CAMBRIDGE INSTITUTE OF TECHNOLOGY

CAMBRIDGE INSTITUTE OF TECHNOLOGY

OPERATIONS MANAGEMENT

STUDY MATERIAL

Prof. Subramani L
Department of Management Studies Cambridge Institute of Technology K. R. Puram, Bangalore 560 036
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Break Even Point:

Total Revenue =Total cost =Fixed cost +Variable cost Total revenue = Selling price per unit (S)* Quanitity (Q) Variable cost = Variable cost per unit (V) * Quanitity (Q) Selling price per unit (S)* Quanitity (Q) = fixed cost (FC) + Variable cost per unit (V) * Quanitity (Q) S * Q = FC + V * Q S * Q V * Q = FC Q(S V) = FC

Break Even Chart: Selling price per unit = Rs 2 Variable cost per unit = Rs 1 Fixed Cost = Rs 5 Fixed cost Variabe cost Total cost Quantity Sales 0 0 5 0 5 1 2 5 1 6 2 4 5 2 7 3 6 5 3 8 4 8 5 4 9 5 10 5 5 10 6 12 5 6 11 7 14 5 7 12 8 16 5 8 13 9 18 5 9 14 10 20 5 10 15

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Exercise Draw the Break Even Chart:

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Problem 1: P ltd manufacturing kid Pen need a fixed cost of Rs 10,000 per year. Variable cost per unit is Rs 5 and selling price per unit Rs 10. Required i. ii. iii. Break Even point Number of pens to be sold to earn a profit of Rs 20,000. If Pltd could able to sell 3,000 units per yeat what is the profit. Solution : i) Break Even point Contribution per unit = s v = 10 5 = Rs 5

Problem 2: I. II. III.

Sales Rs Profit Rs

2010 2009 1,50,000 1,00,000 20,000 5,000

Comput Fixed cost Break even point Find the sales to make profit of Rs 10,000

1, 00,000 =Rs 30,000

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Problem 3: company has a fixed cost of Rs 20,000. It sells two products A and B, in the ratio of 2 units of A and 1 unit of B. Contribution is Rs I per unit of A and Rs 2 per unit of B. how many units of A and B would be sold at break even point. Solution: Total Contribution for A (for 2 units) = contribution per unit * 2 = 1 * 2 = Rs 2 Total Contribution for B (for 1 units) = contribution per unit * 1 = 2 * 1 =Rs 2 Total contribution of A and B = Rs 4

Units of product A and B sold in the ratio 2:1 Break even quantity of A = 5000 * 2 =10,000 units Break even quantity of B = 5000 * 1 =5,000 units

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Forecasting: week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

3 years moving average: actual inventory 100 125 90 110 105 130 85 102 110 90 105 95 115 120 80 95 100 3years moving average/forecasts absolute deviation

(90+125+100)/3= 105 (110+90+125)/3= 108.3 (105+110+90)/3= 101.7 (130+105+110)/3= 115 (85+130+105)/3= 106.7 (102+85+130)/3= 105.7 (110+102+85)/3= 99 (90+110+102)/3= 100.7 (105+90+110)/3= 101.7 (95+105+90)/3= 96.7 (115+95+105)/3= 105 (120+115+95)/3= 110 (80+120+115)/3= 105 (95+80+120)/3= 98.3 sum of absolute deviation 5 years moving average
5years moving average/forecasts

5 3.3 28.3 30 4.7 4.3 9 4.3 6.7 18.3 15 30 10 1.7 170.6

absolute deviation

week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

actual inventory 100 125 90 110 105 130 85 102 110 90 105 95 115 120 80 95

(105+110+90+125+100)/5= (130+105+110+90+125)/5= (85+130+105+110+90)/5= (102+85+130+105+110)/5= (110+102+85+130+105)/5= (90+110+102+85+130)/5= (105+90+110+102+85)/5= (95+105+90+110+102)/5= (115+95+105+90+110)/5= (120+115+95+105+95)/5= (80+120+115+95+105)/5=

