# MOS 3330 Test 2 Review Problems & Solutions

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1 MOS 3330 Test 2 Review Problems & Solutions General Information Test date, time, location: See the course outline See also the course web site: dan.uwo.ca/courses/3330 Test time conflict (due to having a Wed. evening class) must report to the instructor no later than one week before the test date Exam conflict consists of having 3 exams within 23 hours Missing the test check the course web site for instruction Test coverage: The coverage is based on the lecture notes, not the textbook. o Aggregate Planning o MRP (including Scheduling) o ERP (including Project Management) Test 2 is not cumulative of Test 1 materials. Test structure: Test 2 is worth 25% of your course grade Test 2 = total 65 marks o Question 1 Computational, 2 parts, total 16 marks o Question 2 Short answers, 1 question (conceptual, no calculation), total 9 marks o Question 3 Multiple choice, 40 questions (concepts and simple calculations), 1 mark each, total 40 marks o Formula sheet provided on the last page of the test (the sheet is the same from Test 1) Don t forget to bring to test: Student ID Non-programmable calculator Pencils for multiple choice scantron sheet (also a good idea for doing aggregate plan tables) No cell phones on person or on desk during the test No personal scrap paper 1

2 A. Computational General Tips Recommended steps for how to prepare for computational questions in Test 2: 1. Review computational examples in the lecture notes. Familiarize yourself with typical input data for an aggregate plan. Familiarize yourself with the format of the aggregate plan table as shown in the lecture notes (you don t have to memorize the column headings because they will be provided in the test). Understand how to calculate columns of the aggregate plan table and the total cost. Understand the aggregate plan examples shown in the lecture notes (Examples 1a- 1d & 2a-2d) Understand the differences among level, chase, and hybrid approaches; for Test 2, you have to determine which one to use based on the description of the plan given in the test question. 2. Download the formula sheet from the course web site. Test 2 covers the middle ¹ ₃ of the formula sheet. Recall that symbols are not defined on the formula sheet; you should know what they stand for. 3. Study questions from the old exams. See A1 this is not a mistake; for Test 2, you should do the questions from the old exams (A1) before the textbook questions (A2). 4. Study end-of-chapter problems in the textbook. See A2. The textbook questions may be confusing because they sometimes refer to hybrid cases as level or chase ; also, their solutions sometimes include additional improvement, which was not specified in the question. If you get stuck with a textbook question, check the solution right away and learn from it. Rounding Reminder For a physical quantity (e.g., order quantity), the final answer should be an integer. For a dollar amount, the final answer should have two decimal points. 2

3 A1. Computational Questions from Old Exams 1. Wetski currently maintains a steady production level at the average demand all year around and does not hire or fire workers. Fill all blank spaces in the following table so that it represents an aggregate production plan based on Wetski s current production and hiring policy. What is the total cost of this plan? Regular production cost = \$55 per unit rate = 750 units/worker/quarter Overtime production cost = \$82 per unit Holding cost = \$4 per unit per quarter Subcontracting cost = \$77 per unit Backorder cost = \$80 per unit per quarter Opening workforce level = 11 Hiring cost = \$140 per worker Overtime capacity = 2500 units per quarter Firing cost = \$550 per worker Subcontracting capacity = 1000 units per quarter Opening inventory = 0 Quarter Demand (units) Fall 3700 Winter 4600 Spring Summer Total Prod. Workforce Inventory Regular Prod. Overtime Prod. Subcontract Hiring Firing 2. University Press publishes textbooks for the academic market. The relevant cost and printing equipment-related capacity information are given below. Regular production cost = \$20 per book Regular production max. capacity = books per quarter Overtime production cost = \$30 per book Overtime production max. capacity = 5000 books per quarter Subcontracting cost = \$35 per book Beginning inventory = 0 Holding cost = \$2 per book a) Fill all blank spaces in the following table so that it represents an aggregate production plan using a pure level approach with average demand. What is the total cost of the initial plan? Quarter Demand Total Workforce Inventory Regular Overtime Subcontract Hire Fire b) Fill all blank spaces in the following table so that it represents an aggregate production plan using a pure chase approach. For this question, we will ignore workforce-related costs since the cost information is not provided. What is the total cost of the plan? Compared to the level approach in part a), which approach seems better? Justify your answer briefly. Quarter Demand Total Workforce Inventory Regular Overtime Subcontract Hire Fire 3

