Test Bank For Operations Management An Integrated Approach, 7th Edition By R. Dan Reid and Nada Sanders Chapter 1-16
Test Bank For
Operations Management An Integrated Approach, 7th Edition By R. Dan Reid and Nada Sanders Chapter 1-16
Chapter 1: Introduction to Operations Management LO Section
Subsection
What Is Operations Management?
Question # 1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 73, 75, 81, 82, 83, 84, 85, 86, 87, 114, 115, 116, 117, 118, 119, 130,
Differences between Manufacturing and Service Organizations
14, 21, 22, 23, 24, 74, 88, 89, 120, 132, 133, 134, 135, 136, 138,
Operations Management Decisions
25, 26, 27, 76, 121, 122, 124,
Historical Development
19, 20 Why OM?
28, 29, 94, 139
Historical Milestones
28, 29, 94, 139,
The Industrial Revolution
30, 31, 32, 33, 90, 91
Scientific Management
34, 35, 36, 37, 38, 39, 40, 41, 69, 92, 93, 95, 123, 125
The Human Relations Movement
42, 43, 44, 46, 47, 48, 71, 96, 98, 100, 101
Management Science
45, 49, 50, 97, 103,
The Computer Age
104, 126
Just-in-Time
51, 52, 53
Total Quality Management Business Process Reengineering
54, 55, 57
Flexibility
77, 106
Time-Based Competition
58, 107
Supply Chain Management
56, 105, 128
Global Marketplace Sustainability and Green Operations
60, 63
Electronic Commerce Outsourcing and Flattening of the World
61, 62, 64, 108
Big Data Analytics
6, 127, 141
59, 99, 129
102 109
Today's OM Environment Operations Management in Practice
65, 66, 70, 78, 131, 140 67, 68, 110
OM across the Organization
72, 79, 80, 111, 112, 113, 137
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Multiple Choice
1. Every business is managed through what three major functions? a) accounting, finance, and marketing b) engineering, finance, and operations management c) accounting, purchasing, and human resources d) accounting, engineering, and marketing e) finance, marketing, and operations management Ans: e Solution: Every business is managed through three major functions: finance, marketing, and operations management. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min
2. Which business function is responsible for managing cash flow, current assets, and capital investments? a) accounting b) finance c) marketing d) operations management e) purchasing Ans: b
Solution: Finance is the function responsible for managing cash flow, current assets, and capital investments. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min
3. The finance function is responsible for a) sales, generating customer demand, and understanding customer wants and needs. b) planning and coordinating all the resources needed to design, produce, and deliver the merchandise to its various retail locations. c) planning, coordinating, and controlling the resources needed to produce a company‘s products and services. d) managing cash flow, current assets, and capital investments. e) efficiency and costs. Ans: d Solution: The financial function is responsible for managing cash flow, current assets, and capital investments. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min
4. Which business function is responsible for sales, generating customer demand, and understanding customer wants and needs? a) finance b) human resources c) marketing d) operations management e) purchasing Ans: c Solution: Marketing is responsible for sales, generating customer demand, and understanding customer wants and needs. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy
Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min 5. Which business function is responsible for planning, coordinating, and controlling the resources needed to produce a company‘s products and services? a) engineering b) finance c) human resources d) marketing e) operations management Ans: e Solution: Operations management is the business function that plans, organizes, coordinates, and controls the resources needed to produce a company‘s goods and services. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min
6. All of the following are true for business process reengineering EXCEPT a) it can increase efficiency. b) it cannot be used to improve quality. c) it can reduce costs. d) it involves asking why things are done in a certain way. e) it involves redesigning processes. Ans: b Solution: Business process reengineering means redesigning a company‘s processes to increase efficiency, improving quality, and reducing costs. Reengineering requires asking why things are done in a certain way, questioning assumptions, and then redesigning the processes. Section Ref: Historical Development Sub Section Ref: Business Process Reengineering Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
7. At the retailer The Gap, which function plans and coordinates all the resources needed to design, produce, and deliver the merchandise to its various retail locations? a) engineering b) human resources c) marketing d) operations management e) purchasing Ans: d Solution: The Gap sells casual apparel. It is the operations function that plans and coordinates all the resources needed to design, produce, and deliver the merchandise to the various retail locations. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min
8. Operations management is responsible for increasing the organization‘s efficiency, which means the company will be able to a) add to the engineering process. b) take for granted current operations. c) increase the number of positions under the manager‘s position. d) eliminate activities that do not add value. e) increase purchasing opportunities. Ans: d Solution: An important role of operations is to analyze all activities, eliminate those that do no add value, the restructure processes and jobs to achieve greater efficiency. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min 9. Which of the following is NOT an example of a value-added activity? a) having a haircut b) riding a train c) manufacturing a radio d) waiting to see a doctor e) having a surgery
Ans: d Solution: Value added refers to the net increase between the final value of a product and the value of all the inputs. Waiting to see a doctor is an activity that does not add value toward the final output, a healthy person. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 1: Define operations management. AACSB: Analytic Time on Task: 1 min
10. At a factory, the transformation process is a (an) and components into products. a) locational b) imperceptible c) hypothetical d) irreversible e) physical
change of raw materials
Ans: e Solution: At a factory, the transformation process is the physical change of raw materials into products. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min
11. All of the following may be inputs of a transformation process EXCEPT a) services. b) managers. c) buildings. d) technology. e) information. Ans: a Solution: Services are outputs of a transformation process. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension
Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min
12. Operations management is responsible for orchestrating all the resources needed to produce the final product. This includes all of the following EXCEPT a) managing cash flow. b) arranging schedules. c) managing inventory. d) controlling quality. e) designing work methods. Ans: a Solution: Finance is the function responsible for managing cash flow. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min 13. Which second-tier computer company utilized a drastic change in its operations function to become an industry leader in the late 1990s? a) Apple b) Compaq c) Dell d) IBM e) Kozmo Ans: c Solution: Dell was a second-rate computer maker that managed its operations similarly to others in the industry. Then in 1994 Dell implemented a new business model that completely changed the role of its operations function. In 2019, the Digital Supply Chain Institute listed Dell as a top leader in their industry. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min
14. Which term is used to describe the companies that have low customer contact and are capital
intensive, yet they provide a service? a) quasi-service organizations b) manufacturing organizations c) quasi-manufacturing organizations d) service organizations e) Industrial Revolution era operations management Ans: c Solution: Quasi-manufacturing organizations are the companies that have low customer contact and are capital intensive, yet they provide a service. Section Ref: Differences between Manufacturing and Service Organizations Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Knowledge Time on Task: 1 min 15. Which initially successful Web-based home delivery company had to shut down in 2001 due to inadequate management of its operations? a) Contact.com b) Time Saver.com c) Kozmo.com d) Kramer.com e) Neptune.com Ans: c Solution: Kozmo.com was founded in 1997 as a Web-based home delivery company. It was technology enabled and rapidly became a huge success. Yet the company had to close in 2001 due to its inadequate operations management. Due to a strong foundation, Kosmo back in business in 2018, led by new owners and a new vision. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min
16. In order to be successful with Web-based online shopping, companies must do all of the following EXCEPT a) manage distribution centers and warehouses. b) operate fleets of trucks. c) maintain adequate inventories of products. d) increase the cost of production.
e) schedule deliveries. Ans: d Solution: To ensure meeting promises, companies must forecast what customers want, maintain adequate inventories of goods, manage distribution centers and warehouses, operate fleets of trucks, and schedule deliveries, all while keeping costs low and customer satisfied. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Technology Time on Task: 1 min 17. What outsourcing functions does UPS provide for its clients? a) accounting and inventories b) inventories and deliveries c) accounting and deliveries d) accounting and maintenance e) deliveries and maintenance Ans: b Solution: Some companies hire outside firms for certain functions, such as outsourcing the management of inventories and deliveries to UPS. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min
18. Which of the following is NOT an example of a value-added activity? a) removing iron ore from the ground and shipping it to a steel mill b) filling the underground gasoline tanks at a service station c) making a wedding cake d) moving components to a warehouse for storage until the factory needs them e) moving luggage from a cab to the airport ticket counter Ans: d Solution: Moving components to a warehouse for storage does not add value to the final output. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Medium Bloom‘s: Application
Learning Objective 1: Define operations management. AACSB: Analytic Time on Task: 1 min 19. Which famous economist once suggested that ―The production problem has been solved‖? a) John Nash b) Irving Fisher c) John Kenneth Galbraith d) Adam Smith e) John Maynard Keynes Ans: c Solution: The distinguished economist John Kenneth Galbraith observed, ―The production problem has been solved.‖ Section Ref: Historical Development Sub Section Ref: Why OM? Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
20. What was the primary reason that American firms lost market dominance in many industries in the 1970s and 1980s? a) OPEC oil embargoes. b) The Vietnam war had drained the economy of resources. c) After Richard Nixon was President, foreign consumers began to mistrust American firms. d) They had become lax due to the lack of competition in the 1950s and 1960s. e) Foreign government subsidies for business. Ans: d Solution: In the 1970s and 1980s, American companies experienced large declines in productivity growth. It appeared that they had become lax due to the lack of competition in the 1950s and 1960s. Section Ref: Historical Development Sub Section Ref: Why OM? Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
21. In what area does General Motors earn its highest return on capital? a) selling cars b) selling logo merchandise c) financing d) selling racing engines e) post-sales parts and service Ans: e Solution: General Motors‘ greatest return on its capital does not come from selling cars, but rather from post-sales parts and service. Section Ref: Differences between Manufacturing and Service Organizations Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Knowledge Time on Task: 1 min 22. Which of the following is an example of a ―back room‖ operation for an airline company? a) serving food and drinks to passengers b) collecting tickets and checking passengers in at the gate c) loading luggage onto the airplane d) demonstrating use of the seat belt and other safety features of the airplane e) assisting passengers in getting off of the plane Ans: c Solution: A ―back room‖ operation is a behind the scene operation. Loading luggage onto an airplane has no direct customer contact and can be managed like a manufacturing operation. Section Ref: Differences between Manufacturing and Service Organizations Level: Medium Bloom‘s: Application Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Analytic Time on Task: 1 min 23. What do we call companies that have low customer contact and are capital intensive and yet provide a service? a) pseudo-manufacturing organizations b) quasi-manufacturing organizations c) hierarchical manufacturing organizations d) service factories e) quasi-service organizations Ans: b Solution: Quasi-manufacturing organizations are the organizations that have low customer contact and are capital intensive, yet they provide a service.
Section Ref: Differences between Manufacturing and Service Organizations Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Knowledge Time on Task: 1 min
24. What percentage of total nonfarm jobs in the U.S. economy comes from service-producing industries? a) 20% b) 50% c) 60% d) 80% e) 95% Ans: d Solution: Since the 1960s, the percentage of jobs in the service-producing industries of the U.S. economy has increased from less than 50 to over 80 percent of total nonfarm jobs. Section Ref: Differences between Manufacturing and Service Organizations Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Knowledge Time on Task: 1 min 25. What are long-term decisions that set the direction for the entire organization called? a) tactical b) operational c) directional d) distant e) strategic Ans: e Solution: Long-term decisions that set the direction for the entire organization are called strategic decisions. Section Ref: Operations Management Decisions Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe decisions that operations managers make. AACSB: Knowledge Time on Task: 1 min
26. Which of the following is true with respect to strategic and tactical decisions? a) Tactical decisions focus on more specific day-to-day decisions. b) Tactical decisions determine the direction for strategic decisions. c) Strategic decisions are bound by tactical decisions. d) Strategic decisions are made more frequently and routinely. e) Strategic decisions must be aligned with tactical decisions. Ans: a Solution: Tactical decisions focus on more specific day-to-day issues, such as the quantities and timing of the specific resources. Section Ref: Operations Management Decisions Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe decisions that operations managers make. AACSB: Knowledge Time on Task: 1 min 27. Which of the following is NOT primarily performed by the operation management function? a) job design and work measurement b) advertising strategy c) location analysis d) quality management e) facility layout Ans: b Solution: Marketing is responsible for advertising. All others are OM decisions. Section Ref: Operations Management Decisions Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe decisions that operations managers take. AACSB: Knowledge Time on Task: 1 min
28. When did operations management emerge as a formal field of study? a) during the late 1950s and early 1960s b) during the late 1970s and early 1980s c) during World War II d) during the nineteenth century e) during the early 1900s Ans: a Solution: Operations management did not emerge as a formal field of study until the late 1950s and early 1960s, when scholars began to recognize that all production systems face a common
set of problems and to stress the systems approach to viewing operations processes Section Ref: Historical Development Sub Section Ref: Historical Milestones Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
29. Managing the transformation of inputs into goods and services is a) a postindustrial era process. b) a direct contributor to the curved earth syndrome. c) as old as time. d) a twenty-first century developed process. e) a design of Frederick Taylor. Ans: c Solution: When we think of what operations management does, we can see that as a function it is as old as time. Section Ref: Historical Development Sub Section Ref: Historical Milestones Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
30. Who invented the steam engine? a) James Watt b) Adam Smith c) Eli Whitney d) Henry Ford e) Frederick Taylor Ans: a Solution: James Watt invented the steam engine in 1764. Section Ref: Historical Development Sub Section Ref: The Industrial Revolution Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
31. What concept involves breaking down the production of a product into a series of small, elementary tasks, each of which is performed by a different worker? a) division of labor b) interchangeable parts c) scientific management d) the Hawthorne effect e) operations research Ans: a Solution: Division of labor means that the production of a good is broken down into a series of small, elemental tasks, each of which is performed by a different worker. Section Ref: Historical Development Sub Section Ref: The Industrial Revolution Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
32. Who wrote The Wealth of Nations in 1776, describing division of labor? a) James Watt b) Adam Smith c) Eli Whitney d) Henry Ford e) Frederick Taylor Ans: b Solution: Adam Smith described the concept of division of labor in 1776 in The Wealth of Nations. Section Ref: Historical Development Sub Section Ref: The Industrial Revolution Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min 33. The concept of interchangeable parts was introduced by a) Adam Smith. b) Frederick Taylor. c) Eli Whitney. d) Henry Ford. e) W. Edwards Deming. Ans: c
Solution: Eli Whitney introduced the concept of interchangeable parts in 1790. Section Ref: Historical Development Sub Section Ref: The Industrial Revolution Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
34. Who created scientific management? a) James Watt b) Adam Smith c) Eli Whitney d) Frederick W. Taylor e) Henry Ford Ans: d Solution: Scientific management was an approach to management promoted by Frederick W. Taylor at the turn of the twentieth century. Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min 35. What was Frederick W. Taylor‘s background? a) physics b) human resources management c) operations research d) psychology e) engineering Ans: e Solution: Taylor was an engineer with an eye for efficiency. Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
36. A key feature of scientific management is that it assumed that workers are motivated only by a) love. b) power. c) challenging work. d) money. e) fame. Ans: d Solution: Scientific management assumed that workers are motivated only by money and are limited only by their physical ability. Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min 37. A key feature of scientific management is that it assumed that workers are limited only by a) machinery b) co-workers c) their job description d) their tools. e) their physical ability. Ans: e Solution: Scientific management assumed that workers are motivated only by money and are limited only by their physical ability. Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
38. The creator of scientific management believed that a) worker productivity is governed by scientific laws. b) workers should have a lot of control over their jobs. c) efficiency is overrated. d) workers should be paid based on seniority. e) mathematical models are the basis for management of production. Ans: a Solution: Taylor believed that worker productivity is governed by scientific laws and that it is up
to management to discover these laws through measurement, analysis, and observation. Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min 39. Which of the following operations management concepts did NOT evolve from scientific management? a) moving assembly lines b) interchangeable parts c) stopwatch time studies d) piece-rate incentives e) setting time standards for task performance Ans: b Solution: The concept of interchangeable parts was introduced by Eli Whitney during the Industrial Revolution in late 1700s. All others were evolved from scientific management in the early 1900s. Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
40. Who popularized the moving assembly line? a) James Watt b) Adam Smith c) Eli Whitney d) Frederick W. Taylor e) Henry Ford Ans: e Solution: Ford introduced the moving assembly line to produce Ford cars. Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
41. Under scientific management, information from what is used to set time standards for task performance? a) stopwatch time studies b) observance of similar tasks c) computer simulation d) negotiations with unions e) arbitration Ans: a Solution: In stopwatch time studies, observations are made and recorded of worker performing a task over many cycles. This information is then used to set a time standard for performing the particular task. Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
42. What movement started with the publication of the results of the Hawthorne studies? a) scientific management b) human relations c) management science d) marketing research e) operations management Ans: b Solution: The publication of the results of the Hawthorne studies led to the human relations movement. Section Ref: Historical Development Sub Section Ref: The Human Relations Movement Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
43. What is the Hawthorne effect? a) workers responding to the attention they are given b) stopwatch time studies leading to time standards c) the use of quantitative methods for solving management problems d) the use of interchangeable parts e) more lighting increasing productivity Ans: a Solution: The Hawthorne effect is a term referring to the tendency that people will modify their behavior and respond to the attention they are given. Section Ref: Historical Development Sub Section Ref: The Human Relations Movement Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
44. Increasing the level of responsibility of a job by adding planning tasks is a) job enlargement. b) job rotation. c) job involvement. d) job enrichment. e) job backward integration. Ans: d Solution: Job enrichment is an approach in which workers are given a greater role in planning. Section Ref: Historical Development Sub Section Ref: The Human Relations Movement Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min 45. The first military use of management science was solving complex problems of logistics control, weapons system design, and deployment of missiles during a) World War I. b) World War II. c) the Korean War. d) the Vietnam War. e) Operation Desert Storm. Ans: b Solution: World War II posted many military, strategic, logistic, and tactical problems. The
techniques of management science were used to solve many of these problems. Section Ref: Historical Development Sub Section Ref: Management Science Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
46. What term describes the approach of giving workers a larger portion of the total task to do? a) job enlargement b) job rotation c) job involvement d) job enrichment e) job backward integration Ans: a Solution: Job enlargement is an approach in which workers are given a larger portion of the total task to do. Section Ref: Historical Development Sub Section Ref: The Human Relations Movement Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
47. When were the Hawthorne Studies conducted? a) 1770s b) 1830s c) 1930s d) 1960s e) 1980s Ans: c Solution: The Hawthorne studies were conducted at a Western Electric plan in Hawthorne, Illinois, in the 1930s. Section Ref: Historical Development Sub Section Ref: The Human Relations Movement Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
48. In which company were the Hawthorne Studies conducted? a) Westinghouse b) General Electric c) Hawthorne Incorporated d) General Motors e) Western Electric Ans: e Solution: The Hawthorne studies were conducted at a Western Electric plant in Hawthorne, Illinois, in the 1930s. Section Ref: Historical Development Sub Section Ref: The Human Relations Movement Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min 49. Management science focuses on a) profit margin. b) qualitative systems analysis. c) management promotion metrics. d) quantitative techniques for solving personnel issues. e) quantitative techniques for solving operations problems. Ans: e Solution: Management science is a field of study that focuses on the development of quantitative techniques to solve operations problems. Section Ref: Historical Development Sub Section Ref: Management Science Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
50. When was the first mathematical model for inventory management developed? a) 1770 b) 1865 c) 1900 d) 1913 e) 1930
Ans: d Solution: The first mathematical model for inventory management was developed by F. W. Harris in 1913. Section Ref: Historical Development Sub Section Ref: Management Science Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min 51. Where was the just-in-time philosophy developed? a) Germany b) United States c) Canada d) Japan e) Italy Ans: d Solution: Just-in-time is a major operations management philosophy developed in Japan in the 1980s. Section Ref: Historical Development Sub Section Ref: Just-in-Time Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
52. Just-in-time a) is applicable to both manufacturing and service organizations. b) was first used in services. c) focuses primarily on the efficiency of assembly line operations. d) is a major operations management philosophy developed in the United States. e) is a philosophy designed to achieve operations effectiveness through the use of computers. Ans: a Solution: JIT has been implemented in both manufacturing and service organizations. It is a philosophy designed to achieve high-volume production through elimination of waste and continuous improvement. Section Ref: Historical Development Sub Section Ref: Just-in-Time Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management.
AACSB: Knowledge Time on Task: 1 min 53. When was the just-in-time philosophy developed? a) 1980s b) 1930s c) 1800s d) 1700s e) 1990s Ans: a Solution: Just-in-time was developed in Japan in the 1980s. Section Ref: Historical Development Sub Section Ref: Just-in-Time Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
54. What is a philosophy that aggressively seeks to improve product quality by eliminating causes of product defects and making quality an all-encompassing organizational philosophy? a) CQI b) TQM c) SPC d) JIT e) BPR Ans: b Solution: TQM is a philosophy that aggressively seeks to improve product quality by eliminating causes of product defects and making quality an all-encompassing organizational philosophy. Section Ref: Historical Development Sub Section Ref: Total Quality Management Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
55. Who among the following is considered a ―quality guru‖? a) Elton Mayo b) W. Edwards Deming c) Alex Gamble d) F. W. Harris e) Frederick W. Taylor Ans: b Solution: TQM is a philosophy promulgated by ―quality gurus‖ such as W. Edwards Deming. Section Ref: Historical Development Sub Section Ref: Total Quality Management Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
56. Supply chain management involves managing a) the flow of internal information only. b) the flow of materials and information from suppliers to customers. c) the flow of raw materials to inventory only. d) the flow of information among customers. e) the stock room supply only. Ans: b Solution: Supply chain management involves managing the flow of materials and information from suppliers to customers in order to reduce overall cost and increase responsiveness to customers. Section Ref: Historical Development Sub Section Ref: Supply Chain Management Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min 57. Many companies require their suppliers to meet what standards as a condition for obtaining contracts? a) RFO 6000 b) PUR 8000 c) ISO 9000 d) MACH 5000 e) SUP 2000 Ans: c
Solution: ISO 9000 is a global set of standards. Many companies require their suppliers to meet the standards as a condition for obtaining contracts. Section Ref: Historical Development Sub Section Ref: Total Quality Management Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
58. One of the two most important features of time-based competition involves a) advertising on the Internet. b) stopwatch time studies. c) setting time standards for task performance. d) instantaneous access to inventory information. e) developing new products and services faster than competitors. Ans: e Solution: Time-based competition focuses on efforts to develop new products and services and deliver them to customers faster than competitors. Section Ref: Historical Development Sub Section Ref: Time-Based Competition Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min 59. ISO 14000 standards provide guidelines for what? a) business ethics b) environmentally responsible actions c) supplier certification d) quality control e) website development Ans: b Solution: ISO 14000 standards provide guidelines and a certification program documenting a company‘s environmentally responsible actions. Section Ref: Historical Development Sub Section Ref: Sustainability and Green Operations Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min
60. NAFTA (the North American Free Trade Agreement) is a) a certification group. b) a regional trade agreement. c) a quality control method. d) a logistics provider. e) a U.S. government agency. Ans: b Solution: Regional trading agreements, such as NAFTA, EU, and WTO, are designed to guarantee continued competition on the international level. Section Ref: Historical Development Sub Section Ref: Global Marketplace Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min 61. What type of commerce makes up the highest percentage of electronic transactions? a) B2C b) C2C c) B4B d) B2B e) B4C Ans: d Solution: The electronic commerce that occurs between businesses, known as B2B commerce, makes up the highest percentage of transactions. Section Ref: Historical Development Sub Section Ref: Electronic Commerce Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Technology Time on Task: 1 min
62. The Internet was developed from a government network called ARPANET created in 1969 by a) Japanese scientists. b) the EPA. c) the U.S. Defense Department. d) NSF. e) ISO.
Ans: c Solution: The Internet was developed from a government network called ARPANET created in 1969 by the U.S. Defense Department. It has become an essential business medium since the late 1990s. Section Ref: Historical Development Sub Section Ref: Electronic Commerce Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Technology Time on Task: 1 min 63. Today‘s business must think in terms of a) regional trade zones. b) the EPA. c) the U.S. Defense Department. d) the global marketplace. e) the curved world Ans: d Solution: Today businesses must think in terms of a global marketplace in order to compete effectively. Section Ref: Historical Development Sub Section Ref: Global Marketplace Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min 64. General Electric‘s Trading Process Network primarily handles transactions between a) individual customers. b) companies and individual customers. c) companies and their shipping firms. d) companies and their distributors. e) companies and their suppliers. Ans: e Solution: The most common B2B exchanges occur between companies and their suppliers, such as General Electric‘s Trading Process Network. Section Ref: Historical Development Sub Section Ref: Electronic Commerce Level: Easy Bloom‘s: Comprehension
Learning Objective 4: Identify major historical developments in operations management. AACSB: Technology Time on Task: 1 min 65. What is a concept that takes a total system approach to creating efficient operations? a) lean systems b) enterprise resource planning c) customer relationship management d) management science e) management information systems Ans: a Solution: Lean systems take a total system approach to creating an efficient operation and pull together best practices concepts. Section Ref: Today's OM Environment Level: Easy Bloom‘s: Knowledge Learning Objective 5: Identify current trends in operations management. AACSB: Knowledge Time on Task: 1 min
66. What are software solutions that allow the firm to collect customer-specific data? a) MRP b) CRM c) ERP d) JIT e) ISO Ans: b Solution: CRM encompasses software solutions that enable the firm to collect customer-specific data, information that can help the firm identify profiles of its most loyal customers, and provide customer-specific solutions. Section Ref: Today's OM Environment Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 5: Identify current trends in operations management. AACSB: Technology Time on Task: 1 min
67. Entry-level positions for operations management graduates include all of the following EXCEPT a) quality specialist. b) inventory analyst. c) plant manager. d) production analyst. e) production supervisor. Ans: c Solution: Plant manager is a midlevel position. The other positions, such as quality specialist, product analyst, inventory analyst, and production supervisor are below the midlevel. Section Ref: Operations Management in Practice Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 6: Describe the flow of information between operations management and other business functions. AACSB: Knowledge Time on Task: 1 min
68. Operations management personnel perform a variety of functions, including all of the following EXCEPT a) analyzing production problems. b) analyzing potential mergers. c) developing forecasts. d) developing employee schedules. e) monitoring inventory. Ans: b Solution: OM is responsible for a variety of operational functions, such as analyzing product problems, developing forecasting, monitoring inventory, and developing employee schedules. It is not responsible for analyzing potential mergers. Section Ref: Operations Management in Practice Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 6: Describe the flow of information between operations management and other business functions. AACSB: Knowledge Time on Task: 1 min
69. Which of the following concepts is linked the LEAST with Henry Ford? a) scientific management b) mass production c) mass customization d) technology e) interchangeable parts Ans: c Solution: Mass customization is linked the least with Ford. Ford introduced moving assembly lines by combing scientific management with technology and developed the concept of mass production by combining scientific management with the division of labor and interchangeable parts. Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 1 min 70. Today‘s operations management is characterized by a) its use of the Internet. b) its reliance on the intranet. c) its increased use of cross-functional decision making. d) its use of cross-functional job sharing. e) its use of interchangeable parts. Ans: c Solution: One characteristic of today‘s OM environment is the increased use of cross-functional decision making. Section Ref: Today‘s OM Environment Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 5: Identify current trends in operations management. AACSB: Knowledge Time on Task: 1 min
71. Which of the following historical figures would probably have the MOST different management style from the others? a) Elton Mayo b) Henry Ford c) Eli Whitney d) Frederick W. Taylor e) Adam Smith Ans: a Solution: Elton Mayo focused on understanding human elements of job design, such as worker motivation. All the others focused more on improving production efficiency, such as division of labor, interchangeable parts, and scientific management. Section Ref: Historical Development Sub Section Ref: The Human Relations Movement Level: Medium Bloom‘s: Application Learning Objective 4: Identify major historical developments in operations management. AACSB: Analytic Time on Task: 1 min
72. Operations management interacts with all of the following functions EXCEPT a) marketing. b) information systems. c) finance. d) engineering. e) total quality management (TQM). Ans: e Solution: TQM is not a function; it is a philosophy that seeks to improve quality by eliminating causes of product defects and by making quality the responsibility of everyone in the organization. Section Ref: Operations Management in Practice Sub Section Ref: OM across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 6: Describe the flow of information between operations management and other business functions. AACSB: Knowledge Time on Task: 1 min
73. OM‘s transformation role is to add value. Value added is a) performing activities well for the least possible cost. b) the net decrease between output product value and input material value. c) increasing product value in the first stage. d) the net increase between output product value and input material value. e) customizing a product, regardless of expense, to satisfy customer needs. Ans: d Solution: Value added is the net increase created during the transformation of inputs into final outputs. Section Ref: What Is Operations Management? Sub Section: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min 74. Canton Gourmet is a restaurant offering both Japanese and Chinese food. Customer service and contact are important parts of the business. Yet, Canton Gourmet manages its kitchen segment of the operation like a manufacturing operation. What manufacturing characteristics does the kitchen segment have? a) intangible outputs and low customer contact b) intangible outputs and high customer contact c) tangible outputs and low customer contact d) tangible outputs and high customer contact Ans: c Solution: The kitchen segment produces tangible output, food, but it has low customer contact. Section Ref: Differences between Manufacturing and Service Organizations Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 2: Describe the difference between manufacturing and service organizations. AACSB: Analytic Time on Task: 1 min 75. Sadie was recently hired as an operations manager by Wang Group, a top sneaker manufacturer in China. Which of the following is least likely to be among her job responsibilities? a) designing products b) controlling product quality c) managing inventory d) arranging labor schedules e) generating customer demand
Ans: e Solution: Marketing is responsible for generating customer demand. Operations management is responsible for orchestrating all the resources need to produce the final product, which includes designing the product, controlling quality, managing inventory, and arranging labor schedules. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 1: Define operations management. AACSB: Analytic Time on Task: 1 min 76. Angel is a supply chain manger. She oversees the company‘s supply chain and logistics operations and is involved in a variety of decision-making processes. If she is currently faced with making a tactical rather than a strategic decision, which of the following issues is she addressing? a) Should the company make or buy the product? b) How many suppliers should the company use? c) What relationship should the company develop with its suppliers? d) How should the company deal with the issues of ethics in managing suppliers? e) What should be the quantity and timing of our next order from Supplier A? Ans: e Solution: The quantity and timing of the next order from Supplier A would be considered as a tactical decision since it is short-term in nature and focuses on more specific day-to-day operations. The other decisions would be considered strategic because they are broad in scope and long-term in nature. Section Ref: Operations Management Decisions Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 3: Describe decisions that operations managers make. AACSB: Analytic Time on Task: 1 min 77. Sue and her husband are planning an Alaska cruise vacation. They are excited about the trip and are debating which excursions to take, such as a train ride up to the White Pass Summit or a glacier adventure by helicopter from Juneau. The cruise company has determined that a standard cruise vacation package with several options satisfies the different needs of customers. What is the cruise company‘s philosophy an example of? a) total quality management (TQM) b) just-in-time (JIT) c) business process reengineering d) time-based competition e) flexibility
Ans: e Solution: The standard vacation package with different excursion choices is an example of flexibility. Section Ref: Historical Development Sub Section Ref: Flexibility Level: Medium Bloom‘s: Application Learning Objective 4: Identify major historical developments in operations management. AACSB: Analytic Time on Task: 1 min 78. The business school at Jersey State University formed a task force to review its undergraduate curricula for currency, relevance, and content. The group includes professors from different departments. One of its charges is to examine what core topics related to the emerging discipline of business analytics are currently being covered, in which courses, and by which departments. The group will then make a recommendation to the business faculty on how to best present business analytics across several disciplines. This type of decision making is called a) organizational decision making. b) employee decision making. c) cross-functional decision making. d) managerial decision making. Ans: c Solution: Cross-functional decision making requires coordinated interaction and decision making among the different business functions of the organization. In this scenario, experts from different departments formed a cross-functional team to help solve organizational problems. Section Ref: Today‘s OM Environment Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 5: Identify current trends in operations management. AACSB: Analytic Time on Task: 1 min 79. Wyatt is a marketing manager responsible for deploying successful marketing campaigns and owning their implementation from ideation to execution. What information will he need from operations management in order to perform his task? a) What are customer expectations? b) What are financial constraints? c) What are operating capabilities? d) What are labor requirements? e) What are technological capabilities? Ans: c Solution: To fully capable of meeting customer needs and making sales, marketing managers need to understand what operations can produce, what due dates it can and cannot meet, and
what types of customization operations can deliver. Section Ref: Operations Management in Practice Sub Section Ref: OM across the Organization Level: Medium Bloom‘s: Application Learning Objective 6: Describe the flow of information between operations management and other business functions. AACSB: Analytic Time on Task: 1 min 80. Wyatt is a marketing manager responsible for deploying successful marketing campaigns and owning their implementation from ideation to execution. He often needs information from operations to make decisions. Which of the following would he least likely pose to an operations manager? f) Production capabilities g) Production capacities h) Product specifications i) Inventory levels Ans: d Solution: Product specifications is an information flow from Engineering to OM. Section Ref: Operations Management in Practice Sub Section Ref: OM across the Organization Level: Medium Bloom‘s: Application Learning Objective 6: Describe the flow of information between operations management and other business functions. AACSB: Analytic Time on Task: 1 min True/False 81. Operations management is the business function that plans, coordinates, and controls the resources needed to produce a company‘s products and services. Ans: True Solution: OM is the business function that plans, organizes, coordinates, and controls the resources needed to produce a company‘s goods and services. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 0.5 mins
82. Marketing is one of the three major functions of every company. Ans: True Solution: Every business is managed through three major functions: finance, marketing, and operations management. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 0.5 mins
83. Operations management is the central core function of every company. Ans: True Solution: Operations management is the central core function of every company. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 0.5 mins 84. An example of a transformation at a hospital is waiting to see the doctor. Ans: False Solution: At a hospital, the transformation involves organizing resources, such as doctors, medical procedures, and medications, to transform sick people into healthy ones. Waiting to see a doctor is not a value-added activity. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 0.5 mins
85. At a factory, the transformation process is the physical change of raw materials and components into products. Ans: True Solution: At a factory, the transformation is the physical change of raw materials into products,
such as transforming leather and rubber into sneakers, denim into jeans, or plastic into toys. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 0.5 mins
86. Making a wedding cake is an example of a value-added activity. Ans: True Solution: Making a wedding case is a value-added activity. It adds value during the transformation of inputs to the final output. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 0.5 mins 87. Efficiency means being able to perform most activities. Ans: False Solution: Efficiency means performing activities well and at the lowest possible cost. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 0.5 mins 88. An example of a ―back room‖ operation for an airline company is loading luggage onto the airplane. Ans: True Solution: ―Back room‖ or ―behind the scene‖ operations are the service operations that have low customer contact. Loading luggage onto the airplane is an operation that has no direct customer contact and can be managed like a manufacturing operation. Section Ref: Differences between Manufacturing and Service Organizations Sub Section Ref: n/a Level: Medium Bloom‘s: Application
Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Knowledge Time on Task: 0.5 mins
89. Companies that have low customer contact and are capital intensive, yet provide a service, are called service factories. Ans: False Solution: Companies that have low customer contact and are capital intensive, yet they provide a service, are called quasi-manufacturing organizations. Section Ref: Differences between Manufacturing and Service Organizations Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Knowledge Time on Task: 0.5 mins 90. The Industrial Revolution started in the 1770s with the development of a number of inventions that relied on machine power instead of human power. Ans: True Solution: The Industrial Revolution started in the 1770s with the development of a number of inventions that relied on machine power instead of human power. Section Ref: Historical Development Sub Section Ref: The Industrial Revolution Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins
91. Division of labor involves breaking down the production of a product into a series of small, elementary tasks, each of which is performed by a different worker. Ans: True Solution: Division of labor means that the production of a good is broken down into a series of small, elemental tasks, each of which is performed by a different worker. Section Ref: Historical Development Sub Section Ref: The Industrial Revolution Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge
Time on Task: 0.5 mins
92. A key feature of scientific management is that workers are limited only by their tools. Ans: False Solution: A key feature of scientific management is that it assumed that workers are motivated only by money and are limited only by their physical ability. Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins 93. The creator of scientific management believed that worker productivity was governed by scientific laws. Ans: True Solution: Tylor believed that worker productivity is governed by scientific laws and that it is up to management to discover these laws through measurement, analysis, and observation. Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins
94. Operations management is a result of a single event, the Industrial Revolution. Ans: False Solution: Many events helped shape operations management today. Section Ref: Historical Development Sub Section Ref: Historical Milestones Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins
95. Worker participation in decision making is a key feature of scientific management.
Ans: False Solution: One key feature of scientific management is the separation of management and labor. Management is responsible for designing productive systems and determining acceptable worker output. Workers have no input into this process. Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins 96. Job enrichment is an approach in which workers are given a larger portion of the total task to do. Ans: False Solution: Job enrichment is an approach in which workers are given a greater role in planning, i.e., giving more meaning to jobs. Job enlargement is an approach in which workers are given a larger portion of the total tasks to do. Section Ref: Historical Development Sub Section Ref: The Human Relations Movement Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins
97. The first mathematical model for inventory management was developed by Elton Mayo. Ans: False Solution: The first mathematical model for inventory management was developed by F. W. Harris in 1913. Section Ref: Historical Development Sub Section: Management Science Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins
98. Operations research started with the publication of the results of the Hawthorne studies. Ans: False Solution: The human relations movement started with the publication of the results of the
Hawthorne studies. Section Ref: Historical Development Sub Section Ref: The Human Relations Movement Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins 99. Sustainability was an early 1950s management function and focus. Ans: False Solution: Sustainability is a current trend in business to consciously reduce waste, recycle, and reuse products and parts. Section Ref: Historical Development Sub Section Ref: Sustainability and Green Operations Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins
100. The Hawthorne effect is that workers are motivated by the attention they are given. Ans: True Solution: The idea of workers responding to the attention they are given came to be known as the Hawthorne effect. Section Ref: Historical Development Sub Section Ref: The Human Relations Movement Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins
101. Increasing the level of responsibility of a job by adding planning tasks is called job enrichment. Ans: True Solution: Job enrichment is an approach to giving more meaning to jobs, in which workers are given a greater role in planning. Section Ref: Historical Development Sub Section Ref: The Human Relations Movement Level: Easy
Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins 102. Outsourcing is providing goods or services to an outside provider. Ans: False Solution: Outsourcing is obtaining goods or services from an outside provider. Section Ref: Historical Development Sub Section Ref: Outsourcing and Flattening of the World Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins
103. Management science focuses on developing quantitative techniques for solving operations problems. Ans: True Solution: Management science is a field of study that focuses on the development of quantitative techniques to solve operations problems. Section Ref: Historical Development Sub Section Ref: Management Science Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins
104. The advent of the computer age paved the way for the development of MRP for inventory control and scheduling. Ans: True Solution: The use of computers in business became widespread in the 1970s. A particularly important computerized system, MRP, was developed for inventory control and scheduling. Section Ref: Historical Development Sub Section Ref: The Computer Age Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Technology Time on Task: 0.5 mins
105. The objective of supply chain management is to have every member of the chain compete against each other to enhance competitive abilities. Ans: False Solution: The objective of SCM is to have everyone in the chain work together to reduce overall cost and improve quality and service delivery. Section Ref: Historical Development Sub Section Ref: Supply Chain Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins
106. The need to offer to customers a greater variety of product choices of a traditionally standardized product is the challenge of flexibility. Ans: True Solution: One of the current competitive challenges for companies is the need to offer to customers a greater variety of product choices of a traditionally standardized product. This is the challenge of flexibility. Section Ref: Historical Development Sub Section Ref: Flexibility Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins 107. One of the most important trends in companies today is competition based on time. Ans: True Solution: One of the most important trends within companies today is time-based competition — developing new products and services faster than the competition, reaching the market first, and meeting customer orders most quickly. Section Ref: Historical Development Sub Section Ref: Time-based Competition Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 0.5 mins
108. The highest percentage of transactions on the Internet occurs between businesses and their customers (B2C). Ans: False Solution: B2B makes up the highest percentage of transactions. Section Ref: Historical Development Sub Section Ref: Electronic Commerce Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Technology Time on Task: 0.5 mins
109. Big Data Analytics allows companies to precisely understand what happened in the past and better predict the future. Ans: True Solution: Big data analytics enables converting the large amount of information into an unprecedented amount of business intelligence. It allows companies to precisely understand what happened in the past and better predict the future. Section Ref: Historical Development Sub Section Ref: Big Data Analytics Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Technology Time on Task: 0.5 mins 110. Today many corporate CEOs have come through the ranks of operations. Ans: True Solution: Many Corporate CEOs today have come through the ranks of operations. Section Ref: Operations Management in Practice Sub Section Ref: Untitled introduction Level: Easy Bloom‘s: Knowledge Learning Objective 6: Describe the flow of information between operations management and other business functions. AACSB: Knowledge Time on Task: 0.5 mins
111. Marketing can always meet the customer‘s needs. Ans: False Solution: Marketing cannot fully meet the customer needs if marketing managers do not understand what operations can produce, what due dates it can and cannot meet, and what types of customization operations can develop. Section Ref: Operations Management in Practice Sub Section Ref: OM across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 6: Describe the flow of information between operations management and other business functions. AACSB: Knowledge Time on Task: 0.5 mins
112. Marketing can meet the customer needs if they understand what operations can produce. Ans: True Solution: Marketing can meet the customer needs if marketing managers understand what operations can produce, what due dates it can and cannot meet, and what types of customization operations can deliver. Section Ref: Operations Management in Practice Sub Section Ref: OM across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 6: Describe the flow of information between operations management and other business functions. AACSB: Knowledge Time on Task: 0.5 mins 113. Finance cannot judge the need for capital investments if they understand operations concepts and needs. Ans: False Solution: Finance cannot realistically judge the need for capital investments, make-or-buy decisions, plant expansions, or relocation if finance managers do not understand operations concepts and needs. Section Ref: Operations Management in Practice Sub Section Ref: OM across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 6: Describe the flow of information between operations management and other business functions. AACSB: Knowledge Time on Task: 0.5 mins
Essay
114. Define operations management. Ans: The business function responsible for planning, organizing, coordinating, and controlling the resources needed to produce a company‘s products and services Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 2 mins 115. What must companies focus on in order to survive in today‘s business environment? Ans: To survive, companies today must focus on quality, time-based competition, efficiency, international perspectives, innovation, cost, diverse, and customer relationships. Section Ref: What Is Operations Management? Sub Section Ref: Chapter Overview Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 3 mins 116. What are the three major functions through which every business is managed? Ans: Finance, marketing, and operations management Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 1 min 117. What is the ―role‖ of operations management? Ans: To transform organizational inputs into outputs (the finished goods or services) Section Ref: What Is Operations Management? Sub Section Ref: n/a
Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 2 mins
118. List five different possible inputs to a transformation process. Ans: Examples may be: workers, managers, buildings, equipment, materials, technology, information, etc. Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 2 mins
119. What must companies do in order to be successful with Web-based online shopping? Ans: Manage distribution centers and warehouses, operate fleets of trucks, forecast what customers want and maintain adequate inventories of products, and schedule deliveries while keeping costs low and customers happy Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define operations management. AACSB: Technology Time on Task: 3 mins
120. In what ways do service organizations differ from manufacturing organizations? Ans: Manufacturing organizations produce a physical, tangible product that can be stored in inventory before it is needed, while service organizations produce an intangible product that cannot be produced ahead of time; and for manufacturing organizations most customers have no direct contact with the operation, while for service organizations customers are typically present during creation of the service. Also, service organizations tend to have a shorter response time and are more labor intensive. Section Ref: Differences between Manufacturing and Service Organizations Sub Section Ref: n/a Level: Medium Bloom‘s: Analysis
Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Knowledge Time on Task: 3 mins
121. List five typical operations management decisions. Ans:
The list may include: What are the unique features of the business that will make it competitive? (Operations strategy) What are the unique features of the product? (Product design) What are the unique features of the process that give the product its unique characteristics? (Process selection) How do we manage our sources of supply? (Supply chain management) How will managers ensure the quality of the product, measure quality, and identify quality problems? (Quality management) What is the expected demand for the product? (Forecasting) Where will the facility be located? (Location analysis) How large should the facility be? (Capacity planning) How should the facility be laid out? (Facility layout) What jobs will be needed in the facility, who should do what task, and how will their performance be measured? (Job design and work measurement) How will the inventory of raw materials be monitored? When will orders be placed? (Inventory mgt.) Who will work on what schedule? (Scheduling) Section Ref: Operations Management Decisions Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe decisions that operations managers take. AACSB: Knowledge Time on Task: 3 mins
122. Why are operations management decisions typically more complex for large companies than for small companies? Ans: Because of the size and scope of large companies: they typically produce a greater variety of products, have multiple location sites, and often use both domestic and international suppliers. Section Ref: Operations Management Decisions Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe decisions that operations managers take. AACSB: Knowledge
Time on Task: 2 mins
123. What four operations management approaches came out of the scientific management movement? Ans: moving assembly lines, stopwatch time studies, piece rate incentives, and setting time standards for task performance Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 2 mins 124. Tactical decisions can be distinguished from strategic decisions by what set of characteristics? Ans: Tactical decisions focus on specific day-to-day issues; tactical decisions are made after strategic decisions; tactical decisions must be aligned with strategic decisions; tactical decisions provide feedback to strategic decision. Section Ref: Operations Management Decisions Sub Section Ref: n/a Level: Medium Bloom‘s: Analysis Learning Objective 3: Describe decisions that operations managers take. AACSB: Analytic Time on Task: 3 mins
125. What are the two key features of scientific management? Ans: First, it is assumed that workers are motivated only by money and are limited only by their physical ability. Second, management should perform ―planning‖ separately from the workers who perform the ―doing.‖ Section Ref: Historical Development Sub Section Ref: Scientific Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 2 mins
126. What were the major impacts on operations management that resulted from the widespread
use of computers in the 1970s? Ans: Using quantitative models on a larger scale; development of material requirements planning; and ease of data processing, with advances in forecasting, scheduling, and inventory management Section Ref: Historical Development Sub Section Ref: The Computer Age Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Technology Time on Task: 3 mins 127. What is the basic approach for business process reengineering and what are its major impacts? Ans: It involves asking why things are done in a certain way, questioning assumptions, and then redesigning the processes. It can help increase efficiency, improve quality, and reduce costs. Section Ref: Historical Development Sub Section Ref: Business Process Reengineering Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 3 mins
128. How have information technology tools helped with supply chain management? Ans: They enable collaborative planning and scheduling. They allow synchronized supply chain execution and design collaboration, and they allow companies to respond better and faster to changing market needs. Section Ref: Historical Development Sub Section Ref: Supply Chain Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 3 mins
129. What are environmental issues faced by businesses today? Ans: air pollution, water pollution, global warming, waste disposal, etc. Section Ref: Historical Development Sub Section Ref: Sustainability and Green Operations
Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 2 mins 130. Define operations management. Ans: The business function that plans, organizes, coordinates, and controls resources an organization transforms into goods and services Section Ref: What Is Operations Management? Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define operations management. AACSB: Knowledge Time on Task: 2 mins 131. Why is today‘s operations management environment described as very different from what it was just a few years ago? Ans: Customers demand better quality, greater speed, and lower costs. Best practices can be quickly passed to competitors. There is the use of ERP to improve efficiency and the use of CRM to gain a deeper knowledge about customers. There is an increased use of cross-functional decision making. Section Ref: Today‘s OM Environment Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 5: Identify current trends in operations management. AACSB: Knowledge Time on Task: 3 mins
132. While customers and service organizations interact directly, customers and manufacturers interact through what? Ans: Through service organizations like distributors, wholesalers, and retailers Section Ref: Differences between Manufacturing and Service Organizations Sub Section Ref: n/a Level: Medium Bloom‘s: Analysis Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Analytic Time on Task: 2 mins
133. Manufacturers often provide services as part of their business. Provide some examples. Ans: Shipping, helping customers use products, repairs, replacement parts, warranty service, and credit Section Ref: Differences between Manufacturing and Service Organizations Level: Medium Bloom‘s: Application Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Analytic Time on Task: 3 mins
134. Service providers may also transform inputs into goods that support their services. Provide some examples. Ans: Examples may be: restaurant food preparation, hair and skin care products, and final assembly of bicycles, tricycles, wagons, furniture, and other products. Section Ref: Differences between Manufacturing and Service Organizations Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Analytic Time on Task: 3 min
135. The U.S. Postal Service (USPS) is a service provider, yet most of its operations are similar to those that occur in manufacturing. What manufacturing-like characteristics does USPS have? Ans: low customer contact, capital intensive, large amount of inventory, etc. Section Ref: Differences between Manufacturing and Service Organizations Sub Section: n/a Level: Medium Bloom‘s: Application Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Analytic Time on Task: 3 mins
136. While service and manufacturing firms contribute more to the economy and offer more jobs at all levels, which firms in other industries are also important to our lives and the economy? Hint: Agriculture firms is one example. Ans: Agriculture, fishing, and forestry; construction, and extraction (mining, oil and natural gas, industrial gases) Solution: Section Ref: Differences between Manufacturing and Service Organizations Sub Section Ref: Level: Hard Bloom‘s: Evaluation Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Analytic Time on Task: 3 mins
137. What should be the relationship and information flow between operations and other business functions in order to achieve the goals of the organization? Ans: Operations and other functions should interact and coordinate with each other, understand what others do, and share the information. Section Ref: Operations Management in Practice Sub Section Ref: OM across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 6: Describe the flow of information between operations management and other business functions. AACSB: Knowledge Time on Task: 3 mins
138. While operations management focuses on privately-owned firms, federal, state, and local governments provide many services and some goods, such as: Ans: postal service; family, social, and aged assistance and care; health care; transportation; safety and security; transportation facility maintenance; education and libraries; real estate title and ownership recording; professional licensing; skill testing; recreation and related licensing (fishing and hunting); historic preservation Section Ref: Differences between Manufacturing and Service Organizations Sub Section Ref: n/a Level: Hard Bloom‘s: Evaluation Learning Objective 2: Describe difference between manufacturing and service organizations. AACSB: Analytic Time on Task: 4 mins
139. What does the historical development of operations management reflect? Ans: The accumulation of experience and ideas over time. Solution: As a function, OM is as old as time. The accumulation of many historical events, experiences and ideas, helped shape OM today. Section Ref: Historical Development Sub Section Ref: Historical Milestones Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 2 mins 140. In today‘s information age, applying best practices to operations management is not enough to give a competitive advantage. Why? Ans: Because best practices are quickly passed to competitors. Solution: Applying best practices to operations management is not enough to give a company a competitive advantage. The reason is that in today‘s information age, best practices are quickly passed to competitors. Section Ref: Today‘s OM Environment Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 5: Identify current trends in operations management. AACSB: Knowledge Analytic Time on Task: 3 mins
141. What does business process reengineering mean? Ans: Business process reengineering means redesigning a company‘s processes to increase efficiency, improve quality, and reduce costs. It questions existing practices and accepts changes OM is a key player in a company‘s reengineering efforts. Section Ref: Historical Development Sub Section Ref: Business Process Reengineering Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify major historical developments in operations management. AACSB: Knowledge Time on Task: 2 mins
Testbank Chapter 2: Operations Strategy and Competitiveness CHAPTER
LO Section
Subsection
The Role of Operations Strategy
Question # 1, 74, 79, 80, 81, 82, 103, 132, 140
The Importance of Operations Strategy
2, 3, 106, 133
Developing a Business Strategy Mission Environmental Scanning Core Competencies Putting It Together Developing an Operations Strategy Competitive Priorities Competitive Priorities: Flexibility Competitive Priorities: Time Competitive Priorities: Cost Competitive Priorities: Quality The Need for Trade-Offs Order Winners and Qualifiers Translating Competitive Priorities into Production Requirements Strategic Role of Technology Types of Technologies Technology as a Tool for Competitive Advantage
108, 134 4, 6, 70, 71, 83, 84, 107, 109, 110, 136 5, 7, 8, 75, 112, 113, 137 138 9 10 11, 12, 15, 76 13, 87 85, 115 86 14, 89, 130 16, 88, 104, 139 17, 18, 90, 91, 92, 93, 111 94 19, 20, 22, 23, 95, 96, 135 21, 77, 129
Productivity
Measuring Productivity
Interpreting Productivity Measures Productivity and Competitiveness Productivity and the Service Sector Operations Strategy within OM: How It All Fits Together
24, 25, 26 , 27, 28, 29, 30, 31, 32, 33, 45, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 62, 63, 64, 65, 66, 67, 68, 69, 72, 73, 78, 97, 98, 99, 101, 116, 117, 118, 121, 122, 123, 124, 128, 131 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 46, 57, 58, 59, 60, 61, 119, 120, 125, 126, 127 105, 114 102 100
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Multiple Choice
1. Which of the following operations decisions did FedEx make to support its business strategy of competing on time and providing dependability of deliveries? a) have its own fleet of tractor trailers and use a sophisticated bar code technology b) have its own fleet of tractor trailers and have a large warehouse in every state c) have its own fleet of airplanes and have a large warehouse in every state d) use a sophisticated bar code technology and have a large warehouse in every state e) have its own fleet of airplanes and use a sophisticated bar code technology Ans: e Solution: To provide spend of delivery, FedEx acquired its own fleet of airplanes. To provide dependability of deliveries, FedEx invested in a sophisticated bar-code technology to track all packages. Section Ref: The Role of Operations Strategy Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Knowledge Time on Task: 1 min
2. Operational efficiency is a) driving the business strategy. b) ensuring the right tasks are performed. c) decreasing the firm‘s input requirements. d) increasing the firm‘s output. e) performing operations tasks well Ans: e Solution: Operational efficiency is performing operations tasks well, even better than competitors. Section Ref: The Role of Operations Strategy Sub Section Ref: The Importance of Operations Strategy Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Knowledge Time on Task: 1 min
3. During the 1970s and 1980s, firms from which country provided the MOST serious competitive threat to U.S. companies? a) Germany b) Canada c) Mexico d) Japan e) United Kingdom Ans: d Solution: During the 1970s and 1980s, Japanese companies began offering products of superior quality at lower cost, and the U.S. companies lost market share to their Japanese counterparts. Section Ref: The Role of Operations Strategy Sub Section Ref: The Importance of Operations Strategy Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Knowledge Time on Task: 1 min
4. The process of monitoring the external environment is called what? a) environmental examination b) environmental inspection c) environmental scrutiny d) environmental perusal e) environmental scanning Ans: e Solution: Environmental scanning is the process of monitoring the external environment for changes and trends to determine business opportunities and threats. Section Ref: Developing a Business Strategy Sub Section Ref: Environmental Scanning Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 1 min
5. Which of the following would NOT be considered a core competency that a company might have? a) a highly trained workforce b) an inefficient distribution system c) skills in attracting and raising capital d) use of information technology e) quality control techniques Ans: b Solution: Core competencies are the unique strengths of an organization. The examples include special skills of workers, financial know-how, knowledge of production and information technology, etc. An inefficient distribution system is weakness of the business. Section Ref: Developing a Business Strategy Sub Section Ref: Core Competencies Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 1 min
6. Environmental scanning would NOT provide information on a) changes in customer wants and expectations. b) the firm‘s internal inefficient distribution system. c) opportunities and threats. d) changes in information technology. e) changes in global competition. Ans: b Solution: Environmental scanning looks at external environmental trends that can affect the business and allows a company to identify business opportunities and threats. It does not focus on a company‘s own strengths and weakness (e.g., the internal inefficient distribution system). Section Ref: Developing a Business Strategy Sub Section Ref: Environmental Scanning Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 1 min
7. Which of the following is NOT typically considered to be a core competency? a) workforce b) mission c) market understanding d) technology e) facilities Ans: b Solution: Core competencies are the unique strengths of a business. A company may have core competencies in workforce, facilities, market understanding, financial know-how, and technology. Mission is a statement indicating what business the company is in. Section Ref: Developing a Business Strategy Sub Section Ref: Core Competencies Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 1 min
8. What term describes the process of obtaining goods or services from an outside provider? a) outproviding b) transferization c) outsourcing d) subsourcing e) supersourcing Ans: c Solution: Outsourcing is obtaining goods or services from an outside provider. Section Ref: Developing a Business Strategy Sub Section Ref: Core Competencies Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 1 min
9. Once a business strategy has been developed, a) service prices must be established. b) competition must be identified. c) an operations strategy must be formulated. d) contracting with external sources must begin. e) insourcing will be conducted Ans: c Solution: Once a business strategy has been developed, an operation strategy must be formulated. Section Ref: Developing an Operations Strategy Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 1 min 10. Which of the following is NOT considered one of the four broad categories of competitive priorities? a) technology b) cost c) quality d) flexibility e) time Ans: a Solution: The four broad categories of competitive priorities: cost, quality, time, and flexibility. Section Ref: Developing an Operations Strategy Sub Section Ref: Competitive Priorities Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 1 min
11. Which of the following competitive priorities typically requires the use of more generalpurpose equipment? a) technology b) cost c) quality d) flexibility e) time Ans: d Solution: Flexibility is a competitive priority focusing on offering a wide variety of products and services and meeting unique customer requirements. It typically requires the use of more general-purpose equipment that can be used to make many different kinds of products. Section Ref: Developing an Operations Strategy Sub Section Ref: Competitive Priorities — Flexibility Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 1 min
12. Highly skilled hourly workers would be MOST needed by companies employing which of the following competitive priorities? a) location b) cost c) flexibility d) development speed e) time Ans: c Solution: Workers in flexible companies tend to have higher skill levels and can often perform many different tasks in order to meet customer needs. Section Ref: Developing an Operations Strategy Sub Section Ref: Competitive Priorities — Flexibility Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 1 min
13. How does Federal Express maintain its ability to compete on time during peak demand periods? a) It subcontracts overload to other firms. b) It purchases more planes. c) It schedules full-time employees to work overtime. d) It uses a very flexible part-time workforce. e) It purchases more vans. Ans: d Solution: FedEx relies on a very flexible part-time workforce, such as college students, to cover workforce requirements during peak periods without having to schedule full-time workers. Section Ref: Developing an Operations Strategy Sub Section Ref: Competitive Priorities — Time Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 1 min
14. When making competitive priority decisions the firm needs to a) select the correct supply chain. b) ensure the PWP is correctly established. c) focus on the one competitive priority at the exclusion of all others. d) make trade-off decisions. e) isolate the competing internal departments. Ans: d Solution: The operation function must place emphasis on those priorities that directly support the business strategy. Thus, it needs to make trade-offs between the different priorities. Section Ref: Developing an Operations Strategy Sub Section Ref: The Need for Trade-Offs Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 1 min
15. Howard Plastics makes a variety of products out of plastics, ranging from plastic trays to body guards for cars. The company‘s claim is: ―We are ready to meet your custom plastics needs.‖ This is an example of a company that competes based on a) time. b) cost. c) quality. d) flexibility. e) efficiency. Ans: d Solution: Lee Plastics competes based on flexibility, i.e., offering a wide variety of products and customize them to the unique customer requirements. Section Ref: Developing an Operations Strategy Sub Section Ref: Competitive Priorities — Flexibility Level: Medium Bloom‘s: Application Learning Objective 3: Describe how an operations strategy is developed. AACSB: Analytic Time on Task: 1 min
16. Order winners and qualifiers a) are consistent between manufacturing and service organizations. b) only matter when responding to formal competitive bid requests. c) remain constant over time. d) change over time. e) only apply to quasi-manufacturing firms. Ans: d Solution: Order winners and order qualifiers change over time. Section Ref: Developing an Operations Strategy Sub Section Ref: Order Winners and Qualifiers Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 1 min
17. Which of the following is an operations decision related to the structure of the production process? a) organization of operations b) facilities c) worker pay d) quality control measures e) management policies Ans: b Solution: The structure of the production process involves operations decisions related to the design of the production process, such as characteristics of facility used, selection of technology, and flow of goods and services through the facility. Section Ref: Developing an Operations Strategy Sub Section Ref: Translating Competitive Priorities into Production Requirements Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 1 min
18. Which of the following is an operations decision related to the infrastructure of the production process? a) quality control approaches b) characteristics of facilities c) robots d) flow of goods and services through the facility e) flexible manufacturing system (FMS) machines Ans: a Solution: The infrastructure of the production process involves operations decisions related to the planning and control systems of the operations, such as organization of the operations functions, skills and pay of workers, and quality control approaches. Section Ref: Developing an Operations Strategy Sub Section Ref: Translating Competitive Priorities into Production Requirements Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 1 min
19. What are the three primary types of technology? a) product technology, process technology, and information technology b) product technology, process technology, and environmental technology c) product technology, process technology, and safety technology d) information technology, environmental technology, and safety technology e) environmental technology, information technology, and process technology Ans: a Solution: The three primary types of technologies are: product technology, process technology, and information technology. Section Ref: Strategic Role of Technology Sub Section Ref: Types of Technologies Level: Easy Bloom‘s: Knowledge Learning Objective 4: Explain the strategic role of technology. AACSB: Technology Time on Task: 1 min
20. Teflon, the material used in no-stick fry pans, is an example of ________ technology. a) process b) information c) environmental d) safety e) product Ans: e Solution: Product technology is any new technology developed by a firm. One example of this is Teflon, the material used in no-stick fry pans. Teflon became an emerging technology in the 1970s and is currently used in numerous applications. Section Ref: Strategic Role of Technology Sub Section Ref: Types of Technologies Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the strategic role of technology. AACSB: Technology Time on Task: 1 min
21. Technology should be acquired because the new technology a) is fun. b) keeps the employees happy. c) doesn‘t cost very much. d) always improves productivity. e) supports the company‘s chosen competitive priorities. Ans: e Solution: The technology a company acquires should not be decided on randomly. Rather, the selected technology needs to support the organization‘s competitive priorities. Section Ref: Strategic Role of Technology Sub Section Ref: Technology as a Tool for Competitive Advantage Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the strategic role of technology. AACSB: Technology Time on Task: 1 min
22. Computer-aided manufacturing (CAM) is an example of ______ technology. a) process b) information c) environmental d) safety e) product Ans: a Solution: Process technology is the technology used to improve the process of creating goods and services. Computer-aided manufacturing (CAM) is a technology that uses computers to assist engineers in the way they manufacture products. Section Ref: Strategic Role of Technology Sub Section Ref: Types of Technologies Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the strategic role of technology. AACSB: Technology Time on Task: 1 min
23. Which type of technology has had the greatest impact on business? a) process technology b) information technology c) environmental technology d) safety technology e) product technology Ans: b Solution: Information technology enables communication, processing, and storage of information. It has grown rapidly over recent years and has had a profound impact on business. Section Ref: Strategic Role of Technology Sub Section Ref: Types of Technology Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the strategic role of technology. AACSB: Technology Time on Task: 1 min
24. When does productivity increase? a) Inputs increase while outputs remain the same. b) Inputs decrease while outputs remain the same. c) Outputs decrease while inputs remain the same. d) Inputs and outputs increase proportionally. e) Inputs and outputs decrease proportionally. Ans: b Solution: Productivity = Outputs / Inputs. Productivity increases when using less inputs to produce the same amount of outputs. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1 min
25. Which of the following is a valid productivity measure? a) multi-output productivity measure b) partial productivity measure c) multi-part productivity measure d) multi-component productivity measure e) imperfect productivity measure Ans: b Solution: Productivity measures include: total productivity measures, partial productivity measures, and multifactor productivity measures. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Easy Bloom‘s: Knowledge Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge Time on Task: 1 min
26. Consider a pizza parlor. Which of the following would NOT be a valid productivity measure? a) pizzas produced / number of workers used b) pizzas produced / number of ovens c) pizzas produced / cost of workers and ingredients d) pizzas produced / cost of all inputs used e) labor hours / pizzas produced Ans: e Solution: Productivity = Outputs / Inputs. Labor hours / pizzas produced = Inputs / Outputs is not a valid productivity measure. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1 min
27. If inputs increase by 30% and outputs decrease by 15%, what is the percentage change in productivity? a) 100% decrease b) 11.54% increase c) 34.62% decrease d) 15% increase e) 15% decrease Ans: c Solution: P = O / I. New productivity = (1-0.15) / (1+0.3) = 0.85 / 1.3 = 0.6538, so the productivity is decreased by 1-0.6538 = 0.3462, or 34.63%. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 3 mins
28. If inputs increase by 6% and outputs increase by 24%, what is the percentage increase in productivity? a) 400.00% b) 16.98% c) 0.25% d) 4.00% e) 18.00% Ans: b Solution: P = O / I. New productivity = 1.24 / 1.06 = 1.1698. The productivity is increased by 1.1698 –1 = 0.1698 or 16.98%. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 3 mins
29. An airline has determined that its baggage handlers can handle 12,000 bags when 3 baggage handlers are on shift. What is the baggage handler productivity? a) 4,000 bags/shift b) 4,000 bags/handler c) 14,000 bags/shift d) 12,000 bags/shift e) 2,000 bags/handler Ans: b Solution: P = O / I = 12000 / 3 = 4000 bags/handler Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
30. If inputs increase by 10% and outputs increase by 4%, what is the percentage change in productivity? a) 5.45% increase b) 250.00% increase c) 5.45% decrease d) 5.77% increase e) 5.77% decrease Ans: c Solution: P = O / I. New productivity = 1.04 / 1.10 = 0.9455. Since inputs were higher than outputs, this represents a loss or negative; the productivity is decreased by 1.00 –. 9455 = .0545, or 5.45%. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 3 mins
31. If inputs increase by 10% and outputs increase by 5%, what is the percentage change in productivity? a) 4.55% decrease b) 4.55% increase c) 4.76% increase d) 4.76% decrease e) 50.00% increase Ans: a Solution: P = O / I. New productivity = 1.05 / 1.10 = .9545. Since inputs were higher than outputs, this represents a loss or negative; the productivity is decreased by 1.00 –.9545 = .0455, or 4.55%. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 3 mins 32. If Joe‘s Diner serves 150 meals in one day using 3 kitchen staff, what is the kitchen staff daily productivity? a) 40 meals/staff b) 45 meals/staff c) 50 meals/staff d) 55 meals/staff e) 60 meals/staff Ans: c Solution: P = O / I =150 / 3 = 50 meals per staff Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1 min
33. If inputs increase by 30% and outputs increase by 15%, what is the percentage change in productivity? a) 50.00% decrease b) 88.46% increase c) 88.46% decrease d) 11.54% increase e) 11.54% decrease Ans: e Solution: P = O / I. New productivity = 1.15 / 1.30 = .8846. Since inputs were higher than outputs, this represents a loss or negative. The productivity is decreased by 1.00 –.8846 = .1154, or 11.54%. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 3 mins
34. Suppose that on Monday the cost of inputs sums to $1000, and the value of outputs sums to $4000. For which of the following values on Tuesday would productivity increase? a) inputs = $1100, outputs = $4000 b) inputs = $1100, outputs = $4200 c) inputs = $850, outputs = $3600 d) inputs = $1000, outputs = $3900 e) inputs = $2000, outputs = $8000 Ans: c Solution: Calculate the P= O/I for each. ―Inputs = $850 and outputs = $3,600‖ leads to the productivity of 3,600/850 = 4.235, which is the only one higher than the productivity on Monday (4000/1000 = 4). Section Ref: Productivity Sub Section Ref: Interpreting Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
35. Suppose that a plant has a daily productivity of 200 parts per employee. What can we conclude? a) The daily productivity is excellent. b) The plant can hire more workers and still earn profits. c) The plant is not earning profits. d) The plant must be highly automated. e) No specific conclusion can be made. Ans: e Solution: No specific conclusion can be made. To interpret the meaning of a productivity measure, it must be compared with a similar productivity measure. The number by itself does not tell us very much. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
36. Suppose that a plant has a daily productivity of 0.85 parts per employee. What can we conclude? a) The plant must be very labor-intensive. b) The plant is not earning profits. c) The plant must be highly automated. d) The plant should lay off workers. e) No specific conclusion can be made. Ans: e Solution: No specific conclusion can be made. To interpret the meaning of a productivity measure, it must be compared with a similar productivity measure. The number by itself does not tell us very much. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
37. Suppose that a plant has a total productivity measure of 0.85. What can we conclude? a) The plant is not earning profits. b) No specific conclusion can be made. c) The plant should lay off workers. d) The plant is highly automated. e) The daily productivity is excellent. Ans: a Solution: Productivity = Outputs / Inputs. A plant cannot earn profit if its productivity is < 1 (i.e., inputs > outputs). Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
38. Suppose that last month the cost of inputs summed to $100,000, and the value of outputs summed to $800,000. For which of the following values this month would productivity increase? a) inputs = $110,000, outputs = $800,000 b) inputs = $50,000, outputs = $400,000 c) inputs = $200,000, outputs = $1,600,000 d) inputs = $100,000, outputs = $820,000 e) inputs = $300,000, outputs = $1,600,000 Ans: d Solution: Calculate the P= O/I for each; ―inputs = $100,000, outputs = $820,000‖ is the only one higher than last month, i.e., 820,000 / 100,000 = 8.2 > 800,000/100,000 = 8, indicating a productivity increase. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
39. Suppose that in week 1 a company produced 1,000 units using 60 labor hours. For which of the following values in week 2 would labor productivity decrease? a) units = 2,000, hours = 120 b) units = 1,500, hours = 95 c) units = 1,000, hours = 58 d) units = 500, hours = 30 e) units = 2,000, hours = 100 Ans: b Solution: Calculate the P= O/I for each; ―units = 1,500, hours = 95‖ is the only one with the productivity lower than week 1, i.e., 1,500/95 =15.789 < 1,000/60 = 16.67 units/hour, indicating a decrease in labor productivity. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
40. Suppose that on Wednesday the cost of inputs summed to $4,000, and the value of outputs summed to $10,000. For which of the following values on Thursday will productivity stay the same? a) inputs = $2,000, outputs = $5,000 b) inputs = $5,000, outputs = $10,000 c) inputs = $4,000, outputs = $8,000 d) inputs = $10,000, outputs = $4,000 e) inputs = $12,000, outputs = $40,000 Ans: a Solution: Calculate the P= O/I for each; ―inputs = $2,000 and outputs = $5,000‖ = 5000/2000 = 2.5 is the only one that equals to Wednesday‘s (10,000/4,000 = 2.5). Section Ref: Productivity Sub Section Ref: Interpreting Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
41. Vericol, Inc. manufactures drugs using workers and automated machines. The firm has decided to replace two workers with a new machine, while the output per day is not expected to change. Which of the following cannot be true? a) Labor productivity will increase. b) Machine productivity will decrease. c) Labor productivity will decrease. d) Multifactor productivity will increase. e) Multifactor productivity will decrease. Ans: c Solution: Labor productivity = Output / Labor. If replacing 2 workers with a new machine while keeping the same level of output, the labor productivity will increase (fewer hours used), not decrease. Since no further information about machines available, multifactor productivity and machine productivity cannot be computed, so no conclusive statements can be made. That is, they may increase or decrease. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 3 mins
42. A manager has just replaced three workers with a machine that is cheaper to operate than the cost of the three replaced workers. Output is expected to remain the same. Which of the following is true? a) Labor productivity will decrease. b) Machine productivity will increase. c) Multifactor productivity will decrease. d) Multifactor productivity will increase. e) The value of output will decrease. Ans: d Solution: Total inputs will decrease since the machine is cheaper to operate. While the output remains the same, multifactor productivity will increase. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
43. Suppose that in January a company produced 5,000 units using 1,000 labor hours. For which of the following values in February would labor productivity decrease? a) units = 5,000, hours = 900 b) units = 10,000, hours = 1,500 c) units = 10,000, hours = 2,000 d) units = 2,500, hours = 500 e) units = 5,000, hours = 1,100 Ans: e Solution: Calculate the P= O/I for each; ―units = 5,000, hours = 1,100‖ is the only one less than January, i.e., 5,000 / 1,100 = 4.54 < 5,000 / 1,000 = 5, indicating a labor productivity decrease. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
44. Suppose that in year 1 a company produced $100 million worth of outputs while inputs totaled $50 million. For which of the following values in year 2 would productivity decrease? a) outputs = $90 million, inputs = $50 million b) outputs = $400 million, inputs = $200 million c) outputs = $250 million, inputs = $100 million d) outputs = $50 million, inputs = $25 million e) outputs = $60 million, inputs = $25 million Ans: a Solution: Calculate P= O/I for each; ―output = $90 million, inputs = $50 million‖ is the only one less than year 1 (i.e., 90/50 = 1.8 < 100/50 = 2), indicating a productivity decrease. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
45. If the telecommunication company sold $10,000,000 of Internet service using $50,000 of labor, $25,000 of leased bandwidth, $45,000 service fees, and $80,000 or replacement parts, what is the telecommunication multifactor productivity? a) 35 b) 40 c) 45 d) 50 e) 55 Ans: d Solution: Multifactor productivity = 10,000,000 / (50k + 25k + 45k + 80k) = 10,000,000 / 200k = 50 Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
46. Suppose that on Thursday a company produced 80 units using 160 labor hours. For which of the following values on Friday would daily labor productivity increase? a) units = 70, hours = 160 b) units = 80, hours = 180 c) units = 240, hours = 500 d) units = 160, hours = 300 e) units = 40, hours = 100 Ans: d Solution: Calculate the P= O/I for each; ―units = 160, hours = 300‖ is the only one more than Thursday (160 / 300 = 0.5333 > 80 / 160 = 0.5), indicating a productivity increase. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
47. A firm produces 100 units using 800 labor hours. What is its labor productivity? a) 0.125 units/hour b) 8 units/hour c) 100 units/hour d) 800 units/hour e) –0.125 units/hour Ans: a Solution: Labor productivity = O / I = 100 / 800 = .125 units / hr Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
48 A firm produces 2000 products using 10 workers on an eight-hour shift. What is the labor productivity per worker? a) 200 units/hour b) 25 units/hour c) 250 units/hour d) 20 units/hour e) 0.04 units/hour Ans: b Solution: Labor productivity = 2000 units / (10*8 hr) = 25 units/hr Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
49. A machine shop produces metal frames on two different machines. The average daily production on machine 1 is 300 frames, and the average daily production on machine 2 is 180 frames. What is the daily machine productivity? a) 480 frames/machine b) 330 frames/machine c) 240 frames/machine d) 160 frames/machine e) 300 frames/machine Ans: c Solution: Daily machine productivity = (300 + 180) /2 = 240 frames/machine Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
50. A machine shop produces metal brackets on two different machines. Machine 1 can produce a bracket every 10 minutes. Machine 2 can produce a bracket every 4 minutes. What is the average productivity per machine? a) 4.3 brackets/hour b) 8.6 brackets/hour c) 10.5 brackets/hour d) 21.0 brackets/hour e) 7.0 brackets/hour Ans: c Solution: Average machine productivity = (60 mins /10 mins + 60 mins /4 mins) / 2= 21 /2 = 10.5 brackets / hour per machine Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
51. A firm produces handbags using three workers. On Tuesday, Jane completed 60 bags in 6 hours, Ron completed 50 bags in 7 hours, and Mary completed 80 bags in 5 hours. What was the overall productivity of the firm? a) 7.92 bags/hour b) 11.05 bags/hour c) 10.00 bags/hour d) 10.56 bags/hour e) 61.67 bags/hour Ans: d Solution: Overall labor productivity = Total bags / Total labor hours = (60+50+80) / (6+7+5) = 10.56 bags / hour Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
52. Suppose that output is worth $400, and labor and materials costs are $200 and $100, respectively. What is the materials productivity? a) 2.00 b) 1.33 c) 0.25 d) 0.75 e) 4.00 Ans: e Solution: Materials productivity = 400 / 100 = 4.00 Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1 min
53. A firm produces 500 units per day using five workers on a five-hour shift. On average, 15% of the units produced are defective and must be scrapped. What is the labor productivity for nondefective units? a) 17 units/hour b) 3 units/hour c) 20 units/hour d) 85 units/hour e) 15 units/hour Ans: a Solution: Labor productivity = Nondefective units / Total labor hours = (500*0.85) / (5*5) = 17 units/hour Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
54. Suppose that weekly output is worth $1000, and labor and materials costs are $300 and $200, respectively. What is the multifactor productivity ratio? a) 1000 b) 8 c) 2 d) 3 e) 0.5 Ans: c Solution: Multifactor productivity = 1000 / (300 + 200) = 1000 / 500 = 2 Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
55. Each day a firm produces 50 products worth $40 each. Raw materials cost per unit are $12. The firm uses 4 workers on an eight-hour shift earning $10 per hour each. What is the multifactor productivity ratio? a) 1.82 b) 0.77 c) 3.16 d) 0.12 e) 2.17 Ans: e Solution: Multifactor productivity = Total outputs / Total inputs = (50*40) / (50*12 + 4*8*10) = 2.17 Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
56. A bakery bakes bread in two different ovens. Oven 1 can bake a loaf every 30 minutes. Oven 2 can bake a loaf every 15 minutes. What is the average productivity per oven? a) 6.00 loaves/hour b) 3.00 loaves/hour c) 2.67 loaves/hour d) 1.33 loaves/hour e) 0.38 loaves/hour Ans: b Solution: Oven 1 can bake 2 per hour. Oven 2 can bake 4 per hour. Total 6 loaves per hr / 2 ovens = 3 loaves per hour. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
57. Johnny employs five painters. He collected the following data from last week. Painter Hours Walls Completed Julius 40 60 Margaret 32 68 Dave 50 78 Suzy 36 70 Fawn 44 74 Which painter was LEAST productive last week? a) Julius b) Margaret c) Dave d) Suzy e) Fawn Ans: a Solution: Calculate by dividing walls completed by the hours; Julius was LEAST productive with 1.5 walls per hour. Painter Hours Walls Walls per Completed Hour Julius 40 60 1.5 Margaret 32 68 2.125 Dave 50 78 1.56 Suzy 36 70 1.94 Fawn 44 74 1.68 Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
58. A bakery uses five ovens to bake muffins. Yesterday‘s data are provided below. Oven Hours Muffins Baked Oven 1 5 600 Oven 2 10 1500 Oven 3 8 1280 Oven 4 8 800 Oven 5 6 780 Which oven was the MOST productive? a) Oven 1 b) Oven 2 c) Oven 3 d) Oven 4 e) Oven 5 Ans: c Solution: Calculate by dividing muffins baked by the hours; oven 3 was most productive with productivity of 160 muffins per hour. Oven Hours Muffins Muffins per Baked Hour Oven 1 5 600 120 Oven 2 10 1500 150 Oven 3 8 1280 160 Oven 4 8 800 100 Oven 5 6 780 130 Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
59. The state government utilizes five workers to stamp license plates. Last month‘s data are provided below. Worker Days Units Worked Stamped Pete 30 1440 Tommy 20 1600 Laura 24 2000 Julie 28 2100 Susan 29 1200 Which worker was the LEAST productive? a) Pete b) Tommy c) Laura d) Julie e) Susan Ans: e Solution: Calculate by dividing units stamped by the days; Susan was least productive with productivity of 41.38 units per day. Worker Days Units Units Stamped per Worked Stamped Day Pete 30 1440 48 Tommy 20 1600 80 Laura 24 2000 83.33 Julie 28 2100 75 Susan 29 1200 41.38 Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
60. A firm uses five plants to produce its products. Each final product has a value of $100. The following table provides last week‘s output, labor hours used (at $15 per hour), and materials cost per unit. Plant Output Labor Materials Cost per (in units) Hours Unit Plant 1 2000 400 $20 Plant 2 5000 900 $18 Plant 3 9000 2000 $20 Plant 4 1000 150 $30 Plant 5 2000 440 $18 Which plant was MOST productive last week? a) Plant 1 b) Plant 2 c) Plant 3 d) Plant 4 e) Plant 5 Ans: b Solution: Plant 1 = 2000/(400x15 + 20x2000) = .043 Plant 2 = 5000/(900x15 + 18x2000) = .048 Plant 3 = 9000/(2000x15 + 20x2000) = .042 Plant 4 = 1000/(150x15 + 30x2000) = .031 Plant 5 = 2000/(440x15 + 18x2000) = .047 Plant 2 was most productive with the highest productivity ratio of 0.048. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
61. A firm uses five plants to produce its products. Output value and total input cost for last week are provided below. Plant Output Value Total Cost Plant 1 $20,000 $25,000 Plant 2 $50,000 $60,000 Plant 3 $40,000 $42,000 Plant 4 $80,000 $99,000 Plant 5 $25,000 $29,000 Which plant was LEAST productive last week? a) Plant 1 b) Plant 2 c) Plant 3 d) Plant 4 e) Plant 5 Ans: a Solution: Plant 1 = 20000/25000 = .800 Plant 2 = 50000/60000 = .833 Plant 3 = 40000/42000 = .952 Plant 4 = 80000/99000 = .808 Plant 5 = 25000/29000 = .862 Plant 1 was least productive with the lowest productivity ratio of 0.800. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
62. Last week Jason painted 11 houses in 4 days. This week he painted 14 houses in 5 days. What was his percent productivity increase? a) 1.82% b) 1.79% c) 27.27% d) 25.00% e) 5.00% Ans: a Solution: Last week: 11 / 4 = 2.75 This week: 14 / 5 = 2.8 2.8 / 2.75 = 1.01818. The productivity was increased by 0.01818 or 1.82%. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins 63. Last month a plant produced 10,000 units using 2000 labor hours. This month it produced 12,000 units using 3000 labor hours. What is the percent productivity decrease? a) 200% b) 100% c) 50% d) 25% e) 20% Ans: e Solution: Last month: 10000 / 2000 = 5 This month: 12000 / 3000 = 4 Percentage of productivity change = (4 – 5) / 5 = –0.2, or 20% decrease Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Analysis Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
64. On Tuesday George produced 100 units in 8 hours. On Wednesday he produced 120 units in 10 hours. What was his percent productivity change? a) 0.50% b) 4.17% c) 4.17% d) 4.00% e) 4.00% Ans: d Solution: Tuesday: 100 / 8 = 12.5 Wednesday: 120 / 10 = 12 Percent productivity change = (12 – 12.5) / 12.5 = –0.04, or 4% decrease Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
65. Last month Stacy sold 10 houses while working 20 days. This month she sold the same number of houses in 22 days. What is her percent productivity change? a) 10.00% b) 9.1% c) 9.1% d) 10.00% e) 4.55% Ans: b Solution: Last month: 10 / 20 = 0.5 This month: 10 / 22 = 0.4545 Percent productivity change: (.4545 – 0.5) / 0.5 = –.0.091, or 9.1% decrease Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
66. Yesterday, John produced 100 units in 8 hours. Today he produced the same amount in 6 hours. What is his percent productivity change? a) 33.33% b) 0.00% c) 25.55% d) 25.00% e) 4.67% Ans: a Solution: Yesterday: 100 / 8 = 12.5 Today: 100 / 6 = 16.666 Percent productivity change: (16.666 – 12.5) / 12.5 = 0.3333, or 33.33% productivity increase Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
67. A company used to produce 500 units every 2 days, but 10% of the units were defective. After installing a new process, defects have been eliminated while output has remained the same. What is the percent increase in productivity due to installing the new process? a) 10.00% b) 25.00% c) 11.11% d) 0.00% e) 5.56% Ans: c Solution: Productivity = Outputs / Inputs Old process: (500 * 0.9) / 2 = 225 units per day New process: (500) / 2 = 250 units per day Percent productivity increase = (250 – 225) / 225 = 0.111, or 11.11% Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
68. A company used to produce 300 units every day, but 20% of the units were defective. After installing a new process, the defect rate has been reduced to 5%, while output has remained the same. What is the percent increase in productivity due to installing the new process? a) 15.79% b) 0.00% c) 15.00% d) 18.75% e) 75.00% Ans: d Solution: Old process: Nondefective output = 300 – 20%*300 = 240 units New process: Nondefective output = 300 – 5%*300 = 285 units With the same amount of inputs, the % productivity change = (285 – 240)/240 = 0.1875, or 18.75% increase Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
69. Last month a plant produced 1200 units using 150 labor hours. This month it produced 1500 units using 300 labor hours. What is the percent productivity decrease? a) 37.50% b) 60.00% c) 100.00% d) 300.00% e) 200.00% Ans: a Solution: Last month: 1200 / 150 = 8 units / hour This month: 1500 / 300 = 5 units / hour Percent productivity decrease = (5 – 8) / 8 = –0.375, or 37.5% Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
70. Which of the following has used the Internet to conduct a fashion show in order to boost sales? a) The Gap b) Eddie Bauer c) Fruit of the Loom d) Victoria‘s Secret e) Sears Ans: d Solution: Victoria‘s Secret uses the Internet to conduct fashion shows in order to boost sales. Section Ref: Developing a Business Strategy Sub Section Ref: Environmental Scanning Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Technology Time on Task: 1 min
71. Which of the following is NOT described in the chapter as one of the major environmental trends that firms should monitor? a) marketplace trends b) global climate trends c) economic trends d) political trends e) social trends Ans: b Solution: Environmental scanning does not monitor global climate trends. It monitors trends in the market and some other types of trends that can affect business, such as economic, political, and social trends. Section Ref: Developing a Business Strategy Sub Section Ref: Environmental Scanning Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 1 min
72. Suppose that a plant manager is only evaluated based on the partial productivity measure: output/(number of employees). If she replaces 10% of the workforce with robots (one robot per replaced worker), and output remains the same, what will be the percent change in this measure of productivity? a) 10% increase b) 10% decrease c) 11.1% increase d) 11.1% decrease e) No change in productivity Ans: c Solution: Partial labor productivity = O / I = 1 / (1*0.9) = 1.111, or 11.1% increase in labor productivity Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
73. Productivity is essentially a) something to fill out managers‘ reports. b) a measure of resource effectiveness. c) a scorecard of how efficiently resources are used. d) a balance scorecard metric. e) the current business fad. Ans: c Solution: Productivity is a measure of how efficiently an organization converts inputs into outputs. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Easy Bloom‘s: Comprehension Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge Time on Task: 1 min
74. Happy Donuts is a U.S.–based bakery company. Recently, the company opened its first store in China. Which of the following is most likely to be one of the reasons for this movement? a) It helps the company to be a cost leader. b) It helps the company to compete on differentiation. c) It supports the company‘s business strategy. d) It facilitates the implementation of TQM within the company. Ans: c Solution: Business strategy is a long-range plan for a business. Opening a store supports the company‘s long-range plan for its business. Section Ref: The Role of Operations Strategy Sub Section Ref: Untitled Introduction Level: Medium Bloom‘s: Application Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Analytic Time on Task: 1 min
75. Juan is a high school graduate entering a university. He is particularly good in verbal communication and persuasion but not as good in mathematics. Taking advantage of his core competencies means that Juan should major in a) engineering. b) science. c) economics. d) marketing. Ans: d Solution: Core competencies are the unique strengths of a business. Studying a major in marketing would give Juan an advantage, since his strengths, or core competencies, are verbal communications and persuasion. Section Ref: Developing a Business Strategy Sub Section Ref: Core Competencies Level: Medium Bloom‘s: Application Learning Objective 2: Explain how a business strategy is developed. AACSB: Analytic Time on Task: 1 min
76. Fusion Gourmet Cookery is a restaurant offering a range of dishes from India and the Middle East. The slogan of the restaurant is ―We will personalize any dish.‖ This suggests that the restaurant competes based on a) cost. b) quality. c) time. d) flexibility. e) efficiency. Ans: d Solution: The slogan suggests that the restaurant‘s competitive priority is flexibility. That is, it can offer a variety of foods to the customer specifications. Section Ref: Developing an Operations Strategy Sub Section Ref: Competitive Priorities — Flexibility Level: Medium Bloom‘s: Application Learning Objective 3: Describe how an operations strategy is developed. AACSB: Analytic Time on Task: 1 min
77. After identifying various types of technologies that her company could acquire, Lisa and her team list a set of key critical success factors to evaluate each. Which of the following is least likely to be considered? a) Gain a competitive advantage. b) Improve current processes. c) Maintain up-to-date standards. d) Follow the latest fad . Ans: d Solution: The technology a company acquires should not be decided on randomly, such as following the latest fad or industry trend. Technology should be acquired to help gain a competitive advantage, maintain up-to-date technology, and improve processes. Section Ref: Strategic Role of Technology Sub Section Ref: Technology as a Tool for Competitive Advantage Level: Medium Bloom‘s: Application Learning Objective 4: Explain the strategic role of technology. AACSB: Analytic Time on Task: 1 min
78. The IT workshop at a state university is open from 9 a.m. to 5 p.m. Monday through Friday. It uses 4 part-time student technicians per day with each of them working a 4-hour shift. On average, the workshop solves 50 computer hardware- and software-related requests per day. What is the student productivity ratio? a) 50 requests per day b) 25 requests per shift c) 6.25 requests per hour d) 3.125 requests per hour e) 1.5625 requests per hour Ans: d Solution: Student productivity = value of output / labor-hours of input = 50 / (4 * 4) = 3.125 requests per hour. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
True/False 79. An operations strategy covers a relatively short time horizon, whereas a business strategy covers a relatively long time horizon. Ans: False Solution: A business strategy is a long-range plan of a business. An operation strategy is a longrange plan for the operations function that specifies the design and use of resources to support the business strategy. Section Ref: The Role of Operations Strategy Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Knowledge Time on Task: 0.5 mins
80. To provide speed of delivery, Federal Express invested in a sophisticated bar code technology. Ans: False Solution: To provide speed of delivery, FedEx acquired its own fleet of airplanes. To provide dependability of deliveries, FedEx invested in a sophisticated bar code technology to track all packages. Section Ref: The Role of Operations Strategy Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Knowledge Time on Task: 0.5 mins
81. To provide dependability of deliveries, Federal Express acquired its own fleet of airplanes. Ans: False Solution: To provide dependability of deliveries, FedEx invested in a sophisticated bar code technology to track all packages. It acquired its own fleet of airplanes to ensure speed of delivery. Section Ref: The Role of Operations Strategy Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Knowledge Time on Task: 0.5 mins
82. Operations strategy is developed before the business strategy so the company knows what it will be producing before establishing a long range business strategy. Ans: False Solution: The operation strategy is a long-range plan developed for the operations function that specifies the design and use of resources to support the business strategy. It must be aligned with the company‘s business strategy and enable the company to achieve its long-term plan. Section Ref: The Role of Operations Strategy Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Knowledge Time on Task: 0.5 mins
83. Victoria‘s Secret has used the Internet to conduct a fashion show in order to boost sales. Ans: True Solution: Victoria‘s Secret uses the Internet to conduct fashion shows in order to boost sales. Section Ref: Developing a Business Strategy Sub Section Ref: Environmental Scanning Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Technology Time on Task: 0.5 mins 84. Market research represents a type of environmental scanning. Ans: True Solution: Market research represents a type of environmental scanning that monitor marketplace trends, e.g., changes in customer wants and expectations and ways in which competitors are meeting those expectations. Section Ref: Developing a Business Strategy Sub Section Ref: Environmental Scanning Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 0.5 mins
85. Companies that compete on cost generally also allow a lot of product customization. Ans: False Solution: Companies that compete on cost usually offer a narrow range of products and product features and allow for little customization. Section Ref: Developing an Operations Strategy Sub Section Ref: Competitive Priorities — Cost Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 0.5 mins 86. Firms that focus on quality as their primary competitive priority usually implement either product design quality or process quality, but not both. Ans: False Solution: Firms that compete on quality need to address both product design quality and process quality. The product must be designed to meet customer needs and the process must produce the product exactly as it is designed. Section Ref: Developing an Operations Strategy Sub Section Ref: Competitive Priorities — Quality Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 0.5 mins 87. To ensure speed of deliveries, Federal Express subcontracts its work overload to other firms during peak demand periods. Ans: False Solution: FedEx uses a very flexible part-time workforce, such as college students, to cover workforce requirements during peak periods. Section Ref: Developing an Operations Strategy Sub Section Ref: Competitive Priorities — Time Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 0.5 mins
88. As long as the firm meets the order qualifier classification it will always be competitive and win competitive bid opportunities. Ans: False Solution: Order qualifiers are the business standards that a company has to meet if it wants to do the business. Yet to be successful in the marketplace, the company must further focus on order winners, the competitive priorities that will differentiate the company from the others. Section Ref: Developing an Operations Strategy Sub Section Ref: Order Winners and Qualifiers Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 0.5 mins
89. Companies that compete based on flexibility often cannot compete on cost. Ans: True Solution: A company that competes based on flexibility will likely not be able to compete on cost. It often takes more resources to customize a product or a service. Section Ref: Developing an Operations Strategy Sub Section Ref: The Need for Trade-Offs Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 0.5 mins 90. Facilities decisions are part of the production process infrastructure. Ans: False Solution: Facility decisions are related to the structure or the design of the production process. Section Ref: Developing an Operations Strategy Sub Section Ref: Translating Competitive Priorities into Production Requirements Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 0.5 mins
91. Decisions regarding flow of goods and services through the facility are part of the production process structure. Ans: True Solution: The structure of the production process involves operations decisions related to the design of the production process, such as facilities, technology, and flow of goods and services through the facility. Section Ref: Developing an Operations Strategy Sub Section Ref: Translating Competitive Priorities into Production Requirements Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 0.5 mins
92. Worker pay decisions are part of the production process structure. Ans: False Solution: Worker pay decisions are related to the infrastructure of the production process (the planning and control systems of the operations). Section Ref: Developing an Operations Strategy Sub Section Ref: Translating Competitive priorities into Production Requirements Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 0.5 mins
93. Quality control approaches are part of the production process infrastructure. Ans: True Solution: Quality control approaches are part of the production process infrastructure. Section Ref: Developing an Operations Strategy Sub Section Ref: Translating Competitive priorities into Production Requirements Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 0.5 mins
94. Studies have shown that companies that invest in new technologies tend to improve their financial position over those that do not. Ans: True Solution: Studies have shown that companies that invest in new technologies tend to improve their financial position over those that do not. Section Ref: Strategic Role of Technology Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the strategic role of technology. AACSB: Technology Time on Task: 0.5 mins
95. Operations management is only concerned with information technology applications within the firm. Ans: False Solution: The three primary types of technologies (product, process, and information) are differentiated based on their application, but all are important to operations managers. Section Ref: Strategic Role of Technology Sub Section Ref: Types of Technologies Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the strategic role of technology. AACSB: Technology Time on Task: 0.5 mins
96. Process technology is the technology that has grown the MOST rapidly and has had the greatest impact on business. Ans: False Solution: Information technology has grown rapidly over recent years and has had a profound impact on business. Section Ref: Strategic Role of Technology Sub Section Ref: Types of Technology Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the strategic role of technology. AACSB: Technology Time on Task: 0.5 mins
97. A measure of how efficiently inputs are being converted into outputs is called utilization. Ans: False Solution: Productivity is a measure of how efficiently an organization converts inputs into outputs. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Easy Bloom‘s: Knowledge Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge Time on Task: 0.5 mins
98. Productivity = Input / Output Ans: False Solution: Productivity = Output / Input Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Easy Bloom‘s: Knowledge Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge Time on Task: 0.5 mins
99. Output / (all inputs used) is called total productivity. Ans: True Solution: Total productivity measure = Output produced / all inputs used Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Easy Bloom‘s: Knowledge Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge Time on Task: 0.5 mins
100. An operations strategy should NOT impact the firm‘s supply chain design. Ans: False Solution: Decisions regarding operations strategy directly impact decisions on organizational structure and infrastructure of the company. This includes the design of supply chain. Section Ref: Operations Strategy Within OM: How It All Fits Together Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge Time on Task: 0.5 mins
101. Output / (labor + capital) is an example of a partial productivity measure. Ans: False Solution: Partial productivity is computed as a ratio of output to only one input (e.g., labor, materials, and machines). Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Easy Bloom‘s: Comprehension Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge Time on Task: 0.5 mins
102. Productivity gains in the service sector have been much lower than that of manufacturing. Ans: True Solution: Employment in the service sector of the U.S. economy has grown rapidly. However, productivity gains in this sector have been much lower than those of manufacturing. Section Ref: Productivity Sub Section Ref: Productivity and the Service Sector Level: Easy Bloom‘s: Comprehension Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge Time on Task: 0.5 mins
103. Marketing strategy defines marketing plans to support the business strategy. Ans: True Solution: Marketing strategy defines marketing plans to support the business strategy. Section Ref: The Role of Operations Strategy Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Knowledge Time on Task: 0.5 mins 104. McDonald‘s and pizzerias compete on the same ―order winners.‖ Ans: False Solution: McDonalds competes on consistency; pizzerias compete on homemade taste. Section Ref: Developing an Operations Strategy Sub Section Ref: Order Winners and Qualifiers Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 0.5 mins 105. A nation‘s productivity is NOT directly related to its standard of living. Ans: False Solution: Increases in productivity are directly related to increases in a nation‘s standard of living. Section Ref: Productivity Sub Section Ref: Productivity and Competitiveness Level: Easy Bloom‘s: Comprehension Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge Time on Task: 0.5 mins
Essay 106. Describe the difference between operational efficiency and strategy. Ans: Operational efficiency is the ability to perform operations more efficiently than competitors. Strategy, on the other hand, is a plan for competing in the marketplace. Section Ref: The Role of Operations Strategy Sub Section Ref: The Importance of Operations Strategy Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Knowledge Time on Task: 3 mins 107. Define ―environmental scanning.‖ Ans: Environmental scanning is monitoring the external environment for changes and trends in the market, in the economic and political environment, and in society in order to determine business opportunities and threats. Section Ref: Developing a Business Strategy Sub Section Ref: Environmental Scanning Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 3 mins
108. A mission statement answers what three overriding questions? Ans: (1) What business is the organization in? (2) Who are the customers? (3) How will the company‘s core beliefs shape its business? Section Ref: Developing a Business Strategy Sub Section Ref: Mission Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 3 mins
109. What are some general technological trends in the marketplace? Ans: point-of-sale scanners, automation, computer-assisted processing, electronic purchasing, electronic order tracking, and e-commerce Section Ref: Developing a Business Strategy Sub Section Ref: Environmental Scanning Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 3 mins
110. How have U.S. tobacco companies responded to public awareness of the dangers of smoking? Ans: Many have changed their strategy to focus on customers overseas where smoking is still socially acceptable, or have diversified into other product lines. Section Ref: Developing a Business Strategy Sub Section Ref: Environmental Scanning Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 3 mins
111. Discuss how the operations strategy categories of structure and infrastructure determine the nature of the company‘s operations function. Ans: Structure is the operations decisions related to the design of the production process while infrastructure is operations decisions related to the planning and control systems of the operations. Together they define how the firm will pursue its long range plan. Section Ref: Developing an Operations Strategy Sub Section Ref: Translating Competitive Priorities into Production Requirements Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 3 mins
112. Suggest some core competencies that companies may have. Ans: Examples may be: highly trained workforce, responsive in meeting customer needs, flexible in performing a variety of tasks, strong technical capability, creative in product design, flexible in producing a variety of products, technologically advanced, an efficient distribution system, skilled in understanding customer wants and predicting market trends, skilled in attracting and raising capital, use of latest production technology, use of information technology, and quality control techniques. Section Ref: Developing a Business Strategy Sub Section Ref: Core Competencies Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 3 mins
113. What outsourcing activities does Total Logistics Control perform for Meijer? Ans: TLC is responsible for all deliveries, route scheduling, and all activities involved in maintaining a fleet of trucks, allowing Meijer to focus on its core competencies. Section Ref: Developing a Business Strategy Sub Section Ref: Core Competencies Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 3 mins
114. At the national level why is it important to measure productivity? Ans: The economic success of a nation and the quality of life of its citizens are related to the competitiveness in the global marketplace. Increases in productivity are directly related to increases in a nation‘s standard of living. Understanding the nation‘s productivity helps to define how the nation is performing as a whole. Section Ref: Productivity Sub Section Ref: Productivity and Competitiveness Level: Easy Bloom‘s: Comprehension Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge Time on Task: 3 mins
115. Describe how Southwest Airlines competes on cost. Ans: Facilities are streamlined: only one type of aircraft is used, and flight routes are generally short. This serves to minimize costs of scheduling crew changes, maintenance, inventories of parts, and many administrative costs. Unnecessary costs are completely eliminated: there are no meals, printed boarding passes, or seat assignments. Section Ref: Developing an Operations Strategy Sub Section Ref: Competitive Priorities — Cost Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 3 mins
116. For what entities can productivity be measured? Ans: individuals, inputs (e.g., labor, materials, machines, etc.), departments, organizations, industries, or even countries Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Easy Bloom‘s: Comprehension Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge: Time on Task: 3 mins
Problems 117. If a company‘s inputs for producing a certain product increase by 10% and the output increases by 25%, what is the percentage productivity increase for that product? Ans: 13.6% Solution: New productivity = Output / Input = (1 + 0.25) / (1+0.1) =1.136. This results in a productivity increase of 0.136, or 13.6%. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
118. If a company‘s inputs for producing a certain product increase by 50% and the output increases by 90%, what is the percentage productivity increase for that product? Ans: 26.7% Solution: New productivity = Output / Input = (1+0.9) / (1+0.5) = 1.267. This results in a productivity increase of 0.267, or 26.7%. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins 119. The school‘s cafeteria has three service lines (pizza, salads, and sandwiches). The pizza line has one server and serves 90 pizzas per hour. The salad line has two servers and they handle 140 customers in 70 minutes. The sandwich line has three servers and they supply 360 sandwiches in 90 minutes. Which service line has the highest hourly productivity? Ans: Pizza line at 90 pizzas/server/hour Solution: Productivity = Output / Input Productivity (Pizza line) = 90 pizzas / hour or 90 / 60 = 1.5 pizzas/server/min Productivity (Salad line) = 140 / 70 / 2 = 1 salad/server/min Productivity (Sandwich line) = 360 / 90 / 3 = 1.33 sandwiches/server/min Pizza line has the highest productivity at 90 pizzas/server/hour. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 3 mins
120. A new milling machine can process 2,000 jobs in 8 hours. What is the productivity of the machine? Ans: 250 jobs/hour Solution: Machine productivity = 2,000/8 = 250 jobs/hour Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
121. A firm produces 6,000 products using 12 workers on a nine-hour shift. What is the labor productivity per worker? Ans: 55.6 units/hour Solution: Labor productivity = 6,000 units / (12 workers * 9 hours) = 55.6 units/hour per worker Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 1.5 mins
122. A machine shop produces hangers on two different machines. Machine 1 can produce a hanger every 15 minutes. Machine 2 can produce a hanger every 10 minutes. What is the average productivity per machine? Ans: 5 units/hour Solution: Total hourly outputs from 2 machines = 60/15 + 60/10 = 10 units Average productivity = Total output in units / 2 machines = 10 /2 = 5 units/hour per machine Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
123. A firm produces shirts using three workers. On Wednesday, Madeline completed 110 shirts in 6 hours, Federico completed 90 shirts in 7 hours, and Susan completed 130 shirts in 9 hours. What was the overall productivity of the firm? Ans: 15 shirts/hour Solution: Total outputs = 110 + 90 + 130 = 330 shirts Total inputs = 6 + 7 + 9 = 22 hours Total productivity = Total outputs / Total inputs = 330 / 22 = 15 shirts / hour Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
124. A firm produces 1,500 units per day using four workers on a five-hour shift. On average, 12% of the units produced are defective and must be scrapped. What is the labor productivity for nondefective units? Ans: 66 units/hour Solution: Total nondefective units = 1,500 * (1 – 0.12) = 1,320 units. Total input = 4*5 = 20 hours. Labor productivity = 1,320 units / 20 hours = 66 units / hour. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
125. Last week George mowed 6 lawns in two days. This week he mowed 8 lawns in three days. In which week was George more productive? Ans: last week Solution: Productivity = Output / Input. Last week: 6 lawns / 2 days = 3 lawns/day. This week: 8 lawns / 3 days = 2.67 lawns/day. George was more productive last week. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 2 mins
126. During week one, on average, the aircraft cleaning staff was able to totally clean an airplane in 45 minutes using 3 cleaners. During week two the average time to clean an aircraft went to 40 minutes with one of the cleaning staff off sick. Week two productivity changed in which direction and by how much? Ans: Week two productivity is 20 minutes / staff; productivity decreased. Solution: Week 1: Average cleaning time per airplane = 45 minutes / 3 staff = 15 minutes / staff. Week 2: Average cleaning time per airplane = 40 minutes / 2 staff = 20 minutes / staff. The percentage change in labor productivity = (20 – 15)/15 = 0.333, or a decrease of 33.3%. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 3 mins
127. A company uses two plants to produce motorcycles. Plant A produces 200 per week using 20 workers and 4 machines. Plant B produces 250 per week using 10 workers and 10 machines. a) Compute labor productivity ratios for Plant A and Plant B. Which one is more productive? b) Computer machine productivity ratios for Plant A and Plant B. Which one is more productive? c) Can the multifactor productivity ratios be computed to determine which plant is more productive? Why or why not? Ans: (a) Plant A has a lower labor productivity (10 units/worker) than Plan B (25 units/worker). (b) Plant A has a higher machine productivity (50 units/machine) than Plant B (25 units/machine). (c) The overall multifactor productivity ratios cannot be computed because the cost of labor and machines is needed. Solution: (a) Labor productivity (A) = 200 / 20 = 10 units/worker per week. Labor productivity (B) = 250 /10 = 25 units/worker per week. (b) Machine productivity (A) = 200 / 4 = 50 units/machine per week. Machine productivity (B) = 250 / 10 = 25 units /machine per week. (c) Total productivity cannot be computed because costs of labor and machine are unknown. Section Ref: Productivity Sub Section Ref: Interpreting Productivity Measures Level: Medium Bloom‘s: Application Learning Objective 5: Define productivity and identify productivity measures. AACSB: Analytic Time on Task: 5 mins
Fill-in-the-Blank 128. Productivity is computed as a ratio of ____________________. Ans: outputs to inputs Solution: Productivity is computed as a ratio of outputs (goods and services) to inputs (e.g., labor and materials). Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Easy Bloom‘s: Knowledge Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge Time on Task: 1 min
129. Rapid technological change includes the risk of ________________________. Ans: obsolescence Solution: Investing in technology can be costly and entail risks, such as overestimating the benefits of the technology or incurring the risk of obsolescence due to rapid new inventions. Section Ref: Strategic Role of Technology Sub Section Ref: Technology as a Tool for Competitive Advantage Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the strategic role of technology. AACSB: Technology Time on Task: 1 min
130. The operations function must place emphasis on those priorities that directly support the __________. Therefore, it needs to make _________ between different priorities. Ans: Business strategy; trade-offs Solution: The operations function must place emphasis on those priorities that directly support the business strategy. Therefore, it needs to make trade-offs between the different priorities. Section Ref: Developing an Operations Strategy Sub Section Ref: The Need for Trade-Offs Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 1 min
131. ___________ is a measure of how efficiently inputs are being converted into outputs. Ans: Productivity Solution: Productivity is a measure of how efficiently inputs are being converted into outputs. Section Ref: Productivity Sub Section Ref: Measuring Productivity Level: Easy Bloom‘s: Knowledge Learning Objective 5: Define productivity and identify productivity measures. AACSB: Knowledge Time on Task: 1 min
132. Operations strategy is a long range plan for the design and use of resources in support of ____________________. Ans: the business strategy Solution: Operations Strategy is a long-range plan for the design and use of resources to support the business strategy. Section Ref: The Role of Operations Strategy Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Knowledge Time on Task: 1 min
133. Mass produced standard products were the main manufacturing concern until __________________. Ans: the 1970s Solution: Operations strategy did not come to the forefront until the 1970s. Up to that time, U.S. companies emphasized mass production of standard product designs, Section Ref: The Role of Operations Strategy Sub Section Ref: The Importance of Operations Strategy Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Knowledge Time on Task: 1 min
134. Restaurants that offer pizza to go have different ____________ than those that do not. Ans: missions Solution: Restaurants that offer pizza to go have different missions than those that do not. The mission defines the company‘s business. Section Ref: Developing a Business Strategy Sub Section Ref: Mission Level: Medium Bloom‘s: Application Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Analytic Time on Task: 1 min
135. __________ technology is used to improve the process of creating goods and services. Ans: Process Solution: Process technology is used to improve the process of creating goods and services. Section Ref: Strategic Role of Technology Sub Section Ref: Types of Technology Level: Easy Bloom‘s: Knowledge Learning Objective 4: Explain the strategic role of technology. AACSB: Technology Time on Task: 1 min
136. Environmental scanning helps organizations recognize ________________________. Ans: opportunities and threats Solution: Environmental scanning allows a company to identify opportunities and threats. Section Ref: Developing a Business Strategy Sub Section Ref: Environmental Scanning Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 1 min
137. By outsourcing noncore activities, firms can concentrate on their ________________________. Ans: core competencies Solution: By outsourcing noncore activities, a company can focus on its core competencies. Section Ref: Developing a Business Strategy Sub Section Ref: Core Competencies Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 1 min
138. A business strategy is like an explorer‘s ________________________. Ans: compass Solution: Without a business strategy, the company would have no overriding plan. Such a plan acts like a compass, pointing the company in the right direction. Section Ref: Developing a Business Strategy Sub Section Ref: Putting It Together Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain how a business strategy is developed. AACSB: Knowledge Time on Task: 1 min
139. Saying that an organization is qualified to be in its market means it has the right ______________________. Ans: order qualifiers Solution: Order qualifiers are those competitive priorities that a company has to meet if it wants to do business in that particular market. Section Ref: Developing an Operations Strategy Sub Section Ref: Order Winners and Qualifiers Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe how an operations strategy is developed. AACSB: Knowledge Time on Task: 1 min
140. ______________________ develops financial plans to support the business strategy. Ans: Finance strategy Solution: Finance strategy develops financial plans to support the business strategy. Section Ref: The Role of Operations Strategy Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the role of operations strategy in the organization. AACSB: Knowledge Time on Task: 1 min
Testbank Chapter 3 Product Design and Process Selection CHAPTER
LO Section Product Design
Subsection Design of Services versus Goods
Question # 1, 3, 109 2, 73
The Product Design Process Idea Development Idea Development: Ideas from customers, competitors, & suppliers Idea Development: Reverse engineering Product Screening
Product Screening: Break-even analysis Preliminary Design and Testing Final Design
6, 7, 84, 85, 86, 88, 110
5, 8, 9, 12 10, 11, 13, 89 14, 15, 16, 17, 68, 87, 111 18, 19, 20, 21, 22, 23, 74, 90, 113, 126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136 24, 91, 114 25
Factors Impacting Product Design Design for Manufacture Product Life Cycle Concurrent Engineering
26, 27, 28, 93, 84, 115 71, 92 95
Remanufacturing
75, 96
Types of Processes
76, 116, 117
Process Selection Types of Processes: Intermittent operations Types of Processes: The continuum of process types Types of Processes: Repetitive operations
30, 31
32, 33, 34, 35 97, 98
Designing Processes
36, 37, 72, 77, 106, 112, 125
Process Performance Metrics Linking Product Design and Process Selection
78, 79, 101, 137, 138, 139, 140, 141
38, 83 Product Design Decisions Competitive Priorities Facility Layout Product and Service Strategy Degree of Vertical Integration
39, 120, 121 40, 80 41, 42, 99, 100 43, 44, 45, 46, 47, 70 49, 104
Technology Decisions Information Technology Automation Automation: Robotics E-manufacturing E-manufacturing: 3D printing
48, 52, 81, 107 50, 51, 53, 55, 56, 59, 108 102 54, 58, 60 103, 108
Designing Services How Are Services Different from Manufacturing? How Are Services Different from Manufacturing? -Intangible product How Are Services Classified? The Service Package Differing Service Designs Product Design and Process Selection within OM: How It All Fits Together
123
61 62, 63, 64 65, 105 66, 82, 118, 122
124
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Multiple Choice
1. The ease with which the product can be made is its a) manufacturability. b) repeatability. c) readiness for manufacturing. d) reliability. e) accountability. Ans: a Solution: Manufacturability is the ease with which the product can be made. Section Ref: Product Design Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define product design and explain its strategic impact on the organization. AACSB: Knowledge Time on Task: 1 min
2. Service design differs from product design by including a) customer needs. b) marketing personnel in the decision-making process. c) speed. d) quality. e) the aesthetic and psychological benefits of the product. Ans: e Solution: Service design adds the aesthetic and psychological benefits of the product. Section Ref: Product Design Sub Section Ref: Design of Services versus Goods Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define product design and explain its strategic impact on the organization. AACSB: Knowledge Time on Task: 1 min
3. A company‘s product design supports its business strategies by a) designing products that appeal to its customers. b) designing as many products as possible. c) including the company‘s mission somewhere in the product. d) designing products that aid strategic planning activities. e) designing the company‘s strategy. Ans: a Solution: Product design defines a product‘s characteristics, such as its appearance, the materials it is made of, and its performance standards. It can spell success or disaster for a company. Section Ref: Product Design Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define product design and explain its strategic impact on the organization. AACSB: Knowledge Time on Task: 1 min
4. Which of the following is not a step in product design? a) Final design b) Preliminary design and testing c) Idea development d) Conceptual design e) Product screening Ans: d Solution: The common steps to the development of most product designs include: idea development, product screening, preliminary design and testing, and final design. Section Ref: The Product Design Process Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
5. ___________ is a vital link between customers and product design. a) Engineering b) Accounting c) The Internet d) Operations e) Marketing Ans: e Solution: Marketing is a vital link between customers and product design. Section Ref: The Product Design Process Sub Section Ref: Idea Development – Ideas from customers, competitors, & suppliers Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
6. All product designs begin with a) a blueprint. b) a cost analysis. c) an idea. d) a feasibility study. e) a focus group. Ans: c Solution: All product designs begin with an idea. Section Ref: The Product Design Process Sub Section Ref: Idea Development – Untitled introduction Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
7. Which of the following is true regarding the relative predictability of the cycle of new product introductions? a) New car models are predictable, but new fashion and new skin care products are not. b) New car models and new fashion are predictable, but new skin care products are not. c) New car models, new fashion, and new skin care products are all predictable. d) New car models, new fashion, and new skin care products are all unpredictable. e) New fashion and new skin care products are predictable, but new car models are not. Ans: b Solution: In some industries, the cycle of new product development is predictable, such as new car models and new fashion. In other industries, new product releases are less predictable, such as skin care products. Section Ref: The Product Design Process Sub Section Ref: Idea Development – Untitled introduction Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min 8. Lands‘ End is a well-known benchmarking target because of its a) catalog business. b) supply chain management. c) success at resolving complaints. d) labor relations. e) environmental policies. Ans: a Solution: Lands‘ End has historically been well known for its successful catalog business, and companies considering catalog sales often benchmark against Lands‘ End. Section Ref: The Product Design Process Sub Section Ref: Idea Development – Ideas from customers, competitors, & suppliers Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
9. In 1997, who performed a large benchmarking study for IBM? a) Boston Consulting Group b) Anderson Consulting c) i2 Technologies d) Mercer Management Consultants e) Manugistics Ans: d Solution: In 1997, IBM found its supply chain practices were not keeping up with those of its competitors. To evaluate and solve this problem, IBM hired Mercer Management Consultants to perform a large benchmarking study. Section Ref: The Product Design Process Sub Section Ref: Idea Development – Ideas from customers, competitors, & suppliers Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
10. When designing the Taurus model, what did Ford Motor Company do with regard to BMW and Toyota? a) Benchmarking b) Hired some of their employees c) Reverse engineering d) Copied their quality management techniques e) Bought some of their dealerships Ans: c Solution: Reverse engineering is the process of disassembling a product to analyze its design features. When designing the Taurus model, Ford engineers disassembled and studied many other car models, such as BMW and Toyota, and adapted and combined their best features. Section Ref: The Product Design Process Sub Section Ref: Idea Development – Reverse engineering Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
11. Reverse engineering is a) altering the basic design based on user input. b) reengineering a failing product. c) acquiring a competitor‘s product and relabeling it for sale. d) acquiring a competitor‘s product and studying its design features. e) changing your mind on the previous design. Ans: d Solution: Reverse engineering is buying a competitor‘s new product and studying its design features. Section Ref: The Product Design Process Sub Section Ref: Idea Development – Reverse engineering Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min 12. ________ is studying the practices of companies considered ―best in class‖ and comparing the performance of your company against theirs. a) Competition b) Copying c) Frustration d) Benchmarking e) Notching Ans: d Solution: Studying the practices of companies considered ―best-in-class‖ and comparing the performance of one‘s own company against theirs is called benchmarking. Section Ref: The Product Design Process Sub Section Ref: Idea Development – Ideas from customers, competitors, & suppliers Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
13. Supplier ________ is the design process that involves suppliers early in the process. a) reengineering. b) disaggregation. c) redesign. d) benchmarking. e) involvement. Ans: e Solution: Involving suppliers in the early stages of product design is called early supplier involvement (ESI). Section Ref: The Product Design Process Sub Section Ref: Idea Development – Reverse engineering Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
14. Evaluating a product idea to determine its likelihood of success is a) product screening. b) estimating. c) technological forecasting. d) product windowing. e) product evolution. Ans: a Solution: Evaluating a product idea to determine its likelihood of success is called product screening. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Untitled introduction Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
15. In product screening, issues such as ―Will we need new facilities and equipment?‖ and ―Can the material for production be readily obtained?‖ are addressed by a) marketing. b) finance. c) engineering. d) operations. e) accounting. Ans: d Solution: In product screening, issues such as ―Will we need new facilities and equipment?‖ and ―Can the material for production be readily obtained?‖ are addressed by operations. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Untitled introduction Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min 16. In product screening, issues such as ―What is the market size?‖ and ―What is the long-term product potential?‖ are addressed by a) marketing. b) finance. c) engineering. d) operations. e) accounting. Ans: a Solution: In product screening, issues such as ―What is the potential size of the market?‖ and ―What is the long-term product potential?‖ are addressed by marketing. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Untitled introduction Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
17. Approximately what percentage of new ideas do not make it past the screening stage? a) 30% b) 50% c) 60% d) 80% e) 90% Ans: d Solution: Approximately 80 percent of new ideas do not make it past the screening stage. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Untitled introduction Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
18. What technique is based on computing the quantity of goods a company needs to sell to just cover its costs? a) Net present value b) Break-even analysis c) Internal rate of return d) Activity based costing e) Variable costing Ans: b Solution: Break-even analysis is a technique used to compute the amount of goods a company would need to sell to cover its costs. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Easy Bloom‘s: Knowledge Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Knowledge Time on Task: 1 min
19. Costs that are proportional to the amount of units produced, such as materials and labor, are a) fixed costs. b) marginal revenue. c) sunk costs. d) cost drivers. e) variable costs. Ans: e Solution: Variable costs are the costs vary directly with the amount of units produced and include items such as direct materials and labor. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Bread-even analysis Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
20. Which of the following is a variable cost? a) Land rent b) Materials c) Overhead d) Taxes e) Insurance Ans: b Solution: Fixed costs are the costs a company incurs regardless of how much it produces, such as overhead, taxes, insurance, and land rent. Material costs are variable costs. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
21. In break-even analysis, what is the break-even point? a) The quantity where revenue equals total cost b) The quantity where revenue equals fixed cost c) The quantity where revenue equals variable cost d) The quantity beyond which the firm starts to lose money e) The quantity where variable cost equals fixed cost Ans: a Solution: The break-even point is the quantity where total revenue equals total costs. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Easy Bloom‘s: Knowledge Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Knowledge Time on Task: 1 min
22. In break-even analysis, in order to make a profit the company must a) sell above the break-even point. b) sell below the break-even point. c) sell at a loss. d) sell at the break-even point. e) sell on consignment. Ans: a Solution: To make a profit, a company has to sell above the break-even point. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Easy Bloom‘s: Knowledge Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Knowledge Time on Task: 1 min
23. Break-even analysis would be appropriate for all except which of the following? a) Deciding how much of a product must be sold to make a profit b) Evaluating different processes c) Deciding whether it is better to make or buy a product d) Deciding between different products e) Deciding how to allocate overhead Ans: e Solution: Break-even analysis is not appropriate for overhead allocation. It can be used in evaluating processes, products, product profitability, and make-or-buy choices. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Easy Bloom‘s: Comprehension Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Knowledge Time on Task: 3 min
24. Which of the following is NOT included in the preliminary design and testing stage? a) The product idea is evaluated according to the needs of the major business functions. b) The general performance specifications are translated into technical specifications. c) The ―bugs‖ are worked out. d) The initial design is revised based on the test results. e) Prototypes are built and tested. Ans: a Solution: Evaluating a product idea is done at the stage of product screening. At the preliminary design and testing stage, design engineers translate general performance specifications into technical specifications. Prototypes are built and tested. Changes are made based on test results. The process of revising, rebuilding a prototype, and testing continues. Section Ref: The Product Design Process Sub Section Ref: Preliminary Design and Testing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
25. During the final design and testing stage, a) the product design idea is evaluated according to the needs of the major business functions. b) design engineers hand the product over to the final design engineers. c) the product specifications are drawn up. d) marketing becomes involved for the first time. e) the product achieves full production. Ans: c Solution: The final design stage is where final product specifications are drawn up. Section Ref: The Product Design Process Sub Section Ref: Final Design Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
26. Which option refers to reducing the number of parts and features of the product whenever possible? a) Design automation b) Design specification c) Design reduction d) Design standardization e) Design simplification Ans: e Solution: Design simplification means reducing the number of parts and features of the product whenever possible. A simple product is easier to make, costs less, and gives higher quality. Section Ref: Factors Impacting Product Design Sub Section Ref: Design for Manufacture Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
27. Which refers to the use of common and interchangeable parts? a) Design automation b) Design specification c) Design reduction d) Design standardization e) Design simplification Ans: d Solution: Design standardization refers to the use of common and interchangeable parts. Section Ref: Factors Impacting Product Design Sub Section Ref: Design for Manufacture Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
28. Which of the following is NOT a guideline for design for manufacture? a) Use modular design. b) Design parts for different products. c) Minimize parts. d) Rely on automated equipment. e) Simplify operations. Ans: d Solution: The guidelines for design for manufacture (DFM) include: use modular design, design parts for different products, minimize parts, simplify operations, and avoid tools. Relying on automated equipment is not a guideline for DFM. Section Ref: Factors Impacting Product Design Sub Section Ref: Design for Manufacture Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
29. Maturity and decline are also referred to as a) the early stages of the life cycle. b) the life cycle. c) the later stages of the life cycle. d) the manufacture stages. e) the re-engineering stages. Ans: c Solution: Maturity and decline are referred to as the later stages of the life cycle because up to this point both the product and market are well defined. Section Ref: The Product Design Process Sub Section Ref: Product Life Cycle Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
30. Which type of operation is used to produce many different products with varying process requirements in lower volumes? a) Intermittent b) Repetitive c) Continuous d) Downstream e) Gateway Ans: a Solution: Intermittent operations are used to produce a variety type of products with different processing requirements in lower volumes. Section Ref: Process Selection Sub Section Ref: Types of Processes – Intermittent operations Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify different types of processes and explain their characteristics. AACSB: Knowledge Time on Task: 1 min
31. Which of the following is a characteristic of repetitive operations? a) Great product variety b) Capital-intensive operation c) Labor-intensive operation d) General-purpose equipment e) Low degree of standardization Ans: b Solution: Repetitive operations have high degree of automation and are capital intensive. Section Ref: Process Selection Sub Section Ref: Types of Processes – Intermittent operations Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify different types of processes and explain their characteristics. AACSB: Knowledge Time on Task: 1 min
32. Building a bridge over the Mississippi River for a new highway uses a ________ process. a) project b) batch c) line d) continuous e) recycle Ans: a Solution: Project process is a type of process used to make a one-at-a-time product exactly to customer specifications. Building a bridge over the Mississippi River for a new highway is an example of this type of process. Section Ref: Process Selection Sub Section Ref: Types of Processes – The continuum of process types Level: Medium Bloom‘s: Application Learning Objective 4: Identify different types of processes and explain their characteristics. AACSB: Analytic Time on Task: 1 min
33. The classes that you are taking at the university use a ___________ process. a) project b) batch c) line d) continuous e) recycle Ans: b Solution: The classes at a university use a batch process, a type of process used to produce small quantities of products in groups or batches based on customer orders or specifications. Section Ref: Process Selection Sub Section Ref: Types of Processes –The continuum of process types Level: Medium Bloom‘s: Application Learning Objective 4: Identify different types of processes and explain their characteristics. AACSB: Analytic Time on Task: 1 min 34. Which type of processes are designed to produce a large volume of a standardized product for mass production, such as automobiles? a) Project processes b) Batch processes c) Line processes d) Continuous processes e) Recycle processes Ans: c Solution: Line processes are designed to produce a large volume of a standardized product for mass production. Section Ref: Process Selection Sub Section Ref: Types of Processes – The continuum of process types Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify different types of processes and explain their characteristics. AACSB: Knowledge Time on Task: 1 min
35. Which type of process would be LEAST likely to produce goods for inventory rather than for a specific customer request? a) Project process b) Batch process c) Line process d) Continuous process e) Remanufacturing process Ans: a Solution: Project processes would be least likely to produce goods for inventory. They are used to make one-of-a-kind products exactly to customer specifications. Section Ref: Process Selection Sub Section Ref: Types of Processes — The continuum of process types Level: Medium Bloom‘s: Application Evaluation Learning Objective 4: Identify different types of processes and explain their characteristics. AACSB: Analytic Time on Task: 1 min
36. Which of the following is a tool for evaluating an operation in terms of the sequence of steps from inputs to outputs with the goal of improving its design? a) Operations analysis b) Operations sequencing c) Process flow analysis d) Input/output analysis e) Sequencing analysis Ans: c Solution: Process flow analysis is a technique used for evaluating a process in terms of the sequence of steps from inputs to outputs with the goal of improving its design. Section Ref: Designing Processes Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 5: Understand how to use a process flowchart. AACSB: Knowledge Time on Task: 1 min
37. If the third stage of a repetitive line process cannot complete its activities as fast as stage one or stage two, it has become a a) key work location. b) bottleneck. c) place not to work. d) project process location. e) None of the choices is correct. Ans: b Solution: The third stage becomes a bottleneck of the process since its capacity is holding up the speed of the process. Section Ref: Designing Processes Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 5: Understand how to use a process flowchart. AACSB: Analytic Time on Task: 1 min
38. Which of the following is a correct sequence for relating product design, process selection, and arrangement of equipment in the factory? a) Product design determines arrangement of equipment, which determines process selection. b) Product design determines process selection, which determines arrangement of equipment. c) Process selection determines product design, which determines arrangement of equipment. d) Process selection determines arrangement of equipment, which determines product design. e) Arrangement of equipment determines process selection, which determines product design. Ans: b Solution: The type of product a company produces defines the type of operations (processes) needed. The type of operations, in turn, defines many other aspects of the organization, including the type of equipment and its arrangement in the facility. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Untitled Introduction Level: Medium Bloom‘s: Application Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 1 min
39. Which type of operations focus on products in the early stage of the life cycle? a) Repetitive b) Downstream c) Gateway d) Intermittent e) Recycle Ans: d Solution: Intermittent operations focus on product in the early stage of the lift cycle because facilities are general-purpose and can be adapted to the needs of the product. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Product Design Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 1 min
40. With respect to competitive priorities, intermittent operations compete more on _____________ compared to repetitive operations. a) cost and features b) durability and cost c) availability and reliability d) flexibility and delivery e) durability and features Ans: d Solution: Intermittent operations compete more on flexibility and delivery compared to repetitive operations. Repetitive operations are more competitive on cost. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Competitive Priorities Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 1 min
41. Intermittent operations group their resources based on a) requirements of the product. b) similar operations or functions. c) shape of the shop floor. d) abilities of the labor force. e) the number of machines. Ans: b Solution: Intermittent operations have resources grouped based on similar processes or functions. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Facility Layout Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 1 min
42. Compared to intermittent operations, repetitive operations a) have higher material handling costs. b) have greater efficiency. c) have slower processing rates. d) have more flexibility. e) are less specialized. Ans: b Solution: Repetitive operations have faster processing rates, lower material handling costs, and greater efficiency than intermittent operations. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Facility Layout Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 1 min
43. Which product and service strategy is used to produce standard components that can be combined to customer specifications? a) Assemble-to-deliver b) Make-to-stock c) Assemble-to-order d) Make-to-order e) Make-to-package Ans: c Solution: Assemble-to-order, also known as build-to-order, produces standard components that can be combined to customer specifications. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Product and Service Strategy Level: Easy Bloom‘s: Knowledge Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 1 min
44. Which product and service strategy has the longest delivery lead time? a) Assemble-to-deliver b) Make-to-stock c) Assemble-to-order d) Make-to-order e) Make-to-package Ans: d Solution: Make-to-order is a strategy used to produce products to customer specifications after an order has been received. The delivery time is the longest and product volumes are low. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Product and Service Strategy Level: Easy Bloom‘s: Knowledge Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 1 min
45. Prefabricated furniture with choices of fabric colors is an example of which product and service strategy? a) Assemble-to-deliver b) Make-to-stock c) Assemble-to-order d) Make-to-order e) Make-to-package Ans: c Solution: Prefabricated furniture with choices of fabric colors is an example of assemble-to-order strategy. Standard components are produced in advance that can be combined later to customer specifications. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Product and Service Strategy Level: Medium Bloom‘s: Application Learning Objective 7: Understand the link between product design and process selection. AACSB: Analytic Time on Task: 1 min
46. Which product and service strategy is typically seen in repetitive operations? a) Assemble-to-deliver b) Make-to-stock c) Assemble-to-order d) Make-to-order e) Make-to-package Ans: b Solution: Make-to-stock is typically seen in repetitive operations. Companies using this strategy produce a standardized product in larger volumes. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Product and Service Strategy Level: Easy Bloom‘s: Knowledge Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 1 min
47. What is created when a firm‘s facility is laid out improperly? a) project processes b) optimum outputs c) an equal number of products d) inefficiency e) job satisfaction Ans: d Solution: Facility layout is concerned with the arrangement of resources in a facility to enhance the production process. If resources are not arranged properly, a company will have inefficiency and waste. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Facility Layout Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 1 min
48. Information technology enables all of the following EXCEPT a) information storage. b) information processing. c) information creation. d) intra firm information communication. e) inter firm information communication. Ans: c Solution: Information technology (IT) enables storage, processing, and communication of information within and between firms. Section Ref: Technology Decisions Sub Section Ref: Information Technology Level: Easy Bloom‘s: Knowledge Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 1 min
49. Vertical integration is a good strategic option for a manufacturing company when a) it needs several different parts and subassemblies. b) it makes many different products. c) its facilities are obsolete. d) it uses distributed processing. e) it needs a small variety of input materials in large volumes. Ans: e Solution: Vertical integration is a good strategic option when there are high volumes of a small variety of input materials, as in the case with repetitive operations. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Degree of Vertical Integration Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 1 min
50. Which of the following is a disadvantage of automation? a) Inflexibility for product and process changes b) Inconsistency of products c) Inefficiency for producing large volumes d) Harder to monitor quality e) Frequent interruptions of production Ans: a Solution: Automation has some disadvantages, such as costliness and inflexibility in accommodating product and process changes. Section Ref: Technology Decisions Sub Section Ref: Automation Level: Easy Bloom‘s: Comprehension Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 1 min
51. Which is a small battery-driven truck that operates remotely and moves material from location to location? a) CAD b) AGV c) AS/RS d) FMS e) CAM Ans: b Solution: Automated guided vehicle (AGV) is a small battery-driven truck that moves materials from one location to the other. Section Ref: Technology Decisions Sub Section Ref: Automation Level: Easy Bloom‘s: Knowledge Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 1 min
52. Which technology uses sensor tags to monitor perishable products? a) FMS b) CAD c) RFID d) CAM e) RF Ans: c Solution: RFID is a wireless technology that uses memory chips equipped with tiny radio antennas attached to objects used to transmit streams of data. It can be used to monitor the temperature and freshness of perishable products. Section Ref: Technology Decisions Sub Section Ref: Information Technology Level: Easy Bloom‘s: Knowledge Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 1 min
53. Which is an automated material-handling system that basically is an automated warehouse? a) CAD b) AGV c) AS/RS d) FMS e) CAM Ans: c Solution: Automated storage and retrieval systems (AS/RSs) are automated material-handling systems that are basically automated warehouses. Section Ref: Technology Decisions Sub Section Ref: Automation Level: Easy Bloom‘s: Knowledge Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 1 min
54. What is CAD short for? a) Conceptually appropriate design b) Computer-aided design c) Commercial applications design d) Competitive advantage design e) Completely automated design Ans: b Solution: CAD stands for computer-aided design. It is a system that uses computer graphics to design new products. Section Ref: Technology Decisions Sub Section Ref: E-Manufacturing Level: Easy Bloom‘s: Knowledge Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 1 min
55. Which type of automation system provides the flexibility of intermittent operations with the efficiency of repetitive operations? a) CAD b) AGV c) AS/RS d) FMS e) CAM Ans: d Solution: A flexible manufacturing system (FMS) is a type of automation system that combines the flexibility in intermittent operations with the efficiency of repetitive operations. Section Ref: Technology Decisions Sub Section Ref: Automation Level: Easy Bloom‘s: Knowledge Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 1 min
56. A robot in manufacturing typically a) resembles a human in appearance. b) has a mechanical arm. c) is mobile. d) has legs. e) is very small. Ans: b Solution: A robot in manufacturing is usually nothing more than a mechanical arm with a power supply and a computer-control mechanism that controls the movements of the arm. Section Ref: Technology Decisions Sub Section Ref: Automation Level: Easy Bloom‘s: Knowledge Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 1 min
57. What type of machine is controlled by a computer and can do a variety of tasks, such as drilling, boring, or turning parts of different sizes and shapes? a) Numerically controlled b) Variable turning c) Flexible driven d) Noncalculating e) Next component Ans: a Solution: A numerically controlled (NC) machine is a machine controlled by a computer and can do a variety of tasks such as drilling, boring, or turning parts of different sizes and shapes. Section Ref: Technology Decisions Sub Section Ref: Automation — Robotics Level: Easy Bloom‘s: Knowledge Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 1 min
58. Which of the following is a printing technology in which materials like plastics and metals are deposited in thick layers one atop the other? a) Offset Printing b) Toner Printing c) 3D Printing d) Gravure printing e) 2D Printing Ans: c Solution: 3D printing is a 3-dimensional printing technology. It deposits materials like plastics and metals in thick layers one atop the other. Section Ref: Technology Decisions Sub Section Ref: E-Manufacturing Level: Easy Bloom‘s: Knowledge Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 1 min
59. Which of the following is true of intelligent assembly robots? a. They have consistent finger dexterity. b. They lack the precision to perform medical surgeries. c. They require large incisions. d. They cannot provide a competitive advantage. e. They require huge, complex installations. Ans: a Solution: The new generation of intelligent assembly robots can perform delicately fine and small motor movements. They have consistent finger dexterity and require only tiny incisions. Section Ref: Technology Decisions Sub Section Ref: Automation Level: Easy Bloom‘s: Comprehension Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 1 min
60. Which term is used to describe the integration of product design, process planning, and manufacturing using an integrated computer system? a) CAD/CAM b) AGV c) AS/RS d) FMS e) CIM Ans: e Solution: Computer-integrated manufacturing (CIM) is a term used to describe the integration of product design, process planning, and manufacturing using an integrated computer system. Section Ref: Technology Decisions Sub Section Ref: E-Manufacturing Level: Easy Bloom‘s: Knowledge Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 1 min
61. Since services are intangible, the design of the service needs a) to be intangible. b) to be very specific. c) to be in the mind of the customer. d) to be explained to the customer prior to delivery of the service. e) to specify exactly what the customer is supposed to experience. Ans: e Solution: The service produced is experienced by the customer. The design of the service needs to specify exactly what the customer is supposed to experience. Section Ref: Designing Services Sub Section Ref: How Are Services Different from Manufacturing — Intangible product Level: Easy Bloom‘s: Comprehension Learning Objective 9: Understand issues of designing service operations. AACSB: Knowledge Time on Task: 1 min
62. ________ has low customer contact. a) Quasi-manufacturing b) Quasi-services c) Mixed services d) Pure services e) Mixed manufacturing Ans: a Solution: Services with low customer contact are called quasi-manufacturing. Section Ref: Designing Services Sub Section Ref: How Are Services Classified Level: Easy Bloom‘s: Knowledge Learning Objective 9: Understand issues of designing service operations. AACSB: Knowledge Time on Task: 1 min
63. Highly labor-intensive services are called a) quasi-manufacturing. b) quasi-services. c) mixed services. d) pure services. e) mixed manufacturing. Ans: d Solution: Services with high customer contact are called pure services. They are highly labor intensive. Section Ref: Designing Services Sub Section Ref: How Are Services Classified Level: Easy Bloom‘s: Knowledge Learning Objective 9: Understand issues of designing service operations. AACSB: Knowledge Time on Task: 1 min
64. Services that have some areas with little customer contact and others with high customer contact are classified as a) pure services. b) quasi-manufacturing. c) quasi-services. d) mixed services. e) manufacturing. Ans: d Solution: Services that combine elements of both pure services and quasi-manufacturing are called mixed services. Some parts of their operations have face-to-face customer contact, and others do not. The examples include hospitals, restaurants, barber shops, and beauty salons. Section Ref: Designing Services Sub Section Ref: How Are Services Classified Level: Easy Bloom‘s: Knowledge Learning Objective 9: Understand issues of designing service operations. AACSB: Knowledge Time on Task: 1 min
65. What are the three elements of the service package? a) Physical goods, sensual benefits, and psychological benefits b) Sales, return policy, and warranty c) Customer service, return policy, and warranty d) Kindness, information provision, and speed e) Physiological benefits, sensual benefits, and psychological benefits Ans: a Solution: The three elements of the service package are: physical goods, sensual benefits, and psychological benefits. Section Ref: Designing Services Sub Section Ref: The Service Package Level: Easy Bloom‘s: Knowledge Learning Objective 9: Understand issues of designing service operations. AACSB: Knowledge Time on Task: 1 min
66. What are the three different service designs described in the chapter? a) Substitute people for technology, get customers involved, and provide a high level of customer attention. b) Conduct market research, provide a high level of customer attention, and substitute technology for people. c) Conduct market research, provide a high level of customer attention, and get customers involved. d) Substitute people for technology, conduct market research, and provide a high level of customer attention. e) Substitute technology for people, get customers involved, and provide a high level of customer attention. Ans: e Solution: The three very different service designs are: substitute technology for people, get the customer involved, and provide a high level of customer attention. Section Ref: Designing Services Sub Section Ref: Differing Service Designs Level: Easy Bloom‘s: Comprehension Learning Objective 9: Understand issues of designing service operations. AACSB: Knowledge Time on Task: 1 min
67. Product design decisions are a) purely tactical decisions. b) mixed tactical and strategic decisions. c) strategic in nature. d) only made by the OM department. e) rarely made. Ans: c Solution: Product design decisions are strategic in nature. The features and characteristics of a product need to support the overall strategic direction of the company. Section Ref: Product Design and Process Selection within OM Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 1 min
68. Company A is an automobile manufacturer. It has developed a new product design idea. What is the next step for the company? a) Evaluate the idea to determine its likelihood of success. b) Determine characteristics and features of the product. c) Determine the manufacturing process. d) Begin preliminary design and testing. e) Benchmark other similar company‘s products. Ans: a Solution: After a product idea has been developed, it needs to be evaluated to determine its likelihood of success. The process is called product screening. Section Ref: The Product Design Process Sub Section Ref: Product Screening Level: Medium Bloom‘s: Application Learning Objective 2: Describe the steps used to develop a product design. AACSB: Analytic Time on Task: 1 min
69. The common steps in the product design process are a) idea development, benchmarking, product screening, and break-even analysis. b) idea development, benchmarking, preliminary design, and final design. c) idea development, reverse engineering, product screening, and break-even analysis. d) idea development, marketing research, product screening, and testing. e) idea development, product screening, preliminary design and testing, and final design. Ans: e Solution: The steps common to the development of most product designs are: idea development, product screening, preliminary design and testing, and final design. Section Ref: The Product Design Process Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
70. Which of the following represents an assemble-to-order? a) Wedding invitations b) Standard automotive parts c) Custom-made clothing d) Legal services e) Vacation packages with standard options Ans: e Solution: Assemble-to-order strategy produces standard components that can be combined to customer specifications. Examples include vacation packages with standard options and computer systems. Wedding invitations, custom-made clothing, and legal services are examples of make-to-order. Standard automotive parts is an example of make-to-stock. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Product and Service Strategy Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 1 min
71. A series of stages that products pass through in their lifetime, characterized by changing product demands over time, is defined as a) the development life cycle. b) the design program. c) the product life cycle. d) the services life cycle. e) the product life methodology. Ans: c Solution: The product life cycle is a series of stages that products pass through in their lifetime, characterized by changing product demands over time (i.e., introduction, growth, maturity, and decline). Section Ref: Factors Impacting Product Design Sub Section Ref: Product Life Cycle Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 1 min
72. A process flowchart is useful for a) designing a product. b) determining where the strengths are in a process. c) determining where the weaknesses are in a process. d) seeing the totality of the operation and for identifying potential problem areas. e) benchmarking against other processes. Ans: d Solution: A process flow chart is useful for seeing the totality of the operations and for identifying potential problem areas. Section Ref: Designing Processes Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 5: Understand how to use a process flowchart. AACSB: Knowledge Time on Task: 1 min
73. Star Bank recently redesigned its website in an effort to enhance its customers‘ online banking experience. The main changes include using simple yet meaningful visuals with bright colors and dynamic content, and grouping all of its financial products together under three categories on the login page—banking and investing, cards, and others. These changes are considered to be a) product design. b) process selection. c) manufacturability. d) service design. e) concurrent engineering. Ans: d Solution: These changes are part of the bank‘s service design and they are expected to help enhance the customers‘ online banking experience. Service design establishes all the characteristics of a service, including its physical, sensual, and psychological benefits. Section Ref: Product Design Sub Section Ref: Design of Services versus Goods Level: Medium Bloom‘s: Application Learning Objective 1: Define product design and explain its strategic impact on the organization. AACSB: Analytic Time on Task: 1 min 74. The owner of Joe‘s Pizza is considering purchasing a new oven to bake the restaurant‘s signature vegan pizza. The oven costs $25,000. The variable costs are estimated to be $5.00 per pizza, including the costs of flour, yeast, cheese, veggie toppings, etc. If the pizzas sell for $15.00 each, what is the breakeven point for the oven?