106 112 104 106.4 106.4 103.4 98.4 100.4 103 105 103

24 27 2 3.6 16.4 1.6 3.4 14.6 17 25 8

CAMBRIDGE INSTITUTE OF TECHNOLOGY 17 100 (95+80+120+115+95)/5= Sum of absolute deviation 101 1 143.6

7 years moving average: Week actual inventory 1 100 2 125 3 90 4 110 5 105 6 130 7 85 8 102 9 110 10 90 11 105 12 95 13 115 14 120 15 80 16 95 17 100 7 years moving average/forecasts absolute deviation

(85+130+105+110+90+125+100)/7= (102+85+130+105+110+90+125)/7= (110+102+85+130+105+110+90)/7= (90+110+102+85+130+105+110)/7= (105+90+110+102+85+130+105)/7= (95+105+90+110+102+85+130)/7= (115+95+105+90+110+102+85)/7= (120+115+95+105+95+110+102)/7= (80+120+115+95+105+95+110)/7= (95+80+120+115+95+105+95)/7= Sum of absolute deviation Forecasted Demand for 18 week 3 years moving average = (100+95+80)/3=96.7 5 years moving average = (100+95+80+120+115)/5= 102 7 years moving average = (100+95+80+120+115+95+105)/7=101.4 If you are a business analyst suggest the best of the above three?

106.4 106.7 104.6 104.6 103.9 102.4 100.3 105.3 102.1 100

4.4 3.3 14.6 0.4 8.9 12.6 19.7 25.3 7.1 0 96.3

Compute MEAN ABSOLUE DEVIATION (MAD) = sum of absolute deviation/n MAD 3 year = 170.6/14 = 12.19 MAD 5 year = 143.6/ 12 = 11.96 MAD 7 years = 96.3/ 10 = 9.63 n=17-3 = 14 n=17-5 = 12 n=17-7 = 10

Forecaste demand = 101.4 since the MAD (error) is least

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If you are asked to consider the recent 10 years forecast the demand for 18 week. (n=10) 8 to 17 3 years moving average actual Week inventory Forecasts Deviation 8 102 106.7 4.7 9 110 105.7 4.3 10 90 99 9 11 105 100.7 4.3 12 95 101.7 6.7 13 115 96.7 18.3 14 120 105 15 15 80 110 30 16 95 105 10 17 100 98.3 1.7 sum of absolute deviation 104
MEAN ABSOLUE DEVIATION (MAD) 104/10 =10.4

5 years moving average actual absolute inventory forecasts deviation 102 104 2 110 106.4 3.6 90 106.4 16.4 105 103.4 1.6 95 98.4 3.4 115 100.4 14.6 120 103 17 80 105 25 95 103 8 100 101 1 92.6
92.6/10 =9.26

7 years moving average actual absolute inventory forecasts deviation 102 106.4 4.4 110 106.7 3.3 90 104.6 14.6 105 104.6 0.4 95 103.9 8.9 115 102.4 12.6 120 100.3 19.7 80 105.3 25.3 95 102.1 7.1 100 100 0 96.3
96.3/10=9.63

5 years moving average is the best solution since MAD is least hence gorecast for 18 week = 102 Weighted Moving Average 3 years score (sum of year digit) = 1+2+3=6 w1=3/6 W1+W2+W3 = 1 give more weightage for recent years 17 week forecast = 3/6*95+2/6*80+1/6*120= 94.12 and so on 18 week demand = 3/6*100+2/6*95+1/6*80 = 126.7 Sum of 5 years digits = 1+2+3+4+5 = 15 W1= 5/15 W2=4/15 W3=3/15 W4=2/15 W5=1/15 w2= 2/6 w3=1/6

Forecast for 18 week = 5/15*95+4/15*80 + 3/15*120 + 2/15*115+1/15*95= 98.67 and so on Forecast for 18 week = 5/15*100+4/15*95 + 3/15*80 + 2/15*120+1/15*115= 98.33

