TOM 301 FINAL questions correctly
answered to pass
Katie Posh runs an upscale nail salon. The service process includes five activities that are conducted in
the sequence described below. (The time required for each activity is shown in parentheses)
Activity 1: welcome a guest (1 minute) Activity 2: Clip and file nails (3 minutes) Activity 3: Paint (5
minutes)
Activity 4: Dry (10 minutes)
Activity 5: Check out the customer (4 minutes)
Three servers (S1, S2, and S3) offer the services in a worker-paced line. The assignment of tasks to
servers is the following: S1 does Activity 1; S2 does activities 2 and 3; S3 does activities 4 and 5. The
drying process does not require server 3's constant attention; she/he needs to only escort the customer
to the salon's drying chair (equipped with fans for drying). The time to do this is negligible. There exists
only one drying chair in the salon.
Question 1: assuming that the customers arrive at a rate of 7 customers per hour, wha - correct answer
✔✔Question 1: s1 = (7/60) 11.67%; s2 = (56/60 or 7/7.5) 93.33%; s3 = ( 28/60 or 7/15) 46.67; Dryer =
(70/60 or 7/6) 116.67%
Actual Flow rate = Min(demand, capacity = 7;6) 6
Question 2: Capacity of s3 = 15 per worker x 2 = 30
implied utilization = 7/30 = 23.33%
The new process flow rate will still be 6 because of the bottleneck resource.
Question 3: Capacity of dryer = 6 per worker x 2 = 12
implied utilization = 7/12 =58.33%
, the new flow rate = min(demand,capacity = 7,7.5) 7
Home Depot's annual turns are 4.7, its Cost of Goods Sold (COGS) is $44.7 Billion. What is the average
inventory it holds in $ Billion? - correct answer ✔✔Avg inventory = COGS/Annual Turns
$44.7 billion / 4.7 =$9.51 billion
A COMPANY'S HOLDING COST IS 16% PER YEAR. ITS ANNUAL INVENTORY TURNS ARE 9.5. THE COMPANY
BUYS AN ITEM FOR $50. WHAT IS THE AVERAGE COST ($S), TO HOLD THIS ITEM IN INVENTORY? - correct
answer ✔✔Per-item Inventory Cost: (Holding Cost % x COGS)/Annual Turns
(.16 x $50)/9.5 = .84 cents
TRADER BOB, AN ORGANIC FOOD RETAIL CHAIN, OPERATES 365 DAYS A YEAR. IN 2007, THE COMPANY
TURNED ITS INVENTORY APPROXIMATELY 25 TIMES. THE COMPANY'S COGS WERE 60% OF ITS SALES AND
ITS ANNUAL SALES WERE ABOUT $7,000M THAT YEAR. WHAT WAS TRADER BOB'S AVERAGE INVENTORY
IN 2007 (IN $M)?
Assuming Trader Bob's annual inventory holding costs are 20% (an item that cost $10 to purchase would
cost $2 to hold in inventory for one year), what is the inventory cost of an item which sells for $20 and
costs Trader Bob $12 to buy? Assume that this item has inventory turns of 25 per year. - correct answer
✔✔COGS = 0.6 x 7000 = 4200.
Inventory = COGS / Turns = = $168M
Per-item Inv. Cost = (Holding Cost % x COGS)/Annual Turns
= (.20 x 12)/25 = .096 cents
JOE'S BEER, BAIT, & TACKLE CO. IS A SMALL CHAIN OF FISHING TACKLE STORES IN NORTHERN
MINNESOTA. IN 2009, THE COMPANY'S REVENUE WAS $4,300,000 AND ITS COST OF SALES WAS
$3,200,000. ASSUME 52 WEEKS AND 365 DAYS PER YEAR. JOE KEEPS ONLY 5.5 DAYS-OF-SUPPLY OF
INVENTORY ON AVERAGE BECAUSE MUCH OF HIS INVENTORY IS LIVE BAIT AND MICRO-BREW BEER,
BOTH OF WHICH HAVE A SHORT SHELF LIFE. WHAT IS HIS ANNUAL INVENTORY TURNS?
