Estimating and Production Decision Making - Essay Example

These ten activities are sequential such that no activity in any particular unit can commence until the preceding activity is finished.
The assumptions on which we have to built our estimation are as follows:
1. The 10 activities of each unit are sequential and no activity in any particular unit can commence until the preceding activity is finished.
2. Only one gang is permissible for each activity.
3. The efficiency of a gang varies with the size of the gang.
4. Mean output per operative week, Cost per operative week, and overhead per gang week are fixed for 10 different Gang nos.
5. Factors like 60% efficiency in starting and ending the week have been considered.
6. No consideration is made for any holiday.
7. We have not calculated any overtime.
8. Head office overhead of 500 per week is considered.
9. Overhead for individual gangs is considered.
10. No contingency plan for major weather or any other natural calamities is considered.

We have done the following calculations for deriving the estimate:

The size of the gang:
First, we have to decide about the size of the gang to be used for optimum utilization. As we see that the mean output per operative varies with the Gang nos 1 to 10. Hence to find the optimum size of the gang to be used for different activities, we will try to get equal output per week from every gang, so that idle time will be minimized. To get that output, we multiply the mean output per operative week by the size of the gang and the efficiency of that gang.
For example: For Gang no 1; the Mean output per operative week is 0.16, by multiplying this by the size of the gang say 6, and the efficiency of the gang (100%) we get the output per week as 0.16 X 6 X 100% = 0.96. We have calculated the size of the other gangs similarly, (assuming the output per week of each gang is nearer to 0.96 because we have found that cost efficiency is maximum for a gang size of 6). The size of the gang thus found is given in red color.