Graduate School of Management Northwestern University
MORE SAMPLE MIDTERM EXAM QUESTIONS: SOLUTIONS
Consider the life cycle of a product from introduction to maturity to decline. What kind of process (job shop, batch process, or line flow) would be appropriate at each stage and why?
At the introduction phase, product volumes are small and design changes frequent. Thus production in a job shop setup is likely to most appropriate. At maturity volumes will be large and price pressures more significant. Thus production in a line flow or batch setting (depending on volumes) is likely to be more appropriate. As the product declines, volumes decrease and a return to job shops is most appropriate.  A small printed circuit board manufacturer has established itself based on the ability to supply a large variety of small orders in a timely manner. A firm approaches the manufacturer to place a large order (equal to the current volume from all other orders) but asks for a 30 percent discount. Do you think the circuit board manufacturer should accept the order? Justify your answer.
The circuit board manufacturer should either reject the order or set up a separate line to process this order. The current production process is likely to be good at flexibility but not provide the lowest cost. Producing the large order on the same process will not result in lower costs for the large order but will disrupt timeliness of the current orders that are small.  Explain why the overall performance of Wriston will deteriorate if the Detroit plant is closed and products moved for production to lines in other plants.
Variety and scale are two important drivers of overhead costs for Wriston. Detroit has focused on products with high variety and low volumes. This allows other plants to focus on lower variety with higher volumes. Moving the Detroit products to other plants will result in a large increase in variety at these plants with very little increase in volume. This will increase overhead hurting performance. The other plants will lose their focus further hurting their performance.
Compare the differences in patient needs at an emergency room in a hospital with that of a department doing knee replacements in terms of price, quality, time, and variety. Which of these departments should follow the approach taken by Shouldice? Why?
Patients arriving at an emergency room are likely to focus on quality and the ability of the emergency room to be flexible and handle a variety of ailments. A department doing knee replacements only on the other hand does not have to handle variety. It can put in place processes that exploit this fact to improve quality and reduce cost. Thus a department doing knee replacements is more likely to follow the approach taken by Shouldice and exploit the fact that it requires no variety.
Consider CRU Computer Rentals with the following data (different from the original case). Rentals occur at the rate of 1,000 per week. Each rental averages 6 weeks, and generates
$35/wk. Shipping cost is $2.5/unit. Receiving cost is $2.5/unit. Preconfig cost is $6/unit. Repair cost is $130/unit. Each unit costs $780 and is depreciated over 3 years. Flow time, inventory and throughput at each stage are as shown in the Table below.
Status 40 30%
70% Status 24 15%
Customer Pre- Config
Throughput (units / week) Inventory (units) Flow Time (weeks) a)
Customer Receivin Status Status Status Status Status g 24 40 41 42 20 1,000 1,000 700 405 405 405 1,000 6,000 6.0 500 0.5 1,500 1,000 2.14 2.47 905 2.23 500 1.23 2,000 2
Calculate the performance metric "utilization" that CRU uses. Total number of units =12,405 Number on rent = 6,000 Utilization = 6,000/12,405 = 0.48
A rented computer follows one of three possible routes depending upon its...