Test Bank For Operations and Supply Chain Management The Core 5th Edition by F. Robert Jacobs All Ch by ACADEMIAMILL

TEST BANK Operations and Supply Chain Management The Core Test Bank 5thFor Edition by F. Robert Jacobs Operations and Supply Chain Management The Core 5th Edition by F. Robert Jacobs, Richard B. Chase All Chapters 1-14 Chapter 1-14 Chapter 1

Operations and Supply Chain Management

1) Efficiency means doing the right things to create the most value for the company. Answer: FALSE Explanation: Efficiency means doing something at the lowest possible cost. Difficulty: 1 Easy Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Effectiveness means doing the right things to create the most value for the company. Answer: TRUE Explanation: Effectiveness means doing the right things to create the most value for the company. Difficulty: 1 Easy Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) A doctor completes a surgical procedure on a patient without error. The patient dies anyway. In operations management terms, we could refer to this doctor as being efficient but not effective. Answer: TRUE Explanation: Efficiency means doing something at the lowest possible cost. Effectiveness means doing the right things to create the most value. The doctor performed the surgery without error. Because the patient died, no value was created. Difficulty: 2 Medium Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

4) A worker can be efficient without being effective. Answer: TRUE Explanation: Efficiency means doing something at the lowest possible cost. Effectiveness means doing the right things to create the most value. These are different things. Difficulty: 2 Medium Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) A process can be effective without being efficient. Answer: TRUE Explanation: Often, maximizing effectiveness and efficiency at the same time creates conflict between the two goals. "Being efficient" at the customer service counter at a local store or bank means using the smallest number of clerks possible at the counter. Being effective, though, means minimizing the amount of time customers need to wait in line. Difficulty: 2 Medium Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Operations and supply chain management is defined as the design, operation, and improvement of the systems that create and deliver the firm's primary products and services. Answer: TRUE Explanation: Operations and supply chain management is defined as the design, operation, and improvement of the systems that create and deliver the firm's primary products and services. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) The term "value" refers to the relationship between quality and the price paid by the consumer. Answer: TRUE Explanation: Related to efficiency and effectiveness is the concept of value, which can be metaphorically defined as quality divided by price. Difficulty: 1 Easy Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Remember 2

AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Attempting to balance the desire to efficiently use resources while providing a highly effective service may create conflict between the two goals. Answer: TRUE Explanation: Often maximizing effectiveness and efficiency at the same time creates conflict between the two goals. Difficulty: 1 Easy Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 9) Central to the concept of operations strategy are the concepts of operations focus and trade-offs. Answer: TRUE Explanation: Central to their thinking was the notion of factory focus and manufacturing trade-offs. Because a factory cannot excel on all performance measures, its management must devise a focused strategy, (to perform) a limited set of tasks extremely well. This requires trade-offs. Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) OSCM is concerned with management of the trickiest parts of the system that produces a good or delivers a service. Answer: FALSE Explanation: OSCM is concerned with the management of the entire system that produces a good or delivers a service. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) OSCM is a functional field of business with clear line management responsibilities. Answer: TRUE Explanation: OSCM is a functional field of business with clear line management responsibilities. 3

Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) The supply network as can be thought of as a pipeline through which cash, material, and information flows. Answer: FALSE Explanation: Think of the supply network as a pipeline through which material and information flows. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13) Supply networks cannot be constructed for every product or service. Answer: FALSE Explanation: Networks such as this can be constructed for any product or service. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) "Operations" refers to manufacturing and service processes used to transform resources employed by a firm into products desired by customers. Answer: TRUE Explanation: Operations refers to manufacturing, service, and health care processes that are used to transform the resources employed by a firm into products desired by customers. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4

15) "Supply Chain" refers to processes that move information and material to and from the manufacturing and service processes of the firm. Answer: TRUE Explanation: Supply chain refers to processes that move information and material to and from the manufacturing and service processes of the firm. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) "Supply Chain" includes only inbound freight and inventory. Answer: FALSE Explanation: Supply chain refers to processes that move information and material to and from the manufacturing and service processes of the firm. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) It is critical that a sustainable strategy meet the needs of shareholders and employees. It is also highly desirable that it preserves the environment. Answer: FALSE Explanation: A sustainable strategy that meets the needs of shareholders and employees while preserving the environment is critical. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) Planning is where a firm must determine how anticipated demand will be met with available resources. Answer: TRUE Explanation: Planning consists of the processes needed to operate an existing supply chain strategically. Here a firm must determine how anticipated demand will be met with available resources. 5

Difficulty: 1 Easy Topic: Operations and Supply Chain Processes Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Although planning involves determining how the various supply chain processes (sourcing, making, delivering, and returning) will be met, planning itself is not considered a supply chain process. Answer: FALSE Explanation: Operations and supply chain processes can be conveniently categorized…as planning, sourcing, making, delivering, and returning. Difficulty: 1 Easy Topic: Operations and Supply Chain Processes Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) The supply chain processes mentioned in the textbook are: planning, sourcing, delivering, and returning. Answer: FALSE Explanation: Operations and supply chain processes can be conveniently categorized…as planning, sourcing, making, delivering, and returning. Difficulty: 1 Easy Topic: Operations and Supply Chain Processes Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) All managers should understand the basic principles that guide the design of transformation processes. Answer: TRUE Explanation: All managers should understand the basic principles that guide the design of transformation processes. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). 6

Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) Operations and supply management changes constantly because of the dynamic nature of competing in global business and the constant evolution of information technology. Answer: TRUE Explanation: The field of operations and supply management is ever changing due to the dynamic nature of competing in global business and the constant evolution of information technology. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) Internet technology has made the sharing of reliable real-time information expensive. Answer: FALSE Explanation: Internet technology has made the sharing of reliable real-time information inexpensive. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Capturing information directly from the source through such systems as point-of-sale, radio-frequency identification tags, bar-code scanners, and automatic recognition has had little impact on Operations and Supply Chain Management. Answer: FALSE Explanation: Capturing information directly from the source through such systems as point-of -sale, radio-frequency identification tags, bar-code scanners, and automatic recognition has shifted the focus to understanding both what all the information is saying and also how good are the decisions that can be made using it. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7

25) Use of systems like point-of-sale, radio-frequency identification tags, bar-code scanners, and automatic recognition has made it more difficult to understand what all the information is saying. Answer: FALSE Explanation: Capturing information directly from the source through such systems as point-of -sale, radio-frequency identification tags, bar-code scanners, and automatic recognition has shifted the focus to understanding both what all the information is saying and also how good are the decisions that can be made using it. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) Operations and supply chain processes can be conveniently categorized as planning, sourcing, making, and delivering. Answer: FALSE Explanation: Operations and supply chain processes can be conveniently categorized as planning, sourcing, making, delivering, and returning. Difficulty: 2 Medium Topic: Operations and Supply Chain Processes Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) A major aspect of planning involves developing a set of metrics to monitor the supply chain. Answer: TRUE Explanation: A major aspect of planning is developing a set of metrics to monitor the supply chain so that it is efficient and delivers high quality and value to customers. Difficulty: 1 Easy Topic: Operations and Supply Chain Processes Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

28) Returning involves processes for receiving worn-out, defective, and excess products back from customers but does not involve support for customers who have problems with the product. Answer: FALSE Explanation: Returning involves the processes for receiving worn-out, defective, and excess products back from customers and support for customers who have problems with delivered products. Difficulty: 1 Easy Topic: Operations and Supply Chain Processes Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Delivering is not considered in supply chain analysis when outside carriers are contracted to move products to customers. Answer: FALSE Explanation: Delivering is also referred to as logistics processes. Carriers are picked to move products to warehouses and customers, coordinate and schedule the movement of goods and information through the supply network, develop and operate a network of warehouses, and run the information systems that manage the receipt of orders from customers, and invoicing systems to collect payments from customers. Difficulty: 1 Easy Topic: Operations and Supply Chain Processes Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) Services are intangible processes that cannot be weighed or measured. Answer: TRUE Explanation: There are five essential differences between services and goods. The first is that a service is an intangible process that cannot be weighed or measured, whereas a good is a tangible output of a process that has physical dimensions. Difficulty: 1 Easy Topic: Differences between Services and Goods Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Service innovations can be patented. 9

Answer: FALSE Explanation: A service innovation, unlike a product innovation, cannot be patented. Difficulty: 2 Medium Topic: Differences between Services and Goods Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) Services are homogeneous. Answer: FALSE Explanation: The third is that services are inherently heterogeneous Difficulty: 2 Medium Topic: Differences between Services and Goods Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) Services are defined and evaluated as a package of features that affect the five senses. Answer: TRUE Explanation: The specifications of a service are defined and evaluated as a package of features that affect the five senses. Difficulty: 1 Easy Topic: Differences between Services and Goods Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) Automobiles and appliances are classified as "pure goods." Answer: FALSE Explanation: Automobiles and appliances are classified as "core goods." Difficulty: 2 Medium Topic: Differences between Services and Goods Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Core service providers integrate tangible goods into their product. 10

Answer: TRUE Explanation: Core service providers must integrate tangible goods. Difficulty: 1 Easy Topic: Differences between Services and Goods Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) "Product-service bundling" refers to a company building service activities into its product offerings for its customers. Answer: TRUE Explanation: Product-service bundling refers to a company building service activities into its product offerings for its customers.. Difficulty: 1 Easy Topic: Differences between Services and Goods Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) In contrast to careers in finance and marketing, careers in OSCM involve hands-on involvement with people and processes. Answer: TRUE Explanation: OSCM jobs are hands-on, working with people and figuring out the best way to do things. Difficulty: 1 Easy Topic: Careers in Operations and Supply Chain Management Learning Objective: 01-03 Know the potential career opportunities in operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) A bank branch manager position is not an OSCM-type of job. Answer: FALSE Explanation: Listed as an OSCM job: Branch manager (bank). Oversees all aspects of financial transactions at a branch. Difficulty: 2 Medium Topic: Careers in Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. 11

Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) A supply chain manager is an OSCM job while a purchasing manager is not. Answer: FALSE Explanation: Both supply chain manager and purchasing manager are listed as typical management and staff jobs in operations and supply chain management. Difficulty: 2 Medium Topic: Careers in Operations and Supply Chain Management Learning Objective: 01-03 Know the potential career opportunities in operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) Just in time (JIT) production was a major breakthrough in manufacturing philosophy pioneered by the Japanese. Answer: TRUE Explanation: JIT was pioneered by the Japanese. Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) Lean manufacturing refers to just in time production coupled with total quality control. Answer: TRUE Explanation: JIT, coupled with total quality control (TQC)—is now a cornerstone in many manufacturers' production practices, and the term lean manufacturing is used to refer to the set of concepts. Difficulty: 2 Medium Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) The Baldrige National Quality Award was started under the direction of the National Institute of Standards and Technology. Answer: TRUE 12

Explanation: Helping the quality movement along is the Baldrige National Quality Award, which was started in 1987 under the direction of the National Institute of Standards and Technology. Difficulty: 2 Medium Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) The approach that advocates making revolutionary changes as opposed to evolutionary changes is called creation theory. Answer: FALSE Explanation: Business Process Reengineering seeks to make revolutionary changes as opposed to evolutionary changes. Difficulty: 2 Medium Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) The approach that advocates making revolutionary changes as opposed to evolutionary changes is called "business process reengineering." Answer: TRUE Explanation: Business Process Reengineering seeks to make revolutionary changes as opposed to evolutionary changes. Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) Business process reengineering, which seeks revolutionary change, is contrasted with total quality management which commonly advocates incremental change. Answer: TRUE Explanation: Business Process Reengineering seeks to make revolutionary changes as opposed to evolutionary changes (which are commonly advocated in TQM). Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply 13

chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) The "triple bottom line" relates to the economic, employee, and environmental impact of a firm's strategy. Answer: TRUE Explanation: Management must now consider the mandates related to the ongoing economic, employee, and environmental viability of the firm (the triple bottom line). Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) Sustainability is the ability to maintain profits in a system. Answer: FALSE Explanation: Sustainability is the ability to maintain balance in a system. Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) Raising senior management awareness of OSCM as a competitive weapon is not an important issue. Answer: FALSE Explanation: Many senior executives entered the organization through finance, strategy, or marketing and built their reputations on work in these areas and, as a result, often take operations for granted. This can be a critical mistake. Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

49) Green and black belt programs teach six-sigma quality tools to managers at many corporations. Answer: TRUE Explanation: Originally developed in the 1980s as part of total quality management, six-sigma quality in the 1990s saw a dramatic expansion as an extensive set of diagnostic tools was developed. These tools have been taught to managers as part of "Green and Black Belt Programs" at many corporations. Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) The central idea of supply chain management is to apply a total system approach to managing the flow of information, materials, and services from raw material suppliers through factories and warehouses to the end customer. Answer: TRUE Explanation: The central idea of supply chain management is to apply a total system approach to managing the flow of information, materials, and services from raw material suppliers through factories and warehouses to the end customer. Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) The term "electronic commerce" refers to the buying and selling of electronic products and devices. Answer: FALSE Explanation: The term electronic commerce refers to the use of the internet as an essential element of business activity. Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) The term "electronic commerce" refers to the use of the internet as an essential element of business activity. 15

Answer: TRUE Explanation: The term electronic commerce refers to the use of the internet as an essential element of business activity. Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) "Business Analytics" involves the analysis of data through a unique combination of linear programming, game theory, and queuing theory to better solve business problems. Answer: FALSE Explanation: Business analytics is the use of current business data to solve business problems using mathematical analysis. Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) The mathematical results of Business Analytics are used to automate decision making and eliminate the decision maker. Answer: FALSE Explanation: These mathematical results can either be used to support the decision maker or to automate decision-making. Difficulty: 1 Easy Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) Operations and supply chain strategy are not important issues to investors who tend to focus on growth, dividends, and earnings per share. Answer: FALSE Explanation: Comparing firms from an operations view is important to investors since the relative cost of providing a good or service is essential to high earnings growth. Difficulty: 2 Medium Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Remember 16

AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) Investors pay close attention to efficiency and productivity measures like net income per employee because they are interested in how well the firm manages its workforce relations. Answer: FALSE Explanation: Investors are most often interested in financial returns. Comparing firms from an operations and supply chain view is important to investors since the relative cost of providing a good or service is essential to high earnings growth. How well a firm manages its' workforce is of less interest to investors. Difficulty: 2 Medium Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) During a recession, efficient firms often have an opportunity to increase market share while maintaining profitability. Answer: TRUE Explanation: Highly efficient firms usually shine when demand drops during recession periods since they often can continue to make a profit due to their low-cost structure. These operations-savvy firms may even see a recession as an opportunity to gain market share as their less-efficient competitors struggle to remain in business. Difficulty: 2 Medium Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) Wall Street analysts are not particularly concerned with how efficient companies are from an operations and supply management view. Answer: FALSE Explanation: Comparing firms from an operations view is important to investors since the relative cost of providing a good or service is essential to high earnings growth. Difficulty: 1 Easy Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) One reason for studying operations and supply chain management (OSCM) is which of the following? A) OSCM is essential for understanding organizational behavior 17

B) Most business graduates do OSCM work regardless of their job title C) All managers should understand the basic principles that guide the design of transformation processes. D) OSCM is a required course in all business degree programs E) OSCM is the most rigorous business discipline Answer: C Explanation: All managers should understand the basic principles that guide the design of transformation processes. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Management? Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) The Goods–Services Continuum consists of which set of the following categories? A) No goods, some goods, even mix, some service, no service B) Pure goods, core goods, core services, pure services C) No service, some service, good service, excellent service D) Self-service, help desk service, face-to-face service, service-with-a-smile E) None of these Answer: B Difficulty: 2 Medium Topic: Differences between Services and Goods Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation 61) Which of the following are defined as core goods? A) Chemicals B) Airlines C) Data storage systems D) Hotels E) None of these Answer: C Difficulty: 2 Medium Topic: Differences between Services and Goods Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation

62) Current issues in OSCM do not include: A) Coordinating relationships between organizations B) Making senior management aware that OSCM can be a competitive weapon C) Managing customer touch points D) Increasing global supply chain employment Answer: D Difficulty: 2 Medium Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) Which of the following are not listed in the text as jobs in OSCM? A) Department store manager B) Project manager C) Hospital administrator D) Data Center manager E) Call center manager Answer: D Explanation: Typical management and staff jobs in operations and supply chain management do not list Data Center manager. Difficulty: 2 Medium Topic: Careers in Operations and Supply Chain Management Learning Objective: 01-03 Know the potential career opportunities in operations and supply chain management. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation 64) Which of the following is not a characteristic that distinguishes services from goods? A) Service jobs are unskilled B) A service is intangible C) Services are perishable D) Services are heterogeneous E) None of these Answer: A Difficulty: 2 Medium Topic: Differences between Services and Goods Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation 19

65) Which of the following is not a way that operations and supply processes are categorized? A) Planning B) Returning C) Delivering D) Selecting E) Making Answer: D Explanation: Operations and supply chain processes can be conveniently categorized as planning, sourcing, making, delivering, and returning. Difficulty: 2 Medium Topic: Operations and Supply Chain Processes Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) One of the "package of features" that make up a service is: A) Appearance B) Facilitating goods C) Packaging D) Cost E) Implied use Answer: B Explanation: The package of features that make up a service is listed on page 9 of the text and includes facilitating goods. Difficulty: 2 Medium Topic: Differences between Services and Goods Learning Objective: 01-04 Recognize the major concepts that define the operations and supply chain management field. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation

67) Which of the following is not a measure of operations and supply chain management efficiency used by Wall Street? A) Inventory turnover B) Revenue per employee C) Receivable turnover D) Earnings per share E) Asset turnover Answer: D Explanation: Earnings per Share is not a measure of operations and supply chain efficiency. Difficulty: 1 Easy Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) Which of the following is a measure of operations and supply management efficiency used by Wall Street? A) Dividend payout ratio B) Current ratio C) Receivables turnover D) Earnings per share growth E) Financial leverage Answer: D Difficulty: 2 Medium Topic: Efficiency, Effectiveness, and Value; Historical Development of Operations and Supply Chain Management Learning Objective: 01-02 Evaluate the efficiency of the firm.; 01-04 Recognize the major concepts that define the operations and supply chain management field.; 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember; Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) Managing customer touch points becomes a concern under current issues in OCSM when A) complaints arise about shaking hands with customers in cultures that is frowned upon. B) firms striving to become superefficient begin to scrimp on staffing and training customer support personnel. C) a firm has a workforce trained in specifically diverse situations and the correct level of service may be hard to discern. D) firms market global products. E) senior executives fail to recognize the contribution OCSM can make to their success. Answer: B Difficulty: 2 Medium 21

Topic: Historical Development of Operations and Supply Chain Management Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) When considering the concept of value, how is quality defined? A) By the price of the product B) By the producer's reputation in the industry C) By the weight of the product D) By the attractiveness of the product considering its features and durability E) By the product's uniqueness relative to other similar products Answer: D Difficulty: 1 Easy Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-01 Identify the elements of operations and supply chain management (OSCM). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) All other things remaining the same, if the revenue or sales decreases, asset turnover ratio will A) Decrease B) Increase C) Stay the same D) Will decrease, but the amount of change will depend on the profit margin E) Decrease and Will decrease, but the amount of change will depend on the profit margin Answer: A Explanation: Asset turnover =

, sales or revenue is in the numerator and

hence the value will go down as the numerator decreases. Logically, if sales decreases, while total assets remain the same, then asset turn over will go down. Difficulty: 2 Medium Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

72) Which of the following is the most appropriate regarding Inventory turnover? A. Inventory turnover increases as average inventory decreases, while other things remain the same. B. Inventory turnover is an efficiency measure. C. Inventory turnover is unaffected by changes in annual sales.

A) Choice A B) Choice B C) Choice C D) Choice A and B only. E) Choice A, B and C will hold. Answer: D Explanation: Inventory turnover =

, if average inventory decreases

(denominator decreasing) while other things remain the same, turnover will increase. (A is true). Inventory turnover is an efficiency measure and hence B is true. Change is sales will change the cost of goods sold and hence change the turnover ratio and hence C is false. Difficulty: 2 Medium Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 73) Identify the most appropriate answer regarding Cash conversion cycle. A. Is also known as cash-to-cash cycle. B. Cash conversion cycle goes down if payable period goes up. C. Cash conversion cycle goes up if average inventory goes up.

A) Choice A B) Choice B C) Choice C D) Choice A and B are correct. E) Choice A, B and C are all correct. Answer: E Explanation: A is correct as per text description. Cash conversion cycle= Days sales outstanding + Days inventory − payable period , one would note that B and C are correct. Hence E is the right answer. 23

Difficulty: 2 Medium Topic: Efficiency, Effectiveness, and Value Learning Objective: 01-02 Evaluate the efficiency of the firm. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 2 Strategy and Sustainability 1) An operations and supply chain strategy must be integrated with the organization's corporate strategy. Answer: TRUE Explanation: Operations and supply chain strategy is concerned with setting broad policies and plans for using the resources of a firm and must be integrated with corporate strategy. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-01 Know what a sustainable business strategy is and how it relates to operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) One of the competitive dimensions that form the competitive position of a company when planning their strategies is cost. Answer: TRUE Explanation: The major competitive dimensions that form the competitive position of a firm include cost (or price). Difficulty: 1 Easy Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) One of the competitive dimensions that form the competitive position of a company when planning their strategies is delivery speed. Answer: TRUE Explanation: The major competitive dimensions that form the competitive position of a firm include delivery speed. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) One of the competitive dimensions that form the competitive position of a company when planning their strategies is making the best trade-off. Answer: FALSE Explanation: The major competitive dimensions that form the competitive position of a firm do not include making the best trade-off. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) The process when a company seeks to match the benefits of a successful position while maintaining its existing position by adding new features, services, and technologies into its current portfolio is called flexibility. Answer: FALSE Explanation: Straddling occurs when a company seeks to match the benefits of a successful position while maintaining its existing position. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) The process when a company seeks to match the benefits of a successful position while maintaining its existing position by adding new features, services, and technologies into its current portfolio it is called straddling. Answer: TRUE Explanation: Straddling occurs when a company seeks to match the benefits of a successful position while maintaining its existing position. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

7) By following a straddling strategy, firms can broaden their capabilities and effectively compete with more focused firms in markets requiring low cost for success. Answer: FALSE Explanation: Straddling is a risky strategy that often results in failure. More focused firms can effectively compete with a straddling firm in each segment the straddling firm enters. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) An order winner is a set of criterion that differentiates the products or services of one firm from another. Answer: TRUE Explanation: An order winner is a criterion that differentiates the products or services of one firm from those of another. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) An order winner is a set of screening criteria that permits a firm's products to be considered as possible candidates for purchase. Answer: FALSE Explanation: An order qualifier is a screening criterion that permits a firm's products to even be considered as possible candidates for purchase. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

10) An order qualifier is a screening criterion that permits a firm's products to even be considered as possible candidates for purchase. Answer: TRUE Explanation: An order qualifier is a screening criterion that permits a firm's products to even be considered as possible candidates for purchase. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Activity-system maps show how a company's strategy is delivered through a set of tailored activities. Answer: TRUE Explanation: Activity-system maps such as the one for IKEA show how a company's strategy is delivered through a set of tailored activities. Difficulty: 1 Easy Topic: Strategies Are Implemented Using Operations and Supply Chain Activities— IKEA'S Strategy Learning Objective: 02-03 Explain how operations and supply chain strategies are implemented. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Activity-system maps are useful in understanding how well a system of activities fits the overall company's strategy. Answer: TRUE Explanation: This type of map can be useful in understanding how good the fit is between the system of activities and the company's strategy. Difficulty: 1 Easy Topic: Strategies Are Implemented Using Operations and Supply Chain Activities— IKEA'S Strategy Learning Objective: 02-03 Explain how operations and supply chain strategies are implemented. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) Activity-system maps depict the geographic reach of a company's business strategies. Answer: FALSE Explanation: Activity system maps are conceptual have nothing to do with the physical geographic reach of a company. Difficulty: 1 Easy Topic: Strategies Are Implemented Using Operations and Supply Chain Activities— IKEA'S Strategy Learning Objective: 02-03 Explain how operations and supply chain strategies are implemented. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) An operations strategy must resist change because of the long term nature of equipment and personnel investments. Answer: FALSE Explanation: Since the goals of the larger organization change over time, the operations strategy must be designed to anticipate future needs. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Operations and supply strategy can be viewed as part of a planning process that coordinates operational goals with those of the larger organization. Answer: TRUE Explanation: Operations and supply chain strategy can be viewed as part of a planning process that coordinates operational goals with those of the larger organization. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

16) Infrastructure decisions within operations strategy include the selection of the appropriate technology, the role of inventory, and the location of facilities. Answer: FALSE Explanation: Process design includes selecting the appropriate technology, sizing the process over time, determining the role of inventory in the process, and locating the process. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) Infrastructure decisions within operations strategy include the selection of the logic associated with the planning and control systems. Answer: TRUE Explanation: The infrastructure decisions involve the logic associated with the planning and control systems, quality assurance and control approaches, work payment structure, and organization of the operations and supply functions. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) Once an operations strategy is adopted and articulated, the primary emphasis becomes perfecting the system of activities that make up the strategy through detailed refinements over a long period of time. Answer: FALSE Explanation: A firm's operations capabilities can be viewed as a portfolio best suited to adapting to the changing product and/or service needs of a firm's customers. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

19) The job of operations and supply chain strategy is to deliver the most feature-rich, highest quality product at the lowest price within specified parameters of delivery time and customization. Answer: FALSE Explanation: Operations and supply chain strategy is concerned with setting broad policies and plans for using the resources of a firm and must be integrated with corporate strategy. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-01 Know what a sustainable business strategy is and how it relates to operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Productivity is a relative measure. Answer: TRUE Explanation: Productivity is what we call a relative measure. In other words, to be meaningful, it needs to be compared with something else. Difficulty: 1 Easy Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) In a partial measure of productivity the denominator of the ratio would include all resources used or all inputs. Answer: FALSE Explanation: In a partial measure of productivity the denominator includes only a single input. Difficulty: 1 Easy Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

22) In a multifactor measure of productivity the numerator of the ratio would include all resources used or all inputs. Answer: FALSE Explanation: In a multi-factor measure of productivity the denominator includes several but not all inputs. Difficulty: 1 Easy Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) The triple bottom line considers evaluating the firm against social, economic, and environmental criteria. Answer: TRUE Explanation: The triple bottom line considers evaluating the firm against social, economic, and environmental criteria. Difficulty: 1 Easy Topic: A Sustainable Operations and Supply Chain Strategy Learning Objective: 02-01 Know what a sustainable business strategy is and how it relates to operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Sustainability means meeting a firm's current needs without excessively compromising the ability of future generations to meet their own needs. Answer: FALSE Explanation: By adding "sustainability" to the concept (of strategy), we add the requirement to meet these current needs without compromising the ability of future generations to meet their own needs. (Excessively is not mentioned.) Difficulty: 2 Medium Topic: A Sustainable Operations and Supply Chain Strategy Learning Objective: 02-01 Know what a sustainable business strategy is and how it relates to operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

25) The social impact of the triple bottom line concept pertains to fair and beneficial business practices toward labor, the community, and the region in which a firm conducts its business. Answer: TRUE Explanation: "Social" pertains to fair and beneficial business practices toward labor, the community, and the region in which a firm conducts its business. Difficulty: 2 Medium Topic: A Sustainable Operations and Supply Chain Strategy Learning Objective: 02-01 Know what a sustainable business strategy is and how it relates to operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) A firm's business practices toward its labor force pertain mainly to the economic aspect of the triple bottom line concept. Answer: FALSE Explanation: "Social" pertains to fair and beneficial business practices toward labor, the community, and the region in which a firm conducts its business. Difficulty: 2 Medium Topic: A Sustainable Operations and Supply Chain Strategy Learning Objective: 02-01 Know what a sustainable business strategy is and how it relates to operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) According to the economic aspect of the triple bottom line concept, the firm is required to compensate shareholders by paying dividends and growing the value of their common stock faster than their competitors. Answer: FALSE Explanation: The firm is obligated to compensate shareholders who provide capital through stock purchases and other financial instruments via a competitive return on investment. Difficulty: 2 Medium Topic: A Sustainable Operations and Supply Chain Strategy Learning Objective: 02-01 Know what a sustainable business strategy is and how it relates to operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

28) Within a sustainability framework, the economic dimension of the triple bottom line concept goes beyond just profit for the firm but also provides lasting economic benefit to society. Answer: TRUE Explanation: Within a sustainability framework, this (economic) dimension goes beyond just profit for the firm but also provides lasting economic benefit to society. Difficulty: 2 Medium Topic: A Sustainable Operations and Supply Chain Strategy Learning Objective: 02-01 Know what a sustainable business strategy is and how it relates to operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Within a sustainability framework, the environmental dimension of the triple bottom line concept has to do with labor, the community, and the region in which a firm conducts its business. Answer: FALSE Explanation: "Social" pertains to fair and beneficial business practices toward labor, the community, and the region in which a firm conducts its business. Difficulty: 2 Medium Topic: A Sustainable Operations and Supply Chain Strategy Learning Objective: 02-01 Know what a sustainable business strategy is and how it relates to operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) Which of the following is not a major strategic operational competitive dimension that forms a company's competitive position? A) Cost or price B) Delivery speed C) Delivery reliability D) Management acumen E) Coping with changes in demand Answer: D Explanation: The operational competitive dimensions that form a company's competitive position are listed in the text. Management acumen is not mentioned. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) A major competitive dimension that forms a company's strategic operational competitive position in their strategic planning is which of the following? 34

A) Cost or price B) Focus C) Automation D) Straddling E) Activity-system mapping Answer: A Explanation: Cost or price is one of the competitive dimensions mentioned in the text. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) When developing an operations and supply chain strategy, which of the following is an important product-specific criterion to consider? A) Technical liaison B) Learning curve C) Competitor's product performance D) Production lot-size E) Total quality management Answer: A Explanation: Technical liaison and support. A supplier may be expected to provide technical assistance for product development, particularly during the early stages of design and manufacturing. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

33) In development of an operations and supply chain strategy, which of the following may be an important product-specific criteria to consider? A) Focus B) Production lot-size C) Supplier after-sale support D) Learning curve E) Total quality management Answer: C Explanation: An important competitive dimension may be the ability of a firm to support its product after the sale Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) When a company seeks to match the benefits of a successful position while maintaining its existing position in offering customers a variety of differing services, what is this process called? A) Operations capability analysis B) Straddling C) Order qualifying D) Order winning E) Inter-functional analysis Answer: B Explanation: Straddling occurs when a company seeks to match the benefits of a successful position while maintaining its existing position. Difficulty: 1 Easy Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

35) An activity-system map is which of the following? A) A network guide to route airlines B) A listing of activities that make up a project C) A diagram that shows how a company's strategy is delivered to customers D) A facility layout schematic noting what is done where E) A timeline displaying major planned events Answer: C Explanation: Activity-system maps show how a company's strategy is delivered through a set of tailored activities. Difficulty: 1 Easy Topic: Strategies Are Implemented Using Operations and Supply Chain Activities— IKEA'S Strategy Learning Objective: 02-03 Explain how operations and supply chain strategies are implemented. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) Which of the following is a partial measure of productivity? A. Output / Materials B. Output / (Labor + Capital + Energy) C. Output / All resources used D. Output / Inputs

A) Choice A B) Choice B C) Choice C D) Choice D E) All of these Answer: A Explanation: Answer A is correct. Answer B is a multifactor measure of productivity while C & D are measures of total productivity. Difficulty: 2 Medium Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) Which of the following is a multifactor measure of productivity? A. Output / (Materials) 37

B. Output / (Labor + Capital + Energy) C. Output / All resources used D. Output / Inputs

A) Choice A B) Choice B C) Choice C D) Choice D E) All of these Answer: B Explanation: Answer B is correct. Answer A is a partial measure of productivity while C & D are measures of total productivity. Difficulty: 2 Medium Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

38) Which of the following is a total measure of productivity? A. Output / Materials B. Output / (Labor + Capital + Energy) C. Output / Labor D. Output / Inputs

A) Choice A B) Choice B C) Choice C D) Choice D E) All of these Answer: D Explanation: Answer D is correct. Answer A is a partial measure of productivity, Answer B is a multifactor measure of productivity while C is a measure of total productivity. Difficulty: 1 Easy Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

39) If all you knew about a production system was that total daily output was 400 units and the total labor necessary to produce the 400 units was 350 hours, what kind of productivity measure could you use to compute productivity? A. Partial measure B. Multifactor measure C. Total measure D. Global measure

A) Choice A B) Choice B C) Choice C D) Choice D E) All of these Answer: A Explanation: Answer A is correct. Without measures of other inputs only a partial output measure is possible. Difficulty: 1 Easy Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

40) If all you knew about a production system was that total daily output was 400 units and the total labor necessary to produce the 400 units was 350 hours, and the total materials used were 425 units, what kind of productivity measure could you use to compute productivity? A. Partial measure B. Multifactor measure C. Total measure

A) Choice A B) Choice B C) Choice C D) Choice A and B above E) Choice B and C above Answer: D Explanation: Answer D is the most correct of the answers. You could use either a partial or a multifactor measure or both kinds of measure. Difficulty: 1 Easy Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 41) The total output from a production system in one day is 500 units and the total labor necessary to produce the 500 units is 350 hours. Using the appropriate productivity measure, which of the following numbers represents the resulting productivity ratio? A) 1.000 B) 1.428 C) 0.700 D) 0.411 E) None of these Answer: B Explanation: 500 units divided by 350 hours = 1.428. Difficulty: 2 Medium Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

42) The total output from a production system in one day is 900 units and the total labor necessary to produce the 900 units is 900 hours. Using the appropriate productivity measure, what is the resulting productivity ratio? A) 1.000 B) 1.428 C) 0.700 D) 0.411 E) None of these Answer: A Explanation: Answer A is 900 units divided by 900 hours equals 1.0 units per hour. Difficulty: 2 Medium Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 43) Larry's Auto Body Repair Shop had revenues that averaged $60,000 per week in April and $50,000 per week in May. During both months, the shop employed six full-time (40 hours/week) workers. In April the firm also had four part-time workers working 25 hours per week but in May there were only two part-time workers and they only worked 10 hours per week. What is the percentage change in labor productivity from April to May for Larry's Auto Body Repair? A) −20.00% B) −15.82% C) 8.95% D) 2.3% E) −25.00% F) None of these Answer: C Explanation: Labor productivity is output (revenue) divided by hours of labor input. For April, revenue was $60,000 and labor hours were 4 x [(40 x 6) + (25 x 4)]. This is 60,000/1,360 or 44.12 dollars per hour of labor. For May, revenue was $50,000 and labor hours were 4x[(40 x 6)+(10 x 2)] This is 50,000/1,040 or 48.07 dollars per hour of labor a difference of $3.95 per hour. The percentage change in productivity between April and May, then, is 3.95/44.12 = 0.0895 x 100 = 8.95%. (Note: this analysis assumes four weeks in each month and equal productivity for each hour worked.) Difficulty: 3 Hard Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

44) Various financial data for SunPath Manufacturing for 2015 and 2016 follow.

Output: Inputs:

Sales Labor Raw Materials: Energy: Capital Employed: Other:

$ $ $ $ $ $

2015 300,000 40,000 45,000 10,000 250,000 2,000

2016 $ 330,000 $ 43,000 $ 51,000 $ 9,000 $ 262,000 $ 6,000

What is the percentage change in SunPath's total productivity measure between 2015 and 2016? A) − 9.22 B) 2.33 C) − 0.53 D) 2.88 E) 10.39 F) None of these Answer: D Explanation: Total productivity for 2015 is $300,000 divided by the sum $40,000 + $45,000 + $10,000 + $250,000 + $2,000 or 0.8646. Total productivity for 2016 is $330,000 divided by the sum of $43,000 + $51,000 + $9,000 + 262,000 + $6,000 or 0.8895. The difference between 2015 and 2016 is 0.0249 and the percentage difference is 0.0249 divided by 0.8646 = 0.0288 or 2.88% Difficulty: 3 Hard Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

45) Various financial data for SunPath Manufacturing for 2015 and 2016 follow.

Output: Inputs:

Sales Labor Raw Materials: Energy: Capital Employed: Other:

$ $ $ $ $ $

2015 300,000 40,000 45,000 10,000 250,000 2,000

2016 $ 330,000 $ 43,000 $ 51,000 $ 9,000 $ 262,000 $ 6,000

What is the percentage change in the energy partial productivity measure for SunPath between 2015 and 2016? A) − 9.22% B) 2.33% C) − 0.53% D) 2.88% E) 22.2% F) None of these Answer: E Explanation: The energy partial productivity measure for 2015 is $300,000 divided by $10,000 or 30. For 2016 it is $330,000 divided by $9,000 or 36.66. The percentage change between 2015 and 2016 then is (36.66 – 30)/30 or 6.66 divided by 30 = 22.2%. Difficulty: 2 Medium Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

46) Various financial data for SunPath Manufacturing for 2015 and 2016 follow.

Output: Inputs:

Sales Labor Raw Materials: Energy: Capital Employed: Other:

$ $ $ $ $ $

2015 300,000 40,000 45,000 10,000 250,000 2,000

2016 $ 330,000 $ 43,000 $ 51,000 $ 9,000 $ 262,000 $ 6,000

What is the percentage change in the labor partial productivity measure for SunPath between 2015 and 2016? A) − 9.22 B) 2.33 C) − 0.53 D) 2.88 E) 10.39 F) None of these Answer: B Explanation: The labor partial productivity measure for 2015 is $300,000 divided by $40,000 or 7.5. For 2016 it is $330,000 divided by $43,000 or 7.67. The percentage change between 2015 and 2016, then, is (7.67 – 7.5)/7.5 or 0.17 divided by 7.5 = 2.33%. Difficulty: 2 Medium Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

47) Various financial data for SunPath Manufacturing for 2015 and 2016 follow.

Output: Inputs:

Sales Labor Raw Materials: Energy: Capital Employed: Other:

$ $ $ $ $ $

2015 300,000 40,000 45,000 10,000 250,000 2,000

2016 $ 330,000 $ 43,000 $ 51,000 $ 9,000 $ 262,000 $ 6,000

What is the percentage change in the multifactor labor and raw materials productivity measure for SunPath between 2015 and 2016? A) − 9.22 B) 2.33 C) − 0.53 D) − 2.88 E) 10.39 F) None of these Answer: C Explanation: The multifactor labor and raw materials productivity measure for 2015 is $300,000 divided by the sum $40,000 + $45,000 or 3.53. For 2016 it is $330,000 divided by the sum $51,000 + $43,000 or 3.51. . The percentage change between 2015 and 2016, then is (3.511 – 3.529)/3.529 or -0.018 divided by 3.529 = -0.53%. Difficulty: 3 Hard Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

48) What is meant by the term "operations effectiveness?" A) Products produced in sufficient volume to meet demand B) Products produced at the lowest price in the industry C) Operations that run without error and with no surprises for top management D) Operations that can adapt quickly and efficiently to new and evolving conditions E) Performing activities in a manner that best implements strategic priorities at minimum cost Answer: E Explanation: Operations effectiveness is performing activities in a manner that best implements strategic priorities at minimum cost Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-01 Know what a sustainable business strategy is and how it relates to operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) Decisions that relate to the design of the processes and the infrastructure needed to support these processes relate to which OSCM concept? A) Sustainability B) Competitive dimensions of OSCM C) Making trade-offs D) integrating operations and supply chain strategy with a firm's operational capabilities E) Supply chain risk Answer: D Explanation: Integrating operations and supply chain strategy with a firm's operations capabilities involves decisions that relate to the design of the processes and infrastructure needed to support these processes. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

50) Triple bottom line is a phrase that captures A. The concept that shareholders like economic, environmental and societal stewardship affecting shareholders and stake holders. B. The concept that firms should consider economic prosperity, environmental stewardship and social responsibility affecting shareholders and stake holders. C. The concept that sustainability, social awareness and profitability are three important measures for a firm affecting shareholders and stake holders. D. The concept that firms should consider economic prosperity, environmental stewardship and social responsibility affecting only shareholders.

A) Choice A B) Choice B C) Choice C D) Choice D E) None of the above Answer: B Explanation: B is the answer. Key is that it should take care of three objectives as well as shareholders and stakeholders. (Ex 2.1). Difficulty: 2 Medium Topic: A Sustainable Operations and Supply Chain Strategy Learning Objective: 02-01 Know what a sustainable business strategy is and how it relates to operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

51) Which of the following list contains only competitive dimensions of a firm discussed in the text? A. Cost or price, Triple bottom line, order winners B. Delivery speed, delivery reliability, order qualifiers C. Cost or price, delivery speed, delivery reliability, new product design D. Cost or price, delivery speed, delivery reliability, flexibility and new product introduction speed E. Triple bottom line, delivery speed, deliver reliability, supplier after sale support

A) Choice A B) Choice B C) Choice C D) Choice D E) Choice E Answer: D Explanation: Even though other answers contain some of the dimensions, they have other extraneous items. D has only dimensions discussed in the book. It is not exhaustive. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

52) Choose the most accurate description in the context of operations and supply chain from the following list. A. Order winners and order qualifiers are two ways of describing market oriented dimensions of a product. B. Order winners differentiates a product or service from another while order qualifiers are built in features. C. Order winners are built in features and order qualifiers are necessary features. D. Order qualifier is a screening criteria while order winner is a differentiating criteria. E. Order winners may have been order qualifiers before.

