Question 1

Before bonus
Revenues = (Normal units x Selling price for the normal unit) + (Defective units x Selling price for
defective units)
Production = 150 units
Selling price for defective units = £50
Selling price for normal unit = £150
Revenues = (150 x 0.6 x £150) + (150 x 0.4 x £50)
Revenues = 13,500 + 3,000
Revenues = £16,500
Total hours worked = Number of workers x Working hours
Number of workers = 5 workers
Working hours = 300 hours
Total hours worked = 5 x 300
Total hours worked = 1500 hours
Productivity = Revenues ÷ Total hours worked
Revenues = £16,500
Total hours worked = 1500 hours
Productivity = 16500 ÷ 1500
Productivity = £11 per hour
After bonus
Revenues = (Normal units x Selling price for the normal unit) + (Defective units x Selling price for
defective units)
Normal units = 120 units
Defective units = 10 units
Selling price for defective units = £50
Selling price for normal unit = £150
Revenues = (120 x £150) + (10 x £50)
Revenues = 18,000 + 500
Revenues = £18,500
Total hours worked = Number of workers x Working hours
Number of workers = 5 workers
Working hours = 300 hours
Total hours worked = 5 x 300
Total hours worked = 1500 hours
Productivity = Revenues ÷ Total hours worked
Revenues = £18,500
Total hours worked = 1500 hours
Productivity = 18500 ÷ 1500
Productivity = 12.3333333333 (round off to 2 decimal places)
Productivity = £12.33 per hour

Part B;
Step-by-step explanation
b) Determine the appropriate bonus per hour for the workers under the bonus scheme if the cost per
piece is £70 both before and after the scheme.
Profit before the scheme = Revenue before - cost
Revenue before = £16,500
Cost = Production x cost per piece = 150 x 70 = £10,500
Profit before the scheme = 16,500 - 10,500
Profit before the scheme = £6,000
Profit after the scheme = Revenue before - cost
Revenue after= £18,500
Cost = Production x cost per piece = 130 x 70 = £9,100
Profit after the scheme = 18,500 - 9,100
Profit after the scheme = £9,400
Improvement = Profit after the scheme - Profit before the scheme
Profit after the scheme = £9,400
Profit before the scheme = £6,000
Improvement = £9,400 - £6,000
Improvement = £3,400
The workers get 50% of the improvement = 0.5 x 3400 = £1,700
Bonus per hour = workers share ÷ Total hours worked
Workers share = £1,700
Total hours worked = 1500 hours
Bonus per hour = 1700 ÷ 1500
Bonus per hour = 1.133333333 (round off to 2 decimal places)
Bonus per hour = £1.13 per hour

Question 2
The precedence diagram is drawn as shown below:
Determine the cycle time, provided that the objective is to make 1,000 bicycles per standard 40 hour week

Cycle time = (40 hours * 60 minutes * 60 seconds) / 1, 000

= 144 seconds per bicycle

Compute the total task time , given the duration for each of the tasks as shown below.

Task Time (sec)

K3 60

K4 24

K9 27

J1 66

J2 22

J3 3

G4 79
G5 29

F3 32

F4 92

F7 21

F9 126

E2 18

E3 109

D6 53

D7 72

D8 78

D9 37

C1 78

B3 72

B5 108

B7 18

A1 52

A2 72

A3 114
 1,462

The total task time = ∑ task time = 1, 462 seconds.

Calculate the theoretical minimum number of workstations as follows.

The theoretical minimum number of workstations = ∑ task time / cycle time

Substitute the values of ∑ task time – 1.462 seconds and cycle time = 144 seconds to acquire

The theoretical minimum number of workstations = 1, 462 seconds / 144 seconds

= 10.15

= 11 workstations

The theoretical minimum number of workstations is 11 workstations

Apply the heuristic, “largest task time” and try balancing the line as shown.
8 B5 108 36 D8,D7,A1,A2

9 D8 78 66 D7,A1,A2

A1 52 14 D7,A2

10 D7 72 72 A2,B3

B3 72 0 A2,B7

11 B7 18 126 A2,A3

A2 72 54 A3

12 A3 114 30

For balancing the line, 12 workstations are required.