a) $25,000 b) $5,000 c) $2,500 d) 2,500 pizzas e) 5,000 pizzas Ans: d Solution: QBE = F / (SP – VC) = $25,000 / (15 – 5) $/pizza = 2,500 pizzas Section Ref: The Product Design Process Sub Section Ref: Product Screening—Break-Even Analysis Level: Medium Bloom‘s: Application Learning Objective 2: Describe the steps used to develop a product design. AACSB: Analytic Time on Task: 2 mins
75. App Printing Solutions manufactures a variety of printers. To contribute to the goal of zero landfill waste, the company offers its customers a process for returning empty inkjet cartridges at no cost. Those returned cartridges can then be used again in the production of new ones. This business practice of reusing a component of an old product is called
a) design simplification. b) design standardization. c) remanufacturing. d) reverse engineering. e) re-engineering. Ans: c Solution: Remanufacturing uses components of old products in the production of new ones. It can lead to environmental benefits and manufacturing cost savings. Section Ref: Factors Impacting Product Design Sub Section Ref: Remanufacturing Level: Medium Bloom‘s: Application Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Analytic Time on Task: 1 min
76. Andre is an undergraduate senior majoring in management. This semester, he is taking his last four classes required for graduation. Applying what he has learned from his operations management class about different types of processes, Andre states that the classes use a
a) project process. b) line process. c) batch process. d) continuous process. Ans: c Solution: Batch processes, or job shops, are used to produce small quantities of products in groups or batches based on customer orders or product specifications. The examples can be seen in bakeries, education, and printing shops. The classes offered by universities use a batch process. Section Ref: Process Selection Sub Section Ref: Types of Processes Level: Medium Bloom‘s: Application Learning Objective 4: Identify different types of processes and explain their characteristics. AACSB: Analytic Time on Task: 1 min
77. Wendell Woodworking, a furniture maker, wants to evaluate its current process of making wooden tables with the goal of improving system design and production efficiency. The process involves wood cutting, making legs and table tops, finishing the wood, and assembling. Which of the following tools should be used to help the company to evaluate the system and identify any bottlenecks?
a) Break-even analysis b) Process flow analysis c) Regression analysis d) Correlation analysis Ans: b Solution: Process flow analysis is a technique used for evaluating a process in terms of the sequence of steps from inputs to outputs with the goal of improving its design. Section Ref: Designing Processes Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 5: Understand how to use a process flowchart. AACSB: Analytic Time on Task: 1 min
78. Lee Manufacturing makes a product that needs to go through two sequential operations: assembly for 25 minutes and then finishing for 35 minutes. It takes 1.5 hours for a product to move through the system, which includes working time as well as the waiting time. The company operates at 8 hours per day. What is the process velocity?
a) 1.5 b) 5.33 c) 8.0 d) 0.025 Ans: a Solution: Process velocity = throughput time / value-added time = (90 minutes/unit) / (25 + 35) minutes/unit = 1.5 Section Ref: Process Performance Metrics Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 6: Understand how to use process performance metrics. AACSB: Analytic Time on Task: 2 mins
79. The business school at a state university sets a cap on its undergraduate class size at 40. The school has recently moved to a new building, where all the classrooms have a maximum capacity of 50. This semester, an operations management class has an actual enrollment of 36. What is the efficiency for the class?
a) 0.80 b) 0.72 c) 0.90 d) 1.25 Ans: c Solution: Efficiency = Actual output / Standard output = 36 students / 40 students = 0.90 Section Ref: Process Performance Metrics Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 6: Understand how to use process performance metrics. AACSB: Analytic Time on Task: 2 mins
80. Tailor Fit is a family-owned tailor shop specializing in making cheongsams, a type of body-hugging dress with distinctive Chinese features. The shop employs several experienced tailors to make cheongsams to customer specifications in terms of materials, colors, and patterns. Which of the following business slogans would be the best match between the shop‘s operations and its competitive priorities?
a) Time is everything. b) Connecting people. c) Have it your way. d) Efficiency in motion. Ans: c Solution: The tailor shop has intermittent operations. The primary competitive priority for an intermittent operation should be flexibility and customization. ―Have it your way‖ matches best with the shop‘s process operations. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Competitive Priorities Level: Medium Bloom‘s: Application Learning Objective 7: Understand the link between product design and process selection. AACSB: Analytic Time on Task: 1 min
81. Best Carrier is a national carrier for both retail and residential package delivery. The company uses a variety of technologies in its operations. Which of the following is not likely to be used by the company?
a) ERP b) RFID c) GPS d) CAD Ans: d Solution: Computer-aided design (CAD) is an e-manufacturing technology that uses computer graphics to design new products; it is not appropriate for a package delivery company. All other technologies apply. ERP can be used for data sharing and communication within and between firms, RFID for real-time data, and GPS for logistics and navigational efficiency. Section Ref: Technology Decisions Sub Section Ref: Information Technology Level: Medium Bloom‘s: Application Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Analytic Time on Task: 1 min
82. Syreeta is a cosmetic sales associate at a local department store. She is responsible for selling and supporting several different cosmetic lines. Over the years, Syreeta has developed a personal relationship with a group of primary customers. She knows their sense of beauty and style and their product preferences, provides them professional skin care consultation on an as-needed basis, and notifies them about special events and promotions. What is the service approach that Syreeta is using?
a) Substitute technology for people b) Get the customer involved c) High customer attention d) Mass customization Ans: c Solution: The high customer attention approach relies on developing a personal relationship with each customer and giving the customer precisely what he or she wants. It does not get the customer involved but rather has the customer be the passive recipient of the service. Section Ref: Designing Services Sub Section Ref: Differing Service Designs Level: Medium Bloom‘s: Application Learning Objective 9: Understand issues of designing service operations. AACSB: Analytic Time on Task: 1 min
True/False
83. Product design and process selection decisions are typically made separately. Ans: False Solution: Decisions concerning product design and process selection are directly linked and cannot be made independently of one another. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define product design and explain its strategic impact on the organization. AACSB: Knowledge Time on Task: 0.5 mins
84. One source of new product ideas is a product manager. Ans: True Solution: The idea might come from a product manager who spends time with customers and has a sense of what customers want. Section Ref: The Product Design Process Sub Section Ref: Idea Development Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
85. To remain competitive, companies must be innovative and bring out new products regularly. Ans: True Solution: To remain competitive, companies must be innovative and bring out new products regularly. Section Ref: The Product Design Process Sub Section Ref: Idea Development Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
86. Analyzing customer preferences is an ongoing process. Ans: True Solution: Analyzing customer preferences is an ongoing process because customer preferences change over time. What they like next year may be quite different from what they like today. Section Ref: The Product Design Process Sub Section Ref: Idea Development Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
87. There is a pure mathematical formula for making the decision to pursue a specific idea. Ans: False Solution: Unfortunately, there is no magic formula for deciding whether or not to pursue a particular product idea. Managerial skill and experience are the key. Section Ref: The Product Design Process Sub Section Ref: Product Screening Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
88. Benchmarking should only be performed against firms in similar lines of business with our own. Ans: False Solution: A company can benchmark against another company in a completely different line of business and still learn from some aspect of that company‘s operation. Section Ref: The Product Design Process Sub Section Ref: Idea Development Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
89. Buying a competitor‘s new product and studying its design features by disassembling it and analyzing its parts and features is reverse engineering. Ans: True Solution: Reverse engineering means buying a competitor‘s new product and disassembling it to analyze its design features. Section Ref: The Product Design Process Sub Section Ref: Idea Development – Reverse engineering Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
90. Net present value is based on computing the quantity of goods a company needs to sell to just cover its costs. Ans: False Solution: Break-even analysis is a technique that computes the quantity of goods a company needs to sell just to cover its costs. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
91. At the preliminary design and testing stage of new product design, design engineers translate technical specifications into general performance specifications. Ans: False Solution: At the preliminary design and testing stage of new product design, design engineers translate general performance specifications into technical specifications. Section Ref: The Product Design Process Sub Section Ref: Preliminary Design and Testing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
92. Understanding the stages of the life cycle is important for product design purposes. Ans: True Solution: Understanding the stages of the product life cycle is important for product design purpose, such as knowing at which stage to focus on design changes. Section Ref: Factors Impacting Product Design Sub Section Ref: Product Life Cycle Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
93. Design standardization refers to the use of common and interchangeable parts. Ans: True Solution: Design standardization refers to the use of common and interchangeable parts. Section Ref: Factors Impacting Product Design Sub Section Ref: Design for Manufacture Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
94. One issue that design for manufacture focuses on is material durability. Ans: False Solution: Design for manufacture (DFM) focuses on two issues: design simplification and design standardization. Design simplification means reducing the number of parts and features of the product whenever possible. Design standardization refers to the use of common and interchangeable parts. Section Ref: Factors Impacting Product Design Sub Section Ref: Design for Manufacture Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
95. When product and process design work together, much of the work is done in sequence rather than in parallel. Ans: False Solution: With concurrent engineering, multifunctional teams work together to simultaneously design the product and the process. Section Ref: Factors Impacting Product Design Sub Section Ref: Concurrent Engineering Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
96. Remanufacturing is the concept of using components of old products in the production of new ones. Ans: True Solution: Remanufacturing is the concept of using components of old products in the production of new ones. Section Ref: Factors Impacting Product Design Sub Section Ref: Remanufacturing Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 0.5 mins
97. Repetitive operations are used to produce many different products with varying process requirements in lower volumes. Ans: False Solution: Repetitive operations are used to produce one or a few standardized products in high volume. Section Ref: Process Selection Sub Section Ref: Types of Processes – Repetitive operations Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify different types of processes and explain their characteristics. AACSB: Knowledge Time on Task: 0.5 mins
98. A common difference between intermittent and repetitive operations is degree of product standardization. Ans: True Solution: Intermittent operations are used to produce a variety of products in low volume; while repetitive operations are used to produce one or a few standardized products in high volume. Section Ref: Process Selection Sub Section Ref: Types of Processes Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify different types of processes and explain their characteristics. AACSB: Knowledge Time on Task: 0.5 mins
99. Intermittent operations group their resources based on similar operations or functions. Ans: True Solution: Intermittent operations group resources by similar processes or functions, and the product is routed to each resource as needed. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Facility Layout Level: Easy Bloom‘s: Knowledge Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 0.5 mins
100. The make-to-stock product and service strategy has the shortest delivery lead time among the possible strategies, but the customer has no involvement in product design. Ans: True Solution: Make-to-stock is seen in repetitive operations. It has the shortest delivery lead time among the possible strategies (e.g., assemble-to-order and make-to-order), but the customer has no involvement in product design. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Product and Service Strategy Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 0.5 mins
101. Process velocity is computed as a ratio of throughput time to output. Ans: False Solution: Process velocity is computed as a ratio of throughput time to value-added time. Section Ref: Process Performance Metrics Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 6: Understand how to use process performance metrics. AACSB: Knowledge Time on Task: 0.5 mins
102. One advantage of robots is that they can perform delicately fine, small motor movements. Ans: True Solution: The advantage of robots is that they can perform delicately fine, small motor movements, have consistent finger dexterity, and require only tiny incisions. Section Ref: Technology Decisions Sub Section Ref: Automation – Robotics Level: Easy Bloom‘s: Knowledge Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Knowledge Time on Task: 0.5 mins
103. Using 3D printing, a solid object can be created from a software design with just a click of a button. Ans: True Solution: 3D printing deposits materials like plastics and metals in thick layers one atop the other. The process gradually builds up one layer at a time until the object is produced. This literally means that a solid object can be created from a software design with just a click of a button. Section Ref: Technology Decisions Sub Section Ref: E-Manufacturing – 3D printing Level: Easy Bloom‘s: Knowledge Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Knowledge Time on Task: 0.5 mins
104. Outsourcing instead of pursuing vertical integration is often a good strategic option for a firm using an intermittent operation. Ans: True Solution: For intermittent operations with a large variety of items in low volume, outsourcing instead of vertical integration is often a better choice. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Degree of Vertical Integration Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 0.5 mins
105. The psychological benefits of the service package involve the sights, smells, and sounds of the experience. Ans: False Solution: The psychological benefits of the service package include the status, comfort, and wellbeing provided by the experience. Section Ref: Designing Services Sub Section Ref: The Service Package Level: Easy Bloom‘s: Comprehension Learning Objective 9: Understand issues of designing service operations. AACSB: Knowledge Time on Task: 0.5 mins
106. Triangle symbols are used in a process flowchart to represent decision points. Ans: True Solution: Triangles in a process flowchart represent decision points. Section Ref: Designing Processes Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 5: Understand how to use a process flowchart. AACSB: Knowledge Time on Task: 0.5 mins
Essay
107. Name a reason for using ERP and a reason it might be difficult to implement. Ans: Successful ERP projects improve coordination among an organization‘s resources while requiring substantial changes in workers‘ sense of control over their data and relationships with other departments. Section Ref: Technology Decisions Sub Section Ref: Information Technology Level: Easy Bloom‘s: Comprehension Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 3 mins
108. Name three computer applications that affect product design and process selection. Ans: Computer-aided design (CAD), computer-integrated manufacturing (CIM), and robotics (or numerically controlled machines). Section Ref: Technology Decisions Sub Section Ref: Automation, E-manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 8: Understand current technological advancements and how they impact process and product design. AACSB: Technology Time on Task: 2 mins
109. Define product design. Ans: Product design is the process of defining all of characteristics and features of a product. Section Ref: Product Design Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define product design and explain its strategic impact on the organization. AACSB: Knowledge Time on Task: 2 mins
110. Name some sources for ideas for new products. Ans: The ideas might from customers, competitors, R&D departments, suppliers, employees, product managers, or new technological developments. Section Ref: The Product Design Process Sub Section Ref: Idea Development Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 2 mins
111. In the product screening stage of new product development, what are some questions that may need to be explored by the operations function? By marketing? By finance? Ans: Operations: What are the production needs of the proposed new product and how do they match our existing resources? Will we need new facilities and equipment? Do we have the labor skills to make the product? Can the materials for production be readily obtained? Marketing: What is the potential size of the market for the proposed new product? How much effort will be needed to develop a market for the product and what is the long-term product potential? Finance: What is the proposed new product‘s financial potential, cost, and return on investment? Section Ref: The Product Design Process Sub Section Ref: Product Screening – Untitled introduction Level: Medium Bloom‘s: Analysis Learning Objective 2: Describe the steps used to develop a product design. AACSB: Analytic Time on Task: 4 mins
112. Describe what process flow analysis is. Ans: Process flow analysis a technique used for evaluating a process in terms of the sequence of steps from inputs to outputs with the goal of improving its design. Section Ref: Designing Processes Sub Section Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 5: Understand how to use a process flowchart. AACSB: Knowledge Time on Task: 2 mins
113. For what types of decisions is break-even analysis appropriate? Ans: Break-even analysis can be used to determine how much of a product must be sold to make a profit, to evaluate different processes or products, to decide whether it is better to make or buy a product, etc. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Easy Bloom‘s: Comprehension Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Knowledge Time on Task: 3 mins
114. What steps are included in the preliminary design and testing stage of product design? Ans: At this stage, design engineers translate general performance specifications into technical specifications. Prototypes are built and tested. ―Bugs‖ are worked out. Changes are made based on test results. Section Ref: The Product Design Process Sub Section Ref: Preliminary Design and Testing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 3 mins
115. What are the guidelines for design for manufacture? Ans: Use modular design, design parts for different products, minimize parts, simplify operations, and avoid tools. Section Ref: Factors Impacting Product Design Sub Section Ref: Design for Manufacture Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 2 mins
116. What are the characteristics of intermittent operations? Ans: Produce many different products with varying processing requirements; different products have different processing needs and there is no standard route that all products take through the facility. Resources are grouped by function and are labor intensive. Often there are skilled and semiskilled workers with a fair amount of discretion in performing their jobs. Workers need to be flexible and be able to perform different tasks depending on the processing needs of the product. They use general purpose equipment, and the volume of goods produced is directly tied to the number of customer orders. Section Ref: Process Selection Sub Section Ref: Types of Processes Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify different types of processes and explain their characteristics. AACSB: Knowledge Time on Task: 3 mins
117. What are the characteristics of repetitive operations? Ans: Produce one or a few standardized products in high volumes. Resources are organized in a line flow to efficiently accommodate production of the product. They are capital intensive and often rely on automation and technology to improve efficiency and increase output. They use specialized equipment, and the volume of goods produced is based on a forecast of future demands Section Ref: Process Selection Sub Section Ref: Types of Processes Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify different types of processes and explain their characteristics. AACSB: Knowledge Time on Task: 3 mins
118. Describe three different types of service designs. Ans: (1) Substitute technology for people—this provides product consistency and takes the guesswork away from employees; (2) Get the customer involved—this can speed delivery, reduce costs, and empower customers; (3) High customer attention approach—this customizes the service needs unique to each customer and has them be passive and pampered recipients of the service. Section Ref: Designing Services Sub Section Ref: Differing Service Designs Level: Easy Bloom‘s: Comprehension Learning Objective 9: Understand issues of designing service operations. AACSB: Knowledge Time on Task: 3 mins
119. Describe why marketing should be involved in the product design process. Ans: Marketing is impacted by product design issues because they determine the types of products that will be produced and affect marketing‘s ability to sell them. Marketing understands the types of product characteristics customers want and can provide operations with information on customer preferences, competition, and future trends. Section Ref: Product Design and Process Selection within OM Sub Section Ref: Product Design and Process Selection across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the steps used to develop a product design. AACSB: Knowledge Time on Task: 3 mins
120. Name the company described in Chapter 3 that hurt its business success by changing its operations type. Ans: Babcock & Wilcox is one example. The company was successful at producing fossil-fuel boilers, a standard product made via repetitive operation. Then it began managing the production of nuclear pressure vessels—an intermittent operation—as if it were a repetitive operation and focused primarily on cost. Consequently, the venture failed, and the company almost went out of businesses. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Product Design Decisions Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 3 mins.
121. Why is delivery time longer for make-to-order than assemble-to-order processes that deliver similar products? Ans: Processing time is part of delivery time for a make-to-order process but not for an assemble-to-order process. Section Ref: Linking Product Design and Process Selection Sub Section Ref: Product and Service Strategy Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 2 mins 122. Substituting technology for people has been argued to reduce what in the service delivery? Ans: Uncertainty of service delivery. Substituting technology for people automates the service and makes it more like manufacturing. It has been argued as one way to reduce the uncertainty of service delivery. Section Ref: Designing Services Sub Section: Differing Service Designs Level: Easy Bloom‘s: Comprehension Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Knowledge Time on Task: 2 mins
123. Why are services more complex to design than manufactured goods? Ans: Services produce intangible products produced with high levels of customer contact. Section Ref: Designing Services Sub Section: How Are Services Different from Manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 9: Understand issues of designing service operations. AACSB: Knowledge Time on Task: 2 mins
124. Name an operational consideration that a firm must take into consideration when designing a new product. Ans: They must take into consideration the type of processes already used in the company. The design of new products has to take into account the type of processes the company has; otherwise facilities may not be available to produce the new product design. Product design and process selection decisions are directly tied to each other. Section Ref: Product Design and Process Selection within OM: How It All Fits Together Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 7: Understand the link between product design and process selection. AACSB: Knowledge Time on Task: 2 mins
125. What is a process flowchart? Ans: A chart showing the sequence of steps in producing the product or service. Section Ref: Designing Processes Sub Section Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 5: Understand how to use a process flowchart. AACSB: Knowledge Time on Task: 2 mins
Problems
126. What is the break-even quantity if fixed cost = $100, variable cost = $7, and selling price = $9? Ans: 50 units. (Q = Fixed cost/(Price – Variable cost) = 100/(9 – 2) = 50 units. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Medium Bloom‘s: Application Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Analytic Time on Task: 2 mins
127. What is the break-even volume given a fixed cost of $100,000, a variable cost per unit of $30, and a selling price of $35? Ans: 20,000 units (QBE = F/(SP – VC) = $100,000/($35 – $30) = 20,000) Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Medium Bloom‘s: Application Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Analytic Time on Task: 2 mins
128. What is the break-even volume given a fixed cost of $15,000,000, a variable cost per unit of $2.30, and a selling price of $12.80? Ans: 1,428,571 units (QBE = F/(SP – VC) = $15,000,000/($12.80 – $2.30) = 1,428,571) Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Medium Bloom‘s: Application Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Analytic Time on Task: 2 mins
129. What is the break-even volume given insurance costs of $30,000, materials costs of $6 per unit, taxes of $10,000, labor costs of $34 per unit, and a selling price of $80? Ans: 1000 units (QBE = F/(SP – VC) = ($30,000 + $10,000)/($80 – ($34 + $6.00)) = 1,000) Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Medium Bloom‘s: Application Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Analytic Time on Task: 2 mins
130. If a firm has fixed costs of $250,000, a market-based selling price of $50 per unit, and it expects to sell 20,000 units, how low must its variable costs be to break even? Ans: $37.50 (VC = SP – F/QBE) = $50 – ($250,000/20,000) = $37.50/unit) Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Medium Bloom‘s: Application Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Analytic Time on Task: 2 mins
131. Blaster Radio Company is trying to decide whether or not to introduce a new model. If they introduce it, there will be additional fixed costs of $400,000 per year. The variable costs have been estimated to be $20 per radio. a) If Blaster sells the new radio model for $30 per radio, how many must they sell to break even? b) If Blaster sells 70,000 of the new radio model at the $30 price, what will the contribution to profit be? Ans: a) 40,000 radios (QBE = F/(SP – VC) = $400,000/($30 – $20) = 40,000) b) $300,000 (Profit = total revenue – total cost = SP*A - [F+VC*Q] = $30*70000 – [$400,000 + ($20*70000)] = $300,000) Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Medium Bloom‘s: Application Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Analytic Time on Task: 4 mins
132. Birdie Par owns a company that makes golf gloves. She is thinking about introducing a new glove, which would require an additional fixed cost of $20,000 per year. The variable costs for the new glove have been estimated to be $5 per glove. a) If she sells the new glove for $15, how many must she sell to break even? b) If she sells 3,000 gloves at the $15 price, what will the contribution to profit be? Ans: a) 2,000 gloves (QBE = F/(SP – VC) = $20,000/($15 – $5) = 2,000) b) $10,000 (Profit = total revenue – total cost = SP*A – [F + VC*Q] = $15*3000 – [$20,000 + ($5*3000)] = $10,000) Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Medium Bloom‘s: Application Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Analytic Time on Task: 4 mins
133. Bazooka Company is thinking about introducing a new type of color printer. If they introduce it, their factory will incur additional fixed costs of $37,000,000 per year. The variable costs will be $261 per printer. a) If Bazooka sells the new printer for $819, how many must they sell to break even? b) If Bazooka sells 70,000 of the new printer at the $819 price, what will the contribution to profit be? Ans: a) 66,308 printers (QBE = F/(SP – VC) = $37,000,000/($819 – $261) = 66,308 printers) b) $2,060,000 (Profit = total revenue – total cost = SP*A – (F + VC*Q) = $819*70,000 – ($37,000,000 + $261*70,000) = $2,060,000) Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Medium Bloom‘s: Application Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Analytic Time on Task: 4 mins
134. Sam Smear owns a manufacturing company that makes ball point pens. Currently he is trying to decide between two processes for making the pens. The first process will have a fixed cost of $200,000 per year and variable costs of $0.40 per pen. The second process will have a fixed cost of $250,000 per year and variable costs of $0.30 per pen. a) Identify which ranges of product volume are best for each process. b) If Sam makes 200,000 pens, which process provides a lower cost? Ans:
a) The point of indifference is 500,000 pens. The first process is better for volumes less than 500,000 pens because it has a lower fixed cost. The second process is better for volumes greater than 500,000 pens because it has a lower variable cost. (The indifference point Q = (F2 – F1)/( VC2 – VC1) = ($250,000 – $200,000)/($0.40 – $0.30) = 500,000) b) The first process with a lower fixed cost should be used, since 200,000 is less than the indifference point of 500,000. Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Medium Bloom‘s: Analysis Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Analytic Time on Task: 3 mins
135. If a firm has fixed costs of $200,000, variable costs of $100 per unit, and it hopes to sell 1,000 units, what selling price must it charge in order to break even? Ans: $300 (SP = F/ QBE + VC = $200,000/1000 + $100 = $300) Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Medium Bloom‘s: Application Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Analytic Time on Task: 2 mins
136. Languages, Inc. manufactures hand-held computers that translate between two languages. Based on their market research, they have developed computers for French/English, German/English, and Spanish/English. The process for making the computers will have fixed costs of $2,000,000 per year and variable costs of $50 per computer. The company believes that it can sell at least 40,000 computers per year. a) What should the price per computer be if the company wants to break even at a volume of 40,000 computers per year? b) If they sell 60,000 computers at a price of $90 per computer, what will the contribution to profit be? Ans: a) $100 (SP = F/ QBE + VC = $2,000,000/40000 + $50 = $100) b) $400,000 (Profit = total revenue – total cost = SP*A – [F + VC*Q] = $90*60,000 – [$2,000,000 + ($50*60,000)] = $400,000) Section Ref: The Product Design Process Sub Section Ref: Product Screening – Break-even analysis Level: Medium Bloom‘s: Application Learning Objective 3: Use break-even analysis as a tool in deciding between alternative products. AACSB: Analytic Time on Task: 4 mins 137. Frank‘s manufacturing firm has determined that the industry standard process velocity time is 15 seconds. Frank‘s OM engineer has determined that their process velocity time is 17 seconds with a throughput time of 136 seconds. If the throughput time cannot be changed, how much and by which direction does the value-added time need to change so the company can match the industry standard process velocity? Ans: The firm needs to increase the value-added time by 1.1 seconds to match the industry standard. Solution: Process Velocity = Throughput time/Value-added time and Value added time = Throughput time/process velocity. Value-added time (Firm) = 136/17 = 8 seconds. Value-added time (Industry standard) = 136/15 = 9.1 seconds. The firm needs to increase its value-added time by 1.1 seconds (i.e., 9.1 – 8 = 1.1) to match the industry standard. Section Ref: Process Performance Metrics Sub Section Ref: n/a Level: Medium Bloom‘s: Analysis Learning Objective 6: Understand how to use process performance metrics. AACSB: Analytic Time on Task: 3 mins
138. Tom‘s hazardous material movement company limits the number of hours an individual works to 8.5 a day. Each hazardous material handler product movement time has been stopwatch analyzed to take 240 seconds. What is the hazardous material handler utilization if they make 110 moves a day? Ans: 0.863 or 86.3% Solution: Utilization = time a resource used/time a resource available. Convert hours available to seconds available per day: 8.5 hrs/day*60 minutes/hr*60 seconds/minute = 30600 seconds/day. Utilization = (110*240) sec/30600 sec = 0.863 (86.3%) Section Ref: Process Performance Metrics Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 6: Understand how to use process performance metrics. AACSB: Analytic Time on Task: 2 mins
139. What is throughput time if process velocity = 5 and value-added time = 2? Ans: 10 Solution: Process velocity = Throughput time/Value-added time, so Throughput time = Process velocity*Value-added time = 2*5 = 10. Section Ref: Process Performance Metrics Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 6: Understand how to use process performance metrics. AACSB: Analytic Time on Task: 2 mins
140. What is input if productivity = 7 and output = 5? Ans: 0.71 (Productivity = Output/Input, so Input = Output/Productivity = 5/7 = 0.71) Section Ref: Process Performance Metrics Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 6: Understand how to use process performance metrics. AACSB: Analytic Time on Task: 1 min
141. How efficient was a process whose standard output = 27 while actual output = 24? Ans: Efficiency = Actual output/Standard output = 24/27 = 0.889 Section Ref: Process Performance Metrics Sub Section Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 6: Understand how to use process performance metrics. AACSB: Analytic Time on Task: 1 min
TestBank Chapter 4: Supply Chain Management CHAPTER
LO Section
Subsection
Basic Supply Chains
1, 2, 3, 80, 81, 104 Components of a Supply Chain for a Manufacturer A Supply Chain for a Service Organization The Bullwhip Effect The Bullwhip Effect: Causes of the Bullwhip Effect The Bullwhip Effect: Counteracting the Bullwhip Effect
Issues Affecting Supply Chain Management
4, 5, 68, 82, 83, 84, 85, 102, 103, 105, 138 13, 91 6, 7, 69, 86,
9, 10, 11, 88, 89, 106
8, 12, 87
108, E-commerce and Supply Chains Consumer Expectations and Competition Resulting from Ecommerce Globalization Infrastructure Issues Government Regulation and E-commerce Green Supply Chain Management
The Role of
Question #
14, 15, 16, 17, 48, 63, 64, 65, 90, 109, 128, 129
18, 47, 70, 107 19, 79 67, 92, 93, 110, 111, 131 130 20, 112 21, 31, 134
Purchasing Traditional Purchasing and E-purchasing Sourcing Decisions
71, 23, 24, 25, 26, 72, 94, 95, 96
Insourcing versus Outsourcing Decisions Developing Supplier Relationships How Many Suppliers? Developing Partnerships Developing Partnerships: Critical Factors in Successful Partnering Developing Partnerships: Benefits of Partnering Supplier Management Ethics The Role of Warehouses
27, 28, 29, 62, 73, 74, 75, 76, 115, 116, 117, 118, 119, 120, 121, 122, 123, 124, 125, 126, 127 22, 34, 132 30, 60, 61, 136 35, 36, 37 38, 39, 40, 41, 42, 43, 44, 133, 137 45, 46, 32, 33, 97, 135 51, 52, 59
The Role of Warehouses: Transportation Consolidation The Role of Warehouses: Product Mixing The Role of Warehouses: Services Crossdocking Radio Frequency Identification Technology (RFID) Third-Party Service Providers Implementing Supply Chain Management
53 49 77, 101 54, 55, 56, 57, 58, 98, 99, 113, 114
50
78 Strategies for Leveraging Supply Chain Management Supply Chain Performance Metrics
66 100
© John Wiley & Sons, Inc. or the author. All rights reserved. Instructors who are authorized users of this course are permitted to download these materials and use them in connection with the course. Except as permitted herein or by law, no part of these materials should be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise.
Multiple Choice 1. An organization‘s supply chain is facilitated by a) dedicated people. b) an information system. c) specific vendors. d) specific customers e) government regulations. Ans: b Solution: An organization‘s supply chain is facilitated by an information system. Section Ref: Basic Supply Chains Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
2. Which of the following typically represents the beginning of a supply chain? a) Wholesalers b) Retailers c) Manufacturers d) External suppliers e) Inspectors Ans: d Solution: At the beginning of the chain are the external suppliers who supply and transport raw materials and components to the manufacturers. Section Ref: Basic Supply Chains Sub Section Ref: Untitled introduction Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
3. Supply chain management is the vital business function that coordinates and manages the activities of the supply chain linking all of the following EXCEPT a) suppliers. b) transporters. c) human resource interviewers. d) internal departments. e) third-party companies. Ans: c Solution: Supply chain management (SCM) is the vital business function that coordinates and manages all the activities of the supply chain, linking suppliers, transporters, internal departments, third-party companies, and information systems. Section Ref: Basic Supply Chains Sub Section Ref: Untitled introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Analytic Time on Task: 1 min
4. Typically a manufacturer will have direct contact with which type of supplier? a) Tier one supplier b) Tier two supplier c) Tier three supplier d) Tier four supplier e) Tier five supplier Ans: a Solution: Only tier one suppliers supply materials or services directly to the process facility (internal function). Section Ref: Basic Supply Chains Sub Section Ref: Components of a Supply Chain for a Manufacturer – External Suppliers Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Analytic Time on Task: 1 min
5. Consider a packaged milk products supply chain. A lumber company provides wood to a paper mill, who supplies cardboard to a container manufacturer, who supplies containers to the milk products manufacturer. The lumber company is a) a tier one supplier. b) a tier two supplier. c) a tier three supplier. d) a tier four supplier. e) not in the supply chain. Ans: c Solution: The lumber company provides wood to the paper mill and is a tier three supplier. The paper mill is a tier two supplier. The container manufacturer is a tier one supplier who supplies containers directly to the milk products manufacturer. Section Ref: Basic Supply Chains Sub Section Ref: Components of a Supply Chain for a Manufacturer – External Suppliers Level: Medium Bloom‘s: Application Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Analytic Time on Task: 1.5 mins
6. The typical results of the bullwhip effect include all of the following EXCEPT a) absenteeism. b) lost revenues. c) ineffective transportation use. d) poor customer service levels. e) misused manufacturing capacity. Ans: a Solution: The results are excessive inventory investment, poor customer service levels, ineffective transportation use, misused manufacturing capacity, and lost revenues. Section Ref: Basic Supply Chains Sub Section Ref: The Bullwhip Effect – Untitled introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
7. Which term refers to inaccurate or distorted demand information created in the supply chain? a) Battle axe effect b) Reverse effect c) Bullwhip effect d) Lasso effect e) Whirlpool effect Ans: c Solution: Bullwhip effect refers to inaccurate or distorted demand information created in the supply chain. Section Ref: Basic Supply Chains Sub Section Ref: The Bullwhip Effect – Untitled introduction Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
8. Which of the following is NOT a remedy for the bullwhip effect? a) Eliminate gaming. b) Stabilize prices. c) Base forecasts on demand coming from the immediate downstream customer. d) Eliminate order batching. e) Make POS information available to all levels of the supply chain. Ans: c Solution: The four ways of counteracting the bullwhip effect include (1) making the demand information from the final-seller level available to all levels of the supply chain, (2) eliminating order batching, (3) stabilizing prices, and (4) eliminating gaming. Section Ref: Basic Supply Chains Sub Section Ref: The Bullwhip Effect – Counteracting the Bullwhip Effect Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
9. All of the following are major causes of the bullwhip effect EXCEPT a) demand forecast updating. b) order batching. c) price fluctuations. d) the business cycle. e) rationing and shortage gaming. Ans: d Solution: The causes of the bullwhip effect are demand forecasting updating, order batching, price fluctuations, and rationing and shortage gaming. Section Ref: Basic Supply Chains Sub Section Ref: The Bullwhip Effect – Causes of the Bullwhip Effect Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
10. Price fluctuations follow all but which of the following marketing promotions? a) Advertising b) Price discounts c) Quantity discounts d) Coupons e) Rebates Ans: a Solution: Price fluctuations follow special promotions like price discounts, quantity discounts, coupons, and rebates. Advertising is not a special promotion. Section Ref: Basic Supply Chains Sub Section Ref: The Bullwhip Effect – Causes of the Bullwhip Effect Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
11. When do rationing and shortage gaming occur? a) When supply exceeds demand b) When demand exceeds supply c) When government contracts are awarded d) When transportation workers go on strike e) When marginal revenue exceeds marginal cost Ans: b Solution: Rationing and shortage gaming result when demand exceeds supply and products are rationed to members of the supply chain. Section Ref: Basic Supply Chains Sub Section Ref: The Bullwhip Effect – Causes of the Bullwhip Effect Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
12. Collection of point-of-sale (POS) information is MOST useful for which bullwhip effect remedy? a) Allocating units based on past demand b) Stabilizing prices c) Filling orders based on a set percentage d) Eliminating order batching e) Sharing actual demand information Ans: e Solution: One way of counteracting the bullwhip effect is information sharing, that is, making the information from the final-seller level available to all levels of the supply chain. Companies can do so by collecting POS information. Section Ref: Basic Supply Chain Sub Section Ref: The Bullwhip Effect – Counteracting the Bullwhip Effect Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
13. A supply chain for a service organization is a) similar to that for manufacturing organizations. b) very unique. c) not a consideration when planning a service organization. d) universally government regulated. Ans: a Solution: A supply chain for a service organization is similar to that for manufacturing organizations since external suppliers, internal operations, and external distributors can be needed. Section Ref: Basic Supply Chains Sub Section Ref: A Supply Chain for a Service Organization – Untitled introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
14. What is a network internal to an organization called? a) Supernet b) Internet c) Intranet d) Supranet e) Internalnet Ans: c Solution: Intranets are networks internal to an organization. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: E-commerce and Supply Chains Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1 min
15. What is an extension of an intranet to include suppliers and customers called? a) Supply chain net b) Supernet c) Supranet d) Extranet e) Intranet++ Ans: d Solution: Extranets are the intranets that are linked to the Internet and that are open to the members of the organization as well as to suppliers and customers. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: E-commerce and Supply Chains Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1 min
16. Net marketplaces are designed to a) bring together only internal resources. b) bring together limited external resources. c) bring suppliers together with a significant number of purchasing firms. d) limit the number of daily transactions. e) limit cyber security risks. Ans: c Solution: A net marketplace is designed to bring hundreds or thousands of suppliers (each with electronic catalog) together with a significant number of purchasing firms in a single Internetbased environment to conduct trade. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: E-commerce and Supply Chains Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1 min
17. Which of the following is open to the most users? a) An intranet b) An extranet c) A LAN d) A WAN e) The Internet Ans: e Solution: The Internet is wide open, the intranet is open to members of an organization, and the extranet is open to the members of the organization as well as to suppliers and customers. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: E-commerce and Supply Chains Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1 min
18. Online retailing, or B2C, has shifted a) the cost of doing business. b) the power from the suppliers to the consumers. c) the way the Internet works. d) internal corporate power to the IT department. e) corporate funding levels to the IT department. Ans: b Solution: Online retailing, or B2C e-commerce, has shifted the power from the suppliers to the consumers. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Consumer Expectations and Competition Resulting from E-commerce Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1 min
19. Global supply chains with ocean shipping share all of the following common logistical characteristics EXCEPT a) goods arrive in larger quantities. b) greater break-bulk activity is required. c) crossdocking is required. d) typically have higher inventories. e) longer port times occur. Ans: c Solution: As supply chains expand globally, they share some common logistical characteristics. The examples with ocean shipping include: very large quantity arrivals, greater break-bulk activity needed, higher inventory levels, and longer port times. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Globalization Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Knowledge Time on Task: 1 min
20. A recent change in supply chain management has been the a) need for faster computers. b) green supply chain management requirement. c) requirement for advanced educational degrees. d) increased government regulation. e) need for smaller ocean transportation methods. Ans: b Solution: A recent change in supply chain management has been the green supply chain management requirement. A number of organizations have introduced ―greening‖ requirements for both their suppliers and distributors. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Green Supply Chain Management Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Knowledge Time on Task: 1 min
21. Purchasing is typically responsible for a) initiating purchasing requests. b) physically inventorying all received materials. c) developing the engineering specifications. d) analyzing the make-buy decision. e) monitoring supplier performance. Ans: e Solution: Purchasing is typically responsible for selecting suppliers, negotiating and administering long-term contracts, monitoring supplier performance, placing orders to suppliers, developing a responsive supplier base, and maintaining good supplier relations. Section Ref: The Role of Purchasing Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the role of purchasing. AACSB: Time on Task: 1 min
22. The following are main considerations while selecting a supplier EXCEPT a) price. b) quality. c) consistency with the company‘s mission. d) on-time delivery. e) product mixing. Ans: e Solution: Several studies report that the top three criteria for selecting suppliers are price, quality, and on-time delivery. Even more important is that the choice of suppliers be consistent with a company‘s mission. Product mixing is a value-added service for customers. Section Ref: Sourcing Decisions Sub Section Ref: Developing Supplier Relationships Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1.5 mins
23. What term refers to owning or controlling sources of raw materials and components? a) Backward integration b) Horizontal integration c) Encapsulating integration d) Forward integration e) Subsuming integration Ans: a Solution: Backward integration is a company‘s acquisition or control of sources of raw materials and component parts that were previously external suppliers in the supply chain. Section Ref: Sourcing Decisions Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
24. What term refers to processes or activities that are completed in-house? a) Ownsource b) Insource c) Homesource d) Outsource e) Supplysource Ans: b Solution: Insource refers to processes or activities that are completed in-house. Section Ref: Sourcing Decisions Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
25. What term refers to processes or activities that are completed by suppliers? a) Vendorsource b) Insource c) Homesource d) Outsource e) Supplysource Ans: d Solution: Outsource refers to processes or activities that are completed by suppliers. Section Ref: Sourcing Decisions Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
26. A higher level of vertical integration implies a) more outsourcing and more insourcing. b) less outsourcing and less insourcing. c) more outsourcing and less insourcing. d) no changes in the levels of outsourcing and insourcing. e) less outsourcing and more insourcing. Ans: e Solution: The greater the vertical integration, the lower is the level of outsourcing (and the higher is the level of insourcing). Section Ref: Sourcing Decisions Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
27. The quantity that equates the cost of making a product to the cost of buying the product is generally called what? a) Neutrality point b) Point of equality c) Indifference point d) Point of optimality e) No such point can exist. Ans: c Solution: Indifference point refers to the quantity level at which total making costs are equal to the total buying costs. That is, how many units we must buy or produce when the total costs are equal. Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
28. According to the financial calculations of the make-or-buy decision, if we need fewer units than the indifference point, then which option should we choose? a) Make b) Buy c) The option with the lower variable costs d) The option with the lower fixed and higher variable costs e) It is not profitable to choose either option. Ans: d Solution: If we need less than this quantity (indifference point), we choose the alternative with the lower fixed cost and the higher variable cost. Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
29. To perform the financial calculations of the make-or-buy decision, which costs are needed? a) Fixed and variable b) Fixed and average c) Variable and average d) Variable only e) Average only Ans: a Solution: Both fixed and variable costs are needed to compute a total cost of making or buying. Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
30. Which of the following arguments is in favor of a single supplier? a) Provides a greater flexibility of volume b) Eliminates a supplier‘s dependence on the purchaser c) Probability of assured supply is better d) Deliveries can be scheduled more easily e) Allows for testing of new suppliers without jeopardizing the flow of materials Ans: d Solution: ―Deliveries can be scheduled more easily‖ is an argument in favor of one supplier. All other arguments are in favor of multiple suppliers. Section Ref: Sourcing Decisions Sub Section ref: How Many Suppliers? – Table 4.6 Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
31. In general, what comprises the bulk of the cost of goods sold? a) Overhead b) Materials c) Electricity d) Depreciation e) Labor Ans: b Solution: Material costs may represent at least 50–60 percent of the cost of goods sold. Section Ref: The Role of Purchasing Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the role of purchasing. AACSB: Knowledge Time on Task: 1 min
32. A constant concern within purchasing departments is the issue of ethics in managing a) customers. b) websites. c) inventory. d) suppliers. e) entry-level employees. Ans: d Solution: A constant concern within purchasing departments is the issue of ethics in managing suppliers. Section Ref: Sourcing Decisions Sub Section Ref: Supplier Management Ethics Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Ethics Time on Task: 1 min
33. What are the Institute for Supply Management‘s principles of ethical supply chain management conduct? a) Objectivity always, loyalty to your organization, and faith in your profession b) Objectivity always, justice to those with whom you deal, and faith in your profession c) Objectivity always, justice to those with whom you deal, and loyalty to your organization d) Objectivity always, know the law, and justice to those with whom you deal e) Integrity in your decisions actions, value for your employer, and loyalty to your profession Ans: e Solution: The principles are: integrity in your decisions actions, value for your employer, and loyalty to your profession. These principles are the foundation for ISM standards of supply chain management conduct. Section Ref: Sourcing Decisions Sub Section Ref: Supplier Management Ethics – Table 4.9 Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Ethics Time on Task: 2 mins
34. According to several studies, what are the three most important criteria for selecting suppliers? a) Price, quality, fast delivery b) Quality, fast delivery, on-time delivery c) Price, flexibility, on-time delivery d) Quality, flexibility, fast delivery e) Price, quality, on-time delivery Ans: e Solution: Several studies report that the top three criteria for selecting suppliers are price, quality, and on-time delivery. Section Ref: Sourcing Decisions Sub Section Ref: Developing Supplier Relationships Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
35. What is the common term for a process of developing a long-term relationship with a supplier based on mutual trust, shared vision, shared information, and shared risks? a) Marrying b) Cohabitating c) Sharing d) Partnering e) Diversifying Ans: d Solution: Partnering refers to the process of developing a long-term relationship with a supplier based on mutual trust, shared vision, shared information, and shared risks. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Untitled introduction Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
36. Going beyond a basic partnership, an expanded partnership between a firm and its supplier implies a) mutual respect. b) honesty. c) trust. d) open and frequent communications. e) a commitment to helping each other succeed. Ans: e Solution: Expanded partnerships are reserved for a few key suppliers and expanded partners must be committed to helping each other succeed. A basic partnership is built on mutual respect, honesty, trust, open and frequent communications, and a shared understanding of each other‘s role in helping the supply chain achieve its objectives. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Untitled introduction Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
37. According to the textbook, the two kinds of partnerships are basic and a) expanded. b) enhanced. c) enlarged. d) elaborated. e) evolved. Ans: a Solution: The two kinds of partnerships are basic and expanded. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Untitled introduction Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
38. What does the textbook define as the three MOST critical factors in successful partnering? a) Impact, mission, vision b) Impact, intimacy, vision c) Contracting, mission, vision d) Contracting, intimacy, mission e) Contracting, impact, intimacy Ans: b Solution: Impact, intimacy, and vision are critical factors in successful partnering. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Critical Factors in Successful Partnering Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
39. What term refers to attaining levels of productivity and competitiveness that are NOT possible through normal supplier relationships? a) Intimacy b) Vision c) Impact d) Power e) Collusion Ans: c Solution: Impact means attaining levels of productivity and competiveness that not are possible through normal supplier relationships. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Critical Factors in Successful Partnering Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
40. What term refers to the working relationship between partners? a) Impact b) Vision c) Familiarity d) Intimacy e) Proximity Ans: d Solution: Intimacy means the working relationship between partners. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Critical Factors in Successful Partnering Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
41. What term refers to the mission or objectives of a partnership? a) Impact b) Intimacy c) Dream d) Conception e) Vision Ans: e Solution: Vision means the mission or objectives of the partnership. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Critical Factors in Successful Partnering. Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
42. What are the three sources of impact? a) Reduction of duplication and waste, leveraging core competence, and creating new opportunities b) Providing quantity discounts, reducing waste, and creating new opportunities c) Creating detailed contracts, reducing waste, and creating new opportunities d) Creating detailed contracts, leveraging core competence, and reducing waste e) Creating detailed contracts, leveraging core competence, and creating new opportunities Ans: a Solution: Studies suggest that the three sources of impact are reduction of duplication and waste, leveraging core competence, and creating new opportunities. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Critical Factors in Successful Partnering (Impact) Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 2 mins
43. Leveraging core competence is about sharing a) workers. b) knowledge. c) machines. d) expenses. e) financial hedges. Ans: b Solution: Leveraging core competence is about sharing knowledge. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Critical Factors in Successful Partnering (Impact) Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
44. All of the following are characteristics of partnership relations EXCEPT which? a) Have a long-term orientation b) Are strategic in nature c) Are ―arms-length‖ in nature d) Share a common vision e) Share short- and long-term plans Ans: c Solution: Characteristics of partnership relations include: have a long-term orientation, are strategic in nature, share a common vision, and share short- and long-term plans. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Critical Factors in Successful Partnering (Vision) Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
45. What does ESI stand for? a) Easy supplier integration b) Early stage initiation c) Every supplier‘s important d) Early supplier involvement e) Engaged supply initiative Ans: d Solution: ESI stands for early supplier involvement. It‘s a natural result of partnering relations and is one way to create impact. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Benefits of Partnering Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
46. Early supplier involvement refers to the involvement of critical suppliers in a) strategic planning. b) assembly line design. c) speedy delivery planning. d) selection of new suppliers. e) new product design. Ans: e Solution: In ESI, critical suppliers become part of a cross-functional, new-product design team. They provide technical expertise in the initial phases of product design. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Benefits of Partnering Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
47. Online retailing has shifted the power from the suppliers to a) wholesalers. b) manufacturers. c) distributors. d) retailers. e) consumers. Ans: e Solution: Online retailing, or business-to-consumer e-commerce, has shifted the power from the suppliers to the consumers. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Consumer Expectations and Competition Resulting from E-commerce Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Knowledge Time on Task: 1 min
48. What does EDI stand for? a) Easy data interchange b) Electronic door interface c) Electronic detachable interface d) Elementary data integration e) Electronic data interchange Ans: e Solution: EDI stands for electronic data interchange and is a form of computer-to-computer communications that enables sharing business documents. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: E-commerce and Supply Chains Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1 min
49. Some warehouses provide product mixing. This is referred to as a) reduced value-added service for customers. b) value-added service for customers. c) mix-and-match capability. d) correcting earlier mistakes in shipping. e) storage warehouse functions. Ans: b Solution: Product mixing is a value-added service for customers. With product mixing, the customer places an order to the warehouse for a variety of products. The warehouse groups the items together and ships the mixture of items directly to the customer. Section Ref: The Role of Warehouses Sub Section Ref: Product Mixing – Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 1 min
50. Bebop Bikes is a company known for its high-quality bicycles and personalized service. After beginning Internet operations, Bebop Bikes found that it was not well prepared to handle the overwhelming logistic issues. It then outsourced the delivery and return of the products to FedEx. In this example, FedEx is considered as a(n) a) basic partner. b) expanded partner. c) external distributor. d) external supplier. e) third-party service provider. Ans: e Solution: A third-party service provider is an independent contractor who renders services to the company; it‘s not a supplier or a distributor to the company. Section Ref: The Role of Warehouses Sub Section Ref: Third-Party Service Providers Level: Medium Bloom‘s: Application Learning Objective 5: Describe the role of warehousing. AACSB: Analytic Time on Task: 2 mins
51. What type of warehouse is used for long-term storage? a) Customized b) Strategic c) General d) Distribution e) Tactical Ans: c Solution: A general warehouse is used for storing goods for long periods with minimal handling. Section Ref: The Role of Warehouses Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 1 min
52. What type of warehouse is used for short-term storage, consolidation, and product mixing? a) Customized b) Strategic c) General d) Distribution e) Tactical Ans: d Solution: A distribution warehouse is used for short-term storage, consolidation, and product mixing. Section Ref: The Role of Warehouses Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 1 min
53. What does TL stand for? a) Transportation lead time b) Transportation logistics c) Trucking line d) Trucking life e) Truckload (quantity) Ans: e Solution: TL stands for truckload. Less-than-truckload (LTL) quantities are consolidated into TL quantities for lower transportation costs. Section Ref: The Role of Warehouses Sub Section Ref: Transportation Consolidation – Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 1 min
54. What is the process whereby shipments are transferred directly from inbound trailers to outbound trailers? a) Crossdocking b) Directdocking c) Nodocking d) Simuldocking e) Transferdocking Ans: a Solution: Crossdocking refers to the process whereby shipments are transferred directly from inbound trailers to outbound trailers without any storage in between. Section Ref: The Role of Warehouses Sub Section Ref: Crossdocking – Untitled introduction Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 1 min
55. Crossdocking eliminates the a) receiving and shipping functions of a distribution warehouse while still performing its storage and order-picking functions. b) receiving and storage functions of a distribution warehouse while still performing its shipping and order-picking functions. c) storage and shipping functions of a distribution warehouse while still performing its orderpicking and receiving functions. d) receiving and order-picking functions of a distribution warehouse while still performing its storage and shipping functions. e) storage and order-picking functions of a distribution warehouse while still performing its receiving and shipping functions. Ans: e Solution: Crossdocking eliminates the storage and order-picking functions of a distribution warehouse while still performing its receiving and shipping functions. Section Ref: The Role of Warehouses Sub Section Ref: Crossdocking – Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 2 mins
56. Crossdocking allows the retailer to replace ______________ with information and coordination. a) trucks b) buildings c) inventory d) truck loaders e) conveyor belts Ans: c Solution: One of the two major advantages of crossdocking is that it allows the retailer to reduce inventory holding costs by replacing inventory with information and coordination. Section Ref: The Role of Warehouses Sub Section Ref: Crossdocking – Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 1 min
57. _________________ crossdocking is the receiving and consolidating of inbound supplies to support just-in-time manufacturing. a) Warehouse b) Manufacturing c) Distributor d) Transportation e) Retail Ans: b Solution: Manufacturing crossdocking is the receiving and consolidating of inbound supplies to support just-in-time manufacturing. Section Ref: The Role of Warehouses Sub Section Ref: Crossdocking – Types of Crossdocking Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 1 min
58. _________________ crossdocking is the consolidating of shipments from LTL and small package industries to gain economies of scale. a) Warehouse b) Manufacturing c) Distributor d) Transportation e) Retail Ans: d Solution: Transportation crossdocking is the consolidating of shipments from LTL and smallpackage industries to gain economies of scale. Section Ref: The Role of Warehouses Sub Section Ref: Crossdocking – Types of crossdocking Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 1 min
59. Benetton is well known for the practice of assembling all white sweaters and waiting to dye them much closer to the time of sale. This is an example of a) lack of innovation. b) postponement. c) fractionalization. d) partitioning. e) genericness. Ans: b Solution: Postponement refers to a strategy that shifts production differentiation closer to the consumer by postponing final configuration. Section Ref: The Role of Warehouses Sub Section Ref: Untitled Introduction – Services Level: Medium Bloom‘s: Application Learning Objective 5: Describe the role of warehousing. AACSB: Analytic Time on Task: 1 min
60. Which of the following is an argument in favor of having multiple suppliers? a) Quantity discounts may be achieved. b) Partnering becomes more possible. c) Consistency of input materials is achieved. d) Probability of assured supply is better. e) Deliveries can be scheduled more easily. Ans: d Solution: ―Probability of assured supply is better‖ is an argument in favor of multiple suppliers. Section Ref: Sourcing Decisions Sub Section Ref: How Many Suppliers? Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1.5 mins
61. Which of the following is an argument in favor of having a single supplier? a) The just-in-time philosophy can be better utilized. b) Supplier capacity is less important. c) Volume flexibility is obtained. d) Risks may be spread. e) New suppliers may more easily be tested. Ans: a Solution: ―The just-in-time philosophy can be better utilized‖ is an argument in favor of single supplier. Section Ref: Sourcing Decisions Sub Section Ref: How Many Suppliers? Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1.5 mins
62. Insourcing incurs an annual fixed cost of $500,000 and a variable cost of $60 per unit. Outsourcing incurs an annual fixed cost of $750,000 and a variable cost of $20 per unit. What is the indifference point between the two alternatives? a) 0 units b) 6250 units c) 6,250 units d) 40 units e) 12,500 units Ans: c Solution: FCBuy + (VCBuy*Q) = FCMake + (VCMake*Q), $750,000 + ($20Q) = $500,000 + ($60Q), Q = 250,000/40 = 6,250 Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Analysis Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 2 mins
63. What is the name of the electronic marketplace for the auto industry? a) Carnet b) Autoexchange c) Covisint d) Citroen e) Motorint Ans: c Solution: Covisint (www.covisint.com) is an example of a successful net marketplace. It was started in 1999 by a consortium of several auto manufacturers (including GM, Ford Motor, Daimler Chrysler, Nissan, and Renault) with the purpose of addressing escalating costs and gross inefficiencies within the auto industry. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: E-commerce and Supply Chains Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1 min 64. Which of the following is a ―buyer-side,‖ typically industry-specific solution? a) Automated order entry systems b) Electronic data interchange c) Electronic storefronts d) Net marketplaces e) Advertising revenue model Ans: b Solution: Electronic data interchange (EDI) is a form of computer-to-computer communications that enables sharing business documents. EDI systems are designed to reduce the procurement costs for the buyer and generally serve a specific industry. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: E-commerce and Supply Chains Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1 min
65. Which B2C model does MyPoints.com utilize? a) Advertising revenue model b) Subscription revenue model c) Transaction fee model d) Sales revenue model e) Affiliate revenue model Ans: e Solution: In the affiliate revenue model, companies receive a referral fee for directing business to an affiliate. MyPoints.com receives money for connecting companies with potential customers by offering special deals. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: E-commerce and Supply Chains Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1.5 mins
66. Companies want a supply chain that makes it possible to manage a) all suppliers‘ development costs. b) and adapt to all of the business dynamics affecting the company. c) distribution display. d) distribution outlet retail prices. e) customer demands. Ans: b Solution: Companies want a supply chain that makes it possible to manage and adapt to all of the business dynamics affecting the company. Section Ref: Implementing Supply Chain Management Sub Section Ref: Strategies for Leveraging Supply Chain Management Level: Easy Bloom‘s: Comprehension Learning Objective 6: Describe how supply chain management is implemented. AACSB: Knowledge Time on Task: 1 min
67. Supply chain velocity refers to how fast a) the transportation vendor is. b) the company pays the supply chain vendors. c) the purchasing department responds to a request. d) a product moves through a pipeline from the manufacturer to the customer. e) the warehouse is able to crossdock a shipment. Ans: d Solution: Supply chain velocity refers to the speed at which a product moves through a pipeline from the manufacturer to the customer. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Infrastructure Issues Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1.5 mins
68. Which of the following is responsible for arranging the method of shipment for both incoming and outgoing products or material? a) TQM b) Employee management c) Distribution management d) Traffic management e) Project management Ans: d Solution: Traffic management is the selection and monitoring of external carriers or internal fleets of carriers. It is responsible for arranging the methods of shipment for both incoming and outgoing products/materials. Section Ref: Basic Supply Chains Sub Section Ref: Components of a Supply Chain for a Manufacturer – External Distributors Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
69. The table below shows part of the supply chain for a manufacturer. Which of the four combinations of demand forecast updating and order replenishing best describes the phenomenon of the bullwhip effect? A B Updated Orders Updated Orders demand placed demand placed Retailer 100 100 100 150 Wholesaler 100 100 150 150 Distributor 100 100 150 150 Manufacturer 100 100 150 200
C Updated Orders demand placed 180 200 150 180 110 150 100 110
D Updated Orders demand placed 100 110 110 150 150 180 180 200
a) A b) B c) C d) D Ans: d Shuffle: No Solution: The bullwhip effect refers to the phenomenon of variability magnification as orders move from the customer (retailer) to the manufacturer in the supply chain, as shown in D. Choice C reverses the direction of variability magnification; both A and B are pretty much fixed order quantities with no oscillations. Section Ref: Basic Supply Chains Sub Section Ref: The Bullwhip Effect – Untitled introduction Level: Medium Bloom‘s: Application Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Analytic Time on Task: 1 min
70. Shape Tech is a computer technology company. It develops and sells personal computers and related products and services. The company warehouses most of the standard components needed for its computers near an assembly plant. A customized assemble-to-order computer can be en route to the customer within two business days. The company uses this strategy to differentiate itself with a) no tier one suppliers. b) short lead times. c) short product life cycle. d) line balancing. e) state-of-the-art quality design. Ans: b Solution: Shape Tech differentiates itself with short lead time, achieved by warehousing the standard components near an assembly facility. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Consumer Expectations and Competition Resulting from E-commerce Level: Medium Bloom‘s: Application Learning Objective 2: Explain issues affecting supply chain management. AACSB: Analytic Time on Task: 1 min
71. A state university has recently streamlined its process of hardware and software purchasing. All IT-related requests must now be placed online in one place, the IRT Support Portal. The requests are then get routed to the parties involved in order, and the Purchase Office coordinates all purchases to ensure the orders are being tracked appropriately. The expected benefits for the university from using this e-purchasing system include all of the following EXCEPT a) faster payment. b) less data entry. c) reduced paperwork. d) fewer incorrect shipments. e) reduced order processing costs. Ans: a Solution: Faster payment is a benefit for suppliers engaged in an e-purchasing environment. Section Ref: The Role of Purchasing Sub Section Ref: Traditional Purchasing and E-purchasing Level: Medium Bloom‘s: Application Learning Objective 3: Explain the role of purchasing. AACSB: Analytic Time on Task: 1 min
72. A chocolate company, Choco Land, bought a leading hazelnut processing company to aid in producing its popular spread. This acquisition is an example of a) forward integration. b) backward integration. c) balanced integration. d) outsourcing. e) partnering. Ans: b Solution: The company acquired a key supplier (backward integration), rather than performing its own distribution (forward integration). The other three answers do not apply: balanced integration refers to an end-to-end strategy that incorporates multiple members in the supply chain under one corporate umbrella; outsourcing transfers some of the traditional internal activities to outsiders; and partnering indicates a long-term relationship with a supplier. Section Ref: Sourcing Decisions Sub Section Ref: Untitled Introduction Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 1 min 73. Marisol‘s is a Spain-based apparel retailer that specializes in fast fashion. While most of its competitors outsource all production to low-cost suppliers, mainly in Asia, Marisol‘s manufactures its most fashionable items at a dozen company-owned factories in Spain and in some proximity countries. Which of the following is most likely NOT one of the company‘s goals in making this insourcing decision? a) Maintain the company‘s core competencies. b) React to new fashion trends quickly. c) Increase the overall flexibility to meet changing demand. d) Free management to focus on its primary business. e) Obtain desired product quality. Ans: d Solution: Outsourcing frees management to focus on its primary business. Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 1 min
74. Saber Electronics has been making components for its navigation system for years. The company is currently in the process of deciding whether it should purchase the components from others. The costs of manufacturing in-house include: direct labor $1.5 per unit, material $2 per unit, variable overhead $1 per unit, and fixed cost $15,000 per year. One supplier offers a price of $5.5 per unit, but it will also charge a shipping cost of $0.5 per unit. What is the indifference point between making and buying the components? a) $10,000 b) 10,000 units c) $15,000 d) 15,000 units Ans: b Solution: Q = (FCMAKE – FCBUY) / (VCBUY – VCMAKE) = (15,000 – 0) / [(5.5 + 0.5) – (1.5 + 2 + 1)] = 10,000 units. The indifference point is measured in units (quantity), not in dollars. Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 2 mins
75. Saber Electronics has been making components for its navigation systems for years. The company is currently in the process of deciding whether it should purchase the components from others. Inhouse production includes a fixed annual cost of $15,000 and a variable cost of $4.5 per unit (including labor, material, and overhead). One supplier has agreed to offer a unit cost of $5.5, but it will also charge a shipping cost of $0.5 per unit. What is the indifference point between making and buying the components and over what demand range is each option best? a) 10,000 units; Buy if demand < 10,000 and Make if demand >10,000 b) 10,000 units; Buy if demand > 10,000 and Make if demand < 10,000 c) 15,000 units; Buy if demand < 15,000 and Make if demand > 15,000 d) 15,000 units; Buy if demand > 15,000 and Make if demand < 15,000 Ans: b Solution: Q = (FCMAKE – FCBUY) / (VCBUY – VCMAKE) = (15,000 – 0) / [(5.5 + 0.5) – 4.5] = 10,000 units. Buying will be cheaper if demand is lower than 10,000 units, since it has lower fixed cost (actually none in this problem). When demand exceeds 10,000 units, making will be cheaper, since it has lower variable cost. Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 2 mins
76. Norbert and Sons is a family-owned furniture company. It is currently in the process of deciding if it should outsource all its deliveries. Insourcing incurs a fixed monthly cost of $1,500 and a variable cost of $35 per delivery. A local logistics company is willing to provide the service at a fixed annual fee of $10,000 plus $60 per delivery. At what demand level does it make sense economically for Norbert and Sons to outsource its deliveries? a) When number of deliveries > 320 b) When number of deliveries < 320 c) When number of deliveries < 340 d) When number of deliveries > 340 Ans: b Solution: The indifference point = Q = (FCI – FCO) / (VCI – VCO) = (1,500 * 12 – 10,000) / (60 – 35) = 320 deliveries. Outsourcing is cheaper if the number of deliveries is less than 320, since it has lower fixed cost. Insourcing would be a better choice if number of deliveries is more than 320, since it has lower variable cost. Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 2 mins
77. A furniture manufacturer has some of its products left unstained until receipt of a customer order. The stain is then applied and the customer receives a custom product in minimal time. This kind of business practice is called a) product mixing. b) postponement. c) channel assembly. d) timely customization. e) forward integration. Ans: b Solution: Postponement is a strategy that shifts production differentiation closer to the consumer by postponing final configuration until receipt of customer orders. Section Ref: The Role of Warehouses Sub Section Ref: Untitled Introduction – Services Level: Medium Bloom‘s: Application Learning Objective 5: Describe the role of warehousing. AACSB: Analytic Time on Task: 1 min
78. Pop Soda Co. is a large beverage bottler. It requires its tier one suppliers to gain certification to several standards, including ISO 9001 (quality) and ISO 14001 (environment). These requirements are a) directed by the U.S. government. b) unpredictable external events. c) the results of e-commerce. d) predictable external factors. e) controllable internal factors. Ans: d Solution: Predictable external factors include government regulations, mandates from trading partners, and environmental requirements. Section Ref: Implementing Supply Chain Management Sub Section Ref: Untitled Introduction Level: Medium Bloom‘s: Application Learning Objective 6: Describe how supply chain management implemented. AACSB: Analytic Time on Task: 1 min
79. Growth in shipments from ______ to the United States has increased particularly quickly in recent years. a. Asia b. South America c. Africa d. Australia e. Europe Ans: a Solution: Ocean carriers have predicted that the volume of goods shipped from Asia to the United States will continue to have double-digit annual increases. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Globalization Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Time on Task: 1 min
True/False 80. Supply chain management provides the company with a sustainable, competitive advantage. Ans: True Solution: A prime example of operations management (OM), supply chain management provides the company with sustainable, competitive advantages, such as quick response time, low cost, state-of-the-art quality design, or operational flexibility. Section Ref: Basic Supply Chains Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
81. Manufacturers typically represent the beginning of a supply chain. Ans: False Solution: At the beginning of the chain are the external suppliers who supply and transport raw materials and components to the manufacturers. Section Ref: Basic Supply Chains Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
82. A tier one supplier is always more important than a tier two supplier. Ans: False Solution: Supply chains are a series of linked suppliers and customers in which each customer is a supplier to another part of the chain until the product is delivered to the final customer. Suppliers at different tier levels are all important. Section Ref: Basic Supply Chains Sub Section Ref: Components of a Supply Chain for a Manufacturer Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
83. The tier one, tier two, and tier three supplier designations are based upon whom the suppliers are providing materials or services to. Ans: True Solution: Tier one suppliers supply materials or services directly to the processing facility, whereas tier two suppliers directly supply tier one suppliers and tier three suppliers directly supply tier two suppliers. Section Ref: Basic Supply Chains Sub Section Ref: Components of a Supply Chain for a Manufacturer – External Suppliers Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min 84. Like ―ABC inventory analysis,‖ the tier one, tier two, and tier three supplier designations are based upon the annual level of purchases made with the suppliers. Ans: False Solution: The tier one, tier two, and tier three supplier designations are based upon whom the suppliers are providing materials or services to. Section Ref: Basic Supply Chains Sub Section Ref: Components of a Supply Chain for a Manufacturer – External Suppliers Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
85. Location managers are typically responsible for managing the movement of products between locations. Ans: False Solution: Logistic mangers are responsible for managing the movement of products between locations. Section Ref: Basic Supply Chains Sub Section Ref: Components of a Supply Chain for a Manufacturer – External Distributors Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
86. If supply chain A has more levels than supply chain B, then the bullwhip effect will likely impact supply chain B more than supply chain A. Ans: False Solution: The greater the number of levels in the supply chain, the further away the manufacturer is from final customer demand. Section Ref: Basic Supply Chains Sub Section Ref: The Bullwhip Effect – Untitled introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
87. A possible remedy for the bullwhip effect is to base forecasts on demand coming from the immediate downstream customer. Ans: False Solution: A possible remedy for the bullwhip effect is to make the point-of-sale demand information from the final-seller level available to all levels of the supply chain. Section Ref: Basic Supply Chains Sub Section Ref: The Bullwhip Effect – Counteracting the Bullwhip Effect Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
88. Order batching replaces lumpy demand with constant product demand. Ans: False Solution: Order batching changes constant product demand to lumpy demand. Section Ref: Basic Supply Chains Sub Section Ref: The Bullwhip Effect – Causes of the Bullwhip Effect Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
89. Rationing and shortage gaming occur when supply exceeds demand. Ans: False Solution: Rationing and shortage gaming result when demand exceeds supply and products are rationed to members of the supply chain. Section Ref: Basic Supply Chains Sub Section Ref: The Bullwhip Effect – Causes of the Bullwhip Effect Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
90. Internet-based B2B commerce results in higher costs to the global suppliers. Ans: False Solution: One potential benefit from Internet-based B2B commerce is that it results in low-cost access to global suppliers. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: E-commerce and Supply Chains Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1 min
91. Service organizations can also benefit from supply chain management. Ans: True Solution: Service organizations can also benefit from supply chain management. Section Ref: Basic Supply Chains Sub Section Ref: A Supply Chain for a Service Organization – Untitled introduction Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
92. Global competition forces organizations to decrease their amount of product proliferation. Ans: False Solution: Global competition forces firms to supply highly customized products and services to multiple national markets. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Infrastructure Issues Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Knowledge Time on Task: 1 min
93. Supply chain globalization is NOT impacted by security requirements. Ans: False Solution: Product quality and safety and supply chain delivery and security are the most critical concerns when expanding the supply chain globally. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Infrastructure Issues Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Knowledge Time on Task: 1 min
94. A recent survey found that most companies plan to maintain or increase their level of outsourcing in the future. Ans: True Solution: A 2019 survey reported that 74 percent of respondents worldwide stated that they currently used some type of outsourcing and a further 87 percent plan to maintain or increase their outsourcing in the future. Section Ref: Sourcing Decisions Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
95. The amount of outsourcing in industry is increasing. Ans: True Solution: Outsourcing means that the manufacturer pays suppliers or third-party companies for their products or services, a practice that is on the rise. Section Ref: Sourcing Decisions Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
96. The greater the level of vertical integration, the higher the level of outsourcing. Ans: False Solution: The greater the level of vertical integration, the lower the level of outsourcing. Section Ref: Sourcing Decisions Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min 97. One of the Institute for Supply Management‘s principles of ethical supply chain management conduct is ―loyalty to your profession.‖ Ans: True Solution: The principles are: integrity in your decisions actions, value for your employer, and loyalty to your profession. Section Ref: Sourcing Decisions Sub Section Ref: Supplier Management Ethics – Table 4.9 Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Ethics Time on Task: 1 min
98. Shipments should spend less than 24 hours in a crossdock. Ans: True Solution: Shipments are transferred directly from inbound trailers to outbound trailers without any storage in between. Shipments should spend less than 24 hours in a crossdock. Section Ref: The Role of Warehouses Sub Section Ref: Crossdocking Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 1 min
99. Crossdocking eliminates the receiving and shipping functions of a distribution warehouse while still performing its storage and order picking functions. Ans: False Solution: Crossdocking eliminates the storage and order-picking functions of a distribution warehouse while still performing its receiving and shipping functions. Section Ref: The Role of Warehouses Sub Section Ref: Crossdocking Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 1 min
100. A company can use traditional financial measures such as return on investment to measure supply chain performance. Ans: True Solution: A company can use traditional financial measures such as return on investment (ROI), profitability, market share, and revenue growth to measure supply chain performance. Section Ref: Implementing Supply Chain Management Sub Section Ref: Supply Chain Performance Metrics Level: Easy Bloom‘s: Comprehension Learning Objective 6: Describe how supply chain management is implemented. AACSB: Knowledge Time on Task: 1 min
101. Warehouses are sometimes used by manufacturers as part of postponement in their product design process. Ans: True Solution: Warehouses can be used to finish customer products. Almost-finished products are delivered to the warehouse and the warehouse finishes the product according to the specifications of the customers. Section Ref: The Role of Warehouses Sub Section Ref: Untitled Introduction – Services Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 1 min
102. Distribution management is the movement of material from the manufacturer to the customer. Ans: True Solution: Distribution management is responsible for movement of material from the manufacturer to the customer. Section Ref: Basic Supply Chains Sub Section Ref: Components of a Supply Chain for a Manufacturer – External Distributors Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
Essay 103. What are the three ―components‖ of a supply chain? Ans: A company‘s supply chain structure has three components: external suppliers, internal functions of the company, and external distributors. Section Ref: Basic Supply Chains Sub Section Ref: Components of a Supply Chain for a Manufacturer – Untitled introduction Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 2 mins
104. Explain how a supply chain supports the organization to be sustainable and provides a competitive advantage. Ans: A prime example of operations management (OM), supply chain management provides the company with a sustainable, competitive advantage, such as quick response time, low cost, stateof-the-art quality design, or operational flexibility. Section Ref: Basic Supply Chains Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 2 mins
105. Logistics includes which two major management functions? Ans: Logistics includes traffic management and distribution management. Section Ref: Basic Supply Chains Sub Section Ref: Components of a Supply Chain for a Manufacturer – External Distributors Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1.5 mins
106. What are the four causes of the bullwhip effect? Ans: The four causes of the bullwhip effect are (1) demand forecast updating, (2) order batching, (3) price fluctuations, and (4) rationing and shortage gaming. Section Ref: Basic Supply Chains Sub Section Ref: The Bullwhip Effect – Causes of the Bullwhip Effect Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 2 mins
107. Describe how consumers can use the Internet to shop in new ways. Ans: They can comparison shop for suppliers around the world, view color pictures in an online catalog, and find all the information needed about an item. They can use a credit card or electronic funds transfer to buy items online. They can participate in auctions, specify the options and learn the cost of a brand new car, book a trip, or buy a diamond ring. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Consumer Expectations and Competition Resulting from E-commerce Level: Medium Bloom‘s: Application Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 3 mins
108. List some benefits derived from e-commerce. Ans: Benefits include reduced transaction costs, fewer intermediaries, reduced lead times, greater visibility for the company, more choices and information for customers, improved customer service, virtual companies that distribute through the Web, customer preference data collection, and global market access. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: All sections Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 3 mins
109. Compare the access differences among the Internet, an intranet, and an extranet. Ans: The Internet is wide open, an intranet is limited to internal users, and an extranet is an intranet that is linked to the Internet to include suppliers and customers. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: E-commerce and Supply Chains Level: Medium Bloom‘s: Application Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 2 mins
110. List five major factors that become important for the management of global supply chains. Ans: Five factors are substantial geographical distances, forecasting accuracy, exchange rates, infrastructure issues, and product proliferation. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Infrastructure Issues Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Knowledge Time on Task: 3 mins
111. What are some examples of infrastructure issues that firms managing global supply chains may encounter? Ans: Examples include inadequate transportation networks, limited telecommunication capabilities, uncertain power continuity, low worker skill, and poor supply availability and quality. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Infrastructure Issues Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Knowledge Time on Task: 3 mins 112. Provide some examples of ―greening‖ requirements that an organization may impose on their supply chain members. Ans: Examples may include specified supply chain goals (carbon emission footprint reduction, reduced energy consumption, reduced inventory levels, reduced transportation costs, etc.), practices (the use of sustainable farming methods, not using specified materials, etc.), and application of greening supporting technologies. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Green Supply Chain Management Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Knowledge Time on Task: 3 mins
113. What is the big difference between crossdocking and traditional distribution warehousing? Ans: In a traditional setting, the warehouse holds stock until a customer places an order, then the item is picked, packed, and shipped. The customer typically is not known before the items arrive at the warehouse. With crossdocking, the customer is known before the items arrive at the warehouse and there is no reason to move the items into storage. Section Ref: The Role of Warehouses Sub Section Ref: Crossdocking Level: Medium Bloom‘s: Application Learning Objective 5: Describe the role of warehousing. AACSB: Analytic Time on Task: 3 mins
114. What are the two major advantages of crossdocking? Ans: First, the retailer reduces inventory holding costs by replacing inventory with information and coordination. Second, crossdocking can consolidate shipments to achieve truckload quantities and significantly reduce a company‘s inbound transportation costs. Section Ref: The Role of Warehouses Sub Section Ref: Crossdocking Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of warehousing. AACSB: Knowledge Time on Task: 3 mins
Problems
115. What is the formula for the indifference point Q* in the make-or-buy decision? Ans: Q* = (FCMake FCBuy) / (VCBuy VCMake) Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
116. Will‘s omelet factory produces 2,500 omelets a day. They‘ve determined that their daily fixed costs are $4,000 with a variable cost of fifteen cents per omelet. (a) What is the total cost to make a day‘s omelets? (b) What should Will charge for each omelet to make a 10% profit, rounded to the next whole dollar? Ans: (a) $4,375 Solution: TC = F + (VC*Q) = $4,000 + (2,500*$0.15) = $4,375 (b) $2.00 ($1.925) Solution: Cost/omelet = TCmake/Q = $4375/2500 = $1.75; Sales price @ 10% profit = Cost/omelet*1.1 = $1.925 (round to $2.00) Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 3 mins
117. Insourcing incurs a fixed cost of $1,000 and a $5 variable cost. Outsourcing incurs a fixed cost of $2,000 and a $2 variable cost. What is the indifference point? Ans: 333 units Solution: Q = (FCMake FCBuy) / (VCBuy VCMake) = ($2,000 – $1,000) / ($5 – $2) = 333 Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 2 mins
118. Logo, Inc. can transport its own goods for a $140,000 annual cost and $25 per unit. A logistics supplier offers a contract for a $100,000 annual cost at $30 per unit. What is the indifference point? Ans: 8,000 units Solution: Q = (FCMake FCBuy) / (VCBuy VCMake) = ($140,000 – $100,000) / ($30 – $25) = 8,000 Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 2 mins
119. Simuelson Industries can produce its own motors for a $60,000 fixed monthly cost and a $50 variable cost per unit. Alternatively, Simuelson Industries can purchase the motors from an outside supplier for $50,000 per month and $58 per unit. a) What is the indifference point? b) What option should be chosen if monthly demand is 1,200 units? Ans: a) 1,250 units Solution: Q* = (FCMake FCBuy) / (VCBuy VCMake) = ($60,000 – $50,000) / ($58 – $50) = 1,250 b) Outsourcing Solution: Since demand 1,200 < the indifference point of 1,250, choose the option with lower fixed cost (i.e., outsourcing). Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 3 mins
120. Yannis Corporation is trying to decide whether to produce its own subassemblies or outsource them. In-house production costs would include an annual fixed cost of $250,000, materials costs per unit of $7, and labor costs per unit of $5. Teshtown, Inc. has agreed to provide the subassemblies for an annual cost of $400,000 and a unit cost of $8 per subassembly. Over what ranges of demand is each option best? Ans: If demand is < 37,500 units, insourcing is the best option; if demand is > 37,500 units, outsourcing is the best option; if demand is equal to 37,500 units, we are indifferent between insourcing and outsourcing. Solution: Indifference point Q* = (FCMake FCBuy) / (VCBuy VCMake) = ($250,000 – $400,000) / ($8 – $12) = 37,500). If demand < 37,500, choose insourcing with lower fixed costs; if demand > 37,500, choose outsourcing with lower variable costs; otherwise, we are indifferent between insourcing and outsourcing. Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 3 mins
121. Insourcing incurs a periodic fixed cost of $10,000 and a $0.50 variable cost. Outsourcing incurs a periodic cost of $6,000 and a $0.90 variable cost. Over what ranges of demand is each option best? Ans: If demand is < 10,000 units, outsourcing is the best option; if demand is > 10,000 units, insourcing is the best option; if demand is equal to 10,000 units, we are indifferent between insourcing and outsourcing. Solution: Indifference point Q* = (FCMake FCBuy) / (VCBuy VCMake) = ($10,000 – $6,000) / ($0.90 – $0.50) = 10,000. If demand < 10,000 units, choose the option with lower fixed costs; if demand >10,000 units, choose the option with lower variable costs; if demand is equal to 10,000 units, we are indifferent between both options. Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 2 mins
122. Boys ‘R‘ Us sells suits to young men. Management is considering vertical integration. It is determined that the company can produce its own suits for a fixed annual cost of $2,000,000 and a production cost of $100 per suit. The current supplier charges a $2,500,000 fixed annual cost and $120 per suit. Over what ranges of demand is each option best? Ans: Insourcing is always preferable. Solution: Indifference point Q* = (FCMake FCBuy) / (VCBuy VCMake) = ($2,000,000 – $2,500,000) / ($120 – $100) = –25,000. Since indifference point < 0, total cost of insourcing is always lower than that for outsourcing, thus it‘s always preferable. Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 2 mins
123. Annual fixed costs are $900,000 and $800,000 for outsourcing and insourcing, respectively, and variable costs are $28 and $32 for outsourcing and insourcing, respectively. If current annual demand is 22,000 units, by how much must demand increase in order for outsourcing to become economical ? Ans: 3,000 units Solution: Q* = (FCMake FCBuy) / (VCBuy VCMake) = ($800,000 – $900,000) / ($28 – $32) = 25,000; 25,000 – 22,000 = 3,000. Outsourcing has a lower variable cost, so it will become economical when current demand increases by 3,000 units to the indifference point. Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 3 mins
124. Global Metalworks can produce its own hinges for a weekly cost of $96,400 and a cost per hinge of $0.10. Currently an outside supplier is used for a weekly cost of $82,500 and a cost per hinge of $0.24. Current weekly demand is 98,000 units. How much larger must weekly demands grow in order to make insourcing economical? Ans: 1,286 units Solution: Q* = (FCMake FCBuy) / (VCBuy VCMake) = ($96,400 – $82,500) / ($0.24 – $0.10) = 99,286; 99,286 – 98,000 = 1,286. Insourcing has a lower variable cost, so when weekly demands increase by 1,286 to a total of 98,000 units, it will become economical. Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 3 mins
125. Sportsworld, Inc. currently incurs $100,000 in annual purchasing costs, and each purchase order costs the firm approximately $3. Third-Party Logistics, Inc. is willing to perform purchasing services for Sportsworld at a $50,000 annual fixed retainer plus $7 per purchase order. Sportsworld currently places 10,000 orders per year. a) What is the current total cost of purchasing for Sportsworld? b) What would the cost of purchasing be if Third-Party Logistics were used? c) What is the indifference point for the two alternatives? Ans: a) $130,000, Solution: TCBuy = FBuy + (VCBuy*Q) = $100,000 + ($3*10,000) = $130,000 b) $120,000, Solution: TCBuy = FBuy + (VCBuy*Q) = $50,000 + ($7*10,000) = $120,000 c) 12,500 units, Solution: Q* = (FCMake FCBuy) / (VCBuy VCMake) = ($100,000 – $50,000) / ($7 – $3) = 12,500 Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Analytic Time on Task: 3 mins
126. Big Oil Refinery is losing money every month. They cannot shut down the refinery. What quantity of product should they make in an effort to break even? Their primary product sale price is $1.50 per gallon. The production fixed cost is $36,000/day. The variable cost per gallon is $1.20. Hint: total revenue is equal to sales price times volume; compare total revenue to total cost. Ans: 120,000 gallons Solution: Break-even quantity Q = FC / (Sales price – VC) = 36,000 / ($1.50 – $1.20) = 120,000 Section Ref: Sourcing Decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Analytic Time on Task: 2 mins
Fill-In-The Blank 127. A firm may consider outsourcing if _____ cost of insourcing is higher than that of outsourcing. Ans: total Solution: A firm may consider outsourcing if total costs of insourcing is higher than that of outsourcing. This analysis involves three factors: fixed costs, variable costs, and quantity (or demand level). Some students may answer the question by comparing fixed costs or variable costs only. Section Ref: Sourcing decisions Sub Section Ref: Insourcing versus Outsourcing Decisions Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
128. B2B e-commerce has evolved from automated order entry systems to electronic data interchange (EDI), and then to ________________. Ans: either electronic storefronts or net marketplaces Solution: B2B commerce began in the 1970s with automated order entry systems. In the late 1970s, electronic data interchange (EDI) emerged. In the mid-1990s, electronic storefronts emerged. Net marketplaces emerged in the late 1990s. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: E-commerce and Supply Chains Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1 min
129. The potential benefits from Internet-based B2B e-commerce include lower procurement administrative costs, low-cost access to global suppliers, and ___________________. Ans: either lower inventory investment or better product quality. Solution: The potential benefits from Internet-based B2B e-commerce include lower procurement administrative costs, low-cost access to global suppliers, lower inventory investment, and better product quality. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: E-commerce and Supply Chains Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1 min
130. Taxation is a particularly challenging e-commerce problem because of conflicting interests between states with and without sales tax and conflicting _____________. Ans: jurisdictions Solution: Online retailers have argued that collecting sales tax from consumers throughout the world would create an unreasonable burden as there are 9600 jurisdictions nationwide. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Government Regulation and E-commerce Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Technology Time on Task: 1 min
131. Global competition forces firms to offer ________ products and services to multiple national markets. Ans: highly customized Solution: Global competition forces firms to supply highly customized products and services to multiple national markets. Section Ref: Issues Affecting Supply Chain Management Sub Section Ref: Infrastructure Issues Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain issues affecting supply chain management. AACSB: Knowledge Time on Task: 1 min
132. Several studies report that the top three criteria for selecting suppliers are ________, ________, and ________. Ans: price, quality, on-time delivery Solution: Several studies report that the top three criteria for selecting suppliers are price, quality, and on-time delivery. Section Ref: Sourcing Decisions Sub Section Ref: Developing Supplier Relationships Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1.5 mins
133. ________, ________, and ________ are critical factors in successful partnering. Ans: Impact, intimacy, and vision Solution: Impact, intimacy, and vision are critical factors in successful partnering. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Critical Factors in Successful Partnering Level: Easy Bloom‘s: Knowledge Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1.5 mins
134. Name three functions of a purchasing department: _______________, _______________, ______________. Ans: Any three of: selecting suppliers, negotiating and administering long-term contracts, monitoring supplier performance, placing orders, developing a responsive supplier base, and maintaining good supplier relations. Solution: Purchasing is typically responsible for selecting suppliers, negotiating and administering long-term contracts, monitoring supplier performance, placing orders to suppliers, developing a responsive supplier base, and maintaining good supplier relations. Section Ref: The Role of Purchasing Sub Section Ref: Untitled Introduction Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the role of purchasing. AACSB: Knowledge Time on Task: 2 mins
135. Name three things purchasing agents should avoid as they balance loyalty to their own organization and those with whom they deal: ________________________, ________________________, ________________________ Ans: the intent and appearance of unethical or compromising practice; any personal, business and professional activity that conflicts with the employers' interests; soliciting or accepting any financial or other gift that might influence or appear to influence supply management decisions; improper reciprocal agreements. Solution: Purchasing agents should avoid the intent and appearance of unethical or compromising practice; any personal, business and professional activity that conflicts with the employers' interests; soliciting or accepting any financial or other gift that might influence or appear to influence supply management decisions; and improper reciprocal agreements. Section Ref: Sourcing Decisions Sub Section Ref: Supplier Management Ethics Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Ethics Time on Task: 2 mins
136. Partnerships between supplier and purchaser are easier to develop when there is (are) _________ supplier(s). Ans: one Solution: One supplier allows for better supplier relations. For some operations, like make-toorder products, it is easier to deal with a single supplier. Section Ref: Sourcing Decisions Sub Section Ref: How Many Suppliers? Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Knowledge Time on Task: 1 min
137. Studies suggest that the three sources of impact from successful supply chain partnerships are reduction of duplication and waste, leveraging core competence, and ______________________. Ans: creating new opportunities. Solution: The three sources of impact from successful supply chain partnerships are reduction of duplication and waste, leveraging core competence, and creating new opportunities. Section Ref: Sourcing Decisions Sub Section Ref: Developing Partnerships – Critical Factors in Successful Partnering Level: Easy Bloom‘s: Comprehension Learning Objective 4: Illustrate how sourcing decisions are made. AACSB: Time on Task: 1 min
138. __________ are responsible for managing the movement of products between locations. Ans: Logistics managers Solution: Logistics managers are responsible for managing the movement of products between locations. Section Ref: Basic Supply Chains Sub Section Ref: Components of a Supply Chain for a Manufacturer – External Distributors Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe basic supply chains and supply chain management. AACSB: Knowledge Time on Task: 1 min
Testbank Chapter 5: Total Quality Management
LO Section Defining Quality
Subsection Differences between Manufacturing and Service Organizations
Question # 1, 87, 127 2, 3, 4, 5, 81, 88, 115, 116 6, 17, 18, 19, 20, 21, 22, 82, 89, 94, 95, 96, 107, 120
Cost Quality The Evolution of Total Quality Management (TQM) Quality Gurus Quality Gurus: Walter A. Shewhart Quality Gurus: W. Edwards Deming Quality Gurus: Joseph M. Juran Quality Gurus: Armand V. Feigenbaum Quality Gurus: Philip B. Crosby Quality Gurus: Kaoru Ishikawa Quality Gurus: Genichi Taguchi The Philosophy of TQM Customer Focus Continuous Improvement
7, 8, 89, 141 124, 125 63, 64 66, 67, 68, 69, 107 70, 71
72, 108, 140 73, 109 74, 83, 110 128 9 10, 23, 24
Continuous Improvement: The Plan-Do-Study-Act Cycle Continuous Improvement: Benchmarking Employee Empowerment Employee Empowerment: Team Approach
Use of Quality Tools Use of Quality Tools: Cause-andEffect Diagrams Use of Quality Tools: Flowcharts Use of Quality Tools: Checklists Use of Quality Tools: Control Charts Use of Quality Tools: Scatter
16 11, 12, 14, 15, 31, 93, 99 138 13, 32. 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 92, 100, 119, 121, 137 101 102, 137
Diagrams Use of Quality Tools: Pareto Analysis Use of Quality Tools: Histograms
Quality Awards and Standards
Product Design Product Design: Reliability Process Management Managing Supplier Quality
25, 26, 27, 28, 29, 30, 77, 78, 97, 98, 114, 118, 129, 130, 131, 132, 134, 135 76, 84, 139 45, 91, 112, 113 56
The Malcom Baldridge National Quality Award (MBNQA) The Deming Prize
46, 47, 48 , 49, 50, 54, 55, 56, 85, 122 51, 52, 53, 104
ISO 9000 Standards
57, 58, 59, 60, 61, 62, 105, 106, 123
ISO Standards for Sustainability Reporting Why TQM Efforts Fail Total Quality Management (TQM) within OM: How It All Fits Together
103 136
65, 75, 111, 126, 133, 142
79, 80, 86
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Multiple Choice
1. One common definition of quality is __________, which focuses on measuring how well the product or service meets targets and tolerances determined by its designers. a) fitness for use b) value for price paid c) technical perception d) judgmental evaluation e) conformance to specifications Ans: e Solution: Conformance to specifications measures how well the product or service meets the targets and tolerances determined by its designers. Section Ref: Defining Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the meaning of total quality management (TQM). AACSB: Knowledge Time on Task: 1 min
2. The definition of quality that involves the product functioning as expected without failure is a) performance. b) conformance. c) reliability. d) standardization. e) endurance. Ans: c Solution: One of common definitions of quality in manufacturing is reliability, meaning that the product will function as expected without failure. Section Ref: Defining Quality Subsection Ref: Differences between Manufacturing and Service Organizations Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the meaning of total quality management (TQM). AACSB: Knowledge Time on Task: 1 min
3. Which of the following specifically relates to dimensions of quality in service organizations? a) conformance to specifications b) atmosphere c) durability d) features e) serviceability Ans: b Solution: Common definitions of quality in service include responsiveness to customer needs, courtesy and friendliness of staff, promptness in resolving complaints, and atmosphere. Section Ref: Defining Quality Subsection Ref: Differences between Manufacturing and Service Organizations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the meaning of total quality management (TQM). AACSB: Knowledge Time on Task: 1.5 min
4. In Six Sigma the level of defects is reduced to approximately a) 0. b) 1.4 parts per million. c) 2.4 parts per million. d) 3.4 parts per million. e) 4.4 parts per million. Ans: d Solution: Six Sigma is a quality program where the level of defects is reduced to approximately 3.4 parts per million. Section Ref: Defining Quality Subsection Ref: Differences between Manufacturing and Service Organizations Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the meaning of total quality management (TQM). AACSB: Knowledge Time on Task: 1 min
5. The expected operational life of a product is called a) conformance. b) reliability. c) performance. d) durability. e) serviceability. Ans: d Solution: One of common definitions of quality in manufacturing is durability, the expected operational life of the product. Section Ref: Defining Quality Subsection Ref: Differences between Manufacturing and Service Organizations Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the meaning of total quality management (TQM). AACSB: Knowledge Time on Task: 1 min
6. Quality has gained such prominence because organizations a) are following the latest management fad. b) have found a low-cost process to keep some employees busy. c) have identified an employee perk, membership in quality circles. d) understand poor quality is of minimal cost and something to do. e) have gained an understanding of the high cost of poor quality. Ans: e Solution: The reason quality has gained such prominence is that organizations have gained an understanding of the high cost of poor quality. Section Ref: Cost of Quality Subsection Ref: n/a Level: Medium Bloom‘s: Analytic Learning Objective 2: Identify costs of quality. AACSB: Analytic Time on Task: 2 min
7. During World War II, quality a) meant inspecting products to ensure that they met specifications. b) encompassed the entire organization. c) was defined as it had been for more than 100 years. d) became customer driven. e) became more statistical in nature. Ans: e Solution: In the 1940s, during World War II, quality became more statistical in nature. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
8. TQM is __________, because it is designed to build quality into the product and process design. a) reactive b) proactive c) strategic d) competitive e) standardized Ans: b Solution: The concept of TQM is proactive, designed to build quality into the product and process design. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1.5 min
9. Not only does TQM encompass the entire organization, but it also stresses a) that quality is supplier driven. b) that quality is vendor driven. c) that quality is customer driven. d) the need for ISO 9000 compliance. e) the need to be ―green.‖ Ans: c Solution: TQM recognizes that a perfectly produced product has little value if it is not what the customer wants. Therefore, we can say that quality is customer driven. Section Ref: The Philosophy of TQM Subsection Ref: Customer Focus Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
10. The Japanese term for continuous improvement is a) poka-yoke. b) kaizen. c) kanban. d) muda. e) automation. Ans: b Solution: Continuous improvement, called kaizen by the Japanese, requires that the company continually strive to be better through learning and problem solving. Section Ref: The Philosophy of TQM Subsection Ref: Continuous Improvement Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
11. Giving workers responsibility for seeking out quality problems and correcting them is a) continuous improvement. b) passing the buck. c) brainstorming. d) employee empowerment. e) employee involvement. Ans: d Solution: Part of the TQM philosophy is to empower all employees to seek out quality problems and correct them. Section Ref: The Philosophy of TQM Subsection Ref: Employee Empowerment Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
12. Employees of the organization who receive goods or services from others in the company are a) internal customers. b) ultimate customers. c) downstream customers. d) operators. e) external customers. Ans: a Solution: Internal customers are employees of the organization who receive goods or services from others in the company. Section Ref: The Philosophy of TQM Subsection Ref: Employee Empowerment Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
13. Proper training of employees in the understanding of quality tools includes instructing them on a) how to correct problems. b) how to define quality. c) how to develop new quality tools. d) how to redesign a product. Ans: a Solution: If employees are to identify and correct quality problems, they need proper training. They need to understand how to assess quality by using a variety of quality control tools, how to interpret findings, and how to correct problems. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
14. TQM team meetings take place a) after work. b) during lunch breaks. c) when the boss calls them. d) when all the other work is finished. e) during a time in the workday set aside for them. Ans: e Solution: The contributions of teams are considered vital to the success of the company. For this reason, companies set aside time in the workday for team meetings. Section Ref: The Philosophy of TQM Subsection Ref: Employee Empowerment Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
15. A quality circle is a) an approach for the use of control charts. b) an award for quality improvements. c) an inspection stamp found on meat. d) a team of volunteer production employees and their supervisors who meet regularly to solve quality problems. e) a symbol used on flowcharts. Ans: d Solution: One of the most common types of teams is the quality circle, a team of volunteer production employees and their supervisors whose purpose is to solve quality problems. Section Ref: The Philosophy of TQM Subsection Ref: Employee Empowerment Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min 16. Studying business practices of companies considered ―best in class‖ is called a) pairwise comparison. b) benchmarking. c) competition. d) dreamscaping. e) discouraging. Ans: b Solution: Benchmarking is the process of studying the practices of companies considered ―best in class‖ and comparing your company‘s performance against theirs. Section Ref: The Philosophy of TQM Subsection Ref: Continuous Improvement Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
17. Which of the following is an important cost of poor quality? a) dissatisfied customers b) advertisement c) labor d) overhead e) Fixed cost
Ans: a Solution: The most obvious consequence occurs when poor quality creates dissatisfied customers and eventually leads to loss of business. Section Ref: Cost of Quality Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify costs of quality. AACSB: Knowledge Time on Task: 1.5 min
18. Quality planning, employee training in quality measurement, and cost of maintaining records of information and data related to quality are __________ costs. a) internal failure b) external failure c) appraisal d) prevention e) replacement Ans: d Solution: Prevention costs are all costs incurred in the process of preventing poor quality from occurring. They include quality planning costs, the costs of product and process design, employee training in quality measurement, as well as the costs of maintaining records of information and data related to quality. Section Ref: Cost of Quality Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify costs of quality. AACSB: Knowledge Time on Task: 1.5 min
19. Costs of quality inspections, testing, test equipment, and labs are examples of __________ costs. a) internal failure b) external failure c) appraisal d) prevention e) replacement Ans: c Solution: Appraisal costs are incurred in the process of uncovering defects. They include the cost of quality inspections, product testing, performing audits, measuring quality, and the cost of equipment used for quality appraisal. Section Ref: Cost of Quality Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify costs of quality. AACSB: Knowledge Time on Task: 1.5 min
20. Machine downtime due to failures in the process, scrap, and rework are examples of __________ costs. a) internal failure b) external failure c) appraisal d) prevention e) replacement Ans: a Solution: Internal failure costs are associated with discovering poor product quality before the product reaches the customer site. They include costs of rework, scrap, machine downtime, and discounting defective items. Section Ref: Cost of Quality Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify costs of quality. AACSB: Knowledge Time on Task: 1.5 min
21. External failure costs include a) scrap. b) litigation costs resulting from product liability issues. c) rework. d) quality inspections. e) employee training. Ans: b Solution: External failure costs are costs of failure at customer site, including returns and repairs, warranty claims, customer complaints, and costs of litigation. Section Ref: Cost of Quality Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify costs of quality. AACSB: Knowledge Time on Task: 1.5 min
22. Warranty claims, customer complaints, and costs of litigation are examples of __________ costs. a) internal failure b) external failure c) appraisal d) prevention e) replacement Ans: b Solution: External failure costs are costs of failure at customer site, including returns and repairs, warranty claims, customer complaints, and costs of litigation. Section Ref: Cost of Quality Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify costs of quality. AACSB: Knowledge Time on Task: 1.5 min
23. The plan–do–study–act cycle is often called the a) TQM activity approach. b) Deming wheel. c) continuous improvement cycle. d) quality circle. e) action wheel. Ans: b Solution: The plan–do–study–act (PDSA) cycle describes the activities a company needs to perform in order to incorporate continuous improvement in its operation. This cycle is also referred to as the Shewhart cycle or the Deming wheel. Section Ref: The Philosophy of TQM Subsection Ref: Continuous Improvement Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
24. In the plan–do–study–act cycle, what is studied? a) plans made in the plan step b) previous action plan c) data collected in the do step d) evaluation of the current process e) procedure documentation Ans: c Solution: The ―do‖ step in the cycle is implementing the plan. During the implementation process managers should document all changes made and collect data for evaluation. Section Ref: The Philosophy of TQM Subsection Ref: Continuous Improvement Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
25. A useful tool for translating customers‘ everyday language into specific technical requirements is a) quality function deployment. b) quality circles. c) quality of design. d) scatter diagrams. e) cause-and-effect diagrams. Ans: a Solution: Quality function deployment (QFD) is a tool used to translate the preferences of the customer into specific technical requirements. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
26. Quality function deployment begins by a) translating scores into specific product characteristics. b) evaluating how the product compares with its major competitors. c) setting specific goals to address the specified problems. d) identifying important customer requirements. e) numerically scoring customer requirements based on their importance. Ans: d Solution: Quality function deployment (QFD) begins by identifying important customer requirements, which typically come from the marketing department. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
27. When using quality function deployment, __________ is one way to find out precisely what features customers want in the product. a) interviewing the company sales force b) analyzing the changes in features historically c) asking top management d) talking to process engineers e) conducting focus groups Ans: e Solution: To find out precisely what customers want, a marketing department might send representatives to talk to customers, conduct telephone interviews, or conduct focus groups. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
28. The important thing in quality function deployment competitive evaluation is to a) evaluate the financial strength of competitors. b) identify customer requirements that should be pursued and how we fare relative to our competitors. c) increase speed of introduction. d) know the number of competitors. e) know your product well. Ans: b Solution: Quality function deployment (QFD) begins by identifying important customer requirements. The important thing here is to identify which customer requirements we should pursue and how we fare relative to our competitors. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
29. The strength of the relationship between customer requirements and product characteristics is shown in the __________ matrix. a) trade-off b) product c) relationship d) strength e) inverse Ans: c Solution: A relationship matrix ties customer requirements to product characteristics. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
30. The last step in constructing the house of quality includes a) determining how to advertise. b) setting targets for our own product. c) determining how to attack our competitors‘ products. d) designing the product. e) comparing results with past sales. Ans: b Solution: The last step in constructing the house of quality is to evaluate competitors‘ products relative to the specific product characteristics and to set targets for our own product. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
31. One common name for team-based work in TQM is a) quality department. b) quality support group. c) quality circle. d) quality team. e) team one. Ans: c Solution: The quality circle is a team of volunteer production employees and their supervisors whose purpose is to solve quality problems. Section Ref: The Philosophy of TQM Subsection Ref: Employee Empowerment Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min 32. What quality control tool resembles a ―fishbone‖? a) checklists b) scatter diagrams c) pareto analysis d) cause-and-effect diagrams e) flowcharts Ans: d Solution: Cause-and-effect diagrams identify potential causes of particular quality problems. They are often called fishbone diagrams because they look like the bones of a fish. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
33. _______ are also called cause-and-effect diagrams. a) Checklists b) Scatter diagrams c) Pareto analyses d) Fishbone diagrams e) Histograms Ans: d Solution: Cause-and-effect diagrams identify potential causes of particular quality problems. They are often called fishbone diagrams because they look like the bones of a fish. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
34. In a cause-and-effect diagram, causes could be related to a) analysis. b) materials. c) customers. d) companies. Ans: b Solution: Causes could be related to the machines, workers, measurement, suppliers, materials, and many other aspects of the production process. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
35. What is a schematic diagram of the sequence of steps involved in an operation or process? a) a checklist b) a control chart c) a scatter diagram d) a flowchart e) a process chart Ans: d Solution: A flowchart is a schematic diagram of the sequence of steps involved in an operation or process. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
36. What tool is useful in helping everyone develop a clear picture of how an operation or process works? a) a control chart b) a Pareto analysis c) a checklist d) a flowchart e) a scatter diagram Ans: d Solution: A flowchart is a schematic diagram of the sequence of steps involved in an operation or process. By seeing the steps involved in an operation or process, everyone develops a clear picture of how the operation works and where problems could arise. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
37. A checklist is a list of common defects and the __________ of these defects. a) number of occurrences b) relative importance c) attributes d) costs e) visibility Ans: a Solution: A checklist is a list of common defects and the number of observed occurrences of these defects. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
38. Checklists can also be used to focus on a) replacement costs. b) design documentation. c) the time dimension. d) upper control limits. e) a histogram. Ans: c Solution: A checklist can also be used to focus on other dimensions, such as location or time. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
39. For control charts, which of the following situations means that the process is out of control? a) A measured observation is above the LCL. b) A measured observation is below the UCL. c) A measured observation is above the center line. d) A measured observation is below the center line. e) A measured observation is above the UCL. Ans: e Solution: Above and below the center line are two lines, called the upper control limit (UCL) and the lower control limit (LCL). As long as the observed values fall within the upper and lower control limits, the process is in control and there is no problem with quality. When a measured observation falls outside of these limits, there is a problem. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
40. Scatter diagrams are particularly useful in detecting the amount of __________, or the degree of linear relationship, between two variables. a) correlation b) heteroscedasticity c) agreement d) disagreement e) causality Ans: a Solution: Scatter diagrams are graphs that show how two variables are related to one another. They are particularly useful in detecting the amount of correlation, or the degree of linear relationship, between two variables. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
41. __________ analysis is a technique used to identify quality problems based on their degree of importance. a) Deming b) Pareto c) Davis d) Crosby e) Juran Ans: b Solution: Pareto analysis is a technique used to identify quality problems based on their degree of importance. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
42. A chart showing the number of defects that result from different causes is a) a Pareto analysis. b) a flowchart. c) a cause-and-effect diagram. d) benchmarking. e) a control chart. Ans: a Solution: One way to use Pareto analysis is to develop a chart that ranks the causes of poor quality in decreasing order based on the percentage of defects each has caused. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
43. A __________ shows the frequency distribution of observed values of a variable. a) scatter diagram b) control chart c) histogram d) flowchart e) process chart Ans: c Solution: A histogram is a chart that shows the frequency distribution of observed values of a variable. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
44. A scatter diagram shows a nonlinear and scattered relationship, indicating that a) there is a direct correlation between the two variables. b) the two variables‘ data were gathered at different times. c) a third variable needs to be added to the evaluation. d) there is no direct correlation between the two variables. e) you are using the wrong SPC chart. Ans: d Solution: The greater the degree of correlation, the more linear are the observations in the scatter diagram. On the other hand, the more scattered the observations in the diagram, the less correlation exists between the variables. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Medium Bloom‘s: Analysis Learning Objective 4: Identify features of the TQM philosophy. AACSB: Analytic Time on Task: 2 min
45. Quality at the source is the belief that it is far better to _______ quality problems and _____ than to discard defective items after production. a) uncover the person generating; fire them b) uncover the source of; correct it c) discover new methods of; implement them d) discover new processes of; implement them e) allow returns of; fix them Ans: b Solution: Quality at the source is the belief that it is far better to uncover the source of quality problems and correct it than to discard defective items after production. Section Ref: The Philosophy of TQM Subsection Ref: Process Management Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
46. The Baldrige Award is intended to a) demonstrate that American companies are better than their foreign competitors. b) certify suppliers. c) reward and stimulate quality initiatives. d) focus national attention on manufacturing. e) add structure to TQM. Ans: c Solution: The Malcolm Baldrige National Quality Award is intended to reward and stimulate quality initiatives. Section Ref: Quality Awards and Standards Subsection Ref: The Malcolm Baldrige National Quality Award (MBNQA) Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
47. To compete for the Baldrige Award, companies must a) be nominated by their senator. b) submit a lengthy application. c) use e-mail regularly. d) use statistical process control. e) be a Fortune-500 company. Ans: b Solution: To compete for the Baldrige Award, companies must submit a lengthy application, which is followed by an initial screening. Section Ref: Quality Awards and Standards Subsection Ref: The Malcolm Baldrige National Quality Award (MBNQA) Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
48. The Malcolm Baldrige Award criteria include a category for a) manufacturing. b) process management. c) product design. d) service. Ans: b Solution: Section Ref: Quality Awards and Standards Subsection Ref: The Malcolm Baldrige National Quality Award (MBNQA) Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
49. The Malcolm Baldrige Award criteria category that includes commitment by top management is a) leadership. b) strategic planning. c) process management. d) business results. e) Information and analysis. Ans: a Solution: The first category of the Malcolm Baldrige Award is leadership. Examiners consider commitment by top management, their effort to create an organizational climate devoted to quality, and their active involvement in promoting quality. Section Ref: Quality Awards and Standards Subsection Ref: The Malcolm Baldrige National Quality Award (MBNQA) Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
50. Which of the Malcolm Baldrige Award criteria is allocated the MOST points? a) leadership b) information and analysis c) human resource focus d) process management e) business results Ans: e Solution: The last Baldrige category is business results, which receives the highest points. Section Ref: Quality Awards and Standards Subsection Ref: The Malcolm Baldrige National Quality Award (MBNQA) Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
51. In which country is the Deming prize awarded? a) United States b) Japan c) England d) Germany e) Canada Ans: b Solution: The Deming Prize is a Japanese award given to companies to recognize their efforts in quality improvement. Section Ref: Quality Awards and Standards Subsection Ref: The Deming Prize Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
52. The Union of Japanese Scientists and Engineers named its quality award after a) Genichi Taguchi. b) Kaoru Ishikawa. c) Joe Juran. d) Phillip Crosby. e) W. Edwards Deming. Ans: e Solution: The Deming Prize is a Japanese award named after W. Edwards Deming. The award has been given by the Union of Japanese Scientists and Engineers (JUSE) since 1951. Section Ref: Quality Awards and Standards Subsection Ref: The Deming Prize Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
53. Which U.S. company was the first to receive the Deming Prize? a) IBM b) Microsoft c) Walmart d) AT&T e) Florida Power & Light Ans: e Solution: In 1989, Florida Power & Light was the first U.S. company to receive the Deming prize. Section Ref: Quality Awards and Standards Subsection Ref: The Deming Prize Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
54. The Malcolm Baldrige Award criteria category that includes the use of tools such as market surveys and focus groups is a) leadership. b) strategic planning. c) customer and market focus. d) business results. e) information and analysis. Ans: c Solution: Customer and market focus category addresses how the company collects market and customer information. Successful companies should use a variety of tools toward this end, such as market surveys and focus groups. Section Ref: Quality Awards and Standards Subsection Ref: The Malcolm Baldrige National Quality Award (MBNQA) Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1.5 min
55. The Malcolm Baldrige Award criteria category that includes continuous improvement programs, employee training, and functioning of teams is a) leadership. b) strategic planning. c) information and analysis. d) human resource development and management. e) business results. Ans: d Solution: Human resource focus addresses issues of employee involvement. This entails continuous improvement programs, employee training, and functioning of teams. Section Ref: Quality Awards and Standards Subsection Ref: The Malcolm Baldrige National Quality Award (MBNQA) Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1.5 min
56. The Malcolm Baldrige Award criteria category of business results does include a) use of tools for quality improvement over time. b) progressive improvement over time. c) one-time-only use of tools for quality improvement. d) one-time-only improvements. e) accounting standards. Ans: b Solution: Business results category considers numerous measures of performance, from percentage of defective items to financial and marketing measures. Companies need to demonstrate progressive improvement in these measures over time, not just a one-time improvement. Section Ref: Quality Awards and Standards Subsection Ref: The Malcolm Baldrige National Quality Award (MBNQA) Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task 2 min
57. If suppliers meet preset quality standards, materials a) will need minimal arrival inspections. b) will still require full arrival inspections. c) will be package in special approved containers. d) do not have to be inspected upon arrival. e) will be paid for at a premium cost. Ans: d Solution: If suppliers meet preset quality standards, materials do not have to be inspected upon arrival. Section Ref: The Philosophy of TQM Subsection Ref: Managing Supplier Quality Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1.5 min
58. The purpose of the International Organization for Standardization is to a) certify all suppliers worldwide. b) establish international quality standards. c) spread European standards worldwide. d) certify products. e) streamline documentation. Ans: b Solution: The purpose of the International Organization for Standardization (ISO) is to establish agreement on international quality standards. Section Ref: Quality Awards and Standards Subsection Ref: ISO 9000 Standards Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
59. ISO 9000 is a) an award for quality given annually by the U.S. Government. b) an approach to quality management that was developed in Japan by Deming. c) a set of international quality standards and a certification process for companies. d) an approach for managing self-directed teams. e) an approach for product design. Ans: c Solution: In 1987 the International Organization for Standardization published its first set of standards for quality management, called ISO 9000. The purpose of the International Organization for Standardization (ISO) is to establish agreement on international quality standards. Section Ref: Quality Awards and Standards Subsection Ref: ISO 9000 Standards Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
60. Which of the following is necessary for receiving ISO 9000 certification? a) products meeting customer requirements b) low percentage of defective items c) documentation of top management involvement in quality improvement d) documentation of statistical process control tools used e) recommendation by competitors Ans: d Solution: To receive ISO certification, a company must provide extensive documentation of its quality processes. This includes methods used to monitor quality, methods and frequency of worker training, job descriptions, inspection programs, and statistical process control tools used. Section Ref: Quality Awards and Standards Subsection Ref: ISO 9000 Standards Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1.5 min
61. Increases in international trade during the 1980s created a need for the development of standards of quality which are _________. a) universal b) country-specific c) lower d) metric e) bilingual Ans: a Solution: Increases in international trade during the 1980s led to the development of universal standards of quality. Section Ref: Quality Awards and Standards Subsection Ref: ISO 9000 Standards Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
62. What are the most widely used ISO standards? a) ISO 9000, ISO 9001, and ISO 9004 b) ISO 9000, ISO 9001, and ISO 9002 c) ISO 9000, ISO 9010, and ISO 9100 d) ISO 9001, ISO 9002, and ISO 9003 e) ISO 9000, ISO 9002, and ISO 9004 Ans: a Solution: ISO 9000, ISO 9001, and ISO 9004 standards are the most widely used and apply to the majority of companies. Section Ref: Quality Awards and Standards Subsection Ref: ISO 9000 Standards Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
63. Who is the ―grandfather of quality control?‖ a) Walter Shewhart b) W. Edwards Deming c) Joseph Juran d) Phillip Crosby e) Genichi Taguchi Ans: a Solution: Walter Shewhart work created the foundation for today‘s statistical process control, and he is often referred to as the ―grandfather of quality control.‖ Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
64. Who developed quality control charts? a) Walter Shewhart b) W. Edwards Deming c) Joseph Juran d) Phillip Crosby e) Genichi Taguchi Ans: a Solution: Walter Shewhart developed quality control charts that are used to identify whether the variability in the process is random or due to an assignable cause. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
65. ISO 14000 is for evaluating a) automotive suppliers. b) minority suppliers. c) raw materials. d) a company‘s environmental responsibility. e) service suppliers. Ans: d Solution: The International Organization for Standardization (ISO) offers guidance that organizations of any size and industry can use to promote social responsibility and continuously improve environmental management. It includes ISO 26000 and ISO 14000 series. Section Ref: Quality Awards and Standards Subsection Ref: ISO Standards for Sustainability Reporting Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
66. Who is often referred to as the father of quality control? a) W. Edwards Deming b) Joseph Juran c) Philip Crosby d) Martin Marietta e) Count Pareto Ans: a Solution: W. Edwards Deming is often referred to as the ―father of quality control.‖ Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
67. Deming pointed out that 85% of quality problems are caused by a) worker error. b) numerical quotas. c) processes and systems. d) carelessness. e) suppliers. Ans: c Solution: Deming pointed out that only 15 percent of quality problems are actually due to worker error. The remaining 85 percent are caused by processes and systems, including poor management. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
68. Deming believed that __________ is the key to improving quality. a) employee training b) process design c) properly functioning equipment d) having good suppliers e) improving the system Ans: e Solution: Deming said that it is up to management to correct system problems and create an environment that promotes quality and enables workers to achieve their full potential. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1.5 min
69. Who is famous for his quality philosophy called ―14 Points?‖ a) Walter Shewhart b) W. Edwards Deming c) Joseph Juran d) Armand Feigenbaum e) Genichi Taguchi Ans: b Solution: W. Edwards Deming outlined his philosophy on quality in his famous ―14 Points.‖ Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min 70. In Juran‘s quality trilogy, which part stresses that processes should be set up to ensure that the quality standards can be met? a) quality planning b) quality control c) quality improvement d) quality certification e) quality awards Ans: a Solution: The first part of the trilogy, quality planning, is necessary so that companies identify their customers, product requirements, and overriding business goals. Processes should be set up to ensure that the quality standards can be met. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1.5 min
71. Juran stressed that quality improvement should be continuous as well as a) unique. b) novel. c) retroactive. d) include breakthroughs. e) ongoing. Ans: d Solution: According to Juran, quality improvements should not be just breakthroughs, but continuous as well. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1.5 min
72. Which of the following is attributed to Philip Crosby? a) the concept of the quality trilogy b) the phrase ―Do it right the first time‖ c) 14 Points for TQM d) quality control handbook e) quality control charts Ans: b Solution: Philip Crosby developed the phrase ―Do it right the first time‖ and the notion of zero defects, arguing that no amount of defects should be considered acceptable. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
73. Who is best known for the development of cause-and-effect diagrams? a) Walter Shewhart b) W. Edwards Deming c) Joseph Juran d) Kaoru Ishikawa e) Genichi Taguchi Ans: d Solution: Kaoru Ishikawa is best known for the development of quality tools called cause-andeffect diagrams, also called fishbone or Ishikawa diagrams. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
74. Who developed a function for determining the cost of poor quality? a) Walter Shewhart b) W. Edwards Deming c) Joseph Juran d) Kaoru Ishikawa e) Genichi Taguchi Ans: e Solution: Taguchi had a large impact on today‘s view of the costs of quality. He pointed out that the traditional view of costs of conformance to specifications is incorrect and proposed a different way to look at these costs. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
75. The most important factor in the success or failure of TQM efforts is a) getting started quickly. b) the use of statistical process control. c) the genuineness of the organization‘s commitment. d) the use of cause-and-effect diagrams. e) employee training. Ans: c Solution: The most important factor in the success or failure of TQM efforts is the genuineness of the organization‘s commitment. Section Ref: Why TQM Efforts Fail Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 6: Understand why and how TQM efforts fail. AACSB: Knowledge Time on Task: 1.5
76. Which of the following is a valid formula to compute the reliability of two components in parallel? a) (Reliability of 1st Component) +[ (Reliability of 2nd Component) (1 – Reliability of 1st Component)] b) 1 – (1 – Reliability of 1st Component) (1 – Reliability of 2nd Component) c) (1 – Reliability of 1st Component) (1 – Reliability of 2nd Component) d) (Reliability of 1st Component) + (Reliability of 1st Component) (1 – Reliability of 2nd Component) e) (Reliability of 1st Component) (Reliability of 2nd Component) + (Reliability of 1st Component) (1 – Reliability of 1st Component) Ans: a Solution: Redundancy is built into the system by placing components in parallel so that when one component fails the other component takes over. In this case, the reliability of the system is computed by adding the reliability of the first component to the reliability of the second (backup) component, multiplied by the probability of needing the backup. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
77. One TQM mistake companies make is believing that the responsibility for quality and elimination of waste lies a) with the supplier. b) with the return and repair shop. c) with the supply chain. d) with all employees but not with top management. e) with top management alone. Ans: d Solution: A common mistake is the view that the responsibility for quality and elimination of waste lies with employees other than top management. Section Ref: Why TQM Efforts Fail Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 6: Understand why and how TQM efforts fail. AACSB: Knowledge Time on Task: 1.5 min
78. Statistical Process Control (SPC) is a) a direct substitute for continuous improvement. b) a replacement of the teamwork concept. c) a substitute for middle management. d) a fully subjective process. e) not a substitute for continuous improvement. Ans: e Solution: SPC is not a substitute for continuous improvement, teamwork, and a change in the organization‘s belief system. However, SPC is a necessary tool for identifying quality problems. Section Ref: Why TQM Efforts Fail Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 6: Understand why and how TQM efforts fail. AACSB: Knowledge Time on Task: 1.5 min
79. The decision to implement TQM will impact a) product design. b) promotion. c) the hiring process. d) acompany‘s product. e) marketing. Ans: a Solution: The decision to implement TQM affects areas such as product design, which needs to incorporate customer-defined quality. Section Ref: Total Quality Management (TQM) Within OM: How It All Fits Together Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 6: Understand why and how TQM efforts fail. AACSB: Knowledge Time on Task: 1.5 min
80. TQM affects a) only marketing. b) only finance. c) only accounting. d) only engineering. e) all functional areas of an organization. Ans: e Solution: Total quality management impacts every aspect of the organization. Every person and every function is responsible for quality and is affected by poor quality. Section Ref: Total Quality Management (TQM) Within OM: How It All Fits Together Subsection Ref: Total Quality Management (TQM) across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 6: Understand why and how TQM efforts fail. AACSB: Knowledge Time on Task: 1.5 min
81. Caldwell Company has decided to improve the quality of their product. Based on a customer survey they learned that the customers value friendliness of the employees and responsiveness to their needs as the most important characteristics of the product. Caldwell Company is probably an example of what type of an organization? a) manufacturing b) service c) both manufacturing and service d) neither manufacturing nor service Ans: b Solution: Friendliness and responsiveness are dimensions of quality for service organizations. Section Reference: Defining Quality Subsection Reference: Differences between Manufacturing and Service Organizations Level: Medium Blooms: Application Learning Objective 1: Explain the meaning of total quality management (TQM). AACSB: Analytic Time on Task: 1 min
82. Burns Industries had to recall 1,200 product units from their warehouse because of a problem in the production process and the high possibility of defects. What type of quality control costs is Burns incurring? a) prevention costs b) appraisal costs c) internal failure costs d) external failure costs Ans: c Solution: Internal failure costs are associated with discovering poor product quality before the product reaches the customer site. Section Reference: Cost of Quality Subsection Reference: n/a Level: Medium Blooms: Application Learning Objective 2: Identify costs of quality. AACSB: Analytic Time on Task: 2 min
83. The traditional and Taguchi views of the cost of nonconformance assume a) a loss for any nonconformance for both the traditional and Taguchi views. b) some nonconformance with no loss for the Taguchi view and a loss for any nonconformance for the traditional view. c) a loss for any nonconformance for the Taguchi view and some nonconformance with no loss for the traditional view. d) some nonconformance with no loss for both the traditional and Taguchi views. Ans: c Solution: According to Taguchi, smaller differences from the target result in smaller costs: the larger the differences, the larger the cost; but the loss based on the Taguchi view might be smaller or greater than the traditional view. Section Reference: The Evolution of Total Quality Management (TQM) Subsection Reference: Quality Gurus Level: Medium Blooms: Analysis Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 2 min
84. E Corporation produces Blu-ray players that have three major components: optical system, disc drive mechanism, and internal electronics. All the components should work for the player to function. The optical system has a reliability of 95%, the disc drive mechanism has a reliability of 90%, and the internal electronics has a reliability of 70%. The internal electronics has a backup component with the same reliability of 70%. What is the reliability of E Corporation's Blu-ray players? a) 0.550 b) 0.599 c) 0.778 d) 0.855 Ans: c Solution: Internal electronics with backup reliability is RIE = RO + (RB * (1 – RO) = 0.7 + 0.7 * (1 – 0.7) = 0.91. Blu-ray reliability is RS = ROS * RDD * RIE = 0.95 * 0.9 * 0.91 = 0.778 Where subscripts S = System (Blue-ray), OS = Optical system, DD = Disc drive, IE = Internal electronics, O = Original, B = Backup Section Reference: The Philosophy of TQM Subsection Reference: Product Design Level: Medium Blooms: Analysis Learning Objective 4: Identify features of the TQM philosophy. AACSB: Analytic Time on Task: 5 min
85. Globex company has applied for the Malcolm Baldrige National Quality Award (MBNQA). The Baldrige examiners want to know how the company orders products from its suppliers. They are asking the following questions: What departments are involved? How do they interact? How is product quality controlled? What MBNQA category is being evaluated by the examiners? a) leadership b) strategic planning c) information and analysis d) process management e) business results Ans: d Solution: Process management involves documentation of processes; use of tools for quality improvement, such as statistical process control; and the degree of process integration within the organization. Section Reference: Quality Awards and Standards Subsection Reference: The Malcolm Baldrige National Quality Award (MBNQA) Level: Medium Blooms: Application Learning Objective 5: Describe quality awards and quality certifications. AACSB: Analytic Time on Task: 3 min
86. Tyrell Inc identified a lack of communication skills of its workforce as the main source of quality problems. Tyrell organized a training for its employees to improve their communication skills. What department was probably responsible for the training development? a) finance b) human resources c) information systems d) engineering Ans: b Solution: Human resources focus addresses issues of employee involvement. This entails continuous improvement programs, employee training, and functioning of teams. Section Reference: Total Quality Management (TQM) within OM: How It All Fits Together Subsection Reference: Total Quality Management (TQM) across the Organization Level: Medium Blooms: Application Learning Objective 4: Identify features of the TQM philosophy. AACSB: Analytic Time on Task: 1 min
True/False
87. One common definition of quality is conformance to specifications, which focuses on measuring how well the product or service meets targets and tolerances determined by its designers. Ans: True Solution: Conformance to specifications measures how well the product or service meets the targets and tolerances determined by its designers. Section Ref: Defining Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the meaning of total quality management (TQM). AACSB: Knowledge Time on Task: 1 min
88. The expected operational life of a product is called its reliability. Ans: False Solution: Reliability means that the product will function as expected without failure. Section Ref: Defining Quality Subsection Ref: Differences between Manufacturing and Service Organizations Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the meaning of total quality management (TQM). AACSB: Knowledge Time on Task: 1 min
89. External failure costs tend to be particularly high for service organizations. Ans: True Solution: External failure costs tend to be particularly high for service organizations. Section Ref: Cost of Quality Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify costs of quality. AACSB: Knowledge Time on Task: 1 min
90. TQM is reactive, designed to build quality into the product and process design. Ans: False Solution: The TQM concept is proactive, designed to build quality into the product and process design. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
91. Quality at the source involves inspecting goods after they are produced. Ans: False Solution: Quality at the source is the belief that it is far better to uncover the source of quality problems and correct it than to discard defective items after production. Section Ref: The Philosophy of TQM Subsection Ref: Process Management Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
92. It is possible to develop a U-shaped scatter diagram relationship. Ans: True Solution: Different types of relationships can also be observed on a scatter diagram, such as a U shape. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
93. A quality circle is a team of volunteer production employees and their supervisors who meet regularly to solve quality problems. Ans: True Solution: One of the most common types of teams is the quality circle, a team of volunteer production employees and their supervisors whose purpose is to solve quality problems. Section Ref: The Philosophy of TQM Subsection Ref: Employee Empowerment Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
94. Quality planning, employee training in quality measurement, and cost of maintaining records of information and data related to quality are appraisal costs. Ans: False Solution: Appraisal costs are incurred in the process of uncovering defects. They include the cost of quality inspections, product testing, and performing audits to make sure that quality standards are being met. Section Ref: Cost of Quality Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify costs of quality. AACSB: Knowledge Time on Task: 1 min
95. Machine downtime due to failures in the process, scrap, and rework are examples of internal failure costs. Ans: True Solution: Internal failure costs are associated with discovering poor product quality before the product reaches the customer site. Internal failure costs include rework, scrap, the cost of machine downtime, and the costs of discounting defective items. Section Ref: Cost of Quality Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify costs of quality. AACSB: Knowledge Time on Task: 1 min
96. The later that defects are found, the less costly they are to correct. Ans: False Solution: Companies that consider quality important invest heavily in prevention and appraisal costs in order to prevent internal and external failure costs. The earlier defects are found, the less costly they are to correct. Section Ref: Cost of Quality Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify costs of quality. AACSB: Knowledge Time on Task: 1 min 97. A useful tool for translating customers‘ everyday language into specific technical requirements is quality function deployment. Ans: True Solution: A useful tool for translating the voice of the customer into specific technical requirements is quality function deployment (QFD). Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
98. In using quality function deployment, conducting focus groups is one way to find out precisely what features customers want in the product. Ans: True Solution: To find out precisely what features students would like in a backpack, the marketing department might send representatives to talk to students on campus, conduct telephone interviews, and maybe conduct focus groups. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
99. In TQM the role of the employee is very similar to earlier requirements. Ans: False Solution: In TQM, the role of employees is very different from what it was in traditional systems. Section Ref: The Philosophy of TQM Subsection Ref: Employee Empowerment Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
100. A control chart is a schematic diagram of the sequence of steps involved in an operation or process. Ans: False Solution: Control charts are used to evaluate whether a process is operating within set expectations. A flowchart is a schematic diagram of the sequence of steps involved in an operation or process. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
101. Cause-and-effect diagrams are problem solving tools commonly used by quality control teams. Ans: True Solution: Cause-and-effect diagrams identify potential causes of particular quality problems. They are problem-solving tools commonly used by quality control teams. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
102. A checklist is a list of common defects and the relative importance of these defects. Ans: False Solution: A checklist is a list of common defects and the number of observed occurrences of these defects. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
103. Pareto analysis is a technique used to identify quality problems based on their degree of importance. Ans: True Solution: Pareto analysis is a technique used to identify quality problems based on their degree of importance. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
104. The Deming Prize is an American award given to companies to recognize their efforts in quality improvement. Ans: False Solution: The Deming Prize is a Japanese award given to companies to recognize their efforts in quality improvement. Section Ref: Quality Awards and Standards Subsection Ref: The Deming Prize Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
105. ISO 9001 is the standard used for the certification of a firm‘s quality management system. Ans: True Solution: In 1987 the International Organization for Standardization published its first set of standards for quality management, called ISO 9000. Section Ref: Quality Awards and Standards Subsection Ref: ISO 9000 Standards Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
106. ISO certification has become a requirement for conducting business in many industries. Ans: True Solution: ISO certification has become a requirement for conducting business in many industries. Section Ref: Quality Awards and Standards Subsection Ref: ISO 9000 Standards Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 1 min
107. W. Edwards Deming is often referred to as the father of quality control. Ans: True Solution: W. Edwards Deming is often referred to as the ―father of quality control.‖ Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
108. The concept of the quality trilogy is attributed to Philip Crosby. Ans: False Solution: Joseph Juran is well known for originating the idea of the quality trilogy: quality planning, quality control, and quality improvement. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
109. A cause-and-effect diagram is also referred to as a Taguchi diagram. Ans: False Solution: Kaoru Ishikawa is best known for the development of quality tools called cause-andeffect diagrams, also called fishbone or Ishikawa diagrams. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
110. Genichi Taguchi estimates that as much as 80 percent of all defective items are caused by poor product design. Ans: True Solution: Dr. Genichi Taguchi is a Japanese quality expert known for his work in the area of product design. He estimates that as much as 80 percent of all defective items are caused by poor product design. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min
111. The most important factor in the success or failure of TQM efforts is the genuineness of the organization‘s commitment. Ans: True Solution: The most important factor in the success or failure of TQM efforts is the genuineness of the organization‘s commitment. Section Ref: Why TQM Efforts Fail Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 6: Understand why and how TQM efforts fail. AACSB: Knowledge Time on Task: 1 min
112. Quality at the source is the belief that it is AGAINST the best interest to uncover the source of quality problems and eliminate them. Ans: False Solution: Quality at the source is the belief that it is far better to uncover the source of quality problems and correct it than to discard defective items after production. Section Ref: The Philosophy of TQM Subsection Ref: Process Management Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
113. TQM promotes employees to identify problems and pass onto someone else. Ans: False Solution: Part of the TQM philosophy is to empower all employees to seek out quality problems and correct them. Section Ref: The Philosophy of TQM Subsection Ref: Employee Empowerment Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
114. Quality function deployment (QFD) enhances communication between marketing, operations, and engineering functions. Ans: True Solution: Quality function deployment is also useful in enhancing communication between different functions, such as marketing, operations, and engineering. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
Essay
115. Name six common definitions of quality in manufacturing. Ans: conformance, performance, reliability, features, durability, and serviceability Solution: The most common quality definitions in manufacturing is conformance, which is the degree to which a product characteristic meets preset standards; performance, such as acceleration of a vehicle; reliability, meaning that the product will function as expected without failure; features, the extras that are included beyond the basic characteristics; durability, the expected operational life of the product; and serviceability, how readily a product can be repaired. Section Ref: Defining Quality Subsection Ref: Differences between Manufacturing and Service Organizations Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the meaning of total quality management (TQM). AACSB: Knowledge Time on Task: 5 min
116. Name at least four perceptual factors (dimensions) of service quality. Ans: Perceptual (intangible) factors are consistency, responsiveness to customer needs, courtesy/friendliness, timeliness/promptness, atmosphere. Solution: In addition to tangible factors, quality of services is often defined by perceptual factors. They include responsiveness to customer needs, courtesy and friendliness of staff, promptness in resolving complaints, atmosphere, time (the amount of time a customer has to wait for the service), and consistency (the degree to which the service is the same each time). Section Ref: Defining Quality Subsection Ref: Differences between Manufacturing and Service Organizations Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the meaning of total quality management (TQM). AACSB: Knowledge Time on Task: 4 min
117. What are the four types of quality costs? Ans: internal failure costs, external failure costs, appraisal costs, and prevention costs Solution: Prevention costs are all costs incurred in the process of preventing poor quality from occurring. Appraisal costs are incurred in the process of uncovering defects. Internal failure costs are associated with discovering poor product quality before the product reaches the customer site. External failure costs are associated with quality problems that occur at the customer site. Section Ref: Cost of Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 2: Identify costs of quality. AACSB: Knowledge Time on Task: 4 min
118. What are the steps involved in quality function deployment? Ans: 1) important customer requirements are identified; 2) the requirements are numerically scored, based on their importance; 3) the scores are translated into specific product characteristics; 4) evaluations are made of how the product compares with its main competitors relative to the identified characteristics; and 5) specific goals are set to address the identified problems Solution: QFD begins by identifying important customer requirements, which typically come from the marketing department. These requirements are numerically scored based on their importance, and scores are translated into specific product characteristics. Evaluations are then made of how the product compares with its main competitors relative to the identified characteristics. Finally, specific goals are set to address the identified problems. The resulting matrix looks like a picture of a house and is often called the house of quality. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 5 min
119. What are the seven TQM tools for solving quality problems? Ans: cause-and-effect diagrams, flowcharts, checklists, control charts, scatter diagrams, Pareto analysis, and histograms Solution: Cause-and-effect diagrams identify potential causes of particular quality problems. A flowchart is a schematic diagram of the sequence of steps involved in an operation or process. A checklist is a list of common defects and the number of observed occurrences of these defects. Control charts are a very important quality control tool. Scatter diagrams are graphs that show how two variables are related to one another. Pareto analysis is a technique used to identify quality problems based on their degree of importance. A histogram is a chart that shows the frequency distribution of observed values of a variable. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 6 min
120. Explain why external failure costs tend to be very expensive for service organizations. Ans: With a service the customer spends much time in the service delivery system, and there are fewer opportunities to correct defects than there are in manufacturing. Solution: Companies that consider quality important invest heavily in prevention and appraisal costs in order to prevent internal and external failure costs. The earlier defects are found, the less costly they are to correct. External failure costs tend to be particularly high for service organizations. The reason is that with a service the customer spends much time in the service delivery system, and there are fewer opportunities to correct defects than there are in manufacturing. Section Ref: Cost of Quality Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify costs of quality. AACSB: Knowledge Time on Task: 5 min
121. In using a cause-and-effect diagram, what are the primary possible causes of quality problems? Ans: machines, workers, measurements, suppliers, and materials Solution: The diagram is drawn so that the ―spine‖ of the fish connects the ―head‖ to the possible cause of the problem. These causes could be related to the machines, workers, measurement, suppliers, materials, and many other aspects of the production process. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 4 min
122. What are the seven categories for Malcolm Baldrige Award criteria? Ans: leadership, strategic planning, customer and market focus, information and analysis, human resource focus, process management, and business results Solution: The first category is leadership. Examiners consider commitment by top management, their effort to create an organizational climate devoted to quality, and their active involvement in promoting quality. The second category is strategic planning. The examiners look for a strategic plan that has high-quality goals and specific methods for implementation. The next category, customer and market focus, addresses how the company collects market and customer information. The fourth category is information and analysis. Examiners evaluate how the company obtains data and how it acts on the information. The fifth and sixth categories deal with management of human resources and management of processes, respectively. These two categories together address the issues of people and process. The last category is business results. Numerous measures of performance are considered, from percentage of defective items to financial and marketing measures. Section Ref: Quality Awards and Standards Subsection Ref: The Malcolm Baldrige National Quality Award (MBNQA) Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 5 min
123. What must a company do to become ISO 9000 certified? Ans: document methods used to monitor quality, document methods and frequency of worker training, document statistical process control tools used, provide job descriptions, document inspection programs, and have an audit by an ISO 9000 examiner Solution: To receive ISO certification, a company must provide extensive documentation of its quality processes. This includes methods used to monitor quality, methods and frequency of worker training, job descriptions, inspection programs, and statistical process control tools used. High-quality documentation of all processes is critical. The company is then audited by an ISO 9000 registrar, who visits the facility to make sure the company has a well-documented quality management system and that the process meets the standards. Section Ref: Quality Awards and Standards Subsection Ref: ISO 9000 Standards Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe quality awards and quality certifications. AACSB: Knowledge Time on Task: 4 min
124. Who are the seven primary quality gurus? Ans: Walter Shewhart, W. Edwards Deming, Joseph Juran, Armand Feigenbaum, Phillip Crosby, Kaoru Ishikawa, and Genichi Taguchi Solution: Walter A. Shewhart contributed to the understanding of process variability and developed the concept of statistical control charts. W. Edwards Deming stressed management‘s responsibility for quality and developed ―14 Points‖ to guide companies in quality improvement. Joseph M. Juran defined quality as ―fitness for use‖ and developed the concept of cost of quality. Armand V. Feigenbaum introduced the concept of total quality control. Philip B. Crosby coined the phrase ―quality is free‖ and introduced the concept of zero defects. Kaoru Ishikawa developed cause-and-effect diagrams and identified the concept of ―internal customer.‖ Genichi Taguchi focused on product design quality and developed the Taguchi loss function. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 5 min 125. Describe the foundation of Deming‘s ―14 Points.‖ Ans: Upper management must develop a commitment to quality and provide a system to support this commitment. Deming stressed that quality improvements cannot happen without organizational change that comes from upper management. Solution: Deming outlined his philosophy on quality in his famous ―14 Points‖ that help guide companies in achieving quality improvement. They are founded on the idea that upper management must develop a commitment to quality and provide a system to support this commitment that involves all employees and suppliers. Deming stressed that quality improvements cannot happen without the organizational change that comes from upper management. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 5 min
126. What are the common causes of TQM failure? Ans: lack of a genuine quality culture, lack of top management support and commitment, overand under-reliance on statistical process control (SPC) methods Solution: Some common causes for TQM failure are lack of a genuine quality culture, lack of top management support and commitment, and over- and underreliance on statistical process control (SPC) methods. Section Ref: Why TQM Efforts Fail Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 6: Understand why and how TQM efforts fail. AACSB: Knowledge Time on Task: 4 min
127. What are the five ways of defining quality? Ans: Quality is defined five different ways: conformance to specifications, fitness for use, value for price paid, support services, and psychological criteria. Solution: Five of the more common definitions of quality are the following. 1) Conformance to specifications measures how well the product or service meets the targets and tolerances determined by its designers. 2) Fitness for use focuses on how well the product performs its intended function or use. 3) Value for price paid is a definition of quality that consumers often use for product or service usefulness. 4) Support services provided are often how the quality of a product or service is judged. 5) Psychological criteria is a subjective definition that focuses on the judgmental evaluation of what constitutes product or service quality. Section Ref: Defining Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the meaning of total quality management (TQM). AACSB: Knowledge Time on Task: 4 min
128. TQM philosophy focuses on seven basic concepts. What are they? Ans: The seven basic concepts that TQM relies on are customer focus, continuous improvement, employee empowerment, use of quality tools, product design, process management, and managing supplier quality. Solution: 1) Customer focus: Goal is to identify and meet customer needs. 2) Continuous improvement: A philosophy of never-ending improvement. 3) Employee empowerment: Employees are expected to seek out, identify, and correct quality problems. 4) Use of quality tools: Ongoing employee training in the use of quality tools. 5) Product design: Products need to be designed to meet customer expectations. 6) Process management: Quality should be built into the process; sources of quality problems should be identified and corrected. 7) Managing supplier quality: Quality concepts must extend to a company‘s suppliers. Section Ref: The Philosophy of TQM Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 5 min
Problems
129. Suppose that a product has three parts, each of which must work in order for the product to function. The reliabilities of the parts are .898, .933, and .946, respectively. What is the reliability of the product? Ans: 79.3% (RS = R1 * R2 * R3 = .898 * .933 * .946 = .79259) Solution: If all the parts in a product must work for the product to function, then the reliability of the system is computed as the product of the reliabilities of the individual components: RS = R1 * R2 * R3 = .898 * .933 * .946 = .79259 Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Medium Bloom‘s: Application Learning Objective 4: Identify features of the TQM philosophy. AACSB: Analytic Time on Task: 3 min
130. Suppose that a product has two parts, both of which must be working in order for the product to function. The reliability of the first part is .85, and the reliability of the second part is .82. In addition, the second part comes with a backup that is 50% reliable. What is the overall reliability of the product? Ans: 77.35% (R2nd+backup = R2nd + Rbackup * (1 – R2nd) = 0.82 + 0.5 * (1 – 0.82) = .91; RS = R1st * R2nd+backup = 0.85 * 0.91 = .7735) Solution: In this case of parallel components, the reliability is computed by adding the reliability of the first component to the reliability of the second (backup) component, multiplied by the probability of needing the backup: R2nd+backup = R2nd + Rbackup * (1 – R2nd) = 0.82 + 0.5 * (1 – 0.82) = .91 If all the parts in a product must work for the product to function, then the reliability of the system is computed as the product of the reliabilities of the individual components: RS = R1st * R2nd+backup = 0.85 * 0.91 = .7735 Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Medium Bloom‘s: Application Learning Objective 4: Identify features of the TQM philosophy. AACSB: Analytic Time on Task: 5 min
131. As a design engineer you need to obtain 99.9% reliability. The first part has a reliability factor of 99.99%. What level of reliability do all the other parts combined require to achieve 99.9% overall reliability? Ans: 99.91% ((R2 * R3 *…… Rn) = RS / R1 =0.999 / 0.9999 = 0.9991 = 99.91% = 99.9%/99.99% = 99.91%) Solution: If all the parts in a product must work for the product to function, then the reliability of the system is computed as the product of the reliabilities of the individual components: RS = R1 * R2 * R3 *…… Rn; RS = 99.9% = .999; R1 = 99.99% = .9999; (R2 * R3 *…… Rn) = RS / R1 =0.999 / 0.9999 = 0.9991 = 99.91% Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Hard Bloom‘s: Synthesis Learning Objective 4: Identify features of the TQM philosophy. AACSB: Analytic Time on Task: 5 min
132. Suppose a product has two parts, both of which must be working in order for the product to function. The reliability of the first part is 0.99 and the reliability of the second part is 0.85. In addition, the second part comes with a backup that is x% reliable. If the desired overall reliability of the product is 0.9, what should be the value of x? Ans: 40 Solution: If all the parts in a product must work for the product to function, then the reliability of the system is computed as the product of the reliabilities of the individual components: RS = R1 * R2; RS = 90% = .9; R1 = 99% = .99; Then R2=0.9/0.99=0.91. In turn, R2 = R2c + Rbackup * (1 – R2c), 0.91 = 0.85 + x * (1 – 0.85), which yields x = 0.40 or 40%. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Hard Bloom‘s: Evaluation Learning Objective 4: Identify features of the TQM philosophy. AACSB: Analytic Time on Task: 8 min
Short Answer
133. TQM stresses the balanced use of nonquantitative (qualitative) tools and what other type of tools in quality improvement? Ans: statistical or quantitative Solution: Section Ref: Why TQM Efforts Fail Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 6: Understand why and how TQM efforts fail. AACSB: Knowledge Time on Task: 1.5 min
134. Redundant components (backups) are often used when product failure ________________________. Ans: may have severe (critical, catastrophic, disastrous, extreme, etc.) effects. Solution: The failure of certain products can be very critical. One way to increase product reliability is to build redundancy into the product design in the form of backup parts. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 2 min
135. Quality function deployment (QFD) begins by ________________________. Ans: identifying important customer requirements. Solution: QFD begins by identifying important customer requirements, which typically come from the marketing department. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min 136. Histograms report the ________________________ of a variable‘s observed values. Ans: frequency distribution Solution: A histogram is a chart that shows the frequency distribution of observed values of a variable. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
137. Checklists are used to make sure all steps in a process are carried out and to ________________________. Ans: record how often common defects occur. Solution: A checklist is a list of common defects and the number of observed occurrences of these defects. Section Ref: The Philosophy of TQM Subsection Ref: Use of Quality Tools Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min
138. The most common type of a team effort in TQM is called a ________________________. Ans: quality circle Solution: One of the most common types of teams is the quality circle, a team of volunteer production employees and their supervisors whose purpose is to solve quality problems. Section Ref: The Philosophy of TQM Subsection Ref: Employee Empowerment Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 1 min 139. Reliability is described as a _____, a ______, or a _____. Ans: probability, likelihood, chance Solution: Reliability is a probability, a likelihood, or a chance. Section Ref: The Philosophy of TQM Subsection Ref: Product Design Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify features of the TQM philosophy. AACSB: Knowledge Time on Task: 3 min
140. Philip Crosby believed that ________________________ because the cost of doing it right the first time is less than the cost of correcting mistakes later. Ans: quality is free Solution: Crosby stressed that efforts to improve quality more than pay for themselves because these costs are prevented. Therefore, quality is free. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: Quality Gurus Level: Easy Bloom‘s: Comprehension Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min 141. The old concept of quality involved inspecting for quality during, before, or after production? Ans: inspecting for quality after production Solution: Today‘s concept of quality, called total quality management (TQM), focuses on building quality into the process, as opposed to simply inspecting for poor quality after production. Section Ref: The Evolution of Total Quality Management (TQM) Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 3: Describe the evolution of TQM. AACSB: Knowledge Time on Task: 1 min d 142. The most important factor in the success or failure of TQM efforts is the _____ of the organization‘s _____. Ans: genuineness; commitment Solution: The most important factor in the success or failure of TQM efforts is the genuineness of the organization‘s commitment. Section Ref: Why TQM Efforts Fail Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 6: Understand why and how TQM efforts fail. AACSB: Knowledge Time on Task: 3 min
Testbank Chapter 6: Statistical Quality Control LO Section
Subsection
Question #
What Is Statistical Quality Control?
