PART I. Multiple Choice

1. For the level aggregate plan, fluctuations in demand are absorbed by

a. Inventory and subcontracting.

b. Back orders and price changes.

c. Inventory and back orders.

d. Price changes and subcontracting.

e. Subcontracting and back orders.

2. After an aggregate plan is developed, it should be evaluated in terms of all of the following except

a. Cost.

b. Revenue.

c. Operations.

d. Human resources.

e. Customer service.

3. In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will

a. increase by about 41%.

b. increase by 100%.

c. increase by 200%.

d. increase, but more data is needed to say by how much.

e. either increase or decrease.

4. Which of the following statements about the basic EOQ model is true?

a. If the ordering cost were to double, the EOQ would rise.

b. If annual demand were to double, the EOQ would increase.

c. If the carrying cost were to increase, the EOQ would fall.

d. If annual demand were to double, the number of orders per year would increase.

e. All of the above.

5. Which of the following statements regarding the production order quantity model is true?

a. It applies only to items produced in the firm's own production departments.

b. It relaxes the assumption that all the order quantity is received at one time.

c. It relaxes the assumption that the demand rate is constant.

d. It minimizes the total production costs.

e. It minimizes inventory.

6. Activity D has predecessors B and C, and has successor F. D has duration 6. B's earliest finish is 18, while C's is 20. F's late start is 26. Which of the following is true?

a. B is a critical activity.

b. C is completed before B.

c. D has no slack but is not critical.

d. D is critical, and has zero slack.

e. None of the above.

7. The critical path for the network activities shown below is _____ with duration ______.

Activity	Duration	Immediate Predecessors
A	10	---
B	8	---
C	2	A
D	4	A
E	5	B,C,D

a. A-C; 12

b. A-D-E; 19

c. B-E; 13

d. A-B-C-D-E; 29

e. none of the above

8. Suppose activity D can be shortened from 4 weeks to 1 week. Assume all other activity times remain the same. How much shorter will the total project earliest completion time become?

a. 0 weeks

b. 1 week

c. 2 weeks

d. 3 weeks

e. 4 weeks

9. A PERT project has 45 activities, 19 on the critical path. The estimated time for the critical path is 120 days. The sum of all activity variances is 64, while the sum of variances along the critical path is 36. The probability that the project can be completed between days 108 and 120 is

a. -2.00

b. 0.0227

c. 0.1058

d. 0.4773

e. 0.9773

10. Two activities are candidates for crashing. Activity details are in the table below. To cut one day from the project's duration, activity _____ should be crashed first, adding ______ to project cost.

Activity	Normal Time	Normal Cost	Crash Time	Crash Cost
One	8 days	$6,000	6 days	$6,800
Two	10 days	$4,000	9 days	$5,000

a. One; $400

b. One; $6,800

c. Two; $1,000

d. Two; $5,000

e. One or two should be crashed; $1,400

PART II. Problem Solving

Question 1.

C&A has the following aggregate demand requirements and other data for the upcoming four quarters.

Quarter	Demand	Previous quarter's output	1500 units
1	1300	Beginning inventory	200 units
2	1400	Stockout cost	$50 per unit
3	1500	Inventory holding cost	$10 per unit at end of quarter
4	1300	Hiring workers	$4 per unit
		Firing workers	$8 per unit
		Unit cost	$30 per unit
		Overtime	$10 extra per unit

Which of the following production plans is better:

Plan A—chase demand by hiring and firing; or

Plan B—produce at a constant rate of 1200 and obtain the remainder from overtime?

Question 2.

The C&A Company stocks, among many other products, a certain container, each of which occupies four square feet of warehouse space. The warehouse space currently available for storing this product is limited to 600 square feet. Demand for the product is 15,000 units per year. Holding costs per year are 4% of item cost which is $100. Ordering costs are $5 per order.

a. What is the cost-minimizing order quantity (i.e., EOQ) decision for C&A?

b. What is the total inventory-related cost of this decision?

c. What is the total inventory-related cost of managing the inventory of this product, when the limited amount of warehouse space is taken into account?

d. What would the firm be willing to pay for additional warehouse space?

e. What is the reorder point if lead time is 7 days (assume 300 working days a year)?

f. Show graphically how the inventory level fluctuates against time under the EOQ model.

g. Show graphically how the total inventory cost changes against order quantity.

h. C&A Company decides to produce the container instead at a production rate of 20,000 units per year. Set-up costs are $10 per production run. Holding costs per year are 4% of item cost which is $80. What is the economic production quantity?

i. Show graphically how the inventory level fluctuates against time under the situation described in (g)?

j. C&A Company pays a supplier $100 per container but $80 per container if they manufacture the containers themselves. Given the item cost information, should C&A produce or purchase the containers?

k. The supplier offers C&A a discount of 5% if the order quantity exceeds 200. Should C&A take advantage of the discount?

Question 3.

Consider the tasks, durations, and predecessor relationships in the following network.

Activity Description	Immediate Predecessor(s)	Optimistic (Weeks)	Most Likely (Weeks)	Pessimistic (Weeks)
A	---	4	7	10
B	A	2	8	20
C	A	8	12	16
D	B	1	2	3
E	D, C	6	8	22
F	C	2	3	4
G	F	2	2	2
H	F	6	8	10
I	E, G, H	4	8	12
J	I	1	2	3

a. Develop a network diagram for this project using AON notation.

b. Based on the calculation of estimated times, what is the critical path?

c. What is the estimated time of the critical path?

d. What is the activity variance along the critical path?

e. What is the probability of completion of the project before week 42?

f. If C&A wants a 95% probability of being done on time, what is the expected project completion time?