Test Bank For Operations Management 3rd Edition By Gerard Cachon, Christian Terwiesch Chapter 1-20An by StudyGuide

Test Bank For Operations Management 3rd Edition By Gerard Cachon, Christian Terwiesch Chapter 1-20Answers are at the End of Each Chapter Chapter 1

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 1) Supply is the set of products or services a business offers to its customers. ⊚ true ⊚ false 2) Consumption utility is composed of price and convenience. ⊚ true ⊚ false 3) "Firm A Pareto dominates firm B" means that firm A’s product or service is inferior to that of

firm B on all dimensions of the customer utility function. ⊚ true ⊚ false 4) A firm must make trade-offs because no single company can excel at everything. ⊚ true ⊚ false 5) Reducing inefficiencies will increase a firm’s profitability. ⊚ true ⊚ false 6) Every work requires operations. ⊚ true ⊚ false 7) "Who are the customers?" is a key question in operations management. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 8) The set of products or services a business offers to its customers is called _________. A) demand B) bundle C) supply D) value 9) The set of products or services customers want is called _________. A) demand B) bundle C) supply D) value 10) "Match supply with demand" means _________. A) telling customers what they need while reducing prices B) offering customers what they want while also making a profit C) explaining to customers what they should want while lowering costs D) investing in marketing and automation 11) Which of the following is NOT a goal of operations management? A) Understanding the drivers of customer utility B) Matching supply with demand C) Making a profit while providing customers what they need D) Providing great products at low prices to customers 12) Which of the following is NOT a challenge of matching supply with demand? A) Delivering better products at low prices B) Attempting to predict demand C) Providing customers with what they want at a low cost D) Reducing demand to match supply 13) A customer’s desire for a product or service is measured by its _________. A) popularity B) costs C) utility D) advertisement

14) Economic theory suggests that a customer chooses a product or service to obtain the highest

_________. A) demand B) supply C) utility D) satisfaction 15) Utility is composed of the following components EXCEPT _________. A) customer loyalty B) price C) inconvenience D) consumption utility 16) The features of a product or service that most, if not all, customers prefer are called

_________. A) consensus attributes B) consumption attributes C) fit attributes D) performance attributes 17) The many flavors of ice-cream offered by ice-cream parlors are reflective of the _________

of today’s customers. A) bargaining power B) homogeneous preferences C) heterogeneous preferences D) knowledge base 18) Economists refer to the inconvenience of obtaining a product or receiving a service as

_________. A) transaction costs B) fit C) timing D) unavailability 19) A restaurant promising a meal in two minutes or less is attempting to cater to which part of

the customer utility function? A) Timing B) Preference C) Ambience D) Fit

20) Price utility includes all of the following EXCEPT _________. A) cost of owning the product B) shipping cost C) financing costs D) transaction costs 21) _________is the study of how customers derive utility from products or services. A) Marketing B) Operations C) Economics D) Management 22) Which dimension of the customer utility function is emphasized with a restaurant’s slogan,

"Eat Fresh"? A) Timing B) Location C) Performance D) Fit 23) A firm that offers tailor-made suits to its customers is appealing to the _________ dimension

of the customer utility function. A) timing B) location C) performance D) fit 24) Jerry is very frugal and always purchases the least expensive items whenever he goes to the

store. Which dimension of the customer utility function seems to be most important to Jerry? A) Performance B) Timing C) Price D) Location 25) A pizza delivery service attempts to appeal to the_________component or subcomponent of

the customer utility function. A) price B) timing C) location D) performance

26) Which of the following statements about a firm’s capabilities is FALSE? A) A firm has capabilities to do well on some dimensions of its customers’ utility

function. B) A firm has capabilities to do well on all dimensions of its customers’ utility function. C) A firm’s capabilities can be defined as the dimensions of the customer’s utility function it is able to satisfy. D) How well a firm can satisfy its customers’ utility function is dependent on its capabilities. 27) You are considering four hotels that differ from each other with respect to their price and

customer reviews: Hotel H1 H2 H3 H4

Price $ 100 $ 250 $ 200 $ 150

Reviews (1 = worst . . . 5 = best) 3 5 4 2

Which of the following is a valid conclusion? A) H3 is Pareto dominated by H2 B) H2 is Pareto dominated by H3 C) H1 is Pareto dominated by H4 D) H4 is Pareto dominated by H1 28) You are considering four hotels that differ from each other with respect to their price and

customer reviews: Hotel H1 H2 H3 H4

Price $ 100 $ 250 $ 200 $ 150

Reviews (1 = worst . . . 5 = best) 3 5 4 2

Which of these hotels is NOT on the efficient frontier? A) H1 B) H3 C) H2 D) H4

29) You are considering four hotels that differ from each other with respect to their price and

customer reviews: Hotel H1 H2 H3 H4

Price $ 100 $ 250 $ 200 $ 150

Reviews (1 = worst . . . 5 = best) 3 5 4 2

Which of these hotels is inefficient? A) H1 B) H2 C) H3 D) H4 30) You are considering four new vehicles that differ from each other with respect to their price

and fuel economy: Vehicle V1 V2 V3 V4

Price $ 22,000 $ 27,000 $ 29,000 $ 24,000

Fuel Economy (miles per gallon) 24 26 30 27

Which of the following is a valid conclusion? A) V2 is Pareto dominated by V1 B) V4 is Pareto dominated by V2 C) V2 is Pareto dominated by V4 D) V3 is Pareto dominated by V1 31) You are considering four new vehicles that differ from each other with respect to their price

and fuel economy: Vehicle V1 V2 V3 V4

Price $ 22,000 $ 27,000 $ 29,000 $ 24,000

Fuel Economy (miles per gallon) 24 26 30 27

Which of these vehicles is NOT on the efficient frontier? A) V1 B) V2 C) V3 D) V4

32) You are considering four new vehicles that differ from each other with respect to their price

and fuel economy: Vehicle V1 V2 V3 V4

Price $ 22,000 $ 27,000 $ 29,000 $ 24,000

Fuel Economy (miles per gallon) 24 26 30 27

Which of these vehicles is inefficient? A) V1 B) V2 C) V3 D) V4 33) Beyond just executing the current way of doing things, operations management is about

_________. A) eliminating inefficiencies to move the firm below the efficient frontier B) making strategic trade-offs to do well on all dimensions of the customers’ utility function C) managing inputs and resources to move the firm below the efficient frontier D) innovating its operations to shift the efficient frontier in a positive direction 34) By cooking and dressing burgers before customers order them, a fast-food restaurant is

sacrificing the dimension of _________ and improving the dimension of _________in the customers’ utility function. A) timing, fit B) fit, timing C) timing, price D) price, timing 35) A firm that targets a market segment of budget-conscious customers is likely to sacrifice

some _________ to get a better _________. A) consumption utility, price B) performance, fit C) timing, location D) location, utility

36) Three restaurants are compared along the dimensions of responsiveness and cost

performance, as shown below:

Which of the following conclusions can be drawn about Restaurant C? A) It is on the efficient frontier. B) It Pareto dominates A. C) It is inefficient. D) It is efficient.

37) Three restaurants are compared along the dimensions of responsiveness and cost

performance, as shown below:

Which of the following conclusions can be drawn? A) A is Pareto dominated by B. B) A is on the efficient frontier. C) C Pareto dominates A and B. D) C is on the efficient frontier. 38) A firm invents an app that allows customers to make purchases with their smartphone. The

firm hopes its new mobile payment app will _________ the efficient frontier through _________. A) shift, innovation B) stay on, innovation C) stay on, imitation D) shift, imitation 39) The difference between revenue and costs is called _________. A) profit B) input C) supply D) demand

40) A firm invests in building a manufacturing plant. This investment is an example of

_________. A) costs for outputs B) variable costs C) costs for resources D) marketing costs 41) A firm can increase its profitability by _________. A) increasing costs and reducing price B) moving below the efficient frontier C) reducing efficiencies D) reducing inefficiencies 42) Which of the following is NOT a system inhibitor? A) Inflexibility B) Poor brand recognition C) Variability D) Waste 43) Leftover bread that is not sold at a bakery is an example of _________. A) defect B) flexibility C) variability D) waste 44) A long waiting line at the teller station in a bank at various times during the day is an

example of _________ and a symptom of _________. A) defect, waste B) inflexibility, profit C) variability, inflexibility D) waste, variability 45) A sold-out concert that turns away music fans because it is unable to increase the number of

seats is an example of _________. A) defect B) inflexibility C) variability D) waste

46) Which of the following is NOT a source of supply variability? A) Customers with different requests B) Power outage C) Time to serve a customer D) Wrong order entered 47) To which system inhibitor does the following customer complaint relate: "I wish they could

add more cashiers in the busy hours"? A) Defect B) Inflexibility C) Variability D) Waste 48) More guests showing up than expected at a party is an example of _________. A) demand variability B) supply variability C) demand inflexibility D) supply inflexibility 49) A waitress who does not show up for work today will result in _________. A) demand variability B) supply variability C) demand inflexibility D) supply inflexibility 50) Which of the following statements about system inhibitors is TRUE? A) Reducing waste will to eliminate system inhibitors. B) Increasing profit will overcome system inhibitors. C) Eliminating system inhibitors is a one-time activity. D) System inhibitors result in inefficiencies. 51) Sustainability relates to the _________. A) environmental impact of a company’s operations B) labor practices used by a company C) ability of a company to stay in business D) ability of a company to remain competitive

52) What is the goal of sustainable operations? A) to remain competitive B) to stay in business C) to avoid engaging into questionable labor practices D) to maintain an ecological balance by not depleting finite natural resources 53) Engaging in questionable labor practices such as using child labor or illegal labor is an

example of a (an) _________ issue. A) strategic B) environmental C) ethical D) trade-off 54) Operations management is about _________. A) working harder B) avoiding work C) improving work D) dealing with customer feedback 55) Which of the following statements about operations management is TRUE? A) All work requires operations. B) Operations is only about manufacturing plants. C) Operations management is in every job description. D) Operations management is not relevant for lawyers. 56) Operations comes from the Latin word "opus," which means _________. A) continuous change B) helping people C) improvement D) work 57) Operations management improves the way work is done by all of the following means

EXCEPT _________. A) overcoming efficiencies B) eliminating waste C) decreasing variability D) increasing flexibility

58) A doctor can apply operations management tools to _________. A) find a cure for cancer B) discover a new drug C) improve his/her work tasks as a doctor D) improve his/her language skills 59) Which of the following is a job of an operations manager? A) Managing inventory levels B) Setting up an accounting system C) Filing lawsuits against competitors D) Developing a new company logo 60) Which of the following is NOT a job of an operations manager? A) Acquiring inputs B) Managing resources C) Overcoming inefficiencies D) Developing a new company logo 61) Which of the following is NOT a job of an operations manager? A) Acquiring inputs B) Managing resources C) Overcoming inefficiencies D) Filing lawsuits against competitors 62) As an operations manager, you improve work by doing all of the following EXCEPT

_________. A) eliminating waste B) increasing flexibility C) doing the work of others D) reducing variability 63) As an operations manager, you improve work by doing all of the following EXCEPT

_________. A) eliminating waste B) increasing flexibility C) reducing variability D) setting up a new accounting system

64) A mismatch of supply and demand can be caused by all of the following EXCEPT

_________. A) demand variability B) supply variability C) supply inflexibility D) demand inflexibility 65) Which of the following is NOT an operational problem that you will learn in this text? A) Process analysis B) Process improvement C) Process satisfaction D) Process quality 66) _________ addresses the question of how a firm should produce the products or services its

customers want. A) Process analysis B) Product development C) Process satisfaction D) Process quality 67) _________ is(are) a response to the three system inhibitors and helps to answer the question

of how a firm can improve the productivity of its processes. A) Demand anticipation B) Inventory management C) Process variability D) Lean operations 68) _________ helps a firm to answer the question of how much of a product should be made or

how many customers should be served. A) Product development B) Inventory management C) Process variability D) Lean operations 69) Which key operational question corresponds to the "inconvenience" component of the

customer utility function? A) Who are the customers and what are their heterogeneous needs? B) How efficiently will products or services be delivered? C) What is the product or service to be delivered? D) Where will the demand be fulfilled?

70) Which key operational question corresponds to the “performance” subcomponent of

consumption utility? A) Who are the customers and what are their heterogeneous needs? B) How much do we charge? C) What is the product or service to be delivered? D) Where will the demand be fulfilled? 71) Which key operational question corresponds to the “fit” subcomponent of consumption

utility? A) B) C) D)

Who are the customers and what are their heterogeneous needs? How much do we charge? What is the product or service to be delivered? Where will the demand be fulfilled?

Answer Key Test name: chapter 1 1) TRUE

Supply is the set of products or services a business offers to its customers. 2) FALSE

Consumption utility is composed of performance and fit. 3) FALSE

"Firm A Pareto dominates firm B" means that firm A’s product or service is superior to that of firm B on all dimensions of the customer utility function. 4) TRUE

A firm must make trade-offs because no single company can excel at everything. 5) TRUE

Reducing inefficiencies by increasing what the customer is willing to pay and/or by decreasing costs will increase a firm’s profitability. 6) TRUE

All work requires operations to do the work and/or to improve the work. 7) TRUE

"Who are the customers and what are their heterogeneous needs?" is a key operations management question, corresponding to the consumption utility component of the consumer utility function. 8) C

Supply is the set of products or services offered by a business to its customers. 9) A

Demand is the set of products or services customers want. 10) B

"Offer customers what they want" is another way of saying "match supply with demand." 11) A

Understanding the drivers of customer utility is a goal of marketing, not operations management.

12) D

The challenge of matching supply with demand is to understand and satisfy demand, not to reduce demand. 13) C

According to economic theory, utility measures one’s desire for a product or service. 14) C

A customer chooses a product or service that gives him/her the highest utility. 15) A

Utility is composed of consumption utility, price, and inconvenience. 16) D

Performance attributes are features of a product or service that most, if not all, customers prefer. 17) C

The differences in customer preferences for the taste, color, or size of a product or services are called heterogeneous preferences. 18) A

Economists refer to the inconvenience of obtaining a product or receiving a service as transaction costs. 19) A

Promising customers quick delivery is designed to appeal to the timing dimension of customer utility. 20) D

Price utility includes the total cost of owning the product or receiving the service. Transaction costs refer to the inconvenience of obtaining the product or receiving the service. 21) A

Marketing is the study of how customers derive utility from products or services. 22) C

"Eat Fresh" is a performance attribute of Subway’s sandwiches indicating that most, if not all, customers prefer fresh over processed ingredients in their food. 23) D

Fit captures how well the product or service matches the unique characteristics of a given customer. 24) C

The price component of the customer utility function appears to be most important to Jerry. 25) C

A pizza delivery service appeals to the location subcomponent of inconvenience since it eliminates the need to travel to get the pizza. It does not appealing to the timing subcomponent since it may actually take longer to receive the pizza by delivery than by picking it up directly. 26) B

A firm has capabilities to do well on some but not all dimensions of its customers’ utility function. 27) D

Pareto dominated means that a firm’s product or service is inferior to one or multiple competitors on all dimensions of the customer utility function. 28) D

At least one competitor is better on both factors than H4. H4 is Pareto dominated and cannot be on the efficient frontier. 29) D

A firm that is not on the efficient frontier is inefficient. 30) C

Pareto dominated means that a firm’s product or service is inferior to one or multiple competitors on all dimensions of the customer utility function. 31) B

One vehicle is better on both factors than V2. V2 is Pareto dominated and cannot be on the efficient frontier. 32) B

A vehicle that is not on the efficient frontier is inefficient. 33) D

There are three ways in which operations management can match supply with demand: make trade-offs, reduce inefficiencies, and innovate.

34) B

Trade-offs among the dimensions of the customer’s utility function allow a firm to sacrifice on one dimension, such as fit, while excelling on another, such as time. 35) A

Budget-conscious customers are price sensitive and will be less willing to pay (price utility) for a perfectly fitted or optimally performed (consumption utility) product/service. 36) C

Restaurant C is not on the efficient frontier, suggesting that it is inefficient. 37) B

Both A and B are on the efficient frontier and Pareto dominate C. 38) A

Innovating is a way of shifting the efficient frontier. 39) A

Profit is the difference between revenue and costs. 40) C

Resources such as production facilities are things that a business uses to transform inputs into outputs. 41) D

Reducing inefficiencies will increase a firm’s profitability. 42) B

The three system inhibitors are waste, variability, and inflexibility. Brand recognition is the concern of marketing.

43) D

Leftover bread consumes inputs and resources but adds no value to customers if it is not sold. 44) C

Customers arriving at different times of the day result in demand variability and indicate inflexibility in staffing. 45) B

The inability to accommodate all music fans due to insufficient seating capacity is an example of inflexibility. 46) A

Customers having different requests results in demand variability. 47) B

Inflexibility is the inability of an operation to quickly and cheaply respond to new information. 48) A

Demand variability deals with uncertainty in knowing exactly how many guests will show up. 49) B

A waitress who does not show up for work is an example of supply variability. 50) D

Inefficiencies are the result of having system inhibitors in an operation. 51) A

Sustainability relates to the environmental impact of a company’s operations. 52) D

The goal of sustainable operations is to maintain an ecological balance by not depleting finite natural resources.

53) C

Engaging in questionable labor practices such as using child labor or illegal immigrant labor is an example of an ethical issue. 54) C

Operations management is about improving how work is being done. 55) A

All and every work require operations. 56) D

Operations comes from the Latin word "opus," which means "work." 57) A

Operations management helps people improve the way they work by overcoming inefficiencies that they face. 58) C

Operations management tools can help a doctor improve his/her work tasks. 59) A

Operations managers are in charge of acquiring inputs and managing the resources they need to better serve their customers. Managing inventory levels is one such activity. 60) D

Operations managers are in charge of overcoming inefficiencies, acquiring inputs and managing the resources they need to better serve customers. Developing a new company logo would be done by the marketing department. 61) D

Operations managers are in charge of overcoming inefficiencies, acquiring inputs, and managing the resources they need to better serve customers. Filing lawsuits against competitors would be done by attorneys. 62) C

Work can be improved by overcoming the three system inhibitors. As an operations manager, you manage and improve the work of others, not do the work itself. 63) D

Work can be improved by overcoming the three system inhibitors. Setting up a new accounting system would be done by the accounting and/or information technology department, not by an operations manager. 64) D

Inflexibility comes from the supply side only. 65) C

The term "process satisfaction" does not make sense. We should satisfy the customer, not the process. 66) A

Process analysis addresses the question of how a firm should produce the products or services its customers want. 67) D

Lean operations are a response to system inhibitors that can improve a firm’s process productivity.

68) B

Inventory management helps a firm to anticipate customer demand and to guide how much of a product to make. 69) D

The question "Where will the demand be fulfilled?" corresponds to the location subcomponent of the inconvenience component of the customer utility function. 70) C

The question "What is the product or service to be delivered?" defines the features or “performance” subcomponent of consumption utility. 71) A

The question “Who are the customers and what are their heterogeneous needs?” relates to the “fit” subcomponent of consumption utility.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 72) A flow unit is generally associated with the inputs of a process. ⊚ true ⊚ false 73) A process with a high-level scope must have different inputs and outputs than the process

viewed at a lower scope. ⊚ true ⊚ false 74) Process metrics measure the performance and capability of a process. ⊚ true ⊚ false 75) The entry rate of inputs and the exit rate of outputs in a process match at every moment. ⊚ true ⊚ false 76) Little’s Law can be used to identify the actual time that a particular flow unit spends in a

process. ⊚ true ⊚ false 77) C&A Bakery serves 200 customers in 10 hours. On average there are five customers in the

bakery. This means each customer spends on average 15 minutes in the bakery. ⊚ true ⊚ false MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 78) Which of the following statements about a process is TRUE? A) A process cannot be measured. B) A process can be measured. C) A process cannot be improved. D) A process can only be represented mathematically.

79) Which of the following is a definition of the term "process"? A) A set of activities that combines a collection of units. B) A set of activities that combines a collection of supplies. C) A set of activities that transforms a collection of inputs into outputs. D) A set of activities that transforms a collection of outputs into inputs. 80) A graphical representation of a process is called a _________. A) process flow diagram B) process flow chart C) process activity diagram D) process activity chart 81) A process scope is the set of _________. A) flow units moving through the process B) outputs produced by the process C) inputs required by the process D) activities included in the process 82) A CEO of a firm will be interested in a _________level of the _________to know how the

entire firm is doing. A) high, process scope B) high, flow unit C) low, process scope D) low, flow unit 83) From the perspective of a cashier in a supermarket, the appropriate level for the process

scope is _________. A) the customer checkout process B) the supermarket C) the grocery business D) the food industry 84) A flow unit is the basic unit that _________ a process. A) activates B) improves C) bypasses D) moves through

85) An example of a flow unit at a fast-food restaurant is the _________. A) cashier B) kitchen C) customer D) supplier 86) For the purpose of process analysis, what is an appropriate flow unit to analyze the main

operation of a department store? A) Number of hours the store is open each day B) Square footage of the store C) Weekly sales, in dollars D) Number of cash registers 87) For the purpose of process analysis, what is NOT an appropriate flow unit to analyze the

operation at a hair salon? A) Number of customers served per day B) Monthly sales figures C) The dollar value of haircare products sold per day D) Number of stylists working each day 88) Which of the following statements about a process flow diagram is FALSE? A) It cannot have multiple resources. B) It includes inputs, resources, and outputs. C) It has inputs flowing into a process. D) It has outputs flowing out of a process. 89) Which of the following statements about resources in a process flow diagram is TRUE? A) Resources are outputs of a process. B) Resources are represented as arrows pointing to a process. C) Resources are not relevant in a process. D) Outputs of some resources can be inputs to other resources. 90) Which of the following is an appropriate output of a refreshment stand at a cinema? A) Corn B) Popcorn C) Ticket sales D) Movies

91) Which of the following is an appropriate output at a cinema? A) Popcorn B) Movie screens C) Ticket sales D) Theater seats 92) Which of the following is an appropriate input at a bakery? A) Steel beam B) Baked goods C) Oven D) Flour 93) Which of the following is an appropriate output at a bakery? A) Steel beam B) Baked goods C) Oven D) Flour 94) Which of the following is an appropriate resource at a bakery? A) Steel beam B) Baked goods C) Oven D) Flour 95) Which of the following is appropriate flow unit for a bank? A) Tellers B) Teller stations C) Customers D) Cash 96) Which of the following is an appropriate resource at a cinema? A) Movie projector B) Popcorn C) Ticket sales D) Number of customers

97) Which of the following is NOT a rule used to define a flow unit? A) A flow unit should correspond to what is tracked and measured in a process. B) A flow unit should be measured consistently in the same unit as which it is defined. C) A flow unit should be used to measure all activities within a process. D) A flow unit should be used to measure the number of resources in a process. 98) Which of the following is an appropriate flow unit for analyzing the operations at a

supermarket? A) Customers B) Square feet in the store C) Checkout lines D) Employees 99) Which of the following is NOT an appropriate flow unit to analyze the operations at a

supermarket? A) Customers served B) Sales dollars C) Products sold D) Number of cash registers 100)

A flow unit is generally associated with the _________ of a process. A) inputs B) resources C) outputs D) activities

101)

A process metric is something that can be _________ to reveal the _________ and _________ of a process. A) measured, inputs, outputs B) measured, performance, capability C) speculated, inputs, outputs D) speculated, performance, capability

102)

A key process metric is/are _________. A) flow rate B) flow units C) inputs D) resources

103)

A key process metric is/are _________. A) raw materials B) inputs C) inventory D) outputs

104)

A key process metric is _________. A) activity time B) process time C) completion time D) flow time

105)

Which of the following is NOT a key process metric? A) Flow unit B) Flow time C) Flow rate D) Inventory

106)

Flow rate tells us _________. A) how much stuff is in the process B) how much stuff moves through the process per time unit C) how much time stuff spends in the process D) how much stuff is needed for the process

107)

Flow time tells us _________. A) the number of flow units within a process B) the rate at which a flow unit moves through a process C) the time a flow unit spends in a process D) the time at which a flow unit starts a process

108)

Inventory tells us _________. A) the number of flow units within a process B) the rate at which flow units move through a process C) the time a flow unit spends in a process D) the time at which a flow unit starts a process

109)

Which of the following pieces of information is needed to compute flow time at a dentist's office? A) Traveling time of patients B) Scheduling time of patients C) Arrival time of patients D) Arrival time of staff

110)

Arrivals and departures to C&A Optometrist are collected and reported below: Patient 1 2 3 4 5

Arrival 7:45 8:00 10:00 10:15 10:35

Departure 8:45 9:00 10:30 11:45 12:00

What is the average flow time of its patients in minutes? A) 90 B) 65 C) 63 D) 60 111)

Arrivals and departures to C&A Optometrist are collected and reported below: Patient 1 2 3 4 5

Arrival 7:45 8:00 10:00 10:15 10:35

Departure 8:45 9:00 10:30 11:45 12:00

Assume C&A Optometrist is open from 7:45 a.m. to noon. What is the flow rate of patients in C&A Optometrist per hour? A) 1.18 B) 0.85 C) 1 D) 5 112)

C&A Bakery serves 120 customers over the course of a 10-hour day. What is the flow rate of customers in this bakery per hour? A) 10 B) 1200 C) 12 D) 8.5

113)

Ten customers visit C&A Bakery from 8 a.m. to 10 a.m. The customers spend 9, 16, 21, 10, 8, 11, 9, 20, 27, and 29 minutes in the bakery. What is the average flow time (in minutes) of a customer at this bakery? A) 12 B) 160 C) 80 D) 16

114)

Ten customers visit C&A Bakery from 8 a.m. to 10 a.m. The customers spend 9, 16, 21, 10, 8, 11, 9, 20, 27, and 29 minutes in the bakery. What is the average flow rate of customers in this bakery per hour? A) 16 B) 10 C) 12 D) 5

115)

The flow rate of customers at a state fair is 100 per hour. The fair is open from 8 a.m. to 8 p.m. How many total customers are at the fair during this time period? A) 1000 B) 1200 C) 120 D) 100

116)

Flow rate is usually measured in the following units EXCEPT _________. A) customers per week B) pounds per month C) boxes per day D) dollars per customer

117)

Inventory is usually measured in the following units EXCEPT _________. A) hours B) customers C) pounds D) boxes

118)

Which of the following statements regarding the process flow rate is FALSE? A) Over the long run, the flow rate upon entry to the process is the same as the flow rate upon exit of the process. B) The flow rate upon entry must match the flow rate upon exit at every moment. C) The flow rate is always expressed in terms of flow units per unit of time. D) In practice, high flow rates are generally desirable.

119)

The arrival and departure times for five customers at cell phone repair shop are shown below: Customer 1 2 3 4 5

Arrival 9:06 9:30 10:10 10:45 11:18

Departure 9:48 10:25 11:18 11:28 12:00

What is the average flow time of its customers in minutes? A) 50 B) 65 C) 63.7 D) 46.8 120)

The arrival and departure times for five customers at cell phone repair shop are shown below: Customer 1 2 3 4 5

Arrival 9:06 9:30 10:10 10:45 11:18

Departure 9:48 10:25 11:18 11:28 12:00

Assume the repair shop is open from 9:00 a.m. to noon. What is the average flow rate in customers per hour? A) 0.60 B) 1.67 C) 3.33 D) 10

121)

Twelve customers visit a small bank between 9 a.m. and 10:30 a.m. The customers spend 8, 13 21, 16, 7, 11, 14, 19, 27, 22, 17 and 10 minutes in the bank. What is the average flow rate of customers in this bank per hour? A) 12 B) 9.67 C) 8 D) 15.42

122)

Twelve customers visit a small bank between 9 a.m. and 10:30 a.m. The customers spend 8, 13 21, 16, 7, 11, 14, 19, 27, 22, 17 and 10 minutes in the bank. What is the average flow time of customers in this bank per hour? A) 12 B) 1.5 C) 16.24 D) 15.42

123)

The average flow rate of customers at a post office is 42 per hour. The post office is open daily (except Sunday) from 8:30 a.m. to 5 p.m. How many total customers are expected to visit this post office each day it is open? A) 42 B) 336 C) 357 D) 378

124)

Arrivals and departures to C&A Optometrist are collected and reported below: Patient 1 2 3 4 5

Arrival 7:45 8:00 10:00 10:15 10:35

Departure 8:45 9:00 10:30 11:45 12:00

Assume C&A Optometrist is open from 7:45 a.m. to noon. How many patients on average are in C&A Optometrist? A) 0.85 B) 1.27 C) 1.08 D) 4.25

125)

Which of the following factors is relevant to Little’s Law? A) Customer arrival times B) Resource input time C) Customer sequencing D) Average flow time

126)

Both the average flow rate and average flow time of a process are increased by 50%. What will be the percentage change in the average number of units in the process? A) 225% B) 125% C) 50% D) 25%

127)

Each of these is a key metric in Little’s Law EXCEPT _________. A) flow rate B) flow unit C) flow time D) inventory

128)

Little’s Law relates inventory, flow rate, and flow time as _________. A) Inventory = Flow rate + Flow time B) Inventory = Flow rate − Flow time C) Inventory = Flow rate × Flow time D) Inventory = Flow rate ÷ Flow time

129)

Ten customers visit C&A Bakery from 8 a.m. to 10 a.m. The customers spend 10, 15, 20, 11, 8, 12, 25, 18, 29, and 32 minutes in the bakery. On average, how many customers are in the bakery? A) 18 B) 10 C) 1.5 D) 0.83

130)

On average, a patient spends 5 minutes waiting and 15 minutes being treated at C&A Clinic. The average number of patients waiting and being treated at the clinic is 50. What is the average flow rate of patients per minute on a typical day? A) 2.5 B) 20 C) 50 D) 0.5

131)

A drive-through at C&A Fast Food serves 360 customers over a 12-hour day. On average, a customer spends 4 minutes waiting in line, 2 minutes placing the order, and 4 minutes completing the order before leaving the drive-through. How many customers on average are "in" the drive-through (i.e., from the time they enter to the time they exit the drive-through)? A) 10 B) 300 C) 30 D) 5

132)

C&A Cruise owns 5 ships and wants to serve 2000 passengers each week. Each cruise ship can carry 1000 passengers on each voyage. Assume ships always travel fully loaded. What is the longest average travel time on a voyage that allows C&A Cruise to meet its goal of serving 2000 passengers per week? A) 4 weeks B) 2.5 weeks C) 1 week D) 5 weeks

133)

C&A Dairy uses 600 pounds of milk per day to make ice cream. On average, C&A Dairy uses 3 pounds of milk to make one gallon of ice cream in 5 hours. How many gallons of ice cream are being made on average at any one time if C&A Dairy operates for 10 hours a day? A) 25 B) 50 C) 100 D) 120

134)

C&A Dairy uses 600 pounds of milk per day to make ice cream. On average, C&A Dairy uses 3 pounds of milk to make one gallon of ice cream. The production process takes 2 hours of mixing and 2 hours of cooling. How many gallons of ice cream does the cooler hold on average at any one time (i.e., consider only the flow time for cooling) if C&A Dairy operates for 10 hours a day? A) 25 B) 40 C) 50 D) 120

135)

Twenty new members are elected to an agency every two years. The agency has 50 members on average overall. How long does a member hold his/her position at the agency? A) 50 years B) 20 years C) 10 years D) 5 years

136)

C&A Museum has 1,500,000 visitors per year. Each visitor spends an average of 2 hours in the museum. What is the average number of visitors in the museum on a given day if the museum is open 300 days a year from 9 a.m. to 5 p.m.? A) 1250 B) 2400 C) 7500 D) 8000

137)

A clinical trial accepts 2000 new patients each month. Half of the patients are taking a placebo for 3 months. How many patients are taking the placebo on average at any given time? A) 6000 B) 3000 C) 2000 D) 1000

138)

A popular roller coaster ride lasts 8 minutes. There are 24 people on average on the roller coaster during peak time. How many people are stepping onto the roller coaster per minute at peak time? A) 3 B) 6 C) 8 D) 24

139)

McKinley, a large consulting firm in the UK, has a consulting staff consisting of 300 consultants at the rank of "associate." On average, a consultant remains at the associate level for 2 years. After this time, 30% of the consultants are promoted to the rank of "engagement manager"; the other 70% have to leave the company. In order to maintain the consulting staff at an average level of 300 associates, how many new consultants does McKinley have to hire each year at the associate level? A) 100 associates per year B) 150 associates per year C) 200 associates per year D) 600 associates per year

140)

Twelve customers visit a small bank between 9 a.m. and 10:30 a.m. The customers spend 7, 12 18, 16, 7, 11, 14, 19, 27, 22, 17 and 10 minutes in the bank. What is the average number of customers in this bank? A) 1.67 B) 2 C) 2.56 D) 122

141)

A hotel shuttle bus transports passengers between the hotel and the airport. A one-way trip takes 15 minutes at which time all passengers deboard. There are 26 passengers on the bus during peak time. How many passengers are deboarding the bus per hour at peak time? A) 104 B) 152 C) 208 D) 390

142)

Bentco Department Store has 375 customers per day. Each customer spends an average of 45 minutes in the store. What is the average number of customers in the store if the store is open from 9:30 a.m. to 10 p.m.? A) 15.63 B) 18.75 C) 22.5 D) 30

143)

A manufacturing company plans to implement a process improvement that will increase the process flow rate by 25% and decrease the process flow time by 15%. What will be the percentage change in the average number of units in the process? A) 2.25% B) 4.75% C) 6.25% D) 10%

Answer Key Test name: chapter 2 1) FALSE

A flow unit is generally associated with the outputs of a process. 2) FALSE

A process scope at a high level can have the same inputs and outputs as one at a lower level. However, the resources (boxes in the flow diagram) can differ depending on the process scope. 3) TRUE

Process metrics measure the performance and capability of a process. 4) FALSE

The entry and exit rates do not have to match at every moment, but they do have to match “on average” (i.e., over a long period of time). 5) FALSE

Little’s Law can be used to identify the average time a flow unit spends in the process. 6) TRUE

Inventory = 5 customers. Flow rate = 200 customers ÷ 10 hours = 20 customers per hour. Flow time = Inventory ÷ Flow rate = 5 ÷ 20 = 0.25 hour, or 15 minutes. 7) B

The three key process metrics can be used to measure a process. 8) C

A process is a set of activities that transforms a collection of inputs into outputs. 9) A

A process flow diagram provides a graphical representation of a process. 10) D

A process scope is the set of activities included in the process. 11) A

A CEO wants a high-level picture of his/her company to keep track of how the entire company is doing.

12) A

A cashier is responsible for the customer checkout process in a supermarket. 13) D

A flow unit is the basic unit that moves through a process. 14) C

Customers move through a fast-food restaurant. The others are inputs and resources at the fastfood restaurant. 15) C

Weekly sales are measured in sales dollars, which is an appropriate flow unit. 16) D

Stylists are input resources at a hair salon. All others are logical choices to measure performance of its operations. 17) A

A process flow diagram can have multiple resources, with the outputs of some resources used as inputs to other resources. 18) D

A process flow diagram can have multiple resources with the output of some resources used as inputs to other resources. 19) B

A refreshment stand in a cinema transforms corn (inputs) into popcorn (outputs). 20) C

A cinema sells tickets to moviegoers. Thus, ticket sales are an appropriate output or flow unit. 21) D

A bakery takes in flour, milk, eggs, etc. (inputs) and produces baked goods (outputs) using ovens (resources). 22) B

A bakery takes in flour, milk, eggs, etc. (inputs) and produces baked goods (outputs) using ovens (resources). 23) C

An oven is a piece of equipment (resource) at a bakery. 24) C

Customers move through a bank and therefore are an appropriate flow unit. Cash is an input at a bank. 25) A

A movie projector is a piece of equipment (resource) at a cinema. 26) D

A flow unit should be used to measure all activities within a process in the same unit as which it is defined. 27) A

Customers flow through the process at a supermarket. 28) D

Cash registers are an input at a supermarket. 29) C

A flow unit is generally associated with the outputs of a process. 30) B

A process metric is something that can be measured to reveal the performance and capability of a process. 31) A

Flow rate is one of the three key process metrics. 32) C

Inventory is one of the three key process metrics. 33) D

Flow time is one of the three key process metrics. 34) A

The three key process metrics are inventory, flow rate, and flow time. 35) B

Flow rate tells us how much stuff moves through the process per unit of time.

36) C

Flow time tells us how much time stuff spends in the process. 37) A

Inventory tells us how much stuff is in the process. 38) C

Arrival and departure times are needed to compute the flow time for each patient. 39) B

Subtract each patient’s departure time from the arrival time to give the flow time for each patient. For example, patient 1 spends 60 minutes. The flow times for the five patients are 60, 60, 30, 90, and 85. The average flow time is found by dividing total flow time by five patients, 325 ÷ 5 = 65 minutes. 40) A

The optometrist is open from 7:45 a.m. to noon, or 4.25 hours. There are five patients during that time. Flow rate in patients per hour = 5 ÷ 4.25 = 1.18. 41) C

Flow rate = 120 customers ÷ 10 hours = 12 customers per hour. 42) D

Average flow time is (9 + 16 + 21 + 10 + 8 + 11 + 9 + 20 + 27 + 29) ÷ 10 = 16 minutes. 43) D

Flow rate = 10 customers ÷ 2 hours = 5 customers per hour. 44) B

Number of customers = 100 customers per hour × 12 hours = 1200. 45) D

Flow rate is measured in "flow units per unit of time." "Per customer" is not a unit of time. 46) A

Inventory is usually a physical measurement associated with the flow unit. "Hours" is a unit of time. 47) B

The flow rate upon entry to the process will not match the flow rate upon exit of the process at every moment. However, they will match over the long run since "what goes in must come out." 48) A

Subtract each customer’s departure time from the arrival time to give the flow time for each customer. For example, customer 1 spends 42 minutes. The flow times for the five customers are 42, 55, 68, 43, and 42. The average flow time is found by dividing total flow time by five customers, 250 ÷ 5 = 50 minutes. 49) B

The repair shop is open from 9:00 a.m. to noon, or 3 hours. There are five customers during that time. The average flow rate in customers per hour = 5 ÷ 3 = 1.67. 50) C

Flow rate = 12 customers ÷ 1.5 hours = 8 customers per hour. 51) D

Flow time = (8 + 13 + 21 + 16 + 7 + 11 + 14 + 19 + 27 + 22 + 17 + 10) ÷ 12 customers = 15.42 minutes. 52) C

Number of customers = 42 customers per hour × 8.5 hours = 357. 53) B

Flow rate is 5 ÷ 4.25 = 1.18 patients per hour. Flow time is (60 + 60 + 30 + 90 + 85) ÷ 5 = 65 minutes = 1.08 hours. Using I = RT, average number of patients is 1.08 × 1.18 = 1.27 patients. 54) D

Because Little’s Law is dealing with the average number of units in the process, the only other relevant factors are the average flow rate and average flow time. 55) B

Before the change, assume average flow rate = 2 and average flow time = 2 (or use any other numbers you prefer). Therefore, average inventory before the change = 2 × 2 = 4 units. After the 50% increase, average flow rate = 3 and average flow time = 3. Therefore, average inventory after the change = 3 × 3 = 9 units. The percent change in inventory is therefore (9 − 4) ÷ 4 × 100 = 125%. 56) B

Little’s Law relates inventory as the product of flow rate and flow time. 57) C

Little’s Law gives the relationship as Inventory = Flow rate × Flow time. 58) C

Average flow time is (10 + 15 + 20 + 11 + 8 + 12 + 25 + 18 + 29 + 32) ÷ 10 = 18 minutes. Average flow rate = 10 customers ÷ 120 minutes = 1 ÷ 12 customer per minute. Inventory = 1.5 customers. 59) A

Average flow rate = 50 patients ÷ (5 + 15) minutes = 2.5 patients per minute. 60) D

Flow rate = 360 customers ÷ (12 × 60) minutes = 0.5 customer per minute. Flow time = (4 + 2 + 4) minutes = 10 minutes. Inventory = 0.5 customer per minute × 10 minutes = 5 customers. 61) B

Inventory with all ships on a voyage = 5 × 1000 passengers = 5000 passengers. Desired flow rate = 2000 passengers per week. I = R × T, thus T = I ÷ R. Flow time = 5000 passengers ÷ 2000 passengers per week = 2.5 weeks. 62) C

Flow rate = 600 pounds of milk per day ÷ 3 pounds of milk per gallon of ice cream = 200 gallons of ice cream per day. Flow time = 5 hours ÷ 10 hours a day = 0.5 day. Inventory = 200 gallons per day × 0.5 day = 100 gallons. 63) B

Flow rate = 600 pounds of milk per day ÷ 3 pounds of milk per gallon of ice cream = 200 gallons of ice cream per day. Flow time = 2 hours ÷ 10 hours a day = 0.2 day. Inventory = 200 gallons per day × 0.2 day = 40 gallons. 64) D

Inventory = 50 members. Flow rate = 20 ÷ 2 = 10 new members per year. I = R × T, therefore T = I ÷ R. Flow time = 50 ÷ 10 = 5 years. 65) A

Flow rate = 1,500,000 visitors ÷ (300 × 8) hours = 625 visitors per hour. Flow time = 2 hours. Inventory = R × T = 625 × 2 = 1250 visitors.

66) B

Flow rate = 2000 ÷ 2 = 1000 patients per month. Flow time = 3 months. Inventory = R × T = 1000 × 3 = 3000. 67) A

Flow time = 8 minutes. Inventory = 24. I = R × T, therefore R = I ÷ T. Flow rate = 24 ÷ 8 = 3 people per minute. 68) B

Use I = R × T. I, or inventory, is 300. T, or flow time, is 2 years. Solving for R, or flow rate, McKinley should hire 300 ÷ 2 = 150 associates per year. 69) B

Flow time = (7 + 12 + 18 + 16 + 7 + 11 + 14 + 19 + 27 + 22 + 17 + 10) ÷ 12 customers = 15 minutes or 0.25 hours. Flow rate = 12 customers ÷ 1.5 hours = 8 customers per hour. Inventory = R × T = 8 × 0.25 = 2 customers. 70) A

Flow time = 15 minutes ÷ 60 = 0.25 hours. Inventory = 26. I = R × T, therefore R = I ÷ T. Flow rate = 26 ÷ 0.25 = 104 passengers per hour. 71) C

Flow rate = 375 customers ÷ 12.5 hours = 30 customers per hour. Flow time = 45 minutes = 0.75 hours. Inventory = R × T = 30 × 0.75 = 22.5 customers. 72) C

Before the change, assume average flow rate = 2 and average flow time = 2 (or use any other numbers you prefer). Therefore, average inventory before the change = 2 × 2 = 4 units. After the 25% increase in flow rate, the new average flow rate = 2.5. After the 15% decrease in flow time, the new average flow time = 1.7. Therefore, average inventory after the change = 2.5 × 1.7 = 4.25 units. The percent change in inventory is therefore (4.25 − 4) ÷ 4 × 100 = 6.25%.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 144) The primary purpose of a process analysis is to crowdsource new product ideas. ⊚ true ⊚ false

145)

The capacity of a resource is the average flow rate of that resource. ⊚ true ⊚ false

146)

Cycle time is the time between when an order is placed and when it is completed. ⊚ true ⊚ false

147)

A bottleneck is the resource with the lowest capacity in a multistep process. ⊚ true ⊚ false

148)

A resource with a utilization of less than 100% cannot be the bottleneck. ⊚ true ⊚ false

149)

It matters whether the process starts empty or not when computing the time it takes to produce a certain order quantity. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 150) Which of the following statements about process analysis is TRUE? A) Process analysis is the backbone of a company’s accounting system. B) Process analysis tracks an organization’s revenue and costs. C) Process analysis enables a business to create demand. D) Process analysis is a framework to understand an organization’s detailed operations. 151)

Resources are shown in a process flow diagram as _________. A) boxes B) arrows C) circles D) triangles

152)

Inventory is shown as _________ in a process flow diagram. A) boxes B) arrows C) circles D) triangles

153)

Which of the following is a resource in an outpatient medical clinic? A) Flu shot B) X-ray machine C) Ambulance D) Reputation

154)

You are picking up a prescription at a pharmacy which was dropped off a short time ago. Right now, you are waiting in line in front of the pickup window. Which process is upstream, relative to your current position in the process? A) Paying for the prescription B) Leaving the pharmacy with the prescription C) Inspecting the prescription D) Dropping off the prescription

155)

On a process flow diagram, _________ are used to show the journey of a flow unit from input to output. A) boxes B) arrows C) circles D) triangles

156)

Refer to the process flow diagram below. Station 1 is _________ from station 2.

A) B) C) D)

downstream upstream target bottleneck

157)

Refer to the process flow diagram below. Station 3 is _________ from station 2.

A) B) C) D) 158)

Refer to the process flow diagram below. Station 2 is the _________ of Station 1.

A) B) C) D) 159)

downstream upstream target bottleneck

customer supplier target bottleneck

A process analysis of a hospital’s emergency room can answer all of the following questions EXCEPT _________. A) What is the average waiting time of a patient in the emergency room? B) How many patients can be treated each day in the emergency room? C) How busy are the physicians in the outpatient clinic? D) How many seats are in the emergency room?

160)

Consider this checkout process at a post office: "Customers wait in a single line to be waited on by the next available postal clerk." Which process flow diagram is a correct depiction of this process?

161)

Consider this checkout process at a grocery store:"There are three checkout lines, each staffed by a separate cashier. Each customer waits in one of those three lines for checkout." Which process flow diagram is a correct depiction of this checkout process?

162)

Consider this checkout process at a store: "Customers wait in line to drop off their order in one station, then wait to pick up their order in another station." Which process flow diagram is a correct depiction of this checkout process?

D) 163)

The _________ of a resource is how long that particular resource takes to complete one flow unit. A) flow time B) flow rate C) processing time D) processing rate

164)

The capacity of a resource determines the _________ number of flow units that can flow through that resource per unit of time. A) maximum B) minimum C) average D) median

165)

The process capacity determines the _________ a process can provide per unit of time. A) minimum flow rate B) maximum flow rate C) maximum flow time D) minimum flow time

166)

One employee is in charge of the following activities at a bank’s drive-through: Activity Greet customer Take order Process order Print receipt

Activity Time per Customer 3 seconds 5 seconds 3 minutes 12 seconds

What is the processing time (in seconds) of the drive-through process at the bank? A) 5.75 B) 23 C) 43.75 D) 200 167)

One employee is in charge of the following activities at a bank’s drive-through: Activity Greet customer Take order Process order Print receipt

Activity Time per Customer 3 seconds 5 seconds 3 minutes 12 seconds

What is the capacity (in customers per hour) of the employee? A) 0.005 B) 0.3044 C) 18.00 D) 37.88

168)

One employee is in charge of the following activities at a bank’s drive-through: Activity Greet customer Take order Process order Print receipt

Activity Time per Customer 3 seconds 5 seconds 3 minutes 12 seconds

What is the bank’s process capacity (in customers per minute)? A) 0.005 B) 0.3044 C) 18.00 D) 33.75 169)

A bank has three tellers. It takes a teller 5 minutes to serve one customer. What is the capacity of the bank (in customers per hour)? A) 5 B) 15 C) 12 D) 36

170)

A bank has three tellers. It takes a teller 5 minutes to serve one customer. What is the capacity of the bank (in customers per day) over the course of an 8-hour workday? A) 40 B) 120 C) 144 D) 288

171)

A community health system’s nurse team consists of 12 nurses working in the local community. It takes a nurse 1.5 hours to complete one patient visit (including travel times and breaks). What is the capacity of the nurse team over the course of a 9-hour workday? A) 162 patients B) 12 patients C) 72 patients D) 100 patients

172)

In a one-step process with a single resource, which of the following statements is TRUE? A) The capacity of the resource equals its processing time. B) Thecapacity of the resource equals its processing time multiplied by 60. C) The capacity of the resource equals (1 ÷ processing time). D) The capacity of the resource is expressed in terms of time per flow unit.

173)

Customers arrive at a hot dog stand staffed by a single employee. The employee completes the following three activities for each customer. Activity Take order Package and dress hot dogs Process payment

Time per Customer 8 seconds 20 seconds 12 seconds

What is the capacity (in customers per hour) at the hot dog stand? A) 0.025 B) 1.50 C) 40.00 D) 90.00 174)

Customers drive away after failing to find a place to park at a supermarket. The current process is _________. A) capacity-constrained B) demand-constrained C) supply exceeds demand D) capacity unconstrained

175)

Capacity is constrained when _________ exceeds _________ and the flow rate is equal to _________. A) supply, demand, process capacity B) supply, demand, demand C) demand, supply, process capacity D) demand, supply, demand

176)

The process is _________constrained when _________ exceeds _________ and the flow rate is equal to the demand rate. A) demand, supply, demand B) capacity, supply, demand C) demand, demand, supply D) capacity, demand, supply

177)

Process utilization is the ratio between _________ and _________. A) flow time, flow rate B) flow rate, process capacity C) process capacity, flow time D) process time, process capacity

178)

You observe a long line at C&A Bakery with customers leaving every 4 minutes. What is the capacity (in customers per hour) of the bakery? A) 0.25 B) 4 C) 15 D) 12

179)

A help desk can answer 120 calls per hour. The demand rate is 150 calls per hour. What are the cycle time (in minutes per call) and utilization of the call center? A) 0.0083, 1 B) 0.00674, 0.8 C) 0.4, 0.8 D) 0.5, 1

180)

Which of the following statements about utilization of a resource is TRUE? A) It is at its maximum when the flow rate exceeds its capacity. B) It is at its maximum when the flow rate is equal to its capacity. C) It is at its minimum when the flow rate exceeds its capacity. D) It is at its minimum when the flow rate is equal to its capacity.

181)

One employee is in charge of the following activities at a refreshment stand: Activity Greet customer Take order Process order Print receipt

Activity Time per Customer 5 seconds 25 seconds 1.5 minutes 30 seconds

If the demand rate is 20 customers per hour, what are the flow rate (in customers per hour), utilization, and cycle time (in minutes per customer)? A) 24, 1, 0.04 B) 24, 1, 2.5 C) 20, 0.83, 0.05 D) 20, 0.83, 3 182)

A patient leaves an outpatient clinic every 6 minutes. There are 5 patients in the clinic waiting to be seen by the physician. How many minutes will the 5th patient be in the clinic? A) 6 B) 12 C) 24 D) 30

183)

A team of 10 volunteers is visiting families in a local community to deliver canned goods. It takes one volunteer 2 hours to complete one visit. What is the capacity of the team over the course of an 8-hour workday? A) 5 B) 4 C) 40 D) 50

184)

A community health system’s nurse team consists of 12 nurses working in the local community. It takes a nurse 1.5 hours to complete one patient visit (including travel times and breaks). Assuming the demand for the nurses is 60 patients per day over the course of a 9-hour workday, what is the utilization of the nurse team? A) 100% B) 33.3% C) 66.66% D) 83.33%

185)

An electric car company operates a manufacturing facility with 160 robots and 3000 employees. The process produces some 500 vehicles each week. It takes a car about 5 days to move from the beginning of the process to the end. The plant operates for 16 hours per day, 5 days a week. What is the cycle time of the process? A) 5 minutes per car B) 0.0009 minute per car C) 9.6 minutes per car D) 40 minutes per car

186)

Time per Customer 8 seconds 20 seconds 12 seconds

Assuming demand is 60 customers per hour, what is the utilization of the employee? A) 40.00% B) 60.00% C) 66.67% D) 100.00%

187)

Time per Customer 8 seconds 20 seconds 12 seconds

Assuming demand is 60 customers per hour, what is the cycle time of the process (in minutes per customer)? A) 0.40 B) 0.60 C) 0.6667 D) 1.00 188)

Guests are arriving at a party at a rate of 8 per minute. Each guest will be checked in, served a drink, and accompanied to his/her table by one receptionist, one bartender, and one usher, respectively. Both the receptionist and usher can serve 5 guests per minute, whereas the bartender takes 2 minutes to serve one guest. Which of the following conclusions can be drawn? A) The capacity of the bartender is the same as that of the receptionist. B) The capacity of the bartender is higher than that of the receptionist. C) The capacity of all three resources is the same. D) The capacity of the usher is higher than that of the bartender.

189)

Guests are arriving at a party at a rate of 8 per minute. Each guest will be checked in, served a drink, and accompanied to his/her table by one receptionist, one bartender, and one usher respectively. Both the receptionist and usher can serve 5 guests per minute, whereas the bartender takes 2 minutes to serve one guest. Which resource is the bottleneck and what is the process capacity in guests per minute? A) Receptionist, 5 B) Bartender, 5 C) Bartender, 0.5 D) Usher, 5

190)

Guests are arriving at a party at a rate of 8 per minute. Each guest will be checked in, served a drink, and accompanied to his/her table by one receptionist, one bartender, and one usher, respectively. Both the receptionist and usher can serve 5 guests per minute, whereas the bartender takes 2 minutes to serve one guest. The _________ is a nonbottleneck resource and its utilization is _________. A) usher, 10% B) bartender, 100% C) usher, 100% D) receptionist, 40%

191)

Which of the following statements is FALSE? A) Nonbottleneck resources have slack capacity. B) A bottleneck resource must have a utilization of 100%. C) Nonbottleneck resources have a less than 100% utilization. D) A bottleneck resource does not always have the longest processing time.

192)

Patients are arriving at a clinic at a rate of two per minute. Each patient’s visit consists of four steps: check in, record vital signs, receive treatment, and check out. A receptionist takes 1 minute to check a patient in. A nurse takes 2 minutes to record the patient’s vital signs. A doctor spends 10 minutes with a patient. A staff member takes 3 minutes to check a patient out. What is the process capacity in patients per hour? A) 60 B) 30 C) 20 D) 6

193)

Patients are arriving at a clinic at a rate of two per minute. Each patient’s visit consists of four sequential steps: check in, record vital signs, receive treatment, and check out. A receptionist takes 1 minute to check a patient in. A nurse takes 2 minutes to record the patient’s vital signs. A doctor spends 10 minutes with a patient. A staff member takes 3 minutes to check a patient out. What is the utilization of the checkout resource? A) 100% B) 30% C) 20% D) 10%

194)

Patients are arriving at a clinic at a rate of two per minute. Each patient’s visit consists of four steps: check in, record vital signs, receive treatment, and check out. A receptionist takes 1 minute to check a patient in. A nurse takes 2 minutes to record the patient’s vital signs. A doctor spends 10 minutes with a patient. A staff member takes 3 minutes to check a patient out. What is the cycle time of the process in minutes? A) 10 B) 20 C) 30 D) Cannot be determined

195)

When will the utilization of a bottleneck resource be less than 100%? A) When the process is capacity-constrained B) When the process is demand-constrained C) When demand is higher than process capacity D) When demand is equal to process capacity

196)

The capacity of a nonbottleneck resource is _________ the capacity of the process. A) equal to B) smaller than C) larger than D) The answer depends on the specific process under consideration

197)

Job candidates are leaving an office every 50 minutes. Each candidate goes through three activities during the office visit: verification, written test, and interview. Verification takes 1 minute, the written test takes 40 minutes, and the interview takes 10 minutes. Assume there is only one resource dedicated to each activity. What is the bottleneck capacity in candidates per hour? A) 1.5 B) 1.2 C) 2.0 D) 2.5

198)

Job candidates are leaving an office every 50 minutes. Each candidate goes through three activities during the office visit: verification, written test, and interview. Verification takes 1 minute, the written test takes 40 minutes, and the interview takes 10 minutes. Assume there is only one resource dedicated to each activity. Which of the following conclusions can be drawn? A) The process is capacity-constrained. B) The process is demand-constrained. C) The interview resource is the bottleneck. D) The flow rate is equal to the process capacity.

199)

Job candidates are leaving an office every 50 minutes. Each candidate goes through three activities during the office visit: verification, written test, and interview. Verification takes 1 minute, the written test takes 40 minutes, and the interview takes 10 minutes. Assume there is only one resource dedicated to each activity. What is the utilization of the bottleneck resource? A) 100% B) 80% C) 20% D) 2%

200)

There are four steps in the manufacturing process of a stuffed toy: cutting, stuffing, sealing, and packaging. There are two employees each for cutting and stuffing but one each for sealing and packaging. The processing times of cutting, stuffing, sealing, and packaging are 8, 5, 3, and 2 seconds per toy. What is the bottleneck in the process? A) Cutting B) Stuffing C) Sealing D) Packaging

201)

There are four steps in the manufacturing process of a stuffed toy: cutting, stuffing, sealing, and packaging. There are two employees each for cutting and stuffing but one each for sealing and packaging. The processing times of cutting, stuffing, sealing, and packaging are 8, 5, 3, and 2 seconds per toy. What is the capacity in toys per minute at the resource "stuffing"? A) 24 B) 12 C) 0.4 D) 0.2

202)

There are four steps in the manufacturing process of a stuffed toy: cutting, stuffing, sealing, and packaging. There are two employees each for cutting and stuffing but one each for sealing and packaging. The processing times of cutting, stuffing, sealing, and packaging are 8, 5, 3, and 2 seconds per toy. What is the utilization at the "packaging" resource if demand is unlimited? A) 100% B) 75% C) 63% D) 50%

203)

Students are going through a three-step process to obtain their ID cards. Each student will spend 2 minutes at the registration desk before going to one of three cashiers to pay a fee for the card. After that, he/she will visit one of four ID processing stations to have his/her picture taken and the ID card printed. Registration takes 2 minutes. Visits to the cashier and ID processing station take 10 and 20 minutes respectively. If the demand rate is 0.5 student per minute, which of the following conclusions can be drawn if resources are doubled at the processing station? A) The cashier station becomes the bottleneck. B) There will be no bottleneck in the process. C) Registration becomes the bottleneck. D) The ID processing station becomes the bottleneck.

204)

Under which scenario will the utilization of a particular resource in a sequential multistep process be 100 percent? A) The resource is a bottleneck and the process is demand-constrained. B) The resource is a bottleneck and the process is capacity-constrained. C) The resource is a nonbottleneck and the process is demand-constrained. D) The resource is a nonbottleneck and the process is capacity-constrained.

205)

An electronics manufacturing company produces circuit boards using the four-step sequential process shown below. There are three machines for component install, two machines for solder, one machine for inspection, and three machines for test. Step Component install Solder Inspection Test

Processing Time per Circuit Board 2 minutes 2.5 minutes 1.5 minutes 4 minutes

What is the bottleneck of the process? A) Component install B) Solder C) Inspection D) Test 206)

Processing Time per Circuit Board 2 minutes 2.5 minutes 1.5 minutes 4 minutes

What is the capacity of the resource “solder” in circuit boards per hour? A) 1.5 B) 40 C) 48 D) 96

207)

Processing Time per Circuit Board 2 minutes 2.5 minutes 1.5 minutes 4 minutes

What is the utilization of the resource “component install” if demand is unlimited? A) 44.44% B) 50.00% C) 66.67% D) 88.88% 208)

There are four steps in the manufacturing process of a stuffed toy: cutting, stuffing, sealing, and packaging. There are two employees each for cutting and stuffing, but one each for sealing and packaging. The processing times of cutting, stuffing, sealing, and packaging are 8, 5, 3, and 2 seconds per toy. Assuming demand is unlimited, how long does it take (in seconds) to produce 1,000 toys starting with an empty system? A) 4,028 B) 4,014 C) 4,000 D) 3,996

209)

There are four steps in the manufacturing process of a stuffed toy: cutting, stuffing, sealing, and packaging. There are two machines each for cutting and stuffing, but one each for sealing and packaging. The processing times of cutting, stuffing, sealing, and packaging are 8, 5, 3, and 2 seconds per toy. Assuming demand is unlimited, how long does it take (in seconds) to produce 1,000 toys starting with a full system? A) 4,028 B) 4,014 C) 4,000 D) 3,996

210)

Students are going through a three-step process to obtain their ID cards. Each student will spend 2 minutes at the registration desk before going to one of three cashiers to pay a fee for the ID card. After that, he/she will visit one of four ID processing stations to have his/her picture taken and ID card printed. Visits to the cashier and ID processing station take 10 and 20 minutes respectively. If the demand rate is 0.125 student per minute, how long does it take to process 20 students, assuming the system is full? A) 100 minutes B) 152 minutes C) 160 minutes D) 184 minutes

211)

Students are going through a three-step process to obtain their ID cards. Each student will spend 2 minutes at the registration desk before going to one of three cashiers to pay a fee for the ID card. After that, he/she will visit one of four ID processing stations to have his/her picture taken and ID card printed. Visits to the cashier and ID processing station take 10 and 20 minutes respectively. If the demand rate is 0.125 student per minute, how long does it take to process 20 students, assuming the system is empty? A) 100 minutes B) 152 minutes C) 160 minutes D) 184 minutes

212)

Students are going through a three-step process to obtain their ID cards. Each student will spend 2 minutes at the registration desk before going to one of three cashiers to pay a fee for the ID card. After that, he/she will visit one of four ID processing stations to have his/her picture taken and ID card printed. Visits to the cashier and ID processing station take 10 and 20 minutes respectively. If the demand rate is 0.5 student per minute, how long does it take to process 20 students, assuming the system is empty? A) 95 minutes B) 100 minutes C) 127 minutes D) 160 minutes

213)

Students are going through a three-step process to obtain their ID cards. Each student will spend 2 minutes at the registration desk before going to one of three cashiers to pay a fee for the ID card. After that, he/she will visit one of four ID processing stations to have his/her picture taken and ID card printed. Visits to the cashier and ID processing station take 10 and 20 minutes respectively. If the demand rate is 0.5 student per minute, how long does it take to process 20 students, assuming the system is full? A) 95 minutes B) 100 minutes C) 127 minutes D) 160 minutes

214)

Every student who wishes to enter the public library at Hotel de Ville (HdV), in the center of Paris, needs to go through the following steps: a. Show your ID to one of the two guards at the entrance of the HdV building—20 seconds b. Have your bag go through the metal detector—30 seconds c. Give your ID card to the ground floor desk clerk, who will give you in exchange a magnetic badge—1 minute d. Take the stairs up to the fourth floor of the building, where the library is located—2 minutes (Note: multiple people can be on the stairs at the same time) e. Show your badge to one of the two desk clerks at the library entrance to have your badge number archived—30 seconds f. Enter the library and get assigned to a numbered seat by one of the two librarians—40 seconds When the library opens at 9 a.m., there is usually a very long queue of people waiting to get in. How long does it take for the 25 seats in the library to be occupied (assuming there are at least 25 people in the queue)? A) 9 minutes B) 18 minutes C) 29 minutes D) 45 minutes

215)

Processing Time per Circuit Board 2 minutes 2.5 minutes 1.5 minutes 4 minutes

If the demand rate is 1 circuit board per minute, how long does it take to process 200 boards, assuming the system is full? A) 2.5 minutes B) 10 minutes C) 300 minutes D) 500 minutes 216)

Processing Time per Circuit Board 2 minutes 2.5 minutes 1.5 minutes 4 minutes

If the demand rate is 0.5 circuit boards per minute, how long does it take to process 500 boards, assuming the system is empty? A) 2.5 minutes B) 758.5 minutes C) 1,008 minutes D) 1,250 minutes

Answer Key Test name: chapter 3 1) FALSE

The purpose of process analysis is to improve a process. 2) FALSE

The capacity of a resource is the maximum number of flow units that can be processed by the resource per unit of time. 3) FALSE

Cycle time is the time between completing two consecutive flow units. Lead time is the time between when an order is placed and when it is filled. 4) TRUE

A bottleneck is the resource with the lowest capacity in a multistep process. It determines the rate of flow of units through a capacity-constrained process. 5) FALSE

When a process is demand-constrained, even the bottleneck will have a utilization of less than 100%. 6) TRUE

If the process is already running, the time it takes to produce X units is equal to Cycle time of the process × X. If the process starts empty, the time it takes to produce the first unit should be added, making it Time through an empty process + [Cycle time of the process × (X − 1)]. 7) D

Process analysis helps in analyzing a process to make improvements. 8) A

Resources are represented as boxes in a process flow diagram. 9) D

Inventory is shown as triangles in a process flow diagram. 10) B

Equipment such as an X-ray machine is a resource at an outpatient medical clinic. 11) D

An upstream process occurs before the current process; you must drop off the prescription before you can pick it up. 12) B

Arrows are used to show the journey of a flow unit from input to output. 13) B

The beginning of the flow (where Station 1 is located) is called the upstream of the process. 14) A

The end of the flow (where Station 3 is located) is called the downstream of the process. 15) A

Resources downstream are the customers of resources upstream. 16) C

A process analysis of a hospital’s emergency room can answer questions related to all activities involved in providing medical care to patients in the emergency room. 17) B

One triangle indicates a single common waiting line and the three boxes represent three postal clerks serving the next customer waiting in the single common line. 18) A

There are three triangles (waiting areas), one in front of each box (cashier) showing that each cashier has its own waiting line. 19) D

There are two steps in the checkout process: drop off and pick up. Each step requires waiting. Therefore, a triangle (waiting area) will be placed in front of each of the two boxes (stations). 20) C

The time it takes for a resource to complete one flow unit is called the processing time. 21) A

The capacity of a resource determines the maximum number of flow units that can flow through that resource per unit of time. 22) B

The process capacity determines the maximum flow rate a process can provide per unit of time.

