Engineering Management and Economics

QUESTION 1 PROJECT MANAGEMENT
a) As the project manager of a New Product Development project, you are to
develop a gaming device for children ages 9-12. The objective of this product
development project is to increase the revenue of the organisation. Develop a work
breakdown schedule for the project showing the connections/dependencies between
tasks? (Maximum 700 words).
(15 marks)
b) An unexpected incident just occurred in a project, which could result in project
failure if not addressed professionally. With clear explanations, identify five key
Project Management roles and associated skills required to address the situation
and put the project back on track? (Maximum 500 words).
(10 marks)
(Total 25 marks)
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Question 2 FINANCE
a) Mycroft Pumps Limited is a small manufacturing company producing a variety
of pumps for the oil industry. It operates from one factory which is geographically
separated from its head office. The components for the pumps are assembled in the
Assembly Department, and they are then passed through to the Finishing
Department where they are painted and packed. These two production departments
are then supported by three service departments – Administration, Stores, and Work
Study.
The following costs were collected for the year to 30 June 2020
Allocated cost centre overhead costs £000
Administration 70
Assembly 25
Finishing 9
Stores 8
Work Study 18
Additional information:
1 The allocated overhead costs are considered to be indirect and not linked to
specific numbers of units.
2 During the year to 30 June 2020, 35,000 machine hours were worked in the
Assembly Department, and 60,000 direct labour hours in the Finishing Department.
3 The number of employees working in each department was as follows:
Administration = 15 Assembly = 25
Finishing = 40 Stores = 2
Work Study = 3 Total Employees = 85
4 During the year to 30 June 2020, the stores received 15,000 requisitions from
the Assembly Department, and 10,000 requisitions form the Finishing Department.
The Stores Department did not provide a service for any other department.
5 The Work Study Department carried out 2,000 chargeable hours for the
Assembly Department, and 1,000 chargeable hours for the Finishing Department.
6 One special pump (code named PBM 8) was produced during the year to 30
June 2020 – it took 10 machining hours of Assembly Department time, and 15 direct
labour hours were worked on it in the Finishing Department. Its total direct costs
(material and labour) amounted to £100.
Using the above information:
(i) Calculate an appropriate overhead absorption rate for both the
Assembly Department and the Finishing Department.
(ii) Calculate the Total factory cost of the special pump.
(7 marks)
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Please apportion overheads on the following basis:
Allocated costs – by direct allocation.
Administration Overheads – by number of employees (neglect Administration
employees in any apportionment).
Stores overheads – by number of requisitions.
Work Study overheads – by number of chargeable hours.
Please reproduce the following table Q2a to demonstrate the derivation of your
answers:
Production Department Service Department
Cost Centre Assembly Finishing Administration Stores Work Study
£000 £000 £000 £000 £000
Allocated costs
Apportion
Administration
Apportion Stores
Apportion Work Study
Total Overhead
Table Q2a
Clearly explain your workings and give a brief explanation as to how your values in
the table have been calculated (maximum 150 words).
b) Discuss the advantages and disadvantages of using an absorption costing
system for calculating the total cost of a product or service. Highlight separately at the
end of your discussion any deficiencies you may feel that this system may have in
terms of application to an organisation that takes this approach to costing of their
products. (maximum 600 words).
(13 marks)
c) Critically evaluate the advantages and disadvantages of activity-based costing
and suggest the characteristics of a scenario that would in your opinion suggest it
may be a preferable approach to using absorption costing. (maximum 400 words).
(5 marks)
(Total 25 marks)
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QUESTION 3 FINANCE
a) The IT Manager of Moriarty Marketing company is considering purchasing
some new audio visual equipment. Initial research has identified two possible
suppliers that can provide different equipment that will satisfy the requirements and
has given the following budget outlines on a cash basis:
The equipment will cost £50,000 to purchase and at the end of the period will have
zero residual value.
If the project geos ahead, it is predicted that the company will gain increased
revenue that has been projected as that shown in Table Q3a.