1, 2,3 , 4, 7, 73, 74, 84, 85, 86, 106, 107, 108, 109
Sources of Variation: Common and Assignable Causes
5, 17, 18, 87
Descriptive Statistics
75 The Mean The Range and Standard Deviation Distribution of Data
19 6, 8, 20, 21, 88, 89, 90, 132 22
Statistical Process Control Methods
Developing Control Charts Types of Control Charts Control Charts for Variables
9, 24, 25, 26, 27, 28, 29, 30, 91, 92, 93, 94, 96, 110 31, 76, 95, 97, 111 23, 120, 123
Mean (x-Bar) Charts Range (R) Charts Using Mean and Range Charts Together Control Charts for Attributes
10, 11, 12, 32, 68, 70, 77, 103, 134, 135 33, 66, 98, 112, 126, 136 100 13, 35, 36, 37, 102, 122
p-Charts
14, 34, 38, 39, 62, 65, 99, 101, 113, 121, 124, 133
c-Charts
15, 63, 64, 67, 69, 71, 78, 114, 125, 127
Process Capability
40, 41, 102 Measuring Process Capability
48, 79, 128, 129, 130, 137 49, 50, 51, 52, 53, 54, 55, 80, 104, 105, 115, 116, 138
Six Sigma Quality Acceptance Sampling Sampling Plans
Operating Characteristics (OC) Curves
58, 59 16, 57, 119, 139, 140, 141, 144
Developing OC Curves Average Outgoing Quality Implications for Managers
81, 131, 142
How Much and How Often to Inspect Where to Inspect
56 60, 82
Which Tools to Use Statistical Quality Control in Services
72, 83, 117
Statistical Quality Control (SQC) within OM: How It All Fits Together
118, 143
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Multiple Choice
1. Which of the following is associated with descriptive statistics? a) control chart b) standard deviation c) process capability index d) proportion Ans: b Solution: Descriptive statistics are used to describe quality characteristics and relationships. Included are statistics such as the mean, the standard deviation, the range, and a measure of the distribution of data. Section Ref: What Is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 1.5 min
2. What technique determines whether a batch of goods should be accepted or rejected? a) statistical process control b) acceptance sampling c) fishbone diagramming d) scatter plotting e) experimental design Ans: b Solution: Acceptance sampling determines whether a batch of goods should be accepted or rejected. Section Ref: What Is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 1.5 min
3. What technique answers the question of whether the process is functioning properly or not? a) fishbone diagramming b) acceptance sampling c) statistical process control d) scatter plotting e) experimental design Ans: c Solution: Statistical process control (SPC) answers the question of whether or not the process is functioning properly. Section Ref: What Is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 1.5 min
4. Statistical process control tools are used MOST frequently because a) they are mathematically based. b) they are helpful in measuring and evaluating the quality of products. c) they are helpful in measuring and evaluating the customers‘ needs. d) they are qualitative evaluation techniques. e) they provide a definitive ROI calculation. Ans: b Solution: Statistical process control (SPC) tools are used most frequently because they identify quality problems during the production process. Section Ref: What Is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 1.5 min
5. Common causes of variation are also known as a) frequent. b) usual. c) inexpensive. d) ordinary. e) random. Ans: e Solution: Common, or random, causes of variation are based on random causes that we cannot identify. Section Ref: Sources of Variation: Common and Assignable Causes Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 2: Identify and describe causes of variation. AACSB: Knowledge Time on Task: 1 min
6. The range is an example of what? a) measures of variability b) measures of central tendency c) acceptance sampling d) experimental design e) statistical process control Ans: a Solution: The most important descriptive statistics are measures of central tendency such as the mean, measures of variability such as the standard deviation and range, and measures of the distribution of data. Section Ref: Descriptive Statistics Subsection Ref: The Range and Standard Deviation Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the use of descriptive statistics in measuring quality characteristics. AACSB: Knowledge Time on Task: 1 min
7. Variation in the production process leads to a) quality defects. b) process improvement opportunities. c) quality improvements. d) product consistency. e) service improvements. Ans: a Solution: Variation in the production process leads to quality defects and lack of product consistency. Section Ref: What Is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 1.5 min
8. The standard deviation is an example of what? a) measures of variability b) measures of central tendency c) acceptance sampling d) experimental design e) statistical process control Ans: a Solution: The most important descriptive statistics are measures of central tendency such as the mean, measures of variability such as the standard deviation and range, and measures of the distribution of data. Section Ref: Descriptive Statistics Subsection Ref: The Range and Standard Deviation Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the use of descriptive statistics in measuring quality characteristics. AACSB: Knowledge Time on Task: 1 min
9. A process chart is a a) graph that shows how the population was evaluated. b) graph of the population failures. c) graph that shows whether a sample of data falls within assignable causes. d) graph that show whether a sample falls within the common or normal range. e) table showing final inspection results. Ans: d Solution: A control chart (also called process chart or quality control chart) is a graph that shows whether a sample of data falls within the common or normal range of variation. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min
10. An x-bar chart is an example of what? a) descriptive statistics b) fishbone diagramming c) acceptance sampling d) experimental design e) statistical process control Ans: e Solution: The most commonly used statistical process control tool is a control chart. A mean control chart is often referred to as an x-bar chart. Section Ref: Control Charts for Variables Subsection Ref: Mean (x-Bar) Charts Level: Easy Bloom‘s: Comprehension Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 1.5 min
11. For the standard normal distribution, how much confidence is provided within 2 standard deviations above and below the mean? a) 97.22% b) 95.44% c) 99.74% d) 99.87% e) 90.00% Ans: b Solution: For the standard normal distribution, 95.44% of observations are within 2 standard deviations above and below the mean. Section Ref: Control Charts for Variables Subsection Ref: Mean (x-Bar) Charts Level: Easy Bloom‘s: Knowledge Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 1 min
12. The A2 factor includes how many standard deviations of ranges? a) 1 b) 2 c) 3 d) 4 e) 6 Ans: c Solution: A2 is a factor that includes 3 standard deviations of ranges and is dependent on the sample size being considered. Section Ref: Control Charts for Variables Subsection Ref: Mean (x-Bar) Charts Level: Easy Bloom‘s: Knowledge Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 1 min
13. A p-chart is an example of what? a) descriptive statistics b) fishbone diagramming c) acceptance sampling d) experimental design e) statistical process control Ans: e Solution: The most commonly used statistical process control tool is a control chart. Two of the most common types of control charts for attributes are p-charts and c-charts. Section Ref: Control Charts for Attributes Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Knowledge Time on Task: 1.5 min
14. P-charts are used to measure a) continuous variation. b) intermittent random variation. c) the proportion of items in a sample that are defective. d) the count of defective parts. e) proportion of items in a sample that are good. Ans: c Solution: P-charts are used to measure the proportion of items in a sample that are defective. Section Ref: Control Charts for Attributes Subsection Ref: p-Charts Level: Easy Bloom‘s: Knowledge Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Knowledge Time on Task: 1 min
15. A c-chart is an example of what? a) descriptive statistics b) fishbone diagramming c) acceptance sampling d) experimental design e) statistical process control Ans: e Solution: The most commonly used statistical process control tool is a control chart. Two of the most common types of control charts for attributes are p-charts and c-charts. Section Ref: Control Charts for Attributes Subsection Ref: c-Charts Level: Easy Bloom‘s: Comprehension Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Knowledge Time on Task: 1.5 min
16. An operating characteristic (OC) curve is an example of what? a) descriptive statistics b) fishbone diagramming c) acceptance sampling d) experimental design e) statistical process control Ans: c Solution: Operating characteristic (OC) curve is the most common sampling plan used in acceptance sampling. Section Ref: Acceptance Sampling Subsection Ref: Operating Characteristic (OC) Curves Level: Easy Bloom‘s: Comprehension Learning Objective 9: Explain the process of acceptance sampling and describe the use of operating characteristic (OC) curves. AACSB: Knowledge Time on Task: 1.5 min
17. Causes of variation that can be identified and eliminated are called a) random. b) assignable. c) identifiable. d) stochastic. e) common. Ans: b Solution: Variations where the causes can be precisely identified and eliminated are called assignable causes of variation. Section Ref: Sources of Variation: Common and Assignable Causes Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 2: Identify and describe causes of variation. AACSB: Knowledge Time on Task: 1 min
18. All processes will have what type of variation? a) random b) assignable c) identifiable d) stochastic e) common Ans: a Solution: Common (random) causes of variation are unavoidable and are due to slight differences in processing. Section Ref: Sources of Variation: Common and Assignable Causes Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify and describe causes of variation. AACSB: Knowledge Time on Task: 1 min
19. What measures the central tendency of a set of data? a) coefficient of variation b) variance c) standard deviation d) mean e) range Ans: d Solution: The arithmetic average, or the mean, is a statistic that measures the central tendency of a set of data. Section Ref: Descriptive Statistics Subsection Ref: The Mean Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the use of descriptive statistics in measuring quality characteristics. AACSB: Knowledge Time on Task: 1 min
20. What measures the difference between the largest and smallest observations in a set of data? a) range b) coefficient of variation c) coefficient of kurtosis d) coefficient of skewness e) standard deviation Ans: a Solution: The range is the difference between the largest and smallest observations. Section Ref: Descriptive Statistics Subsection Ref: The Range and Standard Deviation Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the use of descriptive statistics in measuring quality characteristics. AACSB: Knowledge Time on Task: 1 min
21. Which of the following would imply that data observations are closely clustered around the mean? a) small range and small standard deviation b) small range and large standard deviation c) large range and small standard deviation d) large range and large standard deviation Ans: a Solution: Small values of the range and standard deviation mean that the observations are closely clustered around the mean. Large values of the range and standard deviation mean that the observations are spread out around the mean. Section Ref: Descriptive Statistics Subsection Ref: The Range and Standard Deviation Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the use of descriptive statistics in measuring quality characteristics. AACSB: Knowledge Time on Task: 1.5 min
22. What is a distribution called when the same numbers of observations are below the mean as are above the mean? b) proportional b) equalized c) wholly uniform d) balanced e) symmetric Ans: e Solution: When a distribution is symmetric, there are the same number of observations below and above the mean. Section Ref: Descriptive Statistics Subsection Ref: Distribution of Data Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the use of descriptive statistics in measuring quality characteristics. AACSB: Knowledge Time on Task: 1 min
23. What are the four most common control charts? a) x-bar, R, p, c b) x-bar, R, p, OC c) x-bar, R, c, OC d) x-bar, p, c, OC e) R, p, c, OC Ans: a Solution: Control charts can be divided into two groups: variables, which include x-bar and Rcharts, and attributes, which include p- and c-charts. Section Ref: Control Charts for Variables Subsection Ref: Introduction Level: Easy Bloom‘s: Knowledge Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 1 min
24. On a control chart, what separates common from assignable causes of variation? a) x-bar lines b) control limits c) specification limits d) production limits e) mean divided by standard deviation Ans: b Solution: A control chart has upper and lower control limits that separate common from assignable causes of variation. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min
25. The center line of a control chart represents what? a) range b) standard deviation c) mean d) mean divided by standard deviation e) skewness Ans: c Solution: The center line (CL) of the control chart is the mean, or average, of the quality characteristic that is being measured. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min
26. What is the first step that should be taken if an observation falls below the lower control limit on a control chart? a) Recalibrate the machine. b) Perform a new process capability study. c) Try a larger standard deviation value. d) Search for assignable causes. e) Nothing—a low value is a ―good‖ thing. Ans: d Solution: If a sample of observations falls outside the control limits, we need to look for assignable causes. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Comprehension Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1.5 min
27. Upper and lower control limits are usually set at how many standard deviations from the mean? a) 0.5 b) 1.0 c) 2.0 d) 3.0 e) 6.0 Ans: d Solution: The upper and lower control limits on a control chart are usually set at 3 standard deviations from the mean. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min 28. Assuming that data exhibit a normal distribution, control limits set at 3 standard deviations from the mean capture how much common variation? a) 50.00% b) 80.00% c) 95.44% d) 99.74% e) 99.99% Ans: d Solution: If we assume that the data exhibit a normal distribution, the control limits set at 3 standard deviations will capture 99.74 percent of the normal variation. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min
29. What is the probability of a Type I error for a control chart with limits set at 3 standard deviations from the mean? a) 0.00% b) 0.26% c) 4.56% d) 20.00% e) 50.00% Ans: b Solution: For limits of ± 3 standard deviations from the mean, the probability of a Type I error is 0.26 percent (100% − 99.74%). Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min
30. What is the term for the probability that a value falling outside the control limits is still due to normal variation? a) Type I error b) Type II error c) normalization anomaly d) Beta risk e) standard deviation irregularity Ans: a Solution: There is a small probability that a value that falls outside the limits is still due to normal variation which is called Type I error. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min
31. The different characteristics that can be measured by control charts can be divided into what two groups? a) parameters and attributes b) variables and attributes c) variables and constraints d) variables and parameters e) attributes and constraints Ans: b Solution: The different characteristics that can be measured by control charts can be divided into two groups: variables and attributes. Section Ref: Statistical Process Control Methods Subsection Ref: Types of Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min
32. What is a control chart that monitors changes in the mean value of a process? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: a Solution: An x-bar chart is used to monitor changes in the mean value of a process. Section Ref: Control Charts for Variables Subsection Ref: Mean (x-Bar) Charts Level: Easy Bloom‘s: Knowledge Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 1 min
33. What is a control chart that monitors changes in the dispersion or variability of a process? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: b Solution: Range (R) charts monitor the dispersion or variability of the process. Section Ref: Control Charts for Variables Subsection Ref: Range (R) Charts Level: Easy Bloom‘s: Knowledge Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 1 min
34. What is a control chart that monitors the proportion of defects in a sample? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: c Solution: P-charts are used to measure the proportion that is defective in a sample. Section Ref: Control Charts for Attributes Subsection Ref: p-Charts Level: Easy Bloom‘s: Knowledge Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Knowledge Time on Task: 1 min
35. For which of the following would a control chart for attributes be appropriate? a) weight of potato bags b) temperature of refrigerated sodas c) number of rotten apples d) length of metal rods Ans: c Solution: Section Ref: Control Charts for Attributes Subsection Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 2 min
36. What are the two types of control charts for attributes? a) p and c b) x-bar and p c) x-bar and R d) R and c e) p and R Ans: a Solution: Two of the most common types of control charts for attributes are p-charts and ccharts. Section Ref: Control Charts for Attributes Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Knowledge Time on Task: 1 min
37. What are the two types of control charts for variables? a) p and c b) x-bar and p c) x-bar and R d) R and c e) p and R Ans: c Solution: Two of the most commonly used control charts for variables monitor both the central tendency of the data (x-bar) and the variability of the data (R). Section Ref: Control Charts for Variables Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 1 min
38. Consider a p-chart measuring the percentage of defective light bulbs. If the LCL is 4% and a sample has 1% defects, what is the implication? a) The process is in a state of control. b) The process is out of control even though the variation is ―good.‖ c) The value of sigma must be increased. d) The process has too many errors. e) A calculation error must have occurred. Ans: b Solution: P-charts are used to measure the proportion that is defective in a sample. The sample has 1% defects or p = 0.01. Since p = 0.01 < LCL = 0.04, the process is out of control. Section Ref: Control Charts for Attributes Subsection Ref: p-Charts Level: Medium Bloom‘s: Application Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 2.5 min
39. For a p-chart or c-chart, what is the implication of a negative value for the LCL? a) A calculation error must have occurred. b) The value of sigma must be reduced. c) The process has too many errors. d) The process is in a state of control. e) The LCL can effectively be rounded up to 0. Ans: e Solution: When the lower control limit is negative, the LCL is rounded up to zero because we cannot have a negative control limit. Section Ref: Control Charts for Attributes Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Knowledge Time on Task: 1.5 min
40. What are preset ranges of acceptable quality characteristics? b) control limits b) product specifications c) Six Sigma limits d) AQC limits e) R-chart limits Ans: b Solution: Product specifications, often called tolerances, are preset ranges of acceptable quality characteristics, such as product dimensions. Section Ref: Process Capability Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Knowledge Time on Task: 1 min
41. Product tolerances are often called a) SPC. b) product drawings. c) product descriptions. d) process capability. e) product specifications. Ans: e Solution: Product specifications, often called tolerances, are preset ranges of acceptable quality characteristics, such as product dimensions. Section Ref: Process Capability Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Knowledge Time on Task: 1 min
42. What process width is typically used when computing the process capability index Cp? a) 1 b) 2 c) 3 d) 4 e) 6 Ans: e Solution: The process width is usually computed as 6 standard deviations (6σ) of the process being monitored. Section Ref: Process Capability Subsection Ref: Measuring Process Capability Level: Easy Bloom‘s: Knowledge Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Knowledge Time on Task: 1 min
43. Setting up control charts to monitor whether a process is in control a) guarantees process capability. b) guarantees process specifications. c) does not guarantee process capability. d) does not guarantee product specification. e) guarantees meeting client needs. Ans: c Solution: Simply setting up control charts to monitor whether a process is in control does not guarantee process capability. Section Ref: Process Capability Subsection Ref: Measuring Process Capability Level: Easy Bloom‘s: Comprehension Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Knowledge Time on Task: 1.5 min
44. What is the formula for the process capability index Cp? a) process width / specification width b) specification width process width c) specification width / Type I error d) specification width / process width e) specification width / 99.74% Ans: d Solution: Process capability index, Cp is computed as the ratio of the specification width to the width of the process variability: (CP = (USL – LSL)/6σ) Section Ref: Process Capability Subsection Ref: Measuring Process Capability Level: Easy Bloom‘s: Knowledge Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Knowledge Time on Task: 1 min
45. What process capability index (Cp) value implies that the process ―exceeds minimal capability?‖ a) 0 b) < 1 c) = 1 d) > 1 e) 6 Ans: d Solution: A value of Cp above 1 means that the process variability is tighter than specifications and the process exceeds minimal capability. Section Ref: Process Capability Subsection Ref: Measuring Process Capability Level: Easy Bloom‘s: Comprehension Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Knowledge Time on Task: 1.5 min
46. A process capability index (Cp) value of 1 means that what percent of products produced will fall within the specification limits? a) 0.26% b) 90.00% c) 95.44% d) 99.74% e) 100.00% Ans: d Solution: A value of Cp equal to 1 means that the process variability just meets specifications and that 99.74 percent of the products produced will fall within the specification limits. Section Ref: Process Capability Subsection Ref: Measuring Process Capability Level: Easy Bloom‘s: Comprehension Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Knowledge Time on Task: 1.5 min
47. According to the textbook, the way to reduce the parts per million (ppm) defective is to a) change product specifications. b) increase process capability. c) increase the number of inspection points. d) employ more inspectors. e) increase process throughput. Ans: b Solution: The way to reduce the parts per million (ppm) defective is to increase process capability. Section Ref: Process Capability Subsection Ref: Measuring Process Capability Level: Easy Bloom‘s: Comprehension Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Knowledge Time on Task: 1.5 min
48. What is the relationship between Cp and Cpk? a) Cp 2 Cpk b) Cp Cpk c) Cp Cpk d) Cp 2Cpk e) Cp Cpk 3 Ans: c Solution: This measure of process capability (Cpk) helps us address a possible lack of centering of the process over the specification range which is not captured by Cp. Therefore, Cp = Cpk if the process is centered and Cp > Cpk if the process is not centered. Section Ref: Process Capability Subsection Ref: Measuring Process Capability Level: Medium Bloom‘s: Analysis Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Analytic Time on Task: 2 min
49. Which company is known for coining the term ―Six Sigma?‖ a) Ford Motor Company b) Proctor & Gamble c) IBM d) Motorola Corporation e) Hewlett-Packard Ans: d Solution: The term Six Sigma was coined by the Motorola Corporation in the 1980s to describe the high level of quality the company was striving to achieve. Section Ref: Six Sigma Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Explain the concept Six Sigma. AACSB: Knowledge Time on Task: 1 min
50. Six Sigma quality implies how many average defects per million? a) 3.4 b) 6 c) 2600 d) 3 e) 6 Ans: a Solution: The level of defects associated with Six Sigma is approximately 3.4 ppm. Section Ref: Six Sigma Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Explain the concept Six Sigma. AACSB: Knowledge Time on Task: 1 min
51. What are the two aspects to implementing the Six Sigma concept? a) numerically controlled machines and inventory management b) numerically controlled machines and people involvement c) numerically controlled machines and technical tools d) technical tools and people involvement e) inventory management and technical tools Ans: d Solution: There are two aspects to implementing the Six Sigma concept: the use of technical tools to identify and eliminate causes of quality problems and people involvement. Section Ref: Six Sigma Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Explain the concept Six Sigma. AACSB: Knowledge Time on Task: 1 min
52. In Six Sigma programs, individuals who have extensive training in the use of technical tools and are responsible for carrying out the implementation of Six Sigma are __________________. a) black belts b) green belts c) blue belts d) red belts e) white belts Ans: a Solution: Black belts and master black belts are individuals who have extensive training in the use of technical tools and are responsible for carrying out the implementation of Six Sigma. Section Ref: Six Sigma Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Explain the concept Six Sigma. AACSB: Knowledge Time on Task: 1 min
53. In Six Sigma programs, individuals are given __________________ titles that reflect their skills in the Six Sigma process. a) Olympic games b) academic c) martial arts d) medieval jousting e) boxing Ans: c Solution: Employees are given martial arts titles that reflect their skills in the Six Sigma process. Section Ref: Six Sigma Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Explain the concept Six Sigma. AACSB: Knowledge Time on Task: 1 min
54. The Six Sigma approach is organized around a _______ plan known as ________. a) four step; PDAC b) four step; DMAC c) five step; PDACR d) five step; DMAIC e) five step; DMCRA Ans: d Solution: The Six Sigma approach is organized around a five-step plan known as DMAIC, which stands for Define, Measure, Analyze, Improve, and Control. Section Ref: Six Sigma Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Explain the concept Six Sigma. AACSB: Knowledge Time on Task: 1.5 min
55. The person that comes from the top ranks of the organization and is responsible for providing direction and overseeing all aspects of a Six Sigma implementation process is called a ________________________. a) general b) admiral c) director d) producer e) champion Ans: e Solution: A champion of Six Sigma is a person who comes from the top ranks of the organization and who is responsible for providing direction and overseeing all aspects of the process. Section Ref: Six Sigma Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Explain the concept Six Sigma. AACSB: Knowledge Time on Task: 1 min
56. When should 100% inspection be used? a) whenever attributes are being measured b) when the expected cost of a defective item exceeds the cost of inspecting a unit c) with destructive testing d) when the cost of inspecting a unit exceeds the expected cost of a defective item e) 100% inspection should never be used Ans: b Solution: Frequency of inspection should be designed to consider the trade-off between the cost of inspection and the cost of passing on a defective item. Historically, inspections were set up to minimize these two costs. Thus, if the expected cost of a defective item exceeds the cost of inspecting a unit all items produced should be inspected. Section Ref: Implications for Managers Subsection Ref: How Much and How Often to Inspect Level: Medium Bloom‘s: Analysis Learning Objective 10: Identify decisions that managers must make when implementing SPC. AACSB: Analytic Time on Task: 2 min
57. What is a graph that shows the probability or chance of accepting a lot, given various proportions of defects in the lot? a) S curve b) Z-chart c) OC curve d) p-chart e) R-chart Ans: c Solution: An operating characteristic (OC) curve shows the probability or chance of accepting a lot, given various proportions of defects in the lot. Section Ref: Acceptance Sampling Subsection Ref: Operating Characteristic (OC) Curves Level: Easy Bloom‘s: Knowledge Learning Objective 9: Explain the process of acceptance sampling and describe the use of operating characteristic (OC) curves. AACSB: Knowledge Time on Task: 1 min
58. Single sampling plan is when a) a nonrandom sample is drawn from every lot. b) a random sample is drawn from every lot. c) a second lot is sampled due to the first sample‘s inconclusive results. d) only one time is tested. e) a sample plan is used once and discarded. Ans: b Solution: Single sampling plan is a plan in which a random sample is drawn from every lot. Section Ref: Acceptance Sampling Subsection Ref: Sampling Plans Level: Easy Bloom‘s: Knowledge Learning Objective 9: Explain the process of acceptance sampling and describe the use of operating characteristic (OC) curves. AACSB: Knowledge Time on Task: 1 min
59. According to the text, what percent of defects are consumers generally willing to accept? a) 1–2% b) 2–3% c) 3–4% d) 4–5% e) 5–6% Ans: a Solution: There is a small percentage of defects that consumers are willing to accept. This is called the acceptable quality level (AQL) and is generally on the order of 1–2 percent. Section Ref: Acceptance Sampling Subsection Ref: Operating Characteristic (OC) Curves Level: Easy Bloom‘s: Knowledge Learning Objective 9: Explain the process of acceptance sampling and describe the use of operating characteristic (OC) curves. AACSB: Knowledge Time on Task: 1 min
60. Which of the following is the LEAST important point to perform inspection? a) incoming materials b) prior to costly processing c) just after costly processing d) prior to bottleneck (limited machine capacity) processing e) after the product is finished Ans: c Solution: Since we cannot inspect every aspect of a process all the time, another important decision is where to inspect. Some areas are less critical than others. Some points that are typically considered most important for inspection are inbound materials, finished products, and prior to costly processing. Section Ref: Implications for Managers Subsection Ref: Where to Inspect Level: Easy Bloom‘s: Comprehension Learning Objective 10: Identify decisions that managers must make when implementing SPC. AACSB: Knowledge Time on Task: 1.5 min
61. What is the only service company to have won the Malcolm Baldrige National Quality Award twice? a) Marriott b) Nordstrom Department Stores c) Walmart d) Ritz-Carlton e) Northwest Airlines Ans: d Solution: The Ritz-Carlton has received a number of quality awards, including winning the Malcolm Baldrige National Quality Award twice. Section Ref: Statistical Quality Control in Services Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 11: Describe the challenges inherent in measuring quality in service organizations. AACSB: Knowledge Time on Task: 1 min
62. Suppose that you want to measure the percentage of candles that are cut longer than 9 inches. Which control chart would be appropriate? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: c Solution: P-charts are used to measure the proportion or percentage of items in a sample that are defective. Section Ref: Control Charts for Attributes Subsection Ref: p-Charts Level: Medium Bloom‘s: Application Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 2 min
63. What is the 3-sigma upper control limit for a c-chart if the total defects found over 20 samples equals 150? a) 7.5 b) 2.739 c) 15.72 d) 20 e) 30 Ans: c Solution: The average number of defects per sample is 150/20 = 7.5. The upper control limit is computed as the average number of defects plus standard normal variable by square root of the average number of defects: UCL = 7.5 + 3 * Square root of (7.5) = 15.72. Section Ref: Control Charts for Attributes Subsection Ref: c-Charts Level: Medium Bloom‘s: Application Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 4 min
64. Suppose that Matt wants to use a process control chart to monitor the number of different types of mistakes that he makes when giving motivational speeches to student groups. Which control chart would be MOST appropriate? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: d Solution: C-charts are used to monitor the number of defects per unit. Thus, c-charts should be used to monitor the number of mistakes made per speech. Section Ref: Control Charts for Attributes Subsection Ref: c-Charts Level: Medium Bloom‘s: Application Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 2 min
65. Suppose that you have calculated the control limits for a p-chart to be the following: LCL = 0.02 and UCL = 0.08. Today, you took 10 samples of 20 units each. The first nine samples each had one defect. The last sample had zero defects. What can you conclude? a) The process is out of control. b) The process is in a state of control. c) The last sample should be ignored because it was ―too good.‖ d) The limits were calculated incorrectly because the LCL must be either negative or 0. e) The sample size must be increased. Ans: a Solution: For the first 9 samples, p = 1/20 = 0.05. This is within control limits (0.02, 0.08). For the last sample, p = 0/20 = 0. This is below the LCL and the process is out of control. Section Ref: Control Charts for Attributes Subsection Ref: p-Charts Level: Medium Bloom‘s: Application Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 3 min
66. Suppose that you want to monitor the variability in ounces of a process that fills beer cans. Which control chart would be appropriate? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: b Solution: Range (R) charts monitor the dispersion or variability of the process for variables. Section Ref: Control Charts for Variables Subsection Ref: Range (R) Charts Level: Medium Bloom‘s: Application Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Analytic Time on Task: 2 min
67. What is the 3-sigma lower control limit for a c-chart if the average number of defects found over 320 samples is equal to 16? a) 6.584 b) 4 c) 20 d) 0 e) 12 Ans: b Solution: The lower control limit is computed as the average number of defects minus standard normal variable by square root of the average number of defects: LCL = 16 – 3 * Square root of (16) = 4. Section Ref: Control Charts for Attributes Subsection Ref: c-Charts Level: Medium Bloom‘s: Application Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 3 min 68. Each day for two workweeks (10 days total), George weighs 4 bags from that day‘s production. If the average of the means is 14 oz. and the average range is 0.4 oz., what is the 3sigma lower control limit for an x-bar chart for this process? a) 13.7084 oz. b) 13.8768 oz. c) 14.2916 oz. d) 12.8000 oz. e) 13.5908 oz. Ans: a Solution: The lower control limit (LCL) is equal to the average of the sample means minus factor A2 multiplied by average range of the samples. Factor A2 can be found from Table 6.1 (text p. 177). For the sample of 4 bags per day, A2 = 0.73. LCL = 14 – .73 * .4 = 13.708. Section Ref: Control Charts for Variables Subsection Ref: Mean (x-Bar) Charts Level: Medium Bloom‘s: Application Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Analytic Time on Task: 4 min
69. If the 3-sigma upper control limit for a c-chart is 28 and the 3-sigma lower control limit is 4, what is the average number of defects per sample? a) 16 b) 12 c) 5.29 d) 7.29 e) 4 Ans: a Solution: The lower control limit is computed as the average number of defects minus standard normal variable by square root of the average number of defects. The upper control limit is computed as the average number of defects plus standard normal variable by square root of the average number of defects. Thus, the difference between UCL and LCL is 2 * standard normal variable by square root of the average number of defects. And the average number of defects is equal to squared [ (UCL – LCL) / (2 * z) ] = squared [ (28 – 4) / (2 * 3) ] = 16. Section Ref: Control Charts for Attributes Subsection Ref: c-Charts Level: Hard Bloom‘s: Synthesis Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 5 min
70. Suppose that you want to monitor the average ounces of a process that fills beer cans. Which control chart would be appropriate? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: a Solution: An x-bar chart is used to monitor changes in the mean (average) of a process. Section Ref: Control Charts for Variables Subsection Ref: Mean (x-Bar) Charts Level: Medium Bloom‘s: Application Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Analytic Time on Task: 2 min
71. What is the 3-sigma upper control limit for a c-chart if the total defects found over 200 samples equals 32? a) 1.36 b) 13.75 c) 0.56 d) 25.00 e) 48.97 Ans: a Solution: The average number of defects per sample is 32/200 = 0.16. The upper control limit is computed as the average number of defects plus standard normal variable multiplied by the square root of the average number of defects: UCL = 0.16 + 3 * Square root of (0.16) = 1.36. Subsection Ref: c-Charts Level: Medium Bloom‘s: Application Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 4 min
72. Ritz-Carlton employees are empowered to spend up to how much money on the spot to correct any customer complaint? a) $25 b) $50 c) $100 d) $1000 e) $2000 Ans: e Solution: To keep customers happy, employees are empowered to spend up to $2000 on the spot to correct any customer complaint. Section Ref: Statistical Quality Control in Services Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 11: Describe the challenges inherent in measuring quality in service organizations. AACSB: Knowledge Time on Task: 1 min
73. What program at Intel enforces the policy to make chips in the same way at all facilities? a) ―make-same‖ b) ―copy-exactly‖ c) ―duplicate-same‖ d) ―duplicate-exactly‖ e) ―one-size-fits-all‖ Ans: b Solution: Intel has implemented the ―copy-exactly‖ program, where the production process must be the same at every facility. Section Ref: What is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 1 min
74. Burns Industries wants to know information about the diameter of tires they produce. A sample of 100 tires was taken and the diameters were measured. Based on the sample the average diameter and the range were calculated. Which category of statistical process control was used by Burns Industries? a) descriptive statistics b) statistical process control c) acceptance sampling d) Six Sigma Ans: a Solution: Descriptive statistics are used to describe quality characteristics and relationships. Included are statistics such as the mean, the standard deviation, the range, and a measure of the distribution of data. Section Reference: What Is Statistical Quality Control? Subsection Reference: n/a Level: Medium Blooms: Application Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Analytic Time on Task: 1.5 min
75. Sam collected 10 apples from an orchard. The weights of the apples in ounces were 5, 7, 6, 7, 9, 10, 6, 5, 8, and 7. Calculate the mean and the range of weights for the sample. a) mean of 5 ounces and range of 5 ounces b) mean of 5 ounces and range of 10 ounces c) mean of 7 ounces and range of 5 ounces d) mean of 7 ounces and range of 10 ounces Ans: c Solution: The mean is ̅
∑
= (5 + 7 + 6 + 7 + 9 + 10 + 6 + 5 + 8 + 7) / 10 = 7 ounces
The range is the difference between the largest and smallest observations (10 – 5) = 5 ounces Section Reference: Descriptive Statistics Subsection Reference: n/a Level: Medium Blooms: Application Learning Objective 3: Explain the use of descriptive statistics in measuring quality characteristics. AACSB: Analytic Time on Task: 3 min
76. Room temperature is an example of a) an attribute. b) a variable. c) both attribute and variable. d) neither attribute nor variable. Ans: b Solution: Variables are characteristics that can be measured and have a continuum of values, such as height, weight, or volume. Section Reference: Statistical Process Control Methods Subsection Reference: Types of Control Charts Level: Medium Blooms: Analysis Learning Objective 4: Describe the use of control charts. AACSB: Analytic Time on Task: 1.5 min
77. A sample of 8 units was taken and the length of each unit was measured in inches. The lengths are 12, 15, 13, 17, 11, 12, 14, and 12. The standard deviation of the distribution of sample means is 2.1 inch. Develop 3-sigma control limits for an x-bar chart. a) UCL = 15.48 inches and LCL = 11.02 inches b) UCL = 19.55 inches and LCL = 6.95 inches c) UCL = 15.89 inches and LCL = 11.44 inches d) UCL = 19.97 inches and LCL = 7.37 inches Ans: b Solution: The average of sample means is ̿
∑
̅
= (12 + 15 + 13 + 17 + 11 + 12 + 14 +
12)/8 = 13.25. Upper control limit (UCL) = ̿ ̅ = 13.25 + 3 * 2.1 = 19.55 inches. Lower control limit (LCL) = ̿ ̅ = 13.25 – 3 * 2.1 = 6.95 inches. Section Reference: Control Charts for Variables Subsection Reference: Mean (x-Bar) Charts Difficulty Level: Medium Blooms: Application Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Analytic Time on Task: 4 min
78. Hooper‘s Store analyzes customer complaints they receive daily. The number of complaints per day for the past week is as following: 20, 23, 15, 29, 27, 25, and 23. Develop 3-sigma control limits using the appropriate control chart. a) UCL = 35.23 and LCL = 8.71 b) UCL = 37.57 and LCL = 9.22 c) UCL = 35.23 and LCL = 9.22 d) UCL = 37.57 and LCL = 8.71 Ans: d Solution: A c-chart should be used. The average number of complaints per day is (20 + 23 + 15 + 29 + 27 + 25 + 23)/7 = 23.14. √ ̅ = 23.14 + 3 * square root (23.14) = 37.57. Upper control limit (UCL) = ̅ √ ̅ = 23.14 – 3 * square root (23.14) = 8.71. Lower control limit (LCL) = ̅ Section Reference: Control Charts for Attributes Subsection Reference: c-Charts Level: Medium Blooms: Application Learning Objective 6: Identify the differences between p- and c-charts. AACSB: Analytic Time on Task: 3 min
79. The Green Farm produces potatoes and sells them in 5-pound bags. The specification limits for the acceptable weight of the bags are 4.8 and 5.3 pounds. Standard deviation of the process is 0.12 pounds. Calculate the process capability index. A. 0.694 B. 0.753 C. 0.426 D. 1.112 Ans: A Solution: Cp =
= (5.3 – 4.8) / (6 * 0.12) = 0.694.
Section Reference: Process Capability Subsection Reference: Measuring Process Capability Level: Medium Blooms: Application Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Analytic Time on Task: 2.5 min
80. Fang and Bone is implementing Six Sigma to improve the quality of customer service. Information about current processes was already collected and Fang and Bone is trying to recognize the main causes of the customer service problem. What step of the DMAIC plan is the company currently at? a) define b) measure c) analyze d) improve e) control Ans: c Solution: STEP 3: Analyze the process to identify the root causes of the quality problem. Section Reference: Six Sigma Quality Subsection Reference: n/a Level: Medium Blooms: Analysis Learning Objective 8: Explain the concept of Six Sigma. AACSB: Analytic Time on Task: 2 min
81. Globex is shipping 1,000 units to its buyer. It inspected 100 units from the lot and found that 2% of the items are defective. Probability of accepting the lot is assumed to be 95%. Compute the average outgoing quality. a) 0.0125 b) 0.0171 c) 0.0243 d) 0.0415 Ans: b Solution: AOQ =
(
) = 0.95 * 0.02 * (1,000 – 100) / 1,000 = 0.0171.
Section Reference: Acceptance Sampling Subsection Reference: Average Outgoing Quality Level: Medium Blooms: Application Learning Objective 9: Explain the process of acceptance sampling and describe the use of operating characteristic (OC) curves AACSB: Analytic Time on Task: 3 min
82. Should a company inspect its final product before shipping it to a buyer? Why or why not? a) Yes, so high quality of product will be guaranteed. b) Yes, so the buyer will not need to inspect. c) No, the buyer will inspect it anyway. d) No, inspection is expensive. Ans: a Solution: Yes. The buyer will probably inspect the product anyway, but final product is what will be experienced by the customer, and an inspection at this point is necessary to ensure high quality. Section Reference: Implications for Managers Subsection Reference: Where to Inspect Level: Medium Blooms: Analysis Learning Objective 10: Identify decisions that managers must make when implementing SPC. AACSB: Analytic Time on Task: 2 min
83. Measuring quality in service is ________ than in manufacturing, because __________________. a) easier; customers are often present during the service and can explain what they want b) easier; service processes are usually less complicated than manufacturing processes c) harder; service processes are usually more complicated than manufacturing processes d) harder; customers are often present during the service that provides less time for quality improvement Ans: d Solution: An issue that complicates quality control in service organizations is that the service is often consumed during the production process. The customer is often present during service delivery, and there is little time to improve quality. The workforce that interfaces with customers is part of the service delivery. Section Reference: Statistical Quality Control in Services Subsection Reference: n/a Level: Medium Blooms: Analysis Learning Objective 11: Describe the challenges inherent in measuring quality in service organizations. AACSB: Analytic Time on Task: 2 min
True/False
84. Descriptive statistics are used to describe quality characteristics and relationships. Ans: True Solution: Descriptive statistics are used to describe quality characteristics and relationships. Section Ref: What Is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 1 min
85. Statistical quality control is a subset of statistical process control. Ans: False Solution: Statistical quality control can be divided into three broad categories: descriptive statistics, statistical process control, and acceptance sampling. Section Ref: What Is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 1 min
86. Acceptance sampling occurs after the product has been produced. Ans: True Solution: Acceptance sampling is the process of randomly inspecting a sample of produced goods. Section Ref: What Is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 1 min
87. An important task in quality control is to find out the range of natural random variation in a process. Ans: True Solution: An important task in quality control is to find out the range of natural random variation in a process. Section Ref: Sources of Variation: Common and Assignable Causes Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Identify and describe causes of variation. AACSB: Knowledge Time on Task: 1 min
88. The standard deviation measures the difference between the largest and smallest observations in a set of data. Ans: False Solution: The range is the difference between the largest and smallest observations. Section Ref: Descriptive Statistics Subsection Ref: The Range and Standard Deviation Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the use of descriptive statistics in measuring quality characteristics. AACSB: Knowledge Time on Task: 1 min
89. The range of a data set is always non-negative. Ans: True Solution: The range is the difference between the largest and smallest observations, so it cannot be negative. Section Ref: Descriptive Statistics Subsection Ref: The Range and Standard Deviation Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the use of descriptive statistics in measuring quality characteristics. AACSB: Knowledge Time on Task: 1 min
90. A small range and large standard deviation imply that data observations are closely clustered around the mean. Ans: False Solution: Small values of the range and standard deviation mean that the observations are closely clustered around the mean. Large values of the range and standard deviation mean that the observations are spread out around the mean. Section Ref: Descriptive Statistics Subsection Ref: The Range and Standard Deviation Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the use of descriptive statistics in measuring quality characteristics. AACSB: Knowledge Time on Task: 1 min
91. A process that is in control has no variation. Ans: False Solution: A control chart has upper and lower control limits that separate common from assignable causes of variation. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Comprehension Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min
92. A process can be considered in a state of control even if one observation is 1.75 standard deviations above the mean. Ans: True Solution: The upper and lower control limits on a control chart are usually set at ± 3 standard deviations from the mean. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Comprehension Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min
93. Upper and lower control limits are usually set at 6 standard deviations from the mean. Ans: False Solution: The upper and lower control limits on a control chart are usually set at ± 3 standard deviations from the mean. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min
94. Increasing the number of standard deviations on which control chart limits are based will decrease the Type I error. Ans: True Solution: For limits of ±3 standard deviations from the mean, the probability of a Type I error is 0.26 percent, whereas for limits of ±2 standard deviations it is 4.56 percent. Thus, increasing the number of standard deviations on which control chart limits are based will decrease the Type I error. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Medium Bloom‘s: Analysis Learning Objective 4: Describe the use of control charts. AACSB: Analytic Time on Task: 1.5 min
95. A variable is a product characteristic that has a discrete value and can be counted. Ans: False Solution: Variables are characteristics that can be measured and that have a continuum of values, such as height, weight, or volume. Section Ref: Statistical Process Control Methods Subsection Ref: Types of Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min
96. The y-axis in a control chart represents the quality characteristic that is being monitored. Ans: True Solution: A control chart‘s y-axis represents the quality characteristic that is being monitored. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 1 min
97. The weight of a bag of sugar is an example of a variable. Ans: True Solution: Variables are characteristics that can be measured and have a continuum of values, such as height, weight, or volume. Section Ref: Statistical Process Control Methods Subsection Ref: Types of Control Charts Level: Medium Bloom‘s: Application Learning Objective 4: Describe the use of control charts. AACSB: Analytic Time on Task: 1.5 min
98. The lower limit for the R-chart may be 0. Ans: True Solution: For example, LCL = D3 * average range of the samples. From Table 6.1 on text page 177, D3 = 0 for n = 2. Section Ref: Control Charts for Variables Subsection Ref: Range (R) Charts Level: Medium Bloom‘s: Application Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Analysis Time on Task: 2 min
99. A p-chart monitors the number of defects per unit. Ans: False Solution: P-charts are used to measure the proportion that is defective in a sample. Section Ref: Control Charts for Attributes Subsection Ref: p-Charts Level: Easy Bloom‘s: Knowledge Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Knowledge Time on Task: 1 min
100. Suppose that you have created control charts to measure the length of candles. The process is in a state of control if either the x-bar chart is in control or the R-chart is in control. Ans: False Solution: A shift in either the mean or the range means that the process is out of control. Section Ref: Control Charts for Variables Subsection Ref: Using Mean and Range Charts Together Level: Easy Bloom‘s: Comprehension Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 1 min
101. A p-chart is used when we can compute only the number of defects but NOT the total sample size. Ans: False Solution: P-charts are used to measure the proportion that is defective in a sample. Thus, both the number of defects and total sample size are required. Section Ref: Control Charts for Attributes Subsection Ref: p-Charts Level: Easy Bloom‘s: Comprehension Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Knowledge Time on Task: 1 min
102. Product specifications are preset, whereas control limits are computed after observing data. Ans: True Solution: Product specifications are usually established by design engineers or product design specialists. Control limits are computed after observing data. Section Ref: Control Charts for Attributes and Process Capability Subsection Ref: Level: Easy Bloom‘s: Comprehension Learning Objective 6 and 7: (6) Identify the differences between p- and c- charts. (7) Explain the meaning of process capability and the process capability index. AACSB: Knowledge Time on Task: 1.5 min
103. Another way to construct the control limits for variables is to use the sample mean as an estimate of variability of the process. Ans: False Solution: One of the ways to construct the control limits is to use the sample range as an estimate of the variability of the process. Section Ref: Control Charts for Variables. Subsection Ref: Mean (x-Bar) Charts Level: Easy Bloom‘s: Comprehension Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 1 min
104. In Six Sigma programs, individuals are given academic titles that reflect their skills in the six-sigma process. Ans: False Solution: In Six Sigma programs, individuals are given martial arts titles that reflect their skills in the Six Sigma process. Section Ref: Six Sigma Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Explain the concept Six Sigma. AACSB: Knowledge Time on Task: 1 min
105. The person that comes from the top ranks of the organization and is responsible for providing direction and overseeing all aspects of a Six Sigma implementation process is called a general. Ans: False Solution: A champion of Six Sigma is a person who comes from the top ranks of the organization and is responsible for providing direction and overseeing all aspects of the process. Section Ref: Six Sigma Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Explain the concept Six Sigma. AACSB: Knowledge Time on Task: 1 min
106. The term for inspecting a random sample of an output from process, within range and functioning properly, is ―statistical process control.‖ Ans: True Solution: Statistical process control (SPC) involves inspecting a random sample of the output from a process and deciding whether the process is producing products with characteristics that fall within a predetermined range. Section Ref: What Is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 1 min
Essay
107. What are the three broad categories of statistical quality control? Ans: descriptive statistics, acceptance sampling, statistical process control Solution: Descriptive statistics are used to describe quality characteristics and relationships. Statistical process control (SPC) involves inspecting a random sample of the output from a process and deciding whether the process is producing products with characteristics that fall within a predetermined range. Acceptance sampling is the process of randomly inspecting a sample of goods and deciding whether to accept the entire lot based on the results. Section Ref: What Is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 4 min
108. Define acceptance sampling. Ans: Acceptance sampling is a technique that determines whether a batch of goods should be accepted or rejected. Solution: Acceptance sampling is the process of randomly inspecting a sample of goods and deciding whether to accept the entire lot based on the results. Acceptance sampling determines whether a batch of goods should be accepted or rejected. Section Ref: What Is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 3 min
109. Define statistical process control. Ans: Statistical process control is a technique that answers the question of whether the process is functioning properly or not. Solution: Statistical process control (SPC) involves inspecting a random sample of the output from a process and deciding whether the process is producing products with characteristics that fall within a predetermined range. SPC answers the question of whether or not the process is functioning properly. Section Ref: What Is Statistical Quality Control? Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Describe categories of statistical quality control (SQC). AACSB: Knowledge Time on Task: 3 min
110. Define control limits. Ans: On a control chart, they separate common from assignable causes of variation. Solution: A control chart has upper and lower control limits that separate common from assignable causes of variation. The common range of variation is defined by the use of control chart limits. We say that a process is out of control when a plot of data reveals that one or more samples fall outside the control limits. Section Ref: Statistical Process Control Methods Subsection Ref: Developing Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 3 min
111. Define attribute (as a product characteristic). Ans: An attribute is a product characteristic that has a discrete value and can be counted. Solution: Attributes are characteristics that have discrete values and can be counted. Often they can be evaluated with a simple yes-or-no decision. Examples include color, taste, or smell. Section Ref: Statistical Process Control Methods Subsection Ref: Types of Control Charts Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe the use of control charts. AACSB: Knowledge Time on Task: 3 min
112. What is an R-chart? Ans: An R-chart is a control chart that monitors changes in the dispersion or variability of a process. Solution: Range (R) charts are a type of control chart for variables. Range charts monitor the dispersion or variability of the process. Section Ref: Control Charts for Variables Subsection Ref: Range (R) Charts Level: Easy Bloom‘s: Knowledge Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 3 min
113. What is a p-chart? Ans: A p-chart is a control chart that monitors the proportion of defects in a sample. Solution: P-charts are used to measure the proportion that is defective in a sample. Section Ref: Control Charts for Attributes Subsection Ref: p-Charts Level: Easy Bloom‘s: Knowledge Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Knowledge Time on Task: 2.5 min
114. What is a c-chart? Ans: A c-chart is a control chart that monitors the number of defects per unit. Solution: C-charts are used to monitor the number of defects per unit. Examples are the number of returned meals in a restaurant, the number of trucks that exceed their weight limit in a month, the number of discolorations on a square foot of carpet, and the number of bacteria in a milliliter of water. Section Ref: Control Charts for Attributes Subsection Ref: c-Charts Level: Easy Bloom‘s: Knowledge Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Knowledge Time on Task: 2.5 min
115. Describe the two aspects to implementing the Six Sigma concept. Ans: The first is the use of technical tools to identify and eliminate causes of quality problems. These tools include statistical quality control, cause-and-effect diagrams, flow charts, and Pareto analysis. In Six Sigma programs the use of these tools is integrated throughout the entire organizational system. The second aspect is people involvement. In Six Sigma, all employees have the training to use technical tools and are responsible for rooting out quality problems. Employees are given martial arts titles that reflect their skills in the Six Sigma process. Section Ref: Six Sigma Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Explain the concept Six Sigma. AACSB: Knowledge Time on Task: 4 min
116. Describe the difference between black belts and green belts in a Six Sigma implementation. Ans: Black belts are individuals who have extensive training in the use of technical tools and are responsible for carrying out the implementation of Six Sigma. They are experienced individuals that oversee the measuring, analyzing, process controlling, and improving. They achieve this by acting as coaches, team leaders, and facilitators of the process of continuous improvement. Green belts, on the other hand, are individuals who have sufficient training in technical tools to serve on teams or on small individual projects. Section Ref: Six Sigma Quality Subsection Ref: n/a Level: Medium Bloom‘s: Analysis Learning Objective 8: Explain the concept Six Sigma. AACSB: Analytic Time on Task: 4 min
117. Describe why service organizations have tended to lag manufacturing organization in the application of SQC. Ans: The primary reason is that statistical quality control requires measurement, and it is difficult to measure the quality of a service. Another issue that complicates quality control in service organizations is that the service is often consumed during the production process. The customer is often present during service delivery and there is little time to improve quality. Solution: The primary reason is that statistical quality control requires measurement, and it is difficult to measure the quality of a service. Another issue that complicates quality control in service organizations is that the service is often consumed during the production process. The customer is often present during service delivery and there is little time to improve quality. Section Ref: Statistical Quality Control in Services
Subsection Ref: n/a Level: Medium Bloom‘s: Analysis Learning Objective 11: Describe the challenges inherent in measuring quality in service organizations. AACSB: Analytic Time on Task: 4 min
118. Describe how finance is associated with SQC. Ans: Finance is an integral part of the statistical quality control process because it is responsible for placing financial values on SQC efforts. Solution: Section Ref: Finance is an integral part of the statistical quality control process because it is responsible for placing financial values on SQC efforts. For example, the finance department evaluates the dollar costs of defects, measures financial improvements that result from tightening of quality standards, and is actively involved in approving investments in quality improvement efforts. Statistical Quality Control (SQC) within Om: How It All Fits Together Subsection Ref: Statistical Quality Control (SQC) Across the Organization Level: Medium Bloom‘s: Analysis Learning Objective 11: Describe the challenges inherent in measuring quality in service organizations. AACSB: Analytic Time on Task: 4 min 119. What does ―OC‖ stand for in acceptance sampling? Ans: operating characteristics Solution: An operating characteristic (OC) curve shows the probability or chance of accepting a lot given various proportions of defects in the lot. Section Ref: Acceptance Sampling Subsection Ref: Operating Characteristic (OC) Curves Level: Easy Bloom‘s: Knowledge Learning Objective 9: Explain the process of acceptance sampling and describe the use of operating characteristic (OC) curves. AACSB: Knowledge Time on Task: 2 min
Problems
120. Mrs. Crabapple has a class with three students, and she has given four quizzes so far this semester. She has created control charts to determine if the variation in students‘ scores from quiz to quiz is exhibiting only natural variation. Each of the quiz scores is shown below. The upper and lower control limits for the x-bar chart are 109.6 and 34.9, respectively. The upper and lower control limits for the R-chart are 93.95 and 0, respectively. Quiz Bart Lisa Nelson 1 75 100 50 2 62 82 72 3 90 90 90 4 60 86 10 Is the process in a state of control? Ans: All average scores for quizzes (75, 72, 90, and 52) are within the control limits (109.6 and 34.9), thus the process is in control based on the x-bar chart. All ranges for quizzes (50, 20, 0, and 76) are within the control limits (0 and 93.95) and the process is in control based on the R-chart. Solution: For the x-bar chart we need average scores for each quiz. For the first quiz the average is (75 + 100 + 50) / 3 = 75, for the second it is (62 + 82 + 72) / 3 = 72, for the third it is (90 + 90 + 90) / 3 = 90, for the fourth it is (60 + 86 + 10) = 52. All 4 values (75, 72, 90, and 52) are within the control limits (109.6 and 34.9), thus the process is in control based on the x-bar chart. For the R-chart we need ranges of scores for each quiz. For the first quiz it‘s (100 – 50) = 50, for the second it‘s (82 – 62) = 20, for the third it‘s (90 – 90) = 0, and for the fourth it‘s (86 – 10) = 76. All 4 ranges (50, 20, 0, and 76) are within the control limits (0 and 93.95) and the process is in control based on the R-chart. Section Ref: Control Charts for Variables Subsection Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Analytic Time on Task: 5 min
121. Twenty samples of n = 200 were taken by an operator at a workstation in a production process. The number of defective items in each sample was recorded as follows. Number Number Sample of Defects Sample of Defects 1 12 11 16 2 18 12 15 3 10 13 13 4 15 14 16 5 16 15 18 6 19 16 17 7 17 17 18 8 12 18 20 9 11 19 21 10 14 20 22 Management wants to develop a p-chart using 3-sigma limits. What are the control limits? Ans: UCL = 0.1376; LCL = 0.0225. (p-bar = ∑#defects/∑N = (12+18+10+15+16+19+17+12+11+14+16+15+13+16+18+1+18+20+21+22)/(20*200) = .08; σp=√[p-bar*(1-p-bar)]/n = √[.08*(1-.08)]/200 = .01918 UCL = p-bar + Z σp = .08 + 3 * .01918 = 0.13755 LCL = 0.023, p-bar - Z σp = .08 - 3 * .01918 = 0.02245) Solution: The average proportion of defects for the 20 samples is (12+18+10+15+16+19+17+12+11+14+16+15+13+16+18+1+18+20+21+22)/(20*200) = .08 The sample standard deviation is √[.08*(1-.08)]/200 = .01918 UCL = .08 + 3 * .01918 =0.13755 LCL = . 08 - 3 * .01918 = 0.02245. Section Ref: Control Charts for Attributes Subsection Ref: p-Charts Level: Medium Bloom‘s: Application Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 4 min
122. Cans of soup are supposed to weigh exactly 16 oz. Inspectors want to develop process control charts. They take eight samples of five boxes and weigh them. They obtain the following data: Sample Mean Range 1 15.2 1.8 2 14.6 0.7 3 16.5 0.5 4 18.1 0.4 5 13.2 0.2 6 16.0 0.4 7 15.9 0.5 8 14.8 0.9 (a) What is the upper 3-sigma control limit for the x-bar chart? (b) What is the lower 3-sigma control limit for the x-bar chart? (c) What is the upper 3-sigma control limit for the R-chart? (d) What is the lower 3-sigma control limit for the R-chart? (e) Is the process in a state of control? Ans: (a) 15.93, (x-double bar = ∑x-bar/N = (15.2+14.6+16.5+18.1+13.2+16.0+15.9+14.8)/8 = 15.5375; R-bar = ∑R/N = (1.8+0.7+0.5+0.4+0.2+0.4+0.5+0.9)/8 = 0.675; UCL = x-double bar + A2*R-bar = 15.5375 + .58*0.675 = 15.929) (b) 15.15, (LCL = x-double bar - A2*R-bar = 15.5375 - .58*.0675 = 15.146) (c) 1.42, (UCL = D4*R-bar = 2.11 * 0.675 = 1.424) (d) 0.00, (LCL = D3*R-bar = 0 * 0.675 = 0) (e) No Solution: (a) The center line of the chart (x-double bar) is (15.2+14.6+16.5+18.1+13.2+16.0+15.9+14.8)/8 = 15.5375; The average range of the samples is (1.8+0.7+0.5+0.4+0.2+0.4+0.5+0.9)/8 = 0.675; A2 factor from Table 6.1 for n = 5 is 0.58. Upper control limit (UCL) for the x-bar chart = 15.5375 + .58*0.675 = 15.929 (b) Lower control limit ( LCL) for the x-bar chart = 15.5375 – .58*.0675 = 15.146 (c) D4 factor from Table 6.1 for n = 5 is 2.11. Upper control limit (UCL) for the R-chart = 2.11 * 0.675 = 1.424 (d) D3 factor from Table 6.1 for n = 5 is 0. Lower control limit ( LCL) for the R chart = 0 * 0.675 = 0 (e) Some of the average weights for samples are outside of the control limits (15.929 and 15.146), thus the process is out of control based on the x-bar chart. The range for the first sample (1.8) is outside of the control limits (0 and 1.424) and the process is out of control based on Rchart. Section Ref: Control Charts for Variables Subsection Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Analytic Time on Task: 7 min
123. Inspectors want to develop process control charts to measure the weight of crates of wood. Data (in pounds) from three samples are: Sample Crate 1 Crate 2 Crate 3 Crate 4 1 18 38 22 26 2 26 30 28 20 3 26 26 26 26 (a) What is the upper 3-sigma control limit for the R-chart? (b) What is the lower 3-sigma control limit for the R-chart? (c) What is the upper 3-sigma control limit for the x-bar chart? (d) What is the lower 3-sigma control limit for the x-bar chart? (e) Is the process in a state of control? If not, why not? Ans: (a) The range for sample 1 is (38 – 18) = 10, for sample 2 is (30 – 20) = 10, for sample 3 is (26 – 26) = 0. The average range of the samples is (10 + 10 + 0) / 3 = 6.667; D4 factor from Table 6.1 for n = 4 is 2.28. Upper control limit (UCL) for the R-chart = 2.28 * 6.667 = 15.2. (b) D3 factor from Table 6.1 for n = 4 is 0. Lower control limit (LCL) for the R-chart = 0 * 6.667 = 0. (c) The average for sample 1 is (18 + 38 + 22 + 26) / 4 = 26, for sample 2 is (26 + 30 + 28 + 20) / 4 = 26, for sample 3 is (26 + 26 + 26 + 26) / 4 = 26. The center line of the chart (x-double bar) is (26 + 26 + 26) / 3 = 26; A2 factor from Table 6.1 for n = 4 is 0.73. Upper control limit (UCL) for the x-bar chart = 26 + .73 * 6.667 = 30.867. (d) Lower control limit (LCL) for the x-bar chart = 26 – .73 * 6.667 = 21.133. (e) All the average weights for samples are within the control limits (21.133 and 30.867), thus the process is in control based on the x-bar chart. The ranges for all the samples are within the control limits (0 and 15.2) and the process is in control based on the R-chart. Solution: (a) The range for sample 1 is (38 – 18) = 10, for sample 2 is (30 – 20) = 10, for sample 3 is (26 – 26) = 0. The average range of the samples is (10 + 10 + 0) / 3 = 6.667; D4 factor from Table 6.1 for n = 4 is 2.28. Upper control limit (UCL) for the R-chart = 2.28 * 6.667 = 15.2. (b) D3 factor from Table 6.1 for n = 4 is 0. Lower control limit ( LCL) for the R-chart = 0 * 6.667 = 0. (c) The average for sample 1 is (18 + 38 + 22 + 26) / 4 = 26, for sample 2 is (26 + 30 + 28 + 20) / 4 = 26, for sample 3 is (26 + 26 + 26 + 26) / 4 = 26. The center line of the chart (x-double bar) is (26 + 26 + 26) / 3 = 26;
A2 factor from Table 6.1 for n = 4 is 0.73. Upper control limit (UCL) for the x-bar chart = 26 + .73 * 6.667 = 30.867. (d) Lower control limit ( LCL) for the x-bar chart = 26 – .73 * 6.667 = 21.133. (e) All the average weights for samples are within the control limits (21.133 and 30.867), thus the process is in control based on the x-bar chart. The ranges for all the samples are within the control limits (0 and 15.2) and the process is in control based on R-chart. Section Ref: Control Charts for Variables Subsection Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Analytic Time on Task: 7 min
124. Eight samples of n = 50 were taken by an operator at a workstation in a production process. The number of defective items in each sample was recorded as follows. Number of Sample Defects 1 10 2 0 3 12 4 8 5 10 6 16 7 14 8 10 (a) Management wants to develop a p-chart. What are the 3-sigma control limits? (b) Is the process in a state of control? Ans: (a) LCL = 0.0302, (p-bar = ∑total defects/ ∑total observations = (10+0+12+8+10+16+14+10)/(8*50) = .2; σp = √[p-bar*(1-p-bar)]/n = √[.2*(1-.2)]/50 = .0566; LCL = p-bar -Z * σp = 0.2 - 3*0.0566 = .0302) UCL = 0.3698, (UCL = p-bar +Z * σp = 0.2 + 3*0.0566 = 0.3698) (b) No (Sample 2) Solution: (a) The average proportion of defects for the 8 samples is (10+0+12+8+10+16+14+10)/(8*50) = .2 The sample standard deviation is √[.2*(1-.2)]/50 = .0566 UCL = .2 + 3 * .0566 = 0.3698 LCL = .2 - 3 * .0566 = .0302. (b) The process is out of control because the proportion of defects for sample 2 (0) is below LCL (.0302). Section Ref: Control Charts for Attributes Subsection Ref: p-Charts
Level: Medium Bloom‘s: Application Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 5 min
125. Suppose a process has been monitored daily for the last ten days and the number of machine failures each day was noted. The results follow: Day Number: 1 2 3 4 5 6 7 8 9 10 Number of Failures: 8 9 6 10 12 4 9 11 9 12 Compute 3-sigma control limits for a c-chart that monitors the average number of machine failures per day. Is the process in a state of control? Ans: UCL = 18, (Ċ= ∑failures/#observations = (8+9+6+10+12+4+9+11+9+12)/10 = 9; UCL = Ċ + Z√Ċ = 9 + 3* √9 = 18) LCL = 0, (LCL = Ċ - Z√Ċ = 9 - 3* √9 = 0) Yes, the process is in control. Solution: The average number of defects is (8+9+6+10+12+4+9+11+9+12)/10 = 9; The upper control limit (UCL) = 9 + 3* √9 = 18 The lower control limit (LCL) = 9 - 3* √9 = 0 Since all the numbers of failures are with the control limits (0 and 18), the process is in control. Section Ref: Control Charts for Attributes Subsection Ref: c-Charts Level: Medium Bloom‘s: Application Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 4 min
126. If the average range is 4.0 inches and the sample size is 18, compute the upper and lower 3sigma limits for an R-chart. Ans: UCL = 6.44, (UCL = D4 * R-bar = 1.61 * 4 = 6.44) LCL = 1.56(LCL = D3 * R-bar = 0.39 * 4 = 1.56) Solution: D4 factor from Table 6.1 for n = 18 is 1.61. Upper control limit (UCL) for the R-chart = 1.61 * 4 = 6.44 D3 factor from Table 6.1 for n = 18 is 0.39. Lower control limit (UCL) for the R-chart = 0.39 * 4 = 6.44 Section Ref: Control Charts for Variables Subsection Ref: Range (R) Charts Level: Medium Bloom‘s: Application Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Analytic Time on Task: 3 min
127. Cholesterol Palace is a fast-food restaurant. Management was concerned with errors in filling orders at its drive-up window. It hired several undercover quality inspectors to randomly place 100 orders while the process seemed to be in control. The completed orders were then checked for accuracy. The following table shows the results of the survey: Defect Frequency Incomplete, shorted order 12 Unordered items dispensed 2 Wrong product dispensed 14 Wrong toppings 14 Wrong size drink 2 Drink lid not sealed 17 No drinking straw with soft drink order 0 No napkins 18 Far too many condiment packets 65 No salt with sandwich or fries order 10 Wrong change 3 Other 12 (a) Use these data to estimate the average number of defects per order and determine the threesigma control limits for a c-chart. (b) A quality inspector just used the drive-up window and now checks her order. Her cheeseburger has mustard on it although she ordered it without ketchup or mustard. Three handfuls of ketchup and mustard packets are in the sack, but no napkins. And hot coffee has spilled because the lid wasn‘t properly sealed. Is the drive-up process in control? Ans: (a) Average defects per order = 1.69, (Ċ= ∑failures/#observations = (12+2+14+14+2+17+0+18+65+10+3+12)/100 = 1.69) UCL = 5.59, (UCL = Ċ + Z√Ċ = 1.69 + 3* √1.69 = 5.59)
LCL = 0, (LCL = Ċ - Z√Ċ = 1.69 - 3* √1.69 = –2.21) (b) Yes, the process is in control, despite producing an order with three glaring errors. Solution: (a) Average defects per order is (12+2+14+14+2+17+0+18+65+10+3+12)/100 = 1.69 Upper control limit (UCL) = 1.69 + 3* √1.69 = 5.59. Lower control limit (LCL) = 1.69 – 3 * √1.69 = – 2.21. Since LCL cannot be negative, LCL = 0. (b) Yes, the process is in control, despite producing an order with three glaring errors. Section Ref: Control Charts for Attributes Subsection Ref: c-Chart Level: Medium Bloom‘s: Application Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Analytic Time on Task: 4 min
128. Johnson Enterprises sells no-spill syrup in bottles. Management is evaluating four different machines with standard deviations of .006, .01, .022, and .04 ounces for Machines A, B, C, and D, respectively. The specification limits 11.95 and 12.05 ounces. Which machines should be of interest to Johnson Enterprises, i.e., which are statistically ―capable‖? Ans: A and B Solution: (CP = (USL – LSL)/6σ; Machine A = (12.05 – 11.95)/6*0.006 = 2.78; Machine B = (12.05 – 11.95)/6*0.01 = 1.67; Machine C = (12.05 – 11.95)/6*0.022 = 0.7575; Machine D = (12.05 – 11.95)/6*0.04 = 0.417) A value of CP above 1 means that the process variability is tighter than specifications and the process exceeds minimal capability. Thus Machines A and B are statistically ―capable‖ and should receive more detailed evaluation. Solution: (CP = (USL – LSL)/6σ; Machine A = (12.05 – 11.95)/6*0.006 = 2.78; Machine B = (12.05 – 11.95)/6*0.01 = 1.67; Machine C = (12.05 – 11.95)/6*0.022 = 0.7575; Machine D = (12.05 – 11.95)/6*0.04 = 0.417) A value of CP above 1 means that the process variability is tighter than specifications and the process exceeds minimal capability. Thus Machines A and B are statistically ―capable‖ and should receive more detailed evaluation. Section Ref: Process Capability Subsection Ref: Measuring Process Capability Level: Medium Bloom‘s: Application Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Analytic Time on Task: 4 min
129. Julia has been assigned to develop a new product design specifications. Manufacturing has stated that the system must have a capability index of 1.2 when the product standard deviation is 1.3. What is the specification range limit? Ans: 9.36 Solution: CP = (USL – LSL)/6σ. Thus, (USL – LSL) = CP * 6σ = 1.2*6*1.3 = 9.36 Section Ref: Process Capability Subsection Ref: Measuring Process Capability Level: Medium Bloom‘s: Evaluation Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Analytic Time on Task: 4 min
130. Compute the Cpk measure of process capability for the following machine and interpret the findings. What value would you have obtained with the Cp measure? Upper spec limit = 100 feet Lower spec limit = 99.5 feet Process = 99.8 feet Process = .08 feet Ans: Cpk = 0 .83, so the process is not capable. Cp = 1.04. Solution: Cpk = 0 .83, so the process is not capable, (CPK = min [(USL – μ)/3σ; (μ - LSL)/3σ]; [(100-99.8)/3*.08 = 0.833; (99.8 – 99.5)/3*.08= 1.25) Cp = 1.04, implying a capable process (CP = (USL – LSL)/6σ = (100 – 99.5)/(6*.08) = 1.04). Section Ref: Process Capability Subsection Ref: Measuring Process Capability Level: Medium Bloom‘s: Application Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Analytic Time on Task: 4 min
131. Joel‘s fresh flower processing plant processes 2,000 flowers in a lot. For quality control they use a sample size of 10 flowers. Joel has established a probability of accepting a given lot as 99.74% with a proportion of defective items, in a lot, of .05. What is the AOQ? Ans: 4.96% Solution: AOQ = (Pac)p[(N-n)/N] = .9974*.05*[(2000-10)/2000] = .0496 or 4.96% Section Ref: Acceptance Sampling Subsection Ref: Average Outgoing Quality Level: Medium Bloom‘s: Application Learning Objective 9: Explain the process of acceptance sampling and describe the use of operating characteristic (OC) curves. AACSB: Analysis Time on Task: 3 min
Short Answer
132. What is the formula for the sample standard deviation? Ans: ̅ √ Solution: ̅ √ Where σ = standard deviation of a sample; x = the mean; n = the number of observations in the sample. Section Ref: Descriptive Statistics Subsection Ref: The Range and Standard Deviation Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the use of descriptive statistics in measuring quality characteristics. AACSB: Knowledge Time on Task: 2 min
133. What is the formula for the sample standard deviation of a variable measured as a fraction or probability? Ans: p
p(1 p) n
p(1 p) n Where p = the sample proportion defective; n = the number of observations in the sample. Section Ref: Control Charts for Attributes Subsection Ref: p-Charts Level: Easy Bloom‘s: Knowledge Learning Objective 6: Identify the differences between p- and c- charts. AACSB: Knowledge Time on Task: 2 min Solution: p
134. What are two different formulas for an x-bar chart's control limits? Ans: One of: UCLx x 3
x n
LCLx x 3
Solution: Upper control limit UCLx x 3
x
x
n
LCL x x A2 R UCL x x A2 R
; Lower control limit LCLx x 3
x
, n n Where ̿ = the average of the sample means; z = standard normal variable; σ = population (process) standard deviation; n = sample size (number of observations per sample). Or Upper control limit LCL x x A2 R ; Lower control limit UCL x x A2 R , Where ̿ = the average of the sample means; = average range of the samples; A2 = factor obtained from a table. Section Ref: Control Charts for Variables Subsection Ref: Mean (x-Bar) Charts Level: Easy Bloom‘s: Knowledge Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 3 min
135. What is the formula for an x-bar chart‘s center line? Ans: ̿
∑
̅̅̅̅̅ ∑
̅̅̅̅̅
Solution: ̿ , Where x = the average of the sample means, n = sample size (number of observations per sample). Section Ref: Control Charts for Variables Subsection Ref: Mean (x-Bar) Charts Level: Easy Bloom‘s: Knowledge Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 3 min
136. What is the formula for an R-chart‘s center line? Ans: ̅
∑ ∑
Solution: Average range of the samples ̅ . Section Ref: Control Charts for Variables Subsection Ref: Range (R) Charts Level: Easy Bloom‘s: Knowledge Learning Objective 5: Identify the differences between x-bar and R-charts. AACSB: Knowledge Time on Task: 3 min
137. What is the formula for the basic capability index? Ans: CP = Specification width/process width = (USL-LSL)/6σ Solution: CP = Specification width/process width = (USL-LSL)/6σ, where the specification width is the difference between the upper specification limit (USL) and the lower specification limit (LSL) of the process. The process width is computed as 6 standard deviations (6σ) of the process being monitored. Section Ref: Process Capability Subsection Ref: Measuring Process Capability Level: Easy Bloom‘s: Knowledge Learning Objective 7: Explain the meaning of process capability and the process capability index. AACSB: Knowledge Time on Task: 3 min
138. Six sigma programs strive to set control limits at ________________________. Ans: the centerline plus or minus 6 σ. Solution: Sigma (σ) stands for the number of standard deviations of the process. ± 3 sigma (σ) means that 2600 ppm are defective. Section Ref: Six Sigma Quality Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Explain the concept Six Sigma. AACSB: Knowledge Time on Task: 2 min
139. Consumers willingly accept defects if ________________________. Ans: they are not more than the acceptable quality level. Solution: There is a small percentage of defects that consumers are willing to accept. Consumers will usually tolerate a few defects, but at some point the number of defects reaches a threshold level beyond which consumers will not tolerate them. Section Ref: Acceptance Sampling Subsection Ref: Operating Characteristic (OC) Curves Level: Easy Bloom‘s: Comprehension Learning Objective 9: Explain the process of acceptance sampling and describe the use of operating characteristic (OC) curves. AACSB: Knowledge Time on Task: 2.5 min
140. The probability of shipping a lot or batch of products whose proportion of defective items is greater than LTPD is called consumer‘s risk because ______________________. Ans: they pay the cost of discovering defects and seeking repairs or replacements. Solution: Consumer‘s risk is the chance or probability that a lot will be accepted that contains a greater number of defects than the LTPD limit. This is the probability of making a Type II error—that is, accepting a lot that is truly ―bad.‖ Section Ref: Acceptance Sampling Subsection Ref: Operating Characteristic (OC) Curves Level: Easy Bloom‘s: Comprehension Learning Objective 9: Explain the process of acceptance sampling and describe the use of operating characteristic (OC) curves. AACSB: Knowledge Time on Task: 2.5 min
141. The probability of rejecting a lot or batch of products whose proportion of defective items is not greater than AQL is called producer‘s risk because ____________________. Ans: they discard products that consumers would accept, thereby wasting the resources that went into the batch or lot. Solution: Producer‘s risk is the chance or probability that a lot containing an acceptable quality level will be rejected. This is the probability of making a Type I error—that is, rejecting a lot that is ―good.‖ Section Ref: Acceptance Sampling Subsection Ref: Operating Characteristic (OC) Curves Level: Easy Bloom‘s: Comprehension Learning Objective 9: Explain the process of acceptance sampling and describe the use of operating characteristic (OC) curves. AACSB: Knowledge Time on Task: 2.5 min
142. The computed AOQ provides a sense of the ______________ of the product. Ans: overall outgoing quality Solution: Given that some lots are accepted and some rejected, it is useful to compute the average outgoing quality (AOQ) of lots to get a sense of the overall outgoing quality of the product. Section Ref: Acceptance Sampling Subsection Ref: Average Outgoing Quality Level: Easy Bloom‘s: Comprehension Learning Objective 9: Explain the process of acceptance sampling and describe the use of operating characteristic (OC) curves. AACSB: Knowledge Time on Task: 2.5 min
143. Two areas of operations management that are particularly affected by the decision to increase the level of quality and reduce the number of product defects are ____ and ______. Ans: product design; process design Solution: The decision to increase the level of quality and reduce the number of product defects requires support from every function within operations management. Two areas of operations management that are particularly affected are product and process design. Section Ref: Statistical Quality Control (SQC) Within OM: How it All Fits Together. Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 11: Describe the challenges inherent in measuring quality in service organizations. AACSB: Knowledge Time on Task: 2 min
144. A graph that shows the probability or chance of accepting a lot given various proportions of defects in the lot is called an ____________________. Ans: operating characteristic curve Solution: We can show the discriminating power of a sampling plan on a graph by means of an operating characteristic (OC) curve. This curve shows the probability or chance of accepting a lot given various proportions of defects in the lot. Section Ref: Acceptance Sampling Subsection Ref: Operating Characteristic (OC) Curves Level: Easy Bloom‘s: Knowledge Learning Objective 9: Explain the process of acceptance sampling and describe the use of operating characteristic (OC) curves. AACSB: Knowledge Time on Task: 2 min
Testbank Chapter 7 Just-in-Time and Lean Systems LO Section
Subsection
The Philosophy of JIT Eliminate Waste A Broad View of Operations Simplicity Continuous Improvement
Question # 1, 2, 3, 4, 5, 9, 76, 84, 85, 110 7, 8 6, 10 86 12, 13, 87, 88, 112
Visibility Flexibility Elements of JIT
Just-in-time Manufacturing Total Quality Management (TQM) Respect for People Just-in-Time Manufacturing
The Pull System
Kanban Production Variations of Kanban Production Small Lot Sizes and Quick Setups Uniform Plant Loading Flexible Resources Facility Layout
90, 111 11, 14, 15, 91, 144 16, 17, 77, 135 18, 19, 20, 21, 22, 23, 24, 26, 27, 46, 89, 92, 93, 94, 95 25, 28, 29, 30, 31, 32, 33, 34, 96, 136 35, 36 37, 38, 39, 40, 42, 43, 44, 78, 97, 98, 113, 123, 124, 125, 126, 127, 128. 129, 130, 131, 132, 133, 134 41 45, 47, 99 48, 137 49 50, 114, 122
Total Quality Management Product versus Process Quality at the Source Preventive Maintenance Work Environment
51 52, 53, 54, 79, 109 55, 56, 57, 138 58 59, 100
The Role of Production Employees Lifetime Employment The Role of Management
60, 61, 62, 63, 64, 80, 101, 102, 115, 139 66 65, 67
Respect for People
Supplier Relationships Benefits of JIT Implementing JIT JIT in Services Improved Quality
68, 69, 70, 71, 74, 103, 116, 140 75, 81., 117 73, 82, 104, 118, 119, 141 83, 120
Uniform Facility Loading Use of Multifunction Workers Reductions in Cycle Time
72, 106 105 107
Minimizing Setup Times and Parallel Processing Workplace Organization JIT and Lean Systems within OM: How It all Fits Together
108, 121, 142, 143
© John Wiley & Sons, Inc. or the author. All rights reserved. Instructors who are authorized users of this course are permitted to download these materials and use them in connection with the course. Except as permitted herein or by law, no part of these materials should be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise.
