Operations Management, 5th Edition Test Bank

Operations Management, 5th Edition

By

Dan Reid

File: ch01, Chapter 1: Introduction to Operations Management Multiple Choice 1. Every business is managed through what three major functions? a) accounting, finance, and marketing b) engineering, finance, and operations management c) accounting, purchasing, and human resources d) accounting, engineering, and marketing e) finance, marketing, and operations management Ans: e Section Ref: What is Operations Management?

Level: easy

2. Which business function is responsible for managing cash flow, current assets, and capital investments? a) accounting b) finance c) marketing d) operations management e) purchasing Ans: b Section Ref: What is Operations Management?

Level: easy

3. The finance function is responsible for a) sales, generating customer demand, and understanding customer wants and needs b) plans and coordinates all the resources needed to design, produce, and deliver the merchandise to its various retail locations c) planning, coordinating, and controlling the resources needed to produce a company’s products and services d) managing cash flow, current assets, and capital investments e) efficiency and costs Ans: d Section Ref: What is Operations Management?

Level: easy

4. Which business function is responsible for sales, generating customer demand, and understanding customer wants and needs? a) finance b) human resources c) marketing d) operations management e) purchasing Ans: c

Section Ref: What is Operations Management?

Level: easy

5. Which business function is responsible for planning, coordinating, and controlling the resources needed to produce a company’s products and services? a) engineering b) finance c) human resources d) marketing e) operations management Ans: e Section Ref: What is Operations Management?

Level: easy

6. Which of the following is not true for business process reengineering? a) It can increase efficiency. b) It cannot be used to improve quality. c) It can reduce costs. d) It involves asking why things are done in a certain way. e) It involves redesigning processes.

Ans: b Section Ref: Historical Development Level: easy

7. At the GAP, which function plans and coordinates all the resources needed to design, produce, and deliver the merchandise to its various retail locations? a) engineering b) human resources c) marketing d) operations management e) purchasing Ans: d Section Ref: What is Operations Management?

Level: easy

8. Operations Management is responsible for increasing the organization’s efficiency, which means the company will be able to __________. a) add to the engineering process b) take for granted current operations c) increase the number of positions under the manager’s position d) eliminate activities that do not add value e) increasing purchasing opportunities Ans: d Section Ref: What is Operations Management?

Level: moderate

9. Which one of the following would not generally be considered to be a transformation? a) a haircut b) a train ride c) manufacturing a radio d) waiting to see the doctor e) a surgery Ans: d Section Ref: What is Operations Management?

Level: moderate

10. At a factory, the transformation process is a (an) components into products. a) locational b) imperceptible c) hypothetical d) irreversible e) physical

change of raw materials and

Ans: e Section Ref: What is Operations Management?

Level: moderate

11. Which of the following is not an input? a) services b) managers c) buildings d) technology e) information Ans: a Section Ref: What is Operations Management?

Level: moderate

12. Operations management is responsible for orchestrating all the resources needed to produce the final product. This includes all of the following except ______________________________________. a) obtaining customer feedback b) arranging schedules c) managing inventory d) controlling quality e) designing work methods Ans: a Section Ref: What is Operations Management?

Level: hard

13. Which second-tier computer company utilized a drastic change in its operations function to become an

industry leader in the late 1990s? a) Apple b) Compaq c) Dell d) IBM e) Kozmo Ans: c Section Ref: What is Operations Management?

Level: easy

14. A company with a low customer contact that is capital intensive is called: a) a farm b) manufacturing c) quasi-manufacturing d) service e) Industrial era operations management Ans: c Section Ref: Differences Between Manufacturing and Service Organizations Level: easy

15. Which initially successful web-based home delivery company had to shut down in 2001 due to inadequate management of its operations? a) Contact.com b) Time Saver.com c) Kozmo.com d) Kramer.com e) Neptune.com Ans: c Section Ref: What is Operations Management?

Level: moderate

16. In order to be successful with Web-based on-line shopping, companies must do all except which of the following? a) manage distribution centers and warehouses b) operate fleets of trucks c) maintain adequate inventories of products d) promise same-day delivery e) schedule deliveries Ans: d Section Ref: What is Operations Management?

Level: hard

17. What outsourcing functions does UPS provide for clients? a) accounting and inventories b) inventories and deliveries

c) accounting and deliveries d) accounting and maintenance e) deliveries and maintenance Ans: b Section Ref: What is Operations Management?

Level: hard

18. An example of an operation that does not add value is ____________________________. a) removing iron ore from the ground and shipping it to a steel mill b) filling the underground gasoline tanks at a service station c) making a wedding cake d) moving components to a warehouse for storage until the factory needs them e) moving luggage from a cab to the airport ticket counter Ans: d Section Ref: What is Operations Management?

Level: hard

19. Which famous economist once suggested that, “The production problem has been solved.”? a) John Nash b) Irving Fisher c) John Kenneth Galbraith d) Adam Smith e) John Maynard Keynes Ans: c Section Ref: Historical Development Level: hard

20. What was the primary reason why American firms lost market dominance in many industries in the 1970s and 1980s? a) OPEC oil embargoes b) the Vietnam war had drained the economy of resources c) after Richard Nixon was President, foreign consumers began to mistrust American firms d) they had become lax with a lack of competition in the 1950s and 1960s e) foreign government subsidies for business Ans: d Section Ref: Historical Development Level: moderate

21. In what area does General Motors earn its highest return on capital? a) selling cars b) selling logo merchandise c) financing d) selling racing engines e) post-sales parts and service

Ans: e Section Ref: What is Operations Management?

Level: hard

22. Which of the following is an example of a “back room” operation for an airline company? a) serving food and drinks to passengers b) collecting tickets and checking passengers in at the gate c) loading luggage onto the airplane d) demonstrating use of the seat belt and other safety features of the airplane e) assisting passengers in getting off of the plane Ans: c Section Ref: Differences Between Manufacturing and Service Organizations Level: moderate

23. What are companies that have low customer contact and are capital intensive; yet provide a service, called? a) pseudo-manufacturing organizations b) quasi-manufacturing organizations c) hierarchical manufacturing organizations d) service factories e) servifacturing organizations Ans: b Section Ref: Differences Between Manufacturing and Service Organizations Level: moderate 24. What percentage of total non-farm jobs in the U.S. economy comes from service-producing industries? a) 20% b) 50% c) 60% d) 80% e) 95% Ans: d Section Ref: Differences Between Manufacturing and Service Organizations Level: moderate

25. What are long-term decisions that set the direction for the entire organization called? a) tactical b) operational c) directional d) distant e) strategic Ans: e Section Ref: Operations Management Decisions Level: easy

26. Which of the following is not true with respect to strategic and tactical decisions? a) tactical decisions focus on more specific day-to-day decisions b) tactical decisions determine the direction for strategic decisions c) tactical decisions provide feedback to strategic decisions d) tactical decisions are made more frequently and routinely e) tactical decisions must be aligned with strategic decisions Ans: b Section Ref: Operations Management Decisions Level: moderate

27. Which of the following is not primarily performed by the operation management function? a) job design and work measurement b) advertising strategy c) location analysis d) quality management e) facility layout Ans: b Section Ref: Operations Management Decisions Level: moderate

28. When did operations management emerge as a formal field of study? a) during the late 1950s and early 1960s b) during the late 1970s and early 1980s c) during World War II d) during the nineteenth century e) during the early 1900s Ans: a Section Ref: Historical Development Level: moderate

29. Managing the transformation of inputs into goods and services is: a) a post industrial era process. b) a direct contributor to the curved earth syndrome. c) as old as time. d) a twenty-first century developed process. e) a design of Frederick Taylor.

Ans: c Section Ref: Historical Development Level: hard

30. Who invented the steam engine? a) James Watt b) Adam Smith c) Eli Whitney

d) Henry Ford e) Frederick Taylor Ans: a Section Ref: Historical Development Level: hard

31. What concept involves breaking down the production of a product into a series of small, elementary tasks, each of which is performed by a different worker? a) division of labor b) interchangeable parts c) scientific management d) the Hawthorne effect e) operations research Ans: a Section Ref: Historical Development Level: easy

32. Who wrote The Wealth of Nations in 1776, describing division of labor? a) James Watt b) Adam Smith c) Eli Whitney d) Henry Ford e) Frederick Taylor Ans: b Section Ref: Historical Development Level: hard

33. The concept of interchangeable parts was introduced by ___________________. a) Adam Smith b) Frederick Taylor c) Eli Whitney d) Henry Ford e) W. Edwards Deming Ans: c Section Ref: Historical Development Level: hard

34. Who created “scientific management?” a) James Watt b) Adam Smith c) Eli Whitney d) Frederick W. Taylor e) Henry Ford Ans: d

Section Ref: Historical Development Level: moderate

35. What was Frederick W. Taylor’s background? a) physics b) human resources management c) operations research d) psychology e) engineering Ans: e Section Ref: Historical Development Level: hard

36. A key feature of scientific management is that workers are motivated only by __________________. a) love b) power c) challenging work d) money e) fame Ans: d Section Ref: Historical Development Level: moderate

37. A key feature of scientific management is that workers are limited only by __________________. a) machinery b) co-workers c) their job description d) their tools e) their physical ability Ans: e Section Ref: Historical Development Level: moderate

38. The creator of scientific management believed that ______________________________________. a) worker productivity is governed by scientific laws b) the worker should have a lot of control over his or her job c) efficiency is overrated d) worker pay should primarily be based on seniority e) mathematical models are the basis for management of production Ans: a Section Ref: Historical Development Level: moderate

39. Which of the following operations management concepts did not evolve from scientific management?

a) moving assembly lines b) interchangeable parts c) stopwatch time studies d) piece rate incentives e) setting time standards for task performance Ans: b Section Ref: Historical Development Level: moderate

40. Who popularized the moving assembly line? a) James Watt b) Adam Smith c) Eli Whitney d) Frederick W. Taylor e) Henry Ford Ans: e Section Ref: Historical Development Level: moderate

41. Under scientific management, information from what is used to set time standards for task performance? a) stopwatch time studies b) observance of similar tasks c) computer simulation d) negotiations with unions e) arbitration Ans: a Section Ref: Historical Development Level: moderate

42. What movement started with the publication of the results of the Hawthorne studies? a) scientific management b) human relations c) management science d) marketing research e) operations management Ans: b Section Ref: Historical Development Level: moderate

43. What is the Hawthorne effect? a) workers responding to the attention they are given b) stopwatch time studies leading to time standards c) the use of quantitative methods for solving management problems d) the use of interchangeable parts

e) more lighting increases productivity Ans: a Section Ref: Historical Development Level: moderate

44. Increasing the level of responsibility of a job by adding planning and coordination tasks is ___________. a) job enlargement b) job rotation c) job involvement d) job enrichment e) job backward integration Ans: d Section Ref: Historical Development Level: moderate

45. The first military use of management science was solving complex problems of logistics control, weapons system design, and deployment of missiles during _____________________. a) World War I b) World War II c) The Korean War d) The Vietnam War e) Operation Desert Storm Ans: b Section Ref: Historical Development Level: hard

46. What term describes the approach of giving workers a larger portion of the total task to do? a) job enlargement b) job rotation c) job involvement d) job enrichment e) job backward integration Ans: a Section Ref: Historical Development Level: moderate

47. When were the Hawthorne Studies conducted? a) 1770s b) 1830s c) 1930s d) 1960s e) 1980s Ans: c Section Ref: Historical Development

Level: moderate

48. In what company were the Hawthorne Studies conducted? a) Westinghouse b) General Electric c) Hawthorne Incorporated d) General Motors e) Western Electric Ans: e Section Ref: Historical Development Level: hard

49. Management science is focused on: a) profit margin b) qualitative systems analysis c) management promotion metrics d) quantitative techniques for solving personnel issues e) quantitative techniques for solving operations problems Ans: e Section Ref: Historical Development Level: hard

50. When was the first mathematical model for inventory management developed? a) 1770 b) 1865 c) 1900 d) 1913 e) 1930 Ans: d Section Ref: Historical Development Level: hard

51. Where was the just-in-time philosophy developed? a) Germany b) United States c) Canada d) Japan e) Italy Ans: d Section Ref: Historical Development Level: moderate

52. Just-in-time philosophy is applicable in: a) Service organizations

b) Manufacturing organizations c) Assembly line operations d) A, B, and C e) A and C only Ans: d Section Ref: Historical Development Level: moderate

53. When was the just-in-time philosophy developed? a) 1980s b) 1930s c) 1800s d) 1700s e) 1990s Ans: a Section Ref: Historical Development Level: hard

54. What is a philosophy that aggressively seeks to improve product quality by eliminating causes of product defects and making quality an all-encompassing organizational philosophy? a) CQI b) TQM c) SPC d) JIT e) BPR Ans: b Section Ref: Historical Development Level: moderate

55. Which of the following is considered a “quality guru?” a) Elton Mayo b) W. Edwards Deming c) Alex Gamble d) F.W. Harris e) Frederick W. Taylor Ans: b Section Ref: Historical Development Level: hard

56. Supply chain management involves managing: a) the flow of internal information only. b) the flow of materials and information from suppliers and buyers to the final customer. c) the flow of raw materials to inventory only. d) managing the stock room supply only.

Ans: b Section Ref: Historical Development Level: hard

57. Many companies require their suppliers to meet what standards as a condition for obtaining contracts? a) RFO 6000 b) PUR 8000 c) ISO 9000 d) MACH 5000 e) SUP 2000 Ans: c Section Ref: Historical Development Level: hard

58. One of the two most important features of time-based competition involves ___________________. a) advertising on the Internet b) stopwatch time studies c) setting time standards for task performance d) instantaneous access to inventory information e) developing new products and services faster than the competition Ans: e Section Ref: Historical Development Level: moderate

59. ISO 14000 standards provide guidelines for what? a) business ethics b) environmentally responsible actions c) supplier certification d) quality control e) web site development Ans: b Section Ref: Historical Development Level: moderate

60. NAFTA and the EU are _________________________. a) certification groups b) regional trade agreements c) quality control methods d) logistics providers e) U.S. government agencies Ans: b Section Ref: Historical Development Level: moderate

61. What type of commerce makes up the highest percentage of electronic transactions? a) B2C b) C2C c) B4B d) B2B e) B4C Ans: d Section Ref: Historical Development Level: moderate

62. The Internet developed from a government network called ARPANET, which was created in 1969 by _____. a) Japanese scientists b) the EPA c) the U.S. Defense Department d) NSF e) ISO Ans: c Section Ref: Historical Development Level: hard

63. Today’s business must think in terms of: a) regional trade zones b) the EPA c) the U.S. Defense Department d) the global market place e) the curved world Ans: d Section Ref: Historical Development Level: hard

64. General Electric’s Trading Process Network primarily handles transactions between _______________. a) individual customers b) companies and individual customers c) companies and their shipping firms d) companies and their distributors e) companies and their suppliers Ans: e Section Ref: Historical Development Level: moderate

65. What is a concept that takes a total system approach to creating efficient operations? a) lean systems b) enterprise resource planning c) customer relationship management

d) management science e) management information systems Ans: a Section Ref: Today's OM Environment Level: easy

66. What are software solutions that allow the firm to collect customer-specific data? a) MRP b) CRM c) ERP d) JIT e) ISO Ans: b Section Ref: Today's OM Environment Level: moderate

67. Entry-level positions for operations management graduates include all of the following except _________. a) quality specialist b) inventory analyst c) plant manager d) production analyst e) production supervisor Ans: c Section Ref: Today's OM Environment Level: moderate

68. Operations management personnel perform a variety of functions, including all of the following except ___________________. a) analyzing production problems b) analyzing potential mergers c) developing forecasts d) developing employee schedules e) monitoring inventory Ans: b Section Ref: Today's OM Environment Level: moderate

69. Which of the following concepts is linked the least with Henry Ford? a) scientific management b) mass production c) mass customization d) technology e) interchangeable parts

Ans: c Section Ref: Historical Development Level: hard

70. Today’s operations management is characterized by: a) its use of the internet. b) its reliance on the intranet. c) its increased use of cross-functional decision making. d) its use of cross-functional job sharing. e) its use of interchangeable parts.

Ans: c Section Ref: Today’s OM Environment Level: hard

71. Which of the following historical figures would probably have the most different management style from the others? a) Elton Mayo b) Henry Ford c) Eli Whitney d) Frederick W. Taylor e) Adam Smith Ans: a Section Ref: Historical Development Level: hard

72. Operations management interacts with which of the following: a) Marketing b) Information systems c) Finance d) Engineering e) all the above Ans: e Section Ref: OM Across the Organization Level: moderate

73. OM’s transformation role is to add value. Value added is a) performing activities well for the least possible cost b) the net decrease between output product value and input material value c) increasing product value in the first stage d) the net increase between output product value and input material value e) customizing a product, regardless of expense, to satisfy customer needs Ans: d Section Ref: OM’s Transformation Role Level: moderate

True/False 74. Operations management is the business function that plans, coordinates, and controls the resources needed to produce a company’s products and services.

Ans: True Section Ref: What is Operations Management?

Level: easy

75. Marketing is the central core function of every company.

Ans: False Section Ref: What is Operations Management?

Level: easy 76. Operations management is the central core function of every company.

Ans: True Section Ref: What is Operations Management?

Level: easy 77. An example of a transformation is waiting to see the doctor.

Ans: False Section Ref: What is Operations Management?

Level: moderate

78. At a factory, the transformation process is the physical change of raw materials and components into products.

Ans: True Section Ref: What is Operations Management?

Level: moderate

79. An example of an operation that does not add value is making a wedding cake.

Ans: False Section Ref: What is Operations Management?

Level: moderate

80. Efficiency means being able to perform most activities.

Ans: False Section Ref: What is Operations Management?

Level: moderate

81. An example of a “back room” operation for an airline company is loading luggage onto the airplane.

Ans: True Section Ref: Differences Between Manufacturing and Service Organizations Level: moderate

82. Companies that have low customer contact and are capital intensive, yet provide a service, are called service factories.

Ans: False Section Ref: Differences Between Manufacturing and Service Organizations Level: moderate

83. The Industrial Revolution started in the 1770s with the development of a number of inventions that relied on machine power instead of human power.

Ans: True Section Ref: Historical Development Level: moderate

84 Division of labor involves breaking down the production of a product into a series of small, elementary tasks, each of which is performed by a different worker.

Ans: True Section Ref: Historical Development Level: moderate

85. A key feature of scientific management is that workers are limited only by their tools.

Ans: False Section Ref: Historical Development Level: moderate

86. The creator of scientific management believed that worker productivity was governed by scientific laws.

Ans: True Section Ref: Historical Development Level: moderate

87. Operations management is a result of a single event, the industrial revolution.

Ans: False Section Ref: Historical Development Level: moderate

88. Worker participation in decision making is a key feature of scientific management.

Ans: False R Section Ref: Historical Development Level: moderate

89. “Job enrichment” is an approach in which workers are given a larger portion of the total task to do.

Ans: False Section Ref: Historical Development Level: moderate

90. The first mathematical model for inventory management was developed by Elton Mayo.

Ans: False Section Ref: Historical Development Level: hard

91. Operations research started with the publication of the results of the Hawthorne studies.

Ans: False Section Ref: Historical Development Level: moderate

92. Sustainability was an early 1950’s management function and focus.

Ans: False Section Ref: Historical Development Level: moderate

93. The Hawthorne effect is that workers are motivated by the attention they are given.

Ans: True Section Ref: Historical Development Level: moderate

94. Increasing the level of responsibility of a job by adding planning and coordination tasks is called job enrichment.

Ans: True Section Ref: Historical Development Level: moderate

95. Outsourcing is providing goods or services to an outside provider.

Ans: False Section Ref: Historical Development Level: moderate

96. Management science focuses on developing quantitative techniques for solving operations problems.

Ans: True Section Ref: Historical Development Level: moderate

97. The advent of the computer age paved the way for the development of MRP for inventory control and scheduling.

Ans: True Section Ref: Historical Development Level: moderate

98. The objective of supply chain management is to have every member of the chain compete against each other to enhance competitive abilities.

Ans: False Section Ref: Historical Development Level: moderate

99. The need to offer a greater variety of product choices to customers of a traditionally standardized product is the challenge of flexibility.

Ans: True Section Ref: Historical Development Level: moderate

100. One of the most important trends in companies today is competition based on time.

Ans: True Section Ref: Historical Development Level: moderate

101. The highest percentage of transactions on the internet occurs between businesses and their customers (B2C).

Ans: False Section Ref: Historical Development Level: moderate

102. Today many corporate CEOs have come through the ranks of operations.

Ans: True Section Ref: Today's OM Environment Level: easy

103. Marketing can always meet the customer’s needs.

Ans: False Section Ref: Today's OM Environment Level: easy 104. Marketing can meet the customer needs if they understand what operations can produce.

Ans: True Section Ref: OM Across the Organization Level: easy

105. Finance cannot judge the need for capital investments if they understand operations concepts and needs.

Ans: False; cannot judge if they do not understand….

Section Ref: OM Across the Organization Level: easy

Essay 106. Define operations management.

Ans: The business function responsible for planning, coordinating, and controlling the resources needed to produce a company’s products and services.

Section Ref: What is Operations Management Level: easy 107. What must companies focus on in order to survive in today’s business environment?

Ans: quality, time-based competition, efficiency, international perspectives, and customer relationships Section Ref: What is Operations Management Level: moderate

108. What are the three major functions through which every business is managed?

Ans: finance, marketing, and operations management Section Ref: What is Operations Management Level: easy

109. What is the “role” of operations management?

Ans: To transform organizational inputs into outputs Section Ref: What is Operations Management Level: easy 110. List at least seven different possible inputs to a transformation process.

Ans: workers, managers, buildings, equipment, materials, technology, and information Section Ref: What is Operations Management Level: moderate 111. What must companies do in order to be successful with Web-based on-line shopping?

Ans: Manage distribution centers and warehouses, operate fleets of trucks, forecast what customers want and maintain adequate inventories of products, and schedule deliveries while keeping costs low and customers happy.

Section Ref: What is Operations Management Level: moderate

112. In what ways do service organizations differ from manufacturing organizations?

Ans: Manufacturing organizations produce a physical, tangible product that can be stored in inventory before it is needed, while service organizations produce an intangible product that cannot be produced ahead of time; and for manufacturing organizations most customers have no direct contact with the operation, while for service organizations customers are typically present during creation of the service. Also, service organizations tend to have a shorter response time and are more labor intensive.

Section Ref: Differences Between Manufacturing and Service Organizations Level: moderate

113. List some typical operations management decisions that are made, along with their associated operations management term.

Ans:

What are the unique features of the business that will make it competitive? (Operations strategy) What are the unique features of the product? (Product design) What are the unique features of the process that give the product its unique characteristics?

(Process selection) How do we manage our sources of supply? (Supply chain management) How will managers ensure the quality of the product, measure quality, and identify quality problems? (Quality management) What is the expected demand for the product? (Forecasting) Where will the facility be located? (Location analysis) How large should the facility be? (Capacity planning) How should the facility be laid out? (Facility layout) What jobs will be needed in the facility, who should do what task, and how will their performance be measured? (Job design and work measurement) How will the inventory of raw materials be monitored? When will orders be placed? (Inventory mgt.)

Who will work on what schedule? (Scheduling)

Section Ref: Operations Management Decisions Level: hard

114. Why are operations management decisions typically more complex for large companies than for small companies?

Ans: Because of the size and scope of large companies: they typically produce a greater variety of products, have multiple location sites, and often use both domestic and international suppliers.

Section Ref: Operations Management Decisions Level: hard

115. What operations management approaches came out of the scientific management movement?

Ans: moving assembly lines, stopwatch time studies, piece rate incentives, and setting time standards for task performance Section Ref: Historical Development Level: hard

116. Tactical decisions can be distinguished from strategic decisions by what set of characteristics?

Ans: Focus on specific day-to-day issues, tactical decisions are made after strategic decisions, tactical decisions must be aligned with strategic decisions, tactical decisions provide feedback to strategic decision.

Section Ref: Operations Management Decisions Level: hard

117. What are the two key features of scientific management?

Ans: First, it is assumed that workers are motivated only by money and are limited only by their physical ability. Second, management should perform “planning” separately from the workers who perform the “doing.”

Section Ref: Historical Development Level: moderate

118. What were the major impacts on operations management that resulted from the widespread use of computers in the 1970s?

Ans: using quantitative models on a larger scale; development of material requirements planning; and data processing was made easier, with advances in forecasting, scheduling, and inventory management Section Ref: Historical Development Level: hard

119. What is the basic approach for business process reengineering and what are its major impacts?

Ans: It involves asking why things are done in a certain way, questioning assumptions, and then redesigning the processes. It can increase efficiency, improve quality, and reduce costs.

Section Ref: Historical Development

Level: moderate

120. How has information technology tools helped with supply chain management?

Ans: They enable collaborative planning and scheduling. They allow synchronized supply chain execution and design collaboration, and they allow companies to respond better and faster to changing market needs.

Section Ref: Historical Development Level: hard

121. What are environmental issues faced by business?

Ans: air pollution, water pollution, global warming, and waste disposal Section Ref: Historical Development Level: moderate

122. Operations Management is: Ans: The business function that plans, organizes, coordinates, and controls resources an organization transforms into goods and services.

Section Ref: What is Operations Management?

Level: easy

123. Why is today’s Operations Management environment described as very different from what it was just a few years ago?

Ans: Customers demand better quality, greater speed, and lower costs.

Section Ref: Today’s OM Environment Level: moderate

124. While customers and service organizations interact directly, customers and manufacturers interact Ans: Through service organizations like distributors, wholesalers, and retailers.

Section Ref: What is Operations Management?

Level: hard

125. Manufacturers often provide services like Ans: Shipping, helping customers use products, repairs, replacement parts, warranty service, and credit.

Section Ref: What is Operations Management?

Level: hard

126. Service providers may also transform inputs into Ans: Goods that support their service, like restaurant food preparation, hair and skin care products, and final assembly of bicycles, tricycles, wagons, furniture, and other products.

Section Ref: What is Operations Management?

Level: hard

127. Service providers’ “back room” activities, like ________________________, often have manufacturing characteristics like ________________________.

Ans: Check and credit card transaction processing, credit analysis, cleaning and repairing clothing and other products; physical products that can be inventoried, low customer contact, capital intense, and long response times.

Section Ref: Differences Between Manufacturing and Service Organizations Level: hard

128. While service and manufacturing firms contribute more to the economy and offer more jobs at all levels, ________________________ are also important to our lives and the economy.

Ans: Agriculture, fishing, and forestry; construction, and extraction (mining, oil and natural gas, industrial gases).

Section Ref: Differences Between Manufacturing and Service Organizations Level: hard

129. All business functions need ______________from operations management while operations managers are highly dependent on______ from _____ _______ to perform their jobs.

Ans: Information, input, all others Section Ref: Operations Management in Practice Level: moderate

130. While Operations Management focuses on privately−owned firms, governments provide many services and some goods, like: Ans: postal service; family, social, and aged assistance and care, health care, transportation, safety and security, transportation facility maintenance, education and libraries, real estate title and ownership recording, professional licensing, skill testing, recreation and related licensing (fishing and hunting), historic preservation.

Section Ref: Differences Between Manufacturing and Service Organizations Level: hard

131. The history of Operations Management reflects.

Ans: The accumulation of experience and ideas over time.

Section Ref: Historical Development Level: hard

132. Applying the best practices to operations management is not enough to give a competitive advantage because: Ans: Best practices are quickly passed to competitors.

Section Ref: Today’s OM Environment Level: moderate

133. Scientific Management, Management Science, Just−in−Time, Total Quality Management, Business Process Reengineering, and other developments reflect the application of ________________________ and ________________________ to the transformation of inputs into goods and services.

Ans: the Computer Age or computers or information processing or quantitative methods and philosophies that emphasize human relations, questioning existing practices, accepting change.

Section Ref: Historical Development Level: hard

File: ch02, Chapter 2: Operations Strategy and Competitiveness

Multiple Choice

1. What are the two key components of the operations strategy of Federal Express? a) they own their own fleet of tractor trailers, and they use a sophisticated bar code technology b) they own their own fleet of tractor trailers, and they have a large warehouse in every state c) they own their own fleet of airplanes, and they have a large warehouse in every state d) they use a sophisticated bar code technology, and they have a large warehouse in every state e) they own their own fleet of airplanes, and they use a sophisticated bar code technology Ans: e Section Ref: The Role of Operations Strategy Level: moderate

2. Operational efficiency is: a) driving the business strategy b) ensuring the right tasks are performed c) decreasing the firm’s input requirements d) increasing the firm’s output e) performing operations tasks well Ans: e Section Ref: The Role of Operations Strategy Level: moderate

3. During the 1970s and 1980s, firms from which country provided the most serious competitive threat to U.S. companies? a) Germany b) Canada c) Mexico d) Japan e) United Kingdom Ans: d Section Ref: The Role of Operations Strategy Level: moderate

4. The process of monitoring the external environment is called what? a) environmental examination b) environmental inspection c) environmental scrutiny d) environmental perusal e) environmental scanning Ans: e Section Ref: The Role of Operations Strategy Level: easy

5. Which of the following would not be considered a core competency that a company might have? a) a highly trained workforce b) an inefficient distribution system c) skills in attracting and raising capital d) use of information technology e) quality control techniques

Ans: b Section Ref: Developing a Business Strategy Level: easy

6. .Environmental scanning would not provide information on: a) sources of highly trained workers b) the firm’s internal inefficient distribution system c) opportunities and threats d) changes in information technology e) changes in global competition Ans: b Section Ref: Developing a Business Strategy Level: easy

7. Which of the following is not typically considered to be a core competency? a) workforce b) mission c) market understanding d) technology e) facilities Ans: b Section Ref: Developing a Business Strategy Level: moderate

8. What term describes the process of obtaining goods or services from an outside provider? a) outproviding b) transferization c) outsourcing d) subsourcing e) supersourcing Ans: c Section Ref: Developing a Business Strategy Level: easy

9. Once a business strategy has been developed: a) service prices are established b) competition must be identified c) an operations strategy must be formulated d) contracting with external sources must begin e) insourcing will be conducted Ans: c Section Ref: Developing a Business Strategy Level: easy

10. Which of the following is not considered one of the four broad categories of competitive priorities? a) technology b) cost c) quality d) flexibility e) time

Ans: a Section Ref: Developing an Operations Strategy Level: easy

11. Which of the following competitive priorities typically requires the use of more general-purpose equipment? a) technology b) cost c) quality d) flexibility e) time Ans: d Section Ref: Developing an Operations Strategy Level: moderate

12. Highly-skilled hourly workers would be most needed by companies employing which of the following competitive priorities? a) location b) cost c) flexibility d) development speed e) time Ans: c Section Ref: Developing an Operations Strategy Level: hard

13. How does Federal Express maintain its ability to compete on time during peak demand periods? a) it subcontracts overload to other firms b) it purchases more planes c) overtime d) it uses a very flexible part-time workforce e) it purchases more vans Ans: d Section Ref: Developing an Operations Strategy Level: hard

14. When making competitive priority decisions the firm: a) must select the correct supply chain b) must ensure the PWP is correctly established c) must focus on the one competitive priority at the exclusion of all others d) must make trade-off decisions e) must isolate the competing internal departments Ans: d Section Ref: Developing an Operations Strategy Level: hard

15. Empire West displays what by specializing in making a wide variety of products? a) outsourcing b) SCM c) quality d) flexibility e) efficiency

Ans: d Section Ref: Developing an Operations Strategy Level: moderate

16. Order winners and qualifiers: a) are consistent between manufacturing and service organizations b) only matter when responding to formal competitive bid requests c) remain constant over time d) change over time e) only apply to quasi-manufacturing firms Ans: d Section Ref: Developing an Operations Strategy Level: hard

17. Decisions regarding which of the following are not part of the production process infrastructure? a) organization of workers b) facilities c) worker pay d) quality control measures e) management policies Ans: b Section Ref: Developing an Operations Strategy Level: moderate

18. Decisions regarding which of the following are not part of the production process structure? a) management policies b) facilities c) robots d) flow of goods and services through the facility e) flexible manufacturing system (FMS) machines Ans: a Section Ref: Developing an Operations Strategy Level: moderate

19. What are the three primary types of technology? a) product technology, process technology, and information technology b) product technology, process technology, and environmental technology c) product technology, process technology, and safety technology d) information technology, environmental technology, and safety technology e) environmental technology, information technology, and process technology Ans: a Section Ref: Strategic Role of Technology Level: easy

20. Teflon is an example of what? a) process technology b) information technology c) environmental technology d) safety technology e) product technology Ans: e

Section Ref: Strategic Role of Technology Level: moderate

21. Technology should be acquired because: a) the new technology is fun b) the new technology keeps the employees happy c) the new technology doesn’t cost very much d) the new technology always improves productivity e) the new technology supports the company’s chosen competitive priorities Ans: e Section Ref: Strategic Role of Technology Level: easy

22. Computer-aided manufacturing is an example of what? a) process technology b) information technology c) environmental technology d) safety technology e) product technology Ans: a Section Ref: Strategic Role of Technology Level: moderate

23. Which type of technology has had the greatest impact on business? a) process technology b) information technology c) environmental technology d) safety technology e) product technology Ans: b Section Ref: Strategic Role of Technology Level: moderate

24. When does productivity increase? a) inputs increase while outputs remain the same b) inputs decrease while outputs remain the same c) outputs decrease while inputs remain the same d) inputs and outputs increase proportionally e) none of the above Ans: b Section Ref: Strategic Role of Technology Level: moderate 25. Which of the following is a valid type of “productivity measure”? a) multi-output productivity measure b) partial productivity measure c) multi-part productivity measure d) multi-component productivity measure e) imperfect productivity measure Ans: b Section Ref: Productivity

Level: moderate

26. Consider a pizza parlor. Which of the following would not be a valid productivity measure? a) pizzas produced / number of workers used b) pizzas produced / number of ovens c) pizzas produced / cost of workers and ingredients d) pizzas produced / cost of all inputs used e) labor hours / pizzas produced Ans: e Section Ref: Productivity Level: moderate

27. If inputs increase by 30% and outputs decrease by 15%, what is the percentage change in productivity? a) 100% decrease b) 11.54% increase c) 34.62% decrease d) 15% increase e) 15% decrease Ans: c Solution: P = O / I Section Ref: Productivity Level: hard

28. If inputs increase by 6% and outputs increase by 24%, what is the percentage productivity increase? a) 400.00% b) 16.98% c) 0.25% d) 4.00% e) 18.00% Ans: b Solution: P = O / I 1.24 / 1.06 = 1.1698 Section Ref: Productivity Level: hard

Move the decimal over two to get your percentage 16.98%

29. An airline has determined that its baggage handlers handle 12,000 bags when 3 baggage handlers are on shift.

What is the baggage handler productivity? a) 4,000 bags/shift b) 4,000 bags/handler c) 14,000 bags/shift d) 12,000 bags/shift e) 2,000 bags/handler Ans: b Solution: P = O / I 12000 / 3 = 4000 bags/handler Section Ref: Productivity Level: hard

30. If inputs increase by 10% and outputs increase by 4%, what is the percentage productivity increase? a) 5.45% b) 250.00% c) - 5.45% d) 5.77%

e) - 5.77% Ans: c Solution: P = O / I 1.04 / 1.10 = .94 Since inputs were higher than outputs, this represents a loss or negative; Now, subtract 1.00 –. 94 = .06 .06 / 1.10 = -5.45 Section Ref: Productivity Level: hard

31. If inputs increase by 10% and outputs increase by 5%, what is the percentage change in productivity? a) 4.545% decrease b) 4.545% increase c) 4.762% increase d) 4.762% decrease e) 50.000% increase Ans: a Solution: P = O / I 1.05 / 1.10 = .95 Since inputs were higher than outputs, this represents a loss or negative; Now, subtract 1.00 –. 95 = .05 .05 / 1.10 = decrease 4.545% Section Ref: Productivity Level: hard 32. If Joe’s Diner serves 150 meals in one day using 3 kitchen staff, what is the kitchen staff daily productivity? a) 40 meals/staff b) 45 meals/staff c) 50 meals/staff d) 55 meals/staff e) 60 meals/staff Ans: c Solution: 150 / 3 = 50 meals per staff Section Ref: Productivity Level: moderate

33. If inputs increase by 30% and outputs increase by 15%, what is the percentage change in productivity? a) 50.00% decrease b) 88.46% increase c) 88.46% decrease d) 11.54% increase e) 11.54% decrease Ans: e Solution: 1.15 / 1.30 = .8846 Since inputs were higher than outputs; this represents a loss or negative Now, subtract 1.00 –. 8846 = .1154 decrease 11.54% Section Ref: Productivity Level: hard

34. Suppose that on Monday the cost of inputs sums to $1000, and the value of outputs sums to $4000. For which of the following values on Tuesday would productivity increase? a) inputs = $1100, outputs = $4000 b) inputs = $1100, outputs = $4200 c) inputs = $850, outputs = $3600 d) inputs = $1000, outputs = $3900 e) inputs = $2000, outputs = $8000 Ans: c

Solution: Calculate the P= O/I for each; c is the only one higher than Monday.

3600 / 850 = 4.23 Section Ref: Productivity Level: moderate

35. Suppose that a plant has a daily productivity of 200 parts per employee? What can we conclude? a) the daily productivity is excellent b) the plant can hire more workers and still earn profits c) the plant is not earning profits d) the plant must be highly automated e) nothing Ans: e Section Ref: Productivity Level: moderate

36. Suppose that a plant has a daily productivity of 0.85 parts per employee? What can we conclude? a) the plant must be very labor-intensive b) the plant is not earning profits c) the plant must be highly automated d) the plant should lay off workers e) nothing Ans: e Section Ref: Productivity Level: moderate

37. Suppose that a plant has a total productivity measure of 0.85. What can we conclude? a) the plant is not earning profits b) nothing c) the plant should lay off workers d) the plant is highly automated e) the daily productivity is excellent Ans: a Section Ref: Productivity Level: moderate

38. Suppose that last month the cost of inputs summed to $100,000, and the value of outputs summed to $800,000.

For which of the following values this month would productivity increase? a) inputs = $110,000, outputs = $800,000 b) inputs = $50,000, outputs = $400,000 c) inputs = $200,000, outputs = $1,600,000 d) inputs = $100,000, outputs = $820,000 e) inputs = $300,000, outputs = $1,600,000 Ans: d Solution: Calculate the P= O/I for each; d is the only one higher than last month. 820,000 / 100,000 = 8 Section Ref: Productivity Level: moderate

39. Suppose that in week 1 a company produced 1000 units using 60 labor hours. For which of the following values in week 2 would labor productivity decrease? a) units = 2000, hours = 120 b) units = 1500, hours = 95

c) units = 1000, hours = 58 d) units = 500, hours = 30 e) units = 2000, hours = 100 Ans: b Solution: Calculate the P= O/I for each; b has the lowest productivity.

1500 / 95 = 15.79 Section Ref: Productivity Level: moderate

40. Suppose that on Wednesday the cost of inputs summed to $4000, and the value of outputs summed to $10,000.

For which of the following values on Thursday will productivity stay the same? a) inputs = $2000, outputs = $5000 b) inputs = $5000, outputs = $10,000 c) inputs = $4000, outputs = $8000 d) inputs = $10,000, outputs = $4000 e) inputs = $12,000, outputs = $40,000 Ans: a Solution: Calculate the P= O/I for each; 5000 / 2000 = 2.5 a is the only one equal to Wednesday’s.

Section Ref: Productivity Level: moderate

41. Vericol, Inc. manufactures drugs using workers and automated machines. The firm has decided to replace two workers with a new machine, while the output per day is not expected to change. Which of the following cannot be true? a) labor productivity will increase b) machine productivity will decrease c) labor productivity will decrease d) multifactor productivity will increase e) multifactor productivity will decrease Ans: c Section Ref: Productivity Level: moderate

42. A manager has just replaced three workers with a machine that is cheaper to operate than the cost of the three replaced workers. Output is expected to remain the same. Which of the following is true? a) labor productivity will decrease b) machine productivity will increase c) multifactor productivity will decrease d) multifactor productivity will increase e) the value of output will decrease Ans: d Section Ref: Productivity Level: moderate

43. Suppose that in January a company produced 5000 units using 1000 labor hours. For which of the following values in February would labor productivity decrease? a) units = 5000, hours = 900 b) units = 10,000, hours = 1500 c) units = 10,000, hours = 2000 d) units = 2500, hours = 500

e) units = 5000, hours = 1100 Ans: e Solution: Calculate the P= O/I for each; e is the only one less than January. 5000 / 1100 = 4.54 Section Ref: Productivity Level: moderate

44. Suppose that in year 1 a company produced $100 Million worth of outputs while inputs totaled $50 Million. For which of the following values in year 2 would productivity decrease? a) outputs = $90 Million, inputs = $50 Million b) outputs = $400 Million, inputs = $200 Million c) outputs = $250 Million, inputs = $100 Million d) outputs = $50 Million, inputs = $25 Million e) outputs = $60 Million, inputs = $25 Million Ans: a Solution: Calculate the P= O/I for each; 90 / 50 = 1.8 a is the only one less than Year 2.

Section Ref: Productivity Level: moderate

45. If the telecommunication company sold $10,000,000 of internet service using $50,000 of labor, $25,000 of leased bandwidth, $45,000 service fees, and $80,000 or replacement parts, what is the telecommunication multifactor productivity? a) 35 b) 40 c) 45 d) 50 e) 55 Ans: d Solution: 10,000,000 / 50k + 25k + 45k + 80k = 10,000,000 / 200k = 50 Section Ref: Productivity Level: moderate

46. Suppose that on Thursday a company produced 80 units using 160 labor hours. For which of the following values on Friday would daily labor productivity increase? a) units = 70, hours = 160 b) units = 80, hours = 180 c) units = 240, hours = 500 d) units = 160, hours = 300 e) units = 40, hours = 100 Ans: d Solution: Calculate the P= O/I for each; d is the only one more than Thursday. 160 / 300 = .5333 Section Ref: Productivity Level: moderate

47. A firm produces 100 units using 800 labor hours. What is its labor productivity? a) 0.125 units/hour b) 8 units/hour c) 100 units/hour d) 800 units/hour e) -0.125 units/hour Ans: a

Solution: 100 / 800 = .125 units / hr Section Ref: Productivity Level: easy

48 A firm produces 2000 products using 10 workers on an eight-hour shift. What is the labor productivity per worker? a) 200 units/hour b) 25 units/hour c) 250 units/hour d) 20 units/hour e) 0.04 units/hour Ans: b Solution: 2000 / 10 = 200 = 200/8 = 25 units/hr Section Ref: Productivity Level: moderate

49. A machine shop produces metal frames on two different machines. The average daily production on machine 1 is 300 frames, and the average daily production on machine 2 is 180 frames. What is the daily machine productivity? a) 480 frames/machine b) 330 frames/machine c) 240 frames/machine d) 160 frames/machine e) 300 frames/machine Ans: c Solution: 300 + 180 = 480 Section Ref: Productivity Level: easy

480 / 2 = 240 frames/machines

50. A machine shop produces metal brackets on two different machines. Machine 1 can produce a bracket every 10 minutes. Machine 2 can produce a bracket every 4 minutes. What is the average productivity per machine? a) 4.3 brackets/hour b) 8.6 brackets/hour c) 10.5 brackets/hour d) 21.0 brackets/hour e) 7.0 brackets/hour Ans: c Solution: Machine 1 > 6 [6x10=1 hr] Machine 2 > 15[4x15=1 hr] 6 + 15 = 21 = 21 / 2 = 10.5 brackets/hr Section Ref: Productivity Level: hard

51. A firm produces handbags using three workers. On Tuesday, Jane completed 60 bags in 6 hours, Ron completed 50 bags in 7 hours, and Mary completed 80 bags in 5 hours. What was the overall productivity of the firm? a) 7.92 bags/hour b) 11.05 bags/hour c) 10.00 bags/hour

d) 10.56 bags/hour e) 61.67 bags/hour Ans: d Solution: Jane 60 bags 6 hrs Ron 50 bags 7 hrs Mary 80 bags 5 hrs Total - 190 bags 18 hrs 190 / 18 = 10.56 bags/hr Section Ref: Productivity Level: moderate

52. Suppose that output is worth $400, and labor and materials costs are $200 and $100, respectively. What is the materials productivity? a) 2.00 b) 1.33 c) 0.25 d) 0.75 e) 4.00 Ans: e Solution: 400 / 100 = 4.00 Section Ref: Productivity Level: easy

53. A firm produces 500 units per day using five workers on a five-hour shift. On average, 15% of the units produced are defective and must be scrapped. What is the labor productivity for non-defective units? a) 17 units/hour b) 3 units/hour c) 20 units/hour d) 85 units/hour e) 15 units/hour Ans: a Solution: 500 per day – 15% or 75 = 425 per day 425 / 5 workers = 85 85 / 5 hr = 17 units / hr Section Ref: Productivity Level: moderate

54. Suppose that weekly output is worth $1000, and labor and materials costs are $300 and $200, respectively.

What is the multifactor productivity ratio? a) 1000 b) 8 c) 2 d) 3 e) 0.5 Ans: c Solution: 1000 / 300 + 200 = 1000 / 500 = 2 Section Ref: Productivity Level: moderate

55. Each day a firm produces 50 products worth $40 each. Raw materials cost per unit are $12. The firm uses 4 workers on an eight-hour shift earning $10 per hour each. What is the multifactor productivity ratio? a) 1.82

b) 0.77 c) 3.16 d) 0.12 e) 2.17 Ans: e Solution: 50 x $40 = 2000 600 [12x50] + 320 = 920 2000 / 920 = 2.17 Section Ref: Productivity Level: moderate

56. A bakery bakes bread in two different ovens. Oven 1 can bake a loaf every 30 minutes. Oven 2 can bake a loaf every 15 minutes. What is the average productivity per oven? a) 6.00 loaves/hour b) 3.00 loaves/hour c) 2.67 loaves/hour d) 1.33 loaves/hour e) 0.38 loaves/hour Ans: b Solution: Oven 1 can bake 2 per hour Oven 2 can bake 4 per hour Total 6 loaves per hr / 2 ovens = 3 loaves per hour Section Ref: Productivity Level: hard

57. Johnny employs five painters. He collected the following data from last week.

Painter Hours Walls Completed Julius 40 60 1.5 Margaret 32 68 2.125 Dave 50 78 1.56 Suzy 36 70 1.94 Fawn 44 74 1.68 Which painter was least productive last week? a) Julius b) Margaret c) Dave d) Suzy e) Fawn Ans: a Solution: Calculate by dividing walls completed by the hours; a is the lowest and least productive Painter Hours Walls Completed Julius 40 60 1.5 Margaret 32 68 2.125 Dave 50 78 1.56 Suzy 36 70 1.94 Fawn 44 74 1.68 Section Ref: Productivity Level: moderate 58. A bakery uses five ovens to bake muffins. Yesterday’s data are provided below.

Oven Hours Muffins Baked Oven 1 5 600 120

Oven 2 10 1500 Oven 3 8 1280 Oven 4 8 800 Oven 5 6 780 Which oven was the most productive? a) Oven 1 b) Oven 2 c) Oven 3 d) Oven 4 e) Oven 5

150 160 100 130

Ans: c Solution: Calculate by dividing muffins baked by the hours; c is the highest and most productive Oven 1 5 600 120 Oven 2 10 1500 150 Oven 3 8 1280 160 Oven 4 8 800 100 Oven 5 6 780 130 Section Ref: Productivity Level: moderate 59. The state government utilizes five workers to stamp license plates. Last month’s data are provided below.

Worker Days Worked Units Stamped Pete 30 1440 48 Tommy 20 1600 80 Laura 24 2000 83.33 Julie 28 2100 75 Susan 29 1200 41.38 Which worker was the least productive? a) Pete b) Tommy c) Laura d) Julie e) Susan Ans: e Solution: Calculate by dividing units stamped by the days; e is the lowest and least productive Worker Days Worked Units Stamped Pete 30 1440 48 Tommy 20 1600 80 Laura 24 2000 83.33 Julie 28 2100 75 Susan 29 1200 41.38 Section Ref: Productivity Level: moderate

60. A firm uses five plants to produce its products. Each final product has a value of $100. The following table provides last week’s output, labor hours used (at $15 per hour), and materials cost per unit.

