Managerial Decision Modeling
Instructions:
1. Please read the cases, then provide the answers to the questions following each case.
2. You are only required to do two (2) cases.
3. Provide your answers using both MS Word and MS Excel sheets (where necessary).
4. Submit your files through Campus Web. You can submit multiple files.
5. This is an INDIVIDUAL EFFORT - all parties caught cheating will receive a -0- for this exam.
6. If you have any questions please e-mail me at [email protected]
Bay Community Hospital
The staff of the Bay Community Hospital had committed itself to introduce a new diagnostic procedure in the clinic. This procedure required the acquisition, installation, and introduction of a new medical instrument. Dr. Ed Windsor was assigned the responsibility for assuring that the introduction be performed as quickly and smoothly as possible.
Dr. Windsor created a list of activities that would have to be completed before the new service could begin. Initially, three individual steps had to be taken: (1) write instructions and procedures, (2) select techniques to operate the equipment, and (3) procure the equipment. The instructions and selection of the operators had to be completed before the training could commence. Dr. Windsor also believed it was necessary to choose the operators and evaluate their qualifications before formally announcing the new service to the local medical community. Upon arrival and installation of the equipment and completion of the operators' training, Edward Windsor wanted to spend a period checking out the procedures, operators, and equipment before declaring that the project was successfully completed. The activities and times are listed in Table 1.
Table 1
|
Activity
|
Duration (Weeks)
|
Predecessor(s)
|
|
A. Write instructions
|
2
|
-
|
|
B. Select operators
|
4
|
-
|
|
C. Train operators
|
3
|
A, B
|
|
D. Announce new service
|
4
|
B
|
|
E. Purchase, ship, and receive equipment
|
8
|
-
|
|
F. Test new operators on equipment
|
2
|
C, E
|
Jack Worth, a member of the Bay Community Hospital staff, reported that it would be possible to save time on the project by paying some premiums to complete certain activities faster than the normal schedule listed in Table 1. Specifically, if the equipment were shipped by express truck, one week could be saved. Air freight would save two weeks. However, a premium of $200 would be paid for the express truck shipment and $750 would be paid for air shipment. The operator training period could also be reduced by one week if the trainees worked overtime. However, this would cost the hospital an additional $600. The time required to complete the instructions could be reduced by one week with the additional expenditure of $400. However, $300 could be saved if this activity was allowed to take three weeks.
Questions
1. What is the shortest time period in which the project can be completed using the expected times listed in Table 1?
2. What is the shortest time in which the project can be completed?
3. What is the lowest cost schedule for this shortest time?
Ruth Jones' Heart Bypass Operation
Ruth Jones, a robust 50-year-old insurance adjuster living in the northern suburbs of Chicago, has been diagnosed by a University of Illinois cardiologist as having a defective heart valve. Although otherwise healthy, Jones' heart problem could prove fatal if left untreated.
Firm research data are not yet available to predict the likelihood of survival for a woman of Mrs. Jones' age and condition without surgery. Based on his own experience and recent medical journal articles, the cardiologist tells her that if she selects to avoid surgical treatment of the valve problem, chances of survival would be approximately as follows: only a 40 percent chance of living one year, a 30 percent chance of surviving for two years, a 25 percent rate for five years, and a 5 percent chance of living to age 58. He places her probability of survival beyond age 58 without a heart bypass to be extremely low.
The bypass operation, however, is a serious surgical procedure. Five percent of the patients succumb during the operation or its recovery stage, with an additional 35 percent dying during the first year. Thirty percent survive for 5 years, 8 percent survive for 10 years, and 18, 2, and 2 percent survive, respectively, for 15, 20, and 25 years.
Question
1. Do you think Mrs. Jones should select the bypass operation?
Pantry Shopper
Pantry Shopper is a supermarket in suburban Philadelphia, where competition among supermarkets is fierce. Pantry Shopper management feels that because prices are so competitive, shoppers will choose one supermarket over another due to the services offered. For this reason, Pantry Shopper prides itself on its in-store bakery; its deli counter, which the store claims offers more varieties of meats, cheeses, and salads than any competitor; and its meat counter, where the store provides custom cuts of meat and poultry.