Multiple Choice 1. JIT is applied to a) only manufacturing organizations. b) only service organizations. c) both manufacturing and service organizations. d) only the production portion of manufacturing and service organizations. e) all of the organization except the marketing division. Ans: c Solution: JIT is applicable to service organizations as well as to manufacturing and can even be used in your everyday life. Section Ref: The Philosophy of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1.5 min
2. JIT considers waste anything that a) fits in a waste basket. b) reduces production capacity. c) has been discarded. d) cannot be recycled. e) does not add value. Ans: e Solution: JIT is an all-encompassing philosophy that is founded on the concept of eliminating waste. JIT considers waste anything that does not add value—anything. Section Ref: The Philosophy of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
3. JIT can be traced back to the early 1900s but no one can argue that the philosophy gained worldwide prominence a) at the close of WWII. b) in the 1950s. c) in the 1960s. d) in the 1970s. e) in the 1980s. Ans: d Solution: Although many authors say that the origins of JIT can be traced back to the early 1900s, no one can argue that the philosophy gained worldwide prominence in the 1970s. Section Ref: The Philosophy of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
4. The philosophy of JIT a) originated in Japan. b) was operational at Henry Ford‘s complex in 1920s. c) is a production planning system. d) has received little attention in the United States. e) focuses on direct control of worker activities by management. Ans: a Solution: The philosophy of JIT originated in Japan. Section Ref: The Philosophy of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
5. The broad view of JIT is now often termed __________________________. a) vendor-managed inventory b) business process reengineering c) lean production d) cycle time management e) e-distribution Ans: c Solution: The broad view of JIT is now often termed lean production or lean systems. Section Ref: The Philosophy of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
6. In the broad view of the organization everyone should have a) the same job duration. b) the same retirement plan. c) the same job description. d) the same view of serving the customer. e) a narrow view of the organization that includes only their assigned tasks. Ans: d Solution: Part of the philosophy of JIT is that everyone in the organization should have a broad view of the organization and work toward the same goal, which is serving the customer. Section Ref: The Philosophy of JIT Subsection Ref: A Broad View of Operations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1.5 min
7. The central belief of the JIT philosophy is a) that quality must be emphasized. b) the use of kanban. c) the elimination of waste. d) minimizing inventory. e) saving money. Ans: c Solution: The underlying premise of JIT is that all waste must be eliminated. Section Ref: The Philosophy of JIT Subsection Ref: Eliminate Waste Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
8. Which of the following is characteristic of the JIT philosophy? a) inventories as an asset b) optimization of lot sizes by formula c) tolerance of some scrap d) elimination of waste e) rigidity Ans: d Solution: The underlying premise of JIT is that all waste must be eliminated. Section Ref: The Philosophy of JIT Subsection Ref: Eliminate Waste Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
9. Beliefs that help define the JIT philosophy include ________. a) accountability b) visibility c) reliability d) push production e) craft production Ans: b Solution: Although elimination of waste is the core belief of the JIT philosophy, others include a broad view of operations, simplicity, continuous improvement, visibility, and flexibility. Section Ref: The Philosophy of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min 10. An employee who doesn‘t help a customer because ―it is not my job‖ violates the JIT belief of a) simplicity. b) a broad view of operations. c) continuous improvement. d) visibility. e) pull production. Ans: b Solution: Part of the philosophy of JIT is that everyone in the organization should have a broad view of the organization and work toward the same goal, which is serving the customer. One example of employees having a narrow view is an employee who will not help a customer with a problem, saying, ―It‘s not my job.‖ Section Ref: The Philosophy of JIT Subsection Ref: A Broad View of Operations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1.5 min
11. JIT was based on the need for a) survival. b) waste elimination. c) better working conditions. d) consistent application of policies. e) consistent supplier performance. Ans: a Solution: JIT was based on the need for survival, and survival means being flexible in order to adapt to changes in the environment. Section Ref: The Philosophy of JIT Subsection Ref: Flexibility Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
12. Kaizen is a Japanese term referring to __________________________. a) just-in-time production b) continuous improvement c) employee involvement d) concurrent engineering e) simplicity Ans: b Solution: Continuous improvement, called kaizen by the Japanese, in every aspect of the operation is a cornerstone of this philosophy. Section Ref: The Philosophy of JIT Subsection Ref: Continuous Improvement Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
13. An improvement tool that utilizes cross-functional teams to plan and deliver improvements to specific processes during two- or three-day marathon sessions is called a ___________________. a) kanban blitz b) cross-functional blitz c) short-term blitz d) JIT blitz e) kaizen blitz Ans: e Solution: A number of companies are utilizing a powerful JIT approach called the ―kaizen blitz.‖ Section Ref: The Philosophy of JIT Subsection Ref: Continuous Improvement Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
14. JIT flexibility refers to a) the ability to modify sales figures. b) correcting the bull whip effect. c) increasing or decreasing supplier deliveries on short notice. d) workers being able to perform many different tasks. e) managers being able to shift positions easy. Ans: d Solution: A company can be flexible by being able to produce a wide variety of products. JIT systems are designed with the ability to produce different product models with different features through a manufacturing process that can easily switch from one product type to another by flexible workers who can perform many different tasks. Section Ref: The Philosophy of JIT Subsection Ref: Flexibility Level: Medium Bloom‘s: Analysis Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Analytic Time on Task: 2 min
15. Being able to keep costs low while changing the volume of production is an example of a) simplicity. b) flexibility. c) visibility. d) continuous improvement. e) total quality management. Ans: b Solution: Flexibility can mean being able to make changes in the volume of a product produced. JIT accomplishes this by keeping the costs of facilities, equipment, and operations at such a low level that breaking even typically is not a problem. Section Ref: The Philosophy of JIT Subsection Ref: Flexibility Level: Medium Bloom‘s: Analysis Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Analytic Time on Task: 2 min
16. Three basic elements work together to complete a JIT system: just-in-time manufacturing, total quality management, and a) quality circles. b) pull production. c) minimizing inventory. d) respect for people. e) full utilization of capacity. Ans: d Solution: Three basic elements work together to complete a JIT system: just-in-time manufacturing, total quality management, and respect for people. Section Ref: Elements of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1 min
17. JIT is often mistakenly assumed to a) refer to the final assembly schedule only. b) dictate the product standards specification. c) refer to only just-in-time manufacturing. d) be a core element of ISO 9000 requirements. e) be driven by the finance department‘s long-range spending plan. Ans: c Solution: Often, it is assumed that JIT refers only to just-in-time manufacturing. However, this is only one of three elements of JIT. Section Ref: Elements of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1 min
18. By focusing on __________ processes, JIT is able to achieve high-volume production of high-quality, low-cost products. a) downstream b) upstream c) change-over d) gateway e) value-added Ans: e Solution: By focusing on value-added processes, JIT is able to achieve high-volume production of high-quality, low-cost products while meeting precise customer needs. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
19. The manufacturing process in JIT starts with the a) final assembly schedule. b) schedules for individual machines. c) vendor deliveries. d) prioritization of lots. e) forward scheduling. Ans: a Solution: The manufacturing process in JIT starts with the final assembly schedule, often called the master production schedule. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1 min
20. For the current month using JIT a) the same amount of each product is produced in the same order each day. b) production matches that of last month. c) lot sizes are varied week to week. d) production differs greatly from day to day. e) production is primarily for next month‘s sales. Ans: a Solution: For the current month, the schedule is ―leveled,‖ or developed so that the same amount of each product is produced in the same order every day. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
21. JIT relies on a ______ that withdraws parts for a previous work cell and moves them to the next. a) information technology system b) coordination system c) six sigma system d) quality circle system e) transportation system Ans: b Solution: JIT relies on a coordination system that withdraws parts from a previous work center and moves them to the next. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
22. JIT is a __________ system. a) pull b) push c) lead time d) preventive maintenance e) closed Ans: a Solution: JIT system typically relies on cards, called kanban, to pull the needed products through the production system. For this reason, JIT is often referred to as a pull system. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
23. JIT manufacturing cannot succeed if __________costs are too high. a) variable b) fixed c) setup d) depreciation e) marginal Ans: c Solution: JIT systems have been very efficient at reducing setup costs, which is a key to the success of JIT manufacturing. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
24. The ultimate goal of JIT is to produce products in a lot size of a) 100 or fewer units. b) N = (DT(1+X))/C. c) the inverse of the carrying cost. d) one unit. e) the capacity of the factory. Ans: d Solution: Low setup times mean that small lot sizes of products can be produced as needed and that production lead times will be shorter. The ultimate goal of JIT is to produce products in a lot size of 1. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
25. Unlike JIT, traditional quality control systems use a) quality circles. b) quality plans. c) control charts. d) acceptable quality levels. e) quality applications. Ans: d Solution: Traditional quality control systems use the concept of acceptable quality level (AQL) to indicate the acceptable number of defective parts. Section Ref: Elements of JIT Subsection Ref: Total Quality Management (TQM) Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
26. According to JIT, __________ is carried to cover up a wide variety of problems, such as poor quality, demand uncertainty, and slow delivery. a) inventory b) excess capacity c) a group of back-up workers d) spare equipment e) insurance Ans: a Solution: According to JIT, inventory is carried to cover up a wide variety of problems, such as poor quality, slow delivery, inefficiency, lack of coordination, and demand uncertainty. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1 min
27. According to JIT, by eliminating inventory we can clearly identify __________ and work on eliminating them. a) obsolete products b) malfunctioning machines c) grievances d) product imperfections e) problems Ans: e Solution: According to JIT, by eliminating inventory we can clearly identify problems and work to eliminate them. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
29. An important TQM concept is that quality is defined by the a) quality control group. b) marketing department. c) board of directors. d) customer. e) auditors. Ans: d Solution: The foundation of JIT is to produce the exact product that the customer wants. Quality is defined by the customer, and an effort is made by the whole company to meet the customer‘s expectations. Section Ref: Elements of JIT Subsection Ref: Total Quality Management (TQM) Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1 min
30. The objective of quality at the source is to identify a quality problem and a) determine its extent. b) uncover its root cause. c) rate its seriousness. d) place blame. e) categorize it. Ans: b Solution: The concept of quality at the source is part of JIT. The objective is not only to identify a quality problem but to uncover its root cause. Section Ref: Elements of JIT Subsection Ref: Total Quality Management (TQM) Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min 31. JIT considers __________ to be a company‘s most precious resource. a) capital b) productive equipment c) information d) people e) vision Ans: d Solution: JIT considers people to be a company‘s most precious resource. Section Ref: Elements of JIT Subsection Ref: Respect for People Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
32. In JIT the workforce is viewed as a) another resource to be managed. b) another contractual obligation. c) a long-term asset. d) a short-term asset. e) an asset that must be closely managed. Ans: c Solution: The workforce is viewed as a long-term asset, providing ongoing training and encouraging a sense of security and organizational belonging. Section Ref: Elements of JIT Subsection Ref: Respect for People Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
33. JIT believes in developing __________ relationships with suppliers. a) long-term b) adversarial c) arms-length d) temporary e) distant Ans: a Solution: JIT believes in developing long-term relationships with suppliers in a partnership format. Section Ref: Elements of JIT Subsection Ref: Respect for People Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
34. __________ are groups of workers who are responsible for every aspect of their business. a) Focus teams b) Staff departments c) Partnerships d) Self-managed teams e) Negotiators Ans: d Solution: Self-managed teams are groups of workers that have no supervisors, inspectors, time clocks, or union stewards. Section Ref: Elements of JIT Subsection Ref: Respect for People Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1 min
35. Traditional manufacturing operations are based on the assumption that a) overproduction is disastrous. b) nice guys finish last. c) it is better to anticipate future requirements and plan for them. d) if you manufacture it, demand will increase. e) inventory has no value. Ans: c Solution: Traditional manufacturing operations are push-type systems. They are based on the assumption that it is better to anticipate future production requirements and plan for them. Section Ref: Just-in-Time Manufacturing Subsection Ref: The Pull System Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1.5 min
36. JIT uses a pull system where communication starts with either the customer or with the _________ workstation in the production line. a) first b) bottleneck c) dominant d) most expensive e) last Ans: e Solution: Communication in JIT starts either with the last workstation in the production line or with the customer and works backward through the system. Section Ref: Just-in-Time Manufacturing Subsection Ref: The Pull System Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1.5 min
37. With JIT there are two types of kanban cards: production cards and __________ cards. a) buffer b) transaction c) withdrawal d) logistics e) sales Ans: c Solution: There are two types of kanban cards: production cards that authorize production and withdrawal cards that authorize withdrawal of materials. Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1 min
38. In JIT a kanban card is used to signal a) the need for more parts. b) that a supplier needs assistance. c) that a worker is overloaded. d) that a machine is ready for preventive maintenance. e) that management is inspecting operations. Ans: a Solution: When workers need products from a preceding workstation, they pass the kanban and the empty container to that station. Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1.5 min
39. Without kanbans, the withdrawal and production of materials a) can continue in a reduced manner. b) will not be well coordinated. c) cannot take place. d) would continue based on historical needs. e) would continue based on forecasted needs. Ans: c Solution: It is the kanban cards that coordinate the pull production system. Without kanbans, the withdrawal and production of materials cannot take place. Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1.5 min
40. The number of kanbans or containers needed at a workstation is dependent on a) the demand rate. b) the number of workers. c) the production rate. d) the number of machines. e) the number of workers and machines. Ans: a Solution: The formula to compute the number of kanbans needed to control the production of a particular product includes total number of kanbans, demand rate at a using workstation, the time it takes to receive an order from the previous workstation (also called the lead time), size of container, and safety stock to protect against variability or uncertainty in the system. Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1.5 min
41. The system of kanbans used to coordinate delivery of goods by suppliers can include a) filled containers delivered by the supplier. b) purchase approvals by the production manager. c) orders placed by the buyer. d) empty containers delivered from the buyer. e) empty containers used by the customer. Ans: a Solution: The system of kanbans can also be used to coordinate delivery of goods by suppliers. The suppliers bring the filled containers to the point of usage in the factory and at the same time pick up an empty container with a kanban to be filled later. Since a manufacturer may have multiple suppliers, ―mailboxes‖ can be set up at the factory for each supplier. The suppliers can check their ―mailboxes‖ to pick up their orders. Section Ref: Just-in-Time Manufacturing Subsection Ref: Variations of Kanban Production Level: Medium Bloom‘s: Analysis Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 2 min
42. If the goal is to reduce the amount of inventory in the system, the number of kanban cards should a) be decreased. b) be increased. c) remain the same. d) be calculated by formula. e) remain the same, but container size should be increased. Ans: a Solution: The goal of kanban is to continually improve the efficiency of the system. This means striving to reduce the number of kanbans and the amount of inventory in the system. Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1.5 min
43. Consider a workstation that can process 4 units per minute. It takes 2 hours to receive an order from the previous station. The container size is 10 units. The factory sets safety stock at 20% of demand during lead time. How many kanbans are needed for the workstation? a) 57.6 b) 48 c) 0.96 d) 9.6 e) 28.8 Ans: a Solution: The demand rate is D = 4 units/min; the time it takes to receive an order is T = 2 hours = 120 min; the safety stock is S = 20% = 0.2 * 4 * 120 = 96 units; the size of container is C = 10 units. The total number of kanbans is N = (DT+S)/C = (4 * 120 + 96)/10 = 57.6. Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Medium Bloom‘s: Application Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 4 min
44. Consider a workstation that can process 4000 units per hour. It takes 15 minutes to receive an order from the previous station. The container size is 20 units. The factory sets safety stock at 20% of demand during lead time. How many kanbans are needed for the workstation? a) 16 b) 3600 c) 50 d) 10 e) 60 Ans: e Solution: The demand rate is D = 4000 units/hour; the time it takes to receive an order is T = 15 min = 0.25 hour; the safety stock is S = 20% = 0.2 * 4000 * 0.25 = 200 units; the size of container is C = 20 units. The total number of kanbans is N = (DT+S)/C = (4000 * 0.25 + 200) / 20 = 60. Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Medium Bloom‘s: Application Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 4 min
45. Small lot production a) increases inventory. b) decreases flexibility. c) reduces setup. d) increases excess processing. e) shortens lead time. Ans: e Solution: A principal way of eliminating inventory and excess processing while increasing flexibility is through small-lot production, which means that the amount of products produced at any one time is small. Section Ref: Just-in-Time Manufacturing Subsection Ref: Small Lot Sizes and Quick Setups Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1.5 min
46. What is the term for an adjustment of a machine after making one product type so that production can begin for another product type? a) level assembly schedule b) group technology c) setup d) cycle time e) automation Ans: c Solution: Setup includes activities such as recalibrating and cleaning equipment, changing blades, and readjusting equipment settings. Setup cost is the cost incurred when equipment is set up for a new production run. Section Ref: Just-in-Time Manufacturing Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1 min
47. External setups a) are the same as single setup. b) can be done while the machine is running. c) are undesirable for small lot production. d) are often contracted out. e) are more common than internal setups in traditional manufacturing systems. Ans: b Solution: External setups can be performed while the machine is still running. Almost all setups in traditional manufacturing systems are internal. Section Ref: Just-in-Time Manufacturing Subsection Ref: Small Lot Sizes and Quick Setups Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1 min
48. Uniform plant loading involves a) large lots produced over several days. b) making the same mix of products every day in small quantities. c) large amounts of inventory. d) making large changes in production to respond to changes in demand. e) spreading production uniformly over several plants. Ans: b Solution: JIT philosophy is to eliminate the problem by making adjustments as small as possible and setting a production plan that is frozen for the month. This is called uniform plant loading or ―leveling‖ the production schedule. Section Ref: Just-in-Time Manufacturing Subsection Ref: Uniform Plant Loading Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1.5 min
49. One aspect of flexible resources is a) the use of multifunction workers. b) relying on special equipment. c) the use of overtime. d) leasing, rather than buying, equipment. e) variable work schedules. Ans: a Solution: A key element of JIT is having flexible resources in order to meet customer demands and produce small lots. One aspect of flexibility is relying on general-purpose equipment capable of performing a number of different functions. Section Ref: Just-in-Time Manufacturing Subsection Ref: Flexible Resources Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1.5 min
50. The advantages of cell manufacturing using a U-shaped cell include a) greater production quantities per setup. b) easy reach and flexibility for workers. c) higher worker flexibility. d) longer setup times. e) smaller lot sizes. Ans: b Solution: U-shaped cells have a number of advantages. First, the use of cells provides production efficiency with the flexibility to produce a variety of different products. Second, the shape allows workers to have easy reach and flexibility. No special material handling is needed because everything is within reach. Finally, worker satisfaction is higher because of the ability to perform a variety of tasks. Section Ref: Just-in-Time Manufacturing Subsection Ref: Facility Layout Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1.5 min
51. Quality in just-in-time is centered on building quality into the a) product. b) maintenance of equipment. c) process. d) distribution system. e) workforce. Ans: c Solution: In JIT the quality of the product is distinguished from the quality of the process used to produce the product. Quality in JIT is centered on building quality into the process. Section Ref: Total Quality Management Subsection Ref: Product versus Process Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the elements of total quality management (TGM) and their role in JIT. AACSB: Knowledge Time on Task: 1.5 min
52. Quality problems in manufacturing can come from many sources, including a) customer needs that are not incorporated into the product design. b) the high cost of materials from suppliers. c) product specifications being ignored. d) small equipment quantities. e) large equipment quantities. Ans: a Solution: Quality problems can come from many sources including: product design (customer needs may be misunderstood and not incorporated into the product design), process design (management and equipment problems may stem from the design of the production process), suppliers (low-quality materials due to misunderstandings between manufacturer and supplier). Section Ref: Total Quality Management Subsection Ref: Quality at the Source Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the elements of total quality management (TGM) and their role in JIT. AACSB: Knowledge Time on Task: 1.5 min
53. What is the term that means giving workers authority to stop the production line when quality problems are encountered? a) automation b) kaizen c) muda d) poka-yoke e) jidoka Ans: e Solution: Workers are given the authority to stop the production line if quality problems are encountered; this is called jidoka. Section Ref: Total Quality Management Subsection Ref: Quality at the Source Level: Easy Bloom‘s: Knowledge Learning Objective 4: Explain the elements of total quality management (TGM) and their role in JIT. AACSB: Knowledge Time on Task: 1 min
54. Poka-yoke means a) using color coding. b) foolproofing. c) using process control charts. d) preventive maintenance. e) undercapacity scheduling. Ans: b Solution: Poka-yoke means ―foolproof‖ and refers to a device or mechanism that prevents defects from occurring. Section Ref: Total Quality Management Subsection Ref: Quality at the Source Level: Easy Bloom‘s: Knowledge Learning Objective 4: Explain the elements of total quality management (TGM) and their role in JIT. AACSB: Knowledge Time on Task: 1 min
55. Regular inspections and maintenance designed to keep a machine operational is __________ maintenance. a) preventive b) breakdown c) unscheduled d) emergency e) unnecessary Ans: a Solution: Preventive maintenance is regular inspections and maintenance designed to keep machines operational. Section Ref: Total Quality Management Subsection Ref: Preventive Maintenance Level: Easy Bloom‘s: Knowledge Learning Objective 4: Explain the elements of total quality management (TGM) and their role in JIT. AACSB: Knowledge Time on Task: 1 min
56. According to JIT, workers should perform a) system specification development. b) as directed by the supervisor. c) routine preventive maintenance activities. d) poka-yoke designs. e) quality program development. Ans: c Solution: According to JIT, workers should perform routine preventive maintenance activities, including cleaning, lubricating, recalibrating, and making other adjustments to equipment. Section Ref: Total Quality Management Subsection Ref: Preventive Maintenance Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the elements of total quality management (TGM) and their role in JIT. AACSB: Knowledge Time on Task: 1.5 min
57. Which of the following is ONE characteristic of preventive maintenance in JIT systems? a) fixing machinery breakdowns b) calling specialists to maintain equipment c) workers performing routine preventive maintenance d) perceiving breakdowns as an opportunity for continuous quality improvement e) preventive maintenance done by inspectors Ans: c Solution: Preventive maintenance is regular inspections and maintenance designed to keep machines operational. According to JIT, workers should perform routine preventive maintenance activities. Section Ref: Total Quality Management Subsection Ref: Preventive Maintenance Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the elements of total quality management (TGM) and their role in JIT. AACSB: Knowledge Time on Task: 1.5 min
58. Something you would expect to see in a just-in-time work environment is a) order. b) clutter. c) complexity. d) uncleanliness. e) confusion. Ans: a Solution: Order and simplicity are considered highly important element of quality management. Section Ref: Total Quality Management Subsection Ref: Work Environment Level: Easy Bloom‘s: Comprehension Learning Objective 4: Explain the elements of total quality management (TGM) and their role in JIT. AACSB: Knowledge Time on Task: 1.5 min
59. Just-in-time organizations rely on employees to a) do what their boss tells them to do. b) dress differently every day. c) work together. d) file grievances. e) be adversarial toward management. Ans: c Solution: JIT organizations rely on all employees to work together, including management and labor. Section Ref: Respect for People Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
60. Just-in-time relies on __________ worker skills, meaning the ability of workers to perform many different tasks on many different machines. a) natural b) verbal c) intuitive d) manual e) cross-functional Ans: e Solution: JIT relies on cross-functional worker skills, meaning the ability of workers to perform many different tasks on many different machines. Section Ref: Respect for People Subsection Ref: The Role of Production Employees Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
61. JIT production workers are expected to a) cover up quality problems. b) ignore data. c) take responsibility in getting to the root cause of quality problems. d) blame problems on someone else. e) have a poor attitude about quality. Ans: c Solution: Quality at the source means that all employees are responsible for getting to the root cause of quality problems. Section Ref: Respect for People Subsection Ref: The Role of Production Employees Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
62. JIT production workers a) keep data to themselves. b) participate in team problem-solving activities. c) do not understand data. d) never use data. e) rely on others to do data analysis. Ans: b Solution: The real task of production employees is to search for causes of problems in quality and production. Problem-solving activities usually take place, using the team approach in group meetings. Section Ref: Respect for People Subsection Ref: The Role of Production Employees Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
63. The role of production employees in JIT includes a) being actively engaged in improving the production process. b) covering up quality problems. c) ignoring data. d) following clearly defined and limiting work rules. e) rely on others to do data analysis Ans: a Solution: Part of workers‘ duties is to be actively engaged in improving the production process, monitoring quality, and correcting quality problems. Section Ref: Respect for People Subsection Ref: The Role of Production Employees Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
64. Which of the following is a characteristic of bottom-round management? a) consensus management by committees or teams b) fast decision-making process c) decision making starting with discussion at the top level d) lack of consensus e) top management making the final decision Ans: a Solution: JIT uses a style of management called bottom-round management, which means consensus management by committees or teams. When a decision needs to be made, it is discussed at all levels, starting at the bottom, so that everyone in the company contributes to the decision. This decision-making process is very slow, but it achieves consensus among all involved. Section Ref: Respect for People Subsection Ref: The Role of Production Employees Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
65. Which of the following is a role of JIT management? a) creating a hierarchy-oriented culture b) sharing cost and information c) serving as ―bosses‖ d) developing an incentive system to reward workers for their efforts e) centralizing all decisions Ans: d Solution: The role of management in JIT is to be responsible for creating a JIT culture; to serve as coaches and facilitators, not ―bosses‖; to develop an incentive system that rewards workers for their efforts; to develop employee skills necessary to function in a JIT environment; and to ensure that workers receive multifunctional training; facilitate teamwork. Section Ref: Respect for People Subsection Ref: The Role of Management Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
66. In Japan, lifetime employment a) is a recent trend. b) has had little impact. c) is an ideal that is never achieved. d) is true for everyone. e) comprises a relatively small percentage of the total work force today. Ans: e Solution: Japanese companies have traditionally provided lifetime employment for most of their permanent employees. Today, lifetime employment covers a relatively small percentage of the total workforce. Section Ref: Respect for People Subsection Ref: Lifetime Employment Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1 min
67. In a JIT environment, workers need to a) protect themselves from their boss‘s whims. b) be prepared to be reprimanded. c) keep their ideas to themselves. d) always work in pairs. e) feel secure in their jobs. Ans: e Solution: In a JIT environment, workers must feel secure in their jobs and know that they will not be reprimanded or lose their jobs for being proactive. Section Ref: Respect for People Subsection Ref: The Role of Management Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
68. With JIT a company‘s relationship with its suppliers includes a) competitive bidding. b) being in partnership with them. c) buying parts from the cheapest supplier. d) short-term relationships. e) having as many suppliers as possible. Ans: b Solution: JIT companies understand that they are in a partnership with their suppliers, who are viewed as the external factory. Section Ref: Respect for People Subsection Ref: Supplier Relationships Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
69. With regard to suppliers, JIT typically requires a) delivery of large lots at regular intervals. b) buyer inspection of incoming goods and materials. c) multiple sources from which to purchase. d) information sharing. e) buying parts from the cheapest supplier. Ans: d Solution: With a long-term relationship, a supplier can act as a service provider rather than a onetime seller. Part of such a relationship is cost and information sharing. Section Ref: Respect for People Subsection Ref: Supplier Relationships Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
70. The benefits of long-term relationships with a small number of suppliers include a) always getting the lowest price. b) receiving payments at regular intervals rather than on delivery of goods. c) transferring costs to the supplier. d) controlling supplier decisions. e) transferring all inventory to the supplier. Ans: b Solution: A certified JIT supplier with a long-term agreement also has the advantage of receiving payment at regular intervals rather than on delivery of goods. Paperwork is eliminated, and electronic linkages can be set up between manufacturer and supplier. These result in direct savings for both the supplier and the manufacturer. Section Ref: Respect for People Subsection Ref: Supplier Relationships Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
71. Which of the following is a good approach for suppliers who are providing JIT services to manufacturers? a) Use the ―push system‖ for deliveries. b) Locate near their suppliers. c) Have small warehouses near the manufacturing plant. d) Use third party logistics. e) Don‘t have inventory. Ans: c Solution: Key elements of JIT supplier relationships: suppliers viewed as external factory; use of single-source suppliers; long-term supplier relationships developed; suppliers located near customer; stable delivery schedules; cost and information sharing. Section Ref: Respect for People Subsection Ref: Supplier Relationships Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
72. The challenge for service operations is that they have to synchronize their __________ with demand. a) accounting b) finance c) marketing d) production e) information systems Ans: d Solution: The challenge for service operations is synchronizing their production with demand. Section Ref: JIT In Services Subsection Ref: Uniform Facility Loading Level: Easy Bloom‘s: Comprehension Learning Objective 8: Describe the impact of JIT on service and manufacturing organizations. AACSB: Knowledge Time on Task: 1.5 min
73. In making specific changes to JIT manufacturing, which of the following steps should come first? a) Reduce lot sizes and lead times. b) Switch to pull production. c) Reorganize workplace. d) Reduce setup times. e) Implement layout changes. Ans: c Solution: Following is a sequence of steps that should be followed in the implementation process: 1) Make quality improvements. 2) Reorganize workplace. 3) Reduce setup times. 4) Reduce lot sizes and lead times. 5) Implement layout changes. 6) Switch to pull production. 7) Develop relationship with suppliers. Section Ref: Implementing JIT Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 7: Discuss the implementation process of a successful JIT system. AACSB: Knowledge Time on Task: 1.5 min
74. Which of the following is considered to be a key element of JIT supplier relationships? a) suppliers viewed as internal factory b) use of multiple suppliers c) use of the ―push system‖ for deliveries d) suppliers located near customer e) suppliers competing with each other Ans: d Solution: Key elements of JIT supplier relationships: suppliers viewed as external factory; use of single-source suppliers; long-term supplier relationships developed; suppliers located near customer; stable delivery schedules; cost and information sharing. Section Ref: Respect for People Subsection Ref: Supplier Relationships Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
75. One of the greatest benefits of JIT is a) increasing waste and improving responsiveness. b) longer lead times and increased productivity. c) decreased machine utilization and improved quality. d) competing based on schedules. e) eliminating waste, improving responsiveness, and competing based on time. Ans: e Solution: Benefits of JIT: reduction in inventory; improved quality; reduced space requirements; shorter lead times; lower production costs; increased productivity; increased machine utilization; greater flexibility. Section Ref: Benefits of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 6: Describe the benefits of JIT. AACSB: Knowledge Time on Task: 1.5
76. Many car manufacturers are using the same production lines to produce several different vehicles (cars, SUVs, etc.). What part of JIT philosophy are they using? a) flexibility b) visibility c) simplicity d) cost reduction Ans: a Solution: A company can be flexible by being able to produce a wide variety of products. JIT systems are designed with the ability to produce different product models with different features through a manufacturing process that can easily switch from one product type to another by flexible workers who can perform many different tasks. Section Reference: The Philosophy of JIT Subsection Reference: n/a Level: Medium Blooms: Application Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Analytic Time on Task: 2 min
77. What element of JIT focuses on cost reduction based on elimination of waste? a) just-in-time manufacturing b) total quality management c) respect for people d) continuous improvement Ans: a Solution: JIT systems have been very efficient at reducing setup and inventory costs, which is a key to the success of JIT manufacturing. Section Reference: Elements of JIT Subsection Reference: n/a Level: Medium Blooms: Analysis Learning Objective 2: Describe the elements of JIT. AACSB: Analytic Time on Task: 2 min
78. Anna needs to decide the number of kanbans she should use. It takes 15 minutes to deliver her product to the next workstation using a container that can carry 8 units. The next workstation needs 2 units per minute and safety stock should be 10 units. How many kanbans should Anna use? a) 3 b) 5 c) 6 d) 8 Ans: b Solution: D = demand rate at the workstation = 2, T = the time it takes to receive an order from the previous workstation = 15, C = size of the container = 8, and S = safety stock to protect against variability or uncertainty in the system = 10. N = (DT + S) / C = (2 * 15 + 10) / 8 = 5. Section Reference: Just-in-Time Manufacturing Subsection Reference: Kanban Production Level: Medium Blooms: Application Analysis Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 3 min
79. Oceanic Airlines opened a new flight route from Baltimore to Washington, DC, but did not see a significant demand. They realized that potential customers prefer to drive rather than fly between these cities. What type of source of quality problem is described? a) product design b) process design c) suppliers d) customers Ans: a Solution: In the design process, customer needs may be misunderstood and not incorporated into the product design. Section Reference: Total Quality Management Subsection Reference: Quality at the Source Level: Medium Blooms: Application Learning Objective 4: Explain the elements of total quality management (TGM) and their role in JIT. AACSB: Analytic Time on Task: 2 min
80. Parker Industries is training its workers to construct and analyze SPC charts. Which role of production employees in JIT will the workers be able to perform after the training? a) Workers have cross-functional skills. b) Workers are responsible for recording and visually displaying performance data. c) Workers are responsible for preventive maintenance. d) Workers work in teams to solve problems. Ans: b Solution: Part of a worker‘s responsibility is recording data, such as the number of setups completed, the number of units produced, the number of defects and scrap, quality process control data, and equipment malfunctions. Section Reference: Respect for People Subsection Reference: The Role of Production Employees Level: Medium Blooms: Application Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Analytic Time on Task: 2 min
81. Product redesign without significant changes in the production process will mostly contribute which benefit of JIT? a) reduction in inventory b) improved quality c) shorter lead times d) increased productivity Ans: b Solution: Reduction in inventory, shorter lead times, and increased productivity will require changes in the production process. Quality improvement can be achieved not only by changing the production process but also by redesigning the product. Section Reference: Benefits of JIT Subsection Reference: n/a Level: Medium Blooms: Analysis Learning Objective 6: Describe the benefits of JIT. AACSB: Analytic Time on Task: 2 min
82. When a company is moving from traditional production to kanban production, which step of the JIT implementation process is the company at? a) Reorganize workplace. b) Implement layout changes. c) Switch to pull production. d) Make quality improvements. Ans: c Solution: Traditional manufacturing operations are push-type systems. JIT uses a pull system rather than a push system to move products through the facility. For the pull system to work, there must be good communication between the work centers, which is made possible by the use of a device called a kanban card. Section Reference: Implementing JIT Subsection Reference: n/a Level: Medium Blooms: Analysis Learning Objective 7: Discuss the implementation process of a successful JIT system. AACSB: Analytic Time on Task: 2 min
83. Many restaurants have happy hours and lower prices for lunch than for dinner because they are implementing which JIT concept? a) improved quality b) uniform facility loading c) reductions in cycle time d) workplace organization Ans: b Solution: The challenge for service operations is synchronizing their production with demand. Many service firms have developed unique ways to level customer demand in order to provide better service responsiveness. Differential pricing systems can be used to even out demand. Section Reference: JIT in Services Subsection Reference: n/a Level: Medium Blooms: Analysis Learning Objective 8: Describe the impact of JIT on service and manufacturing organizations. AACSB: Analytic Time on Task: 2 min
True/False
84. JIT considers waste anything that does add value. Ans: False Solution: JIT considers waste anything that does not add value—anything. Section Ref: The Philosophy of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
85. The broad view of JIT is now often termed lean production or lean systems. Ans: True Solution: The broad view of JIT is now often termed lean production or lean systems. Section Ref: The Philosophy of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
86. Often the best quality problem resolution solution involves a complex answer as the organization is a complex organization. Ans: False Solution: It is often tempting to solve an organizational problem using a complex and perhaps expensive method. It is far more difficult to think of a simple solution that goes directly to the root of the problem. Section Ref: The Philosophy of JIT Subsection Ref: Simplicity Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1.5 min
87. Continuous improvement is called kaizen by the Japanese. Ans: True Solution: Continuous improvement, called kaizen by the Japanese, in every aspect of the operation is a cornerstone of this philosophy. Section Ref: The Philosophy of JIT Subsection Ref: Continuous Improvement Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
88. An improvement tool that utilizes cross-functional teams to plan and deliver improvements to specific processes during two- or three-day marathon sessions is called a kanban blitz. Ans: False Solution: ―Kaizen blitz‖ is an improvement tool that utilizes cross-functional teams to plan and deliver improvements to specific processes during two- or three-day marathon sessions. Section Ref: The Philosophy of JIT Subsection Ref: Continuous Improvement Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
89. With a kaizen system there is no excess production because the only products and quantities produced are those specified by the kaizen. Ans: False Solution: The kanban specifies what is needed. There is no excess production because the only products and quantities produced are those specified by the kanban. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Knowledge Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1 min
90. JIT facilities are lacking in floor space. Ans: False Solution: JIT facilities are open and clean, with plenty of floor space. Section Ref: The Philosophy of JIT Subsection Ref: Visibility Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1 min
91. Being able to keep costs low while changing the volume of production is an example of flexibility. Ans: True Solution: Flexibility can mean being able to make changes in the volume of a product produced. JIT accomplishes this by keeping the costs of facilities, equipment, and operations at such a low level that breaking even typically is not a problem. Section Ref: The Philosophy of JIT Subsection Ref: Flexibility Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 1.5 min
92. By focusing on value-added processes, JIT is able to achieve high-volume production of high-quality, low-cost products. Ans: True Solution: By focusing on value-added processes, JIT is able to achieve high-volume production of high-quality, low-cost products while meeting precise customer needs. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
93. The manufacturing process in JIT starts with the final assembly schedule. Ans: True Solution: The manufacturing process in JIT starts with the final assembly schedule, often called the master production schedule, which is a statement of which products and quantities will be made in specific time periods. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
94. JIT manufacturing cannot succeed if setup costs are too high. Ans: True Solution: JIT systems have been very efficient at reducing setup costs, which is a key to the success of JIT manufacturing. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min
95. According to JIT, by eliminating inventory we can clearly identify obsolete products and work on eliminating them. Ans: False Solution: According to JIT, by eliminating inventory we can clearly identify problems and work to eliminate them. Section Ref: Elements of JIT Subsection Ref: Just-in-Time Manufacturing Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1.5 min 96. JIT considers people to be a company‘s most precious resource. Ans: True Solution: JIT considers people to be a company‘s most precious resource. The JIT philosophy believes in treating all employees with respect, providing job security, and offering significant rewards for well-performed tasks. Section Ref: Elements of JIT Subsection Ref: Respect for People Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge Time on Task: 1 min
97. There are two types of kanban cards: production cards and withdrawal cards. Ans: True Solution: There are actually two types of kanban cards: production cards that authorize production and withdrawal cards that authorize withdrawal of materials. Section Ref: Just-In-Time Manufacturing Subsection Ref: Kanban Production Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1 min
98. If the goal is to reduce the amount of inventory in the system, the number of kanban cards should be increased. Ans: False Solution: The JIT goal is to continually improve the efficiency of the system. This means striving to reduce the number of kanbans and the amount of inventory in the system. The number of kanbans and, therefore, the number of container. Section Ref: Just-In-Time Manufacturing Subsection Ref: Kanban Production Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1.5 min
99. External setups can be done while the machine is running. Ans: True Solution: External setups can be performed while the machine is still running. Almost all setups in traditional manufacturing systems are internal. Section Ref: Just-In-Time Manufacturing Subsection Ref: Small Lot Sizes and Quick Setups Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 1 min
100. Just-in-time organizations rely on employees to work together. Ans: True Solution: JIT organizations rely on all employees to work together, including management and labor. Section Ref: Respect for People Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
101. Just-in-time relies on cross-functional worker skills. Ans: True Solution: JIT relies on cross-functional worker skills, meaning the ability of workers to perform many different tasks on many different machines. Section Ref: Respect for People Subsection Ref: The Role of Production Employees Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
102. Bottom-round management includes consensus management by committees or teams. Ans: True Solution: JIT uses a style of management called bottom-round management, which means consensus management by committees or teams. Section Ref: Respect for People Subsection Ref: The Role of Production Employees Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1 min
103. With regard to suppliers, JIT typically requires information sharing. Ans: True Solution: With a long-term relationship, a supplier can act as a service provider rather than a onetime seller. Part of such a relationship is cost and information sharing. Section Ref: Respect for People Subsection Ref: Supplier Relationships Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 1.5 min
104. Successfully implementing JIT requires that it be done as quickly as possible. Ans: False Solution: JIT implementation process will not start and end in definite time periods. Rather, it will be a gradual process. Section Ref: Implementing JIT Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 7: Discuss the implementation process of a successful JIT system. AACSB: Knowledge Time on Task: 1.5 min
105. JIT concepts that are applicable to service organizations include use of multifunction workers. Ans: True Solution: The use of multifunction workers in service organizations helps improve quality and customer responsiveness. Section Ref: JIT in Services Subsection Ref: Use of Multifunction Workers Level: Easy Bloom‘s: Comprehension Learning Objective 8: Describe the impact of JIT on service and manufacturing organizations. AACSB: Knowledge Time on Task: 1.5 min
106. The challenge for service organizations is synchronizing their production with demand. Ans: True Solution: The challenge for service operations is synchronizing their production with demand. Section Ref: JIT in Services Subsection Ref: Uniform Facility Loading Level: Easy Bloom‘s: Comprehension Learning Objective 8: Describe the impact of JIT on service and manufacturing organizations. AACSB: Knowledge Time on Task: 1.5 min
107. Services organizations cannot use the JIT philosophy to reduce cycle time. Ans: False Solution: Competition based on speed is common in services, several companies have used JIT concepts to reduce their cycle time and, consequently, increase their speed. Section Ref: JIT in Services Subsection Ref: Reductions in Cycle Time Level: Easy Bloom‘s: Comprehension Learning Objective 8: Describe the impact of JIT on service and manufacturing organizations. AACSB: Knowledge Time on Task: 1.5 min 108. A key outcome of JIT is that organizational barriers are eliminated. Ans: True Solution: Implementing a philosophy such as JIT will inevitably have consequences for every aspect of the organization. The entire organization is affected by JIT, primarily because organizational barriers are eliminated. Section Ref: JIT and Lean Systems within OM: How It All Fits Together Subsection Ref: JIT and Lean Systems across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 8: Describe the impact of JIT on service and manufacturing organizations. AACSB: Knowledge Time on Task: 1.5 min
109. Undercapacity scheduling is the term that describes working with a schedule of seven hours of production and one hour of problem solving with teams. Ans: True Solution: JIT systems usually operate with seven hours of production and one hour of problem solving and working with teams. Called undercapacity scheduling, it is necessary in order to leave ample time for problem-solving activities. Section Ref: Total Quality Management Subsection Ref: Quality at the Source Level: Easy Bloom‘s: Knowledge Learning Objective 4: Explain the elements of total quality management (TGM) and their role in JIT. AACSB: Knowledge Time on Task: 1 min
Essay
110. The central belief of the JIT philosophy is elimination of waste. What are the other beliefs that help define this philosophy? Ans: broad view of operations, simplicity, continuous improvement, visibility, and flexibility Solution: Part of the philosophy of JIT is that everyone in the organization should have a broad view of the organization and work toward the same goal, which is serving the customer. JIT is built on simplicity—the simpler the better. JIT encourages employees to think about problems and come up with simple solutions. A major aspect of the JIT philosophy is an emphasis on quality; continuous improvement in every aspect of the operation is a cornerstone of this philosophy. Part of the JIT philosophy is to make all waste visible; waste can be eliminated only when it is seen and identified. JIT was based on the need for survival, and survival means being flexible in order to adapt to changes in the environment. Section Ref: The Philosophy of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 4 min
111. Under the JIT belief of visibility, describe JIT facilities. Ans: open and clean, with plenty of floor space; no clutter; everyone can see what everyone else is doing; no one can hide extra inventory anywhere; an orderly environment; visibility allows waste to be readily seen Solution: JIT facilities are open and clean, with plenty of floor space. There is no clutter, and everyone can see what everyone else is doing. No one can hide extra inventory in a corner of his or her office or take a short nap in the afternoon. Section Ref: The Philosophy of JIT Subsection Ref: Visibility Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 3 min 112. Describe the ―kaizen blitz.‖ Ans: This is an improvement tool that utilizes cross-functional teams to plan and deliver improvements to specific processes during two- or three-day marathon sessions. This process allows a small group of people to concentrate on a bit-size chunk of the problem for a short period of time. Companies find that a kaizen blitz can quickly deliver dramatic and low-cost improvements to processes. Solution: This is an improvement tool that utilizes cross-functional teams to plan and deliver improvements to specific processes during two- or three-day marathon sessions. This process allows a small group of people to concentrate on a bit-size chunk of the problem for a short period of time. Companies find that a kaizen blitz can quickly deliver dramatic and low-cost improvements to processes. Section Ref: The Philosophy of JIT Subsection Ref: Continuous Improvement Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 3 min
113. What is the formula to compute the number of kanbans needed to control the production of a particular product (including the variable definitions)? Ans: N = (DT + S) / C; where N = total # of kanbans or containers (one card per container), D = demand rate at the workstation, T = the time it takes to receive an order from the previous workstation, C = size of the container, and S = safety stock to protect against variability or uncertainty in the system. Solution: N = (DT + S) / C; where N = total # of kanbans or containers (one card per container), D = demand rate at the workstation, T = the time it takes to receive an order from the previous workstation, C = size of the container, and S = safety stock to protect against variability or uncertainty in the system. Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 3 min
114. What are the advantages of cell manufacturing using a U-shaped cell? Ans: production efficiency with flexibility to produce a variety of parts, easy reach and flexibility for workers, higher worker satisfaction, and no special material handling Solution: The equipment in a work cell is usually arranged in a U-shape, with the worker placed in the center of the U that has a number of advantages. First, the use of cells provides production efficiency with the flexibility to produce a variety of different products. Second, the U-shape allows workers to have easy reach and flexibility. No special material handling is needed because everything is within reach. Finally, worker satisfaction is higher because of the ability to perform a variety of tasks. Section Ref: Just-in-Time Manufacturing Subsection Ref: Facility Layout Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge Time on Task: 3 min
115. What are the responsibilities of production employees in JIT? Ans: get to the root cause of quality problems, participate in team problem-solving activities, be actively engaged in improving the production process, monitor quality, record data, and act on the information they have Solution: JIT relies on cross-functional worker skills, meaning the ability of workers to perform many different tasks on many different machines. Part of workers‘ duties is to be actively engaged in improving the production process, monitoring quality, and correcting quality problems. Continuous improvement relies heavily on the knowledge and skills of the workers closest to the operation. Section Ref: Respect for People Subsection Ref: The Role of Production Employees Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 3 min 116. What are the key elements a JIT company‘s relationship with its suppliers? Ans: suppliers viewed as an external factory, use of single-source suppliers, respect for suppliers, building long-term relationships, forming a partnership with suppliers, sharing cost and other information, working together to improve process controls, increased accountability on the part of the suppliers, development of stable delivery schedules, suppliers located near the company‘s factory, and elimination of paperwork Solution: suppliers viewed as an external factory, use of single-source suppliers, respect for suppliers, building long-term relationships, forming a partnership with suppliers, sharing cost and other information, working together to improve process controls, increased accountability on the part of the suppliers, development of stable delivery schedules, suppliers located near the company‘s factory, and elimination of paperwork Section Ref: Respect for People Subsection Ref: Supplier Relationships Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge Time on Task: 4 min
117. What are the benefits of JIT? Ans: increased flexibility, shorter lead times, increased productivity, improved quality, increased machine utilization, lower production costs, reduced inventory Solution: increased flexibility, shorter lead times, increased productivity, improved quality, increased machine utilization, lower production costs, reduced inventory Section Ref: Benefits of JIT Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 6: Describe the benefits of JIT. AACSB: Knowledge Time on Task: 4 min
118. What does a company need to have to successfully implement JIT? Ans: a ―champion‖ for JIT implementation, a shared vision of where the company is and where it wants to go, top management creating the right atmosphere, reward systems to reward ideas and team cooperation, quality improvements being made, reorganizing the workplace, reducing setup times, reducing lot sizes and lead times, making layout changes, switching to pull production, and developing relationships with suppliers Solution: : a ―champion‖ for JIT implementation, a shared vision of where the company is and where it wants to go, top management creating the right atmosphere, reward systems to reward ideas and team cooperation, quality improvements being made, reorganizing the workplace, reducing setup times, reducing lot sizes and lead times, making layout changes, switching to pull production, and developing relationships with suppliers Section Ref: Implementing JIT Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 7: Discuss the implementation process of a successful JIT system. AACSB: Knowledge Time on Task: 4 min
119. Discuss why implementation of a JIT will NOT start and end in definite time periods. Ans: JIT is a gradual process that is never complete because improving performance is a neverending task. Solution: When it comes to implementation, the concept of continuous improvement is an integral part of JIT. This means that the implementation process will not start and end in definite time periods. Rather, it will be a gradual process. Section Ref: Implementing JIT Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 7: Discuss the implementation process of a successful JIT system. AACSB: Knowledge Time on Task: 3 min
120. What JIT concepts are applicable to service organizations? Ans: reductions in cycle times, use of multifunction workers, minimizing setup times, parallel processing, workplace organization, improved quality, and uniform facility loading Solution: reductions in cycle times, use of multifunction workers, minimizing setup times, parallel processing, workplace organization, improved quality, and uniform facility loading Section Ref: JIT in Services Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Describe the impact of JIT on service and manufacturing organizations. AACSB: Knowledge Time on Task: 3 min
121. Describe how JIT affects the accounting department. Ans: Traditional accounting systems generally allocate overhead on the basis of direct labor hours. This does not accurately describe the actual use of overhead. JIT relies on activity-based costing to appropriately allocate overhead. In an ABC specific costs are identified and then assigned to various types of activities. Overhead is then assigned to the jobs depending on how many activities a particular job takes up. Solution: Accounting is strongly affected by JIT. Traditional accounting systems generally allocate overhead on the basis of direct labor hours that does not accurately describe the actual use of overhead by different jobs. These numbers may lead management to make inappropriate decisions. JIT relies on activity-based costing to allocate overhead. In activity-based costing, specific costs are identified and then assigned to various types of activities, such as inspection, movement of goods, and machine processing. Overhead costs are then assigned to jobs depending on how many activities a particular job takes up. Section Ref: JIT and Lean Systems within OM: How It All Fits Together Subsection Ref: JIT and Lean System Across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 8: Describe the impact of JIT on service and manufacturing organizations. AACSB: Knowledge Time on Task: 3 min
122. What is the difference between traditional and cell manufacturing? Ans: Cell manufacturing is the placement of dissimilar machines and equipment together in order to produce a family of products with similar processing requirements—inventory is lower. Traditional manufacturing will produce goods ahead of time in anticipation of demand— inventory is high. Solution: Cell manufacturing is the placement of dissimilar machines and equipment together in order to produce a family of products with similar processing requirements—inventory is lower. Traditional manufact, 124, uring will produce goods ahead of time in anticipation of demand— inventory is high. Section Ref: Just-in-Time Manufacturing Subsection Ref: Facility Layout Level: Easy
Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge
Time on Task: 3 min
Problems
123. Frank James works for a production facility that makes car radios. His job is to insert the integrated circuits and make sure that they work correctly. He is expected to handle 20 radios per hour. The factory uses a kanban production system with containers that hold four radios. It takes 60 minutes for Frank to receive the radios from the previous workstation. Safety stock is zero. How many kanbans are needed? Ans: 5 Solution: D = demand rate at the workstation = 20, T = the time it takes to receive an order from the previous workstation = 60 min = 1 hour, C = size of the container = 4, and S = safety stock to protect against variability or uncertainty in the system = 0 (not mentioned). N = (DT + S) / C = (20 * 1 + 0) /4 = 5 Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Medium Bloom‘s: Application Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 3.5 min
124. Matt Dillon works for a production facility that makes ball point pens. His job is to place the spring on the central ink insert. He is expected to process 200 inserts per hour. The factory uses a kanban production system with containers that hold 50 inserts. It takes 30 minutes for Matt to receive the inserts from the previous workstation. Safety stock is zero. How many kanbans are needed? Ans: 2 Solution: D = demand rate at the workstation = 200, T = the time it takes to receive an order from the previous workstation = 30 min = 0.5 hour, C = size of the container = 50, and S = safety stock to protect against variability or uncertainty in the system = 0 (not mentioned). N = (DT + S) / C = (200 * 0.5 + 0) / 50 = 2 Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Medium Bloom‘s: Application Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 3.5 min
125. Frank James works for a production facility that makes car radios. His job is to insert the integrated circuits and make sure that they work correctly. He is expected to handle 20 radios per hour. The factory uses a kanban production system with containers that hold four radios. It takes 60 minutes for Frank to receive the radios from the previous workstation. The factory sets safety stock at 50% of demand during lead time. How many kanbans are needed? Ans: 7.5 Solution: D = demand rate at the workstation = 20, T = the time it takes to receive an order from the previous workstation = 60 min = 1 hour, C = size of the container = 4, and S = safety stock to protect against variability or uncertainty in the system = 50% = 0.5. Safety stock in units S = 0.5 * 20 * 1 = 10 N = (DT + S) / C = (20 * 1 + 10) /4 = 7.5 Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Medium Bloom‘s: Application Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 4.5 min
126. Matt Dillon works for a production facility that makes ball point pens. His job is to place the spring on the central ink insert. He is expected to process 200 inserts per hour. The factory uses a kanban production system with containers that hold 50 inserts. It takes 30 minutes for Matt to receive the inserts from the previous workstation. The factory sets safety stock at 40% of demand during lead time. How many kanbans are needed? Ans: 2.8 Solution: D = demand rate at the workstation = 200, T = the time it takes to receive an order from the previous workstation = 30 min = 0.5 hour, C = size of the container = 50, and S = safety stock to protect against variability or uncertainty in the system = 40% = 0.4. Safety stock in units S = 0.4 * 200 * 0.5 = 40. N = (DT + S) / C = (200 * 0.5 + 40) / 50 = 2.8 Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Medium Bloom‘s: Application Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 4.5 min
127. Consider a workstation that can process 4 units per minute. It takes 10 minutes to receive an
order from the previous station. The container size is 10 units. The factory sets safety stock at 20% of demand during lead time. How many kanbans are needed for the workstation? Ans: 4.8 Solution: D = demand rate at the workstation = 4, T = the time it takes to receive an order from the previous workstation = 10 min, C = size of the container = 10, and S = safety stock to protect against variability or uncertainty in the system = 20% = 0.2. Safety stock in units S = 0.2 * 10 * 4 = 8 N = (DT+S)/C = [4 * 10 + 8] /10 = 4.8 units/minute Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Medium Bloom‘s: Application Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 4 min
128. Consider a workstation that can process 2 units per minute. It takes 6 minutes to receive an order from the previous station. The container size is 12 units. The factory sets safety stock at 20% of demand during lead time. How many kanbans are needed for the workstation? Ans: 1.2 Solution: D = demand rate at the workstation = 2, T = the time it takes to receive an order from the previous workstation = 6 min, C = size of the container = 12, and S = safety stock to protect against variability or uncertainty in the system = 20% = 0.2 Safety stock in units S = 0.2 * 2 * 6 = 2.4 N = (DT+S)/C = (2 * 6 + 2.4) /12 = 1.2 units/minute Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Medium Bloom‘s: Application Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 4 min
129. Consider a workstation that can process 4 units per minute. It takes 2 hours to receive an order from the previous station. The container size is 10 units. The factory sets safety stock at 20% of demand during lead time. How many kanbans are needed for the workstation? Ans: 57.6 Solution: D = demand rate at the workstation = 4, T = the time it takes to receive an order from the previous workstation = 2 hours = 120 min, C = size of the container = 10, and S = safety stock to protect against variability or uncertainty in the system = 20% = 0.2 Safety stock in units S = 0.2 * 4 * 120 = 96 N = (DT+S)/C = (4 * 120 + 96)] /10 = 57.6 units/minute Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Medium Bloom‘s: Application Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 4.5 min
130. Consider a workstation that can process 1060 units per hour. It takes 15 minutes to receive an order from the previous station. The container size is 20 units. The factory sets safety stock at 20% of demand during lead time. How many kanbans are needed for the workstation? Ans: 15.9 Solution: D = demand rate at the workstation = 1060, T = the time it takes to receive an order from the previous workstation = 15 min = 0.25 hour, C = size of the container = 20, and S = safety stock to protect against variability or uncertainty in the system = 20% = 0.2 Safety stock in units S = 0.2 * 1060 * 0.25 = 53 N = (DT+S)/C = (1060 * 0.25 + 53) /20 = 15.9 Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Medium Bloom‘s: Application Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 4.5 min
131. Consider a workstation that can process 400 units per hour. It takes 3 hours to receive an order from the previous station. The container size is 50 units. The factory sets safety stock at 10% of demand during lead time. How many kanbans are needed for the workstation? Ans: 26.4 Solution: D = demand rate at the workstation = 400, T = the time it takes to receive an order from the previous workstation = 3 hours, C = size of the container = 50, and S = safety stock to protect against variability or uncertainty in the system = 10% = 0.1 Safety stock in units S = 0.1 * 400 * 3 = 120 N = (DT+S)/C = (400 * 3 + 120) /50 = 26.4 Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Medium Bloom‘s: Application Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 4 min
132. Consider a workstation that can process 1200 units per hour. It takes 1.5 hours to receive an order from the previous station. The container size is 40 units. The factory sets safety stock at 20% of demand during lead time. How many kanbans are needed for the workstation? Ans: 54 Solution: D = demand rate at the workstation = 1200, T = the time it takes to receive an order from the previous workstation = 1.5 hours, C = size of the container = 40, and S = safety stock to protect against variability or uncertainty in the system = 20% = 0.2 Safety stock in units S = 0.2 * 1200 * 1.5 = 360 N = (DT+S)/C = (1200 * 1.5 + 360) /40 = 54 Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Medium Bloom‘s: Application Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 4 min
133. Frank‘s umbrella corporation is designing a kanban system. They know that they are expected to produce 100 umbrellas per hour. They‘ve also determined that a key external resource takes 30 minutes to deliver the required material once an order has been transmitted. To start with they want to maintain a safety stock of 25 critical parts. Originally they want to start with 3 kanbans. What container size should Frank‘s umbrella company start with? Ans: 25 Solution: D = demand rate at the workstation = 100, T = the time it takes to receive an order from the previous workstation = 30 min = 0.5 hours, N = number of kanbans = 3, and S = safety stock to protect against variability or uncertainty in the system = 25 units N = (DT+S)/C therefore C = (DT+S)/N = (100 * 0.5) + 25] /3 = 25 Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Hard Bloom‘s: Evaluation Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 5 min 134. Raissa‘s teapot firm is moving to a JIT system. One question they are trying to answer is what level of safety stock they should maintain. They produce 240 teapots every four hours. The teapot ceramic handle vendor will deliver a container containing 30 parts one hour after they receive a request to ship. Raissa‘s kanban system uses four containers. What should they maintain as a safety stock? Ans: 60 Solution: D = demand rate at the workstation = 240 / 4 = 60, T = the time it takes to receive an order from the previous workstation = 1 hours, N = number of kanbans = 4, and C = size of the container = 30 N = (DT+S)/C therefore S = N*C - D*T = 4 * 30 – 60 * 1 = 60 Section Ref: Just-in-Time Manufacturing Subsection Ref: Kanban Production Level: Hard Bloom‘s: Evaluation Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Analytic Time on Task: 6 min
Short Answer
135. What are the three major elements of JIT? Ans: just-in-time manufacturing, total quality management, and respect for people
Solution: Three basic elements work together to complete a JIT system: just-in-time manufacturing, total quality management, and respect for people. Section Ref: Elements of JIT Subsection Ref: n/a Level: Easy
Bloom‘s: Knowledge Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge
Time on Task: 2 min 136. What are the reasons that respect for people is important in JIT? Ans: JIT requires workers‘ active participation, cooperation, ideas, willingness to cross train, flexibility, good attitude, and willingness to change, for example. Solution: JIT requires total organizational reform and participation by everyone in the company. Everyone is equally important and equally involved. In a JIT system all functions of the company must work together to meet customer needs. Employees in JIT organizations are expected to be active participants in meeting customer needs, from developing improvements in the production process to making sure quality standards are met at every level. JIT also relies on workers to perform multiple tasks and to work in teams, including management, labor, staff, and even suppliers. Section Ref: Elements of JIT Subsection Ref: Respect for People Level: Easy Bloom‘s: Comprehension Learning Objective 2: Describe the elements of JIT. AACSB: Knowledge
Time on Task: 3 min
137. Regarding production batches, traditional production plans schedule _______ batches at one time, while JIT with level scheduling uses __________ batches at many times. Ans: large; small. Solution: To meet demand and keep inventories low, a ―level‖ schedule is developed so that the same mix of products is made every day in small quantities. This is in contrast to traditional systems, which produce large quantities of one product on one day and of another product on the next day, causing large buildups of inventory. Section Ref: Just-in-Time Manufacturing Subsection Ref: Uniform Plant Loading Level: Easy
Bloom‘s: Comprehension Learning Objective 3: Explain the key elements of JIT manufacturing. AACSB: Knowledge
Time on Task: 2.5 min 138. Scheduling two 10-hour shifts and a 4-hour housekeeping and repair shift each workday is an example of _________________maintenance. Ans: preventive Solution: Preventive maintenance is regular inspections and maintenance designed to keep machines operational. According to JIT, workers should perform routine preventive maintenance activities, including cleaning, lubricating, recalibrating, and making other adjustments to equipment. Section Ref: Total Quality Management Subsection Ref: Preventive Maintenance Level: Medium
Bloom‘s: Application Learning Objective 4: Explain the elements of total quality management (TGM) and their role in JIT. AACSB: Analytic
Time on Task: 2.5 min
139. Production employees in a JIT setting capture and visually display performance data in ______charts and _________ statistics. Ans: SPC; descriptive. Solution: Workers are responsible for recording and visually displaying performance data in form of SPC charts and descriptive statistics. Section Ref: Respect for People Subsection Ref: The Role of Production Employees Level: Medium
Bloom‘s: Analysis Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Analytic
Time on Task: 2.5 min 140. JIT supply chains often involve firms that locate _____________________. Ans: near each other Solution: To provide JIT service to manufacturers, suppliers often locate near their customers. Section Ref: Respect for People Subsection Ref: Supplier Relationships Level: Easy
Bloom‘s: Comprehension Learning Objective 5: Describe the role of people in JIT and why respect for people is so important. AACSB: Knowledge
Time on Task: 2 min 141. JIT changes happen in sequence because ________________________. Ans: some changes depend on, or are easier to implement after, others. Trying to make all changes at once would overwhelm and demoralize the managers and other employees. Solution: The concept of continuous improvement is an integral part of JIT. This means that the implementation process will not start and end in definite time periods. Rather, it will be a gradual process. Reductions in inventory have to be preceded by improvements in quality, changes in layout, reductions in setup times, and worker training. As improvements are made, inventory can be reduced. As new problems become visible, they must be solved before further reductions in inventory are made. Section Ref: Implementing JIT Subsection Ref: n/a Level: Medium Bloom‘s: Analysis Learning Objective 7: Discuss the implementation process of a successful JIT system. AACSB: Analytic
Time on Task: 2.5 min
142. Every organization is just one element of an entire ___________ chain system. Ans: supply Solution: Every organization is just one element of an entire supply chain system. Section Ref: JIT and Lean Systems within OM: How It All Fits Together Subsection Ref: The Supply Chain Link Level: Easy Bloom‘s: Comprehension Learning Objective 8: Describe the impact of JIT on service and manufacturing organizations. AACSB: Knowledge
Time on Task: 2 min
143. The principles of JIT need to be adopted by all members of a supply chain in order to have a __________ impact. Ans: full Solution: The principles of JIT need to be adopted by all members of a supply chain in order to have a full impact. This is often referred to as a lean supply chain. Section Ref: JIT and Lean Systems within OM: How It All Fits Together Subsection Ref: The Supply Chain Link Level: Easy Bloom‘s: Comprehension Learning Objective 8: Describe the impact of JIT on service and manufacturing organizations. AACSB: Knowledge
Time on Task: 2 min
144. Part of JIT philosophy is to design operations that are highly efficient but flexible in order to accommodate changing ______________________. Ans: customer demands Solution: Part of the JIT philosophy is to design operations that are highly efficient but flexible in order to accommodate changing customer demands. Section Ref: The Philosophy of JIT Subsection Ref: Flexibility Level: Easy Bloom‘s: Comprehension Learning Objective 1: Explain the core beliefs of the just-in-time (JIT) philosophy. AACSB: Knowledge Time on Task: 2 min
Testbank Chapter 8 Forecasting
LO Section
Subsection
Question #
Principles of Forecasting Steps in the Forecasting Process
1, 2, 74, 82, 108, 135
Types of Forecasting Methods
4, 5, 8, 72, 73, 84, 85
3, 75, 83, 109
Qualitative Methods
6, 7, 9, 10, 11, 12, 13, 86, 87, 88, 110, 111
Quantitative Methods
14, 15, 16, 19, 76, 89
Time Series Model
20, 21, 23, 47, 51, 52, 90, 91, 112
Forecasting Level or Horizontal Pattern Forecasting Trend Forecasting Seasonality
17, 18, 22, 24, 25, 26, 27, 28, 29, 30, 42, 43, 44, 48, 49, 50, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 66, 67, 77, 92, 93, 94, 95, 96, 97, 98, 100, 113, 114, 120, 121, 122, 123, 136 128 124, 125, 137, 138 31, 65, 126 127
Causal Models
Linear Regression Multiple Regression Measuring Forecast Accuracy
32, 33, 34, 35, 36, 37, 38, 39, 40, 78, 115, 129, 141 142 139
Forecast Accuracy Measures Tracking Signal Selecting the Right Forecasting Model
45, 46, 79, 99, 130, 131 41, 132
80, 116 Forecasting Software Predictive Analytics and Forecasting
68, 106, 107, 119
Combining Forecasting
69, 101, 117, 133
102
Collaborative Planning, Forecasting, and Replenishment (CPFR)
70, 71, 81, 103, 118, 134
Forecasting within OM: How It All Fits Together
104, 105, 140
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Multiple Choice
1. When evaluating forecasting models it is accurate to say a) they all rely on the same data sets. b) they will provide the same results. c) they are usually accurate. d) they differ in their degree of complexity. e) they do not differ in their degree of complexity. Ans: d Solution: There are many types of forecasting models. They differ in their degree of complexity, the amount of data they use, and the way they generate the forecast. Section Ref: Principles of Forecasting Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Identify principles of forecasting. AACSB: Knowledge Time on Task: 1.5 min
2. Which of the following is a feature common to all forecasting models? a) This period‘s forecast error is needed to compute next period‘s forecast. b) Models use the same way to generate the forecast. c) Models use the same amount of data for forecast. d) Forecasts are more accurate for shorter rather than for longer time horizons. Ans: d Solution: Some features are common to all forecasting models. They include the following: forecasts are rarely perfect, forecasts are more accurate for groups or families of items rather than for individual items, and forecasts are more accurate for shorter rather than longer time horizons. Section Ref: Principles of Forecasting Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Identify principles of forecasting. AACSB: Analytic Time on Task: 1.5 min
3. The first step in forecasting is to a) determine what data is available. b) decide what to forecast. c) evaluate and analyze appropriate data. d) select and test the forecast model. e) establish the forecast accuracy requirements. Ans: b Solution: Decide what to forecast. Remember that forecasts are made in order to plan for the future. To do so, we have to decide what forecasts are actually needed. Section Ref: Steps in the Forecasting Process Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain the steps involved in the forecasting process. AACSB: Knowledge Time on Task: 1 min
4. Which of the following companies helps businesses use weather data to make their business plans? a) i2 technologies b) Manugistics c) Planalytics d) Algorithmics e) SAP Ans: c Solution: Planalytics Inc. is a company that helps businesses use weather data to make their business plans. Section Ref: Types of Forecasting Methods Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1 min
5. Qualitative forecasting methods a) are made objectively by the forecaster. b) are made subjectively by the forecaster. c) are made using existing data sources. d) are based on mathematical models. e) are only used in parallel with quantitative models. Ans: b
Solution: Qualitative forecasting methods, often called judgmental methods, are methods in which the forecast is made subjectively by the forecaster. Section Ref: Types of Forecasting Methods
Subsection Ref: n/a Level: Easy
Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge
Time on Task: 1 min 6. Under which forecasting method does a group of managers meet to generate a forecast?
a) market research b) executive opinion c) Delphi method d) naïve method e) Gamma method Ans: b Solution: Executive opinion is a forecasting method in which a group of managers meet and collectively develop a forecast. Section Ref: Types of Forecasting Methods Subsection Ref: Qualitative Methods Level: Easy Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1 min
7. Which forecasting method seeks to develop a consensus among a group of experts? a) market research b) executive opinion c) Delphi method d) naïve method e) Gamma method Ans: c Solution: The Delphi method is a forecasting method in which the objective is to reach a consensus among a group of experts while maintaining their anonymity. Section Ref: Types of Forecasting Methods Subsection Ref: Qualitative Methods Level: Easy Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1 min
8. One limitation to quantitative forecasting models is that a) they are objective. b) they are consistent. c) they are based on mathematical formulas. d) they are limited on the quality of available data. e) they can work around bad data. Ans: d Solution: Quantitative methods are only as good as the data on which they are based. Section Ref: Types of Forecasting Methods Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1.5 min
9. Which forecasting method is particularly good for predicting technological changes and scientific advances? a) market research b) executive opinion c) Delphi method d) naïve method e) Gamma method Ans: c Solution: Although the Delphi method takes a large amount of time, it has been shown to be an excellent method for forecasting long-range product demand, technological change, and scientific advances in medicine. Section Ref: Types of Forecasting Methods Subsection Ref: Qualitative Methods Level: Easy Bloom‘s: Comprehension Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1.5 min
10. Which forecasting method is particularly good for determining customer preferences? a) market research b) executive opinion c) Delphi method d) naïve method e) Gamma method Ans: a Solution: Market research can be a good determinant of customer preferences. Section Ref: Types of Forecasting Methods Subsection Ref: Qualitative Methods Level: Easy Bloom‘s: Comprehension Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1.5 min
11. Which forecasting method suffers from the possibility of having one person‘s opinion dominate the forecast? a) market research b) executive opinion c) Delphi method d) naïve method e) Gamma method Ans: b Solution: In executive opinion method, often the opinion of one person can dominate the forecast if that person has more power than the other members of the group or is very domineering. Section Ref: Types of Forecasting Methods Subsection Ref: Qualitative Methods Level: Easy Bloom‘s: Comprehension Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1.5 min
12. Which of the following forecasting methods is MOST likely to be implemented to change an existing quantitative forecast to account for a new competitor in the marketplace? a) market research b) executive opinion c) Delphi method d) naïve method e) Gamma method Ans: b Solution: Sometimes executive opinion can be used to change an existing forecast to account for unusual events, such as an unusual business cycle or unexpected competition. Section Ref: Types of Forecasting Methods Subsection Ref: Qualitative Methods Level: Easy Bloom‘s: Comprehension Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1.5 min
13. Which of the following forecasting methods is specifically designed to go through several rounds of modification before generating a final forecast?
a) exponential smoothing b) executive opinion c) Delphi method d) naïve method e) Gamma method Ans: c Solution: In the Delphi method, the researcher puts together a panel of experts in the chosen field. The process involves sending questionnaires to the panelists, then summarizing the findings and sending them an updated questionnaire incorporating the findings. This process continues until a consensus is reached. Section Ref: Types of Forecasting Methods Subsection Ref: Qualitative Methods Level: Easy Bloom‘s: Comprehension Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1.5 min
14. What are the two categories of quantitative models? a) Delphi and noncausal b) causal and noncausal c) Delphi and time series d) causal and time series e) causal and Delphi Ans: d Solution: Quantitative methods can also be divided into two categories: time series models and causal models. Section Ref: Types of Forecasting Methods Subsection Ref: Quantitative Methods Level: Easy Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1 min
15. A causal research model is based on the assumption that a) the independent variable is related to the dependent variable. b) there is a relationship between the time series and the dependent variable. c) the variable being forecast is related to other variables in the environment. d) there is a relationship between the time series and the independent variable. e) the information is contained in a time series of data. Ans: c Solution: Causal models, sometimes called associative models, assume that the variable we wish to forecast is somehow related to other variables in the environment. Section Ref: Types of Forecasting Methods Subsection Ref: Quantitative Methods Level: Easy Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1 min
16. Which of the following is a causal forecasting method? a) naïve b) moving average c) weighted moving average d) trend adjusted exponential smoothing e) linear regression Ans: e Solution: Some of the best-known causal models are regression models including linear and multiple regressions. Section Ref: Types of Forecasting Methods Subsection Ref: Quantitative Methods Level: Easy Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1 min
17. Which of the following is the LEAST useful sales forecasting model to use when sales are increasing? a) trend adjusted exponential smoothing b) simple mean c) exponential smoothing d) weighted moving average e) naïve Ans: b Solution: The simple mean model is only good for a level data pattern. As the average becomes based on a larger and larger data set, the random variation and the forecasts become more stable. Thus, the forecast will not significantly change when sales are increasing, which will lead to greater and greater error. Section Ref: Types of Forecasting Methods Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Analysis Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Analytic Time on Task: 2 min
18. Over the long term, which of the following forecasting models will likely require carrying the LEAST amount of data? a) naïve b) simple mean c) exponential smoothing d) weighted moving average e) moving average Ans: a Solution: The naïve method is one of the simplest forecasting models. It assumes that the next period‘s forecast is equal to the current period‘s actual. Thus, it requires information about the last period only. Section Ref: Types of Forecasting Methods Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Analysis Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Analytic Time on Task: 2 min
19. In looking at seasonal indexes one weakness to watch for is a) use of the wrong alpha. b) incorrect selection of weights. c) a clear lack of linear relationship. d) seasonality not being present. e) significant increase in computational requirements. Ans: d Solution: A weakness of seasonal indexes is that a researcher should make sure seasonality is actually present. Section Ref: Types of Forecasting Methods Subsection Ref: Quantitative Methods Level: Easy Bloom‘s: Comprehension Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1.5 min
20. Which of the following is considered to be one of the basic patterns of time series data? a) horizontal b) east c) vertical d) west Ans: a Solution: A level or horizontal pattern exists when data values fluctuate around a constant mean. Section Ref: Time Series Models Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 1 min
21. Which is typically the MOST difficult data pattern to predict? a) horizontal b) trend c) level d) seasonality e) cycle Ans: e Solution: Patterns that are created by economic fluctuations such as those associated with the business cycle are called cycles. The major distinction between a seasonal pattern and a cyclical pattern is that a cyclical pattern varies in length and magnitude and therefore is much more difficult to forecast than other patterns. Section Ref: Time Series Models Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 1.5 min 22. Which forecasting method assumes that next period‘s forecast is equal to this period‘s actual value? a) simple mean b) ignorant c) basic d) naïve e) nescient Ans: d Solution: The naïve method is one of the simplest forecasting models. It assumes that the next period‘s forecast is equal to the current period‘s actual. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 1 min
23. The OM supervisor informs you, the researcher, that the data has a large standard deviation. What data pattern would you expect to observe once you generated a time series trend? a) horizontal b) seasonal c) positive/negative trend d) cycle e) There is insufficient information to derive a valid response. Ans: e Solution: The four components of the data are part of a pattern that we try to forecast. Standard deviation defines random variation that is unexplained variation that cannot be predicted. Standard deviation is not related to the patterns. Section Ref: Time Series Models Subsection Ref: n/e Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2 min
24. Suppose that you are using the naïve forecasting method with trend to forecast sales. If sales have been declining by 20% per week, and this week‘s sales amounted to $200, what would your forecast be for next week? a) $200 b) $40 c) $240 d. $180 e) $160 Ans: e Solution: If we see that our trend is decreasing by 20% and the current period‘s sales are $200, a naïve method with trend would give us current period‘s sales minus 20%, which is a forecast of $160 (200 – 200 * 0.2) for the next period. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2.5 min
25. Suppose that you are using the simple mean to make a forecast. This period‘s forecast was equal to 100 units, and it was based on 6 periods of demand. This period‘s actual demand was 86 units. What is your forecast for next period? a) 98 b) 100 c) 93 d) 86 e) Not enough information is given to answer the question. Ans: a Solution: 5 * 100 + 86 = 586/6 = 97.67 = 98. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2.5 min
26. Suppose that you are using the four-period simple moving average method to forecast sales, and sales have been decreasing by 10% every period. How will your forecasts perform? a) Forecasts will be lower than actual. b) Forecasts will be higher than actual. c) Forecasts will equal actual. d) Forecasts will be increasing. e) Forecasts will be decreasing by 2.5% every period. Ans: b Solution: The problem is that the forecasts are trailing behind the actual data or ―lagging‖ the data. This is what happens when you apply a model that is good only for a level pattern to data that have a trend. Thus, forecasts will be higher than actual. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Analysis Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2 min
27. The following sales figures show actual sales over the identified time period. What are a simple mean forecast and a six-month moving average forecast for June? December 4,000 January 5,000 February 4,000 March 4,500 April 5,500 May 5,000 a) 4,700; 5,000 b) 4,700; 4,000 c) 4,667; 4,667 d) 4,000; 4,700 Ans: d Solution: Simple mean forecast (based on 6 months) and a six-month moving average forecast for June are the same: 4,667 ([4000 + 5000 + 4000 + 4500 + 5500 + 5000] / 6 ). Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analysis Time on Task: 3 min
28. What is the most frequently used forecasting technique?
a) linear regression b) simple mean c) exponential smoothing d) weighted moving average e) econometric models Ans: c Solution: Exponential smoothing models are the most frequently used forecasting techniques and are available on almost all computerized forecasting software. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 1 min
29. In exponential smoothing, what values can the smoothing coefficient, , have? a) [1, 1] b) [1, ] c) [0, ] d) [0, 1] e) [, ] Ans: d Solution: The value of a smoothing coefficient, α, varies between 0 and 1. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 1 min 30. In exponential smoothing, which of the following values for would generate the MOST stable forecast?
a) 0.10 b) 0.25 c) 0.50 d) 0.75 e) 1.00 Ans: a Solution: Values of that are low—say, 0.1 or 0.2—generate forecasts that are very stable because the model does not place much weight on the current period‘s actual demand. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Easy Bloom‘s: Comprehension Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 1.5 min
31. Suppose that you are interested in trend-adjusted exponential smoothing. Which of the following values of the trend smoothing constant, , would MOST likely be seen in practice? a) 0.10 b) 0.50 c) 0.75 d) 0.90 e) 1.00 Ans: a Solution: Like α , β can theoretically vary between 0 and 1, though we tend to keep the value conservatively low, around 0.1 or 0.2. Section Ref: Time Series Models Subsection Ref: Forecasting Trend Level: Easy Bloom‘s: Comprehension Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 1.5 min
32. In linear regression, what are we trying to forecast? a) beta parameter b) dependent variable c) independent variable d) Y intercept of the line e) slope of the line Ans: b Solution: In linear regression the variable being forecast, called the dependent variable, is related to some other variable, called the independent variable. Section Ref: Causal Models Subsection Ref: Linear Regression Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe causal modeling using linear regression. AACSB: Knowledge Time on Task: 1 min
33. What does the linear regression line do? a) It minimizes the sum of errors. b) It minimizes the product of squared errors. c) It minimizes the sum of squared errors. d) It minimizes the product of errors. e) It minimizes the sum of absolute value of errors. Ans: c Solution: Linear regression selects parameters a and b, which define a straight line that minimizes the sum of the squared errors, or deviations from the line. Section Ref: Causal Models Subsection Ref: Linear Regression Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe causal modeling using linear regression. AACSB: Knowledge Time on Task: 1.5 min
34. What value of the correlation coefficient implies that there is a perfect positive linear relationship between the two variables of a linear regression model? a) 1 b) 0 c) 0.5 d) 1 e) Ans: d Solution: r = +1: There is a perfect positive linear relationship between the two variables. For every 1-unit increase in the independent variable, there is a 1-unit increase in the dependent variable. Section Ref: Causal Models Subsection Ref: Linear Regression Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe causal modeling using linear regression. AACSB: Knowledge Time on Task: 1 min
35. In linear regression, an r2 of .984 implies what? a) 98.4% of the variability of the independent variable is explained by the dependent variable. b) 98.4% of the variability of the dependent variable is explained by the independent variable. c) 1.6% of the variability of the independent variable is explained by the dependent variable. d) 1.6% of the variability of the dependent variable is explained by the independent variable. e) 99.2% of the variability of the dependent variable is explained by the independent variable Ans: b Solution: If we square the correlation coefficient, r2, we can determine how well the independent variable explains changes in the dependent variable. Section Ref: Causal Models Subsection Ref: Linear Regression Level: Medium Bloom‘s: Analysis Learning Objective 5: Describe causal modeling using linear regression. AACSB: Analytic Time on Task: 3 min
36. What value of the correlation coefficient implies that there is no relationship between the two variables of a linear regression model?
a) 1 b) 0 c) 0.5 d) 1 e)
Ans: b Solution: r = 0 : There is no linear relationship between the variables. Section Ref: Causal Models Subsection Ref: Linear Regression Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe causal modeling using linear regression. AACSB: Knowledge Time on Task: 1 min
37. What is the statistic that measures the direction and strength of the linear relationship between two variables? a) r2 b) coefficient of variation c) variance d) coefficient of kurtosis e) correlation coefficient Ans: e Solution: The correlation coefficient measures the direction and strength of the linear relationship between the independent and dependent variables. Section Ref: Causal Models Subsection Ref: Linear Regression Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe causal modeling using linear regression. AACSB: Knowledge Time on Task: 1 min
38. Which of the following is true with respect to the correlation coefficient r? a) r2 r b) r2 | r | c) r2 r d) r2 | r | e) r2 can never equal r Ans: b Solution: Since | r | 1, r2 | r |. Section Ref: Causal Models Subsection Ref: Linear Regression Level: Medium Bloom‘s: Analysis Learning Objective 5: Describe causal modeling using linear regression. AACSB: Analytic Time on Task: 2 min
39. Which of the following values of the correlation coefficient implies that the value of the dependent variable decreases as the value of the independent variable increases? a) 0.2 b) 0 c) 0.2 d) 1 e) 0.5 Ans: a Solution: Negative values of the correlation coefficient implies that the value of the dependent variable decreases as the value of the independent variable increases. Section Ref: Causal Models Subsection Ref: Linear Regression Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe causal modeling using linear regression. AACSB: Knowledge Time on Task: 1.5 min
40. The following correlation coefficient values come from five different linear regression models. Which model ―fits‖ the data the best? a) 0.99 b) 0.5 c) 0 d) 0.8 e) 1 Ans: e Solution: r = −1 : There is a perfect negative linear relationship between the two variables. Just because the relationship is negative does not mean that there is no relationship. Section Ref: Causal Models Subsection Ref: Linear Regression Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe causal modeling using linear regression. AACSB: Knowledge Time on Task: 1.5 min
41. What is a tracking signal used for? a) to identify trends in actual data b) to identify seasonality in actual data c) to identify the effect of business cycles on actual data d) to compute the value of the smoothing constant, , for exponential smoothing e) to identify forecast bias Ans: e Solution: One way to control for forecast bias is to use a tracking signal. A tracking signal is a tool used to monitor the quality of the forecast. Section Ref: Measuring Forecast Accuracy Subsection Ref: Tracking Signal Level: Easy Bloom‘s: Knowledge Learning Objective 6: Compute forecast accuracy. AACSB: Knowledge Time on Task: 1 min 42. Suppose that Sally‘s company uses exponential smoothing to make forecasts. Further suppose that last period‘s demand forecast was for 20,000 units and last period‘s actual demand was 21,000 units. Sally‘s company uses a smoothing constant (α) equal to 40%. What should be the forecast for this period? a) 20,000 b) 21,000 c) 20,600 d) 20,400 e) 19,600 Ans: d Solution: Ft 1 αA t 1 α Ft = .4 * (21,000) + (1- .4) * 20,000 = 20,400 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2.5 min
43. Suppose that Jane‘s company uses exponential smoothing to make forecasts. Further suppose that last period‘s demand forecast was for 500 units and last period‘s actual demand was 480 units. In addition, yesterday Jane found out that this period‘s actual demand will be for 550 units. Jane‘s company uses an α value of .20. Today, Jane‘s boss asked her to prepare a forecast for this period. What should that forecast be?
a) 504 b) 496 c) 510 d) 484 e) 550 Ans: c Solution: Ft 1 αA t 1 α Ft = .2 * (550) + (1-.2) * 500 = 510 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2.5 min
44. A firm has the following order history over the last 6 months. January 120 February 95 March 100 April 75 May 100 June 50 What would be a 3-month weighted moving average forecast for July, using weights of 40% for the most recent month, 30% for the month preceding the most recent month, and 30% for the month preceding that one? a) 75 b) 72.5 c) 50 d) 90 e) 106.5 Ans: b Solution: Ft 1 Ct A t At CtAt 75 22.5 100 30 50 20 Forecast 72.5 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analysis Time on Task: 3 min April May June
Ct .3 .3 .4
45. What is the mean absolute deviation of the following forecasts? Month Actual Sales Forecast Jan. 614 600 Feb. 480 480 Mar. 500 550 Apr. 500 600 a) 3,174 b) 164 c) 41 d) 136 e) –34 Ans: c Solution: MAD
actual forecast
n Forecast error for January is 14 (614 – 600), for February is 0 (480 – 480), for March is – 50 (500 – 550), for April is –100 (500 – 600). MAD = (14 + 0 + 50 + 100) / 4 = 41. Section Ref: Measuring Forecast Accuracy Subsection Ref: Forecast Accuracy Measures Level: Medium Bloom‘s: Application Learning Objective 6: Compute forecast accuracy. AACSB: Analytic Time on Task: 3.5 min
46. What is the mean absolute deviation and mean squared error of the following forecast Day Sale Sales Forecast 24 37 31 41 27 46 29 47 25 50 a) 13 and 157 b) 14 and 321 c) 16 and 312 d) 17 and 316 e) 18 and 321 Ans: d
actual forecast Solution: MAD
actual - forecast and MSE
n Using the first Days of Sales and Sale Forecast as an example, 24 – 37 = –13; 13; 13x13 = 169 Do this for each set of data then add all five errors. Day Sale Absolute Sales Fore Error Error error2 24 37 -13 13 169 31 41 -10 10 100 27 46 -19 19 361 29 47 -18 18 324 25 50 -25 25 625 85 1579 136 221 -85 17 315.8 MAD MSE Section Ref: Measuring Forecast Accuracy Subsection Ref: Forecast Accuracy Measures Level: Medium Bloom‘s: Application Learning Objective 6: Compute forecast accuracy. AACSB: Analytic Time on Task: 4 min
2
n
47. When is exponential smoothing equivalent to the ―naïve‖ approach to forecasting? a) when the smoothing constant is chosen randomly b) α = 0 c) α = 1 d) α = .5 e) when next month‘s forecast equals this month‘s forecast Ans: c Solution: When α = 1, F t+1 = α A t + (1 − α) F t = A t which is naïve forecast. Section Ref: Time Series Models Subsection Ref: n/a Level: Medium Bloom‘s: Analysis Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2 min
48. Consider the demand data listed below. What is the 4-month moving average forecast for June? Month Actual Demand Jan. 10,000 Feb. 12,000 Mar. 24,000 Apr. 8,000 May 14,000 a) 14,000 b) Not enough information is given to answer the question. c) 14,500 d) 13,500 e) 15,333 Ans: c Solution: Ft 1 A t / n (12,000 + 24,000 + 8,000 + 14,000) / 4 = 58,000 / 4 = 14,500 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 3 min
49. Suppose that you want to set up a 3-month weighted moving average forecasting system. You want the weights to be percentages (that add to 100%). Furthermore, you want weights for the most recent two months to be equal but you want each of those weights to be twice as large as the weight for the oldest month. What should the weight be for the oldest month? a) 33% b) 25% c) 80% d) 50% e) 20% Ans: e Solution: x = the weight be for the oldest month, than 2*x = the weights be for the other 2 months. Then x + 2 * x + 2 * x = 100%, or 5 * x = 100%, x = 20%. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Hard Bloom‘s: Evaluation Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 4 min 50. Given the following data, use exponential smoothing (α = .2) to develop a demand forecast for period 3. Assume the forecast for the initial period is 5. What is the forecast? Period Demand 1 7 2 9 a) 9.00 b) 3.72 c) 9.48 d) 5.00 e) 6.12 Ans: e Solution: Ft 1 αA t 1 α Ft . F2 = .2 * 7 + (1 – .2) * 5 = 5.4; F3 = .2 * 9 + (1 – .2) * 5.4 = 6.12 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 4 min
51. Which of the following forecasting methods would be MOST accurate if demand were rapidly decreasing? a) 3-month moving average b) 6-month moving average c) 12-month moving average d) simple mean e) exponential smoothing with = 0.001 Ans: a Solution: Simple mean model is only good for a level data pattern. Forecast will not significantly change when demand is decreasing. Exponential smoothing with = 0.001 will be significantly affected by the initial forecast and will not react to rapid decrease of demand. The smaller the number of observations in the moving average, the more responsive the forecast is to changes in demand; thus 3-month moving average will be most accurate. Section Ref: Time Series Models Subsection Ref: n/a Level: Hard Bloom‘s: Evaluation Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 4 min
52. Suppose that you are using the exponential smoothing forecasting method, and this period‘s forecast (Ft) was 100% accurate (i.e., no error). If α = .5, which of the following is definitely true? a) Next period‘s forecast will also be 100% accurate. b) Next period‘s forecast equals this period‘s actual. c) This period‘s forecast must be thrown out, and next period‘s forecast equals Ft-1 + α (At-1 α − Ft-1). d) Next period‘s forecast equals 50% of this period‘s forecast. e) Next period‘s forecast equals 50% more than this period‘s forecast. Ans: b Solution: F t+1 = α A t + (1 − α) F t, if forecast (Ft) was 100% accurate (F t = A t), then F t+1 = α A t + (1 − α) A t = A t Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Analysis Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 3 min
53. A firm has had the following order history over the last 4 months: November 140 December 80 January 100 February 150 What is the weighted moving average forecast for March, assuming a weight of 60% for the most recent month, 30% for the month preceding the most recent month, and 10% for the month preceding that one? a) 117.5 b) 228.1 c) 118.0 d) 128.0 e) 132.4 Ans: d Solution: Ft 1 Ct A t = 0.1 * 80 + 0.3 * 100 + 0.6 * 150 = 128 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 3 min
54. What is the mean absolute deviation of the following forecasts? Month Actual Sales January 68 60 February 48 50 March 50 60 April 30 30 a) 1 b) 5 c) 20 d) 1 e) 42 Ans: b Solution: MAD
Forecast
actual forecast
n Forecast error for January is 8 (68 – 60), for February is –2 (48 – 50), for March is –10 (50 – 60), for April is 0 (30 – 30). MAD = (8 + 2 + 10 + 0) / 4 = 5. Section Ref: Measuring Forecast Accuracy Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 6: Compute forecast accuracy. AACSB: Analytic Time on Task: 3.5 min
55. What is the mean squared error of the following forecasts? Month Actual Sales Forecast Jan. 614 600 Feb. 480 480 Mar. 500 450 Apr. 500 600 a) 3174 b) 164 c) 41 d) 136 e) 12,696 Ans: a
actual - forecast Solution: MSE
2
Month Jan. Feb. Mar. Apr.
n Actual Forecast error error2 600 14 614 196 480 480 0 0 500 450 50 2500 500 600 –100 10000 12696 / 4 3174
Section Ref: Measuring Forecast Accuracy Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 6: Compute forecast accuracy. AACSB: Analytic Time on Task: 4 min
56. What is the mean squared error of the following forecasts? Month Actual Sales Forecast Jan. 68 60 Feb. 48 50 Mar. 50 60 Apr. 30 30 a) 168 b) 5 c) 20 d) 1 e) 42 Ans: e
actual - forecast Solution: MSE
2
n Forecast error Actual error2 68 8 60 64 48 –2 50 4 50 –10 60 100 30 0 30 0 168 / 4 42 Section Ref: Measuring Forecast Accuracy Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 6: Compute forecast accuracy. AACSB: Analytic Time on Task: 4 min Month Jan. Feb. Mar. Apr.
57. Suppose that you are using exponential smoothing with = 0.5 and your initial forecast 5 months ago was for 100 units. If the actual demand last month was 0 units, which of the following is definitely true? a) The forecast for this month should be 0. b) The model blew up. You can‘t use exponential smoothing anymore. c) The forecast for last month was 0. d) The forecast for this month should be 50. e) We need more information to determine this month‘s forecast. Ans: e Solution: F t+1 = α A t + (1 − α) F t,. We need forecast for the previous month, not 5 months ago. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 3 min
58. Suppose that you are using the four-period simple moving average method to forecast sales, and sales have been increasing by 20% every period. How will your forecasts perform? a) Forecasts will be lower than actual. b) Forecasts will be higher than actual. c) Forecasts will equal actual. d) Forecasts will be decreasing. e) Forecasts will be increasing by 5.0% every period. Ans: a Solution: When data has a trend, the forecasts are trailing behind the actual data. We say that they are ―lagging‖ the data. Thus, forecasts will be lower than actual. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Analysis Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2 min
59. Suppose that you are using the four-period simple moving average method to forecast sales, and sales have been increasing by 40% every period. How will your forecasts perform? a) Forecasts will be increasing by 40.0% every period. b) Forecasts will be higher than actual. c) Forecasts will equal actual. d) Forecasts will be decreasing. e) Forecasts will be increasing by 10.0% every period. Ans: a Solution: Suppose x = sales for period 1, x*1.4 = sales for period 2, x*(1.4)2 = sales for period 3, x*(1.4)3 = sales for period 4, x*(1.4)4 = sales for period 5. Moving average forecast for period 5 = (x + x*1.4 + x*(1.4)2 + x*(1.4)3) / 4 Moving average forecast for period 6 = (x*1.4 + x*(1.4)2 + x*(1.4)3 + x*(1.4)4) / 4 = 1.4 * (x + x*1.4 + x*(1.4)2 + x*(1.4)3) / 4. Thus forecast for period 6 is 40% greater than forecast for period 5. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Hard Bloom‘s: Evaluation Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 4 min
60. Suppose that you are using the naïve forecasting method with trend to forecast sales. If sales have been increasing by 40% per month, and this month‘s sales amounted to $1200, what would your forecast be for next month? a) $1200 b) $ 480 c) $1680 d) $ 720 e) $1600 Ans: c Solution: If we see that our trend is decreasing by 40 percent and the current period‘s sales are $1200, a naïve method with trend would give us current period‘s sales plus 40 percent, which is a forecast of $1680 (1200 + 1200 * 0.4) the next period. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2.5 min
61. Suppose that you are using the naïve forecasting method with trend to forecast sales. Sales have been increasing by 10% per week. Two weeks ago, sales amounted to $100. What should your forecast be for this week? a) $100 b) $10 c) $110 d) $121 e) $120 Ans: d Solution: If we see that our trend is decreasing by 10 percent and the two week ago sales were $100, a naïve method with trend would give us two week ago sales plus 10 percent, which is a forecast of $110 (100 + 100 * 0.1) the last week. Similar this week forecast is $121 (110 + 110 * 0.1). Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 4 min 62. Suppose that you are using the simple mean to make a forecast. This period‘s forecast was equal to 200 units, and it was based on 5 periods of demand. This period‘s actual demand was 300 units. What is your forecast for next period? a) 217 b) 250 c) 260 d) 300 e) 200 Ans: a Solution: Ft 1 A t / n = (5 * 200 + 300) / 6 = 216.67= 217 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2.5 min
63. Suppose that you are using the simple mean to make a forecast. This period‘s forecast was equal to 1000 units, and it was based on 99 periods of demand. This period‘s actual demand was 0 units. What is your forecast for next period? a) 1000 b) 990 c) 0 d) 1010 e) 999 Ans: b Solution: Ft 1 A t / n = (99 * 1000 + 0) / 100 = 990 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2.5 min
64. A firm has the following order history over the last 6 months. January 120 February 95 March 100 April 75 May 100 June 50 What would be the 4-month simple moving average forecast for July? a) 97.5 b) 325 c) 90 d) 81.25 e) 50 Ans: d Solution: Ft 1 A t / n = (100 + 75+ 100 + 50) / 4 = 325 / 4 = 81.25 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2.5 min
65. Which of the following is a step in forecasting seasonality? a) Calculate a seasonal index for each season of each year. b) Divide this year‘s average seasonal demand by each average seasonal index. c) Multiply the indexes for all seasons. d) Forecast demand for the next year and multiply by the seasonal index.
Ans: a Solution: Step 2 of the forecasting seasonality procedure is to compute a seasonal index for every season of every year for which you have data. This is done by dividing the actual demand for each season by the average demand per season. Section Ref: Time Series Models Subsection Ref: Forecasting Trend Level: Easy Bloom‘s: Comprehension Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 1.5 min 66. Given the following data, use exponential smoothing (α = .1) to develop a demand forecast for period 3. Assume the forecast for the initial period is 500. What is the forecast? Period Demand 1 600 2 200 a) 569 b) 470 c) 541 d) 551 e) 479 Ans: e Solution: Ft 1 αA t 1 α Ft F2 = 0.1 * 600 + (1 - .1) * 500 = 510 F3 = 0.1 * 200 + (1 - .1) * 510 = 479 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 3 min
67. Which of the following is the simplest forecasting method? a) naïve b) moving average c) weighted moving average d) trend-adjusted exponential smoothing e) linear regression Ans: a Solution: The naïve method is one of the simplest forecasting models. It assumes that the next period‘s forecast is equal to the current period‘s actual. Section Ref: Types of Forecasting Methods Subsection Ref: Forecasting Level or Horizontal Pattern Level: Easy Bloom‘s: Comprehension Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1.5 min
68. Which of the following would be a consideration for selecting a forecasting software package? a) Does the seller provide a discount? b) Is it possible to implement new methods? c) What was the supervisor recommendation? d) Does the supplier support a local conference? Ans: b Solution: Following are some guidelines for selecting the right package: Does the package have the facilities you want? What platform is the package available for? How easy is the package to learn and use? Is it possible to implement new methods? Do you require interactive or repetitive forecasting? Do you have very large data sets? Is there any local support? Does the package give the right answers? Section Ref: Selecting the Right Forecasting Model Subsection Ref: Forecasting Software Level: Easy Bloom‘s: Comprehension Learning Objective 7: Explain the factors that should be considered when selecting a forecasting model. AACSB: Knowledge Time on Task: 1.5 min
69. Combined forecasting involves a rule that a) you must work with different vendors. b) you need different forecasters. c) you must always use a quantitative and qualitative method. d) the results are not comparable to a single forecast. e) the forecasting methods should be different. Ans: e Solution: One approach to forecasting that has been shown to result in improved forecast accuracy is to combine forecasts from two or more different forecasting methods. Section Ref: Selecting the Right Forecasting Model Subsection Ref: Combining Forecasting Level: Easy Bloom‘s: Comprehension Learning Objective 7: Explain the factors that should be considered when selecting a forecasting model. AACSB: Knowledge Time on Task: 1.5 min
70. Which of the following is typically done jointly by CPFR trading partners? a) Set forecasts. b) Negotiate contracts. c) Analyze costs. d) Raise capital. Ans: a Solution: By implementing CPFR, trading partners jointly set forecasts, plan production, replenish inventories, and evaluate their success in the marketplace. Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 8: Explain the nine-step process of CPFR. AACSB: Knowledge Time on Task: 1.5 min
71. ____________________ is a collaborative process between two trading partners that establishes formal guidelines for joint forecasting and planning. a) Collaborative Planning Forecasting and Replenishment (CPFR) b) Supply Chain Planning Forecasting and Replenishment (SCPFR) c) Supply Chain Optimization (SCO) d) Collaborative Creation of Guidelines (CCG) e) Joint Planning and Forecasting (JPP) Ans: a Solution: Collaborative Planning, Forecasting, and Replenishment (CPFR) is a collaborative process between two trading partners that establishes formal guidelines for joint forecasting and planning. Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 8: Explain the nine-step process of CPFR. AACSB: Knowledge Time on Task: 1 min 72. ―Inside information‖ is MOST likely garnered through a) exponential smoothing method. b) seasonal indexes method. c) naïve method. d) Delphi method. e) multiple regression method. Ans: d Solution: Qualitative methods can incorporate the latest changes in the environment and ―inside information.‖ The Delphi method is the only qualitative method listed. Section Ref: Types of Forecasting Methods Subsection Ref: n/a Level: Medium Bloom‘s: Analysis Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Analytic Time on Task: 2 min
73. Which of the following is one of the nine steps utilized in the most complete form of CPFR? a) Identify exceptions for order forecasts. b) Create a demand forecast. c) Identify exceptions for demand forecasts . d) Create separate business plans. Ans: a Solution: Identify exceptions for sales forecasts. Items that are exceptions to the sales forecast are identified. Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 8: Explain the nine-step process of CPFR. AACSB: Knowledge Time on Task: 1.5 min
74. Anna prepared a demand forecast for the next year. Anna is confident that the company will be able to sell 12 million units over the next year in the United States. Her manager wants Anna to prepare demand forecasts for each state instead of the whole U.S. demand. Anna claims that she cannot be as confident in the forecast by state as in the forecast for the whole country. What feature of forecasting models is Anna relying upon for her claim? a) Forecasts are rarely perfect. b) Forecasts are more accurate for groups or families of items rather than for individual items. c) Forecasts are more accurate for shorter than longer time horizons. d) Forecasts should be monitored for accuracy. Ans: b Solution: Forecasts are more accurate for groups or families of items rather than for individual items. When items are grouped together, their individual high and low values can cancel each other out. The U.S. forecast is a grouped forecast for all states together. Section Reference: Principles of Forecasting Subsection Reference: n/a Level: Medium Blooms: Application Learning Objective 1: Identify principles of forecasting. AACSB: Analytic Time on Task: 2 min
75. If a forecasting method has worked well for the previous two years, the company should ________________ a) definitely rely on it in the future because the method has proved itself. b) choose a new method because this one has been used too long. c) monitor the forecast accuracy because the situation might change. d) not trust the forecast because they are rarely perfect. Ans: c Solution: A company should monitor forecast accuracy. Forecasting is an ongoing process. This process should be carried out continuously because environments and conditions often change. What was a good forecasting model in the past might not provide good results for the future. Section Reference: Steps in the Forecasting Process Subsection Reference: n/a Level: Medium Blooms: Analysis Learning Objective 2: Explain the steps involved in the forecasting process. AACSB: Analytic Time on Task: 2 min
76. Which forecasting method will be the most appropriate if demand is expected to decrease over time? a) simple mean c) weighted moving average c) exponential smoothing d) linear trend line e) seasonal indexes Ans: d Solution: When data exhibit an increasing or decreasing pattern over time, we say that they exhibit a trend. Linear trend line is a time series technique that computes a forecast with trend by drawing a straight line through a set of data. Section Reference: Types of Forecasting Methods Subsection Reference: Quantitative Methods Level: Medium Blooms: Analysis Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Analytic Time on Task: 2 min
77. Hooper‘s Store sales in January were $1.5 million. In February, March, April, and May the sales were $1.2, $1.9, $1.7, and $1.9 million consequently. What is the three-period moving average forecast for May? a) $1.64 million b) $1.80 million c) $1.83 million d) $1.90 million Ans: c Solution: Ft+1 = (At + At-1 + At + … + At-n) / n = (1.9 + 1.7 + 1.9) / 3 = $1.83 million Section Reference: Time Series Models Subsection Reference: Forecasting Level or Horizontal Pattern Level: Medium Blooms: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2.5 min
78. The Elsa Ice Cream shop wants to forecast the demand for ice cream. They realized the demand depends on the weather—the warmer the day, the greater the demand. Demands and temperatures for 10 days were collected. The average demand over 10 days is $3,130 and the average temperature is 72 degrees. Sum of the squared temperatures is 51,954; sum of the squared demands is 99,030,000; and sum of the products of demands and temperatures is 2,264,200. Which linear regression equation should be used? a) Demand = –3,565 + 93 * Temperature b) Demand = 41 + 0.01 * Temperature c) Demand = –3,256 + 84 * Temperature d) Temperature = 41 + 0.01 * Demand
Ans: a Solution: Temperature is independent variable (X), and demand is dependent variable (Y). Parameter b =
= (2264200 – 10 * 3130 * 72) / (51954 – 10 * (72)2) = 10600 / 114 =
92.98 Parameter a = = 3130 – 92.98 * 72 = –3,564.56. Y = a + b * X = – 3,564.56 + 92.98 * X Section Reference: Causal Models Subsection Reference: Linear Regression Level: Medium Blooms: Application Learning Objective 5: Describe causal modeling using linear regression. AACSB: Analytic Time on Task: 3.5 min
79. Axe Capital wants to analyze accuracy of the forecasting model they are using. Forecasts and actual demands in units for summer months are given in the table: Month Forecast Actual demands June 1,200 1,100 July 1,150 1,200 August 1,200 1,200 Calculate mean absolute deviation. a) 0 b) 50 c) 100 d) 150 Ans: b Solution: MAD =
= (|1100 – 1200| + |1200 – 1150| + |1200 – 1200|) / 3 = 50.
Section Reference: Measuring Forecast Accuracy Subsection Reference: Forecast Accuracy Measures Level: Medium Blooms: Application Learning Objective 6: Compute forecast accuracy. AACSB: Analytic Time on Task: 3 min
80. Joanna needs to select a model to forecast the demand of a new product over the next 20 years. Which model will be the most appropriate? A. Delphi method B. multiple regression C. seasonal indexes D. trend-adjusted exponential smoothing Ans: A Solution: Some forecasting models are better suited to short forecast horizons, whereas others are better for long horizons. The Delphi method is a forecasting method in which the objective is to reach a consensus among a group of experts while maintaining their anonymity. It is excellent for forecasting long-term product demand, technological changes, and scientific advances. Section Reference: Selecting the Right Forecasting Model Subsection Reference: n/a Level: Medium Blooms: Application Learning Objective 7: Explain the factors that should be considered when selecting a forecasting model. AACSB: Analytic Time on Task: 2 min
81. Delos Inc. is utilizing the CPFR process for their new product. They already forecasted the demand for the next several months and just decided with their suppliers how many components will be ordered in the next 3 months. What is the next step of the process? a) Create a joint business plan. b) Identify exceptions for sales forecasts. c) Identify exceptions for order forecast. d) Generate order. Ans: C Solution: Delos Inc just finished step 6 of CPFR process: Create order forecast. An order forecast is generated that supports the shared sales forecast and joint business plan. The next step is 7 (Identify exceptions for order forecast). Section Reference: Collaborative Planning, Forecasting, and Replenishment (CPFR) Subsection Reference: n/a Level: Medium Blooms: Application Learning Objective 8: Explain the nine-step process of CPFR. AACSB: Analytic Time on Task: 2 min
True/False
82. Forecasts are more accurate for individual items than for groups or families of items. Ans: False Solution: Forecasts are more accurate for groups or families of items rather than for individual items. When items are grouped together, their individual high and low values can cancel each other out. Section Ref: Principles of Forecasting Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Identify principles of forecasting. AACSB: Knowledge Time on Task: 1 min
83. Forecasting demand and forecasting sales are the same thing. Ans: False Solution: Forecasting sales and demand are two different things, and sales do not necessarily equal the total amount of demand for the product. Section Ref: Steps in the Forecasting Process Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain the steps involved in the forecasting process. AACSB: Knowledge Time on Task: 1.5 min
84. A qualitative forecast is made subjectively by the forecaster. Ans: True Solution: Qualitative forecasting methods, often called judgmental methods, are methods in which the forecast is made subjectively by the forecaster. Section Ref: Types of Forecasting Methods Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1 min
85. Planalytics is a company that helps businesses use weather data to make their business plans. Ans: True Solution: Planalytics Inc. is a company that helps businesses use weather data to make their business plans. Section Ref: Types of Forecasting Methods Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1 min
86. Executive opinion is a forecasting method designed to preserve anonymity among the forecasters. Ans: False Solution: Executive opinion is a forecasting method in which a group of managers meet and collectively develop a forecast. Section Ref: Types of Forecasting Methods Subsection Ref: Qualitative Methods Level: Easy Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1 min
87. With the Delphi method, a group of managers meet and collectively generate a forecast. Ans: False Solution: The Delphi method is a forecasting method in which the objective is to reach a consensus among a group of experts while maintaining their anonymity. Section Ref: Types of Forecasting Methods Subsection Ref: Qualitative Methods Level: Easy Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1 min
88. The Delphi method of forecasting is preferred to the executive opinion method if an important consideration is eliminating any one person‘s dominant opinion. Ans: True Solution: The Delphi method has the advantage of not allowing anyone to dominate the consensus, and it has been shown to work very well. Section Ref: Types of Forecasting Methods Subsection Ref: Qualitative Methods Level: Easy Bloom‘s: Comprehension Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1.5 min
89. Time series models are generally more difficult to use than causal models. Ans: False Solution: Time series models are generally easier to use than causal models. Causal models can be very complex, especially if they consider relationships among many variables. Section Ref: Types of Forecasting Methods Subsection Ref: Quantitative Methods Level: Easy Bloom‘s: Comprehension Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 1.5 min
90. A cycle is any data pattern that regularly repeats itself and is constant in length. Ans: False Solution: Patterns that are created by economic fluctuations such as those associated with the business cycle are called cycles. Section Ref: Time Series Models Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 1 min
91. A cycle is typically the MOST difficult data pattern to predict. Ans: True Solution: The major distinction between a seasonal pattern and a cyclical pattern is that a cyclical pattern varies in length and magnitude and therefore is much more difficult to forecast than other patterns. Section Ref: Time Series Models Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 1.5 min
92. The naïve forecasting method assumes that next period‘s actual value will be equal to this period‘s forecast. Ans: False Solution: The naïve method assumes that the next period‘s forecast is equal to the current period‘s actual. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 1 min 93. The naïve forecasting method assumes that next period‘s actual value will be equal to this period‘s actual value. Ans: True Solution: The naïve method assumes that the next period‘s forecast is equal to the current period‘s actual. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 1 min
94. The simple moving average forecasting method uses fewer periods of data than the simple mean forecasting method does. Ans: True Solution: The simple moving average (SMA) is similar to the simple average except that we are not taking an average of all the data, but are including only n of the most recent periods in the average. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Easy Bloom‘s: Comprehension Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 1.5 min
95. Suppose that you are using the three-period simple moving average method to forecast sales, and sales have been increasing by 10% every period. Then your forecasts will be increasing by 10% every period. Ans: True Solution: Suppose x = sales for period 1, x*1.1 = sales for period 2, x*(1.1)2 = sales for period 3, x*(1.1)3 = sales for period 4. Moving average forecast for period 4 = (x + x*1.1 + x*(1.1)2) / 3 Moving average forecast for period 5 = (x*1.1 + x*(1.1)2 + x*(1.1)3) / 3 = 1.1 * (x + x*1.1 + x*(1.1)2) / 3. Thus forecast for period 5 is 10% greater than forecast for period 6. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Hard Bloom‘s: Evaluation Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 4 min
96. Suppose that you are using the three-period simple moving average method to forecast sales, and sales have been increasing by 10% every period. Then your forecasts will be lower than the actual sales. Ans: True Solution: When you apply a model that is good only for a level pattern to data that have a trend the forecasts are trailing behind the actual data. Thus, your forecasts will be lower than the actual sales. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Analysis Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2.5 min
97. Moving average forecasts with a larger number of observations are more responsive than those with a smaller number of observations. Ans: False Solution: The smaller the number of observations in the moving average, the more responsive the forecast is to changes in demand. However, the forecast is also more subject to the random changes in the data. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Analysis Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2 min
98. Moving average forecasts with a smaller number of observations are more subject to random changes in the data than those with a larger number of observations. Ans: True Solution: The smaller the number of observations in the moving average, the more responsive the forecast is to changes in demand. However, the forecast is also more subject to the random changes in the data. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Analysis Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 2 min
99. The MSE is always greater than or equal to the MAD. Ans: False Solution: The MSE might be greater or smaller than or equal to the MAD. Section Ref: Measuring Forecast Accuracy Subsection Ref: Forecast Accuracy Measures Level: Medium Bloom‘s: Analysis Learning Objective 6: Compute forecast accuracy. AACSB: Analytic Time on Task: 2 min
100. Exponential smoothing forecasting methods requires a small amount of historical data. Ans: True Solution: Exponential smoothing requires only the current period‘s actual and current period‘s forecast to make a forecast for the next period. Section Ref: Selecting the Right Forecasting Model Subsection Ref: Forecasting Level or Horizontal Pattern The simplest Level: Medium Bloom‘s: Analysis Learning Objective 7: Explain the factors that should be considered when selecting a forecasting model. AACSB: Analytic Time on Task: 2 min
101. Studies have shown that combining forecasts can lead to forecast accuracy that is better than that of the individual forecasts. Ans: True Solution: Studies have shown that combining forecasts can lead to forecast accuracy that is better than that of the individual forecasts. Section Ref: Selecting the Right Forecasting Model Subsection Ref: Combining Forecasting Level: Easy Bloom‘s: Knowledge Learning Objective 7: Explain the factors that should be considered when selecting a forecasting model. AACSB: Knowledge Time on Task: 1 min
102. Predictive analytics uses a variety of techniques- such as statistics, modeling, and data mining-to analyze current and historical facts to make predictions about the future. Ans: True Solution: Predictive analytics uses a variety of techniques—such as statistics, modeling, and data mining—to analyze current and historical facts to make predictions about the future. Section Ref: Selecting the Right Forecasting Model Subsection Ref: Predictive Analytics and Forecasting Level: Easy Bloom‘s: Knowledge Learning Objective 7: Explain the factors that should be considered when selecting a forecasting model. AACSB: Knowledge Time on Task: 1 min
103. CPFR is an iterative process. Ans: True Solution: CPFR is an iterative process. That means that it is done over and over again. Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 8: Explain the nine-step process of CPFR. AACSB: Knowledge Time on Task: 1.5 min
104. Forecasting only impacts the business functions. Ans: False Solution: Forecasting is an excellent example of an activity that is critical to the management of all functional areas within a company. In business organizations, forecasts are made in virtually every function and at every organizational level. Section Ref: Forecasting within OM: How It All Fits Together Subsection Ref: Forecasting across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 8: Explain the nine-step process of CPFR. AACSB: Knowledge Time on Task: 1.5 min
105. Economics relies on forecasting to predict the duration of economic turning points. Ans: True Solution: Economics relies on forecasting to predict the duration of business cycles, economic turning points, and general economic conditions that affect business. Section Ref: Forecasting within OM: How It All Fits Together Subsection Ref: Forecasting across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 8: Explain the nine-step process of CPFR. AACSB: Knowledge Time on Task: 1.5 min
106. Statistical packages such as SPSS, SAS, and Minitab, are types of forecasting software. Ans: True Solution: Statistical software includes packages designed primarily for Statistical analysis, such as SPSS, SAS, NCSS, and Minitab. Section Ref: Selecting the Right Forecasting Model Subsection Ref: Forecasting Software Level: Easy Bloom‘s: Knowledge Learning Objective 7: Explain the factors that should be considered when selecting a forecasting model. AACSB: Knowledge Time on Task: 1 min 107. ―Do you have medium data sets?‖ is a key guideline for selecting software. Ans: False Solution: ―Do you have very large data sets?‖ is one of guidelines for selecting software. Section Ref: Selecting the Right Forecasting Model Subsection Ref: Forecasting Software Level: Easy Bloom‘s: Comprehension Learning Objective 7: Explain the factors that should be considered when selecting a forecasting model. AACSB: Knowledge Time on Task: 1.5 min
Essay
108. Why are forecasts more accurate for groups or families of items rather than for individual items? Ans: Individual high and low values can cancel each other out (offset each other), i.e., ―risk pooling.‖ Solution: When items are grouped together, their individual high and low values can cancel each other out. The data for a group of items can be stable even when individual items in the group are very unstable. Section Ref: Principles of Forecasting Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Identify principles of forecasting. AACSB: Knowledge Time on Task: 3 min
109. What are the five basic steps in the forecasting process? Ans: 1. Decide what to forecast, 2. Evaluate and analyze appropriate data, 3. Select and test the forecasting model, 4. Generate the forecast, 5. Monitor forecast accuracy. Solution: There are some basic steps that should be followed when making a forecast: 1. Decide what to forecast, 2. Evaluate and analyze appropriate data, 3. Select and test the forecasting model, 4. Generate the forecast, 5. Monitor forecast accuracy. Section Ref: Steps in the Forecasting Process Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain the steps involved in the forecasting process. AACSB: Knowledge Time on Task: 4 min
110. What is the objective of the Delphi method? Ans: It‘s a forecasting method that has an objective to reach a consensus among a group of experts while maintaining their anonymity. Solution: The Delphi method is a forecasting method in which the objective is to reach a consensus among a group of experts while maintaining their anonymity. Section Ref: Types of Forecasting Methods Subsection Ref: Qualitative Methods Level: Easy Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 3 min
111. What are the two categories of quantitative models? Ans: time series and causal Solution: Quantitative methods can also be divided into two categories: time series models and causal models. Section Ref: Types of Forecasting Methods Subsection Ref: Quantitative Methods Level: Easy Bloom‘s: Knowledge Learning Objective 3: Identify types of forecasting methods and their characteristics. AACSB: Knowledge Time on Task: 2 min
112. Describe a data pattern with seasonality. Ans: It regularly repeats itself and is constant in length. Solution: A seasonal pattern is any pattern that regularly repeats itself and is of a constant length. Such seasonality exists when the variable we are trying to forecast is influenced by seasonal factors such as the quarter or month of the year or day of the week. Examples are a retail operation with high sales during November and December or a restaurant with peak sales on Fridays and Saturdays. Section Ref: Time Series Models Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 3 min
113. Describe the naïve forecasting method. Ans: It assumes that next period‘s forecast is equal to this period‘s actual value. Solution: The naïve method is one of the simplest forecasting models. It assumes that the next period‘s forecast is equal to the current period‘s actual. For example, if your sales were 500 units in January, the naïve method would forecast 500 units for February. It is assumed that there is little change from period to period. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 3 min
114. Explain the impact on forecasting that the number of observations used in a simple moving average has. Ans: The smaller the number of observations in the moving average, the more responsive the forecast is to changes in demand. However, the forecast is also more subject to the random changes in the data. If the data contain a lot of randomness, high responsiveness could lead to greater errors. On the other hand, the larger the number of observations in the moving average the less responsive the forecast is to changes in the demand, but also to the randomness. These forecasts are more stable. One is not better than the other.
Solution: The smaller the number of observations in the moving average, the more responsive the forecast is to changes in demand. However, the forecast is also more subject to the random changes in the data. If the data contain a lot of randomness, high responsiveness could lead to greater errors. On the other hand, the larger the number of observations in the moving average the less responsive the forecast is to changes in the demand, but also to the randomness. These forecasts are more stable. One is not better than the other. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium
Bloom‘s: Analysis Learning Objective 4: Describe time series models. AACSB: Analytic
Time on Task: 5 min
115. What is a correlation coefficient? Ans: It is the statistic that measures the direction and strength of the linear relationship between two variables. Solution: When performing linear regression, it is helpful to compute the correlation coefficient, which measures the direction and strength of the linear relationship between the independent and dependent variables. Section Ref: Causal Models Subsection Ref: Linear Regression Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe causal modeling using linear regression. AACSB: Knowledge Time on Task: 3 min
116. Discuss why the degree of accuracy is important in selecting the right forecasting model. Ans: Depending on the situation some forecast estimates require general results or rough forecast estimates. Often, higher levels of accuracy are required, which creates the need for more advanced forecasting models. Solution: The type of model selected is related to the degree of accuracy required. Some situations require only rough forecast estimates, whereas others require precise accuracy. Often, the greater the degree of accuracy required, the higher the cost of the forecasting process. Section Ref: Selecting the Right Forecasting Model Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 7: Explain the factors that should be considered when selecting a forecasting model. AACSB: Knowledge Time on Task: 3 min
117. What is one of the simplest ways to combine forecasts? Ans: Use a simple average of the individual forecasts.
Solution: One of the simplest ways to combine is to use a simple average of the individual forecasts. Even though there are more sophisticated ways of combining, a simple average has been shown to be very effective in improving forecast accuracy. Section Ref: Selecting the Right Forecasting Model
Subsection Ref: Combining Forecasting Level: Easy
Bloom‘s: Comprehension Learning Objective 7: Explain the factors that should be considered when selecting a forecasting model. AACSB: Knowledge
Time on Task: 3 min 118. What are the 9 steps utilized in the MOST complete form of CPFR? Ans: (1) establish collaborative relationships, (2) create a joint business plan, (3) create a sales forecast, (4) identify exceptions for sales forecasts, (5) resolve/collaborate on exception items, (6) create order forecast, (7) identify exceptions for order forecast, (8) resolve/collaborate on exception items, and (9) generate order
Solution: The most complete form of CPFR utilizes a nine-step process: (1) establish collaborative relationships, (2) create a joint business plan, (3) create a sales forecast, (4) identify exceptions for sales forecasts, (5) resolve/collaborate on exception items, (6) create order forecast, (7) identify exceptions for order forecast, (8) resolve/collaborate on exception items, and (9) generate order. Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR)
Subsection Ref: n/a Level: Easy
Bloom‘s: Knowledge Learning Objective 8: Explain the nine-step process of CPFR. AACSB: Knowledge
Time on Task: 5 min
119. Describe the ten guidelines for selecting forecasting software. Ans: 1. Does the package have the features you want? 2. What platform is the package available for? 3. How easy is the package to learn and use? 4. Is it possible to implement new methods? 5. Do you require interactive or repetitive forecasting? 6. Do you have any large data sets? 7. Is there local support and training available? 8. Does the package give the right answers? 9. What is the cost of the package? 10. Is it compatible with our existing software? Solution: Guidelines for selecting forecasting software are: 1. Does the package have the features you want? 2. What platform is the package available for? 3. How easy is the package to learn and use? 4. Is it possible to implement new methods? 5. Do you require interactive or repetitive forecasting? 6. Do you have any large data sets? 7. Is there local support and training available? 8. Does the package give the right answers? 9. What is the cost of the package? 10. Is it compatible with our existing software? Section Ref: Selecting the Right Forecasting Model Subsection Ref: Forecasting Software Level: Easy Bloom‘s: Knowledge Learning Objective 7: Explain the factors that should be considered when selecting a forecasting model. AACSB: Knowledge Time on Task: 5 min
Problems 120. Hoops, Inc. produces videos on the art of shooting in basketball. The firm has experienced the following demand for the first 6 months of the year. Month Demand Jan. 4,000 Feb. 6,000 Mar. 10,000 Apr. 2,000 May 20,000 June 30,000 What is the forecast for July using a 5-month simple moving average forecast? Ans: 13,600 Solution: Add Feb through June and divide by 5: (6000 + 10000 + 2000 + 20000 + 30000) / 5 = 68000 / 5 = 13,600 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 3 min
121. Hoops, Inc., produces videos on the art of shooting in basketball. The firm has experienced the following demand for the first 6 months of the year. Month Demand Jan. 4,000 Feb. 6,000 Mar. 10,000 Apr. 2,000 May 20,000 June 30,000 What is the forecast for July using a 4-month weighted moving average forecast, where (1) the weight for the most recent month is three times more than the weight for the period that‘s four months in the past, (2) the weight for two periods ago is the same as the weight for the most recent period, (3) the weight for three periods ago is the same as the weight for the demand four periods ago, and (4) the weights sum to 100%? Ans: 20,250 Solution: Let x = the weight for three periods ago, then the weight for four periods ago is x, the weights for the most recent month and two periods ago are 3*x. x + x + 3*x + 3*x = 100%; 8 * x = 100%, x = 100 / 8 = 12.5. Thus, the weights for the most recent month and or two periods ago are 37.5% or 0.375, the weights for three and four periods ago are 12.5% or 0.125. The forecast for July is 0.375 * 30000 + 0.375 * 20000 + 0.125 * 2000 + 0.125 * 10000 = 20,250. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Hard Bloom‘s: Evaluation Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 6 min
122. Hoops, Inc., produces videos on the art of shooting in basketball. The firm has experienced the following demand for the most recent four months. Month Demand Mar. 10,000 Apr. 2,000 May 20,000 June 30,000 Prepare an exponential smoothing forecast for July, using an value of .40. Initiate the process by assuming that the forecast for March is 8,000 units. Ans: 18,988.8 Solution: Ft 1 αA t 1 α Ft For April, F = 0.4 * 10000 + (1 – 0.4) * 8000 = 8,800 For May, F = 0.4 * 2000 + (1 – 0.4) * 8800 = 6,080 For June, F = 0.4 * 20000 + (1 – 0.4) * 6,080 = 11,648 For July, F = 0.4 * 30000 + (1 – 0.4) * 11648 = 18,988.8 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 5 min
123. The Freewheel motorcycle dealer in the Chicago area wants to be able to forecast accurately the demand for the Freewheel Super Z12 motorcycle. From sales records, the dealer has accumulated the following data for the second half of 2000. Month Sales July 10 August 15 September 23 October 44 November 54 December 36 a) Compute a 3-month moving average forecast of demand for January 2001. b) Compute a 5-month moving average forecast of demand for January 2001. Ans: a) 44.67; (FT+1 = ∑AT / n = (36 + 54 + 44)/3 = 44.67) Ans: b) 34.4; (FT+1 = ∑ AT / n = (36 + 54 + 44 + 23 + 15)/5 = 34.4) Solution: a) 44.67; (FT+1 = ∑AT / n = (36 + 54 + 44)/3 = 44.67) b) 34.4; (FT+1 = ∑ AT / n = (36 + 54 + 44 + 23 + 15)/5 = 34.4) Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 4 min 124. John‘s Office Supply Company has the following order history over the last 7 months. April 65 May 180 June 30 July 90 August 120 September 190 October 70 Compute an exponential smoothing forecast for November, with a smoothing constant of α = .25. To start the procedure, assume that the forecast for April was 100. Round each forecast to two decimal places. Ans: 108.79; Solution: Ft 1 αA t 1 α Ft For May, F = 0.25 * 65 + (1 – 0.25) * 100 = 91.25 For June, F = 0.25 * 180 + (1 – 0.25) * 91.25 = 113.4375 For July, F = 0.25 * 30 + (1 – 0.25) * 113.44 = 92.58 For August, F = 0.25 * 90 + (1 – 0.25) * 92.58 = 91.935 For September, F = 0.25 * 120 + (1 – 0.25) * 91.94 = 98.955
For October, F = 0.25 * 190 + (1 – 0.25) * 98.96 = 121.72 For November, F = 0.25 * 70 + (1 – 0.25) * 121.72 = 108.79 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 7 min 125. John‘s Office Supply Company has the following order history over the last 8 months. April 50 May 75 June 160 July 120 August 80 September 120 October 180 November 90 Compute a 3-month weighted moving average forecast for December, with a weight of 65% for the most recent month, 25% for the month preceding the most recent month, and 10% for the month preceding that one. Ans: 115.5; (FT+1 = ∑ CT AT = (.65 * 90 + .25 * 180 + .1 * 120) = 115.5) Solution: FT+1 = ∑ CT AT = (.65 * 90 + .25 * 180 + .1 * 120) = 115.5 Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 3 min
126. Steve‘s Steak House uses exponential smoothing with trend (alpha = .10 and beta = .40) to forecast its weekly demand for chopped steak in the metro area. Average sales have been 1000 steaks per week, and the recent trend has been an increase of 20 steaks per week. Actual demand last week was for 1040 steaks. What should the forecast be for this week? Ans: 1042.8 Solution: Smoothing the Level of the Series S = 0.1 * 1040 + (1 – 0.1) * (1000 + 20) = 1,022 Smoothing the Trend T = 0.4 (1022 − 1000) + (1 – 0.4) * 20 = 20.8 Forecast Including Trend FIT = 1022 + 20.8 = 1042.8 Section Ref: Time Series Models Subsection Ref: Forecasting Trend Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 5 min 127. Joe‘s Equipment Distributors sells ―Low and Loud‖ brand lawnmowers. Total demand in 2002 is expected to be 2000 units. Given the historical sales figures listed below, compute quarterly seasonality for each quarter in 2002. 1999 2000 2001 Fall 50 80 120 Winter 150 450 510 Spring 500 600 700 Summer 400 490 610 Ans: Fall = 104.5, Winter = 451.5, Spring = 790.5, Summer = 654 Solution: 1. Calculate the average demand per season (average quarterly demand) 1999: (50 + 150 + 500 + 400) / 4 = 275 2000: (80 + 450 + 600 + 490) / 4 = 405 2001: (120 + 510 + 700 + 610) / 4 = 485 2. Calculate a seasonal index for each season of each year: Divide the actual demand of each season by the average demand per season for that year 1999 2000 2001 Fall 50/275 = 0.182 80/405 = 0.198 120/485 = 0.247 Winter 150/275 = 0.545 450/405 = 1.111 510/485 = 1.052 Spring 500/275 = 1.818 600/405 = 1.481 700/485 = 1.443
3.
Summer 400/275 = 1.455 490/405 = 1.210 610/485 = 1.258Average the indexes by season; take the average of all Spring indexes, then of all Summer indexes, ... Fall (0.182 + 0.198 + 0.247) / 3 = 0.209; Winter (0.545 + 1.111 + 1.052) / 3 = 0.903; Spring (1.818 + 1.481 + 1.443) / 3 = 1.581; Summer (1.455 + 1.210 + 1.258) / 3 = 1.308 4. Forecast demand for the next year & divide by the number of seasons. Use regular forecasting method & divide by four for average quarterly demand 2000 / 4 = 500 5. Multiply next year‘s average seasonal demand by each average seasonal index; Result is a forecast of demand for each season of next year Fall 0.209 * 500 = 104.5; Winter 0.903 * 500 = 451.5; Spring 1.581 * 500 = 790.5; Summer 1.308 * 500 = 654 Section Ref: Time Series Models Subsection Ref: Forecasting Seasonality Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 10 min
128. Central Heating needs to forecast the number of boilers they will sell in April using exponential smoothing model. Using the following data and an alpha of .3 how many boilers should they have on hand? Boilers sold forecast Nov 12 13 Dec 13.5 12 Jan 14 14 Feb 16 15 Mar 17 18 Ans: 18 Solution: Ft+1=αAt+(1 – α)Ft = .3 * 17 + (1 – .3) * 18 = 17.7; you must round up to 18 as you cannot buy a .7 boiler. Section Ref: Time Series Models Subsection Ref: Forecasting Level or Horizontal Pattern Level: Medium Bloom‘s: Application Learning Objective 4: Describe time series models. AACSB: Analytic Time on Task: 3 min
129. Cover Me, Inc. sells umbrellas in three cities. Management assumes that annual rainfall is the primary determinant of umbrella sales, and it wants to generate a linear regression equation to estimate potential sales in other cities. Given the data below, what is the regression equation? Rainfall X City A City B City C
36 in. 30 in. 12 in.
Sales Y 2300 2000 800
Ans: Y = 50.04 + 63.46X Solution: Average X = (36 + 30 + 12) / 3 = 26; Average Y = (2300 + 2000 + 800) / 3 = 1700; Sum of X*Y = 36 * 2300 + 30 * 2000 + 12 * 800 = 152,400 Sum of X squared = 36 * 36 + 30 * 30 + 12 * 12 = 2,340 Parameter b = (152400 – 3 * 26 * 1700) / (2340 – 3 * 26 * 26) = 19800 / 312 = 63.46 Parameter a = 1700 – 63.46 * 26 = 50.04 Section Ref: Causal Models Subsection Ref: Linear Regression Level: Medium Bloom‘s: Application Learning Objective 5: Describe causal modeling using linear regression. AACSB: Analytic Time on Task: 7 min
130.
Hoops, Inc. has the following actual demand and forecasted demand data. Month Actual Demand Forecast Jan. 1000 800 Feb. 200 880 Mar. 2000 600 Apr. 3000 1100 Calculate the mean squared error of those forecasts. Ans: 1,518,100 Solution: Month Actual Forecast error Jan. 1000 200 800 Feb. 200 880 –680 Mar. 2000 600 1400 Apr. 3000 1100 1900
error2 40000 462400 1960000 3610000 6072400 / 4 1518100
Section Ref: Measuring Forecast Accuracy Subsection Ref: Forecast Accuracy Measures Level: Medium Bloom‘s: Application Learning Objective 6: Compute forecast accuracy. AACSB: Analytic Time on Task: 5 min 131. Annie‘s Smart Dog annual fair concession stand operates for five days. Last year they sold the following number of supreme smart dogs. Calculate (a) MAD, (b)MSE, and (c) using a tracking signal of +/–8, determine if the forecast should be reviewed. Day Sales 24 31 27 29 25
Sale Forecast 27 31 36 37 35
Ans: (a) 6, (b) 51, and (c) forecast should be reviewed as signal exceeds the +/–8 range on day 5. Solution: Cumulative Deviation Day Sale Tracking Sales Forecast Error MAD MSE Deviation Signal 8 1.33 24 27 –3 3 9 –3 5 0.83 31 31 0 0 0 –3 2 0.33 27 36 –9 9 81 –12 –10 –1.67 29 37 –8 8 64 –20 –30 –5.00 25 35 –10 10 100 –30 –60 –10.00 6 51 Section Ref: Measuring Forecast Accuracy Subsection Ref: Forecast Accuracy Measures Level: Medium Bloom‘s: Application Learning Objective 6: Compute forecast accuracy. AACSB: Analytic Time on Task: 10 min
Short Answer
132. Unlike MAD and MSE, the tracking signal‘s numerator allows positive and negative forecast errors to _____________. Ans: cancel each other
Solution: Tracking signal is computed as the ratio of the algebraic sum of the forecast errors divided by MAD. Since forecast errors can be positive or negative, they can cancel each other. Section Ref: Measuring Forecast Accuracy
Subsection Ref: Tracking Signal Level: Medium
Bloom‘s: Analysis Learning Objective 6: Compute forecast accuracy. AACSB: Analytic
Time on Task: 3 min 133. Developing a single forecast from several methods is called _________________. Ans: combining forecasting
Solution: One approach to forecasting that has been shown to result in improved forecast accuracy is to combine forecasts from two or more different forecasting methods. Section Ref: Selecting the Right Forecasting Model
Subsection Ref: Combining Forecasting Level: Easy
Bloom‘s: Knowledge Learning Objective 7: Explain the factors that should be considered when selecting a forecasting model. AACSB: Knowledge
Time on Task: 1.5 min
134. Companies that use collaborative planning, forecasting, and replenishment repeat its steps _____________________ and _____________________ annually. Ans: weekly or monthly (both required); evaluate their agreement
Solution: Most of the CPFR steps are performed on a weekly or monthly basis, and the agreement between parties is evaluated annually. Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR)
Subsection Ref: n/a Level: Easy
Bloom‘s: Comprehension Learning Objective 8: Explain the nine-step process of CPFR. AACSB: Knowledge
Time on Task: 2.5 min 135. The basic principles of forecasting are: ____________________, ______________________, and ______________________. Ans: forecasts are rarely perfect; more accurate for groups than individual items; for shorter than longer time horizons
Solution: The principles of forecasting include the following: forecasts are rarely perfect; more accurate for groups than individual items; for shorter than longer time horizons. Section Ref: Principles of Forecasting
Subsection Ref: n/a Level: Easy
Bloom‘s: Knowledge Learning Objective 1: Identify principles of forecasting. AACSB: Knowledge
Time on Task: 2 min 136. What is the exponential smoothing formula? Ans: (formula) Ft 1 αA t 1 α Ft
Solution: The equation for the exponential smoothing forecast is quite simple: Next period‘s forecast = α (current period‘s actual) + (1 − α) (current period‘s forecast), where the value of a smoothing coefficient, α , varies between 0 and 1. Section Ref: Time Series Models
Subsection Ref: Forecasting Level or Horizontal Pattern Level: Easy
Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge
Time on Task: 2 min 137. The MOST frequently used forecasting model is ____________. Ans: exponential smoothing
Solution: Exponential smoothing models are the most frequently used forecasting techniques and are available on almost all computerized forecasting software.
Section Ref: Time Series Models
Subsection Ref: Forecasting Level or Horizontal Pattern Level: Easy
Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge
Time on Task: 1.5 min 138. The first round of an exponential smoothing process is often begun by setting the second period forecast equal to ___________________. Ans: the first period‘s actual observation, an example of naïve forecasting
Solution: There are many ways to start the forecasting process with exponential smoothing, but the most common is to use the naïve method to generate an initial forecast. Section Ref: Time Series Models
Subsection Ref: Forecasting Level or Horizontal Pattern Level: Easy
Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge
Time on Task: 2 min 2
139. The difference between MSE and r regarding sample size is that _______________. 2
Ans: MSE uses the sample size, n, in the denominator while r corrects for the bias inherent in small samples by using n–1.
Solution: MSE uses the sample size, n, in the denominator while r2 corrects for the bias inherent in small samples by using n-1. Section Ref: Measuring Forecast Accuracy
Subsection Ref: n/a Level: Medium
Bloom‘s: Analysis Learning Objective 6: Compute forecast accuracy. AACSB: Analytic
Time on Task: 4 min 140. Nearly all business decisions depend on _______________. Ans: forecasting
Solution: Budgets are set, resources allocated, and schedules made based on forecasts. Without a forecast of the future, a company would not be able to make any plans, including day-to-day and long-range plans. Section Ref: Forecasting within OM: How It All Fits Together
Subsection Ref: Forecasting across the Organization Level: Easy
Bloom‘s: Comprehension Learning Objective 1: Identify principles of forecasting.
AACSB: Knowledge
Time on Task: 1.5 min 141. When developing the linear trend line, you must calculate the coefficient _________ before calculating the coefficient __________. Ans. b (slope); a (intercept) Solution: The steps in computing the linear regression equation are as follows: Step 1: Compute parameter b; Step 2: Compute parameter a; Step 3; Substitute these values to obtain the linear regression equation. Section Ref: Time Series Models Subsection Ref: Linear Regression Level: Easy Bloom‘s: Knowledge Learning Objective 4: Describe time series models. AACSB: Knowledge Time on Task: 2 min
142. Multiple regression is a(n) ___________ of linear regression. Ans: extension Solution: Multiple regression is an extension of linear regression. However, unlike in linear regression where the dependent variable is related to one independent variable, multiple regression develops a relationship between a dependent variable and multiple independent variables. Section Ref: Causal Models Subsection Ref: Multiple Regression Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe causal modeling using linear regression. AACSB: Knowledge Time on Task: 2 min
Testbank Chapter 9: Capacity Planning and Facility Location LO Section Capacity Planning
Subsection n/a Why Is Capacity Planning Important? Measuring Capacity
Question # 1, 2,3, 72, 73, 111 4, 5,6, 7, 74, 112 8, 9, 10, 12, 13, 14, 15, 16, 17, 18, 75, 76, 77, 78, 79, 80, 96, 117, 123, 125
Making Capacity Planning Decisions
Capacity Considerations
11, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 81, 82, 83, 84, 85, 98, 99, 100, 101, 102, 113, 114
n/a
34, 110
Identify Capacity Requirements Evaluate Capacity Alternatives
35, 36, 86, 87, 103, 115 37 38, 39, 40, 41, 71, 88, 122, 124, 125 43, 45, 47, 55 44 52, 53, 54, 90, 107, 119 42, 46, 48, 49, 50, 51, 89, 104, 105, 106, 116
Decision Trees Location Analysis
Making Location Decisions
Capacity Planning and Facility Location within OM: How It All Fits Together
What Is Facility Location? Globalization Factors Affecting Location Decisions Procedure for Making Location Decisions
56
Procedures for Evaluating Location Alternatives
57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 91, 92, 93, 94, 95, 118, 120, 121, 126, 127, 128, 129, 130, 131, 132, 133, 134
Capacity Planning and Facility Location Across the Organization
70, 97, 108
The Supply Chain Link TOTAL QUESTIONS
109
© John Wiley & Sons, Inc. or the author. All rights reserved. Instructors who are authorized users of this course are permitted to download these materials and use them in connection with the course. Except as permitted herein or by law, no part of these materials should be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise.
