Junsay-Ms9 - Module 2 - Leganes - Bsa3 D-E Ivisan - A-B
Junsay-Ms9 - Module 2 - Leganes - Bsa3 D-E Ivisan - A-B
Junsay-Ms9 - Module 2 - Leganes - Bsa3 D-E Ivisan - A-B
COO – FORM 12
MIDTERM MODULE
LEARNING OBJECTIVES:
NOTES:
1.1. PERT or Program Evaluation and Review Technique used for planning and
controlling the activities in a project. It provides management pertinent information
about a project, such as;
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• how resources may be shifted from one part to another part of project without
affecting the overall completion time of the project;
• the progress of each part of the project as of a certain date.
ACTIVITY
*Types of Activities*
Immediate predecessors are activities that can be completed prior to the start of
the activity in question.
TIME ESTIMATES
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• Most likely time (tm) – it is based on the assumption that the time would
occur most frequently if the activity is repeated many times.
• Expected Time (te) - the average time an activity would require if it were
repeated a large number of times.
𝒕𝒐 "𝟒𝒕𝒎 "𝒕𝒑
te =
𝟔
Activity slacks are the time that starts the activity can be delayed without
exceeding time the critical path project time. Slack time the length of time by
which a particular activity can slip (can delay) without having any delaying
effect on the end event. Activities along the critical path have a slack of zero
and all non-critical path activities have positive slack.
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Crashing the Network is determining the minimum cost for completing the
project in minimum time so that an optimum trade-off between time and cost
is achieved. Activity times and activity costs are estimated for both the normal
and crash efforts with these estimates, project manager can determine the
cost of completing the project if some of the activities are completed in the
crash basis. Crash time is the time required to complete an activity assuming
that all available resources are devoted to such activities.
BENEFITS OF PERT
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LIMITATIONS OF PERT
Reliable time and cost data may not be readily available and obtaining them
may be difficult. Persons involved may overstate budgeted costs and time
estimates to avoid unfavorable variances and pressure from their superiors.
A Gantt chart or Bar chart shows the different activities or tasks in a project, as
well as their estimated start and completion times.
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• A Gantt chart can be used to monitor the activities in a project. It shows which
activity should be in progress as of a certain date and how close it is to
completion time.
• A Gantt chart does not show the interrelationships among the activities in a
project. Only simple relationships can be shown on the chart.
Exercises:
3. Why use PERT technique? What do you think the advantages of using this
technique?
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D Select architect C 5
E Establish C 6
budget
F Finalize design D,E 14
G Obtain E 13
financing
H Hire contractor F,G 7
5. Given in the table are estimated times (in days) of each activity of the project
coded as FRANCHISED.
Activity Predecessor Most Most Most
Optimistic likely pessimistic
time (a) time time (b)
(c)
None 9 11 16
F
F 2 8 15
R
F 1 4 5
A
F 2 3 4
N
R 9 12 20
C
A 15 18 23
H
A 3 5 8
I
C,H 2 4 8
S
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N,I 5 8 12
E
S,E 5 6 14
D
6. The Omega department is planning to bid on large project for the development
of a new communication system for commercial planes the table below shows
the activities, times and sequences required:
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LEARNING OBJECTIVES:
NOTES:
In any environment if a person is assigned to do the same task, then after a period
of time, there is an improvement in his performance. If data points are collected over
a period of time, the curve constructed on the graph will show a decrease in effort
per unit for repetitive operations. This curve is very important in cost analysis, cost
estimation and efficiency studies. This curve is called the learning curve. The learning
curve shows that if a task is performed over and over than less time will be required
at each iteration. Historically, it has been reported that whenever there has been
instanced of double production, the required labor time has decreased by 10 or 15
percent or more.
Learning curves are also known as experience curve, cost curves, efficiency curves
and productivity curves. These curves help demonstrate the cost per unit of output
decreases over time with the increase in experience of the workforce. Learning curves
and experience curves is extensively used by organization in production planning,
cost forecasting and setting delivery schedules.
