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business
principles of operations
Principles Of Microeconomics 1st Canadian Edition Kevin Milligan, Philip Oreopoulos, Betsey Stevenson, Justin Wolfers - Solutions
6 Comment on the statement, “To maximize profitability, it is always better to give priority to produce products with the highest unit contribution margins.”
5 List examples of organizations that rely on judicious product mix decisions in order to maximize their throughput and revenues.
4 List examples of service organizations that rely mainly on setup reductions to improve their capacity and throughput.
3 The theoretical capacity of a process is the reciprocal of the theoretical flow time of the process. Do you agree? Explain.
2 Explain the concepts of unit load and theoretical unit load for an airline such as Southwest Airlines.
1 While visiting your favorite restaurant, identify the major resource pools and the bottleneck and estimate the overall capacity utilization.
*5 The Vancouver International Airport Authority manages and operates the Vancouver International Airport (YVR). Its focus on safety, security, and customer service has contributed to YVR’s ranking among the top 10 airports in the world. To maintain its excellent customer service standards and in
4 A home insurance application consists of two forms:F1, which relates to the home owner, and F2, which relates to the property. On receipt, each application is processed, recorded, and separated into F1 and F2.This operation requires 10 minutes. F1 requires Activity Afor 15 minutes per unit and
3 The Evanstonian is an upscale independent hotel that caters to both business and leisure travelers. When a guest calls room service at The Evanstonian, the roomservice manager takes down the order.The service manager then submits an order ticket to the kitchen to begin preparing the food. She
2 Wonder Shed Inc. (Example 3) produces, in addition to the standard model, a deluxe version for the discriminating customer. The production process for the two models is identical and is depicted in Figure 1.The activity times for deluxe models is listed in Table 8. All the times mentioned
*1 The Traffic Court of King James County operates between the hours of 9 A.M. and 1 P.M. Each morning, roughly at 9 p.m., 200 defendants show up for trial involving traffic violations, such as speeding, illegal parking, and ignoring a stop sign. On Monday, June 10, 2003, a sample of 10 defendants
8 Decreasing the activity time of an activity always improves the flow time. Comment. Table 7 The Traffic Court Time Paying Fine (minutes) 5 Defendant Arrival Departure Time with Judge (minutes) 10 12345. 61190 1 8:45 9:30 1 8:45 9:45 1.5 8:45 12:05 2 8:50 12:55 1.5 5 8:50 10:35 1 8:55 9:20 1 7
7 How long does it take your company to process a customer complaint? Draw a process map of the process utilized, and discuss how some of the levers used in this chapter can be used to speed up this process.
6 How long does it take your company to process a business expense form? What is your estimate of the theoretical time required for this process? What is the flow-time efficiency?
5 The speed at which pit crews replace flat tires at car races such as the Indy 500 is amazing. Discuss the effects of “moving work to the outer loop” in this context.
4 Agroup of MBA students is preparing a business case for submission as a final project for their operations management course. Describe the process used by the group from the perspective of working in parallel versus working sequentially.
3 Describe the process used by your bank for approving a home mortgage. In particular, highlight the activities that are done or could be done in parallel. What are the pros and cons of doing these activities in parallel?
2 Provide an example from your work environment of how flow time could be improved using the following levers:a. “Work smarter”b. “Do it right the first time”c. “Work faster”
1 Examine a service encounter such as a visit to a restaurant. Give a rough estimate of the average flow time, the theoretical flow time, and the flow-time efficiency.
