ET2051 Engineering Management - Staff.city.ac.uk - City University
ET2051 Engineering Management - Staff.city.ac.uk - City University ET2051 Engineering Management - Staff.city.ac.uk - City University
Question 1. (a) (i) Why do large companies often set up a centralised purchasing department to buy frequently used materials and components, which are then kept in Stores until the user department requires them. Are there any disadvantages to this procedure? [4 marks] (ii) Stores may charge the user department for the materials and items it holds in a number of different ways. Name three of these ways and describe the advantages and disadvantages of each. [6 marks] (b) The Stores Branch of an engineering firm takes delivery of batches of logic chips, "logichips", that are to be used in several of the products made by the firm's two production arms: HomeWare Division (HWD) and Factory Products Division (FPD). Delivery occurs over the summer months, and there is a considerable variation in the price paid by Stores Branch: 1 June: 3000 logichips @ £6.00 each 1 July: 4000 @ £4.50 each 1 August: 3500 @ 10.00 each 1 September: 5000 @ 7.50 each 1 October: 3500 @ 8.00 each The company operates a First In First Out policy when charging for Stores' withdrawals. FPD withdraws 7500 logichips on 15 September. HWD withdraws 4000 logichips on 21 September. (i) What is the size of the Stores' inventory of logichips on 2 September? What is the average cost per logichip to Stores for the units purchased to this date? [2 marks] (ii) What is the cost to FPD of the logichips it withdraws and hence what is the average cost per logichip to FPD? [2 marks] (iii) What is the cost to HWD of the logichips it takes from Stores. What value does HWD find for the average cost of the logichips it has withdrawn? [2 marks] (iv) The manager of HWD complains to the Managing Director for what he sees as arbitrary discrimination in favour of FPD. What other methods of charging for Stores' withdrawals could the Managing Director adopt? What would you recommend? [4 marks] Page 2 of 6 ET2051 Engineering Management II Jun07.doc
Question 2. (a) The Maddock Curve for a project is given by: A B wd c E B r c = − + (2.1) c E B c Explain each of the symbols in equation (2.1) above. [6 marks] (b) You have been posted to a new Department and asked to take over responsibility for managing the ongoing project to build a new small-scale chemical plant. This £7.5M project was supposed to be complete within 30 months, but that time has just elapsed and the plant is by no means finished. Your predecessor has spent only £5.4M so far, and your boss is under the impression that the project is 72% complete; he is expecting the plant to come in 12 months late but on budget. However, you have just discovered a project file listing at the end of each 6 month period both the actual cost of work done to date and the expected cost remaining. These are shown in the table below. Months into project Actual cost of work done (£M) 6 1.5 6.15 12 2.55 4.65 18 3.75 4.2 24 4.35 6.0 30 5.4 4.95 Estimated cost remaining (£M) In order to show your boss the true state of affairs, you decide to draw the Maddock Curve for the project, drawing on the ideal curve also for comparison purposes. (i) Draw such a graph and attempt to explain why the actual project deviates from the ideal. [10 marks] (ii) State what you think the eventual cost of the project will be, and provide justification for this estimate. At the current rate of progress, how much longer will it be before the project is complete? [4 marks] Question 3. (a) (i) Explain the terms, "variable costs" and "fixed costs". [2 marks] (ii) Can you give an example of a variable cost for a company running a scheduled bus service? [2 marks] (iii) What is the meaning of the term "total absorption cost"? [1 mark] Page 3 of 6 ET2051 Engineering Management II Jun07.doc
- Page 1: CITY UNIVERSITY LONDON No. BSc Degr
- Page 5 and 6: DIRECT COSTS £M Chemical reactor 3
Question 1.<br />
(a)<br />
(i) Why do large companies often set up a centralised purchasing department<br />
to buy frequently used materials and components, which are then kept in<br />
Stores until the user department requires them. Are there any disadvantages to<br />
this procedure?<br />
[4 marks]<br />
(ii) Stores may charge the user department for the materials and items it holds<br />
in a number of different ways. Name three of these ways and describe the<br />
advantages and disadvantages of e<strong>ac</strong>h.<br />
[6 marks]<br />
(b) The Stores Branch of an engineering firm takes delivery of batches of logic chips,<br />
"logichips", that are to be used in several of the products made by the firm's two<br />
production arms: HomeWare Division (HWD) and F<strong>ac</strong>tory Products Division (FPD).<br />
Delivery occurs over the summer months, and there is a considerable variation in the<br />
price paid by Stores Branch:<br />
1 June: 3000 logichips @ £6.00 e<strong>ac</strong>h<br />
1 July: 4000 @ £4.50 e<strong>ac</strong>h<br />
1 August: 3500 @ 10.00 e<strong>ac</strong>h<br />
1 September: 5000 @ 7.50 e<strong>ac</strong>h<br />
1 October: 3500 @ 8.00 e<strong>ac</strong>h<br />
The company operates a First In First Out policy when charging for Stores'<br />
withdrawals.<br />
FPD withdraws 7500 logichips on 15 September. HWD withdraws 4000 logichips on<br />
21 September.<br />
(i) What is the size of the Stores' inventory of logichips on 2 September?<br />
What is the average cost per logichip to Stores for the units purchased to this<br />
date?<br />
[2 marks]<br />
(ii) What is the cost to FPD of the logichips it withdraws and hence what is the<br />
average cost per logichip to FPD?<br />
[2 marks]<br />
(iii) What is the cost to HWD of the logichips it takes from Stores. What<br />
value does HWD find for the average cost of the logichips it has withdrawn?<br />
[2 marks]<br />
(iv) The manager of HWD complains to the Managing Director for what he<br />
sees as arbitrary discrimination in favour of FPD. What other methods of<br />
charging for Stores' withdrawals could the Managing Director adopt? What<br />
would you recommend?<br />
[4 marks]<br />
Page 2 of 6<br />
<strong>ET2051</strong> <strong>Engineering</strong> <strong>Management</strong> II Jun07.doc
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