answered to pass
Katie Posh runs an upscale nail salon. The service process includes five activities that are conducted in
the sequence described below. (The time required for each activity is shown in parentheses)
Activity 1: welcome a guest (1 minute) Activity 2: Clip and file nails (3 minutes) Activity 3: Paint (5
minutes)
Activity 4: Dry (10 minutes)
Activity 5: Check out the customer (4 minutes)
Three servers (S1, S2, and S3) offer the services in a worker-paced line. The assignment of tasks to
servers is the following: S1 does Activity 1; S2 does activities 2 and 3; S3 does activities 4 and 5. The
drying process does not require server 3's constant attention; she/he needs to only escort the customer
to the salon's drying chair (equipped with fans for drying). The time to do this is negligible. There exists
only one drying chair in the salon.
Question 1: assuming that the customers arrive at a rate of 7 customers per hour, wha - correct answer
✔✔Question 1: s1 = (7/60) 11.67%; s2 = (56/60 or 7/7.5) 93.33%; s3 = ( 28/60 or 7/15) 46.67; Dryer =
(70/60 or 7/6) 116.67%
Actual Flow rate = Min(demand, capacity = 7;6) 6
Question 2: Capacity of s3 = 15 per worker x 2 = 30
implied utilization = 7/30 = 23.33%
The new process flow rate will still be 6 because of the bottleneck resource.
Question 3: Capacity of dryer = 6 per worker x 2 = 12
implied utilization = 7/12 =58.33%
, the new flow rate = min(demand,capacity = 7,7.5) 7
Home Depot's annual turns are 4.7, its Cost of Goods Sold (COGS) is $44.7 Billion. What is the average
inventory it holds in $ Billion? - correct answer ✔✔Avg inventory = COGS/Annual Turns
$44.7 billion / 4.7 =$9.51 billion
A COMPANY'S HOLDING COST IS 16% PER YEAR. ITS ANNUAL INVENTORY TURNS ARE 9.5. THE COMPANY
BUYS AN ITEM FOR $50. WHAT IS THE AVERAGE COST ($S), TO HOLD THIS ITEM IN INVENTORY? - correct
answer ✔✔Per-item Inventory Cost: (Holding Cost % x COGS)/Annual Turns
(.16 x $50)/9.5 = .84 cents
TRADER BOB, AN ORGANIC FOOD RETAIL CHAIN, OPERATES 365 DAYS A YEAR. IN 2007, THE COMPANY
TURNED ITS INVENTORY APPROXIMATELY 25 TIMES. THE COMPANY'S COGS WERE 60% OF ITS SALES AND
ITS ANNUAL SALES WERE ABOUT $7,000M THAT YEAR. WHAT WAS TRADER BOB'S AVERAGE INVENTORY
IN 2007 (IN $M)?
Assuming Trader Bob's annual inventory holding costs are 20% (an item that cost $10 to purchase would
cost $2 to hold in inventory for one year), what is the inventory cost of an item which sells for $20 and
costs Trader Bob $12 to buy? Assume that this item has inventory turns of 25 per year. - correct answer
✔✔COGS = 0.6 x 7000 = 4200.
Inventory = COGS / Turns = = $168M
Per-item Inv. Cost = (Holding Cost % x COGS)/Annual Turns
= (.20 x 12)/25 = .096 cents
JOE'S BEER, BAIT, & TACKLE CO. IS A SMALL CHAIN OF FISHING TACKLE STORES IN NORTHERN
MINNESOTA. IN 2009, THE COMPANY'S REVENUE WAS $4,300,000 AND ITS COST OF SALES WAS
$3,200,000. ASSUME 52 WEEKS AND 365 DAYS PER YEAR. JOE KEEPS ONLY 5.5 DAYS-OF-SUPPLY OF
INVENTORY ON AVERAGE BECAUSE MUCH OF HIS INVENTORY IS LIVE BAIT AND MICRO-BREW BEER,
BOTH OF WHICH HAVE A SHORT SHELF LIFE. WHAT IS HIS ANNUAL INVENTORY TURNS?
