Questions and Answers of Principles Of Operations

The U.S. gross national product (GNP) in billions of dollars during the period 1964 to 1984 was as follows:Year GNP Year GNP 1964 649.8 1975 1,598.4 1965 705.1 1976 1,782.8 1966 772.0 1977 1,990.5
Find S11 and G11, and find the updated values of the seasonal factors. Also determine the forecast made at the end of quarter 11 for quarter 13.
The owner of a small brewery in Milwaukee, Wisconsin, is using Winters’s method to forecast his quarterly beer sales. He has been using smoothing constants of .2, .2, and .2. He has
Assume that E1 e1 (the observed error in January)and M1 e1. Use .1.b. For what types of time series will the Trigg-Leach adaptive response rate give more accurate forecasts, and under what
Using the MAD, compare the accuracy of these forecasts with the simple exponential smoothing forecasts obtained in Problem
Trigg and Leach (1967) suggest the following adaptive response-rate exponential smoothing method. Along with smoothing the original series, also smooth the error et and the absolute error et
Using .2 and .2, find one-step-ahead forecasts for 1982 through 1989 and compute the MAD and MSE for the forecasts during this period. What is the sales forecast for the year 2000 made at the
Lakeroad, a manufacturer of hard disks for personal computers, was founded in 1981 and has sold the following numbers of disks:Number Sold Number Sold Year (in 000s) Year (in 000s)1981 0.2 1985 34.5
A suggested method for determining the “right” value of the smoothing constant in exponential smoothing is to retrospectively determine the value that results in the minimum forecast error
After six months of operation, the observed sales of ice cream (in dollars) and the number of park attendees are Month 1 2 3 4 5 6 Ice cream sales 325 335 172 645 770 950 Park attendees 880 976 440
Hy and Murray are planning to set up an ice cream stand in Shoreline Park, described in Problem
What forecast for sales revenue in year 10 do you obtain using the results of part (a)?c. Suppose that simple exponential smoothing with .15 is used to predict the number of births. Use the
Baby It’s You, a maker of baby foods, has found a high correlation between the aggregate company sales (in $100,000) and the number of births nationally the preceding year. Suppose that the sales
Repeat the calculations in Problem 51 using simple exponential smoothing, and allow the smoothing constant to be a variable. That is, the smoothing constant should be a cell location. By
Over a two-year period, the Topper Company sold the following numbers of lawn mowers:Month: 1 2 3 4 5 6 7 8 9 10 11 12 Sales: 238 220 195 245 345 380 270 220 280 120 110 85 Month: 13 14 15 16 17 18
Irwin Richards, a publisher of business textbooks, publishes in the areas of management, marketing, accounting, production, finance, and economics. The president of the firm is interested in getting
Herman Hahn is attempting to set up an integrated forecasting and inventory control system for his hardware store, Hahn’s Hardware. When Herman indicates that outdoor lights are a seasonal item on
Using the same value of , what values of the MAD does this method give for periods 2 through 8? Discuss the advantages and disadvantages of this approach vis-à-vis direct computation of the MAD.
A method of estimating the MAD discussed in Section 2.13 recomputes it each time a new demand is observed according to the following formula:MADt et (1 ) MADt1.Consider the one-step-ahead
John Kittle, an independent insurance agent, uses a five-year moving average to forecast the number of claims made in a single year for one of the large insurance companies he sells for. He has just
The U.S. Federal Reserve in St. Louis stores a host of economic data on its Web site at http://research.stlouisfed.org/fred2/categories/106. Download the following time series from this Web site:a.
Consider the seasonal time series pictured in Figure 2–8. What level of differencing would be required to make this series stationary?
Using back-substitution, show that an ARMA(1, 1) model may be written as either an AR or an MA model.
Consider an ARIMA(0,2,2) process. Write out the resulting model usinga. Backshift notation with the backshift operator B.b. Backshift notation with the operatorc. No backshift notation.
Consider an ARIMA(2,1,1) process. Write out the resulting model usinga. Backshift notation with the backshift operator B.b. Backshift notation with the operatorc. No backshift notation.
Use the random number generator in Excel and the normal variate generator given in Problem 5.34 to generate a sample path for an ARMA(1,1) process. Use a10.8 and b10.6. Compute the sample
Use the random number generator in Excel and the normal variate generator given in Problem 5.34 to generate a sample path for an MA(1) process such as the ones shown in Figure 2–16 for b1 0.7.
Use the random number generator in Excel and the normal variate generator given in Problem 5.34 to generate a sample path for an AR(1) process such as the ones shown in Figure 2–14 for a1 0.7.
