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Solution%20Key%20Midterm%20Fall%202008 - Carnegie Mellon...

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Carnegie Mellon University Tepper School of Business Production 70-371 Midterm Examination October 8, 2008 INSTRUCTIONS 1. This is a closed book, closed notes exam. 2. All work must be shown on the exam. The formula sheet will be collected. No credit will be given without supporting work. 3. Restrict your answers to the space provided. 4. Total number of points for this exam is 100. Relative value of each question is indicated in parentheses. 5. Please make sure that your booklet has 11 pages, including the cover page. Question Maximum Points Points Earned 1 35 2 10 3 10 4 20 5 25 TOTAL 100 Name: Key
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Name: _________________________ 1 1. Chad’s Creative Concepts designs and manufactures wood furniture. Founded by Chad Thomas on the banks of Lake Erie in Sandusky, Ohio, the company began by producing custom-made wooden furniture for vacation cabins located along the coast of Lake Erie and on nearby Kelly’s Island and Bass Island. Being an outdoors type himself, Chad Thomas originally wanted to bring a bit of the outdoors inside. Chad’s Creative Concepts developed a solid reputation for creative designs and high-quality workmanship. Traditionally, the company had focused entirely on custom-made furniture, with the customer specifying the kind of wood from which the piece would be made. As the company’s reputation grew and sales increased, the sales force began selling some of the more popular pieces to retail furniture outlets. This move into retail outlets led Chad’s Creative Concepts into the production of a more standard line of furtinure. Buyers of this line were much more price sensitive and imposed more stringent delivery requirements than did clients for the custom line. Custom-designed furniture, however, continued to dominate sales, accounting for 60 percent of volume and 75 percent of dollar sales. Currently, the company operates a single manufacturing facility in Sandusky, where both custom and standard furniture is manufactured. The equipment is mainly general purpose in nature in order to provide the flexibility needed for producing custom pieces of furniture. The layout puts together saws in one section of the facility, lathes in another, and so on. The quality of the finished product reflects the quality of the wood chosen and the craftsmanship of individual workers. Both custom and standard furniture compete for processing on the same equipment by the same craftspeople.
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