END-OF-SEMESTER EXAMINATION

SEMESTER 2, 2018/2019 SESSION

KULLIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES

Programme : BBA Level of Study : 3 - 4

Time : 3.00 p.m. – 6.00 p.m. Date : 24/05/2019

Duration : 3 Hr.(s) – 0 Min(s)

Course Code : MGT 4010 Section(s) : 1

Course Title : Operation Management

(This Question Paper Consists of 11 Printed Pages)

INSTRUCTION (S) TO CANDIDATES

DO NOT OPEN UNTIL YOU ARE ASKED TO DO SO
Part A - Answer ALL Questions. TRUE or FALSE Questions.

Part B - Answer ALL Questions. Multiple Choice Questions.

Part C - Answer ALL Questions.

ANY FORM OF CHEATING OR ATTEMPT TO CHEAT IS A SERIOUS

OFFENCE WHICH MAY LEAD TO DISMISSAL
APPROVED BY:
PART A: TRUE or FALSE Questions.

Each question carries one (1) mark.

1. Increasing inventory exposes variability in production processes.

2. A push system means providing the next station with exactly what is needed when it is
needed.

3. Product storage is an example of waste in the sense that no value is added.

4. Effective capacity is the theoretical maximum output of a system in a given period under
ideal conditions.

5. In proces-focused facilities, utilization of facilities is low.

6. A useful tactic for increasing capacity is to redesign a product in order to facilitate more
throughputs.

7. Clustering occurs when competing companies locate near each other because of a critical
mass of information, talent, venture capital, or natural resources.

8. The center-of-gravity method finds the location of a centralized facility, such as a

distribution center that will maximize the organization's revenue.

9. Exchange rates and currency risks are not relevant in making location decisions.

10. A process oriented layout's main objective is to equalize the task time for each station.

11. One guideline for determining the arrangement and space allocation of a retail store is to
place high-impulse and high-margin items in prominent locations.

12. Servicescape refers to the physical surrounding in which the service is delivered.

13. When safety stock is deemed absolutely necessary, the usual policy is to build it into
(increase) the inventory requirement of the MRP logic.

14. Lead times, inventory availability, and purchase orders outstanding are among the five
things operations managers must know for effective use of dependent inventory models.

15. Gross material requirements take into account the amount of inventory on hand.

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 PART B: Multiple Choice Questions.
Each Question carries one (1) mark.

16. The objective of a human resource strategy is to

A) produce the demand forecast at the lowest possible labor cost.
B) match employment levels with demand.
C) achieve a reasonable quality of work life at low cost.
D) manage labor and design jobs so people are effectively and efficiently utilized.
E) hire the most diversified workforce possible.

17. Working four shifts of ten hours each instead of five shifts of eight hours each is known
as which of the following?
A) Flextime.
B) Permanent employment.
C) Part-time employment.
D) Flexible workweek.
E) Flexwork.

18. Utilization will always be lower than efficiency because

A) Effective capacity is less than design capacity.
B) Effective capacity is greater than design capacity.
C) Effective capacity equals design capacity.
D) Expected output is less than actual output.
E) Expected output is less than rated capacity

19. Christopher's Cranks uses a machine that can produce 100 cranks per hour. The firm
operates 12 hours per day, five days per week. Due to regularly scheduled preventive
maintenance, the firm expects the machine to be running during approximately 95% of
the available time. Based on experience with other products, the firm expects to achieve
an efficiency level for the cranks of 85%. What is the expected weekly output of cranks
for this company?
A) 5100
B) 5700
C) 4845
D) 969
E) 6783

20. Which of the following is most likely to affect the location decision of a service firm
rather than a manufacturing firm
A) Energy and utility costs
B) Attitude toward unions
C) Parking and access
D) Cost of shipping finished goods
E) Labour costs

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21. The reason fast food restaurants often are found in close proximity to each other is
A) they enjoy competition.
B) location clustering near high traffic flows.
C) low cost.
D) availability of skilled labor.
E) all of the above.

22. Cross-docking means which of the following?

A) Avoid placing materials or supplies in storage by processing them as they are
received.
B) The same docks can be used either incoming or outbound shipments.
C) The same dock is used to unload and then reload the same truck.
D) Warehouse docks are designed in the shape of a cross.
E) Docks are placed in the warehouse according to the direction (north, south, east,
or west) from which the truck is arriving.

23. The main goal of retail layout is

A) minimizing material handling cost.
B) minimizing customer confusion regarding location of items.
C) minimizing storage costs.
D) minimizing space required.
E) maximizing profitability per square foot of floor space.

24. What is one of the tools that is particularly useful in reducing system nervousness in an
MRP system?
A) Modular bills.
B) Time phasing.
C) Time fences.
D) Lot sizing.
E) Closed loop system

25. Which of the following is NOT a key benefit of MRP?

A) Increased quality.
B) Better response to customer orders.
C) Faster response to market changes.
D) Improved utilization of facilities and labor.
E) Reduced inventory levels

26. Which of the following is specifically characterized by a focus on continuous

improvement, respect for people, and standard work practices?
A) Just-in-time (JIT)
B) Toyota Production System (TPS)
C) Lean operations
D) Material requirements planning (MRP)
E) Kanban

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27. Which of the following is NOT one of the seven wastes?
A) Overproduction
B) Transportation
C) Assignment
D) Defective product
E) Motion

28. Concerning relationships with suppliers, which of the following combinations is critical
to the success of JIT?
A) Close relationships with trust.
B) Close relationships with skepticism.
C) Distant relationships with trust.
D) Distant relationships with skepticism.
E) None of the above.