Plant Output Labor Hours Materials Cost per Unit Plant 1 2000 400 $20 Plant 2 5000 900 $18 Plant 3 9000 2000 $20 Plant 4 1000 150 $30 Plant 5 2000 440 $18 Which plant was most productive last week? a) plant 1 b) plant 2 c) plant 3 d) plant 4

e) plant 5 Ans: b Solution Plant 1 2000/(400x15) + (20x2000) = .043 Plant 2 5000/(900x15) + (18x2000) = .048 Plant 3 9000/(2000x15) + (20x2000) = .042 Plant 4 1000/(150x15) + (30x2000) = .031 Plant 5 2000/(440x15) + (18x2000) = .047 Section Ref: Productivity Level: hard

61. A firm uses five plants to produce its products. Output value and total input cost for last week are provided below.

Plant 1 Output Value Total Cost Plant 1 $20,000 $25,000 Plant 2 $50,000 $60,000 Plant 3 $40,000 $42,000 Plant 4 $80,000 $99,000 Plant 5 $25,000 $29,000 Which plant was least productive last week? a) plant 1 b) plant 2 c) plant 3 d) plant 4 e) plant 5 Ans: a Solution: Plant 1 20000/25000 = .800 Plant 2 50000/60000 = .833 Plant 3 40000/42000 = .952 Plant 4 80000/99000 = .808 Plant 5 25000/29000 = .862 Section Ref: Productivity Level: moderate

62. Last week Jason painted 11 houses in 4 days. This week he painted 14 houses in 5 days. What was his percent productivity increase? a) 1.82% b) 1.79% c) 27.27% d) 25.00% e) 5.00% Ans: a Solution: 11 / 4 = 2.75 14 / 5 = 2.8 2.8 / 2.75 = 1.01818 or 1.82% (remember to move the decimal over) Section Ref: Productivity Level: moderate

63. Last month a plant produced 10,000 units using 2000 labor hours. This month it produced 12,000 units using 3000 labor hours. What is the percent productivity decrease? a) 200% b) 100%

c) 50% d) 25% e) 20% Ans: e Solution: 10000 / 2000 = 5 12000 / 3000 = 4 4 /5 = .8 or 20% Section Ref: Productivity Level: moderate

64. On Tuesday George produced 100 units in 8 hours. On Wednesday he produced 120 units in 10 hours. What was his percent productivity change? a) −0.50% b) −4.17% c) 4.17% d) −4.00% e) 4.00% Ans: d Solution: 100 / 8 = 12.5 120 / 10 = 12 12 / 12.5 = .96 or -4% Section Ref: Productivity Level: moderate

65. Last month Stacy sold 10 houses while working 20 days. This month she sold the same number of houses in 22 days. What is her percent productivity change? a) 10.00% b) − 9.09% c) 9.09% d) −10.00% e) − 4.55% Ans: b Solution: 10 / 20 = .5 10 / 22 = .4545 .4545 / .5 = -.9090 or – 9.09% Section Ref: Productivity Level: moderate

66. Yesterday, John produced 100 units in 8 hours. Today he produced the same amount in 6 hours. What is his percent productivity change? a) 33.33% b) 0.00% c) 25.55% d) −25.00% e) 4.67% Ans: a Solution: 100 / 8 = 12.5 100 / 6 = 16.666 16.666 / 12.5 = 1.3333 or 33.33% Section Ref: Productivity

Level: moderate

67. A company used to produce 500 units every 2 days, but 10% of the units were defective. After installing a new process, defects have been eliminated while output has remained the same. What is the percent increase in productivity due to installing the new process? a) 10.00% b) 25.00% c) 11.11% d) 0.00% e) 5.56% Ans: c Solution: 10% of 500 = 450 450 / 2 = 225 500/2 = 250 250 / 225 = 1.1111 or 11.11% Section Ref: Productivity Level: hard

68. A company used to produce 300 units every day, but 20% of the units were defective. After installing a new process, the defect rate has been reduced to 5%, while output has remained the same. What is the percent increase in productivity due to installing the new process? a) 15.79% b) 0.00% c) 15.00% d) 18.75% e) −75.00% Ans: d Solution: 300 – 20% = 240 300 – 5% = 285 285 / 240 = 1.1875 or 18.75% Section Ref: Productivity Level: hard

69. Last month a plant produced 1200 units using 150 labor hours. This month it produced 1500 units using 300 labor hours. What is the percent productivity decrease? a) 37.50% b) 60.00% c) 100.00% d) 300.00% e) 200.00% Ans: a Solution: 1200 / 150 = 8 1500 / 300 = 5 5/ 8 = .625 100 – 62.5 = 37.50% Section Ref: Productivity Level: moderate

70. Which of the following has used the Internet to conduct a fashion show in order to boost sales? a) The Gap b) Eddie Bauer

c) Fruit of the Loom d) Victoria’s Secret e) Sears Ans: d Section Ref: Developing a Business Strategy Level: hard

71. Which of the following is not described in the chapter as one of the major environmental trends that firms should monitor? a) marketplace trends b) global climate trends c) economic trends d) political trends e) social trends Ans: b Section Ref: Developing a Business Strategy Level: hard

72. Suppose that a plant manager is only evaluated based on the partial productivity measure: output/(number of employees). If she replaces 10% of the workforce with robots (one robot per replaced worker), and output remains the same, what will be the percent change in this measure of productivity?

Ans: 11.1% increase Section Ref: Productivity Level: hard

73. Productivity is essentially: a) something to fill out managers’ reports b) measure of resource effectiveness c) a scorecard of how efficiently resources are used d) a balance scorecard metric e) the current business fad Ans: c Section Ref: Productivity Level: hard

True/False 74. An operations strategy covers a relatively short time horizon, whereas a business strategy covers a relatively long time horizon.

Ans: False Section Ref: The Role of Operations Strategy Level: easy

75. To provide speed of delivery, Federal Express invested in a sophisticated bar code technology.

Ans: False Section Ref: The Role of Operations Strategy Level: hard

76. To provide dependability of delivery, Federal Express acquired its own fleet of airplanes.

Ans: False Section Ref: The Role of Operations Strategy Level: hard

77. Operations Strategy is developed before the business strategy so the company knows what it will be producing before establishing a long range business strategy.

Ans: False Section Ref: The Role of Operations Strategy Level: hard 78. Victoria’s Secret has used the Internet to conduct a fashion show in order to boost sales.

Ans: True Section Ref: Developing a Business Strategy Level: hard

79. Market research represents a type of environmental scanning.

Ans: True Section Ref: Developing a Business Strategy Level: moderate

80. Companies that compete on cost generally also allow a lot of product customization.

Ans: False Section Ref: Developing a Business Strategy Level: moderate

81. Firms that focus on quality as their primary competitive priority usually implement either product design quality or process quality, but not both.

Ans: False Section Ref: Developing an Operations Strategy Level: moderate

82. Federal Express subcontracts its work overload to other firms during peak demand periods.

Ans: False Section Ref: Developing an Operations Strategy Level: hard

83. As long as the firm always meets the order qualifier classification it will be always be competitive and win competitive bid opportunities Ans: False Section Ref: Developing an Operations Strategy Level: moderate

84. Companies that compete based on flexibility often cannot compete on cost.

Ans: True

Section Ref: Developing an Operations Strategy Level: moderate

85. Facilities decisions are part of the production process infrastructure.

Ans: False Section Ref: Developing an Operations Strategy Level: moderate

86. Decisions regarding flow of goods and services through the facility are part of the production process structure.

Ans: True Section Ref: Developing an Operations Strategy Level: moderate

87. Worker pay decisions are part of the production process structure.

Ans: False Section Ref: Developing an Operations Strategy Level: moderate

88. Quality control approaches are part of the production process infrastructure.

Ans: True Section Ref: Developing an Operations Strategy Level: moderate

89. Studies have shown that companies that invest in new technologies tend to improve their financial position over those that do not.

Ans: True Section Ref: Developing an Operations Strategy Level: moderate

90. Operations management is only concerned with information technology applications within the firm.

Ans: False Section Ref: Strategic Role of Technology Level: moderate

91. Process technology is the technology that has grown the most rapidly and has had the greatest impact on business.

Ans: False Section Ref: Strategic Role of Technology Level: moderate

92. A measure of how efficiently inputs are being converted into outputs is called utilization.

Ans: False Section Ref: Strategic Role of Technology Level: moderate

93. Productivity = input/output.

Ans: False Section Ref: Productivity Level: easy

94. Output/(all inputs used) is called total productivity.

Ans: True Section Ref: Productivity Level moderate 95. An operations strategy should not impact the firm’s supply chain design.

Ans: False Section Ref: Operations Strategy Within OM: How It All Fits Together Level moderate

96. Output/(labor + capital) is an example of a partial productivity measure.

Ans: False Section Ref: Productivity Level: moderate

97. Productivity gains in the service sector have been much lower than that of manufacturing.

Ans: True Section Ref: Productivity Level: moderate

98. A Marketing Strategy is defines marketing plans to support the business strategy.

Ans: True Section Ref: The Role of Operations Strategy Level: easy 99. McDonald’s and Pizzerias compete on the same “order winners”.

Ans: False; McDonalds competes on consistency, Pizzerias compete on homemade taste.

Section Ref: Developing an Operations Strategy Level: easy 100. A nation’s productivity is not directly related to its standard of living.

Ans: False Section Ref: Productivity Level: moderate

Essay 101. Describe the difference between operational effectiveness and strategy.

Ans: Operational effectiveness is the ability to perform operations more efficiently than competitors. Strategy, on the other hand, is a plan for competing in the marketplace.

Section Ref: The Role of Operations Strategy Level: moderate 102. Define “environmental scanning.”

Ans: Monitoring the external environment for changes and trends in the market, in the economic and political environment, and in society in order to determine business opportunities and threats.

Section Ref: The Role of Operations Strategy Level: moderate

103. A mission statement answers what three overriding questions?

Ans: (1) What business is the organization in?, (2) Who are the customers?, (3) How will the company’s core beliefs shape its business?

Section Ref: The Role of Operations Strategy Level: moderate

104. What are some general technological trends in the marketplace?

Ans: point-of-sale scanners, automation, computer-assisted processing, electronic purchasing, electronic order tracking, and e-commerce Section Ref: The Role of Operations Strategy Level: moderate

105. How have U.S. tobacco companies responded to public awareness of the dangers of smoking?

Ans: Many have changed their strategy to focus on customers overseas where smoking is still socially acceptable, or have diversified into other product lines.

Section Ref: Developing a Business Strategy Level: moderate

106. Discuss how the operation strategy categories of structure and infrastructure determine the nature of the company’s operations function.

Ans: Structure is the operations decisions related to the design of the production process while infrastructure is operations decisions related to the planning and control systems of the operations. Together they define how the firm will pursue its long range plan.

Section Ref: Developing a Business Strategy Level: moderate

107. Suggest some core competencies that companies may have.

Ans: highly trained workforce, responsive in meeting customer needs, flexible in performing a variety of tasks, strong technical capability, creative in product design, flexible in producing a variety of products, technologically advanced, an efficient distribution system, skilled in understanding customer wants and predicting market trends, skilled in attracting and raising capital, use of latest production technology, use of information technology, and quality control techniques.

Section Ref: Developing a Business Strategy Level: moderate 108. What is management guru Tom Peters’ famous quote regarding outsourcing? What is his main point?

Ans: “Do what you do best and outsource the rest.” The point is to outsource non-core activities so that the firm can focus on its core competencies.

Section Ref: Developing a Business Strategy Level: hard

109. What outsourcing activities does Total Logistics Control perform for Meijer?

Ans: all deliveries, route scheduling, and all activities involved in maintaining a fleet of trucks Section Ref: Developing a Business Strategy Level: hard

110. At the national level why is it important to measure productivity?

Ans: The economic success of a nation and the quality of life of its citizens are related to the competitiveness in the global marketplace. Understanding the nation’s productivity helps to define how the nation is performing as a whole/ Section Ref: Developing an Operations Strategy Level: hard

111. Describe how Southwest Airlines competes on cost.

Ans: Facilities are streamlined: only one type of aircraft is used, and flight routes are generally short. This serves to minimize costs of scheduling crew changes, maintenance, inventories of parts, and many administrative costs.

Unnecessary costs are completely eliminated: there are no meals, printed boarding passes, or seat assignments.

Section Ref: Developing a Business Strategy Level: moderate

112. For what entities can productivity be measured?

Ans: individuals, departments, organizations, industries, or even countries Section Ref: Productivity Level: moderate

Fill-in-the-Blank 113. If a company’s inputs for producing a certain product increase by 10% and the output increases by 25%, what is the percentage productivity increase for that product?

Ans: 13.6% Section Ref: Productivity Level: hard 114. If a company’s inputs for producing a certain product increase by 50% and the output increases by 90%, what is the percentage productivity increase for that product?

Ans: 26.7% Section Ref: Productivity Level: hard 115. The school’s cafeteria has three service lines (pizza, salads, and sandwiches). The pizza line has one server and serves 90 pizzas per hour. The salad line has two servers and they handle 140 customers in 70 minutes. The sandwich line has three servers and they supply 360 sandwiches in 90 minutes. Which service line has the highest hourly productivity?

Ans: Pizza line at 90 pizzas/server/hour Section Ref: Productivity Level: hard

116. A new milling machine can process 2000 jobs in 8 hours. What is the productivity of the machine?

Ans: 250 jobs/hour Section Ref: Productivity Level: easy

117. A firm produces 6000 products using 12 workers on a nine-hour shift. What is the labor productivity per worker?

Ans: 55.6 units/hour Section Ref: Productivity Level: moderate

118. A machine shop produces hangers on two different machines. Machine 1 can produce a hanger every 15 minutes. Machine 2 can produce a hanger every 10 minutes. What is the average productivity per machine?

Ans: 5 units/hour Section Ref: Productivity Level: hard

119. A firm produces shirts using three workers. On Wednesday, Madeline completed 110 shirts in 6 hours, Federico completed 90 shirts in 7 hours, and Susan completed 130 shirts in 9 hours. What was the overall productivity of the firm?

Ans: 15 units/hour Section Ref: Productivity Level: moderate

120. A firm produces 1500 units per day using four workers on a five-hour shift. On average, 12% of the units produced are defective and must be scrapped. What is the labor productivity for non-defective units?

Ans: 66 units/hour Section Ref: Productivity Level: moderate

121. Last week George mowed 6 lawns in two days. This week he mowed 8 lawns in three days. In which week was George more productive?

Ans: last week Section Ref: Productivity Level: moderate

122. During week one, on average, the aircraft cleaning staff was able to totally clean an airplane in 45 minutes using 3 cleaners. During week two the average time to clean an aircraft went to 40 minutes with one of the cleaning staff off sick. Week two productivity changed in which direction and by how much?

Ans: Week two productivity is 20 minutes/staff, productivity decreased Section Ref: Productivity Level: moderate

123. A company uses two plants to produce motorcycles. Plant A produces 200 per week using 20 workers and 4 machines. Plant B produces 250 per week using 10 workers and 10 machines. Which plant is more productive?

Ans: unknown—Plant A has a higher machine productivity but a lower labor productivity. The cost of labor and machines is needed.

Section Ref: Productivity Level: moderate

124. Firms measure productivity to learn how ________________________ they are.

Ans: competitive Section Ref: Developing an Operations Strategy Level: moderate

125. Rapid technological change includes the risk of ________________________ .

Ans: obsolescence.

Section Ref: Strategic Role of Technology Level: moderate

126. The operations function must place emphasis on those priorities that directly support the __________ ________. Therefore, it needs to make _________ between different priorities.

Ans: Business strategy, trade-offs Section Ref: Developing an Operations Strategy Level: moderate

127. Estimating productivity requires measurements of ________________________ and ________________________.

Ans: results and effort; output and input, etc.

Section Ref: Productivity Level: moderate

128. Operations strategy is a long range plan for the design and use of resources in support of ________________________ Ans: the business strategy Section Ref: The Role of Operations Strategy Level: easy

129. Mass produced standard products were the main manufacturing concern until ________________________.

Ans: the 1970s Section Ref: The Role of Operations Strategy Level: easy

130. Restaurants that offer pizza to go have different ________________________ than those that do not.

Ans: missions Section Ref: The Role of Operations Strategy Level: easy

131. __________ ________ is used to improve the process of creating goods and services.

Ans: Process technology Section Ref: Strategic Role of Technology Level: easy

132. Environmental scanning helps organizations recognize ________________________.

Ans: opportunities and threats.

Section Ref: Developing a Business Strategy Level: easy

133. Firms use ________________________ to concentrate on their ________________________.

Ans: outsourcing, core competencies Section Ref: Developing a Business Strategy Level: easy

134. A business strategy is like an explorer's ________________________.

Ans: compass Section Ref: Developing a Business Strategy Level: easy

135. Saying that an organization is qualified to be in its marker means it has the right ______________________.

Ans: order qualifiers Section Ref: Developing a Business Strategy Level: easy

136. ____________ _______________ develops financial plans to support the business strategy.

Ans: Finance Strategy Sections Ref: The Role of Operations Strategy Level: easy

Chapter: Chapter 3 Test Bank: Product Design and Process Selection

Multiple Choice

1. The ease with which the product can be made is its a) manufacturability b) repeatability c) readiness for manufacturing d) reliability e) accountability Ans: a Reference: Product Design Level: moderate

2. Service design differs from product design by including _____________ . a) customer needs b) marketing personnel in the decision making process c) speed d) quality e) the esthetic and psychological benefits of the product Ans: e Reference: Product Design Level: moderate 3. A company’s product design supports its business strategies by a) designing products that appeal to its customers b) designing as many products as possible c) including the company’s mission somewhere in the product d) designing products that aid strategic planning activities e) designing the company’s strategy Ans: a Reference: Product Design Level: hard

4. Which of the following is not a step in product design? a) final design b) preliminary design and testing c) idea development d) conceptual design e) product screening Ans: d Reference: The Product Design Process

Level: moderate

5. ___________ is a vital link between customers and product design. a) Engineering b) Accounting c) The Internet d) Operations e) Marketing Ans: e Reference: The Product Design Process Level: moderate

6. All product designs begin with ____________ . a) a blueprint b) a cost analysis c) an idea d) a feasibility study e) a focus group Ans: c Reference: The Product Design Process Level: moderate

7. Which of the following is true regarding the relative predictability of the cycle of new product introductions? a) new car models are predictable, but new fashion and new skin care products are not b) new car models and new fashion are predictable, but new skin care products are not c) new car models, new fashion, and new skin care products are all predictable d) new car models, new fashion, and new skin care products are all unpredictable e) new fashion and new skin care products are predictable, but new car models are not Ans: b Reference: The Product Design Process Level: hard 8. Lands’ End is a well-known benchmarking target because of its __________ . a) catalog business b) supply chain management c) success at resolving complaints d) labor relations e) environmental policies Ans: a Reference: The Product Design Process Level: hard

9. In 1997, who performed a large benchmarking study for IBM? a) Boston Consulting Group b) Anderson Consulting c) i2 Technologies d) Mercer Management Consultants e) Manugistics Ans: d Reference: The Product Design Process Level: hard

10. When designing the Taurus model, what did Ford Motor Company do with regard to BMW and Toyota? a) benchmarking b) hired some of their employees c) reverse engineering d) copied their quality management techniques e) bought some of their dealerships Ans: c Reference: The Product Design Process Level: hard

11. Reverse engineering is: a) altering the basic design based on user input. b) reengineering a failing product. c) acquiring a competitor’s product and relabeling it for sale. d) acquiring a competitor’s product and studying its design features. e) changing your mind on the previous design.

Ans: d Reference: The Product Design Process Level: moderate 12. Studying the practices of companies considered “best in class” and comparing the performance of our company against their performance is a) competition b) copying c) frustration d) benchmarking e) notching Ans: d Reference: The Product Design Process Level: moderate

13. Involving suppliers early in the design process is called: a) reengineering b) disaggregation c) redesign d) benchmarking e) supplier involvement Ans: e Reference: The Product Design Process Level: moderate

14. Evaluating a product idea to determine its likelihood of success is a) product screening b) estimating c) technological forecasting d) product windowing e) product evolution Ans: a Reference: The Product Design Process Level: moderate 15. In product screening, issues such as “Will we need new facilities and equipment?” and “Can material for production be readily obtained?” are addressed by a) marketing b) finance c) engineering d) operations e) accounting Ans: d Reference: The Product Design Process Level: moderate 16. In product screening, issues such as, “What is the market size?” and “What is the long term-product potential?” are addressed by: a) marketing b) finance c) engineering d) operations e) accounting Ans: a Reference: The Product Design Process Level: moderate

17. Approximately what percentage of ideas do not make it past the screening stage? a) 30%

b) 50% c) 60% d) 80% e) 90% Ans: d Reference: The Product Design Process Level: hard

18. What technique is based on computing the quantity of goods a company needs to sell to just cover its costs? a) net present value b) break-even analysis c) internal rate of return d) activity based costing e) variable costing Ans: b Reference: The Product Design Process Level: easy

19. Costs that are proportional to the amount of units produced, such as materials and labor, are a) fixed costs b) marginal revenue c) sunk costs d) cost drivers e) variable costs Ans: e Reference: The Product Design Process Level: easy

20. Which of the following is not a fixed cost? a) land rent b) materials c) overhead d) taxes e) insurance Ans: b Reference: The Product Design Process Level: moderate

21. In break-even analysis, what is the break-even point? a) the quantity where revenue equals total cost b) the quantity where revenue equals fixed cost c) the quantity where revenue equals variable cost

d) the quantity beyond which the firm starts to lose money e) the quantity where variable cost equals fixed cost Ans: a Reference: The Product Design Process Level: moderate

22. In break-even analysis, in order to make a profit the company must a) sell above the break-even point b) sell below the break-even point c) sell at a loss d) sell at the break-even point e) sell on consignment Ans: a Reference: The Product Design Process Level: easy

23. For which of the following is break-even analysis not appropriate? a) deciding how much of a product must be sold to make a profit b) evaluating different processes c) deciding whether it is better to make or buy a product d) deciding between different products e) deciding how to allocate overhead Ans: e Reference: The Product Design Process Level: moderate

24. Which of the following is not included in the preliminary design and testing stage? a) the product design idea is evaluated according to the needs of the major business functions b) design engineers translate general performance specifications into technical specifications c) “bugs” are worked out d) revising the design based on test results e) prototypes are built and tested Ans: a Reference: The Product Design Process Level: moderate

25. During the final design and testing stage: a) the product design idea is evaluated according to the needs of the major business functions. b) design engineers hand the product over to the final design engineers. c) the product specifications are drawn up. d) marketing becomes involved for the first time. e) the product achieves full production.

Ans: c Reference: The Product Design Process Level: moderate

26. Which one of these refers to reducing the number of parts and features of the product whenever possible? a) design automation b) design specification c) design reduction d) design standardization e) design simplification Ans: e Reference: Factors Impacting Product Design Level: moderate

27. What refers to the use of common and interchangeable parts? a) design automation b) design specification c) design reduction d) design standardization e) design simplification Ans: d Reference: Factors Impacting Product Design Level: moderate

28. Which of the following is not a guideline for design for manufacture? a) use modular design b) design parts for different products c) minimize parts d) rely on automated equipment e) simplify operations Ans: d Reference: Factors Impacting Product Design Level: hard

29. Maturity and decline are also referred to as: a) the early stages b) the life cycle c) the later stages d) design for manufacture stages e) re-engineering stages Ans: c Reference: The Product Design Process

Level: Moderate

30. Which type of operation is used to produce many different products with varying process requirements in lower volumes? a) intermittent b) repetitive c) continuous d) downstream e) gateway Ans: a Reference: Process Selection Level: moderate

31. Which of the following is not characteristic of intermittent operations? a) produce many different products with varying processing requirements b) capital intensive c) workers need to be able to perform different tasks depending on the processing needs of the product d) general purpose equipment e) volume of goods produced directly tied to number of customer orders Ans: b Reference: Process Selection Level: moderate

32. Building a bridge over the Mississippi River for a new highway uses a a) project process b) batch process c) line process d) continuous process e) recycle process Ans: a Reference: Process Selection Level: moderate

33. The classes that you are taking at the university use a ___________ process. a) project b) batch c) line d) continuous e) recycle Ans: b Reference: Process Selection Level: moderate

34. What type of process is designed to produce a large volume of a standardized product for mass production, such as automobiles? a) project processes b) batch processes c) line processes d) continuous processes e) recycle processes Ans: c Reference: Process Selection Level: moderate

35. Which type of process would be least likely to produce goods for inventory rather than for a specific customer request? a) project b) batch c) line d) continuous e) remanufacturing Ans: a Reference: Process Selection Level: moderate

36. Which of the following is a tool for evaluating an operation in terms of the sequence of steps from inputs to outputs with the goal of improving its design? a) operations analysis b) operations sequencing c) process flow analysis d) input/output analysis e) sequencing analysis Ans: c Reference: Designing Processes Level: moderate

37. If the third stage of a repetitive line process cannot complete its activities as fast as stage one or two it has become a: a) key work location b) bottle neck c) place not to work d) project process location e) none of these Ans: b Reference: Designing Processes Level: Moderate

38. Which of the following is correct sequence for relating product design, process selection, and arrangement of equipment in the factory? a) product design determines arrangement of equipment which determines process selection b) product design determines process selection which determines arrangement of equipment c) process selection determines product design which determines arrangement of equipment d) process selection determines arrangement of equipment which determines product design e) arrangement of equipment determines process selection which determines product design Ans: b Reference: Linking Product Design and Process Selection Level: moderate

39. What type of operations focus on products in the early stage of the life cycle? a) repetitive b) downstream c) gateway d) intermittent e) recycle Ans: d Reference: Linking Product Design and Process Selection Level: moderate

40. With respect to competitive priorities, intermittent operations compete more on _____________ compared to repetitive operations. a) cost and features b) durability and cost c) availability and reliability d) flexibility and delivery e) durability and features Ans: d Reference: Linking Product Design and Process Selection Level: moderate

41. Intermittent operations group their resources based on a) requirements of the product b) similar operations or functions c) shape of the shop floor d) abilities of the labor force e) the number of machines Ans: b Reference: Linking Product Design and Process Selection Level: moderate

42. Compared to intermittent operations, repetitive operations a) have higher material handling costs b) have greater efficiency c) have slower processing rates d) have more flexibility e) are less specialized Ans: b Reference: Linking Product Design and Process Selection Level: moderate

43. Which product and service strategy is used to produce standard components that can be combined to customer specifications? a) assemble-to-deliver b) make-to-stock c) assemble-to-order d) make-to-order e) make-to-package Ans: c Reference: Linking Product Design and Process Selection Level: easy

44. Which product and service strategy has the longest delivery lead time? a) assemble-to-deliver b) make-to-stock c) assemble-to-order d) make-to-order e) make-to-package Ans: d Reference: Linking Product Design and Process Selection Level: moderate

45. Pre-fabricated furniture with choices of fabric colors is an example of which product and service strategy? a) assemble-to-deliver b) make-to-stock c) assemble-to-order d) make-to-order e) make-to-package Ans: c Reference: Linking Product Design and Process Selection Level: moderate

46. Which product and service strategy is typically seen in repetitive operations? a) assemble-to-deliver b) make-to-stock c) assemble-to-order d) make-to-order e) make-to-package Ans: b Reference: Linking Product Design and Process Selection Level: moderate 47. If a firm’s facility layout is not correct it will create: a) project processes b) optimum outputs c) equal number of products d) inefficiency e) job satisfaction Ans: d Reference: Linking Product Design and Process Selection Level: Moderate

48. Information Technology does not assist the firm in: a) information storage b) information processing c) information creation d) intra firm information communication e) inter firm information communication Ans: c Reference: Technology Decisions Level: Easy

49. Vertical integration is a good strategic option for a manufacturing company when a) it needs several different parts and subassemblies b) it makes many different products c) its facilities are obsolete d) it uses distributed processing e) it needs one input material in large volumes Ans: e Reference: Technology Decisions Level: moderate

50. Which of the following is a disadvantage of automation? a) inflexibility for product and process changes b) inconsistency of products

c) inefficiency for producing large volumes d) harder to monitor quality e) frequent interruptions of production Ans: a Reference: Technology Decisions Level: hard

51. What is a small battery-driven truck that is not operated by a human and moves material from location to location? a) CAD b) AGV c) AS/RS d) FMS e) CAM Ans: b Reference: Technology Decisions Level: moderate

52. A technology which uses sensor tags to monitor perishable products is: a) FMS b) CAD c) RFID d) CAM e) RF Ans: c Reference: Technology Decisions Level: Hard

53. What is an automated material handling system that basically is an automated warehouse? a) CAD b) AGV c) AS/RS d) FMS e) CAM Ans: c Reference: Technology Decisions Level: moderate

54. What is CAD short for? a) conceptually appropriate design b) computer aided design c) commercial applications design d) competitive advantage design

e) completely automated design Ans: b Reference: Technology Decisions Level: moderate

55. What is a type of automation system that provides the flexibility of intermittent operations with the efficiency of repetitive operations? a) CAD b) AGV c) AS/RS d) FMS e) CAM Ans: d Reference: Technology Decisions Level: moderate

56. In manufacturing, a robot typically: a) resembles a human in appearance b) has a mechanical arm c) is mobile d) has legs e) is very small Ans: b Reference: Technology Decisions Level: moderate

57. What type of machine is controlled by a computer and can do a variety of tasks, such as drilling, boring, or turning parts of different sizes and shapes? a) numerically controlled b) variable turning c) flexible driven d) non-calculating e) next component Ans: a Reference: Technology Decisions Level: moderate

58. What term is used to describe the integration of product design, process planning, and manufacturing using an integrated computer system? a) CAD/CAM b) AGV c) AS/RS d) FMS

e) CIM Ans: e Reference: Technology Decisions Level: hard

59. Since services are intangible, the design of the service needs ___________ . a) to be intangible b) to be very specific c) to be in the mind of the customer d) to be explained to the customer prior to delivery of the service e) to specify exactly what the customer is supposed to experience.

Ans: e Reference: Designing Services Level: hard

60. Services with low customer contact are called _____________ . a) quasi-manufacturing b) quasi-services c) mixed services d) pure services e) mixed manufacturing Ans: a Reference: Designing Services Level: moderate

61. Highly labor intensive services are called _____________ . a) quasi-manufacturing b) quasi-services c) mixed services d) pure services e) mixed manufacturing Ans: d Reference: Designing Services Level: moderate

62. Firms that have areas that have little customer contact and others with high customer contact are classified as _________ services. a) pure services b) quasi-manufacturing c) quasi-services d) mixed services e) manufacturing

Ans: d Reference: Designing Services Level: moderate

63. What are the three elements of the service package? a) physical goods, sensual benefits, and psychological benefits b) sales, return policy, and warranty c) customer service, return policy, and warranty d) kindness, information provision, and speed e) physiological benefits, sensual benefits, and psychological benefits Ans: a Reference: Designing Services Level: hard

64. What are the three different service designs that are described in the chapter? a) substitute people for technology; get the customer involved, high customer attention approach b) customer-based market research, high customer attention approach, substitute technology for people c) customer-based market research, high customer attention approach, gets the customer involved d) substitute people for technology, customer-based market research, and high customer attention approach e) substitute technology for people; get the customer involved, high customer attention approach Ans: e Reference: Designing Services Level: hard

65. Product design decisions are: a) purely tactical decisions. b) mixed tactical and strategic decisions. c) strategic in nature. d) only made by the OM department. e) rarely made.

Ans: c Reference: Product Design and Process Selection Within OM Level: Moderate

66. Company A has a great idea for a product. What is the first step for Company A? a) do a break-even analysis b) determine characteristics and features of the product c) determine the process selection d) determine characteristics and features of the product and determine the process selection e) benchmark other similar company’s products Ans: d (these are done in tandem; pg. 56) Reference: The Product Design Process

Level: moderate

67. The steps in the product design process include a) Idea Development, Product Screening, Break-even analysis, Build b) Idea Development, Benchmarking, Preliminary Design, Final Design c) Seek Competitors Design Specs, Product Screening, Manufacture, Sell d) Seek Customer Input, Product Screening, Testing, Final Design e) Idea Development, Product Screening, Preliminary Design & Testing, Final Design Ans: e (pg. 57) Reference: The Product Design Process Level: moderate

68. Which type of operational function represents an Assemble-to-Order? a) wedding invitations b) corporate training c) airline flights d) legal services e) vacation packages Ans: b Reference: Linking Product Design and Process Selection Level: moderate to hard

69. A series of stages that products pass through in their lifetime, characterized by changing product demands over time is defined as a) Development life cycle b) Design program c) Product life cycle d) Services life cycle e) Product life methodology Ans: c Reference: The Product Design Process Level: easy

70. Why is a process flowchart useful? a) for designing a product b) for determining where the strengths are in a process c) for determining where the weaknesses are in a process d) for seeing the totality of the operation and for identifying potential problem areas e) for benchmarking against other processes Ans: d Reference: Designing Processes Level: moderate

True/False

71. Product design and process selection decisions are typically made separately.

Ans: False Reference: Product Design Level: moderate

72. One source of new product ideas is a product manager.

Ans: True Reference: The Product Design Process Level: moderate

73. To remain competitive, companies must be innovative and bring out new products regularly.

Ans: True Reference: The Product Design Process Level: moderate

74. Analyzing customer preferences is an ongoing process.

Ans: True Reference: The Product Design Process Level: moderate

75. There is a pure mathematical formula to making the decision to pursue a specific idea.

Ans: False Reference: The Product Design Process Level: moderate

76. Benchmarking should only be performed against firms in similar lines of business with our own.

Ans: False Reference: The Product Design Process Level: moderate 77. Buying a competitor’s new product and studying its design features by disassembling it and analyzing its parts and features is reverse engineering.

Ans: True Reference: The Product Design Process

Level: moderate

78. Net present value is based on computing the quantity of goods a company needs to sell to just cover its costs.

Ans: False Reference: The Product Design Process Level: moderate

79. At the preliminary design and testing stage of new product design, design engineers translate technical specifications into general performance specifications.

Ans: False Reference: The Product Design Process Level: moderate

80. Understanding the stages of the life cycle is not important for product design purposes.

Ans: False Reference: Factors Impacting Product Design Level: moderate

81. Design standardization refers to the use of common and interchangeable parts.

Ans: True Reference: Factors Impacting Product Design Level: moderate

82. One issue that design for manufacture focuses on is material durability.

Ans: False Reference: Factors Impacting Product Design Level: Answer: moderate

83. When product and process design work together, much of the work is done in sequence rather than in parallel.

Ans: False Reference: Factors Impacting Product Design Level: moderate

84. Remanufacturing is the concept of using components of old products in the production of new ones.

Ans: True

Reference: Factors Impacting Product Design Level: moderate

85. Repetitive operations are used to produce many different products with varying process requirements in lower volumes.

Ans: False Reference: Process Selection Level: easy

86. A common difference between intermittent and repetitive operations is degree of product standardization.

Ans: True Reference: Process Selection Level: easy

87. Intermittent operations group their resources based on similar operations or functions.

Ans: True Reference: Linking Product Design and Process Selection Level: moderate

88. The make-to-stock product and service strategy has the shortest delivery lead time among the possible strategies, but the customer has no involvement in product design.

Ans: True Reference: Linking Product Design and Process Selection Level: moderate

89. Process velocity is computed as a ratio of throughput time to output.

Ans: False Reference: Process Performance Metrics Level: Moderate

90. Outsourcing instead of pursuing vertical integration is often a good strategic option for a firm using an intermittent operation.

Ans: True Reference: Technology Decisions Level: moderate

91. The psychological benefits of the service package involve the sights, smells, and sounds of the experience.

Ans: False Reference: Designing Services Level: moderate

92. Triangle symbols are used in a process flowchart to represent decision points?

Ans: True Reference: Designing Services Level: moderate

Essay

93. Define product design.

Ans: The process of deciding on the unique characteristics and features of the company’s products.

Reference: Product Design Level: easy

94. Name some sources for ideas for new products.

Ans: customers, competitors, R&D departments, suppliers, employees, and new technological developments Reference: The Product Design Process Level: moderate

95. In the product screening stage of new product development, what are some questions that may need to be explored by the operations function? By marketing? By finance?

Ans: Operations: What are the production needs of the proposed new product and how do they match our existing resources? Will we need new facilities and equipment? Do we have the labor skills to make the product? Can the materials for production be readily obtained? Marketing: What is the potential size of the market for the proposed new product? How much effort will be needed to develop a market for the product and what is the long-term product potential? Finance: What is the proposed new product’s financial potential, cost, and return on investment?

Reference: The Product Design Process Level: hard

96. Describe what process flow analysis is.

Ans: A technique used for evaluating a process in terms of the sequence of steps from inputs to outputs with the goal of improving its design.

Reference: Designing Processes

Level: Moderate

97. For what types of decisions is break-even analysis appropriate?

Ans: deciding how much of a product must be sold to make a profit, evaluating different processes, deciding whether it is better to make or buy a product, and deciding between different products Reference: The Product Design Process Level: hard

98. What is included in the preliminary design and testing stage of product design?

Ans: design engineers translate general performance specifications into technical specifications, “bugs” are worked out, revising the design based on test results, and prototypes are built and tested Reference: The Product Design Process Level: hard

99. What are the guidelines for design for manufacture?

Ans: Use modular design, design parts for different products, minimize parts, simplify operations, and avoid tools Reference: Factors Impacting Product Design Level: hard

100. What are the characteristics of intermittent operations?

Ans: Produce many different products with varying processing requirements, different products have different processing needs and there is no standard route that all products take through the facility, resources are grouped by function, labor intensive, often there are skilled and semiskilled workers with a fair amount of discretion in performing their jobs, workers need to be flexible and to be able to perform different tasks depending on the processing needs of the product, general purpose equipment, and the volume of goods produced is directly tied to the number of customer orders Reference: Process Selection Level: moderate

101. What are the characteristics of repetitive operations?

Ans: Produce one or a few standardized products in high volumes, resources are organized in a line flow efficiently accommodate production of the product, capital intensive, often rely on automation and technology to improve efficiency and increase output, specialized equipment, and the volume of goods produced is based on a forecast of future demands Reference: Process Selection Level: moderate

102. Describe three different types of service designs.

Ans: (1) substituting technology for people-this provides product consistency and takes the guesswork away from employees; (2) get the customer involved-this can speed delivery, reduce costs, and empower customers; (3) high customer attention approach-this customizes the service needs unique to each customer and has them be passive and pampered recipients of the service Reference: Designing Services Level: hard

103. Describe why marketing should be involved in the product design process.

Ans: Marketing is impacted by product design issues because they determine the types of products that will be produced and affect marketing’s ability to sell them. Marketing understands the types of product characteristics customers want and can provide operations with information on customer preferences, competition, and future trends.

Reference: Product Design and Process Selection Within OM Level: Moderate

104. What is the break-even volume given a fixed cost of $100,000, a variable cost per unit of $30, and a selling price of $35?

Ans: 20,000 units (QBE = F/(SP - VC) = $100,000/($35 - $30) = 20,000) Reference: The Product Design Process Level: easy

105. What is the break-even volume given a fixed cost of $15,000,000, a variable cost per unit of $2.30, and a selling price of $12.80?

Ans: 1,428,571 units (QBE = F/(SP - VC) = $15,000,000/($12.80 - $2.30) = 1,428,571) Reference: The Product Design Process Level: easy

106. What is the break-even volume given insurance costs of $30,000, materials costs of $6 per unit, taxes of $10,000, labor costs of $34 per unit, and a selling price of $80?

Ans: 1000 units (QBE = F/(SP - VC) = ($30,000 + $10,000)/($80 - ($34 + $6.00)) = 1,000) Reference: The Product Design Process Level: moderate

107. If a firm has fixed costs of $250,000, a market-based selling price of $50 per unit, and it expects to sell 20,000 units, how low must its variable costs be to break even?

Ans: $37.50 (VC= SP - F/ QBE) = $50 - $250,000 /20,000) = $37.50/unit) Reference: The Product Design Process Level: hard

108. Blaster Radio Company is trying to decide whether or not to introduce a new model. If they introduce it, there will be additional fixed costs of $400,000 per year. The variable costs have been estimated to be $20 per radio. a) If Blaster sells the new radio model for $30 per radio, how many must they sell to break even? b) If Blaster sells 70,000 of the new radio model at the $30 price, what will the contribution to profit be?

Ans: a) 40,000 radios (QBE = F/(SP - VC) = $400,000/($30 - $20) = 40,000) b) $300,000 (Profit = total revenue - total cost = SP*A - [F+VC*Q] = $30 * 70000 - [$400,000+ ($20*70000)] = $300,000) Reference: The Product Design Process Level: moderate

109. Birdie Par owns a company that makes golf gloves. She is thinking about introducing a new glove, which would require an additional fixed cost of $20,000 per year. The variable costs for the new glove have been estimated to be $5 per glove. a) If she sells the new glove for $15, how many must she sell to break even? b) If she sells 3,000 gloves at the $15 price, what will the contribution to profit be?

Ans: a) 2,000 gloves (QBE = F/(SP - VC) = $20,000/($15 - $5) = 2,000) b) $10,000 (Profit = total revenue - total cost = SP*A - [F+VC*Q] = $15 * 3000 - [$20,000+ ($5*3000)] = $10,000) Reference: The Product Design Process Level: moderate

110. Bazooka Company is thinking about introducing a new type of color printer. If they introduce it, their factory will incur additional fixed costs of $37,000,000 per year. The variable costs will be $261 per printer. a) If Bazooka sells the new printer for $819, how many must they sell to break even? b) If Bazooka sells 70,000 of the new printer at the $819 price, what will the contribution to profit be?

Ans: a) 66,308 printers (QBE = F/(SP - VC) = $37,000,000/($819 - $261) = 66,308) b) $2,060,000 (Profit = total revenue - total cost = SP*A - [F+VC*Q] = $819 * 70,000 [$37,000,000+ ($261*70,000)] = $2,060,000) Reference: The Product Design Process Level: moderate

111. Sam Smear owns a manufacturing company that makes ball point pens. Currently he is trying to decide between two processes for making the pens. The first process will have a fixed cost of $200,000 per year and variable costs of $0.40 per pen. The second process will have a fixed cost of $250,000 per year and variable costs of $0.30 per pen. a) Identify which ranges of product volume are best for each process. b) If Sam makes 200,000 pens, which process provides a lower cost?

Ans: a) the first process is better for volumes less than or equal to 500,000 pens, the second process is better for volumes greater than or equal to 500,000 pens (Q = (F2 - F1)/( VC2 - VC1) = ($250,000$200,000)/($0.40 - $0.30) = 500,000) b) the first process

Reference: Product Design and Process Selection Across the Organization Level: moderate

112. If a firm has fixed costs of $200,000, variable costs of $100 per unit, and it hopes to sell 1000 units, what selling price must it charge in order to break even?

Ans: $300 (SP = F/ QBE + VC = $200,000/1000 + $100 = $300) Reference: Product Design and Process Selection Across the Organization Level: hard

113. Languages, Inc. manufactures hand held computers that translate between two languages. Based on their market research, they have developed computers for French/English, German/English, and Spanish/English. The process for making the computers will have fixed costs of $2,000,000 per year and variable costs of $50 per computer. The company believes that it can sell at least 40,000 computers per year. a) What should the price per computer be if the company wants to break even at a volume of 40,000 computers per year? b) If they sell 60,000 computers at a price of $90 per computer, what will the contribution to profit be?

Ans: a) $100 (SP = F/ QBE + VC = $2,000,000/40000 + $50 = $100) b) $400,000 (Profit = total revenue - total cost = SP*A - [F+VC*Q] = $90 * 60,000 - [$2,000,000+ ($50*60,000)] = $400,000) Reference: Product Design and Process Selection Across the Organization Level: hard 114. Frank’s manufacturing firm has determined that the industry standard process velocity time is 15 seconds. Frank’s OM engineer has determined that their process velocity time is 17 seconds with a throughput time of 136 seconds. If the throughput time cannot be changed, what, how much, and by which direction does the value added time need to change so Frank’s manufacturing can match the industry standard process velocity?

Ans: Process Velocity = Throughput time/value added time; Value added time = Throughput time/process velocity Value added time = 136/17 = 8; 14.5=136/value added time: Value added time = 136/15 = 9.1 Value added time must increase by 1.1 seconds Reference: Product Design and Process Selection Across the Organization Level: moderate 115. Tom’s hazardous material movement company limits the number of hours an individual works to 8.5 a day. Each hazardous material handler product movement time has been stopwatch analyzed to take 240 seconds. What is the hazardous material handler utilization if they make 110 moves a day?

Ans: Utilization = time a resource used/time a resource available Convert hours available to seconds available: 8.5 hrs/day* 60 minutes/hr*60 seconds/minute = 30600 seconds/day Utilization = (110*240) sec/30600 sec = 0.863 (86.3%) Reference: Product Design and Process Selection Across the Organization

Level: hard

116. Name a company that has a good match between customer expectations and a company that does not have a good match.

Ans: FedEx and, since bankruptcy often follows failure to meet customer expectations, K-Mart or Woolworth's are examples.

Reference: Factors Impacting Product Design Level: hard

117. Name a company that hurt its business success by changing its Operations Type.

Ans: Babcock & Wilcox is one example.

Reference: Linking Product Design and Process Selection Level: moderate

118. What is throughput time if process velocity = 5 and Value-added time = 2?

Ans: Process velocity = Throughput time/Value-added time, so Throughput time = Process velocity * Value-added time = 2 * 5 = 10.

Reference: Process Performance Metrics Level: hard

119. What is input if Productivity = 7 and Output = 5?

Ans: Productivity = Output / Input, so Input = Output/Productivity = 5/7 = 0.71.

Reference: Process Performance Metrics Level: hard

120. How efficient was a process whose Standard output = 27 while Actual output = 24?

Ans: Efficiency = Actual output / Standard output = 24 / 27 0.889.

Reference: Process Performance Metrics Level: moderate

121. Why is delivery time longer for make to order than assembly to order processes that deliver similar products?

Ans: Processing time is part of delivery time for a make to order process but not for an assemble to order process.

Reference: Linking Product Design and Process Selection Level: moderate

122. Name a reason for using ERP and a reason it might be difficult to implement.

Ans: Successful ERP projects improve coordination among an organization's resources while requiring substantial changes in workers' sense of control over their data and relationships with other departments.

Reference: Technology Decisions Level: hard

123. Name three computer applications that affect product design and process selection: Ans: Computer-aided Design, Computer-integrated Manufacturing, and Robotics (or numerically controlled machines).

Reference: Technology Decisions Level: moderate

124. What is the break-even price if fixed cost = 100, variable cost = 7, and selling price = 9?

Ans: 50. The break-even quantity formula, (formula), assumes that the selling price will be constant as quantity supplied increases. If true, the break-even price is 9, otherwise, it cannot be determined with this data.

Reference: The Product Design Process Level: hard

125. Substituting technology for people has been argued to reduce what in the service delivery?

Ans: uncertainty of service delivery Reference: Designing Services Level: Hard

126. Why are services more complex to design than manufactured goods?

Ans: Services produce intangible products produced with high levels of customer contact.

Reference: Product Design and Process Selection Across the Organization Level: easy

127. Name an operational consideration that a firm must take into consideration when designing a new product Ans: Type of processes already used in the company, Reference: Product Design and Process Selection Across the Organization Level: Moderate

128. What is a process flowchart?

Ans: A chart showing the sequence of steps in producing the product or service.

Reference: Designing Processes Level: moderate

File: ch04, Chapter 4: E-Commerce and Supply Chain Management

Multiple Choice 1. An organization’s supply chain is facilitated by: a) dedicated people b) an information system c) specific vendors d) specific customers e) government regulations Ans: b Section Ref: What is a Supply Chain?

Level: Moderate

2. Which of the following typically represents the beginning of a supply chain? a) Wholesalers b) Retailers c) Manufacturers d) External suppliers e) Inspectors Ans: d Section Ref: What is a Supply Chain?

Level: easy

3. Supply chain management is the vital business function which does not coordinate and manage: a) linking suppliers b) transporters c) human resource interviews d) internal departments e) third-party companies Ans: c Section Ref: What is a Supply Chain?

Level: easy

4. Typically a manufacturer will have more direct contact with which type of supplier? a) Tier one supplier b) Tier two supplier c) Tier three supplier d) Tier four supplier e) Tier five supplier Ans: a: Section Ref: Issues Affecting Supply Chain Management

Level: moderate

5. Consider a packaged milk products supply chain. A lumber company provides wood to a paper mill, who supplies cardboard to a container manufacturer, who supplies containers to the milk products manufacturer. The lumber company is: a) a tier one supplier. b) a tier two supplier. c) a tier three supplier. d) a tier four supplier. e) not in the supply chain.

Ans: c Section Ref: Issues Affecting Supply Chain Management Level: moderate

6. Which of the following is not a typical result of the bullwhip effect? a) Absenteeism b) Lost revenues c) Ineffective transportation use d) Poor customer service levels e) Misused manufacturing capacity Ans: a Section Ref: The Bullwhip Effect Level: moderate

7. Which term refers to inaccurate or distorted demand information created in the supply chain? a) Battle axe effect b) Cobra effect c) Bullwhip effect d) Lasso effect e) Whirlpool effect Ans: c Section Ref: The Bullwhip Effect Level: easy

8. Which of the following is not a remedy for the bullwhip effect? a) Allocate units based on past demand b) Price stabilization c) Base forecasts on demand coming from the immediate downstream customer d) Eliminate order batching e) Information sharing Ans: c Section Ref: The Bullwhip Effect Level: moderate

9. Which of the following is not one of the four major causes of the bullwhip effect? a) Demand forecast updating b) Order batching c) Price fluctuations d) The business cycle e) Rationing and shortage gaming Ans: d Section Ref: The Bullwhip Effect Level: moderate

10. Price fluctuations follow all but which of the following marketing promotions? a) Advertising b) Price discounts c) Quantity discounts d) Coupons e) Rebates Ans: a Section Ref: Issues Affecting Supply Chain Management Level: easy

11. When do rationing and shortage gaming occur? a) Supply exceeds demand. b) Demand exceeds supply. c) Government contracts are awarded. d) Transportation workers go on strike. e) Marginal revenue exceeds marginal cost.

Ans: b Section Ref: The Bullwhip Effect Level: moderate

12. Collection of point-of-sale (POS) information is most useful for which bullwhip effect remedy? a) Allocate units based on past demand b) Price stabilization c) Fill orders based on a set percentage d) Eliminate order batching e) Information sharing Ans: e Section Ref: The Bullwhip Effect Level: Hard

13. The time between order placement and the receipt of goods is called ___________________. a) receipt time

b) lead time c) allowance time d) processing time e) waiting time Ans: b Section Ref: Issues Affecting Supply Chain Management Level: easy

14. Service organization supply chains are: a) similar to manufacturing organizations. b) not similar to service organizations. c) very unique. d) not a consideration when planning a service organization. e) universally government regulated.

