Student ID Number:_______________

AK3719 BACHELOR OF ENGINEERING TECHNOLOGY

EXAMINATION
Semester 2 2014

PAPER DESCRIPTION: Production Operations Management

PAPER CODE: 766450
TIME ALLOWED: Three (3) Hours plus Ten (10) Minutes Reading Time

TOTAL MARKS: 100

INSTRUCTIONS:

1. Answer ALL five (5) questions.

2. All answers except diagrams and sketches must be in ink.

3. Correcting fluid is not permitted.

4. Hand held devices other than non-programmable calculators are not allowed.

NOTES:

1. Questions do not carry equal mark values

ADDITIONAL MATERIALS:

1. Data and formulae supplied separately.

Question 1

a)
During the month of November the Rocket Guitar Company must decide on the most
profitable mix of guitars to produce. The two major constraints that occur are body
building and detailing. In November, 2140 hours will be available for body building
and 790 hours will be available for detailing. The company produces bass guitars and
acoustic guitars.
The time requirements for the bass guitars are six hours for body building and three
hours for detailing. Acoustic guitars require eight hours for body building and two
hours for detailing.
The profit made on the bass guitars is $130 per unit whilst the profit made on the
acoustic guitars is $90 per unit.
You are required to:

i) Formulate the necessary equations and find the optimal product mix
[5 marks]
ii) Determine the actual profit to be made from that mix
[2 marks]
iii) Construct a suitable, fully labelled diagram and indicate:
 feasible region
 optimal point
 body building constraint
 detailing constraint [5 marks]
Question 1
b)
A new worker is employed to carry out body building of the acoustic guitar. His first
operation is completed in ten hours and ten minutes, and his learning rate is 95%.
Find:

i) Time taken for the fifteenth repetition [3 marks]

ii) The number of repetitions required for the new worker to achieve completion of
the task in eight hours [5 marks]
Question 2
a)
The results of a time study carried out to determine the standard time for carrying out one
stage of the body building process for an acoustic guitar are shown in the following table.

Observations (minutes)

Element Performance 1 2 3 4 5
Rating (%)

1 97 11.6 12.2 12.1 11.5 11.9

2 105 22.3 22.9 22.7 24.1 22.8

3 86 9.9 10.1 9.6 9.7 9.9

4 90 16.2 16.5 16.1 15.8 16.2

On the basis of these observations, determine the normal and standard times for the
operation, assuming a 14% allowance factor. [5 marks]
Question 2
b)
If the standard time for the operation is 1 hour 8 minutes and 10 seconds, and a worker
completes 37 operations in a week, find that worker’s total pay for the week, subject to:
Workers are paid for eight hours per day, five days per week
Pay rate is $22.50 per hour
Performance incentives are as tabulated below

Performance 100% 105% 110% 115% 120%

Incentive payment 5% 6% 7% 8% 9%

[5 marks]
Question 2
c)
The Ajax Manufacturing Company (AMC) employs 150 productive staff who each work 35
hours per week for 45 weeks during each year. AMC pays its workers $22.00 per hour and in
2012 produced 250 000 mussel openers.
The Superior Manufacturing Company (SMC) believes that, by hiring youthful, highly
energetic staff, it will achieve better productivity and higher profits than AMC. SMC has a
policy of relatively long working weeks and provides fewer holidays than AMC in order to
exploit the vigour of its young manufacturing staff. SMC employs 100 productive staff, paying
each $16.00 per hour for a 45 hour week, 47 weeks per year.
In 2012 SMC produced 210 000 mussel openers, identical to those made by AMC.
Which company was more productive in terms of:

i) Output per hour [3 marks]

ii) Output per dollar [3 marks]

iii) Ignoring overheads and considering only direct labour cost, and assuming that each
company has the same material costs, which was the more profitable company in 2012? Both
companies sell the finished product for $24.95 per unit. Show ALL working to support your
answers.
[4 marks]
Question 3
a)
The Commercial Television Company (CTC) is considering setting up a factory in Europe,
where it expects to sell large format, ultra-high definition television sets with curved screens
to distributors in Spain, France, Germany, Poland and Italy.

POLAND

GERMANY
CZECH
FRANCE

ITALY

SPAIN

Distribution centre

Assuming the distribution centres in each country are located as indicated, determine which
of the five nations is likely to be the optimum location for the CTC factory. The centre of
gravity method is suggested. Calculations should be based on the following anticipated
annual sales volumes:
 France 60 000
 Spain 60 000
 Germany 60 000
 Poland 20 000
 Italy 40 000 [6 marks]
Question 3
b)
CTC considers annual fixed costs of manufacturing in Poland, France and Italy, and
transport costs from those nations to intended markets. It is anticipated that annual
sales of television sets would not exceed 10 000 000 units.
Because of tax packages offered, and generally low rental costs in Poland, annual
fixed costs in that country are found to be $15 million. Corresponding costs are
$35 million in Italy and $60 million in France.
Average transport costs per unit from Poland are $20, $12 from Italy and $8 from
France.
Construct a graph to show which locations are to be preferred if annual production
consists of:
 2 000 000 units
 4 000 000 units
 8 000 000 units [8 marks]
Question 3
c)
Annual revenue of $10 million during the next three years is required for CTC to
remain viable. To establish its manufacturing operation CTC must invest in
production machinery.
The company has received proposals from two machinery suppliers, A and B.
The proposals are as follows:

