MODULE-WISE MARKS DISTRIBUTION
S. Module No.
2017
2018
2019
J
J
J
D
D
D
2021
2022
D
D
J
2023 D
Average
Section A: Operations Management Operations Management- Introduction
7
9
7
7
7
8
5
10
9
9
7.8
2
Operations Planning
12
18
11
13
4
12
33
10
10
11
13.4
3
Designing of Operational System and Control
9
9
1
8
7
9
16
9
8
9
8.5
4
Production Planning 24 & Control
23
33
30
53
19
25
11
22
27
26.7
5
Productivity Management and Quality Management
8
1
9
10
13
20
9
2
7.2
6
Project Management
8
8
9
7
12
10
9
7.1
7
Economics of Main- 11 tenance and Spares Management
10
11
10
8
11
9
11.1
8 8
12
21
Section B: Strategic Management 8
Strategic Management - Introduction
6
12
10
4
21
10
5
12
11
9
10
9
Strategic Analysis & 22 Strategic Planning
16
22
25
10
20
6
14
27
20
18.2
15
14
12
15
10
4
20
8
16
13.1
7
7
10 Formulation & Implementation of Strategy
17
11 Digital Strategy* *Module 11: Digital Strategy has been newly added in Syllabus. Note: J: June; D: December
I-5
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1
PREVIOUS EXAMS TREND ANALYSIS
Year
Question No.
Dec. 2023 (New Syllabus)
1(a)
Topic Name
Marks 2
Operations Planning
4
Designing of Operational System and Control
2
Production Planning & Control
6
Productivity Management and Quality Management
2
Project Management
2
Economics of Maintenance and Spares Management
2
Strategic Management - Introduction
2
Strategic Analysis & Strategic Planning
6
Formulation & Implementation of Strategy
2
2(a)
Operations Management- Introduction
7
2(b)
Designing of Operational System and Control
7
3(a)
Production Planning & Control
7
3(b)
Operations Planning - Demand Forecasting
7
4(a)
Production Planning & Control
7
4(b)
Production Planning & Control
7
5(a)
Economics of Maintenance and Spares Management
7
5(b)
Project Management
7
6(a)
Strategic Management - Introduction
7
6(b)
Digital Strategy
7
7(a)
Strategic Analysis & Strategic Planning
7
7(b)
Strategic Analysis & Strategic Planning
7
8(a)
Formulation & Implementation of Strategy
7
8(b)
Formulation & Implementation of Strategy
7
I-7
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Operations Management- Introduction
MODULE-WISE COMPARISON WITH STUDY MATERIAL Module No.
Name of Module
Study Material Module
Section A: Operations Management 1
Operations Management - Introduction
Module 1
2
Operations Planning
Module 2
3
Designing of Operational System and Control
Module 3
4
Production Planning & Control
Module 4
5
Productivity Management and Quality Management
Module 5
Project Management
Module 6
Economics of Maintenance and Spares Management
Module 7
Section B: Strategic Management 8
Strategic Management - Introduction
Module 8
9
Strategic Analysis & Strategic Planning
Module 9
10
Formulation & Implementation of Strategy
Module 10
11
Digital Strategy
Module 11
I-9
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6 7
CONTENTS PAGE
Module-wise Marks Distribution Previous Exams Trend Analysis Module-wise Comparison with Study Material
I-5 I-7 I-9
SECTION A OPERATIONS MANAGEMENT MODULE 1 OPERATIONS MANAGEMENT - INTRODUCTION
1.3
2.1
OPERATIONS PLANNING
MODULE 3 DESIGNING OF OPERATIONAL SYSTEM AND CONTROL
3.1
MODULE 4 PRODUCTION PLANNING & CONTROL
4.1
MODULE 5 PRODUCTIVITY MANAGEMENT AND QUALITY MANAGEMENT
5.1
MODULE 6 6.1
PROJECT MANAGEMENT
MODULE 7 ECONOMICS OF MAINTENANCE AND SPARES MANAGEMENT
7.1
SECTION B STRATEGIC MANAGEMENT MODULE 8 STRATEGIC MANAGEMENT - INTRODUCTION
I-11
8.3
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MODULE 2
I-12
CONTENTS
MODULE 9 STRATEGIC ANALYSIS & STRATEGIC PLANNING
PAGE
9.1
MODULE 10 FORMULATION & IMPLEMENTATION OF STRATEGY
10.1
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MODULE 11 DIGITAL STRATEGY
11.1
Additional Practice Questions
B.1
Module-wise Solved Paper : Dec. 2023 (Suggested Answers)
P.1
2
OPERATIONS PLANNING
M O D U L E A Quick Review
CHAPTER 2.1 DEMAND FORECASTING
FORECASTING