Ans: a Section Ref: Supply Chains for Service Organizations Level: Moderate

15. What is a network internal to an organization called? a) supernet b) internet c) intranet d) supranet e) internalnet Ans: c Section Ref: Issues Affecting Supply Chain Management Level: easy

16. What is an extension of an intranet to include suppliers and customers called? a) supply chain net b) supernet c) supranet d) extranet e) intranet++ Ans: d Section Ref: Issues Affecting Supply Chain Management Level: easy

17. Net marketplaces are designed to: a) bring together only internal resources. b) bring together limited external resources. c) bring together significant number of purchasing firms. d) limit the number of daily transactions. e) limit cyber security risks.

Ans: c Section Ref: Major Issues Affecting Supply Chain Management Level: Moderate

18. Which of the following is open to the most users? a) an intranet b) an extranet c) a LAN d) a WAN e) the Internet Ans: e Section Ref: Issues Affecting Supply Chain Management Level: easy

19. Online retailing, or B2C, has shifted: a) the cost of doing business. b) the power from the suppliers to the consumers. c) the way the internet works. d) internal corporate power to the IT department. e) corporate funding levels to the IT department.

Ans: b Section Ref: Major Issues Affecting Supply Chain Management (eCommerce) Level: Moderate

20. Due to globalization, which of the following are not some commonly shared ocean shipping logistical characteristics? a) goods arrive in larger quantities b) greater break-bulk activity is required c) crossdocking is required d) typically have higher inventories e) longer port times occur Ans: c Section Ref: Major Issues Affecting Supply Chain Management (Global) Level: Moderate

21. A recent change in supply chain management has been the: a) need for faster computers. b) green supply chain management requirement. c) requirement for advanced educational degrees. d) increased government regulation. e) need for smaller ocean transportation methods.

Ans: b Section Ref: Major Issues Affecting Supply Chain Management (Green)

Level: Moderate

22. Purchasing is typically responsible for: a) initiating purchasing requests. b) physically inventorying all received materials. c) developing the engineering specifications. d) analyzing the make-buy decision. e) monitoring supplier performance.

Ans: e Section Ref: The Role of Purchasing Level: Moderate

23. Which activity appears to be most frequently outsourced by large companies? a) Purchasing b) Marketing c) Finance d) Accounting e) Manufacturing Ans: e Section Ref: Sourcing Issues Level: Hard

24. What refers to owning or controlling sources of raw materials and components? a) Backward integration b) Horizontal integration c) Encapsulating integration d) Forward integration e) Subsuming integration Ans: a Section Ref: Sourcing Issues Level: easy

25. What term refers to processes or activities that are completed in-house? a) Ownsource b) Insource c) Homesource d) Outsource e) Supplysource Ans: b Section Ref: Sourcing Issues Level: easy

26. What term refers to processes or activities that are completed by suppliers?

a) Vendorsource b) Insource c) Homesource d) Outsource e) Supplysource Ans: d Section Ref: Sourcing Issues Level: easy

27. A higher level of vertical integration implies: a) more outsourcing and more insourcing b) less outsourcing c) more insourcing d) less insourcing e) less outsourcing and more insourcing Ans: e Section Ref: Sourcing Issues Level: moderate

28. The quantity that equates the cost of making a product to the cost of buying the product is generally called what? a) Neutrality point b) Point of equality c) Indifference point d) Point of optimality e) No such point can exist.

Ans: c Section Ref: Sourcing Issues Level: moderate

29. According to the financial calculations of the make-or-buy decision, if we need fewer units than the indifference point, then which option should we definitely choose? a) Make b) Buy c) The option with the lower variable costs d) The option with the higher variable costs e) It is not profitable to choose either option.

Ans: d Section Ref: Sourcing Issues Level: moderate

30. To perform the financial calculations of the make-or-buy decision, which costs are needed? a) Fixed and variable b) Fixed and average

c) Variable and average d) Variable only e) Average only Ans: a Section Ref: Sourcing Issues Level: easy

31. Which of the following is not a positive attribute of Multiple Suppliers? a) provides a greater flexibility of volume b) eliminates a supplier’s dependence on the purchaser c) probability of assured supply is better d) deliveries can be schedule more easily e) allows for testing of new suppliers without jeopardizing the flow of materials Ans: c Section Ref: Sourcing Issues Level: easy

32. In general, what comprises the bulk of the cost of goods sold? a) Overhead b) Materials c) Electricity d) Depreciation e) Labor Ans: b Section Ref: The Role of Purchasing Level: moderate

33. A constant concern within purchasing departments is the issue of ethics in managing _______________. a) customers b) web sites c) inventory d) suppliers e) entry-level employees Ans: d Section Ref: The Role of Purchasing Level: moderate 34. What are the Institute for Supply Management’s principles of ethical supply chain management conduct? a) objectivity always, loyalty to your organization, and faith in your profession b) objectivity always, justice to those with whom you deal, and faith in your profession c) objectivity always, justice to those with whom you deal, and loyalty to your organization d) objectivity always, know the law, and justice to those with whom you deal

e) loyalty to your organization, justice to those with whom you deal, and faith in your profession Ans: e Section Ref: The Role of Purchasing Level: hard

35. According to several studies, what are the three most important criteria for selecting suppliers? a) Price, quality, fast delivery b) Quality, fast delivery, on-time delivery c) Price, flexibility, on-time delivery d) Quality, flexibility, fast delivery e) Price, quality, on-time delivery Ans: e Section Ref: The Role of Purchasing Level: moderate

36. What is the common term for a process of developing a long-term relationship with a supplier based on mutual trust, shared vision, shared information, and shared risks? a) Marrying b) Cohabitating c) Sharing d) Partnering e) Diversifying Ans: d Section Ref: The Role of Purchasing Level: easy

37. Going beyond a basic partnership, an expanded partnership between a firm and its supplier implies: a) mutual respect b) honesty c) trust d) open and frequent communications e) a commitment to helping each other succeed Ans: e Section Ref: The Role of Purchasing Level: moderate

38. According to the textbook, the two kinds of partnerships are basic and what? a) Expanded b) Enhanced c) Enlarged d) Elaborated e) Evolved

Ans: a Section Ref: The Role of Purchasing Level: moderate

39. What does the textbook define as the three most critical factors in successful partnering? a) Impact, mission, vision b) Impact, intimacy, vision c) Contracting, mission, vision d) Contracting, intimacy, mission e) Contracting, impact, intimacy Ans: b Section Ref: The Role of Purchasing Level: moderate

40. What term refers to attaining levels of productivity and competitiveness that are not possible through normal supplier relationships? a) Intimacy b) Vision c) Impact d) Power e) Collusion Ans: c Section Ref: The Role of Purchasing Level: moderate

41. What term refers to the working relationship between partners? a) Impact b) Vision c) Familiarity d) Intimacy e) Proximity Ans: d Section Ref: The Role of Purchasing Level: moderate

42. What term refers to the mission or objectives of a partnership? a) Impact b) Intimacy c) Dream d) Conception e) Vision Ans: e Section Ref: The Role of Purchasing

Level: moderate

43. What do studies suggest are the three sources of impact? a) Reduce waste, leverage core competence, and create new opportunities b) Provide quantity discounts, reduce waste, and create new opportunities c) Create detailed contracts, reduce waste, and create new opportunities d) Create detailed contracts, leverage core competence, and reduce waste e) Create detailed contracts, leverage core competence, and create new opportunities Ans: a Section Ref: The Role of Purchasing Level: moderate

44. Leveraging core competence is about sharing: a) workers b) knowledge c) machines d) expenses e) financial hedges Ans: b Section Ref: The Role of Purchasing Level: moderate

45. Which of the following is not considered to be a characteristic of partnership relations? a) Have a long-term orientation b) Are strategic in nature c) Are “arms-length” in nature d) Share a common vision e) Share short- and long-term plans Ans: c Section Ref: The Role of Purchasing Level: easy

46. What does ESI stand for? a) Easy supplier integration b) Early stage initiation c) Every supplier’s important d) Early supplier involvement e) Engaged supply initiative Ans: d Section Ref: The Role of Purchasing Level: moderate

47. Early supplier involvement refers to the involvement of critical suppliers for what?

a) Strategic planning b) Assembly line design c) Speedy delivery planning d) Selection of new suppliers e) New product design Ans: e Section Ref: The Role of Purchasing Level: easy

48. According to a 1996 study by the Council for Logistics Management of the third-party logistics industry, which companies are particularly likely to use third-party logistics services to handle most of their logistics needs? a) Companies engaged in international business b) Transportation companies c) Warehousing companies d) Hospital equipment manufacturers e) Large retailers Ans: a Section Ref: The Role of Purchasing Level: moderate

49. Which of the following is least likely to be a benefit of implementing barcode scanners at retail store checkout registers? a) Improved forecasting b) More efficient packaging of customer orders c) Improved inventory control d) Faster checkout for customers e) More accurate checkout for customers Ans: b Section Ref: Supply Chain Distribution Level: moderate

50. The discussion in the textbook implies that information sharing has shifted power in the supply chain the most to which group? a) Suppliers b) Manufacturers c) Distributors d) Retailers e) Individual consumers Ans: e Section Ref: Supply Chain Distribution Level: Hard 51. Which type of technology provides “point-of-sale information?”

a) Automatic guided vehicles (AGV) b) Automatic storage and retrieval systems (ASRS) c) Barcode scanners d) Flexible manufacturing systems (FMS) e) Computer aided design/computer aided manufacturing (CAD/CAM) Ans: c Section Ref: Supply Chain Distribution Level: easy

52. What does EDI stand for? a) Easy data interchange b) Electronic door interface c) Electronic detachable interface d) Elementary data integration e) Electronic data interchange Ans: e Section Ref: What is a Supply Chain?

Level: easy

53. Which of the following is not considered to be a benefit of EDI? a) Increased human interaction b) Reduced paperwork c) Improved data accuracy d) Improved tracking capability e) Reduced clerical costs Ans: a Section Ref: What is a Supply Chain?

Level: moderate

54. Some warehouses provide product mixing. This is referred to as: a) reduced value-added service for customers. b) value-added service for customers. c) mix and match capability. d) correcting earlier mistakes in shipping. e) storage warehouse functions.

Ans: b Section Ref: Supply Chain Distribution Level: moderate 55. What is the throughput of Fingerhut’s warehouse in St. Cloud, MN? a) 30,000 items per minute b) 30,000 items per hour c) 30,000 items per day d) 30,000 items per week

e) 30,000 items per month Ans: b Section Ref: Supply Chain Distribution Level: moderate

56. What type of warehouse is used for long-term storage? a) Customized b) Strategic c) General d) Distribution e) Tactical Ans: c Section Ref: Supply Chain Distribution Level: easy

57. What type of warehouse is used for short-term storage, consolidation, and product mixing? a) Customized b) Strategic c) General d) Distribution e) Tactical Ans: d Section Ref: Supply Chain Distribution Level: easy

58. What does TL stand for? a) Transportation lead time b) Transportation logistics c) Trucking line d) Trucking life e) Truckload (quantity) Ans: e Section Ref: Supply Chain Distribution Level: easy

59. What is the process whereby shipments are transferred directly from inbound trailers to outbound trailers? a) crossdocking b) directdocking c) nodocking d) simuldocking e) transferdocking Ans: a

Section Ref: Supply Chain Distribution Level: easy

60. Crossdocking ____________________________________________________. a) eliminates the receiving and shipping functions of a distribution warehouse while still performing its storage and order picking functions b) eliminates the receiving and storage functions of a distribution warehouse while still performing its shipping and order picking functions c) eliminates the storage and shipping functions of a distribution warehouse while still performing its order picking and receiving functions d) eliminates the receiving and order picking functions of a distribution warehouse while still performing its storage and shipping functions e) eliminates the storage and order picking functions of a distribution warehouse while still performing its receiving and shipping functions Ans: e Section Ref: Supply Chain Distribution Level: moderate

61. Crossdocking allows the retailer to replace ______________ with information and coordination. a) trucks b) buildings c) inventory d) truck loaders e) conveyor belts Ans: c Section Ref: Supply Chain Distribution Level: hard

62. _________________ crossdocking is the receiving and consolidating of inbound supplies to support just-in-time manufacturing. a) Warehouse b) Manufacturing c) Distributor d) Transportation e) Retail Ans: b Section Ref: Integrated Supply Chain Management Level: moderate

63. _________________ crossdocking is the consolidating of shipments from LTL and small package industries to gain economies of scale. a) Warehouse b) Manufacturing

c) Distributor d) Transportation e) Retail Ans: d Section Ref: Integrated Supply Chain Management Level: moderate

64. What is a virtual organization? a) A company that provides core functions and outsources everything else b) An e-commerce company c) A web server developer d) A computer manufacturer e) A company with no vertical levels of management Ans: a Section Ref: Trends in Supply Chain Management Level: moderate

65. Benetton is well known for the practice of assembling all white sweaters and waiting to dye them much closer to the time of sale. This is an example of what? a) Stupidity b) Postponement c) Fractionalization d) Partitioning e) Genericness Ans: b Section Ref: Supply Chain Distribution Level: moderate

66. Which of the following is not an argument in favor of having a single supplier? a) Quantity discounts may be achieved. b) Partnering becomes more possible. c) Consistency of input materials is achieved. d) Probability of assured supply is better. e) Deliveries can be scheduled more easily.

Ans: d Section Ref: The Role of Purchasing Level: moderate

67. Which of the following is not an argument in favor of having multiple suppliers? a) The Just-in-time philosophy can be better utilized. b) Supplier capacity is less important. c) Volume flexibility is obtained. d) Risks may be spread. e) New suppliers may more easily be tested.

Ans: a Section Ref: The Role of Purchasing Level: moderate

68. Insourcing incurs an annual fixed cost of $500,000 and a variable cost of $60 per unit.

Outsourcing incurs an annual fixed cost of $750,000 and a variable cost of $20 per unit. What is the indifference point between the two alternatives? a) 0 units b) −6250 units c) 6250 units d) 40 units e) 12,500 units Ans: c Solution: (FCBUY + (VCBUY*Q) = FC Make + (VC Make*Q) $750,000 + ($20Q) = $500,000 + ($60Q) = 6,250) Section Ref: Sourcing Issues Level: moderate

69. What is the electronic marketplace for the auto industry? a) Carnet b) Autoexchange c) Covisint d) Citroen e) Motorint Ans: c Section Ref: What is a Supply Chain?

Level: hard

70. In January 2003, how many suppliers were members of Covisint? a) 76 b) 760 c) 7,600 d) 76,000 e) 760,000 Ans: d Section Ref: What is a Supply Chain?

Level: hard 71. Which of the following is a “buyer-side,” typically industry-specific solution? a) automated order entry systems b) electronic data interchange c) electronic storefronts d) net marketplaces

e) advertising revenue model Ans: b Section Ref: What is a Supply Chain?

Level: hard

72. Which B2C model does MyPoints.com utilize? a) advertising revenue model b) subscription revenue model c) transaction fee model d) sales revenue model e) affiliate revenue model Ans: e Section Ref: Components of a Supply Chain Level: hard

73. Companies want a supply chain that makes it possible to: a) manage all suppliers’ development costs. b) manage and adapt to all of the business dynamics. c) manage distribution display. d) manage distribution outlet retail prices. e) manage customer demands.

Ans: b Section Ref: Implementing Supply Chain Management Level: moderate

74. Which of the following is not one of the supply chain wastes the text book identifies? a) over production b) delay between activities c) procurement/purchasing delay d) unnecessary transport or conveyance of product e) unnecessary movement by people Ans: c Section Ref: Implementing Supply Chain Management Level: moderate

75. Supply chain velocity refers to a) how fast the transportation vendor is b) how fast the company pays the supply chain vendors c) how fast the purchasing department responds to a request d) the speed at which a product moves through a pipeline from the manufacturer to the customer e) the speed at which the warehouse is able to crossdock a shipment Ans: d Section Ref: Trends in Supply Chain Management

Level: easy 76. Which of the following is the term for “arranging the method of shipment for both incoming and outgoing products or material”? a) TQM b) Employee management c) Distribution management d) Traffic management e) Logistics management Ans: d Section Ref: The Bullwhip Effect Level: moderate

True/False

77. Supply chain management provides the company with a sustainable, competitive advantage.

Ans: True Section Ref: What is a Supply Chain?

Level: moderate

78. Manufacturers typically represent the beginning of a supply chain.

Ans: False Section Ref: Components of a Supply Chain Level: easy

79. A tier one supplier is always more important than a tier two supplier.

Ans: False Section Ref: The Bullwhip Effect Level: moderate

80. The tier one, tier two, and tier three supplier designations are based upon whom the suppliers are providing materials or services to.

Ans: True Section Ref: The Bullwhip Effect Level: moderate 81. Like “ABC inventory analysis,” the tier one, tier two, and tier three supplier designations are based upon the annual level of purchases made with the suppliers.

Ans: False Section Ref: The Bullwhip Effect Level: moderate

82. Location managers are typically responsible for managing the movement of products between locations.

Ans: False Section Ref: The Bullwhip Effect Level: easy

83. If supply chain A has more levels than supply chain B, then the bullwhip effect will likely impact supply chain B more than supply chain A. Answer: False Section Ref: The Bullwhip Effect Level: moderate

84. A possible remedy for the bullwhip effect is to base forecasts on demand coming from the immediate downstream customer.

Ans: False Section Ref: The Bullwhip Effect Level: moderate

85. Order batching replaces lumpy demand with constant product demand.

Ans: False Section Ref: The Bullwhip Effect Level: moderate

86. Rationing and shortage gaming occur when supply exceeds demand.

Ans: False Section Ref: The Bullwhip Effect Level: easy

87. The time between order placement and the receipt of goods is called lead time.

Ans: True Section Ref: Issues Affecting Supply Chain Management Level: easy

88. Internet-based B2B commerce results in higher costs to the global suppliers

Ans: False Section Ref: Major Issues Affecting Supply Chain Management (eCommerce) Level: easy

89. The Internet has created greater competition between suppliers.

Ans: True Section Ref: Issues Affecting Supply Chain Management Level: moderate

90. A firm can hedge exchange rate risk by establishing links with suppliers in a variety of countries.

Ans: True Section Ref: Issues Affecting Supply Chain Management (Global) Level: moderate

91. Service organizations can also benefit from supply chain management.

Ans: True Section Ref: Supply Chain for Service Organizations Level: easy

92. Global competition forces organizations to decrease their amount of product proliferation.

Ans: False Section Ref: Issues Affecting Supply Chain Management (Global) Level: moderate

93. Supply chain globalization is not impacted by security requirements.

Ans: False Section Ref: Major Issue Affecting Supply Chain Management (Global) Level: Easy

94. Recent research suggests that most large companies have not increased their level of outsourcing.

Ans: True Section Ref: Sourcing Issues Level: Hard

95. The amount of outsourcing in industry is increasing.

Ans: True

Section Ref: Sourcing Issues Level: moderate

96. The greater the level of vertical integration, the higher is the level of outsourcing.

Ans: False Section Ref: Sourcing Issues Level: moderate 97. One of the Institute for Supply Management’s principles of ethical supply chain management conduct is “loyalty to your organization.”

Ans: True Section Ref: The Role of Purchasing (Ethics) Level: hard

98. Shipments should spend less than 24 hours in a crossdock.

Ans: True Section Ref: Integrated Supply Chain Management Level: moderate

99. Crossdocking eliminates the receiving and shipping functions of a distribution warehouse while still performing its storage and order picking functions.

Ans: False Section Ref: Integrated Supply Chain Management Level: moderate

100. A company can use traditional financial measures such as return on investment to measure supply chain performance.

Ans: True Section Ref: Supply Chain Performance Metrics Level: Moderate

101. Warehouses are sometimes used as part of their postponement in their product design process.

Ans: True Section Ref: Supply Chain Distribution Level: Moderate

102. Distribution management is the movement of material from manufacturer to the customer.

Ans: True Section Ref: The Bullwhip Effect Level: moderate

Essay 103. What are the three “components” of a supply chain?

Ans: (1) external suppliers, (2) internal functions of the company, (3) external distributors Section Ref: Components of a Supply Chain Level: Easy

104. Explain how a supply chain supports the organization to be sustainable and provide a competitive advantage.

Ans: It provides the ability to provide quick response times, low cost, state-of-the-art quality design, and operational flexibility.

Section Ref: What is a Supply Chain?

Level: Moderate

105. Logistics includes what two major management functions?

Ans: traffic management and distribution management Section Ref: The Bullwhip Effect Level: easy

106. What are the four causes of the bullwhip effect?

Ans: (1) demand forecast updating, (2) order batching, (3) price fluctuations, (4) rationing and shortage gaming Section Ref: The Bullwhip Effect Level: moderate

107. Describe how consumers can use the Internet to shop in new ways.

Ans: They can comparison shop for suppliers around the world, view color pictures in an online catalog, and find all the information needed about an item. They can use a credit card or electronic funds transfer to buy items on-line. They can participate in auctions, specify the options and learn the cost of a brand new car, book a trip, or buy a diamond ring.

Section Ref: What is a Supply Chain?

Level: moderate

108. List some benefits derived from E-commerce.

Ans:

reduced transaction costs, fewer intermediaries, reduced lead times, greater visibility for

the company, more choices and information for customers, improved customer service, virtual companies that distribute through the Web, customer preference data collection, and global market access Section Ref: Issues Affecting Supply Chain Management (eCommerce) Level: moderate

109. Compare the access differences among the Internet, an intranet, and an extranet.

Ans: The Internet is wide open, the intranet is limited to internal users, and the extranet is expanded to include suppliers and customers.

Section Ref: Issues Affecting Supply Chain Management (eCommerce) Level: moderate

110. List five major factors that become important for the management of global supply chains.

Ans: substantial geographical distances, forecasting accuracy, exchange rates, infrastructure issues, and product proliferation Section Ref: Issues Affecting Supply Chain Management (Global) Level: hard

111. What are some examples of infrastructure issues that firms managing global supply chains may encounter?

Ans: inadequate transportation networks, limited telecommunication capabilities, uncertain power continuity, low worker skill, and poor supply availability and quality Section Ref: Issues Affecting Supply Chain Management (Global) Level: moderate 112. Provide some examples of “greening” requirements that an organization may impose on their supply chain members.

Ans: Examples may include carbon emission footprint reduction, reduced energy consumption, reduced inventory levels, reduced transportation costs, the use of sustainable farming methods, use of specified material and application of greening supporting technologies.

Section Ref: Major Issues Affecting Supply Chain Management (Green) Level: Moderate

113. What is the big difference between crossdocking and traditional distribution warehousing?

Ans: In a traditional setting, the warehouse holds stock until a customer places an order, then the item is picked, packed and shipped. The customer typically is not known before the items arrive at the warehouse. With crossdocking, the customer is known before the items arrive at the warehouse and there is no reason to move the items into storage.

Section Ref: Integrated Supply Chain Management Level: hard

114. What are the two major advantages or crossdocking?

Ans: First, the retailer reduces inventory holding costs by replacing inventory with information and coordination. Second, crossdocking can consolidate shipments to achieve truck-load quantities and significantly reduce a company’s inbound transportation costs.

Section Ref: Integrated Supply Chain Management Level: hard

Problems

115. What is the formula for the indifference point Q* in the make-or-buy decision.

Ans: Q* = (FCMake − FCBuy) / (VCBuy − VCMake) Section Ref: SCM Across The Organization Level: moderate 116. Will’s omelet factory produces 2,500 omelets a day. They’ve determined that their daily fixed costs are $4,000 with a variable cost of fifteen cents per omelet. (a) What is the total cost to make a day’s omelets, and (b) what should Will charge for each omelet to make a 10% profit, rounded to the next whole dollar?

Ans: (a) $4,375 TC = F + (VC*Q) = $4,000+ (2,500*$0.15) = $4,375 (b) $2.00 ($1.925) Cost/omelet = TCmake/Q=$4375/2500=$1.75: Sales price @ 10% profit = Cost/omelet*1.1= $1.925 (round to $2.00) Section Ref: SCM Across The Organization Level: moderate

117. Insourcing incurs a fixed cost of $1000 and a $5 variable cost. Outsourcing incurs a fixed cost of $2000 and a $2 variable cost. What is the indifference point?

Ans: 333 units (Q* = (FCMake − FCBuy) / (VCBuy − VCMake) = ($2000 - $1000)/ ($5 - $2) = 333) Section Ref: SCM Across The Organization Level: moderate

118. Logo, Inc. can transport its own goods for a $140,000 annual cost and $25 per unit. A logistics supplier offers a contract for a $100,000 annual cost at $30 per unit. What is the indifference point?

Ans: 8000 units (Q* = (FCMake − FCBuy) / (VCBuy − VCMake) = ($140,000 - $100,000)/ ($30 - $25) = 8,000) Section Ref: SCM Across The Organization Level: moderate

119. Simuelson Industries can produce its own motors for a $60,000 fixed monthly cost and a $50 variable cost per unit. Alternatively, Simuelson Industries can purchase the motors from an

outside supplier for $50,000 per month and $58 per unit. a) What is the indifference point? b) What option should be chosen if monthly demand is 1200 units?

Ans: a) 1250 units, (Q* = (FCMake − FCBuy) / (VCBuy − VCMake) = ($60,000 - $50,000)/ ($58 $50) = 1,250) b) outsourcing Section Ref: SCM Across The Organization Level: moderate

120. Yannis Corporation is trying to decide whether to produce its own subassemblies or outsource them. In-house production costs would include an annual fixed cost of $250,000, materials costs per unit of $7, and labor costs per unit of $5. Teshtown, Inc. has agreed to provide the subassemblies for an annual cost of $400,000 and a unit cost of $8 per subassembly.

Over what ranges of demand is each option best?

Ans: insourcing is optimal between 1 and 37,500 units; outsourcing is optimal for annual demand  37,500 units (Q* = (FCMake − FCBuy) / (VCBuy − VCMake) = ($250,000 - $400,000)/ ($8 - $12) = 37,500) Section Ref: SCM Across The Organization Level: Moderate

121. Insourcing incurs a periodic fixed cost of $10,000 and a $0.50 variable cost. Outsourcing incurs a periodic cost of $6000 and a $0.90 variable cost. Over what ranges of demand is each option best?

Ans: outsourcing is optimal between 1 and 10,000 units. Insourcing is optimal for demand  10,000 units (Q* = (FCMake − FCBuy) / (VCBuy − VCMake) = ($10,000 - $6,000)/ ($0.90 - $0.50) = 10,000) Section Ref: SCM Across The Organization Level: Moderate

122. Boys `R Us sells suits to young men. Management is considering vertical integration. It is determined that the company can produce its own suits for a fixed annual cost of $2,000,000 and a production cost of $100 per suit. The current supplier charges a $2,500,000 fixed annual cost and $120 per suit. Over what ranges of demand is each option best?

Ans: insourcing is always preferable (Q* = (FCMake − FCBuy) / (VCBuy − VCMake) = ($2,000,000 $2,500,000)/ ($120 - $100) = - 25,000) Section Ref: SCM Across The Organization Level: moderate

123. Annual fixed costs are $900,000 and $800,000 for outsourcing and insourcing, respectively, and variable costs are $28 and $32 for outsourcing and insourcing, respectively. If current annual demand is 22,000 units, by how much must demand increase in order for outsourcing to become cheaper?

Ans: 3000 units (Q* = (FCMake − FCBuy) / (VCBuy − VCMake) = ($800,000 - $900,000)/ ($28 - $32) = 25,000; 2500 – 22000 = 3,000) Section Ref: SCM Across The Organization Level: moderate

124. Global Metalworks can produce its own hinges for a weekly cost of $96,400 and a cost per hinge of $0.10. Currently an outside supplier is used for a weekly cost of $82,500 and a cost per hinge of $0.24. Current weekly demand is 98,000 units. How much larger must weekly demands grow in order to make insourcing economical?

Ans: 1286 units (Q* = (FCMake − FCBuy) / (VCBuy − VCMake) = ($96,400 - $82,500)/ ($0.24 $0.10) = 99,286; 99,286 – 98000 = 1,286) Section Ref: SCM Across The Organization Level: moderate

125. Sportsworld, Inc. currently incurs $100,000 in annual purchasing costs, and each purchase order costs the firm approximately $3. Third-Party Logistics, Inc. is willing to perform purchasing services for Sportsworld at a $50,000 annual fixed retainer plus $7 per purchase order. Sportsworld currently places 10,000 orders per year. a) What is the current total cost of purchasing for Sportsworld? b) What would the cost of purchasing be if Third-Party Logistics were used? c) What is the indifference point for the two alternatives?

Ans: a) $130,000, (TC = F + (VC*Q) = $100,000 + ($3 * 10,000) = $130,000) b) $120,000, (TC = F + (VC*Q) = $50,000 + ($7 * 10,000) = $120,000) c) 12,500 (Q* = (FCMake − FCBuy) / (VCBuy − VCMake) = ($100,000 - $50,000)/ ($7 - $3) = 12,500) Section Ref: SCM Across The Organization Level: Moderate

126. Big Oil Refinery is losing money every month. They cannot shut down the refinery. What quantity of product should they make in an effort to break even? Their primary product sale price is $1.50 per gallon. The production fixed cost is $36,000/day. The variable cost per gallon is $1.20.

Ans: 180,000 gal: Sales price * Quantity = F + (VC*Q); Q = FC/ (Sales price – VC) = 36,000/ ($1.50 - $1.20) = 180,000 Section Ref: SCM Across the Organization Level: hard

Short Answer

127. A firm whose variable cost of providing a function is $10 while a potential supplier will outsource the function if ______________________ Ans: the potential supplier's fixed cost is lower than its own.

Section Ref: Issues Affecting Supply Chain Management Level: moderate

128. Name three kinds of B2B e-commerce: ______________________, ______________________, ______________________.

Ans: Any three of automated order entry, electronic data interchange, electronic storefronts, and electronic marketplaces.

Section Ref: Issues Affecting Supply Chain Management (eCommerce) Level: hard

129. Name three benefits of B2B e-commerce: ______________________, ______________________, _______________________.

Ans: Any three of: lower procurement (purchasing) information costs, low-cost access to global suppliers, lower inventory investment, and better product quality.

Section Ref: Issues Affecting Supply Chain Management (eCommerce) Level: hard

130. Growth in shipments from ____________________ to the U.S. has grown particularly quickly in recent years.

Ans: Asia Section Ref: Issues Affecting Supply Chain Management (Global) Level: moderate

131. Taxation is a particularly challenging e-commerce problem because of _________________ Ans: conflicting jurisdictions and interests.

Section Ref: Issues Affecting Supply Chain Management (eCommerce)

132. Global competition forces firms to offer _____________________ products.

Ans: highly customized Section Ref: Issues Affecting Supply Chain Management (Global) Level: moderate

133. Several studies report that the top three criteria for selecting suppliers are ________, ________, and ________.

Ans: price, quality, on-time delivery Section Ref: Sourcing Issues Level: moderate

134. ________, ________, ________ are critical factors in successful partnering.

Ans: Impact, intimacy, and vision Section Ref: Sourcing Issues Level: moderate

135. Name three functions of a purchasing department: ________________________, ________________________, ________________________ Ans: Any three of: selecting suppliers, negotiating and administering long-term conflicts, monitoring supplier performance, placing orders, developing a responsive supplier base, and maintaining good supplier relations.

Section Ref: The Role of Purchasing Level: easy

136. Name three things purchasing agents should avoid as they balance loyalty their own organization and those with whom they deal: ________________________, ________________________, ________________________ Ans: Any three of: the intent and appearance of unethical or compromising practice, personal business and professional activity that creates a conflict between personal interests and the employers' interests, soliciting or accepting any financial or other gift that might influence or appear to influence supply management decisions, and improper reciprocal agreements.

Section Ref: The Role of Purchasing Level: hard

137. Partnerships between supplier and purchaser are easier to develop when there is (are) ______________________ supplier(s).

Ans: one Section Ref: The Role of Purchasing Level: easy

138. Successful supply chain partnerships have impact when they reduce: _______________________ and ______________________ while ______________________ and ______________________.

Ans: Duplication and waste, leveraging core competence and creating new opportunities.

Section Ref: The Role of Purchasing Level: hard

139. ______________ ________________ are responsible for managing the movement of products between locations.

Ans: Logistics managers Section Ref: The Bullwhip Effect Level: moderate

File: ch05, Chapter 5: Total Quality Management

Multiple Choice

1. One common definition of quality is __________, which focuses on measuring how well the product or service meets targets and tolerances determined by its designers. a) Fitness for use b) Value for price paid c) Technical perception d) Judgmental evaluation e) Conformance to specifications Ans: e Section Ref: Defining Quality Level: moderate

2. The definition of quality that involves the product functioning as expected without failure is a) Performance b) Conformance c) Reliability d) Standardization e) Endurance Ans: c Section Ref: Defining Quality Level: hard

3. Which of the following specifically relates to Service Organization dimensions of quality? a) conformance to specifications b) atmosphere c) durability d) features e) serviceability Ans: b Section Ref: Defining Quality Level: moderate

4. In six-sigma the level of defects is reduced to approximately a) 0 b) 1.4 parts per million c) 2.4 parts per million d) 3.4 parts per million e) 4.4 parts per million Ans: d

Section Ref: Defining Quality Level: moderate

5. The expected operational life of a product is called its __________________________. a) conformance b) reliability c) performance d) durability e) serviceability Ans: d Section Ref: Defining Quality Level: moderate

6. Quality has gained such prominence because organizations a) are following the latest management fad b) have found a low cost process to keep some employees busy c) have identified an employee perk, membership in quality circles d) understand it is minimal cost and something to do e) have gained an understanding of the high cost of poor quality Ans: e Section Ref: Cost of Quality Level: easy

7. During World War II, quality a) Meant inspecting products to ensure that they met specifications b) Encompassed the entire organization c) Was defined as it had been for more than 100 years d) Became customer driven e) Became more statistical in nature Ans: e Section Ref: The Evolution of Total Quality Management (TQM) Level: hard

8. TQM is __________, designed to build quality into the product and process design. a) Reactive b) Proactive c) Strategic d) Competitive e) Standardized Ans: b Section Ref: The Evolution of Total Quality Management (TQM) Level: moderate

9. Not only does TQM encompass the entire organization but it a) stresses quality is supplier driven b) stresses quality is vendor driven c) stresses quality is customer driven d) stresses the need for ISO 9000 compliance e) stressed the need to be ‘green’ Ans: c Section Ref: The Philosophy of TQM Level: moderate

10. Which of the following is not characteristic of TQM? a) Inspecting products after they have been made b) Identifying and correcting the root causes of quality problems c) Encompasses the entire organization d) Attempts to embed quality in every aspect of the organization e) Concerned with technical aspects of quality Ans: a Section Ref: The Philosophy of TQM Level: moderate

11. The Japanese term for continuous improvement is a) Poka-yoke b) Kaizen c) Kanban d) Muda e) Automation Ans: b Section Ref: The Philosophy of TQM Level: moderate

12. Giving workers responsibility for seeking out quality problems and correcting them is a) Continuous improvement b) Passing the buck c) Brainstorming d) Employee empowerment e) Employee involvement Ans: d Section Ref: The Philosophy of TQM Level: easy

13. Employees of the organization who receive goods or services from others in the company are

a) Internal customers b) Ultimate customers c) Downstream customers d) Operators e) External customers Ans: a Section Ref: The Philosophy of TQM Level: easy

14. Proper training of employees in the understanding of quality tools includes all of the following except a) How to correct problems b) How to assess quality c) How to develop new quality tools d) How to use quality control tools e) How to interpret findings Ans: c Section Ref: The Philosophy of TQM Level: moderate

15. TQM team meetings take place a) After work b) During lunch breaks c) When the boss calls them d) When all the other work is finished e) During time in the workday set aside for them Ans: e Section Ref: The Philosophy of TQM Level: moderate

16. A quality circle is a) An approach for the use of control charts b) An award for quality improvements c) An inspection stamp found on meat d) A team of volunteer production employees and their supervisors who meet regularly to solve quality problems e) A symbol used on flow charts Ans: d Section Ref: The Philosophy of TQM Level: moderate 17. Studying business practices of companies considered “best in class” is called a) Pairwise comparison

b) Benchmarking c) Competition d) Dreamscaping e) Discouraging Ans: b Section Ref: The Philosophy of TQM Level: moderate

18. When using SPC if you plot the variable of interest against a timeline you are using a) scatter diagrams b) control charts c) fishbone diagrams d) pareto charts e) flow charts Ans: b Section Ref: The Philosophy of TQM Level: moderate

19. Which of the following is not an important cost of poor quality? a) Product recalls b) Litigation resulting from product liability issues c) Loss of business d) Overhead e) Dissatisfied customers Ans: d Section Ref: Cost of Quality Level: moderate

20. Quality planning, employee training in quality measurement, and cost of maintaining records of information and data related to quality are __________ costs. a) Internal failure b) External failure c) Appraisal d) Prevention e) Replacement Ans: d Section Ref: Cost of Quality Level: moderate

21. Costs of quality inspections, testing, test equipment, and labs are examples of __________ costs. a) Internal failure b) External failure

c) Appraisal d) Prevention e) Replacement Ans: c Section Ref: Cost of Quality Level: moderate

22. Machine downtime due to failures in the process, scrap, and rework are examples of __________ costs. a) Internal failure b) External failure c) Appraisal d) Prevention e) Replacement Ans: a Section Ref: Cost of Quality Level: moderate

23. External failure costs include a) Scrap b) Litigation costs resulting from product liability issues c) Rework d) Quality inspections e) Employee training Ans: b Section Ref: Cost of Quality Level: moderate

24. Warranty claims, customer complaints, and costs of litigation are examples of __________ costs. a) Internal failure b) External failure c) Appraisal d) Prevention e) Replacement Ans: b Section Ref: Cost of Quality Level: moderate

25. The plan-do-study-act cycle is often called the a) TQM activity approach b) Deming wheel c) Continuous improvement cycle

d) Quality circle e) Action wheel Ans: b Section Ref: The Philosophy of TQM Level: moderate

26. In the plan-do-study-act cycle, what is studied? a) The plans made in the plan step b) The previous action plan c) The data collected in the do step d) The evaluation of the current process e) Procedure documentation Ans: c Section Ref: The Philosophy of TQM Level: hard 27. A useful tool for translating customers’ everyday language into specific technical requirements is a) Quality Function Deployment b) Quality circles c) Quality of design d) Scatter diagrams e) Cause-and-effect diagrams Ans: a Section Ref: The Philosophy of TQM Level: moderate

28. Quality Function Deployment begins by a) Translating scores into specific product characteristics b) Evaluating how the product compares with its major competitors c) Setting specific goals to address the specified problems d) Identifying important customer requirements e) Numerically scoring customer requirements based on their importance Ans: d Section Ref: The Philosophy of TQM Level: moderate

29. In using Quality Function Deployment, __________ is one way to find out precisely what features customers want in the product. a) Interviewing the company sales force b) Analyzing the changes in features historically c) Asking top management d) Talking to process engineers

e) Conducting focus groups Ans: e Section Ref: The Philosophy of TQM Level: hard

30. The important thing in Quality Function Deployment competitive evaluation is a) To evaluate the financial strength of competitors b) To identify customer requirements that should be pursued and how we fare relative to our competitors c) Speed of introduction d) The number of competitors e) Knowing our product well Ans: b Section Ref: The Philosophy of TQM Level: hard

31. The strength of the relationship between customer requirements and product characteristics is shown in the __________ matrix. a) Trade-off b) Product c) Relationship d) Strength e) Inverse Ans: c Section Ref: The Philosophy of TQM Level: hard

32. The last step in constructing the house of quality includes a) Determining how to advertise b) Setting targets for our own product c) Determining how to attack our competitors’ products d) Designing the product e) Comparing results with past sales Ans: b Section Ref: The Philosophy of TQM Level: hard

33. One common name for TQM based team work is: a) quality department b) quality support group c) quality circle d) quality team e) team one

Ans: c Section Ref: The Philosophy of TQM Level: hard

34. What quality control tool resembles a "fishbone?" a) Checklists b) Scatter diagrams c) Pareto analysis d) Cause-and-effect diagrams e) Flowcharts Ans: d Section Ref: The Philosophy of TQM Level: easy

35. Cause-and-effect diagrams are often called a) Checklists b) Scatter diagrams c) Pareto analysis d) Fishbone diagrams e) Histograms Ans: d Section Ref: The Philosophy of TQM Level: easy

36. For a cause-and-effect diagram, causes could be related to all of the following except a) Analysis b) Materials c) Measurements d) Machines e) Workers Ans: a Section Ref: The Philosophy of TQM Level: moderate

37. What is a schematic diagram of the sequence of steps involved in an operation or process? a) Checklist b) Control chart c) Scatter diagram d) Flow chart e) Process chart Ans: d

Section Ref: The Philosophy of TQM Level: moderate

38. What tool is useful in helping everyone develop a clear picture of how an operation or process works? a) Control chart b) Pareto analysis c) Checklist d) Flowchart e) Scatter diagram Ans: d Section Ref: The Philosophy of TQM Level: moderate

39. A checklist is a list of common defects and __________ of these defects. a) Number of occurrences b) Relative importance c) Attributes d) Costs e) Visibility Ans: a Section Ref: The Philosophy of TQM Level: moderate

40. Checklists can also be used to focus on? a) replacement costs b) design documentation c) time dimension d) upper control limits e) histogram Ans: c Section Ref: The Philosophy of TQM Level: moderate

41. For control charts, which of the following situations means that the process is not in control? a) A measured observation is above the LCL b) A measured observation is below the UCL c) A measured observation is above the center line d) A measured observation is below the center line e) A measured observation is above the UCL Ans: e Section Ref: The Philosophy of TQM

Level: hard

42. Scatter diagrams are particularly useful in detecting the amount of __________, or the degree of linear relationship, between two variables. a) Correlation b) Heteroscedasticity c) Agreement d) Disagreement e) Causality Ans: a Section Ref: The Philosophy of TQM Level: hard

43. __________ analysis is a technique used to identify quality problems based on their degree of importance. a) Deming b) Pareto c) Davis d) Crosby e) Juran Ans: b Section Ref: The Philosophy of TQM Level: moderate

44. A chart showing the number of defects that result from different causes would be used in: a) Pareto analysis b) Flowcharts c) Cause-and-effect diagrams d) Benchmarking e) Control charts Ans: a Section Ref: The Philosophy of TQM Level: hard

45. A __________ shows the frequency distribution of observed values of a variable. a) Scatter diagram b) Control chart c) Histogram d) Flow chart e) Process chart Ans: c Section Ref: The Philosophy of TQM Level: moderate

46. If the derived scatter diagram shows a non-linear but scattered relationship it indicates that a) there is a direct correlation between the two variables. b) the two variables’ data was gathered at different times c) a third variable needs to be added to the evaluation d) there is no direct correlation between the two variables e) you are using the wrong SPC chart Ans: d Section Ref: The Philosophy of TQM Level: moderate

47. Quality at the source is the belief that it is far better to _______ quality problems and _____ them than to discard defective items after production. a) uncover the person generating, fire b) uncover the source of, correct c) discover new methods of, implement d) discover new processes of, implement e) allow returns of, fix Ans: b Section Ref: The Philosophy of TQM Level: moderate

48. The Baldrige Award is intended to a) Demonstrate that American companies are better than their foreign competitors b) Certify suppliers c) Reward and stimulate quality initiatives d) Focus national attention on manufacturing e) Add structure to TQM Ans: c Section Ref: Quality Awards and Standards Level: moderate

49. To compete for the Baldrige Award, companies must a) Be nominated by their senator b) Submit a lengthy application c) Use e-mail regularly d) Use statistical process control e) Be a Fortune-500 company Ans: b Section Ref: Quality Awards and Standards Level: moderate

50. The Malcolm Baldrige Award criteria include categories for all of the following except a) Leadership b) Process management c) Product design d) Customer and market focus e) Business results Ans: c Section Ref: Quality Awards and Standards Level: moderate

51. The Malcolm Baldrige Award criteria category that includes commitment by top management is a) Leadership b) Strategic planning c) Process management d) Business results e) Information and analysis Ans: a Section Ref: Quality Awards and Standards Level: hard

52. Which of the Malcolm Baldrige Award criteria is allocated the most points? a) leadership b) information and analysis c) human resource focus d) process management e) business results Ans: e Section Ref: Quality Awards and Standards Level: hard

53. Where is the Deming prize awarded? a) U.S. b) Japan c) England d) Germany e) Canada Ans: b Section Ref: Quality Awards and Standards Level: moderate

54. The Union of Japanese Scientists and Engineers named its quality award after ___________________. a) Genichi Taguchi b) Kaoru Ishikawa c) Joe Juran d) Phillip Crosby e) W. Edwards Deming Ans: e Section Ref: Quality Awards and Standards Level: moderate

55. What was the first US company to receive the Deming Prize? a) IBM b) Microsoft c) Wal-Mart d) AT&T e) Florida Power & Light Ans: e Section Ref: Quality Awards and Standards Level: hard

56. The Malcolm Baldrige Award criteria category that includes the use of tools such as market surveys and focus groups is a) Leadership b) Strategic planning c) Customer and market focus d) Business results e) Information and analysis Ans: c Section Ref: Quality Awards and Standards Level: moderate

57. The Malcolm Baldrige Award criteria category that includes continuous improvement programs, employee training, and functioning of teams is a) Leadership b) Strategic planning c) Information and analysis d) Human resource development and management e) Business results Ans: d Section Ref: Quality Awards and Standards Level: hard

58. The Malcolm Baldrige Award criteria category of business results does not include a) Percentage of defective items b) Progressive improvement over time c) Financial measures d) Marketing measures e) One-time only improvements Ans: e Section Ref: Quality Awards and Standards Level: easy

59. If suppliers meet preset quality standards, materials a) will need minimal arrival inspections b) will still require full arrival inspections c) will be package in special approved containers d) do not have to be inspection upon arrival e) will be paid for at a premium cost Ans: d Section Ref: The Philosophy of TQM Level: moderate

60. The purpose of the International Organization for Standardization is to a) Certify all suppliers worldwide b) Establish international quality standards c) Spread European standards worldwide d) Certify products e) Streamline documentation Ans: b Section Ref: Quality Awards and Standards Level: moderate

61. ISO 9000 is a) An award for quality given annually by the U.S. Government b) An approach to quality management that was developed in Japan by Deming c) A set of international quality standards and a certification process for companies d) An approach for managing self-directed teams e) An approach for product design Ans: c Section Ref: Quality Awards and Standards Level: easy

62. Which of the following is not necessary for receiving ISO 9000 certification? a) Products meet customer requirements

b) Documentation of methods used to monitor quality c) Documentation of methods and frequency of worker training d) Documentation of statistical process control tools used e) An audit by an ISO 9000 examiner Ans: a Section Ref: Quality Awards and Standards Level: hard

63. Increases in international trade during the 1980s created a need for the development of ____________ standards of quality. a) universal b) country-specific c) lower d) metric e) bilingual Ans: a Section Ref: Quality Awards and Standards Level: hard

64. What are the most widely used ISO standards? a) ISO 9000, ISO 9001, and ISO 9004 b) ISO 9000, ISO 9001, and ISO 9002 c) ISO 9000, ISO 9010, and ISO 9100 d) ISO 9001, ISO 9002, and ISO 9003 e) ISO 9000, ISO 9002, and ISO 9004 Ans: a Section Ref: Quality Awards and Standards Level: hard 65. Who is the “grandfather of quality control?” a) Walter Shewhart b) W. Edwards Deming c) Joseph Juran d) Phillip Crosby e) Genichi Taguchi Ans: a Section Ref: The Evolution of Total Quality Management (TQM) Level: moderate

66. Who developed quality control charts? a) Walter Shewhart b) W. Edwards Deming c) Joseph Juran

d) Phillip Crosby e) Genichi Taguchi Ans: a Section Ref: The Evolution of Total Quality Management (TQM) Level: moderate

67. ISO 14000 is for evaluating a) Automotive suppliers b) Minority suppliers c) Raw materials d) A company’s environmental responsibility e) Service suppliers Ans: d Section Ref: Quality Awards and Standards Level: moderate

68. __________ is often referred to as the father of quality control. a) W. Edwards Deming b) Joseph Juran c) Philip Crosby d) Martin Marietta e) Count Pareto Ans: a Section Ref: The Evolution of Total Quality Management Level: easy

69. Deming pointed out that 85% of quality problems are caused by a) Worker error b) Numerical quotas c) Processes and systems d) Carelessness e) Suppliers Ans: c Section Ref: The Evolution of Total Quality Management Level: hard

70. Deming believed that __________ is the key to improving quality. a) Employee training b) Process design c) Properly functioning equipment d) Having good suppliers e) Improving the system

Ans: e Section Ref: The Evolution of Total Quality Management Level: hard 71. Who is famous for his “14 Points?” a) Walter Shewhart b) W. Edwards Deming c) Joseph Juran d) Armand Feigenbaum e) Genichi Taguchi Ans: b Section Ref: The Evolution of Total Quality Management Level: moderate 72. For Juran’s quality trilogy, which part stresses that processes should be set up to ensure that the quality standards can be met? a) Quality planning b) Quality control c) Quality improvement d) Quality certification e) Quality awards Ans: a Section Ref: The Evolution of Total Quality Management Level: moderate

73. Juran stressed that quality improvement should be continuous as well as a) Unique b) Novel c) Retroactive d) Breakthrough e) Ongoing Ans: d Section Ref: The Evolution of Total Quality Management Level: hard

74. Which of the following is not attributed to Philip Crosby? a) The concept of the quality trilogy b) The phrase “Do it right the first time.” c) Stressed the idea of prevention of defects d) The notion of zero defects e) The phrase “Quality is free.”

