Estimating and Reducing Labor Costs Chapter 4 Exam Questions

Matching Supply with Demand: An Introduction to Operations Management, 4e (Cachon)

Chapter 4 Estimating and Reducing Labor Costs

[The following information applies to questions 1-3.]

Furniture Face Lift refinishes old wood furniture. Their process for refinishing chairs has 8 workers and 4 stations. Each chair starts at the Stripping station, then goes to Priming, then to Painting and finally to Inspection. Where there are multiple workers within a station, each worker works independently on his/her own chair. Assume inventory buffers are allowed between each station.

1) What is the maximum number of chairs per hour that can be produced? Assume they start the day with inventory at each station to work on.

Difficulty: 3 Hard

Topic: Analyzing an Assembly Operation

AACSB: Analytical Thinking

Blooms: Apply

2) Suppose at the start of the day there is no inventory of chairs in the shop. That is, there are no chairs within any of the stations nor between them in any buffer. A truck loaded with 15 chairs arrives. How many hours will it take them to complete these 15 chairs?

Difficulty: 3 Hard

Topic: Analyzing an Assembly Operation

AACSB: Analytical Thinking

Blooms: Analyze

3) Suppose now that each worker is trained to do all tasks and each worker works on a chair from start to finish, i.e., each worker does Stripping, Priming, Painting, and Inspection. What is the maximum capacity of the process in chairs per hour?

Difficulty: 3 Hard

Topic: Increasing Capacity by Line Balancing

AACSB: Analytical Thinking

Blooms: Analyze

[The following information applies to questions 4-6.]

The White Tooth Device Company is a manufacturer of high-end electric toothbrushes. For each toothbrush, there is a sequence of assembly steps performed by five workers. Each worker does two tasks. Inventory buffers are allowed between workers.

4) What is the capacity of this process (toothbrushes per minute)?

Difficulty: 3 Hard

Topic: Analyzing an Assembly Operation

AACSB: Analytical Thinking

Blooms: Apply

5) Suppose two workers could be hired, F and G, and they take the same time to complete tasks as the current five workers. F and G can be assigned to work on the same pair of tasks as one of the current workers. For example, F could be assigned tasks T1 and T2 (just like worker A) while G is assigned T5 and T6 (just like worker C). They cannot be assigned tasks that are currently assigned to two workers. For example, F cannot be assigned to tasks T2 and T3 (because they are currently being done by workers A and B). What is the capacity of this process with workers F and G included (toothbrushes per minute)?

Difficulty: 3 Hard

Topic: Scale Up to Higher Volume

AACSB: Analytical Thinking

Blooms: Analyze

6) Return to the case of 5 workers. Suppose the assignment of tasks to workers can change, but the sequence of tasks must remain the same. Workers must be assigned to consecutive tasks and each task can be assigned to only one worker. For example, worker A could do tasks T1-T3 (because they are consecutive) but cannot be assign T1, T2, and T4. If worker A is assigned to tasks T1-T3, then worker B's first task must be T4 (worker B cannot also be assigned to task T3). Because a U-shaped line is used, tasks T1 and T10 can actually be considered consecutive tasks — worker A could be assigned tasks T10, T1, and T2. What would the maximum capacity be after possibly reassigning tasks (toothbrushes per minute)?

Difficulty: 3 Hard

Topic: Increasing Capacity by Line Balancing

AACSB: Analytical Thinking

Blooms: Analyze

[The following information applies to questions 7-10.]

Imagine US is a startup that offers high definition 3D prenatal ultrasounds for high-end customers. The service process includes five activities that are conducted in the sequence described below. (The time required for each activity is shown in parentheses):

Activity 1: Welcome a patient and explain the procedure. (8 minutes)

Activity 2: Prep the patient (e.g., show them to the room, apply ultrasound gel). (5 minutes)

Activity 3: Take images. (14 minutes)

Activity 4: Analyze images. (12 minutes)

Activity 5: Discuss diagnostic with the patient. (16 minutes)

At each location, there are employees (servers) S1, S2, and S3. The assignment of tasks to servers is the following:

S1 does Activity 1.