Forecast must see that they are very nearer to the accuracy. In long range forecast, the normal period used is generally 5 years. In some cases it may extends to 10 to 15 years also. The purpose of long range forecast is: (i) To work out expected capital expenditure for future developments or to acquire new facilities, (ii) To determine expected cash flow from sales, (iii) To plan for future manpower requirements, (iv) To plan for material requirement, (v) To plan for Research and Development. Here much importance is given to long range growth factor. In case of medium range forecasting the period may extend over to one or two years. The purpose of this type of forecasting is: (i) To determine budgetary control over expenses, (ii) To determine dividend policy, (iii) To find and control maintenance expenses, (iv) To determine schedule of operations, (v) To plan for capacity adjustments. In case of short-term forecast, which extends from few weeks to three or six months and the following purposes are generally served: (i) To estimate the inventory requirement, 2.1
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Forecasting means peeping into the future. As future is unknown and is anybody’s guess but the business leaders in the past have evolved certain systematic and scientific methods to know the future by scientific analysis based on facts and possible consequences. Thus, this systematic method of probing the future is called forecasting. In this way forecasting of sales refers to an act of making prediction about future sales followed by a detailed analysis of facts related to future situations and forces which may affect the business as a whole.
2.2
SECTION A : OPERATIONS MANAGEMENT
(ii) To provide transport facilities for despatch of finished goods, (iii) To decide work loads for men and machines, (iv) To find the working capital needed, (v) To set-up of production run for the products, (vi) To fix sales quota, (vii) To find the required overtime to meet the delivery promises. Steps in forecasting Whatever may be the method used for forecasting, the following steps are followed in forecasting: (a) Determine the objective of forecast: What for you are making forecast? Is it for predicting the demand? Is it to know the consumer’s preferences? Is it to study the trend? You have to spell out clearly the use of forecast.
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(b) Select the period over which the forecast will be made? Is it long-term forecast or medium-term forecast or short-term forecast? What are your information needs over that period? (c) Select the method you want to use for making the forecast: This method depends on the period selected for the forecast and the information or data available on hand. It also depends on what you expect from the information you get from the forecast. Select appropriate method for making forecast. (d) Gather information to be used in the forecast: The data you use for making forecasting to produce the result, which is of great use to you. The data may be collected by: (i) Primary source: This data we will get from the records of the firm itself. (ii) Secondary source: This is available from outside means, such as published data, magazines, educational institutions etc. (e) Make the forecast: Using the data collected in the selected method of forecasting, the forecast is made. Forecasting Methods: Methods or techniques of sales forecasting: Different authorities on marketing and production have devised several methods or techniques of sales or demand forecasting. The sales forecasts may be result of what market people or buyers say about the product or they may be the result of statistical and quantitative techniques. The most common methods of sales forecasting are: 1. Survey of buyer’s intentions or the user’s expectation method: Under this system of sales forecasting actual users of the product of the concern are contacted directly and they are asked about their intention to buy the company’s products in an expected given future usually a year. Total sales forecasts of the product then estimated on the basis of advice and willingness of various customers. This is most direct method of sales forecasting. The chief advantages of this method are: (i) Sales forecast under this method is based on information received or collected from the actual users whose buying actions will really decide the future demand. So, the estimates are correct.