Ans: a Section Ref: The Evolution of Total Quality Management

Level: moderate

75. Who is best known for the development of cause-and-effect diagrams? a) Walter Shewhart b) W. Edwards Deming c) Joseph Juran d) Kaoru Ishikawa e) Genichi Taguchi Ans: d Section Ref: The Evolution of Total Quality Management Level: moderate

76. Who developed a formula for determining the cost of poor quality? a) Walter Shewhart b) W. Edwards Deming c) Joseph Juran d) Kaoru Ishikawa e) Genichi Taguchi Ans: e Section Ref: The Evolution of Total Quality Management Level: moderate

77. The most important factor in the success or failure of TQM efforts is a) Getting started quickly b) The use of statistical process control c) The genuineness of the organization’s commitment d) The use of cause-and-effect diagrams e) Employee training Ans: c Section Ref: The Philosophy of TQM Level: moderate

78. Which of the following is a valid formula to compute the reliability of two components in parallel? a) (Reliability of 1st component) – (Reliability of 2nd Component) (1 – Reliability of 1st Component) b) 1 – (1 – Reliability of 1st Component) (1 – Reliability of 2nd Component) c) (1 – Reliability of 1st Component) (1 – Reliability of 2nd Component) d) (Reliability of 1st component) + (Reliability of 1st Component) (1 – Reliability of 2nd Component) e) (Reliability of 1st component) (Reliability of 2nd Component) + (Reliability of 1st Component) (1 –Reliability of 1st Component) Ans: b

Commented [C1]: In the pdf, the formula is different Rs = (1st component) + [(2nd component) x (1 – 1st component)] Not sure if I am missing anything?

Section Ref: The Philosophy of TQM Level: hard

79. Suppose that you have a system with one component and two backups. What is the formula for the reliability of the system? a) P(1st works) + [P(1st fails)][P(2nd works)] + [P(1st fails)][P(3rd works)] b) [P(1st works)][P(2nd works)][P(3rd works)] c) [P(1st works)] + [P(2nd works)] + [P(3rd works)] d) P(1st works) + [1 – P(1st fails)][P(2nd works)] + [1 – P(1st fails)][P(3rd works)] e) 1 – [P(1st fails)][P(2nd fails)][P(3rd fails)] Ans: e Section Ref: The Philosophy of TQM Level: hard

80. One TQM mistake companies make is believing that the responsibility for quality and elimination of waste lies a) with the supplier b) with the return and repair shop c) with the supply chain d) with all employees but top management e) with top management alone.

Ans: d Section Ref: Why TQM Efforts Fail Level: moderate

81. SPC is a) a direct substitute for continuous improvement b) a replacement of the teamwork concept c) a substitute for middle management d) a fully subjective process e) is not a substitute for continuous improvement Ans: e Section Ref: Why TQM Efforts Fail Level: moderate

82. The decision to implement TQM will impact all of the following EXCEPT a) product design b) processes c) job design d) supply chain management e) company product Ans: e Section Ref: Total Quality Management (TQM) Within OM: how it all fits together

Level: easy

83. TQM affects which of the following a) marketing b) finance c) accounting d) engineering e) all the answer choices are correct Ans: e Section Ref: Total Quality Management (TQM) Across the Organization Level: easy

True/False

84. One common definition of quality is conformance to specifications, which focuses on measuring how well the product or service meets targets and tolerances determined by its designers.

Ans: True Section Ref: Defining Quality Level: moderate

85. The expected operational life of a product is called its reliability.

Ans: False Section Ref: Defining Quality Level: moderate

86. External failure costs tend to be particularly high for service organizations.

Ans: True Section Ref: Cost of Quality Level: moderate

87. TQM is reactive, designed to build quality into the product and process design.

Ans: False Section Ref: The Evolution of Total Quality Management (TQM) Level: moderate

88. Quality at the source involves inspecting goods after they are produced.

Ans: False

Section Ref: The Philosophy of TQM Level: moderate

89. It is not possible to develop a U shaped scatter diagram relationship.

Ans: False Section Ref: The Philosophy of TQM Level: moderate

90. A quality circle is a team of volunteer production employees and their supervisors who meet regularly to solve quality problems.

Ans: True Section Ref: The Philosophy of TQM Level: easy

91. Quality planning, employee training in quality measurement, and cost of maintaining records of information and data related to quality, are appraisal costs.

Ans: False Section Ref: Cost of Quality Level: moderate

92. Machine downtime due to failures in the process, scrap, and rework are examples of internal failure costs.

Ans: True Section Ref: Cost of Quality Level: moderate

93. The later that defects are found, the less costly they are to correct.

Ans: False Section Ref: The Philosophy of TQM Level: easy 94. A useful tool for translating customers’ everyday language into specific technical requirements is Quality Function Deployment.

Ans: True Section Ref: The Philosophy of TQM Level: moderate

95. In using Quality Function Deployment, conducting focus groups is one way to find out precisely what features customers want in the product.

Ans: True Section Ref: The Philosophy of TQM Level: moderate

96. In TQM the role of the employee is very similar to earlier requirements.

Ans: False Section Ref: The Philosophy of TQM Level: moderate

97. A control chart is a schematic diagram of the sequence of steps involved in an operation or process.

Ans: False Section Ref: The Philosophy of TQM Level: moderate

98. Cause-and-effect diagrams are problem solving tools commonly used by quality control teams.

Ans: True Section Ref: The Philosophy of TQM Level: moderate

99. A checklist is a list of common defects and the relative importance of these defects.

Ans: False Section Ref: The Philosophy of TQM Level: hard

100. Pareto analysis is a technique used to identify quality problems based on their degree of importance.

Ans: True Section Ref: The Philosophy of TQM Level: moderate

101. The Deming Prize is an American award given to companies to recognize their efforts in quality improvement.

Ans: False Section Ref: Quality Awards and Standards

Level: moderate 102. ISO 9001 is the standard used for the certification of a firm’s quality management system.

Ans: True Section Ref: Quality Awards and Standards Level: hard

103. ISO certification has become a requirement for conducting business in many industries.

Ans: True Section Ref: Quality Awards and Standards Level: moderate

104. W. Edwards Deming is often referred to as the father of quality control.

Ans: True Section Ref: The Evolution of Total Quality Management (TQM) Level: easy

105. The concept of the quality trilogy is attributed to Philip Crosby.

Ans: False Section Ref: The Evolution of Total Quality Management (TQM) Level: moderate

106. A cause-and-effect diagram is also referred to as a Taguchi diagram.

Ans: False: Section Ref: The Evolution of Total Quality Management (TQM) Level: moderate

107. Genichi Taguchi estimates that as much as 80 percent of all defective items are caused by poor product design.

Ans: True Section Ref: The Evolution of Total Quality Management (TQM) Level: hard

108. The most important factor in the success or failure of TQM efforts is the genuineness of the organization’s commitment.

Ans: True Section Ref: The Evolution of Total Quality Management (TQM)

Level: moderate

109. Quality at the source is the belief that it is not in the best interest to uncover the source of quality problems and eliminate them.

Ans: False Section Ref: The Philosophy of TQM (Process Management) Level: easy

110. TQM promotes employees to identify problems and pass onto someone else.

Ans: False Section Ref: The Philosophy of TQM Level: easy

111. Quality Function Deployment (QFD) enhances communication between marketing, operations, and engineering functions.

Ans: True Section Ref: The Philosophy of TQM Level: moderate

Essay

112. Name six common definitions of quality in manufacturing.

Ans: Conformance, performance, reliability, features, durability, and serviceability Section Ref: Defining Quality Level: moderate

113. What are four dimensions of manufacturing quality?

Ans: Conformance to specifications, performance, reliability, features, durability and serviceability Section Ref: Defining Quality Level: hard

114. What are four dimensions of service quality?

Ans: Intangible factors, consistency, responsiveness to customer needs, courtesy/friendliness, timeliness/promptness, atmosphere Section Ref: Defining Quality Level: hard

115. What are the four types of quality costs?

Ans: Internal failure costs, External failure costs, Appraisal costs, and Prevention costs Section Ref: Cost of Quality Level: moderate

116. What are the steps involved in Quality Function Deployment?

Ans: 1) identify important customer requirements; 2) the requirements are numerically scored, based on their importance; 3) the scores are translated into specific product characteristics; 4) evaluations are made of how the product compares with its main competitors relative to the identified characteristics; and 5) specific goals are set to address the identified problems; Section Ref: The Philosophy of TQM Level: hard

117. What are the seven TQM tools for solving quality problems?

Ans: cause-and-effect diagrams, flowcharts, checklists, control charts, scatter diagrams, Pareto analysis, and histograms Section Ref: The Philosophy of TQM Level: easy

118. Explain why external failure costs tend to be very expensive for service organizations.

Ans: With a service the customer spends much time in the service delivery system, and there are fewer opportunities to correct defects than there are in manufacturing.

Section Ref: Cost of Quality Level: hard

119. In using a cause-and-effect diagram, what are the primary possible causes of quality problems?

Ans: machines, workers, measurements, suppliers, and materials Section Ref: The Philosophy of TQM Level: hard

120. What are the seven categories for Malcolm Baldrige Award criteria?

Ans: leadership, strategic planning, customer and market focus, information and analysis, human resource focus, process management, and business results Section Ref: Quality Awards and Standards Level: hard

121. What must a company do to become ISO 9000 certified?

Ans: document methods used to monitor quality, document methods and frequency of worker training, document statistical process control tools used, provide job descriptions, document inspection programs, and have an audit by an ISO 9000 examiner Section Ref: Quality Awards and Standards Level: hard

122. Who are the seven primary quality gurus?

Ans: Walter Shewhart, W. Edwards Deming, Joseph Juran, Armand Feigenbaum, Phillip Crosby, Kaoru Ishikawa, and Genichi Taguchi Section Ref: The Evolution of Total Quality Management (TQM) Level: hard 123. Describe the foundation of Deming’s “14 Points.”

Ans: Upper management must develop a commitment to quality, and provide a system to support this commitment. Deming stressed that quality improvements cannot happen without organizational change that comes from upper management.

Section Ref: The Evolution of Total Quality Management (TQM) Level: hard

124. What are the common causes of TQM failure?

Ans: lack of a genuine quality culture, lack of top management support and commitment, overand under-reliance on statistical process control (SPC) methods Section Ref: The Evolution of Total Quality Management (TQM) Level: moderate

125. What are the five ways of defining Quality?

Ans: Quality is defined five different ways: conformance to specifications, fitness for use, value for price paid, support services, and psychologically.

Section Ref: The Philosophy of TQM Level: Hard

126. TQM philosophy focuses on seven basic concepts. What are they?

Ans: The seven basic concepts that TQM relies on are customer focus, continuous improvement, employee empowerment, use of quality tools, product design, process managements, and managing supplies quality.

Section Ref: The Philosophy of TQM Level: Hard

Problems

127. Suppose that a product has three parts, each of which must work in order for the product to function. The reliabilities of the parts are .898, .933, and .946, respectively. What is the reliability of the product?

Ans: 79.3% (RS = R1* R2* R3*…… Rn = .898 * .933 * .946 = .70259) Section Ref: The Philosophy of TQM Level: easy

128. Suppose that a product has two parts, both of which must be working in order for the product to function. The reliability of the first part is .85, and the reliability of the second part is .82. In addition, the second part comes with a backup that is 50% reliable. What is the overall reliability of the product?

Ans: 77.35% (RP =1 – [P(1st fails)][P(2nd fails)] = 1- .18*(.5) = .91 & RS = R1* R2* R3*…… Rn = .85 * .91 = .7735 or 77.35%) Section Ref: The Philosophy of TQM Level: hard

129. As a design engineer you need to obtain 99.9% reliability. The first part has a reliability factor of 99.99%. What level of reliability does the series part require to achieve 99.9% overall reliability?

Ans: 99.91% (RS = R1* R2* R3*…… Rn) 99.9% = 99.99%*x; x = 99.9%/99.99% = 99.91% Section Ref: The Philosophy of TQM Level: moderate

130. The design engineer in question #3 needs to improve the overall system reliability by adding another part in parallel to the unit calculated in question #3. The objective is to achieve an overall system reliability of 99.95%. What reliability must the parallel part have to meet this objective?

Ans: 44.5% Solution: (RS = R1* R2* R3*…… Rn) 99.9% = 99.99%*x; x = 99.95%/99.99% = 99.96 RP =1 – [P(1st fails)][P(2nd fails)] 99.96 = 1-[.0009*x]; P(2nd fails)=(1-.99.96)/.0009 = 44.5% Section Ref: The Philosophy of TQM Level: hard

Short Answer

131. TQM requires that external and internal customers receive ________________________ Ans: the same quality products.

Section Ref: Why TQM Efforts Fail Level: easy

132. TQM stresses the balanced use of non-quantitative (qualitative) and ________________________ tools in quality improvement.

Ans: statistical Section Ref: Why TQM Efforts Fail Level: moderate

133. Redundant components are often used when product failure ________________________ Ans: may have severe (catastrophic, disastrous, extreme, etc.) effect.

Section Ref: The Philosophy of TQM Level: moderate

134. Quality Function Deployment (QFD) begins by ________________________ Ans: identifying important customer requirements.

Section Ref: The Philosophy of TQM Level: moderate

135. Histograms report the ________________________ of a variable's observed values.

Ans: frequency distribution Section Ref: The Philosophy of TQM Level: easy

136. Checklists are used to make sure all steps in a process are carried out and to ________________________ Ans: record how often common defects occur.

Section Ref: The Philosophy of TQM Level: moderate

137. Quality circles are a common application of the ________________________ Ans: team approach Section Ref: The Philosophy of TQM Level: easy

138. Products have little value if they do not ________________________ Ans: satisfy customers.

Section Ref: The Philosophy of TQM Level: easy

139. Reliability is described as a _____, ______, or a _____ Ans: probability, likelihood, chance Section Ref: The Philosophy of TQM Level: moderate

140. Philip Crosby believed that ________________________ because the cost of doing it right the first time is less than the cost of correcting mistakes later Ans: quality is free Section Ref: The Evolution of Total Quality Management (TQM) Level: easy

141. The old concept of quality involved ________________________ Ans: inspecting for quality after production Section Ref: The Evolution of Total Quality Management (TQM) Level: moderate

142. The most important factor in the success or failure of TQM efforts is the _____ of the organization’s _____.

Ans: genuineness, commitment Section Ref: Why TQM Efforts Fail Level: moderate

File: ch06, Chapter 6: Statistical Quality Control

Multiple Choice

1. Which of the following is not associated with descriptive statistics? a) mean b) standard deviation c) range d) proportion e) measure of the distribution of data Ans: d Section Ref: What is Statistical Process Control?

Level: moderate

2. What technique determines whether a batch of goods should be accepted or rejected? a) Statistical process control b) Acceptance sampling c) Fishbone diagramming d) Scatter plotting e) Experimental design Ans: b Section Ref: What Is Statistical Quality Control?

Level: easy

3. What technique answers the question of whether the process is functioning properly or not? a) Fishbone diagramming b) Acceptance sampling c) Statistical process control d) Scatter plotting e) Experimental design Ans: c Section Ref: What Is Statistical Quality Control?

Level: easy

4. Statistical process control tools are used most frequently because a) they are mathematically based b) they are helpful in measuring and evaluating the quality of products

c) they are helpful in measuring and evaluating the customers’ needs d) they are qualitative evaluation techniques e) they provide a definitive ROI calculation Ans: b Section Ref: What is Statistical Quality Control?

Level: Moderate

5. Common causes of variation are also known as __________________________. a) frequent b) usual c) inexpensive d) ordinary e) random Ans: e Section Ref: Sources of Variation: Common and Assignable Causes Level: moderate

6. The range is an example of what? a) Traditional statistical tools b) Fishbone diagramming c) Acceptance sampling d) Experimental design e) Statistical process control Ans: a Section Ref: Descriptive Statistics Level: easy

7. Variation in the production process leads to: a) quality defects b) process improvement opportunities c) quality improvements d) product consistency e) service improvements Ans: a Section Ref: What is Statistical Quality Control?

Level: moderate

8. The standard deviation is an example of what? a) Traditional statistical tools

b) Fishbone diagramming c) Acceptance sampling d) Experimental design e) Statistical process control Ans: a Section Ref: Descriptive Statistics Level: easy

9. A process chart is a a) graph that shows how the population was evaluated b) graph of the population failures c) graph that shows whether a sample of data falls within assignable causes d) graph that show whether a sample falls within the common or normal range e) table showing final inspection results Ans: d Section Ref: Control Charts for Variables Level: moderate

10. An x-bar chart is an example of what? a) Traditional statistical tools b) Fishbone diagramming c) Acceptance sampling d) Experimental design e) Statistical process control Ans: e Section Ref: Control Charts for Variables Level: easy

11. For the standard normal distribution, how much confidence is provided within 2 standard deviations above and below the mean? a) 97.22% b) 95.44% c) 99.74% d) 99.87% e) 90.00% Ans: b Section Ref: Control Charts for Variables Level: hard

12. The A2 factor includes how many standard deviations of ranges? a) 1 b) 2 c) 3 d) 4 e) 6 Ans: c Section Ref: Control Charts for Variables Level: moderate

13. A p-chart is an example of what? a) Traditional statistical tools b) Fishbone diagramming c) Acceptance sampling d) Experimental design e) Statistical process control Ans: e Section Ref: Control Charts for Attributes Level: easy

14. P-charts are used to measure: a) continuous variation b) intermittent random variation c) proportion of items in a sample that is defective d) the count of defective parts e) proportion of items in a sample that are good Ans: c Section Ref: Control Charts for Attributes Level: easy

15. A c-chart is an example of what? a) Traditional statistical tools b) Fishbone diagramming c) Acceptance sampling d) Experimental design e) Statistical process control Ans: e Section Ref: Control Charts for Attributes Level: easy

16. An OC curve is an example of what? a) Traditional statistical tools b) Fishbone diagramming c) Acceptance sampling d) Experimental design e) Statistical process control Ans: c Section Ref: Acceptance Sampling Level: easy

17. Causes of variation that can be identified and eliminated are called what? a) Random b) Assignable c) Identifiable d) Stochastic e) Common Ans: b Section Ref: Sources of Variation: Common and Assignable Causes Level: easy

18. All processes will have what type of variation? a) Random b) Assignable c) Identifiable d) Stochastic e) Common Ans: a Section Ref: Sources of Variation: Common and Assignable Causes Level: easy

19. What measures the central tendency of a set of data? a) Coefficient of variation b) Variance c) Standard deviation d) Mean e) Range Ans: d Section Ref: Sources of Variation: Common and Assignable Causes Level: easy

20. What measures the difference between the largest and smallest observations in a set of data? a) Range b) Coefficient of variation c) Coefficient of kurtosis d) Coefficient of skewness e) Standard deviation Ans: a Section Ref: Descriptive Statistics Level: easy

21. What measures symmetry of a distribution? a) Range b) Skewness c) Standard deviation d) Mean e) Variance Ans: b Section Ref: Descriptive Statistics Level: moderate

22. Which of the following would imply that data observations are closely clustered around the mean? a) Small range and small standard deviation b) Small range and large standard deviation c) Large range and small standard deviation d) Large range and large standard deviation e) Neither range nor standard deviation has anything to do with “clustering.”

Ans: a Section Ref: Descriptive Statistics Level: easy

23. What is a distribution called when the same numbers of observations are below the mean as are above the mean? b) Proportional b) Equalized c) Wholly Uniform d) Balanced e) Symmetric

Ans: e Section Ref: Statistical Process Control Methods Level: moderate

24. What are the four most common control charts? a) x-bar, R, p, c b) x-bar, R, p, OC c) x-bar, R, c, OC d) x-bar, p, c, OC e) R, p, c, OC Ans: a Section Ref: Control Charts for Variables Level: easy

25. On a control chart, what separates common from assignable causes of variation? a) x-bar lines b) Control limits c) Specification limits d) Production limits e) Mean divided by standard deviation Ans: b Section Ref: Statistical Process Control Methods Level: moderate

26. The center line of a control chart represents what? a) Range b) Standard deviation c) Mean d) Mean divided by standard deviation e) Skewness Ans: c Section Ref: Statistical Process Control Methods Level: easy

27. What is the first step that should be taken if an observation falls below the lower control limit on a control chart? a) Recalibrate the machine b) Perform a new process capability study c) Try a larger standard deviation value d) Search for assignable causes

e) Nothing—a low value is a “good” thing Ans: d Section Ref: Statistical Process Control Methods Level: easy

28. Upper and lower control limits are usually set at  how many standard deviations from the mean? a) 0.5 b) 1.0 c) 2.0 d) 3.0 e) 6.0 Ans: d Section Ref: Statistical Process Control Methods Level: moderate

29. Assuming that data exhibit a normal distribution, control limits set at  3 standard deviations from the mean capture how much common variation? a) 50.00% b) 80.00% c) 95.44% d) 99.74% e) 99.99% Ans: d Section Ref: Statistical Process Control Methods Level: moderate

30. What is the probability of a Type I error for a control chart with limits set at  3 standard deviations from the mean? a) 0.00% b) 0.26% c) 4.56% d) 20.00% e) 50.00% Ans: b Section Ref: Statistical Process Control Methods Level: moderate

31. What is the term for the probability that a value falling outside the control limits is still due to normal variation? a) Type I error b) Type II error c) Normalization anomaly d) Beta risk e) Standard deviation irregularity Ans: a Section Ref: Statistical Process Control Methods Level: moderate

32. The different characteristics that can be measured by control charts can be divided into what two groups? a) Parameters and attributes b) Variables and attributes c) Variables and constraints d) Variables and parameters e) Attributes and constraints Ans: b Section Ref: Statistical Process Control Methods Level: easy

33. What is a control chart that monitors changes in the mean value of a process? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: a Section Ref: Control Charts for Variables Level: easy

34. What is a control chart that monitors changes in the dispersion or variability of a process? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: b Section Ref: Control Charts for Variables

Level: easy

35. What is a control chart that monitors the proportion of defects in a sample? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: c Section Ref: Control Charts for Attributes Level: easy

36. For which of the following would a control chart for attributes not be appropriate? a) Number of nonfunctioning light bulbs b) Proportion of broken eggs in a carton c) Number of rotten apples d) Number of complaints issued e) Length of metal rods Ans: e Section Ref: Control Charts for Attributes Level: moderate

37. What are the two types of control charts for attributes? a) p and c b) x-bar and p c) x-bar and R d) R and c e) p and R Ans: a Section Ref: Control Charts for Attributes Level: easy

38. What are the two types of control charts for variables? a) p and c b) x-bar and p c) x-bar and R d) R and c e) p and R Ans: c

Section Ref: Control Charts for Variables Level: easy

39. Consider a p-chart measuring the percentage of defective light bulbs. If the LCL is .04 and a sample has 1% defects, what is the implication? a) The process is in a state of control. b) The process is out of control even though the variation is “good.” c) The value of sigma must be increased. d) The process has too many errors. e) A calculation error must have occurred.

Ans: b Section Ref: Control Charts for Attributes Level: moderate

40. For a p-chart or c-chart, what is the implication of a negative value for the LCL? a) A calculation error must have occurred. b) The value of sigma must be reduced. c) The process has too many errors. d) The process is in a state of control. e) The LCL can effectively be rounded up to 0.

Ans: e Section Ref: Control Charts for Attributes Level: moderate

41. What are preset ranges of acceptable quality characteristics? b) Control limits. b) Product specifications. c) Six-sigma limits. d) AQC limits. e) R-chart limits.

Ans: b Section Ref: Process Capability Level: easy

42. Product tolerances are often called a) SPC b) Product drawings c) Product descriptions d) Process capability e) Product specifications

Ans: e Section Ref: Process Capability Level: easy

43. What process width is typically used when computing the process capability index Cp ? a) 1 b) 2 c) 3 d) 4 e) 6 Ans: e Section Ref: Process Capability Level: easy

44. Setting up control charts to monitor whether a process is in control a) guarantees process capability b) guarantees process specifications c) does not guarantee process capability d) does not guarantee product specification e) guarantees meeting client needs Ans: c Section Ref: Process Capability Level: easy

45. What is the formula for the process capability index Cp? a) process width / specification width b) specification width  process width c) specification width / Type I error d) specification width / process width e) specification width / 99.74% Ans: d Solution: (CP = (USL – LSL)/6σ) Section Ref: Process Capability Level: easy

46. What process capability index (Cp) value implies that the process “exceeds minimal capability?” a) 0

b) < 1 c) = 1 d) > 1 e) 6 Ans: d Section Ref: Process Capability Level: moderate

47. A process capability index (Cp) value of 1 means that what percent of products produced will fall within the specification limits? a) 0.26% b) 90.00% c) 95.44% d) 99.74% e) 100.00% Ans: d Section Ref: Process Capability Level: moderate

48. According to the textbook, the way to reduce the ppm defective is to a) change product specifications b) increase process capability c) increase the number of inspection points. d) employ more inspectors e) increase process throughput Ans: b Section Ref: Process Capability Level: moderate

49. What is the relationship between Cp and Cpk? a) Cp  2 Cpk b) Cp  Cpk c) Cp  Cpk d) Cp  2Cpk e) Cp  Cpk  3 Ans: c Section Ref: Process Capability Level: hard

50. Which company is known for coining the term “six-sigma?” a) Ford Motor Company b) Proctor and Gamble c) IBM d) Motorola Corporation e) Hewlett-Packard Ans: d Section Ref: Six Sigma Quality Level: moderate

51. Six-sigma quality implies how many average defects per million? a) 3.4 b) 6 c) 2600 d) 3 e) 6 Ans: a Section Ref: Six Sigma Quality Level: moderate

52. What are the two aspects to implementing the six-sigma concept? a) numerically controlled machines and inventory management b) numerically controlled machines and people involvement c) numerically controlled machines and technical tools d) technical tools and people involvement e) inventory management and technical tools Ans: d Section Ref: Six Sigma Quality Level: hard

53. In six-sigma programs, individuals who have extensive training in the use of technical tools and are responsible for carrying out the implementation of Six Sigma are __________________. a) black belts b) green belts c) blue belts d) red belts e) white belts Ans: a Section Ref: Six Sigma Quality Level: moderate

54. In six-sigma programs, individuals are given __________________ titles that reflect their skills in the six-sigma process. a) Olympic medal b) academic c) martial arts d) medieval jousting e) boxing Ans: c Section Ref: Six Sigma Quality Level: moderate

55. The Six Sigma approach is organized around a _______ plan known as ________. a) four step, PDAC b) four step, DMAC c) five step PDACR d) five step DMAIC e) five step, DMCRA Ans: d Section Ref: Six Sigma Quality Level: moderate

56. The person that comes from the top ranks of the organization and is responsible for providing direction and overseeing all aspects of a six-sigma implementation process is called a ________________________. a) general b) admiral c) director d) producer e) champion Ans: e Section Ref: Six Sigma Quality Level: moderate

57. When should 100% inspection be used? a) Whenever attributes are being measured b) When the expected cost of a defective item exceeds the cost of inspecting a unit c) With destructive testing d) When the cost of inspecting a unit exceeds the expected cost of a defective item e) 100% inspection should never be used

Ans: b Section Ref: Acceptance Sampling Level: moderate

58. What is a graph that shows the probability or chance of accepting a lot given various proportions of defects in the lot? a) S curve b) Z-chart c) OC curve d) p-chart e) R-chart Ans: c Section Ref: Acceptance Sampling Level: easy

59. Single sampling plan is when a) a non-random sample is drawn from every lot. b) a random sample is drawn from every lot. c) a second lot is sampled due to the first sample inconclusive results. d) only one time is tested. e) a sample plan used once and discarded.

Ans: b Section Ref: Acceptance Sampling Level: easy

60. According to the text, what percent of defects are consumers generally willing to accept? a) 1-2% b) 2-3% c) 3-4% d) 4-5% e) 5-6% Ans: a Section Ref: Acceptance Sampling Level: easy

61. Which of the following is the least important point to perform inspection? a) Incoming materials b) Prior to costly processing c) Just after costly processing

d) Prior to bottleneck (limited machine capacity) processing e) After the product is finished Ans: c Section Ref: Implications for Managers Level: hard

62. What is the only service company to have won the Malcolm Baldrige National Quality Award twice? a) Marriott b) Nordstrom Department Stores c) Wal-Mart d) Ritz-Carlton e) Northwest Airlines Ans: d Section Ref: Statistical Quality Control In Services Level: moderate

63. Suppose that you want to measure the percentage of candles that are cut longer than 9 inches. Which control chart would be appropriate? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: c Section Ref: Control Charts for Attributes Level: hard

64. What is the upper control limit for a c-chart if the total defects found over 20 samples equals 150? a) 7.5 b) 2.739 c) 15.72 d) 20 e) 30 Ans: c Solution: (UCL = Ċ + Z√Ċ = 150/20 + 3 * √(150/20) = 15.72) Section Ref: Control Charts for Attributes Level: moderate

65. Suppose that Matt wants to use a process control chart to monitor the number of different types of mistakes that he makes when giving motivational speeches to student groups. Which control chart would be most appropriate? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: d Section Ref: Control Charts for Attributes Level: moderate

66. Suppose that you have calculated the control limits for a p-chart to be the following: LCL = 0.02 and UCL = 0.08.

Today, you took 10 samples of 20 units each. The first nine samples each had one defect.

The last sample had zero defects. What can you conclude? a) the process is out of control b) the process is in a state of control c) the last sample should be ignored because it was “too good” d) you calculated the limits incorrectly because the LCL must be either negative or 0 e) the sample size must be increased Ans: a Section Ref: Control Charts for Attributes Level: hard

67. Suppose that you want to monitor the variability in ounces of a process that fills beer cans. Which control chart would be appropriate? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: b Section Ref: Control Charts for Variables Level: moderate

68. What is the lower control limit for a c-chart if the average number of defects found over 320 samples is equal to 16? a) 6.584 b) 4 c) 20

d) 0 e) 12 Ans: b Solution: (LCL = Ċ - Z√Ċ = 16 + 3 * √(16) = 4) Section Ref: Control Charts for Attributes Level: moderate

69. Each day for two workweeks (10 days total), George weighs 4 bags from that day’s production. If the average of the means is 14 oz. and the average range is 0.4 oz., what is the lower control limit for an x-bar chart for this process? a) 13.7084 oz. b) 13.8768 oz. c) 14.2916 oz. d) 12.8000 oz. e) 13.5908 oz.

Ans: a Solution: (LCL = x-bar – A2*R-bar = 14 - .73*.4 = 13.708) Section Ref: Control Charts for Variables Level: moderate

70. If the upper control limit for a c-chart is 28 and the lower control limit is 4, what is the average number of defects per sample? a) 16 b) 12 c) 5.29 d) 7.29 e) 4 Ans: a Solution: (Ċ= (UCL-LCL)/2 + LCL = (28-4)/2 + 4 = 16) Section Ref: Control Charts for Attributes Level: moderate

71. Suppose that you want to monitor the average ounces of a process that fills beer cans.

Which control chart would be appropriate? a) x-bar chart b) R-chart c) p-chart d) c-chart e) OC chart Ans: a Section Ref: Control Charts for Variables

Level: moderate

72. What is the upper control limit for a c-chart if the total defects found over 200 samples equals 32? a) 1.36 b) 13.75 c) 0.56 d) 25.00 e) 48.97 Ans: a Solution: (UCL = Ċ + Z√Ċ = 32/200 + 3 * √(32/200) = 1.36) Section Ref: Control Charts for Attributes Level: moderate

73. Ritz-Carlton employees are empowered to spend up to how much money on the spot to correct any customer complaint? a) $25 b) $50 c) $100 d) $1000 e) $2000 Ans: e Section Ref: Statistical Quality Control In Services Level: hard

74. What program at Intel enforces the policy to make chips in the same way at all facilities? a) “make-same” b) “copy-exactly” c) “duplicate-same” d) “duplicate-exactly” e) “one-size-fits-all” Ans: b Section Ref: What is Statistical Quality Control?

Level: hard

True/False

75. Descriptive statistics are used to describe quality characteristics and relationships.

Ans: True Section Ref: What is Statistical Quality Control?

Level: moderate

76. Statistical quality control is a subset of statistical process control.

Ans: False Section Ref: What is Statistical Quality Control?

Level: moderate

77. Acceptance sampling occurs after the product has been produced.

Ans: True Section Ref: What is Statistical Quality Control?

Level: moderate

78. An important task in quality control is to find out the range of natural random variation in a process.

Ans: True Section Ref. Sources of Variation: Common and Assignable Causes Level: moderate

79. The standard deviation measures the difference between the largest and smallest observations in a set of data.

Ans: False Section Ref: Descriptive Statistics Level: easy

80. The range of a data set is always non-negative.

Ans: True Section Ref: Descriptive Statistics Level: moderate

81. A small range and large standard deviation imply that data observations are closely clustered around the mean.

Ans: False Section Ref: Descriptive Statistics Level: easy

82. A skewed distribution implies that assignable causes of variation may be present.

Ans: True Section Ref: Descriptive Statistics Level: moderate

83. A process that is in control has no variation.

Ans: False Section Ref: Statistical Process Control Methods Level: moderate

84. A process can be considered in a state of control even if one observation is 1.75 standard deviations above the mean.

Ans: True Section Ref: Statistical Process Control Methods Level: moderate

85. Upper and lower control limits are usually set at  6 standard deviations from the mean.

Ans: False Section Ref: Statistical Process Control Methods Level: moderate

86. Increasing the number of standard deviations on which control chart limits are based will decrease the Type I error.

Ans: True Section Ref: Statistical Process Control Methods Level: moderate

87. A variable is a product characteristic that has a discrete value and can be counted.

Ans: False Section Ref: Statistical Process Control Methods Level: easy

88. A control chart y-axis represents the quality characteristic that is being monitored.

Ans: True Section Ref: Statistical Process Control Methods Level: moderate

89. The weight of a bag of sugar is an example of a variable.

Ans: True Section Ref: Statistical Process Control Methods Level: easy

90. The A2 factor includes two standard deviations of ranges.

Ans: False Section Ref: Control Charts for Variables Level: moderate

91. Given a sample size of 2, the lower limit for the R-chart is 0.

Ans: True Section Ref: Control Charts for Variables Level: hard

92. A p-chart monitors the number of defects per unit.

Ans: False Section Ref: Control Charts for Attributes Level: easy

93. Suppose that you have created control charts to measure the length of candles. The process is in a state of control if either the x-bar chart is in control or the R-chart is in control.

Ans: False Section Ref: Control Charts for Variables Level: moderate

94. A p-chart is used when we can compute only the number of defects but not the total sample size.

Ans: False Section Ref: Control Charts for Attributes Level: easy

95. Product specifications are preset, whereas control limits are computed after observing data.

Ans: True Section Ref: Control Charts for Attributes Level: moderate

96. Another way to construct the control limits for variables is to use the standard deviation as an estimate of variability of the process.

Ans: False Section Ref. Control Charts for Variables.

Level: Hard

97. In six-sigma programs, individuals are given academic titles that reflect their skills in the sixsigma process.

Ans: False Section Ref: Six Sigma Quality Level: moderate

98. The person that comes from the top ranks of the organization and is responsible for providing direction and overseeing all aspects of a six-sigma implementation process is called a general.

Ans: False Section Ref: Six Sigma Quality Level: moderate

99. The term for “inspecting a random sample of an output from process, within range and functioning properly” is Statistical Process Control Ans: True Section Ref: Descriptive Statistics Level: easy

Essay

100. What are the three broad categories of statistical quality control?

Ans: traditional statistical tools, acceptance sampling, statistical process control Section Ref: What is Statistical Quality Control?

Level: easy

101. Define acceptance sampling.

Ans: a technique that determines whether a batch of goods should be accepted or rejected Section Ref: What is Statistical Quality Control?

Level: moderate

102. Define statistical process control.

Ans: a technique that answers the question of whether the process is functioning properly or not.

Section Ref: What is Statistical Quality Control?

Level: moderate

103. Define control limits.

Ans: On a control chart, they separate common from assignable causes of variation.

Section Ref: Statistical Process Control Methods Level: moderate

104. Define attribute (as a product characteristic).

Ans: a product characteristic that has a discrete value and can be counted Section Ref: Statistical Process Control Methods Level: moderate

105. What is an R-chart?

Ans: a control chart that monitors changes in the dispersion or variability of a process Section Ref: Control Charts for Variables Level: moderate

106. What is a p-chart?

Ans: a control chart that monitors the proportion of defects in a sample Section Ref: Control Charts for Attributes Level: moderate

107. What is a c-chart?

Ans: a control chart that monitors the number of defects per unit Section Ref: Control Charts for Attributes Level: moderate

108. Describe the two aspects to implementing the six-sigma concept.

Ans: The first is the use of technical tools to identify and eliminate causes of quality problems.

These tools include statistical quality control, cause-and-effect diagrams, flow charts, and Pareto analysis. In six-sigma programs the use of these tools is integrated throughout the entire organizational system. The second aspect is people involvement. In six-sigma, all employees have the training to use technical tools and are responsible for rooting out quality problems.

Employees are given martial arts titles that reflect their skills in the six-sigma process.

Section Ref: Six Sigma Quality Level: hard

109. Describe the difference between black belts and green belts in a six-sigma implementation.

Ans: Black belts are individuals who have extensive training in the use of technical tools and are responsible for carrying out the implementation of Six Sigma. They are experienced individuals that oversee the measuring, analyzing, process controlling, and improving. They achieve this by acting as coaches, team leaders, and facilitators of the process of continuous improvement.

Green belts, on the other hand, are individuals who have sufficient training in technical tools to serve on teams or on small individual projects.

Section Ref: Six Sigma Quality Level: hard

110. Describe why service organizations have tended to lag manufacturing organization in the application of SQC. Ans: The primary reason is that statistical quality control requires measurement, and it is difficult to measure the quality of a service. Another issue that complicates quality control in service organizations is that the service is often consumed during the production process. The customer is often present during service delivery and there is little time to improve quality.

Section Ref: Statistical Quality Control in Services Level: moderate

111. Describe how finance is associated with SQC. Ans: Finance is an integral part of the statistical quality control process because it is responsible for placing financial values on SQC efforts.

Section Ref: Statistical Quality Control (SQC) Across the Organization Level: Hard

112. What does “OC” stand for?

Ans: Operating Characteristics Section Ref: Acceptance Sampling Level: easy

Problems

113. Mrs. Crabapple has a class with three students, and she has had four quizzes so far this semester. She has created control charts to determine if the variation in students’ scores from quiz to quiz is exhibiting only natural variation. Each of the quiz scores is shown below. The upper and lower control limits for the x chart are 109.6 and 34.9, respectively. The upper and lower control limits for the R chart are 93.95 and 0, respectively.

Quiz Bart Lisa Nelson 1 75 100 50 2 62 82 72 3 90 90 90 4 60 86 10

Is the process in a state of control?

Ans: Yes (X-Bar = ∑scores/n Bart = (75+62+90+60)/4 = 71.75; Lisa = (100+82+90+86)/4 = 89.5; Nelson = (50+72+90+10)/4= 55.5 all means fall within X-bar chart ranges: R-bar = ∑Upper – lower/N; Bart = 90 – 60 = 30; Lisa = 100 – 82 = 18; Nelson = 90-10 = 80; all individual ranges fall within the R-bar limits) Section Ref: Control Charts for Variables Level: moderate

114. Twenty samples of n = 200 were taken by an operator at a workstation in a production process. The number of defective items in each sample was recorded as follows.

Number Number Sample of Defects Sample of Defects 1 12 11 16 2 18 12 15 3 10 13 13 4 15 14 16 5 16 15 18 6 19 16 17 7 17 17 18 8 12 18 20 9 11 19 21 10 14 20 22 Management wants to develop a p-chart using 3-sigma limits. What are the control limits?

Ans: UCL = 0.137 (p-bar = ∑#defects/∑N = 12+18+10+15+16+19+17+12+11+14+16+15+13+16+18+1+18+20+21+22)/(20*200) = .08; σp=√[p-bar*(1-p-bar)]/n = √[.08*(1-.08)]/200 = .019 UCL = p-bar + Z σp = .08 + 3 * .019 =0.137 LCL = 0.023, p-bar - Z σp = .08 - 3 * .019 = 0.0225) Section Ref: Control Charts for Attributes Level: hard

115. Cans of soup are supposed to weigh exactly 16 oz. Inspectors want to develop process control charts. They take eight samples of five boxes and weigh them. They obtain the following data: Sample Mean Range 1 15.2 1.8 2 14.6 0.7 3 16.5 0.5 4 18.1 0.4 5 13.2 0.2 6 16.0 0.4

7 15.9 0.5 8 14.8 0.9 (a) What is the upper control limit for the x-bar chart? (b) What is the lower control limit for the x-bar chart? (c) What is the upper control limit for the R chart? (d) What is the lower control limit for the R chart? (e) Is the process in a state of control?

Ans: (a) 15.93, (x-double bar = ∑x-bar/N = (15.2+14.6+16.5+18.1+13.2+16.0+15.9+14.8)/8 = 15.5375; R-bar = ∑R/N = (1.8+0.7+0.5+0.4+0.2+0.4+0.5+0.9)/8 = 0.675; UCL = x-double bar + A2*R-bar = 15.5375 + .58*0.675 = 15.929) (b) 15.15, (LCL = x-double bar - A2*R-bar = 15.5375 + .58*.0675 = 15.146) (c) 1.42, (UCL = D4*R-bar = 2.11 * 0.675 = 1.424) (d) 0.00, (LCL = D3*R-bar = 0 * 0.675 = 0) (e) No Section Ref: Control Charts for Variables Level: hard

116. Inspectors want to develop process control charts to measure the weight of crates of wood. Data (in pounds) from three samples are: Sample Crate 1 Crate 2 Crate 3 Crate 4 1 18 38 22 26 2 26 30 28 20 3 26 26 26 26 (a) What is the upper control limit for the R chart? (b) What is the lower control limit for the R chart? (c) What is the upper control limit for the x-bar chart? (d) What is the lower control limit for the x-bar chart? (e) Is the process in a state of control? If not, why not?

Ans: (a) 20.56, R-bar = ∑R/N = (8 + 12 + 6 + 6)/4 = 8; UCL = D4*R-bar = 2.57 * 8 = 20.56) (b) 0.0, (LCL = D3*R-bar = 0 * 8 = 0) (c) 34.2, (x-double bar = ∑x-bar/N = (23.3+31.3+25.3+24)/4 = 26; UCL = x-double bar + A2*R-bar = 26 + 1.02 * 8 = 34.16 (d) 17.8, (LCL = x-double bar - A2*R-bar = 26 – 1.02 * 8 = 17.84 (e) Yes Section Ref: Control Charts for Variables Level: hard

117. Eight samples of n = 50 were taken by an operator at a workstation in a production process. The number of defective items in each sample was recorded as follows.

Number of Sample Defects 1 10

2 0 3 12 4 8 5 10 6 16 7 14 8 10 (a) Management wants to develop a p-chart. What are the control limits? (b) Is the process in a state of control?

Ans: (a) LCL = 0.0302, (p-bar = ∑total defects/ ∑total observations = (10+0+12+8+10+16+14+10)/(8*50) = .2; σp = √[p-bar*(1-p-bar)]/n = √[.2*(1-.2)]/50 = .0566; LCL = p-bar -Z * σp = 0.2 - 3*0.0566 = .0302) UCL = 0.3698, (UCL = p-bar +Z * σp = 0.2 + 3*0.0566 = .0.3698) (b) No (Sample 2) Section Ref: Control Charts for Attributes Level: hard

118. Suppose a process has been monitored daily for the last ten days and the number of machine failures each day was noted. The results follow: Day Number: 1 2 3 4 5 6 7 8 9 10 Number of Failures: 8 9 6 10 12 4 9 11 9 12 Compute control limits for a c-chart that monitors the average number of machine failures per day. Is the process in a state of control?

Ans: UCL = 18, (Ċ= ∑failures/#observations = (8+9+6+10+12+4+9+11+9+12)/10 = 9; UCL = Ċ + Z√Ċ = 9 + 3* √9 = 18) LCL = 0, (LCL = Ċ - Z√Ċ = 9 - 3* √9 = 0) Yes, the process is in control Section Ref: Control Charts for Attributes Level: moderate

119. If the average range is 4.0 inches and the sample size is 18, compute the upper and lower limits for an R chart.

Ans: UCL = 6.44, (UCL = D4 * R-bar = 1.61 * 4 = 6.44) LCL = 1.56(LCL = D3 * R-bar = 0.39 * 4 = 1.56) Section Ref: Control Charts for Variables Level: moderate

120. Cholesterol Palace is a fast-food restaurant. Management was concerned with errors in filling orders at its drive-up window. It hired several undercover quality inspectors to randomly place 100 orders while the process seemed to be in control. The completed

orders were then checked for accuracy. The following table shows the results of the survey: Defect Frequency Incomplete, shorted order 12 Unordered items dispensed 2 Wrong product dispensed 14 Wrong toppings 14 Wrong size drink 2 Drink lid not sealed 17 No drinking straw with soft drink order 0 No napkins 18 Far too many condiment packets 65 No salt with sandwich or fries order 10 Wrong change 3 Other 12 (a) Use these data to estimate the average number of defects per order and determine the three-sigma control limits for a c-chart. (b) A quality inspector just used the drive-up window and now checks her order. Her cheeseburger has mustard on it although she ordered it without ketchup or mustard.

Three handfuls of ketchup and mustard packets are in the sack, but no napkins. And hot coffee has spilled because the lid wasn’t properly sealed. Is the drive-up process in control?

Ans: (a) average defects per order = 1.69, (Ċ= ∑failures/#observations = (12+2+14+14+2+17+0+18+65+10+3+12)/100 = 1.69) UCL = 5.59, (UCL = Ċ + Z√Ċ = 1.69 + 3* √1.69 = 5.59) LCL = −2.21 (or 0), (LCL = Ċ - Z√Ċ = 1.69 - 3* √1.69 = -2.21) (b) Yes, the process is in control, despite producing an order with four glaring errors Section Ref: Control Charts for Attributes Level: hard

121. Johnson Enterprises sells no-spill syrup in bottles. Management is evaluating four different machines with standard deviations of .006, .01, .022, and .04 ounces for Machines A, B, C, and D, respectively. The specification limits 11.95 and 12.05 ounces.

Which machines should receive more detailed evaluation, i.e. which are statistically “capable?”

Ans: A and B Solution: (CP = (USL – LSL)/6σ; Machine A = (12.05 - 11.95)/6*0.006 = 2.78; Machine B = (12.05 - 11.95)/6*0.01 = 1.67; Machine C = (12.05 - 11.95)/6*0.022 = 0.7575; Machine D = (12.05 - 11.95)/6*0.04 = 0.417) Section Ref: Process Capability Level: moderate

122. Julia has been assigned to develop a new product design specifications.

Manufacturing has stated that the system must have a capability index of 1.2 when the product standard deviation is 1.3. What is the specification range limits?

Ans: 9.36 Solution: CP = (USL – LSL)/6σ; (USL-LSL) = CP * 6σ = 1.2*6*1.3 = 9.36 Section Ref: Process Capability Level: easy

123. Compute the Cpk measure of process capability for the following machine and interpret the findings. What value would you have obtained with the Cp measure?

Upper spec limit = 100 feet Lower spec limit = 99.5 feet Process  = 99.8 feet Process  = .08 feet Ans: 1.04 Solution: Cpk = 0 .83 so the process is not capable, (CPK = min [(USL – μ)/3σ; (μ LSL)/3σ]; [(100-99.8)/3*.08 = 0.833; (99.8 – 99.5)/3*.08= 1.25) Cp = 1.04, implying a capable process (CP = (USL – LSL)/6σ = (100 – 99.5)/(6*.08) = 1.04) Section Ref: Process Capability Level: moderate

124. Joel’s fresh flower processing plant processes 2000 flowers in a lot. For quality control they use a sample size of 10 flowers. Joel has established a probability of accepting a given lot as 99.74% with a proportion of defective items, in a lot, of .05.

What is the AOQ? Ans: 4.96% AOQ = (Pac)p[(N-n)/N] = .9974*.05*[(2000-10)/2000] = .0496 Section Ref: Acceptance Sampling Level: moderate

Short Answer

125. What is the formula for the sample standard deviation?

N

Ans:  x =

 (x − x ) j =1

2

j

N Section Ref: What is Statistical Quality Control?

Level: moderate

126. What is the formula for the sample standard deviation of a variable measured as a fraction or probability? p(1 − p) n Section Ref: Control Charts for Attributes Level: hard

Ans:  p =

127. What is the formula for an x-bar chart's control limits?

Ans: One of: UCLx = x + 3

x

LCLx = x − 3

n Section Ref: Control Charts for Variables Level: hard

x n

LCLx = x − A2 • R UCLx = x + A2 • R

128. What is the formula for an x-bar chart's center line?

N

X

j

Ans: x = j =1 N Section Ref: Control Charts for Variables Level: moderate

129. What is the formula for an R chart's center line? n

Ans: R =  R / N 1

Section Ref: Control Charts for Variables Level: hard

130. What is the formula for the basic capability index?

Ans: CP = Specification width/process width = (USL-LSL)/6σ Section Ref: Process Capability Level: moderate

131. Six sigma programs strive to set control limits at ________________________.

Ans: the centerline plus or minus 6 σ.

Section Ref: Process Capability Level: easy

132. Consumers willingly accept defects if ________________________.

Ans: they are not more than the acceptable quality level.

Section Ref: Acceptance Sampling Level: moderate

133. The probability of shipping a lot or batch of products whose proportion of defective items is greater than LTPD is called consumer's risk because ______________________.

Ans: they pay the cost of discovering defects and seeking repairs or replacements.

Section Ref: Acceptance Sampling Level: hard

134. The probability of rejecting a lot or batch of products whose proportion of defective items is not greater than AQL is called producer's risk because ____________________.

Ans: they discard products that consumers would accept, thereby wasting the resources that went into the batch or lot.

