QUESTION 36 You are leading a committee deciding which capital improvement project to fund in the factory. You have been directed by corporate management that when you choose a project that you consider certain factors. The strategic plan is focused on improving productivity and quality, so the project you choose should focus on one of those areas. Management is willing to fund a project up to $1.5 million. There are three performance measures that will be used to select the project: payback period (lower is better), return on investment (higher is better), and impact index (higher is better). The committee decides to weight the performance measures: payback period - 4, return on investment - 7, and impact index - 9. Using the formal decision making process, which of the following statement is correct? Payback Project Cost ($) ROI (%) (Years) Impact Index Focus A Productivity 950.000 2.0 15 7 B Capacity 500.000 1.5 24 8 Quality 800.000 3.0 12 5 D 1.500.000 3.5 17 6 E 1.5 17 8 F 2.0 21 4 Productivity Quality 1.800.000 Productivity 1.750,000 1. Iffwhen assigning a score, we will assign the second lowest score to the payback time for project A since this criterion is the second shortest. 2. Project B is the best choice because it has the highest ROI. 3. After we remove the ineligible project(s) due to the requirements from the strategic plan, the rest choices are indifferent and we can choose any one project as the final choice. 4. Based on the requirement, we should make a decision simply based on the criteria of payback, ROI, and Impact index. The focus and cost are irrelevant information. 5. After we remove the ineligible project(s) due to the requirements from the strategic plan, we will assign a score (subjective or objective) to the considered criteria. For example, we align the measure in a consistent way among the considered criteria. QUESTION 37 You are leading a committee deciding which capital improvement project to fund in the factory. You have been directed by corporate management that when you choose a project that you consider certain factors. The strategic plan is focused on improving productivity and quality, so the project you choose should focus on one of those areas. Management is willing to fund a project up to $1.5 million. There are three performance measures that will be used to select the project: payback period (lower is better), return on investment (higher is better), and impact index (higher is better). The committee decides to weight the performance measures: Payback period - 4, return on investment -7, and impact index - 9. Using the formal decision making process, what is the weighted score of project A? Payback Cost ($) (Years) Project Focus ROI (9) Impact Index A 950.000 2.0 15 7 B Productivity Capacity Quality 500.000 1.5 24 8 C 800.000 3.0 12 5 D 1.500.000 3.5 17 6 E Productivity Quality Productivity 1.800.000 1.5 17 8 F 1.750.000 2.0 21 4 1.0 0 2.24 3.100 04. 176 5. 174
