Homework for Supply Chain Management
BUS ADM 370
Introduction to Supply Chain Management
Homework 2 (50 points)
For all the problems, to receive full scores, you have to show your complete and accurate work. If you only provide the final answers without showing your computations, you will not be assigned a full score (or you will miss the opportunity of receiving partial credit).
Problem 1) (12 points)

a) Compute the multifactor productivity measure (output in sales dollars) for each week using the data provided below for the production of chocolate bars. Assume 45hour weeks and an hourly wage of $14. Overhead is 2.5 times the total weekly labor cost. Material cost is $12 per pound. Standard price to sell is $200 per unit. (10 points)

b) Whatdotheproductivityfiguressuggest?(Whatisthetrend?)(2point)
Problem 2) (12 points)
Jimbo Elrod has obtained fixed and unit variable cost in formation of four potential locations for his professional wrestling school and summarized it in the table below. All values are in dollars.

a) Jimbo plans to charge the same amount for tuition regardless of where he decides to establish his school. If he believes that 450 students will matriculate each year, which location will result in the lowest total cost? (4 points)

b) WhatisthebreakevenpointforeachlocationifJimbodecidestocharge$22perstudent?(4 points)

c) How many student enrollments would make Sites B and D equally attractive? (4 points)
Week 
Output (units) 
Workers 
Material (lbs) 
1 
2,500 
6 
520 
2 
2,750 
7 
540 
3 
2,850 
8 
560 
4 
3,000 
9 
580 
Site 
Fixed Cost 
Variable Cost 
A 
10,000 
24 
B 
12,000 
20 
C 
14,000 
18 
D 
16,000 
17 
Problem 3) (18 points)
Astro Industries of Minneapolis, MN, makes weekly shipments to 20 customers in the Dallas area. Each customer’s order weighs, on average, 1,500 pounds. A direct truck shipment from Minneapolis to Dallas costs $1,800. The maximum load per truck is 40,000 pounds.

a) How much would it cost Astro to make direct, singleorder shipments to all of its customers each week? What would the utilization level for the trucks look like? (5 points)

b) Suppose a Dallasbased warehousing firm has agreed to run a breakbulk warehousing operation for Astro at a cost of $75 per hundredweight. Local deliveries to each customer would tack on another $100 per customer per week. How much money could
Astro save by going with the breakbulk solution? (8 points)

c) How high would the warehousing cost (currently at $75 per hundredweight) have to be
before breakbulk warehousing is no more attractive than direct shipments? (5 points)
Note: You can solve Parts a and b together as we did in class practice problem.
Problem 4) (8 points)

a) A barbecue sauce producer sells their product in a 40 ounce bottle. Their historical process mean has been 40 ounces with a standard deviation of 0.5 ounces. If their tolerance limits are set at 40 ounces plus or minus 2 ounce, what is the process capability ratio of the bottle filling process? (4 points)

b) Abarbecuesauceproducersellstheirproductina30ouncebottle.Theircurrentprocess mean is 29.70 ounces with a standard deviation of 0.45 ounces. If their tolerance limits are set at 30 ounces plus or minus 1.5 ounce, what is the process capability index of the bottle filling process? (4 points)
Bonus) (8 points)
MountainMole Foods has decided to use the perfect order measurement approach to track its logistics performance. According to MountainMole, a perfect order is one that (1) is delivered on time, (2) arrives in one complete shipment, (3) arrives undamaged, (4) is correctly billed. MountainMole has the following performance figures for the past four years: (Assume that there is at most one error per order.)
Year
Total Shipments
Ontime Shipments
Complete Shipments
Undamaged Shipments
Correctly Billed Shipments

a) Calculate performance for each of the four years. What is the overall trend in the performance, if any? What factors explain the results? (6 points)

b) IfyouwerelookingtoimproveMountainMole’slogisticsperformance,whatareasmight you concentrate on based on these results? (2 points)
2000 2001
2002 2003
250,000 
320,000 
360,000 
380,000 
190,000 
290,000 
340,000 
345,000 
198,000 
275,000 
318,000 
350,000 
196,000 
270,000 
346,000 
378,000 
180,000 
235,000 
268,000 
282,000 