Midterm Exam

Operations Management
QSO 600 Operations Management
The mid-term exam consists of two parts. Both parts shall completed
using the midterm examination template. The completed examination
shall be submitted via Blackboard for grading. The first part consists of
five (5) research-based case study questions. Be sure to cite any
appropriate reference material. The second part of the examination
shall consist of five (5) problem from the material covered during
Modules 1-5 inclusive. Students must show their work for full credit.
Answer all the questions.
Case Study Questions:
There is no set length for answers; students may be as verbose or brief
as they feel necessary to cover the question. Use this same exam
document for your answers, placing them below each question. This
portion of the exam is worth 75 points.
Problem Questions:
Make sure to show all your work to get full credit. The instructor needs
to know the formulas and calculations you used to get to your final
answer. You can do part of the exam in Excel and Paste your Excel
work into this document. This portion of the exam is worth 75 points.
File Convention:
File name for the exam attachment to be
studentlastname-finalexam (Be sure there are no spaces)
Be sure to put your name on the exam paper.
Note: You may use the text and any other materials. You are NOT to
work with anyone else including other students in completing the exam
nor discuss it with them.

QSO 600 Midterm Exam Essay Questions

Question 1: You are designing a grocery delivery business. Via the
internet, your company will offer staples and frozen foods in a large
metropolitan area and then deliver them within a customer-defined
window of time. You plan to partner with two major food stores in the
area. What should your competitive priorities be and what capabilities
do you want to develop in your own core and support processes?

Question 2: A flowchart helps us see all of the steps in a process,

which in turn helps us improve the process. It also helps us identify and
eliminate any redundant steps in a process. Using Word tools (SmartArt
under the Insert tab), design a process flow chart for the grocery
delivery business in Question 1 above. In the discussion element of
your response, clearly define the steps within the process and provide
a rationale for each step. Include all elements that you feel are
necessary and appropriate to the process of a singular customer. The
assumption is that the process is repeatable for every customer using
the service. Think of the elements that you will be addressing or
answering in the succeeding questions.

Question 3: For the grocery delivery business addressed in Question

1, the grocery chains that you are planning to partner with use
differing inventory control models. Company A utilizes the Just-in-Time
(JIT) inventory control model and Company B uses an Economic Order
Quantity model. In reviewing your business plan, the bank loan officer
has noticed this. As the loan officer is not overly familiar with either
model, a request has been made of you to provide a description of
each model and an explanation of why partnering with these
companies would or would not create a conflict within your operations.
Provide a detailed analysis of the situation in your business model.
Question 4: A Quality Assurance (QA) Program is essential to the
success of any business. In establishing your grocery delivery business,
what are some of the Quality Control (QC) processes that you envision
employing? Why? Provide examples of potential metrics. Justify your
choices.

Question 5: Efficiency is a critical element both in terms of individuals

and machinery in any business. Describe some efficiency measures
that you would implement in your grocery delivery business. What are
the analysis tools that you would utilize to determine the effectiveness
of these efficiency measures?

QSO 600 Midterm Exam Problem Questions

Problem 1.
The Bureau of Labor Statistics collects input and output data from
various countries for comparison purposes. Labor hours are the
standard measure of input. Calculate the output per hour from the
following data. Which country is most productive?
Labor Hours

Units of Output

United States

89.5

136

Germany

83.6

100

Japan

72.7

102

Problem 2.
Construct a network from the information in the following table and
identify all the paths in the network, compute the length of each, and
indicate the critical path. Determine the earliest start and finish times,

latest start and finish times, and slack for each activity. Indicate how
the critical path would be determined from this information.
Activity

Activity Predecessor

Time (weeks)

10

3, 4

5, 6

Problem 3.
Burger Doodle is a fast-food restaurant that processes an average of 680 food orders each
day. The average cost of each order is $6.15. Four percent of the orders are incorrect, and
only 10% of the defective orders can be corrected with additional food items at an
average cost of $1.75. The remaining defective orders have to be thrown out.
a. Compute the average product cost.
b. In order to reduce the number of wrong orders, Burger Doodle is going to invest
in a computerized ordering and cash register system. The cost of the system will
increase the average order cost by $0.05 and will reduce defective orders to 1%.
What is the annual net effect of this quality improvement initiative?
c. What other indirect effects on quality might be realized by the new computerized
order system?

Problem 4.
A firm is faced with the attractive situation in which it can obtain
immediate delivery of an item it stocks for retail sale. The firm has
therefore not bothered to order the item in any systematic way.

However, recently profits have been squeezed due to increasing

competitive pressures, and the firm has retained a management
consultant to study its inventory management. The consultant has
determined that the various costs associated with making an order for
the item stocked are approximately $70 per order. She has also
determined that the costs of carrying the item in inventory amount to
approximately $27 per unit per year (primarily direct storage costs and
forgone profit on investment in inventory). Demand for the item is
reasonably constant over time, and the forecast is for 16,500 units per
year. When an order is placed for the item, the entire order is
immediately delivered to the firm by the supplier. The firm operates 6
days a week plus a few Sundays, or approximately 320 days per year.
Determine the following:
a. Optimal order quantity per order
b. Total annual inventory costs
c. Optimal number of orders to place per year
d. Number of operating days between orders, based on the optimal
ordering.

Problem 5.
The Commonwealth Banking Corporation issues a national credit card
through its various bank branches in five southeastern states. The

bank credit card business is highly competitive and interest rates do

not vary substantially, so the company decided to attempt to retain its
customers by improving customer service through a reduction in billing
errors. The credit card division monitored its billing department process
by taking daily samples of 200 customer bills for 30 days and checking
their accuracy. The sample results are as follows:
Sample Number of Defectives Sample Number of Defectives
1

16

10

12

17

12

18

14

19

16

20

15

21

13

10

22

11

23

10

14

24

12

10

10

25

15

11

26

14

12

27

16

13

28

12

14

29

15

15
8
30
Develop a -chart for the billing process using
indicate if the process is out of control.

14
control limits and