Year Revenue generated –
Supplier A (£)
Revenue generated –
Supplier B (£)
1 5,000 20,000
2 17,000 30,000
3 42,000 20,000
4 30,000 20,000
5 10,000 20,000
Table Q3a
You are required to determine for each supplier option:
The Payback Period.
The ARR (Average rate of Return)
Produce tables showing the relative cash flows that are relevant to each year that
can be used to determine these answers. It is assumed that the annual cash flows
shown in the table arise evenly throughout the year and that there are no tax,
depreciation or interest aspects to be considered.
Analyse your findings and make recommendations as to which supplier Moriarty
Marketing should choose from a financial perspective, using the answers from above
to support your argument (Maximum 150 words).
(6 marks)
b) Discuss the various limitations of the simple payback period method and the
ARR in the context of overall capital investment appraisal. Explain what you believe
the advantages and disadvantages may be of using discounted cash flow methods
for capital investment appraisal. (Maximum 600 words).
(14 marks)
c) The Lestrade & Metropolitan Manufacturing company produce aluminium die
cast models of famous fictional characters. On the 1st of September they carried out
a stock check and found that they held in their company stores a quantity of 1,100
tonnes of aluminium alloy, which is valued at £5.10 per tonne (as shown in Table
Q3c). The goods received notes and materials requisitions (from production
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departments) show the following receipts and issues during the month as given in
Table Q3c:
Date
Receipts Issues
(Quantity – tonnes)
Quantity
(tonnes)
Price per tonne £
1 September 1,100 5.10
2 September 1,000 5.50
3 September 750
14 September 750
15 September 950 6.10
16 September 750
29 September 1,000 6.40
30 September 750
Table Q3c
i) – Construct and use a table with columns representing “dates, receipts, issues and
inventory balance” and use the FIFO (First In First Out) and the AVECO (Average
Cost) methods to determine the stock balance in terms of both quantity and value at
the end of the month.
ii) – Identify which of the two methods would give the higher profit for the month in
this particular case, giving your reasons. (Maximum 100 words).
(5 marks)
(Total 25 marks)
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QUESTION 4 QUALITY
a) Watson Wafers Ltd. Manufacture electronic components. For one of their
manufacturing processes, they have recorded some data that they wish to use
control charts to monitor. They wish to use an x-bar chart to see when their system
may be subject to problems, and need to calculate the control limits for the system
(both the UCL and the LCL).
The company operate a 6 hour working shift (without breaks), and following the start
of the shift a sample measure of the component produced by the process was taken
every 20 minutes. At each sample time 6 component readings were taken.
The company found that in their first shift the data recorded gave the following
values:
∑ = 280.2 and that ∑ s = 8.44
n 2 3 4 5 6 7 8 9 10 11
an 0.798 0.886 0.921 0.940 0.952 0.959 0.965 0.969 0.973 0.975
Table Q4a
Calculate the Upper and Lower Control Limits for the company using the appropriate
constant given in Table Q4a.
Show your workings and any equations used.
Comment upon the values of the constant in the table. (Maximum 100 words).
(5 marks)
b) Compare and contrast the quality philosophies of Deming and Juran.
(Maximum 200 words).
It has been suggested by some authors that Six Sigma implementation programs are
simply repackaged (and possibly slightly enhanced) versions of previous quality
improvement approaches such as those that originally accompanied TQM initiatives
stemming from the 1980’s. Present arguments that both support and refute this
viewpoint. (Maximum 200 words).
(10 marks)
c) Discuss the significant differences associated with the relevant sample sizes
and sampling frequency for attributes and variables data. (Maximum 200 words).
(5 marks)
d) Adler United football club sell pies to fans at their ground. They have found
that their usual attendance on a match day is 63,250 fans. Each fan on average eats
4.6 of their tasty award winning pies that come in a variety of flavours. Analysis of
their catering receipts data shows that some fans were incorrectly given the wrong
pie on some of their orders even though they can only order one pie each
transaction, and that this happened with 3,840 pies.
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Using this data, and showing your workings, determine the dpmo of the process and
determine the level of quality that the catering service currently operate to. You may
use any available appropriate table of z value data as required.
(5 marks)
(Total 25 marks