TEST BANK for Matching Supply with Demand: An Introduction to Operations Management, 4th Edition, Ge by welldoneassistant

Matching Supply with Demand: An Introduction to Operations Management, 4e (Cachon) Chapter 2 The Process View of the Organization 1) Butternut is a ski resort in Massachusetts. One of their triple chair lifts unloads 1296 skiers per hour at the top of the slope. (A triple chair lift can carry three passengers per chair.) The ride from the bottom to the top takes 5 minutes. How many skiers are riding on the lift at any one time? (Round the answer to the nearest whole number.) Answer: 108 skiers Explanation: Use Little's Law. 1296 skiers/hour * 5/60 = 108 skiers Difficulty: 3 Hard Topic: Littles Law AACSB: Analytical Thinking Blooms: Apply 2) Home Depot's annual turns are 4.7, its Cost of Goods Sold (COGS) is $44.7 billion, and its gross margin is 33%. Recall, gross margin = (Revenue – COGS) / Revenue. What is the average inventory it holds? (Round the answer to 2 decimal places.) Answer: $9.51 billion Explanation: $44.7 billion / 4.7 =$9.51 billion. Note that average inventory in dollars is measured by the cost of goods sold, thus the gross margin does not play a role in the calculation. Difficulty: 3 Hard Topic: Littles Law AACSB: Analytical Thinking Blooms: Apply 3) A company's holding cost is 16% per year. Its annual inventory turns are 9.5. The company buys an item for $50. What is the average cost in dollars to hold this item in inventory? (Round the answer to 2 decimal places.) Answer: Average cost: $ 0.84 Explanation: The item will be turned 9.5 times a year. Thus, for each turn it stays in inventory, the holding cost is 16%/9.5 of the cost of the item. Thus, the average cost to hold this item in inventory is $50 * (16%/9.5) = $0.84 Difficulty: 3 Hard Topic: Inventory Turns and Inventory Costs AACSB: Analytical Thinking Blooms: Apply

4) Trader Bob, an organic food retail chain, operates 365 days a year. In 2007, the company turned its inventory approximately 25 times. The company's COGS were 60% of its Sales and its annual Sales were about $7,000M that year. What was Trader Bob's average inventory in 2007? (Round the answer to the nearest whole number.) Answer: $168 million Explanation: COGS = 0.6 × 7000M = 4200M. Inventory = COGS / Turns = 4200M / 25 = $168M Difficulty: 3 Hard Topic: Littles Law AACSB: Analytical Thinking Blooms: Apply 5) Assuming Trader Bob's annual inventory holding costs are 20% (an item that cost $10 to purchase would cost $2 to hold in inventory for one year), what is the inventory cost of an item which sells for $20 and costs Trader Bob $12 to buy? Assume that this item has inventory turns of 25 per year. (Round the answer to 3 decimal places.) Answer: $0.096 Explanation: 20% per year with 25 turns is .20/25 = 0.008%. COGs is $12. So, inventory cost is 0.008% × $12 = $0.096 Difficulty: 3 Hard Topic: Inventory Turns and Inventory Costs AACSB: Analytical Thinking Blooms: Apply [The following information applies to questions 6-7.] Joe's Beer, Bait, & Tackle Co. Joe's Beer, Bait, & Tackle Co. is a small chain of fishing tackle stores in northern Minnesota. In 2009, the company's revenue was $4,300,000 and its cost of sales was $3,200,000. Assume 52 weeks and 365 days per year. 6) Joe keeps only 5.5 days-of-supply of inventory on average because much of his inventory is live bait and micro-brew beer, both of which have a short shelf life. What is his annual inventory turns? (Round the answer to 2 decimal places.) Answer: 66.36 Explanation: 365/5.5 = 66.36 Difficulty: 3 Hard Topic: Inventory Turns and Inventory Costs AACSB: Analytical Thinking Blooms: Apply

7) Given that he has 5.5-days-of-supply of inventory on average, how much inventory does Joe have on average? (Round the answer to the nearest whole number.) Answer: $48,219 Explanation: $3,200,000/ (365/5.5) =$48,219 Difficulty: 3 Hard Topic: Five Reasons to Hold Inventory AACSB: Analytical Thinking Blooms: Apply 8) Which of the following best explains why slow turning items may not be profitable at a brick-and-mortar retailer? A) If turns are low, days-of-supply will also be low. B) If turns are low, the gross margin will also be low. C) If turns are low, the setup costs to stock the shelf will be high. D) If turns are low, blocking and starving are more likely to occur. E) If turns are low, units spend a long time on the retailer's shelves. Answer: E Explanation: a) If turns are low, days-of-supply will be high. b) it is not necessary that the gross margin will be low, since various factors affect gross margin. c) setup costs are not affected by turns. d) starving is less likely to occur when turns are low. e) units spend too much time on the shelves, and this will increase the inventory holding cost. Difficulty: 3 Hard Topic: Inventory Turns and Inventory Costs AACSB: Analytical Thinking Blooms: Analyze 9) Is it possible for two firms to have the same annual inventory turns and the same gross-margin but different days-of-supply? A) Yes, because days-of-supply measures how long the firm can satisfy demand with its current inventory whereas inventory turns measures the frequency at which inventory turns over. B) Yes, inventory turns and gross margin are related but they are independent of days-of-supply C) Yes, the firm with the higher days-of-supply will have the lower return on invested capital. D) No, if firms have the same gross-margin then they must have the same days-of-supply. E) No, if firms have the same inventory turns then they must have the same days-of-supply. F) None of the above. Answer: E Explanation: Knowing inventory turns uniquely specifies days of supply because inventory turns = 365/ days of supply. Difficulty: 3 Hard Topic: Inventory Turns and Inventory Costs AACSB: Analytical Thinking Blooms: Analyze 3 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

