OPERATIONS MANAGEMENT STRATEGIC MANAGEMENT aca Group - II Paper - IX ows UNTANTS OF INDIA Cray a, (Statutory body under an Act of [Zelilfelut tn) M www.icmai.inWORK BOOK OPERATIONS MANAGEMENT & STRATEGIC MANAGEMENT INTERMEDIATE GROUP - Il The Institute of Cost Accountants of India (Statutory body under an Act of Parliament) www.iemai.inFirst Edition : March 2018 Second Edition : March 2019 Published By : Directorate of Studies The Institute of Cost Accountants of India CMA Bhawan, 12, Sudder Street, Kolkata - 700 016 www.iemai.in Copyright of these study notes is reserved by the Institute of Cost Accountants of India and prior permission from the Institute is necessary for reproduction of the whole or any part thereof.Preface Professional education systems around the world are experiencing great change brought about by the global demand. Towards this end, we feel, it is our duty to make our students fully aware about their curriculum and to make them more efficient. 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It is our hope and expectation that this second edition of work book will provide further an effective learning experience to the students like the first edition, The Directorate of Studies, The Institute of Cost Accountants of IndiaOnly for Practice Purpose Paper-5/6/7/8/11 | Paper-9/10/12 Objective 5 Marks 28 Marks Others |= 75 Marks [= 72 Marks Total 100 Marks [3 Hours] Objective Question McQ 25 Marks/28 Marks Match (1 Mark each questions) Trve/False Fill in the Blanks Short Notes/Case Study Minimum Marks for each Questions 4 Marks Maximum Marks for each Questions 10 Marks Practical Problem Minimum Marks for each Questions 4 Marks Maximum Marks for each Questions 15 MarksWork Book : Operations Management & Strategic Management =x Study Note -1 OPERATIONS MANAGEMENT - INTRODUCTION Learning Objective: The goal of operations management is to maximize efficiency while producing goods and services that effectively fulfil customer needs. Operations are one of the three strategic functions of any organization. Operations decisions include decisions that are strategic in nature, meaning that they have long-term consequences and offen involve a great deal of expense and resource commitments. 1 Define Operations management. Answer: Operations management designs and deals with operations of productive system—system which produces goods and services and operations manager is responsible for smooth running of this system. Every book one reads, every video one watches, every e-mail one sends, and every medical treatment ‘one receives involves the operations function of one or more organizations. 2. What is called operations/Operating System? Answer: Operations is defined as a transfermation—a transformation of input in the form of material, machines, Labour, Management, capital to output in the form of goods and services. Operations as a transformation process looks like following el oan FEEDBACK REQUIREMENT Therefore an Operating System is defined as a configuration of resources combined for the provision of goods or services Further to ensure that the desired output are obtained, an organization takes measurements at various points in the transformation process (feedback) and then compares with them with previously established standards to determine whether corrective action is needed|control) The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1% Sa Work Book : Operations Management & Strategic Management 6. What is the Objective of Operations Management? Answer: In operations management we try to ensure that the transformation process is performed efficiently and that the output is of greater value than the sum of the inputs. Input-transformation-output process itself can be viewed as a series of activities along a value chain extending from supplier to customer and operations management thrives for customer satisfaction with effective ufilzation of resources. ‘Match the items in first column with that in second column: Transformation process ‘Sector where found 1) Physical a) Communication li) Psychological b) Health care Locational ‘¢) Manufacturing iv) Physiological d) Entertainment vy) Informational ‘e) Retail Operations vi) Exchange f) Transport Answer: ek: id); AN) WMI); vista): vil/(e) ‘Match the item in Colum | with that in Column I ‘Column (inpul) ‘Column I (ouipul) (a) Physical 1)_ BSNL telecommunication service b) Exchange ii)_Health Service in Medical College ¢) Locational iil) Railway Service ‘d) Psychological iv) Shopping in Big bazar ‘e) Physiological ¥)_Movie in Inox. f)_Informational vi) Production of Ignis in Marufi Lid Answer: (oystvi); (o\/tv): (esti (ayitv); (ey): (n/) Relate the following characteristics to either Product (P) or Service (S): a) High contact with clients or customers; b) Location dependent on location of local customers, clients and users; ¢) Large units that can take advantage of economies of scale; 4) Availability achieved by keeping the productive system open for operation; e) Achievable inventory; f) Markets served by the productive system are regional, national and international; g) Demand on system variable on weekly, monthly and seasonal basis; h) Complex and interrelated processing; Answer: Q)S; bys: clP: aS; e)P: AP; g)P: YS: The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 2Work Book : Operations Management & Strategic Management 7. Choose the correct answer: ‘Modern views classifies Production management decisions pertaining to a) People; b) People, supply, space; ) People, supply, space and time; 4) People, supply, space, time and feelings; Answer: {c) 8. Choose the correct answer: Under people centric production and operations management function to maintain desired quality and productivity which of the following people centric decision is required most? a) HR decision; b) Supply decision; ‘¢) Spatial decision; 4) Timing decision; Answer: (0) 9. For Outpatient ward of a general hospital name individual components in Input-Transformation process- Output system. Answer: > Input: Unhealthy patient (Physical) » Transformation Process: Uses physical resources like Doctors, Nurses, and other Staff & Equipment etc. > Output: Healthier/Cured Person (Physical) 10. _Inan operating system's output goods-service combination is a continuum. Explain Answer: An operating system can provide physical goods as well as services together and clear demarcation of the output activity may not be always possible. A mobile manufacturer in addition to mobile sets (good) so provides atter sales service. Therefore the concepts of “physical goods production” and “service provision” are not mutually exclusive. In fact in most cases these are mixed, one being more predominant than the other. It can range from primarily goods, with lttie service, to primarily service, with few goods. Because there are relatively few pure goods or pure services, companies usually sell product packages, which are a combination of goods and services. There are elements of both goods production and service delivery in these product packages. This makes managing operations more interesting, and also more challenging, 11. The four primary functional areas of a business unit are marketing, finance, operations and human resources. Write down the mutual interactions of operations with Marketing, HR and Finance functions. Answer: Markefing fo Operation Operations fo Marketing Provides sales forecasts, customer Orders, | Provides information on Product/Service availabilty, customer feedback, Product Development. |lead time estimates, Order status, delivery schedule etc. Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 312. 13. 4. oS Work Book : Operations Management & Strategic Management % HR fo Operations (Operations to HR Provides information on personnel need Skil_| Provides information on Hiring/firing Training, legal sets, performance evaluation, Job Designs, requirements Union contract negotiations. work measurement, Finance fo Operation (Operations fo Finance Provides budgets, cost analysis Provides information on Product & Inventory data, Capital invesiments, Stockholders capital budgeting Requests, Capacity expansion Requirements etc. plans etc. Choose the correct answer: Configuration of resources combined for the provision of goods or services is known as: a) Productive System; b) Operating System: ) Service System; d) Operations Management; Answer: b) ‘Match Column A with Column B Column A ‘Column 8 ‘a) Product 1) Part of operations functions itself providing operations with parts and materials, Packages performing work on products and/or performing services: b) Operations | ji) An organization takes measurements at various points in the transformation functions Process and then compares them with previously established standards to determine whether corrective action is needed: ‘¢) Internal part of | iil) There are elements of both goods production and service delivery; a supply chain ‘d) Process iv) Include process design, process execution and process moniforing: e) BPM ¥y) Consists of one or more actions that transform inputs into outputs; f) Feedback & | vi) Add value during the transformation process; Control Answer: ay/Gi). divi), ei). adv) elviiv) ati, What is called Business Process? Answer: Business process, large or small, is composed of a series of supplier-customer relationships where every business organization every department and every individual operation is both a customer of the previous step in the process and a supplier to the next step in the process. The following figure illustrates ihe same: LE eae Sy Suppiier(s) Cet ead EE CUstomer(s) Input(s) from one Transformation Output(s) to one or (Or more suppliers more customers Directorate of Stu The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 4¥ Work Book : Operations Management & Strategic Management 15. Write down the general categories of a business process. Answer: Generally speaking, there are three categories of a business process: 1. Upper-Management Process—these govern the operation of the entire organization. e.g. corporate governance, corporate strategy: 2. Operational Process - these are the core process that make up the value stream. e.g. purchasing, producing, marketing, sales etc; 3. Supporting Process - these support the core processes. e.g. accounting, human resources, information technology etc. Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page §ti, Nana Work Book : Operations Management & Strategic Management : Study Note -2 OPERATIONS PLANNING 1 Define Forecasting. Why Productions and Operations departments need forecasts? Answer: Forecasting means peeping into the future. As future is unknown and is anybody's guess but the business leaders in the past have evolved certain systematic and scientific methods to know the future by scientific analysis based on facts and possible consequences. Thus, this systematic method of probing the future is called forecasting, Production and Operation departments will produce goods as per the sales program given by the sales department, but it has to prepare forecast regarding machine capacity required, materials required and time required for production and so on. Knowledge on Forecasting helps in this regard. 2 Why Sales Forecasting is the most important activity in the business? Answer: All business and industrial activities revolve around the sale and its future planning. To know what a business will do we must know its future sales. All other activities depend upon the sales of the concem. Salles forecasting as a guiding factor for a firm because it enables the fim to concentrate ifs efforts to produce the required quantities, at the right time at reasonable price and of the right quality. Sales forecasting is the basis of planning the various activities ie; production activities, pricing policies, programme policies and strategies, personnel policies as to recruitment, transfer, promotion, training, wages etc. 3. What are the time ranges for Short-term, Medium-term and Long-term Forecasting? Answer: Short term forecasting period may be one week, two weeks or a couple of months. Medium term. forecasting period may vary from 3 to 6 months. Long term forecasting period may vary fram one year to any period, The objective of above said forecast is naturally different. 4, Write down the objectives of Long-range Forecasting. Answer: {) Towork out expected capital expenditure for future developments or to acquire new facies: {i} To determine expected cash flow trom soles: ii) To plan for future manpower requirements; (iv) To plan for material requirement: (¥) To plan for Research and Development. Here much importance is given to long range growth factor; Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 6¢ Oo . : é Work Book : Operations Management & Strategic Management eats 5. Write down the objectives of Medium-range Forecasting: Answer: {) To determine budgetary control over expenses: [ii] To determine dividend policy, (iii) To find and control maintenance expenses; [iv] To determine schedule of operations: (v1 To pian for capacity adjustments 6. Write down the objectives of Short-range Forecasting; Answer: (i) To estimate the inventory requirement; (i) To provide transport facilities for finished goods; (il) To decide workloads for men and machines; (iv) To find the working capital needed; (v)_ To set-up of production run for the products; (vil) To fixsales quota; (vil) To find the required overtime to meet the delivery promises; 7. What are the factors influencing business forecasting? Answer: (i) Environmental changes: (i) Changes in the preference of the user: (ii) Number of competitive products (iv) Disposable income of the consumer; 8 What are the important factors for production forecasting? Answer: (i) Demand from the marketing department; (i) Rate of labours absenteeism: (ii) Avaitabilty of materials (iv) Avaitable capacity of machines: (v)_ Maintenance schedules: (vi) Delivery date schedvies; 9. Name the factors on which methods of forecasting depends. Answer: (i) Period selected for the forecast; (il) The information or data available on hand: (ii) What ate the expectation from you expect from the information from the forecast; Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 7% Sa Work Book : Operations Management & Strategic Management 2 10. Math the items in column (1) with those in column (2). q) (2) ‘@) A process of combining, averaging or evaluating, in some | i)Sales Forecasting under Expert's other way, the opinions and views of top executives: Opinions: 'b) Quite appropriate when the product is quite new in the |i) Market test method of sales market or good estimators are not available or where | forecasting; buyers do not prepare their purchase plan; ©) More appropriate where users of the product are |i) Composite method of sales numbered and a new product is to be introduced for} forecasting; which no previous records can be made available: 4) Views of salesmen, branch manager, area manager and |iv) Executive judgment method of sales manager are secured for the different segments of | __sales forecasting; the market; ‘@) Opinions of experts given in the newspapers and journals | v) User's Expectation method of sales for the trade, wholesalers and distributors for company’s | __ forecasting: products, agencies or professional experts are taken. Answer: a/v): byl: ivi: ays eli) 11. Demand in (000 Mr) for sugar of Sour India is given below: Year 2010 2011 2012 2013 2014 2015 2016 Demond | __77 88 4 85 a 98 90 () Fita straight line trend by method of least squar (i) Calculate trend values and plot observed and trend valves on a graph; (il) Obtain the forecast of demand for the year 2017; Answer: (i) The trend line is represented os % = a+ bx Where ¥; a= the ¥ oxi the trend value (which is to be predicted): lercept; b= slope of the trend fine; X =the independent variable, the time; aandb are computed as _ SRY-nkP youritn, a : Work Book : Operations Management & Strategic Management The computations are in the following table Year x Demand. Y | _x¥ X2_| Trend Values Yt 2010 oO 77 0 oO 3 2011 1 8 8 1 85. 2012 2 74. 188. 4 Ed 2013 3 85. 255 a a 2014 4 91 36d) 16 a 2015 5 8 490 25 3 2016 é 90. 540 26 95: Totol_|_21 623 1925 a 125 4925—743409) 89S0b= “Gra ond a = 89 ~ 2x3 = 83 (i) Trend valves are calculated from equation ¥; = a +5X and given in last column of the above table; Plot is shown below 220 100 20 5° Year vs qeved 8 Demand fears threcast “0 demana| 20 ° 20921) 2k 220180 NG Year (ii) Forecast voive for 2017 = 83+ 2x7 = 97 12. The following table shows the profits, € Y (in’000) of a shop in X year as given below: x 2010 2011 2012 2013 2014 Y 1250 1400 1650 1900 2300 (@ Fita straight line trend by method of least square: (i) Calculate trend valves and plot observed and trend valves on a graph; (il) Obtain the forecast of demand for the year 2017: Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 9Work Book : Operations Management & Strategic Management = Answer: i] The problem is similar to problem given in @ (11) above. But we will do this problem in a bit different way. Here n= 5 (in QII it was 7) an odd and therefore we could shift the origin to the middle time period, viz. 2012. Let X = ¢~ 2012; The trend line is represented os ¥, = a+ bX Where ¥, = the trend value (which is to be predicted): a= the Y axis intercept: b= slope of the trend line: X =the independent variable, the time: and} are computed as b= a= ¥as3x=0 The computations are in the following table Yeor(t) |X| Profitsiy) | x2 XY _| Trend valves (Yi) 2010 2 1250, 4 -2500. 1180, 2011 =I 1400) 1 =1400, 1440) 2012 0 1650 oO 0 1700 2013 4 1900, 1 1900, 1960, 2014 2 2300 4 "4600" 2220 Total oO ‘8500 jo | 2600 1700 (i) Trend values are calculated from equation ¥, = a + bX and given in last column of the above table: Plot is shown below 2500 —Year Vs Observed Profit —Year vs Forecast profit 1000 500 ° 2003 2010 2011 2012-2013 20142015 (ii) Forecast value for 2017 = 1700 + 260x5 = 3000 Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 10itn, % i y; Work Book : Operations Management & Strategic Management <3 13. The following table shows the profits, ¥ (in'000) of a shop in Xm year as given below: x 2010 [2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 Y 80 90. 2. 33 94. 9 2 104 (@_Fita straight line trend by method of least square; i) Calculate trend values and plot observed and trend values on a graph; Gi) Obtain the forecast of demand for the year 2018; Answer: (i) The problem is similar to problem given in @ (12) above except here n= 8 an even and therefore we ould shift the origin to the time which is the arithmetic mean of the two middle terms, viz.2013 & 2014 and we take % aamtemary = 2(+2013.5) The trend line is represented as ¥; = a + bx Where ¥; = the trend vaive (which is to be predicted); a= the Y axis intercept: b= slope of the trend line: X =the independent variable, the time: aandb are computed as b=22, a= Pasyx=0 The computations are in the following table Year(t) X__[Profits(y) [x XY_|_ Trend Vaiues(¥t) 2010 7 80 49 560 83 2011 5 90. 25 -450 85.5 2012 3 92 9 -276 88 2013 =I 83 1 83 90.5 2014 1 34 1 94 93 2015 3 9 9 297 95.5 2016 5 92 25 460 98 2017 7 104 49 728. 100.5 Total 0 734 168 210 734 Fotsoay=S=o175 10) Sob= Gay 1.25 and a= 91.75 Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 11Q Work Book : Operations Management & Strategic Management Ww (i) Tend values are calculated from equation ¥; = a + bX and given in last column of the above table; Plot is shown below Year Vs Observed Profit, Year vs Forecast Profit, 2010-2012, «2014.-—S 20162018 (ii) Forecast value for 2018 = 91.75 + 1.25x9 = 103 14. Why Capacity planning is required? Answer: Copacity planning is required for the following: Sufficient capacity is required to meet the customers demand in time; Capacity affects the cost efficiency of operations; Capacity affects the scheduling system; Capacity creation requires an investment; Capacity planning is the fist step when an organisation decides to produce more or new products vyvvy 15. How Capacity of a plant is measured? Answer: Capacity of a plant is usually expressed as the rate of output, Le., in terms of units produced per period of time (ie., hour, shift, day, week, month etc.). But when firms are producing different types of products, itis difficult to use volume of output of each product fo express the capacity of the fim. In such cases, capacity of the firm is expressed in terms of money value (production valve) of the various products produced put together. 