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Exponential Smoothening Method: Ft = forecasted indamand for period t, the next peiod. Ft-1 = forecasted demand for period t-1, the prior period At-1 = Actual demand for period t-1, the prior period = smoothening constant from 0 to 1

week 1 2 3 4 5 6 7 8 9 10 11

Ft = Ft-1 + (At-1 - Ft-1) ,=0.1 Abs. Actual Deviation Demand Forecasts 85 85 102 85+0.1(85-85) 85 17 110 85+0.1(102-85) 86.7 23.3 90 86.7+0.1(110-86.7) 89 1 105 89+0.1(90-89) 89.1 15.9 95 89.1+0.1(105-89.1) 90.7 4.3 115 90.7+0.1(95-90.7) 91.1 23.9 120 91.1+0.1(115-91.1) 93.5 26.5 80 93.5+0.1(120-93.5) 96.2 16.2 95 96.2+0.1(80-96.2) 94.6 0.4 100 94.6+0.1(95-94.6) 94.6 5.5 Sum of Abs.Deviation 134

Ft = Ft-1 + (At-1 - Ft-1) ,=0.2 Abs. Deviation Forecasts 85 85 17 88.4 21.6 92.7 2.7 92.2 12.8 94.8 0.2 94.8 20.2 98.8 21.2 103 23 98.4 3.4 97.7 2.3 124.4

Note: forecasted demand for period 1 = actual demand for period 1 MAD @0.1 = 134/10 = 13.4 12 week forecast = 94.6+0.1(100-94.6) = 95.14 MAD @0.2= 124/10 = 12.4 12 week forecast=97.7+0.2(100-97.7) = 98.16 Since MAD is least for = 0.2 forecast is 98.16 Exponential Smoothening Trend /Seasonal Method: Exponential Smoothening Method: St =Smoothed forecasted in period t. Tt =Trend estimate in period t. At =Actual demand in period t. FTt= Forecast with trend in period t = smoothening constant from 0 to 1 = smoothening constant for the trend FTt= St-1 + Tt-1 St = FTt + (At - FTt) Tt= Tt-1+ (FTt - FTt -1- Tt-1) = 0.2 = 0.3 Month t 1 2

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sales '000 *** FT1 = A1= 130

130 and

136

134

140

146

150

T1= (A6 - A1)/5 = (150 -130)/5 = 4 St 130 134.4 137.52 141.31 145.34 149.28 step3 step6 step9 step12 step15 step18

Month t At FTt + (At - FTt) 1 130 130 + 0 .2 (130-130) 2 136 134 + 0.2 (136-134) 3 134 138.4 + 0.2 (134-138.4) 4 140 141.64 + 0.2 ( 140-141.64) 5 146 145.17+ 0.2(146 - 145.17) 6 150 149.1 + 0.2( 150 - 149.1)

Month t At Tt-1+ (FTt - FTt -1- Tt-1) 1 130 2 136 4 + 0.3 ( 134 - 130-4) 3 134 4 + 0.3 (138.4 - 134 - 4) 4 140 4.12 + 0.3 ( 141.64 - 138.4- 4.12) 5 146 3.86 +0.3(145.17 - 141.64 - 3.86) 6 150 3.76 + 0.3(149.1 - 145.17 - 3.76)

Tt 4 4 4.12 3.86 3.76 3.81 step2 step5 step8 step11 step14 step17

Month t

At 130 136 134 140 146 150 ----

St-1 + Tt-1 130 + 4 134.4 + 4 137.52 + 4.12 141.31+ 3.86 145.34+3.76 149.28+3.81

FTt 130 134 138.4 141.64 145.17 149.1 step1 step4 step7 step10 step13 step 16

1 2 3 4 5 6 7

153.09 step 19

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Regression Method: Problem 1: An investigation into demand for colour TV sets in 5 cities has resulte in the following data: Population In lakhs X 5 7 9 11 13 Demand for TV in thousands Y 9 11 13 15 17 Fit a linear regression of Y on X and estimate the demand for CTV sets for two towns with population of 10 lakhs and 12 laks respectvely. Solution: X 5 7 9 11 13 X = 45 Y 9 11 13 15 17 Y =65 X 25 49 81 121 169 X = 445 XY 45 77 117 165 221 =XY= 625

-------------1 -------2 65 = 5a + 45 b----------------3 625= 45a + 445 b-----------4 Multiply equation 3 by 9 585 = 45a + 405b-----------5 Solve equation 4 and 5 40 = 40 b b=1

