Question

The Internal Revenue Service Department of Tax Regulations writes regulations in accord with laws passed by Congress. On average, the department completes 300 projects per year. The Wall Street Journal reported that, as of October 11, 1997, the number of projects "on the Department’s plate" was 588. Nevertheless, the department head claimed that average time to complete a project was under six months. Do you have any reason to disagree? Why or why not?

Answer 1

Answer:

The IRS's claim (that the average time it takes to complete a project is < 6 months) is wrong.  It takes the Department 23.52 months to complete a project.

Explanation:

a) Data and Calculations:

Number of projects "on the Department’s plate" (I) = 588 Projects

Average projects completed per year (R) = 300 Projects

Therefore, the flow time (the average time to complete a project by the department), T, = I / R

= 588 / 300 = 1.96 years = 1.96 X 12 = 23.52 months

b) The steps to calculate flow time (the amount of time a flow unit spends in a business process from beginning to end) are given as:

1. The number of projects handled over a period of time.

2. Let R = the number of units produced / duration of time period .

3. Compute the average inventory (I).

4. Compute flow time T =I/R.