Lecture 1 Romulo Ely

Fixed cost includes: raw materials and resources staff and management salaries material handling and freight direct labor and packaging

staff and management salaries

Profit

total revenue - total cost

Observation

Identification of a problem that exists in the system or organization

Model Solution

Models solved using management science techniques.

Cadbury's chocolate operations in Tasmania does produce greenhouse emissions, but is taking steps to reduce those emissions. This is an example of: Socially responsible and ethical management Optimizing productivity Optimizing competitiveness Optimizing Quality

Socially responsible and ethical management

Which of the following combinations of constraints has no feasible region? x1 + x2 greater or equal than 15 and x1 - x2 less or equal than 10 x1 + x2 greater or equal than 5 and x1 greater or equal than 10 x1 + x2 greater or equal than 100 and x1 + x2 less or equal than 50 All of the above have a feasible region.

x1 + x2 greater or equal than 100 and x1 + x2 less or equal than 50

Consider the following linear programming problem: Max Z = $15x + $20y Subject to: 8x + 5y ≤ 40 0.4x + y ≥ 4 x, y ≥ 0 Considering that the values for x and y that will maximize revenue are respectively x = 0 and y = 8, what is the amount of slack associated with the first constraint - in the optimal point? 4 8 0 6

0

Consider the following linear programming problem: Max Z = 4x1 + 2x2 Subject to: x1 less or equal than 4 x2 less or equal than 2 x1, x2 ≥ 0 The Z obtained from the best combination of x2 and x1 is: 4 20 16 None of the above

20

Parameters

Numerical values that are included in the objective functions and constraints.

Promoting a sense of urgency within the organization can help: competing on speed of delivery competing on quality competing on cost competing on social and ethical responsibilities

competing on speed of delivery

If by processing the same amount of inputs used in the past, a company is now capable to produce a(n) ________ amount of outputs, it means that an improvement of productivity was achieved. lower similar greater none of the above

greater

Decision Variables

mathematical symbols that represent levels of activity

A company can compete on cost by: immediately responding to customer needs respond quickly to change in demand producing standardized products for larger markets tailor products to customers

producing standardized products for larger markets

Australian road freight company Linfox uses aerodynamic trucks and trailers to reduce fuel consumption. This is a case of generating higher productivity competitiveness quality stochastic simulation

productivity

Strictly conforming to design specifications enables quality competitiveness. cost competitiveness. productivity augmentation. optimized products with least cost.

quality competitiveness.

Break Even Point

total cost = total revenue with zero profit

Break Even Analysis

The aim is to determine the number of units of a product (volume) to sell or produce that will equate total revenue with total cost.

When building a chair, a carpenter uses 2 pounds of wood and 3 ounces of glue. If the Carpenter has 3 pounds of wood and 6 ounces of glue, how many chairs will he/she be able to build? one chair two chairs three chairs four chairs

one chair

Definition of the problem

problem must be clearly and consistently defined, showing its boundaries and interactions with the objectives of the organization

Optimizing variance in final output can augment supply chain efficiency productivity competitiveness quality

quality

Administrators at a university are planning to offer a summer seminar. It costs $4000 to reserve a room, hire an instructor, and bring in the equipment. Assume it costs $45 per student for the administrators to provide the course materials. If we know that 100 people will attend, what price should be charged per person to break even? 48 175 85 137

85

LP

A model that consists of linear relationships representing a firm's decisions given an objective and resource constraints.

Six Sigma is a quality management approach that seeks to identify and remove the causes of problems in the operations process, achieving virtually defect-free production. Which of the following will directly contribute to six sigma quality management process? Continuous improvement of processes Reduce variance in final output Strictly conforming to standards All of the above are correct

All of the above are correct

___________________ refers to the ability of an organization to sell products in a market. Total Quality Management Productivity Optimal profitability Business competitiveness

Business competitiveness

Model Construction

Development of the functional mathematical relationships that describe the decision variables, objective function and constraints of the problem.

The break-even point is the volume that the profit is positive (greater than zero). True False

False

Sensitivity Analysis: Increase in Fixed Cost

For the Break even point an increase in fixed cost results in an increase in volume and increase in revenue

Sensitivity Analysis: Increase in Price

For the Break even point an increase in price will result in less volume and less revenue

Sensitivity Analysis: Increase in Variable Cost

For the Break even point an increase in variable cost will result in an increase in volume and increase in revenue

The Pinewood Furniture Company produces chairs and tables from two resources: labor and wood. The company has 120 hours of labor and 100 board-ft. of wood available each day. Demand for table is limited to 8 per day. Each chair requires 3 hours of labor and 4 board-ft. of wood, whereas a table requires 20 hours of labor and 9 board-ft. of wood. The profit derived from each chair is $100 and from each table is $500. The company wants to determine the number of chairs and tables to produce each day in order to maximize profit. The correct linear programming model formulation of this problem is: Max Z = 120x1 + 100x2 Subject to: 3x1 + 4x2 ≤ 100 20x1 + 9x2 ≤ 500 x2 ≤ 8 x1, x2 ≥ 0 Max Z = 100x1 + 500x2 Subject to: 3x1 + 4x2 ≤ 120 20x1 + 9x2 ≤ 100 x2 ≤ 8 x1, x2 ≥ 0 Max Z = 100x1 + 500x2 Subject to: 3x1 + 20x2 ≤ 120 4x1 + 9x2 ≤ 100 x2 ≤ 8 x1, x2 ≥ 0 Max Z = 100x1 + 500x2 Subject to: 9x1 + 4x2 ≤ 120 20x1 + 3x2 ≤ 100 x1 ≤ 8 x1, x2 ≥ 0

Max Z = 100x1 + 500x2 Subject to: 3x1 + 20x2 ≤ 120 4x1 + 9x2 ≤ 100 x2 ≤ 8 x1, x2 ≥ 0

Total Revenue

Price x Quantity

Consider the following linear programming problem: Max Z = $200x1 + $100x2 Subject to: 8x1 + 5x2 ≤ 80 2x1 + x2 ≤ 100 x1, x2 ≥ 0 What is maximum Z and the value of x1 and x2 at the optimal solution? Z = 2000; x1 = 10; and x2 = 0; Z = 2000; x1 = 0; and x2 = 20; Z = 1000; x1 = 0; and x2 = 10; None of the above

Z = 2000; x1 = 10; and x2 = 0;

Objective Function

a linear relationship reflecting the objective of an operation

Model Constraints

a linear relationship that represents a restriction on decision making

Total Cost

fixed cost + variable cost * volume