Unit $4$ Exercises

Question $4\mathrm{.}1$

Use exponential smoothing with trend adjustment to forecast demand for period $11.$ Let $\backslash$alpha $=0\mathrm{.}5,=$

$0\mathrm{.}3,$ and let the initial trend value be $12$ and the initial forecast be $200.$

Period

Actual

Demand

$1200$

$2212$

$3214$

$4222$

$5236$

$6221$

$7240$

$8244$

$9250$

$10266$

Question $4\mathrm{.}2$

A restaurant has tracked the number of meals served at lunch over the last four weeks. The data show

little in terms of trends, but do display substantial variation by day of the week. Use the following

information to determine the seasonal $($daily$)$ indices for this restaurant. Round all numbers in your

calculations to four decimal places.

Week

Day $1234$

Sunday $40353943$

Monday $54555459$

Tuesday $61606564$

Wednesday $72777874$

Thursday $89808179$

Friday $91909995$

Saturday $80828483$

Question $4\mathrm{.}3$

WZ Inc. is an event planning and promotion company who organizes events of different sizes for their

clients. Planning and managing events have more than their fair share of frustrations and stressors.

From last$-$minute changes to procrastinating clients, the profession isn$$t for the faint of heart. Luckily,

executing a successful event makes everything else $($like the crazy long hours$)$ worth it$.$ There is a major

event planning project due in $8$ weeks. The penalty for planning the event late is $$14000$ per week,

WWW$.$YORKVILLEU.CA

BUSI $2113$ PRODUCTION AND OPERATIONS MANAGEMENT $5$

since any delay will cause the venue to open later than anticipated, and cost the client significant

returns. If the company uses its inside event planner to complete the planning, it will have to pay them

overtime for all work. WZ Inc. has estimated that it will cost $$12000$ per week $($wages and overhead$),$

including late weeks, to have the event planners finish the job. WZ is also considering outsourcing the

planning work to other event planning companies. A bid of $$92000$ has been received for the

completed event plan. Yet another option for completing the job is to conduct a joint planning by

having a third party complete all the preliminary work at a cost of $$56000.$ WZ would then complete

the rest of the planning at an estimated cost of $$30000.$

WZ has estimated the following probabilities of completing the project within various time frames

when using each of the three options. Those estimates are shown in the following table:

What is the best decision based on an expected monetary value criterion?

Question $4\mathrm{.}4$

Montreal Hardware Co$.$ is making a make$-$or$-$buy decision. The market feedback shows that the

optimal price for this item is $$10$ each. If the item is outsourced to Laval Hardware Co$,$ there is virtually

no cost other than the $$6$ per unit that they would pay Laval Hardware Co$.$ Internally, they have two

choices. Process A requires an investment of $$120,000$ for design and equipment, but it results in a $$4$

per unit cost. Process B requires only a $$100,000$ investment, but its per unit cost is $$5.$ Regardless of

whether the item is subcontracted or produced internally, there is a $50\%$ chance that they will sell

$50,000$ units, and a $50\%$ chance that they will sell $100,000$ units. Draw the decision tree appropriate to

the alternatives and outcomes stated. Using the decision tree and EMV, what is their best choice?