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    Production Management Midterm Exam

    Uploaded by

    Genner Raz

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    © All Rights Reserved
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    Production Management Midterm Exam

    Uploaded by

    Genner Raz
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    © © All Rights Reserved

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    Copyright:

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    Download as docx, pdf, or txt
    20 views2 pages

    Production Management Midterm Exam

    Uploaded by

    Genner Raz

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    GENNER A.

    RAZ
    SECTION 6

    Production Management
    Midterm Exam

    1. Based on this data, is it economical for AMG Company to buy the product from
    market or manufacturing plant.

    A. Sales Forecast (UNIT) 300,000 500,000 700,000 900,000 1,000,000


    B. Manufacturing Cost (Rs)
    Salary
    Supervisor (/Month) 5,000.00 5,500.00 6,050.00 6,655.00 7,320.00
    Supervisor (/Unit) 0.20 0.13 0.10 0.09 0.09
    Indirect Worker (/unit) 2.00 1.80 1.80 1.98 2.18
    Direct worker (unit) 4.00 3.60 3.60 3.96 4.36
    Others
    Material (/unit) 14.00 15.40 16.94 18.63 20.50
    Power & fuel (/unit) 2.00 2.20 2.42 2.66 2.93
    Machine depreciation 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
    Machine depreciation (/unit) 3.33 2.00 1.43 1.11 1.00
    Total Cost/unit 25.53 25.13 26.29 28.44 31.05

    C. PURCHASE COST (Rs)


    Component (/unit) 20.00 20.00 22.00 24.20 26.62
    Transport (/unit) 2.00 2.20 2.40 2.60 2.80
    Inventory (/unit) 1.00 1.00 1.10 1.21 1.33
    Total Cost/unit 23.00 23.20 25.50 28.01 30.75
    D. DIFFERENCE C-B (Rs) (2.53) (1.93) (0.79) (0.43) (0.30)

    Answer: the cost analysis shows that there’s cost savings if valves were purchased
    from market instead of manufactured in-house. So, for the next five years, it is
    economical for AMG Company to purchase from market.

    2. What other factors should AMG Co. consider for making decision?

    Answer: While cost is an important consideration in making business decisions,


    several other factors also have to be looked at by AMG Company:
     Overall objective
     Financial
     Forecast
     In-house improvements
     Control
     Past performance
     Workers availability
     Dependency
     Technology copied
     Offshore outsourcing
     Space availability and land acquisition
     Contract

    While business decisions can be either easy or complex, making an informed


    decision will mitigate the adverse effects and risks faced by the company. Timely
    decision making crucial to avoid loss of business opportunities

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