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Chapter 4
4.3 Refer to Problem 4.2. Develop a forecast for years 2 through 12 using exponential
smoothing with a = 4 and a forecast for year 1 of 6. Plot your new forecast on a graph with
the actual data and the naive forecast. Based on a visual inspection, which forecast is better?
4.4 A check-processing center uses exponential smoothing to forecast the number of
incoming checks each month. The number of checks received in June was 40 million, while
the forecast was 42 million. A smoothing constant of .2 is used.
a) What is the forecast for July?
b) If the center received 45 million checks in July, what would be the forecast for August?
c) Why might this be an inappropriate forecasting method for this situation?
4.6 The monthly sales for Yazici Batteries, Inc., were as follows:
a) Plot the monthly sales data.
b) Forecast January sales using each of the following:
i) Naive method.
ii) A 3-month moving average.
iii) A 6-month weighted average using .1, .1, .1, .2, .2, and .3, with the heaviest weights
applied to the most recent months.
iv) Exponential smoothing using an a = 3 and a September forecast of 18.
v) A trend projection.
c) With the data given, which method would allow you to forecast next March’s sales?
Chapter 5
5.4 Construct a house of quality matrix for a wristwatch. Be sure to indicate specific
customer wants that you think the general public desires. Then complete the matrix to show
how an operations manager might identify specific attributes that can be measured and
controlled to meet those customer desires.
5.5 Using the house of quality, pick a real product (a good or service) and analyze how an
existing organization satisfies customer requirements.
5.6 Prepare a house of quality for a mousetrap.
5.22 MacDonald Products, Inc., of Clarkson, New York, has the option of (a) proceeding
immediately with production of a new top-of-the-line stereo TV that has just completed
prototype testing or (b) having the value analysis team complete a study. If Ed Lusk, VP for
operations, proceeds with the existing prototype (option a), the firm can expect sales to be
100,000 units at $550 each, with a probability of .6, and a .4 probability of 75,000 at $550. If,
however, he uses the value analysis team (option b), the firm expects sales of 75,000 units at
$750, with a probability of .7, and a .3 probability of 70,000 units at $750. Value analysis, at
a cost of $100,000, is only used in option b. Which option has the highest expected monetary
value (EMV)?
5.24 Ritz Products’ materials manager, Tej Dhakar, must determine whether to make or buy a
new semiconductor for the wrist TV that the firm is about to produce. One million units are
expected to be produced over the life cycle. If the product is made, start-up and production
costs of the make decision total $1 million, with a probability of .4 that the product will be
satisfactory and a .6 probability that it will not. If the product is not satisfactory, the firm will
have to reevaluate the decision. If the decision is reevaluated, the choice will be whether to
spend another $1 million to redesign the semiconductor or to purchase. Likelihood of success
the second time that the make decision is made is .9. If the second make decision also fails,
the firm must purchase. Regardless of when the purchase takes place, Dhakar’s best judgment
of cost is that Ritz will pay $.50 for each purchased semiconductor plus $1 million in vendor
development cost.
a) Assuming that Ritz must have the semiconductor (stopping or doing without is not a viable
option), what is the best decision?
b) What criteria did you use to make this decision?
c) What is the worst that can happen to Ritz as a result of this particular decision? What is the
best that can happen?