To develop an accurate learning curve model, you need to make sure you have all
the variables that go into the formula. The data required to plot a learning curve and
then interpret what it means for your company's performance includes the following:
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Learning curve models are useful because they help you understand whether the
processes and employees at your company are performing well enough to match the
resources put into improving them. The shape of the learning curve can tell you
whether performance is improving, declining, stagnating or fluctuating. This can then
bring awareness to the potential influences on this performance so you can make
decisions that help amplify the positive influences on your company and mitigate the
negative influences.
The learning curve model is very useful for monitoring various aspects of company
performance and identifying areas in need of improvement. It can provide a lot of
great insights, but there are some limitations. In this section, we examine some of
the key advantages and disadvantages of the learning curve model.
Using a learning curve model to track the progress of various aspects of your
company can help you in the following tasks:
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• It's incomplete on its own. Because there are so many variables that can
impact performance, it's important that you use the learning curve model in
combination with other methods of tracking company performance for a more
complete picture.
EXERCISES;
4. The cumulative average labor cost per unit for the first batch (100 units) produced
using a new process is P200. The cumulative average labor cost per unit after the
second batch is P140.
a. The new process has learning curve percentage of
b. Assuming that the learning curved obtained continues, the cumulative total labor
cost of four batches is
Moss Point Manufacturing recently completed and sold an order of 50 units that had
costs as shown in the next column.
The company has now been requested to prepare bid for 150 units of the
same product.
Direct materials $1,500
Direct labor (1,000 hours x $8.50) $8,500
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LEARNING OBJECTIVES:
NOTES:
Most waiting line problems are centered on the question of finding the ideal level of
services that a firm should provide. Supermarkets must decide how many cash
register checkout positions should be opened. Gasoline stations must decide how
many pumps should be opened and how many attendants should be on duty.
Manufacturing plants must determine the optimal number of mechanics to have on
duty each shift to repair machines that break down. Banks must decide how many
teller windows to keep open to serve customers during various hours of the day. In
most cases, this level of service is an option over which management has control. An
extra teller, for example, can be borrowed from another chore or can be hired and
trained quickly if demand warrants it. This may not always be the case, though. A
plant may not be able to locate or hire skilled mechanics to repair sophisticated
electronic machinery.
When an organization does have control, its objective is usually to find a happy
medium between two extremes. On the one hand, a firm can retain a large staff and
provide many service facilities. This may result in excellent customer service, with
seldom more than one or two customers in a queue. Customers are kept happy with
the quick response and appreciate the convenience. This, however, can become
expensive.
The other extreme is to have the minimum possible number of checkout lines, gas
pumps, or teller windows open. This keeps the service cost down but may result in
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customer dissatisfaction. How many times would you return to a large discount
department store that had only one cash register open during the day you shop? As
the average length of the queue increases and poor service results, customers and
goodwill may be lost.
Most managers recognize the trade-off that must take place between the cost of
providing good service and the cost of customer waiting time. They want queues that
are short enough so that customers don’t become unhappy and either storm out
without buying or buy but never return. But they are willing to allow some waiting in
line if it is balanced by a significant savings in service costs.
*COST INVOLVED*
One means of evaluating a service facility is thus to look at a total expected cost, a
concept illustrated in Figure below. Total expected cost is the sum of expected service
costs plus expected waiting costs.
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Service costs are seen to increase as a firm attempts to raise its level of service. For
example, if three teams of stevedores, instead of two, are employed to unload a
cargo ship, service costs are increased by the additional price of wages. As service
improves in speed, however, the cost of time spent waiting in lines decreases. This
waiting cost may reflect lost productivity of workers while their tools or machines are
waiting repairs or may simply be an estimate of the costs of customers lost because
of poor service and long queues.
The objective of queuing theory is to minimize total cost involved (both the
service and waiting cost).
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5. Service times also vary from one customer to the next and are independent of
one another, but their average rate is known.