Section Ref: Acceptance Sampling Level: hard

135. The computed AOQ provides a sense of the ______________ of the product Ans: overall outgoing quality Section Ref: Acceptance Sampling Level: moderate

136. Two areas of operations management that are particularly affected by the decision to increase the level of quality and reduce the number of product defects are ____ and ___ ___ Answer: product, process design Section Ref; Statistical Quality Control (SQC) Within OM: How it All Fits Together.

Level: hard

137. A graph that shows the probability or chance of accepting a lot given various proportions of defects in the lot is called an ____________________.

Ans: operating characteristic curve Section Ref: Acceptance Sampling Level: moderate

File: ch07, Chapter 7: Just-In-Time and Lean Systems

Multiple Choice

1. JIT is applies to a) only the manufacturing organization b) only the service organization c) both the manufacturing and service organizations d) only the production portion of manufacturing and service organizations e) all of the organization except the marketing division Ans: c Section Ref: Introduction Level: moderate

2. JIT considers waste anything that a) Fits in a waste basket b) Reduces production capacity c) Has been discarded d) Cannot be recycled e) Does not add value Ans: e Section Ref: Introduction Level: moderate

3. JIT can be traced back to the early 1900’s but no one can argue that the philosophy gained worldwide prominence a) at the close of WWII b) in the 1950s c) in the 1960s d) in the 1970s e) in the 1980s Ans: d Section Ref: The Philosophy of JIT Level: moderate

4. The philosophy of JIT a) Originated in Japan b) Was operational at Henry Ford's complex in 1920's

c) Is a production planning system d) Has received little attention in the US e) Focuses on direct control of worker activities by management Ans: a Section Ref: The Philosophy of JIT Level: easy

5. The broad view of JIT is now often termed __________________________. a) vendor-managed inventory b) business process reengineering c) lean production d) cycle time management e) e-distribution Ans: c Section Ref: Introduction Level: easy

6. In the broad view of the organization everyone should have a) the same job duration b) the same retirement plan c) the same job description d) the same view of serving the customer e) a narrow view of the organization that includes only their assigned tasks Ans: d Section Ref: Introduction Level: moderate

7. The central belief of the JIT philosophy is a) Quality must be emphasized b) Use of Kanban c) Elimination of waste d) Minimize inventory e) Save money Ans: c Section Ref: The Philosophy of JIT Level: easy

8. Which of the following is characteristic of the JIT philosophy? a) Inventories are an asset

b) Lot sizes are optimized by formula c) Tolerate some scrap d) Elimination of waste e) Rigidity Ans: d Section Ref: The Philosophy of JIT Level: easy

9. Beliefs that help define the JIT philosophy include all of the following except a) Simplicity b) Visibility c) Flexibility d) Push production e) Continuous improvement Ans: d Section Ref: The Philosophy of JIT Level: moderate

10. An employee who will not help a customer because “it is not my job” violates the JIT belief of a) Simplicity b) A broad view of operations c) Continuous improvement d) Visibility e) Pull production Ans: b Section Ref: The Philosophy of JIT Level: hard

11. JIT was based on the need for a) survival b) waste elimination c) better working conditions d) consistent application of policies e) consistent supplier performance Ans: a Section Ref: The Philosophy of JIT Level: hard

12. Kaizen is a Japanese term referring to __________________________. a) just-in-time production b) continuous improvement c) employee involvement d) concurrent engineering e) simplicity Ans: b Section Ref: The Philosophy of JIT Level: moderate

13. An improvement tool that utilizes cross-functional teams to plan and deliver improvements to specific processes during two- or three-day marathon sessions is called a ___________________. a) kanban blitz b) cross-functional blitz c) short-term blitz d) JIT blitz e) kaizen blitz Ans: e Section Ref: The Philosophy of JIT Level: moderate

14. JIT flexibility refers to a) ability to modify sales figures b) correct the bull whip effect c) increase or decrease supplier deliveries on short notice d) workers being able to perform many different tasks e) managers being able to shift positions easy Ans: d Section Ref: The Philosophy of JIT Level: moderate

15. Being able to keep costs low while changing the volume of production is an example of a) Simplicity b) Flexibility c) Visibility d) Continuous improvement e) Total quality management Ans: b Section Ref: The Philosophy of JIT Level: hard

16. Three basic elements work together to complete a JIT system: just-in-time manufacturing, total quality management, and a) Quality circles b) Pull production c) Minimizing inventory d) Respect for people e) Full utilization of capacity Ans: d Section Ref: Elements of JIT Level: moderate

17. JIT is often mistakenly assumed to a) refer to the final assembly schedule only b) dictate the product standards specification c) refer to only just-in-time manufacturing d) be a core element of ISO 9000 requirements e) be driven by the finance department long range spending plan Ans: c Section Ref: Elements of JIT Level: moderate

18. By focusing on __________ processes, JIT is able to achieve high-volume production of high-quality, low-cost products. a) downstream b) upstream c) change-over d) gateway e) value-added Ans: e Section Ref: Elements of JIT Level: moderate

19. The manufacturing process in JIT starts with the a) final assembly schedule b) schedules for individual machines c) vendor deliveries d) prioritization of lots e) forward scheduling

Ans: a Section Ref: Elements of JIT Level: hard

20. For the current month using JIT a) The same amount of each product is produced in the same order each day b) Production matches that of last month c) Lot sizes are varied week-to-week d) Production differs greatly from day to day e) Production is primarily for next month’s sales Ans: a Section Ref: Elements of JIT Level: moderate

21. JIT relies on a ______ that withdraws parts for a previous work cell and moves them to the next. a) Information technology system b) coordination system c) six sigma system d) quality circle system e) transportation system Ans: b Section Ref: Elements of JIT Level: moderate

22. JIT is a __________ system. a) Pull b) Push c) Lead time d) Preventive maintenance e) Closed Ans: a Section Ref: Elements of JIT Level: easy

23. JIT manufacturing cannot succeed if __________costs are too high. a) Variable b) Fixed c) Set-up d) Depreciation

e) Marginal Ans: c Section Ref: Elements of JIT Level: moderate

24. The ultimate goal of JIT is to produce products in a lot size of a) 100 or fewer b) N = (DT(1+X))/C c) The inverse of the carrying cost d) One e) The capacity of the factory Ans: d Section Ref: Elements of JIT Level: moderate

25. Unlike JIT traditional quality control systems use a) quality circles b) quality plans c) control charts d) acceptable quality levels e) quality applications Ans: d Section Ref: Elements of JIT Level: moderate

26. According to JIT, __________ is carried to cover up a wide variety of problems, such as poor quality, demand uncertainty, and slow delivery. a) Inventory b) Excess capacity c) A group of back-up workers d) Spare equipment e) Insurance Ans: a Section Ref: Elements of JIT Level: moderate

27. According to JIT, by eliminating inventory we can clearly identify __________ and work on eliminating them. a) Obsolete products

b) Malfunctioning machines c) Grievances d) Product imperfections e) Problems Ans: e Section Ref: Elements of JIT Level: easy

28. What must happen before it is possible to operate successfully with JIT? a) Inventory space must be eliminated b) Inventories must be reduced rapidly c) Problems must be uncovered d) Problems must be solved e) Setup times must be increased Ans: d Section Ref: Elements of JIT Level: hard

29. An important TQM concept is that quality is defined by the a) Quality control group b) Marketing department c) Board of directors d) Customer e) Auditors Ans: d Section Ref: Elements of JIT Level: moderate

30. The objective of quality at the source is not only to identify a quality problem, but also to a) Determine its extent b) Uncover its root cause c) Rate its seriousness d) Place blame e) Categorize it Ans: b Section Ref: Elements of JIT Level: hard

31. JIT considers __________ to be a company’s most precious resource.

a) Capital b) Productive equipment c) Information d) People e) Vision Ans: d Section Ref: Elements of JIT Level: moderate

32. In JIT the workforce is viewed as a) another resource to be managed b) another contractual obligation c) a long-term asset d) a short term asset e) an asset that must be closely managed Ans: c Section Ref: Elements of JIT Level: moderate

33. JIT believes in developing __________ relationships with suppliers. a) Long-term b) Adversarial c) Arms-length d) Temporary e) Distant Ans: a Section Ref: Elements of JIT Level: moderate

34. __________ are groups of workers who are responsible for every aspect of their business. a) Focus teams b) Staff departments c) Partnerships d) Self-managed teams e) Negotiators Ans: d Section Ref: Elements of JIT Level: moderate

35. Traditional manufacturing operations are based on the assumption that a) Overproduction is disastrous b) Nice guys finish last c) It is better to anticipate future requirements and plan for them d) If you manufacture it, demand will increase e) Inventory has no value Ans: c Section Ref: Just-In-Time Manufacturing Level: hard

36. JIT uses a pull system where communication starts with either the customer or with the _________ work station in the production line. a) First b) Bottleneck c) Dominant d) Most expensive e) Last Ans: e Section Ref: Just-In-Time Manufacturing Level: easy

37. With JIT there are two types of Kanban cards, production Kanban and __________ Kanban. a) Buffer b) Transaction c) Withdrawal d) Logistics e) Sales Ans: c Section Ref: Just-In-Time Manufacturing Level: hard

38. In JIT a Kanban card is used to signal a) The need for more parts b) A supplier needs assistance c) A worker is overloaded d) A machine is ready for preventive maintenance e) Management is inspecting operations Ans: a Section Ref: Just-In-Time Manufacturing Level: moderate

39. Without kanbans, the withdrawal and production of materials a) can continue in a reduced manner b) will not be well coordinated c) cannot take place d) would continue based on historical needs e) would continue based on forecasted needs Ans: c Section Ref: Just-In-Time Manufacturing Level: moderate

40. The number of kanbans or containers needed at a workstation is dependent on all except which of the following? a) the demand rate b) the number of workers c) the size of the container d) the lead time e) the safety stock level Ans: b Section Ref: Just-In-Time Manufacturing Level: moderate

41. The system of Kanbans used to coordinate delivery of goods by suppliers can include all of the following except a) Filled containers delivered by the supplier b) Purchase approvals by the production manager c) Mail boxes for each supplier d) Empty containers with a Kanban e) Bar-coded Kanbans Ans: b Section Ref: Just-In-Time Manufacturing Level: moderate

42. It the goal is to reduce the amount of inventory in the system, the number of Kanban cards should a) Be decreased b) Be increased c) Remain the same d) Be calculated by formula e) Remain the same, but container size should be increased

Ans: a Section Ref: Just-In-Time Manufacturing Level: moderate

43. Consider a workstation that can process 4 units per minute. It takes 2 hours to receive an order from the previous station. The container size is 10 units. The factory sets safety stock at 20 percent of demand during lead time. How many kanbans are needed for the workstation? a) 57.6 b) 48 c) 0.96 d) 9.6 e) 28.8 Ans: a Solution: (N=(DT+S)/C =(4 * 60 * 2 + .2 * (4 * 60 * 2))/10 = 57.6) Section Ref: Just-In-Time Manufacturing Level: moderate

44. Consider a workstation that can process 4000 units per hour. It takes 15 minutes to receive an order from the previous station. The container size is 20 units. The factory sets safety stock at 20 percent of demand during lead time. How many kanbans are needed for the workstation? a) 16 b) 3600 c) 50 d) 10 e) 60 Ans: e Solution: (N=(DT+S)/C =(4000 * 15/60 + .2 * (4000 * 15/60))/20 = 60) Section Ref: Just-In-Time Manufacturing Level: moderate

45. Small lot production a) Increases inventory b) Decreases flexibility c) Reduces setup d) Increases excess processing e) Shortens lead time Ans: e Section Ref: Just-In-Time Manufacturing Level: hard

46. What is the term for an adjustment of a machine after making one product type so that production can begin for another product type? a) Level assembly schedule b) Group technology c) Setup d) Cycle time e) Automation Ans: c Section Ref: Just-In-Time Manufacturing Level: easy

47. External setups a) Are the same as single setup b) Can be done while the machine is running c) Are undesirable for small lot production d) Are often contracted out e) Are more common than internal setups in traditional manufacturing systems Ans: b Section Ref: Just-In-Time Manufacturing Level: moderate

48. Uniform plant loading involves a) Large lots produced over several days b) Making the same mix of products every day in small quantities c) Large amounts of inventory d) Making large changes in production to respond to changes in demand e) Spreading production uniformly over several plants Ans: b Section Ref: Just-In-Time Manufacturing Level: moderate

49. One aspect of flexible resources is a) Use of multifunction workers b) Relying on special equipment c) Use of overtime d) Leasing, rather than buying, equipment e) Variable work schedules Ans: a Section Ref: Just-In-Time Manufacturing Level: hard

50. The advantages of cell manufacturing using a U-shaped cell include all of the following except a) Production efficiency with flexibility to produce a variety of parts b) Easy reach and flexibility for workers c) Higher worker satisfaction d) No special material handling e) Longer setup times Ans: e Section Ref: Just-In-Time Manufacturing Level: moderate

51. Quality in just-in-time is centered on building quality into the a) Product b) Maintenance of equipment c) Process d) Distribution system e) Workforce Ans: c Section Ref: Total Quality Management Level: hard

52. Quality problems in manufacturing can come from many sources, including all of the following except a) Customer needs are not incorporated into the product design b) Low quality materials from suppliers c) Product specifications being ignored d) Equipment problems from design of the production process e) Operator error Ans: c Section Ref: Total Quality Management Level: hard

53. What is the term that means giving workers authority to stop the production line when quality problems are encountered? a) Automation b) Kaizen c) Muda d) Poka-yoke e) Jidoka

Ans: e Section Ref: Total Quality Management Level: moderate

54. Poka-yoke means a) Using color coding b) Foolproofing c) Using process control charts d) Preventive maintenance e) Undercapacity scheduling Ans: b Section Ref: Total Quality Management Level: moderate

55. Regular inspections and maintenance designed to keep a machine operational is __________ maintenance. a) Preventive b) Breakdown c) Unscheduled d) Emergency e) Unnecessary Ans: a Section Ref: Total Quality Management Level: moderate

56. According to JIT, workers should perform a) system specification development b) as directed by the supervisor c) routine preventive maintenance activities d) poka-yoke designs e) quality program development Ans: c Section Ref: Total Quality Management Level: moderate

57. Which of the following is not characteristic of preventive maintenance in JIT systems? a) Keeping machines operational b) Regular inspections of machines c) Workers helping to maintain their own equipment d) Operating machines properly

e) Perceiving breakdowns as an opportunity for continuous quality improvement Ans: e Section Ref: Total Quality Management Level: hard

58. Something you would not expect to see in a just-in-time work environment is a) Order b) Clutter c) Ample space d) Tools in their place e) Cleanliness Ans: b Section Ref: Total Quality Management Level: moderate

59. Just-in-time organizations rely on employees to a) Do what their boss tells them to do b) Dress differently every day c) Work together d) File grievances e) Be adversarial toward management Ans: c Section Ref: Total Quality Management Level: moderate

60. Just-in-time relies on __________ worker skills, meaning the ability of workers to perform many different tasks on many different machines. a) Natural b) Verbal c) Intuitive d) Manual e) Cross functional Ans: e Section Ref: Respect for People Level: moderate

61. JIT production workers are expected to a) Cover up quality problems b) Ignore data

c) Take responsibility in getting to the root cause of quality problems d) Blame problems on someone else e) Have a poor attitude about quality Ans: c Section Ref: Respect for People Level: moderate

62. JIT production workers a) Keep data to themselves b) Participate in team problem-solving activities c) Do not understand data d) Never use data e) Rely on others to do data analysis Ans: b Section Ref: Respect for People Level: moderate

63. The role of production employees in JIT includes all of the following except a) Be actively engaged in improving the production process b) Monitor quality c) Record data d) Follow clearly defined and limiting work rules e) Act on the information they have Ans: d Section Ref: Respect for People Level: moderate

64. Which of the following is not a characteristic of bottom-round management? a) Consensus management by committees or teams b) Participation in quality circles c) Decision making starts with discussion at the bottom level d) Lack of consensus e) Employees volunteering to help solve quality problems Ans: d Section Ref: Respect for People Level: easy

65. Which of the following is not a role of JIT management? a) creating a JIT culture

b) cost and information sharing c) serving as coaches and facilitators d) developing an incentive system e) ensuring multifunctional training occurs Ans: b Section Ref: Respect for People Level: easy

66. In Japan, lifetime employment a) Is a recent trend b) Has had little impact c) Is an ideal that is never achieved d) Is true for everyone e) Comprises a relatively small percentage of the total work force today Ans: e Section Ref: Respect for People Level: hard

67. In a JIT environment, workers need to a) Protect themselves from their boss’s whims b) Be prepared to be reprimanded c) Keep their ideas to themselves d) Always work in pairs e) Feel secure in their jobs Ans: e Section Ref: Respect for People Level: moderate

68. With JIT a company’s relationship with its suppliers includes a) Competitive bidding b) Being in partnership with them c) Buying parts from the cheapest supplier d) Short-term relationships e) Having as many suppliers as possible Ans: b Section Ref: Respect for People Level: moderate

69. With regard to suppliers, JIT typically requires

a) Delivery of large lots at regular intervals b) Buyer inspection of incoming goods and materials c) Multiple sources from which to purchase d) Information sharing e) Buying parts from the cheapest supplier Ans: d Section Ref: Respect for People Level: moderate

70. The benefits of long-term relationships with a small number of suppliers include all of the following except a) Always getting the lowest price b) Focus on improving process controls c) Greater accountability d) Develop stable delivery schedules e) Eliminate paperwork Ans: a Section Ref: Respect for People Level: moderate

71. Which of the following is not a good approach for suppliers who are providing JIT services to manufacturers? a) Use the “push system” for deliveries b) Locate near their customers c) Have small warehouses near the manufacturing plant d) Use standardized containers e) Join together with other suppliers to help each other make small deliveries Ans: a Section Ref: Respect for People Level: easy

72. The challenge for service operations is that they have to synchronize their __________ with demand. a) accounting b) finance c) marketing d) production e) information systems Ans: d Section Ref: JIT In Services Level: easy

73. In making specific changes to JIT manufacturing, which of the following steps should come first? a) reduce lot sizes and lead times b) switch to pull production c) reorganize workplace d) reduce setup times e) implement layout changes Ans: c Section Ref: Implementing JIT Level: hard

74. Which of the following is not considered to be a key element of JIT supplier relationships? a) suppliers viewed as internal factory b) use of single-source suppliers c) long-term supplier relationships developed d) suppliers locate near customer e) cost and information sharing Ans: a Section Ref: Benefits of JIT Level: hard

75. One of the greatest benefits of JIT would be a) increasing waste and improving responsiveness b) longer lead times and increased productivity c) decreased machine utilization and improved quality d) competing based on schedules e) eliminating waste, improving responsiveness and competing based on time Ans: e Section Ref: Benefits of JIT Level: hard

True/False

76. JIT considers waste anything that does not add value.

Ans: True Section Ref: Introduction

Level: easy

77. The broad view of JIT is now often termed lean production or lean systems.

Ans: True Section Ref: Introduction Level: easy

78. Often the best quality problem resolution solution involves a complex answer as the organization is a complex organization.

Ans: False Section Ref: The Philosophy of JIT Level: easy

79. Continuous improvement is called kaizen by the Japanese.

Ans: True Section Ref: The Philosophy of JIT Level: moderate

80. An improvement tool that utilizes cross-functional teams to plan and deliver improvements to specific processes during two- or three-day marathon sessions is called a kanban blitz.

Ans: False Feedback: it is called a kaizen blitz Section Ref: The Philosophy of JIT Level: moderate

81. With a kaizen system there is no excess production because the only products and quantities produced are those specified by the kaizen.

Ans: False Section Ref: Elements of JIT Level: hard

82. JIT facilities are lacking in floor space.

Ans: False

Section Ref: Elements of JIT Level: hard

83. Being able to keep costs low while changing the volume of production is an example of flexibility.

Ans: True Section Ref: Elements of JIT Level: moderate

84. By focusing on value-added processes, JIT is able to achieve high-volume production of high-quality, low-cost products.

Ans: True Section Ref: Elements of JIT Level: moderate

85. The manufacturing process in JIT starts with the final assembly schedule.

Ans: True Section Ref: Elements of JIT Level: moderate

86. JIT manufacturing cannot succeed if set-up costs are too high.

Ans: True Section Ref: Elements of JIT Level: moderate

87. According to JIT, by eliminating inventory we can clearly identify obsolete products and work on eliminating them.

Ans: False Section Ref: Elements of JIT Level: moderate

88. JIT considers people to be a company’s most precious resource.

Ans: True

Section Ref: Elements of JIT Level: moderate

89. There are two types of Kanban cards, production Kanban and withdrawal Kanban.

Ans: True Section Ref: Just-In-Time Manufacturing Level: hard

90. If the goal is to reduce the amount of inventory in the system, the number of Kanban cards should be increased.

Ans: False Section Ref: Just-In-Time Manufacturing Level: moderate

91. External setups can be done while the machine is running.

Ans: True Section Ref: Just-In-Time Manufacturing Level: hard

92. Just-in-time organizations rely on employees to work together.

Ans: True Response: See page 238 Level: moderate

93. Just-In-Time relies on cross-functional worker skills.

Ans: True Section Ref: Respect for People Level: moderate

94. Bottom-round management includes consensus management by committees or teams.

Ans: True Section Ref: Respect for People Level: easy

95. With regard to suppliers, JIT typically requires information sharing.

Ans: True Section Ref: Respect for People Level: moderate

96. Successfully implementing JIT requires that it be done as quickly as possible.

Ans: False Section Ref: Implementing JIT Level: easy

97. JIT concepts that are applicable to service organizations include use of multifunction workers.

Ans: True Section Ref: Implementing JIT Level: moderate

98 The challenge for service organizations is synchronizing their production with demand.

Ans: True Section Ref: Implementing JIT Level: moderate

99. Services organizations cannot use the JIT philosophy to reduce cycle time.

Ans: False Section Ref: Implementing JIT Level: moderate

100. A key outcome of JIT is that organizational barriers are eliminated.

Ans: True Section Ref. JIT and Lean Systems Across the Organization Level: moderate

101. Undercapacity scheduling is the term that describes working with a schedule of seven hours of production and one hour of problem solving with teams.

Ans: True Section Ref: Total Quality Management Level: moderate

Essay

102. The central belief of the JIT philosophy is elimination of waste) What are the other beliefs that help define this philosophy?

Ans: broad view of operations, simplicity, continuous improvement, visibility and flexibility Section Ref: The Philosophy of JIT Level: moderate

103. Under the JIT belief of visibility, describe JIT facilities.

Ans: open and clean, with plenty of floor space; no clutter; everyone can see what everyone else is doing; no one can hide extra inventory anywhere; an orderly environment; visibility allows waste to be readily seen Section Ref: The Philosophy of JIT Level: hard

104. Describe the “kaizen blitz.”

Ans: This is an improvement tool that utilizes cross-functional teams to plan and deliver improvements to specific processes during two- or three-day marathon sessions. This process allows a small group of people to concentrate on a bit-size chunk of the problem for a short period of time. Companies find that a kaizen blitz can quickly deliver dramatic and low-cost improvements to processes.

Section Ref: The Philosophy of JIT Level: hard

105. What is the formula to compute the number of kanbans needed to control the production of a particular product (including the variable definitions)?

Ans: N = (DT + S) / C; where N = total # of kanbans or containers (one card per container), D = demand rate at the workstation, T = the time it takes to receive an order from the previous

workstation, C = size of the container, and S = safety stock to protect against variability or uncertainty in the system.

Section Ref: Just-In-Time Manufacturing Level: hard

106. What are the advantages of cell manufacturing using a U-shaped cell?

Ans: production efficiency with flexibility to produce a variety of parts, easy reach and flexibility for workers, higher worker satisfaction, and no special material handling Section Ref: Just-In-Time Manufacturing Level: hard

107. What are the responsibilities of production employees in JIT? Ans: get to the root cause of quality problems, participate in team problem-solving activities, be actively engaged in improving the production process, monitor quality, record data, and act on the information they have Section Ref: Respect for People Level: hard

108. What are the key elements a JIT company’s relationship with its suppliers?

Ans: suppliers viewed as an external factory, use of single-source suppliers, respect for suppliers, build long-term relationships, form a partnership with suppliers, share cost and other information, work together to improve process controls, increased accountability on the part of the suppliers, development of stable delivery schedules, suppliers may locate near the company’s factory, and elimination of paperwork Section Ref: Respect for People Level: hard

109. What are the benefits of JIT? Ans: increased flexibility, shorter lead times, increased productivity, improved quality, increased machine utilization, lower production costs, reduced inventory Section Ref: Respect for People Level: moderate

110. What does a company need to successfully implement JIT? Ans: a “champion” for JIT implementation, a shared vision of where the company is and where it wants to go, top management must create the right atmosphere, reward systems to reward ideas

and team cooperation, quality improvements need to be made, reorganize the workplace, reduce setup times, reduce lot sizes and lead times, make layout changes, switch to pull production, and develop relationships with suppliers Section Ref: Implementing JIT Level: moderate

111. Discuss why implementation of a JIT will not start and end in definite time periods.

Ans: JIT is a gradual process that is never complete because improving performance is a neverending task.

Section Ref: Implementing JIT Level: moderate

112. What JIT concepts are applicable to service organizations?

Ans: reductions in cycle times, use of multifunction workers, minimizing set-up times, parallel processing, workplace organization, improved quality, and uniform facility loading Section Ref: JIT In Services Level: moderate

113. Describe how JIT affects the Accounting department.

Ans: Traditional accounting systems generally allocate overhead on the basis of direct labor hours. This does not accurately describe the actual use of overhead. JIT relies on activity-based costing to appropriately allocate overhead. In an ABC specific costs are identified and then assigned to various types of activities. Overhead is then assigned to the jobs depending on how many activities a particular job takes up.

Section Ref: JIT and Lean System Across the Organization Level: hard

Problems

114. Frank James works for a production facility that makes car radios. His job is to insert the integrated circuits and make sure that they work correctly. He is expected to handle 20 radios per hour. The factory uses a Kanban production system with containers that hold four radios. It takes 60 minutes for Frank to receive the radios from the previous work station. How many Kanbans are needed?

Ans: 5 Solution: N = (DT+S)/C = 20 * 1 /4 = 5 No safety stock Section Ref: Just-In-Time Manufacturing

Level: easy

115. Matt Dillon works for a production facility that makes ball point pens. His job is to place the spring on the central ink insert. He is expected to process 200 inserts per hour. The factory uses a Kanban production system with containers that hold 50 inserts. It takes 30 minutes for Frank to receive the inserts from the previous work station. How many Kanbans are needed?

Ans: 2 Solution: N = (DT+S)/C = 200 * 1/2 /50 = 2 No safety stock, lead time converted to an hour basis Section Ref: Just-In-Time Manufacturing Level: easy

116. Frank James works for a production facility that makes car radios. His job is to insert the integrated circuits and make sure that they work correctly. He is expected to handle 20 radios per hour. The factory uses a Kanban production system with containers that hold four radios. It takes 60 minutes for Frank to receive the radios from the previous work station. The factory sets safety stock at 50 percent of demand during lead time. How many Kanbans are needed?

Ans: 7.5 Solution: N = (DT+S)/C = [(20 * 1) + (.5 * 20 * 1)] /4 = 7.5 Section Ref: Just-In-Time Manufacturing Level: moderate

117. Matt Dillon works for a production facility that makes ball point pens. His job is to place the spring on the central ink insert. He is expected to process 200 inserts per hour. The factory uses a Kanban production system with containers that hold 50 inserts. It takes 30 minutes for Frank to receive the inserts from the previous work station. The factory sets safety stock at 40 percent of demand during lead time. How many Kanbans are needed?

Ans: 2.8 Solution: N = (DT+S)/C = [(200 * ½) + (.4 * 200 * ½)] /50 = 2.8 Section Ref: Just-In-Time Manufacturing Level: moderate

118. Consider a workstation that can process 4 units per minute. It takes 10 minutes to receive an order from the previous station. The container size is 10 units. The factory sets safety stock at 20 percent of demand during lead time. How many kanbans are needed for the workstation?

Ans: 4.8 Solution: N = (DT+S)/C = [(4 * 60 * 10/60) + (.2 * 4 * 60 * 10/60)] /10 = 4.8 units/minute and lead time converted to an hour basis Section Ref: Just-In-Time Manufacturing

Level: moderate

119. Consider a workstation that can process 2 units per minute. It takes 6 minutes to receive an order from the previous station. The container size is 12 units. The factory sets safety stock at 20 percent of demand during lead time. How many kanbans are needed for the workstation?

Ans: 1.2 Solution: N = (DT+S)/C = [(2 * 60 * 6/60) + (.2 * 2 * 60 * 6/60)] /12 = 1.2 units/minute and lead time converted to an hour basis Section Ref: Just-In-Time Manufacturing Level: moderate

120. Consider a workstation that can process 4 units per minute. It takes 2 hours to receive an order from the previous station. The container size is 10 units. The factory sets safety stock at 20 percent of demand during lead time. How many kanbans are needed for the workstation?

Ans: 57.6 Solution: N = (DT+S)/C = [(4 * 60 * 2) + (.2 * 4 * 60 * 2)] /10 = 57.6 units/minute converted to an hour basis Section Ref: Just-In-Time Manufacturing Level: moderate

121. Consider a workstation that can process 1060 units per hour. It takes 15 minutes to receive an order from the previous station. The container size is 20 units. The factory sets safety stock at 20 percent of demand during lead time. How many kanbans are needed for the workstation?

Ans: 15.9 Solution: N = (DT+S)/C = [(1060 * 15/60) + (.2 * 1060 *15/60)] /20 = 15.9 lead time converted to an hour basis Section Ref: Just-In-Time Manufacturing Level: moderate

122. Consider a workstation that can process 400 units per hour. It takes 3 hours to receive an order from the previous station. The container size is 50 units. The factory sets safety stock at 10 percent of demand during lead time. How many kanbans are needed for the workstation?

Ans: 26.4 Solution: N = (DT+S)/C = [(400 * 3) + (.1 * 400 * 3)] /50 = 26.4 Section Ref: Just-In-Time Manufacturing Level: moderate

123. Consider a workstation that can process 1200 units per hour. It takes 1.5 hours to receive an order from the previous station. The container size is 40 units. The factory sets safety stock at 20 percent of demand during lead time. How many kanbans are needed for the workstation?

Ans: 54 Solution: N = (DT+S)/C = [(1200 * 1.5) + (.2 * 1200 * 1.2)] /40 = 54 Section Ref: Just-In-Time Manufacturing Level: moderate

124. Frank’s umbrella corporation is designing a kanban system. They know that they are expected to produce 100 umbrellas per hour. They’ve also determined that a key external resource takes 30 minutes to deliver the required material once an order has been transmitted. To start with they want to maintain a safety stock of 25 critical parts. Originally they want to start with 3 kanbans. What container size should Frank’s umbrella company start with?

Ans: 25 Solution: N = (DT+S)/C therefore C = (DT+S)/N = [(100 umbrellas/hr * 0.5/hr)+25] /3 = [50 umbrellas +25)] /3 = 54) = 25 Section Ref: Just-In-Time Manufacturing Level: moderate

125. Raissa’s teapot firm is moving to a JIT system. One question they are trying to answer is what level of safety stock they should maintain. They produce 240 teapots every four hours. The teapot ceramic handle vendor will deliver a container containing 30 parts one hour after they receive a request to ship. Raissa’s kanban system uses four containers. What should they maintain as a safety stock?

Ans: 2 Solution: N = (DT+S)/C therefore S = (N*C)/(D*T) = (4*30)/(240 tea pots/4 hours * 1 hour) = 2 Section Ref: Just-In-Time Manufacturing Level: hard

Short Answer

126. What are the three major elements of JIT? Ans: just-in-time manufacturing, total quality management, and respect for people.

Section Ref: Elements of JIT Level: easy

127. What are three reasons that respect for people is important in JIT?

Ans: JIT requires workers active participation, cooperation, ideas, willingness to cross train, flexibility, good attitude, willingness to change, for example.

Section Ref: Elements of JIT Level: hard

128. What is the difference between traditional and cell manufacturing?

Ans: Cell manufacturing is the placement of dissimilar machines and equipment together in order to produce a family of products with similar processing requirements – inventory is less.

Traditional manufacturing will produce goods ahead of time in anticipation of demand – inventory is high Section Ref: Just-In-Time Manufacturing Level: moderate

129. Traditional production plans schedule ________________________ while JIT with Level Scheduling uses ________________________.

Ans: large batches at one time; small batches at many times.

Section Ref: Just-In-Time Manufacturing Level: moderate

130. Materials and work in process move farther and more often under ____________________.

Ans: traditional manufacturing.

Section Ref: Total Quality Management Level: moderate

131. Name three ways that quality at the source includes more than manufacturing.

Ans: product design, process design, suppliers, stopping a production line when a problem occurs.

Section Ref: Total Quality Management Level: moderate

132. Scheduling two, 12-hour shifts and a 4-hour housekeeping and repair shift each workday is an example of ___________________.

Ans: preventive maintenance Section Ref: Total Quality Management Level: hard

133. Production employees in JIT setting record and visually display performance data like: _____________________.

Ans: SPC charts, time since last unscheduled work stoppage, time since last injury Section Ref: Respect for People Level: hard

134. JIT supply chains often involve firms that _____________________.

Ans: locate near each other.

Section Ref: Respect for People Level: moderate

135. JIT changes happen in sequence because ________________________.

Ans: One of several reasons like: Some changes depend on, or are easier to implement after, others. Trying to make all changes at once would overwhelm and demoralize the managers and other employees.

Section Ref: Implementing JIT Level: hard

136. Every organization is just one element of an _______________.

Ans: entire supply chain Section Ref: The Supply Chain Link Level: moderate

137. The principles of JIT need to be adopted by all members of a supply chain in order to have a __________.

Ans: full impact Section Ref: The Supply Chain Link Level: easy

138. Part of JIT philosophy is to design operations that are highly efficient but flexible in order to accommodate changing ______________________.

Ans: customer demands

Section Ref: The Philosophy of JIT Level: easy

File: ch08, Chapter 8: Forecasting

Multiple Choice

1. Forecasting is not a function which contributes to: a) deciding which business market to pursue b) deciding which product to produce c) deciding how bonuses should be allocated d) deciding how much inventory to carry e) deciding how many people to hire Ans: c Section Ref: Introduction Level: easy

2. When evaluating forecasting models it is accurate to say: a) they all rely on the same data sets b) they will provide the same results c) they are usually accurate d) they differ in their degree of complexity e) they do not differ in their degree of complexity Ans: d Section Ref: Principles of Forecasting Level: moderate

3. Which of the following is not a feature common to all forecasting models? a) This period’s forecast error is needed to compute next period’s forecast. b) Forecasts are rarely perfect. c) Forecasts are more accurate for groups of items rather than for individual items. d) Forecasts are more accurate for shorter rather than for longer time horizons. e) All of the answer choices are correct.

Ans: a Section Ref: Principles of Forecasting Level: moderate

4. The first step in forecasting is: a) determine what data is available b) decide what to forecast c) evaluate and analyze appropriate data

d) select and test the forecast model e) establish the forecast accuracy requirements Ans: b Section Ref: Steps in the Forecasting Process Level: moderate

5. Which of the following companies helps businesses use weather data to make their business plans? a) i2 technologies b) Manugistics c) Planalytics d) Algorithmics e) SAP Ans: c Section Ref: Types of Forecasting Methods Level: hard

6. Qualitative forecasting methods a) are made objectively by the forecaster b) are made subjectively by the forecaster c) are made using existing data sources d) are based on mathematical models e) are only used in parallel with quantitative models Ans: b Section Ref: Types of Forecasting Methods Level: moderate

7. Under which forecasting method does a group of managers meet to generate a forecast? a) Market research b) Executive opinion c) Delphi method d) Naïve method e) Gamma method Ans: b Section Ref: Types of Forecasting Methods Level: easy

8. Which forecasting method seeks to develop a consensus among a group of experts?

a) Market research b) Executive opinion c) Delphi method d) Naïve method e) Gamma method Ans: c Section Ref: Types of Forecasting Methods Level: easy

9. One quantitative forecasting models limitation is a) it is objective b) they are consistent c) they are based on mathematical formulas d) they are limited on the quality of available data e) they can work around bad data Ans: d Section Ref: Types of Forecasting Methods Level: moderate

10. Which forecasting method is particularly good for predicting technological changes and scientific advances? a) Market research b) Executive opinion c) Delphi method d) Naïve method e) Gamma method Ans: c Section Ref: Types of Forecasting Methods Level: moderate

11. Which forecasting method is particularly good for determining customer preferences? a) Market research b) Executive opinion c) Delphi method d) Naïve method e) Gamma method Ans: a Section Ref: Types of Forecasting Methods Level: moderate

12. Which forecasting method suffers from the possibility of having one person’s opinion dominate the forecast? a) Market research b) Executive opinion c) Delphi method d) Naïve method e) Gamma method Ans: b Section Ref: Types of Forecasting Methods Level: moderate

13. Which of the following forecasting methods is most likely to be implemented to change an existing quantitative forecast to account for a new competitor in the marketplace? a) Market research b) Executive opinion c) Delphi method d) Naïve method e) Gamma method Ans: b Section Ref: Types of Forecasting Methods Level: moderate

14. Which of the following forecasting methods is specifically designed to go through several rounds of modification before generating a final forecast? a) Exponential smoothing b) Executive opinion c) Delphi method d) Naïve method e) Gamma method Ans: c Section Ref: Types of Forecasting Methods Level: moderate

15. What are the two categories of quantitative models? a) Delphi and non-causal b) Causal and non-causal c) Delphi and time series d) Causal and time series e) Causal and Delphi

Ans: d Section Ref: Types of Forecasting Methods Level: easy

16. A causal research model is based on the assumption that a) the independent variable is related to the dependent variable b) there is a relationship between the time series and the dependent variable c) the variable being forecast is related to other variables in the environment d) there is a relationship between the time series and the independent variable e) the information is contained in a time series of data Ans: c Section Ref: Types of Forecasting Methods Level: moderate

17. Which of the following is a causal forecasting method? a) Naïve b) Moving average c) Weighted moving average d) Trend adjusted exponential smoothing e) Linear regression Ans: e Section Ref: Types of Forecasting Methods Level: easy

18. Which of the following is the least useful sales forecasting model to use when sales are increasing? a) Trend adjusted exponential smoothing b) Simple mean c) Exponential smoothing d) Weighted moving average e) Naïve Ans: b Section Ref: Types of Forecasting Methods Level: hard

19. Over the long term, which of the following forecasting models will likely require carrying the least amount of data? a) Naïve b) Simple mean c) Exponential smoothing

d) Weighted moving average e) Moving average Ans: a Section Ref: Types of Forecasting Methods Level: moderate

20. In looking at seasonal indexes one weakness to watch for is a) use of the wrong alpha b) incorrect selection of weights c) a clear lack of linear relationship d) seasonality is not present e) significant increase in computational requirements Ans: d Section Ref: Types of Forecasting Methods Level: easy

21. Which of the following is not considered to be one of the four basic patterns of time series data? a) Horizontal b) Trend c) Vertical d) Seasonality e) Cycle Ans: c Section Ref: Time Series Models Level: easy

22. Which is typically the most difficult data pattern to predict? a) Horizontal b) Trend c) Level d) Seasonality e) Cycle Ans: e Section Ref: Time Series Models Level: moderate

23. Which forecasting method assumes that next period’s forecast is equal to this period’s actual value?

a) Simple mean b) Ignorant c) Basic d) Naïve e) Nescient Ans: d Section Ref: Time Series Models Level: easy

24. The OM supervisor informs you, the researcher, that the data has a large standard deviation. What data pattern would you expect to observe once you generated a time series trend? a) horizontal b) seasonal c) positive/negative trend d) cycle e) insufficient information to derive a valid response Ans: e Section Ref: Time Series Models Level: moderate

25. Suppose that you are using the naïve forecasting method with trend to forecast sales.

If sales have been declining by 20% per week, and this week’s sales amounted to $200, what would your forecast be for next week? a) $200 b) $ 40 c) $240 d. $180 e) $160 Ans: e Solution: 200 x .20 = 40; 200 – 40 = 160 Section Ref: Time Series Models Level: moderate

26. Suppose that you are using the simple mean to make a forecast. This period’s forecast was equal to 100 units, and it was based on 6 periods of demand. This period’s actual demand was 86 units. What is your forecast for next period? a) 98 b) 100 c) 93 d) 86 e) Not enough information is given to answer the question.

Ans: a Solution: 100 + 100 + 100 + 100 + 100 + 86 = 586/6 = 98 Section Ref: Time Series Models Level: hard

27. Suppose that you are using the four-period simple moving average method to forecast sales, and sales have been decreasing by 10% every period. How will your forecasts perform? a) Forecasts will be lower than actual. b) Forecasts will be higher than actual. c) Forecasts will equal actual. d) Forecasts will be increasing. e) Forecasts will be decreasing by 2.5% every period.

Ans: b Section Ref: Time Series Models Level: hard

28. Suppose that you are using the four-period weighted moving average forecasting method to forecast sales and you know that sales will be increasing every period for the foreseeable future. What of the following would be the best set of weights to use (listed in order from the most recent period to four periods ago, respectively)? a) 0.25, 0.25, 0.25, 0.25 b) 0.40, 0.30, 0.20, 0.10 c) 1.00, 0.00, 0.00, 0.00 d) 0.10, 0.20, 0.30, 0.40 e) 0.00, 0.00, 0.00, 1.00 Ans: c Section Ref: Time Series Models Level: hard

29. The following sales figures show actual sales over the identified time period. What can be determined by comparing a simple mean forecast and a six month moving average forecast?

December 4,000 January 5,000 February 4,000 March 4,500 April 5,500 May 5,000 a) moving average develops a smoother forecast b) 4.7, 5 c) 4.7, 4

d) 4, 4 e) 4, 4.7 Ans: d Section Ref: Time Series Models Level: moderate

30. What are the most frequently used forecasting techniques? a) Linear regression b) Simple mean c) Exponential smoothing d) Weighted moving average e) Econometric models Ans: c Section Ref: Time Series Models Level: moderate

31. In exponential smoothing, what values can the smoothing constant, , have? a) [−1, 1] b) [1, ] c) [0, ] d) [0, 1] e) [−, ] Ans: d Section Ref: Time Series Models Level: easy

32. In exponential smoothing, which of the following values for  would generate the most stable forecast? a) 0.10 b) 0.25 c) 0.50 d) 0.75 e) 1.00 Ans: a Section Ref: Time Series Models Level: moderate

33. Suppose that you are interested in trend-adjusted exponential smoothing. Which of the following values of the trend smoothing constant, , would most likely be seen in practice? a) 0.10 b) 0.50 c) 0.75 d) 0.90 e) 1.00 Ans: a Section Ref: Time Series Models Level: moderate

34. In linear regression, what are we trying to forecast? a) Beta parameter b) Dependent variable c) Independent variable d) Y-intercept of the line e) Slope of the line Ans: b Section Ref: Causal Models Level: moderate

35. What does the linear regression line do? a) Minimizes sum of errors b) Minimizes product of squared errors c) Minimizes sum of squared errors d) Minimizes product of errors e) Minimizes sum of absolute value of errors Ans: c Section Ref: Causal Models Level: moderate

36. What value of the correlation coefficient implies that there is a perfect positive linear relationship between the two variables of a linear regression model? a) −1 b) 0 c) 0.5 d) 1 e)  Ans: d Section Ref: Causal Models

Level: easy

37. In linear regression, an r2 of .984 implies what? a) 98.4% of the variability of the independent variable is explained by the dependent variable b) 98.4% of the variability of the dependent variable is explained by the independent variable c) 1.6% of the variability of the independent variable is explained by the dependent variable d) 1.6% of the variability of the dependent variable is explained by the independent variable e) 99.2% of the variability of the dependent variable is explained by the independent variable Ans: b Section Ref: Causal Models Level: moderate

38. What value of the correlation coefficient implies that there is no relationship between the two variables of a linear regression model? a) −1 b) 0 c) 0.5 d) 1 e)  Ans: b Section Ref: Causal Models Level: easy

39. What is the statistic that measures the direction and strength of the linear relationship between two variables? a) r2 b) Coefficient of variation c) Variance d) Coefficient of kurtosis e) Correlation coefficient Ans: e Section Ref: Causal Models Level: moderate

40. Which of the following is true with respect to the correlation coefficient r? a) r2  r b) r2  | r | c) r2  r d) r2  | r | e) r2 can never equal r

Ans: b Section Ref: Causal Models Level: moderate

41. Which of the following values of the correlation coefficient implies that the value of the dependent variable decreases as the value of the independent variable increases? a) −0.2 b) 0 c) 0.2 d) 1 e) 0.5 Ans: a Section Ref: Causal Models Level: easy

42. The following correlation coefficient values come from five different linear regression models. Which model “fits” the data the best? a) 0.99 b) 0.5 c) 0 d) −0.8 e) −1 Ans: e Section Ref: Causal Models Level: moderate

43. What is a tracking signal used for? a) To identify trends in actual data b) To identify seasonality in actual data c) To identify the effect of business cycles on actual data d) To compute the value of the smoothing constant, , for exponential smoothing e) To identify forecast bias Ans: e Section Ref: Selecting The Right Forecasting Model Level: moderate

44. Suppose that Sally’s company uses exponential smoothing to make forecasts. Further suppose that last period’s demand forecast was for 20,000 units and last period’s actual

demand was 21,000 units. Sally’s company uses a smoothing constant (α) equal to 40%.

What should be the forecast for this period? a) 20,000 b) 21,000 c) 20,600 d) 20,400 e) 19,600 Ans: d Solution: .4(21,000) + (1- .4)20,000 = 8400 + (.6 x 20,000) = 8400 + 12,000 = 20,400 Ft +1 = αAt + (1 − α )Ft Section Ref: Time Series Models Level: moderate

45. Suppose that Jane’s company uses exponential smoothing to make forecasts. Further suppose that last period’s demand forecast was for 500 units and last period’s actual demand was 480 units. In addition, yesterday Jane found out that this period’s actual demand will be for 550 units. Jane’s company uses an α value of .20. Today, Jane’s boss asked her to prepare a forecast for this period. What should that forecast be? a) 504 b) 496 c) 510 d) 484 e) 550 Ans: c Solution: Ft +1 = αAt + (1 − α )Ft .2(550) + (1-.2)500 = 110 + .8(500) = 110 + 400 = 510 Section Ref: Time Series Models Level: hard

46. A firm has the following order history over the last 6 months.

January 120 February 95 March 100 April 75 May 100 June 50 What would be a 3-month weighted moving average forecast for July, using weights of 40% for the most recent month, 30% for the month preceding the most recent month, and 30% for the month preceding that one? a) 75 b) 72.5 c) 50 d) 90 e) 106.5 Answer: b

Solution: Ft +1 =  Ct A t At 75 100 50 Forecast Section Ref: Time Series Models Level: moderate April May June

Ct .3 .3 .4

CtAt 22.5 30 20 72.5

47. What is the mean absolute deviation of the following forecasts?

Month Actual Sales Forecast Jan. 614 600 Feb. 480 480 Mar. 500 550 Apr. 500 600 a) 3174 b) 164 c) 41 d) 136 e) -34 Ans: c

Solution: MAD = 

actual − forecast

n Using the month of January as an example, 614 – 600 = 14 / 4 = 3.5 Do this for each month then add all four errors.

Feb (0) Mar (12.5) Apr (25) Section Ref: Measuring Forecast Accuracy Level: moderate

48. What is the mean absolute deviation and mean squared error of the following forecast Day Sale Sales Forecast 24 37 31 41 27 46 29 47 25 50 a) 13, 157 b) 14, 321 c) 16, 312 d) 17, 316 e) 18, 321

Ans: d

actual − forecast Solution: MAD = 

(actual - forecast ) and MSE = 

2

n Using the first Days of Sales and Sale Forecast as an example, 24 – 37 = -13; 13; 13x13 = 169 Do this for each set of data then add all five errors.

Day Sale Error Error error2 Sales Fore 24 37 -13 13 169 31 41 -10 10 100 27 46 -19 19 361 29 47 -18 18 324 25 50 -25 25 625 85 1579 136 221 -85 17 MAD

n

315.8 MSE

Section Ref: Measuring Forecast Accuracy Level: moderate

49. When is exponential smoothing equivalent to the “naïve” approach to forecasting? a) When the smoothing constant is chosen randomly b) α = 0 c) α = 1 d) α = .5 e) When next month’s forecast equals this month’s forecast Ans: c Section Ref: Time Series Models Level: hard

50. Consider the demand data listed below. What is the 4-month moving average forecast for June?

Month Actual Demand Jan. 10,000 Feb. 12,000 Mar. 24,000 Apr. 8,000 May 14,000 a) 14,000 b) Not enough information is given to answer the question. c) 14,500 d) 13,500 e) 15,333 Ans: c

Solution: Ft +1 =  A t / n 12,000 + 24,000 + 8,000 + 14,000 = 58,000 / 4 = 14,500 Section Ref: Time Series Models Level: moderate

51. Suppose that you want to set up a 3-month weighted moving average forecasting system. You want the weights to be percentages (that add to 100%). Furthermore, you want weights for the most recent two months to be equal but you want each of those weights to be twice as large as the weight for the oldest month. What should the weight be for the oldest month? a) 33% b) 25% c) 80% d) 50% e) 20% Ans: e Solution: 40 + 40 +_20 = 100 Section Ref: Time Series Models Level: hard

52. Given the following data, use exponential smoothing (α = .2) to develop a demand forecast for period 3. Assume the forecast for the initial period is 5. What is the forecast?