S2 does Activities 2 and 3.

S3 does Activities 4 and 5.

7) What is the capacity of this process (in customers per hour)?

Difficulty: 3 Hard

Topic: Analyzing an Assembly Operation

AACSB: Analytical Thinking

Blooms: Apply

8) Suppose that 2 patients arrive every hour on average. Ignoring any "start of day" or "end of day" effects, what is the utilization of Server 1 (as a %)?

Difficulty: 3 Hard

Topic: Labor Content and Idle Time; Increasing Capacity by Line Balancing

AACSB: Analytical Thinking

Blooms: Analyze

9) Suppose each activity can be done by any server and any server can do any set of activities. However, each activity is done by only one server. For example, a feasible assignment includes: S1 does activities 1 and 5, S2 does activities 2 and 4, and S3 does activity 3. Of course, the original assignment of servers to activities is also feasible. What is the maximum capacity of the process (in customers per hour)?

Difficulty: 3 Hard

Topic: Increasing Capacity by Line Balancing

AACSB: Analytical Thinking

Blooms: Analyze

10) Now suppose each activity can be assigned to more than one server, each activity can be done by any server and any server can do any set of activities. What is the maximum capacity of the process (in customers per hour)?

Difficulty: 3 Hard

Topic: Increasing Capacity by Line Balancing

AACSB: Analytical Thinking

Blooms: Apply

[The following information applies to questions 11-12.]

A process requires six tasks, A, B, C, D, E, and F, that must be performed in that order. Currently, there are 3 employees that are equally skilled at each task. Employee 1 is assigned tasks A and B, employee 2 is assigned tasks C and D, and employee 3 is assigned tasks E and F. The task times (all in seconds) are given in the process diagram below. For example, task A requires 90 seconds.

11) Suppose the system started without any work in process inventory (i.e., an empty system). How long would this process take to produce 10 units (in seconds)?

Difficulty: 3 Hard

Topic: Time to Process a Quantity X Starting with an Empty Process

AACSB: Analytical Thinking

Blooms: Apply

12) Suppose now the 3 employees can be assigned to any task, but employees must be assigned to consecutive tasks (e.g., an employee cannot be assigned tasks B and D). What would be the processes' maximum capacity (units per hour)?

Difficulty: 3 Hard

Topic: Increasing Capacity by Line Balancing

AACSB: Analytical Thinking

Blooms: Analyze

[The following information applies to questions 13-17.]

Mr. K's Hair Salon

Mr. K's is a very popular hair salon. It offers high-quality hair-styling and physical relaxation services at a reasonable price, so it always has unlimited demand. The service process includes five activities that are conducted in the sequence described below. (The time required for each activity is shown in parenthesis):

Activity 1: Welcome a guest and offer homemade herb tea. (10 minutes)

Activity 2: Wash and condition hair. (10 minutes)

Activity 3: Neck, shoulder, and back stress release massage. (10 minutes)

Activity 4: Design the hairstyle and do the hair. (25 minutes)

Activity 5: Check out the guest. (5 minutes)

Three servers (S1, S2, and S3) offer the services in a worker-paced line. The assignment of tasks to servers is the following:

S1 does Activity 1.

S2 does Activities 2 and Activity 3.

S3 does Activities 4 and Activity 5.

13) Which server is the bottleneck of the process?

A) S1

B) S2

C) S3

Difficulty: 3 Hard

Topic: Time to Process a Quantity X Starting with an Empty Process

AACSB: Analytical Thinking

Blooms: Apply

14) What is the utilization of server 2?

Difficulty: 3 Hard

Topic: Labor Content and Idle Time

AACSB: Analytical Thinking

Blooms: Apply

15) What is the average labor utilization of the servers? Assume the process operates at its capacity.