Multiple Choice 1. Capacity planning can occur at the following level: a) supply chain. b) manager. c) assembly line.
d) board of directors. Ans: c Solution: Capacity can be defined as the maximum output rate that can be achieved by a facility. The facility may be an entire organization, a division, or only one machine. Section Ref: Capacity Planning Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 2. Which of the following is a reason that capacity and location decisions are usually made simultaneously? a) They should be in the operating budget on a consistent basis. b) It makes it easier to understand capacity. c) Often there is not enough time available to separate them. d) They require the same types of information. e) The size of a new facility may affect its location. Ans: e Solution: When a company decides to open a new facility, it must also decide on both the size of the facility and its location. The size of the facility may also be affected by the location. Section Ref: Capacity Planning Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min
3. The maximum output that can be achieved by a facility is the definition of a) lead time. b) storage space. c) capacity. d) productivity. e) cycle counting. Ans: c Solution: Capacity can be defined as the maximum output rate that can be achieved by a facility. Section Ref: Capacity Planning Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min 4. Capacity decisions at the strategic level include a) investment in new facilities and equipment. b) size of workforce. c) inventory buffers. d) day-to-day use of machines. e) composition of the workforce. Ans: a Solution: The first level of capacity decisions is strategic and long-term in nature. This is where a company decides what investments in new facilities and equipment it should make. Section Ref: Capacity Planning Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min
5. If capacity is excessive, a company may have to a) decide how to use a partially empty facility. b) outsource. c) back-order demand. d) use group technology. e) raise prices. Ans: a Solution: When a business that purchases a larger facility in anticipation of an increase in demand, only to find that the demand increase does not occur. It is then left with a huge expense, no return on its investment, and the need to decide how to use a partially empty facility. Section Ref: Capacity Planning Subsection Ref: Why Is Capacity Planning Important? Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 6. Capacity planning is complicated by the fact that a) capital markets are complex. b) existing facilities may become obsolete. c) capacity is difficult to define. d) capacity is usually purchased in chunks, rather than smooth increments. e) depreciation must be calculated. Ans: d Solution: One of the issues that complicates capacity planning is the fact that capacity is usually purchased in ―chunks‖ rather than in smooth increments. Section Ref: Capacity Planning Subsection Ref: Why Is Capacity Planning Important? Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min
7. Investments in building or purchasing long-term production facilities are inherently risky due to a) uncertainty in forecasting future demands. b) unexpected changes in interest rates. c) durability of materials. d) corporate mergers. e) rapid technology changes. Ans: a Solution: Forecasting future demands entails a great deal of uncertainty and risk; this makes long-term facility purchases inherently risky. Section Ref: Capacity Planning Subsection Ref: Why Is Capacity Planning Important? Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 8. Capacity planning is difficult because a) the board of directors sets the requirements. b) the mathematical requirements are difficult. c) the planning stages always require global considerations. d) there is no one way to measure capacity. e) it is easy to confuse the service organization and manufacturing organization measurements. Ans: d Solution: Although our definition of capacity seems simple, there is no one way to measure it. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min
9. An example of an input measure of capacity is a) floor space in square feet. b) number of patients per month. c) number of pizzas per day. d) revenues per day. e) number of cars per shift. Ans: a Solution: Examples of how input capacity might be measured by different organizations include floor space in square feet, operational hours per day, and available beds per month. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 10. Which of the following is a measure of output capacity? a) floor space in square feet b) labor hours consumed c) available beds per month d) TVs sold per day Ans: d Solution: TVs sold per day is a measure of output capacity. All others are measures of input capacity. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min
11. Which of the following is a factor in capacity planning? a) quality of product b) economies of scale c) proximity to buyers d) proximity to suppliers Ans: b Solution: Important implications of capacity that a company needs to consider when changing its capacity include economies of scale, best operating level, and approach used to measure capacity. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 12. Input measures of capacity work better when a company produces a) discrete items. b) a single product. c) liquids. d) many different products. e) off-the-shelf items. Ans: d Solution: When a company produces many different kinds of products, input measures work better. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min
13. When discussing the capacity of a facility, we need what two types of information? a) the amount of available capacity and the productivity of workers b) the speed of the machines and the availability of labor c) the amount of available capacity and the effectiveness of capacity use d) the investment in equipment and the availability of labor e) the investment in equipment and the number of workers Ans: c Solution: When discussing the capacity of a facility, we need two types of information: the amount of available capacity and effectiveness of capacity use. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min 14. Effective capacity is defined as a) the maximum input rate that can be sustained under normal conditions. b) the maximum output rate that can be sustained under normal conditions. c) the maximum input rate that can be sustained under ideal conditions. d) the maximum output rate that can be sustained under ideal conditions. e) the maximum percent measure of how well available capacity is being used. Ans: b Solution: Effective capacity is the maximum output rate that can be sustained under normal conditions. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min
15. Which of the following does contribute to the sustainability of design capacity? a) scheduled machine maintenance b) overtime c) facility size d) average wage Ans: b Solution: Design capacity can be sustained only for a relatively short period of time. A company achieves this output rate by using many temporary measures, such as overtime, overstaffing, maximum use of equipment, and subcontracting. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 16. The maximum output rate that can be achieved by a facility under ideal conditions is called a) utilization. b) design capacity. c) effective capacity. d) ultimate capacity. e) temporary capacity. Ans: b Solution: Design capacity is the maximum output rate that can be achieved by a facility under ideal conditions. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min
17. ________ is the maximum output rate that can be sustained under normal conditions. a) Utilization b) Design capacity c) Effective capacity d) Ultimate capacity e) Temporary capacity Ans: c Solution: Effective capacity is the maximum output rate that can be sustained under normal conditions. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min 18. The ratio of actual output rate to capacity is called a) effectiveness. b) cycle time. c) throughput. d) utilization. e) productivity. Ans: d Solution: Capacity utilization can simply be computed as the ratio of actual output over capacity. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min
19. _____________________ capacity can serve to intimidate and preempt competitors from entering the market. a) Design b) Flexible c) Extra d) Effective e) Focused Ans: c Solution: Extra capacity can serve to intimidate and preempt competitors from entering the market. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 20. The best operating level is the volume of output that results in the a) lowest average unit cost. b) most revenue. c) maximum use of machinery. d) best quality. e) optimum product mix. Ans: a Solution: Every production facility has a volume of output that results in the lowest average unit cost. This is called the facility‘s best operating level. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min
21. Operating a facility close to its best operating level is clearly important because a) it reduces fixed cost. b) it reduces overtime requirements. c) of its impact on costs. d) of its impact on employees bonuses. e) it increases production. Ans: c Solution: Operating a facility close to its best operating level is clearly important because of the impact on costs. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 22. The cost per unit is $36.74 at the best operating level. When the output is higher, the unit cost will be a) lower. b) the same. c) higher. d) potentially higher or lower. e) potentially higher, lower, or the same. Ans: c Solution: Every production facility has a volume of output that results in the lowest average unit cost. This is called the facility‘s best operating level. Any other output will lead to higher unit cost. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min
23. Economies of scale occur when a company is operating a) at its best operating level and increases its output. b) at its best operating level and decreases its output. c) below its best operating level and decreases its output. d) above its best operating level and increases its output. e) below its best operating level and increases its output. Ans: e Solution: Economies of scale occur when a company is operating below its best operating level and increases its output. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 24. The concept of diseconomies of scale a) states that the average cost of a unit produced is reduced when the amount of output increases. b) is not realistic. c) is not valid for regulated industries. d) states that beyond a certain point the cost of each additional unit made increases. e) is an approach for measuring unusable output. Ans: d Solution: Diseconomies of scale occur at a point beyond the best operating level, when the cost of each additional unit made increases. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min
25. Management has decided to add capacity incrementally in smaller chunks as needed, rather than purchasing one large facility. This decision a) is very risky. b) will result in low initial costs. c) will ultimately result in lower costs per unit if demand increases rapidly. d) positions the company to be well prepared for high demand in the future. e) can lead to a large amount of excess capacity. Ans: b Solution: Adding capacity incrementally in smaller chunks as needed, rather than purchasing one large facility, is less risky but does not offer the same opportunities and flexibility. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Medium Bloom‘s: Analysis Learning Objective 1: Define capacity planning. AACSB: Analytic Time on Task: 2 min 26. A focused factory is one that a) produces many products with options. b) is small and highly specialized. c) has a large number of management specialists.. d) is vertically integrated e) is located at the center of demand. Ans: b Solution: Facilities can respond more efficiently to demand if they are small, specialized, and focused on a narrow set of objectives; this concept is referred to as focused factories. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min
27. Compared to large facilities, focused factories a) bring economies of scale. b) have much bureaucracy. c) are ancient history. d) lead to higher average inventories. e) are more flexible. Ans: e Solution: Large facilities tend to be less flexible because they generally contain larger machines or process technology that is costly to change in order to make other goods and services. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 28. _____________________ facilities may NOT be the best approach in today‘s business environment that has short product and technological life cycles and in which flexibility is more important than ever before. a) Large b) Small c) Leased d) Self-operating e) Agile Ans: a Solution: The idea that large facilities are necessary for success because they bring economies of scale is rather dated. Today‘s facilities must succeed in a business environment that has short product and technology life cycles and in which flexibility is more important than ever before. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min
29. Large facilities can benefit from the concept of _____________________ by creating a plant within a plant (PWP). a) just-in-time b) focused factories c) economies of scale d) supply chain e) hierarchical management Ans: b Solution: Even a large facility can benefit from the concept of the focused factory by creating what is known as a plant within a plant, or PWP. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 30. One benefit the plant within a plant (PWP) concept provides over independent plants is a) increased production output. b) increased design capacity capabilities. c) reduction of unnecessary layers of bureaucracy. d) reduction in transportation costs. e) improved supplier relationships. Ans: c Solution: Specialized facilities can be physically separated with a wall or barrier and kept independent from one another. In this manner, unnecessary layers of bureaucracy are eliminated, and each ―plant‖ is free to focus on its own objectives. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min
31. In the 1980s retail sales were dominated by large department stores. However, in the 1990s gains in sales were made by specialty stores because a) the large department stores started moving out of shopping malls, and their new locations were not nearly as effective. b) customers got tired of trying to find sales clerks who would help them in the large department stores. c) the specialty stores always had donuts and coffee for their customers. d) consumer preferences change very rapidly, and the specialty stores can focus on a specific set of customers and respond to their unique needs. e) parking is more readily available at the specialty stores. Ans: d Solution: In the 1990s, gains in sales were made by specialty stores, while large department stores faltered. The reason is that consumer preferences change very rapidly, and each specialty store can focus precisely on the needs of its customer group. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 32. According to the textbook, one of the fastest-growing trends today is a) leveraging technology. b) the plant within a plant (PWP) concept. c) focused plants. d) developing a large network of subcontractors. e) developing a large focused distribution chain. Ans: d Solution: Another alternative to having a large production facility is to develop a large network of subcontractors and suppliers who perform a number of tasks. This is one of the fastestgrowing trends today. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min
33. _____________________ can perform a number of tasks to help a company focus on its core capabilities. a) A plant within a plant b) Agile manufacturing c) Total quality management d) Just-in-time e) Subcontractor networks Ans: e Solution: Companies are realizing that to be successful in today‘s market, they need to focus on their core capabilities—for example, by hiring third parties or subcontractors to take over tasks that the company does not need to perform itself. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 34. The first step in making a capacity planning decision is a) to evaluate capacity alternatives. b) implementation. c) to identify capacity requirements. d) to develop capacity alternatives. e) to weight capacity objectives. Ans: c Solution: The three-step procedure for making capacity planning decisions is as follows: 1) Identify capacity requirements; 2) Develop capacity alternatives; 3) Evaluate capacity alternatives. Section Ref: Making Capacity Planning Decisions Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain the steps involved in capacity planning and location analysis. AACSB: Knowledge Time on Task: 1 min
35. Long-term capacity requirements are identified on the basis of a) the current trend of the economy. b) the expected lifetime of the facility. c) demographic factors. d) forecasts of future demand. e) future political events. Ans: d Solution: Long-term capacity requirements are identified on the basis of forecasts of future demand. Section Ref: Making Capacity Planning Decisions Subsection Ref: Identify Capacity Requirements Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain the steps involved in capacity planning and location analysis. AACSB: Knowledge Time on Task: 1 min 36. Capacity cushions can be helpful if a) demand is greater than expected. b) sales need to be buffered from production. c) total quality management fails. d) productivity is too high. e) there is excess capacity. Ans: a Solution: A capacity cushion is an amount of capacity added to the needed capacity in order to provide greater flexibility. Capacity cushions can be helpful if demand is greater than expected. Section Ref: Making Capacity Planning Decisions Subsection Ref: Identify Capacity Requirements Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain the steps involved in capacity planning and location analysis. AACSB: Knowledge Time on Task: 1.5 min
37. Evaluating capacity alternatives can include use of a) the Delphi method. b) estimated market shares. c) demographic factors. d) econometric forecasting. e) decision trees. Ans: e Solution: There are a number of tools that we can use to evaluate our capacity alternatives. One of the most popular of these tools is the decision tree. Section Ref: Making Capacity Planning Decisions Subsection Ref: Evaluate Capacity Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 2: Explain the steps involved in capacity planning and location analysis. AACSB: Knowledge Time on Task: 1 min 38. Which of the following information items is contained in decision trees? a) probability of making the decision b) advantages and disadvantages of alternatives c) chance events d) probability of choosing decision alternatives Ans: c Solution: Decision trees contain decision points, decision alternatives, chance events, and outcomes. Section Ref: Decision Trees Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the usefulness of decision trees in decision making. AACSB: Knowledge Time on Task: 1 min
39. Decision trees are useful when the alternatives are __________ and involve __________. a) local; senior management b) in parallel; certainty c) in sequence; uncertainty d) in sequence; certainty e) in parallel; certainty Ans: c Solution: Decision trees are useful whenever we have to evaluate interdependent decisions that must be made in sequence and when there is uncertainty about events. Section Ref: Decision Trees Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the usefulness of decision trees in decision making. AACSB: Knowledge Time on Task: 1.5 min 40. Solving a decision tree that involves maximizing profit includes a) using probabilities to calculate expected values for decision points. b) calculating from left to right. c) selecting the decision alternative with the highest expected value. d) calculating expected values for all chance events before considering decision nodes. e) inverting decision nodes. Ans: c Solution: The expected value (EV) is a weighted average of the chance events, where each chance event is given a probability of occurrence. We start with the profitability of each alternative, working backward and selecting the most profitable alternative. Section Ref: Decision Trees Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the usefulness of decision trees in decision making. AACSB: Knowledge Time on Task: 1.5 min 41. Expected values are a) forecasted sales prices. b) forecasted revenues. c) the average value of chance events. d) the weighted average of the chance events. e) the exponential value of the chance events. Ans: d
Solution: The expected value (EV) is a weighted average of the chance events, where each chance event is given a probability of occurrence. Section Ref: Decision Trees Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the usefulness of decision trees in decision making. AACSB: Knowledge Time on Task: 1 min 42. Which of the following is a factor affecting location analysis the most? a) sources of transportation b) quality of product c) price of the product d) automation of factories Ans: a Solution: Many factors can affect location decisions, including proximity to customers, transportation, source of labor, community attitude, proximity to suppliers, and many other factors. Section Ref: Location Analysis Subsection Ref: Factors Affecting Location Decisions Level: Medium Bloom‘s: Analysis Learning Objective 4: Identify key factors in location analysis. AACSB: Analytic Time on Task: 2 min 43. Service organizations such as restaurants, movie theaters, and banks focus on locating near a) suppliers. b) roads. c) intersections. d) their customers. e) potential workers. Ans: d Solution: Service organizations such as restaurants, movie theaters, and banks focus on locating near their customers. Section Ref: Location Analysis Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify key factors in location analysis. AACSB: Knowledge Time on Task: 1.5 min
44. Location decisions are particularly important because a) typically they are made rather frequently. b) they entail a high-cost, short-term commitment. c) there are so many potential locations. d) they have a major impact on product design. e) they can have a large impact on operating costs and revenues. Ans: e Solution: Facility location decisions are particularly important for two reasons. First, they require long-term commitments in buildings and facilities, which means that mistakes can be difficult to correct. Second, these decisions require sizable financial investment and can have a large impact on operating costs and revenues. Section Ref: Location Analysis Subsection Ref: What is Facility Location? Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify key factors in location analysis. AACSB: Knowledge Time on Task: 1.5 min 45. Which of the following is LEAST likely to be a consideration in facility location? a) There are several options to design of the production process. b) Mistakes in choosing a location can be difficult to correct. c) Often there are a number of acceptable locations. d) Expanding capacity at a current location may be an option. e) Location decisions can have a major impact on operating costs and revenues. Ans: a Solution: Many factors can affect location decisions, including proximity to customers, transportation, source of labor, community attitude, proximity to suppliers, and many other factors. The design of the production process is not related to facility location. Section Ref: Location Analysis Subsection Ref: n/a Level: Medium Bloom‘s: Analysis Learning Objective 4: Identify key factors in location analysis. AACSB: Analytic Time on Task: 2 min
46. A facility location factor that is important for both service and manufacturing organizations is locating close to a) labor supply. b) sources of transportation. c) suppliers. d) warehouses. e) natural resources. Ans: a Solution: Proximity to an ample supply of qualified labor is important in many businesses, especially those that are labor intensive. Section Ref: Location Analysis Subsection Ref: Factors Affecting Location Decisions Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify key factors in location analysis. AACSB: Knowledge Time on Task: 1.5 min 47. Locating close to customers is LEAST important for a) bakeries. b) movie theaters. c) flower shops. d) diamond mines. e) gas stations. Ans: d Solution: Service organizations such as restaurants, movie theaters, and banks focus on locating near their customers. Manufacturing organizations seek to be close to sources of transportation, suppliers, and abundant resources such as labor. Diamond mines is the only manufacturing organization on the list. Section Ref: Location Analysis Subsection Ref: n/a Level: Medium Bloom‘s: Analysis Learning Objective 4: Identify key factors in location analysis. AACSB: Analytic Time on Task: 2 min
48. It takes many pounds of milk to make one pound of cheese. Therefore, there are many cheese factories in dairy states because a) of reputation. b) ―cheeseheads‖ eat a lot of cheese. c) of transportation costs. d) making cheese is a batch process. e) customers prefer domestic cheese. Ans: c Solution: Another reason to locate close to sources of supply is to avoid high transportation costs—for example, if a firm‘s raw materials are much bulkier and costlier to move than the finished product. Transporting the finished product outbound is less costly than transporting the raw materials inbound, and the firm should locate closer to the source of supply. Section Ref: Location Analysis Subsection Ref: Factors Affecting Location Decisions Level: Medium Bloom‘s: Analysis Learning Objective 4: Identify key factors in location analysis. AACSB: Analytic Time on Task: 2 min 49. Local wage rates, presence of local unions, and attitudes of local workers would be major factors for location decisions for businesses that a) are labor intensive. b) have perishable products. c) have high transportation costs. d) have need for specific raw materials. e) provide in-home services. Ans: a Solution: Proximity to an ample supply of qualified labor is important in many businesses, especially those that are labor intensive. The factors that should be considered are local wage rates, the presence of local unions, and attitudes of local workers. Section Ref: Location Analysis Subsection Ref: Factors Affecting Location Decisions Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify key factors in location analysis. AACSB: Knowledge Time on Task: 1.5 min
50. In facility location, zoning restrictions, soil conditions, and access roads for trucks are a) community considerations. b) site considerations. c) quality of life issues. d) hardly ever important. e) cultural considerations. Ans: b Solution: Site considerations for a particular location include factors such as utility costs, taxes, zoning restrictions, soil conditions, and even climate. Section Ref: Location Analysis Subsection Ref: Factors Affecting Location Decisions Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify key factors in location analysis. AACSB: Knowledge Time on Task: 1.5 min 51. Which of the following is a quality-of-life factor? a) climate b) cost of housing c) average income d) room for customer parking Ans: a Solution: Quality of life includes factors such as climate, a desirable lifestyle, good schools, and a low crime rate. Section Ref: Location Analysis Subsection Ref: Factors Affecting Location Decisions Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify key factors in location analysis. AACSB: Knowledge Time on Task: 1.5 min
52. With respect to globalization, which of the following would be considered an important location consideration? a) vertical integration b) language barriers c) horizontal integration d) family sizes Ans: b Solution: There are many issues to consider when locating globally: different culture, language barriers, different laws and regulations. Section Ref: Location Analysis Subsection Ref: Globalization Level: Medium Bloom‘s: Analysis Learning Objective 4: Identify key factors in location analysis. AACSB: Analytic Time on Task: 2 min 53. Disadvantages of globalization include a) use of cheap labor in certain countries. b) increased stigma due to locating factories overseas. c) reduction of trade barriers. d) increased sales in foreign markets. e) political risks for countries with unstable governments. Ans: e Solution: Political risks can be large, particularly in countries with unstable governments. For example, during a period of political unrest a company may have its technology confiscated. Section Ref: Location Analysis Subsection Ref: Globalization Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify key factors in location analysis. AACSB: Knowledge Time on Task: 1.5 min
54. Issues that need to be considered in locating globally include a) different cultures. b) FEC accounting requirements. c) size of the company. d) structure of the company. Ans: a Solution: There are many issues to consider when locating globally: different culture, language barriers, different laws and regulations. Section Ref: Location Analysis Subsection Ref: Globalization Level: Medium Bloom‘s: Analysis Learning Objective 4: Identify key factors in location analysis. AACSB: Analytic Time on Task: 2 min 55. ________ is the LEAST likely reason for a U.S. firm to choose to locate a factory in a foreign country. a) Climate b) Natural resources c) Markets d) Cheaper suppliers e) Lower labor costs Ans: a Solution: There are many issues to consider when locating globally: different culture, language barriers, different laws and regulations. Section Ref: Location Analysis Subsection Ref: n/a Level: Medium Bloom‘s: Analysis Learning Objective 4: Identify key factors in location analysis. AACSB: Analytic Time on Task: 2 min
56. The first step managers need to take when making facility location decisions is to ___________________. a) begin negotiations with governments for several potential locations b) identify specific location possibilities c) gather information on location alternatives d) evaluate specific sites e) identify the location factors that are dominant for the business Ans: e Solution: Three-step procedure when making facility location decisions is as follows: 1) Identify dominant location factors; 2) Develop location alternatives; 3) Evaluate location alternatives. Section Ref: Making Location Decisions Subsection Ref: Procedure for Making Location Decisions Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1 min 57. When evaluating location alternatives the firm should look at a) only qualitative factors. b) only quantitative factors. c) both qualitative and quantitative factors. d) weighted average values. e) decision support models only. Ans: c Solution: A number of procedures can help in evaluating location alternatives. Some of them help with qualitative factors that are subjective, such as quality of life. Others help with quantitative factors that can be measured, such as distance. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1.5 min
58. An excellent procedure that can be used with location factors that are qualitative is __________________. a) the transportation method b) break-even analysis c) the factor rating method d) the center of gravity approach e) the load–distance method Ans: c Solution: An excellent procedure that can be used to give structure to this process is called factor rating. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1.5 min 59. The first step in the factor rating method for evaluating location alternatives is to a) select a scale by which to evaluate each alternative relative to each factor. b) evaluate each alternative relative to each factor. c) select the alternative with the highest score. d) identify dominant factors. e) assign weights to factors reflecting the importance of each factor relative to the other factors. Ans: d Solution: Step 1: Identify dominant location factors (e.g., proximity to market, access, competition, quality of life). Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1 min
60. A location analysis has been narrowed down to two locations, A and B. The main factors in the decision will be supply of raw materials, which has a weight of 50, and labor cost, which has a weight of 50. The ratings for raw materials and labor are: for A, 3 and 4, respectively; for B, 5 and 3, respectively. Using the factor rating method, the manager should ______________________. a) be indifferent between these locations b) choose location A c) choose location B d) reject both locations e) determine the capacity before deciding Ans: c Solution: Location A‘s score is 3 * 50 + 4 * 50 = 350 Location B‘s score is 5 * 50 + 3 * 50 = 400 Thus, the manager should choose a location with the highest score, which is location B. Section Ref: Making Location Decisions Subsection Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Analytic Time on Task: 2.5 min
61. The load–distance model frequently utilizes _____________________ distance, which is the shortest distance between two points using only north–south and east–west movements. a) curvilinear b) Euclidean c) rectilinear d) direct e) vertical Ans: c Solution: A frequently used measure of distance is rectilinear distance, the shortest distance between two points measured by using only north–south and east–west movements. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1 min
62. Which of the following is a step in the load–distance model? a) Solve algebraically for the best location. b) Identify loads. c) Identify capacity. d) Identify customers. Ans: b Solution: The three steps in developing the load–distance model are: 1) Identify distances; 2) Identify loads; 3) Calculate the load–distance score for each location. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1 min 63. In choosing a location, the _____________________ provides an easy way to calculate X and Y coordinates for a good starting point. a) transportation method b) break-even approach c) factor rating method d) center of gravity approach e) load–distance method Ans: d Solution: The center of gravity provides an excellent starting point. We can use it to test the load–distance score of other locations in the area. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1 min
64. The center of gravity approach a) identifies the precise location for the new distribution site. b) identifies where the trucking firm should be located. c) may identify a location that may not be feasible to locate to. d) relies on GPS coordinates for all calculations. e) relies on which transportation method is selected. Ans: c Solution: The location identified by the center of gravity approach may not be a feasible site because of geographic restrictions. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1.5 min 65. For fixed costs of $10,000, revenue per unit of $20, and variable cost per unit of $10, the break-even quantity is ______________________. a) 10 units b) 500 units c) 1,000 units d) 2,000 units e) 10,000 units Ans: c Solution: The break-even quantity is Q = F/(p-c) = 10,000 / (20 – 10) = 10,000/10 = 1,000 Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Medium Bloom‘s: Application Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Analytic Time on Task: 2.5 min
66. At the break-even point, _____________________. a) output equals capacity b) total cost equals total revenue c) total cost equals profit d) variable cost equals fixed cost e) variable cost equals total revenue Ans: b Solution: At the break-even point, total cost and total revenue are equal. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1 min
67. For a break-even graph, the total cost for each possible location is plotted against __________________. a) fixed costs b) variable costs c) profit margin d) quantity e) price Ans: d Solution: For a break-even graph, the total cost for each possible location is plotted against quantity. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1 min
68. To plot the break-even line, one end of the line is the y-intercept point. The other line point a) requires the center of gravity calculation. b) is established by the finance department. c) is arbitrary but it usually is the expected volume. d) is not arbitrary. e) is derived from the location analysis. Ans: c Solution: To plot any straight line we need two points. One point is Q = 0 , which is the y intercept. Another point can be selected arbitrarily, but it is best to use the expected volume of sales in the future. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1.5 min 69. The method that relies on a specific algorithm to evaluate the cost impact of adding potential location sites to the network of existing facilities is called a) cost-volume analysis. b) the transportation method. c) factor rating analysis. d) linear regression analysis. e) the load–distance model. Ans: b Solution: The transportation method relies on a specific algorithm to evaluate the cost impact of adding potential location sites to the network of existing facilities. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1 min
70. Capacity planning and location analysis are decisions that must be made by _______________ working together. a) accounting, marketing, and operations b) marketing and finance c) finance, accounting, marketing, and operations d) accounting, marketing, and finance e) marketing and operations Ans: c Solution: It should be clear how capacity planning and location analysis affect operations management. However, these decisions are also important to many other functions in the company. Section Ref: Capacity Planning and Facility Location within OM: How It All Fits Together Subsection Ref: Capacity Planning and Facility Location Across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1.5 min 71. Which of the following is part of decision trees? a) decision makers b) decision alternatives c) decision events d) decision signs Ans: b Solution: Decision trees contain decision points, decision alternatives, chance events, and outcomes. Section Ref: Decision Trees Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 3: Explain the usefulness of decision trees in decision making. AACSB: Knowledge Time on Task: 1 min
True/False
72. Capacity decisions at the strategic level include the size of workforce. Ans: False Solution: The first level of capacity decisions is strategic and long-term in nature. This is where a company decides what investments in new facilities and equipment it should make. Section Ref: Capacity Planning Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 73. The first level of capacity planning is at the strategic level. Ans: True Solution: Planning for capacity in a company is usually performed at two levels, each corresponding to either strategic or tactical decisions. The first level of capacity decisions is strategic. Section Ref: Capacity Planning Subsection Ref: n/a Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min 74. Capacity planning is complicated by the fact that capacity is usually purchased in chunks, rather than smooth increments. Ans: True Solution: An issue that complicates capacity planning is the fact that capacity is usually purchased in ―chunks‖ rather than in smooth increments. Section Ref: Capacity Planning Subsection Ref: Why Is Capacity Planning Important? Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min
75. An example of an output measure of capacity is labor hours. Ans: False Solution: Labor hours is an example of input measure of capacity. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 76. Input measures of capacity work better when a company produces a single product. Ans: False Solution: When a company produces many different kinds of products, input measures work better. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 77. Scheduled machine maintenance is one of the determinants of effective capacity. Ans: True Solution: Effective capacity is the maximum output rate that can be sustained under normal conditions. These conditions include realistic work schedules and breaks, regular staff levels, and scheduled machine maintenance. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min
78. The maximum output rate that can be achieved by a facility under ideal conditions is design capacity. Ans: True Solution: Design capacity is the maximum output rate that can be achieved by a facility under ideal conditions. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min 79. Under ideal conditions the firm can achieve 125% of design capacity on a daily basis. Ans: False Solution: Design capacity is the maximum output rate that can be achieved by a facility under ideal conditions. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 80. The ratio of actual output rate to capacity is utilization. Ans: True Solution: Capacity utilization can simply be computed as the ratio of actual output over capacity. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min
81. Extra capacity can serve to intimidate and preempt competitors from entering the market. Ans: True Solution: Extra capacity can serve to intimidate and preempt competitors from entering the market. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 82. The best operating level is the volume of output that results in the lowest average unit cost. Ans: True Solution: Every production facility has a volume of output that results in the lowest average unit cost. This is called the facility‘s best operating level. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min 83. A focused factory is one that produces many products with options. Ans: False Solution: Facilities can respond more efficiently to demand if they are small, specialized, and focused on a narrow set of objectives; this concept is referred to as focused factories. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min
84. Focused factories are a factor that contributes to the success of JIT. Ans: True Solution: Focused factories are only one of many factors that contribute to the success of JIT, but the concept is applicable to any facility. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 85. A plant within a plant can perform a number of tasks to help a company focus on its core capabilities. Ans: False Solution: Companies are realizing that to be successful in today‘s market, they need to focus on their core capabilities—for example, by hiring third parties or subcontractors to take over tasks that the company does not need to perform itself. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1.5 min 86. Capacity cushions can be helpful if sales need to be buffered from production. Ans: False Solution: Capacity cushions can be helpful if demand is greater than expected. Also, cushions can help the ability of a business to respond to customer needs for different products or different volumes. Section Ref: Making Capacity Planning Decisions Subsection Ref: Identify Capacity Requirements Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain the steps involved in capacity planning and location analysis. AACSB: Knowledge Time on Task: 1.5 min
87. Long-term capacity requirements are identified on the basis of forecasts of future labor market supplies. Ans: False Solution: Long-term capacity requirements are identified on the basis of forecasts of future demand. Section Ref: Making Capacity Planning Decisions Subsection Ref: Identify Capacity Requirements Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain the steps involved in capacity planning and location analysis. AACSB: Knowledge Time on Task: 1.5 min 88. Solving a decision tree that involves maximizing profit includes selecting the decision alternative with the highest expected value. Ans: True Solution: Solving a decision tree that involves maximizing profit includes selecting the decision alternative with the highest expected value. Section Ref: Decision Trees Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 3: Explain the usefulness of decision trees in decision making. AACSB: Knowledge Time on Task: 1.5 min 89. In facility location, zoning restrictions, soil conditions, and access roads for trucks are quality of life issues. Ans: False Solution: Quality of life includes factors such as climate, a desirable lifestyle, good schools, and a low crime rate. Section Ref: Location Analysis Subsection Ref: Factors Affecting Location Decisions Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify key factors in location analysis. AACSB: Knowledge Time on Task: 1.5 min
90. Disadvantages of globalization include political risks for countries with unstable governments. Ans: True Solution: Political risks can be large disadvantage, particularly in countries with unstable governments. For example, during a period of political unrest a company may have its technology confiscated. Section Ref: Location Analysis Subsection Ref: Globalization Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify key factors in location analysis. AACSB: Knowledge Time on Task: 1.5 min 91. An excellent procedure that can be used with location factors that are qualitative is the factor rating method. Ans: True Solution: Many of the factors that managers need to consider when evaluating location alternatives are qualitative in nature. An excellent procedure that can be used to give structure to this process is called factor rating. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1.5 min 92. The load–distance model frequently utilizes rectilinear distance, which is the shortest distance between two points using only north–south and east–west movements. Ans: True Solution: A frequently used measure of distance in the load-distance model is rectilinear distance, the shortest distance between two points measured by using only north–south and east– west movements. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1.5 min
93. The center of gravity approach requires precise (X,Y) grid coordinates to develop a valid location. Ans: False Solution: To measure rectilinear distance, we place grid coordinates on a map and use them to measure the distance between two locations. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1 min 94. In choosing a location, the transportation method provides an easy way to calculate X and Y coordinates for a good starting point. Ans: False Solution: The transportation method of linear programming is a useful technique for solving specific location problems. The method relies on a specific algorithm to evaluate the cost impact of adding potential location sites to the network of existing facilities. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1 min 95. At the break-even point, total cost equals total revenue. Ans: True Solution: At the break-even point, total cost and total revenue are equal. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1 min
96. Two types of information needed when measuring capacity are the amount of available capacity and the effectiveness of capacity use. Ans: True Solution: When discussing the capacity of a facility, we need two types of information: the amount of available capacity and effectiveness of capacity use. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 1 min 97. Finance and customer support are the two primary functions interested in capacity planning and location analysis. Ans: False Solution: It should be clear how capacity planning and location analysis affect operations management. However, these decisions are also important to many other functions in the company. Section Ref: Capacity Planning and Facility Location within OM: How It All Fits Together Subsection Ref: Capacity Planning and Facility Location Across the Organization Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 1.5 min
Essay
98. Describe some of the factors that contribute to the capacity of an emergency room, as measured by the number of patients served per day. Ans: One factor is the number of beds in the ER and the amount of space available. If there are not enough beds, patients may have to wait long periods of time to be examined. Too many empty beds, on the other hand, would be a waste of space. Another factor is the number of nurses and doctors working on a shift. If not enough staff is available, patients may not have anyone to treat them. The consequences of not having enough capacity could be grave. However, scheduling more staff than needed would result in excess capacity in the form of highly paid professionals not having work to do. Solution: One factor is the number of beds in the ER and the amount of space available. If there are not enough beds, patients may have to wait long periods of time to be examined. Too many empty beds, on the other hand, would be a waste of space. Another factor is the number of nurses
and doctors working on a shift. If not enough staff is available, patients may not have anyone to treat them. The consequences of not having enough capacity could be grave. However, scheduling more staff than needed would result in excess capacity in the form of highly paid professionals not having work to do. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Medium Bloom‘s: Application Learning Objective 1: Define capacity planning. AACSB: Analytic Time on Task: 5 min
99. What conditions make effective capacity differ from design capacity? Ans: realistic work schedules and break schedules, regular staff levels, scheduled machine maintenance, and none of the temporary measures that are used to achieve design capacity Solution: Design capacity is the maximum output rate that can be achieved by a facility under ideal conditions. Effective capacity is the maximum output rate that can be sustained under normal conditions. These conditions include realistic work schedules and breaks, regular staff levels, scheduled machine maintenance, and none of the temporary measures that are used to achieve design capacity. Note that effective capacity is usually lower than design capacity. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 3 min
100. Why would a company consider purchasing or building a small facility, when in the long run they think that they could use a large one? Ans: risk that demand will not materialize Solution: The large facility means that we would have a large amount of excess capacity in the beginning and that our initial costs would be high. We would also run the risk that demand might not materialize and we would be left with unused overcapacity. On the other hand, this alternative allows us to be prepared for higher demand in the future. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Medium Bloom‘s: Analysis Learning Objective 1: Define capacity planning. AACSB: Analytic Time on Task: 4 min
101. Two sizes are being considered for a new facility, medium and large. The large facility will have greater operating level. Discuss best operating level in this context. Ans: The best operating level will vary with the size of the facility. The average cost per unit will be lowest at the best operating level for the large facility. Solution: Every production facility has a volume of output that results in the lowest average unit cost. This is called the facility‘s best operating level. Operating a facility close to its best operating level is clearly important because of the impact on costs. However, we have to keep in mind that different facility sizes have different best operating levels. The average cost per unit will be lowest at the best operating level for the large facility. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Medium Bloom‘s: Analysis Learning Objective 1: Define capacity planning. AACSB: Analytic Time on Task: 4 min 102. Why are focused factories often the best approach in today‘s business environment? Ans: due to short product and technology life cycles, and the importance of flexibility Solution: Today‘s facilities must succeed in a business environment that has short product and technology life cycles and in which flexibility is more important than ever before. Facilities can respond more efficiently to demand if they are small, specialized, and focused on a narrow set of objectives; this concept is referred to as focused factories. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Medium Bloom‘s: Analysis Learning Objective 1: Define capacity planning. AACSB: Analytic Time on Task: 4 min 103. How should forecasts of long-range demand be developed for identifying capacity requirements? Ans: 1) Forecast overall long-range market demand; 2) then estimate the company‘s market share as a percentage of the total; 3) then translate the forecast of demand into specific facility requirements. Solution: Capacity requirements are identified on the basis of forecasts of future demand. One way to proceed with long-range demand forecasting at this stage is to first forecast overall market demand. Then the company can estimate its market share as a percentage of the total. That forecast of demand can then be translated into specific facility requirements. Section Ref: Making Capacity Planning Decisions
Subsection Ref: Identify Capacity Requirements Level: Medium Bloom‘s: Analysis Learning Objective 2: Explain the steps involved in capacity planning and location analysis. AACSB: Analytic Time on Task: 4 min 104. There they go again. There is another Burger King being built right next to a McDonald‘s at an interstate highway exit. Why does this approach make sense? Ans: Customers will be drawn to that location by the availability of fast-food restaurants. Solution: Locating near the market they serve is often critical for many organizations, particularly service firms. For this reason, service firms typically locate in high-population areas that offer convenient access. Customers will be drawn to that location by the availability of fastfood restaurants. Section Ref: Location Analysis Subsection Ref: Factors Affecting Location Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Identify key factors in location analysis. AACSB: Analytic Time on Task: 4 min 105. Why does it make sense that there are many cheese factories that are staying in Wisconsin, while many clothing manufacturers have been shutting down domestic plants and locating outside of the United States? Ans: Cheese is made from milk, and cheese factories are located near dairy farms to avoid the cost of transporting the heavy milk long distances. The major cost in making clothes is labor, and labor costs tend to be high in the United States. Solution: Many firms need to locate close to sources of supply. The location may be determined by the perishable nature of goods, such as in preparing and processing perishable food items. Another reason to locate close to sources of supply is to avoid high transportation costs. Cheese is made from milk, and cheese factories are located near dairy farms to avoid the cost of transporting the heavy milk long distances. The major cost in making clothes is labor, and labor costs tend to be high in the United States. Section Ref: Location Analysis Subsection Ref: Factors Affecting Location Decisions Level: Medium Bloom‘s: Application Learning Objective 4: Identify key factors in location analysis. AACSB: Analytic Time on Task: 4 min
106. Give an example of a type of facility for which quality-of-life issues would be of primary importance. Ans: There are several possibilities, such as research and development facilities, corporate offices, universities, nuclear plants, etc. Solution: When other factors do not differ much from one location to another, quality of life can be the decisive factor. Facilities that might consider quality of life in location decisions include research and development facilities, corporate offices, universities, nuclear plants, etc. Section Ref: Location Analysis Subsection Ref: Factors Affecting Location Decisions Level: Medium Bloom‘s: Analysis Learning Objective 4: Identify key factors in location analysis. AACSB: Analytic Time on Task: 3 min 107. What are the disadvantages of globalization? Ans: political risks in countries with unstable governments, need to share proprietary technology, bad attitudes on the part of workers, lower worker productivity and skills, poor roads, lack of utilities and other infrastructure problems Solution: There are also a number of disadvantages that companies should consider. Political risks can be large, particularly in countries with unstable governments. Using offshore suppliers might mean that a company may need to share some of its proprietary technology. Other issues are whether to use local employees and local infrastructure. Section Ref: Location Analysis Subsection Ref: Globalization Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify key factors in location analysis. AACSB: Knowledge Time on Task: 3 min 108. Discuss why marketing is important in making capacity decisions. Ans: Marketing is the function that has information on future demands and competition. Each of these is critical for future capacity planning. Solution: Marketing is a function that is highly affected by capacity planning decisions. The amount of current and future capacity restricts the ability to meet demand. Building a large facility that enables the company to capture future demand and position itself in the marketplace could be advantageous from a marketing perspective. On the other hand, given future demands and competition this may not be a critical issue. Marketing is the function that has this information. Section Ref: Capacity Planning and Facility Location within OM: How It All Fits Together Subsection Ref: Capacity Planning and Facility Location Across the Organization Level: Easy
Bloom‘s: Comprehension Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 3 min 109. Describe the relation between the demand and the capacity of a supply chain. Ans: The supply chain is a pipeline that supplies a certain level of customer demand. This can only happen if the supply chain capacity meets the demand requirements and is matched across the full supply chain. Solution: In order for a supply chain to satisfy the demand, the supply chain must flow smoothly without disruption. This can only happen if capacity is uniform throughout the entire supply chain and is matched between entities. For example, a manufacturer must make sure that the capacity of its suppliers is sufficient to meet its own capacity needs and that there is no gap in product delivery. Section Ref: Capacity Planning and Facility Location within OM: How It All Fits Together Subsection Ref: The Supply Chain Link Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 3 min 110. How are capacity planning and location analysis similar? Ans: In both capacity planning and location analysis, managers must follow a three-step process to make good decisions. The steps are assessing needs, developing alternatives, and evaluating alternatives. Solution: In both capacity planning and location analysis, managers must follow a three-step process to make good decisions. The steps are assessing needs, developing alternatives, and evaluating alternatives. Section Ref: Making Capacity Planning Decisions Subsection Ref: n/a Level: Medium Bloom‘s: Analysis Learning Objective 2: Explain the steps involved in capacity planning and location analysis. AACSB: Analytic Time on Task: 4 min
Short Answer
111. While long term capacity decisions are strategic and capital intensive, short term capacity decisions involve _______________________. Ans: short-term issues such as workforce, inventory, and machinery Solution: The second level of capacity decisions is more tactical in nature, focusing on shortterm issues that include planning of workforce, inventories, and day-to-day use of machines. Section Ref: Capacity Planning Subsection Ref: n/a Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 2 min 112. Capacity planning problems are notorious in emergency rooms (ER) and other organizations that experience high demand ____. Ans: fluctuations Solution: Capacity planning problems are notorious in the ER, partly due to the high fluctuations in demand and the high costs of insufficient capacity. Section Ref: Capacity Planning Subsection Ref: Why Is Capacity Planning Important? Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 2 min 113. Agile organizations often use focused factories to increase efficiency by ______________________. Ans: working on fewer tasks and goals Solution: Facilities can respond more efficiently to demand if they are small, specialized, and focused on a narrow set of objectives; this concept is referred to as focused factories. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 2 min
114. Subcontractor networks reduce reliance on acceptance sampling by ____________________. Ans: increasing suppliers‘ responsibility for quality Solution: Also, many companies are contracting with suppliers to perform tasks that they used to perform themselves. A good example is in the area of quality management. Historically, companies performed quality checks on goods received from suppliers. Today, suppliers and manufacturers work together to achieve the same quality standards, and much of the quality checking of incoming materials is performed at the supplier‘s site. Section Ref: Capacity Planning Subsection Ref: Capacity Considerations Level: Easy Bloom‘s: Comprehension Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 2.5 min 115. Forecasting product demand involves forecasting _________________ demand and the firm‘s _________________. Ans: market; market share Solution: Capacity requirements are identified on the basis of forecasts of future demand. One way to proceed with long-range demand forecasting at this stage is to first forecast overall market demand. Then the company can estimate its market share as a percentage of the total. Section Ref: Making Capacity Planning Decisions Subsection Ref: Identify Capacity Requirements Level: Easy Bloom‘s: Comprehension Learning Objective 2: Explain the steps involved in capacity planning and location analysis. AACSB: Knowledge Time on Task: 2 min 116. Name three of the main factors that affect location decisions: ________________________, ________________________, and ________________________. Ans: proximity to suppliers, proximity to customers, proximity to qualified labor, community, site, quality of life Solution: The main factors that affect location decisions are proximity to suppliers, proximity to customers, proximity to qualified labor, community, site, and quality of life. Section Ref: Location Analysis Subsection Ref: Factors Affecting Location Decisions Level: Easy Bloom‘s: Knowledge Learning Objective 4: Identify key factors in location analysis. AACSB: Knowledge Time on Task: 2 min
117. What is the formula for utilization? ________________________ Ans: (formula) U = actual output /capacity (100) Solution: Capacity utilization can simply be computed as the ratio of actual output over capacity. Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Easy Bloom‘s: Knowledge Learning Objective 1: Define capacity planning. AACSB: Knowledge Time on Task: 2 min 118. What is the load–distance score formula? Ans: (formula) ld = sum l_ij times d_ij where l_ij is the weight carried from point i to j and d_ij is the distance from i to j. Solution: The ld score for a particular location is obtained by multiplying the load (denoted by l) for each location by the distance traveled (denoted by d) and then summing over all the locations. This score is a surrogate measure for movement of goods, material handling, or even communication. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 2.5 min 119. An area that has further encouraged globalization is the __________ of just-in-time manufacturing. Ans: growth Solution: An area that has further encouraged globalization is the growth of just-in-time manufacturing, which encourages suppliers and manufacturers to be in close proximity to one another. Section Ref: Location Analysis Subsection Ref: Globalization Level: Easy Bloom‘s: Comprehension Learning Objective 4: Identify key factors in location analysis. AACSB: Knowledge Time on Task: 2 min
120. A firm that wishes to use break-even analysis to evaluate potential locations must know _______________, _________, and __________ for each site. Ans: fixed cost, selling price, and variable cost Solution: The basic break-even equations include fixed cost, selling price, and variable cost. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Comprehension Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: AACSB: Knowledge Time on Task: 2 min
121. Factor rating can be used to evaluate multiple _____ based on a number of ________. Ans: alternatives; selected factors Solution: Factor rating can be used to evaluate multiple alternatives based on a number of selected factors. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Easy Bloom‘s: Knowledge Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Knowledge Time on Task: 2 min
Problems
122. A firm must choose between remaining where it is, with current capacity, and building a new facility with 50% more capacity. The probability of high demand is estimated to be 75%. The current facility would provide $100,000 profit if there is high demand or $50,000 profit if there is low demand. The replacement facility would provide $160,000 profit if there is high demand but would only break even if there is low demand. What is the expected value of each option? Ans: For the replacement facility EV = .75 * $160,000 + .25 * $0 = $120,000. For the current facility EV = .75 * $100,000 + .25* $50,000 = $87,500. Solution: The expected value (EV) is a weighted average of the chance events, where each chance event is given a probability of occurrence. For the replacement facility EV = .75 * $160,000 + .25 * $0 = $120,000. For the current facility EV = .75 * $100,000 + .25 * $50,000 = $87,500. Section Ref: Decision Trees Subsection Ref: n/a Level: Medium
Bloom‘s: Application Learning Objective 3: Explain the usefulness of decision trees in decision making. AACSB: Analytic Time on Task: 4 min 123. A clinic has been set up to give flu shots to the elderly in a large city. The design capacity is 50 seniors per hour, and the effective capacity is 44 seniors per hour. Yesterday the clinic was open for ten hours and gave flu shots to 330 seniors. (a) What was the design utilization yesterday? (b) What was the effective utilization yesterday? Ans: a) 66% b) 75% Solution: a) Design utilization = output/design capacity = 330/(10*50) = .66 or 66% b) Effective utilization = output/effective capacity = 330/(10*44) =.75 or 75% Section Ref: Capacity Planning Subsection Ref: Measuring Capacity Level: Medium Bloom‘s: Application Learning Objective 1: Define capacity planning. AACSB: Analytic Time on Task: 4 min
124. Magnatree is a large company that has been working on a new product. This product has tremendous potential, but Magnatree must move quickly. They have decided that they will introduce the product in two months and have already started developing their advertising campaign. They are sure that the product will be a success, with a possibility that it will be a huge success. They recently found out that another company, Shadycorp, has some unique expertise that could significantly improve the new product. They contacted them and Shadycorp offered to sell their expertise to Magnatree for $5 million. Magnatree needs to make an immediate decision on Shadycorp‘s offer or it will be too late to investigate the use of the expertise in design of the new product. Without the expertise Magnatree has a 20% chance of making the new product a huge success. With Shadycorp‘s expertise there will be a 40% chance of the new product being a huge success. If the new product is a huge success, the net present value of its future profits is expected to be $50 million. If it is merely a success, the net present value of its future profits is expected to be $20 million. (a) Construct a decision tree and solve it. (b) Should Magnatree accept Shadycorp‘s offer? (c) What is the expected net present value of its future profits from the new product?
Ans: (a) --------Huge success (0.2)---- $50 million | ---Reject offer-------- O | | | --------Success (0.8) ---------- $20 million | --------Huge success (0.4)---- $45 million | | ---Accept offer------- O | --------Success (0.6) ---------- $15 million Calculate expected values --------Huge success (0.2)---- $50 million | ---Reject offer-------- O Expected value = $26 million | | | --------Success (0.8) ---------- $20 million Accept offer - Expected value = $27 million | --------Huge success (0.4)---- $45 million | | ---Accept offer------- O Expected value = $27 million | --------Success (0.6) ---------- $15 million (b) Magnatree should accept Shadycorp‘s offer. (c) The expected net present value of its future profits from the new product is $27 million. Solution: (a) --------Huge success (0.2)---- $50 million | ---Reject offer-------- O | | | --------Success (0.8) ---------- $20 million | --------Huge success (0.4)---- $45 million | | ---Accept offer------- O | --------Success (0.6) ---------- $15 million Calculate expected values
If offer is rejected, EV = Probability(Huge success) * Profit (Huge success) + Probability(Success) * Profit (Success) = 0.2 * 50 + 0.8 * 20 = $26 million If offer is accepted, EV = Probability(Huge success) * Profit (Huge success) + Probability(Success) * Profit (Success) = 0.4 * 45 + 0.6 * 15 = $27 million (b) Since expected value is greater if the offer is accepted, Magnatree should accept Shadycorp‘s offer. (c) The expected net present value of its future profits from the new product is $27 million. Section Ref: Decision Trees Subsection Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 3: Explain the usefulness of decision trees in decision making. AACSB: Analytic Time on Task: 8 min
125. Aacorp has experienced an increase in demand for its product and has decided that it will expand its factory, since capacity is currently too low to meet demand. It is not sure whether demand will continue to increase in the future or not. It is considering two options. A small expansion will be sufficient to meet its current demand and also its future demand if demand levels off. Its second option is a large expansion, which will be more than sufficient for current demand and will also handle future demand even if it continues to increase. They have estimated that the probability that demand will continue to increase is 40%. A small expansion will cost $2 million while a large expansion will cost $4 million. If they make a small expansion and demand continues to increase, they will have to make a second expansion in 18 months and the net present value of that second expansion is $3 million. The net present value of the future revenue resulting from the expansion will be $5 million under two conditions: 1) demand levels off, or 2) demand continues to increase, but Aacorp chooses a small expansion and does not make a second expansion in 18 months. The net present value of the future revenue will be $9 million if demand continues to increase and Aacorp either chooses a large expansion or makes a second expansion in 18 months after choosing a small expansion. (a) Construct a decision tree and solve it. (b) Should Aacorp make a small expansion or a large expansion? (c) What is the resulting expected net present value of its future profits?
Ans: (a) ------Expand again---------- $4 million (9-2-3) | ---Demand increases (0.4)--- | | | ------No second expansion- $3 million (5-2) ------Expand small----O | | | | | ---Demand levels off (0.6)------------------------------------ $3 million (5-2) | ---Demand increases (0.4)------------------------------------ $5 million (9-4) | | | | ------Expand large----O | | ---Demand levels off (0.6)------------------------------------ $1 million (5-4)
Calculate expected values ------Expand again---------- $4 million (9-2-3) | ---Demand increases (0.4)--- Choose Expand again - $4 million | | | ------No second expansion- $3 million (5-2) ------Expand small----O Expected value = $3.4 million | | | | | ---Demand levels off (0.6)------------------------------------ $3 million (5-2) Expand small - Expected value = $3.4 million | ---Demand increases (0.4)------------------------------------ $5 million (9-4) | | | | ------Expand large----O Expected value = $2.6 million | | ---Demand levels off (0.6)------------------------------------ $1 million (5-4) (b) Aacorp should make a small expansion. (c) The resulting expected net present value of its future profits is $3.4 million. Solution: (a) ------Expand again---------- $4 million (9-2-3)
| ---Demand increases (0.4)--- | | | ------No second expansion- $3 million (5-2) ------Expand small----O | | | | | ---Demand levels off (0.6)---------------------- $3 million (5-2) | ---Demand increases (0.4)------------------------- $5 million (9-4) | | | | ------Expand large----O | | ---Demand levels off (0.6)------- ------------------ $1 million (5-4)
Calculate expected values If small expansion is selected and demand increases, the company should choose to expand again because it provides greater profit. If expansion is small, EV = Probability(Level off) * Profit(Level off) + Probability(Increase) * Profit (Increase) = 0.6 * 3 + 0.4 * 4 = $3.4 million If expansion is large, EV = Probability(Level off) * Profit(Level off) + Probability(Increase) * Profit (Increase) = 0.6 * 1 + 0.4 * 5 = $2.6 million (b) Aacorp should make a small expansion because it has greater expected profit. (c) The resulting expected net present value of its future profits is $3.4 million. Section Ref: Decision Trees Subsection Ref: n/a Level: Medium Bloom‘s: Application Learning Objective 3: Explain the usefulness of decision trees in decision making. AACSB: Analytic Time on Task: 10 min
126. Medco plans to open a new medical center and is looking for a suitable location. They have narrowed their choice down to three locations: Oak, Elm, and Ash Streets. They have defined four factors and have assigned weights to these factors as follows: proximity to hospitals (40), customer parking (30), appearance (20), and ease of expansion (10). They then rated the three locations for the four factors, using a scale of one to five. Their ratings are as follows: Location Factor Oak Elm Ash Proximity to hospitals 2 5 Customer parking 5 1 Appearance 4 2 Ease of expansion 3 4 (a) Calculate the scores for each location. (b) According to the model, which location should they choose?
3 3 5 1
Ans: (a) Oak; 340; Elm; 310; Ash: 320 (b) Choose Oak. (a) Solution: Score = sum of (weight * rating) = proximity to hospitals weight * rating + customer parking weight * rating + appearance weight * rating + ease of expansion weight * rating Oak score = 40 * 2 + 30 * 5 + 20 * 4 + 10 * 3 = 340 Elm score = 40 * 5 + 30 * 1 + 20 * 2 + 10 * 4 = 310 Ash score = 40 * 3 + 30 * 3 + 20 * 5 + 10 * 1 = 320 (b) Location Oak should be chosen because it has the highest score. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Medium Bloom‘s: Application Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Analytic Time on Task: 5 min
127. Supershirtco plans to open a new factory and is looking for a suitable location. They have narrowed their choice down to three locations, Lima, Peru; Rome, Italy; and Nome, Alaska. They have defined four factors and have assigned weights to these factors as follows: wage rates (60), construction costs (20), logistics (10), and climate (10). They then rated the three locations for the four factors, using a scale of one to five. Their ratings are as follows: Location Factor Lima Rome Nome Wage rates 5 3 Construction costs 4 2 Logistics 3 2 Climate 3 5 (a) Calculate the scores for each location. (b) According to the model which location should they choose?
1 5 5 1
Ans: (a) Lima: 440; Rome: 290; Nom:– 220 (b) Choose Lima. Solution: (a) Solution: Score = sum of (weight * rating) = wage rates weight * rating + construction costs weight * rating + logistics weight * rating + climate weight * rating Lima score = 60 * 5 + 20 * 4 + 10 * 3 + 10 * 3 = 440 Rome score = 60 * 3 + 20 * 2 + 10 * 2 + 10 * 5 = 290 Nome score = 60 * 1 + 20 * 5 + 10 * 5 + 10 * 1 = 220 (b) Location Lima should be chosen because it has the highest score. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Medium Bloom‘s: Application Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Analytic Time on Task: 5 min
128. Aalogistics Co. has just signed a contract to deliver products to three locations, and they are trying to decide where to put their new warehouse. The three delivery locations are Chicago, Kansas City, and Memphis. The two potential sites for the warehouse are Peoria and St. Louis. The x, y coordinates for the delivery locations and warehouses are as follows: Location x coordinate y coordinate Chicago 92 42 Kansas City 85 39 Memphis 90 35 Peoria 90 41 St. Louis 90 39 The total quantity to be delivered to each destination is: 400 to Chicago, 150 to Kansas City, and 100 to Memphis. (a) Calculate the total load–distance value from each potential warehouse location. (b) Where should the new warehouse be located? Ans: (a) load–distance for Peoria = 2,850; load–distance for St. Louis = 3,150 (b) Locate in Peoria. Solution: (a) dAB = |xA – xB| + |yA – yB| Load–distance for Peoria to Chicago d = |92 – 90| + |42 – 41| = 3 to Kansas City d = |85 – 90| + |39 – 41| = 7 to Memphis d = |90 – 90| + |35 – 41| = 6 Total load–distance value for Peoria: d = sum of Distance * load = 3 * 400 + 7 * 150 + 6 * 100 = 2,850 Load–distance for St. Louis to Chicago d = |92 – 90| + |42 – 39| = 5 to Kansas City d = |85 – 90| + |39 – 39| = 5 to Memphis d = |90 – 90| + |35 – 39| = 4 Total load–distance value for St. Louis: d = sum of Distance * load = 5 * 400 + 5 * 150 + 4 * 100 = 3,150 (b) The warehouse should be located in Peoria because it has the lower load–distance value. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Medium Bloom‘s: Application Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Analytic Time on Task: 6 min
129. Wefixit Co. has just signed a contract to handle copy machine repairs for a large printing company in Chicago. The contract covers copy machines at four locations: in the Loop (downtown), on the North side, on the West side, and on the South side. Wefixit has identified two potential sites for housing their equipment, spare parts, and employees. One site is Northwest of the Loop, and the other on is south of the Loop. The x, y coordinates for the printing company locations and potential sites for Wefixit are as follows: Type Location x coordinate y coordinate Printing Co. Loop 24 18 Printing Co. North side 19 27 Printing Co. West side 11 19 Printing Co. South side 27 11 Wefixit Northwest of Loop 18 23 Wefixit South of Loop 24 16 The estimated number of trips per year to each Printing Co. location is: 400 to Loop, 200 to North side, 200 to West side and 100 to South side. (a) Calculate the total load–distance value from each potential Wefixit location. (b) Where should Wefixit be located? Ans: (a) load–distance for Northwest = 9,700; load–distance for South = 8,000 (b) South Solution: (a) dAB = |xA – xB| + |yA – yB| Load–distance for Northwest of Loop to Loop d = |18 – 24| + |23 – 18| = 11 to North side d = |18 – 19| + |23 – 27| = 5 to West side d = |18 – 11| + |23 – 19| = 11 to South side d = |18 – 27| + |23 – 11| = 21 Total load–distance value for Northwest of Loop: d = sum of Distance * load = 11 * 400 + 5 * 200 + 11 * 200 + 21 * 100 = 9,700 Load-distance for South of Loop to Loop d = |24 – 24| + |16 – 18| = 2 to North side d = |24 – 19| + |16 – 27| = 16 to West side d = |24 – 11| + |16 – 19| = 16 to South side d = |24 – 27| + |16 – 11| = 8 Total load–distance value for Northwest of Loop: d = sum of Distance * load = 2 * 400 + 16 * 200 + 16 * 200 + 8 * 100 = 8,000 (b) The warehouse should be located at South of Loop because it has lower the load–distance value. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Medium Bloom‘s: Application Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Analytic Time on Task: 7 min
130. Aalogistics Co. has just signed a contract to deliver products to three locations, and they are trying to decide where to put their new warehouse. The three delivery locations are Chicago, Kansas City, and Memphis. The x, y coordinates for the delivery locations are as follows: Location x coordinate y coordinate Chicago 92 42 Kansas City 85 39 Memphis 90 35 The total quantity to be delivered to each destination is: 400 to Chicago, 150 to Kansas City, and 100 to Memphis. Calculate the location of the new warehouse using the center of gravity approach. Ans: x = 90.1, y = 40.2 Solution: Xc.g. = sum of (li * xi) / sum of (li); Yc.g. = sum of (li * yi) / sum of (li) Xc.g. = (400 * 92+ 150 * 85 + 100 * 90) / (400 + 150 + 100) = 58,550 / 650 = 90.08 Yc.g. = (400 * 42+ 150 * 39 + 100 * 35) / (400 + 150 + 100) = 26,150 / 650 = 40.23 Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Medium Bloom‘s: Application Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Analytic Time on Task: 4 min 131. Phil‘s consulting services has grown rapidly. Phil is now traveling extensively around the country. Phil has the liberty to live anywhere he wants but wants to decide, geographically, the ideal location to relocate to. Phil‘s primary clients and associated number of trips are: Client A = 15 trips, coordinates (20,80) Client B = 40 trips, coordinates (30,60) Client C = 35 trips, coordinates (40,70) Client D = 25 trips, coordinates (50,90) Where should Phil Live? Ans: (36.1,72.2) Xc.g.=∑liXi/∑li= (15*20 + 40*30 + 35* 40 + 25* 50) / (15 + 40 + 35 + 25) = 36.1 Yc.g.=∑liYi /∑li = (15*80 + 40*60 + 35* 70 + 25* 90) / (15 + 40 + 35 + 25) = 72.2 Solution: Xc.g. = sum of (li * xi) / sum of (li); Yc.g. = sum of (li * yi) / sum of (li) Xc.g. = (15*20 + 40*30 + 35* 40 + 25* 50) / (15 + 40 + 35 + 25) = 4,150 / 115 = 36.09 Yc.g. = (15*80 + 40*60 + 35* 70 + 25* 90) / (15 + 40 + 35 + 25) = 8,300 / 115 = 72.17 Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Medium Bloom‘s: Application Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Analytic Time on Task: 4 min
132. Amalagamatada HOH, Inc., makes water treatment machines for homes. These machines are referred to as AmaHOH, and Amalagamatada HOH, Inc. is trying to decide whether or not to build a new plant in Southern California. The plant will have annual fixed costs of $2,000,000 and variable costs of $800 for each AmaHOH produced. The sales price is $1,000 for each AmaHOH. (a) Determine the break-even quantity. (b) Marketing is certain that they will be able to sell much more than the break-even quantity determined in part a and have proposed building an even larger plant. This plant will have annual fixed costs of $5,000,000 and variable costs of $700 for each AmaHOH produced. The sales price will still be $1,000 for each AmaHOH. Determine the quantity above which the larger plant should be built, rather than the plant in part a. Ans: (a) 10,000 (b) 16,667 Solution: (a) Q = F / (p – c) = 2000000 / (1000 – 800) = 10,000 (b) Q = F / (p – c) = 5000000 / (1000 – 700) = 16,667 Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Medium Bloom‘s: Application Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Analytic Time on Task: 4 min
133. Acme Corp. makes vending machines for small companies. They have recently started selling their vending machines in Southern California, with a great deal of success, at a price of $5,000 per machine. The company is convinced that they will need to either build a new plant near San Diego or expand their existing plant in New Orleans. If they build a new plant near San Diego, the annual fixed costs will be $6,000,000 and the variable costs will be $3,000 for each vending machine delivered to Southern California. If they expand the New Orleans plant, their annual fixed costs for the expansion will be $2,000,000 and the variable costs will be $4,000 for each vending machine delivered to Southern California. (a) Determine the break-even quantity for building the new plant near San Diego. (b) Determine the break-even quantity for expanding the plant in New Orleans. (c) At what output will the two locations have the same total cost? (d) Assume that the demand forecast is less than the output determined in part c. Which option should the company choose? Ans: (a) 3,000 (b) 2,000 (c) 4,000 (d) Expand the plant in New Orleans. Solution: (a) Q = F / (p – c) = 6000000 / (5000 – 3000) = 3,000 (b) Q = F / (p – c) = 2000000 / (5000 – 4000) = 2,000
(c) Fb + cb * Q = Fe + ce * Q, where b = building, e = expanding Q = (Fb – Fe) / (ce – cb) = (6000000 – 2000000) / (4000 – 3000) = 4,000 (d) Expand the plant in New Orleans because total cost will be lower. Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Hard Bloom‘s: Synthesis Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Analytic Time on Task: 10 min 134. Raissa‘s early learning center must decide how many students they need to enroll to make a profit. There is a trade-off in quality of care and the number of students enrolled. They must make a profit but not have so many children that the care suffers. They must establish the point where the number of enrolled students establishes the first profit point. They‘ve determined that their fixed costs are $4,500 per month. It costs them an additional $150 per month for each enrolled child. They only enroll students on a monthly basis at a price of $450. How many students must they enroll to start making a profit? Ans: 15 students Solution: Q = F / (p – c) = $4,500 / ($450 – $150) = 15 Section Ref: Making Location Decisions Subsection Ref: Procedures for Evaluating Location Alternatives Level: Medium Bloom‘s: Application Learning Objective 5: Describe the decision-support tools used in location analysis. AACSB: Analytic Time on Task: 3 min
Testbank Chapter 10: Facility Layout LO Section
Subsection
Question #
What Is Layout Planning?
N/A
1, 2, 3, 77, 83, 108,
Types of Layouts
N/A
Hybrid Layouts
4, 109, 5, 6, 7, 8, 9, 11, 17, 19, 21, 25, 74, 78, 84, 85, 86, 87, 88, 12, 13, 14, 15, 16, 18, 20, 22, 23, 24, 26, 27, 89, 110, 10, 28,
Fixed-Position Layouts
29, 30, 31, 32, 33, 92, 112,
N/A
34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 79, 94, 95, 96, 97, 98, 99, 101, 113, 114, 115, 121, 122, 123, 133, 134, 135, 136,
Process Layouts Product Layouts
Designing Process Layouts
Step 1: Gather Information Step 2: Develop a Block Plan
90,
Step 3: Develop a Detailed Layout Special Cases of Process Layouts
Warehouse Layouts Office Layouts
Designing Product Layouts
N/A
Step 1: Identify Tasks and Their Immediate Predecessors Step 2: Determine Output Rate Step 3: Determine Cycle Time Step 4: Computer the Theoretical Minimum Number of Stations Step 5: Assign Tasks to Workstations (Balance the Line) Step 6: Computer Efficiency, Idle Time, and Balance Delay Other Considerations
48, 49, 67, 70, 71, 72, 80, 100, 124, 125, 50, 51, 52, 53, 91, 137, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 68, 69, 73, 76, 81, 93, 101, 102, 103, 104, 106, 116, 117, 120, 126, 127, 128, 129, 130, 131, 132, 138, 139, 140, 141,142, 143,
Group Technology (Cell) Layouts
N/A
Facility Layout within OM: How It All Fits Together
66, 82, 105, 111, 118, 75, 144
Facility Layout across the Organization
107, 119,
TOTAL QUESTIONS
144
© John Wiley & Sons, Inc. or the author. All rights reserved. Instructors who are authorized users of this course are permitted to download these materials and use them in connection with the course. Except as permitted herein or by law, no part of these materials should be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise.
Multiple Choice
1. Which of the following is NOT a resource that might be included in deciding a facility layout? a) desk b) work center c) telephone switch d) file cabinet e) person Answer: c Solution: These resources might include a desk, a work center, a cabinet, a person, an entire office, or even a department. Section Ref: What Is Layout Planning? Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension AACSB: Knowledge Learning Objective 1: Define layout planning and explain its importance.
2. Which of the following may NOT be a result of a poor layout? a) wasted time b) wasted energy c) confusion d) poor communication e) increased flow of information Answer: e Solution: Wasted time, energy, confusion, confusion, and poor communication result from a poor layout. Section Ref: What Is Layout Planning? Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Define layout planning and explain its importance. AACSB: Knowledge
3. Intermittent operations are seen in organizations that produce a) a small variety of different products. b) high volumes of a few standard products. c) a large variety of different products. d) a large volume of many standardized products. e) assembly line manufacturing. Answer: c Solution: Intermittent processing systems are seen in organizations that produce a large variety of different products, each in low volume. Section Ref: What is Layout Planning? Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Define layout planning and explain its importance. AACSB: Knowledge
4. Which of the following is NOT one of the four basic layout types? a) product b) hybrid c) process d) fixed position e) inverted Answer: e Solution: There are four basic layout types: process, product, hybrid, and fixed position. Section Ref: Types of Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
5. The challenge in process layouts is to arrange resources to maximize __________ and minimize ___________. a) movement; effectiveness b) effectiveness; efficiency c) efficiency; waste of movement d) efficiency; effectiveness e) efficiency; labor cost Answer: c Solution: The challenge in process layouts is to arrange resources to maximize efficiency and minimize waste of movement. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
6. A company using a continuous process is NOT likely to use which layout type? a) inverted b) product c) process d) fixed position e) hybrid Answer: b Solution: A product layout is used by companies that have repetitive processing systems and produce one or a few standardized products in large volume. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
7. Process layouts have __________. a) less automation b) more automation c) fewer employees d) more cycle time e) less cycle time Answer: a Solution: Process layouts have less automation, which is typically devoted to the production of one product. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
8. A job shop is MOST likely to use which layout type? a) inverted b) hybrid c) process d) fixed position e) product Answer: c Solution: Intermittent processing systems are seen in organizations that produce a large variety of different products, each in low volume. An example is a typical job shop. Process layouts are layouts that group resources based on similar processes or functions. This type of layout is seen in companies with intermittent processing systems. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
9. A hospital is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Answer: c Solution: A hospital is an example of process layout. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
10. A grocery store is MOST likely which of the following layout types? a) inverted b) circular c) hybrid d) fixed position e) product Answer: c Solution: Retail stores and grocery stores use hybrid layouts Section Ref: Types of Layouts Subsection: Hybrid Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
11. A university is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Answer: c Solution: A university is another example of a process layout. Colleges and departments are grouped based on their function. You, the student, move between departments based on the unique program you have chosen. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
12. Which of the following is LEAST likely a process layout? a) job shop b) automobile plant c) hospital d) university e) grocery store Answer: b Solution: Examples of product layouts are seen on assembly lines, in cafeterias, or even at a car wash. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
13. Which of the following is MOST likely a feature of a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are less capital intensive. c) Processing rates are slower. d) Space requirements for inventory storage are lower. e) Scheduling resources is more challenging. Answer: d Solution: Space requirements for inventory storage are lower. Product layouts have much faster processing rates and less need for inventory storage. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
14. Which of the following is MOST likely a feature of a product layout as compared to a process layout? a) Resources used are specialized. b) Facilities are less capital intensive. c) Processing rates are slower. d) Space requirements for inventory storage are higher. e) Scheduling resources is more challenging. Answer: a Solution: Product layouts use specialized resources designed to produce large quantities of a product. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
15. Which of the following is MOST likely a feature of a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are more capital intensive. c) Processing rates are slower. d) Space requirements for inventory storage are higher. e) Scheduling resources is more challenging. Answer: b Solution: Facilities are capital intensive. Product layouts make heavy use of automation, which is specifically designed to increase production. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
16. Which of the following is MOST likely a feature of a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are less capital intensive. c) Processing rates are faster. d) Space requirements for inventory storage are higher. e) Scheduling resources is more challenging. Answer: c Solution: Processing rates are faster. Processing rates are fast, as all resources are arranged in sequence for efficient production. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
17. Which of the following is MOST likely a feature of a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are less capital intensive. c) Processing rates are slower. d) Space requirements for inventory storage are higher. e) Scheduling resources is less challenging. Answer: e Solution: Scheduling resources is more challenging in a process layout. Scheduling equipment and machines is particularly important in this environment. If it is not done properly, long waiting lines can form in front of some work centers while others remain idle. Section Ref: Types of Layouts Subsection: Process Layout Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
18. Which of the following is MOST likely a feature of a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are less capital intensive. c) Material handling costs are lower. d) Space requirements for inventory storage are higher. e) Scheduling resources is more challenging. Answer: c Solution: Due to the arrangement of work centers in close proximity to one another, material handling costs are significantly lower than for process layouts. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
19. Which of the following is MOST likely a feature of a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are less capital intensive. c) Less-skilled workers can be used. d) Space requirements for inventory storage are higher. e) Scheduling resources is more challenging. Answer: c Solution: Process layouts typically rely on higher-skilled workers who can perform different functions. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
20. Which of the following is MOST likely a feature of a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are less capital intensive. c) Products cannot be easily added or deleted from the existing product line. d) Space requirements for inventory storage are higher. e) Scheduling resources is more challenging. Answer: c Solution: Because all facilities and resources are specialized, product layouts are locked into producing one type of product. They cannot easily add or delete products from the existing product line. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
21. A company with an intermittent processing system is MOST likely to use which layout type? a) inverted b) hybrid c) process d) fixed position e) product Answer: c Solution: Process layouts are layouts that group resources based on similar processes or functions. This type of layout is seen in companies with intermittent processing systems. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
22. A single-line cafeteria is an example of which layout type? a) inverted b) disjointed c) process d) fixed position e) product Answer: e Solution: Examples of product layouts are seen on assembly lines, in cafeterias, or even at a car wash. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
23. A car wash is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Answer: e Solution: Examples of product layouts are seen on assembly lines, in cafeterias, or even at a car wash. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
24. A high-volume paper mill is an example of which layout type? a) inverted b) circular c) process d) fixed position e) product Answer: e Solution: A product layout is used by companies that have repetitive processing systems and produce one or a few standardized products in large volume. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
25. Which of the following is LEAST likely a product layout? a) high-volume paper mill b) automobile plant c) hospital d) single-line cafeteria e) car wash Answer: c Solution: A hospital is an example of process layout. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
26. In a product layout facility the manager must decide a) employees‘ salaries. b) exactly what tasks will not be performed by every workstation. c) exactly what tasks will be performed by every workstation. d) exactly what vacation schedule must be followed. e) the general sequence the work must be performed in. Answer: c Solution: The challenge in designing product layouts is to arrange workstations in sequence and designate the jobs that will be performed by each station in order to produce the product in the most efficient way possible. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
27. Which company is widely considered to be the leader of just-in-time production? a) Ford b) Timex c) Gateway d) Toyota e) Sony Answer: d Solution: The importance of an efficient product layout can be seen at the Toyota Motor Corporation, the leader of just-in-time production. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
28. A hybrid layout combines a) fixed and product layouts. b) fixed and process layouts. c) inverted and product layouts. d) services and manufacturing. e) process and product layouts. Answer: e Solution: Hybrid layouts combine aspects of both process and product layouts. Section Ref: Types of Layouts Subsection: Hybrid Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
29. A wheat farm is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Answer: d Solution: A fixed-position layout is used when the product is large and cannot be moved due to its size. All the resources for producing the product—including equipment, labor, tools, and all other resources—have to be brought to the site where the product is located. Section Ref: Types of Layouts Subsection: Fixed-Position Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
30. Shipbuilding is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Answer: d Solution: A fixed-position layout is used when the product is large and cannot be moved due to its size. All the resources for producing the product—including equipment, labor, tools, and all other resources—have to be brought to the site where the product is located. Examples of fixedposition layouts include building construction, dam or bridge construction, shipbuilding, or large aircraft manufacture. Section Ref: Types of Layouts Subsection: Fixed-Position Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
31. Building construction is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Answer: d Solution: A fixed-position layout is used when the product is large and cannot be moved due to its size. All the resources for producing the product—including equipment, labor, tools, and all other resources—have to be brought to the site where the product is located. Examples of fixedposition layouts include building construction, dam or bridge construction, shipbuilding, or large aircraft manufacture. Section Ref: Types of Layouts Subsection: Fixed-Position Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
32. Bridge construction is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Answer: d Solution: A fixed-position layout is used when the product is large and cannot be moved due to its size. All the resources for producing the product—including equipment, labor, tools, and all other resources—have to be brought to the site where the product is located. Examples of fixedposition layouts include building construction, dam or bridge construction, shipbuilding, or large aircraft manufacture. Section Ref: Types of Layouts Subsection: Fixed-Position Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
33. Which of the following is LEAST likely a fixed-position layout? a) farm b) shipbuilding c) bridge construction d) building construction e) car wash Answer: e Solution: A fixed-position layout is used when the product is large and cannot be moved due to its size. All the resources for producing the product—including equipment, labor, tools, and all other resources—have to be brought to the site where the product is located. Examples of fixedposition layouts include building construction, dam or bridge construction, shipbuilding, or large aircraft manufacture. Section Ref: Types of Layouts Subsection: Fixed-Position Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
34. The first step in designing a layout is _____________. a) identifying the facility b) gathering information c) selecting the correct layout software package d) developing a REL chart e) developing a from–to matrix Answer: b Solution: The first step is to collect information that will be used to design an initial layout. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
35. What are the two primary tools used to identify closeness measures during the layout design process? a) REL chart and from–to matrix b) MRP chart and from–to matrix c) x-bar chart and from–to matrix d) MRP chart and x-bar chart e) x-bar chart and REL chart Answer: a Solution: There are two simple tools that can be used for this purpose: a from–to matrix and a REL chart. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
36. According to the textbook, the available space of a facility is best seen by using a(n) ___________. a) photograph b) detailed floor plan c) architecture software package d) block plan e) overview plan Answer: d Solution: The available space of a facility is best seen by using a block plan, a schematic that shows the placement of departments in a facility. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
37. Which layout design tool is primarily based on managers‘ opinions? a) x-bar chart b) REL chart c) MRP chart d) from–to matrix e) Gantt chart Answer: b Solution: A REL chart is a tool that reflects opinions of managers with regard to the importance of having any two departments close together. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
38. What is typically used to quantitatively compare the effectiveness of layouts? a) trial and error b) process control charts c) load–distance model d) mean absolute deviation (MAD) e) exponential smoothing Answer: c Solution: We need a way to measure its effectiveness quantitatively. We can do this by using the load–distance model that was discussed in Chapter 9. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
39. What do we call the shortest distance between two locations using north–south and east–west movements? a) Euclidean distance b) triangulated distance c) rectilinear distance d) Socratic distance e) latitude-longitude (LL) distance Answer: c Solution: Remember that the rectilinear distance between any two locations is the shortest distance using only north–south and east–west movements. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
40. Using a relationship chart to develop acceptable layouts is part of a classic layout technique called ______________. a) real layout planning b) CHART c) systematic from-to planning d) systematic layout planning e) SRP Answer: d Solution: Using a relationship chart to develop acceptable layouts is part of a classic layout technique called systematic layout planning (SLP). Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
41. Which type of movement is MOST likely rectilinear? a) driving cross-country on an interstate highway b) flying an airplane c) climbing a mountain d) driving in New York City e) riding a roller coaster Answer: d Solution: Because the size of each block is the same, we do not need to measure the distance in feet. Rather, to keep it simple we can use one block as a measure of distance. Blocks in NYC are the same size. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
42. How many different layout solutions are possible with 7 departments? a) 7 b) 720 c) 28 d) 7000 e) 5040 Answer: e Solution: 7! = 7x6x5x4x3x2x1 = 5040 Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
43. How many different layout solutions are possible with 7 departments? a) 7! b) 6! c) 7! 1 d) (1!)(2!)(3!)(4!)(5!)(6!)(7!) e) 8! Answer: a Solution: A block plan for x departments has x! possible solutions. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
44. What are two of the most popular facility layout software packages? a) CONWIP and CRAFT b) ALDEP and CRAFT c) CONWIP and MRP d) ALDEP and MRP e) ALDEP and CONWIP Answer: b Solution: Two of the most popular first-generation programs are ALDEP (automated layout design program) and CRAFT (computerized relative allocation of facilities technique). Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
45. Which popular facility layout software package works from an REL chart? a) CONWIP b) MRP c) ALDEP d) LAYOUT e) CRAFT Answer: c Solution: ALDEP works from a REL chart. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
46. Which popular facility layout software package uses a from–to matrix? a) CONWIP b) MRP c) ALDEP d) LAYOUT e) CRAFT Answer: e Solution: CRAFT uses a from–to matrix and an existing layout as a starting point. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
47. When developing a detailed layout, what tools would be used? a) MS Excel b) MULTISTORY c) CRAFT++ d) 3-D models and CAD software e) architecture software Answer: d Solution: Operations managers can use a variety of tools in this final stage; they include drawings, three-dimensional models, and computer graphics software. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
48. Warehouse layouts have the key characteristics of process layouts EXCEPT a) number of loads is not a design consideration. b) location isn‘t a major consideration. c) there is movement between the storage areas. d) from trips are the only consideration. e) there is no movement between the storage areas. Answer: e Solution: Typically, there is no movement between the storage areas themselves; the primary function of a warehouse is to provide storage space, so the only movement is inbound or outbound. Section Ref: Special Cases of Process Layout Subsection: Warehouse Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe the two special cases of process layout. AACSB: Knowledge
49. For the general warehouse layout problem, which department should be located furthest from the dock? a) the one with the least number of trips needed b) the one with the most area needed c) the one with the highest ratio of trips needed to area needed d) the one with the smallest ratio of area needed to trips needed e) the one with the smallest ratio of trips needed to area needed Answer: a Solution: Since the movements are only between the departments and the dock, we simply locate the departments with the highest number of trips closest to the dock. The department with the lowest number is located farthest from the dock. Section Ref: Special Cases of Process Layout Subsection: Warehouse Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe the two special cases of process layout. AACSB: Knowledge
50. Approximately how much of the U.S. workforce works in an office environment? a) 10% b) 25% c) 50% d) 75% e) 90% Answer: c Solution: Almost half of the workforce in the United States works in an office environment, Section Ref: Special Cases of Process Layout Subsection: Office Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Describe the two special cases of process layout. AACSB: Knowledge
51. Studies mentioned in the textbook have shown that workers that are in close proximity to each other are more likely to ______________________. a) catch a cold b) date each other c) get on each other‘s nerves d) have greater understanding, tolerance, and trust for one another e) distrust one another Answer: d Solution: Studies have shown that workers who are in close proximity to one another have greater understanding, tolerance, and trust for one another. Section Ref: Special Cases of Process Layout Subsection: Office Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe the two special cases of process layout. AACSB: Knowledge
52. On which key trade-off concerning office layouts does the textbook focus? a) cost vs. comfort b) pictures vs. windows c) cubes vs. doors d) network printers vs. individual printers e) proximity vs. privacy Answer: e Solution: One of the key trade-offs that has to be made in an office layout is between proximity and privacy. Section Ref: Special Cases of Process Layout Subsection: Office Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Describe the two special cases of process layout. AACSB: Knowledge
53. One important consideration in designing any layout is ____________. a) consistency b) flexibility c) equitability d) uniformity e) tenure Answer: b Solution: One important consideration in designing any layout is flexibility. Section Ref: Special Cases of Process Layout Subsection: Office Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe the two special cases of process layout. AACSB: Knowledge
54. What is the term for the number of units we wish to produce over a specific period of time? a) job flow b) output rate c) cycle time d) output flow e) flow time Answer: b Solution: The number of units of product we wish to produce over a period of time is called the output rate. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 100 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
55. What is the term for the maximum amount of time each workstation has to complete its assigned task? a) output rate b) task time c) station time d) cycle time e) output time Answer: d Solution: Cycle time is the maximum amount of time each workstation has to complete its assigned tasks. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
56. What term tells us how frequently a product is completed? a) output rate b) task time c) station time d) cycle time e) output time Answer: d Solution: Cycle time also tells us how frequently a product is completed. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
57. Which of the following statements is NOT true? a) The bottleneck determines the lowest possible cycle time. b) It might be possible to split a bottleneck task into two smaller non-bottleneck tasks. c) A production process always has at least one bottleneck. d) A bottleneck task is the longest task in a process. e) A perfectly balanced line has no bottlenecks. Answer: e Solution: There will always be a bottleneck. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
58. What is the longest task in a process called? a) obstruction b) bottleneck c) blockade d) hindrance e) constrainer Answer: b Solution: The longest task acts as a constraint. This is called the bottleneck. The bottleneck constrains the production process and determines the lowest or minimum cycle time. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
59. The bottleneck determines ________________. a) which station has the minimum cycle time b) the minimum cycle time of the whole process c) the maximum cycle time of the whole process d) the point at which a product layout converts to a process layout e) which station has the maximum output rate Answer: b Solution: The longest task acts as a constraint. This is called the bottleneck. The bottleneck constrains the production process and determines the lowest or minimum cycle time. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
60. Assigning tasks to workstations is known as __________________. a) offsetting the line b) harmonizing the line c) stabilizing the line d) balancing the line e) counterbalancing the line Answer: d Solution: Line balancing is the process of assigning tasks to workstations in a product layout in order to achieve a desired output and balance the workload among stations. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
61. The theoretical minimum number of stations is the number of workstations that would be needed if a) all stations were balanced. b) all task times were the same. c) the line was 100% efficient. d) every task had a separate station. e) the company had no absenteeism. Answer: c Solution: The theoretical minimum number of stations is the number of workstations that would be needed if the line was 100 percent efficient. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
62. When line balancing, which rule does the textbook suggest for assigning tasks to workstations? a) shortest task time b) first come first served c) fewest predecessors d) longest task time e) most successors Answer: d Solution: We will use the longest task time rule, which basically states that when selecting from a group of tasks we should pick the task that takes the longest time. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
63. Which production line shapes are particularly useful for the sharing of resources? a) S and U b) L and O c) O and S d) L and S e) O and U Answer: e Solution: Shapes such as U and O can store frequently used resources in the center, where they are accessible to everyone. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
64. What is the amount by which the efficiency of a production line falls short of 100%? a) balance delay b) efficiency deficiency c) efficiency delay d) balance shortfall e) percentage deficiency Answer: a Solution: Balance delay (%) = 100 − efficiency Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
65. What is the term for a system in which the product being worked on is physically attached to the line and automatically moved to the next station when the cycle time has elapsed? a) cyclical line b) paced line c) autoline d) continuous line e) constrained line Answer: b Solution: A self-paced line is a system in which the product being worked on is physically attached to the line and automatically moved to the next station when the cycle time has elapsed. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
66. Group technology creates groupings of products primarily based on what? a) product cost b) raw materials requirements c) similar processing requirements d) operating characteristics e) market segmentation Answer: c Solution: Group technology is the process of creating groupings of products based on similar processing requirements. Section Ref: Group Technology (Cell) Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 6: Explain the meaning of group technology (cell) layouts. AACSB: Knowledge
67. The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very back (furthest away from the dock)? Item Trips Area Needed (blocks) A 300 60 B 220 3 C 72 1 D 60 10 E 24 3 a) A b) B c) C d) D e) E Answer: a Solution: (Trip ratio = trips/area needed: A = 300/60 = 5; B= 220/3 = 73.3; C = 72/1 = 72; D = 60/10 = 6; E = 24/3 = 8: A lowest trip ratio store furthest from dock) Section Ref: Special Cases of Process Layout Subsection: Warehouse Layouts Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 4: Describe the two special cases of process layout. AACSB: Analytic
68. Consider a production line that has a station with two machines, and each unit produced at the station needs to be processed by both of the machines. (A unit cannot be worked on by both machines simultaneously.) Each machine has a production capacity of 4 units per hour. What is the lowest possible cycle time of the station? a) 4 minutes per unit b) 8 minutes per unit c) 7.5 minutes per unit d) 30 minutes per unit e) 15 minutes per unit Answer: e Solution: 60 min/hr / 4 units/hr = 15 min per unit Section Ref: Designing Product Layouts Subsection: N/A Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Analytic
69. Which of the following is true? a) A line with a lower cycle time has greater output than one with a higher cycle time. b) A line with a higher cycle time has greater output than one with a lower cycle time. c) Cycle time is unrelated to output rate. d) A line must be arranged such that capacity grows with each successive station. e) Cycle time cannot be greater than the task time of the bottleneck. Answer: a Solution: Output = available time divided by cycle time, so a smaller cycle time has greater output. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Analytic
70. The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very back (furthest away from the dock)? Item Trips Area Needed (blocks) ―Star Trek‖ videos 2000 5 Ballet videos 5 1 Tom Cruise videos 200 2 ―The Simpsons‖ videos 1000 2 Operations Management videos 500 1 a) ―Star Trek‖ videos b) Ballet videos c) Tom Cruise videos d) ―The Simpsons‖ videos e) operations management videos
Answer: b Solution: Trips / Area Needed; lowest number should be furthest away from dock. ―Star Trek‖ videos 5 2000 400 Ballet videos 1 5 5 Tom Cruise videos 200 2 100 ―The Simpsons‖ videos 1000 2 500 Operations Management videos 500 1 500 Section Ref: Special Cases of Process Layout Subsection: Warehouse Layouts Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 4: Describe the two special cases of process layout. AACSB: Analytic
71. The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very front (closest to the dock)? Item Trips Area Needed (blocks) A 300 60 B 220 3 C 74 1 D 60 10 E 24 3 a) A b) B c) C d) D e) E
Answer: c Solution: Trips / Area Needed = highest number should be closest to dock Area Needed Item Trips (blocks) A 300 60 5 B 220 3 73.33333 C 74 1 74 D 60 10 6 E 24 3 8 Section Ref: Special Cases of Process Layout Subsection: Warehouse Layouts Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 4: Describe the two special cases of process layout. AACSB: Analytic
72. The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very front (closest to the dock)? Item Trips Area Needed (blocks) ―Star Trek‖ videos 2000 5 Ballet videos 5 1 Tom Cruise videos 200 2 ―The Simpsons‖ videos 1000 2 Operations Management videos 500 3 a) ―Star Trek‖ videos b) Ballet videos c) Tom Cruise videos d) ―The Simpsons‖ videos e) operations management videos
Answer: d Solution: Highest number should be closest to the dock. ―Star Trek‖ videos 5 2000 400 Ballet videos 1 5 5 Tom Cruise videos 200 2 100 ―The Simpsons‖ videos 1000 2 500 Operations Management 500 3 videos 166.6667 Section Ref: Special Cases of Process Layout Subsection: Warehouse Layouts Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 4: Describe the two special cases of process layout. AACSB: Analytic
73. Which of the following production line shapes is least likely to be found in a factory? a) N b) S c) U d) O e) L Answer: a Solution: The actual shape of the line can be an S shape, a U shape, an O, or an L. N isn‘t an option discussed in the text. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
74. What is Walmart‘s primary consideration for its store layout decisions regarding the number and size of aisles in its stores? a) predictability b) comfort c) ease of navigation through the store d) customer exposure to merchandise e) inventory control Answer: d Solution: Walmart layouts also provide for maximum use of floor space. For example, the layouts are designed with multiple narrow aisles as opposed to a smaller number of wide aisles. The reason is to maximize customer exposure to merchandise. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge 75. The company‘s __________ dictates the type of layout the company will have. a) location b) process c) union agreements d) HR policies e) market share Answer: b Solution: The company‘s process dictates the type of layout the company will have. Section Ref: Facility Layout Within OM: How it all Fits Together Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Explain the meaning of group technology (cell) layouts. AACSB: Knowledge
76. When designing a product layout, which is the step whose goal is to design a product layout that can produce the desired number of units with the least amount of work centers and a balance of workload. a) Compute efficiency, idle time, and balance delay. b) Determine cycle time. c) Determine output rate.. d) Assign tasks to workstations e) Identify tasks and immediate predecessors. Answer: c Solution: The ―determine output rate‖ step of line balancing determines how many units of product we wish to produce over a period of time, called the output rate. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
77. Which of these is the BEST example of an intermittent processing system? a) automotive repair shop b) automotive assembly line c) bridge construction d) newspaper printing operation Answer: a Solution: Intermittent processing systems are seen in organizations that produce a large variety of different products, each in low volume. An example is a typical job shop, so the correct answer is automotive repair shop. Difficulty Level: Medium Task on Time: 1.00 minutes Section: What Is Layout Planning? Subsection: N/A Blooms Taxonomy: Application AACSB: Analytic Learning Objective: LO 10.1 Define layout planning and explain its importance.
78. Tim mastered the chapter material on product layouts but wasn‘t able to grasp the concept of a process layout. When it came time to decide on a layout for the new hospital, he decided to go with a product layout despite all advice to the contrary. Which of the following unfortunate circumstances will result from his decision? a) Most of the expensive, specialty items, like the MRI machine and cardiac catheterization laboratory will be utilized far less frequently than they would in a process layout. b) The patients will be routed through a number of departments that they do not need to spend any time in. c) The patients will be grouped by illness and routed to a specialized cluster of services that cater to their condition. d) This configuration will require more square footage than the more typical process layout for a hospital. Answer: b Solution: Hospital patients are routed to departments based on treatment needs, so a process layout is superior. Using a product layout will require more patient transportation through unnecessary departments. Difficulty Level: Medium Task on Time: 2.00 minutes Section: Types of Layouts Subsection: Process Layouts Blooms Taxonomy: Application AACSB: Analytic Learning Objective: LO 10.2 Identify and describe different types of layouts.
79. Four departments must be assigned to a hallway with adjacent offices on one side of the hall. Which statement regarding this from–to matrix is correct? Department A B C D
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a) There are more trips from department B to department A than there are from department C to department B. b) There is a mistake in this matrix because the total number of trips is not an even number. C and B should be at opposite ends of the hall. c) If this from–to matrix were converted to a REL chart, departments A and B would have a rating code of A.
Answer: c Solution: Calculate load–distance among departments. BC combination has only 15 trips while AB and CD have 57 and 43 respectively, makings AB and CD combinations necessary adjacent assignments. The AD pairing has 25 trips, making it a better candidate for a central pair. The room sequence should be BADC. Difficulty Level: Medium Task on Time: 3.00 minutes Section: Designing Process Layouts Subsection: N/A Blooms Taxonomy: Analysis AACSB: Analytic Learning Objective: LO 10.3 Describe the steps involved in designing a process layout.
80. Essen Ell Toys contracts with a warehouse company in the Midwest to prepare for the holiday shopping season. Based on market research, they forecast a daily order for each of the top ten toys as shown in the table. The warehouse they intend to use has fourteen bays on each side of a main aisle with a loading dock at one end as shown in the figure. Which of these assignments is optimal? Trips Area Toy 47 2 Happy Fun Ball 159 1 Flame Hat 84 4 Neck Tornado 83 4 Bag O' Glass 165 2 Plane Lasers 93 3 Lil Poundcake My Little 10 3 Stepchildren 177 3 Lawn Darts 93 2 Action Cats 38 4 Wells for Boys 1
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Dock
a) Wells for Boys in bays 12, 13, 14, and 15 b) Neck Tornado in bays 10, 11, 12, and 13 c) Action Cats in bays 5 and 6 d) Lil Poundcake in bays 9, 10, and 11
Answer: d Solution: Compute trips per area for all toys; Lil Poundcake trips/area = 93/3 = 31, which ranks fifth. Ranks 1–4 use bays 1–8, leaving bays 9–11 for this toy. Difficulty Level: Medium Task on Time: 10.00 minutes Section: Special Cases of Process Layout Subsection: Warehouse Layout Blooms Taxonomy: Analysis AACSB: Analytic Learning Objective: LO 10.4 Describe the two special cases of process layout.
81. Two partners, both named Steve, cleared some space in their garage to assemble their latest invention. They have identified ten tasks and their durations (in seconds) that must be completed in the order given in the table. They believe that they can create demand for 320 units per day, so they would like to set up a production line to produce 40 units per hour in an eight-hour day. What is the balance delay of the most efficient line balance possible in this situation? Task Task Time Predecessor(s) A 50 — B 30 A C 20 A D 15 A E 60 B, C F 45 C, D G 20 E H 25 G J 35 F K 30 H, J a) 8.33% b) 12.67% c) 17.5% d) 22.35%
Answer: a
t Balance delay 100 efficiency 100 100 NC 330 Balance delay 100 100 8.33% 4 90 Solution: Difficulty Level: Medium Task on Time: 7.00 minutes Section: Designing Product Layouts Subsection: N/A Blooms Taxonomy: Analysis AACSB: Analytic Learning Objective: LO 10.5 Describe the steps involved in designing a product layout.
82. Which of the following is the best example of applying group technology to the service process of undergraduate student advisement? a) One advisor works with students with last names that begin with A–D, another advisor works with students with last names that begin with E–J, another advisor works with students with last names beginning K–N. b) One advisor works only with freshmen business majors, another advisor works only with sophomore business majors, and another advisor works only with junior business majors. c) One advisor works only with business students with GPAs of 3.0 or higher, one advisor works only with business students with GPAs of 2.0 up to 3.0, and another advisor works only with business students with GPAs of 1.0 up to 2.0. d) One advisor works only with the accounting majors, another advisor works only with the marketing majors, and another advisor works only with the supply chain majors. Answer: d Solution: Group technology is the process of creating groupings of products based on similar processing requirements. Each major has required courses that may be offered infrequently, so an advisor with expertise in that area can best advise students regarding timing and sequence of course offerings. Difficulty Level: Medium Task on Time: 2.00 minutes Section: Group Technology (Cell) Layouts Subsection: N/A Blooms Taxonomy: Application AACSB: Analytic Learning Objective: LO 10.6 Explain the meaning of group technology (cell) layouts.
True/False
83. An assembly line is an example of an intermittent processing system. Answer: False Solution: Repetitive processing systems are used to produce a small variety of standardized products in high volume. An example is an assembly line. Section Ref: What is Layout Planning? Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Define layout planning and explain its importance. AACSB: Analytic
84. A process layout is seen in companies with continuous processing systems. Answer: False Solution: Process layouts are layouts that group resources based on similar processes or functions. This type of layout is seen in companies with intermittent processing systems. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
85. A hospital is an example of process layout. Answer: True Solution: Process layouts are very common. A hospital is an example of process layout. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Analytic
86. As compared to a process layout, a product layout generally requires less-skilled workers. Answer: True Solution: Process layouts typically rely on higher-skilled workers who can perform different functions. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
87. In general, scheduling resources is less challenging under a process layout than it would be under a product layout. Answer: False Solution: Scheduling resources is more challenging in a process layout. Scheduling equipment and machines is particularly important in this environment. If it is not done properly, long waiting lines can form in front of some work centers while others remain idle. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
88. At Walmart, to maximize customer comfort and enjoyment, layouts are designed with a limited number of aisles, each of which is very wide, rather than with multiple but narrow aisles. Answer: False Solution: Walmart layouts also provide for maximum use of floor space. For example, the layouts are designed with multiple narrow aisles as opposed to a smaller number of wide aisles. The reason is to maximize customer exposure to merchandise. Section Ref: Types of Layouts Subsection: Process Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
89. In product layouts, the material moves continuously and uniformly through a series of workstations until the product is completed. Answer: True Solution: In product layouts the material moves continuously and uniformly through a series of workstations until the product is completed. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
90. Load-distance calculations are very concerned with the direction of the move. Answer: False Solution: Using a load-distance model uses the ld score to compare relative locations. Section Ref: Designing Process Layouts Subsection: Step 2: Develop a Block Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
91. Maximizing worker proximity minimizes privacy issues. Answer: False Solution: One of the key trade-offs that has to be made in an office layout is between proximity and privacy. Increasing proximity decreases privacy. Section Ref: Special Cases of Process Layout Subsection: Office Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe the two special cases of process layout. AACSB: Knowledge
92. In a fixed position layout, resources are fixed in various locations and the products move from one resource location to the next. Answer: False Solution: In a fixed-position layout the product cannot be moved due to its size and all the resources have to come to the production site. Section Ref: Types of Layouts Subsection: Fixed-Position Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
93. A predecessor can be worked in parallel with a successor. Answer: False Solution: A predecessor must be performed before a successor. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
94. Managers use a from–to matrix for facility layout design to identify both the number of trips and the direction of those trips. Answer: False Solution: A from–to matrix is a table that shows the number of trips or units of product moved between any pair of departments regardless of direction. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
95. Typically, an REL chart is more subjective than a from–to matrix. Answer: True Solution: A REL chart is a tool that reflects opinions of managers with regard to the importance of having any two departments close together. It is a good tool to use when we need to consider the judgments of managers in deciding where to locate departments. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
96. A REL chart can contain ratings of both desirability of closeness and undesirability of closeness. Answer: True Solution: A REL chart is a tool that reflects opinions of managers with regard to the importance of having any two departments close together. It is a good tool to use when we need to consider the judgments of managers in deciding where to locate departments. Ratings range from A (adjacency is absolutely necessary) to X (adjacency is undesirable). Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
97. The shortest distance between two locations is called rectilinear distance. Answer: False Solution: Remember that the rectilinear distance between any two locations is the shortest distance using only north–south and east–west movements. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
98. When possible, managers should purchase and use CRAFT because it gives an optimal solution to the facility layout problem. Answer: False Solution: ALDEP and CRAFT are called decision-support tools because they use different heuristics to develop a solution. They do not give an optimal solution, and they consider only one criterion at a time in designing a layout. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
99. A heuristic solution always provides the best possible answer. Answer: False Solution: it is important to understand the logic behind trial and error, because decision-support tools are based on heuristics that use logic similar to that used in trial and error. To understand how the decision-support tools work, you need to understand the trial and-error process which produces good, but not necessarily optimal, answers. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task:1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
100. For the general warehouse layout problem, the department with the highest ratio of trips to areas needed should be located closest to the dock. Answer: True Solution: Assign the department with the highest ratio closest to the dock. Section Ref: Special Cases of Process Layout Subsection: Warehouse Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe the two special cases of process layout. AACSB: Knowledge
101. The cycle time of a production line is based on the workstation with the highest potential output rate. Answer: False Solution: The bottleneck is important because it provides the lowest limit on the cycle time. Cycle time is related to the amount of output; therefore, this minimum cycle time determines the maximum output that can be achieved given current tasks. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge 102. If a process has a ―faster‖ cycle time, then its cycle time has decreased. Answer: True Solution: If a cycle time is faster its numerical value would be lower. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
103. As the cycle time of a process decreases, its output also decreases. Answer: False Solution: Output = available time/cycle time, so a decrease in process cycle time increases process output. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
104. The theoretical minimum number of stations results in the production of daily requirements when no inefficiency exists. Answer: True Solution: The theoretical minimum number of stations is the number of workstations that would be needed if the line was 100 percent efficient. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
105. Group technology has the advantage of bringing the efficiencies of a process layout to a product layout environment. Answer: False Solution: Group technology has the advantage of bringing the efficiencies of a product layout to a process layout environment. Section Ref: Group Technology (Cell) Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Explain the meaning of group technology (cell) layouts. AACSB: Knowledge
106. A product layout can look like an S-curve. Answer: True Solution: The actual shape of a product layout can be an S shape, a U shape, an O, or an L. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
107. Marketing is not highly affected by layout planning. Answer: False Solution: Marketing is highly affected by layout planning, particularly in environments where customers and clients come to the site. Section Ref: Facility Layout within OM: How it All Fits Together Subsection: Facility Layout Across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Explain the meaning of group technology (cell) layouts. AACSB: Knowledge
Short Answer
108. What are the two broad categories of operating systems? Answer: intermittent processing systems and continuous processing systems Solution: There are two broad categories of operations: intermittent and repetitive processing systems. Section Ref: What is Layout Planning? Subsection: N/A Level: Easy Time on Task: 1.0 minutes Bloom‘s: Knowledge Learning Objective 1: Define layout planning and explain its importance. AACSB: Knowledge
109. What are the four basic layout types? Answer: process, product, fixed position, and hybrid Solution: There are four basic layout types: process, product, hybrid, and fixed position. Section Ref: Types of Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
110. How does material move in a product layout? Answer: continuously and uniformly through a series of workstations until the product is completed Solution: Examples of product layouts are seen on assembly lines, in cafeterias, or even at a car wash. In product layouts the material moves continuously and uniformly through a series of workstations until the product is completed. Section Ref: Types of Layouts Subsection: Product Layouts Level: Easy Time on Task:1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
111. What is another name for cell layout? Answer: group technology Solution: One of the most popular types of hybrid layouts is group technology (GT) or cell layouts. Section Ref: Group Technology (Cell) Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
112. What is the term for a layout in which the product cannot be moved due to its size, and all the resources have to come to the production site? Answer: fixed-position layout Solution: A fixed-position layout is used when the product is large and cannot be moved due to its size. All the resources for producing the product—including equipment, labor, tools, and all other resources—have to be brought to the site where the product is located. Section Ref: Types of Layouts Subsection: Fixed-Position Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Identify and describe different types of layouts. AACSB: Knowledge
113. What are the three steps in designing process layouts? Answer: (1) gather information, (2) develop a block plan or schematic of the layout, (3) develop a detailed layout Solution: There are three steps in designing process layouts: Step 1) Gather information; Step 2) Develop a block plan or schematic of the layout; Step 3) Develop a detailed layout. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
114. What is the name of a table that gives the number of trips or units of product moved between any pair of departments? Answer: from–to matrix Solution: A from–to matrix is a table that shows the number of trips or units of product moved between any pair of departments. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
115. What is the name of a table that reflects opinions of managers with regard to the importance of having any two departments close together? Answer: REL chart Solution: A REL chart is a tool that reflects opinions of managers with regard to the importance of having any two departments close together. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
116. What do we call the maximum amount of time that each workstation has to complete its assigned task? Answer: cycle time Solution: Cycle time is the maximum amount of time each workstation has to complete its assigned tasks. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
117. Compare the minimum versus maximum cycle time of a process. Answer: The minimum cycle time is equal to the bottleneck, or the longest task. The maximum cycle time is equal to the sum of the task times in the whole process. The minimum and maximum cycle times are important as they establish the range of output for the production line. Solution: We learned that the minimum cycle time is equal to the bottleneck, or longest task. The maximum cycle time is equal to the sum of the task times. The minimum and maximum cycle times are important because they establish the range of output for the production line. Section Ref: Designing Product Layouts Subsection: N/A Level: Medium Time on Task: 2.00 minutes Bloom‘s: Analysis Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Analytic
118. Describe what group technology is. Answer: Group technology is the process of creating groupings of products based on similar processing requirements. Solution: Group technology is the process of creating groupings of products based on similar processing requirements. Section Ref: Group Technology (Cell) Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 6: Explain the meaning of group technology (cell) layouts. AACSB: Knowledge
119. Discuss why facility layout is important to a supply chain. Answer: Arranging layouts for efficient delivery of materials to move directly to the production line is important. Arranging the facility layout to be linked to inbound and outbound shipments can greatly enhance the smooth flow of products throughout the supply chain. Solution: Entities that make up a supply chain must be linked efficiently, with product flowing smoothly throughout the chain. This includes efficient shipments and deliveries between entities. Facility layout plays an important role in making sure this takes place. Arranging layouts for efficient delivery of materials to move directly to the production line is important. In locating the shipping and receiving docks, consideration must be given to the layout of the production facility and the shape of the production line to enable smooth flow between inbound and outbound shipments and the production facility. Similarly, in the retail environment delivery of products must be done in a manner that enhances sales. Section Ref: The Supply Chain Link Subsection: Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 6: Explain the meaning of group technology (cell) layouts. AACSB: Knowledge
120. Explain the difference between paced and unpaced lines. Answer: Paced lines use an automatic enforced cycle time. Unpaced lines have more autonomy. Solution: On paced lines the product being worked on is physically attached to the line and automatically moved from one station to the next when cycle time elapses. The amount of time workers have to perform their tasks is identical to cycle time. Unpaced lines, on the other hand, allow the product to be physically removed from the line to be worked on. Workers can then vary the amount of time they spend working on the product. And the product may be removed off the assembly line. Section Ref: Designing Product Layouts Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Analysis Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Analytic
Problems
121. Consider the following layout of departments. A B C D F E Compute the ld score given the following from–to matrix. Trips Between Departments Department A B C D E A 12 45 3 B 16 72 C 30 D E F
F 14 5 20 10
29 42 90 4 12
Answer: 743 Solution: 12x1 + 45x2 + 3x1 + 14x3 + 29x2 + 16x1 + 72x2 + 5x2 + 42x1 + 30x3 + 20x1 + 90x2 + 10x2 + 4x1 + 12x1 = 743 Section Ref: Designing Process Layouts Subsection: N/A Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Reflective Thinking
122. Consider the following two layouts of departments. Layout 1 Layout 2 D E C C D B A B A E Compute the ld score for each and choose the best, given the following from–to matrix. Trips between Departments Department A B C D E A 18 8 3 4 B 16 22 5 C 50 20 D 90 E
Answer: layout 1 = 344, layout 2 = 316, layout 2 is better Solution: Layout 1 (on the left) 18x1 + 8x3 + 3x1 + 4x2 + 16x2 + 22x2 + 5x1 + 50x2 +20x 1 + 90x 1 = 344 Layout 2 (on the right) 18x3 + 8x1 + 3x2 + 4x1 + 16x2 + 22x1 + 5x2 + 50x1 + 20x2 + 90x1 = 316 Layout 2 is vastly superior. Section Ref: Designing Process Layouts Subsection: N/A Level: Medium Time on Task: 7.00 minutes Bloom‘s: Application Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Reflective Thinking
123. A firm has four departments to locate in the following space.
Department A has a daily average of 20, 10, and 60 trips to Departments B, C, and D, respectively; Department B has a daily average of 25 and 30 trips to Departments C and D, respectively; and Department C has a daily average of 50 trips to Department D. While there are 24 different layout combinations, only three are effectively different (in terms of distances between departments). Calculate the ld score for the three different combinations and choose the best. Answer: A diagonal from B = 265, A diagonal from C = 235, A diagonal from D = 280, best layout is A diagonal from C Solution: A diagonal from B = 20x2 + 10x1 + 60x1 + 25x1 + 30x1 + 50x2 = 265. A diagonal from C = 20x1 + 10x2 + 60x1 + 25x1 + 30x2 + 50x1 = 235. A diagonal from D = 20x1 + 10x1 + 60x2 + 25x2 + 30x1 + 50x1 = 280, Best layout is A diagonal from C. Section Ref: Designing Process Layouts Subsection: N/A Level: Medium Time on Task: 7.00 minutes Bloom‘s: Application Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Reflective Thinking
124. The items listed below are stored in a one-dock warehouse. Rank them in order from closest to the dock to furthest away. Item Trips Area Needed (blocks) A 200 5 B 100 4 C 78 3 D 60 2 E 35 1 Answer: A-E-D-C-B Solution: Item
Trips
A
200
Area Needed (blocks) 5
B
100
4
C
78
3
D
60
2
E
35
1
Trips/Area
40 25 26 30 35 From highest to lowest trips/area: A, E, D, C, B Section Ref: Special Cases of Process Layout Subsection: Warehouse Layouts Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 4: Describe the two special cases of process layout. AACSB: Reflective Thinking
125. The items listed below are stored in a one-dock warehouse. Rank them in order from closest to the dock to furthest away. Item Trips Area Needed (blocks) Golf balls 300 1 Basketballs 420 3 Ballet shoes 10 1 Aerobics tapes 20 1 Volleyballs 360 3 Answer: golf balls-basketballs-volleyballs-aerobics tapes-ballet shoes Solution: Item Trips Area Needed (blocks) Golf balls 300 1 300
Trips/Area
Basketballs 420 3 140 Ballet shoes 10 1 10 Aerobics tapes 20 1 20 Volleyballs 360 3 120 From highest to lowest trips per area: Golf balls, Basketballs, Volleyballs, Aerobics tapes, Ballet shoes Section Ref: Special Cases of Process Layout Subsection: Warehouse Layouts Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 4: Describe the two special cases of process layout. AACSB: Reflective Thinking
126. If a production line produces 800 units per 8-hour workday, what is the cycle time in minutes? Answer: 0.6 minutes Solution: (8 hrs/day x 60 minutes/hr) / 800 units/day = 0.6 minutes/unit Section Ref: Designing Product Layouts Subsection: N/A Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Reflective Thinking
127. Suppose that assembly of a product involves three different tasks taking 10 seconds, 20 seconds, and 30 seconds, respectively. What is the maximum possible output per hour of the system? Answer: 120 Solution: 3600 seconds/hour / 30 seconds/unit = 120 units/hour. Minimum cycle time is the maximum task time assuming one worker per station. Section Ref: Designing Product Layouts Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 5: Describe the steps involved in designing a product layout.
AACSB: Reflective Thinking
128. Maxine‘s cookie factory‘s bottleneck is the oven. It takes 45 seconds to cook a batch of 144 cookies. What is the maximum number of cookies that Maxine can produce every hour? Answer: 11,520 Solution: 3600 seconds/hour / 45 seconds/batch = 80 batches/hour 80 batches/hour x 144 cookies/batch = 11,520 cookies/hour Section Ref: Designing Product Layouts Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Reflective Thinking
129. Maxine has identified the following process times and desired output. What is the theoretical minimum number of work stations? mix dough 90 sec desired output 30 batches/hour shape cookie 50 sec cook 45 sec cool 75 sec Answer: 3 Solution: TM = (90 + 50 + 45 + 75 seconds)/120 seconds = 2.1666 or 3 stations Section Ref: Designing Product Layouts Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Reflective Thinking
130. Suppose that assembly of a product involves four different tasks taking 40 seconds, 20 seconds, 30 seconds, and 80 seconds, respectively. What is the theoretical minimum number of stations if the desired output is 45 units per hour? Answer: 3 Solution: TM = (40 + 20 + 30 + 80)/80 = 2.125 or 3 stations Section Ref: Designing Product Layouts Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Reflective Thinking
131. Suppose that an assembly line consists of two stations. Station 1 involves three tasks, taking 40 seconds, 20 seconds, and 30 seconds, respectively. Station 2 involves one task that takes 80 seconds. Compute the efficiency and balance delay of the assembly line. Answer: efficiency = 94.4%, balance delay = 5.6% Solution: Efficiency = (40 + 20 + 30 + 80) / (2x90) = 94.444% Balance delay = 100% – 94.4444% = 5.55556% Section Ref: Designing Product Layouts Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Reflective Thinking
132. The following table provides tasks on an assembly line, along with their predecessors and task times. Immediate Task Predecessor Time (seconds) A None 45 B None 30 C A, B 48 D B 20 E C 10 F D, E 20 G E 40 If desired output is 75 units per hour, compute (a) the associated cycle time, (b) the assignment of tasks to stations using the longest task time rule, and (c) the efficiency of your solution.