16. What are the activities involved in Capacity Planning Decisions? Answer: Capacity planning involves activities such as: > Assessing the capacity of existing facilities; Forecosting the long-range future capacity needs: Identifying and analysing sources of capacity for future needs; Evaluating the altemative sources of capacity based on financial, technological and economical Considerations: Selecting a capacity altemative most suited to achieve strategic mission of the firm; Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 12 vvvyvyWork Book : Operations Management & Strategic Management 17. Name the factors that affect determination of Plant Capacity. Answer: > Capital investment required: Changes in product design, process design, market conditions and product life cycles; > Flexibility for capacity additions; > Level of automation desired: > Market demand for the product; > Product obsolescence and technology obsolescence: > Type of technology selected) 18. Which one of the following is not the factor infivencing effective capacity? (i) Level of automations desired; Gil) Forecasts of Demand; (il) Plant and labour efficiency: (iv) Multiple Shift operation; Answer: (1) 19. Plant and labour efficiency are very much essential to arrive at realistic capacity planning. Explain Answer: It is difficult to attain 100 per cent efficiency of plant and equipment. The efficiency is less than 100 percent because of the enforced idle time due to machine breakdown, delays due fo scheduling and other reasons. The plant efficiency varies from equipment to equipment and from organisation to ‘organisation, Labour efficiency contributes to the overall capacity utilisation. The standard time set by industrial engineer is for a representative or normal worker. But the actual workers ciffer in their speed, and efficiency. The actual efficiency of the labour should be considered for calculating efficiency. Thus plant and labour efficiency are very much essential to arrive at realistic copacity planning. 20. Name five reasons because of which Over Capacity are preferred. Answer: Fixed cost of the capacity is not very high: Subcontracting is not possible because of secrecy of design and/or quality requirement; The time required to add capacity is long: The company cannot afford to miss the delivery, and cannot afford to loose the customer; There is cn economic capacity size below which it is not economical to operate the plant; vvvvy 21. Name reasons because of which Over Capacity are preferred. Answer: > Shortage of products does not affect the company [ie., lost sales can be compensated); > The technology changes fast, i.., ihe rate of obsolescence of plant and equipment are high; > The cost of creating the capacity is prohibitively high; Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 13,Work Book : Operations Management & Strategic Management What are the general factors considered for selecting Manufacturing facilities? Answer: Land Costs; Construction Costs: Transportation costs pre & post operation stage: Proximity to suppliers; Labour availabilty: Electrcity/Utiities availabilty; Environmental & other Govi. Regulations; vvvvvvy What are the general factors considered for selecting Retail & Service facilities? Answer: Land /Leasing Costs; Proximity to customers; No of customers: Environmental & other Govt. Regulations; ‘Match the item in Column (1) with that in Column (2). vvvy a 2 {) It produces distinguished products in different locations;_| i) Ordnance factories of India; 'b) It produces multiple products in same locatior fi) ACC Cement; c) It produces same products in different locations: iil) Indian Railways; d) It feeds one plant with products of another plant; iv) Maruti Udyog: Answer: ai): b)Aiv): il: aati: What are the costs associated with decision on plant layout? Answer: > Cost of movement of materials from one work arec to another: > Cost of space: > Cost of production delay, if any, which are the indirect costs; > Cost of spoilage of materials; > Cost of labour dissatisfaction and health risks; > Cost of changes require, if the operational conditions change in the future. This is ong term cost; > Cost of customer dissatisfaction due to poor service (quality, delivery, flexibiity, responsiveness) which may be due to poor lay out; What are the most common reasons for design of new layout? Answer: (i) Layout is one of the key decisions that determine the long-run efficiency in operations (i) Layout has many strategic implications because it establishes an organisation's competitive priorities in regard to capacity, processes, flexibility and cost as well as quality of work life, customer contact and image (in case of service organisations); (ii) An effective layout can help an organisation to achieve a strategic advantage that supports differentiation low cost, fast response or flexibility; (iv) A well designed layout provides an economic layout that wil meet the firm's competitive requirements: Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 14% ad Bom Work Book : Operations Management & Strategic Management % 27. ‘Match the item in Column (1) with that in Column (2). a @ 4) It is to avoid waste of labour and time and to minimize cost | i) Layout principle of Compactness; cof material handling: 'b) Itis to use effectively every unit of available space: Layout Principle of Sequence c) It Is for harmonious fusion of all the relevant factors so that | il) Layout Principle of Minimum the finallayout looks well integrated and compact Investment: 4) It permits revisions with the least difficulty and at minimum | iv) Layout Principle of Safety and cost: Satisfaction: €@) It is followed for comfort and convenience of the workmen |v) Layout Principle of Minimum 30 that they feel satisfied. Travel: f) itis for savings in fixed capital investment, not by avoiding _ | vi) Layout Principle of Usage installation of the necessary facilities but by an intensive use of available facilities; [g)it arranges Machinery and operations in a sequential order. | vi) Principle of Flexibility Answer: a/v): by/(viy: i: d)/(wii); e)/iv), Aili), yi) A company produces 2000 TV sets in a year for which it needs an equal number of tubes of a certain type. Each tube costs D10 and the cost fo hold a tube in stock for a year is D2.4, The cost of placing an ‘order is D150 which is not related to size. Consider no of working days as250 days. Lead time Is 15, working days. Compute EOQ and reorder level. Answer: £0Q = |*2where A= cost of placing an order, D = annual demand, h = holding cost; With no of working days in the year = 250 days and lead time = 15 working days, the daily demand = 2000/250 = 8 tubes. Demand during lead tim: So re-order level = 120 tubes. 5x8 = 120 tubes. Using the following data obtain the EOQ and the total variable cost associated with the policy of ‘ordering quantities of that size: ‘Annual Demand (in D) = D20000 Ordering Cost = D150/order Inventory canying cost = 24% of average inventory valve Answer: £09 = [#2 where A = cost of placing an order, cB = the annual demand in rupee terms, i= the holding rote, = /P02200° - D500 Total cost = VEXAXeDRi = VEN TSVE D000 K O24 = D 1200 Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 15,% ad Bom Work Book : Operations Management & Strategic Management % 30. Bearing Hub Company is going to build a new plant to manufacture bearings. The site selection team is evaluating three sites and they have scored the important factors for each as follows. Compute total score of each locations under location factor rating scheme. Location factor Scores(0 to 100) Weight | Site 1 Site 2 Site 3 Labour pool and climate 0.30 80. 65 90. Proximity to suppliers 0.20 95 288. 78 Wage rates 0.15 75 5 85 ‘Community environment 0.15 0. 80 90. Proximity to customers 0.10 65 90. 95. Shipping modes 0.05 85 90 60 Airservice (0.05 50. 5 90. Answer: Wid Scores | Wid Scores | Wid Scores Weight | sitet | site2 | Site3 Site 1 Site 2 Site 3 0.3 80, 5 0. 24 19.5 2 0.2 95. 88. 78 2 17.6 15.6 O15 75. 5. 85 11.25 14.25) 12.75 0.15 60. 80. 90. 9 12 13.5 01 65. 90. 95 85 9 95 0.05 85, 90. 60 4.25 45 3 (0.05 50. 6s 90, 25 3.25 45 Total 765 80.1 65.85 Site 3 has the highest factor rating compared with the other locations, however, this evaluation would have to be used with other information, parficulatly a cost analysis before making a decision in favour of site 3 or others, 31. M/s. ABC Ltd. are the manufacturers of a product called “Super Z" The following are the details of their ‘operation during2017: Average monthly market demand 5,000 units ‘Ordering cost B200 per order Inventory canying cost 25% per annum Cost of productionB500 per unit Normal usage 1000 units per week ‘Minimum usage 500 units per week ‘Maximum usage 2000 units per week Lead time to supply 6-8 weeks ‘Compute from the above: (1) Economic order quantity. If the supplier is willing to supply quarterly 1,000 units at a discount of 5%, is it worth accepting? (2) Maximum level of stock. (3) Minimum level of stock. (4) Re-order level of stock. Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 16itn, a Work Book : Operations Management & Strategic Management Answer: (1) Economic Order Quantity: Annual usage of Super Z = Normal usage per week « 52 weeks = = 52000 units |000units « 52 weeks Ordering cost per order = 8200. Inventory camying cost per unit per annum = 25% of B500 = B125. Evaluation of order size of 1,000 units at 5% discount 8 (approx) No. of orders = 5,200 units/1,000 unit considered) '5.2units or 6 (in case of a fraction, the next whole number is Ordering cost order per year at B 200 per order = B 1200 Canying cost of average inventory: 1,000 units/2 x B(SO0 less 5%) * 25/100 = B59375 Total annual cost (excluding item cost) B 1200 + B59375 = B60575, Annual cost if EO @ (408 units) is adopted: Ordering cost: 52000 + 408 orders per year @8 200 per order 525490 Carrying cost of average inventory 408 units 4408 units/2 * B (500) * 25/100 = B25500 Total annual cost (excluding item cost) = B25490+ B25500 = B50790 Increase in annual cost: 8 (60575 - 50990} = 89585. Amount of quantity discount: 5% * B500 * 52000 uni = 81300000 Since the amount of quantity discount (81300000) is more than the increase in total annual cost (89585,), it is advisable to accept the offer. This will result in a saving of B (1300000 - 9585) or 81290415 p.a. in inventory cost. (2) Maximum Level of Stock: = Re-order level + Re-order quantity - (Minimum usage * Minimum delivery period) = 16000 units + 408 units ~ (500 units x 6 weeks) = 13408unit. (3) Minimum Level of Stock = Re-order level - (Normal usage x Normal delivery period) [see Note] = 16000 units - (1000 units « 7 weeks} = 9000 units. Note: Normal delivery period is taken to be the average delivery period, (4) Re-order Level of Stock: = Maximum usage « Maximum delivery period = 2000 units x 8 weeks = 16000 units. Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 17% a Work Book : Operations Management & Strategic Management 32. “Carpet for Golden foot” company in Kashmir stocks carpet in its warehouse and sells it through an adjoining showroom. The store keeps several brands and styles of carpet in stock. The store wants to determine the optimal order size. The order quantity is received gradually over time and the inventory level is depleted at the same time it is being replenished i.e., the store here faces a non-instantaneous receipt. Estimated annual demand is 15000 yards of carpet with an annual carrying cost of B 2.50 per yard and an ordering cost 8200. The manufacturing facility operates the same days the store is open (i.e. 300 days) and produces 200 yards of the carpet per day. Determine the optimal order size, total inventory cost, the length of time to receive an order, the number of orders per year and the maximum inventory level. Answer: £0Q with non-instantaneous receipt £0Q = aawhere A= cost of placing an order, D = annual demand, h = holding cost, d = daily rate at nao which inventory is demanded & p = daily rate at which the order is received over time also known as production rate. £09 = /RROEET® = 1789(Approx.) {210-2 Total minimum inventory cost: “20 The lenath of time to receive an order for this type of manufacturing operation is commonly called the length of the production run, £09 _ 1789 Production run = £22 = 2% 945 days /order The number of orders per year is actually the number of production runs that will be made. So number of production runs (from orders) = = 2 orders(Approx) Finaly the maximum inventory lvelis = £09 (1 ~4) = 1780x (1-22) = 1342yards 33. A contractor is evaluating ifs machine shop's current layout. Figure below (Table 1) shows the current layout and the adjoining table (Table I!) shows the closeness matrix for the facility measured as the number of trips per day between department pairs. Safety and health regulations require the following department pairs close to each other: A & E, C & F, A&B and C & E as shown in the third table (Table Il) below. How much better is your layout than the current layout in terms of the wd score? Use rectilinear distance. E B F A ¢ Table Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 18Work Book : Operations Management & Strategic Management Department Trips Between Depariments A B c D E F A = 9 2 : 8 5 8 = = - 3 = = ci = = : : 7 8 D = = : : = 3 E = = : : = 4 F = : : : - - Table i E c F A 8 Table ill Answer: Department Current layout Proposed Layout Pair Number of Irips (I) | Distance (2) | wd Score (1x2) | Distance (3) | wd score AB 2 18 i AC 2 AE 9 AF 15 CE 14 CF 16 DF 3 EF 2: 8 Total ol 2 1 3 B,D é 1 i 1 7 2 The above table reveals that the wd score drops from 91 from the current plan to 66 for the revised plan, So we can change the layout as proposed. Baker Machine Company is a job shop that specializes in precision paris for firms in the aerospace industry. Figure (Table |) shows the current block plan for the key manufacturing centers of the 75000 sq. ft. facility. Refer to following closeness matrix (Table I!) and use rectilinear distance (the current distance from inspection to shipping and receiving is three units) to calculate the change in the weighted distance, weighted score if Baker exchanges the locations of the tool crib and inspection. Put up your decision. ic D a | A E Table | Deparment Tips Between Depariments A Bic D E Burr & Grid (A) = a | 3 3 Numerically Controlled Equipment (6) | - - | 3 Shipping & Receiving (C) = - | : Leather & Drills (D) = 7 | : Too! Crib(E) = a Inspection(F) 5 - | - = - Table I Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 19 9 a + Jealeo|so|+ jennWork Book : Operations Management & Strategic Management Answer: Proposed Layout Plan: ic D B A E E Depariment Current layout Proposed Layout Pair___ | Number of Trips (1) [Distance (2) wd Score (1x2) | Distance (3) | wd score (1X 3] AB 8 3 24 3 24. AC 3 1 3 1 3 AE 2 1 9 2 18, AF 5 2 10 1 5 6.0. 3 1 3 1 3 CE 8 2 16 3 24 CF 2 3 2 2. 18 DE 3 2 é 3 9 EF 3 T 3 1 3 Total Tor 107 The above table reveals that the wd score increased from 101 from the current plan to 107 for the revised plan. So we should not adopt the layout as proposed. 35. Bharat Forge does its annual production planning over four quarters. Its demand projections for the coming year are as follows: Quarter Demand (tonnes) i 70. w 130 UL 10 Vv 0. Bharat's workforce can produce 60 tonnes of output/quarter. The workforce needs fo be increased but that is going to be a distant plan. Overtime can be used. Of course the output rate during the overtime period is observed to be 20% greater than that during the regular time. But there is a legal cap on the ‘overtime limiting it to a maximum time of 25% of the regular time in any quarter. Overtime costs 407% more than the regular time production. It can subcontract to smaller company at a premium of 45% of the cost of the regular production. The regular time costs are B200000/T (does not include cost of materials). Inventory carrying cost is 8400000/1/year. As a management policy, no shortages allowed. Suggest an economical aggregate production plan for Bharat Forge. Assume zero inventories of the product at the beginning of the plan year. What is the total production cost for this plan? Answer: Regular time production cost: 8200000/T ‘Overtime production cost: B200000/T Xx 1.40 = 8280000/T Subcontracting cost: 8200000/T X 1.45 = 8290000/T Cost of producing in overtime and canying the inventory to the next quarter = 200000+400000/4 = 8300000 The approach to the aggregate planning will be: Produce during regular time If this quantity is not adequate to meet the demand, produce the additional quantity in overtime Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 20,¢ Nt Work Book : Operations Management & Strategic Management <3 However, the maximum overtime production possible in a quarter is 20% of the regular production capacity = 0.25 X 60 X 1.20 = 18T Hence in any quarter the maximum that can be produced in regular plus overtime would be = 60+18=78T, If in any quarter the demand exceeds 781, the quantity over and above 78T will have to be sub contracted. The aggregate production plan can now be as follow: Quarter ‘Output [1] obtained through Reguior_| Qverime | Subcontract | Total T 60. 10 70. W 60. 18 52 130 UL 60. 18 32 no. Vv 60. 18 12, 90. There is no limit on the amount to subcontract. Therefore the last option, the most expensive one, will not be used, The production costs for this aggregate production plan are as: ‘Quarter I: (60 x 200000) + (10 x 280000) = B1 4800000; ‘Quarter I: (60 X 200000) + (18 x 280000) + (52 X 290000) = 832120000; ‘Quarter Ill: (60 x 200000) + (18 x 280000) + (32 x 270000) = 826320000: Quarter IV: (60 X 200000) + (18 x 280000) + (12 x 290000) = 620520000; What are the conditions to be met for Product-layout. Answer: Adequate volume for reasonable equipment utilization; Reasonably stable product demand; Product Standardisation; Part Interchangeabilty: Continuous supply of materials; vyvvy 37. With respect to forecasting choose “True” and “False” statements from the following: (Long range forecasts pertain to ongoing operation; Gi) Business Managers use forecasts to plan the system and to plan the use of the syster (il) Business forecasting pertains to more than predicting demand; {iv) Short range forecasts helps planning for usage of the designed system; (¥) Production planning is the basis for making Sales forecasting; Answer: ive, iia, ‘iy, im, WF 38. Categorise the following into Long range forecasting and short range forecasting: a) Determination of Dividend Policy; b) Computation of overtime requirement to honour the delivery schedule; ¢) Capacity adjustment plan; d)_ Determination of working capital requirement; e) Determination of expected cash flows from sales Answer: }, c) & e) are long range forecasts Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 21itn, % i y; Work Book : Operations Management & Strategic Management <3 39. Actual Demand for last 15 weeks are given in the following table: Week [1 [2 [3 [4 [5 [6 [7 [se [9 [10 [11 [12 [13 [aa [15 Demand | 70 | 130 | 90 | 140 | 140 | 120 | 170 | 160 | 120 | 160 | 160 | 140 | 220 | 210 | 200 ‘Compute moving average forecasts for the three and six week period and comment. Answer: Forecast Week | Demand | 3Week 6 Week 1 70. 2 130, 3 90. 4 140, 96.66667 5 140. 120. é 120 123.3333, 7 160. 133.3333, 15 € 120 143.3333 _| 131.6667 9 160) 150, 136.6667, 10 160. 150. 141.6667 UW 160) 146.6667 145, 12 140, 146.6667 148.3333 13 220) 153.3333 | 151.6667 14 210 173.3333 160 15 200 190. 148.3333 The figure below shows the moving average forecasts for the 3 and 6 week period graphically. The shorter moving average period has more fluctuations and is closely following the rising trend, The longer moving average period smoothens out the random elements but lags behind the trend. if the fluctuations in the actual demand are high and there is a requirement to take these into account in the forecasts as well, a shorter moving average period is preferred. If the fluctuations are small, a longer moving average period is preferred. Actual & Forecast 200 350 Demand 100 —2 Week so —s week Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 22i} Work Book : Operations Management & Strategic Management 2: 40. The data given in the following table refers to three different machines X, Y and Z. The output is expected to be 6000 units per month. Factory works for 48 hours per week. Find out the machine which will satisty the required capacity. Particulars x Y z Set up fime in minutes 10 7 8 ‘Machine operation fime in minutes per unit 1.5 18 1.4 Lot Size 500 400 300, Answer: Machine x Number of lots required = 600/500 = 12 Set up time required = 10°12 = 120 minutes Processing time = 6000*1.5 = 9000 minutes Total Time = 9000 + 120 = 9120 minutes Machine ¥ Number of lots required Set up time required = 7°15 = 105 minutes Processing time = 6000*1.8 = 10800 minutes Total Time = 10800 + 105 = 10905 minutes 000/400 = 15, Machine Z Number of lots required = 600/300 = 20 Set up time required = 8°20 = 160 minutes Processing time = 6000"! 4 = 8400 minutes Total Time = 8400 + 140 = 8560 minutes 41. Capacity of a work centre is expressed as: (a) Capacity = Number of Machines or workers x Number of shifts * Efficiency (©) Copacity = Number of Machines or workers x Number of shifts Utlisation Factor Efficiency (d) Capacity = Number of Machines or workers » Number of shifts * Utilisation Factor * Efficiency (c) Capacity = Number of Machines or workers x Number of Shifts * Answer: d) Define Design capacity and Effective capacity. Answer: Design Capacity: The maximum output rate or service capacity an operation, process or facility is designed for. Effective Capacity: Design capacity minus allowance such as personal time and maintenance. Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 23,% ad Bom Work Book : Operations Management & Strategic Management =* Design capacity is the maximum rate of output achieved under ideal conditions, Effective capacity is ‘always less than design capacity owing to realities of changing product mix, the need for periodic maintenance of equipment, lunch break, problems in scheduling and balancing operations etc. Actual output cannot exceed effective capacity and is offen less because of machine breakdowns, absenteeism, shortages of materials and quality problems as well as factors that are outside the control of the operation mangers. 43. Given the following information, compute the efficiency and the ulllization of the vehicle repairing department. Design Capacity = 80 trucks per day; Effective Capacity = 75 trucks per day; Actual output = 60 trucks per day; Answer: Actual Output Ff fective Capacity * Efficiency Actual Output 60 Bestgn Capcity * 1007 yy * 100 = 75% Utilisation = ‘Match Column A with Column B ‘Column & ‘Column 8. 4) Ifthe output is uniform i) focusing exclusively on ufiization of capacity will be ‘counterproductive and leads to increase in inventory carrying cos! 'b) When qualify of output fails | ii) an organization has differences in equipment capabilities among to meet standard alternative pieces of equipment; ‘¢) Scheduling problem occurs | iil) there are more opportunities for standardization of methods and when materials which leads to greater capacity: d) Effective capacity is | iv) paperwork required by regulatory agencies controlling the dependent on external factor | product/service market like ‘e) If demand for product is | v) the rate of production will be slowed by the need for inspection poor ‘and rework activities Answer: ay/(ii). billy). oil. al/iv). el/(i) 45. Name steps in the Capacity planning Process. Answer: 1. Estimate future capacity requirements: 2. Evaluate exchange capacity and facilities and identify gaps: 3. Identify alternatives for meeting requirements: 4. Conduct financial analyses of each alternative; 5. Assess key qualitative issues for each alternative: 6. Select the alternative to pursue that will be best in the long term: 7. Implement the selected alternative: 8 Monitor results; Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 24% a Work Book : Operations Management & Strategic Management 47, 49, Choose “True” and “False” statements from the following: a) Long term capacity needs require forecasting demand over a time horizon and then converting those forecasts into capacity requirement b) Combinations of cycles and trends make complex demand pattern into simple one; ¢) When trends are identified in demand pattern, fundamental issues are 1) how long the trend might persist and ii) the slope of the tre 4) When cycles are identified fundamental issues are i) the approximate length of the cycles and ii) the ‘amplitude of the cycle; ) Short term capacity needs are less concerned with cycles and trends than with seasonal variations and other variations from averagi Answer: al, bir, eM air elt: Capacity requirements of products that will be processed need few information. Name these information. Answer: i) Accurate demand forecasts for each product; ji) Standard processing time per unit for each product; li) Number of workdays per year; iv] Number of shifts to be used: A department works one 8-hour shift, 300 days a year and has the following information for finding out the capacity requirements: Product | Annual Demand | Standard processing Time per unit (Hr) 1 500 5 2 300 7 3 1300 2 Compute the capacity requirement—No of such type of machine required to fulfil the demand. Answer: Product | Annual Demand [Standard processing Time per unit (Hr) [Total Processing time needed (Hr) 1 500) 5 '500*5 =2500 2 300) Z 300°7 =2100. 3 1300 2 1300°2 =2400, Total Processing fime needed for all products 7200 Tal Proceesing tne needle Processing time capaclty per wil ~ B00 No of Machine required in the department = 3machine Apsara Spinners is proposing to set up a new cotton yam spinning unit to produce cotton yam. The unit has been gifted 3 draw frames. A diagrammatic representation of the spinning process is given below: Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 25or) |__ aes errs ord Raw cotton Is sent to the blow room wherelrom after removing the fibrous part raw cotton Is passed through carding machine. It disentangle the fibres of the cotton yam. Then draw frames draw the cotton into thick strands. From here the output is passed fo simplex frame where thinner strands are made. The ‘output of the simples Is then fed fo the ring frame wherefrom required quality of yarn or thread comes out. The unit has been given a license for 4000 spindles capacity. The technical details of the machinery working at 100% rated capacity are as follows: ‘Machine Capacity per 8hour | Wastage Capacity shift utiization/Efficiency Blow Room 1100 kg S% 82% Carding Machine 160 kg 5% 85% Draw Frame 300 kg 2% 75% ‘Simplex Frame (120 spindles) ‘4kg per spindle 1% 85% Ring Spinning Frame (450 spindles) 250. gm 3% 88% Capacity utilization of the ring spinning frame is 90%. What equipment do you recommend purely from the technical point of view of balancing the output? Answer: Ring spinning frames: Each ring spinning frame has 450 spindles. Number of ring spinning frames permissible = “28 = Each spindle on a ring spinning frame processes 250 gm at 100% capacity, but it works at 90% capacity. Total production per shift (including wastage) = Production x weight x machine ef ficiency x capacity utilisation x 450 x 0.25 x 0.88 x 0.90 = 712.8 kg This must be the input at the ring spinning frames and should correspond to the output of the simplex frames Simplex frames: Since there is 1% wostage at the simplex frame, its input should be 712.8 = Fay 20kg Let the number of simplex frame machine be S. Then Sx 120 x 4x 085 = 720 So = 2 machines Draw frames: Since there is 2% wastage at the simplex frame, its Input should be 720 = 734.69 kg 098 Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 26% ad Bom Work Book : Operations Management & Strategic Management =* 51. Let the number of draw frame machine be D. Then. D x 300 x 0.75 = 734.69 SoD = 4 machines Carding machine: Since there is 5% wastage at the simplex frame, its input should be 734.69 sae = 77336k9 Let the number of carding machine be C. Then Cx 160 x 0.85 = 73:36 SoC = 6 machines Blow Rooms: Since there is 6% wastage at the simplex frame, its input should be 773.36 Fer = 2272 kg Let the number of carding machine be B. Then Bx 1100 x 0.82 = 822.72 ‘So B = 1 machines Name three most important factors considered in planning service capacity. Answer: a} There may be a need fo be near customers: b) The inability to store services; ¢} The degree of volatility of demand: A firm's manager is facing a problem to decide whether fo make or buy a cerfain item used in the production of vending machine. You are asked to help the manager with the following informatior ‘Making the item would involve annual fixed costs of 7150000. Cost and volume estimates are as follows: Make Buy ‘Annual fixed cost 150000 Nil Variable cost/unit 60 80 ‘Annual Volume( units) 12000) 12000 a) Given these numbers, should the firm buy or make this item? b) If variable cost/unit to buy is < 260 will your decision in (a) above change? ¢) There is a possibility that volume could change in the future. At what volume would you be indifferent between making and buying? Answer: 4} The total cost of each altemative: Total cost = Fixed cost + Volume + Variable cost Total cost under make: Total cost = 150000 + 12000 x 60 = Rs.870000 Total cost under buy: Total cost = 0 + 12000 x 80 = Rs.960000 Since total cost under make < total cost under buy, manager should make the item. Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 27Work Book : Operations Management & Strategic Management = b) If variable cost under buy option is less than %60 which is the variable cost under make option then ‘we don't require to consider the fixed cost component as considered in answer to (a) above and ‘we could safely suggest the manager to go for buying. ¢) Indifference point is that volume (@) where total cost under both the alternatives will be equal ie. Total cost under make = Total cost under buy Or, 0+ x 80 = 150000 + x 60,0r Q x20 = 150000, Or, @ = 7500 Find the capacity of the following system: 22 units/hour 17 units /hour 18 units /hour ————} 20 units/hour 18 units /hour 18 units/hour ©——@)—__-@) 22 units/hour 17 units/hour 15 units/hour 51 units/hour 54 units/hour Answer: The attainable output of the system is equal to the output of the slowest operation The slowest output in the Is! channel (1,2. 3) = 17 unis/hour: The siowest output in the 24 channel (4, 5, 6) = 18 unis/hour: The slowest output in the 3 channel (7, 8, 9) = 15 unis/hour: Together these three portions could produce = 17 +18+15 units/hour, Although operation 10 & operation 11 could handle more than 50 units/hour, only 50 unitsfhour come: from the preceding feeding channels of the system, so the system output could only be 50 units/hour. Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament!) Page 28sa eS Work Book : Operations Management & Strategic Management 53. Say true or false: a) Product Layouts are used to achieve a smooth and rapid flow of large volumes of goods or customers through a system: b) Product layouts achieve a high degree of labour and equipment utilization which tends to result in high equipment costs; ¢) Process layouts are designed when variety of jobs that are processed requires frequent adjustments to equipment; d) The system in process layout is much less vulnerable to shutdown caused by mechanical failure because equipment is arranged by processing sequence; @) Maintenance costs in product layout tend to be lower than that in process layout because of less specialized type of equipment used in product layout. Answer: aif. B/E, oy. yr. eVF 54. Match Column A with Column B ‘Column A Column B ‘@) Entire product layout corresponds fo the fechnological |i) because large volumes are handled by processing requirements of the product this system: 'b)In product layout the amount of work in process is, ii) because processing requirements offen minimal. usually exhibit too much variability: €) Product layouts are less plentifulin service Til) because only one or a few very similar environments items are involved: 4) In product layout material handling cost per unit is low | iv) because units here follow the same sequence of operations: ) In product layout even a substantial investment of ¥) because items move quickly from money in equipment becomes economical ‘operation to operation: Answer: ay/ii bi). Mf. dyjiv, eli. A.company must decide which type of machine fo buy and how many units of that type given the following information: Type Cost 1 10000 2 14000 Product demand and processing times for the equipment are: Product | Annual Demand Processing Time/unit (minutes) 1 2 001 12000 4 6 002 10000 2 a 003) 18000 5 3 a) How many machines of each type would be required to handle demand if the machine will operate 8 hours a day, 250 days a year and what annual capacity cushion in processing time would result for each? Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 29Work Book : Operations Management & Strategic Management <3 'b) With high certainty of annual demand which type of machine would be chosen if that was an important consideration? With low certainty which type of machine would be chosen? ¢) If purchasing and operating costs are taken into account which type of machine would minimize total costs, given your answer for part (a)? Operating costs are %6/hour for type 1 and %5/hour for type 2. Answer: a} Hour available in the year = 8*250 = 2000 hours. Processing time required by Machines: Machine 1: 12000°4+10000°9+ 18000*5 = 228000 minutes = 3800 hours Machine 2: 12000°6+10000°9+ 18000°3 = 216000 minutes = 3600 hours No of machines required: Machine 1: 3800/2000 = 1.9 = 2 machines Machine 2: 3600/2000 = 1.8 = 2 machines Capacity Cushion available: Machine 1 = 8*250*60*2 — 228000 = 12000 minutes Machine 2 = 8*250*60"2 — 216000 = 24000 minutes b) With high certainty of annual demand a machine with low capacity cushion could be chosen. So machine | will be the right choice. With low certainty however high cushion machine ie. Machine 2 is the right candidate, ¢) Total cost of machines: Machine 2: 2*1 4000 + 3600* 5 = 246000. Machine 1 will minimize total cost. 56. Match Column A with Column B Column A ‘Column B ‘@) Job shop | 1) It is used for work that is non- routine with a unique sel of objectives fo be accomplished in a limited time frame: 'b) Batch ii) Itis used when higher volumes of more standardized goods or services are needed: ¢) Repetitive | il) itis used when a very high volume of non-discrete, highly standardized output is required 4) Continous | iv) It operates on a relatively small scale and used when a low volume of high variety goods or services are required; ) Project _| v) It is used when a moderate volume of goods and services is desired anda moderate varieties are handled: Answer: )/fiv), billv). (il. yi). eli) For each of the following name the basic process type. a) A tool and die shop; b) Making of Rasgullas; ¢) Building of bullet train railway track; d) Manufacturing of Steel; e) Assembly lines in Maruti Udyog Limited; Answer: {a} Job shop, b) Batch, c} Project, <)Continuous e] Repetitive. Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 30¢ iD Work Book : Operations Management & Strategic Management <3 58. A producer of a printer is planning to add a new line of printers and you have been asked fo balance the process, given the following task fimes and precedence relationships. Assume that cycle fime is to be the minimum possible. Task Immediate predecessor_| Length (minutes) : 0.2 a 04 - 03 bic 13 : 01 e 08 af 0.3 g 12 Isa ||0 lala lola Do each of the following: i) Draw the precedence diagram. li) Assign tasks to stations in order of most following tasks. Tiebreaker: greater positional weights iil) Determine the percentage of idle time. iv) Compute the rate of output in printers per day that could be expected for this line assuming a 450 minute working day. Answer: i) Precedence diagram a © © O_O 1 ji) Assignment in order of most following tasks &. tiebreaker: Greater positional weights Tasks Number of Tasks Following Positional Weights a 4 (6.4.9 h) 34 b 3{d.a.h) 32 c 3 (d.g.h) 3 d 2 (ah) 28 e 3(f.g.h) 24 f 2(g.h) 23 g J (h) 15 A = 12 Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 31itn, a Work Book : Operations Management & Strategic Management Positional weights: 1 =0.240.4+1.340.3+1.2=3.4 b=0.4+1.3+0.3+1.2= 3.2 c= 0.341.3+0.3+12=3.1 1.340.3+1.2= 28 2 = 0.140.810.3412 =2.4 0,840.3 + 1.2=23 g=0341.2=15 h=12 Cycle time = Minimum possible time = Longest task time = 1.3 minutes per unit Station [Time remaining] Eligible will fit__[ Assign (task time} [Revised time remaining] Idle 1 13 ace ace a if 1 b.ce bce b O7 O7 ce Ge © 0.4 0.4 ae e e 0.3 03 at No one: - ~ os 2 13 at df a 0 3 13 f.9 fg t Os 0.5 gh g g 0.2 O2 Not fitted : oz 4 13 h h h on O1 No task left On In work station 1: When a, c, e were eligible, a was assigned as a has the maximum follower When b, c, e were eligible, b was assigned as b has the maximum positional weight even when b, c, e have the same no of folowers. When c, e were eligible, c was assigned as c has the maximum positional weight even when c, € have the same no of followers. When d, e were eligible, e was assigned as e has the maximum follower When d, f were eligible, no one were fit, as time remaining was not sufficient to complete any one of these tasks. In work station 2: When d, { were eligible, d was assigned as d has the maximum positional weight even when d, f have the same no of followers. In work station 3: When f, g were eligible, f was assigned as f has the maximum follower When g, h were eligible, g was assigned as g has the maximum follower When h was eligible it was no! fitted as time remaining was not sufficient to complete this task Total idle time = 0.3+0.2+0.1= 0.6 otal cine le time = Fe. “OF work station xeyele Fine per tation 100 lt x 100 = 11.5456 1v) Outpue rare = 22886 time Be de> _ 346 units per day approx Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 32ti, * Lj ad ys. Work Book : Operations Management & Strategic Management 2: 3 4. Study Note -3 DESIGNING OF OPERATIONAL SYSTEM AND CONTROL Define Importance of Product Design Answer: Production or operations strategy is directly influenced by product design for the following reasons: (i) As products are designed, all the detailed characteristics of each product are established; (i) Each product characteristic directly affects how the product can be made or produced {ie., process technology and process design); (ii) How the product is made determines the design of the production system (production design} which is the heart of production and operations strategy: iv) A good product design can improve the marketability of a product by making it easier to operate or use, upgrading its quality, improving its appearance, and/or reducing manutacturing costs. Which one of the following is not correct? a) An excellent design provides competitive advantage to the manufacturer, by ensuring appropriate quality; b) An excellent design provides competitive advantage to the manufacturer, by ensuring reasonable cost; ¢) An excellent design provides competitive advantage to the manufacturer, by ensuring sustainability; d) An excellent design provides competitive advantage to the manufacturer, by ensuring expected product feature; Answer: (c) What Does Product Design Do? Answer: The activities and responsibilities of product design include the following: (i) Translating customer needs and wants into product and service requirements (marketing): (il) Refining existing products (marketing): (il) Developing new products (marketing, product design and production); (iv) Formulating quality goals (quality assurance, production): (v) Formulating cost targets (accounting): (vi) Constructing and testing prototype (marketing, production); (vil) Documenting specifications (product design): What are the Reasons for Product Design or Redesign? Answer: The most obvious reason for product design is to offer new products to remain competitive in the market. The second most important reason is to make the business grow and increase profits. Also, when Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament!) Page 33,Work Book : Operations Management & Strategic Management <3 productivity gains result in reduction of workforce, developing new products can mean adding jobs and retaining surplus workforce instead of downsizing by layotfs/ retrenchment. Sometimes product design is actually redesign or modification of existing design instead of an entirely new design. The reasons for this include customer complaints, accidents or injuries during product use, excessive warranty claims or low demand. Sometimes product redesign is initiated to achieve cost reductions in labour and material costs. 5. Which one of the following is not an Objective of Product Design? (i) To generate profit in the long run; Gil) To reduce the development time and cost to the minimum; To facilitate easy handiing of the product; (iv) To ensure productibility or manufacturability (design for manufacturing and assembly); Answer: {i 6. Match the item in column (1) to that of in column (2) Factors influencing Feature Product Design @) Customer ill goes hand in hand with product design and attractiveness of fis, Requirement enhances the sales appeal of the product, b) Convenience of |i) the designer should have the knowledge of the this for the manufacturing the operator facilities and specify tolerances which can be achieved by the available machines and equipments; ¢) Cost/price ratio | ii) This partly depends on quality of design and parlly on quality of conformance and quality policy of the firm has a say on this; ‘d) Work methods & | iv) Designers must keep abreast of improvements on this for utilization in equipments product design to achieve reduction in cost; ) Trade off between | v) It influences the product design so that the design suifs the convenience of function and form | customers for use: f) Process vi) it influences to make the design cost effective in a competitive mark Capability 9) Packaging vil) Under this the design combines both performance and aesthelics or appearance with a proper balance between the two. h) Types of materials | vil) This influences design of industrial products mainly; used 1) Product quality | ix) This is considered to keep the cost of implementing the changes fo a minimur 1) Effecton existing | x) Designers keep in touch with the latest developments taking place in this product field and any new discovery in this improves the product design Answer: a/v; byvil; cl/vir div; elvis ffi; gis dic 7. What are the determinants of sequence of operations? Answer: The nature of the product; The materials used; The quantities to be produced; The existing physical layout of the plant: vvvy Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 34Work Book : Operations Management & Strategic Management & Whatare the primary questions before deciding on process selection? Answer: (i) How much variety of products or services will the system need to handle? (il) What degree of equipment flexibilly wil be needed? (ii) What is the expected volume of output? 