23) D

The processing time of a process is the sum of its activity times 3 + 5 + (3 × 60) + 12 = 200 seconds. 24) C

Capacity = 1 ÷ [3 + 5 + (3 × 60) + 12] = 0.005 customer per second = 0.005 × 60 (seconds/minute) × 60 (minutes/hour) = 18.00 customers per hour. 25) B

Since there is only one employee, the process capacity = 1 ÷ [3 + 5 + (3 × 60) + 12] = 0.005 customer per second = 0.005 × 60 (seconds/minute) = 0.3044 customer per minute. 26) D

Capacity = 3 ÷ 5 × 60 = 36 customers per hour. 27) D

Capacity = 3 ÷ 5 × 60 = 36 customers per hour = 36 × 8 (hours per day)= 288 customers per day. 28) C

The capacity of 1 nurse is 1 ÷ processing time, or 1 ÷ 1.5 hours = 0.667 patient per hour. 0.667 × 9 hours = 6 patients per day per nurse. There are 12 nurses × 6 patients per day per nurse = 72 patients per day. 29) C

In a one-step process with a single resource, that resource will perform all work activities. Therefore, the capacity of the resource will equal (1 ÷ processing time). 30) D

Capacity = 1 ÷ [8 + 20 + 12] = 0.025 customer per second = 0.025 × 60 (seconds/minute) × 60 (minutes/hour) = 90 customers per hour. 31) A

Customers leaving without being served means that the demand exceeds supply, or that the supermarket is capacity-constrained. 32) C

Flow rate is the minimum of demand or process capacity. Capacity is constrained when demand exceeds supply; flow rate is limited to the process capacity. 33) A

Flow rate is equal to the demand rate means demand is the constraint, which happens when supply exceeds demand. 34) B

Process utilization is the ratio between flow rate and process capacity. 35) C

Flow rate = 1 ÷ Cycle time = 1 ÷ 4 = 0.25 minute. Capacity = Flow rate when capacity is constrained = 0.25 customer per minute = 0.25 × 60 (minutes/hour) = 15 customers per hour. 36) D

Flow rate = Min(demand, capacity) = Min(150, 120) = 120 calls per hour. Cycle time = 1 ÷ Flow rate = 1 ÷ 120 hour per call = 1 ÷ 120 × 60 (minutes/hour) = 0.5 minute per call. Utilization = Flow rate ÷ Capacity = 120 ÷ 120 = 1. 37) B

Utilization of a resource is at its maximum when it is equal to one, or when flow rate is equal to capacity. 38) D

Processing time = 5 + 25 + (1.5 × 60) + 30 = 150 seconds. Process capacity = 1 ÷ 150 × 60 (seconds/minute) × 60 (minutes/hour) = 24 customers per hour. Flow rate = Min(Demand, Process capacity) = Min(20, 24) = 20 customers per hour. Utilization = Flow rate ÷ Process capacity = 20 ÷ 24 = 0.83. Cycle time = 1 ÷ Flow rate = 1 ÷ 20 × 60 (minutes/hour) = 3 minutes per customer. 39) D

Flow time = Inventory × Cycle time = 5 patients × 6 minutes per patient = 30 minutes. 40) C

Processing time = 2 hours. Capacity = 1 ÷ Processing time = 1 ÷ 2 = 0.5 family per hour per volunteer. Capacity of 10 volunteers over an 8-hour day = 0.5 × 10 × 8 = 40 families per day. 41) D

The capacity of the nurse team is 12 nurses × 9 hours per day per nurse ÷ 1.5 hours per patient = 72 patients per day. Flow rate = Min(Demand, Process capacity) = Min(60, 72) = 60 patients per day.Utilization is Flow rate ÷ Capacity, or 60 ÷ 72 = 0.8333, or 83.33%. 42) C

Cycle time = 1 ÷ Flow rate. Flow rate is 500 cars per week. There are 16 × 5 = 80 (working) hours in a week. Cycle time = 1 ÷ (500 ÷ 80) = 0.16 hours per car, or 0.16 × 60 minutes = 9.6 minutes per car. 43) C

Process capacity = 1 ÷ [8 + 20 + 12] = 0.025 customer per second = 0.025 × 60 (seconds/minute) × 60 (minutes/hour) = 90 customers per hour. Flow rate = Min(Demand, Process capacity) = Min(60, 90) = 60 customers per hour. Utilization = Flow rate ÷ Process capacity = 60 ÷ 90 = 0.6667 = 66.67%. 44) D

Process capacity = 1 ÷ [8 + 20 + 12] = 0.025 customer per second = 0.025 × 60 (seconds/minute) × 60 (minutes/hour) = 90 customers per hour. Flow rate = Min(Demand, Process capacity) = Min(60, 90) = 60 customers per hour. Cycle time = 1 ÷ Flow rate = 1 ÷ 60 × 60 (minutes/hour) = 1.00 minute per customer. 45) D

Capacity = 1 ÷ Process time. Capacity for both the receptionist and usher = 5 guests per minute. Capacity of the bartender is 1 ÷ 2 = 0.5 guest per minute. Because demand is higher than the capacity of any of the three resources, Flow rate = Capacity. Therefore, the capacity for both the receptionist and usher = 5 guests per minute, which is higher than that of the bartender’s 1 ÷ 2 = 0.5 guest per minute. 46) C

Capacity = 1 ÷ Process time. Capacity for both the receptionist and usher = 5 guests per minute. Capacity of the bartender is 1 ÷ 2 = 0.5 guest per minute. The bottleneck is the bartender because it is the resource with the lowest capacity. The lowest capacity also defines the process capacity, which is 0.5 guest per minute. 47) A

Capacity for both the receptionist and usher = 5 guests per minute. Capacity of the bartender is 1 ÷ 2 = 0.5 guest per minute. Process capacity = Bottleneck capacity = 0.5 guest per minute. Flow rate = Min(Demand, Process capacity) = Min(8, 0.5) = 0.5 guest per minute. Utilization = Flow rate ÷ Capacity. Utilization for both the receptionist and usher (nonbottlenecks) = 0.5 ÷ 5 = 10%. 48) B

A bottleneck resource can have a less than 100% utilization if the process is demand constrained. 49) D

Capacity = 1 ÷ Processing time. Capacity at check in, record vital signs, receive treatment, and check out is 1, 0.5, 0.1, and 0.333 patient per minute respectively. The lowest capacity is the bottleneck and the Process capacity = 0.1 patient per minute = 0.1 × 60 (minutes/hour) = 6 patients per hour. Flow rate = Min(Demand, Process capacity) = Min(2, 0.1) = 0.1. Utilization of checkout = Flow rate ÷ Capacity of checkout = 0.1 ÷ 0.333 = 30%. 51) A

Capacity = 1 ÷ Processing time. Capacity at check in, record vital signs, receive treatment, and check out is 1, 0.5, 0.1, and 0.333 patient per minute respectively. The lowest capacity is the bottleneck and the Process capacity = 0.1 patient per minute = 0.1 × 60 (minutes/hour) = 6 patients per hour. Flow rate = Min(Demand, Process capacity) = Min(2, 0.1) = 0.1. Cycle time = 1 ÷ Flow rate = 1 ÷ 0.1 = 10 minutes. 52) B

A process that is demand-constrained will have a flow rate less than the bottleneck capacity, which means there is slack capacity at the bottleneck resources, causing less than 100% utilization. 53) C

A nonbottleneck resource has a higher capacity than the bottleneck of the process. 54) A

Bottleneck capacity = Min(1, 1 ÷ 40, 1 ÷ 10) = 0.025 candidate per minute or 1.5 candidates per hour. 55) B

Process capacity = Min(1, 1 ÷ 40, 1 ÷ 10) = 0.025 candidate per minute. Flow rate = 1 ÷ Cycle time = 1 ÷ 50 = 0.02 candidate per minute. The process is demand constrained because the flow rate is less than the process capacity. 56) B

Cycle time = 50 minutes. Flow rate = 1 ÷ 50 = 0.02 candidate per minute. Bottleneck capacity = Min(1, 1 ÷ 40, 1 ÷ 10) = 0.025 candidate per minute. Utilization of the bottleneck resource = Flow rate ÷ Capacity = 0.02 ÷ 0.025 = 80%. 57) A

Capacity = Number of workers ÷ Processing time. Capacity = 2 ÷ 8, 2 ÷ 5, 1 ÷ 3, and 1 ÷ 2 for cutting, stuffing, sealing, and packaging. The bottleneck is the lowest capacity = 2 ÷ 8, which is cutting. 58) A

Capacity = Number of resources ÷ Processing time = 2 ÷ 5 toy per second = 2 ÷ 5 × 60 (seconds/minute) = 24 toys per minute. 59) D

Capacity of packaging = 1 ÷ 2. Process capacity = Min(2 ÷ 8, 2 ÷ 5, 1 ÷ 3, 1 ÷ 2) = 1 ÷ 4. Flow rate = Min(Demand, Process capacity) = 1 ÷ 4. Utilization = Flow rate ÷ Capacity = 0.25 ÷ 0.5 = 50%. 60) A

Bottleneck capacity = Min(1 ÷ 2, 3 ÷ 10, 4 ÷ 20) = 0.2 student per minute at the processing station. If four additional ID stations are added, Bottleneck capacity = Min(1 ÷ 2, 3 ÷ 10, 8 ÷ 20) = 0.3 student per minute at the cashier station. 61) B

A bottleneck resource will have a utilization of 100% when the process is capacity-constrained. In all other cases, the utilization of the resource will be less than 100%. 62) C

Capacity = Number of resources ÷ Processing time. Capacity = 3 ÷ 2, 2 ÷ 2.5, 1 ÷ 1.5 and 3 ÷ 4 for component install, solder, inspection, and test, respectively. The bottleneck is the lowest capacity = 1 ÷ 1.5, which is inspection. 63) C

Capacity = Number of resources ÷ Processing time = 2 ÷ 2.5 circuit boards per minute = 2 ÷ 2.5 × 60 (seconds/minute) = 48 circuit boards per hour. 64) A

Capacity of component install = 3 ÷ 2 = 1.50. Process capacity = Min(3 ÷ 2, 2 ÷ 2.5, 1 ÷ 1.5 and 3 ÷ 4) = 1 ÷ 1.5 = 0.6667. Flow rate = Min(Demand, Process capacity) = 0.6667 boards per minute. Utilization = Flow rate ÷ Capacity = 0.6667 ÷ 1.50 = 44.44%. 65) B

Process capacity = Min(2 ÷ 8, 2 ÷ 5, 1 ÷ 3, 1 ÷ 2) = 1 ÷ 4. Flow rate = Min(Demand, Process capacity) = 1 ÷ 4. Cycle time = 1 ÷ Flow rate = 1 ÷ 0.25 = 4 seconds. Time to complete the first toy = 8 + 5 + 3 + 2 = 18 seconds. Time to complete the remaining 999 toys = 999 × Cycle time = 999 × 4 = 3,996 seconds. Time to make 1,000 toys = 3,996 + 18 seconds, or 4,014 seconds. 66) C

Process capacity = Min(2 ÷ 8, 2 ÷ 5, 1 ÷ 3, 1 ÷ 2) = 1 ÷ 4. Flow rate = Min(Demand, Process capacity) = 1 ÷ 4. Cycle time = 1 ÷ Flow rate = 1 ÷ 0.25 = 4 seconds. Time to complete 1,000 toys = 1,000 × 4 seconds, or 4,000 seconds. 67) C

Process capacity = Min(1 ÷ 2, 3 ÷ 10, 4 ÷ 20) = 0.2 student per minute. Flow rate = Min(Demand, Process capacity) = Min(0.125, 0.2) = 0.125 student per minute. Cycle time = 1 ÷ Flow rate = 1 ÷ 0.125 = 8 minutes. Time to process 20 students = 20 × 8 = 160 minutes. 68) D

Process capacity = Min(1 ÷ 2, 3 ÷ 10, 4 ÷ 20) = 0.2 student per minute. Flow rate = Min(Demand, Process capacity) = Min(0.5, 0.2) = 0.2 student per minute. Cycle time = 1 ÷ Flow rate = 1 ÷ 0.2 = 5 minutes. Time to process the first student = 2 + 10 + 20 = 32 minutes. Time to process 20 students = (19 × 5) + 32 = 127 minutes. 70) B

Use the "Time to finish X units starting with an empty system" equation: The first customer requires 20 + 30 + 60 + 120 + 30 + 40 = 300 seconds, or 5 minutes. Cycle time after that is based on the bottleneck, step 3, at 1 minute. 24 × 1 = 24 minutes for the remaining 24 seats. Total time is 5 + 24 = 29 minutes. 72) C

Process capacity = Min(3 ÷ 2, 2 ÷ 2.5, 1 ÷ 1.5 and 3 ÷ 4) = 1 ÷ 1.5 = 0.6667. Flow rate = Min(Demand, Process capacity) = Min(1, 0.6667) = 0.6667 boards per minute. Cycle time = 1 ÷ Flow rate = 1 ÷ 0.6667 = 1.5 minutes per board. Time to process 200 circuit boards = 200 × 1.5 = 300 minutes. 73) C

Process capacity = Min(3 ÷ 2, 2 ÷ 2.5, 1 ÷ 1.5 and 3 ÷ 4) = 1 ÷ 1.5 = 0.6667. Flow rate = Min(Demand, Process capacity) = Min(0.5, 0.6667) = 0.5 board per minute. Cycle time = 1 ÷ Flow rate = 1 ÷ 0.5 = 2 minutes per board. Time to process the first board = 2 + 2.5 + 1.5 + 4 = 10 minutes. Time to process 500 boards = (499 × 2) + 10 = 1,008 minutes.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 217) Cost of direct labor will increase whenever labor content increases at any step in the process. ⊚ true ⊚ false 218)

Takt time matches cycle time if supply matches demand. ⊚ true ⊚ false

219)

Automating activities at a nonbottleneck resource leading to a processing time reduction can increase the amount of idle time at that resource without making the process more efficient. ⊚ true ⊚ false

220)

Line balancing can only be applied to activities with a fixed sequence. ⊚ true ⊚ false

221)

Specialization reduces processing times by making it easier to balance the line. ⊚ true ⊚ false

222)

Revenue cannot be increased with an efficiency improvement on a demand-constrained process. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 223) Four employees at a fast-food restaurant each perform one of the four activities in serving a customer: greet customer, take order, process order, and deliver order. The processing time for each activity is given as follows: Activity Greet customer Take order Process order Deliver order

Processing time per customer 2 seconds 30 seconds 60 seconds 5 seconds

Assume demand is unlimited. If each employee is paid $7.50 per hour, what is the cost of direct labor associated with serving one customer? A) $0.80 B) $7.50 C) $0.50 D) $0.125 224)

Four employees at a fast-food restaurant each perform one of the four activities in serving a customer: greet customer, take order, process order, and deliver order. The processing time for each activity is given as follows: Activity Greet customer Take order Process order Deliver order

Processing time per customer 2 seconds 30 seconds 60 seconds 5 seconds

Assume demand is unlimited. What is the labor content associated with serving one customer? A) 60 seconds per customer B) 24.25 seconds per customer C) 97 seconds per customer D) 388 seconds per customer.

225)

Processing time per customer 2 seconds 30 seconds 60 seconds 5 seconds

Assume demand is unlimited. What is the average labor utilization? A) 162.7% B) 68.2% C) 50.0% D) 40.4% 226)

Processing time per customer 2 seconds 30 seconds 60 seconds 5 seconds

Assume demand is unlimited. What is the total idle time? A) 35.75 seconds B) 60 seconds C) 97 seconds D) 143 seconds 227)

Which of the following statements about process efficiency is FALSE, assuming unlimited demand? A) A process is efficient if it can achieve a high flow rate with few resources. B) Cost of direct labor goes up if flow rate goes up. C) Revenue goes up if flow rate goes up. D) Cycle time goes up if flow rate goes down.

228)

What will be the percentage change in cost of direct labor if flow rate goes up by 25% while other factors remain unchanged? A) Goes up by 20% B) Goes down by 20% C) Goes up by 80% D) Goes down by 80%

229)

Patients use a self-serve kiosk to confirm their arrival at an outpatient clinic. They then proceed to the receptionist to update any personal information. After that, a nurse will record the patient’s vital signs. A physician will then consult with the patient and prescribe appropriate treatments. The patient will then visit the checkout station to settle payment and schedule the next appointment, if needed. Processing times and other information on the process are presented in the table below: Resource

Process

Self-service Receptionist

Check in Update information Record vital signs Treat patient Collect payment

Nurse Physician Checkout

Processing Number of Wage rate time (minutes workers ($ per per patient) hour) 1 n/a n/a 5 2 15 10

30 10

5 2

100 15

What is the cost of direct labor per patient if demand is unlimited? A) $6500 per patient B) $1950 per patient C) $65 per patient D) $217 per patient

230)

Process

Self-service Receptionist

Check in Update information Record vital signs Treat patient Collect payment

Nurse Physician Checkout

Processing Number of Wage rate time (minutes workers ($ per per patient) hour) 1 n/a n/a 5 2 15 10

30 10

5 2

100 15

What is the labor content, excluding the self-serve kiosk? A) 11.2 min/patient B) 13.75 min/patient C) 55 min/patient D) 56 min/patient

231)

Process

Self-service Receptionist

Check in Update information Record vital signs Treat patient Collect payment

Nurse Physician Checkout

Processing Number of Wage rate time (minutes workers ($ per per patient) hour) 1 n/a n/a 5 2 15 10

30 10

5 2

100 15

Which of the following options would be the best process improvement to increase flow rate, assuming unlimited demand? A) Increase check-in capacity B) Increase the pay for the receptionists C) Hire more physicians D) Move some work from the receptionist to the checkout clerk 232)

An electronics manufacturing company produces circuit boards using the four-step sequential process shown below. There is a single employee at each step. Step Component install Solder Inspection Test

Processing Time per Circuit Board 2 minutes 2.5 minutes 1.5 minutes 3 minutes

Assume demand is unlimited. If each employee is paid $18.00 per hour, what is the cost of direct labor associated with producing one circuit board? A) $6.00 B) $3.60 C) $18.00 D) $0.90

233)

An electronics manufacturing company produces circuit boards using the four-step sequential process shown below. There is a single employee at each step. Step Component install Solder Inspection Test

Processing Time per Circuit Board 2 minutes 2.5 minutes 1.5 minutes 3 minutes

Assume demand is unlimited. What is the labor content associated with producing one circuit board? A) 9 minutes per board B) 2.25 minutes per board C) 3 minutes per board D) 36 minutes per board 234)

An electronics manufacturing company produces circuit boards using the four-step sequential process shown below. There is a single employee at each step. Step Component install Solder Inspection Test

Processing Time per Circuit Board 2 minutes 2.5 minutes 1.5 minutes 3 minutes

Assume demand is unlimited. What is the average labor utilization? A) 118.2% B) 94.7% C) 75.0% D) 48.2% 235)

An electronics manufacturing company produces circuit boards using the four-step sequential process shown below. There is a single employee at each step. Step Component install Solder Inspection Test

Processing Time per Circuit Board 2 minutes 2.5 minutes 1.5 minutes 3 minutes

Assume demand is unlimited. What is the total idle time? A) 1.5 minutes B) 3 minutes C) 2.25 minutes D) 9 minutes

236)

If _________ is the constraint, we should _________ the staffing level to raise capacity so it matches demand. A) demand, lower B) demand, raise C) capacity, raise D) capacity, lower

237)

If _________ is the constraint, we should _________ the staffing level to lower capacity so it matches demand. A) demand, lower B) demand, raise C) capacity, raise D) capacity, lower

238)

C&A Chemicals operates three eight-hour shifts to produce 600 gallons of a chemical per day. It requires 12 minutes of labor to produce a gallon of the chemical. What is C&A’s takt time in minutes per gallon, and what is the target manpower? A) 0.3, 40 B) 0.8, 15 C) 0.04, 5 D) 2.4, 5

239)

Which of the following statements about takt time is FALSE? A) Takt time is the ratio between the available time and the required production quantity. B) Takt time is dependent on the demand level. C) Takt time tells us how much time actually elapses between completing two consecutive units. D) Takt time tells us how much time should elapse between completing two consecutive units.

240)

Which of the following statements about target manpower is TRUE? A) Target manpower gives the maximum number of resources required to meet demand. B) The only way to compute target manpower is through cycle time. C) The target manpower calculation assumes that all resources are utilized at 100%. D) The target manpower calculation accounts for idle time in the process.

241)

Which of the following statements about takt time and cycle time is TRUE, assuming the current staff level is based on takt time? A) If takt time is longer than cycle time, target manpower will be higher than current staff level. B) If takt time is longer than cycle time, target manpower will be lower than current staff level. C) Supply matches demand when takt time is shorter than cycle time. D) Supply is less than demand when takt time is equal to cycle time.

242)

What happens to takt time if demand rate is doubled? A) Increases by 50% B) Decreases by 50% C) No change D) Takt time doubles

243)

Labor content is increased by 20% while takt time remains the same. What is the percentage change in target manpower? A) Increases by 20% B) Decreases by 20% C) No change D) Cannot be determined

244)

Both takt time and labor content are increased by 15%. What happens to target manpower? A) Increases by 15% B) Decreases by 15% C) No change D) Cannot be determined

245)

An electronics manufacturing company operates two ten-hour shifts to produce 2400 circuit boards per day. It requires 8 minutes of labor to produce each board. What is the takt time in minutes per board? A) 0.25 B) 0.50 C) 0.75 D) 1.00

246)

An electronics manufacturing company operates two ten-hour shifts to produce 2400 circuit boards per day. It requires 14 minutes of labor to produce each board. What is the target manpower? A) 6 B) 171.4 C) 14 D) 28

247)

Which of the following strategies will NOT off-load the bottleneck? A) Outsource some of the activities at the bottleneck. B) Automate some of the activities at the bottleneck. C) Reassign some of the activities at the bottleneck to other resources with more capacity. D) Slow down work at resources with extra capacity to match that of the bottleneck.

248)

C&A Fast Food has four activities in serving a customer: greet customer, take order, process order, and deliver order. Each activity is staffed by one employee (for a total of four employees). The processing time for each activity is given as follows: Activity Greet customer Take order Process order Deliver order

Processing time per customer 2 seconds 30 seconds 60 seconds 5 seconds

Assume demand is unlimited. To which activity should C&A assign an additional employee in order to increase process capacity? A) Greet customer B) Take order C) Process order D) Deliver order

249)

Processing time per customer 2 seconds 30 seconds 60 seconds 5 seconds

Assume demand is unlimited. If one additional employee is added to the bottleneck activity, what will be the percentage change in process capacity? A) 100% B) 50% C) 2% D) Cannot be determined 250)

Processing time per customer 2 seconds 30 seconds 60 seconds 5 seconds

Assume demand is unlimited. Each employee is paid $7.50 per hour. If one additional employee is added to the bottleneck activity, what will be the cost of direct labor in $ per customer? A) 0.50 B) 0.3125 C) 0.25 D) 0.125

251)

Processing time per customer

Greet customer Take order Process order Deliver order

2 seconds 30 seconds 60 seconds 5 seconds

Wage rate ($ per hour) 5 5 15 8

Assume demand is unlimited. If one additional employee is added to the bottleneck activity, what will be the cost of direct labor in $ per customer? A) 0.275 B) 0.3125 C) 0.40 D) 0.50 252)

Processing time per customer

Greet customer Take order Process order Deliver order

2 seconds 30 seconds 60 seconds 5 seconds

Wage rate ($ per hour) 5 5 15 8

Assume demand is unlimited. Which of the following conclusions can be drawn? A) Adding two employees at the current bottleneck activity is the minimum change in manpower necessary to increase process capacity. B) Adding one employee at a nonbottleneck activity will cause a larger decrease in the cost of direct labor than adding one employee at the bottleneck activity. C) Adding two employees at the current bottleneck activity will increase average labor utilization more than adding one employee. D) Adding two employees at the current bottleneck activity will not increase the process capacity more than adding one employee.

253)

Processing time per customer

Greet customer Take order Process order Deliver order

2 seconds 30 seconds 60 seconds 5 seconds

Wage rate ($ per hour) 5 5 15 8

Assume demand is unlimited. If two additional employees are added to the current bottleneck activity, what will be the cost of direct labor in $ per customer? A) 0.525 B) 0.50 C) 0.40 D) 0.3125 254)

Processing time per customer

Greet customer Take order Process order Deliver order

2 seconds 30 seconds 60 seconds 5 seconds

Wage rate ($ per hour) 5 5 15 8

Assume demand is unlimited. If two additional employees are added to the current bottleneck activity, what will be the average labor utilization? A) 0.400 B) 0.475 C) 0.539 D) 0.667

255)

An electronics manufacturing company produces circuit boards using the four-step sequential process shown below. There is a single employee at each step. Step Component install Solder Inspection Test

Processing Time per Circuit Board 2 minutes 2.5 minutes 1.5 minutes 3 minutes

Assume demand is unlimited. To which step should an additional employee be assigned to increase process capacity? A) Component install B) Solder C) Inspection D) Test 256)

An electronics manufacturing company produces circuit boards using the four-step sequential process shown below. There is a single employee at each step. Step Component install Solder Inspection Test

Processing Time per Circuit Board 2 minutes 2.5 minutes 1.5 minutes 3 minutes

Assume demand is unlimited. If one additional employee is added to the bottleneck activity, what will be the percentage change in process capacity? A) 100% B) 40% C) 20% D) 8.75%

257)

There are five activities in making one toy: cutting, sewing, stuffing, assembling, and packaging. The activities have to be carried out in this order. The processing time of each activity is given below: Activity Cutting Sewing Stuffing Assembling Packaging

Processing time (minutes per toy) 10 10 5 5 25

Demand rate is 4 toys per hour. Currently we have worker A in charge of cutting, worker B in charge of sewing and stuffing, and worker C in charge of assembling and packaging. Which of the following strategies will increase the process capacity by balancing the line? A) Adding one additional worker to sewing. B) Adding two additional workers to sewing. C) Moving packaging to worker A. D) Moving assembling to worker B. 258)

Processing time (minutes per toy) 10 10 25 5 5

Demand rate is 4 toys per hour. Currently we have worker A in charge of cutting, worker B in charge of sewing and stuffing, and worker C in charge of assembling and packaging. Which of the following strategies will increase the process capacity by balancing the line? A) Adding one additional worker to assembling. B) Adding two additional workers to assembling. C) Moving packaging to worker A. D) Moving sewing to worker A. 259)

Line balancing is the act of allocating activities of a process across the process resources as _________ as possible so that all resources have a comparable _________. A) irregularly, inventory level B) evenly, utilization level C) irregularly, utilization level D) evenly, inventory level

260)

A process can be balanced by moving work away from the _________ to another resource with unused capacity. A) most expensive resource B) least expensive resource C) nonbottleneck D) bottleneck

261)

Which of the following statements about line balancing is TRUE? A) A process can be balanced without involving the bottleneck resource. B) Process capacity can be increased by balancing a process. C) Average labor utilization can be increased by defining a fixed sequence of activities when no such need exists. D) Average labor utilization cannot be increased by balancing a process.

262)

An electronics manufacturing company produces circuit boards using the four-step sequential process shown below. There is a single employee at each step. Step Component install Solder Inspection Test

Processing Time per Circuit Board 2 minutes 3 minutes 2.5 minutes 1.5 minutes

Which of the following strategies will increase the process capacity? A) Add one additional worker to component install. B) Add one additional worker to solder. C) Add one additional worker to inspection. D) Add one additional worker to test. 263)

Which of the following is NOT a benefit of specialization? A) Reduced idle time B) Lower wage rates C) Elimination of setups D) Reduced equipment replication

264)

Which of the following is a drawback of specialization? A) Increased processing time B) Increased wage rates C) Demotivated workers D) Increased setup times

265)

Which of the following ways to assign employees to activities will more likely lead to a higher labor utilization? Assume demand is unlimited. A) Each employee takes care of all activities involved in the process. B) Each employee specializes in one activity. C) Each employee works on the bottleneck activity while nonbottleneck activities are removed from the process. D) One employee works on the bottleneck activity while the others work on nonbottleneck activities.

266)

Which of the following is a way to address some of the shortcomings of specialization? A) Each employee further develops his/her area of specialization. B) Each employee brings his/her own equipment or tools to work. C) Each employee is assigned to a team to perform a job. D) Each employee takes care of one activity only.

267)

A possible drawback of having one employee in charge of all activities involved in serving customers at a coffee shop is _________. A) Low labor utilization B) Unbalanced process C) High idle time D) Increased setups

268)

A possible drawback of having each employee specialize in one or more activities in serving customers at a coffee shop is _________. A) increased idle time B) higher direct labor costs C) increased equipment replication D) increased processing time

269)

Which of the following is NOT a way to improve process efficiency? A) Staffing to meet supply B) Line balancing C) Off-loading the bottleneck D) Specialization

270)

Which of the following is a fixed cost in operating a dental clinic? A) Advertising in the local newspaper B) Cost of dental checkup per patient C) Health insurance discounts mandated for each patient D) Dental supplies needed for each procedure

271)

Which of the following is a variable cost in operating a dental clinic? A) Hourly wages for full-time dental assistants B) Utility costs for the office building C) Material cost for metal fillings D) Annual salary for the dentist

272)

In what situations is labor cost considered a fixed cost? A) Making staffing decisions to match demand B) Paying employees according to the units of products made or number of customers served C) Paying employees by the hour even when they are idle D) Paying suppliers for materials used in the production of products or services

273)

In what situation is labor cost considered a variable cost? A) Making short-term staffing decisions to match resource availability B) Making longer-term staffing decisions to match demand C) Paying employees by the hour even when they are idle D) When the number of employees to keep is mandated in advance and cannot be changed

274)

Which of the following is NOT a process variable that has an impact on profits? A) Demand-constrained vs. capacity-constrained B) High margin vs. low margin. C) High rate vs. low rate of interest on loans. D) Bottleneck resource vs. nonbottleneck resource.

275)

Consider a capacity-constrained process producing a high profit margin product. What will the impacts on revenue and profits be if processing time for the bottleneck resource is reduced by 10% while everything else remains the same? A) No impact on revenue or profits B) Higher revenue and profits C) Lower revenue and profits D) Higher profits with no change in revenue

276)

Process improvements can help increase revenues if the process is _________constrained. A) customer B) demand C) capacity D) machine

277)

Consider a demand-constrained process producing a high profit margin product. What will be the impact on revenue if processing time for the bottleneck resource is reduced by 10% while everything else remains the same? A) No impact on revenue B) 10% increase in revenue C) 10% decrease in revenue D) 5% increase in revenue

278)

C&A Clothing sells T-shirts for $14 each. Material costs are $3 per shirt and fixed costs are $250 per hour including the cost of labor. C&A Clothing currently employs two workers to make T-shirts, each of whom takes three minutes to make one shirt. Assume that labor costs are considered fixed and the demand is unlimited. How much profit does C&A Clothing make per hour? A) $500 B) $148 C) $190 D) $750

279)

Among other products, C&A Clothing sells T-shirts for $14 each. Material costs are $3 per shirt and fixed costs are $250 per hour including the cost of labor. C&A Clothing currently employs two workers to make T-shirts, each of whom takes three minutes to make one shirt. Assume that labor costs are considered fixed and the demand is unlimited. C&A Clothing is considering moving one additional worker from elsewhere in the company to make shirts. This new worker’s wages will increase the fixed costs to $268 per hour. What will be the impact on C&A’s profit per hour, with three workers? A) 25.4% decrease B) 106.3% increase C) 56.1% decrease D) 25.4% increase

280)

C&A Toys uses two steps to make a toy. Step 1 takes 20 seconds. Step 2 takes 15 seconds. Each step is staffed by one worker, for a total of two workers. Assume labor costs are considered fixed and demand is unlimited. Each toy is sold for $20. Material costs are $5 per toy. Fixed costs are $500 per hour including the cost of labor. How much profit does C&A Toys make per hour? A) $3100 B) $2200 C) $1900 D) $1300

281)

C&A Toys uses two steps to make a toy. Step 1 takes 20 seconds. Step 2 takes 15 seconds. Each step is staffed by one worker, for a total of two workers. Assume labor costs are considered fixed and demand is unlimited. Each toy is sold for $20. Material costs are $5 per toy and fixed costs are $500 per hour including the cost of labor. What will be the impact on C&A’s profit per hour if the processing time of step 2 is reduced to 10 seconds? A) No impact on profit B) 124% increase C) 124% decrease D) Cannot be determined

282)

C&A Toys uses two steps to make a toy. Step 1 takes 20 seconds. Step 2 takes 15 seconds. Each step is staffed by one worker, for a total of two workers. Assume wages are a fixed cost. Each toy is sold for $20. Material costs are $5 per toy and fixed costs are $500 per hour. Demand rate is 120 toys per hour including the cost of labor. How much profit does C&A Toys make per hour? A) $3100 B) $2200 C) $1900 D) $1300

283)

C&A Toys uses two steps to make a toy. Step 1 takes 20 seconds. Step 2 takes 15 seconds. Each step is staffed by one worker, for a total of two workers. Assume wages are a fixed cost. Each toy is sold for $20. Material costs are $5 per toy and fixed costs are $500 per hour including the cost of labor. Demand rate is 120 toys per hour. What will be the impact on C&A’s profit per hour if the processing time of step 1 is reduced by 5 seconds? A) No impact on profit B) Cannot be determined C) 41% increase D) 373% increase

284)

C&A Toys uses two steps to make a toy. Step 1 takes 20 seconds. Step 2 takes 15 seconds. Each step is staffed by one worker, for a total of two workers. Assume wages are a fixed cost and demand is unlimited. Each toy is sold for $20. Material costs are $5 per toy and fixed costs are $500 per hour including the cost of labor. What will be the impact on C&A’s profit per hour if the processing time of step 1 is reduced by 5 seconds? A) No impact on profit B) Cannot be determined C) 40.9% increase D) 173.7% increase

285)

A deli sells sandwiches for $8.50 each, on average. Material costs are $2.25 per sandwich and fixed costs are $95 per hour including the cost of labor. The shop employs three workers, each of whom makes an entire sandwich and requires five minutes to process the entire order for each customer. Assuming labor costs are fixed and demand is unlimited, how much profit does the shop make per hour, on average? A) $95 B) $102 C) $130 D) $190

286)

A deli sells sandwiches for $8.50 each, on average. Material costs are $2.25 per sandwich and fixed costs are $95 per hour including the cost of labor. The shop employs three workers, each of whom makes an entire sandwich and requires five minutes to process the entire order for each customer. Assuming labor costs are fixed and demand is 25 sandwiches per hour, how much profit does the shop make per hour, on average? A) $45.25 B) $61.25 C) $95.00 D) $212.50

287)

Salade Normande is the producer of packaged salads that the company distributes throughout France and the Benelux area. Salads are mostly sold in large supermarkets (Carrefour, LeClerc, Champion) or at gas stations. All salads are shipped in a plastic bowl of 26-cm diameter with a smaller plastic bowl for the dressing inside. For its best-selling salad, the "Salade du Chef," the company operates a five-step process. The activities of the five steps and the associated processing times are shown in the following table. Station

A Salad 1

B Salad 2

C Add meat

D Add sauce container

Tasks

Grab an empty bowl Fill with green salad Add five slices of tomatoes

Processing Time (seconds) 6 12 8

Total time for A

Add four spoons of corn Add three rings of onions Add sliced cucumber

10 8 13

Total time for B

Carefully cut four slices of meat Weigh slices and ensure a weight of 30–32 grams Add meat slices to the bowl

20 20

Total time for C

Grab a sauce bowl Add sauce Seal sauce bowl Put sauce bowl into salad bowl

4 12 8 4

Total time for D

E Seal bin and label Clean the outside of the bowl/wipe bowl off the rim of container Cosmetic inspection Seal container Label container Total time for E

6 6 8 7 27

Workers (one per station) get paid 10 euros per hour, and this type of salad is always in high demand (assume unlimited demand). Ignore any idle time of workers resulting from the beginning or the end of the day. What is the labor content for each salad? A) 40 seconds per unit B) 80 seconds per unit C) 160 seconds per unit D) 180 seconds per unit

288)

A Salad 1

B Salad 2

C Add meat

D Add sauce container

Tasks

Grab an empty bowl Fill with green salad Add five slices of tomatoes

Processing Time (seconds) 6 12 8

Total time for A

Add four spoons of corn Add three rings of onions Add sliced cucumber

10 8 13

Total time for B

Carefully cut four slices of meat Weigh slices and ensure a weight of 30–32 grams Add meat slices to the bowl

20 20

Total time for C

Grab a sauce bowl Add sauce Seal sauce bowl Put sauce bowl into salad bowl

4 12 8 4

Total time for D

E Seal bin and label Clean the outside of the bowl/wipe bowl off the rim of container Cosmetic inspection Seal container Label container Total time for E

6 6 8 7 27

Workers (one per station) get paid 10 euros per hour, and this type of salad is always in high demand (assume unlimited demand). Ignore any idle time of workers resulting from the beginning or the end of the day. What is the cost of direct labor for each salad? A) 0.23 euro per unit B) 0.67 euro per unit C) 1.89 euros per unit D) 45 euros per unit

289)

A Salad 1

B Salad 2

C Add meat

D Add sauce container

Tasks

Grab an empty bowl Fill with green salad Add five slices of tomatoes

Processing Time (seconds) 6 12 8

Total time for A

Add four spoons of corn Add three rings of onions Add sliced cucumber

10 8 13

Total time for B

Carefully cut four slices of meat Weigh slices and ensure a weight of 30–32 grams Add meat slices to the bowl

20 20

Total time for C

Grab a sauce bowl Add sauce Seal sauce bowl Put sauce bowl into salad bowl

4 12 8 4

Total time for D

E Seal bin and label Clean the outside of the bowl/wipe bowl off the rim of container Cosmetic inspection Seal container Label container Total time for E

6 6 8 7 27

Workers (one per station) get paid 10 euros per hour, and this type of salad is always in high demand (assume unlimited demand). Ignore any idle time of workers resulting from the beginning or the end of the day. What is the average labor utilization in this process? A) 13.53% B) 33.33% C) 66.67% D) 100%

Answer Key Test name: chapter 4 1) FALSE

Cost of direct labor increases only when the processing time at the bottleneck step increases. 2) TRUE

Takt time matches cycle time when we produce (or supply) exactly the amount to meet demand. 3) TRUE

Activity automation should be applied to the bottleneck resource to increase process capacity. 4) FALSE

Line balancing can be applied to activities with or without a fixed sequence. 5) FALSE

Specialization usually reduces labor utilization and makes it harder to balance the line. 6) TRUE

Efficiency improvement on a demand-constrained process will not change flow rate and thus brings no change in revenue. 7) C

Flow rate = Min(1 ÷ 2, 1 ÷ 30, 1 ÷ 60, 1 ÷ 5) = 1 ÷ 60 customer per second, or 1 ÷ 60 × 60 (seconds/minute) × 60 (minutes/hour) = 60 customers per hour because demand is unlimited. Cost of direct labor = (4 employees × $7.50 per hour) ÷ 60 = $0.50 per customer. 8) C

Labor content = Sum of processing times = 2 + 30 + 60 + 5 = 97 seconds. 9) D

Flow rate = Process capacity = Min(1 ÷ 2, 1 ÷ 30, 1 ÷ 60, 1 ÷ 5) = 1 ÷ 60 customer per second. Average labor utilization = Average(2 ÷ 60, 30 ÷ 60, 60 ÷ 60, 5 ÷ 60) × 100 = 40.4%. 10) D

Cycle time = 1 ÷ Flow rate = 1 ÷ Min(1 ÷ 2, 1 ÷ 30, 1 ÷ 60, 1 ÷ 5) = 60 seconds. Total idle time = Sum(60 – 2, 60 – 30, 60 – 60, 60 – 5) = 143 seconds. 11) B

Cost of direct labor = Wages per unit of time ÷ Flow rate. If flow rate goes up, cost of direct labor will go down. 12) B

A 25% increase in flow rate will mean a change of [1 ÷ (1 + 25%)] – 1, or –20% in cost of direct labor. 13) C

Flow rate = Process capacity = Min(2 ÷ 5, 3 ÷ 10, 5 ÷ 30, 2 ÷ 10) = 1 ÷ 6 patient per minute = 1 ÷ 6 × 60 (minutes/hour) = 10 patients per hour. Wages per unit of time = ($15 × 2) + ($30 × 3) + ($100 × 5) + ($15 × 2) = $650 per hour. Cost of direct labor = Wages per unit of time ÷ Flow rate = $650 ÷ 10 = $65 per patient. 14) C

Labor content = 5 + 10 +30 +10 = 55 minutes ÷ patient, excluding the self-serve kiosk 15) C

Physicians are the bottleneck, so increasing their capacity by hiring more of them would increase flow rate. 16) B

Flow rate = Min(1 ÷ 2, 1 ÷ 2.5, 1 ÷ 1.5, 1 ÷ 3) = 1 ÷ 3 boards per minute, or 1 ÷ 3 × 60 (minutes/hour) = 20 boards per hour because demand is unlimited. Cost of direct labor = (4 employees × $18.00 per hour) ÷ 20 = $3.60 per board. 17) A

Labor content = Sum of processing times = 2 + 2.5 + 1.5 + 3 = 9 minutes. 18) C

Cycle time = 1 ÷ Flow rate = 1 ÷ Min(1 ÷ 2, 1 ÷ 2.5, 1 ÷ 1.5, 1 ÷ 3) = 3 minutes. Average utilization = Labor content ÷ (Cycle time × Number of employees) = 9 minutes ÷ (3 × 4) = 0.75 = 75%. 19) B

Cycle time = 1 ÷ Flow rate = 1 ÷ Min(1 ÷ 2, 1 ÷ 2.5, 1 ÷ 1.5, 1 ÷ 3) = 3 minutes. Total idle time = Sum(3 − 2, 3 − 2.5, 3 − 1.5, 3 − 3) = 3 minutes. 20) C

If capacity is the constraint, the staffing level should be raised to increase capacity.

21) A

If demand is the constraint, we have excess capacity, which can be lowered by reducing the staff level. 22) D

Takt time = Available time ÷ Required quantity = 3 × 8 hours ÷ 600 gallons = 0.04 hours per gallon = 2.4 minutes per gallon. Target manpower = Labor content ÷ Takt time = 12 minutes per gallon ÷ 2.4 minutes per gallon = 5. 23) C

The time that actually elapses between completing two consecutive units is called cycle time, not takt time. 24) C

The target manpower calculation assumes there’s no idle time in the process (i.e., all resources are utilized at 100%). 25) B

If takt time is longer than cycle time, demand is the constraint or there is excess capacity. In this case, target manpower will be lower than the current staff level. 26) B

Takt time = 1 ÷ Demand rate = 1 ÷ 2 = 0.5. Therefore, takt time goes from 1 to 0.5 with a 50% decrease. 27) A

Target manpower = Labor content ÷ Takt time. New labor content = 1.2. New target manpower = 1.2. Therefore, the percentage change in target manpower = 1.2 − 1 = 20%. 28) C

Target manpower = Labor content ÷ Takt time. If both labor content and takt time are increased by 15%, the effects will cancel each other, leaving target manpower unchanged. 29) B

Takt time = Available time ÷ Required quantity = 2 × 10 hours ÷ 2400 boards = 0.00833 hours per board = 0.5 minutes per board. 30) D

Takt time = Available time ÷ Required quantity = 2 × 10 hours ÷ 2400 boards = 0.00833 hours per board = 0.5 minutes per board. Target manpower = Labor content ÷ Takt time = 14 minutes per board ÷ 0.5 minutes per board = 28. 31) D

Slowing down work at non-bottleneck resources will not reduce the processing time at the bottleneck. 32) C

An additional employee should be added to the bottleneck to increase its capacity. Bottleneck capacity = Min(1 ÷ 2, 1 ÷ 30, 1 ÷ 60, 1 ÷ 5) = 1 ÷ 60; the bottleneck is the “Process order” activity. 33) A

Process capacity before = Min(1 ÷ 2, 1 ÷ 30, 1 ÷ 60, 1 ÷ 5) = 1 ÷ 60 and process order is the bottleneck. Process capacity after = Minutes(1 ÷ 2, 1 ÷ 30, 2 ÷ 60, 1 ÷ 5) = 1 ÷ 30. Percent change in process capacity = (1 ÷ 30 − 1 ÷ 60) ÷ 1 ÷ 60 = 100%. 34) B

Flow rate = Minutes (1 ÷ 2, 1 ÷ 30, 2 ÷ 60, 1 ÷ 5) = 1 ÷ 30 customer per second = 1 ÷ 30 × 60 (seconds/minute) × 60 (minutes/hour) = 120 customers per hour. Wage rate = 5 × $7.50 per hour. Cost of direct labor = (5 × $7.50) ÷ 120 = $0.3125 per customer. 35) C

Flow rate = Min(1 ÷ 2, 1 ÷ 30, 2 ÷ 60, 1 ÷ 5) = 1 ÷ 30 customer per second = 1 ÷ 30 × 60 (seconds/minute) × 60 (minutes/hour) = 120 customers per hour. Wage rate = $5 + $5 + (2 × $15) + $8 = $48 per hour. Cost of direct labor = $48 ÷ 120 = $0.40 per customer. 36) D

Process capacity with one additional employee = Min(1 ÷ 2, 1 ÷ 30, 2 ÷ 60, 1 ÷ 5) = 1 ÷ 30. Process capacity with two additional employees added to the current bottleneck = Min(1 ÷ 2, 1 ÷ 30, 3 ÷ 60, 1 ÷ 5) = 1 ÷ 30. “Take order” becomes a bottleneck and process capacity remains unchanged beyond what can be achieved with only one additional worker at the “Process order” activity. 37) A

Flow rate = Min(1 ÷ 2, 1 ÷ 30, 3 ÷ 60, 1 ÷ 5) = 1 ÷ 30 customer per second = 120 customers per hour. Wage rate = $5 + $5 + (3 × $15) + $8 = $63 per hour. Cost of direct labor = $63 ÷ 120 = $0.525 per customer.

38) C

Flow rate = Min(1 ÷ 2, 1 ÷ 30, 3 ÷ 60, 1 ÷ 5) = 1 ÷ 30 customer per second. Average utilization = Labor content ÷ (Cycle time × Number of employees) = 97 seconds ÷ (30 × 6) = 0.539. Note we cannot use the formula Average labor utilization = Average(Resource 1 Utilization, Resource 2 Utilization, etc.) since there are different staffing levels across resources (i.e., three employees at the bottleneck resource and only one employee at each nonbottleneck resource). 39) D

An additional employee should be added to the bottleneck to increase its capacity. Bottleneck capacity = Min(1 ÷ 2, 1 ÷ 2.5, 1 ÷ 1.5, 1 ÷ 3) = 1 ÷ 3; the bottleneck is the “Test” step. 40) C

Process capacity before = Min(1 ÷ 2, 1 ÷ 2.5, 1 ÷ 1.5, 1 ÷ 3) = 1 ÷ 3; the bottleneck is the “Test” step. Process capacity after = Min(1 ÷ 2, 1 ÷ 2.5, 1 ÷ 1.5, 2 ÷ 3) = 1 ÷ 2.5. Percent change in process capacity = (1 ÷ 2.5 − 1 ÷ 3) ÷ 1 ÷ 3 = 20%. 41) D

Adding one or two additional workers to sewing are not line-balancing strategies. Worker C is the bottleneck. Moving the 5 seconds of assembly time to worker B increases the capacity of Worker C and, thus, increases the process capacity. 42) D

Adding one or two additional workers to assembling are not line-balancing strategies. Worker B is the bottleneck. Moving the 10 seconds of sewing time to Worker A increases the capacity of Worker B and, thus, increases the process capacity. 43) B

Line balancing is the act of allocating activities of a process across the process resources as evenly as possible so that all resources have a comparable utilization level. 44) D

A process can be balanced by moving work away from the bottleneck to unused capacity elsewhere in the process. 45) B

Moving work away from the bottleneck to unused capacity elsewhere in the process (i.e., balancing a process) reduces processing time at the bottleneck and increases the process capacity. 46) B

Solder is the bottleneck since it has the longest processing time. Therefore, adding one additional worker to solder will increase the process capacity. 47) A

Specialization usually lowers labor utilization, which means increased idle time. 48) C

Specialization can lead to very repetitive work, which can demotivate workers. 49) A

Non-specialization leads to a more balanced process and therefore a higher labor utilization. 50) C

A work cell allows a team of employees to develop skills of mastering a broad set of activities. 51) D

The employee has to spend time doing setups when switching from one activity to another. These setups increase processing time and reduce process efficiency. 52) A

It is more difficult to have a balanced process with specialization, which leads to idling of nonbottleneck resources. 53) A

Staffing to meet demand (not supply) is a way to improve process efficiency. 54) A

Advertising is a marketing expense that is independent of the number of patients served. 55) C

The cost of materials increases with the number of patients served and, thus, it is a variable cost. 56) C

Paying employees by the hour independent of demand is considered a fixed labor cost. 57) B

Labor costs are considered a variable cost when making staffing decisions to match demand. 58) C

Interest rate on loans is a financial variable, not a process variable.

59) B

A 10% reduction in processing time of the bottleneck resource will increase flow rate by 10%. Revenue = Average price × Flow rate, so revenue will increase. Total costs [= (Variable cost × Flow rate) + Fixed costs] also will increase due to the higher flow rate. since the product has a high profit margin (the ratio between relative price and variable costs is large), the higher revenues will offset the higher costs and, thus, lead to higher profits. 60) C

Revenue = Flow rate × Average price. Process improvements in a capacity constrained process increase flow rate and therefore revenues. 61) A

Because the process is demand-constrained, a shorter processing time will not change the flow rate and therefore has no impact on revenue. 62) C

Flow rate = Process capacity = 2 ÷ 3 × 60 = 40 shirts per hour. Revenue = $14 × 40 = $560; Fixed costs = $250 per hour; Material costs = $3 × 40 = $120; Profit = $560 − $250 − $120 = $190 per hour. 63) B

Flow rate with 2 workers = Process capacity = 2 ÷ 3 × 60 = 40 shirts per hour. Profit with two workers = ($14 × 40) − $250 − ($3 × 40) = $190 per hour. Flow rate with 3 workers = 3 ÷ 3 × 60 = 60 shirts per hour. Profit with 3 workers = ($14 × 60) − $268 − ($3 × 60) = $392. Change in profit = (392 − 190) ÷ 190 = 106.3% increase. 64) B

Capacity = Min(1 ÷ 20, 1 ÷ 15) = 0.05 toys per second; Flow rate = 0.05 × 3600 = 180 toys per hour. Profit = ($20 × 180) − ($5 × 180) − $500 = $2200 per hour. 65) A

Because step 2 is not the bottleneck, reducing its processing time will not change the flow rate and, therefore, will not have an impact on profit (all else the same). 66) D

Capacity = Min(1 ÷ 20, 1 ÷ 15) = 0.05 toys per second or 180 toys per hour; Flow rate = Min(120, 180) = 120; Profit = ($20 × 120) − ($5 × 120) − $500 = $1300 per hour. 67) A

The process is demand constrained. A reduction in processing time has no impact on flow rate and therefore there is no change in profit. 68) C

Capacity ÷ Flow rate = Min(1 ÷ 20, 1 ÷ 15) = 0.05 toys per second, or 180 toys per hour; Profit = ($20 × 180) − ($5 × 180) − $500 = $2200 per hour. Capacity with reduction in processing time of step 1 = Min(1 ÷ (20 − 5), 1 ÷ 15) = 0.067 toys per second, or 240 toys per hour. New profit = ($20 × 240) − ($5 × 240) − $500 = $3100 per hour. Change in profit = (3100 − 2200) ÷ 2200 = 40.9%. 69) C

Flow rate = Process capacity = 3 ÷ 5 × 60 = 36 sandwiches per hour. Revenue = $8.50 × 36 = $306; Fixed costs = $95 per hour; Material costs = $2.25 × 36 = $81; Profit = $306 − $95 − $81 = $130 per hour. 70) B

Process capacity = 3 ÷ 5 × 60 = 36 sandwiches per hour. Flow rate = min(demand, process capacity) = min(25, 36) = 25 sandwiches per hour. Revenue = $8.50 × 25 = $212.50; Fixed costs = $95 per hour; Material costs = $2.25 × 25 = $56.25; Profit = $212.50 − $95 − $56.25 = $61.25 per hour. 71) C

Add the total times for each task: 26 + 31 + 48 + 28 + 27 = 160 seconds per unit. 72) B

Cost of direct labor = Wages per unit of time ÷ Flow rate. Wages per hour = 5 workers × 10 euros per hour = 50 euros per hour. The bottleneck is station C. Flow rate = 1 ÷ 48 × 3600 seconds = 75 salads per hour. Cost of direct labor = 50 ÷ 75 = 0.67 euro per unit. 73) C

Each worker’s capacity is 1 ÷ Total processing time at that station. A: 1 ÷ 26, B: 1 ÷ 31, C: 1 ÷ 48, D: 1 ÷ 28, E: 1 ÷ 27. Multiply by 3600 to give per hour rates. A: 138.5; B: 116.2; C: 75; D: 128.6; E: 133.3. C is the bottleneck. Average utilization = (75 ÷ 138.5 + 75 ÷ 116.2 + 75 ÷ 75 + 75 ÷ 128.6 + 75 ÷ 133.3) ÷ 5 = (0.542 + 0.645 + 1 + 0.583 + 0.563) ÷ 5 = 0.667 or 66.7%. It can also be solved with the alternate formula: Average utilization = Labor content ÷ (Cycle time × Number of employees) = 160 seconds ÷ (48 × 5) = 0.667 or 66.7%.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 290) All flow units will have the same exit point in a production process. ⊚ true ⊚ false 291)

A bottleneck resource must have an implied utilization less than 100%. ⊚ true ⊚ false

292)

The overall process yield is the sum total of the yields of all resources. ⊚ true ⊚ false

293)

When analyzing a process flow with flow unit-dependent processing times, the unit of analysis should be a unit of demand. ⊚ true ⊚ false

294)

Rework always lowers the process capacity regardless of where it occurs in the process. ⊚ true ⊚ false

295)

The demand rate for a resource that does rework is higher than for a resource with no rework, all else equal. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 296) Customers at an e-retailer site abandon their shopping carts without completing their purchase. This is an example of _________. A) attrition loss B) attrition gain C) attention loss D) attention gain

297)

A store manager at C&A Retailers notices that 40% of customers come to browse but not buy, 45% do not require any assistance before making a purchase, and 15% of customers need assistance during their visit. This is a _________ situation where customers take different paths through the shopping process. A) process mix B) operation mix C) product mix D) market mix

298)

A store manager at C&A Retailers notices that about 38% of customers who walk into the store will make a purchase without assistance, about 42% come to browse but not buy, 14% need assistance from an assistant manager and make a purchase, and 6% need assistance from the store manager and do not buy. C&A Retailers has one greeter, two assistant managers, one store manager, and six cashiers. In setting up a demand matrix, how many rows of resource type and columns of customer type does C&A Retailers need? A) 10, 3 B) 10, 4 C) 4, 4 D) 5, 5

299)

Not all of the 100 customers who walk into the C&A Retailers per day will make a purchase. About 20% come to browse but not buy, 10% need assistance to complete a purchase, and 5% need assistance but leave without making a purchase. The other 65% purchase something without requiring assistance. C&A Retailers has one greeter (who greets every customer), two assistants (who deal with customers who need assistance), and two cashiers (who serve customers who purchase something). What does the demand matrix for C&A Retailers look like? Browse Greeter Assistant Cashier

20 0 0 Browse

Help

20 0 0

15 15 15

Greeter Assistant Cashier Browse Greeter Assistant Cashier

Greeter Assistant Cashier 300)

Buy 80 10 75

Help

20 0 0 Browse 20 0 0

Buy 80 0 75 Buy

10 10 10 Help + Buy 10 10 10

65 0 65 Help + Leave 5 5 0

Buy 65 0 65

Not all of the 100 customers who walk into the C&A Retailers per day will make a purchase. About 20% come to browse but not buy, 10% need assistance to complete a purchase, and 5% need assistance but leave without making a purchase. The other 65% purchase something without requiring assistance. C&A Retailers has one greeter (who greets every customer), two assistants (who deal with customers who need assistance), and two cashiers (who serve customers who purchase something). What is the total demand rate per day for the greeter? A) 100 B) 20 C) 15 D) 10

301)

Not all of the 100 customers who walk into the C&A Retailers per day will make a purchase. About 20% come to browse but not buy, 10% need assistance to complete a purchase, and 5% need assistance but leave without making a purchase. The other 65% purchase something without requiring assistance. C&A Retailers has one greeter (who greets every customer), two assistants (who deal with customers who need assistance), and two cashiers (who serve customers who purchase something). What is the total demand rate per day for assistants? A) 100 B) 20 C) 15 D) 10

302)

Not all of the 100 customers who walk into the C&A Retailers store per day will make a purchase. About 20% come to browse but not buy, 10% need assistance to complete a purchase, and 5% need assistance but leave without making a purchase. The other 65% purchase something without requiring assistance. C&A Retailers has one greeter (who greets every customer), two assistants (who deal with customers who need assistance), and two cashiers (who serve customers who purchase something). What is the total demand rate per day for cashiers? A) 100 B) 75 C) 65 D) 25

303)

304)

A _________ is a combination of different types of flows through a process. A) capacity mix B) demand matrix C) product matrix D) product mix

A _________ determines how many flow units of each type are flowing through each _________. A) demand matrix, process B) demand matrix, resource C) product mix, process D) product mix, resource

305)

All students register with the receptionist upon arrival at a university orientation. The receptionist will assign each student to one of five groups, each of which takes a different path during their tour of the campus. Each campus tour has its designated tour guide. In setting up a demand matrix, how many rows of resource type and columns of flow unit type does the situation have? A) 5, 6 B) 2, 2 C) 6, 5 D) 5, 5

306)

C&A Industries makes two types of products using four machines. Product A visits machines 1, 2, and 4. Product B only visits machines 1 and 3. The demand per day is 40 units for Product A and 160 units for Product B. What does the demand matrix for C&A Industries look like? All products Machine 1 Machine 2 Machine 3 Machine 4

Machine 1 Machine 2 Machine 3 Machine 4

200 40 160 40 Product A

Product B

1 1 0 1 Product A

1 0 1 0 Product B

Machine 1 Machine 2 Machine 3 Machine 4

40 40 0 40

160 0 160 0 Product B

160

Product A All machines

307)

Which of the following statements is TRUE regarding implied utilization? A) A resource with an implied utilization of 1.4 means that capacity exceeds demand by 1.4%. B) A resource with an implied utilization of 1.4 means that demand exceeds capacity by 1.4%. C) A resource with an implied utilization of 1.4 means that demand exceeds capacity by 40%. D) A resource with an implied utilization of 1.4 means that capacity exceeds demand by 40%.

308)

Which of the following statements is TRUE regarding utilization or implied utilization? A) Utilization measures by how much demand exceeds the capacity of the resource. B) Utilization can exceed 1. C) Implied utilization can exceed 1. D) Implied utilization is a measure of demand variability.

309)

A process is _________constrained if the implied utilization of any resource is above 100%. A) capacity B) demand C) bottleneck D) inventory

310)

A process is _________ constrained if the highest implied utilization of all resources is less than or equal to 100%. A) capacity B) demand C) bottleneck D) inventory

311)

The steps involved in finding the bottleneck in a process with a product mix include all the following EXCEPT _________. A) compute the total demand for each resource B) compute the capacity level for each resource C) compute the flow rate for each resource D) compute the implied utilization for each resource

312)

The resource with the _________ is the bottleneck in a process with multiple types of flow units. A) highest capacity B) lowest capacity C) highest implied utilization D) lowest implied utilization

313)

C&A Industries makes two types of products using four machines from 9 a.m. to 5 p.m. each day. Product A visits machines 1, 2, and 4. Product B only visits machines 1 and 3. The capacity is 0.4 unit per minute at machine 1, 0.12 unit per minute at machine 2, 0.2 unit per minute at machine 3, and 0.3 unit per minute at machine 4. The demand per day is 40 units for Product A and 160 units for Product B. Which is the implied utilization for the bottleneck resource? A) 1.67 B) 1.04 C) 0.69 D) 0.28

314)

C&A Industries makes two types of products using four machines from 9 a.m. to 5 p.m. each day. Product A visits machines 1, 2, and 4. Product B only visits machines 1 and 3. The capacity is 0.4 unit per minute at machine 1, 0.12 unit per minute at machine 2, 0.2 unit per minute at machine 3, and 0.3 unit per minute at machine 4. The demand per day is 40 units for Product A and 160 units for Product B. What is the implied utilization for machine 1? A) 1.67 B) 1.04 C) 0.69 D) 0.28

315)

C&A Industries makes two types of products using four machines from 9 a.m. to 5 p.m. each day. Product A visits machines 1, 2, and 4. Product B only visits machines 1 and 3. The capacity is 0.4 unit per minute at machine 1, 0.12 unit per minute at machine 2, 0.2 unit per minute at machine 3, and 0.3 unit per minute at machine 4. The demand per day is 40 units for Product A and 160 units for Product B. Which resource is the bottleneck? A) Machine 1 B) Machine 2 C) Machine 3 D) Machine 4

316)

C&A Industries makes two types of products using four machines from 9 a.m. to 5 p.m. each day. Product A visits machines 1, 2, and 4. Product B only visits machines 1 and 3. The capacity is 0.4 unit per minute at machine 1, 0.12 unit per minute at machine 2, 0.2 unit per minute at machine 3, and 0.3 unit per minute at machine 4. The demand per day is 40 units for Product A and 160 units for Product B. Assume the relative proportion between the two product types remains constant. What is the flow rate for Product B in units per day? A) 24 B) 96 C) 120 D) 192

317)

318)

Which of the following statements is TRUE regarding implied utilization? A) A resource with an implied utilization of 0.7 means that capacity exceeds demand by 70%. B) A resource with an implied utilization of 0.7 means that demand exceeds capacity by 70%. C) A resource with an implied utilization of 0.7 means that demand exceeds capacity by 30%. D) A resource with an implied utilization of 0.7 means that capacity exceeds demand by 42.86%.

