June 2007

Paper 13 Operations and Project Management & Control June 2007

F-13(OPM) Revised Syllabus Full Marks : 100

Time Allowed : 3 Hours

The figures in the margin on the right side indicate full marks Answer Question No. 1 & Question No. 7, which are compulsory and any two other questions from Section I and any two other from Section II. Please answer all the bits of a question at one place. Section I

Marks 1. (a) Match each item in the left hand Column-1 with an appropriate item in the right hand column-II: Column I Column II (A) Picking (i) Heat Treatment (B) Broaching (ii) Metal Joining (C) Brazing (iii) Machining (D) Extrusion (iv) Metal Forming (E) Annealing (v) Surface Treatment (b) Explain the following acronyms: (i) FMS (ii) MTM (iii) CRM (iv) ERP (v) AQL (c) In each of the cases given below one out of four answers is correct. Indicate the correct answer and give your workings/reasons briefly: (i) The deviations of work centre time and cycle time for five work centers on an assembly line are 0, 10, 10, 10 and 40 minutes. Smoothness Index will be (a) 1900 (b) 70 (c) 43.59 (d) 8.37 (ii) The expected (observed) time a worker will take to produce a part for which standard time is 10 minutes, if the allowance of this work is 25% of the normal time and the worker is rated at 80%. 10 (a) 6 minutes (b) 8 minutes (c) (d) 15 minutes minutes (iii) A component is made from 2 parts A and B whose dimension and tolerances are 0.600 ± 0.001 and 0.750 ± 0.002. The dimension and tolerance of the component will be 1.350 ± 1.350 ± 1.350 ± None of the (a) (b) (c) (d) 0.015 0.003 0.0015 above

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(d) Distinguish between (only two points each): (i) Conveyor and Elevator; (ii) Quality Control and Inspection. 2. (a) Mention the factors that are normally covered in the choice of Appropriate Technology. (b) Smith Engineering Ltd. (SEL) produced one type of mild steel pins for supply to a pump manufacturer. The pins have a diameter of 1 cm and length of 5 cms. The pins are manufactured in lathes by turning and facing from mild steel forged and annealed rods supplied by two firms A and B who supplies the material in following shape and size: Firm 1.2 cms diameter and 6 cms length in forged and annealed condition A: at a rate of Rs. 160 per piece. Firm 1.4 cms diameter and 7 cms length in forged condition only at a rate B: of Rs. 145 per piece.

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Please turn over (2) F-13(OPM) Marks Revised syllabus The company (SEL) can do annealing of the forged rods supplied by Firm B in its own heat treatment shop at a cost of Rs. 10.00 per rod on an average. Weight of mild steel is 7.8 gms per cubic centimeter and machining cost for forged and annealed mild steel is Rs. 300.00 per kg. of metal removal. Assuming that scrap value of chips is negligible. As a Cost Accountant which firm will you choose? 3. (a) A factory has three departments X, Y and Z to manufacture two products A 7 and B. Department 'X' can produce parts for 7000 units of A or parts for 12000 units of B per week, but cannot do both at the same time though parts for some A and for some B can be produced. Similarly Department 'Y' can produce 9000 parts for A or 6000 parts for B or combinations in between. Final assembly is undertaken in department 'Z' with separate assembly lines for A and B with maximum capacities by 6000 and 4000 units respectively. Both lines can be operated at the same time. What is the Optimal Product Mix? (b) A radial bearing manufacturing units produces three types of bearing namely X, Y and Z during the year 2006-2007, the unit manufactured 20000; 10000 and 13650 Nos. of X, Y and Z respectively. The standard Man-hours (SMH) of X, Y and Z are 12, 14 and 16 respectively. The unit worked for 8 hours per day for single shift for Monday to Friday and 4 hours shift on Saturday. There were 50 working weeks during the year. The ratio of piece workers to Day workers among Industrial employees was 1:0.4 and total No. of

