MSCI432 Lecture Notes - Gantt Chart, Msci, Operations Management

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Msci 432: production and service operations management, winter 2010. Assignment # 1 solutions to qualitative questions: [3 marks] a major oil company is considering the optimal timing for the construction of new refineries. From the past experience, each doubling of the size of a refinery at a single location results in an increase in the construction costs of about 68%. Furthermore, a plant size of 10,000 barrels per day costs million. Determine the optimal timing of plant additions and the optimal size of each plant in this case. Year = 365 days: a) 2a = 1. 68 => a ln(2) = ln(1. 68) => a = . 7485. To find k substitute 6 = k(10,000). 7485 => k = . 0061: locating a = . 7485 on figure 1. 14 gives a value of u of approximately 0. 67. Solving: x = u/r = . 67/. 15 = 4. 47 years. The optimal size of each new addition is (4. 47)(2) = 8. 94 million barrels (per year): [(15,000)/day][365 days/year] = 5,475,000.

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