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MGMT170 (C) - Individual Assignment 1

2022

Guidelines for Individual Assignment 1

•   Work out each problem by hand, showing your workings. (Please be neat and organised with your responses  so the tutor can mark these easily. If he/she can’t understand what you’re presenting, he/she can’t mark the assignment).

•   When complete paste a photo of your response in the appropriate homework File on LEARN (See the separate file How to submit your Individual Assignment 1”).

•   In this Individual Assignment 1, students will solve nine (9) quantitative problems. There will be a separate link for each of the 9 problems in Learn.

Problem 1 (10 Marks) - FORECASTING

Kaia wants to forecast weekly sales at Fush. Historical data (in dollars) for 15 weeks are shown in the table below.

a.   Calculate the forecast for Week 16, using

–   a 2-period moving average (Marks: 2)

–   a 3-period moving average (Marks: 2)

b.   Compute MSE for the two models and compare the result. (Marks: 4)

c.   Based on MSE, which model provides the best forecast, and why? (Marks: 2)

Week         Actual sales         Week         Actual sales

1

1486

9

1245

2

1345

10

1521

3

1455

11

1544

4

1386

12

1502

5

1209

13

1856

6

1178

14

1753

7

1581

15

1789

8

1332

16

 

Problem 2 (10 Marks) - FORECASTING

At AW Fraser Engineering, Jason is trying to determine workload plans for the coming months.      One of the key products produced is a particular type of Bronze Bearing that is highly demanded by industrial customers. Monthly demand for Bronze Bearing is given in the table below.

a.   Compute a 3-month moving average forecast for months 4 through 9. (Marks: 3)

b.   Compute a 3-month weighted moving average forecast for months 4 through 9. Assign weights of 0.55, 0.33 and 0.12 to the months in sequence, starting with the most recent month. (Marks: 3)

c.   Compare the two forecasts using MAD. Which forecast would you advise Jason to use, and why? (Marks: 4)

Month

Demand for    Bronze Bearings

Month

Demand for    Bronze Bearings

1

50

6

100

2

100

7

90

3

60

8

120

4

80

9

 

5

140

 

 

Problem 3 (16 Marks) - FORECASTING

Sara manages one of the Allbirds shoe lines, and is working to improve the group’s forecasting capabilities so that production will more closely match actual demand (that’s the goal, at least!). Monthly sales for the past year are noted in the table below.

1.   Develop forecast models using each of the following:

a.   A five-month moving average (Marks: 2)

b.   Exponential Smoothing with a smoothing constant equal to 0.2, (seed the model with a January forecast = 16,000). (Marks: 2)

c.   A weighted moving average using 0.6(t- 1),  0.3(t-2) and 0. 1(t-3) (Marks: 2)

2.   Assess Forecast Error

a.   Calculate the MAPE for each of the 3 forecast models generated in Question 1 above. (Marks: 8)

b.   Which model should Sara use for her forecasting efforts, and why? (Marks: 2)

Month      Sales (‘000 Units)     Month     Sales (‘000 Units)

Jan

16,000

Jul

22,000

Feb

19,000

Aug

20,000

Mar

18,000

Sept

19,000

Apr

15,000

Oct

22,000

May

20,000

Nov

24,000

Jun

18,000

Dec

23,000

Problem 4 (10 Marks)  COST VOLUME ANALYSIS

At Ethique, Susannah knows she needs to increase capacity for production of the solid shampoo bars. She is considering one of two new machines, with associated costs and revenues as estimated in the table below.

a.   Determine each alternatives break-even point in units. (Marks: 5)

b.   At what volume of output would the two alternatives yield the same profit? (Marks: 3)

c.   If expected annual demand is 12,000 units, which alternative would yield the higher profit? (Marks: 2)

Machine A              Machine B

Annual fixed costs

$40,000

$30,000

Variable costs per unit

$10

$11

Revenue per unit

$15

$15

Problem 5 (10 Marks)  COST VOLUME ANALYSIS

Tamati has been pleased with the success at Fush in recent years, and is thinking about expanding to a 2nd  location across the city. Fush II will have a slightly different approach, while maintaining the current culture and mission of the organisation. Tamiti is tentatively planning for the following 4 categories of revenue:

•    Beer and wine. He estimates that 15,000 drinks will be served, with an average selling price of $9.00. Average cost per drink will be $7.00.

•    Fish Dinners.   The average fish dinner will sell for $19.50, with a cost of $15.00 Tamati estimates selling 20,000 meals.

•    Dessert. The specialty cakes and tarts will sell for $8.00, at a cost of $6.50. Tamati estimates selling 9,500.

     Lunch specials. Opening for lunch, with a special lunch menu will be a new offering at Fush

II. Tamati expects to draw a steady group of customer, selling 10,000 lunches in the next year. Lunch prices will average $10.00, with a cost of $8.00.

•    The new location being consider for Fush II will have expenses of $5,300 per month in rent (including utilities). Tamati estimates monthly labour costs of $7,600. Although labour is often considered a variable cost, the estimate can be considered a fixed cost in this situation due to its predictability.

a.   What is the breakeven point in dollars? (Marks: 5)

b.  Would you advise Tamati to go ahead with his plans to open this restaurant?  Justify your response. If yes, why? If no, why not, and what would need to change to make this a good idea? Use further analysis to support your recommendations. (Marks: 5)

Problem 6 (10 Marks)  COST VOLUME ANALYSIS

At Fraser Engineering, Eric is trying to decide whether to purchase a certain part or to have it produced internally. Internal production  could use  either of two processes.  One would  entail  a variable cost per unit of $17, and an annual fixed cost of $200,000; the other would entail a variable cost of $14 and annual fixed costs of $240,000. Three vendors are willing to provide the part.            Vendor A has a price of $20 per-unit for any volume up to 30,000 units.