MODULE 2 : OPERATIONS PLANNING
2.3
(ii) It provides a subjective feel of the market and of the thinking behind the buying intention of the actual uses. It may help the development of a new product in the market. (iii) This method is more appropriate where users of the product are numbered and a new product is to be introduced for which no previous records can be made available. (iv) It is most suitable for short-run forecasting. 2. Collective opinion or sales force composite method: Under this method, views of salesmen, branch manager, area manager and sales manager are secured for the different segments of the market. Salesmen, being close to actual users are required to estimate expected sales in their respective territories and sections. The estimates of individual salesmen are then consolidated to find out the total estimated sales for the coming session. These estimates are then further examined by the successive executive levels in the light of various factors like proposed changes in product design, advertising and selling prices, competition etc. before they are finally emerged for forecasting.
4. Experts’ opinions: Under this method, the organisation collects opinions from specialists in the field outside the organisation. Opinions of experts given in the newspapers and journals for the trade, wholesalers and distributors for company’s products, agencies or professional experts are taken. By analysing these opinions and views of experts, deductions are made for the company’s sales, and sales forecasts are done. 5. Market test method: Under this method seller sells his product in a part of the market for sometimes and makes the assessment of sales for the full market on the bases of results of test sales. This method is quite appropriate when the product is quite new in the market or good estimators are not available or where buyers do not prepare their purchase plan. 6. Trend projection method: Under this method, a trend of company’s or industry’s sales is fixed with the help of historical data relating to sales which are collected, observed or recorded at successive intervals of time. Such data is generally referred to as time series. The change in values of sales is found out. The study may show that the sales sometimes are increasing and sometimes decreasing, but a general trend in the long run will be either upward or downward. It cannot be both ways. This trend is called secular trend. The sales forecasts with the help of this method are made on the assumption that the same trend will continue in the future. The method which is generally used in fitting the trend is the method of least squares or straight line trend method. With this method a straight line trend is obtained. This line is called ‘line of best fit’. By using the formula of regression equation of Y on X, the future sales are projected.
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3. Group executive judgment or executive judgment method: This is a process of combining, averaging or evaluating, in some other way, the opinions and views of top executives. Opinions are sought from the executives of different fields i.e., marketing; finance; production etc. and forecasts are made.
2.4
SECTION A : OPERATIONS MANAGEMENT
PAST EXAMINATION QUESTIONS OBJECTIVE QUESTIONS MULTIPLE CHOICE QUESTIONS Q. 1 A method in which a trend line is drawn in such a way that the sum of the squares of deviations of the actual points above and below the trend line is at the minimum is known as: (a) Squared trend method. (b) Equal square method. (c) Adjusted square method. (d) Least square method.
[June 2013, 1 Mark]
Ans. (d) Least square method Q. 2 For a marketing manager, the sales forecast is: (a) Estimate of the amount of unit sales for a specified future period. (b) Arranging the salesmen to different segments of the market. TAXMANN®
(c) To distribute the goods through transport to satisfy the market demand. (d) To plan the sales methods.