4 c) Based on parts a) and b), develop an improved aggregate production plan in terms of the total cost. The plan may deviate from a pure level or a pure chase approach. Assume that no other information or objective will be considered. Provide the total cost of the improved plan and explain briefly how you came up with your improved plan. Quarter Demand Total Workforce Inventory Regular Overtime Subcontract Hire Fire A2. Textbook Computational Problems Topic Aggregate Planning Suggested textbook end-of-chapter problems For #1-7: (1) Convert per hour to per unit : regular-time labor cost per hour labor standard per unit = regular-time labor cost per unit = 10 6 = \$60 (2) Convert overtime labor cost per hour to overtime labor cost per unit in the same manner = 15 6 = \$90 (3) Convert time available to production rate : regular time available per period labor standard per unit = production rate/worker/period = = (4) Convert overtime available per period to production rate/worker/period in the same manner = 32 6 = 5.33 FOR ALL QUESTIONS, USE THE SAME TABLE FORMAT & COLUMN HEADINGS AS THE LECTURE NOTES: Resource Planning (MRP) #1 #2 (a) The textbook solution is based on the max of cumulative demand, but this question, as it reads, can actually be done in two ways: the highest demand or the max of cumulative average; in the test, either a question has enough information so that it is not ambiguous or it will accept multiple answers if ambiguous; (b) the question refers to this plan as level but it is hybrid/modified because part (b) suggests hiring of 18 employees. #3 #4 #6 #7 The textbook solution contains some errors; see the alternative solution provided in this review document #8 #9 Use the workforce calculated in 8) as the opening workforce; the textbook solution contains some errors; see the alternative solution provided in this review document #11 The textbook solution contains some errors; see the alternative solution provided in this review document #12 The textbook solution contains some errors; see the alternative solution provided in this review document #1 #2 #3 #4 Scheduling #5 #7 #8 4

5 B. Multiple Choice General Tips Recommended steps for how to prepare for multiple choice questions in Test 2: 1. Focus on the lecture notes. All multiple choice questions are based on the lecture notes. Be able to define/explain all terms and concepts contained in the lecture notes. If you are not sure about a term or concept, make a note of that and look it up in the textbook later (see Step 2). 2. Read the textbook chapters that correspond to the test coverage. DO NOT read the textbook unless you are clear about what is in the lecture notes. Take notes only on the materials covered in the lecture notes. Take notes on terms/concepts that you were not sure about in the lecture notes. Read quickly through the terms/concepts that are not in the lecture notes (don t take any notes). 3. Study questions from the old exams. See B1 below. B1. Multiple Choice Questions from Old Exams 1) The active strategy in aggregate production planning a. is developed for product families rather than individual products b. changes workforce levels so that production capacity meets demand c. maintains resources for high demand levels d. produces products with counter-cyclic demands 2) Which of the following is true concerning aggregate production planning? a. When a firm wants to minimize inventory investment, a level production strategy is best. b. When a firm wants to keep skilled labour, a level production strategy is best. c. When a firm wants to emphasize plant utilization, a chase strategy is best. d. When a firm wants to minimize changes in production, a chase strategy is best. 3) Aggregate production planning a. may be constrained by management policies and labour agreements b. assumes a planning horizon of 2 years and longer c. assumes that facilities, products, and processes may change during the planning period d. deals with one product at a time 4) The best way to manage fluctuating demand when using a level production strategy is to a. hire part-time workers b. hire or fire full-time workers c. increase inventory d. backorder 5) Which of the following best describes the chase approach? a. always lagging behind demand b. Constant production capacity c. Inventory minimization policy d. Stable labour management cost 5

7 15) Given the data below, using the SPT heuristic sequencing rule, determine the completion date and tardiness for each job as well as the average completion time and average tardiness for all four jobs. Which of the following statements is true? Job A B C D Processing time (days) Due date (in days) a. Jobs B and D will have no tardiness b. The average completion time is 6.5 c. The tardiness for Job A is 12 days d. The average tardiness is ) What is an information system designed to integrate internal and external members of the supply chain? a. ERP b. MRP c. MPS d. EIS 17) Each A (finished good) requires 1 of component B and 2 of component C. Each B requires 2 of part D and 1 of part E; and each C requires 1 of part D and 1 of part F. If the demand for product A is 30 units, and there are 10 units of B on hand and none of C, how many units of part D will be needed? a. 60 b. 120 c. 100 d ) MPS should not be a. a realistic plan b. a final assembly schedule c. an anticipated build schedule d. all of the above 19) Which of the following is not an ERP enabler? a. EFT b. Shared databases c. EDI d. None of the above 20) Which one of the following is considered a technical issue in ERP implementation? a. Lack of management support b. Inaccurate data c. Expensive software d. Employee resistance 7

