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Operations Management - I (MB241): October 2007
• Answer all questions.
• Marks are indicated against each question.
10/28/2007
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(1 mark)
6. The operations manager must be able to identify the problems for the application of linear programming
technique with all of the following characteristics except
(a) The problem has a well-defined single objective
(b) There are no alternative courses of action to solve the problem
(c) The decision variables are continuous
(d) The decision variables can accept any non-negative or fractional values within specified range
(e) The objective and the constraints are linear functions.
(1 mark)
7. In an organization, control of a job, the methods or functions used in carrying out the job, and
relationships that exist among the jobs are manipulated in such a way to attain higher productivity and
operational efficiency. What is this concept called?
(a) Job analysis
(b) Job specification
(c) Job design
(d) Job evaluation
(e) Job enrichment.
(1 mark)
8. The Predetermined Motion Time Studies (PMTS) are useful in
I. Developing standards.
II. Control and auditing.
III. Benchmarking.
IV. Performance evaluation.
(a) (I), (II) and (III) above
(b) (I), (II) and (IV) above
(c) (I), (III) and (IV) above
(d) (II), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
(1 mark)
9. When the price reduces, customers tend to buy large volumes of products/services till a point. How is
the curve likely to be affected in such ‘price–volume (demand)’ relationship?
(a) The curve tends to be parabola
(b) The curve becomes almost vertical
(c) The curve becomes almost horizontal
(d) The curve tends to retard
(e) The curve after a significant rise; declines abruptly.
(1 mark)
10. In 1939, colonel Harland D. Sanders started Kentucky, which is now popularly known as ‘KFC’
Kentucky Fried Chicken. In Jan 2000, it was known that KFC uses genetically manipulated organism
and not the real chickens. These organisms are kept alive by tubes inserted into their bodies to pump
blood and nutrients. They have no beaks, no feathers and no feet but four or more legs (drumsticks).
Their bone structure is dramatically shrunk to get more meat out of them. This resulted in an increase of
profits for KFC. Which of the following process designing decision had KFC taken?
(a) Flexibility
(b) Forward integration
(c) Backward Integration
(d) Degree of Automation
(e) Quality level and degree of customer contact.
(1 mark)
11. A firm uses simple exponential smoothing constant with α = 0.1 to forecast demand. The forecast for
the 1st week of February was 500 units, whereas actual demand turned out to be 450 units. Forecasting
the demand for the 2nd week of February assuming that the actual demand during the 2nd week of
February turned out to be 505 units, calculate the demand forecast for the 3rd week of February
assuming the subsequent actual demand to be 516 units.
(a) 495 units
(b) 496 units
(c) 498 units
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fertilizers Ganga, Jamuna and Saraswati are Rs. 2,000, Rs.2,500 and Rs.3,000 per tonne respectively.
There is a constraint that the company must produce at least 6,000 tonnes of fertilizer Ganga per
month. Let G, J and S be the quantity (in tonnes) of Ganga, Jamuna and Saraswati to be manufactured.
Which of the following is the correct linear programming problem in order to maximize their monthly
profit?
(a) Max Z = 950G + 1,212.5J + 1,325S; Subject to: G + J + 2S ≤ 20,000; G + J + S ≥ 18,000; G + 2J
+ 2S ≤ 24,000; G ≥ 6, 000 and J, S ≥ 0
(b) Max Z = 950G +1,212.5J + 1,325S; Subject to: G + J + 2S ≥ 6, 000; G + J + S ≥ 18,000; G + 2J
+ 2S ≥ 24,000; G ≥ 20,000 and J, S ≥ 0
(c) Max Z = 1,325G +1,212.5J + 950S; Subject to: G + J + 2S ≥ 20,000; G + J + S ≥ 18,000; G + 2J
+ 2S ≥ 24,000; G ≤ 6,000 and G, J, S ≥ 0
(d) Min Z = 1,212.5G +950J + 1,325S; Subject to: G + J + 2S ≥ 18,000; G + J + S ≤ 20,000; G + 2J
+ 2S ≥ 24,000; G ≥ 6,000 and J, S ≥ 0
(e) Max Z = 950G + 1,212.5J + 1,325S; Subject to: G + J + 2S ≤ 20,000; G + J + S ≤ 18,000; G + 2J
+ 2S ≤ 24,000; G ≥ 6,000 and J, S ≥ 0.
(3 marks)
23. Which of the following statements is not true with respect to Linear Decision Rules (LDRs)?
(a) They are a set of equations for calculating aggregate output rate and inventory level for each
time period in a planning horizon
(b) This method guarantees an optimal solution and saves trial and error computations
(c) It overcomes the limitation of linear programming
(d) It determines the actual costs incurred by an organization
(e) They are a set of standards that can be applied to any organization without modification.
