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Assignment 2

This document outlines an assignment for a production and operations management course. It includes 6 questions asking students to: 1) Explain the differences between design, effective, and actual capacity with an example. 2) Relate a manufacturer's observation of decreasing unit costs with increasing output to an operations management concept and explain 4 factors that could have led to this. 3) Answer true/false questions about capacity utilization, factory types, and capacity measurement. 4) Calculate capacity utilization, machine, and labor requirements for a beverage company over 4 years. 5) Draw a decision tree to analyze purchasing a new system vs. hiring workers for a semiconductor producer. 6) Comment on a situation where maximizing

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Ravi Goyal
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129 views2 pages

Assignment 2

This document outlines an assignment for a production and operations management course. It includes 6 questions asking students to: 1) Explain the differences between design, effective, and actual capacity with an example. 2) Relate a manufacturer's observation of decreasing unit costs with increasing output to an operations management concept and explain 4 factors that could have led to this. 3) Answer true/false questions about capacity utilization, factory types, and capacity measurement. 4) Calculate capacity utilization, machine, and labor requirements for a beverage company over 4 years. 5) Draw a decision tree to analyze purchasing a new system vs. hiring workers for a semiconductor producer. 6) Comment on a situation where maximizing

Uploaded by

Ravi Goyal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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ENG M 501 - PRODUCTION AND OPERATIONS MANAGEMENT

Assignment 2
(Due on 1stOct 2019)
Total Marks: 40
1. Elaborate on the difference between design capacity, effective capacity and actual output
with an example. (6 Points)

2. A manufacturer observed that the unit cost of the product continuously reduced with the
output rate of production. Which operations management concept can you relate this
behaviour to? Explain at least 4 factors that might have led to the manufacturer’s
observation. (5 Points)

3. True or False:
A) Capacity utilization rate of a plant represents its efficiency.
B) A fast food restaurant is an example of a focussed factory.
C) It is an effective strategy to always operate a plant at its maximum capacity.
D) There is a need to develop a single capacity measure to suit multiple situations in
order to ease operations management. (4 Points)

4. XR Beverages manufactures soft drinks in small and large plastic bottles, with the
following demand forecasts. All the values in ‘000s.

Years
1 2 3 4
Small 180 220 245 240
Large 125 155 182 200

Four machines, capable of producing 100,000 small bottles each/year are available.Each
machine needs an operator. Similarly, two machines are available formanufacturing large
bottles. Each machine needs three operators and can produce upto 120,000 units per year
per machine.Calculate the capacity utilization, machine and labour requirements each
year. (12 Points)

5. A semiconductor producer wants to produce and market a type of microprocessor. This


project requires either purchasing a new system or recruiting several additional skilled
workers.

1|P a ge
ENG M 501 - PRODUCTION AND OPERATIONS MANAGEMENT

When the market is favourable, sales can reach 20,000 processors sold at $100 each.
However on the downside, sales can only be 8,000 processors sold at the same price. The
cost of new system is $800,000, but that of hiring workers is only $500,000. However,
manufacturing costs would drop from $80 each to $40 each when manufacturing with the
assistance of the new system.

The probability of favourable acceptance of the new microprocessor is only 40%. What
should the firm do? Draw a decision tree to explain the various scenarios. (10 Points)

6. Is maximizing capacity utilization rate, always a good strategy? Comment on a situation


where maximizing the capacity utilization is not a desirable practice. (3 Points)

2|P a ge

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