Answer: (a) 48 seconds (b) Workstation
Eligible 1 2
Selected A, B A B
3 4
C, D D, E E
C D
F, G G
G
Time Idle 45 B
3 30
18 48 20 E
0 28 10
18 5 6
F 28 (c) 73.96% Solution: (a) CT = 3600 seconds/hour / 75 units/hour = 48 seconds/unit (b) Workstation Eligible Selected Time Idle 1 A, B A 45 3 30 secs 2 B B 30 eligible assignment 3 C, D C 48 0 20 secs 4 D, E D 20 28 10 secs E E 10 eligible assignment 5 F, G G 40 8 20 secs 6 G F 20 remaining task (c) (45 + 30 + 48 + 20 + 10 + 40 + 20) / (6x48) = 213/288 = 73.96%
40
8 20
Reasoning A 45 secs > B 18
B only C 48 secs > D D 20 secs > E
18
E only G 40 secs > F
28
Section Ref: Designing Product Layouts Subsection: N/A Level: Medium Time on Task: 10 minutes Bloom‘s: Application Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Reflective Thinking
F only
Short Answer
133. Managers‘ opinions about the importance of paired departments being near each other are recorded in ________________. Answer: REL charts. Solution: A REL chart is a tool that reflects opinions of managers with regard to the importance of having any two departments close together. It is a good tool to use when we need to consider the judgments of managers in deciding where to locate departments. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
134. The number of trips or products moved between pairs of departments is recorded in a ____________________. Answer: from–to matrix Solution: A from–to matrix is a table that shows the number of trips or units of product moved between any pair of departments. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
135. The _____________ distance between two locations on north-south and east-west axes is used in the _____________ model. Answer: rectilinear; load–distance Solution: To measure the distance between departments, we typically use rectilinear distance. Rectilinear distance between any two locations is the shortest distance using only north–south and east–west movements. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
136. The load–distance model tells us which departments should be closest to each other by _________. Answer: minimizing the distance large numbers of products move. Solution: Relative locations can be compared by computing the ld score, which is obtained by multiplying the load for each department by the distance traveled and then summing over all the departments. The resulting score is a surrogate measure for material handling, movement, or communication. Our goal is to make the ld score as low as possible by reducing the distance large loads have to travel. Section Ref: Designing Process Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the steps involved in designing a process layout. AACSB: Knowledge
137. While traditional walls and doors provide privacy, they reduce _____________ and opportunities for ______________. Answer: proximity; teamwork Solution: One of the key trade-offs that has to be made in an office layout is between proximity and privacy. The ability of workers to communicate and interact with one another is highly important in an office environment. As companies increasingly embrace team approaches, open office environments are valued because they provide visibility and allow workers to interact easily. Section Ref: Special Cases of Process Layout Subsection: Office Layouts Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe the two special cases of process layout. AACSB: Knowledge
138. Cycle time assumes that each workstation has ____________ time to work on a product. Answer: the same Solution: Cycle time is the maximum amount of time each workstation has to complete its assigned tasks. Thus, each workstation has the same time to work on each product. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
139. Since there are 3600 seconds per hour, a process that is expected to produce 40 units per hour has a cycle time of _________________. Answer: 90 seconds/unit Solution: 3600 seconds/hour / 40 units/hour = 90 seconds/unit Section Ref: Designing Product Layouts Subsection: N/A Level: Medium Time on Task: 1.00 minutes Bloom‘s: Application Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Reflective Thinking
140. Bottlenecks determines determine maximum output because it __________________. Answer: has the minimum cycle time. Solution: The bottleneck constrains the production process and determines the lowest or minimum cycle time. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
141. What is the formula for the theoretical minimum number of work stations? Answer: ∑t/NC Solution: The computation for the theoretical minimum number of stations is as follows: ∑t/NC. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
142. What is the formula for efficiency? Answer: Efficiency(%) = ∑t/NC(100) Solution: Efficiency is the ratio of total productive time divided by total time, given as a percentage: Efficiency (%) = 100xΣt/NC. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
143. A single-model line is __________ to produce only __________ version of a product. Answer: designed. one Solution: A single-model line is designed to produce only one version of a product. Section Ref: Designing Product Layouts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the steps involved in designing a product layout. AACSB: Knowledge
144. Facility layout decisions are _________ with a number of other _______decisions. Answer: linked; operations. Solution: The company‘s process dictates the type of layout the company will have. In turn, facility layout decisions are linked with a number of other operations decisions. Section Ref: Facility Layout Within OM: How it All Fits Together Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Explain the meaning of group technology (cell) layouts. AACSB: Knowledge
Testbank Chapter 11: Work System Design LO Section Work System Design Job Design
Subsection N/A
Question # 1, 2, 3, 74, 78
Job Design
4, 5, 6, 8, 75, 81, 102, 116, 117, 118
Level of Labor Specialization Eliminating Employee Boredom Team Approaches to Job Design The Alternative Workplace Methods Analysis The Work Environment
7, 9, 10, 11, 103, 119, 120 12, 13, 14, 15, 82, 104 16, 17, 18, 19, 79, 105 20, 21, 22, 23, 80, 83, 106, 121 24, 25, 84, 115
Work Measurement N/A
26, 27, 28, 29, 30, 31, 85, 86, 107, 108, 122, 123
Work Measurement
Developing Standards
Developing a Standard Work Sampling Learning Curve Theory Compensation
32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 87, 88, 89, 90, 91, 92, 93, 94, 95, 109, 110, 124, 125, 128, 131, 132, 133, 134, 135 54, 55, 56, 57, 96, 111, 129, 136, 137 64, 76, 99, 100, 113, 127, 130, 138, 139 58
N/A Group Incentive Plans Incentive Plan Trends Learning Curve Theory
59, 60, 61, 97, 112 62, 63, 77, 98 126 64, 65, 66, 67, 68, 69, 70, 71, 72
Work System Design within OM: How It All Fits Together The Sustainability Link Work System Design across the Organization TOTAL QUESTIONS
73, 114 101 139
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Multiple Choice
1. Part of the operations strategy is designing a work system that: a) is easy to build. b) provides an appropriate risk/reward structure. c) provides the structure for the productivity of the company. d) provides a structure for the HR recruiting function. e) provides the structure for determining the company objectives. Answer: c Solution: Part of the operations strategy is designing a work system, which provides the structure for the productivity of the company. Section Ref: Work System Design Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss work system design. AACSB: Knowledge
2. What technique eliminates unnecessary tasks and improves the process for completing tasks? a) methods analysis b) job design c) work measurement
d) task inversion e) cycle counting Answer: a Solution: Methods analysis eliminates unnecessary tasks and improves the process for completing tasks. Section Ref: Work System Design Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss work system design. AACSB: Knowledge
3. Job design ensures that each employee‘s _________ and ________ are geared toward achieving the company‘s mission. a) compensation; teams b) duties; teams c) satisfaction; compensation d) duties; responsibility e) compensation; responsibility Answer: d Solution: Job design ensures that each employee‘s duties and responsibilities are geared toward achieving the restaurant‘s mission. Section Ref: Work System Design Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss work system design. AACSB: Knowledge
4. The technical feasibility of a job is the degree to which an individual or group of individuals is: a) able to understand the instructions. b) physically and mentally able to do the job. c) able to control the process. d) physically and mentally able to provide suggestions. e) able to meet the organization‘s mission. Answer: b Solution: The technical feasibility of a job is the degree to which an individual or group of individuals is physically and mentally able to do the job. Section Ref: Job Design Subsection: Job Design Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
5. The ________ feasibility is determining to what degree a job adds value as opposed to the cost of having the job done, and what is the profit created. a) technical b) behavioral c) activity-based accounting d) job enrichment e) economic Answer: e Solution: The economic feasibility of a job is the degree to which the value a job adds and the cost of having the job done create profit for the company. Section Ref: Job Design Subsection: Job Design Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
6. The challenge with behavioral feasibility is to design a job ____________ and that adds value. a) that is socially acceptable b) that will not get the worker in trouble c) without doing something that is morally wrong d) that the worker feels good about doing it e) that fits in with the norms of society Answer: d Solution: The behavioral feasibility of a job is the degree to which an employee derives intrinsic satisfaction from doing the job. The challenge is to design a job so the worker feels good about doing the job and adds value by doing it. Section Ref: Job Design Subsection: Job Design Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
7. Which of the following is an advantage of specialization in job design? a) high turnover rates b) minimal training needed c) intrinsic satisfaction of employees d) increased opportunity for advancement of employees e) low scrap rates Answer: b Solution: There are benefits from specialization because the jobs are narrowly defined and easily learned, so less training is needed. Section Ref: Job Design Subsection: Eliminating Employee Boredom Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge 8. From the employee‘s perspective, which of the following is NOT an advantage of job specialization? a) reasonable wages b) minimal self-fulfillment c) minimal mental effort needed d) minimal responsibilities e) minimal credentials needed Answer: b Solution: From the worker‘s point of view, this type of job design minimizes the education and skills required. Section Ref: Job Design Subsection: Level of Labor Specialization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
9. What is the approach to job design that involves an increase in responsibility for work planning and/or inspection? a) job enlargement b) job rotation c) job involvement d) job enrichment e) job enhancement Answer: d Solution: Job enrichment is the vertical expansion of a job. The job designer adds worker responsibility for work planning and/or inspection Section Ref: Job Design Subsection: Eliminating Employee Boredom Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
10. Which of the following MOST closely describes job enrichment? a) vertical expansion b) transferring workers through a series of jobs to increase their scope of experience c) increasing the amount of workspace assigned to a worker d) horizontal expansion e) assigning two jobs to the same worker Answer: a Solution: Job enrichment is the vertical expansion of a job. Section Ref: Job Design Subsection: Eliminating Employee Boredom Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
11. Having waiters cook and having the cooks wait on tables is an example of ______________. a) job enlargement b) job rotation c) job enrichment d) job involvement e) job enhancement Answer: b Solution: Job rotation exposes a worker to other jobs in the work system. Section Ref: Job Design Subsection: Eliminating Employee Boredom Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
12. What do we call small groups of employees who meet to identify, analyze, and solve operational problems? a) traditional work groups b) cross-functional teams c) self-managed teams d) problem-solving teams e) special-purpose teams Answer: d Solution: Problem-solving teams are small groups of employees who meet to identify, analyze, and solve operational problems. Section Ref: Job Design Subsection: Team Approaches to Job Design Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
13. Which of the following is typically NOT associated with problem-solving teams? a) Employees typically volunteer. b) Employees are trained in problem-solving techniques. c) Employees contribute on a short-term basis. d) Employees engage in data gathering. e) Employee participation is on an ongoing basis. Answer: c Solution: Teams undergo training and meet once a week for a few hours, so the assignment is long term, and would not be considered a short-term group. However, special purpose teams are normally considered short-term. Section Ref: Job Design Subsection: Team Approaches to Job Design Level: Easy Time on Task:1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
14. Which of the following issues would best be handled by a special-purpose team? a) A machine on the shop floor occasionally malfunctions. b) Particular items in a warehouse are difficult to find. c) A proposal has been made to switch from rail to truck for both transporting incoming parts and product distribution. d) Customers are complaining that they get charged twice for their purchases. e) Forklifts have difficulty moving material in the factory because there is too much congestion in the aisles. Answer: c Solution: Members of special-purpose teams typically represent several functional areas for an overall view of the problem. Distribution and receiving are disparate functions. Section Ref: Job Design Subsection: Team Approaches to Job Design Level: Medium Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
15. A difference between self-directed and self-managed teams is: a) who defines the team‘s working goal. b) who defines the team‘s compensation package. c) who defines the team rules. d) where the work is performed. e) what means of job enrichment will be applied. Answer: a Solution: A self-directed team is a group of people working together in their own ways toward a common goal that the team has defined. The team decides on compensations and disciplinary actions when team rules are broken and acts as a profit center. A self-managed team is a group of people working together in their own ways toward a common goal that is defined by a source outside of the team. Section Ref: Job Design Subsection: Team Approaches to Job Design Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
16. What is the approach that moves the work to the worker rather than the worker to the workplace? a) teleworking b) virtual office c) office at home d) office on the move e) the alternative workplace Answer: e Solution: The alternative workplace moves the work to the worker rather than the worker to the work. Section Ref: Job Design Subsection: The Alternative Workplace Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
17. Which of the following is NOT a form of alternative workplace arrangements? a) hot desking b) desk sharing c) working from the hotel room on an occasional business trip d) telework center e) virtual office Answer: c Solution: The alternative workplace moves the work to the worker rather than the worker to the work. Section Ref: Job Design Subsection: The Alternative Workplace Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
18. Advantages of the alternative workplace include all EXCEPT which of the following? a) eliminating offices that people do not need b) reducing overhead expenses c) offering more flexibility to balance work and family d) increased cohesiveness among employees e) employees devoting more time to customers and/or meaningful work activities Answer: d Solution: In alternative workplaces employees tend to devote less time to socializing. Section Ref: Job Design Subsection: The Alternative Workplace Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
19. To determine whether the alternative workplace is right for your organization, which of the following questions should be positively answered? a) Are you out of space? b) Does your organization have an open culture? c) Does your organization allow the employee to set their own expectations? d) Does your organization subscribe to the ―new‖ work force program? e) Does the organization plan office parties? Answer: b Solution: To determine whether the alternative workplace is right for your organization, consider the following question. Does your organization have an open culture and proactive managers? Your managers must be open to change and must support the migration to alternative workplaces for it to work. Section Ref: Job Design Subsection: The Alternative Workplace Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
20. Methods analysis can _________________. a) improve efficiency b) analyze the fairness of pay systems c) improve how teams function d) evaluate job performance e) help select issues that need to be brought to management‘s attention Answer: a Solution: Methods analysis is used by companies when developing new products or services and for improving the efficiency of methods currently in use. Section Ref: Job Design Subsection: Methods Analysis Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
21. The approach that details the tasks of a job and how to do them is ____________________. a) work measurement b) job evaluation c) methods analysis d) job design e) work sampling Answer: c Solution: Whereas job design shows the structure of the job and names the tasks within the structure, methods analysis details the tasks and how to do them. Section Ref: Job Design Subsection: Methods Analysis Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
22. What results from methods analysis? a) a graph of how long each step takes b) an evaluation of current employees c) time standards d) guidance for designing jobs e) a standard, detailed procedure for an operation Answer: e Solution: Methods analysis documents this accepted procedure, including specific notations that identify customer preferences. The result is a standard operating procedure your restaurant can use for training new employees and for evaluating the performance of existing employees. Section Ref: Job Design Subsection: Methods Analysis Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
23. What is the methods analysis chart that describes the overall sequence of operation, movement, inspection, delay, and storage? a) process flowchart b) worker-machine chart c) simultaneous-motion (simo) chart d) efficiency/time-of-day chart e) operations chart Answer: a Solution: The process flowchart in Figure 11.2 shows the elements operation, movement, inspection, delay, and storage. Section Ref: Job Design Subsection: Methods Analysis Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
24. Which of the following is NOT taken into consideration when dealing with the effects of working conditions on worker productivity, quality and safety? a) cafeteria location b) temperature c) relative humidity d) ventilation e) lighting Answer: a Solution: Temperature, relative humidity, ventilation, lighting, and noise level are all factors in work system design. Section Ref: Job Design Subsection: The Work Environment Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
25. What is the governmental agency that has inspectors who check for safety conditions? a) ISO b) OSHA c) FCC d) IRS e) HEW Answer: b Solution: Concern for worker safety brought about the enactment in 1970 of the Occupational Safety and Health Act (OSHA), which created the Occupational Safety and Health Administration. Section Ref: Job Design Subsection: The Work Environment Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
26. What does work measurement determine? a) how long it should take to do a job b) what is the best way to do a job c) who is the best worker d) where work should be done e) why a particular step must be included in an operation Answer: a Solution: The second component in work system design, work measurement, is a way of determining how long it should take to do a job. Section Ref: Work Measurement Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
27. The ____________ time is the time it should take a qualified operator, working at a sustainable pace and using the appropriate tools and process, to do the job. a) performance b) observed c) normal d) standard e) ideal Answer: d Solution: The standard time is the time it should take a qualified operator, working at a sustainable pace and using the appropriate tools and process, to do the job. Section Ref: Work Measurement Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
28 The formula to determine standard labor costs for costing a product is: a) standard labor time x hourly labor cost. b) standard labor time x normal labor cost. c) normal labor time x hourly labor cost. d) normal labor time x normal labor cost. e) adjusted normal time x adjusted normal labor cost. Answer: a Solution: Instead of timing the labor to build single units, companies typically use a standard labor cost. To do this, they multiply the standard labor time by a given hourly labor cost to determine the direct labor content of a product. Section Ref: Work Measurement Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
29. A company uses standard times for ______________________. a) public relations b) advertising c) financial accounting d) the winter months e) costing Answer: e Solution: Companies use standard times to develop product costs, to evaluate different materials and/or alternative manufacturing techniques, to measure individual worker proficiency, and to plan a production schedule. Section Ref: Work Measurement Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
30. The use of standard times for costing allows the company to do all EXCEPT which of the following? a) evaluate quantitative methods b) evaluate new product proposals c) evaluate use of new equipment d) evaluate new techniques for building a product e) evaluate individual operator proficiency Answer: a Solution: Standard times allow companies to evaluate new-product proposals, the use of new materials and equipment, new processes or techniques for building a product, and individual operator proficiency. Section Ref: Work Measurement Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
31. Standard times can be used to measure performance of individual workers. If a worker fails to match the standard time, the company should do what? a) put the worker on probation b) ignore the situation c) change the standard time d) provide training to improve the worker‘s performance e) fire the worker Answer: d Solution: If a worker fails to match the standard time, the company should provide training to improve the worker‘s performance. Section Ref: Work Measurement Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
32. Which of the following is NOT a commonly used process for setting standard times? a) elapsed times b) time study c) elemental time data d) predetermined time data e) work sampling Answer: a Solution: Time studies, elemental time data, predetermined time data, and work sampling are all methods used to establish standard times. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
33. The steps involved in a time study include all EXCEPT which of the following? a) Break the job into easily recognizable units. b) Determine the probability distribution that best fits the observed times. c) Calculate the number of cycles you must observe. d) Time each element, record the times, and rate the worker‘s performance. e) Tell the worker whose job you will be studying. Answer: b Solution: The procedure for a time study includes these 7 steps: Step 1) Choose the job for the time study; Step 2) Tell the worker whose job you will be studying; Step 3) Break the job into easily recognizable units; Step 4) Calculate the number of cycles you must observe; Step 5) Time each element, record the times, and rate the worker‘s performance; Step 6) Compute normal time; Step 7) Compute the standard time. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
34. Typically the job chosen for the time study will be ___________________. a) a routine job that is labor intensive b) a simple job performed by many different people c) done primarily by machine d) done only occasionally e) insignificant Answer: a Solution: You base standard times on the routine, labor-intensive jobs rather than one-of-a-kind jobs. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
35. For the step in a time study that involves breaking the job down into easily recognizable elements, each of these elements should ________________. a) overlap b) not be stand-alone c) not involve the worker d) have clear starting and ending points e) be semicontinuous Answer: d Solution: Each of these elements has a clear starting and ending point, and you cannot break it down any further. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
36. The formula for determining the number of observations needed depends upon all EXCEPT which of the following values? a) the number of standard deviations needed for the desired confidence b) the maximum observed value in the sample c) the standard deviation of the sample observations d) the mean of the sample observations e) the desired accuracy Answer: b Solution: The number of cycles is dependent on the confidence interval, desired accuracy, standard deviation, and the mean of the sample. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
37. How many standard deviations are required for a 98% confidence level? a) 2 b) 2.05 c) 2.17 d) 2.33 e) 2.58 Answer: d Solution: From Table 11.3, a 98% confidence interval requires 2.33 standard deviations (a zscore of 2.33). Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
38. What is the effect of an increase in the desired confidence level on the number of observations necessary in a time study? a) The number of observations necessary increases. b) The number of observations necessary decreases. c) The number of observations necessary does not change. d) The number of observations necessary may increase or decrease. e) There is not enough information to know. Answer: a Solution: The sample size is directly related to the confidence level (z-score). Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
39. When performing a time study, the analyst converts the observed time into the time an ―average‖ worker would require working at an acceptable pace by using which of the following? a) allowance factor b) mean time modulation c) methods analysis d) performance rating factor e) analysis of efficiency Answer: d Solution: As the time-study analyst, you must make a judgment about the work pace of the observed worker in terms of how far from the average it is. This is a factor of 1.0 called the performance rating factor (PRF). Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
40. Which of the following performance rating factor values would be for an above-average work pace? a) .9 b) 1.0 c) 1.40 d) .18 e) .78 Answer: c Solution: If a factor of 1.0 represents an average work pace, any performance rating above 1.0 is an above-average work pace. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
41. Establishing a performance factor rating is an attempt to: a) fudge the actual times. b) punish the worker who does not perform fast enough. c) counterbalance any unusual patterns noted. d) allow management to ―encourage‖ greater productivity. e) use the ISO 9000 approval process. Answer: c Solution: Performance rating is an attempt to counterbalance any unusual patterns noted in the worker‘s performance. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
42. In calculating the time standard, the frequency of occurrence for a work element is _________________. a) how many times the work element is repeated in doing the job once b) how many other jobs have the same work element c) the fraction of the time the work element needs to be done when the job is done d) the number of times the work element took longer than all the other work elements e) the inverse of the wave length for the work element Answer: c Solution: One other factor to consider when calculating the time standard is the frequency of occurrence (F) for each work element. We expect most elements to be done every cycle, so they would have a frequency of occurrence equal to 1. However, some elements are not done each cycle, so we adjust the frequency accordingly. If an element is done every other cycle, it would have a frequency equal to 0.5, or, on average, half of it is done each cycle. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
43. For each work element in a time study, multiplying the mean observed time by the performance rating factor and by the frequency of occurrence results in what? a) the normal time for the element b) the average observed time for the element c) the standard time for the element d) the average delay for the element e) the standard time for the job Answer: a Solution: We compute the normal time (NT) for each work element by multiplying the mean observed time by the performance rating factor by the frequency of occurrence. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
44. In a time study, personal time, fatigue, and unavoidable delays (PFD) during the typical work day are accounted for in what? a) the normal time b) an allowance factor c) the performance rating d) how the work elements are defined e) costs Answer: b Solution: However, the normal time does not allow for personal time, fatigue, or unavoidable delays (PFD) during the typical workday. Therefore, we adjust the normal time with an allowance factor (AF). Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
45. The allowance factor is computed by adding one to PFD (personal time, fatigue, and unavoidable delays) when the allowance is based on what? a) normal time b) the performance rating factor c) job time d) time worked e) standard time Answer: c Solution: With the first method, the PFD allowance is based on individual jobs the worker does throughout the day. This is typically used when workers perform several different types of jobs, with some of the jobs more fatiguing than others and other jobs having longer unavoidable delays. In this case, the amount of output expected must take into account the actual jobs performed by the worker. The PFD allowance factor is computed as AFJob = 1 + PFD Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
46. If MOT = the mean observed time, PRF = the performance rating factor, F = the frequency of occurrence, and PFD = the percentage allowance based on time worked, what is the formula to compute the normal time? a) (MOT)(PRF)(F) b) (MOT)(PRF)(F)(1 + PFD) c) (MOT)(PRF)(F) / (1 – PFD) d) (MOT)(PRF) / (F) e) (MOT)(PRF)(F) / (1 + PFD) Answer: a Solution: To calculate normal time for an element, you multiply the mean observed time by the performance rating factor and then by the frequency. In this case, use the revised mean observed time, which includes all of the observations. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
47. If MOT = the mean observed time, PRF = the performance rating factor, F = the frequency of occurrence, and PFD = the percentage allowance adjustment based on job time, what is the formula to compute the standard time? a) (MOT)(PRF)(F) b) (MOT)(PRF)(F)(1 + PFD) c) (MOT)(PRF)(F) / (1 – PFD) d) (MOT)(PRF) / (F) e) (MOT)(PRF)(F) / (1 + PFD) Answer: b Solution: To determine standard time, we multiply the normal time by the allowance factor. Since the allowance is based on job time, we use the formula 1 + allowances . Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 2.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge 48. A company‘s accepted time studies are stored in a(n) ____________ for possible future use. a) file cabinet b) time study vault c) warehouse d) jar e) elemental time database Answer: e Solution: After your company performs and validates time studies, it stores those accepted time studies in an elemental time database for possible future use. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
49. Typical work elements that occur in many jobs include all EXCEPT which of the following? a) Insert something. b) Tighten something. c) Position an item. d) Figure out the instructions. e) Reach for materials. Answer: d Solution: Work elements must be easily observed with distinct beginnings and endings and repeatable. Figuring out instructions fails on both criteria. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
50. Which of the following steps is NOT included when a time-study analyst uses standard elemental times? a) Identify the standard elements of the job. b) Determine the performance rating factor. c) Adjust the database times if needed. d) Check the database for time studies done on these elements. e) If no valid studies exist for this or a similar work element, do a time study for the new work element. Answer: b Solution: When a time-study analyst uses standard elemental times, the procedure requires: identification of standard elements; checking the database for time elements; adjustment of database times as required; do a time study if no time exists for an element. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
51. ____________ is a published database of elemental time data used for establishing standard times. a) Predetermined time data b) Time elements c) Time histories d) Performance times e) Time samples Answer: a Solution: Predetermined time data is a large database of valid work element times. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
52. Which of the following would NOT be a basic element into which a job would be split when using predetermined time data? a) reach b) sort c) grasp d) insert e) turn Answer: b Solution: When using predetermined time data, you split the job into basic elements (reach, grasp, move, engage, insert, turn, disengage). Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
53. Which of the following is an advantage of using predetermined time data? a) You can calculate standard times before the job begins. b) Very little skill is required. c) There is universal agreement in assessing the level of difficulty of different work elements. d) No calculations are required. e) You do not need to know much about the job. Answer: a Solution: The advantages of using predetermined time data are that you do not have to rate individual operator performance, you do not disrupt the workplace to determine the standard time, and you can calculate standard times before the job even begins. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
54. What is a technique for estimating the proportion of time an employee or machine spends on different work activities? a) predetermined time data b) time elements c) stopwatch time study d) work sampling e) simultaneous motion study Answer: d Solution: Work sampling is a method used for estimating the proportion of time that an employee or machine spends on different work activities. Section Ref: Work Measurement Subsection: Developing a Standard Work Sampling Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
55. In work sampling, when should observations be taken? a) at the same time each day b) once per week c) at random times d) once per hour e) once per day Answer: c Solution: You do not time activities for work sampling. Instead, you make random observations and note the kind of activity. Section Ref: Work Measurement Subsection: Developing a Standard Work Sampling Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
56. Which of the following is a basic difference between work sampling and a time study? a) Work sampling does not require any observations. b) Work sampling requires fewer observations to accomplish the same thing. c) Work sampling is better suited for short, repetitive tasks. d) Work sampling does not provide standard times. e) Work sampling is suitable only for assembly lines. Answer: d Solution: You do not time activities for work sampling. Instead, you make random observations and note the kind of activity. Section Ref: Work Measurement Subsection: Developing a Standard Work Sampling Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
57. Which of the following is NOT a step in work sampling? a) Estimate the proportion of time spent on the given activity. b) Estimate the sample size based on the desired level of accuracy and confidence. c) Define the activities to be observed. d) Identify the worker or machine to be sampled. e) Divide the job into basic elements. Answer: e Solution: Work sampling consists of the following procedures: 1) Identify the worker or machine to be sampled; 2) Define the activities to be observed; 3) Estimate the sample size based on the desired level of accuracy and confidence; 4) Develop the random observation schedule. Make your observations over a time period that is representative of normal work conditions; 5) Make your observations and record the data. Check to see whether the estimated sample size remains valid; 6) Estimate the proportion of time spent on the given activity. Section Ref: Work Measurement Subsection: Developing a Standard Work Sampling Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
58. Companies need to design compensation systems that _________________. a) punish poor performance b) reinforce the behaviors needed to meet the company‘s objectives c) are easy to administer d) do not differ significantly from those of other firms in the industry e) are innovative Answer: b Solution: Companies need to develop compensation systems that reinforce the behaviors needed to meet the company‘s objectives. Section Ref: Compensation Subsection: n/a Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe compensation approaches. AACSB: Knowledge
59. Which of the following is NOT characteristic of time-based compensation systems? a) easily calculated wages b) employees knowing what they will get in their regular paycheck c) simplicity d) normally used when measuring output per employee is not applicable e) lower cost per unit than output-based systems Answer: e Solution: The advantage of the time-based system is its simplicity. For the company, wages are easily calculated. For the employees, the pay is steady, and they know what they will get in their regular paycheck. Time-based compensation systems are normally used when measuring output per employee is not applicable. Section Ref: Compensation Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe compensation approaches. AACSB: Knowledge
60. Output-based incentive systems are based on the assumption that some workers _____________. a) mentally calculate their pay by keeping track of their output b) are motivated by money and produce more when pay is linked to performance c) like to work in a competitive environment d) like to work overtime e) work harder than others Answer: b Solution: Output-based (incentive) systems, or piece-rate systems, or commission systems can be linked to Frederick Taylor‘s theory that humans are economically motivated. These systems reward workers for their output. The more the worker produces, the more the worker earns. The assumption is that some workers are motivated by money and produce more when pay is linked to performance. Section Ref: Compensation Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe compensation approaches. AACSB: Knowledge
61. Which of the following is NOT characteristic of output-based compensation systems? a) can be used to compensate individuals b) can be used to compensate groups c) can include a base salary d) often include an upper limit on how much an individual can be compensated each day e) need to be linked to quality as well as quantity to be successful Answer: d Solution: Successful individual and group incentive plans are linked to quality as well as to quantity. Encouraging a worker to produce low-quality units faster does not make good business sense. The incentive plan must be clear on how output is counted. Individual incentive plans typically provide a base salary for the employee, plus a bonus for output achieved above the standard. Section Ref: Compensation Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe compensation approaches. AACSB: Knowledge
62. Profit sharing and gain sharing are two methods of _______________. a) group incentive plans b) keeping costs down c) calculating pay for top management d) employee retirement plans e) keeping expense account costs under control Answer: a Solution: Group incentive plans are designed to reward employees when the company achieves certain performance objectives. Two methods are profit sharing and gain sharing. Section Ref: Compensation Subsection: Group Incentive Plans Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Describe compensation approaches. AACSB: Knowledge
63. Disadvantages of individual incentive systems include all EXCEPT which of the following? a) They undermine teamwork. b) A study has shown they had no effect on worker performance. c) They avoid the ―free-rider‖ problem. d) They need a significant amount of data collection. e) They give employees a short-term focus. Answer: c Solution: Some evidence suggests that group incentive systems suffer from the ―free-rider‖ problem. Section Ref: Compensation Subsection: Group Incentive Plans Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe compensation approaches. AACSB: Knowledge
64. The fact that human activities typically improve when they are done on a repetitive basis is described by a(an) _________________ curve. a) normal distribution b) learning c) binomial distribution d) lognormal distribution e) S-shaped Answer: b Solution: An important factor in calculating labor times is the learning effect. We all can recall a new task or job that took a long time to finish the first time we tried. However, each subsequent time we did the task, it took less time. This is the basis of learning curve theory. People learn from doing a task and get quicker each time they repeat that task. Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
65. A worker performed a particular task for the first time, and it took 10 minutes. If we assume a 90% learning curve, how long will it take the worker the fourth time she performs the task? a) 10.0 minutes b) 9.0 minutes c) 8.1 minutes d) 7.29 minutes e) 6.561 minutes Answer: c Solution: T x Ln .810 x 10 = 8.1 Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
66. Which one of the following would learning curves affect the MOST? a) layout analysis b) statistical process control c) planning labor requirements d) location analysis e) robots Answer: c Solution: Understanding learning curves is important. The amount of labor needed to finish the same task or build the same product a number of times can be calculated, which allows a company to better estimate the labor cost. The company can also better schedule its workload since it knows how much labor is needed to complete the task a specific number of times. Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
67. The first unit of a product took 400 hours to complete. If an 80% learning curve is expected, how long will the 18th unit take to complete? a) 157.6 hours b) 163.8 hours c) 400.0 hours d) 3886.4 hours e) 7200.0 hours Answer: a Solution: T x Ln .394 x 400 = 157.6 Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
68. The first unit of a product took 400 hours to complete. If an 80% learning curve is expected, how long will it take to complete the first 18 units? a) 157.6 hours b) 163.8 hours c) 400.0 hours d) 3886.4 hours e) 7200.0 hours Answer: d Solution: T x Ln 9.716 x 400 = 3886.4 Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
69. The first unit of a product took 400 hours to complete. The firm plans to produce 8 units in the first month and 10 units in the second month. If an 80% learning curve is expected, how many hours will the firm use to work on the product during the second month? a) 4000.0 hours b) 2526.0 hours c) 3886.4 hours d) 2138.4 hours e) 1748.0 hours Answer: e Solution: T x Ln 9.716 x 400 = 3886.4 5.346 x 400 = 2138.4 3886.4 – 2138.4 = 1748 Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
70. The first unit of a product took 80 hours to complete. If a 75% learning curve is expected, how long will the 22nd unit take to complete? a) 22.2 hours b) 751.0 hours c) 25.3 hours d) 80.0 hours e) 1760.0 hours Answer: a Solution: T x Ln .277 x 80 = 22.16 or 22.2 Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
71. The first unit of a product took 80 hours to complete. If a 75% learning curve is expected, how long will it take to complete the first 22 units? a) 22.2 hours b) 751.0 hours c) 25.3 hours d) 80.0 hours e) 1760.0 hours Answer: b Solution: T x Ln 9.388 x 80 = 751.04 Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
72. The first unit of a product took 80 hours to complete. The firm plans to produce 10 units in the first month and 12 units in the second month. If a 75% learning curve is expected, how many hours will the firm use to work on the product during the second month? a) 960.0 hours b) 505.2 hours c) 751.0 hours d) 447.1 hours e) 303.9 hours Answer: e Solution: T x Ln 9.388 x 80 = 751.04 5.589 x 80 = 447.12 751.04 – 447.12 = 303.92 Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
73. Which two are sustainability practices in work system design? a) environmental and social b) social and ecosystem c) industrial and agriculture d) development and environment e) industrial and social Solution: Answer: a Solution: A significant aspect of sustainability is the design of jobs and work with an eye toward minimizing harm to the environment. Another important aspect of sustainability in work system design is addressing social responsibility. Section Ref: Work System Design within OM: How It All Fits Together Subsection: The Sustainability Link Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Describe compensation approaches. AACSB: Knowledge
74. Which of the following statements is true? a) Work system design seeks to balance the contributions of human labor and mechanization. b) Job design ensures that each employee‘s actions are geared toward extrinsic satisfaction. c) Job design ensures that each employee‘s actions are geared toward intrinsic satisfaction. d) A job must enable the company to achieve its objective and add value. Answer: d Solution: A job must add value and enable the company to achieve its objectives. Section Ref: Work System Design Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss work system design. AACSB: Knowledge
75. The difference between the economic feasibility and behavioral feasibility of a job is that: a) economic feasibility is viewed from the perspective of the company and behavioral feasibility is from the perspective of the employee. b) economic feasibility addresses whether a worker is capable of performing the work and behavioral feasibility addresses whether an employee enjoys the work c) economic feasibility justifies the use of automation and behavioral feasibility justifies the use of human labor. d) economic feasibility justifies separation of duties into task specialists and behavioral feasibility advocates for a cross-trained generalist worker. Answer: a Solution: The technical feasibility of a job is the degree to which an individual or group of individuals is physically and mentally able to do the job. The economic feasibility of a job is the degree to which the value a job adds and the cost of having the job done create profit for the company. Section Ref: Job Design Subsection: Job Design Level: Medium Time on Task: 1.00 minutes Bloom‘s: Analysis Learning Objective 2: Discuss job design. AACSB: Analytic
76. A generous professor allows you to redo assignments as many times as you like in order to improve your grade. The first time you work all the problems at the end of Chapter 11 it takes you fifteen hours. Dissatisfied with your grade, you decide to work them all again and it takes you only twelve hours the second time. How many times will you have to redo all of the problems to lower the time to complete them to under ten hours? a) three b) four c) five d) six Answer: b Solution: Time for nth item = T x Ln. You are operating on an 80% learning curve (12/15). The 3rd unit time multiplier is .702, which results in a completion time of 10.5 hours. The 4th unit time multiplier is .64, which yields a 9.6 hour completion time. Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
77. The College of Business at Central Oklahoma enacts a profit-sharing plan whereby professors may earn a bonus of 20% of their base pay if the college meets an enrollment growth goal of 10%. The first year this system is implemented, the enrollment growth is 9%. If the Management Department chair has a base salary of $90,000, what is his total compensation for the year? a) $83,800 b) $90,000 c) $106,200 d) $108,000 Answer: b Solution: The college failed to meet the enrollment growth goal so the bonus is $0. The chair receives his base salary of $90,000. Section Ref: Compensation Subsection: Group Incentive Plans Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 4: Describe compensation approaches. AACSB: Analytic
True/False 78. Job design ensures that each employee‘s activities are closely timed. Answer: False Solution: Job design ensures that each employee‘s duties and responsibilities are geared toward achieving the restaurant‘s mission. Section Ref: Work System Design Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss work system design. AACSB: Knowledge
79. When deciding if the firm should participate in alternative workplace arrangements you must ensure that the same level of direct report control is maintained. Answer: False Solution: One question that must be answered is ―Are you prepared to ‗push-back‘ or loosen your control over your direct reports?‖ Managers must respect their direct reports and trust that work will be completed when the worker is out of sight. Section Ref: Job Design Subsection: The Alternative Workplace Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
80. Methods analysis eliminates unnecessary tasks and improves the process for completing tasks. Answer: True Solution: Methods analysis eliminates unnecessary tasks and improves the process for completing tasks. Section Ref: Job Design Subsection: Methods Analysis Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss work system design. AACSB: Knowledge
81. The degree to which an individual or group of individuals can physically and mentally handle the job is its technical feasibility. Answer: True Solution: The technical feasibility of a job is the degree to which an individual or group of individuals is physically and mentally able to do the job. Section Ref: Job Design Subsection: Job Design Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
82. Problem-solving teams are small groups of employees who meet to identify, analyze, and solve operational problems. Answer: True Solution: Problem-solving teams are small groups of employees who meet to identify, analyze, and solve operational problems. Section Ref: Job Design Subsection: Team Approaches to Job Design Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
83. The process flowchart describes the overall sequence of operation, movement, inspection, delay, and storage. Answer: True Solution: The process flowchart describes the overall sequence of operation, movement, inspection, delay, and storage, as depicted in Figure 11.2. Section Ref: Job Design Subsection: Methods Analysis Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
84. The FCC is the governmental agency that has inspectors who check for safety conditions. Answer: False Solution: Concern for worker safety brought about the enactment in 1970 of the Occupational Safety and Health Act (OSHA), which created the Occupational Safety and Health Administration. The law was designed to ensure that all workers have healthy and safe working conditions. Section Ref: Job Design Subsection: The Work Environment Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
85. Work measurement determines how long it should take to do a job. Answer: True Solution: The second component in work system design, work measurement, is a way of determining how long it should take to do a job. Section Ref: Work Measurement Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
86. The standard time is the time it should take a qualified operator, working at a sustainable pace and using the appropriate tools and process, to do the job. Answer: True Solution: The standard time is the time it should take a qualified operator, working at a sustainable pace and using the appropriate tools and process, to do the job. Section Ref: Work Measurement Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
87. Typically the job chosen for the time study will be a routine job that is labor intensive. Answer: True Solution: You base standard times on the routine, labor-intensive jobs rather than one-of-a-kind jobs. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
88. An increase in the desired confidence level will decrease the number of observations necessary in a time study. Answer: False Solution: The number of cycles observed is directly related to the confidence level and the standard deviation and inversely related to the accuracy and mean of the sample observations. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
89. In calculating the time standard, the frequency of occurrence for a work element is how many times the work element is repeated in doing the job once. Answer: False Solution: The frequency of occurrence is how often the work element must be done each cycle. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
90. In a time study, personal time, fatigue, and unavoidable delays (PFD) during the typical work day are accounted for in the allowance factor. Answer: True Solution: The allowance factor is the amount of time the analyst allows for personal time, fatigue, and unavoidable delays. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
91. If MOT = the mean observed time, PRF = the performance rating factor, F = the frequency of occurrence, and PFD = the percentage allowance adjustment based on job time, the formula to compute the standard time is (MOT)(PRF)(F)(1 + PFD). Answer: True Solution: The formula to compute the standard time is (MOT)(PRF)(F)(1 + PFD). Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
92. If MOT = the mean observed time, PRF = the performance rating factor, F = the frequency of occurrence, and PFD = the percentage allowance based on time worked, the formula to compute the normal time is (MOT)(PRF)(F). Answer: True Solution: The formula to compute the normal time is (MOT)(PRF)(F). Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
93. If MOT = the mean observed time, PRF = the performance rating factor, F = the frequency of occurrence, and PFD = the percentage allowance based on time worked, the formula to compute the standard time is (MOT)(PRF)(F). Answer: False Solution: (MOT)(PRF)(F) is the formula to compute the normal time. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
94. Predetermined time data is a published database of elemental time data used for establishing standard times. Answer: True Solution: Predetermined time data is a published database of elemental time data used for establishing standard times. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
95. An advantage of using predetermined time data is that you can calculate standard times before the job begins. Answer: True Solution: You don‘t need to observe work since you create a standard from discrete job elements. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
96. In work sampling, observations should be taken at random times. Answer: True Solution: You do not time activities for work sampling. Instead, you make random observations and note the kind of activity. Section Ref: Work Measurement Subsection: Developing a Standard Work Sampling Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
97. Output-based incentive systems are based on the assumption that some workers are motivated by money and produce more when pay is linked to performance. Answer: True Solution: Output-based (incentive) systems, or piece-rate systems, or commission systems can be linked to Frederick Taylor‘s theory that humans are economically motivated. These systems reward workers for their output. Section Ref: Compensation Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe compensation approaches. AACSB: Knowledge
98. Gain sharing emphasizes profit levels so employees can share the benefits of increased profits. Answer: False Solution: Gain sharing emphasizes the costs of output rather than profit levels. With this plan, employees share the benefits of quality and productivity improvements made during the year. Section Ref: Compensation Subsection: Group Incentive Plans Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe compensation approaches. AACSB: Knowledge
99. The fact that human activities typically improve when they are done on a repetitive basis is described by a learning curve. Answer: True Solution: The major attributes of a learning curve are that it takes less time to complete the task each additional time it is done by the same employee, and the time savings decrease with each additional time that task is done by that employee. Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
100. The table containing the learning curve coefficients allows one to calculate both the time it should take to build the nth unit as well as the total production time required to build the entire production run when the nth unit is the last one completed. Answer: True Solution: An alternative method of calculating the time required to produce a specific unit is to use a table of learning curve coefficients, as shown in Table 11.9. This table allows you to calculate the time it should take to build the nth unit as well as to calculate the total production time required to build the entire production run when the nth unit is the last one completed. Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
101. Human resources is NOT really involved in work sampling as this is a production facility process. Answer: False Solution: Human resources uses work sampling to establish and validate hiring criteria. Section Ref: Work System Design within OM: How It All Fits Together Subsection: Work System Design across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe compensation approaches. AACSB: Knowledge
102. Economic feasibility is the degree to which the job adds value and the cost of performing the job done are profitable for the company. Answer: True Solution: The economic feasibility of a job is the degree to which the value a job adds and the cost of having the job done create profit for the company. Section Ref: Job Design Subsection: Job Design Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
Essay
103. What are the approaches to eliminating employee boredom? Briefly describe each. Answer: Job enlargement involves a horizontal expansion of the job by adding other related tasks. Job enrichment involves a vertical expansion of the job by adding more responsibility for work planning and/or inspection. Job rotation involves moving workers to other jobs on the same level. Solution: Job enlargement involves a horizontal expansion of the job by adding other related tasks. Job enrichment involves a vertical expansion of the job by adding more responsibility for work planning and/or inspection. Job rotation involves moving workers to other jobs on the same level. Section Ref: Job Design Subsection: Eliminating Employee Boredom Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
104. What are the characteristics of self-managed teams? Answer: Self-managed teams are designed to achieve a high level of employee involvement; use an integrated team approach; allow people who are most knowledgeable about the process to control the work flow; and allow employees to develop a sense of ownership and pride in their work. Solution: A self-managed team is designed to achieve a high level of employee involvement and an integrated team approach. A self-managed team is a group of people working together in their own ways toward a common goal that is defined by a source outside of the team. The team does its own work scheduling and training and provides its own rewards and recognition. Section Ref: Job Design Subsection: Team Approaches to Job Design Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
105. What are the advantages of the alternative workplace? Answer: reducing overhead expenses by eliminating offices that people do not need and consolidating others; offers more flexibility for employees to balance work and family; and increased productivity and job effectiveness due to employees devoting more time to customers and/or meaningful work activities Solution: Companies have begun using alternative workplaces for the benefits they afford in terms of cost reduction, productivity, and flexibility. The cost reduction is achieved through eliminating offices people do not need and consolidating others, thereby reducing overhead expenses. Alternative workplaces can improve productivity because employees tend to devote more time to customers and/or meaningful work activities and less time to unproductive office routines like socializing, making up work to look busy, and attending unnecessary meetings. A survey of alternative workplace employees at IBM revealed that 87% believed their personal productivity and job effectiveness had increased significantly. The alternative workplace offers the flexibility some employees need to balance work and family, which helps companies build and keep a valuable workforce. Section Ref: Job Design Subsection: The Alternative Workplace Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss job design. AACSB: Knowledge
106. What are the steps in methods analysis? Answer: (1) Identify the operation to be analyzed. (2) Gather all relevant information about the operation, including tools, materials, and procedures. (3) Talk with employees who use the operation or have used similar operations. (4) Chart the operation, whether you are analyzing an existing operation or a new operation. (5) Evaluate each step in the existing operation or proposed new operation. (6) Revise the existing or new operation as needed. (7) Put the revised or new operation into effect. Solution: (1) Identify the operation to be analyzed. (2) Gather all relevant information about the operation, including tools, materials, and procedures. (3) Talk with employees who use the operation or have used similar operations. (4) Chart the operation, whether you are analyzing an existing operation or a new operation. (5) Evaluate each step in the existing operation or proposed new operation. (6) Revise the existing or new operation as needed. (7) Put the revised or new operation into effect. Section Ref: Job Design Subsection: Methods Analysis Level: Easy Time on Task: 3.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
107. With respect to costing, what uses does a company have for standard times? Answer: Standard times allow companies to evaluate new product proposals, the use of new materials and equipment, new processes or techniques for building a product, and individual operator proficiency. Solution: When costing a product, a company includes labor in the total cost estimate. Instead of timing the labor to build single units, companies typically use a standard labor cost. To do this, they multiply the standard labor time by a given hourly labor cost to determine the direct labor content of a product. Standard times allow companies to evaluate new-product proposals, the use of new materials and equipment, new processes or techniques for building a product, and individual operator proficiency. The standard time provides a benchmark for companies to use when evaluating other alternatives. Section Ref: Work Measurement Subsection: N/A Solution: Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
108. What are the ways that standard times can help in planning and scheduling? Answer: make workload forecasts; plan how much labor is needed; schedule work; promise viable delivery dates to customers Solution: Standard times also help a company to plan. If you know how long it takes to do a job and how often that job is repeated, you can plan your workload from that job. This information allows you to make workload forecasts, plan the labor needed, and schedule work. If you know how long a job should take, you know how long your resources will be busy with that job before you can start the next job. With this knowledge you can schedule jobs and promise viable delivery dates to your customers. Section Ref: Work Measurements Subsection: N/A Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
109. What are the steps involved in doing a time study? Answer: (1) Choose the job for the time study. (2) Tell the worker whose job you will be studying. (3) Break the job into easily recognizable elements. (4) Calculate the number of cycles you must observe. (5) Time each element, record the times, and rate the worker‘s performance. (6) Compute the standard time. Solution: The steps involved in performing a time study are: (1) Choose the job for the time study. (2) Tell the worker whose job you will be studying. (3) Break the job into easily recognizable elements. (4) Calculate the number of cycles you must observe. (5) Time each element, record the times, and rate the worker‘s performance. (6) Compute the standard time. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 3.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
110. What are the steps involved when a time study analyst uses standard elemental times? Answer: (1) Identify the standard elements of the job. (2) Check the database for time studies done on these elements. (3) If no valid studies exist for this or a similar work element, do a time study for the new work element. (4) Adjust the database times if needed. (5) Add the element times to determine the normal time, then multiply by the allowance factor to determine the standard time. Solution: Standard elemental times are developed by (1) Identify the standard elements of the job. (2) Check the database for time studies done on these elements. (3) If no valid studies exist for this or a similar work element, do a time study for the new work element. (4) Adjust the database times if needed. (5) Add the element times to determine the normal time, then multiply by the allowance factor to determine the standard time. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 3.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
111. What are the steps involved in work sampling? Answer: (1) Identify the worker or machine to be sampled. (2) Define the activities to be observed. (3) Estimate the sample size based on the desired level of accuracy and confidence. (4) Develop the random observation schedule. (5) Make observations and record the data. (6) Estimate the proportion of time spent on the given activity. Solution: The steps involved in work sampling include: (1) Identify the worker or machine to be sampled. (2) Define the activities to be observed. (3) Estimate the sample size based on the desired level of accuracy and confidence. (4) Develop the random observation schedule. (5) Make observations and record the data. (6) Estimate the proportion of time spent on the given activity. Section Ref: Work Measurement Subsection: Developing a Standard Work Sampling Level: Easy Time on Task: 3.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
112. What are the characteristics of time-based compensation systems? Answer: wages are easily calculated; the pay is steady and employees know what they will get in their regular paycheck; simplicity; and normally used when measuring output per employee is not applicable Solution: Time-based compensation systems are normally used when measuring output per employee is not applicable—say, for managers, administrative support staff, and some direct laborers. Consider an employee working in your company‘s research and development group. This employee is doing creative work, which is not easily measured in terms of output. The advantage of the time-based system is its simplicity. For the company, wages are easily calculated. For the employees, the pay is steady, and they know what they will get in their regular paycheck. Section Ref: Compensation Subsection: N/A Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe compensation approaches. AACSB: Knowledge
113. Describe why understanding learning curves is important to the organization. Answer: Understanding learning curves is important as it allows for the calculation and planning of how much labor is needed to finish the same task or build the same product a number of times. The company can also better schedule its workload. Solution: Understanding learning curves is important. The amount of labor needed to finish the same task or build the same product a number of times can be calculated, which allows a company to better estimate the labor cost. The company can also better schedule its workload since it knows how much labor is needed to complete the task a specific number of times. Calculating the learning rate also is a means for evaluating productivity. The company can compare its learning rate with that of its competitors. The rate of learning is affected when there are changes in designs, personnel, or procedures. Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
114. Discuss how job design is related to the supply chain. Answer: Every member of the supply chain needs to have his or her role defined so they know what has to be done, who has to do it, how it should be done, and how it should be measured. Solution: Job design requires clearly specifying what has to be done, who has to do it, how it should be done, and how it should be measured. Every member of the supply chain needs to have his or her role similarly defined. Section Ref: Work System Design within OM: How It All Fits Together Subsection: The Supply Chain Link Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe compensation approaches. AACSB: Knowledge
115. What does OSHA stand for and when was it enacted? Answer: The Occupational Safety and Health Act was enacted in 1970 to mandate specific safety conditions that must be met. This created the Occupational Safety and Health Administration. Solution: Concern for worker safety brought about the enactment in 1970 of the Occupational Safety and Health Act (OSHA), which created the Occupational Safety and Health Administration. The law was designed to ensure that all workers have healthy and safe working conditions. It mandates specific safety conditions that are inspected randomly by OSHA inspectors. Section Ref: Job Design Subsection: The Work Environment Level: Easy Time on Task: 3.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
Short Answer
116. Jobs that are physically and mentally doable are said to be __________________. Answer: technically feasible Solution: The technical feasibility of a job is the degree to which an individual or group of individuals is physically and mentally able to do the job. Section Ref: Job Design Subsection: Job Design Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
117. Jobs that cost less than the value they add are said to be __________________. Answer: economically feasible Solution: The economic feasibility of a job is the degree to which the value a job adds and the cost of having the job done create profit for the company. If the job as it is designed costs more than the value it adds, then it is not economically feasible. Section Ref: Job Design Subsection: Job Design Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
118. Jobs that are intrinsically satisfying to the employee are said to be ____________________. Answer: behaviorally feasible Solution: The behavioral feasibility of a job is the degree to which an employee derives intrinsic satisfaction from doing the job. Section Ref: Job Design Subsection: Job Design Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
119. Expanding a job horizontally through increasing the scope of work assigned is called ________________. Answer: job enlargement Solution: Job enlargement is the horizontal expansion of a job. The job designer adds other related tasks to the job so the worker produces a portion of the final product that he or she can recognize. Section Ref: Job Design Subsection: Eliminating Employee Boredom Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
120. Expanding a job vertically through increased worker responsibility is called ____________. Answer: job enrichment Solution: Job enrichment is the vertical expansion of a job. The job designer adds worker responsibility for work planning and/or inspection. This allows the worker some control over the workload in terms of scheduling—although not in terms of how much work to do—and instills a sense of pride in the worker. Section Ref: Job Design Subsection: Eliminating Employee Boredom Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
121. Studying the detailed process for doing a job is called ___________________. Answer: methods analysis Solution: Methods analysis is the process concerned with the detailed process for doing a particular job. Section Ref: Job Design Subsection: Methods Analysis Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss job design. AACSB: Knowledge
122. Studying the time it takes to do a job is called __________________. Answer: work measurement Solution: Work measurement is a way of determining how long it should take to do a job. Work measurement techniques are used to set a standard time for a specific job. Section Ref: Work Measurement Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
123. The time it should take a qualified worker using appropriate process and tools to complete a specific job allowing time for personal fatigue and unavoidable delays is called _________________. Answer: standard time Solution: Standard time is the length of time it should take a qualified worker using appropriate process and tools to complete a specific job, allowing time for personal fatigue and unavoidable delays. Section Ref: Work Measurement Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
124. Developing standard time by observing an operator is called ___________________. Answer: a time study Solution: A time study is a technique for developing a standard time based on actual observations of the operator. Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
125. The average observed time for each work element is its __________________. Answer: mean observed time Solution: The average observed time for each work element is its mean observed time Section Ref: Work Measurement Subsection: Developing Standards Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain work measurement. AACSB: Knowledge
126. Research on twenty Social Security Administration offices‘ individual incentive systems showed that an individual merit pay system had _______________on worker performance. Answer: no effect Solution: A study of twenty Social Security Administration offices showed that an individual merit pay system had no effect on worker performance. This finding tells us that individual incentive plans need significantly more data collection by management than time-based systems. Section Ref: Compensation Subsection: Incentive Plan Trends Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe compensation approaches. AACSB: Analytic
127. Calculating the learning rate is a means for ____________. Answer: evaluating productivity Solution: Calculating the learning rate also is a means for evaluating productivity. Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain work measurement. AACSB: Knowledge
Problems
128. Consider the following information. Standard Deviation Mean Observed Time Work Element (minutes) (minutes) Performance Rating 1 0.4 2.2 0.9 2 0.1 1.2 1.2 3 0.4 4.4 0.8 4 0.2 3.6 1.0 (a) Determine the sample size needed if the standard time estimate is to be within 1% of the true mean 90% of the time. (b) Calculate the normal time for each work element. (c) Using an allowance factor of 10% based on job time, calculate the standard time for each work element and for the entire job. Subsection: (d) Based on the standard time, how many units should an employee performing at 100% of standard complete during an 8-hour day? Answer: (a) 900 for element 1; 189 for element 2; 225 for element 3; 84 for element 4; so 900 is the sample size required (b) 1.98 for element 1; 1.44 for element 2; 3.52 for element 3; 3.60 for element 4 (c) 2.178 for element 1; 1.584 for element 2; 3.872 for element 3; 3.960 for element 4; 11.594 for the entire job (d) 41.4 units z s n a x
2
2
1.65 0.4 Element 1 900 .01 2.2 2
1.65 0.1 Solution: a) Element 2 189 Since element 1 is largest, use a sample of 900. .01 1.2 2
1.65 0.4 Element 3 225 .01 4.4 2
1.65 0.2 Element 4 84 .01 3.6 Normal Time MOT PRF F Element 1 2.2 0.9 1 1.98 b) Element 2 1.2 1.2 1 1.44 Element 3 4.4 0.8 1 3.52 Element 4 3.6 1.0 1 3.6
Standard Time NT (1 PFD) Element 1 1.98 (1 0.1) 2.178 c) Element 2 1.44 (1 0.1) 1.584 The entire job is 2.178 + 1.584 + 3.872 + 3.960 = 11.594 Element 3 3.52 (1 0.1) 3.872 Element 4 3.6 (1 0.1) 3.960 d) 480 minutes/day / 11.594 minutes/unit = 41.4 units in an eight-hour day Section Ref: Work Measurement Subsection: Developing Standards Level: Medium Time on Task: 15 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic 129. You‘ve been assigned to use work sampling to determine how much time Frank spends sorting the mail. You‘ve decided that a preliminary estimate of sample size is required to determine the proportion of time spent sorting the mail with a 97% confidence level and within 5% of the true value. What is the preliminary estimate of sample size? Answer: 471 2
2
z 2.17 Solution: n pˆ (1 pˆ ) 0.50(1 0.50) 470.89 or 471 e .05 Section Ref: Work Measurement Subsection: Developing a Standard Work Sampling Level: Medium Bloom‘s: Application Time on Task: 3.00 minutes Learning Objective 3: Explain work measurement. AACSB: Analytic
130. Frank‘s appliance store has just employed a new repair technician. The factor says that the re is a 90% learning curve. Typically, the first refrigerator repair takes 2 hours. How long should it take this technician to repair the 8th refrigerator? Answer: 1.458 hours Solution: Time for 8th = T Ln 2 0.98 1.458 hours -OR- 2x.729=1.458 hours Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
131. Consider the following information. Standard Deviation Mean Observed Time Work Element (minutes) (minutes) Performance Rating 1 1.2 22.2 1.1 2 0.9 31.2 1.4 3 1.3 44.4 0.6 4 0.6 13.6 1.2 5 0.4 22.8 0.9 (a) Determine the sample size needed if the standard time estimate is to be within 2% of the true mean 99% of the time. (b) Calculate the normal time for each work element. (c) Using an allowance factor of 20% based on the amount of time worked, calculate the standard time for each work element and for the entire job. (d) Based on the standard time, how many units should an employee performing at 110% of standard complete during an 8-hour day? Answer: (a) 49 for element 1; 14 for element 2; 14 for element 3; 32 for element 4; 5 for element 5, so 49 is the sample size required (b) 24.42 for element 1; 43.68 for element 2; 26.64 for element 3; 16.32 for element 4; 20.52 for element 5 (c) 30.53 for element 1; 54.60 for element 2; 33.30 for element 3; 20.40 for element 4; 25.65 for element 5; 164.48 for the entire job (d) 3.21 units Solution:
z s n a x
2
2
2.58 1.2 Element 1 48.6 .02 22.2 2
a)
2.58 0.9 Element 2 13.8 .02 31.2 2
2.58 1.3 Element 3 14.2 .02 44.4
Since element 1 is the largest, use 49 as a sample size.
2
2.58 0.6 Element 4 32.3 .02 13.6 2
2.58 0.4 Element 5 5.1 .02 22.8 Normal Time MOT PRF F Element 1 22.2 1.11 24.42 Element 2 31.2 1.4 1 43.68 b) Element 3 44.4 0.6 1 26.64 Element 4 13.6 1.2 1 16.32 Element 5 22.8 0.9 1 20.52 NT Standard Time (1 PFD) 24.42 Element 1 30.525 1 0.2 43.68 Element 2 54.60 1 0.2 c) The entire job is 30.5 + 54.6 + 33.3 + 20.4 + 25.7 = 164.5. 26.64 Element 3 33.30 1 0.2 16.32 Element 4 20.40 1 0.2 20.52 Element 5 25.65 1 0.2 d) 480 minutes/day / 164.5 minutes/unit = 2.92 units in an eight-hour day; at 110% of standard 2.92*1.1=3.21 units/day Section Ref: Work Measurement Subsection: Developing Standards Level: Medium Time on Task: 15 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement.
AACSB: Analytic
132. Consider the following information. Standard Deviation Mean Observed Time Work Element (minutes) (minutes) Performance Rating 1 0.8 8.2 1.3 2 0.6 9.2 1.1 3 0.5 4.4 0.8 (a) Determine the sample size needed if the standard time estimate is to be within 5% of the true mean 99% of the time. (b) Calculate the normal time for each work element. (c) Using an allowance factor of 15% based on job time, calculate the standard time for each work element and for the entire job. (d) Based on the standard time, how many units should an employee performing at 100% of standard complete during an 8-hour day? Answer: (a) 25 for element 1; 11 for element 2; 34 for element 3; so 34 is the sample size required (b) 10.66 for element 1; 10.12 for element 2; 3.52 for element 3 (c) 12.259 for element 1; 11.638 for element 2; 4.048 for element 3; 27.945 for the entire job (d) 17.2 units Solution:
z s n a x
2
2
2.58 0.8 Element 1 25.34 .05 8.2 2
2.58 0.6 a) Element 2 11.32 Since element 3 is the largest, use 34 samples. .05 9.2 2
2.58 0.5 Element 3 34.38 .05 4.4
Normal Time MOT PRF F Element 1 8.2 1.3 1 10.66 b) Element 2 9.2 1.11 10.12 Element 3 4.4 0.8 1 3.52
Standard Time NT (1 PFD) Element 1 10.66 (1 0.15) 12.259 c) Element 2 10.12 (1 0.15) 11.638 Element 3 3.52 (1 0.15) 4.048
Job time is 12.25 + 11.63 + 4.04 = 27.945 minutes.
d) In an eight-hour day the industrious worker can make 480/27.945 = 17.17 units, Section Ref: Work Measurement Subsection: Developing Standards Level: Medium Time on Task: 12 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
133. Consider the following information. Element 1 Element 2 Element 3 Element 4 Element 5 Observations (minutes) (minutes) (minutes) (minutes) (minutes) Cycle 1 2.79 3.27 9.34 4.12 1.37 Cycle 2 2.97 3.07 8.76 4.42 1.22 Cycle 3 2.59 3.21 8.82 4.01 1.57 Cycle 4 2.47 3.32 9.25 3.87 1.77 Cycle 5 3.21 3.46 8.85 4.45 1.98 Cycle 6 2.88 3.33 9.09 4.21 1.45 Cycle 7 2.56 3.01 8.66 4.00 1.47 Cycle 8 2.76 2.98 8.81 3.93 1.22 Cycle 9 2.69 3.45 8.71 4.34 1.59 Cycle 10 2.35 3.12 9.11 4.22 1.42 Performance rating factor 1.1 0.8 1.0 1.2 0.7 Frequency 1 1 1 1 1 (a) Calculate the mean observed time for each work element. (b) Calculate the normal time for each work element. (c) Using an allowance factor of 10% based on job time, calculate the standard time for each work element and for the entire job. (d) Based on the standard time, how many units should an employee performing at 100% of standard complete each hour? Answer: (a) 2.73 for element 1; 3.22 for element 2; 8.94 for element 3; 4.16 for element 4; 1.51 for element 5; (b) 3.00 for element 1; 2.58 for element 2; 8.94 for element 3; 4.99 for element 4; 1.05 for element 5; (c) 3.30 for element 1; 2.84 for element 2; 9.83 for element 3; 5.49 for element 4; 1.16 for element 5, 22.62 for the entire job (d) 2.65 units
Solution:
MOT1
t 27.27 2.727 i
n
10 ti 32.22 3.222 MOT2 n 10 ti 89.4 8.94 a) MOT3 n 10 ti 41.57 4.157 MOT4 n 10 ti 15.06 1.506 MOT5 n 10 Normal Time MOT PRF F
Element 1 2.727 1.11 2.9997 Element 2 3.222 0.8 1 2.5776 b) Element 3 8.94 11 8.94 Element 4 4.157 1.2 1 4.9884 Element 5 1.506 0.7 1 1.0542 Standard Time NT (1 PFD) Element 1 2.9997 (1 0.1) 3.29967 Element 2 2.5776 (1 0.1) 2.83536 c) Element 3 8.94 (1 0.1) 9.834 Time for the entire job is 22.616 minutes. Element 4 4.9884 (1 0.1) 5.48724 Element 5 1.0542 (1 0.1) 1.15962 d) 60 minutes/hour / 22.616 minutes/unit = 2.653 units/hour Section Ref: Work Measurement Subsection: Developing Standards Level: Medium Time on Task: 15 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
134. Consider the following information. Element 1 Element 2 Element 3 Observations (minutes) (minutes) (minutes) Cycle 1 4.82 8.27 7.34 Cycle 2 4.97 8.37 7.67 Cycle 3 4.69 8.21 7.82 Cycle 4 4.87 8.23 8.25 Cycle 5 4.41 8.46 7.35 Cycle 6 4.88 8.03 8.09 Cycle 7 4.65 8.61 7.83 Cycle 8 4.86 7.98 7.81 Cycle 9 4.99 8.57 7.71 Cycle 10 5.01 8.05 7.11 Performance rating factor 1.3 0.9 1.1 Frequency 1 1 1 (a) Calculate the mean observed time for each work element. (b) Calculate the normal time for each work element. (c) Using an allowance factor of 15% based on the amount of time worked, calculate the standard time for each work element and for the entire job. (d) Based on the standard time, how many units should an employee performing at 120% of standard complete each hour? Answer: (a) 4.82 for element 1; 8.28 for element 2; 7.70 for element 3 (b) 6.26 for element 1; 7.45 for element 2; 8.47 for element 3 (c) 7.36 for element 1; 8.76 for element 2,\; 9.96 for element 3; 26.08 for the entire job (d) 2.76 units Solution: ti 48.15 4.82 MOT1 n 10 ti 82.78 8.28 a) MOT2 n 10 ti 76.98 7.70 MOT3 n 10
Normal Time MOT PRF F Element 1 4.82 1.3 1 6.26 b) Element 2 8.28 0.9 1 7.45 Element 3 7.70 1.11 8.47
NT (1 PFD) 6.26 Element 1 7.36 (1 0.15) c) Entire job takes 7.36 + 8.76 + 9.96 = 26.09 minutes. 7.45 Element 2 8.76 (1 0.15) 8.47 Element 3 9.96 (1 0.15) d) 60 minutes/hour / 26.09 minutes/unit = 2.29 units/hour x 1.2 rating = 2.76 units/hour Section Ref: Work Measurement Subsection: Developing Standards Level: Medium Time on Task: 15 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic Standard Time
135. Consider the following information. Element 1 Element 2 Element 3 Element 4 Element 5 Observations (minutes) (minutes) (minutes) (minutes) (minutes) Cycle 1 4.99 6.27 4.34 5.76 3.47 Cycle 2 6.07 5.82 3.33 Cycle 3 4.79 6.21 4.82 5.51 3.57 Cycle 4 4.67 6.32 5.47 3.47 Cycle 5 6.66 4.65 5.92 3.21 Cycle 6 4.88 6.44 5.71 3.45 Cycle 7 4.76 6.01 5.55 3.47 Cycle 8 5.99 5.63 3.36 Cycle 9 6.45 4.71 5.89 3.19 Cycle 10 4.41 6.33 5.66 3.32 Performance rating factor 1.3 1.1 0.8 0.9 1.0 Frequency 0.6 1 0.4 1 1 (a) Calculate the mean observed time for each work element. (b) Calculate the normal time for each work element. (c) Using an allowance factor of 20% based on job time, calculate the standard time for each work element and for the entire job. (d) Based on the standard time, how many units should an employee performing at 110% of standard complete each hour? Answer: (a) 4.75 for element 1; 6.28 for element 2; 4.63 for element 3; 5.69 for element 4; 3.38 for element 5;
(b) 3.71 for element 1; 6.90 for element 2; 1.48 for element 3; 5.12 for element 4; 3.38 for element 5; (c) 4.45 for element 1; 8.28 for element 2; 1.78 for element 3; 6.15 for element 4; 4.06 for element 5; 24.72 for the entire job; (d) 2.67 units Solution: ti 28.5 4.75 MOT1 n 6 ti 62.75 6.275 MOT2 n 10 ti 18.52 4.63 a) MOT3 n 4 ti 56.92 5.692 MOT4 n 10 ti 33.84 3.384 MOT5 n 10 Normal Time MOT PRF F
Element 1 4.75 1.3 0.6 3.705 Element 2 6.275 1.11 6.9025 b) Element 3 4.63 0.8 0.4 1.4816 Element 4 5.692 0.9 1 5.1228 Element 5 3.384 11 3.384 Standard Time NT (1 PFD) Element 1 3.705 (1 0.2) 4.446 Element 2 6.9025 (1 0.2) 8.283 c) Element 3 1.4816 (1 0.2) 1.778 Time for the entire job is 24.7151 minutes. Element 4 5.1228 (1 0.2) 6.147 Element 5 3.384 (1 0.2) 4.061 d) 60 minutes/hour / 24.7151 minutes/unit = 2.428 units/hour x 1.1 Rating = 2.67 units/hour Section Ref: Work Measurement Subsection: Developing Standards Level: Medium Time on Task: 15 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
136. You have been asked to observe the office manager at Wolf Mountain Christian School to estimate the proportion of time she spends handling visitors to the school who stop by the office. Your 50 observations have revealed the following: Number of Activity Observed Times Observed Talking on phone 13 Handling student problems 5 Directing work of others 12 Handling visitors 3 Working on computer 11 Other 6 (a) Based on the preliminary data, calculate the proportion of time she spends handling visitors to the school who stop by the office. (b) Calculate the sample size needed to estimate the proportion of time she spends handling visitors to the school who stop by the office. Assume a 95% confidence that the results will lie within 5% of the true value. Answer: (a) 0.06 (b) 87 Solution: (a) Total observations= 50; Proportion of time handling visitors = 3/50 = .06 2
2
z 1.96 (b) n pˆ (1 pˆ ) 0.06(1 0.06) 86.6665 e .05 Section Ref: Work Measurement Subsection: Developing a Standard Work Sampling Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
137. You have been asked to observe the shift supervisor at the process test plant for Hudson Chemical Co. to estimate the proportion of time she spends answering questions for the operators. Your 30 observations have revealed the following: Number of Activity Observed Times Observed Talking on the phone to engineers 3 Answering questions for operators 6 Observing work of others 12 Working on computer 4 Other 5 (a) Based on the preliminary data, calculate the proportion of time she spends answering questions for the operators. (b) Calculate the sample size needed to estimate the proportion of time she spends answering questions for the operators. Assume a 90% confidence that the results will lie within 5% of the true value. Answer: (a) 0.20 (b) 175 Solution: a) Total observations = 3 + 6 + 12 + 4 + 5 = 30. Percent answering questions = 6/30 = 0.2. 2
2
z 1.65 b) n pˆ (1 pˆ ) 0.2(1 0.2) 174.24 or 175 e .05 Section Ref: Work Measurement Subsection: Developing a Standard Work Sampling Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
138. The first unit of a product took 180 hours to complete. A 70% learning curve is expected. (a) How long will the 19th unit take to complete? (b) How long will it take to complete the first 19 units? Answer: (a) (180)(.220) = 39.6 hours (b) (180)(7.192) = 1294.56 hours Solution: (a) 180*0.220 = 39.6 hour (b) 180*7.192 = 1294.56 hours Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
139. The first unit of a product took 180 hours to complete. The firm plans to produce 4 units in the first month and 15 units in the second month. If a 70% learning curve is expected, how many hours will the firm use to work on the product during the second month? Answer: (180)(7.192) – (180)(2.758) = 1294.56 – 496.44 = 798.12 hours Solution: (180)(7.192 – 2.758) = 180(4.434) = 798.12 hours Section Ref: Work Measurement Subsection: Learning Curve Theory Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 3: Explain work measurement. AACSB: Analytic
Testbank Chapter 12: Inventory Management LO Section
Subsection
Question #
N/A
Inventory in Service Organizations
1, 2, 85, 111 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 77, 64, 70, 75, 77, 86, 87, 88, 112, 113, 114, 124 23, 136
N/A
78
Basic Inventory Principles
How Manufacturers Use Inventory Inventory Management Objectives
Customer Service Minimum Inventory Investment Cost-Efficient Operations Relevant Inventory Costs
13, 14, 15, 76 16, 18, 19, 20, 90, 91, 92, 115, 125, 135 17
Inventory Record Accuracy N/A
22, 123
N/A
24 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 63, 65, 66, 67, 69, 71, 82, 99, 127, 128, 130, 134, 138, 139, 140, 141, 142, 143
Determining Order Quantities
Mathematical Models for Determining Order Quantity How a Company Justifies Smaller Order Quantities Nonmathematical Techniques for Determining Order Quantity The Single-Period Inventory Model Why Companies Don‘t Always Use the Optimal Order Quantity
48, 68, 121 72, 73, 97, 98, 137 105, 122 74
The Periodic Review System Comparing Continuous Review Systems and Periodic Review Systems
104
N/A
25, 51, 52, 53, 54, 55, 56, 58, 59, 84, 100, 101, 102, 103, 119, 120, 126, 133
N/A
49, 50, 57, 83, 118, 129, 131, 132, 144
N/A
60, 61, 62, 80
Cost-Efficient Operations
89
Minimum Inventory Investment
93
N/A
81
N/A
20, 21, 79, 94, 95, 109, 116, 117
Inventory Management across the Organization
106, 107
The Supply Chain Link
108
Determining Safety Stock Levels
ABC Inventory Classification Inventory Management Objectives
Relevant Inventory Costs Inventory Management within OM: How it All Fits Together
Sustainability Link
110
TOTAL QUESTIONS
144
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Multiple Choice
1. What does WIP stand for? a) work-in-process b) waiting inventory position c) warning of inventory position d) weight of inventory position e) waiting inventory potential Answer: a Solution: Work-in-process (WIP) refers to all items in process throughout the plant. Since products are not manufactured instantaneously, there is always some WIP inventory flowing through the plant. Section Ref: Basic Inventory Principles Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
2. What do we call the purchased items or extracted materials that will be transformed into components or products? a) raw materials inventory b) finished goods inventory c) work-in-process inventory d) distribution inventory e) MRO inventory Answer: a Solution: Raw materials are the purchased items or extracted materials that are transformed into components or products. Section Ref: Basic Inventory Principles Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
3. Hand tools, lubricants, and cleaning supplies are usually examples of what? a) WIP inventory b) finished goods inventory c) raw materials inventory d) MRO inventory e) distribution inventory Answer: d Solution: Maintenance, repair, and operating (MRO) inventory includes maintenance supplies, spare parts, lubricants, cleaning compounds, and daily operating supplies such as pens, pencils, and note pads. MRO items support general operations and maintenance but are not part of the product the company builds. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
4. Finished goods in transit to the customer are called what? a) WIP inventory b) components inventory c) raw materials inventory d) distribution inventory e) MRO inventory Answer: d Solution: Distribution inventory consists of finished goods and spare parts at various points in the distribution system—for example, stored in warehouses or in transit between warehouses and consumers. Section Ref: Basic Inventory Principles Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
5. Which inventory function is specifically designed to allow the company to maintain a level production strategy? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) transportation inventory e) speculative inventory Answer: a Solution: Anticipation inventory or seasonal inventory is built in anticipation of future demand, planned promotional programs, seasonal fluctuations, plant shutdowns, and vacations. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
6. Which inventory function provides a cushion against unexpected supply shortage? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) transportation inventory e) speculative inventory Answer: e Solution: Speculative (or hedge) inventory is a buildup to protect against some future event such as a strike at your supplier, a price increase, or the scarcity of a product that may or may not happen. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
7. Which inventory function helps firms garner quantity discounts? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) transportation inventory e) speculative inventory Answer: c Solution: Lot-size inventory, or cycle stock, results when a company buys or produces more than is immediately needed. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
8. Which of the following inventory functions does NOT involve end products sold to customers? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) MRO inventory e) speculative inventory Answer: d Solution: MRO items support general operations and maintenance but are not part of the product the company builds. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
9. Which is the primary inventory function that is activated after coupons are distributed to customers? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) MRO inventory e) speculative inventory Answer: a Solution: Anticipation inventory or seasonal inventory is built in anticipation of future demand, planned promotional programs, seasonal fluctuations, plant shutdowns, and vacations. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
10. Which inventory function provides a hedge against inflation? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) MRO inventory e) speculative inventory Answer: e Solution: Speculative or hedge inventory is a buildup to protect against some future event such as a strike at your supplier, a price increase, or the scarcity of a product that may or may not happen. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
11. Which inventory function exists between the manufacturing plant and the distribution plant? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) transportation inventory e) speculative inventory Answer: d Solution: Transportation or pipeline inventory is in transit between the manufacturing plant and the distribution warehouse. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
12. Which of the following allows you to calculate the average amount of inventory in transit? a) ATI – (365*d)/t b) ATI – (t/365)*d c) ATI = 365*t*d d) ATI = (tD)/365 e) ATI – (365*t)/d Answer: d Solution: To calculate the average amount of inventory in transit, we use the formula ATI = tD/365 where ATI = average transportation inventory (in units); t = transit time (in days); D = annual demand (in units). Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
13. In inventory management, when discussing customer service, we mean a) whether the customer is available when the product is. b) whether the product is available regardless if the customer desires it or not. c) whether the product is available when the customer wants it. d) whether the customer wants the available product. e) whether repair of the product is available. Answer: c Solution: When we talk about customer service in inventory management, we mean whether or not a product is available for the customer when the customer wants it. Section Ref: Inventory Management Objectives Subsection: Customer Service Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
14. Percentage of orders shipped on schedule is a good measure of finished goods customer service if a) all orders and customers have similar cost impacts. b) all orders and customers have similar value. c) all orders and customers have similar backorder requirements. d) later deliveries are not considered. e) late deliveries contribute to the overall demand. Answer: b Solution: Percentage of orders shipped on schedule is a good measure for finished goods customer service, such as your kayaking equipment company, if all orders and customers have similar value and late deliveries are not excessively late. Section Ref: Inventory Management Objectives Subsection: Customer Service Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
15. Percentage of line items shipped on schedule recognizes that a) not all orders are equal but fails to take into account the dollar value of orders. b) not all orders are equal but this can be compensated for. c) there are differences in orders in terms of both line items and dollar value. d) there is an absolute measure of manufacturing or service time lost because material or parts are not available. e) all orders and customers should be treated equally. Time on Task: 1.00 minutes Answer: a Solution: Percentage of Line Items Shipped on Schedule recognizes that not all orders are equal but fails to take into account the dollar value of orders. Section Ref: Inventory Management Objectives Subsection: Customer Service Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
16. What is the formula for inventory turnover? a) annual cost of goods sold/average inventory in dollars b) annual sales/average inventory in dollars c) average inventory in dollars/annual cost of goods sold d) average inventory in dollars/annual sales e) annual cost of goods sold/annual holding cost Answer: a Solution: We calculate the inventory turnover measure as inventory turnover = annual cost of goods sold/average inventory in dollars. Section Ref: Inventory Management Objectives Subsection: Minimum Inventory Investment Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
17. Companies can achieve cost-efficient operations by using which of the following inventory approaches? a) work-in-process to buffer operations b) inventory building to leverage reduced setup costs c) JIT inventory to reduce overall cost d) level workforce maintenance throughout the year e) speculative selling Answer: b Solution: By building inventory in long production runs, the setup cost is spread over a larger number of units, decreasing the per unit setup cost. Section Ref: Inventory Management Objectives Subsection: Cost-Efficient Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
18. If a company carries 13 weeks of supply, what is the inventory turnover? a) 0.077 b) 4 c) 7.77 d) 676 e) 0.25 Answer: b Solution: 52 wks/13 weeks = 4 Section Ref: Inventory Management Objectives Subsection: Minimum Inventory Investment Level: Medium Time on Task: 2 minutes Bloom‘s: Application Learning Objective 2: Describe inventory management objectives. AACSB: Analytic
19. The formula to calculate weeks of supply is? a) weeks of supply = average weekly usage in dollars/average inventory on hand in dollars b) weeks of supply = average weekly usage/12 * average inventory on hand in dollars c) weeks of supply = average inventory on hand in dollars/average weekly usage in dollars d) weeks of supply = average inventory on hand * average weekly usage in dollars e) weeks of supply = average inventory on hand * average annual usage in dollars * 12 Answer: c Solution: Weeks of supply is calculated by dividing the average on-hand inventory by the average weekly usage in dollars. Section Ref: Inventory Management Objectives Subsection: Minimum Inventory Investment Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
20. Which of the following is NOT affected by decisions about how much inventory to hold? a) item costs b) holding costs c) depreciation d) ordering costs e) stockout costs Answer: c Solution: Item, holding, ordering, and stockout costs are all impacted by the amount of inventory held. Depreciation is not mentioned in the chapter. Section Ref: Relevant Inventory Costs Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain the relevant inventory costs. AACSB: Knowledge
21. All of the following affect holding costs EXCEPT a) storage costs. b) obsolescence cost. c) damage cost. d) setup cost. e) insurance cost. Answer: d Solution: We can determine unit holding costs by examining three cost components: capital costs, storage costs, and risk costs. Setup costs are not included in capital, storage, and risk costs. Section Ref: Relevant Inventory Costs Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain the relevant inventory costs. AACSB: Knowledge
22. If inventory records fail to accurately reflect the quantity of materials available, all EXCEPT which of the following may occur? a) poor customer service b) continuous operations c) lower productivity d) poor material planning e) excessive expediting Answer: b Solution: Inaccurate inventory records can result in lost sales (finished good not available at time of sale), disrupted operations (not enough of a component or raw material to complete a job), poor customer service (late deliveries to customers), lower productivity (additional setups to complete a job), poor material planning (the inventory records are critical in determining MRP quantities), and excessive expediting (trying to obtain necessary items in less than normal lead time). Section Ref: Inventory Record Accuracy Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Discuss inventory record accuracy. AACSB: Knowledge
23. In the service industry it is considered good performance when a company has an inventory loss of only _____. a) 1% b) 2% c) 3% d) 4% e) 5% Answer: a Solution: In retailing, it is considered good performance when a company has an inventory loss of only 1% or less. Section Ref: Basic Inventory Principles Subsection: Inventory in Service Organizations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
24. A SKU is a ______________ at a _____________ geographic location. a) cost; uniquely identified b) profit; generally classified c) specific item; generally classified d) specific item; particular e) general item; particular Answer: d Solution: Inventory management and control are done at the level of the individual item or stockkeeping unit (SKU). An SKU is a specific item at a particular geographic location. Section Ref: Determining Order Quantities Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 6: Calculate order quantities. AACSB: Knowledge
25. In a periodic review inventory system, how many units are ordered? a) target inventory level b) target inventory level on hand balance c) max inventory level min inventory level d) yhe EOQ e) average demand during review period + average demand during lead time Answer: b Solution: With the periodic review system, you determine the quantity of an item your company has on hand at specified, fixed-time intervals (such as every Friday or the last day of every month). You place an order for an amount (Q) equal to the target inventory level (TI), minus the quantity on hand (OH). Section Ref: The Periodic Review System Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
26. Which of the following is an assumption of the basic EOQ model? a) Lead time is unknown. b) Demand may be seasonal. c) Orders can arrive in partial shipments. d) Quantity discounts are not considered. e) Lost sales are allowed, but not back orders. Answer: d Solution: Quantity discounts are not considered: the cost of all units is the same, regardless of the quantity ordered. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
27. Which of the following is an assumption of the basic EOQ model? a) Lead time is known and constant. b) Demand may be seasonal. c) Orders can arrive in partial shipments. d) Quantity discounts are considered. e) Lost sales are allowed, but not back orders. Answer: a Solution: Lead time is known and constant. It is the amount of time it takes from order placement until it arrives at the manufacturing company Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
28. Which of the following is an assumption of the basic EOQ model? a) Lead time is unknown. b) Demand is known and constant. c) Orders can arrive in partial shipments. d) Quantity discounts are considered. e) Lost sales are allowed, but not back orders. Answer: b Solution: Demand for the product is known and constant. This means that we know how much the demand is for every time period and that this amount never changes. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
29. Which of the following is an assumption of the basic EOQ model? a) Lead time is unknown. b) Demand may be seasonal. c) Orders arrive at once (in one lot). d) Quantity discounts are considered. e) Lost sales are allowed, but not back orders. Answer: c Solution: The quantity ordered arrives at once, as shown in Figure 12.3. Since the order is scheduled to arrive just as the company runs out of inventory, the maximum inventory level equals the economic order quantity. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
30. What costs are considered in the basic EOQ model? a) annual ordering costs + annual holding costs b) annual purchasing costs + annual holding costs c) annual ordering costs + annual holding costs + annual shortage costs d) annual purchasing costs + annual ordering costs + annual holding costs + annual shortage costs e) ordering costs per order + annual holding costs Answer: a Solution: Since companies are interested in the costs associated with inventory policies, let‘s calculate the annual ordering or setup costs and the annual holding costs associated with the basic EOQ model. We do not include shortage costs since all demand is satisfied with the basic EOQ model. We do not include the annual item cost either: no quantity discounts are considered in the basic EOQ model, so the annual item cost remains constant regardless of the quantity ordered each time. Given that, our total costs are total annual cost = annual ordering costs + annual holding costs. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 6: Calculate order quantities. AACSB: Knowledge
31. If annual demand is 24,000 units, orders are placed every 0.5 months, and the cost to place an order is $50, what is the annual ordering cost? a) $50 b) $1,200,000 c) $2,400,000 d) $1,200 e) $600,000 Answer: d Solution: 24 x $50 = $1,200 Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 1.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
32. If annual demand is 48,000 units, orders are placed in quantities of 2000 units at a time, and the cost to place an order is $80, what is the annual ordering cost? a) $1,920 b) $3,840,000 c) $160,000 d) $80 e) $4,160 Answer: a Solution: (D/Q)(S) = (48000/2000)80 = $1,920 Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
33. For the basic EOQ model, what is the formula for the total annual cost? a) 2 DS H b) (D/Q)S + (Q/2)H c) (Q/D)S + (Q/2)H d) DQ/S + 2Q/H e) 2DH S + 2H SD Answer: b Solution: Total cost in the EOQ model = SD over Q plus HQ over 2 SD HQ TC Q 2 Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 6: Calculate order quantities. AACSB: Knowledge
34. For the basic EOQ model, how many units should be ordered each time that an order is placed? a) 2DS H b) (D/Q)S + (Q/2)H c) (Q/D)S + (Q/2)H d) DQ/S + 2Q/H e) 2DH S + 2H SD Answer: a Solution: Q = square root (2DS/H) Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 6: Calculate order quantities. AACSB: Knowledge
35. If the EOQ is ordered, which of the following is true? a) Annual ordering cost exceeds annual holding cost. b) Annual holding cost exceeds annual ordering cost. c) Annual ordering cost is equal to annual holding cost. d) The sum of annual ordering cost plus annual holding cost is maximized. e) The annual holding cost curve is decreasing. Answer: c Solution: Note that the annual ordering costs equal the annual holding costs. This is true when we use the EOQ model without rounding. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
36. If the EOQ is ordered, which of the following represents the total annual cost of ordering and holding? a) 2DS H b) 2DH S c) 2DSH d) DSH e) 2H SD Answer: c Solution: Total cost of ordering and holding is square root(2DSH) if ordering at the optimal Q in the EOQ model. Substitute the EOQ formula in the total cost formula and use algebra. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Hard Time on Task: 5.00 minutes Bloom‘s: Knowledge Learning Objective 6: Calculate order quantities. AACSB: Knowledge
37. What does EPQ stand for? a) ensuring purchasing quality b) economic production quota c) economic production quantity d) economic purchasing quota e) economic purchasing quantity Answer: c Solution: Economic Production Quantity (EPQ) Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 6: Calculate order quantities. AACSB: Knowledge
38. Which basic EOQ assumption does the EPQ model relax? a) Lead time is known and constant. b) Demand is known and constant. c) Quantity discounts are not considered. d) Orders arrive at once. e) Back orders are not allowed. Answer: d Solution: EPQ allows for gradual buildup of inventory as your production processes generate it. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
39. If the costs (S and H) and demands (D) are the same, which of the following is NOT true with regard to the EPQ model as compared to the EOQ model? a) The EPQ model produces a lower total annual cost. b) The maximum inventory level is lower under the EPQ model than under the EOQ model. c) Both models use the same formula to compute annual ordering cost. d) The inventory depletion rate is the same for both models. e) Both models use the same formula to compute annual holding cost. Answer: e Solution: The EOQ model uses HQ/2 for holding cost while the EPQ formula uses HImax/2. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 2.00 minutes Bloom‘s: Analysis Learning Objective 6: Calculate order quantities. AACSB: Analytic
40. If the costs (S and H) and demands (D) are the same, which of the following is NOT true with regard to the EPQ model as compared to the EOQ model? a) The EPQ model produces a higher total annual cost. b) The maximum inventory level is lower under the EPQ model than under the EOQ model. c) Both models use the same formula to compute annual ordering cost. d) The inventory depletion rate is the same for both models. e) The two models use different formulas to compute annual holding cost. Answer: a Solution: The EPQ model produces a lower total cost than EOQ if all parameters are the same. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 2.00 minutes Bloom‘s: Analysis Learning Objective 6: Calculate order quantities. AACSB: Analytic
41. If the costs (S and H) and demands (D) are the same, which of the following is NOT true with regard to the EPQ model as compared to the EOQ model? a) The EPQ model produces a lower total annual cost. b) The maximum inventory level is lower under the EPQ model than under the EOQ model. c) The two models use different formulas to compute annual ordering cost. d) The inventory depletion rate is the same for both models. e) The two models use different formulas to compute annual holding cost. Answer: c Solution: Both models use SD/Q to compute annual cost of ordering. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 2.00 minutes Bloom‘s: Analysis Learning Objective 6: Calculate order quantities. AACSB: Analytic
42. If the costs (S and H) and demands (D) are the same, which of the following is NOT true with regard to the EPQ model as compared to the EOQ model? a) The EPQ model produces a lower total annual cost. b) The maximum inventory level is lower under the EPQ model than under the EOQ model. c) Both models use the same formula to compute annual ordering cost. d) The inventory depletion rate is not the same for both models. e) The two models use different formulas to compute annual holding cost. Answer: d Solution: The depletion rate, driven by the annual demand, is the same for both models. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 2.00 minutes Bloom‘s: Analysis Learning Objective 6: Calculate order quantities. AACSB: Analytic
43. If the costs (S and H) and demands (D) are the same, which of the following is true with regard to the EPQ model as compared to the EOQ model? a) The lot size under the EPQ model is bigger than under the EOQ model. b) The maximum inventory level is higher under the EPQ model than under the EOQ model. c) The two models use different formulas to compute annual ordering cost. d) The inventory depletion rate is not the same for both models. e) Both models use the same formula to compute annual holding cost. Answer: a Solution: The EPQ lot size is adjusted by 1 – d/p in the denominator. Since that value by definition is less than 1, this inflates the lot size for an optimal EPQ order. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 2.00 minutes Bloom‘s: Analysis Learning Objective 6: Calculate order quantities. AACSB: Analytic
44. A (an) _________________ inventory record provides an up-to-date inventory balance by recording all inventory transactions as they happen. a) infinite b) everlasting c) constant d) permanent e) perpetual Answer: e Solution: A perpetual inventory record provides an up-to-date inventory balance by recording all inventory transactions—items received into inventory or items disbursed from inventory—as they happen. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Response: See page 437 Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 6: Calculate order quantities. AACSB: Knowledge
45. In a two-bin system, what does the quantity in the second bin represent? a) the EOQ b) the EPQ c) demand during replenishment lead time d) the quantity in the first bin e) safety stock Answer: c Solution: In a two-bin system, a quantity equal to demand during replenishment time is held back, often in a second bin. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 6: Calculate order quantities. AACSB: Knowledge
46. Which of the following statements is NOT true? a) A two-bin system allows a firm to not have to keep perpetual inventory records. b) Using perpetual inventory records results in different order quantities than using a two-bin system. c) In a two-bin system, units in the second bin are not used until the first bin is empty. d) In a two-bin system, the size of the second bin should equal the demand during replenishment lead time. e) Perpetual inventory records are appropriate when using the EPQ model. Answer: b Solution: An alternative to using perpetual inventory records is the two-bin system. In a two-bin system, a quantity equal to demand during replenishment time is held back, often in a second bin. When stock available is depleted, the held-back quantity is made available for use and a replenishment order is placed. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
47. What costs are considered in the quantity discount model? a) annual ordering costs + annual holding costs b) annual purchasing costs + annual holding costs + annual ordering costs c) annual ordering costs + annual holding costs + annual shortage costs d. annual purchasing costs + annual ordering costs + annual shortage costs e. ordering costs per order + annual holding costs Answer: b Solution: Purchasing costs must be considered in a quantity discount model since the cost of goods varies depending on order quantity. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
48. How can the EPQ model be economically reconciled with just-in-time (JIT) production? a) Reduce annual demand (D). b) Increase annual holding cost per unit (H). c) Decrease ordering cost (S). d) Increase annual holding cost per unit (H) and Decrease ordering cost (S). e) The two cannot be reconciled. Answer: c Solution: To decrease the optimal order quantity, we must reduce the product of the terms under the square root. We can reduce the numerator or increase the denominator. It doesn‘t make sense for a company to want to increase its holding costs, so we eliminate the idea of increasing the denominator. To reduce the numerator, we can reduce either the annual demand or the setup cost. Most companies are not trying to reduce their annual demand, so we have only one variable left to use: setup cost. Section Ref: Determining Order Quantities Subsection: How a Company Justifies Smaller Order Quantities Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
49. _____________________ is the probability that demand during lead time will NOT exceed on-hand inventory. a) EOQ service level b) Fill rate c) Stockout risk d) Order-cycle service level e) Lead time service level Answer: d Solution: The order-cycle service level is the probability that demand during lead time does not exceed on-hand inventory—that on-hand stock is adequate to meet demand. Section Ref: Determining Safety Stock Levels Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 7: Calculate the appropriate safety stock level. AACSB: Knowledge
50. The formula for calculating safety stock, when an estimate of demand during lead time and its standard deviation are known, is which of the following? a) SS = lead time * standard deviation b) SS = lead time * z c) SS = z* standard deviation d) SS = z*σdL e) SS = σdL* mean Answer: d Solution: Let‘s look at a case in which an estimate of demand during lead time and its standard deviation are known. In this case, the formula for calculating safety stock is SS = zσdL. Section Ref: Determining Safety Stock Levels Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 7: Calculate the appropriate safety stock level. AACSB: Knowledge
51. Which of the following is used in determining the order quantity in the periodic review system? a) reorder point b) critical ratio c) target inventory level d) EOQ e) EPQ Answer: c Solution: You place an order for an amount (Q) equal to the target inventory level (TI), minus the quantity on hand (OH), similar to the min-max system. Section Ref: The Periodic Review System Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
52. Under a periodic review system, enough inventory must be carried to protect against stockout for the ___________. a) replenishment lead time b) review period c) replenishment lead time plus the review period d) bottleneck cycle time e) bottleneck cycle time plus the replenishment lead time Answer: c Solution: One result from using the periodic review system is a larger average inventory level. Your company must carry enough inventory to protect against stockout for the replenishment lead time plus the review period. The two major decisions to be made when using the periodic review system concern the time between orders and the target inventory level. Section Ref: The Periodic Review System Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
53. What are the two major decisions to be made when using the periodic review system? a) the time between orders and the target inventory level b) the time between orders and the on-hand inventory c) the target inventory level and the on-hand inventory d) the time between orders and the order quantity e) the target inventory level and the order quantity Answer: a Solution: The two major decisions to be made when using the periodic review system concern the time between orders and the target inventory level. Section Ref: The Periodic Review System Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
54. What are two logical ways in which to base the time between orders in a periodic review system? a) replenishment lead time or EOQ calculations b) replenishment lead time or bottleneck cycle time c) convenience or replenishment lead time d) convenience or EOQ calculations e) convenience or bottleneck cycle time Answer: d Solution: The time between orders (TBO) may be selected for convenience reasons. That is, it may be easier for you to review your inventory at the end of each week and prepare your replenishment order then. An alternative is to base your TBO on the economic order quantity calculation. Section Ref: The Periodic Review System Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
55. What does TBO stand for? a) time-based optimization b) target-based ordering c) target-based optimization d) time-based ordering e) time between orders Answer: e Solution: The time between orders (TBO) Section Ref: The Periodic Review System Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
56. In a periodic review system, if you are basing your time between orders on the EOQ, what should be its length in weeks? a) EOQ/52 b) EOQ/average weekly demand c) average weekly demand/EOQ d) 52/EOQ e) (EOQ)(average weekly demand) Answer: b Solution: An alternative is to base your TBO on the economic order quantity calculation. For example, if you determine that the EOQ = 75 units and that weekly demand is 25 units, it makes sense to place orders every three weeks. You simply divide the EOQ by the average weekly demand. Section Ref: The Periodic Review System Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
57. Consider a periodic review inventory system with a lead time of two weeks and a review period of seven weeks. If the standard deviation of weekly demand is 200 and the desired cycleservice level is 86%, what should the safety stock equal? a) 305 b) 516 c) 600 d) 648 e) 1944 Answer: d Solution: SS z RP dL ; 86% service z 1.08
dL 200 2 7 600 SS 1.08(600) 648 Section Ref: Determining Safety Stock Levels Subsection: N/A Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 7: Calculate the appropriate safety stock level. AACSB: Analytic 58. Consider a periodic review system with a lead time of two weeks and a review period of seven weeks. If the average demand per week is 1000 units and 300 units of safety stock are held, what should the target inventory level be? a) 7300 b) 1300 c) 9000 d) 9300 e) 3300 Answer: d Solution: TI d (RP L) z RP L 1000 7 2 300 9300 Section Ref: The Periodic Review System Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 8: Describe the periodic review approach. AACSB: Analytic
59. Consider a periodic review system. The target inventory level is 1000 units. It is time to review the item, and the on-hand inventory level is 200 units. How many units should be ordered? a) 800 b) 1000 c) 1200 d) the EOQ amount e) the safety stock amount Answer: a Solution: Q TI OH 1000 200 800 Section Ref: The Periodic Review System Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 8: Describe the periodic review approach. AACSB: Analytic
60. What implies that about 20% of the inventory items will account for about 80% of the inventory value? a) Little‘s law b) Friedman‘s law c) Pablo‘s proposition d) Keyne‘s law e) Pareto‘s law Answer: e Solution: Pareto‘s law implies that roughly 10–20 percent of a company‘s inventory items account for approximately 60–80 percent of its inventory costs. Section Ref: ABC Inventory Classification Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Explain the ABC inventory classification model. AACSB: Knowledge
61. The ranking in ABC inventory analysis is based on what? a) annual dollar usage b) annual demand in units c) alphabetical order d) unit price e) item number Answer: a Solution: The first step for an ABC inventory analysis is to determine the annual usage for each item. We calculate the total annual dollar volume by multiplying the annual usage by the item cost. We then rank items in descending order based on total dollar volume and calculate the total inventory investment. Section Ref: ABC Inventory Classification Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Explain the ABC inventory classification model. AACSB: Knowledge 62. ABC inventory assumes that a company‘s inventory is ____ equal and _______________ the same level of _________. a) fully; does demand approximately; costs b) counted; requires control for; profit c) not; does not need; control d) not; does not need; ordering e) not; does not need; sales Answer: c Solution: All items in a company‘s inventory are not equal and do not need the same level of control. Using Pareto analysis, we can classify parts as ABC and monitor them according to their classification. Section Ref: ABC Inventory Classification Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Explain the ABC inventory classification model. AACSB: Knowledge
63. Suppose that a plant manager uses economic batch sizes for production of a product. Suppose further that the setup cost is $50 per batch, the holding cost per unit per year is $10, the annual demand is 30,000 units, the firm operates (and experiences demand) 300 days per year, and the production rate per day is 1000 units. What will be the maximum inventory level that this product ever reaches? a) 577 b) 30 c) 519 d) 27,000 e) 58 Answer: c Solution: EPQ
d 2DS I MAX Q1 d p H 1 p
2 30, 000 $50 577.35 100 $10 1 300 100 I MAX 577.35 1 519.62 300 Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic EPQ
64. Mary‘s Flower Boutique needs to ship finished goods from its manufacturing facility to its distribution warehouse. Annual demand for the Flower Boutique is 2400 flowers. Flower Boutique can ship the flowers via regular parcel service (3 days transit time), premium parcel service (1 day transit time), or via public carrier (5 days transit time). What is the average annual transportation inventory for each alternative? a) 19.7, 6.6, 32.9 b) 20, 7, 50 c) 1, 15, 30 d) 25, 46, 99 e) 20, 6.6, 47.0
Answer: a Solution: ATI (regular service) = (3) (2400) / 365 = 19.7 ATI (premium service) = (1) (2400) / 365 = 6.6 ATI (public service) = (5) (2400) / 365 = 32.9 Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 1: Discuss basic inventory principles. AACSB: Analytic
65. For product W, a firm has an annual holding cost percentage of 20%, an ordering cost of $110 per order, and annual demand of 15,000 units. The following price schedule applies to the firm‘s purchases. Units Ordered Price per Unit 1–250 $30.00 251–500 $28.00 501–750 $26.00 ≥ 751 $25.00 What is the optimal order quantity? a) 251 b) 501 c) 696 d) 751 e) 812 Answer: e Solution: 2 DS 2 15000 110 Q 812.4 H .2 25 SD HQ 110 15000 .2 25 812.4 TC DC 15000 25 $379, 062 Q 2 812.4 2 This amount is feasible at this price. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
66. A computer company has annual demand of 20,000. They want to determine EOQ for circuit boards which have an annual holding cost (H) of $10/unit, and an ordering cost (S) of $75. The purchasing lead time is 5 days. What is the reorder point (R) and the TC if the company works 250 days per year? a) 300 units, $3,000 b) 400 units, $5,477 c) 200 units, $2,000 d) 350 units, $5, 277 e) 400 units, $5,350 Answer: b Solution: 2DS 2 * 20,000* $75 Q 548 units H $10 R = 20,000 / 250 days x 5 days = 400 units TC = (20,000/548 x $75) + (548 / 2 x $10) = $ 2,737 + $ 2,740 = $ 5,477 Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
67. What is the formula for calculating the maximum inventory level? a) Imax = H(1-d/p) b) Imax = Q(1-d/p) c) Imin = Q(1-s/p) d) Imax = Q(1-d/s) e) Imin = Q(1-d/h) Answer: b Solution: The formula for calculating the maximum inventory level in the EPQ model is Q(1 _ d/p). Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 6: Calculate order quantities. AACSB: Knowledge
68. How can both the JIT and EOQ inventory theories effectively be reconciled? a) They can‘t. A firm must choose either one or the other. b) by using MRP c) by considering the setup cost as a variable instead of a parameter d) by applying Kanban cards to the EOQ system e) by assuming a finite production rate Answer: c Solution: You can see that reducing the setup cost allows us to economically decrease order quantity. If a company fails to reduce its setup costs and just starts producing in smaller order quantities, it will face higher total annual inventory costs. Section Ref: Determining Order Quantities Subsection: How a Company Justifies Smaller Order Quantities Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
69. Consider the following all-units quantity discount schedule and calculated EOQs. Units Ordered Price per Unit EOQ at That Price 0-999 $36.00 1200 1,000-1,999 $32.00 1450 2,000-4,999 $30.00 2500 5,000-8,000 $26.00 2780 ≥ 8,000 $20.00 6000 Which of the following sets of order quantities is guaranteed to contain the optimal solution? a) {1450, 2500} b) {1450, 999} c) {0, 1000, 2000, 5000, 8000} d) {1200, 1450, 2500, 2780, 6000} e) {2500, 5000, 8000}
Answer: e Solution: The basic procedure for finding a price break EOQ begins with the lowest possible price; calculate the EOQ and if that is within the lowest price range of quantities, then you‘re done. If not, then increase the price and recalculate the EOQ. These steps are repeated and total costs are calculated with buying the minimum quantity to achieve the price break. The set of quantities that contains all the price break minimums should have the optimal solution. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
70. What is the formula for calculating the average transportation inventory (ATI)? a) ATI = tD / 365/2 b) ATI = tU / 365 c) ATI = tD / 180x2 d) ATI = txD + 365 e) ATI = tD / 365 Answer: e Solution: To calculate the average amount of inventory in transit, we use the formula ATI = 365/tD; where ATI = average transportation inventory (in units); t = transit time (in days); D = annual demand (in units). Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
71. When is the basic EOQ model a special case of the EPQ model? a) The demand per day approaches the demand per year. b) The production rate per day approaches 0. c) The production rate per day approaches infinity. d) The back order cost approaches infinity. e) d/p = 1
Answer: c Solution: As p approaches infinity, the term 1 – d/p approaches 1, so the equation for EPQ reduces to the EOQ equation for Q. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
72. The technique of fixed-order quantity involves a company a) ordering exactly what is needed. b) specifying the number of units to order whenever an order is placed. c) placing a replenishment order whenever the on-hand inventory level falls below a minimum level. d) determining the order quantity using the total demand for the item in the next n months. e) ordering a quantity that will maintain the inventory at a predetermined maximum level. Answer: b Solution: Fixed-order quantity specifies the number of units to order each time you place an order for a certain SKU or item. Section Ref: Determining Order Quantities Subsection: Nonmathematical Techniques for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 6: Calculate order quantities. AACSB: Knowledge
73. Consider the basic EOQ model. If annual demand doubles, what happens to the total annual setup and holding cost? a) It doubles. b) It increases by 41.42%. c) It remains the same. d) The impact depends upon the value of the setup cost. e) It quadruples (increases by 400%).
Answer: b Solution: As demand doubles, Q increases by the square root of 2 (which is 1.4142) so both holding and setup costs increase by 41.42% Section Ref: Determining Order Quantities Subsection: Nonmathematical Techniques for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
74. Which of the following is NOT an identified reason why manufacturing firms do not use optimal EOQ order quantities? a) They do not have known uniform demand. b) Some suppliers have a minimum order quantity. c) The way the material is shipped is a factor. d) They do not know the sales price. e) There is insufficient storage space. Answer: d Solution: Four motivations discussed in the book for not using EOQ are companies that do not have a uniform demand, have shipping minimums, have insufficient storage space, and how the material is shipped. Section Ref: Determining Order Quantity Subsection: Why Companies Don‘t Always Use the Optimal Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
75. Which of the following is NOT one of the six ways to use inventory? a) seasonal inventory b) JIT inventory c) pipeline inventory d) hedge inventory e) MRO inventory
Answer: b Solution: The functions of inventory include anticipation, fluctuation, lot-size, transportation, speculative, and MRO. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
76. The inventory objective of customer service is measured by any of the following EXCEPT _______________. a) weeks of supply b) percentage of dollar volume shipped on schedule c) idle time due to component and material shortages d) percentage of orders shipped on schedule e) percentage of line items shipped on schedule Answer: a Solution: Customer service is a company‘s ability to satisfy the needs of its customers. When we talk about customer service in inventory management, we mean whether or not a product is available for the customer when the customer wants it. In this sense, customer service measures the effectiveness of the company‘s inventory management. Section Ref: Inventory Management Objectives Subsection: Customer Service Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
77. Carolco is a multinational company owned by a global entrepreneur that has production and distribution operations worldwide. They are currently considering shipping alternatives from MLam Enterprises to their central U.S. distribution center. Shipping by sea freight requires two weeks at sea, a day unloading at a western U.S. port, and two days on semi-truck before products reach the distribution center. Air shipping takes three days in the air and port and another day on semi-truck. Demand for one popular item, the Matzo Matic, is 12,000 units annually. What is the difference in pipeline inventory between the two shipping alternatives? a) 193 units b) 305 units c) 427 units d) 559 units Answer: c Solution: ATI = tD/365; for sea freight 17*12,000/365 = 558.9, for air 4*12,000/365 = 131.5; difference is 558.9 – 131.5 = 427.4 units. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 1: Discuss basic inventory principles. AACSB: Analytic
78. Champion Cooling provides window air conditioners to apartment complexes and independent property owners in a metropolitan area. A review of the sales records from July 2019 reveals that twenty unique customers requested three different types of 5,000 BTU units, seven different types of 12,000 BTU units, and five different types of 18,000 BTU units. A review of shipping records for the same month indicates that Champion Cooling was unable to ship any of the 5,000 BTU units on schedule, but all of the other air conditioners shipped on time. Which of the following statements is most accurate? a) The percentage of line items shipped on schedule is 80%. a) The percentage of orders shipped on schedule is 75%. c) The percentage dollar volume shipped on schedule is 75%. d) The percentage of idle time due to material and component shortages is 20%. Answer: a Solution: There are 3 + 7 + 5 = 15 different line items, 12 of which shipped on schedule. Percentage of line items on schedule is 12/15 = 80% Section Ref: Inventory Management Objectives Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 2: Describe inventory management objectives. AACSB: Analytic
79. Lisa‘s Etsy Store has a robust inventory of miniature cat figurines that is conservatively valued at $15,000. Her cost of capital is only 5% but her risk cost, entirely attributable to her eight pet cats damaging her inventory, is 20%. Her storage cost can be estimated at 3.875%. What is the annual holding cost of Lisa‘s Etsy Store to the nearest dollar? a) $1,631 b) $4,331 c) $4,551 d) $9,551 Answer: b Solution: Holding cost = $15,000 x (5% + 20% + 3.875%) = $4,331.25 Section Ref: Relevant Inventory Costs Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 3: Explain the relevant inventory costs. AACSB: Analytic
80. Ocho Enterprises is performing an ABC analysis of its inventory of cat treats and runs the report shown in the following table. Which option lists an A, a B, and a C item in that order? Item Unit Value Annual Usage 10 $1.90 1466 20 $2.10 599 30 $18.60 163 40 $15.25 73 50 $12.35 2215 60 $5.70 196 70 $16.20 110 80 $4.25 535 90 $24.25 1880 100 $6.20 146 110 $4.70 980 120 $5.60 150 130 $6.20 164 140 $13.10 1962 150 $11.30 419 a) Item 90; Item 50; Item 140 b) Item 150; Item 110; Item 30 c) Item 100; Item 20; Item 10 d) Item 140; Item 110; Item 130
Answer: d Solution: This table is sorted from greatest Annual $ Usage to smallest. Item Unit Value Annual Annual $ Cumulative Classification Usage Usage Percentage 90 $24.25 1880 $45,590.00 37% A 50 $12.35 2215 $27,355.25 59% A 140 $13.10 1962 $25,702.20 79% A 150 $11.30 419 $4,734.70 83% B 110 $4.70 980 $4,606.00 87% B 30 $18.60 163 $3,031.80 89% B 10 $1.90 1466 $2,785.40 92% B 80 $4.25 535 $2,273.75 94% B 70 $16.20 110 $1,782.00 95% C 20 $2.10 599 $1,257.90 96% C 60 $5.70 196 $1,117.20 97% C 40 $15.25 73 $1,113.25 98% C 130 $6.20 164 $1,016.80 99% C 100 $6.20 146 $905.20 99% C 120 $5.60 150 $840.00 100% C Section Ref: ABC Inventory Classification Subsection: N/A Level: Medium Time on Task: 1.00 minutes Bloom‘s: Application Learning Objective 4: Explain the ABC inventory classification model. AACSB: Analytic 81. Nathan works as a bartender at Sherlock‘s Pub and occasionally pours regular customers a shot of whisky without charging them or recording the transaction. Sherlock‘s uses a periodic counting system to manage the bar inventory. The most likely outcome of Nathan's generous bartending practice is a a) shift to vendor-managed inventory. b) lost sale of a whisky-based drink. c) decrease in the frequency of cycle counting. d) match between the ticket and record during the next physical inventory.