A) Choice A B) Choice B C) Choice C D) Choice D E) Choice E Answer: D Explanation: D is the most complete answer. Difficulty: 2 Medium Topic: What is Operations and Supply Chain Strategy? Learning Objective: 02-02 Define operations and supply chain strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

53) In a firm, if the employees attend a training program, then the time to assemble one unit reduces by 10%. Training program will A. increase the labor productivity only B. increase the multifactor productivity only C. increase both labor and multifactor productivity D. decrease capital productivity E. have no effect on productivity. A) Choice A B) Choice B C) Choice C D) Choice D E) Choice E Answer: C Explanation: Labor productivity will increase since it takes less labor. Since labor is one of the components of multifactor productivity, it will also increase. Clearly, it cannot decrease capital productivity. And E is also wrong. Difficulty: 3 Hard Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

54) In a firm, all other things remaining the same, if the material usage per unit of final product decreases to half of the current usage, then the firm will A) double the material productivity B) increase the multifactor productivity C) double the material productivity and increase the multifactor productivity D) decrease capital productivity E) have no effect on productivity. Answer: C Explanation: Labor productivity will not change. Material productivity doubles, since the denominator is halved. Has no effect on capital productivity. Affects overall productivity. Difficulty: 3 Hard Topic: Productivity Measurement Learning Objective: 02-05 Evaluate productivity in operations and supply chain management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 3 Forecasting 1) Continual review and updating in light of new data is a forecasting technique called second-guessing. Answer: FALSE Explanation: Second guessing is not a forecasting technique. Difficulty: 1 Easy Topic: Quantitative Forecasting Models Learning Objective: 03-01 Understand how forecasting is essential to supply chain planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Cyclical influences on demand are often expressed graphically as a linear function that is either upward or downward sloping. Answer: FALSE Explanation: By their nature, cyclical influences are non-linear. Difficulty: 1 Easy Topic: Components of Demand Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Cyclical influences on demand may come from occurrences such as political elections, war, or economic conditions. 52

Answer: TRUE Explanation: Cyclical influence on demand may come from such occurrences as political elections, war, economic conditions, or sociological pressures. Difficulty: 1 Easy Topic: Components of Demand Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) Trend lines are usually the last things considered when developing a forecast. Answer: FALSE Explanation: Trend lines are the usual starting point in developing a forecast. Difficulty: 1 Easy Topic: Components of Demand Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Time series forecasting models make predictions about the future based on analysis of past data. Answer: TRUE Explanation: Time series forecasting models try to predict the future based on past data. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) In the weighted moving average forecasting model the weights must add up to one times the number of data points. Answer: FALSE Explanation: A weighted moving average (model) allows any weights to be placed on each element, providing, of course, that the sum of all weights equals 1 (one). Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

7) In a forecasting model using simple exponential smoothing the data pattern should remain stationary. Answer: TRUE Explanation: See exhibit 3.3

Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) In a forecasting model using simple moving average, the shorter the time span used for calculating the moving average, the closer the average follows volatile trends. Answer: TRUE Explanation: While a shorter time span produces more oscillation, there is a closer following of the trend. Conversely, a longer time span gives a smoother response but lags the trend. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) In the simple exponential smoothing forecasting model you need at least 30 observations to set the smoothing constant alpha. Answer: FALSE Explanation: In the exponential smoothing method, only three pieces of data are needed to forecast the future: the most recent forecast, the actual demand that occurred for that forecast period, and a smoothing constant alpha. This smoothing constant determines the level of smoothing and the speed of reaction to differences between forecasts and actual occurrences. The value for the constant is determined both by the nature of the product and by the manager's sense of what constitutes a good response rate. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Experience and trial and error are the simplest ways to choose weights for the weighted moving average forecasting model. Answer: TRUE Explanation: Experience and trial and error are the simplest ways to choose weights for the weighted moving average forecasting model. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Bayesian analysis is the simplest way to choose weights for the weighted moving average forecasting model. Answer: FALSE Explanation: Experience and trial and error are the simplest ways to choose weights for the weighted moving average forecasting model. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

12) The weighted moving average forecasting model uses a weighting scheme to modify the effects of individual data points. This is its major advantage over the simple moving average model. Answer: TRUE Explanation: The weighted moving average has a definite advantage over the simple moving average in being able to vary the effects of past data. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13) A central premise of exponential smoothing is that more recent data is less indicative of the future than data from the distant past. Answer: FALSE Explanation: If the premise that the importance of data diminishes as the past becomes more distant is valid then exponential smoothing may be the most logical and easiest method to use. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) The equation for exponential smoothing states that the new forecast is equal to the old forecast plus the error of the old forecast. Answer: FALSE Explanation: The equation for exponential smoothing states that the new forecast is equal to the old forecast plus a portion of the error (the difference between the previous forecast and what actually occurred). Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

15) Exponential smoothing is always the best and most accurate of all forecasting models. Answer: FALSE Explanation: No model is best and most accurate in every situation. That is why there are so many models. A perfect forecast is virtually impossible. Too many factors in the business environment cannot be predicted with certainty. Therefore, rather than search for the perfect forecast, it is far more important to establish the practice of continual review of forecasts and to learn to live with inaccurate forecasts. Difficulty: 1 Easy Topic: From Bean to Cup: Starbucks Global Supply Chain Challenge Learning Objective: 03-01 Understand how forecasting is essential to supply chain planning. Bloom's: Create AACSB: Analytical Thinking Accessibility: Keyboard Navigation 16) In exponential smoothing, it is desirable to use a higher smoothing constant when forecasting demand for a product experiencing high growth. Answer: TRUE Explanation: The more rapid the growth, the higher the reaction rate (e.g., smoothing constant) should be. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) The value of the smoothing constant alpha in an exponential smoothing model is between 0 and 1. Answer: TRUE Explanation: Exponential smoothing requires that the smoothing constant alpha be given a value between 0 and 1. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

18) Simple exponential smoothing lags changes in demand. Answer: TRUE Explanation: Single exponential smoothing has the shortcoming of lagging changes in demand. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Exponential smoothing forecasts always lag behind the actual occurrence but can be corrected somewhat with a trend adjustment. Answer: TRUE Explanation: The forecast lags during an increase or decrease but overshoots when a change in direction occurs. To more closely track actual demand, a trend factor may be added. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Because the factors governing demand for products are very complex, all forecasts of demand contain error. Answer: TRUE Explanation: Demand for a product is generated through the interaction of a number of factors too complex to describe accurately in a model. Therefore, all forecasts certainly contain some error. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

21) Random errors can be defined as those that cannot be explained by the forecast model being used. Answer: TRUE Explanation: Random errors can be defined as those that cannot be explained by the forecast model being used. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) There are no differences in strategic and tactical forecasting. A forecast is a mathematical projection and its ultimate purpose should make no difference to the analyst. Answer: FALSE Explanation: In considering what forecasting approach to use it is important to consider the purpose of the forecast. Some forecasts are for very high-level demand analysis. What do we expect the demand to be for a group of products over the next year, for example? Some forecasts are used to help set the strategy of how, in an aggregate sense, we will meet demand. We will call these strategic forecasts. Forecasts are also needed for how a firm operates processes on a day-to-day basis. For example, when should the inventory for an item be replenished, or how much production should we schedule for an item next week? These are tactical forecasts where the goal is to estimate demand in the relative short term, a few weeks or months. Difficulty: 2 Medium Topic: From Bean to Cup: Starbucks Global Supply Chain Challenge Learning Objective: 03-01 Understand how forecasting is essential to supply chain planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) Random errors in forecasting occur when an undetected secular trend is not included in a forecasting model. Answer: FALSE Explanation: Random errors can be defined as those that cannot be explained by the forecast model being used. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

24) The MAD is used to generate tracking signals. Answer: FALSE Explanation: The MAD is one of the formula inputs to calculate the tracking signal. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) MAD statistics can be used to generate tracking signals. Answer: TRUE Explanation: In recent years, MAD has made a comeback because of its simplicity and usefulness in obtaining tracking signals. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) RSFE in forecasting stands for "reliable safety function error." Answer: FALSE Explanation: RSFE (stands for) running sum of forecast errors. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) In forecasting, RSFE stands for "running sum of forecast errors." Answer: TRUE Explanation: RSFE (stands for ) running sum of forecast errors. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

28) A tracking signal (TS) can be calculated using the arithmetic sum of forecast deviations divided by the MAD. Answer: TRUE Explanation: A tracking signal can be calculated using the arithmetic sum of forecast deviations divided by the mean absolute deviation. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) A restriction in using linear regression is that it assumes that past data and future projections fall on or near a straight line. Answer: TRUE Explanation: The major restriction in using linear regression forecasting is, as the name implies, that past data and future projections are assumed to fall on or near a straight line. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) Regression is a functional relationship between two or more correlated variables, where one or more variables are used to predict a single variable of interest. Answer: TRUE Explanation: Regression can be defined as a functional relationship between two or more correlated variables. It is used to predict one variable given the other. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

31) Linear regression is not useful for aggregate planning. Answer: FALSE Explanation: Linear regression is useful for long-term forecasting of major occurrences and aggregate planning. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) The standard error of the estimate of a linear regression is not useful for judging the fit between the data and the regression line when doing forecasts. Answer: FALSE Explanation: The standard error of estimate indicates how well the line fits the data. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) Multiple regression analysis uses several regression models to generate a forecast. Answer: FALSE Explanation: Multiple regression analysis, (is where) a number of variables are considered, together with the effects of each on the item of interest. Difficulty: 1 Easy Topic: Causal Relationship Forecasting Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

34) For every forecasting problem there is one best forecasting technique. Answer: FALSE Explanation: When forecasting, a good strategy is to use two or three methods and look at them for the common sense view. Difficulty: 1 Easy Topic: From Bean to Cup: Starbucks Global Supply Chain Challenge Learning Objective: 03-01 Understand how forecasting is essential to supply chain planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) A good forecaster is one who develops special skills and experience at one forecasting technique and is capable of applying it to widely diverse situations. Answer: FALSE Explanation: When forecasting, a good strategy is to use two or three methods and look at them for the commonsense view. Difficulty: 1 Easy Topic: Quantitative Forecasting Models Learning Objective: 03-01 Understand how forecasting is essential to supply chain planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) In causal relationship forecasting leading indicators are used to forecast occurrences. Answer: FALSE Explanation: Often leading indicators are not causal relationships, but in some indirect way, they may suggest that some other things might happen. Difficulty: 1 Easy Topic: Causal Relationship Forecasting Learning Objective: 03-01 Understand how forecasting is essential to supply chain planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

37) Qualitative forecasting techniques generally take advantage of the knowledge of experts and therefore do not require much judgment. Answer: FALSE Explanation: Qualitative forecasting techniques generally take advantage of the knowledge of experts and require much judgment. Difficulty: 1 Easy Topic: Qualitative Techniques in Forecasting Learning Objective: 03-03 Apply qualitative techniques to forecast demand. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) Market research is a quantitative method of forecasting. Answer: FALSE Explanation: Market research is used mostly for product research in the sense of looking for new product ideas, likes and dislikes about existing products, which competitive products within a particular class are preferred, and so on. Again, the data collection methods are primarily surveys and interviews. It is a discussed under the qualitative techniques in forecasting topic area. Difficulty: 1 Easy Topic: Qualitative Techniques in Forecasting Learning Objective: 03-03 Apply qualitative techniques to forecast demand. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) Decomposition of a time series means identifying and separating the time series data into its components. Answer: TRUE Explanation: Decomposition of a time series means identifying and separating the time series data into its components. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

40) A time series is defined in the text as chronologically ordered data that may contain one or more components of demand variation: trend, seasonal, cyclical, autocorrelation, and random. Answer: TRUE Explanation: A time series can be defined as chronologically ordered data that may contain one or more components of demand: trend, seasonal, cyclical, autocorrelation, and random. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) It is difficult to identify the trend in time series data. Answer: FALSE Explanation: In practice, it is relatively easy to identify the trend and the seasonal component (by comparing the same period year to year). Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) In decomposition of time series data it is relatively easy identify cycles and autocorrelation components. Answer: FALSE Explanation: It is considerably more difficult (than trend detection) to identify the cycles, autocorrelation, and random components. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

43) We usually associate the word "seasonal" with recurrent periods of repetitive activity that happen on other than an annual cycle. Answer: FALSE Explanation: We usually associate seasonal with a period of the year characterized by some particular activity. We use the word cyclical to indicate other than annual recurrent periods of repetitive activity. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) In time series data depicting demand which of the following is not considered a component of demand variation? A) Trend B) Seasonal C) Cyclical D) Variance E) Autocorrelation Answer: D Explanation: Variance is a measure of the degree of error, not a component of demand variation. E.g., several common terms used to describe the degree of error are standard error, mean squared error (or variance), and mean absolute deviation. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

45) Which of the following is not one of the basic forecasting types discussed in the text? A) Qualitative B) Time series analysis C) Causal relationships D) Simulation E) Force field analysis Answer: E Explanation: Forecasting can be classified into four basic types: qualitative, time series analysis, causal relationships, and simulation. Difficulty: 1 Easy Topic: Quantitative Forecasting Models Learning Objective: 03-01 Understand how forecasting is essential to supply chain planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) In most cases, demand for products or services can be broken down into several components. Which of the following is not considered a component of demand? A) Average demand for a period B) A trend C) Seasonal elements D) Past data E) Autocorrelation Answer: D Explanation: In most cases, demand for products or services can be broken down into six components: average demand for the period, a trend, seasonal elements, cyclical elements, random variation, and autocorrelation. Difficulty: 2 Medium Topic: Components of Demand Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

47) In most cases, demand for products or services can be broken into several components. Which of the following is considered a component of demand? A) Cyclical elements B) Future demand C) Past demand D) Inconsistent demand E) Level demand Answer: A Explanation: In most cases, demand for products or services can be broken down into six components: average demand for the period, a trend, seasonal elements, cyclical elements, random variation, and autocorrelation. Difficulty: 1 Easy Topic: Components of Demand Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) In most cases, demand for products or services can be broken into several components. Which of the following is considered a component of demand? A) Forecast error B) Autocorrelation C) Previous demand D) Consistent demand E) Repeat demand Answer: B Explanation: In most cases, demand for products or services can be broken down into six components: average demand for the period, a trend, seasonal elements, cyclical elements, random variation, and autocorrelation. Difficulty: 1 Easy Topic: Components of Demand Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

49) Which of the following forecasting methodologies is considered a qualitative forecasting technique? A) Simple moving average B) Market research C) Linear regression D) Exponential smoothing E) Multiple regression Answer: B Explanation: Market research is used mostly for product research in the sense of looking for new product ideas, likes and dislikes about existing products, which competitive products within a particular class are preferred, and so on. Again, the data collection methods are primarily surveys and interviews. It is a discussed under the qualitative techniques in forecasting topic area. Difficulty: 1 Easy Topic: Qualitative Techniques in Forecasting Learning Objective: 03-03 Apply qualitative techniques to forecast demand. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) Which of the following forecasting methodologies is considered a time series forecasting technique? A) Simple moving average B) Market research C) Leading indicators D) Historical analogy E) Simulation Answer: A Explanation: Simple moving average is the only choice that attempts to predict future values of demand based upon past data. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

51) Which of the following forecasting methodologies is considered a time series forecasting technique? A) Delphi method B) Exponential averaging C) Simple movement smoothing D) Weighted moving average E) Simulation Answer: D Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) Which of the following forecasting methodologies is considered a causal forecasting technique? A) Exponential smoothing B) Weighted moving average C) Linear regression D) Historical analogy E) Market research Answer: C Explanation: Causal forecasting, which we discuss using the linear regression technique, assumes that demand is related to some underlying factor or factors in the environment. Difficulty: 1 Easy Topic: Causal Relationship Forecasting Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

53) Which of the following forecasting methods uses executive judgment as its primary component for forecasting? A) Historical analogy B) Time series analysis C) Panel consensus D) Market research E) Linear regression Answer: C Explanation: In a panel consensus, the idea that two heads are better than one is extrapolated to the idea that a panel of people from a variety of positions can develop a more reliable forecast than a narrower group. Panel forecasts are developed through open meetings with free exchange of ideas from all levels of management and individuals. When decisions in forecasting are at a broader, higher level (as when introducing a new product line or concerning strategic product decisions such as new marketing areas), the term executive judgment is generally used. Difficulty: 1 Easy Topic: Qualitative Techniques in Forecasting Learning Objective: 03-03 Apply qualitative techniques to forecast demand. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) Which of the following forecasting methods is very dependent on selection of the right individuals who will judgmentally be used to actually generate the forecast? A) Time series analysis B) Simple moving average C) Weighted moving average D) Delphi method E) Panel consensus Answer: D Explanation: The step-by-step procedure for the Delphi method is: 1. Choose the experts to participate. There should be a variety of knowledgeable people in different areas. Difficulty: 2 Medium Topic: Qualitative Techniques in Forecasting Learning Objective: 03-03 Apply qualitative techniques to forecast demand. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

55) In business forecasting, what is usually considered a short-term time period? A) Four weeks or less B) More than three months C) Six months or more D) Less than three months E) One year Answer: D Explanation: In business forecasting short term usually refers to under three months. Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) In business forecasting, what is usually considered a medium-term time period? A) Six weeks to one year B) Three months to two years C) One to five years D) One to six months E) Six months to six years Answer: B Explanation: In business forecasting medium term (refers to) three months to two years. Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

57) In business forecasting, what is usually considered a long-term time period? A) Three months or longer B) Six months or longer C) One year or longer D) Two years or longer E) Ten years or longer Answer: D Explanation: In business forecasting long term (refers to) greater than two years. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) In general, which forecasting time frame compensates most effectively for random variation and short term changes? A) Short-term forecasts B) Quick-time forecasts C) Long range forecasts D) Medium term forecasts E) Rapid change forecasts Answer: A Explanation: In general, the short-term models compensate best for random variation and adjust for short-term changes (such as consumers' responses to a new product). Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

59) In general, which forecasting time frame best identifies seasonal effects? A) Short-term forecasts B) Quick-time forecasts C) Long range forecasts D) Medium term forecasts E) Rapid change forecasts Answer: D Explanation: Medium-term forecasts are useful for capturing seasonal effects. Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) In general, which forecasting time frame is best to detect general trends? A) Short-term forecasts B) Quick-time forecasts C) Long range forecasts D) Medium term forecasts E) Rapid change forecasts Answer: C Explanation: Long-term models detect general trends and are especially useful in identifying major turning points. Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

61) Which of the following forecasting methods can be used for short-term forecasting? A) Simple exponential smoothing B) Delphi technique C) Market research D) Hoskins-Hamilton smoothing E) Serial regression Answer: A Explanation: Refer to exhibit 3.3

Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

62) Which of the following considerations is not a factor in deciding which forecasting model a firm should choose? A) Time horizon to forecast B) Product C) Accuracy required D) Data availability E) Analyst availability Answer: B Explanation: Which forecasting model a firm should choose depends on: (1) Time horizon to forecast; (2) Data availability; (3) Accuracy required; (4) Size of forecasting budget; (5) Availability of qualified personnel. Difficulty: 1 Easy Topic: Quantitative Forecasting Models Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) A company wants to forecast demand using the simple moving average. If the company uses four prior yearly sales values (i.e., year 2014 = 100, year 2015 = 120, year 2016 = 140, and year 2017 = 210), which of the following is the simple moving average forecast for year 2018? A) 100.5 B) 140.0 C) 142.5 D) 145.5 E) 155.0 Answer: C Explanation: Forecast for 2018 = (100 + 120 + 140 + 210) / 4 = 570 / 4 = 142.5 Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

64) A company wants to forecast demand using the simple moving average. If the company uses three prior yearly sales values (i.e., year 2015 = 130, year 2016 = 110, and year 2017 =160), which of the following is the simple moving average forecast for year 2018? A) 100.5 B) 122.5 C) 133.3 D) 135.6 E) 139.3 Answer: C Explanation: Forecast for 2018 = (130 + 110 + 160) / 3 = 400 / 3 = 133.3 Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 65) A company wants to forecast demand using the weighted moving average. If the company uses two prior yearly sales values (i.e., year 2013 = 110 and year 2015 = 130), and we want to weight year 2016 at 10% and year 2017 at 90%, which of the following is the weighted moving average forecast for year 2018? A) 120 B) 128 C) 133 D) 138 E) 142 Answer: B Explanation: Forecast for 2018 = (110 x 0.1) + (130 x 0.9) = 11 + 117 = 128 Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

66) A company wants to forecast demand using the weighted moving average. If the company uses three prior yearly sales values (i.e., year 2015 = 160, year 2016 = 140 and year 2017 = 170), and we want to weight year 2014 at 30%, year 2015 at 30% and year 2016 at 40%, which of the following is the weighted moving average forecast for year 2018? A) 170 B) 168 C) 158 D) 152 E) 146 Answer: C Explanation: Forecast for 2018 = (160x0.3) + (140x0.3) + (170x0.4) = 158 Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 67) Which one of the following are among the major reasons that exponential smoothing has become well accepted as a forecasting technique? A) Accurate and easy to use B) Sophistication of analysis C) Predicts turning points D) Captures patterns in historical data E) Ability to forecast lagging data trends Answer: A Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

68) The exponential smoothing method requires which of the following data to forecast the future? A) The most recent forecast B) Precise actual demand for the past several years C) The value of the smoothing constant delta D) Overall industry demand data E) Tracking values Answer: A Explanation: In the exponential smoothing method, only three pieces of data are needed to forecast the future: the most recent forecast, the actual demand that occurred for that forecast period, and a smoothing constant alpha. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) Given a prior forecast demand value of 230, a related actual demand value of 250, and a smoothing constant alpha of 0.1, what is the exponential smoothing forecast value for the following period? A) 230 B) 232 C) 238 D) 248 E) 250 Answer: B Explanation: Forecast = 230 + 0.1 x (250 − 230) = 232 Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

70) If a firm produced a standard item with relatively stable demand, the smoothing constant alpha (reaction rate to differences) used in an exponential smoothing forecasting model would tend to be in which of the following ranges? A) 5% to 10% B) 20% to 50% C) 20% to 80% D) 60% to 120% E) 90% to 100% Answer: A Explanation: If a firm produced a standard item with relatively stable demand, the reaction rate to differences between actual and forecast demand would tend to be small, perhaps just 5 or 10 percentage points. Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) If a firm produced a product that was experiencing growth in demand, the smoothing constant alpha (reaction rate to differences) used in an exponential smoothing forecasting model would tend to be which of the following? A) Close to zero. B) A very low percentage, less than 10%. C) The more rapid the growth, the higher the percentage. D) The more rapid the growth, the lower the percentage. E) 50% or more. Answer: C Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

72) Given a prior forecast demand value of 1,100, a related actual demand value of 1,000, and a smoothing constant alpha of 0.3, what is the exponential smoothing forecast value? A) 1,000 B) 1,030 C) 1,070 D) 1,130 E) 970 Answer: D Explanation: Forecast = 1,100 + 0.3 x (1,100 − 1,000) = 1,130 Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 73) A company wants to generate a forecast for unit demand for year 2018 using exponential smoothing. The actual demand in year 2017 was 120. The forecast demand in year 2017 was 110. Using this data and a smoothing constant alpha of 0.1, which of the following is the resulting year 2018 forecast value? A) 100 B) 110 C) 111 D) 114 E) 120 Answer: C Explanation: Forecast = 110 + 0.1 x (120 − 110) = 111 Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

74) As a consultant you have been asked to generate a unit demand forecast for a product for year 2018 using exponential smoothing. The actual demand in year 2017 was 750. The forecast demand in year 2017 was 960. Using this data and a smoothing constant alpha of 0.3, which of the following is the resulting year 2018 forecast value? A) 766 B) 813 C) 897 D) 1,023 E) 1,120 Answer: C Explanation: Forecast = 960 + 0.3 x (750 − 960) = 897 Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 75) Which of the following is a possible source of bias error in forecasting? A) Failing to include the right variables B) Using the wrong forecasting method C) Employing less sophisticated analysts than necessary D) Using incorrect data E) Using standard deviation rather than MAD Answer: A Explanation: Bias errors occur when a consistent mistake is made. Sources of bias include the failure to include the right variables; the use of the wrong relationships among variables; employing of the wrong trend line; a mistaken shift in the seasonal demand from where it normally occurs; and the existence of some undetected secular trend. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

76) Which of the following are used to describe the degree of error? A) Weighted moving average B) Regression C) Moving average D) Forecast as a percent of actual E) Mean absolute deviation Answer: E Explanation: Several common terms used to describe the degree of error are standard error, mean squared error (or variance), and mean absolute deviation. Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) A company has actual unit demand for three consecutive years of 124, 126, and 135. The respective forecasts for the same three years are 120, 120, and 130. Which of the following is the resulting MAD value that can be computed from this data? A) 1 B) 3 C) 5 D) 15 E) 123 Answer: C Explanation: MAD = ABS((124 − 120) + (126 − 120) + (135 − 130)) / 3 = 15 / 3 =5 Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

78) A company has actual unit demand for four consecutive years of 100, 105, 135, and 150. The respective forecasts were 120 for all four years. Which of the following is the resulting MAD value that can be computed from this data? A) 2.5 B) 10 C) 20 D) 22.5 E) 30 Answer: C Explanation: MAD = ABS((100 −120) + (105 − 120) + (135 − 120) + (150 − 120)) / 4 = 80/4 =20 Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 79) If you were selecting from a variety of forecasting models based on MAD, which of the following MAD values from the same data would reflect the most accurate model? A) 0.2 B) 0.8 C) 1.0 D) 10.0 E) 100.0 Answer: A Explanation: Mean absolute percent error (MAPE) gauges the error relative to the average demand. For example, if the MAD is 10 units and average demand is 20 units, the error is large and significant, but relatively insignificant on an average demand of 1,000 units. Since the same data is being used in the question, MAPE would be least when MAD was smallest. Therefore 0.2 is the correct answer. Difficulty: 3 Hard Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

80) A company has calculated its running sum of forecast errors to be 500 and its mean absolute deviation is exactly 35. Which of the following is the company's tracking signal? A) Cannot be calculated based on this information B) About 14.3 C) More than 35 D) Exactly 35 E) About 0.07 Answer: B Explanation: The tracking signal is RSFE/MAD = 500 / 35 = 14.29. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 81) A company has a MAD of 10. Its wants to have a 99.7 percent control limits on its forecasting system. It's most recent tracking signal value is 3.1. What can the company conclude from this information? A) The forecasting model is operating acceptably B) The forecasting model is out of control and needs to be corrected C) The MAD value is incorrect D) The upper control value is less than 20 E) It is using an inappropriate forecasting methodology Answer: A Explanation: Tracking Signal = RSFE / MAD hence, 3.1 = RSFE/10 or RSFE =3.1 x 10 = 31. MAD = 10, SD = 1.25 x MAD = 12.5. Since 99.7 percent corresponds to 3 standard deviations from the mean, RSFE would have to be higher than 3 x 12.5 or 37.5 for the forecasting model to be out of control. Difficulty: 3 Hard Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Create AACSB: Analytical Thinking Accessibility: Keyboard Navigation

82) You are hired as a consultant to advise a small firm on forecasting methodology. Based on your research you find the company has a MAD of 3. Its wants to have a 99.7 percent control limits on its forecasting system. Its most recent tracking signal value is 15. What should be your report to the company? A) The forecasting model is operating acceptably B) The forecasting model is out of control and needs to be corrected C) The MAD value is incorrect D) The upper control value is less than 20 E) The company is using an inappropriate forecasting methodology Answer: B Difficulty: 3 Hard Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Create AACSB: Analytical Thinking Accessibility: Keyboard Navigation 83) Which of the following is the portion of observations you would expect to see lying within a plus or minus 3 MAD range? A) 57.05 percent B) 88.95 percent C) 98.36 percent D) 99.85 percent E) 100 percent Answer: C Explanation: 3 MAD x 0.8 = 2.4 Standard Deviations. From any Z table, 2.4 standard deviations includes = 0.4918 of the area x 2 = 0.9836 or 98.36% Difficulty: 3 Hard Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

84) Which of the following is the portion of observations you would expect to see lying within a plus or minus 2 MAD range? A) 57.04 B) 89.04 C) 98.33 D) 99.86 E) 100.00 Answer: B Explanation: 2 MAD x 0.8 = 1.6 Standard Deviations. From any Z table, 1.6 standard deviations includes = 0.4452 of the area x 2 = 0.8904 or 89.04% Difficulty: 3 Hard Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 85) If the intercept value of a linear regression model is 40, the slope value is 40, and the value of X is 40, which of the following is the resulting forecast value using this model? A) 120 B) 1,600 C) 1,640 D) 2,200 E) 64,000 Answer: C Explanation: The linear regression line is of the form Y = a + bX , where Y is the value of the dependent variable that we are solving for, a is the Y intercept, b is the slope, and X is the independent variable. Hence, Y = 40 + 40 x 40 = 1,640. Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

86) A company hires you to develop a linear regression forecasting model. Based on the company's historical sales information, you determine the intercept value of the model to be 1,200. You also find the slope value is minus 50. If after developing the model you are given a value of X = 10, which of the following is the resulting forecast value using this model? A) – 1,800 B) 700 C) 1,230 D) 1,150 E) 12,000 Answer: B Explanation: The linear regression line is of the form Y = a + bX , where Y is the value of the dependent variable that we are solving for, a is the Y intercept, b is the slope, and X is the independent variable. Hence, Y = 1,200 + (-50) x 10 = 700. Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 87) Heavy sales of umbrellas during a rain storm is an example of which of the following? A) A trend B) A causal relationship C) A statistical correlation D) A coincidence E) A fad Answer: B Explanation: We can expect that an extended period of rain will increase sales of umbrellas and raincoats. The rain causes the sale of rain gear. This is a causal relationship, where one occurrence causes another. Difficulty: 1 Easy Topic: Causal Relationship Forecasting Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

88) You are using an exponential smoothing model for forecasting. The running sum of the forecast error statistics (RSFE) are calculated each time a forecast is generated. You find the last RSFE to be 34. Originally the forecasting model used was selected because it's relatively low MAD of 0.4. To determine when it is time to reevaluate the usefulness of the exponential smoothing model you compute tracking signals. Which of the following is the resulting tracking signal? A) 85 B) 60 C) 13.6 D) 12.9 E) 8 Answer: A Difficulty: 2 Medium Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 89) Using the exponential smoothing model for forecasting, the smoothing constant alpha determines the level of smoothing and A) the slope of the growth curve. B) the speed of reaction to differences between forecasts and actual results. C) the intercept on the Y-axis. D) the next forecast error. E) a measure of forecast accuracy. Answer: B Explanation: The smoothing constant determines the level of smoothing and the speed of reaction to differences between forecasts and actual occurrences. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-03 Apply qualitative techniques to forecast demand. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

90) The least squares method refers to A) a computation in linear regression. B) selecting participants for the Delphi Technique. C) time series decomposition into smaller and smaller units. D) determining the smallest sources of error in a forecast. E) calculating the running sum of forecast errors. Answer: A Explanation: The least squares method tries to fit the line to the data that minimizes the sum of the squares of the vertical distance between each data point and its corresponding point on the line which becomes the result of the linear regression computation. Difficulty: 1 Easy Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) Collaborative Planning, Forecasting, and Replenishment (CPFR) is a web-based tool used to coordinate demand forecasting, production and purchase planning, and inventory replenishment between supply chain trading partners. In practice CPFR often doesn't deliver on its' promise because; 1) Computer systems at supplier companies cannot be made to work with each other. 2) Forecast errors accumulate as data exchanges are made down the supply chain culminating in the "feast or famine" phenomena known as the "bullwhip effect." 3) Firms in a supply chain may not trust each other sufficiently to share information openly. 4) conflicting objectives between the profit-maximizing vendor and the cost-minimizing customer give rise to adversarial supply chain relationships. A) All of these B) 2 and 4 above C) 1 and 3 above D) 1, 3, and 4 above E) 3 and 4 above Answer: E Difficulty: 3 Hard Topic: Web based collaborative forecasting Learning Objective: 03-04 Apply collaborative techniques to forecast demand. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

92) A company wants to forecast demand using the simple moving average. The company uses four positive prior yearly (2014, 2015, 2016 and 2017) sales values. All yearly sales figures are unique (no repetitions). Which of the following is most accurate about the moving average forecast for year 2018?

A. Has to be smaller than at least one of the four yearly sales figures. B. Has to be larger than at least one of the four yearly sales figures. C. Has to be between the smallest and largest yearly sales figures. D. Has to greater than all four yearly sales figures.

A) Choice A B) Choice B C) Choice C D) Choice D E) Choice A, B and C only Answer: E Explanation: Since it is moving average, and the four yearly figures are positive and different from each other, the moving average will have to be between the smallest and largest and that implies A and B. Difficulty: 3 Hard Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

93) As a consultant, you have been asked to generate a unit demand forecast for a product for year 2018 using exponential smoothing. You have data for the past three years and the forecast and the actual are the same for the first period of your data (3 years ago). Which of the following is most accurate? A. Forecast for year 2018 will be higher than the actual for 2017, if your α is close to 1.0 B. Forecast for 2018 will be between all the actual sales C. Exponential smoothing is a type of weighted average forecasting method

A) Choice A B) Choice B C) Choice C D) Choice B and C only E) None of the above Answer: D Explanation: Exponential smoothing is a weighted average method, averaging over all past actual sales, starting from year 1, since the actual and forecast are same for that year. So B and C are true. Difficulty: 3 Hard Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

94) As a consultant, you have been thinking about choosing the "right" alpha (smoothing constant) for forecasting using exponential smoothing. Which of the following is most accurate about alpha? A. If alpha is high, speed of reaction to changes in actually low. B. If a firm produces standard product with relatively stable demand, alpha should be small. C. Products experiencing growth should be assigned higher alpha value. D. Alpha could be more than 1.0, and in this case (1-alpha) will become negative to make up for it.

A) Choice A B) Choice B C) Choice C D) Choice D E) Choice B and C Answer: E Explanation: Alpha in exponential smoothing determines speed of reaction to changes in actual demand. High changes (growth or fast decline) requires high alpha and steady demand uses small alpha. Bit is is always between 0 and 1. Difficulty: 3 Hard Topic: Time Series Analysis Learning Objective: 03-02 Evaluate demand using quantitative forecasting models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 4 Strategic Capacity Management 1) Capacity can be defined as the ability to hold, receive, store, or accommodate. Answer: TRUE Explanation: A dictionary definition of capacity is "the ability to hold, receive, store, or accommodate." Difficulty: 1 Easy Topic: Capacity Management in Operations and Supply Chain Management Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) When evaluating capacity, managers need to consider both resource inputs and product outputs. 94

Answer: TRUE Explanation: When looking at capacity, operations managers need to look at both resource inputs and product outputs. Difficulty: 1 Easy Topic: Capacity Management in Operations and Supply Chain Management Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember; Analyze AACSB: Reflective Thinking; Analytical Thinking Accessibility: Keyboard Navigation 3) Capacity can be defined as the amount of available resource inputs relative to requirements for output over a particular period of time. Answer: TRUE Explanation: Capacity is a relative term; in an operations management context, it may be defined as the amount of resource inputs available relative to output requirements over a particular period of time. Difficulty: 1 Easy Topic: Capacity Management in Operations and Supply Chain Management Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) The capacity utilization rate is found by dividing best operating level by capacity used. Answer: FALSE Explanation: The capacity utilization rate is found by dividing capacity used by best operating level. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) The objective of strategic capacity planning is to provide an approach for determining the overall capacity level of labor-intensive resources. Answer: FALSE Explanation: The objective of strategic capacity planning is to provide an approach for determining the overall capacity level of capital-intensive resources—facilities, equipment, and overall labor force size—that best supports the company's long-range competitive strategy. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) The objective of strategic capacity planning is to determine the overall capacity level of capital intensive resources (including facilities, equipment, and overall labor force size) that best supports the company's short-range competitive strategy. Answer: FALSE Explanation: The objective of strategic capacity planning is to provide an approach for determining the overall capacity level of capital-intensive resources—facilities, equipment, and overall labor force size—that best supports the company's long-range competitive strategy. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

7) The objective of strategic capacity planning is to determine the overall capacity level of capital intensive resources (including facilities, equipment, and overall labor force size) that best supports the company's long-range competitive strategy. Answer: TRUE Explanation: The objective of strategic capacity planning is to provide an approach for determining the overall capacity level of capital-intensive resources—facilities, equipment, and overall labor force size—that best supports the company's long-range competitive strategy. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Best operating level is usually a multiple of the level of capacity for which a process was designed. Answer: FALSE Explanation: (Best operating level) is the level of capacity for which the process was designed and thus is the volume of output at which average unit cost is minimized. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) Best operating level is the volume of output at which average unit cost is minimized. Answer: TRUE Explanation: (Best operating level) is the level of capacity for which the process was designed and thus is the volume of output at which average unit cost is minimized. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

10) At some point, the size of a growing plant can become too large and diseconomies of scale becomes a capacity planning problem. Answer: TRUE Explanation: At some point, the size of a plant becomes too large and diseconomies of scale becomes a problem. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-02 Exemplify how to plan capacity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Long-range capacity planning requires top management participation. Answer: TRUE Explanation: Where productive resources (such as buildings, equipment, or facilities) take a long time to acquire or dispose of, long-range capacity planning requires top management participation and approval. Difficulty: 1 Easy Topic: Capacity Management in Operations and Supply Chain Management Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Overtime and personnel transfers are solutions to capacity problems in the intermediate term. Answer: FALSE Explanation: Short range —less than one month. This is tied into the daily or weekly scheduling process and involves making adjustments to eliminate the variance between planned and actual output. This includes alternatives such as overtime, personnel transfers, and alternative production routings. Difficulty: 1 Easy Topic: Capacity Management in Operations and Supply Chain Management Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) Capacity planning is generally viewed in three time durations: Immediate, Intermediate, and Indeterminate. Answer: FALSE Explanation: The correct answer is long-range, intermediate-range and short-range. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-02 Exemplify how to plan capacity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) The basic notion of economies of scale is that as a plant gets larger and volume increases, the average cost per unit of output drops. Answer: TRUE Explanation: The basic notion of economies of scale is that as a plant gets larger and volume increases, the average cost per unit of output drops. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-02 Exemplify how to plan capacity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) A piece of equipment with twice the capacity of another piece typically costs twice as much to purchase and to operate. Answer: FALSE Explanation: The basic notion of economies of scale is that as a plant gets larger and volume increases, the average cost per unit of output drops. This is partially due to lower operating and capital cost, because a piece of equipment with twice the capacity of another piece typically does not cost twice as much to purchase or operate. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-02 Exemplify how to plan capacity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

16) The problem of keeping demand sufficiently high to keep a large factory busy is a sales issue and not a diseconomy of scale. Answer: FALSE Explanation: While this can be viewed as a sales issue, it is one brought on by the large scale of operations and is thus also a diseconomy of scale. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-02 Exemplify how to plan capacity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) A production facility works best when it focuses on a fairly limited set of production objectives. Answer: TRUE Explanation: The concept of a focused factory holds that a production facility works best when it focuses on a fairly limited set of production objectives. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-02 Exemplify how to plan capacity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) A production facility develops virtuosity and works best when it focused on a widely varied set of production objectives. Answer: FALSE Explanation: A firm should not expect to excel in every aspect of manufacturing performance: cost, quality, delivery speed and reliability, changes in demand, and flexibility to adapt to new products. Rather, it should select a limited set of tasks that contribute the most to corporate objectives. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-02 Exemplify how to plan capacity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

100

19) Making adjustments to eliminate the variance between planned and actual output is tied into intermediate range capacity planning. Answer: FALSE Explanation: Short range —less than one month. This is tied into the daily or weekly scheduling process and involves making adjustments to eliminate the variance between planned and actual output. This includes alternatives such as overtime, personnel transfers, and alternative production routings. Difficulty: 1 Easy Topic: Capacity Management in Operations and Supply Chain Management Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) The ultimate in plant flexibility is a one-hour-changeover time plant. Answer: FALSE Explanation: Perhaps the ultimate in plant flexibility is the zero-changeover-time plant. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) Capacity flexibility means having the ability to rapidly increase or decrease production levels, or to shift production capacity quickly from one product or service to another. Answer: TRUE Explanation: Capacity flexibility means having the ability to rapidly increase or decrease production levels, or to shift production capacity quickly from one product or service to another. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

101

22) Economies of scope exist when multiple products can be produced at a lower cost in combination than they can separately. Answer: TRUE Explanation: Economies of scope exist when multiple products can be combined and produced at one facility, at a lower cost than they can be produced separately. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-02 Exemplify how to plan capacity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) The frequency of adding to productive capacity should balance the costs of upgrading too frequently and the costs of upgrading too infrequently. Answer: TRUE Explanation: See below exhibit 4.2 and narrative on "Frequency of Capacity additions."

Difficulty: 1 Easy Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

102

24) Outsourcing is a common source of external capacity. Answer: TRUE Explanation: In some cases, it may be cheaper to not add capacity at all, but rather to use some existing external source of capacity. Two common strategies used by organizations are outsourcing and sharing capacity. Difficulty: 1 Easy Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) Sharing capacity is a common source of external capacity. Answer: TRUE Explanation: In some cases, it may be cheaper to not add capacity at all, but rather to use some existing external source of capacity. Two common strategies used by organizations are outsourcing and sharing capacity. Difficulty: 1 Easy Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) A capacity cushion is the amount of capacity less than expected demand. Answer: FALSE Explanation: A capacity cushion is the amount of capacity in excess of expected demand Difficulty: 1 Easy Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

103

27) A decision tree problem does not need probabilities or payoffs to generate a solution. Answer: FALSE Explanation: See the decision tree examples in the text. Without probabilities and payoffs a decision tree is not capable of generating a solution. Difficulty: 1 Easy Topic: Using Decision Trees to Evaluate Capacity Alternatives Learning Objective: 04-03 Evaluate capacity alternatives using decision trees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) In solving a decision tree problem, calculations start at the ends of the "branches" of the tree and work backwards to the base of the tree. Answer: TRUE Explanation: In solving a tree problem, we work from the end of the tree backward to the start of the tree. Difficulty: 1 Easy Topic: Using Decision Trees to Evaluate Capacity Alternatives Learning Objective: 04-03 Evaluate capacity alternatives using decision trees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) The probability of each occurrence at a decision tree chance node is the reciprocal of the number of possibilities at the chance node. Answer: FALSE Explanation: See the decision tree example in the text. This is only true in the unusual event that all the possibilities at each node have an equal chance of occurring. Difficulty: 2 Medium Topic: Using Decision Trees to Evaluate Capacity Alternatives Learning Objective: 04-03 Evaluate capacity alternatives using decision trees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

104

30) In a decision tree, the only time probabilities are applied to a decision node is when the decision is being made by someone else such as you customer or your competitor. Answer: FALSE Explanation: Decision trees are composed of decision nodes with branches to and from them. Usually squares represent decision points and circles represent chance events. Branches from decision points show the choices available to the decision maker; branches from chance events show the probabilities for their occurrence. Difficulty: 2 Medium Topic: Using Decision Trees to Evaluate Capacity Alternatives Learning Objective: 04-03 Evaluate capacity alternatives using decision trees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Low rates of capacity utilization in service organizations are never appropriate. Answer: FALSE Explanation: Hospital emergency rooms and fire departments should aim for low utilization because of the high level of uncertainty and the life-or-death nature of their activities. Difficulty: 1 Easy Topic: Planning Service Capacity Learning Objective: 04-04 Compare capacity planning in services to capacity planning in manufacturing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) The smaller the capacity cushion the better. Answer: FALSE Explanation: This is not necessarily true except in the instance of a firm whose competitive advantage is low cost or price. For a firm competing on speed of delivery or innovative ability, for example, a larger capacity cushion will allow more flexibility and enable an appropriate response to unplanned orders. Difficulty: 2 Medium Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation

105

33) The larger the capacity cushion the better. Answer: FALSE Explanation: This is false for the firm whose competitive advantage is low cost or price. For a firm competing on speed of delivery or innovative ability, for example, a larger capacity cushion will allow more flexibility and enable an appropriate response to unplanned orders. Difficulty: 2 Medium Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation 34) The capacity cushion is the ratio of capacity used to the best capacity level. Answer: FALSE Explanation: A capacity cushion is an amount of capacity in excess of expected demand. Difficulty: 2 Medium Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) When a firm's design capacity is less than the capacity required to meet its demand, it is said to have a negative capacity cushion. Answer: TRUE Explanation: When a firm's design capacity is less than the capacity required to meet its demand, it is said to have a negative capacity cushion. Difficulty: 2 Medium Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

106

36) In decision tree analysis the time value of money is ignored because you are only concerned with cash costs. Answer: FALSE Explanation: In solving decision tree problems, we work from the end of the tree backward to the start of the tree. As we work back, we calculate the expected values at each step. In calculation of the expected value, the time value of money is important if the planning horizon is long. Difficulty: 2 Medium Topic: Using Decision Trees to Evaluate Capacity Alternatives Learning Objective: 04-03 Evaluate capacity alternatives using decision trees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) In practice, achieving a perfectly balanced plant is usually desirable but impossible. Answer: FALSE Explanation: In practice achieving such a "perfect" design is usually both impossible and undesirable. Difficulty: 2 Medium Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) In practice achieving a perfectly balanced plant is usually both impossible and undesirable. Answer: TRUE Explanation: In practice achieving such a "perfect" design is usually both impossible and undesirable. Difficulty: 2 Medium Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

107

39) Because services cannot be stored for later use, service managers consider time as one of their supplies or resources. Answer: TRUE Explanation: Unlike goods, services cannot be stored for later use. As such, in services managers must consider time as one of their supplies. Difficulty: 2 Medium Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) The ability to rapidly and inexpensively switch production from one product to another enables what are sometimes referred to as: A) economies of scale. B) economies of size. C) economies of shape. D) economies of scope. E) economies of shipping. Answer: D Explanation: Flexible manufacturing systems and simple easily set-up equipment permit rapid low-cost switching from one product to another, enabling what are sometimes referred to as economies of scope. Difficulty: 2 Medium Topic: Capacity Planning Concepts Learning Objective: 04-02 Exemplify how to plan capacity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

108

41) Capacity planning that involves hiring, layoffs, some new tooling, minor equipment purchases, and subcontracting is considered as which one of the following planning horizons? A) Intermediate range B) Long range C) Short range D) Current E) Upcoming Answer: A Explanation: Intermediate range: monthly or quarterly plans for the next 6 to 18 months. Here, capacity may be varied by such alternatives as hiring, layoffs, new tools, minor equipment purchases, and subcontracting. Difficulty: 2 Medium Topic: Capacity Management in Operations and Supply Chain Management Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) Capacity planning involving acquisition or disposal of fixed assets such as buildings, equipment or facilities is considered as which one of the following planning horizons? A) Intermediate-range B) Long-range C) Short-range D) Current E) Upcoming Answer: B Explanation: Long range: greater than one year. Where productive resources (such as buildings, equipment, or facilities) take a long time to acquire or dispose of, long-range capacity planning requires top management participation and approval. Difficulty: 2 Medium Topic: Capacity Management in Operations and Supply Chain Management Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

109

43) If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units, which of the following is the capacity utilization rate? A) 0.75 B) 1.00 C) 1.33 D) 2.33 E) 300 Answer: A Explanation: 300 units of output divided by 400 units best operating level = 0.75 Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 44) If the actual output of a piece of equipment during an hour is 500 units and its best operating level is at a rate of 400 units per hour, which of the following is the capacity utilization rate? A) 0.75 B) 1.00 C) 1.25 D) 1.33 E) 100 Answer: C Explanation: Capacity utilization rate: 500 units / 400 units best operating level = 1/25. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

110

45) If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units, which of the following is the capacity cushion? A) 25 percent B) 100 units per hour C) 75 percent D) 125 percent E) 133 percent Answer: B Explanation: A capacity cushion is an amount of capacity in excess of expected demand Difficulty: 1 Easy Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 46) The capacity focus concept can be put into practice through a mechanism called which of the following? A) Best operating level (BOL) B) Plant within a plant (PWP) C) Total quality management (TQM) D) Capacity utilization rate (CUR) E) Zero-changeover-time (ZXT) Answer: B Explanation: The capacity focus concept can be operationalized through the mechanism of plant within a plant (PWP). Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

111

47) The way to build in greater flexibility in your workers is to do which of the following? A) Pay higher wages to motivate a willingness to do a variety to tasks B) Provide a broader range of training C) Provide a wide variety of technology to augment workers skills D) Institute a "pay for skills" program E) Use part-time employees with specialized skills as needed Answer: B Explanation: Flexible workers have multiple skills and the ability to switch easily from one kind of task to another. They require broader training than specialized workers. Difficulty: 1 Easy Topic: Capacity Planning Concepts Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) When deciding to add capacity to a factory which of the following need not be considered? A) Maintaining system balance B) The frequency of capacity additions C) Use of external capacity D) Immediate product demand E) Availability of raw materials Answer: D Explanation: Many issues must be considered when adding or decreasing capacity. Three important ones are maintaining system balance, frequency of capacity additions or reductions, and the use of external capacity. In many cases, the size of a plant may be influenced by factors other than the internal equipment, labor, and other capital expenditures. A major factor may be the cost to transport raw materials Difficulty: 1 Easy Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

112

49) Which of the following is not a step used in determining production capacity requirements? A) Forecasting to predict product sales B) Forecasting raw material usage C) Projecting availability of labor D) Calculating equipment and labor needs E) Projecting equipment availability Answer: B Explanation: Forecasting raw material usage is not a step used in determining production capacity requirements. Difficulty: 1 Easy Topic: Capacity Planning Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) Which of the following models uses a schematic model of the sequence of steps in a problem and the conditions and consequences of each step? A) Probability indexing B) Johnson's sequencing rule C) Decision trees D) Activity System Maps E) Decision mapping Answer: C Explanation: A decision tree is a schematic model of the sequence of steps in a problem and the conditions and consequences of each step. Difficulty: 1 Easy Topic: Using Decision Trees to Evaluate Capacity Alternatives Learning Objective: 04-03 Evaluate capacity alternatives using decision trees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

113

51) Compared with a service operation, a manufacturing operation's capacity is which of the following? A) More dependent on time and location B) Subject to more volatile demand fluctuations C) Utilization more directly impacts quality D) Demand can be smoothed by inventory policies E) More capable of reacting to demand fluctuations Answer: D Explanation: Service capacity is more time – and location-dependent, (than manufacturing capacity) it is subject to more volatile demand fluctuations, and utilization directly impacts service quality. Also, unlike goods, services cannot be stored for later use. Difficulty: 1 Easy Topic: Planning Service Capacity Learning Objective: 04-04 Compare capacity planning in services to capacity planning in manufacturing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) At a decision point in a decision tree, which machine would you select when trying to maximize payoff when the anticipated benefit of selecting machine A is $45,000 with a probability of 90%; the expected benefit of selecting machine B is $80,000 with a probability of 50% and the expected benefit of selecting machine C is $60,000 with a probability of 75%? A) Machine A B) Machine B C) Machine C D) You would be indifferent between machines A and C E) You would be indifferent between machines A and B Answer: C Explanation: EMV of Machine A = 0.9 x 45,000 = 40,500; EMV of Machine B = 0.5 x $80,000 = $40,000; and EMV of Machine C = 0.75 x 60,000 = $45,000. Since $45,000>$40,500>$40,000 you would select Machine C. Difficulty: 2 Medium Topic: Using Decision Trees to Evaluate Capacity Alternatives Learning Objective: 04-03 Evaluate capacity alternatives using decision trees. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

114

53) What is an important difference between capacity planning in services as contrasted to capacity planning in manufacturing operations? A) Time B) Location C) Demand volatility D) Utilization impacts service quality E) All of these Answer: E Explanation: Although capacity planning in services is subject to many of the same issues as manufacturing capacity planning, and facility sizing can be done in much the same way, there are several important differences. Service capacity is more time and location dependent, it is subject to more volatile demand fluctuations, and utilization directly impacts service quality. Difficulty: 1 Easy Topic: Planning Service Capacity Learning Objective: 04-04 Compare capacity planning in services to capacity planning in manufacturing. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 54) Capacity planning involving consideration of production scheduling and inventory position is characterized by which one of the following time durations? A) Intermediate-range B) Long-range C) Short-range D) Current E) Upcoming Answer: C Explanation: Short range: less than one month. This is tied into the daily or weekly scheduling process and involves making adjustments to eliminate the variance between planned and actual output. Difficulty: 1 Easy Topic: Capacity Management in Operations and Supply Chain Management Learning Objective: 04-01 Explain what capacity management is and why it is strategically important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

115

55) Planning service capacity involves consideration of the mean arrival rate and the mean service rate. When the mean arrival rate exceeds or gets too close to the mean service rate the quality of the service declines. The operating point is the ratio of mean service rate to mean arrival rate. According to the text, what is the best operating point for the typical service operation? A) 120% B) 100% C) 90% D) 70% E) 57% Answer: D Explanation: The best operating point is near 70 percent of the maximum capacity. This is enough to keep servers busy but allows enough time to serve customers individually and keep enough capacity in reserve so as not to create too many managerial headaches Difficulty: 2 Medium Topic: Planning Service Capacity Learning Objective: 04-04 Compare capacity planning in services to capacity planning in manufacturing. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 56) The optimal utilization rate of a service operation is context specific. Planning for low utilization rates is appropriate when both the degree of uncertainty and the stakes are high as in emergency response services. Which of the following services should plan for a high utilization rate? A) The fire department B) An expensive restaurant C) A hospital ambulance service D) A stage performance E) A customer help line Answer: D Explanation: Answers A, B, C and E are eliminated because service quality declines as utilization nears 100%. All sports teams like sellouts, not only because of the virtually 100 percent contribution margin of each customer, but because a full house creates an atmosphere that pleases customers, motivates the home team to perform better, and boosts future ticket sales. Stage performances share this phenomenon. Difficulty: 1 Easy Topic: Planning Service Capacity Learning Objective: 04-04 Compare capacity planning in services to capacity planning in manufacturing. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 57) In designing a general service facility, capacity should be such that the target rate of service utilization (ρ), in order to get the best general-purpose design, should be 116

A) less than 0.6 (or 60%), so that your system would be within the zone of service with maximum possible utilization within that. B) more than 0.6 (or 60%) so that your system would have a good utilization. C) about 0.7 (70%) so that your system would be in the zone of service with maximum possible utilization within that. D) more than 1.0 (100%) so that the servers are fully utilized, even if the customers had to wait a little. E) between 0.9 (90%) and 1.0 (100%) so that the utilization of the system is ideal. Answer: C Explanation: For most general service operations, rate of service utilization (ρ) should be about 0.7 for maximum utilization without sacrificing customer service. Above 0.7, congestion builds up. Above 1.0 there will be infinite queue. O.6 or less may be less than ideal. Exhibit 4.6.