Vendor B has a price of $22-per-unit for demand of 1,000 units or less, and $18 per-unit for larger quantities.

Vendor C offers a price of $21-per-unit for the first 1,000 units, and $19 for each additional unit.

a.   What is the correct formula to use to compare these options? (Marks: 2)

b.   Which options would be best for: (Marks: 6)

i.   10,000 Units?

ii.  20,000 Units?

iii.   100,000 Units?

c.   What is the value in considering these option across three very different demand values ranging from 10,000 to 100,000 units? (Marks: 2)

Problem 7 (10 Marks)  INVENTORY MANAGEMENT

Fush uses an average of 40 boxes of paper serviettes a day. The restaurant operates 260 days per year, storage and handling costs for the serviettes are $30-per-year per box, and it costs approximately $60 to order and receive a shipment of serviettes.

a.   Calculate the order size would minimize the sum of annual ordering and carrying costs? (Marks: 3)

b.   Compute the total annual costs using your order size from part (a). (Marks: 3)

c.   Except for rounding, are annual ordering costs and carrying costs always equal at the EOQ? Justify your answer. (Marks: 2)

d.  The manager is currently using an order size of 200 boxes, but wants to make sure he is managing supplies in a cost efficient manner.” Would you recommend that the manager use the optimal order size instead of200 boxes? Justify your answer. (Marks: 2)

Problem 8 (10 Marks)  INVENTORY MANAGEMENT

Susan manages the packaging supplies for the New Zealand distributorship ofAllBirds product     lines.  It’s her job to order all the shoe boxes that house each pair of shoes (whether going to retail stores, or shipping directly to consumers via the online store). She purchases shoe boxes from a     local printing supplier. The NZ distributor ships on average 325 boxes of shoes each month. Boxes cost $2.25 each, and each order costs $18.00 to process. Because of limited storage space, Susan’s manager wants to charge inventory holding at 25-percent of the unit cost. The lead time is 7 days.  Assume 360 working days per year. Calculate the following:

a.   Economic Order Quantity (Marks: 2)

b.   Reorder Point (assuming no safety stock) (Marks: 1)

c.   Number of Orders-per-Year  (Marks: 1)

d.   Total Annual Cost  (Marks: 2)

e.   If storage space weren’t so limited, Susan estimates that inventory holding costs would only be 15% of unit cost. How would that change total annual costs? (Marks: 4)

Problem 9 (10 Marks)  INVENTORY MANAGEMENT

Unaiki manages the inventory for Hine’s kids collection. She’s had too many stockouts lately and is worried about poor customer service. Therefore, she is considering a change to the current               inventory control system for kids track pants. She gathers the following information:

Average Demand: 250 Pairs/Week

Lead Time: 2 Weeks

Order Cost = $75 Per/Order

Unit Cost: $21.50

Carrying Charge Rate = 18%

Desired Service Level = 95%

Standard Deviation of Weekly Demand: 40

Number of Weeks per year: 52

Unaiki decides to use a fixed order quantity system.

a.   What is the Economic Order Quantity? (Marks: 3)

b.   What is the total annual order and inventory-holding costs for the EOQ? (Marks: 3)

c.   What should the reorder point be to have a 95% service level (Marks: 3)

d.  Help Unaiki understand her new order logic:  In order to stay in stock 95% of the time, she should place an order for _______ pairs when ________________. (Marks: 1)

B.Com. Learning Goals

This assessment will be used to partially assess the following B.Com Learning Goal

   Graduates are able to use analytical thinking and problem-solving skills to address specific

problems.

o The test, exam and assignments all require application of theories to analytical thinking and problem-solving skills.

Dishonest Practice

The University's interpretation of what constitutes dishonest practice includes the following:

1.   Plagiarism, being the presentation of any material (text, data or figures, on any medium including computer files) from any other source without clear and proper acknowledgement of the source of that material.

2.   Collusion*, being work performed in whole or in part in conjunction with another person or persons, but submitted as if it had been completed by the named author alone (or joint authors if a group item of work).

3.   Copying, being the use of material (in any medium, including computer files) produced by another person or persons, with or without their knowledge and approval.

4.   Ghost writing, being the use of another party (with or without any form of payment) to prepare all or part of an item of work submitted for assessment.

Under the University Regulations, evidence of any of these or other forms of dishonest practice by any student(s) represents grounds for disciplinary action and may result in penalties ranging from denial of credit for the item of work in question to exclusion from the University.

*This interpretation of the dishonest practice of collusion is not intended to discourage students from having  discussions  with  each  other  about  how  to  approach  a  particular  assigned  task,  and incorporating general ideas coming out of such discussions into their own individual submissions.

Assignment Submission

Assignments must be submitted via Learn by the due date. Note that by submitting your assignment you are also agreeing to the following declaration:

I have read andfully understand the statement regardingDishonest Practice and hereby certify that this item of work submittedfor assessment is entirely my own work. 

Assignments submitted after the due date (either physical or electronic) without an extension being granted by the Lecturer will have 10% deducted for every day or part day the assignment is late. Assignments will not be accepted for marking if the assignment is submitted any later than 5 days after the due date.