Operations Management
INSTRUCTIONS
(i)
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(ii)
Please type your answers into this Word document. Pictures and images
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Question 1 (30 points)
City government has collected the following data on the number of new car registrations over the
past seven years. It also indicates what annual sales tax collections was in the same years from
2016 to 2022.
Year
Annual Sales Tax
Collection (in billions)
New Car Registration
(in thousands)
2017 2018 2019 2020 2021 2022 2023
1.0
1.5
1.8
2
2.5
2.8
3.0
10
12
15
13
18
20
22
Using linear trend (trend analyses) to predict the Annual Sales Tax Collection in years 2025 as
function of time.
1
Question 2 (55 points)
The last six weeks of demand at a new car dealer are shown below.
Week Sales
1
36
2
45
3
48
4
54
5
60
6
66
a) Use a four-period weighted moving average to determine a forecast for the week 4, week 5, and
week 6, using weights of 2, 3, and 5 as shown in the table given below. Calculate the MAPE. (20
points)
Weights Applied
5
3
2
Week
Sales
1
36
2
45
3
48
4
54
5
60
6
66
Time Period
Last week
Two weeks ago
Three weeks ago
Forecasting
2
b) Use exponential smoothing with an alpha of 0.5 to determine a forecast from week 2 to week
6 with an initial forecast of 36 for Week 1. Calculate the MAPE. (20 points)
Week
Sales
Forecasting
(alpha = 0.5)
1
36
12
2
45
3
48
4
54
5
60
6
66
c) Based on these calculations, which method seems more accurate? Show your work to support
your results (15 points)
3
Question 3 (50 points)
A toy manufacturer makes stuffed kittens and puppies which have relatively lifelike motions.
There are three different mechanisms which can be installed in these “pets.” These toys will sell
for the same price regardless of the mechanism installed, but each mechanism has its own variable
cost and setup cost. Profit, therefore, is dependent upon the choice of mechanism and upon the
level of demand. Payoffs for each mechanism-demand combination appear in the table below.
State of Nature
Alternatives
Light
Moderate
Heavy
Wind-up action
– $5,000
$40,000
$65,000
Pneumatic action
-$10,000
$45,000
$75,000
Electronic action
-$150000
$50,000
$80,000
a) If Maximin strategy were used, which would be chosen? (10 points)
b) Assuming a Minimax Regret strategy, which alternative would be chosen? (You can use the
following regret (or opportunity loss) table to help you answer the question) (15 points)
Regrets
Alternatives
Light
Moderate
Heavy
Wind-up action
Pneumatic action
Electronic action
c) The manufacturer has in hand a forecast of demand that suggests a 0.3 probability of light
demand, a 0.5 probability of moderate demand, and a probability of 0.2 of heavy demand. Using
the criterion of expected monetary value, which production alternative should be chosen? (10
points)
4
d) How much should the operations manager be willing to pay for accurate information (i.e. what
is the Expected Value of Perfect Information, EVPI?)? (15 points)
Question 4 (15 points)
A farmers’ cooperative association plans to build a new sugar mill in Southwestern Louisiana.
The primary objective of the mill is to provide the farmers with a place to take their crop for
processing that will reduce their transportation costs. The members of the co-op believe that the
center-of-gravity method is appropriate for this objective. While there are over 200 sugar cane
farms in the region, they are tightly clustered around five villages. Using the data below, use the
center-of-gravity method to calculate the coordinates of the best location for this mill. All
mileage references use the city of Lake Charles as (0,0).
Village
Arceneaux
Boudreaux
Cancienne
Darbonne
Evangeline
Miles East of Miles North of Sugar Cane
Lake Charles Lake Charles
tonnage
90
10
240,000
140
60
320,000
20
70
450,000
50
20
120,000
100
80
60,000
5
6

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