting technique would you prefer? g)In general, when do you think managers prefer MAD over MSE (to decide on which forecasting technique is preferable) and vice versa?

3.The demand for electrical power in the Montreal area for 2003-2009 is shown below, in megawatts:

YearPower Demand (MW)

a)Use double exponential smoothing for the above data to forecast demand for 2010-2012. Assume α = 0.4 and β = 0.2 and start with initial estimates of average for 2003 as 74MW and trend for 2003 as 5MW. b)If the demand for 2010 turns out to be 125MW, what will be the demand forecast for 2011-2012 (α = 0.4 and β = 0.2)?

4.Manager of firm ABC is trying to decide whether to purchase a certain part or to have it produced...
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