[The following information applies to questions 10-11.] ProofSmart Inc. ProofSmart Inc., a supplier of home insulation materials, was burned down in a recent fire. From the remains of what used to be the accounting ledger, the following information was recovered: Inventory Gross Margin Inventory Turns

2006 $2,367,121 42% 11

2007 $2,418,257 45% [unreadable]

Prior to the fire, ProofSmart saw a sales growth of 48% in 2007, a record performance for the 18-year-old company. (NOTE: Gross margin is defined as 1 - (COGS/Sales).) 10) What was the sales for 2007? Circle the answer closest to the correct answer. A) $318,000 B) $38,000,000 C) $43,000,000 D) $66,000,000 E) $85,000,000 F) Cannot be determined from the data given Answer: D Explanation: 2006 COGS = 2,367,121 * 11 = $26,038,331 2006 Sales = 26,038,331 / (1-42%) = $44,893,674 2007 Sales = 44,893,674 * 148% = $66,442,638 Difficulty: 3 Hard Topic: Inventory Turns and Inventory Costs AACSB: Analytical Thinking Blooms: Apply

11) What was the inventory turns for 2007? Circle the answer closest to the correct answer. A) 10 B) 11 C) 12 D) 13 E) 14 F) 15 G) Cannot be determined from the data given H) None of these Answer: F Explanation: 2007 COGS = $66,442,638 * (1-45%) = $36,543,451 2007 Inventory Turns = $36,543,451/2,418,257 = 15 Difficulty: 3 Hard Topic: Inventory Turns and Inventory Costs AACSB: Analytical Thinking Blooms: Apply

[The following information applies to questions 12-13.] Cheap Retailers The following table shows financial data (year 2006) for Dirt Cheap Wholesale and Kwiki-Mart, two U.S. retailers.

Inventories ($MM) Sales (net $MM) COGS ($MM)

DIRT CHEAP WHOLESALE 4754 59217 52762

KWIKI-MART STORES 40894 397206 326606

Assume that both companies have an average annual holding cost rate of 20% (i.e. it costs both retailers $2 to hold an item that they procured for $10 for one entire year). 12) How many days, on average, does a product stay in Dirt Cheap's inventory before it is sold? Assume that stores operate 365 days a year. (Round the answer to 2 decimal places.) Answer: 32.89 days Explanation: Dirt Cheap has a COGS=$52762M = flow rate R. Inventory I = $4754M. Therefore, flow time T = I/R = 4754/52762 = .09 years, or 32.89 days. Difficulty: 3 Hard Topic: Inventory Turns and Inventory Costs AACSB: Analytical Thinking Blooms: Apply 13) How much lower (expressed in dollars) is, on average, the inventory cost for Dirt Cheap compared to Kwiki-Mart of a house hold cleaner valued at $5 COGS? Assume that the unit cost of the house hold cleaner is the same for both companies and that the price and the inventory turns of an item are independent. (Round the answer to 3 decimal places.) Answer: $0.035 Explanation: Inventory turns for Dirt Cheap = 1/.09 = 11.1 turns. Flow time for Kwiki-Mart = Inventory/COGS = 40894/326606 = 0.125. Therefore, inventory turns for Kwiki-Mart = 7.98. Holding costs per year = 20% or $1 per unit for one year. This means inventory costs per unit for Dirt Cheap = 1/11.1 = $0.09. For Kwiki-Mart, the inventory costs per unit = 1/7.98 = $0.125. So, Dirt Cheap's costs are 3.5 cents or $0.035 lower. Difficulty: 3 Hard Topic: Inventory Turns and Inventory Costs AACSB: Analytical Thinking Blooms: Analyze

Matching Supply with Demand: An Introduction to Operations Management, 4e (Cachon) Chapter 3 Understanding the Supply Process: Evaluating Process Capacity 1) The Philadelphia Airport has 5 de-icing stations. Each plane uses a single station and each station takes 11.5 minutes to de-ice a plane. How many planes per hour can be de-iced at the Philadelphia Airport? (Round the answer to 2 decimal places.) Answer: 26.09 planes Explanation: Each station de-ices 60 min/11.5 min planes per hour. Five stations can de-ice 60/11.5 * 5 = 26.09 planes. Difficulty: 3 Hard Topic: Process Utilization and Capacity Utilization AACSB: Analytical Thinking Blooms: Apply 2) Consider a process that has 3 stations, ordered in sequence: 1, 2, and 3. At each station, two consecutive tasks are performed one after the other. The time (in seconds per unit) it takes for a single person to perform each task is given in the table below (e.g., task A2 takes 10 seconds per unit): Station 1 2 3

