Page 334 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes 8. How is value analysis related to efficiency gains? What importance does value analysis
hold in an organisation?
9. "The cost to perform a function is inversely proportional to its importance". Elucidate.

10. Write short notes on: Cost Function Matrix and Quality Function Deployment.
11. Compare and contrast centralized and decentralized purchasing systems.
12. Why do you think it is difficult to move from a decentralized purchasing system to a
centralized one?
13. Assume a firm has prepared the following cost estimates for the manufacture of a
subassembly component based on an annual production of 8000 units:

Per Unit Total
Direct Materials $5 $40,000
Direct labour 4 32,000
Variable overhead applied 4 32,000
Fixed overhead applied (150% of direct labour cost) 6 48,000
Total cost $19 $152,000

The supplier has offered the subassembly at a price of $16 each. Two-thirds of fixed factory
overhead, which represents executive salaries, rent, depreciation, and taxes, continue
regardless of the decision. Should the company buy or make the product?

14. Suppose you are the purchasing officer in an organisation that in engaged in apparels
production. Your management wants that purchasing should be centralized but employees
in your department resist working under this condition. How will you handle the situation?
14. What are the codes of conduct that you think a purchasing department should adhere to?
Should a purchasing officer purchase a low quality raw material because it is cost effective
and approved by the management? If not, then what should he do?
16. ABC company has the following manufacturing costs for producing 120 units of part X:
Direct materials 28,000
Direct labor 18,500
Mixed overhead 29,000
Variable overhead 15,000
Fixed overhead 30,000

Total 120,500
If it considers buying the part, 80 units of parts would cost 90000. Should the company
make or buy the part?
Answers: Self Assessment

1. True 2. False
3. False 4. True
5. True 6. False
7. True 8. Supply Chain

9. Two Way 10. Dual
11. ISO 9000 12. Decentralized

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