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Answer FIVE questions, taking ANY TWO from Group A, Any TWO from Group B and ALL from Group C. Figures in the bracket indicate full marks.

Group A Q. 1. (a) What support exists management is a science? Explain.





(b) Does the expected monetary value criterion (EMV) .always provide the decision· maker with the best course of action? Explain. (5)

(c) A manufacturer of farm equipment is considering three locations (A, B aod q for a new plant. Cost studies show that fixed costs per year at sites are $2,40,000, $2,70,000 and $2,52,000 respectively, whereas variable costs are $100 per unit, $90 per uoit aod $95 per unit, respectively. If the plant is designed to have an effective system capacity of 2500 units per year and is expected to operate at 80 petcent efficiency, what is the most economic location on the basis of actual output? (5)

(d) Distinguish among the following types of layout:
(I) Fixed position, (ii) job-shop

and (iii) line processing.

Give examples of each type. Ans. (a) Refer Q. 2. (a) Summer 20 I0

(b) For problem involving risk situations, the most widely used criterion for evaluating the alternative courses of action is Expected Monetary Value (EMV) or expected payoff. The objective of decision making here is to optimize the expected payoff, which may mean either maximization if expected profit or minimization of expected target.

Expected Monetary Value (EMV). Given a payoff table with conditional values (pay-off) and probability assessment for all state of nature, it is possible to determine expected monetary value (EMV) for each course of action if the decision could be repeated a large number of times.




The EMV for given course of action is just sum of possible payoffs of the alternative, each weighted by the probability of that-payoff occurring. It is often possible for a decision maker to know enough about the future states of nature to assign probabilities that each will occur, which is decision making under risk. EMV is computed by each outcome by the probabilities of its occurrence and then summing these products. Thus the expected monitory value corresponding to the course of action Ai of the decision maker is given by EVM(A;)


= LPijP(Sj)

When peS)~ is the probability of state of nature S)' Pi} is conditional payoff of the course of action. The criterion of selecting expected payoff act is sometime referred as Baye's decision rule. According to this rule 'Best' would refer to the highest value if the payoff are expressed in terms of profit or gain. and lowest value when payoff values are expressed in terms of cost or loss. The optimum act is one with the highest EMy. It is not necessary that EMV always provide the decision maker with best course of action as it is important to recognize that using expected payoff or EMV as the decision criterion is based on some assumption regarding the decision maker's attitude towards risk. Specifically, this criterion implies that decision maker is risk neutral with respect to large risk rather they are risk averse which means they would be willing to give up some expected payoff in exchange of less risk. If we are going to face many small risks over time. In other words EMV while incorporates uncertainty, it still an inadequate measure of risk.
(c) Refer Q. 2. (b) Summer 2010. (d) Refer Q. 4. (a) Summer 2010.


Q. 2.(a)What are the major outputs from an MRP system? In what ~ay do MRP benefits extend to inventories, priorities and capacities? (5)
(b) Which aspects, or principle of Taylor's philosophy of scientific management corresponds most closely with some firms' effort to improve the quality of work life today? Explain with an example. (5)

Summer 2012 (c). Distinguish



between dependent Give some examples.


independent (5) and personnel

(d) 'tn what major respect are facilities maintenance different? Give examples.

Ans. (a) MRP Outputs MRP provides output in standard format. The format provides the schedule of material for future time-periods. It is generally of two types viz., primary output and secondary output. The primary outputs of an MRP system are the material requirements plans for each item and master material requirements plans that aggregate requirements for all product. These would be used to generate the following other report and documents.
(i) Order and production release schedules, which specify the

amount and timing of future orders and production runs.
(ii) Order releases, which authorize the purchase or production

of items.
(iii) Change reports, which focus on changes to the previous

production and purchase plans. (iv) Load reports, which indicate the amount of each major department capacity that is to be utilized with the plan. Secondary MRP outputs include: 1. Exception report i.e., reporting errors, late orders, shortages and excess scrap and wastages ; 2 Performance report i.e., performance of system (such as inventory turn over ratio, delivery promises and stock out index etc.); 3. Planning report i.e., future planning of inventory. Some examples are purchase commitment reports, pegging (i.e., traces to demand sources). Benefits of M.RP. I. To ensure that materials and components are available in right quantity at right time. 2. Reduction in inventory 3. Quicker response to the change in demand 4. Improved customer schedules. service due to adherence of the and

5. Better machine utilization, hence greater productivity economy.

340 -.



Primary MRP outputs include: I. Order release note: to place order ; 2. Planned order schedule ; 3. Rescheduling notice ; 4. Cancellation notice and 5. Reports on inventory status.
(b) Taylor's


(Refer Q. l. (b) Summer 2010).

The four ideas of Taylor's led to a great deal of new thinking about organization and they are an integral part of present day managerial thinking. Entire fields of present day managerial specialization have developed from Taylor's principle. For example, under the general heading of point (i) the fields of methods engineering and work measurement have developed, with research areas of experimental philosophy, physiology and ergonomics. From points (ii) and (iii), the field of personnel management developed, with the technologies of personnel selection and placement together with the organizational function of industrial relation. From point (iv) developed basic managerial function of planning and control and the functional organizational, which was also a Taylor's idea. Taylor was also known for some pioneering experiments in wage payment and in -the scientific procedure for such tasks in the steel industry as metal matching, pig iron handling and shoveling. In his metal cutting experiments, he used tons of metals over a period of 10 years, which resulted in specification for the field or speed that would be used for different metals and tool materials. In connection with these experiments he discovered high speed steel in collaboration with Maunsel White, which made him wealthy and allowed him to spend the bulk of his later life furthering his philosophy of scientific management.
(c) Refer Q. 4. (c) Summer 2010. (d) Personnel maintenance: It is concerned with manpower requirements for all the related activities of a organization and keep the records of the personnel and their duty/work in the organization. Also keep a track for ~ore requirements of personnel for any department and also if any department is over hired with personnel, So personnel maintenance is concerned in looking for manpower planning in any organization.

Facilities for personnel: Among the various factors for success of any organization one of the most important is the need of efficient personnels. Therefore, safe, comfort and adequate facilities, to take care of all the personnel needs of the employee result in higher

Summer 2012


morale, greater productivity, etc. therefore, proper thought must be given to the comfort, convenience and safety of the employee. Some of the facilities given to employees are : I. Employment, interview, testing and physical examination, assignment of jobs, training and upgrading. 2. Lockers, washroom and toilets. 3. Food services and drinking water. 4. Medical services, dispensary, first aid. 5. Working conditions.
(i) Light.

(ii) Air conditioning (comfortable temperature)
(iii) Fresh air (iv) Minimum air (v) Use of colours (vi) Safety


Special services
(i) Banking and loan facilities

(ii) Consumer's cooperative society
(iii) Trade union activities

(iv) Insurance programme
(v) Personnel advisory services

(vi) Training programme
(vii) Adult education (viii) Education for children of employees (Ix) Recreation programme-games/sports/cinemalTV. (x) Reading room and library. (xi) Creches, rest room, common meeting room etc.

Q. 3. (a) What aspects of goals are especially important when applying them at the job design level? Explain. (5)

Discuss the following in brief : management bargaining

(3 + 3)

(I) Participative (iz) Collective

Give an example of each.

342 (c) Give an example



strategy facilities Explain.

of a situation where a pure planning would be infeasible from a practical standpoint. (4) respect is the location of goods producing more flexible than that of service- producing facilities?

(d) 'In what

Ans. (a) A job is a collection of tasks performed in support of organizational objectives. The process of job design is one of creating or defining jobs by assigning specific work tasks to individual and groups. Job designs uses the insights of motivation theories to help accomplish two major goals-high levels of both job satisfaction and job performance. Job can and should be designed so that satisfaction and performance go hand in hand. This is in many ways an exercise in 'fit'. Agood design provides a good fit between the individual worker and the task requirements. One of the means of increasing the motivation of workers is through job redesigning. The concept of job redesign is to make the work itself interesting, varied and challenging. A key element in employee motivation and job performance is to make sure that employee is well suited for job and vice versa. If job is not designed properly and it is not good fit for the employee, then it will not, be performed well. Motivation accounts for the level, direction and persistence of effort expended at work. A manager who leads through motivation does so by creating conditions under which other people feel consistently inspired to work hard. Obviously a highly motivated workforce is indispensable to the achievement of sustained high performance results. Job performance is measured as the quantity and quality of tasks accomplished by an individual or group. Even the most capable and hardworking individual will not achieve the highest performance level, unless proper support is available. To fully utilize their abilities workers need sufficient resources, clear goals and direction, freedom from unnecessary rules and job constraints, appropriate technologies and performance feedback. Providing these and other forms of direct work support is a basic managerial responsibility. The best information on the need for support, of course, comes from the workers themselves. Job enrichment increases the amount of job satisfiers (achievement, recognition, work itself, responsibility, advancement

Summer 2012


and growth). Thus the responsibility level: (control by oneself), growth level: (continuing learning opportunities) and therefore the challenge level would be increased in job, thus enriching it. Of course, the people should be capable of handling these higher level demands of "enriched" job.
(b) (I) Refer Q. 3. (b) Summer 2011. (il) Refer 4. (ii) Winter 2005 and Q. 2. «(i) Summer 2006. (c) A strategy is a comprehensive action plan that identifies long term direction for an organization and guides resource utilization to accomplish goal with sustainable competitive advantage. It focuses on competitive environment and represents a 'best guess' about what must be done to ensure future success in the face of rivalry and even as condition change. The planning strategy is concerned with application of human and material resources in right direction to achieve the targets and goals, while policies are deciding factors, i.e. what should be done in particular situation. Strategies and policies both help managers planning by guiding, operating decision. Therefore, strategies and policies must be clearly understood and implemented in current manner. To be more effective, strategies and policies must be put into practice by means of plans with details to go into depth of various operations of organization.

In certain situations pure planning strategy is. infeasible and plans go wrong. For example plans based on antignated data or absolute assumptions about human behavior are likely to fail. Pitfalls that inhibit strategy implementation include failures of substance - such as poor analysis of the environment and failure of process - such as lack of panicipation in planning process. Strategic l;hoice must be considered in light of risk involved in particular decision. Some profitable opportunities may not be pursued because failure is risky venture could result in bankruptcy of the firm. Another critical element in choosing ...strategy is timing. Even the best product may fail if it is introduced in the market at an inappropriate time. (d) The factors important in determining the 10l;u";'on or manufacturing plant (i.e. good producing facility) are usually different from those important in locating a service facility. The essential difference between goods and services is that good is tangible while service is an intangible process. In case of good




producing facility, location of system is in relation to regional, national and international markets while in case of service location is dependent of local customers, clients and users. Factors in location decision of goods producing facility include construction cost, modes of transportation for shipping heavy manufactured items etc., access to railroads is frequently a factor of locating a plant or goods producing facility. Environmental issue is also a factor in plant location. The location of productive system is dedicated to local market. Since these factors are available at various places and are different, therefore location of good producing facilities are somewhat flexible as compared to service producing facilities, because goods can be transfered from different location to local market. Service facilities are usually smaller and least costly. Examples include .retail facilities such as restaurant, banks, hotels, cleaner, clinics or law office. However, there are always exceptions, such as hospital, a company head quarter, a resort hotel may be costly. One of the most important factors for locating a service facility is proximity to customers. It is often critical that a service facility be near the customer it services. Factors like zoning, utilities, transportation environmental constraints and labor tend to be less important for service operations. Thus the primary location criteria for a service related business is usually access to customers, a different set of criteria is important for good producing facilities. While profit or revenue is one of the important considerations in case of good producing facilities location others factors likes labour and environmental may be flexible the goal of purely service center is that of providing as equitability as possible as much of service to as large population as possible. If the service system is a nonprolH organization, then the location is dependent on the location of users as in case with post offices, medical clinic and so on. In case of emergency services, such as ambulance. police and fire, a major objective is to deliver the service (IB quickly as possible, i.e. minimize the response time. Thus from abov= discussions it is clear that location of goods I"'r041.lcingJ'a,,11ities is more flexible than that of service producing facilities. Q. 4. (0) Identify your different approaches to management and then define what you mean by the term 'management'?(5)



Summer 2012 (b) A producer


needs to add a component sub-assembly operation that can produce 80 units during a regular 8 hr shift. The operations have been designed for three activities with times as shown below: Operation A B C Activity Mechanical Test assembly Standard Time, min 12 16 3 (in parallel) will 'be required for

Electric wiring

(I) How many work-stations each activity?

(it) Assuming that the workers at each station cannot be used for other activities in the plant, what is the appropriate percentage of idle time for this sub-assembly operation? (5) (c) How is recruitment process of an IT company different from .. .the same of a manufacturing company? Explain. (5) Sol. (a) Refer Q. 1. (a) Summer 2010. (b) (I) Desired number of unit to be produced during a regular shift of 8 hr. =80

For operation Standard time

A :

12 min.

Total time for 80 units = 80 x 12 = 960 min. Since one work station time = 8 hr No. of work stations for activity A in parallel For operation B.: Standard time

16 hour I::::


16 4 hr = - hr 60 15 No. of work stations (in parallel) for activity B


16 min

= -


Whose = 2.666 nearest integer is 3. " No. of work stations (in parallel) for activity B For operation C : Total time required for 80 units 80

4 -x80 hr ..!.1~5 _ 8hr 3.


3 min


240 min


4 hr

As there is 8 hr shift for one work station, so number of work station for activity C = 1. (ii) Total number of work stations

2 + 3 + I






Assuming x workers at each work stations. Then total time = 6 x 8 x hr. = 48 x hr. Now actual time (as per given standard time) assembly operations. Ideal time

utilized in sub-

= (12 + 16 + 3) 80 x min = 2480 x min. = 41.33 x hr
48 hr - 41.33 hr 6.67x

6.67 x hr

Percentage ideal time

= 48x x 100 = 13.9%

(c) Recruitment is a set of activities designed to attract a qualified pool of job applications to an organization.

Effective recruitment should bring employment opportunities to the attention of people whose abilities and skills meet job specifications. The three steps in a typical recruitment process are
(i) Advertisement

of job vacancy.

(ii) Preliminary contact with potential job candidates. (iii) Initial screening to create a pool of qualified applicants.

The recruitment may be external or internal. The collegiate recruiting is one of the external recruitment in which job candidates are from outside the hiring organization. Labor market and recruiting are increasingly global in new economy, Internal recruitment seeks applicants from inside the organization. Both recruitment strategies offer potential advantages and disadvantages. External requiting brings in outsiders with fresh-perspectives. It also provides access to specialized expertise not otherwise available from insiders. Internal recruitment is usually less expensive. It also deals with persons whose performance records are well established. A history of serious internal requirement also builds employees, loyalty and motivation, sowing that one can advance by working hard and doing well when given responsibility. An IT company mostly needs professions (Engineers, technicians etc.) having knowledge of computers, electronics, communication system etc. The external recruitment process of an IT company is generally collegiate and also by advertisement on websites, news papers etc. In collegiate recruiting, for example advertising is done by the firm posting short job description in print or online through campus placement- centre. Preliminary contact involves a short 20 to 30

Summer 2012


minute interview, during which a candidate present a resume and briefly explain his or her job qualification. Successful candidates at this stage are usually invited for further interviews during a formal visit to organization. Jobs are also posted on websites like hotjobs.com and monster. com and thousands of resumes are received from all over the world. The advertisement on websites also attract persons in competing organizations. The internal recruitment in IT companies is generally done by electronic bulletin boards, or mostly on manager's recommended candidates as candidates for advancement. We take. the example of Infosys which is one of the biggest IT company in India created a foundation in 1996 works in variety of areas such as healthcare, arts, culture, social activities and education. Some of the initiative include a program called Academic Entente that involves activities such as arranging academic conferences, research collaborations, a global internship program and study tours to company's development centre. The initiative provides the link to academic institutions. The global internship program also provides opportunities for recruiting undergraduates as well as Ph.D students. The disciplines are not restricted to business students, but also include liberal arts majors. Such program aim at getting young people interested in information technology and computer science. There are fever requirement for labors, guards etc. in IT company which can by recruited by personal contact or from local placement agencies. A manufacturing company needs more number of (skilled and unskilled) labours, technicians. The requirement of professionals for such companies is somewhat similar to that of IT companies. For many large companies, college and graduate school campus are major source of entry level and new managerial help. When top-quality ability is in short supply, middle management requirement often requires the services of placement agencies or purchase of expensive ads in news paper and national publications, employment agencies etc. and when recruiting is done to fill top-level positions, many corporate management turn to executive search firms. For manufacturing company requirement mainly takes place in labour market that is the pool of available people who have skills to fill open position. The labour market changes over time in response to the environmental factors. Sources of recruitment depend on availability of right kind of




people in the local labour pool as well as the nature of position to be filled. If people with appropriate skills are not available within the organization or in the local labour pool, they may have to be recruited from some distance away or perhaps from competing organization. Unskilled labour recruitment is generally done are on factory gate. Group B Q. 5. (a) What are the essential differences and CPM? Give an example of each.
(b) How are control

between PERT



charts for variables for attributes? Explain are different financial


than the

(c) What implications.




(d) What MRP-II?

is ERP?

How is it different

from MRP-I


Sol. (a) Refer Q. 5. (c) Summer 2006 and Refer Q. 7. (b) Summer 2009.
(b) Refer Q. 6. (c) Summer 2010. (c) Refer Q. 6. (a) Summer 2010. (d) Refer Q. 6 (d) Summer 2010.

Q. 6. (a) Discuss different acceptance sampling plans used in SQC. Give examples of each plan with their merits and demerits. (10)
(b) Discuss the following (i) Fund


(5 +5)

flow statement and loss statement. Sampling Plans

(ii) Profit

Sol. (a) Types of Acceptance

There are four acceptance sampling plans in common use. These are described below:
(i) Single Sampling Plan. In this type of plan, the decision to accept or to reject a lot depends on the inspection of a single sample only. If the number of defectives found in the sample is equal or less than the acceptance number, the lot or batch is considered as acceptable and in the case, the defective is equal or greater than the rejection number the batch is rejected.

Summer 2012


A single sampling plan requires the specification three quantities namely, lot size (N), the sample size (n) and the acceptance number (c). We can understand it better by following example: Example I. Consider a sampling in which Lot size-N Sample size-n == 5, Acceptance Number-C == 1.


In above plan from a lot of ISOpieces select five pieces at random and inspect. If the number of defectives in sampling is two or more the lot is rejected otherwise if defectives are zero, sample is accepted or lot is accepted. It is worth to note that in single sampling plan the decision is always taken on the evidence of only one sample. (ii) Double Sampling Plan. In this type of plan the decision rule requires evidence of two samples taken from the lot or batch. The procedure adopted for this is as follows: Here, combined (n2)' It can be better understood by the following example: N

Ct C2

= ==

acceptance number of first sample (nt) acceptance number of first and second sample

58, nJ

Example. Let us consider a sampling plan with following data: == 3, n2 == 6, CJ == 0, C2 == 1.

(i) First select a random from a lot of 50; a sample of three pieces (nt).
(ii) If there are no defectives in the sample accept the lot. (iii) If there are two or more defects in the sample, reject the lot

(rejection number


acceptance number + 1)


I + I



(iv) If there is one defective, take a second sample of six (n2)' (v) If in the combined

sample (nt + n2) there is only one defective accept the lot.

(iii) Multiple SampljotPlan. In this plan there is a possibility of taking more than two samples before we reach at any particular decision of acceptance or rejection. This is also extension of double sampling plan.

It is type of sample plan or inspection in which after each sample is inspected, the decision is made to accept a lot or reject or to take another sample, but in which their is a prescribed maximum number of sample by which a decision to accept or reject is reached.


Engineering Management

The required data for this plan are lot size (N) first sample size (nt), first acceptance number (C), first rejection number (rt), second sample size (n2)' second acceptance number (C2) for the two combined samples, second rejection number (r2) for the two samples combined and so on. (iv) Sequential Sampling Plans. These plans are of two types by count of defects, namely (a) item sequential plans, and (b) group by group sequential plans. (a) Item by Item Sequential Plans. In this type of plan the number of item to be inspected are not pre-determined and items are drawn from the batch or lot one at a time and inspected. After carefully inspected the item drawn decision is made whether to accept or reject the lot or to continue inspection by taking up one more item from the lot. This procedure is continued till the lot is accepted or rejected. The formula employed for this type of plan is beyond the scope of this book.
(ii) Group-by-group-sequential plan. In this plan group of items rather than a sequence of items are inspected, thus items are drawn from a lot in groups and inspected. After careful inspection of each group, the commulative results are examined and a decision is made to accept or reject the lot or to continue inspection. This process continue till finally lot is rejected or accepted. (b) (,) Funds flow statement:

(Refer Q. 5. (b) Summer 2008)

The funds flow statement shows inflows and outflows, i.e. net working capital during a period, which may be one year, or a .day. It is prepared from the successive balance sheets and income statement. It identifies both the direction and volume of flow of funds and their consequential effect on the financial position of the enterprise. Whenever, an enterprise puts up a request for loan to a banker, the two questions posed by the banker are - What has the enterprise done with the funds it had? What will it do with the new funds? These questions are better answered by the funds flow statement. Sources of funds - Proceeds from issue of funds. - Operations. - Borrowings of long term nature, in the·form of debentures, debit deposits or...waus, secured or unsecured. - Proceeds from sales of fixed assets.

Summer 2012


Funds from operations are an internal source of funds, while the other sources are external. Uses of ·funds - Payment of cash dividends. - Capital expenditures in the form of fixed assets or long term investment. - Repayment of long term loans. Preparation of funds flow statement Calculate the change in the net working capital during the period from the working capital accounts (current assets and current liabilities) for the balance sheets from two successive periods. Sources (i) Work-out the sources of funds from transactions between non-working capital and working capital accounts. (ii) Ascertain the funds from operation after adjusting expenses not decreasing the net working capital. Also see Q. 5 (b) Summer 2008.
(i,) Profit and loss account


Profit and loss account also called income statement or revenue statement, is a statement of revenue and expenses resulting from business operations for a specific period, say a year. This is prepared to show income or loss, generated over the period from the firm's assets rather than with the assets themselves. It is prepared on the principles that all expenses and revenues relating to the period, whether paid or not are recorded in the income statement. Revenue is gross receipt of the enterprise which generally comes from sale of goods and services. The terms revenue and sales are used interchangeably and represent the inflow of funds in the form of cash or debtors, resulting in an increase in assets, Expenses, on the other hand represent outflow of funds resulting in an increase in liabilities or a decrease in assets. Both revenue and expenses involve a flow of funds and affect shareholders capital which increases on profit or decreases on loss. For example, expenses involving outflow would decrease capital. This is as follows:




Revenue ~ Capital ~ Expenses or sales Profit and loss AIC ABC Co. is depicted below: Profit and Loss AlC of ABC Co.
Particulators To opening stock (inventory) Purchases 10,90,815.00 (less refund) 7815.00 10,83000.00 Closing stock To cartage & wages (inventory) 6250.00 To gross profit CIF 65,3750.00 19,78000.00 Insurance Commisions paid Interest paid on Capital Interest paid to bank Trade expenses Rent & Taxes Electricity & water Misc. expenses Net profit 12,650.00 7950.00 28750.00 9650.00 229890.00 11750.00 14650.00 10750.00 3391600.00 6,65,200.00 6,65,200.00 By gross profit BF Commissions received 3,93750.00 19,78000.00 Amount Rs. Particulars By sales

Amount 15,95000.00 15,842500.00 Rs.


(sales returns) 19,750.00

653750.00 11500.00

Q.7. (a) Define the following
(I) Quality (il) Quality

(4 + 3 + 3)

assurance planning management.

(iii) Total quality

(b) Discuss the role of information technology in pricing and promotion of products in the scenario of globalization. Give some examples. (10) Sol. (a) (I) Quality Assurance: It is the confidence level with which we can assess the overall quality level of our product.
[t determines current level of quantity, future trends in quality level and also compares quality level of competitors products.

Summer 2012


Quality assurance is different from quality control. Quality control involves functions such as inspection, measurement and analysis in order to ensure that the products and services confirm to the designer's specification. on the other hand quality assurance covers all aspects of quality such as R&D, design parameters quality control function including SQC. In addition it also includes feedback from field performance and market intelligence report on competitors' strategies and technological breakthrough which become the basis of product improvement through better design and manufacturing methods. Planning: Quality plans are derivative plans containing policy, objective and long and short term strategies to meet such plans in quality. . The planning part of quality management should deal with following aspects. 'quality plarining'
(ii) Quality

I. To set quality objective and targets and take into account customers' wants and the marketability of the products etc. 2. To carry out pre-production process capability or quality derivability study. 3. To establish the relative importance of the quality characteristics and specification, and communicate it to the production line people as well as to vendors supplying the raw materials.

4. To look after various vendor quality control aspects such as examining new vendor facilities, their producers and systems, setting up the vendor rating scales and periodic performance evaluation of vendors. 5. To establish statistical control techniques, charts and sampling plans. 6. To establish training programs for various personnel in the company so that quality consciousness gains a firm ground in the Organization.
(iii) Total Quality Management (TQM): Refer Q. 6. (a) Winter 2009 and Q. 6. (b) Winter 2008. (b) Nowadays information technology is playing a vital role in pricing and promotion of products in the scenario of globalization. Companies that make their product internationally popular must decide what prices to charge in the different countries in which they operate.


Engineering Management

In some cases, a company can set a uniform worldwide price. The pricing in scenario of globalization depends on nature of market. In case of pure monopoly the government permits the company to set rates that will yield fair return. But in case of pure competition, monopolistic competition and algopolistic competition information technology plays a major role in deciding the price. The price that a company should change in a specific country depends on many factors, including competitive situations, laws and regulations etc. cost play an important role in setting price. The information technology provide database from which prices of various products of other companies can be known and then price of its own product can be determined. Here is a short list of how the internet allows sellers to discriminate between buyers and buyers to discriminate between sellers. 1. Get instant price comparison from thousand of venders: On the website pricescan.com lures thousands of visitors a day most of them corporate of visitors a day, most of them corporate buyers. 2. Name their price and have it met: On pricescan.com the customers states the price he wants to pay and price line checks whether the seller willing to meet that price. 3. Monitor customer behavior and tailor offers to individuals: GE lighting, which gets 55,000 pricing request a year has web program that evaluate 300 factors that go into a picturing quote. Such as past sales data and discounts 4. Give certain customers access to special prices: CD NOW online vendor of music albums e-rnails. Certain buyer can access a special website address with lower price. Whenever there is a change in price in global market, the company gets the information instantly through the database and can change its price accordingly. For promotional pricing the companies can use several pricing technique to estimate early purchase, like special-event pricing, low interest financing, large"payment terms etc. Promotion is closely related to advertising and serves the purpose of giving a company's target market information about a brand, product or company. Brand quality deals with the customers knowledge of product and association of a certain product with a particular company or brand name. Product launches are one of the

Slimmer 2012

355 Information

most common uses of promotions and advertisements. technology is very helpful in promotion of products.


Company can design own websites that embody or express their purpose, history products and vision. They can show the video of the products, quality, performance and also comparison with other similar products. A key challenge is designing a site that is interesting enough to encourage repeated visits. Visitors will judge a site's performance on ease of use and physical attractiveness. A micro site is a limited area on web managed page and paid for by an external advertiser! company. Display ads or banner ads are small, rectangular boxes containing text and perhaps a picture that companies pay to place on relevant website. Interstitials are advertisements, often with video and animation that pop up between changes on websites. With usergenerated content sites such as Youtube etc. My space video and Google video, consumers and advertisers can upload ads and videos to be shared by millions of people. Q.8. (a) Define the following : (5) Fixed and current asset items (il) Fixed and current liability items. (b) What is ISO 9000 quality system? Discuss its various clauses and provisions. (7) (c) What is the 'law of diminishing marginal return'? Explain. (4)

(d) What is e-commerce? Give some of its benefits. (4) Ans. (a) (l) Fixed asset items : The fixed asset are fixed in the sense that they are acquired to be retained in the business on a longterm basis to produce goods and services and are not for resale. They are in sense long term resources in that they are held for longer than one accounting period. Fixed assets fall in two categories; tangible and intangible. Tangible fixed assets are those which have a physical existence and generate goods and services. Including in this category of fixed assets are land, buildings, plants, machinery, furniture and so on. They are shown in balance sheet, in accordance with the cost concept, at their cost to the firm at the time they were purchased. The intangible assets, do not generate goods and service directly. In a way, they reflect the rights of the firm. This category of assets include companies patents, copyright, trade mark and goodwill. These




assets confer certain exclusive rights on their owners. Intangible fixed assets are also written off over a period of time. (;;) Current assets items: In contrast to the fixed assets, current assets are short term in nature. As short term assets, they refer to the assets/resources which are either held in form of cash or are expected to be realized in cash with the accounting period or the normal operating cycle of the business. Conventionally, current assets designate assets which are held for a short period of time, usually not more than a year from the balance sheet. There are also known as liquid assets. Current assets, include cash, marketable securities accounts receivable (debtors, notes/bills receivable and inventory). (iiI) Fixed liability, items: Liabilities may be defined as the claim of outsiders against the firm. Alternatively, they represent the amount that the firm owes to outsiders, i. e. other than owners. Fixed liability (or more appropriate term long term liability) items are those in which sources of funds included are available for period exceeding one year. In other words such liabilities represent obligation of a firm payable after the accounting period. The sources of long term borrowing are (i) Debentures (ii) Bonds,
(iii) Mortgages



Secured loan from financial institution and commercial banks. They have to be rapid/reduced either in lump sum at the maturity of loan/debenture or in installments over the life of the loan. Longterm liabilities are shown in the balance sheet net of redemptionrepayment. (iv) Current liability items: In contrast to the long term liabilities, such liabilities are obligations to outsiders repayable in a short period, usually within accounting period or the operating cycle of the item. It can be said to be the counter part of the current assets. Conventionally, they are paid out of the current assets; in some cases however, existing current liabilities can be liquidated though the creation of additional current liabilities. Includes in this category are:
(iv) (i) Accounts payable

(iii) Tax payable (v) Deferred income and

Bill/notes payable (tv) Accrued expenses (vi) Short term bank credit.

Summer 2012 (b)


ISO 9000: Refer Q. 6. (c) Winter 2010. There are twenty major clauses of ISO-9000. Details is given below: Clause 1: Quality Policy Clause 2: Organisation Responsibility and Authority. Clause 3: Organisation Resources. Clause 4: Management Representative Clause 5: Management Review Clause 6: Quality System Clause 7: Contract Review Clause 8: Purchasing Clause 9: Control of Customer Supplied Product. Clause 10: Product Identification and Traceability. Clause 11: Process Control Clause 12: Inspection and Testing. Clause 13: Control of Inspection, Measuring and Test Equipment Clause 14: Inspection and Test Status. Clause 15: Control of Non-Conforming Material. Clause ,16: Corrective and Preventive Action. Clause 17: Handling, Storage, Packaging, Preservation and Delivery. Clause 18: Control of Quality Records. Clause 19: Internal Quality Audits. Clause 20: Training. Clause 21: Servicing Clause 22: Statistical Techniques. Major Provisions of the Standards The rso 9000 Series standards are created as generic standards in order to allow them, to be applied to every industry. They help businesses plan, control, and document issues related to quality. They are based on the assumption that if a quality management system is properly designed, then quality assurance programs will also be properly designed. However, it is important to note that the ISO 9000 standards relate to the quality of production processes only. They do not include provisions for evaluating the quality of the product. This means that three companies following ISO 9000 standards, each producing the same product, could produce three


Engineering Management

products of varying qualities. This fact has been the basis for criticism of the ISO 9000 series standards. There are more than five standards in the ISO 9000 series, but five contain most of the crucial provisions. They include ISO 9000, ISO 900 I, ISO 9002, ISO 9003, and ISO 9004. In addition, ISO 8402 is often grouped with the ISO 9000 series. ISO 8402, which covers vocabulary, was passed in 1986 in anticipation of the ISO 9000 series. ISO 9000 and ISO 9004 provide guidelines. To develop a quality system, a company must choose to become certified to one of three standards: ISO 9001, ISO 9002, or ISO 9003. (c) Refer Q. 8. (d) (i) Winter 2011. (d) Refer Q. 6 (e) Winter 2011. Group-C (to x 2) Q, 9. (a) Answer the following in brief: (i) What is CRAFT and ALDEP? (ii) What is marginal productivity? (iiI) What do you understand by the crashing of the activity? (iv) What is mass customization? (v) What is decision support system? (VI) What are different types of organization? (vii) What is ABC classification of inventory? (viii) What is preventive maintenance? (ix) What are 'BOM' and 'MPS' in MRP? (x) What is a balance-sheet? ADS. (I) CRAFT: It is a acronym standing for Computerized Relative Allocation of Facilities Technique. Although craft was originally developed for designing layouts where material handling costs were a major consideration, by broadening the interpretation of material flow CRAFT can be used as an aid in designing layout for non-manufacturing activities also develop office layouts CRAFT is an improvement program, CRAFT has the flexibility of allowing certain departments to have fixed location in the layout. Also CRAFT can be used to evaluate for improved design. ALDEP: It is the acronym standing for Automated Layout Design Program. It is primarily a construction program, however

Summer 2012


due to evaluation process employed in accepting or rejecting a given layout it can also be considered to be an improvement program. It constructs layouts without any existing layout. ALDEP is used when activity relationship are a major consideration and when constantly changing conditions prohibit the collection of precise numerical data. (ii) Marginal productivity: In economics and in particular neoclassical economics, the marginal product or marginal physical product of an input (factor of production) is the extra output that can be produced by using one more unit of the input (for instance, the difference in output when a firm's labor usage is increased from five to six units), assuming that the quantities of no other inputs to production change. The marginal product of a given input can be expressed as

where, /'lx is the change in the firm's use of the input (conventionally a one unit change) and l1y is the change in quantity of output produced. Note that the quantity of the product is typically defined ignoring external costs and benefits.
(ii~) Crashing

of activity: Crashing of activity mean reducing the normal completion time of that activities (generally critical activities). It is done by for reducing the project completion time. (iv) Mass customizatioD: It is the process of delivering widemarket goods and services that are customized to satisfy a specific customer need. It is the method of effective post pending the task of differentiating a product for a specific customer until the latest possible point of supply network. Mass customization in marketing, manufacturing, call centers and management is the use of flexible computer aided manufacturing system to produce custom output. Those systems combine the low unit costs of mass production process with the flexibility of individual customization. Mass customization, is the new frontier in business competition for both manufacturing service industries. At its core is a tremendous increase in variety and






(viii) (ix) (x)

customization without a corresponding increase in costs. At its limit, it is the mass production of individually customized goods and services. At its best, it provides stragetic advantage and economic value. Refer Q. 7. (b) Summer 2011. According to formation organization are of two types: I. Formal organization 2. Informal organization According to structure orga"{!ization is of following types: I. Line or scalar organization 2. The line and staff organization 3. Functional organization 4. Line staff and functional organization 5. Matrix organization. Refer Q. 1. (d) Winter 2011. Refer Q. 9. (ix) Summer 2005. Refer Q. 4. (a) Summer 2007. A balance sheet is a significant financial statement of a firm. Other terms to describe this financial statement are the statement of financial position or the position statement. As the name suggests, the balance sheet provides: information about the financial standing/position of a firm at a particular point of time, say as on December 31. lt can be visualized as a snapshot of the financial status of a company. The financial position of the company is valid for one-day the reference day. The position of the firm on the preceding or following day is bound to be different. For form of balance sheet: Refer Q. 5. (a) Summer 2007.

Winter 2011


Answer FIVE questions.

taking ANY TWO from Group A. ALL from Group C

ANY TWO from Group Band

Figures in the bracket indicate full marks

Group A Q. 1. (a) What is cellular manufacturing system ? Explain cell layout and how it helps in reducing material handling equipment, with the help of a suitable example. (1+2+2) (b) Define the term 'management'. Also, explain briefly mission functions of management. (2+2) (c) Highlight the contribution of HL Gantt, H Fayol and Gilbreth. (2x3) (d) What do you mean by ABC classification ? Discuss different types of inventory control system according to different classes of ABC. (2+3) Sol. l(a) The concept of performing all the necessary operations to make a part, component, subassembly or finished product in a work cell is called cellular manufacturing. Cellular manufacturing is an application of group technology. In a cellular manufacturing system dissimilar machine or processes are arranged into cells, each of which is dedicated to the production of a part, product family, or limited group of technologies. Cell layout: Cell layout (or cellular layout) consists of an arrangement of a facility so that equipment used to make similar parts or families of part grouped together. Cell configuration is usually Ushaped, enabling personnel to move from machine to machine, loading and unloading parts. The machines in the cell are usually all single cell cycle automatics so that they can complete the machining cycle unattended. The layout of machine within each cell resembles a small assembly line. Thus, line balancing procedures, with some adjustments. Following key points for a cellular layout may be noted: 1. Machines are arranged in the process sequence. 2. One piece at a time is made in a cell. 3. The cycle time for the system dictates the production rate for the cell. 4. The personnel once trained to handle more than one process.




5. The cell is designed in horse shoe shape (U-shape). Flexibility is the key design feature of a cellular layout. The layout can react quickly to changes in customer demand or changes in product design by the mix products.



Raw materials

Fig. 1 Cellular layouts

Cellular layouts have become popular in the last decade as the backbone of modem factories. Cellular manufacturing shortens lead times by reducing setup, workpart handling, waiting time and batch sizes, material handling and transport are reduced because the work stations (machines) are spatially close and often are operated as repetitive flow process. (b) Defining management: Refer Q. l. (b) Winter 2005. Mission and functions of management: Refer Q. L (a) Winter 2008. (c) Contribution of HL Gantt and Gilbreth: Refer Q. 3. (b) (ii) Winter 2008. Contribution of Henri Fayol: Henri Fayol is generally hailed as father founder of the classical management school not because he was first to investigate managerial behaviour but he was first to systematize it. Fayol believed that sound management practices falls into certain patterns that can be identified and analysed. From basic insight, he drew up a blue print for cohesive doctrine of management, one that retains much of its force to this day. With his faith in scientific management Fayol was like Taylor, his contemporary. While Taylor was concerned with first-line managers and scientific' methods Fayol's attention was dedicated at activities of all managers. In other words Fayol was

If-i"nler 20 J I


interested in total organization and focused on management. Fayol wrote from personal experience as he was managing director of a large French coal-mining firm. Fayol described the practice of management as something distinct from accounting. finance, production, distribution and other typical business functions. His belief that management was an activity common to all business endeavors, government and even the home led him to develop 14 principles of management- fundamental rules of management that could be.applied to all organizational situation and taught in schools. The 14 principles are; I. Division of labour 3. Discipline 5. Unity of direction 6. Subordination of individual interest to the common good. 7. Remuneration 9. The Hierarchy It. Equity 13. Esprit de corps. 8. Centralization 2. Authority 4. Unity of command

to. Order
t2. Stability of staff

of Inventory Items and Their (d) ABC Classification Controls The ABC classification of inventory also known as Pareto Analysis after Italian economist Vilfredo Pareto who discovered empirically wealth is maldistributed. ABC analysis is a convenient way of dividing regular items into three groups viz high value, medium value and low value goods. The classification is however required only for moving items. Equal control efforts of all items are not ordinarily justified. Different value of inventory suggest that we should first concentrate our attention on higher value items and less concentration about lower valued items. For example Fig. 2 shows a fairly typical relationship between the percentage of inventory items and percentage of inventory's total value (in Rs.). From figure it is clear that Twenty percent of the items account for 60 percent of the inventory's total rupees value (Class A). The second twenty percent of the items accounts for 20 percent of the value, and finally greatest percent of items (60 percent) accounts for only 20 percent of total inventory. (Class B)




4. MRP-ll usagewise is still quite popular inspite of the intervention of ERP. Leading manufacturing units in vogue do not drop its importance. Its success is governed by a number of factors such as cent percent accuracy in the calculations, besides adaptation of operation techniques. (c) In trying to systematically describe the nature of managerial work and demands placed on those who do it, Mintzberg identified the set of 10 roles given below. The roles involve managing information, people and action the roles are interconnected, and all managers must be prepared to perform all of them. Mintzberg's Interpersonal Roles How a manager intracts with other people I. Figure head 2. Leader 3. Liaison Managerial roles Decisional Roles How a manager uses information in decision making I. Entrepreneur 2. Disturbance handler 3. Resource allocator 4. Negotiator Informational Roles How a manager exchanges and process information I. Monitor 2. Disseminator 3. Spokes person

The interpersonal roles are ones that involve people (subordinate and person outside the organisation) and other duties that are ceremonial and symbolic in nature. The informational roles involve the giving, receiving and analyzing of information. The decisional roles involve using information to make decision to solve problem or address opportunities. (d) (I) Parity principle: Organizational principle implying strictly joint decision-making mechanisms in which the representatives of two group with differing interests carry equal weight for example, industrial tribunal. Its .development is associated with collective bargaining. Thus, the bodies which administer institutions created by collective agreement are usually joint bodies composed of equal number of representatives of the two sides. (il) Acceptance theory: (Chester Barnard's acceptance theory of authority. ) Chester Barnard identified four conditions that determine whether a leader's directives will be followed and true influence is achieved.

Winter 20 II


(I) The other person must truly understand the directive. (2) The other person must feel capable of carrying out the directive. (3) The other person must believe that the directive is in the organisation's best interests. (4) The other person must believe that directive is consistent with personal values.
(iii) Authority and its delegation:

Authority is the right to assign tasks and direct activities of subordinates in ways that support accomplishment of organisation's purpose. Delegation is the process of distributing and entrusting work to other persons. There are three steps of delegation: (1) The manager assignes responsibility by carefully explaining the work. (2) The manager grants authority to act. (3) The manager creates accountability. Managers in progressive organisations are delegating more, they are finding more ways to empower people at all levels to make more decisions affecting themselves and their work. (iv) Scalar chain of command: Fayol in his management theory used this term. According the him scalar chain of command is a "chain of superiors from the highest to the lowest ranks, which, while not be departed from needlessly, should be short-circuited when following it scrupulously would be detrimental. In other words there should be a unbroken line of communication from the top to the bottom in the organisation. (v) Division of labour: It is the breakdown of complex task into components so that individuals are responsible for a limited set of activities instead of the task as a whole often referred as division of work. (vi) Functional authority: The authority of members of staff departments to control the activities of other departments as they relate to specific staff responsibilities.




Q. 3. (0) Explain different factors that affect the decision of location of a hospital. (4) (b) What are different types of inventories? Explain each one in detail. What are the advantages and disadvantages of holding the inventory? (1+2+2) (c) Classify the controlling approaches. Explain autocratic and clan control style. Also, explain bench marking. (2+2+2) (d) What do you mean by environment of an organization? Explain SWOT analysis. What are different types of plans. (2+2+1) Sol. 3 (a) The issue of location of service facilities such as hospitals differ from the issue of plant location because the objectives in this case is different while profit or revenue is one of the important considerations in case of industries location, the goal of purely service centres in that of providing as equitability as possible as much of service to a large population as possible. In case of emergency services such as ambulance, police and fire, a major objective is to deliver the service as quickly as possible i.e. minimise the response time. The factors affecting the decision for location of a hospital more generally primary health care centre (PHC) are; (i) No. of localities and blocks (L) (ii) No. of categories or strata of people (M) (iii) No. of people of stratum (J) in block (I) (iv) Total population in the region (N) (v) Expected no. of visits per time period by stratum (J) people if PHC (or hospital), is in immediate vicinity of the individual. (vi) Charastistics effect of distance on utilisation for the different state of people. (vii) The probability of choice of PHC or hospital by people in case more hospitals in the region. In general the aim should be l. Maximise utilisation of the hospital or health care centre. 2. Minimise average distance per capita to the closest hospital (or PHC). 3. Minimise distance per visit. 4. Minimise percent degradation in utilisation. Thus the hospital (or PHC) should be closed to the areas that have large number of people from whom distance is strong barrier to utilisation.

Winter 2011


Area should have large population density and neglect the performances of different strata of people. Distance should be minimum but there should be strata of people for whom distance is not a major barrier. (b) Inventory can be broadly defined as stock of goods, commodities or other economic resources that are stored or reserved at any given period for future production or for meeting future demand. The term inventory may be divided in two classes namely Direct and Indirect inventories. 1. Direct Inventories: Those items which playa direct role in manufacture and become integral parts of goods and products. It is classified in three group (i) Raw materials: The material to be used in goods. (ii) Work in process: Semi-finished or goods in process temporarily stored during the production process. (iii) Finished good: Finished goods awaiting shipment from the factory, wholesaler or retailer. 2. Indirect inventories: Those items which are necessary to manufacturing but do not become component of finished production such as lubricants, grease, oil, petrol. office materials etc. They afe/ further subdivided as: (i) Transit or pipeline inventories: The inventories whose function is to cover delays in handling and transit. e.g. coal. (ii) Buffer inventories: These inventories are held to prevent stock out due to uncertain demand and supply fluctuation. The excess stock (safety stock) is held to meet fluctuations in demand and lead time. (iii) Lot size or cycle inventories: These inventories are held due to the fact that orders are placed in lots rather than purchasing the exact amount of inventory which may be needed at a point of time. (iv) Decoupling inventories: These inventories serve as the function of decoupling operation in a production system. (v) Seasonal inventories: The inventories to meet the seasonal functions in demand economically. Example: Crackers for Diwali, fans and coolers for summer season


Engineering Management

(vi) Fluctuation inventories: Those inventories which have to be carried because sales and production times for product cannot always be predicted accurately. (vii) Anticipation inventories: These are built up in advance for a big selling season, a promotion program or plant shut down period. Advantages of holding inventories: 1. Avoid losses of sales 2. Gains from quantity discount 3. Reduced order cost 4. Achieves effective production. Disadvantages: I. Involves blocking of funds in different kind of inventories 2. Needs more space and blocks it for some time. 3. The cost of finish raw or finished good may be reduced causing loss in future time. (c) The controlling approach of manager also called leadership approach is classified as follows: (1) Trait approach : Many studies of traits have been made. (i) Physical traits (ii) Intelligenc\ and ability traits. I;· .\ 'l';!rsonal traits
(/v) Task related characteristics. (v) Social characteristics 2. Charismatic approach: Charismatic leaders (managers) may have certain characteristics such as being self confident, articulating a vision, being able to initiate change etc. 3. Behavioural approach : Behavour unlike traits can be learned, so it followed that individuals trained in appropriate leadership behaviour would be able to lead more effectively. 4. Contingency approach: Situational or contingency approach is for managerial theory and practice. Autocratic control style. The autocratic control style describes a leader who dedicates work method, make unilateral decisions and limit employee participation. The autocratic leader commands and expects compliance, is dogmatic and positive, and leads by ability to with hold or give rewards and punishment



Clan control style: Clan control represents cultural values almost the opposite of bureaucratic control. Clan control relies on values, beliefs, corporate culture, shared norms, and informal relationships to regulate employee behaviour and facilitate the reaching of organization goals. Organization that use clan control require trust among their employees. Given minimal direction and standards, employees are assumed to perform well-indeed, they participate in setting standards and designing the control system. Benchmarking: It is an approach for setting goals and productivity measures based on best industry practices. Benchmarking developed out of the need to have data against which performance can be measured. The goal of benchmarking is to identify various benchmarks, which are the standards of excellence against which to measure and compare. There are three types of benchmarking. First strategic benchmarking compares various strategies and identifies the key strategic elements of success. Second operational benchmarking compares relative costs or possibilities for product differentiation. Management benchmarking focuses on support functions such as market planning and information system, logistic, human resource management and so on. The benchmarking process begins with the identification of what is to be benchmarked. Then superior performances have to be selected. Data need to be gathered and analysed. which become basis of or performance goals. During the implementations a new approach , performance is periodically measured and correctives are taken at that time. (d) Organizational environment: According to system theory organizations are neither self sufficient nor self contained. Rather they exchanges resources with and are dependent upon the external environment defined as all elements outside an organization that are relevant to its operations. Organisation take inputs (raw materials, money labour and energy) from the external environment. The external environment has both direct-action and indirect action elements. Directaction elements, also called stakeholders, includes share holders. unions suppliers and many others who directly influences an organization. Indirect-action element, such as technology, economy, and politics of a society, affect the climate in which an organization operates and have the potential to become direct-action element.




SWOT analysis: Refer Q 2(b) Winter 2007. Types of Plans (i) Standing or repeated use plans. (ii) Single use plans (iii) Kinds of enterprise plans (iv) Time plans. (v) Aggregate and planning (vi) Project and production plans. Q. 4. (0) What do you mean by the function 'organizing'? Enlist the advantages and disadvantages of line organization and matrix organization. (2+2) (b) Explain Maslow's hierarchy of needs. Also, explain motivation cycle. (2+2) (c) ABC company produces brass door knockers, among other things. The company expects the next year demand for door knockers to be 20,0000 units at a uniform rate. It costs $125 to set up the equipment to produce the door knockers, and production rate is 5000 units per month. The company accountant estimates that it costs $0'40 per year to hold a door knocker in inventory. (l) How many knockers should company produce each time it initiates production of knockers? (4) (ii) It takes 3 weeks from the time the warehouse orders more knockers until finished knockers begins to arrive. At what inventory level should the company release production orders, if it desires ),5 times the average lead time used to be designated as safety stock ? (2) (d) Five jobs are to be on two processes, all in the sequence of first process 1 and then process 2. The duration of the operations are indicated in the table below :
Job Time, hr

Process 1 A

Process 2 2·2 . 3'5 2·6 4·0 2·5



4 3 2 4 4·5

Sequence the job according to Johnson's rule. Use a Gantt chart to show how long, after the start of the first job on process 1, each job will be completed process 2. (6)

Winter 2011


Sol. 4(a) Organizing: Organizing is the process of arranging and resources among an organization's member so that they can achieve the organizational goals. Different goals require' different structures. Thus manager must match organizations to its goals and resources, a process called organizational design. Relationship and time are central to organizing activities. Organizing produces a structure for the relationship of an organization, and it is through these structured relationship that future plans will be pursued. Merits Merits: I. Expert advice from specialist available. staff executives can be made and Demerits of line organizations

2. Line executives are relied of some of their loads and are thus able to devote more attention towards production. 3. Less wastage of material, 4. Quality of product Demerits: I. Product cost will increase executives. because of high salaries of staff 5. There is no confusion man and machine hours. organization is improved. as exist in functional

2. At times the staff department may break upon the rights and responsibilities of the line organization. 3. Line and staff organization not clear: may get confused as functions are

4. Frictions and jealousy if developed between executives may cause harm to the enterprise.

line and staff

5. Line executives if start depending too much on staff executives may loose their initiative, drive and ingenuity. Advantages Advantages and Disadvantage of Matrix Organisations separately which It also helps in

1. It focuses to resources on each project facilitates better planning and control. completion of projects in time.

2. It is more flexible than the traditional functional organization. It can be applied more usefully to an organization involved in projects ranging from small to large. It can better respond of




the changes in technology, market conditions etc. 3. Service of professionals are better utilized in case of matrix organization as more emphasis is placed on the authority of knowledge than rank of the individual in the organizational hierarchy. 4. It provides motivation to the personnel engaged in a project. As they can utilize their competence and knowledge to make maximum contribution for the execution of project. 5. Functional departments provide the necessary personnel to each project. The personnel revert back to their parent departments after the project is completed. This brings economy in the use of specialized services of personnel from different functional areas. Disadvantages I. It violates the principle of unity of command as personnel receive orders from the project manager and the functional boss. This may give rise to jurisdictional conflicts. 2. Formal and informal relationship, operate in the matrix organization, thus the relationship become more complex here. 3. Here, the personnel are drawn temporarily from different departments and the project manager does not have line authority over them, which may lead to lack of commitment to objectives and morale of personnel may also be low. 4. Matrix organization can't constitute a homogeneous and compact group. The multiplicity of vertical and horizontal relationship may impair organizational efficiency. 5. In matrix organizations state of conflict exists between functional and project managers this conflict create competition for limited resources.
(b) Maslow's of Hierarchy Needs: Maslow observed human needs in the form of a hierarchy, starting from lowest needs and subsequently rising to highest needs. The moment at which one set of need is satisfied then motivators (incentives) for that need ceases to operate.

Maslow's principal argument is that employees need to emerge in a hierarchical fashion, lower-order needs are experienced first and must be satisfied by the work environment before higher-order needs are



perceived. Maslow's hierarchy is illustrated in Fig.4. From lowest to highest, the needs are defined as: (I) Physiological needs: These include hunger, sex, thirst etc. These needs are at the lowest level of hierarchy (ii) Safety needs: After fulfilling the physiological needs a set of needs emerges for protection against danger and threats. Safety needs are thus seen in preferences of job security, security against disease, misfortune, old age, industrial injury etc. (iil) Social needs: Now comes the needs for love and affection. The love needs involve both giving and receiving love. (iv) Esteem needs: Now employees look for self respect and respect from others. This results in desire for strength, adequacy; confidence, independence, reputation or prestige recognition, attention and appreciation. (v) Self actualization needs: This need is desire to become what a person wants to be and his personal choice, for example a musician must make music, an artist must paint, a poet must write, if he is to be ultimately happy. Same is the case in an organization. If employees are basically satisfied with their potential and type of work, one can expect fullest and healthier creativeness from them.

MOTIVATORS or Secondary need

Fig. 4. Maslow's Heirarchty of Needs

A need theory of motivation Most industrial psychologists agree that Maslow identified several classes of needs that are important sources of work motivation. This theory appears to be faulty. However, over the presidency issue, very few management theorists believe that a strict ordering exists in the sequence in which needsare felt (except, possibly, for physiological and safety needs). Perhaps the most important managerial implication


Engineering Management

its sales reaches maximum value (called saturation point) and after that it popularity starts declining as the customers who have already used that product divert its attention in general towards some other product of better quality and also does not suggest others to purchase the product. Also the customers gets attracted towards new products (viz two in one, mobiles and other shophisticated appliances. Hence the sale starts declining steeply and finally its sale stops and company does not manufacture the product. (ii) Marginal productivity : It is defined" as change in output that results from changing the labour input by one unit, all other factors remaining constant. Marginal productivity

Ax iii' where Ax is change in output and

iii in change in number of labour. The concept of the marginal productivity of an input is a productive process is a particularly important idea in economic analysis, because under competitive conditions, the equilibrium price of a factor of production (including wages, interest etc.) will tend toward equ,ality with its marginal productivity. Marginal productivity is the increase in the value of output that can be produced by adding in one more r.mit of the particular input while holding other inputs constant. Thus the higher the productivity of a factor of production, the higher the income that, may be expected to accrue to its providers, and anything that raises overall levels of productivity within a society may be expected to increase the average overall prosperity of the society as a whole. Q. 6. (a) What are the factors of production? Explain the total, average and marginal product. Why are average cost, marginal cost a..d average cost curves are If-shaped ? (1+2+1) (6) Expl~in transaction theory of firm with the help of a suitable examte. (3) (c) Exp ain MBNQA in detail through its purpose, criteria for performa ee, and characteristic of criteria. Supplement your answer with a neat sketch. (I +2+2) (d) List the steps of the product design and explain them briefly. What are the general approaches to prolltlpte the new product in the market. (2+2) (e) Explain the objectives of e-commerce and its benefits. (2+2)

Winter 2011


Sol. 6(a) The factor of production (also called inputs) are; (i) Planning (ii) Manpower (iii) Materials (iv) Machinery (v) Money (vi) technology (vi) Time (vii) Organisation (viii) Government Interaction. Total product: It is the sum of fixed product as decided by management as per availability of inputs plus the variable product (overtime production). Average product: It is defined as the product per unit input (labour, material, power and others) Total product I. . Tota mput Marginal product: The marginal product of an input (factor of product) is the extra output that can be produced by using one more unit of input (for instance the difference in output when firms manpower labour is increased by on unit) assuming that no other inputs to production change. AP= MP= fly Ax where Ax is change in firms' use of the input (conventionally one-unit change) and fly is the change in quantity of output produced. In a more general from marginal product is the mathematical derivative of production with respect to that input i.e.