# of Task A1 Task A2 Task B1 Task B2 Task C1 Task C2 Workers 1 20 10 2 40 40 1 1

The table also gives the number of workers at each station. What is the capacity of this process (in units per minute)? (Round the answer to 1 decimal place.) Answer: 1.5 units/minute Explanation: The capacity of station 1 is 60/(20 + 10) = 2 units per minute. Station 2 is 60/(40 + 40) = 0.75 units per worker, or 2 × 0.75 = 1.5 units in total. Station 3 is 60/(15 + 5) = 3 units per minute. The capacity of the process is the capacity of the bottleneck, which is the slowest step. That is station 2, which produces 1.5 units/min. Difficulty: 3 Hard Topic: Process Utilization and Capacity Utilization AACSB: Analytical Thinking Blooms: Apply

3) Consider the following four step process:

The following data are available for the four steps: Activity time per unit (min) Capacity per worker (units/min) Number of workers

A 0.25 4 2

B 0.33 3 3

C 0.2 5 2

D 0.5 2 4

Suppose the steps in activity D are made easier, so the activity time per unit in step D is reduced by 50% (to 0.25 minutes per unit). If the assignment of workers to steps remains the same, by how much does the capacity of the entire process increase in units per minute? Answer: 0 units per minute Explanation: Before the change, the process capacity is min (4 × 2, 3 × 3, 5 × 2, 2 × 4) = 8 units per min. If the activity time is cut in half for stage D, then process capacity for step D is (1/0.25) × 4 = 16 units per min. Step A can only produce 8 units per minute, so the total capacity of the process doesn't increase. Difficulty: 3 Hard Topic: How to Draw a Process Flow Diagram; Workload and Implied Utilization AACSB: Analytical Thinking; Knowledge Application Blooms: Analyze

4) Panini, a popular sandwich shop, offers 3 types of sandwiches: grilled vegetables, grilled chicken, and pastrami. The table below provides demand data: Demand per hour

Grilled Vegetables 25

Grilled Chicken 15

Pastrami 10

There are up to five steps in the process of making sandwiches listed below with activity times. Only 50% of customers want their sandwich toasted, no matter which sandwich is ordered. Step Cut bread Grill Slice meat Toast Wrap

Grilled Vegetables .75 minutes 1.4 minutes 2 minutes .5 minutes

Grilled Chicken .75 minutes 1.4 minutes 2 minutes .5 minutes

Pastrami .75 minutes 3 minutes 2 minutes .5 minutes

Suppose Panini employs 1 worker at each step. What is the highest implied utilization of this process? (Round the answer to 3 decimal places.) Answer: 0.933 Explanation: Evaluate workload per hour on each step: Cut = 0.75 × 50 = 37.5; Grill = 1.4 × 40 = 56; Slice = 3 × 10 = 30; Toast = 2 × 0.5 × 50 = 50; Wrap = 0.5 × 50 = 25. Implied utilizations are then 37.5/60, 56/60, 30/60, 50/60 and 25/60. The largest one is 56/60. The highest implied utilization = 0.93. Difficulty: 3 Hard Topic: Workload and Implied Utilization AACSB: Analytical Thinking Blooms: Apply

[The following information applies to questions 5-6.] Department of Motor Vehicles The local Department of Motor Vehicles issues new licenses and renews licenses. (See the diagram below.) The office receives 110 customers per hour. All customers see a receptionist first. The receptionist directs them in one of three directions: 75% go directly to issue license (staffed by 9 workers) where a new photo and license are done, 15% are required to take an eye test (staffed by one worker), and 10% must first take a multiple-choice electronic written test (on one of three computers). Only 85% of people pass the eye test and the remaining 15% exit. The customers who pass the eye test proceed to the written test where 10% of the people fail it, while 90% pass the test and proceed to issue license.

Data on each station are provided in the following table: Reception Eye Test Written Test Issue License

Workers 1 1 3 9

Activity time per worker (min) 0.4 5 15 6

5) What is the implied utilization of the Receptionist? (Round the answer to 2 decimal places.) Answer: 73.33%.

Explanation: Workers Reception 1 Eye Test 1 Written Test 3 Issue License 9

Processing Capacity per Implied time (min) Flow rate hour utilization 0.4 110 150 73% 5 110 * 0.15 = 16.5 12 138% 15 110 * 0.1 + 16.5 * 0.85 = 25.025 12 209% 6 110 * 0.75 + 25.025 * 0.9 = 105.0225 90 117%

