MBA*503* OPERATIONS MANAGEMENT Midterm Exam Spring 2014

Part I: True-False Questions

1. When evaluating the quality of a forecast, it is possible to have Bias < 0 and MAD = 0 at the same
time.
A) True
B) False
2. The quality of a product is considered to be an order winner if quality is the deciding factor in the
customer's decision to purchase the product.
A) True
B) False

3. In increase in input from one year to the next will always result in a decrease in productivity,
regardless of whether outputs increase as well.
A) True
B) False

4. When developing its operations strategy, a manufacturing or service organization should identify
and leverage its core capabilities, the set of skills that differentiate it from its competitors.
A) True
B) False

5. A product that can be easily assembled from a set of independent components or modules is well
suited for being produced by a mass customization approach.
A) True
B) False

6. Although many consumers receive a large quantity of sales material through the mail, the service-
system design matrix indicates that some form of face-to-face contact provides a higher sales
opportunity than does mail contact.
A) True
B) False

7. The sharing of information between customers and suppliers in a supply chain will increase both
variability and uncertainty, forcing companies in the supply chain to increase their inventories and
lengthen delivery lead times.
A) True
B) False
8.
When a company uses a make-to-stock production approach, the scheduled production levels are
based on a forecast of demand.
A) True
B) False

9. Total Factor Productivity (TFP) is calculated as:TFP = Input/(Labor + Capital + Materials +

Energy)
 A) True
B) False

10. One strategic use of the service-system design matrix is to permit comparisons with how other
competitors deliver a specific service, and to determine where a competitive advantage resulting
from a different delivery method may be present.
A) True
B) False

11. From the perspective of a company in the middle of a long supply chain, its customer
relationship processes include the interaction its sales force has with its customers.
A) True
B) False

12. The primary purpose in building a house of quality matrix is to aid a cross-functional team in
making decisions related to marketing and engineering design decisions, with the goal of creating a
product that will satisfy customers.
A) True
B) False

13. Baggage handling, beginning with the point where the passenger's suitcase has been labeled and
placed on the conveyor belt, is considered a low contact operation at an airline.
A) True
B) False

14. The value analysis and value engineering processes are intended to identify product changes that
can reduce costs through actions such as eliminating nonstandard components or unnecessary design
features.
A) True
B) False

15. If a queuing system has a limited-size customer pool, it is treated as having an infinite
population.
A) True
B) False

Part II: Multiple Choice Questions

16. Delaying the process step that differentiates the product to a point late in the supply chain is
called
A) an efficient supply chain.
B) process postponement.
C) an outsourcing strategy.
D) the bullwhip effect.
E) global positioning sourcing.
17. Given the following information (RSFE and MAD) on the quality of a forecast, and using the
tracking signal (TS) range presented in class, in which period would the tracking signal first classify
the forecast as being "out of control"?
Period RSFE MAD
3 58 16
4 76 20
5 82 18
6 74 18

A) in period 3.
B) in period 4.
C) in period 5.
D) in period 6.
E) This forecast would not be classified as being out of control.

18. A product requires 32 distinct steps to manufacture, with a total work content of 67 minutes.
Demand for the product requires that the single assembly line must produce one unit every 6
minutes. If it is possible to balance the line using the theoretical minimum number of workstations,
what level of throughput efficiency (TE) will be achieved?
A) 100% TE
B) between 95.9% TE and 99.9% TE
C) between 93.9% TE and 95.8% TE
D) between 91.9% TE and 93.8% TE
E) less than 91.9% TE

19. Which of the following is not one of the seven characteristics of a well-designed service system?
A) It is robust.
B) It ensures complete independence and separation between the "back office" and the "front
office."
C) It is cost-effective.
D) It manages the evidence of service quality so that customers see the value of the service
provided.
E) Select this answer if you think that all of the above (a,b,c,d) are characteristics of a well-
designed service system.

20. Which of the following statements does not characterize the quality function deployment (QFD)
process?
A) QFD helps marketing and engineering work together on design decisions.
B) QFD helps identify the product characteristics that are important to the customer.
C) QFD uses a "house of quality" matrix to show how customer requirements relate to the
technical characteristics of a product.
D) QFD uses customer input to identify how a product performs relative to competitors'
products.
E) Select this answer if you think that all of the above answers (a,b,c,d) correctly characterize
the QFD process.