[June 2017, 1 Mark]
Ans. (a) Estimate of the amount of unit sales for a specified future period TRUE/FALSE Q. 1 In general, long-range forecasting is more useful in production planning. [June 2013, 1 Mark] Ans. True (in production planning, short term forecasting is useful) Q. 2 In general short term forecasting will be more useful in production planning. [December 2017, 1 Mark] Ans. True Q. 3 Short-term forecasting is useful to serve the purpose of estimating the inventory requirement. [December 2017, 1 Mark] Ans. True FILL IN THE BLANKS Q. 1 After forecasting human resource needs, it is logical to ________ how these needs can be ________ [December 2016, 1 Mark] Ans. determine, met Q. 2 In Regression and Correlation analysis, the ratio of explained variation to the total variation is called _________________ [December 2017, 1 Mark] Ans. Coefficient of determination
2.5
MODULE 2 : OPERATIONS PLANNING
THEORY QUESTIONS Q. 1 What are two measures of forecasting
[December 2013, 1 Mark]
Ans. MEAN absolute deviation (MAD) and bias. Q. 2 What are the merits of Delphi method of forecasting technique? [December 2013, 5 Marks] Ans. Delphi is preferred for the following reasons: It involves knowledgeable persons on the subject. Members in Delphi exercise come from different subject area and therefore the method is able to consider and pool up various aspects of the issue. The members do not meet each other, their views are not influenced by the views of other. No conflict of personality is seen in the process. No dominance by any influential expert on the other experts. It gives quick results as compared to quantitative techniques and helps in timely decisions. Q. 3 What is measured by regression analysis? Ans. Regression analysis is a statistical tools for measuring the change in dependent variable due to change in independent variable. It helps in estimation of dependent variable on the basis of dependent variable
PRACTICAL QUESTIONS Q. 1 With the help of the following data, project the trend for the next five years: Year
2002
2003
2004
2005
2006
2007
Sales (Lakhs)
100
110
115
120
135
140
[December 2013, 5 Marks] Ans. Year T
Time deviations X
Sales ` (Lakhs) y
X2
XY
2002
-5
100
25
-500
2003
-3
110
9
-330
2004
-1
115
1
-115
2005
1
120
1
120
2006
3
135
9
405
2007
5
140
25
700
n=6
6X = 0
6Y=720
6X = 70
6XY = 280
2
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[December 2014, 2 Marks]
2.6
SECTION A : OPERATIONS MANAGEMENT
Let linear trend be: Y = a + bX ------- (1)
where X is time deviation, X = 2(T – 2004.5) ORIGIN YEAR – 2004.5
6 Y = 6 a + b X .........................(2) 6 Y = na + b 6 X .......................(3) 6 XY = a6 X + b 6 X2 ................(4) PUT 6 X = 0, 6Y=720, 6X2 = 70, 6XY = 280 and n = 6 in Equation (2), (3) and (4) Then equation (3) becomes 720 = 6 a, a = 120 From equation (4 ) 280 = 70b, b = 4 Put value of a and b in equation (1) So linear trend be, y = 120 + 4x Sales forecast for the next 5 years i.e. 2008 to 2012 Y2008 =120 + 4 (+7) = 120 + 28 = ` 148 lakhs TAXMANN®
Y2009 =120 + 4 (+9) = 120 + 36 = ` 156 lakhs Y2010 =120 + 4 (+11) = 120 + 44 = ` 164 lakhs Y2011 =120 + 4 (+13) = 120 + 52 = ` 172 lakhs Y2012 = 120 + 4 (+15) = 120 + 60 = ` 180 lakhs Q. 2 The annual sales of truck tyres manufactured by a company are as follows: YEAR Sales (’000 units)
(Y)
2008
2009
2010
2011
2012
25
34
45
38
53
[June 2014, 4 Marks] Ans. Years T
X
Sales in (’000 units)Y
X2
XY
2008
-2
25
4
-50
2009
-1
34
1
-34
2010
0
45
0
0
2011
+1
38
1
+38
2012
+2
53
4
n=5
6X = 0
6Y = 195
6X = 10
+106 2
Let linear trend be: Y = a + bX ------- (1) where X is time deviation, X = (T – 2010) ORIGIN YEAR - 2010 6 Y = 6 a + b X .........................(2) 6 Y = na + b 6 X .......................(3)
6XY = + 60
2.7
MODULE 2 : OPERATIONS PLANNING