Flow rate for receptionist = 110 customers per hour, because all customers first see the receptionist. Hourly Capacity for receptionist = 60 minutes/0.4 minutes per customer = 150 per customer. Implied utilization of the receptionist = 73.33%. Difficulty: 3 Hard Topic: How to Draw a Process Flow Diagram; Workload and Implied Utilization AACSB: Analytical Thinking Blooms: Apply 6) What is the implied utilization of issue license? (Round the answer to 2 decimal places.) Answer: 116.69% Explanation: Implied Utilization = Demand/CapacityFlow rate for issuing a license 75% of the customers go directly to issuing a new license: 0.75 × 110 = 82.5 customers per hour 15% take the eye exam, 0.15 × 110 = 16.5, and 85% of them pass to go to the written test, 0.85 × 16.5 = 14.025 customers 10% go straight to the written test = 0.1 x 110 = 11 customers 90% of the customer pass the written test = 0.9 (11 + 14.025) = 22.5225 customers The overall flow rate for issuing a license is = 22.5225 + 82.5 = 105.0225 customers per hour. Hourly Capacity for receptionist = 6 minutes/9 workers = 2/3 minutes= 60 minutes / (2/3 minutes) = 90 Implied Utilization of issuing a license = 105.0225/90 = 116.69 The implied utilization of issue license is 116.69%. Difficulty: 3 Hard Topic: How to Draw a Process Flow Diagram; Workload and Implied Utilization AACSB: Analytical Thinking Blooms: Apply

[The following information applies to questions 7-8.] Happy Toy Company The Happy Toy Company's R&D department is always looking for great ideas for new toys. On average, the R&D department generates about 10 new toy ideas a week. To go from idea to approved product, the idea must go through 5 stages:

In initial screening, a staff member spends 2 hours considering the idea. In mock-up, the idea is sent to one of many suppliers to produce a physical mock-up of the toy. There is essentially unlimited capacity at this stage, but it takes 4 days to get the mock-up built, even though multiple mock-ups can be built simultaneously. In safety testing, each idea requires 2 days from a staff member to have the idea checked for safety. In focus groups, each idea requires 3 hours from a staff member to have the idea test marketed. Finally, the management team meets for 4 hours per idea to decide if the toy should be added to its line of products sold to customers. At the end of each stage, successful ideas enter the next stage. All other ideas are dropped. The following table summarizes the process:

Screening Mock-up Safety Focus group Final decision

Pr(Success) 60%

Pr(Fail) 40%

Staffing 2

50% 35% 20%

50% 65% 80%

7 1 1

Time per idea put into this stage 2 hours 4 days 2 days 3 hours 4 hours

For example, there are 7 staff members that work in the safety stage. In each stage, each idea is processed by only one staff member. For example, once one of the 7 staff members starts working on an idea in the safety stage, the idea completes that stage in 2 days and either exits or moves to the focus group stage. Everyone works 8 hours per day, 5 days a week. 7) On average, how many ideas are in the mock-up stage? (Round the answer to 1 decimal place.) Answer: 4.8 ideas

Explanation: Demand for initial screening = 10 ideas per week. Output from initial screening = 10 * 60% = 6 ideas per week. 6 ideas pass the screening stage and then enter the mock-up stage per week. Each idea spends 4 days (5 days per week) or 0.8 weeks in the mock-up stage. Use Little's Law, 6 * 0.8 = 4.8 ideas in the mock-up stage. Difficulty: 3 Hard Topic: Process Utilization and Capacity Utilization AACSB: Analytical Thinking; Knowledge Application Blooms: Apply 8) Among these stages, what is the highest implied utilization? (Round the answer to 2 decimal places.) Answer: 34.29% Explanation: The highest implied utilization is safety, 34.29%. time per available Pr idea Demand per hours per implied (success) Pr (Fail) Staffing (hours) week week utilization screening 60% 40% 2 2 10 80 0.2500 mock-up 100% 0 32 6 safety 50% 50% 7 16 6 280 0.3429 focus group 35% 65% 1 3 3 40 0.2250 final dicision 20% 80% 1 4 1.05 40 0.1050

Difficulty: 3 Hard Topic: Workload and Implied Utilization AACSB: Analytical Thinking; Knowledge Application Blooms: Analyze

[The following information applies to questions 9-10.] Comfy Shoes, Inc. — Implied Utilization Comfy Shoes, Inc. builds shoes tailored to meet each individual customer's needs. Customers who visit the downtown offices of Comfy Shoes in Philadelphia can choose one or more of the following four custom-tailoring services. Customers receive their shoes in the mail within a week of their initial visit. Service A. Walking Basics B. Walking Plus C. Running Basics D. Running Adv

Description Time Take measurements for basic walking shoes. 12 min. Choose a specific design (e.g. material, color selection). 12 min. Take measurements for tailor-made running shoes. 10 min. Consult physical therapist and obtain precise needs for running shoes and choose a specific design. 40 min.

Resource used 1 attendant 1 attendant 1 attendant 1 attendant

The company offers the following packages to their customers: Package 1: Includes only Walking Basics (Service A) Package 2: Includes Walking Basics and Walking Plus (Services A and B) Package 3: Walking Basics, Walking Plus, and Running Basics (Services A, B, and C) Package 4: All four services (A, B, C, and D) Customers of Comfy Shoes visit the store at a constant rate (you can ignore any effects of variability) of 20 customers per day. Of these customers, 45% buy Package 1, 10% buy Package 2, 20% buy Package 3 and 25% buy Package 4. The mix does not change over the course of the day. The store operates 12 hours a day. 9) What is the implied utilization of the attendant in service D? Answer: Service D has an implied utilization of 28%. Explanation: The calculations are summarized below:

Task A. Walking Basics B. Walking Plus C. Running Basics D. Running Adv

Time # Avail. (min) workers Cap. 12 1 60 12 1 60 10 1 60 40 1 60

Package 1 2 3 0.45 0.10 0.20 9 2 4 2 4 3.33

4 Total Utilization 0.25 5 20 0.33 5 11 0.183 4.166 7.5 0.125 16.66 16.66 0.278

Difficulty: 3 Hard Topic: Workload and Implied Utilization AACSB: Analytical Thinking Blooms: Analyze 8 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

10) Which resource has the highest implied utilization? A) Service A (Walking Basics) B) Service B (Walking Plus) C) Service C (Running Basics) D) Service D (Running Adv) Answer: A Explanation: Service A (Walking Basics) has the highest implied utilization. Difficulty: 3 Hard Topic: Workload and Implied Utilization AACSB: Analytical Thinking Blooms: Analyze [The following information applies to questions 11-12.] Comfy Shoes, Inc. — Bottleneck At the end of the spring season, Comfy Shoes anticipates an increase in the demand to 50 customers per day. A change in the mix of packages demanded is also expected: 30% of the customers ask for Package 1, 10% for Package 2, 10% for Package 3 and 50% for Package 4. The company will hire an additional attendant to help with Service A (Walking Basics). 11) What will be the bottleneck in the process given this new demand pattern? A) Service A (Walking Basics) B) Service B (Walking Plus) C) Service C (Running Basics) D) Service D (Running Adv) Answer: D Explanation: Calculations are as follows: Package Time # Avail. 1 2 Task (min) workers Cap. 0.3 0.10 A. Walking Basics 12 2 120 15 5 B. Walking Plus 12 1 60 5 C. Running Basics 10 1 60 D. Running Adv 40 1 60

3 4 Total Utilization 0.10 0.5 5 25 50 0.417 5 25 35 0.58 4.166 20.83 25 0.4166 83.33 83.33 1.388

Difficulty: 3 Hard Topic: Bottleneck, Process Capacity, and Flow Rate (Throughput) AACSB: Analytical Thinking Blooms: Analyze

12) How many customers a day will not be served? Answer: 7 customers Explanation: Service D receives 0.5*(50/12)*40=83.33 minutes of work every hour. Only 60 minutes of work can be served. Thus, every hour, 23.33 minutes of work, or 23.33/40th of a customer is not served. Customers not served in a day = [(83.333 – 60)/40]*12=7 customers a day will not be served. Put another way, the worker has 60x12=720 minutes available each day. 40 min per customer means that 720/40=18 customers can be served. 50% of 50 = 25 customers arrive each day, so 25–18=7 cannot be served. Difficulty: 3 Hard Topic: Bottleneck, Process Capacity, and Flow Rate (Throughput) AACSB: Analytical Thinking; Knowledge Application Blooms: Analyze

[The following information applies to questions 13-15.] Old City Photographics Located alongside a cobblestoned street in Old City, Old City Photographics (OCP) specializes in the processing of the traditional 35mm negative film, a once dominant photographic medium now in decline due to the popularity of digital photography. OCP offers three packages to their customers. With the standard package, the customer gets a set of 6"×4" prints for $19.99. The deluxe package adds to the standard package a CD-ROM of high-resolution scans of the pictures for $29.99. Finally, the $39.99 pro package is similar to the deluxe package in that it comes with a CD-ROM, although the customer gets a contact print rather than a set of prints. (A contact print is an 8"×10" sheet of photographic paper that has all pictures on the roll of film printed next to each other at reduced dimensions and is used as an index.) The workflow for OCP is shown below (s = standard, d = deluxe, p = pro):

OCP is operated by one person at every station. 13) On average, OCP receives 13 jobs per hour which consist of 44% standard, 37% deluxe and 19% pro. Which of the following statement best describes OCP's process? A) The process is demand-constrained. B) The process is capacity-constrained and "process film" is the bottleneck C) The process is capacity-constrained and "scan film" is the bottleneck. D) The process is capacity-constrained and "make 6"×4" prints" is the bottleneck. E) The process is capacity-constrained and "make contact print" is the bottleneck. Answer: A

Explanation: Implied utilization is: (100% * 13 jobs/hr * 2min/job ) / (60 min/hr) = 0.43 at "process film" ((37% + 19%) * 13 jobs/hr * 5 min/job ) / (60 min/hr) = 0.61 at "scan film" ((44% + 37%) * 13 jobs/hr * 4 min/job) / (60 min/hr) = 0.70 at "make 6"×4" prints" (19% * 13 jobs/hr * 10 min/job) / (60 min/hr) = 0.41 at "make contact print" As implied utilization is less than 1.0 at all steps, the process is demand-constrained. Difficulty: 3 Hard Topic: Bottleneck, Process Capacity, and Flow Rate (Throughput) AACSB: Analytical Thinking; Knowledge Application Blooms: Analyze 14) What is the implied utilization (ratio of workload relative to capacity) at "Scan Film"? A) less than 50% B) 50% to 60% C) 60% to 70% D) 80% to 90% E) 90% to 100% F) more than 100% Answer: C Explanation: ((37% + 19%) * 13 jobs/hr * 5 min/job ) / (60 min/hr) = 0.61 Difficulty: 3 Hard Topic: Workload and Implied Utilization AACSB: Analytical Thinking Blooms: Apply

