Answer of Operation Management Final Exam SP 2011 (Student Development MSS) By: Tri Handhika, M.

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Problem 1 Working hours per day Working hours to produce a unit Average pay rate Overtime pay rate Currently worker Cost of hiring and training for additional worker Cost of layoff worker Beginning inventory Inventory cost Stock out cost : 8 hours : 10 working-hours : $6 per hour ($48 per day) : $9 per hour (above 8 hours per day) : 20 people : $300 per person : $400 per person : 50 units : $2 per unit per month : $20 per unit per month

1. Plan 1 (Chase Strategy by hiring and layoff workers)

Basic Production Cost (FD 10 $6) Jan Feb Mar Apr May Jun 250 (= 300 - 50) 500 400 100 200 300 Total Production Cost 22 19 21 21 22 20 $15,000 $30,000 $24,000 $6,000 $12,000 $18,000 $105,000 Demand per Day (DD) (FD W) Extra Cost of Increasing/Decreasing Production $2,000 (= 5 $400) $5,400 (= 18 $300) $3,600 (= 9 $400) $7,200 (= 18 $400) $1,500 (= 5 $300) $2,400 (= 8 $300) $22,100

Month

Forecasted Demand (FD)

Workdays (W)

Worker (DD 10 8) 20 15 33 24 6 11 19

12 26 19 5 9 15 Total Extra Cost

Total Cost

= Total Production Cost + Total Extra Cost = $105,000 + $22,100 = $127,100

2. Plan 2 (Level strategy by fixed amount of 20 workers and utilize overtime when there are large demand)
Production Cost (Wo W $48) $21,120 $18,240 $20,160 $20,160 $21,120 $19,200 $120,000 Production per Day (PD) (Wo 8 10) 16 16 16 16 16 16 Production per Month (PM) (PD W) Over time (SO 10) 0 940 640 0 0 0 1,580

Month

Forecasted Demand (FD)

Work days (W)

Worker (Wo) 20 20 20 20 20 20 20

Monthly Inventory Change

Ending Inventory 50 102 0 0 236 388 408 1,134

Stock Out (SO)

Jan Feb Mar Apr May Jun

300 500 400 100 200 300

22 19 21 21 22 20

352 304 336 336 352 320

+52 0 0 +236 +152 +20

Total Production Cost Total Cost = = = =

Total Inventory

0 94 64 0 0 0 Total Overt ime

Total Production Cost + Total Inventory Cost + Total Overtime Cost $120,000 + (1,134 $2) + (1,580 $9) $120,000 + $2,268 + $14,220 $136,488

3. Plan 3 (Level strategy by not doing overtime (stock out))

Average Requirements = Total FD Total W = 1,800 125 15

Worker = 15 10 8 19

Month

Forecasted Demand (FD)

Work days (W)

Worker (Wo) 20 19 19 19 19 19 19 Total PC

Production Cost (PC) (Wo W $48) $20,064 $17,328 $19,152 $19,152 $20,064 $18,240 $114,000

Production per Day (PD)

Production per Month (PM) (PD W)

Monthly Inventory Change

Ending Inventory 50 84 0 0 219 353 357 1,013

Stock Out (SO)

Jan Feb Mar Apr May Jun Total FD & W

300 500 400 100 200 300 1,800

22 19 21 21 22 20 125

15 15 15 15 15 15

334 289 319 319 334 304

+34 0 0 +219 +134 +4

0 127 81 0 0 0 208

Total Inventory & SO

Total Cost

= = = =

Total Production Cost + Total Inventory Cost + Total Stock Out Cost +Total Layoff Cost $114,000 + (1,013 $2) + (208 $20) + (1 $400) $114,000 + $2,026 + $4,160 +$400 $120,586

Hence, choose Plan 3 which gives the lowest total cost.

Problem 2 (Not Sure) a) I think this problem is not clear (multi-interpretation). The simplest answer is just sort the data. b) I think this problem is not clear (multi-interpretation). The simplest answer is just sort the data. c) Scatter Diagram or Cause-and-Effect Diagram. These are tools of Total Quality Management (TQM) for generating ideas. An example for scatter diagram might be a plot of time and sales for each firm. However, Cause-and-Effect Diagram might be a chart of possible locations for increasing quality problem which starts with four categories: material, machinery/equipment, manpower, and method.