9 C1. Textbook Discussion Questions Topic Suggested end-of-chapter discussion questions Aggregate Planning #3, 4, 5, 6, 7, 8, 9, 10, 11 Resource Planning (MRP, ERP) #1, 2, 3, 6, 8, 9, 10, 13, 15 C2. Short Answer Questions from Old Exams 1. ERP implementation requires a great deal of attention to behavioural issues. Describe two behavioural issues and make suggestions for how to deal with those issues. 2. What is the main problem with MRP that requires human intervention? How could the problem be dealt with? 3. Describe how MRP can be used as an analysis tool for the inventory manager. 4. For a restaurant, what would be an example of the active strategy and an example of the reactive strategy? Which of the two strategies is better suited for the Wave Restaurant on UWO campus during the summer time? Justify your answer briefly. 5. Is ERP more advantageous than MRP II? Justify your answer briefly. 9

10 Solutions A1. Computational Questions from Old Exams 1. Quarter Demand (units) Total Prod. Workforce Inventory Regular Prod. Overtime Prod. Subcontract Hiring Firing Fall Winter Spring Summer Note: subcontracting is cheaper than overtime Total cost = (regular production) + (overtime production) + (subcontract) + (inventory) = 55 33, ,900 = 1,815, , , ,600 = \$2,804, a) Quarter Demand Total Workforce Inventory Regular Overtime Subcontract Hire Fire Total cost = (regular production) + (overtime production) + (subcontracting) + (inventory) = = \$1,830,000 b) Quarter Demand Total Workforce Inventory Regular Overtime Subcontract Hire Fire Total cost = (regular production) + (overtime production) + (subcontracting) + (inventory) = = \$1,875,000 The level approach seems better because the chase approach costs more than the level approach even without workforce-related costs. c) In any aggregate plan, there are 3 general components to the total cost: production, inventory, and workforce. Hence, if you want to reduce the total cost, look at the 3 components to see which one can be reduced. 10

11 From part a), we can see that the level approach has zero workforce cost. From part b), we can see that the chase approach has zero workforce cost and zero inventory cost. Hence, if you start with the chase plan, then you can focus only on reducing production cost production cost consists of regular-time + overtime + subcontracting subcontracting is most expensive try to reduce subcontracting cost in the first three quarters of the chase plan (in b) by using cheaper regular and overtime production. Quarter Demand Total Workforce Inventory Regular Overtime Subcontract Hire Fire Total cost = (regular production) + (overtime production) + (subcontracting) + (inventory) = = \$1,800,000 A2. Textbook Computational Problems Agg, #1 Appendix A (look for chapter 5 answers) (c) Solution in the lecture note format: Agg, #2 (a) production rate per period = 6080 units (b) 228 employees (c) Solution in the lecture note format: (d) total cost = ( ) + ( ) + (600 18) = \$2,263,600 (e) the cost of this plan is \$150,000 higher than a level aggregate plan using inventories and back orders; the inventory and hiring costs are also considerably higher than a level aggregate plan using inventories and backorders; however, in terms of customer service, this plan has a high degree of customer service since no orders are placed on back order 11

12 Agg, #3 Agg, #4 Appendix A (look for chapter 5 answers) (a) Solution in the lecture note format: (b) total cost = ( ) + ( ) + ( ) + = \$2,223,000 (c) this plan yields no inventory carrying cost since it produces exactly what is needed; the total cost was lower than the level aggregate plan in problem 2; moreover, customer service is high since no backorders are needed; however, from a planning perspective, this plan would be difficult to implement due to the high variability of resources needed each period; moreover, employee morale would tend to be fairly low with such a plan due to lack of job security. Agg, #6 (a) regular-time production units possible in each period given a workforce of 195 = (160 hours/employee/period)/(6 hours/unit) (195 employees) = 5200 units/period (b) Solution in the lecture note format: (c) total cost = ( ) + ( ) + ( ) + ( ) + (450 15)= \$2,225,350 (d) this plan provides stable use of resources throughout the production periods; however, periods 3-5 experience backorder costs, and hence, this plan will not provide a high level of customer satisfaction Agg, #7 (a) Solution in the lecture note format: (b) total cost = ( ) + ( ) + ( ) + (20 320) = \$2,231,200 (c) this plan provides some backorders but only in period 3; overtime costs are still significant, but this plan fits the existing available overtime hours and should not be too disruptive to operations 12

