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A PREVIOUS EXAM EXAMPLE

ID number:

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U N I VE R S I D A D E C A T Ó L I C A P O R T U G U E S A
FACULDADE DE CIÊNCIAS ECONÓMICAS E EMPRESARIAIS

Operations Management
International Master of Science in Business Administration

Duration 2h

Important
Write down your name and ID number on top of this page and on the answer sheet.

Write your answer in the space between the questions. If you need more space, continue on the
other side on approximately the same level. Show all your work to allow partial credit if appropriate.

Use the answer sheet for drafting and trying your answers, and in the end use this answer sheet as a
cover for your exam and notes that must be signed and turned in.

Budget your time. There will not be any extensions.

As specified before, you can use in the exam following: Calculator, dictionary, two sheets of paper
A4 with notes of your free choice (you can use both sides, must be turned in with the exam)

Good luck! / Boa sorte!

1. Assembling product P ( 25 % )

Product P is made by assembling two parts, P1 and P2. P1 is first processed on machine A for 15
minutes per unit and then processed on machine B for 20 minutes per unit. P2 is processed on
machine C for 20 minutes per unit. The two parts are then assembled on machine D, with the
assembly time taking 15 minutes. The system utilizes one of machines A, B, C and D. Each of these
resources is available for 6 h per day.

a) Draw a process flow chart for this product

b) What is the theoretical cycle time for this process

c) What is the theoretical capacity of this process per day

d) Every 15 minutes one unit of raw material for P1 and one unit for P2 arrive at machines A
and C, respectively. Draw a new flow chart and indicate with a triangle where and at what
rate (if at all) does inventory build up in the system.

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2. The ombudsman office ( 10% )

The ombudsman office investigates 500 complaints per year, on average. On March 1 2009, they
reported that the current number of complaints under investigation is 789. They claim that the
average time to investigate a complaint is 5 months. Verify and comment this statement.

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3. Hospital ordering item A ( 25% )

The county hospital orders supplies with very little thoughts to cost trade-off. Item A is currently
ordered twice a year, yearly usage is 1000, and its unit price is 30 €, and the order is delivered
immediately. The sources suggest that annual holding cost for hospitals are between 15% and 25%,
based on the opportunity cost of capital. Major costs at a hospital are salaries, and allocation of
work among many activities allows to estimate ordering cost between 5 and 15 €.

a) Take the average of estimated holding and ordering costs and suggest economic order
quantity (EOQ).

b) What are the savings based on EOQ ordering policy?

c) Faced with the new EOQ ordering policy, the supplier of item A offers the hospital a discount
price of 29 € for orders of at least 100. What order quantity is best for the hospital now?

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4. Catalogue ordering per phone ( 20% )

A catalogue mail order retailer has one customer service operator taking orders on phone. If the
number is busy, the caller is put on hold. For simplicity, assume that any number of incoming calls
can be put on hold, and that everyone is patiently waiting to talk to the operator. On average, 15
customers call per hour, and it takes operator 3 minutes to take the order. The operator is paid 20 €
per hour, the phone company charges 50 € an hour of time that the line is actually used (besides the
customer speaking to the operator, each customer on hold is also using one line), and that each
minute a customer is kept on hold cost the company 2 € (due to customer dissatisfaction and
consequently loss of future business).

a) Estimate the proportion of time the operator is busy

b) Estimate the average time a customer will be on hold in minutes

c) Estimate the average number of customers waiting on line

d) Estimate the total hourly cost of this service system

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5. MRP vs. EOQ ( 10% )

The quantity of an item that your MRP system tells you to purchase next week is 5 times higher than
the EOQ that you are using. Explain how can this happen. What do you do in this case?

6. Forecasting and Statistical process control in OM ( 10% )

Why are forecasting and statistical process control important for managing operations? In what way
their relevance to Operations Management is similar, and in what way it is different?