By putting the value of b in equation 3, we get 65 = 5a + 45*1 Regression equation of Y on: Population =10 lakhs 5a = 65-45 5a = 20 a= 4

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Y = 4 + 1*10 = 14 thousand CTV sets Population = 20 lakhs Y = 4 + 1* 20 = 24 thousand CTV sets Problem 3: project the trend of sales for the next 5 years from the follwing data: Year(X) 2006 2007 2008 2009 Sales (000 units)(Y) 120 140 120 150 Fit a regression equation to the sales figures and estimate the sales for 2011 Solution: Year 2006 2007 2008 2009 2010 X=year2008 -2 -1 0 1 2 X=0 2010 170

Y X XY 120 4 -240 140 1 -140 120 0 0 150 1 150 170 4 340 Y=700 X=10 XY=110

-------------1 -------2 700 = 5a + (0) b 5a = 700/5 a = 140 b = 11 Y = 140 + 11X

110 = (0) a + 10 b b=110/10 Regression equation of Y on X: Trend for the next five years

X (2011) = 2011 2008 =3 Y = 140 + 11*3 = 140 + 33 Y = 173 lakhs X (2012) = 2012 2008=4 Y = 140 + 11*4 = 140 + 44 Y = 184 lakhs X (2012) = 2013 2008 =5 Y = 140 + 11*5= 140 + 55 Y = 195 lakhs X (2012) = 2014 2008 =6 Y = 140 + 11*6 = 140 + 66 Y = 206 lakhs X (2012) = 2015 2008 =7 Y = 140 + 11*7 = 140 + 77 Y = 217 lakhs

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Plant Location: Problem1: A manufacture is considering four loations for anew plant. It has attempted tos study all costs at the various loaction and find that tah costs of the following items vary from one location to another. The firm will finance the new plant from deposits bearing 10 percent interest labor (Rs per unit) plant (Crores) material @ equipment(Rs per Unit) 0.43 0.6 0.4 0.55 Electricity per year (Rs) 30 26 30 28 Water per year (Rs) 7 6 7 7 transportation per unit (Rs) 0.02 0.1 0.1 0.05 Taxes(per year)(Rs) 33 28 63 35 Determine the most suitable location(economically) for output volumes in the range of 50,000 to 130000 units SOLUTION: cost element 10% Interest Electricity Water Taxes TOTAL FIXED COST Labour material @ equipment(Rs per Unit) transportation per unit (Rs) variable cost per unit variable cost for 50,00 units TOTAL COST For 50,000 units variable cost for 1,30,000 units TOTAL COST for 1,30,000 variable cost for 1,0000 units TOTAL COST for 1,00,000 A B C D 4,60,00 3,90,000 4,00,000 4,80,000 30,000 26,000 30,000 28,000 7,000 6,000 7,000 7,000 33,000 28,000 63,000 35,000 5,30,000 4,50,000 5,00,000 550,000 0.75 1.1 0.8 0.9 0.43 0.02 1.2 60,000 5,90,000 1,56,000 6,86,000 1,20,000 6,80,000 0.6 0.1 1.8 90,000 5,40,000 2,34,000 6,84,000 1,80,000 6,30,000 0.4 0.1 1.3 65,000 5,65,000 1,69,000 6,69,000 1,30,000 6,30,000 0.55 0.05 1.5 75,000 6,25,000 1,95,000 7,45,000 1,50,000 7,00,000 A 0.75 0.46 B 1.1 0.39 C 0.8 0.4 D 0.9 0.48

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GRAPH

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Problem2: A company is planning to undertake the production of a medical testing equipments has to decide on the location of the plant. The locations are being considered, namely A, B and C. The fixed costsof these locations are estimated to be Rs.300 lakhs, 500 Lakhs and 250 Lakhs respectively. The variable costs are Rs.3000, Rs.2000mand Rs.3500 per unit respectively. The avearge salesprice of the equipment is Rs.7000 per unit. Find a. The range of annula prodution/sales volume for each location is most suitable. b. Select the besst location if the sales volume is of 18000 units Solution: determination of total cost of three locations Total cost = Fixed cost + quantity produced * variable cost per unit Variable cost per unit = x Total cost A = 3,00,00,000 + 3,000 x Total cost A = 5,00,00,000 + 2,000 x Total cost A = 2,00,00,000 + 3,500 x 10000 plant COST(LACS) 5000units units A vriable cost 150 TOTAL COST 450 B vriable cost 100 TOTAL COST 600 C vriable cost 225 TOTAL COST 425 15000units 20000units 25000units 300 450 600 750 600 200 700 400 600 750 300 800 575 775 900 400 900 750 950 1050 500 1000 925 1125