21. Although some sources say that the best operating point for a service facility is at approximately
70% of the maximum capacity, the optimal utilization rate depends on the context. In which of the
following situations would it be most appropriate to operate at a relatively low percent of maximum
capacity?
A) A dry cleaning (laundry) operation.
B) Processing membership applications submitted by mail.
C) The Ashland fire department.
D) The Columbus Crew stadium (seating for home games.)
E) A flight on United Airlines.

22. Actual sales in April and May were 50 and 60 units, respectively. Forecast sales for those same
two months were 55 and 65. Which of the following statements about the two forecasts is true?
A) The average error is 5 and the MAD is 5.
B) The average error is 0 and the MAD is 5.
C) The average error is 0 and the MAD is 0.
D) The average error is -5 and the MAD is 5.
E) None of the above statements (a,b,c,d) is true.

23. A copy center served 1,841 customers last week. The center was open 7 days per week, 8 hours
per day, and runs 1 shift per day. There are 4 employees each working an 8-hour shift per day. What
was the labor productivity at the copy center last week?
A) 2.1 customers per labor hour.
B) 4.1 customers per labor hour.
C) 8.2 customers per labor hour.
D) 16.4 customers per labor hour.
E) 57.5 customers per labor hour.

24. An operation (routing) sheet does which of the following?

A) It shows how parts go together and the order of assembly.
B) It shows an "exploded" view of the product and its components.
C) It defines symbolically, and in great detail, the operations performed.
D) It specifies the sequence of machines or workcenters used to assemble the product.
E) It shows the route taken from the supplier to the warehouse.

25. Given the following quarterly demand data for 2011 - 2012, what is the multiplicative seasonal
index for quarter 3?
Quarter 2011 2012
Q1 120 113
Q2 135 132
 Q3 144 143
Q4 114 118

A) less than 0.50

B) between 0.50 and 1.00
C) between 1.01 and 1.20
D) between 1.21 and 1.40
E) greater than 1.40

26. Using the data given in the previous problem (and reproduced in the table below), if the seasonal
index for quarter 4 is 1.91, what forecast (rounded to the nearest integer) should be made for quarter
4 of 2013?
Quarter 2011 2012
Q1 120 113
Q2 135 132
Q3 144 143
Q4 114 118
A) 91
B) 115
C) 118
D) 127
E) 133

27. The following table lists the anticipated profits associated with five alternate product innovations
using two possible scenarios: low demand (30% probability) and high demand (70% probability.)
Based on the expected value criterion, which product innovation should be selected?
Product
AA BB CC DD EE
Innovation
Profits with Low
10 30 20 60 30
Demand (p = .30)
Profits with High
60 40 10 30 50
Demand (p = .70)

A) AA
B) BB
C) CC
D) DD
E) EE

28. Given a similar decision situation as in the previous question (NOTE: this is not the same
decision table), and assuming that the probabilities of each demand situation are not known in this
case, which option should be selected if the decision maker applies the maximin decision criterion?
Product
AA BB CC DD EE
Innovation
 Profits with Low
15 30 20 85 35
Demand
Profits with High
70 50 10 30 40
Demand
A) AA
B) BB
C) CC
D) DD
E) EE

29. Which of the following answers characterizes a continuous flow process most accurately?
A) high volume production, limited variety of products, and high labor cost per unit
B) high volume production, large variety of products, and low labor cost per unit
C) high volume production, limited variety of products, and low labor cost per unit
D) low volume production, limited variety of products, and low labor cost per unit
E) low volume production, large variety of products, and high labor cost per unit

30. Consider two firms that provide the same product to customers. Company A uses a make-to-
order (MTO) process, while Company B uses a make-to-stock (MTS) process. Which of the
following statements about the way each firm meets customer demand is not true?
A) Company A (MTO)will have a longer delivery lead time than will Company B (MTS)in most
cases.
B) Company A (MTO)will be better able to provide a customized product than will Company B
(MTS).
C) While making the product, Company A (MTO)will have a greater need to keep track of
individual customer orders and requirements than will Company B (MTS).
D) When determining production schedules, Company A (MTO)will rely more heavily on
forecasts of customer demand than will Company B (MTS).
E) Both Company A and Company B may choose to sell only standard products to their
customers.