6 XY = a6 X + b 6 X2 ................(4) Put 6X = 0, 6Y=195, 6X2 = 10, 6XY = 60 and n=5 in Equation (2), (3) and (4) Then equation (3) becomes 195= 5 a, a = 39 From equation (4 ) 60 = 10b, b = 6 Put value of a and b in equation (1) So linear trend be, y = 39 + 6x ESTIMATION OF SALES for 2013 Y 2013 = 39 + 6 (3) = 39 + 18 = 57 The estimated sales for 2013 will be 57,000 units. Q. 3 The following data on the exports of an item by a company during the various years fit a straight line, (for the time being, assume that a straight line gives a good fit). Give a forecast for the years 2014 and 2015. [December 2014, 6 Marks] No. of items (’000) 15
2006
20
2007
25
2008
28
2009
30
2010
35
2011
35
2012
40
2013
45
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Year 2005
Ans. X
Y
X2
XY
-4
15
16
-60
-3
20
9
-60
-2
25
4
-50
-1
28
1
-28
0
30
0
0
1
35
1
35
2
35
4
70
3
40
9
120
4
45
16
180
6X = 0
6Y = 273
6 X = 60
6XY = 207
2
2.8
SECTION A : OPERATIONS MANAGEMENT
Let y = a + bX ----------1 be linear trend Where X = year – origin (Deviation in time) Origin – 2009 6 Y = 6 a + bX .........................(2) 6 Y = na + b 6 X .......................(3) 6 XY = a6 X + b 6 X2 ................(4) HERE 6 X = 0 and Then from equation (3) 6 Y = na and 273 = 9a then a=273/9 = 30.33 From equation (4) 6 XY = b6 X2, 207= b 60 then b = 207/60 = 3.45 Put value of a and b in equation (1) The equation of a straight line fitting the data is: Y = 30.33 + 3.45X (a) Forecast for 2014, (i.e., X = 5): Y = 30.33 + 3.45 (5) = 47.58 (in 000)
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(b) Forecast for 2015, (i.e., X = 6): Y = 30.33 + 3.45 (6) = 51.03 (in 000) Q. 4 The demand for Personal Computers was estimated as 1100 per month for 5 months. Later on the actual demand was found as 1050, 1000, 1200, 1100 and 1050 respectively. Workout Mean Absolute Deviation (MAD) and Bias. Analyze whether the forecast made was accurate. [December 2014, 2 + 2 + 1 = 5 Marks] Ans. MAD =
1100 − 1050 + 1100 − 1000 + 1100 − 1200 + 1100 − 1100 + 1100 − 1050 5
(1100 − 1050) + (1100 − 1000) + (1100 − 1200) + (1100 − 1100) + (1100 − 1050) 5 (1100 − 1050) + (1100 − 1000) + (1100 − 1200) + (1100 − 1100) + (1100 − 1050) BIAS = 5 MAD =
= 100/5 = 20 units In this case, MAD is 60 units whereas Bias has deviation of 20 units. Since MADmeasures the overall accuracy of the forecasting method, it is found that the forecast is not based on accurate model and the error is (60/1100) × 100 = 5.5% Q. 5 The demand for three months for 60 watt bulbs is given below: Period
January
February
March
Demand
540
620
760
If the weight assigned to the period of January, February and March are 0.2, 0.3 and 0.45 respectively, forecast the demand for the month of April by using Weighted Moving Average Method [December 2017, 6 Marks]
2.9
MODULE 2 : OPERATIONS PLANNING
Ans. D1 = 540 W1 = 0.20 D2 = 620 W2 = 0.30 D3 = 760 W3 = 0.45 The Weighted Moving Average = W1 × D1 × W2 × D2 × W3 × D3 = 540 × 0.2 + 620 × 0.3 + 760 × 0.45 = 636. Therefore the Demand for the month of April is 636 nos. of 60 watt bulbs. Q. 6 The following table relates to the tourist arrivals in India during 2016 to 2022.
Year
2016
2017
2019
2021
2022
Tourist arrivals (in Lakh)
36
40
50
56
60
(Present calculation upto three decimal points) Required: (i) Fit a straight line trend by method of least squares. (ii) Estimate the number of tourists (in lakh) in the year 2018 and that would arrive in the year 2026. [July 2023, 6+1+1=8 Marks]
(i) Year (t)
Tourist (Y) arrival (in lakh)
x = t – 2019
xy
X2
2016
36
-3
-108
9
2017
40
-2
-80
4
2019
50
0
0
0
2021
56
2
112
4
2022
60
3
180
9
¦y = 242
¦x=0
¦ x y = 104
¦ x = 26
Let straight line trend be y = a+bx
(1)
Here x = t origin -2019 Now
¦y = na + b¦x
¦xy = a¦x + b¦x
(2) 2
Here ¦x=0 Then From Eq (2) 242 = 5a + 0 a=
242 = 48.4 5
From Eq (3) 104 = 0 + b × 26
(3)
2
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Ans.