29. Which one of the following is NOT a benefit of JIT implementation?

A) Cost reduction.
B) Variability increase.
C) Rapid throughput.
D) Quality improvement.
E) Rework reduction.

30. Characteristics of just-in-time partnerships do NOT include:

A) Removal of in-transit inventory.
B) Large lot sizes to save on setup costs and to gain quantity discounts.
C) Long-term contracts.
D) Produce with zero defects.
E) Focus on core competencies.

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PART C: Problems.

QUESTION 1
Virginia College promotes a wide variety of executive training courses for firms in the
Arlington, Virginia, region. Director Wendy Tate believes that individually written letters add a
personal touch to marketing. To prepare letters for mailing, she conducts a time study of her
secretaries. On the basis of the observations shown in the following table, she wishes to
develop a time standard for the whole job. The college uses a total allowance factor of 12%.

a - Secretary stopped to answer the phone

b - Interruption by supervisor

a) What is the normal time for typing letters by the secretaries?

b) What is the standard time for typing letters if the total allowance factor of 12% is based on
job time?
[8+2 = 10 marks]

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QUESTION 2
The following table describes a flow process chart for Fahim Intel Sdn Bhd.

a) What is the purpose of using flow process chart for this analysis? Only maximum of 3
lines of answer will be accepted.

b) Complete the flow process chart using the correct symbols. Copy the table WITHOUT
the description column for the activities.

c) Calculate the percentage of value added elements to complete the process of expense
reports. Using the target of no more than 25% non-value-added threshold, is the process
considered as efficient?
[1+6+3 = Total 10 marks]

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QUESTION 3
The three-station work cell illustrated in the following figure has a product that must go
through one of the two machines at station 1 (they are parallel) before proceeding to the next
stations.

a) What is the processing time for Station 1?

b) Which is the bottleneck station for this work cell?
c) What is the throughput time for this work cell?
d) If the firm operates 10 hours a day, 5 days a week, what is the weekly capacity of this
work cell?
[3+2+3+3=11 marks]

QUESTION 4

The fixed and variable costs of four potential plant locations are shown below:

Location Fixed cost per year (RM) Variable cost per unit (RM)
A 250,000 11
B 100,000 30
C 150,000 20
D 200,000 35

a) Identify the range of output for which each alternative is superior.

b) If expected output is to be 8,000 units per year, which location would be the best
location?
[13+2=15 marks]

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QUESTION 5
The figure given below shows the total number of journeys made between six centres each day.
The unit transportation cost between two adjacent departments is RM5 while the cost between
two departments located farther apart is RM10. Determine the better layout design by choosing
the layout that would minimize the cost and distance.

[7 marks]
QUESTION 6
The following is product-tree for assembling a product called “pony friend”, represented by P.

a) Determine the quantity of each component needed to assemble one unit of P.

b) Determine the quantity of component K needed to assemble 80 units of P, given on-
hand inventory of 30 A's, 50 B's and 20 C's.
[6+11=17 marks]

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 FORMULA SHEET

BEPx = FC
P – VC

∑ 𝑡𝑡
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 = 𝑇𝑇𝑇𝑇 − 𝑇𝑇𝑇𝑇 𝐸𝐸 =
𝑁𝑁𝑁𝑁.𝑜𝑜𝑜𝑜 𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊 𝑥𝑥 𝐶𝐶𝐶𝐶

2𝐷𝐷𝐶𝐶𝑂𝑂
𝐸𝐸𝐸𝐸𝐸𝐸 = �
𝐶𝐶ℎ

If assuming 99.73% = c ± 3 c

∑ (x − x )
2

s= i

n −1

UCL = x + zσ x UCL = x + A2 R UCL = D4 R

LCL = x − zσ x LCL = x − A2 R LCL = D3 R

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 TABLE S6.1 Factors for Computing Control Chart Limits (3 sigma)

SAMPLE MEAN UPPER RANGE, LOWER RANGE,

SIZE, FACTOR, D4 D3
n A2

2 1.880 3.268 0

3 1.023 2.574 0

4 .729 2.282 0

5 .577 2.115 0

6 .483 2.004 0

7 .419 1.924 0.076

8 .373 1.864 0.136

9 .337 1.816 0.184

10 .308 1.777 0.223

12 .266 1.716 0.284

TABLE S6.2 Common z Values

Z-VALUE (STANDARD
DEVIATION REQUIRED FOR
DESIRED CONTROL DESIRED LEVEL OF
LIMIT (%) CONFIDENCE
90.0 1.65
95.0 1.96
95.45 2.00
99.0 2.58
99.73 3.00

Upper Specification - Lower Specification If assuming 99.73% = c ± 3 c

Cp =
6σ

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