(1 mark)
24. Albi electronics’ production manager is evaluating a project. The cash flows associated with the project
are given below. The firm’s cost of capital is 15 percent. Find the Net Present Value for the project.
Year 0 1 2 3 4 5
Cash flows (Rs.‘000s) (2200) 900 850 700 650 500
I. Larger shipments can result in reduced incoming freight costs and material handling cost.
II. Production of products as and when the customers demand them can be uneconomical.
III. Backlogs in customer orders may not always be allowed.
IV. Products can be shown to customers.
28. The method that considers several variables that are related to the variable being predicted is
(a) Exponential smoothing
(b) Weighted moving average
(c) Regression analysis
(d) Simple moving average
(e) Trend adjusted exponential smoothening.
(1 mark)
29. A forecast that projects a company’s sales is
(a) Economic forecast
(b) Technological forecast
(c) Demand forecast
(d) Market survey
(e) Resource forecast.
(1 mark)
30. The effectiveness of purchasing activities can be enhanced by proper organization and coordination of
the activities. Which of the following is true with regard to decentralized purchasing system?
(a) The individual departments are flexible to alter its purchasing policy on the basis of specific
requirements
(b) All the purchasing activities are carried out by a separate department
(c) The benefits of bulk purchasing can be realized
(d) Uniformity in maintaining purchase records
(e) It is effective for an organization with a number of production sites.
(1 mark)
31. A tracking signal
I. Is a measure of how well the forecast is predicting the actual values.
II. Is computed as mean absolute deviation (MAD) divided by the running sum of the forecast errors
(RSFE).
III. That is positive indicates that demand is greater than the forecast.
(a) Only (I) above
(b) Both (I) and (II) above
(c) Both (I) and (III) above
(d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
(1 mark)
32. To exercise proper control over the inventory items, organizations classify and categorize inventory
items allowing operations managers in devising control plans relevant and effective for items with
similar attributes. In which of the following methods the goods are classified on the basis of their
turnover?
(a) ABC
(b) VED
(c) FSND
(d) JIT
(e) RFID.
(1 mark)
33. Which of the following is/are the benefits of setting work standards?
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(a) ⇒ − О − − О − О − ∇ − О − О − D − О − D − − О − ⇒ −∇
(b) ⇒−О−О− −О−О− −∇−О−D−О−О−D−∇−⇒
(c) О−⇒− −О−О− −∇−О−D−О−О−⇒−∇−О−D
(d) ⇒−О− −О−О−О−D−О−О−О−D− −∇−⇒−∇
(e) О − ⇒ − − О − О − D − О − О − О − D − − О −∇ − ⇒ − ∇.
(2 marks)
49. In the straight line equation for regression where Y = a + bX, X is
(a) The Y intercept
(b) The time period
(c) The dependent variable
(d) The slope of the line
(e) The variable being predicted.
(1 mark)
50. The transportation Linear programming cost analysis for a plant-location study covering possible sites
X, Y and Z is complete except for final evaluation of cell AY in figure given below. Complete the
evaluation cell AY, make any changes justified and compute the optimal cost.
Demand
X Y Z
A − 5 + 2 9 10
10
B 10 − 6 + 3 18
15 3
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C + 9 8 − 6 12
5 7
15 15 10 40
Month Jan Feb March April May June Jul Aug Sept
Demand 70 76 75 80 92 87 93 114 105
(Round off the value to the nearest integer)
(a) 98 units
(b) 101 units
(c) 201 units
(d) 208 units
(e) 298 units.
(1 mark)
52. Dolly Milk and Drinks company has thought of introducing a drink that can be an instant breakfast
drink for adults who want a quick nutritious breakfast, a tasty snack drink for children and a health
supplement for elderly people. Dolly Milk’s main competitors were considered to be bacon, eggs,
breakfast cereals, coffee and other breakfast alternatives and also other soft drinks, fruits juices and
thirst quenchers. After analyzing results from prototype testing, the company planned to introduce the
instant breakfast drink in different flavors of chocolate, vanilla, and strawberry in attractive packages
available in different quantities. Which of the following would be the next step Dolly Milk and Drinks
company should follow in its new product development process?
(a) Dolly Milk and Drinks should test the drink under standard conditions and defects are to be
noted
(b) Dolly Milk and Drinks must test its product in few selected cities
(c) Dolly Milk and Drinks should check the economical feasibility
(d) Dolly Milk and Drinks should develop the mission statement of its company
(e) Dolly Milk and Drinks should develop and prepare the sales, cost and profit projections for
determining success of the company objectives.