= dy Ax dx The average and marginal costs are generally U-shaped because average cost and marginal cost initially reduces with increase in production capacity and the minimum and again rises. Reduction is due to increase in efficiency with in the economical size as quantity increases. Further rise afterwards indicates dis-economics of scale i.e. increase in fixed cost, overhead etc. due to introduction of new machinery plants etc.




(b) Transaction theory of a firm: According to Ronald Coase, people begin to organise their production in firms when the transaction cost of coordinating production through the market exchange, given imperfect information, is greater than within the firm.

Ronald Coase set out his transaction cost theory of the firm in 1937, making it one of the first (neo-classical) attempts to define the firm




theoretically in relation to the market. One aspect of its 'neoclassicism' lies in presenting an explanation of the firm consistent with constant returns to scale, rather than relying on increasing returns to scale Another is in defining a firm in a manner which is both realistic and compatible with the idea of substitution at the margin, so instruments of conventional economic analysis apply. He notes that a firm's interactions with the market may not be under its control (for instance because of sales taxes), but its internal allocation of resources are: "Within a firm, market transactions are eliminated and in place of the complicated market structure with exchange transactions is substituted the entrepreneur who directs production." He asks why alternative methods of production (such as the price mechanism and economic planning), could not either achieve all production, so that either firms use internal prices for all their production, or one big firm runs the entire economy. Coase begins from the standpoint that markets could in theory carry out all production, and that what needs to be explained is the existence of the firm, with its "distinguishing mark of the supersession of the price mechanism." Coase identifies some reasons why firms might arise, and dismisses each as unimportant: If some people prefer to work under direction and are prepared to pay for the privilege (but this is unlikely); If some people prefer to direct others and are prepared to pay for this (but generally people are paid more to direct others); if purchasers prefer goods produced by firms. Instead, for Coase the main reason to establish a firm is to avoid some of the transaction costs of using the price mechanism. These include discovering relevant prices (which can be reduced but not eliminated by purchasing this information through specialists), as well as the costs of negotiating and writing enforceable contracts for each transaction (which can be large if there is uncertainty). Moreover, contracts in an uncertain world will necessarily be incomplete and have to be frequently re-negotiated. The costs of haggling about division of surplus, particularly if there is asymmetric information and asset specificity, may be considerable. If a firm operated internally under the market system, many contracts would be required (for instance, even for procuring a pen or delivering a presentation). In contrast, a real firm has very few (though much more complex) contracts, such as defining a manager's power of direction over employees, in exchange for which the employee is paid. These

Winter 2011


kinds of contracts are drawn up in situations of uncertainty, in particular for relationships which last long. periods of time. Such a situation runs counter to neo-c1assical economic theory. The neo-classical market is instantaneous, forbidding the development of extended agent-principal (employee-manager) relationships, of planning, and of trust. Coase concludes that "a firm is likely therefore to emerge in those cases where a very short-term contract would be unsatisfactory," and that "it seems improbable that a firm would emerge without the existence of uncertainty." Malcolm Baldrige National Quality Award: In 1987, President Reagon signed legislation that established the Malcolm Baldrige National quality Award, and award named after the late secretary of commerce (Malcolm Baldrige) , to be presented annually by the National Institute of Standards and Technology (NIST) to two US companies (at most) in each of the categories of small business service company, manufacturing, education, healthcare and non profit organisation: The purpose of the award is to improve quality in American products and make US more competitive in world markets. Applicants are Judged according to series of criteria in seven major areas, leadership, effectiveness in collecting and analysing information, planning, human resource utilization, management of process quality, and operational results, and customer focus and satisfaction. I. Leadership: How upper management leads the organization, and how the organization leads within the community. 2. Strategic planning: How the organization establishes and plans to implement strategic directions. 3. Customer and market focus: How the organization builds and maintains strong, lasting relationships with customers. 4. Measurement, analysis, and knowledge management: How the organization uses data to support key processes and manage performance. 5. Human resource focus: How the organization empowers and involves its workforce. 6. Process management: How the organization designs, manages and improves key processes. 7. Business/organizational performance results: How the organization performs in terms. of customer satisfaction, finances,
(c) MBNQA-The




human resources, supplier and partner performance, operations, governance and social responsibility, and how the organization compares to its competitors. Applicants are screened on the basis of a written application and then inspected by a team of examinees who observe operations and interview employee and managers at all levels. Every year thousands of companles requests applications, primarily for the purpose of using the award criteria and guidelines to establish TQM program.
Fig. 7 The Baldrige Although the Baldrige award is in National Award some ways similar to ISO 9000 in terms of quality criteria and audits, it infact has much broader scope than ISO. (d) The design process: The various steps of design process are shown in boxes in Fig. 8.
Supplier R&D CUstomers

DeSign specifICation


Manufacturing and delivery specifICations

Fig. 8 Outline of the design process.

Winter 2011


Idea generation: T~ design process begins with understanding the customer and actively identifying customer need. Ideas for new products or improvements to existing products can be generated from many sources, including a companies own R&D department, customer complaints or suggestions, marketing research, supplier, sales person in field, factory, workers and new technological developments. Feasibility study: Marketing takes the ideas that are generated and customer needs that are identified from the first stage of design process and formulate alternative product and service concepts. Ihe promising concepts undergo a feasibility study that includes several type of analysis like market analysis, economic analysis etc. Rapid protopying: It create preliminary design models that are quickly tested and either discarded (as fast failures) or further refined. Form design: It refers to the physical appearance of a product its shape colour, size and style. Functional design: It is concerned with how the product performs. Production design: It is concerned with how the product will be made. Final design: It consist of detailed drawings and specification of new product or service. Geperal approaches to promote the new product in the market .. Market surveys and analyses of customer behaviour have become sophisticated, and data that result are extremely valuable inputs for predicting market demand. In general the method involve questionnaire, consumer panels, and test of new product and services. There is a considerable amount of literature dealing with estimation of new product performance based on consumer panels and analytical approaches as well as simultation and other techniques, Proposed product can be compared with the products of known plans of other competitors, and new market segments can be exploited with variations in product design and quality levels. In such instances comparisons can be made using data onexisting products. These kinds of data are often the best available to refine the designs of products and facilities for new ventures. (e) e-Commerce: Refer Q. 8. (a) Summer 2008.




Benefits: Some of the features are the e-commerce brings. saving and price- reduction derived from lower transaction costs. (ii) Reduction and elimination of the role of intermediates and even retailers and service providers thus reducing cost. (iii) Shortening supply chain response and transaction times of ordering and delivery. (iv) Gaining a wider presence of and increased visibility of components. (v) Greater choices and more information for customers. (vi) Improved service as a result of instant accessibility of services. (vii) Collection and analysis of voluminous amounts of customer data and preferences. (viii) The creation of virtual companies like Amazon-com the web, which can afford to sell at'lower prices because they do not need to maintain retail space. (ix) Gaining global access to markets suppliers, and distribution channels. Q. 7. (a) Information concerning a project is given below. Indirect project cost amounts to S250 per day. The company will incur a cost SIOO per day penalty for each day the projeCt last beyond day 14. (i) Draw AON network. What is project duration only if normal times are used ? (2+1) (h) What is the minimum cost schedule? (4) (iii) What is the minimum path for the minimum cost schedule? (I)
(i) Cost

Activity A B C D E

Normal Time, days 5 5 2 3 • 5 2 3

Normal Cost,S 1000 800 600 1500 900 1300 900 500

Crash Time,

Crash Cost,S 1200 2000 900 2000


Predecessor None None

4 3

2 3 1

1400 900 900

8 C,D E




(b) What do you mean by productivity?

319 Explain its type in (1+2) ? Explain how it (3+2) dealing with (2+2)

(c) What is Total Quality Management differs from six sigma.

(d) Explain difference between fact, data and information.

What is the role of information e-commerce ?

in organization

Sol. 7. (a) As per given predecessor activities if we draw the AON diagram will be as follows.

Fig. 9 (a)

But the activity F having predecessor E is disconnected so it is an dangling error. So we think there is a misprint in question paper and take activity F as predecessor of G. Then the correct AON network is as follows.

Fig. 9 (b) AON network (I) The earliest and latest fmished times are shown in nodels.

'Clearly 1-2-4-5-6-7-8 is critical path (having zero floats) and project duration will be 23 days when normal times are used.
(ii) In order to find minimum cost schedule we first find cost slope of each activity.

/ "(-





Crasg cost -Nonnal c6s't Cost slope - N onna I'time - C ras h tune ti 1200-800 5-4 2000 - 800 5-3 .,'

= 200
= 600



~--60~=300 2-c-l ....


20uO-1500 3-2 1200-900 5-3 1400-1300 2-1 /900-900 3- 3

= 500·
= 150

100 0


(not defined)

900-500 = 200 5-3 Here minimum slope (i.e. 100) is for activity F. Crashing activity F by 1 day the project duration will also be reduced by I day i.e. project duration will become = 22 days. The network is

Fig. 9 (c)

Again 1 - 2 - 4 - 5 - 6 - 7 - 8 is critical path with zero floats. In the similar way we crash other activities on critical path by permissible number of days. The activity G is not considered as there is no possibility of crashing.

Winter 2011 Critical activity B Crashed cost slope





Crashing activity E (with lowest slope) by 2 days which will also reduce the project duration by 2 days. The network is

Fig. 9 (d) .


The critical path is same and project duration is reduced to 20 days. Further crashing of activity H by 2 days, the project duration will be 18 days, the critical path will remain same. Now crashing activity B by two days will increase the project duration by one day (the project to duration will be 18 days co using incn.a-« in total cost). But crashing activity 0 by one day will reduce the p:"lJc:ct dl,,.~ti"'1 by one more day. Hence minimum project duration will be 17 days. Now we have two critical paths.

1-2-4-5-6-7-8 1-3-4-5-6-7-8

Both having project duration of 17 days.






X ±3a

and LNlL = __ and

X + 3a = 1-750 + 3 x 0-0015 = 1-7545 em X - 3a = 1-750 - 3 x 0-0015 = 1-7455 em

Now given specification limit is 1-750 ± 0-03 USL = 1-750 + 0-003 = 1-753 cm




1-750 - 0-003 = 1-747 cm The specification limit and natural tolerance limit are shown in


Fig_ 10

= 1-747 = 1·7455


Fig_ 10

Clearly if the process were kept in original state some proportion ofa part would fall above specification limit of 1·753 To calculate the proportion, the standardised normal value of is Z=

USL-X 1-753-1-750 =----a 0-005

0·003 ---=2 0·0015

The cumulative! probability P (Z> 2)

= I - P (Z => 2)


1 - 0-9772

= 0-0228

Thus 0-0228 (2-28 percent) would be outside the specification of this dimension (iiI) As 1000 good parts (with in specification limit) are to be produced, Then No, of parts to be produced 1000 1000

= (1-0-0228)

= 0.9772





Winter 201l


No. of parts scaped
scraped parts

= 1024 - 1000 = 24.

Cost of internal failure

= (manufacturing

cost - scap value)



= $ (36 -




= $ 840

(c) DuPont analysis (also known as the DuPont identity, DuPont equation, DuPont Model or the DuPont method) is an expression which breaks ROE (Return On Equity) into three parts.

The name comes from the DuPont Corporation using this formula in the 1920s.

that started

ROE = (Profit margin)*(Asset tumover)*(Equity multiplier) = (Net profit/Sales )*(Salesl Assets)*(Assets/Equity)= (Net Profit/Equity) Operating efficiency (measured by profit margin) Asset use efficiency (measured by asset turnover) Financial leverage (measured by equity multiplier) ROE allwiysis The Du Pont identity breaks down Return on Equity (that is, the returns that investors receive from the firm) into three distinct elements. This analysis enables the analyst to understand the source of superior (or inferior) return by comparison with companies in similar industries (or between industries).
Other current assets + Inventory

Accounts receivable

+ Cash and

Fig. ll. DuPont Model


Engineering Management

The Du Pont identity, however, is less useful for some industries, such as investment banking, that do not use certain concepts or for which the concepts are less meaningful. Variations may be used in certain industries, as long as they also respect the structure of the Du Pont identity. return. The law states that "when increasing quantities of a variable factor are used. in combination with a fixed factor; the marginal and average product of the variable factor will exactly decrease". The law of diminishing returns operate on account of the following reasons: and the variable factors alongwith fixed factor or production do not receive full attention and co-operation. As a result of this the productivity of the variable factors goes on diminishing.
Ui) Agricultural weather conditions. tendency to fall. (i) There is fixed factor of production (tI) (i) Law of Diminishing

output are exposed to vagaries of climatic and Due to this reason the average productivity has a

(iii) Division of labour and specialisation which help a lot in reducing the cost of production is not applied in agriculture. (iv) Agriculture field are spread over a large areas, making the task of supervision difficult. Due to lack of supervision the productivity falls thus setting the law of diminishing return into motion.
(v) The fertility of soil is exhausted after some time. This leads to

operation of the law of diminishing returns to agriculture. Scales of economics: In every law of returns to scale, scale of production determines the level of output and gross national product ofa country. In other words, the scale of production determines the size of or the amount of investment in relatively fixed factors of production. Cost of production is generally low in large plants than in small ones. This is due to a number of economies of large scale production. Large scale production implies the making of an article on massive scale with the help of large



amount of capital and numerous labourers working under One single management. Briefly it means .concentration and employment of various factors of production on a large scale.
(ii) Advantage

of sampling include.

(i) Economy of time and cost.

(Ii) Reliability is improved
(iii) Minimisation of errors (iv) Follow up and information in depth

GroupC Q. 9. Choose the correct answer for the following:


(a) F W Taylor (b) H L Gantt (c) Elton Mayo

study is attrfbuted to

(d) Gilbreth

System of working developed by F W Taylor is
(0) line organization. (b) line and staff organization. (c) effective organizations.

(d) functional organization. (iii) A chart, indicating vertical distribution
(a) authentication (b) Pi chart (c) organization

a horizontal span of control of authority, is called as chart.



(d) span chart,

Acceptance sampling is widely used in
(a) batch production. (b) cellular



(c) mass production.

(d) All of the above.




Standard deviatiou for three samples are 5, 6 and 8. If these samples are merged, what will be the standard deviatio.1
(II) 19-11 (c) 125-80 (b) n'18

(tI) 8·00


A wiak is equal to

112000 MIN 112580 MIN

(b) 1/1000 MIN (c)

(d) 113000 MIN (vii)

What is the difrereaee betweea TQM and Six Sigma? (II)TQM relates-to Kaizen while Six Sigma to zero defect.

TQM focuses on employee hivolveme.t Sigma does not.

while Six

In Six Sigma, SPC is used while in TQM, SPC has no signineaaee.

(d) All of the above.

Monitoring and follow up work intended for completion of job within the due data is
(II) (b) (c)

scheduling. expediting. routing.

(d) None of the above.


Process layout
(II) (b)

allows low variety and high volume mass production.

allows variety of products to be made on the same facility. has the dedicated automation on demand.


which lead to full

(d) All of the above.

Wimer 2011 (x)

For a giveR level .f safety alMl EOQ orderiRg, re-onlerilag paiIIt (,,) depellds 0IIIy ~ tile rate" (b) is iadepeadnt of tile rate of cORsaaptioD and lead time. (c) depends ODIy on the lead tbae. (d) depeDds ORlead time aR~ cHsa_ptioD rate. (Xl) EOQ is within the raDge of tile lowest discounted rate offered, theD (,,) accept the discoaDt offer au order for tbe minimam iD the raDge. (b) reject the discouDt order. (c) cODsider the total cost of the raDges of discouDt before takiDg the decisioD. (d) accept tile disco.Dt offer aDd order at EOQ level. (xh) The method of c1assificatioD of items to be adopted for spare parts iDveDtory is / (b) XYZ an_lysis (a) ABC aDalysis (d) SDE analysis. (c) VED aDalysis (xiii) Match the ite.s of list A with the items of list B aDd give tbe correct response usiDg the code writteD iD pareDthesis. List A List B (P) MRP (A) MaDBflieturiDg time (B) Planned order release (Q) JlT (R) ROP (C) Closing inveDtory (D) Pall system (S) EOQ (I) Safety stock (E) Stock level (U) ABC (F) Costly items (G) BalaaciDg the orderiDg cost and carryiPg cost (U) Selective cODtrol (I) Flactuation in the lead time




334 (a) P-B, Q-D, R-E, S-G, T-I, U-H (b) P-B, Q-D, R-E, S-G, T-I, U-F (c) P..B, Q-D, R-I, S-G, T-E, U-H



(4) P-B, Q-D, R-I, S-G, T-I, U-F

The optimally of transportation following method :.
(a) N':'W corner method

is checked

by the

(c) MODI method

(4) Least cost method.

A free float is (.) ODe which does not affect the EST of successors.
(b) one which affects EST~of successors. (c) one which does not a«ect

the EST of successors but but project

project length. (4) one which affects the EST of successors length.

In a CPM network, critical path is
(a) shortest


(6) longest path.
(c) moderate (II) Neae of





Ia a PERT DetwOn. the activity duratioD is assumed to be
(a) Normally distribated.

(6) Beta distributed.
(c) LiDearly distrilMlW.

(d) Poissob distrt ......

Winter 2011 (xviiI)


Direct cost of an activity is
(a) directly proportional (b) inversely proportional

to its duration. to its duration.

(c) associated with total project time.

(d) None of the above.

The amount sold on credit by a firm is indicated under the
(a) assets side of the balance-sheet. (b) liabilities side of the balance-sheet. (c) sundry head.

(d) None of the above.

Balance-sheet principle:
(a) Assets

is based

on the following


+ liabilities

(b) Assets - liabilities (c) As~

- liabilities :: Profit, Liabilities.
(iv) (c) (ix) (b) (xiv) (c) (ix) (c) (v) (b) (x) (d)

(d) Net worth Ans.
(i) (d) (vi) (d) (xi) (c) (xvi) (b) (il) (d) (vii) (c) (xii) (c)

.s~ ::
(iii) (c) (viii) (a) (xiii) (a) (a)

= Net worth = Net worth

(xv) (a)
(xx) (b)

(xvii) (b)


Summer 2011 SUMMER 2011 ENGINEERING MANAGEMENT 402) Answer FIVE questions, taking ANY TWO from Group A, Any TWO from Group B and ALL from Group C. Figures in the bracket indicate full marks. Group A Q.1. (a) What are. various types of management in organisations? Which one fall under each category 9f management? (4) (b) You are a manager in an organisation heading a department. How do you select right span of control ? (4) (c) Explain steps involved in the process of management planning with suitable examples. (8) (d) 'Planning is looking ahead and controlling is looking back'. Do you agree? Comment. (4) Sol. (a) The various types of management in organisation are: 1. Financial management: It includes economic forecasting accounting, costing, statistical control, budgetary control, insurance and actual work. . 2. Production management: It includes work analysis, scheduling, routing, planning, quality control time and motion study. 3. Development ma :rgement: It includes research in materials, machines and processing. It includes whole field of application of the physical sciences to indus1t1al processes, laboratories, experimental plants and the relation between design, consumer demand and production. 4. Distribution management: It includes marketing merchandising, consumer research, advertising, sales management and export. 5. Material management: It includes purchase and store keeping, inventory control, material handling, tendering and contract work. 6. Maintenance management: It includes upkeeping of buildings, plant equipment and other repairs in the enterprise. 7. Personnel management: It includes selection, recruitment and placement, training, transfer, promotion, retirement and industrial relations. It also covers medical and welfare services of the employee. 8. Transportation or Logistics Management: It includes transportation of finished, semi-finished goods to destination by road, railway, air or other means. This also includes packaging and warehousing.



Engineering Management

In every organisation there is a chain of superiors and subordinates from the highest level to the lowest. This chain is known as chain of command or scalar chain. Generally, this chain is divided into three levels of management, (1) Top-level management (2) Middle level management (3) Lower level management The top level of management is composed of comparatively small group of people. The common job titles at this level are chief executive officer (CEO), president and vice president, directors etc. These top managers are responsible for the performance of organisation as a whole or for one of its larger parts. The term middle management can include more than one level in an organisation. Middle managers direct the activities of lower level managers and sometimes those of operating employees as well. They are in charge of relatively large departments or divisions consisting of several smaller work units. The lowest level of an organisation at which individual are responsible for work of others is called first line or first level management. A first job in management typically involves serving as a team leader or supervisor, superintendents, sales/section officers etc. Team leaders or supervisors report to middle managers and directly supervise nonmanagerial works. (b) Span of control means number of subordinates which report to an executive as well as number of sub-ordinates which execute and supervise directly. The concept effects organizational design in various ways, such as speed of communication and motivation as well as reporting relationships to administrative heads. Span of control depends upon business enterprise conditions. Had I been a manager in an organization and working as the head of the department. I will look for the following important factors to decide about correct and ideal span of control. 1. Complex nature of work in the department. 2. The quality of person working under me, whether they are trained or not and their abilities etc. 3. Do we need R (research) aM D (development) in the department. 4. Available technology and inf~ system. ,. Geographical location of the peI'IC)III working under me.

Summer 2011


6. Type of hierarchy needed in the organisation. After looking into these factors, I will prefer to go for a wider span of control to reduce costs, speed in decision making, increase flexibility and empower employees. I will also hire training manager to impart good training to my employees to enhance their qualities and performances. (c) Steps involved in the process of management planning: (i) Realising the necessity of planning: First step in planning is to closely examine the problem (project) which needs the planning.
(ii) Determination of objectives: Second step in planning is to clearly identify the objectives keeping in view the strengths and limitations. (iii) Forecasting: Third step in planning is forecasting. It involves collection and dissemination (spreading) of the data required for planning the future course of an industry. This is based on the inferences (conclusions) drawn from the known facts and figures. (iv) Identifying alternative courses of action: TI:e fourth step in planning is to carefully examine several alternative courses of action. The responsibility of the planning manager is to determine the maximum number of alternatives after thoroughly reviewing them. (v) Evaluating alternative courses: The fifth step in planning involves the consideration and evaluation of the best two or three alternatives keeping in view the goals, objectives and premises of the organization. (vi) Selecting a course of action: The sixth step in planning involves critical examination of two or three alternatives, considering objectives, economy and advantages in the long run. If found necessary, _8OI"e than one plan can be formulated. (vii) Formulating derivative plans: The seventh step is that planning is seldom complete inspite of making decisions. Derivative plans are equally important to support the basic plan. (viii) Numberizing plans by budgeting: The eighth step in planning is to numberize the selected plan by converting them to financial resources or budgets. The overall budgets of an industry represent the sum total of income and expenditure, with resultant profit or surplus. In this way, budget becomes means of adding together the various plans and also setting standards against which the progress made in planning can be evaluated. (II) "."ning is looldng ahead: According to M.E.Herley •PltJlfniltg 18dttcidingin advance what is 10 be done.' It involves selection


, Engineering



of objectives, policies, procedures and programmes among best alternatives. Planning is always performed for deciding for the future to achieve targets, Therefore it is very clear that planning involves looking ahead in future. Planning is done in order to achieve followings objectives. I. Determining capacity of manufacturing departments to coordinate sales department. 2. Planning materials for manufacturing requirements of right quality, quantity and at the right time. 3. Translating sales orders into the orders on the works departments. 4. Coordinating with different departmental groups. 5. Preparing management well before for tackling problems that may appear at any occasion. 6. Promoting full utilization of plant capacity. 7. Maintaining record of material and components in stock. 8. Preparing schedule of requirement. _ So the goals also clearly show that planning is done for future to improve overall efficiency of the organisation. Planning is looking ahead and controlling is looking back can further be explained by Terry. According to GR.Terry term controlling can be defined as process of determining what is being accomplished that is performance; evaluating the performance against what was to be accomplished and if necessary applying corrective measures, so that performance takes place according to plans, that is in conformity with the standards. According to Fayol controlling comprise of verifying whether everything occurs in conformity with the plan adopted and the instructions used for principles established. So, from above definitions it is clear that Control is concerned looking what is achieved and evaluating same against plans and suggest correcting measures for any deviation and so control is looking back. From definition of planning and controlling it can be clearly said that planning is looking ahead and controlling is looking back. Q.2. (a) What are the skills and personel characteristics desired in managers? (5) (b) Make a list of various information being exchanged between an enterprise and the applicant in the process of selection. (5)
(c) What are different types of business organisations ? Briefly putforth important characteristics of these organisations. (5)

Summer 2011


(d) Make a list of your five major objectives (verifiable) in the next three years. (5) Sol. (a) The important qualities that a manager should possess are:

• •

He should know problem solving techniques and have an ability to inspire, motivate and direct employees. Personal integrity so that employees may repose confidence in him.

• A dented sense of vocation and faith in humanity. • Capacity for persuation, coupled with patience and confidence. • • Mobility of facial expression. Ability to generate trust among his colleagues and develop acceptability recognition for himself and his ideas of communication with readiness and fluency. Initiative and decision-making ability. He/she must possess creativity. He/ she must be honest showing fairness, truth and justice, in working.

• • • •

He/she must be quality conscience. (b) List of information being exchanged between .. .""ictlllt and enterprise Information provided by applicant
1. Name of Candidate

Information fro,. enterprise Name of post or designations Qualification requirements Work experience required Age limit Salary offered

2. Educational qualification 3. Age 4. Experience 5. Expected salary

6. Any special qualification or Other benefits offered certificate of games/ sports etc. Test or Interview format and dates. (c) Refer to Q.l. (b) Winter 2008. (d) List of five major objectives in the next three years.
(a) Commitment, honesty and punctuality. (b) Truthfulness and sincerity. (c) Determination and patriotism. (d) Kindness and meditation. (e) Healthiest person is the wealthiest man.




Q.3. (a) What are the major objectives of plant layout? ,List the factors affecting plant layout. (6) (b) Define the term 'participative management'. List various benefits of participative management. (5) (c) What are the advantages of materials requirements planning (MRP) ? What are tbe requirements of an effective MRP system? (5) (d) How do organisations carry out an analysis of training needs? Explain witb an example. (4) Sol. (a) Major objectives of plant layout are: 1. Provide overall satisfaction and simplification. 2. Reduction in material cost. 3. Elimination of wastage from each shop. 4. Provide high turnover and increase in production. S. Economic and full use of space and machines. 6. Worker's convenience, job satisfaction and improved working conditions. 7. Minimize material handling cost. 8. Reduction in process inventory. Factors affecting layout are: 1. Quantity of goods to be produced. 2. Number of operations required. 3. Nature and type of equipments required and dimensions of machinery to be used. 4. Safer operating working conditions, ventilated workshops and minimum movement of workers. S. Material flow requirements. 6. Method of production. 7. Expansion 8. Adaptability and versatility. 9. Services. (b) Participative management: Participative management means such a management in which each employee has its own say in the decision-making process. Some of the advantages of a participative management are: (i) It narrows the communication gap between the employee and employer. (ii) It helps developing a spirit of unity and harmony within the orginsation.
(iii) It uplifts the pride of each employee.

Summer 2011 (iv) It helps developing


a team spirit which results in higher production and profit for the company.

(v) Work efficiency is increased. (vi) It gives way to innovation. (vii) It restrirts time lag.

Thus, we can say that participative management helps in smooth functioning within the organisation and gives way to new projects. Also, refer to Q.2. of Winter 2005.

(c) The following prerequisites are necessary for launching
(i) (ii) (iii) (iv) (v)

All inventory items are identified. Prepare the inventory reports containing data on the inventory status of every component. Product manufacturing details and bill of materials are readily available. Master schedule of the manufacturing of different product indicating number of finished products to be manufactured. Lead times for all the inventory items are estimated considering market positions.

Advantages 2. 3. 4. S.

0/ MRP are given


1. Customer service is improved Lead time is reduced Reduction of work-in-progress Reduction in past due orders Increase in productivity

6. Capacity constraints (limitations) are understood 7. Annual inventory is eliminated 8. Reduction in finished good inventory, raw material and components. 9. Elimination of annual inventory 10. Better understanding of capacity constraints. (d) Training is an essential' input in providing learning opportunities to employees of an organization to enable them to optimally contribute towards meeting the short and long term objectives of organization. The first phase of training is identification of specific programme. Training programme and development are needed to analyse the following :


Engineering Management

(i) Organizational analysis: This involves a study of entire organization in terms of its objectives, resources, allocation and utilization of such resources for achievement of objectives. The analysis involves following steps: (a) Objective analysis (b) Resource utilization (c) Environmental scanning (d) Organisational climate analysis

(ii) Role Analysis: This involves a careful study of jobs within an organisation in a further effort to define the specific content of training. It requires an orderly, systematic collection of data about the job, role or position, and its purpose to spell out, in as much detail as possible as what tasks constitute the job, how they are to be performed and what behaviour, skills, knowledge and attitudes the job holder must have to perform in certain specified tasks. (iii) Analysis of Manpower: The focus of this analysis is on the individual in a given job rather than on the job itself. These basic issues are involved in analysis of manpower for training purpose. If a training programme is to remain viable, then three types of analysis must be carried out continuously. Training programmes should be reviewed constantly and revised in the light of the changes in a company's resources, objectives, internal climate and external environment. Q.4. (a) Define materials management. functions of materials management. Discuss various (7)

(b) What is the major objective of plant maintenance? Explain various functions involved in plant maintenance. (7) (c) What


are the types of budgets used in management Discuss briefly the role of these budgets in controlling. (6)

Sol. (a) Material management can be defined as a function which focuses its attention for an integrated approach towards the management of material in every industry. Materials management can be defined as the function responsible for planning and programming of machines, equipment (tools) material, purchasing, transporting, storing and controlling material in an optimum manner which increases the profit level. Materials management is of vital importance for any industry as nearly 75% of the industry's total investment is usually locked up in material and inventory.

Summer 2011 Functions of Material Management are: 1. 2. 3. 4. 5. 6. 7. 8.


Materials planning and programming. Purchasing and procurement. Store keeping. Inventory control. Material handling. Quality control and inspection. Value analysis and standardisation. Standardisation, simplification, product development, make or buy decisions. 9. Despatchi~g, shipping and disposal of scrap and obsolete materials. (b) Objectives of maintenance: 1. To keep building and machinery safe preventing it from hazards. 2. Minimize frequency and severity of interruptions. 3. To minimize breakdowns or failure. 4. Minimize production loss from failure. 5. Increase reliability of all operating systems. 6. Maximise useful life of plant and equipment. 7. Maximise production capacity through put! utilization. 8. Maximise performance of production equipment. 9. Improve product quality and customer satisfaction through adjusted and serviced equipment. Functions of maintenance management are: 1. Maintenance of ~xisting plant buildings and equipments etc. 2. Periodic inspection and provide lubrication etc. 3. Utilities generation and proper distribution. 4. Alterations and new installation in plant. 5. Waste disposal. 6. Plant protection including fire safety etc. 7. Salvage management. 8. Insurance administration. 9. Pollution and noise abatement. (c) Types of budgets: There are many types 'of budgets used by management control departments. Most organizations develop and make use of following important type of budget to control activities well in time. The most important budgets are ;

278 I) Operating budgets 3) Variable budgets

Engineering Management 2) Financial budgets 4) Zero base budgets

I) Operating budget: It is a statement that presents the financial plan for each responsibility centre during the budget period and reflect operating activities involving revenue and expenses. The most important operating budgets are: (i) expense, (ii) revenue and (iii) profit budgets. 2) Financial budgets: These budgets outline how an organization is going to acquire its cash and how it intends to use the cash. Three important financial budgets are: (i) cash budget, (ii) capital expenditure _budget and (iii) the balance sheet. 3) Variable budgets: Also called flexible budget due to danger arising from inflexibility or rigidity in budgets as well as maximum flexibility consistent with efficiency and good planning. In view of this attention has been increasingly given to variable or flexible budgets. Fixed budgets express that individual costs should be at one specified volume, variable budgets are cost schedules that show how each cost should vary 'as the level of activity or output varies. Three types of costs must be considered when variable budgets are developed (i) Fixed, (ii) Variable and (iii) Semi-variable costs. The problem of devising variable budgets is that cost variability is often difficult to determine and that they are often quite expensive to prepare. 4. Zero base budgeting: In this budget we assume that previous year budget is not a valid base from where we should work. It forces - manager to thoroughly examine the operations and justify their departmental activities based on the achievement of organizational goals. GroupB Q.5. (a) What are various steps involved in market research process? (4) (b) List various steps used to number the events in network techniques devised by Fulkerson. (4) (c) Explain the concept of'opportunlty cost with a suitable ~m~ 00 (d) Identify the following items of assets and liability as fixed assets, current assets, current liability and fixed/long term liabilities: (6) (ii) Debentures (,) Plant and machinery (iv) Tax~payable (ii,) Inventory (VI) Goodwill. (v) Bonds

Summer 2011


Sol. (a) Steps in market research are following: I. Defining the problem and research activities: The first and foremost step for marketing managers and researchers is to define the problem carefully and agree on research objectives. An old age says, "A problem well defined is half-solved." 2. Developing research plan: The second stage of marketing research is developing the most efficient plan for gathering the needed information. The marketing manager cannot simply say to the researcher, "Find some passengers and ask them if they would use an in-flight phone service if they were available. "The marketing researcher has the skills to design the research approach. The marketing manager should thus, know enough about marketing research, to evaluate the research plan and the findings". The marketing manager needs to know the cost of research plan before approving it. 3. Observational research: Fresh data can be collected by observing the relevant factors and settings. The researchers under this form of research could fly on American and competitor plane to observe the quality of in-flight service. This exploratory research might yield some valuable hypothesis about how people choose their air-carriers. In other words researchers under this sort of research go through practical experiences of self for those particular products or services and then come to conclude what the customer really feels for those services or products. 4. Focus-group research: A focus-group is a gathering of six to ten persons who are invited to spend a few hours with a skilled modulator to discuss a product, service, organisation or any other marketing entity. The moderator needs objectivity, knowledge of the issue, and knowledge of dynamics and consumer behaviour. The participants are normally paid a small sum for attending. The meeting is typically held in pleasant surroundings and refreshments are served to increase the informality. Focus-group research is a useful exploratory step to take before designing a large scale survey. It yields insights into consumer's perceptions, attitudes and satisfaction that helps to define the issues to be researched more formally. 5. Survey research: This research stands midway between observational and focus-group research on one hand and experimental research on the other. Observation and focus groups are best suited for exploratory research, surveys are best suited for deceptive research, and


Engineering Management

experiments are best suited for casual research. Companies undertake surveys to know about people's knowledge, beliefs, preferences, satisfaction and so on and to measure these magnitudes in the population. 6. Experimental research: The most scientifically valid research is experimental research. This calls for selecting matched groups of subjects, subjecting them to different treatments, controlling extraneous variables and checking whether observed response differences are statistically significant. To the extent that extraneous factors are eliminated or controlled, the observed effects can be related to the variations in the treatments. The purpose of experimental research is to capture cause- and effect relationships by eliminating competing explanations of observed findings. (b) The various steps used to number the events in network techniques devised by Fulkerson are following: I. The initial event which has all emerging (outgoing) arrows with no incoming arrow is assigned number 1. 2. Delete all the arrows coming out from node 1. This will result in conversion of some more nodes (at least one) into initial event then do the numbering of these events as 2, 3... and so on. 3. Remove all the arrows emerging from these numbered events to produce more initial events. Assign the next numbers to these events. 4. Proceed in this way until the end event is arrived at. (c) Opportunity cost in most simple terms can be defined as the opportunity lost. Opportunity cost is the minimum price that would be necessary to retain a factor service in its given use. In this sense, opportunity cost refers to the transfer earnings of a factor of production which have been defined by one expert as: "the price which is necessary to retain a given unit of a factor in a certain industry may be called its transfer earning or transfer price". Distinction is also made between opportunity cost and outlay costs. On the basis of nature of sacrifice outlay costs are those that involve financial expenditure at some time and recorded in the books of account. <)pportunity costs take the form of profit from alternative ventures that are foregone by using limited facilities for a particular purpose. Since they represent only sacrificed alternatives, they are never recorded as such in the financial accounts. The implication of opportunity cost principle can be explained as follows in a nutshell manner:

Summer 2011 1.


The opportunity cost of the funds put in one's business is the interest that could be earned on those funds, had these funds been used in some other ventures (business attempts). 2. The opportunity cost of the time an entrepreneur invest to his own business is the salary he could earn in other occupation. 3. The opportunity cost of using machine to produce a product is the earning foregone which would have been possible from other products. 4. The opportunity cost of using a machine is useless for any other purpose and is zero as its use requires no sacrifice of other opportunities. (d) (i) Plant and machinery: Fixed Assets (ii) Debentures: Current liability (iii) Inventory: Current assets (iv) Tax payable: Current liabilities (v) Bonds: Long term liabilities (vi) Goodwill: Intangible and fixed assets. Q.6. (a) List and explain the major categories of costs associated with quality management with examples. (5) (b) If you are the marketing manager of a firm, what are the possible factors that you would consider while pricing your product? Explain. (5) (c) Explain briefly different steps involved in project planning. (4) (d) Name various types of factors of production. Briefly explain a few with their peculiarities? (6) Sol. (a) Major categories of costs associated with quality management are given below : I. Prevention costs: These are incurred in planning, implementing and maintaining a quality system. They include salaries and developmental costs for product design process and equipment design, process control techniques (control charts) information systems design and all other costs associated with making the product right the first time. 2. Appraisal cost: These costs are associated with measuring, evaluating and auditing products, components, or purchased materials to determine their degree of conformance to the specified products. 3. Internalfailure costs: These costs are incurred when products, components, materials and services fails to meet quality requirements




prior to the transfer of ownership to the customer. These costs become zero or disappear if there were no non-conformities in the product. 4. External failure costs: These costs incurred when the product does not perform satisfactorily after ownership is transferred to the customer. If no nonconforming units are produced this cost would become zero. This cost includes, customer complaints, cost of investigation and rectification and adjustments and those associated with receipt, handling, repair and replacement of nonconforming of products. Warranty charges and product liability also fall under this category. (b) If I am the marketing manager the factors I will consider while pricing products are following: 1. Availability of similar products in the market and their pricing. 2. Quality of my product and extra value added to it.. 3. Cost of production. 4. Demand of product. 5. Degree of competition in the market. (c) Factors of production are following: (3) Capital (l) Land (2) Labour (4) Machines (5) Entrepreneur. 1. Land or natural resource: naturally-occurring goods such as water, air, soil, minerals, flora and fauna that are used in the creation of products. The payment for use and the received income of a land owner is rent.
2. Labour: Human effort used in production which also includes technical and marketing expertise is called labour. The payment for someone else's labour and all income received from one's own labour is wages. Labour can also be classified as the physical and mental contribution of an employee to the production of the goods and services. 3. Capital: Anything required by man to be used for. further production is called capital. This had many meanings, including the financial capital raised to operate and expand business. In much of economies, however, "capital" (without any qualification) means goods that can help produce other goods in the future: It is the result of investment. It refers to machines, roads, factories, schools, infrastructure, and office buildings which humans-have produced in order to produce goods and services. There can three types of capital, social capital, physical capital and financial capital.

Summer 2011


4. Entrepreneur: It is a person who has possession of a new enterprise, venture or idea and is accountable for the inherent risks and the outcome of a product. (d) The following steps potrays the project planning process: Step 1. The first step is of definition. We must define (a) The objectives of the project. (b) The desired end product. (c) The constraints of the project. (d) The available resources. Step 2. This step is to list all the task that must be completed to accomplish the objectives of the project. Here we proceed as follows: (a) Define task in terms of end product. (b) Define the' role to be played by each department in each task. (c) Develop schedule and budget for each task. Step 3. In this step plans for execution of the project are made. These outline clearly and in detail how to accomplish the tasks defined in st~p 2, within scheduled time and budget. Q.7. (a) With a block diagram, explain the acceptance sampling procedure used in quality control. (4) (b) Briefly explain the role of Decision Support Systems (DSS) in present day organisations. (5) (c) What are the major benefits of enterprise resource planning? (5) (d) Agro Industries Ltd. has submitted the following projections. You are required to work out yearly debt service coverage ratio (DSCR) and average DSCR : Year 1 2 3 4 Net Profit (Rs lac) 21·67 34·77 36·01 19·20 Interest on Term Loan (Rs lac) 19·14 17·64 15·12 12'60 Repayment of Term Loan (Rs lac) 10·70 18·00 18·00 18·00

The net profit has been arrived after charging depreciation of Rs 17·68 lac every year. (6) Sol. (a) Refer to Q.6. (a) of Winter 2005. (b) A decision support system is an interactive system that provides the user with easy access to decision models and data in order to support semi-structured and unstructured decision-making tasks. The decision maker sits at a terminal and directs the operation




of the system. The user of the system has an easy access to models and data. (i) It helps in tracking new product (ii) It facilitates faster, more accurate decisions in view of changed business environment. (iii) It assists management by walking around. (iv) It helps in decentralisation (breaking the company into geographical business areas). (v) Lastly, DSS provide information to middle managers to have a complete picture of what is happening. (c) We can summarise the ERP benefits as follows: (i) ERP facilitates a company-wide integrated information system covering all functional areas such as manufacturing, sales and distribution, accounts, payables, receivables, inventory, human resources, etc.
(ii) ERP integrates and automates most business processes and shares information enterprise-wide in real time, thereby improving customer service and the corporate image. (iii) ERP provides complete integration of the system not only across depentments but also across companies under the same management. (iv) ERP is the solution for better project management. (v) ERP not only addresses the current requirements of the company but also provides an opportunity for improvement and refinement in the business processes on a continuous basis.

ERP is a management information system. This system is used to integrate (.loin) many business activities. These business activities pertain to operation, production and distribution. ERP is useful to all those companies that are engaged in manufacturing products as well as services. ERP works and operate automatically. ERP software is a big aid in controlling business activities. These business activities are:
(i) Production; (ii) Sales; (iii) Delivery; (iv) Billing; (v) Inventory control; (vi) Quality control; (vii) Human Resource Management (HRM). (d) Financial institutions provide the bulk of long term finance, judge the debt capacity of a firm in term of debt service coverage ration (DSCR).

Profit after tax + Depreciation + Other non-cash charges DSCR= + __ In_t_e_re_s_t_on __ re_rm __ l_o_an~ Interest on term loan + Repayment of term loan

Summer20ll 21·67+ 17·68+ 19·14 19·14+ 10·70 34·77 + 17·64 + 17·68 17·64 + 18·00 36-01 + 17·68 + 15·12 15·12+ 18·00


58·49 29.84 70·09 35.64 68·81 33.12

= 1.96

1·96 2·07


19·20 + 17·68 + 12·60 49·48 12·60 + 18·00 = 30.60 Q.8. (a) Define e-business measures for e-business.

= 1·61

and list key performance (5) What are the steps (7)

(b) What do you mean bye-commerce? involved in getting your business on-line ?

(c) A building project consists of 10 activities (A, B, C, •.., J) represented by the network shown below :




Activity duration in days is given below the related activity in brackets. Calculate (i) event times, (ii) activity times, and (iiI) total float. Also, determine the critical path on the network. (8) Sol. (a) E-business stands for electronic business. The business has been revolutionalised with the advent of internet. E-business does not include selling of goods and services but also servicing customers, collaborating with business partners and connecting electronic transactions within an organization. Performance measures of e-business as given below: ~. Process measures 1. Volume of e-business 2. The number of e-business users. 3. Customer fall off rates 4. Number of registered buyers.

can be divided into two parts


Engineering Management 5. Average value per transaction.

II. End-state measures: Assessment of customers perceptions of the services they receive like customer satisfaction and perceptions of service or product quality.

We use generally e-business performance.



strategy to measure

(b) From a business process perspective e-comrnerce (electronic commerce) is the application of technology toward the automation of business transactions and workflows.

Electronic commerce emphasizes the generation and exploitation of new business opportunities and generate business value to do more with less. E-commerce is cheaper and provide interaction with customer 24 hours availability of product, global reach, user's comment, that through internet business will grow abundantly from 10-11 trillion to by 2011. Perspective of E-business are communication, commercial trading, business process, service learning, collaborative and community. Steps involved getting business on line:
I. Creating e-mail identity of organization.

2. Preparing website of the organization describing services offered and launching the same on internet. 3. Allowing customers to pay amount online directly to your bank accounts to make transactions fast. (b) From the given network and duration we calculate (i) Even: times: Earliest event occurrence time max (Ei+ Ii) E) = 0 day. E2 = E) + 1)2 = 5 days E 3 = E2 + t13 = 5 + 2 = 7 days E 4 = E2 + 124 = 5 + 6 = 11 days E 5 = max (E3 + 135, E4 + (45) = max (7 + 4, 11 + 2) = 13 days


+ 136 = 7 + 4 = 11 days = E4 + 147 = 11 + 3 = 14 days. Es = max (E6 + 168' Es + Iss, E7 + 17S) = max (II + 8, 13 + 7, 14 + 2) = 20
E6 E7
= E3

Summer 20ll (b) Latest event occurrence time [Li

Min (Lf - lij)].

Assuming L
L8 L7 L6 L5 L4
= E8 =


E for ending event.

20 days

-= L8 - 178

= =

L8 L8 -

= 20 - 2 = 18 days 168 = 20 - 8 = 12 days 158 = 20 - 7 = 13 days

min (L7 - L47' L5 - 145) " min (18 - 3, 13 - 2) = II days min (L6 - 136, L5 - (35) min (12 - 4, 12 - 4) = 8 min (L3 - 123, L4 min (8 - 2, 11 - 6)
L2 - t12 (24)



L2 =





=5- 5=0
l(ii) Tota/float

Now we find activity times and floats in the following table , Activity

Duration (i) Activity times (hours) £Sij = Ej Earliest Latest (Earliest jinith start Start) E/Ij= LSi} = Ej + iii Li I,

Latest fmish Lf;j=Lj 5 8
II 12 13 13

Fij =LSijESij


A (1-2) B (2 -3) C(2-4) D(3 -6) E(3 -5) F(4-5) G(4-7) H(6-8) 1(5 - 8) J(7 - 8)

5 2 6
4 4 2 3



5 5 7 7 11 11


13 14

0 6 5 8 9


1 2


8 7


19 ~

15 12


18 ~ ~ ~




As the critical activities should have zero total float. Hence activities 1 - 2, 2 - 4, 4 - 5, and 5 - 8, so the critical ipatb is 1 -+ 2 -+ 4 -+ 5 -+ 8 is c:ritic:al path. The duration will. be = 5 + 6 + 2 + 7 = 20 hours. '




GroupC 9. (A) Indicate true or false for the following:
(i) PERT is probabilistic. (ii) All managerial (iii) Product

(4 x 2) .

activities always begin with planning and end with controlling. price is independent of its cost.
(4 x 2)

(iv) Plant and machinery

is an item of 'current asset. List B Training Equipment Balance-sheet ~~~C~~ (4 x 1)
(il) PERT (iv) EOQ (iii) False (iv) False

(B) Match the items in List A with List B :

List A Financial Statement Management

Quality h~r~Prod~tioo
(i) MRP (iii) ROI

(C) Write the full form of following terms:

Sol. (A) (I) True (il) True
(B) Financial

statement: Balance sheet; HRM: Training; Quality management: Contrcil charts; Factors of production: Equipment

(C) (I) MRP: Material Requirement Planning
(il) PERT: Project Evaluation & Review Technique (iii) ROI: Return on Investment (iv) EOQ: Economic Order Quantity





Answer FIVE questions, taking ANY TWO from Group A, ANY TWOfrom Group B and ALL from Group C Figures in the bracket indicate full marks Group A Q. 1. (a) What is scientific criticisms levelled against it.
(b) Make a brief description of management function. (c) What



the (~)

of Henri Fayol's classification (5) How is it related to other (10) Refer to Q. 2. (c) of Winter

is meant by control? functions of management? Sol. (a) Scientific Management. 2005.

Fredric W. Taylor rested his philosophy on four basic principles as follows. I. Develop a science for each element of an individual's work that includes rules of motion, standarized work implementation and proper working conditions in order to replace the old thumb rule. Scientific training and teaching of every worker.


3. Co-operating whole hearted with workers so as to ensure that all work is done in accordance with the scientific principles developed. 4. Division of work and responsibility is done equally between management and workers. Criticisms levelled against scientific management : Although Taylor's method led dramatic increases in productivity and to higher pay in a number of instances, workers and- unions begin to oppose his approach because they feared that working harder or faster would exhaust whatever work was available, causing layoffs. Moreover, Taylor's system clearly meant that time was essence. His critics objected to the "speed up" condition that placed unique pressures on employees to perform at faster and faster levels. The emphasis on productivity and by extension, profitability-led some




managers to exploit both workers and customers. As a result workers joined unions and thus reinforced a pattern of suspicion and mistrust that shaded labour management relations for decade.
(b) Refer to Q. l. (a) of Summer 2005. (c) Refer to Q. 2. (b) of Summer 2008.

Q. 2. (a) Distinguish between (i) vocational (il) vocational guidance, and (iiI) vocational training. Explain how they help in recruiting business concern.


efficient personnel for a (12) (8)

(b) What is the trade union? What are its proper functions?

Bring out chief weaknesses of trade union.

Sol. (a) (I) Vocational selection. The term vocational refers to the profession adopted based on qualification and self intuition. Thus vocational selection is the selection of a desirous candidate with appropriate qualification for the job that he or she wants. Usually the selection criteria are established on the basis of current (and sometimes future) job requirements. It includes education,' knowledge skills, and experience of the candidate. Candidate is requested to complete an application form. This step can be omitted if the candidate is to be taken from the organisation itself. A face to face dialogue between the employer and the candidate is the most popular tool of selection. The objective of selection interview is finding out the suitability of the candidate for most suitable occupation and for collecting more information about the candidate and giving correct picture of the organisation to the candidate.
(it) Vocational guidance. Counseling for seeking a career is of great importance. The person who performs vocational guidance provides the process of assisting a student to choose, prepare for, and enter an occupation for which he or she shows aptitude. Vocational guidance is a guidance service based on psychological test and interviews to find out best career or occupation. (iiI) Vocational training. In this type of training, education and

training go simultaneously. Learners join semi-skilled jobs in industries without prior knowledge. People are sent to vocational schools or

inter 2010


lleges to learn workshop techniques. After such education, they are ovided with regular jobs in industries and factories.

The role of selection in an organisation's effectiveness is crucial r at least, two reasons. First, work performance depends on dividuals. The best way to improve performance is to hire people ho have the competence and the willingness to work. Arguing from e employee's viewpoint, poor or unappropriate choice can be moralising to the individual concerned, and de-motivating to the rest the work force. Effective selection, therefore, assumes greater levance.


Second, cost incurred in recruiting and hiring personnel speaks lumes about the role of selection. Trained and technically skilled rson can be recruited from colleges and technical schools. Personnel anagement unit of the organisation keep contact with these educational ntres and select all those candidates as per the requirement referred y them.
(b) Trade union. The trade union is an association formed by

e workers whose primary function and purpose is influencing mployer's decisions about .their conditions of employment. In simple nguage a trade union, engaged in a particular trade and formed sically with the main goal of helping the members in time of distress d problems are solved legitimately.

The trade unions open ways and means through which industrial nd other workers are able to do negotiations. These unions assist in ising technical efficiency and living standards of the workers thereby creasing production. They help in creating spirit of brotherhood ooperation and fraternity among the workers. They encourage and enerate capacity of collective bargaining among workers.

A trade union is an association formed by the workers whose imary function and purpose is influencing employer's decisions about eir conditions of employment. In simple language a trade union may e 'defined as an association or union of employees engaged in a articular trade and formed basically with the main goal of elping the members in times of distress and problems solved gitimately.

The trade union has certain objective and function accordingly. hese objectives are :




(i) Securing fair wages for the workers in view of cost of living index. (ii) Getting working conditions of employees improved. Ensuring worker's share in the increased profitability of producing unit.

(iv) Protecting the interest of workers by saving them from exploitation.
(v) Ensuring securing of employment.

(vi) Enlarging the interest of society by helping in the improvement of trade and industry. (vii) Encouraging workers to use militant functions such as strike and boycott etc. when they are not granted adequate wages, holiday with pay, bonus etc. as per the factory acts.

Promotion offratemity and friendly relations among the mem-

bers. (ix) Trade unions use political affiliations for the further end of their objectives.
(x) It provides guidance and advice to ignorant workers so that they may fight for their rights.

(xi) It help members in times of distress and getting their grievances settled.
(xii) It ensures the workers for providing adequate social security benefits and appropriate educational facilities.

Chief weakness of trade union. 1. Trade union leaders are selfish who grind their own axe in the name of workers. The ignorant workers become helpless in front of their employers. 2. Many trade union leaders are found having association with the politicians. These politicians inspire the workers through union leader which create disharmony in factories and industries. Leaders of trade union instead of solving the problems of workers instigate them and develop a confronted attitude in them.


Winter 2010


4. Trade union leaders always raise the expectations c c the workers. When these greedy expectations are not met .hey resort to closures and strikes. Many workers even burn the producing units just on the inflammable slogan of the trade union leader, S. Employees become highly irresponsible and indisciplined towards their supervision in the industries because they know their back is quite strong to protect them. ' Q. 3. (a) A plant is presently organised on a process layout basis. It is contemplated to replace the layout as a product layout. Prepare a statement for management in which you specify the circumstances that would justify such a change over. (12)
(b) What kind of private-sector/service facilities should be established in the hilly north-eastern states of India? Give reasons for your answer. (8)

Sol. (a) ADS. Plant layout deals with the arrangement of the physical facilities and the man power required to manufacture a product. The arrangement includes the space needed for material movement, storage, indirect labour and all other supporting activities and services as well as the operating equipments and personnel. It is the duty of management to make a layout so that man, material and machinery can work together most efficiently and also it is safe and satisfying for employees. Proper plant-layout is one of the key of success in factory management. Everyone within an industrial' organisation is concerned with plant layout in some way, and every one within a plant is interested in its layout to some degree.
Product is of fundamental importance in establishing the type of plant, because the nature of product and volume to be produced determine the process to be employed. The production process in tum determines the equipments, machinery and plant to be utilised in plant layout. In product layout one product or one type of product is produced in one area, but unlike layout by fixed position the material moves. In this layout the relative position of the equipment used to produce a given item is arranged according to the sequence of operations of product or the range of products required from raw




material to finished product. The relative position of each equipment and each activity is fixed. Product layout is sequencing of product operations in line, it arranges processing machines, assembly stations and inspection machines. In product layout component flows smoothly from one machine to another with the shortest move at a time till all the operations are completed. It is a rigid layout and used for mass production. In process layout machines are arranged group wise depending upon their respective operations. For the change of product statements are as under; layout to process layout the

1. We want to shift to flexible manufacturing 2. Quality of product to be improved. 3. Volume of activity for individual or group of parts is very high and has a degree of variations. c~~ 4. Available capital investment is less and expansion is also less . 5. We want better utilisation of equipments and machinery. 6.Clw;:ge in product design may effect only a few pieces of equipment. The above statements give a chance to change from product layout to process layout.
(b) The seven sister states are region in North-eastern states of India, comprising the contiguous states of Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland, and Tripura.