11 ABC Corporation’s consolidated income statement and balance sheet for the years 2011 and 2012 is shown in Table 9 (in thousands of dollars).How do you think cash flow performance in 2011 compares with that of 2012 in the factory as well as accounts receivable? Do you think 2012 is an
10 The Evanstonian is an upscale independent hotel that caters to both business and leisure travelers. On average, one-third of the guests checking in each day are leisure travelers. Leisure travelers generally stay for 3.6 nights—twice as long as the average business customer.a. On an average
9 Cheapest Car Rental rents cars at the Chicago airport.The car rental market consists of two segments: the short-term segment, which rents for an average of 0.5 week, and the medium-term segment, which rents for an average of 2 weeks. Cheapest currently rents an average of 200 cars a week to the
8 Jasper Valley Motors (JVM) is a family-run auto dealership selling both new and used vehicles. In an average month, JVM sells a total of 160 vehicles. New vehicles represent 60 percent of sales, and used vehicles represent 40 percent of sales. Max has recently taken over the business from his
7 Orange Juice Inc. produces and markets fruit juice.During the orange harvest season, trucks bring oranges from the fields to the processing plant during a workday that runs from 7 A.M. to 6 P.M. On peak days, approximately 10,000 kilograms of oranges are trucked in per hour. Trucks dump their
6 Refer to Exercise 5. Once the triage system is put in place, it performs quite close to expectations. All data conform to planners’ expectations except for one set—the classifications made by the nurse practitioner.Assume that the triage nurse has been sending 91 percent of all patients to
5 A triage system has been proposed for the ER described in Exercise 4. Under the proposed triage plan, entering patients will be registered as before.They will then be quickly examined by a nurse practitioner who will classify them as Simple Prescriptions or Potential Admits. While Simple
*4 A hospital emergency room (ER) is currently organized so that all patients register through an initial check-in process. At his or her turn, each patient is seen by a doctor and then exits the process, either with a prescription or with admission to the hospital.Currently, 55 people per hour
3 Checking accounts at a local bank carry an average balance of $3,000. The bank turns over its balance 6 times a year. On average, how many dollars flow through the bank each month?
2 At the drive-through counter of a fast-food outlet, an average of 10 cars waits in line. The manager wants to determine if the length of the line is having any impact on potential sales. A study reveals that, on average, 2 cars per minute try to enter the drivethrough area, but 25 percent of the
1 A bank finds that the average number of people waiting in line during lunch hour is 10. On average, during this period, 2 people per minute leave the bank after receiving service. On average, how long do bank customers wait in line?
8 Why is it preferable to have a short cost-to-cash cycle, and how can that be achieved?
7 Is there a difference between flow time and takt time?Illustrate with an example.
6 Is there a difference between low inventories and fast inventory turnover?
5 The Wall Street Journal reported that “although GM and Toyota are operating with the same number of inventory turns, Toyota’s throughput is twice that of GM.” The discrepancy, concluded the writer, “could be due to much faster flow times and lower inventories by virtue of Toyota’s
4 The Internal Revenue’s Department of Tax Regulations writes regulations in accordance with laws passed by Congress. On average, the department completes 300 projects per year. The Wall Street Journal reports that, as of October 11, 2011, the number of projects currently“on the department’s
3 How can a manager determine the minimal set of operational measures that should be tracked on a daily basis to predict the financial performances of a process?
2 Discuss why it is often easier to measure average inventory and average throughput rather than average flow time.
1 Why is it important to look at aggregate flow performance, as measured by average inventory, average flow time, and average throughput?
9 Give two main benefits of focus. Provide at least two reasons all organizations do not employ focused operations. (Note: Claiming a firm is ignorant of focus is not an option.)
8 There are a surprising number of styles of baby strollers and carriages available in the marketplace.One style is the jogging stroller, which features oversize wheels that make the stroller easy to push on rough surfaces as the parent jogs. One maker of jogging strollers is Baby Trend. Baby Trend
7 MDVIP is a group of primary care physicians in Florida that offers a unique pricing structure. They charge patients a fixed fee of $1,500 per year on top of fees per visit over the year. That is, patients pay $1,500 even if they do not see a doctor during the year and still pay per consultation
6 Briefly give an argument supporting the claim that“the essence of strategy is choosing what to do and what not to do.”
5 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?
4 A small printed-circuit-board manufacturer has established itself on the ability to supply a large variety of small orders in a timely manner. Afirm 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
3 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?
2 Compare and contrast the strategies and supporting business processes of Southwest Airlines and Singapore Airlines. That is, do some research (e.g., read their corporate Web sites) and compare their business strategy in terms of the four product dimensions, targeted market segments, and their
1 How do the strategies of your neighborhood supermarket differ from those of Walmart? How do their business processes support those strategies?
4 As a product moves through its life cycle from introduction to maturity to decline, how do the attributes that customers consider important change? What are the implications in terms of the process competencies that need to be developed? What process type is appropriate in the introductory phase?
3 Compare McDonald’s and a fine dining restaurant in terms of the product attributes that customers expect.What process competencies should each organization aim to develop? Would you expect each process to be more like a job shop or a flow shop? Why?
2 Compare Walmart and a convenience store like 7-Eleven in terms of the product attributes that customers expect. What process competencies does each organization aim to develop?
