2015/2016

Question 1
The AON network below shows various activities in the execution of the project in weeks;
a) Which are the critical bottleneck activities where any delays must be avoided to
prevent delaying project completion?
b) What is the total time required to complete the project if no delays occur?
c) For the other activities, how much delay can be tolerated without delaying project
completion?

[25 Marks]

a)
Critical path:
START A B C E F J L N FINISH

b) START A B C E F J L N FINISH
2 + 4 + 10 + 4 + 5 + 8 + 5 + 6 = 44 weeks
c)
Activity Slack (LF – On Critical Path
EF)
A 0 Yes

B 0 Yes

C 0 Yes

D 4 No

E 0 Yes

F 0 Yes

G 4 No

H 4 No

I 2 No
 J 0 Yes

K 1 No

L 0 Yes

M 4 No

N 0 Yes

Each activity with zero slack is on a critical path through the project network such that any
delay along this path will delay project completion.

START A B C E F J L N FINISH

Question 2
a. Write short note on error in forecasting.
b. Amsairat limited has been designing and installing kitchen cabinets for the last five years.
The company has operated at near capacity for the last two years. Forecasts are now
needed to scheduled production and to provide estimates for future capacity expansion.
The sales records in thousands of Naira are as follows;
Year 2011 2012 2013 2014 2015

Naira (in 108 119 110 122 130

thousands)
i. Using an exponential smoothing constant of 0.2, finds out the forecast for the year
2016. Take initial forecast as the average of all five available annual sales.
ii. Will your result vary if the smoothing constant is 0.8? If yes, by how much?

[25 Marks]

a. Error in forecasting is nothing but the numeric difference in the forecasted demand
and actual demand. Mean Absolute Deviation (MAD) and Bias are two measures that
are used to assess the accuracy of the forecasted demand. It may be noted that MAD
expresses the magnitude but not the direction of the error.
 b.

i.
Where, is the forecast of next period demand, is the smoothing coefficient, is the
actual demand for recent period and, is demand forecast for recent period.
Work out the average of all five available annual sales to find actual demand (initial)

At

Year Forecast Next period demand

2012 117.80 0.2(108) + (1-0.2)(117.80) = 115.84

2013 115.84 0.2(119) + (1-0.2)(115.84) = 116.47

2014 116.47 0.2(110) + (1-0.2)(116.47) = 115.18

2015 115.18 0.2(122) + (1-0.2)(115.18) = 116.54

2016 116.54 0.2(130) + (1-0.2)(116.54) = 119.23

At

Year Forecast Next period demand

2012 117.80 0.8(108) + (1-0.8)(117.80) = 109.96

2013 117.17 0.8(119) + (1-0.8)(109.96) = 117.19

2014 111.44 0.8(110) + (1-0.8)(117.19) = 111.44

2015 119.89 0.8(122) + (1-0.8)(111.44) = 119.89

2016 119.89 0.8(130) + (1-0.8)(119.89) = 127.98

Yes, the result vary as shown in the table above, however, the difference in the two cases are;
127.98 – 119.23 = 8.74 (thousands of Naira)

Question 3
The various reasons for an imbalance between the rates of supply and demand at different
points in any operation lead to the different types of inventory.

a) Explain any two of the following types of inventory

 i. Buffer inventory
ii. Cycle inventory
iii. Anticipatory inventory
b) The annual demand of a product is 24,000 units. The buying cost per order is £100 and
the estimated cost of carrying one unit in stock for a month is 2%. The normal price of
the product is £10 per unit. However, the supplier offers a discount of 7.5% if an order of
at least 3000 units and a discount of 12.5% if an order is for at least 5000 units. Find the
most economic purchase quantity per year.
[25 Marks]

a. Inventory Types; any two

i. Buffer Inventory: Buffer inventory is also called safety Inventory. Its purpose is to
compensate for the unexpected fluctuations in supply and demand. The minimum
level of inventory is there to cover against the possibility that demand will be greater
than expected during the time taken to deliver the goods. This is buffer, or safety
inventory. It can also compensate for the uncertainties in the process of the supply of
goods into the store, perhaps because of the unreliability of certain suppliers or
transport firm.
ii. Cycle Inventory: Cycle inventory occur because one or more stages in the process
cannot supply all the items it produces simultaneously. So even when demand is
steady and predictable, there will always be some inventory to compensate for the
intermittent supply of each type of bread. Cycle inventory only results from the need
to produce products in batches, and the amount of it depends on volume decisions.
iii. Anticipation Inventory: Anticipatory inventory is most commonly used when the
demand fluctuations are large but relatively predictable. It is used to compensate
differences in the timing of supply and demand. Rather than trying to make the
product only when it is needed, it was produced throughout the year ahead of demand
and put into inventory until it was needed.