6. The average service rate is greater than the average arrival rate.
𝑩
N = 𝑻#𝑩
Where;
N = average number of customer or work units in the system
B = average number of customer or work units arriving in one unit of
time
T = average number of customer or work units service of time
(assuming there is no shortage of work units)
$
*it is assumed that < 1, otherwise, the queue will grow to infinite
%
length.
𝟏
L =
𝑻#𝑩
𝑩𝟐
Nq = 𝑻(𝑻#𝑩)
𝑵𝒒
W= 𝑩
The utilization factor for the system, (the Greek lowercase letter rho), that is, the
probability that the service facility is being used:
𝑩
P=𝑻
The percent idle time, that is, the probability that no one is in the system
𝑩
P =1- 𝑻
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These two costs are called the waiting cost and the service cost.
Total Service Cost = (Number of service provider) X (Cost per service provider)
Total Waiting Cost = (Total time spent waiting by all arrivals) X (Cost of Waiting)
Exercises:
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4. Arnold’s Muffler Shop in New Orleans. Arnold’s mechanic, Reid Blank, is able
to install new mufflers at an average rate of 3 per hour, or about 1 every 20
minutes. Customers needing this service arrive at the shop on the average
of 2 per hour. Larry Arnold, the shop owner, studied queuing models in an
MBA program and feels that all seven of the conditions for a single-channel
model are met. Proceeds to calculate the following:
a. Average Cars in the system
b. Average time spend in the system
c. Average car waiting in line
d. Average waiting time per car
e. Percentage of time the mechanic is busy
5. Arnold pays $15 per labor hour to the mechanic for 8 hours of work per day.
He also estimates that the cost of customer waiting time, in terms of customer
dissatisfaction and lost goodwill, is $50 per hour of time spent waiting in line.
6. Arnold finds out through the muffler business grapevine that the Rusty Muffler,
a cross-town competitor, employs a mechanic named Jimmy Smith who can
efficiently install new mufflers at the rate of 4 per hour. Larry Arnold contacts
Smith and inquires as to his interest in switching employers. Smith says that
he would consider leaving the Rusty Muffler but only if he were paid a $20 per
hour salary.
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LEARNING OBJECTIVES:
NOTES:
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Exercises:
1. With sales of 100 units, the company’s projected profit is P500:
Sales P5,000
Less variable cost 3,000
Contribution margin 2,000
Less fixed cost 1,500
Profit 500
2. Bisikleta Corporation manufactures models of bicycles for kids and adults. For
the coming period, Bisikleta is planning to start the production of new model
of bicycle to increase its profitability. A recently concluded projected sales for
next year is 5,000 model with a selling price of P4,250 and variable cost of
P2,740. The total fixed cost in producing this product is P3,455,000.
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a. How will profit change if the sales price increases by $25 per unit (10
percent)?
b. How will profit change if sales volume decreases by 70 units (10 percent)?
c. How will profit change if fixed costs decrease by $15,000 (30 percent)
and variable cost increases $15 per unit (10 percent)?
d. How many units must Snowboard Company sell to break even?
e. How would these scenarios achieve a profit of $30,000?
5. Back Door Café has the opportunity to purchase a new espresso machine
that will reduce the amount of coffee beans required for an espresso drink by
putting the beans under higher pressure. The new machine will cost $15,000,
but it will decrease the variable cost per cup by $0.05. The owner wants to
see what the effect will be on the monthly net operating income and break-
even point if she purchases the new machine. She has arranged financing for
the new machine and the monthly payment will increase her fixed costs by
$400 per month.
She has the following information:
Current Data
Sales Price/Unit 3.75
VC/unit 1.5
CM/unit 2.25
Fixed Cost 2,475
a. What would happen if she purchased the new machine to realize the
variable cost savings and also raised her price by just $0.20?
b. Compute for the new total profit and the new break-even point.
c. What will be the amount and percentage change?
d. If the Company aims a 1000 target profit, how many units they should
sell?
END OF MIDTERM MODULE
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