9. Define Process Strategy and write down its key aspects. Answer: A process strategy is an organisation's approach to process selection for the purpose of transforming resource inputs into goods and services (outputs). The objective of a process strategy is to find a way to produce goods and services that meet customer requirement and product specification (ie., design specifications) within the constraints of cost and other managerial limitations. The process selected will have a long-term effect on efficiency and production as well as flexibility, cost, and quality of the goods produced. Hence it is necessary that a firm has @ sound process strategy at the time of selecting the process. Key aspects in process strategy include: (i) Make or buy decisions: (ii), Capital intensity; (i) Process flexibly: 10. The probability that a product will function for a specific time period without failure is termed as product's: 1) Maintainability; i) Availability; ii) Reliability; iv) Predictabil Answer: i 11. High reliability and maintainability of a product ensures i) High productivity; ii) High productibility; ii) Highly standard quality; Answer: iv iv)High availability; 12. Name the following product design activity: It reduces variety among a group of products of parts. It results in economies of scale due to high volume of production of standard products. However it may lead to reduced choices for customers. Answer: Standardisation’ 13. Define Specification Answer: A specification is a detailed description of a material, part or product, including physical measures such as dimensions, volume, weight, surface finish etc. Specifications indicate tolerances on physical measures which provide production department with precise information about the characteristics of products to be produced and the processes and production equipment to be used to achieve the specified tolerances (acceptable variations).Interchangeabilty of parts in products produced in large volumes (mass production and flow-line productionjis provided by appropriate specification of tolerances to facilitate the desired fit between parts which are assembled together. Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament!) Page 35,% Sa eS Work Book : Operations Management & Strategic Management 14. Which one of the following is correct? To avoid damage during transportation and storage of the product i) a proper package has to be provided; li) a proper specification has to be provided: ili) a proper transportation layout has to be provided; iv) a reliable design has to be provided: Answer: (i) 15. Explain Process Focus Strategy. Answer: Majority (about 75 per cent) of global production is devoted to low volume, high variety products in manufacturing facilities called job shops. Such facilities are organised around performing processes. For example, the processes might be welding, grinding or painting cared out in departments devoted to these processes. Such facilities are process focused in terms of equipment, machines, layout and supervision. They provide a high degree of product flexibility as products move intermittently between, processes. Each process is designed to perform a wide variety of activities and handle frequent changes. Such processes are called intermittent processes. These facilities have high variable costs and low utilization of facilities. 16. Say true or fats i) Batch process is characterized by high customization (made to order), high flexibility of equipment and skilled labour and low volume; it) Under maturity stage of product life cycle the manufacturers introduce new models or adopt methods such as trading-in, etc., to promote the sale of their brands with a view to retaining their position in the market; iil) A product is born, grows lustily, attains a dynamic maturity, and then enters its most productive years; iv) Repetitive process is also referred to as line process as it include production lines and assembly lines in job production; v) Repetitive process is suitable to “manufacture-to-stock” strategy with standard products held in finished goods inventory; vi) Developing a new product is Job shop process; vil) In batch processing, volumes are higher because same or similar products or services are repeatedly provided; vill) A job shop uses a flexible flow strategy, with resources organized around the job; ix) In project process equipment flexibility and labour skills can range from low to high depending on the type of projects; x) A continuous process is the extreme end of high volume, standardised production with flexible line flows; xi) The process design is concerned with Kind of labour skills available, amount of labour available and their wage rates; xii) Capital intensity refers to the mix of equipment and material which will be used by the firm; xill) Production planning and development is followed by introduction stage of product life cycle and this stage requires greater investment; xiv) The process design is concerned with whether the process should be capital-intensive or labor- intensive; xy) Batch processing is used when a high volume of goods or services is required andalso a moderate variety in products or services; Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 36% Sa Work Book : Operations Management & Strategic Management <3 Answer: i) Fo'se il) Wwe: ii) False; iv) False: vi Te: vi) Fate: vil True: vii) False; ix) True: x) False: xi) True: xil) False; xij True: xiv) True: xy) False: 17. Say true or fas a) The general purpose equipment in process layout are not suitable because processing requires wide range of flexibility; b) In process layout system if equipment is arranged by processing sequence then the system becomes much more vulnerable to shut down; ¢) In process layout low volumes, special attention to each product and to customers result in higher unit costs than with product lay out; d) In process layout there is more interdependence between successive operations than with a product layout; 2) Job complexities in product layout offen reduce the span of supervision and result in higher supervisory costs than with process layouts. Answer: ay/F, byL cll, oF. el/F 18. S departments are to be assigned to locations B-F in the grid. (For technical reasons, department 6 must be assigned fo location A). Transportation cost is Rs.3 per foot. Information on interdepartmental work flows and distances between locations is shown in the following tables. Develop a suitable layout that minimizes transportation costs using the given information. Compute the total cost. Assume the reverse distances are the same. From Distance belween Locations (Fee!) To —> B Cc D E 70 120 70. 100 : 70 110 60 80, 70 e 160 From Distance between Locations (Fee!) 4 To —> 1 2 3 4 5 6 1 : 15 52 54 15 40 2 - 10 7 16 44 3 - 2 0 20 4 : 13 2 5 : 5 ‘ = ‘A Dept. 6 8 c D E F Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament!) Page 37itn, a Work Book : Operations Management & Strategic Management Answer: ‘Arranging the work flows from high to low we have Department Work Flow 12 115 14 SA 13. 52 26 44 1-6 40 36 20 25 16 15 15: 45 13, 23 10 24 Z 56 5 x4 2 46 2 35 0 ‘A (Dept. 6) B (Dept. 2) (Depts) D (Dept.3) E (Dept. 1) F [Dept.4) Position of Department 6 is fixed in location A because of technical reasons. Departments 1-2 have the greatest interdepartmental work flow (115) so they should be placed side by side. 1-3 and 1-4 are now in the next in the ranking of work flow table.1-4 is in 2° rank and 1-3 is in 34 rank, So they could be placed adjacent to Department 1. Now if we place department 3 on right side of Department 1 and department 4 on left side of department | then distance between Department 3- 6(A-} > than that between Department 4-6(A-D). But in the work flow ranking 3-6 is much higher than that of 4-6, So itis better to place department 3 on left side of department 1 and department 4 on the fight side of department 1 So total cost table is: Tip Distance Frequency | Cost = Distance x Frequency x3 12 0. ns. 20700 13 70. 52 10920 14 70. 54. 11340. 15) 80. 15 3600 16 100. 40. 12000 23 110 10 3300 24 0. 7 1890, 25 70, 16 3360 2-6 70. 44 9240 34 140. 2 840) 35 160. O 0 36 70. 20, 4200 45 70, 13 2730 46 150. 2 ‘900, 56 120 5 1800, TOTAL 86820 Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 38% Sa Work Book : Operations Management & Strategic Management =< 19. What are the information required for designing a process layout? Answer: > A list of departments or work centers to be arranged, their approximate dimensions and the dimensions of the building or buildings that will house the departments; A projection of future work flows between the various work centers The distance between locations and the cost per unit of distance to move loads between locations; The amount of money to be invested in the layout A list of any special considerations (e.g. operation that must be close to each other or operations that must be separated); > The location of key utilities, access and exit points, loading docks and so on, in existing buildings; vvvy 20. Choose the correct answer: @) Under product and service design translating product and service specification into process specification involve i) Marketing functional area of an organization; ji) Finance functional area of an organization; lil) Accounting functional area of an organization; iv) Engineering functional area of an organization; b) From a buyer's standpoint most purchasing decision entail i) 2 fundamental consideration—Cost and Quality; ji) 3 fundamental consideration—Cost, Quality and Sustainability; i) 2 fundamental consideration—Cost and Quantity; iv) 3 fundamental consideration—Cost, Quantity and Ethical beauty; ¢) The factor which is not responsible for bringing market opportunities and threat to product design and redesign is i) Aneed to reduce costs; ji) Anew regulation by Government; iil) Aneed to increase GDP; iv) Aneed to adopt new technology; 4) Reverse engineering