Suppose implied utilization at a machine is 1.9. If total demand at the machine is 4 units per minute, what is the capacity of the machine in units per hour? A) 7.6 B) 126.3 C) 240 D) 456

319)

A deli offers two types of products—cold sandwiches and warm sandwiches. There are four employees. A cashier takes the customer’s order and processes the payment, a sandwich maker prepares cold sandwiches, a cook prepares warm sandwiches, and a manager bags the order and gives it to the customer. All customers are processed by the cashier and the manager. Only customers who order cold sandwiches are processed by the sandwich maker, and only customers who order warm sandwiches are processed by the cook. At peak time, 50 customers arrive every hour who order cold sandwiches and 40 customers arrive every hour who order warm sandwiches. The cashier takes 45 seconds to process each order and take a payment. The sandwich maker takes 50 seconds to prepare each cold sandwich order. The cook takes 2.5 minutes to cook a warm sandwich but can process (cook) three different orders at the same time. The manager takes 30 seconds to bag each order and pass it to the customer. Which employee is the bottleneck at peak time? A) Cashier B) Sandwich maker C) Cook D) Manager

320)

A deli offers two types of products—cold sandwiches and warm sandwiches. There are four employees. A cashier takes the customer’s order and processes the payment, a sandwich maker prepares cold sandwiches, a cook prepares warm sandwiches, and a manager bags the order and gives it to the customer. All customers are processed by the cashier and the manager. Only customers who order cold sandwiches are processed by the sandwich maker, and only customers who order warm sandwiches are processed by the cook. At peak time, 50 customers arrive every hour who order cold sandwiches and 40 customers arrive every hour who order warm sandwiches. The cashier takes 45 seconds to process each order and a take payment. The sandwich maker takes 50 seconds to prepare each cold sandwich order. The cook takes 2.5 minutes to cook a warm sandwich but can process (cook) three different orders at the same time. The manager takes 30 seconds to bag each order and pass it to the customer. What is the implied utilization of the sandwich maker at peak time? A) 0.69 B) 1.00 C) 1.13 D) 1.25

321)

A deli offers two types of products—cold sandwiches and warm sandwiches. There are four employees. A cashier takes the customer’s order and processes the payment, a sandwich maker prepares cold sandwiches, a cook prepares warm sandwiches, and a manager bags the order and gives it to the customer. All customers are processed by the cashier and the manager. Only customers who order cold sandwiches are processed by the sandwich maker, and only customers who order warm sandwiches are processed by the cook. At peak time, 50 customers arrive every hour who order cold sandwiches and 40 customers arrive every hour who order warm sandwiches. The cashier takes 45 seconds to process each order and take a payment. The sandwich maker takes 50 seconds to prepare each cold sandwich order. The cook takes 2.5 minutes to cook a warm sandwich but can process (cook) three different orders at the same time. The manager takes 30 seconds to bag each order and pass it to the customer. What is the hourly flow rate of customers who order cold sandwiches at peak time? A) 28.8 B) 35.6 C) 44.4 D) 72

322)

About 80% of customers who receive a promotion coupon will visit the store, but only 20% of those in the store will make a purchase. What is the overall process yield of the promotion? A) 25% B) 60% C) 20% D) 16%

323)

About 80% of customers who receive a promotion coupon will visit the store, but only 20% of those in the store will make a purchase. How many promotion coupons have to be sent in order to get 100 customers to make a purchase? A) 1600 B) 625 C) 500 D) 125

324)

Which of the following is an example of attrition loss? A) All customers renew their magazine subscriptions. B) Defective units in a manufacturing process are reworked. C) More loan applications are received than approved. D) The number of students at the beginning of a course is the same at the end.

325)

In a process with attrition loss, all flow units start at _________ resource and drop out of the process at _________ points. A) the same, different B) a different, the same C) the same, the same D) a different, different

326)

When defective flow units are removed from the process and do not return, this process is known as _________. A) reworking B) yielding C) scrapping D) eliminating

327)

The _________ of a resource measures the percentage of _________ units that are processed at this resource. A) yield, defective B) yield, non-defective C) capacity, defective D) capacity, non-defective

328)

329)

Which of the following statements about the yield of a process is FALSE? A) A process can have a yield of 100%. B) A process with attrition loss has a lower yield than one without attrition loss. C) A process without attrition loss will have a yield of 100%. D) A process can have a yield that exceeds 100%.

A three-step process is used to make a product. The yield of step 1 is 85%; of step 2, 70%; and of step 3, 60%. What is the yield of the overall process? A) 71.7% B) 60% C) 35.7% D) 32.5%

330)

A three-step process is used to make a product. The yield of step 1 is 50%; of step 2, 80%; and of step 3, 20%. How many units must be started at step 1 to get 100 good units from the process? A) 500 B) 200 C) 150 D) 1250

331)

A three-step process is used to make a product. The yield of step 1 is 80%; of step 2, 40%; and of step 3, 50%. Step 1 takes 2 minutes per unit. Step 2 takes 4 minutes per unit. Step 3 takes 5 minutes. Which step in the process is the bottleneck, and how many good units can be produced from this process in one 8-hour day? A) Step 3, 15 B) Step 3, 38 C) Step 2, 48 D) Step 2, 24

332)

A three-step process is used to make a product. The yield of step 1 is 80%; of step 2, 40%; and of step 3, 50%. Step 1 takes 2 minutes per unit. Step 2 takes 4 minutes per unit. Step 3 takes 5 minutes. How many good units can the process produce per hour? A) 0.05 B) 0.1 C) 3 D) 6

333)

A manufacturing process consists of three steps. Step 1 has a 90% yield, step 2 has a 75% yield, and step 3 has an 85% yield. What is the overall process yield? A) 37.5% B) 57.4% C) 75% D) 83.3%

334)

A manufacturing process consists of three steps. Step 1 has a 90% yield, step 2 has a 75% yield, and step 3 has an 85% yield. If 125 units enter the process every hour, how many good units will exit step 2 every hour? A) 0.675 B) 71.7 C) 84.4 D) 93.4

335)

A manufacturing process consists of three steps. Step 1 has a 90% yield, step 2 has a 75% yield, and step 3 has an 85% yield. How many units should enter step 1 every hour to yield 250 good units exiting at the end of the process each hour? A) 278 B) 296 C) 333 D) 436

336)

When analyzing a process flow with flow unit-dependent processing times, the flow unit is changed from using _________ to _________. A) a minute of work, a unit of demand B) a unit of demand, a unit of work C) a unit of resource, a unit of demand D) a unit of demand, a unit of resource

337)

A workload matrix has _________ as columns and _________ as rows. A) resource types, load types B) work types, load types C) work types, flow unit types D) flow unit types, resource types

338)

A workload matrix captures the _________ that each flow unit type requires at each resource. A) amount of work B) amount of demand C) amount of revenue D) amount of supply

339)

Which of the following statements is TRUE regarding a process flow with flow unitdependent processing times? A) Processing times at a given resource are the same for each product/customer type. B) A unit of demand is used as a flow unit. C) The bottleneck is the resource with the highest implied utilization. D) The bottleneck is the resource with the highest workload.

340)

Which of the following statements is FALSE regarding the workload matrix? A) It has the same number of columns and rows as the demand matrix. B) It computes the total amount of work requested at a resource across all customer (flow unit) types. C) It captures the time available at each resource. D) It has flow unit types as columns and resource types as rows.

341)

Two types of customers are served by a two-step process. Each resource is staffed by one employee. Customer A spends two minutes at resource X and five minutes at resource Y. Customer B spends five minutes at resource X and two minutes at resource Y. The demand rate per hour is 10 customer As and 15 customer Bs. Which of the following is the workload matrix for this situation? All customers Resource X Resource Y

95 80 Customer A

Customer B

Resource X Resource Y

2 5 Customer A

5 2 Customer B

Resource X Resource Y

20 50 Customer A

75 30 Customer B

105

All resources 342)

Two types of customers are served by a two-step process. Each resource is staffed by one employee. Customer A spends two minutes at resource X and five minutes at resource Y. Customer B spends five minutes at resource X and two minutes at resource Y. The demand rate per hour is 10 customer As and 15 customer Bs. What is the workload for resource X across all customer types? A) 70 minutes per hour B) 80 minutes per hour C) 95 minutes per hour D) 105 minutes per hour

343)

Two types of customers are served by a two-step process. Each resource is staffed by one employee. Customer A spends two minutes at resource X and five minutes at resource Y. Customer B spends five minutes at resource X and two minutes at resource Y. The demand rate per hour is 10 customer As and 15 customer Bs. What is the workload for resource Y across all customer types? A) 70 minutes per hour B) 80 minutes per hour C) 95 minutes per hour D) 105 minutes per hour

344)

Two types of customers are served by a two-step process. Each resource is staffed by one employee. Customer A spends two minutes at resource X and five minutes at resource Y. Customer B spends five minutes at resource X and two minutes at resource Y. The demand rate per hour is 10 customer As and 15 customer Bs. Where in the process is the bottleneck and what is its implied utilization? A) Resource X, 1.58 B) Resource X, 1.33 C) Resource Y, 1.33 D) Resource Y, 1.58

345)

Two types of customers are served by a two-step process. Each resource is staffed by one employee. Customer A spends two minutes at resource X and five minutes at resource Y. Customer B spends five minutes at resource X and two minutes at resource Y. The demand rate per hour is 10 customer As and 15 customer Bs. What is the flow rate for customer A, holding the mix of A and B constant? A) 1.6 customers per hour B) 6.3 customers per hour C) 7.5 customers per hour D) 9.5 customers per hour

346)

Two types of customers are served by a two-step process. Each resource is staffed by one employee. Customer A spends two minutes at resource X and five minutes at resource Y. Customer B spends five minutes at resource X and two minutes at resource Y. The demand rate per hour is 10 customer As and 15 customer Bs. What is the flow rate for customer B, holding the mix of A and B constant? A) 1.6 customers per hour B) 6.3 customers per hour C) 9.5 customers per hour D) 11.25 customers per hour

347)

In a manufacturing process, two types of products flow through a three-step process. Each step consists of a single machine. Product A spends 45 seconds at the first step, 35 seconds at the second step, and 50 seconds at the third step. Product B spends 36 seconds at the first step, 40 seconds at the second step, and 25 seconds at the third step. The demand rate for Product A is 100 units per hour, and the demand rate for Product B is 120 units per hour. Where in the process is the bottleneck and what is its implied utilization? A) Step 1, 2.45 B) Step 2, 2.31 C) Step 3, 2.22 D) Step 3, 2.75

348)

In a manufacturing process, two types of products flow through a three-step process. Each step consists of a single machine. Product A spends 45 seconds at the first step, 35 seconds at the second step, and 50 seconds at the third step. Product B spends 36 seconds at the first step, 40 seconds at the second step, and 25 seconds at the third step. The demand rate for Product A is 100 units per hour, and the demand rate for Product B is 120 units per hour. What is the flow rate for Product B in units per hour, holding the mix of A and B constant? A) 38.7 B) 49.0 C) 72.5 D) 120.0

349)

Rework is a _________ of activities that have to be completed by a _________ flow unit in order to be restored to a good flow unit. A) reduction, defective B) reduction, non-defective C) repetition, defective D) repetition, non-defective

350)

Which of the following process flow diagrams DOES NOT represent a process with rework?

D) 351)

Which of the following statements concerning rework is TRUE? A) Rework does not involve performing an extra set of activities. B) Rework does not involve inventories. C) Rework can never return a process yield to 100%. D) Rework increases the demand rate for a particular resource.

352)

Which of the following statements concerning rework is TRUE? A) Rework involves only bottleneck resources. B) Rework does not affect overall process capacity. C) Rework leads to a lower overall process yield than scrap. D) Rework leads to a higher overall process yield than scrap.

353)

Students who failed a course last semester are retaking it this semester. This is an example of _________. A) attrition loss B) rework C) compliance D) process reengineering

354)

_________ refers to a _________ of activities or an extra set of activities that have to be completed by a defective unit in order to be restored to a good flow unit. A) Rework, removal B) Reduce, removal C) Rework, repetition D) Reduce, repetition

355)

A four-step process is used to make a product. The first resource takes 8 minutes per unit, the second takes 7 minutes per unit, the third takes 2 minutes per unit, and the fourth takes 10 minutes per unit. 20% of all units have to be reworked. For that, they have to revisit the third and fourth resources. Each resource is staffed by one worker. Rework takes the same processing times as the first pass and always fixes the problem. Where is the bottleneck? A) Resource 1 B) Resource 2 C) Resource 3 D) Resource 4

356)

A four-step process is used to make a product. The first resource takes 8 minutes per unit, the second takes 7 minutes per unit, the third takes 2 minutes per unit, and the fourth takes 10 minutes per unit. 20% of all units have to be reworked. For that, they have to revisit the third and fourth resources. Each resource is staffed by one worker. Rework takes the same processing times as the first pass and always fixes the problem. What is the capacity of the process in units per minute? A) 0.08 B) 0.125 C) 0.143 D) 0.417

357)

The salesforce of Small Travel Company (STC) is selling cultural immersion programs to U.S. college students that allow them to spend 3 months in Europe. STC advertises in various college newspapers, as well as via social media. Potential customers fill out an online application form expressing their interest in more information about this experience. The form also includes their phone number for follow-up discussion, which sometimes, but not always, leads to the customer purchasing the package (more details below). On 60 consecutive days in the winter, STC’s employees work hard to sell these programs to elite university students. The goal of the company is to sell, on average, two packages per day, leading to a total of 120 sold packages. The sales process works in four steps: 1. One salesperson reaches out to the potential customer by phone in order to put together a full profile of the customer, including skills and location preferences (Germany, Italy, France, etc.). The call takes on average 20 minutes. After the call, each profile is forwarded to a language teacher. 2. The language teacher looks at the student’s profile and also organizes a quick follow-up call. This takes, on average, 40 minutes per profile. The teacher rejects 60% of the profiles as the student would not have the language skills to benefit from an STC trip. From the remaining 40% of the profiles, half tell the teacher that they are no longer interested in participating. The teacher then forwards the remaining profiles to the STC accountant. 3. STC’s accountant then contacts the student to make a 10% down payment. This takes about 20 minutes per customer. 4. Finally, the teacher’s assistant contacts the customer to confirm the trip and start working on a travel schedule. At this point, an average of one-third of the students decide that they will not participate in the trip (in which case, STC and the student agree to give the 10% down payment to a charitable cause). This takes on average 50 minutes per student. All employees work 8 hours per day. How many students does STC have to contact each day through its call center to fill, on average, its target of 120 students per season (2 students per day)? A) 5 students/day B) 15 students/day C) 35 students/day D) 120 students/day

358)

The salesforce of Small Travel Company (STC) is selling cultural immersion programs to U.S. college students that allow them to spend 3 months in Europe. STC advertises in various college newspapers, as well as via social media. Potential customers fill out an online application form expressing their interest in more information about this experience. The form also includes their phone number for follow-up discussion, which sometimes, but not always, leads to the customer purchasing the package (more details below). On 60 consecutive days in the winter, STC’s employees work hard to sell these programs to elite university students. The goal of the company is to sell, on average, two packages per day, leading to a total of 120 sold packages. The sales process works in four steps: 1. One salesperson reaches out to the potential customer by phone in order to put together a full profile of the customer, including skills and location preferences (Germany, Italy, France, etc.). The call takes on average 20 minutes. After the call, each profile is forwarded to a language teacher. 2. The language teacher looks at the student’s profile and also organizes a quick follow-up call. This takes, on average, 40 minutes per profile. The teacher rejects 60% of the profiles as the student would not have the language skills to benefit from an STC trip. From the remaining 40% of the profiles, half tell the teacher that they are no longer interested in participating. The teacher then forwards the remaining profiles to the STC accountant. 3. STC’s accountant then contacts the student to make a 10% down payment. This takes about 20 minutes per customer. 4. Finally, the teacher’s assistant contacts the customer to confirm the trip and start working on a travel schedule. At this point, an average of one-third of the students decide that they will not participate in the trip (in which case, STC and the student agree to give the 10% down payment to a charitable cause). This takes on average 50 minutes per student. All employees work 8 hours per day. Which resource is the bottleneck? A) The salesperson B) The language teacher C) The accountant D) The teacher’s assistant

359)

Consider the following four-step assembly operation with quality problems. All resources are staffed by one employee. 1. The first resource has a processing time of 5 minutes per unit. 2. The second resource has a processing time of 6 minutes per unit. 3. The third resource has a processing time of 3 minutes per unit. With a 30% probability, the flow unit coming out of the third resource has to be reworked. In that case, the operations at the first, second, and third resources are repeated. You can assume that (a) rework always succeeds (i.e., a unit going through the rework loop will always work after the third resource) and (b) the processing times for units in rework are the same as for regular units. 4. The fourth resource has a processing time of 4 minutes per unit. Which resource in the process is the bottleneck? A) The first resource B) The second resource C) The third resource D) The fourth resource

360)

Consider the following four-step assembly operation with quality problems. All resources are staffed by one employee. 1. The first resource has a processing time of 5 minutes per unit. 2. The second resource has a processing time of 6 minutes per unit. 3. The third resource has a processing time of 3 minutes per unit. With a 30% probability, the flow unit coming out of the third resource has to be reworked. In that case, the operations at the first, second, and third resources are repeated. You can assume that (a) rework always succeeds (i.e., a unit going through the rework loop will always work after the third resource) and (b) the processing times for units in rework are the same as for regular units. 4. The fourth resource has a processing time of 4 minutes per unit. What is the capacity of the process (in units per hour)? What is the capacity of the process (in units per hour)? A) 6.0 B) 7.7 C) 8.9 D) 20.1

361)

Consider a process that has multiple flow units with different demand rates and different paths through the process flow diagram. Consider the following statements: 1. The resource with the largest total demand rate is the bottleneck 2. The implied utilization can never be bigger than 100%. 3. The resource that has the highest implied utilization is the bottleneck. Which of the following choices identifies the correct statement(s)? A) 3 only B) 1 and 2 C) 1 and 3 D) 2 only

362)

GV is a small accounting firm supporting wealthy individuals in their preparation of annual income tax statements. Every December, GV sends out a short survey to its customers, asking for the information required for preparing tax statements. Based on 50 years of experience, GV categorizes its cases into the following two groups: Group 1 (new customers): 20 percent of cases Group 2 (repeat customers): 80 percent of cases An administrative support person processes every tax statement. A senior accountant (the owner of GV) processes only tax statements for new customers. A junior accountant processes tax statements for repeat customers. A) 33.3% B) 66.7% C) 83.3% D) 93.3%

363)

364)

Which of the following statements about the concepts of "labor utilization" and "implied utilization" is correct? A) Labor utilization is above 100% if the process is capacity constrained. B) Labor utilization is above 100% if the process is demand constrained. C) If the process is capacity constrained, then implied utilization is higher than the labor utilization. D) If the process is demand constrained, then implied utilization is higher than the labor utilization.

Answer Key Test name: chapter 5 1) FALSE

Attrition loss is an example of when flow units exit the process before completion. Therefore, some flow units exit the process earlier than others. 2) FALSE

An implied utilization less than 100% simply means that the resource has capacity to meet demand. It has no bearing on whether or not the resource is a bottleneck. 3) FALSE

The overall process yield is the product of the yields of all resources. 4) FALSE

When analyzing a process flow with flow unit-dependent processing times, the unit of analysis for a flow unit becomes a time unit, such as number of minutes or hours of work. 5) FALSE

Rework lowers the process capacity only when it involves a bottleneck resource in restoring reworked units. 6) TRUE

Reworked units revisit a resource and therefore consume more time at that resource than good units. 7) A

Attrition loss refers to flow units leaving the process before they are completed. 8) C

A product mix refers to a combination of different flow unit types moving through a process. 9) C

There are four types of resources and four types of customers. 10) D

There are four customer types and three resource types. 11) A

Demand for greeter = 20 + 10 + 5 + 65 = 100. 12) C

Demand for assistants = 10 customers who need assistance in completing a purchase + 5 who need assistance but leave without making a purchase = 15. 13) B

Demand for cashiers = 10 customers who buy and need assistance + 65 who buy without needing assistance = 75. 14) D

A product mix is a combination of different types of flows moving through a process. 15) B

A demand matrix determines how many flow units of each type are flowing through each resource. 16) C

Each student will be assigned to one of the five tour groups. Therefore, there will be six resources (the receptionist and five tour guides) and five types of students. 17) C

Demand rate for Product A is 40 units per day. Demand rate for Product B is 160 units per day. Machine 1 is visited by Products A and B. Machine 2 is visited by Product A only. Machine 3 is visited by Product B only. Machine 4 is visited by Product A only. 18) C

Implied utilization = Total demand at the resource ÷ Capacity at the resource. Therefore, if implied utilization is 1.4, that means demand exceeds capacity by 1.4 – 1 = 0.4 or 40%. 19) C

Implied utilization measures by how much demand exceeds the capacity of the resource. If it exceeds 1, then it means the process is capacity constrained. 20) A

A process is capacity constrained if the implied utilization of any resource is above 100%. 21) B

A process is demand constrained if the implied utilization of the resource is below 100%. 22) C

The bottleneck in a process with a product mix is the resource with the highest implied utilization, and does not involve the flow rate. Furthermore, flow rate should be computed in relation to each flow unit type. 23) C

The resource with the highest implied utilization is the bottleneck in a process with multiple types of flow units. 24) A

Total demand rate for machine 1 = 40 + 160 = 200 units per day. Total demand rate for machine 2 = 40 units per day. Total demand rate for machine 3 = 160 units per day. Total demand rate for machine 4 = 40 units per day. Implied utilization for machine 1 = 200 ÷ (0.4 × 8 × 60) = 1.04. Implied utilization for machine 2 = 40 ÷ (0.12 × 8 × 60) = 0.69. Implied utilization for machine 3 = 160 ÷ (0.2 × 8 × 60) = 1.67. Implied utilization for machine 4 = 40 ÷ (0.3 × 8 × 60) = 0.28. The bottleneck is machine 3 with an implied utilization of 1.67. 25) B

Total demand for machine 1 = 40 + 160 = 200 units per day. Capacity for machine 1 = 0.4 unit per minute or 0.4 × 8 × 60 units per day. Implied utilization for machine 1 = 200 ÷ (0.4 × 8 × 60) = 1.04. 26) C

Total demand for machine 1 = 40 + 160 = 200 units per day. Total demand for machine 2 = 40 units per day. Total demand for machine 3 = 160 units per day. Total demand for machine 4 = 40 units per day. Implied utilization for machine 1 = 200 ÷ (0.4 × 8 × 60) = 1.04. Implied utilization for machine 2 = 40 ÷ (0.12 × 8 × 60) = 0.69. Implied utilization for machine 3 = 160 ÷ (0.2 × 8 × 60) = 1.67. Implied utilization for machine 4 = 40 ÷ (0.3 × 8 × 60) = 0.28. The bottleneck is the resource with the highest implied utilization, which is machine 3. 27) B

Product B visits machines 1 and 3. Product A also visits machine 1, but not machine 3. Therefore, implied utilization of machine 1 = 200 ÷ (0.4 × 8 × 60) = 1.04. Implied utilization of machine 3 = 160 ÷ (0.2 × 8 × 60) = 1.67. The implied utilization is highest at machine 3, and 1.67 is greater than 1, so the process is capacity constrained. Flow rate for Product B = Demand rate ÷ Implied utilization of the bottleneck = 160 ÷ 1.67 = 96 units per day 28) D

Implied utilization = Total demand at the resource ÷ Capacity at the resource. If demand = 1, then 1 ÷ capacity = 0.7. Therefore, capacity = 1 ÷ 0.7 = 1.4286 which means capacity exceeds demand by (1.4286 − 1) ÷ 1 × 100 = 42.86%. 29) B

Implied utilization = Total demand at the machine ÷ Capacity at the machine. If demand = 4 units per minute, then 4 ÷ capacity = 1.9. Therefore, capacity = 2.105 units per minute, or 2.015 × 60 minutes per hour = 126.3 units per hour. 30) A

The demand rate for cashier = 50 + 40 = 90 customers per hour. The demand rate for sandwich maker = 50 customers per hour. The demand rate for cook = 40 customers per hour. The demand rate for manager = 50 + 40 = 90 customers per hour. The capacity of cashier = 1 ÷ 45 × 60 seconds/minute × 60 minutes/hour = 80 customers per hour. The capacity of sandwich maker is 1 ÷ 50 × 60 seconds/minute × 60 minutes/hour = 72 customers per hour. The capacity of cook is 1 ÷ 2.5 × 60 minutes/hour × 3 orders at a time = 72 customers per hour. The capacity of the manager is 1 ÷ 30 × 60 seconds/minute × 60 minutes/hour = 120 customers per hour. The implied utilizations are as follows: 90 ÷ 80 = 1.125 for the cashier, 50 ÷ 72 = 0.694 for the sandwich maker, 40 ÷ 72 = 0.556 for the cook, and 90 ÷ 120 = 0.75 for the manager. The bottleneck is the cashier. 31) A

The demand rate for sandwich maker = 50 customers per hour. The capacity of sandwich maker is 1 ÷ 50 × 60 seconds/minute × 60 minutes/hour = 72 customers per hour. Therefore, the implied utilization of the sandwich maker is 50 ÷ 72 = 0.69. 32) C

33) D

Of the 100% of customers who received a coupon, 80% visited the store, and 20% of those made a purchase. Overall process yield = 1 × 0.80 × 0.20 = 0.16. 34) B

Use the formula “Number of units started to get Q good units = Q ÷ Process yield”. Q is 100, and process yield is 1 × 0.80 × 0.20 = 0.16. Number of promotion coupons that have to be sent = 100 ÷ 0.16 = 625 35) C

Loan applicants who are rejected in the loan application process are regarded as attrition losses. 36) A

In a process with attrition loss, all flow units start at the same resource but then drop out of or are removed from the process at different points. 37) C

Scrapping is the process of removing defective flow units from a process which are not returned to the process for rework. 38) B

The yield of a resource measures the percentage of non-defective units that are processed at this resource. 39) D

The yield of a process is the percentage of units processed correctly. It cannot exceed 100%. 40) C

The yield of the overall process = 0.85 × 0.7 × 0.6 = 0.357 = 35.7% 41) D

Process yield = 0.5 × 0.8 × 0.2 = 0.08 or 8%. Number of good units = Q ÷ Process yield = 100 ÷ 0.08 = 1250. 42) D

Starting at the end of the process, the demand to produce one good unit at step 3 is 1 ÷ 0.5 = 2 units. The demand at step 2 is then 2 ÷ 0.4 = 5 units. The demand at step 1 is, therefore, 5 ÷ 0.8 = 6.25 units. The implied utilization values are 6.25 ÷ (1 ÷ 2) = 12.5 at step 1, 5 ÷ (1 ÷ 4) = 20 at step 2, and 2 ÷ (1 ÷ 5) = 10 at step 3. Step 2 is the bottleneck because it has the highest implied utilization. The process capacity is, therefore, 1 ÷ 20 units per minute = 1 ÷ 20 × 60 minutes/hour × 8 hours/day = 24 good units per 8-hour day. 43) C

Starting at the end of the process, the demand to produce one good unit at step 3 is 1 ÷ 0.5 = 2 units. The demand at step 2 is therefore 2 ÷ 0.4 = 5 units. The demand at step 1 is therefore 5 ÷ 0.8 = 6.25 units. The implied utilization values are 6.25 ÷ (1 ÷ 2) = 12.5 at step 1, 5 ÷ (1 ÷ 4) = 20 at step 2, and 2 ÷ (1 ÷ 5) = 10 at step 3. Step 2 is the bottleneck since it has the highest implied utilization. The process capacity is therefore 1 ÷ 20 units per minute = 1 ÷ 20 × 60 minutes/hour = 3 good units per hour. 44) B

The overall process yield is 0.90 × 0.75 × 0.85 = 0.574 = 57.4%. 45) C

125 × 0.90 × 0.75 = 84.4 units per hour. 46) D

The overall process yield is 0.90 × 0.75 × 0.85 = 0.5738 = 57.38%. Using the formula “Number of units started to get Q good units = Q ÷ Process yield,” we have 250 ÷ 0.5738 = 436. 47) B

When analyzing a process flow with flow unit-dependent processing times, the flow unit is changed from using a unit of demand to a unit of work. 48) D

A workload matrix has flow unit types as columns and resource types as rows. 49) A

A workload matrix captures the amount of work that each flow unit type requires at each resource. 50) C

The bottleneck in a process flow with flow unit-dependent processing times is the resource with the highest implied utilization.

51) C

The workload matrix does not contain information about the time available at each resource. 52) C

Workload for customer A at resource X = 10 × 2; Workload for customer A at resource Y = 10 × 5; Workload for customer B at resource X = 15 × 5; Workload for customer B at resource Y = 15 × 2. 53) C

Workload for resource X = (10 × 2) + (15 × 5) = 95 minutes per hour. 54) B

Workload for resource Y = (10 × 5) + (15 × 2) = 80 minutes per hour. 55) A

Workload for resource X = (10 × 2) + (15 × 5) = 95 minutes per hour; Implied utilization for resource X = 95 ÷ 60 = 1.58. Workload for resource Y = (10 × 5) + (15 × 2) = 80 minutes per hour; Implied utilization for resource Y = 80 ÷ 60 = 1.33. Resource X has the higher implied utilization and therefore is the bottleneck. 56) B

Workload for step 1 = (100 × 45) + (120 × 36) = 8820 seconds per hour. Workload for step 2 = (100 × 35) + (120 × 40) = 8300 seconds per hour. Workload for step 3 = (100 × 50) + (120 × 25) = 8000 seconds per hour. Because there is a single machine at each step, the available capacity at each step is 60 seconds per minute × 60 minutes per hour = 3600 seconds per hour. The implied utilization for step 1 is therefore 8820 ÷ 3600 = 2.45, the implied utilization at step 2 is 8300 ÷ 3600 = 2.31, and the implied utilization at step 3 is 8000 ÷ 3600 = 2.22. Step 1 is the bottleneck and its implied utilization is 2.45. 59) B

Rework is to repeat activities that have to be completed by a defective flow unit in order to be restored to a good flow unit. 61) A

Rework is represented as a loop showing resources that a unit has revisited or an extra set of activities that have to be completed by a defective flow unit in order to be restored to a good flow unit. 62) D

Rework revisits a particular resource and thus increases the demand rate for that resource. 63) D

Rework attempts to restore the overall process yield to 1. Scrap, on the other hand, simply exits the process according to the yield at a particular resource. 64) B

Rework refers to a repetition of activities or an extra set of activities that have to be completed by a defective unit in order to be restored to a good flow unit. 65) C

Rework refers to a repetition of activities or an extra set of activities that have to be completed by a defective unit in order to be restored to a good flow unit. 66) D

Workload for resource 1 = (0.8 × 8) + (0.2 × 8) = 8 minutes per unit; Workload for resource 2 = (0.8 × 7) + (0.2 × 7) = 7 minutes per unit; Workload for resource 3 = (0.8 × 2) + [0.2 × (2 + 2)] = 2.4 minutes per unit; Workload for resource 4 = (0.8 × 10) + [0.2 × (10 + 10)] = 12 minutes per unit. Each resource has one worker who can provide one minute of work each minute. The implied utilization for resource 1 is 8 ÷ 1 = 8; for resource 2, it is 7 ÷ 1 = 7; for resource 3, it is 2.4 ÷ 1 = 2.4; and for resource 4, it is 12 ÷ 1 = 12. The highest implied utilization is 12 at resource 4. 67) A

Step 1 passes 100%. Step 2 passes 20% (40% pass × 50% choose to continue). Step 3 passes 100%. Step 4 passes 67% (2 ÷ 3 of students at this step choose to continue). Use the formula Number of good units per day = Q ÷ process yield. Q = 2 ÷ (1 × .2 × 1 × .67) = 14.93 rounded up to 15. 69) B

Calculation of implied utilization Resource

Yield

Demand

Capacity

Salesperson

1.00

15 ÷ 1 = 15

Language teacher 0.20

3 ÷ 0.2 = 15

Accountant

1.00

3 ÷ 1 = 3

Teacher’s assistant

0.67

2 ÷ 0.67 = 3

1 ÷ 20 × 60 × 8 = 24 students per day 1 ÷ 40 × 60 × 8 = 12 students per day 1 ÷ 20 × 60 × 8 = 24 students per day 1 ÷ 50 × 60 × 8 = 9.6 students per day

Implied utilization 15 ÷ 24 = 0.625 15 ÷ 12 = 1.25 3 ÷ 24 = 0.125 3 ÷ 9.6 = 0.3125

Yield is based on "1 good output." Demand is the quantity which must be started at that resource. The Demand formula is “number of desired units” ÷ “yield for that resource,” and we will work backwards starting at teacher’s assistant. The goal is "2 good outputs" per day exiting the process at teacher’s assistant. 2 ÷ 0.67 = 3 applications that must be started by the teacher’s assistant per day, in order to result in 2 good outputs. This demand is placed in the numerator of the previous resource, the accountant, and so on, backward to the salesperson. Implied utilization is demand ÷ capacity. The highest implied utilization is the language teacher. 70) B Good

Rework

WL = Resource 1

0.7 × 5

WL = Resource 2

0.7 × 6

WL = Resource 3

0.7 × 3

0.3 × [5 + 5] 0.3 × [6 + 6] 0.3 × [3 + 3]

WL = Resource 4

1.00 × 4

Total per unit 3.5 + 3 = 6.5 4.2 + 3.6 = 7.8 2.1 + 1.8 = 3.9 4

IU per minute

The second resource is the bottleneck since it has the highest implied utilization. 71) B

6.5 ÷ 1 = 6.5 7.8 ÷ 1 = 7.8 3.9 ÷ 1 = 3.9 4 ÷ 1 = 4

Good

Rework

Total per unit

WL = Resource 1

0.7 × 5

WL = Resource 2

0.7 × 6

WL = Resource 3

0.7 × 3

0.3 × [5 + 5] 0.3 × [6 + 6] 0.3 × [3 + 3]

3.5 + 3 = 6.5 4.2 + 3.6 = 7.8 2.1 + 1.8 = 3.0 4

WL = Resource 4 1.00 × 4

IU per minute 6.5 ÷ 1 = 6.5 7.8 ÷ 1 = 7.8 3.9 ÷ 1 = 3.9 4 ÷ 1 = 4

The second resource is the bottleneck since it has the highest implied utilization (7.8). The capacity is 1 ÷ 7.8 = 0.1282 unit per minute × 60 = 7.7 units per hour. 72) A

Implied utilization can be higher than 100%. Total demand and capacity at the resource must be taken into account in determining where the bottleneck is located. The resource with the highest implied utilization is the bottleneck. 73) D

Implied utilization is Total demand at the resource ÷ Capacity at the resource. Demand for the junior accountant is 80% of the 35 statements arriving weekly, or 28 statements. The capacity is 30 statements per week. IU = 28 ÷ 30 = 93.3%. 74) C

The bottleneck is the resource with the highest implied utilization. Administrative support person processes all 35 statements and has capacity for 40. IU = 35 ÷ 40 = 87.5%. Senior accountant IU = (0.2 × 35) ÷ 10 = 70%. Junior accountant IU = (0.8 × 35) ÷ 30 = 93.3%. Therefore, the junior accountant is the bottleneck resource. 75) C

Labor utilization cannot be above 100%. Implied utilization can exceed 100%, as it includes additional information about how much demand exceeds capacity of the resource. In a capacityconstrained process, implied utilization will be higher than utilization because labor utilization = flow rate ÷ capacity and implied utilization = demand rate/capacity and, by definition, the demand rate must exceed the flow rate in such a capacity-constrained process.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 365) All learning curves have an exponential growth trajectory. ⊚ true ⊚ false 366)

The power law assumes a constant percentage improvement with each doubling of cumulative experience. ⊚ true ⊚ false

367)

A log-log plot of a learning curve that follows the power law shows a non-linear decrease as a curve. ⊚ true ⊚ false

368)

For volumes greater than one, the cumulative learning curve coefficients are always bigger than the learning curve coefficients. ⊚ true ⊚ false

369)

Average tenure is the average time an employee spends with a company before leaving. ⊚ true ⊚ false

370)

Standardization does NOT apply to service settings because of the high variability in processing times. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 371) The most common forms of learning curves can use any of the following performance measures to plot against cumulative experience EXCEPT _________. A) labor content B) unit cost C) processing time D) interest rate

372)

Which of the following learning curves captures the relationship between the percentage of defects (y-axis) and the number of times an operation is performed (x-axis)?

373)

A(n) _________ learning curve is indicative of a positive relationship between the experience with a process and its performance measure such as production yield or customer satisfaction score. A) downward-sloping B) upward-sloping C) flat D) bell-shaped

374)

A(n) _________ learning curve is indicative of a negative relationship between the experience with the process and its performance measure such as processing time or number of defects. A) downward-sloping B) upward-sloping C) flat D) bell-shaped

375)

Two different performance measures are used on the same process to demonstrate how the process improves with experience, as shown in the following learning curves. What conclusions can be drawn?

A) The amount of learning is higher when using capacity as a performance measure as

opposed to processing time. B) Processing time should not be used as a performance measure. C) Capacity should not be used as a performance measure. D) The amount of learning is exactly the same using either capacity as a performance measure or using processing time.

376)

Which of the following is the most likely shape of the learning curve for the given situation: "Number of errors found in essays written by students in a writing class throughout the semester." A) Linear growth B) Exponential growth C) Exponential decay D) Diminishing-return growth

377)

When the power law is applied to unit costs, unit costs exhibit a(n) _________. A) exponential growth B) exponential decay C) diminishing return growth D) linear growth

378)

The power law can be used to represent a common form of a learning curve that uses _________ as a dependent variable and _________ as the independent variable. A) cumulative output, unit costs B) unit costs, cumulative output C) production yield, unit costs D) learning rate, production yield

379)

Consider a process with a unit cost of $50 for the first unit and a learning rate of 0.9. What will be the unit cost for the 64th unit? A) 38.08 B) 29.16 C) 26.57 D) 0.06

380)

A learning rate of 0.9 means each _________ of the cumulative output will reduce unit costs by _________. A) tripling, 90% B) tripling, 10% C) doubling, 90% D) doubling, 10%

381)

A learning curve which follows the power law shows the _________ gets smaller from unit to unit, but the _________ remains constant with each doubling of cumulative output. A) absolute improvement in unit cost, percentage improvement B) percentage improvement in unit cost, absolute improvement C) absolute improvement in unit profit, percentage improvement D) percentage improvement in unit profit, absolute improvement

382)

Consider a process with a unit cost of $100 for the first unit and a learning rate of 0.5. What will be the unit cost for the 32nd unit? A) $30.00 B) $12.50 C) $6.250 D) $3.125

383)

Consider a process with a learning rate of 0.5. What is the unit cost for the first unit if the unit cost for the 15th unit is $16? A) $128 B) $120 C) $240 D) $256

384)

Suppose the second unit of a product cost is $70. What is the expected cost of the 64th unit if the product follows an 85% learning rate? A) $12.19 B) $26.72 C) $31.06 D) $59.50

385)

Suppose the eighth unit of a product cost is $850. What is the expected cost of the 128th unit if the product follows a 75% learning rate? A) $268.95 B) $637.50 C) $38.05 D) $53.13

386)

Consider a process with a unit cost of $250 for the first unit and a learning rate of 0.8. What will be the unit cost for the 29th unit? A) B) C) D)

387)

$138.74 $200.00 $62.44 $84.56

Suppose the 50th unit of a product cost is $35. What was the cost of the first unit if the product has a 90% learning rate? A) $31.50 B) $63.43 C) $88.74 D) $38.89

388)

Which of the following plots is the learning curve that portrays the power law on a loglog graph?

389)

When portraying the power law on a log-log graph, the y-axis is the _________ and the x-axis is the _________. A) cumulative output, absolute improvement in unit costs B) absolute improvement in unit costs, cumulative output C) logarithm of the unit costs, logarithm of the cumulative output D) logarithm of the cumulative output, logarithm of the unit costs

390)

The _________ of the line in the log-log version of the learning curve is determined by the learning rate. A) slope B) intercept C) logarithm D) convexity

391)

If learning happens faster, the learning rate is _________ and the downward slope of the line in the log-log version of the learning curve is _________. A) larger, flatter B) larger, steeper C) smaller, flatter D) smaller, steeper

392)

_________ is a statistical approach to determine the _________ of the log-log representation of the learning curve. A) Probability analysis, slope B) Probability analysis, intercept C) Regression analysis, slope D) Regression analysis, intercept

393)

C&A has a cumulative output of 1000 units and unit costs of $50 in 2005. A decade later, C&A has a cumulative output of 1500 units and unit costs of $40. The learning curve in a log-log graph is linear. By how much does C&A improve its unit costs with each doubling of cumulative output? (Use Table 6.2.) A) 99% B) 68% C) 32% D) 1%

394)

C&A started production in two factories in 2005. Both factories had the same cumulative output and unit costs in the first year. A decade later, factory A has a greater cumulative output than factory B. The unit costs in 2015 are the same between the two factories. Both learning curves in a log-log graph are linear. Which factory has a higher learning rate? A) Factory A B) Factory B C) Both factories have the same learning rate. D) Cannot be determined

395)

C&A started production in two factories in 2005. Both factories had the same cumulative output and unit costs in the first year. A decade later, factory A has a greater cumulative output than factory B. The unit costs in 2015 are the same between the two factories and both learning curves in a log-log graph are linear. Which factory has a higher performance improvement (which firm learns faster)? A) Factory A B) Factory B C) Both factories have the same learning rate. D) Cannot be determined

396)

A process has an initial cost of $100, a learning rate of 0.7, and a cumulative experience of 500. The learning curve in a log-log graph is linear. Using the learning curve coefficient method, what will be the expected unit costs in producing the 500th unit? (Use Table 6.3.) A) $0.04 B) $9.26 C) $6.30 D) $4.08

397)

A process has a learning rate of 0.75. The expected unit cost to produce the 1000th unit is $5. The learning curve in a log-log graph is linear. Using the learning curve coefficient method, what was its initial cost? (Use Table 6.3.) A) $97.55 B) $87.92 C) $9.75 D) $8.79

398)

C&A has an initial cost of $5000 and the slope of its learning curve in a log-log graph is 1.4. What will be its expected unit cost to produce the 200th unit? A) $1.77 B) $17.70 C) $5.59 D) $3.00

399)

Which of the following statements about learning curve coefficients is FALSE? A) A learning curve coefficient, LCC(x, y), gives the cost to produce 1 unit in a process with an initial cost of 1, a cumulative output of x, and a learning rate of y. B) A higher level of experience (cumulative output) leads to a lower value of learning curve coefficient. C) The learning curve coefficient method is the only way to predict the cost of making one unit in a process. D) A lower value of learning rate leads to a lower value of learning curve coefficient.

400)

C&A has an initial cost of $500 and a $20 unit cost at a cumulative output levle of 500. The learning curve in a log-log graph is linear. Using the LCC method, what will be its learning rate? (Use Table 6.3.) A) 0.7 B) 0.8 C) 0.9 D) 0.6

401)

C&A has an initial cost of $500 and a $20 unit cost at a cumulative output level of 500. The learning curve in a log-log graph is linear. Using the learning curve function directly (i.e., without using the LCC method), what will be its learning rate? A) 0.7 B) 0.8 C) 0.9 D) 0.6

402)

C&A has an initial cost of $500 and a $20 unit cost at a cumulative output of level 500. The learning curve in a log-log graph is linear. The following measures can be computed from the given information EXCEPT _________. A) the profit margin B) the learning rate C) the slope of the learning curve D) the unit costs at a cumulative output of 1000

403)

A process has an initial cost of $75 and a learning rate of 0.85. The learning curve in a log-log graph is linear. Using the learning curve coefficient method, what will be the expected unit cost to produce the 200th unit? (Use Table 6.3.) A) $15.66 B) $21.65 C) $42.44 D) $63.75

404)

A process has a learning rate of 0.80. The expected unit cost to produce the 100th unit is $18. The learning curve in a log-log graph is linear. Using the learning curve coefficient method, what was its initial cost? (Use Table 6.3.) A) $22.50 B) $87.92 C) $79.27 D) $114.75

405)

When considering learning only, which of the following statements is TRUE when computing the cumulative costs of producing a certain quantity of output (greater than one)? A) The cumulative cost of producing a certain quantity of output is higher than the product of the initial cost and the output quantity. B) The cumulative cost of producing a certain quantity of output is equal to the product of the initial cost and the output quantity. C) The cumulative cost of producing a certain quantity of output is lower than the product of the initial cost and the output quantity. D) The cumulative cost of producing a certain quantity of output is equal to the quotient of the initial cost and the output quantity.

406)

Which of the following is TRUE about the cumulative learning curve coefficient? A) A cumulative learning curve coefficient, CLCC(x, y), gives the cost to produce 1 unit in a process with an initial cost of 1, a cumulative output of x, and a learning rate of y. B) A higher value of experience (cumulative output) leads to a higher value of the cumulative learning curve coefficient. C) The cumulative learning curve coefficients for the first unit are the same across all learning rates. D) A lower value of learning rate leads to a higher value of the cumulative learning curve coefficient.

407)

What is the total cost of producing 100 units in a process that has a learning rate of 0.8 and an initial cost of $50? (Use Table 6.4.) A) $4,000 B) $1,632.54 C) $22.71 D) $42.16

408)

The initial cost of a product increases by 15%. What will be the impact on the cost to produce 50 units if the process has a learning curve that follows the power law? A) Remains the same B) Increases by 15% C) Decreases by 15% D) Increases by 30%

409)

The cumulative cost of producing 100 units of a product is $7000. Assuming the process has a learning rate of 0.85 and follows the power law, what was its initial cost? (Use Table 6.4.) A) $33.97 B) $159.99 C) $2378.76 D) $4375.00

410)

What is the total cost of producing 30 units in a process that has a learning rate of 0.75 and an initial cost of $65? (Use Table 6.4.) A) $743.98 B) $15.84 C) $343.37 D) $932.76

411)

The cumulative cost of producing 50 units of a product is $13,400. Assuming the process has a learning rate of 0.90 and follows the power law, what was its initial cost? (Use Table 6.4.) A) $376.54 B) $24,286 C) $460.85 D) $416.90

412)

The _________ the employee turnover, the _________ experience the average employee will have with their job. A) higher, more B) higher, less C) lower, less D) greater, more

413)

Company A has a more stable workforce than company B. Assuming that both companies have the same number of employees and initial costs, which of the following conclusions can be drawn? A) Company A has a higher employee turnover than company B. B) Company A needs to recruit more new employees each year than company B. C) Employees at company A have a higher average tenure than those at company B. D) Employees at company A have less experience than company B.

414)

Which of the following statements about employee turnover is TRUE? A) If the employee turnover decreases, the average tenure of an employee in the company decreases. B) If the employee turnover increases, the average time an employee spends with the company increases. C) If the employee turnover increases, the average number of employees increases. D) If the employee turnover decreases, the average number of new employees recruited per year decreases.

415)

A company has 2000 employees on average and they spend, on average, 8 years with the company. What is the average number of new employees recruited each year and the average tenure of an employee? A) 250, 4 B) 250, 8 C) 125, 4 D) 125, 8

416)

If employee turnover is doubled, average tenure of an employee is _________. A) doubled B) unchanged C) halved D) quadrupled

417)

When applying _________ Law to compute employee turnover, the concept of a flow unit is equivalent to a(n) _________. A) Little’s, product B) Little’s, employee C) Moore’s, product D) Moore’s, employee

418)

When you have information on the average tenure of an employee and the average number of employees, you will be able to compute each of the following EXCEPT _________. A) employee turnover B) average time an employee spends with a company C) number of new employees each year D) learning rate of employees

419)

Employee turnover is _________. A) 2 × Average tenure B) 1 ÷ Average tenure C) 1 ÷ 2 × Average tenure D) 1 ÷ (2 × Average tenure)

420)

On average, a large company has 27,000 employees and they spend 6 years with the company. What is the average number of new employees recruited each year and the average tenure of an employee? A) 2250, 3 B) 2250, 6 C) 4500, 3 D) 4500, 6

421)

The intent of process standardization includes the following EXCEPT _________. A) to avoid reinventing the wheel B) to avoid recurrence of defects or mistakes that have happened in the past C) to set a high standard of performance for a particular activity in a process D) to motivate employees

422)

A _________ documents the best practice of how to conduct a particular activity in a process. A) to-do list B) labor law C) standard work sheet D) progress report

423)

A _________ documents the task sequence of how to perform an activity correctly. A) to-do list B) checklist C) standard work sheet D) progress report

424)

The improvements gained through doing an activity over and over again is the result of _________ learning. A) autonomous B) automatic C) induced D) inspired

425)

Taking piano lessons to improve one’s piano-playing skill is an example of _________ learning. A) autonomous B) automatic C) induced D) inspired

426)

Which of the following statements about induced learning is FALSE? A) Induced learning is a deliberate process. B) Induced learning happens spontaneously. C) Induced learning is an iterative process. D) Induced learning follows the PDCA cycle.

427)

Which of the following is NOT a part of the PDCA cycle? A) Plan B) Design C) Check D) Act

428)

What are the four steps in the PDCA cycle? A) Plan, Design, Confirm, Act B) Plan, Delegate, Check, Act C) Plan, Do, Check, Act D) Propose, Design, Check, Accomplish

429)

Which of the following statements about autonomous learning is TRUE? A) It is a deliberate process. B) It improves performance. C) It is a one-step process. D) It follows the PDCA cycle.

430)

A(n) _________ signal-to-noise ratio is needed for learning to happen. A) weak B) distorted C) insignificant D) strong

431)

The PDCA cycle is also referred to as the _________. A) signal-to-noise ratio B) standard work sheet C) Deming cycle D) checklist

Answer Key Test name: chapter 6 1) FALSE

There are at least three forms of learning curves: exponential growth, exponential decay, and diminishing return growth. 2) TRUE

The power law assumes performance improves by a fixed percentage with each doubling of cumulative experience. 3) FALSE

A log-log plot of a learning curve that follows the power law shows a non-linear decrease as a straight line. 4) TRUE

Both coefficients are equal to one for the first unit independent of learning rates. After this, the cumulative coefficients are bigger. 5) FALSE

Average tenure is the average time an employee has spent on his or her job. It is half of the average time that employees spend with the company. 6) FALSE

There are three elements to standardization: processing time, work sequence, and inventory. Work sequence can be standardized in service settings. 7) D

Interest rate is set by the financial market and is independent of the experience of a process. 8) A

The number of defects decreases and levels off to zero with cumulative experience. 9) B

As experience with a process increases, so does performance. A higher production yield or customer satisfaction score is indicative of better performance. Therefore, the relationship between the two is positive, resulting in an upward-sloping learning curve. 10) A

As experience with a process increases, so does performance. A lower processing time or number of defects indicates better performance. Therefore, the relationship between the two is negative, resulting in a downward-sloping learning curve. 11) D

Both capacity and processing time are valid performance measures. Because both are measuring the same process, their underlying amount of learning should be the same. 12) C

Fewer mistakes are made with cumulative learning that ultimately reaches an asymptote of zero with growing experience, resulting in an exponential decay process. 13) B

The power law plots unit costs against cumulative output, showing declining unit costs with cumulative output, or an exponential decay process. 14) B

A plot of unit costs (y-axis) against cumulative output (x-axis) can be represented using the power law. 15) C

16) D

A learning rate of 0.9 means each doubling of the cumulative output reduces unit costs by 10%. 17) A

A learning curve which follows the power law shows the absolute improvement in unit cost gets smaller from unit to unit, but the percentage improvement remains constant with each doubling of cumulative output. 18) D

19) C

20) C

21) A

22) D

23) B

24) D

When portraying the power law on a log-log graph, the learning curve becomes a linear, downward-sloping straight line. 25) C

A log-log graph is a plot with the logarithm of the unit costs on the y-axis and the logarithm of the cumulative output on the x-axis. 26) A

The slope of the line in the log-log version of the learning curve is determined by the learning rate. 27) D

If learning happens faster, the learning rate is smaller and the downward slope of the line in the log-log version of the learning curve is steeper. 28) C

Regression analysis is a statistical approach to determine the slope of the log-log representation of the learning curve. 29) C

Slope = [ln($40) –– ln($50)] ÷ [ln(1500) − ln(1000)] = −0.55; LR = 0.68; Cost improvement = 1 − 0.68 = 0.32 = 32%. 30) A

The only difference between the two factories is that factory A has a greater cumulative output than factory B in 2015. Therefore, the slope of the log-log version of the learning curve for A is not as steep as that of B. This means that the learning rate of A is higher than that of B. 31) B

LCC(500, 0.7) = 0.040849. Expected unit costs = $100 × 0.040849 = $4.08. 33) B

LCC(1000, 0.75) = 0.056871. c(1) × 0.056871 = c(1000), and we are given c(1000) = $5. c(1) = $5 ÷ 0.056871 = $87.92. 34) D

35) C

Besides using the LCC method, the cost of making one unit in a process can be predicted by using the learning curve function directly. 36) A

c(500) = $20 = $500 × LCC(500, LR). Therefore, LCC(500, LR) = $20 ÷ $500 = 0.04. From the LCC table, LR = 0.7. 37) A

38) A

The slope of the learning curve can be found by dividing [ln(500) – ln(1)] by [ln(20) – ln(500)]. The learning rate can be found by looking it up from the LCC table using LCC(500, LR) = $20 ÷ $500. The unit costs at a cumulative output of that cannot be computed with the given information is the profit margin. 39) B

. The only item

LCC(200, 0.85) = 0.288728. Expected unit cost = $75 × 0.288728 = $21.65. 40) C

LCC(100, 0.80) = 0.227062. c(1) × 0.227062 = c(100) and we are given c(100) = $18. c(1) = $18 ÷ 0.227062 = $79.27. 41) C

Learning lowers the unit costs of cumulative output. Therefore, the cumulative cost of producing a certain quantity of output is lower than the product of the initial cost and the output quantity. 42) C

The CLCC of the first unit is 1 across all learning rates. 43) B

c(100) = c(1) × CLCC(100, 0.9) = 50 × 32.65081 = $1632.54. 44) B

c(50) = c(1) × CLCC(50, LR). c(1)_new = 1.15 while everything else stays the same; thus, c(50)_new = 1.15 × CLCC(50, LR). % change = 1.15 − 1, or 15%. 45) B

CLCC(100, 0.85) = 43.75387. 7000 = c(1) × 43.75387. c(1) = $7000 ÷ 43.75387 = $159.99. 46) A

c(30) = c(1) × CLCC(30, 0.75) = 65 × 11.44577 = $743.98. 47) D

CLCC(50, 0.90) = 32.14196. 13,400 = c(1) × 32.14196. c(1) = $13,400 ÷ 32.14196 = $416.90. 48) B

The higher the employee turnover, the less experience the average employee will have with his or her job. 49) C

Employees spend more time with company A, resulting in lower turnover, fewer new employees recruited each year, and higher average tenure. 50) D

If the employee turnover decreases, an employee on average stays with the company longer, leading to a higher average tenure and lower number of new recruits needed per year. 51) A

Average number of new employees = Average number of employees ÷ Average time with company = 2000 ÷ 8 = 250 employees per year. Average tenure = 1 ÷ 2 × Average time with company = 1 ÷ 2 × 8 = 4 years. 52) C

Average tenure = 1 ÷ (2 × Employee turnover). If employee turnover doubles, the denominator doubles, and tenure is halved. 53) B

An employee is treated as a flow unit when applying Little's Law to compute employee turnover. 54) D

Employee turnover = 1 ÷ (2 × Average tenure); Average time an employee spends with a company = 2 × Average tenure. Avg number of employees = Number of new employees each year × Avg time spent in company. We can use average tenure and average number of employees to determine each value, except learning rate of employees. 55) D

Employee turnover = 1 ÷ (2 × Average tenure). 56) C

Average number of new employees = Average number of employees ÷ Average time with company = 27,000 ÷ 6 = 4500 employees per year. Average tenure = 1 ÷ 2 × Average time with company = 1 ÷ 2 × 6 = 3 years. 57) D

The intent of process standardization is to avoid relearning. 58) C

A standard work sheet documents the best practice of how to conduct a particular activity in a process.

59) B

A checklist documents the task sequence of how to perform an activity correctly. 60) A

Autonomous learning refers to improvements from experience. 61) C

Induced learning refers to improvements from deliberate actions with investment in resources. 62) B

Induced learning requires a deliberate action and an investment in resources. It may not optimize short-term performance but through iterative experiments, will eventually lead to performance improvements. 63) B

The D in PDCA is Do, not Design 64) C

The four steps in the PDCA cycle are Plan, Do, Check, Act. 65) B

Autonomous learning improves performance with experience. 66) D

A strong signal-to-noise ratio allows the driver of learning to be identified. 67) C

The PDCA cycle is also referred to as the Deming cycle.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 432) Setup time depends on the actual number of units to be made. ⊚ true ⊚ false 433)

The capacity of a resource with setups is dependent on the batch size. ⊚ true ⊚ false

434)

A resource with setups can achieve a flow rate that is equal to its capacity when producing. ⊚ true ⊚ false

435)

A batch size should be chosen for a process with setups to make a trade-off between capacity and inventory. ⊚ true ⊚ false

436)

The average inventory of all items produced by a resource with setups will increase when there is an increase in the variety of products produced on that resource. ⊚ true ⊚ false

437)

It is impossible to increase efficiency and variety at the same time. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 438) Which of the following statements about setups is FALSE? A) A setup is a set of activities. B) A setup is a required activity. C) Setup time is also called changeover time. D) Setup time is dependent on the number of units subsequently produced. 439)

Which of the following is an example of a setup activity? A) Changing the color of paint in a paint sprayer. B) Applying finishing touches to a vehicle at an auto body shop. C) Putting frosting on donuts at a bakery. D) Ringing up sales at a cash register at a store.

440)

Which of the following is NOT a setup activity? A) Preventive maintenance at a manufacturing facility. B) Quality control activities at an oil-processing plant. C) Calibrating an oven at a bakery. D) Sewing buttons on a shirt at an apparel factory.

441)

A cutting machine takes 10 minutes to cut a piece of component for a product. After cutting 200 pieces, the machine takes 5 minutes to be recalibrated. What is the setup time of the cutting process? A) 5 minutes B) 10 minutes C) 15 minutes D) 20 minutes

442)

C&A Cleaner uses a five-step process to dry clean garments: tagging, pretreatment, dry cleaning, spot cleaning, and finishing. In tagging, a number tag is attached to each garment for tracking purposes. In stain pretreatment, stains are identified on garments and chemicals applied to the stains. In dry cleaning, up to 80 pounds of garments are placed in a large drum machine where water-free solvents remove traces of dirt and oil. In spot cleaning, stains on each garment which didn’t come out earlier are identified and removed. And, finally, in finishing, garments are pressed and retagged, and placed in bags for pickup. Which of these five steps is a setup activity? A) Tagging B) Stain pretreatment C) Dry cleaning D) Finishing

443)

C&A Furniture uses a four-step process to make its famous wood table: Process Milling—table top Milling—table stand Assembly Finishing

Processing Time (minutes) 10 5 15 20

The milling machine requires a setup time of 30 minutes to make table tops and a changeover time of 25 minutes to make table stands. What is the total setup time (in minutes) in the above process? A) 30 B) 15 C) 25 D) 55

444)

C&A Furniture uses a four-step process to make its famous wood table: Process Milling—table top Milling—table stand Assembly Finishing

Processing Time (minutes) 10 5 15 20

The milling machine requires a setup time of 30 minutes to make table tops and a changeover time of 25 minutes to make table stands. C&A works an 8-hour day. What is the capacity of the milling machine (in tables per day) if the batch size is 10? A) 2.9 B) 9.6 C) 23.4 D) 64.7 445)

C&A Furniture uses a four-step process to make its famous wood table: Process Milling—table top Milling—table stand Assembly Finishing

Processing Time (minutes) 10 5 15 20

446)

C&A Furniture uses a four-step process to make its famous wood table: Process Milling—table top Milling—table stand Assembly Finishing

Processing Time (minutes) 10 5 15 20

447)

C&A Cleaner uses a five-step process to dry clean garments: Process Tagging

Stain pretreatment

Dry cleaning

Spot cleaning

Finishing

Description Attach a number tag on garments for tracking purposes. Identify stains on garments and apply chemicals on the site of a stain. Place garments in a large drum machine where water-free solvents are used to remove traces of dirt and oil. Identify and remove stains that did not come out earlier. Press garments and retag them before placing them in bags for pickup.

Time (minutes) 1 per garment

No of Workers 1

5 per garment

50 per batch

n/a

10 per garment

4 per garment

A garment piece weighs 1 pound on average. What is the capacity of C&A’s entire drycleaning process in pounds of garments per minute if the batch size is 10 garments? A) 1 B) 0.5 C) 0.4 D) 0.2

448)

C&A Cleaner uses a five-step process to dry clean garments: Process Tagging

Stain pretreatment

Dry cleaning

Spot cleaning

Finishing

Description

Time (minutes)

Attach a number tag on garments for tracking purposes. Identify stains on garments and apply chemicals on the site of a stain. Place garments in a large drum machine where water-free solvents are used to remove traces of dirt and oil. Identify and remove stains that did not come out earlier. Press garments and retag them before placing them in bags for pickup.

1 per garment

No of Workers 1

5 per garment

50 per batch

n/a

10 per garment

4 per garment

A garment piece weighs 1 pound on average. What is the change in capacity (in garments per minute) of C&A’s entire dry-cleaning process if the batch size increases from 15 garments to 30 garments? A) Increases from 0.2 to 0.4 B) Decreases from 0.4 to 0.2 C) Increases from 0.3 to 0.4 D) Decreases from 0.3 to 0.2

449)

C&A Furniture uses a four-step process to make its famous wood table: Process Milling—table top Milling—table stand Assembly Finishing

Processing Time (minutes) 10 5 15 20

The milling machine requires a setup time of 30 minutes to make table tops and a changeover time of 25 minutes to make table stands. If the batch size is 10, what is the capacity of the process in tables per minute? A) 0.049 B) 0.050 C) 0.067 D) 0.077 450)

C&A Furniture uses a four-step process to make its famous wood table: Process Milling—table top Milling—table stand Assembly Finishing

Processing Time (minutes) 10 5 15 20

The milling machine requires a setup time of 30 minutes to make table tops and a changeover time of 25 minutes to make table stands. The company currently uses a batch size of 12 tables, but it is considering reducing the batch size to 10 tables. Which of the following conclusions can be drawn if the batch size is reduced from 12 to 10 tables? A) The finishing operation will be the bottleneck at either batch size. B) The milling operation will be the bottleneck at either batch size. C) The bottleneck will switch from finishing to milling if the batch size is reduced from 12 tables to 10 tables. D) The bottleneck will switch from milling to finishing if the batch size is reduced from 12 tables to 10 tables. 451)

C&A Printing takes 10 seconds to print a page in color, but after 500 pages, the printer must be cooled down for 15 minutes. No pages can be printed while the printer is cooling down. What is C&A’s capacity in pages per hour? A) 2,000 B) 1,978 C) 395 D) 305

452)

Which of the following graphs correctly portrays the relationship between batch size (xaxis) and capacity of a resource with setups (y-axis)?