Main industries/service facilities in the region are tea-based, crude oil and natural gas, silk, bamboo and handicrafts. The states are endowed with forest and have heavy rainfall. There are beautiful wildlife sanctuaries, tea-estates and mighty rivers like Brahmaputra etc. We take the example of Nagaland in the hilly north-eastern states of India for establishing the service facilities/industries.

Winter 2010


Nagaland is blessed with unimaginable beauty, picturesque landscapes and deep valleys. It is located amidst the gentle green hills of the Himalayas. The state has rich and varied cultural heritage. The natural skill of the Nagas lies in basketry, pottery, cultivation, spanning, weaving, carving and dyeing and metal work. Handloom and Handicrafts industries should be established in the Nagaland in the hilly north-eastern states of India as state's natural environments and resources supports these industries. Handicrafts and hand loom sector in Nagaland have vast potential for growth due to the availability of abundant skills, raw materials and rich cultural traditions of its people. The Nagas are inherently skilled people and their handicrafts and hand loom products are well known for the beauty and intricacies of work. The main traditional crafts of the state are its rich handloom and handicraft, which have widespread appeal and demand in the domestic as well as off shore markets. Traditional techniques for weaving on loin-looms or use of primitive tools are labour intensive and time consuming. With the easy availability and applicability of modern techniques and tools, there is substantial scope for growth in this sector. Q. 4. (a) Maruti automobile assembles four different types of cars on their assembly line. The assembly is done in batches. Given the following data, in which sizes of each type of vehicle should be produced? The company has 300 working days in a year. Neglect the stock-out situation. (12) Vehicle Annual Demand, unit 9000 5000 10000 3000 Setup Costs(per set up), Rs. Omni Swift Wagon R M800 1000 1000 1000 1000 Carrying Costs (per unit per year), Rs. 40 50 60 30 100 120 100 90 Assembling Rate (number per day)


Engineering Management

(b) Explain how you would carry out material requirement planning (MRP). State the basic steps involved in setting up MRP. (8) Sol. (a) In the given problem Omni we find the Economic Batch Size

or Economic lot Size (ELS) for each car.
: Annual demand, D = 9000 As company has 300 working days and assembling rate is 100 per day, therefore annual assembling rate P = 300 x 100 = 30,000. Set up cost, ( Co) per order = Rs 1000 Carrying ELS, Q* cost, C h
= =

Rs. 40

2DC (_P_) c, P-D
2 x 9000 x 1000 ( 30000 ) 40 30000 - 9000



801·73 ::::: 802

Swift: D

= 5000, Co = Rs. 1000, Ch = Rs. 50








2 x 5000 x 1000 ( 36000 ) 50 36000 - 5000 = 481·93 ::::: 482

Wagon D P
= =

10000, Co 100 x 300


Rs. 30000


c, =




2 x 10000 x 1000 (

30000 30000 -10000



= 707·11 ::::: 707

M800 D = 3000, Co = Rs. 1000,

c; = Rs.


90 x 300 = 27000

Winter 2010



= =

2 x 3000 x 1000 ( 27000 ) 60 27000 - 300Q 335·41 :::;335

(b) Refer to Q. 4. (c) of Winter 2009.

GroupB Q. 5. From the information given below of a pencil manufacturing unit, prepare a projected balance-sheet, profit and loss account and then estimate the working capital requirements: (20)
(a) Issued share capital

6% debentures Fixed assets at cost Raw materials Labour Overheads Profit
(c) Raw materials

Rs. 3,00,000 Rs. 2,00,000 Rs. 2,00,000 50% 20% 20% 10%

(b) The expected ratios of cost to selling price are:

are kept in store for an average of two

(d) Finished goods remain in stock for an average period of three months. (e) Production during the previous year was 1,80,000 units and it is planned to maintain the same in the current year as well.

<f) Each unit of production half a month.

is expected to be in process for is three months and given

(g) Credit allowed to customers by suppliers is two months. (I) There is a regular (j) Calculation

(h) Selling price is Rs. 4 per unit.


and sales cycle.

of debtors may be made at selling price.
= = =

Sol. 5 Calculations

S.P. of 1 unit S.P. of 1,80,000 units

Rs. 4
1,80,000 x 4 Rs. 7,20,000


Engineering Management Raw material

50% of 7,20,000

= 7,20,000


50 100 = Rs. 3,60,000 20 100 = Rs. 1,44,000

20% of 7,20,000



Overhead = 20% of 7,20,000 Profit = 10% of 7,20,000

Rs. 1,44,000 10 100 = Rs. 72,000

= 7,20,000
Raw material stock for 2 months 3,60,000 Work in Process (WIP) Raw material Labour
= x =


2 12


Rs. 60,000


= 1,44,000 = 72 000
2 '

(Since each unit of production is expected to be in process for half a month) Thus Raw material + Labour

3,60,000 + 72,000 4,32,000 I 4,32,000 x 12 x 2 (Since production in process for half a month)






Rs 18,000 Raw Material + Labour + Overheads 3,60,000 + 1,44,000 + 1,44,000 6,481000

Finished Goods (F.G.)

= = =

Winter 2010


For 3 months F.G.




= Rs. 1,62,000



R.M. + Labour + Overhead

+ Profit

= 6,48,8000

+ 72,000



For 3 months



12 12


= Rs. 1,80,000


(2 months)





Rs. 60,000


(Issued ESC share capital) 63% Debentures N.P. 3,00,000 2,00,000 60,000 5~60~000 (il) PROFIT & Fixed Assets Working Capital 2,00,000 3,60,000 5~60~OOO

+ 3,60,000 + 1,44,000 + 1,44,000 + 72,000
7~20~000 12,000 60,000 72,000 7,20,000 2,40,000 Closing Stock [WIP + Raw material + FG] 72,000 Profit


Raw material Labour Overhead Profit


Interest (6% of 2,00,000) Net Profit [Profit - 6% Deventures interest] (iii) WCR (Working

Capital Requirement) R.M. = + 60,000 W. I.P. = + 18,000 F.G. = + 1,62,000 Debtors = + 1,80,000
= -


60,000 3,60,000




Q. 6. (a) Explain the term 'quality control'. How does quality control differ from conventional inspection? (5)

What do you understand

by market research?


How is it (5)

(c) What are ISO 9000 standards? How do these differ from BIS (lSI) standards? Does ISO certification ensure the quality of the product? Discuss. (10)

Sol. (a) Quality control. It is defined as a mechanism by which the products are made to the specifications determined from the customer's demand. It mainly deals with making things right rather than discovering defects and rejecting which are made wrong or defective. Quality control check processes, materials products and services to ensure that they met high standards. It is not necessary that a company having an ISO 9000 certification will achieve TQM (Total quality control) goal. The functions of quality control department are as under. (i) Instructions issued to the effect that only the products of established standard quality are permitted to be sold.
(ii) To suggest ways and means to eliminate the defects in the manufacturing process. (iii) To discard the defective pieces and take special care that such pieces of poor quality should not reach to the consumer. (iv) To determine the points where the control is breaking down

and examine thoroughly the reasons thereof.
(v) Whenever possible and feasible attempts should be made to correct the defective pieces. This process is named as Rehabilitation of defective pieces or products.

Quality control and inspection are employed to assure the quality of a product. Inspection is the process of physical verification of the F~oducts and its characteristics in terms of established standards. It is the art of measuring and comparing materials, products on performance in terms of established standards. Inspection should basically organisation under chief Inspector. be an independent unit in the

Winter 2010


It can also be a part of Quality Control Department, depending upon the situation and requirement of the industry. It is always suggested to keep inspection under the direct control of General Manager, then only it can justify its existence.

(b) Market Research. Market means gathering of people for
purchase and sale of provisions. Research means careful inquiry and search to discover new facts. Market research means discovering new ways and means in the gathering of people engaged in purchase and sale of provisions (good/articles and services). The investigations are exercised to open gates locked otherwise because customer is king and satisfaction in his ultimate aim. A market researcher analyse house hold purchases of 12 key brands of a frequently purchased consumer product and concluded that advertising appears effective in increasing the volume purchased by loyal buyers. Advertisement can be more effective when its message is suitablewith their surroundings. (Television show in more likely to be effective ). The sales promotion tools for market research are ; - Samples - Coupons - Cash refund offers - Price soft - Prizes - Patronage - Rewards - Free trails - Warranties - Free cards. - Trade show and conventions etc. Current Market Research : Professional researchers drawn some general guidelines that are useful to marketers. have

(I) Brand switching: A market researcher analysed house hold purchases of 12 key brands of a frequently purchased consumer product




and concluded that advertising appears effective in increasing the volume purchased by loyal buyers but less effective in winning new buyers. Price have a stronger impact on response than does advertisJllg. Of course advertising have same cumulative effect that leads to loyalty. (~Surroundings effect: An advertisement can be more effective when its message is congruent (suitable) with their surroundings. A "happy" commercial placed within an upbeat television show is more likely to be effective than a downbeat commercial in same place. Moreover, people frequently believe a TV or radio advertisement and become more positively to them associated toward the brand provided advertisemen~\as shown within a programme they generally watch. , (iii) Positive versus negative messages: Research reports on marketing reveai that consumers may sometimes respond more to negative messages than to positive messages. For instance a credit card concern (company) contacted customers who did not use the card for two and haJfmonths. To one group of people i.e. non-users of card, the company sent a message explaining the benefits of using the card. To another group, it sent a message explaining the losses they could suffer by not using the card. The impact of loss-oriented message was found much stronger. (iv) Using sales promotion tools: These are samples, coupons, cash refund offers, prices off, premiums, prizes, patronage, rewards, free trails, warranties, tie-in-promotions, cross-promotions, point of purchase displays and demonstrations, display allowances, free cards, trade show and conventions, contests for sales representatives. (c) Refer to Q. 7. (c) of Summer 2009. ISO, the international organisation for standardization, is an Intematlcnal body. It consists of representatives from more than 100 countries. Each country is represented by its one national standards body. Burean of Indian standards (BIS) is the Indian representative to ISO. ISO 9000 is a series of five international standards on quality management and assurance. The series consists of ISO 9001, LSD 9002, ISO 9003, aad ISO 9004. ISO 9000 is a road map for implementina ISO 9001, IS 9002, or ISO 9003. These three quality standards ca III dMo1u&f1t of in terms of their differences in scope.

Winter 2010


The most comprehensive, ISO 900 I, incorporates all twenty quality elements of the quality standard; ISO 9002 has eighteen of the elements, and 9003 has the twelve basic elements. The main two objectives of ISO 9000 are
(i) To facilitate international trade of goods and services.

Objectives of ISO 9000

(U) To obtain competitiveness by obtaining required quality in cost effective way. The objectives of ISO 9000 can be achieved by

(0 Promoting a single third party assessment of quality standards.
(ii) Becoming the part of national/regional/international


(iii) Encouraging bilateral and multinational agreement in technology,

manufacture and trade.
(iv) Supporting industries for improving their qualities (v) Promoting Total Quality Control (TQC) systems.

ISO 9001 is used for companies to certify their quality systems hroughout the product development ..ycle, from design to service. It ncludes the product-design element, which is becoming more critical o customers that rely on error-free products.

ISO 9002 is used by companies for whom the focus is on production and installation. The quality standard may be used by a company whose products have already been marketed, tested, mproved, and approved. Chances of the product quality are high. These companies focus their quality efforts. on maintaining and improving existing quality systems.

ISO 9003 is for companies in which comprehensive quality systems may be important or necessary, such as commodity suppliers. In 1hae eases final product inspection and testing'woukl---suffice. 1be above functional criteria for selecting the appropriate ISO

standInt ... tJroad. The following are additional criteria to consider while d I the appropriate ISO standard, (.) Design process capability (6) Design maturity


(c) Production process capability


Engineering . (d) Product or service safety (e) Economics.


ISO 9000 provides essential documentation and system to enable an establishment to translate their quality assurance policy into specific action plans. Some of the documents are given below. ISO 8402 - Quality vocabulary Isol9000 - Quality standard guide lines. ISO 9001 - Quality standard-for suppliers. ISO 9002 - Quality standard for manufacturers. ISO 9003 - Quality standard for test houses. ISO 9004 - Quality standard system and elements. Clearly ISO certification insures the quality of product. Q. 7. (a) Def"me an information system. What are the factors on which information requirements depend? (5) (6) Why is DBMS important for e-business? (5)
(c) Identify the risks and governance issues an organization faces while migrating to an integrated ERP system. (10)

SoL (a) Information system. Information system is defined as a set of interrelated system which collects, store, process and distribute information to support decision making. It may also be called as a set of organised procedures that, when executed, provides information to support the organisation. Information system existed long before the development of the electronic computer; however, the explosion of information and need to process large amount of data to extract small amount of information required for the use of computer. An information system serves an individual with certain cognitive style faced with a particular decision problem in some organisational setting. In addition to these variables, we suggest the importance of personnel and situational factors in the interpretation of information. Following factors must be taken into account on which information requirements depend.

Winter 2010


(i) Purpose. Here first we calculate the cost of producing information, as compared to not producing the information. For this we took into (a) Does the information contribute to decision. (b) In this information still required. (c) What is the purpose of information. (ii) Accuracy. We should take into account MIS should fulfil the degree of accuracy for which it is required.

Frequency. How frequently the information should be produced. As too frequent information may lead to fluctuations and infrequent information may conceal the information.


(iv) Speed. Speed by which information is produced is an important factor because we may have to take short decisions also. Higher speed is preferable where effective control is needed.

(b) DBMS (Database Management System) is very important or e-business. DBMS is a software system that enables users to define, reate and maintain the data base and also provides controlled access o this database for e-business such as:

Programs automatically maintain stock levels and calculates ustomer's bill. In shopping malls, bar codes on goods link to the product's data base.

In the library, data of books link 'to library database for cquisition, issue-return, or any other library management. In a college, tudent and course module information may be stored in a database. Different programs handle different parts of the system, for example, dmissions, and recording of examination results.

In a municipality, data on· roads, property owners, water supply nd sewerage network and other information may be stored in the database. Property tax collection program may identify owners who have defaulted in paying property tax, such that notices may be issued o then as and when required. (c) Refer to Q. 8. (a) of Winter 2007.

Q. 8. Consider a project to construct a small hydroelectric power plant. The details of differeat activiti~ their ,prececleace constraints, and the estimated times are given below : '\
. \'




Activity Description Immediate Predecessor Ecological survey a b File environmental impact report; get approval a Economic feasibility study c a d Preliminary design and cost estimation c e Project approval and funding commitments b,d CaD quotation for equipment I (turbines, generators) e g Select supplier for equipment / Final design of project h e i Select construction contractor e . Arrange construction materials supply h,i J k Dam building j Power station building I j m Power lines ereetion g,h n Thrbines, generators installation g, I 0 Build-up reservoir water level k n, o: Commission tbe generators Start supplying water m,p f

Duration 6·2 9·1 7·3 4·2 10·2 4·3 3·1 6·S 2·7 S'2 24'8 18·4 20'3 6'S 2·1 1·2



(,) Construct

the PERT chart.


(i,) What is the earliest time that one can complete the en-

tire project? (5) (iii) Which, activities have bottlenecks? (5) (iv) What is the latest time that one can begin an activity, and _ill not delay the project? (5) . Sol. (i) The PERT Chart of the given problem is shown in Fig. I.


Fig. 1PERT chart Now we prepare the following table for calculation of earliest time latest time and total floats.

Table 1


Earliest time Start Finish ESij=E; EFij

Latest time Start Finish LFij =Lj LSij= (Lj-t;)

Total LSirESij

Floats Free Ej-EFij

Independent (E--L;)-t J -



a 0-2) c (2-3) b (2-4) d (3-4) e (4-5) h (5-6)

/(5-7) i (5-8)
Dl (6-8) D2 (6-11)

g (7-9)
j (8-10) D3 (9-11) D4 (9-12) / (10-12) k (10-13) m (11-15) n (12-14)

P (14-15) q (15-16)

6·2 7-3 9-1 4·2 10-2 6-5 4·3 2·7 0 -0 H 5·2 0 0 18·4 24·8 20-3 6·8 2·1 1·2 1-1

0 6·2 6-2 13·5 17·7 27-9 27·9 27-9 34-4 34-4



35·3 35·3 39-6 39-6 35·3 58·0 64·4 66-5 67·7

6·2 13·5 15-3 17·7 27·9 34·4 32·2 30-6 34-4 34'4 35·3 39-6 35-3 35-3 58-0 64-4 55·6 64·8 66·5 67·7 68·8

0 6·2 8·6 13·5 17·7 27-9 400 31·7 34-4 47-4 #3 34-4 47·4 59·7 4l-3 39-6 47·4 ' 59-7 64·4 66-5 67-7

6·2 13·5 17·7 17·7 27·9 34·4 44,3 34-4 34·4 47·4 47-4 39-6 47-4 59-7 59-7 64-4 67·7 66·5 66-5 67·7 68·8


2'" 8 0 0 12-1

0 13 12·1 0 12·1 24·4 1·7 0 12·1 1·7 I 0 0 0

0 0 2-4 0 0 0 0 3·8 0 0-9 0 0 0 22·7 0 0 0 1·7 0 '0 0

0 0 2·4 0 0 0 0 3·8 0 0·9 -12·1 -12·1 0 1(}6 0 0 0 0 0 0





(il) Since the activities having zero float are critical activities and

determine the critical path. Thus the critical path (darken in diagram) is: 1 - 2 - 3 - 4 - 5 - 6 - 8 - 10 - 13 - 14 - 15 - 16 So the shortest time in which project can be completed

6·8 + 7·3 + 4·2 + 10·2 + 6·5 + 0 + 5·2 + 24·8 + 2·1 + 1·2 + 1·1 = 68·8 units of time.

which is same as latest finish time of last activity.
(iii) The critical activities have bottlenecks as their delay will affect the completion of project in shortest time so they have no surplus time. Thus the. activities having bottlenecks are:

a, c, d, e, h, j, k,


p, q.

(iv)The Independent float gives the amount of time by which the start of an activity can be delayed without affecting the earliest start time of successor activities and hence project completion time is not affected. These are calculated in the table 1.

Group C Q. 9. (A) Cboose tbe correct answer for tbe foliowing:(lOxl)

Real founder of motion study was (a) F. W. Taylor
(b) (c) (d)"

F. B. Gilbretb

H. L. Grantt H. Emerson. (il) Continuous manufaeturfng

factories adopt


(a) (b) (c)

product layout process layout combined layout

(d) fixed layout.

Work study is most useful wbere
(a) (b)

production activities are involved industrial relationsbip is to be improved




(c) worker is to be proved wrong

(d) image of the manager is to be improved.
(iv) Which one of the following description of the concept of

line and staff is correct?
(a) Represents a specification of managerial (b) Is regarded as a type of organisation



(c) Is regarded as specirlC types of departments

(d) Is simply a matter of line and staff relationship.
(v) Critical path moves along the activities having total float

(a) positive value (b) negative value (c) zero value

(d) same value.
(VI) The word 'fund' means the difference between .••••••••••••.••••• and •••••.••••••••••• (viI) Mention three steps involved in developing an informa-

tion system:
(a) Specification, design, testing (b) Programming,

design, and testing

(c) Analysis,. system design, and implementation

(d) Programming, 'design and analysis.
(viii) Which one of the following system components is respon-

sible for ensuring that the system is working to fulfil its objective?
(a) Inputs (b) Feedback (c) Control

(d) Outputs.
(ix) Decision support systems are used by


266 (a) line-managers (b) top-level



managers managers

(c) middle-level

(d) system users.
(x) Which one of the following terms defines the process of project compliance with policies and procedures? (a) 'Quality control (b) Quality (c) Quality

assurances audits (5

(d) Quality control management (8) Answer the following in brief:
(i) Define span of control (ii) Define collective bargaining (iii) Define merit rating (iv) What is the meaning of project crashing? (v) A production process producing nails is being controlled for quality. The single important characteristic of quality is the hardness of nails, and accordingly a sample of three nails is periodically tested for hardness. The data on fIVe samples is given below:


Sample No. 1 2 3 4 5 71

Hardness 70 74 70 74

69 66

70 71 73



If, for a sample of size 3, values of factors for X and R charts are: A2 = 1'02, D3 = 0, D4 = 2'57, the 3 (J control limits for R charts are •••.•.••••••

Winter 2010 Sol. 9 (A)
(I) (a);


(il) (a); (iv) (b);

(iii) (b); (I') (c); (vii) (c); / (ix) (h) and (d); (8)

(VI) Liability and Assets.
(viii) (c); (x) (c).

(Ii Span

of control. Span of control refers to the number

of sub ordinates that report to an executive or the number of subordinates that an executive can supervise directly. Depending upon the conditions of the business enterprise, the span of control may be any number varying from 2 to 20.
(ii) Refer to Q.

of Winter-2008.

(iii) Merit Rating. Performance appraisal is called merit rating. In past the emphases was on measuring merit. This includes personality, initiative, drive and dependability. But now-a-days attention in being focussed on measuring the output quantitatively and qualitatively of the personnel.


(iv) Project crashing. The process applied for reducing time of

a given project is called crashing procedure. This is done by adding extra resources to an activity. Resources refer to labour and material and the extra money spent for procuring them. Direct cost include money spent on the procurement of the inputs such as materials, equipment and labour to be used in performing an activity.
(v) We have

R, 0: 70 - 70 0: 4 R2 0: 70 - 680: 2 RJ 0: 74 - 660: 8


Engineering Management R4 = 71 - 69= 2 R5

74 - 69 = 5 4 + 2+ 8 + 2'+ 5 5


= 21 = 4.2

The 3cr limit for R chart LCL

= D3 R =

0 x 4·2 == 0

UCL = D4 R = 2·57

4·2 = 10·79

SUMMER 2010 ENGINEERING MANAGEMENT Answer FIVE questions, taking ANY TWO from Group A, ANY TWO from Group B and ALL from Group C Figures in the bracket indicate full marks Group A Q. 1. (a) Identify four different approaches to management, and then define what you mean by the term 'management'. (4)
(b) Which aspect, a principle, of Taylor's philosophy of scientific management corresponds most closely with some firms efforts to improve the quality of work life today? (4) (c) Name any three Indian companies in each of the following form of business organisation (2x4) (I) Proprietorship

stock companies (iii) Partnership (iv) Co-operative. (d) Why do firms classify their materials according to ABC method of classification? Explain. (4) Sol. (a) The four different approaches to management are as

(ii) Joint

(i) Classical Management Approach : It is concerned with increasing the efficiency of workers and organization based on management practices. It includes bureaucratic, scientific and administrative management.
(ii) Behavioral Management approach : It is concerned with emphasis on the human side of the work place. The major branches of behavioural or human resource approaches are

* The

* * * Argyrist's

Hawthorn studies and Human relations Moslow's theory of human needs Mc Gregor's theory X and theory Y. theory of adult personality.


Engineering Management
(iii) Quantitative Management approach: It focuses on improving

decision making via the application of mathematical and statistical models of management. The foundation of the quantitative approaches is the assumption where mathematical technique can be used for better problem solution. The quantitative management approach involves the management science and applied quantitative analysis. (iv) Modern Management approach: According to the modern management approach, people are complex and varied. They have many varied needs that can change over time. Key foundations of modern management approach include system view of organisations and contingency thinking. There are various ways of defining management. As per Harold "Management is the art of getting things done through and with people in formally organised groups. In terms of functions, Management is the process of planning, organising, leading and controlling the use of resources to accomplish performance goals. The themes reflected throughout management include quality and performance excellence, ethics and social responsibility, global awareness and importance of new leadership in an age of information, knowledge, workers, and highly competitive business environment. (b) Scientific management theory arose an increase from the need to quality of life. Taylor rested his philosoply on four basic principles. (i) The development of true science of management is the best method for performing each task.
(ii) The scientific selection of workers, is that each worker would be given responsibility for the task for which he or she is most suited. (iii) Intimate, friendly cooperation between management and labour.

(iv) Carefully train workers to do the job and give them the proper increase to cooperate with the job 'science'. The implementations of Taylor's effort are found in many management setting today and has changed the quality of work life today to a large extent. The Taylor's effort has given the practical lessons to scientific management whose application has saved much time, high increase in

Summer 2010


the productivity. The summarized lessons from scientific management are ; * Make results-based compensation for every performance incentive. * Carefully design jobs with efficient work methods. * Carefully select workers with abilities to do this work. * Train workers to perform jobs to the best of their abilities.

* Train supervisors to support workers so that they can perform jobs to the best of their knowledge.
Increase rumenerative as per the efficiency enhanced in production by workers. (c) The ABC method of classification is concerned with inventory management. Inventories serve a number of functions. with respect to smooth production, meeting anticipated demand, preventing stock outs, working against price increase, taking advantage of quantitative discounts etc. The requirements for effective inventory management are keeping track on inventory, forecasting demand, estimating inventory holding cost, as well as ordering and shortage cost. The ABC classification system recognizes that items held as inventory are not of equal importance. ABC classification primarily mean for relative inventory control where maximum care can be given to components which involve more money and has important functions. A fair attention should be given to medium value items whereas attention for low value can be reduced to routine produce only. Though no definite procedure can be laid down for classifying the invention in A, B, C categories as this will depend upon large number of factors such as nature and variety of items, specific requirements of human etc. But in general on the basis of their function and cost, one with more valuable function and higher cost corne under category A, medium cost fall under category B and one with least importance function and minimum cost fall under the category C. The firms prefer ABC method of classification because this can also be applied in many other aspects of materials management, such as purchase, sales, inspection, inventory control storekeeping etc. (I) Proprietorship
(i) Proprietorship








- Surgro-Tex - Jain Brothers - Laxmi Publications Joint Stock Companies - HDFC Bank - TATA Group - Aditya Birla group - Associated Cement Corporation (ACC) Partnership - Industrial sub- contracting, Chennai, India. - S.R. Batliboi & Co. Kolkata -KPMG Co-operative - Kangra-co-operative Bank Ltd. - Amul Milk Co-operative Ltd. - IFFCO - Ramgarhia Co-operative Bank Ltd. [Refer to Q. 4. (b) of Winter 2008] exists for the claim that

Q. 2. (a) What support management is a science?

(b) A manufacturer of farm equipment is considering three locations A, 8 and C for a new plant. Cost studies show that fixed cost per year at the sites are $240,000, $270,000, and $252,000, respectively, whereas variable costs are $100 per unit, $90 per unit, and $95 per unit, respectively. If the plant is designed to have an effective system capacity of 2500 units per year and is expected to operate at 80% efficiency, what is the most economical location on the basis of actual output? (8) (c) What has been the effect of higher corresponding increase in productivity ?

wages without

Sol. (a) Science is a systematised and generalised kr-owledge gained through observation and experiment. In the similar way the head of the management (manager) observe the workers, workout put etc. and adopt a policy after various changes (experiments) which will give maximum productivity in least time and with least cost.

ummer 2010


Although management can be considered both an art as well as ience. It is the art of making people more effective than they would ave been without a manager. The science is how as manager does this. se of statistically validated theories and techniques already available onstitutes the scientific aspects of management. The terms management science and operations research are often sed interchangeably to describe the scientific applications of mathematical chnique to management problems. There are variety of management ience application that can be used. For example.

• Mathematical forecasting helps to make future projections that e useful in planning process. • Inventory modelling helps

control inventories mathematically.

• Establishing how much to order and when • Linear programming is used to calculate how best to allocate arce resources among competing uses. • Quing theory helps to allocate service personnel or workstations minimise customer waiting time and service cost. etc. problems to different solutions tested. to run a management properly, In other words management.is

• Simulations create models of nder various assumptions that can be In this way we see that in order athematical application is necessary. ience itself.

Location A B Fixed cost per year ($) 240,000 270,000 Variable cost per unit ($) 100 90 Total cost for effect system capacity = Fixed cost (FC) + Variable cost (VC) = FC + 2500 x VC per unit For location A TC = $ (240,000 + 2500 x 100) = $ 490,000 For location B TC = $ (270,000 + 2500 x 90) = $ 495,000 For location C

252,000 95





= =

$ (252,000 + 2500 $ 489,500



80 2500 x = 2000 100 Thus per unit actual cost at three locations are :Location A As the efficiency is 80% so actual output

Per unit cost


$490,000 2000

= $245

Location B = $495,000 2000 Location C

= $247·5

$489,500 = $244·75 2000 Also from expected output of 2500 units, the costs per unit would be $198, $196, and $195·8 respectively. The respective difference in two costs at three locations are $49·5, $49, $48·95, clearly location C is most economical. (c) The relationship between wages and productivity in the Indian economy has represented an enduring source of concern over the last many years. Wages are directly concerned with productivity. Higher wages means more productivity. But if there are increase in wages without subsequent increase in productivity the effects on economy shall be as follows: I. Increase in inflation as higher wages will give chance to spend more. 2. Standard of living of people will increase but overall GOP will fall and country may become deficit in finances. 3. Sales targets of company are not met 4. Balance sheet of company may present adverse effects. 5. Targets and goals of the company can be adversely. Q. 3. (a) Four different organisations are considering your hometown as a potential plant location __ : (I) A medical research centre, (il) a soft drink producer, (iii) a steel mill, and (iv) a uranium mining firm. Select any two of tbe four, and systematically evaluate the relevant locational factors. (8) (b) Distinguish between job enlargement and job enricbment. (4)

Summer 2010


(c) Overland motors used 25,000 gear assemblies each year and purchases them at $3·40 each. It costs $50 to process and receive an order, and inventory can be carried at a cost of $0'78 per unit-year. How many (i) assemblies should be ordered? and (il) orders per year should be placed ? (4+4) Sol. 3 (a) (I) A medical research centre: • The climate at the location must be neither too much rainy nor too much hot. • The location should be either in a city/town or should not be at very far distance from the city. • There must be a hospital with the place for research centre. • There must be cleanliness in the surrounding area. • The transportation system (road/air) must be good. • There should be educational institutes, market, availability of financial facilities. • There should be all means of communication readily available. • The area should be safe and should have high security arrangements. • Availability of place for disposal of waste. (il) A soft drink producer: • Availability of large piece of land for plant set up. • Large natural water resources should be available nearby. • Good transport facility (road/rail) • The nearby area should be populated specially with youths and middle aged persons. The surrounding area should be prosperous. • Transport costs for obtaining raw material or marketing furnished product should be minimum. • There should be good means of communication (TV, Magazines) etc. for advertisement. (iii) Steel mill : • The area should be at some distance from the populated area. • The area must be a mining area so that the raw materials. ore/ iron can easily be obtained. • The area should have availability of labour in nearby areas. • The area should have good transport system especially Railway & Road.




* * *


There should be sufficient residential colonies nearby for the workers. There must be good power supply in the area. There should be link between the plant area and market area nearby. Good educational centres, hospitals, water and electricity supply for workers.

(iv) Uranium mining Firm :

* The location must be very far from residential area.

* * *
(b) (I) It

The area should have high security arrangements. There should be availability of barren land area for disposal (underground) of nuclear waste. There should be nuclear power plant and defence base nearby.

Job enrichment. (i) It is the increase in Job depth by adding work planning and evaluating duties normally performed by the supervisor. (il) Job enlargement for a particular task (ii) It enablesandallowsemployees attempts to enhance the scope of to assume more responsibility the job to include variety of task that acountability and independence need to be performed by the while learning new tasks. It individual. It adds interest and attempts to design job in such a employment to working, without way that it helps employees in necessarily hanlding over extra satisfying their needs for growth, responsibility to the employees. recognition and responsibility. (iil)Often these are tasks done (iii) It adds new dimensions to the immediately before and after work job by expanding it vertically performed in original job. This some time called vertical loading and employees are given more is some time called horizontal responsibility. loading. Job Enlargement increases task variety by combining into one job two or more task previously assigned to separate workers.
(c) D

25,000 unit/year;
$ 0'78/unit year;


= $ SO/order


$ 3·40 each

(i) Number of assembled should be ordered

Summer 2010 _ - EOQ

=~2DCO C
h =





(ii) Number of orders per year N= D






Q. 4. (a) Distinguish amongst the following types of layout : (I) Fixed position, (il) job shop, and (iii) line processing. Also, give some examples. (8) (b) What are major outputs from an MRP system ? In what way do MRP benefits extent to inventories, priorities, and capacities ? Explain. (8) (c) Distinguish between dependent and independent inventories. Give examples. ." (4) Sol. 4 (a) (i) and (iii) [Refer to Q.4(b) of Winter 2006] (il) Job shop. The job shop is the most widely used production organization representing a variety of industries that produce goods and services. According to it idle facility time and excess inventories can be controlled by the proper use of assembly line balancing techniques. In a job shop, however, every order is different and each job could be unique. Workstations are grouped together according to their functions. In the job shop production control system schedule, the incoming orders in a way do not violate capacity constraints of individual workstations. This system checks the availability of materials and tools before releasing an order to departments. It is an effective production and control system because it covers many activities such as planning, executing, monitoring and control. Job shop meets the individual requirement as well as less finance, low risk and easy to start. (b) Major outputs of MRP. MRP provides output in standard format. The format provides the schedule of material for future timeperiods. It is generally of t\~o types viz; primary output and secondary output. Primary MRP output include : I. order release note to face order; 2. Planned order schedule ; 3. Rescheduling notice ; 4. Cancellation notice and 5. Reports on inventory status.




Secondary MRP outputs include: I. Exception report i.e., reporting errors, late orders, shortages and excess scrap and wastages ; 2. Performance report i.e., performance of system (such as inventory turn over ratio, delivery promises and stock out index etc.) ; 3. Planning report i.e., future planning of inventory. Some examples are purchase commitment report, pegging (i.e., traces to demand sources.)

Benefits of MRP are given below
1. Customer 3. Reduction service is improved. 2. Load time is reduced. of work-in-progress in past due orders. in productivity

4. Reduction
5. Increase

6. Capacity constraints (limitations) are understood 7. Annual inventory is eliminated. 8. Reduction in finished good inventory, raw material
components. Correct tracking of inventory and accurate estimation order for each time are the basic funds of MRP benefits.


of planned

Capacity means maximum amount that can be contained or produced. Requirement means need to meet the order received by the entrepreneurs. Planning means programme designed to meet the entrepreneur's need of course as per demand of customer. Capacity requirements planning is a useful tool for some of the capacity design problems. (c) S.No. Dependent inventories 1. Product demand is related to demand for other items as component of any product. Example: Raw material, sub-assembly, work in progress. 2. Dependent demand is governed by calculation (like MRP etc) 3. Delivery schedule of dependent demand is determined by its lead-time plus due date for end product. Independent inventories Product demand is unrelated to demand for. other items. Example: End product and spare parts.


demand is normally

known by forecast and projections
Delivery is determined by delivery schedule. Delivery schedule is known by customer requirements i. e., by order or forecast.



Group B differences between PERT (4)

Q. 5. (a) What are essential and CPM ?
(b) A control

chart is established, with limits of ±2 standard errors, for use in monitoring sample of size n = 20. Assume the process in the control.

(I) Would you expect many individual values to lie outside hese limits ? (4)

(ii) How likely would control limits ? (iii)

a sample


fall outside

the (4) in


What kind of error would be committed concluding that the process is out of control?

(c) What is the difference between data, information and knowledge? Explain. (4) Sol. 5 (a) [Refer to Q. 5. (c) of Summer - 2006] (b) The control chart is established the limits of ± 2 standard error, therefore the control limits for control chart for available average (x) is given by,

Lower control limit (UCL).
= x -


2 S.E.


x -

= ,.In zo

and Upper control limit (UCL)


20 which may be considered large. We may take number of samples N = 10 to 20 (as n is large). Here we take N = 10. Fig. 4.

x is the average of sample averages. Here sample size n

where c is standard deviation obtained from the sample mean and

Fig. 4 : Control chart




We have LCL

= 20' x--=

and UCL

!20 = 0' x + ~

0' x--2-.15




Clearly control limit is narrow as n is large.
(i) Given process is in control so both individual values should be within control n but due to comparatively large size of sample n (20) it .may be possible that many individual values may be outside the control. (Fig. 4). (ii) It is highly unlikely that a sample drawn from the process lies outside the upper or lower control limits while the process is in statistical control. Therefore, if it happens that a sample value does fall out side these limits, it is interpretted to mean that process is out of control. (iii) Observing the individual points which are out side the control limit Fig. 4 may be supposed that the process is out of control but conclusion has error. The usual control limit is kept between - 3cr to + 3cr (i.e. total 6 o tolerance) which is much large as in present case which is between





2-.15 i.e. -.15 tolerance.

So there is a chance of individual data falling out side the given limit and considering process out of control. In case usual tolerance of 60' there is greater than 98% chance of individual point falling with in control limit.
(c) [Refer to Q. 7. (c) of Summer - 2006]

Q. 6. (a) What are different financial their implications in financial management.
(b) What

ratios ? Discuss (5) security (5)

issues related

is e-commerce to it.

? Discuss information

(c) How do sampling plans for attributes differ from those for variables ? (5) (d) What

is ERP ? How is it different


from MRP ? (5)

Summer 2010


Sol. 6 (a) Financial Ratios : Ratio analysis: It is the most important and widely used method of financial analysis. The term ratio refers to the numerical relationship between the two items. Ratio makes the variables comparable so that meaningful conclu-

sions can be drawn from them. Ratio analysis is helpful in judging the
performance and position of the enterprise. The ratio by itself does not reveal much but its comparison with similar ratio of the past provide .good information. Various ratios can be used by the financial analyst but we give below important ratios generally employed. These ratios are as mentioned below:
Ratio I. Gross Profit Ratio Formula Gross Profit Net Sales Net Profit 2. Net Profit Ratio 3. Operating Ratio Net Sales Operating Expenses Net Sales Net Profit after 4. Return Ratio Taxes before interest Capital Employed pee of investment Current Assets 5. Current Ratio Current Liabilities Long-term debt 6. Debt-Equity Ratio Shareholder's Equity Sales 7. Capital Turnover Ratio 8. Stock Turnover Ratio Capital Employed Sales Average Inventory Sales 9. Receivable Ratio Average accounts receivables Quick assets I O. Assd trst Ratio Current liabilities Quick assets are defined as current assets excluding inventories. The As Contd.. Judging the efficiency turnover Ratio in collection from debtors. Judging efficiency Ratio in the use of long-term funds. Judging efficiency of inventory man agement. To measure and judge the long-term solvency of a company Measuring firms ability to meet firm's short term liabilities Measuring ability to minimise operat ing cost Measuring return investment per ru Measuring margin on sales Measurement of production efficiency and trading operations Objective



measure of


Inventory over ratio


Inventory x Days in the year Cost of goods sold

set ratio is fairly stringent current ratio. Inventory means

basic raw material.

Every organization must work out per annum, quarterly and per month inventory ratio as per its requirement.

12. Miscellaneous


Inventory to working It is that part of firm's current capital +Long term assets which will stay. liabilities to working capital +Fixed assets to long term liabilities+ current assets to total liabilities.


of Ratio Analysis profit and loss account and the balance sheet of any organization or it simplifies the financial statements.

(i) Ratio analysis helps in easier way better understanding of

(ii) The accounting ratios of any firm can be compared with

those of other firms to judge the relative efficiency and financial position of different firms. By doing so the management can detect the weaknesses and strength of a firm. It permits trend analysis.

The ratio analysis enables any firm to judge whether its rinancial position/performance is improving or deteriorating over the years. it provides clues on trends and future performance. They can also be used for forecasting future results.

(iv) Ratio analysis is helpful in planning and decision making as

(b) [Refer to Q. 8 (a) of Summer - 2008]

Limitation of E-commerce: 1. There is a lack of universally quality, security and reliability. accepted standards for

2. Internet accessibility is still expensive and or inconvenient. 3. Security and privacy concerns deter customers for being. There are many cases nowadays for scam through hacking of security codes for financial organisations.

Summer 2010


(c) Sampling Planfor attributes: In an attribute sampling plan,
a random sample is drawn from the batch, and the units in sample are classified as acceptable or defective, depending on the quality criterion being used. The batch is accepted if the number of defect does not exceed a certain value called acceptance number. If the number of defects found in the sample is greater than acceptance 01'--' er, the batch is rejected. In a variable sampling plan, a random sample is taken from the population, and the quality characteristic of interest (e.g. a part of dimension) is measured for each unit of sample. The measurement are then averaged, and the mean value is compared with an allowed value for the plan. The batch is then accepted or rejected depending on results of this comparison. The allowed value used in the comparison is choosen so that the probability that a batch will be rejected is small unless the actual level in the population is indeed poor. In other words in variable sampling, the value of acceptance number is selected so that the probability that the batch will be rejected is small unless the overall quality of the parts in the batch is poor. It must be noted that in both types of sampling plans, there is always a probability that the batch will be rejected even if overall quality is acceptable. Similarly there is a probability that the batch will be accepted even if the overall quality level of the batch is not acceptable.
(d) Enterprise

resource planning systems (ERP)

Enterprise resource planning (ERP) systems is a packaged business software system that integrates business processes to share common data and practices across the enterprise to produce information for use in real time. This system is different than other legacy systems in that it enables all business transactions to be entered, processed, monitored, and reported. An ERP system also introduces 'best practices'. In fact, the successful implementation of an ERP system requires that business processes be aligned with ERP software by reengineering, SAP, Oracle, and People Soft are some of major vendors ofERP software. Before ERP systems, material requirement planning (MRP) systems and manufacturing




resource planning (MRPII) had taken off from reorder point systems, which mainly had the function of inventory management. While MRP took care of demand-based production planning, MRPII focuses on process control and cost reporting. ERP systems provide seamless integration of financial accounting, supply chain management, human resource functions, etc. Acquisition of an ERP system is a business decision. The company must weigh both the tangible and intangible benefits. The most important tangible benefits are inventory reduction and productivity improvement whereas information visibility and customer response are important intangible benefits. The important ERP cost elements are software, hardware, consulting, and training/implementation team costs. As ERP projects involve considerable time and cost, it may take four to five years before the benefits are realized. Q. 7. (a) An electrical firm has developed a PERT plan for the electrical wiring activity of power plant control panels. It expects that assembly operations will follow a 90% learning curve. The project team, composed of workers, electricians, and supervisors, feels that the first assembly will most likely be completed in 14 days but could take as long as 24 days, or if everything went exceptionally well, it would be finished in 10 days. What is the expected assembly time of the fourth unit ?
(5) (b) What is TQM philosophy ? Explain. (c) Discuss essential

(5) (5)


of a balance-sheet.

(d) What are generally the sub-system in manufacturing module of an ERP package ? (5)
i.e. 1m or m

Sol. (a) First assembly will most likely completed in 14 day = 14 days

Given for unit :Most likely time (m or 1m) Optimistic time (a or

14 days 24 days.



10 days.

Pessimistic time (p or t)

= =

Summer 2010


Using Beta distribution with 90% learning we have expected time
te =-(/0

I 6

+4tm +t)

For first unit expected time te=6"(l0+4xI4+24)

IS days.

Assuming the same possibility for successive units, the assembly time for all .successive units will be same i. e (4th) fourth unit will also be IS days and will be completed on both day if units are prodyced one by one.
(b) [Refer to Q. 6. (b) of Winter - 2008] (c) [Refer to Q. 5. (a) of Winter - 2005]

(d) Following are the subsystem in manufacturing module

of an ERP package.
(i) Inventory control (ii) Master production scheduling (iii) Capacity requirement planning. (iv) . MaterialRequirement planning (v) Shop floor control and work-in process. (vi) Production Management

(vii) Quality control.

Fixed assets management

(ix) Budgeting and costing (x) Project Management.

Q. 8. (a) How will you start the selection process of an ERP package ? What would be the criteria for the selection ? What are the costs to be included in the budget for implementation of ERP ? (5)
(b) What is ISO 9000 quality system? (c) Services are intangible




services be measured?


Can the quality of (5)

238 (d) How is the consumer

Engineering Management behaviour ? Explain with examples. assessed in the era of (5)


Sol. (a) 'The first step of implementations of ERP package is to identify the reason for going in for a solution for our business. We should first think : Why should, implement the ERP. Will package significantly improve my profitability ? Will it enhance my customers satisfaction level in terms of cost, delivery, time, service and quality? Will it help to reduce the cost of my 'product? Will it enable me to achieve the same business volume with reduced manpower ? Will it enable me to reengineer my business processes ? The criteria for selection of ERP package is the evaluation of various ERP package. The ERP package available in market with respect to following aspects. (i) Global presence: Check whether the package has global presence or not ? (U) Local presence: Check the performance of package in local market that will give the idea as to how well a package is taking care of country specific basic need.
(iii) Investment in R&D

: A good investment in R& 0 is a healthy indication of the longevity of the package.

(iv) Target market: The package must have a strong hold in any type of industry. (v) Price : The price of the package capability of the finn. . should be under

(vi) Modularity : If we need only some particular function in the ERP package. The package is independent modules be available. (vii) Obsolescence: The package should have longer active life. (viii) Ease of implementation: The implementation quick, smooth and hassle free. must be

Summer 2010


Cost of implementation With large-scale integration of ERP packages and the consequent complexity built into them, it has become essential to consider the of implementation. In the budget the cost included are Cost of ERP package, salary of implement action team, test run cost etc.
(b) [Refer to Q. 7. (c) of Summer - 2009] (c) Services are intagible products because a service provider cannot produce a tangible product that can be stored for later consumption. The output of such productive system are consumed in the process of its production. For example hospital provide the service as health-care where health starts improving with start of treatment similarly, beauty salons provide the service for good looking at the time of service.

The measurement of quality of services depends on nature of service. For example. In stagnant personal service like hair cutting, live artistic performance, psychiatric counselling, and teaching, the quality of such services are highly correlated with labour and time, it is difficult to realize significant productivity gains for the services without an appreciable reduction in quality. It seems evident, for instance, that the amount of time required for haircut can not be decreased substantially without some drastic implications. These services offer low innovation potential and are difficult to standardize. Similarly substitutable personal services like services of guard, personal servants etc. require direct personal contact and they have characteristic similar to stagnate personal services. However, it is possible to substitute for these services with technological or other alternatives. For example services of guard can be replaced by electronic surveillance system. The quality of guard's service cannot be considered inferior with electronic substitute. Similarly watching a concert or a sporting event on TV is not the same as live performance. The progressive services like television broadcasting with two components production and transmission. The production cost can not determine the quality but quality of transmission can be measured.




The quality of explosive services like telephone communication can be measured with comparison.
(d) No business can progress without taking active steps to promote itself; this makes advertising essential to business. Advertising can be used to motivate consumers to buy goods, change attitudes, encourage retailers to st<1ck the products, or at certain times to dissuade people from indulging in certain socially unacceptable behaviours. Modem advertising industry has its roots in the industrial revolution. Technological progress improved production techniques, thus making mass-production possible for a number of goods and services. Producers had to find new consumer markets and expand existing ones to maintain profits and keep a control over prices. They branded goods and advertised them, Manufacturers identified the mass media as a vehicle to stimulate the demand. The promotional efforts of large firms focussed almost exclusively upon mass media advertising, increasing promotional costs, and pricing potential competitors out of the most concentrated markets.

Advertising is often used to increase the sale of a product or use of a service. However, this is not always the most important objective of a firm; it may lead to contlict with the long-term profit goals. Long-term profits are a more useful indicator of a firm's objectives than increasing sales. Achieving a direct sales effect is actually one Of the least effective aspects of advertising. The goal of good advertisement is to ensure that the message that the company intends to convey to the masses, is done in a clear and attractive way. Consumer behaviour dynamics take place when consumers shift from one 'company's brands to its rivals' in the same product class and vice versa (Fig. 3). Also, consumers may shift from the company's or its competitor's brands to brands which are considered as, generic substitutes and not falling iri the same product class. On the other hand, the company and its competitors may be getting customers who were earlier buying the brands from the substitute product class. It is in this context of behavioural. dynamics that advertising has to perform its job effectively and efficiently,

Summer 2010


Company's brand

Brands from competitors


Brands from other product class


Fig. 3 : Consumer behaviour dynamics

Classification of consumers: All consumers are classified into wo types-personal and organizational. Whenever one buys goods and services for his own or family use, he is a representative of a personal consumer group. All business firms, government agencies and NGO's who purchase goods and services for running the organization represent organizational units. They can be trusts, hospitals, temples etc. The process and procedure of decision making constitute a simple model of consumer behaviour as placed below:
CONSUMER BEHAVIOUR MODEL Other factors Economical Political Social Technological " Consumer decision Process


External factors 4 Ps Product (i) Price (il) Promotion (iiI) Place(iv) Buyer features Psychological Personal Cultural characteristics


Choice of product Choice of brand Choice of dealer Purchase time Purchase quantity



Consumer decisions and actions

Group C Q. 9. (A) Choose the correct answer for the following : (2x4)
(I) Variety


is generally

known as

(a) less varieties (b) simplification (c) reduced

varieties name given to

(4) None of the above.
(il) Line of best fit is another (a) method

of least squares method method

(b) moving average (c) semi-average

(4) trend

line method.

(iii) The card, which shows the number of rejected products from the total quantity produced, is
(a) quality control (b) inspection (c) rejection


card card

(4) job card.
(iv) Route card and technological (a) different (b) route

route card are route

types of documents

card shows route and technological card shows the technology used

(c) same type of documents

(4) one is prepared by the production other by the dispatcher.

manager and the

Summer 2010 (B) Expand



functional List A WIP ISO

the terms in list A and match them with the areas of management in list B : (2x6) List B Project Quality Quality Materials Inventory management philosophy system management cost

P & LAIc TQM CPM Sol. 9 (A)
(i) (b) (ii) (a)


(iii) (d)

(iv) (d).

List A WIP~ ISO ~ EOQ~ TQM ~ Work in Progress International Standard Organization Economic Order Quantity Inventory control Balance-sheet Quality philosophy Project Management. P & L AlC ~ .Profit & Loss A/C Total Quality Management Critical Path Method CPM ~ List B Material management Quality system

WINTER-2009 ENGINEERING MANAGEMENT Answer FIVE questions, taking ANY TWO from Group A, ANY TWO from Group B and ALL from Group C Figures in the bracket indicate full marks Group A Q. 1. (a) Why is planning considered to be the most important function of management ? Discuss different types of plans and at different levels of an organization. (4 + 8) (b) Describe the methods of control at shop-floor of a manufacturing plant. What are the basic principles to be followed for controlling? (5 + 3) Solution {a] Planning is a primary function of management: The most vital function of management is planning. The other functions of the management are organising, staffing, directing and controlling. All these functions are no doubt quite important for the smooth running of an organisation but it should be well understood that these functions can not be carried out effectively without proper planning. Why planning is primary function of management ? 1. Planning spreads to all managerial activities. 2. Planning is directed towards higher production and efficiency which clearly means higher revenue and profits. 3. Planning determines capacity of manufacturing departments and co-ordinates with other departments like sales etc. 4. Planning is important for all department, as it allows to take proper steps for tackling problems that may appear at any occasion. 5. Planning promotes full utilization of resources and plant capacity. 6. Planning enforce maintenance of records and strategies to minimise losses or wastes. Refer to 0.2. (a) of Winter-2007 Levels of an organization: Small firms have a relatively simple organizational structure. There is special isation of jobs but often the jobs are designed to fit the persons in the organisation. Relations are informal and employees at the low level organisation can communicate easily with top executives. The rules and regulations are relatively simple, authority is mostly centralized, hence the decisions are taken quickly by the top executive.

Board of directors



Top management's objective is to Improve the overall performance

Middle management's objective increase profits regardless of the means



Supervisory or bottom management's objective don't worry about quality and work fast

Fig. 1

As the firm grows the organisation structure becomes complex. More specialists, technical and managerial hands are required to meet the increasing needs of organization. Duties and responsibilities become specific. Authority is also decentralized at various levels of the organization to enable the managers to get the desired work done through people. The number thus in the organization increases with the number of people employed. For example, a company with large number of manual workers has fewer tires as compared to the company having large number of supervisors. A typical organizational structure is shown in Fig. I. Top management: Top management works out the activities of the company for time dimension of one to five years. The top management deals with only unstructured framework, such as market place, the products and services etc. The top management level activity is comprised of the plans, policies and strategies that the industry will follow over the next year. Middle management: As regards control there is a heavy control co· ,tent at the middle management and operating for a year or so. Middle management looks after entire functional area such as production, planning and quality eontrol. Middle management's activity consists of implementation of schedules and performance yardsticks to achieve a goal as devised in plan. Operating management: The operating management has to supervise activities on a daily basis. The operating management is mainly responsible for individual sub-functions, the components of which enable a function to be completed. The operating management's activity is mainly confined to the end product. He has to enforce effici'ent and effective technique to achieve the desired job. (b) Methods of control at shop floor of a manufacturing plant. The most flexible system of batch production capable of producing an infinite variety of customized products are calledjob shops. Furniture,

Winter 2009


musical instruments and bakery products are produced with batch production. Advantages of this type of production is flexibility to customization of output, disadvantages include higher unit costs, frequent changes in product mix, complex scheduling problems, variations in capacity requirements and lengthy job completion times. Job shop scheduling is also known as shop floor control, production control and production activity control. Regardless of their primary scheduling objective, manufacturers typically have a production control department whose responsibilities consists of I. Loading: Checking the availability of material, machines, and labour. The MRP system plans for material availability. CRP converts the material plan into machine and labour requirements, and projects resource overloads and underloads. Production control assigns work to individual workers or machines, and then attempts to smooth out the load to make the MRP schedule "double." smoothing the load is called load leveling. 2. Sequencing : Releasing work orders to the shop and issuing dispatch lists for individual machines. The dispatch list contains the sequence in which jobs should be processed. This sequence is often based on certain sequencing rules. 3. Monitoring: Maintaining progress reports on each job until it is completed. This is important because items may need to be rescheduled as changes occur in the system. In addition to timely data collection, it involves the use of Gantt charts and input/output control charts. Loading is the process of assigning work to limited resources Basic principles of controlling are; I. Planning the production in advance 2. Setting the route of each item. 3. Fixing the starting and finishing data for each item orders. 4. Giving production orders to shop. 5. Follow up action of the progress according to production. 6. Making use of control methods to check periodically production and sales. Q. 2. (a) State and briefly describe a few important activities of human resource function of an organization. How does this function influence the overall performance of the organization ? (8+4) (b) Write short notes on (/) collective ban:,aining and its role in today's arganizational context, and (il) trade union and industrial relations. (4 + 4)




Solution. (a) Important activities of human resource function of an organisation are:
I. Placement of right man at right job to achieve maximum production

at lower cost. Pressing management efforts in this direction reduces idle hours, cost of production and helps in stepping up the morale of employees. Correct manpower planning develop cooperation and team spirit between workers and management and among workers also. 2. Improving performance of the workers towards better goals. 3. Training of the workers and employees for better output. 4. Taking care of employees towards health and social issues. 5. To train employees and workers for developing new products. 6. Maintaining relations government etc. with publ ic, other organizations and


Human Resource Planning. It is a process of determining and assuming the availability of adequate number of qualified persons at the proper times, performing jobs which meet the needs of an enterprise. Importance of HRD in Organization Despite modern technology and all the systems and computers coming into wide spread use, people remain the most important factor in every organisation. None of these techniques or management method' are effective unless they are administered and carried out by the competent employees. Dynamic leadership must be applied at the top of an organisation, and capable employees must exist throughout the organisation in order for a company to operate, grow, and prosper. In other words, the human resources available at all levels in the organization are the key to success. Human resource planning performance of an organization organization. All the machines and they can bring maximum handled properly.
(b)(i) Collective

and management influence the overall as the workers are the backbones of any including computers are run by humans results from these machines if they are

bargaining : Refer to Q 4. (ii) of Winter-200S

(ii) Trade unions: Refer to Q.9 (iii) of Summer-2008.