The total time for the 12 workstations including idle times is

Calculate the efficiency as

Apply the heuristic, “ranked position weight” and try balancing the line as shown.

station task time (sec) Time left (sec) Ready tasks

1 K3 60 84 K4,K9,J1,J2,J3

J2 22 62 K4,K9,J1,J3,F3,F4

K9 27 35 K4,J1,J3,F3,F4

J3 3 32 K4,J1,F3,F4,F7

F7 21 11 K4,J1,F3,F4,C1

2 C1 78 66 K4,J1,F3,F4,B5
For balancing the line, 12 workstations are required.

The total time for all the 12 workstations together with idle time is = 12 * 144 = 1, 728 seconds

Determine the efficiency as shown below:

∑ task time / total time in the 12 workstations = 1, 462 / 1, 728

= 84.61%

Apply the heuristic, “shortest task time” and try balancing the line as shown
station task time (sec) Time left (sec) Ready tasks

1 J3 3 141 K3, F7

F7 21 120 K3, C1

C1 78 42 K3, B5
 B3 72 35 B7

B7 18 17 A3

13 A3 114 30

For the balancing of the line, 13 workstations are needed.

The total time for the 13 workstations together with the idle time is

13 * 144 = 1, 872 seconds

Determine the efficiency as shown here:

∑ task time / total time in all the 13 workstations

= 1, 462 / 1, 872

= 78.1%

Summarize the results from the five heuristics as follows.

Heuristic rules Number of workstations Efficiency

Largest task time 12 84.61%

Most following tasks 12 84.61%

Ranked position weight 12 84.61%

Shortest task time 13 78.10%

Least number of following tasks 13 78.10%

The three heuristic rules give the efficiencies of 84.61 percent

• Largest task time

• Most following tasks

• Ranked position weight

The other two give lower efficiencies.

b)

The theoretical minimum number of workstations = ∑ task time / cycle time

Substitute the values of ∑ task time = 1, 462 seconds and the cycle time is = 147.6 seconds to acquire

The theoretical minimum number of workstations = 1, 462 seconds / 147.6 seconds

= 9.91

= 10 workstations

The theoretical minimum number of workstations is 10 workstations

Apply the heuristic, “largest task time” and try balancing the line as shown.
Station Task Time (sec) Time Left (sec) Ready Tasks
1 K3 60 87.60 J3, K4, K9, J1, J2 J2 22 65.60 J3, K4, K9,
J1, F3, F4
 A1 52 17.60 D7, A2

10 D7 72 75.60 A2, B3

B3 72 3.60 A2, B7

11 A2 72 75.60 A3, B7

B7 18 57.60 A3

12 A3 114 33.60

For balancing the line, 12 workstations are required.

The total time for the 12 workstations including idle times is

Calculate the efficiency as

Apply the heuristic, “ranked position weight” and try balancing the line as shown.

Station Task Time (sec) Time Left (sec) Ready Tasks

1 K3 60 87.60 J3, K4, K9, J1, J2

J2 22 65.60 J3, K4, K9, J1, F3, F4

K9 27 38.60 J3, K4, J1, F3, F4

J3 3 35.60 K4, J1, F3, F4, F7

F7 21 14.60 K4, J1, F3, F4, C1

2 C1 78 69.60 K4, J1, F3, F4, B5

F3 32 37.60 K4, J1, F4, B5, E3

K4 24 13.60 J1, F4, B5, E3, G4

3 G4 79 68.60 J1, F4, B5, E3, F9

J1 66 2.60 F4, B5, E3, F9, G5

Calculate the efficiency as

Station Task Time (sec) Time Left (sec) Ready Tasks

1 J3 3 144.60 K3, F7

F7 21 123.60 K3, C1

C1 78 45.60 K3, B5

2 B5 108 39.60 K3, A1, A2

 13 A3 114 33.60

For balancing the line, 13 workstations are required.

The total time for the 13 workstations including idle times is = 13 * 147.6 = 1, 918.8 seconds

Calculate the efficiency as = ∑ task time / total time in the 13 work stations = 1, 462 / 1,918.8 = 76.19%

Make a summary of the results from the five heuristic rules, for a 41 hour week as follows.