Problem 3
Type 1 2 1 2 3 Units 1 to 40 41 or More 1 to 30 31 to 60 61 or More Price per Unit (Thousand Rupiahs) 220 200 220 208 198

Supplier A Supplier B

Annual Demand (D) = 1.000 units Carrying/Holding Cost (H) = 10% per unit per year Ordering/Setup Cost (S) = Rp 250.000
QA1 QA 2 QB1 QB 2 QB 3 2 DS 2 1.000 250 151 units per order H 0,1 220 2 1.000 250 159 units per order 0,1 200 2 1.000 250 151 units per order 0,1 220 2 1.000 250 156 units per order 0,1 208 2 1.000 250 159 units per order 0,1 198
Annual Ordering Cost (D Q S) Annual Carrying Cost (Q 2 H)

Supplier Type A B 2 3

Units (Q) 159 159

Price per Unit (P) Rp200.000 Rp198.000

Annual Product Cost (P D)

Total Cost

Rp200.000.000 Rp1.572.327 Rp198.000.000 Rp1.572.327

Rp1.590.000 Rp203.162.327 Rp1.574.100 Rp201.146.427

Daisy Corp. should choose Supplier B for 159 units which gives total cost Rp201.146.427.

Problem 4
Level 0 Product 1

Level 1

Product A (3)

Product B (2)

Product C (1)

Level 2

Product D (3)

Product E (2)

Level 0

Product 2

Level 1

Product A (5)

Product E (2)

Level 0

Product 3

Level 1

Product A (2)

Product B (3)

Product D (2)

Lot Lead On Level Product Size Time Hand Lot for Lot Gross Requirements Projected On Hand Net Requirements Planned Order Receipts Planned Order Releases Gross Requirements Projected On Hand Net Requirements Planned Order Receipts Planned Order Releases Gross Requirements Projected On Hand Net Requirements Planned Order Receipts Planned Order Releases Gross Requirements Projected On Hand Net Requirements Planned Order Receipts Planned Order Releases Gross Requirements Projected On Hand Net Requirements Planned Order Receipts Planned Order Releases Gross Requirements Projected On Hand Net Requirements Planned Order Receipts Planned Order Releases Gross Requirements Projected On Hand Net Requirements Planned Order Receipts Planned Order Releases Gross Requirements Projected On Hand Net Requirements Planned Order Receipts Planned Order Releases 15

1 15

2 15

3 15

Week 4 5 15 15

6 15

7 15

8 15

15

9 80 15 65 65

65 8 8 8 8 8 8 8 40 8 32 32 30 5 25 25

Lot for Lot

32 5 5 5 5 5 5 5 5 5

Lot for Lot

Lot for Lot

1602 1951 7 0 153 195 153 195 1301 15 115 115 651 7 58 58

25 503 0 50 50 753 0 75 75

153 195 15 15 15 15

50 15 15 0

Lot for Lot

15

115 7 7 7 7 7

75 7

Lot for Lot

Lot for Lot

15

15

15

15

15

1&2

58 174C 15 159 159

C

503 0 50 50

159 8 8 8 116 8 8 108 108 108 64

Lot for Lot

1&2

50 642 0 64 64

Problem 5 a) Infant mortality is the failure rate early in the life of a product or process. It can be applied as guidelines to know when a system requires service or when it is likely to fail for performing preventive maintenance. We should note that many infant mortality failures are not product failures per se, but rather failure due to improper use. This fact points up the importance in many industries of operations managements building an after-sales service system that includes installing and training. b)
Number of Breakdowns (N) 0 1 2 3 4 5 6 7 8 Total Number of Weeks in Record (TO) Number of Weeks That Breakdowns Occurred (O) 1 1 3 5 9 11 7 8 5 50 Frequency (F = O TO) 0.02 0.02 0.06 0.1 0.18 0.22 0.14 0.16 0.1 Expected Number of Breakdowns FN 0 0.02 0.12 0.3 0.72 1.1 0.84 1.12 0.8 5.02 breakdowns/week

Expected Breakdowns Cost

Preventive Maintenance Cost

= = = = = =

Expected Number of Breakdowns Cost per Breakdown 5.02 Rp250,000 Rp1,255,000/week Cost of Expected Breakdowns if Service Contract Signed Cost of Service Contract (3 breakdowns/week Rp250,000) + Rp645,000 Rp1,395,000/week

This preventive maintenance system based on contract is not profitable because it is more expensive than to not do so (the lowest cost strategy).