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VINCENT’S COLLEGE INCORPORATED

Ground Floor, Millennium Building, Main Campus, Padre Ramon Street, Estaka, Dipolog City 7100 Philippines
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Graduate School in Business Administration

PRODUCTION AND OPERATIONS MANAGEMENT
Final Exam 2021

CHARLIE MAINE D. TORRES

A. ESSAY (10 points each)

1. Discuss how a change in a product design could produce a change in the design of a planning and
control system.

Answer: Product design is cross-functional, knowledge-intensive work that has become

increasingly important in today's fast-paced, globally competitive environment. It is a key
strategic activity in many firms because new products contribute significantly to sales revenue.
When firms are able to develop distinctive products, they have opportunities to command
premium pricing. Product design is a critical factor in organizational success because it sets the
characteristics, features, and performance of the service or good that consumers demand. The
objective of product design is to create a good or service with excellent functional utility and
sales appeal at an acceptable cost and within a reasonable time. The product should be produced
using high-quality, low-cost materials and methods. It should be produced on equipment that is
or will be available when production begins. The resulting product should be competitive with or
better than similar products on the market in terms of quality, appearance, performance, service
life, and price.

2. What is the potential impact on planning and control if the organization has several types of
customers, each with a different order-winning characteristic?

Answer: If the company has several different customers with different order-winning
characteristics they need to adjust the planning and control system to accommodate each order
winner. This may be difficult to accomplish for a single system, implying that in some cases there
may be more than one system, each focused on the needs of a particular set of customers.

3. Services are often knowledge-based. Provide two examples, and explain why they are
knowledge-based.

Answer: Services which are knowledge-based are legal services which are provided by lawyers
after passing the BAR Examination, and financial/accounting services which are provided
usually by Certified Public Accountant after passing the CPA Licensure Examination. The
services rendered by the said professionals are based on the knowledge acquired. These services
cannot be simply rendered to clients or to the public without having enough qualification such as
completing extensive study for 4-5 years in College and passing the Licensure Exam.

4. Why are organizations changing from batch(large) shipments to just-in-time(JIT) shipments?

 Answer: Organizations are switching to JIT shipments because inventory requires a large
financial investment and impedes the responsiveness to changes in the marketplace.

5. As the administrative manager in a law office, you have been asked to develop a system for
evaluating the productivity of the 15 lawyers in the office. What difficulties are you going to have
in doing this, and how are you going to overcome them?

Answer: First, we will do the assessment of the present situation wherein we need to develop a
new system of measuring the productivity of lawyers in the office.
 
The traditional way to measuring the productivity of law firm is based on billable hours, wherein
the client uses to pay based on number of hour interaction or consultation with the lawyer, and
this was a standard type of KPI to measure the productivity of each lawyer and based on the
qualification and capability the hourly rate also used to vary among the lawyers.
 
But now a days this standard hourly billable rate is fading away because now clients are more
focused towards the outcome not just the discussion, and more clients are offering with the
outcome-based fee and because of this there is need to develop a new system to evaluate the
productivity of each.

B. PROBLEM SOLVING (10 points each)

1. A firm produces 1500 units per day using four workers on a five-hour shift. On average, 12% of
the units produced are defective and must be scrapped. What is the labor productivity for non-
defective units?
Answer: P = O/I = [1500-(.12*1500)]/4*5 = [1500-180]/20 = 1320/20 = 66 units/hour
2. Birdie Par owns a company that makes golf gloves. She is thinking about introducing a new
glove, which would require an additional fixed cost of $20,000 per year. The variable costs for
the new glove have been estimated to be $5 per glove. If she sells the new glove for $15, how
many must she sell to break even?
Answer: QBE = FC/SP-VC = $20,000/$15-$5 = $20,000/$10 = 2,000 gloves
3. Insourcing incurs a fixed cost of $1000 and a $5 variable cost. Outsourcing incurs a fixed cost of
$2000 and a $2 variable cost. What is the indifference point?
Answer: Qind = FCmake-FCbuy/VCbuy-VCmake = $1000-$2000/$2-$5 = -$1000/-$3 = ~333
units
4. Cheeseburger and Taco Company purchases 12,885 boxes of cheese each year. It costs $25 to
place and ship each order and $7.01 per year for each box held as inventory. The company is
using Economic Order Quantity model in placing the orders. What is the annual carrying costs of
post card inventory?
Answer: Carrying Cost= Average Inventory x Cost of carrying one unit for 1 year
= 6,442.50 x $25
= $161,062.50
5. Train Company makes units, and each unit requires 3 pounds of material at $4 per pound. 500
and 700 units will be built in May and June, respectively. Train keeps material on hand at 20% of
the next month's production needs. How much is the total materials cost for May?

Deadline of submission on or before May 31, 2021, please email your answers together with you
scanned copy of OR of full payment.