The store has been in business in the same location since 1953. Over the years, the store has had different owners and different managers, each with his or her own ideas on the management and design of the store. The new manager, Beth Smith-Danton, is no exception. Beth felt that by providing shoppers with faster, more efficient service, she might be able to improve the store's competitive position and market share. To this end, she has already moved check approval from the main desk to the cash register. She has increased the limit on cash back from checks from $20 above the purchase amount to $50 above the purchase amount. She has instituted a delivery service to make shopping more convenient, especially for senior citizens.
To this point, however, Beth has not changed the checkout system itself. The last major remodeling of the checkout system occurred in 1982. Since then, the demand at the store has increased and the technology of the cash registers has changed. Beth needs to use her square footage efficiently in redesigning the checkout system. She knows that she has to design the system for peak usage but does not want to over design the system - that is, to install too many cash registers and lanes. It's not that Beth is concerned about the unnecessary expenses, because the registers, scanners, and conveyors represent a fixed cost that would be spread over many shoppers. Wasted space is a far greater concern.
Planning for a major redesign, Beth collected data at her store on several consecutive Saturday mornings. She noticed that customers arrived at the checkout at a rate of approximately 100 per hour. Fully 20 percent of the customers had 10 items or less. Those people took about 2 minutes to serve on average, while customers with more than 10 items took about 4 minutes to process. Beth expects service time to improve when universal price code readers are installed in the new design.
Question
1.) How would you help Beth with her design for the system?
Akron Zoological Park
During the late 1990s, the decline in Akron's industry and changes in governmental priorities almost resulted in the permanent closing of the Akron Children's Zoo. Lagging attendance and a low level of memberships did not help matters. Faced with uncertain prospects of continuing, the city of Akron opted out of the zoo business. In response, the Akron Zoological Park was organized as a corporation to contract with the city to operate the zoo.
The Akron Zoological Park is an independent organization that manages the Akron Children's Zoo for the city. To be successful, the zoo must maintain its image as a high-quality place for its visitors to spend their time. Its animal exhibits are clean and neat. The animals, birds, and reptiles look well cared for. As resources become available for construction and continuing operations, the zoo keeps adding new exhibits and activities. Efforts seem to be working, because attendance increased from 53,353 in 1996 to an all-time record of 133,762 in 2001.
|
Admission Fee ($)
|
|
Year
|
Attendance
|
Adult
|
Child
|
Group
|
|
1996
|
53,353
|
1.50
|
0.75
|
0.50
|
|
1997
|
61,417
|
1.50
|
0.75
|
0.50
|
|
1998
|
63,853
|
1.50
|
0.75
|
0.50
|
|
1999
|
63,034
|
1.50
|
0.75
|
0.50
|
|
2000
|
95,504
|
2.00
|
1.00
|
0.50
|
|
2001
|
133,762
|
2.50
|
1.50
|
1.00
|
|
2002
|
108,363
|
2.50
|
1.50
|
1.00
|
|
2003
|
126,853
|
3.00
|
2.00
|
1.50
|
|
2004
|
125,363
|
3.00
|
2.00
|
1.00
|
|
2005
|
117,874
|
4.00
|
2.50
|
1.50
|
Due to its northern climate, the zoo conducts its open season from mid-April until mid-October. It reopens for 1 week at Halloween and for the month of December. Zoo attendance depends largely on the weather. For example, attendance was down during the month of December 2002, which established many local records for the coldest temperature and the most snow. Variations in weather also affect crop yields and prices of fresh animal foods, thereby influencing the costs of animal maintenance.
In normal circumstances, the zoo may be able to achieve its target goal and attract an annual attendance equal to 40% of its community. Akron has not grown appreciably during the past decade. But the zoo became known as an innovative community resource, and as indicated in the table, annual paid attendance has doubled. Approximately 35% of all visitors are adults. Children accounted for one-half of the paid attendance. Group admissions remain a constant 15% of zoo attendance.
The zoo does not have an advertising budget. To gain exposure in its market, then, the zoo depends on public service announcements, the zoo's public television series, and local press coverage of its activities and social happenings. Many of these activities are but a few years old. They are a strong reason that annual zoo attendance has increased.
Although the zoo is a nonprofit organization, it must ensure that its sources of income equal or exceed its operating and physical plant costs. Its continued existence remains totally dependent on its ability to generate revenues and to reduce its expenses.
Questions
1. The president of the Akron Zoo asked you to calculate the expected gate admittance figures and revenues for both 2006 and 2007. Would simple linear regression analysis be the appropriate forecasting technique?
2. What factors other than admission price influence annual attendance and thus should be considered in the forecast?