Period Demand 1 7 2 9 a) 9.00 b) 3.72 c) 9.48 d) 5.00 e) 6.12 Ans: e Solution: Ft +1 = αAt + (1 − α )Ft Section Ref: Time Series Models Level: moderate

53. Which of the following forecasting methods would be most accurate if demand were rapidly decreasing? a) 3-month moving average b) 6-month moving average c) 12-month moving average d) Simple mean

e) Exponential smoothing with  = 0.001 Ans: a Section Ref: Types of Forecasting Methods Level: hard

54. Suppose that you are using the exponential smoothing forecasting method, and this period’s forecast (Ft) was 100% accurate (i.e., no error). If α = .5, which of the following is definitely true? a) Next period’s forecast will also be 100% accurate. b) Next period’s forecast equals this period’s actual. c) This period’s forecast must be thrown out, and next period’s forecast equals Ft-1 + α (At-1 α − Ft-1). d) Next period’s forecast equals 50% of this period’s forecast. e) Next period’s forecast equals 50% more than this period’s forecast.

Ans: b Section Ref: Time Series Models Level: hard

55. A firm has had the following order history over the last 4 months: November 140 December 80 January 100 February 150 What is the weighted moving average forecast for March, assuming a weight of 60% for the most recent month, 30% for the month preceding the most recent month, and 10% for the month preceding that one? a) 117.5 b) 228.1 c) 118.0 d) 128.0 e) 132.4 Ans: d Solution: Ft +1 =  Ct A t Nov Dec Jan Feb

140 80 100 150 470

0.1 0.3 0.6 1

Section Ref: Time Series Models Level: moderate

8 30 90 128

56. What is the mean absolute deviation of the following forecasts?

Month Actual Sales Forecast January68 60 February 48 50 March 50 60 April 30 30 a) −1 b) 5 c) 20 d) 1 e) 42 Ans: b

Solution: MAD = 

actual − forecast

n Month Actual Forecast error error January 8 8 68 60 February -2 2 48 50 March -10 50 60 10 April 0 30 30 0 20 5 MAD

Section Ref: Selecting the Right Forecasting Model Level: moderate

57. What is the mean squared error of the following forecasts?

Month Actual Sales Forecast Jan. 614 600 Feb. 480 480 Mar. 500 450 Apr. 500 600 a) 3174 b) 164 c) 41 d) 136 e) 12,696 Ans: a

 (actual - forecast ) Solution: MSE =

2

Month Jan. Feb. Mar. Apr.

Actual 614

480 500 500

n Forecast error error error2 600 14 14 196 480 0 0 0 450 50 50 2500 600 -100 100 10000

12696 3174 MSE

Section Ref: Selecting the Right Forecasting Model Level: moderate

58. What is the mean squared error of the following forecasts?

Month Actual Sales Forecast Jan. 68 60 Feb. 48 50 Mar. 50 60 Apr. 30 30 a) 168 b) 5 c) 20 d) 1 e) 42 Ans: e

 (actual - forecast ) Solution: MSE =

2

Month Jan. Feb. Mar. Apr.

Actual

68 48 50 30

n Forecast error 60 50 60 30

8 -2 -10 0

error

8 2 10 0

error2 64 4 100 0 168 42

Section Ref: Selecting the Right Forecasting Model Level: moderate

59. Suppose that you are using exponential smoothing with  = 0.5 and your initial forecast 5 months ago was for 100 units. If the actual demand last month was 0 units, which of the following is definitely true? a) The forecast for this month should be 0. b) The model blew up. You can’t use exponential smoothing anymore. c) The forecast for last month was 0. d) The forecast for this month should be 50. e) We need more information to determine this month’s forecast.

Ans: e Section Ref: Time Series Models Level: hard

60. Suppose that you are using the four-period simple moving average method to forecast sales, and sales have been increasing by 20% every period. How will your forecasts perform? a) Forecasts will be lower than actual. b) Forecasts will be higher than actual. c) Forecasts will equal actual. d) Forecasts will be decreasing. e) Forecasts will be increasing by 5.0% every period.

Ans: a Section Ref: Time Series Models Level: hard

61. Suppose that you are using the four-period simple moving average method to forecast sales, and sales have been increasing by 40% every period. How will your forecasts perform? a) Forecasts will be increasing by 40.0% every period. b) Forecasts will be higher than actual. c) Forecasts will equal actual. d) Forecasts will be decreasing. e) Forecasts will be increasing by 10.0% every period.

Ans: a Section Ref: Time Series Models Level: hard

62. Suppose that you are using the naïve forecasting method with trend to forecast sales.

If sales have been increasing by 40% per month, and this month’s sales amounted to $1200, what would your forecast be for next month? a) $1200 b) $ 480 c) $1680 d) $ 720 e) $1600 Ans: c Solution: Ft +1 = At 1200 – (.4 * 1200) = 1200 – 480 = 720 1200 + 480 = 1680 Section Ref: Time Series Models Level: moderate

63. Suppose that you are using the naïve forecasting method with trend to forecast sales.

Sales have been increasing by 10% per week. Two weeks ago, sales amounted to $100.

What should your forecast be for this week? a) $100 b) $ 10 c) $110 d) $121 e) $120 Ans: d Solution: Ft +1 = At Week 1 = 100 + (100 x .10 = 10) Week 2 = 110 + (110 x .10 = 11) Week 3 = 121 Section Ref: Time Series Models Level: moderate

64. Suppose that you are using the simple mean to make a forecast. This period’s forecast was equal to 200 units, and it was based on 5 periods of demand. This period’s actual demand was 300 units. What is your forecast for next period? a) 217 b) 250 c) 260 d) 300 e) 200 Ans: a Solution: Ft +1 =  A t / n Section Ref: Time Series Models Level: hard

65. Suppose that you are using the simple mean to make a forecast. This period’s forecast was equal to 1000 units, and it was based on 99 periods of demand. This period’s actual demand was 0 units. What is your forecast for next period? a) 1000 b) 990 c) 0 d) 1010 e) 999 Ans: b Solution: Ft +1 =  A t / n Section Ref: Time Series Models Level: hard

66. A firm has the following order history over the last 6 months.

January 120 February 95 March 100 April 75 May 100 June 50 What would be the 4-month simple moving average forecast for July? a) 97.5 b) 325 c) 90 d) 81.25 e) 50 Ans: d Solution: Ft +1 =  A t / n 100 + 75+ 100 + 50 = 325 / 4 = 81.25 Section Ref: Time Series Models Level: moderate

67. Which of the following is not a step in Forecasting Seasonality? a) Calculate a seasonal index for each season of each year b) Divide this year’s average seasonal demand by each average seasonal index c) Average the indexes by season d) Forecast demand for the next year and divide by the number of seasons e) Calculate the average demand per season Ans: b Section Ref: Time Series Model Level: Moderate

68. Given the following data, use exponential smoothing (α = .1) to develop a demand forecast for period 3. Assume the forecast for the initial period is 500. What is the forecast?

Period Demand 1 600 2 200 a) 569 b) 470 c) 541 d) 551 e) 479 Ans: e Solution: Ft +1 = αAt + (1 − α )Ft

Section Ref: Time Series Models Level: moderate

69. Which of the following is the simplest forecasting method? a) Naïve b) Moving average c) Weighted moving average d) Trend adjusted exponential smoothing e) Linear regression Ans: a Section Ref: Types of Forecasting Methods Level: easy

70. Which of the following would not be a consideration for selecting a forecasting software package? a) How easy is the package to learn? b) Is it possible to implement new methods? c) Do you require repetitive forecasting? d) Does the supplier support a local conference? e) Is there any local support?

Ans: d Section Ref: Forecasting Software Level: moderate

71. Combined forecasting involves a rule that a) you must work with different vendors b) you need different forecasters c) you must always use a quantitative and qualitative method d) the results are not comparable to a single forecast e) the forecasting methods should be different Ans: e Section Ref: Combining Forecasts Level: easy

72. Which of the following is not typically done jointly by CPFR trading partners? a) set forecasts b) plan production c) replenish inventories d) raise capital e) evaluate their success in the marketplace

Ans: d Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Level: easy

73. ____________________ is a collaborative process between two trading partners that establishes formal guidelines for joint forecasting and planning. a) Collaborative Planning Forecasting and Replenishment (CPFR) b) Supply Chain Planning Forecasting and Replenishment (SCPFR) c) Supply Chain Optimization (SCO) d) Collaborative Creation of Guidelines (CCG) e) Joint Planning and Forecasting (JPP) Ans: a Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Level: moderate

74. “Inside information” is most likely garnered through which of the following forecasting methods? a) exponential smoothing b) seasonal indexes c) naïve d) Delphi e) multiple regression Ans: d Section Ref: Types of Forecasting Methods Level: hard

75. Which of the following is not one of the nine steps utilized in the most complete form of CPFR? a) identify exceptions for order forecasts b) create a sales forecast c) create order forecast d) create separate business plans e) generate order Ans: d Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Level: hard

True/False

76. Forecasts are more accurate for individual items than for groups or families of items.

Ans: False Section Ref: Principles of Forecasting Level: moderate

77. Forecasting demand and forecasting sales are the same thing.

Ans: False Section Ref: Steps in the Forecasting Process Level: moderate

78. A qualitative forecast is made subjectively by the forecaster.

Ans: True Section Ref: Types of Forecasting Methods Level: easy

79. Planalytics is a company that helps businesses use weather data to make their business plans.

Ans: True Section Ref: Types of Forecasting Methods Level: hard

80. Executive opinion is a forecasting method designed to preserve anonymity among the forecasters.

Ans: False Section Ref: Types of Forecasting Methods Level: easy

81. With the Delphi method, a group of managers meet and collectively generate a forecast.

Ans: False Section Ref: Types of Forecasting Methods Level: easy

82. The Delphi method of forecasting is preferred to the executive opinion method if an important consideration is eliminating any one person’s dominant opinion.

Ans: True Section Ref: Types of Forecasting Methods Level: moderate

83. Time series models are generally more difficult to use than causal models.

Ans: False Section Ref: Types of Forecasting Methods Level: moderate

84. A cycle is any data pattern that regularly repeats itself and is constant in length.

Ans: False Section Ref: Time Series Models Level: moderate

85. A cycle is typically the most difficult data pattern to predict.

Ans: True Section Ref: Time Series Models Level: moderate

86. The naïve forecasting method assumes that next period’s actual value will be equal to this period’s forecast.

Ans: False Section Ref: Time Series Models Level: hard

87. The naïve forecasting method assumes that next period’s actual value will be equal to this period’s actual value.

Ans: True Section Ref: Time Series Models Level: hard

88. The simple moving average forecasting method uses fewer periods of data than the simple mean forecasting method does.

Ans: True Section Ref: Time Series Models Level: moderate

89. Suppose that you are using the three-period simple moving average method to forecast sales, and sales have been increasing by 10% every period. Then your forecasts will be increasing by 10% every period.

Ans: True Section Ref: Time Series Models Level: hard

90. Suppose that you are using the three-period simple moving average method to forecast sales, and sales have been increasing by 10% every period. Then your forecasts will be lower than the actual sales.

Ans: True Section Ref: Time Series Models Level: moderate

91. Moving average forecasts with a larger number of observations are more responsive than those with a smaller number of observations.

Ans: False Section Ref: Time Series Models Level: moderate

92. Moving average forecasts with a smaller number of observations are more subject to random changes in the data than those with a larger number of observations.

Ans: True Section Ref: Time Series Models Level: moderate

93. The MSE is always greater than or equal to the MAD. Ans: False

Section Ref: Selecting the Right Forecasting Model Level: hard

94. Exponential smoothing forecasting methods requires a small amount of historical data.

Ans: True Section Ref: Selecting the Right Forecasting Model Level: hard

95. Studies have shown that combining forecasts can lead to forecast accuracy that is better than that of the individual forecasts.

Ans: True Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Level: moderate

96. Focus forecasting needs to test the rule set once for the highest level of accuracy.

Ans: False Section Ref: Focus Forecasting Level: moderate

97. CPFR is an iterative process.

Ans: True Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Level: moderate

98. Forecasting only impacts the business functions.

Ans: False Section Ref: Forecasting Within OM: How It All Fits Together

99. Economics relies on forecasting to predict the duration of economic turning points.

Ans: True Section Ref: Forecasting Across the Organization Level: easy

100. Statistical packages such as SPSS, SAS, and Minitab, are types of forecasting software.

Ans: True Section Ref: Selecting The Right Forecasting Model Level: moderate

101. “Do you have medium data sets?” is a key guideline for selecting software.

Ans: False Section Ref: Selecting The Right Forecasting Model Level: moderate

Essay

102. Why are forecasts more accurate for groups or families of items rather than for individual items?

Ans: individual high and low values can cancel each other out (offset each other), i.e., “risk pooling” Section Ref: Principles of Forecasting Level: moderate

103. What are the five basic steps in the forecasting process?

Ans: 1. Decide what to forecast, 2. Evaluate and analyze appropriate data, 3. Select and test the forecasting model, 4. Generate the forecast, 5. Monitor forecast accuracy Section Ref: Principles of Forecasting Level: moderate

104. What is the objective of the Delphi method?

Ans: It’s a forecasting method that has an objective to reach a consensus among a group of experts while maintaining their anonymity.

Section Ref: Types of Forecasting Methods Level: moderate

105. What are the two categories of quantitative models?

Ans: time series and causal Section Ref: Types of Forecasting Methods Level: easy

106. Describe a data pattern with seasonality.

Ans: It regularly repeats itself and is constant in length.

Section Ref: Time Series Models Level: moderate

107. Describe the naïve forecasting method.

Ans: It assumes that next period’s forecast is equal to this period’s actual value.

Section Ref: Time Series Models Level: moderate

108. Explain the impact on forecasting that the number of observations used in a simple moving average has.

Ans: The smaller the number of observations in the moving average, the more responsive the forecast is to changes in demand. However, the forecast is also more subject to the random changes in the data. If the data contain a lot of randomness, high responsiveness could lead to greater errors. On the other hand, the larger the number of observations in the moving average the less responsive the forecast is to changes in the demand, but also to the randomness. These forecasts are more stable. One is not better than the other.

Section Ref: Time Series Models Level: moderate

109. What is a correlation coefficient?

Ans: It is the statistic that measures the direction and strength of the linear relationship between two variables.

Section Ref: Causal Models Level: moderate

110. Discuss why the degree of accuracy is important in selecting the right forecasting model.

Ans: Depending on the situation some forecast estimates require general results or rough forecast estimates. Often, higher levels of accuracy are required, which creates the need for more advanced forecasting models.

Section Ref: Selecting the Right Forecasting Model Level: moderate

111 Describe the idea behind focus forecasting.

Ans: Focus forecasting is based on the concept that simple rules have worked well in developing good forecasts. The idea behind focus forecasting is to test these rules on past data and evaluate how they perform. New rules can be added at any time, and old ones that have not performed well can be eliminated.

Section Ref: Focus Forecasting Level: moderate

112. What is one of the simplest ways to combine forecasts?

Ans: Use a simple average of the individual forecasts.

Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Level: moderate

113. What are the 9 steps utilized in the most complete form of CPFR? Ans: (1) establish collaborative relationships, (2) create a joint business plan, (3) create a sales forecast, (4) identify exceptions for sales forecasts, (5) resolve/collaborate on exception items, (6) create order forecast, (7) identify exceptions for order forecast, (8) resolve/collaborate on exception items, and (9) generate order Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Level: hard

114. Describe the ten guidelines for selecting forecasting software.

Ans: 1. Does the package have the features you want? 2. What platform is the package available for? 3. How easy is the package to learn and use? 4. Is it possible to implement new methods? 5.

Do you require interactive or repetitive forecasting? 6. Do you have any large data sets? 7. Is there local support and training available? 8. Does the package give the right answers? 9. What is the cost of the package? 10. Is it compatible with our existing software?

Section Ref: Selecting The Right Forecasting Model Level: hard

Problems

115. Hoops, Inc. produces videos on the art of shooting in basketball. The firm has experienced the following demand for the first 6 months of the year.

Month Demand Jan. 4,000 Feb. 6,000 Mar. 10,000 Apr. 2,000 May 20,000 June 30,000 What is the forecast for July using a 5-month simple moving average forecast?

Ans: 13,600 Solution: Add Feb thru June = 68000 / 5 = 13,600 Section Ref: Time Series Models Level: moderate

116. Hoops, Inc., produces videos on the art of shooting in basketball. The firm has experienced the following demand for the first 6 months of the year.

Month Demand Jan. 4,000 Feb. 6,000 Mar. 10,000 Apr. 2,000 May 20,000 June 30,000 What is the forecast for July using a 4-month weighted moving average forecast, where (1) the weight for the most recent month is three times more than the weight for the period that’s four months in the past, (2) the weight for two periods ago is the same as the weight for the most recent period, (3) the weight for three periods ago is the same as the weight for the demand four periods ago, and (4) the weights sum to 100%?

Ans: 20,060; Ft +1 =  Ct A t Month Jan. Feb. Mar. Apr. May June

Demand 4,000 6,000 10,000 2,000 20,000 30,000

10,000 2,000 20,000 30,000

0.13 0.13 0.37 0.37

1,300 260 7,400 11,100

62,000

1

20,060

Section Ref: Time Series Models Level: hard

117. Hoops, Inc., produces videos on the art of shooting in basketball. The firm has experienced the following demand for the most recent four months.

Month Demand Mar. 10,000 Apr. 2,000 May 20,000 June 30,000 Prepare an exponential smoothing forecast for July, using an  value of .40. Initiate the process by assuming that the forecast for March is 8,000 units.

Ans: 18.98 Solution: Ft +1 = αAt + (1 − α )Ft Section Ref: Time Series Models Level: hard

118. The Freewheel motorcycle dealer in the Chicago area wants to be able to forecast accurately the demand for the Freewheel Super Z12 motorcycle. From sales records, the dealer has accumulated the following data for the second half of 2000.

Month Sales July 10 August 15 September 23 October 44 November 54 December 36 a) Compute a 3-month moving average forecast of demand for January 2001. b) Compute a 5-month moving average forecast of demand for January 2001.

Ans: a. 44.67; (FT+1 = ∑AT / n = (36 + 54 + 44)/3 = 44.67) Ans: b. 34.4; (FT+1 = ∑ AT / n = (36 + 54 + 44 + 23 + 15)/5 = 34.4) Section Ref: Time Series Models Level: moderate

119. John’s Office Supply Company has the following order history over the last 7 months.

April 65 May 180 June 30 July 90 August 120 September 190 October 70 Compute an exponential smoothing forecast for November, with a smoothing constant of α = .25. To start the procedure, assume that the forecast for April was 100. Round each forecast to two decimal places.

Ans: 108.79; Ft +1 = αAt + (1 − α )Ft

Section Ref: Time Series Models Level: hard

120. John’s Office Supply Company has the following order history over the last 8 months.

April 50 May 75 June 160 July 120 August 80 September 120 October 180 November 90 Compute a 3-month weighted moving average forecast for December, with a weight of 65% for the most recent month, 25% for the month preceding the most recent month, and 10% for the month preceding that one.

Ans: 115.5; (FT+1 = ∑ CT AT / n = (.65 * 90 + .25 * 180 + .1 * 120)/3 = 115.5) Section Ref: Time Series Models Level: moderate

121. Steve’s Steak House uses exponential smoothing with trend (alpha = .10 and beta = .40) to forecast its weekly demand for chopped steak in the metro area. Average sales have been 1000 steaks per week, and the recent trend has been an increase of 20 steaks per week. Actual demand last week was for 1040 steaks. What should the forecast be for this week?

Ans: 1042.8; Ft +1 = αAt + (1 − α )Ft and Ft +1 = At Section Ref: Time Series Models Level: hard

122. Joe’s Equipment Distributors sells “Low and Loud” brand lawnmowers. Total demand in 2002 is expected to be 2000 units. Given the historical sales figures listed below, derive a forecast for each quarter in 2002.

1999 2000 2001 Fall 50 80 120 Winter 150 450 510 Spring 500 600 700 Summer 400 490 610 Ans: Fall = 104.5, Winter = 451, Spring = 790.5, Summer = 654 Solution: 1. Calculate the average demand per season (average quarterly demand) 2. Calculate a seasonal index for each season of each year: Divide the actual demand of each season by the average demand per season for that year

3. Average the indexes by season; take the average of all Spring indexes, then of all Summer indexes, ...

4. Forecast demand for the next year & divide by the number of seasons. Use regular forecasting method & divide by four for average quarterly demand 5. Multiply next year’s average seasonal demand by each average seasonal index; Result is a forecast of demand for each season of next year Section Ref: Time Series Models Level: hard

123. Central Heating needs to forecast the number of boilers they will sell in April. Using the following data and an alpha of .3 how many boilers should they have on hand?

Boilers sold forecast Nov 12 13 Dec 13.5 12 Jan 14 14 Feb 16 15 Mar 17 18 Ans: 18 Solution: Ft+1=αAt+(1-α)Ft = .3*17+(1-.3)*18) = 17.7, must round up to 18 as you cannot buy a .7 boiler Section Ref: Time Series Models Level: moderate

124. Cover Me, Inc. sells umbrellas in three cities. Management assumes that annual rainfall is the primary determinant of umbrella sales, and it wants to generate a linear regression equation to estimate potential sales in other cities. Given the data below, what is the regression equation?

City A City B City C

Rainfall X 36 in.

30 in.

12 in.

Sales Y 2300 2000 800

Ans: Y = 50.04 + 63.46X Section Ref: Causal Models Level: hard

125.

Hoops, Inc. has the following actual demand and forecasted demand data.

Month Actual Demand Forecast Jan. 1000 800 Feb. 200 880 Mar. 2000 600

Apr. 3000 1100 Calculate the mean squared error of those forecasts.

Ans: 1,518,100 Solution: Month Actual Forecast error error error2 Jan. 1000 200 200 800 40000 Feb. 200 880 -680 680 462400 Mar. 2000 600 1400 1400 1960000 Apr. 3000 1100 1900 1900 3610000 6072400 1518100 MSE

Section Ref: Measuring Forecast Accuracy Level: moderate

126. Annie’s Smart Dog annual fair concession stand operates for five days. Last year they sold the following number of supreme smart dogs. Calculate (a) MAD, (MSE) and using a tracking signal of+/- 8 determine if the forecast should be reviewed.

Day Sales 24 31 27 29 25

Sale Forecast 27 31 36 37 35

Ans: (a) 6, (b) 51 and (c) forecast should be reviewed as signal exceeds the +/- 8 range on day 5

Day Sales

Sale Forecast Error

24 31 27 29 25

27 31 36 37 35

MAD

-3 0 -9 -8 -10

MSE

3 0 9 8 10 6

9 0 81 64 100 51

Cumulative Deviation Tracking Deviation Signal 8 1.33 -3 5 0.83 -3 2 0.33 -12 -10 -1.67 -20 -30 -5.00 -30 -60 -10.00

Section Ref: Measuring Forecasts Accuracy Level: moderate

Short Answer

127. An observation's residual error is the ________________________ distance between itself and the linear regression line.

Ans: vertical Section Ref: Time Series Models Level: moderate

128. Unlike MAD and MSE, the tracking signal's numerator allows positive and negative forecast errors to _____________.

Ans: cancel each other.

Section Ref: Measuring Forecast Accuracy Level: hard

129. Developing a single forecast from several methods is called _________________.

Ans: combining forecasting Section Ref: Combining Forecasts

Level: easy

130. Companies that use collaborative planning, forecasting, and replenishment repeat its steps _____________________ and _____________________ annually.

Ans: weekly or monthly (both required), evaluate their agreement Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Level: hard

131. The basic principles of forecasting are: ____________________, ______________________, and ______________________.

Ans: forecasts are rarely perfect; more accurate for groups than individual items; for shorter than longer time horizons Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR) Level: moderate

132. What is the exponential smoothing formula?

Ans: (formula) Ft +1 = αAt + (1 − α )Ft Section Ref: Time Series Models Level: moderate

133. The most frequently used forecasting model is the ____________.

Ans: exponential smoothing Section Ref: Time Series Models Level: moderate

134. The first round of an exponential smoothing process is often begun by setting the second period forecast equal to ___________________.

Ans: the first period's actual observation, an example of naive forecasting.

Section Ref: Time Series Models Level: moderate

2

135. The difference between MSE and r is that _______________.

2

Ans: MSE uses the sample size, n, in the denominator while r corrects for the bias inherent in small samples by using n-1.

Section Ref: Measuring Forecast Accuracy Level: hard

136. The number of future periods forecast is called the ____________________.

Ans: forecast or time horizon Section Ref: Principles of Forecasting Level: easy

137. Nearly all other business decisions depend on _______________.

Ans: forecasting Section Ref: Principles of Forecasting Level: easy

138. When developing the linear trend line you must calculate _________ before __________.

Ans. coefficient b; coefficient a Section Ref: Time Series Models Level: hard

139. Multiple regression is a(n) ___________ of linear regression.

Ans: extension Section Ref: Measuring Forecast Accuracy Level: moderate

File: ch09, Chapter 9: Capacity Planning and Facility Location

Multiple Choice

1. Capacity planning can occur at all but which level: a) organization b) division c) assembly line d) machine level e) board of directors level Ans: e Section Ref: Capacity Planning Level: moderate

2. Which of the following is a reason capacity and location decisions are usually made simultaneously? a) in order to get them in the operating budget on a consistent basis b) it makes it easier to understand capacity c) often there is not enough time available to separate them d) they require the same types of information e) the size of a new facility may affect its location Ans: e Section Ref: Capacity Planning Level: moderate

3. The maximum output that can be achieved by a facility is ____________. a) lead time b) storage space c) capacity d) productivity e) cycle counting Ans: c Section Ref: Capacity Planning Level: easy

4. Capacity decisions at the strategic level include ____________________. a) investment in new facilities and equipment b) size of workforce

c) inventory buffers d) day-to-day use of machines e) composition of the workforce Ans: a Section Ref: Capacity Planning Level: moderate

5. If capacity is excessive, a company may have to ______________________. a) decide how to use a partially empty facility b) outsource c) back-order d) use group technology e) raise prices Ans: a Section Ref: Capacity Planning Level: moderate

6. Capacity planning is complicated by the fact that ___________________. a) capital markets are complex b) existing facilities may become obsolete c) capacity is difficult to define d) capacity is usually purchased in chunks, rather than smooth increments e) depreciation must be calculated Ans: d Section Ref: Capacity Planning Level: moderate

7. Investments in building or purchasing long-term production facilities are inherently risky due to __________. a) uncertainty in forecasting future demands b) unexpected changes in interest rates c) durability of materials d) corporate mergers e) rapid technology changes Ans: a Section Ref: Capacity Planning Level: hard

8. Capacity planning is difficult because

a) Board of directors set the requirements b) the mathematical requirements are difficult c) the planning stages always require global considerations d) there is no one way to measure it e) it is easy to confuse the service organization and manufacturing organization measurements Ans: d Section Ref: Capacity Planning Level: moderate

9. An example of an input measure of capacity is _____________________. a) floor space in square feet b) number of patients per month c) number of pizzas per day d) revenues per day e) number of cars per shift Ans: a Section Ref: Capacity Planning Level: easy

10. Which of the following is not a measure of output capacity? a) cars per shift b) labor hours consumed c) revenues per day d) TVs sold per day e) patients served per month Ans: b Section Ref: Capacity Planning Level: moderate

11. Which of the following is not a factor in capacity planning? a) approach used to measure capacity b) economies of scale c) prepare to deal with capacity in "chunks" d) proximity to suppliers e) identify the best operating level Ans: d Section Ref: Capacity Planning Level: moderate

12. Input measures of capacity work better when a company produces _____________________. a) discrete items b) a single product c) liquids d) many different products e) off-the-shelf items Ans: d Section Ref: Capacity Planning Level: moderate

13. When discussing the capacity of a facility, we need what two types of information? a) the amount of available capacity and the productivity of workers b) the speed of the machines and the availability of labor c) the amount of available capacity and the effectiveness of capacity use d) the investment in equipment and the availability of labor e) the investment in equipment and the number of workers Ans: c Section Ref: Capacity Planning Level: moderate

14. Effective capacity is a) the maximum input rate that can be sustained under normal conditions b) the maximum output rate that can be sustained under normal conditions c) the maximum input rate that can be sustained under ideal conditions d) the maximum output rate that can be sustained under ideal conditions e) the maximum percent measure of how well available capacity is being used Ans: b Section Ref: Capacity Planning Level: moderate

15. Which of the following does not contribute to the sustainability of design capacity? a) scheduled machine maintenance b) overtime c) overstaffing d) using equipment to the maximum e) subcontracting Ans: a Section Ref: Capacity Planning Level: moderate

16. The maximum output rate that can be achieved by a facility under ideal conditions is _________________. a) utilization b) design capacity c) effective capacity d) ultimate capacity e) temporary capacity Ans: b Section Ref: Capacity Planning Level: moderate

17. The maximum output rate that can be sustained under normal conditions is _______________________. a) utilization b) design capacity c) effective capacity d) ultimate capacity e) temporary capacity Ans: c Section Ref: Capacity Planning Level: moderate

18. The ratio of actual output rate to capacity is ____________________________. a) effectiveness b) cycle time c) throughput d) utilization e) productivity Ans: d Section Ref: Capacity Planning Level: easy

19. _____________________ capacity can serve to intimidate and preempt competitors from entering the market. a) Design b) Flexible c) Extra d) Effective e) Focused Ans: c

Section Ref: Capacity Planning Level: hard

20. The best operating level is the volume of output that results in the ____________________. a) lowest average unit cost b) most revenue c) maximum use of machinery d) best quality e) optimum product mix Ans: a Section Ref: Capacity Planning Level: moderate

21. Operating a facility close to its best operating level is clearly important because a) it reduces fixed cost b) it reduces overtime requirements c) of impact on costs d) of impact on employees bonuses e) it increases production Ans: c Section Ref: Capacity Planning Level: moderate

22. The cost per unit is $36.74 at the best operating level. When the output is higher, the unit cost will be what? a) lower b) the same c) higher d) could be higher or lower e) could be higher, lower or the same Ans: c Section Ref: Capacity Planning Level: moderate

23. Economies of scale occur when a company is operating _______________________. a) at its best operating level and increases its output b) at its best operating level and decreases its output c) below its best operating level and decreases its output d) above its best operating level and increases its output e) below its best operating level and increases its output

Ans: e Section Ref: Capacity Planning Level: moderate

24. The concept of diseconomies of scale ________________________. a) states that the average cost of a unit produced is reduced when the amount of output increases b) is not realistic c) is not valid for regulated industries d) states that beyond a certain point the cost of each additional unit made increases e) is an approach for measuring unusable output Ans: d Section Ref: Capacity Planning Level: moderate

25. Management has decided to add capacity incrementally in smaller chunks as needed, rather than purchasing one large facility. This decision ____________________. a) is very risky b) will result in low initial costs c) will ultimately result in lower costs per unit if demand increases rapidly d) positions the company to be well prepared for high demand in the future e) can lead to a large amount of excess capacity Ans: b Section Ref: Capacity Planning Level: hard

26. Last month TMJG Co. started producing a new product called Thingamajigs from its new plant. Sales were quite good for the first couple of weeks. Unfortunately, a technological innovation was then announced by a competitor. This innovation will almost completely eliminate the demand for Thingamajigs. As a result, TMJG has decided to shut down and dismantle the plant next week. The average cost per unit will be highest if the plant was _________________________. a) a small facility b) in the right location c) a large facility d) just-in-time e) a medium facility Ans: c Section Ref: Capacity Planning Level: hard

27. A focused factory is one that ____________________. a) produces many products with options b) is small and highly specialized c) has a large number of management specialists d) is vertically integrated e) is located at the center of demand Ans: b Section Ref: Capacity Planning Level: moderate

28. Compared to large facilities, focused factories _____________________. a) bring economies of scale b) have much bureaucracy c) are ancient history d) lead to higher average inventories e) are more flexible Ans: e Section Ref: Capacity Planning Level: moderate

29. _____________________ facilities may not be the best approach in today’s business environment that has short product and technological life cycles and in which flexibility is more important than ever before. a) Large b) Small c) Leased d) Self-operating e) Agile Ans: a Section Ref: Capacity Planning Level: easy

30. Large facilities can benefit from the concept of _____________________ by creating a plant within a plant (PWP). a) just-in-time b) focused factories c) economies of scale d) supply chain e) hierarchical management Ans: b

Section Ref: Capacity Planning Level: hard

31. One benefit PWP provides over independent plants is a) increased production output b) increased design capacity capabilities c) reduction of unnecessary layers of bureaucracy d) reduction in transportation costs e) improved supplier relationships Ans: c Section Ref: Capacity Planning Level: hard

32. In the 1980s retail sales were dominated by large department stores. However, in the 1990s gains in sales were made by specialty stores because __________________________________. a) the large department stores started moving out of shopping malls, and their new locations were not nearly as effective b) customers got tired of trying to find sales clerks who would help them in the large department stores c) the specialty stores always had donuts and coffee for their customers d) consumer preferences change very rapidly, and the specialty stores can focus on a specific set of customers and respond to their unique needs e) parking is more readily available at the specialty stores Ans: d Section Ref: Capacity Planning Level: hard

33. According to the textbook, one of the fastest-growing trends today is a) Leveraging technology b) PWP c) focused plants d) developing a large network of subcontractors e) developing a large focused distribution chain Ans: d Section Ref: Capacity Planning Level: hard

34. _____________________ can perform a number of tasks to help a company focus on its core capabilities. a) A plant within a plant

b) Agile manufacturing c) Total Quality Management d) Just-In-Time e) Subcontractor networks Ans: e Section Ref: Capacity Planning Level: hard

35. The first step in making a capacity planning decision is ______________________. a) evaluate capacity alternatives b) implementation c) identify capacity requirements d) develop capacity alternatives e) weight capacity objectives Ans: c Section Ref: Making Capacity Planning Decisions Level: moderate

36. Long-term capacity requirements are identified on the basis of _____________________. a) the current trend of the economy b) the expected lifetime of the facility c) demographic factors d) forecasts of future demand e) future political events Ans: d Section Ref: Making Capacity Planning Decisions Level: moderate

37. Capacity cushions can be helpful if ______________________. a) demand is greater than expected b) sales need to be buffered from production c) total quality management fails d) productivity is too high e) there is excess capacity Ans: a Section Ref: Making Capacity Planning Decisions Level: hard

38. Evaluate capacity alternatives can include use of ______________________________.

a) the Delphi method b) estimated market shares c) demographic factors d) econometric forecasting e) decision trees Ans: e Section Ref: Decision Trees Level: hard

39. Which of the following information items is not contained in decision trees? a) points in time when decisions are made b) ) decision alternatives c) chance event probabilities d) probability of choosing decision alternatives e) outcomes, such as estimated profits Ans: d Section Ref: Decision Trees Level: hard

40. Decision trees are useful when the alternatives are __________ and involve __________ a) local, senior management b) in parallel, certainty c) in sequence, uncertainty d) in sequence, certainty e) in parallel, certainty Ans: c Section Ref: Decision Trees Level: hard

41. Solving a decision tree that involves maximizing profit includes ______________________. a) using probabilities to calculate expected values for decision points b) calculating from left to right c) selecting the decision alternative with the highest expected value d) calculating expected values for all chance events before considering decision nodes e) inverting decision nodes Ans: c Section Ref: Decision Trees Level: hard

42. Expected values are a) forecasted sales prices b) forecasted revenues c) average value of chance events d) weighted value of the chance events e) exponential value of the chance events Ans: d Section Ref: Decision Trees Level: hard

43. Which of the following has the least to do with location analysis? a) sources of transportation b) reduction in trade barriers c) information technology reducing need for proximity d) retail stores locating near each other e) automation of factories Ans: e Section Ref: Location Analysis Level: moderate

44. Service organizations such as restaurants, movie theaters, and banks focus on locating near ____________. a) suppliers b) roads c) intersections d) their customers e) potential workers Ans: d Section Ref: Location Analysis Level: easy

45. Location decisions are particularly important because __________________________. a) typically they are made rather frequently b) they entail a high cost, short-term commitment c) there are so many potential locations d) they have a major impact on product design e) they can have a large impact on operating costs and revenues Ans: e Section Ref: Location Analysis Level: moderate

46. Which of the following is least likely to be a consideration in facility location? a) the design of the production process b) mistakes in choosing a location can be difficult to correct c) often there are a number of acceptable locations d) expanding capacity at a current location may be an option e) location decisions can have a major impact on operating costs and revenues Ans: a Section Ref: Location Analysis Level: moderate

47. A facility location factor that is important for both service and manufacturing organizations is locating close to ________________________. a) labor supply b) sources of transportation c) suppliers d) warehouses e) natural resources Ans: a Section Ref: Location Analysis Level: hard

48. Locating close to customers is least important for ______________________. a) bakeries b) movie theaters c) flower shops d) diamond mines e) gas stations Ans: d Section Ref: Location Analysis Level: easy

49. It takes many pounds of milk to make one pound of cheese. Therefore, there are many cheese factories in dairy states because ________________________. a) of reputation b) “cheeseheads” eat a lot of cheese c) of transportation costs d) making cheese is a batch process e) customers prefer domestic cheese Ans: c

Section Ref: Location Analysis Level: hard

50. Local wage rates, presence of local unions, and attitudes of local workers would be major factors for location decisions for businesses that ________________________. a) are labor intensive b) have perishable products c) have high transportation costs d) have need for specific raw materials e) provide in-home services Ans: a Section Ref: Location Analysis Level: easy

51. In facility location zoning restrictions, soil conditions, and access roads for trucks are ________________. a) community considerations b) site considerations c) quality of life issues d) hardly ever important e) cultural considerations Ans: b Section Ref: Location Analysis Level: moderate

52. Which of the following is not a quality-of-life factor? a) climate b) a desirable lifestyle c) good schools d) a low crime rate e) room for customer parking Ans: e Section Ref: Location Analysis Level: easy

53. With respect to globalization, which of the following would not be considered an important location consideration? a) vertical integration b) trade barriers

c) culture d) language barriers e) foreign markets Ans: a Section Ref: Location Analysis Level: moderate

54. Disadvantages of globalization include ________________________________. a) use of cheap labor in certain countries b) increased stigma due to locating factories overseas c) reduction of trade barriers d) increased sales in foreign markets e) political risks for countries with unstable governments Ans: e Section Ref: Location Analysis Level: moderate

55. Issues that need to be considered in location globally include all of the following except ______________. a) different cultures b) FEC accounting requirements c) language barriers d) different laws e) different business practices Ans: b Section Ref: Location Analysis Level: moderate

56. The least likely reason for a U.S. firm to choose to locate a factory in a foreign country is _____________. a) climate b) natural resources c) markets d) cheaper suppliers e) lower labor costs Ans: a Section Ref: Location Analysis Level: moderate

57. The first step managers need to take when making facility location decisions is ___________________. a) begin negotiations with governments for several potential locations b) identify specific location possibilities c) gather information on location alternatives d) evaluate specific sites e) identify the location factors that are dominant for the business Ans: e Section Ref: Making Location Decisions Level: moderate

58. When evaluating location alternatives the firm should look at a) only qualitative factors b) only quantitative factors c) both qualitative and quantitative factors d) weighted average values e) decision support models only Ans: c Section Ref: Making Location Decisions Level: moderate

59. An excellent procedure that can be used with location factors that are qualitative is __________________. a) the transportation method b) break-even analysis c) the factor rating method d) the center of gravity approach e) the load-distance method Ans: c Section Ref: Making Location Decisions Level: moderate

60. The first step in the factor rating method for evaluating location alternatives is what? a) select a scale by which to evaluate each alternative relative to each factor b) evaluate each alternative relative to each factor c) select the alternative with the highest score d) identify dominant factors e) assign weights to factors reflecting the importance of each factor relative to the other factors Ans: d Section Ref: Making Location Decisions Level: moderate

61. A location analysis has been narrowed down to two locations, A and B. The main factors in the decision will be supply of raw materials, which has a weight of 50, and labor cost, which has a weight of 50. The ratings for raw materials and labor are: for A, 3 and 4, respectively; for B, 5 and 3, respectively. Using the factor rating method, the manager should ______________________. a) be indifferent between these locations b) choose location A c) choose location B d) reject both locations e) determine the capacity before deciding Ans: c Solution: A 3 + 4 x 50 = 350 B 5 + 3 x 50 = 400 Section Ref: Making Location Decisions Level: moderate

62. The load-distance model frequently utilizes _____________________ distance, which is the shortest distance between two points using only north-south and east-west movements. a) curvilinear b) Euclidean c) rectilinear d) direct e) vertical Ans: c Section Ref: Making Location Decisions Level: hard

63. Which of the following is not a step in the load-distance model? a) solve algebraically for the best location b) identify loads c) select the site with the lowest load-distance score d) identify distances e) calculate the load-distance score for each location Ans: a Section Ref: Making Location Decisions Level: moderate

64. In choosing a location, the _____________________ provides an easy way to calculate X and Y coordinates for a good starting point. a) transportation method b) break-even approach c) factor rating method d) center of gravity approach e) load-distance method Ans: d Section Ref: Making Location Decisions Level: moderate

65. The center of gravity approach a) identifies the precise location for the new distribution site b) identifies where the trucking firm should be located c) may identify a location that may not be feasible to locate to d) relies on GPS coordinates for all calculations e) relies on which transportation method is selected Ans: c Section Ref: Making Location Decisions Level: easy

66. Which of the following is not a valid assumption of the break-even model? a) only one product is involved b) everything which is produced will be sold c) the revenue per unit will be the same regardless of volume d) the fixed cost per unit will be the same regardless of volume e) the variable cost per unit will be the same regardless of volume Ans: d Section Ref: Making Location Decisions Level: hard

67. For fixed costs of $10,000, revenue per unit of $20, and variable cost per unit of $10, the break-even quantity is ______________________. a) 10 b) 500 c) 1,000 d) 2,000 e) 10,000 Ans: c Solution: Q = F/(p-c); 10,000 / (20-10) = 10,000/10 = 1,000 Section Ref: Making Location Decisions

Level: moderate

68. At the break-even point, _____________________. a) output equals capacity b) total cost equals total revenue c) total cost equals profit d) variable cost equals fixed cost e) variable cost equals total revenue Ans: b Section Ref: Making Location Decisions Level: easy

69. For a break-even graph, the total cost for each possible location is plotted against __________________. a) fixed costs b) variable costs c) profit margin d) quantity e) price Ans: d Section Ref: Making Location Decisions Level: moderate

70. To plot the break-even line one end of the line is the y-intercept point. The other line point a) requires the center of gravity calculation b) is established by the finance department c) is arbitrary but usually the expected volume d) is not arbitrary e) is derived from the location analysis Ans: c Section Ref: Making Location Decisions Level: easy

71. The method which relies on a specific algorithm to evaluate the cost impact of adding potential location sites to the network of existing facilities is ______________________________. a) cost-volume analysis b) the transportation method c) factor rating analysis d) linear regression analysis

e) the load-distance model Ans: b Section Ref: Making Location Decisions Level: moderate

72. Capacity planning and location analysis are decisions that must be made by _______________ working together. a) accounting, marketing and operations b) marketing and finance c) finance, marketing and operations d) accounting, marketing and finance e) marketing and operations Ans: c Section Ref: Capacity Planning and Facility Location Across the Organization Level: hard

73. Which of the following is not an example of factory focus? a) Ann Taylor b) Sears c) Limited Too d) The Gap e) The Limited Ans: b Section Ref: Capacity Planning Level: hard

74. Which of the following is not part of decision trees? a) decision points b) decision alternatives c) decision events d) chance events e) outcomes Ans: c Section Ref: Decision Trees Level: hard

True/False

75. Capacity decisions at the strategic level include the size of workforce.

Ans: False Section Ref: Capacity Planning Level: moderate

76. The first level of capacity planning is at the strategic level.

Ans: True Section Ref: Capacity Planning Level: moderate

77. Capacity planning is complicated by the fact that capacity is usually purchased in chunks, rather than smooth increments.

Ans: True Section Ref: Capacity Planning Level: moderate

78. An example of an output measure of capacity is labor hours.

Ans: False Section Ref: Capacity Planning Level: easy

79. Input measures of capacity work better when a company produces a single product.

Ans: False Section Ref: Capacity Planning Level: moderate

80. Scheduled machine maintenance is one of the determinants of effective capacity.

Ans: True Section Ref: Capacity Planning Level: hard

81. The maximum output rate that can be achieved by a facility under ideal conditions is design capacity.

Ans: True Section Ref: Capacity Planning Level: moderate

82. Under ideal conditions the firm can achieve 125% of design capacity on a daily basis.

Ans: False Section Ref: Capacity Planning Level: moderate

83. The ratio of actual output rate to capacity is utilization.

Ans: True Section Ref: Capacity Planning Level: easy

84. Extra capacity can serve to intimidate and preempt competitors from entering the market.

Ans: True Section Ref: Capacity Planning Level: hard

85. The best operating level is the volume of output that results in the lowest average unit cost.

Ans: True Section Ref: Capacity Planning Level: moderate

86. A focused factory is one that produces many products with options.

Ans: False Section Ref: Capacity Planning Level: hard

87. Focused factories are a factor which contributes to the success of JIT.

Ans: True Section Ref: Capacity Planning Level: moderate

88. A plant within a plant can perform a number of tasks to help a company focus on its core capabilities.

Ans: False Section Ref: Capacity Planning Level: hard

89. Capacity cushions can be helpful if sales need to be buffered from production.

Ans: False Section Ref: Making Capacity Planning Decisions Level: hard

90. Long-term capacity requirements are identified on the basis of forecasts of future labor market supplies.

Ans: False Section Ref: Making Capacity Planning Decisions Level: hard

91. Solving a decision tree that involves maximizing profit includes selecting the decision alternative with the highest expected value.

Ans: True Section Ref: Decision Trees Level: hard

92. The cost of space in Silicon Valley is higher now than it was in the late 1990s.

Ans: False Section Ref: Location Analysis Level: moderate

93. In facility location zoning restrictions, soil conditions, and access roads for trucks are quality of life issues.

Ans: False Section Ref: Location Analysis Level: moderate

94. Disadvantages of globalization include political risks for countries with unstable governments.

Ans: True Section Ref: Location Analysis Level: moderate

95. An excellent procedure that can be used with location factors that are qualitative is the factor rating method.

Ans: True Section Ref: Making Location Decisions Level: moderate

96. The load-distance model frequently utilizes rectilinear distance, which is the shortest distance between two points using only north-south and east-west movements.

Ans: True Section Ref: Making Location Decisions Level: moderate

97. The center of gravity approach requires precise XY grid coordinates to develop a valid location.

Ans: False Section Ref: Making Location Decisions Level: moderate

98. In choosing a location, the transportation method provides an easy way to calculate X and Y coordinates for a good starting point.

Ans: False Section Ref: Making Location Decisions Level: moderate

99. At the break-even point, total cost equals total revenue.

Ans: True Section Ref: Making Location Decisions Level: easy

100. Two types of information needed when measuring capacity is the amount of available capacity and the effectiveness of capacity use.

Ans: True Section Ref: Capacity Planning Level: easy

101. Finance and Customer Support are the two primary functions interested in capacity planning and location analysis.

Ans: False Section Ref: Capacity Planning And Facility Location Across the Organization Level: easy

Essay

102. Describe some factors that contribute to the capacity of an emergency room, as measured by the number of patients served per day.

Ans: One factor is the number of beds in the ER and the amount of space available. If there are not enough beds, patients may have to wait long periods of time to be examined. Too many empty beds, on the other hand, would be a waste of space. Another factor is the number of nurses and doctors working on a shift. If not enough staff is available, patients may not have anyone to treat them. The consequences of not having enough capacity could be grave.

However, scheduling more staff than needed would result in excess capacity in the form of highly paid professionals not having work to do.

Section Ref: Capacity Planning Level: moderate

103. What conditions make effective capacity differ from design capacity?

Ans: realistic work schedules and break schedules, regular staff levels, scheduled machine maintenance, and none of the temporary measures that are used to achieve design capacity Section Ref: Capacity Planning

Level: hard

104. Why would a company consider purchasing or building a small facility, when in the long run they think that they could use a large one?

Ans: risk that demand will not materialize Section Ref: Capacity Planning Level: hard

105. Two sizes are being considered for a new facility, medium and large. Discuss best operating level in this context.

Ans: The best operating level will vary with size of the facility. The average cost per unit will be lowest at the best operating level for the large facility.

Section Ref: Capacity Planning Level: hard

106. Why are focused factories often the best approach in today’s business environment?

Ans: due to short product and technology life cycles, and the importance of flexibility Section Ref: Capacity Planning Level: moderate

107. How should forecasts of long-range demand be developed for identifying capacity requirements?

Ans: 1) forecast overall long-range market demand, 2) then estimate the company’s market share as a percentage of the total Section Ref: Making Capacity Planning Decisions Level: hard

108. There they go again. There is another Burger King being built right next to a McDonald’s at an Interstate Highway exit. Why does this approach make sense?

Ans: Customers will be drawn to that location by the availability of fast food restaurants.

Section Ref: Location Analysis Level: moderate

109. Why does it make sense that there are many cheese factories that are staying in Wisconsin, while many clothing manufacturers have been shutting down domestic plants and locating outside of the US? Ans: Cheese is made from milk, and cheese factories are located near dairy farms to avoid the cost of transporting the heavy milk long distances. The major cost in making clothes is labor, and labor costs tend to be high in the U.S. Section Ref: Location Analysis Level: hard

110. Give an example of a type of facility for which quality-of-life issues would be of primary importance.

Ans: Several possibilities, such as research and development facilities, corporate offices, universities, nuclear plants, etc.