(2 marks)
53. Which of the following is not a major component of inventory cost?
(a) Storage cost
(b) Insurance cost
(c) Taxes
(d) Cost of spoilage and obsolescence
(e) Direct labor costs.
(1 mark)
54. In which of the following work measurement techniques, the timing role of analyst is to record times for
several cycles of the tasks, and judge and record pace?
(a) Time study
(b) Standard data
(c) Pre-determined time study
(d) Work sampling
(e) Historical analysis.
(1 mark)
55. Which of the following is not among the steps involved in the time study?
(a) Job identification
(b) Job division
(c) Job analysis
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minimization.
II. The focus in service is revenue maximization, while the focus in manufacturing is cost
minimization.
III. The focus in manufacturing is on labor, while the focus in service is on raw materials.
(a) Only (I) above
(b) Only (II) above
(c) Only (III) above
(d) Both (I) and (III) above
(e) Both (II) and (III) above.
(1 mark)
61. Comfort Zone Furniture has plants is Boston, Dallas and Seattle which ship to four demand locations,
with transportation cost per unit as shown. Use the northwest-corner method to determine optimal
transportation cost.
Demand Location
W1 W2 W3 W4
3 5 7 4
Boston 50
Supply 6 8 5 2 50
Dallas
plants
1 9 7 3 50
Seattle
20 60 30 40 150
(a) Rs.310
(b) Rs.410
(c) Rs.510
(d) Rs.610
(e) Rs.740.
(2 marks)
62. Which of the following aggregate planning strategies requires ‘stable employment of personnel’ to be
most effective?
(a) Varying production rates through overtime or idle time
(b) Varying the workforce size in response to the output requirements
(c) Back-ordering during high-demand periods
(d) Subcontracting
(e) Varying size of inventory.
(1 mark)
63. The aggregate planning strategies of varying inventory level and back ordering during periods of high
demand has which of the following disadvantages in common?
(a) Customers may go elsewhere
(b) Holding costs
(c) Quality of output may suffer
(d) It is difficult to exactly match supply with demand
(e) Managing agreements with unions on wages, hiring costs and layoffs.
(1 mark)
64. The disadvantages of product layout include
I. High volume is required because of the large investment needed to set up the process.
II. Seeks the best personnel and machine utilization in repetitive or continuous production.
III. There is a lack of flexibility in handling a variety of products.
IV. Work stoppage at any one point ties up the whole operation.
(a) Both (I) and (II) above
(b) Both (I) and (III) above
(c) (I), (II) and (III) above
(d) (I), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
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(1 mark)
65. Which of the following is not true about constrained optimization models?
(a) An optimization model reduces the feasible solutions for complex problem to a manageable
number
(b) Optimization models make the decision-making process more objective
(c) Optimization models enable the decision-maker to solve practical problems mathematically
(d) Only an experienced and skilled modeler can formulate a practical problem into an optimization
model
(e) Non-quantifiable criteria do not affect the effectiveness of the solution.
(1 mark)
66. The Evergreen Garden Tractor Co. has extra capacity that can be used to produce gears that the
company is now buying for Rs.10 each. If Evergreen makes the gears, it will incur materials costs of
Rs.3 per unit, labor costs of Rs.4 per unit and variable overhead costs of Rs.1 per unit. The annual fixed
cost associated with the unused capacity is Rs.8,000. Demand over the next year is estimated at 4,000
units. Estimate the cost to making and buying the gears.
(a) Cost to make is Rs.40,000, cost of buying is Rs.48,000
(b) Cost to make is Rs.48,000, cost of buying is Rs.48,000
(c) Cost to make is Rs.48,000, cost of buying is Rs.40,000
(d) Cost to make is Rs.40,000, cost of buying is Rs.40,000
(e) Cost to make is Rs.49,000, cost of buying is Rs.40,000
(2 marks)
67. Which of the following constitutes the objectives of Job design?
(a) Job content
(b) Specialization
(c) Technical feasibility
(d) Tools and equipment
(e) Atmosphere.
(1 mark)
68. Which of the following systems allow both sidetracking and backtracking in the product flow route?
(a) Discrete unit manufacturing
(b) Process manufacturing
(c) Cellular manufacturing
(d) Process focused production
(e) Delivery of services using a product focused production system.
(1 mark)
69. The general manager of a building materials production plant feels that the demand for plasterboard
shipments may be related to the number of construction permits issued in the country during the
previous quarter. The manager has collected the data as shown in table below. Using least square
method, find the number of plasterboard shipments when the number of construction permits is 30.
Construction Permits 15 9 40 20 25 25 15 35
Plasterboards Shipments 6 4 16 6 13 9 10 16
(Round off your answer to nearest integer.)
(a) 13
(b) 8
(c) 7
(d) 10
(e) 9.