1 Several examples of organizations are listed here. For each, identify underlying business processes in terms of inputs, outputs, and resources employed. What financial, external, and internal performance measures should each organization use? Who are their customers, and what product attributes
7. The federal government is expected to introduce a new spending bill that increases government purchases by$10billion . Predict how GDP will change if the multiplier is 1.2. Explain why the change in GDP is not exactly equal to the change in government spending.
6. In response to a $25billion increase in government purchases, GDP increased by $40billion .a. What is the multiplier?b. Use this estimate to predict how GDP will change if businesses invest an additional $10billion in capital investment projects.c. What is the marginal propensity to consume?
5. Forecast how aggregate expenditure and real GDP will change in each of the following scenarios. Indicate which component of aggregate expenditure changes and illustrate your answers with a graph.a. A sharp uptick in stock prices increases consumer wealth and makes consumers willing to spend more
4. Draw an aggregate expenditure graph and label the macroeconomic equilibrium on it occurring when real GDP is $7trillion . Then illustrate how a decrease in aggregate expenditure will lead the economy to experience a recession as it shifts to a new macroeconomic equilibrium where real GDP is
3. If aggregate expenditure in Thailand this year is on track to be $600billion and output is $500billion , is the economy currently at a macroeconomic equilibrium? Predict how unplanned inventories will change. How will producers respond to this imbalance? Do you anticipate GDP will rise or fall
2. Use the graph to answer the following questions.a. What is consumption spending if income is $1.5 trillion ?b. What is aggregate expenditure if income is $1.5 trillion ?c. What is the sum of planned investment, government purchases, and net exports when income is $1.5 trillion ?d. If income
1. In 2021, Real GDP in Canada increased by $137 billion and consumption spending increased by $71billion .a. What do these data suggest was the marginal propensity to consume?b. If real income increases by $100billion in 2022, use this estimate of the marginal propensity to consume to predict how
7. Your provincial legislature is debating whether the government should use public funds to encourage motion picture studios to shoot and produce films in your province. The provincial Ministry of Finance issues a report that includes the following statement:“The average budget for a movie is
6. If everyone has the same marginal propensity to consume as you indicated in your answer to question 2, determine the multiplier. Explain why the marginal propensity to consume determines the multiplier.
5. Use the Keynesian cross to illustrate how changes in aggregate expenditure can lead to changes in output.Provide an example of something that would lead to a recession and something that would lead to an expansion.Illustrate each example with a small graph showing the shift in aggregate
4. Explain why the 45-degree line represent all the possible points of macroeconomic equilibrium. Why would production tend to change if it is to the left or right of the 45-degree line?
3. Spending depends on income, income depends on production, and production depends on spending. Explain how this circular interdependence is resolved at the macroeconomic equilibrium.
2. You receive $1, 000 . How much of it will you spend this year and how much of it will you save? What is your marginal propensity to consume?
1. Explain why unplanned inventory changes are not considered part of aggregate expenditure.
11. The finance minister has just released new budget that drastically cuts taxes without decreasing government spending. When asked how he plans to address the dramatic increase in deficits that will occur due to the tax cuts, the finance minister responds, “We’re going to see some amazing
10. A political candidate has written an op-ed piece in which she claims that the federal government debt has continually grown and is out of control. She includes the following graph of consolidated government debt as evidence to support her argument.She further argues that there is no way the
9. In 2021, the federal government spent $490 billion and brought in revenue of $380 billion.a. Is this a budget deficit or surplus, and what is its size?b. If net government debt in 2021 was $990 billion, what will it be in 2022?c. GDP was $2.5 trillion in 2021 and $2.65 trillion in 2022.How has
8. Now consider what happens if the federal government introduces new government spending to combat the recession. How will this affect the economy in the short run? As the economy recovers, political pressures lead the government to keep this spending in place. What are some possible long-run
7. If the economy slides into recession next year, and the government does nothing to adjust existing tax and spending programs, how will government spending and government revenue change? Do any of these adjustments help stabilize the economy?
6. Which of the following are examples of expansionary fiscal policy, and which are examples of automatic stabilizers?a. The government paid an extra $25 million in Employment Insurance claims last month.b. New legislation temporarily extends Employment Insurance benefits for an additional 26
5. A politician says, “We could help low-wage workers by offering them tax credits that depend on their earned income, but it would be cheaper to do it by raising the minimum wage because that would cost the government nothing.” Evaluate this argument.