Industrial relations. Industrial relations are used to denote the collective relationship between management and the workers. Traditionally, the term industrial relation is used to cover such aspects of industrial life

Winter 2009


as trade unionism, collective bargaining, worker's participation in management, discipline and grievance handling, industrial disputes and interpretation of labour laws as well as rules and code of conduct.
Q. 3. (a) State the main factors to be considered for selecting a site for (I) a chemical plant, and (i/) and electronic goods manufacturing unit. (4+4) (b) Distinguish between product and functional layouts. For an

office, what type of layout is preferred?


(3+3) for a manufactur(3+3)

(c) Identify different types of maintenance ing unit. How is maintenance cost controlled?


(a)(i) Refer to Q.3 (c) of Summer-2005

(il) Refer Q.4. (a) of Winter-2006.

(b) Refer to Q.4. as functional layout).


of Winter-2006. (Process layout also known

For an office, combination layout is preferred. In the layout, improved flexibility and better utilisation of man and machinery is possible, one should not hesitate to combine product and process layouts in finding a new layout. In industry one does not find any layout in its pure form. They are usually a combination of one type with another type of layout and the line of demarcation is very difficult. The fmal layout so developed is called a combination layout as shown in Fig. 2.
(c) Types of Maintenance

~ - - - - - - -

- -I :

: [SJ
B -A


Fig. 2. Combination layout for an office

Following chart shows the various forms of maintenance: Let us now briefly explain the above terms: Planned Maintenance This term signifies the maintenance work conducted in planned and orderly manner. It is divided under two SUbtypes: (i) Preventive maintenance and (ii) Corrective maintenance. (i)Preventive maintenance. In this type of maintenance, efforts are made to prevent failure and to locate the faults. Further, we can classify preventive maintenance as running maintenance and shutdown maintenance.




Running maintenance-This type of maintenance is conducted when the item is running or in service. Shutdown maintenance-This when the item is out of service. type of maintenance is conducted


Planned Maintenance

t t



Preventive Maintenance

Corrective Maintenance

Running Maintenance

Shutdown Maintenance


Breakdown Maintenance

Emergency Maintenance

Fig. 3 Types of Maintenance (ii) Corrective maintenance. This type of maintenance is conducted to restore the item to its original working condition. In this case minor repairs are carried out between inspections.

This type of maintenance is carried out after the failure. Emergency Maintenance This type of maintenance is carried out when the maintenance work is caused by unforeseen breakdown of the component of a machine part. It may be noted here that this type of maintenance is conducted only in exceptional cases. When the planned maintenance system is followed, then there would not be the necessity for emergency maintenance. Predictive Maintenance: Predictive maintenance makes use of human senses and other sensitive Instruments like- (i) Audio-gauges (ii) Vibration Analyzers and (iii) Amplitude meters. The use of these instruments predict the breakdown before it actually occurs. It helps to take corrective measures before hand to avoid breakdown. In predictive maintenance strategy the sensor fitted to a machine monitor process parameter and indicate real time status of system functioning. Cost is a significant limitation of this strategy. Instrumentation for predictive maintenance can be costly; On the other hand preveetive maintenance is done to reduce the incidences of breakdown and does not aim at totally preventing a breakdown. Following are the essential requirement for Maintenance cost control. I. Good supervision and administration of maintenance department. 2. Detailed, clear and correct instructions should be given to maintain crew and operators.

Winter 2009


Operators should be trained and skilled. A good lubrication programme should be worked out. Mobile service van should be used. Well-equipped repair shops should be arranged. Predictive maintenance strategies should be used to minimize repair cost. Q. 4. (a) State any four objectives of inventory management. Why is selective inventory management used ? What are the factors affecting the types of inventory problems ? Briefly state them. (2+2+4) (b) Briefly describe continuous and periodic review inventory control system. Derive the classical EOQ formula. (3+3) (c) State the main elements and working of an MRP system. Why is it used? (4+2) Solution. (a) Objectives of inventory Management. 1. To ensure that materials cost is brought down to the minimum. 2. To ensure good quality of the product at the appropriate price. 3. To find out new sources of supply and develop healthy and cordial relations with suppliers. 4. To ensure constant flow of material for production. 5. Proper and adequate control of inventories. Selective inventory Management. The analysis is based on a universal Pareto's Law. This law explains that a large number of variety of items are stocked by various organisaitons. These may vary from 10,000 to 1,00,000 different types of items. It is very difficult to use scientific principle to control inventory. Depending upon the value and usage frequency, one has to divide an appropriate type of inventory policy. A-B-C analysis is primarily meant for relative selective inventory control where maximum care can be given to components which involves more money. A fair attention is given to medium value items whereas the attention for low value can be reduced to routine procedure only. This policy is quite popular as it can also be applied in many other aspects of materials management, such as purchase, sales, inspection inventory control, store keeping etc. Factors affecting the types of inventory problems: Refer to Q.4. (b) of Winter-2007. (b) Continuous and periodic review inventory control systems. (i) Continuous review model is one in which production performance is checked and reviewed without any interval.

3. 4. 5. 6. 7.




(ii) Periodic review model is one in which inventory (raw material

etc.) and stock position is checked and reviewed after a specified break may be monthly or bi-monthly.
(iii) The lead time is nil or zero and quantity is fixed. (iv)

The order quantity in case of periodic model is fixed but the time interval between different orders vary. Demand in case of continuous model fluctuates. In periodic model, efforts are made to absorb the fluctuations in demand.
(i) The total ordering cost per unit time is equal to the fixed cost


Classical EOQ formula. per order (C), times the number of order placed per unit of time. The number of orders placed per unit time are equal to the demand per unit time divided by the order quantity i.e., DIQ Ordering cost per un{time


(ii) The holding cost per unit time is equal to the holding cost per unit time (CI1) times the average inventory level (Q/2). The average inventory is Qmin + Qmax Q 2 2

Holding cost per unit time


c, (;)

(iii) The purchase cost i.e., the variable item cost per unit time is

equal to cost per unit (P) times the number purchased or used per unit time. Purchase cost Thus,


TC = Co

[~]+ [;]+


Fig. 4 illustrates the ordering cost, the holding cost and total stocking cost. From the graph it is clear that ordering cost per unit time decreases with increase in Q, because fewer orders are placed per unit time and the fixed ordering cost are spread over more time. Once fixed cost are spreaded over time, it automatically reduced due to full or optimal utilization.

inter 2009


The holding cost increases linearly with Q because the average ventory, Q/2, increases proportionally with Q and holding cost per unit assumed to be constant.







(Economic order quantity)


Fig. 4 Graph showing variation of holdings, ordering and total stocking costs.

EOQ Equation: We have considered about total cost (TC) per unit me. (Total annual inventory cost is the sum of ordering and carrying st)

Differentiating total cost (TC) with respect to Q, we get

di2 = coDxlQ2)+1xl+0 =-7+2
For minimum value of Q, Equating d(TC) = 0 dQ we get,


( 1





210 Thus economic



order quantity in number of units (EOQ) is EOQ (Qo)






Cost of an order. Cost of holding material or stocks in per unit of per unit time.



D = Demand per unit time. (c) Main elements of an MRP. I. Globalization 3. Just-in-time 5. Responsibility. The main purpose of materials management efficient handling of materials at all stages. is lost reduction and inventories 2. Reduced time to market 4. Large variety/shorter life cycles

Working of an MRP.
The MRP system is responsible for scheduling the production of all items beneath the end item level. It recommends release of work orders and purchase orders and issues like rescheduling notices ifrequired. MRP process consists of four basic steps: I. Exploding the bill of material 2. Netting process of subtracting on hand quantities and scheduled receipts from gross requirements to produce net requirements. 3. Lot sizing and 4. Time phasing requirements. structure The process of product is performed again and again, moving down the until all the items are scheduled.


terms related to MRP

I. Bill of material (ROM) : Fi Ie is revised every time there is a change in product design or specification. It is the means by which the master production schedule act as the controller of the system. 2. Bucket: It is the main unit of measurement used in MRP system. 3. Dependent demand: It is the demand of raw materials and many other inputs that are needed for the end item (final and finished product). 4. Inventory status file: It contains material in hand or on order, lot sizes and safety stocks. 5. Gross requirements: Total requirement of particular material without taking into account its availability in inventory or scheduled receipts.

Winter 2009 Why MRP is used? 1. It is used for the improvement ,., Lead time is reduced. '3. Reduction of work-in-progress 4. Increase in productivity. 5. Annual inventory is eliminated. of the customer service.


6. Reduction in finished good inventory, raw material and components. Group B

Q. 5. (0) Financial statements reflect the financial performance of a company. State the basic structure of balance-sheet and profitand-loss statement indicating clearly their items. (4+4) (b) Define current (c) Samples follows: asset and current and liability. income statement (2+2) are as

of a balance-sheet Balance-sheet

Current Anel5 Cash & Securities Accounts receivable Inventory Prepaid expenses Fixed Assets Net plant & equipment

Rs. 40,000 1,00,000 3,00,000 10,000 5,50,000

Current Liabilities Accounts payable Notes payable Accrued expenses Current long-term debt Long-term debt Owner's Equity Preferred stock Common stock Retained earnings

Rs. 80,000 20,000 10,000 50,000 3,00,000

1,40,000 3,00,000 1,00,000 1,000,000 Rs. 1,000,000

Total Assets

1,000,000 Income

Total liabilities to owner's equity Statement

Sales Direct material. Direct labour Factory overhead Cost of goods sold Gross profit Selling expenses

4,00,000 2,00,000 1,00,000 7,00,000 50,000

-7,00,000 3,00,000

212 Administrative expenses Total selling/administrative

Engineering 1,00,000 expenses 1,50,000 Income Statement

Management 1,50,000 Rs. 1,50,000 50,000 1,00,000

Operating income Interest expenses Net income before taxes Compute and throughput interpret them. Solution. current ratio, acid test ratio, time (assuming 360 operating

inventory turnover days per year) and

(8) (a) Refer to 0.5 (b) of Winter-2006.
also refer to 0.8. (iv)

(b) Refer to 0.5 (a)(i) & (iii) of Winter-2005, of Summer-2009.
(C)(l) Current



Current assets Current liability 4,50,000 1,60 ,000 = 2·813


Quick asset (ii) Acid test ratio

(Current asset excluding Inventory)

Current liability (Excluding current long-term debt.)

1,50,000 I, 10,000 Sales (iii) Inventory turnover ratio Inventory 10,00000 300000





Q. 6. (a) Describe
State a few important

the main elements of a TQM programme. objectives of TQM. (6+4) of control charting? Why how is quality improvement is a

(b) What are the advantages acceptance sampling used ? State possibility through TQM.




Solution. (a) The Main elements of a TQM programme These are the elements of TQM programme: I. Quality vision and goals (e.g., a defect free or completely bench marked product) 2. Strong customer focus (in partnership with suppliers) 3. Thorough knowledge of company processes and customer's needs. 4. Continuous improvement (via team approach, using empowered employees, etc.). 5. Performance measures to track results. 6. Quality monitoring and quality control at each and every stages. Objectives of TQM The main objectives of total quality management are the following: I. To evaluate design, size, material, workmanship, finish appearance, chemical composition and other important relevant properties which are acceptable to the consumer. 2. To sort out good pieces from the defective ones in a lot to ensure the quality of the final product which does not in any way deteriorate. 3. To stop the manufacturing of the defective pieces or components and to dispose off the bad-finished products through remark, salvage or scrap. 4. To determine the various methods and processes of production and suggest improvements to achieve good quality. (b) Advantages of control charting: 2005. Refer to Q.6. (c) of Winter-

Control charts are graphs that visually show if a sample is within statistical control limits. They have two basic purposes; to establish the control limits for a process and then to monitor the process to indicate when it is out of control. Advantages of control charts
(i) To obtain information to be used in determining whether a

given process can meet specifications. (ii) To secure information to be used in establishing changing production inspection or acceptance procedure. (iii) To provide information on the basis of which current decision can be taken during production. (iv) To provide a basis for current decision on , acceptance or rejection of manufactured or purchased products.




Acceptance sampling: Achieving Quatity-Tuguchi's

Refer to Q.6 (d) of Winter-2005.

Quality improvement through TQM Seven Points

Achieving superior performance calls for an attitude that must continuously search for incremental improvement. The Japanese call this Kaizen. This trait is different from the commonly applied method of relying only on new technologies and innovations as the route to quality improvement. The following seven points highlight the distinguishing features of Taguchi's approach (as different from the traditional approach) which is aimed at assuring quality: I. Taguchi defined the term 'quality' as the performance which appears at first to be him, the quality ofa manufactured product by that product to society from the time deviation from on-target a paradox. According to is the total loss generated it is shipped. (CQI)

2. In a competitive economy, Continuous Quality Improvement and cost reduction are necessary for staying in business.

3. A CQI programme includes continuous reduction in the variation of product performance characteristic in their target values. 4. Customer's loss attributable to product performance variation is often proportional to the square of the deviation of the performance characteristic from its target value. 5. The final quality and cost (R and D, manufacturing, and operating) of a manufactured product depend primarily on the engineering design of the product and its manufacturing process. 6. Variation in product (or process) performance can be reduced by exploiting the non-linear effects of the product (or process) parameters on the performance characteristics. 7. Statistically planned experiments can efficiently and reliably identify the settings of product and process parameters that reduce performance variation. One achieves- Kaizen by formally integrating design and R&D efforts with actual production in order to get the process right and continually improve it. A large number of design, process, and environmental factors are usually involved in such a task. Consequently, there is no effective way of doing Kaizen except by the pervasive use of scientific methods. Statistically designed experiments, in particular, can generate

Winter 2009


ghly valuable insights about the behaviour of a process or product, ormally using only a surprisingly small ~umber of experiments. The onsequence of superior performance is the superior fit of the anufacturing process or product to its user requirements. Subsequently is reduces the product's lifetime cost of use. Q. 7. (a) State the important criteria for economic evaluation a project. (6) (b) Identify (c) A project Activity A B C D E F G H I J K L M N (it) Find the critical the activities of a product development characteristics : project (4) has the following

Preceding Activity None A A B D D D B C,E G F,I, J K H,G M

Expected Completion Time, weeks 5 2 6 12 10 9 5 9 2 3 9 7 8 (5) completion time. (3)

(I) Draw a PERT network

for the project.

path and the project

(iii) Will the critical path change if activity G takes 10 weeks stead of 5 weeks? If so, what will be the new critical path ?(2)

Solution. (a) The important criteria for economic evaluation. of a roject is to select the maximum profit/benefits. The profit maximization the main goal of private organization while providing goods/services as er specifications to their customers. But. the same criterion can not be sed while evaluating public alternatives. Examples of some public ternatives are, constructing bridges, roads, dams, establishing public ilities, etc.

The main objectives of any public alternative is to provide goods/ ervices to the public at the minimal cost. In this process, one should see hether the sum of the benefits of the public activity is at least equal to




its construction. If it is yes, then the public activity can be undertaken for implementation. Otherwise, it can be dropped. This is nothing but taking a decision based on Benefit cost (Be) ratio which is shown as : Equivalent benefits Benefit cost ratio = Equivalent costs The benefits may occur at different time periods of the public activity. For the purpose of comparison, these are to be converted into a common time base (present worth or future worth or annual equivalent), Similarly, the costs consists of initial investment and yearly operation and maintenance cost, These are to be converted to a common time base as done in the equivalent benefits. Now, the ratio between the equivalent benefits and equivalent costs is known as "Benefit cost ratio." If this ratio is at least one, the public activity is justified, otherwise it is not justified.
(b) Refer to Q.7. (a) of Summer-2007

Fig. 4 Network Diagram

(ii) The various paths and their lengths are as follows :

(a) 1-2-5-8-10-11 (b) 1-2-3-7-9-11 1-2-,3-4-6-7-9-11 (d) 1-2-3-4-6-8-10-11
(c) (e)

Length (weeks)
24 31 39 38 40 42

1-2-3-4-8-10-11 1-2-3-4-5-8-10-11


Winter 2009


Thus, the critical path is 1-2-3-4-5-8-10-11 and the duration of the project is 42 weeks. Ans.
(iii) If activity G(4-6) takes 10 weeks instead of 5, the lengths of the paths (c) and (d) would become 44 and 43 weeks respectively. In that case path 1-2-3-4-6-7-9-11 would become critical path.

(New critical path-t-2-3-4-6-7-9-11)


Q. 8. (a) State a few important activities of a market research cell of an organization. Cite two examples of 'product brief'. For market research, a number of tools and techniques may be used. List any six of them. (5 + 2 + 3)
(b) Define DSS. State the basic elements of an ERP system. Why has it assumed importance in today's context? (3 + 4 + 3)


(a) Refer to Q.6 (a) of Winter-2006.

For market research, tools and techniques used are as follow: (i) Brand switching: A market researcher analyses house hold purchases of 12 key brands of a frequently purchased consumer product and concluded that advertising appears effective in increasing the volume purchased by loyal buyers but less effective in winning new buyers. Price have a stronger impact on response than does advertising_. Of course advertising have same cummulative effect that leads to loyalty. (ii) Surroundings effect: An advertisement can be more effective when its message is congruent (suitable) with their surroundings. A "happy" commercial placed within an upbeat television show is more likely to be effective than a downbeat commercial in same place. Moreover. people frequently believe a TV or radio advertisement and become more positive to them associated toward the brand provided advertisement as shown within a programme they generally watch. (iii) Positive versus negative messages: Research reports on marketing reveal that consumers may sometimes respond more to negative messages than to positive messages. For instance a credit card concern (company) contacted customers who did not use the card for two and half months. To one group of people i.e. non-users of card, the company sent a message explaining the benefits of using the card. To another group, it sent a message explaining the losses they could suffer by not using the card. The impact of lossoriented message was found much stronger.




(iv) Using sales promotion tools: These are samples,

coupons, cash refund offers, prices off, premiums, prizes, patronage, rewards, free trails, warranties, tie-in-promotions, cross-promotions, point of purchase displays and demonstrations, display allowances, free cards, trade show and conventions, contests for sales representatives. A product brief is document designed to focus on specific benefits and attributes of technical products. Product brief can be presented in a form or in the form of brochure. Project brief form captures a summary of the project including a product and product description, objectives, resource requirements, planned goals, and a financial justification. This form initially serves as a proposal for the project, then serves to authorize the project, later provides boundary serves conditions for managing the project and communicating updates, and finally becomes a project management and quality record for indicating successful completion of key project and process milestones.

(b) Decision support system (D88): A decision support system is an interactive system that provides the user with easy access to decision models and data in order to support semi-structured and unstructured decision making tasks. The decision maker sits at a terminal and directs the operation of this system. The user of the system has an easy access to mode!" ~l1d data.
Structured decisions are repetitive and routine. A definite procedure can be worked out so that they do not have to be treated as a new each time. Unstructured decisions are novel and consequential. exclusive and complex and deserve special treatment. There are

Basic elements of an ERP system:

Refer to Q.8. (c) of Winter

Importance in toduy 's context: ERP have great importance in todays context. Global companies and those that share data regularly benefit the most from ERP. Nation-specific laws, currencies and business practices embedded in the ERP system enable it to translate sales transactions smoothly between business units in different countries. For example, a company in Taiwan and its customer in Brazil. ERP simplifies customer interaction and speeds production with its configure to order capabilities. Customer ordering on line or through sales representative can quickly choose from a variety for which a bill of material is automatically generated and sent to production.

Winter 2009 Group C Q. 9. Answer the following in brief:



State two essential features of scientific management. between 'feedforward' and 'feedback' control.

(ii) State the difference (iii) Mention any four


related to the classical EOQ and that


The basis of ABC analysis for inventory is of V-E-D analysis is , R-control chart is used to control is used to control ---

and X-control chart

(vi) State an example of all-units multiple price discount. (vii) What is ISO 9000 standard? (viii) Describe briefly the concept of e-business. (ix) What is a 'matrix'

organization tion where it is recommended.

? State one industrial


(x) What are the five objectives of an effective MIS ? Solution.
(I) Refer to Q. 1. (c) of Winter-200S. (il) Feed forward control: It is a type of control that concentrate attention on the prevention of anticipated problems since it takes place in advance of the actual work activity.

Feed back control: The time tag in the management control process needs that control must be directed towards future by using feed back from the output. (iii) Assumptions related to the classical EOQ
I. The demand (D per unit time) for item is relatively constant overtime. 2. The cost of item (P per unit price) is independent ordered. 3. The fixed cost for executing an order is independent ordered. of quantity of the quantity

4. The holding cost or carrying cost (Ch) for inventories is independent of the inventory level.




5. All demands must be satisfied when requested, i.e., there is no shortages. 6. All items ordered are delivered at the same time.
(iv) The basis of ABC analysis for inventory is CIE (control by

importance and exception and that of V-E-D analysis is Classified according to their use consumption, value etc. (v) R-control chart is used to control Variable and is used to control Attributes.

x -control chart

(vi) Examples are: Incremental discount policies, economic batch quantity discount-pricing schedule, freight-discount, EOQ, warranty.
(vii) ISO 9000: ISO, the International organization for standardisation.

is an international body. It consists of representatives from more than 90 countries. Each country is represented by its one national standard body. BIS is the Indian representative at ISO. ISO and IEC (International electrotechnical commission) operate as a single system. The objective of ISO and IEC is to facilitate the development of international standard in order to reduce the barriers effect of different national standards on international trade of goods and services.
(viii) Refer to Q.8. (b) of Winter-2008.

(ix) Matrix organisation: Refer to Q. 2. (a) of Winter-200S. This type of organization occurs frequently in construction ti.e. building a bridge) in aerospace (e.g, designing and launching a weather satellite) and management consulting firms. (x) Objectives of an effective MIS: Integrated, structured complex of people, machines and procedures for supplying relevant data (information) from both external and internal sources to help managers in planning, staffing, communicating, controlling and decision making. Objectives of MIS I. Getting information to the decision maker in the proper form at the right time at a justifiable cost. 2. Time saving to middle, top or even low level scalar chain. 3. MIS's major thrust is to the reduce cost. 4. MIS avoid duplication and overlapping in data gathering, storage and dissemination. S. It is directed towards oriental management.


Answer FIVE questions. taking ANY TWO from Group A. ANY TWO from Group B and ALL from Group C Figures in the bracket indicate full marks Group A Q.l (a) Distinguish between management and administration. How far is this distinction justified in your opinion? (10) (b) 'Sound organisation structure is an essential prerequisite of efficient management'. L 'scuss this statement and point out various principles which shc uld be followed in developing an organization. (10) Solution. (a) Distinguish between administration and management.
S.No. Administration
I. It is concerned about the determination of objectives and major policies of an organisation. It is a determinative function. It takes major decisions of an enterprise as a whole. It is a top level activity. It consists of owners who invest capital in and receive profits from an enterprise. It is popular with government, military, educational and religious organisations. Its decisions are influenced by public opinion, government policies, social and religious factors. Planning and organizing functions are involved in it. It needs administrative rather than technical abilities. Administration handles the business aspects such as finance. "

It puts into action the policies and plans laid down by the administration. It is an executive function.

2. 3. 4. 5.

It takes decisions within the frame work set by the administration. It is a middle level activity. It is a group of managerial personnel who use their specialized knowledge to fulfill the objectives of an enterprise. It is used in business enterprise.



Its decisions are influenced by the values, opinions, and beliefs of the mangers. Motivating and controlling functions are involved in it. It requires technical activities. Management handles the employees

8. 9. 10.

and other major activities.





Administration can be defined as the universal process of organizing people and resources efficiently so as to direct activities toward common goals and objectives. In some organisational analyses, management is viewed as a subset of administration, specially associated with the technical and mundane elements within an organizations operation. It stands distinct from executive or strategic work.

(b) Sound organisation structure is an pre-requisite of efficient management: Through sound organisation structure any enterprise can
achieve its objectives in a efficient way. A sound organisational structure effects the target achieving and also proper working environment in the »rganisation. The effects of sound organisation structure are as follows: (i) Clear-cut authority relationships. of communication and coordination. centres. (ii) By providing (iii) Determining (iv) Balancing patterns

location of decision-making

all types of activities.

(v) Stimulating creative thinking <U1d initiative among organisational members by providing well defined pattern of authority. (vi) Meeting challenges and creating opportunities improvement. for growth. (vii) Making use of technological to Q. 2 (c), Summer 2005.

Various principles followed in developing an organisation: Refer Q.2 (a) Define management system (MS). Discuss its advantages and disadvantages briefly. (10) (b) Brief the contribution of F.W. Taylor towards scientific management. (4) (c) Differentiate between mission, goal and objective. (6) Solution. (a) Management is the primary force within the
organization which drives the firms towards the well determined and selected goals. Persons working in an organization need some system to direct to activities of the organization so that the resources can be effectively utilized with optimization. A system is interconnected and interrelated issue designed to achieve predetermined (thought well before) objectives. Disturbance of any type or of any nature can break the system and delay the achievement of objectives. System concepts and techniques are quite old. Credit goes to scientific management picneers Taylor and Fayol for the present day techniques of systems. Application of work its simplification is the

Summer 2009


objective of a system. The basic responsibility of system's function is reducing costs by way of simplifying performance. The glaring example of this is a software system in computer. So we can define the system as an interconnected functionally related components designed to achieve predetermined aims and objectives. This definition of system has several significant points as detailed below: (i) There must be an established orderly and coherent arrangement of components and activities. (sequence wise like I, 2, 3, 4... and so on). (ii) There must be coherent rather than a random collection of elements. (iii) Collection of elements leads to assemblage when acknowledged with relatedness. (iv) The way in which these components interact must be clearly defined and explained. (v) Objective and aim is very essential in pursuance of which system is to be formed, because non-systematically arranged assemblage does not constitute system without any aim and objective. The explanation as given above is applicable to many systems such as production system, hospital system, penal system, Copernican system, nervous system as well as welfare system. If systems do not exist we would invert them because no work can be done properly without formation of a system. (b) Refer Q. I (a) Winter 2006. (c) Mission, goal and objective The word mission provides general term to describe the company's overall reason for existence. The mission is based on top management's knowledge of broad economic needs and the competitive resources of the firm. The mission statement is expressed in general, unquantifiableterms. The statement typically focuses on some aspect of the enterprise with which the firm would like its name associated. The mission statement of the Johnson and Johnson company is "We believe our first responsibility is to the doctors, nurses and patients, to mothers and all others who use our product and services". Goal is an end result and a stated in quantitative terms. These are the desired future results/conditions which an organisation strives to


Engineering Management

achieve. It can also be thought of as relatively long-run targets. As goals are derived from the organisations mission. An example of goal is "The eradication of tuberculosis as a health hazard by the end of 1995". Objectives are the ends towards which the activities of the enterprise are aimed. Objective decide what to do. These are determined by the top management and fixed in nature. These are derived from goals and are ordinarily short-run, specific milestones towards goals. An example of objective is "increasing market share by 25% in the next two years, "increasing foreign sales revenues by 30% in the next year", or "reducing plant downtime by 50% in the next three years." Q.3 (a) What are some selection processes/ techniques that a manufacturing organisation should adopt? Discuss. (10)
(b) Define and differentiate



lockout and picketing.

disputes, (10)

Selection is a long process, commencing from the preliminary interview of the applicants and ending with the contract of employment. Fig. I shows a generalised selection process. Selection is influenced by several factors such as supply and demand of specific skills in the labour market, unemployment rate, legal and political considerations, company's image and cost of hiring. The company's policy, human resource planning and cost of hiring constitute the internal environmental and the remaining form the external environment of the selection process. In recent years, two new methods of selection have been evolved by HR specialists. These are:
(i) participative selection, (ii) employee leasing.

Participative selection means the subordinates participate in the selection of their co-workers and supervisors. The idea is that such participation will improve quality, increase support for the selected supervisor and co-workers, and improve employee morale. In employee leasing, the client company leases employees from a third party, not on temporary basis, but rather on leased or full-time, long term help. An interesting feature of this method is that the client company need not perform such personnel activities as hiring, compensating a record keeping. Employees already working elsewhere are leased. They are not directly emoloyed by the company where they are working.

Summer 2009


External Environment

Internal Environment

Fig. 1 Selection process

(b) Industrial dispute: Industrial dispute is a type which occurs when two or more parties are in opposition. dispute is a disagreement between two or more members the organisation. The conflict may arise due to following (i) sharing of scare resource or work activities, (ii) different status, goals, values or perceptions,

of behaviour Organisation or groups of reasons:

182 (iv) due to psychological reasons,

Engineering (iii) disagreement over facts, methods etc.


due to social and economical reasons. Picketing: In order to call attention of the workers that a strike is going on, and disallow other from entering the plant or doing business in the undertaking. The workers or their sympathizers place themselves at the entrance of the factory causing obstruction to people who want to go in or comeout. These workers (or peoples) are termed 'pickets' and the method as a whole is called picketing. Lockout: It is just opposite procedure of strike and consists in the closing of factory by the employer because of a dispute with the employees and is the refusal of entry to employees or workers. Q.4 (a) What are Material Requirement Planning and Manufacturing Resources Planning? (8)

(b) Derive Q = J2U.PIC.P., where Q is the economic lot size; C, the cost of carrying inventory in percentage per period; P, the procurement cost; and U, the total quantity used per period. (6)

uses two pieces per day of a rod, 6 mm in diameter and 150 mm long, in one of their manufacturing processes. The rod costs Rs.3 each and the total expenses involved in purchasing and receiving them are Rs.50 per order. The annual inventory carrying cost per item is Re.1. The procurement period is three days and the minimum stock kept is 8 pieces. Find out the (i) standard ordering quantity, (il) reorder point, and (iil) maximum s~c~ (~ Solution. (a) Material requirement planning: M.R.P. is defined as a computational technique that transforms the master schedule for finished product into detailed schedule for raw material and components required for the finished product. The success of materials management lies in the proper planning of materials requirement and its timely provision. At the start of the manufacturing process it is imperative to see that the required material is already in hand. In the event of nonavailability of the material in time, the manufacturing process will be severely hampered resulting in substantial loss of money and time. Hence, it becomes essential that the materials management department should prepare the estimate of materials requirement well in advance and planning is also done which will ensure that the right material is available at right time.

(c) A factory

ummer 2009


M.R.P. clearly signifies as to when each of these items must be rdered and delivered with a view to meet that target of master schedule f the finished product. Terms used in MRP

(i) Bills of materials file: The Bill of Materials (BOM) Bill of materials is the list of materials and their quantities required to produce he end item. It is also called product structure file. Indent placed is overed in BOM. BOM contains the list of finished products, material eeded for each finished product in units, assembly and subssemblies, parts and material. BOM file is revised every time there is a hange in product design or specification. It is the means by which the master production schedule acts as the controller of the system. For ach end item the bill of materials lists all of the materials required I:, roduce that end item. This list also includes items required for roduction that do not become part of end item such as solder for welding, grease for lubrication and dies. (ii) Bucket: It is the main unit of measurement used in MRP ystem. (iii) CRP (Capacity Requirement Planning): CRP means apacity oflabour and machine when pressed for production. So CRP is he process of reconciling (matching) the master production schedule o the working capacity of labour and machine in production epartments over the planning horizon. Horizon means number of eriod. (iv) Dependent demand: It is the demand of raw materials and many other inputs that are needed for the end item (final or finished roduct).

(v) End item: It is often called a product. Service part or any ther output that has a demand from customers and distributors or ther department. (vi) Gross requirements: Total requirement of particular material ithout taking into account its availability in inventory or scheduled eceipts. (vii) Independent demand: This demand is free and unrestricted. f course it is concerned with the material involved in end item but it as nothing to do with the demand of other materials. So it is the emand for a material that is independent of the demands fer other materials.


Engineering Management

(viii) Inventory status file: It contains material on hand or on order, lot sizes and safety stock levels. (ix) Lumpy demand: Irregular demand which appears from period-to-period. (x) Master production schedule (MPS): It is the controlling mechanism of the material requirement planning system. Master production specifies what is to be made and when. In it the needs for each end items are spelled out in a systematic manner with the help of scheduling period. Schedule specifies resource and inventory factors for each product, once MPS is planned in reality. After MPS is created it must be broken down into a schedule that can be implemented. The aggregate plan contains the aggregate levels of resources required and inventory that will be available on hand. The master production schedule specifies resource and inventory factors for each product. The factors must coincide with the aggregate levels. Aggregate plan represents production across a family or product line that use same resources. (xi) Net requirement: It is equal to gross requirement minus material available. (xii) On-hand inventory: Amount/quantity of material actually present in inventory. (xiii) Planned order receipt: It is the quantity of material to be received in any time period of the planning horizon. (xiv) Planned order release: Material ordered by company in each time period of the planning horizon. (xv) Planning horizon: The number of period included in the MPS (Master Production Schedule), MRP (Material .Requirement Planning) and other production planning. (xvi) Safety stock: It means buffer stock. In other words inventory kept aside to be used in emergency shortages. (xvii) Service parts: It is the materials demanded as end item when ordered by service centres for repairing some end items. (xviii) Lead time: It is the time needed for completing the job from initial stage to final stage. Manufacturing resource planning: Inventory control technique is the backbone of material requirement planning. MRP-II often referred to a manufacturing resource planning overcome the setback of MRP-l. It is in existence right from the year 1960. It is a science based on art of ensuring just enough inventory or stock held by

Summer 2009


an organization to economically meet both its internal and external . demand commitments. The different types of stock and the purposes .for which they are held are: (l) Raw material stocks 35% (2) Work in progress or stocks in process about 38% and (3) finished goods about 25%. (b) The economic lot size is obtained by the quantity whose procurement cost is equal to inventory carrying cost. Given data require some corrections which are as follow, Derive where,




Q = the economic lot size,
U = quantity used per period,

procurement cost per order, carrying cost percentage per period Po = unit price of an inventory item Holding cost (Ch) per unit per period of time = C· Po Now, Procurement cost/year = (No. of orders placed in a year) x (cost per order)


UxP Q Inventory carrying cost/year = (Average value of inventory in a year) x (Annual inventory carrying cost per item)

Total cost




QxCPo 2

This total cost will be minimum, when UxP


QxC-Po 2

Q2 -

(c) Given data:



Demand rate (R) = 2 x 36S/year = 730 units/year; Each rod cost (C) = Rs. 3/each; Total expenses or Procurement cost (Cp) Carrying cost (Ch) = Rs. I/unitlorder Procurement period = 3 days; Minimum safety stock = 8 units. (i) Standard ordering quantity,


Rs. SO/order;


~ t




2 x SOx 730

= 270·19 units/order == 271 units/order



Lead time demand

procurement period =3x2

Avg. daily demand

6 units Reorder level = Safety stock + Lead time demand = 8 + 6 = 14 units Maximum inventory = (Economic order quantity) + (safety stock) = 271 + 8 = 279 units Group B Q.5 (a) Differentiate suitable example. between debentures and shares.

Ans. (6)

(b) What do you understand

by trial balance. Explain with a (6)

(c) Calculate the selling price of one fountain pen from the data given below: (8)

No. of fountain pens produced Labour Material Factory cost cost overheads

135 Rs. 200 Rs.160 35% of prime cost

Summer 2009



and sales overheads

35% of factory cost and

Profit 10% of the total cost Solution. (a) Difference between debentures and shares are described as follows in a summarised manner: (;) A debenture holder is a creditor of the company whereas a shareholder is a proprietor of the company's capital. (ii) A debenture holder receives interest against the value of debenture whether a company earns profit or not whereas a shareholder gets dividend only when a company earns profit. (iii) Debenture is a debt to a company and must be repaid but this is possible only in case of redeemable preference shares. (iv) An unlimited company cannot issue debentures but it can have share capital. (v) A debenture holder does not have a right to vote whereas a shareholder can vote. (b) Trial balance: Trial balance is simply a list of the account names and the balances in each account as of a given moment of time, with debit balances in one column and credit balances in another column. A trial balance is a statement of ledger.A trial balance sheet is shown in table below. Table: Trial balance of ABC company
Account Debit Cash Account receivable Inventory Prepaid expenses Equipment, at cost Notes payable Account payable Paid in capital Sales revenue Cost of sales Wage expenses Utilities expenses Total 5,450 0 550 750 7,200 2,200 4,000 5,000 12,200 6,000 3,000 450 Rs. 23,400 Rs. 23,400 Balance Credit




The preparatior. purposes:

of a trial balances

servers two principal

(i) It shows whether the equality of debits and credits have been maintained and (ii) It provides a convenient summary transcript of the ledger records as a basis for making the adjusting and closing entries that precede the preparation of the period's financial statements. (c) No. of fountain pens produced = 135 units.

Labour cost Material cost Prime cost


Rs. 200/Rs. 160/-


= =

labour cost + material cost

Rs. (200 + 160)
Rs. 360/=

Factory overheads

35% of prime cost 35 100 x Rs. 360 = Rs. 126/-

Factory cost


Rs. (360 + 126)


Rs. 486/-

Administration and sales overheads

35% of factory cost 35 -x Rs. 486 100


Rs. 170·lJ-

Total cost

= = =

Factory cost + Administrative and sales overheads Rs. (486 + 170·1) Rs. 656·1/10% of total cost 10 100xRs.656·1



Rs. 65·61/-

Selling price = Total cost + profit

Rs. (656·1 + 65·61)


Rs. 721·71/-

Selling price of one fountain pen is 721·71 = Rs. 5-35/135 Ans.

Summer 2009


Q.6 (0) What is quality circle (QC)? What are its merits and demerits? (8)
(b) What is inspection? What is the basic difference between inspection and quality control? (6) (c) What do you mean by economic batch quantity? its formula.

Derive (6)

Solution. (0) Refer Q. 7 (c), Summer 2008. Merits of quality circle:
(i) Through the forms of Quality Circles, the age old problem of

industries putting several kinds of hurdles in work get readily settled with the help of employees of the industry. (ii) A growing organisation can always undertake difficult and challenging assignments for its growth and profit with the active help of the capable work force. (iii) With more and more experience gained. by the employees, they undertake more challenging projects on cost reduction, material handling, quality improvement, preventing wastage, improving delivery schedule, improving customer service, improving inspection and test methods, preventing accidents, improving design and process etc. (iv) Reduction in costs. (v) Increase in productivity.
(vi) Improved quality, productivity, safety and loss reduction (vii) Better communication. (viii) Better house keeping. (ix) Increased team work. (x) Smooth team work. (xi) Better mutual trust. (xii) Greater sense of belongingness. (xiii) Increased safety. (xiv) Better human relations. (xv) Use of wisdom and creativity. (xvi) Improvements in the life-style of employes.

Demerits of quality circle (i) Quality circle is not feasible in small industries because it needs 8-10 employees working at some area to form a quality circle.




(ii) It is a lengthy process because it require several meetings (i.e., 1st, 2nd, 3rd and onwards).

Inspection is the art of applying test, preferably by the aid of measuring appliances, to observe whether a given item of products is within the specified limit of variability. Difference between inspection and quality control: Quality control is concerned with the making things right rather than detecting and rejecting those made wrong. Quality of a product itself comprises several engineering and manufacturing characteristics which go to make the product to meet the performance expectations of the designer and the customers. These characteristics are: dimensions, properties, appearance, performance, reliability, maintainability, taste, sound etc. Inspection is the process of sorting good from bad, and reject the bad. Inspection is the art of comparing materials, products or performances with established standards. The objectives of the inspection are: to detect errors in manufacturing system, to protect the customer from receiving a product that is below the standard quality, and to compile informations regarding the conformance of the product with specifications for the use of engineering, production, purchasing, quality control and other divisions.
(c) Let, k
= = = = =

(b) Inspection:

total products manufactured per year no. of lots fixed costs or setup costs/lot variable production cost/unit economic batch size




I = Interest on investment in average inventory, expressed as a percent variable production cost C
= =

Inventory carrying cost/unit consumption or demand rate





Now the economic lot size is obtained by the quantity whose fixed cost is equal to the variable cost per year. Fixed cost per year = (No. of lots produced per year) x (setup cost per year) -xP Q

Summer 2009 Now variable

191 production cost/year in a year x Inventory carrying cost per product

Average value of inventory

2 k


If no production takes place during use and replacement of the inventory are instantaneous, the average inventory would be Q12. But here, since the production rate is greater than the demand rate, the average inventory is reduced by the amount ;, x

Total cost


dxP --+-


Q( 2

1-- d) C


Total cost will be minimum


dxP Q

QXC(k-d) -2- --k-


C (k-d)


2Pdk C (k-d) 2Pd


use of total floats and


Q.7 (a) Discuss floats.

the managerial

free (6)

(b) In which situation PERT technique is more suitable than CPM? What is the technique more commonly used in India and why? Discuss. (8)




(c) What do you mean by ISO standards? Name three standards for different purposes. (6)

Solution. (a) Total float is the most important type of float as it is concerned with overall project duration. The value of total float for any activity can help in making following conclusions.

I Total float value I





Resources are not adequate and the activity may not finish in time. Induct extra resources or critical path needs crashing to compensate the losses. Resources are just sufficient to complete the activity or say the activity is complete on time

t t

Resources are extra. The activity can be delayed if necessary

Free float is concerned with commencement of subsequent activity. It is very valuable in rescheduling activities with minimum disruption of earlier plans. The knowledge of floats helps the management in determining the flexibility of the schedule and the extent to which the resources will be utilised on different activities. This also helps in diverting the resources from the non-critical activities to the critical activities which can result in shortening the project period and in the saving of costs.
(b) To support PERT (Programme evaluation and review technique)

compared to CPM (critical path method) following statements are furnished: (i) PERT is designed for scheduling complex projects tt. interrelated tasks.


In PERT the duration is not fixed but is a random variable whereas in case of CPM technique the duration of an activity is deterministic.

Summer 2009


PERT system of management and control has three time estimates such as optimistic time (to); most likely time (1m) and pessimistic time (9., to stands to estimate minimum time under ideal conditions, tm stands for actual time taken by an activity. Things go in a normal way only a few delays. tp stands for maximum possible time taken for completion of an activity and does not include major catastropies like labour unrest. The traditional single estimate of duration of any activity is replaced by 3 time estimates.

(iv) PERT is usually used where time required for completion of various activities is not known; and is also an important control device.

PERT is a probability model which assist the manager to schedule and coordinate in various activities in view of completing project on schedule time. Technique between PERT and CPM most commonly used in India.

Between PERT and CPM, the most commonly used method. in India is PERT. Reasons are given below:

It is important section of projectology developed by a Navy sponsored Research team in 1950.

(ii) It is designed for scheduling complex projects because labour unrest is quite common in India alongwith diversified breakdowns.

PERT is useful for non-repetitive and complex projects in which activity time estimates may vary over a range of possibilities. CPM is utilized best for repetitive and non-complex projects. Further more PERT is considered to be event- oriented whereas CPM is activity oriented.

(iv) In PERT we try to exercise logical discipline in planning and controlling projects, after the project is planned and its implemention put underway.

Once PERT is tailored properly can be used with advantages for responsibility accounting. It suggests area for increasing efficiency, reduction of costs and profit improvement.


Engineering Management Estimation of time for each activity takes care of bottleneck anticipated at the time of execution. This helps management to take corrective action before hand.
(c) ISO 9000 is a series of five international standards on quality

management and assurance. The series consists of ISO 9000, ISO 9001, ISO 9002, ISO 9003, and ISO 9004. ISO 9000 is a, road map for implementing ISO 9001, ISO 9002, or ISO 9003. These three quality standards can be thought of in terms of their differences in scope. The most oomprehensive, ISO 900 I, incorporates all twenty quality elements of the quality standard; ISO 9002 has eighteen of the elements; and ISO 9003 has the twelve basic elements. ISO 9001 is used by companies to certify their quality systems throughout the product-development cycle, from design to service. It includes the product-design element, which is becoming more critical to customers that rely on error-free products. ISO 9002 is used by companies for whom the focus is on production and installation. This quality standard may be used by a company whose products have already been marketed, tested, improved, and approved. Chances are the product quality is high. These companies focus their quality efforts on maintaining and improving existing quality systems, instead of developing quality systems for a .new product. ISO 9003 is for companies in which comprehensive quality systems may not be important or necessary; such as commodity suppliers. In these cases, final product inspection and testing would suffice. Q.8 Write short notes, on any four of the following: (5 x 4) (,) Management
(iii) ABC analysis (Iv) Liability (v) Learning

as a science and as an art. of good housekeeping.

(Ii) Necessity and advantages

and asset phenomenon and faCtors on which this is


Summer 20u'}


(,) Management as a science and as an art: Management is a science in the sense, that it adopts a systematic approach through knowledge acquired by continuous and vigorous efforts in the field of management science. Management is an art, as it is an application of some skills to achieve the desired results. It is an art because it utilizes the talent, practical knowledge and creativity of the people, and also because it manages the human beings.
(i,) Necessity and advantages

of good housekeeping:

(a) To receive materials, spares, tools and equipment and keep them in proper place. (b) Maintain the safety of items from damage, pilferage and

(c) Maintain record and update receipts and issues of materials.


of good housekeeping:

(a) It helps to operate shops efficiently. (b) Ready record of all materials and store purchases may be

(c) Classification of receipt and issue are made easy.

(d) To safeguard the materials which are lying in stores.
(e) Wastage of time and labour, leakage, thefts and pilferage of

stores are reduced to their minimum.
(iiI) ABC analysis: It is believed that this analysis originated in the General Electric Company of America. A-B-C stands for a/ways b.tter control analysis. The analysis is based on a universal -Pareto's law. This law explains that a large number of variety of items are stocked by various organisations. These may vary from 10,000 to 1,00,000 different types of items. It is very difficult to use scientific principle to control inventory. Depending upon the value and usage frequency, one has to divide an appropriate type of inventory policy. A~ B-C control policy is one out of 8 control techniques which are discussed under selective control techniques. A-B-C analysis is primarily meant for relative inventory control where maximum care can be given to components which involves more money. A fair attention is liveD to medium value items whereas tile attention for low value ca. be reduc:ed to routine procedure only.


Engineering Management

This policy is quite popular as it can also be applied in many other aspects of materials management, such as purchase, sales, inspection inventory control, storekeeping etc. Though no definite procedure can be laid down for classifyin~ t,he inventories into A, B, C categories as this will depend upon a large number of factors such as nature and varieties of items, specific requirements of the business etc. Liabilities: Liabilities denotes claims against the organization as a separate entity or in simple words we can say the amounts company owe to others.

Liabilities can be divided into two categories (i) Current liabilities (ii) Fixed or long term liabilities. (i) Current liabilities are the liabilities which are payable by the organization within one year from the date of balance sheet. This liability is met from the existing assets or from the asset created. Important items of current liabilities are (i) Accounts payable which includes, creditors and bills payable (ii) Outstanding expenses, (expenses made but not paid) (iii) Bank over drafts (iv) Short terms loans from bank or financial institutions payable within a year (v) Advances received from the trade or customers (ii) Fixed liabilities: All liabilities other than current liabilities are known as fixed liabilities. These liabilities are paid after one year from the date of balance sheet. The important items of fixed liabilities are (i) long terms loans and capital of the owner or equity. Assefs:Assets are the resources available to organization by the owners and funds made available by creditors of business. Assets include all rights and properties owned by the organization. Examples of assests are ; cash in hand, credit balance in banks, stocks, investments, bills receivable, land building, plant & machinery, trade marks, patents, furniture & fixtures etc. All assets of an organization categories as shown below: 1. Current assets: can be classified into four by an

The assets which are acquired

Summer 2009

organization to convert them into cash during the normal business operations are current assets. Current assets include; cash in hand, stocks- both raw and finished, cash at bank, bills receivable, work in progress and finished goods, debtors, short term investments and prepaid expenses etc. 2. Liquid assets: The assets which can be immediately converted into cash are liquid assets. These are cash in hand, balance in bank, stocks, debtors and investors etc. 3. Fixed assets: These assets are acquired for long term use by the enterprise for carrying out the business operations smoothly. These assets include, land, building, plant and machinery, furniture & fixtures etc. (v) Learning is acquiring new knowledge, behaviors, skills, values, preferences or understanding, and may involve synthesizing different types of information. The ability to learn is possessed by humans, animals and some machines. I Human learning may occur as part of education or personal development. It may be and may be aided by motivation or by imparting Training. Factors on which learning phenomena depends are: 1. Requirements and necessity for upgrading knowledge. 2. Ability to acquire knowledge. 3. Interest in acquiring new techniques. 4. Market trends and situations 5. Thinking for future and making workers more competent. 6. Competition. 7. Automation and robotics. GroupC Q.9. Choose the correct answer for the following
(i) The founder of scientific management (a) F.W. Taylor (c) H.Gantt

(2 x 10)


(b) F.Gilberth (d) H.Simon

(ii) Military




is known as

(a) line organisation (b) line and staff organisation (c) fundamental


(d) matrix organisation.
(iil) PERT has the following time estimate (s): (a) one time estimate (b) two time estimate (c) three

time estimate

(d) No time estimate.
(iv) Standing

orders, which are statutory,

are applicable to

(a) all industries (b) all process industries (c) only major industries

(d) all industries

employing more than 100 workers.

(v) Break- even analysis shows profit when (a) sales revenue > fixed cost (b) sales revenue> (c) sales revenue>

variable total cost


(d) sales revenue
(VI) The appellate


fixed cost. for any industrial dispute is


(a) management (b) labour court (c) high court or supreme


(d) board of directors.

Stack represents

the difference

between the expected time. expected time.

(a) latest allowed time and the normal (b) latest allowed time and the earliest

Summer 2009 (c) proposed

199 allowable time and the earliest expected project.

time. (d) project limitation time and actual starting
(vii,) The method of classification

of items to be adopted for

spare part inventory
(a) ABC analysis (b) VED analysis (c) XYZ analysis


(d) SDI analsysis
(ix) CPM is (a) critical

process method

(b) critical path method (c) common plan method

(d) combined process method.
(x) All financial

decisions on any project appraisal are based

on the
(a) future value of money (b) present value of money (c) opportunity

cost of money

(d) Anyone

of the above.

(i) (a) (vi) (c)

(ii) (a) (vii) (b)

(iii) (c) (viii) (b)

(iv) (b) (ix) (b)

(v) (c) (x) (d)




Answer FIVE questions, taking ANY nvo from Group A, ANY TWO from Group B and ALL from Group C Figures in the bracket indicate full marks

Group A Q.1. (a) What are the important functions What is a management process?
(b) Discuss different

of management ". (10)

organization company?


types of organizations. ,rnich type of be most suitable f ... • a manufacturing (10)

Sol. (a) Functions of M8~~ement Management fur: .ions includes the following:
I. PIan": '6, ~taffing, 5. Controlling. 2. Organising, 4. Directing, 6. Communication.

1. Planning. Planning is deciding in advance what to do, how /0 do, when to do and who has to do. Planning bridges the gap from where
we are to where we want to go. It makes possible which would not otherwise happen. are shown in Fig. I.
1. Setting objectives

for things to occur

Steps inplanning: The steps involved in systematic planning method

Followup of Plans

Considering Planning Premises


Identifying alternatives



Evaluation and choice




Securing Cooperation


Formulating derivative Plans

of sound

Fig. 1: Various steps in planning

Importance of planning: The importance/advantages
planning are as follows : (i) Planning makes goals clear and specific. (ii) Planning helps the organisation

to keep itself on the right path.

(iii) It reduces risk and uncertainty.

154 (iv) Planning
(v) (vi) (vii)

Engineering improves efficiency of operations.


Planning provide the standards against which performance can be measured and evaluated. It encourages Planning creative thinking. also involves forecasting

the actual

of future conditions.

Limitations of planning
(i) It is costly.

It is time consuming.

(iii) It
(iv) (v)


Some times ....leads to inaccuracy. False sense of secur-e, barriers.

(vi) Psychological

2. Organising. Organisation is a system II. vhich a large number of people are engaged in a complexity of tasks, relate tht;,'~lye~ to each other in systematic establishment and accomplishment ofmutu~l_ ..eed purposes and goals.

Importance of organisation
• Efficient administration • Growth and diversification • Adaptation • Gplimum of new technology use of human resources

• Specialization • Security and support

• Coordination • Training and development

Process of organising. The process of organising involves bringing together physical, financial and human resources, and establishing productive relationship among them so as to achieve the common objectives. The process of organising involves the following steps:
I. Determining 2. Grouping 3. Assigning 4. Delegating 5. Coordinating activities activities duties authority activities



3. Staffing. Staffing may be defined as the process of hiring and developing the required personnel to fill in various positions in the organisation. It involves estirnating the number and type of personnel required, recruiting and developing them, and maintaining and improving their competence and performance.

Needfor staffing Staffing is also a major function of management
like planning, benefits: organising etc. Efficient staffing provides the following employees of output for by

(i) It helps in discovering various jobs.

and obtaining competent

(ii) It helps to improve the quantity (iii) It improves the job satisfaction
(iv) It reduces costs of personnel resources.

and quality putting the right man at the right job. for employees. by avoiding

wastage of human of organisation by

It facilitates the growth and diversification developing the talent of employees.

Elements of staffing process
(i) Human resource planning (ii) Recruitment

(iii) Selection
(iv) Placement
(v) Orientation

(vi) Training and development (vii) Remuneration (viii) Performance evaluation


(x) Transfer.

4. Directing. Directing is that part of management process which actuates the members of organisation to work efficiently and effectively for the attainment of desired objectives. It is concerned with influencing,
guiding, supervising termined objectives. and inspiring the subordinates to accomplish prede-

Directing functions:
(i) Issuing orders and instruction, (ii) Motivating and leading subordinates, people at work (i.e.. supervising) leadership to guide and advise subordinates

(iii) Overseeing
(iv) Providing


Engineering Management Communicating with people to remain in constant touch with them. Distinction between supervision and directing: (i) ",upcn'ision is an element of directing.

(ii) Directing function is important for all level of management while supervision is at the operating level. (iii) Supervision involves face to face contact between superiors and subordinates while directing can also be done without face to face. 5. Controlling. Controlling is the process of ensuring that the actual activities and results confirm to the planned activities and results. Relationship Between Planning and Control: Planning and control are interrelated and interdependent functions of management. Without planning, there lies no basis for controlling. Plans provide the standards for controlling. On the other hand control observes deviations from the course and initiates corrective actions to maintain the chosen course or to make appropriate changes in the course. Thus, planning and controlling may be called the not separable twins of management.

Fig. 2: Interrelationship

between planning and control

Steps in the control process:
Establishment standards of



Measurement of actual performance



Comparison of actual performance and standards



Taking corrective action


Identifying causes of deviations

Fig. 3: Various steps in control process

6. Communication. Communication is the process of passing information and understanding from one person to another.


Winter 2008 The process of communication is shown in Fig. 4.


Fig. 4: Communication process Types of communication

Fig. 5: Types of communication

Formal communication refers to official communication which takes place through a chain of commands. It is generally done in writing in the form of letters, notes, re~rts, etc. Downward communication: It involves transmission of message from superiors and subordinates. It includes
,(i) Orders and instructions (ii) Notices and circulars

(iii) Rules and regulations
(iv) Lectures and manuals (v) Handbooks.