2.10
SECTION A : OPERATIONS MANAGEMENT
b=
104 =4 26
Put value of a & b in Eq (1) y = 48.4 + 4x (4) This is straight line trend (ii) Estimation tourist arrive in 2018, For 2018 x = 2018 – 2019 = - 1 Put x = – 1 in Eq (4) y2018 = 48.4 + 4 (-1) = 44.4 i.e. 44.4 Lakh Estimation of tourist arrive in 2026 x = 2026 -2019=7 Put x = 7 in Eq (4) y 2026 = 48.4 + 4 (7)
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=48.4 + 28 = 76.4 i.e. 76.4 Lakh.
A Quick Review
CHAPTER 2.2 CAPACITY PLANNING & UTILIZATION
Capacity Planning: The effective management of capacity is the most important responsibility of production and operations management. The objective of capacity management i.e., planning and control of capacity, is to match the level of operations to the level of demand. Capacity planning is concerned with finding answers to the basic questions regarding capacity such as: (i) What kind of capacity is needed? (ii) How much capacity is needed? (iii) When this capacity is needed? Capacity planning is to be carried out keeping in mind future growth and expansion plans, market trends, sales forecasting, etc. Capacity is the rate of productive capability of a facility. Capacity is usually expressed as volume of output per period of time. Capacity planning is required for the following: Sufficient capacity is required to meet the customers demand in time, Capacity affects the cost efficiency of operations, Capacity affects the scheduling system, Capacity creation requires an investment,
MODULE 2 : OPERATIONS PLANNING
2.11
Capacity planning is the first step when an organisation decides to produce more or new products.
Capacity planning is mainly of two types: (i) Long-term capacity plans which are concerned with investments in new facilities and equipments. These plans cover a time horizon of more than two years. (ii) Short-term capacity plans which takes into account work-force size, overtime budgets, inventories etc. Capacity refers to the maximum load an operating unit can handle. The operating unit might be a plant, a department, a machine, a store or a worker. Capacity of a plant is the maximum rate of output (goods or services) the plant can produce. Effective Capacity can be determined by giving due consideration to the following factors: Facilities - Design, location, layout and environment. Product - Product design and product-mix. Process - Quantity and quality capabilities of the process or to be followed.
Operational factors - Scheduling, materials management, quality assurance, maintenance policies, and equipment break-downs. External factors - Product standards, safety regulations, union attitudes, pollution control standards. Measurement of capacity Capacity of a plant is usually expressed as the rate of output, i.e., in terms of units produced per period of time (i.e., hour, shift, day, week, month etc.). But when firms are producing different types of products, it is difficult to use volume of output of each product to express the capacity of the firm. In such cases, capacity of the firm is expressed in terms of monetary value (production value) of the various products produced put together. Capacity Planning Decisions Capacity planning involves activities such as: (i) Assessing the capacity of existing facilities. (ii) Forecasting the long-range future capacity needs. (iii) Identifying and analysing sources of capacity for future needs. (iv) Evaluating the alternative sources of capacity based on financial, technological and economical considerations. (v) Selecting a capacity alternative most suited to achieve strategic mission of the firm. Factors affecting determination of plant capacity (i) Capital investment required,
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Human factors - Job content, Job design, motivation, compensation, training and experience of labour, learning rates and absenteeism and labour turn over.