15) Fixing the relative proportions of job types, what is the largest number of jobs per hour that OCP can handle? Choose the answer from the list below that is closest to the correct answer. A) 10 B) 11 C) 12 D) 13 E) 14 F) 15 G) 16 H) 17 J) 18 Answer: J Explanation: From the calculations for OCP1, we know that "make 6"×4" prints" will become the bottleneck once the process is capacity-constrained (if the mix of jobs does not change). The answer to our present question is given by the solution X to the equation ((44% + 37%) * X jobs/hr * 4 min/job) / (60 min/hr) = 1.00. Re-arranging the equation yields X = (60 min/hr) / (81% * 4 min/job) = 18.5 jobs/hr. Difficulty: 3 Hard Topic: Multiple Types of Flow Units AACSB: Analytical Thinking; Knowledge Application Blooms: Analyze

Matching Supply with Demand: An Introduction to Operations Management, 4e (Cachon) Chapter 4 Estimating and Reducing Labor Costs [The following information applies to questions 1-3.] Furniture Face Lift refinishes old wood furniture. Their process for refinishing chairs has 8 workers and 4 stations. Each chair starts at the Stripping station, then goes to Priming, then to Painting and finally to Inspection. Where there are multiple workers within a station, each worker works independently on his/her own chair. Assume inventory buffers are allowed between each station. Station

Staffing

Stripping Priming Painting Inspection

3 2 2 1

Processing time (hours per chair per worker) 2.5 1.5 1.75 0.8

1) What is the maximum number of chairs per hour that can be produced? Assume they start the day with inventory at each station to work on. Answer: 1.14 chairs per hour. Explanation: The average time needed to finish one chair at each station are as follows. Capacity = staffing/activity time Station Stripping Priming Painting Inspection

Staffing 3 2 2 1

Activity time (hours) Capacity = staffing/activity time 2.5 1.2 1.5 1.333333333 1.75 1.142857143 0.8 1.25

Painting is the bottleneck since it has the lowest capacity. The process capacity is the capacity of the bottleneck. Thus, the process capacity is 1.14 chairs per hour. Difficulty: 3 Hard Topic: Analyzing an Assembly Operation AACSB: Analytical Thinking Blooms: Apply

2) Suppose at the start of the day there is no inventory of chairs in the shop. That is, there are no chairs within any of the stations nor between them in any buffer. A truck loaded with 15 chairs arrives. How many hours will it take them to complete these 15 chairs? Answer: 18.8 hours Explanation: It takes 2.5 + 1.5 + 1.75 + 0.8 = 6.55 hours for the first chair to be produced. It takes 1/1.14 hours for each of the subsequent chairs. In total, it takes 6.55 + 1/1.14 * 14 = 18.8 hours to complete 15 chairs. Difficulty: 3 Hard Topic: Analyzing an Assembly Operation AACSB: Analytical Thinking Blooms: Analyze 3) Suppose now that each worker is trained to do all tasks and each worker works on a chair from start to finish, i.e., each worker does Stripping, Priming, Painting, and Inspection. What is the maximum capacity of the process in chairs per hour? Answer: 1.22 chairs per hour Explanation: In this system, there will be no bottleneck, i.e., every worker is working at their full capacity. It takes each worker 2.5 + 1.5 + 1.75 + 0.8 = 6.55 hours to finish one chair. 3 + 2 + 2 + 1 = 8 workers can complete 8/6.55 = . The maximum capacity is 1.22 chairs per hour. Difficulty: 3 Hard Topic: Increasing Capacity by Line Balancing AACSB: Analytical Thinking Blooms: Analyze

[The following information applies to questions 4-6.] The White Tooth Device Company is a manufacturer of high-end electric toothbrushes. For each toothbrush, there is a sequence of assembly steps performed by five workers. Each worker does two tasks. Inventory buffers are allowed between workers. Worker A A B B C C D D E E

Task T1 T2 T3 T4 T5 T6 T7 T8 T9 T10

Time (seconds) 40 25 20 15 10 15 10 20 25 35

4) What is the capacity of this process (toothbrushes per minute)? Answer: 0.92 toothbrushes per minute. Explanation: The process time for each worker is: A: 65 sec, B: 35 sec, C: 25 sec, D: 30 sec, E: 60 sec. Worker A is the bottleneck. The process capacity is 60sec/65sec = 0.92 toothbrushes per minute Difficulty: 3 Hard Topic: Analyzing an Assembly Operation AACSB: Analytical Thinking Blooms: Apply