(2 marks)
70. Market proximity is most important for which of the following industries?
(a) Paper industry
(b) Textile industry
(c) Petrochemical industry
(d) Hospitality industry
(e) FMCG industry.
(1 mark)
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71. One of the key objectives of any business organization is to reach to a position where it is able to attract
more customers than its competitors. Organizations in order to gain such a competitive advantage will
follow all of the following except
(a) Identify their distinct competencies
(b) Determine the choice of products and markets
(c) Perform financial analysis of business investment
(d) Employ its strengths in product functionalities and process capabilities
(e) Adapt flexible capacity and an adaptive production process.
(1 mark)
72. Which among the following is the average of the errors made by the forecast over a period of time
without considering the direction of error?
(a) Mean Square Error
(b) Mean Forecast Error
(c) Mean Absolute Deviation
(d) Mean Absolute Percentage Error
(e) Tracking Signal.
(1 mark)
73. Consider the following linear programming problem:
Maximize: 4X + 10Y; Subject to constraints: 3X + 4Y ≤ 480; 4X + 2Y ≤ 360; X, Y ≥ 0
Find the maximum possible profit for the objective function.
(a) 1,520
(b) 1,500
(c) 1,200
(d) 1,220
(e) 1,320.
(1 mark)
74. Value analysis involves the coordinated efforts of the engineering, production and purchasing personnel
and helps in reviewing purchase activities to ensure that expenditures result in the receipt of appropriate
value. Which of the following is the correct sequence in the procedure of value analysis?
I. Gather all information about the product design, costs, scrap rates etc.
II. Evaluate the alternatives on criteria like cost and feasibility and eliminate the non- feasible
alternatives.
III. Examine all the products that are being reordered and identify each product needs and
improvements.
IV. Form a team that includes experts from various functional areas that are related to the functions
performed by the material.
V. Refine the feasible alternatives and select the optimal alternative.
VI. Generate all alternatives by generating new ideas and evaluate different ways of accomplishing
the tasks.
(a) I, IV, II, III, VI, V
(b) III, I, IV, VI, II, V
(c) IV, V, III, I, II, VI
(d) III, I, IV II, V, VI
(e) I, IV, II, V, III, VI.
(1 mark)
75. Which of the following is not true for purchasing function?
(a) A small saving in the cost of the material can have a significant impact on the total performance
of an organization
(b) Centralized purchasing vests maximum purchasing power with the buyer
(c) The primary responsibility of purchase manager includes vendor development, selection of
suppliers and contract negotiation
(d) While selecting a vendor the only concern is to select the vendor who has quoted the lowest
price
(e) Whenever a new item is indented management has to take a make-or-buy decision.
(1 mark)
76. Wendell Engineering Works manufactures automotive gears. The organization cannot adopt a varying
workforce strategy because of the nature of the job, which requires skilled workers. Since training and
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hiring/layoff costs would be significant, the organization decided to follow a varying inventory strategy
to meet the fluctuating demand requirements.
Suggested Answers
Operations Management - I (MB241): October 2007
1. Answer : (d)
Reason : Responding to customer inquiries about status of orders is a coordinating activity
• Compare work progress to schedule is a controlling activity.
Following are planning decisions :
• Decide on the number of shifts
• Plan product and service mix
Following is categorized as organizing activity :
• Arrange supplier and subcontractor networks.
2. Answer : (a)
Reason : Reliance is offering variety of fruits, vegetables in a large store, this allows them to display their variety
and thus benefit from economies of scale.
3. Answer : (e)
Reason : Forecasting helps to predict the future but not with absolute accuracy. As future demand or future cann
be accurately predicted for product/service. Hence (I) does not apply to forecasting.
Statements (II), III & (IV) are relevant to the forecasting.
4. Answer : (b)
Reason : (I) & (II) are the main problems inherent in Delphi technique.
(III) It is a step taken by the coordinator a Delphi method to obtain opinions and predictions from ex
member through questionnaire.
(IV) absence of bias is an advantage associated with Delphi method.
5. Answer : (a)
Reason : Constrained optimization model is a mathematical approach that evaluates all possible combination
mixtures & finds the optimal solution that satisfies all the requirements at the least possible cost.
6. Answer : (b)
Reason : Linear programming is appreciable to solve those problems which have alternative courses of action.
7. Answer : (c)
Reason : In the organization, control of a job, the methods or functions used in carrying out the job,
relationships that exist among the jobs are manipulated in such a way to attain higher productiv
operational efficiency, and quality. This concept is known as the Job Design.
8. Answer : (e)
Reason : Developing, Control and auditing, Bench marking and Performance evaluation are useful in
predetermined Motion Time Studies (PMTS).