2.12
SECTION A : OPERATIONS MANAGEMENT
(ii) Changes in product design, process design, market conditions and product life cycles, (iii) Flexibility for capacity additions, (iv) Level of automation desired, (v) Market demand for the product, Factors Affecting Capacity Planning: Two kinds of factors affecting capacity planning are: (i) Controllable Factors: amount of labour employed, facilities installed, machines, tooling, shifts of work per day, days worked per week, overtime work, subcontracting, preventive maintenance and number of production set ups. (ii) Less Controllable Factors: absenteeism, labour performance, machine break-downs, material shortages, scrap and rework, strike, lock-out, fire accidents, natural calamities (flood, earthquake etc.)
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PAST EXAMINATION QUESTIONS OBJECTIVE QUESTIONS MULTIPLE CHOICE QUESTIONS Q. 1 Out of the following factors that are affecting Capacity Planning, which one is Less Controllable one? (a) Machine break-downs (b) Amount of labour employed (c) Facilities installed (d) Shifts of work per day
[June 2017, 1 Mark]
Ans. (a) Machine breakdowns Q. 2 The effective capacity is NOT influenced by which of the following factors: (a) Forecasts of demand (b) Plant and labour efficiency (c) Subcontracting (d) None of the above
[December 2017, 1 Mark]
Ans. (d) None of the above Q. 3 Effective capacity can NOT be determined by which of the following factors? (a) Product design and product-mix (b) Quantity and quality capabilities (c) Facilities (d) None of the above Ans. (d) None of the above
[June 2018, 1 Mark]
2.13
MODULE 2 : OPERATIONS PLANNING
TRUE/FALSE Q. 1. Capacity refers to the minimum load an operating unit can handle. [June 2018, 1 Mark] Ans. False Q. 2. Strikes and lock-out are controllable factors affecting Capacity Planning. [December 2019, 1 Mark] Ans. False FILL IN THE BLANK Q. 1 Efficiency is a ratio of the actual output of a process relative to some ____. Ans. Standard
THEORY QUESTIONS Q. 1 How Can you identify a bottleneck in a process ? [June 2017, 1 Mark]
Q. 2 Which type of capacity plan takes into account workforce size, overtime budgets, inventories, etc.? [December 2021, 1 Mark] Ans. Short-term capacity plan.
PRACTICAL QUESTIONS Q. 1 A manufacturing company has a product line consisting of five work stations in series. The individual work station capacities are given. The actual output of the line is 540 units per shift. Work station No.
1
2
3
4
5
Capacity/shift
700
650
700
650
600
Calculate (i) System capacity (ii) Efficiency of the production line. [December 2011, 3 Marks] Ans. (i) System capacity is decided by the work station, with minimum capacity/ shift. i.e., the bottleneck. In the given question, the work station ‘5’ has minimum capacity 600 units/shift. Hence, the system capacity = 600 units/shift. (ii) The Actual output of the line = 540 units/shift. Therefore, the system efficiency = Actual Output/System Capacity × 100 = 540/600 ×100 = 90%
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Ans. A bottleneck can be identified by determining points at which excessive amounts of work-in-process inventories are accumulated.
2.14
SECTION A : OPERATIONS MANAGEMENT
Q. 2 A manufacturing company has a product line consisting of five work stations in series. The individual workstation capacities are given. The actual output of the line is 440 units per shift. Workstation No.
