QUANTITATIVE TECHNIQUES

LEARNING CURVE
This reflects the increased rate at which people
perform tasks as they gain experience.
One common assumption made in a learning curve
model is that the cumulative average time per unit is
reduced by a certain percentage each time production
doubles.
Given an 80% learning curve model, the following is
expected during the early stages of the manufacture of
a new product.
Cumulative Number of
Cumulative Average Time
Tasks
per Unit
100
3.0
200
2.4
400
1.92
800
1.536
1, 600
1.228
EXERCISES:
1. A particular manufacturing job is subject to an
estimated 60% learning curve. The first unit
required 20 labor hours to complete.
a. What is the cumulative average time per
unit after four units are completed?
b. What is the total time required to produce
2 units?
c. How many hours are required to produce
the second unit?
d. How many hours are required to produce
additional 3 units?
2. The average labor cost per unit for the first
batch produced by a new process is P120. The
cumulative average labor cost after the second
batch is P72 per product. Using a batch size of
100 and assuming the learning curve continues,
the total labor cost of four batches will be
__________.
PROGRAM EVALUATION AND REVIEW TECHNIQUES
Pert diagram
Events
Activities
Critical path
Expected time (te) - the average time an
activity would require if it were repeated a
large number of times
to optimistic time
tm most likely time
tp- pessimistic time
Slack time the amount of time that can be
added to an activity without increasing the
total time required on the critical path
CRITICAL PATH METHOD (CPM)
It is a network technique. It uses deterministic time
and cost estimates.
Crashing the network this means finding the minimum
cost of completing the project in minimum time to
achieve an optimum trade-off between time and cost.

1. Pert Network. A company is faced with the

following PERT network situation (time in days)

2 4- 6

1 5- 9

4 8- 12

D
1 3- 5

2 6- 10

C
3- 4- 5

a. Calculate the expected time for each activity.

For each activity, the estimates are in order.
b. Calculate the total time for each path and
identify the critical path.

2. New Mork Building Corporation uses the critical

path method to monitor construction jobs. The
company is currently 2 weeks behind schedule
on Job # 181, which is subject to P10, 500 perweek completion penalties. Path A-B-C-F-G-H-I
has a normal completion time of 20 weeks, and
critical path A-D-E-F-G-H-I has a normal
completion time of 22 weeks. The following
activities can be crashed.
Activities
Cost to Crash 1
Cost to Crash 2
Week
Weeks
BC
8, 000
15, 000
DE
10, 000
19, 600
EF
8, 800
19, 500
New Mork Building desires to reduce the normal
completion time of Job # 181 and, at the same
time, report the highest possible income for
the year. New Mork Building should crash
_______________.

PROBABILITY ANALYSIS
Expected Value
The expected value of an action is found by multiplying
the probability of each outcome by its pay-off and
summing the products.
1. In planning its budget for 2016, Futurama
Company prepared the following pay-off
probability distribution describing the relative
likelihood of monthly sales volume levels for its
product:
Monthly Sales Volume
Probability
100
10%
200
15%
500
50%
700
20%
900
5%
a. What is the expected monthly sales
volume, considering the given probabilities?
b. If the products contribution margin per
unit is P4, what is the expected value of
the monthly contribution margin for this
product?