Upward communication: It refers to the flow of communication from subordinates to their support. It may consists of:
(i) Appeals Ui) Suggestions (iii) Grievances (iv) Reports and proposals.




Horizontal communication: It implies the flow of communication among persons occupying positions at the same level of authority. It consists of (i) Interdepartment meetings (iii) Union management talks (ij) Interpersonal talks

Management process: Management is an activity consisting of a distinct process, which is known as the management process. This process is primarily concerned with the important task of goal achievement. No business enterprise can achieve its objectives unless all the members of the unit make an integrated and planned effort under the directions of central coordination agency. The logic of the management process is that particular functions are performed in a sequence within a given period of time.
(b) Types of organisation

I. Line or scalar organisation 2. The line and staff organisation 3. Functional organisation 4. Line, staff and functional organisation 5. Matrix organisation or Committee organisation. I. Line or scalar organisation: The simplex form of organisation is line organisation. It is also known as departmental or military type of organisation. In this organisation the president handles all problems that arise, whether they have to do with production, sales, finance or personnel. Any company that starts small in size probably starts with a line type of the organisation. This is known as military type of organisation because orders and instructions issued from the top have to be followed by the lowers.

Fig. 6: Line organisation

Winter 2008


2. The line and staff organisation: In a firm size operating on big scale, managers cannot give careful attention to every part of management. Some staff is deputed to do the work of investigation, research, recording and advise to managers. These staff provide expert information and helps to improve overall efficiency.

Fig. 7: The line and staff organisation Application: Preferred for medium and large scaled industries. For example, automobile industries. 3. Functional organisation: In functional type of organisation each worker would report to a speed boss, a gang boss, a repair boss, an inspector. Each boss would have full authority over his/her particular function and would instruct the workers in that function.

Fig. 8: Functional organisation




Applications: I. Large manufacturing concerns which are capable of expansion in future. 4. Line, staff and functional organisation: Because of the market competition and complications in the business, to obtain a sound system, the combination of line, staff and function type of organisation is required. The inspector will have the proper authority to control the quality and he can directly order the workers. (Refer Fig. 9)

General manager J..------------,

Fig. 9: Line. staff and functional organisation

Applications: Electricity boards, steel plants and other large undertakings, big chemical plants.

Winter 2008


5. Matrix organisation or Committee organisation: A committee is often composed and formed in an organisation at a high level of management. Such a committee is usually comprised of all the various heads of departments and often serve to formulate and direct policy for the entire business. Any organisation consisting organisation chart alongwith a committee is called matrix organisation. Purpose served by committee are given below: I. To coordinate various functions. 2. To secure co-operation of various personnel. 3. To solve a problem. 4. To train younger executives.
G ·leral manager


Fig. 10: A Matrix organisation

Q. 2. (a) Discuss why human resource management is important today in every organization. Briefly describe the role of recruitment and selection in this context. (8)
(b) Bring 'retraining'.






and (6)

(c) What is collective bargaining?



What is its role in human (6)

Sol. (a) Despite modern technology and all the systems and computers coming into wide spread use, people remain the most important factor in every organisation. None of these techniques or management methods are effective unless they are administered and carried out by the competent employees. Dynamic leadership must be applied at the top of an organisation, and capable employees must exist throughout the organisation in order for a company to operate, grow,




and prosper. In other words, the human resources available at all levels in the organization will bethe key to success. Role of recruitment
(i) Determine the present and future requirements of the organization

in conjunction with its personnel planning and job-analysis activities.
(ii) Increase the roll of job candidates at minimum cost. (iii) Help to increase the success rate of the selection process by reducing the number of visibly underqualified or overqualified job applicants.

(iv) Increase organizational and individual effectiveness in the short term and long term.
(v) Evaluate the effectiveness of various recruitment techniques and

sources for all types of job applications. Role of selection The role of selection in an organisation's effectiveness is crucial for at least for two reasons.
(i) Work performance (ii) Cost

The fist one (i.e. work performance) depends on individuals. The best way to improve performance is to hire people who have the competence and the willingness to work. Effective selection, therefore, assumes greater relevance. Second, cost incurred in recruiting and hiring personnel speaks volumes about the role of selection. Cost of wrong selection are much greater. An organisation with a false positive error incurs three types of costs. The first type is incurred while the person is employed. This can be the result of production or profit losses, damaged company reputation, accidents due to negligence, absenteeism, and the like. The second type of costs is associated with the training, transfer or terminating the services of the employee. Costs of replacing an employee with a fresh one-costs of hiring, training and replacementconstitute the third type of costs. Therefore, the more important the job, the greater the cost of the selection error.

Winter 2008


(b) Retraining: It is proces of learning new skills or trades, often in response to a change in the economic environment. Generally it reflects changes in professions choice rather than a upward movement in the same field. Retraining is training for a new occupation or job or learning new skills. Retaining is required in the following cases: (i) For departmental transfers (ii) For quality improvement (iii) Change in profession (iv) Failure of already acquired training.

Training: It is process of imparting, information and knowledge to employees or trainees with a view of increasing skills for doing a specific job. Training is imparted to increase productivity, making first line supervisors a more effective tool and increasing morale and team spirit.
(c) Collective bargaining:

Refer Q. 4. (ii) Winter 2005.

Role of collective bargaining in human resource management: In brief, collective bargaining offers the following benefits to both employers as well as employees:
(f) It helps to increase economic strength of both the parties at the

same time protecting their interests.
(if) It helps establish uniform conditions of employment with a view to avoid occurrence of industrial disputes. (iii) It lays down rules and norms for dealing with labour. (iv) Collective bargaining infuses democratic principles into the industrial world. Workers participate in decisions that affect their work and work life. Thus, collective bargaining may be a form of participative management.

Q. 3. (a) What is scientific management? in today's context?
(b) Bring out the contribution

What is its relevance (6)

context of management:
(I) Frank

of the following persons in the (8)

and Lillian Gilbreth is engineering management ?

(it) Henry L. Gantt.
(c) What

Sol. (a) Refer Q. 1. (c) Winter -2005.

(b) (I) Contribution of Frank and Lillian Gilberth: They did a pioneer job in order to' improve work methods and thus discover the




best way of accomplishing a task. Their main field of interest was motion study.Gilberth evolved the principles of motion economy, therbligs (Classification scheme to label 17 basic hand motions) the fundamental motions involved in doing an activity. He developed micromotion study and simo chart. Both of them carried out studies on fatigue and its elimination. They concluded that fatigue could be considerably reduced by lightening the load, spacing the work and by introducing rest periods. The Gilbreths were among the first researchers to use motion pictures to study hand and body motions. They invented a device called a Microhronometer that recorded a worker's motions and the amount of time spent doing each motion. Wasted motions missed by the naked eye could be identified and eliminated. made by H.L. Gantt: H.L. Gantt worked under F. W. Taylor and was his close associate. He was more concerned with the man behind the machine. He improved Taylor's differential piece rate system and brought out his task and bonus plan. He developed the daily balance charter say Gantt chart in the year 1900. This chart is still being used and is the fore runner of some of the commercial scheduling techniques. He pleaded for wider recognition of the human factor in management and also for a policy of preaching and teaching workmen to do their work rather than using the policy of driving and cajoling the workers. like cattle. Management: Engineering organizations require management techniques to enhance productivity, with minimum cost and to utilize the resources at their best. This can be achieved by applying various management techniques such as motivation theories, PERT and CPM techniques, statistical methods, planning, inventory control, system approach and many other. All management techniques when applied to engineering are termed as Engineering management.
Q. 4. (a) What do you mean by inventory? to manage inventory? (c) Engineering (il) Contributions

Why is it required (6) steps. Give (8)

(b) What is ABC analysis ? Discuss its procedural


figures to substantiate

your answer.

Winter 2008


(c) What is MRP? Draw a schematic diagram to show the interrelation between MRP and the production planning and scheduling process. (6)

Sol. (a) Refer Q. 3. (a) Winter 2005.
(b) A-B-C Control Policy: It is believed that this analysis originated in the General Electric Company of America. A-B-C stands for always better control analysis. The analysis is based on a universal Pareto's law. This law explains that a large number of variety of items are stocked by various organisations. These may vary from 10,000 to 1,00,000 different types of items. It is very difficult to use scientific principle to control inventory. Depending upon the value and usage frequency, one has to divide an appropriate type of inventory policy. AB-C control policy is one out of 8 control techniques which are discussed under selective control techniques. A-B-C analysis is primarily meant for relative inventory control where maximum care can be given to components which involves more money. A fair attention is given to medium value items whereas the attention for low value can be reduced to routine procedure only.

Procedure of ABC analysis based on observation ABC analysis is also known as CIE (Control by Importance and Exception) as well as PAY (Proportional Value Analysis).
(ii) All items that company consumes must be considered together. Separate classification of raw materials and spare parts is not really meaningful. (iii) While classifying as ABC items, what counts is the consumption rupees and not the unit price. If the amount of money spent is Rs. 5,00,000 on annual consumption is units 500 @ Rs. 1000 compared annual consumption of 1.00,00,000 units @ Rs. 0.02 which amounts to Rs. 2.00,000 then annual consumption amounting to Rs. 5,00,000 is more important compared to Rs. 2,00,000. (iv) It is not at all necessary that consumption figure should be taken only for one year. It can be even 6 months or even 3 months. What important is consumption figure should be representative. However, annual figures are universally accepted and followed. (v) Policy guidelines for selective control with regard to classifying inventory items into 'A', 'B' and 'C' categories are important.




Table given below illustrate and exhibit the situation.
Items A. B. C. Control Tightly controlled inventory system inventory system Attention Constant Attention Periodic Attention Casual Attention

Routine (moderately) Loose control system

(c) M.R.P. is defined as a computational technique that transforms the master schedule for finished product into detailed schedule for raw material and components required for the finished product.

MRP inputs An MRP system requires four specific types of information. These informations are as follows:
(i) a schedule of requirements (or planned production) for each

end product,
(ii) a list of all components of the product according to the products

hierarchical structure,
(iii) expected lead times for producing or purchasing all components

and materials, (iv) information about current inventory levels. This information is maintained in three standard data files:
(a) Master production schedule file, (b) The bill of materials file, and (c) the inventory records file.

Fig. 11: MRP inputs (a) The master production schedule file (MPS)

This file contains the master production schedule for each product. The MPS for a product specifies how much of the end product is

Winter 2008


need or is to be produced and when. This is derived from the aggregate production plan based on demand forecasts, customer orders, and capacity limitations.
(b) Bill of material (BOM) file

The BOM file list for each end products all assemblies, subassemblies, components, and raw materials necessary to produce the product. The bill of material is an index of the parts that were used in the product. The following information should be included in the Bill of material. (1) The item No.: This is a key to the components on the assembly drawing. (2) The part No.: This is a number used through out the purchasing manufacturing and assembly system to identify the component. The part No. is an index to the company system. (3) The quantity needed in the assembly. (4) The name and description of the component. (5) The material from which the component is made. (6) The source of the component. (7) The cost of the individual component. This part will be kept for the design team.
(c) The inventory records file

This file listing the current inventories and outstanding purchase and production orders for each item. Although accuracy of inventory file is most crucial and is most prone to error. For example, if components are removed from stock and used in an operation, but this action is not recorded in the inventory record file, the company believe it has components that are really not available. This can cause it to schedule subsequent production using non existent components. Ultimately, the scheduled production will not occur because of the shortages, and ordering of the needed components will be delayed. Group B Q. 5.(0) What are the different standard statements? Why are they used? forms of financial (6) What (6)

(b) What are the different liabilities in a balance-sheet? is owner's equity?

168 (c) According to the recent balance-sheet following data are obtained:

Engineering Management

of ABC company, the

Current Current Sales Inventory

assets liability

Rs. 5,00,000 Rs. 50,000 Rs. t ,00,000 Rs. 50,000
(i) Current ratio.

Find the following for the company: Quick ratio; and (iii) Inventory turnover
(i) Creditors Oi) Share capital (iii) Reserves and surplus (iv) Secured loans (v) Unsecured loans (vi) Current liabilities (vii) Provisions

ratio; (ii)

Sol. (a) Different types of liabilities in a balance sheet are:

Owner's equity : The n~t worth of a firm consisting of ,paid up equity capital plus reserves and surplus.
(c) Given data:

Current assets Current liability Sales Inventory
(i) Current ratio

Rs. 500000 Rs. 50000 Rs. 100000 Rs. 5000
Current assets Current liability Rs. 500000 Rs,50000



(ii) Quick ratio

Liquid assets Current liability Rs. 100000 Rs.50000




(iii) Inventory Sales == Rs. 100000 == 2 Inventory Rs. 50000 between quality assurance





Q. 6. (a) What quality control? (b) What

is the different

and (6) (6)

is TQM? sampling ? Explain 2008. with the help

(c) What is acceptance suitable plots.

of (8)

Sol. (a) Refer Q. 7. (b) Summer

(b) Total Quality Management (TQM): After world war II, Japanese products were often known for their poor quality. Now products from Japan ranging from cars to electronics are recognised for their high quality. One reason is the way quality is managed. TQM involves the orgnanisation's long term commitment to the continuous improvement of quality-throughout the organisation, and with the active participation of all members at all levels to meet and exceed participation of all members at all levels to meet and exceed customer's expectations. This top-management driven philosophy is considered a way of organisational life. In a sense, TQM is simply effective management. When done effectively, TQM should result in greater customer satisfaction, fewer defects and less wastage, increased total productivity, reduced costs and improved profitability and an environment in which quality has high priority. TQM involves designing organisations day out. It has two standards namely: I. Careful design of the product to please customers day in and

or service.

2. Ensuring that the organisation's system can consistently produce the design. These can be achieved only if the whole organisation is oriented towards them. Benefits of TQM

(a) Benefits for the company
(i) Reduced quality costs of the company (ii) Increased market share

(iii) Better product quality of the company (iv) Employees/work force are more creative and quality conscious


Engineering (v) Product and productivity improvement (vi) Increases problem solving capacity (vii) (viii)


Improved profitability of the company Improvement in human relationship

(b) Benefits to customers
(i) Number of problems are less with the product or service. (ii) Better customer care between organisation and customer. (iii) Great satisfaction among the customer and organisation.

(c) Benefits to staff or employee
(i) More recognition and appreciate (ii) (iv)

(iii) Enhancement of job interest and security

improvement in skills
(v) Reduced employee complaints. (c) Acceptance

Sampling plans

Acceptance sampling is based upon taking a sample from submitted lots of raw material by the supplier. For example, if 10,000 items are present in a lot, a random sample is taken of say 250 pieces and the lot is accepted on the basis of number of defectives permitted in the sample -lual to say 2 or less. In this plan N = 10,000 n = 250, C = 2. Because of using the sampling process, every inspection scheme will result in a certain proportion defectives (howsoever small) of defects. A curve called operating characteristic curve as plotted for specified values of N, n, and C by applying probability formulae. For example, the Binominal formula shall yield.

_ PA =

x=c x=c L Px = L nCxpx(I- pt-X x=o x=o
Q,1 (A P ) Operating characteristic curve (n, c)

:.:C: .- til .0til


00 ... 0 til

" a



Fig. 12

Winter 2008


On plotting a graph between P and P A the operating characteristic curve is obtained. (See Fig. 12) In the Fig. 12,

f3 = proportion defective in lot; PI = acceptable quality level; P 2 lot proportional defective ; a = producer's risk f3 = consumer risk.

Consumer's risk can be defined as probability oflot being bad or even worse than the limiting quality but yielding a good sample and thus getting accepted. Therefore, it is the probability of a defective batch being accepted which otherwise would have rejected. Producer's risk can be defined as probability of a batch being good or even better than acceptance quality level but yielding a bad sample and thus getting rejected. Thus, it is the probability of rejecting a good lot, which otherwise would have been accepted. Q. 7. (a) Define project. Differentiate between project evaluation and review technique (PERT) and critical path method
(CPM). (8) (b) A project consists of eight activities, the details of which are given below: (12)

S.No. 1. 2. 3.

Activity A

Duration days

Immediate Predecessor(s)




3 1 12 3

4. 5. 6.





(I) Draw the project network diagram. Find the critical path and

the project completion time.
(it) If the activity, F, is now completed in 8 days only, what would be the critical path and the project completion time?




Sol. (a) Project: A project is a one-shot, time limited, goal directed, major undertaking, requiring the commitment of varied skills and resources. Also Refer Q. 5. (c) Summer 2006.
(b) The project network diagram is shown in Fig. 13.

Fig. 13.

The critical path is F-G-H and the project completion time is 16 days. If the activity F is now completed in 8 days then new project network is shown in Fig. 14..

Fig. 14.

Fig. 14 shows that, there are two critical path i.e. C-D-E-G-H and F-G-H The project completion time is 13 days. Q. 8. (a) Brtng out the difference between management information system (MIS) and decision support system (DSS) in the context of an organization. (8)

Winter 2008 (b) What is e-business?


(6) (ERP) needed?

(c) Why is enterprise

resource planning D.S.S

Sol. (a) Difference between MIS and DSS
I. This is mainly deals with

storage and execution of information 2. It should provide informations for whole organisation

The system should lay emphasis on semi-structured and unstructurted decisions It should provide decision making supports for managers at all levels D.S,S. provide information to middle managers to have a complete picture of what is happenings in operating level.

M.I.S. provide information to top managers to have a complete picture of what is happening in overall oranisation

(b) E-business is a broader definition of electronic commerce, which includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization.

Also, refer Q. 8. (b) Winter 2005.
(c) Information technology in service industry: Technology also has a wide range of applications in service industry. These include everything from diagnostic equipment at auto repair shops, to bloodand urine-testing equipment in hospitals, to improved materials for a knee replacement. The hospitality industry also provide a good example of the many ways technology can be used in service industry. As you may have experienced, you can now authorize payment of your bill from your hotel room via a channel on the room's television set. The resulting labor savings at the registration desk and enhanced service for the customer are currently demonstrated at most major hotels.

ERP (Enterprise Resource Planning) 'Enterprise Resource Planning (ERP) is a Business Solution' ERP is an integrated system that allows information to enter at a single point in the process and updates a single shared database for all functions that directly or indirectly depend on this information. Most of enterprise in developing countries, such as India, are in the process of




implementing enterprise resource planning (ERP) systems in alignment with organisational transformation and process re-engineering initiatives. ERP systems promise benefits that range from increased efficiency to translation of quality, productivity and profitability. However, its implementation pose some unexpected organisational challenges and changes that can be structural as well as cultural in nature. ERP not only help establish world class best business practices but also brings transparency to the organisation. It also demands empowerment and flexibility in decision making process. We can summarise the ERP benefits as follows:
(i) ERP facilitates a company-wide integrated information system covering all functional areas such as manufacturing, sales and distribution, accounts, payables, receivables, inventory, human resources, etc. (ii) ERP integrates and automates most business processes and shares information enterprise-wide in real time, thereby improving customer service and the corporate image. (iii) ERP provides complete integration of the system not only across dependents but also across companies under the same management. (iv) ERP is the solution for better project management. (v) ERP not only addresses the current requirements of the com-

pany but also provides an opportunity for improvement and refinement in the business processes on a continuous basis. ERP is management information system. This system is used to integrate (join) many business activities. These business activities pertain to operation, production and distribution. ERP is useful to all those companies that are engaged in manufacturing products as well as services. ERP works and operate automatically. ERP software is a big aid in controlling business activities. These business activities are:
(i) Production; (ii) Sales; (iii) Delivery; (iv) Billing; (v) Inventory

control; (vi) Quality control; (vii) Human Resource Management (HRM). Group C Q. 9. Write the correct answer for the following:




is primarily

carried out by

(a) top management (c) knowledge

(b) middle management (d) operational



Winter 2008 (il) Scientific management (a) F. Gilbreth (c) H. Gantt (iii) Induction and orientation resource management function: (a) Recruitment (b) Training (c) Retraining (d) Skill development

175 was originally proposed by

(b) F.W. Taylor (d) H. Simon.

are part of the following human

(iv) What kind of method may be used for solving line balancing problems of intermitted flow systems? (a) Heuristic (b) Linear programming


(c) Dyanamic programming (d) None of the above. (v) A simple EOQ model consists of the following costs: (a) Carrying (b) Ordering (c) Carrying (d) Carrying

and stockout and stockout and ordering and backorder bills receivable is a part of

(VI) In a balance-sheet, (a) curent

liabilities liabilities

(b) long-term

(c) fixed assets (d) current

assets defective or %

(vii) A control chart that plots the fraction defective items from samples is a (a) X bar chart (c) p chart (b) R chart (d) C chart




{viii) In PERT analysis, we usually take the following number

of time estimates for every activity: (b) two (a) one (d) four (c) three (ix) In a project network, there could be following number critical paths; (b) Exactly one (a) Zero
(c) Exactly two (x) A decision



(d) One or many. system usually supports this level of

(b) Knowledge

management level management (c) Middle level management
(a) Operational

(d) None of the above.

(i) (a) (vi) (d) (ii) (b) (vii) (c)
(iii) (a)

(iv) (a) (ix) (d)

(v) (c) (x) (c)






Answer FIVE questions. taking ANY TWO from Group A, ANY nvo from Group B and ALL from Group C Figures in the bracket indicate full marks
/ GroupA Q.1. (a) Briefly explain different aspects of management by which it is conceived, evolved and implemented. (8)

(b) How are management functions integrated? Explain with an appropriate diagram. (7) (c) Discuss the role of knowledge leadership and change handler of a manager in an oi-ganisation. (5) Sol. (a) Different aspects of management by which it is conceived, evolved and implemented are as follow: (I) Universe: There has to be horizon (big or small) called a universe in which the management must perform its function effectively.

(il) Organisation: Organisation is a mechanism or structure that enables living things on the universe to work effectively together. It crystallises, make out a shape and form the management otherwise look like a heap of people. (iil)Planning, implementation and monitoring: There is a universal need for planning, implementation and monitoring. The logic behind is that functions are performed in a sequence through time. (iv) Staffing: A management system must properly equipped with its

(v) Leadership and direction: Leadership quality inspire confidence and trust in their subordinates. This quality is more important than personal ability and skill.
Direction guides the subordinates towards common goal of the enterprise. It also involves motivating, guiding and supervising subordinates. (VI) Communication: An effective communication system management leads to better understanding among peopie, satisfaction, transmission etc. in a


(vii) Coordination: Coordinating means achieving harmony individual effort towards the accomplishment of system objectives.
system requires constant evaluation,

(\lUI1Evaluation, monitoring or control: A healthy management
monitoring or control of its functions.


Engineering Management

(IX) Innovation: Innovation leads to new creative ideas to satisfy growing needs of management system. This is achieved by rapid scientific growth and technological discoveries as well as competition among companies. (b) Management is the dynamic life giving element to every business. The primary job of manager is to achieve the enterprise objectives. In order to achieve the enterpi ise objectives he co-ordinates various activities cf various people. In fact, functions of manager are almost same as functions of management. They are listed below:

(I) Planning: (a) It is a process by which a manager anticipates the future and discovers alternative course of action open to him. (b) Without proper planning, the activities of an enterprise may become confused, haphazard and ineffective.
(c) Prior planning is very essentialfor (il) Organising: (a) It is the process

utilizing the available facilities. by which the structure and

allocation of jobs is determined. (b) It involves determining activities required to achieve the established company's objectives, grouping of these activities logically so that these can be handled efficiently by subordinates, managers, etc. (c) Organising means, organising people, materials, jobs, time, etc. and establishing a framework in which responsibilities can be defined and authorities are laid down. (iii) Directing: (a) It is a process by which actual working of subordinates is guided towards common goal of the company. (b) It involves issuing instructions to subordinates.
(c) It involves supervising the subordinates work is done by them as per the plans.

to make sure that the

(d) For directing, the managers are requiredto have the qualities of leadership, communication, motivation and supervision.

(iv)Stafjing: This activity involves filling and keeping the job filled in the structure of organization. To find requirement of work force, inventorying the available person, and recruiting, selecting, placing, promoting, appraising, planning the careers of persons, compensation methods and impart training ifrequired. (v) Controlling: It means correcting individual and organizational performance to ensure that all activities confirm to plans. It iJwolves measuring performance against goals, and find deviations from standards and give help to correct them. Control activities generally relate to the measurement of achievement.


ummer 2008


(VI) Co-ordinating: (a) Harmonising all assets of the company and mployees into a coherent whole for the accomplishment of company objecves.
/Planning ~coordinatin~ Controlling Communication Decision-making Motivation Directing ~Staffing \ Organizing )

Fig. I Management


(b) It involves making plans those will co-ordinate the activities of he subordinates, regulate their activities on the job and regulate their communications.

(c) Knowledge Management and Role of Knowledge leadership: By knowledge we mean Information and skills gained through experience or ystematic education. Knowledge is gaining importance in management ystems due to globalization and stiff competition faced by the organizations- Now, application of intelligence and knowledge has become necessary to take decision at strategic level. Now-a days there is a growing ecognition of knowledge as an asset, which can be substituted for land, abour or capital and can be a greater force than any of these in production nd marketing of goods and services.

Knowledge management involves cultivating a learning culture where organizational team members gather available knowledge and share this to get better performance and results.

Knowledge management require various supports to grow and diseminate: This is possible only if a proper system is developed to enable organization to become a learning organization. Organization has to create ome leadership to obtain best knowledge for management system. in an organization

Role of knowledge leadership

1. To make a good and efficient knowledge team: For doing this, management create a team of persons who expertise in their fields looking nto their experience. The team is selected to disseminate knowledge, Seminars, short term courses, workshops, books, internet and web technologies, assist in this direction.




2. Documentation and computerization: Knowledge acquired by the organization must be well documented and databased. Databased knowledged is very useful even in those situations where experts leave the organization. The leadership role can be summarized as under: I. Transfer individual knowledge into database. 2. Filter and separate the most relevant knowledge 3. Organize and arrange knowledge in database or through documentation that allow other employees to make use of knowledge. (ii) Push specific knowledge to employees based on their specified needs. Change handler The role of change handler lies in continuous improvement, benchmarking and re-engineering the whole system. The manager perform the following function as a change handler: (i) To inform everybody that there exists a better way of doing the things which we are doing now. (ii) Building team to make changes and evaluation of performance during the change. (iii) Careful handling of situation and resources.
(iv) Identification of benchmarking


(v) Systematic planning and leadership.

Q.2. (a)What are the processes of corporate planning? Illustrate these processes in a neat sketch. Enumerate the benefits of corporate planning in a manufacturing company. (10) (b) What do you understand by management control? Discuss nine methods of management control suggested by Arthur Bedeian. (10) Sol. (a) Corporate Planning: Corporate planning means designing the strategy of company in such a style and fashion that it develops good business relationships. It inc,Iudes e-business initiatives. Once positive business initiatives are developed and set in motion growth automatically starts. Business communication is the force behind corporate planning. German software company SAP became the third largest software company in the world because its sales were robust. For a corporate planning three stragies are very important. These are objectives, forecasts and strategies. These three objectives are carried out in the light of SWOT (Strengths, Weaknesses, Opportunities, and Threats). SWOT covers both internal-and

ummer 2008

xternal appraisals. Internal appraisals are strengths and weaknesses where s external appraisals cover opportunities and threats. Aims of corporate lanning are given below one by one:
(I) Systematic

process of developing achieved with defined objectives.

long term strategies

to be

(ii) Long-range forecasts based upon present strategies. (iii) Creating financial, marketing capital investment, diversification and product development plans.
(ill) Monitoring and communication

of company's results.

(v) Corporate planning clarity objectives. (vi) Providing strategic frame work. (vii)

Systematic look at the future.

Corporate planning involves a thorough study of the following: 1. Corporate objectives and goals 2. Framework of the organization 3. Strategies 4. Resource planning, procurement and deployment 5. Implementation and monitoring strategies 6. World business scenario.

Fig. 2



of corporate


Benefits of corporate planning (i) Clarification of company objectives (ii) Provide a strategic framework of action plans
(iii) It shows the strengths,


threats and opportunities.




(b) Control functions - engineering system: Depending upon the frequency of use, nine methods of management' control were developed by Arthur Bedein and the same are discussed below:



It includes

(i) Self-Control: It means reporting to work on time and discharging duties and responsibilities properly, Self-control can be promoted among workers through behaviour modification and training. (ii) Group Control: It is used for reinforcing formal authority. Group Control can hinder as well as aid formal authority. It means obeying the orders of seniors. Studies reveal that in some organisations it helps in increasing output and improving quality. (iii) Procedures and Rules: These are managerial controls and are quite effective in controlling individual and work group behaviour.
Standard of Performance




Take corrective action/modify plans


I performance I



_I Comparison With-I
" standands set


Deviations identifiedcorrective action required


On-target no corrective action required

Fig. 3 The Control




These are as follows:

(iv) Management Information Systems (MIS): Conversion of data collected internally and externally into information and communicating the same to managers of all levels in the organization is called MIS. This increases efficiency of managers in the organisation and enable them to take timely and effective decisions for planning.
(v) External audits: The annual financial audit by an outside accounting firm is called external audit. Comptroller and Auditor General do auditing of public sector (government) undertakings in-India, Auditing is necessary to find how efficiently different organisations are discharging their social obligations. (vi) Budgets: Budgeting refer to future allocation and utilisation of various resources to different activities of an enterprise. Budget throw light

Summer 2008


on the performance of an enterprise and results are expressed in numerical terms. C-Occasional Controls: These are expressed as follows: (vii) Special reports: Use of special reports is made when normal control system point the need for detailed investigation or major policy decisions to be taken. Special reports furnish information to be implemented to overcome the existing difficulties of the organisation as well as modernisation and expansion of firm. (viii) Personal observationsiii is important at managerial level to know what is happening in an organisation by relying on information provided by others. This information can be obtained and collected by personally visiting the site of operating units.
(ix) Project controls: It helps to determine current status and position of project, so that necessary changes can be introduced. Various methods such as network analysis using PERT (Programming Evaluation and Review Technique), technique are quite popular.

Q.3. (a) Explain the Sargant Florance's theory ol'industriallocation. What are the factors affecting facility location? (10) (b) Discuss the facility location model given by Brown and Gibson. What are the important factors offacility location of a software company? (10)
(a) Sargent Theory of Location: Sargent Florance theory is based on statistical technique for measuring the degree and incidence of localization. He has observed that, "the location of an industry to an area is not so important as the relation of the industry to the distribution of the occupied population as whole".

Prof. Sargent has introduced three new concepts, for the measurement of the degree and incidence of location. These are: (i) Location quotient (ii) Coefficient oflocalization. (iiI) Coefficient of linkage.
(I) Location Quotient: It is the degree of concentration of industries in a particular region. It can be computed by two different methods, both the methods yield the same results:

(I) Location quotient, (2) Coefficient of location. :. Location Quotient =

Total industrial population of a place Total industrial population of the country



Total industrial population of the locality in the industry concerned Total industrial population of the country engaged in the same industry concerned

If an industry is evenly scattered over to whole country, its location quotient will be close to unity for each region, where as if industry is localised in any particular region, the location quotient will be more than unity for that region and zero or as for others. (it) Coefficient of localisation: It gives a general tendency of an industry to localize as compared to the distribution of the working population as a whole. It can be computed by dividing the workers region wise as percentage of the total of all the regions. The co-efficient is the sum (divided by 100) of the plus ,deviations of the regional percentages of workers in the particular industry from the corresponding regional percentage of workers in all industries. This will yield a co-efficient varying from 0 to I. Industries showing low coefficient of localization have high propensity for dispersal. Enough of such industries are shoe making, brick making etc. Industries showing high coefficient of localization are extra active·industries i.e. industries using large amount of weight losing materials. For example, iron, steel, glass, copper manufacturing, sugar and other metal industries. Other industries such as cotton, jute, paper, cement etc. which lie between the two extremes, have usually a wide choice of location. (iii) Coefficient of linkage: It is a statistical technique which signifies the geographical association between two industries. When workers in various industries are divided up, region by region, as percentage of their total, it is the sum of the plus deviations of the regional percentages of workers in the particular industry from the regional percentages of workers in the other industry. This will yield a coefficient of linkage varying from 0 to I. The industries having high coefficient of linkage tend to move in the same direction and their location trends usually manifest considerable degree of uniformity and similarity. Criticism theory are: of Sargent's Theory: Some important criticism of Sargent's

I. The three indices given by Sargent reveal only the existing state of distribution of industries in a particular country. 2. The location factor which is based on the number of industrial workers employed in a particular area is not a sure guide of the degree of concentration of an industry.

Summer 2008


3. The coefficient of localization is based essentially on the pattern of distribution in each country so that it would vary from country to country according to local conditions. Despite these weaknesses, the three indices suggested by Sargent, are of great significance in studying the locational dynamics in any country. Also Refer Q. 4. (a) Winter 2006.

Refer Q. 3. (a) Summer-2006.

Some important factors for a software company (i) Availability of large amount ofIT skill. (ii) Presence of world class educational institutes. (iii) Easy land availability with low cost. (iv) Lower power tariff.
(v) Availability of support industries and services at reasonable


(vi) Supportive government policies. (vii) Suitable climatic conditions for industry. (viii) Easy availability of expertise, partners and customers. Q.4. (a) With a neat sketch, discuss the systematic management system. maintenance (8)

(b) An Engineering Consultant firm received an order from private industrial enterprise to study the total cost at the present maintenance policy for machinery in a decentralised section of its manufacturing plant. Data on machinery breakdown over a 16 h period is as follows:

Request for Repair (arrival time)
01·00 07·30 08'00 11'50 12·50

Total Repair Time Required (worker hours)
2·00 5·00 1·00 3·00 0·50

The company has two maintenance engineers and charges their time (working/ idle) at Rs. 250 per hour each. The downtime cost of machines, from lost production, is estimated at Rs. 1200 per hour. Determine the (i) simulated service maintenance cost; (ii) simulated breakdown maintenance cost; and (iii) simulated total maintenance cost. (12)




Sol. «(I) Maintenance management, is very important as a support function to the production operations and to the service operations. The objective of maintenance is to facilitate the optimal use of capital equipment through actions such as replacement, repair, service and modification of the components or machinery so that these will continue to operate at a specified availability for as long as it is beneficial to do so. The basic components of a maintenance management system are shown in Fig. 4.
Decision Variables (a) What to maintain? (b) By whom? (c) How to perform? (d). Where to perform?

Constraints (a) Crew size (b) Maintenance facility (c) Capital budget (d) Aggregate production plans

Equipment breakdown

data on distribution


Schedule for
(a ) Preventive maintenance (b ) Corrective maintenance




Maintenance Decision variables


Reports on a) Equipment status b) Inventory requirement c) Capacity requirement



MaintenanceJ__ data Performance Input criteria

Fig. 4 Basic Components

of a maintenance



(b) (i) According to the given problem simulated service maintenance

cost is calculated

as under;

Service cost = 2 engineers x Rs. 250/hr x 16 hrs = Rs. 8, 0001 period. (ii) Assumption; let us assume that the two engineers are twice as effective as cne, and they. therefore. reduce total repair to half.

Summer 2008 Table shows method of calculating simulated breakdown cost.
Arrival Time 01.00 07.30 08.00 11.50 12.20 Repair hr. 1.00 2.50 0.50 1.50 0.25 5.75 hr Tillie (2



Repair Tllne hegins 01.60 07.30 08.00 11.50 12.20



ends 02.00 10.00 08.30 13.20 12.35

Machine Downtime (2 engineers; 1.00 2.50 0.50 1.50 0.25 5.75 hr

60 150 30 90 15

Breakdown cost Total cost

= Rs. 1,200 /hr



= Rs. 6,900 /period.

(c) Simulated total maintenance

cost can be calculated as under

= service cost + breakdown cost = Rs. 8,000 + Rs. 6,900 = Rs. 14,9001 period.

Q.5. Define balance sheet. Classify the asset and liability items for inclusion in the balance sheet. Explain the linkage of two successive balance sheets. (10)
(b) What do you understand example offunds flow statement.

by funds flow statement?

Given an (10)

Sol. (a) Refer Q. 5 (a) Summer-2007. Linkage Between two Successive Balance Sheets: Balance sheet is the financial position of a company or an organization at a given date. Balance sheet of an organization can be prepared from ledger accounts at any interval of time, it may be prepared quarterly, half yearly or once a year. After completion of a balance sheet, all its details and figures are shifted to ledger book of subsequent period and taken as opening balances. All transactions are made in the ledger book and at the time of preparing new balance sheet the closing balance as on date is taken for new balance sheet, and any alternation/ deletion are incorporated in ledger book. The new balance sheet shows any difference or alteration in assets / labilities from last balance sheet. So two successive balance sheets depicts the alternation or changes in assets/ labilities which facilitates executive to take corrective actions or change their policies for certain items. By linking two balance sheets executive or directors of an organization can decide future course of actions to make organization more healthy and sound. This analysis gives information on about the working capital of an enterprise. It indicates the sources from which the working capital was obtained and the purpose for which it was used.
(b) Funds flow analysis:




Fund flow statement: It also refers to statement of changes in financial position or the statement of sources and uses of funds drawing inforrnation from basic financial statements. Fund flow statement is divided into four sections as follows:
(a) Funds flow statement - Total resources basis. (b) Funds flow statement - Working capital basis. (c) Funds flow statement - Cash basis

(d) Cash flow statement -

Q.6. (a)

Discuss the concept of 'theory under perfect competition.

of the firm'. Explain profit (8)

(b) If the total cost function ofa firm is

where C is the total cost and x, the output under perfect condition given as 6. At what values of x will the profit be maximized? Examine both first and second order conditions. Will the firm continue production? (12) Sol. (0) The term 'firm' includes all producers who undertake the activity of creating value by combining and organizing the factors of production. The firm produces goods and services by employing the factors of production and selling the same to the consumers, other firms and the government. Thus, the basic decision maker regarding production is the firm. It include: ,111 types of enterprises like sole proprietorship, partnership, joint stock companies, cooperatives and government as well as public sector enterprises. In the analysis of supply of goods and services and the demand for factors of production, firms are the basic units. A firm is generally identified with an entrepreneur. Difference between firm and industry exists. The size of firm is small and that of industry is big varying from market to market; in a perfectly competitive market, there are one hundred firms equal to one industry. In other words, an industry is an aggregate. of all the firms producing a commodity. Profit maxim.ization under perfect competition The firm is- in short-run equilibrium when it intends to maximize its profit (P), given as: Profit (P)
= Total

revenue (TR) - Total cost(TC)

Since TR = p.Q.

Summer 2008


...(i) Since p is constant dp =0

From (i),

MR =p =AR
The result MR = P = AR implies that MR and AR curves are under perfect competition [Fig 5]. There are two possible conditions exist:
(a) The first order condition for the maximization of profit (P) is given

(b) The second order condition for maximization
Price cost

of profit requires





Fig. 5 Perfect


in short

term equilibrium.

d2p that dQ2 < 0 (negative) that is, slope of MR < slope of Me.

(b) Given that total cost function of a firm is
= -:;x3 .)


c (x)

5 x2 + 30 x + 10

Therefore, Marginal cost (MC),




Me =



{c (x)}

= - x







, 3r - 5 x 2x + 30 lOx + 30

= x2 -

According to the problem, the output under perfect condition is 6. That means, for profit maximization; Marginal cost (MC) or, or, or, x2 =

Price (P)
= =

10 x + 30 lOx + 24 6, 4

6 0


2 -

(x - 6)(x - 4)


The 2nd order condition under perfect competition for profit maximization requires



d dx

=> =>
Now , forx=4 d2c


d {x2-IOx+31J}>0 dx

2x-JO>0 d2c -=2 , dx2

x4 -10=-2«0)

and, for '" = 6,




6 - J0


+ 2 (> 0)

This implies that at x = 6, the level of output where the firm earns maximum profit.

Summer 2008 Therefore, Maximum profit



Total revenue - Total cost

P'x - {I x x 3 - 5 x x 2 + 30x + 10}




:. The negative profit indicates that loss occurs at fixed cost of Rs.l 0 hence the firm will discontinue production at given condition of product price.

Q.7. (a) Define quality cost and explain why its management is useful. Classify cost of quality assurance and differentiate between each cost. (10)
(b) Distinguish between quality control and quality assurance.

Explain the term 'quality circle' with a neat diagram.

(6) (4)

Sol. (a) Quality Cost Management utility and Cost of Quality Assurance
Before defining quality cost, let us understand meaning of quality. Quality means freedom from deficiencies i. e., freedom from errors that require rework. Rework result in field failures, customer dissatisfaction, customer claims and so on. Freedom from deficiencies of an organization lead to higher quality which enables companies to:
(a) Reduce error rates (b) Reduce rework (c) Reduce field failures (d) Warranty charges (e) Reduce time to put new products to the market (j) Increase yields, Capacity (g) Improve delivery performance.

Quality cost has different meaning to different people. Costs associated with the improvement of product/service refer to quality cost. The quality related costs are much larger as shown in the accounting reports. Studies reveal that these costs are both visible and hidden. Here our main concern is with poor quality because it covers bulk of costs: Poor quality adversely effect income as well as cost. Income may consist of sales of an industrial company, taxes collected by a government body, appropriations received by a government agency, tutions received by a school, and donations received by a charity. Whatever the source, the amount of the income relates in varying degrees to the features of the product produced by the recipient. In many markets, products with superior features are able to secure superior income. Product deficiencies also have an




effect on income. The customer who encounters a deficiency may take action of a cost related nature: file a complaint, return the product, make a claim or file a suit. The cost of poor quality consists of all costs that would disappear if there were no deficienciesno errors, no field failures and so on. The cost of poor quality is shockingly high. Deficiencies that occur prior to sales obviously add to producer's costs. Deficiencies that occur after sale add to customer's costs as well as producer's costs. (Source: Juran's Quality Handbook). For most companies, these costs run in the range of 10 to 30% or 25 to 40% of operating expenses. The quality costs are not simply the results of factory operation, the support operations are also major contributors. The language of money is essential for measuring quality improvement costs. Quality cost measurement and publication alone does not solve quality problems. It makes no provision to identity projects, establish clear responsibilities, provide resources to diagnose and remove causes of problems, or take other essential steps. Categories of Quality Costs: Many companies summarize these costs into four categories. These categories of quality costs are given below: Internal Failure Costs: These are costs of deficiencies discovered before delivery associated with the failure. They are failures to meet customer requirement and needs. Their examples are: (i) Scrap: They are labour, material and usually overhead on defective product that cannot be economically repaired. Their titles are numerous such as scrap, spoilage and defectives etc. (ii) Rework: Correcting defects in physical products or errors in service products. (iii) Lost or missing information: Retrieving (recollecting) information that should have been supplied. (iv) Failure analysis: Analyzing non-conforming to determine causes. missing

goods or services

(v) Scrap and rework-supplier: Scrap and rework due to non-conforming product received from suppliers as this also includes the costs to buyer of resolving supplier quality problems. (vi) Sorting inspection: Finding defective units in product lots which contain unacceptably high levels of defectives. (vii) Retest: Reinspection of products that have undergone rework. (viii) Changing processes: Modifying manufacturing to correct deficiencies.


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(ix) Redesign of hard and software: Changing designs of both hard and software.

(x) Scrapping of obsolete product: have been superseded.


of products that

(xi) Downgrading: Finding difference between the normal selling price and reduced price due to quality reasons. Cost of Inefficient low: (i) Variability of product with conforming products. (ii) Unplanned downtime ment due to failures. characteristics:

Processes: Examples of these costs are given beLosses that occur even

equipment: Loss of capacity of equip-

(iii) Inventory shrinkage: Loss due to the difference between actual and recorded inventory amounts. (iv) Variation of process characteristics from best practices: Losses due to cycle time and c<?sts of processes as compared to best practices in providing the same output. (v) Non-value added activities: A value added activity increases the utility of a product to the customer whereas non-value aded activity does not. Redundant operations, sorting inspections, and other non-value added activities. External Failure Costs: These are those costs which are discovered after product is received by the customer. Examples are given below: (/) Warranty charges: Making repairs of products that are still within the warranty period. ' (ii) Complaint adjustment: It includes costs involved for investigation and adjustment of justified complaints. (iii) Returned material: Costs associated with returned material and replacement of defective product received from field. (tv) Allowance: Costs of concessions made to customers due to substandard products accepted by the customer, (v) Penalities due to poor quality: It includes late payment of an invoice resulting in a lost discount for paying in time. (vi) Rework on support operations: Correcting errors on billing and other external processes. (vii) Revenue losses in support operations: Cost involved due to failure in collecting receivables from some customers.




Appraisal Costs: These are those costs which are borne by an entrepreneur to the degree of conformance to quality requirement. Examples of such losses are as follows: (i) Incoming tests and inspection: Determine the quality of product purchased other by inspection or by surveillance (secret tests). (ii) Pr~cess inspection/tests: conformance to requirements. Costs involved in process evaluation of

(iii) Final inspection: Costs involved while evaluation of conformance to match product acceptance. (iv) Document review: Costs associated with the reviewing of documents before these are sent to customer. (v) Balancing: Examining all accounts to assure internal consistency. (vi) Quality audits: Performing quality audits of finished products. (vii) Accuracy of test equipment: Costs associated with the measurement of instruments/equipments in calibration (correct value estimation). (viii) Test materials and services: Costs associated with testing of materials through inspection and test work. This can be done through X-ray as weI! as by MRI (Magnetic Resonance Imaging) depending upon the structure and budged of organization. Prevention Costs: These are those costs which are made by an organization to keep failure and appraisal costs minimum. Examples are given below: (i) Quality planning: It covers both quality plan and many specialized plans. It includes preparation of technologies required to communicate plans to all concerned. (ii) New products review: It includes reliability engineering and other quality related activities connected with launching of new design. (iii) Process planning: It covers inspection planning and other activities connected to manufacturing and services processes. (iv) Process control: It includes costs associated with inspection and tests to determine the status of the process rather than product acceptance.


(v) Quality audits: Evaluating the execution of activities in the overall quality plan. (vi) Supplier quality evaluation: Examing supplier quality activities prior to supplier evaluation.

Summer 2008


(vii) Training: It includes quality-related training progrmmes. Some of his work can be done by personnel who are not on the payroll of the quality department. The criterion with regard to decision is again the type of work and not the name of department performing the work.

Quality assurance
J. It provides protection of quality to consumers for quality have been achieved. J.

Quality control
It is a mechanism by which the products are made to the specifications determined from customer's demand.

2. Demonstrates that the requirements 3. Creates
confidence organization's products. in the

2. It improves quality of product. 3. Contributes
reputation to higher profits of company. of labour and and

4. Its implementation

directly affect quality related process and product results. labour.

4. Greater


S. Reduces cost of inspection.
6. Reduces cost of re-work. 7. Reduces cost of scrap. 8. Improves moral of workers. 9. Improves technical knowledge and competency in labour and personnet.

S. Creates efficiency among workers &
6. Quality audit provides minute variation in product quality. ..., It helps to reduce losses of company . 8. Quality assurance acts as a watch dog over to quality system.

10. Uninterrupted production, so reduction in manufacturing cost.

(c) Quality circles: The concept of the' quality circle is based on respect for the human individual compared to the earlier traditional concept based on suspicion and mistrust between the management and the workers. Quality circle involves a small group of employees of the same work area, doing similar work meet voluntarily and regularly to identify, analyse and discuss work related problems.

This small group carries on the activities, utilising problemsolving techniques to achieve control and also help in the development of work.

Mutual trust and confidence is built up between the management and the workers due to quality circles.

Quality circle aims at building people, developing them, arousing genuine interest and devotion to their work to improve quality, productivity, cost reduction etc.




·Fig. 6 Quality circles

Q.8. (a) Discuss the role of Internet in electronic commerce. (4) (b) Explain the various concepts of project management.. (4) (c) Consider a project, given the following activities and their time estimates: Activity 1-2 1-3 2-4 3.:..4 3-5 4-9

Expected time (days) 4 1

Activity 5-6 5-7 6-8 7-8 8 - 10 9 -10

Expected Time (dll)'s) 4 8 1 2 5 7 (4) (2) (6)

1 6 5

Draw the network;

(il) Identify the critical path for monitoring the project; and

(iii) Calculate total float and free Hoat for each activity.


Sol. (a) E-Commerce: Traditional business have been evolving through the human history depending upon the prevailing market system from barter to paper currency. Now with advent of internet the business system have been revolutionized by opening new horizon at a global level with promising opportunities. Now the whole world seem to be caught up in a new mode of doing business called Electronic Commerce (E-Commerce).
It starts with setting up of virtual shops in a -virtual location exhibiting of the products and services any organisation wants to sell. Thus the

Summer 2008


emoval of boundaries in the cyber space has added new dimension in the whole approach of modern business that expands the market at a global scale. In E-commerce companies take orders for e-products or goods and services, accepts payments over internet through credit/smart cards and deliver goods and services. The delivery mechanism could be done through nternet e.g. software, music electronic body for a distribution channel is formed using internet.

The E-commerce is responsible for making trading more efficient. Now consumer will be able to save money and time by making purchase on line and save transaction time and money both.

E-commerce offers some overwhelming advantages over conventional shopping such as:

(I) It is cheaper (2) It provides interaction with customer (3) It does not require high street real estate (4) It requires less inventory (5) It provides 24 hours availability of product (6) It offers global reach both to buyer and seller. The possibilities for e-commerce are endless and limited only by one's magination.

Accordingly quantum of business done through inernet is expected o grow abudantly more than 10 trillion up by 20 I O. Comapanies that see it as a catalyst to business process redesign are likely to reap the benefits and profits. It is gaining popularity among Indian trade and industries also.
(c) According to given data. a network diagram is shown in Fig 7.

Earliest start time

Latest start time

Earliest finish time

finish time

Fig. 7.




The critical path in the network is I - 3 - 5 - 7 - 8 - 10 and the total project duration is 22 days. Table I shows the calculations for total floats and free floats. Table 1
(i -j)

Duration (days)

Total float (T F) (LrEj-d;j)

Head slack (LrEj)

Free float (F F)
= TF - Head slack

1- 2 1- 3 2-4 3-4 3-5 4-9 5-6 5-7 6-8 7-8 8- 10 9- 10


9-0-4=5 1-0-1=0 10-4-1=5

9-4=5 1- 1= 0 10-5=5 10-5=5 7-7=0 15-10=5 16- 11 = 5 15-15=0 17- 17·=0 17-17=0 22 - 22 'i= 0 22 - 22 = 0

5-5=0 0-0=0 5-5=0 8-5=3 0-0=0 5-5=0 5-5=0 0-0=0 5-0=5 0-0=0 0-0=0 5-0=0

1 6 5 4 8 2 5 7

10-1-1=8 7-1-6=0 15-5-5=5 16-7-4=5 15-7-8=0 17-11-1=5 17-15-2=0 22 - 17- 5 = 0 22 - 10-7 = 5 GroupC

Q.9. Define the following terms in 2 - 3 sentences:
(I) Training and development. (il) Hierarchy (iii)




of human needs.

Trade Union management.

(iv) Four Cs of human resources (v) Product/

line layout.

(VI) Full form of CRAFT.
(vii) Break down maintenance


(viii) Value analysis.
(IX) 'Most likely time' in project management. (x) Management

information system (MIS).

Sol (i) Training and development: Training and development programs are necessary in any organisations to improve the quality of work of the employees at all levels. Training is a short term process while

Summer 2008


development is a long term process. Training refers to instruction about machine operation while development refers to detail analysis of machine and its operation.
(iI) Hierarchy 0/ human needs: Hierarchy of human needs are in preferential order as physiological needs, safety needs, social! love needs, ego/ esteem needs, self actualization need. Hunger is a basic physiological

need, but when there is plenty of food, higher need emerges. When the higher needs are satisfied, new and still higher needs arises. (ii,) Trade Union: A trade union is a continuing long term association of employees formed to promote, protect and improve, through collective action, the social, economic and political interests of its members. Trade unions are the creation of industrialization and modern industrial conditions.

(iv) Refer to Q.I. (c) Summer 2006
(v) Refer to Q.4. (b) Winter 2006 (VI) Computerized Relative allocation offacilities technique. (CRAFT)

(vi,) Breakdown maintenance index: It is the ratio of total hours
spent on breakdown multiplied by 100 to the total man hours available. Therefore. Bre ...·<iown maintenance index


_o_n_b_r--:ea_k-:d-:o_w_n x 100 _:T_:o:_::ta:.:.':_h:.:.o::._u:.:_r_s_s.!.p_e_n_t Total man hours available

(vii,) Val,... an"'Y~is: Value analysis is a technique of cost reduction
based on systematic and orgarusea examination of every item of cost which goes into the manufacture of the industrIal product in terms of the value or customer satisfaction it adds to the product.

(IX)Most likely time: Most likely time is probably be the actual time.
It is assumed that things go in the normal way, with a few delay or set back etc. This estimate oftime, lies between the optimistic and pessimistic time .

(x) Management Ill/ormation System (M.I.S.): \1.I.S. is an organised'
method by which managers at all levels in the organisation are presented with needed information in the right form and at the right time so they are in a Pv";tion to perform their task well.






Answer FIVE questions. taking ANY TWO from Group A, ANY TWO from Group Band ALL from Group C Figures in the bracket indicate full marks

Group A Q. 1 (a) Describe the approach to the 'scientific management principle' of Taylor and discuss its limitations. (6 + 2)
(b) Briefly discuss what you understand by 'scalar and functional processes'. How are the chains of commands, obligations and reporting flow in these process? (4 + 2)

(c) Why does modern theory consider the organization as a system consisting of interconnected parts? Briefly discuss the components of the parts and their implications in modern organization. (3 + 3) Sol. (a) Approach to the scientific management principle developed by F.W. Taylor reformed the management through a thoughtful and systematic discipline to its problem. Taylor found that, various type of wastes relating to metal, time and efficiency etc. are due to the lack of order and system in the management. He emphasized that usually management was ignorant about the amount of work performed by a worker in a day, and also about the best way of doing the job.

Some significant achievement of Taylor are listed below : Work Study. This technique is used for work measurement

and work improvement. Taylor scientifically conducted time and motion studies, method study and fatigue study etc. Work study is also used to determine the standard time to perform a specific job along with best method of performing each operation to eliminate wastage with less fatigue.

(if) Standardisation of tools and equipment of workmanship and working conditions are very important. Taylor gave his attention to the best size of shovel for different types of materials. After several experiments he selected 21 ~ Ib as being the optimum shovel load and thereafter designed shovel of such a size which he found sufficient to hold this quantity of material. He designed small shovel for heavier materials and larger shovel for lighter materials in order each man can lift 21·5 Ib of material so as to achieve maximum output. (iii) Incentive Scheme. Taylor's different price rate scheme provides an incentive for a worker to achieve high level of optimum output.




Principles of management. Taylor recommended
productivity and improved efficiency of specialised knowledge and skill.

that greater is possible through the use

(v) Application

of scientific methods. Taylor introduced the scientific methods to solve various problems such as recorded facts, applied knowledge to avoid mistakes.
management opposition. was great innovation. It received

Limitations (l) Scientific tremendous (ii)

Primary resistance, from workers community, came from management itself which was not prepared to discard old rules of thumb in favour of scientific approach. (b) Refer to Q. 2. (a) Winter 2005.