D) 453)

A landscaper can load and move a wheelbarrow of mulch in 4 minutes. Due to the strenuous nature of the work, he needs to take a 12-minute break after every hour of work. What is his capacity, in wheelbarrow loads per hour? A) 3.75 B) 5 C) 12.5 D) 15

454)

C&A Printing takes 10 seconds to print a page in color, but after 500 pages, the printer must be cooled down for 15 minutes. No pages can be printed while the printer is cooling down. C&A’s demand rate is 10 pages per minute. What is the utilization of the printer? A) 28% B) 50% C) 85% D) 100%

455)

C&A Printing takes 10 seconds to print a page in color, but after 500 pages, the printer must be cooled down for 15 minutes. No pages can be printed while the printer is cooling down. C&A’s demand rate is 3 pages per minute. What is the utilization of the printer? A) 28% B) 50% C) 85% D) 100%

456)

C&A Candy produces two kinds of gumdrops: regular and sugar-free. The data on these gumdrops are given below: Demand (lbs per hour) Changeover time (minutes) Production rate (lbs per hour)

Regular

Sugar-Free

30 60 80

10 30 80

C&A first makes 60 pounds of regular gumdrops, then 20 pounds of sugar-free gumdrops, and then repeats this sequence. What is the utilization of the production process? A) 50% B) 40% C) 25% D) 20%

457)

C&A Pens produces three kinds of ink pens: red, black, and blue. The data on these products are given below: Demand (pens per hour) Changeover time (minutes) Production rate (pens per hour)

Red

Black

Blue

50 60 200

30 30 200

10 45 200

C&A’s production sequence is making 150 red first, then switching to make 90 black before changing over to make 30 blue. What is the utilization of the production process? A) 45.5% B) 40.4% C) 37.5% D) 75.0% 458)

A two-step process is used to finish a product: painting and drying. There are 5 workers painting and each one takes an average of 60 minutes to paint each unit. Drying takes place in an oven that can hold up to 100 units, and it takes 5 minutes to load each unit. Once all the units are loaded into the oven, it takes 6 hours to dry each load. What fraction of time is the oven being loaded if C&A uses a batch size of 100 and demand is unlimited? A) 58% B) 42% C) 20% D) 2%

459)

Which of the following statements is TRUE regarding utilization in a process with setups? A) When batch size increases, the utilization of the bottleneck resource with setups will decrease. B) When batch size increases, the utilization of the bottleneck resource without setups will increase. C) When batch size increases, the utilization of the bottleneck resource without setups will decrease. D) When batch size increases, the utilization of the bottleneck resource with setups will increase.

460)

A landscaper can load and move a wheelbarrow of mulch in 4 minutes. Due to the strenuous nature of the work, he needs to take a 12-minute break after every hour of work. What is his utilization, assuming demand is 15 wheelbarrow loads per hour? A) 66.7% B) 80% C) 83.3% D) 100%

461)

A landscaper can load and move a wheelbarrow of mulch in 4 minutes. Due to the strenuous nature of the work, he needs to take a 12-minute break after every hour of work. What is his utilization, assuming demand is 10 wheelbarrow loads per hour? A) 66.7% B) 80% C) 83.3% D) 100%

462)

C&A Bakers produces three kinds of bread: wheat, white, and multigrain. The data on these products follows: Demand (lbs per hour) Changeover time (minutes) Production rate (pounds per hour)

Wheat

White

Multigrain

40 60 200

20 30 200

10 45 200

C&A’s production sequence is making 200 pounds of wheat first, then switching to 100 pounds of white before changing over to 50 pounds of multigrain. What is the average inventory of white bread? A) 135 B) 45 C) 32.5 D) 30

463)

C&A Candy produces two kinds of gumdrops: regular and sugar-free. The data on these gumdrops follow: Demand (lbs per hour) Changeover time (minutes) Production rate (lbs per hour)

Regular

Sugar-Free

30 60 80

10 30 80

C&A first makes 90 pounds of regular gumdrops, then 30 pounds of sugar-free gumdrops, and then repeats this sequence. What is the average inventory of regular gumdrops? A) 56.25 B) 45.00 C) 28.13 D) 22.50

464)

Which of the following best shows the change of inventory level (y-axis) over time (xaxis) in a process with setups?

465)

Which of the following statements is TRUE regarding inventory in a process with setups? A) Operating with a larger batch size will reduce inventory. B) Operating with as large a batch size as possible is recommended. C) Operating with a larger batch size will increase inventory. D) Batch size has no effect on inventory level.

466)

Company C produces two kinds of gumdrops: regular and sugar-free. The data on these gumdrops follow: Demand (lbs per hour) Changeover time (minutes) Production rate (lbs per hour)

Regular

Sugar-Free

30 60 80

10 30 80

Company C first makes 90 pounds of regular gumdrops, then 30 pounds of sugar-free gumdrops, and then repeats this sequence. What is the average inventory of sugar-free gumdrops? A) 28.13 B) 22.50 C) 9.38 D) 13.13 467)

C&A uses a two-step process to make a part. The first step involves cutting with a machine that requires a 40-minute setup time before the production of each batch. The cutting takes 30 minutes per part. The second step is polishing the parts from cutting. The polishing takes 240 minutes per part. C&A has 5 workers to do the task. The demand rate is 3 parts per hour. What is the maximum inventory between cutting and polishing (in number of parts) if C&A operates with batches of 200 parts? A) 200 B) 100 C) 75 D) 37.5

468)

C&A Bakers produces three kinds of bread: wheat, white, and multigrain. The data on these products follow: Demand (lbs per hour) Changeover time (minutes) Production rate (lbs per hour)

Wheat

White

40 60 200

20 30 200

Multigrain 10 45 200

C&A Bakers produces three kinds of bread: wheat, white, and multigrain. The data on these products follow: Demand (lbs per hour) Changeover time (minutes) Production rate (lbs per hour)

Wheat

White

40 60 200

20 30 200

Multigrain 10 45 200

C&A Printing takes 10 seconds to print a page in color, but after 500 pages, the printer must be cooled down for 15 minutes. No pages can be printed while the printer is cooling down. C&A’s demand rate is 3 pages per minute. What is the smallest batch size (in pages) to ensure the process is demand-constrained? A) 500 B) 90 C) 64 D) 3

471)

A machine does three setups per production cycle. Each setup takes 20 minutes. The processing time is 0.5 minute. What batch size achieves a capacity of 24 units per hour? A) 83 B) 40 C) 30 D) 10

472)

C&A uses a two-step process to make a part. The first step involves cutting with a machine that requires a 40-minute setup time before the production of each batch. The cutting takes 30 minutes per part. The second step is polishing the parts from cutting. The polishing takes 40 minutes per part. Assume demand is unlimited. What is the ideal batch size of the parts? A) 10 B) 8 C) 4 D) 2

473)

Which of the following statements is TRUE regarding the ideal batch size for a process with setups? A) The ideal batch size is one that minimizes inventory while satisfying demand in a supply-constrained process. B) The ideal batch size is one that minimizes inventory while satisfying demand in a demand-constrained process. C) The ideal batch size is one that maximizes inventory while satisfying demand in a demand-constrained process. D) The ideal batch size is one that maximizes inventory while satisfying demand in a supply-constrained process.

474)

C&A Furniture uses a machine to make one table top and four table legs to assemble into a table. The machine takes 5 minutes to set up for the tops and 10 minutes to switch from tops to legs. Each top takes 1 minute to make. Each leg takes 0.5 minute to make. The assembly step combines the top with four legs into one table every 4 minutes. Assume there is sufficient demand for every table made. Considering one table as a flow unit, what is the ideal batch size of table tops? A) 15 B) 10 C) 6 D) 5

475)

When batch size reaches the threshold, further increases in batch size will _________ inventory and _________ capacity. A) increase, have no impact on B) decrease, have no impact on C) have no impact on, increase D) have no impact on, decrease

476)

In a supply-constrained process, the ideal batch size is one that _________ inventory in the system and results in a process capacity that matches the _________. A) maximizes, demand rate B) minimizes, demand rate C) maximizes, bottleneck capacity D) minimizes, bottleneck capacity

477)

In a demand-constrained process, the ideal batch size is one that _________ inventory in the system and results in a process capacity that matches the _________. A) maximizes, demand rate B) minimizes, demand rate C) maximizes, bottleneck capacity D) minimizes, bottleneck capacity

478)

C&A Pottery makes ceramic vases using a process that involves forming, drying, firing, and glazing. The 5 workers each take an average of 60 minutes to form a vase. The vases will then be loaded into an oven to dry. The oven can hold up to 100 pieces; it takes 5 minutes to load each vase. Once all the vases are loaded into the oven, it takes 24 hours to dry each load. The dried vases are then placed in a kiln that holds up to 100 pieces. It takes 6 minutes to load each vase and the vases will be fired in the kiln for 72 hours. After firing, 3 workers each take an average of 2 hours to glaze each vase. C&A receives an order of 1 vase per hour. What is the smallest batch size to ensure the process is demand-constrained? A) 98 B) 80 C) 32 D) 26

479)

C&A Pottery makes several lines of ceramic vases using a process that involves forming, drying, firing, and glazing. The 5 workers each take on average 60 minutes to form a vase. The vases will then be loaded into an oven to dry. The oven can hold up to 200 pieces and it takes 5 minutes to load each vase. Once all the vases are loaded into the oven, it takes 25 hours to dry each load. The dried vases are then placed in a kiln that holds up to 200 pieces. It takes 6 minutes to load each vase and the vases will be fired in the kiln for 72 hours. After firing, 4 workers each takes an average of 2 hours to glaze each vase. C&A can sell each vase that is made. What is the ideal batch size to minimize inventory while allowing the process to produce at maximum flow rate? A) 306 B) 240 C) 180 D) 60

480)

Consider a two-step process. Step 1 consists of a single resource with a setup time of 30 minutes. Step 2 consists of a single resource without a setup. The processing time at both steps is 5 minutes per unit. When we compute the ideal batch size, we find the formula does not produce a mathematically feasible answer. What is a valid explanation for this unusual finding? A) Given equal processing times, the resource without a setup will always be the bottleneck; therefore, the batch size formula does not apply since matching of capacities is not possible. B) Given equal processing times, the resource with a setup will always be the bottleneck; therefore, the batch size formula does not apply since matching of capacities is not possible. C) The setup time should be reduced. D) The resource without a setup has excess capacity.

481)

A milling machine requires four setups per production cycle. Each setup takes 25 minutes. The processing time is 0.6 minute per unit. What batch size (rounded to the nearest whole number) will achieve a capacity of 50 units per hour? A) 50 B) 98 C) 167 D) 214

482)

A company uses a two-step process to make a part. The first step involves a drill press that requires a 60-minute setup time before the production of each batch can begin. After that, one unit can be drilled every 6 minutes. The second step involves attaching the drilled item to another device which takes 8 minutes per unit. Assuming demand is unlimited, what is the ideal batch size of the parts? A) 60 B) 30 C) 10 D) 8

483)

A company uses a two-step process to make a part. The first step involves a drill press that requires a 60-minute setup time before the production of each batch can begin. After that, one unit can be drilled every 6 minutes. The second step involves attaching the drilled item to another device which takes 8 minutes per unit. Demand is 5 units per hour. What is the ideal batch size of the parts? A) 60 B) 30 C) 10 D) 8

484)

C&A Candy produces two kinds of gumdrops: regular and sugar-free. The data on these gumdrops follow: Demand (lbs per hour) Changeover time (minutes) Production rate (lbs per hour)

Regular

Sugar-Free

30 60 80

10 30 80

How many pounds of gumdrops should C&A produce in each production cycle to minimize inventory while satisfying demand? A) 30 B) 80 C) 90 D) 120

485)

C&A Candy produces two kinds of gumdrops: regular and sugar-free. The data on these gumdrops are given below: Regular

Sugar-Free

30 60 80

10 30 80

Demand (lbs per hour) Changeover time (minutes) Production rate (lbs per hour)

How many pounds of regular gumdrops should C&A produce before switching to sugar-free in order to minimize inventory while satisfying demand? A) 30 B) 80 C) 90 D) 120 486)

C&A Bakers produces three kinds of bread: wheat, white, and multigrain. The data on these products are given below: Demand (lbs per hour) Changeover time (minutes) Production rate (lbs per hour)

Wheat

White

Multigrain

50 60 200

20 30 200

10 45 200

How many pounds of white bread should C&A produce in each production cycle to minimize inventory while satisfying demand? A) 37.5 B) 75 C) 187.5 D) 300

487)

C&A Bakers produces three kinds of bread: wheat, white, and multigrain. The data on these products follow: Demand (lbs per hour) Changeover time (minutes) Production rate (lbs per hour)

Wheat

White

Multigrain

50 60 200

20 30 200

10 45 200

How many pounds of wheat bread should C&A produce with each batch in order to minimize inventory while satisfying demand? A) 37.5 B) 75 C) 187.5 D) 300 488)

C&A Dairy makes 5 different flavors of ice cream. The machine must be set up properly for making each flavor. Setup time is 45 minutes and production time is 30 minutes per gallon for each flavor of ice cream. Demands (in gallons per hour) for the ice cream are given below: Vanilla 0.3

Cherry 0.2

Strawberry 0.1

Chocolate 0.5

Mint 0.1

How many gallons of ice cream should C&A produce in each production cycle to minimize inventory while satisfying demand? A) 281.25 B) 16.75 C) 112.50 D) 11.25 489)

C&A Dairy makes 5 different flavors of ice cream. The machine must be setup properly for making each flavor. Setup time is 45 minutes and production time is 30 minutes per gallon for each flavor of ice cream. Demands (in gallons per hour) for the ice cream follow: Vanilla 0.3

Cherry 0.2

Strawberry 0.1

Chocolate 0.5

Mint 0.1

How many gallons of vanilla ice cream should C&A produce in each production cycle to minimize inventory while satisfying demand? A) 281.25 B) 2.8 C) 1.50 D) 11.25

490)

The reason why resources with setups are used is because the advantage of a _________ can outweigh the disadvantage of the setup. A) small inventory B) high utilization C) fast processing time D) large inventory

491)

C&A Candy produces two kinds of gumdrops: regular and sugar-free. The data on these gumdrops follow: Demand (lbs per hour) Changeover time (minutes) Production rate (lbs per hour)

Regular

Sugar-Free

30 60 80

10 30 80

How many pounds of sugar-free gumdrops should C&A produce before switching to regular gumdrops in order to minimize inventory while satisfying demand? A) 30 B) 80 C) 90 D) 120 492)

C&A Dairy makes 5 different flavors of ice cream. The machine must be setup properly for making each flavor. Setup time is 45 minutes and production time is 30 minutes per gallon for each flavor of ice cream. Demands (in gallons per hour) for the ice cream follow: Vanilla 0.3

Cherry 0.2

Strawberry 0.1

Chocolate 0.5

Mint 0.1

How many gallons of chocolate ice cream should C&A produce in each production cycle to minimize inventory while satisfying demand? A) 0.5 B) 1.2 C) 4.7 D) 11.25 493)

Which of the following is NOT a solution to the problem of setup times? A) Reengineer the setup process to increase the processing time. B) Reduce product variety. C) Change an internal setup task to an external setup task. D) Reengineer the setup process to reduce the setup time.

494)

Which of the following is an external setup task for a printer with a single paper tray and ink cartridge? A) Changing the paper tray for a different kind of paper stock needed B) Changing the ink cartridge of a printer C) Preparing a paper tray with the paper stock needed for the next printing task D) Canceling all printing tasks to remove a paper jam

495)

Which of the following is an internal setup task? A) Purchasing additional ink cartridges to carry in inventory B) Cooling the printer with a fan while it is operating C) Preparing a paper tray with the paper stock needed for the next printing task D) Clearing a paper jam

496)

Which of the following is NOT a way to reduce setup times? A) Change internal to external setups. B) Reduce internal setups. C) Adopt mixed-model assembly. D) Produce each type of a product in as large of a batch as possible.

497)

Which of the following statements about heijunka is FALSE? A) It is a strategy to assemble different products in very small batches one after the other. B) It is a strategy to schedule production to resemble as much as possible the true rate of demand. C) It is a strategy that works if setup times are reduced to an inconsequential level. D) It is a strategy of producing products without variety.

498)

Which of the following curves is a correct portrayal of the relationship between variety and efficiency?

499)

Considering the trade-off between variety and efficiency, which of the following is the correct portrayal of a solution to reduce variety in order to gain a higher efficiency?

500)

Considering the trade-off between variety and efficiency, which of the following is the correct portrayal of a solution to increase both variety and efficiency?

D) 501)

If a resource with setups produces in _________ batches and does _________ setups, then its capacity will be _________. A) small, infrequent, unconstrained. B) small, frequent, low. C) large, frequent, unconstrained. D) large, infrequent, low.

502)

Which of the following statements about managing processes with setups is FALSE? A) Setup times are always a problem for any resource. B) A possible solution to the setup problem is to eliminate product variety. C) Setups can be considered as wastes in a process. D) Setup times create inflexibility in a process.

503)

The goal of Single-Minute Exchange of Die (SMED) is to reduce _________. A) setup time to one minute or less. B) setup time to a single-digit number of minutes (nine or fewer). C) product variety to nine or fewer models. D) processing time to one minute or less.

Answer Key Test name: chapter 7 1) FALSE

Setup involves a fixed amount of time that is not directly related to the number of units produced. 2) TRUE

An increase in batch size will increase the capacity of a resource with setups with diminishing returns. 3) FALSE

The traditional formula for utilization = flow rate/capacity. A resource with setups cannot be utilized 100%, as production must stop when it is doing a setup. 4) TRUE

A batch size should be chosen for a process with setups so that it is not so large as to incur high inventory holding costs and not so small as to constrain the capacity of the process. 5) TRUE

Producing a variety of products requires more setups, which leads to larger batch sizes and therefore more inventory. 6) FALSE

SMED and heijunka are ideas that enable Toyota to increase both efficiency and variety at the same time. 7) D

Setup time is not dependent on the number of units subsequently produced. 8) A

Changing the color of paint in a paint sprayer is an example of a setup activity because it requires stopping the painting operation and its time does not depend directly on the number of square feet to be painted. 9) D

Sewing time is dependent on the number of units actually produced. Therefore, it is not a setup activity. 10) A

Recalibration is the time it takes the machine to get ready for cutting: 5 minutes. This is the setup time. 11) C

Dry cleaning is performed in a batch and is independent of the number of garments to be cleaned. Therefore, it is a setup activity. 12) D

Milling setup = 30 minutes; Milling changeover = 25 minutes. The total setup time = 30 + 25 = 55 minutes. 13) C

Capacity = Batch size ÷ (Total setup time + (Processing time × Batch size). Total production and setup time for ten tables = 30 + (10 × 10) + 25 + (5 × 10) = 205 minutes. Batch size is 10. Capacity = 10 ÷ 205 or 0.0488 tables per minute. For capacity per day, 10 ÷ 205 × 8 hours × 60 minutes per hour = 23.4 tables per day. 14) B

Capacity = Batch size ÷ (Total setup time + (Processing time × Batch size). Total production and setup time for 100 tables = 30 + (10 × 100) + 25 + (5 × 100) = 1,555 minutes. Batch size is 100. Capacity = 100 ÷ 1,555 or 0.0643 tables per minute. Capacity per day = 100 ÷ 1,555 × 8 hours × 60 minutes per hour = 30.9 tables per day. 15) C

Capacity = Batch size ÷ (Total setup time + (Processing time × Batch size). Total production and setup times for 50 tables = 30 + (10 × 50) + 25 + (5 × 50) = 805 minutes. Capacity = 50 ÷ 805 or 0.0621 tables per minute. Capacity per day = 50 ÷ 805 × 8 hours × 60 minutes per day = 29.8 tables per day. 16) D

Capacity = Units produced ÷ Time to produce the units. Capacity of tagging = 10 garments ÷ (1 minute × 10 garments) = 1; Since stain pretreatment has 2 workers, each worker will pretreat 10 ÷ 2 = 5 garments per batch, and we assume they complete the work at the same time. Capacity of stain pretreatment = 10 garments ÷ (5 minutes per garment × 5 garments per worker) = 10 ÷ 25 = 2 ÷ 5 = 0.4. Capacity of dry cleaning = 10 ÷ 50 = 0.2; Capacity of spot cleaning = 10 ÷ (10 minutes per garment × 10 ÷ 5 garments per worker) = 0.5. Capacity of finishing = 10 ÷ (4 × 10 ÷ 2) = 0.5. Capacity of the process = Min(1, 0.4, 0.2, 0.5, 0.5) = 0.2 pounds of garments per minute. 17) C

Capacity = Units produced ÷ Time to produce the units. Capacity when tagging 15 garments = 15 garments ÷ 15 minutes = 1 vs capacity for 30 garments = 30 ÷ 30 = 1. Stain pretreatment has 2 workers; we assume workers complete the work at the same time. Capacity for stain pretreatment with 15 garments = 15 ÷ (5 × 15 ÷ 2) = 15 ÷ 37.5 = 0.4 vs capacity with 30 garments = 30 ÷ (5 × 30 ÷ 2) = 0.4. Capacity of dry cleaning 15 garments = 15 ÷ 50 = 0.3 vs capacity with 30 garments 30 ÷ 50 = 0.6. Capacity of spot cleaning 15 garments = 15 ÷ (10 × 15 ÷ 5) = 0.5 vs capacity for 30 garments = 30 ÷ (10 × 30 ÷ 5) = 0.5. Capacity for finishing batches of 15 garments = 15 ÷ (4 × 15 ÷ 2) = 0.5 vs capacity for 30 garments = 30 ÷ (4 × 30 ÷ 2) = 0.5. Capacity at 15 garments = Min(1, 0.4, 0.3, 0.5, 0.5) = 0.3. Capacity at 30 garments = Min(1, 0.4, 0.6, 0.5, 0.5) = 0.4. Capacity increases from 0.3 to 0.4, a net increase of 0.1 garments per minute. 18) A

Capacity = Batch size ÷ (Total setup time + (Processing time × Batch size). Capacity of milling = 10 ÷ [30 + (10 × 10) + 25 + (5 × 10)] = 0.049. With no setup time, the formula is capacity = Units produced ÷ Time to produce the units. Capacity of assembly = 10 ÷ (15 × 10) = 1 ÷ 15 = 0.067; Capacity of finishing = 10 ÷ (20 × 10) = 1 ÷ 20 = 0.05. Capacity of the process = Min(0.049, 0.067, 0.05) = 0.049 tables per minute. 19) C

Capacity of milling with a batch size of 12 = 12 ÷ (30 + (10 × 12) + 25 + (5 × 12)) = 0.051. Capacity of finishing = 1 ÷ 20 = 0.050. Capacity of assembly = 1 ÷ 15 = 0.067. Therefore, finishing is the bottleneck with a batch size of 12. If the batch size decreases to 10, milling capacity = 10 ÷ (30 + (10 × 10) + 25 + (5 × 10)) = 0.049. Capacity of finishing and assembly will not change. Therefore, the bottleneck will switch from finishing to milling with a batch size of 10. 20) D

Setup is 15 ÷ 60 = 0.25 hour. Processing time is 10 seconds per page ÷ 3,600 seconds per hour = 1 ÷ 360 hour per page. Batch size = 500 pages per hour. Capacity = 500 ÷ [0.25 + (1 ÷ 360 × 500)] = 305 pages per hour. 21) B

As batch size increases, capacity of a resource with setups increases. However, capacity increases more slowly as the batch size continues to grow larger (diminishing marginal returns). 22) C

Capacity of the printer = 500 ÷ [15 + (10 ÷ 60 × 500)] = 5.08 pages per minute. Flow rate = Min(10, 5.08) = 5.08. Utilization = Flow rate × Processing time = 5.08 × 10 ÷ 60 = 0.85 = 85%. 24) B

Capacity of the printer = 500 ÷ [15 + (10 ÷ 60 × 500)] = 5.08 pages per minute. Flow rate = Min(3, 5.08) = 3. Utilization = Flow rate × Processing time = 3 × 10 ÷ 60 = 0.50 = 50%. 25) B

Batch size = 60 + 20 = 80 lbs; Processing time = 1 ÷ 80 hour per lb; Capacity = 80 ÷ [(60 + 30) ÷ 60 + (1 ÷ 80 × 80)] = 32 lbs per hour; Flow rate = Min(30 + 10, 32) = 32; Utilization = 32 × 1 ÷ 80 = 40%. 26) C

Batch size = 150 + 90 + 30 = 270 pens; Processing time = 1 ÷ 200 hour per pen; Capacity = 270 ÷ [(60 + 30 + 45) ÷ 60 + (1 ÷ 200 × 270)] = 75 pens per hour; Flow rate = Min(50 + 30 + 10, 75) = 75; Utilization = 75 × 1 ÷ 200 = 37.5%. 27) B

Capacity of painting = 100 ÷ (1 hour × 100 ÷ 5) = 5 ÷ 1 = 5; Capacity of drying = 100 ÷ [6 hours + (5 ÷ 60 × 100)] = 7; Capacity of the process = Min(5, 7) = 5. Utilization refers to the time a resource is busy processing units. In this case, for the oven, “loading” is the processing time and “drying” is the setup time. Hence, the fraction of time busy loading equals the utilization of the oven. Utilization = flow rate × processing time = 5 × 5 ÷ 60 = 42%. 28) D

The larger the batch size, the more utilized the resource with setups will be as long as the resource is the bottleneck. 29) C

The breaks are the setups. Setup time is 12 ÷ 60 = 0.2 hour. Processing time is 4 ÷ 60 hours per load. Batch size = 60 minutes between breaks ÷ 4 minutes per load = 15 loads. Capacity = 15 ÷ [0.2 + (4 ÷ 60 × 15)] = 12.5 loads per hour. Flow rate = Min(15, 12.5) = 12.5. Utilization = Flow rate × Processing time = 12.5 × 4 ÷ 60 = 0.833 = 83.3%.

30) A

The breaks are the setups. Setup time is 12 ÷ 60 = 0.2 hour. Processing time is 4 ÷ 60 hours per load. Batch size = 60 minutes between breaks ÷ 4 minutes per load = 15 loads. Capacity = 15 ÷ [0.2 + (4 ÷ 60 × 15)] = 12.5 loads per hour. Flow rate = Min(10, 12.5) = 10. Utilization = Flow rate × Processing time = 10 × 4 ÷ 60 = 0.667 = 66.7%. 31) B

Batch size = 200 + 100 + 50 = 350 lbs; Processing time = 1 ÷ 200 hour per lb.; Capacity = 350 ÷ [(60 + 30 + 45) ÷ 60 + (1 ÷ 200 × 350)] = 87.5 lbs per hour; Flow rate = Min(40 + 20 + 10, 87.5) = 70. The process is demand–constrained. Average inventory = Maximum inventory ÷ 2, where Maximum inventory = Batch size × [1 − (Flow rate × Processing time)]. Batch size of white = 100; Flow rate of white = 20; Processing time = 1 ÷ 200. Average inventory = ½ × 100 × [1 – (20 × 1 ÷ 200)] = 45. 32) C

Batch size = 90 + 30 = 120 lbs; Processing time = 1 ÷ 80 hour per lb.; Capacity = 120 ÷ [(60 + 30) ÷ 60 + (1 ÷ 80 × 120)] = 40. Flow rate = min(30 + 10, 40) = 40. Capacity is sufficient to meet demand, so the flow rate of regular = 30. Average inventory = Maximum inventory ÷ 2, where Maximum inventory = Batch size × [1 – (Flow rate × Processing time)]. Average inventory of regular = 1/2 × 90 × [1 – (30 × 1 ÷ 80)] = 28.13. 33) B

Inventory level in a process with setups follows a saw-toothed pattern over time. 34) C

A larger batch size leads to more inventory. 35) D

Batch size = 90 + 30 = 120 lbs; Processing time = 1 ÷ 80 hour per lb.; Capacity = 120 ÷ [(60 + 30) ÷ 60 + (1 ÷ 80 × 120)] = 40. Flow rate = min(30 + 10, 40) = 40. Capacity is sufficient to meet demand, so the flow rate of sugar-free is 10 lbs per hour. Average inventory = Maximum inventory ÷ 2, where Maximum inventory = Batch size × [1 − (Flow rate × Processing time)]. Average inventory of sugar-free = 1 ÷ 2 × 30 × [1 – (10 × 1 ÷ 80)] = 13.13 lbs. 36) C

Batch size = 200. Capacity of cutting = 200 ÷ [40 + (30 × 200)] = 0.033. Capacity of polishing = 5 ÷ 240 = 0.0208. Capacity of the process = Min(0.033, 0.0208) = 0.0208. Demand rate = 3 ÷ 60 = 0.05. Flow rate = Min(0.05, 0.0208) = 0.0208 parts per minute. Maximum inventory = 200 × [1 − (0.0208 × 30)] = 75. 37) D

Batch size = 200 + 100 + 50 = 350 lbs; Processing time = 1 ÷ 200 hour per lb.; Capacity = 350 ÷ [(60 + 30 + 45) ÷ 60 + (1 ÷ 200 × 350)] = 87.5 lbs per hour; Flow rate = Min(40 + 20 + 10, 87.5) = 70. The process is demand–constrained. Average inventory = Maximum inventory ÷ 2, where Maximum inventory = Batch size × [1 − (Flow rate × Processing time)]. Batch size of wheat = 200; Flow rate of wheat = 40; Processing time = 1 ÷ 200. Average inventory = ½ × 200 × [1 − (40 × 1 ÷ 200)] = 80. 38) A

Batch size = 200 + 100 + 50 = 350 lbs; Processing time = 1 ÷ 200 hour per lb.; Capacity = 350 ÷ [(60 + 30 + 45) ÷ 60 + (1 ÷ 200 × 350)] = 87.5 lbs per hour; Flow rate = Min(40 + 20 + 10, 87.5) = 70. The process is demand–constrained. Average inventory = Maximum inventory ÷ 2, where Maximum inventory = Batch size × [1 − (Flow rate × Processing time)]. Batch size of multigrain = 50; Flow rate of multigrain = 10; Processing time = 1 ÷ 200. Average inventory = ½ × 50 × [1 − (10 × 1 ÷ 200)] = 23.8. 39) B

Capacity of the printer = 3 pages per minute. Use the formula Batch size = (Target capacity × Total setup time) ÷ [1 − (Target capacity × Processing time)] = (3 × 15) ÷ [1 − (3 × 10 ÷ 60)] = 90. 40) C

Batch size = (Capacity × Setup) ÷ [1 − (Capacity × Processing time)]. Capacity = 24 ÷ 60 = 0.4 unit per minute. Setup = 20 × 3 = 60 minutes. Processing time = 0.5 minute. Batch size = (0.4 × 60) ÷ [1 − (0.4 × 0.5)] = 30. 41) C

Demand is unlimited, therefore the process is supply-constrained and the ideal batch size will balance the capacities of the resources (to minimize the inventory). Batch size = (Capacity × Setup) ÷ [1 − (Capacity × Processing time)]. Capacity = 1 ÷ 40 = 0.025 part per minute. Setup = 40 minutes. Processing time = 30 minutes. Batch size = (0.025 × 40) ÷ [1 − (0.025 × 30)] = 4. 42) B

In a demand-constrained process, capacity is equal to the demand rate. Therefore, the ideal batch size should minimize inventory while satisfying demand. 43) A

Capacity = 1 ÷ 4 = 0.25. Setup = 5 + 10 = 15 minutes. Processing time = 1 + (4 × 0.5) = 3 minutes. Batch size = (0.25 × 15) ÷ [1 − (0.25 × 3)] = 15. 44) A

Further increase in batch size beyond the threshold will have no impact on capacity but will increase inventory. 45) D

The ideal batch size in a supply-constrained process is one that minimizes inventory and matches the bottleneck capacity. 46) B

The ideal batch size in a demand-constrained process is one that minimizes inventory and matches the demand rate. 47) B

Demand is 1 vase per hour. Use the formula Batch size = (Target capacity × Total setup time) ÷ [1−; (Target capacity × Processing time)]. Capacity = 1. Batch size for the oven = (1 × 24) ÷ [1 − (1 × 5 ÷ 60)] = 26; Batch size for the kiln = (1 × 72) ÷ (1 − (1 × 6 ÷ 60)) = 80. Therefore, the minimum batch size should be 80 because that is the smallest batch size that allows both the oven and the kiln to operate at a rate that doesn’t constrain the flow. 48) C

Capacity of the process = Min(5 ÷ 1, 60 ÷ 5, 60 ÷ 6, 4 ÷ 2) = 2. Batch size for the oven = (2 × 25) ÷ [1 − (2 × 5 ÷ 60)] = 60; Batch size for the kiln = (2 × 72) ÷ [1 − (2 × 6 ÷ 60)] = 180. The ideal batch size is 180 because that is the smallest batch size that allows both the oven and the kiln to operate at a rate that doesn’t constrain the flow. 49) B

Given equal processing times, the resource with a setup will always be the bottleneck; therefore, the batch size formula does not apply since matching of capacities is not possible. 50) C

Batch size = (Capacity × Setup) ÷ [1 − (Capacity × Processing time)]. Capacity = 50 ÷ 60 = 0.8333 unit per minute. Setup = 25 × 4 = 100 minutes. Processing time = 0.6 minute. Batch size = (0.8333 × 100) ÷ [1 − (0.8333 × 0.6)] = 167. 51) B

Demand is unlimited. Therefore the process is supply-constrained and the ideal batch size will balance the capacities of the resources (to minimize the inventory). Batch size = (Capacity × Setup) ÷ [1 − (Capacity × Processing time)]. Target capacity = 1 ÷ 8 = 0.125 unit per minute. Setup = 60 minutes. Processing time = 6 minutes. Batch size = (0.125 × 60) ÷ [1 − (0.125 × 6)] = 30. 52) C

The process is demand-constrained and the target capacity = 5 units per hour ÷ 60 minutes per hour = 0.0833 units per minute. Batch size = (Capacity × Setup) ÷ [1 − (Capacity × Processing time)]. Setup = 60 minutes. Processing time = 6 minutes. Batch size = (0.0833 × 60) ÷ [1 − (0.0833 × 6)] = 10. 53) D

Batch size = (Capacity × Setup) ÷ [1 − (Capacity × Processing time)]. Demand is less than the production rate, thus set target capacity = 30 + 10 = 40 lbs per hour. Setup = 60 + 30 = 90 minutes = 1.5 hours. Processing time = 1 ÷ 80 hour per lb. Batch size = (40 × 1.5) ÷ [1 − (40 × 1 ÷ 80)] = 120. To ensure the production of regular and sugar-free matches demand, 30 out of every 40 pounds produced should be regular. Batch size for regular = 120 × (30 ÷ 40) = 90. 55) B

Batch size = (Capacity × Setup) ÷ [1 − (Capacity × Processing time)]. Demand is less than the production rate, thus set target capacity = 50 + 20 + 10 = 80 lbs per hour. Setup = (60 + 30 + 45) ÷ 60 = 2.25 hours. Processing time = 1 ÷ 200 hour per lb. Batch size = (80 × 2.25) ÷ [1− (80 × 1 ÷ 200)] = 300. Batch size for white bread = 300 × (20 ÷ 80) = 75. 56) C

Batch size = (Capacity × Setup) ÷ [1 − (Capacity × Processing time)]. Demand is less than the production rate, thus set target capacity = 50 + 20 + 10 = 80 lbs per hour. Setup = (60 + 30 + 45) ÷ 60 = 2.25 hours. Processing time = 1 ÷ 200 hour per lb. Batch size = (80 × 2.25) ÷ [1 − (80 × 1 ÷ 200)] = 300. Batch size for wheat = 300 × (50 ÷ 80) = 187.5. 57) D

Batch size = (Capacity × Setup) ÷ [1 − (Capacity × Processing time)]. Demand is less than the production rate, thus set target capacity = 0.3 + 0.2 + 0.1 + 0.5 + 0.1 = 1.2 gallons per hour. Setup = 45 ÷ 60 × 5 = 3.75 hours. Processing time = 30 ÷ 60 = 0.5 hour. Batch size = (1.2 × 3.75) ÷ [1 − (1.2 × 0.5)] = 11.25. To ensure production of vanilla meets demand, set batch size consistent with the proportion of demand. Batch size of vanilla = 11.25 × 0.3 ÷ 1.2 = 2.8. 59) C

The advantage of a fast processing time can outweigh the disadvantage of the setup to make resources with setups worthwhile to use. 60) A

Batch size = (Capacity × Setup) ÷ [1 − (Capacity × Processing time)]. Demand is less than the production rate, thus set target capacity = 30 + 10 = 40 lbs per hour. Setup = 60 + 30 = 90 minutes = 1.5 hours. Processing time = 1 ÷ 80 hour per lb. Batch size = (40 × 1.5) ÷ [1 − (40 × 1 ÷ 80)] = 120. To ensure the production of regular and sugar-free matches demand, 10 out of every 40 pounds produced should be sugar-free. Batch size for sugar-free = 120 × (10 ÷ 40) = 30. 61) C

Batch size = (Capacity × Setup) ÷ [1 − (Capacity × Processing time)]. Demand is less than the production rate, thus set target capacity = 0.3 + 0.2 + 0.1 + 0.5 + 0.1 = 1.2 gallons per hour. Setup = 45 ÷ 60 × 5 = 3.75 hours. Processing time = 30 ÷ 60 = 0.5 hour. Batch size = (1.2 × 3.75) ÷ [1 − (1.2 × 0.5)] = 11.25. To ensure production of chocolate meets demand, set batch size consistent with the proportion of demand. Batch size of chocolate = 11.25 × 0.5 ÷ 1.2 = 4.7. 62) A

An increase in the processing time reduces a setup resource’s capacity.

63) C

Getting a paper tray ready for the next printing task will reduce setup times for the next printing task while the printer is still running. 64) D

Clearing a paper jam cannot be done while the printer is still running. 65) D

Increasing the batch size has no impact on setup times. 66) D

Producing products without variety is not what heijunka is about. 67) C

When product variety increases, setup times increase, which leads to less efficiency. As variety increases, efficiency drops faster and faster. 68) A

When product variety is reduced, efficiency increases, following the downward shift along the trade-off curve. 69) D

When both variety and efficiency are increased, the trade-off curve shifts outwards to the right. 70) B

If a resource with setups produces in small batches and does frequent setups, then its capacity will be low. 71) A

Setup times are not a problem for a resource which only produces a single item and therefore does not require any setups. 72) B

The goal of Single-Minute Exchange of Die (SMED) is to reduce setup time to a single-digit number of minutes (nine or fewer).

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 504) An example of a lean operation is to have workers circulating in a store, waiting for customers to check out on mobile payment units. ⊚ true ⊚ false 505)

A worker moving inventory from one machine to another is considered non-value-added work. ⊚ true ⊚ false

506)

An operation is lean if it only strives to reduce waste in its capacity. ⊚ true ⊚ false

507)

The 4Ps of the TPS are place, promotion, people, and profit. ⊚ true ⊚ false

508)

A process should operate at a rate equal to the discretionary flow of resources. ⊚ true ⊚ false

509)

A short information turnaround time requires many inspection points throughout the process to identify quality problems when and where they arise. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 510) Lean operations is about reducing two forms of waste, wasted _________ and wasted _________. A) inventory, capacity B) resource time, flow unit time C) inventory, flow time D) inventory, processing time

511)

Which of the following is NOT an example of wasted capacity? A) Idle time B) Rework C) Setup D) Flow time

512)

The goal of lean is to _________ from the system. A) extract profit B) increase output C) eliminate waste D) generate value

513)

Which of the following is an example of wasted flow time? A) A long waiting time at a checkout B) Idle time of a cashier C) Merchandise returned to a store D) Ringing up sales at a register

514)

Which of the following terms is interchangeable with "lean"? A) Value adding B) Toyota Production System C) Green D) No waiting

515)

Which of the following is NOT a component of worker time on the job? A) Waste B) Value-added work C) Commuting D) Non-value-added work 516)

Which of the following is an example of value-added work? A) Taking orders from customers B) Repairing a defective product C) Unpacking boxes in a stock room D) Waiting for customers to order

517)

The overall equipment effectiveness (OEE) formula computes the fraction of a resource’s _________, which is _________. A) available time, value-added time B) equipment time, labor time C) value-added time, wasted time D) available time, wasted time

518)

A machine is available 10 hours a day. Each part takes 80 minutes to fabricate and 10 minutes to setup. 10% of the parts made are defective and must go through the machine again to be reworked, during which both setup and fabrication have to be performed again. The machine is idle for any unused time. On average, 5 good parts are made each day. What is the overall equipment effectiveness of the machine? A) 0.067 B) 0.667 C) 0.75 D) 0.80

519)

Which of the following is NOT one of the seven sources of waste? A) Inventory B) Overproduction C) Processing D) Movement

520)

Which of the following is NOT an element of the Toyota Production System? A) Scientific management B) Kaizen C) Lean D) Genchi genbutsu

521)

Which of the following statements about sources of production waste is FALSE? A) Working overtime is a waste because it means more labor cost is spent on a flow unit than necessary. B) Rework is a waste because it means resources are used to correct mistakes instead of adding value. C) Waiting is a waste because it means resources are idle and are not fully utilized. D) Over-processing is a waste because it means more time is spent on flow units than necessary.

522)

To avoid rework is to _________. A) do it at the right time B) do it right using the longest time C) do it right using the shortest time D) do it right the first time

523)

Which of the following statements is FALSE regarding overall equipment effectiveness (OEE)? A) OEE identifies what percent of a resource’s time is spent on value-added work. B) OEE is part of a productivity analysis of a resource. C) OEE can exceed a value of one. D) OEE identifies the portion of a worker's time which is being wasted.

524)

Which of the following is an example of waste of worker intellect? A) Walking from one part of the building to the other B) Discounting process improvement suggestions from workers C) Working overtime D) Taking lunch breaks

525)

Which of the following is a means to counter overproduction? A) Keep resources busy. B) Keep moving things around. C) Produce expected demand. D) Produce at the actual rate of demand.

526)

A machine is available two shifts per day and 10 hours per shift. It produces 75 units per day, on average. Each unit requires 10 minutes to produce. The remainder of the day is spent performing setups, doing preventative maintenance, and being idle. What is the overall equipment effectiveness of the machine? A) 0.313 B) 0.625 C) 0.75 D) 0.833

527)

A machine is available three shifts per day and 8 hours per shift. It produces 425 units per day, on average. Each unit requires 2 minutes to produce. The remainder of the day is spent performing setups, doing preventative maintenance and being idle. What is the overall equipment effectiveness of the machine? A) 0.32 B) 0.48 C) 0.59 D) 0.89

528)

The following are sources of wasted time of a flow unit EXCEPT _________ times. A) storage B) transportation C) processing D) setup

529)

Wastes of flow time become visible by taking the perspective of the _________. A) flow unit B) manager C) supplier D) labor content

530)

Which of the following statements about wasting time of a flow unit is TRUE? A) By reducing the waiting time of a flow unit, the time it takes to turn inputs into output is decreased. B) The process flow diagram shows how much time a flow unit spends at each step in the process. C) The value-added time of a flow unit is equal to its takt time. D) Holding everything constant, an increase in flow time improves the extent to which an operation is considered lean.

531)

Which of the following can NOT be used to determine the extent to which an operation is lean? A) Inventory turns B) Value-added percentage C) Overall equipment effectiveness D) Labor content

532)

Which of the following can be used to uncover a waste of flow time? A) Inventory level B) Overall equipment effectiveness C) Labor content D) Overtime

533)

The value-added percentage is defined as _________ divided by _________. A) value-added time of a flow unit, available time B) available time, value-added time of a flow unit C) value-added time of a flow unit, flow time D) flow time, value-added time of a flow unit

534)

A lean operation strives to achieve a reduction of _________ and _________ simultaneously. A) demand in capacity, available time B) demand in capacity, flow time C) waste in capacity, flow time D) waste in capacity, available time

535)

A patient spent 24 minutes waiting in the reception area before seeing a doctor. The visit with the doctor lasted 6 minutes. What is the value-added percentage of the patient? A) 17% B) 20% C) 25% D) 80%

536)

A circuit board in an electronics manufacturing process has a 17-hour flow time, on average. Two hours of this time is spent being processed. Twelve hours is spent waiting between resources and the other three hours is spent on setup activities. What is the valueadded percentage of the process? A) 11.8% B) 17.7% C) 29.4% D) 70.6%

537)

A salesperson spends his 8-hour day as follows: 4.5 hours driving between client locations, 45 minutes eating lunch, 2 hours engaging in sales activities, and 45 minutes making personal phone calls. What is the value-added percentage of his sales process? A) 81.3% B) 56.3% C) 34.4% D) 25.0%

538)

Which of the following is NOT one the 4Ps of Toyota production system? A) People and partners B) Profit C) Processes D) Philosophy

539)

The Toyota Production System is often depicted as a house. The roof of TPS consists of the principle of _________ and the goal to _________. A) waste reduction, maximize profit B) waste reduction, match supply with demand C) built-in quality, match supply with demand D) built-in quality, operate just-in-time

540)

The Toyota Production System is often depicted as a house. The two pillars of the TPS are _________ and _________. A) waste reduction, just-in-time flow B) process improvement, just-in-time flow C) waste reduction, built-in quality D) built-in quality, just-in-time flow

541)

The Toyota Production System is often depicted as a house. The foundation of TPS consists of _________ and _________. A) waste reduction, just-in-time B) process improvement, just-in-time C) process improvement, stable processes D) waste reduction, process improvement

542)

The Toyota Production System can be represented in the shape of a _________. A) boat B) box C) house D) pyramid

543)

_________ means to produce in the amounts needed, when needed, and where needed using a single unit flow. A) Just-in-time B) Built-in quality C) Process improvement D) Stable environment

544)

_________ means to detect and address defects when and where they occur and prevent them from recurring. A) Just-in-time B) Built-in quality C) Process improvement D) Stable environment

545)

_________ means a process has a smooth flow with little variability and built-in flexibility. A) Just-in-time B) Built-in quality C) Process improvement D) Stable environment

546)

The benefits of a smooth single-unit flow include all of the following EXCEPT _________. A) reduced worker turnover B) less inventory C) shorter flow times D) faster feedback

547)

548)

Which of the following process changes is NOT needed to implement ikko-nagashi? A) Implementing a push system B) Operating based on takt time C) Leveling demand D) Transferring units piece by piece

In a pull system, an information flow of external demand is moving _________ and the physical flow of the flow units is moving _________. A) downstream, upstream B) upstream, downstream C) upstream, upstream D) downstream, downstream

549)

A kanban system _________ work through the process based on _________. A) pushes, capacity B) pulls, capacity C) pushes, demand D) pulls, demand

550)

Which of the following is a way to implement a pull system? A) Make to stock B) Make to order C) Make to capacity D) Make to inventory

551)

A production process has two workstations. The first workstation has a capacity of 200 units per hour and the second workstation has a capacity of 150 units per hour. Demand for the process is 250 units per hour. What is the utilization of the first workstation in a push process? A) 100% B) 80% C) 75% D) 60%

552)

553)

Which of the following statements about ikko-nagashi is TRUE? A) It is about optimizing transfer batch size with a given process layout. B) It is the same as a kanban system. C) It is about flowing one unit at a time from one resource to the next. D) It is about organizing work flow by function or equipment.

Daily demand for a product is 200 units. The production lead time is 3 days. A 1-day safety stock is kept. How many kanban containers are needed if one container holds 100 units? A) 8 B) 6 C) 2 D) 1

554)

What is the relationship between the number of kanban cards in a process and the inventory level? A) There is no more inventory in the process than was authorized via kanban cards. B) The inventory of the process grows with the square root of the number of kanban cards. C) The inventory of the process is reduced by adding more kanban cards. D) There is no relationship between kanban cards and inventory levels.

555)

Which one of the following is a consequence of uneven workflow? A) Multiple job assignments B) No idle time in the production process C) Overburdening of workers and equipment D) Just-in-time production

556)

A production process has three workstations. The first workstation has a capacity of 125 units per hour, the second workstation has a capacity of 115 units per hour, and the third workstation has a capacity of 140 units per hour. Demand for the process is 180 units per hour. What is the utilization of the first workstation in a push process? A) 63.9% B) 77.8% C) 92.0% D) 100%

557)

Daily demand for a product is 384 units. The production lead time is 5 hours. A 2-hour safety stock is kept. How many kanban containers are needed if one container holds 16 units and the process operates 12 hours per day? A) 8 B) 14 C) 16 D) 24

558)

Daily demand for a product is 1200 units. The production lead time is 3 hours. A 1-hour safety stock is kept. How many kanban containers are needed if one container holds 24 units and the process operates 10 hours per day? A) 5 B) 12 C) 20 D) 50

C&A Dairy makes two flavors of ice cream – chocolate and vanilla. Each gallon is produced and shipped in discrete containers. The demand for the ice cream (in gallons) is given as follows:

559)

Day 1 2 3 4 5

Chocolate 20 60 30 50 10

Vanilla 40 100 30 70 100

C&A operates 8 hours a day, 5 days a week. What is the takt time and how should C&A schedule the production of its ice cream to level demand? A) 5.5 minutes per gallon, alternate between 1 unit of chocolate and 1 unit of vanilla B) 5.5 minutes per gallon, alternate between 1 unit of chocolate and 2 units of vanilla C) 4.7 minutes per gallon, alternate between 1 unit of chocolate and 1 unit of vanilla D) 4.7 minutes per gallon, alternate between 1 unit of chocolate and 2 units of vanilla 560)

C&A Dairy makes two flavors of ice cream—chocolate and vanilla. Each gallon is produced and shipped in discrete containers. The demand for the ice cream (in gallons) is given as follows: Day 1 2 3 4 5

Chocolate 30 60 40 40 30

Vanilla 60 100 90 80 70

C&A operates 8 hours a day, 5 days a week. Given a labor content of 12 minutes per gallon, what is the target manpower? A) 10 workers B) 2 workers C) 4 workers D) 3 workers

561)

Chocolate 50 25 70 65 40

Vanilla 20 25 30 35 15

C&A operates 10 hours a day, 5 days a week. What is the takt time and how should C&A schedule the production of its ice cream to level demand? A) 8 minutes per gallon, alternate between 1 unit of chocolate and 1 unit of vanilla B) 8 minutes per gallon, alternate between 2 units of chocolate and 1 unit of vanilla C) 6.2 minutes per gallon, alternate between 1 unit of chocolate and 1 unit of vanilla D) 6.2 minutes per gallon, alternate between 2 units of chocolate and 1 unit of vanilla 562)

Chocolate 30 25 50 35 60

Vanilla 40 20 60 35 45

C&A operates two shifts per day, 8 hours per shift, and 5 days a week. What is the takt time and how should C&A schedule the production of its ice cream to level demand? A) 4 minutes per gallon, alternate between 1 unit of chocolate and 1 unit of vanilla B) 12 minutes per gallon, alternate between 2 units of chocolate and 1 unit of vanilla C) 12 minutes per gallon, alternate between 1 unit of chocolate and 2 units of vanilla D) 12 minutes per gallon, alternate between 1 unit of chocolate and 1 unit of vanilla 563)

TPS’s quality improvement involves all of the following EXCEPT _________. A) avoid recurrence B) detect-stop-alert C) kanban D) root cause analysis

564)

C&A uses an assembly line of 20 stations to make a product. The cycle time is 5 minutes per unit. Station 6 is the most error-prone operation. Inspection occurs at the last station. What will be the information turnaround time for a defect made at station 6 if there is no inventory between stations? A) 100 minutes B) 70 minutes C) 5 minutes D) 0.2 minute

565)

A computer is assembled on an assembly line consisting of 12 stations. The cycle time is 3 minutes per unit. Station 4 is the most error-prone operation. Inspection occurs at the last station. What will be the information turnaround time for a defect made at station 4 if there is no inventory between stations? A) 0.33 minutes B) 3 minutes C) 24 minutes D) 36 minute

566)

C&A uses a line of 5 stations to make a product. The cycle time is 30 seconds per unit. The inventory between stations is 10 units. Inspection happens at the end of the process. Which of the following is NOT a way to shorten the information turnaround time for a defect made at station 2? A) Reduce the amount of inventory between stations. B) Reduce cycle time. C) Inspect at every station. D) Add another station after station 2.

567)

The key concepts that characterize TPS’s approach towards root-cause problem solving are _________ and _________. A) kaizen and jidoka B) genchi genbutsu and jidoka C) kaizen and genchi genbutsu D) kaizen and zero inventory

568)

In the Toyota Production System, jidoka refers to _________. A) Level production, where different models are produced alongside each other on the assembly line B) Continuous improvement, where workers organize meetings to discuss ways of improving the production process C) The inventory retrieval system, where parts are replenished only when they are needed D) Mechanisms used in production to stop the process and alert workers when a quality problem is detected

569)

What term refers to fool-proofing an operation to avoid the recurrence of defects? A) Poka-yoke B) Autonomation C) Heijunka D) Andon

570)

Which of the following statements about the Toyota Production System is TRUE? A) An Andon cord that is rarely pulled is a good indicator of success of TPS implementation. B) Implementing TPS amounts to selecting the right lean tools to use. C) TPS is only relevant for manufacturing operations. D) All dimensions of TPS need to be adopted by an organization to get the full benefits of lean.

571)

What term refers to combining machines in production with the intelligence of workers? A) Genchi genbutsu B) Heijunka C) Muri D) Autonomation

572)

Which of the following is the idea behind genchi genbutsu? A) Work should be designed by engineers. B) Improvement of work can only come from management. C) Work can be designed by those who are not fully familiar with the process. D) Workers should be the ones observing and improving a process.

Answer Key Test name: chapter 8 1) FALSE

Flow time is minimized at the expense of wasted time of workers waiting to check out customers. 2) TRUE

Moving inventory is not value-adding. 3) FALSE

An operation is lean if it strives to reduce waste in its capacity as well as the time a flow unit spends in the system. 4) FALSE

The 4Ps of the TPS are philosophy, processes, people and partners, and problem solving. 5) FALSE

A process should operate at the rate of demand. 6) TRUE

Having many inspection points will stop a defect from passing downstream and thus reduce information turnaround time. 7) B

There are two forms of waste: wasted resource time and wasted flow unit time. 8) D

Flow time is the amount of time a flow unit spends in a production system. It is not about capacity being wasted. 9) C

Lean's goal is to eliminate waste from the system. 10) A

Long waiting times will increase flow time, leading to wasted flow time. 11) B

Lean and Toyota Production System are interchangeable terms.

12) C

Commuting is not a component of a worker’s time, as it happens outside work. 13) A

Taking orders from customers is value-added work. 14) A

The overall equipment effectiveness (OEE) formula computes the fraction of a resource’s available time, which is value-added time. 15) B

Total time available = 10 × 60 = 600 minutes. Value added time = 80 × 5 = 400 minutes. OEE = 400 ÷ 600 = 0.667. 16) C

Processing time is not one of the seven sources of waste. 17) A

Scientific management is not an element of the Toyota Production System. It is about following scientific principles of designing work instead of relying on workers’ insights. 18) A

Working overtime is not a source of production waste because it is a way to match supply and demand. 19) D

Do it right the first time will eliminate rework. 20) C

OEE cannot exceed one since value-added time cannot exceed the total available time. 21) B

Frontline workers are most familiar with the work and should be encouraged to suggest ideas to improve their work. 22) D

Producing exactly at the rate of demand is a means to counter overproduction. 23) B

Total time available = 2 × 10 × 60 = 1200 minutes. Value added time = 75 × 10 = 750 minutes. OEE = 750 ÷ 1200 = 0.625. 24) C

Total time available = 3 × 8 × 60 = 1440 minutes. Value added time = 425 × 2 = 850 minutes. OEE = 850 ÷ 1440 = 0.59. 25) C

Time spent processing is not a waste because it is spent productively. 26) A

Taking the perspective of the flow unit can reveal wastes of flow time. 27) A

When waiting time of a flow unit is reduced, its flow time is shortened which means it takes less time to turn inputs into output. 28) D

Labor content is the sum of processing time. It does not tell whether an operation is lean or not. 29) A

A high level of inventory is usually indicative of a waste of flow time. 30) C

The value-added percentage is defined as value-added time of a flow unit divided by flow time. 31) C

A lean operation strives to achieve a reduction of waste in capacity and flow time simultaneously. 32) B

Flow time is 24 + 6 = 30 minutes. Value-added time is 6 minutes. Therefore, the value-added percentage = 6 ÷ 30 = 0.20 = 20%. 33) A

Flow time is 17 hours. Value-add time is 2 hours. Therefore, the value-added percentage = 2 ÷ 17 = 0.118 = 11.8%. 34) D

Flow time is 8 hours. Value-added time is 2 hours. Therefore, the value-added percentage = 2 ÷ 8 = 0.25 = 25%. 35) B

The 4Ps of Toyota production system is philosophy, processes, people and partners, and problem solving. 36) B

The roof of TPS consists of the principle of waste reduction and the goal to match supply with demand. 37) D

Built-in quality and just-in-time flow are the two pillars of the Toyota Production System. 38) C

The foundation of TPS consists of process improvement and stable processes. 39) C

TPS is often represented in the shape of a house. 40) A

Just-in-time means to produce in the amounts needed, when needed, and where needed using a single unit flow. 41) B

Built-in quality means to detect and address defects when and where they occur and prevent them from recurring. 42) D

Stable environment means a process has a smooth flow with little variability and built-in flexibility. 43) A

Reduced worker turnover may occur as a result of a lean culture, but it is not a direct benefit of smooth single-unit flow. 44) A

Implementing a pull system is the process change needed to implement single-unit flow. 45) B

External demand is the information that flows upstream and the physical flow of the flow units is moving downstream. 46) D

A kanban system pulls work through the process based on demand. 47) B

Make to order releases work into a system per customer order. 48) A

Flow rate = Min(Demand, Process capacity) = Min(250, 200) = 200. Capacity = 200. Utilization = 200 ÷ 200 = 1. 49) C

Ikko-nagashi is about having single-unit flow from one resource to the next. 50) A

Demand during lead time + safety stock = (3 × 200) + (1 × 200) = 800. Number of Kanban containers = 800 ÷ 100 = 8. 51) A

The main advantage of a kanban system is that there can never be more inventory between two resources than what has been authorized by the kanban cards. 52) C

Uneven workflow (mura) leads to an overburdening of workers and equipment (muri). 53) C

Flow rate = Min(Demand, Process capacity) = Min(180, 115) = 115. Capacity = 125. Utilization = 115 ÷ 125 = 0.920 = 92.0%. 54) B

Demand is 384 units per day ÷ 12 hours per day = 32 units per hour. Demand during lead time + safety stock = (5 × 32) + (2 × 32) = 224. Number of kanban containers = 224 ÷ 16 = 14. 55) C

Demand is 1200 units per day ÷ 10 hours per day = 120 units per hour. Demand during lead time + safety stock = (3 × 120) + (1 × 120) = 480. Number of kanban containers = 480 ÷ 24 = 20. 56) D

Available time = 8 × 60 × 5 = 2400 minutes. Total demand = 20 + 40 + … + 100 = 510 gallons. Takt time = available time ÷ demand = 2400 ÷ 510 = 4.7 minutes per gallon. Total chocolate demand = 170 gallons. Total vanilla demand = 340 gallons. There is twice as much demand for vanilla as chocolate. Therefore, a level production schedule should alternate between 1 unit of chocolate and 2 units of vanilla. 57) D

Available time = 8 × 60 × 5 = 2400 minutes. Total demand = 30 + 60 + … + 60 = 600 gallons. Takt time = available time ÷ demand = 2400 ÷ 600 = 4 minutes per gallon. Target manpower = Labor content ÷ Takt time = 12 minutes ÷ 4 minutes = 3 workers. 58) B

Available time = 10 × 60 × 5 = 3000 minutes. Total demand = 50 + 25 + ... + 15 = 375 gallons. Takt time = available time ÷ demand = 3000 ÷ 375 = 8 minutes per gallon. Total chocolate demand = 250 gallons. Total vanilla demand = 125 gallons. There is twice as much demand for chocolate as vanilla. Therefore, a level production schedule should alternate between 2 units of chocolate and 1 unit of vanilla. 59) D

Available time = 2 × 8 × 60 × 5 = 4800 minutes. Total demand = 30 + 25 + ... + 45 = 400 gallons. Takt time = available time ÷ demand = 4800 ÷ 400 = 12 minutes per gallon. Total chocolate demand = 200 gallons. Total vanilla demand = 200 gallons. Because the demand for each flavor is the same, a level production schedule should alternate between 1 unit of chocolate and 1 unit of vanilla. 60) C

Kanban is not one of the steps in TPS’s quality improvement. 61) B

There are 14 stations between stations 6 and 20. It takes 14 cycles of 5 minutes each for the flow unit to reach the last station where it will be inspected. Therefore, the information turnaround time = 14 × 5 = 70 minutes. 62) C

There are 8 stations between stations 4 and 12. It takes 8 cycles of 3 minutes each for the flow unit to reach the last station where it will be inspected. Therefore, the information turnaround time = 8 × 3 = 24 minutes. 63) D

Having more stations to make a product will increase cycle time and thus increase the information turnaround time. 64) C

Kaizen and genchi genbutsu are the two concepts that relate to TPS’s approach towards rootcause problem solving. 65) D

jidoka is the Japanese term used in the Toyota Production System to mean automation with a human touch. The concept has been generalized to include any mechanism that stops production in response to quality problems. 66) A

Poka-yoke refers to fool-proofing an operation to avoid the recurrence of defects. 67) D

To get the full benefits of TPS, the entire organization needs to embrace all dimensions of TPS. 68) D

Autonomation is automation with a human touch—combining the use of machines with the intelligence of workers. 69) D

Genchi genbutsu means literally "go and see in the real place." Improvements in operations should come from the front line, from those who are performing the work.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 573) A new backpack that has a zipper which is broken due to a supplier problem is indicative of a quality problem resulting from assignable cause variations. ⊚ true ⊚ false 574)

A defect occurs only because of abnormal variations in input variables. ⊚ true ⊚ false

575)

A process capability index of 2 means that the upper and lower specification limits of the process are six standard deviations above and below the mean respectively. ⊚ true ⊚ false

576)

Eliminating variations is always possible. ⊚ true ⊚ false

577)

An chart is used to track a process with binary outcome variables. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 578) C&A Pies runs a pizza restaurant. Which of the following is an outcome variable for C&A? A) The amount of cheese purchased from the supplier B) The weather condition C) The delivery time of the pizza D) The number of employees working for C&A 579)

C&A Cleaners operates a dry-cleaning service. Which of the following is an input variable for C&A? A) Stains left on garments after dry cleaning B) The average satisfaction of the customers C) Weather conditions D) The temperature of the dry-cleaning machine

580)

C&A Cleaners operates a dry-cleaning service. Which of the following is an outcome variable for C&A? A) Stains left on garments after dry cleaning B) The average age of the customers C) Weather conditions D) The temperature of the dry-cleaning machine

581)

Which of the following is NOT one of the steps in statistical process control? A) Capability analysis B) Conformance analysis C) Assignable cause investigation D) Common cause investigation

582)

C&A Chips' potato chip filling process has a lower specification limit of 4.5 oz. and an upper specification limit of 5.5 oz. The standard deviation is 0.3 oz. and the mean is 5 oz. What is the process capability index for the chip filling process? A) 3.33 B) 1.67 C) 0.56 D) 0.28

583)

A can-filling process has a lower specification limit of 11.9 oz. and an upper specification limit of 12.1 oz. The standard deviation is 0.02 oz. and the mean is 12 oz. What is the process capability index for the can-filling process? A) 3.33 B) 1.67 C) 0.56 D) 0.28

584)

C&A Chips' potato chip filling process has a lower specification limit of 4.5 oz. and an upper specification limit of 5.5 oz. The standard deviation is 0.3 oz. and the mean is 5 oz. What is the probability that a bag will weigh more than 5.5 oz.? A) 95.2% B) 90.4% C) 9.56% D) 4.78%

585)

A can-filling process has a lower specification limit of 11.9 oz. and an upper specification limit of 12.1 oz. The standard deviation is 0.2 oz. and the mean is 12 oz. What is the probability that a can will have less than 11.9 oz in it? A) 0.02% B) 9.35% C) 30.85% D) 69.15%

586)

C&A Chips' potato filling process has a lower specification limit of 4.5 oz. and an upper specification of 5.5 oz. The standard deviation is 0.3 oz. and the mean is 5 oz. What is the parts per million defective? Choose the closest answer. A) 952,000 B) 904,000 C) 95,600 D) 47,800

587)

A can-filling process has a lower specification limit of 11.9 oz. and an upper specification limit of 12.1 oz. The standard deviation is 0.1 oz. and the mean is 12 oz. What is the parts per million defective? Choose the closest answer. A) 158,700 B) 317,400 C) 32,600 D) 16,300

588)

Consider a product with 500 components. Each component has a defect probability of 0.015%. What is the defect probability of the final product if all components must work properly? A) 0% B) 0.015% C) 7.23% D) 92.77%

589)

Consider a product with 20 components. Each component has a defect probability of 0.5%. What is the defect probability of the final product if all components must work properly? A) 0.24% B) 9.54% C) 28.74% D) 90.46%

590)

A jar-filling process has a lower specification limit of 9.5 oz. and an upper specification of 10.5 oz. The standard deviation is 0.5 oz. and the mean is 10 oz. Which value comes closest to the standard deviation required in this process to achieve a ppm of 5000? A) 0.17 B) 0.20 C) 0.32 D) 0.24

591)

Which of the following statements is TRUE about capability analyses? A) A higher process capability index means the process has a higher defect probability. B) A higher process capability index means the process has a lower defect probability. C) A process must have its mean centered in the middle of its tolerance interval in order to perform capability analyses. D) A process capability index of 1.33 means that a process has a six-sigma capability.