Answer: b Solution: Inventory will be lower than anticipated. Inaccurate inventory records can result in lost sales. Section Ref: Inventory Record Accuracy Subsection: N/A Level: Medium Time on Task: 1.00 minutes Bloom‘s: Application Learning Objective 5: Discuss inventory record accuracy. AACSB: Knowledge
82. The Bodega uses an EOQ system to manage their inventory of powdered drink mixes. Demand for instant lemonade is 130 packages per week over the course of the 52-week year. The ordering cost is $20 and the annual holding cost is 15%. The cost to The Bodega is $1/package, and they sell it to their customers at $3/package. There is a 1-week replenishment time once they place an order with their supplier. How many orders per year does The Bodega place with their supplier? a) 5 b) 6 c) 7 d) 8 Answer: a Solution:
2 130 52 $20 2 DS 1343 units / order H 15% $1 130 52 units / year 5 orders / year 1343 units / order Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic Q
83. K-Paul‘s orders celery, green peppers, and onions by the pound and receives an order two days after they place it. Since virtually every dish served at the restaurant uses these three ingredients, it is critical that they never run out. On average they use 300 pounds a day and the standard deviation of demand during the two-day lead time is also 300 pounds. Paul returns to the restaurant after an extended vacation and learns that the sous chef has been using a reorder point of 1000 pounds because he likes round numbers. What service level is the sous chef using? a) 86.88% b) 90.88% c) 94.28% d) 98.28%w Answer: b R dL z dL Solution: 1000 300 2 z 300 1000 600 z 1.33 look up in normal table 90.88% 300 Section Ref: Determining Safety Stock Levels Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 7: Calculate the appropriate safety stock levels. AACSB: Analytic
84. Big Truck Tacos uses a periodic review system to manage their corn and flour tortilla inventory. They operate seven days a week and place an order every Monday morning. On average, they use 250 flour tortillas each day with a standard deviation of 30. It takes their supplier two days to fill an order. If they wish to maintain a 98% service level, what is their target inventory? a) 1934 b) 2276 c) 2435 d) 2804 Answer: c
Solution: TI d L RP z L RP 250 2 7 2.0537 30 2 7 2435 Section Ref: The Periodic Review System Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 8: Describe the periodic review approach. AACSB: Analytic
True/False
85. World-class companies are known for having zero WIP inventory in their facilities. Answer: False Solution: Since products are not manufactured instantaneously, there is always some WIP inventory flowing through the plant. Section Ref: Basic Inventory Principles Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge 86. Firms that ―chase‖ demand by hiring MORE workers have LESS need for anticipation inventory. Answer: True Solution: Anticipation inventory or seasonal inventory is built in anticipation of future demand, planned promotional programs, seasonal fluctuations, plant shutdowns, and vacations. Hiring seasonal workers mitigates the need for inventory buildup. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
87. Anticipation inventory is also called cycle stock. Answer: False Solution: Anticipation inventory or seasonal inventory is built in anticipation of future demand, planned promotional programs, seasonal fluctuations, plant shutdowns, and vacations. Lot-size Inventory or Cycle Stock results when a company buys or produces more than is immediately needed. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
88. When order quantities are higher, average transportation inventory is higher. Answer: False Solution: ATI is directly related to transit time and annual demand, not order quantities. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
89. A long production run implies a large setup cost per unit. Answer: False Solution: Third, by building inventory in long production runs, the setup cost is spread over a larger number of units, decreasing the per unit setup cost. Section Ref: Inventory Management Objectives Subsection: Cost-Efficient Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
90. Inventory turnover is the reciprocal of weeks of supply. Answer: False Solution: We calculate the inventory turnover measure as inventory turnover = annual cost of goods sold divided by average inventory in dollars. Section Ref: Inventory Management Objectives Subsection: Minimum Inventory Investment Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
91. Inventory turnover is the reciprocal of years of supply. Answer: True Solution: Note that there is a relationship between inventory turnover and weeks of supply. If you divide total weeks per year (52) by the weeks of supply (10.4), you see that the answer is the same as when you calculated inventory turnover. If you divide total number of weeks (52) by the inventory turnover rate (5), the answer is 10.4 weeks of supply. Section Ref: Inventory Management Objectives Subsection: Minimum Inventory Investment Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
92. In general, if car company A has a smaller weeks of supply than car company B does, then car company A is using its inventory MORE effectively. Answer: True Solution: Although there is no magic number for inventory turnover, the higher the number, the more effectively the company is using its inventory. One measure of the level of demand that can be satisfied by on-hand inventory is weeks of supply. Section Ref: Inventory Management Objectives Subsection: Minimum Inventory Investment Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
93. Any inventory turnover less than 4 is considered to be poor performance. Answer: False Solution: Although there is no magic number for inventory turnover, the higher the number, the more effectively the company is using its inventory. Section Ref: Inventory Management Objectives Subsection: Minimum Inventory Investment Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
94. Even if the company already owns the storage space and incurs no additional expense for storing the inventory, we still include the cost of that storage space as part of holding costs. Answer: False Solution: We can determine unit holding costs by examining three cost components: capital costs, storage costs, and risk costs. If there are no storage costs incurred from physical warehousing, then the storage space should not be included. Section Ref: Relevant Inventory Costs Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain the relevant inventory costs. AACSB: Knowledge
95. Whenever demand exceeds supply, the company experiences a lost sale. Answer: False Solution: Companies incur shortage costs when customer demand exceeds the available inventory for an item. This may result in a back order or a lost sale. Section Ref: Relevant Inventory Costs Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain the relevant inventory costs. AACSB: Knowledge
96. Even though loss of customer goodwill is an intangible cost, it is considered a type of shortage cost. Answer: True Solution: In the case of the back order, shortage costs result from the additional paperwork to track the order and the possible added expense of overnight shipping rather than normal delivery. There is also the lost customer goodwill, an intangible cost. Section Ref: Relevant Inventory Costs Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain the relevant inventory costs. AACSB: Knowledge
97. Lot-for-lot ordering is commonly used in material requirements planning systems. Answer: True Solution: Lot-for-lot is ordering exactly what you need. This system is also commonly used in material requirements planning (MRP) systems Section Ref: Determining Order Quantities Subsection: Non-mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
98. A min-max inventory system implies a larger average inventory than a periodic review inventory system. Answer: False Solution: The min-max system involves placing an order when the on-hand inventory falls below a predetermined minimum level. The quantity ordered is the difference between the quantity available and the predetermined maximum inventory level. Both the quantity and time between orders may vary. This in no way implies a larger average inventory than a periodic system. Section Ref: Determining Order Quantities Subsection: Non-mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
99. In the basic EOQ model, the maximum inventory level equals the economic order quantity. Answer: True Solution: The order quantity Q arrives in full as the inventory level drops to zero, so the maximum level of inventory is the Q as it arrives. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
100. The reorder point is used in determining the order quantity in the periodic review system. Answer: False Solution: Q = TI – OH (target inventory minus on-hand inventory) Section Ref: The Periodic Review System Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
101. Under a periodic review system, enough inventory must be carried to protect against stockout for the replenishment lead time plus the review period. Answer: True Solution: One result from using the periodic review system is a larger average inventory level. Your company must carry enough inventory to protect against stockout for the replenishment lead time plus the review period. Section Ref: The Periodic Review System Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
102. The two major decisions to be made when using the periodic review system are the target inventory level and the order quantity. Answer: False Solution: The two major decisions to be made when using the periodic review system concern the time between orders and the target inventory level. Section Ref: The Periodic Review System Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
103. In a periodic review system, the time between orders should never be based on the EOQ calculation. Answer: False Solution: The time between orders (TBO) may be selected for convenience reasons. That is, it may be easier for you to review your inventory at the end of each week and prepare your replenishment order then. An alternative is to base your TBO on the economic order quantity calculation. Section Ref: The Periodic Review System Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
104. In general, companies use periodic review systems for items that are expensive and/or critical to the company. Answer: False Solution: In general, companies use CRS for items that are expensive and/or critical to the company because CRS more closely monitors these items and reduces inventory investment. Section Ref: The Periodic Review System Subsection: Comparing Continuous Review Systems and Periodic Review Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
105. The single-period inventory model objective is to balance the sale of a unit with the cost incurred for each unit sold. Answer: False Solution: The objective is to balance the gross profit generated by the sale of a unit with the cost incurred for each unit that is not sold until after the primary selling period has elapsed. Section Ref: Determining Order Quantities Subsection: The Single-Period Inventory Model Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
106. Inventory record accuracy is especially critical for master production schedule users. Answer: True Solution: Manufacturing‘s cost efficiency can be affected by inventory decisions. If insufficient material is available, either because items are not ordered on time or not ordered in the right quantities, manufacturing efficiency decreases and unit costs increase. Unit costs can also increase when too much material is ordered or when it is ordered too soon. Section Ref: Inventory Management within OM: How it All Fits Together Subsection: Inventory Management across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge 107. Manufacturing‘s cost efficiency is NOT affected by inventory decisions. Answer: False Solution: Manufacturing‘s cost efficiency can be affected by inventory decisions. If insufficient material is available, either because items are not ordered on time or not ordered in the right quantities, manufacturing efficiency decreases and unit costs increase. Unit costs can also increase when too much material is ordered or when it is ordered too soon. Section Ref: Inventory Management within OM: How it All Fits Together Subsection: Inventory Management across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
108. Inventory management is a key component of effective supply chain performance. Answer: True Solution: Inventory management is a key component of effective supply chain performance. Section Ref: Inventory Management within OM: How it All Fits Together Subsection: The Supply Chain Link Level: Easy Bloom‘s: Comprehension Time on Task: 1.00 minutes Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
109. Risk costs are obsolescence, damage or deterioration, theft, insurance, and taxes. Answer: True Solution: Risk costs include obsolescence, damage or deterioration, theft, insurance, and taxes. Section Ref: Relevant Inventory Costs Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain the relevant inventory costs. AACSB: Knowledge
110. Inventory management, order policies, and storage and movement of goods are NOT areas where significant gains in sustainability can be make for companies. Answer: False Solution: Inventory management, order policies, and storage and movement of goods are all areas where significant gains in sustainability can be made for companies. Section Ref: Section Ref: Inventory Management within OM: How it All Fits Together Subsection: Sustainability Link Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
Essay
111. What does WIP stand for? Answer: work-in-process Solution: Work-in-process (WIP) refers to all items in process throughout the plant. Section Ref: Basic Inventory Principles Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
112. What are items used in support of manufacturing and maintenance called? Answer: maintenance, repair, and operational (MRO) inventory Solution: Maintenance, Repair, and Operating (MRO) Inventory includes maintenance supplies, spare parts, lubricants, cleaning compounds, and daily operating supplies such as pens, pencils, and note pads. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Subsection: Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
113. What inventory function protects against supply shortages? Answer: speculative inventory Solution: A company typically builds speculative inventory to ensure a continuous supply of necessary items. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
114. What is another name for speculative inventory? Answer: hedge inventory Solution: Speculative or hedge inventory is a buildup to protect against some future event such as a strike at your supplier, a price increase, or the scarcity of a product that may or may not happen. Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
115. What is the formula for inventory turnover? Answer: inventory turnover = annual cost of goods sold / average inventory in dollars Solution: inventory turnover = annual cost of goods sold / average inventory in dollars Section Ref: Inventory Management Objectives Subsection: Minimum Inventory Investment Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe inventory management objectives. AACSB: Knowledge
116. What are the three major categories of holding costs? Answer: capital costs, storage costs, and risk costs Solution: We can determine unit holding costs by examining three cost components: capital costs, storage costs, and risk costs. Section Ref: Relevant Inventory Costs Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Explain the relevant inventory costs. AACSB: Knowledge
117. When a company experiences a stockout, what are the two possibilities? Answer: back order and lost sale Solution: One of two things happens during a stockout: either the customer allows you to backorder items or the customer decides to buy the item from another company and you experience a lost sale. Section Ref: Relevant Inventory Costs Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Explain the relevant inventory costs. AACSB: Knowledge
118. Discuss some of the factors on how much safety stock will be kept on hand. Answer: The amount of safety stock to hold depends on the variability of demand and lead time and the desired order-cycle service level. Solution: The amount of safety stock to hold depends on the variability of demand and lead time and the desired order-cycle service level. The safety stock needed to achieve a particular ordercycle service level increases as demand and lead time variability increase. The greater the uncertainty, the more safety stock is needed. Section Ref: Determining Safety Stock Levels Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 7: Calculate the appropriate safety stock level. AACSB: Knowledge
119. Describe advantages and disadvantages of periodic review systems. Answer: An advantage is that inventory is counted only at specific time intervals. You do not need to monitor the inventory level between review periods. This system also makes sense when you order several different items from a supplier. A potential disadvantage includes the varying replenishment levels, possibly precluding, for example, quantity discounts. Also, the average inventory level will be larger than under reorder point systems. Solution: The advantages of continuous review systems (CRS) are the disadvantages of periodic review systems (PRS). For instance, a CRS has no set review periods. This lack of specified review periods means that less inventory is needed to protect against stockouts. With a PRS, enough inventory must be carried to cover both the lead time and the review period. Since a CRS has no review period, it has a smaller average inventory investment. On the other hand, a CRS means significantly more work because the inventory balances are updated after each transaction rather than periodically. A PRS means less work because inventory balances are only reviewed
and updated periodically. So a PRS makes it easier to consolidate orders from a single supplier because you can review all of those items at the same time interval, whereas the CRS is designed to handle items individually. In general, companies use CRS for items that are expensive and/or critical to the company because CRS more closely monitors these items and reduces inventory investment. Companies typically use both systems depending on the value and criticality of the items to be monitored. Section Ref: The Periodic Review System Subsection: Comparing Continuous Review Systems and Periodic Review Systems Level: Easy Time on Task: 5.00 minutes Bloom‘s: Comprehension Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
120. Define periodic review system. Answer: The periodic review system requires periodic reviews of the on-hand quantity to determine the size of the replenishment order. Solution: With the periodic review system, you determine the quantity of an item your company has on hand at specified, fixed-time intervals (such as every Friday or the last day of every month). You place an order for an amount (Q) equal to the target inventory level (TI), minus the quantity on hand (OH ), similar to the min-max system. The difference is that with the periodic review system, the time between orders is constant (such as every hour, every day, every week, or every month) with varying quantities ordered. Section Ref: The Periodic Review System Subsection: N/A Level: Easy Time on Task: 5.00 minutes Bloom‘s: Knowledge Learning Objective 8: Describe the periodic review approach. AACSB: Knowledge
121. List some advantages of small order quantities. Answer: improved customer responsiveness, reduced cycle inventory, reduced work-in-process inventory, and reduced inventories of raw materials and purchased components Solution: One of the principles of the just-in-time philosophy, discussed in Chapter 7, is to reduce order quantities ideally down to an order size of one unit. Smaller orders improve customer responsiveness, reduce cycle inventory, reduce work-in-process (WIP) inventory, and reduce inventories of raw materials and purchased components. Section Ref: Determining Order Quantity Subsection: How a Company Justifies Smaller Order Quantities Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
122. What are the characteristics of a single-period inventory model? Answer: They are sold at their regular price only during a single time period. Demand for these products is highly variable but follows known probability distribution. Salvage value of these products is less than its original costs. Solution: The single-period model is designed for products that share the following characteristics: They are sold at their regular price only during a single time period. Demand for these products is highly variable but follows a known probability distribution. Salvage value of these products is less than their original cost, so you lose money when they are sold for their salvage value. Section Ref: Determining Order Quantity Subsection: The Single-Period Inventory Model Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 6: Calculate order quantities. AACSB: Knowledge
123. What are the two methods for checking record accuracy and what do they do? Answer: Periodic and cycle counting; periodic counting is when a physical inventory is taken periodically, usually annually. Cycle counting is when pre-specified items are counted daily. Solution: Cycle counting is a method of counting inventory throughout the year. This is a series of mini-physical inventories done daily of some prespecified items. The frequency of counting a particular item depends on the importance and value of the item. Periodic counting satisfies auditors that the inventory records accurately reflect the value of the inventory on hand. For material planners, the physical inventory is an opportunity to correct errors. Section Ref: Inventory Record Accuracy Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Knowledge Learning Objective 5: Discuss inventory record accuracy. AACSB: Knowledge
Problems
124. If a firm has an annual demand of 50,000 units and average transit time (in days) is 15, what is the average transportation inventory? Answer: 2055 Solution: ATI = tD/365 = 15*50000/365 = 2054.79, round to 2055 Section Ref: Basic Inventory Principles Subsection: How Manufacturers Use Inventory Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 1: Discuss basic inventory principles. AACSB: Analytic
125. Suppose that the annual cost of goods sold is $4,000,000, annual sales amount to $6,000,000, and average inventory in dollars equals $2,000,000. What is the inventory turnover? Answer: 2 Solution: Turnover = 4,000,000/2,000,000 = 2 Section Ref: Inventory Management Objectives Subsection: Minimum Inventory Investment Level: Medium Time on Task: 1.0 minutes Bloom‘s: Application Learning Objective 2: Describe inventory management objectives. AACSB: Analytic 126. Frank‘s dairy inventory review is every 7 days and they they consume an average of 15 cases of milk cartons every day? Frank‘s new milk carton supplier says they can deliver an order every 5 days. While Frank‘s material coordinator says they should order 45 cases at a time, what is their target inventory level if they do not want to maintain a safety stock? Answer: 180 Solution: TI d ( RP L ) SS 15 (7 5) 0 180 Section Ref: The Periodic Review System Subsection: N/A Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 8: Describe the periodic review approach. AACSB: Analytic 127. Tom‘s tire shop annual demand is 1,460 tires and they are capable of producing 2,920 tires per year. Tom‘s production manager plans to order 12 tires at a time. What is the maximum inventory level? Answer: 6
d 1460 Solution: Imax Q 1 12 1 6 2920 p Section Ref: Determining Order Quantity Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
128. Consider a firm with an annual demand of 6000 units, a setup cost of $20 per order, and an annual holding cost per unit of $2. If the company purchases 1200 units every time that they order, what are the total annual setup and holding costs? Answer: $1300
SD HQ 20 6000 2 1200 $1300 Q 2 1200 2 Section Ref: Determining Order Quantity Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic Solution: TC
129. Troy Enterprises uses a continuous review inventory control system. The firm operates 50 weeks per year, with an annual demand of 50,000 units, an ordering cost of $35 per order, a holding cost of $1 per unit per year, a lead time of 3 weeks, and a standard deviation of demand during lead time equal to 216.51 units. (a) How many units should be ordered at a time (rounded to the nearest unit)? (b) What is the reorder point if a 94% order-cycle service level is desired? Answer: (a) 1871; (b) 3336 Solution: 2DS 2 50,000 $35 a) Q 1871 H $1 50000 3 1.55 216.51 3336 b) R dL z dL 50 Section Ref: Determining Safety Stock Levels Subsection: N/A Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
130. Jefferson Products offers the following all-units quantity discount schedule for its 4-feet-by8-feet sheets of quality plywood. Order Size Price 1–9 sheets $25 10–49 sheets $23 50–99 sheets $21 100 sheets or more $18 Washington Home Furnishings orders plywood from Jefferson Products. The firm has an ordering cost of $50, an annual inventory holding cost percentage of 20%, and an annual demand of 250 sheets. What should the order size be every time that an order is placed? Answer: 100 units Solution: 2 DS 2 250 50 Q 83.33 H .2 18 SD HQ 52 250 .2 18 100 TC DC 250 18 $4805 Q 2 100 2
2 DS 2 250 50 Q 77.15 H .2 21 SD HQ 52 250 .2 21 77.15 TC DC 250 21 $5574.04 Q 2 77.15 2 Section Ref: Determining Order Quantity Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 8.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
Order Q=100
131. For a continuous review policy, 92% order-cycle service level, and standard deviation of replenishment lead time of 189.31 units, how many units of safety stock should be held? Answer: 266 Solution: SS z dL ;92% service z 1.405 SS 1.405 189.31 265.99 266 Section Ref: Determining Safety Stock Levels Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 7: Calculate the appropriate safety stock level. AACSB: Analytic
132. For a continuous review policy, if the standard deviation of replenishment lead time is 171.58 units and 266 units of safety stock are held, what is the implied order-cycle service level? Answer: 93.943% Solution: SS z dL
SS 266 Z 171.58 Z 1.5503 from the normal distribution table with z = 1.5503 we obtain a 93.946% service level Section Ref: Determining Safety Stock Levels Subsection: N/A Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 7: Calculate the appropriate safety stock level. AACSB: Reflective Thinking
133. Consider a periodic review system with a lead time of 2 weeks, a review period of 4 weeks, average weekly demand of 100 units, standard deviation of weekly demand of 20 units, and a desired cycle-service level of 90%. (a) What is the target inventory level? (b) If it is time to review the item and 10 units are on hand, how many units should be ordered? Answer: (a) 663 units; (b) 653 units Solution: a) (100)(2 + 4) + 63 = 663 units b) 663 – 10 = 653 units
Section Ref: The Periodic Review System Subsection: N/A Level: Medium Time on Task: 5.00minutes Bloom‘s: Application Learning Objective 8: Describe the periodic review approach. AACSB: Analytic
134. Suppose that your company sells a product for which the annual demand is 10,000 units. Holding costs are $1.00 per unit per year, and setup costs are $200 per order. (a) What is the economic order quantity for your product? (b) What is the total annual cost of ordering and holding? (c) Now suppose that instead of purchasing the product, you decide to produce it yourself. Assume the same demand and cost structure as above. In addition, your average production rate would be 200 units per day, and you have 200 working days per year. What batch size should you use? (d) Given your answer to part c, now what is the total annual cost of ordering and holding? (e) What conclusions can you make regarding the impact of production rate on the holding and ordering costs? Answer: (a) 2000 units; (b) $2000; (c) 2309 units; (d) $2020; (e) The lower the production rate, the lower the ―effective holding cost,‖ which implies larger batch sizes and lower total costs. Solution: 2 DS 2 10, 000 200 2, 000 a) Q H 1 D Q 10, 000 2, 000 200 1 $2, 000 b) TC S H Q 2 2, 000 2 c) Q
2 DS d H 1 p
2 10, 000 200 2309.4 50 1 1 200
d 50 Q 1 2309.4 1 p D 10,000 200 H 200 1 $1732.05 d) TC S Q 2 2309.4 2
e) The lower the production rate, the lower the ―effective holding cost,‖ which implies larger batch sizes and lower total costs. Section Ref: Determining Order Quantities Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
Short Answer
135. What is ABC Widget Company‘s inventory turns if it sells goods whose cost is $7,350,000 and if its average inventory is $1,225,000? Answer: 6 Solution: turnover = 7,350,000 / 1,225,000 = 6 Section Ref: Inventory Management Objectives Subsection: Minimum Inventory Investment Level: Medium Time on Task: 1.00 minutes Bloom‘s: Application Learning Objective 2: Describe inventory management objectives. AACSB: Analytic
136. The textbook discusses that in the service industry it is not uncommon for retailers NOT to be able to __________ specific merchandise. Answer: locate Solution: An additional problem, other than theft, facing many retailers is the inability to locate specific merchandise. It is not uncommon for customers to change their minds and simply place merchandise they no longer want in a convenient spot, not necessarily anywhere close to where it belongs. Section Ref: Basic Inventory Principles Subsection: Inventory in Service Organizations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Discuss basic inventory principles. AACSB: Knowledge
137. The inventory method that places a maximum order when the on-hand inventory falls below a predetermined minimum level is called the ____________. Answer: min-max system Solution: A min-max system operates in a way that When on-hand inventory falls below a predetermined minimum level, order a quantity that will take the inventory back up to its predetermined maximum level. Section Ref: Determining Order Quantities Subsection: Nonmathematical Techniques for Determining Order Quantity Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 6: Calculate order quantities. AACSB: Knowledge
138. The reorder point for a product that is delivered two days after an order is placed and whose average daily demand is 100 is __________________. Answer: 200 Solution: R dL z dL 2 100 200 Section Ref: Determining Order Quantity Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
139. What is the total annual inventory cost (using basic EOQ) of a product whose annual demand is 12,000 units, daily demand is 40, daily production is 60, order cost is $80, and holding cost is $6? (Round to the nearest dollar.) Answer: $3,394. 2 DS 2 12, 000 80 Q 565.69 H 6 Solution: SD HQ 80 12, 000 6 565.69 TC $3,394.11 Q 2 565.69 2 Section Ref: Determining Order Quantity Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 7 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
140. What is the basic EOQ for a product whose annual demand is 48,000 with a setup cost of $15 and a holding cost of $5? Answer: 536.66
2 DS 2 48, 000 $15 536.66 H $5 Section Ref: Determining Order Quantity Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic Solution: Q
141. What is the maximum inventory of a product that is produced in batches of 1000 when 500 units are produced per day and 250 units are sold per day? Answer: 500
d 250 Solution: I max Q 1 1000 1 500 p 500 Section Ref: Determining Order Quantity Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
142. What is the EPQ for a product whose annual demand is 48,000 with setup cost = $15, holding cost = $6, daily demand = 1,250, and daily production = 1500? Answer: 1200 2 DS 2 48, 000 $15 1200 d 1250 $6 1 H 1 p 1500 Section Ref: Determining Order Quantity Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
Solution: Q
143. What is the total annual inventory cost (using basic EPQ) of a product whose annual demand is 15,000 units, daily demand is 40, daily production is 60, order cost is $80, and holding cost is $6? (Round to the nearest dollar.) Answer: $2,191. Solution: 2 DS 2 15, 000 $80 Q 1095.45 d 40 $6 1 H 1 p 60
40 $6 1095.45 1 SD HI max 15, 000 $80 60 $2190.89 TC Q 2 1095.45 2 Section Ref: Determining Order Quantity Subsection: Mathematical Models for Determining Order Quantity Level: Medium Time on Task: 8.00 minutes Bloom‘s: Application Learning Objective 6: Calculate order quantities. AACSB: Analytic
144. How much safety stock should an organization hold if it wants to provide a 95% order-cycle service level for an item whose annual demand is 120,00 units with a standard deviation of 300 units per year and 30 units during lead time. The organization uses 1.96 standard deviations for this purpose. Answer: 58.8 Solution: SS z dL ;95% service z 1.96 SS 1.96 30 58.8 Section Ref: Determining Safety Stock Levels Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 7: Calculate the appropriate safety stock level. AACSB: Analytic
Testbank Chapter 14: Aggregate Planning LO Section Business Planning
Subsection
Question #
N/A
1, 2, 3, 4, 5, 6, 7, 8, 9, 46, 47, 52, 55, 59, 68, 69, 70, 71, 72, 73, 80,
102, 103, 107 Aggregate Planning Options
Aggregate Plan Strategies
N/A Demand-Based Options Capacity-Based Options Evaluating the Current Situation N/A Level Aggregate Plan Chase Aggregate Plan Hybrid Aggregate Plan
Developing the Aggregate Plan
N/A
20, 41, 43, 75, 91 21, 22, 23, 24, 62, 63, 79, 81 25, 26, 27, 28, 29, 44, 48, 64, 76, 82, 83, 84, 85, 86, 106, 110 30, 31, 51, 56, 65 10, 11, 12, 13, 14, 15, 57, 96, 97, 98, 104, 108, 109 16, 17, 19, 60, 61, 94, 105 18, 74, 95 32, 33, 34, 35, 36, 37, 38, 39, 58, 66, 87, 88, 89, 111
Aggregate Plans for Companies with Tangible Products
40, 92, 93, 101
Aggregate Plans for Companies with Nontangible Products
42, 45, 67, 77, 90, 99, 100
Aggregate Planning across the Organization
49, 50, 53, 54, 78
TOTAL QUESTIONS
111
Aggregate Planning with OM: How It All Fits Together
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Multiple Choice
1. A company‘s ____________ plan is a statement of the resources available to the operations group during the next 6 to 18 months. a) project b) master c) strategic d) aggregate e) tactical Answer: d Solution: The aggregate plan, also called the production plan, identifies the resources needed by the operations group during the next six to eighteen months to support the marketing plan. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain business planning. AACSB: Knowledge
2. Sales and operations planning integrates the medium-range functional plans for all EXCEPT which of the following? a) marketing b) operations c) human resources d) engineering e) finance Answer: c Solution: Sales and operations planning integrates the medium-range functional plans developed by marketing, operations, engineering, and finance. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain business planning. AACSB: Knowledge
3. All of the following are detailed by the aggregate plan EXCEPT which of the following? a) purchases of components from vendors b) the aggregate production rate c) subcontracting d) the amount of overtime authorized e) back ordering of customer orders Answer: a Solution: The aggregate plan details the aggregate production rate and the size of the workforce, which enables planners to determine the amount of inventory to be held; the amount of overtime or undertime authorized; any authorized subcontracting, hiring, or firing of employees; and back ordering of customer orders. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain business planning. AACSB: Knowledge
4. The marketing plan identifies all but which of the following? a) targeted market segments b) necessary market share c) quality d) flexibility e) resources Answer: e Solution: Detailed in the marketing plan are the targeted market segments; necessary market share; competitive focus such as price, quality, flexibility, or time; expected profit margins; and any new products needed. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
5. The Production Plan is usually updated and reevaluated _______. a) weekly b) monthly c) quarterly d) semi-annually e) annually Answer: b Solution: The aggregate (production) plan is usually updated and reevaluated monthly by the operations group. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
6. The goal of developing an aggregate plan using composite product information is to a) group like things together. b) reduce the number of calculations. c) keep it simple for senior management. d) help marketing plan. e) provide detail reports. Answer: b Solution: Regardless of the method, the goal is to reduce the number of calculations to develop the aggregate plan. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
7. The master production schedule is reviewed ________. a) annually b) semi-annually c) quarterly d) monthly e) weekly Answer: e Solution: The master production schedule and the detailed sales plan are reviewed weekly or even daily. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
8. The master production schedule is typically stated as _________. a) resource requirements b) sales quotas c) work-in-process d) specific finished goods e) composite products Answer: d Solution: The master production schedule is an anticipated production schedule and is typically stated as specific finished goods. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
9. The next level down in the planning process after development of the aggregate plan is the _____________. a) materials requirements plan b) engineering plan c) rough-cut capacity plan d) master production schedule e) purchasing plan Answer: d Solution: As Figure 13.1 shows, the master production schedule is the next greater level of detail than the aggregate production plan. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain business planning. AACSB: Knowledge
10. What type of aggregate plan maintains a constant workforce and produces the same amount of product in each time period? a) uniform b) level c) chase d) mixed e) steady Answer: b Solution: A level aggregate plan maintains a constant workforce and produces the same amount of product in each time period of the plan. Section Ref: Aggregate Plan Strategies Subsection: Level Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge
11. For the level aggregate plan, fluctuations in demand are absorbed by ________________. a) inventory and subcontracting b) back orders and price changes c) inventory and back orders d) price changes and subcontracting e) subcontracting and back orders Answer: c Solution: A level aggregate plan maintains a constant workforce and produces the same amount of product in each time period of the plan. Therefore the level plan experiences a buildup of inventory and/or possible poor customer service from extensive use of back orders. Section Ref: Aggregate Plan Strategies Subsection: Level Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge
12. A disadvantage of the level aggregate plan is _________________. a) workforce instability b) excess hiring c) layoffs d) possible poor customer service from extensive use of backorders e) excessive purchase of additional tools and equipment Answer: d Solution: The disadvantages of the level plan are the buildup of inventory and/or possible poor customer service from extensive use of back orders. Section Ref: Aggregate Plan Strategies Subsection: Level Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge
13. In a level production plan, equipment capacity is set equal to ________. a) the number of trained and qualified operators b) average demand c) mean demand d) maximum number of equipment minus 10% contingency reserves e) peak demand Answer: b Solution: Your company sets labor and equipment capacity equal to average demand, rather than hire excess labor or buy additional tools and equipment just to meet peak demand. Section Ref: Aggregate Plan Strategies Subsection: Level Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge 14. Raissa‘s Pizza parlor has an average monthly demand of 1200 pizzas. Statistically, each employee can meticulously produce 10 pizzas per day. The parlor is open 20 days each month. How many employees must they need to meet the demand using a level aggregate plan? a) 4 b) 5 c) 6 d) 7 e) 8 Answer: c Solution: 1200 pizzas per month/20 days per month = 60 pizzas/day 60 pizzas/day / 10 pizzas/worker/day = 6 workers Section Ref: Aggregate Plan Strategies Subsection: Level Aggregate Plan Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 3: Identify aggregate planning strategies. AACSB: Analytic
15. Using a level production plan how many oil changes must each employee be capable of to meet a weekly demand of 1400 oil changes in a five day work week if there are 4 employees? a) 40 b) 50 c) 60 d) 70 e) 80 Answer: d Solution: 1400/5 = 280/4 = 70 Section Ref: Aggregate Plan Strategies Subsection: Level Aggregate Plan Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 3: Identify aggregate planning strategies. AACSB: Analytic
16. . What type of aggregate plan sets labor and equipment capacity to satisfy demand each period? a) uniform b) level c) chase d) mixed e) steady Answer: c Solution: The chase aggregate plan sets labor and equipment capacity to satisfy demand each period. Section Ref: Aggregate Plan Strategies Subsection: Chase Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge
17. An advantage of the chase aggregate plan is ____________________________. a) workforce instability b) excess hiring c) space requirements d) minimizes finished good holding costs e) excessive purchase of additional tools and equipment Answer: d Solution: Because the chase aggregate plan produces exactly what is needed each period, it minimizes finished goods holding costs. Section Ref: Aggregate Plan Strategies Subsection: Chase Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge
18. What type of aggregate plan may keep a stable workforce and use backorders to compensate for excess demand needs one period, and then use overtime another period? a) uniform b) level c) chase d) hybrid e) steady Answer: d Solution: A hybrid aggregate plan typically uses a combination of options. With this plan, your company might maintain a stable workforce supplemented by an inventory buildup and some overtime production to meet demand. Or the company may back-order a portion of its demand. Section Ref: Aggregate Plan Strategies Subsection: Hybrid Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge
19. Using a chase strategy with the following 4 month demand and starting employee count, how many employees will be fired and how many will be hired if each employee can fix 20 engines per period? November = 1920 Starting Employee Count = 90 December = 2160 January = 1440 February = 1200 a) 12, 12 b) 12, 14 c) 13, 16 d) 18, 48 e) 14, 14 Answer: d Solution: Nov
Dec
Jan
Feb
demand 25 10 15 12 prod rate 25 10 15 12 Emply need period 96 108 72 60 hire 6 12 0 0 fire 0 0 36 12 6 + 12 = 18 to hire 36 + 12 = 48 to fire Section Ref: Aggregate Plan Strategies Subsection: Chase Aggregate Plan Level: Medium Time on Task: 10 minutes Bloom‘s: Application Learning Objective 3: Identify aggregate planning strategies. AACSB: Analytic
20. A proactive marketing approach in aggregate planning involves ____________________. a) varying inventory levels b) modifying work force size c) back orders d) shifting the demand patterns to level demand fluctuations e) varying overtime rate Answer: d Solution: When formulating an aggregate plan one option is proactive, in which marketing tries to shift the demand patterns to minimize demand fluctuations. Section Ref: Aggregate Planning Options Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss planning options. AACSB: Knowledge
21. Which of the following is an advantage of producing at average demand levels? a) Inventory fluctuates. b) It allows for a lower investment in capacity. c) It minimizes space needs for inventory. d) It minimizes finished good holding costs. e) It makes it difficult to calculate average production. Answer: b Solution: Producing at average demand levels allows your company to invest less in capacity. Section Ref: Aggregate Planning Options Subsection: Demand-Based Options Level: Easy Time on Task:1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
22. Companies that use back orders are asking their customers to ___________________. a) resubmit their orders b) wait for delivery of the product c) check back to see what their last order was d) receive the product immediately and pay for it later e) send back their last order Answer: b Solution: Back orders result when your company does not have enough production and/or inventory on hand to cover current demand, so it promises to deliver the product to the customer at a later date. Customers may wait or they may take their business elsewhere. Section Ref: Aggregate Planning Options Subsection: Demand-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss planning options. AACSB: Knowledge
23. A difficulty with back orders, even when the customer waits, can be ________________. a) finding space to store the product b) extra administrative costs c) added inventory holding costs d) possible deterioration of the product e) that other customers will want back orders also Answer: b Solution: In addition to possible lost sales, your company may have extra administrative costs because of the back order, such as higher shipping costs for overnight delivery. Section Ref: Aggregate Planning Options Subsection: Demand-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
24. Shifting demand makes sense when the company has ______________________. a) lots of space for inventory b) low inventory carrying costs c) equipment that is highly flexible with respect to production volume changes d) high fixed costs and low variable costs e) excess capacity Answer: d Solution: This strategy makes sense when the company has high fixed costs and low variable costs. Section Ref: Aggregate Planning Options Subsection: Demand-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
25. What is the most common method for increasing output capacity? a) outsourcing b) hiring temps c) overtime d) back orders e) purchasing more machines Answer: c Solution: Overtime is the most common method for increasing output capacity. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss planning options. AACSB: Knowledge
26. Which of the following is NOT typical of overtime? a) There is a 50% wage premium. b) Quality may decrease. c) Productivity decreases. d) Workers‘ output rate increases. e) Cost of labor per unit increases. Answer: d Solution: Unfortunately, when people work overtime, their productivity does not increase proportionately, so the cost of labor per unit increases. Workers typically do not produce more during overtime. Worker productivity—and the quality of the work—may even decrease. In fact, the more overtime a company uses, the more likely it will experience reduced productivity and quality. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
27. One disadvantage of using undertime is that the a) employee hourly rate decreases. b) employee hourly rate increases. c) product labor cost decreases. d) product labor cost increases. e) product labor cost is constant. Answer: d Solution: Undertime does not cost a company a wage premium, but it does increase the labor cost per unit, because fewer units are built but regular-time wages stay the same. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task:1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
28. Which of the following best describes subcontracting? a) It provides additional output capacity during periods of high demand. b) It is a strategic decision. c) Cost per unit is less for subcontracting. d) It is used when a company has no in-house capability. e) It defines the company‘s core business. Answer: a Solution: Subcontracting means letting another company do some of the work for you. Subcontracting provides additional output capacity during periods of high demand. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
29. Which of the following is NOT true for firing permanent employees? a) Deciding who will go and who will stay is difficult. b) Keeping senior employees is always the least cost effective approach. c) It can involve severance pay. d) Valuable knowledge may leave with the employee. e) It can harm morale. Answer: b Solution: Some companies base the decision on seniority rather than what makes sense from an operational standpoint. When senior employees remain and junior employees are forced out, the remaining employees may return to jobs that have experienced major technological change. Thus respect for seniority rewards company loyalty but often at the expense of lost productivity. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
30. In evaluating the current situation, the ____________ is the percentage of normal capacity at which the company is currently operating. a) point of departure b) amount of subcontracting needed c) magnitude of the change d) duration of the change e) rated capacity Answer: a Solution: The point of departure is the percentage of normal capacity your company is currently operating at. Section Ref: Aggregate Planning Options Subsection: Evaluating the Current Situation Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss planning options. AACSB: Knowledge
31. When you are considering different production planning approaches, the magnitude of change a) is not important from an aggregate planning perspective. b) determines the type of implementation and measures to take. c) drives the point of departure. d) reduces the point of departure. e) modifies the duration of change. Answer: b Solution: Magnitude of the change is the size of change needed. Smaller changes may be easier to implement. Larger capacity changes need more drastic measures, such as hiring or firing a shift, and the effects on productivity are greater. Section Ref: Aggregate Planning Options Subsection: Evaluating the Current Situation Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
32. The comparison of aggregate plans is difficult when they produce different quantities and thus _________. a) have different ending inventories b) have different staffing levels c) have different amounts of overtime d) have different amounts of subcontracting e) have different revenues Answer: a Solution: After you develop a plan, it is critical to evaluate it in terms of cost, customer service, operations, and human resources. The comparisons are less clear when plans produce different quantities and leave different ending inventories. Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
33 The first step in developing the production plan is a) identification of the point of departure. b) identification of the magnitude of change. c) identification of the duration of change d) development of the target aggregate plan rate. e) selection of the aggregate plan that matches your company‘s objectives. Answer: e Solution: Step 1: Identify the aggregate plan that matches your company‘s objectives: level, chase, or hybrid. When choosing the type of aggregate plan to be used, consider your objectives. Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
34. Evaluating an aggregate plan in terms of employment stability is using which perspective? a) cost b) customer service c) quality d) operations e) human resources Answer: e Solution: The human resources perspective of aggregate plan evaluation includes the effects on the workforce and employment stability. Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
35. Evaluating an aggregate plan in terms of inventory levels is using which perspective? a) cost b) customer service c) quality d) operations e) human resources Answer: a Solution: The cost perspective might examine the total cost, unit cost, and inventory levels of different aggregate plans. Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
36. Evaluating an aggregate plan in terms of number of back orders is using which perspective? a) cost b) customer service c) quality d) operations e) human resources Answer: b Solution: The customer service perspective would examine aggregate plans in terms of the number of back orders Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
37. Which of the following is NOT an input to the aggregate planning process? a) beginning workforce b) demand forecast c) beginning inventory d) master production schedule e) overtime available per period Answer: d Solution: The workforce and inventory levels, demand forecast, and available overtime are all inputs to the aggregate planning process. Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
38. Once you implement a new aggregate plan you must then a) begin the planning process again. b) evaluate the plan‘s performance in terms of cost. c) evaluate the plan‘s performance in terms of customer service. d) evaluate the plan‘s performance in terms of human resources. e) evaluate the plan‘s performance in terms of cost and human resources. Answer: e Solution: When developing an aggregate plan, there are five steps to complete. First, you must decide on the type of aggregate plan. Second, calculate the aggregate production rate. Third, calculate the size of the workforce. Fourth, test the plan. Fifth, evaluate the plan‘s performance. Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
39. When evaluating the production plan you should use all EXCEPT which of the following? a) total/unit cost b) inventory levels c) number of back orders d) effect on marketing plan e) effect on workforces Answer: d Solution: After you develop a plan, it is critical to evaluate it in terms of cost, customer service, operations, and human resources. Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
40. For the following data, verify the number of employees needed. Cost Data Labor cost Regular 20 $/hr Over Time 30 $/hr Hiring 250 $/employee Firing 400 $/employee Inventory Holding 10 $/unit/period Shortage 15 $/unit/period material 45 $/unit/period Capacity Workforce beginning 15 employees Inventory initial 100 units Production rate 8 hrs/unit Regular time 160 hrs/period/employee Over time available 40 hrs/period/employee a) 20 b) 5 c) 34 d) 25 e) 15 Answer: e
Jan Feb
Demand 400 250
Mar April May
275 325 350
Solution: Net cumulative demand = 1600 – 100 = 1500 units Step 2: 1500 / 5 periods = 300 units Step 3: 300 units; 300/8 / 160 = 15 employees Section Ref: Developing the Aggregate Plan Subsection: Aggregate Plans for Companies With Tangible Products Level: Medium Time on Task: 6.00 minutes Bloom‘s: Application Learning Objective 4: Develop aggregate plans. AACSB: Analytic
41. A demand-based option in which the operations department uses inventories and back orders to react to demand fluctuations is called ________. a) hyperactive b) inactive c) proactive d) reactive e) retroactive Answer: d Solution: Demand-based options include reactive options, in which the operations department uses inventories and back orders to react to demand fluctuations. Section Ref: Aggregate Planning Options Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss planning options. AACSB: Knowledge
42. When a company‘s product is nontangible (a service), which of the following is no longer a viable option? a) hiring permanent employees b) subcontracting c) inventory d) working overtime e) increasing normal capacity Answer: c Solution: When your company‘s product is nontangible—for example, if your company offers a service as do banks, healthcare providers, and hair stylists—inventory is no longer a viable option. Section Ref: Developing the Aggregate Plan Subsection: Aggregate Plans for Companies with Nontangible Products Level: Easy Time on Task: 1.00minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
43. A demand-based option in which the marketing tries to shift demand patterns to minimize demand fluctuations is called __________. a) hyperactive b) inactive c) proactive d) reactive e) retroactive Answer: c Solution: A proactive option for aggregate planning requires marketing tries to shift the demand patterns to minimize demand fluctuations. Section Ref: Aggregate Planning Options Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss planning options. AACSB: Knowledge
44. What is it called when a publishing company has decided to send the technical information development elsewhere and have no in-house capability? a) outsourcing b) subcontracting c) subsidiary d) affiliate e) partner Answer: a Solution: Strategic outsourcing decisions might have components, subassemblies, or final products previously done in-house instead produced by another company Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
45. If you allocate scarce resources to customers at prices that maximize the yield to the company you are using ___________. a) level aggregate planning b) chase production planning c) price fixing d) yield management e) price compression Answer: d Solution: Yield management is the process of allocating scarce resources to customers at prices that maximize the yield to the company. Although we normally assume that companies charge all customers the same price for a product or service, sometimes that is not the case. Section Ref: Developing the Aggregate Plan Subsection: Aggregate Plans for Companies with Nontangible Products Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
46. Which of the following is NOT typically indicated as part of the resources authorized in an aggregate plan? a) number of machines to be used b) size of the workforce c) authorized level of overtime and undertime d) number of units to be subcontracted e) level of inventory held Answer: a Solution: The aggregate plan details the aggregate production rate and the size of the workforce, which enables planners to determine the amount of inventory to be held; the amount of overtime or undertime authorized; any authorized subcontracting, hiring, or firing of employees; and back ordering of customer orders. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
47. Which of the following is NOT a primary objective of the master production schedule? a) Minimize shipping costs. b) Achieve the desired customer service level. c) Make the best use of the company‘s resources: material, labor, and equipment. d) Ensure that the inventory investment is at the appropriate level. e) None of the answer choices are correct. Answer: a Solution: The master production schedule seeks to achieve the desired customer service level by making the best use of the company‘s resources while ensuring that the inventory investment is at the appropriate level. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task:1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
48. Which of the following is NOT a way to increase capacity? a) Change depreciation methods. b) Use overtime. c) Employ temporary workers. d) Subcontract. e) Use alternative manufacturing processes. Answer: a Solution: Overtime, hiring temporary workers, subcontracting and using alternative processes are all ways to increase capacity. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
49. Accounting uses the aggregate plan for all the following EXCEPT _________. a) projecting cash flows b) making short term loans c) calculating the capital needed to support operations d) projecting earnings e) benchmarking operation effectiveness Answer: b Solution: Accounting is affected because the aggregate plan details the resources needed by operations during the next 12 to 18 months. Accounting uses this information to project cash flows, calculate the capital needed to support operations, and project earnings. It also sets a benchmark for measuring the effectiveness of operations. Section Ref: Aggregate Planning within OM: How It All Fits Together Subsection: Aggregate Planning across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
50. The aggregate plan helps manufacturing with all of the following EXCEPT ________. a) whom to employ b) how much work to subcontract c) how much inventory can be held d) when to add/subtract employees e) when to use overtime Answer: a Solution: Manufacturing learns from the aggregate plan what resources are available to achieve its goals: how many workers, how much work can be subcontracted, how much inventory can be held, and so forth. Section Ref: Aggregate Planning within OM: How It All Fits Together Subsection: Aggregate Planning across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
51. UPS is a company that hires a very high number of __________ and _________ workers. a) steady; part-time b) older; wiser c) seasonal; full-time d) part-time; overtime e) seasonal; part-time Answer: e Solution: When companies face highly seasonal demand, an alternative to hiring full-time permanent employees is the use of seasonal employees. UPS experiences high seasonal demand each year, delivering approximately 800 million packages globally during the four weeks between Thanksgiving and Christmas. Section Ref: Aggregate Planning Options Subsection: Evaluating the Current Situation Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss planning options. AACSB: Knowledge
52. Which of the following is NOT typically contained in the marketing plan? a) product design b) target markets c) new products d) profit margin e) competitive focus Answer: a Solution: The marketing plan contains the competitive focus, profit margin, target markets and new products, according to Figure 13.1. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
53. The master production schedule is shared a) only internally. b) only with management. c) only to marketing and engineering. d) to all members of the executive team, exclusively. e) to all members of the supply chain. Answer: e Solution: The master production schedule is shared with all members of the supply chain so that everyone knows expected completion dates and availability of different products. Section Ref: Aggregate Planning within OM: How It All Fits Together Subsection: Aggregate Planning across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
54. What are the two primary objectives of aggregate planning? a) material availability and supplier size b) total cost and production rate c) input rate and training for employees d) output rate and workforce size e) transportation rate and workforce size Answer: d Solution: Aggregate planning ensures the necessary resources to satisfy an organization‘s objectives (profit, customer service, inventory investment, etc.). It determines both the output rate and the workforce size. Section Ref: Aggregate Planning within OM: How It All Fits Together Subsection: Aggregate Planning across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
55. Which of these lists is in increasing order of scope? a) master production schedule – production plan – strategic business plan b) sales plan – master production schedule – marketing plan c) master production schedule – sales plan – strategic business plan d) engineering plan – master production schedule – financial plan Answer: a Solution: The strategic business plan is at the top level of the hierarchy and the master production schedule is a more detailed production plan. Section Ref: Business Planning Subsection: N/A Level: Medium Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
56. Acme‘s Arizona factory was designed to be capable of producing 1000 pairs of rocketpowered roller skates in a 30-day month. Each pair of skates takes 4 hours of labor to produce and demand has been low recently: 950 pairs of skates each of the last three months. There is reason to be optimistic, however, because roadrunner season begins next month and demand is anticipated to be 1300 pairs of skates. What is Acme‘s point of departure? a) 73% b) 95% c) 105% d) 137% Answer: b Solution: Point of departure is the percentage of normal capacity your company is currently operating at. 950/1000 = 95%. Section Ref: Aggregate Planning Options Subsection: Evaluating the Current Situation Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Discuss planning options. AACSB: Analytic
57. ConHugeCo forecasts demand as July 3000 units, August 3500 units, September 4250 units, October 4900 units, November 5450 units, and December 3900 units. At the end of June, they have 2500 units in inventory and a workforce of 40 employees, each of which can make 75 units per month. How many workers will they need to hire to use a level aggregate plan using inventories and backorders? a) 0 workers b) 5 workers c) 10 workers d) 15 workers Answer: c Solution: Total demand = 25,000, Net demand = 22,500; 22,500/6 months = 3750 units/month; 3750/75 units/worker/month = 50 workers; 50 – 40 =10 to hire Section Ref: Aggregate Plan Strategies Subsection: Level Aggregate Plan Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 3: Identify aggregate planning strategies. AACSB: Analytic
58. Consider the cost structure and the forecasted demand displayed in the following table. Create a level aggregate plan using inventories and back orders and determine the total cost of labor, inventory, hiring/firing, and materials. Cost Data Regular time labor cost per hour Overtime labor cost per hour Subcontracting cost per unit (labor only) Back order cost per unit per period Inventory holding cost per unit per period Hiring cost per employee Firing cost per employee Material cost per unit Capacity Data Beginning workforce (employees) Beginning inventory (units) Production standard per unit (hours) Regular time available per period (hours) Overtime available per period (hours)
$15.00 $22.00 $125.00 $7.50 $5.00 $500.00 $750.00 $30.00
Period Forecast 1 2800 2 4600 3 3800 4 2500 5 3200 6 4100 7 5100 8 6000
18 2100 0.64 160 20
a) $897,750 b) $900,000 c) $1,291,000 d) $1,293,250 Answer: d Solution: Total demand = 32,100; Net demand = 30,000; Average demand/period = 3750; 3750/250 units/employee/period = 15 employees, so fire 3 at $750 each; no backorders; Total period ending inventory = 20,600 units*$5 = $103,000; Labor cost = 15*8*160*15 = $288,000; Material cost = 30,000*$30 = $900,000; Total plan cost=$1,293,250 Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Medium Time on Task: 15.00 minutes Bloom‘s: Application Learning Objective 4: Develop aggregate plans. AACSB: Analytic
True/False
59. The aggregate plan is usually updated and reevaluated monthly by the operations group. Answer: True Solution: The aggregate plan is usually updated and reevaluated monthly by the operations group. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
60. The chase aggregate plan maintains a constant workforce and produces the same amount of product in each time period. Answer: False Solution: A chase aggregate plan produces exactly what is needed to satisfy demand during each period. The production rate changes in response to demand fluctuations. Whereas the level aggregate plan sets capacity to accommodate average demand, the chase aggregate plan sets labor and equipment capacity to satisfy demand each period. Section Ref: Aggregate Plan Strategies Subsection: Chase Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge
61. An advantage of the chase aggregate plan is that it minimizes finished good holding costs. Answer: True Solution: A chase aggregate plan produces exactly what is needed to satisfy demand during each period. The advantage of the chase plan is that it minimizes finished goods holding costs. Section Ref: Aggregate Plan Strategies Subsection: Chase Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge
62. An advantage of producing at average demand levels is that it allows for a lower investment in capacity. Answer: True Solution: Producing at average demand levels allows your company to invest less in capacity. Section Ref: Aggregate Planning Options Subsection: Demand-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
63. Shifting demand makes sense when the company has high fixed costs and low variable costs. Answer: True Solution: A shifting demand strategy makes sense when the company has high fixed costs and low variable costs. Section Ref: Aggregate Planning Options Subsection: Demand-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
64. Overtime is the most common method for increasing output capacity. Answer: True Solution: Overtime is the most common method for increasing output capacity. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss planning options. AACSB: Knowledge
65. In evaluating the current situation, the point of departure is the size of the change that is needed. Answer: False Solution: When you are considering the different options, it is important to evaluate your company‘s current situation in terms of point of departure, magnitude of the change, and duration of the change. Section Ref: Aggregate Planning Options Subsection: Evaluating the Current Situation Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss planning options. AACSB: Knowledge
66. The comparison of aggregate plans is difficult when they produce different quantities and have different ending inventories. Answer: True Solution: After you develop a plan, it is critical to evaluate it in terms of cost, customer service, operations, and human resources. Cost comparisons are less clear when plans produce different quantities and leave different ending inventories. Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
67. When a company‘s product is nontangible (a service), inventory is no longer a viable option. Answer: True Solution: When your company‘s product is nontangible—for example, if your company offers a service as do banks, healthcare providers, and hair stylists—inventory is no longer a viable option. Section Ref: Developing the Aggregate Plan Subsection: Aggregate Plans for Companies with Nontangible Products Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
68. A master production schedule is MORE specific (tactical) than an aggregate plan. Answer: True Solution: The master production schedule is an anticipated production schedule and is typically stated as specific finished goods. It details how operations will use available resources. The aggregate plan does not present information to specific model numbers. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
69. The master production schedule is a statement of upcoming demand. Answer: False Solution: The master production schedule is an anticipated production schedule and is typically stated as specific finished goods. It details how operations will use available resources and which units or models will be built in each time frame. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
70. A primary objective of the master production schedule is to achieve the desired customer service level. Answer: True Solution: The master production schedule allows marketing to make informed commitments to customers. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
71. Sales and operations planning can be used in a variety of business environments. Answer: True Solution: Sales and operations planning is the process that brings together all the functional business plans (marketing, operations, engineering, and finance) into one integrated plan and can be used in a variety of business environments. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
72. The purpose of the aggregate plan is to develop production rates and authorize resources that accommodate the engineering plan. Answer: False Solution: The aggregate plan, also called the production plan, identifies the resources needed by the operations group during the next six to eighteen months to support the marketing plan. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
73. The financial plan indicates the sources and uses of funds, expected cash flows, anticipated profits and projected budgets. Answer: True Solution: The financial plan indicates the sources and uses of funds, expected cash flows, anticipated profits, and projected budgets. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain business planning. AACSB: Knowledge
74. There are a limited number of options that are applicable to a hybrid aggregate plan. Answer: False Solution: A hybrid aggregate plan typically uses a combination of options. Any combination of options is possible. Because of the number of options you can combine in a hybrid plan, you need to evaluate your company‘s current situation and limit the options you choose from. Section Ref: Aggregate Plan Strategies Subsection: Hybrid Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge
75. Demand-based options include two reactive options and two proactive options. Answer: False Solution: Companies can choose from two groups of options when formulating an aggregate plan. The first group, demand-based options, includes two reactive options and one proactive option. Section Ref: Aggregate Planning Options Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss planning options. AACSB: Knowledge
76. During overtime, worker productivity increases due to the increase salary received. Answer: False Solution: Worker productivity—and the quality of the work—may even decrease. In fact, the more overtime a company uses, the more likely it will experience reduced productivity and quality. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
77. Nontangible capacity can be added by the use of an on-call labor pool. Answer: True Solution: Different methods of controlling the cost of labor for service firms include (1) accurately scheduling labor-hours to ensure quick response to customer demand (using prearranged appointments); (2) having an on-call labor pool that can be added or deleted to meet unexpected demand; (3) having multiskilled workers who can be reassigned in response to unexpected demand; and (4) having flexible work hours to meet changing demand. Section Ref: Developing the Aggregate Plan Subsection: Aggregate Plans for Companies with Nontangible Products Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
78. Aggregate planning, master production scheduling, and rough-cut capacity affect a specific area of the organization. Answer: False Solution: Aggregate planning, master production scheduling, and rough-cut capacity affect functional areas throughout an organization. Section Ref: Aggregate Planning within OM: How It All Fits Together Subsection: Aggregate Planning Across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
79. Demand patterns cannot be smoothed through pricing incentives, reduced prices for out-ofseason purchases, or nonprime service times. Answer: False Solution: Shifting demand is a proactive marketing approach to leveling demand in which your company tries to change consumer buying patterns by offering incentives. Prime examples of this are movie matinees, early-bird dinners, and preseason or off-season discounts. Another way to level demand is offering preseason or off-season discounts. Section Ref: Aggregate Planning Options Subsection: Demand-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
Essay
80. What are the characteristics of the marketing plan? Answer: It is intended to meet the objectives of the strategic plan; it identifies the sales needed to achieve the profitability level, growth rate, and the return on investment stated in the strategic plan; it details the targeted market segments, necessary market share, competitive focus, such as price, quality, flexibility, or time, expected profit margins, and new products needed. Solution: The marketing plan identifies the markets to be served, desired levels of customer service, product competitive advantage, profit margins, and the market share needed to achieve the objectives of the strategic business plan. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
81. What are the difficulties associated with back orders? Answer: Customers may take their business elsewhere resulting in lost sales. Even when customers wait, there may be extra administrative costs, such as higher shipping costs for overnight delivery. Solution: Customers may wait or they may take their business elsewhere. When a customer is unwilling to wait, the back order turns into a lost sale. Your company must understand its customers and its marketplace to judge whether or not back orders are a viable option. If alternative products or sources are readily available, customers probably will not wait. They are more likely to wait for unique products. Section Ref: Aggregate Planning Options Subsection: Demand-Based Options Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
82. What are the capacity-based options in aggregate planning? Answer: overtime, undertime, subcontracting, hiring and firing, hiring temps Solution: Capacity-based options discussed in the text include overtime, undertime, subcontracting, hiring and firing, and hiring temps. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss planning options. AACSB: Knowledge
83. What are the characteristics of overtime? Answer: It typically involves a 50% wage premium; cost of labor per unit increases; the more overtime used, the more likely it is that productivity and quality will decrease. Solution: Using overtime to increase output typically means your company pays a 50 percent wage premium to its workers. Unfortunately, when people work overtime, their productivity does not increase proportionately, so the cost of labor per unit increases. Workers typically do not produce more during overtime. Worker productivity—and the quality of the work—may even decrease. In fact, the more overtime a company uses, the more likely it will experience reduced productivity and quality. Reduced productivity and quality tend to increase costs even more. Therefore, overtime is at best a short-term option for increasing production capacity. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
84. What are the characteristics of undertime? Answer: It normally results from reduced demand and a desire not to build inventory; it does not cost the company a wage premium, but increases the labor cost per unit; employee morale may suffer. Solution: Undertime is normally the result of reduced demand and a desire not to build up inventory levels. Undertime does not cost a company a wage premium, but it does increase the labor cost per unit, because fewer units are built but regular-time wages stay the same. It may be cost-effective to carry valuable workers for a short period of time if the company expects demand to return to previous levels. If the company releases employees immediately, it may incur high replacement costs when it eventually hires new employees. The problem with undertime is that employee morale may suffer when people realize that there is not enough work to keep everyone busy. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
85. What are the disadvantages for hiring permanent employees? Answer: It requires the administrative work of identifying the position, communicating with potential applicants, evaluating the materials submitted by applicants, interviewing, verifying employment and references, running background checks, verifying physical condition, making offers, and completing negotiations; after hiring, the company must set up health insurance, payroll, security ID and badge, computer log-in, phone extension, etc.; and output is normally lower and mistakes typically higher during training. Solution: Hiring requires the administrative work of identifying the position, communicating with potential applicants, evaluating the materials submitted by applicants, interviewing, verifying employment and references, running background checks, making decisions, verifying physical condition, making offers, and completing negotiations. After the employee is hired, your company sets up payroll, health insurance, security ID and badge, computer log-in, phone extension, and so forth. During employee training, output is normally lower and mistakes are typically higher. Thus hiring a permanent employee is a long-term option. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
86. What are the disadvantages for firing permanent employees? Answer: Excessive firing can lead to increased unemployment compensation premiums. Typically there is also severance pay. Valuable knowledge may leave with the employee. It can harm morale. Deciding who will go and who will stay is difficult. Solution: Firing employees is also expensive. Excessive firing can lead to increased unemployment compensation premiums. (Unemployment compensation is like any insurance policy: when you have a lot of claims, your rates increase.) Add to that the severance pay that companies typically pay to permanently laid-off employees, and the cost mounts. Significant, too, is the expense in lost knowledge when you terminate employees. Employees may leave with individual know-how that the remaining workforce will have to learn for themselves. For example, your employee may not have documented a minor change to the job instructions that increases productivity or improves product quality. The next employee on the job will have to learn this secret of improved output. Finally, you have the cost in morale, which may affect productivity Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
87. What are the steps involved in developing the aggregate plan? Answer: (1) Choose the kind of aggregate plan: level, chase, or hybrid. (2) Calculate the aggregate production rate. (3) Calculate the size of the workforce. (4) Test the aggregate plan and calculate costs. (5) Evaluate the plan in terms of cost, customer service, human resources, and operations. Solution: When developing an aggregate plan, there are five steps to complete. First, you must decide on the type of aggregate plan. Second, calculate the aggregate production rate. Third, calculate the size of the workforce. Fourth, test the plan. Fifth, evaluate the plan‘s performance Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 3.00 minutes Bloom‘s: Knowledge Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
88. What are the inputs to the aggregate planning process? Answer: beginning workforce, production standard per hour, regular time available per worker per period, demand forecast, beginning inventory, overtime available per period, and cost data Solution: The beginning workforce, production standard per hour, regular time available per worker per period, demand forecast, beginning inventory, overtime available per period, and cost data are all inputs to the aggregate planning process. Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
89. Discuss some of the human resource concerns you should have when evaluating the production plan. Answer: (1) Achieve the desired customer service level. (2) Make the best use of the company‘s resources. (3) Are the workers putting in excessive overtime one month and doing little the next? How does this plan affect the workforce? Does it lower morale or does it provide stability for the workers? Solution: Assess the plan first in terms of operations, then in terms of human resources. Are the workers putting in excessive overtime one month and doing little the next? How does this plan affect the workforce? Does it lower morale or does it provide stability for the workers? Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
90. Briefly discuss a negative outcome of using a level production plan in a nontangible (service) organization. Answer: There will be insufficient employees to handle the demand. This can result in lost business and negative impact to the overall customer satisfaction. Solution: Think about services that use these different methods. Emergency response organizations often have the right to call in off-duty workers in the case of a major emergency. When business is slow at a restaurant, bar, or retail store, companies often send workers home early. In cases when workers must stay, additional work is done during customer lags. In supermarkets, we often see a rush of personnel to the front of the store when a rush of business occurs. These are multiskilled workers being temporarily reallocated to meet the customer demand. Section Ref: Developing the Aggregate Plan Subsection: Aggregate Plans for Companies With Nontangible Products Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
91. Explain the reactive vs. proactive demand-based options. Answer: Reactive uses finished goods inventory, absorbing fluctuations and developing a stable work environment; backorders for fluctuations are used and can be costly. Proactive shifts the demand, incentives are used to minimize fluctuations. Solution: Companies can choose from two groups of options when formulating an aggregate plan. The first group, demand-based options, includes two reactive options and one proactive option. These are: a) Reactive options, in which the operations department uses inventories and back orders to react to demand fluctuations and b) The proactive option, in which marketing tries to shift the demand patterns to minimize demand fluctuations. Section Ref: Aggregate Planning Options Subsection: N/A Level: Medium Time on Task: 2.00 minutes Bloom‘s: Analysis Learning Objective 2: Discuss planning options. AACSB: Analytic
Problems
Reference: Input data for problems 92–95 follows. Cost data Regular time labor cost per hour Overtime time labor cost per hour Subcontracting cost per unit (labor only) Back order cost per unit per period Inventory holding cost per unit per period Hiring cost per employee Firing cost per employee
$10 $15 $80 $20 $10 $500 $400
Capacity data Beginning workforce Beginning inventory Beginning back orders Production standard per unit (hours) Regular time available per period (hours) Overtime time available per period (hours)
40 employees 0 units 0 units 2 hours of labor per unit 160 hours per period per employee 30 hours per period per employee
Demand data Period 1 Period 2 Period 3 Period 4
3,920 units 2,480 units 2,200 units 3,280 units
Period 5 Period 6 Period 7 Period 8
3,800 units 4,340 units 4,820 units 4,600 units
92. Develop a level aggregate plan using inventory and back orders (data given above). (a) What is the production rate per period? (b) No overtime is to be used. What is the required workforce level and how many workers are hired or fired at the beginning of period 1? (c) What is the maximum ending inventory and when does it occur? (d) What is the maximum amount of back orders and when does it occur? (e) What is the total cost? (f) What is the cost per unit? Answer: (a) 3,680 units; (b) 46 workers, so 6 must be hired; (c) 2,840 units at end of period 4; (d) 240 units at end of period 1; (e) $716,000; f) $24.32 Solution: Period Detailed Plan Computations 1 2 3 4 5 6 7 8 Total Demand (units) (net 0 -240 960 2440 2840 2720 2060 920 of beg. Inventory) Cumulative demand 3920 2480 2200 3280 3800 4340 4820 4600 (units) Period production 3680 3680 3680 3680 3680 3680 3680 3680 29440 (units) Regular 3680 3680 3680 3680 3680 3680 3680 3680 29440 Overtime 0 0 0 0 0 0 0 0 0 Cum.Dem. Minus -240 960 2440 2840 2720 2060 920 0 Cum.Prod. Ending Inventory 0 960 2440 2840 2720 2060 920 0 11940 (units) Backorders (units) 240 0 0 0 0 0 0 0 240 a) Total Demand – Beginning Inventory = Period Production 29440 – 0 = 29440/8 periods = 3680 units/period b) 40 workers can make 3200 units/period when 3680 units/period are required; 3680/80 = 46 workers, so hire 6 workers. c) Peak ending inventory occurs in period 4 at 2840. d) Max back orders occur in period 1 at 240. e) 29440 units regular x 2 hrs/unit x $10/hour = $588,800 Inventory holding cost = 11940 units x $10/unit = $119,400 Cackorder cost = 240 units x $20/unit = $4800 Hiring cost = 6 employees x $500/employee = $3000
Total cost = $716,000 f) Cost per unit = $716,000/29440 = $24.32 Section Ref: Developing the Aggregate Plan Subsection: Aggregate Plans for Companies with Tangible Products Level: Medium Time on Task: 20 minutes Bloom‘s: Application Learning Objective 4: Develop aggregate plans. AACSB: Analytic
93. Develop a chase aggregate plan without inventory and back orders. Do no hiring or firing. When demand exceeds regular production, use overtime up to its maximum and then subcontracting. When demand is less than regular production, use undertime (data given above). (a) What are the total hours of overtime per employee for the plan? (b) How many total units are produced using subcontracting? (c) What are the total hours of undertime per employee for the plan? (d) What is the total cost? (e) What is the cost per unit? Answer: (a) 154 hours; (b) 2,480; (c) 86 hours; (d) $768,400; (e) $26.10 Solution: 1 2 3 4 5 6 Demand (calls) 3920 2480 2200 3280 3800 4340 Service hours needed 7840 4960 4400 6560 7600 8680 Regular time hours of 6400 6400 6400 6400 6400 6400 capacity Overtime hours needed 1440 0 0 160 1200 2280 Undertime hours 0 1440 2000 0 0 0 Overtime Used 1200 160 1200 1200 Subcontracting Hours 240 0 0 0 0 1080 Subcontracting Units 120 0 0 0 0 540
7 8 Total 4820 4600 29440 9640 9200 58880 6400 6400 51200 3240 2800 11120 0 0 3440 1200 1200 6160 2040 1600 4960 1020 800 2480
a) (3080 units made overtime x 2 hours/unit)/40 workers = 154 hours/worker b) 2480 units made subcontracting = 120 + 540 + 1020 + 800 c) Undertime used in periods 2 & 3 = 3440 / 40 workers = 86 hours/worker d) Regular production = 23880 units x 2 hours/unit x $10/hour = $477,600 Overtime cost = 3080 units x 2 hours/unit x $15/hour = $92,400 Subcontracting cost = 2480 units x $80/unit = $198,400 Total cost = $768,400 e) Cost/unit = $768,400/29440 = $26.10 Section Ref: Developing the Aggregate Plan Subsection: Aggregate Plans for Companies with Tangible Products Level: Medium Time on Task: 20 minutes
Bloom‘s: Application Learning Objective 4: Develop aggregate plans. AACSB: Analytic
94. Develop a chase aggregate plan without inventory and back orders. Use no undertime or subcontracting. When demand exceeds regular plus maximum overtime production, hire enough employees to meet demand, working as much overtime as possible. When demand is less than regular time production, fire just enough workers to avoid undertime (you may then use a minimal amount of overtime to get production back up to demand) (data given above). (a) What is the workforce at the end of the last period? How many total were hired? How many total were fired? (b) How many total units were produced using overtime? (c) What is the total cost? (d) What is the cost per unit? Answer: (a) 49 workers, with 30 hired and 21 fired; (b) 4,000 units; (c) $652,200; (d) $22.15 Solution: 1 2 3 4 5 6 7 8 Total Demand (calls) 3920 2480 2200 3280 3800 4340 4820 4600 29440 Service hours needed 7840 4960 4400 6560 7600 8680 9640 9200 58880 Regular Hours Used 6720 4320 3840 5760 6560 7520 8320 7840 50880 OT Hours Used 1120 640 560 800 1040 1160 1320 1360 8000 # Employees Needed 42 27 24 36 41 47 52 49 318 Num Hires 2 0 0 12 5 6 5 0 30 Num Fires 0 15 3 0 0 0 0 3 21 a) 49 workers with 30 hired and 21 fired b) OT hours used = 8000; 8000 / 2 = 4000 units produced using overtime c) Regular time cost = 50,880 x $10 = $508,800; OT cost = 8,000 x $15 = $120,000; Hiring cost = 30 x $500 = $15,000; Firing cost = 21 x $400 = $8,400; Total cost = $652,200 d) Cost per unit = $652,200/29,440 = $22.15 Section Ref: Developing the Aggregate Plan Subsection: Chase Aggregate Plan Level: Medium Time on Task: 15.00 minutes Bloom‘s: Application Learning Objective 4: Develop aggregate plans. AACSB: Analytic
95. Develop a hybrid aggregate plan with inventory, but no back orders. Also, use no undertime and no subcontracting. Also use no firing, since the company is projecting a 20% annual growth rate per year over the next several years. When demand minus opening inventory exceeds regular plus maximum overtime production, hire enough employees to meet demand, working as much overtime as possible. When demand is less than regular time production, work no overtime and add to inventory (data given above). (a) What is the workforce at the end of the last period? How many total were hired? (b) How many total units were produced using overtime? (c) What is the maximum ending inventory and when does it occur? (d) What is the total cost? (e) What is the cost per unit? Answer: (a) 42 workers, with 2 hired; (b) 3050 units produced on overtime; (c) 1,880 units at periods 3–6; (d) $622,100; (e) $21.13 Solution: 1 2 3 4 5 6 7 8 Total Demand (calls) 3920 2480 2200 3280 3800 4340 4820 4600 29440 Service hours 7840 4960 4400 6560 7600 8680 9640 9200 58880 needed Regular Hours 6560 6560 6560 6560 6560 6560 6720 6720 52800 Used OT Hours Used 1280 0 0 0 1040 1260 1260 1260 6100 # Employees 41 41 41 41 41 42 42 42 330 Needed Num Hires 1 0 0 0 0 1 0 0 2 Ending Inventory 0 800 1880 1880 1880 1530 700 90 8520 a) 42 workers, with 2 hired, 1 in period 1 and 1 in period 6 b) 6100 hours used / 2 hours/unit = 3050 units produced on overtime c) 1,880 units at periods 3–5 d) Regular time labor = 331 x $10 x 160 = $529,600, OT Labor = 6100 x $15 = $91,500, Hiring cost = 2 x $500 = $1,000, Total cost = 529,600 + 91,500 + 1,000 = $622,100 e) $622,100 / 29,440 = $21.13 per unit Section Ref: Aggregate Plan Strategies Subsection: Hybrid Aggregate Plan Level: Medium Time on Task: 20.00 minutes Bloom‘s: Application Learning Objective 4: Develop aggregate plans. AACSB: Analytic
96. Sam‘s dry cleaning store has 3 employees who fold the clothes. Each employee can fold 45 shirts every hour. Assuming a level aggregate program how many employees will Sam need if to meet a demand of 1600 shirts per day if everyone works an 8 hour shift? a) 3 b) 5 c) 7 d) 12 e) 35 Answer: b Solution: 45 shirts/worker/hour x 8 hours = 360 shirts/worker/day 1600 shirts/day / 360 shirts/worker/day = 4.44 workers, round to 5 Section Ref: Aggregate Plan Strategies Subsection: Level Aggregate Plan Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 3: Identify aggregate planning strategies. AACSB: Analytic
97. Frank has 200 chickens in stock and he forecasts the following monthly demands. Using a level production plan, how many chickens will Frank need to supply each month to meet the demand? January = 300 February = 250 March = 180 April = 175 May =200 June = 240 July = 220 a) 175 b) 195 c) 223 d) 232 e) 1565 Answer: b Solution: Total demand = 1565 – initial inventory 200 = 1365 chickens; 1365/7 = 195 Section Ref: Aggregate Plan Strategies Subsection: Level Aggregate Plan Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 3: Identify aggregate planning strategies. AACSB: Analytic
98. Given the following, calculate 1) cost using a level production plan, 2) cost using a chase aggregate plan, and 3) the lowest cost option. In the level production plan, backorders are allowed but for each unfilled order it costs the company $10/unit. The employees work an 8-hour day and overtime is not allowed. Demand Period 1 240 Initial Employees 6 Period 2 235 Capacity/Employee 40 Hourly Period 3 265 Cost/Employee $18 Period 4 220 Inventory Holding $20 Period 5 220 Shortage Cost $10 Period 6 260 Hiring Cost $230 Firing Cost $190 a) $5884 for level, $6122 for chase, lowest cost option is level b) $5884 for level, $6122 for chase, lowest cost option is chase c) $6122 for level, $5884 for chase, lowest cost option is level d) $6122 for level, $5880 for chase, lowest cost option is chase e) $5884 for level, $6122 for chase, lowest cost option is either
Answer: a Level Production Plan Production 240 240 240 240 240 240
Over/short 0 5 -25 20 20 -20
Cumulative 0 5 -20 0 20 0 Total
Inventory/Backorder Cost $0 $100 $200 0 $400 0 $ 700.00
Employee Cost $864 $864 $864 $864 $864 $864 $5,184
Chase Production Plan
Period 1 Period 2 Period 3 Period 4 Period 5 Period 6
Demand 240 235 265 220 220 260
Production 6 5.875 6.625 5.5 5.5 6.5 Total Cost
Hire 0 0 1 0 0 1 2 $460
Fire 0 0 0 1 0 0 1 $190
Cumulative 0 5 -20 0 20 0 Total
Inventory/Backorder Cost $0 $100 $200 0 $400 0 $ 700.00
Total Employee 6 6 7 6 6 7 38 $5,472
Solution: Level Production Plan Production 240 240 240 240 240 240
Over/short 0 5 -25 20 20 -20
Employee Cost $864 $864 $864 $864 $864 $864 $5,184
Chase Production Plan
Period 1 Period 2 Period 3 Period 4 Period 5 Period 6
Demand 240 235 265 220 220 260
Production 6 5.875 6.625 5.5 5.5 6.5 Total Cost
Hire 0 0 1 0 0 1 2 $460
Fire 0 0 0 1 0 0 1 $190
Total Employee 6 6 7 6 6 7 38 $5,472
Section Ref: Developing the Aggregate Plan Subsection: Aggregate Plans for Companies with Tangible Products Level: Medium Time on Task: 20.00 minutes Bloom‘s: Application Learning Objective 4: Develop aggregate plans. AACSB: Analytic Reference: Use the following for problems 99–101. Labor Labor Cost regular 24 $/hr Overtime 32 $/hr hiring 125 $/employee firing 200 $/employee Capacity Employee initial 2 employee fabrication 3.6 hrs/unit regular hr/time time 160 period/employee hr/time overtime 40 period/employee
Period 1 Period 2 Period 3 Period 4
#units 200 150 185 210
99. Calculate the total cost to meet the demand using a chase production plan without using overtime. Answer: $73,660 Solution: #units Period 1 Period 2 Period 3 Period 4
200 150 185 210
Hours Needed 720 540 666 756
Reg Emp 4.5 3.375 4.1625 4.725
Total Cost = $72,960 + $700 = $73,660
Reg Cost
Hire/Fire
$19,200 $15,360 $19,200 $19,200 $72,960
+3 -1 +1 0
Hire/Fire Cost $375 $200 $125 $0 $700
Section Ref: Developing the Aggregate Plan Subsection: Aggregate Plans for Companies with Nontangible Products Level: Medium Time on Task: 12.00 minutes Bloom‘s: Application Learning Objective 4: Develop aggregate plans. AACSB: Analytic
100. Calculate the total cost to meet the demand using a chase production plan with overtime. Once overtime is approved the workers are on the job 12 hours each day for the full period. Answer: $77,375 Solution: Period #units Hours Reg OT Reg OT Hire/Fire Hire/Fire Needed Emp Employees Cost Cost Cost 1 200 720 4.5 3.6 $15360 $5120 2 $250 2 150 540 3.375 2.7 $11520 $3840 -1 $200 3 185 666 4.1625 3.33 $15360 $5120 1 $125 4 210 756 4.725 3.78 $15360 $5120 0 0 Total Cost = $57,600 + $19200 + $575 = $77,375 Section Ref: Developing the Aggregate Plan Subsection: Aggregate Plans for Companies with Nontangible Products Level: Medium Time on Task: 15.00 minutes Bloom‘s: Application Learning Objective 4: Develop aggregate plans. AACSB: Analytic
101. Calculate the total cost to meet the demand using a level production plan with overtime. Once overtime is approved the workers are on the job 12 hours each day for the full period. Each unit that cannot be filled with a level production plan will be back-ordered and costs the firm $150. Assume that the employees can only finish a whole unit and round up/down accordingly. Answer: $67,890
Solution: Total demand = 200 + 150 + 185 + 210 = 745 / 4 = 186.25 units/period round to 187. 187 x 3.6 hours/unit = 673.2 hours/160 hours per worker = 4.2 workers or 168.3 hours per period per worker, which is equivalent to 160 regular hours plus 8.3 hours overtime per worker per period. Demand Output Inventory Backorder Cost 200 187 _13 $1950 150 187 24 185 187 26 210 187 3 Total cost = Backorder + Regular hours + Hiring/Firing + Overtime Total cost = $1950 + 4 x 160 x 4 x $24 + $125 x 2 + 8.3 x 4 x $32 x 4 Total cost = $1950 + $61440 + $250 + $4250 = $67,890 Section Ref: Developing the Aggregate Plan Subsection: Aggregate Plans for Companies with Tangible Products Level: Medium Time on Task: 15.00 minutes Bloom‘s: Application Learning Objective 4: Develop aggregate plans. AACSB: Analytic
Short Answer
102. If the marketing plan does NOT meet the strategic business objectives, top management and marketing revise either the _________ or the ___________. Answer: objectives; marketing plan Solution: If the marketing plan does not meet the strategic business objectives, top management and marketing management revise either the objectives or the marketing plan itself until it fully supports the strategic objectives. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
103. The master production schedule is a(n) ______ production schedule and is typically stated as _______ finished goods. Answer: anticipated; specific Solution: The master production schedule is an anticipated production schedule and is typically stated as specific finished goods. It details how operations will use available resources and which units or models will be built in each time frame. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain business planning. AACSB: Knowledge
104. ___________________ is an important advantage of level production plans. Answer: Workforce stability Solution: One advantage of a level production plan is workforce stability. Your company sets labor and equipment capacity equal to average demand, rather than hire excess labor or buy additional tools and equipment just to meet peak demand. Section Ref: Aggregate Plan Strategies Subsection: Level Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge
105. An important advantage of chase aggregate plans is that they ____________________. Answer: minimize finished goods holding cost Solution: A chase aggregate plan produces exactly what is needed to satisfy demand during each period, which offers the advantage of minimizing finished goods holding costs. Section Ref: Aggregate Plan Strategies Subsection: Chase Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge
106. Subcontracting has unattractive ________________________ effects. Answer: cost Solution: The disadvantage of subcontracting is the cost, which is substantial. The first step is to find a qualified subcontractor for the job. Then you have the additional cost of shipping parts to the subcontractor and having finished subassemblies or products shipped back to you. In addition, subcontracting means your company loses some degree of control. By contrast, work done in-house is always under your control: you know exactly where it is and how it is progressing. Since finding a good subcontractor takes time, subcontracting is a medium- to longterm option. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
107. At Coca-Cola Midi (CCM) _________ and ___________ is the basis for all planning, manufacturing, and supply chain activities. Answer: sales; operations planning Solution: CCM has used both enterprise resource planning (ERP; discussed in Chapter 14) and sales and operations planning since opening in 1991. Sales and operations planning is the basis for all planning, manufacturing, and supply chain activities. Section Ref: Business Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain business planning. AACSB: Knowledge
108. In the level production plan you do NOT add ______, _____ or ______ to meet peak demand. Answer: people (personnel); tools; equipment Solution: One advantage of a level production plan is workforce stability. Your company sets labor and equipment capacity equal to average demand, rather than hire excess labor or buy additional tools and equipment just to meet peak demand. Section Ref: Aggregate Plan Strategies Subsection: Level Aggregate Plan Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Identify aggregate planning strategies. AACSB: Knowledge
109. In proactive option demand-based aggregate planning, marketing tries to _____ the _____ pattern. Answer: shift; demand Solution: The demand-based proactive option is for marketing to shift the demand patterns to minimize demand fluctuations. Section Ref: Aggregate Planning Options Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Discuss planning options. AACSB: Knowledge
110. Subcontracting provides _____ output capacity during periods of ______. Answer: additional; high demand Solution: Subcontracting provides additional output capacity during periods of high demand. Section Ref: Aggregate Planning Options Subsection: Capacity-Based Options Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Discuss planning options. AACSB: Knowledge
111. In a level production plan, if you do NOT allow backorders, you will need to ensure that the _____ is sufficient to meet the average demand. Answer: workforce Solution: If you use the level plan with inventories and back orders, the aggregate production rate is set equal to average demand. In addition, if you allow no back orders, the size of the workforce is changed initially so that all demand is met on time. Section Ref: Developing the Aggregate Plan Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Develop aggregate plans. AACSB: Knowledge
Testbank Chapter 14: Resource Planning LO Section Chapter Overview Enterprise Resource Planning
The Benefits and Costs of ERP Material Planning Systems
Subsection N/A The Evolution of ERP Systems The Benefits of ERP Systems The Costs of ERP Systems NA An Overview of Material Planning Systems Objectives of MRP Types of Demand
The Operating Logic of MRP
How MRP Works
N/A Action Notices
Question # 1, 2, 3, 4, 5, 6, 7, 8, 70, 74, 76, 81, 82, 84, 106, 107, 108, 129 9, 10, 11, 13, 83, 85, 86, 109, 130, 131, 132 12, 75, 110 15, 71, 77, 133, 140 14, 19, 21, 78 16, 17, 22, 23, 128 29, 97 18, 20, 24, 26, 27, 28, 87, 88, 134 25, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 89, 90, 91, 92, 93, 94, 95, 96, 111, 112, 118, 119, 120, 121, 122, 123, 135, 136 52, 79, 98, 100 53, 54, 55, 56, 57, 58, 59, 99, 101, 102, 113, 115
Comparing Different Lot Size Rules Capacity Requirements Planning (CRP) Resource Planning within OM: How It All Fits Together
N/A
60, 61, 62, 63, 103, 105, 114, 124, 125 64, 65, 66, 67, 68, 69, 72, 80, 104, 116, 126, 127, 137, 138 117
Resource Planning Across the Organization
73, 139
TOTAL QUESTIONS
140
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Multiple Choice 1. What does ERP stand for? a) educational resources planning b) end routing procedure c) enterprise reliability production d) enterprise resource planning e) easy resource planning Answer: d Solution: Enterprise resource planning (ERP) Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
2. ERP is software designed for _____ and ______ business processes. a) calculating; budgeting b) deleting; changing c) organizing; managing d) organizing; budgeting e) selecting; managing Answer: c Solution: Enterprise resource planning (ERP) is software designed for organizing and managing business processes (core and administrative) by sharing information across functional areas. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
3. What is the name of an information system designed to integrate internal and external members of the supply chain? a) material requirements planning b) master production schedule c) capacity requirements planning d) aggregate planning e) enterprise resource planning Answer: e Solution: The number of finished goods sold to final customers is a good example of the type of useful information shared throughout the supply chain. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
4. Owens Corning reported savings of ______________ by using ERP. a) $6 million b) $16 million c) $65 million d) $600 million e) $660 million Answer: c Solution: Owens Corning reported saving $65 million by using ERP to coordinate customer orders, financial reporting, and global procurement. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
5. Which of the following is NOT one of the four basic categories of ERP modules? a) finance and accounting b) information systems c) sales and marketing d) production and materials management e) human resources Answer: b Solution: Core processes include production planning and control, inventory management, purchasing, and distribution. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
6. Which ERP module includes investment management? a) finance and accounting b) information systems c) sales and marketing d) production and materials management e) human resources Answer: a Solution: The finance and accounting module can include the following capabilities: financial report generation, investment management, cost control analysis, asset management, capital management, debt management, and so on. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
7. Which ERP module handles billing? a) finance and accounting b) information systems c) sales and marketing d) production and materials management e) human resources Answer: c Solution: The sales and marketing function handles customer-related activities. This module also handles billing, invoicing, rebate processing, product registrations, and customer complaints. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
8. Which ERP module includes workflow analysis? a) finance and accounting b) information systems c) sales and marketing d) production and materials management e) human resources Answer: e Solution: The human resources module includes workforce planning, employee scheduling, training and development, payroll and benefits, expense reimbursement, job descriptions, organizational charts, and workflow analysis. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
9. What proportion of U.S. companies with greater than $1 billion in annual revenues has implemented ERP? a) 10% b) 20% c) 40% d) 75% e) 95% Answer: c Solution: Merrill Lynch reported that almost 40 percent of U.S. companies with greater than $1 billion in annual revenues had implemented ERP. Section Ref: Enterprise Resource Planning Subsection: The Evolution of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
10. The ERP system provides a single interface to a) operations only. b) operations and inventory control only. c) external members of the supply chain as well. d) the company management structure only. e) customers only. Answer: c Solution: An ERP system provides a single interface for managing all routine activities performed in manufacturing—from order entry to after-sales customer service. In the later 1990s, ERP systems were extended to external members of the supply chain (suppliers and customers). These extensions provide customer interaction and supplier management modules. Using a single interface can provide significant savings for large companies. Section Ref: Enterprise Resource Planning Subsection: The Evolution of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
11. Second-generation ERP systems addressed the first-generation deficiency of: a) inadequate statistics b) interdepartmental communications c) integrated modules d) continuous planning capabilities e) forecasting capabilities Answer: d Solution: While first-generation ERP systems gave planners plenty of statistics about what happened in the company, in terms of costs and financial performance, the reports were merely snapshots of the business at a single point in time. These reports did not support the continuous planning needed in supply chain management. This deficiency led to the development of planning systems focused on decision making. These new systems are referred to as SCM (supply chain management) software. Section Ref: Enterprise Resource Planning Subsection: The Evolution of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
12. ERP systems provide _____ and _____ benefits. a) tangible; HR b) intangible; marketing c) marketing; operation d) tangible; intangible e) CEO; CFO Answer: d Solution: ERP provides both tangible and intangible benefits. Section Ref: The Benefits and Costs of ERP Systems Subsection: The Benefits of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Review the benefits and costs of an ERP system. AACSB: Technology
13. Second-generation ERP systems are referred to as ___________ software. a) scheduling b) MRP c) inventory management d) MPS e) SCM Answer: e Solution: Second-generation ERP systems have leveraged advantages of original systems to increase efficiency in handling transactions, improve decision making, and support e-commerce. These new systems are referred to as SCM (supply chain management) software. Section Ref: Enterprise Resource Planning Subsection: The Evolution of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
14. _______________ MRP is an MRP system that includes production planning, master production scheduling, and capacity requirements planning. a) Fully integrated b) Closed-loop c) Open-loop d) Wide-range e) Enterprise Answer: b Solution: Closed-loop MRP is an MRP system that includes sales and operations planning, master production scheduling, and capacity requirements planning. Section Ref: Material Planning Systems Subsection: N/A Level: Easy Bloom‘s: Knowledge Time on Task: 1.00 minutes Learning Objective 3: Describe material planning systems. AACSB: Analytic
15. The most critical factors for successful EPR implementation are ______ and _________ ______. a) leadership; top management commitment b) leadership; technological transfer management c) management; technological transfer management d) funding; top management commitment e) leadership; detailed technical specifications Answer: a Solution: A review of successful ERP implementations indicates that the most critical factors are leadership and top management commitment. Section Ref: The Benefits and Costs of ERP Systems Subsection: The Costs of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Review the benefits and costs of an ERP system. AACSB: Technology
16. What information system enables companies to have the right material in the right amounts available at the right time? a) manufacturing resources planning b) multifunctional requirements planning c) material requirements planning d) material relationships planning e) manufacturing requirements planning Answer: c Solution: Material planning systems are designed to answer five primary questions: 1) What needs to be built? 2) How many are needed? 3) When do we need to have the items completed? 4) What materials are needed? and 5) When are those materials needed? Section Ref: Material Planning Systems Subsection: An Overview of Material Planning Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
17. Companies use ____________ to check that enough work is scheduled for operations and that the amount of work scheduled is feasible. a) capacity management b) closed-loop requirements planning c) cut requirements planning d) capacity resources planning e) capacity requirements planning Answer: e Solution: Companies use capacity requirements planning (CRP) to check that enough work is scheduled for operations and that the amount of work is feasible. Section Ref: Material Planning Systems Subsection: An Overview of Material Planning Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
18. Independent demand is the demand for ______________. a) finished products b) subassemblies c) parts d) raw materials e) components Answer: a Solution: Independent demand is the demand for finished products; it does not depend on the demand for other products. Section Ref: Material Planning Systems Subsection: Types of Demand Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
19. In the mid-1970s, MRPII was developed. One of its major components is _______. a) leadership b) inventory management c) operations execution d) strategic management e) marketing Answer: c Solution: MRP II has three major components: management planning, operations planning, and operations execution. Section Ref: Material Planning Systems Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
20. Which of the following most closely describes dependent demand? a) demand generated by suppliers b) demand that is seasonal c) demand estimates using regression analysis d) demand derived from finished products e) demand for repair parts Answer: d Solution: Dependent demand is derived from finished products. Section Ref: Material Planning Systems Subsection: Types of Demand Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
21. A computer-based information system designed to manage dependent demand inventory is called _____________. a) manufacturing resources planning b) multifunctional requirements planning c) material relationships planning d) material requirements planning e) manufacturing requirements planning Answer: d Solution: Material planning systems are designed to answer five primary questions: 1) what needs to be built, 2) how many are needed, 3) when do we need to have the items completed, 4) what materials are needed, and 5) when are those materials needed. Section Ref: Material Planning Systems Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Technology
22. The ____________ file lists the materials needed to build a product. a) master production schedule b) bill of material c) inventory records d) material needs e) build structure Answer: b Solution: Reviewing the recipes to determine the materials needed is equivalent to checking the bill of material (BOM) file to determine the materials needed to build a product. Section Ref: Material Planning Systems Subsection: An Overview of Material Planning Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
23. CRP systems are used to check that the amount of work a) meets the MRP directive. b) meets the ERP directive. c) will make a profit. d) is feasible. e) meets OSHA requirements. Answer: d Solution: Companies use capacity requirements planning (CRP) to check that enough work is scheduled for operations and that the amount of work is feasible. Section Ref: Material Planning Systems Subsection: An Overview of Material Planning Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic 24. The ____________ details the company‘s planned products, quantity, and the schedule used by marketing when promising deliveries. a) master production schedule b) bill of material c) inventory records d) material product sales e) promised deliveries Answer: a Solution: The master production schedule shows final products and time-phased net requirements for subassemblies and final assemblies for manufacturing and components and raw materials for purchasing. Section Ref: Material Planning Systems Subsection: Types of Demand Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
25. The ____________ is (are) checked for the materials on hand and those that need to be procured. a) master production schedule b) bill of material c) inventory records d) material inventories e) promised deliveries Answer: c Solution: To determine whether enough inventory is available or whether a replenishment order is needed, the MRP system checks the inventory records of all items listed in the BOM. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
26. MRP develops a ____________ that shows future demand, supply, and inventories by time period. a) DSI report b) snapshot forecast c) requirements plan d) material movements schedule e) time-phased schedule Answer: e Solution: Part of the MRP system is developing a time-phased schedule that shows future demand, supply, and inventories by time period. Section Ref: Material Planning Systems Subsection: Types of Demand Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
27. In MRP, the starting points for each part and material needed to accomplish the master production schedule are the ___________________. a) net requirements b) gross requirements c) planned releases d) scheduled receipts e) planned receipts Answer: b Solution: The MRP system checks the BOM file to determine the materials needed, how much, and when. The system generates the gross requirements of each part and material needed to accomplish the MPS. The system inserts the gross requirements into the individual inventory records and computes the projected available quantity for each item so that you know whether there‘s enough inventory or whether you need a replenishment order. Section Ref: Material Planning Systems Subsection: Types of Demand Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
28. Which of the following is NOT true concerning replenishment orders? a) They are generated when there is not enough inventory. b) MRP specifies when to place the order. c) The order may be for material from a supplier. d) They are orders for the final product. e) The order may be for material from the manufacturing floor. Answer: d Solution: The company does not forecast dependent demand but, rather, calculates the material needs based on the final products to be produced. MRP computerized information systems are designed to manage dependent demand inventory and to schedule necessary replenishment orders. The system inserts the gross requirements into the individual inventory records and computes the projected available quantity for each item so that you know whether there‘s enough inventory or whether you need a replenishment order. If you need a replenishment order, the MRP system tells you when to place the order, either to a supplier or to the manufacturing floor, to ensure that the parts or material are available when needed. Section Ref: Material Planning Systems Subsection: Types of Demand Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
29. Which of the following is an objective of MRP? a) Keep priorities updated and valid. b) Keep track of material movements on the shop floor. c) Provide information for expediting orders. d) Allocate scarce parts to products. e) Provide information for activity based costing. Answer: a Solution: Your company also uses MRP to keep priorities updated and valid. Section Ref: Material Planning Systems Subsection: Objectives of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
30. The authorized MPS is a statement of ______________________________. a) manufacturing orders that have been authorized for release to the shop floor b) which workers are authorized to work on which machines c) what the company expects to build and when it expects to build it d) authorized payments to vendors e) where different end products are authorized to be manufactured Answer: c Solution: The authorized MPS is a statement of what and when your company expects to build. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.0 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
31. The quantity of the replenishment order is based on the __________________________. a) capacity available b) size of the item c) number of workers available d) inventory space available e) lot sizing rule used Answer: e Solution: When we do not have enough inventory to satisfy the forecast for a particular period, we need an MPS order. The quantity of the replenishment order is based on the lot sizing rule used. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.0 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
32. Information that may be contained in the inventory records file includes all EXCEPT which of the following? a) part numbers b) run times for manufactured parts c) part names d) lead times e) safety stock requirements Answer: b Solution: The top part of the record contains product or part identification information—typically either a part number, part name, or description. In our example, the part name is the CD cabinet. The top portion also contains planning factors. These can include the lot size rule, lead time, safety stock requirements, and so forth. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.0 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
33. The time interval necessary to either manufacture or purchase an item is its ______________. a) time fence b) lead time c) safety time d) time bucket e) receipt time Answer: b Solution: Lead time is the span of time needed to perform an activity or series of activities. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
34. Information in the inventory records file that can change with inventory transactions includes the ________. a) part number b) lot size rule c) projected inventory level d) lead time e) safety stock requirement Answer: c Solution: Additional information in the records changes with each inventory transaction. These transactions include releasing new orders, receiving previously ordered materials, withdrawing inventory, canceling orders, correcting inventory record errors, and adjusting for rejected shipments. The record shows how much inventory of an item is available, projects future needs, and shows the projected inventory level in different time periods. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
35. An error in replenishment ordering can result from a(n) _____________________________. a) inaccuracy in the inventory records file b) breakdown of equipment c) expediting of an order d) circumstance of working excessive overtime e) error in accounts receivables Answer: a Solution: One problem with an MRP system is inventory record accuracy. Because the system checks the inventory record to see whether it has to generate a replenishment order, an inaccuracy in the record can cause an error in replenishment ordering. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
36. What is a technique for improving inventory record accuracy? a) cycle counting b) drum, buffer, rope c) Kanban d) tracking signal e) statistical process control Answer: a Solution: Cycle counting, discussed in Chapter 12, is a technique for improving inventory record accuracy. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
37. Gross requirements for finished products are taken from ________________________. a) the inventory records file b) the order entry file c) the authorized MPS d) the bill of materials file e) forecasted sales Answer: c Solution: Gross requirements for finished products are taken from the authorized MPS. Scheduled receipts are replenishment orders that have been placed but not yet received. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
38. When there is insufficient inventory to satisfy the forecast for a particular period a(n) _____________ order must be placed. a) BOM b) restock c) inventory request d) MPS e) MRP Answer: d Solution: When we do not have enough inventory to satisfy the forecast for a particular period, we need an MPS order. The quantity of the replenishment order is based on the lot sizing rule used. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
39. Scheduled receipts are _________________________________________. a) planned orders b) planned orders offset by lead time c) gross requirements offset by lead time d) gross requirements minus inventory e) replenishment orders that have been placed but not yet received Answer: e Solution: Scheduled receipts are replenishment orders that have been placed but not yet received. For example, if we placed an order last week and we know it will arrive in period 1, it would be in the scheduled receipts row. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
40. For every scheduled receipt in an MRP table, there is also in the organization a(n) __________________. a) shop floor order b) order that has been placed but not yet been received c) planned order d) period order e) dispatch list Answer: b Solution: Scheduled receipts are replenishment orders that have been placed but not yet received. For example, if we placed an order last week and we know it will arrive in period 1, it would be in the scheduled receipts row. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
41. For any period the beginning inventory, plus any replenishment orders due, less the gross requirement is called the __________________________. a) planned orders b) projected available quantity c) scheduled receipts d) lead time e) safety stock Answer: b Solution: The projected available quantity is a period-by-period projection of how much inventory should be available. The projected available quantity equals the beginning inventory, plus any replenishment order due, less the gross requirements for that period. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
42. The beginning inventory for any time period is equal to _____________________________________. a) safety stock plus gross requirements from the previous period b) scheduled receipts plus projected available quantity c) planned orders plus scheduled orders d) projected available quantity at the end of the previous period e) gross requirements less scheduled orders Answer: d Solution: The projected available quantity is a period-by-period projection of how much inventory should be available. The projected available quantity equals the beginning inventory, plus any replenishment order due, less the gross requirements for that period. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
43. Which of the following is NOT true for planned orders? a) They are necessary only for finished products. b) They result when there is not enough inventory to cover the gross requirements. c) The quantity is calculated using the lot-sizing rule. d) The lead time is required to determine when the order should be placed. e) The inventory records file is updated for the order. Answer: a Solution: Planned orders result when we do not have enough inventory to cover the gross requirements for a period. For example, unless we plan an order to arrive in period 4, we will be short 100 CD cabinets. When we need a replenishment order, we calculate the quantity by the lot size rule and we calculate the timing by the lead time. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
44. The MRP file that contains data on specific materials used to make final products and their correct quantities is the ______________________. a) authorized master production schedule b) bill of materials file c) inventory records file d) part status file e) routing file Answer: b Solution: A bill of material (BOM) lists the subassemblies, intermediate assemblies, component parts, raw materials, and quantities of each needed to produce one final product. It is exactly like a recipe for baking a cake. As we would follow the recipe for the cake, the manufacturer is expected to follow the BOM precisely. No extra parts are added. No substitutions are made without appropriate paperwork. Companies that use MRP systems must have a disciplined workforce that uses only the materials authorized by the BOM. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
45. When there is insufficient inventory to cover the gross requirements for a period, a) an MRP is placed. b) an ERP is placed. c) a planned order is placed. d) a scheduled order is placed. e) a rush order occurs. Answer: c Solution: Planned orders result when we do not have enough inventory to cover the gross requirements for a period. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
46. The MRP input listing the intermediate assemblies, subassemblies, component parts, raw materials, and the quantities of each needed to produce one final product is the ___________________________. a) authorized master production schedule b) bill of materials file c) inventory records file d) part status file e) assembly time chart Answer: b Solution: A bill of material (BOM) lists the subassemblies, intermediate assemblies, component parts, raw materials, and quantities of each needed to produce one final product. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
47. Which of the following is NOT true concerning indented bills of materials? a) Subsequent levels are indented further to the right. b) Children are indented toward the right. c) The highest level parents are closest to the left margin. d) Quantity required is shown for each part number. e) Lead times determine how far children are indented. Answer: e Solution: The BOMs used as input to the MRP system are indented bills of materials. In an indented BOM, the highest-level item (―parent‖) is closest to the left margin, with components (―children‖) going into that item indented to the right. In our example, the CD cabinet is the highest-level item and all the components are indented. The components for the cabinet door are indented even farther to the right since these components go directly into the door assembly rather than the CD cabinet. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
48. A visual depiction of the subassemblies and components that are needed to produce a finished product is called a(n) ______________________. a) assembly time chart b) product structure tree c) peg d) product chart e) blueprint Answer: b Solution: A product structure tree is the visual representation of the BOM, clearly defining the parent–child relationships. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
49. An item that has no parents is a(n) ______________. a) subassembly b) end item c) child item d) intermediate assemble e) component Answer: b Solution: In the MRP system, a parent item is any end item made from one or more components. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
50. The cumulative lead time is _______________________________. a) the sum of the lead times for all the components b) the sum of the lead time and the safety time c) the number of time buckets used in the MRP d) the longest route in terms of time from the low level items to the end item in the product structure tree e) lead time less the safety time Answer: d Solution: Cumulative lead time for a product is the largest value associated with any individual connected path from the lowest level to the final assembly level. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
51. The lead time can be less than the cumulative lead time when _________________________. a) the company has inventory on hand b) the order has already been shipped c) the supply chain is well tuned d) there is no safety time e) the order is expedited Answer: a Solution: Beginning inventories can reduce the amount of time it takes to complete an order. For example, if sufficient hinges were already available, four weeks of lead time is subtracted from the lead time of this connected path. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
52. The gross requirements of a given component part are determined from ______________________. a) scheduled receipts plus projected available b) gross requirements of the parent c) planned orders of the parent d) projected available of the end item e) planned orders of the end item Answer: c Solution: Gross requirements for a component, or child, are determined by the planned orders of its parent or parents. The planned orders of the parent item determine the timing of the gross requirements of the child. Section Ref: How MRP Works Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
53. Which of the following is NOT true for action notices that are produced by MRP systems? a) An action notice is produced when a planned order needs to be released. b) An action notice is produced when due dates of orders need to be adjusted. c) An action notice is produced when the lead time is not sufficient for a planned order. d) An action notice is produced when inventory is moved to the manufacturing floor. e) They indicate actions that need to be taken by inventory planners. Answer: d Solution: An action notice is created when a planned order needs to be released, when due dates of orders need to be adjusted, or when there is insufficient lead time for a planned replenishment order. Section Ref: How MRP Works Subsection: Action Notices Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
54. The current time period is referred to as __________________. a) time zero b) the point of departure c) the start time d) the action bucket e) this year Answer: d Solution: We call the current period the action bucket because that is the period in which we take actions such as releasing, rescheduling, or canceling orders. Section Ref: How MRP Works Subsection: Action Notices Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
55. A positive quantity in the current period‘s planned order row means that ___________________. a) lead time is too long b) the projected available is negative c) gross requirements are too large d) the planned order is due to be completed in the current period e) an order must be released Answer: e Solution: A positive quantity in the current period‘s planned order row means that an order must be released. Section Ref: How MRP Works Subsection: Action Notices Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
56. Production and inventory planners release orders to ________________________. a) the expediter b) either an external supplier or to the shop floor c) the logistics manager d) either the shop floor or to the warehouse e) marketing Answer: b Solution: Production and inventory control planners release orders either to an external supplier or to the shop floor. Section Ref: How MRP Works Subsection: Action Notices Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
57. An order released to a supplier authorizes ______________________________________. a) the shipment of the material so that it arrives as needed b) movement of the material from the warehouse to the supplier c) the sending of information concerning production to the supplier d) accounting to set up an accounts receivable entry e) the logistics manager to start investigating shipment options Answer: a Solution: An order released to a supplier authorizes the shipment of the material so that it arrives as needed. An order released to the shop authorizes withdrawal of the needed materials and the start of production. Section Ref: How MRP Works Subsection: Action Notices Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
58. An action notice is generated ________________________________________. a) for planned orders in any period b) only for orders that are to be released to the shop floor c) only for movements to and from the warehouse d) only when marketing needs to be notified e) when a planned order needs to be released Answer: e Solution: An action notice is created when a planned order needs to be released, when due dates of orders need to be adjusted, or when there is insufficient lead time for a planned replenishment order. Section Ref: How MRP Works Subsection: Action Notices Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
59. If an order CANNOT be scheduled to arrive in time, the planner tries to ________________. a) find a replacement order b) cancel the order c) split the order in two d) expedite the order e) talk marketing into changing the due date Answer: d Solution: If the order is not scheduled to arrive in time, the planner tries to rush or expedite the order. Section Ref: How MRP Works Subsection: Action Notices Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
60. Which of the following is NOT a lot size rule? a) lot-for-lot b) fixed order quantity c) overall factors d) least total costs e) parts period balancing Answer: c Solution: Different lot size rules can be used with MRP systems, such as least unit cost, least total costs, and parts period balancing. In this book, we cover the fixed-order quantity (FOQ), lot-for-lot (L4L), and period-order quantity (POQ). Section Ref: How MRP Works Subsection: Comparing Different Lot Size Rules Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
61. Different lot size rules determine the quantity of the order and __________________. a) the quality b) change the frequency of replenishment orders c) how projected available is calculated d) the lead time e) the backorder cost Answer: b Solution: Companies using MRP often use different lot-sizing techniques. Different techniques determine the timing of replenishment orders, the amount of inventory carried, and the frequency of setups. Section Ref: How MRP Works Subsection: Comparing Different Lot Size Rules Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
62. If setup costs are essentially zero (negligible when compared to carrying costs), which approach should be used for lot sizing? a) lot-for-lot b) fixed order quantity c) period order quantity with POQ = 6 periods d) period order quantity with POQ = 2 periods e) period order quantity with POQ = 4 periods Answer: a Solution: Since lot-for-lot makes just what is needed, there is no holding cost for carrying inventory to the next period, so its costs are lowest if the setup cost is zero or negligible. Section Ref: How MRP Works Subsection: Comparing Different Lot Size Rules Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
63. Selection of the lot size rule to be used should be based on minimizing ____________________. a) the order size b) late shipments c) total processing time d) quality problems e) the sum of ordering and carrying costs Answer: e Solution: The two costs incurred are ordering and carrying costs, so these should be minimized. The rules should all be able to obtain materials in time to fill orders. Section Ref: How MRP Works Subsection: Comparing Different Lot Size Rules Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
64. Capacity requirements planning uses data from _________________________. a) MRP b) rough-cut capacity planning c) aggregate planning d) MPS e) the bill of labor file Answer: a Solution: Capacity requirements planning (CRP) uses data from MRP. We calculate workloads for critical work centers based on open shop orders and planned shop orders. Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
65. For capacity requirements planning, loads for critical work centers are calculated based on ___________. a) open external supplier orders and planned external supplier orders b) gross requirements for the end product c) open shop orders and planned shop orders d) safety stock e) the sum of ordering and carrying costs Answer: c Solution: Capacity requirements planning (CRP) uses data from MRP. We calculate workloads for critical work centers based on open shop orders and planned shop orders. Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
66. Which of the following is NOT a direct input to capacity requirements planning? a) planned shop orders b) open shop orders c) setup time and run time per unit for shop orders d) current inventory levels e) quantity for shop orders Answer: d Solution: We calculate workloads for critical work centers based on open shop orders and planned shop orders. We translate these orders into hours of work by work center and by time period. We calculate the total item time by summing the setup time and the total run time for the item. Total item time = setup time + (quantity × run time per unit) Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
67. With capacity requirements planning, the calculated workload for a work center is compared with ___________. a) available capacity b) calculated workloads for other work centers c) the cost of expanding the work center d) standard capacity e) design capacity Answer: a Solution: When we have calculated the workloads, we compare them to the available capacity for the work center in those time periods. Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
68. If the available capacity at a work center is NOT adequate, the company can __________________. a) decrease run times per piece b) authorize overtime c) expedite d) decrease order quantities e) hold up payment Answer: b Solution: If the available capacity is not adequate, the company has a number of options. The easiest and quickest way to increase available capacity may be to authorize overtime at the work center. Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
69. Capacity requirements planning enables the company to evaluate ____________________. a) employee morale b) its suppliers c) its manufacturing costs d) quality e) how well it is using its critical work centers Answer: e Solution: CRP enables a company to evaluate both the feasibility of the MRP system and how well the company is using its critical work centers. Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
70. Dell practices _____________________________. a) focused customization b) make to stock production c) mass merchandising d) mass customization e) frozen assembly schedules Answer: d Solution: Dell uses this approach to support the concept of mass customization. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
71. Which of the following is NOT a major supplier of ERP systems? a) SAP AG b) PeopleSoft c) Oracle d) Infor.com e) IBM Answer: e Solution: SAP, Oracle, Epicor, NetSuite, and Infor are major suppliers of ERP systems. Section Ref: The Benefits and Costs of ERP Systems Subsection: The Costs of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Review the benefits and costs of an ERP system. AACSB: Technology
72. Setup time is incurred ________________________. a) once each day regardless of product changes b) each time the operator starts the machine c) each time the machine is prepared to produce the desired item quantity d) for each shift that works on the desired item quantity e) on rare occasions if it takes significant time Answer: c Solution: The setup time is incurred each time the machine is prepared to produce the desired quantity of an item. Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
73. According to the textbook, most manufacturing operations, production, and inventory control planners are responsible for working with MRP. Planners are typically responsible for all EXCEPT which of the following? a) end item inventory items b) subassemblies inventory items c) component inventory items d) raw material pricing e) supplier delays Answer: d Solution: In most manufacturing operations, production or inventory control planners are responsible for working with MRP. Planners are typically responsible for certain inventory items, including end items, subassemblies, and components. Planners check the MRP output for action notices related to the items for which they are responsible. Planners schedule, reschedule, and expedite materials to support the MPS. Section Ref: Resource Planning within OM: How It All Fits Together Subsection: Resource Planning Across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
74. Which of the following is NOT part of the common ERP database? a) finance b) suppliers c) customers d) operations e) CEO strategic plan Answer: e Solution: Enterprise resource planning provides the structure for common databases across the organization, its suppliers, and its customers. Suppliers can access the master production schedule (MPS) to see projected build dates for products that use materials supplied by them. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
75. Which of the following is NOT an intangible benefit of ERP? a) improved customer response b) better integration between systems c) global sharing of information d) increased flexibility e) improved on-time delivery performance Answer: e Solution: Intangible benefits refer to the improved visibility of corporate data, improved customer responsiveness, better integration between systems, standardization of computing platforms, improved flexibility, global sharing of information, and better visibility into the supply chain management process. Section Ref: The Benefits and Costs of ERP Systems Subsection: The Benefits of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Review the benefits and costs of an ERP system. AACSB: Technology
76. Which of these entities is most likely to be consolidated when a company implements an ERP or SCM system? a) separate databases for production, sales, and human resources b) core processes for production planning, accounting, and human resources c) separate desktop clients for employees within a single function, such as accounting d) members of a supply chain like upstream suppliers and downstream customers Answer: a Solution: All modules are fully integrated, using a common database and support processes that go across functional areas. A transaction in any module is immediately available to all other modules and to all relevant parties. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Medium Time on Task: 1.00 minutes Bloom‘s: Analysis Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
77. Brogan Boutique Foods Inc. has determined that it wants to implement an ERP system to cut back on an ever-increasing consultancy budget, to improve supply chain management, to reduce IT costs, and to consolidate human resources. To successfully implement their chosen ERP system, Brogan‘s CIO estimates that the company will have to spend $150,000 on software, $150,000 on services, and $30,000 per year for the first three years of maintenance costs. If Brogan‘s total cost of ownership for their ERP system is within industry averages, approximately what is the company‘s annual sales? a) less than $50 million b) $50 million to $100 million c) $500 million to $1 billion d) more than $5 billion Answer: a Solution: Brogan‘s total cost of ownership is $390,000. The average total cost of ownership is under $500,000 for companies with annual sales of less than $50 million. Section Ref: The Benefits and Costs of ERP Subsection: The Costs of ERP Systems Level: Medium Time on Task: 1.00 minutes Bloom‘s: Analysis Learning Objective 2: Review the benefits and costs of an ERP system. AACSB: Technology 78. Chat Noir, a black cat toy that‘s expected to be a hot seller this season, has two front legs and two back legs. Each front leg assembly has one paw and each back leg assembly has one paw. The front paws each have 5 identical toes and the back paws have 4 identical toes each. Front and back toes are interchangeable but front and back paws and front and back legs are not interchangeable. There are currently 3 front leg assemblies and 4 back leg assemblies, along with 10 front paws and 8 back paws, plus 40 toes in inventory. If forecasted demand is 50 units of Chat Noir, how many toes should be ordered? a) 635 b) 692 c) 747 d) 878
Answer: c Solution: 50 Chats Noirs require gross 100 front legs and 100 back legs, less starting inventory, so 97 front legs and 96 back legs net. 97 front legs require 97 front paws less 10 beginning inventory for 87 front paws net. 96 back legs require 96 back paws gross less 8 beginning inventory for 88 back paws net. 87 front paws require 435 toes and 88 back paws require 352 toes, less the 40 in beginning inventory, for a total order of 747 toes. Section Ref: Material Planning Systems Subsection: N/A Level: Medium Bloom‘s: Application Time on Task: 5.00 minutes Learning Objective 3: Describe material planning systems. AACSB: Analytic
79. The 2021 automobile model Quantum has four wheels with five lug nuts each. The scheduled build for Quantums in March is 250. The wheel system uses L4L ordering and the lug nut system uses FOQ = 144. The current inventory levels for wheels is 60 and for lug nuts is 1200. How many lug nuts will be shipped to fill an order for 250 Quantums? a) 3300 b) 3400 c) 3500 d) 3600 Answer: d Solution: 250 Quantums require 1000 wheels gross, less 60 in inventory, so 940 wheels net. 940 wheels net require 4700 lug nuts, less beginning inventory of 1200, for a total of 3500 lug nuts. Since the FOQ = 144, the shipping quantity will be 3500/144 = 24.3 gross, rounded up to 25 gross or 3600 lug nuts. Section Ref: How MRP Works Subsection: N/A Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
80. The copy service is printing final exams in three different colors (pink, green, and yellow) to distinguish between the three different versions of the exam. The printer is capable of printing ten copies (regardless of color) of the exam each minute and it takes three minutes to switch between the different colors. The professor would like to print the same percentage of each of the three colors for his mass lecture, which has 500 students. What is the total item time for copying this exam if the copier is currently loaded with white paper? a) 59 minutes b) 56 minutes c) 53 minutes d) 50 minutes Answer: a Solution: Item time = Setup time + quantity x run time/unit = 9 + 500 x 0.1 = 59 minutes Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
True/False
81. Material requirements planning is an information system designed to integrate internal and external members of the supply chain. Answer: False Solution: Enterprise resource planning is an information system designed to integrate internal and external members of the supply chain. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
82. The primary objective of ERP is to integrate all departments and functions, internal and external, onto a single computer system to serve the enterprise‘s needs. Answer: True Solution: The primary objective of ERP is to integrate all departments and functions, internal and external, into a single computer system to serve the enterprise‘s needs. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology 83. ERP systems are more commonly found in small companies than in large ones. Answer: False Solution: Almost 40 percent of U.S. companies with greater than $1 billion in annual revenues have implemented ERP. Section Ref: Enterprise Resource Planning Subsection: The Evolution of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology 84. ERP modules are fully integrated. Answer: True Solution: All modules are fully integrated, using a common database and support processes that go across functional areas. A transaction in any module is immediately available to all other modules and to all relevant parties. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
85. Supply chain intelligence enables strategic decision making along the supply chain. Answer: True Solution: Supply chain intelligence (SCI) is the capability of collecting business intelligence along the supply chain. This intelligence enables strategic decision making by analyzing data along the entire supply chain. Section Ref: Enterprise Resource Planning Subsection: The Evolution of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
86. ERP and e-commerce systems should NOT interface with each other. Answer: False Solution: Since many companies involved in e-commerce have ERP systems, and since ecommerce needs to interface with the ERP systems, integration is necessary, primarily for order fulfillment and collaboration with business partners. Section Ref: Enterprise Resource Planning Subsection: The Evolution of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
87. MRP develops a time-phased schedule that shows future demand, supply, and inventories by time period. Answer: True Solution: Part of the MRP system is developing a time-phased schedule that shows future demand, supply, and inventories by time period. Section Ref: Material Planning Systems Subsection: Types of Demand Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
88. Companies forecast dependent demand based on independent demand input. Answer: False Solution: The company does not forecast dependent demand but, rather, calculates the material needs based on the final products to be produced. Section Ref: Material Planning Systems Subsection: Types of Demand Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
89. The authorized MPS is a statement of what the company expects to build and when it expects to build it. Answer: True Solution: The definition of authorized MPS is a statement of what and when your company expects to build. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
90. An error in replenishment ordering can result from an inaccuracy in the inventory records file. Answer: True Solution: If inventory records are inaccurate, a company may order the incorrect amount too soon, resulting in excess inventory, or too late, resulting in a stoppage. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
91. Gross requirements for finished products are taken from the order entry file. Answer: False Solution: Gross requirements for finished products are taken from the authorized MPS. Scheduled receipts are replenishment orders that have been placed but not yet received. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
92. Scheduled receipts are replenishment orders that have been placed but NOT yet received. Answer: True Solution: Gross requirements for finished products are taken from the authorized MPS. Scheduled receipts are replenishment orders that have been placed but not yet received. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
93. For any period, the beginning inventory, plus any replenishment order due, less the gross requirement equals planned orders. Answer: False Solution: The projected available quantity is a period-by-period projection of how much inventory should be available. The projected available quantity equals the beginning inventory, plus any replenishment order due, less the gross requirements for that period. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
94. A product structure tree is a visual depiction of the subassemblies and components that are needed to produce a finished product. Answer: True Solution: A product structure tree visually represents the BOM for a product. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
95. An end item has no parents. Answer: True Solution: At the top of the product structure tree is the end item, the product sold to the customer. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
96. The lead time can be less than the cumulative lead time when the company has inventory on hand. Answer: True Solution: Cumulative lead time for this product is the largest value associated with any individual connected path from the lowest level to the final assembly level. Beginning inventories can reduce the amount of time it takes to complete an order. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
97. Companies use an MRP system to respond to changes in the daily environment, to reorganize priorities, and to keep plans current and viable. Answer: True Solution: In an ever-changing environment, you use an MRP system to respond to changes in the daily environment, to reorganize priorities, and to keep plans current and viable. Section Ref: Material Planning Systems Subsection: Objectives of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
98. The gross requirements of a given component part are determined from planned orders of the parent. Answer: True Solution: Gross requirements for a component, or child, are determined by the planned orders of its parent or parents. Section Ref: How MRP Works Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
99. Production and inventory planners release orders to the expeditor. Answer: False Solution: Production and inventory control planners release orders either to an external supplier or to the shop floor. An expeditor works on the floor, but rushes orders rather than taking them from the planner. Section Ref: How MRP Works Subsection: Action Notices Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
100. The explosion process calculates the demand for the parent of the children. Answer: False Solution: The explosion process calculates the demand for the children of a parent by multiplying the parent requirements by the children‘s usage as specified in the BOM. Section Ref: How MRP Works Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
101. An order released to the shop floor authorizes withdrawal of the needed materials and the start of production. Answer: True Solution: An order released to the shop authorizes withdrawal of the needed materials and the start of production. Section Ref: How MRP Works Subsection: Action Notices Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
102. If an order is NOT scheduled to arrive in time, the planner tries to cancel the order. Answer: False Solution: If an order is scheduled to arrive before it is needed (for example, because the gross requirements changed), the planner delays receipt of the replenishment order until it is needed. If the order is not scheduled to arrive in time, the planner tries to rush or expedite the order. Section Ref: How MRP Works Subsection: Action Notices Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
103. Under the lot-for-lot rule, order sizes are essentially determined directly from gross requirements. Answer: True Solution: L4L orders just enough for the next period based on the requirements. Section Ref: How MRP Works Subsection: Comparing Different Lot Size Rules Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
104. Capacity requirements planning enables the company to evaluate how well it is using its critical work centers. Answer: True Solution: CRP enables a company to evaluate both the feasibility of the MRP system and how well the company is using its critical work centers. Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
105. The three types of lot size rules are FOQ, L4L, and POQ. Answer: True Solution: Different lot size rules can be used with MRP systems, such as least unit cost, least total costs, and parts period balancing. In this book, we cover the fixed-order quantity (FOQ), lot-for-lot (L4L), and period-order quantity (POQ). Section Ref: How MRP Works Subsection: Comparing Different Lot Size Rules Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
Essay
106. Explain how Dell Computer has become able to implement mass customization. Answer: Dell begins assembly of a customer‘s order almost immediately after receiving the order. To do this, Dell must carefully manage its component inventories, knowing availability of needed components to complete the assembly. Information regarding the order is sent to members of its supply chain to assure on-time delivery of the finished computer. Solution: Consider a company like Dell Computer, well known for its rapidly built-to-order computers. Dell begins assembly of a customer‘s order almost immediately after receiving the order. To do this, Dell must carefully manage its component inventories, knowing the availability of needed components to complete the assembly. Information regarding the order is sent to members of its supply chain to ensure on-time delivery of the finished computer. Dell uses this approach to support the concept of mass customization. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
107. List the major users of ERP systems. Answer: managers, employees, suppliers, and customers Solution: The number of finished goods sold to final customers is a good example of the type of useful information shared throughout the supply chain. Knowing actual sales figures allows improved decision making by members of the supply chain and can help eliminate the bullwhip effect. For example, using the information about actual sales to the customer, manufacturing can determine more accurately the quantity and timing of product replenishments. Warehouse management then can plan for the receipt and subsequent distribution of the replenishments. Suppliers can determine the materials and components needed by manufacturing to meet the manufacturing schedule. All members of the supply chain are aware of what is happening and can plan accordingly. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
108. What is the primary objective of ERP? Answer: Integrate all departments and functions, internal and external, onto a single computer system to serve the enterprise‘s needs. Solution: The primary objective of ERP is to integrate all departments and functions, internal and external, into a single computer system to serve the enterprise‘s needs. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
109. What are the objectives of second-generation ERP systems? Answer: leverage existing systems to increase efficiency in handling transactions, improve decision-making, and to support e-commerce Solution: Second-generation ERP systems have leveraged advantages of original systems to increase efficiency in handling transactions, improve decision making, and support e-commerce. SCM software is designed to improve decision making in the supply chain. It helps answer such questions as: (1) What is the best way to ship a product to a specific customer? (2) What is the optimal production plan? (3) How much product should ship to specific intermediaries? (4) How can outbound and inbound transportation costs be minimized? SCM software typically includes decision-support modules, such as linear programming and simulation, to help answer these questions. Section Ref: Enterprise Resource Planning Subsection: The Evolution of ERP Systems Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
110. What are some technological motivations for implementing ERP systems? Answer: replace disparate systems; improve quality and visibility of information; integrate business processes and systems; replace older, obsolete systems; and acquire systems that can support future business growth Solution: A study by Benchmarking Partners for the Deloitte consulting corporation classifies companies‘ motivations for implementing ERP systems into two groups: technological and operational. Technological motivation relates to the replacement of disparate systems; improved quality and visibility of information; integration of business processes and systems; replacement of older, obsolete systems; and the acquisition of systems that can support future business growth. For example, ExxonMobil used ERP to replace 300 different systems. Section Ref: The Benefits and Costs of ERP Subsection: The Benefits of ERP Systems Level: Easy Time on Task: 5.00 minutes Bloom‘s: Comprehension Learning Objective 2: Review the benefits and costs of an ERP system. AACSB: Technology
111. What transactions can cause information in the inventory records file to change? Answer: releasing new orders, receiving previously ordered material, withdrawing inventory, canceling orders, correcting inventory record errors, and adjusting for rejected shipments Solution: The inventory records information in the records changes with each inventory transaction. These transactions include releasing new orders, receiving previously ordered materials, withdrawing inventory, canceling orders, correcting inventory record errors, and adjusting for rejected shipments. The record shows how much inventory of an item is available, projects future needs, and shows the projected inventory level in different time periods. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
112. What are the characteristics of indented bills of materials? Answer: The highest-level item is closest to the left margin. Components going into that item are indented to the right. Subsequent levels are indented further to the right. Quantity required is shown for each part number. Solution: The BOMs used as input to the MRP system are indented bills of materials. In an indented BOM, the highest-level item (―parent‖) is closest to the left margin, with components (―children‖) going into that item indented to the right. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
113. Under what conditions are action notices generated? Answer: if a planned order needs to be released in the current period, when due dates of orders need to be adjusted, or when there is insufficient lead time for a planned replenishment order Solution: An action notice is created when a planned order needs to be released, when due dates of orders need to be adjusted, or when there is insufficient lead time for a planned replenishment order. Section Ref: How MRP Works Subsection: Action Notices Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
114. Name some lot size rules. Answer: least unit cost, least total cost, parts period balancing, fixed order quantity, lot-for-lot, and period order quantity Solution: Different lot size rules can be used with MRP systems, such as least unit cost, least total costs, and parts period balancing. In this book, we cover the fixed-order quantity (FOQ), lot-for-lot (L4L), and period-order quantity (POQ). Section Ref: How MRP Works Subsection: Comparing Different Lot Size Rules Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic 115. Discuss the difference between the production and inventory control planners‘ release order to external suppliers versus the shop floor. Answer: Release orders to the suppliers authorize the shipment of the materials so it arrives as needed. Orders released to the shop authorize withdrawal of the needed materials and the start of production. Solution: Production and inventory control planners release orders either to an external supplier or to the shop floor. An order released to a supplier authorizes the shipment of the material so that it arrives as needed. An order released to the shop authorizes withdrawal of the needed materials and the start of production. Section Ref: How MRP Works Subsection: Action Notices Level: Medium Time on Task: 2.00 minutes Bloom‘s: Analysis Learning Objective 4: Demonstrate how MRP works. AACSB: Analytic
116. Describe how workload is computed for a work center for capacity requirements planning. Answer: MRP data for planned shop orders and open shop orders are used. For each order, the run time per unit is multiplied by the quantity and added to the setup time to calculate the total time for the order. The total times are added together for each time period to calculate the workload for the work center for each time period. Solution: Capacity requirements planning (CRP) uses the planned order releases from the MRP output to calculate the workload for specific work centers. The workload associated with a planned order has two parts: the setup to do the job and the processing time for the job. We calculate available capacity (discussed in Chapter 9) by multiplying the number of machines available × number of shifts used × number of hours per shift × number of days per week × usage × efficiency. Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
117. Discuss how MRP reports are used by the production and inventory planners. Answer: These reports are used to (1) generate purchasing requisitions and (2) develop schedules of different activities to be done on the manufacturing floor. Solution: MRP reports are used by the production and inventory planners to (1) generate purchasing requisitions and (2) develop schedules of different activities to be done on the manufacturing floor. Section Ref: Resource Planning within OM: How It all Fits Together Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
Problems
118. Given the following data: Usage per Lead Time Item Parent (weeks) J – 3 K 3 2 L 1 1 M 2 2 N 4 3 O 2 2 P 1 1 Q 6 2 The end product J is made from components K, L, and M. K is made from N and O. O is made from P and Q. (a) What is the replenishment lead time for J, assuming there are no inventories? (b) Calculate the gross requirements for each of the components if the company plans to build 10 of its J model. Assume that there are no beginning inventories. (c) Calculate the gross requirements for each of the components if the company plans to build 10 of its J model if you have these beginning inventories: 60 N and 60 O. (d) What is the replenishment lead time if the company plans to build 10 of its J model, assuming the beginning inventories given in (c) above? Answer: (a) 9 weeks; (b) 10 J, 30 K, 10 L, 20 M, 120 N, 60 O, 60 P, and 360 Q; (c) 10 J, 30 K, 10 L, 20 M, 60 N, 0 O, 0 P, and 0 Q; (d) 8 weeks Solution: a) Lead times for J‘s components are 3(J) + 2(K) + 2(O) + 2(Q) = 9 b) 10 J models require 10*3 = 30 K, 10*1 = 10 L, and 10*2 = 20 M; 30 K require 4*30 = 120 N, 2*30 = 60 O; 60 O require 1*60 = 60 P, 2*60 = 120 Q. c) From part (b) for 10 Js we need 30 K, 10 L, and 20 M; the 30 Ks require 120 N less the 60 in beginning inventory so 60 N net; the 30 Ks require 60 O less the 60 beginning inventory, so 0 O. We don‘t need P or Q since we don‘t need any Os. d) Js need 3 weeks to assemble, Ks 2 weeks, and N needs 3 weeks, for a total of 8 weeks. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Medium Time on Task: 15.00 minutes Bloom‘s: Application Learning Objective 3: Describe material planning systems. AACSB: Reflective Thinking
119. Given the following data: Usage per Lead Time Item Parent (weeks) J 1 K 4 2 L 2 3 M 4 1 N 1 4 O 5 2 P 3 2 Q 8 1 R 2 3 S 4 2 The end product J is made from components K and L. K is made from M and N. L is made from O and P. P is made from Q, R, and S. (a) What is the replenishment lead time for J, assuming there are no inventories? (b) Calculate the gross requirements for each of the components if the company plans to build 10 of its J model. Assume that there are no beginning inventories. (c) Calculate the gross requirements for each of the components if the company plans to build 10 of its J model if you have these beginning inventories: 20 K, 10 L, and 30 P. (d) What is the replenishment lead time if the company plans to build 10 of its J model, assuming the beginning inventories given in (c) above? Answer: (a) 9 weeks; (b) 10 J, 40 K, 20 L, 160 M, 40 N, 100 O, 60 P, 480 Q, 120 R, and 240 S; (c) 10 J, 20 K, 10 L, 80 M, 20 N, 50 O, 0 P, 0 Q, 0 R, and 0 S; (d) 7 weeks Solution: a) 9 weeks is 3 + 2 + 3 + 1 from RPLJ. b) 10 Js require 4*10 = 40 K, 3*10 = 30 L; 40 K require 4*40 = 160 M, 1*40 = 40 N; 30 L require 5*30 = 150 O, 3*30 = 90 P; 90 P require 8*90 = 720 Q, 2*90 = 180 R, 4*90 = 360 S. c) Starting from part (b), 10 Js need 40 K gross less 20 K beginning inventory, so 20 K net; the 20 K need 4*20 = 80 M and 1*20 = 20 N; the 10 Js need 2*10 = 20 L gross less 10 L beginning inventory, so 10 Ls net. The 10 Ls require 5*10 = 50 O and 3*10 = 30 P, less the 30 P in beginning inventory, so 0 P. No Q, R, or A are needed. d) The NKJ lead time total is 4 + 2 + 1 = 7, and the OLJ lead time total is 2 + 3 + 1 = 6, so the lead time required is 7 weeks. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Medium Time on Task: 15.00 minutes Bloom‘s: Application Learning Objective 3: Describe material planning systems. AACSB: Reflective Thinking
120. Given the following data: Usage per Lead Time Item Parent (weeks) J 1 K 4 3 L 2 2 M 4 3 N 1 1 O 2 2 The end product J is made from components K, and L. K is made from M, N, and O. (a) What is the replenishment lead time for J, assuming there are no inventories? (b) Calculate the gross requirements for each of the components if the company plans to build 10 of its J model. Assume that there are no beginning inventories. (c) Calculate the gross requirements for each of the components if the company plans to build 10 of its J model if you have these beginning inventories: 20 K and 80 M. (d) What is the replenishment lead time if the company plans to build 10 of its J model, assuming the beginning inventories given in (c) above? Answer: (a) 7 weeks; (b) 10 J, 40 K, 20 L, 160 M, 40 N, and 80 O; (c) 10 J, 20 K, 20 L, 0 M, 20 N, and 40 O; (d) 6 weeks Solution: a) The MKJ path is longest at 3 + 3 + 1 = 7 weeks. b) 10 Js require 4*10 = 40 K and 2*10 = 20 L; 40 K require 4*40 = 160 M, 1*40 = 40 N, 2*40 = 80 O. c) 10 Js require 2*10 = 20 L; 4*10 = 40 K gross less 20 K beginning inventory =20 K net; 20 K require 4*20 = 80 gross M less 80 M beginning leaves 0 M net, 1*20 = 20 N, and 2*20 = 40 O. d) The LJ path is 2 + 1 = 3; the OKJ path is 2 + 3 + 1 = 6 weeks, therefore 6 weeks. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Medium Time on Task: 12.00 minutes Bloom‘s: Application Learning Objective 3: Describe material planning systems. AACSB: Reflective Thinking
121. Given the following data: Usage per Lead Time Beginning Lot Size Item Parent (weeks) Inventory Rule J 3 0 L4L K 3 2 40 L4L L 4 1 60 L4L The end product J is made from components K and L. The authorized MPS calls for 10 J to be completed in week 4 and 30 J to be completed in week 7. (a) What are the gross requirements for K and L? (b) What are the planned orders for K and L? Answer: (a) for K—30 in week 1 and 90 in week 4, for L—40 in week 1 and 120 in week 4; (b) for K—80 in week 2, for L—100 in week 3 Solution: a) K: to make 10 J in week 4 we need 3*10 = 30 K in week 1 and 30 J in week 7 require 3*30 = 90 in week 4. L: to make 10 J in week 4 we need 4*10 = 40 L in week 1 and 30 J in week 7 require 4*30 = 120 L in week 4. b) With 40 K beginning inventory, we don‘t need any (30 – 40 = –10) in week 1. In week 4 we need 90 – 10 = 80 as a planned order. With 60 L beginning we don‘t need any in week 1 (40 – 60 = –20) and need only 120 – 20=100 in week 4. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 3: Describe material planning systems. AACSB: Reflective Thinking
122. Given the following data: Usage per Lead Time Beginning Lot Size Item Parent (weeks) Inventory Rule J 1 0 L4L K 3 1 40 FOQ = 200 L 4 3 40 L4L M 2 1 400 L4L N 1 1 200 L4L The end product J is made from components K and L. Component K is made from M and N. The authorized MPS calls for 10 J to be completed in week 2, 30 J to be completed in week 3, 40 J to be completed in week 5, and 50 J to be completed in week 6. There is a scheduled receipt of 120 L in week 2. (a) What are the gross requirements for K, L, M and N? (b) What are the planned orders for K, L, M and N? Answer: (a) for K—30 in week 1, 90 in week 2, 120 in week 4, and 150 in week 5; for L—40 in week 1, 120 in week 2, 160 in week 4, and 200 in week 5; for M—400 in week 1 and 400 in week 4; for N—200 in week 1 and 200 in week 4; (b) for K—200 in week 1, and 200 in week 4; for L—160 in week 1 and 200 in week 2; for M—400 in week 3; for N—200 in week 3 Solution: a) J has one-week lead time, shift one week back, so 10 J in week 1, 30 J in week 2, 40 J in week 4, and 50 J in week 5. K gross requirements are 3*10 = 30 K week 1, 3*30 = 90 K week 2, 3*40 = 120 K week 4, 3*50 = 150 K week 5. L gross requirements are 4*10 = 40 L week 1, 4*30 = 120 L week 2, 4*40 = 160 L week 4, 4*50 = 200 L week 5. M gross requirements are 2*10 = 20 M week 1, 2*30 = 60 M week 2, 2*40 = 80 M week 4, 2*50 = 100 M week 5. N gross requirements are 1*10 = 10 M week 1, 1*30 = 30 N week 2, 1*40 = 40 N week 4, 1*50 = 50 N week 5. b) Planned orders: K has an FOQ = 200 and beginning inventory of 40, no order needed for week 1‘s gross requirement of 30 K, 10 Ks left over for week 2, so 90 gross – 10 = 80 net, order 200 units in week 1. 80 – 200 week 2 ends with 120 units left over, 120 K gross week 3 – 120 K beginning leaves 0 net week 3. Order 200 K in week 3 for the 150 K gross needed week 5. L is L4L ordering with 40 units beginning inventory, week 1 40 L gross – 40 inventory = 0 net, order 120 L in week 1 and 200 L in week 2. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Medium Time on Task: 12.00 minutes Bloom‘s: Application Learning Objective 3: Describe material planning systems. AACSB: Reflective Thinking
123. Given the following data: Usage per Lead Time Beginning Lot Size Item Parent (weeks) Inventory Rule J 1 0 L4L K 8 1 850 FOQ = 2,000 L 6 1 1,250 L4L The end product J is made from components K and L. The authorized MPS calls for 200 J to be completed in week 3, 300 J to be completed in week 5, and 300 J to be completed in week 6. There is a scheduled receipt of 400 L in week 2. (a) What are the gross requirements for K and L? (b) What are the planned orders for K and L? Answer: (a) for K—1,600 in week 2, 2,400 in week 4, and 2,400 in week 5; for L—1,200 in week 2, 1,800 in week 4, and 1,800 in week 5; (b) for K—2,000 in week 1, 2,000 in week 3, and 2,000 in week 4; for L—1,350 in week 3 and 1,800 in week 4 Solution: 200 Js require 1600 Ks and 1200 Ls; 300 Js require 2400 Ks and 1800 Ls. 1 week lead time moves K and L demand back to weeks 2, 4, and 5.
Item J Gross requirements Scheduled receipts On Hand Inventory NET POQ Req Planned receipts Planned orders Item K Gross requirements Scheduled receipts On Hand Inventory NET POQ Req Planned receipts Planned orders Item L Gross requirements Scheduled receipts On Hand Inventory NET POQ Req Planned receipts Planned orders
Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 0 0 200 0 300 300
0
0
0
0
0
0
0 0
0 0
200 200
0 0
300 300
300 300
0
200
0
300
300
0
Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 0 1600 0 2400 2400 0 0
0
0
0
0
0
850
850
1250
1250
850
450
0 0
750 2000
0 0
2000
0
2000
1150 1550 2000 2000 2000 0 0
0 0
Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 0 1200 0 1800 1800 0 0
400
0
0
0
0
1250
450
450
0
0
0
0 0 0
0 0 0
0 0 1350
1350 1350 1800
1800 1800 0
0 0 0
Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Medium Time on Task: 12.00 minutes Bloom‘s: Application Learning Objective 3: Describe material planning systems. AACSB: Reflective Thinking
124. Given the following data: Period 1 2 3 4 5 6 7 8 Gross Requirements 20 20 50 50 80 80 50 50 The beginning inventory is 0 and there are no scheduled receipts. The order cost is $50 and the holding cost is $1 per part per period. Lead time is zero. (a) What are the order costs, carrying costs, and totals cost over the 8 periods using the lot-for-lot size rule? (b) What are the order costs, carrying costs, and totals cost over the 8 periods using the fixed order quantity rule with FOQ = 100? (c) What are the order costs, carrying costs, and totals cost over the 8 periods using the period order quantity rule with POQ = 2? Answer: (a) order costs = $400, carrying costs = $0, and total costs = $400; (b) order costs = $200, carrying costs = $340, and total costs = $540; (c) order costs = $200, carrying costs = $200, and total costs = $400 Solution: a) L4L has only order costs, so 8 orders x $50/order = $400, total costs are $400. b) FOQ needs a total of 400 units, so 400/100 = 4 orders, which costs 4 x $50 = $200. FOQ has carrying costs with ending inventory in periods 1–8 of 80, 60, 10, 60, 80, 0, 50, 0 for a total of 340 units x $1/unit = $340. Total cost = $200 + $340 = $540. c) POQ(2) needs 4 orders over 8 periods so ordering cost = 4 x $50 = $200; there is ending inventory in periods 1, 3, 5, and 7 of 20, 50, 80, 50 for a total of 200 units at $1/unit/period or $200. Total cost is $200 = $200 = $400. Section Ref: How MRP Works Subsection: Comparing Different Low Size Rules Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 4: Demonstrate how MRP works. AACSB: Reflective Thinking
125. Given the following data: Period 1 2 3 4 5 6 7 8 9 Gross Requirements 70 30 90 30 80 20 90 60 80 The beginning inventory is 0 and there are no scheduled receipts. The order cost is $90 and the holding cost is $1 per part per period. Lead time is zero. (a) What are the order costs, carrying costs, and totals cost over the 9 periods using the lot-for-lot size rule? (b) What are the order costs, carrying costs, and totals cost over the 9 periods using the fixed order quantity rule with FOQ = 100? (c) What are the order costs, carrying costs, and totals cost over the 9 periods using the period order quantity rule with POQ = 3? Answer: (a) order costs = $810, carrying costs = $0, and total costs = $810; (b) order costs = $540, carrying costs = $370, and total costs = $910; (c) order costs = $270, carrying costs = $550, and total costs = $820 Solution: a) L4L requires 9 orders @ $90/order = $810; no carrying cost; total cost = $810. b) FOQ requires order in periods 1, 3, 4, 6, 7, and 9 @ $90/order = $540; Ending inventory in periods 1-9 is 30, 0, 10, 80, 0, 80, 90, 30, 50 for a total of 370 @ $1/unit/period = $370; total cost is $540 + $370 = $910. c)POQ requires orders in periods 1, 4, and 7 @ $90/order = $270; ending inventory is 120, 90, 0, 100, 20, 0, 140, 80, and 0 for a total of 550 units @ $1/unit/period = $550; total cost is $270 + $550 = $820. Section Ref: How MRP Works Subsection: Comparing Different Lot Size Rules Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 4: Demonstrate how MRP works. AACSB: Reflective Thinking
126. Given the following data: Run Time per Unit in Standard Hours 0.45 0.25 0.70 0.15 0.60 0.20 0.55 0.15 0.80 0.35
Item Setup Time Number Period Quantity (Hours) KE738 3 400 3.6 KR376 4 550 2.7 KM276 4 800 1.6 KW718 5 200 4.0 KJ395 5 350 3.9 KA729 3 100 5.6 KP237 4 700 1.0 KF823 5 300 7.2 KH489 3 600 6.6 KE812 3 300 3.9 (a) What are the workloads for periods 3, 4, and 5? (b) There are 168 hours of operating time per machine each period. How many machines should be operated for periods 3, 4, and 5? Answer: (a) 804.7 hours for period 3, 1,087.8 hours for period 4, and 300.1 hours for period 5; (b) 5 machines for period 3, 7 machines for period 4, and 2 machines for period 5 Solution: KE738 3 400 3.6 0.45 3.6+400*0.45= 183.6 KA729 3 100 5.6 0.2 5.6+100*0.2= 25.6 KH489 3 600 6.6 0.8 6.6+600*0.8= 486.6 KE812 3 300 3.9 0.35 3.9+300*0.35= 108.9 KR376 4 550 2.7 0.25 2.7+550*0.25= 140.2 KM276 4 800 1.6 0.7 1.6+800*0.7= 561.6 1+700*0.55= 386 KP237 4 700 1 0.55 4+200*0.15= 34 KW718 5 200 4 0.15 KJ395 5 350 3.9 0.6 3.9+350*0.6= 213.9 KF823 5 300 7.2 0.15 7.2+300*0.15= 52.2 Period 3 = 183.6 + 25.6 + 486.6 + 108.9 = 804.7; Period 4 = 140.2 + 561.6 + 386 = 1087.8; Period 5 = 34 + 213.9 + 52.2 = 300.1 b) Period 3 = 804.7/168 = 4.8 = 5 machines; Period 4 = 1087.8/168 = 6.5 = 7 machines; Period 5 = 300.1/168 = 1.8 = 2 machines Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Reflective Thinking
127. Given the following data: Run Time per Unit in Standard Hours 0.25 0.55 0.70 0.25 0.40 0.30 0.65
Item Setup Time Number Period Quantity (Hours) KE738 3 600 7.6 KR376 4 350 3.7 KM276 4 700 7.6 KW718 3 400 5.0 KJ395 4 250 8.9 KA729 3 500 3.6 KP237 4 600 5.0 (a) What are the workloads for periods 3 and 4? (b) There are 168 hours of operating time per machine each period. How many machines should be operated for periods 3 and 4? Answer: (a) 416.2 hours for period 3, and 1,197.7 hours for period 4; (b) 3 machines for period 3, and 8 machines for period 4 Solution: a) Number Period Quantity Hours Hours 7.6+600*0.25= 157.6 KE738 3 600 7.6 0.25 5+400*0.25= 105 KW718 3 400 5 0.25 3.6+500*0.3= 153.6 KA729 3 500 3.6 0.3 3.7+350*0.55= 196.2 KR376 4 350 3.7 0.55 7.6+700*0.7 497.6 KM276 4 700 7.6 0.7 8.9+250*0.4= 108.9 KJ395 4 250 8.9 0.4 5+600*0.65= 395 KP237 4 600 5 0.65 Period 3: 157.6 + 105 + 153.6 = 416.2; Period 4: 196.2 + 497.6 + 108.9 + 395 = 1197.7 b) Period 3: 416.2/168 = 2.5 = 3 machines; Period 4: 1197.7/168 = 7.1 = 8 machines Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Reflective Thinking
Short Answer
128. Scheduling all the activities that must be done by a due date from that point of view is called ________________ scheduling. Answer: backward Solution: Backward scheduling starts with the due date for an order and works backward to determine the start date for each activity. Section Ref: Material Planning Systems Subsection: An Overview of Material Planning Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
129. ____________________ uses a database that supports processes across functional areas. Answer: Enterprise resource planning (ERP) Solution: All modules are fully integrated, using a common database and support processes that go across functional areas. A transaction in any module is immediately available to all other modules and to all relevant parties. Section Ref: Enterprise Resource Planning Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Analytic
130. Computer programs that are designed to improve supply chain decision making are called __________________ software. Answer: supply chain management (SCM) Solution: Second-generation ERP systems have leveraged advantages of original systems to increase efficiency in handling transactions, improve decision making, and support e-commerce. Section Ref: Enterprise Resource Planning Subsection: The Evolution of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
131. Supply chain intelligence enables ______________ along the supply chain. Answer: strategic decision making Solution: Supply chain intelligence (SCI) is the capability of collecting business intelligence along the supply chain. This intelligence enables strategic decision making by analyzing data along the entire supply chain. Section Ref: Enterprise Resource Planning Subsection: The Evolution of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
132. A(n) __________ sets up and runs ERP systems. Answer: application service provider (ASP) Solution: The ERP vendor is typically referred to as an application service provider (ASP). The ASP sets up the system and runs it for the company. This approach often works well for small to medium-size companies. The software is usually delivered via the Internet. Section Ref: Enterprise Resource Planning Subsection: The Evolution of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe enterprise resource planning (ERP). AACSB: Technology
133. The most critical factors in successful ERP programs are __________________ and _________________. Answer: leadership; top management commitment Solution: A review of successful ERP implementations indicates that the most critical factors are leadership and top management commitment. Section Ref: The Benefits and Costs of ERP Systems Subsection: The Costs of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Review the benefits and costs of an ERP system. AACSB: Technology
134. The primary output of an MRP system is _____________________. Answer: schedule of replenishment orders Solution: See Figure 14.3, Overview of the MRP Process. The MRP system tells when to place orders, either to the supplier or the manufacturing floor, in order to ensure that the parts or materials are available when needed. Section Ref: Material Planning Systems Subsection: Types of Demand Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe material planning systems. AACSB: Analytic
135. MRP systems require as inputs the following: ______________________, ______________________, and ______________________. Answer: bill of materials; authorized master production schedule; inventory records Solution: Before illustrating the operating logic of an MRP system, it is necessary to understand the three inputs needed by the MRP system. The inputs are an authorized MPS, the bill of material, and individual item inventory records. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
136. Items that are sold as complete or repair parts are called ______________________. Answer: end items Solution: At the top of the product structure tree is the end item, the product sold to the customer. Section Ref: Material Planning Systems Subsection: The Operating Logic of MRP Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe material planning systems. AACSB: Analytic
137. _______________ assumes that we make enough of everything to build the required quantity, ignoring beginning inventory. Answer: RCCP (rough-cut capacity planning) Solution: The primary difference between rough-cut capacity planning (RCCP) and CRP is that CRP uses the actual planned orders instead of the quantity needed just to complete the final product assembly. We don‘t take into account beginning inventories. Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
138. _________________ uses planned order releases from the MRP, which considers beginning inventory. Answer: CRP (capacity requirements planning) Solution: The primary difference between rough-cut capacity planning (RCCP) and CRP is that CRP uses the actual planned orders instead of the quantity needed just to complete the final product assembly. This information comes from the MRP, which considers beginning inventory. Section Ref: Capacity Requirements Planning (CRP) Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
139. The business function called___________________ uses the planned orders generated by MRP to evaluate the feasibility of long-term or blanket contracts and to determine delivery need. Answer: purchasing Solution: Purchasing uses the planned orders generated by MRP to evaluate the feasibility of long term or blanket contracts and to determine delivery need. The lead times that are input into MRP often come directly from purchasing. ERP will facilitate supplier-managed inventory approaches and reduce transaction costs for purchasing. Section Ref: Resource Planning within OM: How It All Fits Together Subsection: Resource Planning Across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Demonstrate capacity requirements planning (CRP). AACSB: Analytic
140. The three criteria for selecting an ERP system include _____________, ________________, and _______________.
Answer: functionality; ease of use; TCO (total cost of ownership) Solution: When selecting the ERP system to use, a study by the Aberdeen Group (www.aberdeen.com) reports that functionality, ease of use, and total cost of ownership (TCO) are the top three selection criteria. Total cost of ownership is the software cost, service costs, and three years of maintenance costs. Section Ref: The Benefits and Costs of ERP Systems Subsection: The Costs of ERP Systems Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Review the benefits and costs of an ERP system. AACSB: Technology
Testbank Chapter 15: Scheduling LO Section
Subsection
Question #
Chapter Overview Basic Scheduling Concepts
N/A
102
Scheduling High-Volume Operations Scheduling Low-Volume Operations
Shop Loading Methods
1,2, 85 3, 4, 6, 72, 79, 80, 103, 127 5, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 18, 19, 20, 21, 74, 81, 82, 83, 84, 105, 106, 115, 116, 128
Developing a Schedule of Operations
N/A
Scheduling Performance Measures Using Different Priority Rules Sequencing Jobs Through Two Work Centers
17, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 86, 87, 88, 104, 122 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 53, 54, 75, 89, 90, 91, 92, 93, 107, 108, 117, 118, 119, 120, 121, 123, 124, 130, 131, 132 129, 133 52, 55, 56, 109, 114, 125, 134
Optimized Production Technology Theory of Constraints
Scheduling Bottlenecks
57, 66, 67, 68, 97, 112, 136 58, 59, 60, 61, 62, 63, 64, 65, 73, 76, 94, 95, 96, 98, 99, 110, 111, 135
Scheduling Issues for Service Organizations Scheduling Employees Developing a Workforce Schedule Scheduling Techniques for Service Organizations Scheduling within OM: Putting It All Together Scheduling Across the Organization
113, 137, 138 69, 70, 71, 77, 100, 126 139
101
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Multiple Choice 1. Which of the following is NOT a feature of flow operations? a) a process layout b) fixed routings c) special-purpose equipment and tooling d) high volume production e) high levels of labor and equipment utilization Answer: a Solution: Flow operations use fixed routings—the product or service is always done the same way in the same sequence with the same workstations, contrary to the variability inherent in a process layout. Section Ref: Basic Scheduling Concepts Subsection: Scheduling High-Volume Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
2. Flow operations can be ________ or ________ operations. a) intermittent, continuous b) intermittent, repetitive c) repetitive, single shot d) repetitive, continuous e) single shot, continuous Answer: d Solution: High-volume operations, also called flow operations, can be repetitive operations for discrete products like automobiles, appliances, or bread, or services like license renewals at the Division of Motor Vehicles. Or they can be continuous operations for goods produced in a continuous flow as in a product like gasoline or a service like waste treatment. Section Ref: Basic Scheduling Concepts Subsection: Scheduling High-Volume Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
4. Which of the following is NOT a feature of job-shop operations? a) a process layout b) highly skilled employees c) special-purpose equipment and tooling d) highly customized products e) low volume production Answer: c Solution: Companies with low-volume operations use highly skilled employees, general-purpose equipment, and a process layout. Section Ref: Basic Scheduling Concepts Subsection: Scheduling Low-Volume Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
5. A well designed high-volume system will minimize _________ inventory and reduce _____________for the product or service. a) work-in-process, throughput time b) raw material, storage capacity c) finished, throughput time d) work-in-process, storage capacity e) finished, transportation cost Answer: a Solution: Material flows between workstations may be automated. A well-designed system minimizes work-in-process inventory and reduces the throughput time for the product or service. Section Ref: Basic Scheduling Concepts Subsection: Scheduling High-Volume Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
6. Which of the following techniques loads jobs up to a predetermined capacity level? a) finite loading b) infinite loading c) forward scheduling d) backward scheduling e) input/output control Answer: a Solution: Finite loading is an operational schedule with start and finish times for each activity. It does not allow you to load more work than can be done with the available capacity. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
7. A progress chart shows the relationship between: a) a Gantt chart and PERT chart b) vacation schedule and work schedule c) forecast and historical performance d) planned and actual performance e) planned and actual efficiency Answer: d Solution: The progress chart monitors job progress by showing the relationship between planned performance and actual performance. Section Ref: Basic Scheduling Concepts Subsection: Scheduling Low-Volume Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
8. Which of the following techniques loads jobs without regard to the capacity available to do the work? a) finite loading b) infinite loading c) forward scheduling d) backward scheduling e) input/output control Answer: b Solution: Two kinds of work scheduling or work loading are infinite loading and finite loading. Infinite loading schedules work without regard to capacity limits. They let you know how much capacity you need to meet a schedule. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
9. The two different approaches to load work centers in job-shop scheduling are __________________. a) load chart and process chart b) finite loading and infinite loading c) input control and output control d) fixed routings and line balancing e) makespan and linear programming Answer: b Solution: Two kinds of work scheduling or work loading are infinite loading and finite loading. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
10. Which of the following scheduling techniques tends to break down over the long term? a) input/output control b) infinite loading c) forward scheduling d) backward scheduling e) finite loading Answer: e Solution: The disadvantage of finite loading is that it tends to break down over the long term: problems arise and the schedule slips, causing jobs to be rescheduled. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
11. Which of the following scheduling techniques can be used to identify resource bottlenecks? a) finite loading b) infinite loading c) forward scheduling d) backward scheduling e) input/output control Answer: b Solution: Infinite loading identifies uneven workloads and bottlenecks. In this way, we identify time periods when capacity is either poorly used or inadequate and change the schedule to level the resource requirements. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
12. Which of the following scheduling techniques determines the earliest possible completion time for a job? a) finite loading b) infinite loading c) forward scheduling d) backward scheduling e) input/output control Answer: c Solution: With forward scheduling, processing starts immediately when a job is received, regardless of its due date. Each job activity is scheduled for completion as soon as possible, which allows you to determine the job‘s earliest possible completion date. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge 13. Which of the following is MOST likely the reason you may have to wait at the doctor‘s office? a) infinite loading b) finite loading c) forward scheduling d) backward scheduling e) input/output control Answer: b Solution: Finite loading is an operational schedule with start and finish times for each activity. It does not allow you to load more work than can be done with the available capacity. The disadvantage of finite loading is that it tends to break down over the long term: problems arise and the schedule slips, causing jobs to be rescheduled. Finite loading is why you may have to wait at the doctor‘s office. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
14. Slack can be calculated if _______________________ are used together. a) infinite loading and finite loading b) infinite loading and forward scheduling c) finite loading and backward scheduling d) finite loading and forward scheduling e) forward scheduling and backward scheduling Answer: e Solution: When you are using backward scheduling and forward scheduling together, a difference between the start times of the first activity indicates slack in the schedule. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
15. Which of the following techniques determines when the job must begin in order to be completed by the due date? a) infinite loading b) finite loading c) forward scheduling d) backward scheduling e) input/output control Answer: d Solution: With backward scheduling, you begin scheduling the job‘s last activity so that the job is finished right on the due date. To do this, you start with the due date and work backward, calculating when to start the last activity, when to start the next-to-last activity, and so forth. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
16. If the schedule shows a 5 day slack between the end of Task A and start of Task B, this means: a) you must start Task B as soon as Task A ends. b) Task B start is late. c) Task A is taking longer to complete. d) Task A and Task B should be performed concurrently. e) Task B start can be delayed up to 5 days after Task A‘s scheduled completion. Answer: e Solution: When you are using backward scheduling and forward scheduling together, a difference between the start times of the first activity indicates slack in the schedule. Slack means that you can start a job immediately but you do not have to do so. You can start it any time up to the start time in your backward schedule and still meet the due date. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
17. Which of the following techniques is used to monitor work flow at individual work centers? a) infinite loading b) finite loading c) forward scheduling d) backward scheduling e) input/output control Answer: e Solution: Input/output control is a capacity-control technique used to monitor workflow at individual work centers. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
18. Which of the following scheduling rules is a global priority rule? a) first come, first served b) last come, first served c) earliest due date d) shortest processing time e) slack per remaining operations Answer: e Solution: Global priority rules, like critical ratio or slack per remaining operations, set priority according to factors such as the scheduled workload at the remaining work centers that the job must be processed through. Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
19. Slim-Quick Inc. produces a variety of nutritional diet products. Management wants to evaluate the performance of Work Center 10, the bottleneck in the packaging line. They are particularly worried about the backlogging problem in the work center. The following input/output report is given. Input Information Period 1 2 3 Planned Input (hours) 110 80 130 Actual Input (hours) 80 120 100 Output Information Period 1 2 3 Planned Output (hours) 100 100 100 Actual Output (hours) 80 70 110 The initial backlog was 100 hours. Based on the above information, calculate the backlog hours of Work Center 10 at the end of period 3. a) 100 b) 110 c) 140 d) 150 e) 200
Answer: c Solution: Planned Input (hours)
110
80
130
Actual Input (hours)
80
120
100
Deviation Cumulative Deviation
-30 -30
40 10
-30 -20
Planned Output (hours) Actual Output (hours) Deviation Cumulative Deviation
100 80 -20 -20
100 70 -30 -50
100 110 10 -40
Backlog hours 0 50 -10 Total backlog hours = 100 + 40 or 140 Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 1: Explain basic scheduling concepts. AACSB: Analytic
20. Quick-Slim Inc. produces a variety of nutritional diet products. Management wants to evaluate the performance of Work Center 10, the bottleneck in the packaging line. The following input report is given. Input Information Period 1 2 3 Planned Input (hours) 110 80 130 Actual Input (hours) 80 120 100 Calculate the cumulative deviation of the input at the end of period 3. a) -20 b) -30 c) 10 d) 20 e) 30
Answer: a Solution: Planned Input (hours)
110
80
130
Actual Input (hours)
80
120
100
Deviation -30 40 -30 Cumulative -30 10 -20 Deviation Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 1: Explain basic scheduling concepts. AACSB: Analytic
21. A Dallas firm manufactures dishwashing liquid. The manager wants to evaluate the performance of station 3, the bottleneck in the filling operation. The following output report is given. Output Information Period 1 2 3 Planned Output (hours) 100 100 100 Actual Output (hours) 80 70 110 Calculate the cumulative deviation of the output at the end of period 3. a) -20 b) -40 c) 10 d) 20 e) 40 Answer: b Solution: Output Information Period Planned Output (hours) Actual Output (hours) Deviation Cumulative Deviation
1
2
3
100
100
100
80 -20 -20
70 -30 -50
110 10 -40
Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 1: Explain basic scheduling concepts. AACSB: Analytic 22. What is Period 3‘s hour deviation for Frank‘s manufacturing firm, based on the following input/output information? Input Information Period 1 2 3 4 Planned Input (hours) 48 68 54 62 Actual Input (hours) 47 72 56 48 Output Information Period 1 2 3 4 Planned Output (hours) 50 65 55 65 Actual Output (hours) 52 60 53 67 a) 4, -5 b) -3, 2 c) 3, -2 d) 2, -2 e) -14, 2
Answer: d Solution: Input Information Period 1 2 3 Planned Input 48 68 54 Actual Input 47 72 56 Deviation -1 4 2 Cumulative Deviation -1 3 5 Output Information Period 1 2 3 Planned Output 50 65 55 Actual Output 52 60 53 Deviation 2 -5 -2 Cumulative Deviation 2 -3 -5 Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 1: Explain basic scheduling concepts. AACSB: Analytic
4 62 48 -14 -9 4 65 67 2 -3
23. Which of the following is NOT an assumption of priority rules? a) There is no variability in the setup time. b) There is no variability in the run time of the job. c) Multiple jobs are waiting to be processed. d) Only a single job is waiting to be processed. e) None of these answer choices are correct. Answer: d Solution: A work center needs priority rules when multiple jobs await processing (but not if only a single job needs processing). Priority rules assume that there is no variability in either the setup time or the run time of the job. Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
24. Operation sequencing creates a work center plan based on available _______ and ______. a) capacity, priorities b) demand, priorities c) capacity, demand d) capacity, rules e) staff, management Answer: a Solution: The APICS Dictionary defines operation sequencing or job sequencing as a technique for short-term planning of actual jobs to be run in each work center based on capacity and priorities. Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
25. The following jobs are waiting to be scheduled. Today is day 9. Determine the sequence of jobs by using SPT as a priority rule. Job Number Arrival Date (day #) Processing Time (days) Due Date (day #) A 4 2 12 B 5 12 30 C 1 6 21 D 2 1 14 E 3 10 28
a) D-A-C-E-B
b) B-E-C-A-D c) C-D-E-A-B d) B-A-E-D-C e) A-D-C-E-B Answer: a Solution: Determine sequencing by shortest ―processing time‖ column in ascending order. Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
26. The following jobs are waiting to be scheduled. Today is day 9. Determine the sequence of jobs by using LPT as a priority rule. Job Number Arrival Date (day #) Processing Time (days) Date (day #)
Due
A 4 2 12 B 5 12 30 C 1 6 21 D 2 1 14 E 3 10 28
a) D-A-C-E-B b) B-E-C-A-D c) C-D-E-A-B d) B-A-E-D-C e) A-D-C-E-B Answer: b Solution: Determine sequencing by longest ―processing time‖ column in descending order Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
27. The following jobs are waiting to be scheduled. Today is day 9. Determine the sequence of jobs by using EDD as a priority rule.
