Operations Management Assignment

Operations Management Assignment

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Title page: the number of the case (e.g., Case_1), your group number (e.g., Group_xx), the group members in the alphabetical order by the LAST name, followed by the first name (do NOT provide student ID numbers).
On the subsequent pages, provide the solution of the case (e.g., all your results, explanations, discussion, conclusions, implications, etc.). I am not offering any specific guidelines here. Your choice. Just make sure that you have solved the problem described in the case and answered all possible questions that emerge from the case. I do not restrict the number of pages nor suggest the desired number of pages. Your decision. Provide all necessary explanations.
On the final pages, provide all exhibits such as calculations based on specific formulas, Excel’s computer printouts wherever applicable, graphs, tables, and the like.
The text, calculations, etc. should be type-written (whenever possible), and neatly presented, SINGLE line spacing, one sided, (any font type of your choice size 10). Try to use the Excel’s computational and graphical capabilities as much as possible. Avoid/minimize hand writing/drawing. Use only when absolutely necessary.
No additional literature review is needed. If you include one, it will NOT be evaluated. Use only the information provided in the case and in the relevant power point files on the Sakai.
6. Each project has to be type-written, any relevant exhibits/computer printouts/etc.

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A company is considering opening a fast-food service operation (drive through). Prior research shows that customer arrivals would follow a Poisson process, with an arrival rate of 24 cars per hour, and that service times would follow a negative exponential probability distribution. Arriving customers would place orders at an intercom station at the back of the parking lot and then drive to the service area to pay for and receive their orders. The following service alternatives are being considered:

Q1. (10 p.) A single-server operation in one service window in which one employee fills the order and takes the money from the customer. The average service time for this alternative is 2 minutes.

– What is the average number of cars waiting for service in the line?

– What is the average number of cars in the system?

– What is the average time a car waits for service in the line?

– What is the average time in the system?

– What is the utilization factor of the system?

Q2. (10 p.) A single-server operation in one service window in which one employee fills the order while a second employee takes the money from the customer. The average service time for this alternative is 1.25 minutes.

– What is the average number of cars waiting for service in the line?

– What is the average number of cars in the system?

– What is the average time a car waits for service in the line?

– What is the average time in the system?

– What is the utilization factor of the system?

Q3. (10 p.) A two-server operation with two service windows and two employees (one employee per window). The employee stationed at each window fills the order and takes the money from the customer. The average service time for this alternative is 2 minutes for each server. This service operation assumes that the two service windows are located at the opposite sides of the restaurant building with two separate lanes leading to them, i.e., the arriving customers must choose from the very beginning (after placing their order) which lane they will follow (with no chance for backing up or switching to the other lane).

– What is the average number of cars waiting for service in the line?

– What is the average number of cars in the system?

– What is the average time a car waits for service in the line?

– What is the average time in the system?

– What is the utilization factor of the system?

Q4. (10 p.) A two-server operation with two service windows and two employees (one employee per window). The employee stationed at each window fills the order and takes the money from the customer. The average service time for this alternative is 2 minutes for each server. This service operation assumes that although the two service windows are located at the opposite sides of the restaurant building, there would be only one common lane leading to the building from the parking lot, i.e., the arriving customers would follow the same, common, lane and only at the very end they would move to the first window available (on the left or on the right side of the building).

– What is the average number of cars waiting for service in the line?

– What is the average number of cars in the system?

– What is the average time a car waits for service in the line?

– What is the average time in the system?

– What is the utilization factor of the system?

Q5. (30 p.) Which option would you recommend and why? Fully justify and interpret your answer.

The following additional cost information is available:

– Customer waiting time in the line is valued at $25 per hour to reflect the fact that waiting time is annoying to customers of the fast-food business.

– The cost of each employee is $12 per hour.

Q6. (30 p.) What is the lowest-cost design for this fast-food business? Based on this analysis, are you going to change/modify your recommendation in Q5 above? Fully justify and interpret your answer.

An investment company manages portfolios of stocks, bonds, and other investment alternatives. One of the company’s clients would like to invest $200,000 in stocks. The client is interested in four specific stocks – A, B, C, and/or D. The company gathered the following relevant financial data for the four stocks:

 Stock AStock BStock CStock D
Price per share$100$50$80$40
Annual rate of return0.120.080.060.10
Risk measure per dollar invested0.100.070.050.08

Based on the above data, the investor has stipulated the following investment guidelines:

1. The entire amount of $200,000 must be invested.

2. The annual rate of return must be at least 9% of the invested capital of $200,000.

3. Not every stock has to be purchased, however, if selected, no one stock can account for more than 50% of the total dollar investment.

4. The total investment in stocks A and B combined must be equal to or greater than the total investment in stocks C and D combined.

Q1. Build a linear programming model to develop an investment portfolio that minimizes total risk under the above constraints.

a) (4 p.) Define the decision making variables.

b) (12 p.) Show the objective function.

c) (14 p.) Show the constraints.

Q2. (20 p.) What is the optimal solution and what is the value of the objective function? Show the relevant portion of the Solver’s output. Fully interpret the results.

Q3. (20 p.) What are the objective coefficient ranges for the four stocks? Show the relevant portion of the Solver’s output. Fully interpret these ranges.

Q4. (30 p.) Suppose the investor decides that the annual rate of return no longer has to be at least 9% and agrees to at minimum level of 8%. What does the shadow price associated with this constraint indicate about a possible change in total risk that could occur from this lower rate of return? Show the relevant portion of the Solver’s output. Fully interpret the results.

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