592)

C&A Industries is making steel rods with an average diameter of 2 mm. The process has a standard deviation of 0.2 mm. The upper and lower specification limits are 2.2 mm and 1.8 mm respectively. What is the probability that the rod’s diameter will either be too wide or too narrow? Choose the closest answer. A) 84.13% B) 68.27% C) 31.73% D) 15.87%

593)

C&A Industries is making steel rods with an average diameter of 2 mm. The process has a standard deviation of 0.2 mm. The upper and lower specification limits are 2.2 mm and 1.8 mm respectively. What is C&A’s process capability index? A) 0.333 B) 0.667 C) 0.167 D) 0.844

594)

C&A Industries is making steel rods with an average diameter of 2 mm. The process has a standard deviation of 0.1 mm. The upper and lower specification limits are 2.2 mm and 1.8 mm respectively. What is C&A’s process capability index? A) 0.333 B) 0.667 C) 0.167 D) 0.844

595)

A key joint in a precision machining process has a lower specification limit of a width of 0.99 mm and an upper specification limit of 1.01 mm. The standard deviation is 0.005 mm and the mean is 1 mm. What is the process capability index for the precision machining process? A) 0.01 B) 0.33 C) 0.67 D) 0.99

596)

A key joint in a precision machining process has a lower specification limit of a width of 0.99 mm and an upper specification limit of 1.01 mm. The standard deviation is 0.005 mm and the mean is 1 mm. The company wants to reduce its defect probability and operate a "six sigma process." To what level would this company have to reduce the standard deviation in the process to meet this target? A) 0.000001 B) 0.00001 C) 0.0017 D) 0.00017

597)

An chart has _________ on the x-axis and _________ on the y-axis. A) sample sizes, sample variations B) sample sizes, sample means C) time periods at which samples are taken, sample means D) time periods at which samples are taken, sample variations

598)

A control chart is used to identify the _________ in a process. A) input variables B) output variables C) assignable causes of variation D) normal causes of variation

599)

The control limits, calculated as three standard deviations from the long-term sample mean, imply that _________ of the sample points are expected to fall between the upper and lower control limits. A) 100% B) 99.7% C) 50% D) 3%

600)

Which of the following statements about a control chart is TRUE? A) If a process is in control, then no defects can be found. B) It is possible that the outcome of a process is within the control limits but outside the specification limits. C) Control limits are the same as specification limits. D) It is impossible that the outcome of a process is outside the control limits but within the specification limits.

601)

C&A Goods manufactures treats for dogs. Six samples each of five bags of treats were randomly selected and weighed, yielding the following data: Sample 1 2 3 4 5 6

1 10.2 8.9 10.6 9.6 5.9 12.1

2 11.8 11.2 8.8 6.5 8.6 7.3

Bag (lbs) 3 10.1 12.4 7.6 12.5 10.3 5.9

4 5.9 7.6 11.3 10.4 11.8 10.8

5 8.6 5.9 9.9 6.9 10.1 11.1

Based on the sample data, what will be the center line of a 3sigma chart? A) 12.25 B) 9.35 C) 6.50 D) 2.12

602)

C&A Goods manufactures treats for dogs. Six samples each of five bags of treats were randomly selected and weighed, yielding the following data: Sample 1 2 3 4 5 6

1 10.2 8.9 10.6 9.6 5.9 12.1

2 11.8 11.2 8.8 6.5 8.6 7.3

Bag (lbs) 3 10.1 12.4 7.6 12.5 10.3 5.9

4 5.9 7.6 11.3 10.4 11.8 10.8

5 8.6 5.9 9.9 6.9 10.1 11.1

Based on the sample data, what will be the upper control limit of a 3-sigma chart? A) 12.2 B) 11.9 C) 15.7 D) 28.1 603)

C&A Goods manufactures treats for dogs. Six samples each of five bags of treats were randomly selected and weighed, yielding the following data: Sample 1 2 3 4 5 6

1 10.2 8.9 10.6 9.6 5.9 12.1

2 11.8 11.2 8.8 6.5 8.6 7.3

Bag (lbs) 3 10.1 12.4 7.6 12.5 10.3 5.9

4 5.9 7.6 11.3 10.4 11.8 10.8

5 8.6 5.9 9.9 6.9 10.1 11.1

Based on this sample data, what will be the lower control limit of a 3-sigma chart? A) 6.8 B) 6.5 C) 3.7 D) 3.0

604)

Which of the following control charts indicates that the process is in control, assuming the two horizontal lines shown represent the upper control limit and lower control limit.

605)

_________ illustrate how the _________ variable is being influenced by the input and _________ variables. A) Fishbone diagrams, environmental, outcome B) Flow diagrams, environmental, outcome C) Fishbone diagrams, outcome, environmental D) Flow diagrams, outcome, environmental

606)

Which of the following is NOT a component of a fishbone diagram? A) A horizontal arrow pointing at the outcome variable B) Diagonal arrows connecting root causes of process defects to the horizontal arrow C) Small lines connecting the underlying causes of a root cause to the diagonal arrow D) The frequency of occurrence of defects in the outcome variable

607)

Which of the following is another name for the fishbone diagram? A) Cause-effect diagram B) Pareto diagram C) Frequency diagram D) Flow diagram

608)

Which of the following is another name for the fishbone diagram? A) Pareto diagram B) Taichi diagram C) Toyota diagram D) Ishikawa diagram

609)

The Pareto principle states that _________ of the problems can be traced back to _________ of the root causes. A) 10%, 90% B) 90%, 10% C) 20%, 80% D) 80%, 20%

610)

Which of the following is the Pareto principle? A) The majority of problems can be explained by one root cause. B) The majority of problems can be explained by a few root causes. C) The majority of problems can be explained by many root causes. D) The majority of problems can be explained by many symptoms.

611)

The "Five Whys" tool helps to uncover the _________ as opposed to the _________ of a problem. A) symptoms, root causes B) root causes, symptoms C) solutions, root causes D) solutions, symptoms

612)

In the view of the Toyota Production System, how many times should one continually ask why a quality problem has occurred? A) 1 B) 3 C) 5 D) 10

613)

The data that should be collected in order to construct a Pareto diagram include all of the following EXCEPT _________. A) causes of defects B) number of defect occurrences C) associated defect types D) the bottleneck location

614)

Which of the following is the correct definition of a robust process? A) A robust process is one that can tolerate variations in input and environmental variables with an increase in outcome variation. B) A robust process is one that cannot tolerate variations in input and environmental variables. C) A robust process is one that can tolerate variations in input and environmental variables without an increase in outcome variation. D) A robust process is one that cannot tolerate variations in outcome variables.

615)

Which of the following is NOT a strategy to make a process robust? A) Foolproofing B) Overengineering C) Underengineering D) Early warning signs

616)

Which of the following is an example of overengineering? A) A saw that will not start if the blade is not inserted properly in its housing B) A building that can withstand a major earthquake C) A colorful liquid laundry packet that resembles a piece of candy D) A beeping sound that happens when the battery in a smoke detector is getting low

617)

Which of the following is an example of foolproofing? A) A saw that will not start if the blade is not inserted properly in its housing B) A building that can withstand a major earthquake C) A colorful liquid laundry packet that resembles a piece of candy D) A beeping sound that happens when the battery in a smoke detector is getting low

618)

Which of the following is an example of an early warning sign? A) A saw that will not start if the blade is not inserted properly in its housing B) A building that can withstand a major earthquake C) A colorful liquid laundry packet that resembles a piece of candy D) A beeping sound that happens when the battery in a smoke detector is getting low

619)

Which of the following is NOT an example of robust process design? A) A saw that will not start if the blade is not inserted properly in its housing B) A building that can withstand a major earthquake C) A colorful liquid laundry packet that resembles a piece of candy D) A fire alarm that goes off when a fire is detected in a building

620)

If outcome variables do not follow a continuous distribution, then the _________ of a defect is/are analyzed to improve the process. A) degree of specification conformance B) degree of control conformance C) discrete probabilities D) continuous probabilities

621)

A component is assembled in a four-step process. The probability of making a defect in step 1 is 10%; in step 2, 20%; in step 3, 8%; and in step 4, 5%. What is the probability that the final component will be defective if all steps must be performed correctly? A) 99.99% B) 62.9% C) 37.1% D) 0.008%

622)

A component is assembled in a four-step process. The probability of making a defect in step 1 is 4%; in step 2, 7%; in step 3, 5%; and in step 4, 9%. What is the probability that the final component will be defective if all steps must be performed correctly? A) 0.0013% B) 22.8% C) 77.2% D) 99.87%

623)

A product test is designed in such a way that for a defective product to be undiscovered, all four inspections would have to fail to catch the defect. The probability of catching the defect in inspection 1 is 90%; in inspection 2, 80%; in inspection 3, 18%; and in inspection 4, 95%. What is the probability of catching a defect? A) 99.9% B) 62.9% C) 37.1% D) 0.008%

624)

A product test is designed in such a way that for a defective product to be undiscovered, all four inspections would have to fail to catch the defect. The probability of catching the defect in inspection 1 is 82%; in inspection 2, 74%; in inspection 3, 78%; and in inspection 4, 80%. What is the probability of a defect passing through undetected? A) 99.79% B) 62.14% C) 37.86% D) 0.21%

625)

A product test is designed in such a way that for a defective product to be undiscovered, all four inspections would have to fail to catch the defect. The probability of catching the defect in inspection 1 is 82%; in inspection 2, 74%; in inspection 3, 78%; and in inspection 4, 80%. What is the probability of catching a defect? A) 99.79% B) 62.14% C) 37.86% D) 0.21%

626)

A component is assembled in a three-step process. The probability of making a defect in step 1 is 8%; in step 2, 12%; and in step 3, 7%. How many leaves does the event tree of this process have? A) 2 B) 4 C) 8 D) 16

627)

A component is assembled in a four-step process. The probability of making a defect in step 1 is 10%; in step 2, 20%; in step 3, 8%; and in step 4, 5%. How many leaves does the event tree of this process have? A) 2 B) 4 C) 8 D) 16

628)

A p-chart is used to track a process with _________ outcomes. A) continuous B) quantitative C) variable D) binary

629)

A p-charts is also called a(n) _________ chart. A) X-bar B) continuous-based control C) attribute-based control D) variable-based control

630)

Sample sizes for p-charts typically range from A) 5 to 10 B) 10 to 20 C) 30 to 50 D) 50 to 200

631)

C&A Industries takes 100 samples of 50 units each for inspection. The total number of defects is found to be 75 units. What is the center line of a 3-sigma p-chart? A) 100 B) 75 C) 0.75 D) 0.015

632)

C&A Industries takes 100 samples of 50 units each for inspection. The total number of defects is found to be 75 units. What is the upper control limit of a 3-sigma p-chart? A) 0 B) 0.015 C) 0.017 D) 0.067

633)

C&A Industries takes 100 samples of 50 units each for inspection. The total number of defects is found to be 75 units. What is the lower control limit of a 3-sigma p-chart? A) 0 B) 0.015 C) 0.017 D) 0.067

634)

If you are to monitor the fraction of customers who are not satisfied with your services, which of the following control charts will you use? A) X-bar chart B) p-chart C) Fishbone chart D) Pareto chart

Answer Key Test name: chapter 9 1) TRUE

A new backpack with a broken zipper is not a random issue but the result of an assignable cause variation such as poor quality of the zipper. 2) FALSE

A defect occurs because of abnormal variations in both input and environmental variables. 3) TRUE

A process capability index of 2 means that the upper (lower) specification limit is six standard deviations above (below) the mean. 4) FALSE

Eliminating variation is not always possible, especially when dealing with human resources/flow units. 5) FALSE

A p-chart is used to track a process with binary outcome variables. 6) C

The delivery time of the pizza is an output of a pizza restaurant and therefore is an outcome variable. 7) D

The temperature of the dry-cleaning machine is under the control of C&A and determines the effectiveness of the dry-cleaning process and therefore is an input variable. 8) A

Stains left on garments after dry cleaning are a quality issue of the dry-cleaning process and therefore an outcome variable. 9) D

Common cause investigation is not a step in statistical process control. 10) C

Process capability index = (USL − LSL) ÷ (6 × Standard deviation) = (5.5 − 4.5) ÷ (6 × 0.3) = 0.56.

11) B

Process capability index = (USL − LSL) ÷ (6 × Standard deviation) = (12.1 − 11.9) ÷ (6 × 0.02) = 1.67. 12) D

Probability of too much weight = 1 − NORM.DIST(5.5, 5, 0.3, 1) = 4.78%. 13) C

Probability of too little weight = NORM.DIST(11.9, 12, 0.2, 1) = 30.85%. 14) C

Probability of too much weight = (1 − NORM.DIST(5.5,5,0.3,1) = 0.0478. Parts per million = 0.0478 × 2 × 1,000,000 = 95,600. 15) B

Probability of too much weight = (1 − NORM.DIST(12.1,12,0.1,1) = 0.1587. Parts per million = 0.1587 × 2 × 1,000,000 = 317,400. 16) C

17) B

18) A

is 0.933 for a ppm of 5110 from Table 9.1. Standard deviation = (10.5 − 9.5) ÷

(0.933 × 6) = 0.1786. will be greater than 0.933 for a ppm of 5000. Therefore, the standard deviation should be less than 0.1786. 19) B

A higher process capability index means the process variation is lower (or a higher probability of meeting the tolerance interval) and therefore the defect probability is also lower. 20) C

Probability of too wide = 1 − NORM.DIST(2.2, 2, 0.2, 1) = 15.87%. Probability of too narrow = NORM.DIST(1.8, 2, 0.2, 1) = 15.87%. The probability of either too wide or too narrow = 15.87% × 2 = 31.73%. 21) A

Process capability index = (USL − LSL) ÷ (6 × Standard deviation) = (2.2 − 1.8) ÷ (6 × 0.2) = 0.333. 22) B

Process capability index = (USL − LSL) ÷ (6 × Standard deviation) = (2.2 − 1.8) ÷ (6 × 0.1) = 0.667. 23) C

Process capacity = (USL − LSL) ÷ (6 × Standard deviation) = (1.01 − 0.99) ÷ (6 × 0.005) = 0.67. 24) C

A Six sigma process is one that has a Sigma = 0.0017.

of 2. 2 = (1.01 − 0.99) ÷ (6 × sigma); solve for sigma.

25) C

An chart has time periods at which samples are taken on the x-axis and sample means on the y-axis. 26) C

Assignable causes of variation in a process can be identified as drifts or outliers falling outside the control limits of a control chart. 27) B

Three standard deviations from the mean is equivalent to a 99.7% confidence level. 28) B

It is possible that the outcome of a process is within the control limits but outside the specification limits, and vice versa. 29) B

= Center line = Average across all 30 bags = 9.35. 30) A

= center line = average across all 30 bags = 9.35; standard deviation of all bags = STDEV.S(10.2,8.9,10.6…11.1) = 2.12; estimated standard deviation(X-bar) = 2.12 ÷ sqrt(5) = 0.95; UCL = 9.35 + (3 × 0.95) = 12.2. 31) B

The process is in control if its control chart shows no systemic patterns within the control limits or jumps outside the control limits. 33) C

Fishbone diagrams illustrate how the outcome variable is being influenced by the input and environmental variables. 34) D

A fishbone diagram identifies possible root causes to identify a quality problem; a Pareto chart displays the frequency of occurrence of defects. 35) A

Fishbone diagrams are also called cause-effect diagrams. 36) D

Fishbone diagrams are also called Ishikawa diagrams. 37) D

The Pareto principle states that 80% of the problems can be traced back to 20% of the root causes. 38) B

The Pareto principle is that the majority of problems can be explained by a few root causes. 39) B

The "Five Whys" tool helps to uncover the root causes as opposed to the symptoms of a problem. 40) C

The "Five Whys" is a tool that helps search for the root causes of a quality problem by asking at least five times why a quality problem has occurred. 41) D

While defects at the bottleneck tend to be very costly, this is not a part of the Pareto analysis. 42) C

A robust process is one that can tolerate variations in input and environmental variables without an increase in outcome variation. 43) C

The three ways to make a process robust are foolproofing, overengineering, and early warning signs. 44) B

A building that can withstand a major earthquake is an example of overengineering. 45) A

A saw that will not start if the blade is not inserted properly in its housing is an example of foolproofing. 46) D

A beeping sound that happens when the battery in a smoke detector is getting low is an example of an early warning sign. 47) C

An example of poor process design is colorful laundry packets that can be mistaken for candy. 48) C

If outcome variables do not follow a continuous distribution, then the discrete probabilities of a defect are analyzed to improve the process. 49) C

Probability of a functioning unit = Probability of step 1 correct × . . . × Probability of step 4 correct = (1 − Probability of step 1 defective) × . . . × (1 − Probability of step 4 defective) = (1 − 10%) × (1 − 20%) × (1 − 8%) × (1 − 5%) = 62.9%. Therefore, the probability of a defect = 1 − 62.9% = 37.1%. 50) B

Probability of a functioning unit = Probability of step 1 correct × . . . × Probability of step 4 correct = (1 − Probability of step 1 defective) × . . . × (1 − Probability of step 4 defective) = (1 − 4%) × (1 − 7%) × (1 − 5%) × (1 − 9%) = 77.2%. Therefore, the probability of a defect = 1 − 77.2% = 22.8%. 51) A

Probability of failing to catch the defect = Probability of failing inspection 1 × . . . × Probability of failing inspection 4 = 0.1 × 0.2 × 0.82 × 0.05 = 0.00082. Probability of catching the defect = 1 − 0.00082 = 0.99918 = 99.9%. 52) D

Probability of failing to catch the defect = Probability of failing inspection 1 × . . . × Probability of failing inspection 4 = 0.18 × 0.26 × 0.22 × 0.20 = 0.0021 = 0.21%. 53) A

Probability of failing to catch the defect = Probability of failing inspection 1 × . . . × Probability of failing inspection 4 = 0.18 × 0.26 × 0.22 × 0.20 = 0.0021. Probability of catching a defect = 1 − 0.0021 = 0.9979 = 99.79%. 54) C

There are 3 variables with 2 outcomes each. The number of possible scenarios 55) D

There are 4 variables with 2 outcomes each. The number of possible scenarios 56) D

p-charts monitor binary outcome variables. 57) C

p-charts are also known as attribute-based control charts. 58) D

Sample sizes for p-charts typically range from 50 to 200. 59) D

The center line is the average percentage of defects = 75 ÷ (50 × 100) = 0.015. 60) D

The center line is the average percentage of defects = 75 ÷ (50 × 100) = 0.015. Estimated standard deviation = sqrt[ (0.015 × 0.985) ÷ 50 = 0.0172. Upper control limit = 0.015 + (3 × 0.0172) = 0.067. 61) A

The center line is the average percentage of defects = 75 ÷ (50 × 100) = 0.015. Estimated standard deviation = sqrt[ (0.015 × 0.985) ÷ 50 = 0.0172. Lower control limit = 0.015 − (3 × 0.0172) = −0.037, or 0 (round up to zero). 62) B

p-charts are used to monitor binary outcome variables. If a customer is or is not satisfied, satisfaction becomes a binary outcome variable.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 635) Manufacturers usually carry work-in-process inventory. ⊚ true ⊚ false 636)

The use of a production smoothing strategy can create inventory for products that experience a seasonal fluctuation in demand. ⊚ true ⊚ false

637)

Measuring inventory in terms of dollars tells us whether the amount of inventory is large or not. ⊚ true ⊚ false

638)

Companies belonging to the same industry segment should have the same inventory turns. ⊚ true ⊚ false

639)

640)

Inventory turns can be evaluated for any publicly traded company. ⊚ true ⊚ false

The actual inventory holding cost incurred by an item depends on how long it actually spends in inventory. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 641) The goal of inventory management is to have the right _________, in the right _________, at the right _________. A) product, range, season B) price, place, supplier C) price, range, season D) product, place, time 642)

Which of the following is NOT a category of inventory? A) Raw materials B) Finished goods C) Assembly-line workers D) Work in process

643)

Which of the following is an example of raw material inventory for C&A Bakery? A) Flour B) Cupcake mix prepared from scratch C) Ovens D) Cupcakes freshly out of the oven

644)

Which of the following is an example of work-in-process inventory for C&A Bakery? A) Flour B) Cupcake mix prepared from scratch C) Ovens D) Cupcakes freshly out of the oven

645)

Which of the following is an example of finished goods inventory for C&A Bakery? A) Flour B) Cupcake mix prepared from scratch C) Ovens D) Cupcakes freshly out of the oven

646)

From the perspective of a manufacturing company, which type of firm would provide the raw material inventory that is utilized in its production activities? A) Suppliers B) Wholesalers C) Retailers D) Distributors

647)

Which of the following is an essential skill for inventory management? A) Forecasting future demand B) Negotiating product prices C) Designing appealing websites D) Developing new product ideas

648)

Which of the following is NOT an essential skill for inventory management? A) Product and demand tracking B) Forecasting future demand C) Analytical skills D) Negotiation

649)

A(n) _________ tag is a small electronic device that transmits a unique radio signal to identify the object to which it is attached. A) bar code B) QR C) RFID D) price

650)

Which of the following is a question that product and demand tracking is able to answer? A) What is the holding cost per unit? B) How much product do you have at the moment? C) What is the selling price of your product? D) Who are your suppliers?

651)

The reasons for holding inventory include all the following EXCEPT _________. A) it takes time to transform inputs into outputs and move them to where they are needed B) to allow output rate to remain relatively stable as demand varies predictably over time C) to ensure employees are motivated D) to serve as a buffer against demand uncertainty

652)

Expecting the cost of a popular brand of canned soup to increase in the future, a supermarket orders extra cases of the soup. This is an example of holding inventory because of changes in the _________ of the inventory. A) value B) demand C) management D) classification

653)

A machine in a production process has been breaking down frequently and affecting downstream resources. Pending the machine problem being addressed, management has been working the machine overtime at the end of each day to build inventory immediately after it so that future breakdowns will not affect the process to such an extent. This is an example of holding inventory for what reason? A) Seasonality B) Flow time C) Batching D) Buffers

654)

_________ protects a firm against unpredictable demand. A) Kanban B) Safety stock C) Just in time D) Disruption

655)

Which of the following is a reason for batching? A) Price fluctuations B) Demand fluctuations C) Fixed costs associated with starting the process D) Variable costs associated with starting the process

656)

Inventory can be measured in many ways EXCEPT in _________. A) physical units B) days-of-supply C) profit D) dollars

657)

C&A Candy has on average $5,000 in inventory and its daily sales are $250. What is its days-of-supply? A) 1,250,000 B) 500 C) 250 D) 20

658)

C&A Candy has on average $5,000 in inventory and its daily sales are $250. What are C&A’s weekly inventory turns (assuming demand occurs seven days a week)? A) 20 B) 2.86 C) 0.35 D) 0.05

659)

The days-of-supply of a process is the _________ it takes for a unit to flow through the system. A) total amount of time B) total amount of physical units C) average amount of time D) average amount of physical units

660)

The days-of-supply of a process is the amount of time it takes for the _________ to flow through the system at the _________. A) average inventory, maximum flow rate B) average inventory, average flow rate C) maximum inventory, maximum flow rate D) maximum inventory, average flow rate

661)

The inventory turns of a process are the number of times the _________ flows through a process in a(n) _________. A) maximum inventory, designated interval of time B) maximum inventory, average interval of time C) average inventory, designated interval of time D) average inventory, average interval of time

662)

Higher days of supply means _________ inventory. Higher turns mean _________ inventory. A) more, more B) more, less C) less, more D) less, less

663)

C&A Dairy sells two kinds of eggs: brown and white. Brown eggs are 5% more expensive than white. Which of the following is the most appropriate way to measure how many eggs C&A has in inventory? A) In dollars B) In dozens C) In inches D) In ounces

664)

C&A Dairy sells 1,200 dozen eggs each day. If C&A’s days-of-supply increases from 2 days to 5 days, what will happen to its average inventory? A) Increases from 2,400 to 6,000 dozen B) Decreases from 600 to 240 dozen C) Remains the same D) Cannot be determined

665)

C&A Deli sells two kinds of sandwiches: regular and deluxe. Each regular sandwich costs $1.50 to make and each deluxe sandwich costs $2.50 to make. On average, C&A has 5 regular and 10 deluxe sandwiches in inventory and 0.5 days-of-supply. What is C&A's average daily cost of goods sold? A) $97.50 B) $32.50 C) $65.00 D) Cannot be determined

666)

C&A Deli sells two kinds of sandwiches: regular and deluxe. Each regular sandwich costs $1.50 to make and each deluxe sandwich costs $2.50 to make. On average, C&A has 5 regular and 10 deluxe sandwiches in inventory and 0.5 days-of-supply. How many sandwiches does C&A expect to sell each day? A) 15 B) 30 C) 50 D) 100

667)

Inventory turns for perishable items are usually _________ those for durable goods. A) higher than B) lower than C) the same as D) twice as much as

668)

Days-of-supply for durable goods are usually _________ those for perishable items. A) higher than B) lower than C) the same as D) half the number of

669)

Inventory turns for apparel tend to be _________ those for fresh vegetables. A) higher than B) lower than C) the same as D) half the number of

670)

Inventory turns and days-of-supply measure _________ items remain in _________. A) how long, inventory B) how valuable, inventory C) how long, sales D) how valuable, sales

671)

A hardware store has on average $61,200 in inventory and its daily sales are $600. What is its days-of-supply? A) 38 B) 102 C) 600 D) 36,720,000

672)

A hardware store has on average $61,200 in inventory and its daily sales are $600. What is its monthly inventory turns (assuming demand occurs 25 business days a month)? A) 102 B) 4.08 C) 0.25 D) 0.01

673)

An ice cream stand sells three different flavors of ice cream: vanilla, chocolate, and strawberry. Each gallon of vanilla costs $6.00 to purchase, each gallon of chocolate costs $6.50 to purchase, and each gallon of strawberry costs $7.00 to purchase. On average, the stand has 8 gallons of vanilla, 6 gallons of chocolate, and 4 gallons of strawberry in inventory and 1.5 days-of-supply. Each gallon of ice cream serves 16 customers, on average. What is the ice cream stand’s average daily cost of goods sold? A) $76.67 B) $115.00 C) $172.50 D) $196.48

674)

An ice cream stand sells three different flavors of ice cream: vanilla, chocolate, and strawberry. Each gallon of vanilla costs $6.00 to purchase, each gallon of chocolate costs $6.50 to purchase, and each gallon of strawberry costs $7.00 to purchase. On average, the stand has 8 gallons of vanilla, 6 gallons of chocolate, and 4 gallons of strawberry in inventory and 1.5 days-of-supply. Each gallon of ice cream serves 16 customers, on average. How many customers does the ice cream stand expect to serve each day? A) 12 B) 18 C) 96 D) 192

675)

To evaluate inventory turns for a publicly traded company, data on average inventory can be found in which one of the following financial reports? A) Income statement B) Balance sheet C) Balance scorecard D) Sustainability report

676)

Average inventory is reported as a(n) _________ in a publicly traded company’s _________. A) income, income statement B) asset, income statement C) asset, balance sheet D) income, balance sheet

677)

To evaluate inventory turns for a publicly traded company, data on flow rate can be found in which one of the following financial reports? A) Income statement B) Balance sheet C) Balance scorecard D) Sustainability report

678)

Flow rate can be estimated from the value of _________ reported in a publicly traded company’s _________. A) revenue, balance sheet B) cost of goods sold, balance sheet C) revenue, income statement D) cost of goods sold, income statement

679)

C&A Industries reports annual sales of $5 million, cost of goods sold of $2 million, inventory of $0.5 million, and net income of $0.75 million. What are C&A’s annual inventory turns? A) 10 B) 4 C) 0.25 D) 0.1

680)

C&A Industries reports annual sales of $5 million, cost of goods sold of $2 million, inventory of $0.5 million, and net income of $0.75 million. What is C&A’s months-of-supply of inventory? A) 0.5 B) 3 C) 8 D) 1.2

681)

A company turns its inventory eight times a year. What is its months-of-supply? A) 0.67 B) 1.5 C) 8 D) 96

682)

C&A Industries reports has annual turns of 10, cost of goods sold of $9 million, and revenue of $20 million. What is its average inventory? A) $90 million B) $20 million C) $1.1 million D) $0.9 million

683)

C&A Industries reports annual sales of $20 million, cost of goods sold of $7 million, inventory of $5 million, and net income of $2 million. What is C&A’s flow rate? A) $20 million per year B) $7 million per year C) $5 million per year D) $2 million per year

684)

C&A Industries reports annual sales of $30 million, cost of goods sold of $15 million, inventory of $5 million, and net income of $2 million. What is C&A’s monthly inventory turns? A) 0.25 B) 0.33 C) 3 D) 4

685)

C&A Industries reports annual sales of $30 million, cost of goods sold of $15 million, inventory of $5 million, and net income of $2 million. What is C&A’s months-of-supply? A) 0.25 B) 0.33 C) 3 D) 4

686)

C&A Industries reports has monthly turns of 4, cost of goods sold of $12 million, and revenue of $36 million. What is its average inventory? A) $0.25 million B) $0.75 million C) $1.33 million D) $4 million

687)

C&A Industries reports has four months-of-supply, cost of goods sold of $12 million, and revenue of $36 million. What is its average inventory? A) $0.25 million B) $0.75 million C) $1.33 million D) $4 million

688)

C&A Industries reports holds on average $20,000 in inventory throughout the year. Its cost of goods sold is $250,000 and sales are $400,000. What is C&A’s inventory turns? A) 1.6 per year B) 12.5 per year C) 20 per year D) Cannot be determined

689)

A hardware store reports annual sales of $375,000, cost of goods sold of $185,400, inventory of $65,000, and net income of $80,000. What is its annual inventory turns? A) 0.16 B) 0.32 C) 2.85 D) 6.25

690)

A hardware store reports annual sales of $375,000, cost of goods sold of $185,400, inventory of $65,000, and net income of $80,000. What is its months-of-supply of inventory? A) 0.5 B) 2.0 C) 2.9 D) 4.2

691)

692)

A company turns its inventory 5 times a year. What is its months-of-supply? A) 0.4 B) 2.4 C) 5 D) 60

A pawn shop turns its inventory 3 times a year. It has a cost of goods sold of $60,000 and a revenue of $125,000. What is its average inventory? A) $180,000 B) $60,000 C) $41,667 D) $20,000

693) The following table provides past financial information for Kroger (in $ million): Sales 95,751 Cost of goods sold 76,858 Inventory 6,244

What were Kroger’s inventory turns? A) 5.5 turns per year B) 8.1 turns per year C) 12.3 turns per year D) 15.3 turns per year 694) The following provides past financial information for Lowes (in $ million): Sales 50,521 Cost of goods sold 33,194 Inventory 8,600

How many days of supply did Lowes hold? A) 43.6 days B) 94.6 days C) 142.6 days D) 201.5 days 695)

A local parts supply store has provided the following financial information for the past year (in $): Sales Cost of goods sold Inventory

What were the inventory turns in the past year? A) 0.2 turns per year B) 4.7 turns per year C) 7.8 turns per year D) 12.2 turns per year

344,740 207,852 44,224

696)

A local parts supply store has provided the following financial information for the past year (in $): Sales Cost of goods sold Inventory

344,740 207,852 44,224

How many days of supply did the store hold in the past year (assume 365 days per year)? A) 220.1 days B) 116.4 days C) 77.7 days D) 46.8 days 697)

A _________ is a situation when a customer wants a product but it is not available. A) stockout B) stock up C) holdout D) holdup

698)

Which consequence of stockouts is the most costly? A) Customer waits for the item to become available B) Loss of the sale C) Loss of the sale of one item, but the customer purchases another item D) Loss of the sale and loss of the customer

699)

Which consequence of stockouts is the least costly? A) Customer waits for the item to become available B) Loss of the sale C) Loss of the sale of one item, but the customer purchases another item D) Loss of the sale and loss of the customer

700)

Inventory holding costs include all of the following EXCEPT _________. A) cost of lost sales B) storage cost C) spoilage cost D) opportunity cost of capital

701)

Which of the following statements is FALSE regarding inventory holding costs? A) A holding cost percentage is the ratio of the cost to hold an item in inventory for a particular time period relative to the cost to purchase the item. B) A holding cost percentage must be defined for a certain time period. C) A holding cost percentage specifies how long the item is actually held. D) No matter what the holding cost percentage is, the longer an item is held in inventory, the higher the cost.

702)

C&A Clothiers sells T-shirts for $20 that cost $5 to produce. The annual holding cost percentage is 10% and the T-shirts turn 25 times a year. What holding cost does C&A incur for each T-shirt? A) $0.50 B) $0.08 C) $0.04 D) $0.02

703)

Inventory holding costs are generally expressed as a _________ of the cost to _________ an item. A) sum, purchase B) percentage, rework C) percentage, purchase D) sum, rework

704)

Bread expires at the end of the day and cannot be sold. This is an example of which component of the store’s inventory holding cost? A) Storage cost B) Spoilage cost C) Obsolescence cost D) Opportunity cost of capital

705)

C&A Antiques' annual holding cost percentage is 15%. It has annual turns of 5. How much does it cost C&A to hold an item with a purchase cost of $100? A) $75 B) $20 C) $15 D) $3

706)

Assume that the holding cost of inventory at Macy’s is 35% per year. Assume further that Macy’s turns its inventory 3 times per year. How much does it cost Macy’s to hold a dress that it purchased for $50? A) $0.88 per dress B) $2.16 per dress C) $5.83 per dress D) $12.94 per dress

707)

A home improvement store sells a cordless drill for $90 that costs $48 to purchase. The annual holding cost percentage is 12% and the item turns 8 times a year. What holding cost does the store incur for each drill? A) $0.36 B) $0.72 C) $1.35 D) $5.76

Answer Key Test name: chapter 10 1) TRUE

Manufacturers are in the process of transforming inputs into outputs and therefore they usually carry work-in-process inventory. 2) TRUE

As demand varies predictably over time due to seasonality, a production smoothing strategy will maintain a stable output rate. Therefore, it creates inventory during the time of slow demand. 3) FALSE

Measuring inventory in terms of dollars tells us the aggregate value of different inventory items but not the size of the inventory. 4) FALSE

Different products, companies, and countries have different inventory turns. 5) TRUE

Publicly traded companies are required to provide public financial disclosures from which their inventory turns can be evaluated. 6) TRUE

The longer an item is held in inventory, the higher its inventory holding cost. 7) D

The goal of inventory management is to have the right product, in the right place, at the right time. 8) C

Assembly-line workers are not a category of inventory. 9) A

Flour is the raw material for a bakery. 10) B

Cupcake mix is work-in-process inventory for C&A Bakery. 11) D

A cupcake freshly out of the oven is a finished goods inventory for a bakery. 12) A

Suppliers provide the raw material inventory that a manufacturing company would utilize. 13) A

Forecasting future demand is an essential skill for inventory management. 14) D

Negotiation is not an essential skill for inventory management. 15) C

An RFID tag is a small electronic device that transmits a unique radio signal to identify the object to which it is attached. 16) B

Product and demand tracking is able to answer the question about how much product you have at the moment. 17) C

Holding inventory will not motivate employees. 18) A

Retailers respond to changes in the expected value of the inventory by holding inventory at a lower current cost. 19) D

Holding inventory between process steps serves as a buffer, meaning that the process steps can operate more independently from each other. 20) B

Safety stock protects a firm against unpredictable demand. 21) C

Fixed costs associated with starting the process is a reason for batching. 22) C

Inventory can be measured in dollars, physical units, and days-of-supply. 23) D

Days-of-supply = Inventory ÷ Flow rate = 5,000 ÷ 250 = 20 days. 24) C

Inventory turns = Weekly demand ÷ Inventory = 7 × 250 ÷ 5,000 = 0.35 turn. 25) C

The days-of-supply of a process is the average amount of time it takes for a unit to flow through the system. 26) B

The days-of-supply of a process is the amount of time it takes for the average inventory to flow through the system at the average flow rate. 27) C

The inventory turns of a process are the number of times the average inventory flows through a process in a designated interval of time. 28) B

Higher days of supply means more inventory. Higher turns mean less inventory. 29) A

The two kinds of egg are of different values. Therefore, they should be measured in dollars. 30) A

Average inventory with 2 days of supply = 2 × 1,200 = 2,400. Average inventory with 5 days of supply = 5 × 1,200 = 6,000. 31) C

Average inventory (in dollars) = (5 × 1.50) + (10 × 2.50) = $32.50. Days of supply = 0.5. Flow rate = $32.50 ÷ 0.5 = $65.00 32) B

Average inventory = 5 + 10 = 15. Days of supply = 0.5. Flow rate = 15 ÷ 0.5 = 30. 33) A

Inventory turns for perishable items are higher than those for durable goods. 34) A

Days-of-supply for durable goods are usually higher than those for perishable items.

35) B

Fresh vegetables are more perishable than apparel. Therefore, inventory turns for apparel are lower than those for fresh vegetables. 36) A

Inventory turns and days-of-supply measure how long items remain in inventory. 37) B

Days-of-supply = Inventory ÷ Flow rate = 61,200 ÷ 600 = 102 days. 38) C

Inventory turns = Monthly demand ÷ Inventory = 25 × 600 ÷ 61,200 = 0.25 turn. 39) A

Average inventory (in dollars) = (8 × 6.00) + (6 × 6.50) + (4 × 7.00) = $115.00. Days of supply = 1.5. Flow rate = $115.00 ÷ 1.5 = $76.67. 40) D

Average inventory 8 + 6 + 4 = 18 gallons. Days of supply = 1.5. Flow rate = 18 ÷ 1.5 = 12 gallons, or 12 gallons × 16 customers per gallon = 192 customers. 41) B

The asset section of the balance sheet contains information about average inventory of a publicly traded company. 42) C

Average inventory is reported as an asset in a publicly traded company’s balance sheet. 43) A

To evaluate inventory turns for a publicly traded company, data on flow rate can be found in its income statement. 44) D

Flow rate can be estimated from the value of cost of goods sold reported in a publicly traded company’s income statement. 45) B

Flow rate = Cost of goods sold = $2 million per year; Inventory = $0.5 million. Inventory turns = 2 ÷ 0.5 = 4 turns per year.

46) B

Flow rate = Cost of goods sold = $2 million per year = $1 ÷ 6 million per month; Inventory = $0.5 million. Months-of-supply = 0.5 ÷ (1 ÷ 6) = 0.5 × 6 = 3 months-of-supply. 47) B

Inventory turns = 8 per year. Months-of-supply = 12 ÷ 8 = 1.5. 48) D

Turns = R ÷ I; R = annual flow rate or COGS. Solve for I. Average inventory = Cost of goods sold ÷ Turns = ($9 million) ÷ 10 = $0.9 million. 49) B

Flow rate is cost of goods sold, which is $7 million per year. 50) A

Flow rate = $15 million per year. Inventory = $5 million. Inventory turns = 15 ÷ 5 = 3 per year = 3 ÷ 12 = 0.25 per month. 51) D

Flow rate = $15 million per year. Inventory = $5 million. Inventory turns = 15 ÷ 5 = 3 per year = 3 ÷ 12 = 0.25 per month. Months-of-supply = 1 ÷ 0.25 = 4. 52) A

Average inventory = Cost of goods sold ÷ Turns. Cost of goods sold = $12 million per year = $12 ÷ 12 = $1 million per month. Average inventory = ($1 million) ÷ 4 = $0.25 million. 53) D

Average inventory = Cost of goods sold × Months of supply. Cost of goods sold = $12 ÷ 12 = $1 million per month. Average inventory = ($1 million) × 4 = $4 million. 54) B

Inventory = $20,000. Flow rate = Cost of goods sold = $250,000. Turns = 250,000 ÷ 20,000 = 12.5 per year. 55) C

Flow rate = Cost of goods sold = $185,400 per year; Inventory = $65,000. Inventory turns = 185,400 ÷ 65,000 = 2.85 turns per year. 56) D

Flow rate = Cost of goods sold = $185,400 per year = $15,450 per month; Inventory = $65,000. Months-of-supply = 65,000 ÷ 15,450 = 4.2 months-of-supply. 57) B

Inventory turns = 5 per year. Months-of-supply = 12 ÷ 5 = 2.4. 58) D

Turns = R ÷ I; R = annual flow rate or COGS. Solve for I. Average inventory = Cost of goods sold ÷ Turns = $60,000 ÷ 3 = $20,000. 59) C

Turns = R ÷ I. R, or flow rate, is COGS. In this case, 76,858 ÷ 6,244 = 12.3 turns per year. 60) B

Turns = R ÷ I = 33,194 ÷ 8,600 = 3.86 turns in a year. Days of supply = 365 ÷ 3.86 = 94.6 days of supply. 61) B

Turns = R ÷ I. R, or flow rate, is COGS. In this case, 207,852 ÷ 44,224 = 4.7 turns per year. 62) C

Turns = R ÷ I = 207,852 ÷ 44,224 = 4.70 turns per year. Days of supply = 365 ÷ 4.70 = 77.7 days of supply. 63) A

A stockout is a situation when a customer wants a product but it is not available. 64) D

Loss of the sale and loss of the customer is the most costly consequence of stockouts. 65) A

A customer waiting for the item to become available is the least costly consequence of stockouts. 66) A

The cost of lost sales is not an inventory holding cost. It is an inventory stockout cost. 67) C

The holding cost percentage does not specify how long the item is actually held. 68) D

The annual holding cost for each T-shirt = $5 × 10% = $0.50. The T-shirt spends 1 ÷ 25 of a year in inventory, so each T-shirt incurs $0.50 ÷ 25 = $0.02 in holding cost. 69) C

Inventory holding costs are generally expressed as a percentage of the cost to purchase an item. 70) B

Bread expires at the end of the day and cannot be sold. This is an example of spoilage cost. 71) D

Holding the item for one year would cost 15% × $100 = $15. Inventory turns = 5. Therefore, the cost to hold the item = $15 ÷ 5 = $3. 72) C

Macy’s turns its inventory 3 times per year, or every 4 months. 4 ÷ 12 × 0.35 × $50 = $5.83. 73) B

The annual holding cost for each drill = $48 × 12% = $5.76. The drill spends 1 ÷ 8 of a year in inventory, so each drill incurs $5.76 ÷ 8 = $0.72 in holding cost.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 708) A supply chain with a distributor has more product handling than one without a distributor. ⊚ true ⊚ false 709)

Tier 2 suppliers are primary suppliers to manufacturers. ⊚ true ⊚ false

710)

Inventory availability is a service metric to evaluate the performance of a supply chain. ⊚ true ⊚ false

711)

Lead time is a way to measure the availability of inventory. ⊚ true ⊚ false

712)

Managers are much more prone to underinvest in flexibility when the product is innovative than to overinvest in flexibility when the product is functional. ⊚ true ⊚ false

713)

Online retailers face demand location uncertainty. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 714) A supply chain for goods and services consists of a _________ of firms and locations that begins with _________ and ends with _________. A) merging, public entities, private entities B) merging, private entities, public entities C) network, final users, raw materials D) network, raw materials, final users 715)

A supply chain that involves suppliers of raw materials in Germany, manufacturers in China, distributors in Spain, and retailers in the United States has _________ different levels or stages. A) 5 B) 4 C) 3 D) 2

716)

Which of the following statements is TRUE regarding a supply chain of physical products? A) A supply chain must have five levels. B) A supply chain must involve global companies. C) A supply chain must start with raw materials. D) A supply chain must have distributors.

717)

Which of the following statements is TRUE regarding tier 1 suppliers? A) Tier 1 suppliers are the starting point of a supply chain. B) Tier 1 suppliers are the primary suppliers to tier 2 suppliers. C) Tier 1 suppliers are the primary suppliers to manufacturers. D) Tier 1 suppliers are the primary suppliers to retailers.

718)

A supermarket is typically at the _________ level of a supply chain. A) supplier B) manufacturer C) distributor D) retailer

719)

A distribution center is also called a _________. A) tier 1 supplier B) tier 2 supplier C) fulfillment center D) finishing center

720)

Company A provides corn to Company B to make into corn syrup. Company B sells its corn syrup to Company C, who makes ice cream for sale at Company D. Company B is a _________ in the supply chain of ice cream. A) tier 2 supplier B) tier 1 supplier C) manufacturer D) retailer

721)

Company A provides corn to Company B to make into corn syrup. Company B sells its corn syrup to Company C, who makes ice cream for sale at Company D. Company C is a _________ in the supply chain of ice cream. A) retailer B) tier 1 supplier C) manufacturer D) distributor

722)

Company A provides corn to Company B to make into corn syrup. Company B sells its corn syrup to Company C, who makes ice cream for sale at Company D. Company A is a _________ in the supply chain of ice cream. A) tier 2 supplier B) tier 1 supplier C) manufacturer D) retailer

723)

Company A provides corn to Company B to make into corn syrup. Company B sells its corn syrup to Company C, who makes ice cream for sale at Company D. Company D is a _________ in the supply chain of ice cream. A) tier 2 supplier B) tier 1 supplier C) manufacturer D) retailer

724)

Which of the following is NOT a value that distributors provide in a supply chain? A) Faster delivery lead times to retailers B) Smaller order quantities C) Cost-effective storage of inventory D) Less product handling

725)

Which of the following is an advantage of a supply chain without a distributor? A) Faster delivery lead times to retailers B) Smaller order quantities C) Cost-effective storage of inventory D) Less product handling

726)

An outdated term for a distribution center is a _________. A) tier 1 supplier B) retailer C) manufacturer D) warehouse

727)

From which supply chain level would an online order placed on Walmart.com likely be shipped? A) retailer B) distribution center C) manufacturer D) tier 1 supplier

728)

Your local Walmart store is an example of which level in a supply chain? A) retailer B) distribution center C) manufacturer D) tier 1 supplier

729)

The path that recycled printer toner cartridges follow is an example of a(an) _________. A) reverse supply chain B) forward supply chain C) efficient supply chain D) market-responsive supply chain

730)

The four key costs associated with a supply chain include all of the following EXCEPT _________. A) lead time B) transportation C) labor D) procurement

731)

_________ is responsible for negotiating the price of goods purchased from its suppliers. A) Human resources B) Procurement C) Distribution D) Manufacturing

732)

_________ refers to the cost of having people perform various supply chain functions. A) Procurement B) Inventory C) Transportation D) Labor

733)

Which of the following is NOT a mode of transportation in the context of supply chain management? A) Railroad B) Truck C) Elevator D) Air

734)

Lead time is the time between when an order is _________ and when it is _________. A) submitted, delivered B) submitted, canceled C) delivered, returned D) returned, canceled

735)

Which of the following is NOT a factor that influences the realized lead time for an order? A) Operational capabilities of the sender B) Mode of transportation C) Availability of inventory D) Operational capabilities of the receiver

736)

Which of the following is NOT a way to measure the availability of inventory? A) In-stock probability B) Stockout probability C) Flow rate D) Fill rate

737)

Company A carries 5,000 items. Customers ordered 1,000 items from inventory last week. Company A was able to fulfill 600 items of the order. What is the in-stock probability for last week? A) 0.08 B) 0.12 C) 0.6 D) 0.92

738)

Company B carries 5,000 items. Customers ordered 1,000 different items last week. Company B was able to fulfill 600 items of the order. What is the stockout probability for last week? A) 0.08 B) 0.4 C) 0.6 D) 0.92

739)

Company A failed to satisfy 15% of customers’ orders last month. Company A stocks 100 items and all 100 were ordered last month. What is Company A’s in-stock probability? A) 15% B) 85% C) 100% D) 30%

740)

Company B sold 50% of the 5,000 items that it carried last week. There were 500 items for which some demand was not satisfied. What is the stockout probability for last week? A) 0.1 B) 0.2 C) 0.5 D) 0.9

741)

C&A Jewelers sold 30% of the 5,000 items that it carried last week. There were 500 items for which some demand was not satisfied. What is the in-stock probability for last week? A) 0.1 B) 0.7 C) 0.3 D) 0.9

742)

A large online retailer carries 550,000 items. Customers ordered 205,000 different items from inventory last week. The retailer was able to satisfy all demand for 170,000 of those items. What is the in-stock probability for last week? A) 30.9% B) 82.9% C) 93.6% D) 99.7%

743)

A large online retailer carries 550,000 items. Customers ordered 205,000 different items from inventory last week. The retailer was able to satisfy all demand for 170,000 of those items. What is the stockout probability for last week? A) 6.4% B) 17.1% C) 20.6% D) 93.6%

744)

A large online retailer sold 44% of the 550,000 items that it carried last week. There were 12,500 items for which some demand was not satisfied. What is the stockout probability for last week? A) 2.3% B) 5.2% C) 94.8% D) 97.7%

745)

A large online retailer sold 44% of the 550,000 items that it carried last week. There were 12,500 items for which some demand was not satisfied. What is the in-stock probability for last week? A) 2.3% B) 94.8% C) 97.7% D) 99.7%

746)

_________ decisions usually influence a firm’s performance in _________. A) Tactical, the next few years B) Tactical, the next few days C) Strategic, the next few weeks D) Strategic, the next few days

747)

Which of the following is a tactical decision in the context of supply chain management? A) To decide whether to produce within the country or overseas B) To decide whether to make or buy a group of items C) To decide whether to expand capacity or not D) To decide whether to use overtime this week or not

748)

Which of the following is a strategic decision in the context of supply chain management? A) To decide how much inventory to order from a supplier this week B) To decide whether or not a shipment should be expedited C) To decide whether to outsource production or not D) To decide employees’ weekly work schedule

749)

Which of the following statements about supply chain decisions is TRUE? A) Tactical decisions are not as important as strategic decisions. B) Strategic decisions change frequently to achieve the right level of flexibility to counteract the amount of variability in a supply chain. C) All supply chains face the same amount of variability. D) Supply chain decisions are about selecting the right level of flexibility to counteract the amount of variability in a supply chain.

750)

Which of the following is an example of functional products? A) Toilet paper B) Designer handbags C) Fashionable clothing D) Luxury cars

751)

Characteristics of functional products include all of the following EXCEPT _________. A) frequent markdowns. B) low risk of obsolescence. C) low gross margin. D) numerous competitors.

752)

Characteristics of innovative products include _________. A) frequent markdowns B) low risk of obsolescence C) low gross margin D) numerous competitors

753)

_________ products are relatively _________ because they can experience substantial variability. A) Functional, safe B) Functional, risky C) Innovative, risky D) Innovative, safe

754)

_________ efficient supply chains are designed to _________. A) Physically, minimize costs B) Physically, maximize flexibility C) Market, minimize costs D) Market, maximize flexibility

755)

Characteristics of market-responsive supply chains include all of the following EXCEPT _________. A) flexibility emphasized over cost B) low factory utilization C) functional products D) fast and expensive modes of transportation

756)

Characteristics of physically efficient supply chains include _________. A) flexibility emphasized over cost B) low factory utilization C) functional products D) fast and expensive modes of transportation

757)

Which of the following is a match between the type of supply chain and the type of product? A) Physically efficient and innovative B) Market-responsive and functional C) Physically efficient and functional D) Market-responsive and flexible

758)

_________ decisions usually influence a firm’s performance over _________. A) Tactical, the next few years B) Tactical, the next few decades C) Strategic, the next few weeks D) Strategic, the next few years

759)

Which of the following is NOT a component of demand variability? A) Level B) Innovation C) Variety D) Location

760)

The bullwhip effect can cause the variability in _________ to be substantially greater than variability in _________. A) consumer demand, supplier demand B) distributor demand, supplier demand C) manufacturer demand, supplier demand D) supplier demand, consumer demand

761)

Firm A adds jackets to its line of designer clothing. Which form of demand variability would be introduced by Firm A? A) Level B) Innovation C) Variety D) Location

762)

The bullwhip effect is the tendency for _________ to be more volatile at _________ levels of the supply chain. A) supply, higher B) demand, higher C) demand, lower D) supply, lower

763)

Which of the following is NOT a reason for the bullwhip effect? A) Ordering a quantity that exceeds demand B) Ordering a quantity that exactly matches demand C) Stocking up with items on sale D) Placing orders in batches

764)

Which of the following will NOT mitigate variability within the supply chain? A) Designing a product with proprietary components B) Working with suppliers who adopt industrywide standards C) Requiring suppliers to be financially sound D) Sharing customer and demand information with suppliers

765)

Supply chain partners can increase the variability in the supply chain in a number of ways EXCEPT _________. A) failing to deliver the quantity needed B) failing to deliver the quality needed C) failing to operate in an acceptable manner D) failing to cooperate with competitors

766)

C&A Clothiers, an American company, decides to make and sell its products in Australia. C&A is able to mitigate what kind of disruptions to its supply chain? A) Natural B) Political C) Currency fluctuations D) Supplier

767)

A small, independently operated deli has decided to open a new store on the opposite side of town. Which form of demand variability would this introduce? A) Level B) Location C) Variety D) Innovation

768)

Which of the following is a supply chain strategy? A) Online retailing B) Stock-to-order C) Vertical sourcing D) Innovation

769)

Store A orders on a weekly basis. Its weekly demand is 50 units with a standard deviation of five units. The holding cost is $10 per unit per week and a 0.99 in-stock probability is desired. What is Store A’s average holding cost incurred each week for on-order inventory if lead time is five weeks? A) $2,500.00 B) $285.40 C) $250.00 D) $28.54

770)

Store A orders on a weekly basis. Its weekly demand is 50 units with a standard deviation of five units. The holding cost is $10 per unit per week and a 0.99 in-stock probability is desired. What is Store A’s average on-hand inventory if lead time is five weeks? A) 2500.00 B) 285.40 C) 250.00 D) 28.54

771)

Store A orders on a weekly basis. Its weekly demand is 50 units with a standard deviation of five units. The holding cost is $10 per unit per week and a 0.99 in-stock probability is desired. What will be the effect on Store A’s average on-hand inventory if lead time increases from two weeks to five weeks? A) It will increase. B) It will decrease. C) It will remain the same. D) It will double.

772)

Store B orders on a weekly basis. Its weekly demand is 50 units with a standard deviation of five units. The holding cost is $10 per unit per week and a 0.99 in-stock probability is desired. What is Store B’s weekly inventory holding cost if lead time is two weeks? A) $1,000.00 B) $24.04 C) $120.18 D) $1,201.78

773)

Store B orders on a weekly basis. Its weekly demand is 50 units with a standard deviation of five units. What is Store B’s weekly inventory holding cost per unit if its weekly inventory holding cost is $1,201.78? A) $20.18 B) $24.04 C) $120.18 D) $59.56

774)

Reasons for overseas sourcing include reducing _________. A) inventory costs B) labor costs C) transportation costs D) product value

775)

With _________ operations, a product is made before the _________ for that product has been identified. A) make-to-order, demand B) make-to-stock, supply C) make-to-stock, demand D) make-to-order, supply

776)

Make-to-order is a viable strategy when _________. A) customers are not willing to wait for the product B) product variety is desirable C) products are inexpensive to hold in inventory D) product differentiation cannot be delayed

777)

Compared to online retailers, traditional retailers tend to face _________. A) demand location uncertainty B) demand level uncertainty C) lower holding costs D) higher shipping costs

778)

With _________ operations, a product is made after the _________ for that product has been identified. A) make-to-order, demand B) make-to-stock, supply C) make-to-stock, demand D) make-to-order, supply

779)

A parts supply store orders a particular item on a weekly basis. The weekly demand is 30 units with a standard deviation of four units. The holding cost is $5 per unit per week and a 90% in-stock probability is desired. What is the store’s average on-hand inventory for this item if lead time is three weeks? A) 10.24 B) 30.00 C) 58.76 D) 90.00

780)

A parts supply store orders a particular item on a weekly basis. The weekly demand is 30 units with a standard deviation of four units. The holding cost is $5 per unit per week and a 90% in-stock probability is desired. What is the store’s average holding cost incurred each week for the on-order inventory of this item if lead time is three weeks? A) $90.00 B) $150.00 C) $450.00 D) $900.00

781)

A parts supply store orders a particular item on a weekly basis. The weekly demand is 30 units with a standard deviation of four units. The holding cost is $5 per unit per week and a 90% in-stock probability is desired. What is the store’s weekly holding cost for this item if lead time is three weeks? A) $16.71 B) $50.12 C) $100.24 D) $501.20

782)

A parts supply store orders a particular item on a weekly basis. The weekly demand is 30 units with a standard deviation of four units. The holding cost is $5 per unit per week and a 90% in-stock probability is desired. What is the store’s weekly holding cost per unit for this item if lead time is three weeks? A) $16.71 B) $50.12 C) $100.24 D) $501.20

Answer Key Test name: chapter 11 1) TRUE

A supply chain with a distributor has to do extra loading and unloading at the distribution center and therefore has more product handling than one without a distributor. 2) FALSE

Tier 2 suppliers are primary suppliers to tier 1 suppliers. Tier 1 suppliers are primary suppliers to manufacturers. 3) TRUE

Inventory availability measures the extent to which customers’ demands are satisfied. Therefore, it is a way to evaluate the performance of a supply chain from a service perspective. 4) FALSE

The lead time is the time between when an order is received and when it is delivered. It depends on the availability of inventory. 5) TRUE

It is harder to quantify flexibility than costs and to regard a product as innovative as opposed to functional. Therefore, managers tend to underinvest in flexibility when the product is innovative. 6) FALSE

Online retailers do not face demand location uncertainty; no matter where market demand occurs, the online retailer provides service from the same location. 7) D

A supply chain for goods and services consists of a network of firms and locations that begins with raw materials and ends with final users. 8) B

There are four different levels in the given supply chain: suppliers, manufacturers, distributors, and retailers. 9) C

A supply chain starts with raw materials and ends with final users. 10) C

Tier 2 suppliers are the primary suppliers to tier 1 suppliers who, in turn, are the primary suppliers to manufacturers. 11) D

A supermarket is typically at the retailer level of a supply chain. 12) C

A distribution center is also called a fulfillment center. 13) B

Corn syrup is a component provided by Company B to Company C for making ice cream. Company B is a tier 1 supplier to Company C. 14) C

Company C makes ice cream to sell at Company D. Company C is a manufacturer. 15) A

Company A provides corn to Company B to make into corn syrup that becomes an ingredient in ice cream at Company C. Company A is a tier 2 supplier in the supply chain. 16) D

Company D sells ice cream that is made by Company C. Company D is a retailer. 17) D

There is more product handling in a supply chain with a distributor as extra loading and unloading of products are required with a distributor in between a manufacturer and retailer. 18) D

There is more product handling in a supply chain with a distributor as extra loading and unloading of products are required with a distributor in between a manufacturer and retailer. 19) D

An outdated term for a distribution center is a warehouse. 20) B

An online order placed on Walmart.com would likely be shipped from a Walmart distribution center. 21) A

Your local Walmart store is an example of the retailer level of a supply chain.

22) A

The path that recycled printer toner cartridges follow is an example of a reverse supply chain. 23) A

Lead time is a service (not cost) metric of supply chain performance. 24) B

Procurement is responsible for negotiating the price of goods purchased from its suppliers. 25) D

Labor refers to the cost of having people perform various supply chain functions. 26) C

Elevators are for moving people from one floor to another within a building. They are not a mode of transportation in the context of supply chain management. 27) A

Lead time is the time between when an order is submitted and when it is delivered. 28) D

Operational capabilities of the sender (not the receiver) is a factor that influences the realized lead time for an order. 29) C

Flow rate measures the number of flow units going through a business process per unit time. It is not a measure of the availability of inventory. 30) D

Stockout = 1,000 − 600 = 400. The demand being satisfied = 5,000 − 400 = 4,600. In-stock probability = 4,600 ÷ 5,000 = 0.92. 31) A

Stockout = 1,000 − 600 = 400. Stock out probability = 400 ÷ 5,000 = 0.08. 32) B

Stockout probability = 15%. Therefore, in-stock probability = 100% − 15% = 85%. 33) A

Stockout probability = 500 ÷ 5,000 = 0.1.

34) D

Stockout probability = 500 ÷ 5,000 = 0.1. In-stock probability = 1 − 0.1 = 0.9. 35) C

Stockout = 205,000 − 170,000 = 35,000. The demand being satisfied = 550,000 − 35,000 = 515,000. In-stock probability = 515,000 ÷ 550,000 = 0.936 = 93.6%. 36) A

Stockout = 205,000 − 170,000 = 35,000. Stockout probability = 35,000 ÷ 550,000 = 0.064 = 6.4%. 37) A

Stockout probability = 12,500 ÷ 550,000 = 0.023 = 2.3%. 38) C

Stockout probability = 12,500 ÷ 550,000 = 0.023 = 2.3%. In-stock probability = 100% − 2.3% = 97.7%. 39) B

Tactical decisions usually influence a firm’s performance in the next few days, weeks, or months; strategic decisions typically influence a firm’s direction over the course of years. 40) D

Using overtime or not is a tactical decision because its impact is short term. 41) C

Outsourcing is a strategic decision because its impact is long term. 42) D

Supply chain decisions are about selecting the right level of flexibility to counteract the amount of variability in a supply chain. 43) A

Toilet paper is a stable product that does not become obsolete quickly. Therefore, it is a functional product. 44) A

Functional products rarely need to be discounted as demand can be forecasted with reasonable accuracy.