Given; , ,
 i. Case 1: Total cost if discount of 7.5% on 3000 units order

Hence,

ii. Case 2: Total cost if discount of 12.5% on 5000 units order

Then,

Hence, the economic purchase quantity is 5000 units per order, because is least in case 2.
2016/2017

Question 1

a) What is deflator? Why it is essential to deflate outputs and inputs?

b) Explain partial productivity measures and total productivity measures and what are
the advantages and limitations of both?
c) Enlist the factors influencing productivity
d) The following information regarding the output produced and inputs consumed for a
particular time period for Amsairat Nig. Limited is given below;
Output = N 10,000
Human input = N 3,000
Material input = N 2,000
Capital input = N 3,000
Energy input = N1,000
Other miscellaneous input = N500
The terms are in terms of base year Naira value. Compute total productivity and total
factor productivity. [25 Marks]

a)
Any
i. Productivity is a function of providing more and more of everything to more
and more people with less and less consumption.
ii. Productivity is the volume of output attained in a given period of time in
relation to the sum of direct and indirect efforts expended in its production.
iii. Productivity is the measure of how well the resources are brought together in
an organisation and utilised for accomplishing a set of objectives.
iv. Productivity is concerned with establishing congruency between
organisational goals with societal aspirations through input-output
relationship.
v. Productivity is the multiplier effect of efficiency and effectiveness.

The concept of production and productivity are totally different. Production refers to absolute
output whereas productivity is relative term where in the output is always expressed in term
of inputs. Increase in production may or may not be an indicator of increase in productivity.
If the production in increased for the same output, then there is an increase in production.

b)
Advantages Limitations

Partial Productivity Measures

1. Easy to understand and calculate 1. Misleading if used alone

2. No consideration of overall impact
2. A tool to pinpoint improvement
 Total Productivity Measures

1. Easy and more accurate representation 1. Difficulty in obtaining the data

of the total picture of the company. 2. Requirement of special data collection
2. Consider all quantifiable outputs and system.
inputs

c) Factors influencing productivity can be classified broadly into two (2) categories:
(a) Controllable or internal factors (b) Non-controllable or external factors.

Controllable (Internal Factors) Non-controllable (external factors)

Product Structural adjustment (economic and Social)

Plant and equipment Natural resources
Technology Government policy
Materials Infrastructure
Human factors
Work methods
Management style
Financial factors
Sociological factors

d) Solution:
i.
ii.
iii.

iv.

v.

1.

2.

Assume that the company purchase all its material and services including energy,
miscellaneous and equipment (leasing), then
Question 2

a) You have determined the process capability of a process and found that tolerance
proposed by the designer are tight and fear to produce some nonconforming product.
What action will you take to avoid scrap and rework?
b) What is the purpose of LCLp on a p-chart?
c) The following are and values for 20 subgroups of 5 readings, the specification
limits for the components are . Assume the reasons for out-of-control
points on and charts are known.

i. Establish the control limits for and charts. Will the product meet us
specification?
ii. What is the process capability?
iii. What is variance?
[25 Marks]

a) The best solution to avoid scrap and rework is to produce the work within tolerance
limits. Since the tolerance limits are tighter than process capability of , we should use
more precise method to reduce the value of , and of course this will have a bearing on
the production cost.

b) When a process makes less number of rejects than normally expected, it is a welcome
situation. More and more points will fall near the . But it may also be true that the
process has not changed but there is less relaxation in inspection and thereby number of
rejects. In any case the causes of low rejects are to be investigated. If the process has
really changed to produce less rejects, the changes in process must be studied for future
control limits. If there is a deliberate attempt on the part of the inspector to show less
rejects, h must be warned to report correctly.
c) Solution:
i.
 For subgroup of 5, Table B of Appendix A4 gives, , ,

With the above control limits, values of 37.8, 38.4 and 28.2 will fall outside the control
limits. Since the reasons for these can be eliminated to get revised out of control of these
points are known, these point .