is 1) Purchasing of an existing foreign product and adding a new feature to own product copied from the foreign product; ii) Purchasing a competitor's product, dismantling it, inspect i for ways to improve own product; ii) Purchasing a product at its fag end of life cycle, dismantling it, inspect itfor ways fo improve own product; iv) Purchasing a substitute product dismantting it, inspect itfor ways to improve own product; e) In product and service design life cycle analysis ’) is the assessment of the environmental impact of a product or service throughout its useful life: li) is the dealing with products that have reached the end of their useful lives with an objective to teduce dumping of products; iil) is an examination of the function of parts and materials in an effort to reduce the cost and/or improve the performance of a product; \v) is the assessment of potential cost saving with reduction of environmental impact and with use of ‘appropriated valued materials; Answer: a)fiv by, chfii, Afi, eli Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 39oS Work Book : Operations Management & Strategic Management =* 21, Choose the correct answer: a) Remanufacturing of products refers to 1) An examination of the function of parts and materials in an effort to reduce the cost and/or improve the performance of the product; ji) Refurbishing use of products by replacing wom-out or defective components ans reselling the products; lil) A programme to reduce the dumping of products, particularly electronic equipment in landfills or third world countries; iv) An assessment fo choose products and services that have the least environmental impact while sfll taking into economic consideration; b) Reasons for recycling does not include i) Cost savings; ji) Environment concems; iil) Environmental regulations; iv) Future sales growth; ¢) DFD means ) Design for Disassembly; i) Design for Dismantling: iil) Design for Destabilizing: iv) Design for Detoxifying: d) DFR means i) Design for Refurbishing; ii) Design for Redesigning; i) Design for Recycling; iv) Design for Reconstruction; ) Standardized products has a disadvantage namely i) Immediate availability to customers; li) Resistance to modification of design; iil) Lowers the cost of productior iv) Increase productivity; Answer: alfi, byfiv, cli, apf, eyfi 22. State whether the following statements are “Irue” or “False” a) All products and services go through a series of stages over their useful life, sometimes ref their life cycle; b) In the growth phase of product life cycle it is important to obtain accurate projections of the demand growth rate and how long that will persist; ) Style items have a life cycle more than the life cycle of cloth washers. 4) Reliability of a product is a measure of the ability of the product to perform its intended function under any condition; ) Failure in product with non-modular design Is easier to diagnose compared fo product with modular design; ed to as Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 40% Sa Work Book : Operations Management & Strategic Management <3 Answer: ove byt. cr. aye. ey/F: 23. Match Column A with Column B Column A Column 8 ‘) Feasibility i) In this phase of product design & development collaboration between Analysis ‘accounting and operations are needed to weigh the alternatives in terms of cost, availabilty of resources, profit potential and quality: 'b) Product ii) n this phase of product design & development based on user feedback specification | changes may be made or forecasts refined: €) Process ii) In this phase of product design & development detailed description of what is specification | needed to meet customer wants are made: d) Prototype iv) During product design & development itis used fo determine the extent of development | consumer acceptance: ) Design Review | v) In this phase of product design & development demand, development costs, production costs profit potential are studied; f) Market test | vi) In this phase of product design & development demand marketing, finance, ‘engineering, design and operation collaborate to determine whether to proceed with the product or abandon: ‘g) Follow up vii) In this phase of product design & development one or few units are made to evaluation see if there are any problems with the product or process specification Answer: a), b)fii, c)f, Alvi, evi, f/iv, Df Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 41Batman, Work Book : Operations Management & Strategic Management Study Note -4 PRODUCTION PLANNING AND CONTROL 1. Whatis the meaning of Production Planning? Answer: Production planning is the planning of production and manufacturing modules in a company or industry. It utilizes the resource allocation of activities of employees, materials and production capacity, in order to serve different customers. 2 Ina work measurement exercise, a worker was observed for 30 minutes continuously. In this period, the worker completed 42 parts. The performance rating for the worker is 130. If the company allows 15% as a fatigue and personal fime allowance, what should be the a) Normal time for the job b) Standard time for the job Answer: Time required by worker for completion of one part (observed time) = 30/42 =0.714 minute The performance rating of the worker = 130% So, the normal time = observed time performance rating = 0.714 * 1.3 = 0.9286 min. Company allows 15% as a fatigue and personal time allowance on normal time. ie., (0.9286 « 0.15) min 13929 min, Standard time for the job Normal time) + (fatigue and personal allowance) = (0.9286 + 0.13929) .06789 mins. 3. What Is PPC In Production? Answer: a4, How The PPC Cycle refers to Production Plenning Control. It has three phases—prepianning, planning, controlling. The pre-planning phase consists of product development, sales forecasting, factory or plant layout, equipment selection policy, and preplanning of production just prior to large scale production. =Po=1=(1- Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 42oA a . : é Work Book : Operations Management & Strategic Management eats 4, State the diferent options a company have in matching demand and capacity. Answer: There are three general categories of options used 1. Level 2. Chase and 3. Combination Level planning approach establishes a level set of resources and implies the demand will fluctuate ‘round those available resources, or in, some cases, attempts to alter the demand pattems themselves, to more effectively match the resource levels established. This approach tends to be more common and certainly more appealing in environments where resources are difficult or expensive to alter. Chase approach represents the other exireme, in that demand is not altered, but resources are. In fact in a “pure” chase environment the resources are continually being raised or lowered to meet the demand as it fluctuates under the normal conditions. Combination approach is by far the most common approach. As the name implies, companies using this approach will “mix and match", altering demand and resources in such a way io maximize performance to their established criteria, including profit, inventory investment, and the impact on People. Hf the arrival and departure rates in a public telephone booth with a single phone are 1/12 and1/14 respectively, find the probability that the phone is busy. Answer: P{Phone is busy] = 1 -P [No customerin the booth} Rate of Arrival p = Service Rate 6. Briefly describe the M|G|1 queuing system. Answer: Answer: Poisson arrival / General Service / Single server queuing system. 7. Briefly describe the JIf philosophy. Answer: Just-in-time (JIT) inventory systems are not just a simple method that a company has to buy in to; it has a whole philosophy that the company must follow. The ideas in this philosophy come from many different disciplines including; statistics, industrial engineering, production management and behavioral science. In the JIT inventory philosophy there are views with respect to how inventory is looked upon, what it says about the management within the company, and the main principle behing JIT. Inventory is seen as incurring costs instead of adding valve, contrary to traditional thinking. Under the Philosophy, businesses are encouraged fo eliminate inventory that doesn't add value to the product. Secondly, it sees inventory as a sign of sub par management as it is simply there fo hide problems within the production system. These problems include backups at work centres, lack of flexibility for employees and equipment, and inadequate capacity among other things. -fime inventory system is all about having “the right material, at the right time, at the right place, and in the exact amount.” Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 43,Work Book : Operations Management & Strategic Management & Choose the correct answer: Key to just-in-time production is 1) The elimination of all inventories; fi) To rely very heavily upon purchased items rather than in-house production; iil) Production in large lot sizes; ination of all or most product options; 9. What is the difference between the Toyota Production System and Lean Manufacturing? Answer: For all practical purposes, the two terms mean the same thing. The term “Lean Manufacturing” was coined by James Womac and Daniel Jones in their 1990 book The Machine That Changed the World to describe the phenomenal success that Japanese manufacturers were having in global markets. Since the Toyota Motor Company was the most successful of these Japanese companies to explain the Japenese manufacturing philosophy with their supply base and strategic partners, the term "Toyota Production System, or TPS, was born. Regardless of what itis called, the goal is aiways to eliminate waste from processes in order to reduce total lead-time. 10. Choose the correct answer: In transportation models designed in linear programming, points of demand is classified as a) ordination b) transportation c) destinations d) origins Answer: c) 11. Jobs A through E in the aircraft repair facility must each pass through the Sheet Metal centre and then through Paint centre. The processing time for each job in each centre is shown below. Find the sequence that minimizes completion time of the job. Calculate the cumulative flow time and idle time. Processing Time in Days Jobs We: We-2 (Sheet metal centre) | (Paint centre) A 4 5 B 7 7 c 4 12 D 9 2 E u 6 Answer: joss] al p{clol|e Wel 7 [14 u wel s[7[i2[ 26 Directorate of Studies, The Insitute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 44