45) A

Innovative products often suffer from leftover inventory that needs to be discounted considerably to sell. 46) C

Innovative products are relatively risky because they can experience substantial variability. 47) A

Physically efficient supply chains are designed to minimize costs. By contrast, marketresponsive supply chains are designed to maximize flexibility. 48) C

Innovative products (not functional products) move through market-responsive supply chains. 49) C

Functional products move through physically efficient supply chains. 50) C

A physically efficient supply chain is designed for a functional product. 51) D

Strategic decisions typically influence a firm’s direction over the course of years; tactical decisions usually influence a firm’s performance in the next few days, weeks, or months. 52) B

There are three components of demand variability: level, variety, and location. 53) D

The bullwhip effect can cause the variability in supplier (upstream) demand to be substantially greater than variability in consumer (downstream) demand. 54) C

Firm A increases its product variety by adding jackets to its line of designer clothing, resulting in demand variability due to variety. 55) B

The bullwhip effect is the tendency for demand to be more volatile at higher levels of the supply chain. 56) B

Ordering a quantity that exactly matches demand will reduce or eliminate the bullwhip effect. 57) A

Products with standard components (not proprietary components) will reduce the risk of relying on one supplier. 58) D

Supply chain partners can increase the variability in the supply chain in four ways: failure to deliver the quantity needed, failure to deliver the quality needed, failure in finances, and failure to operate in an acceptable manner. 59) C

By producing and selling products in the same country, C&A reduces the risk of currency fluctuations, which is an economic disruption to its supply chain. 60) B

Opening a new store on the opposite side of town would introduce demand variability due to location. 61) A

Four supply chain strategies are discussed in this chapter: mode of transportation, make-to-order, overseas sourcing, and online retailing. 62) A

Average inventory on order = Lead time × Average demand = 5 × 50 = 250. Weekly inventory holding cost for on-order inventory = Holding cost per unit per week × Average inventory on order = $10 × 250 = $2,500. 63) D

A 0.99 in-stock probability is equivalent to a safety factor, z, of 2.33. Average inventory on-hand = 64) A

Average inventory on-hand = If L increases while other parameters remain the same, average on-hand inventory will increase, but not necessarily always double. 65) D

A 0.99 in-stock probability is equivalent to a safety factor of 2.33. Weekly inventory holding cost = Holding cost per unit per week × (Average inventory on order + Average inventory on hand) 66) B

Inventory holding cost per unit = Inventory holding cost ÷ Average demand. Average demand = 50 units per week. Weekly inventory holding cost = Holding cost per unit per week × (Average inventory on order + Average inventory on hand) Inventory holding cost per unit = weekly holding cost ÷ weekly demand = $1201.78 ÷ 50 = $24.04. 67) B

Reduction of labor costs is the main reason for overseas sourcing. 68) C

With make-to-stock operations, a product is made before the demand of that product has been identified. 69) B

Make-to-order is viable if customers desire a broad selection of products. 70) A

Traditional retailers depend on their location to attract customers whereas online retailers do not have location uncertainty issues. 71) A

With make-to-order operations, a product is made after the demand of that product has been identified. 72) A

A 90% in-stock probability is equivalent to a safety factor, z, of 1.28. Average inventory on-hand =

.

73) C

Average inventory on order = Lead time × Average demand = 3 × 30 = 90. Weekly inventory holding cost for on-order inventory = Holding cost per unit per week × Average inventory on order = $5 × 90 = $450. 74) D

A 90% in-stock probability is equivalent to a safety factor of 1.28. Weekly inventory holding cost = Holding cost per unit per week × (Average inventory on order + Average inventory on hand) =

.

75) A

A 90% in-stock probability is equivalent to a safety factor of 1.28. Weekly inventory holding cost = Holding cost per unit per week × (Average inventory on order + Average inventory on hand) = . Inventory holding cost per unit = weekly holding cost ÷ weekly demand = $501.20 ÷ 30 = $16.71.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 783) A firm's ordering cost per year is independent of its order quantity decision. ⊚ true ⊚ false 784)

Limited inventory always increases demand because of the scarcity effect. ⊚ true ⊚ false

785)

As demand increases, the optimal economic order quantity increases at the same rate of demand. ⊚ true ⊚ false

786)

Expanding product variety does not always result in an increase in profit. ⊚ true ⊚ false

787)

When solving for an optimal order quantity in the presence of order quantity restrictions, the best approach is to order at a feasible quantity closest to the economic order quantity. ⊚ true ⊚ false

788)

When solving for an optimal order quantity in the presence of a quantity discount, the best approach is to select an order quantity which takes advantage of the discount. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 789) The assumptions behind the economic order quantity (EOQ) model include all of the following EXCEPT __________. A) a constant rate of demand B) a fixed ordering cost per year C) a fixed lead time D) a fixed purchase price per unit 790)

791)

Which of the following is TRUE regarding the economic order quantity (EOQ) model? A) Demand rate is dependent on order quantity. B) Ordering cost per order is dependent on order quantity. C) Holding cost per unit per year is independent of order quantity. D) Holding cost per unit per year is dependent on the selling price per unit.

Input parameters for the economic order quantity (EOQ) model include all of the following EXCEPT _________. A) order quantity B) demand rate C) holding cost per unit per year D) ordering cost per order

792)

Which of the following graphs correctly portrays the relationship between ordering cost per year (y-axis) and order quantity (x-axis) according to the economic order quantity model?

793)

Which of the following graphs correctly portrays the relationship between holding cost per year (y-axis) and order quantity (x-axis) according to the economic order quantity model?

794)

Which of the following graphs correctly portrays the relationship between total inventory costs per year (y-axis) and order quantity (x-axis) according to the economic order quantity model?

795)

Which of the following graphs correctly portrays the relationship between inventory level (y-axis) and time (x-axis) according to the economic order quantity model?

796)

C&A Vitamins sells 600 bottles of a dietary supplement per week at $100 per bottle. The supplement is ordered from a supplier who charges C&A $30 per order and $50 per bottle. C&A’s annual holding cost percentage is 40%. Assume C&A operates 50 weeks in a year. What is C&A’s total ordering and holding cost per year if C&A orders 500 bottles at a time? A) $11,800 B) $10,036 C) $6,800 D) $5,036

797)

C&A Vitamins sells 600 bottles of a dietary supplement per week at $100 per bottle. The supplement is ordered from a supplier who charges C&A $30 per order and $50 per bottle. C&A’s annual holding cost percentage is 40%. Assume C&A Vitamins operates 50 weeks in a year. What order quantity minimizes C&A’s total ordering and holding cost per year? A) 300 B) 2121 C) 600 D) 30

798)

C&A Vitamins sells 600 bottles of a dietary supplement per week at $100 per bottle. The supplement is ordered from a supplier who charges C&A $30 per order and $50 per bottle. C&A’s annual holding cost percentage is 40%. Assume C&A Vitamins operates 50 weeks in a year. What is C&A’s total ordering and holding cost per year if the order quantity is 200? A) $6,500 B) $4,243 C) $3,000 D) $600

799)

C&A Vitamins sells 600 bottles of a dietary supplement per week at $100 per bottle. The supplement is ordered from a supplier who charges C&A $40 per order and $50 per bottle. C&A’s annual holding cost percentage is 30%. Assume C&A Vitamins operates 50 weeks in a year. What is the economic order quantity? A) 200 B) 400 C) 500 D) 800

800)

C&A Lawn Care purchases cases of fertilizer for its lawn-care business from a supplier who charges C&A $30 per order and $50 per case. Each case consists of five bags of fertilizer. C&A needs 2000 bags of fertilizer a year. C&A’s annual holding costs are 30%. How many cases of fertilizer should C&A order from its supplier with each order to minimize the total annual ordering and holding cost? A) 40 B) 49 C) 67 D) 89

801)

C&A Lawn Care purchases cases of fertilizer for its business from a supplier who charges $40 per order and $60 per case. Each case consists of four bags of fertilizer. Firm A needs 1600 bags of fertilizer a year. C&A’s annual holding costs are 25%. What is C&A’s economic order quantity? A) 92 B) 80 C) 46 D) 40

802)

Store A purchases cases of fertilizer for its lawn-care business from a supplier who charges Store A $30 per order and $50 per case. Each case consists of five bags of fertilizer. Store A needs 1,000 bags of fertilizer a year. How many orders does Store A place per year if the order quantity is 40 cases? A) 40 B) 20 C) 25 D) 5

803)

Store A purchases cases of fertilizer for its lawn-care business from a supplier who charges Store A $30 per order and $50 per case. Each case consists of five bags of fertilizer. Store A needs 1,000 bags of fertilizer a year. Store A’s annual holding costs are 30%. If Store A’s order quantity is 40 cases, what is its average inventory level (in cases)? A) 89 B) 45 C) 40 D) 20

804)

C&A Lawn Care purchases fertilizer for its lawn-care business from a supplier who charges $30 per order and $50 per case. Each case consists of five bags of fertilizer. C&A needs 2,000 bags of fertilizer a year. C&A’s annual holding costs are 30%. What is C&A’s holding cost per case per year? A) $3 B) $5 C) $10 D) $15

805)

806)

Which of the following statements concerning the economic order quantity (EOQ) model is FALSE? A) The holding cost per unit of time is equal to the ordering cost per unit of time when ordering at the EOQ level. B) The sum of the holding cost and ordering cost per unit of time is minimized when ordering at the EOQ level. C) If the order quantity is large, the ordering cost dominates the EOQ cost. D) If the order quantity is large, the holding cost dominates the EOQ cost.

807)

C&A Lawn Care purchases cases of fertilizer for its lawn-care business from a supplier who charges C&A $30 per order and $50 per case. Each case consists of five bags of fertilizer. C&A needs 2000 bags of fertilizer a year. C&A’s annual holding costs are 30%. If C&A uses the economic order quantity when placing orders, what will be its annual ordering and holding cost per case of fertilizer? A) $0.15 B) $0.30 C) $1.25 D) $1.50

808)

Bakery A uses 60 bags of flour each month. The flour is purchased from a supplier for a price of $80 per bag and an ordering cost of $20 per order. Bakery A’s annual inventory holding cost percentage is 40%. What is its economic order quantity? A) 30 B) 15 C) 9 D) 4.5

809)

Bakery A uses 60 bags of flour each month. The flour is purchased from a supplier for a price of $80 per bag and an ordering cost of $20 per order. Bakery A’s annual inventory holding cost percentage is 40%. If Bakery A chooses to use the economic order quantity for flour purchases, what will be its average inventory? A) 30 B) 15 C) 9 D) 4.5

810)

Bakery A uses 60 bags of flour each month. The flour is purchased from a supplier for a price of $80 per bag and an ordering cost of $20 per order. Bakery A’s annual inventory holding cost percentage is 40%. If Bakery A chooses to use the economic order quantity for flour purchases, how many orders will be placed with the supplier each year? A) 7 B) 15 C) 24 D) 30

811)

Bakery A uses 60 bags of flour each month. The flour is purchased from a supplier for a price of $80 per bag and an ordering cost of $20 per order. Bakery A’s annual inventory holding cost percentage is 40%. If Bakery A chooses to use the economic order quantity for flour purchases, what will be the total of its holding and ordering costs per year? A) $138 B) $277 C) $480 D) $960

812)

Holding all other parameters fixed, an increase in which of the following parameters in the economic order quantity (EOQ) model will NOT always increase total annual ordering and holding cost? A) Holding cost per unit per year B) Ordering cost per order C) Order quantity D) Demand rate

813)

A parts supply store sells 90 automotive batteries per week at $130 per battery. The battery is ordered from a distributor who charges the store $100 per order and $75 per battery. C&A’s annual holding cost percentage is 20%. Assume the store operates 50 weeks in a year. If the store orders 200 batteries at a time, what is its average inventory level of batteries? A) 90 B) 100 C) 200 D) 2,250

814)

A parts supply store sells 90 automotive batteries per week at $130 per battery. The battery is ordered from a distributor who charges the store $100 per order and $75 per battery. C&A’s annual holding cost percentage is 20%. Assume the store operates 50 weeks in a year. What is the store’s total ordering and holding cost per year if it orders 200 batteries at a time? A) $1,545 B) $3,750 C) $5,250 D) $6,800

815)

A parts supply store sells 90 automotive batteries per week at $130 per battery. The battery is ordered from a distributor who charges the store $100 per order and $75 per battery. C&A’s annual holding cost percentage is 20%. Assume the store operates 50 weeks in a year. What order quantity minimizes the store’s total ordering and holding cost per year? A) 35 B) 128 C) 212 D) 245

816)

A automotive supply store purchases cases of motor oil from a supplier who charges the store $80 per order and $35 per case. Each case contains 12 quarts of oil. Demand at the store for the oil is 700 quarts per month. The store’s annual holding cost percentage is 30%. How many cases of oil should the store order from its supplier to minimize its total annual ordering and holding cost? A) 30 B) 57 C) 103 D) 228

817)

A automotive supply store purchases cases of motor oil from a supplier who charges the store $80 per order and $35 per case. Each case contains 12 quarts of oil. Demand at the store for the oil is 700 quarts per month. The store’s annual holding cost percentage is 30%. If the store uses the economic order quantity when placing orders, what will be its annual ordering and holding cost per case (round the EOQ and total cost to the nearest dollar)? A) $1,084 B) $1,625 C) $3,284 D) $7,065

818)

A automotive supply store purchases cases of motor oil from a supplier who charges the store $80 per order and $35 per case. Each case contains 12 quarts of oil. Demand at the store for the oil is 700 quarts per month. The store’s annual holding cost percentage is 30%. If the store’s order quantity is 50 cases, what is its average inventory level (in cases)? A) 12.5 B) 25 C) 50 D) 58.3

819)

A automotive supply store purchases cases of motor oil from a supplier who charges the store $80 per order and $35 per case. Each case contains 12 quarts of oil. Demand at the store for the oil is 700 quarts per month. The store’s annual holding cost percentage is 30%. If the store’s order quantity is 50 cases, how many orders does the store place each year? A) 3.5 B) 7 C) 14 D) 168

820)

As demand increases, the sum of the ordering and holding costs per period for the economic order quantity _________ at a rate _________ than demand. A) increases, faster B) decreases, faster C) increases, slower D) decreases, slower

821)

The sum of ordering and holding costs per period for the economic order quantity becomes a _________ percentage of the purchasing cost as the demand rate _________. A) fixed, increases B) fixed, decreases C) larger, increases D) smaller, increases

822)

Which of the following is TRUE regarding the source of economies of scale in inventory management according to the economic order quantity model? A) The source of economies of scale is the fixed demand rate. B) The source of economies of scale is the fixed order quantity. C) The source of economies of scale is the fixed ordering cost. D) The source of economies of scale is the fixed holding cost.

823)

Which of the following is a consequence of economies of scale according to the economic order quantity model? A) If a product is not popular, its total economic order quantity costs are a small portion of the purchase cost. B) If the demand rate for a product is high, its total economic order quantity costs are a large portion of the purchase cost. C) More product variety always results in higher profit. D) More product variety does not always result in higher profit.

824)

Bakery A uses 80 bags of chocolate chips each year. The chocolate chips are purchased from a supplier for a price of $80 per bag and an ordering cost of $20 per order. Bakery A’s annual inventory holding cost percentage is 40%. If Bakery A chooses an order quantity of 10 bags, what are its ordering and holding costs per year expressed as a percentage of their annual purchasing cost? A) 2% B) 3% C) 4% D) 5%

825)

Restaurant A uses 60 bags of tomatoes each month. The tomatoes are purchased from a supplier for a price of $80 per bag and an ordering cost of $20 per order. Restaurant A’s annual inventory holding cost percentage is 40%. If Restaurant A chooses to use the economic order quantity when placing an order for tomatoes, what are its ordering and holding costs per year expressed as a percentage of the annual purchasing cost? A) 1.7% B) 2.2% C) 3.4% D) 5.0%

826)

Restaurant A uses 60 bags of potatoes each month. The potatoes are purchased from a supplier for a price of $80 per bag and an ordering cost of $20 per order. Restaurant A’s annual inventory holding cost percentage is 40%. If Restaurant A’s demand for the potatoes is decreased by 10%, what will be the change in its economic order quantity? A) Decreases from 8.7 bags to 8.2 bags B) Remains the same C) Increases from 28.5 to 30 bags D) Decreases from 30 to 28.5 bags

827)

Bakery A uses 80 bags of chocolate chips each year. The chocolate chips are purchased from a supplier for a price of $80 per bag and an ordering cost of $20 per order. Bakery A’s annual inventory holding cost percentage is 40%. If Bakery A’s demand for the chip is doubled, what will be the percentage change in its economic order quantity? A) 100% increase B) 100% decrease C) 41% increase D) 41% decrease

828)

Product _________ refers to the situation when customers are willing to purchase a less preferred version when their most preferred version is not available. A) substitution B) promotion C) economy D) sustainability

829)

_________ in demand rate of a product makes its inventory management _________ because of an increase in inventory costs relative to purchasing costs. A) A decrease, more efficient B) An increase, less efficient C) An increase, more efficient D) A decrease, less efficient

830)

When is expanding product variety not a good idea? A) When adding variety increases the overall margin. B) When adding variety increases total demand insignificantly C) When adding variety increases consumer value significantly D) When adding variety increases overall profitability

831)

Economies of scale describes the relationship between _________ and _________. A) product variety, demand B) operational efficiency, demand C) product variety, supply D) operational efficiency, supply

832)

Which of the following is a pallet? A) It is the quantity of inventory that is stacked on a wooden platform designed to be moved by a forklift. B) It is the amount of time that inventory stays on a wooden platform designed to be moved by a forklift. C) It is the quantity of inventory ordered to minimize moving time. D) It is the quantity of inventory ordered to minimize inventory costs.

833)

A automotive supply store purchases cases of motor oil from a supplier who charges the store $80 per order and $35 per case. Each case contains 12 quarts of oil. Demand at the store for the oil is 700 quarts per month. The store’s annual holding cost percentage is 30%. If the store chooses an order quantity of 75 cases, what is its total ordering and holding costs per year expressed as a percentage of its annual purchasing cost? A) 2.4% B) 3.6% C) 4.4% D) 4.7%

834)

A automotive supply store purchases cases of motor oil from a supplier who charges the store $80 per order and $35 per case. Each case contains 12 quarts of oil. Demand at the store for the oil is 700 quarts per month. The store’s annual holding cost percentage is 30%. If the store chooses to use the economic order quantity when placing an order for oil, what are its ordering and holding costs per year expressed as a percentage of the annual purchasing cost (round the EOQ to the nearest whole number in subsequent calculations)? A) B) C) D)

2.4% 3.6% 4.4% 4.7%

835)

Which of the following is NOT a possible complication that prevents a firm from ordering at the economic order quantity level? A) A supplier offers a quantity discount. B) A supplier places order quantity restrictions. C) A supplier charges the fixed cost to place an order. D) An area offers limited space to hold the inventory received from a supplier.

836)

Company A purchases cases of fertilizer for its lawn-care business from a supplier who charges $30 per order and $50 per case. Each case consists of five bags of fertilizer. Company A needs 2,000 bags of fertilizer a year. Company A’s annual holding costs are 30%. If Company A only has room to hold 25 cases of fertilizer, how many cases should Company A order each time to minimize the total holding and ordering cost? A) 25 B) 20 C) 16 D) 10

837)

Company A purchases fertilizer for its lawn-care business from a supplier who charges $30 per order and $50 per case. Each case consists of five bags of fertilizer and the order size must be an integer multiple of five bags. Company A needs 2015 bags of fertilizer a year. Company A’s annual holding costs are 30%. What is the order quantity to minimize the total holding and ordering cost? A) 202 bags B) 201 bags C) 200 bags D) 205 bags

838)

Company A purchases cases of fertilizer for its lawn-care business from a supplier who charges Company A $30 per order and $50 per case. Each case consists of five bags of fertilizer and the order size must be an integer multiple of five bags. Company A needs 2,000 bags of fertilizer a year. Company A’s annual holding costs are 30%. What would be the order quantity that minimizes annual ordering and holding costs? A) 40 cases B) 30 cases C) 20 cases D) 10 cases

839)

Company A purchases cases of fertilizer for its lawn care business from a supplier who charges Company A $30 per order and $50 per case. Each case consists of five bags of fertilizer. Company A needs 2,000 bags of fertilizer a year. Company A’s annual holding costs are 30%. If Company A only has room to hold 30 cases of fertilizer, what would be the annual ordering and holding costs per case of fertilizer? A) $0.64 B) $5.57 C) $1.11 D) $1.56

840)

Firm A’s demand for a product is 100,000 units per year. It has a holding cost of $10 per unit per year and an ordering cost of $50 per order. If the firm is required to order an integer multiple of 500 units, what order quantity should it use to minimize ordering and holding costs? A) 500 B) 1,000 C) 1,500 D) 2,000

841)

Firm B’s demand for a product is 100,000 units per year. It has a holding cost of $50 per unit per year and an ordering cost of $10 per order. If the firm is required to order an integer multiple of 150 units, what order quantity should it use to minimize ordering and holding costs? A) 150 B) 200 C) 300 D) 450

842)

The _________ of the product refers to how high the product can be put on top of another without causing damage to the lower layers. A) weight limit B) batch size C) pallet dimension D) stackability

843)

Which of the following is TRUE when solving for the optimal order quantity in the presence of a quantity discount? A) The economic order quantity at the regular price is the optimal order quantity only if it is less than the threshold needed for the quantity discount. B) The economic order quantity at the discount price is always the optimal order quantity. C) The economic order quantity at the regular price is always the optimal order quantity. D) The economic order quantity at the regular price is the optimal order quantity if it is greater than or equal to the threshold needed for the quantity discount.

844)

Firm B’s demand for a product is 10 units per month. Its supplier charges an ordering cost of $5 per order and $10 per unit with a 10% discount for orders of 25 units or higher. Firm B incurs a 30% annual holding cost. What is the optimal order quantity for Firm B? A) 20 B) 21 C) 22 D) 25

845)

Firm B’s demand for a product is 10 units per month. Its supplier charges an ordering cost of $5 per order and $10 per unit with a 10% discount for orders of 25 units or higher. Firm B incurs a 30% annual holding cost. How much does Firm B save each year (including purchasing, ordering, and holding costs) if it purchases enough units to get the discount? A) $122.25 B) $120.00 C) $6.00 D) $2.25

846)

Firm B’s demand for a product is 10 units per month. Its supplier charges an ordering cost of $5 per order and $10 per unit with a 10% discount for orders of 15 units or higher. Firm B incurs a 30% annual holding cost. What is the optimal order quantity for Firm B (i.e., the order quantity that minimizes the total purchasing, ordering, and holding cost)? A) 15 B) 20 C) 21 D) 22

847)

Firm A’s demand for a product is 15 units per month. Its supplier charges an ordering cost of $5 per order and $10 per unit with a 10% discount for orders of 15 units or higher. Firm A incurs a 25% annual holding cost. What is Firm A’s annual holding cost if it orders at a quantity of 28 units? A) $30.00 B) $32.14 C) $31.50 D) $27.00

848)

Firm A’s demand for a product is 15 units per month. Its supplier charges an ordering cost of $5 per order and $10 per unit with a 10% discount for orders of 15 units or higher. Firm A incurs a 25% annual holding cost. What is Firm A’s annual ordering costs if it orders at a quantity of 28 units? A) $30.00 B) $32.14 C) $31.50 D) $27.00

849)

Firm A’s demand for a product is 15 units per month. Its supplier charges an ordering cost of $5 per order and $10 per unit with a 10% discount for orders of 15 units or higher. Firm A incurs a 25% annual holding cost. Firm A orders at a quantity of 28 units. What is its total annual cost, including purchasing cost (round to the nearest dollar)? A) $1,260 B) $1,256 C) $1,620 D) $1,684

850)

Firm C’s demand for a product is 60 units per month. Its supplier charges an ordering cost of $40 per order and $35 per unit with a 20% discount for orders of 100 units or more. Orders must be placed in integer multiples of 100 units. Firm C incurs a 20% annual holding cost. What is the optimal order quantity that minimizes the total annual purchasing, ordering, and holding cost? A) 91 B) 100 C) 101 D) 110

851)

Firm C’s demand for a product is 60 units per month. Its supplier charges an ordering cost of $40 per order and $35 per unit with a 20% discount for orders of 100 units or more. Firm C incurs a 20% annual holding cost. What is the optimal order quantity that minimizes the total annual purchasing, ordering, and holding cost? A) 91 B) 100 C) 101 D) 110

852)

Firm C’s demand for a product is 60 units per month. Its supplier charges an ordering cost of $40 per order and $35 per unit with a 20% discount for orders of 100 units or more. Firm C incurs a 20% annual holding cost. Calculate the economic order quantity without the discount. Then calculate the economic order quantity with the discounted price. What will be the change in Firm C’s total annual cost (purchasing, holding, and ordering) if it decides to take advantage of the quantity discount? A) $5,040 increase B) $5,040 decrease C) $5,107 increase D) $5,107 decrease

853)

An automotive supply store sells a product that has a demand of 400 units per month. Its supplier charges an ordering cost of $60 per order and $25 per unit with a 20% discount for orders of 250 units or higher. The store incurs a 20% annual holding cost. What is the store’s annual holding cost if it orders at a quantity of 300 units? A) $4 B) $5 C) $600 D) $1,200

854)

An automotive supply store sells a product that has a demand of 400 units per month. Its supplier charges an ordering cost of $60 per order and $25 per unit with a 20% discount for orders of 250 units or higher. The store incurs a 20% annual holding cost. What is the store’s annual ordering cost if it orders at a quantity of 300 units? A) B) C) D)

855)

$60 $80 $480 $960

An automotive supply store sells a product that has a demand of 400 units per month. Its supplier charges an ordering cost of $60 per order and $25 per unit with a 20% discount for orders of 250 units or higher. The store incurs a 20% annual holding cost. What is the store’s total annual cost (purchasing, ordering, and holding) if it orders at a quantity of 300 units? A) $96,000 B) $97,560 C) $120,000 D) $121,560

Answer Key Test name: chapter 12 1) FALSE

The ordering cost per year depends on the order quantity decision. The higher the order quantity per order, the lower the ordering cost per year since fewer orders will be needed. 2) FALSE

Limited inventory does not always increase demand. Customers will not want to purchase the last package of meat in a grocery store if they think it must be old. 3) FALSE

Every time demand doubles, the EOQ only increases by a factor of the square root of 2. Therefore, as demand increases, the EOQ does not increase at the same rate of demand. 4) TRUE

If adding a product to an assortment does not increase total demand enough to compensate for the decrease in demand rate for the initial product assortment, then overall profitability could be reduced. 5) FALSE

The best feasible quantity to minimize ordering and holding costs will not always be the one closest to the EOQ. 6) FALSE

Ordering at a quantity to take advantage of the discount will make sense only if the reduction in total purchase and ordering costs is high enough to compensate for the increase in total holding costs. 7) B

The ordering cost per year is dependent on the amount ordered and is not fixed. 8) C

Holding cost per unit per year is fixed and dependent on the purchasing cost of the item. 9) A

Order quantity is an output parameter that is computed using the EOQ model. 10) A

Ordering cost per year decreases as a curve as the order quantity increases according to the economic order quantity model. 11) B

Holding cost per year increases as a straight line as the order quantity increases according to the economic order quantity model. 12) D

The total inventory cost per year shows a U-shaped curve as order quantity increases according to the economic order quantity model. 13) A

Inventory level follows a saw-tooth pattern against time according to the economic order quantity model. 14) C

Annual holding cost per bottle = 40% × $50 = $20. Annual holding cost = 500 ÷ 2 × $20 = $5,000. Annual demand = 600 × 50 = 30,000. Annual ordering cost = 30,000 ÷ 500 × $30 = $1,800. Total ordering and holding cost = $1,800 + $5,000 = $6,800. 15) A

Annual holding cost per bottle = 40% × $50 = $20. Annual demand = 600 × 50 = 30,000.

16) A

Annual holding cost per bottle = 40% × $50 = $20. Annual demand = 600 × 50 = 30,000. Total ordering and holding cost at 200 = (200 ÷ 2 × $20) + (30,000 ÷ 200 × $30) = $6,500. 17) B

Annual holding cost per bottle = 30% × $50 = $15. Annual demand = 600 × 50 = 30,000.

18) A

Holding cost per case per year = $50 × 30% = $15. Annual demand = 2,000 bags ÷ 5 bags per case = 400 cases.

19) C

Holding cost per case per year = $60 × 25% = $15. Annual demand = 1,600 bags ÷ 4 bags per case = 400 cases. 20) D

1,000 bags of fertilizer equals 1,000 ÷ 5 = 200 cases. Number of orders made in a year = 200 cases per year ÷ 40 cases per order = 5 orders per year. 21) D

Average inventory = 40 ÷ 2 = 20. 22) D

Holding cost per case per year = $50 × 30% = $15. 23) A

Holding cost per bag per year = $50 ÷ 5 × 30% = $3. 24) C

If the order quantity is small, the ordering cost dominates the EOQ cost. 25) D

Holding cost per case per year = $50 × 30% = $15. Annual demand = 2,000 bags ÷ 5 bags = 400 cases. The annual holding and ordering cost = 40 ÷ 2 × $15 + 400 ÷ 40 × $30 = 600. The annual ordering and holding cost per case = 600 ÷ 400 = 1.5. 26) A

Holding cost per bag per year = $80 × 40% = $32.

27) B

Holding cost per bag per year = $80 × 40% = $32. Average inventory = 30 ÷ 2 = 15. 28) C

Holding cost per bag per year = $80 × 40% = $32. Number of orders placed in a year = 60 × 12 ÷ 30 = 24. 29) D

Holding cost per bag per year = $80 × 40% = $32. Annual holding and ordering cost = (30 ÷ 2 × $32) + (20 × 60 × 12 ÷ 30) = $960. 30) C

An increase in order quantity may increase or decrease total annual ordering and holding cost. 31) B

Average inventory = 200 ÷ 2 = 100. 32) B

Annual holding cost per battery = 20% × $75 = $15. Annual holding cost = 200 ÷ 2 × $15 = $1,500. Annual demand = 90 × 50 = 4,500. Annual ordering cost = 4,500 ÷ 200 × $100 = $2,250. Total ordering and holding cost = $1,500 + $2,250 = $3,750. 33) D

Annual holding cost per battery = 20% × $75 = $15. Annual demand = 90 × 50 = 4,500.

34) C

Annual holding cost = 30% × $35 = $10.50 per case. Annual demand = 700 quarts per month × 12 months = 8,400 quarts per year, or 8,400 quarts per year ÷ 12 quarts per case = 700 cases per year.

35) A

Annual holding cost = 30% × $35 = $10.50 per case. Annual demand = 700 quarts per month × 12 months = 8,400 quarts per year, or 8,400 quarts per year ÷ 12 quarts per case = 700 cases per year. Annual holding cost = 103 ÷ 2 × $10.50 = $540.75. Annual ordering cost = 700 ÷ 103 × $80 = $543.69. Total ordering and holding cost = $540.75 + $543.69 = $1,084.44, or $1084 rounded.

36) B

Average inventory = 50 ÷ 2 = 25. 37) C

Annual demand = 700 quarts per month × 12 months = 8,400 quarts per year, or 8,400 quarts per year ÷ 12 quarts per case = 700 cases per year. Number of orders made in a year = 700 cases per year ÷ 50 cases per order = 14 orders per year. 38) C

As demand increases, the sum of ordering and holding costs per period for a given order quantity increases at a rate slower than demand. 39) D

The sum of ordering and holding costs per period becomes a smaller percentage of the purchasing cost as the demand rate increases. 40) C

According to the economic order quantity model, the source of economies of scale in inventory management is the fixed ordering cost. As the order quantity increases, the fixed ordering cost is spread across more units, thereby creating an economy of scale. 41) D

If adding a product to an assortment increases total demand by only a little, then overall profitability could suffer. 42) D

Holding cost per bag per year = $80 × 40% = $32. Annual holding and ordering cost = 10 ÷ 2 × $32 + 80 ÷ 10 × $20 = $320. Annual purchasing cost = 80 × $80 = $6,400. Annual holding and ordering cost as a % of annual purchasing cost = 320 ÷ 6,400 = 5%. 43) A

Holding cost per bag per year = $80 × 40% = $32. Annual holding and ordering cost = (30 ÷ 2 × $32) + (60 × 12 × $20 ÷ 30) = $960. Annual purchasing cost = 60 × 12 × $80 = $57,600. Annual holding and ordering cost as a % of annual purchasing cost = 960 ÷ 57,600 = 1.7%. 44) D

EOQ =

= 30 bags. EOQ when demand is decreased by 10%

= 28.5 bags.

45) C

EOQ when demand is 80 =

= 10. EOQ when demand is 160 =

= 14.1. The % change in EOQ = (14.1 − 10) ÷ 10 = 41%. 46) A

Product substitution refers to the situation when customers are willing to purchase a less preferred version when their most preferred version is not available. 47) D

A decrease in demand rate of a product makes its inventory management less efficient because of an increase in inventory costs relative to purchasing costs. 48) B

If adding variety does not increase total demand significantly, then expanding product variety is not a good idea. 49) B

Economies of scale describes the relationship between operational efficiency and demand. 50) A

A pallet is the quantity of inventory that is stacked on a wooden platform designed to be moved by a forklift. 51) D

Annual holding cost = 30% × $35 = $10.50 per case. Annual demand = 700 quarts per month × 12 months = 8,400 quarts per year, or 8,400 quarts per year ÷ 12 quarts per case = 700 cases per year. Annual holding cost = 75 ÷ 2 × $10.50 = $393.75. Annual ordering cost = 700 ÷ 75 × $80 = $746.67. Total ordering and holding cost = $393.75 + $746.67 = $1,140.42. Annual purchasing cost = 700 × 35 = $24,500. Annual holding and ordering cost as a % of annual purchasing cost = 1,140.42 ÷ 24,500 = 4.7%. 52) C

A fixed ordering cost is a valid assumption (not a complication) of the EOQ model. 54) A

Holding cost per case per year = $50 × 30% = $15. Annual demand = 2,000 bags ÷ 5 bags = 400 cases. EOQ = = 40 cases. The EOQ is infeasible because Company A only has room to hold 25 cases. Therefore, the order quantity should be 25. 55) C

Holding cost per bag per year = $50 ÷ 5 × 30% = $3. EOQ = = 200.7 bags. The EOQ is infeasible because order size has to be an integer multiple of five bags. Therefore, the order quantity to be considered is either 200 bags or 205 bags. Total holding and ordering cost for 200 bags = (200 ÷ 2 × $3) + (2015 ÷ 200 × $30) = $602.25. Total holding and ordering cost for 205 bags = (205 ÷ 2 × $3) + (2015 ÷ 205 × $30) = $602.38. Therefore, the optimal order quantity is 200 bags. 56) A

Holding cost per case per year = $50 × 30% = $15. Annual demand = 2,000 bags ÷ 5 bags = 400 cases. EOQ = = 40 cases. This is feasible because 40 cases is equivalent to 200 bags, an integer multiple of 5 bags. 57) D

Holding cost per case per year = $50 × 30% = $15. Annual demand = 2,000 bags ÷ 5 bags = 400 cases. EOQ = = 40 cases. The EOQ is infeasible because Company A only has room to hold 30 cases. Therefore, the order quantity should be 30. The annual holding and ordering costs = (30 ÷ 2 × $15) + (400 ÷ 30 × $30) = $625. The annual ordering and holding cost per case = $625 ÷ 400 = $1.56.

58) B

EOQ =

= 1,000, which is an integer multiple of 500.

59) A

EOQ = = 200, which is not an integer multiple of 150. Total costs if order is 150 = (150 ÷ 2 × $50) + (100,000 ÷ 150 × $10) = $10,417. Total costs if order is 300 = (300 ÷ 2 × $50) + (100,000 ÷ 300 × $10) = $10,833. Therefore, it is cheaper to order 150 units each time. 60) D

The stackability of the product refers to how high the product can be put on top of another without causing damage to the lower layers. 61) D

The economic order quantity at the regular price is the optimal order quantity only if the order quantity is greater than or equal to the threshold needed for the quantity discount. 62) D

EOQ at the regular price = = 20 units. Total purchasing, holding, and ordering cost when order at EOQ = (120 × $10) + (20 ÷ 2 × $10 × 0.3) + (120 ÷ 20 × $5) = $1,260. To take advantage of the discount, the minimum order quantity = 25. The purchase cost = $10 × (1 − 10%) = $9 per unit. The holding cost = $9 × 30% = $2.70 per unit per year. Total purchasing, holding, and ordering cost when order at 25 units = (120 × $9) + (25 ÷ 2 × $9 × 0.3) + (120 ÷ 25 × $5) = $1,080 + $33.75 + $24 = $1,137.75. Therefore, the optimal order quantity is 25 units. Note: EOQ at the discounted price = therefore be ignored as a possible solution. 63) A

= 21 units is not feasible and can

EOQ at regular price = = 20 units. Total purchasing, holding, and ordering cost when order at EOQ = (120 × $10) + (20 ÷ 2 × $10 × 0.3) + (120 ÷ 20 × $5) = $1,260. To take advantage of the discount, the minimum order quantity = 25. The purchase cost = $10 × (1 − 10%) = $9 per unit. The holding cost = $9 × 30% = $2.70 per unit per year. Total purchasing, holding, and ordering cost when order at 25 units = (120 × $9) + (25 ÷ 2 × $9 × 0.3) + (120 ÷ 25 × $5) = $1080 + $33.75 + $24 = $1,137.75. Therefore, the annual savings are $1,260 – $1,137.75 = $122.25. 64) C

EOQ at regular price = = 20 units. This EOQ is higher than the threshold of 15 units to get the discount. Therefore, the optimal order quantity is the EOQ at the discount price. The holding cost at the discount price = $10 × (1 − 10%) × 30% = $2.70. EOQ at discount price =

= 21 units.

65) C

With an order quantity of 28, the firm receives the discount. The holding cost at the discount price = $10 × (1 − 10%) × 25% = $2.25. The annual holding cost when ordering at 28 units with discount = 28 ÷ 2 × $2.25 = $31.50. 66) B

Annual ordering costs if it orders at 28 units = (15 × 12) ÷ 28 × $5 = $32.14. 67) D

With an order quantity of 28, the firm receives the discount. The holding cost at the discount price = $10 × (1 − 10%) × 25% = $2.25. Annual ordering cost if it orders at 28 units = (15 × 12) ÷ 28 × $5 = $32.14. Annual holding cost when ordering at 28 units with discount = 28 ÷ 2 × $2.25 = $31.50. Annual purchasing cost when ordering at 28 units = (15 × 12) × $9 = $1,620. The total annual cost = $1,620 + $31.50 + $32.14 = $1,683.64, or $1,684. 68) B

EOQ at regular price = = 90. Total purchasing, ordering, and holding cost at 90 = (60 × 12 × $35) + (90 ÷ 2 × $35 × 0.2) + (60 × 12) ÷ 90 × $40) = $25,835. Minimum quantity to get discount = 100. Purchasing cost with discount = $35 × (1 − 20%) = $28. Holding cost per unit per year with discount = 0.2 × $28 = $5.60. EOQ at discount price = = 101. It needs to order at multiple of 100. Therefore, the order quantity should be 100. Total cost at 100 = (60 × 12 × $28) + (100 ÷ 2 × $5.6) + [(60 × 12 ÷ 100) × $40] = $20,728. The optimal order quantity is 100. 69) C

EOQ at regular price = = 90. Total purchasing, ordering, and holding cost at 90 = (60 × 12 × $35) + (90 ÷ 2 × $35 × 0.2) + (60 × 120 ÷ 90 × $40) = $25,835. Minimum quantity to get discount = 100. Purchasing cost with discount = $35 × (1 − 20%) = $28. Holding cost per unit per year with discount = 0.2 × $28 = $5.60. EOQ = = 101. Since the EOQ at the discounted price is feasible, it is also optimal. Total costs at 101 = (60 × 12 × $28) + (101 ÷ 2 × $5.6) + [(60 × 12 ÷ 101) × $40] = $20,728. The optimal order quantity is 101. 70) D

EOQ at regular price = = 90. Total purchasing, ordering, and holding cost at 90 = (60 × 12 × $35) + (90 ÷ 2 × $35 × 0.2) + (60 × 120 ÷ 90 × $40) = $25,835. Minimum quantity to get discount = 100. Purchasing cost with discount = $35 × (1 − 20%) = $28. Holding cost per unit per year with discount = 0.2 × $28 = $5.60. EOQ at discount price = = 101. Total cost at 101 = (60 × 12 × $28) + (101 ÷ 2 × $5.6) + [(60 × 12 ÷ 101) × $40] = $20,728. Total annual savings are $25,835 − $20,728 = $5107. 71) C

With an order quantity of 300, the firm receives the discount. The holding cost at the discount price = $25 × (1 − 20%) × 20% = $4.00. The annual holding cost when ordering at 300 units with discount = 300 ÷ 2 × $4.00 = $600. 72) D

Annual ordering cost if it orders 300 units = (400 × 12) ÷ 300 × $60 = $960. 73) B

With an order quantity of 300, the firm receives the discount. The purchasing cost at the discount price = $25 × (1− 20%) = $20 per unit. Thus, the annual purchasing cost is $20 × 400 × 12 = $96,000. The holding cost at the discount price = $25 × (1 − 20%) × 20% = $4.00 per unit per year. Thus, the annual holding cost when ordering at 300 units with discount = 300 ÷ 2 × $4.00 = $600.00. The annual ordering cost = (400 × 12) ÷ 300 × $60 = $960. Therefore, the total annual cost is $96,000 + $600 + $960 = $97,560.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 856) A critical ratio of 0.7 means there is a 70% chance that demand is less than or equal to the optimal order quantity. ⊚ true ⊚ false 857)

The optimal order quantity that maximizes expected profit is always equal to the mean of the demand distribution. ⊚ true ⊚ false

858)

The in-stock probability cannot be greater than the critical ratio. ⊚ true ⊚ false

859)

Expected profit is a direct measure of how well a company serves its customers. ⊚ true ⊚ false

860)

A newsvendor earns a high percentage of the maximum profit if its critical ratio is close to one. ⊚ true ⊚ false

861)

A make-to-order system is more suitable if leftover inventory is expensive for the product. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 862) Bakery A sells bread for $2 per loaf that costs $0.50 per loaf to make. Bakery A gives a 70% discount for its bread at the end of the day. What is the salvage value of its bread? A) $2.00 B) $0.60 C) $0.50 D) $0.10

863)

Which of the following is a plot of the density function of a normal distribution?

864)

The __________ function returns the __________ that a particular outcome occurs. A) density, frequency B) density, probability C) distribution, probability D) distribution, frequency

865)

A wide and short density function has a large __________ relative to the __________. A) mean, standard deviation B) mean, outcome C) standard deviation, mean D) standard deviation, median

866)

The __________ function provides the probability that an uncertain outcome is at a certain level or __________. A) density, lower B) distribution, lower C) density, higher D) distribution, higher

867)

Which of the following is a plot of the distribution function of a normal distribution?

868)

Demand is modeled with a normal distribution that has a mean of 300 and a standard deviation of 50. What is the probability that demand is 400 or less? Use Table 13.4. A) 97.7% B) 95.4% C) 47.7% D) 2.3%

869)

Demand is modeled with a normal distribution that has a mean of 300 and a standard deviation of 50. What is the probability that demand is 400 or more? Use Table 13.4. A) 97.7% B) 95.4% C) 47.7% D) 2.3%

870)

Demand is modeled with a normal distribution that has a mean of 300 and a standard deviation of 50. What is the probability that demand is between 200 and 400? Use Table 13.4. A) 97.7% B) 95.4% C) 47.7% D) 2.3%

871)

The inputs to the newsvendor model include all of the following EXCEPT __________. A) underage cost B) overage cost C) fixed cost D) demand forecast

872)

The ___________ is the cost of ordering one unit ___________. A) underage cost, exactly B) overage cost, exactly C) underage cost, too few D) overage cost, too few

873)

The ___________ is the cost of ordering one unit ___________. A) underage cost, exactly B) overage cost, exactly C) underage cost, too many D) overage cost, too many

874)

Bakery A sells bread for $2 per loaf that costs $0.50 per loaf to make. Bakery A gives an 80% discount for its bread at the end of the day. What is the overage cost? A) $1.50 B) $0.50 C) $0.40 D) $0.10

875)

Bakery A sells bread for $2 per loaf that costs $0.50 per loaf to make. Bakery A gives an 80% discount for its bread at the end of the day. What is the underage cost? A) $1.50 B) $0.50 C) $0.40 D) $0.10

876)

Bakery A sells bread for $2 per loaf that costs $0.80 per loaf to make. Bakery A gives a 75% discount for its bread at the end of the day. What is the critical ratio? A) 0.80 B) 0.71 C) 0.29 D) 0.20

877)

Bakery A sells bread for $2 per loaf that costs $0.80 per loaf to make. Bakery A gives a 75% discount for its bread at the end of the day. Demand for the bread is normally distributed with a mean of 300 and a standard deviation of 30. Using Excel, what order quantity maximizes expected profit for Bakery A? A) 325.25 B) 324.00 C) 306.00 D) 300.17

878)

Which of the following statement is TRUE regarding the optimal order quantity that maximizes expected profit? A) It always is equal to the mean of the demand distribution. B) It is a balance between the salvage value and the overage cost. C) It is a balance between the underage cost and overage cost. D) More should be ordered when the overage cost exceeds the underage cost.

879)

A donut shop sells specialty donuts for $1 each that cost $0.30 each to make. The shop gives a 60% discount for its donuts at the end of the day. What is the salvage value of each donut? A) $0.12 B) $0.40 C) $0.60 D) $1.00

880)

Suppose the critical ratio is F(Q*) = 0.65. Which of the following interpretations is FALSE? A) At the optimal order quantity, there is 65% probability of meeting all demand. B) At the optimal order quantity, there is 35% probability of not meeting all demand. C) At the optimal order quantity, there is 65% probability of not meeting all demand. D) At the optimal order quantity, expected profit is maximized.

881)

A souvenir store sells New Year’s Eve sweatshirts with the year and a slogan printed on them for $25 each. The sweatshirts cost $12 each to purchase from their supplier. Demand for the sweatshirts is normally distributed with a mean of 250 and a standard deviation of 40. The week after New Year’s, unsold shirts are donated free to a local Goodwill store. The souvenir store receives a tax refund (credit) of $5 for every sweatshirt that it donates. What is the overage cost? A) $5 B) $7 C) $12 D) $13

882)

883)

884)

A souvenir store sells New Year’s Eve sweatshirts with the year and a slogan printed on them for $25 each. The sweatshirts cost $12 each to purchase from their supplier. Demand for the sweatshirts is normally distributed with a mean of 250 and a standard deviation of 40. The week after New Year’s, unsold shirts are donated free to a local Goodwill store. The souvenir store receives a tax refund (credit) of $5 for every sweatshirt that it donates. Using Excel, what order quantity maximizes the expected profit for the souvenir store? A) 234.59 B) 250.00 C) 265.41 D) 298.75

885)

Which of the following is NOT a performance measure of the newsvendor model that you learned in this chapter? A) Expected sales B) Expected supply C) In-stock probability D) Stockout probability

886)

Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 150 and a standard deviation of 60. What is its expected inventory if Store A’s order quantity is 90 units? A) 5 B) 10 C) 50 D) 65

887)

Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 200. What are expected sales for Store A if the order quantity is 400 units? Use Table 13.4 A) 260 B) 262 C) 340 D) 360

888)

Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 250. Store A purchases the product for $10 each unit and sells each for $30. Inventory is salvaged for $5. What is its expected profit if Store A’s order quantity is 400 units? Use Table 13.4. A) $4,063 B) $6,560 C) $8,560 D) $10,560

889)

Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. What is its in-stock probability if Store A’s order quantity is 800 units? Use Table 13.4 A) 97.7% B) 84.1% C) 15.9% D) 2.3%

890)

Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. What is its stockout probability if Store A’s order quantity is 800 units? A) 97.7% B) 84.1% C) 15.9% D) 2.3%

891)

Which of the following shows the trade-off between expected profit (y-axis) and in-stock probability (x-axis)?

892)

Which of the following statements is FALSE regarding in-stock probability? A) In-stock probability is equal to the critical ratio when expected profit is maximized. B) In-stock probability is greater than the critical ratio when expected profit is maximized. C) In-stock probability is a measure of customer service. D) In-stock probability has a value between 0 and 1.

893)

Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. Store A purchases the product for $10 each unit and sells each for $30. Inventory is salvaged for $5. What is its expected profit if Store A’s order quantity is 525 units? A) $10,000 B) $7,815 C) $7,185 D) $2,815

894)

A souvenir store sells New Year’s Eve sweatshirts with the year and a slogan printed on them. Demand for the sweatshirts is normally distributed with a mean of 250 and a standard deviation of 40. What is the expected inventory if the souvenir store’s order quantity is 230 sweatshirts? A) 7.9 B) 25.0 C) 27.9 D) 47.9

895)

896)

897)

898)

A souvenir store sells New Year’s Eve sweatshirts with the year and a slogan printed on them. Demand for the sweatshirts is normally distributed with a mean of 250 and a standard deviation of 40. What is the in-stock probability if the souvenir store orders 262 sweatshirts? A) 38.2% B) 54.8% C) 58.6% D) 61.8%

899)

A souvenir store sells New Year’s Eve sweatshirts with the year and a slogan printed on them. Demand for the sweatshirts is normally distributed with a mean of 250 and a standard deviation of 40. What is the stockout probability if the souvenir store orders 262 sweatshirts? A) 38.2% B) 54.8% C) 58.6% D) 61.8%

900)

Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. How many units should be ordered to achieve a 99.7% in-stock probability? Use Table 13.4. A) 1,310 B) 1,340 C) 1,650 D) 1,695

901)

Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. Store A purchases the product for $10 each unit and sells each for $20. Inventory is salvaged for $5. Which of the following statements is TRUE if Store A increases its in-stock probability from 98% to 99%? A) Expected profit decreases. B) Order quantity decreases. C) Order quantity remains unchanged. D) Expected profit increases.

902)

Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. Store A purchases the product for $10 each unit and sells each for $20. Inventory is salvaged for $5. Which of the following statements is TRUE if Store A increases its in-stock probability from 98% to 99%? A) Expected inventory increases. B) Order quantity remains the same. C) Order quantity decreases. D) Expected inventory decreases.

903)

A souvenir store sells New Year’s Eve sweatshirts with the year and a slogan printed on them. Demand for the sweatshirts is normally distributed with a mean of 250 and a standard deviation of 40. How many sweatshirts should be ordered to achieve a 90% in-stock probability? Use Table 13.4. A) 198 B) 302 C) 324 D) 370

904)

Which of the following is most likely the density function of demand for products with a coefficient of variation above one, i.e., an extreme amount of variability?

905)

Demand for a company’s product is normally distributed with a mean of 50 and a standard deviation of 10. What is the coefficient of variation of its demand forecast? A) 0.2 B) 5 C) 10 D) 50

906)

Among the four products given below, which is most likely to have the lowest mismatch costs expressed as a percentage of maximum profit? Product

Mean of demand

A B C D

500 300 600 400

A) B) C) D)

Standard deviation of demand 300 100 500 200

Critical ratio 0.6 0.7 0.4 0.5

Product A Product B Product C Product D

907)

The relative consequence of mismatch costs in the newsvendor model is small if demand uncertainty is __________ or critical ratio is __________. A) high, high B) high, low C) low, low D) low, high

908)

909)

Mismatch costs are the difference between the __________ and __________ in the newsvendor model. A) maximum profit, expected profit B) maximum profit, expected sales C) minimum profit, expected profit D) minimum profit, expected sales

910)

Mismatch costs are the sum of the costs of __________ and __________. A) stockouts, work-in-process inventory B) stockouts, leftover inventory C) overstock, leftover inventory D) overstock, work-in-process inventory

911)

Expected profit __________ as the coefficient of variation __________. A) increases, stays the same B) decreases, increases C) decreases, decreases D) stays the same, increases

912)

Expected profit __________ as the critical ratio __________. A) increases, stays the same B) decreases, increases C) decreases, decreases D) stays the same, increases

913)

Maximum profit is computed as the product of __________ and __________. A) expected demand, profit per unit sold B) actual demand, unit selling price C) expected demand, unit selling price D) actual demand, profit per unit sold

914)

Which of the following graphs shows the relationship between expected profit in the newsvendor model (y-axis) and standard deviation of demand (x-axis)?

D) 915)

Coefficient of variation is the ratio of the __________ to the __________. A) maximum profit, expected demand B) standard deviation of demand, expected demand C) maximum profit, expected profit D) standard deviation of demand, expected profit

916)

The two factors which influence mismatch costs are __________ and __________. A) critical ratio, coefficient of correlation of demand B) critical ratio, coefficient of variation of demand C) overage cost, coefficient of correlation of demand D) overage cost, coefficient of variation of demand

917)

Which of the following statements is TRUE regarding the coefficient of variation of demand? A) It is an absolute measure of demand uncertainty. B) Its value is always between −1 to 1. C) Its value is always greater than or equal to 0. D) Its value is always between 0 and 1.

918)

Among the four products given below, which is most likely to have the lowest mismatch costs expressed as a percentage of maximum profit? Product

Mean of demand

A B C D

250 300 300 200

A) B) C) D)

Standard deviation of demand 150 250 120 100

Critical ratio 0.5 0.3 0.6 0.4

Product A Product B Product C Product D

919)

Which of the following is NOT a way to manage a newsvendor product that has substantial mismatch costs? A) Increase underage costs relative to overage costs B) Reduce demand uncertainty C) Pool similar products D) Increase product variety

920)

__________ is a statistical measure of the interaction between two uncertain events. A) Variation B) Range C) Standard deviation D) Correlation

921)

Two events are __________ if when the outcome of one event is high, then the outcome of the other event is also high. A) positively correlated B) uncorrelated C) negatively correlated D) independent

922)

Which of the following is TRUE about correlation? A) Correlation has a value in between zero and one. B) Two independent events will have a zero correlation. C) Product pooling is most effective if the correlation between two products is one. D) A product with a high demand uncertainty has a high correlation.

923)

The capability to respond to updated __________ information is called __________ response. A) supply, slow B) supply, quick C) demand, quick D) demand, slow

924)

The capacity that allows a firm to react to changes in its __________ is called __________ capacity. A) demand forecast, proactive B) demand forecast, reactive C) supply forecast, proactive D) supply forecast, reactive

925)

Which of the following statements is FALSE regarding a make-to-order system? A) It is the opposite of mass customization. B) The production of a unit begins only after its demand is known. C) It does not have leftover inventory. D) It helps to reduce mismatch costs.

926)

Product pooling __________ demand across correlated products to __________ coefficient of variation, thereby reducing mismatch costs. A) aggregates, increase B) aggregates, decrease C) segregates, increase D) segregates, decrease

927)

928)

Product pooling is more effective with products whose demands are __________. A) positively correlated B) uncorrelated C) negatively correlated D) known in advance

__________ is an effective strategy to manage mismatch costs by increasing the __________ of a firm’s production process. A) Quick response, variability B) Pooling, variability C) Quick response, flexibility D) Pooling, flexibility

929)

Make-to-order systems are most effective in environments with the following characteristics, EXCEPT those in which __________. A) critical ratio is high B) critical ratio is low C) customers prefer variety D) customers are willing to wait

930)

The heating cost for homes tends to increase as the outdoor temperature decreases. Therefore, we can conclude that heating cost and outdoor temperature are __________. A) positively correlated B) uncorrelated C) negatively correlated D) independent

Answer Key Test name: chapter 13 1) TRUE

A critical ratio of 0.7 means there is a 70% chance that demand will be less than or equal to the optimal order quantity. 2) FALSE

The optimal order quantity that maximizes expected profit is rarely the mean of the demand distribution. 3) FALSE

In-stock probability can be greater than the critical ratio if the order quantity is larger than the optimal quantity that maximizes expected profit. 4) FALSE

Expected profit measures how much a company earns but not how well a company serves its customers. 5) TRUE

A high critical ratio means overage cost is negligible compared to underage cost. Expected sales equal expected demand. Total profit is not reduced by much by leftover inventory and therefore the newsvendor earns a high percentage of the maximum profit. 6) TRUE

If leftover inventory is expensive, then the critical ratio is low, which makes a make-to-order system more suitable. 7) B

Salvage value is the value that can be obtained per unit for inventory at the end of the selling period. For Bakery A, the salvage value of its bread is $2 × (1 − 70%) = $0.60. 8) D

The density function for a normal distribution is a bell-shaped curve. 9) B

The density function returns the probability that a particular outcome occurs. 10) C

A wide and short density function has a large standard deviation relative to the mean. 11) B

The distribution function provides the probability that an uncertain outcome is a certain level or lower. 12) A

The distribution function of the normal distribution is an "S"-shaped curve. 13) A

The z-value = (400 − 300) ÷ 50 = 2. Look up z in Table 13.4. Or use Excel’s NORM.S.DIST(2,TRUE). The probability of z ≤ 2 is 97.7%. 14) D

The z-value = (400 − 300) ÷ 50 = 2. Look up z of 2 in Table 13.4. Or use Excel’s NORM.S.DIST(2,TRUE). The probability that demand is 400 or less is 0.9772. Subtract this result from 1 to get the probability of z ≥ 2, which is 2.3%. 15) B

Convert each demand value to a z value. The first z value = (200 − 300) ÷ 5 = −2 and the second z value = (400 − 300) ÷ 2 = 2. To find the probability of −2 ≤ Z ≤ 2, use Table 13.4. P(z ≤ 2) – P(z ≤ −2) = 97.7% − 2.3% = 95.4%. Or use Excel, NORM.S.DIST(2,TRUE)NORM.S.DIST(−2,TRUE) = 0.9545 or 95.45%. 16) C

The three key inputs to the newsvendor model include overage cost, underage cost, and demand forecast. 17) C

The underage cost is the cost of ordering one unit too few. 18) D

The overage cost is the cost of ordering one unit too many. 19) D

The salvage value is $2 × (1 − 0.8) = $0.40. The loss of making one too many = $0.50 − $0.40 = $0.10. 20) A

Making one too few means not earning the profit of one loaf of bread = $2 − $0.50 = $1.50. 21) A

Salvage value = $2 × (1 − 75%) = $0.50. Overage cost = $0.80 − $0.50 = $0.30. Underage cost = $2 − $0.80 = $1.20. The critical ratio = 1.2 ÷ (1.2 + 0.3) = 0.8. 22) A

Salvage value = $2 × (1 − 75%) = $0.50. Overage cost = $0.80 − $0.50 = $0.30. Underage cost = $2 − $0.80 = $1.20. The critical ratio = 1.2 ÷ (1.2 + 0.3) = 0.8. z = NORM.S.INV(0.8) = 0.8416. Order quantity = µ + zσ = 300 + (0.8416 × 30) = 325.25. 23) C

The optimal order quantity that maximizes expected profit is a balance between the underage cost and overage cost. 24) B

Salvage value is the value that can be obtained per unit for inventory at the end of the selling period. The salvage value of each donut is $1 × (1 − 60%) = $0.40. 25) C

If the critical ratio is F(Q*) = 0.65, there is a 0.65 = 65% probability of meeting all demand at the optimal order quantity and, therefore, a 35% probability of not meeting all demand. It is also the order quantity which maximizes expected profit. 26) B

The salvage value is $5. The loss of ordering one too many = $12 − $5 = $7. 27) D

Making one too few means not earning the profit of one sweatshirt = $25 − $12 = $13. 28) A

Salvage value = $5. Overage cost = $12 − $5 = $7. Underage cost = $25 − $12 = $13. The critical ratio = 13 ÷ (7 + 13) = 0.65. 29) C

Salvage value = $5. Overage cost = $12 − $5 = $7. Underage cost = $25 − $12 = $13. The critical ratio = 13 ÷ (7 + 13) = 0.65. z = NORM.S.INV(0.65) = 0.3853. Order quantity = µ + zσ = 250 + (0.3853 × 40) = 265.41. 30) B

There are five performance measures of the newsvendor model: expected inventory, expected sales, expected profit, in-stock probability, and stockout probability. 31) A

z = (90 − 150) ÷ 60 = −1. Use Table 13.4 to find I(z = −1) = 0.0833. Expected inventory = σ × I(z) = 60 × 0.0833 = 5. 32) D

z = (400 − 500) ÷ 200 = −0.5. Use Table 13.4 to find I(z = −0.5) = 0.1978. Expected inventory = σ × I(z) = 200 × 0.1978 = 40. Expected sales = Order quantity − Expected inventory = 400 − 40 = 360. 33) B

z = (400 − 500) ÷ 250 = −0.4. Use Table 13.4 to find I(z = −0.4) = 0.2304. Expected inventory = σ × I(z) = 250 × 0.2304 = 57.6. Expected sales = Order quantity − Expected inventory = 400 − 57.6 = 342.4. Expected profit = (Price × Expected sales) + (Salvage value × Expected inventory) − (Cost × Order quantity) = ($30 × 342.4) + ($5 × 57.6) − ($10 × 400) = $6,560. 34) B

z = (800 − 500) ÷ 300 = 1. Using Table 13.4, the probability of z ≤ 1 is 84.1%. This is the instock probability. Or use Excel’s NORM.S.DIST(1,TRUE) = 0.8413 = 84.1%. 35) C

z = (800 − 500) ÷ 300 = 1. Using Table 13.4, the probability of z ≤ 1 is 84.1%. This is the instock probability. Stockout probability is the probability of z ≥ 1 = 1 − 84.1% = 15.9%. 36) D

The trade-off between expected profit and in-stock probability is relatively flat at the top with a sharp drop when in-stock probability is close to 100%. 37) B

It is false that the in-stock probability is greater than the critical ratio when expected profit is maximized. 38) C

z = (525 − 500) ÷ 300 = 0.083. Use I(z) = NORM.S.DIST(0.083,False) + [0.083 × NORM.S.DIST(0.083,true)] = 0.44. Expected inventory = 300 × 0.44 = 132.6. Expected sales = Order quantity - Expected inventory = 525 − 132.6 = 392.4. Expected profit = (Price × Expected sales) + (Salvage value × Expected inventory) − (Cost × Order quantity) = ($30 × 392.4) + ($5 × 132.6) − ($10 × 525) = 7,185. 39) A

z = (230 − 250) ÷ 40 = −0.5. Use Table 13.4 to find I(z = −0.5) = 0.1978. Expected inventory = σ × I(z) = 40 × 0.1978 = 7.9. 40) C

z = (270 − 250) ÷ 40 = 0.5. Use Table 13.4 to find I(z = 0.5) = 0.6978. Expected inventory = σ × I(z) = 40 × 0.6978 = 27.9. 41) C

z = (230 − 250) ÷ 40 = −0.5. Use Table 13.4 to find I(z = −0.5) = 0.1978. Expected inventory = σ × I(z) = 40 × 0.1978 = 7.9. Expected sales = Order quantity − Expected inventory = 230 − 7.9 = 222.1. Expected profit = (Price × Expected sales) + (Salvage value × Expected inventory) − (Cost × Order quantity) = ($25 × 222.1) + ($5 × 7.9) − ($12 × 230) = $2,832. 42) B

z = (294 − 250) ÷ 40 = 1.1. Use Table 13.4 to find I(z = 1.1) = 1.1686. Expected inventory = σ × I(z) = 40 × 1.1686 = 46.7. Expected sales = Order quantity − Expected inventory = 294 − 46.7 = 247.3. Expected profit = (Price × Expected sales) + (Salvage value × Expected inventory) − (Cost × Order quantity) = ($25 × 247.3) + ($5 × 46.7) − ($12 × 294) = $2,888. 43) D

z = (262 − 250) ÷ 40 = 0.3. Using Table 13.4, the probability of z ≤ 0.3 is 61.8%. This is the instock probability. Or use Excel’s NORM.S.DIST(0.3,TRUE) = 0.6179 = 61.8%. 44) A

z = (262 − 250) ÷ 40 = 0.3. Using Table 13.4, the probability of z ≤ 0.3 is 61.8%. This is the instock probability. Stockout probability is the probability of z ≥ 0.3 = 1 − 61.8% = 38.2%. 45) B

Use Table 13.4 to find the z which has probability most closely associated with 99.7%. Or use Excel’s NORM.S.INV(0.997). The z value for 0.997 is 2.748 (from Excel) or 2.8 (Table 13.4). Order quantity = µ + zσ = 500 + (2.8 × 300) = 1,340.