Difficulty: 2 Medium Topic: Planning Service Capacity Learning Objective: 04-04 Compare capacity planning in services to capacity planning in manufacturing. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

117

58) Precise capacity design or the rate of service utilization (ρ), is application specific. A) It could be close to 100% for a sports arena. B) It could be as low as 0.5 for hospital emergency room. C) As the degree of uncertainty in demand increases, higher ρ may be appropriate. D) All of the above choices are correct. E) Both it could be close to 100% for a sports arena and it could be as low as 0.5 for hospital emergency room. Answer: A Explanation: See discussion following Exhibit 4.6. As uncertainty of demand increases ρ should be lower.

118

59) In a decision tree problem involving capacity planning, there was a random outcome node with three random outcomes (A,B, and C) which followed a decision node. The probabilities for A, B and C: P(A)=0.4, P(B) = 0.6 and P(C) = 0.2. Payoff following A,B and C respectively are $10000, $5000 and $2000. Expected value of that random outcome node is: A) $7400 B) $7000 C) $17000 D) Cannot be determined since there is something wrong with the data given. E) $5666 Answer: D Explanation: Since the probabilities of a random outcome node should add up to 1.0 and in this example , it adds up to 1.2, there is something wrong with the given problem data. Difficulty: 2 Medium Topic: Using Decision Trees to Evaluate Capacity Alternatives Learning Objective: 04-03 Evaluate capacity alternatives using decision trees. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 5 Projects 1) Project management can be defined as planning, directing, and controlling resources to meet the technical, cost, and time constraints of the project. Answer: TRUE Explanation: Project management can be defined as planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of the project. Difficulty: 1 Easy Topic: What Is Project Management? Learning Objective: 05-01 Explain what projects are and how projects are organized. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) A project may be defined as a series of related jobs directed toward some major output and requiring a significant period of time to perform. Answer: TRUE Explanation: A project may be defined as a series of related jobs usually directed toward some major output and requiring a significant period of time to perform. Difficulty: 1 Easy Topic: What Is Project Management? Learning Objective: 05-01 Explain what projects are and how projects are organized. Bloom's: Remember AACSB: Reflective Thinking 119

Accessibility: Keyboard Navigation 3) The second step in managing a project is writing the statement of work. Answer: FALSE Explanation: A project starts out as a statement of work Difficulty: 1 Easy Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

120

4) An event unit package is a subdivision of a project. Answer: FALSE Explanation: There is no such item as an event unit package described in the text. Difficulty: 2 Medium Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Complex projects are often subdivided into a series of tasks that are typically configured to be not longer than several months in duration. Answer: TRUE Explanation: A task is a subdivision of a project. It is usually not longer than several months in duration and is performed by one group or organization. Difficulty: 1 Easy Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) A work breakdown structure is used in project management but it is not used when the critical path method is involved. Answer: FALSE Explanation: Activities are identified as part of the work breakdown structure. Activities are also the essence of the Critical Path Method. Hence, the work breakdown structure is used when the critical path method is involved. Difficulty: 2 Medium Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Create AACSB: Analytical Thinking Accessibility: Keyboard Navigation

121

7) The fact that organizations are flattening is one of the reasons that project management is important. Answer: TRUE Explanation: As organizations flatten (through reengineering, downsizing, outsourcing), more will depend on projects and project leaders to get work done, work that previously was handled within departments. Difficulty: 1 Easy Topic: What Is Project Management? Learning Objective: 05-01 Explain what projects are and how projects are organized. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) The Gantt chart is an example of a project control chart. Answer: TRUE Explanation: Gantt charts, sometimes referred to as bar charts, show both the amount of time involved and the sequence in which activities can be performed. Difficulty: 2 Medium Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) Upper level management must decide between pure, functional, and matrix structures as ways to organize projects. Answer: TRUE Explanation: Before the project starts, senior management must decide which of three organizational structures will be used to tie the project to the parent firm: pure project, functional project, or matrix project. Difficulty: 2 Medium Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

122

10) One of the disadvantages of a pure project organizational structure is that the project manager has full authority over the project. Answer: FALSE Explanation: The project manager having full authority over the project is listed as an advantage in the text. Difficulty: 2 Medium Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) One of the advantages of a functional project organizational structure is that a team member can work on several projects. Answer: TRUE Explanation: That a team member can work on several projects in a functional organizational structure is listed as an advantage in the text. Difficulty: 1 Easy Topic: Structuring Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) A matrix project attempts to blend properties of functional and pure project structures. Answer: TRUE Explanation: The classic specialized organizational form, "the matrix project," attempts to blend properties of functional and pure project structures. Difficulty: 1 Easy Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

123

13) A matrix project structure is often referred to as a "skunkworks." Answer: FALSE Explanation: A pure project is nicknamed skunkworks. Difficulty: 2 Medium Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) A disadvantage of a matrix project organizational structure is that a project manager is held responsible for successful completion of the project. Answer: FALSE Explanation: A project manager is held responsible for successful completion of the project is listed as an advantage of a matrix organizational structure. Difficulty: 1 Easy Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) The critical path of activities in a project is the sequence of activities that form the shortest chain in a project network of activities. Answer: FALSE Explanation: The critical path of activities in a project is the sequence of activities that form the longest chain in terms of their time to complete. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

124

16) CPM is an abbreviation for critical path method. Answer: TRUE Explanation: CPM is defined as an abbreviation for critical path method in the text. Difficulty: 1 Easy Topic: Network-Planning Models Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) In CPM the late start time estimate is the latest time you can start an activity and still keep the entire project on schedule. Answer: TRUE Explanation: The late start and late finish are the latest times activities can start and finish without delaying the project. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) The critical path in a project is that sequence of activities that consume the longest amount of time in a project network of activities. Answer: TRUE Explanation: The critical path of activities in a project is the sequence of activities that form the longest chain in terms of their time to complete. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

125

19) The critical path in a CPM analysis is always the shortest path through the network. Answer: FALSE Explanation: The critical path of activities in a project is the sequence of activities that form the longest chain in terms of their time to complete. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Slack activity time is the difference between the early start and the late finish of a project activity time. Answer: FALSE Explanation: The difference between the late start time and early start time is the slack time. Difficulty: 1 Easy Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 21) In a CPM analysis if you subtract the late finish from the early finish the result is the activity's slack time. Answer: FALSE Explanation: The difference between the late start time and early start time is the slack time. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

126

22) In a CPM analysis if you subtract the early start from the late start the result is the activity's slack time. Answer: TRUE Explanation: The difference between the late start time and early start time is the slack time. Difficulty: 1 Easy Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) The critical path in a CPM analysis is found by locating the activities times with zero slack. Answer: TRUE Explanation: The critical path is the longest sequence of connected activities through the network and is defined as the path with zero slack time. Difficulty: 1 Easy Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Calculating the early start and early finish times for each activity in a CPM analysis does not provide any useful information. Answer: FALSE Explanation: One motivation for using a late start schedule is that savings are realized by postponing purchases of materials, the use of labor, and other costs until necessary. Using an early start schedule allows handling unforeseen circumstances on non-critical activities without disrupting critical path activities. Difficulty: 1 Easy Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

127

25) The project indirect costs associated with a project include overhead, facilities, and resource opportunity costs. Answer: TRUE Explanation: The costs associated with sustaining the project are termed project indirect costs: overhead, facilities, and resource opportunity costs. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) The activity direct costs associated with a project might include giving workers overtime to complete a project in less than the expected time. Answer: TRUE Explanation: The costs associated with expediting activities are termed activity direct costs and add to the project direct cost. Some may be worker-related, such as overtime work, hiring more workers, and transferring workers from other jobs; others are resource-related, such as buying or leasing additional or more efficient equipment and drawing on additional support facilities. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 27) You are managing a project and need to cut the cost of the project. You decide to transfer workers to another job to cut the project's costs. Costs associated with transferring the workers are an example of project indirect costs. Answer: FALSE Explanation: The costs associated with expediting activities are termed activity direct costs and add to the project direct cost. Some may be worker-related, such as overtime work, hiring more workers, and transferring workers from other jobs; others are resource-related, such as buying or leasing additional or more efficient equipment and drawing on additional support facilities. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) Using the Time-Cost CPM model, the crash time is the shortest possible time allowed for each 128

activity in the project. Answer: TRUE Explanation: Crash time (CT): is defined as the shortest possible activity time. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) In the Time-Cost CPM model, cost is assumed to be a linear function of time. Answer: TRUE Explanation: We assume a linear relationship between time and cost. This assumption is common in practice and helps us derive the cost per day to expedite. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) When reducing the planned duration of a project using the Time-Cost CPM model we select the activity to crash by determining the cost of each alternative and selecting the one whose cost is the greatest. Answer: FALSE Explanation: The easiest way to proceed is to start with the normal schedule, find the critical path, and reduce the path time by one day using the lowest-cost activity. Difficulty: 1 Easy Topic: Network-Planning Models Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

129

31) One of the assumptions made using CPM is that project activities can be identified with clear beginning and ending points. Answer: TRUE Explanation: From the text, we are assuming that the activity times are known. Hence each activity must have clear beginning and ending points. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) One of the assumptions made using CPM is that project activity sequence relationships can be specified and networked. Answer: TRUE Explanation: Determine the required sequence of activities and construct a network reflecting the precedence relationships. Difficulty: 1 Easy Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) Project management software available today combines CPM and other scheduling aids, like Gantt charting, to aid in tracking progress of project completion. Answer: TRUE Explanation: See the highlighted box on in the text "Project Management Information Systems" Difficulty: 1 Easy Topic: Project Management Information systems Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

130

34) A project milestone is a specific event to be reached by a particular point in time. Answer: TRUE Explanation: Specific events to be reached at points in time are called project milestones. Difficulty: 2 Medium Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Breakthrough projects are those that provide fundamental improvements to existing products. Answer: FALSE Explanation: Breakthrough projects involve major changes that create entirely new markets. Platform projects are those that provide fundamental improvements to existing products. Difficulty: 1 Easy Topic: What Is Project Management? Learning Objective: 05-01 Explain what projects are and how projects are organized. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) Derivative projects are those which address incremental changes to products or processes. Answer: TRUE Explanation: Derivative projects are those that produce incremental changes such as new product packaging or no-frills versions. Difficulty: 1 Easy Topic: What Is Project Management? Learning Objective: 05-01 Explain what projects are and how projects are organized. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) Earned value management (EVM) is a technique for measuring project progress in an objective manner. Answer: TRUE Explanation: EVM is a technique for measuring project progress in an objective manner. Difficulty: 1 Easy Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) The valuations in an Earned Value Management analysis must be either profits or revenue. 131

Answer: FALSE Explanation: The valuations could be based on either a value measure (revenue or profit) or a cost measure. Difficulty: 1 Easy Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) Earned Value Management (EVM) has the capability to combine measurements of scope, schedule, and cost in a project. Answer: TRUE Explanation: EVM has the ability to combine measurements of scope, schedule, and cost in a project. Difficulty: 1 Easy Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) A project can be subdivided into which of the following? A) Job orders B) Sub-jobs C) Work packages D) Sub-paths E) Events and decisions Answer: C Difficulty: 1 Easy Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

132

41) A project starts out as which of the following? A) A Statement of Work B) Critical Path Method (CPM) C) A series of milestones D) A Gantt chart E) A latest-start-time estimate Answer: A Explanation: A project starts out as a statement of work. Difficulty: 1 Easy Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) What is a work breakdown structure? A) A list of the activities making up the higher levels of the project B) A definition of the hierarchy of project tasks, subtasks, and work packages C) A depiction of the activities making up a project D) A Gantt chart E) A structure that is incompatible with the Critical Path Method Answer: B Explanation: The work breakdown structure defines the hierarchy of project tasks, subtasks, and work packages. Difficulty: 2 Medium Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

133

43) In a Gantt chart the horizontal axis is usually which of the following? A) Activities B) Cost C) Profit D) Time E) Milestones Answer: D Explanation: See exhibit 5.4a.

Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

134

44) Which of the following is a graphic project report used in project management? A) Project proposal B) Approved project plan C) Humphrey chart D) Equipment and supplies chart E) Cost and performance tracking schedule Answer: E Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) An advantage of a pure project where self-contained teams work full time on a project is which of the following? A) Team members can work on several projects B) Functional area is a "home" after the project is completed C) There are duplicated resources D) Lines of communication are shortened E) Overall organizational policies and goals can be ignored Answer: D Difficulty: 2 Medium Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

135

46) Some of the advantages of a functional project where the project is housed in a functional division include which of the following? A) The project manager has full authority over the project B) Team pride, motivation, and commitment are high C) A team member can work on several projects D) Needs of the client are secondary E) None of these Answer: C Explanation: An advantage of the functional project structure listed in the text is that a team member can work on several projects. Difficulty: 1 Easy Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) A series of projects that are organized in such a way that each project utilizes people from different functional areas is using which of the following organizational structures? A) Matrix project B) Integrated Task Force C) Functional project D) Pure project E) Cross-functional flexible team Answer: A Explanation: The matrix project utilizes people from different functional areas. Difficulty: 1 Easy Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

136

48) You are looking at a chart that has the terms BCWS, BCWP, and AC indicating lines on the chart. What kind of chart are you looking at? A) Gantt Chart B) PERT Chart C) Bar/Milestone Chart D) Total Program Cost Breakdown E) EVM Chart Answer: E Difficulty: 1 Easy Topic: Network-Planning Models Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) PERT is an abbreviation for which of the following methodologies? A) Product Evaluation, Result, and Treatment B) Programming and Evaluation Realization Technology C) Program Evaluation and Review Technique D) Process Evaluation and Review Technology E) It is a name, not an abbreviation for anything Answer: C Difficulty: 1 Easy Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

137

50) You have just been assigned to oversee a series of projects. Functional areas will loan you personnel for each project and separate project managers will be responsible for separate projects. These project managers will report to you. Which project management structure is being used? A) Pure Project B) Task force C) Matrix Project D) Functional Project E) PERT Answer: C Explanation: The matrix form: projects borrow resources from functional areas. Difficulty: 3 Hard Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) You have been placed in charge of a large project. Shortened communication lines are required to ensure quick resolution of problems as they arise. You recognize that the project is going to take a lot of time and require a lot of team pride, motivation, and commitment by all members. Which project management structure should you use in this situation? A) Pure Project B) Task force C) Matrix Project D) Functional Project E) PERT Answer: A Difficulty: 3 Hard Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

138

52) A simple project listing of five activities and their respective time estimates are presented below:

Activity A B C D E

Immediate Predecessor None A A B and C D

Time in Days 1 2 1 3 2

Using CPM, which activities make up the critical path? A) A, C, D, E B) A, B, D, E C) A, C, B, D, E D) A, D, E E) None of these Answer: B Explanation: There are two paths: A, B, D, E and A, C, D, E. ABDE will take 8 days while ACDE will take 7 days. ABDE, therefore, is the critical path for this project. Activity C is off the critical path because there is one day of slack in that activity. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

139

53) A simple project listing of five activities, their predecessors, and their respective time estimates are presented below:

Activity A B C D E

Immediate Predecessor None A A B and C D

Time in Days 3 2 1 3 4

Using CPM, what is the Latest Finish Time for the last activity in this project (i.e., the total time to complete the project)? A) 10 days B) 7 days C) 8 days D) 12 days E) 9 days Answer: D Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

140

54) A simple project listing of five activities, their predecessors, and their respective time estimates are presented below:

Activity A B C D E

Immediate Predecessor None A A B and C D

Time in Days 2 2 1 3 1

Using the CPM, which activities have slack in this project? (Select all that apply.) A) A B) B C) C D) D Answer: C Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

141

55) A company must perform a maintenance project consisting of seven activities. The activities, their predecessors, and their respective time estimates are presented below:

Activity Break down both machines Clean machine 1 Clean machine 2 Re-set machine 1 Re-set machine 2 Re-calibrate both machines Final test

Designation Immediate Predecessor Time in Days A None 3 B A 3 C A 3 D B 4 E C 2 F D and E 1 G F 2

Using CPM, which activities make up the critical path? A) A, B, D, F, G B) A, C, E, F, G C) A, C, B, F, E D) A, D, E E) None of these Answer: A Explanation: There are only two paths, ABDFG & ACEFG. ABDFG takes 13 days while ACEFG takes 11 days. ABDFG (answer A) is the critical path. Difficulty: 3 Hard Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

142

56) A company must perform a maintenance project consisting of seven activities. The activities, their predecessors, and their respective time estimates are presented below:

Activity Break down both machines Clean machine 1 Clean machine 2 Re-set machine 1 Re-set machine 2 Re-calibrate both machines Final test

Designation Immediate Predecessor Time in Days A None 3 B A 3 C A 3 D B 1 E C 2 F D and E 1 G F 2

Using CPM, what is the Latest Finish Time for the last activity in this project (i.e., the total time to complete the project)? A) 9 days B) 10 days C) 11 days D) 12 days E) 13 days Answer: C Explanation: There are two paths, ABDFG & ACEFG. ABDFG takes 10 days while ACEFG takes 11 days. ACEFG is the critical path and C) 11 days is the correct answer. Difficulty: 3 Hard Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

143

57) A company must perform a maintenance project consisting of seven activities. The activities, their predecessors, and their respective time estimates are presented below:

Activity Break down both machines Clean machine 1 Clean machine 2 Re-set machine 1 Re-set machine 2 Re-calibrate both machines Final test

Designation Immediate Predecessor Time in Days A None 3 B A 3 C A 3 D B 4 E C 2 F D and E 1 G F 1

Using CPM, which activities have slack in this project? A) A, B, C B) B, D C) Only C D) C, E E) F, G Answer: D Explanation: There are two paths, ABDFG & ACEFG. ABDFG takes 12 days while ACEFG takes 10 days. ABDFG is the critical path. Activities C & E have 2 days of slack time in this project. The correct answers are C &E. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

144

58) For an activity in a CPM analysis, the early start time is 8 and the late start time is 10. Which of the following statements is true? A) The Late Finish is 12 B) The Early Finish is 10 C) The slack for this activity is 2 D) The duration of this activity is 2 E) The activity is on the critical path Answer: C Explanation: The difference between the late start time and early start time is the slack time. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 59) For an activity in a CPM analysis the early finish time is 20 and the late finish time is 20. Which of the following statements is true? A) The activity's late start must happen before its early start B) The activity is on the critical path C) The slack for this activity is 20 D) The duration of this task is zero E) The duration of this task is 20 Answer: B Explanation: The critical path is the longest sequence of connected activities through the network and is defined as the path with zero slack time. Since the critical path has zero slack time each activity on the path must have zero slack time. It follows that an activity with zero slack time (e.g., early start = late start = zero) is on the critical path. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

145

60) A listing of immediate predecessor activities is important information in a CPM analysis for which of the following reasons? A) It specifies the relationships in the CPM network of activities B) It provides useful timing information C) It includes cost information D) It is the probability information required in the final step of CPM E) None of these Answer: A Explanation: The immediate predecessors are the activities that need to be completed immediately before an activity. They therefore specify relationships in the CPM network. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) You have just performed a CPM analysis and have found that more than one path through the project network has zero slack values. What can you conclude? A) You have incorrectly performed the analysis B) You have multiple critical paths C) Only one path is optimal D) More than one path is optimal E) The project will not be completed by the desired time Answer: B Explanation: It is possible and it often happens that there are multiple paths of the same length through the network so there are multiple critical paths. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Evaluate AACSB: Analytical Thinking Accessibility: Keyboard Navigation

146

62) You have the following time and cost information below for use in a Time-Cost CPM Scheduling model. What are the three costs per unit of time to expedite each activity?

Activity A B C

Normal Time 3 5 4

Crash Time 2 3 1

Normal Cost $ 400 $ 600 $ 300

A) A = $300, B = $200, C = $300 B) A = $100, B = $200, C = $400 C) A = $200, B = $200, C = $200 D) A = $100, B = $400, C = $300 E) A = $200, B = $300, C = $400

147

Crash Cost $ 600 $ 1200 $ 1500

Answer: E Explanation: Using (Crash cost − Normal cost) / (Normal time – Crash time) = Cost per unit of time, A = (600 − 400) / (3 − 2) = $200; B = (1200 − 600) / (5 − 3) = $300; and C = (1500 − 300) / (4 − 1) = $400. The correct answer is E. (See exhibit 5.11)

Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

148

63) Below are the data for a Time-Cost CPM Scheduling model analysis. The time is in days and the costs include both direct and indirect costs. What are the total time of this project and total normal cost?

Activity Immediate Predecessor Normal Time Crash Time A None 3 2 B A 4 3 C A 1 1 D B and C 3 2 E D 2 1

Normal Cost $ 200 $ 300 $ 200 $ 500 $ 500

Crash Cost $ 400 $ 600 $ 200 $ 550 $ 900

A) Total time is 13 days, total cost is $1200 B) Total time is 12 days, total cost is $1700 C) Total time is 11 days, total cost is $1600 D) Total time is 10 days, total cost is $1750 E) Total time is 9 days, total cost is $1700 Answer: B Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

149

64) Below are the data for a Time-Cost CPM Scheduling model analysis. The time is in days and the costs include both direct and indirect costs. If you crash this project to reduce the total time by one day what is the total time of the project and total cost?

Normal Activity Immediate Predecessor Normal Time Crash Time Cost A None 3 2 $ 200 B A 4 3 $ 300 C A 1 1 $ 300 D B and C 3 2 $ 500 E D 2 1 $ 500

Crash Cost $ 400 $ 600 $ 300 $ 550 $ 900

A) Total time is 13 days, total cost is $1500 B) Total time is 12 days, total cost is $2000 C) Total time is 12 days, total cost is $2300 D) Total time is 11 days, total cost is $1850 E) Total time is 11 days, total cost is $2350 Answer: D Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

150

65) Below are the data for a Time-Cost CPM Scheduling analysis. The time is in days and the costs include both direct and indirect costs. If you crash this project to reduce the total time by four days, what is the total time of the project and total cost?

Normal Activity Immediate Predecessor Normal Time Crash Time Cost A None 3 2 $ 200 B A 4 3 $ 300 C A 1 1 $ 300 D B and C 3 2 $ 500 E D 2 1 $ 500

Crash Cost $ 400 $ 600 $ 300 $ 550 $ 900

A) Total time is 10 days, total cost is $2,500 B) Total time is 9 days, total cost is $2,300 C) Total time is 8 days, total cost is $2,750 D) Total time is 8 days, total cost is $14,800 E) Total time is 9 days, total cost is $2350 Answer: C Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

151

66) You have collected the data for a Time-Cost CPM Scheduling model analysis. The time is in days and the project "direct costs" are given below. The indirect costs for the project are determined on a daily duration basis. If the project lasts 16 days the total indirect costs are $400, 15 days they will be $250, 14 days they will be $200, and 13 days they will be $100. If you crash this project by one day what is the total (i.e., direct and indirect) project cost?

Immediate Activity Predecessor A None B A C A D B and C E D F E G F

Normal Time 3 3 1 3 2 3 2

Crash Time 2 3 1 2 1 3 2

Normal Crash Cost(Direct) Cost(Direct) $ 300 $ 400 $ 100 $ 100 $ 200 $ 200 $ 400 $ 550 $ 500 $ 900 $ 200 $ 200 $ 100 $ 100

A) $2,150 B) $2,300 C) $2,400 D) $2,450 E) $2,500 Answer: A Difficulty: 3 Hard Topic: Network-Planning Models Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

152

67) You have collected the data for a Time-Cost CPM Scheduling model analysis. The time is in days and the project "direct costs" are given below. The indirect costs for the project are determined on a daily duration basis. If the project lasts 16 days the total indirect costs are $400, 15 days they will be $250, 14 days they will be $200, and 13 days they will be $100. At what day do we achieve the lowest total project cost (i.e., direct plus indirect costs)?

Immediate Activity Predecessor A None B A C A D B and C E D F E G F

Normal Time 3 3 1 3 2 3 2

Crash Time 2 3 1 2 1 3 2

Normal Crash Cost(Direct) Cost(Direct) $ 300 $ 400 $ 100 $ 100 $ 200 $ 200 $ 400 $ 550 $ 500 $ 900 $ 200 $ 200 $ 100 $ 100

A) 16 days B) 15 days C) 14 days D) 13 days E) 12 days Answer: B Difficulty: 3 Hard Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

153

68) You know when you have arrived at the optimal solution in using the Time-Cost CPM Scheduling model analysis when what happens? A) You have found the critical path B) You have run out of crash time C) You no longer have a linear relationship with costs D) You have reached the minimum total cost E) You have run out of crash costs Answer: D Explanation: See exhibit 5.12.

Difficulty: 2 Medium Topic: Time cost tradeoff Learning Objective: 05-04 Exemplify how network-planning models and earned value management are implemented in commercial software packages. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

154

69) In CPM analysis it is generally expected that the relationship between activity direct costs and project indirect costs will be which of the following? A) Positively related B) Optimally related C) Negatively related D) Not related E) Fractionally related Answer: C Explanation: Activity direct costs and project indirect costs are opposing costs dependent on time. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) In a project analysis using three time estimates with more than one critical path existing, how does the project manager decide which variances to use in arriving at the probability of meeting the project due date? A) The project manager averages the variances and uses that. B) The project manager uses the smallest variance in order to get the highest probability of on-time completion. C) The project manager uses the variances considered most correct. D) The project manager uses the largest variances in order to understate the probability of on-time completion. E) The project manager uses the most likely estimate plus the amount of slack time in the project. Answer: D Explanation: A conservative approach dictates using the critical path with the largest total variance to focus management's attention on the activities most likely to exhibit broad variations. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

155

71) What does "EVM" stand for? A) Extra Value Materials—premium quality raw materials at the project site. B) Enterprise Vacation Matrix—A chart indicating team members planned vacation absences C) Earned Value Management–a technique for measuring project progress objectively. D) Early Vision Management—An technique used in early project planning meetings for activities that set expectations to highlight and avoid "scope creep." E) External Variance Measurement—identifying the degree to which project time and cost variances were due to forces and issues uncontrollable by the project manager. Answer: C Difficulty: 2 Medium Topic: Managing Projects Learning Objective: 05-02 Evaluate projects using earned value management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) The major goal of critical path analysis is to: A) Estimate the project's completion date B) Identify and manage the critical path C) Determine the latest feasible start date D) Provide a visual aid that indicates precedent and antecedent relationships E) To determine when each activity in the project should be scheduled Answer: E Difficulty: 1 Easy Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

156

73) You have just used the network planning model and found the critical path length is 30 days and the variance of the critical path is 25 days. The probability that the project will be completed in 33 days or less is equal to (2 decimal accuracy) A) 0.73 B) 0.55 C) 0.12 D) 0.27 E) 0.60 Answer: A Explanation: Note that variance of 25 implies that the s.d. is sqrt(25) = 5. Z value corresponding to 33 is equal to Z = [(33 − 30)/5] = 0.6, which leads to the probability of 0.73. Difficulty: 2 Medium Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Evaluate AACSB: Analytical Thinking Accessibility: Keyboard Navigation 74) You have just used the network planning model and found the critical path length is 60 days and there are two critical paths. The standard deviation of the first critical path is 10 days and the s.d. of the second critical path is 15 days. The probability that the project will be completed in 70 days or less is equal to (2 decimal accuracy) A) 0.84 B) 0.25 C) 0.16 D) 0.75 E) 0.66 Answer: D Explanation: Note that standard deviation of the critical path is the larger of the two standard deviations, namely 15. Z value corresponding to 70 is equal to Z = [(70 − 60)/15] = 0.6667, which leads to the probability of 0.75. Difficulty: 3 Hard Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Evaluate AACSB: Analytical Thinking Accessibility: Keyboard Navigation

157

75) You have just used the network planning model for a county road resurfacing project and found the critical path length is 40 days and the standard deviation of the critical path is 10 days. Suppose you want to pick a time (in days) within which you will complete the project with 90% confidence level, what should be that time (in days and round to the nearest whole number.) A) 40 B) 13 C) 45 D) 29 E) 53 Answer: E Explanation: First find the Z value corresponding to 90% confidence level, (using =normsinv(.9) function) which will be 1.2815. Time (X) = mu + Z* sigma, that is 40 + 1.2851*10 = 52.81, rounded to 53 days. Difficulty: 3 Hard Topic: Network-Planning Models Learning Objective: 05-03 Analyze projects using network-planning models. Bloom's: Evaluate AACSB: Analytical Thinking Accessibility: Keyboard Navigation Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 6 Manufacturing Processes 1) Process selection refers to the strategic decision of choosing the volume of output to produce in a manufacturing facility depending upon the way that facility produces. Answer: FALSE Explanation: Process selection refers to the strategic decision of selecting which kind of production processes to use to produce a product or provide a service. Difficulty: 1 Easy Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 2) Process selection refers to the strategic decision of selecting which kind of production processes to use to produce a product or provide a service. Answer: TRUE Explanation: Process selection refers to the strategic decision of selecting which kind of production processes to use to produce a product or provide a service. Difficulty: 1 Easy Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking 158

Accessibility: Keyboard Navigation 3) A continuous process indicates production of discrete parts moving from workstation to workstation at a controlled rate. Answer: FALSE Explanation: A continuous process is similar to an assembly line in that production follows a predetermined sequence of steps, but the flow is continuous such as with liquids, rather than discrete. Difficulty: 2 Medium Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

159

4) One difference between an assembly line process flow and a continuous process flow is that on the assembly line the flow is discrete rather than continuous. Answer: TRUE Explanation: A continuous process is similar to an assembly line in that production follows a predetermined sequence of steps, but the flow is continuous such as with liquids, rather than discrete. Difficulty: 1 Easy Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 5) One trade-off illustrated by the product-process matrix is between flexibility and cost. Answer: TRUE Explanation: To produce nonstandard products at relatively low volumes, workcenters (flexible) should be used. A highly standardized product (low-cost commodity) produced at high volumes should be produced using an assembly line or a continuous process Difficulty: 1 Easy Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 6) The volume requirements for the product are one determinant of the choice of which process structure to select. Answer: TRUE Explanation: Two dimensions (of the product/process matrix, C=

) are shown. The first dimension relates to the volume of a

particular product or group of standardized products. Standardization is shown on the vertical axis and refers to variations in the product that is produced. These variations are measured in terms of geometric differences, material differences, and so on. Standardized products are highly similar from a manufacturing processing point of view, whereas low standardized products require different processes. Difficulty: 1 Easy Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 7) The product-process matrix shows the relationship between process structures and product 160

volume and variety characteristics. Answer: TRUE Explanation: C =

, Product–Process Matrix: Framework

Describing Layout Strategies Difficulty: 1 Easy Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 8) The term "assembly line" refers to progressive assembly linked by some material handling device. Answer: TRUE Explanation: An assembly line is a layout design for the special purpose of building a product by going through a progressive set of steps. The assembly steps are done in areas referred to as "stations," and typically the stations are linked by some form of material handling device. Difficulty: 1 Easy Topic: Designing a Production System Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 9) Work center layouts allocate dissimilar machines into cells to work on products that have dissimilar processing requirements. Answer: FALSE Explanation: A work center layout, sometimes referred to as a job shop, is where similar equipment or functions are grouped together. Difficulty: 1 Easy Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

161

10) A project layout is characterized by a relatively low number of units produced in comparison with process and product layout formats. Answer: TRUE Explanation: C =

, Product–Process Matrix: Framework

Describing Layout Strategies. Difficulty: 1 Easy Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 11) A project layout is characterized by a high degree of task ordering. Answer: TRUE Explanation: In a project layout, a high degree of task ordering is common. Difficulty: 1 Easy Topic: Designing a Production System Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 12) The closer the customer is to the customer order decoupling point the longer it takes the customer to receive the product. Answer: FALSE Explanation: Selection of decoupling points is a strategic decision that determines customer lead times and can greatly impact inventory investment. The closer this point is to the customer, the quicker the customer can be served. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

162

13) The closer the customer is to the customer order decoupling point the more quickly the customer receives the product. Answer: TRUE Explanation: Selection of decoupling points is a strategic decision that determines customer lead times and can greatly impact inventory investment. The closer this point is to the customer, the quicker the customer can be served. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 14) Engineer-to-order firms will work with the customer to design the product, and then make it from purchased materials, parts, and components. Answer: TRUE Explanation: An engineer-to-order firm will work with the customer to design the product, and then make it from purchased materials, parts, and components. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 15) A make-to-order firm will work with the customer to design the product, and then make it from purchased materials, parts, and components. Answer: FALSE Explanation: Firms that make the customer's product from raw materials, parts, and components are make-to-order firms. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

163

16) The time needed to respond to a customer's order is called the customer response time. Answer: FALSE Explanation: The time needed to respond to a customer order is called the lead time Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 17) The focus in the make-to-stock environment is on providing finished goods where and when the customers want them. Answer: TRUE Explanation: The focus in the make-to-stock environment is on providing finished goods where and when the customers want them. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 18) An example of an assemble-to-order firm is Dell Computer. Answer: TRUE Explanation: In the assemble-to-order environment, a primary task is to define a customer's order in terms of alternative components and options since it is these components that are carried in inventory. A good example is the way Dell Computer makes desktop computers Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

164

19) The essential issue in satisfying customers in the make-to-stock environment is to balance the level of finished inventory against the level of service to the customer. Answer: TRUE Explanation: The essential issue in satisfying customers in the make-to-stock environment is to balance the level of finished inventory against the level of service to the customer. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 20) The essential issue in satisfying customers in the make-to-stock environment is to balance the cost of the finished item against the willingness of the consumer to pay for it. Answer: FALSE Explanation: The essential issue in satisfying customers in the make-to-stock environment is to balance the level of finished inventory against the level of service to the customer. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 21) Assembling-to-order means moving the customer order decoupling point from finished goods to components. Answer: TRUE Explanation: Assembling-to-order derives significant advantages from moving the customer order decoupling point from finished goods to components. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

165

22) A high-level map or diagram of a supply chain process can be useful to understand how material flows and where inventory is held. Answer: TRUE Explanation: A high-level map of a supply chain process can be useful to understand how material flows and where inventory is held. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-02 Understand production process mapping and Littles law. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 23) Little's law can be thought of as a relationship between units and time. Answer: TRUE Explanation: We can think of Little's law as a relationship between units and time. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-02 Understand production process mapping and Littles law. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 24) Little's law states that supply chain processes can be regarded as unrelated and thus treated and analyzed separately. Answer: FALSE Explanation: We can think of Little's law as a relationship between units and time. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-02 Understand production process mapping and Littles law. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 25) A process map shows the physical location of the various processes within a supply chain. Answer: FALSE Explanation: Inventory = Throughput Rate × Flow Time, Make-to-Stock Process Map. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-02 Understand production process mapping and Littles law. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 26) Workstation cycle time is the time between successive units coming off the end of the 166

assembly line. Answer: TRUE Explanation: Workstation cycle time is the time between successive units coming off the end of an assembly line. Difficulty: 1 Easy Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 27) The assembly-line balancing procedure determines the precedence relationships of manufacturing tasks. Answer: FALSE Explanation: The assembly-line balancing problem is one of assigning all tasks to a series of workstations so that each workstation has no more than can be done in the workstation cycle time, and so that the unassigned (that is, idle) time across all workstations is minimized. The problem is complicated by the relationships among tasks imposed by product design and process technologies. This is called the precedence relationship, which specifies the order in which tasks must be performed in the assembly process. Difficulty: 2 Medium Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 28) In assembly-line balancing the theoretical minimum number of workstations is found by a ratio of the sum of all task times divided by the cycle time. Answer: TRUE Explanation: Theoretical minimum number of workstations = Sum of all task times / Cycle time Difficulty: 1 Easy Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

167

29) The efficiency of an assembly-line is found by a ratio of the sum of all task times divided by the cycle time. Answer: FALSE Explanation: Efficiency = Sum of task times / No. of workstations X Cycle time. Difficulty: 1 Easy Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 30) For the purposes of assembly-line balancing, the required workstation cycle time is found by dividing production time per day by the required units of output per day. Answer: TRUE Explanation: Workstation cycle time = (Production time per day/Required output per day in units) Difficulty: 1 Easy Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 31) In balancing an assembly line, workstation cycle time has to be less than the time between successive units coming off the end of the line. Answer: FALSE Explanation: Workstation cycle time is defined as the time between successive units coming off the end of an assembly line. Difficulty: 2 Medium Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

168

32) If the sum of the task times required to produce a product is 45 minutes and the cycle time for the same product is 10 minutes. Thus, the theoretical minimum number of workstations is 5 using the assembly-line balancing procedure. Answer: TRUE Explanation: Nt =

: 45 minutes / 10 minutes = 4.5, round up to 5.

Difficulty: 2 Medium Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 33) The first step in balancing an assembly line is to specify the precedence relationships among tasks to be performed on the line. Answer: TRUE Explanation: The steps in balancing an assembly line are straightforward: 1. Specify the sequential relationships among tasks using a precedence diagram. Difficulty: 1 Easy Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 34) The term "assembly line" refers to progressive assembly linked by some material handling device. Answer: TRUE Explanation: An assembly line is a layout design for the special purpose of building a product by going through a progressive set of steps. The assembly steps are done in areas referred to as "stations," and typically the stations are linked by some form of material handling device. Difficulty: 1 Easy Topic: Designing a Production System Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

169

35) If the sum of the task times required to produce a product is 80 minutes and the cycle time for the same product is 15 minutes, the theoretical minimum number of workstations is 8 using the assembly-line balancing procedure. Answer: FALSE Explanation: Nt =

: 80 minutes / 15 minutes = 5.3, round up to 6.

Difficulty: 2 Medium Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 36) In designing a production layout a flexible line layout might have the shape of a "U". Answer: TRUE Explanation: Assembly-line balances frequently result in unequal workstation times. Flexible line layouts are a common way of dealing with this problem. A U-shaped line with work-sharing could help resolve the imbalance. Difficulty: 1 Easy Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

170

37) Using the assembly-line balancing procedure, which of the following is the required cycle time in minutes per unit if the daily production time is 480 minutes and the required daily output is 50 units? A) 0.104 B) 50 C) 9.6 D) 480 E) Cannot be determined from the information above Answer: C Explanation: C =

, 480 minutes / 50 units

= 9.6 minutes per unit. Difficulty: 1 Easy Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 38) Using the assembly-line balancing procedure, which of the following is the required cycle time if the production time in minutes per day is 1,440 and the required output per day in units is 2,000? A) 0.72 B) 1.388 C) 250 D) 500 E) Cannot be determined from the information above Answer: A Explanation: C =

, 1,440 minutes / 2,000 units

= 0.72 minutes per unit. Difficulty: 1 Easy Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

171

39) Using the assembly-line balancing procedure, which of the following is the theoretical minimum number of workstations if the task times for the six tasks that make up the job are 4, 6, 7, 2, 6, and 5 minutes, and the cycle time is 10 minutes? A) 3 B) 5 C) 6 D) 8 E) None of these Answer: A Explanation: Nt =

, (4 + 6 + 7 + 2 + 6 + 5) / 10 = 3.