Part III -- Essay and Computational

31. (15 points) A flowchart used for service process design is often referred to as a service blueprint.
First, describe what the line of visibility on a service blueprint shows. Then, consider any service
business that you are familiar with. Define what is meant by a “poka-yoke”, and describe at least
one element of the service system that is an example of a poka-yoke (if the system does not have any
examples of poka-yoke, suggest at least one that could be added). [Your answer can be a
maximum length of 1 page typed, double-spaced, so be concise!] Note: for full credit, you must
give an example of a poka-yoke in a service industry, not a manufacturing industry.

32. (10 points) A bank reviews loan applications. One team of employees in this bank does a
relatively quick initial screening of applications to reject loan applications with no chance of
approval. The following table gives the number of applications screened by this team during the past
four months. Note: Assume that there is a backlog of loan applications waiting to be screened in
each month; for example, assume that there were more than 850 applications waiting to be screened
in July. Due to an increasing volume of applications in the summer, the company hired three
additional reviewers at the beginning of July, as shown in the table.

Month April May June July

Loan Applications
440 480 520 840
Screened

Number of
4 4 4 7
Workers

Labor

Productivity

a. Calculate the labor productivity for each month, placing your answers in the blank spaces in the
table above.

b. Briefly describe how labor productivity has changed over the four month period, and suggest a
reason why productivity increased or decreased in a given month.

33. (10 points) Many manufacturing companies have applied the concept of DFMA (Design For
Manufacturability and Assembly) to improve the design of their products. Select any product that
you are familiar with that requires some assembly (by the factory and/or by the customer) and
describe the changes to the product that you might suggest as part of a DFMA initiative. Discuss
the benefits that the company making that product would expect to achieve from DFMA.
[Your answer can be a maximum length of 1 page typed, double-spaced, so be concise!

34. (10 points) A time study analyst observes a worker over a period of time and calculates that the
worker required 30.0 minutes per unit produced. The worker was rated at a 110 percent performance
rating, and a 15 percent allowance for personal time and fatigue applies. What is the standard time
for this task? If a worker managed to produce 14 units in an eight-hour day, what would their day’s
pay be if the basic rate was $18 per hour and the premium payment system paid on a 100 percent
basis?35. (10 points) The following gives the number of computers sold during each of the last four
months.

Computers
Month Sold
February 330
March 320
April 290
May 330
a. Using a four-period weighted moving average, with weights w1 = .3, w2 = .3, w3 = .2 and w4 = .2,
forecast the number of computers to be sold in June.

b. Using a three-period simple moving average, forecast the number of computers to be sold in June.

c. Using simple exponential smoothing with an initial forecast for April of 320 and smoothing
constant α = 0.2, forecast the number of computers to be sold in June. If you also had to make a
forecast for July (two months from now), what would it be?

d. Which of the forecasting methods used in part (b) and part (c) above will be more responsive to
changes in demand?

36. (15 points) A hotel breakfast area has a self-serve coffee machine. During the three hour
breakfast period, customers arrive at a rate of 80 per hour (approximately one new customer arrives
every 45 seconds), and the arrivals follow a Poisson distribution. The mean service rate at the coffee
machine follows an Exponential distribution, and is 180 customers per hour (customers take
approximately 20 seconds to serve themselves a cup of coffee.)

a. What is the mean (average) time in hours that a customer spends in the system (waiting in line at
the machine, then filling their cup with coffee)?

b. The hotel wants to know how crowded the area around the coffee machine will be during a
typical breakfast period. What is the mean number of customers that are in line, waiting to get a
cup of coffee?

c. What is the mean utilization percentage of the coffee machine (the server in this system)?

d. If the company decides to purchase a second coffee machine (there are now two “servers” in this
system), the waiting time should be faster. On average, how long will a customer now wait in line
for their cup of coffee?