INSTRUCTORS MANUAL - Foundations of Operations Management Fourth Can...

INSTRUCTOR’S MANUAL

Foundations of Operations Management Fourth Canadian Edition

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CHAPTER ONE  Creating Value through Operations Chapter 1 Creating Value through Operations

PROBLEMS

• Suds and Duds Laundry

a.Labor productivity Week Number of Workers Input (Labor-hours) Output (Shirts) Output/Input Ratio

• 2 24 68 2.83 shirts/hour
• 2 46 130 2.83 shirts/hour
• 3 62 152 2.45 shirts/hour
• 3 51 125 2.45 shirts/hour
• 2 45 131 2.91 shirts/hour

b.Output per person does not vary much whether it is Sud, Dud, or Jud working. Productivity declines when all three are present. Perhaps there isn’t enough work to keep three persons occupied, or perhaps there is not enough work space or equipment to accommodate three workers.

• Smartphones

Value of Output: $300

Value of Input: Labor + Materials + Overhead

Productivity Ouput $300 2.000 Input $30 $70 $50 = ==

• +

10% productivity improvement → × =2 00 110 2 200. . .Given productivity=2 20., and the value of output =$300, we solve for the cost of inputs: Productivity Ouput $300 2.20 Input Input = = = Input $300

$136.36

2.2 = = or $136 The cost of inputs must decrease by( )$150 $136 $14− = .Copyright © 2016 Pearson Education Canada Inc.1 2 / 4

CHAPTER ONE  Creating Value through Operations

• A $14 reduction in material costs is

$14$7020.00%=

• A $14 reduction in labor costs is

$14$3046.67%=

• A $14 reduction in overhead is $14/$50 = 28.00%

• Alyssa’s Custom Cakes

a.

• Birthday cakes x $50 per cake = $250
• Wedding cakes x $150 per cake = $300
• Specialty cakes x $100 per cake = $300

Total monthly revenue = $850

Multifactor productivity ratio = output/input 1.25 = $850/x

Solve for x = $850/1.25 = $680 Total costs = $680 Average cost per cake = $680/10 = $68/cake

• Labor productivity

Birthday cake = $50/ 1.5 hours = $33.30/hour Wedding Cake = $150/ 4 hours = $37.50/hour Specialty Cake = $100/1 hours = $100/hour

• Based on labor productivity, Alyssa should try to sell specialty cakes the most.
• Yes, Alyssa should stop selling birthday cakes. Based on answer a, she loses $68 - $50 = $18

every time she sells a birthday cake.

• Big Black Bird Company

The Big Black Bird Company problem is based on a product made by Raven Industries. None of the numbers are representative of actual costs or volume.

• Multifactor Productivity

Original Situation:

Value of output:

2500000 uniforms$200×()=$500,

Value of input: 2500000 uniforms$120×()=$300,

Productivity ratio:

Productivity = = = Ouput Input $500, $300, .000 000 167

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CHAPTER ONE  Creating Value through Operations

Overtime Situation:

Value of output: 4000000 uniforms$200×()=$800,

Value of input: 4000000 uniforms$144×()=$576,

Productivity ratio:

Productivity = = = Ouput Input $800, $576, .000 000 139

Productivity decreases by:

1.671.39

100%16.77%

1.67 − × =

• Labor Productivity

Original Situation:

Value of output (from part a) is: $500,000

Labor-hours of input: 7040 3040 4000× +× =( )( ) hours hours hours

Labor productivity ==$500,$1250004000 hours hour

Overtime Situation:

Value of output (from part a) is: $800,000

Labor-hours of input: 7 0 7 2 3 0 7 2 7 2 0 0 × + × = ( ) ( ) h o u r s h o u r s h o u r s

Labor productivity =$800,000 / 7200 hours = $111.11/hours

Labor productivity decreases by:

(125/111.11) / 125 x 100% = 11.1%

• Gross profits

Original Situation: $500, $300, $200,000 000 000− =

Overtime Situation: $800, $576, $224,000 000 000− =

Weekly profits increased.

• Morning Brew Coffee Shop

Excel used to perform all calculations

• Current labor and multifactor productivity

Currently Regular Coffee Cappuccino Vienna coffee total Output in dollars $700.00 $300.00 $600.00 $1,600.00 Labor cost $320.00 Material cost $175.00 $75.00 $187.50 $437.50 Equipment cost $125.00 Overhead cost $225.00 Profit $492.50

Labor Productivity 5.0000 Multifactor Productivity 1.4447

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