Supplier A Supplier B
Initial cost $8 600 000 $10 780 000
Maintenance per year $1 865 000 $1 560 000
Labour per year $3 850 000 $2 320 000

Given that CTC has the opportunity to earn a return of 6% per annum by investing elsewhere,
establish the net present value of each supplier’s proposal and state which one should be
accepted.
Assume that funds to cover the three-year operating costs for the production machinery are to
be reserved at the commencement of the project.
[6 marks]
Question 4

a)

The Moonbeam Appliance Company manufactures spice grinders. Demand is for

100 000 spice grinders per year and the factory operates for 50 weeks per year, five
days per week and 7.5 hours per day. Assembly operations, times and precedents
are given in Table 1.

Work Time
Description Predecessor
Element (minutes)

A Place frame in workholder and clamp 0.2 None

B Assemble plug, grommet to power cord 0.4 None
C Assemble brackets to frame 0.7 A
D Wire power cord to motor 0.1 A, B
E Wire power cord to switch 0.3 B
F Assemble mechanism plate to bracket 0.11 C
G Assemble blade to bracket 0.32 C
H Assemble motor to brackets 0.6 C, D
I Assign blade and attach to motor 0.27 F, G, H
J Assemble switch to motor bracket 0.38 E, H
K Attach cover, inspect, and test 0.5 I, J
L Place in bag for packing 0.12 K
Total 4.0
Table 1
a. Find the cycle time for the operation [2 marks]
b. Draw a precedence diagram for the operation [2 marks]
c. Find the theoretical minimum number of work stations [2 marks]
d. Assign tasks to work stations [2 marks]
e. Determine the idle time per cycle [2 marks]
f. Determine the idle time per day [2 marks]
g. Calculate the efficiency of the line [2 marks]
Question 4
b)
For a shop selling spice grinders the actual sales for the first six months of the year
are tabled below. Use the moving average technique to forecast sales for April, May
and June, based on sales for January, February and March.
Three month moving
  Actual sales
average Forecast
January 65    
February 54    
March 59    
April 63
May 68
June 72

[6 marks]
Question 5
a)
A small appliance shop has fixed costs of $5 000 per month. The shop is open six
days per week, 52 weeks per year. Its three main offerings and their prices, costs and
predicted annual sales are:
Selling price Cost Annual sales
prediction
Spice grinders $75.00 $40.00 600
Juice extractors $60.00 $25.00 400
Blenders $90.00 $45.00 800

Find breakeven point (in dollars) [12 marks]

Item Selling Cost Predicted % of Weighted

price annual sales contribution
sales ($)
X sales %
Spice
grinders
Juice
extractor
s
Blenders
Total
sales
Question 5

b)
Calculate number of juice extractors that must be sold every day to break even
[6 marks]

c)
Determine whether the appliance shop will make a profit or loss if it just achieves
the predicted sales
[2 marks]
FORMULAE

Time studies:

Break even analysis:

Layout strategy:

T N =T 1 ( N b ) where:
T N =time for nth unit
T 1 =time for first unit
log of learning rate
b=
log 2
aX 1 +bX 2 ≤q
cX 1 +dX 2 ≤r where:
q=available quantity of first constraint
r=available quantity of second constraint
X 1 =Output 1
X 2 =Output 2
Objective function:
P1 X 1 +P 2 X 2 =maximum where:
P1=unit profit for X 1
P2 =unit profit for X 2

Location strategies

Present value

Forecasting
Present value of $1
5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00% 14.00%
1 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877
2 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769
3 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675
4 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592
5 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519
6 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456
7 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400
8 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351
9 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308
10 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270
11 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237
12 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208
13 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182
14 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160
15 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140
16 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 0.141 0.123
17 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.108
18 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095
19 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.116 0.098 0.083
20 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0.073

Present value of an annuity of $1

5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00% 14.00%
1 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877
2 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690 1.668 1.647
3 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 2.361 2.322
4 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914
5 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433
6 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 3.998 3.889
7 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288
8 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639
9 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946
10 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 5.426 5.216
11 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453
12 8.863 8.384 7.943 7.536 7.161 6.814 6.492 6.194 5.918 5.660
13 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842
14 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002
15 10.380 9.712 9.108 8.559 8.061 7.606 7.191 6.811 6.462 6.142
16 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265
17 11.274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373
18 11.690 10.828 10.059 9.372 8.756 8.201 7.702 7.250 6.840 6.467
19 12.085 11.158 10.336 9.604 8.950 8.365 7.839 7.366 6.938 6.550
20 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 7.025 6.623