June 2004

Paper 13 Operations and Project Management & Control June 2004 Time Allowed : 3 Hours (Answer Question No. 1 which is compulsory and any two questions from the rest under Section I) SECTION I Marks 1. (a) Indicate whether the following statements are "true" or "false". 1x10=10 (i) Incentives are substitute for lower wages; (ii) Method study should precede work measurement; (iii) Job evaluation is used to measure absolute job worth; (iv) Value engineering aims at reducing work content of a product; (v) Operation process chart incorporates all five symbols; Inventory control in FSN technique is based on classification by (vi) movement in consumption; (vii) Methods improvement has unlimited scope; (viii) No handling is best handling; "Principle of overall integration" is one basic principle of best (ix) layout. Quality of lot submitted for inspection is the percentage of (x) defectives actually present in it. (b) Rewrite the statements, filling in the blanks and underline the blanks 1x10=10 filled in. For each blank a suitable word/phrase may be needed; Expansion Project is a project to expand the _______ _______ of (i) the plant; (ii) The _______ schedule is used for progressing of the executive agencies; (iii) The investment opportunity is so promising that an investment decision can be taken on the basis of the information elaborated at the _______ stage; (iv) CBA stands for _______ _______ _______; (v) Under or over absorption of overheads arise only when overheads are absorbed by _______ _______ _______ _______ _______; (vi) DPR is similar to the feasibility study, but with more accurate data and information, the progress and review of the project is anchored on _______ _______ _______;

I—13(OPM) Revised Syllabus Full Marks : 100

(vii) The internal rate of return is the discount rate at which the PV of _______ is equal to the PV of _______. (viii) The major sources of finance can be broadly classified into _______ and _______ funds. (ix) _______ is the opposite of "risk averse"; (x) Identification of the project objectives is the first step in the _______ _______ process. 2. (a) What do you understand by "Defective work"? What are the possible reasons of defective work? Indicate approach of management of defective work, along with its cost implication. (b) "Three" Limited is a popular manufacturer of different kind of lifting tools. These lifting tools are made of polypropylene fibre. The company installed a plant for backward integration of its raw material polypropylene fibre. It produces these polypropylene fibre at the rate of 5000 mt per hour. The usage rate of these fibre for the production of lifting tool is Rs. 5 per metre. The inventory carrying cost is 25% and the set up cost are Rs. 4050 per set up. Compute optimal number of cycle required in a year for the manufacture of this special fibre. (Take 365 days as no. of days for the year computations).

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Please turn over (2) F-13(OPM) Revised syllabus 3. (a) What factors might cause a company to order an amount larger or smaller than "Economic order quantity"? (b) What are the basic objectives of preventive maintenance? (c) COORAN, a limited company, planning to manufacture a household cooking range has to decide on the location of the plant. Three locations are being considered viz, Patna, Ranchi and Dhanbad. The fixed costs of the three locations are estimated to be Rs. 30 lakhs, 50 lakhs and 25 lakhs per annum respectively. The variable costs are Rs. 300, Rs. 200 and Rs. 350 per unit respectively. The expected sales price of the cooking range is Rs. 700 per unit. Find out: The range of annual production/sales volume for which each location is (i) the most suitable; Which one of three locations is the best location at a production/sales (ii) volume of 18000 units? 4. (a) What do you understand by "standardization"? In what ways standardization

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differs from simplification? (b) The targeted weekly output of a manufacturing unit employing 20 workers is 400 pieces. The group is entitled to earn an incentive @ 10% on the aggregate of wages based on basic piece rate plus deamess allowance (which is Rs. 120 per week) upon achievement of a minimum of 80% of the output target. This incentive rate is increased by 2.5% flat for every 10% increase in achievement of targets up to a maximum of 10% at the level of 120% of the output target in the following manner: Output Target Incentive rate 80%-90% 10% 90%-100% 12.5% 100%-110% 15% 110%-120% 17.5% 120% and above 20% During the four weeks in February, the actual outputs achieved by the workers are 383 pieces, 442 pieces, 350 pieces and 318 pieces respectively. The average basic piece rate is Rs. 5. Compute the amount of incentive earned by the group during each of the four weeks. 5. (a) Briefly discuss different priority rules for a job shop for despatching. (b) On anticipating the current booming market, the Vajpayee Steels is planning to expand its capacity by adding more numbers of 10 ton capacity Electric Arc Furnace (EAF). Each batch of production (10 ton) involves 30 minutes furnace time including loading the unloading operations. Due to power restriction the furnace can be used only for 80% of the time. The required output for the capacity added is 160 ton per shift of 8 hours. The plant system efficiency is 50%. (i) Determine the number of furnaces required. (ii) Estimate the percentage of idle time in furnace.

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Please turn over (3) F-13(OPM) Revised syllabus Marks SECTION II 6. (a) Intel Project is having the following activities and expected time duration: Activity Duration Precedence (weeks) Activity A 8 — B 9 A C 7 B

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D 15 A E 4 C, D F 1 E G 4 D H 5 E, G I 4 H, F (i) Draw the network diagram; (ii) Identify the critical path; and (iii) Amount of slack for non-critical activities. A successful Project Manager should have a wide range of skills. Identify (b) those skills. 7. (a) The following data pertains to a project— Activity Normal Cash time Normal cost Crash cost time (days) (days) (Rs.) (Rs.) 1-2 1 1 5000 5000 2-3 3 2 5000 12000 2-4 7 4 11000 17000 3-4 5 3 10000 12000 3-5 8 6 8500 12500 4-5 4 2 8500 16500 5-6 2 1 7000 9000 It is desired to compress the project to the least possible duration day by day. You are required to determine the total direct cost stage by stage. (b) What is a DPR? What is its relevance in a Project? What are the important items that are covered in a DPR? 8. (a) The director of finance for a farm cooperative is concerned about the yield per acre he can expect from this year's com crop. The probability distribution of the yields for the current weather conditions is given below: Yield kg. per acre Probability 120 0.18 140 0.26 160 0.44 180 0.12 He would like to see a simulation of the yields he might expect over the next 10 years for weather conditions similar to those he is now experiencing. (i) Simulate the average yield he might expect per acre using the following random numbers: 20, 72, 34, 54, 30, 22, 48, 74, 76, 02. He is also interested in the effect of market price fluctuations on the co-operative's farm revenue. He makes this estimate of per kg. prices for com. Price per kg. (Rs.) Probability 2.00 0.05

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2.10 0.15 2.20 0.30 2.30 0.25 2.40 0.15 2.50 0.10 (i) Simulate the price he might expect to observe over the next 10 years using the following random numbers: 82, 95, 18, 96, 20, 84, 84, 56, 11, 52, 03. (b) Project Cost Estimation is a vital factor for starting the business. As a Cost 10 Accountant, you are required to prepare the steps for cost estimation. 9. Write Short notes on any four of the following:4x5=20 (a) Operation process chart; (b) Item rate contract; (c) Powder Metallurgy;; (d) Pareto Analysis; (e) Performance Rating; (f) Social costs benefit analysis. __________