Job Number Arrival Date (day #) Processing Time (days) Date (day #)
Due
A 4 2 12 B 5 12 30 C 1 6 21 D 2 1 14 E 3 10 28
a) D-A-C-E-B b) B-E-C-A-D c) C-D-E-A-B d) B-A-E-D-C e) A-D-C-E-B
Answer: e Solution: EDD (the job due the earliest has the highest priority); sequence using the ―Due date‖ column in ascending order. Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
28. The following jobs are waiting to be scheduled. Today is day 9. Determine the sequence of jobs by using FCFS as a priority rule. Job Number Arrival Date (day #) Processing Time (days) Due Date (day #) A 4 2 12 B 5 12 30 C 1 6 21 D 2 1 14 E 3 10 28
a) D-A-C-E-B b) B-E-C-A-D c) C-D-E-A-B d) B-A-E-D-C e) A-D-C-E-B Answer: c Solution: FCFS (jobs are processed in the order in which they arrive at a machine or work center); sequence by ―arrival date‖ column in ascending order.
Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
29. The following jobs are waiting to be scheduled. Today is day 9. Determine the sequence of jobs by using LCFS as a priority rule. Job Number Arrival Date (day #) Processing Time (days) Due Date (day #) A 6 2 12 B 1 12 30 C 10 6 21 D 12 1 14 E 3 10 28
a) D-C-A-E-B b) A-B-C-D-E c) B-E-A-C-D d) B-E-C-A-D e) B-E-C-D-A Answer: a Solution: LCFS (the last job into the work center or at the top of the stack is processed first); sequence by ―arrival date‖ column, highest number first. Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Medium
Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
30. The jobs listed below have NOT yet been scheduled. Today is day 0. Using the critical-ratio technique, in what sequence would you schedule these jobs? Job Due Date A 3 B 10 C 5 D 12 E 8 a) B-E-C-D-A b) A-D-C-E-B c) A-C-E-B-D d) A-C-D-E-B e) E-C-D-A-B Answer: a Solution: Job Due Date A 3 B 10 C 5 D 12 E 8
Duration (days) 1 11 4 6
Duration 1 11 4 6 8
8
Critical Ratio 3/1=3 10/11=.91 5/4=1.25 12/6=2 8/8=1
Sequence 5 1 3 4 2
Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
31. The jobs listed below have NOT yet been scheduled. Using the S/RO technique, in what sequence would you schedule these jobs?
Job Slack A 3 B 10 C 5 D 12 E 8 a) B-E-C-A-D b) A-D-C-E-B c) A-C-E-B-D d) A-C-D-E-B e) E-C-D-A-B Answer: a Solution: Job Slack
A B C D E
3 10 5 12 8
Remaining Operations after current workcenter 1 11 4 6 8
Remaining plus current workcenter 2 12 5 7 9
S/RO
Sequence
1.5 0.83 1 1.71 0.88
5 1 3 4 2
Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
32. Using the S/RO rule, which of the following jobs will be scheduled first? a) the first job that arrives at a work center b) the job with the least slack per remaining operations c) the job with the highest slack per remaining operations d) the job with the smallest ratio of time remaining until due date to process time remaining e) the job with the largest ratio of time remaining until due date to process time remaining Answer: b Solution: Slack per remaining operations (S/RO): The job with the least slack per remaining operations is given the highest priority. Calculate by dividing slack by remaining operations. Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
33. If using CR as the priority rule, which of the following jobs will be scheduled first? a) the first job arrives at a work center b) the job with the least slack per remaining operations c) the job with the highest slack per remaining operations d) the job with the smallest ratio of time remaining until due date to process time remaining e) the job with the largest ratio of time remaining until due date to process time remaining Answer: d Solution: Critical ratio (CR): The job with the smallest ratio of time remaining until due date to its processing time remaining has the highest priority. Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
34. What does job flow time measure? a) the time a job spends in the shop b) due-date performance c) the amount of time it takes to finish a batch of jobs d) job tardiness e) job lateness Answer: a Solution: Job flow time measures response time—the time a job spends in the shop, from the time it is ready to be worked on until it is finished. It includes waiting time, setup time, processing time, and possible delays. We calculate job flow time as Job flow time = time of completion − time job was first available for processing Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
35. If your company is concerned with customer response time you will measure scheduling effectiveness in terms of: a) job reject rates b) job profit ratio c) response time d) input time e) makespan Answer: c Solution: For example, if your company is concerned with customer response time, you measure scheduling effectiveness in terms of response time. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
36. What does makespan measure? a) WIP inventory b) due-date performance c) the amount of time it takes to finish a batch of jobs d) job tardiness e) job lateness Answer: c Solution: Makespan measures efficiency by telling us how long it takes to finish a batch of jobs. To calculate makespan, we subtract the starting time of the first job from the completion time of the last job in the group. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
37. A measure of response time is: a) makespan b) job flow time c) due date d) job lateness e) job schedule time Answer: b Solution: Job flow time measures response time—the time a job spends in the shop, from the time it is ready to be worked on until it is finished. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
38. What does average number of jobs in the system measure? a) WIP inventory b) due-date performance c) makespan d) job tardiness e) job lateness Answer: a Solution: The average number of jobs in the system measures the work-in-process inventory and also affects response time. The greater the number of jobs in the system, the longer the queues and subsequently the longer the job flow times. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
39. Which of the following is a measure of whether the job is done ahead of, on, or behind schedule? a) average number of jobs in system b) mean flow time c) makespan d) job tardiness e) job lateness Answer: e Solution: Job lateness, a measure of customer service, is the difference between the time a job is finished and the time it is supposed to be finished (its due date). When a job is finished ahead of schedule, it has negative lateness. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
40. Sweet-Dreams Inc. manufactures custom pillows. Five jobs are waiting to be processed. Job A has a flow time of 8 days, job B has a flow time of 10 days, job C has a flow time of 15 days, job D has a flow time of 20 days, and job E has a flow time of 27 days. What is the mean flow time? a) 8 days b) 10 days c) 7 days d) 0 days e) 16 days Answer: e Solution: 8+10+15+20+27=80/5=16 Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
41. Heavy Eyes Inc. manufactures custom pillows. Five jobs are waiting to be processed using the SPT priority rule. Their processing times are shown in the following table. What is the mean flow time? Job Processing Time A 6 B 2 C 10 D 8 E 1 a) 57 days b) 11.4 days c) 17 days d) 5.4 days e) 27 days Answer: d Solution: 6+2+10+8+1=27/5=5.4 Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
42. The following jobs must be processed in the Super Clean motor shop. Assume that the company operates seven days per week. Using FCFS as the priority rule, calculate average job tardiness. Due Job Arrival Comp Date A Nov. 1 8 16 F Nov. 5 12 10 E Nov. 6 12 15 B Nov. 4 12 11 C Nov. 2 20 21 D Nov. 3 5 13 a) 0 b) 6 c) .5 d) -2.833 e) -8 Answer: c Solution: Job Arrival A Nov. 1 C Nov. 2 D Nov. 3 B Nov. 4 F Nov. 5 E Nov. 6
Comp 8 20 5 12 12 12
Due Date 16 21 13 11 10 15
Lateness 8-16=-8 20-21=-1 5-13=-8 12-11=1 12-10=2 12-15=-3 Sum=-17 -17/6=-2.83
Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
Tardiness 0 0 0 1 2 0 Sum=3 3/6=0.5
43. Sweet-Dreams Inc. manufactures custom pillows. Five jobs are waiting to be processed using the SPT priority rule. Their processing times are shown in the following table. What is the average number of jobs in the system? Job Processing Time A 8 B 2 C 4 D 6 E 7 a) 66 b) 13.2 c) 27 d) 5.4 e) 2.44 Answer: e Solution: SPT sequence is BCDEA; WIP= Makespan/Sum of processing times Job Process Time Finish Time B 2 2 C 4 6 D 6 12 E 7 19 A 8 27 Sum 27 66 WIP=66/27=2.44 Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
44. Green Inc. manufactures a variety of wooden desks. Five jobs are waiting to be processed using the LPT priority rule. Their processing times are shown in the following table. What is the makespan? Job Processing Time A 8 B 2 C 4 D 6 E 7 a) 66 b) 13.2 c) 27 d) 5.4 e) 2.4 Answer: c Solution: A 8 E 7 D 6 C 4 B 2 Total = 27 (makespan = completion time of last job – beginning time of 1st job) Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
45. A greater number of jobs in the system implies what? a) a higher work-in-process inventory level and a longer response time b) a lower work-in-process inventory level and a longer response time c) a higher work-in-process inventory level and a shorter response time d) a lower work-in-process inventory level and a shorter response time e) more jobs will certainly be tardy. Answer: a Solution: The average number of jobs in the system measures the work-in-process inventory and also affects response time. The greater the number of jobs in the system, the longer the queues and subsequently the longer the job flow times. If quick customer response is critical to your company, the number of jobs waiting in the system should be relatively low. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
46. Job A is due on day 15, and it is finished on day 12. What is its lateness? a) –3 b) 0 c) 3 d) both -3 and 3 e) none of these answer choices are correct Answer: a Solution: 15-12 = 3; ahead of schedule Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 1.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
47. Which of the following is a measure of how long after the due date the job is completed? a) job belatedness b) mean flow time c) makespan d) job overdueness e) job tardiness Answer: e Solution: Positive job lateness values are typically described as job tardiness. Tardiness indicates how many days pass after the due date before the job is completed. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
48. Which of the following scheduling rules is often considered the fairest rule? a) first come, first served b) last come, first served c) earliest due date d) shortest processing time e) longest processing time Answer: a Solution: FCFS (first come, first served) is considered a fair rule because everyone is treated equally. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
49. Which of the following scheduling rules minimizes the average number of jobs in the system? a) first come, first served b) last come, first served c) earliest due date d) shortest processing time e) longest processing time Answer: d Solution: Different priority rules measure different aspects of performance, depending on your company‘s competitive priorities. SPT (shortest processing time) always minimizes mean job flow time, mean job lateness, and average number of jobs in the system. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
50. Which of the following scheduling rules minimizes mean job flow time? a) first come, first served b) last come, first served c) earliest due date d) shortest processing time e) longest processing time Answer: d Solution: Different priority rules measure different aspects of performance, depending on your company‘s competitive priorities. SPT (shortest processing time) always minimizes mean job flow time, mean job lateness, and average number of jobs in the system. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
51. Using the following data, calculate the average job lateness. Job Completion Date Due Date A 15 12 B 11 24 C 25 22 D 18 19 a) -2 days b) 3 days c) 13 days d) -8 days e) 1.5 days Answer: a Solution: A 15-12= 3 B 11-24= -13 C 25-22= 3 D 18-19= -1 Total = -8/4=-2 Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 5.00minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
52. Using the following data, calculate the average job tardiness. Job Completion Date Due Date A 15 12 B 11 24 C 25 22 D 18 19 a) 6 days b) 1.5 days c) -2 days d) -8 days e) 3 days Answer: b Solution: Completion Job Date A 15 B 11 C 25 D 18
Due Date 12 24 22 19
lateness tardiness 3 -13 3 -1 -8 -2
3 0 3 0 6 1.5
Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
53. Five jobs must be scheduled. Each of the jobs must be processed on two machines (A and B) in the same order. The processing times are listed below. According to Johnson‘s rule, in what order should the jobs be processed? Job Machine A Machine B A 6 30 B 23 2 C 1 7 D 4 3 E 8 8 a) C-B-D-A-E b) C-D-A-E-B c) B-E-A-D-C d) C-A-E-D-B e) C-D-E-B-A Answer: d Solution: Shortest operation times are C=1 on 1st machine, B=2 on 2nd, D=3 on 2nd, A=6 on 1st, so E falls in the middle Section Ref: Developing a Schedule of Operations Subsection: Sequencing Jobs Through Two Work Centers Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic 54. What does ―negative lateness‖ mean? a) The job is finished after its due date. b) The job is finished on its due date. c) The job is finished before its due date. d) The job is not finished. e) The job has not started. Answer: c Solution: Job lateness, a measure of customer service, is the difference between the time a job is finished and the time it is supposed to be finished (its due date). When a job is finished ahead of schedule, it has negative lateness. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
55. Job A is due on day 15, and it is finished on day 12. What is its tardiness? a) –3 b) 0 c) 3 d) both -3 and 3 e) none of these answer choices are correct Answer: b Solution: 15-12 = 3; still on schedule thus 0 Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 1.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
56. Seven jobs must be scheduled. Each of the jobs must be processed on two machines (A and B) in the same order. The processing times are listed below. According to Johnson‘s rule, in what order should the jobs be processed? Job Machine A Machine B A 6 25 B 12 2 C 11 7 D 4 3 E 7 8 F 9 1 G 18 5 a) A-E-C-G-D-B-F b) A-F-E-G-D-B-C c) F-B-D-G-C-E-A d) F-D-B-G-E-C-A e) G-D-B-F-A-E-C
Answer: a Solution: Shortest process times are F on 2nd, B on 2nd, D on 2nd, G on 2nd, A on 1st, E on 1st, C on 2nd; jobs with shortest durations on 1st machine go towards beginning of schedule, on 2nd machine go to end of schedule Section Ref: Developing a Schedule of Operations Subsection: Sequencing Jobs Through Two Work Centers Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
57. Which of the following sequencing rules is used for minimizing makespan in a two-stage, unidirectional process? a) FCFS b) S/RO c) SPT d) CR e) Johnson‘s rule Answer: e Solution: Johnson‘s rule is a scheduling technique for developing a sequence when jobs are processed through two successive operations. Johnson‘s rule is an optimizing technique and always minimizes makespan. Section Ref: Developing a Schedule of Operations Subsection: Sequencing Jobs Through Two Work Centers Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
58. Which of the following is the LEAST effective tactic for managing a bottleneck station? a) Assign extra workers to the bottleneck station if necessary in order to keep it running. b) Increase the production rate at the bottleneck station. c) Inspect items just as soon as they come out of the bottleneck station. d) Subcontract part of the workload at that station to other companies. e) Assign your best people to that station to improve efficiency.
Answer: c Solution: Inspection should come before the bottleneck so that bottleneck time is not used processing defective parts. Section Ref: Optimized Production Technology Subsection: Theory of Constraints Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
59. Consider a production line with five stations. Stations one through five can process a unit in 10, 15, 20, 5, and 12 minutes, respectively. What is the maximum throughput per hour?
a) 6 units b) 4 units c) 3 units d) 12 units e) 5 units Answer: c Solution: Capacity at the stations in units/hour is 60/t; Station 1=60/10=6; Station 2=60/15=4; Station 3 = 60/20=3; Station 4 = 60/5=12; Station 5 = 60/12=5. The minimum capacity station determines the line‘s maximum throughput, thus Station 3 relegates us to a puny 3 units/hour. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 3: Describe the optimized production technology. AACSB: Analytic
60. Consider a production line with five stations. The first station can process a unit in 8 minutes. The second station has two identical machines, each of which can process a unit in 18 minutes (each unit only needs to be processed on one of the two machines). The third station can process a unit in 4 minutes. The fourth station can process a unit in 9 minutes. The fifth station can process a unit in 10 minutes. Which station is the bottleneck station?
a) Station 1 b) Station 2 c) Station 3 d) Station 4 e) Station 5
Answer: e Solution: Capacity at the stations in units/hour is 60/t; Station 1=60/8=7.5; Station 2=2*60/18=6.67; Station 3 = 60/4=15; Station 4 = 60/9=6.67; Station 5 = 60/10=6. The minimum capacity station determines the line‘s maximum throughput, thus Station 5 is the bottleneck. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 3: Describe the optimized production technology. AACSB: Analytic
61. Which of the following statements is NOT a valid scheduling principle? a) Balance the process rather than the flow. b) Non-bottleneck usage is determined by some other constraint in the system. c) Usage and activation of a resource are the same. d) The process batch should be variable. e) An hour lost at a bottleneck resource is an hour lost forever. Answer: c Solution: Usage and activation of a resource are not the same. Activation of a resource means the resource is used to process materials or products. Usage means that the resource activated is contributing positively to the company‘s performance. Thus usage means the resource is performing a needed activity. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
62. What is throughput? a) the quantity of finished goods that can be sold b) the quantity of items moved at the same time from one resource to the next c) the quantity of work-in-process inventory d) the quantity produced at a resource before the resource is switched over to produce another product e) the average flow time of the system Answer: a Solution: Throughput is the quantity of finished goods that can be sold. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
63. What is a process batch? a) the quantity of finished goods that can be sold b) the quantity of items moved at the same time from one resource to the next c) the quantity of work-in-process inventory d) the quantity produced at a resource before the resource is switched over to produce another product e) the set of machines used to make products Answer: d Solution: The process batch is the quantity of an item processed at a resource before that resource is changed to produce a different product. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
64. What is a transfer batch? a) the quantity of finished goods that can be sold b) the quantity of items moved at the same time from one resource to the next c) the quantity of work-in-process inventory d) the quantity produced at a resource before the resource is switched over to produce another product e) the quantity of items needed to attain a full truckload (TL) shipping rate Answer: b Solution: The transfer batch is the quantity of items moved at the same time from one resource to the next. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
65. The process batch should a) match the transfer batch. b) exceed the transfer batch. c) be smaller than the transfer batch. d) be fixed. e) be variable. Answer: e Solution: The process batch should be variable. We do not always have to produce the same quantity, but instead we should produce what is needed. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
66. Which of the following statements is NOT true? a) An hour lost at a bottleneck is an hour lost forever. b) An hour lost at a non-bottleneck is just a mirage. c) Bottlenecks determine throughput and system inventory. d) The transfer batch does not have to equal the process batch. e) Lead times are predetermined. Answer: e Solution: Schedules should be established by considering all constraints simultaneously. Lead times are the result of the schedule and are not predetermined. You should develop the schedule considering all your constraints. If you do not know what your workload is, you cannot tell a customer how long it will take to do a job. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
67. Which of the following is mostly like to be an internal resource constraint? a) increasing market demand b) raw material shipping problems c) decreasing market demand d) no overtime e) a regular bottleneck in the production process Answer: e Solution: According to the TOC, a system‘s output is determined by three kinds of constraints: internal resource constraint, market constraint, and policy constraint. An internal resource constraint is the classic bottleneck discussed in the previous section. Section Ref: Optimized Production Technology Subsection: Theory of Constraints Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
68. Which of the following is mostly like to be a market constraint? a) strike at the supplier‘s plant b) raw material shipping problems c) decreasing market demand d) no overtime e) a regular bottleneck in the product process Answer: c Solution: A market constraint results when market demand is less than production capacity. Since companies do not want excess inventory buildup, the market determines the rate of production. Section Ref: Optimized Production Technology Subsection: Theory of Constraints Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
69. Which of the following is mostly like to be a policy constraint? a) strike at the supplier‘s plant b) raw material shipping problems c) decreasing market demand d) no overtime e) a regular bottleneck in the product process Answer: d Solution: Policy constraint means that a specific policy dictates the rate of production (for example, a policy of no overtime). Section Ref: Optimized Production Technology Subsection: Theory of Constraints Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
70. Only Roses Flower Shop currently operates 7 days per week. The staffing needs for each day are shown in the following table. Each of the employees must have two consecutive days off in a week. (Since Monday is used as the first day of the pay week, an employee cannot be off on both Sunday and Monday.) What is the minimum number of employees that needs to be hired? Days of Week Monday Tuesday Wednesday Thursday Friday Saturday Sunday Staff Need 2 3 4 4 5 4 6 a) 5 b) 6 c) 7 d) 8 e) 9 Answer: e Solution: need 6 on Sunday, so hiring 6 folks for Wednesday through Sunday covers all labor requirements for those days. This leaves coverage for Monday and Tuesday‘s requirements – Rose needs 3 workers for Tuesday, so the minimum number to hire is an additional 3, for a total of 9. Section Ref: Scheduling Issues for Service Organizations Subsection: Developing a Workforce Schedule Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 4: Describe scheduling issues for service organizations. AACSB: Analytic 71. Jim-O‘s fast focus restaurant is opening up a new branch. Based on demand forecast the following service personnel levels are anticipated. What is the number of employees needed for Thursday-Friday pair? Days of Week Monday Tuesday Wednesday Thursday Friday Saturday Sunday Staff needs 5 4 3 4 6 6 5 a) 7 b) 9 c) 10 d) 11 e) 12
Answer: c Solution: Using Step 1 and 2 of the technique developed by Tibrewala, Philippe, and Brown, Thursday (4) + Friday (6) = 10 Section Ref: Scheduling Issues for Service Organizations Subsection: Developing a Workforce Schedule Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 4: Describe scheduling issues for service organizations. AACSB: Analytic 72. Jim-O‘s fast focus restaurant is opening up a new branch. Based on demand forecast the following service personnel levels are anticipated. What days will employee #1 have off? Days of Week Monday Tuesday Wednesday Thursday Friday Saturday Sunday Staff needs 5 4 4 3 6 6 5 a) Mon - Tue b) Tue - Wed c) Wed - Thur d) Thur - Fri e) Fri - Sat Answer: c Solution: Consecutive Days Mon-Tue Tue-Wed Wed-Thu Thu-Fri Fri-Sat Staff needs 9 8 7 9 12 The lowest two-day total is Wed-Thu at 7 Section Ref: Scheduling Issues for Service Organizations Subsection: Developing a Workforce Schedule Level: Medium Time on Task: minutes Bloom‘s: Application Learning Objective 4: Describe scheduling issues for service organizations. AACSB: Analytic
Sat-Sun 11
73. When were Gantt charts developed? a) early 1800s b) early 1900s c) early 1920s d) early 1940s e) early 1960s Answer: b Solution: Gantt charts are named after Henry Gantt, who developed these charts in the early 1900s. Section Ref: Basic Scheduling Concepts Subsection: Scheduling Low-Volume Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
74. Optimized production technology (OPT) was introduced by Eli ____________________. a) Goldratt b) Manning c) Jefferson d) Rosenblatt e) Strasburg Answer: a Solution: Techniques for scheduling bottleneck systems emerged in the late 1970s with the introduction of optimized production technology (OPT) by Eli Goldratt. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
75. When the Reproduction Retailer worker opened the night drop box at 8:00 a.m., he found a complicated copy and binding job had been dropped off overnight. After reviewing the request, he noticed that the customer wanted to pick up the work by closing time at 8:00 p.m. the same day. The work had four major steps and the worker determined that Step A would take two hours, Step B would take four hours, Step C would take one hour, and Step D would take two hours. It is now 9:00 a.m. and all machines are idle. If the worker backward schedules the job and must perform the steps in the ABCD sequence, when will Step B start? a) 10 a.m. b) 11 a.m. c) 12 p.m. d) 1 p.m. Answer: d Solution: Working backwards from 8 p.m., Step D must start by 6 p.m., Step C must start by 5 p.m., and step B must start by 1 p.m. for the job to be ready at 8 p.m. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 1: Explain basic scheduling concepts. AACSB: Analytic
76. Unoriginal Industries has six customer requests to process. They have estimated the processing time and included this information along with each request‘s due date in the following table. What is the average lateness if the requests are completed in an EDD sequence? Request A B C D E F Process Time 13 11 6 7 12 19 Due Date 24 30 15 14 42 50 a) 4.16 b) 5.67 c) 6.33 d) 7.83
Answer: B Solution: Sequence is shown in the following table along with completion times and lateness. Request D C A B E F Σ Time complete 7 13 26 37 49 68 200 Lateness 0 0 2 7 7 18 34 34/6 = 5.67 Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic 77. A production line has four stations that all product must pass through before completion. Stations one through four can process a unit in 10, 15, 20, and 12 minutes, respectively. The worker at Station 2 develops a new approach to her work and reduces the process time to 12 minutes. What is the capacity of the production line after her new approach is implemented?
a) 3 units per hour b) 4 units per hour c) 5 units per hour d) 6 units per hour Answer: a Solution: The bottleneck remains at Station 3 so capacity is 60 minutes/hr / 20 minutes/unit = 3 units/hour. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Describe the optimized production technology. AACSB: Analytic
78. Rosie's Flower and Fun Shop currently operates 7 days per week. The staffing needs for each day are shown in the following table. Each of the employees must have two consecutive days off, including the Sunday of one week and the Monday of the following week. What is the minimum number of employees that needs to be hired? Days of Week Monday Tuesday Wednesday Thursday Friday Saturday Sunday Staff Need 4 4 6 5 5 4 3 a) 6 b) 7 c) 8 d) 9 Answer: b Solution: Two workers are Monday-Friday, three workers are Wednesday-Sunday, one worker is Tuesday-Saturday, and one worker is Saturday-Wednesday, for a total of 7. Section Ref: Scheduling Issues for Service Organizations Subsection: Developing a Workforce Schedule Level: Medium Time on Task: 10 minutes Bloom‘s: Application Learning Objective 4: Describe scheduling issues for service organizations. AACSB: Reflective Analytic
True/False
79. Flow operations are often related to high volume production. Answer: True Solution: Flow operations Processes designed to handle high-volume, standard products. Section Ref: Basic Scheduling Concepts Subsection: Scheduling High-Volume Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
80. A Gantt chart is usually used for a company with low flexibility in both product variation and product volume. Answer: False Solution: Companies with low-volume operations use highly skilled employees, general-purpose equipment, and a process layout. The objective is flexibility, both in product variation and product volume. As a result, scheduling is complex. The workload must be distributed among the work centers or service personnel. A useful tool for viewing the schedule and workload is a Gantt chart. Section Ref: Basic Scheduling Concepts Subsection: Scheduling Low-Volume Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
81. A Gantt chart is a basic scheduling tool for low-volume systems. Answer: True Solution: Companies with low-volume operations use highly skilled employees, general-purpose equipment, and a process layout. The objective is flexibility, both in product variation and product volume. As a result, scheduling is complex. The workload must be distributed among the work centers or service personnel. A useful tool for viewing the schedule and workload is a Gantt chart. Section Ref: Basic Scheduling Concepts Subsection: Scheduling Low-Volume Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
82. In a service organization, a doctor‘s office is a good example of finite loading. Answer: True Solution: Finite loading is why you may have to wait at the doctor‘s office. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
83. Forward scheduling sometimes causes inventory buildup if items are NOT delivered by the due date. Answer: True Solution: With forward scheduling, it is not unusual for jobs to be finished before their due date. The disadvantage to finishing a job early is that it causes an inventory buildup if items are not delivered before the due date. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
84. Backward scheduling determines the earliest possible completion time for a job. Answer: False Solution: Backward scheduling shows you how late the job can be started and still be finished on time. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
85. The backlog at a work center increases when the work center receives MORE work than it finishes. Answer: True Solution: The only time the size of the backlog changes is when actual input does not equal actual output. When a work center receives more work than it finishes, the backlog increases Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
86. Priority rules are MORE useful in sequencing jobs in high-volume systems than in lowvolume systems. Answer: False Solution: High volume systems typically have a product layout, so all jobs flow through the same sequence of operations and no priority rules are needed. Section Ref: Basic Scheduling Concepts Subsection: Scheduling High-Volume Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
87. A local priority rule sets priority based only on the jobs waiting at that individual work center. Answer: True Solution: A local priority rule sets priority based only on the jobs waiting at that individual work center. For example, the highest priority might be given to the job that arrives first or the job that can be done the fastest. Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
88. If using critical ratio (CR) as the scheduling rule, the job with the smallest ratio of time remaining until due date to the processing time remaining has the lowest priority. Answer: False Solution: Critical ratio (CR): The job with the smallest ratio of time remaining until due date to its processing time remaining has the highest priority. Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
89. If using slack per remaining operations (S/RO) as the scheduling rule, the job with the LEAST slack per remaining operations has the highest priority. Answer: True Solution: Slack per remaining operations (S/RO): The job with the least slack per remaining operations is given the highest priority. Calculate by dividing slack by remaining operations. Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
90. Makespan has a link to customer due dates. Answer: False Solution: Makespan measures efficiency by telling us how long it takes to finish a batch of jobs. To calculate makespan, we subtract the starting time of the first job from the completion time of the last job in the group. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
91. Makespan is a measure of WIP. Answer: False Solution: Makespan measures efficiency by telling us how long it takes to finish a batch of jobs. To calculate makespan, we subtract the starting time of the first job from the completion time of the last job in the group. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
92. If customer service is important to the company, average job lateness is probably a MORE relevant measurement than average job tardiness. Answer: False Solution: Job lateness, a measure of customer service, is the difference between the time a job is finished and the time it is supposed to be finished (its due date). When a job is finished ahead of schedule, it has negative lateness. Positive job lateness values are typically described as job tardiness. Tardiness indicates how many days pass after the due date before the job is completed. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
93. EDD always minimizes mean job flow time. Answer: False Solution: Different priority rules measure different aspects of performance, depending on your company‘s competitive priorities. SPT (shortest processing time) always minimizes mean job flow time, mean job lateness, and average number of jobs in the system. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
94. Negative lateness means the job is finished before the due date. Answer: True Solution: Negative lateness means the job is finished ahead of its due date. Zero lateness means the job finished on its due date. Positive lateness means the job finished after its due date. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
95. Firms should balance the flow rather than the process. Answer: False Solution: Balance the process rather than the flow. Traditionally, managers try to make the same amount of capacity available in each department or work center. This means every resource is a bottleneck. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
96. Schedules should be established by considering all constraints simultaneously. Answer: True Solution: Schedules should be established by considering all constraints simultaneously. Lead times are the result of the schedule and are not predetermined. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
97. Usage and activation of a resource are NOT the same. Answer: True Solution: Usage and activation of a resource are not the same. Activation of a resource means the resource is used to process materials or products. Usage means that the resource activated is contributing positively to the company‘s performance. Thus usage means the resource is performing a needed activity. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge 98. According to the text, a system‘s input is determined by three kinds of constraints: internal resource constraint, market constraint, and policy constraint. Answer: False Solution: According to the TOC, a system‘s output is determined by three kinds of constraints: internal resource constraint, market constraint, and policy constraint. An internal resource constraint is the classic bottleneck discussed in the previous section. A market constraint results when market demand is less than production capacity. Since companies do not want excess inventory buildup, the market determines the rate of production. Policy constraint means that a specific policy dictates the rate of production. Section Ref: Optimized Production Technology Subsection: Theory of Constraints Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
99. The transfer batch should always equal the process batch. Answer: False Solution: The transfer batch does not have to equal the process batch. The transfer batch is the quantity of items moved at the same time from one resource to the next. The process batch is the quantity of an item processed at a resource before that resource is changed to produce a different product. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
100. The process batch should be variable. Answer: True Solution: The process batch should be variable. We do not always have to produce the same quantity, but instead we should produce what is needed. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
101. Using the Tibrewala, Phillippe, and Brown technique for a Monday through Sunday work week a regular, full time employee can end up with a Sunday-Monday set of days off. Answer: False Solution: Tibrewala, Phillippe, and Brown developed a technique in 1972 that enables a company to operate seven days a week and give each of its full-time employees two consecutive days off. Since most companies define the starting day and ending day of their pay week, we will use Monday as the first day of the week. Thus, an employee cannot be off on Sunday and Monday since those are not two consecutive days during the same pay week. Section Ref: Scheduling Issues for Service Organizations Subsection: Developing a Workforce Schedule Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe scheduling issues for service organizations. AACSB: Knowledge
102. Marketing uses flow time metrics to determine if deliveries are made on time. Answer: False Solution: Marketing uses schedule effectiveness measurements to determine whether the company is using lead times for competitive advantage, whether flow time is correlated to estimated lead times, and whether deliveries are made on time. Knowing lead times allows marketing to make realistic delivery promises to customers. Section Ref: Scheduling within OM: Putting It All Together Subsection: Scheduling Across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Describe scheduling issues for service organizations. AACSB: Knowledge
Essay
103. What are some important considerations to make when developing an operational schedule? Answer: Are there some activities that can be done in parallel? Can the schedule be arranged to avoid bottlenecks? Can some of the tasks be done by someone else? Are there some activities that can be postponed to another time? Are additional tasks created because of the sequence that is followed? For each task, we need to know what must be done, how long it should take to do, who must do it, and what its priority is.
Solution: When developing an operational schedule, there are numerous things to consider. For example, are there some activities that can be done in parallel (simultaneously)? Can you arrange your schedule to avoid bottlenecks? Can you let someone else do some of the tasks for you? Are there some activities that can be postponed to another time? Do you create additional tasks because of the sequence you choose to follow Sometimes the length of time needed to complete your scheduled jobs depends on whether certain jobs require more time because of the preceding task Section Ref: Chapter Overview Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
104. What are the two major kinds of Gantt charts? Answer: load chart and progress chart Solution: Two kinds of Gantt charts are the load chart and the progress chart. Section Ref: Basic Scheduling Concepts Subsection: Scheduling Low-Volume Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
105. Based on the definition in the ninth edition of the APICS Dictionary, what is operation sequencing? Answer: a technique for short-term planning of actual jobs to be run in each work center based on capacity and priorities Solution: The APICS Dictionary defines operation sequencing or job sequencing as a technique for short-term planning of actual jobs to be run in each work center based on capacity and priorities. Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
106. Discuss how companies can benefit from both infinite and finite loading. Answer: Infinite loading identifies the company‘s resource bottlenecks for a proposed schedule so that planners can find solutions proactively. Finite loading develops the operational schedule that suits the available capacity. Each provides a different view for a broader overall planning purpose. Solution: Companies benefit from both infinite and finite loading. Infinite loading identifies resource bottlenecks for a proposed schedule so that planners can find solutions proactively, such as changing the schedule and increasing the resource capacity. Finite loading develops the operational schedule that uses the available capacity. Finite and infinite loading assign work to specific work centers based on a proposed schedule. Both techniques use either a schedule (infinite loading) or a prioritized list of jobs to be done (finite loading). Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
107. Define what slack is. Answer: Slack is the amount of time a job can be delayed and still be finished by its due date. Solution: We calculate slack by subtracting the total work remaining (current operation plus all other undone operations times) from the amount of time left until the due date. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
108. Define job lateness. Answer: Job lateness is a measure of whether the job is done ahead of, on, or behind schedule. Solution: Job lateness, a measure of customer service, is the difference between the time a job is finished and the time it is supposed to be finished (its due date). Lateness=Completion Time Due Time. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
109. Define job tardiness. Answer: Job tardiness is a measure of how long after the due date the job is completed. Solution: Positive job lateness values are typically described as job tardiness. Tardiness indicates how many days pass after the due date before the job is completed. Tardiness =max(Completion Time-Due Time, 0) Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
110. Define Johnson‘s rule. Answer: Johnson‘s rule is a technique for minimizing makespan in a two-stage unidirectional process. Solution: Johnson‘s rule is a scheduling technique for developing a sequence when jobs are processed through two successive operations. Step 1: List the jobs and the processing time for each activity. Step 2: Find the shortest activity processing time among all the jobs not yet scheduled. If the shortest activity processing time is a first activity, put the job needing that activity in the earliest available position in the job sequence. If the shortest activity processing time is a second activity, put the job needing that activity in the last available position in the job sequence. When you schedule a job, eliminate it from further consideration. Step 3: Repeat Step 2 until you have put all the activities for the job in the schedule. Section Ref: Developing a Schedule of Operations Subsection: Sequencing Jobs Through Two Work Centers Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
111. Optimized production technology (OPT) was introduced by whom in the late 1970s, and what does it do? Answer: Eli Goldratt introduced OPT, and it is a technique used to schedule bottleneck systems. Solution: Techniques for scheduling bottleneck systems emerged in the late 1970s with the introduction of optimized production technology (OPT) by Eli Goldratt. OPT classifies resources as either bottlenecks or nonbottlenecks, and makes bottlenecks the basis for scheduling and capacity planning. According to OPT, companies should schedule bottleneck resources to full capacity and schedule nonbottleneck resources to support the bottleneck resources. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
112. What is a transfer batch? Answer: the quantity of items moved at the same time from one resource to another Solution: The transfer batch is the quantity of items moved at the same time from one resource to the next. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
113. What are the three kinds of constraints defined by TOC? Answer: internal resource constraint, market constraint, and policy constraint Solution: The theory of constraints (TOC) is an extension of OPT. According to the TOC, a system‘s output is determined by three kinds of constraints: internal resource constraint, market constraint, and policy constraint. An internal resource constraint is the classic bottleneck discussed in the previous section. A market constraint results when market demand is less than production capacity. Since companies do not want excess inventory buildup, the market determines the rate of production. Policy constraint means that a specific policy dictates the rate of production (for example, a policy of no overtime). Section Ref: Optimized Production Technology Subsection: Theory of Constraints Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
114. What does the term ―floating employees‖ refer to? Answer: Floating employees perform a number of services and are assigned where they are needed each day. Solution: When customer demand for services can change daily, organizations use floating employees to their advantage. Floating employees perform a number of services and are assigned where they are needed each day. A disadvantage of this approach for some employees is the uncertainty of their work location and the transient nature of short-term assignments. Section Ref: Scheduling Issues for Service Organizations Subsection: Scheduling Employees Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Describe scheduling issues for service organizations. AACSB: Knowledge 115. What are the three steps for the Johnson‘s Rule? Answer: Step 1 – List jobs and processing time for each activity; Step 2 – Find shortest activity processing time among the jobs not yet scheduled. If the shortest Processing time is for a 1st activity, schedule that job in the earliest available position in the job sequence. If the shortest processing time is for 2nd activity, schedule that job in the last available position in the job sequence. When you schedule a job eliminate it from further consideration; Step 3 – Repeat step 2 until you have put all activities for the jobs in the schedule Solution: Step 1 – List jobs and processing time for each activity; Step 2 – Find shortest activity processing time among the jobs not yet scheduled. If the shortest Processing time is for a 1st activity, schedule that job in the earliest available position in the job sequence. If the shortest processing time is for 2nd activity, schedule that job in the last available position in the job sequence. When you schedule a job eliminate it from further consideration; Step 3 – Repeat step 2 until you have put all activities for the jobs in the schedule Section Ref: Developing a Schedule of Operations Subsection: Sequencing Jobs Through Two Work Centers Level: Easy Time on Task: 5.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
Problems
116. Desire Inc. produces a variety of pediatric nutritional products. Management wants to evaluate the performance of Work Center 17, the bottleneck in the packaging line. Managers are particularly worried about the backlogging problem in the work center. The following input/output report is given. Input Information Period 1 2 3 Planned Input (hours) 100 80 130 Actual Input (hours) 80 100 100 Output Information Period 1 2 3 Planned Output (hours) 100 100 100 Actual Output (hours) 100 70 110 The initial backlog was 50 hours. Based on the above information, calculate the backlog hours of Work Center 17 for periods 1, 2, and 3, respectively. Answer: period 1 = 30, period 2 = 60, period 3 = 50 Solution: Input Information Period 1 2 Planned Input (hours) 100 80 Actual Input (hours) 80 100 Deviation -20 20 Cumulative Dev -20 0
3 130 100 -30 -30
Output Information Planned Output Actual Output Deviation Cumulative Deviation
100 110 10 -20
100 100 0 0
100 70 -30 -30
Backlog 30 60 50 Backlog1=50+80-100=30; Backlog2=30+100-70=60; Backlog3=60+100-110=50 Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Medium Time on Task: 7.00 minutes Bloom‘s: Application Learning Objective 1: Explain basic scheduling concepts. AACSB: Analytic
117. Terry‘s cycle shop standard hour input/output report is below. Calculate the output deviation and backlog hours for periods 1, 2, 3, and 4. Input Information Period 6 7 8 9 Planned Input 59 68 54 62 Actual Input 55 72 62 48
Output Information Period Planned Output Actual Output Backlog
6 50 52
7 65 60
8 55 53
9 65 67
75
Answer: Output deviation = 2, -5, -2, 2; Backlog = 78, 90, 99 and 80 Solution: Input Information Period 6 7 8 9 Planned Input 59 68 54 62 Actual Input 55 72 62 48 Deviation -4 4 8 -14 Output Information Period Planned Output Actual Output Deviation
6 50 52 2
7 65 60 -5
8 55 53 -2
9 65 67 2
Backlog 78 90 99 80 Output deviation = 52 – 50 = 2, 60 – 65 = -5, 53 - 55= -2, 67 – 65 = 2; Backlog = 75 + 55 – 52 = 78, 78 + 72 – 60 = 90, 90 + 62 – 53 = 99 and 99 + 48 – 67 = 80 Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Medium Time on Task: 12.00 minutes Bloom‘s: Application Learning Objective 1: Explain basic scheduling concepts. AACSB: Analytic
118. Job A has a flow time of 20 days, job B has a flow time of 13 days, job C has a flow time of 12 days, and job D has a flow time of 15 days. If the time it takes to finish all four jobs (as a whole batch) is 15 days, what is the average number of jobs in the system? Answer: 4 jobs Solution: Average # Jobs = Sum of Flow Times/Makespan = 60/15 = 4 Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
119. Using the following data, calculate the average job lateness and average job tardiness. Job Completion Date Due Date A 13 10 B 19 24 C 25 20 D 18 18 Answer: lateness = 0.75 days, tardiness = 2 days Solution: Job Completion Date Due Date Lateness A 13 10 13-10=3 B 19 24 19-24=-5 C 25 20 25-20=5 D 18 18 18-18=0 Total 3 Average 0.75 Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
Tardiness 3 0 5 0 8 2
120. What is the mean job flow time for Bob‘s body and fender shop for the following repair jobs? Fender job finishes day 8; hood replacement finishes day 7, front end repair finished day 4, trunk fix finishes on day 12, and the door repair finishes on day 6. Answer: 7.4 Solution: Assuming all repairs were ready to be worked on at Day 0, 8+7+4+12+6=37; 37/5=7.4 Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
121. Perfect Inc manufactures a variety of wooden chairs. The following data were reported by the control system for order processing at the assembly station. The current date is day 100. The number of remaining operations and the work time remaining includes the operations at the assembly station. All jobs are available for processing, and none have been started yet. Remaining Work Time Job Due Date Operations Remaining A 110 10 9 B 115 9 5 C 118 1 7 D 106 8 4 E 120 5 12 Using the S/RO priority rule, sequence the above jobs. Answer: A-D-B-E-C Solution: Remaining Work Time Slack Job Due Date Operations Remaining A 110 10 9 1 B 115 9 5 10 C 118 1 7 11 D 106 8 4 2 E 120 5 12 8 Sequence from lowest to highest S/RO is A-D-B-E-C Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
S/RO 0.1 1.111 11 0.25 1.6
122. Jackie is the owner and the manager of an auto repair company. In order to be fair to all the customers, Jackie decides to use the FCFS priority rule in job sequencing. Currently, four cars need to be repaired. Assume that the cars arrive in the order listed, that is, A first, then B, then C, then D. The estimated labor times (in days) and promise dates are shown in the following table. Customers usually do not pick up their cars early. Today is day 0. Car Estimated Labor Time Promise Date A 5 5 B 10 18 C 1 12 D 3 15 Based on the FCFS sequence, calculate the following performance measures: (a) makespan, (b) average job flow time, (c) average number of jobs in the system, (d) average job tardiness. Answer: (a) 19 days, (b) 4.75 days, (c) 2.89 jobs, (d) 2 days Solution: Car Estimated Promise Completion Lateness Tardiness Labor Time Date A 5 5 5 0 0 B 10 18 15 -3 0 C 1 12 16 4 4 D 3 15 19 4 4 Makespan is completion time of last job (D) which is 19 days Avg Flow = Sum of Flows / # Jobs = (5 + 15 + 16 + 19) / 4 = 13.75 Jobs in System = Sum of Flows / Makespan = 2.89 Average Tardiness = Sum of Tardiness / # Jobs = (4 + 4) / 4 = 2 Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 12.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
123. The following jobs need to be processed at J. J. Rupper‘s work center. Job Arrival Date Production Days Needed Due Date A 5 20 75 B 15 30 95 C 17 16 70 D 20 10 125 E 25 18 105 In what sequence would the jobs be ranked according to the following rules: (a) FCFS, (b) SPT, (c) LPT, (d) EDD? Answer: (a) A-B-C-D-E, (b) D-C-E-A-B, (c) B-A-E-C-D, (d) C-A-B-E-D Solution: a) FCFS = Assume they are assigned letters in order of arrival, so ABCDE b) SPT sort in ascending order by Production Days Needed, so DCEAB c) LPT sort in descending order by Production Days Needed so BAECD d) EDD sort in ascending order of Due Date so CABED Section Ref: Developing a Schedule of Operations Subsection: N/A Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic 124. The following jobs are waiting to be processed at J. J. Rupper‘s work center. Job Production Days Needed Due Date A 20 135 B 30 190 C 16 140 D 10 125 E 18 150 Customers usually do not pick up orders before the due date. Today is day 100. Using the SPT priority rule, calculate the (a) mean flow time, (b) average number of jobs in the system, and (c) average job tardiness.
Answer: (a) 47.6 days, (b) 2.53 jobs, (c) 6.6 days Solution: Table is sorted in SPT sequence (Days in Work column) Job Days Work Due Date Completion Flow Time Lateness D 10 125 110 10 -15 C 16 140 126 26 -14 E 18 150 144 44 -6 A 20 135 164 64 29 B 30 190 194 94 4 Sum 238 -2 a) Mean Flow = Sum(Flow)/# Jobs = 238 / 5 = 47.6 b) # Jobs in System = Sum(Flow)/Makespan = 238 / 94 = 2.53 c) Average Tardiness = Sum(Tardiness) / # Jobs = 33 / 5 = 6.6 Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 7.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
Tardiness 0 0 0 29 4 33
125. The following jobs must be processed in the Super Clean motor center. Assume that the company operates seven days per week. Job Arrival Date Work Required (in Days) Due Date A Nov. 1 8 Nov. 16 B Nov. 4 1 Nov. 11 C Nov. 2 20 Nov. 21 D Nov. 3 5 Nov. 13 E Nov. 6 3 Dec. 2 F Nov. 5 4 Dec. 10 Today is November 10. If the company decides to use EDD as the priority rule, calculate the (a) average flow time, (b) average number of jobs in the system, and (c) average job tardiness.
Answer: (a) 22.2 days, (b) 3.24 jobs, (c) 10 days Solution: Job Arrival Work Due Completion Flow Lateness Tardiness Date Required Date Day (From Time (in Days) Nov 10) B Nov. 4 1 Nov. 11 1 1 0 D Nov. 3 5 Nov. 13 6 6 3 3 A Nov. 1 8 Nov. 16 14 14 8 8 C Nov. 2 20 Nov. 21 34 34 23 23 E Nov. 6 3 Dec. 2 37 37 15 15 F Nov. 5 4 Dec. 10 41 41 11 11 Sum 133 60 60 a) Average Flow = Sum(Flows)/# Jobs = 133 / 6 = 22.17 b) Average # Jobs = Sum(Flows)/Makespan = 133 / 41 = 3.24 c) Average Tardiness = Sum(Tardiness)/# Jobs = 60 / 6 = 10 Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Medium Time on Task: 8.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
126. Six jobs are to be processed through a two-stage operation. The first operation involves drill pressing, and the second involves lathing. Process times are as follows Job Operation 1 Operation 2 A 15 12 B 11 24 C 25 22 D 18 19 E 10 15 F 8 9 Determine a sequence that will minimize the total completion time for these jobs. Answer: F-E-B-D-C-A Solution: Use Johnsonn‘s algorithm; Shortest times for remaining jobs to schedule from either end of the sequence are F(8) on 1st machine, E(10) on 1st machine, B(11) on 1st machine, A(12) on 2nd machine, D(18) on 1st machine, and C(22) on 2nd machine Section Ref: Developing a Schedule of Operations Subsection: Sequencing Jobs Through Two Work Centers Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 2: Develop a schedule of operations. AACSB: Analytic
127. Steve‘s Steak House currently operates 7 days per week. The staffing needs for each day are shown in the following table. Each of the employees must have two consecutive days off in a week. (Since Monday is used as the first day of the pay week, an employee cannot be off on Sunday and Monday.) Develop a schedule to satisfy staffing needs as well as minimize excess capacity by using the technique developed by Tibrewala, Philippe, and Brown. Days of Week Monday Tuesday Wednesday Thursday Friday Saturday Sunday Staff Need 3 2 4 2 5 4 5 Answer: 6 workers minimum, one possible (but not unique schedule) is as follows: Employee Monday Tuesday Wednesday Thursday Friday Saturday Sunday 1 off off × × × × × 2 × × off off × × × 3 off off × × × × × 4 × × off off × × × 5 × × × × off off × 6 off off × × × × × Solution: Two Days Mon-Tue Tue-Wed Wed-Thu Thu-Fri Fri-Sat Sat-Sun Staff Need 5 6 6 7 9 9 Two lowest consecutive totals are Mon-Tue, so first employee has these days off; reduce needs for other days by 1 and recompute, adding employees. Employee Monday Tuesday Wednesday Thursday Friday Saturday Sunday 1 off off × × × × × 2 × × off off × × × 3 off off × × × × × 4 × × off off × × × 5 × × × × off off × 6 off off × × × × × Totals by 3 3 4 4 5 5 6 Day Section Ref: Scheduling Issues for Service Organizations Subsection: Developing a Workforce Schedule Level: Medium Time on Task: minutes Bloom‘s: Application Learning Objective 4: Describe scheduling issues for service organizations. AACSB: Analytic
Short Answer
128. Load and progress charts are examples of _____________________. Answer: Gantt charts Solution: Gantt charts are named after Henry Gantt, who developed these charts in the early 1900s. A Gantt chart is a visual representation of a schedule over time. Two kinds of Gantt charts are the load chart and the progress chart. Section Ref: Basic Scheduling Concepts Subsection: Scheduling Low-Volume Operations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
129. Operational schedules that consider work center capacity use ________________. Answer: finite loading Solution: Finite loading is an operational schedule with start and finish times for each activity. It does not allow you to load more work than can be done with the available capacity. The finite loading schedule shows how a company plans to use available capacity at each work center. Section Ref: Basic Scheduling Concepts Subsection: Shop Loading Methods Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Explain basic scheduling concepts. AACSB: Knowledge
130. The formula (due date - remaining processing time)/(number of remaining operations measures the ___________________. Answer: slack per remaining operation Solution: We calculate the S/RO by finding the amount of slack each job has and then dividing that slack by the remaining number of operations (including the current operation). We calculate slack by subtracting the total work remaining (current operation plus all other undone operations times) from the amount of time left until the due date. Section Ref: Developing a Schedule of Operations Subsection: Using Different Priority Rules Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
131. The time a job spends in the shop is called its __________________. Answer: flow time Solution: Job flow time measures response time—the time a job spends in the shop, from the time it is ready to be worked on until it is finished. It includes waiting time, setup time, processing time, and possible delays. We calculate job flow time as Job flow time = time of completion − time job was first available for processing Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
132. What is the formula for makespan? Answer: (last job completion time) - (first job starting time) Solution: Makespan measures efficiency by telling us how long it takes to finish a batch of jobs. To calculate makespan, we subtract the starting time of the first job from the completion time of the last job in the group. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
133. The greater the number of jobs in the system, the longer the queues and subsequently the longer the ____________. Answer: job flow times Solution: The average number of jobs in the system measures the work-in-process inventory and also affects response time. The greater the number of jobs in the system, the longer the queues and subsequently the longer the job flow times. Section Ref: Developing a Schedule of Operations Subsection: Scheduling Performance Measures Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
134. If all jobs are available at the same time, their flow time is the same as their _____________. Answer: completion time Solution: All jobs with a common availability time means the Completion Time – Ready Time calculation will use a common Ready Time, so Flow Time=Completion Time. Section Ref: Developing a Schedule of Operations Subsection: Using Different Priority Rules Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
135. A scheduling technique for jobs that follow the same path through two operations is ___________. Answer: Johnson's Rule Solution: Johnson‘s rule is a scheduling technique for developing a sequence when jobs are processed through two successive operations. The operations can be at machine centers, departments, or different geographical locations. The job flow must be unidirectional: the first activity for every job is the same, and you must finish it before you can begin the second activity (wash the clothes before you dry the clothes). Johnson‘s rule is an optimizing technique and always minimizes makespan. Section Ref: Developing a Schedule of Operations Subsection: Sequencing Jobs Through Two Work Centers Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Develop a schedule of operations. AACSB: Knowledge
136. Eli Goldratt's bottleneck scheduling system is called _____________. Answer: optimized production technology (OPTsx) Solution: Techniques for scheduling bottleneck systems emerged in the late 1970s with the introduction of optimized production technology (OPT) by Eli Goldratt. OPT classifies resources as either bottlenecks or nonbottlenecks, and makes bottlenecks the basis for scheduling and capacity planning. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
137. Eli Goldratt's approach to continuous improvement is called ____________. Answer: theory of constraints Solution: The theory of constraints (TOC) is an extension of OPT. According to the TOC, a system‘s output is determined by three kinds of constraints: internal resource constraint, market constraint, and policy constraint. An internal resource constraint is the classic bottleneck discussed in the previous section. A market constraint results when market demand is less than production capacity. Since companies do not want excess inventory buildup, the market determines the rate of production. Policy constraint means that a specific policy dictates the rate of production (for example, a policy of no overtime). TOC tries to improve system performance by focusing on constraints. Improvement is measured financially and operationally. Section Ref: Optimized Production Technology Subsection: Theory of Constraints Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
138. Under OPT, lead times are _____________ rather than ________________. Answer: scheduled, predetermined Solution: One OPT principle is that schedules should be established by considering all constraints simultaneously. Lead times are the result of the schedule and are not predetermined. Section Ref: Optimized Production Technology Subsection: Scheduling Bottlenecks Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Describe the optimized production technology. AACSB: Knowledge
139. Employees who perform a variety of services and are assigned where they are needed each day are said to ________________. Answer: float Solution: When customer demand for services can change daily, organizations use floating employees to their advantage. Floating employees perform a number of services and are assigned where they are needed each day. Section Ref: Scheduling Issues for Service Organizations Subsection: Scheduling Employees Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Describe scheduling issues for service organizations. AACSB: Knowledge
140. Service organizations use different techniques such as _____________, ___________, and ____________ for effective use of service capacity. Answer: appointments, reservations, posted schedules Solution: Techniques for scheduling services demanded range from setting appointments, requiring reservations, using a public schedule, and delaying or back ordering the service. Let‘s look at each of these individually. Section Ref: Scheduling Issues for Service Organizations Subsection: Scheduling Techniques for Service Organizations Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Describe scheduling issues for service organizations. AACSB: Knowledge
Testbank Chapter 16: Project Management LO Section
Subsection
The Project Life Cycle
N/A
Project Management Concepts
N/A Step 1: Describe the Project Step 2: Diagram the Network Step 3: Estimate the Project's Completion Time
Question # 1, 2, 3, 72, 73, 78, 79, 80, 105, 106, 107, 129, 130, 131 4, 5, 6, 7, 8, 9, 10, 11, 13, 14, 15, 17, 70, 81, 82, 83, 106, 132, 133, 141 96, 12, 16, 18, 19, 20, 21, 22, 23, 84, 85, 86, 88, 89, 90, 134,
Step 3 (a): Deterministic Time Estimates Step 3 (b): Probabilistic Time Estimates Step 4: Monitor the Project's Progression
24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 87, 91, 92, 93, 117, 118, 119, 135, 136, 39, 40, 41, 42, 43, 44, 45, 74, 94, 95, 120, 121, 122, 128 46, 97, 137,
Estimating the Probablity of Completion Dates
N/A
47, 48, 49, 50, 52, 53, 54, 75, 98, 99, 108, 109, 123, 124
Reducing Project Completion Time
N/A
55, 56, 57, 110,
Crashing Projects The Critical Chain Approach
N/A Adding Safety Time Wasting Safety Time
51, 58, 59, 60, 61, 76, 100, 111, 112, 113, 125, 126, 127, 138 62, 63, 64, 101, 114 65, 115, 66, 67, 68, 69, 71, 77, 102, 103, 116, 139, 140
Project Management within OM: How It All Fits Together Project Management OM Across the Organization
104,
TOTAL QUESTIONS
141
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Multiple Choice
1. What is a unique, one-time event that is intended to achieve an objective in a given time period? a) a project b) a job c) a task d) an activity e) an event Answer: a Solution: A project is a unique, one-time set of activities that is intended to achieve an objective in a given time period. The project is of some length (weeks, months, or even years) and uses resources (human, capital, materials, and equipment). Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
2. Which of the following is not characteristic of a project? a) has a specific objective b) has multiple activities c) typically performed by external consultants d) activities have defined precedence relationships e) to be completed in a specified time period Answer: c Solution: A project is a unique, one-time set of activities that is intended to achieve an objective in a given time period. The project is of some length (weeks, months, or even years) and uses resources (human, capital, materials, and equipment). Projects consist of several tasks and take place in a given time period. Every project has a life cycle. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
3. Which of the following is not characteristic of a project? a) has a life cycle b) uses no resources c) involves a unique, one-time event d) consists of several tasks e) typically some activities may be done simultaneously Answer: b Solution: A project is a unique, one-time set of activities that is intended to achieve an objective in a given time period. The project is of some length (weeks, months, or even years) and uses resources (human, capital, materials, and equipment). Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
4. Which of the following would probably NOT benefit from the use of critical path scheduling? a) constructing a new bridge over the Mississippi River b) moving the company‘s credit card center to a new city c) building a new natural gas pipeline d) receiving orders for the company‘s products by phone e) developing a new computer system for financial planning Answer: d Solution: Receiving orders by phone is process work, i.e., a routine business transaction and does not merit the detailed planning and execution that a project does. Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
5. Which phase in the project life cycle involves identifying the need for the project? a) conception b) feasibility analysis or study c) planning d) execution e) termination Answer: a Solution: Concept: Identify the need for the project. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
6. Which phase in the project life cycle involves evaluating expected costs, benefits, and risks? a) conception b) feasibility analysis or study c) planning d) execution e) termination Answer: b Solution: Feasibility analysis or study: Evaluate costs, benefits, and risks. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
7. Which phase in the project life cycle involves analyzing the work to be done and developing time estimates for completing each of the activities? a) conception b) feasibility analysis or study c) planning d) execution e) termination
Answer: c Solution: Planning: Decide who does what, how long it should take, and what you need to do it. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
8. Which phase in the project life cycle involves analyzing the project risk? a) conception b) feasibility analysis or study c) planning d) execution e) termination Answer: b Solution: Feasibility analysis or study: Evaluate costs, benefits, and risks. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
9. Which phase in the project life cycle involves carrying out the activities that make up the project? a) conception b) feasibility analysis or study c) planning d) execution e) termination Answer: d Solution: Execution: Do the project. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
10. Which phase in the project life cycle involves ending the project? a) conception b) feasibility analysis or study c) planning d) execution e) termination Answer: e Solution: Termination: End the project. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
11. Which of the following is NOT a benefit of network planning techniques? a) graphical display of the project, including the relationships and sequence of activities b) estimate of the expected project length c) resources are clearly identified d) identification of activities that are critical to the timely completion of the project e) identification of the amount of slack associated with individual activities Answer: c Solution: The benefits of network planning techniques include the following: graphical display of the project, including the relationships and sequence of activities; estimate of the expected project length; method for determining which activities are critical to the timely completion of the project and are therefore included in the critical path; method for determining the amount of slack associated with individual project activities. Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
12. Two type of network diagramming notation include: a) AON and AOA b) AON and Node c) AON and NOA d) node and AOA e) node and arrow Answer: a Solution: Diagram the project as a network, visually displaying the interrelationships between the activities. There are two kinds of network diagrams: activity-on-arrow (AOA) and activityon-node (AON). Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
13. Actions that consume resources and/or time are project ______________________. a) events b) activities c) nodes d) arrows e) tasks Answer: b Solution: Project activities are actions that consume resources and/or time. For example, making the drawings for a new product is an activity—it takes time and uses resources (human and equipment). Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
14. _____________________ structure the sequencing of activities. a) Evaluation of costs b) Crashings c) Work breakdowns d) Backschedules e) Precedence relationships Answer: e Solution: Precedence relationships structure the sequencing of activities; that is, you have to finish one before you can start the next. These are like course prerequisites: before you can enroll in an operations management class, you have to take a basic statistics course. Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
15. Project managers use network planning techniques to ________________________. a) evaluate costs b) assign resources to activities c) estimate how long it will take to assign activities d) calculate the expected completion time of the project e) invert activities Answer: d Solution: The benefits of network planning techniques include an estimate of the expected project length. Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
16. What does AON stand for? a) action-oriented-network b) activity-on-network c) activity-on-node d) activity-oriented-network e) activity-overrun-network Answer: c Solution: Activity–on-node is abbreviated AON. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
17. Which of the following is NOT a step involved in using network planning techniques? a) Define deliverables. b) Describe the project. c) Diagram the network. d) Monitor the project‘s progression. e) Estimate the project‘s completion time. Answer: a Solution: The steps outlined in the Project Management Concepts section are: describe the project, diagram the network, estimate the project‘s completion time, and monitor the project‘s progression. Section Ref: Project Management Concepts Subsection: multiple subsection headings Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
18. The critical path is the sequential path of interrelated activities which has the ____________________. a) most activities b) longest time c) most nodes d) most events e) most arrows Answer: b Solution: We can use the network diagram to determine the project‘s critical path. The critical path is the longest sequential path of interrelated activities in the network and shows the minimum completion time for the project. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
19. If a delay in an activity will delay completion of the whole project, the activity ____________________. a) is on the critical path b) has slack c) is costly d) is a dummy e) is represented by a node Answer: a Solution: We can use the network diagram to determine the project‘s critical path. The critical path is the longest sequential path of interrelated activities in the network and shows the minimum completion time for the project. Any delay in an activity that is on the critical path will delay the whole project. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
20. The longest connected route through the path network is the ______________________. a) planning matrix b) final deliverable c) crash path d) connector e) critical path Answer: e Solution: We can use the network diagram to determine the project‘s critical path. The critical path is the longest sequential path of interrelated activities in the network and shows the minimum completion time for the project. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
21. The sum of the activity times on the critical path determines _____________________. a) total slack available b) total labor time required for the project c) minimum time to complete the project d) the number of milestones e) amounting of crashing that needs to be done Answer: c Solution: We can use the network diagram to determine the project‘s critical path. The critical path is the longest sequential path of interrelated activities in the network and shows the minimum completion time for the project. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
22. When we are unsure about the duration of project activities, we use _____________________ time estimates. a) variable b) probabilistic c) estimated d) deterministic e) cumulative Answer: b Solution: Activity time estimates can be either probabilistic or deterministic. We use probabilistic time estimates when we are unsure about the duration of project activities—for example, because of technical problems, bad weather, delayed material delivery, and less-thanexpected labor productivity. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
23. We use _____________________ time estimates when we can make a reliable estimate. a) variable b) probabilistic c) estimated d) deterministic e) cumulative Answer: d Solution: Activity time estimates can be either probabilistic or deterministic. We use deterministic time estimates when we have done similar activities in the past and can make a reliable time estimate. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
24. The process of calculating ES and EF ______________________________. a) requires working from start node to end node through the network b) requires working from the end node back to the start node through the network c) requires working both start to end and end to start through the network d) cannot be accomplished until slack is first determined e) is sufficient for calculating the critical path Answer: a Solution: After moving from left to right through the network computing the ESs and EFs, the LSs and LFs are calculated working from right to left. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
25. The process of calculating LS and LF _____________________________. a) requires working from start node to end node through the network b) requires working from the end node back to the start node through the network c) requires working both start to end and end to start through the network d) cannot be accomplished until slack is first determined e) is sufficient for calculating the critical path Answer: b Solution: After moving from left to right through the network computing the ESs and EFs, the LSs and LFs are calculated working from right to left. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
26. The last project activity ES and LS times are __________. a) different b) calculated using termination rules c) the same d) required probabilistic calculations e) involving risk analysis Answer: c Solution: The last activity to be completed must lie on the critical path, so it‘s ES = LS. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
27. In making a forward pass through a network, three activities are immediate predecessors for activity T. What is the early start time for activity T? a) the smallest ES for the three activities that are immediate predecessors for activity T b) the largest ES for the three activities that are immediate predecessors for activity T c) the smallest EF for the three activities that are immediate predecessors for activity T d) the largest EF for the three activities that are immediate predecessors for activity T e) the activity time for activity T Answer: d Solution: T cannot begin until all three predecessors are complete, thus the ES for T must be the greatest of its predecessors‘ EF values. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
28. In making a forward pass through a network, activities L, M, and P are immediate predecessors for activity T, which has an activity time of 7. The early start times for activities L, M, and P are 22, 17, and 27, respectively. The early finish times for activities L, M, and P are 29, 27, and 33, respectively. What is the early start time for activity T? a) 17 b) 24 c) 27 d) 33 e) 40 Answer: d Solution: P‘s EF is 33 and thus is the ES for T. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
29. In making a forward pass through a network, activities L, M, and P are immediate predecessors for activity T, which has an activity time of 7. The early start times for activities L, M, and P are 22, 17, and 27, respectively. The early finish times for activities L, M, and P are 29, 27, and 33, respectively. What is the early finish time for activity T? a) 17 b) 24 c) 27 d) 33 e) 40 Answer: e Solution: P‘s EF is 33; T‘s duration is 7; 33 + 7 = 40. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
30. In making a backward pass through a network, activity L has an activity time of 4 and immediately precedes activities M, P, and T. The late start times for activities M, P, and T are 22, 17, and 27, respectively. The late finish times for activities M, P, and T are 29, 27, and 33, respectively. What is the late finish time for activity L? a) 13 b) 17 c) 22 d) 33 e) 37 Answer: b Solution: P‘s ES is 17 and thus is L‘s LF. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
31. In making a backward pass through a network, activity L has an activity time of 4 and immediately precedes activities M, P, and T. The late start times for activities M, P, and T are 22, 17, and 27, respectively. The late finish times for activities M, P, and T are 29, 27, and 33, respectively. What is the late start time for activity L? a) 13 b) 17 c) 22 d) 33 e) 37 Answer: a Solution: L can start on the 13 (+ 4 = 17). Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Medium Time on Task: 2.00minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
32. In making a backward pass through a network, activity T immediately precedes three activities. What is the late finish time for activity T? a) the smallest LS for the three activities that activity T immediately precedes b) the largest LS for the three activities that activity T immediately precedes c) the smallest LF for the three activities that activity T immediately precedes d) the largest LF for the three activities that activity T immediately precedes e) the activity time for activity T Answer: a Solution: T must end in time for the three successors to begin on time. The lowest value LS for all three successors is what drives the LF for T. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Easy Time on Task: 2.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
33. Activities on the critical path _______________________________________. a) are the ones with the longest activity times b) always are connected directly to dummy activities c) have LS equal to LF d) have ES equal to EF e) have no slack Answer: e Solution: Slack means that the start time for a specific activity can be delayed without delaying the project‘s planned completion date. Any activity with slack is not on the critical path. To determine whether slack exists for an activity, compare its ES value with the LS value. If these two values are equal, then that activity has no slack. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
34. In critical path scheduling, slack is computed as the difference between ______________________. a) latest and earliest times b) optimistic and pessimistic times c) mean and modal times d) finish and start times e) observed and predicted times Answer: a Solution: Any activity with slack is not on the critical path. To determine whether slack exists for an activity, compare its ES value with the LS value. If these two values are equal, then that activity has no slack. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
35. Given this information about an activity: ES = 10, EF = 15, LS = 26, and LF = 31. The amount of slack associated with the activity is ____________________. a) 32 b) 5 c) 21 d) 16 e) 11 Answer: d Solution: LS – ES or LF – EF; both equal 16. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
36. Given this information about an activity: ES = 10, EF = 18, LS = 28, and LF = 36. The amount of slack associated with the activity is ____________________. a) 38 b) 8 c) 18 d) 26 e) 10 Answer: c Solution: LS – ES or LF – EF; both equal 18. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
37. Given this information about an activity: ES = 10, EF = 20, LS = 29, and LF = 39. The amount of slack associated with the activity is ____________________. a) 29 b) 9 c) 19 d) 38 e) 10 Answer: c Solution: LS – ES or LF – EF; both equal 19. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
38. Which of the following can be calculated for an activity once ES, EF, LS, and LF have been calculated for the activity? a) expected project duration b) slack time c) potential for crashing d) variance in project duration e) the relative time position for when the activity will be completed Answer: b Solution: To determine whether slack exists for an activity, compare its ES value with the LS value. If these two values are equal, then that activity has no slack. Slack = LS – ES = LF – EF. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
39. With probabilistic time estimates for activities, (o) denotes the _______________________. a) median time b) original time c) optimistic time d) pessimistic time e) most likely time Answer: c Solution: The optimistic time, denoted as (o), is the shortest time in which the activity can be completed. Section Ref: Project Management Concepts Subsection: Step 3(b): Probabilistic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
40. With probabilistic time estimates for activities, (p) denotes the _______________________. a) median time b) probable time c) optimistic time d) pessimistic time e) most likely time Answer: d Solution: The pessimistic time, denoted as (p), is the longest time in which the activity can be completed. Section Ref: Project Management Concepts Subsection: Step 3(b): Probabilistic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
41. With probabilistic time estimates, when we calculate the expected time for an activity, we treat each activity time estimate as a random variable derived from a ______________ probability distribution. a) normal b) beta c) gamma d) Poisson e) uniform Answer: b Solution: When we calculate the expected time for an activity, we treat each activity time estimate as a random variable derived from a beta probability distribution. The beta distribution can have various shapes typically found in project management activities and also has definite end points. Section Ref: Project Management Concepts Subsection: Step 3(b): Probabilistic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
42. The formula to calculate an activity‘s probabilistic expected time is a) ET = ( M + 4*O + P)/6 b) ET = ( P + 4*O + M)/6 c) ET = ( P + 4*M + O)/6 d) ET = ( P + 3*M + O)2/6 e) ET = ( M + 3*O + P)/4 Answer: c Solution: We use three time estimates to compute an expected time for finishing each of the activities. The expected time for each activity is a weighted average, calculated using the formula optimistic time 4( most likely time) pessimistic time Expected time 6 Section Ref: Project Management Concepts Subsection: Step 3(b): Probabilistic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
43. An activity in a network diagram has an optimistic time estimate of five days, a most likely time estimate of seven days, and a pessimistic time estimate of 15 days. Its expected time is _________________. a) 5 days b) 7 days c) 8 days d) 10 days e) 15 days Answer: c Solution: (15 + (4x7) + 5)/6 = (15 + 28 + 5)/ 6 = 48/6 = 8 Section Ref: Project Management Concepts Subsection: Step 3(b): Probabilistic Time Estimates Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
44. Joe‘s radio tower fabrication company has developed the following milestone project schedule. What is the expected time duration for the project? ACTIVITY PRECEDENCE P M O A Complete Design None 4 3 2 B Develop BOM A 2 1 1 C Order Materials B 3 2 1 D Site Selection A 7 4 3 E Receive Materials C 6 3 2 F Obtain Permits A, D 4 2 1 Begin Fabrication Facility G Development E, F 6 5 3 a) 9 b) 10 c) 14 d) 14.33 e) 17.33 f) 21 Answer: d Solution: A 18/6 = 3 B 7/6 = 1.17 C 12/6 = 2 D 26/6 = 4.33 E 20/6 = 3.33 F 13/6 = 2.17 G 29/6 = 4.83 ADFG 14.30 ABCEG 14.33 Section Ref: Project Management Concepts Subsection: Step 3(b): Probabilistic Time Estimates Level: Medium Time on Task: 5.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
45. What can be used to display graphically the scheduled times for activities? a) an AOA network diagram b) an AON network diagram c) a project structure tree d) a Gantt chart e) an affinity diagram Answer: d Solution: A Gantt chart can show the project with each activity finished at the earliest possible start date. Section Ref: Project Management Concepts Subsection: Step 3(b): Probabilistic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
46. In monitoring the progress of a project, it is important to focus on _____________________________. a) activities on the critical path b) activities with long completion times c) activities with large slacks d) initiating events e) terminating events Answer: a Solution: Planning the project is necessary, but monitoring its progress is even more important in meeting the scheduled completion date. You focus initially on activities in the critical path since any delay in these activities delays the whole project. Section Ref: Project Management Concepts Subsection: Step 4: Monitor the Project‘s Progression Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
47. An activity in a network diagram has an optimistic time estimate of 7 days, a most likely time estimate of 11 days, and a pessimistic time estimate of 19 days. Its variance is _________. a) 2 b) 4 c) 6 d) 12 e) 24 Answer: b Solution: (19 – 7)^2/36 = 4 Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Reflective Thinking
48. There are four activities on the critical path, and they have standard deviations of 1, 2, 4, and 2. The standard deviation of the critical path is ______. a) 3 b) 5 c) 9 d) 16 e) 25 Answer: b Solution: The variance of the critical path is 1 + 4 + 16 + 4 = 25. The standard deviation of the critical path is then sqrt(25) = 5. Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Reflective Thinking
49. There are four activities on the critical path, and they have variances of 1, 2, 4, and 2. The variance of the critical path is _______. a) 3 b) 5 c) 9 d) 16 e) 25 Answer: c Solution: The variance of the critical path is 1 + 2 + 4 + 2 = 9. Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Reflective Thinking
50. The probability of completing a project in a specified amount of time is being calculated. For a particular path through the project, the ______________ shows the path‘s number of standard deviations that the specified time is past the expected path completion time. a) m value b) z value c) sigma value d) s value e) alpha value Answer: b Solution: For a particular path through the project, the z value shows the path‘s number of standard deviations that the specified time is past the expected path completion time. Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Analytic
51. Crashing a schedule is reducing a project completion time by ___________________. a) renegotiating with management b) realign tasks in parallel c) rearranging all tasks d) throwing additional resources to the critical path e) throwing less resources to the critical path Answer: d Solution: However, you may be able to speed up a project by making additional resources available to activities on the critical path. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
52. For projects whose activities have probabilistic time estimates, the probability of completing the project in a specified amount of time is determined by __________________________. a) the expected time for the critical path only b) the standard deviation for the critical path only c) the expected time and standard deviation for the critical path only d) the expected times for all paths e) the expected times and standard deviations of the critical path(s) and, if applicable, any other paths whose expected times are very close to that of the critical path Answer: e Solution: The critical path determines project duration; the expected completion time is the sum of the expected times of the critical activities; the critical path standard deviation is determined by the variances of the critical activities. Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Analytic
53. Joe‘s tower fabrication company client would like to know what the probability is of completing the project in 60 days rather than the 58 estimated days. Based on z values, what is the probability that Joe‘s tower fabrication will be able to meet the request if the variance is 1.25? a) –1.6 b) 1.6 c) –1.79 d) 1.79 e) 2 Answer: d Solution: 60 – 58/sqrt 1.25 = 2/1.12 = 1.79 Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Medium Time on Task: 3.00 minutes Bloom‘s: Application Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Reflective Thinking
54. In calculating the estimated probability of completion, a negative value is obtained. This means a) your calculation is wrong. b) the project will be delayed. c) the specified completion time is later than the expected completion time. d) the specified completion time is earlier than the expected completion time. e) the variance is incorrect. Answer: d Solution: For a particular path through the project, the z value shows the path‘s number of standard deviations that the specified time is past the expected path completion time. A negative z value shows that the specified time is earlier than the expected path completion time. Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Analytic
55. Which of the following is NOT a valid reason for reducing the time spent finishing a particular project? a) deadlines b) promised completion dates c) penalty clauses for late completion d) the project started too early e) the need to put resources on a new project Answer: d Solution: You may need to reduce the time you spend finishing a particular project because of deadlines, promised completion dates, penalty clauses for late completion, or the need to put resources on a new project. Section Ref: Reducing Project Completion Time Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
56. You may be able to speed up completion of a project by _______________________. a) reducing the standard deviation of activities b) recalculating the critical path c) making additional resources available d) adding slack to critical activities e) redoing some of the activities Answer: c Solution: When you plan a project, you make time estimates based on normal procedures and resources. However, you may be able to speed up a project by making additional resources available. Section Ref: Reducing Project Completion Time Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
57. Which of the following is NOT an example of a method that can be used to reduce the time to complete an activity? a) work on other activities b) faster shipments of materials c) use special equipment d) work overtime e) work around the clock Answer: a Solution: You can‘t reduce an activity if you don‘t work on it, this is just common sense. Section Ref: Reducing Project Completion Time Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
58. Shortening the total time for completing a project by incurring higher costs from shortening activities is called ________. a) normal cost b) backward pass c) crashing d) leveling e) project control Answer: c Solution: At the same time that you shorten a project‘s duration, you also need to minimize the additional expense. We call shortening a project crashing the project. To crash the project and minimize expense, you need additional information about your project activities. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
59. Shortening a project‘s duration is called ______________ the project. a) reducing b) crashing c) cutting short d) wrecking e) shaking Answer: b Solution: At the same time that you shorten a project‘s duration, you also need to minimize the additional expense. We call shortening a project crashing the project. To crash the project and minimize expense, you need additional information about your project activities. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
60. Which of the following information about activities is NOT needed in determining how to crash a project? a) the normal cost b) the crash cost c) the crash time estimate d) the normal time estimate e) how many dummy activities there are Answer: e Solution: The normal and crash time and costs are needed to determine how to crash a project. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
61. Which of the following is NOT included in the approach for crashing projects? a) Determine which activity requires the most time. b) Crash the least expensive activity first. c) Determine how much the project needs to be reduced. d) Calculate the total costs associated with crashing the project. e) Determine which activities on the critical path can be reduced. Answer: a Solution: Crashing involves the longest overall path, not necessarily the longest activity. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
62. An approach for getting projects done faster and MORE consistently at or before the project due date is called ____________________. a) business process reengineering b) PERT c) project inversion d) backcasting e) the critical chain approach Answer: e Solution: The critical chain approach is to get projects done faster and more consistently at or before the project due date. The focus is on the final due date rather than on individual activities or project milestones. Section Ref: The Critical Chain Approach Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
63. In the critical chain approach, the focus is on _______________________. a) deliverables b) making activity times certain c) project milestones d) the final due date of the project e) individual activities Answer: d Solution: The critical chain approach is to get projects done faster and more consistently at or before the project due date. The focus is on the final due date rather than on individual activities or project milestones. Section Ref: The Critical Chain Approach Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
64. Which of the following is NOT characteristic of the critical chain approach? a) It can help get projects done faster and more consistently at or before the project due date. b) The focus is on project milestones. c) The idea is that project activities are uncertain. d) Safety time is added to project time estimates. e) Safety time is placed at the end of the critical path. Answer: b Solution: The focus is on the final due date rather than on individual activities or project milestones. Section Ref: The Critical Chain Approach Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
65. Which of the following is NOT characteristic of adding safety time in the critical chain approach? a) Probability and statistics provide no insights into the adding of safety time. b) It can be added by basing time estimates on pessimistic experiences. c) It is added at the end of the critical path. d) It can be added by having more safety factors added at each level of management. e) It can be added to offset possible global reductions in project length made by top management Answer: a Solution: We have three ways to add safety time. First, we base time estimates on a pessimistic experience. Most time estimates include enough safety time to ensure that the project activity is completed on time 80–90 percent of the time. From statistics, we know that to cover 80–90 percent of the area under the curve, we have to add a substantial safety factor. Section Ref: The Critical Chain Approach Subsection: Adding Safety Time Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
66. One way of wasting safety time in the critical chain approach is multitasking, which involves ___________. a) waiting until the last minute to start a project b) interaction among project activities c) having the computer operating system do everything d) using a person or resource for more than one project e) reversing the order of the activities Answer: d Solution: We have three ways to waste safety time. One way is multitasking, which uses a person or resource for more than one project. Thus, we have to decide which project to work on: assigning resources to a low-priority project wastes valuable safety time. Section Ref: The Critical Chain Approach Subsection: Wasting Safety Time Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
67. A feeder buffer protects a ______ path from delays in a __________. a) shortest; buffer overflow b) noncritical; critical path c) critical; noncritical path d) critical; longest variance e) noncritical; longest variance Answer: c Solution: The feeder buffer protects the critical path from delays in noncritical paths. When the delay exceeds the feeder buffer, the project completion date is still protected by the project buffer. Section Ref: The Critical Chain Approach Subsection: Wasting Safety Time Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
68. An activity has eight weeks allotted to it, but we should be able to do it in five weeks. Waiting three weeks before getting started on it is an example of the _____________________. a) project buffer approach b) common sense approach c) professor approach d) academic approach e) student syndrome Answer: e Solution: We have three ways to waste safety time; one is the student syndrome. If we have six weeks allotted for an activity that should take only two weeks, we do not start it until two weeks before it is due. Then if anything unexpected happens, we miss the due date because we wasted the safety cushion. Section Ref: The Critical Chain Approach Subsection: Wasting Safety Time Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
69. Removing safety time from the individual activities and putting the total safety time at the end of the critical path creates a(n) ___________________. a) project safety net b) project buffer c) overconfident project manager d) activity shortage e) larger number of activities Answer: b Solution: The critical chain removes safety time from the individual activities and puts the total safety time at the end of the critical path, which creates a project buffer. Section Ref: The Critical Chain Approach Subsection: Wasting Safety Time Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
70. PERT is credited with reducing the duration of the Polaris missile project by _________________. a) one year b) two years c) three years d) four years e) five years Answer: b Solution: Program evaluation and review technique (PERT) and critical path method (CPM) date back to the 1950s. PERT was originally developed to plan and monitor the Polaris missile, an extremely large project using over 3000 contractors and involving thousands of activities. PERT is credited with reducing the project duration by two years. Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
71. Which of the following represents a way to waste safety time? a) dependencies between activities b) multitasking c) student syndrome d) waiting until the last minute to do a task e) All of these answer choices are correct. Answer: e Solution: We have three ways to waste safety time. One is the student syndrome. If we have six weeks allotted for an activity that should take only two weeks, we do not start it until two weeks before it is due. Then if anything unexpected happens, we miss the due date because we wasted the safety cushion. A second way is multitasking, which uses a person or resource for more than one project. Thus we have to decide which project to work on: assigning resources to a lowpriority project wastes valuable safety time. On the other hand, the amount of safety time may be the reason for using it on a lower-priority project. The third way to waste safety time comes from dependencies between activities in which delays accumulate and advances are wasted. Section Ref: The Critical Chain Approach Subsection: Wasting Safety Time Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
72. Who is responsible for the success and failure of a project? a) the CEO b) the program manager c) the project manager d) the project sponsor e) the functional manager Answer: c Solution: The project manager plans and coordinates the activities that make up the project and is responsible for the success or failure of the project. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
73. Which of the following phases of the project life cycle is absolutely essential to do a project? a) concept b) feasibility study c) planning d) execution Answer: d Solution: Execution is the phase where the work (project) gets done. The other phases could be skipped and the work could still get done. Section Ref: The Project Life Cycle Subsection: N/A Level: Medium Time on Task: 1.00 minutes Bloom‘s: Analysis Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
74. What is the earliest that activity E can start given the predecessor relationships and task times shown in the following table? Activity A B C D E
Predecessor None None None None A, B, C, D
Duration 5 6 7 8 5
a) 5 b) 8 c) 10 d) 13 Answer: b Solution: Since activities A, B, C, and D have no predecessors, they can all start at the same time and E can start after the 8 time unit duration of D. Section Ref: Project Management Concepts Subsection: Step 3 (b): Probabilistic Time Estimates Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Analytic
75. What is the likelihood that the project described in the following table will be completed within 44 days, if the critical path is A-C-D-F? Activity Optimistic A 5 B 6 C 8 D 4 E 9 F 10
Most Likely 8 8 13 5 12 15
Pessimistic 11 10 16 8 15 20
Mean 8 8 12.66 5.33 12 15
Variance 1 0.44 1.78 0.44 1 2.78
Predecessor None A A B, C D D
a) 0.74 b) 0.79 c) 0.84 d) 0.89 e) 0.99 Answer: d Solution: Critical path = ACDF = 8 + 12.66 + 5.33 + 15 = 41, Variance of CP = 1 + 1.78 + 0.44 x 44 41 + 2.78 = 6; s.d. = 2.45; 1.22 ; Z1.22 = 0.89 2.45 Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Medium Time on Task: 10 minutes Bloom‘s: Application Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Analytic
76. A publisher tasks an overworked production assistant with a revision of a popular operations management textbook. There are eight activities that make up this project with normal duration times (in days) and minimum durations as shown in the following table. The crash cost shown is the cost to make the maximum reduction; it is possible to reduce an activity only partially. Activity Normal time Minimum time A 10 8 B 12 10 C 14 10 D 8 6 E 6 5 F 12 9 G 10 8 H 14 10
Crash Cost 400 600 800 300 500 700 800 900
Predecessor A A A B D E F
What is the lowest crash cost that reduces this project to 45 days duration? a) $1833 b) $2200 c) $2300 d) $2400 Answer: a Solution: Normal completion time is 54 days with critical path ADFH; Reduce A 2 days for $400; reduce D 2 days for $300; reduce F 1 day for $233; reduce H 4 days for $900. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Medium Time on Task: 10 minutes Bloom‘s: Application Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
77. Bill has designed the project shown in Gantt format so that each activity has its own safety buffer of 25%. All times indicated in the Gantt chart are in days. Alex proposes they adopt the critical chain approach that removes individual activity safety buffers and adds a project buffer such that the new project completion time is identical to Bill‘s original project completion time. What is the size of the project buffer? A5
B8
C 10
D4
E8
F 12
G6
a) 10.75 days b) 12.00 days c) 13.25 days d) 14.50 days Answer: c Solution: Original duration is 53 days, and new activity durations are 3.75, 6, 7.5, 3, 6, 9, and 4.5, so project buffer is 53 – 39.75 = 13.25 days. Section Ref: The Critical Chain Approach Subsection: Wasting Safety Time Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
True/False
78. A project is a unique, one-time event that is intended to achieve an objective in a given time period. Answer: True Solution: A project is a unique, one-time set of activities that is intended to achieve an objective in a given time period. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
79. Planning consists of adjusting the project to meet the demand. Answer: False Solution: Planning: Decide who does what, how long it should take, and what you need to do it. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
80. The termination phase in the project life cycle involves identifying the need for the project. Answer: False Solution: Termination: End the project. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
81. CPM was originally developed to conceive and plan maintenance projects in chemical plants. Answer: True Solution: Program evaluation and review technique (PERT) and critical path method (CPM) date back to the 1950s. CPM was initially developed to plan and coordinate maintenance projects in chemical plants. Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
82. Precedence relationships structure the sequencing of activities. Answer: True Solution: Precedence relationships structure the sequencing of activities; that is, you have to finish one before you can start the next. Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
83. Project managers use network planning techniques to assign resources to activities. Answer: False Solution: Project managers use these network planning techniques to: identify project activities and precedent relationships, calculate the expected completion time of the project, and identify the activities critical to the timely completion of the project. Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
84. The two kinds of network diagrams are activity-on-arrow and activity-on-node. Answer: True Solution: There are two kinds of network diagrams: activity-on-arrow (AOA) and activity-onnode (AON). Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
85. In network diagramming, dashed lines represent precedence relationships. Answer: False Solution: Solid lines represent precedence relationship. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
86. In network diagramming, arrows represent precedence relationships. Answer: True Solution: The activity-on-node (AON) diagram represents project activities by nodes and precedence relationships by arrows. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
87. Working from the start of the network to the end of the network allows you to calculate the LS and LF times. Answer: False Solution: After moving from left to right through the network computing the ESs and EFs, the LSs and LFs are calculated working from right to left. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
88. If a delay in an activity will delay completion of the whole project, the activity has slack. Answer: False Solution: The critical path has no slack. Delaying any activity on the critical path will delay the entire project. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
89. The sum of the activity times on the critical path determines the total slack available. Answer: False Solution: The sum of the activity times on the critical path determines the duration of the project. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
90. When we are unsure about the duration of project activities, we use probabilistic time estimates. Answer: True Solution: We use probabilistic time estimates when we are unsure about the duration of project activities—for example, because of technical problems, bad weather, delayed material delivery, and less-than-expected labor productivity. With probabilistic time estimates, we make three time estimates for each project activity: the optimistic time, the most likely time, and the pessimistic time. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
91. In making a forward pass through a network, three activities are immediate predecessors for activity T. The early start time for activity T is the largest EF for the three activities that are immediate predecessors for activity T. Answer: True Solution: T cannot begin until all three predecessors are complete, thus the ES for T must be the greatest of its predecessors‘ EF values. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
92. In critical path scheduling, slack is computed as the difference between finish and start times. Answer: False Solution: To determine whether slack exists for an activity, compare its ES value with the LS value. If these two values are equal, then that activity has no slack. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
93. With probabilistic time estimates for activities, (m) denotes the mean time. Answer: False Solution: The most likely time, denoted as (m), is the most reasonable time estimate. Section Ref: Project Management Concepts Subsection: Step 3(b): Probabilistic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
94. An activity in a network diagram has an optimistic time estimate of 5 days, a most likely time estimate of 7 days, and a pessimistic time estimate of 15 days. Its expected time is 8 days. Answer: True Solution: Expected = (optimistic+4x(most likely)+pessimistic)/6 = (5 + 4 x 7 + 15) / 6 = 8 days Section Ref: Project Management Concepts Subsection: Step 3(b): Probabilistic Time Estimates Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
95. A Gantt chart can be use to display graphically the scheduled times for activities. Answer: True Solution: A Gantt chart can show the project schedule using the latest possible start times for each of the activities of a project Section Ref: Project Management Concepts Subsection: Step 3(b): Probabilistic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
96. A project schedule is a tool used to communicate what work needs to be performed, which resources are used to perform the work, and when the work needs to be performed. Answer: True Solution: The project schedule is the tool used to communicate what work needs to be performed, which resources are used to perform the work, and when the work needs to be performed. Section Ref: Project Management Concepts Subsection: Step 1: Describe the Project Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
97. The purpose of change control boards is to review and prioritize changes during the course of a project. Answer: True Solution: When changes are made, project managers manage these changes through the use of change control boards. The purpose of these boards is to review and prioritize changes during the course of the project. Section Ref: Project Management Concepts Subsection: Step 4: Monitor the Project‘s Progression Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
98. The probability of completing a project in a specified amount of time is being calculated. For a particular path through the project, the z value shows the path‘s number of standard deviations that the specified time is past the expected path completion time. Answer: True Solution: For a particular path through the project, the z value shows the path‘s number of standard deviations that the specified time is past the expected path completion time. A negative z value shows that the specified time is earlier than the expected path completion time. Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Analytic
99. For projects whose activities have probabilistic time estimates, the probability of completing the project in a specified amount of time is determined by the standard deviation for the critical path only. Answer: False Solution: For a particular path through the project, the z value shows the path‘s number of standard deviations that the specified time is past the expected path completion time. A negative z value shows that the specified time is earlier than the expected path completion time. The z value is calculated from both the standard deviation and the expected path completion time. Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Analytic
100. Crashing is shortening the total time for completing a project by incurring higher costs from shortening activities. Answer: True Solution: We call shortening a project crashing the project. To crash the project and minimize expense, you need additional information about your project activities. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
101. An approach for getting projects done faster and more consistently at or before the project due date is the critical chain approach. Answer: True Solution: The critical chain approach is to get projects done faster and more consistently at or before the project due date. Section Ref: The Critical Chain Approach Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
102. The TOC focuses on correct placement of buffers. Answer: False Solution: Since the theory of constraints (discussed in Chapter 15), which is the basis of the critical chain, focuses on keeping the bottleneck busy, we can put time buffers before bottlenecks in the critical path. Section Ref: The Critical Chain Approach Subsection: Wasting Safety Time Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
103. Removing safety time from the individual activities and putting the total safety time at the end of the critical path creates a project buffer. Answer: True Solution: How does the critical chain approach solve the problem of safety time? The critical chain removes safety time from the individual activities and puts the total safety time at the end of the critical path, which creates a project buffer. Section Ref: The Critical Chain Approach Subsection: Wasting Safety Time Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
104. Accounting uses project management information to provide a time line for the marketing program. Answer: False Solution: Accounting uses project management information to provide a time line for major expenditures associated with the project. Section Ref: Project Management within OM: How It All Fits Together Subsection: Project Management OM Across the Organization Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
Essay
105. List and briefly describe the phases in the project life cycle. Answer: Conception identifies the need for the project. Feasibility analysis or study evaluates expected costs, benefits, and risks of the project. Planning involves analyzing the work to be done and developing time estimates for completing each of the activities. Execution is carrying out the activities that make up the project. Termination involves ending the project. Solution: Concept: Identify the need for the project. Feasibility analysis or study: Evaluate costs, benefits, and risks. Planning: Decide who does what, how long it should take, and what you need to do it. Execution: Do the project. Termination: End the project. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
106. What are the benefits of network planning techniques? Answer: graphical display of the project, including the relationships and sequence of activities; estimate of the expected project length; identification of activities that are critical to the timely completion of the project; and identification of the amount of slack associated with individual activities Solution: The benefits of network planning techniques include the following: Graphical display of the project, including the relationships and sequence of activities; Estimate of the expected project length. Method for determining which activities are critical to the timely completion of the project and are therefore included in the critical path. ; Method for determining the amount of slack associated with individual project activities. Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
107. What are the steps involved in using network planning techniques? Answer: (1) Describe the project. (2) Diagram the network. (3) Estimate the project‘s completion time. (4) Monitor the project‘s progression. Solution: Suppose you are a project manager using network planning techniques. You would typically describe the project, diagram the network, estimate the project‘s completion time, and monitor the project‘s progression. Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
108. Discuss how to determine the critical path variance. Answer: First, you must calculate each critical path activity variance using the formula Activity Variance = ((p – o)/6)2. Then the sum of all critical path activities variances are summed for a total critical path variance. Solution: First, you must calculate each critical path activity variance using the formula Activity Variance = ((p – o)/6)2. Then the sum of all critical path activities‘ variances are summed for a total critical path variance. Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Analytic
109. Identify the variables required to predict the probability of meeting a project completion date. Answer: You must have the expected completion time of the path in question, the specified completion date, and the variance of the path in question. Solution: You must have the expected completion time of the path in question, the specified completion date, and the variance of the path in question. The square root of the variance is the specified time - expected completion time standard deviation. The formula is z = standard deviation Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Knowledge Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Analytic
110. What are valid reasons for reducing the time spent finishing a particular project? Answer: deadlines, promised completion dates, penalty clauses for late completion, and the need to put resources on a new project Solution: You may need to reduce the time you spend finishing a particular project because of deadlines, promised completion dates, penalty clauses for late completion, or the need to put resources on a new project. Section Ref: Reducing Project Completion Time Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
111. Define crashing as it relates to project management. Answer: Crashing is reducing the completion time of the project. Solution: We call shortening a project crashing the project. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
112. What information about activities is needed in determining how to crash a project? Answer: the normal cost and time estimate, and the crash cost and time estimate, activities on the critical path Solution: To crash the project and minimize expense, you need additional information about your project activities. You must know normal time and normal cost refer to how long the activity typically takes to complete and the cost for completing the activity in that amount of time. You must also know crash time and cost. Crash time is the least possible amount of time in which the activity can be done. The crash cost is the amount of money you must pay to complete the activity in the minimum amount of time. If you choose to only partially speed up an activity, the additional cost must be calculated. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
113. What is involved in the approach for crashing projects? Answer: Determine how much the project needs to be reduced. Determine which activities on the critical path can be reduced. Crash the least expensive activity first, the second least expensive second, and so on until you have shortened the project to the desired length. Calculate the total costs associated with crashing the project. Solution: Determine how much the project needs to be reduced. Determine which activities on the critical path can be reduced. Crash the least expensive activity first, the second least expensive second, and so on until you have shortened the project to the desired length. Calculate the total costs associated with crashing the project. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Easy Time on Task: 3.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
114. What are the characteristics of the critical chain approach? Answer: It can help get projects done faster and more consistently at or before the project due date. The focus is on the final due date for the project. The idea is that project activities are uncertain. Safety time is added to project time estimates and is placed at the end of the critical path. Solution: The critical chain approach is to get projects done faster and more consistently at or before the project due date. The focus is on the final due date rather than on individual activities or project milestones. The idea of the critical chain is that project activities are uncertain. Because of this uncertainty, we add safety time to project time estimates. In some cases, the safety time added exceeds 200 percent of the work time estimate. Section Ref: The Critical Chain Approach Subsection: N/A Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
115. Name and describe the three ways to add safety time in the critical chain approach. Answer: by basing time estimates on a pessimistic experience, by having more safety factors added at each level of management, and by inflating our time estimate to offset possible global reductions in project length made by top management Solution: We have three ways to add safety time. First, we base time estimates on a pessimistic experience. Most time estimates include enough safety time to ensure that the project activity is completed on time 80–90 percent of the time. From statistics, we know that to cover 80–90 percent of the area under the curve, we have to add a substantial safety factor. Second, the more management levels involved, the greater the safety factor. Since no manager wants to look bad, we add more safety factors (perhaps an extra 10–20 percent). When each management level adds this safety factor, the total safety is greatly increased. Third, top management may make global reductions in project length. If we know that the total project length is likely to be reduced by 20–25 percent, we inflate our time estimate by 20–25 percent. Section Ref: The Critical Chain Approach Subsection: Adding Safety Time Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
116. Name and describe the three ways to waste safety time in the critical chain approach. Answer: the student approach, which involves delaying the start of an activity because we think its time estimate is too long; multitasking, which involves using a person or resource for more than one project; and dependencies between activities in which delays accumulate and advances are wasted Solution: Just as we have three ways to add safety time, we have three ways to waste safety time. One is the student syndrome. If we have six weeks allotted for an activity that should take only two weeks, we do not start it until two weeks before it is due. Then if anything unexpected happens, we miss the due date because we wasted the safety cushion. A second way is multitasking, which uses a person or resource for more than one project. Thus we have to decide which project to work on: assigning resources to a low-priority project wastes valuable safety time. On the other hand, the amount of safety time may be the reason for using it on a lowerpriority project. Suppose we have two activities. Activity A is on schedule and has plenty of safety time, whereas activity B is behind schedule and has little safety time. Typically, we work on activity B first and waste activity A‘s safety time. The third way to waste safety time comes from dependencies between activities in which delays accumulate and advances are wasted. Section Ref: The Critical Chain Approach Subsection: Wasting Safety Time Level: Easy Time on Task: 2.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
Problems
117. Consider a project having the following seven activities: Immediate Activity Predecessors Time (weeks) A none 3 B A 5 C B 4 D B 5 E C 3 F D 8 G E, F 3 (a) What is the project duration? (b) What is the critical path? (c) What is the slack for each activity? Answer: (a) 24 weeks; (b) A-B-D-F-G; (c) A—0 weeks, B—0 weeks, C—6 weeks, D—0 weeks, E—6 weeks, F—0 weeks, and G—0 weeks Solution: a) paths are ABCEG and ABDFG; ABCEG=3+5+4+3+3=18; ABDFG=3+5+5+8+3=24 b) critical path is ABDFG=24 c) no slack on critical path ABDFG, the only two activities not on the CP are C and E, so their slack is 24 – 18 = 6 Section Ref: Project Management Concepts Subsection: Step 3 (a): Deterministic Time Estimates Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
118. Consider a project having the following seven activities: Immediate Activity Predecessors Time (weeks) A none 4 B none 6 C A 9 D A 7 E B 4 F D, E 5 G F 4 (a) What is the project duration? (b) What is the critical path? (c) What is the slack for each activity? Answer: (a) 20 weeks; (b) A-D-F-G; (c) A—0 weeks, B—1 week, C—7 weeks, D—0 weeks, E—1 week, F—0 weeks, and — 0 weeks Solution: a) AC=4+9=13, ADFG=4+7+5+4=20, BEFG=6+4+5+4=19, project duration is 20 b) critical path has longest duration = 20 = ADFG c) no slack on CP, so ADFG= 0 slack, BEFG has duration of 19, so activities B & E have 2019=1 slack, path AC=13, so activity C slack = 20-13=7 Section Ref: Project Management Concepts Subsection: Step 3 (a): Deterministic Time Estimates Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
119. Consider a project having the following ten activities: Immediate Activity Predecessors Time (weeks) A none 7 B none 3 C A 5 D A, B 6 E C, D 4 F D 4 G C 9 H E, G 8 I E, F 6 J H, I 5 (a) What is the project duration? (b) What is the critical path? (c) What is the slack for each activity? Answer: (a) 34 weeks; (b) A-C-G-H-J; (c) A—0 weeks, B—8 weeks, C—0 weeks, D—4 weeks, E—4 weeks, F—6 weeks, G—0 weeks, H—0 weeks, I—6 weeks, and J—0 weeks Solution: Activity Time ES EF LS LF Slack Slack A 7 0 7 0 7 7–7=0 0 B 3 0 3 8 11 11 – 3 = 8 8 C 5 7 12 7 12 12 – 12 = 0 0 D 6 7 13 11 17 17 – 13 = 4 4 E 4 13 17 17 21 21 – 17 = 4 4 F 4 13 17 19 23 23 – 17 = 6 6 G 9 12 21 12 21 21 – 21 = 0 0 H 8 21 29 21 29 29 – 29 = 0 0 I 6 17 23 23 29 29 – 23 = 6 6 J 5 29 34 29 34 34 – 34 = 0 0 a) Path ACEHJ = 7 + 5 + 4 + 8 + 5 = 34 b) Critical path is ACEHJ c) Slacks indicated in table Section Ref: Project Management Concepts Subsection: Step 3 (a): Deterministic Time Estimates Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
120. Consider a project having the following seven activities: Optimistic Most likely Pessimistic Immediate Time (o) Time (m) Time (p) Activity Predecessors (weeks) (weeks) (weeks) A none 4 7 9 B none 3 5 8 C A 2 4 6 D A, B 6 9 9 E C, D 5 5 5 F B 2 5 9 G E, F 3 3 6 (a) What is the expected time for each activity? (b) What is the expected project completion time? (c) What is the critical path? (d) What is the variance for each activity? (e) What are the expected time and variance of each path? (f) What is the probability that the project will be completed in less than 22 weeks? Answer: (a) A— 6.83 weeks, B—5.17 weeks, C—4 weeks, D—8.50 weeks, E—5 weeks, F— 5.17 weeks, and G—3.50 weeks; (b) 23.83 weeks; (c) A-D-E-G; (d) A—0.69, B—0.69, C— 0.44, D—0.25, E—0, F—1.36, and G—0.25; (e) A-C-E-G—expected time is 19.33 weeks, variance is 1.38; A-D-E-G—expected time is 23.83 weeks, variance is 1.19; B-D-E-G—expected time is 22.17 weeks, variance is 1.19; B-F-G—expected time is 13.83 weeks, variance is 2.30; (f) for the critical path A-D-E-G, the z value for a completion time of 22 weeks is –1.67, which corresponds to a probability of 4.75% Solution: Activity Expected Expected ES EF LS LF Slack Variance Variance Time A (4+4*7+9)/6= 6.83 0 6.83 0 6.83 0 (9-4)2/36 .69 B (3+4*5+8)/6= 5.17 0 5.17 1.67 6.83 1.67 (8-3)2/36 .69 C (2+4*4+6)/6= 4 6.83 10.83 11.33 15.33 4.5 (6-2)2/36 .44 D (6+4*9+9)/6= 8.5 6.83 15.33 6.83 15.33 0 (9-6)2/36 .25 E (5+4*5+5)/6= 5 15.33 20.33 15.33 20.33 0 (5-5)2/36 0 F (2+4*5+9)/6= 5.17 5.17 10.33 15.17 20.33 10 (9-2)2/36 1.36 G (3+4*3+6)/6= 3.5 20.33 23.83 20.33 23.83 0 (6-3)2/36 .25 a) see table above b) Completion time is 23.83 weeks due to path ADEG = 6.83+8.5+5+3.5 c) Critical path is ADEG, no slack on these activities d) see table for variance calculations e) ADEG has expected time of 23.83 and variance of 1.19 = 0.69+0.25+0+0.25 ACEG Expected time = 19.33, variance = 1.38 = .69 + .44 + 0 + .25 BDEG Expected time = 22.17, variance = 1.19 = .69 + .25 + 0 + .25 BFG Expected time = 13.84, variance = 2.3 = .69 + 1.36 + .25 f) Probability of finishing in 22 weeks = (22-23.83)/sqrt(1.19) = -1.677 look up value in normal table for probability of 4.68% Section Ref: Project Management Concepts
Subsection: Step 3 (b): Probabilistic Time Estimates Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
121. Consider a project having the following seven activities: Optimistic Most likely Immediate Time (o) Time (m) Activity Predecessors (weeks) (weeks) A none 2 3 B A 4 4 C A 3 5 D B 5 5 E B, C 3 6 F D 4 5 G E, F 3 3
Pessimistic Time (p) (weeks) 4 8 7 5 7 9 7
(a) What is the expected time for each activity? (b) What is the expected project completion time? (c) What is the critical path? (d) What is the variance for each activity? (e) What are the expected time and variance of each path? (f) What is the probability that the project will be completed in less than 24 weeks? Answer: (a) A—3 weeks, B—4.67 weeks, C—5 weeks, D—5 weeks, E—5.67 weeks, F—5.50 weeks, and G—3.67 weeks; (b) 21.83 weeks; (c) A-B-D-F-G; (d) A—0.11, B—0.44, C—0.44, D—0, E—0.44, F—0.69, and G—0.44; (e) A-B-D-F-G—expected time is 21.83 weeks, variance is 1.67; A-B-E-G—expected time is 17.00 weeks, variance is 1.44; A-C-E-G—expected time is 17.33 weeks, variance is 1.44; (f) for the critical path A-B-D-F-G, the z value for a completion time of 24 weeks is 1.67, which corresponds to a probability of 95.25%
Solution: Activity Exp. T Exp. T ES EF LS LF Slack Variance Var A (2+4x3+4)/6= 3 0 3 0 3 0 (4-2)2/36= .11 B (4+4x4+)8/6= 4.67 3 7.67 3 7.67 0 (8-4)2/36= .44 C (3+4x5+)7/6= 5 3 8 7.5 12.5 4.5 (7-3)2/36= .44 D (5+4x5+)5/6= 5 7.67 12.67 7.67 12.67 0 (5-5)2/36= 0 E (3+4x6+)7/6= 5.67 8 13.67 12.5 18.17 4.5 (7-3)2/36= .44 F (4+4x4+)9/6= 5.5 12.67 18.17 12.67 18.17 0 (9-4)2/36= .69 G (3+4x3+)7/6= 3.67 18.17 21.83 18.17 21.83 0 (7-3)2/36= .44 a) see table b) ABDFG = 21.83 c) ABDFG = 21.83 d) see table e) ABDFG = 21.83, variance = 1.68 ; ABEG = 17.01, variance = 1.43; ACEG = 17.34, variance = 1.43; f) (24-21.83)/sqrt(1.68) = 1.669, lookup Z= 1.669 in normal table, probability = 95.19% Section Ref: Project Management Concepts Subsection: Step 3 (b): Probabilistic Time Estimates Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
122. Consider a project having the following ten activities: Optimistic Most likely Pessimistic Immediate Time (o) Time (m) Time (p) Activity Predecessors (weeks) (weeks) (weeks) A none 1 5 9 B A 6 6 6 C A 3 5 9 D A 2 4 6 E B, C 4 4 4 F D 4 7 8 G E 2 2 8 H E, F 7 8 9 I F 4 6 9 J G, H, I 3 5 7 (a) What is the expected time for each activity? (b) What is the expected project completion time? (c) What is the critical path? (d) What is the variance for each activity? (e) What are the expected time and variance of each path? (f) What is the probability that the project will be completed in less than 30 weeks?
Answer: (a) A—5 weeks, B—6 weeks, C—5.33 weeks, D—4 weeks, E—4 weeks, F—6.67 weeks, G—3 weeks, H—8 weeks, I—6.17 weeks, and J—5 weeks; (b) 28.67 weeks; (c) A-D-FH-J; (d) A—1.78, B—0, C—1.00, D—0.44, E—0, F—0.44, G—1.00, H—0.11, I—0.69, and J— 0.44; (e) A-B-E-G-J—expected time is 23.00 weeks, variance is 3.22; A-B-E-H-J—expected time is 28.00 weeks, variance is 2.33; A-C-E-G-J—expected time is 22.33 weeks, variance is 4.22; A-C-E-H-J—expected time is 27.33 weeks, variance is 3.33; A-D-F-H-J—expected time is 28.67 weeks, variance is 3.21; A-D-F-I-J—expected time is 26.84 weeks, variance is 3.79; (f) for the critical path A-D-F-H-J, the z value for a completion time of less than 30 weeks is 0.75, which corresponds to a probability of 77.34% Solution: Activity Exp. T Exp T ES EF LS LF Slack Var Var A (1 + 4x5 + 9)/6= 5 0 5 0 5 0 (9-1)2/36 1.78 B (6 + 4x6 + 6)/6= 6 5 11 5.67 11.67 .67 (6-6)2/36 0 C (3 + 4x5 + 9)/6= 5.33 5 10.33 6.33 11.67 1.33 (9-3)2/36 1 D (2 + 4x4 + 6)/6= 4 5 9 5 9 0 (6-2)2/36 .44 E (4 + 4x4 + 4)/6= 4 11 15 11.67 15.67 .67 (4-4)2/36 0 F (4 + 4x7 + 8)/6= 6.67 9 15.67 9 15.67 0 (8-4)2/36 .44 G (2 + 4x2 + 8)/6= 3 15 18 20.67 23.67 5.67 (8-2)2/36 1 H (7 + 4x8 + 9)/6= 8 15.67 23.67 15.67 23.67 0 (9-7)2/36 .11 I (4 + 4x6 + 9)/6= 6.17 15.67 21.83 17.5 23.67 1.83 (9-4)2/36 .69 J (3 + 4x5+ 7)/6= 5 23.67 28.67 23.67 28.67 0 (7-3)2/36 .44 a) see table b) ADFHJ = 28.67 c) ADFHJ = 28.67 d) see table e) ADFHJ = 28.67, variance = 3.22; ABEGJ = 23, variance = 3.22; ABEHJ = 28, variance=2.33; ACEHJ = 27.33, variance = 3.33; ADFIJ = 26.84, variance = 3.79 f) (30 - 28.67)/sqrt(3.22) = 0.74118 look up Z=0.742, probability = 77.13% Section Ref: Project Management Concepts Subsection: Step 3 (b): Probabilistic Time Estimates Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
123. For the project data below. Activity Precedence P M O A None 17 15 13 B A 13 12 9 C A 20 17 15 D A 15 14 13 E C, D 24 21 18 F B, E 20 19 16 G B 17 15 10 H G, F 8 4 3 a) What is the expected time for each activity (ET)? b) What are the critical path activities? c) Define each activity variance. d) What is the critical path variance? Answer:
M O E.T. Variance 15 13 15 0.44 12 9 11.67 0.44 17 15 17.17 0.69 14 13 14 0.11 21 18 21 1 19 16 18.67 0.44 15 10 14.5 1.36 4 3 4.5 0.69
Critical Path Variance 0.44
Activity A B C D E F G H
Precedence None A A A C, D B, E B G, F
Solution: Activity P
M
O
Expected
Exp
Variance
Variance
A B C D E F G H
15 12 17 14 21 19 15 4
13 9 15 13 18 16 10 3
(17+60+13)/6= (13+48+9)/6= (20+68+15)/6= (15+56+13)/6= (24+84+18)/6= (20+76+16)/6= (17+60+10)/6= (8+16+3)/6=
15 11.67 17.17 14 21 18.67 14.5 4.5
(17-13)2/36= (13-9)2/36= (20-15)2/36= (15-13)2/36= (24-18)2/36= (20-16)2/36= (17-10)2/36= (8-3)2/36=
0.44 0.44 0.69 0.11 1 0.44 1.36 0.69
17 13 20 15 24 20 17 8
P 17 13 20 15 24 20 17 8
Critical Path Yes No Yes No Yes Yes No Yes Total
0.69 1.00 0.44 0.69 3.28
Path ACEFH is critical 76.33 units of time: 15 + 17.17 + 21 + 18.67 + 4.5 = 76.33. CP variance is 0.44 + 0.69 + 1 + 0.44 + 0.69 = 3.28. Section Ref: Estimating the Probability of Completion Dates
Subsection: N/A Level: Medium Time on Task: 12.00 minutes Bloom‘s: Application Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Reflective Thinking
124. For the project in question #123 what is the z value that the project will be complete on the 79th day? Answer: Z = (DT – EFPath)√σ2path = (79 – 76.33)/√3.28 = 1.47 Solution: Z = (DT – EFPath)√σ2path = (79 – 76.33)/√3.28 = 1.47 Section Ref: Estimating the Probability of Completion Dates Subsection: N/A Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 3: Estimate the probability of a project being completed by a specific due date. AACSB: Reflective Thinking
125. Consider a project having the following seven activities: Normal Normal Crash Crash Maximum Immediate Time Cost Time Cost Weeks Activity Predecessors (weeks) ($) (weeks) ($) Reduced A none 4 3,000 3 5,000 1 B A 9 5,000 7 8,000 2 C A 4 7,000 4 7,000 0 D B, C 6 6,000 4 8,000 2 E C 8 4,000 6 8,000 2 F D 3 4,000 2 9,000 1 G E, F 4 2,000 2 7,000 2 (a) What is the expected project completion time? (b) What is the critical path? (c) What is the MOST economical way and how much will it cost to reduce the completion time of the project by three weeks? By five weeks?
Answer: (a) 26 weeks; (b) A-B-D-F-G; (c) three weeks—reduce D by 2 weeks at a cost of $2000 and reduce B by one week at a cost of $1500—total cost is $3500; five weeks—for the fourth week reduce B a second week at a cost of $1500 and reduce A by one week at a cost of $2000—total cost is $3500 + $3500 = $7000
Solution: ABDFG = 4 + 9 + 6 + 3 + 4 = 26; c) to reduce by three weeks, reduce D by 2 weeks for $2000 and reduce B by 1 week for $1500, for a total cost of $3500; c) to reduce by 5 weeks, make the aforementioned reductions and then reduce B another week for $1500 and reduce A by 1 week for $2000, for a total cost of $7000. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Medium Time on Task: 10.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
126. Consider a project having the following seven activities: Normal Normal Crash Crash Maximum Immediate Time Cost Time Cost Weeks Activity Predecessors (weeks) ($) (weeks) ($) Reduced A none 4 3,000 3 6,000 1 B none 3 5,000 2 7,000 1 C A 9 2,000 7 4,000 2 D A, B 2 3,000 2 3,000 0 E B 9 4,000 6 7,000 3 F C, D 8 4,000 6 9,000 2 G E, F 5 2,000 3 5,000 2 (a) What is the expected project completion time? (b) What is the critical path? (c) What is the MOST economical way and how much will it cost to reduce the completion time of the project by three weeks? By five weeks? Answer: (a) 26 weeks; (b) A-C-F-G; (c) three weeks—reduce C by 2 weeks at a cost of $2000 and reduce G by one week at a cost of $1500—total cost is $3500; five weeks—for the fourth week reduce G a second week at a cost of $1500 and reduce F by one week at a cost of $2500—total cost is $3500 + $4000 = $7500.
Solution: a, b) Path ACFG = 4 + 9 + 8 + 5 = 26 c) Reduce by 3 weeks: reduce C from 9 to 7 for $2000, reduce G from 5 to 4 for $1500 for a total cost of $3500. Reduce by 5 weeks: Reduce by 3 weeks as before, reduce G from 4 to 3 for $1500, reduce F from 8 to 7 for $2500 for a total cost of $7500.
Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Medium Time on Task: 12.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
127. Consider a project having the following ten activities: Normal Normal Crash Crash Maximum Immediate Time Cost Time Cost Weeks Activity Predecessors (weeks) ($) (weeks) ($) Reduced A none 7 3,000 6 6,000 1 B A 8 5,000 6 9,000 2 C A 2 2,000 1 3,000 1 D A 4 3,000 4 3,000 0 E B, C 9 4,000 7 6,000 2 F C, D 6 4,000 4 9,000 2 G E 2 3,000 2 3,000 0 H E, F 9 4,000 7 7,000 2 I G 1 4,000 1 4,000 0 J H, I 8 2,000 6 7,000 2 (a) What is the expected project completion time? (b) What is the critical path? (c) What is the MOST economical way and how much will it cost to reduce the completion time of the project by three weeks? by five weeks? Answer: (a) 41 weeks; (b) A-B-E-H-J; (c) three weeks—reduce E by 2 weeks at a cost of $2000 and reduce H by one week at a cost of $1500—total cost is $3500; five weeks—for the fourth week reduce H a second week at a cost of $1500 and reduce B by one week at a cost of $2000—total cost is $3500 + $3500 = $7000
Solution: a, b) ABEHJ = 41 = 7 + 8 + 9 + 9 + 8 c) Reduce by 3 weeks: Reduce E by 2 weeks for $2000 and reduce H by 1 week for $1500 for a total cost of $3500. Reduce by 5 weeks: Make the same 3 week reduction, then reduce H a second week for $1500 and reduce B by 1 week for $2000 for a total cost of $7000. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Medium Time on Task: 12.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking
128. Consider a project activity that has an optimistic time of 3 weeks, a most likely time of 10 weeks, and a pessimistic time of 25 weeks. What is the expected time for that activity?
Answer: 11.33 weeks
o 4m p 3 4 10 25 11.33 6 6 Section Ref: Project Management Concepts Subsection: Step 3(b): Probabilistic Time Estimates Level: Medium Time on Task: 2.00 minutes Bloom‘s: Application Learning Objective 2: Describe project management concepts. AACSB: Reflective Thinking Solution: Expected
Short Answer
129. Every project has a ____________________. Answer: life cycle Solution: Projects vary in terms of objectives, but each project has a common life cycle or sequence of activities. The life cycle begins with an initial concept, followed by a feasibility study, the planning of the project, the execution of the plan, and finally the termination of the project. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
130. Projects vary in terms of objectives but each has a _______________ of activities. Answer: sequence Solution: Projects vary in terms of objectives, but each project has a common life cycle or sequence of activities. The life cycle begins with an initial concept, followed by a feasibility study, the planning of the project, the execution of the plan, and finally the termination of the project. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic 131. In politics, a _______________ is a candidate‘s ____________ of the resources needed to run a successful political campaign. Answer: feasibility study; assessment Solution: In politics, a feasibility study is a candidate‘s assessment of the resources needed to run a successful political campaign and the benefits of elected office. Section Ref: The Project Life Cycle Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 1: Describe a project‘s life cycle. AACSB: Analytic
132. CPM was initially developed to plan and _______________ maintenance projects in chemical plants. Answer: coordinate Solution: CPM was initially developed to plan and coordinate maintenance projects in chemical plants. Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
133. Project managers can evaluate whether the __________ of completing the project on schedule is acceptable. Answer: probability Solution: The project manager can evaluate whether the probability risk of completing the project on schedule is acceptable or whether additional resources are needed to ensure timely completion. Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
134. Critical path determines the _______________ completion time for the project. Answer: minimum Solution: We can use the network diagram to determine the project‘s critical path. The critical path is the longest sequential path of interrelated activities in the network and shows the minimum completion time for the project. Any delay in an activity that is on the critical path will delay the whole project. Section Ref: Project Management Concepts Subsection: Step 2: Diagram the Network Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
135. A deterministic time estimate is a _______________ time estimate for each project ___________. Answer: single; activity Solution: With the deterministic time estimate, we make a single time estimate for each project activity. Section Ref: Project Management Concepts Subsection: Step 3(a): Deterministic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
136. The MOST likely time completion date is the _______________ of the beta distribution. Answer: mode Solution: The most likely time completion date is the mode of the beta distribution. Section Ref: Project Management Concepts Subsection: Step 3(a): Probabilistic Time Estimates Level: Easy Time on Task: 1.00 minutes Bloom‘s: Knowledge Learning Objective 2: Describe project management concepts. AACSB: Analytic
137. Planning a project is critical but _______________ a project is even MORE important. Answer: monitoring Solution: Planning the project is necessary, but monitoring its progress is even more important in meeting the scheduled completion date. Section Ref: Project Management Concepts Subsection: Step 4: Monitor the Project‘s Progression Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic
138. When crashing a project, you first consider _______________ activities on the _______. Answer: reducing; critical path Solution: Crashing is reducing project duration; since the critical path determines project duration, you should focus on reducing those activities. Section Ref: Reducing Project Completion Time Subsection: Crashing Projects Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 4: Demonstrate how to reduce a project‘s completion time. AACSB: Analytic
139. In the TOC, if delays exceed the feeding buffer, the project completion date is still protected by the ____________. Answer: project buffer Solution: The feeder buffer protects the critical path from delays in noncritical paths. When the delay exceeds the feeder buffer, the project completion date is still protected by the project buffer. Section Ref: The Critical Chain Approach Subsection: Wasting Safety Time Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
140. The project management approach indicates the timing and the quantity of resources needed. For manufacturing, this input is needed to develop a valid __________. Answer: MPS Solution: Operations uses project management information to monitor the progress of activities on and off the critical path and to manage resource requirements in terms of the quantity and time needed for operations. The master production schedule is a prime example. Section Ref: The Supply Chain Link Subsection: Wasting Safety Time Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 5: Describe the critical chain approach. AACSB: Analytic
141. PERT stands for ___________________. Answer: project evaluation and review technique Solution: Program evaluation and review technique is represented by the acronym PERT Section Ref: Project Management Concepts Subsection: N/A Level: Easy Time on Task: 1.00 minutes Bloom‘s: Comprehension Learning Objective 2: Describe project management concepts. AACSB: Analytic