Mid-Exam ABM 54 (Production Management)

Mid Exam

ABM 54 (Production Management)

1. One of the product groups of a manufacturer of office furniture is desks. The number of desks sold during the past 10 years is as follows:

Year                Number of desks

1                     11,922

2                     10,417

3                     13,060

4                     11,841

5                     14,183

6                     10,168

7                     12,574

8                       9,856

9                     11,333

10                   10,716

For production planning purposes, annual sales are estimated for this product group and then broken down by type of desk. What would these annual group forecasts have been for year 5 through 11 with each of the following methods?

   a. An unweighted four-year moving average approach

   b. A weighted four-year moving average approach in which a weight of 0.1 was assigned to the first year, 0.2 to the second, 0.3 to the third, and 0.4 to the fourth.

   c. An exponential smoothing approach in which a smoothing factor of 0.05 was used and in which the weighted four-year moving average was used as the forecast for year 5.

2. A producer of farm equipment believes that net farm income leads his sales by two years. To determine whether he is correct, he compiles the following data for seven past years:

Pariod                Farm Income                Sales

                          Php billion               Php Million

1                            18.7                      57

2                            33.3                      98

3                            26.1                      155

4                            24.3                      208

5                            20.0                      186

6                            25.2                      164

7                            31.4                      131

a. What would he find the coefficient of correlation to be?

b. What would the equation of the least-squares line prove to be?

c. Locate the line and the points on a graph.

d. What values of sales would be obtained for a periods 8 and 9 with the use of the least-squares line?

3. A bakery which supplies a large number of retail outlets uses an ingredient every operating day of the year at a rate of 2,000 pounds per day. When an order for the material is placed, the source delivers the item at a rate of 8,000 pounds per day over a time period whose length depends on the quality ordered.

No safety stock is carried. The lead time is five operating days. The cost of placing, receiving, and handling an order is Php48.00.

The carrying cost is estimated in terms of an amount per pound per year, but this annual cost is then converted into per day cost by dividing it by the 300 operating days per year. This yields a carrying cost of P0.001 per pound per day.

a. Compute the value of the economic lot size.

b. Determine the resultant 1.) maximum inventory 2.) Average inventory, 3.) Average number of orders per day, 4.) Average daily carrying cost, 5.) average daily order cost, 6.) average daily total costs, and 7.) reorder point.

c. Calculate the value of the economic order interval generated by the economic lot size.

Note: Submission will be on Monday September 3, 2012 at 5:00 PM Dead line.