46) A

Order quantity increases as in-stock probability increases. The critical ratio is 10 ÷ (5 + 10) = 0.67. An in-stock probability of 0.98 is greater than the critical ratio. Therefore, expected profit decreases when in-stock probability increases from 98% to 99%. 47) A

As in-stock probability increases, order quantity increases, which leads to an increase in expected inventory. 48) B

Use Table 13.4 to find the z which has probability closest to 90%. The z value for 0.90 is 1.3. Thus, the order quantity = µ + zσ = 250 + (1.3 × 40) = 302. 49) C

Products with a coefficient of variation above 1 have a high chance of low demand and a small chance of high demand. 50) A

Coefficient of variation = Standard deviation ÷ Mean = 10 ÷ 50 = 0.2. 51) B

Product B has the highest critical ratio (0.7) and the lowest coefficient of variation (100 ÷ 300 = 0.33). Therefore, it is most likely to have the lowest mismatch costs. 52) D

The relative consequence of mismatch costs in the newsvendor model is small if demand uncertainty is low or critical ratio is high. 53) C

Maximum profit = Expected demand × (Price − Cost) = 500 × ($25 − $10) = $7,500. 54) A

The difference between maximum profit and expected profit is the mismatch costs in the newsvendor model. 55) B

The total of mismatch costs is the costs of stockouts and leftover inventory. 56) B

Expected profit decreases as the coefficient of variation increases. 57) C

Expected profit decreases as the critical ratio decreases. 58) A

Maximum profit is computed as the product of expected demand and profit per unit sold. 59) B

As demand uncertainty increases (or higher standard deviation of demand), expected profit in the newsvendor model decreases. 60) B

Coefficient of variation is the ratio of the standard deviation of demand to expected demand. 61) B

The factors that influence mismatch costs are critical ratio and coefficient of variation of demand. 62) C

Coefficient of variation of demand is a measure of the demand uncertainty relative to expected demand. A product for a niche market may have a coefficient of variation above 1. 63) C

Product C has the highest critical ratio (0.6) and the lowest coefficient of variation (120 ÷ 300 = 0.4). Therefore, it is most likely to have the lowest mismatch costs. 64) D

Increasing product variety will increase total demand uncertainty, so it is not a way to manage mismatch costs. 65) D

Correlation is a statistical measure of the interaction between two uncertain events. 66) A

Two events are positively correlated if when the outcome of one event is high, then the outcome of the other event is also high. 67) B

If two events are independent, their correlation is zero.

68) C

The capability to respond to updated demand information is called quick response. 69) B

The capacity that allows a firm to react to changes in its demand forecast is called reactive capacity. 70) A

Mass customization is the extreme form of make-to-order systems. 71) B

Product pooling aggregates demand across correlated products to decrease coefficient of variation, thereby reducing mismatch costs. 72) C

Product pooling is more effective if the demands of the products are negatively correlated. 73) C

Quick response is an effective strategy to manage mismatch costs by increasing the flexibility of a firm's production process. 74) A

When the critical ratio is high, leftover inventory is relatively cheap to hold, which reduces the effectiveness and necessity of make-to-order systems. 75) C

Two events (variables) are negatively correlated if when the outcome of one event (e.g., temperature) is low, then the outcome of the other event (e.g., heating cost) is high.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 931) The actual demand for an order-up-to product is the same in every period. ⊚ true ⊚ false 932)

Inventory position cannot drop below the order-up-to level. ⊚ true ⊚ false

933)

The expected on-order inventory depends on expected demand during the lead time only. ⊚ true ⊚ false

934)

The relationship between in-stock probability and the expected number of periods before the first period with a stockout is linear. ⊚ true ⊚ false

935)

A firm with a high in-stock probability for its product is considering paying for air shipments rather than ground shipments. The higher shipping costs could be justified if the firm is able to compensate for the increased shipping cost with reduced inventory holding costs. ⊚ true ⊚ false

936)

Demand variability does not affect on-order inventory. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 937) For which of the following products will it be most suitable to use the order-up-to model to manage its inventory? A) Designer handbags B) Laundry detergents C) Newspapers D) Halloween costumes 938)

Which of the following does not apply to the order-up-to model? A) Replenishment orders are received after a fixed amount of time. B) Lead time is dependent on order quantity. C) Each period’s demand is represented by the same distribution function. D) There is no limit on the quantity that can be ordered within a period.

939)

The time between two ordering opportunities for an order-up-to product is called a _________ and it has a _________ duration. A) lead time, fixed B) period, variable C) lead time, variable D) period, fixed

940)

Which of the following is TRUE regarding the order-up-to model? A) Each period’s demand cannot exceed available inventory. B) Backordering happens when demand is less than available inventory. C) Supply is not capacity constrained. D) Opportunities to order replenishment inventory occur at random intervals.

941)

_________ inventory is the number of units ordered in previous periods which has not yet been received and, therefore, is _________ to serve demand. A) On-hand, unavailable B) On-hand, available C) On-order, unavailable D) On-order, available

942)

There are 50 boxes of cereal in inventory before demand occurs. Demand in the period is 80 boxes. This means at the end of the period, on-hand inventory is _________ boxes and the backorder is _________ boxes. A) 50, 0 B) 50, 30 C) 0, 0 D) 0, 30

943)

Which of the following is the way inventory position is calculated? A) On-order inventory − On-hand inventory − Backorder B) On-order inventory + On-hand inventory + Backorder C) On-order inventory + On-hand inventory − Backorder D) On-order inventory − On-hand inventory + Backorder

944)

The _________ is the desired inventory position after an order is _________. A) order-up-to level, received B) order-up-to level, submitted C) order quantity, received D) order quantity, submitted

945)

Which of the following is a push system? A) Newsvendor model B) Order-up-to model C) Kanban system D) Bucket brigade

946)

Which of the following is NOT a characteristic of a pull system? A) It is most effective if demand is represented by the same distribution function in every period. B) It is most effective in preventing excessive buildup of inventory. C) It initiates production only when demand of another unit occurs. D) It is good at anticipating shifts in future demand.

947)

A firm chooses an order-up-to level of 10 units. At the start of this week there are 5 units in inventory and 1 unit on order. No units are on backorder. How much should be ordered this week? A) 10 B) 6 C) 5 D) 4

948)

A firm chooses an order-up-to level of 80 units. At the start of this week there are no onhand units, 20 on-order units, and 5 backordered units. How much should be ordered this week? A) 5 B) 15 C) 65 D) 80

949)

A _________ distribution is suitable for modeling demand with a mean of _________ or less. A) normal, 100 B) normal, 20 C) Poisson, 100 D) Poisson, 20

950)

Which of the following regarding the order-up-to level is FALSE? A) It is the desired inventory position after an order is submitted. B) It is the sum of the beginning inventory position and the order quantity in a particular period. C) It is the order quantity which maximizes expected profit. D) It is a value that is selected by the user of the order-up-to model.

951)

There are 100 boxes of cereal in inventory before demand occurs. Demand in the period is 60 boxes. This means at the end of the period, on-hand inventory is _________ boxes and the backorder is _________ boxes. A) 40, 0 B) 0, 60 C) 60, 0 D) 60, 40

952)

A firm chooses an order-up-to level of 55 units. At the start of this week there are 20 units in inventory and 25 units on order. No units are on backorder. How much should be ordered this week? A) 5 B) 10 C) 45 D) 55

953)

A firm chooses an order-up-to level of 135 units. At the start of this week there are 30 onhand units, 45 on-order units, and 15 backordered units. How much should be ordered this week? A) 15 B) 60 C) 75 D) 135

954)

Which of the following is NOT a performance measure of the order-up-to model? A) Expected on-hand inventory B) Expected on-order inventory C) Expected gross margin D) Stockout probability

955)

A product’s demand over (L + 1) periods follows a normal distribution with mean of 100 and standard deviation of 50. The order-up-to level is 125. What is the expected on-hand inventory? Use Table 14.1. A) 125.10 B) 100.42 C) 34.89 D) 31.52

956)

A product’s demand over (L + 1) periods follows a Poisson distribution with mean of 0.6. The order-up-to level is 4. What is the expected on-hand inventory? Use Table 14A.2. A) 2.4 B) 3.4 C) 4.4 D) 5.4

957)

A product’s demand over (L + 1) periods follows a normal distribution with mean of 80 and standard deviation of 20. The order-up-to level is 100. What is the in-stock probability? Use Table 14.1. A) 1 B) 0.8413 C) 0.5987 D) 0.3413

958)

A product’s demand over (L + 1) periods follows a Poisson distribution with mean of 3.2. The order-up-to level is 5. What is the stockout probability? Use Table 14A.2. A) 0.8946 B) 0.7355 C) 0.2645 D) 0.1054

959)

Which of the following comparisons between the order-up-to model and the newsvendor model is TRUE? A) Both models sell leftover inventory at a discounted price. B) Both models allow the decision maker to order inventory many times. C) The newsvendor model should be applied when demand is uncertain and the orderup-to model should be applied when demand is constant. D) The decision maker chooses the order-up-to level in the order-up-to model and the order quantity in the newsvendor model.

960)

A product’s demand per period follows a Poisson distribution with mean of 0.50. The lead time is 3 periods and the order-up-to level is 4. What is the expected on-order inventory? A) 0.5 B) 1.0 C) 1.5 D) 2.0

961)

A product’s demand in each period follows a normal distribution with mean of 60 and standard deviation of 10. The order-up-to level is 200 and the lead time is 2 periods. What is the expected on-order inventory? A) 400 B) 120 C) 60 D) 20

962)

963)

A product’s demand in each period follows a normal distribution with mean of 60 and standard deviation of 10. The order-up-to level is 200 and the lead time is 2 periods. What is its stockout probability? Use Table 14.1. A) 1 B) 0.885 C) 0.115 D) 0

964)

A product’s demand per period follows a Poisson distribution with mean of 0.55. The lead time is 3 periods and the order-up-to level is 4. What is its expected on-hand inventory? Use Table 14A.2. A) 3.45 B) 2.91 C) 2.39 D) 1.91

965)

A product’s demand per period follows a Poisson distribution with mean of 0.55. The lead time is 3 periods and the order-up-to level is 4. What is its stockout probability? Use Table 14A.2. A) 99.97% B) 92.75% C) 7.25% D) 0.03%

966)

A product’s demand over (L + 1) periods follows a normal distribution with mean of 700 and standard deviation of 250. The order-up-to level is 925. What is the expected on-hand inventory? Use Table 14.1. A) 125.1 B) 148.6 C) 204.0 D) 250.1

967)

A product’s demand over (L + 1) periods follows a Poisson distribution with mean of 2.8. The order-up-to level is 7. What is the expected on-hand inventory? Use Table 14A.2. A) 4.21 B) 2.8 C) 1.4 D) 0.9919

968)

A product’s demand over (L + 1) periods follows a normal distribution with mean of 700 and standard deviation of 250. The order-up-to level is 925. What is the stockout probability? Use Table 14.1. A) 6.24% B) 18.41% C) 24.62% D) 81.59%

969)

A product’s demand over (L + 1) periods follows a Poisson distribution with mean of 2.8. The order-up-to level is 7. What is the stockout probability? UseTable 14A.2. A) 0.81% B) 4.21% C) 95.79% D) 99.19%

970)

A product’s demand per period follows a Poisson distribution with mean of 6. The lead time is 4 periods and the order-up-to level is 10. What is the expected on-order inventory? A) 4 B) 6 C) 24 D) 32

971)

A product’s demand in each period follows a normal distribution with mean of 250 and standard deviation of 75. The order-up-to level is 400 and the lead time is 3 periods. What is the expected on-order inventory? A) 1,200 B) 750 C) 225 D) 200

972)

A product’s demand in each period follows a normal distribution with mean of 120 and standard deviation of 60. The order-up-to level is 732 and the lead time is 3 periods. What is the expected on-hand inventory? Use Table 14.1. A) 24 B) 118 C) 176 D) 253

973)

A product’s demand in each period follows a normal distribution with mean of 120 and standard deviation of 60. The order-up-to level is 732 and the lead time is 3 periods. What is its stockout probability? Use Table 14.1. A) 0.36% B) 1.79% C) 2.11% D) 98.21%

974)

A product’s demand per period follows a Poisson distribution with mean of 0.76. The lead time is 4 periods and the order-up-to level is 7. What is its expected on-hand inventory? Use Table 14A.2. A) 0.9599 B) 3.26 C) 6.24 D) 16.30

975)

A product’s demand per period follows a Poisson distribution with mean of 0.76. The lead time is 4 periods and the order-up-to level is 7. What is its stockout probability? Use Table 14A.2. A) 3.26% B) 4.01% C) 10.38% D) 95.99%

976)

Expected on-order inventory is also known as _________ inventory. A) in-stock B) seasonal C) pipeline D) target

977)

A product’s demand per period follows a Poisson distribution with mean of 0.5. The lead time is 3 periods. What order-up-to level should be used to achieve at least a 95% in-stock probability? Use Table 14A.2. A) 2 B) 3 C) 4 D) 5

978)

Firm A’s demand for its product per period follows a Poisson distribution with mean of 0.8. The lead time is 2 periods. Firm A wants at least a 0.97 in-stock probability. What is its order-up-to level? Use Table 14A.2. A) 2 B) 3 C) 4 D) 6

979)

Firm B’s demand for its product per period follows a Poisson distribution. The lead time is 2 periods. Firm B wants at least a 0.95 in-stock probability. What is its order-up-to level if average demand is 0.4 unit per period? Use Table 14A.2. A) 5 B) 3 C) 2 D) 1

980)

A product’s demand per period follows a normal distribution with mean of 60 and standard deviation of 10. The lead time is 2 periods. What order-up-to level should be used to achieve at least a 95% in-stock probability? Use Table 14.1. A) 77 B) 137 C) 149 D) 209

981)

A product’s demand per period follows a normal distribution with mean of 60 and standard deviation of 10. The lead time is 2 periods. What will happen to its order-up-to level if the in-stock probability is increased from 95% to 99%? A) It will increase. B) It will decrease. C) It will remain the same. D) It may be increased or decreased.

982)

A product’s demand per period follows a normal distribution with mean of 60 and standard deviation of 10. Its in-stock probability is 95%. What will happen to its order-up-to level if the lead time is increased from two to four periods? A) It will increase. B) It will decrease. C) It will remain the same. D) It may be increased or decreased.

983)

Firm C’s demand for its product per period follows a Poisson distribution. The lead time is 2 periods. Firm C wants at least a 0.95 in-stock probability. What is its order-up-to level if average demand is 0.8 unit per period? Use Table 14A.2. A) 5 B) 3 C) 2 D) 1

984)

A product’s demand per period follows a Poisson distribution with mean of 0.76. The lead time is 4 periods. What order-up-to level should be used to achieve at least a 97% instock probability? Use Table 14A.2. A) 6 B) 7 C) 8 D) 9

985)

A product’s demand over (L + 1) periods is normally distributed with a mean of 100 and standard deviation of 10. Lead time is 2 periods. The order-up-to model is used to manage inventories. Which of the following shows the relationship between expected on-hand inventory (y-axis) and in-stock probability (x-axis)?

D) 986)

A product’s demand over (L + 1) periods is normally distributed with a mean of 200 and standard deviation of 25. Lead time is 2 periods. The order-up-to model is used to manage inventories. If in-stock probability stays at 99%, what will happen to expected on-hand inventory when expected demand increases to 300? A) It will increase. B) It will decrease. C) It may either increase or decrease. D) It will stay the same.

987)

A product’s demand over (L + 1) periods is normally distributed with a mean of 200 and standard deviation of 25. Lead time is 2 periods. The order-up-to model is used to manage inventories. What will happen to expected on-hand inventory when in-stock probability increases? A) It will stay the same. B) It may either increase or decrease. C) It will increase. D) It will decrease.

988)

Suppose the order-up-to model is used to manage inventories. The required amount of inventory _________ at a(n) _________ rate as the target in-stock probability approaches one. A) decreases, decreasing B) decreases, increasing C) increases, increasing D) increases, decreasing

989)

A product’s demand over (L + 1) periods is normally distributed with a mean of 200 and standard deviation of 25. The in-stock probability is 99%. The order-up-to model is used to manage inventories. Which of the following shows the relationship between expected onhand inventory (x-axis) and lead time (y-axis)?

D) 990)

A product’s demand per period is normally distributed with a mean of 200 and standard deviation of 25. The in-stock probability is 99%. The order-up-to model is used to manage inventories. What will happen to expected on-hand inventory if its lead time increases from two to four periods? A) It will increase. B) It will decrease. C) It will stay the same. D) It may either increase or decrease.

991)

In the order-up-to model, when in-stock probability is _________ and lead time is _________, most of the inventory in the supply chain will be on order. A) high, short B) high, long C) low, short D) low, long

992)

993)

On-hand inventory is directly dependent on all of the following EXCEPT _________. A) length of lead time B) in-stock probability C) coefficient of variation of demand D) on-order inventory

Which of the following order-up-to strategies will reduce inventory without changing where inventory is sold to customers? A) Combine inventory locations so that there are more locations to hold inventory. B) Combine inventory locations so that there are fewer locations to hold inventory. C) Move final assembly to a point earlier in the supply chain. D) Move final assembly to a point later in the supply chain.

994)

Which of the following is a strategic decision in the context of an order-up-to environment? A) Determining a desired in-stock probability B) Determining a desired order-up-to level C) Determining a desired location where inventories should be held D) Determining a desired stockout probability

995)

Which of the following questions is addressed by location pooling? A) Should we change where variety is added to a product? B) Should we change where to hold inventory to serve customer demand? C) Should we change which product should be discounted? D) Should we hold inventory in an intermediate step in the supply chain process?

996)

Which of the following questions is addressed by lead-time pooling? A) Should we change where variety is added to a product? B) Should we change where to hold inventory to serve customer demand? C) Should we change which product should be discounted? D) Should we hold inventory in an intermediate step in the supply chain process?

997)

Which of the following questions is addressed by delayed differentiation? A) Should we change where variety is added to a product? B) Should we change where to hold inventory to serve customer demand? C) Should we change which product should be discounted? D) Should we hold inventory in an intermediate step in the supply chain process?

998)

Which of the following is a key impact of the location-pooling strategy? A) Reducing the in-stock probability B) Increasing demand variability C) Reducing on-order inventory D) Reducing days of supply

999)

Which of the following graphs correctly portrays the shift in the trade-off curve between in-stock probability (x-axis) and expected on-hand inventory (y-axis) due to location pooling?

D) 1000) Which of the following is a disadvantage of location pooling? A) It increases in-stock probability. B) It decreases on-hand inventory. C) It decreases demand variability. D) It increases delivery cost. 1001) Which of the following order-up-to strategies reduces demand uncertainty in a supply

chain while keeping inventory reasonably close to customers? A) Location pooling B) Lead-time pooling C) Make-to-stock D) Batching 1002) Which of the following is a benefit of lead-time pooling? A) Decreases in-stock probability B) Reduces number of locations with a long lead time C) Reduces the lead time from the supplier to each location D) Increases demand uncertainty

1003) A major difference between lead-time pooling and location pooling strategies is that

_________. A) lead-time pooling keeps inventory close to customers whereas location pooling moves inventory away from customers B) lead-time pooling moves inventory away from customers whereas location pooling keeps inventory close to customers C) lead-time pooling is a direct-from-factory strategy whereas location pooling is a direct-to-factory strategy D) lead-time pooling is a direct-to-customer strategy whereas location pooling is a direct-from-factory strategy 1004) A major difference between lead-time pooling and delayed differentiation strategies is

that _________. A) lead-time pooling adds an intermediate point early in a supply chain to customize products whereas delayed differentiation adds an intermediate point late in a supply chain to customize products B) lead-time pooling adds an intermediate point in a supply chain to hold inventory whereas delayed differentiation adds an intermediate point early in a supply chain to customize products C) lead-time pooling adds an intermediate point in a supply chain to hold inventory whereas delayed differentiation adds an intermediate point late in a supply chain to customize products D) lead-time pooling adds an intermediate point late in a supply chain to customize products whereas delayed differentiation adds an intermediate point early in a supply chain to customize products

Answer Key Test name: chapter 14 1) FALSE

Each period's actual demand can be different as random demand can occur during each period. 2) FALSE

Inventory position can drop below the order-up-to level when demand occurs. 3) TRUE

Expected on-order inventory is computed as Expected demand in one period × Lead time. Therefore, it is based on demand during the lead time only. 4) FALSE

If p is the in-stock probability, then the expected number of periods before the first period with a stockout is 1 ÷ (1 − p). The relationship between the two is not linear. 5) TRUE

The higher the in-stock probability, the more sensitive inventory is to the lead time. By reducing lead time with a faster mode of transportation, inventory is reduced which, in turn, could compensate for the increased shipping cost by reduced inventory holding costs. 6) TRUE

On-order inventory depends on average demand per period and the length of the lead time but not demand variability. 7) B

Laundry detergent has a long shelf life and assured future demand with numerous replenishment opportunities. The order-up-to-model is the inventory management tool of choice for such a product. 8) B

Lead time is independent of order quantity in an order-up-to model. 9) D

The time between two ordering opportunities for an order-up-to product is called a period with a fixed duration. 10) C

There is no limit to the order quantity within a period, which means supply is not capacity constrained. 11) C

On-order inventory is the number of units ordered in previous periods which has not yet been received and, therefore, is unavailable to serve demand. 12) D

On-hand inventory at the beginning of the period is 50 boxes, all of which must be used. Therefore, at the end of the period, there are 0 boxes of on-hand inventory and (80 − 50) = 30 boxes backordered. 13) C

Inventory position = On-order inventory + On-hand inventory − Backorder 14) B

The order-up-to level is the desired inventory position after an order is submitted. 15) A

The newsvendor model is a push system where production occurs in anticipation of demand. 16) D

A pull system is not good at anticipating shifts in future demand. 17) D

Inventory position = 1 + 5 = 6. Order quantity = 10 − 6 = 4. 18) C

Inventory position = On-order inventory + On-hand inventory − Backorder = 20 + 0 − 5 = 15. Order quantity = Order-up-to level − Inventory position = 80 − 15 = 65. 19) D

A Poisson distribution is suitable for modeling demand with a mean of 20 or less. 20) C

The order-up-to-level is a value selected by the user of the order-up-to model. Therefore, it does not necessarily maximize expected profit. 21) A

On-hand inventory at the beginning of the period is 100 boxes which is sufficient to satisfy the demand of 60 boxes. Therefore, at the end of the period, there are 100 − 60 = 40 boxes of onhand inventory and no boxes on backorder. 22) B

Inventory position = 20 + 25 = 45. Order quantity = 55 − 45 = 10. 23) C

Inventory position = On-order inventory + On-hand inventory − Backorder = 30 + 45 − 15 = 60. Order quantity = Order-up-to level − Inventory position = 135 − 60 = 75. 24) C

There are three performance measures of the order-up-to model: expected on-hand inventory, expected on-order inventory, and stockout probability. 25) C

Use z = (S − µ) ÷ σ = (125 − 100) ÷ 50 = 0.5. Use Table 14.1 to find I(0.5) = 0.6978. Expected on-hand inventory = 50 × 0.6978 = 34.89. 26) B

From Table 14A.2, when S = 4, I(4) = 3.4. Therefore, the expected on-hand inventory is 3.4. 27) B

Use z = (S − µ) ÷ σ = (100 − 80) ÷ 20 = 1. Use Table 14.1 to find F(z), the in-stock probability. F(z) = 0.8413. 28) D

Use Table 14A.2. In-stock probability for a mean of 3.2 with an order-up-to level of S = 5 is F(5) = 0.8946. Stockout probability = 1 − In-stock probability = 1 − 0.8946 = 0.1054. 29) D

The order-up-to level in the order-up-to model is similar to the order quantity in the newsvendor model. 30) C

Expected on-order inventory = Mean demand per period × Lead time = 0.50 × 3 = 1.5. 31) B

Expected on-order inventory = Mean demand per period × Lead time = 60 × 2 = 120.

32) C

Mean of demand over (L + 1) (or 2 + 1 = 3) periods = 60 × 3 = 180. Standard deviation of demand over 3 periods = × 10 = 17. z-value = (200 − 180) ÷ 17 = 1.18 or 1.2. Use Table 14.1 to find I(1.2) = 1.2561. Expected on-hand inventory = 1.2561 × 17 = 21.35, rounded to 21. 33) C

Mean of demand over (L + 1) (or 2 + 1 = 3) periods = 60 × 3 = 180. Standard deviation of demand over 3 periods = × 10 = 17. z-value = (200 − 180) ÷ 17 = 1.18 or 1.2. Use Table 14.1 to find F(1.2) = 0.8849. Stockout probability = 1 − 0.8849 = 0.1151 or 0.115. 34) D

Mean of demand over (L + 1) (or 3 + 1 = 4) periods = 0.55 × 4 = 2.2. Use Table 14A.2 with mean demand of 2.2 and order-up-to level of 4. I(4) with a mean of 2.2 is 1.91 35) C

Mean of demand over (L + 1) (or 3 + 1 = 4) periods = 0.55 × 4 = 2.2. Use Table 14A.2. In-stock probability, F(4) with a mean of 2.2, is 0.9275. Stockout probability = 1 − 0.9275 = 0.0725 = 7.25%. 36) D

Use z = (S − µ) ÷ σ = (925 − 700) ÷ 250 = 0.9. Use Table 14.1 to find I(0.9) = 1.0004. Expected on-hand inventory = 250 × 1.0004 = 250.1. 37) A

From Table 14A.2, when S = 7, I(7) = 4.21. Therefore, the expected on-hand inventory is 4.21. 38) B

Use z = (S − µ) ÷ σ = (925 − 700) ÷ 250 = 0.9. Use Table 14.1 to find F(0.9) = 0.8159. Therefore, the stockout probability = 1 − 0.8159 = 0.1841 = 18.41%. 39) A

From Table 14A.2, when S = 7, F(7) = 0.9919. Therefore, the stockout probability = 1 − 0.9919 = 0.0081 = 0.81%. 40) C

Expected on-order inventory = Mean demand per period × Lead time = 6 × 4 = 24. 41) B

Expected on-order inventory = Mean demand per period × Lead time = 250 × 3 = 750. 42) D

Mean of demand over (L + 1) (or 3 + 1 = 4) periods = 120 × 4 = 480. Standard deviation of demand over 4 periods = × 60 = 120. z-value = (732 − 480) ÷ 120 = 2.1. Use Table 14.1 to find I(2.1) = 2.1065. Expected on-hand inventory = 2.1065 × 120 = 252.78, rounded to 253. 43) B

Mean of demand over (L + 1) (or 3 + 1 = 4) periods = 120 × 4 = 480. Standard deviation of demand over 4 periods = × 60 = 120. z-value = (732 − 480) ÷ 120 = 2.1. Use Table 14.1 to find F(2.1) = 0.9821. Stockout probability = 1 − 0.9821 = 0.0179 or 1.79%. 44) B

Mean of demand over (L + 1) (or 4 + 1 = 5) periods = 0.76 × 5 = 3.8. Use Table 14A.2 with mean demand of 3.8 and order-up-to level of 7. I(7) with a mean of 3.8 is 3.26 45) B

Mean of demand over (L + 1) (or 4 + 1 = 5) periods = 0.76 × 5 = 3.8. Use Table 14A.2 with a mean demand of 3.8 and an order-up-to level of 7. In-stock probability, F(7), is 0.9599. Stockout probability = 1 − 0.9599 = 0.0401 = 4.01%. 46) C

Expected on-order inventory is known as pipeline inventory. 47) D

Mean of demand over (L + 1) (or 3 + 1 = 4) periods = 0.5 × 4 = 2. From the Poisson distribution Table 14A.2, with a mean of 2, F(S=4) = 0.9473 and F(S=5) = 0.9834. To achieve at least a 95% in-stock probability, S should be 5. 48) D

Mean of demand over (L + 1) (or 2 + 1 = 3) periods = 0.8 × 3 = 2.4. From the Poisson distribution Table 14A.2, with a mean of 2.4, F(S=5) = 0.9643 and F(S=6) = 0.9884. To achieve at least a 97% in-stock probability, S should be 6. 49) B

Mean of demand over 2 + 1 = 3 periods = 0.4 × 3 = 1.2. Use Table 14A.2. With a mean of 1.2, F(S=2) has an in-stock probability of 0.8795, and F(S=3) is 0.9662. To achieve at least a 95% instock probability, S should be 3.

50) D

Use Table 14.1. z value of a 95% in-stock probability = 1.7. Mean of demand over (L + 1) (or 2 + 1 = 3) periods = 60 × 3 = 180. Standard deviation of demand over 3 periods = = 180 + (1.7 × 17.3) = 209.

× 10 = 17.3. S

51) A

A higher in-stock probability increases the z value. Therefore, the order-up-to level will increase. 52) A

A higher lead time increases the mean of demand over (L + 1) periods. Therefore, the order-upto level will increase. 53) A

Use (L + 1) or 2 + 1 = 3. Mean of demand is 0.8 × 3 = 2.4. Use Table 14A.2 to find in-stock probability closest to 95%. F(S=5) with a mean of 2.4 is 0.9643. Therefore, S = 5. 54) C

Mean of demand over (L + 1) (or 4 + 1 = 5) periods = 0.76 × 5 = 3.8. From the Poisson distribution Table 14A.2, with a mean of 3.8, F(S=7) = 0.9599 and F(S=8) = 0.9840. To achieve at least a 97% in-stock probability, S should be 8. 55) B

When in-stock probability increases, expected on-hand inventory increases. As in-stock probability approaches 1, each incremental increase in the in-stock probability requires a greater and greater increase in the on-hand inventory. 56) D

On-hand inventory = Standard deviation of demand × I(z). z won’t change because the in-stock probability stays the same. Also, the standard deviation of demand didn’t change. Therefore, nothing changed in the on-hand inventory equation and so expected on-hand inventory will stay the same. 57) C

Providing customers with better service by increasing in-stock probability will require the expected on-hand inventory to increase. 58) C

The required amount of inventory increases at an increasing rate as the target in-stock probability approaches one.

59) A

As lead time gets longer, expected on-hand inventory increases at a decreasing rate as most inventory will be on order with a long lead time. 60) A

When lead time increases, more inventory is needed to achieve a specific level of in-stock probability. 61) D

A long lead time requires a high level of total on-hand and on-order inventory. With a low instock probability, on-hand inventory will also be low. In that case, a greater proportion of the total inventory will be on order. 62) D

On-hand inventory is dependent on three factors: the length of lead time, the in-stock probability, and the coefficient of variation of demand. 63) D

Moving final assembly to a point later in the supply chain is the delayed differentiation strategy which allows a reduction in inventory without changing where inventory is sold to customers. 64) C

Determining where inventories should be held to better serve customers is a strategic decision. 65) B

Location pooling combines inventories from multiple locations into a single location to better serve customers. 66) D

Lead-time pooling adds an intermediate step in the supply chain process. This reduces lead time risk as the longer lead times faced by many locations are pooled into a single lead time faced by one location. 67) A

Delayed differentiation adds variety to a product as late in the supply process as possible. 68) D

Location pooling reduces on-hand inventory and days of supply. 69) A

The trade-off curve increases expected on-hand inventory dramatically as in-stock probability approaches one. Therefore, the shape of the trade-off curve resembles the right half of a letter "U". In addition, a firm can reduce inventory and increase in-stock probability at the same time by reducing demand variability through location pooling. This is in effect shifting the trade-off curve down and out from its current position. 70) D

Location pooling moves inventory away from customers and therefore increases the delivery cost. 71) B

Lead-time pooling can reduce demand uncertainty without moving inventory away from customers as does location pooling. 72) B

Lead-time pooling reduces the number of locations that face a long lead time. 73) A

Lead-time pooling keeps inventory close to customers whereas location pooling moves inventory away from customers. 74) C

Lead-time pooling adds an intermediate point in a supply chain to hold inventory whereas delayed differentiation adds an intermediate point late in a supply chain to customize products.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 1005) Short-term forecasts tend to be automated forecasts. ⊚ true ⊚ false 1006) Simply averaging out the forecast errors is good enough to determine which forecast is

better. ⊚ true ⊚ false 1007) The exponential smoothing forecasting method is not responsive to changes in demand. ⊚ true ⊚ false

1008) The double exponential smoothing method is not applicable to data with no trend. ⊚ true ⊚ false 1009) Incentive alignment is a subjective forecasting bias committed by the forecaster without

his/her awareness of it. ⊚ true ⊚ false MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 1010) Demand forecasting is the process of creating statements about _________ of demand that are _________. A) future realizations, currently uncertain B) current uncertainties, future realized C) current realizations, future realized D) future uncertainties, currently realized 1011) Which of the following is not an input to the forecasting process? A) Old realizations of demand B) Old realizations of other variables C) New techniques of optimization D) Subjective opinions about the future 1012) Which of the following is an input to a time series-based forecast? A) Old realizations of demand B) Old realizations of other variables C) Subjective opinions about the future D) All of these are inputs 1013) Which of the following is an example of a time series-based forecast? A) To determine how many hamburgers to sell tomorrow based on yesterday’s weather B) To determine how many hamburgers to sell tomorrow based on next year’s budget

limit C) To determine how many hamburgers to sell tomorrow based on one’s gut feeling D) To determine how many hamburgers to sell tomorrow based on today’s sales figure

1014) _________ analysis is the statistical process of estimating the relationship between

dependent and _________ variables. A) Regression, independent B) Time series, outcome C) Regression, outcome D) Time series, latent 1015) Which of the following is an example of a regression analysis forecast? A) To determine how many hamburgers to sell tomorrow based on yesterday’s weather B) To determine how many hamburgers to sell tomorrow based on next year’s budget

limit C) To determine how many hamburgers to sell tomorrow based on one’s gut feeling D) To determine how many hamburgers to sell tomorrow based on next year’s sales figure 1016) Which of the following is NOT a forecasting method? A) Machine learning B) Expert panel C) Big data D) Linear programming 1017) The term “expert panel” refers to _________. A) A group of managers sharing their objective opinions based on hard data to reach a

demand forecast. B) A group of managers sharing their subjective opinions to try to reach a consensus about a demand forecast. C) A forecasting approach based on machine learning and Big Data. D) A set of automated forecasting techniques. 1018) The forecast error for period t is the _________ the actual value and the forecast value in

period t. A) sum of B) difference between C) product of D) quotient of

1019) Which of the following is FALSE regarding evaluating forecasting errors? A) Mean squared error aggregates forecast errors without canceling out positive and

negative forecast errors. B) Mean squared error squares the errors and then averages them. C) Mean squared error can be heavily influenced by one single large forecast error. D) Mean squared error and mean absolute error always agree on which forecast is better. 1020) Two methods are used to predict how many customers will call in for help in the next

four days. Method 1 predicts the numbers of callers to be 23, 5, 14, and 20 for the four respective days. Method 2 predicts 20, 13, 14, and 20 for the four respective days. The actual numbers of callers turn out to be 23, 10, 15, and 19. Based on these results, what can we conclude? A) Method 1 is unbiased and Method 2 is biased B) Method 1 is biased and Method 2 is unbiased C) Both methods are unbiased D) Both methods are biased 1021) Two methods are used to predict how many customers will call in for help in the next

1023) A(n) _________ forecast is one that is on average correct. A) unbiased B) biased C) aggregated D) absolute 1024) Which of the following is TRUE regarding evaluating the quality of a forecast? A) If both forecasters have an unbiased forecast, then they are equally good at

forecasting. B) A biased forecast has a zero forecast error. C) The mean squared error is always lower than the mean absolute error when evaluating the same forecaster. D) In the mean squared error evaluation, one single observation can make a very large difference. 1025) Two methods are used to predict how many customers will call in for help in the next

four days. The first method predicts the numbers of callers to be 23, 5, 14, and 20 for the four respective days. The second method predicts 20, 13, 14, and 20 for the four respective days. The actual numbers of callers turn out to be 23, 10, 15, and 19. Which method has the smaller mean absolute percentage error (MAPE)? A) The first method B) The second method C) Both methods have the same MAPE D) Cannot be determined 1026) Which of the following is FALSE regarding the measures of forecast errors? A) The mean absolute percentage error aggregates forecast errors in relative terms. B) The mean absolute error is also known as the mean absolute deviation. C) The mean squared error is always bigger than the mean absolute error for the same

forecast. D) A forecast is unbiased if and only if its mean absolute percentage error is zero. 1027) What is the forecast error if the forecast value in a particular period is 75 and the actual

(realized) demand is 55? A) −65 B) 65 C) −20 D) 20

1028) Given the following three periods of data, what is the MAE? Period Actual Demand Demand Forecast 1 93 92 2 94 91 3 91 93 A) B) C) D)

1.33 2.00 3.00 3.25

1029) Given the following three periods of data, what is the MSE? Period Actual Demand Demand Forecast 1 93 92 2 94 91 3 91 93 A) B) C) D)

4.67 44.75 124 372

1030) Given the following three periods of data, what is the MAPE? Period Actual Demand Demand Forecast 1 93 92 2 94 91 3 91 93 A) B) C) D)

0.02% 0.72% 1.28% 2.15%

1031) The _________ forecasting method creates a forecast for the next period by using the

_________ value of the last period. A) moving average, predicted B) moving average, forecast C) naïve, actual D) naïve, forecast

1032) A store has the following sales figures: Year Sales (in millions of dollars) 1 10 2 5 3 8 4 15

What would the sales forecast for year 2 have been using the naïve method? A) 10 B) 5 C) 8 D) 15 1033) Statistical noise in the demand of a process is defined as the amount of demand that is

purely a result of _________ and could not have been _________ with the best forecasting method. A) inefficiency, biased B) inefficiency, forecasted C) randomness, biased D) randomness, forecasted 1034) Which of the following statements is FALSE regarding the moving average forecast? A) It reduces the effect of statistical noise by taking averages. B) It assigns a heavier weight to the most recent observation in the forecast window. C) It assigns a zero weight to all observations outside the forecast window. D) It is based on the average of observations in the forecast window. 1035) A store has the following demand figures for the last four years: Year Demand 1 100 2 150 3 98 4 112

With a three-year moving average, what is the demand forecast for year 4? A) 124 B) 120 C) 116 D) 105

1036) A store has the following demand figures for the last four years: Year Demand 1 100 2 150 3 98 4 112

With a two-year moving average, what is the demand forecast for year 2? A) 125 B) 124 C) 105 D) Cannot be determined 1037) The moving average forecast corresponds to the naïve forecast when the forecast window

is _________ time period(s). A) one B) two C) three D) zero 1038) Which of the following statements is TRUE regarding the exponential smoothing

forecasting method? A) It takes an average of all observations. B) It assigns an equal weight to all observations. C) It assigns a zero weight to all observations outside the forecast window. D) It corresponds to the naïve method when the smoothing parameter equals one. 1039) A store has the following demand figures for the last four years: Year Demand 1 100 2 150 3 98 4 112

What is the exponential smoothing forecast for year 5? Use alpha = 0.3 and a forecast for year 2 of 100. A) 103.6 B) 109.9 C) 110.5 D) 111.1

1040) Which of the following statements is FALSE regarding the naïve, moving average, and

exponential smoothing methods? A) They fail to detect long-term trends in the data. B) They fail to detect seasonal variation in the data. C) They create a forecast that is higher than any of the previously realized demand values. D) They create data-driven forecasts which are only able to look backward at past values. 1041) If a smoothing parameter of zero is used in an exponential smoothing forecast model,

what is the practical result? A) The exponential smoothed forecast will always be the same as thenaïve forecast. B) The exponential smoothed forecast will never change from period to period. C) The exponential smoothed forecast will always be the same as a 1-period moving average forecast. D) The exponential smoothed forecast will always equal the actual demand value. 1042) Below are actual sales data (in millions) for the past six months at a large retail store. Month Sales (in millions of dollars) May 40 June 38 July 41 August 44 September 42 October 43

What will the 3-month moving average forecast be for November (in millions of dollars)? A) 39.67 B) 41.33 C) 42.33 D) 43.00

1043) Below are actual sales data (in millions) for the past six months at a large retail store. Month Sales (in millions of dollars) May 40 June 38 July 41 August 44 September 42 October 43

In retrospect, what would the 4-month moving average forecast for September have been (in millions of dollars)? A) 40.75 B) 41.25 C) 41.33 D) 42.00 1044) Below are actual sales data (in millions) for the past six months at a large retail store. Month Sales (in millions of dollars) May 40 June 38 July 41 August 44 September 42 October 43

What will the exponential smoothed forecast for November (in millions of dollars), using an October forecast of 45 and an alpha = 0.3? A) 43.0 B) 44.4 C) 45.0 D) 45.6

1045) Below are actual sales data (in millions) for the past six months at a large retail store. Month Sales (in millions of dollars) May 40 June 38 July 41 August 44 September 42 October 43

What will the exponential smoothed forecast for November (in millions of dollars), using an August forecast of 43 and an alpha = 0.2? A) 43.50 B) 44.40 C) 42.97 D) 44.67 1046) Which of the following data are most likely following a long-term trend trajectory? A) Energy drink demand B) Landline phone users C) Stock prices D) Flu-related illnesses 1047) A trend is a _________ or _________ in a variable that is consistent over a long period of

time. A) B) C) D)

sudden increase, continuing decrease continuing increase, continuing decrease sudden increase, sudden decrease continuing increase, sudden decrease

1048) Trend-based forecasts are also known as _________-based forecasts. A) time B) momentum C) realization D) past

1049) Which of the following statements is TRUE regarding the double exponential smoothing

method? A) It uses the same smoothing parameter for forecasting both with and without trend. B) It is a multiplicative method. C) It underestimates demand data without exponential growth. D) It is not applicable for data with no trend. 1050) A store has the following demand figures for the last four years: Year Demand 1 100 2 150 3 112 4 200

Given a demand forecast for year 2 of 100, a trend forecast for year 2 of 10, an alpha of 0.3, and a beta of 0.2, what is the demand forecast for year 3 using the double exponential smoothing method? A) 115 B) 120 C) 125 D) 130 1051) A store has the following demand figures for the last four years: Year Demand 1 100 2 150 3 112 4 200

Given a demand forecast for year 2 of 100, a trend forecast for year 2 of 10, an alpha of 0.3, and a beta of 0.2, what is the demand forecast for year 5 using the double exponential smoothing method? A) 125 B) 134 C) 166 D) 184

1052) When the demand data has an exponential growth trend, one should forecast the

_________ of demand when using the double exponential smoothing method. A) average B) maximum C) minimum D) logarithm 1053) A store has the following demand figures for the last four years: Year Demand 1 200 2 175 3 250 4 275

Given a demand forecast for year 3 of 225, a trend forecast for year 3 of 30, an alpha of 0.2, and a beta of 0.3, what is the demand forecast for year 4 using the double exponential smoothing method? A) 225 B) 230 C) 250 D) 260 1054) Seasonality is a _________ demand change that constitutes a _________ fluctuation over

time. A) B) C) D)

significant, repetitive continuous, gradual significant, gradual unpredictable, repetitive

1055) Which of the following demand data exhibit(s) a seasonality pattern? A) Bread consumption over a month B) Electricity usage over a 24-hour period C) Stock prices over a year D) Number of people with access to a telephone landline over a year 1056) Which of the following is FALSE regarding the set of seasonality indices across all

seasons? A) They must sum to 1.00. B) They must average to 1.00. C) They must sum to the number of seasons. D) Higher seasonality indices represent seasons with higher demand, on average.

1057) Company A is providing technical support for smartphone users. It sees most of its

demand during the evening hours of the day. The demand for its support services for the last three days was as follows: Day 1

Time of day Morning Afternoon Evening Morning Afternoon Evening Morning Afternoon Evening

Demand (in thousands) 42 75 125 35 88 110 52 65 155

What is the seasonal index for morning? A) 1.57 B) 1.00 C) 0.92 D) 0.52 1058) Company A is providing technical support for smartphone users. It sees most of its

demand during the evening hours of the day. The demand for its support services for the last three days was as follows: Day 1

Time of day Morning Afternoon Evening Morning Afternoon Evening Morning Afternoon Evening

What is the seasonal index for afternoon? A) 1.57 B) 1.00 C) 0.92 D) 0.52

Demand (in thousands) 42 75 125 35 88 110 52 65 155

1059) Company A is providing technical support for smartphone users. It sees most of its

demand during the evening hours of the day. The demand for its support services for the last three days was as follows: Day 1

Time of day Morning Afternoon Evening Morning Afternoon Evening Morning Afternoon Evening

Demand (in thousands) 42 75 125 35 88 110 52 65 155

What is the seasonal index for evening? A) 1.57 B) 1.00 C) 0.92 D) 0.52 1060) Company A is providing technical support for smartphone users. It sees most of its

demand during the evening hours of the day. The demand for its support services for the last three days was as follows: Day 1

Time of day Morning Afternoon Evening Morning Afternoon Evening Morning Afternoon Evening

Demand (in thousands) 42 75 125 35 88 110 52 65 155

Using a smoothing parameter of 0.25 and an initial forecast of 80, and rounding all intermediate calculations to 2 decimal places, what is the forecast demand for the morning of day 4? Note: Round your final answer to whole number. A) 78 B) 80 C) 51 D) 44

1061) Company A is providing technical support for smartphone users. It sees most of its

demand during the evening hours of the day. The demand for its support services for the last three days was as follows: Day 1

Time of day Morning Afternoon Evening Morning Afternoon Evening Morning Afternoon Evening

Demand (in thousands) 42 75 125 35 88 110 52 65 155

Using a smoothing parameter of 0.25 and an initial forecast of 80, and rounding all intermediate calculations to 2 decimal places, what is the forecast demand for the afternoon of day 4? Note: Round your final answer to whole number. A) 133 B) 78 C) 51 D) 44

1062) Company A is providing technical support for smartphone users. It sees most of its

demand during the evening hours of the day. The demand for its support services for the last three days was as follows: Day 1

Time of day Morning Afternoon Evening Morning Afternoon Evening Morning Afternoon Evening

Demand (in thousands) 42 75 125 35 88 110 52 65 155

Using a smoothing parameter of 0.25 and an initial forecast of 80, and rounding all intermediate calculations to 2 decimal places, what is the forecast demand for the evening of day 4? Note: Round your final answer to whole number. A) 155 B) 133 C) 78 D) 44 1063) The advantages of analytical forecasting methods include the following EXCEPT

_________. A) they are efficient B) they can be automated C) they are objective D) they assume the future will be like the past 1064) A(n) _________ forecast allows for _________ input into the forecasting method. A) objective, human B) subjective, human C) objective, predictive D) subjective, predictive 1065) Which of the following is NOT a subjective forecasting method? A) Take the average across the forecast by each individual forecaster. B) Arrive at a consensus forecast through discussion and information exchange. C) Put more weight on an individual’s opinion based on the idea of prediction markets. D) Arrive at a forecast through time series extrapolation.

1066) _________ is a phenomenon when all experts _________ although the outcome is

fundamentally wrong or unlikely. A) Consensus, disagree B) Consensus, agree C) Groupthink, disagree D) Groupthink, agree 1067) Which of the following is a way to counter the groupthink problem? A) Start the discussion with the most senior expert in the group. B) Pressure everybody to conform to the group consensus. C) Hold a discussion prior to anyone creating a forecast to agree on what parameters to

include. D) Start the discussion after everyone creates a forecast individually and independently. 1068) The biggest strength of subjective forecasting is the use of _________. A) human intelligence for time series extrapolation B) human intelligence to replace forecasts done by analytical methods C) automated methods to replace human intuition D) automated methods to refute human intuition 1069) Biases in subjective forecasting include all of the following EXCEPT _________. A) overconfidence B) anchoring C) incentive alignment D) consensus building 1070) Which of the following is a way to deal with bias in subjective forecasting? A) Forecast errors should be measured. B) Forecast history should not be collected. C) Forecast is created through groupthink. D) Forecast is created using prediction market. 1071) A(n) _________ tree visualizes a set of decisions and their possible consequences,

including the outcomes of random events. A) outcome B) event C) decision D) forecasting

Answer Key Test name: chapter 15 1) TRUE

Short-term forecasts are made more frequently as they are dealing with decisions that need to be made daily or monthly. Therefore, they tend to be automated. 2) FALSE

Simply averaging out the forecast errors is not good enough to determine which forecast is better because a negative and a positive forecast will cancel each other out. 3) FALSE

The exponential smoothing forecasting method assigns more weight to the recent demand data, which makes it more responsive to changes in demand. 4) FALSE

The double exponential smoothing method is applicable to data with no trend. 5) FALSE

Incentive alignment is a subjective forecasting bias committed by the forecaster knowingly with the intent of achieving a certain outcome. 6) A

Demand forecasting is the process of creating statements about future realizations of demand that are currently uncertain. 7) C

The inputs to the forecasting process are the old realizations of demand, old realizations of other variables, and subjective opinions about the future. 8) A

A time series-based forecast uses only old realizations of demand as inputs. 9) D

Using today’s demand to predict the demand for tomorrow is an example of a time series-based forecast. 10) A

Regression analysis is the statistical process of estimating the relationship between dependent and independent variables. 11) A

Using other variables (weather) to predict future demand is an example of a regression analysis forecast. 12) D

Linear programming is an optimization technique and not a forecasting method. 13) B

The term “expert panel” refers to a group of managers sharing their subjective opinions to try to reach a consensus about a demand forecast. 14) B

The forecast error for period t is the difference between the actual value and the forecast value in period t. 15) D

MSE and MAE do not always agree on which forecast is better because MSE is heavily influenced by one single large forecast error. 16) B

Method 1 has 0, 5, 1, and −1 errors, or an average of 1.25. Method 2 has 3, −3, 1, and −1 errors, or an average of 0. Therefore, Method 1 is biased and Method 2 is unbiased. 17) B

The first method has squared errors of 0, 25, 1, and 1, or an MSE of 6.75. The second method has squared errors of 9, 9, 1, and 1, or an MSE of 5. Therefore, the second method has a smaller MSE. 18) A

The first method has 0, 5, 1, and 1 absolute errors, or an MAE of 1.75. The second method has 3, 3, 1, and 1, or an MAE of 2. Therefore, the first method has a smaller MAE. 19) A

An unbiased forecast is one that is on average correct. 20) D

Because the errors get squared, one large mistake can drive the results.

21) B

The first method has absolute percentage errors 0, 0.50, 0.067, and 0.053, or a MAPE of 0.155. The second method has percentage errors 0.13, 0.3, 0.067, 0.053, or a MAPE of 0.137. Therefore, the second method has a smaller mean absolute percentage error. 22) D

A forecast being unbiased does not mean its mean absolute percentage error is zero, because MAPE aggregates forecast errors without having positive and negative errors cancel each other out. 23) C

The forecast error is the difference between the actual (realized) demand and the forecasted demand: 55 − 75 = −20. 24) B

The absolute errors in each period are, respectively, 1, 3 and 2. Therefore, the MAE = (1 + 3 + 2) ÷ 3 = 2.00. 25) A

The squared errors in each period are, respectively, 1, 9 and 4. Therefore, the MSE = (1 + 9 + 4) ÷ 3 = 4.67. 26) D

The percent errors in each period are, respectively, 1.075%, 3.191% and 2.198%. Therefore, the MAPE = (1.075 + 3.191 + 2.198) ÷ 3 = 2.15%. 27) C

The naïve forecasting method creates a forecast for the next period by using the actual value of the last period. 28) A

The naïve forecast for year 2 equals the actual for year 1, which is 10. 29) D

Statistical noise in the demand of a process is defined as the amount of demand that is purely a result of randomness and could not have been forecasted with the best forecasting method. 30) B

The moving average forecast assigns the same weight to all observation in the forecast window.

31) C

Forecast for year 4 = Average of demand for year 3, year 2, and year 1 = Average(98, 150, 100) = 116. 32) D

Forecast for year 2 = Average of demand for year 1 and year 0. However, we do not have demand for year 0. 33) A

When the forecast window is one time period, the moving average forecast is equivalent to the naïve forecast. 34) D

When the smoothing parameter is one, the exponential smoothing method is equivalent to the naïve method. 35) C

We are given the forecast for year 2, so the first exponential smoothing forecast that can be computed is for year 3. We then update the forecast for the year 4 and year 5. Year 1 2 3 4 5

Demand 100 150 98 112 —

Exponential smoothing forecast — 100 (0.3 × 150) + (0.7 × 100) = 115 (0.3 × 98) + (0.7 × 115) = 109.9 (0.3 × 112) + (0.7 × 109.9) = 110.5

36) C

All three forecasts are based on averaging old demand realizations in some way and therefore cannot create a forecast that is higher than any of the previously realized demand values. 37) B

If a smoothing parameter of zero is used in an exponential smoothed model, the forecast will never change from period to period. 38) D

(44 + 42 + 43) ÷ 3 = $43.00 (million). 39) A

(40 + 38 + 41 + 44) ÷ 4 = $40.75 (million).

40) B

(0.3 × 43) + (0.7 × 45) = $44.4 (million). 41) C

We are given the forecast for August, so the first exponential smoothing forecast that can be computed is for September. We then update the forecast for October and November. Month May June July August September October November

Demand 40 38 41 44 42 43 —

Exponential smoothing forecast — — — 43 (0.2 × 44) + (0.8 × 43) = 43.20 (0.2 × 42) + (0.8 × 43.20) = 42.96 (0.2 × 43) + (0.8 × 42.96) = 42.97

42) B

Land-line phone users are decreasing over a long period of time. 43) B

A trend is a continuing increase or continuing decrease in a variable that is consistent over a long period of time. 44) B

Trend-based forecasts are also known as momentum-based forecasts. 45) C

The double exponential smoothing method is an additive method. In cases where trends are multiplicative, the method will underestimate the demand for next period. 46) C

The double exponential smoothed forecast for year 3 = (0.3 × 150) + (0.7 × 100) + 10 = 125. 47) C

Year

Demand

1 2 3

100 150 112

200

—

Double exponential smoothing forecast — 100 (0.3 × 150) + (0.7 × 100) + 10 = 125 (0.3 × 112) + (0.7 × 125) + 13 = 134 (0.3 × 200) + (0.7 × 134) + 12 = 166

Trend forecast — 10 [0.2 × (125 − 100)] + (0.8 × 10) = 13 [0.2 × (134 − 125)] + (0.8 × 13) = 12 [0.2 × (166 − 134)] + (0.8 × 12) = 16

48) D

If demand grows exponentially, the logarithm of demand grows linearly. Therefore, one should use the double exponential smoothing method to forecast the logarithm of demand for demand data with exponential growth. 49) D

The smoothed forecast for year 4 = (0.2 × 250) + (0.8 × 225) + 30 = 260. 50) A

Seasonality is a significant demand change that constitutes a repetitive fluctuation over time. 51) B

Electricity usage is much higher during the daytime than nighttime. 52) A

The set of seasonality indices must sum to the number of seasons and average to 1.00. Higher seasonality indices represent seasons with higher demand, on average. 53) D

The seasonal index for morning = Average morning demand ÷ Average total demand. Average morning demand = (42 + 35 + 52) ÷ 3 = 43. Average total demand = 747 ÷ 9 = 83. Morning’s seasonal index = 43 ÷ 83 = 0.52. 54) C

The seasonal index for afternoon = Average afternoon demand ÷ Average total demand. Average afternoon demand = (75 + 88 + 65) ÷ 3 = 76. Average total demand = 747 ÷ 9 = 83. Afternoon’s seasonal index = 76 ÷ 83 = 0.92. 55) A

The seasonal index for evening = Average evening demand ÷ Average total demand. Average evening demand = (125 + 110 + 155) ÷ 3 = 130. Average total demand = 747 ÷ 9 = 83. Evening’s seasonal index = 130 ÷ 83 = 1.57. 56) D

The seasonal index = average of time of day ÷ average of total demand. For mornings, the seasonal index = 43 ÷ 83 = 0.52. Afternoon’s seasonal index = 76 ÷ 83 = 0.92. Evening’s index = 130 ÷ 83 = 1.57. The deseasonalized demand column in the table shows each time period’s actual divided by the index. The smoothed forecast column applies the exponential smoothing forecast method. Starting from Day 1 Morning, we have (0.25 × 80.77) + (0.75 × 80) = 80.19. Day 1 Afternoon = (0.25 × 81.52) + (0.75 × 80.19) = 80.52. Continue through Day 3 Evening. Day 1

Time of day Morning Afternoon Evening

Morning Afternoon Evening

Deseasonalized demand 42 ÷ 0.52 = 80.77 75 ÷ 0.92 = 81.52 125 ÷ 1.57 = 79.62 35 ÷ 0.52 = 67.31 88 ÷ 0.92 = 95.65 110 ÷ 1.57 =70.06 52 ÷ 0.52 = 100 65 ÷ 0.92 =70.65 155 ÷ 1.57 = 98.73

Forecast for Day 4 Morning = 85.23 × 0.52 = 44.32. 57) B

Smoothed forecast 80.19 80.52 80.3 77.05 81.7 78.79 84.09 80.73 85.23

Time of day Morning Afternoon Evening

Morning Afternoon Evening

Deseasonalized demand 42 ÷ 0.52 = 80.77 75 ÷ 0.92 = 81.52 125 ÷ 1.57 = 79.62 35 ÷ 0.52 = 67.31 88 ÷ 0.92 = 95.65 110 ÷ 1.57 =70.06 52 ÷ 0.52 = 100 65 ÷ 0.92 =70.65 155 ÷ 1.57 = 98.73

Demand for afternoon of day 4 = 85.23 × 0.92 = 78.41. 58) B

Smoothed forecast 80.19 80.52 80.3 77.05 81.7 78.79 84.09 80.73 85.23

Time of day Morning Afternoon Evening

Morning Afternoon Evening

Deseasonalized demand 42 ÷ 0.52 = 80.77 75 ÷ 0.92 = 81.52 125 ÷ 1.57 = 79.62 35 ÷ 0.52 = 67.31 88 ÷ 0.92 = 95.65 110 ÷ 1.57 =70.06 52 ÷ 0.52 = 100 65 ÷ 0.92 =70.65 155 ÷ 1.57 = 98.73

Smoothed forecast 80.19 80.52 80.3 77.05 81.7 78.79 84.09 80.73 85.23

Demand for evening of day 4 = 85.23 × 1.57 = 133.81. 59) D

The analytical forecasting methods cannot be applied when the future is unlike the past. 60) B

A subjective forecast allows for human input into the forecasting method. 61) D

Time series extrapolation does not allow for human input. Therefore, it is not a subjective forecasting method. 62) D

Groupthink is a phenomenon when all experts agree, although the outcome is fundamentally wrong or unlikely. 63) D

Starting the discussion after everyone creates a forecast individually and independently is a way to counter the groupthink problem. 64) B

The biggest strength of subjective forecasting is the use of human intelligence to replace forecasts done by analytical methods. 65) D

Consensus building is one type of subjective forecasting method. It is not a source of bias in subjective forecasting. 66) A

To counter bias in subjective forecasting, forecasting errors should be measured. 67) C

A decision tree visualizes a set of decisions and their possible consequences, including the outcomes of random events.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 1072) A queue of customers will form if the demand rate is greater than the process capacity and customers are willing to wait. ⊚ true ⊚ false 1073) A good way to improve waiting time is to simply turn customers away. ⊚ true ⊚ false 1074) A queue will not form if capacity exceeds demand. ⊚ true ⊚ false 1075) The coefficient of variation of the arrival process is close to one if the arrivals are

independent of each other. ⊚ true ⊚ false

1076) The number of servers has no influence on the number of customers in service (assuming

the queue is stable). ⊚ true ⊚ false 1077) A pooled queue system improves system performance by having more servers. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 1078) During the two hours of the morning rush, 100 customers per hour arrive at the coffee shop. The coffee shop has a capacity of 80 customers per hour. At what rate does the queue of customers at the coffee shop grow during this time? A) 100 customers per hour B) 80 customers per hour C) 40 customers per hour D) 20 customers per hour 1079) During the two hours of the morning rush from 7 a.m. to 9 a.m., 100 customers per hour

arrive at the coffee shop. The coffee shop has a capacity of 80 customers per hour. What is the number of customers waiting at 9 a.m.? A) 100 B) 80 C) 40 D) 20 1080) During the two hours of the morning rush from 7 a.m. to 9 a.m., 100 customers per hour

arrive at the coffee shop. The coffee shop has a capacity of 80 customers per hour. How long does a customer arriving at 9 a.m. have to wait to be served? A) 2 hours B) 1 hour C) 0.5 hour D) 0.25 hour

1081) During the two hours of the morning rush from 7 a.m. to 9 a.m., 100 customers per hour

arrive at a coffee shop. This coffee shop has a capacity of 80 customers per hour. On average, how long does a customer arriving during the morning rush wait to be served? A) 2 hours B) 1 hour C) 0.5 hour D) 0.25 hour 1082) Which of the following statements about queues is TRUE when demand exceeds supply? A) The higher the implied utilization, the less customers need to wait to be served. B) The higher the implied utilization, the more customers need to wait to be served. C) The greater the implied utilization, the greater supply exceeds demand. D) There is no relationship between implied utilization and a customer’s waiting time. 1083) Which of the following statements about queues is FALSE when demand exceeds

supply? A) The queue will continue to grow as long as customers are willing to wait. B) If demand exceeds capacity for a longer period of time, the queue grows longer. C) The queue will shrink if customers walk away instead of waiting patiently in line. D) The queue grows as long as the supply rate exceeds capacity. 1084) Peak-load pricing is also called _________. A) peak-load discount B) quantity discount C) dynamic pricing D) congestion pricing 1085) One way to reduce a queue is to reduce _________ during _________ times. A) demand, off-peak B) demand, peak C) supply, off-peak D) supply, peak 1086) Peak-load pricing means to _________ during _________ times. A) charge more, peak B) charge extra, off-peak C) apply a discount, peak D) apply a penalty, off-peak

1087) _________ and _________ are ways to reduce a queue by adjusting demand. A) Peak-load discount, off-peak pricing B) Peak-load pricing, off-peak pricing C) Peak-load pricing, off-peak discount D) Peak-load discount, off-peak discount 1088) Which of the following is a way to reduce a queue by adjusting capacity? A) Peak-load pricing B) Off-peak discount C) Maximize the amount of work that needs to be done during peak time D) Minimize the amount of work that needs to be done during peak time 1089) Which of the following is NOT a way to reduce a queue by adjusting capacity? A) Use more workers during peak time. B) Reduce the amount of work that needs to be done during peak time. C) Move some work to off-peak time. D) Encourage customers to come at off-peak times. 1090) Packages arrive at a facility at a rate of 30 per hour and are processed continuously at a

rate of 25 per hour. The facility is open from 8 a.m. to 4 p.m. How long does the last package wait before it is processed? A) 1.75 hours B) 1.60 hours C) 1.33 hours D) 1.20 hours 1091) Cranston Cranberry Cooperative (CCC) processes cranberries that are harvested in the

local area. Barrels of cranberries arrive on trucks to CCC’s facility at a rate of 150 barrels per hour and are processed continuously at a rate of 100 barrels per hour. Trucks arrive at a uniform rate over 8 hours, from 6:00 a.m. until 2:00 p.m. What is the maximum number of barrels of cranberries that are waiting on the trucks at any given time? A) 100 barrels B) 200 barrels C) 400 barrels D) Infinitely many barrels

1092) Shipments arrive and are unloaded at a supermarket every morning between the hours of

5:30 a.m. and 9 a.m. at the rate of 45 pallets per hour. Store employees begin stocking the shelves at 5:30 a.m. at the rate of 29 pallets per hour. How long does the last pallet wait before being stocked on the shelves? A) 0.55 hours B) 1.67 hours C) 1.93 hours D) 2.22 hours 1093) Which of the following is a reason why queues will form even if capacity exceeds

demand? A) There is no variability in average capacity. B) Customers do not arrive in a consistent pattern. C) Customers arrive in a consistent pattern. D) There is no variability in the arrival of customers. 1094) Given the following data at the drive-through of a bank, what is the interarrival time

between the second and third customers? Customer 1 2 3 4 A) B) C) D)

Arrival Time 8:06 8:10 8:15 8:36

Service Time (minutes) 5 10 7 2

4 minutes 5 minutes 10 minutes 20 minutes

1095) Given the following data at the drive-through of a bank, what is the processing time of

the second customer? Customer 1 2 3 4 A) B) C) D)

20 minutes 15 minutes 11 minutes 10 minutes

Arrival Time 8:06 8:10 8:15 8:36

Service Time (minutes) 5 10 7 2

1096) Given the following data at the drive-through of a bank, what is the average processing

time from 8:06 to 8:36? Customer 1 2 3 4 A) B) C) D)

Arrival Time 8:06 8:10 8:15 8:36

Service Time (minutes) 5 10 7 2

10 minutes 8 minutes 7.5 minutes 6 minutes

1097) Given the following data at the drive-through of a bank, what is the average interarrival

time from 8:06 to 8:36? Customer 1 2 3 4 A) B) C) D)

Arrival Time 8:06 8:10 8:15 8:36

Service Time (minutes) 5 10 7 2

10 minutes 8 minutes 7.5 minutes 6 minutes

1098) Given the following data at the drive-through of a bank: Customer Arrival Time Service Time (minutes) 1 8:06 5 2 8:10 10 3 8:15 7 4 8:36 2

Which of the following statements is TRUE regarding the time from 8:06 to 8:36 for the bank? A) The arrival rate is 4 customers per hour. B) The average capacity is 6 customers per hour. C) On average, there is enough capacity to serve all customers. D) The service rate is more variable than the arrival rate because service rate has a higher standard deviation.