Difficulty: 1 Easy Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 40) Using the assembly-line balancing procedure, which of the following is the theoretical minimum number of workstations if the task times for the eight tasks that make up the job are 7, 4, 7, 8, 9, 4, 3, and 6 minutes, and the cycle time is 8 minutes? A) 3 B) 5 C) 6 D) 8 E) None of these Answer: C Difficulty: 1 Easy Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

172

41) You have just determined the actual number of workstations that will be used on an assembly line to be 6 using the assembly-line balancing procedure. The cycle time of the line is 5 minutes and the sum of all that tasks required on the line is 25 minutes. Which of the following is the correct value for the resulting line's efficiency? A) 0.500 B) 0.833 C) 0.973 D) 0.990 E) None of these Answer: B Explanation: Efficiency =

, [25 /

(6 × 5)] = 0.833. Difficulty: 2 Medium Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 42) You have just determined the actual number of workstations that will be used on an assembly line to be 8 using the assembly-line balancing procedure. The cycle time of the line is 10 minutes and the sum of all that tasks required on the line is 60 minutes. Which of the following is the correct value for the resulting line's efficiency? A) 0.500 B) 0.650 C) 0.750 D) 0.850 E) None of these Answer: C Explanation: Efficiency =

, [60 /

(8 × 10)] = 0.750. Difficulty: 2 Medium Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

173

43) When balancing an assembly line, which of the following is not a way to reduce the longest task time below the required workstation cycle time? A) Upgrade the equipment B) Assign a roaming helper to support the line C) Split the task between two workstations D) Speed up the assembly line transfer mechanism E) Use a more skilled worker Answer: D Difficulty: 2 Medium Topic: Assembly Line Design Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 44) Which of the following is not a step in developing a manufacturing cell layout? A) Grouping parts into families that follow a common sequence of steps B) Identifying dominant flow patterns of parts families as a basis for location of processes C) Physically grouping machines and processes into cells D) Disposing of left-over machinery and outsourcing ungrouped processes E) None of the above Answer: D Difficulty: 1 Easy Topic: Cells Learning Objective: 06-04 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

174

45) Which of the following is not considered a major work flow structure? A) Work Center B) Project C) Assembly line D) Fabrication E) Continuous Flow Answer: D Explanation: The formats by which a facility is arranged are defined by the general pattern of work flow; there are five basic structures (project, workcenter, manufacturing cell, assembly line, and continuous process). Difficulty: 1 Easy Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 46) A difference between project and continuous flow categories of process flow structures is which two of the following? A) The size and bulk of the product B) Discrete parts moving from workstation to workstation C) Degree of equipment specialization D) Being a "Virtual Factory" E) Profit per unit Answer: A Explanation: In a project layout, the product (by virtue of its bulk or weight) remains in a fixed location. Continuous processes are usually highly automated and, in effect, constitute one integrated machine. Difficulty: 2 Medium Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

175

47) Which of the following is a basic type of process structure? A) Process flow diagram B) Product matrix C) Process matrix D) Workcenter E) Manual assembly Answer: D Explanation: The formats by which a facility is arranged are defined by the general pattern of work flow; there are five basic structures (project, workcenter, manufacturing cell, assembly line, and continuous process). Difficulty: 2 Medium Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 48) Which of the following is not a basic type of process structure? A) Product-process matrix B) Workcenter C) Manufacturing cell D) Assembly line E) Continuous process Answer: A Explanation: The formats by which a facility is arranged are defined by the general pattern of work flow; there are five basic structures (project, workcenter, manufacturing cell, assembly line, and continuous process). Difficulty: 1 Easy Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

176

49) Which of the following basic types of process structures is one which equipment or work processes are arranged according to the progressive steps by which the product is made? A) Project B) Workcenter C) Manufacturing cell D) Assembly line E) Continuous process Answer: D Explanation: An assembly line is where work processes are arranged according to the progressive steps by which the product is made. Difficulty: 1 Easy Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 50) Which of the following basic types of process structures is one which similar equipment or functions are grouped together? A) Project B) Workcenter C) Manufacturing cell D) Assembly line E) Continuous process Answer: B Explanation: A workcenter layout is where similar equipment or functions are grouped together. Difficulty: 1 Easy Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

177

51) The placement of which of the following is not determined by production process organization decisions? A) Departments B) Workgroups C) Workstations D) Machines E) Emergency exits Answer: E Explanation: Emergency exits are determined by safety concerns, not by production process organization decisions. Difficulty: 2 Medium Topic: How Production Processes Are Organized Learning Objective: 06-03 Explain how manufacturing processes are organized. Bloom's: Create AACSB: Analytic Accessibility: Keyboard Navigation 52) According to Little's Law, which of the following ratios is used to find throughput rate? A) Cycle time/Process time B) Throughput time/Process velocity C) Process velocity/Throughput time D) Inventory /Flow time E) Value added time/Process velocity Answer: D Explanation: Simple systems can be analyzed quickly using a principle known as Little's law. Little's law says there is a long-term relationship between the inventory, throughput, and flow time of a production system in steady state. The relationship is: Inventory = Throughput rate × Flow time. Thus, Throughout Rate = Inventory/Flow Time. Difficulty: 3 Hard Topic: Production Processes Learning Objective: 06-02 Understand production process mapping and Littles law. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

178

53) According to Little's Law, which of the following can be used to estimate work-in-process inventory? A) Process time/Cycle time B) Throughput rate times Flow time C) Process velocity/Flow time D) Set up time/Throughput rate E) Value added time/Process velocity Answer: B Explanation: Simple systems can be analyzed quickly using a principle known as Little's law. Little's law says there is a long-term relationship between the inventory, throughput, and flow time of a production system in steady state. The relationship is: Inventory = Throughput rate × Flow time. Difficulty: 3 Hard Topic: Production Processes Learning Objective: 06-02 Understand production process mapping and Littles law. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 54) A firm fills its customer's orders from finished goods inventory. It is a: A) make to order firm. B) engineer to order firm. C) make to stock firm. D) customer service firm. E) assemble to order firm. Answer: C Explanation: Firms that serve customers from finished goods inventory are known as make-to-stock firms. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-02 Understand production process mapping and Littles law. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

179

55) A firm will work with a customer to design the product, and then make it from purchased materials, parts, and components. This firm is called: A) a make to order firm. B) an engineer to order firm. C) a make to stock firm. D) a customer service firm. E) an assemble to order firm. Answer: B Explanation: An engineer-to-order firm will work with the customer to design the product, and then make it from purchased materials, parts, and components. Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-02 Understand production process mapping and Littles law. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 56) Which of these expressions is Little's Law? A) Inventory/Flow time = Throughput rate: B) Inventory/Throughput Rate = Flow time C) Inventory = Throughput rate × Flow time D) Throughput Rate/Inventory = 1/Flow Time E) All of the above Answer: E Difficulty: 1 Easy Topic: Production Processes Learning Objective: 06-02 Understand production process mapping and Littles law. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation

180

57) Regarding the measures of inventory managing efficiency, identify the most appropriate answer. (Select all that apply.) A) Total average value of inventory is equal to the selling price multiplied by finished goods inventory. B) Inventory turn is the annual cost of goods sold multiplied by average inventory. C) Days of supply is the inverse of inventory turns × 365. D) Inventory turn is the annual cost of goods sold divided by average inventory. Answer: C, D Explanation: Both days of supply is the inverse of inventory turns × 365 and inventory turn is the annual cost of goods sold divided by average inventory. Both days of supply is the inverse of inventory turns × 365 and inventory turn is the annual cost of goods sold divided by average inventory. Difficulty: 2 Medium Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is.; 06-02 Understand production process mapping and Littles law. Bloom's: Remember AACSB: Reflexive Thinking Accessibility: Keyboard Navigation 58) In studying positioning of inventory in supply chains, which, if any, of the following is most appropriate? (Select all that apply.) A) As order decoupling point moves towards source, inventory investment goes down. B) As order decoupling point moves towards the source, customer lead time gets longer. C) As order decoupling point moves towards the source, inventory investment increases. D) As order decoupling point moves towards the source, customer lead time is unchanged. Answer: A, B Explanation: As order decoupling point moves towards source, inventory investment goes down and customer lead time gets longer. Follows from, Total Number of combinations = N1 × N2 × ......× Nn. As order decoupling point moves towards source, inventory investment goes down and customer lead time gets longer. Follows from, Total Number of combinations = N1 × N2 × ......× Nn. Difficulty: 2 Medium Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is. Bloom's: Create AACSB: Analytic Accessibility: Keyboard Navigation

181

59) In studying product-process matrix describing layout strategies, which of the following is most appropriate? (Select all that apply.) A) As you move from project to manufacturing cell to continuous process, product volume increases while standardization increases. B) As you move from project to manufacturing cell to continuous process, product volume decreases while standardization decreases. C) As you move from project to manufacturing cell to continuous process, product volume increases while standardization decreases. D) As you move from project to manufacturing cell to continuous process, product volume decreases while standardization increases. Answer: A Explanation: Follows from C = Difficulty: 2 Medium Topic: Production Processes Learning Objective: 06-01 Understand what a manufacturing process is. Bloom's: Create AACSB: Analytic Accessibility: Keyboard Navigation Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 7 Service Processes 1) Effective management of services requires a clear focus on understanding operations, so much so, that it may even require the exclusion of consideration of marketing or personnel. Answer: FALSE Explanation: It is difficult to separate the operations management functions from marketing in services. Difficulty: 1 Easy Topic: The Nature of Services Learning Objective: 07-01 Understand the characteristics of service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Services often take the form of repeated encounters involving face-to-face interactions. Answer: TRUE Explanation: The horizontal axis of the service-system design matrix indicates the degree of customer/server contact: the buffered core, which is physically separated from the customer; the permeable system, which is penetrable by the customer via phone or face-to-face contact; and the reactive system, which is both penetrable and reactive to the customer's requirements. Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember 182

AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) The term "encounter" is defined by Webster's Dictionary as "meeting in conflict or battle" and is used to also designate meetings between consumers and service systems. Answer: TRUE Explanation: Service encounters can be configured in a number of different ways. The service-system design matrix identifies six common alternatives. Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

183

4) A service system with a high degree of customer contact is less difficult to control than a low degree of customer contact service system. Answer: FALSE Explanation: Service systems with a high degree of customer contact are more difficult to control than those with a low degree of customer contact. Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-01 Understand the characteristics of service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Because little or no inventory is carried in a service operation, it is easy to separate the operations management functions from marketing in services. Answer: FALSE Explanation: Too much capacity generates excessive costs. Insufficient capacity leads to lost customers. In these situations, of course, we seek the assistance of marketing. This is one reason we have discount airfares, hotel specials on weekends, and so on. This is also a good illustration of why it is difficult to separate the operations management functions from marketing in services. Difficulty: 2 Medium Topic: The Nature of Services Learning Objective: 07-01 Understand the characteristics of service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) It is difficult to separate the operations management functions from marketing in services. Answer: TRUE Explanation: Too much capacity generates excessive costs. Insufficient capacity leads to lost customers. In these situations, of course, we seek the assistance of marketing. This is one reason we have discount airfares, hotel specials on weekends, and so on. This is also a good illustration of why it is difficult to separate the operations management functions from marketing in services. Difficulty: 1 Easy Topic: The Nature of Services Learning Objective: 07-01 Understand the characteristics of service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

184

7) The service-system design matrix identifies five alternative forms of service encounters. Answer: FALSE Explanation: The service–system design matrix identifies six common alternatives. Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) The service-system design matrix identifies six forms of service encounters. Answer: TRUE Explanation: The service–system design matrix identifies six common alternatives. Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) The "service blueprint" is a classification of services. Answer: FALSE Explanation: Just as is the case with manufacturing process design, the standard tool for service process design is the flowchart. Recently, the service gurus have begun calling the flowchart a service blueprint to emphasize the importance of process design. Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Poka-yokes are procedures that block the inevitable mistake from becoming a service defect. Answer: TRUE Explanation: Poka-yokes are procedures that block the inevitable mistake from becoming a service defect. Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Poka-yoke is roughly translated from Japanese as "quality management." 185

Answer: FALSE Explanation: Poka-yokes (roughly translated from the Japanese as "avoid mistakes") are common in factories and consist of such things as fixtures to ensure that parts can be attached only in the right way, electronic switches that automatically shut off equipment if a mistake is made, kitting of parts prior to assembly to make sure the right quantities are used, and checklists to ensure that the right sequence of steps is followed. Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Poka-yoke is roughly translated from Japanese as "avoid mistakes." Answer: TRUE Explanation: Poka-yokes (roughly translated from the Japanese as "avoid mistakes") are common in factories and consist of such things as fixtures to ensure that parts can be attached only in the right way, electronic switches that automatically shut off equipment if a mistake is made, kitting of parts prior to assembly to make sure the right quantities are used, and checklists to ensure that the right sequence of steps is followed. Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13) An important aspect of service products is that they cannot be inventoried. Answer: TRUE Explanation: In designing service organizations we must remember one distinctive characteristic of services: We cannot inventory services. Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-01 Understand the characteristics of service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

186

14) Customer contact refers to creation of the service. Answer: FALSE Explanation: Customer contact refers to the physical presence of the customer in the system, and creation of the service refers to the work process involved in providing the service itself. Difficulty: 1 Easy Topic: The Nature of Services Learning Objective: 07-01 Understand the characteristics of service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) The work process involved in providing the service must involve the physical presence of the customer in the system. Answer: FALSE Explanation: Customer contact refers to the physical presence of the customer in the system, and creation of the service refers to the work process involved in providing the service itself. Difficulty: 2 Medium Topic: The Nature of Services Learning Objective: 07-01 Understand the characteristics of service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) The central problem in virtually every waiting line situation is a trade-off decision balancing the costs of adding services with the costs of waiting. Answer: TRUE Explanation: A central problem in many service settings is the management of waiting time. The manager must weigh the added cost of providing more rapid service (more traffic lanes, additional landing strips, more checkout stands) against the inherent cost of waiting. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

187

17) Ideally in waiting line or queuing analysis we want to balance the cost of service capacity with the cost of waiting. Answer: TRUE Explanation: A central problem in many service settings is the management of waiting time. The manager must weigh the added cost of providing more rapid service (more traffic lanes, additional landing strips, more checkout stands) against the inherent cost of waiting. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) The customer arrivals in a queuing system come almost exclusively from finite populations. Answer: FALSE Explanation: Arrivals at a service system may be drawn from a finite or an infinite population. The distinction is important because the analyses are based on different premises and require different equations for their solution. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) The customer arrivals in a queuing system come almost exclusively from infinite populations. Answer: FALSE Explanation: Arrivals at a service system may be drawn from a finite or an infinite population. The distinction is important because the analyses are based on different premises and require different equations for their solution. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

188

20) A finite population in waiting line management refers to a population that is large enough in relation to the service system so that the change in population size caused by subtraction or additions to the population does not significantly affect the system probabilities. Answer: FALSE Explanation: A finite population refers to the limited- size customer pool that will use the service and, at times, form a line. The reason this finite classification is important is that when a customer leaves its position as a member for the population (a machine breaking down and requiring service, for example), the size of the user group is reduced by one, which reduces the probability of the next occurrence. Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) An infinite population in waiting line management refers to a population that is large enough in relation to the service system so that the change in population size caused by subtraction or additions to the population does not significantly affect the system probabilities. Answer: TRUE Explanation: An infinite population is large enough in relation to the service system so that the population size caused by subtractions or additions to the population (a customer needing service or a serviced customer returning to the population) does not significantly affect the system probabilities. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) A variable arrival rate is more common in waiting line management than a constant arrival rate. Answer: TRUE Explanation: In productive systems, the only arrivals that truly approach a constant interval period are those subject to machine control. Much more common are variable (random) arrival distributions. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) A constant arrival rate is more common in productive systems than a variable arrival rate. 189

Answer: FALSE Explanation: In productive systems, the only arrivals that truly approach a constant interval period are those subject to machine control. Much more common are variable (random) arrival distributions. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Arrival characteristics in a queuing problem analysis include the length of the queue. Answer: FALSE Explanation: The queuing system consists essentially of three major components: (1) the source population and the way customers arrive at the system, (2) the servicing system, and (3) the condition of the customers exiting the system. Also, (page 222), the queuing system consists primarily of the waiting line(s) and the available number of servers. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) The Poisson probability distribution is used in waiting line management when we are interested in the number of arrivals to a queue during some fixed time period. Answer: TRUE Explanation: In observing arrivals at a service facility, we can look at them from two viewpoints: First, we can analyze the time between successive arrivals to see if the times follow some statistical distribution. Usually we assume that the time between arrivals is exponentially distributed. Second, we can set some time length and try to determine how many arrivals might enter the system within that length of time. We typically assume that the number of arrivals per time unit is Poisson distributed. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

190

26) The demand on a hospital's emergency medical services is considered a controllable arrival pattern of the calling population. Answer: FALSE Explanation: Some service demands are clearly uncontrollable such as emergency medical demands on a city's hospital facilities. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) The demand on a hospital's emergency medical services is considered an uncontrollable arrival pattern of the calling population. Answer: TRUE Explanation: Some service demands are clearly uncontrollable such as emergency medical demands on a city's hospital facilities. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) Gas stations, loading docks, and parking lots have infinite potential length of lines for their respective queuing systems. Answer: FALSE Explanation: Gas stations, loading docks, and parking lots have limited line capacity caused by legal restrictions or physical space characteristics. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

191

29) Highest-profit customer first is a queue discipline discussed in the textbook. Answer: TRUE Explanation: Reservations first, emergencies first, highest-profit customer first, largest orders first, best customers first, longest waiting time in line, and soonest promised date are other examples of priority rules. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) Longest waiting time in line is a queue discipline discussed in the textbook. Answer: TRUE Explanation: Reservations first, emergencies first, highest-profit customer first, largest orders first, best customers first, longest waiting time in line, and soonest promised date are other examples of priority rules. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Best customer last is a queue discipline discussed in the textbook. Answer: FALSE Explanation: Reservations first, emergencies first, highest-profit customer first, largest orders first, best customers first, longest waiting time in line, and soonest promised date are other examples of priority rules. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

192

32) A car wash is an example of a single channel, multiphase queuing system. Answer: TRUE Explanation: Single channel, multiphase. A car wash is an illustration because a series of services (vacuuming, wetting, washing, rinsing, drying, window cleaning, and parking) is performed in a fairly uniform sequence. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) A tellers' window in a bank is an example of a single channel, multiphase queuing system. Answer: FALSE Explanation: Multichannel, single phase. Tellers' windows in a bank and checkout counters in high-volume department stores exemplify this type of structure. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) The admissions system in a hospital for patients is an example of a single channel, single phase queuing system. Answer: FALSE Explanation: Multichannel, multiphase. The admission of patients in a hospital follows this pattern because a specific sequence of steps is usually followed. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

193

35) There are different queuing models to fit different queuing situations. Answer: TRUE Explanation: In this section we present three sample waiting line problems followed by their solutions. Each has a slightly different structure and solution equation. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) In a practical sense, an infinite queue is one that includes every possible member of the served population. Answer: FALSE Explanation: An infinite population is large enough in relation to the service system so that the change in population size caused by subtractions or additions to the population does not significantly affect the system probabilities. Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) In a waiting line situation, multiple lines occur only when there are multiple servers. Answer: FALSE Explanation: The term multiple lines refers to the single lines that form in front of two or more servers or to single lines that converge at some central redistribution point. Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

194

38) The term "queue discipline" involves the art of controlling surly and unruly customers who have become irritated by waiting. Answer: FALSE Explanation: A queue discipline is a priority rule or set of rules for determining the order of service to customers in a waiting line. Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) In a practical sense, a finite population is one that potentially would form a very long line in relation to the capacity of the serving system. Answer: FALSE Explanation: A finite population refers to the limited-size customer pool that will use the service and, at times, form a line. Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) A department of 25 machines is kept running by three operators who respond to randomly occurring equipment problems. An analyst who wanted to know how much production was being lost by machines waiting for service could use queuing theory analysis to find out. Answer: TRUE Explanation: A central problem in many service settings is the management of waiting time. The manager must weigh the added cost of providing more rapid service (more traffic lanes, additional landing strips, more checkout stands) against the inherent cost of waiting. Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

195

41) A department of 25 machines is kept running by three operators who respond to randomly occurring equipment problems. When an operator is absent, the amount of production being lost by machines waiting for service increases. The analyst can use queuing theory analysis to determine whether to pay overtime to an operator from a different shift or not. Answer: TRUE Explanation: A central problem in many service settings is the management of waiting time. The manager must weigh the added cost of providing more rapid service (more traffic lanes, additional landing strips, more checkout stands) against the inherent cost of waiting. Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 42) A department of 25 machines is kept running by three operators who respond to randomly occurring equipment problems. An analyst wanting to know whether to add a fourth operator or downsize to two operators would be helped by using queuing theory analysis. Answer: TRUE Explanation: A central problem in many service settings is the management of waiting time. The manager must weigh the added cost of providing more rapid service (more traffic lanes, additional landing strips, more checkout stands) against the inherent cost of waiting. Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 43) Which of the following is a suggestion for managing queues that is mentioned in the textbook? A) Put up a serpentine lane to keep people from jumping ahead in line B) Use humor to defuse a potentially irritating situation C) Segment the customers D) Assure customers that the wait is fair and inform them of the queue discipline E) Tell people in the queue that each will be served as soon as possible Answer: C Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) Which of the following is not a suggestion for managing queues presented in the textbook? A) Try to divert your customer's attention when waiting 196

B) Segment the customers C) Encourage customers to come during a slack period D) Train your servers to be friendly E) Periodically close the service channel to temporarily disperse the line Answer: E Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) Which of the following is a suggestion for managing queues presented in the textbook? A) Train your servers to be friendly B) Tell customers that the line should encourage them to come during slack periods C) Give each customer a number D) Periodically close the service channel to temporarily disperse the line E) Use humor to defuse a potentially irritating situation Answer: A Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) Which of the following are the three major components of a queuing system? A) The source population, how customers exit the system, and the queuing discipline. B) The number of servers, the service speed and the waiting line. C) The source population, how the customer exits the system, and the servicing system. D) The source population and the way customers arrive at the system, the serving systems, and how customers exit the system. E) The service speed, the queue discipline and the waiting line. Answer: D Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) Which of the following is a suggestion for managing queues that is mentioned in the textbook? A) Put up a serpentine lane to keep people from jumping ahead in line B) Use humor to defuse a potentially irritating situation C) Train your servers to be friendly 197

D) Assure customers that the wait is fair and inform them of the queue discipline E) Tell people in the queue that each will be served as soon as possible Answer: C Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) Which of the following is not a suggestion for managing queues presented in the textbook? A) Train your servers to be friendly B) Segment the customers C) Determine an acceptable waiting time for your customers D) Inform your customers of what to expect E) Encourage customers to come during slack periods Answer: C Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

198

49) In essence, a queuing system includes several major components. Which of the following is not one of them? A) Source population B) Servicing system C) How the customer exits the system D) The queue discipline E) None of these Answer: D Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) Which of the following is an example of a finite population in a queuing system? A) People waiting to place their order at a fast food restaurant. B) The departmental faculty in line at the copy machine. C) People waiting in line at an ATM. D) Patients seeking help in a hospital emergency room. E) Taxpayers calling for assistance from the IRS. Answer: B Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) Which of the following is not a queue discipline discussed in the textbook? A) First come, first served B) Last in, first out C) Limited needs D) Shortest processing time E) Best customer first Answer: B Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) Which following queue discipline is discussed in the textbook? A) Emergencies first 199

B) Garner-Whitten formula C) Newest customer first D) Patient customers last E) None of these Answer: A Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) Buying a ticket for a college football game where there are multiple windows to buy the ticket at features which type of queuing system line structure? A) Single channel, single phase B) Single channel, multiphase C) Multichannel, single phase D) Multichannel, multiphase E) None of these Answer: C Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) Buying food at a large food store with multiple checkout counters features which type of queuing system line structure? A) Single channel, single phase B) Single channel, multiphase C) Multichannel, single phase D) Multichannel, multiphase E) None of these Answer: C Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) Getting an autograph from a famous person might involve standing in which type of queuing line structure? A) Single channel, single phase 200

B) Single channel, multiphase C) Multichannel, single phase D) Multichannel, multiphase E) None of these Answer: A Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) In a college registration process, several department heads have to approve an individual student's semester course load. What is the queuing system line structure? A) Single channel, single phase B) Single channel, multiphase C) Multichannel, single phase D) Multichannel, multiphase E) None of these Answer: B Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

201

57) Standing in line to buy a ticket for a movie where there are multiple windows to buy tickets is which type of queuing system line structure? A) Single channel, single phase B) Single channel, multiphase C) Multichannel, single phase D) Multichannel, multiphase E) None of these Answer: C Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) A roller coaster ride in an amusement park employs which type of queuing system line structure? A) Single channel, single phase B) Single channel, multiphase C) Multichannel, single phase D) Multichannel, multiphase E) None of these Answer: A Difficulty: 1 Easy Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

202

59) Machine breakdown and repair in a twelve machine factory having one repair mechanic would develop which type of queuing system line structure concerning machine breakdowns? A) Single channel, single phase B) Single channel, multiphase C) Multichannel, single phase D) Multichannel, multiphase E) None of these Answer: C Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) Assume the service rate for a queue in a truck-loading operation is 2 trucks per hour. Using the infinite queuing notion for the models presented in the textbook, which of the following is the average service time? A) 2 hours B) 1 hour C) 0.5 hour D) 0.25 hour E) None of these Answer: C Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

203

61) For an infinite queuing situation, if the arrival rate for loading trucks is 5 trucks per hour, what is the mean time between arrivals? A) 5 hours B) 2.5 hours C) 0.2 hour D) 0.1 hour E) None of these Answer: C Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) A company is concerned about the number of customers that have to wait for service in their customer service department. Assume the rate at which customers arrive is 12 per hour. Using the infinite queuing notion for the models presented in the textbook, which of the following is the mean time between arrivals? A) 12 minutes B) 6 minutes C) 2 minutes D) 1 minute E) None of these Answer: E Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

204

63) Which of the following is a characteristic that can be used to guide the design of service systems? A) Services cannot be inventoried B) Services are all similar C) Quality work means quality service D) Services businesses are inherently entrepreneurial E) Even service businesses have internal services Answer: A Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-01 Understand the characteristics of service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) Which of the following refers to the physical presence of the customer in a service system? A) Creation of the service B) Customer contact C) Intermittent production D) Continuous production E) None of these Answer: B Difficulty: 1 Easy Topic: The Nature of Services Learning Objective: 07-01 Understand the characteristics of service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) Which of the following are alternative possible service encounters included in the service-system design matrix? A) Mail contact B) Warranty C) Sales call D) Field service E) None of these Answer: A Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) Which of the following is an alternative possible service encounter included in the 205

service-system design matrix? A) Face-to-face distance B) Internet C) Questionnaire response D) Automated teller machine (ATM) E) Response card encounter Answer: B Difficulty: 2 Medium Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) In the service-system design matrix, a face-to-face total customization service encounter is expected to have which of the following? A) Low sales opportunity B) Low production efficiency C) High production efficiency D) Low degree of customer/server contact E) None of these Answer: B Difficulty: 2 Medium Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

206

68) In the service-system design matrix, a mail contact service encounter is expected to have which of the following? A) High sales opportunity B) High degree of customer/server contact C) High production efficiency D) Low sales opportunity E) None of these Answer: D Difficulty: 2 Medium Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) In the service-system design matrix, a face-to-face loose specs service encounter is expected to have which of the following? A) Low sales opportunity B) Low production efficiency C) High production efficiency D) Low degree of customer/server contact E) None of these Answer: B Difficulty: 2 Medium Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

207

70) In the service-system design matrix, an internet and on-site technology service encounter is expected to have which of the following? A) High sales opportunity B) High degree of customer/server contact C) Low production efficiency D) High production efficiency E) None of these Answer: D Difficulty: 2 Medium Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) There are many applications of poka-yokes in service organizations. Which of the following is one of the three-T's used to classify poka-yokes? A) Task B) Time C) Teamwork D) Trust E) Talent Answer: A Difficulty: 2 Medium Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

208

72) There are many applications of poka-yokes in service organizations. Which of the following is one of the three-T's used to classify poka-yokes? A) Talent B) Teamwork C) Trust D) Treatment E) Time Answer: D Difficulty: 2 Medium Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) Which of the following is considered a high-contact service operation? A) On-line brokerage house B) Internet sales for a department store C) Physician practice D) Telephone life insurance sales and service E) Automobile repair Answer: C Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) The service blueprint makes a distinction between: A) High and low customer contact aspects of the service. B) Those parts of the service performed before payment from those performed after payment. C) Standardized elements of the service and those distinctive customized aspects of the service. D) Customers desiring good service and customers unconcerned with service quality. E) Low and high value-added aspects of the service. Answer: A Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) The "line of visibility" is a feature of: A) a single-channel, single phase queuing system. 209

B) the service blueprint. C) an entertainment activity for people waiting in line for a service. D) a waiting line that allows visibility of the server(s) tending to customers in front of you. E) None of these Answer: B Difficulty: 1 Easy Topic: Service Blueprinting and Fail-Safing Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) Every service has a service package, which is defined as a bundle of goods and services provided in some environment. The service package consists of five features. Which of the following is not one of these features? A) Supporting facility B) Facilitating services C) Information D) Explicit Services E) Implicit Services Answer: B Difficulty: 1 Easy Topic: The Nature of Services Learning Objective: 07-02 Analyze simple service systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

210

77) Platform service business model describes an approach where a) consumers and producers/service creators are brought together for a social cause. b) transaction provider connects the customer and providers and collects the charges. c) an example of a transaction provider would be eBay. d) another model of manufacture is described. A) Option A B) Option B C) Option C D) Option D Answer: B, C Explanation: See Exhibit 7.3 on platform service business model

See Exhibit 7.3 on platform service business model

211

Difficulty: 2 Medium Topic: The Nature of Services Learning Objective: 07-01 Understand the characteristics of service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) According to the text, the main differences separating Amazon from other on line retailors are all of the following except A) website and the gigantic list of product offerings. B) multi-tiered strategy any one can sell anything. C) you can return products. D) you can setup website with links to Amazon and get paid for click throughs. E) can be your personal shopping assistant. Answer: C Explanation: Amazon intro in the text. Difficulty: 1 Easy Topic: The Nature of Services Learning Objective: 07-01 Understand the characteristics of service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

212

79) In designing service systems, as you go from mail contact to phone contact to face to face total customization, which of the following is most appropriate? A) Sales opportunity decreases while degree of customer/server contact increases. B) Sales opportunity decreases while degree of customer/server contact decreases. C) Sales opportunity increases while degree of customer/server contact decreases. D) Sales opportunity increases while degree of customer/server contact increases. E) None of the above Answer: D Explanation: As you move in that continuum from mail to face to face total customization, sales opportunity increases and customer/server contact also increases. See also Exhibit 7.1

Difficulty: 1 Easy Topic: The Nature of Services Learning Objective: 07-01 Understand the characteristics of service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213

80) Assuming a 24 hour operation in a warehouse, and an arrival following Poisson distribution with mean rate of 36 per day and service (unloading using a single bay) following exponential distribution with a rate of 48 trucks per day, answer the following question. What is the expected waiting time in the system (in hours) for a typical truck? A) 2 hours B) 1 hour C) 1.5 hour D) 0.25 hour E) 0.5 hour Answer: A Explanation: See Exhibit 7.12. μ = 48/24 = 2 per hour, λ = 36/24 = 1.5 per day. Ls = (1.5/(2 − 1.5)) = 3; Ws = Ls/ λ ; = 3/1.5 = 2 hours.

Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

214

81) Assuming a 24 hour operation in a warehouse, and an arrival following Poisson distribution with mean rate of 36 per day and service (unloading using a single bay) following exponential with a rate of 48 trucks per day, answer the following question. What is the expected number of trucks in the system? A) 2.25 B) 1.5 C) 2 D) 1 E) 3 Answer: E Explanation: See Exhibit 7.12. μ = 48/24 = 2 per hour, λ = 36/24 = 1.5 per day. Ls = (1.5/(2 − 1.5)) = 3;

Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

215

82) Customers arrive at a single self-serve coffee machine in a busy mall at the rate of 20 per hour, following Poisson distribution. Each customer takes exactly 90 seconds to get his or her coffee. What is the expected number of customers in queue at this coffee machine? A) 1.0 B) 1.5 C) 0.5 D) 2.0 E) 3.0 Answer: C Explanation: See Exhibit 7.12. First let us calculate the service rate per hour. Since an hour has 60 × 60 = 3600 seconds, μ = 3600/90 = 40 per hour. λ = 20 per hour. This follows Model 2 (constant service time system). Hence, Lq = (20 × 20)/(2 × 40 × (40 − 20)) = 0.5.

Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

216

83) Customers arrive at a common queue at the coffee station with two identical coffee machines in a busy mall at the rate of 48 per hour, following Poisson distribution. Each customer mixes his or her specialty coffee taking 2 minutes on an average following an exponential process. What is the expected number of customers in the system at this coffee station? A) Infinity B) 2.844 C) 2.444 D) 4.444 E) 3 Answer: D Explanation: See Exhibit 7.12. First let us calculate the service rate per hour. μ = 60/2 = 30 per hour. λ = 48 per hour. This follows Model 3 (multi server system). Number of servers (service channels; S) = 2; First find the relevant information for using the table in Exhibit 10.9, with S = 2 and (λ/μ) = (48/30) = 1.6; Hence, Lq (from the table with 1.6 for (λ/μ) and S = 2 is 2.8444. Since we need Ls; Ls = Lq + (λ/μ) = 2.8444 + 1.6 = 4.444 .

Difficulty: 2 Medium Topic: Waiting line models Learning Objective: 07-03 Understand waiting line (queuing) analysis. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 8 Sales and Operations Planning 1) The aggregate operations plan translates annual and quarterly business plans into broad labor and output plans for the intermediate term of 3 to 18 months. 217

Answer: TRUE Explanation: Aggregate operations plan translates annual and quarterly business plans into broad labor and output plans for the intermediate term (3 to 18 months.) Difficulty: 1 Easy Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) The objective of the aggregate operations plan is to insure that the marketing and sales plans are realistic. Answer: FALSE Explanation: The objective of the aggregate operations plan is to minimize the cost of resources required to meet demand over that period. Difficulty: 1 Easy Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) The aggregate operations plan differs in virtually every aspect in service organizations as contrasted with manufacturing organizations. Answer: FALSE Explanation: Charting and graphic techniques are also useful for aggregate planning in service applications. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-02 Construct and evaluate aggregate plans that employ different strategies for meeting demand. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

218

4) The sales and marketing plans are typically developed separately from the aggregate operations plan as a way of cross-checking results to insure the integrity of assumptions about the future. Answer: FALSE Explanation: Typically, this activity requires an integrated effort with cooperation from sales, distribution and logistics, operations, finance, and product development. Difficulty: 1 Easy Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Aggregate sales and operations planning occur in a company about every 3 to 18 months. Answer: FALSE Explanation: Typically, sales and operations planning occurs on a monthly cycle. Difficulty: 1 Easy Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Aggregation in sales and operations planning is by groups of customers on the supply side and by product families on the demand side of the firm's supply chain. Answer: FALSE Explanation: Aggregation on the supply side is done by product families, and on the demand side it is done by groups of customers. Difficulty: 2 Medium Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

219

7) Accurate medium-range planning increases the likelihood of operating within the limits of a budget. Answer: TRUE Explanation: Accurate medium-range planning increases the likelihood of (1) receiving the requested budget and (2) operating within the limits of the budget. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) The main purpose of the aggregate production plan is to specify the optimal combination of workforce level and inventory on hand. Answer: TRUE Explanation: The main purpose of the aggregate plan is to specify the optimal combination of production rate, workforce level, and inventory on hand. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) The International Aggregate Planning Society (IAPS) has developed aggregate operations planning guidelines that are followed by a majority of manufacturing firms. Answer: FALSE Explanation: There is no organization called International Aggregate Planning Society. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

220

10) The sales and operations planning process consists of a series of meetings. Answer: TRUE Explanation: The sales and operations planning process consists of a series of meetings, finishing with a high-level meeting where key intermediate-term decisions are made. Difficulty: 1 Easy Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) The sales and operations planning process is made up of a variety of analytical techniques that interact to produce short and intermediate term goals. Answer: FALSE Explanation: The sales and operations planning process consists of a series of meetings, finishing with a high-level meeting where key intermediate-term decisions are made. Difficulty: 2 Medium Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Subcontracting is viewed as a risky strategy because the firm may lose control of product design and pricing. Answer: FALSE Explanation: Some level of subcontracting can be desirable to accommodate demand fluctuations. However, unless the relationship with the supplier is particularly strong, a manufacturer can lose some control over schedule and quality. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

221

13) The operations plan should not be updated but should be followed precisely until the longest-term planning horizon has passed. Answer: FALSE Explanation: Typically, sales and operations planning occurs on a monthly cycle. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Fixed and variable costs incurred in producing a given product type in a given time period are relevant aggregate operations planning costs. Answer: TRUE Explanation: (Under relevant costs:) Basic production costs. These are the fixed and variable costs incurred in producing a given product type in a given time period. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Backordering costs incurred in producing a given product type in a given time period are relevant aggregate operations planning costs. Answer: TRUE Explanation: (Under relevant costs:) Backordering costs. Usually these are very hard to measure and include costs of expediting, loss of customer goodwill, and loss of sales revenues resulting from backordering. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

222

16) Foregone profit margins are considered as relevant aggregate operations planning costs. Answer: FALSE Explanation: Four costs are relevant to the aggregate production plan. These relate to the production cost itself as well as the cost to hold inventory and to have unfilled orders. These costs are: 1. Basic production costs, 2. Costs associated with changes in the production rate, 3. Inventory holding costs and 4. Backordering costs. Difficulty: 2 Medium Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) Costs incurred in hiring, training and laying off personnel are considered relevant aggregate operations planning costs. Answer: TRUE Explanation: (Under relevant cost:) Costs associated with changes in the production rate. Typical costs in this category are those involved in hiring, training, and laying off personnel. Difficulty: 2 Medium Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) Aggregate planning techniques is developed from the master schedule and the strategic capacity plan. Answer: FALSE Explanation: Note again from Exhibit 8.1 Overview of Major Operations and Supply Chain Planning Activities, that the aggregate plan precedes the master schedule. Difficulty: 1 Easy Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

223

19) The widespread adoption of computing technology has led to the virtual abandonment of simple cut-and-try charting and graphical methods to develop aggregate operations plans. Answer: FALSE Explanation: Companies commonly use simple cut-and-try charting and graphic methods to develop aggregate plans. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-02 Construct and evaluate aggregate plans that employ different strategies for meeting demand. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) The increasing complexity of modern operations management has made simple cut-and-try charting and graphical methods formerly used to develop aggregate operations plans impractical and obsolete. Answer: FALSE Explanation: Companies commonly use simple cut-and-try charting and graphic methods to develop aggregate plans. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-02 Construct and evaluate aggregate plans that employ different strategies for meeting demand. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

224

21) In a services organization, strategic capacity planning follows process planning. Answer: TRUE Explanation: See Exhibit 8.1, Overview of Major Operations and Supply Chain Planning Activities.

Difficulty: 1 Easy Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

225

22) In a logistics organization, vehicle dispatching immediately precedes vehicle loading. Answer: FALSE Explanation: See Exhibit 8.1, Overview of Major Operations and Supply Chain Planning Activities.

Difficulty: 1 Easy Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

226

23) Yield management is the process of allocating the right type of capacity to the right type of customer at the right prices at the right time to maximize revenue or yield. Answer: TRUE Explanation: Yield management can be defined as the process of allocating the right type of capacity to the right type of customer at the right price and time to maximize revenue or yield Difficulty: 1 Easy Topic: Yield Management Learning Objective: 08-03 Explain yield management and why it is an important strategy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

227

24) Order scheduling is the step in the aggregate operations planning process that immediately follows material requirements planning. Answer: TRUE Explanation: See Exhibit 8.1, Overview of Major Operations and Supply Chain Planning Activities.

228

25) The master production schedule is a crucial input into the aggregate operations plan. Answer: FALSE Explanation: See Exhibit 8.1.

229

26) In services, once the aggregate staffing level is determined, the focus is on short-term workforce and customer scheduling. Answer: TRUE Explanation: See Exhibit 8.1, Overview of Major Operations and Supply Chain Planning Activities.

Difficulty: 1 Easy Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

230

27) In aggregate operations planning, the variable "production rate" refers to the number of units completed per unit of time. Answer: TRUE Explanation: Production rate refers to the number of units completed per unit of time (such as per hour or per day). Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) The aggregate operations planning, variable "workforce level" refers to the number of workers needed to accomplish the planned production. Answer: TRUE Explanation: Workforce level is the number of workers needed for production (Production = production rate x workforce level). Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) The aggregate operations plan variable "inventory on hand" refers to the balance of unused inventory carried over from the previous time period. Answer: TRUE Explanation: Inventory on hand is unused inventory carried over from the previous period Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

231

30) Because a level production strategy does not require adjustment in the short-to-medium term, aggregate sales and operations planning is not required. Answer: FALSE Explanation: Although a level strategy will maintain a stable workforce working at a constant output rate with shortages and surpluses are absorbed by fluctuating inventory levels, order backlogs, and lost sales, aggregate planning is necessary to establish the level at which the level strategy should be executed. Difficulty: 2 Medium Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) The essence of yield management is the ability to manage supply. Answer: FALSE Explanation: The essence of yield management is the ability to manage demand. Difficulty: 1 Easy Topic: Yield Management Learning Objective: 08-03 Explain yield management and why it is an important strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) One of the conditions that makes yield management effective is when inventory is easily stored and held for a time when demand is stronger. Answer: FALSE Explanation: From an operational perspective, yield management is most effective when (1) Demand can be segmented by customer; (2) Fixed costs are high and variable costs are low; (3) Inventory is perishable; (4) Product can be sold in advance and (5) Demand is highly variable. Difficulty: 2 Medium Topic: Yield Management Learning Objective: 08-03 Explain yield management and why it is an important strategy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

232

33) Yield management is an important tool that can be used to shape demand patterns. Answer: TRUE Explanation: Yield management is an important tool that can be used to shape demand patterns so a firm can operate more efficiently. Difficulty: 1 Easy Topic: Yield Management Learning Objective: 08-03 Explain yield management and why it is an important strategy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) Firms facing cyclical demand fluctuations would be wise to introduce complementary products whose cycles are the same as their current products. Answer: FALSE Explanation: Complementary products may work for firms facing cyclical demand fluctuations. For instance, lawnmower manufacturers will have strong demand for spring and summer, but weak demand during fall and winter. Demands on the production system can be smoothed out by producing a complementary product with high demand during fall and winter, and low demand during spring and summer (for instance, snowmobiles, snowblowers, or leafblowers). Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Firms that match the production rate to the order rate by hiring and laying off employees as the order rate varies are following what is known as the chase strategy. Answer: TRUE Explanation: Chase strategy: Match the production rate to the order rate by hiring and laying off employees as the order rate varies Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

233

36) A rate fence is a person who books airline seats at low rates far in advance and sells the seats at a profit later. Answer: FALSE Explanation: One (issue) is that pricing structures must appear logical to the customer and justify the different prices. Such justification, commonly called rate fences, may have either a physical basis (such as a room with a view) or a nonphysical basis (like unrestricted access to the Internet) Difficulty: 1 Easy Topic: Yield Management Learning Objective: 08-03 Explain yield management and why it is an important strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) A rate fence is a logical justification for different prices for what is essentially the same service. Answer: TRUE Explanation: One is that pricing structures must appear logical to the customer and justify the different prices. Such justification, commonly called rate fences, may have either a physical basis (such as a room with a view) or a nonphysical basis (like unrestricted access to the Internet) Difficulty: 1 Easy Topic: Yield Management Learning Objective: 08-03 Explain yield management and why it is an important strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) Pricing for a service should primarily relate to the cost of providing the service and has little to do with capacity issues the service provider might face. Answer: FALSE Explanation: Pricing also should relate to addressing specific capacity problems. Difficulty: 1 Easy Topic: Yield Management Learning Objective: 08-03 Explain yield management and why it is an important strategy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

234

39) In an overview of the major operations planning activities in a typical organization, which of the following activities precedes aggregate sales and operations planning? A) Process planning B) Workforce scheduling C) Master production scheduling D) Materials requirements planning E) Order scheduling Answer: A Difficulty: 1 Easy Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

235

40) In an overview of the major operations planning activities in a typical logistics organization, which of the following activities follows aggregate sales and operations planning? A) Process planning B) Workforce scheduling C) Vehicle loading D) Materials requirements planning E) Order scheduling Answer: C Explanation: See exhibit 8.1, Overview of Major Operations and Supply Chain Planning Activities.

236

41) In an overview of the major operations planning activities in a typical service organization, which of the following activities follows aggregate sales and operations planning? A) Process planning B) Workforce scheduling C) Master scheduling D) Materials requirements planning E) Order scheduling Answer: B Explanation: See exhibit 8.1, Overview of Major Operations and Supply Chain Planning Activities.

Difficulty: 1 Easy Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

237

42) In an overview of the major operations planning activities in a typical logistics organization, which of the following activities most immediately follows aggregate sales and operations planning? A) Process planning B) Strategic capacity planning C) Vehicle dispatching D) Vehicle capacity planning E) Warehouse receipt planning Answer: D Explanation: See exhibit 8.1, Overview of Major Operations and Supply Chain Planning Activities.

Difficulty: 2 Medium Topic: What Is Sales and Operations Planning? Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

238

43) The main purpose of aggregate operations planning is to specify the optimal combination of which of the following? A) Workforce levels and inventory on hand B) Inventory on hand and financing costs for that inventory C) The strategic plan and the products available for sale D) The workforce level and the degree of automation E) Operational costs and the cash flow to support operations Answer: A Explanation: The main purpose of the aggregate plan is to specify the optimal combination of production rate, workforce level, and inventory on hand. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

239

44) In conducting aggregate operations planning there are a number of required inputs. Which of the following are inputs considered external to the firm? A) Inventory levels and market demand B) Raw material availability and competitor's behavior C) Current workforce and economic conditions D) Current physical capacity and market demand E) Subcontractor capacity and inventory levels Answer: B Explanation: Refer to exhibit 8.2, Required Inputs to the Production Planning System.

Difficulty: 2 Medium Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

240

45) In conducting aggregate operations planning there are a number of required inputs. Which of the following are inputs considered external to the firm? A) Competitor behavior and economic conditions B) Market demand and inventory levels C) Subcontractor capacity and current workforce D) Economic conditions and current physical capacity E) Raw material availability and inventory levels Answer: A Explanation: Refer to exhibit 8.2, Required Inputs to the Production Planning System.

Difficulty: 2 Medium Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

241

46) In conducting aggregate operations planning there are a number of required inputs. Which of the following are considered inputs internal to the firm? A) Inventory levels and economic conditions B) Market demand and subcontractor capacity C) Current physical capacity and current workforce D) Competitor behavior and current workforce E) Current physical capacity and raw material availability Answer: C Explanation: Refer to exhibit 8.2, Required Inputs to the Production Planning System.

Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

242

47) Which of the following is a production planning strategy presented in the textbook? A) Level B) Strategic C) Balanced D) Synchronous E) Optimal Answer: A Explanation: There are essentially three production planning strategies. These are called level, chase and stable workforce—variable work hours. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) Which of the following is considered a "pure" production planning strategy? A) Variable workforce, stable work hours B) Lag demand C) Level playing field D) Stable workforce, variable work hours E) Product warehouse Answer: D Explanation: There are essentially three production planning strategies. These are called level, chase and stable workforce—variable work hours. When just one of these variables is used to absorb demand fluctuations, it is termed a pure strategy. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

243

49) Matching the production rate to the order rate by hiring and laying off employees as the order rate varies is which of the following pure production planning strategies? A) Stable workforce, variable work hours B) Chase C) Level D) Meeting demand E) Minimizing inventory Answer: B Explanation: The chase strategy matches the production rate to the order rate by hiring and laying off employees as the order rate varies. Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) Maintaining a stable workforce working at a constant output rate while shortages and surpluses are absorbed by fluctuating inventory levels, order backlogs, and allowing lost sales is which of the following production planning strategies? A) Stable workforce, variable work hours B) Chase C) Level D) Full employment E) Skill maintenance Answer: C Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

244

51) Which of the following costs are relevant to aggregate operations planning? A) Sunk costs B) Transaction costs C) Backordering costs D) Legal costs E) Fixed costs Answer: C Explanation: Backorder costs are listed under the heading "Relevant Costs." Difficulty: 1 Easy Topic: Aggregate Planning Techniques Learning Objective: 08-01 Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) Using the cut-and-try method for aggregate operations planning we can determine the production requirement in units of product. If the beginning inventory is 100 units, the demand forecast is 1,200, and the necessary safety stock is 20% of the demand forecast, which of the following is the production requirement? A) 1,200 B) 1,300 C) 1,340 D) 1,500 E) 1,540 Answer: C Explanation: Demand = 1,200; 20% of demand = 240; Inventory = 100; produce 1,200 + 240 – 100 = 1,340. Difficulty: 2 Medium Topic: Aggregate Planning Techniques Learning Objective: 08-02 Construct and evaluate aggregate plans that employ different strategies for meeting demand. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

245

53) Using the cut-and-try method for aggregate operations planning we can determine the production requirement in units of product. If the beginning inventory is 500 units, the demand forecast is 1,000, and the necessary safety stock is 10% of the demand forecast, which of the following is the production requirement? A) 1,000 B) 600 C) 550 D) 450 E) 100 Answer: B Explanation: Demand = 1,000; 10% of demand = 100; Inventory = 500; produce 1,000 + 100 – 500 = 600 Difficulty: 2 Medium Topic: Aggregate Planning Techniques Learning Objective: 08-02 Construct and evaluate aggregate plans that employ different strategies for meeting demand. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 54) Which of the following methods discussed in the text requires generating several alternative aggregate plans? A) Trial and error B) Production smoothing C) Graphing and charting D) Aggregate plan simulation E) Cut and try Answer: E Explanation: A cut-and-try approach involves costing out various production planning alternatives and selecting the one that is best. Difficulty: 2 Medium Topic: Aggregate Planning Techniques Learning Objective: 08-02 Construct and evaluate aggregate plans that employ different strategies for meeting demand. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

246

55) From an operational perspective yield management is most effective under which of the following circumstances? A) Demand cannot be segmented by customer B) Inventory is perishable C) Fixed costs are low and variable costs are high D) The customer is a "captive" of the system E) The firm doing yield management is very profitable Answer: B Difficulty: 2 Medium Topic: Yield Management Learning Objective: 08-03 Explain yield management and why it is an important strategy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) From an operational perspective yield management is least effective under which of the following circumstances? A) Demand can be segmented by customer B) The product can be sold in advance C) Demand is highly variable D) Fixed costs are high and variable costs are low E) Demand is stable and close to capacity Answer: E Difficulty: 2 Medium Topic: Yield Management Learning Objective: 08-03 Explain yield management and why it is an important strategy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

247

57) From an operational perspective yield management is least effective under which of the following circumstances? A) Demand can be segmented by customer B) The product can be sold in advance C) The product can be kept to be sold when demand is stronger D) Fixed costs are high and variable costs are low E) Demand is highly variable Answer: C Difficulty: 2 Medium Topic: Yield Management Learning Objective: 08-03 Explain yield management and why it is an important strategy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) Which of the following is not one of the "number of interesting issues that arise in yield management?" A) Pricing structures must appear logical to the customer and justify different prices B) Designing yield management programs that cannot be imitated by a competitor C) How to handle variability in customer arrivals, duration, and interval D) Managing the service process E) Training workers and managers to work in a yield management environment Answer: B Difficulty: 2 Medium Topic: Yield Management Learning Objective: 08-03 Explain yield management and why it is an important strategy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

248

59) Using the cut-and-try method for aggregate operations planning, we can back calculate beginning inventory if we knew the values of other relevant variables. What should have been the initial inventory in units of demand, if the production requirement in units of product is 900, demand forecast is 1,000, and the necessary safety stock is 20 percent of the demand forecast, Choose the right answer for the beginning inventory. A) 300 B) 500 C) 100 D) 1,900 E) Cannot find it Answer: A Explanation: Demand = 1,000; 20% of demand = 200; Beginning Inventory = X; (Recall that Beginning inventory + Production – Demand = Ending inventory: Thus, X + 900 – 1000 = 200. Or X (Beginning inventory) = 200 + 1000 − 900 = 300. Difficulty: 2 Medium Topic: Aggregate Planning Techniques Learning Objective: 08-02 Construct and evaluate aggregate plans that employ different strategies for meeting demand. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 60) Using the cut-and-try method for aggregate operations planning, we can calculate the ending inventory and then calculate the safety stock as a percent of forecast demand. Suppose that the beginning inventory is 300, the production requirement in units of product is 1,350, demand forecast is 1,500, what is the ending inventory and percent safety stock? A) 200 and 10% B) 150 and 10% C) 300 and 20% D) 450 and 30% E) 150 and 20% Answer: E Explanation: Demand = 1500; Beginning inventory + production required – forecast = ending inventory; Thus, 300 + 1350 – 1500 = 150 should be the ending inventory. Given forecast of 1500, the ending inventory of 150 is 10%. ((150/1500) × 100). So 150 and 10%. Difficulty: 2 Medium Topic: Aggregate Planning Techniques Learning Objective: 08-02 Construct and evaluate aggregate plans that employ different strategies for meeting demand. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

249

61) Using constant workforce and varying inventory and stock out, what would be the constant workforce? Production required in periods 1,2 and 3 respectively are 1,200, 1,500 and 900 units. One worker during the panning horizon can produce two units in one day. Number of work days are 22 in period 17 in period 2 and 21 in period 3. Assume that the beginning inventory and the ending inventory required are 300 units each. What is the number of workers required during the planning horizon of three periods? A) 60 B) 600 C) 35 D) 30 E) 300 Answer: D Explanation: Total production required = Total demand during the three period + ending inventory required – beginning inventory = 1,200 + 1,500 + 900 + 300 – 300 = 3,600. Number of work days available = 22 + 17 + 21 = 60 days. One worker can produce 60 × 2 = 120 units during the planning horizon. So number of workers needed to produce 3,600 units = 3,600 /120 = 30. So 30. Difficulty: 2 Medium Topic: Aggregate Planning Techniques Learning Objective: 08-02 Construct and evaluate aggregate plans that employ different strategies for meeting demand. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 9 Material Requirements Planning 1) MRP stands for manufacturing requirements planning. Answer: FALSE Explanation: Material requirements planning (MRP) Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) MRP stands for material requirements planning. Answer: TRUE Explanation: Material requirements planning (MRP) Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand 250

AACSB: Analytic Accessibility: Keyboard Navigation 3) Manufacturing firms maintain bill of materials (BOM) files, which are simply a sequencing of everything that goes into a final product. Answer: TRUE Explanation: The bill of materials (BOM) file contains the complete product description, listing not only the materials, parts, and components but also the sequence in which the product is created. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

251

4) MRP is based on dependent demand. Answer: TRUE Explanation: MRP is based on dependent demand. Dependent demand is caused by the demand for a higher-level item. Tires, wheels, and engines are dependent demand items based on the demand for automobiles, for example. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) MRP is most valuable where a number of products are made in batches using the same productive equipment. Answer: TRUE Explanation: MRP is most valuable in industries where a number of products are made in batches using the same productive equipment Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) The master production schedule states the number of items to be produced during specific time periods. Answer: TRUE Explanation: The master production schedule states the number of items to be produced during specific time periods. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

252

7) MRP is least valuable in industries where a number of products are made in batches using the same productive equipment. Answer: FALSE Explanation: MRP is most valuable in industries where a number of products are made in batches using the same productive equipment. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. Answer: TRUE Explanation: MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) MRP provides the schedule specifying when each part and component of an end item should be ordered or produced. Answer: TRUE Explanation: MRP provides the schedule specifying when each of these items should be ordered or produced. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

253

10) The deeper one looks into the product creation sequence, the more the requirements of dependent demand items tend to become more "lumpy." Answer: TRUE Explanation: The requirements of dependent demand items tend to become more and more lumpy as we go farther down into the product creation sequence. Difficulty: 2 Medium Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) The deeper one looks into the product creation sequence, the more the requirements of dependent demand items tend to smooth out and become even over time. Answer: FALSE Explanation: The requirements of dependent demand items tend to become more and more lumpy as we go farther down into the product creation sequence. Difficulty: 2 Medium Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) A master production schedule is an input to a material requirements planning (MRP) system. Answer: TRUE Explanation: Generally, the master schedule deals with end items and is a major input to the MRP process. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

254

13) An input to the material requirements planning (MRP) system is an exception report. Answer: FALSE Explanation: This BOM file is one of the three main inputs to the MRP program. (The other two are the master schedule and the inventory records file.) Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) An input to the material requirements planning (MRP) system is an inventory records file. Answer: TRUE Explanation: This BOM file is one of the three main inputs to the MRP program. (The other two are the master schedule and the inventory records file.) Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) An output of MRP is a bill of materials (BOM) file. Answer: FALSE Explanation: This BOM file is one of the three main inputs to the MRP program. (The other two are the master schedule and the inventory records file.) Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

255

16) A BOM file is often called a product structure file or product tree because it shows how a product is put together. Answer: TRUE Explanation: The BOM file is often called the product structure file or product tree because it shows how a product is put together. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) Computing the quantity of each component that goes into a finished product can be done by expanding (or exploding) each item in a product structure file and summing at all levels. Answer: TRUE Explanation: To compute the amount of each item needed at the lower levels, each item would need to be expanded ("exploded") and summed. A more efficient procedure is to store parts data in simple single-level lists. That is, each item and component is listed showing only its parent and the number of units needed per unit of its parent. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) A modular bill of materials includes items with fractional options. Answer: FALSE Explanation: A super bill of materials includes items with fractional options. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

256

19) A modular bill of materials is the term for an item that can be produced and stocked as a subassembly. Answer: TRUE Explanation: A modular bill of materials is the term for a buildable item that can be produced and stocked as a subassembly. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) The MRP program performs its analysis from the bottom up of the product structure trees, imploding requirements level by level. Answer: FALSE Explanation: The MRP program performs its analysis from the top of the product structure downward, calculating requirements level by level. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) Net change MRP systems are "activity" driven. Answer: TRUE Explanation: Net change systems are "activity" driven and requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Net change enables the system to reflect in "real time" the exact status of each item managed by the system. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

257

22) In a net change MRP system, requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Answer: TRUE Explanation: Net change systems are "activity" driven and requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Net change enables the system to reflect in "real time" the exact status of each item managed by the system. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) In a net change MRP system, requirements and schedules are considered rigid and never updated. Answer: FALSE Explanation: Net change systems are "activity" driven and requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Net change enables the system to reflect in "real time" the exact status of each item managed by the system. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Net change MRP reflects the exact status of each item managed by the system in "real time." Answer: TRUE Explanation: Net change systems are "activity" driven and requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Net change enables the system to reflect in "real time" the exact status of each item managed by the system. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

258

25) Low level coding in MRP indicates the exact status of each item managed by the system in "real time." Answer: FALSE Explanation: Low-level coding (is where) each item is placed at the lowest level at which it appears in the structure hierarchy. Difficulty: 1 Easy Topic: An Example Using MRP Learning Objective: 09-03 Analyze an MRP problem. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) In a net change MRP program, a change in one item will result in a completely new inventory plan and schedule for every item in the master production schedule. Answer: FALSE Explanation: Net change systems are "activity" driven and requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Net change enables the system to reflect in "real time" the exact status of each item managed by the system. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) Generally, determining lot sizes in MRP systems is simple. Answer: FALSE Explanation: Determination of lot sizes in an MRP system is a complicated and difficult problem. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

259

28) A lot-for-lot (L4L) lot sizing technique does not take into account setup costs or capacity limitations. Answer: TRUE Explanation: Lot-for-lot (L4L) is the most common technique. It: • Sets planned orders to exactly match the net requirements. • Produces exactly what is needed each week with none carried over into future periods. • Minimizes carrying cost. • Does not take into account setup costs or capacity limitations. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) The lot-for-lot (L4L) lot sizing technique minimizes carrying cost by taking into account setup costs and capacity limitations. Answer: FALSE Explanation: Lot-for-lot (L4L) is the most common technique. It • Sets planned orders to exactly match the net requirements. • Produces exactly what is needed each week with none carried over into future periods. • Minimizes carrying cost. • Does not take into account setup costs or capacity limitations. Difficulty: 2 Medium Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) Lot-for-lot (L4L) is the most common lot sizing technique. Answer: TRUE Explanation: Lot-for-lot (L4L) is the most common technique. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

260

31) The economic order quantity (EOQ) lot sizing technique produces or acquires exactly the amount of product that is needed each time period with none carried over into future periods. Answer: FALSE Explanation: EOQ assumes that parts are used continuously during the period. The lot sizes generated by EOQ do not always cover the entire number of periods. For example, the EOQ might provide the requirements for 4.6 periods (when another EOQ would be needed). Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) The economic order quantity (EOQ) lot sizing technique uses the "square root formula" to balance setup cost, carrying cost and cost of stock-outs. Answer: FALSE Explanation: The EOQ model balances setup and holding costs. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) The economic order quantity (EOQ) lot sizing technique uses the "square root formula" to balance setup cost and carrying cost. Answer: TRUE Explanation: The EOQ model balances setup and holding costs. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

261

34) The least total cost method (LTC) lot-sizing technique calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal. Answer: TRUE Explanation: The least total cost method (LTC) is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) The least unit cost method (LUC) lot-sizing technique calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal. Answer: FALSE Explanation: The least unit cost method is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) The least unit cost method of lot-sizing technique adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost. Answer: TRUE Explanation: The least unit cost method is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

262

37) The least unit cost method of lot-sizing adds ordering, stock-out, and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost. Answer: FALSE Explanation: The least unit cost method is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) "Projected available balance" is a term referring to unsold finished goods inventory. Answer: FALSE Explanation: Projected available balance is the amount of inventory (not just unsold finished goods) that is expected as of the end of a period Difficulty: 1 Easy Topic: An Example Using MRP Learning Objective: 09-03 Analyze an MRP problem. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) Projected available balance is the amount of inventory that is expected only at the beginning of a period. Answer: FALSE Explanation: Projected available balance is the amount of inventory that is expected as of the end of a period (or the beginning of the next period). Difficulty: 1 Easy Topic: An Example Using MRP Learning Objective: 09-03 Analyze an MRP problem. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

263

40) The three main inputs to an MRP system are the bill of materials, the master schedule and the inventory records file. Answer: TRUE Explanation: This BOM file is one of the three main inputs to the MRP program. (The other two are the master schedule and the inventory records file.) Difficulty: 2 Medium Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) When implemented correctly, MRP links all areas of the business. Answer: FALSE Explanation: Material requirements planning is the key piece of logic that ties the production functions together from a material planning and control view. Page 293: (MRP is an) integral part of enterprise resource planning that ties together all the major functions of a firm Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) The time-phased plan specifying how many and when the firm plans to build each end item is called the materials requirements plan (MRP.) Answer: FALSE Explanation: The master production schedule (MPS) is the time-phased plan specifying how many and when the firm plans to build each end item. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

264

43) The time-phased plan specifying how many and when the firm plans to build each end item is called the master production schedule (MPS). Answer: TRUE Explanation: The master production schedule (MPS) is the time-phased plan specifying how many and when the firm plans to build each end item. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) Time fences are periods of time having some specified level of opportunity for the customer to make changes. Answer: TRUE Explanation: Management defines time fences as periods of time having some specified level of opportunity for the customer to make changes. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) The customer grace period is a time-span having some specified level of opportunity for the customer to make changes. Answer: FALSE Explanation: Management defines time fences as periods of time having some specified level of opportunity for the customer to make changes. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

265

46) A BOM file is also called which of the following? A) Product tree B) Stocking plan C) Inventory usage record D) Production parts plan E) Time bucket schedule Answer: A Explanation: The BOM file is often called the product structure file or product tree because it shows how a product is put together. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

266

47) Which of the following industry types have high expected benefits from the application of MRP? A) Fabricate-to-stock B) Fabricate-to-order C) Assemble-to-stock D) Continuous process E) Service and repair parts Answer: C Explanation: See exhibit 9.2.

Difficulty: 2 Medium Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

267

48) Which of the following industry types have high expected benefits from the application of MRP? A) Fabricate-to-order B) Hospitals C) Assemble-to-order D) Aircraft manufacturers E) Oil refineries Answer: C Explanation: See exhibit 9.2.

268

49) Which of the following industry types will not benefit greatly from the application of MRP? A) Fabricate-to-order B) Assemble-to-stock C) Assemble-to-order D) Manufacture-to-order E) None of these Answer: A Explanation: See exhibit 9.2.

269

50) A product tree can do which of the following? A) Help to compute component usage B) Reduce product scrap C) Reduce labor overtime D) Reduce regular time labor E) Locate raw material supplies Answer: A Explanation: The BOM file is often called the product structure file or product tree because it shows how a product is put together. It contains the information to identify each item and the quantity used per unit of the item of which it is a part. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

270

51) Which of the following is an input to the master production schedule (MPS)? A) Inventory records file B) The aggregate plan C) The bill of materials D) The exception report E) Planned order schedules Answer: B Explanation: See exhibit 9.3.

271

52) Which of the following is one of the main purposes of a MRP system? A) Educate personnel in basic work rules B) To determine the amount of materials needed to produce each end item. C) Stimulate the work force D) Decrease labor requirements E) Increase inventory accuracy Answer: B Explanation: MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. MRP also provides the schedule specifying when each of these items should be ordered or produced. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) One of the main purposes of a MRP system is which of the following? A) Track inventory levels. B) Create productive capacity. C) Decrease layers of management. D) Develop schedules specifying when each component should be ordered or produced. E) Upgrade manufacturing's professionalism. Answer: D Explanation: MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. MRP also provides the schedule specifying when each of these items should be ordered or produced. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

272

54) Which of the following is most closely related to the reason a firm might implement MRP? A) So they can order the right parts B) So they can order parts sufficient for immediate use C) So they can insure that parts to arrive prior to when they are needed D) To assure appropriate quality levels E) To keep process costs between the LCL and the UCL Answer: A Explanation: MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. MRP also provides the schedule specifying when each of these items should be ordered or produced. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) MRP systems seek to achieve which of the following? A) Minimize lot sizes B) Determine the number of dependent demand items needed C) Relieve capacity bottlenecks D) Provide a yardstick for future improvements E) Improve on JIT methods Answer: B Explanation: MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. MRP also provides the schedule specifying when each of these items should be ordered or produced. MRP is based on dependent demand. Dependent demand is caused by the demand for a higher-level item. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

273

56) Which of the following is an input to the master production schedule? A) Prototype products from product development B) Aggregate component schedule C) Peg reports D) Exception reports E) Forecasts of demand from customers Answer: E Explanation: See exhibit 9.5.

Difficulty: 1 Easy Topic: An Example Using MRP Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

274

57) Which of the following is an input to the master production schedule? A) Bill of materials (BOM) file B) Inventory records file C) Exception reports D) Planned-order schedules E) None of these Answer: E Explanation: See exhibit 9.5.

Difficulty: 2 Medium Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

275

58) Which of the following is an input file necessary to run an MRP system? A) Bill of materials (BOM) file B) Quality management report C) Exception reports D) Planned-order schedules E) Purchasing contracts Answer: A Explanation: See exhibit 9.5.

Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

276

59) Which of the following is an input file necessary to run an MRP system? A) Exception report B) Computer-aided-design files C) Inventory records file D) Personnel files E) Planned order schedule Answer: C Explanation: See exhibit 9.5.

277

60) Which of the following is not a production activity report generated by MRP? A) Exception report B) Planning report C) Performance control report D) Planned-order schedules E) Bill of materials report Answer: E Explanation: See exhibit 9.5.

278

61) In an MRP program, the program accesses the status segment of an inventory record according to specific periods called which of the following? A) Cubed time units B) Time buckets C) BOM units D) Time modules E) Time lines Answer: B Explanation: The MRP program accesses the status segment of the record according to specific time periods (called time buckets in MRP slang). These records are accessed as needed during the program run. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) Which of the following files allows us to retrace a material requirement upward in the product structure through each level, identifying each parent item that created the demand? A) Planning bill of materials file B) Modular bill of materials file C) Super bill of materials file D) Exception report file E) Peg record file Answer: E Explanation: The MRP program allows the creation of a peg record file either separately or as part of the inventory record file. Pegging requirements allows us to retrace a material requirement upward in the product structure through each level, identifying each parent item that created the demand. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

279

63) We would expect to see which of the following in an MRP system's inventory status file? A) End items produced B) Late/early delivery records C) Scrap losses D) Labor efficiency E) Computer errors Answer: C Explanation: The inventory status file is kept up to date by posting inventory transactions as they occur. These changes occur because of stock receipts and disbursements, scrap losses, wrong parts, canceled orders, and so forth. Difficulty: 2 Medium Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) In a typical inventory status record which of the following would you not expect to see? A) Scrap allowance B) Order quantity C) Gross requirements D) Planned-order releases E) Lost items Answer: E Explanation: The inventory status file is kept up to date by posting inventory transactions as they occur. These changes occur because of stock receipts and disbursements, scrap losses, wrong parts, canceled orders, and so forth. Difficulty: 2 Medium Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

280

65) Which of the following is considered a primary report in an MRP system? A) Planning reports B) Performance reports C) Exception reports D) Planned order schedules E) Cycle counting reports Answer: D Explanation: See exhibit 9.5.

281

66) Which of the following is considered a secondary report in an MRP system? A) Planned order schedule B) Exceptions reports C) Inventory record D) Firm orders from known customers E) Engineering change reports Answer: B Explanation: See exhibit 9.5.

282

67) Which of the following is considered a primary report in an MRP system? A) Planned order schedule B) Peg report C) Planning report D) Inventory accuracy report E) Aggregate production plan report Answer: A Explanation: See exhibit 9.5.

283

68) Which of the following is the net requirement using an MRP program if the gross requirement is 1,250 and the inventory on hand is 50? A) 1,200 B) 1,300 C) 1,150 D) 2,450 E) None of these Answer: A Explanation: 1,250 – 50 = 1,200. Net requirements are the amounts that are needed week by week in the future over and above what is currently on hand or committed to through an order already released and scheduled. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 69) Which of the following is the net requirement using an MRP program if the gross requirement is 1,000 and the inventory on hand is 500? A) 1,000 B) 950 C) 500 D) 400 E) 350 Answer: C Explanation: 1,000 – 500 = 500. Net requirements are the amounts that are needed week by week in the future over and above what is currently on hand or committed to through an order already released and scheduled. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

284

70) Which of the following is the planned-order release using an MRP program if the gross requirement is 5,000, inventory on hand is 1,200, and planned receipts are 800? A) 7,000 B) 4,200 C) 3,000 D) 2,000 E) 1,200 Answer: C Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 71) Which of the following is the planned-order release using an MRP program if the gross requirement is 670 and the inventory on hand is 600? A) 670 B) 600 C) 530 D) 70 E) None of these Answer: D Explanation: Using net requirements, the program calculates when orders should be received to meet these requirements. This can be a simple process of just scheduling orders to arrive according to the exact net requirements or a more complicated process where requirements are combined for multiple periods. This schedule of when orders should arrive is referred to as "planned-order receipts." Since there is typically a lead time associated with each order, the next step is to find a schedule for when orders are actually released. Offsetting the "planned-order receipts" by the required lead time does this. This schedule is referred to as the "planned-order release." 670 – 600 = 70. Difficulty: 1 Easy Topic: Material Requirements Planning System Structure Learning Objective: 09-02 Understand how the MRP system is structured. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

285

72) Which of the following can be used for lot sizing in an MRP system? A) Low-level coding B) Time bucket size C) Least unit cost D) Inventory record file E) Peg inventory Answer: C Explanation: The lot -sizing techniques presented are lot-for-lot (L4L), economic order quantity (EOQ), least total cost (LTC), and least unit cost (LUC). Low level coding, time bucket size, inventory record files and peg inventory are not lot sizing techniques but least unit cost is. Hence Least unit cost is the correct answer. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 73) Which of the following is not a lot sizing technique used in MRP systems? A) Lot-for-lot (L4L) B) Economic order quantity (EOQ) C) Least total cost (LTC) D) Least unit cost (LUC) E) Warehouse loading factor (WLF) Answer: E Explanation: The lot -sizing techniques presented are lot-for-lot (L4L), economic order quantity (EOQ), least total cost (LTC), and least unit cost (LUC). Warehouse loafing factor is not a lot sizing technique. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

286

74) Under the lot-for-lot (L4L) lot sizing technique as used in MRP, we would expect which of the following? A) A consistent lag of supply behind demand B) Minimized carrying costs C) Minimized set-up costs D) A just in time management philosophy E) Minimized quality problems Answer: B Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) If annual demand is 6,125 units, annual holding cost is $5 per unit, and setup cost per order is $50, which of the following is the EOQ lot size? A) 350 B) 247 C) 23 D) 185 E) 78 Answer: A Explanation: From the equation: EOQ = 350 = Square root of (2 x 6125 x50 / 5) Difficulty: 2 Medium Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

287

76) If annual demand is 12,000 units, annual holding cost is $15 per unit, and setup cost per order is $25, which of the following is the EOQ lot size? A) 2,000 B) 1,200 C) 1,000 D) 300 E) 200 Answer: E Explanation: From the equation: EOQ = 200 = Square root of (2 x 12,000 x 25/15) Difficulty: 2 Medium Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 77) Which of the following is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal? A) Economic order quantity B) Lot-for-lot C) Least total cost D) Least unit cost E) ABC analysis Answer: C Explanation: The least total cost method is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

288

78) Which of the following is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot size in which these are most nearly equal? A) Kanban B) Just-in-time system C) MRP D) Least unit cost E) Least total cost Answer: E Explanation: The least total cost method is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) Which of the following is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost? A) Economic order quantity B) Lot-for-lot C) Least total cost D) Least unit cost E) Inventory item averaging Answer: D Explanation: The least unit cost method is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost. Difficulty: 1 Easy Topic: Lot Sizing in MRP Systems Learning Objective: 09-04 Evaluate and compare MRP lot-sizing techniques. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

289

80) The acronym ERP stands for: A) Executive reliability profile—A human resources program that identifies fast-track middle managers. B) Erratic response parameter—A quality metric indicating that a process is in or out of statistical control. C) Enterprise resource planning—A data base of that ties together all application programs in a firm. D) Emergency response plan—A document required by government indicating planned responses to emergency situations. E) Elevated reply protocol—A list of executives authorized to deal with difficult customer concerns. Answer: C Explanation: Enterprise resource planning (ERP) is a computer system that integrates application programs in accounting, sales, manufacturing, and the other functions in a firm. This integration is accomplished through a database shared by all the application programs. Difficulty: 1 Easy Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) From the list below select the one item that the master scheduler does not do to ensure good master scheduling. A) Include all demands from product sales, warehouse replenishment, spares, and interplant requirements. B) Be involved with customer order promising. C) Be visible to all levels of management. D) Trade off conflicts to make it likely that manufacturing will meet its goals. E) Identify and communicate all problems. Answer: D Difficulty: 2 Medium Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

290

82) Freezing the master schedule is: A) not truly feasible because down the road it will become slushy again. B) a commitment to precisely follow the master schedule in the future. C) done to avoid the chaos of expediting and resultant overdue orders. D) preserves the master schedule until it is ready to be used. E) rarely attempted by manufacturing firms. Answer: C Explanation: The purpose of time fences is to maintain a reasonably controlled flow through the production system. Unless some operating rules are established and adhered to, the system could be chaotic and filled with overdue orders and constant expediting. Each firm has its own time fences and operating rules. Under these rules, frozen could be defined as anything from absolutely no changes to only the most minor of changes. Slushy may allow changes in specific products within a product group so long as parts are available. Difficulty: 2 Medium Topic: Understanding Material Requirements Planning Learning Objective: 09-01 Explain what material requirements planning (MRP) is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) In an MRP problem, A is an MPS item. Every A requires 2 B's and 3 C's. Every B requires 5 C's. All lead times are two periods. All initial inventory values are 0. Use lot-for-lot method for order quantities for all items. If gross requirement for A is 500 in period 8, what will be the planned order release for B in period 4? A) 0 B) 1,000 C) 500 D) 1,500 E) 6,500 Answer: B Explanation: Since inventory of all items are 0, and lead times are 2 periods, gross requirements of 500 for A will generate net requirement of 500, in turn generating a planned order release of 500 units of A in period 6. This in turn will generate a gross requirement of 1,000 (since every A requires 2 B's) for B in period 6. Here again, since the initial inventory is 0, lead time is 2, and lot-for-lot is used for determining planned order release quantities, the planned order release for B in period 4 should be 1,000. Difficulty: 2 Medium Topic: Performing MRP Calculations Learning Objective: 09-03 Analyze an MRP problem. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

291

84) In an MRP problem, A is an MPS item. Every A requires 2 B's and 3 C's. Every B requires 5 C's. All lead times are two periods. Initial inventory values for A is 100, B is 200 and C is 0. Use lot-for-lot method for order quantities for all items. If gross requirement for A is 800 in period 9, what will be the planned order release for B in period 5? A) 1,600 B) 1,400 C) 700 D) 800 E) 1,200 Answer: E Explanation: Since initial inventory of A is 100, net requirements for A in period 9 will be (800 − 100), 700. Since lot-for-lot is used for planned order release quantities, this will generate planned order release of 700 units of A in period 7. This in turn will generate a gross requirement of 1,400 (since every A requires 2 B's) for B in period 7. Since the initial inventory of B is 200, net requirement for B in period 7 will be (1,400 − 200) or 1,200. Since the lead time for B is 2, and lot-for-lot is used for determining planned order release quantities, the planned order release for B in period 5 should be 1,200. Difficulty: 2 Medium Topic: Performing MRP Calculations Learning Objective: 09-03 Analyze an MRP problem. Bloom's: Analyze AACSB: Reflective Thinking Accessibility: Keyboard Navigation

292

85) In an MRP problem, A is an MPS item. Every A requires 3 B's and 2 C's. Every B requires 5 C's. All lead times are one period. Initial inventory values for all items are 0. Use lot-for-lot method for order quantities for all items. If gross requirement for A is 400 in period 10, what will be the planned order release for C in period 8? A) 800 B) 1,600 C) 6,800 D) 6,000 E) 1,200 Answer: A Explanation: Since initial inventory of A is 0, net requirements for A in period 10 will be 400. Since lot-for-lot is used for planned order release quantities, this will generate a net requirement in period 10 for A of 400, and hence planned order release of 400 units of A in period 9. This in turn will generate a gross requirement of 800 (since every A requires 2 C's) for C in period 9. Since the initial inventory of C will be 0, using lot-for-lot, net requirement for C in period 9 will be (800-0) or 800. Since the lead time for C is 1, and lot-for-lot is used for determining planned order release quantities, the planned order release for C in period 8 should be 800. Note that C will have gross requirements in other periods such as 8 created by planned order release for B in period 8. However, since lot-for-lot is used and 0 initial inventory is given such gross requirements in prior periods will not create any additional gross requirements for C in period 9. Hence, no additional planned order releases for C in period 8. Difficulty: 2 Medium Topic: Performing MRP Calculations Learning Objective: 09-03 Analyze an MRP problem. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

293

86) In an MRP problem, A is an MPS item. Every A requires 2 B's and 3 C's. Every B requires 5 C's. All lead times are two periods. All initial inventory values are 0. Use lot-for-lot method for order quantities for all items. What is the low level code (LLC) for B and C? A) LLC for B is 2 and C is 1 B) LLC for both B and C are 2 C) LLC for B is 1 and C is 2 D) LLC for B is 0 and C is 1 E) LLC for all items are 1 Answer: C Explanation: Drawing a bill of materials for the product A, note that A is in level 0, B is in level 1 and C shows up in levels 1 and 2. Low level code is the lowest level at which an item appears in the bill of materials, low level code for B is 1 and low level code for C is 2. Difficulty: 2 Medium Topic: Performing MRP Calculations Learning Objective: 09-03 Analyze an MRP problem. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 10 Quality Management and Six Sigma 1) TQM was defined in the textbook as managing the entire organization so that it excels on all dimensions of products and services that are important to the customer. Answer: TRUE Explanation: Total quality management may be defined as "managing the entire organization so that it excels on all dimensions of products and services that are important to the customer." Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) TQM is an acronym meaning "total quality measurement." Answer: FALSE Explanation: Total quality management may be defined as "managing the entire organization so that it excels on all dimensions of products and services that are important to the customer." It has two fundamental operational goals, namely 1. Careful design of the product or service. 2. Ensuring that the organization's systems can consistently produce the design. These two goals can only be achieved if the entire organization is oriented toward them—hence the term total quality management. TQM became a national concern in the United States in the 1980s. Difficulty: 1 Easy 294

Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) One tool used in total quality management is the run chart. Answer: TRUE Explanation: The tools common to all quality efforts, including Six Sigma, are flowcharts, run charts, Pareto charts, histograms, checksheets, cause-and-effect diagrams, and control charts. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) One SPC tool used in total quality management is the Pareto chart. Answer: TRUE Explanation: The tools common to all quality efforts, including Six Sigma, are flowcharts, run charts, Pareto charts, histograms, checksheets, cause-and-effect diagrams, and control charts. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) An operational goal of total quality management is the careful design of the product or service. Answer: TRUE Explanation: Total quality management has two fundamental operational goals: 1. Careful design of the product or service. 2. Ensuring that the organization's systems can consistently produce the design. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) An operational goal of total quality management is ensuring that the organization's systems can consistently produce the product or service as it is designed. Answer: TRUE Explanation: Total quality management has two fundamental operational goals: 295

1. Careful design of the product or service. 2. Ensuring that the organization's systems can consistently produce the design. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

296

7) An operational goal of total quality management is ensuring that the organization's systems will never produce a defective product or service. Answer: FALSE Explanation: Total quality management has two fundamental operational goals: 1. Careful design of the product or service. 2. Ensuring that the organization's systems can consistently produce the design. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Design quality refers to the inherent value of the product in the marketplace. Answer: TRUE Explanation: Design quality refers to the inherent value of the product in the marketplace and is thus a strategic decision for the firm. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) One of the tools common to all quality efforts is leadership. Answer: FALSE Explanation: The tools common to all quality efforts, including Six Sigma, are flowcharts, run charts, Pareto charts, histograms, checksheets, cause-and-effect diagrams, and control charts. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

297

10) In 1997 the Malcolm Baldrige National Quality Improvement Act established the U.S. annual award for total quality management. Answer: FALSE Explanation: So severe was the quality shortfall in the United States that improving it throughout industry became a national priority, with the Department of Commerce establishing the Malcolm Baldrige National Quality Award in 1987 to help companies review and structure their quality programs. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Conformance quality is a strategic decision for a firm. Answer: FALSE Explanation: Conformance quality refers to the degree to which the product or service design specifications are met. The activities involved in achieving conformance are of a tactical, day-to-day nature. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) The Malcolm Baldrige National Quality Award represents the U.S. government's endorsement of quality as an essential part of successful business strategy. Answer: TRUE Explanation: So severe was the quality shortfall in the United States that improving it throughout industry became a national priority, with the Department of Commerce establishing the Malcolm Baldrige National Quality Award in 1987 to help companies review and structure their quality programs. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

298

13) While business organizations can seek to achieve the Baldrige National Quality Award, universities cannot. Answer: FALSE Explanation: Up to 18 awards total may be given annually in these categories: manufacturing, service, small business, education and health care, and not-for-profit. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) While small business organizations can seek to achieve the Baldrige National Quality Award, hospitals cannot. Answer: FALSE Explanation: Up to 18 awards total may be given annually in these categories: manufacturing, service, small business, education and health care, and not-for-profit. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) A quality guru named Philip Crosby defined quality as fitness for use. Answer: FALSE Explanation: In Exhibit 10.1, Mr. Juran is identified as the one who defined quality as fitness for use. For Crosby, quality was conformance to requirements Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

299

16) A quality guru named Philip Crosby defined quality as conformance to requirements. Answer: TRUE Explanation: In Exhibit 10.1, Mr. Crosby is identified as the one who defined quality as conformance to requirements Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) A quality guru named Joseph M. Juran defined quality as fitness for use. Answer: TRUE Explanation: In Exhibit 10.1, Mr. Juran is identified as the one who defined quality as fitness for use. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) A quality guru named Philip Crosby suggested that a general approach to quality management should involve prevention, not inspection. Answer: TRUE Explanation: In Exhibit 10.1, Mr. Crosby is identified as the guru whose general approach to quality was prevention, not inspection. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

300

19) A quality guru named Joseph M. Juran is well known for his program structured around "14 points" for management. Answer: FALSE Explanation: In exhibit 10.1 Mr. Deming is identified as having 14 points for management. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Fundamental to any quality program is the determination of quality specifications and the costs of achieving (or not achieving) those specifications. Answer: TRUE Explanation: Fundamental to any quality program is the determination of quality specifications and the costs of achieving (or not achieving) those specifications. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) The term "conformance quality" refers to the relative level of performance of a product as compared to competing products. For instance, certain luxury sedans are said to be of "higher quality" than some low-priced subcompact automobiles. Answer: FALSE Explanation: Conformance quality refers to the degree to which the product or service design specifications are met. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

301

22) "Quality at the source" refers to the degree to which a product or service design specifications are met. Answer: FALSE Explanation: Quality at the source is frequently discussed in the context of conformance quality. This means that the person who does the work takes responsibility for making sure that his or her output meets specifications. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) Design quality in products refers to the degree to which a product or service design specifications are met. Answer: FALSE Explanation: Conformance quality refers to the degree to which the product or service design specifications are met. Design quality refers to the inherent value of the product in the marketplace. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) One of the definitions for the cost of quality is that it represents the costs attributable to the production of quality that is not 100 percent perfect. Answer: TRUE Explanation: There are a number of definitions and interpretations of the term cost of quality. From the purist's point of view, it means all of the costs attributable to the production of quality that is not 100 percent perfect. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

302

25) Six Sigma refers to the philosophy and methods that some companies use to eliminate defects in their products and processes. Answer: TRUE Explanation: Six Sigma refers to the philosophy and methods companies such as General Electric and Motorola use to eliminate defects in their products and processes. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) A process that is in Six Sigma control will produce no more than two defects out of every million units. Answer: FALSE Explanation: A process that is in Six Sigma control will produce no more than two defects out of every billion units. Difficulty: 2 Medium Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) An opportunity flow diagram is used to separate the value-added from the non-value-added steps in a process. Answer: TRUE Explanation: Opportunity flow diagram is used to separate value-added from non-value-added steps in a process. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

303

28) An opportunity flow diagram is a time sequenced chart showing plotted values measuring the flow of end product or components. Answer: FALSE Explanation: Opportunity flow diagram is used to separate value-added from non-value-added steps in a process. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Philip Crosby states that the correct cost for a well-run quality management program should be under 2.5 percent of sales. Answer: TRUE Explanation: How significant is the cost of quality? It has been estimated at between 15 and 20 percent of every sales dollar—the cost of reworking, scrapping, repeated service, inspections, tests, warranties, and other quality-related items. Philip Crosby states that the correct cost for a well-run quality management program should be under 2.5 percent. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) W. Edwards Deming states that the correct cost for a well-run quality management program should be under 0.5 percent of sales. Answer: FALSE Explanation: How significant is the cost of quality? It has been estimated at between 15 and 20 percent of every sales dollar—the cost of reworking, scrapping, repeated service, inspections, tests, warranties, and other quality-related items. Philip Crosby states that the correct cost for a well-run quality management program should be under 2.5 percent. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

304

31) The term CTQ is used in the "Define (D)" portion of the DMAIC methodology. Answer: TRUE Explanation: Define (D): Identify CTQs (critical-to-quality characteristics) that the customer considers to have the most impact on quality. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) The term CTQ stands for "Cost Through Quality", which is another way to express Philip Crosby's idea that "Quality is Free." Answer: FALSE Explanation: Define (D): Identify CTQs (critical-to-quality characteristics) that the customer considers to have the most impact on quality. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) Design of experiments (DOE) refers to work done before production of early model prototypes of a new product. Answer: FALSE Explanation: Design of experiments is a statistical methodology used for determining the cause-and-effect relationship between process variables and the output variable. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

305

34) Design of experiments (DOE) is sometimes referred to as multivariate testing. Answer: TRUE Explanation: Design of experiments is sometimes referred to as multivariate testing. Difficulty: 2 Medium Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) The International Organization for Standardization (ISO) is a specialized international agency recognized by affiliates in more than 160 countries. Answer: TRUE Explanation: International Organization for Standardization (ISO), is a specialized international agency recognized by affiliates in more than 160 countries Difficulty: 2 Medium Topic: ISO 9000 and ISO 14000 Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) ISO 9000 is primarily concerned with environmental management. Answer: FALSE Explanation: ISO 9000 has become an international reference for quality management requirements in business-to-business dealing, and ISO 14000 is primarily concerned with environmental management. Difficulty: 1 Easy Topic: ISO 9000 and ISO 14000 Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

306

37) ISO 14000 is primarily concerned with environmental management. Answer: TRUE Explanation: ISO 9000 has become an international reference for quality management requirements in business-to-business dealing, and ISO 14000 is primarily concerned with environmental management. Difficulty: 1 Easy Topic: ISO 9000 and ISO 14000 Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) ISO standards ask a company first to document and implement its systems for quality management and then to verify, by means of an internal audit, the compliance of those systems with the requirements of the standards. Answer: FALSE Explanation: These standards ask a company first to document and implement its systems for quality management and then to verify, by means of an audit conducted by an independent accredited third party, the compliance of those systems with the requirements of the standards. Difficulty: 1 Easy Topic: ISO 9000 and ISO 14000 Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) Variation in production systems that is caused by factors that can be clearly identified and possibly even managed is called assignable variation. Answer: TRUE Explanation: Variation caused by factors that can be clearly identified and possibly even managed is called assignable variation. Difficulty: 1 Easy Topic: Statistical Quality Control Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

307

40) An example of assignable variation in a production system may be that workers are not identically trained. Answer: TRUE Explanation: For example, variation caused by workers not being equally trained or by improper machine adjustment is assignable variation. Difficulty: 1 Easy Topic: Statistical Quality Control Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) An example of assignable variation in a production system may be that a machine is not adjusted properly. Answer: TRUE Explanation: For example, variation caused by workers not being equally trained or by improper machine adjustment is assignable variation. Difficulty: 1 Easy Topic: Statistical Quality Control Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) Variation that is inherent in a production process itself is called assignable variation. Answer: FALSE Explanation: Variation that is inherent in the process is called common variation. Difficulty: 1 Easy Topic: Statistical Quality Control Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

308

43) Variation that is inherent in a production process itself is called common variation. Answer: TRUE Explanation: Variation that is inherent in the process is called common variation. Difficulty: 1 Easy Topic: Statistical Quality Control Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) It is impossible to have zero variability in production processes. Answer: TRUE Explanation: However, engineers also know that it is impossible to have zero variability. Difficulty: 1 Easy Topic: Statistical Quality Control Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) Genichi Taguchi's view of the cost of quality is that variance is a discontinuous function. Answer: FALSE Explanation: Taguchi suggests that a more correct picture of the loss is shown in Exhibit 10.8. Notice that, in this graph, the cost is represented by a smooth curve. Difficulty: 1 Easy Topic: Statistical Quality Control Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) The capability index is used to gauge economic changes in service systems. Answer: FALSE Explanation: We use the capability index to measure how well our process is capable of producing relative to the design tolerances. Difficulty: 1 Easy Topic: Process Capability Learning Objective: 10-04 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) Process control is concerned with monitoring quality after the product or service has been produced. 309

Answer: FALSE Explanation: Process control is concerned with monitoring quality while the product or service is being produced. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) Statistical process control involves testing random samples of output from a process to determine whether the process is producing items within a preselected range. Answer: TRUE Explanation: Statistical process control (SPC) involves testing a random sample of output from a process to determine whether the process is producing items within a preselected range. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) Measurement by attributes means taking a sample, measuring the attribute in question and determining the level of quality in the population from which the sample was drawn. Answer: FALSE Explanation: Measurement by attributes means taking samples and using a single decision—the item is good or it is bad. Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

310

50) Attributes are those quality characteristics that are classified as either conforming or not conforming to specification. Answer: TRUE Explanation: Attributes are quality characteristics that are classified as either conforming or not conforming to specification. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) A p-chart has upper and lower control limits expressed as lines on the chart. As long as the sample values fall between these two lines there is no need to investigate process behavior. Answer: FALSE Explanation: See exhibit 10.11. This illustrates several situations where investigation of process behavior is necessary even though all points have fallen between the UCL and the LCL. For example, a run of five above or below the central line calls for one to investigate for the cause of sustained poor performance. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) The p-chart is only useful for sampling that deals with continuous variables. Answer: FALSE Explanation: p-charts record the results of attributes which are quality characteristics that are classified as either conforming or not conforming to specification. Goods or services may be observed to be either good or bad, or functioning or malfunctioning. For example, a lawnmower either runs or it doesn't; it attains a certain level of torque and horsepower or it doesn't. This type of measurement is known as sampling by attributes and involves discrete, not continuous measurements. Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

311

53) The value for Z used in quality control charts is based on the degree of confidence you want to have in the resulting UCL and LCL values. Answer: TRUE Explanation: Z = Number of standard deviations for a specific confidence level Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) If the fraction defective is 0.12 based on a sample size of 16, the standard deviation used in the p-chart is about 0.08. Answer: TRUE Explanation: Sp =

. p-bar = 0.12. Sp = Square root of (0.12 x (1 – 0.12)/16) = 0.0812.

Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation 55) If the fraction defective is 0.4 based on a sample size of 100, the standard deviation used in the p-chart is about 0.10. Answer: FALSE Explanation: Sp =

. p-bar = 0.4. Sp = Square root of (0.4 x (1 – 0.4)/100) = 0.049.

Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation

312

56) To obtain a 99.7 percent confidence level in a p-chart we would use a value of 3 for Z. Answer: TRUE Explanation: Typically, Z = 3 (99.7 percent confidence) Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation 57) Acceptance sampling is performed on goods that already exist to determine what percentage of items conforms to specifications. Answer: TRUE Explanation: Acceptance sampling is performed on goods that already exist to determine what percentage of products conform to specifications. Difficulty: 1 Easy Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) In acceptance sampling, the number of units in the sample (n) is determined by the interaction of the acceptable quality level (AQL), the lot tolerance percent defective (LTPD), the probability of rejecting a high quality lot (alpha), and the probability of accepting a low quality lot (beta). Answer: TRUE Explanation: A single sampling plan is defined by n and c, where n is the number of units in the sample and c is the acceptance number. Values for n and c are determined by the interaction of four factors (AQL, alpha, LTPD, and beta) that quantify the objectives of the product's producer and its consumer. Difficulty: 1 Easy Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

313

59) In acceptance sampling, the value for the acceptance number (c) is determined by the interaction of the acceptable quality level (AQL), the lot tolerance percent defective (LTPD), the probability of rejecting a high quality lot (alpha), and the probability of accepting a low quality lot (beta). Answer: TRUE Explanation: A single sampling plan is defined by n and c, where n is the number of units in the sample and c is the acceptance number. Values for n and c are determined by the interaction of four factors (AQL, alpha, LTPD, and beta) that quantify the objectives of the product's producer and its consumer. Difficulty: 1 Easy Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) AQL stands for accepting questionable lots in production quality management. Answer: FALSE Explanation: Lots are defined as high quality if they contain no more than a specified level of defectives, termed the acceptable quality level (AQL). Difficulty: 1 Easy Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) LTPD in acceptance sampling stands for "lot tolerance for parts defective." Answer: FALSE Explanation: Lots are defined as low quality if the percentage of defectives is greater than a specified amount, termed lot tolerance percent defective (LTPD). Difficulty: 1 Easy Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

314

62) The Greek letter alpha is associated with consumer's risk. Answer: FALSE Explanation: The probability associated with rejecting a high quality lot is denoted by the Greek letter alpha and is termed the producer's risk. Difficulty: 1 Easy Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) The probability associated with rejecting a high quality lot is denoted in acceptance sampling with the Greek letter alpha. Answer: TRUE Explanation: The probability associated with rejecting a high quality lot is denoted by the Greek letter alpha and is termed the producer's risk. Difficulty: 1 Easy Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) The probability associated with accepting a low quality lot is denoted in acceptance sampling with the Greek letter alpha. Answer: FALSE Explanation: The probability associated with accepting a low-quality lot is denoted by the letter beta and is termed the consumer's risk. Difficulty: 1 Easy Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

315

65) The producer's risk associated with rejecting a high quality lot is denoted in acceptance sampling with the Greek letter beta. Answer: FALSE Explanation: The probability associated with rejecting a high quality lot is denoted by the Greek letter alpha and is termed the producer's risk. Difficulty: 1 Easy Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) Total, one-hundred percent, inspection can never be cost justified. Answer: FALSE Explanation: Total (100 percent) inspection is justified when the cost of a loss incurred by not inspecting is greater than the cost of inspection. Difficulty: 1 Easy Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) One-hundred percent inspection is justified when the cost of inspection is low. Answer: FALSE Explanation: Total (100 percent) inspection is justified when the cost of a loss incurred by not inspecting is greater than the cost of inspection. Difficulty: 1 Easy Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

316

68) Sampling plans are generally displayed graphically through the use of operating characteristic (OC) curves. Answer: TRUE Explanation: Sampling plans are generally displayed graphically through the use of operating characteristic (OC) curves. Difficulty: 1 Easy Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) The capability index (Cpk) calculates the percentage of items being produced within specifications. Answer: FALSE Explanation: The capability index (Cpk) shows how well the parts being produced fit into the range specified by the design limits. Difficulty: 1 Easy Topic: Statistical Quality Control Learning Objective: 10-04 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) The capability index (Cpk) indicates the position of the mean and tails of a process's variance relative to design specifications. Answer: TRUE Explanation: The capability index (Cpk) is the position of the mean and tails of the process relative to design specifications. The more off-center, the greater the chance to produce defective parts. Difficulty: 1 Easy Topic: Statistical Quality Control Learning Objective: 10-04 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

317

71) Standard practice in statistical process control for variables is to set control limits so that 95 percent of the sample means will fall within the UCL and the LCL. Answer: FALSE Explanation: Typically, z = 3 (99.7 percent confidence) or z = 2.58 (99 percent confidence) is used. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) In variables sampling the actual measurements of the variable observed are used regardless of whether the unit is good or bad. Answer: TRUE Explanation: In variables sampling we measure the actual weight, volume, number of inches, or other variable measurements, and we develop control charts to determine the acceptability or rejection of the process based on those measurements. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) The philosophical leaders of the quality movement, Philip Crosby, W. Edwards Deming, and Joseph M. Juran, had the same general message about what it took to achieve outstanding quality. Which of the following was not part of that message? A) Quality is free B) Leadership from senior management C) Customer focus D) Total involvement of the workforce E) Continuous improvement Answer: A Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

318

74) The philosophical leaders of the quality movement, Philip Crosby, W. Edwards Deming, and Joseph M. Juran, had the same general message about what it took to achieve outstanding quality. Which of the following was part of that message? A) Fourteen steps for quality management B) Quality is free C) Customer focus D) Zero defects E) Six-sigma Answer: C Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) An analytical tool used in six-sigma quality improvement programs is which of the following? A) Leadership B) Continuous improvement C) Quick response D) Partnership diagrams E) Checksheets Answer: E Explanation: The tools common to all quality efforts, including Six Sigma, are flowcharts, run charts, Pareto charts, histograms, checksheets, cause-and-effect diagrams, and control charts. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

319

76) Which of the following is not an analytical tool used in six-sigma quality improvement programs? A) Run charts B) Pass charts C) Cause-and-effect diagrams D) Flowcharts E) Pareto charts Answer: B Explanation: The tools common to all quality efforts, including Six Sigma, are flowcharts, run charts, Pareto charts, histograms, checksheets, cause-and-effect diagrams, and control charts. Difficulty: 2 Medium Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) A flow chart as part of a six-sigma quality improvement process might be found in which DMAIC category? A) Define B) Measure C) Analyze D) Improve E) Control Answer: A Explanation: Flowcharts. There are many types of flow charts. The one shown in Exhibit 10.5 depicts the process steps as part of a SIPOC analysis. SIPOC in essence is a formalized input-output model, used in the define stage of a project. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

320

78) A fishbone diagram as part of a six-sigma quality improvement process might be found in which DMAIC category? A) Define B) Measure C) Analyze D) Improve E) Control Answer: C Explanation: Cause-and-effect diagrams, also called fishbone diagrams, they show hypothesized relationships between potential causes and the problem under study. Once the diagram is constructed, the analysis would proceed to find out which of the potential causes were in fact contributing to the problem. (See also exhibit 10.5) Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) An opportunity flow diagram as part of a six-sigma quality improvement process might be found in which DMAIC category? A) Define B) Measure C) Analyze D) Improve E) Control Answer: D Explanation: Opportunity flow diagram. This is used to separate value-added from non-value-added steps in a process. (See also Exhibit 10.5) Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

321

80) A Pareto chart as part of a Six Sigma quality improvement process might be found in which DMAIC category? A) Define B) Measure C) Analyze D) Improve E) Control Answer: B Explanation: Pareto charts help to break down a problem into the relative contributions of its components. (See also Exhibit 10.5) Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) Which of the following is an analytical tool used in Six Sigma quality improvement programs? A) Leadership B) Pareto Charts C) Management by fact D) Continuous improvement E) Kaizen Answer: B Explanation: The tools common to all quality efforts, including Six Sigma, are flowcharts, run charts, Pareto charts, histograms, checksheets, cause-and-effect diagrams, and control charts. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

322

82) Which of the following is not an analytical tool used in Six Sigma quality improvement programs? A) Flowcharts B) Run charts C) Control charts D) Pareto diagrams E) Decision diagrams Answer: E Explanation: The tools common to all quality efforts, including Six Sigma, are flowcharts, run charts, Pareto charts, histograms, checksheets, cause-and-effect diagrams, and control charts. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) Failure mode and effect analysis is used in Six Sigma projects. It involves which of the following? A) Closely examining each rejected part to determine the cause B) A careful sampling plan C) Calculating a risk priority number for each possible failure D) Reporting the effect each failure has had on a customer E) Multivariate testing Answer: C Explanation: Failure mode and effect analysis is a structured approach to identify, estimate, prioritize, and evaluate risk of possible failures at each stage of a process. It begins with identifying each element, assembly, or part of the process and listing the potential failure modes, potential causes, and effects of each failure. A risk priority number (RPN) is calculated for each failure mode. Difficulty: 2 Medium Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

323

84) Design of experiments is a statistical methodology often used in Six Sigma projects. It aims to accomplish which of the following? A) Keep careful track of the occurrences of each possible defect B) Determine the cause and effect relationships between process variables and output C) Report defects to management on a Pareto chart D) Carefully change each individual process variable until the cause of a defect is found E) Eliminate defects by finding out whom or what is causing them Answer: B Explanation: Design of experiments is a statistical methodology used for determining the cause-and-effect relationship between process variables and the output variable. In contrast to standard statistical tests, which require changing each individual variable to determine the most influential one, DOE permits experimentation with many variables simultaneously through carefully selecting a subset of them. Difficulty: 2 Medium Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85) The Malcolm Baldrige award selection process helps improve quality and productivity by which of the following means? A) Stimulating foreign based suppliers of American companies to improve quality B) Reporting quality levels among American firms C) Identifying American firms with the most difficult quality problems D) Providing feedback to applicants by the examiners E) Helping Baldrige award winners increase their sales Answer: D Explanation: The president of the United States traditionally presents the awards at a special ceremony in Washington, DC. A major benefit to all applicants is the feedback report prepared by examiners that is based on their processes and practices. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

324

86) Which of the following are eligible companies to be considered for the Baldrige award? A) Auditing firms B) Offshore suppliers to U.S. companies C) Firms operating only outside the U.S. D) State government agencies E) None of these Answer: A Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Which of the following are not eligible to be considered for the Baldrige Award? A) Small businesses B) Health care organizations C) Educational institutions D) State highway patrol organizations E) Nuclear power plants Answer: D Explanation: Up to 18 awards total may be given annually in these categories: manufacturing, service, small business, education and health care, and not-for-profit. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

325

88) The primary purpose of the Malcolm Baldrige National Quality Award is which of the following? A) To encourage the spread of statistical quality control. B) To improve human resource development and management in manufacturing. C) To help companies review and structure their quality programs. D) To prove that American firms were competitive in quality. E) To emphasize the use of quantitative methods in process management. Answer: C Explanation: The Department of Commerce established the Malcolm Baldrige National Quality Award in 1987 to help companies review and structure their quality programs. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 89) Applicants for the Baldrige Award for total quality management must submit an application of up to 50 pages that details the processes and results of their activities under seven major categories. Which of the following is one of those categories? A) DMAIC B) Customer and Market focus C) Standardization D) Control E) Inspection protocols Answer: B Explanation: Candidates for the award must submit an application of up to 50 pages that details the approach, deployment, and results of their quality activities under seven major categories: Leadership, Strategic Planning, Customer and Market Focus, Information and Analysis, Human Resource Focus, Process Management, and Business Results. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

326

90) The Malcolm Baldrige National Quality Award is given to organizations that have done which of the following? A) Instituted a six-sigma approach to total quality control B) Demonstrated a high level of product quality C) Demonstrated outstanding quality in their products and processes D) Have a world-class quality control function E) Most significantly improved their product quality levels Answer: C Explanation: The Award is given to organizations that have demonstrated outstanding quality in their products and processes. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) Which of the following is not a category reported in applying for the Baldrige Award? A) Corporate leadership B) Use of statistical quality control tools C) Business results D) Consumer and market focus E) Strategic planning Answer: B Explanation: Candidates for the award must submit an application of up to 50 pages that details the approach, deployment, and results of their quality activities under seven major categories: Leadership, Strategic Planning, Customer and Market Focus, Information and Analysis, Human Resource Focus, Process Management, and Business Results. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-01 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

327

92) The dimension of design quality that concerns the sensory characteristics of the product is which of the following? A) Features B) Serviceability C) Perceived quality D) Reputation E) Aesthetics Answer: E Explanation: Exhibit 10.2: "The Dimensions of Design Quality." Aesthetics: Sensory characteristics (sound, feel, look, and so on) Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) The dimension of design quality that concerns the consistency of performance over time or the probability of failing is which of the following? A) Response B) Serviceability C) Reliability D) Reputation E) Perceived quality Answer: C Explanation: Exhibit 10.2: "The Dimensions of Design Quality." Reliability/durability: consistency of performance over time, probability of failing, useful life Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

328

94) The dimension of design quality that concerns secondary characteristics is which of the following? A) Features B) Serviceability C) Reliability D) Reputation E) Perceived quality Answer: A Explanation: Exhibit 10.2: "The Dimensions of Design Quality." Features: Added touches, bells and whistles, secondary characteristics Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) Which of the following is a dimension of design quality? A) Price B) Features C) Color D) Weight E) Quality at the source Answer: B Explanation: The dimensions of design quality in exhibit 10.2 are: Performance, Features, Reliability/durability, Serviceability, Aesthetics, and Perceived quality Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

329

96) Which of the following is a dimension of design quality? A) Aesthetics B) Price C) Quality at the source D) Distribution E) Leadership Answer: A Explanation: The dimensions of design quality in exhibit 10.2 are: Performance, Features, Reliability/durability, Serviceability, Aesthetics, and Perceived quality Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Which of the following are basic assumptions that justify an analysis of the costs of quality? A) Failures are caused B) Prevention is more expensive C) Performance can be learned D) Rules of thumb don't always work E) Appraisal costs are less than prevention costs Answer: A Explanation: Three basic assumptions justify an analysis of the costs of quality: (1) failures are caused, (2) prevention is cheaper, and (3) performance can be measured. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

330

98) A cost of quality classification is which of the following? A) Material costs B) Prevention costs C) Variable overhead D) Direct labor E) Inventory costs Answer: B Explanation: The costs of quality are generally classified into four types: 1. appraisal costs, 2. prevention costs, 3. internal failure costs, 4. external failure costs. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) Which of the following is the cost of quality classification for costs such as scrap, rework, or repair? A) Appraisal costs B) Prevention costs C) External failure costs D) Internal failure costs E) Rework and wastage Answer: D Explanation: Internal failure costs: costs for defects incurred within the system: scrap, rework, repair. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

331

100) Which of the following is the cost of quality classification for costs such as inspection, testing, and other tasks to ensure that the product or process is acceptable? A) Appraisal costs B) Prevention costs C) External failure costs D) Internal failure costs E) Checking costs Answer: A Explanation: Appraisal costs, costs of the inspection, testing, and other tasks to ensure that the product or process is acceptable. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) Which of the following is the cost of quality classification for costs such as defects that pass through the system, such as customer warranty replacements, loss of customer or goodwill, handling complaints, and product repair? A) Appraisal costs B) Prevention costs C) External failure costs D) Customer return cost E) Workmanship costs Answer: C Explanation: External failure costs: costs for defects that pass through the system: customer warranty replacements, loss of customers or goodwill, handling complaints, and product repair. Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

332

102) In monitoring process quality we might use which of the following statistics? A) Absolute values B) Percentage deviation from tolerance centers C) "k" values for the sample mean D) Logarithmic control intervals E) Difference between the highest and lowest value in a sample Answer: E Explanation: An R -chart is a plot of the average of the range within each sample. The range is the difference between the highest and the lowest numbers in that sample. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) You have just used the capability index (Cpk) formulas to compute the two values "min [2, 2.5]." Which of the following is the proper interpretation of these numbers? A) The true capability index value is 2.5 B) The mean of the production process has shifted to the left of the design limits C) The mean of the production process has shifted to the right of the design limits D) The mean has not shifted at all E) The true capability index value is between 2 and 2.5 Answer: B Explanation: Because the process mean can shift in either direction, the direction of shift and its distance from the design specification set the limit on the process capability. The direction of shift is toward the smaller number. Difficulty: 1 Easy Topic: Statistical Quality Control Learning Objective: 10-04 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation

333

104) You have just used the capability index (Cpk) formulas to compute the two values "min [1, 1]." Which of the following is the proper interpretation of these numbers? A) The true capability index value is exactly 1 B) The mean of the production process has shifted to the left of the design limits C) The mean of the production process has shifted to the right of the design limits D) The mean has not shifted at all E) None of these Answer: D Explanation: Because the process mean can shift in either direction, the direction of shift and its distance from the design specification set the limit on the process capability. The direction of shift is toward the smaller number. Difficulty: 1 Easy Topic: Statistical Quality Control Learning Objective: 10-04 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation 105) You have just used the capability index (Cpk) formulas to compute the two values "min [1.5, 1]." Which of the following is the interpretation of these numbers? A) The true capability index value is 1 B) The mean of the production process has shifted to the left of the design limits C) The mean of the production process has shifted to the right of the design limits D) The mean has not shifted at all E) The true capability index value is between 1.5 and 1 Answer: C Explanation: Because the process mean can shift in either direction, the direction of shift and its distance from the design specification set the limit on the process capability. The direction of shift is toward the smaller number. Difficulty: 1 Easy Topic: Statistical Quality Control Learning Objective: 10-04 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation

334

106) Quality control charts usually have a central line and upper and lower control limit lines. Which of the following is not a reason that the process being monitored with the chart should be investigated? A) A large number of plots are close to the upper or lower control lines B) Erratic behavior of the plots C) A single plot falls above or below the control limits D) A change in raw materials or operators E) A run of five above the central line Answer: D Explanation: See exhibit 10.11. Answer D is not a reason to investigate the process being monitored. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) Quality control charts usually have a central line and upper and lower control limit lines. Which of the following are reasons that the process being monitored with the chart should be investigated? A) A single plot falls above or below the control limits B) Normal behavior C) A large number of plots are on or near the central line D) No real trend in any direction E) A change in raw materials or operators Answer: A Explanation: See exhibit 10.11. Answer D is not a reason to investigate the process being monitored. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

335

108) If there are 120 total defects from 10 samples, each sample consisting of 10 individual items in a production process, which of the following is the fraction defective that can be used in a p-chart for quality control purposes? A) 120 B) 10 C) 8 D) 1.2 E) 0.8 Answer: D Explanation: The fraction defective = Total number of defects from all samples / Number of samples x Sample size = 120 / 100 = 1.2. See equation 10.4. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation 109) If there are 400 total defects from 8 samples, each sample consisting of 20 individual items in a production process, which of the following is the fraction defective that can be used in a p-chart for quality control purposes? A) 400 B) 160 C) 2.5 D) 1.0 E) 0.4 Answer: C Explanation: The fraction defective = Total number of defects from all samples / Number of samples x Sample size = 400 / (20 x 8) = 2.5. See equation 10.4. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation

336

110) You want to determine the upper control line for a p-chart for quality control purposes. You take several samples of a size of 100 items in your production process. From the samples you determine the fraction defective is 0.05 and the standard deviation is 0.02. If the desired confidence level is 99.7 percent, which of the following is the resulting UCL value for the line? A) 0.39 B) 0.11 C) 0.06 D) 0.05 E) None of these Answer: B Explanation: Where is the fraction defective, Sp is the standard deviation, n is the sample size, and z is the number of standard deviations for a specific confidence. Typically, z = 3 (99.7 percent confidence) or z = 2.58 (99 percent confidence) is used. In this problem, is 0.05 and Sp = 0.02 thus, 0.05 + (3 × 0.02) = 0.11. See equation 10.5. Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation 111) You want to determine the lower control line for a p-chart for quality control purposes. You take several samples of a size of 50 items in your production process. From the samples you determine the fraction defective is 0.006 and the standard deviation is 0.001. If the desired confidence level is 99.7 percent, which of the following is the resulting LCL value for the line? A) 0.0 B) 0.002 C) 0.003 D) 0.004 E) None of these Answer: C Explanation: Where p-bar is the fraction defective, Sp is the standard deviation, n is the sample size, and z is the number of standard deviations for a specific level of confidence. Typically, z = 3 (99.7 percent confidence) or z = 2.58 (99 percent confidence) is used. In this problem, p-bar is 0.006 and Sp = 0.001 thus, 0.006 - (3 x 0.001) = 0.003. See equation 10.6. Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation

337

112) You want to determine the control lines for a p-chart for quality control purposes. If the desired confidence level is 99 percent, which of the following values for Z would you use in computing the UCL and LCL? A) 0.99 B) 2 C) 2.58 D) 3 E) None of these Answer: C Explanation: Typically, z = 3 (99.7 percent confidence) or z = 2.58 (99 percent confidence) is used. Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation 113) You want to determine the control lines for a p-chart for quality control purposes. If the total number of defects from all samples is 2,500, the number of samples is 100, and the sample size is 50, which of the following would be the standard deviation used in developing the control lines? A) 0.4900 B) 0.2499 C) 0.1556 D) 0.0707 E) 0.02499 Answer: D Explanation: From equation 10.4, the fraction defective = Total number of defects from all samples / (Number of samples x Sample size) = 2,500 / (100 x 50) = 0.5. The standard deviation, then, is calculated from equation 10.5 to equal the square root of the result of the fraction defective times one minus the fraction defective divided by the sample size = square root ((0.5 x 0.5)/50)or 0.0707. Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation

338

114) You want to determine the control lines for a p-chart for quality control purposes. If the total number of defects from all samples is 560, the number of samples is 70, and the sample size is 80, which of the following would be the standard deviation used in developing the control lines? A) 0.9000 B) 0.4556 C) 0.0335 D) 0.0011 E) 0.0112 Answer: C Explanation: From equation 10.4, the fraction defective = Total number of defects from all samples / (Number of samples x Sample size) = 560 / (70 x 80) = 0.1. The standard deviation, then, is calculated from equation 10.5 to equal the square root of the result of the fraction defective times one minus the fraction defective divided by the sample size = square root ((0.1 x 0.9)/80) or 0.0335. Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation 115) For which of the following should we use a p-chart to monitor process quality? A) Defective electrical switches B) Errors in the length of a pencil C) Weight errors in cans of soup D) Temperature of entrees in a restaurant E) Letter grades on a final examination Answer: A Explanation: In the case of the p-chart, the item was either good or bad. Also, Measurement by attributes means taking samples and using a single decision—the item is good or it is bad. Because it is a yes or no decision, we can use simple statistics to create a p-chart with an upper control limit (UCL) and a lower control limit (LCL). Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

339

116) For which of the following should we use a p-chart to monitor process quality? A) The dimensions of brick entering a kiln B) Lengths of boards cut in a mill C) The weight of fluid in a container D) Grades in a freshman pass/fail course E) Temperatures in a classroom Answer: D Explanation: In the case of the p-chart, the item was either good or bad. Also, Measurement by attributes means taking samples and using a single decision—the item is good or it is bad. Because it is a yes or no decision, we can use simple statistics to create a p-chart with an upper control limit (UCL) and a lower control limit (LCL). Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) With which of the following should we use an X-bar chart based on sample means to monitor process quality? A) Grades in a freshman pass/fail course B) Tire pressures in an auto assembly plant C) Vehicles passing emissions inspection D) Computer software errors E) Number of units with missing operations Answer: B Explanation: In attribute sampling, we determine whether something is good or bad, fits or doesn't fit—it is a go/no-go situation. In variables sampling we measure the actual weight, volume, number of inches, or other variable measurements, and we develop control charts to determine the acceptability or rejection of the process based on those measurements. X-bar and R charts are used with variable measurements. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

340

118) Which of the following should we use an R-chart to monitor process quality? A) Grades in a freshman pass/fail course B) Tire pressures in an auto assembly plant C) Vehicles passing emissions inspection D) Computer software errors E) Number of units with missing operations Answer: B Explanation: In attribute sampling, we determine whether something is good or bad, fits or doesn't fit—it is a go/no-go situation. In variables sampling we measure the actual weight, volume, number of inches, or other variable measurements, and we develop control charts to determine the acceptability or rejection of the process based on those measurements. X-bar and R charts are used with variable measurements. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 119) Which of the following should we use an R-chart to monitor process quality? A) Weighing trucks at a highway inspection station to determine if they are overloaded B) Deciding whether an airliner has sufficient fuel for its trip C) Student grades measured from 1 to 100 D) Determining whether vehicles from a motor pool will run E) Determining the accuracy of a forecast of snow Answer: C Explanation: In attribute sampling, we determine whether something is good or bad, fits or doesn't fit—it is a go/no-go situation. In variables sampling we measure the actual weight, volume, number of inches, or other variable measurements, and we develop control charts to determine the acceptability or rejection of the process based on those measurements. X-bar and R charts are used with variable measurements. Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

341

120) You are developing an X-bar chart based on sample means. You know the standard deviation of the sample means is 4, the desired confidence level is 99.7 percent, and the average of the sample means is 24. Which of the following is your UCL? A) 36 B) 24 C) 12 D) 4 E) None of these Answer: A Explanation: Using equation 10.12, = 24, standard deviation = 4 and z = 3, UCL = 24 + (3 x 4) = 36. Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-03 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation 121) You are developing an X-bar chart based on sample means. You know the standard deviation of the sample means is 4, the desired confidence level is 99 percent, and the average of the sample means is 20. Which of the following is your LCL? A) 36 B) 24 C) 9.68 D) 16.79 E) 30.32 Answer: C Explanation: Using equation 10.12, = 20, standard deviation = 4 and z = 2.58, LCL = 20 (2.58 x 4) = 9.68. Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation

342

122) You want to develop a three-sigma R-chart. You know the average range is 5 based on several samples of size 10. Which of the following is the resulting UCL? A) 20.9 B) 8.9 C) 7.02 D) 5 E) 3.1 Answer: B Explanation: From equation 10.17, = 5, n = 10, D4 = 1.78. UCL = D4 x Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation

= 1.78 x 5 = 8.9.

123) You want to develop a three-sigma R-chart. You know the average range is 12 based on several samples of size 6. Which of the following is the resulting LCL? A) 20.0 B) 18.3 C) 7.02 D) 5.6 E) 0.0 Answer: E Explanation: From equation 10.18, = 12, n = 6, D3 = 0. LCL = D3 x Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation

343

= 0 x 12 = 0.0.

124) If you are going to develop an X-bar chart based on range statistics and you are using a sample size of 12 for your charting purposes, which of the following is the A2 factor for the X-bar chart? A) 0.37 B) 0.31 C) 0.27 D) 0.22 E) 0.18 Answer: C Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation 125) If you are going to develop an R-chart based on range statistics and you are using a sample size of 9 for your charting purposes, which of the following is the lower control limit D3 factor for the chart? A) 0.08 B) 0.14 C) 0.18 D) 0.22 E) 0.29 Answer: C Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation

344

126) If you are going to develop an R-chart based on range statistics and you are using a sample size of 15 for your charting purposes, which of the following is the upper control limit D4 factor for the chart? A) 1.65 B) 1.70 C) 1.76 D) 1.87 E) 1.92 Answer: A Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation 127) The capability index is: A) The ratio of the range of values produced by a process divided by the range of values allowed by the design specification. B) The ratio of the range of values allowed by the design specifications divided by the range of values produced by the process. C) The ratio of the capacity of a process (in units) divided by the annual unit demand. D) The overhead generated by a piece of equipment divided by the overhead absorbed by that piece of equipment. E) The number of minutes in a machining cycle that a piece of equipment can capably operate without human intervention. Answer: B Difficulty: 2 Medium Topic: Statistical Process Control Procedures Learning Objective: 10-05 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

345

128) The International Organization for Standardization (ISO) has written standards that apply to quality management and assurance for businesses. Which of the following are not among the standards ISO has developed? A) ISO 9000 quality management requirements B) ISO 26000 socially responsible behavior C) ISO 17000 composition of boards of directors D) ISO 14000 environmental management systems E) ISO/TS 16949, aligns existing American, German, French, and Italian automotive quality standards within the global automotive industry Answer: C Explanation: There is no mention of a standard for boards of directors in the text's discussion of The International Organization for Standardization. Difficulty: 1 Easy Topic: Statistical Process Control Procedures Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) Looking outside the organization to examine what industry competitors and excellent performers outside of your industry are doing in a particular process is called: A) Industrial espionage B) Unethical C) External benchmarking D) Hiring an outside expert E) Reverse engineering Answer: C Explanation: External benchmarking goes outside the organization to examine what industry competitors and excellent performers outside of the industry are doing. Difficulty: 1 Easy Topic: ISO 9000 and ISO 14000 Learning Objective: 10-02 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

346

130) DPMO refers to A) defects per million parts. B) defects per many units. C) defects per million operations. D) defects per million opportunities. E) defects per million. Answer: D Explanation: Defects per million opportunities. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) The cause and effect diagram (choose the most inclusive answer.) A) is also referred to as Show cause diagram B) is also referred to as fishbone diagram C) is also referred to as opportunity flow diagram D) is one of the analytical tools in DMAIC analysis Answer: B, D Explanation: The cause and effect diagram is also referred to as fishbone diagram and is one of the analytical tools in DMAIC analysis. The cause and effect diagram is also referred to as fishbone diagram and is one of the analytical tools in DMAIC analysis. Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

347

132) All except one of the following is an analytical tool for six sigma. A) Flowcharts B) Pareto Charts C) fishbone diagram D) DPMO analytics E) Process control charts Answer: D Explanation: DPMO analytics Difficulty: 1 Easy Topic: Six-Sigma Quality Learning Objective: 10-03 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation 133) Other things remaining the same, and assuming that X-bar is smaller than USL and larger than LSL, if the standard deviation (σ) of the process increases, process capability index (Cpk) of the process will A) Stay the same B) Will always increase C) Will always decrease D) Will sometimes increase Answer: C Explanation: Since the deviation of the process (σ) is in the denominator and since the numerators will be positive in both cases, the process capability index (Cpk) will always decrease. Difficulty: 3 Hard Topic: Process Capability Learning Objective: 10-04 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation

348

134) Comparing traditional view of the cost of variability and Taguchi's view of cost of variability, A) Both views are about the same B) Traditional view holds that as long as the product is within specification, there is no difference. C) Taguchi's view holds that closer to the midpoint of specifications better it is. D) None of the above. Answer: B, C Explanation: See Exhibit 10.7 and 10.8. See Exhibit 10.7 and 10.8. Difficulty: 2 Medium Topic: Process Capability Learning Objective: 10-04 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation 135) Consider a sampling plan with n = 40 and c = 2 and given Acceptable quality level (AQL), Lot tolerance percent defective (LTPD), producer's risk (α) and consumer's risk (β). Suppose that c is decreased to 1, keeping AQL and LTPD unchanged, producer's risk (α) will A) Always increase B) Always decrease C) Sometime decrease D) Stay the same. E) None of the above. Answer: A Explanation: See Exhibit 10.17. As you allow less defects, from 2 to 1, it is harder to get lots accepted. Hence probability of rejecting AQL (good) lots producer's risk (α) increases. Difficulty: 3 Hard Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation

349

136) Consider a sampling plan with n = 40 and c = 1 and given Acceptable quality level (AQL), Lot tolerance percent defective (LTPD), producer's risk (α) and consumer's risk (β). Suppose that c is increased to 2, keeping AQL and LTPD unchanged, consumer's risk (β) will A) Always decrease B) Always increase C) Sometime decrease D) Stay the same. E) None of the above. Answer: B Explanation: See Exhibit 10.17. As you allow more defects, from 1 to 2, it is easier to get lots accepted. Hence probability of accepting LTPD (bad) lots increases. Hence, consumer's risk (β) increases. Difficulty: 3 Hard Topic: Acceptance Sampling Learning Objective: 10-06 Bloom's: Analyze AACSB: Analytic thinking Accessibility: Keyboard Navigation Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 11 Inventory Management 1) Inventory is defined as the stock of any item or resource used in an organization. Answer: TRUE Explanation: Inventory is the stock of any item or resource used in an organization. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) An inventory system is a set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be. Answer: TRUE Explanation: An inventory system is the set of policies and controls that monitor levels of inventory and determine what levels should be maintained, when stock should be replenished, and how large orders should be. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 350

3) One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to specify when items should be ordered. Answer: TRUE Explanation: The basic purpose of inventory analysis in manufacturing and stockkeeping services is to specify (1) when items should be ordered and (2) how large the order should be. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

351

4) One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to determine the level of quality to specify. Answer: FALSE Explanation: The basic purpose of inventory analysis in manufacturing and stockkeeping services is to specify (1) when items should be ordered and (2) how large the order should be. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to determine how large the orders to vendors should be. Answer: TRUE Explanation: The basic purpose of inventory analysis in manufacturing and stockkeeping services is to specify (1) when items should be ordered and (2) how large the order should be. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) In inventory models, high holding costs tend to favor high inventory levels. Answer: FALSE Explanation: Holding (or carrying) costs. This broad category includes the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital. Obviously, high holding costs tend to favor low inventory levels and frequent replenishment. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

352

7) In inventory models, high holding costs tend to favor low inventory levels and frequent replenishment. Answer: TRUE Explanation: Holding (or carrying) costs. This broad category includes the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital. Obviously, high holding costs tend to favor low inventory levels and frequent replenishment. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) If the cost to change from producing one product to producing another were zero the lot size would be very small. Answer: TRUE Explanation: If there were no costs or loss of time in changing from one product to another, many small lots would be produced. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) Shortage costs are precise and easy to measure. Answer: FALSE Explanation: When the stock of an item is depleted, an order for that item must either wait until the stock is replenished or be canceled. There is a trade-off between carrying stock to satisfy demand and the costs resulting from stockout. This balance is sometimes difficult to obtain, because it may not be possible to estimate lost profits, the effects of lost customers, or lateness penalties. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

353

10) Inventory levels of dependent demand items are usually managed by calculations using calculus-driven, cost-minimizing models. Answer: FALSE Explanation: The demand for dependent demand items is a direct result of the need for some other item, usually a higher-level item of which it is part. The timing of that demand and the order quantities drive the inventory level. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) The fixed-time period inventory system has a smaller average inventory than the fixed-order quantity system because it must also protect against stockouts during the review period when inventory is checked. Answer: FALSE Explanation: Fixed–time period model has a larger average inventory because it must also protect against stockout during the review period, T; the fixed–order quantity model has no review period. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) The fixed-order quantity inventory model favors less expensive items because average inventory is lower. Answer: FALSE Explanation: The fixed–order quantity model favors more expensive items because average inventory is lower. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

354

13) The fixed-order quantity inventory model is more appropriate for important items such as critical repair parts because there is closer monitoring and therefore quicker response to a potential stockout. Answer: TRUE Explanation: The fixed–order quantity model is more appropriate for important items such as critical repair parts because there is closer monitoring and therefore quicker response to potential stockout. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) The fixed-order quantity inventory model requires more time to maintain because every addition or withdrawal is logged. Answer: TRUE Explanation: The fixed–order quantity model requires more time to maintain because every addition or withdrawal is logged. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Fixed-order quantity inventory models are "event triggered." Answer: TRUE Explanation: The basic distinction is that fixed–order quantity models are "event triggered" and fixed–time period models are "time triggered." Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

355

16) Fixed-order quantity inventory models are "time triggered." Answer: FALSE Explanation: The basic distinction is that fixed–order quantity models are "event triggered" and fixed–time period models are "time triggered." Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) Fixed-time period inventory models are "event triggered." Answer: FALSE Explanation: The basic distinction is that fixed–order quantity models are "event triggered" and fixed–time period models are "time triggered." Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) Fixed-time period inventory models are "time triggered." Answer: TRUE Explanation: The basic distinction is that fixed–order quantity models are "event triggered" and fixed–time period models are "time triggered." Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

356

19) Fixed-order quantity inventory systems determine the reorder point, R, and the order quantity, Q, values. Answer: TRUE Explanation: The fixed–order quantity system focuses on order quantities and reorder points. (See also exhibit 11.3) Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) The computation of a firm's inventory position is found by taking the inventory on hand and adding it to the on-order inventory, and then subtracting back-ordered inventory. Answer: TRUE Explanation: Inventory position is defined as the on-hand plus on-order minus backordered quantities. In the case where inventory has been allocated for special purposes, the inventory position is reduced by these allocated amounts. See exhibit 11.4. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) Using the probability approach we assume that the demand over a period of time is normally distributed. Answer: TRUE Explanation: Using the probability criterion to determine safety assumes that the demand over a period of time is normally distributed. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

357

22) Safety stock can be defined as the amount of inventory carried in addition to the expected demand. Answer: TRUE Explanation: Safety stock can be defined as the amount of inventory carried in addition to the expected demand. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) If demand for an item is normally distributed, we plan for demand to be twice the average demand and carry two standard deviations worth of safety stock inventory. Answer: FALSE Explanation: Companies using the probability approach generally set the probability of not stocking out at 95 percent. This means we would carry about 1.64 standard deviations of safety stock. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Safety stock can be computed when using the fixed-order quantity inventory model by multiplying a z value representing the number of standard deviations to achieve a service level or probability by the standard deviation of periodic demand. Answer: TRUE Explanation: The reorder point is then set to cover the expected demand during the lead time plus a safety stock determined by the desired service level. See equation 11.6. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

358

25) The key difference between a fixed-order quantity inventory model where demand is known and one where demand is uncertain is in computing the reorder point. Answer: TRUE Explanation: The key difference between a fixed–order quantity model where demand is known and one where demand is uncertain is in computing the reorder point. The order quantity is the same in both cases. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) Fixed-time period inventory models generate order quantities that vary from time period to time period, depending on the usage rate. Answer: TRUE Explanation: Fixed–time period models generate order quantities that vary from period to period, depending on the usage rates. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) Fixed-order quantity systems assume a random depletion of inventory, with less than an immediate order when a reorder point is reached. Answer: FALSE Explanation: The fixed–order quantity system focuses on order quantities and reorder points. Procedurally, each time a unit is taken out of stock, the withdrawal is logged and the amount remaining in inventory is immediately compared to the reorder point. If it has dropped to this point, an order for Q items is placed. If it has not, the system remains in an idle state until the next withdrawal. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

359

28) The standard fixed-time period model assumes that inventory is never counted but determined by EOQ measures. Answer: FALSE Explanation: Fixed–time period models generate order quantities that vary from period to period, depending on the usage rates. The standard fixed–time period models assume that inventory is counted only at the time specified for review Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Safety stock is not necessary in any fixed-time period system. Answer: FALSE Explanation: Fixed–time period models generate order quantities that vary from period to period, depending on the usage rates. These generally require a higher level of safety stock than a fixed– order quantity system. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) In the fixed-time period model it is necessary to determine the inventory currently on hand to calculate the size of the order to place with a vendor. Answer: TRUE Explanation: In a fixed–time period system, inventory is counted only at particular times, such as every week or every month. Counting inventory and placing orders periodically is desirable in situations such as when vendors make routine visits to customers and take orders for their complete line of products, or when buyers want to combine orders to save transportation costs. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

360

31) Some inventory situations involve placing orders to cover only one demand period or to cover short-lived items at frequent intervals. Answer: TRUE Explanation: An easy example to think about is the classic single-period "newsperson" problem. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) The optimal stocking decision in inventory management, when using marginal analysis, occurs at the point where the benefits derived from carrying the next unit are more than the costs for that unit. Answer: FALSE Explanation: The optimal stocking level, using marginal analysis, occurs at the point where the expected benefits derived from carrying the next unit are less than the expected costs for that unit. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) When stocked items are sold, the optimal inventory decision using marginal analysis is to stock that quantity where the probable profit from the sale or use of the last unit is equal to or greater than the probable losses if the last unit remains unsold. Answer: TRUE Explanation: Equation 11.1 states that we should continue to increase the size of the order so long as the probability of selling what we order is equal to or less than the ratio Cu / (Cu + Co). Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

361

34) Cycle counting is a physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year. Answer: TRUE Explanation: Cycle counting is a physical inventory-taking technique in which inventory is counted frequently rather than once or twice a year. Difficulty: 1 Easy Topic: Inventory Planning and Accuracy Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) The "sawtooth effect," named after turn-around artist Al "Chainsaw" Dunlap, is the severe reduction of inventory and service levels that occurs when a firm has gone through a hostile takeover. Answer: FALSE Explanation: The "sawtooth effect" relating Q and R in Exhibit 11.5 shows that when the inventory position drops to point R, a reorder is placed. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) The "sawtooth effect," is named after the jagged shape of the graph of inventory levels over time. Answer: TRUE Explanation: The "sawtooth effect" relating Q and R in Exhibit 11.5 shows that when the inventory position drops to point R, a reorder is placed. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

362

37) Price-break models deal with the fact that the selling price of an item varies with the order size. Answer: TRUE Explanation: Price-break models deal with the fact that, generally, the selling price of an item varies with the order size. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) Price-break models deal with the fact that the selling price of an item generally increases as the order size increases. Answer: FALSE Explanation: Price-break models deal with the fact that, generally, the selling price of an item varies with the order size. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) Price-break models deal with discrete or step changes in price as order size changes rather than a per-unit change. Answer: TRUE Explanation: Price-break models deal with the fact that, generally, the selling price of an item varies with the order size. This is a discrete or step change rather than a per-unit change. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

363

40) In a price break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price. Answer: TRUE Explanation: Step 1. Sort the prices from lowest to highest and then, beginning with the lowest price, calculate the economic order quantity for each price level until a feasible economic order quantity is found. By feasible, we mean that the price is in the correct corresponding range. Step 2. If the first feasible economic order quantity is for the lowest price, this quantity is best and you are finished. Otherwise, calculate the total cost for the first feasible economic order quantity (you did these from lowest to highest price) and also calculate the total cost at each price break lower than the price associated with the first feasible economic order quantity. This is the lowest order quantity at which you can take advantage of the price break. The optimal Q is the one with the lowest cost. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) In a price break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price and to check to see whether the lowest cost quantity is feasible. Answer: TRUE Explanation: Step 1. Sort the prices from lowest to highest and then, beginning with the lowest price, calculate the economic order quantity for each price level until a feasible economic order quantity is found. By feasible, we mean that the price is in the correct corresponding range. Step 2. If the first feasible economic order quantity is for the lowest price, this quantity is best and you are finished. Otherwise, calculate the total cost for the first feasible economic order quantity (you did these from lowest to highest price) and also calculate the total cost at each price break lower than the price associated with the first feasible economic order quantity. This is the lowest order quantity at which you can take advantage of the price break. The optimal Q is the one with the lowest cost. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

364

42) In a price break model of lot sizing the lowest cost quantity is always feasible. Answer: FALSE Explanation: Step 1. Sort the prices from lowest to highest and then, beginning with the lowest price, calculate the economic order quantity for each price level until a feasible economic order quantity is found. By feasible, we mean that the price is in the correct corresponding range. Step 2. If the first feasible economic order quantity is for the lowest price, this quantity is best and you are finished. Otherwise, calculate the total cost for the first feasible economic order quantity (you did these from lowest to highest price) and also calculate the total cost at each price break lower than the price associated with the first feasible economic order quantity. This is the lowest order quantity at which you can take advantage of the price break. The optimal Q is the one with the lowest cost. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) One of the drivers of the direct-to-store (direct distribution) approach is the upstream migration of value-added logistics services. Answer: TRUE Explanation: What accounts for the emergence of the direct-to-store model? Global sourcing and the upstream migration of value-added logistics services are certainly primary drivers. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) One of the drivers of the direct-to-store (direct distribution) approach is the increase in global sourcing. Answer: TRUE Explanation: What accounts for the emergence of the direct-to-store model? Global sourcing and the upstream migration of value-added logistics services are certainly primary drivers. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

365

45) One of the drivers of the direct-to-store (direct distribution) approach is the decrease in trucking industry regulation. Answer: FALSE Explanation: What accounts for the emergence of the direct-to-store model? Global sourcing and the upstream migration of value-added logistics services are certainly primary drivers. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) You should visualize inventory as stacks of money sitting on forklifts, on shelves, and in trucks and planes while in transit. Answer: TRUE Explanation: You should visualize inventory as stacks of money sitting on forklifts, on shelves, and in trucks and planes while in transit. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between transportation costs and fulfillment speed. Answer: TRUE Explanation: Logistics managers have to perform a daily, delicate balancing act, balancing: • Transportation costs against fulfillment speed • Inventory costs against the cost of stock-outs • Customer satisfaction against cost to serve • New capabilities against profitability Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

366

48) One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between customer satisfaction and cost to serve. Answer: TRUE Explanation: Logistics managers have to perform a daily, delicate balancing act, balancing: • Transportation costs against fulfillment speed • Inventory costs against the cost of stock-outs • Customer satisfaction against cost to serve • New capabilities against profitability Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between inventory costs and the cost of stock-outs. Answer: TRUE Explanation: Logistics managers have to perform a daily, delicate balancing act, balancing: • Transportation costs against fulfillment speed • Inventory costs against the cost of stock-outs • Customer satisfaction against cost to serve • New capabilities against profitability Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) The average cost of inventory in the United States is 20 to 25 percent of its value. Answer: FALSE Explanation: The average cost of inventory in the United States is 30 to 35 percent of its value. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

367

51) Savings from reduced inventory results in increased profit. Answer: TRUE Explanation: Savings from reduced inventory results in increased profit. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) The costs associated with reduced inventory results in lower profits. Answer: FALSE Explanation: Savings from reduced inventory results in increased profit. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) Which of the following is not one of the categories of manufacturing inventory? A) Raw materials B) Finished products C) Component parts D) Just-in-time E) Supplies Answer: D Explanation: Manufacturing inventory is typically classified into raw materials, finished products, component parts, supplies, and work-in-process. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

368

54) Which of the following is one of the categories of manufacturing inventory? A) Economic order inventory B) Work-in-process C) Quality units D) JIT inventory E) Re-order point Answer: B Explanation: Manufacturing inventory is typically classified into raw materials, finished products, component parts, supplies, and work-in-process. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) Firms keep supplies of inventory for which of the following reasons? A) To maintain dependence of operations B) To provide a feeling of security for the workforce C) To meet variation in product demand D) To hedge against wage increases E) In case the supplier changes the design Answer: C Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) Which of the following is not a reason to carry inventory? A) To provide a safeguard for variation in raw material delivery time B) To take advantage of economic purchase-order size C) To maintain independence of operations D) To meet variation in product demand E) To keep the stock out of the hands of competitors Answer: E Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) When developing inventory cost models, which of the following are not included as costs to 369

place an order? A) Phone calls B) Taxes C) Clerical D) Calculating quantity to order E) Postage Answer: B Explanation: There are costs to place an order: labor, phone calls, typing, postage, and so on. Therefore, the larger each order is, the fewer the orders that need to be written. Also, shipping costs favor larger orders—the larger the shipment, the lower the per-unit cost. Ordering costs refer to the managerial and clerical costs to prepare the purchase or production order. Ordering costs include all the details, such as counting items and calculating order quantities. The costs associated with maintaining the system needed to track orders are also included in ordering costs. Difficulty: 2 Medium Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) When material is ordered from a vendor, which of the following is not a reason for delays in the order arriving on time? A) Normal variation in shipping time B) A shortage of material at the vendor's plant causing backlogs C) An unexpected strike at the vendor's plant D) A lost order E) Redundant ordering systems Answer: E Explanation: When material is ordered from a vendor, delays can occur for a variety of reasons: a normal variation in shipping time, a shortage of material at the vendor's plant causing backlogs, an unexpected strike at the vendor's plant or at one of the shipping companies, a lost order, or a shipment of incorrect or defective material. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

370

59) Which of the following is not included as an inventory holding cost? A) Annualized cost of materials B) Handling C) Insurance D) Pilferage E) Storage facilities Answer: A Explanation: Holding costs include the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital. Difficulty: 2 Medium Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) Which of the following is usually included as an inventory holding cost? A) Order placing B) Breakage C) Typing up an order D) Quantity discounts E) Annualized cost of materials Answer: B Explanation: Holding costs include the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

371

61) In making any decision that affects inventory size, which of the following costs do not need to be considered? A) Holding costs B) Setup costs C) Ordering costs D) Fixed costs E) Shortage costs Answer: D Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) Which of the following are fixed-order quantity inventory models? A) Economic order quantity model B) The ABC model C) Periodic replenishment model D) Cycle counting model E) P model Answer: A Explanation: There are two general types of multi-period inventory systems: fixed–order quantity models (also called the economic order quantity, EOQ, and Q-model) and fixed–time period models (also referred to variously as the periodic system, periodic review system, fixed order interval system, and P-model). Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

372

63) Which of the following are fixed-time period inventory models? A) The EOQ model B) The least cost method C) The Q model D) Periodic system model E) Just-in-time model Answer: D Explanation: There are two general types of multi-period inventory systems: fixed–order quantity models (also called the economic order quantity, EOQ, and Q-model) and fixed–time period models (also referred to variously as the periodic system, periodic review system, fixed order interval system, and P-model). Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) Which of the following is a perpetual system for inventory management? A) Fixed-time period B) Fixed-order quantity C) P model D) First-in-first-out E) The wheel of inventory Answer: B Explanation: The fixed–order quantity model is a perpetual system, which requires that every time a withdrawal from inventory or an addition to inventory is made, records must be updated to reflect whether the reorder point has been reached. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