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Industrial employees were 560. Assuming on an average 15% absenteeism among Industrial employees, what was the productivity of piece workers during the year 2006-2007? 4. (a) What are the objectives of using Control Charts for Variables? 4 (b) 20 samples were obtained from the fabric being produced by a weaving 4+7 machine. The number of defects per 100 meters of cloth for the samples is given below: 1 1 1 1 1 1 1 1 15 4 2 7 4 3 6 6 13 5 13 1 12 1 1 1 1 1 1 1 5 3 2 5 4 4 7 6 (i) Determine the Control Chart limits for the machines; (ii) On a particular day when the machine is operating under controlled conditions, 10 samples were drawn and the defects per 100 metres of cloth are as follows: 2 1 1 1 1 2 11 18 8 2 7 2 3 5 9 0 What conclusions would you draw from these observations? 5. (a) Detail the steps involved in making a work sampling study 6 (b) HIPROD CO LTD manufactures three different items of tools. The time 2+5+2 required to produce each tool on different operations is as follows: Operations

Turning Grinding Milling Heat treating Other data available: Sales per annum (units) Opening stock (units) Closing stock (units)

Time minutes Drills

Cutters

Reamers

16 10 4 3

34 8 5 3

40 17 8 3

18000 5000 2000

20000 6000 3000

15000 — 4000

The workers are trained in each trade as such their services are not interchangeable. they are paid at Rs. 11.00 per hour. The workers are paid for 2500 hours per annum which includes 200 hours for leave in which time substitute operators are appointed and for 300 hours the machines are taken

for overhaul. Using the above data calculate: (i) The production quantity; (ii) No. of operators required per annum; and (iii) Annual direct labour cost on each type of tool.

Please turn over (3)

F-13(OPM) Revised syllabus Marks 4+4+4+3

6. Write short notes on the following: (a) Renewal Theory; (b) Appropriate Technology (c) Powder Metallurgy; (d) Cost of Quality. Section II

7. (a) Expand the following acronyms: (i) MTBF (ii) IIBI (iii) FDI (iv) BOOT (v) LRC (b) Fill up the blanks in the following sentences: (i) Total float of an ________ is the amount of time an activity of a Project can be delayed without affecting the overall ________ of the Project. (ii) Benefit Cost Ratio is the ratio of ________ Value of Benefits to Present ________ of Investments. (iii) Head Slack is the difference between the ________ and the ________ Occurrence Times of the Head Event of an Activity. (iv) Capital Ratio is the ________ of ________ Ratio. Detailed ________ Report is prepared ________ the Feasibility (v) Report. (c) Mention whether the following statements are True or False: (i) Social analysis deals with impact of investment in Project on people and their lives. (ii) Task Force Organization Structure is created by sharing authority between the Project Manager and the Functional Manager. (iii) In term Rate Contract, the Contractor is paid in lump sum at the end of Contract. (iv) IRR is the discount rate at which the Present Value of future cost

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inflows equal the Present Value of Project cash outflows/investment. Sensitivity Analysis is about estimating the impact of market (v) fluctuations on project profitability. (d) Match the statement in Column-I with the statement under Column-II: Column I Column II Enable to continue in Business and (i) Balancing Project (A) compete effectively (ii) (B) Are undertaken to maintain Modernization Production, at acceptable efficiency Project level (iii) Expansion project (C) Seeks profitable investment opportunities, in altogether new areas (iv) Diversification (D) Minimize under-utilization of capacity Project (v) Replacement (E) Enables enlargement of plant capacity Project

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Please turn over (4) F-13(OPM) Marks Revised syllabus 8. (a) A manufacturer is considering four locations for establishing a new project. 9 The location specific costs are as follows: (Costs in rupees) Item I II III IV 1. Plant & 6,00,000 5,00,000 5,50,000 5,00,000 Machinery 30,000 28,000 65,000 45,000 2. Taxes per 35,000 30,000 28,000 25,000 Year 8,000 7,000 7,000 6,000 3. Electricity 1.00 1.50 1.10 1.75 per Year 0.50 0.60 0.40 0.55 4. Water per 0.05 0.10 0.10 0.05 Year 5. Labour per Unit 6. Materials & Equipment per Unit 7. Transportation

per Unit If cost of capital is 10%, determine the most suitable location for volumes of 50,000 units, 1 lakh units and 1.5 lakh units. (b) What are the skills and attributes required of a successful Project Manager? 6 9. (a) Xenith Co. has been offered a contract to build and deliver nine extruding 10+2 presses to the ABC Bottling Co. The contract price negotiated is contingent on meeting a specified delivery time, a bonus being given for early delivery. The marketing department has established the following cost and time information. Activity Normal Time Normal Crash Crash (Weeks) Cost Time Cost Rs. (Weeks) Rs. a b m 1—2 2—3 2—4 2—5 3—6 4—6 5—7 6—7