Similarly on R-chart, R value of 19 and 14 will fall outside the control limits. Eliminating
these points gives,

Hence,

New control limits:

Since , the process is not able to meet the specification.

ii. Process capability =

iii. Variance =
Question 3

A small project is composed of the following activities whose time estimates are given below
(estimated activity duration in weeks);

Activities 1-2 1-3 1-4 2–5 3-5 4–6 5-6

Optimistic 1 1 2 1 2 2 3

Most likely 1 4 2 1 5 5 6

Pessimistic 7 7 8 1 14 8 15

a) Draw the network and find the critical path

b) Find the expected duration and variance for each activity
c) Calculate the standard deviation of project length
d) What is the probability that the project will be completed
i. At least 4 weeks earlier than expected time?
ii. No more than 4 weeks later than expected time
iii. If the project duration due date is 19 weeks, what is the probability of not
meeting the due date?
iv. Find the project duration at 95% probability
[25 Marks]
a)

Critical path: 1 - 3 - 5 - 7

b)

Expected Time Variance

Activity

1–2 2 1
 1–3 4 1

1–4 3 1

2–5 1 0

3–5 6 4

4–6 5 1

5–6 6 4

Expected time of the project = 4 + 6 + 7 = 17 weeks

c) Standard deviation of the project = Variance = 9 = 3 weeks

d) Probability
i. 17 – 4 = 13 weeks

From the normal table, value of Z = -1.33 is 0.0918

Hence, the probability that the project will be completed 4 weeks earlier than expected time is
9.18%

ii.

Ref. to normal table, the value of Z = 90.82 %, i.e. the probability is 90.82%

iii. If the project due date is 19 weeks, probability of not meeting the schedule is

Ref. to normal table, the value of Z = 0.2514

Probability of not meeting the schedule =

iv. If the probability is 95%, Z value from the table = 1.65

2017/2018

Question 1

a) Define forecasting
b) Time span for forecasts are usually a function of the purpose of the forecasts. Explain
c) A company has been designing and installing kitchen cabinets for the last five years.
The company has operated at near capacity for the last two years. Forecasts are now
needed to scheduled production and to provide estimates for future capacity
expansion. The sales records in thousands of Naira are as follows;
Year 2011 2012 2013 2014 2015

Naira (in 108 119 110 122 130

thousands)
iii. Using an exponential smoothing constant of 0.2, finds out the forecast for the year
2016. Take initial forecast as the average of all five available annual sales.
iv. Will your result vary if the smoothing constant is 0.8? If yes, by how much?

[25 Marks]

a) Forecasting defined as the process of estimating the future demand in terms of the
quality, quantity, time and location for desired product (i.e. a prediction, projection, or
estimate of some future activity, event, or occurrence).
b)
i. Short-term Forecast: Short-term forecasts are usually not more than three months.
These forecasts are used for tactical decision making such as job sequencing and
production scheduling, machine assignment, personal scheduling, purchasing and
inventory planning and maintenance planning. These forecasts tend to be narrow or
specific entities, such as demand for goods or services.
ii. Intermediate-term Forecasts: Intermediate forecasts are most commonly used for
aggregate production planning, including decision that alter short term capacity such
as subcontracting, overtime and logistic planning decisions. Intermediate term
forecasts have a time frame of three month to two years but 3-12 month being the
most common. These forecasts are usually made for aggregate entities such as all the
product of some type or made by some facility, rather than for individual products.
 iii. Long-term Forecasts: Long term forecasts usually have a time frame of two to five
years. Their most common use is for planning the introduction of new products and
major capital expenditures, such as new facilities or capacity expansion. These
forecasts are made for aggregate entities or even macroeconomics phenomena e.g.,
industries wide sales or gross national product.
c)

Where, is the forecast of next period demand, is the smoothing coefficient, is the
actual demand for recent period and, is demand forecast for recent period.

Work out the average of all five available annual sales to find actual demand (initial)