1099) Which of the following is the best measure to compare the variability of two arrival

processes? A) Standard deviation B) Range C) Mean D) Coefficient of variation 1100) A coefficient of variation for a service process is less than one if the service rate

_________. A) is uncertain B) is dependent on each customer C) is somewhat consistent D) has high variability 1101) The average time to serve a customer at a fast-food restaurant is 4 minutes. The standard

deviation of the service time is 3 minutes. What is the coefficient of variation of the service time? A) 4 B) 3 C) 1.33 D) 0.75 1102) What is the key assumption for the single-server queue model? A) The average interarrival time is greater than the average process time. B) The average interarrival time is less than the average process time. C) The capacity of the server is less than the demand rate. D) The flow rate is greater than the capacity. 1103) Which of the following is NOT a performance measure of a single-server queue system? A) The average number of customers in service B) The average number of customers waiting in the queue C) The average time a customer waits in the queue D) The average number of customers who leave the system 1104) Which of the following is TRUE regarding the utilization of the server for the one-queue,

one-server model? A) Utilization is greater than one. B) Utilization is less than one. C) A high service variability will lead to high utilization. D) A low service variability will lead to high utilization.

1105) A server is idle 8% of the time. What is the server’s utilization? A) 8% B) 92% C) 100% D) Cannot be determined 1106) Consider a single-server queue system for which customers arrive at a rate of 10 per hour

and the average processing time is 1.5 minutes. What is the server utilization? A) 0.60 B) 0.25 C) 0.15 D) 0.10 1107) A server operates with 80% utilization. The coefficient of variation for the service

process is 0.5 and the coefficient of variation of the arrival process is 1. The average processing time is 3 minutes. What is the average time a customer waits in the queue according to the single-server queue model? A) 10.5 minutes B) 7.5 minutes C) 3.75 minutes D) 3 minutes 1108) A server operates with 80% utilization. The coefficient of variation for the service

process is 0.5 and the coefficient of variation of the arrival process is 1. The average processing time is 3 minutes. What is the average time a customer spends in the system according to the single-server queue model? A) 10.5 minutes B) 7.5 minutes C) 3.75 minutes D) 3 minutes 1109) On average, a customer waits 8 minutes in a queue and customers arrive at a rate of 15

per hour. What is the average number of customers waiting according to the single-server queue model? A) 8 B) 4 C) 2 D) 0.5

1110) Which of the following statements is FALSE regarding the waiting time in a single-

server queue model? A) When capacity decreases, the average waiting time increases. B) When the processing time decreases, the average waiting time decreases. C) When variability in the arrival or service process increases, the average waiting time increases. D) When utilization increases, the average waiting time decreases. 1111) The drivers of waiting time in a single-server queue system include all of the following

EXCEPT _________. A) utilization B) capacity C) variability D) learning 1112) Five customers arrive at a small post office between 10:00 a.m. and 10:30 a.m. Given the

following arrival and processing data, what is the average processing time during this timeframe? Customer 1 2 3 4 5 A) B) C) D)

3 minutes 5 minutes 7 minutes 25 minutes

Arrival Time 10:00 10:08 10:14 10:23 10:30

Service Time (minutes) 4 7 6 3 5

1113) Five customers arrive at a small post office between 10:00 a.m. and 10:30 a.m. Given the

following arrival and processing data, what is the average interarrival time during this timeframe? Customer 1 2 3 4 5 A) B) C) D)

Arrival Time 10:00 10:08 10:14 10:23 10:30

Service Time (minutes) 4 7 6 3 5

4.5 minutes 5 minutes 6 minutes 7.5 minutes

1114) The average time to cut a customer’s hair at a barber shop is 20 minutes. The standard

deviation of the service time is 6 minutes. What is the coefficient of variation of the service time? A) 0.3 B) 3.33 C) 6 D) 20 1115) A post office clerk operates with 75% utilization. The coefficient of variation for the

service process is 0.6 and the coefficient of variation of the arrival process is 0.9. The average processing time is 4 minutes. What is the average time a customer waits in the queue according to the single-server queue model? A) 3.51 minutes B) 4 minutes C) 7.02 minutes D) 11.02 minutes 1116) A post office clerk operates with 75% utilization. The coefficient of variation for the

service process is 0.6 and the coefficient of variation of the arrival process is 0.9. The average processing time is 4 minutes. What is the average time a customer spends in the system according to the single-server queue model? A) 3.51 minutes B) 4 minutes C) 7.02 minutes D) 11.02 minutes

1117) On average, a customer waits 5 minutes in a queue and customers arrive at a rate of 12

per hour. What is the average number of customers waiting according to the single-server queue model? A) 0.5 B) 1 C) 2 D) 5 1118) There are 4 servers in the checkout area. The interarrival time of customers is 2 minutes.

The processing time is 5 minutes. What is the utilization of the servers? A) 2.500 B) 0.625 C) 0.400 D) 0.100 1119) The assumptions of the stable multiple-server queue model include the following

EXCEPT _________. A) the capacity of the system is less than the flow rate B) the customers will wait for their turn to complete the service C) each customer is served by one agent D) the capacity of the system is greater than demand 1120) The interarrival time of customers is 2 minutes. The processing time is 5 minutes. What

is the minimum number of servers needed? A) 2 B) 2.5 C) 3 D) 4 1121) Which of the following statements is true regarding a stable queue? A) The utilization is greater than 100%. B) The utilization is less than 100%. C) The utilization exceeds capacity. D) The utilization exceeds demand.

1122) Consider queues when the demand and service rates are variable with multiple servers.

The graphs below display the total number of customers in the system (y-axis) in relation to time (x-axis). Which graph displays a stable queue?

C) D) Cannot be determined

1123) There are 4 servers in the checkout area. The interarrival time of customers is 2 minutes.

The processing time is 5 minutes. The coefficients of variation for the arrival process and the service process are 1 and 0.85 respectively. What is the average time in queue (rounded to the nearest whole number)? A) 1 minute B) 2 minutes C) 3 minutes D) 4 minutes 1124) There are 3 servers in the checkout area. The interarrival time of customers is 2 minutes.

The processing time is 5 minutes. The coefficients of variation for the arrival process and the service process are 1 and 0.85 respectively. What is the average number of customers that are waiting (rounded to the nearest whole number)? A) 1 B) 2 C) 3 D) 4 1125) There are 3 servers in the checkout area. The interarrival time of customers is 2 minutes.

The processing time is 5 minutes. The coefficients of variation for the arrival process and the service process are 1 and 0.85 respectively. What is the average number of customers in service? A) 0.83 B) 1.00 C) 1.67 D) 2.5 1126) Which of the following statements is TRUE when more servers are added to a multiple-

server queue? A) The average time in queue increases. B) The utilization increases. C) The average number of customers in service increases. D) The average number of customers in service remains the same.

1127) There are 3 servers in the checkout area. The interarrival time of customers is 2 minutes.

The processing time is 5 minutes. The coefficients of variation for the arrival process and the service process are 1 and 0.85 respectively. What will be the impact on the average number of customers in service if one more server is added? A) Increases from 1.25 to 2.5 B) Decreases from 2.5 to 1.25 C) Remains the same at 2.5 D) Remains the same at 1.25 1128) Which of the following statements is typically TRUE regarding a self-service queue (e.g.,

customers do their own service) relative to a queue in which the servers are employees? A) The processing time of a self-service queue is longer. B) The processing time of a self-service queue is shorter. C) The processing time of a self-service queue is the same. D) The processing time of a self-service queue can be longer or shorter. 1129) Camille owns Crunch Code, a company that provides quick programming solutions.

Clients send projects to Crunch via their web page and a programmer develops the necessary code as quickly as possible. Camille has five programmers who do all of the coding. On average, a project arrives once every 4.8 hours with a standard deviation of 6.00 hours. Each project is assigned to one programmer and that programmer takes on average 19.2 hours to complete each project with a standard deviation of 19.2 hours. How many uncompleted projects does Crunch Code have in the system on average at any given time? (Include projects waiting for a programmer as well as those being programmed.) A) 3.45 projects B) 6.96 projects C) 12.56 projects D) 98.72 projects 1130) Find a Doctor (FaD) is a small startup that helps people find a physician that best meets

their needs (location, insurance accepted, etc.). FaD has 7 representatives who take calls from customers. On average, one call arrives every 6 minutes (with a standard deviation of 6). On average, each representative spends 20 minutes with each customer (with a standard deviation of 30). On average, how long (in minutes) does a customer spend waiting on hold before he/she can speak to a representative? A) 0.03 minute B) 0.50 minute C) 0.85 minute D) 0.96 minute

1131) There are 3 servers in the checkout area. The interarrival time of customers is 1.5

minutes. The processing time is 2.5 minutes. What is the utilization of the servers? A) 0.20 B) 0.56 C) 0.60 D) 1.67 1132) The interarrival time of customers is 1.5 minutes. The processing time is 7 minutes. What

is the minimum number of servers needed? A) 3 B) 4 C) 4.67 D) 5 1133) There are 3 servers in the checkout area. The interarrival time of customers is 2.5

minutes. The processing time is 6 minutes. The coefficients of variation for the arrival process and the service process are 0.7 and 0.6 respectively. What is the average time in the queue? A) 2.00 minutes B) 2.83 minutes C) 6.67 minutes D) 8.83 minutes 1134) There are 3 servers in the checkout area. The interarrival time of customers is 2.5

minutes. The processing time is 6 minutes. The coefficients of variation for the arrival process and the service process are 0.7 and 0.6 respectively. What is the average time in the entire system? A) 2.00 minutes B) 2.83 minutes C) 6.67 minutes D) 8.83 minutes 1135) There are 3 servers in the checkout area. The interarrival time of customers is 2.5

minutes. The processing time is 6 minutes. The coefficients of variation for the arrival process and the service process are 0.7 and 0.6 respectively. What is the average number of customers that are waiting for service? A) 1.13 B) 1.82 C) 2.44 D) 3.25

1136) There are 4 servers in the checkout area. The interarrival time of customers is 1.5

minutes. The processing time is 6 minutes. The coefficients of variation for the arrival process and the service process are 1 and 0.85 respectively. What is the average number of customers in service? A) 4 B) 3.33 C) 2.67 D) 2.2 1137) Consider a multiple-server system. Suppose the demand rate doubles and the number of

servers doubles while all else remains the same. Which of the following statements is TRUE? A) Time in queue increases. B) Time in queue decreases. C) Time in queue remains unchanged. D) Time in queue could increase or decrease depending on how utilization changes.

1138) Which of the following graphs correctly portrays the relationship between time in queue

(y-axis) and utilization (x-axis) for a single-queue, multiple-server system?

1139) Which of the following graphs correctly portrays the trade-off between time in queue (y-

axis) and utilization (x-axis) as more servers are added to a multiple-server queue system?

D) 1140) When a process has economies of scale in the operations of a system with queues, it

means a _________ queue system can be more _________. A) smaller, costly B) larger, efficient C) smaller, efficient D) larger, costly E) smaller, cost effective 1141) If the number of servers doubles but processing times and utilization remain the same,

then what change in the interarrival time must have occurred? A) Doubles B) Halves C) Triples D) Remains the same 1142) A _________ queue system is one in which each customer is served by a _________

server. A) B) C) D)

separate, pooled separate, designated shared, pooled shared, designated

1143) A _________ queue system is one in which _________ is shared across all servers. A) separate, supply B) separate, demand C) pooled, supply D) pooled, demand

1144) A pooled queue system can operate more effectively than a separate queue system by

_________. A) making servers work more B) making servers work faster C) taking advantage of economies of scale D) taking advantage of economies of scope 1145) An indicator of inefficiency in a separate queue system is _________. A) having idle servers B) having waiting customers C) having idle servers and waiting customers at the same time D) having idle servers or waiting customers 1146) A pooled queue system increases the _________ of the _________ process. A) processing time, supply B) processing time, demand C) flexibility, supply D) flexibility, demand 1147) Which of the following statements is TRUE about economies of scale in queuing

systems? A) A large system is more sensitive to utilization than a smaller system. B) A large system is more efficient than a small system. C) A large system is more inflexible than a small system. D) Cost per customer in a large system is higher than in a small system. 1148) A supermarket has eight checkout lanes, each with a cashier and line of customers. This

is an example of a _________ queue system. A) pooled B) separate C) single-server D) shared 1149) A post office has three clerks at the service counter and a single waiting line. Whenever a

clerk becomes free, he/she waits on the customer at the front of the waiting line. This is an example of a(an) _________ queue system. A) pooled B) separate C) single-server D) inflexible

Answer Key Test name: chapter 16 1) TRUE

If customers are arriving at a rate greater than the capacity of the process, then a queue of customers will form if the customers are willing to wait. 2) FALSE

Turning customers away during peak demand will result in lost revenue. Therefore, it is not a good solution for improving waiting time. 3) FALSE

The variability in how customers arrive and how long it takes to serve them can lead to queues even if capacity exceeds demand. 4) TRUE

The coefficient of variation of the arrival process is close to one if the arrivals are independent of each other. 5) TRUE

The number of customers in service is dependent on the flow rate and the time they spend in service, not on the number of servers. 6) FALSE

A pooled queue system improves system performance by sharing demand across all servers. 7) D

Queue growth rate = Demand − Capacity = 100 − 80 = 20. 8) C

Queue growth rate = Demand − Capacity = 100 − 80 = 20. Length of queue at 9 a.m. = 2 × 20 = 40. 9) C

Time to serve the customer arriving at 9 a.m. = T × (Demand ÷ Capacity − 1) = 2 × (100 ÷ 80 − 1) = 0.5. 10) D

Average waiting time = ½ × T × (Demand ÷ Capacity − 1) = ½ × 2 × (100 ÷ 80 − 1) = 0.25.

11) B

The higher the implied utilization, the greater demand exceeds supply, which leads to longer waiting time. 12) D

The queue grows as long as the demand rate exceeds capacity. 13) D

Peak-load pricing is also called congestion pricing. 14) B

One way to reduce a queue is to reduce demand during peak times. 15) A

Peak-load pricing means to charge more during peak times. 16) C

Peak-load pricing and off-peak discount are ways to reduce a queue by adjusting demand. 17) D

Minimizing the amount of work that needs to be done during peak time will increase the process capacity to serve more customers and, therefore, will reduce the queue. 18) D

Encouraging customers to come at off-peak times does not change capacity during peak time. 19) B

Length of the queue at 4 p.m. = 8 × (30 − 25) = 40. Time to process the 1.6 hours.

package = 40 ÷ 25 =

20) C

The maximum number of barrels waiting on the trucks will occur at 2:00 p.m., or Hour 8. Therefore, the maximum length of queue at time T = T × (Demand − Capacity) = 8 × (150 − 100) = 400. 21) C

Length of the queue at 9 a.m. = 3.5 × (45 − 29) = 56. Time to process the 56th pallet = 56 ÷ 29 = 1.93 hours. 22) B

Customers not arriving in a consistent pattern is one reason why queues will form even if capacity exceeds demand. 23) B

The arrival times of customers 2 and 3 are 8:10 and 8:15 respectively. Therefore, the interarrival time is 15 − 10 = 5 minutes. 24) D

The processing time of the second customer is its service time, which is 10 minutes. 25) D

The average processing time = (5 + 10 + 7 + 2) ÷ 4 = 6. 26) A

The average interarrival time = (4 + 5 + 21) ÷ 3 = 10. 27) C

The arrival rate is 4 customers in 30 minutes, or 8 customers per hour. Average service time is (5 + 10 + 7 + 2) ÷ 4 = 6 minutes; the average capacity is 60 ÷ 6 = 10 customers per hour. Therefore, on average there is enough capacity to serve all customers. 28) D

Coefficient of variation is a better measure to compare the variability of two arrival processes than range or standard deviation. The mean is not a measure of variability. 29) C

A coefficient of variation for a service process is less than one if the service rate is somewhat consistent. 30) D

Coefficient of variation = Standard deviation ÷ Average = 3 ÷ 4 = 0.75. 31) A

The average interarrival time is greater than the average process time is the key assumption for the single-server queue model. 32) D

The average number of customers who leave the system is not a performance measure of the system in the single-server queue model.

33) B

For the one-queue, one-server model, capacity is greater than flow rate. Utilization = Flow rate/Capacity and so it must be less than one. 34) B

If the server is idle 8% of the time, he/she is working 100 − 8 = 92% of the time. 35) B

Flow rate = 10 per hour. Average interarrival time = 60 minutes ÷ 10 = 6. Utilization = Processing time ÷ Interarrival time = 1.5 ÷ 6 = 0.25. 36) B

37) A

Processing time = 3 minutes. Total time in the system = 7.5 + 3 = 10.5 minutes. 38) C

Average interarrival time = 60 ÷ 15 = 4 minutes. Time in queue = 8 minutes. The average number of customers waiting = 8 ÷ 4 = 2. 39) D

When utilization increases, the server becomes busier and, therefore, the average waiting time should increase. 40) D

There are three drivers of waiting time in a queue: utilization, capacity, and variability. 41) B

The average processing time = (4 + 7 + 6 + 3 + 5) ÷ 5 = 5. 42) D

The average interarrival time = (8 + 6 + 9 + 7) ÷ 4 = 7.5. 43) A

Coefficient of variation = Standard deviation ÷ Average = 6 ÷ 20 = 0.3. 44) C

45) D

Processing time = 4 minutes. Total time in the system = 7.02 + 4 = 11.02 minutes. 46) B

Average interarrival time = 60 ÷ 12 = 5 minutes. Time in queue = 5 minutes. The average number of customers waiting = 5 ÷ 5 = 1. 47) B

Utilization = p ÷ (a × m) = 5 ÷ (2 × 4) = 0.625. 48) A

The capacity of the system being greater than the flow rate is an assumption of the stable multiple-server model. 49) C

Minimum number of servers = p ÷ a = 5 ÷ 2 = 2.5, which is rounded up to 3. 50) B

A queue is stable if its utilization is less than 100%. 51) A

A stable queue is one in which capacity exceeds demand and the total number of customers in the system exhibits a pattern of growth and decline. 52) A

Utilization = p ÷ (a × m) = 5 ÷ (2 × 4) = 0.625. Time in queue =

53) C

Utilization = p ÷ (a × m) = 5 ÷ (2 × 3) = 0.83. Time in queue =

Iq = Tq ÷ a = 6.17 ÷ 2 = 3. 54) D

Ip = p ÷ a = 5 ÷ 2 = 2.5. 55) D

The number of customers in service depends on the flow rate and the time they spend in service but not the number of servers. 56) C

Ip = p ÷ a = 5 ÷ 2 = 2.5 and is independent of the number of servers. 57) A

The average processing time increases in a self-service queue because a customer is not as fast as an employee in completing the process. 58) B

Iq = Average number of projects waiting in queue = Tq ÷ a Utilization = 19.2 ÷ (4.8 × 5) = 0.80 CVa = 6 ÷ 4.8 = 1.25; CVp = 19.2 ÷ 19.2 = 1

= 3.84 × 2.885 × 1.281 = 14.19 Iq = 14.19 ÷ 4.8 = 2.96 Ip = Average number of customers being serviced = p ÷ a = 19.2 ÷ 4.8 = 4 Total uncompleted projects in the system = 2.96 + 4 = 6.96 59) D

Utilization = 20 ÷ (6 × 7) = 0.476 CVa = 6 ÷ 6 = 1; CVp = 30 ÷ 20 = 1.5

= 2.857 × 0.206 × 1.625 = 0.96 60) B

Utilization = p ÷ (a × m) = 2.5 ÷ (1.5 × 3) = 0.56. 61) D

Minimum number of servers = p ÷ a = 7 ÷ 1.5 = 4.67, which is rounded up to 5. 62) B

Utilization = p ÷ (a × m) = 6 ÷ (2.5 × 3) = 0.8. Time in queue = . 63) D

Utilization = p ÷ (a × m) = 6 ÷ (2.5 × 3) = 0.8. Time in queue = . The processing time = 6 minutes. The total time in the system = 2.83 + 6 = 8.83. 64) A

Utilization = p ÷ (a × m) = 6 ÷ (2.5 × 3) = 0.8. Time in queue = Iq = Tq ÷ a = 2.83 ÷ 2.5 = 1.13. 65) A

Ip = p ÷ a = 6 ÷ 1.5 = 4. 66) B

If demand is doubled and the number of servers is also doubled, then utilization stays the same. However, with more servers, the time in queue decreases for a fixed level of utilization. 67) C

Time in queue increases as utilization increases but at a faster rate as utilization approaches 100%. 68) A

As more servers are added to a multiple server queue system, the utilization of the servers can increase while reducing time in queue at the same time. However, time in queue increases as utilization increases but a faster rate as utilization approaches 100%. 69) B

If a process has economies of scale in the operations of the system with queues, this means a larger queue system can be more efficient. 70) B

a = p ÷ (m × U). If m doubles while everything stays the same, a will be halved. The interarrival time must have decreased by a factor of 2. 71) B

A separate queue system is one in which each customer is served by a designated server. 72) D

A pooled queue system is one in which demand is shared across all servers. 73) C

A pooled queue system can operate more effectively than a separate queue system by taking advantage of economies of scale. 74) C

Having idle servers and waiting customers at the same time is the reason why a separate queue system is inefficient. 75) C

A pooled queue system increases the flexibility of the supply process because with a pooled queue, each server can serve any demand, whereas with a separate queue, each server can serve only a portion of demand. 76) B

A large system is more efficient than a small system because of economies of scale. 77) B

A separate queue system is one in which each customer is served by a designated server (cashier). 78) A

A pooled queue system is one in which customer demand is shared across the servers. A key feature is that it has a single waiting line.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 1150) There is never a queue in a system if customers are unwilling or unable to wait for service. ⊚ true ⊚ false 1151) The implied utilization of a system where customers are unwilling or unable to wait

cannot be greater than 100%. ⊚ true ⊚ false

1152) Economies of scale are demonstrated in an Erlang loss system because the number of

servers required increases faster than the demand rate to maintain a particular level of denial of service probability. ⊚ true ⊚ false 1153) The interarrival time of a pooled Erlang loss system is always the sum of the interarrival

times of the separate systems. ⊚ true ⊚ false 1154) Buffering allows a process to generate more output by adding capacity at a particular step

in the process. ⊚ true ⊚ false 1155) The flow rate of a system is reduced when blocking and/or starving occur. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 1156) Consider a queuing system where customers are unwilling or unable to wait for service; the average interarrival time is the average time between the _________. A) processing of two successive customers B) arrival of two successive customers C) departure of two successive customers D) service of two successive customers 1157) A queuing model that applies to a queuing system where customers are unwilling or

unable to wait for service is called the _________. A) Copenhagen model B) Krarup model C) Little model D) Erlang loss model

1158) The Erlang loss model has the following assumptions EXCEPT _________. A) there may be many servers B) customers do not wait C) the coefficient of variation of the interarrival time is one D) the coefficient of variation of the processing time is one 1159) Consider an Erlang loss system. The average processing time is 5 minutes. The average

interarrival time is 2 minutes. The number of servers is 6. What is the capacity of the system? A) 2.4 customers per minute B) 1.2 customers per minute C) 0.8 customers per minute D) 0.4 customers per minute 1160) Consider an Erlang loss system. The average processing time is 5 minutes. The average

interarrival time is 2 minutes. The number of servers is 6. What is the implied utilization of the system? A) 2.402 B) 1.231 C) 0.812 D) 0.417 1161) Consider an Erlang loss system. The average processing time is 5 minutes. The average

interarrival time is 2 minutes. The number of servers is 6. Which of the following statements regarding this system is TRUE? A) Demand exceeds capacity. B) There is no lost demand. C) Variability in processing time reduces lost demand. D) There is never a queue. 1162) The performance measures of an Erlang loss system include all the following EXCEPT

_________. A) the probability that a customer is denied service B) the percentage of time the system is unable to serve demand C) the interarrival time D) the average utilization of the system

1163) Which of the following statements regarding an Erlang loss system is TRUE? A) The percentage of time the system is unable to serve demand is independent of the

volume of lost demand. B) The volume of lost demand is related to the flow rate through the system. C) The flow rate of customers is directly related to cost. D) The average utilization of the system is directly related to revenue. 1164) Which of the following performance measures of an Erlang loss system is directly related

to the cost of idle servers? A) Amount of lost demand B) Flow rate C) Average utilization D) Denial of service probability 1165) The denial of service probability is the probability that all _________ are _________. A) servers, idle B) servers, busy C) customers, idle D) customers, busy 1166) _________ is the ratio of demand to the capacity of one server. A) Accepted load B) Offered load C) Demand load D) Capacity load 1167) Which of the following statements about offered load is TRUE? A) Offered load is the same as implied utilization. B) Offered load accounts for the actual number of servers. C) The higher the value of offered load, the greater the denial of service probability. D) The higher the value of offered load, the smaller the denial of service probability. 1168) The Erlang Loss Table for Denial of Service Probability has inputs of the_________ and

_________. A) processing time, interarrival time B) processing time, number of servers C) number of servers, interarrival time D) number of servers, offered load

1169) Consider an Erlang loss system. The average processing time is 3 minutes. The average

interarrival time is 2 minutes. The number of servers is 4. What is the offered load? A) 2.00 B) 1.50 C) 1.33 D) 0.33 1170) Consider an Erlang loss system. The average processing time is 3 minutes. The average

interarrival time is 2 minutes. The number of servers is 4. What is the probability that all servers are busy? Use Table 17.1. A) 0.0004 B) 0.0016 C) 0.0042 D) 0.0480 1171) Consider an Erlang loss system. The average processing time is 3 minutes. The average

interarrival time is 4 minutes. The number of servers is 2. What is the rate of lost demand in customers per hour (rounded to the nearest whole number)? A) 4 B) 3 C) 2 D) 1 1172) Consider an Erlang loss system. The average processing time is 3 minutes. The average

interarrival time is 5 minutes. The number of servers is 4. What is the flow rate in customers per hour (rounded to the nearest whole number)? A) 13 B) 12 C) 8 D) 6 1173) Consider an Erlang loss system. The average processing time is 6 minutes. The average

interarrival time is 4 minutes. The number of servers is 4. What is the utilization of the servers? A) 0.238 B) 0.323 C) 0.357 D) 0.375

1174) Consider an Erlang loss system. The average processing time is 6 minutes. The average

interarrival time is 8 minutes. The number of servers is 3. What is the average number of occupied servers? A) 0.242 B) 0.725 C) 0.969 D) 1.450 1175) Consider an Erlang loss system. The average processing time is 3 minutes. The average

interarrival time is 4 minutes. The number of servers is 2. What is the average number of idle servers? A) 1.000 B) 1.031 C) 1.354 D) 0.646 1176) Consider an Erlang loss system. The average processing time is 4 minutes. The average

interarrival time is 3 minutes. How many servers does the system need to achieve a denial of service probability of no more than 0.01? Use Table 17.1. A) 3 B) 4 C) 5 D) 6 1177) Consider an Erlang loss system. The average processing time is 4 minutes. A denial of

service probability of no more than 0.01 is desired. The average interarrival time is 10 minutes. How many servers does the system need? Use Table 17.1. A) 2 B) 3 C) 4 D) 5 1178) Consider an Erlang loss system. The average processing time is 6 minutes. The average

interarrival time is 4 minutes. The number of servers is 3. What is the capacity of the system? A) 0.5 customers per minute B) 0.75 customers per minute C) 1.33 customers per minute D) 2.0 customers per minute

1179) Consider an Erlang loss system. The average processing time is 6 minutes. The average

interarrival time is 4 minutes. The number of servers is 3. What is the implied utilization of the system? A) 33.3% B) 50% C) 66.7% D) 100% 1180) Consider an Erlang loss system. The average processing time is 5 minutes. The average

interarrival time is 3 minutes. The number of servers is 2. What is the offered load? A) 0.60 B) 1.00 C) 1.33 D) 1.67 1181) Consider an Erlang loss system. The average processing time is 6 minutes. The average

interarrival time is 4 minutes. The number of servers is 3. What is the probability that all servers are busy? UseTable 17.1. A) 2.55% B) 4.80% C) 13.43% D) 31.03% 1182) Consider an Erlang loss system. The average processing time is 6 minutes. The average

interarrival time is 5 minutes. The number of servers is 3. What is the rate of lost demand in customers per hour? A) 0.018 B) 0.0898 C) 1.08 D) 5.39 1183) Consider an Erlang loss system. The average processing time is 6 minutes. The average

interarrival time is 5 minutes. The number of servers is 3. What is the flow rate in customers per hour? A) 1.08 B) 10.92 C) 26.72 D) 30

1184) Consider an Erlang loss system. The average processing time is 6 minutes. The average

interarrival time is 5 minutes. The number of servers is 3. What is the utilization of the servers? A) 36.4% B) 44.8% C) 62.1% D) 72.4% 1185) Consider an Erlang loss system. The average processing time is 6 minutes. The average

interarrival time is 5 minutes. The number of servers is 3. What is the average number of occupied servers? A) 2.54 B) 2.18 C) 1.91 D) 1.09 1186) Consider an Erlang loss system. The average processing time is 6 minutes. The average

interarrival time is 5 minutes. The number of servers is 3. What is the average number of idle servers? A) 2.54 B) 2.18 C) 1.91 D) 1.09 1187) Consider an Erlang loss system. The average processing time is 5 minutes. The average

interarrival time is 4 minutes. How many servers does the system need to achieve a denial of service probability of no more than 0.03? Use Table 17.1. A) 3 B) 4 C) 5 D) 6 1188) Consider an Erlang loss system. The average processing time is 9 minutes. The average

interarrival time is 6 minutes. How many servers does the system need to achieve a denial of service probability of no more than 0.01? Use Table 17.1. A) 3 B) 4 C) 5 D) 6

1189) A hardware store rents 1 wood chipper. A request to rent the chipper arrives every 3 days

with a standard deviation of 2 days. On average, clients rent the chipper for 1 day. If a request arrives and the chipper is not available, customers rent from another company. What percentage of demand is lost? Use Table 17.1. A) 0% B) 33% C) 25% D) 75% 1190) A hardware store rents 1 wood chipper. A request to rent the chipper arrives every 3 days

with a standard deviation of 2 days. On average, clients rent the chipper for 1 day. If a request arrives and the chipper is not available, customers rent from another company. What is the utilization of the wood chipper? A) 0% B) 25% C) 33% D) 75%

1191) Consider an Erlang loss system. Which of the following graphs shows the effect of

increasing system sizes on the relationship between denial of service probability (y-axis) and implied utilization (x-axis)?

D) 1192) For an Erlang loss system, the higher the _________, the higher the _________, holding

everything else constant. A) implied utilization, probability that all servers are idle B) implied utilization, denial of service probability C) interarrival time, number of servers D) interarrival time, processing time 1193) Which of the following statements is TRUE regarding economies of scale in Erlang loss

systems? A) Holding implied utilization constant, systems with more servers can cope with demand much better than systems with fewer servers. B) Holding implied utilization constant, systems with fewer servers can cope with demand much better than systems with more servers. C) The number of servers decreases as fast as the demand rate. D) The number of servers increases at the same rate as the processing time. 1194) Which of the following is a way to create large Erlang loss systems? A) Create separate smaller systems. B) Combine separate smaller systems into a larger system. C) Reduce interarrival time. D) Increase interarrival time.

1195) The interarrival time of a pooled Erlang loss system can be computed as the _________

of the _________ of the separate systems. A) reciprocal, combined interarrival times B) average, combined interarrival times C) average, combined demand D) reciprocal, combined demand 1196) There are _________ marginal returns to pooling because the incremental benefits of

pooling _________ as you do more pooling. A) declining, decrease B) declining, increase C) increasing, decrease D) increasing, increase 1197) Which of the following is NOT a benefit of pooling? A) Lower denial of service probability B) Higher utilization C) Reduced distance to customers D) Higher implied utilization 1198) Consider two Erlang loss systems. System A has an interarrival time of 15 minutes.

System B has an interarrival time of 10 minutes. What is the interarrival time of the combined system if the demand of the combined system is the sum of the demands of the separate systems? A) 0.04 minute B) 0.08 minute C) 6 minutes D) 12.5 minutes 1199) Inventory within a process is also called a _________ as it helps a process mitigate the

negative consequences of _________. A) storage, incapability B) storage, variability C) buffer, incapability D) buffer, variability

1200) Which of the following graphs illustrates the relationship between probability of a full

system (y-axis) and buffer size (x-axis) in the case of one server at a fixed implied utilization?

1201) Which of the following graphs demonstrates the effect of a higher implied utilization on

the relationship between percentage of demand served ( y-axis) and buffer size ( x-axis) in the case of one server?

D) 1202) The "add buffers" strategy improves the performance of an Erlang loss system by

_________. A) having customers abandon the queue B) having customers balk from the queue C) increasing the probability of a full system D) reducing the probability of a full system 1203) A customer chooses not to enter the queue when he/she arrives at the queue; this is called

_________. A) balking B) abandoning C) reneging D) engaging 1204) A customer leaves a queue that he/she has joined; this is called _________. A) postponing B) repositioning C) balking D) abandoning

1205) Which of the following graphs shows the relationship between average waiting time (x-

axis) and the fraction of customers who renege (y-axis)?

D) 1206) Consider a buffer with K spots in an Erlang loss system; demand is lost only if

_________. A) all of the servers are occupied B) there are fewer than K customers waiting C) the offered load is greater than 1 D) all the servers are occupied and there are K customers waiting 1207) For the same implied utilization, an Erlang loss system with _________ servers has all of

its servers occupied _________ than a system with _________ servers. A) more, more often, fewer B) more, less often, fewer C) faster, more often, slower D) slower, less often, faster

1208) Which of the following process flow diagrams portrays an Erlang loss system with a

buffer that could help to prevent starving?

1209) Consider two Erlang loss systems. System A has an interarrival time of 4 minutes.

System B has an interarrival time of 8 minutes. What is the interarrival time of the combined system if the demand of the combined system is the sum of the demands of the separate systems? A) 0.125 minute B) 2.67 minutes C) 6.00 minutes D) 12.00 minutes 1210) Another term for abandoning is _________. A) reneging B) repositioning C) balking D) postponing 1211) Which of the following is NOT a negative consequence of variability? A) Increases the implied utilization B) Creates queues of waiting customers C) Causes a process to lose demand D) Causes a process to lose capacity 1212) With a _________ queue, the _________ of one queue becomes the _________ to

another queue in a sequential process. A) tandem, input, output B) tandem, output, input C) buffer, output, input D) buffer, input, output 1213) Which of the following is a problem in a tandem queue when there is variability in

processing times? A) Bypassing B) Batching C) Blocking D) Buffering

1214) A resource is _________ when it would like to begin working on a unit but there is no

unit available to work on. A) balked B) blocked C) satisfied D) starved 1215) _________ is a way to predict the performance of a tandem queue. A) A simple mathematical equation B) Regression analysis C) Discrete event simulation D) Structured equation modeling 1216) Which of the following is a way to reduce variability in processing time? A) Use standard working procedures B) Reduce buffer size C) Switch to separate queues D) Adopt sequential processes 1217) Which of the following is NOT a way to mitigate the negative consequences of

variability? A) Avoid sequential processes B) Increase buffer size C) Decrease buffer size D) Use standard working procedures 1218) _________ are guidelines and instructions that detail how a task is to be completed. A) Fishbone charts B) Flow charts C) Process flow diagrams D) Standard working procedures 1219) Which of the following statements is TRUE regarding a strategy to add buffers to a

process? A) It is generally more expensive to add buffer space than capacity. B) Larger buffers decrease the implied utilization of a process. C) A buffer helps to reduce processing time variability. D) A buffer helps to reduce blocking and starving.

1220) Avoiding sequential servers is one way to _________. A) increase processing times B) reduce blocking and starving C) accelerate the interarrival time D) increase reneging 1221) Which of the following statements is TRUE regarding the following process flow

diagram:

A) B) C) D)

Station 1 is blocked if the buffer between stations 1 and 2 is full. Station 1 is starved if the buffer between stations 1 and 2 is full. Station 2 is starved if the buffer between stations 1 and 2 is full. Station 2 is blocked if the buffer in front of station 1 is full.

1222) Which of the following process flow diagrams has no blocking or starving?

D) 1223) The consequence of blocking and starving is _________. A) a loss in flow rate B) a gain in flow rate C) a gain in processing time D) a loss in processing time 1224) _________ is a principle that states that a system’s _________ decreases if it does not

have sufficient _________. A) Blocking or starving, output, resources B) Blocking or starving, capacity, buffers C) Buffer or suffer, output, resources D) Buffer or suffer, capacity, buffers

1225) Which of the following most directly expresses the motivation behind the expression

"Buffer or Suffer"? A) To increase capacity, it is important to pool queues; otherwise, the system will experience longer waiting times. B) Sufficient buffers between the resources can help to ensure inventory exists at each resource so that flow rate will not be reduced by blocking or starving. C) Variability in the service process reduces capacity more than variability in the arrival process. D) It is important that machines are endowed with systems that avoid breakdowns (security buffers) to minimize down time. 1226) Which of the following statements is TRUE regarding the following process flow

diagram:

A) B) C) D)

Station 1 is blocked if the buffer between stations 1 and 2 is empty. Station 1 is starved if the buffer between stations 1 and 2 is empty. Station 2 is starved if the buffer between stations 1 and 2 is empty. Station 2 is blocked if the buffer between stations 1 and 2 is full.

1227) Which of the following is NOT a benefit associated with increasing buffer size? A) It helps to reduce blocking and starving. B) It makes problems in the process more obvious. C) It helps to mitigate the effects of variability in processing times. D) It tends to be inexpensive as compared to adding capacity.

Answer Key Test name: chapter 17 1) TRUE

For a system where customers are unwilling or unable to wait for service, there is never a queue because whenever all servers are busy and there is an arrival, the arrival is lost. 2) FALSE

The implied utilization of a system where customers are unwilling or unable to wait can be greater than 100%. In this case, there is considerable lost demand. 3) FALSE

The economies of scale are demonstrated in an Erlang loss system because the number of servers required does not increase faster than the demand rate to maintain a particular level of denial of service probability. 4) FALSE

The interarrival time of a pooled Erlang loss system is the reciprocal of the sum of demand of the separate systems. 5) FALSE

A buffer does not perform any work and thus offers no capacity improvement at any step in the process. However, it does increase the output of the process itself by reducing variability and, thus, the denial of service probability. 6) TRUE

When a resource is blocked and/or starved, there is a loss in capacity, which leads to reduced flow rate. 7) B

In a queuing system where customers are unwilling or unable to wait for service, the average interarrival time is the average time between the arrival of two successive customers. 8) D

A queuing model that applies to a queuing system where customers are unwilling or unable to wait for service is called the Erlang loss model. 9) D

A coefficient of the variation of the processing time equal to one is not an assumption of the Erlang loss model. 10) B

Capacity = m ÷ p = 6 ÷ 5 = 1.2 customers per minute. 11) D

Implied utilization = p ÷ (a × m) = 5 ÷ (2 × 6) = 0.417. 12) D

There is never a queue in an Erlang loss system. Capacity is 6 ÷ 5 min = 1.2 customers per minute while the arrival rate is ½ customer per minute. Hence, capacity exceeds demand. Even when capacity exceeds demand, there can be some lost demand. Variability never reduces lost demand. 13) C

The interarrival time is not a performance measure but an input to an Erlang loss system. 14) B

The volume of lost demand is related to the flow rate through the system because the more customers who are lost, the fewer customers who can be served and, thus, who can flow through the system. 15) C

Average utilization is the fraction of time servers are serving, so it is directly related to the fraction of time they are idle. 16) B

The denial of service probability is the probability that all servers are busy. 17) B

Offered load is the ratio of demand to the capacity of one server. 18) C

The higher the value of offered load, the greater the denial of service probability 19) D

The Erlang Loss Table for Denial of Service Probability has inputs of the number of servers and offered load. 20) B

21) D

From the Table 17.1, the probability that all servers are busy is 0.0480. 22) C

23) B

24) C

25) B

Average number of occupied servers = M × Utilization = 3 × 0.242 = 0.725. 26) C

Average number of occupied servers = m × Utilization = 2 × 0.323 = 0.646. Average number of idle servers = 2 − 0.646 = 1.354. 27) C

From Table 17.1, the probability that 4 servers are busy is 0.0351. The probability that 5 servers are busy is 0.0093, which is less than 0.01. Therefore, the number of servers needed should be 5. 28) B

From Table 17.1, the probability that 2 servers are busy is 0.0541. The probability that 3 servers are busy is 0.0072, which is less than 0.01. Therefore, the number of servers needed should be 3. 29) A

Capacity 30) B

31) D

customers per minute.

32) C

From the Table 17.1, the probability that all servers are busy is 0.1343, or 13.43%. 33) C

34) B

35) A

36) D

Average number of occupied servers = m × Utilization = 3 × 0.364 = 1.09. 37) C

Average number of occupied servers = m × Utilization = 3 × 0.364 = 1.09. Average number of idle servers = 3 − 1.09 = 1.91. 38) B

From Table 17.1, the probability that 3 servers are busy is 0.0970. The probability that 4 servers are busy is 0.0294, which is less than 0.03. Therefore, the number of servers needed should be 4. 39) D

From Table 17.1, the probability that 5 servers are busy is 0.0142. The probability that 6 servers are busy is 0.0035, which is less than 0.01. Therefore, the number of servers needed should be 6. 40) C

= the probability the server (in this case, the wood chipper) is occupied, which is also the percent of customers who arrive when the server is busy. Using we look up the value in Table 17.1 for m = 1 server. 0.25. 41) B

=

= the probability the server (in this case, the wood chipper) is occupied,

which equates to utilization. Using we look up the value in Table 17.1 for m = 1 server. Pm = 0.25. Utilization = Flow rate/Capacity.

42) B

Implied utilization = r × m. When r increases, the denial of service probability also increases. Therefore, there is a positive relationship between denial of service probability (y-axis) and implied utilization (x-axis). Furthermore, as system size increases, both the denial of service probability and implied utilization would decrease. 43) B

For an Erlang loss system, the higher the implied utilization, the higher the denial of service probability, holding everything else constant. 44) A

Systems with more servers can cope with demand much better than systems with fewer servers. 45) B

Combining separate smaller systems into a larger system is a way to create large Erlang loss systems. 46) D

The interarrival time of a pooled Erlang loss system is the reciprocal of the combined demand of the separate systems. 47) A

There are declining marginal returns to pooling because the incremental benefits of pooling decrease as you do more pooling. 48) C

Pooling may increase the distance between the customer and the service provider because pooling capacity often means having capacity available in fewer locations. Therefore, it is not a benefit of pooling. 49) C

Demands for system A and system B are 1 ÷ 15 and 1 ÷ 10 respectively. Demand of the pooled system = 1 ÷ 15 + 1 ÷ 10 = 0.167. The interarrival time of the pooled system = 1 ÷ 0.167 = 6. 50) D

Inventory within a process is also called a buffer as it helps a process mitigate the negative consequences of variability. 51) D

Increasing the buffer size will reduce the probability of a full system but at decreasing marginal returns. 52) A

An increase in buffer size increases the percentage of demand served but at a decreasing rate and, thus, the curve slopes upward but then flattens out. Subsequently, as implied utilization increases, the percentage of demand served decreases for a fixed buffer size and, thus, the new curve shifts downward and to the right. 53) D

The "add buffers" strategy improves the performance of an Erlang loss system by reducing the probability of a full system. 54) A

When a customer chooses not to enter the queue when he/she arrives at the queue, it is called balking. 55) D

When a customer leaves a queue that he/she has joined, this is called abandoning. 56) D

The relationship between average waiting time and the fraction of customers who renege is a positive one. 57) D

With a buffer of K spots in an Erlang loss system, demand is lost if there are K customers waiting and all the servers are occupied. 58) B

For the same implied utilization, an Erlang loss system with more servers has all of its servers occupied less often than a system with fewer servers. 59) A

Customers can choose between waiting in the buffer area (the triangle) when they first arrive at the system or leaving when they first arrive at the system. Starving occurs when there is no work for servers. A buffer in front of the servers helps to prevent starving.

60) B

Demands for system A and system B are 1 ÷ 4 and 1 ÷ 8 respectively. Demand of the pooled system = 1 ÷ 4 + 1 ÷ 8 = 0.375. The interarrival time of the pooled system = 1 ÷ 0.375 = 2.67. 61) A

Another term for abandoning is reneging. 62) A

Implied utilization doesn’t depend on variability. 63) B

With a tandem queue, the output of one queue becomes the input to another queue. 64) C

Blocking is a problem in a tandem queue when there is variability in processing times. 65) D

A resource is starved when it would like to begin working on a unit but there is no unit available to work on. 66) C

Discrete event simulation is a way to predict the performance of a tandem queue. 67) A

Using standard working procedures is a way to reduce variability in processing time. 68) C

Decreasing buffer size is not a way to reduce variability in processing time. 69) D

Standard working procedures are guidelines and instructions that detail how a task is to be completed. 70) D

Adding buffers helps with reducing blocking and starving. 71) B

Using one resource to serve a customer from start to finish is a way to counter blocking and starving. 72) A

Station 1 is blocked if the buffer between stations 1 and 2 is full and so there is no place to put the completed unit. 73) C

A process with a single queue and three servers where each customer is processed by only one server is one with no blocking or starving in its process flow. 74) A

Blocking and starving lead to a loss in flow rate. 75) D

Buffer or suffer is a principle that states that a system’s capacity decreases if it does not have sufficient buffers. 76) B

If a process is not sufficiently buffered, it suffers the loss of capacity. If there is variability in the arrival process or in processing times, ensure sufficient inventory exists between stages; otherwise flow rate may be reduced due to blocking or starving. 77) C

Station 2 is starved if the buffer between stations 1 and 2 is empty and, thus, station 2 has nothing left to work on. 78) B

Increasing buffer size tends to hide problems in the process, not make them more obvious.

Student name:__________ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 1228) Scheduling is the process of deciding what work to assign to which resources and when to assign the work. ⊚ true ⊚ false 1229) Jobs flow at the same rate in a system with either the shortest processing time or the first-

come-first-served sequencing. ⊚ true ⊚ false

1230) The weighted shortest processing time rule sequences jobs in ascending order of the ratio

of the job’s weight to its processing time. ⊚ true ⊚ false 1231) If a job is completed before its due date, then its tardiness is zero. ⊚ true ⊚ false 1232) The longest processing time rule should be used to schedule jobs at the bottleneck

resource if the buffer after the bottleneck is nearly empty. ⊚ true ⊚ false 1233) Using an appointment system increases the capacity of a system. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 1234) An example of a scheduling decision includes all of the following EXCEPT _________. A) who is working which shift for next week B) which machine should receive preventive maintenance next C) which countries a rock band should visit over the next two years D) what is the demand for our product to break even 1235) A _________ system plans the delivery of components required for a manufacturing

process so that components are available when needed but not so early as to create excess inventory. A) bill of materials B) production schedule C) material requirements planning D) project management 1236) _________ provides a list of components that are needed for the assembly of an item. A) A bill of materials B) A production schedule C) Material requirements planning D) Project management

1237) Which of the following occupations performs scheduling often on a week-to-week basis? A) Professional sports league B) Flight controller C) Emergency medical dispatcher D) Airline crew 1238) Which of the following is NOT a performance measure for scheduling? A) Inventory B) Flow rate C) Profit D) Flow time 1239) Which of the following performance measures is dependent on a specific schedule? A) Flow rate B) Flow time C) Average processing time D) Total processing time 1240) The _________ rule imposes the _________ on the other jobs. A) first-come-first-served, most delay B) first-come-first-served, least delay C) shortest processing time, most delay D) shortest processing time, least delay 1241) Which of the following is TRUE when comparing the shortest processing time (SPT) rule

with the first-come-first-served (FCFS) rule for job sequencing? A) Jobs spend more time in the system with SPT than with FCFS. B) The system has more capacity with SPT than with FCFS. C) Jobs spend less time in the system with SPT than with FCFS. D) The system has less capacity with SPT than with FCFS.

1242) The processing times of five jobs are given as follows: Job Processing time (minutes) 1 25 2 70 3 30 4 95 5 20

Assume the jobs arrived in numeric order of the job name and no other jobs arrive in the next 190 minutes. In what order would the jobs be processed according to the shortest processing time rule? A) 1, 2, 3, 4, 5 B) 5, 4, 3, 2, 1 C) 5, 1, 3, 2, 4 D) 4, 2, 3, 1, 5 1243) The processing times of five jobs are given as follows: Job Processing time (minutes) A 12 B 22 C 14 D 18 E 34

Assume the jobs arrived in alphabetical order of the job name and no other jobs arrive in the next 100 minutes. What is the average flow rate in jobs per minute? A) 0.050 B) 0.020 C) 0.013 D) 0.010

1244) The processing times of four jobs are given as follows: Job Processing time (minutes) A 10 B 24 C 16 D 20

Assume the jobs arrived in alphabetical order of the job name and no other jobs arrive in the next 70 minutes. What is the average flow time in minutes if the jobs are processed in shortest processing time order? A) 152 B) 70 C) 38 D) 18 1245) The processing times of five jobs are given as follows: Job Processing time (minutes) A 15 B 60 C 20 D 85 E 10

Assume the jobs arrived in alphabetical order of the job name and no other jobs arrive in the next 190 minutes. What is the average inventory if the jobs are processed in shortest processing time order? A) 5.00 B) 2.92 C) 1.97 D) 1.00 1246) Which of the following performance measures is better with the shortest processing time

rule than the first-come-first-served rule? A) Average inventory (only) B) Average flow time and average flow rate C) Average flow rate (only) D) Average inventory and average flow time

1247) The advantages of a shortest processing time (SPT) rule over a first-come-first-served

(FCFS) rule include all of the following EXCEPT that _________. A) SPT always gives a lower average flow time than FCFS B) the gap between SPT and FCFS is largest when there are many jobs waiting for service C) SPT always gives a lower average inventory than FCFS D) SPT treats all jobs equally 1248) All of the following information can be found in Gantt charts EXCEPT _________. A) the job sequence B) the number of jobs C) the completion time of each job D) the variability of processing time 1249) The limitations of the shortest processing time rule include all of the following EXCEPT

_________. A) shortest processing time rule is often perceived as less fair B) the average flow time for jobs is longer C) the waiting time for large jobs is longer than for small jobs D) jobs have an incentive to misrepresent their processing times 1250) The _________ rule arranges jobs in a descending order of processing time. A) first-come-first-served B) shortest processing time C) longest processing time D) weighted shortest processing time 1251) The _________ rule always arranges jobs in an ascending order of processing time. A) first-come-first-served B) shortest processing time C) longest processing time D) weighted shortest processing time

1252) An IT help desk has the following six help requests waiting to be processed. Job A B C D E Processing time (mins) 5 11 8 2 1

F 9

The help desk has one operator on staff. If the help desk has the objective to minimize the average flow time of its customers, which job would be the fourth to be processed? A) E B) A C) F D) B E) C F) D 1253) Jack’s Refrigeration Repair Service repairs and reconditions commercial icemakers at

restaurants. Jack has five jobs to complete today. Below are their processing times: Job A B C D E

Processing time (hours) 1.2 0.7 2.5 1.5 2.1

Assuming no other jobs arrive today, in what order would the jobs be processed using to the shortest processing time rule? A) A, B, C, D, E B) B, A, D, E, C C) C, E, D, A, B D) E, D, C, B, A

1254) Jack’s Refrigeration Repair Service repairs and reconditions commercial icemakers at

restaurants. Jack has five jobs to complete today. Below are their processing times: Job A B C D E

Processing time (hours) 1.2 0.7 2.5 1.5 2.1

Assuming no other jobs arrive today, what is the average flow rate in jobs per hour if the jobs are processed using the shortest processing time rule? A) 0.625 B) 0.960 C) 1.250 D) 1.600 1255) Jack’s Refrigeration Repair Service repairs and reconditions commercial icemakers at

restaurants. Jack has five jobs to complete today Below are their processing times: Job A B C D E

Processing time (hours) 1.2 0.7 2.5 1.5 2.1

Assuming no other jobs arrive today, what is the average flow time in hours if the jobs are processed using the shortest processing time rule? A) 1.58 B) 3.90 C) 8.00 D) 19.50

1256) Jack’s Refrigeration Repair Service repairs and reconditions commercial icemakers at

restaurants. Jack has five jobs to complete today. Below are their processing times: Job A B C D E

Processing time (hours) 1.2 0.7 2.5 1.5 2.1

Assuming no other jobs arrive today, what is the average inventory if the jobs are processed using the shortest processing time rule? A) 5.00 B) 3.24 C) 2.50 D) 2.44 1257) Which of the following is NOT a situation that illustrates that some jobs cost more than

others? A) B) C) D)

Not all customers have the same urgent needs Some customers are more patient than others Some customers are more profitable than others Not all customers arrive at the same time

1258) The _________ rule sequences jobs in decreasing order of the ratio of the job's cost per

unit of time in the system to its processing time. A) first-come-first-served B) shortest processing time C) longest processing time D) weighted shortest processing time 1259) The weighted shortest processing time sequence is the same as the shortest processing

time sequence if _________. A) all jobs have different weights B) all jobs have the same weight C) the weights sum up to one D) the weights do not sum up to one

1260) A(n) _________ weight can be assigned to the _________ consumers so that customers

who are more sensitive to delays will be served first in resource scheduling with priorities. A) lower, more impatient B) equal, less impatient C) higher, more impatient D) higher, less impatient 1261) Consider the processing times and priorities for four jobs: Job Processing time Weight/Priority (cost (minutes) per minute) A 8 2 B 20 7 C 5 10 D 40 2

In what order should the jobs be processed if the weighted shortest processing time rule is used? A) D, B, A, C B) C, A, B, D C) D, A, B, C D) C, B, A, D 1262) In which situation is the weighted shortest processing time rule preferred to shortest

processing time? A) The weights of jobs are similar. B) The weights of jobs are significantly different. C) The weights of jobs are the same. D) The weights of jobs sum up to one.

1263) Which of the following statements is FALSE regarding the given information of three

jobs: Job A B C

Processing time (minutes) 6 10 20

Weight/Priority (cost per minute) 100 1 5

Assume jobs arrive in alphabetical order of their names. A) The job sequence should be A, B, C if the objective is to minimize average flow time across all jobs. B) The job sequence should be B, C, A if the objective is to minimize total weighted cost of processing the jobs. C) The weighted shortest processing time rule is reduced to a simple priority rule. D) The shortest processing time rule is reduced to the first-come-first-served rule. 1264) Consider the processing times and priorities for four jobs: Job Processing time Weight/Priority (cost (minutes) per minute) A 10 6 B 2 1 C 50 2 D 16 10

Assume the WSPT rule is used. Which job should be processed second? A) A B) B C) C D) D 1265) Consider the processing times and priorities for four jobs: Job Processing time Weight/Priority (cost (minutes) per minute) A 10 6 B 2 1 C 50 2 D 16 10

Assume the WSPT rule is used. What is the average flow time in minutes? A) 0.05 B) 1.90 C) 3.7 D) 37

1266) Consider the processing times and priorities for four jobs: Job Processing time Weight/Priority (cost (minutes) per minute) A 10 6 B 2 1 C 50 2 D 16 10

Assume the WSPT rule is used. What is the average inventory of the jobs? A) 0.05 B) 1.90 C) 3.7 D) 37 1267) Jack’s Refrigeration Repair Service repairs and reconditions commercial icemakers at

restaurants. Jack has four jobs to complete. Below are their processing times and costs (weights): Job A B C D

Processing time (minutes) 10 2 50 16

Weight/Priority (cost per minute) 6 1 2 10

In what order should the jobs be processed if the weighted shortest processing time rule is used? A) A, C, D, B B) B, D, A, C C) B, D, C, A D) B, C, D, A

1268) Jack’s Refrigeration Repair Service repairs and reconditions commercial icemakers at

restaurants. Jack has four jobs to complete. Below are their processing times and costs (weights): Job A B C D

Processing time (hours) 4 5 4 6

Weight/Priority (cost per hour) 4 8 7 5

Assume the WSPT rule is used. Which job should be processed last? A) A B) B C) C D) D 1269) Jack’s Refrigeration Repair Service repairs and reconditions commercial icemakers at

restaurants. Jack has four jobs to complete. Below are their processing times and costs (weights): Job A B C D

Processing time (hours) Weight/Priority (cost per hour) 7 7 5 10 6 8 2 3

Assume the WSPT rule is used. What is the average flow time in hours? A) 5.00 B) 11.25 C) 20.00 D) 45.00

1270) Jack’s Refrigeration Repair Service repairs and reconditions commercial icemakers at

restaurants. Jack has four jobs to complete. Below are their processing times and costs (weights): Job A B C D

Processing time (hours) Weight/Priority (cost per hour) 7 7 5 10 6 8 2 3

Assume the WSPT rule is used. What is the average inventory? A) 0.20 B) 1.75 C) 2.25 D) 11.25 1271) Which of the following performance metrics is LEAST appropriate when scheduling jobs

with due dates? A) Percent on time B) Maximum tardiness C) Minimum tardiness D) Average lateness 1272) Percent on time is a measure of the fraction of jobs that are completed _________ the due

date. A) B) C) D)

before after on or before on or after

1273) The_________ of a job is the difference between its_________ and due date. A) lateness, completion time B) complexity, completion time C) lateness, arrival time D) complexity, starting time 1274) Which of the following statements about tardiness is TRUE? A) A negative tardiness means the job is completed early. B) A positive tardiness means the job is completed early. C) A negative tardiness means the job is completed late. D) A positive tardiness means the job is completed late.

1275) The _________ rule processes jobs in _________ order of their due dates. A) shortest processing time, ascending B) earliest due date, ascending C) earliest due date, descending D) shortest processing time, descending 1276) Which of the following rules is the best approach to minimize maximum lateness or

tardiness? A) Shortest processing time B) First-come-first-served C) Weighted shortest processing time D) Earliest due date 1277) Which of the following rules is the best approach to minimize average lateness? A) Shortest processing time B) First-come-first-served C) Weighted shortest processing time D) Earliest due date 1278) Which of the following performance measure comparisons between the shortest

processing time (SPT) and earliest due date (EDD) is FALSE? A) SPT is always better than EDD in minimizing average flow time. B) SPT is always better than EDD in minimizing average lateness. C) EDD is always better than SPT in minimizing maximum tardiness. D) EDD is always better than SPT in maximizing percent on time. 1279) Consider the processing times and due dates of the following jobs: Job Processing time (days) Due date (day) 1 3 35 2 19 25 3 24 40 4 8 20

In what order will the jobs be processed according to the earliest due date rule? A) 4, 3, 2, 1 B) 4, 2, 1, 3 C) 3, 1, 2, 4 D) 1, 2, 3, 4

1280) Consider the processing times and due dates of the following jobs: Job Processing time (days) Due date (day) 1 3 35 2 19 25 3 24 40 4 8 20

What is the lateness of job 1 if the earliest due date rule is used to sequence the jobs? A) −32 B) −12 C) −5 D) 5 1281) Consider the processing times and due dates of the following jobs: Job Processing time (days) Due date (day) 1 3 35 2 19 25 3 24 40 4 8 20

What is the tardiness of job 4 if the earliest due date rule is used to sequence the jobs? A) −12 B) −5 C) 0 D) 12 1282) Consider the processing times and due dates of the following jobs: Job Processing time (days) Due date (day) 1 3 35 2 19 25 3 24 40 4 8 20

What is the maximum lateness if the earliest due date rule is used to sequence the jobs? A) 29.75 B) 24.50 C) 14.00 D) −0.25

1283) Consider the processing times and due dates of the following jobs: Job Processing time (days) Due date (day) 1 3 35 2 19 25 3 24 40 4 8 20

What is the percent on time if the earliest due date rule is used to sequence the jobs? A) 100% B) 75% C) 50% D) 25% 1284) Consider the processing times and due dates of the following jobs: Job Processing time (days) Due date (day) 1 3 35 2 19 25 3 24 40 4 8 20

What is the average tardiness if the earliest due date rule is used to sequence the jobs? A) 0.75 B) 1.25 C) 4.25 D) 5.67 1285) Consider the processing times and due dates of the following jobs: Job Processing time (days) Due date (day) 1 3 35 2 19 25 3 24 40 4 8 20

What is the average flow time if the earliest due date rule is used to sequence the jobs? A) 54.00 B) 29.75 C) 24.50 D) 14.00

1286) Jack’s Refrigeration Repair Service repairs and reconditions commercial icemakers at