Section Ref: Location Analysis Level: moderate

111. What are the disadvantages of globalization?

Ans: Political risks in countries with unstable governments, need to share proprietary technology, bad attitudes on the part of workers, lower worker productivity and skills, poor roads, lack of utilities and other infrastructure problems Section Ref: Location Analysis Level: moderate

112. Discuss why marketing is important in making capacity decisions.

Ans: Marketing is the function that has information to future demands and competition. Each of these is critical for future capacity planning.

Section Ref: Capacity Planning and Facility Location Across the Organization Level: easy

113. Describe the relation of capacity requirement and the supply chain.

Ans: The supply chain is a pipeline that supplies a certain level of customer demand. This can only happen if the supply chain capacity meets the demand requirements and is matched across the full supply chain.

Section Ref: The Supply Chain Link Level: moderate

114. How are capacity planning and location analysis similar?

Ans: In both capacity planning and location analysis, managers must follow three-step process to make good decisions. The steps are assessing needs, developing alternatives, and evaluating alternatives.

Section Ref: Making Capacity Planning Decisions Level: moderate

Short Answer

115. While long term capacity decisions are strategic and capital intense, short term capacity decisions involve _______________________.

Ans: short-term issues of workforce, inventory, and machinery.

Section Ref: Capacity Planning Level: moderate

116. Capacity planning problems are notorious in ER and other organizations that experience ______________.

Ans: high fluctuations in demand Section Ref: Capacity Planning Level: hard

117. Agile organizations often use focused factories to increase efficiency by ______________________.

Ans: working on fewer tasks and goals.

Section Ref: Capacity Planning Level: moderate

118. Subcontractor networks reduce reliance on acceptance sampling by ____________________.

Ans: increasing suppliers' responsibility for quality.

Section Ref: Capacity Planning Level: moderate

119. Forecasting product demand involves forecasting _________________ demand and the firm's _________________.

Ans: market, market share Section Ref: Making Capacity Planning Decisions Level: moderate

120. Name three of the main factors that affect location decisions. ________________________, ________________________, and ________________________.

Ans: proximity to suppliers, proximity to customers, proximity to qualified labor, community, site, quality of life.

Section Ref: Location Analysis Level: moderate

121. Schools, colleges, and universities consider the size of the classrooms carefully because _____________________.

Ans: an instructor may interact with one or many students.

Section Ref: Capacity Planning Level: hard

122. What is the formula for effective utilization? ________________________ Ans: (formula) U = actual output /capacity (100) Section Ref: Capacity Planning Level: easy

123. A firm must choose between remaining where it is, with current capacity, and building a new facility with 50% more capacity. The probability of high demand is estimated to be 75%.

The current facility would provide $100,000 profit if there is high demand or $50,000 profit if there is low demand. The replacement facility would provide $160,000,000 profit if there is high demand but would only break even if there is low demand. What is the expected value of each option?

Ans: For the replacement facility, .75*$160,000 + .25*0 = $120,000. For the current facility, .75*100,000 + .25*$50,000 = $87,500.

Section Ref: Making Capacity Planning Decisions Level: hard

124. What is the load-distance score formula?

Ans: (formula) ld = sum l_ij times d_ij where l_ij is the weight carried from point i to j and d_ij is the distance from i to j.

Section Ref: Location Analysis Level: hard

125. An area that has further encouraged globalization is the growth of __________.

Ans: just-in-time manufacturing Section Ref: Section Ref: Location Analysis Level: hard

126. A firm that wishes to use break-even analysis to evaluate potential locations must know _______________ for each site.

Ans: fixed cost, selling price, and variable cost.

Section Ref: Location Analysis Level: hard

127. Factor rating can be used to evaluate multiple _____ based on a number of ________.

Ans: alternatives, selected factors Section Ref: Making Location Decisions Level: moderate

Problems

128. A clinic has been set up to give flu shots to the elderly in a large city. The design capacity is 50 seniors per hour, and the effective capacity is 44 seniors per hour. Yesterday the clinic was open for ten hours and gave flu shots to 330 seniors. (a) What is the design utilization? (b) What is the effective utilization?

Ans: a) 66% b) 75% Solution: a) (Design utilization = output/design capacity = 330/(10*50) = .66 or 66%) b) (Effective utilization = output/effective capacity = 330/(10*44) =.75 or 75%) Section Ref: Capacity Planning Level: easy

129. Magnatree is a large company that has been working on a new product. This product has tremendous potential, but Magnatree must move quickly. They have decided that they will introduce the product in two months and have already started developing their advertising campaign.

They are sure that the product will be a success, with a possibility that it will be a huge success.

They recently found out that another company, Shadycorp, has some unique expertise that could significantly improve the new product. They contacted them and Shadycorp offered to sell their expertise to Magnatree for $5 million. Magnatree needs to make an immediate decision on Shadycorp’s offer or it will be too late to investigate the use of the expertise in design of the new product. Without the expertise Magnatree has a 20% chance of making the new product a huge success. With Shadycorp’s expertise there will be a 40% chance of the new product being a huge success.

If the new product is a huge success, the net present value of its future profits is expected to be $50 million. If it is merely a success, the net present value of its future profits is expected to be $20 million. (a) Construct a decision tree and solve it. (b) Should Magnatree accept Shadycorp’s offer? (c) What is the expected net present value of its future profits from the new product?

Ans: see below (a) --------Huge success (0.2)---- $50 million | ---Reject offer-------- O | | | --------Success (0.8) ---------- $20 million  | --------Huge success (0.4)---- $45 million | | ---Accept offer------- O | --------Success (0.6) ---------- $15 million Calculate expected values --------Huge success (0.2)---- $50 million | ---Reject offer-------- O Expected value = $26 million | | | --------Success (0.8) ---------- $20 million  Accept offer - Expected value = $27 million | --------Huge success (0.4)---- $45 million | | ---Accept offer------- O Expected value = $27 million | --------Success (0.6) ---------- $15 million (b) Magnatree should accept Shadycorp’s offer. (c) The expected net present value of its future profits from the new product is $27 million.

Section Ref: Making Capacity Planning Decisions

Level: hard

130. Aacorp has experienced an increase in demand for its product and has decided that it will expand its factory, since capacity is currently too low to meet demand. It is not sure whether demand will continue to increase in the future or not. It is considering two options. A small expansion will be sufficient to meet its current demand and also its future demand if demand levels off. Its second option is a large expansion, which will be more than sufficient for current demand and will also handle future demand even if continues to increase. They have estimated that the probability that demand will continue to increase is 40%.

A small expansion will cost $2 million while a large expansion will cost $4 million. If they make a small expansion and demand continues to increase, they will have to make a second expansion in 18 months and the net present value of that second expansion is $3 million.

The net present value of the future revenue resulting from the expansion will be $5 million under two conditions: 1) demand levels off, or 2) demand continues to increase, but Aacorp chooses a small expansion and does not make a second expansion in 18 months. The net present value of the future revenue will be $9 million if demand continues to increase and Aacorp either chooses a large expansion or makes a second expansion in 18 months after choosing a small expansion. (a) Construct a decision tree and solve it. (b) Should Aacorp make a small expansion or a large expansion? (c) What is the resulting expected net present value of its future profits?

Ans: see below (a) ------Expand again---------- $4 million (9-2-3) | ---Demand increases (0.4)---  | | | ------No second expansion- $3 million (5-2) ------Expand small----O | | | | | ---Demand levels off (0.6)------------------------------------ $3 million (5-2)  | ---Demand increases (0.4)------------------------------------ $5 million (9-4) | | | | ------Expand large----O | | ---Demand levels off (0.6)------------------------------------ $1 million (5-4)

Calculate expected values ------Expand again---------- $4 million (9-2-3) | ---Demand increases (0.4)---  Choose Expand again - $4 million

| | | ------No second expansion- $3 million (5-2) ------Expand small----O Expected value = $3.4 million | | | | | ---Demand levels off (0.6)------------------------------------ $3 million (5-2)  Expand small - Expected value = $3.4 million | ---Demand increases (0.4)------------------------------------ $5 million (9-4) | | | | ------Expand large----O Expected value = $2.6 million | | ---Demand levels off (0.6)------------------------------------ $1 million (5-4) (b) Aacorp should make a small expansion. (c) The resulting expected net present value of its future profits is $3.4 million.

Section Ref: Making Capacity Planning Decisions Level: moderate

131. Medco plans to open a new medical center and is looking for a suitable location. They have narrowed their choice down to three locations, on Oak, Elm, and Ash Streets. They have defined four factors and have assigned weights to these factors as follows: proximity to hospitals (40), customer parking (30), appearance (20), and ease of expansion (10). They then rated the three locations for the four factors, using a scale of one to five. Their ratings are as follows: Location Factor Oak Elm Ash Proximity to hospitals 2 5 Customer parking 5 1 Appearance 4 2 Ease of expansion 3 4 (a) Calculate the scores for each location. (b) According to the model which location should they choose?

3 3 5 1

Ans: (a) Oak - 340, Elm - 310, Ash - 320; (b) choose Oak Section Ref: Making Location Decisions Level: moderate

132. Supershirtco plans to open a new factory and is looking for a suitable location. They have narrowed their choice down to three locations, Lima, Peru; Rome, Italy; and Nome, Alaska.

They have defined four factors and have assigned weights to these factors as follows: wage rates (60), construction costs (20), logistics (10), and climate (10). They then rated the three locations for the four factors, using a scale of one to five. Their ratings are as follows: Location Factor Lima Rome Nome Wage rates

5

3

1

Construction costs 4 2 Logistics 3 2 Climate 3 5 (a) Calculate the scores for each location. (b) According to the model which location should they choose?

5 5 1

Ans: (a) Lima - 440, Rome - 290, Nome - 220; (b) choose Lima Section Ref: Making Location Decisions Level: moderate

133. Aalogistics Co. has just signed a contract to deliver products to three locations, and they are trying to decide where to put their new warehouse. The three delivery locations are Chicago, Kansas City, and Memphis. The two potential sites for the warehouse are Peoria and St. Louis.

The x, y coordinates for the delivery locations and warehouses are as follows: Location x coordinate y coordinate Chicago 92 42 Kansas City 85 39 Memphis 90 35 Peoria 90 41 St. Louis 90 39 The total quantity to be delivered to each destination is: 400 to Chicago, 150 to Kansas City, and 100 to Memphis. (a) Calculate the total load-distance value from each potential warehouse location. (b) Where should the new warehouse be located?

Ans: (a) load-distance for Peoria - 2,850, load-distance for St. Louis - 3,150; (b) in Peoria Section Ref: Making Location Decisions Level: moderate

134. Wefixit Co. has just signed a contract to handle copy machine repairs for a large printing company in Chicago. The contract covers copy machines at four locations, in the Loop (downtown), on the North side, on the West side, and on the South side. Wefixit has identified two potential sites for housing their equipment, spare parts, and employees. One site is Northwest of the Loop, and the other on is south of the Loop. The x, y coordinates for the printing company locations and potential sites for Wefixit are as follows: Type Location x coordinate y coordinate Printing Co. Loop 24 18 Printing Co. North side 19 27 Printing Co. West side 11 19 Printing Co. South side 27 11 Wefixit Northwest of Loop 18 23 Wefixit South of Loop 24 16 The estimate number of trips per year to each Printing Co. location is: 400 to Loop, 200 to North side, 200 to West side and 100 to South side. (a) Calculate the total load-distance value from each potential Wefixit location. (b) Where should Wefixit be located?

Ans: (a) load-distance for Northwest - 9,700, load-distance for South - 8,000; (b) South Section Ref: Making Location Decisions Level: moderate

135. Aalogistics Co. has just signed a contract to deliver products to three locations, and they are trying to decide where to put their new warehouse. The three delivery locations are Chicago, Kansas City, and Memphis. The x, y coordinates for the delivery locations are as follows: Location x coordinate y coordinate Chicago 92 42 Kansas City 85 39 Memphis 90 35 The total quantity to be delivered to each destination is: 400 to Chicago, 150 to Kansas City, and 100 to Memphis. Calculate the location of the new warehouse using the Center of Gravity approach.

Ans: x = 90.1, y = 40.2 Section Ref: Making Location Decisions Level: moderate

136. Phil’s consulting services has grown rapidly. Phil is now traveling extensively around the country. Phil has the liberty to live anywhere he wants but wants to decide, geographically, the ideal location to relocate to. Phil’s primary clients and associated number of trips are: Client A = 15 trips, coordinates (20,80) Client B = 40 trips, coordinates (30,60) Client C = 35 trips, coordinates (40,70) Client D = 25 trips, coordinates (50,90) Ans: (36.1,72.2) Xc.g.=∑liXi/∑li= (15*20 + 40*30 + 35* 40 = 25* 50) = 36.1 /∑li = 15*80 + 40*60 + 35* 70 = 25* 90 = 72.2 Section Ref: Making Location Decisions Level: moderate

Yc.g.=∑liYi

137. Amalagamatada HOH, Inc., makes water treatment machines for homes. These machines are referred to as AmaHOH, and Amalagamatada HOH, Inc. is trying to decide whether or not to build a new plant in Southern California. The plant will have annual fixed costs of $2,000,000 and variable costs of $800 for each AmaHOH produced. The sales price is $1,000 for each AmaHOH. (a) Determine the break-even quantity. (b) Marketing is certain that they will be able to sell much more than the break-even quantity in part a. and have proposed building an even larger plant. This plant will have annual fixed costs of $5,000,000 and variable costs of $700 for each AmaHOH produced. The sales price will still be $1,000 for each AmaHOH. Determine the quantity above which the larger plant should be built, rather than the plant in part a.

Ans: (a) 10,000; (b) 30,000

Section Ref: Making Location Decisions Level: easy

138. Acme Corp. makes vending machines for small companies. They have recently started selling their vending machines in Southern California, with a great deal of success, at a price of $5,000 per machine. The company is convinced that they will need to either build a new plant near San Diego or expand their existing plant in New Orleans. If they build a new plant near San Diego, the annual fixed costs will be $6,000,000 and the variable costs will be $3,000 for each vending machine delivered to Southern California. If they expand the New Orleans plant, their annual fixed costs for the expansion will be $2,000,000 and the variable costs will be $4,000 for each vending machine delivered to Southern California. (a) Determine the break-even quantity for building the new plant near San Diego. (b) Determine the break-even quantity for expanding the plant in New Orleans. (c) At what output will the two locations have the same total cost? (d) Assume that the demand forecast is less than the output in part c. Which option should the company choose?

Ans: (a) 3,000; (b) 2,000, (c) 4,000; (d) Expand the plant in New Orleans Section Ref: Making Location Decisions Level: moderate

139. Raissa’s early learning center must decide how many students they need to enroll to make a profit. There is a trade off in quality of care and the number of students enrolled. They must make a profit but not have so many children that the care suffers. They must establish the point where the number of enrolled students establishes the first profit point. They’ve determined that their fixed costs are $4,500 per month. It costs them an additional $150 per month for each enrolled child. They only enroll students on a monthly basis at a price of $450. How many students must they enroll to start making a profit?

Ans: 15 students Solution: Q = FC/(p-c) = $4,500/($450 - $150) = 15 Section Ref: Making Location Decisions Level: easy

File: ch10, Chapter 10: Facility Layout

Multiple Choice

1. Which of the following is not a resource that might not be included in deciding a facility layout? a) desk b) work center c) telephone switch d) work center e) person Ans: c Section Ref: What is Layout Planning?

Level: moderate

2. Which of the following may not be a result of a poor layout? a) wasted time b) wasted energy c) confusion d) poor communication d) increased flow of information Ans: e Section Ref: What is Layout Planning?

Level: easy

3. Intermittent operations are seen in organizations that produce: a) a small variety of different products b) high volumes of a few standard products c) a large variety of different products d) a large volume of many standardized products e) assembly line manufacturing Ans: c Section Ref: What is Layout Planning?

Level: easy

4. Which of the following is not one of the four basic layout types? a) product b) hybrid

c) process d) fixed position e) inverted Ans: e Section Ref: Types of Layouts Level: easy

5. The challenge in process layouts is to arrange resources to maximize __________ and minimize ___________. a) movement, effectiveness b) effectiveness, efficiency c) efficiency, waste of movement d) efficiency, effectiveness e) efficiency, labor cost Ans: c Section Ref: Types of Layouts Level: moderate

6. A company with a pure continuous processing system is most likely to use which layout type? a) inverted b) product c) process d) fixed position e) hybrid Ans: b Section Ref: Types of Layouts Level: moderate

7. Process layouts have a) less automation b) more automation c) fewer employees d) more cycle time e) less cycle time Ans: a Section Ref: Types of Layouts Level: easy

8. A job shop is most likely to use which layout type? a) inverted

b) hybrid c) process d) fixed position e) product Ans: c Section Ref: Types of Layouts Level: moderate

9. A hospital is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Ans: c Section Ref: Types of Layouts Level: moderate

10. A grocery store is most like which of the following layout types? a) inverted b) circular c) process d) fixed position e) product Ans: c Section Ref: Types of Layouts Level: moderate

11. A university is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Ans: c Section Ref: Types of Layouts Level: moderate

12. Which of the following is least like a process layout?

a) job shop b) automobile plant c) hospital d) university e) grocery store Ans: b Section Ref: Types of Layouts Level: moderate

13. Which of the following is more like a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are less capital intensive. c) Processing rates are slower. d) Space requirements for inventory storage are lower. e) Scheduling resources is more challenging.

Ans: d Section Ref: Types of Layouts Level: moderate

14. Which of the following is more like a product layout as compared to a process layout? a) Resources used are specialized. b) Facilities are less capital intensive. c) Processing rates are slower. d) Space requirements for inventory storage are higher. e) Scheduling resources is more challenging.

Ans: a Section Ref: Types of Layouts Level: moderate

15. Which of the following is more like a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are more capital intensive. c) Processing rates are slower. d) Space requirements for inventory storage are higher. e) Scheduling resources is more challenging.

Ans: b Section Ref: Types of Layouts Level: moderate

16. Which of the following is more like a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are less capital intensive. c) Processing rates are faster. d) Space requirements for inventory storage are higher. e) Scheduling resources is more challenging.

Ans: c Section Ref: Types of Layouts Level: moderate

17. Which of the following is more like a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are less capital intensive. c) Processing rates are slower. d) Space requirements for inventory storage are higher. e) Scheduling resources is less challenging.

Ans: e Section Ref: Types of Layouts Level: moderate

18. Which of the following is more like a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are less capital intensive. c) Material handling costs are lower. d) Space requirements for inventory storage are higher. e) Scheduling resources is less challenging.

Ans: c Section Ref: Types of Layouts Level: moderate

19. Which of the following is more like a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are less capital intensive. c) Less skilled workers can be used. d) Space requirements for inventory storage are higher. e) Scheduling resources is less challenging.

Ans: c Section Ref: Types of Layouts Level: moderate

20. Which of the following is more like a product layout as compared to a process layout? a) Resources used are general purpose. b) Facilities are less capital intensive. c) Products cannot be easily added or deleted from the existing product line. d) Space requirements for inventory storage are higher. e) Scheduling resources is less challenging.

Ans: c Section Ref: Types of Layouts Level: moderate

21. A company with a pure intermittent processing system is most likely to use which layout type? a) inverted b) hybrid c) process d) fixed position e) product Ans: c Section Ref: Types of Layouts Level: moderate

22. A single-line cafeteria is an example of which layout type? a) inverted b) disjointed c) process d) fixed position e) product Ans: e Section Ref: Types of Layouts Level: moderate

23. A car wash is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Ans: e Section Ref: Types of Layouts Level: moderate

24. A high-volume paper mill is an example of which layout type? a) inverted b) circular c) process d) fixed position e) product Ans: e Section Ref: Types of Layouts Level: moderate

25. Which of the following is least like a product layout? a) high-volume paper mill b) automobile plant c) hospital d) single-line cafeteria e) car wash Ans: c Section Ref: Types of Layouts Level: moderate

26. In a product layout facility the manager must decide a) employees’ salary b) exactly what tasks will not be performed by every workstation c) exactly what tasks will be performed by every workstation d) exactly what vacation schedule must be followed e) general sequence the work must be performed in Ans: e Section Ref: Types of Layouts Level: easy

27. Which company is widely considered to be the leader of just-in-time production? a) Ford b) Timex c) Gateway d) Toyota e) Sony Ans: d Section Ref: Designing Process Layouts

Level: moderate

28. A hybrid layout combines a) fixed and product b) fixed and process c) inverted and product d) services and manufacturing e) process and product Ans: e Section Ref: Designing Process Layouts Level: moderate

29. A wheat farm is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Ans: d Section Ref: Designing Process Layouts Level: moderate

30. Shipbuilding is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Ans: d Section Ref: Designing Process Layouts Level: moderate

31. Building construction is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Ans: d

Section Ref: Designing Process Layouts Level: moderate

32. Bridge construction is an example of which layout type? a) inverted b) hybrid c) process d) fixed position e) product Ans: d Section Ref: Designing Process Layouts Level: moderate

33. Which of the following is least like a fixed-position layout? a) farm b) shipbuilding c) bridge construction d) building construction e) car wash Ans: e Section Ref: Designing Process Layouts Level: moderate

34. The first step in designing a layout is a) identifying the facility b) gathering information c) selecting the correct layout software package d) developing a REL chart e) developing a from-to matrix Ans: b Section Ref: Designing Process Layouts Level: moderate

35. What are the two primary tools used to identify closeness measures during the layout design process? a) REL chart and from-to matrix b) MRP chart and from-to matrix c) x-bar chart and from-to matrix d) MRP chart and x-bar chart e) x-bar chart and REL chart

Ans: a Section Ref: Designing Process Layouts Level: easy

36. According to the textbook, the available space of a facility is best seen by using a a) photograph b) detailed floor plan c) architecture software package d) block plan e) overview plan Ans: d Section Ref: Designing Process Layouts Level: moderate

37. Which layout design tool is primarily based on managers’ opinions? a) x-bar chart b) REL chart c) MRP chart d) from-to matrix e) Gantt chart Ans: b Section Ref: Designing Process Layouts Level: easy

38. What is typically used to quantitatively compare the effectiveness of layouts? a) trial and error b) process control charts c) load-distance model d) mean absolute deviation (MAD) e) exponential smoothing Ans: c Section Ref: Designing Process Layouts Level: easy

39. What is the shortest distance between two locations using north-south and east-west movements called? a) Euclidean distance b) triangulated distance c) rectilinear distance

d) Socratic distance e) latitude-longitude (LL) distance Ans: c Section Ref: Designing Process Layouts Level: easy

40. Using a relationship chart to develop acceptable layouts is part of a classic layout technique called a) Real layout planning b) CHART c) systematic from-to planning d) systematic layout planning e) SRP Ans: d Section Ref: Designing Process Layouts Level: hard

41. Which type of movement is most like rectilinear? a) driving cross-country on an interstate highway b) flying an airplane c) climbing a mountain d) driving in New York City e) riding a roller coaster Ans: d Section Ref: Designing Process Layouts Level: moderate

42. How many different layout solutions are possible with 7 departments? a) 7 b) 720 c) 28 d) 7000 e) 5040 Ans: e Section Ref: Special Cases of Process Layout Level: hard

43. How many different layout solutions are possible with 7 departments? a) 7!

b) 6! c) 7! − 1 d) (1!)(2!)(3!)(4!)(5!)(6!)(7!) e) 8!

Ans: a Section Ref: Special Cases of Process Layout Level: moderate

44. What are two of the most popular facility layout software packages? a) CONWIP and CRAFT b) ALDEP and CRAFT c) CONWIP and MRP d) ALDEP and MRP e) ALDEP and CONWIP Ans: b Section Ref: Special Cases of Process Layout Level: easy

45. Which popular facility layout software package works from an REL chart? a) CONWIP b) MRP c) ALDEP d) LAYOUT e) CRAFT Ans: c Section Ref: Special Cases of Process Layout Level: moderate

46. Which popular facility layout software package uses a from-to matrix? a) CONWIP b) MRP c) ALDEP d) LAYOUT e) CRAFT Ans: e Section Ref: Special Cases of Process Layout Level: moderate

47. When developing a detailed layout, what tools would be used?

a) MS Excel b) MULTISTORY c) CRAFT++ d) 3-D models and CAD software e) Architecture Software Ans: d Section Ref: Special Cases of Process Layout Level: hard

48. Warehouse layouts have the key characteristics of process layouts except a) number of loads is not a design consideration b) location isn’t a major consideration c) there is movement between the storage areas d) from trips are the only consideration e) there is no movement between the storage areas Ans: e Section Ref: Special Cases of Process Layout Level: moderate

49. For the general warehouse layout problem, which department should be located furthest from the dock? a) least trips needed b) most area needed c) highest ratio of trips needed to area needed d) smallest ratio of area needed to trips needed e) smallest ratio of trips needed to area needed Ans: e Section Ref: Special Cases of Process Layout Level: moderate

50. Approximately how much of the U.S. workforce works in an office environment? a) 10% b) 25% c) 50% d) 75% e) 90% Ans: c Section Ref: Designing Product Layouts Level: hard

51. Studies mentioned in the textbook have shown that workers that are in close proximity to each other are more likely to ______________________. a) catch a cold b) date each other c) get on each other’s nerves d) have greater understanding, tolerance, and trust for one another e) play practical jokes on each other Ans: d Section Ref: Designing Product Layouts Level: moderate

52. On which key trade-off does the textbook focus concerning office layouts? a) cost vs. comfort b) pictures vs. windows c) cubes vs. doors d) network printers vs. individual printers e) proximity vs. privacy Ans: e Section Ref: Designing Product Layouts Level: moderate

53. One important consideration in designing any layout is a) consistency b) flexibility c) equitability d) uniformity e) tenure Ans: b Section Ref: Designing Product Layouts Level: moderate

54. What is the term for the number of units we wish to produce over a specific period of time? a) job flow b) output rate c) cycle time d) output flow e) flow time Ans: b Section Ref: Designing Product Layouts Level: easy

55. What is the term for the maximum amount of time each workstation has to complete its assigned task? a) output rate b) task time c) station time d) cycle time e) output time Ans: d Section Ref: Designing Product Layouts Level: easy

56. What term tells us how frequently a product is completed? a) output rate b) task time c) station time d) cycle time e) output time Ans: d Section Ref: Designing Product Layouts Level: moderate

57. Which of the following statements is not true? a) The bottleneck determines the lowest possible cycle time. b) It might be possible to split a bottleneck task into two smaller non-bottleneck tasks. c) A production process always has at least one bottleneck. d) A bottleneck task is the longest task in a process. e) A perfectly balanced line has no bottlenecks.

Ans: e Section Ref: Designing Product Layouts Level: moderate

58. What is the longest task in a process called? a) obstruction b) bottleneck c) blockade d) hindrance e) constrainer Ans: b

Section Ref: Designing Product Layouts Level: easy

59. The bottleneck determines ________________. a) which station has the minimum cycle time b) the minimum cycle time of the whole process c) the maximum cycle time of the whole process d) the point at which a product layout converts to a process layout e) which station has the maximum output rate Ans: b Section Ref: Designing Product Layouts Level: hard

60. Assigning tasks to workstations is known as __________________. a) offsetting the line b) harmonizing the line c) stabilizing the line d) balancing the line e) counterbalancing the line Ans: d Section Ref: Designing Product Layouts Level: moderate

61. The theoretical minimum number of stations is the number of workstations that would be needed if: a) all stations were balanced. b) all task times were the same. c) the line was 100% efficient. d) every task had a separate station. e) the company had no absenteeism.

Ans: c Section Ref: Designing Product Layouts Level: easy

62. When line balancing, which rule does the textbook suggest for assigning tasks to workstations? a) shortest task time b) first come first served

c) fewest predecessors d) longest task time e) most successors Ans: d Section Ref: Designing Product Layouts Level: easy

63. Which production line shapes are particularly useful for the sharing of resources? a) S and U b) L and O c) O and S d) L and S e) O and U Ans: e Section Ref: Group Technology (Cell) Layouts Level: moderate

64. What is the amount by which the efficiency of a production line falls short of 100%? a) balance delay b) efficiency deficiency c) efficiency delay d) balance shortfall e) percentage deficiency Ans: a Section Ref: Designing Product Layouts Level: easy

65. What is the term for a system in which the product being worked on is physically attached to the line and automatically moved to the next station when the cycle time has elapsed? a) cyclical line b) paced line c) autoline d) continuous line e) constrained line Ans: b Section Ref: Group Technology (Cell) Layouts Level: easy

66. Group technology creates groupings of products primarily based on what?

a) product cost b) raw materials requirements c) similar processing requirements d) operating characteristics e) market segmentation Ans: c Section Ref: Group Technology (Cell) Layouts Level: moderate

67. The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very back (furthest away from the dock)?

Item Trips Area Needed (blocks) A 300 60 B 220 3 C 72 1 D 60 10 E 24 3 a) A b) B c) C d) D e) E Ans: a Solution: See pages 357-358 (Trip ratio = trips/area needed: A = 300/60 = 5; B= 220/3 = 73.3; C = 72/1 = 72; D = 60/10 = 6; E = 24/3 = 8: A lowest trip ratio store furthest from dock) Section Ref: Special Cases of Process Layout Level: moderate

68. Consider a production line that has a station with two machines, and each unit produced at the station needs to be processed by both of the machines. (A unit cannot be worked on by both machines simultaneously.) Each machine has a production capacity of 4 units per hour. What is the lowest possible cycle time of the station? a) 4 minutes per unit b) 8 minutes per unit c) 7.5 minutes per unit d) 30 minutes per unit e) 15 minutes per unit Ans: e Solution: 60 min/hr / 4 units/hr = 15 min per unit Section Ref: Special Cases of Process Layout Level: moderate

69. Which of the following is true? a) A line with a lower cycle time has greater output than one with a higher cycle time. b) A line with a higher cycle time has greater output than one with a lower cycle time. c) Cycle time is unrelated to output rate. d) A line must be arranged such that capacity grows with each successive station. e) Cycle time cannot be greater than the task time of the bottleneck.

Ans: a Section Ref: Designing Product Layouts Level: moderate

70. The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very back (furthest away from the dock)?

Item Trips Area Needed (blocks) “Star Trek” videos 2000 5 Ballet videos 5 1 Tom Cruise videos 200 2 “The Simpsons” videos 1000 2 Operations Management videos 500 1 a) “Star Trek” videos b) ballet videos c) Tom Cruise videos d) “The Simpsons” videos e) operations management videos Ans: b Solution: Trips / Area Needed; lowest number should be furthest away from dock.

“Star Trek” videos 5 2000 400 Ballet videos 1 5 5 Tom Cruise videos 200 2 100 “The Simpsons” videos 1000 2 500 Operations Management videos 500 1 500 Section Ref: Special Cases of Process Layout Level: moderate

71. The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very front (closest to the dock)?

Item Trips Area Needed (blocks) A 300 60 B 220 3 C 74 1 D 60 10 E 24 3 a) A b) B c) C d) D

e) E Ans: c Solution: Trips / Area Needed = highest number should be closest to dock Area Needed Item Trips (blocks) A 300 60 5 B 220 3 73.33333 C 74 1 74 D 60 10 6 E 24 3 8 Section Ref: Special Cases of Process Layout Level: moderate

72. The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very front (closest to the dock)?

Item Trips Area Needed (blocks) “Star Trek” videos 2000 5 Ballet videos 5 1 Tom Cruise videos 200 2 “The Simpsons” videos 1000 2 Operations Management videos 500 3 a) “Star Trek” videos b) ballet videos c) Tom Cruise videos d) “The Simpsons” videos e) operations management videos Ans: d Solution: Highest number should be closest to the dock “Star Trek” videos 5 2000 400 Ballet videos 1 5 5 Tom Cruise videos 200 2 100 “The Simpsons” videos 1000 2 500 Operations Management 500 3 166.6667 videos Section Ref: Special Cases of Process Layout Level: Moderate

73. Which of the following production line shapes is least likely to be found in a factory? a) N b) S c) U d) O e) L

Ans: a Section Ref: Group Technology (Cell) Layouts Level: moderate

74. What is Wal-Mart’s primary consideration for its store layout decision regarding the number and size of aisles in its stores? a) predictability b) comfort c) ease of navigation through the store d) customer exposure to merchandise e) inventory control Ans: d Section Ref: Types of Layouts Level: moderate

75. The company’s __________ dictates type of layout the company will have. a) location b) process c) union agreements d) HR policies e) market share Ans: b Section Ref: Facility Layout Within OM: How it all Fits Together Level: moderate

76. The step, when Designing a Product Layout, whose goal is to design a product layout that can produce the desired number of units with the least amount of work centers and a balance of workload. a) Compute efficiency, idle time & balance delay b) Determine cycle time c) Determine output rate d) Assign tasks to workstations e) Identify tasks & immediate predecessors Ans: c Section Ref: Designing Product Layouts Level: moderate

True/False

77. An assembly line is an example of an intermittent processing system.

Ans: False Section Ref: Types of Layouts Level: easy

78. A process layout is seen in companies with continuous processing systems.

Ans: False Section Ref: Types of Layouts Level: easy

79. A hospital is an example of process layout.

Ans: True Section Ref: Types of Layouts Level: moderate

80. As compared to a process layout, a product layout generally requires less skilled workers.

Ans: True Section Ref: Types of Layouts Level: moderate

81. In general, scheduling resources is less challenging under a process layout than it would be under a product layout.

Ans: False Section Ref: Types of Layouts Level: moderate

82. At Wal-Mart, to maximize customer comfort and enjoyment, layouts are designed with a limited number of aisles, each of which is very wide, rather than with multiple but narrow aisles.

Ans: False Section Ref: Types of Layouts Level: hard

83. In product layouts, the material moves continuously and uniformly through a series of workstations until the product is completed.

Ans: True Section Ref: Types of Layouts Level: easy

84. Load-distance calculations are very concerned with the direction of the move.

Ans: False Section Ref: Designing Process Layouts Level: moderate

85. Maximizing worker proximity minimizes privacy issues.

Ans: False Section Ref: Special Cases of Process Layout Level: moderate

86. In a fixed position layout, resources are fixed in various locations and the products move from one resource location to the next.

Ans: False Section Ref: Designing Process Layouts Level: easy

87. A predecessor can be worked in parallel with a successor.

Ans: False Section Ref: Designing Process Layouts Level: easy

88. Managers use a from-to matrix for facility layout design to identify both the number of trips and the direction of those trips.

Ans: False Section Ref: Designing Process Layouts Level: moderate

89. Typically, an REL chart is more subjective than a from-to matrix.

Ans: True Section Ref: Designing Process Layouts Level: moderate

90. An REL chart can contain ratings of both desirability of closeness and undesirability of closeness.

Ans: True Section Ref: Designing Process Layouts Level: moderate

91. The shortest distance between two locations is called rectilinear distance.

Ans: False Section Ref: Designing Process Layouts Level: moderate

92. When possible, managers should purchase and use CRAFT because it gives an optimal solution to the facility layout problem.

Ans: False Section Ref: Special Cases of Process Layout Level: moderate

93. A heuristic solution always provides the best possible answer.

Ans: False Section Ref: Special Cases of Process Layout Level: moderate

94. For the general warehouse layout problem, the department with the highest ratio of trips to areas needed should be located closest to the dock.

Ans: True Section Ref: Special Cases of Process Layout Level: moderate

95. The cycle time of a production line is based on the workstation with the highest potential output rate.

Ans: False Section Ref: Special Cases of Process Layout Level: moderate

96. If a process has a “faster” cycle time, then its cycle time has decreased.

Ans: True Section Ref: Special Cases of Process Layout Level: moderate

97. As the cycle time of a process decreases, its output also decreases.

Ans: False Section Ref: Special Cases of Process Layout Level: moderate

98. The theoretical minimum number of stations results in the production of daily requirements when no inefficiency exists.

Ans: True Section Ref: Special Cases of Process Layout Level: moderate

99. Group Technology has the advantage of bringing the efficiencies of a process layout to a product layout environment.

Ans: False Section Ref: Group Technology (Cell) Layouts Level: hard

100. A product layout can look like an S-curve.

Ans: True Section Ref: Group Technology (Cell) Layouts Level: moderate

101. Marketing is not highly affected by layout planning.

Ans: False Section Ref: Facility Layout Across the Organization Level: easy

102. The See’s Candies facility is an example of a product layout.

Ans: True Section Ref: Types of Layouts Level: easy

Short Answer

103. What are the two broad categories of operating systems?

Ans: intermittent processing systems and continuous processing systems Section Ref: Types of Layouts Level: easy

104. What are the four basic layout types?

Ans: process, product, fixed position, and hybrid Section Ref: Types of Layouts Level: easy

105. How does material move in a product layout?

Ans: continuously and uniformly through a series of workstations until the product is completed Section Ref: Types of Layouts Level: moderate

106. What is another name for cell layout?

Ans: group technology Section Ref: Designing Process Layouts Level: easy

107. What is the term for a layout in which the product cannot be moved due to its size, and all the resources have to come to the production site?

Ans: fixed-position layout Section Ref: Designing Process Layouts Level: easy

108. What are the three steps in designing process layouts?

Ans: (1) gather information, (2) develop a block plan or schematic of the layout, (3) develop a detailed layout Section Ref: Designing Process Layouts Level: easy

109. What is a table that gives the number of trips or units of product moved between any pair of departments called?

Ans: from-to matrix Section Ref: Designing Process Layouts Level: easy

110. What is a table that reflects opinions of managers with regard to the importance of having any two departments close together called?

Ans: REL chart Section Ref: Designing Process Layouts Level: easy

111. What is the maximum amount of time that each workstation has to complete its assigned task called?

Ans: cycle time Section Ref: Designing Product Layouts Level: easy

112. Compare the minimum versus maximum cycle time of a process.

Ans: The minimum cycle time is equal to the bottleneck, or longest, task. The maximum cycle time is equal to the sum of the task times in the whole process. The minimum and maximum cycle times are important as they establish the range of output for the production line.

Section Ref: Designing Product Layouts Level: hard

113. Describe what group technology is.

Ans: Group technology is the process of creating groupings of products based on similar processing requirements.

Section Ref: Group Technology (Cell) Layouts Level: moderate

114. Discuss why facility layout is important to a supply chain Ans: Arranging layouts for efficient delivery of materials to move directly to the production line is important. Arranging the facility layout to be linked to inbound and outbound shipments can greatly enhance the smooth flow of products throughout the supply chain.

Section Ref: The Supply Chain Link Level: moderate

115. Explain the difference between paced and un-paced lines.

Ans: Paced lines use an automatic enforced cycle time. Un-paced lines have more autonomy And the product may be removed off the assembly line.

Section Ref: Designing Product Layouts Level: moderate

Problems

116. Consider the following layout of departments.

A B C D F E Compute the ld score given the following from-to matrix.

Trips Between Departments Department A B C D E F A ⎯ 12 45 3 14 29 B ⎯ 16 72 5 42 C ⎯ 30 20 90 D ⎯ 10 4 E ⎯ 12

F

⎯

Answer: 743 Section Ref: Designing Process Layouts Level: moderate

117. Consider the following two layouts of departments.

Layout 1 Layout 2 D E C C D B A B A E Compute the ld score for each and choose the best, given the following from-to matrix.

Trips Between Departments Department A B C D E A ⎯ 18 8 3 4 B ⎯ 16 22 5 C ⎯ 50 20 D ⎯ 90 E ⎯ Answer: layout 1 = 344, layout 2 = 316, layout 2 is better Section Ref: Designing Process Layouts Level: hard

118. A firm has four departments to locate in the following space.

Department A has a daily average of 20, 10, and 60 trips to Departments B, C, and D, respectively; Department B has a daily average of 25 and 30 trips to Departments C and D, respectively; and Department C has a daily average of 50 trips to Department D. While there are 24 different layout combinations, only three are effectively different (in terms of distances between departments). Calculate the ld score for the three different combinations and choose the best.

Ans: A diagonal from B = 265, A diagonal from C = 235, A diagonal from D = 280, best layout is A diagonal from C Section Ref: Designing Process Layouts Level: hard

119. The items listed below are stored in a one-dock warehouse. Rank them in order from closest to the dock to furthest away.

Item Trips Area Needed (blocks) A 200 5 B 100 4 C 78 3 D 60 2

E

35

1

Ans: A-E-D-C-B Section Ref: Special Cases of Process Layout Level: moderate

120. The items listed below are stored in a one-dock warehouse. Rank them in order from closest to the dock to furthest away.

Item Trips Area Needed (blocks) Golf balls 300 1 Basketballs 420 3 Ballet shoes 10 1 Aerobics tapes 20 1 Volleyballs 360 3 Ans: golf balls-basketballs-volleyballs-aerobics tapes-ballet shoes Section Ref: Special Cases of Process Layout Level: moderate

121. If a production line produces 800 units per 8-hour workday, what is the cycle time in minutes?

Ans: 0.6 minutes Section Ref: Designing Product Layouts Level: moderate

122. Suppose that assembly of a product involves three different tasks taking 10 seconds, 20 seconds, and 30 seconds, respectively. What is the maximum possible output per hour of the system?

Ans: 120 Section Ref: Designing Product Layouts Level: moderate

123. Maxine’s cookie factory bottleneck is the oven. It takes 45 seconds to cook a batch of 144 cookies. What is the maximum number of cookies that Maxine can produce every hour?

Ans: 11,520 Section Ref: Designing Product Layouts Level: moderate

124. Maxine has identified the following process times and desired output. What is the theoretical minimum number of work stations? mix dough 90 sec desired output 30 batches/hour shape cookie 50 sec cook 45 sec cool 75 sec Ans: 3 Section Ref: Designing Product Layouts Level: moderate

125. Suppose that assembly of a product involves four different tasks taking 40 seconds, 20 seconds, 30 seconds, and 80 seconds, respectively. What is the theoretical minimum number of stations?

Ans: 3 Section Ref: Designing Product Layouts Level: moderate

126. Suppose that an assembly line consists of two stations. Station 1 involves three tasks, taking 40 seconds, 20 seconds, and 30 seconds, respectively. Station 2 involves one task that takes 80 seconds. Compute the efficiency and balance delay of the assembly line.

Ans: efficiency = 94.4%, balance delay = 5.6% Section Ref: Designing Product Layouts Level: moderate

127. The following table provides tasks on an assembly line, along with their predecessors and task times.

Immediate Task Predecessor Time (seconds) A None 45 B None 30 C A, B 48 D B 20 E C 10 F D, E 20 G E 40 If desired output is 75 units per hour, compute (a) the associated cycle time, (b) the assignment of tasks to stations using the longest task time rule, and (c) the efficiency of your solution.

Ans: (a) = 48 seconds (b) = Workstation Eligible Selected Time 1 A, B A 45 3 2 B B 30 18

Idle

3 4 5 6

C, D D, E E F, G G

C D E G F

48 20 10 40 20

0 28 18 8 28

(c) = 73.96% Section Ref: Facility Layout Across the Organization Level: hard

Short Answer

128. Managers' opinions about the importance of paired departments being near each other are recorded in ________________.

Ans: REL charts.

Section Ref: Designing Process Layouts Level: moderate

129. The number of trips or products moved between pairs of departments is recorded in a ____________________.

Ans: from-to matrix Section Ref: Designing Process Layouts Level: moderate

130. The _____________ distance between two locations on north-south and east-west axes is used in the _____________ model.

Ans: rectilinear, load-distance Section Ref: Designing Process Layouts Level: hard

131. The load-distance model tells us which departments should be closest to each other by _________.

Ans: minimizing the distance large numbers of products move.

Section Ref: Designing Process Layouts Level: hard

132. While traditional walls and doors provide privacy, they reduce _____________ and opportunities for ______________.

Ans: proximity, team work Section Ref: Designing Product Layouts Level: moderate

133. Cycle time assumes that each workstation has ____________ time to work on a product.

Ans: the same Section Ref: Designing Product Layouts Level: hard

134. Since there are 3600 seconds per hour, a process that is expected to produce 40 units per hour has a cycle time of _________________.

Ans: 90 seconds / unit Section Ref: Designing Product Layouts Level: hard

135. Bottlenecks determines determine maximum output because it __________________.

Ans: has the minimum cycle time.

Section Ref: Designing Product Layouts Level: moderate

136. What is the formula for the theoretical minimum number of work stations?

Ans: ∑t/NC Section Ref: Designing Product Layouts Level:

137. What is the formula efficiency?

Ans: Efficiency(%) = ∑t/NC(100) Section Ref: Designing Product Layouts Level: moderate

138. A single-model line is __________ to produce only __________ version of a product.

Ans: designed, one Section Ref: Designing Product Layouts Level: moderate

139. Facility layout decisions are _________ with a number of other ____________.

Ans: linked, operations decisions.

Section Ref: Facility Layout Within OM: How it All Fits Together Level: moderate

File: ch11, Chapter 11: Work System Design

Multiple Choice

1. Part of the operations strategy is designing a work system that: a) is easy to build. b) provides an appropriate risk/reward structure. c) provides the structure for the productivity of the company. d) provides a structure for the HR recruiting function. e) provides the structure for determining the company objectives.

Ans: c Section Ref: Designing a Work System Level: moderate

2. What technique eliminates unnecessary tasks and improves the process for completing tasks? a) methods analysis b) job design c) work measurement d) task inversion e) cycle counting Ans: a Section Ref: The Work Environment Level: moderate

3. Job design ensures that each employee’s _________ and ________ are geared towards achieving the company’s mission. a) compensation, teams b) duties, teams c) satisfaction, compensation d) duties, responsibility e) compensation, responsibility Ans: d Section Ref: The Work Environment Level: easy

4. Technical Feasibility of a job is the degree to which an individual or group of individuals is: a) able to understand the instructions. b) physically and mentally able to do the job.

c) able to control the process. d) physically and mentally able to provide suggestions. e) able to meet the organization’s mission.

Ans: b Section Ref: Job Design Level: hard

5. Determining if the best financial opportunity is to have an individual perform the task or automate the task is which of the following? a) Technical Feasibility b) Behavioral Feasibility c) Activity Based Accounting Feasibility d) Job Enrichment Feasibility e) Economic Feasibility Ans: e Section Ref: Job Design Level: hard

6. The challenge with behavioral feasibility is to design a job ____________ and that adds value. a) that is socially acceptable b) that will not get the worker in trouble c) without doing something that is morally wrong d) that the worker feels good about doing e) fits in with the norms of society Ans: d Section Ref: Job Design Level: hard

7. Which of the following is an advantage of specialization in job design? a) high turnover rates b) minimal training needed c) intrinsic satisfaction of employees d) increased opportunity for advancement of employees e) low scrap rates Ans: b Section Ref: Job Design Level: moderate

8 From the employee’s perspective, which of the following is not an advantage of job specialization? a) reasonable wages b) minimal training needed c) minimal mental effort needed d) minimal responsibilities e) minimal credentials needed Ans: b Section Ref: Job Design Level: moderate

9. What is the approach to job design which involves an increase in responsibility for work planning and/or inspection? a) job enlargement b) job rotation c) job involvement d) job enrichment e) job enhancement Ans: d Section Ref: Job Design Level: moderate

10. Which of the following most closely describes job enrichment? a) vertical expansion b) transferring workers through a series of jobs to increase their scope of experience c) increasing the amount of workspace assigned to a worker d) horizontal expansion e) assigning two jobs to the same worker Ans: a Section Ref: Job Design Level: moderate

11. Having waiters cook and having the cooks wait on tables is an example of ______________. a) job enlargement b) job rotation c) job enrichment d) job involvement e) job enhancement Ans: b Section Ref: Job Design Level: moderate

12. What are small groups of employees who meet to identify, analyze, and solve operational problems called? a) traditional work groups b) cross-functional teams c) self-managed teams d) problem-solving teams e) special-purpose teams Ans: d Section Ref: Job Design Level: moderate

13. Which of the following is typically not associated with problem solving teams? a) employees typically volunteer b) employees are trained in problem solving techniques c) employees contribute on a short term basis d) employees engage in data gathering e) employee participation is on an ongoing basis Ans: c Section Ref: Job Design Level: moderate

14. Which of the following issues would best be handled by a special-purpose team? a) A machine on the shop floor occasionally malfunctions. b) Particular items in a warehouse are difficult to find. c) A proposal has been made to switch from rail to truck for both transporting incoming parts and product distribution. d) Customers are complaining that they get charged twice for their purchases. e) Forklifts have difficulty moving material in the factory because there is too much congestion in the aisles.

Ans: c Section Ref: Job Design Level: hard

15. A difference between self-directed and self-managed teams is: a) who defines the team’s working goal b) who defines the team’s compensation package c) who defines the team rules d) where the work is performed e) what means of job enrichment will be applied

Ans: a Section Ref: Job Design Level: moderate

16. What is the approach that moves the work to the worker rather than the worker to the workplace? a) teleworking b) virtual office c) office at home d) office on the move e) the alternative workplace Ans: e Section Ref: Methods Analysis Level: moderate

17. Which of the following is not a form of alternative workplace arrangements? a) hot desking b) desk sharing c) working from the hotel room on an occasional business trip d) telework center e) virtual office Ans: c Section Ref: Job Design Level: easy

18. Advantages of the alternative workplace include all except which of the following? a) eliminating offices that people do not need b) reducing overhead expenses c) offers more flexibility to balance work and family d) increased cohesiveness among employees e) employees devote more time to customers and/or meaningful work activities Ans: d Section Ref: Methods Analysis Level: hard

19. To determine whether the alternative workplace is right for your organization, which of the following questions should be positively answered? a) are you out of space? b) does your organization have an open culture?

c) does your organization allow the employee to set their own expectations? d) does your organization subscribe to the ‘new’ work force program? e) does the organization plan office parties?