9. Answer : (c)
Reason : When prices are reduced, customer buys large volumes of products/services, till a point, after which
curve becomes almost horizontal.
10. Answer : (c)
Reason : Backward integration is expansion of ownership of the production distribution chain backwards.
towards the source of supply. In the above case, KFC by utilizing R&D and biotechnology, is produ
genetically altered organisms more or less only ‘flesh’ to increase their profits rather than buying
chickens, as real chicken increases the cost of production such as removing feathers, beaks, feet etc. &
the mass of flesh is comparatively lower than that in mutant birds.
11. Answer : (c)
Reason : Ft = Ft-1 + α (At-1 − Ft-1) = 500 + 0.1 (450 −500) = 495 units.
Actual Demand Old forecast Forecast error Correction New forecast (Ft )
Week At-1 Ft-1 At-1 − Ft-1 α (At-1 − Ft-1) Ft-1 + α (At-1 − Ft-1)
1 450 500 − 50 −5 495
2 505 495 10 1 496
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Reason : F.W. Taylor proposed a systematic approach called “shop system” and implemented in Midvale S
Works to improve labor efficiency. Few key concepts are:
I. Each worker should be assigned a task based on his skill, strength and ability to learn.
II. Standard output time is set for each task, using stopwatch studies.
III. Proper supervision by carefully selected and trained supervisors.
IV. Incentive pay systems to motivate workers.
21. Answer : (a)
Reason : Process layouts also known as Job-shops layouts, involve grouping of similar equipment or function
one area.
(b) Incorrect: Product layouts also called as flow-shop layouts, involve arrangement of equipm
according to the progressive steps by which a product is made.
(c) Incorrect as in group technology layout dissimilar machine is grouped into cells and each
functions like a product layout, within a process layout.
(d) Incorrect: combination of process layout, product layout and several types of layouts comb
together is called as hybrid layout.
(e) Incorrect: In this, the movement of all machines and men to the product remains stationary. A m
component of the product is fixed in a particular location and all requirements are brought to
location.
22. Answer: (e)
Reason : Let us first find out the cost of the fertilizers Ganga, Jamuna and Saraswati as follows:
Fertilizer Nitrate Phosphate Potash Inert
Ganga 5% 10% 5% 80%
Jamuna 5% 10% 10% 75%
Saraswati 10% 10% 10% 70%
Cost per tonne. (Rs.) 8,000 2,000 5,000 250
Cost of Ganga = 0.05 × 8, 000 + 0.1 × 2, 000 + 0.05 × 5, 000 + 0.80 × 250 = Rs.1, 050
Cost of Jamuna = 0.05 × 8,000 + 0.1 × 2,000 + 0.10 × 5,000 + 0.75 × 250 = Rs.1, 287.5
Cost of Saraswati = 0.10 × 8,000 + 0.1 × 2,000 + 0.10 × 5,000 + 0.70 × 250 = Rs.1,675
Let G, J and S be the quantity (in tonnes) of Ganga, Jamuna and Saraswati to be manufactured.
Then The total profit Z = (Selling price- Cost price) × (Quantity of fertilizer)
= (2,000- 1,050) G + (2,500-1287.5) J + (3,000-1,675) S
= 950 G+ 1,212.5 J+ 1,325 S
The constraints in the resources are, the total quantity of chemicals actually available this month. G, J,
0
0.05 G + 0.05 J + 0.10 S ≤ 1,000 or 5 G + 5 J + 10 S ≤ 1,00,000
0.10 G + 0.10 J + 0.10 S ≤ 1,800 or 10 G + 10 J + 10 S ≤ 1,80,000
0.05 G + 0.10 J + 0.10 S ≤ 1,200 or 5 G + 10 J + 10 S ≤ 1,20,000
G ≥ 6, 000
Therefore the linear programming problem can be formulated as :
Maximize: Z = 950 G+ 1,212.5 J+ 1,325 S; G, J, S ≥ 0.
Subject to constraints: 5 G + 5 J + 10 S ≤ 1,00,000
10 G + 10 J + 10 S ≤ 1,80,000
5 G + 10 J + 10 S ≤ 1,20,000 and
G ≥ 6, 000.
23. Answer: (e)
Reason : Linear Decision Rules (LDRs) are a set of equations for calculating optimal workforce, aggregate output
and inventory level for each time period in a planning horizon. One of the drawbacks of LDRs is that
must be custom tailored to fit each organization.
Hence, from above discussion, we can infer that option (e) is not true with respect to Linear Decision R
(LDRs).
Option (a) is true because it is the definition for Linear Decision Rules (LDRs).
