Cru Rental Case

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Topics: Flowchart, Pizza
Kellogg
Graduate School of Management Northwestern University

Operations

MORE SAMPLE MIDTERM EXAM QUESTIONS: SOLUTIONS

[1]

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. [2] 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. [3] 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

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