Paper 13

Operations and Project Management & Control

June 2004
I—13(OPM)
Revised Syllabus
Time Allowed : 3 Hours Full Marks : 100

(Answer Question No. 1 which is compulsory and any two

questions from the rest under Section I)
SECTION I
Marks
1. (a) Indicate whether the following statements are "true" or "false". 1x10=10
(i) Incentives are substitute for lower wages;
(ii) Method study should precede work measurement;
(iii) Job evaluation is used to measure absolute job worth;
(iv) Value engineering aims at reducing work content of a product;
(v) Operation process chart incorporates all five symbols;
Inventory control in FSN technique is based on classification by
(vi)
movement in consumption;
(vii) Methods improvement has unlimited scope;
(viii) No handling is best handling;
"Principle of overall integration" is one basic principle of best
(ix)
layout.
Quality of lot submitted for inspection is the percentage of
(x)
defectives actually present in it.
(b) Rewrite the statements, filling in the blanks and underline the blanks 1x10=10
filled in. For each blank a suitable word/phrase may be needed;
Expansion Project is a project to expand the _______ _______ of
(i)
the plant;
(ii) The _______ schedule is used for progressing of the executive
agencies;
(iii) The investment opportunity is so promising that an investment
decision can be taken on the basis of the information elaborated at
the _______ stage;
(iv) CBA stands for _______ _______ _______;
(v) Under or over absorption of overheads arise only when overheads
are absorbed by _______ _______ _______ _______ _______;
(vi) DPR is similar to the feasibility study, but with more accurate data
and information, the progress and review of the project is anchored
on _______ _______ _______;
 (vii) The internal rate of return is the discount rate at which the PV of
_______ is equal to the PV of _______.
(viii) The major sources of finance can be broadly classified into
_______ and _______ funds.
(ix) _______ is the opposite of "risk averse";
(x) Identification of the project objectives is the first step in the
_______ _______ process.
2. (a) What do you understand by "Defective work"? What are the possible 3+4+3
reasons of defective work? Indicate approach of management of
defective work, along with its cost implication.
(b) "Three" Limited is a popular manufacturer of different kind of lifting 10
tools. These lifting tools are made of polypropylene fibre. The company
installed a plant for backward integration of its raw material
polypropylene fibre. It produces these polypropylene fibre at the rate of
5000 mt per hour. The usage rate of these fibre for the production of
lifting tool is Rs. 5 per metre. The inventory carrying cost is 25% and the
set up cost are Rs. 4050 per set up. Compute optimal number of cycle
required in a year for the manufacture of this special fibre. (Take 365
days as no. of days for the year computations).

Please turn over

(2)

F-13(OPM)
Revised syllabus
Marks
3. (a) What factors might cause a company to order an amount larger or smaller 4
than "Economic order quantity"?
(b) What are the basic objectives of preventive maintenance? 4
(c) COORAN, a limited company, planning to manufacture a household 12
cooking range has to decide on the location of the plant. Three locations are
being considered viz, Patna, Ranchi and Dhanbad. The fixed costs of the
three locations are estimated to be Rs. 30 lakhs, 50 lakhs and 25 lakhs per
annum respectively. The variable costs are Rs. 300, Rs. 200 and Rs. 350 per
unit respectively. The expected sales price of the cooking range is Rs. 700
per unit.
Find out:
The range of annual production/sales volume for which each location is
(i)
the most suitable;
Which one of three locations is the best location at a production/sales
(ii)
volume of 18000 units?
4. (a) What do you understand by "standardization"? In what ways standardization 3+5
 differs from simplification?
(b) The targeted weekly output of a manufacturing unit employing 20 workers 12
is 400 pieces. The group is entitled to earn an incentive @ 10% on the
aggregate of wages based on basic piece rate plus deamess allowance
(which is Rs. 120 per week) upon achievement of a minimum of 80% of the
output target. This incentive rate is increased by 2.5% flat for every 10%
increase in achievement of targets up to a maximum of 10% at the level of
120% of the output target in the following manner:
Output Target Incentive rate
80%-90% 10%
90%-100% 12.5%
100%-110% 15%
110%-120% 17.5%
120% and above 20%
During the four weeks in February, the actual outputs achieved by the
workers are 383 pieces, 442 pieces, 350 pieces and 318 pieces respectively.
The average basic piece rate is Rs. 5. Compute the amount of incentive
earned by the group during each of the four weeks.
5. (a) Briefly discuss different priority rules for a job shop for despatching. 10
(b) On anticipating the current booming market, the Vajpayee Steels is planning
to expand its capacity by adding more numbers of 10 ton capacity Electric
Arc Furnace (EAF). Each batch of production (10 ton) involves 30 minutes
furnace time including loading the unloading operations. Due to power
restriction the furnace can be used only for 80% of the time. The required
output for the capacity added is 160 ton per shift of 8 hours. The plant system
efficiency is 50%.
(i) Determine the number of furnaces required. 5+5
(ii) Estimate the percentage of idle time in furnace.

Please turn over

(3)

F-13(OPM)
Revised syllabus
Marks
SECTION II
6. (a) Intel Project is having the following activities and expected time duration: 12
Activity Duration Precedence
(weeks) Activity
A 8 —
B 9 A
C 7 B
 D 15 A
E 4 C, D
F 1 E
G 4 D
H 5 E, G
I 4 H, F
(i) Draw the network diagram;
(ii) Identify the critical path; and
(iii) Amount of slack for non-critical activities.
A successful Project Manager should have a wide range of skills. Identify 8
(b)
those skills.
7. (a) The following data pertains to a project— 10
Activity Normal Cash time Normal cost Crash cost
time (days) (days) (Rs.) (Rs.)
1-2 1 1 5000 5000
2-3 3 2 5000 12000
2-4 7 4 11000 17000
3-4 5 3 10000 12000
3-5 8 6 8500 12500
4-5 4 2 8500 16500
5-6 2 1 7000 9000
It is desired to compress the project to the least possible duration day by
day.
You are required to determine the total direct cost stage by stage.
(b) What is a DPR? What is its relevance in a Project? What are the important 10
items that are covered in a DPR?
8. (a) The director of finance for a farm cooperative is concerned about the yield 10
per acre he can expect from this year's com crop. The probability
distribution of the yields for the current weather conditions is given below:
Yield kg. per acre Probability
120 0.18
140 0.26
160 0.44
180 0.12
He would like to see a simulation of the yields he might expect over the next
10 years for weather conditions similar to those he is now experiencing.
(i) Simulate the average yield he might expect per acre using the
following random numbers:
20, 72, 34, 54, 30, 22, 48, 74, 76, 02.
He is also interested in the effect of market price fluctuations on the
co-operative's farm revenue. He makes this estimate of per kg. prices
for com.
Price per kg. (Rs.) Probability
2.00 0.05
 2.10 0.15
2.20 0.30
2.30 0.25
2.40 0.15
2.50 0.10
(i) Simulate the price he might expect to observe over the next 10 years
using the following random numbers:
82, 95, 18, 96, 20, 84, 84, 56, 11, 52, 03.
(b) Project Cost Estimation is a vital factor for starting the business. As a Cost 10
Accountant, you are required to prepare the steps for cost estimation.
9. Write Short notes on any four of the following:- 4x5=20
(a) Operation process chart;
(b) Item rate contract;
(c) Powder Metallurgy;;
(d) Pareto Analysis;
(e) Performance Rating;
(f) Social costs benefit analysis.

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