5) Suppose two workers could be hired, F and G, and they take the same time to complete tasks as the current five workers. F and G can be assigned to work on the same pair of tasks as one of the current workers. For example, F could be assigned tasks T1 and T2 (just like worker A) while G is assigned T5 and T6 (just like worker C). They cannot be assigned tasks that are currently assigned to two workers. For example, F cannot be assigned to tasks T2 and T3 (because they are currently being done by workers A and B). What is the capacity of this process with workers F and G included (toothbrushes per minute)? Answer: 1.71 toothbrushes per minute Explanation: Assign one new worker, F, along the bottleneck worker A. Thus, the time to complete T1 and T2 for one toothbrush, for workers A and F, is 65 sec/2 = 32.5 sec. Now the bottleneck is worker E. Assign the other worker, G, to tasks T9 and T10. The time to complete T9 and T10 for one toothbrush is 60 sec/2 = 30sec. The new bottleneck is B, with 35 sec activity time. Thus, the new process capacity with workers F and G is 60 sec/35 sec = 1.71 toothbrushes per minute. Difficulty: 3 Hard Topic: Scale Up to Higher Volume AACSB: Analytical Thinking Blooms: Analyze 6) Return to the case of 5 workers. Suppose the assignment of tasks to workers can change, but the sequence of tasks must remain the same. Workers must be assigned to consecutive tasks and each task can be assigned to only one worker. For example, worker A could do tasks T1-T3 (because they are consecutive) but cannot be assign T1, T2, and T4. If worker A is assigned to tasks T1-T3, then worker B's first task must be T4 (worker B cannot also be assigned to task T3). Because a U-shaped line is used, tasks T1 and T10 can actually be considered consecutive tasks — worker A could be assigned tasks T10, T1, and T2. What would the maximum capacity be after possibly reassigning tasks (toothbrushes per minute)? Answer: 1.2 toothbrushes per hour Explanation: The total process time for one toothbrush is (40 + 25 + 20 + 15 + 10 + 15 + 10 + 20 + 25 + 25 + 35) = 215 sec. If we have 5 workers, the system can do no better than 215/5 = 43sec/worker. We try to assign tasks in which the process time at the slowest worker is as close as to 43sec/worker. The best we can do is the following: A: T1(40 sec), B: T2 and T3(45 sec), C: T4-T7(50 sec), D: T8-T9 (45 sec), T10(35 sec). The bottleneck is worker C. The process capacity is 60 sec/50sec = 1.2 toothbrushes per hour. Difficulty: 3 Hard Topic: Increasing Capacity by Line Balancing AACSB: Analytical Thinking Blooms: Analyze

[The following information applies to questions 7-10.] Imagine US is a startup that offers high definition 3D prenatal ultrasounds for high-end customers. The service process includes five activities that are conducted in the sequence described below. (The time required for each activity is shown in parentheses): Activity 1: Welcome a patient and explain the procedure. (8 minutes) Activity 2: Prep the patient (e.g., show them to the room, apply ultrasound gel). (5 minutes) Activity 3: Take images. (14 minutes) Activity 4: Analyze images. (12 minutes) Activity 5: Discuss diagnostic with the patient. (16 minutes) At each location, there are employees (servers) S1, S2, and S3. The assignment of tasks to servers is the following: S1 does Activity 1. S2 does Activities 2 and 3. S3 does Activities 4 and 5. 7) What is the capacity of this process (in customers per hour)? Answer: 2.14 customers per hour Explanation: The activity time at S1, S2, and S3 is 8 minutes, 19 minutes, and 28 minutes, respectively. S3 is the bottleneck. The capacity of the process is the capacity of the bottleneck. 60 min/28 min = 2.14 customers per hour. Difficulty: 3 Hard Topic: Analyzing an Assembly Operation AACSB: Analytical Thinking Blooms: Apply 8) Suppose that 2 patients arrive every hour on average. Ignoring any "start of day" or "end of day" effects, what is the utilization of Server 1 (as a %)? Answer: 26.67% Explanation: S1's capacity is 60min/8min=7.5 customers/hour, and the demand rate is 2 customers/hour, which is smaller than the process capacity 2.14 customers/hour. Thus, the system is demand-constrained. The utilization of S1 is: 2/7.5 = 26.67%. Difficulty: 3 Hard Topic: Labor Content and Idle Time; Increasing Capacity by Line Balancing AACSB: Analytical Thinking Blooms: Analyze

9) Suppose each activity can be done by any server and any server can do any set of activities. However, each activity is done by only one server. For example, a feasible assignment includes: S1 does activities 1 and 5, S2 does activities 2 and 4, and S3 does activity 3. Of course, the original assignment of servers to activities is also feasible. What is the maximum capacity of the process (in customers per hour)? Answer: 3 customers per hour Explanation: The total activity time = 8 + 5 + 14 + 12 + 16 = 55 min. A perfectly balanced line will have each server working 55/3=18.3min. The best we can do is to combine the 8min task with the 12 min task, and the 5 min task with the 14 min task. Thus, the capacity of the process will be 60 min/20 min = 3 customers per hour. Difficulty: 3 Hard Topic: Increasing Capacity by Line Balancing AACSB: Analytical Thinking Blooms: Analyze 10) Now suppose each activity can be assigned to more than one server, each activity can be done by any server and any server can do any set of activities. What is the maximum capacity of the process (in customers per hour)? Answer: 3.27 customers per hour Explanation: We assign all the tasks to each server. There will be no idle time in this case. The process capacity is 60min/55min * 3 = 3.27 customers per hour. Difficulty: 3 Hard Topic: Increasing Capacity by Line Balancing AACSB: Analytical Thinking Blooms: Apply

[The following information applies to questions 11-12.] A process requires six tasks, A, B, C, D, E, and F, that must be performed in that order. Currently, there are 3 employees that are equally skilled at each task. Employee 1 is assigned tasks A and B, employee 2 is assigned tasks C and D, and employee 3 is assigned tasks E and F. The task times (all in seconds) are given in the process diagram below. For example, task A requires 90 seconds.