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From the graph we can find that upto 22,000 units its economocal to use location C. for qauntity abve 22,000 A is preferred.

Plant Capacity: Problem 1 A steel plant has a designed capacity of 50,000 units per day, effective capacity 40,000 units per day and an actual output of 36000 units per day. Compute the efficiency of the plant and utilisation. efficiency = Actual output/efficiency capacity = 36000/40000 x 100 = 90% Utilization = Actual output/designed capacity = 36000/50000 x 100 = 72% Problem 2. A manufacturing company has a product line consisting of five work stations in series. The indvidual workstation capacities are given. The out put of 500 units per shift. Work station A B C D E Capacity/shift 600 650 650 550 600 Solution:

Calculate i) system capacity ii) efficiency of the production line. i) System capacity/shift = 550 (lowest capacity among the given work sation) ii) Actual Capacity = 500 System efficiency = Actual capacity/system capacity x 100= 500/550 x 100 = 90.91% Problem3 A department works 8 hrs shifts, 250 days a year and has the usage data of the m/c, as given below. Product annual demand X 300 Units std processing time 4 hrs

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400 Uints

6 hrs 3 hrs

Z 500 units Determine the number of machines required Solution: Processing time required annual Product demand X Y Z Total 300 Units 400 Uints 500 units

std processing time 4 hrs 6 hrs 3 hrs

processing time required 1200 2400 1500 5100

Annual production capacity of one m/c = 8 x 250 = 2000 hrs per year. No.of m/c required = work load per year/ ppproduction capacity per year = 5100/2000 = 2.55 = 3 m/c Problem .4 Machine A and B are both capable of processing the product. The following information is given machine machine B A Particularts Investment 75000 80000 interest on capital 10% 15% houraly charges Rs10 Rs8 pieces produced per hour 5 8 annual operating hours 2000 2000 Which m/c will give the lowest cost per unit of production, if it runs for the whole year? If only 4000 piesces are to be produced in ayear, which machine whould give the lowest cost per piece? Solution: machine Particularts machine A B Interst Investment(Fixed Cost) 7500 8000 houraly charges(Variable Cost) 20,000 16,000 TOTAL COST 27,500 28,000 16,000 10000 units units TOTAL OUTPUT Unit cost Rs 2.75 Rs 1.75 If the out put is 4000 units per annum Particularts machine

machine
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Interst Investment(Fixed Cost) houraly charges(Variable Cost) TOTAL COST TOTAL OUTPUT Unit cost

A 7500 8,000 15,500 4000 Rs 3.89

B 8000 4,000 16,000 4000 Rs 4.00

Probem 5 : Machine A and B are both capable of processing the product. The following information is given machine machine B A Particularts Rs Rs 80,000 50,000 Nvestment interest on capital 15% 15% houraly charges(Wages+Power) Rs10 Rs8 No .pieces produced per hour 8 8 annual operating hours 2000 2000 a) Which m/c will give the lowest cost per unit of production, if it runs for the whole year? b) If only 4000 pieces are to be produced in a year, which machine whould give the lowest cost per piece? c) Will your answer to a) above vary if you informed that 12.5% of the output of machine B gets rejected at the ispection satage. If so what would ne new solution. Solution machine A machine B 7500 12,000 20,000 16,000 27,500 28,000 5x2000=10000 8x200=16,000 units units TOTAL OUTPUT Unit cost Rs 2.75 Rs 1.75 if the out put is 4000 units per annum Particularts machine A machine B Interst Investment(Fixed Cost) 7500 800 Operating hors Required 4000/8=500 4000/8=500 hourally charges(Variable Cost) 10x500=5000 8x500=4000 TOTAL COST 12,500 16,000 TOTAL OUTPUT 4000 4000 Unit cost Rs 3.125 Rs 4.00 Machine A give lowest Cost per unit. If 12.5% o/p of machine b is rejected, annual productions from machine B Particularts Interst Investment(Fixed Cost) houraly charges(Variable Cost) TOTAL COST

