The average labor cost per unit for the first batch produced by a new process is US $120. The cumulative average labor cost after the second batch is US $72 per product. Using a batch size of 100 and assuming the learning curve continues, the total labor cost of four batches will be:
Answer(s): D
The learning curve reflects the increased rate at which people perform tasks as they gain experience. The time required to perform a given task becomes progressively shorter.Ordinarily, the curve is expressed in a percentage of reduced time to complete a task for each doubling of cumulative production. One common assumption in a learning curve model is that the cumulative average time and labor cost) per unit is reduced by a certain percentage each time production doubles. Given a US $120 cost per unit for the first 100 units and a US $72 cost per unit when cumulative production doubled to 200 units, the learning curve percentage must be 60% US $72 - $120). If production is again doubled to 400 units four batches), the average unit labor cost should be US $43.20 $72 x 60%). Hence, total labor cost for 400 units is estimated to be US $17,280 400 $43.20).
A plumbing company, a wholesale distributor, supplies plumbing contractors and retailers throughout the Northeast on a next-day delivery. basis. The company has a centrally located warehouse to accept receipts of plumbing supplies. The warehouse has a single dock to accept and unload railroad freight cars during the night. It takes 5 hours to unload each freight car. The company's prior records indicate that the number of freight cars that arrive in the course of a night range from zero to five or mare, with no indicated pattern of arrivals. If more than two freight cars arrive on the same night, some freight must be held until the next dad{ for unloading. The company wants to estimate the wait time when more than two freight cars arrive in the same night. The appropriate technique to analyze the arrival of freight cars is
Answer(s): C
The Monte Carlo simulation method is often used to generate the individual values for a random variable. The performance of a quantitative model under uncertainty may be investigated by randomly selecting values for each variable in the model based on the probability distribution of each variable) and then calculating the value of the solution. If this process is performed many times, the distribution of results from the model will be obtained.
Through the use of decision models, managers thoroughly analyze many alternatives and decide on the best alternative for the company. Often the actual results achieved from a particular decision are not what was expected when the decision was made. In addition, an alternative that was not selected would have actually been the best decision for the company.The appropriate technique to analyze the alternatives by using expected inputs and altering them before a decision is made is:
Sensitivity modeling can be used to determine the outcome of a variety of decisions. A trial and- error method may be adopted, usually in a computer model, to calculate the sensitivity of the solution variability of outcomes) to changes in a variable.
A firm is attempting to estimate the reserves for doubtful accounts. The probabilities of these doubtful accounts follow a transition process over time. They evolve from their starting value to a changed value. As such, the most effective technique to analyze the problem is:
Answer(s): A
A Markov chain is a series of events in which the probability of an event depends on the immediately preceding event. An example is the game of blackjack in which the probability of certain cards being dealt is dependent upon what cards have already been dealt. In the analysis of bad debts, preceding events, such as collections, credit policy changes, and write offs, affect the probabilities of future losses.
A company has several departments that conduct technical studies and prepare reports for clients. Recently, there have been long delays in having these reports copied at the company's centralized copy center because of the dramatic increase in business. !Management is considering decentralizing copy services to reduce the turnaround and provide clients with timely reports. An appropriate technique for minimizing turnaround time and the cost of providing copy services is:
Two basic costs are involved in queuing waiting-line) models: I) the cost of providing service including facility costs and operating costs), and 2) the cost of idle resources waiting in line. The latter II may be a direct cost if paid employees are waiting, or an opportunity cost in the case of waiting customers. The objective of queuing theory is to minimize the total cost of the system, including both service and waiting costs, for a given rate of arrivals. This minimization occurs at the point at which cost of waiting is balanced by the cost of providing service. This company wishes to reduce the total of waiting costs turnaround time) and the cost of copy services.
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