Difficulty: 3 Hard

Topic: Labor Content and Idle Time

AACSB: Analytical Thinking

Blooms: Apply

16) Assume a wage rate of $18 per hour. What are the direct labor costs for one guest?

Difficulty: 3 Hard

Topic: Labor Content and Idle Time; Increasing Capacity by Line Balancing

AACSB: Analytical Thinking

Blooms: Apply

17) To increase the service rate, Mr. K's is considering two alternatives:

Alternative I: To hire a new employee to help any one (and only one) of the servers without changing the tasks performed by each server.

Alternative II: To redesign the assignment of tasks to servers. For this, Mr. K's is evaluating to reassign Activity 5 from S3 to S1.

What would be the costs of direct labor of serving one guest under each of the two alternatives? Assume that the system operates at its capacity.

Difficulty: 3 Hard

Topic: Scale Up to Higher Volume; Increasing Capacity by Line Balancing

AACSB: Analytical Thinking

Blooms: Analyze

[The following information applies to questions 18-25.]

One Hour Loan

One Hour Loan offers customized loans. Customers call a toll-free number with a specific loan request and obtain a response within an hour. One Hour Loan's business process includes five activities which must be conducted in the sequence described below. (The time required for each activity is shown in parenthesis):

Activity 1: Answer customer call and record key information. (4 minutes)

Activity 2: Gather and format the data (obtain credit scores, organize customer specific needs) for analysis (5 minutes)

Activity 3: Analyze the information: Check the creditworthiness and decide loan amount and APR to offer. (7 minutes)

Activity 4: Perform final checks on loan offer (2 minutes)

Activity 5: Call the customer back with the new loan offer and close. (4 minutes)

Three workers conduct the whole process in a worker paced line. The assignment of tasks to workers is the following:

W1 does Activity 1.

W2 does Activities 2 and 3.

W3 does Activities 4 and 5.

18) What is the bottleneck of the process?

A) W1

B) W2

C) W3

Difficulty: 2 Medium

Topic: Analyzing an Assembly Operation

AACSB: Analytical Thinking

Blooms: Apply

19) How much time will it take to process 100 loans? (Assume that the process starts with an empty production line.)

Difficulty: 2 Medium

Topic: Time to Process a Quantity X Starting with an Empty Process

AACSB: Analytical Thinking

Blooms: Apply

20) What is the utilization of worker 3? (You can assume that the process operates at capacity and you do not have to consider any empty system effects).

Difficulty: 2 Medium

Topic: Labor Content and Idle Time

AACSB: Analytical Thinking

Blooms: Apply

21) What is the average labor utilization of the workers? Assume the process operates at its capacity and there are no empty system effects.

Difficulty: 2 Medium

Topic: Labor Content and Idle Time

AACSB: Analytical Thinking

Blooms: Analyze

22) What are the direct labor costs for one loan application? Assume a wage rate of $20 per hour.

Difficulty: 2 Medium

Topic: Labor Content and Idle Time

AACSB: Analytical Thinking

Blooms: Apply

23) To increase the production rate, One Hour Loan is considering two alternatives:

Alternative I: To hire a new worker to help any one (and only one) of the workers without changing the tasks performed by each worker.

Alternative II: To redesign the assignment of tasks to workers. For this, the company is evaluating to re-assign Step 2 from W2 to W1.

Suppose that Alternative I is chosen. Which worker should the new employee assist?

A) W1

B) W2

C) W3

Difficulty: 2 Medium

Topic: Increasing Capacity by Line Balancing; Scale Up to Higher Volume

AACSB: Analytical Thinking

Blooms: Apply

24) What would be the costs of direct labor of one loan application under the solution depicted above? Assume there is sufficient demand (system operates at its capacity) and there are no empty system effects.

Difficulty: 2 Medium

Topic: Labor Content and Idle Time

AACSB: Analytical Thinking

Blooms: Apply

25) What would be the direct labor costs for Alternative II?

Difficulty: 2 Medium

Topic: Labor Content and Idle Time

AACSB: Analytical Thinking

Blooms: Apply