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= 16,000 x (100-12.5)/100=14,000 units Cost per unit=28,000/14,000= Rs 2 Problem 6: A manager has to decide the number of m/c to be purchased. He has three options I.e., purchase one, or two, or three m/c. The data are given below. No.of m/c One Two Three Annual Fixed cost Rs 12000 Rs 15000 Rs 21000 output Range 0 to 300 301 to 600 601 to 900

Variable cost is Rs 20 and selling pice Rs 50 per unit. a) Determine the break even point for each range b) If projected demand is between 600 and 650 units how many machines should the manager purcahse?

Solution: a) one M/c QBEP = Fixedcost / (selling price per unit - variable cost per unit) QBEP = 12000/(50-20) = 400 units Two m/c Three m/c QBEP = 15,000/ 30 = 500 units QBEP = 21,000/30 = 700 units

b) The projected demand is between 600 and 650 output No.of Range m/c QBEP Profit/loss One 0 to 300 400 300(50-20)-12000 = (3000) or (300-400)30 Two 301 to 600 500 600(50-20)-15000 = 3000 or (600-500)30 Three 601 to 900 900 650(50-20)-21000 = (1500) or (650-700)30 If he purchase one m/c, should manufacture 400 units to reach break even- loss 100 units If he purchase three m/c , should manufacture 700 units to reach break even but demad is maximum 650 units loss 50 units If he purchase two m/c should manufacture 500 units to reach break even but minimum demand is 600- profit 100 units

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Employee Productivity: Productivity = Actual production/standard production Problem1: In particular plant there are10 workers manufacturting a single product and output per month cosisting of 25 days of that particular product is 300. How much is the monthly productivity. Monthly productivity per worker=300/10=30 units Problem 2: There are two industires a Aand B manufacturing spark plug. The standard time per piece is 15 minutes. The o/p is 30 and 20 respectively per shift of 8 hours. Find the Productivity of each per shift of 8 hours. What is the expectd production of each per week consisting of 6 days? Solution: Productivity per shift = 8x60/15=32 pcs. Productivity of A = 30/32=93.75% Productivity B =20/32=5/8=62.50% Production per week of industry A = 30x16=480 nos. Production per week of industry A = 20x6=120 nos. Problem 3: The follwing data is avialble for machine in manufacturing unit: hours workedper day working days per month numbers of operators 8 25 1

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standard minutes per unit of production machine time 22 opertor time 8 total time per unit 30 i) If plant opearted at 75% eficiency, ant the opereators is workink at 100% efficency, what is the oput per month? ii) If machine productivity is increased 10% over existing lvel, what will bw the out per month? iii) If opetaors efficeiency is reduced by 20% over existing level, wghat will be the out put per month? a) Hours workedper day =8 Working days per month =25 Hours worked per month Machine time Operator time Total time per unit = 25 x 8 = 200 hrs. = 22 minutes =8 min = 30 min =1/2 hrs