373

65) Which of the following is an assumption of the basic fixed-order quantity inventory model? A) Lead times are averaged B) Ordering costs are variable C) Price per unit of product is constant D) Back orders are allowed E) Stock-out costs are high Answer: C Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) Which of the following is not an assumption of the basic fixed-order quantity inventory model? A) Ordering or setup costs are constant B) Inventory holding cost is based on average inventory C) Diminishing returns to scale of holding inventory D) Lead time is constant E) Demand for the product is uniform throughout the period Answer: C Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

374

67) Which of the following is the symbol used in the textbook for the cost of placing an order in the fixed-order quantity inventory model? A) C B) TC C) H D) Q E) S Answer: E Explanation: S = Setup cost or cost of placing an order Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) Which of the following is the set of all cost components that make up the fixed-order quantity total annual cost (TC) function? A) Annual purchasing cost, annual ordering cost, fixed cost B) Annual holding cost, annual ordering cost, unit cost C) Annual holding cost, annual ordering cost, annual purchasing cost D) Annual lead time cost, annual holding cost, annual purchasing cost E) Annual unit cost, annual set up cost, annual purchasing cost Answer: C Explanation: Total Annual Cost = Annual Purchase Cost + Annual Ordering Cost + Annual Holding Cost. See equation 11.3. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

375

69) Assuming no safety stock, what is the reorder point (R) given an average daily demand of 50 units, a lead time of 10 days and 625 units on hand? A) 550 B) 500 C) 715 D) 450 E) 475 Answer: B Explanation: See equation 11.5. Fifty (50) times ten (10) equals 500. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 70) Assuming no safety stock, what is the reorder point (R) given an average daily demand of 78 units and a lead time of 3 days? A) 421 B) 234 C) 78 D) 26 E) 312 Answer: B Explanation: See equation 11.5. 78 times 3 = 234 Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

376

71) If annual demand is 12,000 units, the ordering cost is $6 per order, and the holding cost is $2.50 per unit per year, which of the following is the optimal order quantity using the fixed-order quantity model? A) 576 B) 240 C) 120.4 D) 60.56 E) 56.03 Answer: B Explanation: From equation 11.4, Q = 240 = Square root of (2 × 12,000 × 6/2.5) Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 72) If annual demand is 50,000 units, the ordering cost is $25 per order, and the holding cost is $5 per unit per year, which of the following is the optimal order quantity using the fixed-order quantity model? A) 909 B) 707 C) 634 D) 500 E) 141 Answer: B Explanation: From equation 11.4, Q = 707.1 = Square root of (2 × 50,000 × 25/5) Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

377

73) If annual demand is 35,000 units, the ordering cost is $50 per order, and the holding cost is $0.65 per unit per year, which of the following is the optimal order quantity using the fixed-order quantity model? A) 5,060 B) 2,320 C) 2,133 D) 2,004 E) 1,866 Answer: B Explanation: From equation 11.4, Q = 2,320.5 = Square root of (2 × 35,000 × 50 / 0.65) Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 74) Using the fixed-order quantity model, which of the following is the total ordering cost of inventory given an annual demand of 36,000 units, a cost per order of $80, and a holding cost per unit per year of $4? A) $849 B) $1,200 C) $1,889 D) $2,267 E) $2,400 Answer: E Explanation: From equation 11.4, Q = 1,200 = Square root of (2 × 36,000 × 80 / 4). Number of orders per year = 36,000 / 1,200 = 30 × $80 = $2,400 Difficulty: 3 Hard Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

378

75) A company is planning for its financing needs and uses the basic fixed-order quantity inventory model. Which of the following is the total cost (TC) of the inventory given an annual demand of 10,000, setup cost of $32, a holding cost per unit per year of $4, an EOQ of 400 units, and a cost per unit of inventory of $150? A) $1,501,600 B) $1,498,200 C) $500,687 D) $499,313 E) None of these Answer: A Explanation: Use equation 11.3 Q = 400. Average Inventory = Q/2 = 200. Holding cost/year = $4. Thus, annual holding cost = $800. Annual set-up cost = 10,000 / 400 = 25 × $32 = 800. Demand × cost per unit = 10,000 × $150 = 1,500,000. Hence, TC = $1,500,000+ 800 + 800 = $1,501,600. Difficulty: 3 Hard Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 76) A company has recorded the last five days of daily demand on their only product. Those values are 120, 125, 124, 128, and 133. The time from when an order is placed to when it arrives at the company from its vendor is 5 days. Assuming the basic fixed-order quantity inventory model fits this situation and no safety stock is needed, which of the following is the reorder point (R)? A) 120 B) 126 C) 630 D) 950 E) 1,200 Answer: C Explanation: Using equation 11.5, Average demand is 120+125+124+128+133 / 5 = 126. Lead time = 5 days so the reorder point is 126 x 5 = 630. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

379

77) A company has recorded the last six days of daily demand on a single product they sell. Those values are 37, 115, 93, 112, 73, and 110. The time from when an order is placed to when it arrives at the company from its vendor is 3 days. Assuming the basic fixed-order quantity inventory model fits this situation and no safety stock is needed, which of the following is the reorder point (R)? A) 540 B) 270 C) 115 D) 90 E) 60 Answer: B Explanation: Using equation 11.5, Average demand is 37+115+93+112+73+110 / 6 = 90. Lead time = 3 days so the reorder point is 90 x 3 = 270. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 78) Using the probability approach to determine an inventory safety stock and wanting to be 95 percent sure of covering inventory demand, which of the following is the number of standard deviations necessary to have the 95 percent service probability assured? A) 1.28 B) 1.64 C) 1.96 D) 2.00 E) 2.18 Answer: B Explanation: Companies using this approach generally set the probability of not stocking out at 95 percent. This means we would carry about 1.64 standard deviations of safety stock. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

380

79) To take into consideration demand uncertainty in reorder point (R) calculations, what do we add to the product of the average daily demand and lead time in days when calculating the value of R? A) The product of average daily demand times a standard deviation of lead time B) A z value times the lead time in days C) The standard deviation of vendor lead time times the standard deviation of demand D) The product of lead time in days times the standard deviation of lead time E) The product of the standard deviation of demand variability and a z-score relating to a specific service probability. Answer: E Explanation: For example, suppose we computed the standard deviation of demand to be 10 units per day. If our lead time to get an order is five days, the standard deviation for the five-day period, assuming each day can be considered independent, is (equation 11.9) and multiplied by the z-score (equation 11.10). Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) In order to determine the standard deviation of usage during lead time in the reorder point formula for a fixed-order quantity inventory model, which of the following must be computed first? A) Standard deviation of daily demand B) Number of standard deviations for a specific service probability C) Stockout cost D) Economic order quantity E) Safety stock level Answer: A Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

381

81) If it takes a supplier four days to deliver an order once it has been placed and the standard deviation of daily demand is 10, which of the following is the standard deviation of usage during lead time? A) 10 B) 20 C) 40 D) 100 E) 400 Answer: B Explanation: From equation 11.9, The standard deviation of usage during lead time is equal to the square root of the sums of the variances of the number of days of lead time. Since variance equals standard deviation squared, the standard deviation of usage during lead time is the square root of 4(10x10) = square root of 400 = 20. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 82) If it takes a supplier 25 days to deliver an order once it has been placed and the standard deviation of daily demand is 20, which of the following is the standard deviation of usage during lead time? A) 50 B) 100 C) 400 D) 1,000 E) 1,600 Answer: B Explanation: Using equation 11.9 the standard deviation of usage during lead time will be the square root of (25 x (20 x 20)) = square root of 10,000 = 100. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

382

83) If it takes a supplier two days to deliver an order once it has been placed and the daily demand for three days has been 120, 124, and 125, which of the following is the standard deviation of usage during lead time? A) About 2.16 B) About 3.06 C) About 4.66 D) About 5.34 E) About 9.30 Answer: B Explanation: The standard deviation (Equation 11.8) of daily demand = Square root of (14/3) = 2.1602. This number squared is 4.6667. The square root of (2 (days) times 4.6667) = the square root of 9.3333 or 3.055. *(Note to instructor: The Feedback above is based on the text's equation 11.8 which calculates standard deviation based on a denominator of "n" rather than the classic statistical "n-1." If the (n-1) formulation is used the result would be SD = SQRT 7. Variance, then, is 2 × 7 = 14 and SQRT 14 = 3.742 which would be the appropriate response. If your students are inclined to use the classical statistical formulation of standard deviation you should adjust the choices appropriately.) Difficulty: 3 Hard Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

383

84) A company wants to determine its reorder point (R). Demand is variable and they want to build a safety stock into R. If the average daily demand is 12, the lead time is 5 days, the desired z value is 1.96, and the standard deviation of usage during lead time is 3, which of the following is the desired value of R? A) About 6 B) About 16 C) About 61 D) About 66 E) About 79 Answer: D Explanation: Equation 11.6 is (average daily demand times number of days of lead time) plus (standard deviation during lead time) times (desired z-score) = (12 × 5) + (3 × 1.96) = 60 + 5.88 = 65.88 = 66 units Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 85) A company wants to determine its reorder point (R). Demand is variable and they want to build a safety stock into R. The company wants to have a service probability coverage of 95 percent. If average daily demand is 8, lead time is 3 days, and the standard deviation of usage during lead time is 2, which of the following is the desired value of R? A) About 17.9 B) About 19.7 C) About 24.0 D) About 27.3 E) About 31.2 Answer: D Explanation: Desired z score for service probability coverage of 95% = 1.64. Equation 11.6 is (average daily demand times number of days of lead time) plus (standard deviation during lead time) times (desired z score) = (8 x 3) + (2x1.64) = 24 + 3.28 = 27.28 = about 27.3 units Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

384

86) Which of the following is not necessary to compute the order quantity using the fixed-time period model with safety stock? A) Forecast average daily demand B) Safety stock C) Inventory currently on hand D) Ordering cost E) Lead time in days Answer: D Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Using the fixed-time period inventory model, and given an average daily demand of 200 units, 4 days between inventory reviews, 5 days for lead time, 120 units of inventory on hand, a z of 1.96, and a standard deviation of demand over the review and lead time of 3 units, which of the following is the order quantity? A) About 1,086 B) About 1,686 C) About 1,806 D) About 2,206 E) About 2,686 Answer: B Explanation: Using equation 11.12, q = (200 × (5 + 4) + 1.96 × 3) - 120 = 1,800 + 5.88 – 120 = 1,685.88 = about 1,686 Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

385

88) Using the fixed-time period inventory model, and given an average daily demand of 75 units, 10 days between inventory reviews, 2 days for lead time, 50 units of inventory on hand, a service probability of 95 percent, and a standard deviation of demand over the review and lead time of 8 units, which of the following is the order quantity? A) 863 B) 948 C) 1,044 D) 1,178 E) 4,510 Answer: A Explanation: The z score for a service probability of 95% is 1.64. Using equation 11.12, q = 75 x (10 + 2) + (1.64 x 8) – 50 = 900 + 13.12 – 50 = 863.12 = 863 Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 89) Using the fixed-time period inventory model, and given an average daily demand of 15 units, 3 days between inventory reviews, 1 day for lead time, 30 units of inventory on hand, a service probability of 98 percent, and a standard deviation of daily demand is 3 units, which of the following is the order quantity? A) About 30.4 B) About 36.3 C) About 42.3 D) About 56.8 E) About 59.8 Answer: C Explanation: The z score for a desired service probability of 98% is 2.053. From equation 11.13, the standard deviation during review and lead time is the square root of (4*3 squared) which is 6. Then, using equation 11.12, q = 15 x (3 + 1) + (2.05x 6) – 30 = 60 + 12.3 – 30 = 42.3 Difficulty: 3 Hard Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

386

90) You would like to use the fixed-time period inventory model to compute the desired order quantity for a company. You know that vendor lead time is 5 days and the number of days between reviews is 7. Which of the following is the standard deviation of demand over the review and lead time if the standard deviation of daily demand is 8? A) About 27.7 B) About 32.8 C) About 35.8 D) About 39.9 E) About 45.0 Answer: A Explanation: Using equation 11.13, The standard deviation of demand over the 12 days of time between reviews and lead time is the square root of (12 x 64) = 27.71. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 91) You would like to use the fixed-time period inventory model to compute the desired order quantity for a company. You know that vendor lead time is 10 days and the number of days between reviews is 15. Which of the following is the standard deviation of demand over the review and lead time period if the standard deviation of daily demand is 10? A) 25 B) 40 C) 50 D) 73 E) 100 Answer: C Explanation: Using equation 11.13, the standard deviation of demand over the 25 days of time between reviews and lead time is the square root of (25 x 100) = 50. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

387

92) If a vendor has correctly used marginal analysis to select their stock levels for the day (as in the newsperson problem), and the profit resulting from the last unit being sold (Cu) is $0.90 and the loss resulting from that unit if it is not sold (Co) is $0.50, which of the following is the probability of the last unit being sold? A) Greater than 0.357 B) Greater than 0.400 C) Greater than 0.556 D) Greater than 0.678 E) None of these Answer: A Explanation: From equation 11.1, P < = Cu / (Cu + Co) = 0.90/1.40 = 0.643. Since P is the probability that the unit will not be sold and 1 - P is the probability of it being sold, the answer to this question is 1 – 0.643 or 0.357. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation 93) If a vendor has correctly used marginal analysis to select their stock levels for the day (as in the newsperson problem), and the profit resulting from the last unit being sold (Cu) is $120 and the loss resulting from that unit if it is not sold (Co) is $360, which of the following is the probability of the last unit being sold? A) Greater than 0.90 B) Greater than 0.85 C) Greater than 0.75 D) Greater than 0.25 E) None of these Answer: C Explanation: From equation 11.1, P < = Cu / (Cu + Co) = 120 /480 = 0.25. Since P is the probability that the unit will not be sold and 1 - P is the probability of it being sold, the answer to this question is 1 – 0.25 or 0.75. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

388

94) The Pareto principle is best applied to which of the following inventory systems? A) EOQ B) Fixed-time period C) ABC classification D) Fixed-order quantity E) Single-period ordering system Answer: C Explanation: This logic of the few having the greatest importance and the many having little importance has been broadened to include many situations and is termed the Pareto principle. Most inventory control situations involve so many items that it is not practical to model and give thorough treatment to each item. To get around this problem, the ABC classification scheme divides inventory items into three groupings: high dollar volume (A), moderate dollar volume (B), and low dollar volume (C). Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-03 Analyze inventory using the Pareto principle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) Which of the following are the recommended percentage groupings of the ABC classifications of the dollar volume of products? A) A items get 15%, B items get 35%, and C items get 50% B) A items get 15%, B items get 45%, and C items get 40% C) A items get 25%, B items get 35%, and C items get 40% D) A items get 25%, B items get 15%, and C items get 60% E) A items get 20%, B items get 30%, and C items get 50% Answer: A Explanation: The ABC approach divides this list into three groupings by value: A items constitute roughly the top 15 percent of the items, B items the next 35 percent, and C items the last 50 percent. Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-03 Analyze inventory using the Pareto principle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

389

96) Using the ABC classification system for inventory, which of the following is a true statement? A) The "C" items are of moderate dollar volume B) You should allocate about 50% of the dollar volume to "B" items C) The "A" items are of low dollar volume D) The "A" items are of high dollar volume E) Inexpensive and low usage items are classified as "C" no matter how critical Answer: D Difficulty: 1 Easy Topic: Inventory Systems Learning Objective: 11-03 Analyze inventory using the Pareto principle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Which of the following values for z should we use in as safety stock calculation if we want a service probability of 98%? A) 1.64 B) 1.96 C) 2.05 D) 2.30 E) None of these Answer: C Explanation: Using the Excel function NORMSINV, the z-score for a 98% service probability is 2.05. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

390

98) Computer inventory systems are often programmed to produce a cycle count notice in which of the following case? A) When the record shows a near maximum balance on hand B) When the record shows positive balance but a backorder was written C) When quality problems have been discovered with the item D) When the item has become obsolete E) When the item has been misplaced in the stockroom Answer: B Difficulty: 1 Easy Topic: Inventory Planning and Accuracy Learning Objective: 11-03 Analyze inventory using the Pareto principle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) ABC inventory classification schemes divide inventory items into three groupings. What are these groupings usually based upon? A) Unit cost B) Lead time C) Criticality D) Weight E) Dollar volume Answer: E Explanation: The ABC inventory classification scheme divides inventory items into three groupings: high dollar volume (A), moderate dollar volume (B), and low dollar volume (C). Difficulty: 1 Easy Topic: Understanding Inventory Management; Inventory Planning and Accuracy Learning Objective: 11-03 Analyze inventory using the Pareto principle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

391

100) What is the basic purpose of inventory analysis? A) To provide precise inventory valuations when generating accounting records for the firm's annual report. B) Because there are costs for making each new production setup, inventory allows management to reduce the number of setups. C) To provide a safeguard for variation in raw material delivery time. D) To take advantage of economic purchase order size. E) To specify when items should be ordered and how large the order should be. Answer: E Explanation: The basic purpose of inventory analysis, whether in manufacturing, distribution, retail, or services, is to specify (1) when items should be ordered and (2) how large the order should be. Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-01 Explain how inventory is used and understand what it costs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) The 80-20 rule, that is the logic of the few having the greatest importance and the many having little importance has been broadened to include inventory situations. The term often used to refer to this logic is called what? A) The Peter Principle B) The Pareto Principle C) Little's Law D) The Parkinson Rule E) The Elitist Conspiracy Answer: B Difficulty: 1 Easy Topic: Understanding Inventory Management Learning Objective: 11-03 Analyze inventory using the Pareto principle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

392

102) Demand for organic super fresh lettuce in a local super market is 5 with probability 0.2; 6 with probability 0.3; 7 with probability 0.4 or 8 with probability 0.1. Unsold lettuce are given to a food bank with a salvage value of $1.00 per lettuce. Cost of the lettuce is $3:00 per unit. Selling price is $6:00 per unit. Using single period model, what is the optimal order quantity in number of units of lettuce the super market should use? A) 7 B) 6 C) 5 D) 8 E) None of these Answer: A Explanation: Cost of shortage = 6 − 3 = 3; cost of excess = 3 − 1 = 2; Ratio using (11.1) = (3/(3+2)) = 0.6; cumulative probability distribution:

Demand 5 6 7 8

Probability 0.2 0.3 0.4 0.1

Cumulative probability 0.2 0.5 0.9 1.0

As per the rule, the optimal order quantity is the demand corresponding to the smallest cumulative probability greater than or equal to the ratio, namely 0.6. Hence the correct answer is 7. Difficulty: 3 Hard Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

393

103) Daily demand for fresh cauliflower in the ZZ-Warehouse store follows normal distribution with mean 100 cartons and s.d. 20 cartons. The ZZ-Warehouse buys at a cost of $50.00 per carton, sells it for $70.00 per carton. Unsold cartons are sold for $20.00 per carton. What is the optimal order quantity, using the single period model? A) 100 B) 80 C) 95 D) 110 E) 105 Answer: C Explanation: Cost of shortage = 70-50 = 20; cost of excess = 50-20 = 30; Ratio using (11.1) = (20/(20+30))=0.4; Since the demand follows normal distribution, the optimal order quantity is found as follows: 1.

Find the Z-value corresponding to the ratio of 0.4. Z=-0.253

2. Using the formula, Order quantity (Mean demand + Z (corresponding to the ratio) * s.d. of demand) = 100 + (-0.253)*20 = 94.93, round it to 95. Note that the order quantity is less than the average demand since the cost of shortage is less than the cost of excess. Difficulty: 2 Medium Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

394

104) Using the simple order quantity model in an inventory control problem, Kathy calculated the order quantity to be 1000 units. In a review, she found out that the demand is actually double that of the quantity she had used and the holding cost is only half that of the value she used, The new economic order quantity using the correct data will be: A) 1000 B) 2000 C) 1414 D) 707.1 E) cannot be found without other cost information. Answer: B Explanation: From Equation 11.4, note that the numerator inside the sqrt is doubled and the denominator inside the sqrt is halved. The net effect is to have a multiple of 4 in the numerator, which has the effect of doubling the order quantity to 200. Difficulty: 3 Hard Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation

395

105) In ABC Printing, Queen's black is a popular input with an annual demand of 50,000 gallons. Ordering cost of $50 per order, and the holding cost is $5 per unit per year; the economic order quantity is 1000. Hence during the year, they used 1000 as the order quantity. An audit of the costs revealed that the true ordering cost was only $25 and the true holding cost was $10 per gallon per year. The correct order quantity would have been 500. How much did ABC lose due to incorrect cost information during the year? A) 0 B) 1250 C) -1250 D) 500 E) Cannot be found without additional information. Answer: B Explanation: From Equation 10.4, Q = 1000 given by Square root of (2 x 50,000 x 50/5). The correct economic order quantity would have been 500 given by square root of (2*50000*25/10). The optimal total cost, if they had used 500 would have been: (500/2) *10+(50000/500) *25 = 5000. However, they used 1000 as the order quantity. The actual cost incurred by ABC Printing is found by using the 1000 gallons order quantity, and the true costs, namely $50 ordering cost and $10 per gallon per year holding cost, which gives (50000/1000) *25 + (1000/2) *10 = 6250. Hence, they lost 6250-5000=1250. Difficulty: 3 Hard Topic: Inventory Systems Learning Objective: 11-02 Analyze how different inventory control systems work. Bloom's: Analyze AACSB: Analytic Accessibility: Keyboard Navigation Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 12 Lean Supply Chains 1) Lean production is an integrated set of activities designed to achieve high-volume production using minimal inventories of raw materials, work in process, and finished goods. Answer: TRUE Explanation: Lean production is an integrated set of activities designed to achieve production using minimal inventories of raw materials, work-in-process, and finished goods. Difficulty: 1 Easy Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Henry Ford used JIT concepts as he streamlined his moving assembly lines to make automobiles in the early 1900s. Answer: TRUE Explanation: Henry Ford used JIT concepts as he streamlined his moving assembly lines to make 396

automobiles Difficulty: 1 Easy Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Lean production requires a "push & pull" system of inventory replenishment. Answer: FALSE Explanation: Rather than "pushing" material through the system based on weekly schedules generated by production control, the entire process is converted to a pull system that is operated directly in response to customer demand. Difficulty: 1 Easy Topic: Explain lean design principles. Learning Objective: 12-04 Explain lean design principles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

397

4) Lean production replaced JIT in the 1990s because JIT did not address the problem of reducing waste. Answer: FALSE Explanation: The basis of lean thinking came from the just-in-time (JIT) production concepts. Difficulty: 2 Medium Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Lean production is a management philosophy and a pull system throughout the plant. Answer: TRUE Explanation: Operations are linked through a pull system. Difficulty: 2 Medium Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Lean production makes implementing green strategies in manufacturing processes more difficult. Answer: FALSE Explanation: Lean production may be one of the best tools for implementing green strategies in manufacturing and service processes. Difficulty: 1 Easy Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

398

7) Group technology is a philosophy wherein similar parts are grouped together and the processes required to make the parts are arranged as a work cell. Answer: TRUE Explanation: Group technology (GT) is a philosophy in which similar parts are grouped into families, and the processes required to make the parts are arranged in a manufacturing cell. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Group technology cells help to eliminate movement and queue (wait) time between operations. Answer: TRUE Explanation: Group technology cells eliminate movement and queue (wait) time between operations, reduce inventory, and reduce the number of employees required. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) Group technology includes the set of psychological tests and training exercises given to group workers to ensure a high level of teamwork. Answer: FALSE Explanation: Psychological tests and training exercises are not mentioned in the text in conjunction with group technology. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

399

10) In the textbook, the expression "quality at the source" means that we need to purchase the best quality a supplier or vendor can provide. Answer: FALSE Explanation: Quality at the source means do it right the first time and, when something goes wrong, stop the process or assembly line immediately. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) "Quality at the source" requires factory workers to become their own inspectors. Answer: TRUE Explanation: Quality at the source factory workers become their own inspectors, personally responsible for the quality of their output. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) JIT production means that we produce the product before it is required so the customer does not wait for the product. Answer: FALSE Explanation: Just-in-time means producing what is needed when needed and no more. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

400

13) The goal of JIT production is to drive all inventory queues lower. Answer: FALSE Explanation: The goal (of JIT) is to drive all inventory queues to zero, thus minimizing inventory investment and shortening lead times. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) JIT is typically applied to nonrepetitive manufacturing. Answer: FALSE Explanation: JIT is typically applied to repetitive manufacturing, which is when the same or similar items are made one after another. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) JIT manufacturing forces a firm to work with a lower water level despite safety hazards. Answer: FALSE Explanation: Exhibit 12.6 presents water levels as an allegory for inventory levels. Lower water levels expose potential problems (rocks). Using JIT reduces inventory to a minimum level. Thus, "JIT manufacturing exposes problems otherwise hidden by excess inventories and staff." None of this has to do with actual water or safety hazards. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

401

16) A principle of value stream mapping is to concentrate on speeding up value-added operations. Answer: FALSE Explanation: Value stream mapping (VSM) is a special type of flowcharting tool that is valuable for the development of lean processes. The technique is used to visualize product flows through various processing steps. Difficulty: 2 Medium Topic: Value Stream Mapping Learning Objective: 12-03 Analyze supply chain processes using value stream mapping. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) One of the aims of value stream mapping to eliminate waste in a process. Answer: TRUE Explanation: With value stream mapping, identification of wasteful processes and flows can be made so that they can be modified or eliminated, and the manufacturing system can be made more productive. Difficulty: 1 Easy Topic: Value Stream Mapping Learning Objective: 12-03 Analyze supply chain processes using value stream mapping. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) Uniform plant loading is where you schedule production with different amounts of the same product each day of the week to permit variation to meet changing demand requirements. Answer: FALSE Explanation: Uniform plant loading is, building the same mix of products every day in small quantities. Thus, a total mix is always available to respond to variations in demand. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

402

19) Uniform plant loading is a process of smoothing the production activity flow to dampen the reaction waves that normally occur in response to schedule variations. Answer: TRUE Explanation: Smoothing the production flow to dampen the reaction waves that normally occur in response to schedule variations is called uniform plant loading. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Value stream mapping is used to visualize product flows through various processing steps. Answer: TRUE Explanation: Value stream mapping is used to visualize product flows through various processing steps. Difficulty: 1 Easy Topic: Value Stream Mapping Learning Objective: 12-03 Analyze supply chain processes using value stream mapping. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) A kanban control system uses a signaling device to regulate JIT flows. Answer: TRUE Explanation: A kanban control system uses a signaling device to regulate JIT flows. Kanban means "sign" or "instruction card" in Japanese. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

403

22) Kanban means "symbol" or "box" in Japanese. Answer: FALSE Explanation: Kanban means "sign" or "instruction card" in Japanese. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) Using the formula in the textbook the only parameters we need to determine the number of kanban car sets is the average number of units demanded over some time period, the container size, and the safety stock. Answer: FALSE Explanation: The data required is (1) the average number of units demanded per period; (2) lead time to replenish an order; (3) safety stock; and (4) container size. See equation 12.1

k = =

Expected demand during lead time + Safety stock Size of the container DL(1 + S ) C

404

24) "Kanban Squares" is an educational game played in kanban training sessions. Answer: FALSE Explanation: Kanban squares are marked spaces on the floor or on a table to identify where material should be stored. When the square is empty, the supplying operations are authorized to produce; when the square is full, no parts are needed. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) Respect for people is a key to Toyota's improvement ideas in manufacturing. Answer: TRUE Explanation: Respect for people is a key to the Toyota Production System. Difficulty: 1 Easy Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) In Japanese manufacturing, automation and robotics are used extensively to perform dull or routine jobs so employees are free to focus on important improvement tasks. Answer: TRUE Explanation: Automation and robotics are used extensively to perform dull or routine jobs so employees are free to focus on important improvement tasks. Difficulty: 1 Easy Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

405

27) Subcontractor networks are not very important in Japanese manufacturing. Answer: FALSE Explanation: Toyota relies heavily on subcontractor networks. Difficulty: 2 Medium Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) Company unions in Japan exist to foster a cooperative relationship with management. Answer: TRUE Explanation: Company unions at Toyota as well as elsewhere in Japan exist to foster a cooperative relationship with management. Difficulty: 1 Easy Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Firms in Japan tend to have short-term relationships with their suppliers and customers. Answer: FALSE Explanation: Firms (in Japan) have long-term partnerships with their suppliers and customers. Suppliers consider themselves part of a customer's family. Difficulty: 1 Easy Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

406

30) One of the many lean techniques that have been successfully applied in service firms is the upgrading of quality. Answer: TRUE Explanation: The only cost-effective way to improve quality is to develop reliable process capabilities. Difficulty: 1 Easy Topic: Lean Services Learning Objective: 12-05 Apply lean concepts to service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) One of the many lean techniques that have been successfully applied in service firms is the upgrading of housekeeping. Answer: TRUE Explanation: Good housekeeping means that only the necessary items are kept in a work area, that there is a place for everything, and that everything is clean and in a constant state of readiness. Difficulty: 1 Easy Topic: Lean Services Learning Objective: 12-05 Apply lean concepts to service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) One of the many lean techniques that have been successfully applied in service firms is leveling facility load. Answer: TRUE Explanation: Leveling facility load is one of the 10 more successful techniques applied to service companies. Difficulty: 1 Easy Topic: Lean Services Learning Objective: 12-05 Apply lean concepts to service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

407

33) One of the many lean techniques that have been successfully applied in service firms is the eliminating of unnecessary activities. Answer: TRUE Explanation: A step that does not add value is a candidate for elimination. A step that does add value may be a candidate for reengineering to improve the process consistency or to reduce the time to perform the tasks. Difficulty: 1 Easy Topic: Lean Services Learning Objective: 12-05 Apply lean concepts to service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) One of the few lean techniques that does not work well in service firms is demand-pull scheduling. Answer: FALSE Explanation: Due to the nature of service production and consumption, demand-pull (customer-driven) scheduling is necessary for operating a service business. Difficulty: 1 Easy Topic: Lean Services Learning Objective: 12-05 Apply lean concepts to service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) The term "freeze window" refers to the practice of building quality into the process and not identifying quality by inspection. Answer: FALSE Explanation: The term "freeze window" refers to that period of time during which the schedule is fixed and no further changes are possible. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

408

36) Preventive maintenance is emphasized in lean production to ensure that flows are not interrupted by downtime or malfunctioning equipment. Answer: TRUE Explanation: Preventive maintenance is emphasized to ensure that flows are not interrupted by downtime or malfunctioning equipment. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) Value stream mapping is used to identify all of the value-adding as well as non-value-adding processes that materials are subjected to within a plant. Answer: TRUE Explanation: Value stream mapping is used to identify all of the value-adding as well as non-value-adding processes that materials are subjected to within a plant. Difficulty: 1 Easy Topic: Value Stream Mapping Learning Objective: 12-03 Analyze supply chain processes using value stream mapping. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) Value stream mapping involves materials, not information. Answer: FALSE Explanation: VSM illustrates information flows that result from the process as well as information used to control flow through the process. Difficulty: 1 Easy Topic: Value Stream Mapping Learning Objective: 12-03 Analyze supply chain processes using value stream mapping. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

409

39) A kaizen burst is a symbol on a value stream map. Answer: TRUE Explanation: See Exhibit 12.3 Difficulty: 1 Easy Topic: Value Stream Mapping Learning Objective: 12-03 Analyze supply chain processes using value stream mapping. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) A kaizen burst is an overfilled kanban container. Answer: FALSE Explanation: See Exhibit 12.3. A Kaizen burst on a value-stream map suggests areas for improvement Difficulty: 1 Easy Topic: Value Stream Mapping Learning Objective: 12-03 Analyze supply chain processes using value stream mapping. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) Automation is a key to lean procurement. Answer: TRUE Explanation: A key to lean procurement is automation. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

410

42) Applying lean concepts in manufacturing balances increases in cost with quality improvement. Answer: FALSE Explanation: Applying lean concepts in manufacturing typically presents the greatest opportunities for cost reduction and quality improvement. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) Applying lean concepts to logistics is difficult unless either the manufacturer or the customer owns the logistics activities. Answer: FALSE Explanation: Lean concepts can be applied to the functions associated with the movement of material through the system. Some of the key areas include optimized mode selection and pooling orders; combined multi-stop truckloads; optimized routing; cross docking; import/export transportation processes; and backhaul minimization. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) Which of the following are related to lean production? A) A philosophy of waste elimination B) Lean consumption C) Never running out of inventory D) The Wahei-Subaru method E) Full use of capacity Answer: A Explanation: Lean production refers to a focus on eliminating as much waste as possible. Difficulty: 1 Easy Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) The Toyota Production System identified which of the following types of waste to be eliminated? A) Excess quality B) Overproduction C) Underproduction 411

D) Environmental E) Over-thinking Answer: B Explanation: The Toyota Production System identifies seven prominent types of waste to be eliminated from the supply chain: (1) waste from overproduction, (2) waste of waiting time, (3) transportation waste, (4) inventory waste, (5) processing waste, (6) waste of motion, and (7) waste from product defects. Difficulty: 2 Medium Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) The Toyota Production System identified which of the following types of waste to be eliminated? A) Underproduction B) Excess quality C) Preventive maintenance D) Product defects E) Kaizen Answer: D Explanation: The Toyota Production System identifies seven prominent types of waste to be eliminated from the supply chain: (1) waste from overproduction, (2) waste of waiting time, (3) transportation waste, (4) inventory waste, (5) processing waste, (6) waste of motion, and (7) waste from product defects. Difficulty: 2 Medium Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

412

47) The Toyota Production System identified which of the following types of waste to be eliminated? A) Excess quality B) Motion C) Excess capacity D) Underproduction E) Excess demand Answer: B Explanation: The Toyota Production System identifies seven prominent types of waste to be eliminated from the supply chain: (1) waste from overproduction, (2) waste of waiting time, (3) transportation waste, (4) inventory waste, (5) processing waste, (6) waste of motion, and (7) waste from product defects. Difficulty: 2 Medium Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) Which of the following address elimination of waste under lean production? A) Info-matic warehouse networks B) Outsourced housekeeping C) Quality at the source D) Backflush E) Bottom-round management Answer: C Explanation: Quality at the source means do it right the first time and, when something goes wrong, stop the process or assembly line immediately. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

413

49) Which of the following are elements that address elimination of waste under lean production? A) Production ahead of demand B) Group plant loading technology C) Kanban production control system D) Minimized run times E) Full capacity utilization Answer: C Explanation: Kanban production control systems are mentioned as a lean supply chain design principle. None of the other terms are associated with lean production which is aimed at reducing waste. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) Group technology (GT) is credited with which of the following benefits? A) Reducing waiting time between process operations B) Improving inventory discipline C) Reducing required workforce skills D) Improved labor relations E) Improved small group functioning Answer: A Explanation: Group technology cells eliminate movement and queue (waiting) time between operations, reduce inventory, and reduce the number of employees required. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

414

51) Which of the following statements holds true for kanban production control systems? A) The authority to produce or supply additional parts comes from upstream operations B) In a paperless control system, containers can be used instead of cards C) The cards or containers make up the kanban push system D) They require substantial quantitative analysis prior to implementation E) They have not been successful outside of Japan and the United States Answer: B Explanation: Sometimes the container itself can be used as a signal device. In this case, an empty container on the factory floor visually signals the need to fill it. The amount of inventory is adjusted by simply adding or removing containers. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

415

52) In setting up a kanban control system you need to determine the number of kanban card sets needed. If the expected demand during lead time is 25 per hour, the safety stock is 20% of the demand during lead time, the container size is 5, and the lead time to replenish an order is 5 hours, what is the number of kanban card sets needed? A) 5 B) 20 C) 27 D) 30 E) 34 Answer: D Explanation: Using equation 12.1, k = 25 × 5 × 1.20 / 5 = 30

k= =

Expected demand during lead time + Safety stock Size of the container DL(1 + S ) C

416

53) In setting up a kanban control system you need to determine the number of kanban card sets needed. If the expected demand during lead time is 50 per hour, the safety stock is 20% of the demand during lead time, the container size is 4. If the lead time to replenish an order is 8 hours, what number of kanban card sets is needed? A) 60 B) 80 C) 90 D) 120 E) 150 Answer: D Explanation: Using equation 12.1, k = 50 × 8 × 1.20 / 4 = 120

k= =

Expected demand during lead time + Safety stock Size of the container DL(1 + S ) C

417

54) You have been called in as a consultant to set up a kanban control system. The first thing to do is to determine the number of kanban card sets needed. Your research shows that the expected demand during lead time for a particular component is 150 per hour. You estimate the safety stock should be set at 25% of the demand during lead time. The tote trays used as containers can hold 8 units of stock and the lead time it takes to replenish an order is 2 hours. Which of the following is the number of kanban card sets necessary to support this situation? A) 42 B) 47 C) 68 D) 89 E) 94 Answer: B Explanation: Using equation 12.1: k = 150 × 2 × 1.25 / 8 = 46.875 = 47

k= =

Expected demand during lead time + Safety stock Size of the container DL(1 + S ) C

418

55) You have been called in as a consultant to set up a kanban control system. The first thing you do is to determine the number of kanban card sets needed. Your research shows that the expected demand during lead time for a particular component is 1,200 per hour. You estimate the safety stock should be set at 5% of the demand during lead time. The tote trays used as containers can hold 2 units of stock and the lead time to replenish an order is 10 hours. Which of the following is the number of kanban card sets necessary to support this situation? A) 5,000 B) 5,500 C) 6,300 D) 6,500 E) 7,000 Answer: C Explanation: Using equation 12.1: k = 1200 × 10 × 1.05 / 2 = 6,300

k= =

Expected demand during lead time + Safety stock Size of the container DL(1 + S ) C

419

56) In designing a lean production facility layout a designer should do which of the following? A) Design for work flow balance B) Locate flexible workstations off line C) Link operations through a push system D) Balance capacity using job shop analysis E) Always keep operations on a single floor of the factory Answer: A Explanation: Lean requires the plant layout to be designed to ensure balanced work flow with a minimum of work-in-process inventory. Difficulty: 2 Medium Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) When implementing a lean production system, a stabilized schedule is achieved using which of the following? A) Level scheduling B) Demand pull C) Demand push D) Reduced lot sizes E) Bottom-round management Answer: A Explanation: Lean production requires a stable schedule over a lengthy time horizon. This is accomplished by level scheduling, freeze windows, and underutilization of capacity. Difficulty: 2 Medium Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

420

58) To implement lean production schedules a firm would do which of the following? A) Have excess capacity B) Force demand C) Hire a consultant D) Bottom-up management E) Implement kanban groups Answer: A Explanation: Under lean production, excess labor, machines, and overtime provide the hedge. The excess capacity in labor and equipment that results is much cheaper than carrying excess inventory. Difficulty: 2 Medium Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) In implementing a lean production system you should work with suppliers to do which of the following? A) Open facilities near your factory B) Focus workstation capacities C) Backflush D) Provide quality at the source E) Reduce lead times Answer: E Explanation: Speed and quick response to changes are keys to the success of a lean supply chain. Difficulty: 2 Medium Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

421

60) In implementing a lean production system you should work with suppliers to do which of the following? A) Calculate lead times B) Quality circles C) Freeze windows D) Make frequent deliveries E) Achieve bottom-round management Answer: D Explanation: Maintaining stock at a lean level requires frequent deliveries during the day. Some suppliers even deliver directly to a location on the production line and not at a receiving dock Difficulty: 2 Medium Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) To implement a flow process in developing a lean system a firm might do which of the following? A) Improve capacity utilization B) Build product in anticipation of demand C) Reduce setup/changeover time D) Eliminate some fixed costs E) Implement groupware Answer: C Explanation: Reductions in setup and changeover times are necessary to achieve a smooth flow. Difficulty: 2 Medium Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

422

62) To develop a lean manufacturing system a firm might do which of the following? A) Eliminate anything that does not add value for the customer B) Standardize product configurations C) Process design with product design D) Adopt a kaizen philosophy E) Implement top-down management controls Answer: A Explanation: Customer value, in the context of lean production, is defined as something for which the customer is willing to pay. Value-adding activities transform materials and information into something the customer wants. Non-value-adding activities consume resources and do not directly contribute to the end result desired by the customer. Waste , therefore, is defined as anything that does not add value from the customer's perspective. Difficulty: 1 Easy Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) Imagine comparing a manufacturing operation using regular lot-sizing and the same operation with a kanban/lean production approach. What would be your expectations of the difference between the total cost (i.e., inventory holding costs + setup/ordering costs) of each? A) Inventory holding cost will increase nonlinearly with inventory B) Total costs will be lower for the regular lot-size operation C) Total costs will be lower for the kanban/lean production operation D) The order quantity will be larger for the kanban/lean production approach E) As long as the total quantity is the same, total costs will be the same Answer: C Explanation: The reductions in setup and changeover times are necessary to achieve a smooth flow. Exhibit 12.10 shows the relationship between lot size and setup costs. Under a traditional approach, setup cost is treated as a constant, and the optimal order quantity is shown as six. Under the kanban approach, setup cost is significantly reduced and the corresponding optimal order quantity is reduced. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

423

64) In a lean production system we expect to see which of the following? A) No extra inventory B) Extra inventory of critical parts held "just-in-case" C) More parts and fewer standardized product configurations D) Managers being held responsible for quality of the work turned out E) Closer management-labor relationships Answer: A Explanation: Lean production is an integrated set of activities designed to achieve production using minimal inventories of raw materials, work-in-process, and finished goods. Difficulty: 1 Easy Topic: Lean Production Learning Objective: 12-01 Explain lean production. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) Which of the following is a lean production technique that is not reported in the textbook to have been successfully applied in service firms? A) Organize problem-solving groups B) Upgrade housekeeping C) Upgrade quality D) Freeze windows E) Eliminate unnecessary activities Answer: D Explanation: Freeze windows are not reported to have succeeded in lean service firms. Difficulty: 1 Easy Topic: Lean Services Learning Objective: 12-05 Apply lean concepts to service processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

424

66) An activity where the parts that go into each unit of a product are periodically removed from inventory and accounted for based on the number of units produced. is called which of the following? A) Frozen window B) Backflush C) Level schedule D) Group Technology E) Kanban Answer: B Explanation: The concept of backflush is used where the parts that go into each unit of the product are periodically removed from inventory and accounted for based on the number of units produced. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) Which of the following is a lean production technique that has been successfully applied in service firms? A) Decision trees B) Leveling the facility load C) Kanban Card Systems D) Fully utilizing capacity E) Backflushing Answer: B Explanation: Service firms synchronize production with demand. They have developed unique approaches to leveling demand so they can avoid making customers wait for service. Difficulty: 1 Easy Topic: Lean Services Learning Objective: 12-05 Apply lean concepts to service processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

425

68) Which of the following is not listed in the textbook as a component of a lean supply chain? A) Lean customers B) Lean management C) Lean logistics D) Lean warehousing E) Lean procurement Answer: B Explanation: Lean suppliers, procurement, manufacturing, warehousing, logistics and customers are discussed as components of a lean supply chain. Difficulty: 1 Easy Topic: Lean Supply Chains Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) Lean concepts discussed in the text do not include which of the following? A) Group technology B) Quality at the source C) Just-in-time production D) Preventive maintenance E) Kaizen burst Answer: E Explanation: Group technology, quality at the source, just-in-time production and preventive maintenance are discussed as lean concepts in the text. Difficulty: 1 Easy Topic: Lean Production Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

426

70) In the context of a production process such as a manufacturing plant, what is the technique used to identify all of the value-adding as well as non-value-adding processes that materials are subjected to within a plant, from raw material coming into the plant through delivery to the customer? A) Lean manufacturing B) Lean supply chain C) Kaizen D) Value stream mapping E) Lean production schedules Answer: D Explanation: No further explanation details are available for this problem. Difficulty: 2 Medium Topic: Value Stream Mapping Learning Objective: 12-03 Analyze supply chain processes using value stream mapping. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) Which of the following problems are not among those hidden when inventory levels are excessively high? A) Inadequate worker motivation B) Engineering design redundancies C) Paperwork backlogs D) Scrap E) Productive equipment downtime Answer: A Explanation: See Exhibit 12.6 Difficulty: 1 Easy Topic: Lean Production Learning Objective: 12-02 Illustrate how lean concepts can be applied to supply chain processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

427

72) You have been called in as a consultant to set up a kanban control system. The first thing to do is to determine the number of kanban card sets needed. Your research shows that the expected demand during lead time for a particular component is 150 per hour. You estimate the safety stock should be set at 25 percent of the demand during lead time. The tote trays used as containers can hold 8 units of stock, and the lead time it takes to replenish an order is 2 hours. You found that the number of kanban cards needed is 47. Your client now tells you that they miscalculated the demand and the true demand is 300 per hour. All other things remain the same. What is the most appropriate answer from the choices below? A) Number of kanban cardsets will stay the same B) Number of kanban cardsets will decrease. C) Number of kanban cardsets will be 94 D) Number of kanban cardsets will be 47 E) Number of kanbancardsets will be 23.5 (rounded to 24). Answer: C Explanation: Using Equation 12.1: k = 300 × 2 × 1.25/8 = 93.75 rounded up to 94.

k= =

Expected demand during lead time + Safety stock Size of the container DL(1 + S ) C

428

73) In a kanban card calculation problem, other things remaining the same (that is changing only one variable at a time). Select the most appropriate answer. A) Number of kanban cards required will increase linearly as demand increases. B) Number of kanban cards required will decrease linearly as demand increases. C) Number of kanban cards required will decrease nonlinearly as the container size increases. D) Number of kanban cards required will decrease linearly as the container size increases. E) Number of kanban cards required will increase linearly as demand increases and number of kanban cards required will decrease nonlinearly as the container size increases. Answer: E Explanation: In Equation 12.1, since D is in the numerator the number of kanban cards increases linearly with demand. However, since C is in the denominator, the number of kanban cards required decreases non-linearly as C increases.

k= =

Expected demand during lead time + Safety stock Size of the container DL(1 + S ) C

429

74) Consider the relationship between the number of kanban cars sets needed with safety stock and the container size. Choose the most appropriate answer. A) As safety stock increases, the number of kanban card sets needed will decrease B) As safety stock decreases, the number of kanban card sets needed will increase C) As container size increases, the number of kanban card sets needed will increase D) As container size increases, the number of kanban card sets needed will decrease E) As container size decreases, the number of kanban card sets needed will decrease Answer: D Explanation: Using 12-1, one can see why D is correct.