Option (b) is true because similar to linear programming, this method guarantees an optimal solution
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1 ⎛ n ⎞ 60
⎜⎜ ∑ A t − Ft ⎟⎟
MAD = n ⎝ t =1 ⎠ = 6 = 10
n (Actual demand − Forecast demand) 36
∑ = = 3.6
Tracking Signal = i = 1 MAD 10
Option (b) is an advantage of Job Specialization as it results in simpler work instructions and e
production control because of consistence in work assignment.
Option (d) is an advantage of Job Specialization as there is ease in recruiting new workers because fe
skills are required.
Option (e) is an advantage of Job Specialization because there is scope for higher degree of mechaniza
or automation.
41. Answer : (b)
Reason : Organizations usually opt for in-house production for the following reasons:
I. To have control over all value chain activities.
II. To put excess plant capacity to productive use.
IV. To ensure that the design of a product is kept a secret.
To maintain a multiple source policy, is reason for organizations to opt for outsourcing.
42. Answer : (b)
Reason : There is a 10 – day delivery time.
Therefore, Green Bluff must have a 10-day supply of boxes on hand when they reorder. Wi
demand of 100 boxes per day, the inventory on hand (reorder point) must be:
Reorder point = (demand rate)(lead time)
Reorder point = 100 boxes/day × 10 days = 1000 boxes.
43. Answer : (d)
Reason : A/2 - B/2 - C/2 ≤ 0.
44. Answer : (a)
2AO 2 (280 x12) (8)
= = 150 cases / order
Reason : EOQ = C 2.40 .
45. Answer : (a)
Reason : Establishing work centric environment is a activity concerning ‘organizing function’. All other options
decisions and activities concerning training and developing personnel.
46. Answer : (d)
Reason : A master production schedule must be visible to all levels of management. All other options are false w
regard to MPS.
47. Answer : (d)
Reason : Weighted Moving Average considers the most recent data as high importance.
48. Answer : (d)
Reason : ⇒ − О − −О−О−О−D−О−О−О−D− −∇−⇒−∇
Description of Method Activity
Walk to storage location
Visually locate item
Inspect and confirm stock number
Count number in stock
Enter value in computer
Update status card
Wait for computer analysis
Check safety stock bar codes
Check job stock bar codes
Send computer printout to office
Wait for office acknowledgement
Inspect record for accuracy
File inventory printout locally
Return to office location
File inventory record disks
49. Answer : (b)
Reason : In the straight line equation for regression where Y = a + bX, X is the time period.
50. Answer : (a)
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10
B 10 - 6 + 3 18
15 3
C + 9 8 - 6 12
5 7
15 15 10 40
Evaluate cell AY as shown in Fig above
Path : AY to BY to BZ to CZ to CX to AX to AY
Cost: +2-6+3-6+9-5 = -3 (Rs 3 cost savings)
Therefore, change 7 units (the smallest entry in the negative cells.
Cost : 3 x 5 + 12 x 9 + 7 x 2 + 8 x 6 + 10 x 3 = Rs 215
Demand
X Y Z
A -5 +2 9 10
3→ →→ →7
10
B ↑ 10 ↓ -6 +3 18
↑ 8→ →→ →10
15 3
C ↑ +9 8 ↓ -6 12
12← ←← ←← ←← ↓
8 7
Supply 15 15 10 40
51. Answer : (a)
Reason : The demand over the past 9 months for a new breakfast cereal is show in Table. Develop a forecast
November using a 5-period moving average
Month Jan Feb March April May June Jul Aug Sept
Demand 70 76 75 80 92 87 93 114 105
5-month moving average for the demand of product at the beginning of October was
Forecast for the month of October is average of demand during May, June, July, August and September
1
= 5 × (sum of preceding five months’ demand)
1
= 5 × (92 + 87 + 93 + 114 + 105)
491
= 5 = 98.2 units
52. Answer : (b)
Reason : Following a successful prototype test, the new product manager of a company should do market testi
by introducing the new product in few selected cities.
53. Answer : (e)
Reason : Direct labor costs is not a major component of inventory. All other options are major component
inventory.
54. Answer : (a)
Reason : In time study the timing role of analyst is to record time for several cycles of the tasks and judge
record pace.
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30 sec
A 40 sec
I 25 sec O
20 sec
B
50 sec M
25 sec
C
25 sec
L 35 sec P
30 sec
D
35 sec J
E 35 sec
45 sec
F
30 sec
40 sec K
G
30 sec
H
Capacity is 300 units in 450 minutes.
operation time per day 450 × 60
Cycle time C= output per day 300 = 90 seconds.
So, in the new assembly line cycle time could be at the most 90 seconds.