13 Agg, #8 Agg, #9 Average weekly demand = 43.3 clients; workforce needed = 43.3 (12hrs/client)/(40 hrs/employee) 13 Appendix A (look for chapter 5 answers) (a) Solution in the lecture note format: Note: use the workforce calculated in 8) as the opening workforce (b) TC = ( ) + ( ) + (2000 1) = \$196,000 Agg, #11 Appendix A (look for chapter 5 answers) (a) Solution in the lecture note format: (b) TC = ( ) + ( ) + (1200 7) = \$108,400 Agg, #12 (a) Solution in the lecture note format: (b) TC = ( ) + ( ) + (500 24) = \$94,800 (c) The major flaw of this plan is that demand in period 3 cannot be met. Resource, #1 Appendix A (look for chapter 6 answers) Resource, #2 8 weeks (X-R-Q) Resource, #3 Q = 100, R = = 200, S = = 100, T = = 300, X = = 400, Y = = 200, V = = 300, Z = = 900 Resource, #4 Q = 100, R = = 0, S = 100, T = = 150, X = 0, Y = 0, V = = 150, Z = = 450 Sched, #5 Sched, #7 Sched, #8 Appendix A (look for chapter 7 answers) Appendix A (look for chapter 7 answers) (a) ABCDEF 13

14 (b) make span = 45 days, mean job flow time = ( )/6 = days, average number of jobs in the system = 161/45 = 3.58 jobs, mean job lateness = 16/6 = 2.67 days, mean job tardiness = 47/6 = 7.83 days, maximum tardiness = 30 days B1. Multiple Choice Questions from Old Exams Question Answer 1 d 2 b 3 a 4 c 5 c 6 a 7 d 8 a 9 d 10 d 11 b 12 d 13 c 14 d 15 a 16 a 17 c 18 b 19 d 20 b C1. Textbook Discussion Questions Agg, #3 Lecture notes, Aggregate Planning, slide 3 Agg, #4 A composite product is used when developing the aggregate plan in order to minimize the level of detail in the plan; also, aggregate forecasts are usually more accurate than individual product forecasts Agg, #5 Lecture notes, Aggregate Planning, slide 5 Agg, #6 Lecture notes, Aggregate Planning, slide 4 Agg, #7 Lecture notes, Aggregate Planning, slide 4 Agg, #8 A hybrid aggregate plan uses options from both the level and chase plans Agg, #9 Lecture notes, Aggregate Planning, slide 6 Agg, #10 E.g., we would want to consider the availability of workers based on the unemployment rate; the cost of holding inventory should be determined; we should also determine the impact of backorders on customer satisfaction Agg, #11 Resource, #1 Lecture notes, ERP, slide 7 Resource, #2 Lecture notes, ERP, slide 7 Resource, #3 Lecture notes, ERP, slide 5-7 In services, we cannot use inventory buildup as a way of dealing with peaks in demand 14

15 Resource, #6 Lecture notes, MRP, slide 3 Resource, #8 Lecture notes, MRP, slide 3 Resource, #9 Lecture notes, MRP, slide 4 Resource, #10 Lecture notes, MRP, slide 4 Resource, #13 Companies do capacity requirements planning because the MRP may create a production schedule that exceeds our available capacity Resource, #15 MRP II synchronizes internal functions with a common database C2. Short Answer Questions from Old Exams GUIDELINES only since there is more than one way to answer short answer questions. 1. Examples of behavioural issues: a lack of top management support, a lack of commitment by employees, coordination among different functions, ownership claim problem, etc. Examples of possible solutions: explain what ERP is, what it does, and why it is needed; provide adequate training; increase involvement by all; set up a project team including all functions 2. Main problem with MRP = shortage Solution examples: move some jobs forward, move some jobs backward, produce more ahead of time, purchase more ahead of time 3. Examples: to provide useful information, to determine MPS feasibility, to compare different solutions for dealing with MRP shortage problems 4. Active strategy examples: incentives and promotions, such as 2 for 1 deal and coupons Reactive strategy examples: staff overtime and undertime (being sent home early), hiring/firing During the summer, active strategies may be better for Wave because it is critical to bring in more customers from a non-student population (otherwise, the restaurant may have to be closed for not having enough business) 5. Discuss main differences between MRP II and ERP; based on MRP II and ERP characteristics, explain what kind of companies would benefit from MRP II or ERP 15

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