Taylor's Functional Organisation Policy: F.W. Taylor evolved functional organisation policy as it was extremely difficult to find all-round persons qualified to work at middle management leves in the line orgnisation. Functional organisation essentially is the line type of organisation with the difference that instead of one foreman (who being master or specialist of everything and hence extremely hard to find) there are eight functional foremen: Four of them located on the shop floor and remaining four in the office, but everyone having direct and equal authority over the workers. Each functional foreman who is a specialist in an activity is incharge of one function. (Refer Fig. 1).


Winter 2007


(c) A system may be defined as a group of interrelated parts or elements designed to achieve a particular goal. The function within organisation are interrelated, the performance of one commences before the other's ceases. Fig. 2 shows the system of organisation and management. This is a system that integrates the parts, resource flows, function of management or organisation theory and the various techniques of management. A component of the system - management information system is also added to provide information for planning, and furnishes the essential feedback information necessary to achieve stability through control.
1. Product demand

4.R&O and Engineering

5. Information

~-----' 7. Financia! and accounting

Fig. 2

Modern theory views the organisation as a system, and studies it as a complex system. Being of very recent origin, it has an analytical base, integrating nature, and relies on empirical research. According to this theory, all the parts of the organisation are interdependent and interlinked as shown in Fig. 2. Q. 2 (a) What is the purpose of planning? How is the planning process to be organized for achieving the purpose? List three key activities in the planning process. (2 + 4 + 1) Define SWOT analysis and discuss its importance of objectives and planning of strategies in an organization.

in the setting (3 + 7) is neither (3)

Critically discuss the statement, 'Delegation decentralization nor are their purpose the same'.




Sol. (0) Purpose of Planning. Planning is a main function of management. Planning means deciding in advance as to what is to be done, how and where it is to be done, when is to be done, who will do it and how the results are to be evaluated. Planning means to assess the future and make provisions for it. Planning is necessary to ensure proper utilisation of resources to achieve the objectives of the enterprise. For the purpose planning manager: of planning, following steps are taken by the

(i) Recognition of the Needfor Planning. Problem or necessity must be identified which has necessitated planning. (ii) Analysis of Environment. The analysis of environment helps in identification of strengths, weaknesses, opportunities and threats. External environmental factor such as government policies, national economy, competitions, availability of resources etc. are to be analysed. (iii) Statement of Mission. This identifies the products! services prospective customers, values of products/ services, social responsibilities and the infrastructure required for the organisation.

Establishing Objectives. clearest possible terms limitations.

Establish planning objectives in the keeping in view the strengthts and

(v) building the Premises of Planning. This step in planning is the collection and dissemination of the facts and figures necessary for planning the future course of an enterprise. Forecasts about sales, market, literacy, population etc. are used for formulating plans for future. (vi) Identifying Alternative courses of action. Planning manager must identify the alternative course of action to maxim,ize his established objectives. (vii) Evaluating Alternative Courses. Each and every alternative is analysed carefully and the best alternative is decided after reducing the number of alternatives to two or three by method of elimination. A final decision is taken considering objectives, economy and advantages in the long run. (viii) Converting Plan to Budgets. The plans are then converted budgets to make them meaningful. into

Winter 2007


The three key activities in the planning process are as follows:
-+ Mission Formulation -+ Objective Formulation -+ Strategies Formulation (b) SWOT Analysis. 'S' stands for strength 'W' for weaknesses, '0' for opportunities, 'T' stands for threats, It has been common to suggest that companies identify their strengths and weaknesses, as well as' the opportunities and threats in the external environment.

The SWOT analysis are based on the analysis of the external environment (threats and opportunities) and the internal environment (weakness and strengths).
(I) The WT strategy aims to minimize both weakness or threats and

may be called the minimum strategy. It may require that the Company, for example, from a joint venture, retrench or even liquidate.
(il) The WO strategy attempts to minimize the weakness and maximise

the opportunities. Thus, a firm with certain weakness, in some areas may either develop those areas within the enterprise or acquire the needed competencies from the outside, making it possible to take advantages of opportunities in the external environment.
(iiI) The ST strategy is based on the organization's strength to deal

with threats in the environment. The aim is to maximize the former while minimizing the latter. Thus, a company may use its technological, financial, managerial, or marketing strengths to cope with the threats of a new product introduced by its competition.
(iv) The most desirable situation is one in which a company can use

its strengths to take advantages to opportunities. Indeed, it is the aim of enterprises to move from other positions in the matrix to this one. If they have weakness, they will strive to overcome them, making them strong. If they face threats, they will cope with them so that they can focus on opportunities.
(c) Delegation is a process, while decentralisation is the end result of delegation and dispersal of authority. Delegation mainly refers to the granting of authority and the creation of responsibility as between the individual and superiors whereas decentralisation is the situation which


Engineering Management

exists as a result of the systematic delegation of authority throughout the organisation. In delegation, a superior continues to be responsible for the work delegated to his subordinates, while in decentralisation the superior is relieved from his responsibility for the work decentralised and the subordinate become liable for that. Delegation is vital and essential to the management process. Only through delegation, subordinates can be involved in the organisation and the management can get things done. Decentralized is optional, in the sense that it mayor may not be practised as a systematic policy.
Q. 3 (a) Describe the purpose of staffing. Discuss the factors to be incorporated in the staffing system. (2 + 4) (b) Elucidate the merits and limitations of trait-based and objective-

based appraisal systems.
(c) Would linear programming

(6) be of help in a site selection (8)

problem? Sol. following:


Purpose of Staffing. The purpose ofstaffing refers to the

(l) Recruitment (il) Training and retraining, (iil) Motivating the people, in order to introduce self control.
(iv) (v) (VI)

To place right persons in right positions. To promote deserving persons on vacant posts. Develop persons for the better prospects of the individual as well as of organisation. Process of staffing is affected by several environmental factors. These factors can be grouped into following two categories:

(I) External environmental Jactors. External environmental factor

affect staffing to various degrees. These factors can be grouped into educational, socio-cultural, legal political and economical factors (i.e. economic constraints or opportunities). (ii) Internal environmental Jactors. Staffing is also affected due to promotion policy i.e. whether the promotion from within the organisation or through open competition. Other main factors that affects the staffing are : Organisational goals, tasks, technology, organisational structure, the kind of people employed, the reward and incentive system or other organisational policies.

Winter 2007


(b) Appraising on the basis of performance against objective has the great advantage of being operational. Appraisals are not apart from the job that managers do but are a review of what they did as managers. There are always questions of how well a person did ; of whether goals were missed or accomplished, and for what reasons; and of how much in the way of goal attainment should be expected. But information about what a person has done, measured against what that individual agreed was a reasonable target available. This information furnishes strong presumptions of objectivity and reduces the element of pure judgment in appraisal which gives better visibility to managerial needs, development programmes can be better pinpointed.

There are certain weaknesses in the 'implementation of objective based appraisal. One of them is that it is entirely possible for persons to meet a miss goals through no fault of their own luck which often plays a part in performance, For example a new product's acceptance may be for beyond expectations, and its success will make a marketing managers look exceptionally good, even though the quality of the marketing programme and its implementation might actually be poor. There may also be an overemphasis on output quantity and not enough attention given to the quality of the product or service. (c) Linear Programming Technique : Linear programming provides a means of finding optimum solution to practical problems. It can be used in' a situation where it is required to maximise or minimise some quantity which is a function of a set of variables, subjected to certain rules or constraints. The quantity to be maximised or minimised is known as the objective function, and takes the form of a linear equation. The constraints can be written as a series of linear equations or inequalities. Every linear programming problem has its original or primal solution and also a dual. If the primal problem is one of maximisation the dual will be one of minimisation and vice versa, so' that dual can be thought as the primal problem turned inside out. The formation of location problems in linear programming terms help to reveal something of their general nature, stressing their common structural characteristics. Linear programming can be used for solving plant location problem such as : (I) The location of single firm. (ii) Inter regional commodity flows and the allocation of production. (iii) The dual and location rent. (iv) Transportation of incoming and distribution of final products.




Q. 4 (a) Items, purchased from a vendor costs Rs. 20 each, and the forecast for next year's demand is 1000 units. If it costs Rs. 5 every time an order is placed for more units and the storage cost is Rs. 4 per unit per year, what quantity. should be ordered each time? (,) What is the total ordering cost for a year? cost for a year? (2 + 2 + 2)

(iI) What is the total storage

(b) What kind of policy or procedure would you recommend to improve the inventory operation in a departmental store? (5)

Discuss the importance (MPS) in an (MRP) system.

of the master


schedule (5) (4)

(d) What is the role of safety stock in an MRP system? Sol. (a) Given data;

Product cost (P) Demand Rate (R) Holding Cost


Rs. 201 unit ; 1000 unit! yr ;
= Rs.


Procurement cost (Cpl
(Ch) =

51 Unit! order; year .


41 Unit!

Economic Order Quantity (Q)


XS: 1000

50 Units! order.

Total No. of order in a year

1000 ---so= 20 orders/ year

Total ordering cost per year



Rs. 100/year J 00 '" Rs. 400/ year.

Ans. (,)

Total storage cost for a year



Ans. (i,)

(b) Procedure


to improve the inventory operation.

The various steps are as follows :

Winter 2007 (I) Items with no issues and receipts identified in the beginning of the financial year. 10 last year should

113 be

(ii) In the cases, where items have been received without any issues, matter should be investigated. These investigation may reveal either of the following:
(a) Items are few and new project utilisation is expected to be started

in near future.
(b) Items are received for the production (c) The item is a replacement

planned a few months later.

for an obsolete item, but will be issued only after existing stock of the obsolete item is exhausted.

(d) The item is for a product whose production has been suspended or delayed due to temporary slump in the demand.
(e) Items are supplied much ahead

of the requirement.

(j) The item is not required. The immediate action is called for in the case of (d) and (e) by rescheduling the deliveries and reducing the total order quantities. In cast: of (j), immediate stoppage of furthur supplies and cancellation of the pending order has to be done. (iii) A list of items which are in excess of predetermined levels should be prepared and investigation is to be done as to where the level has gone up and whether their supply need to be slowed down.
(c) The Master Production Schedule file contains the master production schedule for each product. The master production schedule (MPS) for a product specifies how much of the end product is needed or is to be produced and when. The MPS is derived from the aggregate production plan based on demand forecast, customer's orders and capacity limitation. the MPS is divided into time periods called time buckets. These time buckets are usually conventional units of time, most frequently weeks, one day, two week and one month time buckets are quite common. The time buckets need not be the same for the entire schedule. The planning horizon for an MPS should be atleast as the cumulative lead time for the product. The cumulative lead time is the amount of time required from when the first procurement or production activity must occur until the end product is produced.


(Ii) If there were randomness is lead times and production rates and variation in defect or scrap rates, production and purchasing could be scheduled to meet all requirements exactly as needed with safety stocks.




The key to adapting to these uncertainties efficiently is to determine which items and processes are most subject to randomness, as well as the type and causes of the variation. For those items in which variations are prevalent, we want to determine whether the variation is in time or in quantity. If the variations are in the quantity produced, safety stocks can make up for small production short falls and keep the process operating. For regularly produced items, small amounts of safety stock of the end product and/ or strategically selected components can compensate for minor production or procurement shortages and possibly for short time delays. GroupB Q. 5 (a) Explain briefly the concept of financial management. State the important characteristics of financial management. (6 + 4) (b) Distinguish between the gross and net working capital concepts. Explain the classification of working capital. (S)

Discuss briefly the factors

to be considered

in deciding

dividend policy.

tbe (5)

Sol. 5. (a) Financial management is the most important branch of business administration. One 'Cannot think of any business activity in isolation from its financial implications. Acceptance and rejection of any business proposition depends on the basis of its financial viabilities. So we can say that finance is considered the lifeblood of a business enterprise. Business finance is a broader term than corporation finance because the latter deals with the financial problems of corporate enterprise whereas the former is considered with the financial problems of proprietorship, partnership companies and other types of business enterprises. Characteristics of Financial Management

The importance of financial management is described below: (a) It is the most. important and excellent tool by which funds are raised from various sources for onward allocation on various projects. (b) It provides designing and implementation of plans for effective utilization of funds so raised. (c) It makes decision on financial matters and reviews their execution. (d) It implies a more comprehensive concept besides profit making on efficiency with broader missioD to maximise the value of the

Winter 2007


firm so that the interests of the different sections of the society remain undisturbed and protected. (e) It is applicable to all types of organisations irrespective of their size, nature whether it is a manufacturing or service organization. (/) It does not merely handle day-to-day routine matters but takes care of more complex problems pertaining to mergers and re-organizations and plays two distinct roles such as safeguarding interests of the corporation and secondly watching the interests of the owners and other sections of the community. In this respect it is a rope-walking exercise and an interested gimmick. (g) Its working has been divided into three main areas such as: (l) decisions on the capital structure (ii) allocation of available funds to specific uses (iii) analysis and appraisal of problems (h) A financial manager is usually located at a high level in an organization, and is one of those who advise the President and Board of Directors under authority and policies are formulated and financial decisions are made. The chief financial officer carries the title of vice-president, serves as chairman of the finance committee and reports directly to the president and board of directors. (I) A financial manager anticipates (forecasts) financial needs and acquires financial resources keeping in view such needs of an organization. (/) A financial manager makes a wise choice between profitability and liquidity inspite of the fact that both are essential and desirable. Profitability means making profit by investing money/capital so raised (liquidity). (b) The terms 'gross working capital' also refers to as working capital which means the total current assets. The term 'net working capital' can be defined as the difference between current assets and current Iiablities. Since current liabilities represent sources of short term funds, as long as current assets exceed the current liabilities, the excess must be financed with long term funds. Working capital can be classified under following two heads. :
(I) Regular or permanent or fixed working capital. Working capital

invested in starting the circulation of current assets and keeping it moving is permanently locked up. For example, every manufacturing concern has to maintain a minimum stock of raw material for works is progress, finished products, loose tools and




equipments etc. It also requires money for the payment of wages throughout the year. (ii) Seasonal variable or special working capital. Requirement of working capital varies with the seasonal changes in many industries. Additional working capital may also be required on account of certain abnormal conditions. For example, for strikes, lockout and to face cut throat competitions, additional capital is required. Similarly, special advertisement campaigns or execution of special orders of the government will have to be financed by additional working capital. (c) The factors which determine the dividend policy of a firm may be divided in into : (I) Divided Payout Ratio, (ii) Stability of dividends, (iiI) Legal, contractual and internal constraints, and restrictions (iv) Owner's Considerations (v) Capital market considerations.


Diffident Payout Ratio. A major aspect of the dividend policy of a firm is its dividend payout ratio i.e., the percentage share of the net earning distributed to the shareholders as dividends. It involves the earnings which constitute a source of financing. The payment of dividends results in the reduction of cash and, therefore, in total assets. Stability of Dividends. The term dividend stability refers to consistency or lack of variability in the stream of dividends. In more precise terms it means that a certain minimum amount of dividend is paid out regularly. The stability of dividends can take any of the following three forms: (i) constant dividend per share (ii) constant stable DIP ratio, and (iii) constant divident per share plans extra dividend. Legal, Contractual and Internal Constraints and Restrictions.
Besides dividend stability and the target payout ratio, the firm's divident decision is also affected by certain legal, constractual and internal requirements and commitments. The legal factors stem from certain statutory requirements, the contractual restrictions arise from certain loan covenants and the internal constraints are the result of the firm's liquidity position.

Winter 2007 affected by the owner's considerations of


Owner's Considerations. The dividend policy is also likely to be
(a) the tax status of the shareholders (b) their opportunities

of investment, and

(c) the dilution of ownership.

Undauntedly, it is impossible to establish a policy that. will maximise each owner's wealth. The firm must aim at a dividend policy which has a beneficial effect on the wealth of the majority of the equity shareholders.

Capital Market Considerations. This strongly affect dividend policy is the extent to which the firm has access to the capital markets. In case the firm has easy access to the capital markets, either because it is financially strong or large in size, it can follow a liberal dividend policy. Inflation. This is another factor which affects the firm's dividend
decision. With rising prices, funds generated from depreciation may be inadequate to replace obsolete equipment. These firms have to rely upon retained earnings as a source of funds to make up the short fall. This aspect becomes all the important assets are to be replaced in future. Q. 6 (0) What is a 'production function' in the context of managerial economics? How many types of production function are there? Indicate hqw, with the help of production function, the optimum combination of factor irtputs can be obtained for a given level oftotal investment. (2 + 2 + 4) (b) What is the basic difference between short-run analysis in the context of theory of cost?

and long-run (2)

The total cost C (x) of a firm is C (x)


xl -

0·02 x2


30x + 5000

where x is the output. Determine: (,) average cost (AC)

(il) slope of AC (ii.) marginal cost (MC)
(iv) slope ofMC (v)

value ofxforwhich

MVC =AVC the variable cost. Also, exhibit the necessary (1.)

where VC represents diagrams.

Sol. (a) Production Function. Production Function is purely a technical relationship which connects input factor and output factor, and is


Engineering Management

concerned with maximization of the output with a giveR input combination, or minimisation of input quantities for a given level of output. Production function is generally written in the form of equation. Q=F(L,C, where )

Q is quantity of output, L is labour and C is capital.


Therefore, we can say that, production function engineering relationship between the input and outputs. Type of production functions systems,

There are three types of production ,) Production

system with one variable input,

iI) Production system with two variable input, and
iii) Production system with three variable input

Optional Combination of Resources. Every firm's objective is to optimize the combination of resources for its production. Let us use and analyse a graph shown in Fig.3.


Units of labour (wokers) _


Fig. 3 : Optimal


of Ruourte!

Knowing the prices for machines and labour (two inputs), different isocost curves are drawn (CoLo, CJL!, C2L2). To minimize the expenditure, the firm will like to produce desired level of output (say for output level 2). on the lowest possible isocost curve. In Fig. 3 given output level is best produced at the cost represented by the isocost curve C J L1• Any expenditure below this point will not produce the desired output.

Winter 2007


Therefore, to optimal combination of inputs which minimize the cost for a given level of output is L of labour and C of capital as given by equilibrium point E) in the Fig. 3. Output is fixed at that point where Iso-cost curve is tangent (l) to Iso-quant curve. (b) Difference between Short Run"nd Long Run Costs. Short run costs are the costs that vary with the degree of plant utilisation i.e. output and other fixed factors. In it fixed costs remain unchanged while variable cost fluctuate with the output. Long run costs, on the' other hand, are the costs that vary with the size of the plant. Short Run is a period which varies from weekto month and long run is a period which varies from a month to year.'
(c) The total cost C (x) of a firm is

C (x)

= 0·005

xl- 0·02



30 x + SOOO Total Cost x -30x+SOOO

The average cost (AC)

O·00Sx3 -0·02x2



SOOO O'OOSx2 - 0·02 x - 30 + -x

Slope of AC,
d(AC) dx



O'OOSx _ 0.02 _ SOOO

Marginal Cost (MC),

dC(x) d x




0·005 x2



0·02 x - 30

Slope ofMC,
d (MC) dx



O'OOSx _ 2 'x 0.02

Variable Cost (VC) = O'OOS.x3 - 0·02 x2 - 30 x



Engineering Average Variable Cost (AVC)


= -




0·005 x2


0·02 x - 30

Marginal Variable Cost (MVC)

d d x (VC)



0·005 x2




0·02 x - 30 0·005 x2 0·02 x - 30


MVe 3

= AVe, then

0·005 x2 x2 -




0·002 x-3~



0·05 [3

x2 ]

= 0·02 [2 x - x]

0·05 x 2 x

x2 = 0·02 x [:.xiO]

= 0, 0·2.



Q. 7 (a) Discuss the aspects and importance of managing the 4 Ps of marketing with reference to environmental issues. (10)
(b) Identify the trends and challenges present context of global competitiveness.


to quality in the (6) (2) risk in a (2)

(c) (I) Distinguish
(il) Distinguish sampling plan.

between p and c charts. risk and consumer's

between producer's

Sol. (a) The four basic tools of the marketing mix according to McCarthy is given below: (i) Product, (ii) Price, (iii) Promotion, (iv) Place.
(I) Product. Activity related to a product are product variety, quality, design, features, brand name, packaging, sizes, warranties and returns. Example - Kotak insurance company introduces the new policy; MRF introduced the concept type of service centres, etc. (il) Price. The following factors are generally considered by the markets in setting prices list price, discounts, allowances, payment period, credit terms etc. (iii) Promotion.



The important promotion -factors are sales sales forces, public relations, direct marketing etc.

(iv) Place. Physical distribution and channels of distribution are the two major components of place. Examples of physical distribution are transportation, storage, order processing. The channel of distribution are

Winter 2007 those routes an which the ownership of products, ideas flow from producer to customers.

121 services and design

In most of the countries the trends and challenges relating to quality in present context changes due to global completion. Companies have started giving due recognition to quality as defined by the consumer for their survival in the face of stiff competition. As quality is defined by the customer, rather than the designer, a number of parameters associated with quality has been redefined. Now, the concept of acceptable quality level has become obsolete. Therefore, the costs associated with quality is nothing but to satisfy in terms of product or services which we provide. As many organisations are embarking upon to adopt total quality management (TQM), there is need to understand about the basic philosophy, cone issue, implementation aspects and pitfalls. (c)(t) Charts for fraction defectives is known as P charts while c charts deals with unit number of defects per unit of a product. In case of P chart, set Using

15 be

the me~r of the fraction defectives Pi in different samples.


as an arc set as usual at n 15

± 3~ n P (1- p)





In case of a C chart, the construction of charts is based on an estimate of 11,which can be obtained by computing c , the average number of defects per unit. The central line of the C chart is then let at control limit at


and two

C ±3../c
(it) Consumer's risk can be defined as probability of lot being bad or even worse than the limiting quality but yielding a good sample and thus getting accepted. Therefore, it is the probability of a defective batch being accepted which otherwise would have rejected. Producer's risk can be defined as probability of a batch being good or even better than acceptance quality level but yielding a bad sample and thus getting rejected. Thus, it is the probability of rejecting a good lot, which otherwise would have been accepted. Q. 8. (a) 'Enterprise- resource planning (ERP) is a business solution.' Justify the statement. (4)
(b) A project has been defined to contain the following activities, along with their required times for completion:

list of

Activity Time (days)



Immediate Predecessors




3 7 6 2 7 9 4


I (,)


Draw the critical path diagram;

(il) Show the early start and early finish times ; (ii,) Show the critical path; and (iv) What would happen it activity Fwas revised to take four days instead of two ? (2 + 2 + 2 + 4) (c) A firm is considering two alternative investments. The first investment costs Rs. 30,000 and the second investment Rs. 50,000. The expected yearly cash income streams are shown in the following table: Cash Year 1 2 3 4 5 Inflow, Rs. Alternative 10,000 10,000 10,000 10,000 10,000 A Alternative 15,000 15,000 15,900 15,000 15,000 bas (6) B

To choose between alternatives A and D, find which alternative the highest net present value. Assume an 8 per cent cost of capital.

Sol. (a) ERP is an integrated system that allows information to enter at a single point in the process and updates a single shared database for all functions that directly or indirectly depend on this information. Most of enterprise in developing countries, such as India, are in the

Winter 2007


process of implementing enterprise resource planning (ERP) systems in alignment with organisational transformation and process re-engineering initiatives. ERP systems promise benefits that range from increased efficiency to translation of quality, productivity and profitability. However, its implementation pose some unexpected organisational challenges and changes that can be structural as well as cultural in nature. ERP not only help establish world class best business practices but also brings transparency to the organisation. It also demands empowerment and flexibility in decision making process. We can summarise the ERP benefits as follows: (I) ERP facilitates a company-wide integrated information system covering all functional areas such as manufacturing, sales and distribution, accounts, payables, receivables, inventory, human resources, etc. (ii) ERP integrates and automates most business processes and shares information enterprise-wide in real time, thereby improving customer service and the corporate image. (iii) ERP provides complete integration of the system not only across depentrnents but also across companies under the same management.

ERP is the solution for better project management.

(v) ERP not only addresses the current requirements of the company but also provides an opportunity for improvement and refinement in the business processes on a continuous basis. (b)(,) The network diagram is shown in Fig. 4.

Fig. 4.

124 Activity A B C D E F G H I Normal time (days) 1 4 3 7 6 2 7 9

Engineering Early Start time (days) 0


Early Finish Time (Jays)



8 5 8 11 8 18 11 11 18 18 22

(iii) The critical path in the Fig. 4 is A - B - E - G - I


1 - 2- 3 - 6 - 7 - 8
(iv) Given that,

Normal time for activity F is 4 days

Fig. 5.

The project completion time in this case is 23 days and the critical path A - D - F - G - I

Alternative 'A'

Initial investment First Year,

Rs. 30, 000.

Interest rate, i = 8%

= 10000/ (1 + 0·08) = Rs. 9259.3/-

Winter 2007 10000 (I + 0.08)2 10000 (I + 0.08)3


Second Year,


= Rs.


Third Year,


= Rs. 7938.3/-

Fourth Year,

10000 = (l + 0.08)4 10000 = (l + 0.08)5

""Rs. 7350.3/-

Fifth Year,

= Rs. 6805.83/-

Total income fomr alternative A


Rs. [9259.3 + 8573.4 + 7938.3 + 7350.3 + 6805.83] - 30000 = Rs. 9927.13/Alternative 'B' Initial investment = Rs. 50, 000/Income in 15000 1st Year, = (1+0.08)1


15000 2nd Year, = (I +0.08)2

= Rs. 12860.0/-

15000 3th Year, = (I + 0.08)3

= Rs. 11907.48/-

15000 4thYear'=(l+0.08)4 15000 5th Year, = (l + 0.08)5


= Rs.

10208.75 /-




.. Net Income =Rs. [{ 13888.89 + 12860 + 11907.48 + 11025.45 + 10208.75 }- 50000]

Rs. 9890.57 /-

Alternative 'A' is nore beneficial than alternative '8'. Groupe

Q. 9 Write the correct answer for the following: t




(,) In a PERT network, expected time estimate (te) is calculated as


a+4m+h 6

based on the assumption
(a) normal distribution

of oftime estimates oftime estimates

(b) exponential


(c) beta distribution

oftime estimates oftime estimates. used, tbe key element necessary in

(d) gama distribution (i,) Regardless determining the

of approach

the level of safety stock which should be carried is

(a) demand for items being inventoried

(b) length oflead time
(c) lead time demand

for items

(d) cost of stockout per unit of time. (ii,) Talyor's philosophy of scientific management
(a) convert inputs to desired outputs (b) plan appropriate (c) time management (tf) develop a scientific method for each element of work so as

pays attention to


to replace rule of thump.

Functional organization
(a) Frank Gilbreth (b) F.W. Taylor

was developed by

(c) ASME

Winter 2007 (d) Gantt


(v) The time elapsed between the placing of an order and its arrival

(0) cycle time (b) lead time (c) work station process time

(d) None ofthe above. (VI) Function of finance includes (a) investment decision
(b) wage and incentive distribution (c) sales distribution

(d) costing the products. (vii) Economic order quality is influenced too much by
(a) lead time

(b) inventory carrying cost
(c) variable demand rate


(d) production rate. (vii,) Manufacturing known as (II) job production (b) batch production
(c) continuous production

a number of identical parts or products

in lots

either to meet a specific order or to meet continuous

demand is

(d) flow production. (Lx) The elasticity of total cost of the function, C = :zx2
(0) (4

+ 4x + 3, is

(b) (c)

xl + 4x) I (2 xl + 4x + 3) (2 xl + 4x + 3) I (4 xl + 4x) (4 xl + 4x) (2 xl + 4x + 3)

(d) None of the above.




At break-even point,
(a) total cost> total revenue (b) total cost < total revenue (c) total cost = total revenue (t/) None of the above.

Sol. 9.
(i) (c) (vi) (a) (ii) (c) (vii) (c) (iii) (d) (viii) (b)

(iv) (b)
(ix) (c)

(v) (h) (x) (c)

A.. S. Chauhan '; R .. S. Vaishwana,.·

3~a RevIsed Eilt

P(l.';~; .. B'~l;l ,.




. ·'s··


GroupA Answer FIVE questions, taking any TWO from Group A, ANY TWO from Group Band ALLfrom Group C. Figures in the bracket indicate full marks. Q. 1 (a) Explain the classic three-fold proposed by Harbison and Myers. concept for management as (6)



(b) What are the different functions of management? the roles of managers as per Mintzberg's findings. (c) Classify organizations

Briefly explain (2+6) Explain one of (2+4)

by the nature of authority?


Sol. (a) Harbison and Myers had offered a classic threefold concept for emphasizing a broader scope for the view point of management. They observed management as : (i) An economic resource (ii) A system of authority and (iii) A class or elite. (i) An economic resource: Economists treat management as one of the factors of production together with other factors such as land, labour and capital. As Industrialization of a country increases, the need for management becomes greater as it is substituted for capital and labor. So Harbison and Meye- treated management as an economic resource. (ii) A system of authority: Historically, management first developed an authoritarian philosophy with a small number of top individuals determining all actions of the rank and file. (iii) A class or elite: Sociologists view management as a class and status system. The increase in the complexity of relationship in modern society demands that managers become an elite of brains and education. Entrance into this class is based more and more on education and knowledge instead of on family and political connections.
(b) Different functions of management

: ReferQ. 1. (a) Summer 2005.

The ten managerial roles identified by Mintzberg : (A) Impersonal roles:

The figurehead role (performing ceremonial and social duties as the organization's representative) The leader role The liaison role (particularly with outsiders)

(2) (3)

82 (B) Informational

Engineering roles:


The recipient role (receiving information about the operation of an enterprise) The dissiminator role (passing information to subordinates) The spokesperson's role (transmitting information to those outside the organization).


(C) Decision roles: (I) (2) (3) The entrepreneurial role The disturbance handler role The resource allocator role

(4) The negotiator role (dealing with various persons and groups of persons)
(c) Classification

of organization

according to authority.

These are:
(I) (ii) (iii)

Line or scalar organisation Line and staff organisation Functional organisation Line, staff and functional organisation Matrix organisation.


(i) Line organization. In this type of organization authority descends from the top of the heir to its bottom level, step by step through downward delegation of authority. It involves the establishment of a tapering authority on vertical line under which subordinates become responsible to their immediate superiors. In fact, these lines are the channels through which the authority flows from its source of origin to the point of action. All the major decisions and orders given by the top executives are passed down to their immediate subordinates who in turn break up decisions into specific instructions for the purpose of their execution by another set of their subordinates. Since the authority flows from the topmost executive to the subordinates at the lowest level in a more or less straight line, it is named as 'line organisation'. The term 'line' has been borrowed from military administration and may be explained with reference to it. Refer to Fig. I which illustrates the 'line organisation'.





Fig. I Line organization.

Q. 2. (a) Define leadership factor model of motivation.

and motivation.

Explain Herzberg's


(b) How do forecasting and decision-tree and decision making in an organization?

techniques help in planning (5+5)

Sol. (a) Leadership: Leadership is defined as influence, that is, the art or process of influencing people so that they will strive willingly and enthusiastically toward the achievement of group goals. Motivation: Motivation is the result of processes, internal or external to the individual, that arose enthusiam and persistence to pursue a certain course of action. Two factor model of motivation: This model is also called motivationhygiene theory. There are two distinct aspects of the motivation hygiene theory. The first and more basic part of the model represents a formally stated theory of work behaviour. The second aspect of Herzberg's work has focussed upon the behavioural consequences of job-enrichment and job realization programmes. According to Herzberg, satisfaction and dissatisfaction are not opposite poles of one dimension, they are two separate dimensions. Satisfaction is affected by motivations, and dis-satisfaction by hygiene factors. To achieve motivation, managers should cope with both satisfiers and dissatisfiers, improve hygiene factors. Dissatisfaction is removed from the mind of employees. A favourable frame of mind is now created for motivation. It provides satisfaction, and motivation will take place. Managers should be realistic and should not expect motivation by only i",proving the 'hygienic' work environment.




Fig. 2 (a) and (b) shows the essence of the Herzberg model.
Hygiene factor Motivators

Fig. 2. (a) Hygiene factors and motivators
Hygiene factors

~ ,
No dis-satisfaction

~ +


+ +
Satisfaction No satisfaction

Fig. 2. (b)



views of satisfaction

and dissatisfaction.

Role offorecasting in planning and decision making:

Forecasting is the art and science of predicting future event. Although accurate forecasting has always been important for managing organizations in recent times because nowadays organizations have become larger and complex, and changes occur more rapidly. Short term forecastings are used for typical decision making such as job sequencing, production scheduling, machine assignments, personnel scheduling, purchasing and inventory planning and maintenance planning. Intermediate term forecasts are most commonly used for aggregate production planning, including decisions that alter shorter term capacity such as subcontracting and overtime. Long term forecasts are commonly used for planning the introduction of new products and major capital expenditures, such as new facilities or capacity expansion. Production managers are primarily concerned with forecasts of demand. Forecasting technique is used to estimate raw material prices, plan for appropriate levels of personnel, help to decide how much inventory to carry over etc. This results in better use of capacity, more responsive service to customers, and improved profitability.

Summer-2007 Role of decision tree in planning and decision making:


A decision tree is a schematic diagram that shows the alternative outcomes and interdependence of choices in a multiphase, or sequential, decision process. The treelike diagram is constructed from left to right, using square boxes for controllable or decision points and circles for uncontrollable (chance) events. Each branch leads to a payoff that is stated in monetary terms on the right. Decision trees are analyzed backward (from right to left) by multiplying the payoffs by their respective probabilities (which are assigned to each chance event). The highest expected value identifies the best course of action and is entered at the preceding decision point. This becomes the expected value for the next higher order expectation, as the analyst continues to work back to the trunk of the tree. Decision trees help to structure decisions in an objective way, force an explicit identification of alternatives, and a clear distinction between control lab Ie and uncontrollable variables. They also permit us to incorporate uncertainty in a systematic and objective way. Fig. 3 shows a decision tree of a manufacturer of small power tools faced with foreign competition, which necessitates that it either modify its existing product or abandon it and market a new product.
Decision 1 Decision Payoff RS.2,OOOoo



Rs. 15,00000




Rs.3.00000 Rs. 10,00000 RS.5,OooOO

Rs.30,OOooO Rs. 60,00000

Fig. J.

At chance event (2)

Engineering Management

Drop price branch:
L (x) = 200000 x (0,2) + 1500000 (0'8) == Rs. 124,0000

Raise price branch:
L (x) = 400000 x (0,9) + 2000000 x (0'1) == Rs. 5,60000 :. Choose to drop price. The Rs. 12400000 is an expected monetary value (EMV) and can be entered above the square box under Decision 2 At chance event (1)

Ifdemandislow: Rs. 1240000 If demand is high: Rs. 4000000

x (0'3)=


x (0'7) = 2800000

L (x) == Rs. 3172000 Similarly, for new product at Decision (2) L (x) = Rs. 860000 x (0'7)+ 124000 x (0'3)= 639200 at Decision (I) L (x) == Rs. 3172000 . .'. The new product launch have a higher expected value and is selected at the best course of action under the expected value criteria. Q. 3. (a) Why is the facility location decision important to an organization ? What factors do affect the choice oflocations in manufacturing? How do the location decisions for service facilities differ from that ofmanufacturing facilities? (4+4+4)
(b) What is layout planning? Based on the firm's flow strategy, how many basic types of layout are possible? How do you design for a process layout? (2+2+4)

Sol. (a) Refer Q. 3. (a) Summer 2005 and also Q. 4.(a) Winter 2006.

Services are a/two types:
(i) Facilities based services, and
(ii) Fixed-based


Facilities based services are those for which the customer must go to the facility, such as a grocery-store, airport or hospital. Field-based services are services provided at the customer's location, such as furnace repair. Normally, field based service systems must be more flexible. Service personnel do

Summer-2007 not have easy access to the personnel, equipment, and materials at a base facility, so they must be more self sufficient in terms of their skills, equipment and materials. Facilities -based services, such as hotels and retailing services, often produce more standardized services; consequently, the service system can be designed to exploit this standardization by using labour specialization and greater automation. In some cases, whether the service will be facilities based or field based is dictated by the technical and physical aspects of the service such as hotel loading. In other cases, the same general service can be either field based or facilities based, depending on the organization's strategy. For example, most physicians will treat patients only at their office or in a hospital, but an increasing number are beginning to make house calls (again).
(b) Facility layout planning procedure is elaborate and complex and in order to cover the subject adequately one should consider the following steps in full details:

• Procure basic data. • Product analysis and design of production process. • Make or by part's decision. • Calculation for equipment required.

Accumulate layout data. Sketch plot plan. Plan general flow pattern. Consider general material handling plan. Plan individual work station. Construct master layout. Develop alternative layout and evaluate.




• Determine space requirement.

• Adjust and select the best layout. • Check final layout.

Also Refer

Q. 4.(b) Winter 2006.

Q. 4. (a) What is the purpose of materials management? What factors do contribute significantlyin material requirement planning and how? (2+7)
(b) What are the costs for holding inventories? What types of inventories does a business own? (2+3) (c)

Perform ABC analysis using the following data:


Item 1 Units



Unit Price (Rs.

2 3 4 5 6 7 8 9 10 11 12

700 2400 150 60 3800 4000 6000 300 30 2900 1150 410

5·00 3·00 10·00 22·00 1·50 0·50 0·20 3·50 8·00 0·40 7·10 6·20

Sol. (a) Purpose of materials management: Materia[s management provide simple tools to maximize profit to the company by reducing the material cost of the product. Importance ofmateria[ management is necessary due to following trends:
(i) Globa[ization

(ii) Reduced time to market, (iii) lust-in-time inventories.

(iv) Large variety/shorter life cycles,
(v) Responsibility

The main purpose of materials management is cost reduction and efficient handling ofmateria[s at all stages. Factors which contribute significantly in material requirement planning are as follows: (i) Master production schedule (MPS) file, (ii) The bill ofmateria[ file, and (iii) The inventory record file. The master production schedule file : This file contains the master production schedule for each product. The MPS for a product specifies how much of the end product is required or is to be produced and when. This is derived from the aggregate production plan based on demand forecast customer orders, and capacity limitations.

Summer-200l The bill of material assemblies, subassemblies duce the product.

file : The BOM file list for each end products all components and raw materials necessary to pro-

The bill of material is an index of the parts that were used in the product. The following information should be included in the bill of material.
(i) The item number (ii) The part number

(iii) The quantity needed in the assembly (iv) The name and description of the component.
(v) The material from which the component is made. (vi) The source of the component. (vii)

The cost of the individual component.

The inventory record tile : This file lists the current inventories and outstanding purchase and production orders for each item. The accuracy of inventory file is most crucial and is most prone to error. For example, if components are removed from the stock and used for an operation, but this action is not recorded in the inventory record file, the company believe it has components that are really not available. This can cause to schedule subsequent production using non existent components. Ultimately, the schedule production will not occur due to shortages, and ordering of the needed components will be delayed.
(b) Inventory holding cost: The holding cost is the cost of actually keeping items in inventory. The primary components of holding costs are:

(i) The opportunity cost of capital, (ii) Taxes and insurance, (iii) Breakage, spoilage, pilferage, and obsolescence, (iv) Handling and storing. An inventory consists of usable but idle resources such as raw materials, component parts, finished assemblies, and money etc. According to the need, inventories can be classified as follows: (;) Economic lot size: Since there is a fixed cost in procurement, hence it is economical to order beyond the immediate needs and divide the fixed ordering costs among the large number of units. and



(ii) Stabilizing inventories: Some inventories are accumulated due to mismatch of the timing of production and sales on the other hand, demand is not predicted accurately, so some reserve stocks are necessary. These reserves are called fluctuating or stabilizing inventories. (iii) Anticipation inventories: These inventories are required to meet seasonal demand, high demand during promotion programme and demand during temporary shut down of the plant for repair or maintenance. (iv) Transportation inventories: These inventories include raw materials and supply inventory which are in transit and have already been paid for finished goods whose payment is not received.
(c) Item code 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Item Number 700 2400

Unit Price (Rs) 5·00 3·00 10·00 22·00 1·50 0·50 0·20 3·50 g·OO 0·40 7-10 6·20 Usable Value (Rs.) (700) (5·00) (2400) 3 ·00) (150)(10·00) (60) (22·00) (3800) (1·50) (4000)(0·50) (6000) (0·20) (300) (3·50) (30) (g·OO) (2900) (0·40) (1150)(7·10) (410)(6·20) ~3500 ~7200 ~ 1500 ~ 1320 ~5700 ~2000 ~1200 ~ 1050 ~240 ~ 1160 ~g165 ~2542

60 3800 4000 6000 300 30 2900 1150 410

Total of usable value ~ 35577

After working out Table-I, next requirement is the rank of these 12 items by their annual values and see 'natural' breaks or "gaps" between A and B classes as well as between the Band C classes. This is done in Table-II.



Item Annual value (in Rs.) 8165 ] 7200 ] 5700 3500 ] 2542 7 Item Annual value (in Rs.)

11 2 5 1 12 6 3 4

1200 ~
10 8 9 1160 1050 240

1500 1320

Grand Total of 12 items
= 35577

If you note you will find that the first 3 items (11, 2, 5) have a large annual value; the next 5 items (1, 12, 6, 3,4), a moderate annual value and the remaining four items (7,10,8,9), a small annual value. Therefore, it would be appropriate to classify these as "A", "B" and "C" items respectively. After this we can now compute the percentages of items and annual value in each class as shown in Table-III Table-III
Item Annual value (in Rs.) Class Annual value (in Rs) Percentage of items in class Percentage of annual value in class 21065 -x100 =59,20% 35577


816' ]
7200 5700 21065



-x 100=25% 12


2 5

1 12

3500. 2542 B 10862



10862 --x 100 35577 =30,53%


2000 1500 1320 • 10862





10 8 9 1160 1050 240 3650




4 -xIOO 12 = 33·3%

3650 --x 100 35577 = 10·25



21065+ 10862+3650 = 35577 From percentage of annual value in each class following results are drawn. (1) Item 11,2,5 should be tightly controlled (2) Item I, 12,6,3 and 4 should be moderately controlled.

(3) Item 7, I 0, 8, 9 should be loosely controlled. The following figure summarise the result of A, B, C analysis.


~ rJi a::
(J) :J


20 0
25% 41·66% 33·3%

Fig. ~

GroupB sheet. Q. 5. (a) Present the account form as well as report form ofa balance(4)

(b) What is investment analysis? Why is it of great importance to a firm? Discuss a method of evaluating investment proposals. (2+3+5) (c) What is the present value of the following cash stream, if the discount rate is 14 per cent? (6)

Year Cash flow



2 8000









Sol. (a) The balance sheet shows the financial condition of a business at a given point of time. Table (a) and (b) shows the account as well as report form. Table 1. (a) Balance sheet (Account form)

~ Creditors ~ Share capital ~ Reserves and surplus ~ Secured loans ~ Unsecured loans ~ Current liabilities and provision (I) Current liabilities (ii) Provisions

~ Fixed assets (Furniture & Fixtures) ~ Investments ~ Current assets, loans and advances ~ Liquid asset, (Cash) (i) Current assets (ii) Loan and advances ~ Closing stock ~ Debtors Table 1. (b) Balance sheet (Report form)

l. Sources of funds
(A) share holder's funds (i) Share capital

(ii) Reserves and surplus (8) Loan funds (i) Secured loans (ii) Unsecured loans 2. Application offunds
(A) Fixed assets

(8) Investments (C) Current assets: loans and advances (less) : Current liabilities and provisions ~ net current assets (D) Miscellaneous expenditures.
(b) Investment analysis: Investment analysis is nothing but assessing the financial performance and condition of the firm. After analysis, we can forecast and plan the financial future of the firm, estimating the financial needs of the firm, and instituting appropriate systems of control to ensure that the actions of managers are congruent similar with the goals of the firm.

Investment analysis is the key to management decision. It is necessary for every organization either manufacturing or service type. Investment analysis gives the answers to following questions.




(i) What capital expenditure is required for manufacturing the new prod(ii) What total production costs per piece are envisaged? (iii) What is the reasonable margin of profit that can be expected? Investment analysis is also necessary due to following reasons: (i) Maximization of profit, (ii) Maximization of earnings per share, (iii) Maximization of return on equity Pay back period method. The payback period is simply, the length of time required for return from an investment which is equal to the amount invested. More precisely, it tells how long it takes to get the investment back. The payback period should always be greater than the assets expected as follows: Required investment Payback period Annual receipts- annual disbursements First cost Annual savings
(c) Given,

Discount rate (i) = 14% We know that, present value of a single amount PV FV (l+it


where, PV= present value, FV= future value, n Year Cash flow (Rs.) 5000

number of years.

Present value (Rs.) 5000 6000 (1+0014)1 8000 (1+0·14)2 9000 (1+0·14)3 8000 (1+0·14)4


2 8000

= 5263.16

= 6155.74 = 6074 .74
= 4736.64





Net present value

= Rs. 27230·28


Summer-2007 Q. 6. (a) Define quality. What are the costs of poor quality?
(b) What are the five pillars of total quality

95 (2+3) Define (1+3+3)


Deming's PDCAcycle.

Explain Juran's


(c) Define assignable causes and common causes of variation. The ABC company produces incandescent light bulbs. Following data on the number of lumens for 40 W light bulbs were collected when the process was in control.


1 2 610 600 570 600 620


600 590 580 620 570



Construct x chart [the value of A2 for n = 2 is 1·881. Sol. (a) Quality: Quality implies the ability of a product or service to satisfy a stated or implied need on the other hand, a quality product or service is free from defects or deficiencies. Costs of poor quality Four basic costs are associated with poor quality as given below: (i) Prevention cost: Those costs incurred in planning, implementing and maintaining a quality system. (ii) Appraisedcost: Costs incurred in determining the degree conformance to the quality requirements.


(iii) Internalfailure: Cost incurred when materials, parts, and components fail to meet the quality requirements for shipping to the customers. These parts are either scrapped or reworked. (iv) External failure: Costs incurred when products fail to meet customer expectation. These result in warranty claims, ill will, or product liability suits. (b) Five pillars oftotal quality management. These are the five elements or pillars ofTQM system. (i) Quality vision and goals (e.g., a defect free or competitively benchmarked product) (ii) Strong customer focus (in partnership



Management needs.

(iii) Thorough knowledge of company processes and customer's (iv) Continuous employees, etc.) (v) Performance

improvement (via team approach, using empowered measures to track results.

Deming's PDCA cycle: The plan-do-check-act (PDCA) cycle is a convenient mechanism, promoted by Edwards Deming, for fostering continuous improvement. It is typically depicted as a circle that begins at the top with (1) the plan that includes problem identification, data collection and analysis, and a plan for improvement. (2) Do element represents a trial implementation of the plan, and (3) check is the evaluation of data to see if the plan is fulfilling expectations. Finally, (4) act symbolizes either the full adoption of the plan or adjustments to it.

Fig. 5 PDCA cycle

Juran's trilogy: Juran characterizes his quality management philosophy as a quality trilogy. Quality trilogy is made up of (i) Quality planning, .(ii) Quality monitoring and quality control, and (iii) Quality improvement. Some of his distinctive contribution include attention to the customers as the determinant of quality, an emphasis on identifying the true costs of quality, making trade off that promote the use of more quality planning rather than corrective action after poor products are made and striving for continuous improvements.
(c) Assignable causes of variation : These are identifiable factors that can shift the central tendency of a process or generate some instability.

Common (random) causes ofvariation. These are inherent factors that are expected as a normal (though often unexplained) aspect of operations. They do not cause a shift in the central tendency of a process.



Mean for sample (I),



= = =



= 605 = 595 = 575 = 610

Similarly for,



580+570 620+600 2



- =

and i

= 570+ 620 = 595


Control limit for i chart, Upper control limit (UCL)

x ..... A2R

and Lower control limit (LCL)

x - A2 R

"{ = 605+595+575+610+595 5

Calculation for rar.ge
Forsample, I,


= (xmax

-'"'11In') 600= 10

RI =610-


R2 = 600 - 590 = 10 R3 = 580- 570= IO R4 = 620- 600 Rs =620-570=
= 20


Ii= Ii =

Rl + R2 + R3 + R4 + Rs 5 10 + 10+ 10 + 20 + 50



UCL = 596 + 1·88


= 633·6

20= 558·4


- - -;- - -j - - - :- - - -;- - -j I I I


UCL = 633.6

s ~--~--~.r---*---~--~~CL=596 <;> ~





!11 III






- - '7 - - -: - - - ~ - -

+ - - -: _._

LCL = 558.4


'-__ ~ __ ___... ...__ _ ,___+_


3 Fig. 6.



Sample number



It can be seen from the fig .6 that no value of


is out of the control limit.

Q. 7. (tl) What is product development? Why is product development a critical determinant of an organization's success? Define product life cycle. (2+3+2)
(b) Define marketing and marketing management. What are the key factors affecting pricing decision. Explain cost approach for pricing.

(3+3+3) (c) A process costs Rs. 200·00 to set up. The run time is S min per piece and the run cost is Rs. 30·00 per hour. Determine the (I) fixed cost and variable cost; and (ii) total cost and unit cost for a lot of 500. (2+2) Sol. (a) Product development: Modifying an existing product to meet the changing requirements of the market is known as product development. Product development is a specialized activity which may result in the creation of new product or modification of the existing product. One of the reasons for modifying an existing product is to improve its customer appeal. This can be accomplished by : (i) Reshaping the product to conform the current styling trends, (ii) Adding new features that will set the product uniquely. (iii) Giving the product a new package that will produce a new look or image. Another reason for modifying an existing product is to reduce its production cost. This is best done by redesigning the product so that the cost of materials' that go into production can be reduced. Even after the product has been standardized, the development function should be directed towards finding out newer and better methods of manufacturing the product, or newer or better substitution of materials which are possible through R&D programme.


Product life cycle: Most new products that are offered to the public go hrough a product life cycle which indicates how long the product will survive. During its life a product passes through the following five stages as shown in Fig. 7.




I • ..


I • •


I • ..

Decline and

Satunition lobsolescence!

.. ..


Fig 7. Product

lif~ cycle

(b) Marketing: Marketing mediates the interactions between the firm and its customers. Marketing often facilitates the identification of product opportunities.

All the production activities are necessary and worth while, but it must be emphasized that they would all be useless without the ultimate sale of the product to a customer. The customer may be a consumer who enjoys and ultimately 'consume the product.

Marketing management: Marketing management is concerned with planning, organizing, directing and controlling the activities relating to the marketing of goods and services to satisfy the desires of customers.

The functions of marketing management consists of (i) marketing research, (ii) product planning, (iii) advertising, (iv) sales and (v) product service.

Factors affecting pricing decision: Pricing is the process of fixing the price for a product or service. The price means the exchange value of a product or service expressed in terms of money. The price is generally fixed on the basis of three factors namely. (I) Cost of production (ii) Demand for the production (iii) The degree of competition in the market.




Cost approach for pricing: Cost approach for pricing is mainly depend upon demand orientation. A high price is charged when the demand is strong and a low price when demand is weak, although the unit cost may be the same :n both case~. This is referring to the customer's perceived value of the prodet, and this value will include not only the performance of the product itself out psychological factors and service characteristics of the seller's offer. While this approach can be of works to many manufacturers, it has been and will be effective provided that the seller can maintain those perceived values or create new ones. In one case a replacement part was priced at three times as much 'is exactly the same part when specified for another brand/company. In sort of -everse twist on the perception idea, at a product was not selling well at all what was thought to be a reasonable price. It was removed from the market, epacked in a much more attractive manner, and returned to the market at four times the original price 't soon enjoyed very brisk sales.
(c) Given data ;

Setup cost

= Rs. 200;

Run time


5 min/piece; Run cost

= Rs 30 Ihr;

No. of pieces per hour = 5" x 60 30



12 pieces /hr,

Run cost per price =

12 = Rs. 2 ·50 piece


(I) Fixed cost = Rs. 200

Variable cost


Rs. 2·51 piece


(ii) Total variable cost for 500 units,
= 2·5 x

500 = Rs. 1250

Total cost = fixed cost + total variable cost
= Rs.(1250+200) =

Rs. 1450

unit product cost at break even


Rs. 1450 500

Rs. 2·9 /piece


Q. 8. (a) Define project. What are the elements ofa successful project? What tools are available for scheduling and controlling projects? (2+2+2)
(b) Give the following network and activity times:



Fig. 8


Optimistic Time 6 8 2 6 5 5 4 2·5

Most likely Time

Pessimistic Time 14 12 4 8 9 9 8 3'5 (7) (2) (1)


10 3




6 3

(I) Calculate the expected time and variance for each activity.
(il) What is the critical path? (iii) How long will it take to complete this project?


(iv) What is the probability that the project will be completed within 25 (4)

Sol. (a) Project: A project is a specific activity on which money is spent in the expectation of returns. It has a specific objectives, and has a specific geographic location and would serve a group of population while selecting a project, out of various alternatives, the decision is taken after careful consideration of cost and benefits. A successful project manager must simultaneously basic elements of a project. (i) Resources, (il)Time, (iii) Cost, and (iv) Scope Tools for scheduling and controlling projects are as follows:
(a) Gantt chart,

manage the four

(b) Critical path method (CPM)



(c) Programme evaluation review techniques (PERT)
(b) We know that;

Expected time for each activity (t )

= --'----- 6

tp +4tm +to

where, tp = Pessimistic time tm = Most likely time to = Optimistic time, and t = Expected time. and vari:nce

of each activity,





p ~ to

(14;6r (' 2 6 =1.78 -8r = 0 .44 =0·11 =0·11 = 0·44 =0·44 =0·44 = 0·028 (4~2r (8~6r (9~5r e~5r (8~4r

Table 2 Activity A B C to tm tp

6 8 2 6 5 5 4 2·5


14 12 4 8

6+7x4i-14 6
10 ...






7 5·5 7 6 3

7 6 7 6

9 8 3·5




(i) expected time and variance of each activity is shown in table 2. Ui) Critical path determination The given project is shown in Fig. 9 with expected time of each activity.

Summer-2007 103

Fig. 9

The critical path in the network is A-C-£-G i.e., 1-2-3-4-6 (iii) Project take 23 days to complete. (iv) The standard deviation along the critical path,

a =ir.a~p
=> .. a =.JI·78+0·11 a =1,66
+0·44 +0·44

Now the probability that the project would occur in (Til) i.e., 25 days is til -te 25-23 1 205 Z =-=> Z=--=' a 1·66 :. Probability is 1·205 GroupC Q. 9. Write the correct answer for the following:
(I) The 'father of scientific management' (a) F.W. Taylor


is (b) F.A. Gilbreth (c) M.L. Cooke (d) H. Emerson. (il) The 'classical management principles in terms of human factors' was proposed by (a) Elton Mayo (b) M.P. Follett (c) F.W. Taylor (d) Kurt Lewin (iii) Anthropology is one of the disciplinary bases for management, which deals with (a) measurement and analysis of physical factors in achieving efficlency (b) development ofa sociotechnical model for employees' health and safety improvement.




