Operations Management (70-371)

Professor Soo-Haeng Cho

Assignment 1
Operations Performance Metrics / Process Analysis

NOTE: To receive partial/full credit all calculations must be explained and shown.

QUESTION 1 (10 POINTS)

The following table shows the resources utilized in producing Product A in Period 1 and Period
2. After adjusting for price and volume changes, how many percent of the profitability changes is
due to productivity improvement?
Period 1 Period 2

Output Amount Price Amount Price

22.3 $20.0 24.4 $22.0
Inputs

Materials (lb) 25.99 $1.3 26.08 $1.4

Energy (kwh) 200.00 $0.04 193.92 $0.04
Labor (hrs) 51.30 $5.0 56.19 $5.50

QUESTION 2 (10 POINTS)

Consider the following simple assembly process:

Raw Material 3 min/unit 5 min/unit 2 min/unit Finished Goods

The numbers below each step refer to the time necessary to process one unit of the product at
that step.

The process is staffed by three operators with one operator assigned to each of the three steps.
Assume no set ups are required, processing times are constant and no Work in Process (WIP) is
permitted beyond that actually being worked on at each process step (i.e., there are no buffers
between process steps).

(a) What is the Capacity of the process?

(b) What is the Capacity Utilization of the operator at Step A?

 (c) Each operator receives regular wages of $12/hour for the first 8 hours, and overtime
wages of $16/hour for any additional time. Twelve hours per day is the maximum work
time permitted. A finished unit sells for $10 while its direct material cost is $6/unit.
Does it pay to use overtime under this cost structure (assuming sufficient demand exists)?

(d) Would you hire a skilled operator whose wage rate were $20/hour (regular time), but
could perform Step B at a processing time of 4 minutes/unit?

(e) Same as (d), but performs Step A at a processing time of 2 minutes/unit?

QUESTION 3 (10 POINTS)

Consider the following batch flow process consisting of three process steps performed by three
machines:

Activity Time: 1 min/part 2 min/part 1.5 min/part

Setup Time: 20 min 0 0

Work is processed in batches at each step. Before a batch is processed at step 1, the machine has
to be set up. During a setup, the machine is unable to process any product.

(a) Assume that the batch size is 50 parts. What is the capacity of the process?

(b) For a batch size of 10 parts, which step is the bottleneck for the process?

(c) Using the current production batch size of 50 parts, how long would it take to produce 20
parts starting with an empty system? Assume that the units in the batch have to stay
together (no smaller transfer batches allowed) when transferred to step 2 and to step 3. A
unit can leave the system the moment it is completed at step 3. Assume step 1 needs to
be set up before the beginning of production.

(d) Using the current production batch size of 50 parts, how long would it take to produce 20
parts starting with an empty system? Assume that the units in the batch do not have to
stay together; specifically, units are transferred to the next step the moment they are
completed at any step. Assume step 1 needs to be set up before the beginning of
production.