Time Unassigned Feasible
Station Task (in Time Remaining
sec) (in sec) Tasks
S1 A 30 60 B, N
B 20 40 N
N 40 0 None
S2 C 25 65 D, E
D 30 35 E
E 35 0 None
S3 F 45 45 G
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G 40 5 None
S4 K 30 60 J, L
J 35 25 L
L 25 0 None
S5 I 40 50 M
M 50 0 None
S6 H 30 60 O, P
O 25 35 P
P 35 0 None
Therefore, actual number of workstations, Na = 6.
T 535
Efficiency = Na x C = × 90 = 99.07%.
6
184 80
X= = 23 Y = =10
8 8
b=
( )( )
∑ XY − n X Y
2
2
( )
∑X − n X
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2146 − 8(23)(10)
=
5006− 8(23)(23)
306
= 774 = 0.395
a= Y -b X
= 10 – 0.395 x 23
= 0.915 ≈ 0.92.
Therefore, the linear regression equation can be written as:
Y =0.92 + 0.395 X.
Let X = 30
Y = 0.92 + 0.395 X 30 = 12.77 = 13 shipments
70. Answer : (d)
Reason : The market proximity is the prime consideration aspect for pure service providing organizations suc
hotels, hospitals, retail stores and theatres as they must be located close to the market.
71. Answer : (c)
Reason : Performing a financial analysis of business investment is not true. All other options are related to w
organization follow to reach to a position where it is able to attract more customers than its competitors.
72. Answer : (c)
Reason : Mean absolute deviation is the mean of the average of the errors made by the forecast over a period of t
without considering the direction of error.
73. Answer : (c)
Reason : By solving the equations we get the feasible corner points are (48, 84), (0,120), (0, 0), and (90, 0).
Maximize 4X + 10Y: Subject to 3X + 4Y = 480; 8X + 4Y = 720
(48, 84): 4 x 48 + 10 x 84 = 192 + 840 = 1032
(0,120): 4 x 0 + 10 x 120 = 0+ 1200 = 1200
(0, 0): 4 x 0+ 10 x 0 = 0 + 0 = 0
(90, 0): 4 x 90 + 10 x 0 = 360 + 0 = 360
74. Answer : (b)
Reason : The step -by- step procedure of value analysis is :
III. Examine all the products that are being reordered and identify each product needs and improveme
I. Gather all information about the product design, costs, scrap rates etc.
IV. Form a team that includes experts from various functional areas that are related to the funct
performed by the material
VI Generate all alternatives by generating new ideas and evaluate different ways of accomplishing
tasks
II. Evaluate the alternatives on criteria like cost and feasibility and eliminate the non- feas
alternatives
V. Refine the feasible alternatives and select the optimal alternative.
75. Answer : (d)
Reason : This is not true for purchasing function. While selecting a supplier from those listed in the vendor datab
before ordering an item, purchase managers have to ensure that the purchase is made on the m
advantageous terms. The lowest price does not always ensure for a supply at a low cost, since the sup
may attract other costs like rectification, in case defective material has been supplied. Hence quotation
examined for items such as delivery charges, discount structure, and other supplementary charges like
payable. The selection is also made on the basis of other criteria like quality, quantity and promptnes
deliveries. Purchase managers then select suppliers by rating their merit on relative scale, which is
known as vendor rating.
(a) This is true for purchasing function. Material procurement is a crucial job in many manufactu
organizations because of the high costs involved in buying them. A small saving in the cost of
material can have a significant impact on the total performance of an organization.
(b) This is true for the purchasing function. In many big companies where there are numbe
production sites require materials with same or similar specifications. In such cases, centralizatio
purchasing activities will pool all those requirements and thus avoid uneconomical purchases in sm
quantities.
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(c) This is a true statement for purchasing function. The purchase manager, who heads the purch
department, is responsible for developing purchase plans for each major product or service
accordance with the strategies of the organization. Purchase managers generally undertake
following activities to successfully carry out their responsibilities:
• Vendor development
• Selection of suppliers
• Contract negotiation and Communication Interface
(e) This is true for purchasing function. Whenever a new item is indented, an important issue addre
by purchase managers is the make-or-buy decision. The purchase department never orders
material without analyzing whether such an order is economical or not. It is often possible for
firm’s production department to manufacture parts (or materials) in-house at a lower cost, of be
quality and with faster deliveries, than what an external vendor would supply. On the other han
can also be economical to procure some materials from vendors, owing to their specialized sk
Purchase managers, with assistance of production engineers, generally do a make-or-buy analysis
materials.
76. Answer : (b)
Reason : Actual production = (No. working days) x (No. of workers) x (Productivity per day)
= 24 x 24 x 7 =4032.