11) Suppose the system started without any work in process inventory (i.e., an empty system). How long would this process take to produce 10 units (in seconds)? Answer: 1,440 seconds Explanation: The first unit takes 270 seconds. The next 9 units take 9 × 130 seconds = 1,170. The total time is 270 + 1,170 = 1,440. Difficulty: 3 Hard Topic: Time to Process a Quantity X Starting with an Empty Process AACSB: Analytical Thinking Blooms: Apply 12) Suppose now the 3 employees can be assigned to any task, but employees must be assigned to consecutive tasks (e.g., an employee cannot be assigned tasks B and D). What would be the processes' maximum capacity (units per hour)? Answer: 40 units per hour Explanation: If you assign task A to employee 1, tasks B and C to employee 2, and tasks D, E and F to employee 3, then employee 2 is the bottleneck with a capacity of 1/(40 + 60) = 1/100 units per second. There are 3600 seconds in an hour so the process can produce 1/100 × 3600 = 36 units. However, if you assign every task to each employee, then each employee takes 270 seconds per unit, or one unit produced every 90 seconds, which yields 3600 / 90 = 40 units per hour. Difficulty: 3 Hard Topic: Increasing Capacity by Line Balancing AACSB: Analytical Thinking Blooms: Analyze

[The following information applies to questions 13-17.] Mr. K's Hair Salon Mr. K's is a very popular hair salon. It offers high-quality hair-styling and physical relaxation services at a reasonable price, so it always has unlimited demand. The service process includes five activities that are conducted in the sequence described below. (The time required for each activity is shown in parenthesis): Activity 1: Welcome a guest and offer homemade herb tea. (10 minutes) Activity 2: Wash and condition hair. (10 minutes) Activity 3: Neck, shoulder, and back stress release massage. (10 minutes) Activity 4: Design the hairstyle and do the hair. (25 minutes) Activity 5: Check out the guest. (5 minutes) Three servers (S1, S2, and S3) offer the services in a worker-paced line. The assignment of tasks to servers is the following: S1 does Activity 1. S2 does Activities 2 and Activity 3. S3 does Activities 4 and Activity 5. 13) Which server is the bottleneck of the process? A) S1 B) S2 C) S3 Answer: C Explanation: S1 can process 1/10 customers per minute. S2 can process 1/20 customers per minute. S3 can process 1/30 customers per minute. S3 has the lowest capacity and is hence the bottleneck. Difficulty: 3 Hard Topic: Time to Process a Quantity X Starting with an Empty Process AACSB: Analytical Thinking Blooms: Apply 14) What is the utilization of server 2? Answer: 66.7% Explanation: Since we assume that there is unlimited demand, the flow rate is equal to the capacity of the process, i.e., 2 customers per hour. The capacity of S2 is 3 customers per hour. The utilization at S2 is 2/3 = 66.7%. Difficulty: 3 Hard Topic: Labor Content and Idle Time AACSB: Analytical Thinking Blooms: Apply 8 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

15) What is the average labor utilization of the servers? Assume the process operates at its capacity. Answer: 66.7% Explanation: The labor content = 10 + 20 + 30 = 60 min. and total idle time = 20 + 10 = 30 min. The Average labor utilization = 60/(60 + 30) = 2/3 = 66.7%. Difficulty: 3 Hard Topic: Labor Content and Idle Time AACSB: Analytical Thinking Blooms: Apply 16) Assume a wage rate of $18 per hour. What are the direct labor costs for one guest? Answer: $27 Explanation: Direct labor costs = (Total wages) / (flow rate). There are three employees with a wage of $18/hr implying that the total wages per hour. are given by 18 × 3 = $54/hr. We deduce that direct labor costs = 54/2 = $27. Difficulty: 3 Hard Topic: Labor Content and Idle Time; Increasing Capacity by Line Balancing AACSB: Analytical Thinking Blooms: Apply 17) To increase the service rate, Mr. K's is considering two alternatives: Alternative I: To hire a new employee to help any one (and only one) of the servers without changing the tasks performed by each server. Alternative II: To redesign the assignment of tasks to servers. For this, Mr. K's is evaluating to reassign Activity 5 from S3 to S1. What would be the costs of direct labor of serving one guest under each of the two alternatives? Assume that the system operates at its capacity. Answer: Alternative I: $24; Alternative II: $22.50 Explanation: Under Alternative I, the additional worker would help S3 and under this case the bottleneck would become S2 with a capacity of 3 customers/hr. Direct labor costs = (18 * 4)/3 = $24 Under Alternative II, S3 would still be the bottleneck but the new capacity of S3 will be of 60/25 = 2.4 customers/hr. Direct labor costs = (18 * 3)/2.4 = $22.50 Difficulty: 3 Hard Topic: Scale Up to Higher Volume; Increasing Capacity by Line Balancing AACSB: Analytical Thinking Blooms: Analyze