Consider the white noise process data in Table 2–1. Enter this data into Excel and generate the sample autocorrelations for lags of 1 to 10 periods, using the formula for the sample
Use the values of the smoothing constants given in Problem 35(b).
Using these updated estimates, determine the forecasts that Winters’s method gives for all of Year 6 made at the end of Year
Determine updated estimates of the slope, the intercept, and the seasonal factors for the end of Year 4 based on the observations given in Problem
Compare the accuracy of the forecasts obtained for the last three quarters of Year 4 in Problems 34(d) and 35(c) by computing both the MAD and the MSE.
Suppose the observed quarterly demand for Year 4 was 18, 51, 86,
Using .2, .15, and .10, update the estimates of the series, the slope, and the seasonal factors.c. What are the forecasts made at the end of the first quarter of Year 4 for the remaining
Consider the data for Problem 34.a. Using the data from Years 2 and 3, determine initial values of the intercept, slope, and seasonal factors for Winters’s method.b. Assume that the observed demand
A popular brand of tennis shoe has had the following demand history by quarters over a three-year period.
Sales of walking shorts at Hugo’s Department Store in downtown Rolla appear to exhibit a seasonal pattern. The proprietor of the store, Wally Hugo, has kept careful records of the sales of several
Discuss some of the problems that could arise when using either regression analysis or Holt’s method for obtaining multiple-step-ahead forecasts.
Because of serious flooding, the park was closed for most of December 1993. During that time only 53 people visited. Comment on the effect this observation would have on predictions of future use of
For the data in Problem 28, use the results of the regression equation to estimate the slope and intercept of the series at the end of June. Use these numbers as the initial values of slope and
The Mountain View Department of Parks and Recreation must project the total use of Shoreline Park for calendar year 2014.a. Determine the forecast for the total number of people using the park in
Shoreline Park in Mountain View, California, has kept close tabs on the number of patrons using the park since its opening in January 1993. For the first six months of 2013, the following figures
For the data for Problems 16 through 21, use the arithmetic average of the first six months of data as a baseline to initialize the exponential smoothing.a. Determine the one-step-ahead exponential
Referring to the data in Problem 22, what is the exponential smoothing forecast made at the end of March for the sales in July? Assume .15.
Determine the following:a. The value of consistent with N 6 in moving averages.b. The value of N consistent with .05.c. The value of that results in a variance of forecast error, 2e, 10
Observed weekly sales of ball peen hammers at the town hardware store over an eight-week period have been 14, 9, 30, 22, 34, 12, 19, 23.a. Suppose that three-week moving averages are used to forecast
Compare and contrast exponential smoothing when is small (near zero) and when is large (near 1).
Handy, Inc., produces a solar-powered electronic calculator that has experienced the following monthly sales history for the first four months of the year, in thousands of units:January 23.3 March
What would an MA(1) forecasting method mean? Compare the accuracy of MA(1)and MA(4) forecasts for July through December 2013.
Compute the one-step-ahead three-month and six-month moving-average forecasts for July through December. What effect does increasing N from 3 to 6 have on the forecasts?
Which method gave better results? Based on forecasting theory, which method should have given better results?
Compute the MAD for the forecasts obtained in Problems 17 and
Using a four-month moving average, determine the two-step-ahead forecast for July through December 2013. (Hint: The two-step-ahead forecast for July is based on the observed demands in February
Using a four-month moving average, determine the one-step-ahead forecasts for July through December 2013.
Determine the one-step-ahead forecasts for the demand for January 2014 using 3‑, 6-, and 12-month moving averages.
What is the estimate of the standard deviation of forecast error obtained from the data in Problem 12?
What does the term biased mean in reference to a particular forecasting technique?
Two forecasting methods have been used to evaluate the same economic time series.The results are Forecast from Forecast from R ealized Value Method 1 M ethod 2 of the Series 223 210 256 289 320 340
A simple forecasting method for weekly sales of flash drives used by a local computer dealer is to form the average of the two most recent sales figures.Suppose sales for the drives for the past 12
A forecasting method used to predict can opener sales applies the following set of weights to the last five periods of data: .1, .1, .2, .2, .4 (with .4 being applied to the most recent observation).
In Dave Pelz’s Short Game Bible, the author attempts to characterize the skill of a golfer from a specific distance in terms of the ratio of the error in the shot and the intended shot distance.
Discuss the following statement: “Economists are predicting that interest rates will continue to be under 10 percent for at least 15 years.”
