MGT 3332 Operations & Supply Chain Management Sample Test I Name …………

Show All Work, Box Final Answers.

Part I- T/F and Multiple Choice Section (not provided in sample test)

In addition to the problems below, you need to know how to calculate efficiency and utilization,
break even analysis, capacity in number of machine, and weighted moving average.

Part II – Problems (60 points)

1- (12 pts.) The following equation summarizes the trend projection of quarterly sales of condos
over a long cycle. Sales exhibit seasonal variation. Using the information given, prepare
seasoned forecast of sales for each quarter of next year (not this year).

Ft = 40 – 6.5 t + 2 t2
Where:
Ft = Unit sales
t = 0 at first quarter of last year
if t ≠ 0, count incremental 1 for each next Q

Seasonality: Q1 = 1.1, Q2 = 1.0, Q3 = 0.60, Q4 = 1.3

Answer:
t = 1 at Q2, t = 2 at Q3, t = 3 at Q4 of last year
t = 4 at Q1 …t = 7 at Q4 of this year
t = 8, 9, 10, 11 at Q1,2,3,4 of next year
FQ1 = [40 – 6.5(8) + 2(8)2 ](1.1) = 127.60 note: prob. ask for seasonal must time seasonality.
FQ2 = [40 – 6.5(9) + 2(9)2 ](1.0)= 143.50 Apply quarter seasonality value orderly in circle
2
FQ3 = [40 – 6.5(10) + 2(10) ](0.60) = 105.00
FQ4 = [40 – 6.5(11) + 2(11)2 ](1.3) = 273.65

2- (16 points) Consider the following Sales data.

Period Month Sales

1 Feb. 19
2 Mar. 18
3 Apr. 20
4 May 24
5 Jun. 25
6 Jul. 27
7 Aug. 30
8 Sep.

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 a- What is the naïve forecast for September?
30

b- Find 3-month and 6-month moving averages for September.

MA3 = (25 + 27 + 30)/3 = 27.33
MA6 = (18+ 20 + 24 + 25 + 27 + 30)/6 = 24

c- Find exponential forecast for September if the forecast for June was 27 and alpha is 0.70
FJuly = 27 + 0.70(25 – 27) = 25.60
FAug. = 25.60 + 0.70(27 – 25.60) 26.58
FSept. = 26.58 + 0.70(30 – 26.60) = 28.97

d- Using regression function of your calculator, find the linear trend projection equation and calculate
forecasts for September and October.
a = 15.29, b = 2.00, r = 0.97, r2 = 0.94
F = 15.29 + 2t This is ty le thuan: the x increases the y also increase.
F9 = 15.29 + 2(9) = 33.29 and F10 = 15.29 + 29(10) = 35.29
r = 0.97, there is a strong positive correlation indicating that the x increases the y also increases
r2 = 0.94, there is 94% variation in y that explained by the x

3- (8 pts.) Given the following error of a forecast, find MAD, MSE, and S. Also determine if the error is
under control using 2S control limits.

Errors = -4, 2, -3, 5, -3, 0, 1, -2, -3, 4, 5

MAD = ∑|error|/(n) = |error|1 + |error|2 + +… /(n) = ∑|4+2+3+5+3+1+2+3+4+5|/11 = 2.91
MSE = ∑(error)2/(n-1) = (error)21 + (error)22 + + …/(n-1) = (42 + 22 + 32 + 52 + 32 + 1 + 22 + 32 + 42 +
52)/(11-1) = 118/10 = 11.8

MSE = MAD = S= 2S Control limit = ( , )

4- (16 points) Consider the following data on Price and demand for a given product.

Price (X) Demand (Y)

Price increases Demand decreases
6.00 200

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 6.50 190
6.75 188
7.00 180
7.25 170
7.50 162
8.00 160
8.50 156
9.00 140
9.25 132

a- Find the regression equation to predict demand using your calculator.

a = 319.10, b = -19.97, r = -0.98, r2 = 0.97

F = 319.10 -19.97t

b- Using the above equation, forecast demand if price is $9.75.

F = 319.10 -19.97(9.75) = 124.39

c- What price must be set if demand of 220 is set by the capacity.

220 = 319.10 – 19.97t > t = price = (220 – 319.10)/-19.97 = 4.96

d- What is the correlation coefficient for this regression model? What is the interpretation?
r = - 0.98, there is a negative correlation indicating that when price increases, the demand deceases.

e- What percentage of variation in demand is contributed to variation in price? Explain.

There is 97% of variation in demand due to the variation in price

5- (8 pts.) Compute the seasonal relatives or seasonality for this data using SA method.

Quarter Year 1 Year 2 Year 3 Year 4 Quarter Average Seasonalit

Ẍ y or
Seasonal
relatives

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 1 12 13 17 14 14(12+13+17+14)/ 0.78(14/18)
4
2 16 20 28 24 22 1.22(22/18)
3 12 16 18 18 16 0.89(16/18)
4 15 19 25 21 20 1.11(20/18)
Grand 18(14+22+16+20)4
average
Total 4.00
seasonal
relatives
6- Use the information in the table below to answer this question. Note: department is working one 8-
hour shift 250 days a year. How many machines would be needed to handle the required volume?
(Round your answer to the whole number)

ProductAnnual Demand Standard Processing Time per Unit (Hr) Processing Time Needed (Hr)
Di Pt PD

1 300 5.00 1,500

2 400 8.00 3,200

3 700 2.00 1,400

Total 6,100

NR = ∑ PtDi / T = [(5hr x 300) + (8hr x 400) + (2hr x 700)]/(8 x 250 = T) = 3.05 round up to 3 machines
a) 3 machines

7- The owner of Cookies Inc., Zoya, is contemplating adding a new line of cookies, which require leasing
for a monthly payment of $4,000. Variable costs would be $2 per cookie, and cookies retail price for $6
each.
a/ What would be the profit (loss) if 900 cookies are made and sold in a month?

P = Q(R - v) – FC = 900(6 – 2) – 4000 = 400 profit loss

b/ How many cookies must be sold to realize a profit of $10,000?

Q=($10,000+$4,000)/($6-$2)=3,500 cookies
c/ If 2,500 cookies can be sold, and a profit is $8,000, what price should be charged per cookie?

Profit = Q(R - v) - FC
$8,000=2,500(R-$2)-$4,000

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 $8,000+$4,000=2,500R-$5,000
$17,000=2,500R
R=$6.8

8/ If projected annual demand is between 580 and 650 units, how many machines should the manager
purchase. If break-even point for
One machine: 400 units Range (0 to 300)
Two machines: 500 units Range (301 to 600)
Three machines: 800 units Range (601 to 900)
a) 2 machines
b) 3 machines
c) 1 machine
d) a&b both are correct
e) None of the above; the manager should do nothing.

Answer is A found on page 205.

Comparing the projected range of demand to the two ranges for which a break -even point, you can see
that the break-even point is 500 units, which is in the range 301 to 600. This means that even if demand
is at the low end of the range (580), it would be above the breakeven point (500) and thus yield a profit.
That is not true of range 601 to 900. At the top end of projected demand, the volume would still be less
than the break-even point for that range, so there would be no profit. Thus, the manager should choose
two machines.

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