At

Year Forecast Next period demand

2012 117.80 0.2(108) + (1-0.2)(117.80) = 115.84

2013 115.84 0.2(119) + (1-0.2)(115.84) = 116.47

2014 116.47 0.2(110) + (1-0.2)(116.47) = 115.18

2015 115.18 0.2(122) + (1-0.2)(115.18) = 116.54

2016 116.54 0.2(130) + (1-0.2)(116.54) = 119.23

At

Year Forecast Next period demand

2012 117.80 0.8(108) + (1-0.8)(117.80) = 109.96

2013 117.17 0.8(119) + (1-0.8)(109.96) = 117.19

2014 111.44 0.8(110) + (1-0.8)(117.19) = 111.44

2015 119.89 0.8(122) + (1-0.8)(111.44) = 119.89

2016 119.89 0.8(130) + (1-0.8)(119.89) = 127.98

Yes, the result vary as shown in the table above, however, the difference in the two cases are;
127.98 – 119.23 = 8.74 (thousands of Naira)
Question 2

a) Explain three (3) types of costs with example that are directly associated with
order size.
b) When should an operation replenish its inventory?
c) The annual demand of a product is 24,000 units. The buying cost per order is
N100 and the estimated cost of carrying one unit in stock for a month is 2%. The
normal price of the product is N10 per unit. However, the supplier offers a
discount of 7.5% if an order of at least 3000 units and a discount of 12.5% if an
order is for at least 5000 units. Find the most economic purchase quantity per
year.
[25 Marks]
a) The student(s) are expected to explain any three from the following

i. Costs of Placing the Order: are the expenses incurred to create and process an order
to a supplier.
ii. Price Discount Costs: In many industries suppliers offer discounts on the normal
purchase price for large quantities; alternatively thy might impose extra cost for small
orders.
iii. Stock-out Costs: is the cost associated with lost opportunity caused by the
exhaustion of the inventory. the exhaustion of inventory could be a result of various
factors.
iv. Working Capital Costs: refers to the costs of maintaining daily operations at an
organization. These cots take into account the short term debt and long term debt.
v. Storage Costs (Carrying cost): These are the costs associated with physically
storing the goods. Renting, heating, and lighting the warehouse, as well as insuring
the inventory, can be expensive, especially when special conditions are required such
as low temperature or high security.
vi. Obsolescence Costs: When we order large quantities, this usually results in stocked
items spending a long time stored in inventory. Then there is a risk that the items
might either become obsolete (in the case of a change in fashion, for example) or
deteriorate with age (in the case of most foodstuffs, for example).
vii. Operating Inefficiency Costs: According to lean synchronization philosophies, high
inventory levels prevent us seeing the full extent of problems within the operation.
 b) Partly it depends on the uncertainty of demand. Orders are usually timed to leave a
certain level of average safety stock when the order arrives. The level of safety stock is
influenced by the variability of both demand and the lead time of supply.
Using re-order level as a trigger for placing replenishment orders necessitates the
continual review of inventory levels. This can be time consuming and expensive.
An alternative approach is to make replenishment orders of varying size but fixed
time periods.
c)

Given; , ,

iii. Case 1: Total cost if discount of 7.5% on 3000 units order

Hence,
iv. Case 2: Total cost if discount of 12.5% on 5000 units order

Then,

Hence, the economic purchase quantity is 5000 units per order, because is least in case 2.

Question 3

a) Why is it important to understand the environment in which the project takes place?
b) How are projects planned and controlled?
c) The following table gives the data on normal cost and time, crash cost and time for a
project. The indirect cost is N 50/week.
Activity Time (week) Normal Cost (N) Crash Cost (N) Cost (N)

1–2 3 300 2 400

2–3 3 30 3 30
2–4 7 420 5 580
2–5 9 720 7 810
3–5 5 250 4 300
4–5 0 0 0 0
5–6 6 320 4 410
6–7 4 400 3 470
6–8 13 780 10 900
7–8 10 1000 9 1200

i. Draw the network diagram and label it.

ii. Identify critical path
 iii. Find out normal project duration and corresponding cost
[25 Marks]

a) It is important for two reasons. First, the environment influences the way a project is
carried out, often through stakeholder activity. Second, the nature of the environment
in which a project takes place is the main determinant of the uncertainty surrounding
it.
b) Project can be defined in terms of their objectives (the end state which project
management is trying to achieve), scope (the exact range of the responsibilities taken
on by project management), and strategy (how project management is going to meet
the project objectives).
c)
Activity

1–2 1 100 100

2–3 0 0 0
2–4 2 160 80
2–5 2 90 45
3–5 1 50 50
4–5 0 0 0
5–6 2 90 45
6–7 1 70 70
6–8 3 120 40
7–8 1 200 200

Legend:

The critical path is

1 2 5 6 7 8

The project duration is 32 weeks. The cost of the normal project is the sum of direct and
indirect cost.
Total project cost = Direct cost of all activities + Indirect cost of 32 weeks

= 4220 + 32 + 50 = N 5820