William Paterson University Cotsakos College of Business MGT-4310, Midterm Fall 2014 Problem 1. Charles Lackey operates a bakery in Idaho Falls, Idaho. Currently, the bakery has 4 employees, each one working 160 hours per month. Because of its excellent product and excellent location, demand has increased by 30% in the last year. On far too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the stores, no new ovens can be added. Charles can improve the yield by one of these two options: (1) adding a new employee; (2) purchasing an improved blender. A new blender means an increase in his investment. This added investment has a cost of $1,200 per month. The total number of labor hours required per month is 640. The pay will be $8 per hour for employees. The bakery made 1,500 loaves this time last year. If utility costs remain constant at $500 per month, and cost of ingredients at $0.35 per loaf, 1. What is the current multifactor productivity? 2. What will the multifactor productivity of the bakery be if a new employee is hired? 3. What will be the percentage of increase or decrease with the addition of a new employee? 4. What will the multifactor productivity of the bakery be if a new blender is purchased? 5. What will be the percentage of increase or decrease with the purchase of a new blender? 6. Based on productivity analysis, which option would you recommend? Problem 2. The estimated times and immediate predecessors for the activities in a project at Howard Umrah's retinal scanning company are given in the following table. Assume that the activity times are independent. Activity A B C D E F 1. 2. 3. 4. 5. 6. 7. Immediate Predecessor A B B C, D E a Time (weeks) m b 1 2 2 2 1 1 2 3 3 4 3 3 3 2 1 4 5 3 What is the expected completion time for activities A and C? What is the variance for activities C and D? Identify all paths and their duration What is the critical path and its expected completion time? What is the variance of the project? What is the probability that the project be completed in 16 weeks? What is the probability that the project be completed in 12 weeks? Problem 3. George Kyparisis owns a company that manufactures sailboats. Actual demand for George's sailboats for the last four years was as follows: Quarter Winter Spring Summer Fall 1 1,400 1,500 1,000 600 Year 2 3 1,200 1,000 1,400 1,600 2,100 2,000 750 650 4 900 1,500 1,900 500 Use trend projection to obtain forecast for years 5 and 6. 1. What is the slope? 2. What is the intercept? 3. What is the forecast for year 6? 4. What is the seasonal index for Spring? 5. What is the forecast for spring in year 6? Extra Credit. What is the MAD (Mean Absolute Deviation) for this method? Problem 4. Andrew Thomas, a sandwich vendor at Hard Rock Caf's annual Rockfest created a table of conditional values for the various alternatives (stocking decision) and states of nature (size of crowd): Alternatives Large Stock Average Stock Small Stock States of Nature Big Average Small $22,000 $12,000 -$2,000 $14,000 $10,000 $6,000 $9,000 $8,000 $4,000 The probabilities associated with the states of nature are 0.3 for a big demand, 0.5 for an average demand, and 0.2 for a small demand. 1. Determine the alternative that provides Andrew the greatest Expected Monetary Value. What is this EMV? 2. What is the expected value under certainty? 3. Compute the expected value of perfect information, (EVPI) 4. Determine the appropriate alternative under uncertainty using Maximin. Provide support for your