Heuristic rules Number of workstations Efficienc

y

Largest task 12 82.54

%
time

Most following tasks 12 82.54

%

Ranked position weight 1 90.04

%
1
Shortest task time 12 82.54
%

Least number of following tasks13 76.19

%

The heuristic rule “ranked position weight” requires the least number of workstations
and has the maximum efficiency of 90.04% when the firm has a 41 hour work week.

Question 3
Economic Order Quantity is the number of unit that is added to the inventory which minimize
the total inventory cost. It is also known as the Economic Purchase Quantity. It maintain a
balance between ordering costs and carrying costs. The role of the EOQ is ensuring that the
correct amount of the inventory is ordered in batches to ensure that companies do not necessarily
have to make orders often and also no excessive inventories remain in hand. The model
presumes the presence of a trade-off between the inventories holding the costs and the inventory
setup costs. Besides, the total inventory costs are reduced once both the setup costs and the
holding costs are reduced. For our case here, the Economic Order Quantity formula is
determined by reducing the total cost per order by establishing the first-order derivative at zero.
The elements of the formula or model that make up the total cost per order include the costs of
holding the inventory as well as the cost of ordering the said inventory. The primary notations in
comprehending the EOQ formula are indicated below.
The elements of the EOQ Formula are:
D: the Annual Quantity Demanded
Q: the Volume per Order
S: the Ordering Cost (Fixed Cost)
C: the Unit Cost (a Variable Cost)
H: the Holding Cost (a Variable Cost)
I: the Carrying Cost or the Interest Rate

D = 24 units per day

Cost = £100
H = £10 per unit per year
S = £30 per order
LT = 5 days
M = 250 days
D = d*n
= 24*250
=6000 per year

a) EOQ = √(2DS/H)
 = √(2 * 6000 *30/10)

=189.73 or (190 units)

Total cost = ordering cost + ordering cost + cost of units

TC = (D/Q * S) + (Q/2 * H) + (Cost*D)

= (6000/190*30) + (190/2 * 10) + (100 * 6000)
= 947.368 + 950 + 600000
= 601897.368

b) EOQ, in this case, acts as a review inventory system or framework essential in

monitoring the inventory degree continuously and consistently. Apparently, once the
level gets to reorder point, a firced amount order is placed. The EOQ, therefore, helps to
calculate the reorder point as well as the optimal reorder amount to avoid any shortages
in the inventory.

Question 4
For each supplier, we compare the total cost = total ordering cost + total inventory carrying cost
+ total purchase cost
Total ordering cost = number of orders * ordering cost per order
Total inventory carrying cost = order quantity/2 * holding cost
Total purchase cost = annual quantity * purchase price
Optimal Order Quantity = 1200 lbs
Supplier: Vendor 2
Total Annual Cost = $161,275
1200 lbs should be ordered from the supplier 2
Total annual cost for this order quantity is 161275 dollars.

Q.2) Cost of ordering 341 lbs is $166056.89 which is higher than the Total Annual Cost of
161275 at an optimal order quantity of 1200 lbs. That is why we did not order from supplier 1.
It is important to understand that the concept of EOQ does not apply for price brackets i.e. price
discounts with variable order quantity.
Here, we compare the total cost which includes the annual purchase cost as well.

Question 5
a)

a) What is the σ ´x ?
σ 1.36
a. σ´ =
x
=
b) If z=3, what are the control limits for the mean chart?
a. UCLxx = 12.225
b. LCLxx = 8.575

c. UCLxx & LCLxx = ´x±zσ ´x = 10.4

c) What are the control limits for the range chart?
 R
a. UCLR = ´ D4 = 3.6(2.115) = 7.614

R
b. LCLR = ´ D3 = 3.6(00) = 0

b) The process is in control. Process control 0 X-value lie outside of control limits. Therefore
based on X-chart, the process is In Control 0 R-value lie outside of control limits. 1 2 345 6 7 8
910 Therefore based on R-chart, the process is In Control