(c) cultural variations and discoverable patterns of behaviour from history and environment (d) allocation of scarce resources with orientation to future (iv) The management function 'organizing' focuses on the (a) process by which tbe structure and allocation of jobs are deter-

mined (b) course of actions that can be chosen from available alternatives

process by which manager anticipates the future (d) process by which managers select, train, promote, and retire subordinates. (v) The following is not a basic component of an inventory control system: (a) Planning what inventory to stock and how to acquire it (b) Forecasting the demand for parts and products (c) Organizing the internal inventory users and explain how they can help to control inventory costs (I/) Controlling inventory levels. (VI) PERT never uses (a) activities with probabilistic times (b) dummy activities (c) activity variance estimates (d) None ofthe above. (vii) If the cost of manufacturing (direct material and direct labour) is 60% ofsales and profit is 10% of sales, what would be the improvement in profit. If the cost of manufacturing is reduced from 60% to 50% keeping other expenses constant? (a) 50% (b) 200% (c) 75% (d) 100% (viil) Acompany requires 9000 units ofa certain item annually. It costs Rs. 3·00 per unit. The cost per purchase order is Rs. 300·00 and the inventory carrying cost per unit per year is 20 per cent of the unit cost. The economic order quantity for the company is (a) 4000 units (b) 35000 units (c) 3000 units (d) 5000 units (a) Benchmarking used to develop objectives by (a) obtaining reports from the government (b) using SMART objectives (c) making comparisons with excellent or best-practice companies (d) listening to suggestions from employees (x) Managers who displays Theory X behaviours are (a) autocratic (b) democratic (c) participative (d) situational Sol. (I) (a) (il) (a) (iiI) (c) (iv) (a) (v) (c)
(c) (VI) (d) (vii) (d) (viii) (c) (ix) (c) (x) (a)

Answer FIVE questions. taking any TWO from Gro!4P A, ANY TWO from Group II tIIId ALL/rom Grollp C Figures in the bracket indicate full marks. Group A Q. 1 (G) Discuss the contributions ofF:'" Taylor. (b) I_kate w.y tIM .ifter ......... __ at .. creater impert.aee at tliffereat levels ef .. erc .. batten. (10)





Sol. (a) F.W. Taylor (1856-1915) was an American and he began his career as a machinist in Midvale steel works in Philadelphia, USA, and rose to the positron of its chief engineer. Taylor was basically concerned with the problems of increasing labour productivity without putting undue strain on workers. He conducted several experiments and through his practical experiments he developed a theory of management which came to be known as 'Scientific management'. Therefore, Taylor is known as the 'father of scientific management'. Scientific management implies the application of scientific methods of study and analysis to the problems of management for improving efficiency. It involves observations and analysis of each task, determination of the standards of work, selecting and training men to perform their jobs and ensuring that the work is done in the most efficient manner. The main objective of scientific management is to increase the efficiency of production in industrial organisations. Also refer Q. 1. (b) Summer-2006. (b) According to Koontz management is as follows: (i) Planning (iii) Staffing (v) Controlling These function are so interwovened that in actual practice, it is not possible to separate them from one another. The importance of these. functions are listed below : (i) Planning : Planning involves deciding in advance what to do; when to do it, where to do it, how to do it and who has to do it. It implies determination of the objectives to be achieved and selecting the right course of action to achieve the desired objectives. The process of planning consists of the following steps : (a) Establishing objectives and O'Donnell, classlfleatien of

(ii) Organising (iv) Directing

66 (b) Making forecasts

Engineering Management Formulating policies, procedures and rules.

(d) Drawing programmes, 'schedules, budgets, etc. (U) Organising: To organise business means to provide it with everything useful to its functioning-raw materials, tools, capital and personnel. Process of organising involves the following steps : (a) Indentifying the activities necessary to achieve the objectives. (b) Grouping similar activities into manageable units. (c) 'Assigning duties or tasks to appropriate individuals. (d) Delegating necessary authority to individuals and fixing responsibilities for results. . (e) Defining authority-responsibility relationship among individuals. (iii) Staffing: It is basically concerned with human resources. Its aim is to fit individuals andjobs i.e., the right man for the right job. The board of directors perform staffing of chief executives, who in turn perform this in relation to departmental managers. The departmental heads train and appraise supervisory personnel, who in tum are associated in the selection and training of the workers. (iv) Directing: A manager may plan and organise, but no tangible results can be achieved until the plan is implemented. This is done by directing, which means moving into action. The directing function involves continuous interaction between manager and his subordinates. Directing functions are as follows : (a) Issuing instructions and guidelines to the subordinates. (b) Influencing and supervising the subordinates. (c) Advising, coaching and counselling subordinates to work in the desirable manner. (d) Communicating with people to create mutual understanding and team work. (v) Controlling: Controlling means process of ensuring activities of subordinates and using resources in conformity with the predetermined objectives and targets. It involves observing what is being done, how well it is being done, to what extent it deviates from the desired results and thereafter taking corrective measures. Q.2 (a) How is formal organization different from an informal



(6) Explain, with, suitable examples, the important principles used in de\'eIopinl an organization. . (12)



Sol. (a) Distinction between formal and informal organisations:
Basis of distinction
1. Formation

Formal organisation
Deliberately planned and created by management To achieve planned of the organisation and fulfill common A well defined goals interests

Informal organisation
Emerges spontaneously as a result of social interactions among people To provide satisfaction No clear-cut A complex relations social to members structure. network of

2. Purpose

3. Structure


stakes and relationships 4. Flexibility Rigid, stable and predictable Jobs, functions and technical aspects Standards of behaviour and performance are prescribed and enforced by management Managers acts as a leaders by virtue of their superior position. Formally established official lines of communication Written and fixed Generally large on

Flexible, unstable and unpredictable Interests aspects. and other human

5. Focus 6. Behaviour
of members

Standards of behaviours and performance are evolved by mutual consent among members. Members voluntarily choose their leaders Members communicate informally according to to convenience Oral norms Generally small

7. Leadership

8. Communication 9. Rules & regulations 10. Size

(b) Refer Q. 2. (c) Summer-2005.

Q.3 (a) Explain the role of a personnel manager. (10) (b) Discuss the characteristics of various incentive schemes.

Sol. (a) Role of a Personnel manager: Personnel manager performs the following function: (i) To forecast and balance the demand and supply of suitable personnel for a job. (ii) To find competent employees for various positions in the organiation. (iii) To organite trahring program for employees



Engineering Management
(iv) To provide proper working environment to employees. (v) To promote the spirit of cooperation and self discipline among

(vi) To facilitate expansion and growth of the organisation by developing people to their full potential. (v) Controlling the activities (b) The term 'incentive' means any act or promise which induces .. inclivi4l8a't t. respeDd in tile desired manner. An incentive has JIIIOtivltieul,...cr Mcause it Mlpt .. ..nary a need. lIIc:eJl&ives are of two types : (i) Monetary incentives, (ii) Non monetary incentives. Meodary incentives: Money is useful in satisfying social Reeds because it is considered a symbol of power, prestige and status. Monetary incentives are more powerful motivators for lower level employees and for people in poor countries like India. These incentives are more useful when they are directly linked to performance. Employees work better when they feel that the monetary incentives are worth their efforts. Types of monentary incentives are : • Wages • Salaries • Allowances • Bonus • Leave with pay • Retirement benefits • Fringe benefits • Cash and kind awards • Increments (ii) Non-monetary incentives: These incentives are non-fmancial because they are not measurable in terms of money and do not add to the income of the recipient. These incentives are more helpful in satisfying ego and self actualization needs. These are more important at higher levels of management. Some of the popular non-financial incentives are described below: • Recognition and status • Challenging work • Job security • Responsibility • Opportunity for growth • Competition • Participation in management Q.4 (a) Describe the factors which affect the location choices, both for manufacturing and services. (8)





(b) Describe the basic types 8f layeut and indicate when each is best used. (12) Sol. (a) Factors influencing location (i) Proximity 0/ good highways: The most frequent factor is quality of the highway system, particularly its relationship to markets, raw materials, and labour supply. The existence of excellent highways, such as the interstate superhighways, makes the suburbs, small communities and country as readily accessible as the cities. (ii) Access to a major eirport : Every firm can function in a national market place using air transportation in one form or another. By using air transportation, sales people can reach customers rapidly to obtain raw materials on an emergency basis and delivery offinished goods to customers is also fast.

(iii) Labour supply : A company cannot operate without employees, and the nature of the labour market should be investigated to ensure that an adequate supply of qualified employees is available in the area. It is necessary in some organizations that skilled craftsman be hired to fill all the positions, and is possible to locate the plant in an area where a sufftcient numbers are available. (iv) Nearness to market : The cost and time required for, transporting the product to the customer is a major consideration for many companies. For this reason, it is desirable that the company be located near the centre of its product market. (v) Nearness to raw materials: Companies using bulky or perishable materials find it desirable to be near a readily available source of their materials. The food industry has this problem with its canning factories and meatpacking plants. Other influencing factors are : (vi) Nearness to an existing plant (Vii) Availability of land and land cost (viii) Water supply
(ix) Power supply (x) Pollution control (xi) Taxes (xii) Climate (xiii) Schools, temple, parks and residential areas. (xiv) Infrastructure (transportation and communication

net work) the

(b) There are various methods of grouping and arranging production machinery, the common one are given below : (i) Fixed position layout (ii) Process layout

(iii) Product layout





(iv) Combination layout (,) Fixed position layout: In this type oflayout, the material or the product remains in a fixed location and all tools, machinery and workers as well as other components or parts are brought to the product. The complete job is done or the product is made with the major component staying in one location. Improvements in the techniques of mass production, in material handling, and with the present equipments continuously growing in size and complexity. The use of this type of layout in manufacturing processes has been minimized in present days. Fig. I shows a fixed position layout.

Workplace Tools

Finished product

Fig. 1 Fixed position layout

(i,) Process layout: In a process layout, all operations of similar nature are grouped together in the same department or part of the factory. For example separate area may exist for drilling operations, milling, grinding, fitting and likewise. (Refer Fig. 2).
Drilling Inspection





A : 1 :-..............

Iii .;::

E 3:

--, '_-


a I!!


"8 0
Press Heat treating Painting Milling Packing



i s:


Fig. 1_._ Process layout

In process layout the p~ being worked on travel from one area to other according to the established sequence of operations through which it must be put, and where-the proper machines are located for operation. The process layout is appropriate for non-repetitive, inter -mittent type of production. Product Layout : It is also called line type layout. In this type of product layout, only one type of product is produced in an operating areas. The product so produced should be standardised and manufactured in large



quantity.All the equipmentsas well as raw material used are arranged according to the sequence of operation. The raw material arrives at one end of the line and goes from one operation to the next with a minimum of work in process storage and material handling. Such a layout is provided for continuous production. Continuous type of production pertaining to chemical industries as well as automobile manufacturing concern is a good example of product layout.
Product A Dept.



Heat treat. Grind




..... : 1 :",,2
~ ..... ~ "

r:: :.... r>. :.... .>. .:". B : ....• 3 r .... 4 t: ·,,5 : ..... 6 ,'..... 7 ; .. ~ 8 : ..
..... # .... " .. ' .........

Product B Dept.

1 i
.!II c:






Braze Paint




Fig. 3 Produt:t layout

Combination layout: To improve flexibility and better utilisation of man and machinery, one should not hesitate to combine product and process layouts in finding a new layout. In industry one does not find any layout in its pure form. They are usually a combination of one type with another type of layout and the line of demarcation is very difficult. The final layoutso developed is called a combination layout as shown in Fig. 4.

fDl----fEl ~__]c lr




-j-- -----l--I--I
B A Fig. 4 Combination layout ~

Group layout : Group layout provides a type of product arrangement of facilities for the manufacturing of similar items, each of which, if taken individually, would normally be manufactured through group a process or functional configuration. Group layout, approach is




used as a means to achieve some of the benefits of layout by product in the batch manufacturing of products. Groups or families of similarities, or parts of products are formed using group technology. Fig. 5. shows a group technology layout.





Fig. S Group technology


GroupB of accounting in a business ..... lIization. (10) (b) What are the financial statements and how they are used to live. financial picture of business? (10) Sol. (a) The purpose of accounting in a business organisation are •• follows: (i) The business firm is regarded as a separate entity. Accounts are maintained for this entity as distinct from the persons who are connected with it. The accountant records transactions as they affect this entity and regards owners, creditors, suppliers, employees, customers, and the government as parties transacting with this entity. (ii) Accounting is concerned with only those facts which are expressible in momentary terms. The use of a monetary yardstick provides a means by which heterogeneous elements, such as land, plant and equipment, inventories, securities, and goodwill may be expressed in a common denominator. (iii) Accounting is normally based on the premise that the business entity will remain as a going concern for an indefinitely long period. (iv) Assets acquired by a business are generally recorded at their cost and this is used for all subsequent accounting purposes. (v) Conservation concept of accounting 'anticipate no profit but provide all possible losses.
Q. S (a) Deacribe the purpose



(b) The stakeholders of a firm, viz. shareholders, creditors, suppliers, managers, employees, tax authorities and others, are interested in broadly knowing about how the firm is doing and what is its financial condition. Trade creditors and short term lenders are interested primarily in the short term liquidity of the firm and its ability to pay its dues in the next 12 months or so. Lending institutions and debenture holders have a relatively longer time horizon and are concerned about the ability of the firm to service its debt over the next five to ten years. To understand the financial performance and condition of a firm, its stockholders looks at three financial statements, viz. (i) the balance sheet (ii) the profit and loss account, and (iii) the sources and uses of funds statement. The balance sheet shows the financial position of the firm at a given point of time. The profit and loss account referred as income statement also reflects the financial performance of the firm over a period of time. It is drawn up for a period of one year. The sources and uses of funds statement portays the flow of funds through the business during a given accounting period. Q. 6 (II) Explain the different elements of 'marketing mix' .(12) (b) Justify the role of research in marketing. Give examples in support of your answer. (8) Sol. (II) Marketing mix is a systematic combination of four elements- Product, Price, Place and Promotion. Each of these element is in itself a combination of several sub-factors. Therefore, each element is also known as a mix. These four elements of marketing mix are described below: (i) Product mix: Product mix refers to a combination of various features relating to the product or service to be offered for sale. It involves decisions concerning the quality, size, range, package, brand name, label, warranty and services etc. These product related activities are directed usually at a specific group of consumers (called target market) rather than at consumers at large. Consumers consider a product as • a bundle of! satisfaction' rather than as a physical item. For example, the buyer of a washing machine wants speed, comfort and trouble free operation rather than just a box of metal, plastic and electrical components. (ii) Price mix : Price mix involves decisions regarding the basic price of the product, discount, allowances, credit and terms of payment, etc. Price means the money value that the customer has to pay in exchange for the product. Price mix should be divided keeping in view he cost of producing and marketing the product, purchasing power of the target




group of customers, degree of competition in the market, the profit margin desired by the seller, discounts and allowances to be offered to dealers and customers as incentives, etc. (i;,) Place or physical distribution mix: Place or distribution mix consists of all the activities involved in transferring ownership and physical possession of the product to consumers. Its purpose is to make the product or service available to customers at the right time and at the right place. Distribution mix includes. (a) Channels of distribution, and (b) Physical distribution. Physical distribution includes all those activities which are involved in moving products or services from manufacturers to consumers. It consists of transportation and storage of goods. (iv) Promotion mix: Promotion mix consists of all the activities aimed at persuading customers to buy the product. The various elements of promotion mix are as under: (a) Advertising (b) Personnel selling (c) Sales promotion (d) Publicity Advertising includes activities concerned with providing product information to customers through newspapers, radio, television and other media. It is paid for by the seller. Personnel selling refers to face-to-face communication between a seller or his representative and the buyer. Sales promotion means increasing !>_~«:s through short-term promotional activities such as displays, demonstrations, fashion shows, exhibitions, prize contents, coupons, etc. Publicity means the mention of a company, a brand or product. It is always through mouth speech. Advertisement given in the newspaper and journal is also publicity, but it is paid. Publicity not given in the newspapers and Journals is free. (b) Marketing research refers to a systematic investigation of facts, relevant to the various aspects of marketing. It is the process of system critically gathering and analysing facts relating to any problem in marketing. It involves collection, analysis and supply of information to managers to facilitate decision making in the field of marketing. Marketing research may be conducted on any problem of marketing e.g., product, price, channels of distribution, advertising, consumer preferences, etc. It is helpful in understanding and satisfying the wants of customers with the ript product, at the right price and at the right time and place. In marketiag research, data is collected from both primary sources (customers, salesman and dealers) and secondary sources (press reports, trade directories, government publications, etc.)



Q. 7 (a) Describe the fundamental role of computers and information technology in reshaping an organizations. Give suitable examples in operations, finance, marketing and personnel management areas. (20) Sol. (a) In any organisation, computerisation should be done in 4 phases. In 1st phase, computer is used only for transactions processing, wherever such a need exists, like stock records, personnel records for pay and wage bills, and sales record. In 2nd phase, the traditional operating systems are improved so as to take advantage of Ist phase, such area are cost accounting, budgetary control, inventory management, sales forecasting. In third phase, systems are designed with the computers, which will affect the decision-making styles of the managers. The area of application in the third phase are: Project planning through PERT, product mix decisions, cost benefit analysis, operation research. In the fourth and last phase, advance areas are applied, like policy and strategy decision with management information system and corporate models with simulation, cybernetics. Also refer Q. 7. (a) Summer-2006. Q. 8 (a) A company has received an order from a good customer for a specially designed electric unit. The contract statesthat starting on the thirteenth day from now, tbe firm will experience a penalty of Rs. 100 per day until the job is·completed. Indirect project costs amount to Rs, 200 per day. The data on direct costs and activity precedence relationships are given in the table below. Table- Electric Unit Project Data


Normal Time (days)
4 7 5 6 3 11 4 3

Normal Cost
(Rs.) 1000 1400 2000 1200 900 2500 800 300

Crash Time (days)
3 4

Crash Cost
(Rs.) 1300 2000 2700 1400 1100 3750 1450 500

Immediate Predecessor (s)






5 2 6 3 1




76 Sol.



Fig. 6 Network


The Fig 6. shows the network diagram. The project completion time is 19 days and the critical path in the project network is C -F-H.

Cost slope (Rs)


Crash cost - Normlll cost .Norllllll time - Crash time


1300-1000 =300 4-3 (2000-1400) 600 =-=200 (7-4) 3 (2700-2000) (5-4) (1400-1200) (6-5) (1100-900) (3-2) (3750- 25(0) (11- 6) 700 200 200 250





(1450-800) =650 (4-3) (500- 3(0) = 100 3-1


Total normal cost = Rs. (1000 + 1400 + 2000 + 1200 + 900+2500 + 800+300) =Rs.I0,100

Winter-2006 i.e. lower cost slope activity would be crashed first, Activity C


Step 1 : Crash the activities in the critical path as per the ranking
C.stsltlpe 700 250 100 MlIJCi",llm relillctitl" (flays) (5-4) = 1 (11-6) = 5 (3-1)



Crash the activity H by 2 days.

Fig. 6. (II)

The total project cost = Rs. (10,100 + 2x 100) = Rs. 10,300 Step 2 : Again the critical path is C-F- H. The lowest cost activity out ofC and F is F. Crash the activity 'F' by 2 days.

Fig. 6. (b)

The total project c~st becomes = Rs. (10,300 + 2 x 250)'~Rs. (10,800) All the activities are critical in Fig. 6 (b). There are three critical
<:,-,_ -


G and F D, E and F A, E and F 8, D and F A, 8 and F

Engineering Cost slope 650 200 300 200 300 + + + + + 250 200 200 200 200


Mai",,,,,, ,~d"ctitl" + + + + 900 250 250 250 250 650 = 750 = 650 = 750

A,8 and C

300 + 200 + 700

= 1200

Step 3 : Crash the activities D, E, and F by one day

Fig. 6. (c)

The total project cost become = Rs (10,800 + 650) Step 4 : Crash the activity A, Band F by one day.


Rs. (11450)

Fig. 6. (Ii)


The total project cost becomes = Rs. (11,450 + 750) = Rs (12, 200) Step S : Crashing in only possible in G and F activity. Crash the activ' 'y G and F by one day. The project cost becomes = Rs (12,200 + 900) = Rs. (13,100). The total crashed project duration is 12 days.



'F 6 Fig. 6. (e)

Total indirect cost = Rs. (200 x 12) = Rs. 2400 Net total cost = Rs (13,100 + 2400) = Rs. (15,500) Ans. GroupC Q. 9. Explain very briefly the differences between the following with examples: (2xlO) (i) Planning and organizing. (ii) Accountability and Responsibility. (iii) Job Enlargement and Job Enrichment. (iv) Diversification and Simplification of product lines. (v) Industrial goods and Consumer goods. (VI">Current Ratio and Liquidity Ratio. (vi."> Data Processing and Word Processing. (viii) Push system and Pull system. (ix) Dependent demand and Independent Demand. (x) Quallty and Reliability. Sol. (I) Planning and Organizing : Planning is an integrated activity which seeks to maximize the total effectiveness of an organisation as a system in accordance with its objectives. While organizing combines the human power with other resources to give desired output. Planning is done before organising. (il"> Accountability and Responsibility: A person's obligation to account for or report on his/her performance to his superior is called Accountability whereas responsibility is the obligation to perform the assigned tasks to the best of one's ability. Accountability always moves upward from a subordinate to a superior. (liQ~-~~D~b~e-e-n~M-rg-~--e-ft~t---------'~Jo~b~e-n-'~k~h-m-e-n~t------------1. Increasing the variety of tasks involved in a job 2. Horizontal expansion of a job Increasing the responsibility and challenge of a job Vertical expansion ofa job

(iv) Diversification and Simplification of product lines : The process of adding new products to a line or adding more varieties and sizes of a product is known as diversification; On the other han4. to reduce or . eliminate many, oftbe bJariinal Jines of product is called simplification. '




(v) Industrial goods and consumer goods: Consumer goods are those items that will be used ultimately by the household consumer. Examples are foods, refrigerators etc. Industrial goods, on the other hand, are those items that are used to produce other goods. Examples are machine tools, fork trucks, and overhead cranes. (v.) Current ratio and Liquidity ratio: Current ratio is defined as the ratio of current assets to current liabilities. Curreat assets :. ClDent ran. = Currellt liabilities Liquidity ratio are generally based on the relationship between the sources for meeting short term obligations and current liabilities. Quick assets Liquidity ratio = Current Ii iabiliti umes (vi.) Data processing and word processing: Word processing is a very important software to edit the information contents like reports, letters, notes, resume etc. The contents can be edited in different styles, formats, and fonts. On the other hand, data processing is to do complex jobs of processing at incredible speed. Fig. 7 shows a basic data processing cycle. It uses electronic machines.

I Input I-I-_·~Ipr~ingI-I-__,·~~u~
cycle Cpr Cast and accurate manipulation

Fig. 7 nata


oC data.



-----~-~~-------+------~--~-----------In a push system 0 production control, parts at e~Ch workstation are produced irres ective of the immediate need fo the parts Risk is more Machines becomes overloaded 1. In pull' system, the order to make and delivered parts at production sequence comes from the downstream station that uses those parts. 2. Risk is less 3. Machines are a not overloaded.

Push system

Pull system

2. 3.

(ix) Refer Q. 5. (a)


(x) Quality and Reliability : Quality is defined as the degree of excellence which a product possesses. One of the dimensions of quality is the reliability. Reliability in a product available for the customer and that it lasts a long time before final failure. Reliability is the probability of a device discharging its purpose adequately for intended period of time. Following factors are important with regard to reliability: . (a) Probability (b) Adequate performance of device 14"\ Spedfic>!1 adequate performance (d) Prescribed operating conditions.






Answer FIVE questions. taking ANY TWOfrom Group A, Any TWOfrom Group B and ALL from Group C. Figures in the bracket indicate full marks.
Group A Q. 1 (a) Outline the fundamental elements of a planning system. (2)

(b) Identify and briefly discuss the planning situations associated with the use of a conversion system. (8) (c) Explain how the four C's model can be used to evaluate an organization's human resource management programme? (10) Sol. (a) The fundamental elements of a planning system are as

(I) Recognition (iI) (iii) (iv) of the need Analysis of Environment Statement of mission or purpose Establishing objectives

(v) Building the premises for planning (VI) (vii) (viii) (ix) Identifying alternative courses of action courses

Evaluating alternative

Selecting a course of action Converting plans into budgets

(b) Function of planning of a conversion system starts from the project report preparation. The efficiency, productivity and economy largely depends upon the quality of planning. However, main engineering systems which are required through planning are : Production planing, Product planning, Process planning , Material planning and Manpower planning. Brief description of these systems is given below:

Production planning:
Production planning involves a system to plan production, cost, quality and time. Planning always begins with the analysis of given data




on the basis of which a scheme of the utilisation of the firm's services can be obtained so that the desirable target may be most efficiently attained. It establishes the basic relationship, among (a) Sales forecasts, (b) Production capacity (c) Inventory levels (d) Working capital (e) Raw material (f) Production facilities. Product planning: Product policy decisions and product planning are inter-related activities and decide about product item, product line and product mix. Product planning is done based on the facts available from research in the field. Process planning: It is started after finalisation of the specification design and drawing of the product. The process planning requires the route sheets and operation sheets. Material planning : It involves setting up of consumption standards working out the requirements for all materials for any given manufacturing programme, considering all relevant factors i.e., make or buy, specifications, source of supply etc. Manpower planning : It is a process by which management determines how the organisation should move from its current manpower position to its desired manpower position. Planning function helps the management to have the right number and right kind of people at right places at the right time so that it helps in receiving maximum long run benefits. Capacity planning : It is concerned with the estimating future capacity needs, existing capacity, developing ways to modify capacity. Product characteristics, economic factors and processing technology are the important parameters. Facility location planning: It involves careful consideration of various factors for the selection of an appropriate location for installing a production facility. Facility layout planning: It refers to the selection of particular configuration of departments, work stations and equipment involved in the production system. It relates to choosing a special arrangement of the physical resources. The layout depends on production volume, sequence of operation, material handling system, space utilisation economic aspect etc.

Summer 2006


(c) Four C's of Human resource management programme given by Harvard Business School
1. 2. 3. Commitment: Every worker should be committed to his work sincerely in order to give best performance. Congruence: The worker colleagues and management must work in harmony with his both achieve his targets.

Competence : For professional employees to develop competencies and inter personal skills. Such as coaching, group process and problem solving are the important tasks for HRD programms. Competency in performing the job as needed to grow organizations in a global environment. ' Cost effectiveness: The salary or any other benefit provided to employee by management depends upon his cost effectiveness to the organization. So employee must look for his cost effectiveness in an organization.


Q. 2 (a) Elucidate the sequence of activities for exercising managerial control in organization. (6) (b) Define the directing function of management (c) Distinguish between: (I) Upward and Downward communication (it) Co-operation and Coordination. (d) What is meant by collective bargaining? Why is it referred to as a two way process? (6) Sol. (a) The control process in all the situations have following (2) (6)

activities : (a) Establishment of standards:
which results can be measured. objectives, targets etc. A standard is criterion against These standards refer to goal, plan, step in the control process inspection and reporting. etc. are generally done to organisation. -

(b) Measurement of performance : This includes the setting up of methods of observation Reports at regular intervals, audits, test checks control the performance at various levels in the

(c) Comparing the activity: Results obtained are then compared with the standards. Returns received at regular intervals, audit etc. provide feed back for performance which is then compared to find out if there is any deviation. Negative deviation means a loss and needs remedial action, whereas positive deviation means a gain and does not warrant any control function, and as such the feedback informations are ignored.




(d) Remedial action: In the last activity of process of control, manager initiates action for correction of deviation from standards. For such action, a review is promptly done to make control function more effective. In good ergaaisatiens, a system is made for automatic and selfregulating control process. (b) Directing is a funetien which includes all those activities which are designed to encourage subordinates to work effectively both in short and long run. It includes the following functions : (i) Issuing orders and instructions to subordinates (ii) Guiding and teachingthe subordinates as how to do a work. (iii) Supervising to ensure that the work conforms to plans. (i.v) Maintaining discipline and rewarding for efficiency. (e) (,) 1. Upward communication from workers to higher management levels giving work completion reports or any other feedback of information, while downward communication is from management to worker to perform a job, a promise etc.

2. The ways of upward communication are face to face contacts, reports, group meetings etc., while downward communication; 'is through chain of command, company journals, notice board, etc. (i,) Co-operation and co-ordination: Co-ordination means achieving harmony of individual effort towards the accomplishment of company objectives. Co-operation means working together voluntarily for a' common objective. For example, a trained cricket team, the members of which willingly respond to their instructor and captain demonstrates a good example of the highest form of coordination. If there is no coordination, it is like a vehicle having four wheels moving in different speed and directions.
(d) Collective bargaining is the method of'negotiation between the representatives of labour and management to solve some labour dispute and to enter some agreement to prevent a dispute.

Discussions and negotiations between the representatives of the employees and the representatives of the management regarding disputed issued are done through careful analysis of the basic factors to avoid a conflict in future. With proper negotiations, both the parties will be benefited. Industrial place and continuance of work without interruptions can be maintained.

Summer 2006


Both the parties will be satisfied with the agreement hence it is called the two way process.
Q. 3 (a) Explain Brown and Gibson model (1972)of plant location with a suitable example. (10) (b) How are the organizational goals related to the organizational plans? (3) (c) Show the hierarchy of objectives for a manufacturing organization. (7) Sol. (a) In the year 1972 Brown and Gibson developed a model for plant location which classifies selection criteria on the basis of degree of effect on location. The criteria can be classified into three as per the management requirement.

(,) Criticalfactor: Critic... l factors are those which eliminates sites location from initial consideration. These factors are based on both qualitative and quantitative. For example; Cupola furnace consumes lots of electrical energy for melting iron if plentiful and low cost electrical energy is not available.
(il) Objective factor : Objective factors are generally based on

monetary terms. The various terms like labour, materials, utilities, taxes etc. are included in it. For example, in a manual work based industry, adequate labour is necessary to run the industry effectively.
(iil) Subjective factors

: Various qualitative characteristics are included in it. e.g. relationship between management and employees or union. Therefore, relationship is a qualitative term which is not measures in monetary terms.

The model structure proposed by Brown and Gibson for site i is put in terms of Location Measure (L;) which reflects the relative values for each criterion. L; = CF; where, OF;



OF; + (I-X)



Critical factor measure for site i and this can take a value 0 or 1. Objective factor measure for site i and its value canL.; lie between 0 and 1 such that 0 S OF S 1 and r..PF;

= 1




Subjective factor measure for site i and its value can lie between 0 and I such that 0 < SF; ~ 1 and
2:; SF;



The objective factor decision weightage such that
O~X~ 1.

The critical factor measure (CF) is the product of the individual critical factor indexes for site i with respect to critical factor j. The value of critical factor index for each site is either 0 or I depending on whether the site has an adequacy of factor or not. In case any critical factor index is 0 then CFi and the overall location measure (L) are also O. Site i would 'herefore be eliminated from consideration. The objective criteria are converted to dimensionless indices in order to establish comparability between objective and subjective criteria. The objective factor measure for site i, OFi, in terms of objective factor cost (OFC;) is defined as :



2:; (1/OFC;)J-1

The effect of above equation is that the site with minimum cost will have the largest OF;, the relationships of total costs between sites are retained while the sum of all objective factor measure is one. By doing so the results convert the OF; to proportions with large value representing relatively more desirable results then small values. The subjective factor measure for each site is influenced by the relative weight of each subjective factor and the weight of site i relative to all other sites for each of the subjective factors. This results in the following statement:
SF; = 2:; (SFWk




the weight of subjective factor k relative to all subjective factors, and the weight of site i relative to all potential sites for subjective factor k.

(b) Organisational goals are the future state of affairs which the

organisation is trying to achieve. The goals are yardsticks against which the success of an organisation is measured. Organisational goals can be achieved by proper plannings. The task of managing people am' indicating people requires a good deal of thinking in planning the entire organisation set up in order to make it effective and meaningful.

ummer 2006


(c) The hierarchy of objectives for manufacturing organisation re as follows:

(vii) Individual objectives (a) Performance (b) Personal development objectives

Q. 4 (a) What relationship exists between the layout and location decions ? (4) layout (4) (7) (5)

(b) Explain the essential feature of CRAFT, a computerized model
(c) Explain Total Productive Maintenance (rPM) with example.

(d) What is bathtub curve? Explain. Sol. (a) Refer 3. (b) Summer-2005

(b) One of the early computer programs developed to assist in aying out plant facilities is called CRAFT (computerized Relative allocation f facilities technique). This computer program handles upto 40 activity entre. The basic data presented to this program include a from-to chart nd an initial scale block layout. The computer program endeavors to nterchange departments within the given layout, without violating certain onstraints until a 'best' layout has peen determined. It is a layout mprovement procedure. The output from this program will be an improved ock layout.

The main criterion employed in eRAn minimisation of total ost of movement of items, where this cost is expressed as a linear function distance travelled CRAFT is an improvement programme.

(c) Total productive maintenance involves both operation and aintenance personnel to meet the goals of zero breakdown and zero defects




by adopting preventive maintenance coupled with predictive maintenance and condition monitoring. Many organizations recognize the role of maintenance within the context of the total enterprise and the interdependency among the various workgroups and maintenance. To this end, some firms have adopted TPM. The primary emphasis of TPM involves assignment of basic maintenance tasks to equipment operators. However, its success can be attributed to the involvement of all plant employees.





Fig. 1

Figure shows a plot of various costs versus level of prevention. The cost of preventive programms increases with increasing level of prevention. Total cost represents the sum of the cost of repair and the cost of preventive programs. Total cost is minimum at an optimum level of prevention.
(d) Bath tub-curve is a curve which shows, how failure rate of a products varies with their life.
Useful life period

Failure rate

Life ___.

Fig, 2 Curve

to indicate



Experience pas shown that failure characteristics of most of the

Summer 2006


systems, follow a definite pattern. To understand this, we can divide the life of a device or system in following three periods:
(i) Burn in period: When system is given a trail run during initial period, there may be rapid failures known as initial failure. These failures are concerned with malfunctioning due to poor design, poor workmanship and poor quality. (ii) Usejullife period: After the bum in period, actual useful life of normal use starts. During this period, failure rate is low but occurs unexpectedly and at random intervals, such failures are known as normal failures. (iii) Wear out period: In this zone, failure rate increases. This is due to the excessive wear after the expected useful design life of the device or system. The failures during this period are known as 'wear-out failures'.

Group 8 Q. 5 (a) A project schedule has the following characteristics:

1-2 1-3 2-4 3-4 3-5 4-9

4 1

5-6 5-7 6-8

4 8 1 2 5 7 (4) (4)

1 6 5

7-8 8-10 9-10

(I) Construct a network diagram.

(it) Determine critical path and total project duration.

(b) Location A would result in annual fixed cost of Rs, 300000 variable costs ofRs. 63/unit, and revenues ofRs. 68/unit. Annual fixed cost at location Bare Rs. 800000, with variable costs of Rs. 32/unit and revenue of Rs. 68/ unit. Sales volume is estimated to be 25,000 units/year. Which location is more attractive? (6)
(c) Differentiate

between PERT and CPM with respect to their use, (6)

advantages, and disadvantages. Sol. (a) The network diagram is shown below:




(ii) The critical path is 1-3-5-7-8-10 and the total project duration time is 22 units. (b) Given, fixed cost Variable costs Revenue
= Rs.

300000 = Rs. 63/Unit

Rs 68IUnit

We know that at break even point (B.E.P.), the Total cost = Total revenue. Let the B.E. Quantity be Q. 300000 + 63 x Q = 68 x Q

Q = 60,000 Units
Since the sales volume is 25,000. Therefore there will loss of = (25000 - 60000)
= Rs. x


- 1,75000

Fixed cost Variable cost Revenue

= Rs. 800000
= Rs. 32/Unit = Rs. 68/Unit

Let, Q. be the B.E. quantity

Summer 2006 AtB.E.P. Total cost


= Total revenue


800000 + 32


= 68



Q= 22222·2

= 22223


Profit for 25,000 sales/year is =(25000-22223) = Rs. 99+97 .'. Location B is more attractive Sol. (c) Distinction between PERT imd CPM Technique: PERT (I) A probabilistic uncertainty duration model with In activity (I) CPM A determistic model with well known activity (single) times based upon the past experience. It is activity oriented. It is used for non-repetitive jobs. It is used for construction business problems. and


(iJ) (iii)

It is said to be event oriented It is used for repetitive jobs. It is mainly used for planning and scheduling research programmes. PERT analysis consider costs. does not

(il) (iii)



CPM deals with costs of project schedule and their minimization The use of dummy activities not necessary. is


The use of dummy activities is required for representing the proper sequencing.


Q. 6 (a) Distinguish among funds, working capital, net working capital, and income. (6) (b) Differentiate between the current ratio and acid test. (5)
(c) Why is it possible for a firm to have high profits but still be unable to pay its bill when they are due? (3)

(d) Why do financial managers use a variety of measures of profits for

Sol. (a) Funds are defined as total resources.


Industrial enterprise has land, buildings, machinery, tools etc. This type of assets are called fixed capital. An enterprise needs funds to cover


Engineering Management

its cost of operating. Moreover, there is a need for money to carry the enterprise during the time lag between the sale of its products and the payment for them. Funds are needed cover these costs is commonly called as working capital. Net working capital is simply the difference between current assets and current labilities. Income from business is found by deducting the outgoings from gross incomings.

(b) Current ratio: It is the ratio between current assets to the
current liabilities. Current assets Current ratio = ------Current liabilities Current assets include cash, marketable securities, debtors current liabilities consists of loans and advances, trade creditors. defined as Quick assests Current liabilities Quick assets are defined as current assets excluding inventories. The acid test ratio is a fairly stringent measure of current ratio.
(c) This situation may arise where organization has raised working taking loans, and uses profit earned pay loans to control interest payments. Such organization may find difficulty in paying bills.


Acid test ratio. Also called the quick ratio, the acid test ratio is

Other situation may arise due to excess ordering of materials of stores from financial institutions and inventory. (d) Financial statements can provide valuable insights into a firm's performance, if properly analysed and interpreted. Analysis of financial statements is of interest to lenders, investors, security analysts, managers, and others. Financial statement analysis may be done for a variety of purposes, which may range from a simple analysis of the short term liquidity position of the firm to a comprehensive assessment of the strengths and weaknesses of the firm in various areas. It is helpful in assessing corporate excellence, judging credit worthiness, fore-casting bond ratings, and assessing market risks. Q. 7 (a) Explain the concept of managerial economics stating the important characteristics and major applications. (5)
(b) State and explain the laws of variable proportion or the law of diminishing return, giving the important assumptions. (5) (c) Distinguish between data and information. Identify the various steps for converting data into information. (4)

Summer 2006


(d) Mention the importance of management information system for an organization. State the requirements of an effective MIS. (6) Sol. (a) Managerial Economics is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management. Characteristics of managerial economics :

It is concerned with decision making of economic nature. It deals with identification of resources. of economic choices and allocation

It provides a link between traditional economics and the decision sciences for managerial decision making.

Applications :
(I) Managerial economics links the accounting concepts with economic concepts. So that financial data pertaining to profits and costs can be used more effectively to suit the needs of decision making and forward planning. For the purpose of forecasting, estimate economic relationship between variables such as price, demand, in come, production etc. To establish business plans for the future regarding profit, prices, costs, capitals etc.



(b) Low of Diminishing return : Assumption:
This is the most fundamental law of economics based on the actual experience offarmers. A Scottish farmer is said to have been first to state this law. This has been explained by Marshall in the following words.

"An increase in the capital and labour applied in the cultivation of land causes in general a less titan proportionate increase ill the amount of produce raised unless it happens to coincide with improvement in the art of agriculture. "
The law is generally applied in the field of agriculture. This law states that every increase in the doses of capital labour and other inputs leads to increase in total output and this increase is less than proportionate increase compared to inputs. The law of diminishing returns operate on account of the following assumption (i) There is fixed factor of production and the Variable factors alongwith fixed factor or production do not receive full attention and co-operation. As a result of this the productivity of the variable factors goes on diminishing.




(ii) Agricultural output are exposed to vagaries of climatic and weather

conditions. fall.

Due to this reason the average productivity

has a tendency to

(iii) Division of labour and specialisation which help a lot in reducing the cost of production is not applied in agriculture. (iv) Agriculture field are spread over a large areas, making the task of supervision difficult. Due to lack of supervision the productivity falls thus setting the law of diminishing return into motion. (v) The fertility of soil is exhausted after some time. This leads to operation of the law of diminishing returns to agriculture.

(c) Data Vis Information Data and informations are two separate things. Data are facts and not currently being used in a decision process and generally take the form of records and files, whereas, information consists of data that have been retrieved, processed and used for inference purposes or as a basis for forecasting or decision making. Data are converted steps:
(I) Recording! (ii) Checking

into meaningful


in following

capturing of data from source. and verification of data to ensure that it was captured and recorded correctly. data in a specified sequence. or aggregating data elements. andl or logical manipulation of data

(iii) Data are placed into specific categories.
Ov) Arranging
\ ~!


(vi) Arithmetic

(vii) Placing data on the some storage media where it can be kept for access and retrieval. (viii) Retrieving
(ix) Reproducing

to specific data elements. data from one medium to another. or transferring data from one place to another.

(x) Communicating

(d) MIS can be defined as the combination of human and computer based resources that results in the collection, storage, retrieval, communication and use of data for efficient management of operations and for business planning. Before the evolution of computers, MIS techniques existed to supply users with information that would permit them to arrive at an effective decision. The computer has added new dimensions such as speed, accuracy and processing of massive data, that permit the consideration of more alternatives in a decision. Other importance of MIS are given below:

Summer 2006


(1) Getting information to the decision maker in the proper form at the right time at a justifiable cost. (2) Time saving to middle, top or even low level scalar chain. (3) MIS's major thrust is to reduce cost. (4) MIS avoid duplication and overlapping in data gathering, storage and dissemination. (5) It is directed towards oriental management.

Requirements of an Effective MIS
1. Hardware: Physical computer system and associated devices having important functions, input or dataentry, output, secondary storage devices, CPU and communication network. 2. Software: Instructions the direct operation of the hardware. Software is of three major types, (i) application (ii) Compiler and (iii) Operating systems. 3. Database: The data base contains all data utilized by application software. An individual set of stored data is often referred to as file, storage media such as floppy CD-ROM etc. Procedures: For an efficient procedures are required. MIS three major types of


(i) User instructions (ii) Instructions for preparation of input by data preparation personnel (iii) Operating instructions for computer operations personnel. 5. Operations Personnel : Computer operators, system analysts, programmers, data preparation personnel, information systems management, and data administrators etc. Q. 8 (a) Outline the trends and challenges relating to quality in the present context of global competitiveness. (3) (b) Explain briefly the concept oHotal control and total quality management(TQM). (3)
(c) Explain the following : (I) Pay back period (il) Net Present Value (NPV)


(iii) Internal Rate of Return (lRR).
(d) Elucidate the principles of marketing management

with examples. (5)



Sol. (a) The dimensions of quality in the present context of global competitiveness are as follows:
(I) Product's primary operating characteristics. (il) Secondary characteristics (iii) The probability of a product malfunctioning within a given

(iv) The degree to which a product is manufactured to the agreed

(v) A measure of the product's life in terms of both technical and

economic dimensions.
(VI) The ease of servicing (planner) or breakdown to include the

speed and provision of after sales service.
(Vii) Artifacts and appearance of product. (viii)

How the customer views the products.

(b) Total quality control (TQC) is an effective system of integrating

quality, reliability, quality development, quality maintenance and quality improvement, efforts of the different groups in an organisation firm. TQC gives stress on prevention of defects rather than rectification. The concept of total quality is different from product quality and much more. Total quality management (TQM) is a new approach which leads to improve the effectiveness of the company as a whole and a sincere attempt to ensure the active participation of each and every member to work together to minimize errors, deficiencies, wastage and rejection. (c) (i) Payback period: The payback period is the length of time required to recover the initial cash outlay on the project. When the annual cash in-flow is a constant, the payback period is simply the initial outlay divided by the annual cash flow. According to the payback criterion,
(if) Net present value: The net present value (NPV) of a project is equal to the sum of the present values of all the cash flows associated with it symbolically, NPV= CFo + CF1 (l+k)O (l+k)l + + CFn (l+kt

where, NPV

= =

net present value

Cash flow occurring at the end of year t (t

0, 1,2, ---- , n)

Summer 2006 n
= =

61 life of the project discount rate. over and above the

The N P V represents the net benefit compensation for time and risk.

(iii) Internal rate of return (IRR) : The IRR of a project is the discount rate which makes its net present value equal to zero. It is the discount rate in the equation.

CFo CFj D= (l+r)o + O+r)1 + where, CFt r
= =

CFn + O+'rt

Cash flow at the end of year t discount rate

n = life of the project In the IRR calculation, we set the net present value equal to zero and determine the discount rate (lRR) which satisfies this condition.
(d) According to American Marketing association, marketing is defined as the performance of business activities, directing of satisfying needs and wants through exchange process.

Marketing Management Principles For a successful marketing management core tasks are laid down as under:
1. Developing marketing strategies and plans : It is necessary to

build and develop concrete marketing plans that specify the marketing strategy and tactics going forward. 2 Capturing marketing insights: It is necessary for managers to gather information about market potential and forecasting future demand of product. Then transform marketing strategies into marketing program.

3. Connecting with customers : This leads to gather information about customers and getting in touch with them. Also find out why they want to buy and what are they looking for in the way of features and prices ? Whence they shop ? What are their images for different brands? 5. Developing strong brands: Marketing manager after interacting with customers must find strength and weakness of his products and focus to build brand for his products.


Engineering Management 6. Delivering value : This principle is concerned with providing
correct and needed value of the product to customer in order create faith in customers.

7. Communicating value : Marketing team must also adequately
communicate the value embodied by its products to the target market. This is done by communicating customers by informing. persuading and reminding.

8. Creating long term growth : Long term view of products and
services must be seen by marketing managers with adequate profits growth. This is achieved by new product development. testing and refinements. Groupe Q. 9 Answer the following questions very briefly: (.) What do you mean by scientific management? (iI)What is participative (iii) Differentiate ventory models. management? (2 x 10) Who originated it?

Why is it being practiced?

between continuous review and periodic review inplanning (MRP) ? a firm?

(iv) What are the inputs to materials requirement Name them.

(v) How does the balance sheet show the source ofrewurces.for

(v,) The inventory ofa company is Rs, 2·2 lacs, the current assets are Rs. Slacs and the current liabilities are Rs, 4 lacs. Determine the inventory to working capital ratio. (vii) A company has long-term debt ofRs. 5 lacs. The ownen equity amount is Rs. '·SlaeS. Determine the debt equity ratio. (v;;,) What is a Decision Support them? (a) What do you mean by Enterprise Resource Planning (ERP) ? System (DSS)? Who should use

(x) What is Acceptance Sampling? Why should it be used? Sol. (,) Scientific management is the art of knowing exactly what is to be done and the best way of doing it. This is the application of scientific principles and methods of management. It was originated by 'F. W. Taylor.

Summer 2006
(il) Refer Q. 2. (c) Winter-2005 (Ii,)


(i) Continuous review model, demand rate uniform and

production rate infinite. The lead time is zero and order quantity is fixed. On the other hand, in periodic review systems, the stocks are reviewed periodically (e.g. monthly.). The order quantity is fixed but the time interval between orders varies to absorb the fluctuations in demand.
(ii) The periodic

review system is advantageous

for joint

replenishment orders.
(iv) Inputs to material requirement planning are : (a) Master production schedule (b) Inventory (c) Bill of materials (v) The vertical form of the balance sheet depicts the sources of

resources for a firm. (v,) Inventory to working capital ratio 2·2 =-- =0·55


(vi,) Debt - equity ratio

Debt Equity


5 7.5

= 0·67

(vii,) A decision support system is an interactive system that provides the user with easy access to decision models and data in order to support semi structured and unstructured decision making task. (I) (ii)

It helps in tracking new product It facilitates faster, more accurate decisions in view of changed business environment.
It assists management by walking around. It helps in decentralisation


(breaking the company into

geographical business areas).

Lastly, DSS provide information to middle managers to han a complete picture of what is happening.




(a) ERP (Enterprise Resource Planning) ERP's are management information systems used to integrate and automate many of the business practises associated with the operations or production and distribution of companies engaged in manufacturing products or services. ERP software can aid in the control of many business activities like sales, delivery, billing, production, inventory management, quality management and human resource management.

(x) Refer Q. 6. (d) Winter-2005

Engineering Managel~,ent
Chauhan and Vaisliwanar
2nd Edition 2006

~. ·160.000

Answer FIVE questions, taking any TWOfrom Group A, ANY TWOfrom Group B and ALL from Group C. Figures in the bracket indicate full marks.
Group A Q. 1. (a) Define management? management. Wbat are tbe objectives of (6)

(b) Consider yourself a manager of a firm tbat bas recently identified the need of new consumer product in the market identify the different steps tbat you would undertake so as to successfully develop tbe product. (8) prescribe (c) Wbat do you mean by scientific management? it for today's organisations? If not, wby? Will you (6)

Sol. (a) Management is the art of getting things done through people in order to accomplish objectives of organization. This definition is tradional and management is more than getting things done through others but by satisfying their needs, creating environment of work and providing opportunities for growth and development. According to Koontz" Management is the art of getting things done through and with people in formally organized groups"

Objectives 0/ Management:
(i) To accomplish goals of organization (ii) To optimise efficiency of people and organization (iii) (iv) (v) To control wastages and achieve best possible for a society as a whole To provide opportunity to people for betterment and improvement in quality of life, To forecast the product sales and continuous improvement quality. is

(b) Variousphases/or successfully developing the product are: 1.Planning. It is also known as zero phase since it precedes the project
approval and launch of the actual product development process. This phase begins with corporate strategy and includes assessment of technological developments and market objectives. The output of this phase is project mission statement, which specifies the target market for the product, business goals, key assumptions and constraints. 2. Concept development. In this phase of concept, the needs of market are identified, alternative product concepts are generated and evaluated and a single concept is selected for further development.


Engineering Management

3. System-level design. The system-level design phase includes the definition of the product architecture and the division of the product into subsystems and components. The final assembly scheme for the production system is usually defined during this phase as well. The output of this phase is usually a geometric "layout" of the product, a functional specification of each of the product's subsystem, and a preliminary process flow diagram for the final assembly process. 4. Detail design. The detail design phase includes the complete specification of the geometry, material, and tolerances of all the unique parts in the product and the identification of all the standard parts to be purchased from suppliers. A process plan is established and tooling is designed for each part to be fabricated within the production system. The output of this phase is the control documentation for the product-the drawings or computer files describing the geometry of each part and its production tooling, the specifications of the purchased parts, and the process plans for the fabrication and assembly of the product. S. Testing and refinement The testing and refinement phase involves the construction and evaluation of multiple pre-production versions of the product. Early (alpha) protopypes are usually built with production-intent parts-parts with the same geometry and material properties as intended for the production versions of the product but not necessarily fabricated with the actual processes to be used in production. Design check is also performed in this phase. 6. Production ramp-up. In the production ramp-up phase the product is made using the intended production system. The purpose of the ramp-up is to train the work force and to work out any remaining problems in the manufacturing processes. The artifacts (articles) produced during manufacturing ramp-up are sometimes supplied to preferred customers and are carefully evaluated to identify any remaining flaws in the product. The transition from manufacturing ramp-up to ongoing manufacturing is usually gradual and continuous. At some point in this transition, the product is launched and
becomes available for widespread distribution. (c) Scientific management was developed and introduced by F. W. Taylor in the year 1910 and he is called as FATHER of Scientific Management. "Scientific Management means the application of scientific methods to the problems of management. It is a systematic and thoughtful approach to the job of management as compared to the rule of thumb or trial and error. Scientific management was mostly adopted for increasing productivity and greater efficiency. It also aims for increased pays for workers. I will prescribe scientific management in today's world because all organizations in present scenario have to achieve for survival and growth. The

Winter 2005


following objectives which can be easily attained with the help of scientific management. (1) Increase in Productivity (2) Increase in Efficiency (3) Better pay for workers (4) Scientific study of work (5) Forecasting (6) Time and motion study Q. 2. (a) Compare and contrast between a line organization and a matrix organization. Also identify the kind of firms where such organizational structures would be most suitable. (8) (b) What are the considerations in the design of an organizational structure for a company? Discuss them. (6) (c) What do you mean by participative management? Bring out its advantages and disadvantages. (6) Sol. (a) Line organization: This is known as military type organisation, because in military discipline is of high order. Orders and instructions issued from the top have to be followed by the lowers. So in this type of organisation, orders of General Manager are to be carried out without any say by subordinates and hence no chances of shifting ofresponsibility and hence known as military type of organisation. As in this organisation, the flow of authority moves from top to bottom in vertical lines, therefore, this is also called line or scalar organisation.

1. Such organisation is suitable for factory of small and medium size, in which subordinate and operational staff is not too much. 2. Suitable for continuous process such as sugar, paper, oil refining, spinning and weaving industries etc. 3. Suitable where labour problems are not difficult to solve. 4. Suitable where automatic plants are used.

Matrix Organisation:
Matrix organisation is used when an organization has to handle a variety of projects, ranging from small to large. When a pure project structure is superimposed on a functional structure, the result is matrix structure. In other words the matrix organisation is a project organisation plus a functional organization. The project structure provides a horizontal lateral dimension to the traditional vertical orientation of the functional organisation structure.

(b) Designing the organisation structure: As we known that an organisation is a large group of persons united to achieve any task. It may also be defmed as pooling of human and physical resources in order to achieve


Engineering Management

predetermined goals and objectives. Organisation structure deals with the overall organisational arrangements in a enterprise. The classical hierarchical organisation structure is the most influential structural rationale of the modem corporation. While designing an organisational structure, different factors considered are : specialization of work (departmentation), span of control, chain of command, authority delegation (authority is delegated down the hierarchy), other principles of organisation for a particular type of industry. While preparing the structure, it is first drawn roughly considering different aspects and then attempted to weld various systems into a unified concept. This designed structure is refined until it takes final shape for implementation. The structure should be able to fulfill the objectives and achieve the coordination and decision making. Integrated organisational system is shown in Fig. 1.

External Environment Government Competitors Trade unlona

Internal environment

C Gl E Sor '>'




f!! II) m!! .... 0


~j m
.... .2Suppliers Custcmers Creditors

Fig. 1 Structuring the organisation

During organisational taken:

structure designing following precautions be

1. Develop a technical organisation structure based on the traditional methods of departmentation. 2. Start with total company objectives, develop a hierarchy or network of systems required.

Winter 2005


3. Examine all the related functions like production planning and control, quality control, Inventory control etc. and outline the various positions to be filled to take up these functions. 4. Involve key managers and experts in developing a matrix, team or a system. A detailed analysis of decision process, and information requirement will help in reviewing and refining the organisational structure. Introducing behavioral, decision and information concept helps in giving final shape to the structure.
(c) Participative Management; Participative management may be defined as a system of communication and consultation to keep employees of the organization informed about the day to day functions and affairs of the company so as to seek employees expressions and opinions helpful to management decisions Advantages of worker's participation: Both employees and organization reap advantages from participative management in the following manner: (i) Creates sense of identity and belongings of employees towards organization which motivate them to show better performance. (ii) Better performance increase economic lot that leads to increased wages, incentives and higher standard of living. (iii) Creative ideas creep which improve quality of decision making. (iv) Establish good communication system between employer and employees. (v) Promote mutual understanding between workers and management. (vi) Develop a sense of commitment to decisions to which workers are party. (vii) Create an environment of cordial and harmonious employeremployee relations. (viii) Wastage is controlled due to the sense of belonging ness on the part of employees. (ix) Develop team spirit. (x) Improvement of quality consciousness among the employees. (xi) Reduction in grievances due to better communication. (xii) Better attendance and punctuality growth.