k= =

Expected demand during lead time + Safety stock Size of the container DL(1 + S ) C

where k = Number of kanban card sets D = Average number of units demanded per period (lead time and demand must be expressed in the same time units) L = Lead time to replenish an order (expressed in the same units as demand) S = Safety stock expressed as a percentage of demand during the lead time (this can be based on a service level). C = Container size Difficulty: 2 Medium Topic: Lean Supply Chain Design Principles Learning Objective: 12-04 Explain lean design principles. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 13 Global Sourcing and Procurement 1) Strategic sourcing is the development and management of supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of the business. Answer: TRUE Explanation: Strategic sourcing is the development and management of global supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of the business. Difficulty: 1 Easy Topic: Strategic Sourcing 430

Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Two common measures to evaluate supply chain efficiency are the consumer price index and the beta flow system. Answer: FALSE Explanation: Two common measures to evaluate supply chain efficiency are inventory turnover and weeks of supply. Difficulty: 1 Easy Topic: Measuring Sourcing Performance Learning Objective: 13-04 Evaluate sourcing performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Two common measures to evaluate supply chain efficiency are the inventory turnover and weeks-of-supply ratios. Answer: TRUE Explanation: Two common measures to evaluate supply chain efficiency are inventory turnover and weeks of supply. Difficulty: 1 Easy Topic: Measuring Sourcing Performance Learning Objective: 13-04 Evaluate sourcing performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

431

4) Inventory turn values that are considered good differ by industry and the type of products being handled. Answer: TRUE Explanation: Good inventory turnover values vary by industry and the type of products being handled. At one extreme, a grocery store chain may turn inventory over 100 times per year. Values of six to seven are typical for manufacturing firms. Difficulty: 1 Easy Topic: Measuring Sourcing Performance Learning Objective: 13-04 Evaluate sourcing performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Retailer behavior when stocking up during promotion periods (where the prices of goods are reduced) is called backward buying. Answer: FALSE Explanation: Retailers respond to a price cut by stocking up, a practice the industry calls forward buying. Difficulty: 1 Easy Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) The phenomenon that magnifies the variability in order quantities for goods as orders move through the supply chain from the customer to the producer is called the bullwhip effect. Answer: TRUE Explanation: The phenomenon of variability magnification as we move from the customer to the producer in the supply chain is often referred to as the bullwhip effect. Difficulty: 1 Easy Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

432

7) Functional products include staples that people buy in a wide range of retail outlets, such as grocery stores and gas stations. Answer: TRUE Explanation: Functional products include the staples that people buy in a wide range of retail outlets, such as grocery stores and gas stations. Difficulty: 2 Medium Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) The optimal strategy for functional products is to use an efficient supply chain. Answer: FALSE Explanation: According to the supply chain uncertainty framework, the optimal supply chain for functional products is either an efficient supply chain or a risk hedging supply chain. See exhibit 13.3. Difficulty: 2 Medium Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) The optimal strategy for functional products is to use a responsive supply chain. Answer: FALSE Explanation: According to the supply chain uncertainty framework the optimal supply chain for functional products is either an efficient supply chain or a risk hedging supply chain. See exhibit 13.3. Difficulty: 1 Easy Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

433

10) The optimal strategy for innovative products is to use an efficient supply chain. Answer: FALSE Explanation: According to the supply chain uncertainty framework the optimal supply chain for innovative products is either an agile supply chain or a responsive supply chain. See exhibit 13.3. Difficulty: 1 Easy Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) The best strategy for innovative products is to use either a responsive or an agile supply chain. Answer: TRUE Explanation: According to the supply chain uncertainty framework the optimal supply chain for innovative products is either an agile supply chain or a responsive supply chain. See exhibit 13.3. Difficulty: 2 Medium Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Outsourcing is the act of moving some of a firm's internal activities and decision responsibility to outside providers. Answer: TRUE Explanation: Outsourcing is the act of moving some of a firm's internal activities and decision responsibility to outside providers. Difficulty: 1 Easy Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

434

13) Outsourcing allows a firm to achieve an improved focus on its core competencies. Answer: TRUE Explanation: Outsourcing allows a firm to focus on activities that represent its core competencies. Difficulty: 1 Easy Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Logistics is a term indicating transportation choices for goods produced internationally but consumed domestically. Answer: FALSE Explanation: Logistics is a term that refers to the management functions that support the complete cycle of material flow: from the purchase and internal control of production materials; to the planning and control of work-in-process; to the purchasing, shipping, and distribution of the finished product. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Logistics is a term that refers to the management functions that support the complete cycle of material flow, from the purchase and internal control of production materials; to the planning and control of work-in-process; to the purchasing, shipping, and distribution of the finished product. Answer: TRUE Explanation: Logistics is a term that refers to the management functions that support the complete cycle of material flow: from the purchase and internal control of production materials; to the planning and control of work-in-process; to the purchasing, shipping, and distribution of the finished product. Difficulty: 1 Easy Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

435

16) A financially-driven reason for outsourcing is that it can turn fixed costs into variable costs. Answer: TRUE Explanation: See exhibit 13.4. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) A financially-driven reason for outsourcing is that it can shorten cycle time. Answer: FALSE Explanation: See exhibit 13.4. Shortening cycle time is an improvement driven reason to outsource. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) An organizationally-driven reason for outsourcing is that it can improve effectiveness by focusing on what the firm does best. Answer: TRUE Explanation: See exhibit 13.4. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) An organizationally-driven reason for outsourcing is that it can transform the organization. Answer: FALSE Explanation: See exhibit 13.4. Transforming the organization is not a benefit of outsourcing. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) A financially-driven reason for outsourcing is that it can reduce costs through a lower cost structure. 436

Answer: TRUE Explanation: See exhibit 13.4. Difficulty: 1 Easy Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) An improvement-driven reason for outsourcing is that it can increase product and service value, customer satisfaction, and shareholder value. Answer: FALSE Explanation: See exhibit 13.4. Increasing product and service value, customer satisfaction is an organizationally driven benefit of outsourcing, and shareholder value is not listed as a benefit of outsourcing. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) A financially-driven reason for outsourcing is that it can help gain access to new markets, especially in developing countries. Answer: TRUE Explanation: See exhibit 13.4. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

437

23) A stable supply process is one where product volumes are high, demand is predictable and there is a long product life. Answer: FALSE Explanation: A stable supply process as one where the manufacturing process and the underlying technology are mature and the supply base is well established. Difficulty: 2 Medium Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) A stable supply process is one where the manufacturing process and the underlying technology are mature and the supply base is well established. Answer: TRUE Explanation: A stable supply process as one where the manufacturing process and the underlying technology are mature and the supply base is well established. Difficulty: 2 Medium Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) Firms producing functional products are forced to introduce a steady stream of innovations in order to survive. Answer: FALSE Explanation: Companies producing innovative products are forced to introduce a steady stream of newer innovations. Difficulty: 1 Easy Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

438

26) Inventory turnover and weeks of supply are mathematically the inverse of one another. Answer: TRUE Explanation: Two common measures to evaluate supply chain efficiency are inventory turnover and weeks of supply. These essentially measure the same thing and mathematically are the inverse of one another. Difficulty: 1 Easy Topic: Measuring Sourcing Performance Learning Objective: 13-04 Evaluate sourcing performance. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 27) Green sourcing is only about finding new environmentally friendly technologies and increasing the use of recyclable materials. Answer: FALSE Explanation: Green sourcing is not just about finding new environmentally friendly technologies or increasing the use of recyclable materials. It can also help drive cost reductions in a variety of ways including product content substitution, waste reduction, and lower usage. Difficulty: 1 Easy Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) An important opportunity in green sourcing is waste reduction opportunities. Answer: TRUE Explanation: Green sourcing can also help drive cost reductions in a variety of ways including product content substitution, waste reduction, and lower usage. Difficulty: 1 Easy Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

439

29) Green sourcing requires incorporating new criteria for evaluating alternatives. Answer: TRUE Explanation: A key aspect of green sourcing, compared to a traditional process, is the expanded view of the sourcing decision. This expanded view requires the incorporation of new criteria for evaluating alternatives. Difficulty: 1 Easy Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) The total cost of ownership (TCO) is an estimate of the cost of an item that includes all the costs related to the procurement and use of an item, but does not include any of the costs related to disposing of the item after it is no longer useful. Answer: FALSE Explanation: The total cost of ownership (TCO) is an estimate of the cost of an item that includes all the costs related to the procurement and use of an item, including any related costs in disposing of the item after it is no longer useful. Difficulty: 1 Easy Topic: Total Cost of Ownership Learning Objective: 13-03 Analyze the total cost of ownership. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) The total cost of ownership (TCO) can be categorized into three areas: acquisition costs, ownership costs, and post-ownership costs. Answer: TRUE Explanation: See exhibit 13.7. The costs can be categorized into three broad areas: acquisition costs, ownership costs, and post-ownership costs. Difficulty: 1 Easy Topic: Total Cost of Ownership Learning Objective: 13-03 Analyze the total cost of ownership. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

440

32) Overemphasis on purchase price frequently results in failure to address other significant costs. Answer: TRUE Explanation: Overemphasis on acquisition cost or purchase price frequently results in failure to address other significant ownership and post-ownership costs. Difficulty: 1 Easy Topic: Total Cost of Ownership Learning Objective: 13-03 Analyze the total cost of ownership. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) In conducting a total cost of ownership analysis, it is probably best to use a team representing the key functional areas. Answer: TRUE Explanation: It is probably best to approach this (TCO) using a cross-functional team representing the key functional areas. Difficulty: 1 Easy Topic: Total Cost of Ownership Learning Objective: 13-03 Analyze the total cost of ownership. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) A firm that controls most of the activities in its supply chain is said to be vertically integrated. Answer: TRUE Explanation: When it is vertically integrated, a firm controls most of the activities in its supply chain. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

441

35) Capability sourcing refers to outsourcing the functions that they do best to trusted key partners. Answer: FALSE Explanation: The term capability sourcing was coined to refer to the way companies focus on the things they do best and outsource other functions to key partners. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) The inventory turnover ratio used in measuring supply chain efficiency is found by the ratio of which of the following? A) Cost of goods sold/Average aggregate inventory value B) Fixed costs/Variable costs C) Sales costs/Marketing costs D) Cost of goods sold/Cost to sell goods E) Operations flow costs/Suppliers flow costs Answer: A Explanation: Inventory turnover = Cost of goods sold / Average aggregate inventory value See equation 13.1.

Inventory turnover =

Cost of goods sold Average aggregate inventory value

Difficulty: 1 Easy Topic: Measuring Sourcing Performance Learning Objective: 13-04 Evaluate sourcing performance. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

442

37) The total value of all items held in inventory for the firm valued at cost is which of the following? A) Cost of goods to be sold B) Average aggregate inventory value C) Weeks supply of goods D) Inventory turnover E) None of these Answer: B Explanation: The average aggregate inventory value is the total value of all items held in inventory for the firm valued at cost. Difficulty: 1 Easy Topic: Measuring Sourcing Performance Learning Objective: 13-04 Evaluate sourcing performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) If the average aggregate inventory value is $45,000 and the cost of goods sold is $10,000, which of the following is weeks of supply? A) 45,000 B) 234 C) 120 D) 23.4 E) 4.5 Answer: B Explanation: Weeks of supply = (average aggregate inventory/cost of goods sold) × 52. = (45,000/10,000) × 52 = 4.5 × 52 = 234. Note that cost of goods sold is an income statement item and refers to an annual figure. Average aggregate inventory is a balance sheet item. Difficulty: 1 Easy Topic: Measuring Sourcing Performance Learning Objective: 13-04 Evaluate sourcing performance. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

443

39) If the average aggregate inventory value is $1,200,000 and the cost of goods sold is $600,000, which of the following is weeks of supply? A) 1,040 B) 606 C) 104 D) 60.6 E) 2.0 Answer: C Explanation: Weeks of supply = (average aggregate inventory/cost of goods sold) × 52 = (1200000/600000) × 52 = 2 × 52 = 104. Note that cost of goods sold is an income statement item and refers to an annual figure. Average aggregate inventory is a balance sheet item. Difficulty: 1 Easy Topic: Measuring Sourcing Performance Learning Objective: 13-04 Evaluate sourcing performance. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 40) If the average aggregate inventory value is $1,200,000 and the cost of goods sold is $600,000, which of the following is inventory turnover? A) 60 B) 10.4 C) 2 D) 0.5 E) None of these Answer: D Explanation: Inventory turnover = Cost of goods sold / Average aggregate inventory value = $600,000 / $1,200,000 = 0.5. Note that cost of goods sold is an income statement item and refers to an annual figure. Average aggregate inventory is a balance sheet item. Difficulty: 1 Easy Topic: Measuring Sourcing Performance Learning Objective: 13-04 Evaluate sourcing performance. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

444

41) If the average aggregate inventory value is $100,000 and the cost of goods sold is $450,000, which of the following is inventory turnover? A) 19.23 B) 4.5 C) 0.8654 D) 0.2222 E) None of these Answer: B Explanation: Inventory turnover = Cost of goods sold / Average aggregate inventory value. $450,000 / $100,000 = 4.5. Note that cost of goods sold is an income statement item and refers to an annual figure. Average aggregate inventory is a balance sheet item. Difficulty: 1 Easy Topic: Measuring Sourcing Performance Learning Objective: 13-04 Evaluate sourcing performance. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 42) When using the supply chain uncertainty framework to classify supply chains, a supply chain for functional products with an evolving supply process is called which of the following? A) Efficient B) Forward looking C) Agile D) Risk hedging E) Responsive Answer: D Explanation: See exhibit 13.3 Difficulty: 2 Medium Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

445

43) When using the supply chain uncertainty framework to classify supply chains, a supply chain for functional products with a stable supply process is called which of the following? A) Efficient B) Forward looking C) Agile D) Risk hedging E) Responsive Answer: A Explanation: See exhibit 13.3 Difficulty: 2 Medium Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) When using the supply chain uncertainty framework to classify supply chains, a supply chain for innovative products with an evolving supply process is called which of the following? A) Efficient B) Forward looking C) Agile D) Risk hedging E) Responsive Answer: C Explanation: See exhibit 13.3 Difficulty: 2 Medium Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

446

45) When using the supply chain uncertainty framework to classify supply chains, a supply chain for innovative products with a stable supply process is called which of the following? A) Efficient B) Forward looking C) Agile D) Risk hedging E) Responsive Answer: E Explanation: See exhibit 13.3 Difficulty: 2 Medium Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) The effect of the lack of synchronization among supply chain members is referred to as which of the following? A) Forward buying B) Continuous replenishment C) Bullwhip effect D) Metcalf's Law E) Being out of step Answer: C Explanation: The bullwhip effect indicates a lack of synchronization among supply chain members. Difficulty: 1 Easy Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

447

47) In outsourcing, which of the following internal activities and decision responsibilities cannot be transferred to outside contractors? A) Activities involving people B) Activities involving facilities C) Activities involving equipment D) Activities involving shareholders E) Activities involving technology Answer: D Explanation: Outsourcing goes beyond the more common purchasing and consulting contracts because not only are the activities transferred, but resources that make the activities occur, including people, facilities, equipment, technology, and other assets, are also transferred. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) Which of the following is an organizationally-driven reason for outsourcing? A) Improve effectiveness by focusing on what the firm does best B) Turn fixed costs into variable costs C) Reduce costs through lowered cost structure and increased flexibility D) Improve risk management E) Improve credibility and image by associating with superior providers Answer: A Explanation: See exhibit 13.4. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

448

49) Which of the following is not an organizationally-driven reason for outsourcing? A) Improve effectiveness by focusing on what the firm does best B) Improve flexibility to meet changing demand for products and services C) Increase product and service value by improving response to customer needs D) Improve credibility and image by associating with superior providers E) All of these are organizationally-driven reasons for outsourcing Answer: D Explanation: Organizationally driven benefits of outsourcing listed in Exhibit 13.5 are (a) Improve effectiveness by focusing on what the firm does best; (b) Increase flexibility to meet changing demand for products and services; and (c) Increase product and service value by improving response to customer needs. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) Which of the following is an improvement-driven reason for outsourcing? A) Shorten cycle time B) Improve effectiveness by focusing on what the firm does best C) Increase product and service value by improving response to customer needs D) Turn fixed costs into variable costs E) Reduce costs through a lower cost structure Answer: A Explanation: See exhibit 13.4. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

449

51) Which of the following is not an improvement-driven reason for outsourcing? A) Improve quality and productivity B) Enhance effectiveness by focusing on what you do best C) Improve risk management D) Obtain expertise, skills and technologies not otherwise available E) Improve credibility and image by associating with superior providers Answer: B Explanation: Improvement driven benefits of outsourcing listed in Exhibit 13.4 are (a) Improve quality and productivity; (b) Shorten cycle time; (c) Obtain expertise, skills, and technologies that are not otherwise available; (d) Improve risk management; and (e) Improve credibility and image by associating with superior providers. Enhance effectiveness by focusing on what you do best is an organizationally driven benefit of outsourcing. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) When considering outsourcing, what should firms be sure to avoid? A) Losing control of noncore activities that don't distinguish the firm B) Allowing outsourcing to develop into a substitute for innovation C) Giving the outsourcing partner opportunities to become a strong competitor D) Allowing employees transferred to the outsourcing partner to rejoin the firm E) Adverse corporate tax implications of asset transfers to the outsourcing partner Answer: C Explanation: The example of Intel Corporation which allowed outsourcing partners to become competitors in the memory market. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

450

53) Typically, which is the most challenging kind of supply chain to manage? A) Agile supply chain B) Efficient supply chain C) Risk-hedging supply chain D) Erratic supply chain E) Responsive supply chain Answer: A Explanation: According to the text, it is usually more challenging to operate a supply chain that is in the right column of Exhibit 13.4 than in the left column, and similarly it is more challenging to operate a supply chain that is in the lower row of Exhibit 13.4 than in the upper row. That would be the agile supply chain. Difficulty: 2 Medium Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) Which of the following product categories includes fashionable clothing, personal computers, and other products that typically have a very brief life cycle? A) Functional products B) Dysfunctional products C) Innovative products D) Bullwhip products E) Value density products Answer: C Explanation: To avoid low margins, many companies introduce innovations in fashion or technology to give customers an additional reason to buy their products. Fashionable clothes and personal computers are good examples. Difficulty: 1 Easy Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

451

55) Which of the following is not an improvement-driven reason to outsource? A) Improve risk management B) Increase commitment in a noncore area C) Shorten cycle time D) Improve quality and productivity E) Obtain expertise, skills and technologies that are otherwise not available Answer: B Explanation: In exhibit 13.5, Improve quality and productivity, shorten cycle time, obtain expertise, skills, and technologies that are not otherwise available, improve risk management, and improve credibility and image by associating with superior providers are improvement-driven reasons to outsource, not increase commitment in a non-core area. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) Which of the following is one of the strategic characteristics to consider when deciding how supplier relationships should be structured on the continuum between vertical integration (do not outsource) to arm's length relationships (outsource)? A) Cost B) Location C) Investment D) Coordination E) Control Answer: D Explanation: See exhibit 13.5. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

452

57) The six-step process for green sourcing does not include which of the following? A) Assess the opportunity B) Assess the supply base C) Confer with environmental groups D) Engage sourcing agents E) Institutionalize the sourcing strategy Answer: C Explanation: Confer with environmental groups is not included in exhibit 13.6 or in the ensuing discussion. Difficulty: 1 Easy Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) The six-step process for green sourcing includes which of the following? A) Provide a press release to local (and perhaps national) media B) Include members of environmental groups in the decision C) Notify the state and federal environmental agencies of your plans D) Perform an environmental impact study E) Develop the sourcing strategy Answer: E Explanation: Develop the sourcing strategy. The main goal of this step is to develop quantitative and qualitative criteria that will be used to evaluate the sourcing process. See also exhibit 13.6. Difficulty: 1 Easy Topic: Outsourcing Learning Objective: 13-02 Explain why companies outsource processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

453

59) Ownership costs are incurred after the initial purchase and are associated with the ongoing use of the product or material. Which of the following is not an ownership cost listed in the text? A) Financing costs B) Energy costs C) Taxes D) Maintenance and repair costs E) Supply network costs Answer: C Explanation: See exhibit 13.7. Ownership costs listed are Energy costs; Maintenance and repair; financing; and supply chain/supply network costs. Difficulty: 2 Medium Topic: Total Cost of Ownership Learning Objective: 13-03 Analyze the total cost of ownership. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) Acquisition costs include which of the following costs? A) Quality costs B) Maintenance and repair costs C) Environmental costs D) Supply chain costs E) Customer dissatisfaction costs Answer: A Explanation: See exhibit 13.7. Acquisition costs include purchase planning costs; quality costs; taxes; purchase price; and financing costs. Difficulty: 2 Medium Topic: Total Cost of Ownership Learning Objective: 13-03 Analyze the total cost of ownership. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

454

61) Ownership costs include which of the following costs? A) Environmental costs B) Warranty costs C) Supply chain costs D) Quality costs E) Taxes Answer: C Explanation: See exhibit 13.7. Ownership costs include energy costs; maintenance and repair; financing; and supply chain/supply network costs. Difficulty: 2 Medium Topic: Total Cost of Ownership Learning Objective: 13-03 Analyze the total cost of ownership. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) In the six-step process for Green Sourcing the initial step is Assessing the Opportunity. Which of the following is not among the five most common areas of relevant costs to be taken into account? A) Energy B) Packaging C) Water D) Engineering E) Recycling Answer: D Explanation: The five most common areas include electricity and other energy costs; disposal and recycling; packaging; commodity substitution (alternative materials to replace materials such as steel or plastic); and water (or other related resources). Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-03 Analyze the total cost of ownership. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

455

63) At which stage in the six-step process for Green Sourcing are metrics against which vendors will be measured for the contract's duration defined? A) Assessing the opportunity B) Engage internal supply chain sourcing agents C) Assess the supply base D) Implement the sourcing strategy E) Institutionalize the sourcing strategy Answer: E Explanation: Once the vendor is selected and contracts finalized, the procurement process begins. Here the sourcing and procurement department needs to define a set of metrics against which the supplier will be measured for the contract's duration. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-03 Analyze the total cost of ownership. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) Ownership costs incurred after the initial purchase and associated with the ongoing use of the product or material purchased include which of the following? A) Energy usage B) Purchase price C) Product liability costs D) Warranty costs E) Customer dissatisfaction costs Answer: A Explanation: See exhibit 13.7. Difficulty: 1 Easy Topic: Total Cost of Ownership Learning Objective: 13-03 Analyze the total cost of ownership. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

456

65) In the text example of radically different way of sourcing for subassemblies for Boeing, all except one of the following countries were mentioned. A) China B) Italy C) France D) South Korea E) Japan Answer: A Difficulty: 1 Easy Topic: Strategic Sourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) Warranty costs are part of (choose the most appropriate) A) Acquisition cost B) Total cost of ownership C) Post-ownership costs D) B and C E) None of the above Answer: D Explanation: See Exhibit 13.7. Since both B and C are correct, the answer is D. Difficulty: 2 Medium Topic: Total Cost of Ownership Learning Objective: 13-03 Analyze the total cost of ownership. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation

457

67) First Among Best Solar Inc. announces that they will take back free of cost, all of their solar panels that are no longer useful. Till now, the cost of disposal was significant. This action reduces A) Acquisition cost B) Total cost of ownership C) Post-ownership costs D) B and C E) None of the above Answer: D Explanation: See Exhibit 13.7. Since both B and C are correct, the answer is D. Difficulty: 2 Medium Topic: Total Cost of Ownership Learning Objective: 13-03 Analyze the total cost of ownership. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation 68) Other things remaining the same, if the average aggregate inventory value goes down, then A) inventory turnover ratio and weeks of supply will both go down. B) inventory turnover ratio will go down, but the weeks of supply will stay the same. C) inventory turnover ratio and weeks of supply will both go up. D) inventory turnover ratio will go up, but weeks of supply will go down. E) inventory turnover ratio stay the same, but weeks of supply will go down. Answer: D Explanation: Inventory turnover = cost of goods sold/average aggregate inventory value. This will go up. Weeks of supply = average aggregate inventory/cost of goods sold. This will go down. (see equation 13.1 and 13.2).

Inventory turnover =

Cost of goods sold Average aggregate inventory value

C) inventory turnover ratio and weeks of supply will both go down. D) inventory turnover ratio will go up, but weeks of supply will go down. E) inventory turnover ratio will stay the same, but weeks of supply will go down. Answer: B Explanation: Inventory turnover = cost of goods sold/average aggregate inventory value. This will go down. Weeks of supply = average aggregate inventory/cost of goods sold. This will go up. (see equation 13.1 and 13.2).

Inventory turnover =

Cost of goods sold Average aggregate inventory value

Weeks of supply = Average aggregate inventory value × 52 weeks Cost of goods sold Difficulty: 2 Medium Topic: Measuring Sourcing Performance Learning Objective: 13-04 Evaluate sourcing performance. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 70) In the sourcing/purchasing design matrix, there are three variables: contract duration, transaction costs and specificity (assume levels as short, medium and long for contract duration and for the rest, low, medium and high). Vendor managed inventory belongs to A) long contract duration, high transaction costs and low specificity. B) short contract duration, high transaction costs and low specificity. C) long contract duration, low transaction costs and low specificity. D) long contract duration, high transaction costs and high specificity. E) long contract duration, low transaction costs and high specificity. Answer: E Explanation: See Exhibit 13.1. Difficulty: 2 Medium Topic: Outsourcing Learning Objective: 13-01 Explain what strategic sourcing is. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation Operations and Supply Chain Management: The Core, 5e (Jacobs) Chapter 14 Location, Logistics, and Distribution 1) The local government's willingness to invest in upgrading infrastructure to the levels required by a company is an important issue in a company's decision of where to locate a new facility. 459

Answer: TRUE Explanation: The local government's willingness to invest in upgrading infrastructure to the levels required may be an incentive to select a specific location. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Facility location analysis considers the competitive imperative to be close to customers as to timeliness of deliveries. Answer: TRUE Explanation: Japan's NTN Drive shafts Inc. built a major plant in Columbus, Indiana, to be closer to major automobile manufacturing plants in the United States whose buyers want their goods delivered. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Facility location analysis considers the competitive imperative of lowest total cost. Answer: TRUE Explanation: The objective is to select a site with the lowest total cost. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

460

4) Facility location analysis considers the competitive imperative of a favorable business climate as indicated by the presence of other companies in the same industry. Answer: TRUE Explanation: Favorable business climate can include the presence of companies in the same industry. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Facility location analysis considers the competitive imperative of locating near the appropriate labor pool to take advantage of low wage costs and/or skill levels. Answer: TRUE Explanation: The educational and skill levels of the labor pool must match the company's needs. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Facility location analysis considers the competitive imperative of locating near the appropriate labor pool to take advantage of high technical skills. Answer: TRUE Explanation: The educational and skill levels of the labor pool must match the company's needs. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

461

7) An example of a positive business climate that might influence a facility location decision is increasing governmental costs and increasing property taxes. Answer: FALSE Explanation: Increasing governmental costs and increasing taxes are not mentioned as being part of a positive business climate. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) A favorable business climate in facility location decision making might include government legislation of tax abatements. Answer: TRUE Explanation: Pro-business government legislation and local government intervention to facilitate businesses locating in an area via subsidies, tax abatements, and other support are also factors. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) A favorable business climate in facility location decision making might include local government intervention to facilitate businesses locating in an area via subsidies. Answer: TRUE Explanation: Pro-business government legislation and local government intervention to facilitate businesses locating in an area via subsidies, tax abatements, and other support are also factors. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

462

10) A favorable business climate in facility location decision making might include local government providing basic skill training for prospective members of the workforce. Answer: TRUE Explanation: Pro-business government legislation and local government intervention to facilitate businesses locating in an area via subsidies, tax abatements, and other support are also factors. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) In facility location decision making the educational and skill levels of the labor pool must match the company's needs. Answer: TRUE Explanation: The educational and skill levels of the labor pool must match the company's needs Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) In facility location decision making matching the educational and skill levels of the labor pool to a company's needs is even more important than the labor pool's willingness and ability to learn. Answer: FALSE Explanation: The educational and skill levels of the labor pool must match the company's needs. Even more important are the willingness and ability to learn. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

463

13) Because the world is becoming more highly interconnected, the proximity of an important supplier's plants is not crucial in supporting lean production methods. Answer: FALSE Explanation: A high-quality and competitive supplier base makes a given location suitable. The proximity of important suppliers' plants also supports lean production methods. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Issues of product mix and capacity are strongly interconnected to the facility location decision. Answer: TRUE Explanation: The location of other plants or distribution centers of the same company may influence a new facility's location in the network. Issues of product mix and capacity are strongly interconnected to the location decision in this context. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) A free trade zone operates under different rules and laws than a foreign trade zone. Answer: FALSE Explanation: A foreign trade zone or a free trade zone is typically a closed facility (under the supervision of the customs department) into which foreign goods can be brought without being subject to the normal customs requirements. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

464

16) A free trade zone is typically a closed facility into which foreign goods can be brought without being subject to the usual customs requirements. Answer: TRUE Explanation: A foreign trade zone or a free trade zone is typically a closed facility (under the supervision of the customs department) into which foreign goods can be brought without being subject to the normal customs requirements. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) The objective of facility location analysis is to select the site with the lowest total cost. Answer: TRUE Explanation: The objective is to select a site with the lowest total cost. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) Governmental barriers to enter and locate in many countries are increasing through restrictive protectionist legislation. Answer: FALSE Explanation: Barriers to enter and locate in many countries are being removed today through legislation. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

465

19) Quality of life in a host community is not a major factor in making the facility location decision. Answer: FALSE Explanation: The host community's interest in having the plant in its midst is a necessary part of the evaluation process. Local educational facilities and the broader issue of quality of life are also important. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) In facility location decision making, the factor-rating system is one of the least used general location techniques. Answer: FALSE Explanation: Factor-rating systems are perhaps the most widely used of the general location techniques because they provide a mechanism to combine diverse factors in an easy-to-understand format. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-02 Contrast logistics and warehouse design alternatives. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) In facility location decision making, the factor-rating system is based on linear programming. Answer: FALSE Explanation: Linear programming is another, separate, method of facility location. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-02 Contrast logistics and warehouse design alternatives. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

466

22) A major problem in a plant location decision based on the factor-rating system is that simple point-rating schemes do not account for the wide variance of costs that may occur within each factor used in the analysis. Answer: TRUE Explanation: A major problem with simple point-rating schemes is that they do not account for the wide range of costs that may occur within each factor. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-02 Contrast logistics and warehouse design alternatives. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) Services typically have multiple site locations to maintain close contact with customers. Answer: TRUE Explanation: Services typically have multiple sites to maintain close contact with customers. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-03 Analyze logistics-driven location decisions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Facility location decisions are made using analytical techniques that are able to weigh a large number of different variables equally. Answer: FALSE Explanation: Analytical techniques assist the decisions but seldom weigh different variables equally. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

467

25) A third-party logistics company is a firm that manages all or part of another company's product delivery operations. Answer: TRUE Explanation: There are companies that specialize in logistics, such as United Parcel Service (UPS), Federal Express (FedEx), and DHL. These global companies are in the business of moving everything from flowers to industrial equipment. Today a manufacturing company most often will contract with one of those companies to handle many of its logistics functions. In this case, those transportation companies often are called a third-party logistics company. Difficulty: 1 Easy Topic: Logistics Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) The Association for Operations Management defines logistics as "the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities." Answer: TRUE Explanation: The Association for Operations Management defines logistics as "the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities." Difficulty: 1 Easy Topic: Logistics Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) Cross-docking is a practice used in the international shipping industry that facilitates port utilization. Answer: FALSE Explanation: Cross-docking is an approach used in consolidation warehouses, where large shipments are broken down into small shipments for local delivery in an area. Difficulty: 2 Medium Topic: Decisions Related to Logistics Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

468

28) Cross-docking is an approach used in consolidation warehouses, where large shipments are broken down into small shipments for local delivery in an area. Answer: TRUE Explanation: Cross-docking is an approach used in consolidation warehouses, where large shipments are broken down into small shipments for local delivery in an area. Difficulty: 2 Medium Topic: Decisions Related to Logistics Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Hub-and-spoke systems combine the idea of consolidation and that of cross-docking. Answer: TRUE Explanation: Hub-and-spoke systems combine the idea of consolidation and that of cross-docking. Difficulty: 1 Easy Topic: Decisions Related to Logistics Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) In a hub-and-spoke system each warehouse in the system acts as a spoke. Answer: FALSE Explanation: The warehouse is referred to as a "hub" and its sole purpose is to sort goods. Difficulty: 1 Easy Topic: Decisions Related to Logistics Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

469

31) DHL and United Parcel Service are transportation companies that are prohibited from functioning as a third-party logistics company the way Federal Express does. Answer: FALSE Explanation: There are companies that specialize in logistics, such as United Parcel Service (UPS), Federal Express (FedEx), and DHL. These global companies are in the business of moving everything from flowers to industrial equipment. Today a manufacturing company most often will contract with one of those companies to handle many of its logistics functions. In this case, those transportation companies often are called a third-party logistics company. Difficulty: 2 Medium Topic: Logistics Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) Which of the following is not a criterion that influences manufacturing plant or warehouse facility location decisions? A) Proximity to customers B) Historical cost C) Infrastructure of a country D) Quality of labor E) Business climate Answer: B Explanation: Historical cost is not mentioned as a criterion that influences manufacturing plant or warehouse facility location decisions? Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

470

33) Which of the following is not a criterion that influences manufacturing plant or warehouse facility location decisions? A) Suppliers B) Free trade zones C) Political risk D) Gross national product E) Tariffs and customs duties Answer: D Explanation: Gross national product is not mentioned as a criterion that influences manufacturing plant or warehouse facility location decisions? Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) Which of the following is not a criterion that influences manufacturing plant or warehouse facility location decisions? A) Government barriers B) Trading blocs C) Environmental regulation D) Immigration rules E) Local labor costs Answer: D Explanation: Immigration rules are not mentioned as a criterion that influences manufacturing plant or warehouse facility location decisions? Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

471

35) Which of the following is a criterion that influences manufacturing plant or warehouse facility location decisions? A) Proximity to customers B) Corporate policy C) Competitor's locations D) Competitive advantage E) Host community politics Answer: A Explanation: Japan's NTN Drive shafts Inc. built a major plant in Columbus, Indiana, to be closer to major automobile manufacturing plants in the United States whose buyers want their goods delivered. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) An important issue in facility location analysis is business climate. An unfavorable business climate could be indicated by which of the following? A) Similar-sized businesses nearby B) The willingness of local politicians to provide favorable treatment for a consideration C) The presence of other foreign companies in the case of international locations D) The local presence of companies in the same industry E) An established educational institution nearby F) None of the answers are correct Answer: F Explanation: The willingness of local politicians to accept bribes was not discussed as being favorable or unfavorable in the text. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

472

37) One of the objectives of facility location analysis is to select a site with the lowest total cost. Which of the following costs should be excluded from the analysis? A) Historical costs B) Inbound distribution costs C) Land D) Construction E) Regional costs Answer: A Explanation: The objective is to select a site with the lowest total cost. This includes regional costs, inbound distribution costs, and outbound distribution costs. Land, construction, labor, taxes, and energy costs make up the regional costs. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) One of the objectives of facility location analysis is to select a site with the lowest total cost. Which of the following costs should not be included in the analysis? A) Outbound distribution costs B) Incidental costs C) Energy costs D) Hidden costs E) Taxes Answer: B Explanation: The objective is to select a site with the lowest total cost. This includes regional costs, inbound distribution costs, and outbound distribution costs. Land, construction, labor, taxes, and energy costs make up the regional costs. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

473

39) One of the objectives of facility location analysis is to select a site with the lowest total cost. Which of the following are hidden costs that should be included in the analysis? A) Becoming less responsive to the customer B) Supplier costs C) Taxes D) Construction costs E) Product life cycle costs Answer: A Explanation: Additional hidden costs are difficult to measure. These involve (1) excessive moving of preproduction material between locations before final delivery to the customers and (2) loss of customer responsiveness arising from locating away from the main customer base. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) One of the objectives in facility location analysis is to select a site with the lowest total cost. Which of the following costs are hidden costs that should be included in the analysis? A) Infrastructure costs B) Movement of preproduction material between locations C) Taxes D) Construction costs E) Bribery costs Answer: B Explanation: Additional hidden costs are difficult to measure. These involve (1) excessive moving of preproduction material between locations before final delivery to the customers and (2) loss of customer responsiveness arising from locating away from the main customer base. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

474

41) Which of the following is not an infrastructure criteria used in facility location analysis? A) Adequate school system B) Adequate health care C) Adequate transportation D) Adequate low cost labor E) Adequate public utility systems Answer: D Explanation: Labor is not an infrastructure criterion. Quality of labor is, but low cost labor is not mentioned. Infrastructure criteria mentioned are: adequate road, rail, air, and sea transportation, energy and telecommunications and, the local government's willingness to invest in upgrading infrastructure to the levels required. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) How many free trade zones are there in the United States? A) Less than 50 B) Less than 100 C) About 260 D) More than 412 E) About 310 Answer: C Explanation: There are about 260 such free trade zones in the United States today. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

475

43) An example of a trading bloc is which of the following? A) Central American Free Trade Agreement countries B) Free trade zones C) ISO-9000 companies D) American Production and Inventory Control Society E) Wal-Mart and its suppliers Answer: A Explanation: The Central America Free Trade Agreement (CAFTA) is one of the new trading blocs in our hemisphere. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) Which of the following is a plant location methodology that is good for locating a single facility within a set of existing facilities based in distances and volumes of goods shipped? A) Factor-rating systems B) Centroid method C) Decision trees D) Linear programming E) Regression analysis Answer: B Explanation: The centroid method is a technique for locating single facilities that considers the existing facilities, the distances between them, and the volumes of goods to be shipped. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-03 Analyze logistics-driven location decisions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

476

45) In which of the following situations should we not use the transportation method of linear programming? A) To find a new site location for a plant B) To minimize costs of shipping "n" units to "m" destinations C) To maximize profits of shipping "n" units to "m" destinations D) To determine which corner of a street intersection to locate a retail service facility E) To locate a finished goods distribution warehouse Answer: D Explanation: The transportation method of linear programming either minimizes cost or maximizes profits of shipping to a location from another location. Because the cost would not differ on the scale of a street intersection "D" is the correct response to the question. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-03 Analyze logistics-driven location decisions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

477

46) The centroid method for plant location uses which of the following data? A) Volume of goods to be shipped between existing points B) Inbound transportation costs C) Transport times between facilities D) Correlation matrix of existing facilities E) Probabilities and payoffs Answer: A Explanation: See equation 14.1 and discussion. X and Y coordinates and volume of goods are the only data used in this application of the centroid method. Cx =

ΣdixVi ΣVi

Cy =

ΣdiyVi ΣVi

where Cx = X coordinate of the centroid Cy = Y coordinate of the centroid dix = X coordinate of the ith location diy = Y coordinate of the ith location Vi = Volume of goods moved to or from the ith location Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-03 Analyze logistics-driven location decisions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

478

47) Plant A is located at the (X, Y) coordinates of (100, 200) and has a volume of shipping of 500 units a day. Plant B is located at the (X, Y) coordinates of (150, 400) and has a volume of shipping of 200 units a day. Using the centroid method, which of the following is the X coordinate for the new plant location? A) About 100 B) About 114 C) About 130 D) About 150 E) X coordinate cannot be computed from the data given Answer: B Explanation: Using equation 14.1: (100 × 500 + 150 × 200) / (500 + 200) = 114.29 Cx =

ΣdixVi ΣVi

Cy =

ΣdiyVi ΣVi

where Cx = X coordinate of the centroid Cy = Y coordinate of the centroid dix = X coordinate of the ith location diy = Y coordinate of the ith location Vi = Volume of goods moved to or from the ith location Difficulty: 2 Medium Topic: Issues in Facility Location Learning Objective: 14-03 Analyze logistics-driven location decisions. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

479

48) Plant A is located at the (X, Y) coordinates of (200, 500) and has a volume of shipping of 400 units a day. Plant B is located at the (X, Y) coordinates of (300, 100) and has a volume of shipping of 300 units a day. Using the centroid method, which of the following is the X coordinate for the new plant location? A) About 208 B) About 227 C) About 243 D) About 389 E) X coordinate cannot be computed from the data given Answer: C Explanation: Using equation 14.1: (200 × 400 + 300 × 300) / (400 + 300) = 242.86 Cx =

ΣdixVi ΣVi

Cy =

ΣdiyVi ΣVi

where Cx = X coordinate of the centroid Cy = Y coordinate of the centroid dix = X coordinate of the ith location diy = Y coordinate of the ith location Vi = Volume of goods moved to or from the ith location Difficulty: 2 Medium Topic: Issues in Facility Location Learning Objective: 14-03 Analyze logistics-driven location decisions. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

480

49) A company wants to determine where they should locate a new warehouse. They have two existing production plants (i.e., Plant A and Plant B) that will ship units of a product to this warehouse. Plant A is located at the (X, Y) coordinates of (50, 100) and will have volume of shipping of 250 units a day. Plant B is located at the (X, Y) coordinates of (150, 200) and will have a volume of shipping of 150 units a day. Using the centroid method, which of the following are the X and Y coordinates for the new plant location? A) (81, 117) B) (88, 138) C) (117, 102) D) (76, 123) E) X and Y coordinates cannot be computed from the data given Answer: B Explanation: Using equation 14.1: X = (100 × 50 + 150 × 200) / ( 250 + 150) = 87.5 and Y = (100 × 250 + 200 × 150) / (250 + 150) = 137.5

Cx =

ΣdixVi ΣVi

Cy =

ΣdiyVi ΣVi

where Cx = X coordinate of the centroid Cy = Y coordinate of the centroid dix = X coordinate of the ith location diy = Y coordinate of the ith location Vi = Volume of goods moved to or from the ith location Difficulty: 2 Medium Topic: Issues in Facility Location Learning Objective: 14-03 Analyze logistics-driven location decisions. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

481

50) What transportation mode has very high initial investment costs but gives a very low cost per mile for products that are highly specialized and require no packaging? A) Highway B) Rail C) Water D) Pipeline E) Air Answer: D Explanation: Pipelines (are) highly specialized and limited to liquids, gases, and solids in slurry forms. No packaging is needed and the costs per mile are low. The initial cost to build a pipeline is very high. Difficulty: 1 Easy Topic: Decisions Related to Logistics Learning Objective: 14-01 Explain what logistics is. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) Very few products are moved without at least part of their journey being by which mode of transportation? A) Highway B) Rail C) Water D) Pipeline E) Air Answer: A Explanation: Few products are moved without some highway transportation. Difficulty: 1 Easy Topic: Decisions Related to Logistics Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

482

52) According to the text, an important decision for multinational companies is the nation in which to locate the home base for each business. Which of the following business activities does not happen at the business's home base? A) Core process technology is created B) A critical mass of production takes place C) The largest profits are recorded D) Strategy is created E) Core products are created Answer: C Explanation: Profits are not mentioned in the text segment on competitive advantage Difficulty: 1 Easy Topic: Decisions Related to Logistics Learning Objective: 14-03 Analyze logistics-driven location decisions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) Which of the following is not mentioned in the text as a technique for identifying potential sites for plants or other types of facilities? A) The centroid method B) Factor-rating systems C) Linear programming D) The transportation method of decision analysis E) Regression analysis Answer: D Explanation: There is no such method as the transportation method of decision analysis Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-03 Analyze logistics-driven location decisions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

483

54) Not among the factors related to infrastructure in making facility location decisions is which of the following? A) Satisfactory hotel accommodations B) Adequate air transportation C) Energy requirements D) Telecommunications requirements E) Willingness of local government to invest in infrastructure upgrades Answer: A Explanation: Hotel accommodation is not mentioned in the infrastructure factor in making facility location decisions. Difficulty: 1 Easy Topic: Issues in Facility Location Learning Objective: 14-03 Analyze logistics-driven location decisions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) Suppose that using the centroid method you found the best location for a communications tower. The location happens to be in the middle of a pond. Then, you should locate the tower A) at that location using water proof concrete and precast poles. B) at the closest point outside the pond. C) using some other method. D) after considering qualitative factors such as geography, roads and utilities to help find the exact location. E) None of the above Answer: D Explanation: See discussion under centroid method which emphasizes the other factors. Difficulty: 2 Medium Topic: Issues in Facility Location Learning Objective: 14-03 Analyze logistics-driven location decisions. Bloom's: Remember AACSB: Analytical Thinking Accessibility: Keyboard Navigation

484

56) Using the transportation method for solving the optimal shipping a product from factories to warehouses, as per text, you should use A) "≤" for constraints regarding factory capacity and "=" for constraints regarding demand at warehouses. B) "≥" for constraints regarding factory capacity and "≤" for constraints regarding demand at warehouses. C) "=" for constraints regarding factory capacity and "≥" for constraints regarding demand at warehouses. D) "≥" for constraints regarding factory capacity and "=" for constraints regarding demand at warehouses. E) None of the above Answer: A Explanation: See discussion under transportation method solution. Difficulty: 2 Medium Topic: Issues in Facility Location Learning Objective: 14-03 Analyze logistics-driven location decisions. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 57) In the logistics-systems design matrix, volume, cost and speed of delivery are three variables (assume three levels: low, moderate or high) used to describe attributes of transportation modes. Rail is associated with A) moderate volume, moderate speed and high cost. B) moderate volume, high speed and high cost. C) high volume, moderate speed and low cost. D) low volume, high cost and low speed. E) high volume, high speed and high cost. Answer: C Explanation: See exhibit 14.1. Difficulty: 2 Medium Topic: Decisions Related to Logistics Learning Objective: 14-01 Explain what logistics is. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

485

58) As per the discussion on FedEx, the vision of the firm is and driver for comprehensive technology strategy is A) delivery of the package is important and technology is not relevant. B) information about a package is as important as the delivery itself but technology is incidental. C) delivery of the package is important though information about a package is incidental. D) comprehensive technology is the only important thing. E) information about the package is as important as the delivery of the package and that drives comprehensive technology strategy. Answer: C Explanation: See FedEx intro discussion. Difficulty: 2 Medium Topic: Decisions Related to Logistics Learning Objective: 14-01 Explain what logistics is. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

486