Discuss the following quotation from an inventory control manager: “It’s not my fault we ran out of those parts. The demand forecast was wrong.”
Consider the problem of choosing an appropriate college to attend when you were a high school senior. What forecasting concerns did you have when you made that decision? In particular, list the
What is the advantage of the Delphi method over the jury of executive opinion method? What do these methods have in common?
Distinguish between the following types of forecasts:a. Aggregate versus single item.b. Short-term versus long-term.c. Causal versus naive.
Discuss the role of forecasting for the following functions of the firm:a. Marketingb. Accountingc. Financed. Production
What is the appropriate type of forecasting method to use in each of the following scenarios:a. Holiday Inn, Inc., is attempting to predict the demand next year for motel rooms, based on a history of
What distinguishes seasonality from cycles in time series analysis?
Name the four components of time series (i.e., the four distinct patterns exhibited by time series).
Suppose the supplier of keyboards described in Example 1.2 is willing to offer the following incremental quantity discount schedule:Determine the cost to the firm for order quantities in increments
Maintenance costs for a new facility are expected to be $112,000 for the first year of operation. It is anticipated that these costs will increase at a rate of 8 percent per year.Assuming a rate of
Consider the following break-even problem: the cost of producing Q units, c(Q), is described by the curve c(Q) 48Q[1 exp(.08Q)], where Q is in hundreds of units of items produced and c(Q) is in
A Japanese steel manufacturer is considering expanding operations. From experience, it estimates that new capacity additions obey the law f (y) .00345y.51, where the cost f ( y) is measured in
Delon’s Department Store sells several of its own brands of clothes and several well-known designer brands as well. Delon’s is considering building a plant in Malaysia to produce silk ties. The
Suppose that the Mendenhall Corporation, a producer of women’s handbags, has determined that a 73 percent experience curve accurately describes the evolution of its production costs for a new line.
What is the difference between the product life cycle and the process life cycle?In what way are these concepts related?
What is a production and operations strategy? Discuss the elements in common with marketing and financial strategies and the elements that are different.
A major oil company is considering the optimal timing for the construction of new refineries. From past experience, each doubling of the size of a refinery at a single location results in an increase
Based on past experience, a chemicals firm estimates that the cost of new capacity additions obeys the lawwhere y is measured in tons per year and f (y) in millions of dollars. Demand is growing at
A domestic producer of baby carriages, Pramble, buys the wheels from a company in the north of England. Currently the wheels cost $4 each, but for a number of reasons the price will double. In order
For Problem 35, suppose that sales are expected to be 100 units in the first year and increase at a rate of 40 percent per year. How many years will it take to recoup the$30,000 initial investment?
A start-up company, Macrotech, plans to produce a device to translate Morse code to a written message on a home computer and to send written messages in Morse code over the airwaves. The device is
An analyst predicts that an 80 percent experience curve should be an accurate predictor of the cost of producing a new product. Suppose that the cost of the first unit is $1,000. What would the
Discuss the limitations of learning and experience curves.
Consider the experience curve plotted in Figure 1–10. What percentage experience curve does this represent? FIGURE 1-10 (for Problem 32) Marginal production cost 30 28 26 2227- 24 22 20 18 16 14 12
How much time will be required to produce the 100,000th unit, assuming the learning curve remains accurate?
Consider the learning curve derived in Problem
Consider the example of XYZ Corporation presented in this section. If the learning curve remains accurate, how long will it take to produce the 100,000th unit?
What are some of the pitfalls that can occur when using learning curves and experience curves to predict costs? Refer to the experience of Douglas Aircraft.
What is a “learning curve strategy’’? Describe how this strategy led to Ford’s success up until the mid-1920s and Ford’s problems after that time.
What are the factors that contribute to the learning curve/experience curve phenomenon?
Locate the following operations in the appropriate position on the product–process matrix.a. A small shop that repairs musical instruments.b. An oil refinery.c. A manufacturer of office
Discuss the following: “All firms should evolve along the diagonal of the product–process matrix.’’
Give an example of a product that has undergone the four phases of the product life cycle and has achieved stability.
a. What are the four phases of the manufacturing process that appear in the product–process matrix?b. Discuss the disadvantages of operating off the diagonal of the matrix.
Why can car leasing be viewed as a service? What are the advantages and disadvantages of car leasing from the buyer’s point of view? Why do manufacturers offer leases?
What are some of the services that IBM provided for its mainframe customers during its meteoric rise in sales in the 1960s?
Define “servicization” and provide an example from your own experience of a case where services were the deciding factor in a purchase.

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