No. of units produced/month/operator = 200/(1/2)= 400 Monthly production = 400 x 75/100 = 300 units b) Productivity incresed by 10 % Machine time = 22 x 100/(100+10) = 20 minutes Total time = 20 + 8 = 28 minutes No. of units produced/month/operator = (200 x 60/28) = 428.57 units Monthly production = 428.57 x 75/100 = 321 units c) If operators efficiency reduced by 20% Operator time = 8 x (100+20)/100 = 9.2 minutes Total time = 22 + 9.2 = 31.2 minutes No. of units produced/month/operator = (200 x 60/31.2) = 379.74 Monthly production = 379.74 x 75/100 = 285 units Problem 4: the folwing data avialble for a manufactring uint no of operators daily working hors No of working days pe month Std. production per month 15 8 25 300 units
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std.labor per month 8 The follwing information available for august man days lost due to absentizm 30 unit produced 240 idle time 276 man hours Find the following: Percent absentism a) Efficiency of utilisation labour b) Productive efficiency labour c) Over all productivity of labour interms of units prduced per man per month Solution: No. of man days = 15 x 25 = 375 Total working hours = 375 x 8 = 3,000 hrs Hours lost in abzentism = 30 x 8 = 240 hrs. a) Percent abentism = (240/3000) x 100 = 8% b) Efficiency of utilisation labour = std labour hours to produce 240 units/ total labour hours = (240 x 8)/3000 x 100 = 64% c) Productive efficiency labour std labour hours to produce 240 units = 240 x 8 =1920 labour hours Total loss in time = Loss due to absentism + Iddletime = 30 x 8 + 276 = 516 hrs. Actual Labour Hours = 1920 + 516 = 2484 Hrs. Efficiency of Lbour = Std.labour hrs./Actual Labour hrs. = 1920/2484 x 100 = 77.30% d) 15 men produce 300 units, std. labour productivity = 300 / 20 units = 20 units In August, over all productivty = 240 /15 = 16 unitss Productivity Reduces By = (25-16)/25 x 100 = 25 Problem 5: A factory can manufacture rwo products A and B by using of two materials P or Q. A is expected to sell at Rs 70 per unit and B at Rs 30 per unit. Material P 200 units 300 units 1,000 kg 300 man hours 1000 kwhr Rs 20 Rs 5 Rs 1.5 Material Q 400 units 200 units 1,000 kg 250 man hours 1500kwhr Rs 30 Rs 5 Rs 1.5

out put

A B Raw materal usage labour usage electricit consumption cost of raw materal/kg labou per manhour electricty/kwhr

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Compare the productivity of material, labour, and lectrial energy in using material P and Q. comment on the relative advantage of using either of the materials. Sales value P = 200 x 70+300 x 30 = Rs 23,000 Sales value P = 400 x 70+200 x 30 = Rs 34,000 Productivity = value of output/value of input raw material productivity = sales value output/value of raw material used 23000/(1000x20)=1.150 34000/30000=1.133 labour productivity = sales vaue output/ value of labour 23000/(300x5)= 15.333 34000/(25x5)=27.2 electrical energy Prod = sales value output/ vakue of electrial energy 23000/(1000x1.5)=15.333 34000/(1500x1.5)=15.111 Raw materials and electriacl energy productivity almost same for P and Q, but labour prodctvity is better for P than Q

Control charts Control chart for mean - chart

Where = sum of sample mean K = No. of samples Where standard deviation is known Upper Control limit (LCL) = N= total number of items in a sample
p = standard deviaation of population Where standard deviation is not given Lower Control Limit =

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Where

= Mean of sample range d2 = quality control factor

Where d2 is not given UCL = UCL = where

Control chart for Range (R chart) Where standard deviation is known R = range = Highest value Lowest value

Where central line = UCL = UCL = + 3
pd3 - 3
pd3

, K = total No. of samples.

Where standard deviation is not known UCL = D4 UCL = D3 Note: If LCL is negative take it as zero Control chart for fraction efectives --- ( ) chart **********Minimum sample size 20 CL =

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P = no of defective items in a sample K = total no of samples n = number of items in a samples (sample size)

nP chart ************ When the sapmle size in each sample is same nP chart ispreferred.

) ) C Chart-

Draw the control chart for (Mean) and R(Range) from the following data relating to 20 samples, each of size 5. (for sample size of 5 d2 = 2.326, d3 = 0.864)
C 1 2 3 4 5 6 7 8 9 10 X mean 38.2 33.8 24.4 36.6 27.4 30.6 31.2 27 24 29.4 R 15 1 22 24 18 33 21 29 29 18 sample No 11 12 13 14 15 16 17 18 19 20 X mean 32.6 22.8 21.6 28.8 28.8 24.4 30.4 25.4 37.8 31.4 R 31 12 29 22 16 19 20 34 19 17

Solution:

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Upper Control limit (LCL) = Lower Control Limit = = 29.35 12.11 = 17.23

Plot Chart-

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CAMBRIDGE INSTITUTE OF TECHNOLOGY

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