Shortage ⇒ (opening stock + actual production) < Demand
Shortage (August) = Demand forecast – (Opening stock in August + Actual production in August)
= 4200– (28 + 4032)
= 4200 –4060
= 140 ( shortage )
Shortage = 140
Shortage cost = units shortage x per unit shortage cost
= 140 x Rs. 15
= Rs. 2,100 /-
77. Answer : (b)
Reason : Inventory cycle is the activity of sensing a need for ordering materials, placing an order, determining l
time for getting the material delivered, receiving the material, and using the material. This proces
continuously repeated for a material and is thus cyclical.
(a) This is a wrong answer. Inventory level is the amount of material actually on hand in inventory th
ready for use.
(c) This is the wrong answer. Lead time is the length of time required to replenish the inventory f
material from the time that need for additional material is sensed until the new order for the mate
is in inventory and ready for use.
(d) This is a wrong answer. DDLT is the number of units of a material demanded during the inven
replenishment process.
(e) This is a wrong answer. Demand rate is the number of units demanded by customers or produc
department per unit of time.
78 Answer : (a)
Reason : Fixed costs usually associated with the production of a lot internally or the placing of an order extern
with a vendor are setup or ordering costs.
79. Answer : (b)
Reason : Let the following notations be used:
X : Number of units of the product P25
Y : Number of units of the product P75
S1 : Slack time for process I
S2 : Slack time for process II
S3 : Slack time for process III
Z : Profit.
Maximize Z = 250X + 350Y + 0S1 + 0S2 + 0S3
Subject to : 12X + 12Y + S1 + 0S2 + 0S3 = 420
3X + 6Y + 0S1 + S2 + 0S3 = 150
p gg
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1 ⎛ n ⎞
⎜⎜ ∑ A t − Ft ⎟⎟
Reason : Mean absolute deviation (MAD) = n ⎝ t =1 ⎠
Where,
At = Actual demand in the period
Ft = Forecast demand in the period
n = Number periods
⎛ 7000 − 7000 + 8000 − 6500 + 8500 − 8000 + 8000 − 7000 + ⎞
1 ⎜ ⎟
⎜ 7500 − 8000 + 7300 − 8000 ⎟
∴ MAD = 6 ⎝ ⎠
1
= 6 (0 + 1500 + 500 + 1000 + 500 + 700)
4200
= 6 = 700.
81. Answer : (e)
Reason : Least- Cost Method
Factory W1 W2 W3 W4 Supply
80 120 145 65
100
F1
30 70 30
55 95 60 80
60
F2
60
115 50 90 135 85
F3 40
45 40
70 55 105 120 80
F4 20
60 20
90
120
50 70
Requirement 60 45 325
30
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Algorithm:
i) Find least-cost cell in the matrix and allocate as maximum units as possible based on supply
requirement.
ii) Strike-out either column or row if it is completely satisfied.
iii) Ignore the cells in the column or row satisfied and consider rest of the cells in matrix to find n
least cost and allocate maximum units possible.
iv) Repeat the above steps till all the units are allocated.
Transportation cost = (30 x 145) + (70 x 65) + (60 x 55) + (45 x 50) + (40 x 90) +
(60 x 70) + (20 x 105)
= 4350 + 4550 + 3300 + + 2250 + 3600 + 4200 + 2100
= Rs. 24, 350 /-.
82. Answer : (d)
Reason : The process of determination of the tasks which comprise the job and the skills, knowledge, abilities
responsibilities required of the worker for successful performance of the job and which differentiate
job from all others is called Job analysis.
83. Answer : (b)
Reason : At = αDt + (1-α) (At-1 + Tt-1) Tt = β(At – At-1) + (1 – β)(Tt-1)
A1 = 0.23 × 52 + (1-0.23)(45+0) = 11.96 + 34.65 = 46.61
T1 = 0.18(46.61 – 45) + (1– 0.18)(0) = 0.2898
A2 = 0.23 × 59 + (1– 0.23)(46.61 + 0.2898) = 13.57+36.11 = 49.68
T2 = 0.18(49.68 – 46.61) + (1– 0.18) (0.2898) = 0.5526 + 0.2376 = 0.7902
A3 = 0.23 × 64 + (1– 0.23) (49.68 + 0.7902) = 14.72 + 38.86 = 53.58
T3 = 0.18(53.58 – 49.68) + (1 – 0.18) (0.7902) = 0.702 + 0.6479= 1.3499.
Trend adjusted forecast Ft:
F2 = A 1 + T 1
F3 = A 2 + T2
F4 = A 3 + T3
Trend adjusted
Demand (Dt) Smoothed value (At)
Month Trend (Tt) forecast values (Ft)
(in units) (in units)
(in units)
July 52 46.61 0.2898
August 59 49.68 0.79 46.89
September 64 53.58 1.3499 50.47
October 54.93 ~ 55
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