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Assignment II

The document discusses three topics: capacity management, waiting lines, and project management. For capacity management, the management of a firm must choose between a large, medium, or small plant while considering the probability of a strong or weak market. The optimal choice maximizes expected revenue while minimizing costs. For waiting lines, characteristics like utilization, number of customers, wait times, and more are calculated for a help desk and DMV system. For project management, the critical path method is used to schedule construction of a cement plant, determining completion time, necessary activities to crash to reduce time, and associated crash costs.

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soham agarwal
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151 views

Assignment II

The document discusses three topics: capacity management, waiting lines, and project management. For capacity management, the management of a firm must choose between a large, medium, or small plant while considering the probability of a strong or weak market. The optimal choice maximizes expected revenue while minimizing costs. For waiting lines, characteristics like utilization, number of customers, wait times, and more are calculated for a help desk and DMV system. For project management, the critical path method is used to schedule construction of a cement plant, determining completion time, necessary activities to crash to reduce time, and associated crash costs.

Uploaded by

soham agarwal
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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CAPACITY MANAGEMENT

1)  A management is looking at three different options for opening a plant – large


plant, medium plant and small plant. On taking the decision, the firm can either
face a weak market or a strong market. All relevant details are presented as
follows. Based on this, what should be the management’s decision?
https://www.uky.edu/~dsianita/300/dtree.html

Revenue if market is
Alternatives Revenue if market is weak Cost
strong
Large plant 10,000 200,000 100,000
Medium plant 50,000 120,000 60,000
Small plant 35,000 80,000 40,000

Event Probability
Strong market 40%
Weak market 60%

2) C&A, a cellular phone manufacturer, is investigating the possibility of producing and


marketing a new line of phone. Undertaking this project will require either purchasing a
CAD/CAM system or hiring and training several additional engineers. The market for the
product could be either favorable or unfavorable. C&A, of course, has the option of not
developing the new product at all.

With favorable acceptance by the market, sales would be 25,000 phones selling for $100
each, and with unfavorable acceptance, sales would be only 8,000 phones selling for
$100 each. The cost of the CAD/CAM equipment is $500,000, but that of hiring and
training three new engineers is only $375,000. However, manufacturing cost should drop
from $50 each when manufacturing without CAD/CAM to $40 each when manufacturing
with CAD/CAM.

The probability of favorable acceptance of the new phone is 0.40; the probability of
unfavorable acceptance is 0.60.
https://www.uky.edu/~dsianita/300/dtree.html

What should be the company’s preferred choice?

WAITING LINES
1) The computer lab at State University has a help desk to assist students working on
computer spreadsheet assignments. The students patiently form a single line in front of
the desk to wait for help. Students are served based on a first-come, first-served priority
rule. On average, 15 students per hour arrive at the help desk. Student arrivals are best
described using a Poisson distribution. The help desk server can help an average of 20
students per hour, with the service rate being described by an exponential distribution.

Calculate the following operating characteristics of the service system.


(a) The average utilization of the help desk server
(b) The average number of students in the system
(c) The average number of students waiting in line
(d) The average time a student spends in the system
(e) The average time a student spends waiting in line
(f) The probability of having more than 4 students in the system

2) The local Division of Motor Vehicles (DMV) is concerned with its waiting line system.
Currently, the DMV uses a single-server, single-line, single-phase system when
processing license renewals. Based on historical evidence, the average number of
customers arriving per hour is 9 and is described by a Poisson distribution. The service
rate is 12 customers per hour with the service times following an exponential
distribution. The customers are patient and come from an infinite population. The
manager of the DMV would like you to calculate the operational characteristics of the
waiting line system.

(a) What is the average system utilization?


(b) What is the average number of customers in the system?
(c) What is the average number of customers waiting in line?
(d) What is the average time a customer spends in the system?
(e) What is the average time a customer spends waiting in line?
(f) Also, repeat the above calculations with a deterministic service time of 5 minutes per
customer.

PROJECT MANAGEMENT
1) ASSA ABLOY SA is a company specializing in door opening solutions. One part of the company
focuses on manufacturing pin tumbler and lever locks for multiple brands including Union, Yale
and Multi-Lock. The production line used to produce padlocks is a perfect example of a network
system; the steps are shown in Table 1. Using this example, the CPM (critical path method) will
be explained fully.

For the purpose of the example, a batch of 200 padlocks will be taken as the sample for the data
recorded.
Table 1: Steps followed to produce padlocks.

Extra costs are associated with the activities if the manager wants to reduce the overall time (or
critical path). These costs can be seen from table 2, as well as the maximum reduction in time
per activity.

Table 2: Costs of making reductions in the duration of the activities.

a) What is the critical path for this network?


b) What is the expected completion time for the project?
c) If the project completion time has to be reduced to 5.5 hours, what are the
activities that need to be crashed?
d) What is the total crash cost?
2) A construction company has just made the winning bid of Rs. 6 million to construct a
new plant for a cement company. The cement company needs the plant to go into
operation within a year. Therefore, the contract includes the following provisions:

A penalty of Rs. 350,000 if the construction company has not completed the
construction by the deadline 47 weeks from now.
To provide a bonus of Rs. 200,000 to the construction company if the plant is
completed within 40 weeks.

The construction company is assigning its best construction manager, David, to this
project to help ensure that it stays on schedule. He looks forward to the challenge of
bringing the project in on schedule, and perhaps even finishing early. However, since
he is doubtful that it will be feasible to finish within 40 weeks without incurring
excessive costs, he has decided to focus his initial planning on meeting the deadline of
47 weeks.

David will need to arrange for a number of crews to perform the various construction
activities at different times. Table 1 shows his list of the various activities. The third
column provides important additional information for coordinating the scheduling of
the crews. Table 2 shows the crash times and crash costs for various activities in the
construction project.

e) What is the critical path for this network?


f) What is the expected completion time for the project?
g) If the project completion time has to be reduced to 40, what are the activities that
need to be crashed?
h) What is the total crash cost?

Table 1: Activity List for the Construction Project

Activity Activity Description Immediate Predecessors Estimated Duration


(weeks)
A Excavate - 2
B Lay the foundation A 4
C Put up the rough wall B 10
D Put up the roof C 6
E Install the exterior plumbing C 4
F Install the interior plumbing E 5
G Put up exterior siding D 7
H Do the exterior painting E, G 9
I Do the electrical work C 7
J Put up the wallboard F, I 8
K Install the flooring J 4
L Do the interior painting J 5
M Install the exterior fixtures H 2
N Install the interior fixtures K, L 6

Table 2: Time-cost Trade-off Data for the Activities in the Construction Project

Time (Weeks) Cost (Rs.) Maximum Reduction Crash Cost per


Activity
Normal Crash Normal Crash in Time (weeks) week saved (Rs.)
A 2 1 180,000 280,000 1 100,000
B 4 2 320,000 420,000 2 50,000
C 10 7 620,000 860,000 3 80,000
D 6 4 260,000 340,000 2 40,000
E 4 3 410,000 570,000 1 160,000
F 5 3 180,000 260,000 2 40,000
G 7 4 900,000 1,020,000 3 40,000
H 9 6 200,000 380,000 3 60,000
I 7 5 210,000 270,000 2 30,000
J 8 6 430,000 490,000 2 30,000
K 4 3 160,000 200,000 1 40,000
L 5 3 250,000 350,000 2 50,000
M 2 1 100,000 200,000 1 100,000
N 6 3 330,000 510,000 3 60,000

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