1
2
3
4
5
Capacity/shift
550
650
700
650
600
Calculate (i) System capacity (ii) Efficiency of the production line. [December 2012, 3 Marks] Ans. (i) Workstation decides the capacity of the system with minimum capacity/ shift, i.e., the bottleneck. In the given question, the work station ‘1’ is having a capacity of 550 units/shift which is minimum. Therefore, the system capacity = 550 units/shift. (ii) The actual output of the production line = 440 units/shift. Therefore, the system efficiency = Actual output/System Capacity × 100
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= 440/550 × 100 = 80% Q. 3 In a firm, there are four workstations: A, B, C, & D working in series and their individual capacities in units per day are 400, 380, 350 and 410 respectively. The raw materials are fed to Machine A and the system output is obtained from Machine D. If the actual output is 320 units per day, what is the system efficiency? [December 2013, 1 Mark] Ans. The bottle neck centre is C i.e. the work centre which has minimum capacity. So System capacity i.e. the capacity of the bottle neck centre is 350 units. System efficiency = Actual output/System capacity = (320/350) × 100 = 91.43%. Q. 4 Calculate the number of components that can be produced in a month when available equipment hours are 480 per month, efficiency of utilization is 85%, and it takes 36 minutes of processing time in the equipment for each component. [June 2015, 2 Marks] Ans. Actual Equipment Hrs. that can be used = (480 × 85) ÷ 100 = 408 Hrs. Possible output = 408 × (60 ÷ 36) = 680 Components. Q. 5 A department works on 8 hours shift, 288 days a year and has the usage data of a machine, as given below: Product
Annual Demand (units)
Processing time (Standard time in hours)
A
325
5.0
B
450
4.0
C
550
6.0
Calculate (a) Processing time needed in hours to produce products A, B and C, (b) Annual production capacity of one machine in standard hours, and (c) Number of machines required. [June 2015, 7 Marks] Ans. (a) The processing time needed in hours to produce products A, B and C in the quantities demanded using the standard time data
2.15
MODULE 2 : OPERATIONS PLANNING
Product
Annual Demand (units) 325 450 550
Processing time (standard Processing time time in hours) needed (hrs.) A 5.0 325 × 5 = 1625 B 4.0 450 × 4 = 1,800 C 6.0 550 × 6 = 3,300 Total = 6,725 hrs. (b) Annual production capacity of one machine in standard hours = 8 × 288 = 2,304 hours per year. (c) Number of machines required = Work load per year/Production capacity per Machine = 6,725 /2,304 = 2.92 machines = 3 machines. Q. 6 A department works on 8 hours per day, 250 days a year and has the usage data of a machine, as given below: Product
Ans. Calculation of processing time needed in hours to produce product X, Y and Z in the quantities demanded using the standard time data Product
Annual demand (units)
Processing time needed (standard time in hours)
X
200
4.0 × 200 = 800 hrs.
Y
300
6.0 × 300 = 1800 hrs.
Z
400
3.0 × 400 =1200 hrs.
TOTAL 3800 hrs. Annual production capacity of one machine in standard hours = 8 × 250 = 2000 hours per year. Number of machines required = Work load per year/Production capacity per machine = 3800/2000 = 1.9 machines = 2 machines. Q. 7 A firm has four work centres, A, B, C & D, in series with individual capacities in units per day shown in the figure below: RAW MATERIAL
A
B
C
D
ACTUAL OUTPUT
(450)
(420)
(360)
(390)
(310)
(i) Identify the bottleneck centre ? (ii) What is the system capacity ? (iii) What is system efficiency ?
[December 2017, 9 Marks]
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Annual demand Processing time (standard time in (units) hours) X 200 4.0 Y 300 6.0 Z 400 3.0 Determine the number of machines required. [June 2016, 6 Marks]
OPERATIONS MANAGEMENT & STRATEGIC MANAGEMENT (OMSM) | CRACKER AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE
: : : : : : :
Amarendra Kumar TAXMANN JANUARY 2024 2ND EDITION 9789357784191 318 PAPERBACK
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DESCRIPTION This book is prepared exclusively for the Intermediate Level of Cost & Management Accountancy Examination requirement. It covers the topic-wise questions & detailed answers as per the new syllabus of ICMAI. The Present Publication is the 2nd Edition for the CMA Intermediate | New Syllabus | June 2024 Exam. This book is authored by Amarendra Kumar, with the following noteworthy features: • Strictly as per the New Syllabus of ICMAI • Coverage of the book concludes: o [Past Exam Questions – Topic-wise] including CMA-Intermediate Dec. 2023 Exam o Additional Practice Questions • [Tabular Summary] at the beginning of each chapter is given in this book • [Marks Distribution] is given Module-wise from June 2017 onwards • [Previous Exam Trend Analysis] has been included in the book from Dec. 2023 onwards. • [ICMAI Study-Material Comparison] is also given module-wise
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