4. In an effort to encourage people to purchase electric cars, the federal government introduces a tax credit of $5,000 for each new electric car that is bought in Canada. Who do you think will benefit from this tax expenditure? What do you think the government’s goal is with such a tax
3. Marissa just got hired at a new job for an annual salary of$112,200. After a $6,200 deduction for child care expenses, her taxable income will be $106,000. Use the marginal tax rates shown in Figure 9 to calculate how much she will owe in federal income taxes if she has no other income and no
2. Spending on health care and Old Age Security is expected to grow over the next few decades as the share of the population who are elderly grows. Explain why an aging population increases government spending on these programs. Which level of government is responsible for health care and Old Age
1. A friend of yours argues that federal government spending is out of control and significant cuts in spending are needed to reduce the size of the government. She tells you that if we cut federal government spending on science and international affairs, it will really reduce the size of the
12. How is government debt different from personal debt?Study Problems
11. Explain why requiring the federal government to balance its budget each year would limit its ability to respond to an economic downturn.
10. The Bank of Canada has conducted expansionary monetary policy to combat a recession but is running up against the zero lower bound, and the economy is still not recovering.What other steps could the government take in order to try to stabilize the economy?
9. Describe how automatic stabilizers respond when output is above potential output. Assess the extent to which these responses are timely, targeted, and temporary.
8. Explain how increases in government spending can crowd out investment spending. Is crowding out a major concern when the economy’s output is below its potential?
7. Explain how different types of government spending add to GDP directly and indirectly, and how a rise in government spending can have a multiplied effect on GDP.
6. Use the three T s of fiscal policy to explain the challenges of using discretionary fiscal policy to counter a recession.
5. You’re working as a staffer for a member of Parliament. She is looking to sponsor a private member’s bill for dental insurance. She asks you to brief her on how she might implement it as (a) a direct-spending program, (b) a tax expenditure, or (c) using regulation. Describe the implications,
4. How is a tax expenditure similar to government spending?How is it different?
3. Aboriginal governments are responsible for more spending than ever before. Are their spending responsibilities more like provincial or local governments?
2. How do federal, provincial, and local government spending differ in focus?
1. Explain how the saying, “The federal government is an insurance company with a military,” while exaggerating a bit, does describe Canadian federal government spending.
9. The Bank has decreased the policy interest rate—a nominal short-term interest rate—to 0%, and yet the economy is still struggling. Explain what tools it still has at its disposal to help spur the economy and how it could use them.
8. The Bank of Canada increases real interest rates. Explain how each component of GDP—consumption, investment, government spending, and net exports—changes in response, and why. What happens to output, inflation, and unemployment? What would have led the Bank to increase interest rates?
7. The Governing Council is presented with data and analysis that indicates the output gap has changed from being close to 0 to now being large and negative. Additionally, inflation is 1.2% instead of the target of 2%. Predict how the Governing Council is likely to change its interest rate target
6. You are the managing director of a small local credit union.The Bank announces that it is moving its policy interest rate target from 2.25% up to 3.0%. How does this impact the interest rates on the business lines of credit and personal loans you make? What would have to happen for you to also
5. Use the policy rule-of-thumb to predict how the Bank would want to change the policy interest rate and the real interest rate targets for each of the following scenarios if its estimate of the neutral real interest rate is 1%.a. A recession hits the economy leading output to be 0.75%below
4. Predict how the Bank of Canada would likely respond if the output gap became more positive, so that output moved from being 0.1% above potential output to being 3% above potential output, and inflation rose above its 2% target rate.How would you expect unemployment to change over the next year
3. You are working at the campus bookstore earning $15.00 per hour. Your manager tells you that in the upcoming year you will get a 2% raise. How does your real wage change if inflation next year is 1%, 2%, or 3%? What flexibility does inflation provide employers, especially during prolonged
2. In recent years, the Bank of Canada has increased the number of speeches given by the governor and deputy governors by five times. What is the impact on inflation expectations of this change in communication styles?
1. For each of the following misconceptions about the Bank, identify what is wrong with the statement and why.a. The Bank of Canada lacks accountability because no one audits the Bank. There’s no way to know what really goes on behind the scenes.b. The Bank of Canada just prints more money when
10. Do you think that the Bank’s role as a lender of last resort leads financial institutions to make more risky investments? What problem might the economy face if these institutions were left to fail?Study Problems
9. Compare and contrast how changes in the policy interest rate and quantitative easing affect interest rates and the broader economy.
8. Explain how the average Canadian is affected by monetary policy. How does a change in the policy interest rate percolate from Bay Street to Main Street?
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