1 1 1 5 2 5 4 1

5 7 5 11 6 7 6 5

3 4 3 8 4 6 5 3

15,000 18,000 14,000 15,000 13,000 12,000 20,000 17,000

1 3 2 7 2 4 4 1

19,000 24,000 16,000 16,000 15,000 13,600 24,000 20,600

The normal delivery time is 16 weeks for a contract price of Rs. 1,40,000. Based on the claculated profitability for each of the following specified delivery time, what delivery schedule do you recommend that Zenith Co. may implement? Contract delivery time (Weeks) 15 14 13 12

Contract Amount (Rs.) 1,42,500 1,45,000 1,50,000 1,52,000

(Note: a=to: optimistic time b=tp: pessimistic time m=tm: most likely time.) (b) What is option clause in a Contract? When it is included in a Contract?

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Please turn over (5)

F-13(OPM)

Revised syllabus Marks 10. (a) What information would be required for preparing the Projected Balance 3 Sheet of a Company? (b) The Balance Sheet of M/s. OPTIMA LIMITED on 31st March 2997 is 6+6 given below: Liabilities Assets Share Capital Reserves & Surplus Secured Loans

Unsecured Loans

Current Liabilities Provisions

100 20 80 50 90 20

Fixed Assets Investments Current Assets Cash Receivables Inventories

180 — 20 80 80

360

180 360

The projected Income Statement and the distribution of earnings for the year 2007-08 are as follows: (Rs. in lakhs) Sales Cost of Goods sold Depreciation Earnings Before Interest & Tax (EBIT) Interest Profit Before Interest & Tax (PBT) Tax @50% Profit After Tax (PAT) Dividends Retained Earnings

400 300 20 80 20 60 30 30 10 20

An additional outlay of Rs. 30 lakhs is planned for fixed assets in the year 2007-08, which is proposed to be financed by Rs. 20 lakhs of Secured and Rs. 10 lakhs of Unsecured Loans. Further, Secured Loans of Rs. 5 lakhs are also proposed to be discharged. The operations in 2007-08 are expected to increase the stocks by Rs. 10 lakhs and the credit sales by Rs. 15 lakhs. Based on the information given supra you are required to prepare the Projected Cash Flow Statement for the year 2007-08 and the Projected Balance Sheet as on 31st March 2008. 11. (a) A consultant is appointed for a paper project for undertaking certain assignments at a total fee at Rs. 530 lakhs. Terms of payment include 10% advance on the fee and a 5% retention on the progress payments.

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At a certain point in time, he achieved the following milestones progress against each head of deliverables. What is the overall progress achieved by the consultant and the consulting fee earned by him? What is the amount payable on him at the point of time? SI.No Assignment Total deliverables Total Work Progress Quantity Value Achieved (Nos.) (Rs. in (%) lakhs) Specifications & Tendering Documents Tender Evaluation Work Order Preparation Detailed Design & Drawings Review of Vendors' Drawings Preparations of As Built Drawings

1. 2. 3. 4. 5. 6

30 30 30 1200 540 600

120 60 30 210 90 20

30 20 15 10 5 0

(b) A transporter finds from his past records that the costs per year of maintaining a car whose purchase price is Rs. 1,60,000 are as given below: Year Maintenance Costs Resale Price (in Rs.) (in Rs.) 1 2 3 4 5 6 7 8

8,000 9,000 10,500 13,000 15,000 20,000 25,000 30,000

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1,45,000 1,32,000 1,22,000 1,14,000 1,09,000 90,000 70,000 50,000

At what age he should replace a Car? 12. Write short notes on the following: (a) Venture Capital Funding of Projects; (b) "Invisible Walls" in Project Cost Estimation; (c) Zero Based Budgeting (ZBB); (d) Consortium Lending. _________

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