Q.3 (a) Why is it necessary to store an item in inventory? What are the objectives of an inventory control system? (6) (b) The annual demand of a product is 24,000 units. The buying cost per order is Rs.I00 and the estimated cost of carrying one unit in stock for a month is 2%. Thenormal price of the product is Rs.I0 per unit. However, the supplier offers a discount of 7.5% if an order of at least 3000 units and a discount of 12.5% if an order is for at least 5000 units. Find the most economic purchase quantity per year. (12)


Engineering Management

Sol. (a) Inventory Control: Inventory is defined as the descriptive list of all the movable materials along with the cost of each item. Inventory consists of raw materials, work-in-process inventories, components, finished parts etc. It excludes the machinery, furniture and other fixtures, being used in the industry. The main fanctions of the inventory control are as under:
(a) Effective running of the stores.

(b) Availability of materials at proper time.
(c) Avoid build up of stock.

(d) Development of stock control system.
(e) Specified raw material is mairttained properly.

(j) Inventories are protected. (g) For achieving inventory control objectives, proper policies and plans are developed. (h) Maintaining of overall controL

Objectives of an inventory control system:
(i) Allow for demands that are larger than expected, or at unexpected times; (ii) Allow for deliveries that are delayed or too small; (iii) Allow for mismatches between the best rate of supply and actual rate of demand (iv) Avoid delays in passing products to customers; (v) Take advantage of price discounts on large quantities purchased. (vi) Allow the purchase of items when price is low and expected to rise. (vii) Make full loads for delivery and reduce transport costs. (b) Given: Demand rate (R) = 2AOOO units/year; Procurement cost (Cp) Holding cost (Ch)
= =

Rs 100 per order;

2% of the cost of the product for a month

= (2% x 12) of the cost of the product for a year

Unit product cost = Rs 10 Holding cost per unit (C h)

2 100 x 12 x 10


Rs. 2·4

:. Total holding cost per year = 2·4


Rs. 57600

Case (,) : Total cost if discount of7'5% on 3000 units order, Purchase cost


24000 x [10 - {:~

x 10}]

= Rs. 222000

Winter 2005 Ordering cost per year = No. of orders per year

31 ordering cost

24000 =--xlOO=Rs 800 3000 . :. Total cost per year = Purchase cost + Ordering cost + Holding cost

= 22200 + 800 + 57600


Rs. 280400

Case (h) : Total cost if discount of 12·5% on 5000 units order, Purchase cost

24000 x [ 10 -{:~~ 24000

x 10}]


Rs. 210000

Ordering cost per year :. Total cost per year

= 5000 x 100 = Rs. 480

Purchase cost + Ordering cost + Holding cost


+ 480 + 57600 = Rs. 268080

:. Total cost is least in case (ii), Hence economic purchase quantity is 5000 units per order. Q.4. Write short notes on: (I) Systems management (iv) Strategies (il) Collective bargaining (iii) Human Resource skill development for Effective Maintenance. Sol. (I) Systems Management:

Functional responsibilities below:

of system management

are given

System management is concerned with planning, organizing, directing and controlling the activities of systems for effective utilization of resources available. To see that system work at optimum Reviewing Developing Generating and modification possible alternatives level. system. of possible

2. 3. 4. 5.

systems to speed up the work. to save organization.

Management control is the process of assuring the efficient completion of objectives as decided by an enterprise. Management control is necessary because every enterprise small or big face turbulent (disturbed) environment. The following are the basic five characteristics of effective control. (1) (3) (5) (7) Appropriate Acceptable Cost effective Inventory control (2) Strategic (4) Reliable and objective procedure. (6) MPP and MRP (8) Forecasting

(II) Collective Bargaining: Collective bargaining is a process by which trade union and workers of industries come together to negotiate and dilcuss


Engineering Management

the terms and conditions pertained to their employment. It is a cost of bilateral monopoly where both employees and employers through their trade union representatives exercise enough bargaining power to resolve the issues among them without allowing any third party to intervene. The process of collective bargaining vary from country to country. Wage boards in India are examples of statutory( lawfull) collective bargaining. There are no hard and fast rules for collective bargaining. Issues included in collective bargaining are, standards ofliving of the workers, issues related to productivity, wages, overtime payments, bonus, leave encasement, working hours and working conditions and technical and economic progress of the organization. (iii) Human Resource skill development: Looking at the technological advancement and competitive markets a very high skill workers are required to meet the needs. HR skill development is also an important activity to enhanee the productivity and quality in production. The skill development can be taken up adoting various methods and training programmes. The training programmes can be arranged at the industry premises by calling experts or the works can be sent to other places also. (iv) Planned maintenance strategies: In this, it is necessary to do advance planning of maintenance policy for the organisation after considering all aspect of maintenance. Historical and statistical records of the maintenance work are maintained and compiled to assess the results and to provide guidelines for future. Planned maintenance is concerned with the engineering aspects of maintenance and its relationship with the production and economics. Planned maintenance system consists of deciding the following in advance: (i) The form, method and details of doing the maintenance of each individual item of the plant, equipment and other machines. (ii) The tools, spares, workmen, and time required to carry out this maintenance. (iii) The frequency of carrying out the maintenance operation (iv) The method of analyzing the results.

Group B Q. 5. (a) Describe the following important components of a balance sheet giving suitable examples: (i) Current Assets, (n) Fixed Assets, (iii) Current Llablities, (iv) Fixed Liablities. (8) (b) How are inventories considered in balance sheet- assets or Iibalities? Discuss why? (6)
(c) Show a representative Profit and Loss Statement ora company or your choice. Use hypotheti- cal. figures. (6)

Winter 2005


Sol. (a) (I) Current assets: The assets w~h are acquired by an organization to convert them into cash during the normal business' operations are current assets. Current assets include; cash in hand, stocks- both raw and finished, cash at bank, bills receivable, work in progress and finished goods, debtors, short term investments and prepaid expenses etc. (ii) Fixed assests : These assests are acquired for long term use by the enterprise for carrying out the business operations smoothly. These assests include, land, building, plant and machinery, furniture & fixtures etc. (iii) Current liabilities are the liabilities which are payable by the organization within one year from the date of balance sheet. This liability is met from the existing assests or from the assets created. Important items of current liabilities are (i) Accounts payable which includes, creditors and bills payable (i,) Outstanding expenses, (expenses made but not paid) (iii) Bank over drafts (iv) Short terms loans from bank or tinancial institutions payable within a year (v) Advances received from the trade or customers (d) Fixed liabilities: All liabilities other than current liabilities are known as fixed liabilities; These liabilities are paid after one-year from the date of balance sheet. The important items of fixed liabilities are (I) long terms loans and capital of the owner or equity. (b) Perpetual Inventory control: This is a perpetual or continuous check throughout the year in such a way that each item is checked at least once. In this system, the material is checked as it reaches to its minimum level. This can be performed by the store-keeper or somebody else specially engaged for this task, as he notices that the balance on the bin card has reached the minimum. Special provision is made for checking items which have not reached their minimum during a period. The advantage of this method is that the store need not to be shut down for sometime. Only minimum quantities are counted, weighed etc., therefore, less labour and time is taken. This method is comparatively more accurate. This method is very suitable for larger firms having huge quantities of different materials. If annual physical verification is done in such plants, complete shut-down of the stores may produce large losses to the owner. Therefore, for small plants which takes hardly few days for complete checking, " Annual physical verification" is done. IN such plants, necessity of shutting down the plant also does not arise, as daily issues and receipts are not much. Example: Following differences are noticed in the Physical verification of stores, state how you would adjust them in the stores ledgers. Solution. There are certain differences which are normal and it is difficult to avoid. Wastage occurring from these differences arise from the handling of


Engineering Management

such material. Such expenses should be included in production cost and are added to the factory overheads.
Material Physical balance units 400 300 Ledger balance units 450 150 Issue rate per unit in Rs. 15 Reasons for differences





250 100

280 100

4 3





Original rate 4 current ledger rate 5


Shortage is due theft. Purchase of 100 units not recorded. Balance of the excess is due to errors in issuing Careless stock-taking. Material is obsolete and the total quantity is sold as scrap for Rs. 100. Deficiency is considered as normal and within limits. 10 units are not as per purchase specification and are to be returned to the supplier.

But the abnormal wastage arising due to theft, carelessness, obsolescence etc. cannot be included in the cost of production. Such differences are debited or credited to Profit and Loss Account. On these principles, the decisions on these cases in taken as mentioned below: I. 50 units of material A at the rate of Rs, 15 will be shown as issued in stores ledger and Rs. 750 debited to Profit and Loss account. 2. (a) Entry for 100 units of material B be made in receipt columns of Stores ledgers and Rs, 800 be credited to stores ledger account. (b) Balance 50 units of materials B will again be credited for value Rs. 400 and item is credited in Store Ledger. 3. There are two ways for adjusting such deferences. In one theory, no entry or adjustment is made and we should wait till next stock taking is done and confirm whether there is actually carelessness or not. In second theory, we should not question the accuracy of stock-taking because it will lift the belief from stock taking. According to this theory, differences in material C is adjusted by showing 30 items issued and expenditure of Rs. 120 is booked in factory overheads. 4. The loss will be written offand hence Rs. 300 is debited to Profit and Lots Account and the account of material disclosed in Stores Ledger. 5. The loss being nomml, it shall be altered as issue of 110 units of material E in stores ledger. Tbe loss of Rs, 220 shall be booked in factory overheads. 6. Material F for 10 units shall be issued to supplier Rs, 50 shall be debited to supplier and Rs, 8 shall be written off and shall be added to factory overheads.

Profit and Loss AlC of ABC Co.
Debitside Particulators To opening stock Purchases 10,90,815.00 (less refund) 7815.00 Amount Rs. 2,35,000.00 Particulars Credit Amount Rs.

By sales IS 95000.00 (sales returns) 19,750.00

10,83000.00 Closing stock To cartage & wages in words To gross profit CIF 6250.00 653750.00 1978000.00 393750.00 19,78000.00

By gross profit BF
Insurance Commisions paid Interest paid on Capital Interest paid to bank Trade expenses Tent & Taxes Electricity & water Mise expenses Net profit 28750.00 9650.00 229890.00 11750.00 14650.00 10750.00 ·H91r.oo.OO 6,65,200.00 12,650.00 7950.00 Commissions received

653750.00 11500.00



Engineering Management

Q. 6. (a) Give at least two definitioas ofq .... ib' in.the context ofa product. Which definition woafd you pr'efer aJI~ "'y? (6) (b) What are the objectives of quality cODt..ol? (4) (c) Explain in brief, the X-bar and RChat1s .tlsecl;for quality

(d) What is acceptance sampling?


Sol. (a) Defination (1): Quality is.the totality of features and characteristics of a product or service that bear on its ability to satisfy a given need. Defination (2): Quality is nothing but to satisfy our customer in terms of products or services which we provide.
The first concept, does not incorporate many ofthe l~test interpretations of quality. The concept of quality has changed dramatically over the last ten years. A decade ago, the emphasis focused on prOduets;tb8t 1squality meant a product's ability to conform to speeificatioas, Later its ~ SUU'tedto incorporate elements of the customer, and quality was dtfiAed as "aqticipating and exceeding customer expectations". In the last several years, tM:! ccnceprof' quality has .. OlYedto recognise the importance of satisfying an organisation's D.WlY stak~ld~rs, including community suppliers, shareholders, employees,llrid~ Quality Il()W includes such diverse elements as impI"QvittgWork li.fe,.pr<lJA01jngworkpiece diversity, bettering environmental conditions; tkil,itating trade, and enhancing competitiveness, ' ' (b) OBJECTIVES OF QUALITY< CONTROL '

The main objectives o/quality control are the/ollowbt,:
(i) To evaluate design size,. material, workmallship, finish appearance, chemical composition and other relevant properties which are acceptable tofne'cotf.iutner. To sort out good pieces from the defectiVe ones in a lot to ensure the quality of the final producrwhichdoes not in any way deteriorate. To stop the manufacturing of the, defective pieces or components and to dispose off the bad~finish~d products through rework, salvage or scrap. To determine the various' methods 'a1td' processes of production and suggest improvements to achieve good quality.




(c) Comrot Chunfor Variables: X -chartandR-chartprovidemaximum
utilisation of information available from data and provide detailed information on process average and variation for control of individual dimensions.

Winter 2005


~ ~ ~




s: c:

~ r! q::


0 :::> III 0

~ 0

8. II)


In any process, when the variations in successive observations of the quality characteristic involved are due S9'~Y to a constant system of causes, that process is said to be in a state of statistical control. It is thus, obvious that in every process, causes of quality variation are at work. Individually, their effect on quality variation is negligible and collectively they make up what is known as inherent variability or process capability. No efforts should be made to eliminate these causes or even to identify them. Depending upon the rigidity and design of the machine, these variations are controlled. (d) Acceptance Sampling: Acceptance sampling is based upon taking a sample from submitted lots of raw material by the supplier. For example if 10,000 items are present in a lot, a random sample is taken of say 250 pieces and the lot is accepted on the basis of number of defectives permitted in the sample, (c) equal to say 2 or less. In this plan N = 10,000 n = 250, C = 2. Because of using the sampling process, every inspection scheme will result in a certain proportion defective (howsoever small) of defectives. A curve called operating characteristic curve is plotted for specified values of N, n, and C by applying probability formulae. for example, the Binominal formula shall yield.

PA = LPx = InC.1'px{l-pr-x .1'=0 .1'=0





) Operating

characteristic curve

(n, c)



Engineering Management

On plotting a graph between P and P A the DC curve is obtained. (See Fig. 3) In the Fig.3

P = Proportion defective in lot.
PI = Acceptable quality level.



Lot proportional defective.

ex= Producer's risk. ~ = Consumer risk. Q. 7. The data for a simple construction below: Activity A B


are as given

Immediate Pracessorts)

lime (Days) Crash Normal 4 6 2 5 2 7 4 3 4 1 3 2 5 2

Direct Cost(Rs.) Normal Crash 60 150 38 150 100 115 100 90 250 60 250 100 175 240



A D,B,E Indirect

costs are Rs. 40 per day for the project. (3)

(a) Draw an arrow diagram

(b) Find all the paths in the project along with their normal and crash times. (3)
(c) Find the crashing

costs for each activity on a per day basis. (4)

(d) Determine the project duration that will return the minimum total project cost by appropriately crashing the project. (10) Sol. (a)

Winter 2005
(b) The different paths obtained from the network is given below:


(i) A - F Normal time Crash time (ii) A-D- G Normal time = 4 + 5 + 4 Crash time (iii) C - E - G Normal time = 2 + 2 + 4 Crash time = 1 + 2 + 2
(iv) B- G
= = = =



11 days

3 +5

8 days 13 days

3 +3 +2


8 days

= 8 days

= 5 days
10 days days

Normal time Crash time




4 +2


(c) The crash cost per day table is constructed: Time (days) Normal Crash time time Cost (Rs) Normal Crash


Maximum reduction time (days)

Crash cost Per day Rs

G Total

4 6 2 5 2 7 9

3 4 1




60 150

90 250 60 250 100 175 240

90-60 = 30 1 250-150 2 60-38 --=22 1 250-150 2 0 175-115 2 240-100 2 = 30 = 50 = 30

6-4=2 2-1


38 150 100 115 100

'" -'
2 5 2

5-3 = 2 2-2 = 0 7-5 = 2 4-2 = 2

= 70

40 Critical activity

Engineering Management Cost/day
30 50 70

Maximum reduction (days) 2

From table, the cheapest activity is A and it can be reduced by I day. The increase in cost will be Rs. 30 and the project duration reduces to = 13 - 1 = 12 days. :. Total cost

713 + 30


Rs. 743

Again, Critical path is A - D - G. The cheapest activity is Dbecause A cannot crushed further Reducing activity D by I day. :. Project duration = 12 - 1 = 11 days Total project cost

Rs. (743 + 50)


Rs. 793.

Again, critical activity A - D - G D can be reduced by I day :. Project duration becomes

Winter 2005


Total project cost

= Rs.

(793+ 50)

= Rs. 8'41

There are three critical paths.

A- D-G,and

Activity GandF F,DandB

Cost/days (Rs.)
70+30=100 30 + 50 + 50 = 13(:)

Both G and F can be reduced by 1 ooy :. Project duration becomes = 1@ - I = 9 d8:¥s :. Total project cost = Rs (843 + 1(0) = Rs, 943.

Again, G and F can be reduced by 1 day. :. Project duration = 9 - 1 = 8 days. Total project cost = Rs. (943 + 160) = Rs, ltO!!J<J
A, F, D and G cannot crashed fUrther. Atthis'SlI&g~.6llashmg is possible only at activity B, but B is not present ia aU crit<iGad ~a«it8:, ttmFemre fUrther crashing is not possible


Engineering Management

:. Possible project duration Total project cost


8 days

Rs. 1043

Q. 8. (a) What are the different types of information systems? Identity each of them with an appropriate level of management. (8)
(b) What are the characteristics of e-business applications? Discuss them with reference to an e-business application of your choice. (6) (c) What do you mean by enterprise What are its component subsystems?



(ERP) ? (6)

Sol. (a) Information systems are classified asfollows:
(i) Data bank. It is the simplest form of information system, designed only for the purpose of collection and storage of data. These data can be utilised whenever required.

(ii) Predictive system. In this system, data are not only collected and classified, but are analysed also in order to draw inferences leading to decisionmaking. This helps in predicting, if certain conditions are not changed or changed or new ones are imposed. (iii) Decision-making system. This system is used for making decisions by generating alternatives and then selecting best alternative. (iv) Decision taking system: Decision taking information system incorporate the tools and techniques for implementing the decisions.

(b) Characteristics of e-business application:

Transactions flow seamlessly across departments. Traditional process have barriers and boundaries between departments requiring a hand off of the transactions. Exception transactions, work around, and shadow systems in departments are greatly reduced. There is a focus on providing the web visitor with information.

(ii) (iii)

Winter 2005 (iv)

43 Here, there is a greater dependence on system and technology than in much traditional business. e-business occurs when organisation perform electronically with their customers or suppliers. transaction

(c) Enterprise resource planning is an integerated, multidimensional system for all functions covering logistics (materials, production, sales and distribution, plant maintenance, quality management, project management, production planning etc.), accounting (finance and controlling) and human resources and while at the same time incorporating industry- specific solutions and the best business practices. ERP provides real time online information for decision making or required analysis. That is whenever the data is needed into the system, it is processed and stored immediately. Since under ERP transactions are simultaneous, the information or data based on these transactions shall also be up-to-date and must be readily available at any given time. ERP is basically a software suit that integrates the whole enterprise, covering the entire integrated supply chain from vendors and suppliers to customers. It is not only easy to use and address all software requirements of the enterprise, but also flexible enough to accommodate future changes. ERP software have built in best industry practises and they act as a strong enabler in i:nproving business performance and productivity

Groupe Q. 9. Answer the following questions very briefly:
(I) Name five important


functions of management. not suitable for today's organizations? in making site selection decisions

(il) Why is line organization

(iii) What are some considerations in locating a plant?

(iv) How will you estimate carrying or holding costs of storing ann item in inventory?
(v) What inputs will you use in preparing schedule for a MRP system?



(VI) What is Inventory. Turnover (vii) What is a p-chart

Ratio? What

used for quality control?

(viii) What is the largest path in a project network diagram? is its significance?
(ix) Give a definition (x) Name

of information. Enterprise Resource Planning (ERP)

some popular

Software. Ans. (I) Five important function of management: I. Planning, 2. Organizing, 3. Staffing, 4. Controlling,S. Coordinating


Engineering Management

(ii) Line organisation is not suitable for today's organisations because it requires different departmental heads to be expert in various functions, hence lack of specialization. Therefore, each departmental heads are over-burdened with various routine jobs. (iii) The following considerations are as follows: (1) Raw materials are easily available (2) Plant site must be connected with National highway, Railways and Ports. (3) Easily available man power (4) Plant must be near a river for availability of water. (iv) Inventory carrying costs: They arise on account of maintaining the stocks and the interest period on the capital tied up with the stocks. They vary directly with the size of the inventory as well as the time the item is held in stock. Various components of the stock holding cost are: (i) Cost of money and capital tied up in inventories (ii) Cost of storage space (iii) Depreciation and deterioration costs (iv) Pilferage cost (v) Obsolescence cost (VI) Handling cost (vii) Record keeping and administrative cost /(viii) Taxes and insurances (v) The various input are: 1. Inventory, 2. Bill of materials, 3. Management sales. (VI) Inventory turnover in days

Days in the year Inventory turnover



Days in the year

Cost of goods sold

(vii) The control chart for defectives, known as 'p' chart is used whenever the quality characteristics observed in the classification of items as defectives or not defective is the result of inspection of casting, go and not go gauge test results, etc. P-chart is a chart for fraction rejected as non-conforming to specifications. Fraction rejected is nearly always represented as a decimal fraction. (viii) Longest path in a project network diagram is the critical path. All the activities in the critical path are critical. The length ofthe critical path is shortest time allowable for project completion. The time given by the critical path activities provide the total project time and any reduction in target time can be possible by increasing manpower, introducing shift system or overtime. (ix) Information is something which management expects to know at a given time. The information is needed to plan, organise, direct and control the business. (x) (a) M.S. project 2000, (b) SAP.

Answer FIVE questions, taking ANY TWO from Group A, . Any TWO from Group B and AliLfrom Group C. Figures in the bracket indicate full marks. Group A Q. 1 (a) Discuss the functions of a manager. (b) How is decision making in scientific management decision making in traditional management? (c) What criteria would you suggest for evaluating of a management team ? (d) What are the methods of management them in brief. control? different from the effectiveness Explain each of

Solution. (a) Management is the dynamic life giving element in every business. The primary job of manager is to achieve the enterprise objectives. IIi order to achieve the enterprise objectives he co-ordinates various activities of various people. In fact, functions of manager are almost same as functions of management. They are listed below: Planning: (a) It is a process by which a manager anticipates the future and discovers alternative course of action open to him. (b) Without proper planning, the activities of an enterprise may become confused, haphazard and ineffective. (c) Prior planning is very essential for utilizing the available facilities. Organising: (a) It is the process by which the structure and allocation of jobs is determined. (b) It involves determining activities required to achieve the established company objectives, grouping of these activities logically so that these can be handled efficiently by subordinates, managers, etc. (c) Organising means, organising people, materials, jobs, times, etc. and establishing a framework in which responsibilities can be defined and authorities are laid down. Directing: (a) It is a process by which actual working of subordinates is guided towards common goal of the company. (b) It involves issuing instructions to subordinates. (c) It involves supervising the subordinates to make sure that the work is done by them as per the plans.


Engineering Management

(d) For directing, the managers are required to have the qualities of leadership, communication, motivation and supervision.
(b) Scientific management was developed and introduced by F.W. Taylor in 1910 and he is known as 'father of scientific management'. Throughout his career, Taylor was concerned with the problem of increasing labour productivity without putting undue strain on workers.

Scientific management means the application of scientific methods of study analysis to the problems of management. It is a systematic and thoughtful approach to the job of management as compared to the rule of thumb or trial and error. It is concerned with the scientific bent of mind and is more than merely a set of techniques for improving efficiency. In order to execute the principles of scientific management Taylor and his associates developed the following techniques. 1. Scientific work study: It involves the measurement and improvement of work. Scientific work study includes: (I) Method study: This study involves the critical examination of plan layout, product design, material handling and work processes, to minimise time, distance and cost involved in the transportation and storage or materials. (il) Motion study: It refers to the study of the movement of operator or a machine involved in a task with a view to eliminate unworked or useless motions. Motion study helps to find the best method of doing work. Gilbreth identified 17 basic motions involved in every human operation. These are search, select, grasp, transport empty, transport loaded, hold, release load, position, proposition, inspect, assembly, disassemble, use, unavoidable delay, avoidable delay, plan and rest for overcoming fatigue. Symbolically SR, ST, G, TE, TL, H, RL, P, PP, I, A, DA, U, un, AD, Po & R. (17).


(iii) Time study: It implies the study of time taken to perform each operation of a job in order to find out the proper time that, should be taken in doing the job. (iv) Fatigue study: It implies provision- of rest hours after a set time interval. During the rest time the worker can recoup (recover) his energy.
2. Scientific Task Setting : It is the technique of forecasting and viewing ahead every step in a long series of separate operations. It include (a) Routing : It implies laying down the route or both to be followed by each piece of raw material before its conversion into the finished product.

Summer-2005· (b)Scbeduliog : It refers to time-table of operation.


(c)Despatcbing : It involves assembling or necessary resources, assignment of jobs, supervision of work, enforcing discipline and coordinating activities.

(d)Foliow-up : It is the last step in scientific planning which refers to checking of work and taking corrective steps to ensure that each piece of work is completed at the right time.

(c) Evaluation of effectiveness of a managerial team can be done by taking into consideration foUowing points.

1. Achievement: This is called accomplishments. It means bringing an organization to successful end t' a planned set of expectations.

2 Accuracy: This means correctiveness that is acting and deciding without errors or faults that form barriers (hurdles). 3. Creativity: It is called innovation that is generating alternatives that bring about original and unique results. 4. Delivery: Working according to time-table that shipping goods and mailing services at the time agreed. 5. Honesty: Showing fairness, truth and justice in working. 6. Flexibility: Adaptability and elasticity that is moving to a new areas. 7. Proficiency: This means skill formation and working smartly. 8. Progress: Bringing improvement by way of bettering past and present conditions to increase the quality of work. 9. Productivity: This means efficiency that is consuming minimum resources (inputs without wastage) and reaching the highest level of performance. 10. Quality: Maintaining standard of performance.

11. Renewal: This means dependability that is showing performance in such a manner that it enlarges confidence. (d) Controlling is defined as the process of determining what is to be accomplished that is the standard, what is being accomplished that is the performance and if necessary applying corrective measures so that performance takes place according to plans, that is in conformity with standards controlling process involve following steps. 1. Establishment of standards 2 Measurement of performance

3. Appraisal of performance

4 4.



Deviations if any, what are causes. Techniques of control are : (a) Real time control
(b) Feed forward control

(c) PERT (Programme Evaluation & Review Technique) Q. 2 (a) What are the mechanics of an organisation? effective to achieve the objective of an organisation?
(b) How would you undertake the reorganisation (c) What principles would you use as guides ?

How are these

of an enterprise?

Solution. (a) "Organisation is more than a chart, it is the mechanism through which management direct, coordinates and controls the business. It is indeed the foundation of management. If the organisation plan is i/ldesigned, if it merely make a shift arrangement, then management is rendered difficult and ineffective. If on the other hand, it is logical, clearcut and streamlined to meet present day requirements then the first requisite of sound management has been achieved" "Organisation refers to more than the frame of the edifice. It refers to the complete body, with all its co-related functions. It refers to these functions as they appear in action-the very pulse and heartbreak, the circulation, the respiration, the vital movement, so to speak of the organised unit. It refers to the coordination of all these factors as they cooperate for the common purpose." A good organisation results in the following advantages: 1. It facilitates administration: By dividing duties, and delegating powers and analysing job, the organisation siphons off the routine duties and thus frees the executives for policy formulation, forward planning and many other important jobs. 2. It promotes specialisation: By allocating duties to different individuals according to their suitability, it brings about specialisation and diversification of work. 3. It creates favourable climate for growth: By developing a large number of activities, opportunities are provided for the framework within which the unit may grow. 4. It leads to creative thinking and initiative: By providing well-defined areas of work with broad latitude for the development of new and improved ways of doing things. (b) Reorganisation is hot corrective action. It revises routes, loads, and schedules of an enterprise. In manufacturing unit this is often required



hanges in market conditions, manufacturing methods, or many other factors ffecting the plant will often indicate that a new manufacturing plan is needed. In advance, the route of work through the plant, determines the amount of productive capacity required to do the work, and based on the availability of this capacity schedules all phases of the work so that the plant will be ffectively utilized.

(c) Brech says, "If there is to be systematic approach to the formulation f organisation structure there ought to be a body of accepted principles, .e., to say, a set of agreed basic factors which will determine the effectiveness f an organisation structure when at work in practice and the absence of which will, generally speaking, lead to deficiencies in the working department."

According to Urwick these principles may be set forth as below: l. The principle of objectives: All organisations and each part of any undertaking should be the expression of a purpose, either explicit or implied. 2

Theprinciple of correspondence: Formal authority and responsibility
must be co-terminus and co-equal.

3. The Scalar principle : There must be a clear line of formal authority
running from the top to the bottom of every organisation.

4. The principle of responsibility: the responsibility of higher authority .
for the acts of its subordinates is absolute. who

5. The principle of span of control: No superior can supervise directly
the work of more than five or at the most six subordinates interlocks. is smooth and effective co-ordination.

6. The principle of co-ordination: The final object of all organisations 7. The principle of definition : Every position in every organisation
should be clearly prescribed in writing. S. The principle of balance : It is essential that the various units of an organisation should be kept in balance.

9. The principle of specialisation : The work of every person in the
organisation should be confmed as far as possible to the performance of a single leading function.

10. The principle of continuity: Re-organisation is a continuous process;
in every undertaking specific provision should be made for it. Q. 3 (a) Discuss the importance of plant location.

How are plant location and plant layout~isions


related ?




(c) Outline and explain the factors to be considered development

for plant layout

Solution. (a) Location of an organization is an important management decision viewed as two step decision. l. The choice of the region 2. Choice of site As these two decisions are likely to effect whole working of the organization, they require special attention. Many considerations are looked upon making a final decision for site and region. A good site can boost sales and working of the organization while a bad site at unhealthy region may deteriorate the organization. No location can be considered to be unique and can remain competitive indefinitely. Location studies require continuous monitoring.
(b) If we go through the objectives related to plant layout and plant location we find similarities. Both have following similar objectives.

1. 2. 3. 4. 5. 6.

Increased output/turnover Greater utilization of man/machinery Easier adjustments to changing conditions. Satisfaction and safety of workers. Creating healthy & productive environment. Customer's satisfaction

(c) Factors influencing plant layout development: The need to secure advantageous location of a plant depends on the following important factors: 1. Selection of Site 2. Availability of Labour 3. Infrastructural Facilities 4.- Climatic Conditions 5. Proximity of Market 6. State Legislation and Government Incentives 7. Availability of Power, Fuel and Water 8. Scope of Future Expansion 9. Local by-laws 10. Cost of Land



Q. 4 (a) Put yourself in the position of a training director, who must justify his work to top management How would you go about projecting that you are in asset to the firm ?
(b) Explain in brief two important techniques of work study.

Solution. (a) Executive talent is the most important asset which a company can possess. This talent depends upon the training process or training director of the organization.

If I am the training director of an organization. I will like to adopt methods used for executive development programmes. As some of these methods are meant for newly recruited executives, and their aim is to generate in trainers a deeper understanding of managerial functions. Some other aim at increasing the problem solving skills of managers. Still others aim a changing their attitudes. These methods are :

I. Observation assignement. Under this method new recruited executive called 'understudy' is made an assistant

2. Position rotation. Under this method, the trainee executive is rotated among different managerial jobs. This not only broadens and enriches his experience as a manager but also enables him to understand interdepartmental relations and the need for coordination and cooperation among various departments.

3. Serving as commitees. Another important method of training an executive is to make him serve on a committee. While serving on a committee, the executive comes to learn not only the various organisational problems and views of several senior and experienced members but also learns how a manager should adjust himself to the overall needs of the enterprise.

4. Assignment of special projects. Sometimes, as a method of training some special project is assigned to a trainee executive. For example, he may be asked to develop a system of cost allocation in the production of certain goods for which an order has been received by the company. While working on such projects, the trainee not only acquires knowledge about them but also learns how to work with and relate to other people holding different views.

5. Conferences and seminars. Often an executive is deputed to attend a conference, seminar or workshop to receive a quick orientation in various areas of management with which he might be unfamiliar.

By adopting above methods I shall train the trainee in such a manner hat he finds himself in the best position during his tenure as a manager of any organization. And I can justify my stand to the bosses.




(b) Scientific work study: It involves the measurement and improvement of work. Scientific work study includes: (I) Method study: This study involves the critical examination of plan layout, product design, material handling and work processes, to minimise time, distance and cost involved in the transportation and storage or materials.

(ii) Motion study: It refers to the study of the movement of an operator or a machine involved in a task with a view to eliminate unworked or useless motions. Motion study helps to find the best method of doing work. Gilbreth identified 17 basic motions involved in every human operation. These are search, select, grasp, transport empty, transport loaded, hold, release load, position, proposition, inspect, assembly, disassemble, use, unavoidable delay, avoidable delay, plan and rest for overcoming fatigue. Symbolically SH, ST,

G, TE, TL, H, RL, P, PP, I, A, DA, U, un, AD, Pn & R. (17).
(iiI) Time study : It implies the study of time taken to perform each operation of a job in order to find out the proper time that should be taken in doing the job. (iv) Fatigue study: It implies provision of rest hours after a set time interval. During the rest time the worker can recoup (recover) his energy. GroupB Q. 5 (a) Contrast independent and dependent demand with respect to inventories. (b) A producer distributes 800 packing boxes per month, which he purchased at a cost ofRs. 10 each. The manager has assigned an annual carrying charge of25 per cent of the purchase price per box. Ordering costs are Rs. 28. Currently the manager orders once a month. How much could the firm save annually in ordering and carrying costs using the EOQ ? Derive the formulae you use from the first principles. Solution. (a) Inventory control models assume that demand for an item is either independent of or dependent on the demand for other items. For example, the demand for refrigerators is independent of the demand for toaster ovens. However, the demand for toaster oven components is dependent on the requirements of toaster ovens. In inventory control independent demand depends upon the various cost factors and mostly ordered to the manufacturing companies. While in dependent demand manager is required to know about the following:

Summer-2005 I. Master production schedule 2. Bill of material 3. Inventory availability 4. Lead times


(b) Solution. Economic ordering quantity (E.O.Q.) is obtained by the quantity whose procurement cost is equal to inventory carrying cost. Let,


'= =

Total items consumed (used) per year. Procurement cost per order Economic ordering quantity of orders placed in a year cost per year. ... (1)


= Annual inventory carrying cost per item of component


Then, Procurement cost /year
= Number x

AxP Q and Inventory carrying cost /year = Average value of Inventory in a year carrying cost per item component QxC 2 Total cost AxP QxC

Annual inventory

...(ii) ...(iii)

=_._-+-Q 2

This total cost will be minimum, when

Ax P





2AP C Q =~2~P


Hence, most economic ordering quantity

For the given problem we first find the economic order quantity month.

Qo per

10 Here demand R = 800 units/month



Cost of ordering Co = Rs. 28/unit (P) = Rs. 10 (P) Carrying cost (Ch) Monthly (Ch)
= =

Rs. 28 10 5

12 x 100 = 24


Hence economic order quantity (Co) per month




2x28x800 5/24

2 x 28 x 800 x 24 5

= 463.72

Since Qo = 463'72 is fractional so it may be

Qo' = 464 or Qo' - I = 463
Now Qo' (Qo' - I) = 464 and

463 = 214832

Q02=(463'72t=215036'24 Since Qo' (Qo' -I) < Q 2


So we take Qo = Qo' = 464. Now annual demand

= 12 x 800 = 9600

So the variable annual cost (ordering + carrying)



D c, xQ -Co+-Q 2

= 9600 x 28 + 2 .5 x 800
= 336


+ 1000 = Rs. 1336

For economic order quantity VCo = J2Ch x Co x D

= c, x Qo

= lOx 25 x464
=Rs.II60 Thus annual saving in ordering and carrying cost

= Rs. 1336 - Rs. 1160 = Rs. 176

Summer-2005 Q. 6 (a) Outline the important steps involved in project management.


(b) The time required to complete each of eight jobs on two machines

are shown in the table below. Each job must follow the same sequence, beginning with machine A and moving to machine B. Determine the optimum sequence, and show the resultant on a time chart and find the idle time for B. Time in hours Job 1 2 3 4 5 6 7 8 Machine A 16 3


Machine B 5 13 6 7 14 4 14

8 2 12 18 20

Solution. (a) Steps in project management: management are : I. Project planning; 2. Project scheduling; 3. Project controlling.

The main steps in projects

The above categories are not completely independent but in some sense, are interrelated. For example, controlling and scheduling (rescheduling) are done together. I. Project planning : In small projects, resources, constraints, and interrelationship can be visualized without any difficulty and the project can be planned informally. But if the project is not small enough then we need a formal approach for planning. Without effective planning the project cannot be executed. 2. Project scheduling: In broad sense project scheduling is a part of planning itself. In project scheduling one mainly concentrates on time schedule and allocation of resources. 3. Project control: In project control a continuous check on the performance of the project should be made. The causes of deviation from the goals must be carefully ascertained. There are twe approaches for project control, the Variance Analysis Control and the Performance Analysis Control (Modern Approach).

(b) Solution.



Rewrite the question in the following manner before

Jobs Machines MicA Mlc B 16 5 I








3 13

9 6


2 14

12 4

18 14

20 11

Optimum sequence time chart 5








Now we construct table to find minimum elapsed time. Calculation of Idle time for MlC B
MicA MlcB


Time in 0 2

Time out 2+0=2 2+3=5 5 + 8 = 13 13+18=31 31 + 20 = 51 51+9=60 60 + 16 = 76 76 + 12 = 88

Time in 2 16 29 36 51 62 76 88

Time out 2 + 14 = 16 16 + 13 = 29 29 + 7 = 36 36 + 14 = 50 51 + II = 62 62 + 6 = 68 76 + 5 = 81 88 + 4 = 92

Idle time forMIC B 2

5 2 4 7 8 3

13 31 51 60 76


8 7


Idle time ofMlC B = 18 hours Q. 7 (a) What are the concepts that underline use of control charts? plans? Solution. (a) Control charts: Control charts were developed by Walter Shewhart in 1920s and used to monitor processes. The process of building control chart is based on the concepts shown the construction.and

(b) What factors govern the choice of single versus multiple sampling



in Fig. This figure shows three distributions that are the results of outputs from three type of processes. Plot smal! samples and then examine characteristics of the resulting data to check, if the process is within control limit. The purpose of control charts is to help distinguish between natural variations and variations due to assignable causes. As we see in Fig. a process (a) In control and the process is capable of producing within established control limits (b) In control but the process is not capable of producing within established limits and (c) out of control.
(a) In statistical control and capable of , producing within , control limits ;' A process with only natural causes of variation and capable of } producing within the specified control limits. Upper control limit (b) In statistical control but not capable of producing within control limits A process in control (only natural causes of variation and present) but not capable of producing within the specified control limits,


, ,


Lower control limit ---.,'


, , , ,


, , ,

, ,

, ,

, ,


/'--__'. , , ,
Size _____.., (Weight, length. speed, etc.)


(c) Out of control A process out of control having assignable causes of variation,

Fig. 1

Variablesvalues or data: The measured value of a product (or service) characteristics like diameter, temperature and hardness etc.
These are Go-No-Go defective (deviation) type.


type proportion

for fraction


(b) Single sampling plan: Here, we draw a single random sample of n items from the batch and evaluate each item as being acceptable or defective. If the defective items in the sample is more than some value. we reject the batch. Multiple sampling plan: These sampling plan are similar to double
sampling plant except we keep sampling items until the commulative proportion




of defectives either exceeds some value (to reject the batch) or the commulative proportions of defectives falls below some value (to accept the batch). Q. 8 (a) What are the important aspects to be considered for a project within the scope of project control?
(b) A company builds luxury boats to customer order. Relevant data

are given below. The customer wants delivery in 32 weeks failing which he will impose a penalty of Rs. 3750 for each week his boat is late.
Activity Precedes Normal time, weeks Crashing Cost, Rs: 1st week 2nd week






5 4

4100 1250 450

4150 450 3500 2250




5 8
7 6

2000 850

end end

Develop a crashing schedule. Solution. (a) The main objectives of project management can be' described in terms of a successful project which has been finished on time, within the budgeted cost and to technical specifications which are required by the end users. A project is any human undertaking with a clear beginning as well as a clear ending. Planning scheduling and controlling the work during any worth-while project is the main task for any project manager. Control requires not only current status information but insight into possible trade-offs when difficulties .arise. Normally for any project, one may be interested in answering the questions such as : (i) When do we expect the project to be completed, (ii) If any activity is delayed, what effect will this have on the overall completion time of the project. (iii) If there are additional funds available to reduce the time to perform certain activities, how should they be spent, and (iv) What is the probability of completing the project by the scheduled data.



Solution. (b)

We have two critical paths

1-2-3-4-5-7-8 andJ-2-3-4-6-7-8
The project completion time is 39 weeks. To reduce the project duration by one week, we must reduce the length of all critical paths in the network. Basically either an activity common to both the critical paths or one activity from each of the path has to be selected therefore, L, M, N and J cannot take separately.
Activity 1st week Cost / week (Rs.) 2nd week Maximum reduction weeks


P Z NandL NahdM landM

4100 1250 450 3000 500 200



450 3500

2 2

2250 -

900 1700 3450 3500


2 1
I (least of Nand L) I I


The cheapest alternative is to select Z and crash by one week. And the project cost is increased by Rs. 900.




After deleting the row 'Z' from the table. Nand maximum. L is the cheapest activity and it can be crashed by one week

The project cost is increased by Rs. 1700. Now after Nand L, the cheapest activity is two weeks maximum.

Q and it can be crashed by

The project cost is increased by 2000 + 2250


Rs. 4250

Summer-2005 The remaining table is as follows:
Activity Cost /weeks (Rs.) Is/week K NandM J and M 2nd week


Maximum reduction (weeks)

4100 3450 3500

4150 3900

2 1 1


Now the cheapest activity is N and M. It can be crashed by one week (maximum).

And the project cost is increased by Rs. 3450. Again, J and M is the cheapest alternative and it can be crashed by one weeks maximwn.

The project cost is increased by Rs. 3500. Now activity K is crashed by one weeks.




The project cost is increased by Rs. 4100 for crashing one week. Therefore, Net increase in project cost is
= Rs

[ 900 + 1700 + (2000 + 2250) + 3450 + 3500 + 4100]

=Rs. 17,900 Groupe Q. 9 Answer very briefly the foUowing :

What are the important differences between manufacturing service operations ?


(ii) Outline the steps in the decision making process. (iiI) What are the optimum values of x and y for the foUowing : Maximize Z = lOx

+ 20y

5x+2y~40 4x+4y~48 x,y<?::O (iv) Explain the difference between MAD and MSE as used in forecasting. (v) What are the basic assumptions of Breakeven Analysis? (VI) (viI) (viiI) (ix) What are the advantages of a product layout? How is job enlargement different from job enrichment? How is MRP different from MRP


What are the differences between predictive maintenance and preventive maintenance?

Summ er-2 005


Differentiate between quality and reliability. ANSWERS

(i) Important differences operations?

between manufacturing
Service operations

and service

Manufacturing operations

Manufacturing involve tangible goods production. involve heavy plant &

Services are usually intangible (ex: buying a ride on a vehicle) Services are often produced cosnumed simultaneously. Services have definition. inconsistent and

Manufacturing machinery.

Raw materials, work in process and finished goods can be inventoried.


Maintenance is often preventive and tak.s place at production site.

Maintenance is often repair and takes place at customer's site.

Customer is not in the most of the process.

(il) Step decision making process: In the last several decades research on decision making has indicated that it is a highly complex process. However for convenience, decision making process has been described in five steps below: 1. Understanding the situation 2. recognizing the right problems 3. Analysis of available alternatives 4. Selection of the solutions 5. Acceptance by the organization (iii) The given L.P.P problem in standard form max = lOx + 20y + O'St + O'S2 S.T

5x+2y+St +OS2=40
4x+4y+OSt +S2 =48

x,y, SI' S2 ~ 0
The initial basic solution is SI

= 40, S2 = 48,

both are positive so they enter the basis.

are positive so they enter the basis.




Initial basic feasible solution is given by the following table



r ::l 12.0 1
__ __

0 ~ __ ~ __

0 ~ __ ~ __

:asi~_~_~~ L~ __ ~_~~

~ ~

__ ~, __ ~~ 12+-

~= "L CBa~




I 0 I

I 2.01

L :J

o o

o o

The solution is not optimal as C}' are positive. So we iterate towards .he optimal solution. Here S2 is out going variable and enters the basis. The second feasible solution is given below: Cj CB 0 basis

x 3

y 0



b 16


1 0

-112 114 5 -5







0 0

Since all Cj are negative or zero so the above solution is optimal. The optimum value of XI and yare x
= 0, y =

12. The max z = 24U.

(iv) (a) MAD (Mean Absolute Deviation) : MAD has made a comeback in recent years because of its simplicity and usefulness in obtaining tracking signals. MAD is the average error in the forecasts, using absolute values. It is valuable because MAD, like the standard deviation, measures the dispersion of some observed value from some expected value. MAD is computed using the differences between the actual demand and the forecast demand without regard to sign. It is equal to the sum of the absolute deviations divided by the number of data points.


= ----'-----....:_

"L (forecast errors)



(b) Mean squared error (MSE). It is another way of measuring overall forecsat error. MSE is the average of the several differences between the forecasted and observed values. Formula is MSE = L (forecast errors)2

(v) Break-even analysis: application of empirically The break-even chart is an important practical determined cost functions. In the (practically)

modem industrial setup, break-even chart is being widely used by company executives, investment analysts, labour unions and government agencies. The purpose of brea-keven analysis is to forecast profits.

Product Layout: It is also called line type layout. In this type


product layout, only one type of product is produced in an operating areas. The product so produced should be standardised and manufactured in large quantity. All the equipments as well as raw material used are arranged according to the sequence of operation. The raw material arrives at one end of the line and goes from one operation to the next with a minimum of work in process storage and material handling. Such a layout is provided for continuous production. Continuous type of production pertaining to chemical industries as well as automobile manufacturing concern is a good example of product layout.
(vii) These terms are related to the behavioural


in job

design, like degree of labour specialisation, sociotechnical systems, etc. Specialisation of labour is the two-edged sword of job design. On one hand specialisation has made possible high-speed, low-cost production, and, from a materialistic standpoint, has greatly enhanced our standard of living. Also it is well-known that extreme specialisation, such as encountered in massproduction industries, often has serious adverse effects on workers. In essence, the problem is to determine how much specialisation what point do the disadvantages outweigh the advantages? Some workers prefer not to make decisions about their work, some like to daydream on the job and others are simply not capable of performing more complex work. So two popular contemporary approaches exist which are: is enough: at

1. Job enrichment and 2 Sociotechnical systems. (Job enrichment)

Engineering Management

The philosophical objective underlying these approaches is to improve the quality of work life of the employee and so they are often applied as central features of what is termed as quality of work life (QWL) programme. Job enrichment generally entails making adjustments to a specialised job to make it more interesting to the job holder. A job is said to be enlarged horizontally if the worker performs a greater number or variety of tasks and is said to be enlarged vertically if the worker is involved in planning, organizing, and inspecting his or her own work. Horizontaljob enlargement is intended to counteract over simplification

and to permit the worker to perform a "whole unit of work". Vertical enlargement (traditionally termed as Job Enrichment) attempts to broaden the workers influence in the transformation process by giving them certain managerial powers over their own activities. Today, common practice is to apply both horizontal and vertical

enlargement to a given job and refer to the total approach asjob enrichment. (viii) MRP : Material Requirement computational Planning (MRP) is defined as a

technique that transforms the master schedule for finished

products into detailed schedule for raw materials and component required for the finished product. MRP clearly signifies as to when each of these items must be ordered and delivered with a view to meet the target of master schedule of finished products. MRP is referred to as an open loop system. MRP II : To complete the loop a feed back machanism is added to master production schedule, allowing the analysis of the various production schedules. When an MRP system includes a feedback mechanism, it is referred to as a closed loop system. The more advanced system with feedback mechanism is known as MRP II. It facilitates production scheduling much better than MRP, which actually gives higher priority to materials management. Because of this, the "MRP" in MRP II stand for manufacturing planning" to many companies. Other capabilities planning, and sales requirements planning. resources in a complete requirements

Summer-2005 (ix) Preventive Maintenance:

23 Organized maintenance work carried out lubrication, of

to prevent breakdown by well conceived plans of inspection, or condition base. Preventive maintenance is a routine

adjustments and overhaul refer to preventive maintenance. It can be time based inspection production systems and this service activity is designed to detect potential failure conditions so as to make minor adjustments and/or repairs that will help to prevent major operating problems. Production systems like chemical plants, refineries, steelmills or any flow shop operate continuously and cannot afford the break-down of a machine operative in the system. Since such a failure will bring the entire plant to a stand still and the losses incurred during the downtime are enormous. In such cases the Preventive production system are detected and are maintained Maintenance is most attractive and effective policy. The critical machines belonging to the under the preventive maintenance schedule designed. Predictive Maintenance: Predictive maintenance makes use of human

senses and other sensitive instruments like - (I) Audio-gauges (il) Vibration Analyzers and (iii) Amplitude meters. The use of these instruments predict the breakdown before it actually occurs. It helps to take corrective measures before hand to avoid breakdown. (x) Reliability: Reliability is the probability of an equipment working

in a given environment for its mission time: Reliability of an equipment is given by the expression,

R= e-tlO
where t = mission time and 8 is the characteristic life. Quality: Quality of any product is regarded as the degree to which it

fulfills the requirements of the customer. Once a particular quality level is decided as a policy matter, then that level should be maintained. It should be observed closely that the quality has a meaning at all the stages of production and means any characteristic of (i) the materials,

24 (ii) parts, (iii) assemblies, activity. (iv) process

Engineering and processing

Management and


(v) products including packing and packaging thus embracing all spheres of

In any industry, quality involves all its various sections and all groups of personnel.

Profit and Loss AlC of ABC Co.
Partieulaton To opening stock Purchases (less refund) 10,90,815.00 7815.00 10,83000.00 Closing stock To cartage & wages in words To gross profit CIF 6250.00 653750.00 1978000.00 393750.00 1978000.00 AmountRs. 2,35,000.00 Particulars Credit Amount Rs. 1595000.00 15.842500.00

By sales

(sales returns) 19,750.00

By gross profit BF
[nsurance Commisions paid Interest paid on Capital Interest paid to bank Trade expenses Tent & Taxes Electricity & water Mise expenses Net profit 28750.00 9650.00 229890.00 11750.00 14650.00 10750.00 339JMOoo 6,65,200.00 12,650.00 7950.00 Commissions received

653750.00 11500.00



Engineering Management

Q. 6. (a) Give at least tw9 definitioas of q~ in,tbe cODtex,t of a product. Which definition WQuld you prefer 1!Il~ ",y? (6) (b) What are the objectiv~ of quality cOat~l? (4) (c) Explain control (d) What is acceptance sampling? in brief, the X-bar,aitd R.CIl81s ·used, for quality (6) (4)

Sol. (a) Defination (1): Quality is· the totality of features and characteristics of a product or service that bear on its ability to satisfy a given need. Defination (2): Quality is nothing but to satisfy ow customer in terms of products or services which we provide. The first concept, does not incorporate many ofthe lirt~t interpretations of quality. The concept of quality has changed dramatiCallY over the last ten years. A decade ago, the emphasis focused on pr(jd~idUlt is quality meant a product's ability to conform to specifications. Later its.defination started ·to incorporate elements of the customer, and quality was dtfiaed 1$ '~aqticipating and exceeding customer expectations". ".~ In the last several years, the ccnceprofquality has "Nve~Uo recognise the importance of satisfying an organisation's numY.~9~, jncluding community suppliers, shareholders, etnployees, and ~ Quality D()W includes such diverse elements as impro,vitlg Work life, .~ workpiece diversity, bettering environmental c-onditidrls,' :fiCi~itatingtrade, and enhancing competitiveness. .. .' ".". . (b) OBJECTIVES OF QUALITl'I CONTROL' ., The main objectives of q"Mlty cOhtrol 'are the followbtg: (i) To evaluate design size~, material, worknl~iiship, finish appearance, chemical composition and other relevant properties which are acceptable to tlie ~oo'Sumer. To sort out good pieces from the defective ones in a lot to ensure the quality of the final product which does not in any way deteriorate. . . To stop the manufacturing of the, defective pieces or components and to dispose off the bad:;;finisbed products through rework, salvage or scrap. To determine the various' methods 'aM' processes of production and suggest improvements 'k). achieve good quality.




(c) Control Chan/or Variables: X -chart and R-chaitprovide maximum utilisation of information available from data and provide detailed information on process average and variation for control of individual dimensions.



Earliest time Finish Start EFij ES!J=E; 0 6·2 6·2 13·5 17·7 27·9 27·9 27-9 34-4 344 32·2 34-4 35·3 35·3 3% 39·6 35·3 5S{) 64-4 66-5 67·7 6·2 13·5 15·3 17·7 27·9 34·4 32·2 30-6 34-4 34-4 35·3 39-6 35·3 35·3 5S{) 64-4 55-6 64'S 66-5 67·7 68'S

Table 1 Latest time Start Finish LFij =Lj LSij = (Lj - Ii) 0 6·2 S-6 13·5 17·7 27·9 400 31·7 34-4 47-4 44·3 34·4 47·4 59-7 41·3 39-6 47-4 . 59·7 64·4 66-5 67-7 6·2 13-5 17·7 17·7 27·9 34·4 44-3 34-4 34-4 47-4 47-4 3% 47-4 59-7 59-7 64-4 67·7 66·5 66·5 67·7 68·8

Total LSy- ESij 0

Floats Free Ej-EFjj 0 0 2-4 0 0 0 0 3'S

Independent (Ej- L) -Ii] 0 0 2·4 0 0 0 0 3'S 0 0-9 -12·1 -12,1 0 106 0 0 0 0 0 0 0

a (1-2) c (2-3) b (2-4) d (3-4) e (4-5) h (5-6) /(5-7) i (5-S) Dl (6-S) D2 (6-11) g (7-9) j (S-10) D3 (9-11) D4 (9-12)
1(10-12) k (l0-13) m (11-15) n (12-14) 0(13-14) p (14-15) q (15-16)

6·2 7·3 9-1 4·2 10-2 6·5 4·3 2·7 0



2-4 8 0 0

H 0 13 12·1 0 12·1 24·4 1·7 0 12·1 1·7 I 0
0 0

H 5·2

0 IS'4 24'S 20-3 6'S 2·1 1·2 1-1

0-9 0 0 0 '22:7 0 0 0 1·7 0





(il) Since the activities having zero float are critical activities and determine the critical path. Thus the critical path (darken in diagram) is: I - 2 - 3 - 4 - 5 - 6 - 8 - 10 - 13 - 14 - 15 - 16

So the shortest time in which project can be completed

6·8 + 7·3 + 4·2 + 10·2 + 6·5 + 0 + 5·2 + 24·8 + 1·1 = 68·8 units of time.

+ 2·1

+ 1·2

which is same as latest finish time of last activity.
(iiI) The critical activities have bottlenecks as their delay will affect

the completion of project in shortest time so they have no surplus time. Thus the. activities having bottlenecks are: a, c, d, e, h, j, k,

p, q.

(iv)"The Independent float gives the amount of time by which the start of an activity can be delayed without affecting the earliest start time of successor activities and hence project completion time is not affected. These are calculated in the table I. Group C Q. 9. (A) Choose the correct answer for the foliowing:(lOxl)
(I) Real founder of motion study was (a) F. W. Taylor (b) F. B. Gilbreth (c) H. L. Grantt (df H. Emerson.


(il) Continuous


factories adopt

(a) product layout (b) process layout (c) combined layout

(d) fixed layout.
(iii) Work study is most useful where (a) production (b) industrial

activities are involved relationship is to be improved

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