Ans: b Section Ref: Methods Analysis Level: moderate

20. Methods analysis can _________________. a) improve efficiency b) analyze the fairness of pay systems c) improve how teams function d) evaluate job performance e) help select issues that need to be brought to management’s attention Ans: a Section Ref: The Work Environment Level: moderate

21. The approach that details the tasks of a job and how to do them is ____________________. a) work measurement b) job evaluation c) methods analysis d) job design e) work sampling Ans: c Section Ref: Methods Analysis Level: moderate

22. What results from methods analysis? a) a graph of how long each step takes b) an evaluation of current employees c) time standards d) guidance for designing jobs e) a standard, detailed procedure for an operation Ans: e Section Ref: The Work Environment Level: moderate

23. What is the methods analysis chart that describes the overall sequence of operation, movement, inspection, delay, and storage?

a) process flowchart b) worker-machine chart c) simultaneous-motion (simo) chart d) efficiency/time-of-day chart e) operations chart Ans: a Section Ref: Work Measurement Level: hard

24. Which of the following is not taken into consideration when dealing with the effects of working conditions on worker productivity, quality and safety? a) cafeteria location b) temperature c) relative humidity d) ventilation e) lighting Ans: a Section Ref: The Work Environment Level: moderate

25. What is the governmental agency that has inspectors who check for safety conditions? a) ISO b) OSHA c) FCC d) IRS e) HEW Ans: b Section Ref: Work Measurement Level: hard

26. What does work measurement determine? a) how long it should take to do a job b) what is the best way to do a job c) who is the best worker d) where work should be done e) why a particular step must be included in an operation Ans: a Section Ref: Work Measurement Level: moderate

27. The ____________ time is the time it should take a qualified operator, working at a sustainable pace and using the appropriate tools and process, to do the job. a) performance b) observed c) normal d) standard e) ideal Ans: d Section Ref: Setting Standard Times Level: moderate

28 The formula to determine standard labor costs for costing a product is: a) standard labor time x hourly labor cost b) standard labor time x normal labor cost c) normal labor time x hourly labor cost d) normal labor time x normal labor cost e) adjusted normal time x adjusted normal labor cost Ans: a Section Ref: Work Measurement Level: moderate

29. A company uses standard times for ______________________. a) public relations b) advertising c) financial accounting d) the winter months e) costing Ans: e Section Ref: Setting Standard Times Level: moderate

30. The use of standard times for costing allows the company to do all except which of the following? a) evaluate quantitative methods b) evaluate new product proposals c) evaluate use of new equipment d) evaluate new techniques for building a product e) evaluate individual operator proficiency Ans: a Section Ref: Setting Standard Times

Level: easy

31. Standard times can be used to measure performance of individual workers. If a worker fails to match the standard time, the company should do what? a) put the worker on probation b) ignore the situation c) change the standard time d) provide training to improve the worker’s performance e) fire the worker Ans: d Section Ref: Setting Standard Times Level: moderate

32. Which of the following is not a commonly used process for setting standard times? a) elapsed times b) time study c) elemental time data d) predetermined time data e) work sampling Ans: a Section Ref: Setting Standard Times Level: moderate

33. The steps involved in a time study include all except which of the following? a) Break the job into easily recognizable units. b) Determine the probability distribution that best fits the observed times. c) Calculate the number of cycles you must observe. d) Time each element, record the times, and rate the worker’s performance. e) Tell the worker whose job you will be studying.

Ans: b Section Ref: Setting Standard Times Level: hard

34. Typically the job chosen for the time study will be ___________________. a) a routine job that is labor intensive b) a simple job performed by many different people c) done primarily by machine d) done only occasionally e) insignificant

Ans: a Section Ref: Setting Standard Times Level: moderate

35. For the step in a time study that involves breaking the job down into easily recognizable elements, each of these elements should ________________. a) overlap b) not be stand-alone c) not involve the worker d) have clear starting and ending points e) be semi-continuous Ans: d Section Ref: Setting Standard Times Level: moderate

36. The formula for determining the number of observations needed depends upon all except which of the following values? a) the number of standard deviations needed for the desired confidence b) the maximum observed value in the sample c) the standard deviation of the sample observations d) the mean of the sample observations e) the desired accuracy Ans: b Section Ref: Setting Standard Times Level: moderate

37. How many standard deviations is required for a 98% confidence level? a) 2 b) 2.05 c) 2.17 d) 2.33 e) 2.58 Ans: d Section Ref: Setting Standard Times Level: easy

38. What is the effect of an increase in the desired confidence level on the number of observations necessary in a time study? a) increases b) decreases

c) unchanged d) may increase or decrease e) impossible to say Ans: a Section Ref: Setting Standard Times Level: moderate

39. When performing a time study, the analyst converts the observed time into the time an "average" worker would require working at an acceptable pace by using which of the following? a) allowance factor b) mean time modulation c) methods analysis d) performance rating factor e) analysis of efficiency Ans: d Section Ref: Setting Standard Times Level: moderate

40. Which of the following values for performance rating factor would be for an above-average work pace? a) 90% b) 100% c) 140% d) 138% e) 78% Ans: c Section Ref: Setting Standard Times Level: easy

41. Establishing a performance factor is an attempt to: a) fudge the actual times. b) punish the worker who does not perform fast enough. c) counterbalance any unusual patterns noted. d) allow management to ‘encourage’ greater productivity. e) use the ISO 9000 approval process.

Ans: c Section Ref: Setting Standard Times Level: moderate

42. In calculating the time standard, the frequency of occurrence for a work element is _________________. a) how many times the work element is repeated in doing the job once b) how many other jobs have the same work element c) the fraction of the time the work element needs to be done when the job is done d) the number of times the work element took longer than all the other work elements e) the inverse of the wave length for the work element Ans: c Section Ref: Setting Standard Times Level: moderate

43. For each work element in the time study, multiplying the mean observed time by the performance rating factor by the frequency of occurrence results in what? a) the normal time for the element b) the average observed time for the element c) the standard time for the element d) the average delay for the element e) the standard time for the job Ans: a Section Ref: Setting Standard Times Level: moderate

44. In a time study, personal time, fatigue, and unavoidable delays (PFD) during the typical work day are accounted for in what? a) the normal time b) an allowance factor c) the performance rating d) how the work elements are defined e) costs Ans: b Section Ref: Setting Standard Times Level: easy

45. The allowance factor is computed by adding one to PFD (personal time, fatigue, and unavoidable delays) when the allowance is based on what? a) normal time b) the performance rating factor c) job time d) time worked e) standard time Ans: c

Section Ref: Setting Standard Times Level: moderate

46. If OT = the mean observed time, PRF = the performance rating factor, F = the frequency of occurrence, and PFD = the percentage allowance based on time worked, what is the formula to compute the normal time? a) (OT)(PRF)(F) b) (OT)(PRF)(F)(1 + PFD) c) (OT)(PRF)(F) / (1 – PFD) d) (OT)(PRF) / (F) e) (OT)(PRF)(F) / (1 + PFD) Ans: a Section Ref: Setting Standard Times Level: moderate

47. If OT = the mean observed time, PRF = the performance rating factor, F = the frequency of occurrence, and PFD = the percentage allowance based on time worked, what is the formula to compute the standard time? a) (OT)(PRF)(F) b) (OT)(PRF)(F)(1 + PFD) c) (OT)(PRF)(F) / (1 – PFD) d) (OT)(PRF) / (F) e) (OT)(PRF)(F) / (1 + PFD) Ans: c Section Ref: Setting Standard Times Level: moderate

48. If OT = the mean observed time, PRF = the performance rating factor, F = the frequency of occurrence, and PFD = the percentage allowance adjustment based on job time, what is the formula to compute the standard time? a) (OT)(PRF)(F) b) (OT)(PRF)(F)(1 + PFD) c) (OT)(PRF)(F) / (1 – PFD) d) (OT)(PRF) / (F) e) (OT)(PRF)(F) / (1 + PFD) Ans: b Section Ref: Setting Standard Times Level: moderate

49. A company’s accepted time studies are stored in a(n) ____________ for possible future use.

a) file cabinet b) time study vault c) warehouse d) jar e) elemental time database Ans: e Section Ref: Setting Standard Times Level: easy

50. Typical work elements that occur in many jobs include all except which of the following? a) insert something b) tighten something c) position an item d) figure out the instructions e) reach for materials Ans: d Section Ref: Setting Standard Times Level: moderate

51. Which of the following steps is not included when a time study analyst uses standard elemental times? a) Identify the standard elements of the job. b) Determine the performance rating factor. c) Adjust the database times if needed. d) Check the database for time studies done on these elements. e) If no valid studies exist for this or a similar work element, do a time study for the new work element.

Ans: b Section Ref: Setting Standard Times Level: moderate

52. ____________ is a published database of elemental time data used for establishing standard times. a) Predetermined time data b) Time elements c) Time histories d) Performance times e) Time samples Ans: a Section Ref: Setting Standard Times Level: moderate

53. Which of the following would not be a basic element into which a job would be split when using predetermined time data? a) reach b) sort c) grasp d) insert e) turn Ans: b Section Ref: Setting Standard Times Level: hard

54. Which of the following is an advantage of using predetermined time data? a) You can calculate standard times before the job begins. b) Very little skill is required. c) There is universal agreement in assessing the level of difficulty of different work elements. d) No calculations are required. e) You do not need to know much about the job.

Ans: a Section Ref: Setting Standard Times Level: hard

55. What is a technique for estimating the proportion of time an employee or machine spends on different work activities? a) predetermined time data b) time elements c) stopwatch time study d) work sampling e) simultaneous motion study Ans: d Section Ref: Setting Standard Times Level: moderate

56. In work sampling, when should observations be taken? a) at the same time each day b) once per week c) at random times d) once per hour e) once per day

Ans: c Section Ref: Compensation Level: moderate

57. Which of the following is a basic difference of work sampling compared to a time study? a) It does not require any observations. b) It requires fewer observations to accomplish the same thing. c) It is better suited for short, repetitive tasks. d) It does not provide standard times. e) It is suitable only for assembly lines.

Ans: d Section Ref: Setting Standard Times Level: moderate

58. Which of the following is not a step in work sampling? a) Estimate the proportion of time spent on the given activity. b) Estimate the sample size based on the desired level of accuracy and confidence. c) Define the activities to be observed. d) Identify the worker or machine to be sampled. e) Divide the job into basic elements.

Ans: e Section Ref: Compensation Level: hard

59. Companies need to design compensation systems that _________________. a) punish poor performance b) reinforce the behaviors needed to meet the company’s objectives c) are easy to administer d) do not differ significantly from those of other firms in the industry e) are innovative Ans: b Section Ref: Compensation Level: moderate

60. Which of the following is not characteristic of time-based compensation systems? a) wages are easily calculated b) employees know what they will get in their regular paycheck c) simplicity d) normally used when measuring output per employee is not applicable e) lower cost per unit than output-based systems

Ans: e Section Ref: Compensation Level: moderate

61. Output-based incentive systems are based on the assumption that some workers _____________. a) mentally calculate their pay by keeping track of their output b) are motivated by money and produce more when pay is linked to performance c) like to work in a competitive environment d) like to work overtime e) work harder than others Ans: b Section Ref: Learning Curves Level: moderate

62. Which of the following is not characteristic of output-based compensation systems? a) can be used to compensate individuals b) can be used to compensate groups c) can include a base salary d) often include an upper limit on how much an individual can be compensated each day e) need to be linked to quality as well as quantity to be successful Ans: d Section Ref: Learning Curves Level: moderate

63. Profit sharing and gain sharing are two methods of _______________. a) group incentive plans b) keeping costs down c) calculating pay for top management d) employee retirement plans e) keeping expense account costs under control Ans: a Section Ref: Learning Curves Level: moderate

64. Disadvantages of individual incentive systems include all except which of the following? a) They undermine teamwork. b) A study has shown they had no effect on worker performance. c) They avoid the “free-rider” problem.

d) They need a significant amount of data collection. e) They give employees a short-term focus.

Ans: c Section Ref: Learning Curves Level: hard

65. The fact that human activities typically improve when they are done on a repetitive basis is described by a(an) _________________ curve. a) normal distribution b) learning c) binomial distribution d) lognormal distribution e) S-shaped Ans: b Section Ref: Learning Curves Level: easy

66. A worker performed a particular task for the first time, and it took 10 minutes. If we assume a 90% learning curve, how long will it take the worker the fourth time she performs the task? a) 10.0 minutes b) 9.0 minutes c) 8.1 minutes d) 7.29 minutes e) 6.561 minutes Ans: c Solution: T x Ln .810 x 10 = 8.1 Section Ref: Learning Curves Level: moderate

67. Which one of the following would learning curves affect the most? a) layout analysis b) statistical process control c) planning labor requirements d) location analysis e) robots Ans: c Section Ref: Learning Curves Level: moderate

68. The first unit of a product took 400 hours to complete. If an 80% learning curve is expected, how long will the 18th unit take to complete? a) 157.6 hours b) 163.8 hours c) 400.0 hours d) 3886.4 hours e) 7200.0 hours Ans: a Solution: T x Ln .394 x 400 = 157.6 Section Ref: Learning Curves Level: moderate

69. The first unit of a product took 400 hours to complete. If an 80% learning curve is expected, how long will it take to complete the first 18 units? a) 157.6 hours b) 163.8 hours c) 400.0 hours d) 3886.4 hours e) 7200.0 hours Ans: d Solution: T x Ln 9.716 x 400 = 3886.4 Section Ref: Learning Curves Level: moderate

70. The first unit of a product took 400 hours to complete. The firm plans to produce 8 units in the first month and 10 units in the second month. If an 80% learning curve is expected, how many hours will the firm use to work on the product during the second month? a) 4000.0 hours b) 2526.0 hours c) 3886.4 hours d) 2138.4 hours e) 1748.0 hours Ans: e Solution: T x Ln 6.315 x 400 = 3886.4 5.346 x 400 = 2136 3886.4 – 2136 = 1748 Section Ref: Learning Curves Level: hard

71. The first unit of a product took 80 hours to complete. If a 75% learning curve is expected, how long will the 22nd unit take to complete? a) 22.2 hours b) 751.0 hours c) 25.3 hours d) 80.0 hours e) 1760.0 hours Ans: a Solution: T x Ln .277 x 80 = 22.16 or 22.2 Section Ref: Learning Curves Level: moderate

72. The first unit of a product took 80 hours to complete. If a 75% learning curve is expected, how long will it take to complete the first 22 units? a) 22.2 hours b) 751.0 hours c) 25.3 hours d) 80.0 hours e) 1760.0 hours Ans: b Solution: T x Ln 9.388 x 80 = 751.04 Section Ref: Learning Curves Level: moderate

73. The first unit of a product took 80 hours to complete. The firm plans to produce 10 units in the first month and 12 units in the second month. If a 75% learning curve is expected, how many hours will the firm use to work on the product during the second month? a) 960.0 hours b) 505.2 hours c) 751.0 hours d) 447.1 hours e) 303.9 hours Ans: e Solution: T x Ln 5.589 x 80 = 447.12 6.315 x 80 = 505.20 Section Ref: Learning Curves Level: hard

74. _____________ is the world’s largest privately held software manufacturer. a) Microsoft b) Corel c) GAMS d) SAS e) IBM Ans: d Section Ref: Job Design Level: hard

75. At SAS, employees are not allowed to work later than ____________________. a) 5:00 p.m. b) 6:00 pm. c) 7:00 p.m. d) 9:00 p.m. e) midnight Ans: b Section Ref: Job Design Level: hard

76. Which two are sustainability practices in work system design? a) environmental and social b) social and ecosystem c) industrial and agriculture d) development and environment e) industrial and social Ans: a Section Ref: Sustainability Level: moderate

True/False

77. Job design ensures that each employee’s activities are closely timed.

Ans: False Section Ref: Designing A Work System Level: easy

78. When deciding if the firm should participate in alternative workplace arrangements you must ensure that the same level of direct report control is maintained.

Ans: False Section Ref: Methods Analysis Level: easy

79. Methods analysis eliminates unnecessary tasks and improves the process for completing tasks.

Ans: True Section Ref: Job Design Level: moderate

80. The degree to which an individual or group of individuals can physically and mentally handle the job is its technical feasibility.

Ans: True Section Ref: Job Design Level: moderate

81. Problem-solving teams are small groups of employees who meet to identify, analyze, and solve operational problems.

Ans: True Section Ref: Job Design Level: moderate

82. The process flowchart describes the overall sequence of operation, movement, inspection, delay, and storage.

Ans: True Section Ref: The Work Environment Level: hard

83. FCC is the governmental agency that has inspectors who check for safety conditions.

Ans: False

Section Ref: Work Measurement Level: moderate

84. Work measurement determines how long it should take to do a job.

Ans: True Section Ref: Work Measurement Level: moderate

85. The standard time is the time it should take a qualified operator, working at a sustainable pace and using the appropriate tools and process, to do the job.

Ans: True Section Ref: Work Measurement Level: moderate

86. Typically the job chosen for the time study will be a routine job that is labor intensive.

Ans: True Section Ref: Setting Standard Times Level: moderate

87. An increase in the desired confidence level will decrease the number of observations necessary in a time study.

Ans: False Section Ref: Setting Standard Times Level: moderate

88. In calculating the time standard, the frequency of occurrence for a work element is how many times the work element is repeated in doing the job once.

Ans: False Section Ref: Setting Standard Times Level: moderate

89. In a time study, personal time, fatigue, and unavoidable delays (PFD) during the typical work day are accounted for in the allowance factor.

Ans: True Section Ref: Setting Standard Times Level: easy

90. If OT = the mean observed time, PRF = the performance rating factor, F = the frequency of occurrence, and PFD = the percentage allowance adjustment based on job time, the formula to compute the standard time is (OT)(PRF)(F)(1 + PFD).

Ans: True Section Ref: Setting Standard Times Level: moderate

91. If OT = the mean observed time, PRF = the performance rating factor, F = the frequency of occurrence, and PFD = the percentage allowance based on time worked, the formula to compute the normal time is (OT)(PRF)(F).

Ans: True Section Ref: Setting Standard Times Level: moderate

92. If OT = the mean observed time, PRF = the performance rating factor, F = the frequency of occurrence, and PFD = the percentage allowance based on time worked, the formula to compute the standard time is (OT)(PRF)(F).

Ans: False Section Ref: Setting Standard Times Level: moderate

93. Predetermined time data is a published database of elemental time data used for establishing standard times.

Ans: True Section Ref: Setting Standard Times Level: moderate

94. An advantage of using predetermined time data is that you can calculate standard times before the job begins.

Ans: True Section Ref: Setting Standard Times Level: hard

95. In work sampling, observations should be taken at random times.

Ans: True Section Ref: Setting Standard Times Level: moderate

96. Output-based incentive systems are based on the assumption that some workers are motivated by money and produce more when pay is linked to performance.

Ans: True Section Ref: Compensation Level: moderate

97. Gain Sharing emphasized profit levels so employees can share the benefits of increased profits.

Ans: False Section Ref: Compensation Level: moderate

98. The fact that human activities typically improve when they are done on a repetitive basis is described by a learning curve.

Ans: True Section Ref: Learning Curves Level: easy

99. The table containing the Learning Curve Coefficients allows one to calculate both the time it should take to build the nth unit as well as the total production time required to build the entire production run when the nth unit is the last one completed.

Ans: True Section Ref: Setting Standard Times Level: moderate

100. Human resources is not really involved in work sampling as this is a production facility process.

Ans: False Section Ref: Work System Design Across The Organization Level: moderate

101. Economic feasibility is the degree to which the job adds value and the cost of performing the job done are profitable for the company.

Ans: True Section Ref: Job Design Level: moderate

Essay

102. What are the approaches to eliminating employee boredom? Briefly describe each.

Ans: Job enlargement involves a horizontal expansion of the job by adding other related tasks.

Job enrichment involves a vertical expansion of the job by adding more responsibility for work planning and/or inspection. Job rotation involves moving workers to other jobs on the same level.

Section Ref: Job Design Level: moderate

103. What are the characteristics of self-managed teams?

Ans: designed to achieve a high level of employee involvement; used an integrated team approach, allow people who are most knowledgeable about the process to control the work flow; allow employees to develop a sense of ownership and pride in their work Section Ref: Methods Analysis Level: hard

104. What are the advantages of the alternative workplace?

Ans: reducing overhead expenses by eliminating offices that people do not need and consolidating others; offers more flexibility for employees to balance work and family; and increased productivity and job effectiveness due to employees devoting more time to customers and/or meaningful work activities Section Ref: Methods Analysis Level: hard

105. What are the steps in methods analysis?

Ans: (1) Identify the operation to be analyzed. (2) Gather all relevant information about the operation, including tools, materials, and procedures. (3) Talk with employees who use the operation or have used similar operations. (4) Chart the operation, whether you are analyzing an existing operation or a new operation. (5) Evaluate each step in the existing operation or proposed new operation. (6) Revise the existing or new operation as needed. (7) Put the existing or new operation into effect Section Ref: Methods Analysis Level: hard

106. With respect to costing, what uses does a company have for standard times?

Ans: Standard times allow companies to evaluate new product proposals, the use of new materials and equipment, new processes or techniques for building a product, and individual operator proficiency.

Section Ref: Setting Standard Times Level: hard

107. What are the ways that standard times can help in planning and scheduling?

Ans: make workload forecasts; plan how much labor is needed; schedule work; promise viable delivery dates to customers Section Ref: Setting Standard Times Level: moderate

108. What are the steps involved in doing a time study?

Ans: (1) Choose the job for the time study. (2) Tell the worker whose job you will be studying.

(3) Break the job into easily recognizable elements. (4) Calculate the number of cycles you must observe. (5) Time each element, record the times, and rate the worker’s performance. (6) Compute the standard time.

Section Ref: Setting Standard Times Level: hard

109. What are the steps involved when a time study analyst uses standard elemental times?

Ans: (1) Identify the standard elements of the job. (2) Check the database for time studies done on these elements. (3) If no valid studies exist for this or a similar work element, do a time study for the new work element. (4) Adjust the database times if needed. (5) Add the element times to determine the standard time.

Section Ref: Setting Standard Times Level: hard

110. What are the steps involved in work sampling?

Ans: (1) Identify the worker or machine to be sampled. (2) Define the activities to be observed.

(3) Estimate the sample size based on the desired level of accuracy and confidence. (4) Develop the random observation schedule. (5) Make observations and record the data. (6) Estimate the proportion of time spent on the given activity.

Section Ref: Setting Standard Times Level: hard

111. What are the characteristics of time-based compensation systems?

Ans: wages are easily calculated; the pay is steady and employees know what they will get in their regular paycheck; simplicity; and normally used when measuring output per employee is not applicable Section Ref: Compensation Level: moderate

112. Describe why understanding learning curves is important to the organization.

Ans: Understanding learning curves is important as it allows for the calculation and planning of how much labor is needed to finish the same task or build the same product a number of times.

The company can also better schedule its workload.

Section Ref: Learning Curves Level: moderate

113. Discuss how job design is related to the supply chain.

Ans: Every member of the supply chain needs to have his or her role defined so they know what has to be done, who has to do it, how it should be done, and how it should be measured.

Section Ref: The Supply Chain Link Level: easy

114. What does OSHA stand for and when was it enacted?

Ans: Occupational Safety and Health Administration was enacted in 1970 to mandate specific safety conditions that must be met.

Section Ref: The Work Environment Level: moderate

Short Answer

115. Jobs that are physically and mentally doable are said to be __________________.

Ans: technically feasible.

Section Ref: Job Design Level: hard

116. Jobs that cost less than the value they add are said to be __________________.

Ans: economically feasible.

Section Ref: Job Design Level: hard

117. Jobs that are intrinsically satisfying to the employee are said to be ____________________.

Ans: behaviorally feasible Section Ref: Job Design Level: hard

118. Expanding a job horizontally through increasing the scope of work assigned is called ________________.

Ans: job enlargement Section Ref: Job Design Level: hard

119. Expanding a job vertically through increased worker responsibility is called ____________.

Ans: job enrichment Section Ref: Job Design Level: hard

120. Studying the detailed process for doing a job is called ___________________.

Ans: methods analysis Section Ref: Methods Analysis Level: hard

121. Studying the time it takes to do a job is called __________________.

Ans: work measurement Section Ref: Work Measurement Level: hard

122. The time it should take a qualified worker using appropriate process and tools to complete a specific job allowing time for personal fatigue and unavoidable delays is called _________________.

Ans: standard time Section Ref: Work Measurement Level: hard

123. Developing standard time by observing an operator is called ___________________.

Ans: a time study Section Ref: Setting Standard Times Level: hard

124. The average observed time for each work element is its __________________.

Ans: mean observed time Section Ref: Setting Standard Times Level: hard

125 .Research on twenty Social Security Administration offices’ individual incentive systems showed that an individual merit pay system had _______________.

Ans: no effect on worker performance Section Ref: Compensation Level: moderate

126. Calculating the learning rate is a means for ____________.

Ans: evaluating productivity Section Ref: Learning Curves Level: moderate

Problems

127. Consider the following information.

Standard Deviation Mean Observed Time Work Element (minutes) (minutes) Performance Rating 1 0.4 2.2 0.9 2 0.1 1.2 1.2 3 0.4 4.4 0.8 4 0.2 3.6 1.0 (a) Determine the sample size needed if the standard time estimate is to be within 1% of the true mean 90% of the time. (b) Calculate the normal time for each work element. (c) Using an allowance factor of 10% based on job time; calculate the standard time for each work element and for the entire job. (d) Based on the standard time, how many units should an employee performing at 100% of standard complete during an 8-hour day?

Ans: (a) 900 for element 1, 189 for element 2, 225 for element 3, 84 for element 4, so 900 is the sample size required; (b) 1.98 for element 1, 1.44 for element 2, 3.52 for element 3, 3.60 for element 4; (c) 2.178 for element 1, 1.584 for element 2, 3.872 for element 3, 3.960 for element 4, 11.594 for the entire job; (d) 41.4 units Section Ref: Setting Standard Times Level: moderate

128. You’ve been assigned to use work sampling to determine how much time Frank spends sorting the mail. You’ve decided that a preliminary estimate of sample size is required to determine the proportion of time spent sorting the mail with a 97% confidence level and within 5% of the true value. What is the preliminary estimate of sample size?

Ans: 470.89 Section Ref: Setting Standard Times Level: easy

129. Frank’s appliance store has just employed a new repair technician. The factor says that the re is a 90% learning curve. Typically the first refrigerator repair takes 2 hours. How long should it take this technician to repair the 8th refrigerator?

Ans: 1.458 hours Section Ref: Learning Curves Level: easy

130. Consider the following information.

Standard deviation Mean Observed Time Work Element (minutes) (minutes) Performance Rating 1 1.2 22.2 1.1 2 0.9 31.2 1.4 3 1.3 44.4 0.6 4 0.6 13.6 1.2 5 0.4 22.8 0.9 (a) Determine the sample size needed if the standard time estimate is to be within 2% of the true mean 99% of the time. (b) Calculate the normal time for each work element. (c) Using an allowance factor of 20% based on the amount of time worked; calculate the standard time for each work element and for the entire job. (d) Based on the standard time, how many units should an employee performing at 110% of standard complete during an 8-hour day?

Ans: (a) 49 for element 1, 14 for element 2, 14 for element 3, 32 for element 4, 5 for element 5, so 49 is the sample size required; (b) 24.42 for element 1, 43.68 for element 2, 26.64 for element 3, 16.32 for element 4, 20.52 for element 5; (c) 30.53 for element 1, 54.60 for element 2, 33.30 for element 3, 20.40 for element 4, 25.65 for element 5, 164.48 for the entire job; (d) 3.21 units Section Ref: Setting Standard Times Level: hard

131. Consider the following information.

Standard Deviation Mean Observed Time Work Element (minutes) (minutes) Performance Rating 1 0.8 8.2 1.3 2 0.6 9.2 1.1 3 0.5 4.4 0.8 (a) Determine the sample size needed if the standard time estimate is to be within 5% of the true mean 99% of the time. (b) Calculate the normal time for each work element. (c) Using an allowance factor of 15% based on job time; calculate the standard time for each work element and for the entire job. (d) Based on the standard time, how many units should an employee performing at 100% of standard complete during an 8-hour day?

Ans: (a) 25 for element 1, 11 for element 2, 34 for element 3, so 34 is the sample size required; (b) 10.66 for element 1, 10.12 for element 2, 3.52 for element 3; (c) 12.259 for element 1, 11.638 for element 2, 4.048 for element 3, 27.945 for the entire job; (d) 17.2 units Section Ref: Setting Standard Times Level: moderate

132. Consider the following information.

Element 1 Element 2 Observations (minutes) (minutes)

Element 3 (minutes)

Element 4 (minutes)

Element 5 (minutes)

Cycle 1 2.79 3.27 9.34 4.12 1.37 Cycle 2 2.97 3.07 8.76 4.42 1.22 Cycle 3 2.59 3.21 8.82 4.01 1.57 Cycle 4 2.47 3.32 9.25 3.87 1.77 Cycle 5 3.21 3.46 8.85 4.45 1.98 Cycle 6 2.88 3.33 9.09 4.21 1.45 Cycle 7 2.56 3.01 8.66 4.00 1.47 Cycle 8 2.76 2.98 8.81 3.93 1.22 Cycle 9 2.69 3.45 8.71 4.34 1.59 Cycle 10 2.35 3.12 9.11 4.22 1.42 Performance rating factor 1.1 0.8 1.0 1.2 0.7 Frequency 1 1 1 1 1 (a) Calculate the mean observed time for each work element. (b) Calculate the normal time for each work element. (c) Using an allowance factor of 10% based on job time; calculate the standard time for each work element and for the entire job. (d) Based on the standard time, how many units should an employee performing at 100% of standard complete each hour?

Ans: (a) 2.73 for element 1, 3.22 for element 2, 8.94 for element 3, 4.16 for element 4, 1.51 for element 5; (b) 3.00 for element 1, 2.58 for element 2, 8.94 for element 3, 4.99 for element 4, 1.05 for element 5; (c) 3.30 for element 1, 2.84 for element 2, 9.83 for element 3, 5.49 for element 4, 1.16 for element 5, 22.62 for the entire job; (d) 2.65 units Section Ref: Setting Standard Times Level: moderate

133. Consider the following information.

Element 1 Element 2 Element 3 Observations (minutes) (minutes) (minutes) Cycle 1 4.82 8.27 7.34 Cycle 2 4.97 8.37 7.67 Cycle 3 4.69 8.21 7.82 Cycle 4 4.87 8.23 8.25 Cycle 5 4.41 8.46 7.35 Cycle 6 4.88 8.03 8.09 Cycle 7 4.65 8.61 7.83 Cycle 8 4.86 7.98 7.81 Cycle 9 4.99 8.57 7.71 Cycle 10 5.01 8.05 7.11 Performance rating factor 1.3 0.9 1.1 Frequency 1 1 1 (a) Calculate the mean observed time for each work element. (b) Calculate the normal time for each work element. (c) Using an allowance factor of 15% based on the amount of time worked; calculate the standard time for each work element and for the entire job. (d) Based on the standard time, how many units should an employee performing at 120% of standard complete each hour?

Ans: (a) 4.82 for element 1, 8.28 for element 2, 7.70 for element 3; (b) 6.26 for element 1, 7.45 for element 2, 8.47 for element 3; (c) 7.36 for element 1, 8.76 for element 2, 9.96 for element 3, 26.08 for the entire job; (d) 2.76 units Section Ref: Setting Standard Times Level: moderate

134. Consider the following information.

Element 1 Element 2 Element 3 Element 4 Element 5 Observations (minutes) (minutes) (minutes) (minutes) (minutes) Cycle 1 4.99 6.27 4.34 5.76 3.47 Cycle 2 6.07 5.82 3.33 Cycle 3 4.79 6.21 4.82 5.51 3.57 Cycle 4 4.67 6.32 5.47 3.47 Cycle 5 6.66 4.65 5.92 3.21 Cycle 6 4.88 6.44 5.71 3.45 Cycle 7 4.76 6.01 5.55 3.47 Cycle 8 5.99 5.63 3.36 Cycle 9 6.45 4.71 5.89 3.19 Cycle 10 4.41 6.33 5.66 3.32 Performance rating factor 1.3 1.1 0.8 0.9 1.0 Frequency 0.6 1 0.4 1 1 (a) Calculate the mean observed time for each work element. (b) Calculate the normal time for each work element. (c) Using an allowance factor of 20% based on job time; calculate the standard time for each work element and for the entire job. (d) Based on the standard time, how many units should an employee performing at 110% of standard complete each hour?

Ans: (a) 4.75 for element 1, 6.28 for element 2, 4.63 for element 3, 5.69 for element 4, 3.38 for element 5; (b) 3.71 for element 1, 6.90 for element 2, 1.48 for element 3, 5.12 for element 4, 3.38 for element 5; (c) 4.45 for element 1, 8.28 for element 2, 1.78 for element 3, 6.15 for element 4, 4.06 for element 5, 24.72 for the entire job; (d) 2.67 units Section Ref: Setting Standard Times Level: hard

135. You have been asked to observe the office manager at Wolf Mountain Christian School to estimate the proportion of time she spends handling visitors to the school who stop by the office.

Your 50 observations have revealed the following: Number of Activity Observed Times observed Talking on phone 13 Handling student problems 5 Directing work of others 12 Handling visitors 3 Working on computer 11

Other 6 (a) Based on the preliminary data, calculate the proportion of time she spends handling visitors to the school who stop by the office. (b) Calculate the sample size needed to estimate the proportion of time she spends handling visitors to the school who stop by the office. Assume a 95% confidence that the results will lie within 5% of the true value.

Ans: (a) 0.06; (b) 87 Section Ref: Setting Standard Times Level: moderate

136. You have been asked to observe the shift supervisor at the process test plant for Hudson Chemical Co. to estimate the proportion of time she spends answering questions for the operators. Your 30 observations have revealed the following: Number of Activity Observed Times observed Talking on the phone to engineers 3 Answering questions for operators 6 Observing work of others 12 Working on computer 4 Other 5 (a) Based on the preliminary data, calculate the proportion of time she spends answering questions for the operators. (b) Calculate the sample size needed to estimate the proportion of time she spends answering questions for the operators. Assume a 90% confidence that the results will lie within 5% of the true value.

Ans: (a) 0.20; (b) 174 Section Ref: Setting Standard Times Level: moderate

137. The first unit of a product took 180 hours to complete. A 70% learning curve is expected. (a) How long will the 19th unit take to complete? (b) How long will it take to complete the first 19 units?

Ans: (a) (180)(.220) = 39.6 hours; (b) (180)(7.192) = 1294.56 hours Section Ref: Work System Design Within OM: How It All Fits Together Level: moderate

138. The first unit of a product took 180 hours to complete. The firm plans to produce 4 units in the first month and 15 units in the second month. If a 70% learning curve is expected, how many hours will the firm use to work on the product during the second month?

Ans: (180)(7.192) – (180)(2.758) = 1294.56 – 496.44 = 798.12 hours Section Ref: Work System Design Within OM: How It All Fits Together

Level: hard

File: ch12, Chapter 12: Independent Demand Inventory Management

Multiple Choice

1. What does WIP stand for? a) work-in-process b) waiting inventory position c) warning of inventory position d) weight of inventory position e) waiting inventory potential Ans: a Section Ref: How Companies Use Their Inventory Level: easy

2. What are purchased items or extracted materials that will be transformed into components or products called? a) raw materials inventory b) finished goods inventory c) work-in-process inventory d) distribution inventory e) MRO inventory Ans: a Section Ref: Types of Inventory Level: easy

3. Hand tools, lubricants, and cleaning supplies are usually examples of what? a) WIP inventory b) finished goods inventory c) raw materials inventory d) MRO inventory e) distribution inventory Ans: d Section Ref: How Companies Use Their Inventory Level: moderate

4. Finished goods in transit to the customer are called what? a) WIP inventory b) components inventory

c) raw materials inventory d) distribution inventory e) MRO inventory Ans: d Section Ref: How Companies Use Their Inventory Level: easy

5. Which inventory function specifically is designed to allow the company to maintain a level production strategy? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) transportation inventory e) speculative inventory Ans: a Section Ref: How Companies Use Their Inventory Level: moderate

6. Which inventory function provides a cushion against unexpected supply shortage? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) transportation inventory e) speculative inventory Ans: e Section Ref: How Companies Use Their Inventory Level: easy

7. Which inventory function helps firms garner quantity discounts? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) transportation inventory e) speculative inventory Ans: c Section Ref: How Companies Use Their Inventory Level: easy

8. Which of the following inventory functions does not involve end products sold to customers?

a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) MRO inventory e) speculative inventory Ans: d Section Ref: How Companies Use Their Inventory Level: moderate

9. Which is the primary inventory function that is activated after coupons are distributed to customers? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) MRO inventory e) speculative inventory Ans: a Section Ref: How Companies Use Their Inventory Level: moderate

10. Which inventory function provides a hedge against inflation? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) MRO inventory e) speculative inventory Ans: e Section Ref: How Companies Use Their Inventory Level: moderate

11. Which inventory function exists between the manufacturing plant and the distribution plant? a) anticipation inventory b) fluctuation inventory c) lot-size inventory d) transportation inventory e) speculative inventory Ans: d Section Ref: How Companies Use Their Inventory Level: moderate

12. Which of the following allow you to calculate the average amount of inventory in transit? a) ATI – (365*d)/t b) ATI – (t/365)*d c) ATI = 365*t*d d) ATI = (tD)/365 e) ATI – (365*t)/d Ans: e Section Ref: How Companies Use Their Inventory Level: moderate

13. In inventory management, when discussing customer service we mean: a) whether the customer is available when the product is. b) whether the product is available regardless if the customer desires it or not. c) whether the product is available when the customer wants it. d) whether the customer wants the available product. e) whether repair of the product is available.

Ans: c Section Ref: Objectives of Inventory Management Level: easy

14. Percentage of orders shipped on schedule is a good measure of finished goods customer service if: a) all orders and customers have similar cost impacts. b) all orders and customers have similar value. c) all orders and customers have similar backorder requirements. d) later deliveries are not considered. e) late deliveries contribute to the overall demand.

Ans: b Section Ref: Objectives of Inventory Management Level: hard

15. Percentage of Line Items Shipped on Schedule recognizes that: a) not all orders are equal but fails to take into account the dollar value of orders. b) not all orders are equal but this can be compensated for. c) there are differences in orders in terms of both line items and dollar value. d) an absolute measure of manufacturing or service time lost because material or parts are not available. e) all orders and customers should be treated equally.

Ans: a Section Ref: Objectives of Inventory Management

Level: medium

16. What is the formula for inventory turnover? a) annual cost of goods sold / average inventory in dollars b) annual sales / average inventory in dollars c) average inventory in dollars / annual cost of goods sold d) average inventory in dollars / annual sales e) annual cost of goods sold / annual holding cost Ans: a Section Ref: Objectives of Inventory Management Level: easy

17. Companies can achieve cost-efficient operations by using which of the following inventory approaches? a) work-in-process to buffer operations b) inventory building to leverage reduced setup costs c) JIT inventory to reduce overall cost d) level work force maintenance through e) speculative selling Ans: b Section Ref: Objectives of Inventory Management Level: moderate

18. If a company carries 13 weeks of supply, what is the inventory turnover? a) 0.077 b) 4 c) 7.77 d) 676 e) 0.25 Ans: b Solution: 52 wks / 13 weeks = 4 Section Ref: Objectives of Inventory Management Level: moderate

19. The formula to calculate a week’s of supply is? a) weeks of supply = average weekly usage in dollars/average inventory on hand in dollars b) weeks of supply = average weekly usage/12 * average inventory on hand in dollars c) weeks of supply = average inventory on hand in dollars/average weekly usage in dollars d) weeks of supply = average inventory on hand * average weekly usage in dollars e) weeks of supply – average inventory on hand * average annual usage in dollars * 12

Ans: c Section Ref: Relevant Inventory Costs Level: hard

20. Which of the following is not affected by decisions about how much inventory to hold? a) item costs b) holding costs c) depreciation d) ordering costs e) stockout costs Ans: c Section Ref: Relevant Inventory Costs Level: moderate

21. All of the following affect holding costs except: a) storage costs b) obsolescence cost c) damage cost d) setup cost e) insurance cost Ans: d Section Ref: Relevant Inventory Costs Level: moderate

22. If inventory records fail to accurately reflect the quantity of materials available, all except which of the following may occur? a) poor customer service b) continuous operations c) lower productivity d) poor material planning e) excessive expediting Ans: b Section Ref: Inventory Record Accuracy Level: easy

23. In the service industry it is considered good performance when a company has an inventory loss of only: a) 1% b) 2%

c) 3% d) 4% e) 5% Ans: a Section Ref: Inventory in Service Organizations Level: moderate

24. A SKU is a ______________ at a _____________ geographic location. a) cost, uniquely identified b) profit, generally classified c) specific item, generally classified d) specific item, particular e) general item, particular Ans: d Section Ref: Determining Order Quantities Level: moderate

25. In a periodic review inventory system, how many units are ordered? a) Target inventory level b) Target inventory level − on hand balance c) Max inventory level − min inventory level d) The EOQ e) Average demand during review period + average demand during lead time Ans: b Section Ref: Periodic Review System Level: moderate

26. Which of the following is an assumption of the basic EOQ model? a) Lead time is unknown. b) Demand may be seasonal. c) Orders can arrive in partial shipments. d) Quantity discounts are not considered. e) Lost sales are allowed, but not back orders.

Ans: d Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

27. Which of the following is an assumption of the basic EOQ model? a) Lead time is known and constant.

b) Demand may be seasonal. c) Orders can arrive in partial shipments. d) Quantity discounts are considered. e) Lost sales are allowed, but not back orders.

Ans: a Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

28. Which of the following is an assumption of the basic EOQ model? a) Lead time is unknown. b) Demand is known and constant. c) Orders can arrive in partial shipments. d) Quantity discounts are considered. e) Lost sales are allowed, but not back orders.

Ans: b Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

29. Which of the following is an assumption of the basic EOQ model? a) Lead time is unknown. b) Demand may be seasonal. c) Orders arrive at once (in one lot). d) Quantity discounts are considered. e) Lost sales are allowed, but not back orders.

Ans: c Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

30. What costs are considered in the basic EOQ model? a) annual ordering costs + annual holding costs b) annual purchasing costs + annual holding costs c) annual ordering costs + annual holding costs + annual shortage costs d) annual purchasing costs + annual ordering costs + annual holding costs + annual shortage costs e) ordering costs per order + annual holding costs Answer: a Section Ref: Mathematical Models for Determining Order Quantity Level: easy

31. If annual demand is 24,000 units, orders are placed every 0.5 months, and the cost to place an order is $50, what is the annual ordering cost? a) $50 b) $1,200,000 c) $2,400,000 d) $1,200 e) $600,000 Ans: d Solution: 24 x $50 = $1,200 Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

32. If annual demand is 48,000 units, orders are placed in quantities of 2000 units at a time, and the cost to place an order is $80, what is the annual ordering cost? a) $1,920 b) $3,840,000 c) $160,000 d) $80 e) $4,160 Ans: a Solution: (D/Q)(S) (48000/2000)80 = $1,920 Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

33. For the basic EOQ model, what is the formula for the total annual cost? a) 2 DS H b) (D/Q)S + (Q/2)H c) (Q/D)S + (Q/2)H d) DQ/S + 2Q/H e) 2DH S 2H SD Ans: b Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

34. For the basic EOQ model, how many units should be ordered each time that an order is placed? a) 2DS H b) (D/Q)S + (Q/2)H c) (Q/D)S + (Q/2)H d) DQ/S + 2Q/H

e)

2 DH S

2H SD

Ans: a Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

35. If the EOQ is ordered, which of the following is true? a) Annual ordering cost exceeds annual holding cost. b) Annual holding cost exceeds annual ordering cost. c) Annual ordering cost is equal to annual holding cost. d) The sum of annual ordering cost plus annual holding cost is maximized. e) The annual holding cost curve is decreasing.

Ans: c Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

36. If the EOQ is ordered, which of the following represents the total annual cost of ordering and holding? a) 2DS H b) 2DH S c) 2DSH d) DSH e) 2H SD Ans: c Section Ref: Mathematical Models for Determining Order Quantity Level: hard

37. What does EPQ stand for? a) ensuring purchasing quality b) economic production quota c) economic production quantity d) economic purchasing quota e) economic purchasing quantity Ans: c Section Ref: Mathematical Models for Determining Order Quantity Level: easy

38. Which basic EOQ assumption does the EPQ model relax? a) Lead time is known and constant.

b) Demand is known and constant. c) Quantity discounts are not considered. d) Orders arrive at once. e) Back orders are not allowed.

Ans: d Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

39. If the costs (S and H) and demands (D) are the same, which of the following is not true with regard to the EPQ model as compared to the EOQ model? a) The EPQ model produces a lower total annual cost. b) The maximum inventory level is lower under the EPQ model than under the EOQ model. c) Both models use the same formula to compute annual ordering cost. d) The inventory depletion rate is the same for both models. e) Both models use the same formula to compute annual holding cost.

Ans: e Section Ref: Mathematical Models for Determining Order Quantity Level: hard

40. If the costs (S and H) and demands (D) are the same, which of the following is not true with regard to the EPQ model as compared to the EOQ model? a) The EPQ model produces a higher total annual cost. b) The maximum inventory level is lower under the EPQ model than under the EOQ model. c) Both models use the same formula to compute annual ordering cost. d) The inventory depletion rate is the same for both models. e) The two models use different formulas to compute annual holding cost.

Ans: a Section Ref: Mathematical Models for Determining Order Quantity Level: hard

41. If the costs (S and H) and demands (D) are the same, which of the following is not true with regard to the EPQ model as compared to the EOQ model? a) The EPQ model produces a lower total annual cost. b) The maximum inventory level is lower under the EPQ model than under the EOQ model. c) The two models use different formulas to compute annual ordering cost. d) The inventory depletion rate is the same for both models. e) The two models use different formulas to compute annual holding cost.

Ans: c Section Ref: Mathematical Models for Determining Order Quantity Level: hard

42. If the costs (S and H) and demands (D) are the same, which of the following is not true with regard to the EPQ model as compared to the EOQ model? a) The EPQ model produces a lower total annual cost. b) The maximum inventory level is lower under the EPQ model than under the EOQ model. c) Both models use the same formula to compute annual ordering cost. d) The inventory depletion rate is not the same for both models. e) The two models use different formulas to compute annual holding cost.

Ans: d Section Ref: Mathematical Models for Determining Order Quantity Level: hard

43. If the costs (S and H) and demands (D) are the same, which of the following is true with regard to the EPQ model as compared to the EOQ model? a) The lot size under the EPQ model is bigger than under the EOQ model. b) The maximum inventory level is higher under the EPQ model than under the EOQ model. c) The two models use different formulas to compute annual ordering cost. d) The inventory depletion rate is not the same for both models. e) Both models use the same formula to compute annual holding cost.

Ans: a Section Ref: Mathematical Models for Determining Order Quantity Level: hard

44. A (an) _________________ inventory record provides an up-to-date inventory balance by recording all inventory transactions as they happen. a) infinite b) everlasting c) constant d) permanent e) perpetual Ans: e Section Ref: Mathematical Models for Determining Order Quantity Response: See page 437 Level: easy

45. In a two-bin system, what does the quantity in the second bin represent? a) the EOQ b) the EPQ c) demand during replenishment lead time d) the quantity in the first bin e) safety stock

Ans: c Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

46. Which of the following statements is not true? a) A two-bin system allows a firm to not have to keep perpetual inventory records. b) Using perpetual inventory records results in different order quantities than using a two-bin system. c) In a two-bin system, units in the second bin are not used until the first bin is empty. d) In a two-bin system, the size of the second bin should equal the demand during replenishment lead time. e) Perpetual inventory records are appropriate when using the EPQ model.

Ans: b Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

47. What costs are considered in the quantity discount model? a) annual ordering costs + annual holding costs b) annual purchasing costs + annual holding costs + annual ordering costs c) annual ordering costs + annual holding costs + annual shortage costs d. annual purchasing costs + annual ordering costs + annual shortage costs e. ordering costs per order + annual holding costs Ans: b Section Ref: Mathematical Models for Determining Order Quantity Level: easy

48. How can the EPQ model be economically reconciled with just-in-time (JIT) production? a) Reduce annual demand (D). b) Increase annual holding cost per unit (H). c) Decrease ordering cost (S). d) Increase annual holding cost per unit (H) and Decrease ordering cost (S). e) The two cannot be reconciled.

Ans: c Section Ref: Inventory Record Accuracy Level: moderate

49. _____________________ is the probability that demand during lead time will not exceed on-hand inventory. a) EOQ service level

b) Fill rate c) Stockout risk d) Order-cycle service level e) Lead time service level Ans: d Section Ref: Determining Safety Stock Levels Level: easy

50. The formula for calculating safety stock when an estimate of demand during lead time and its standard deviation are known is? a) SS = lead time * standard deviation b) SS = lead time * z c) SS = z* standard deviation d) SS = z*σdl e) SS = σdl* mean Ans: d Section Ref: Determining Safety Stock Levels Level: moderate

51. Which of the following is used in determining the order quantity in the periodic review system? a) reorder point b) critical ratio c) target inventory level d) EOQ e) EPQ Ans: c Section Ref: Periodic Review System Level: easy

52. Under a periodic review system, enough inventory must be carried to protect against stockout for the ___________. a) replenishment lead time b) review period c) replenishment lead time plus the review period d) bottleneck cycle time e) bottleneck cycle time plus the replenishment lead time Ans: c Section Ref: Periodic Review System Level: moderate

53. What are the two major decisions to be made when using the periodic review system? a) the time between orders and the target inventory level b) the time between orders and the on-hand inventory c) the target inventory level and the on-hand inventory d) the time between orders and the order quantity e) the target inventory level and the order quantity Ans: a Section Ref: Periodic Review System Level: hard

54. What are two logical ways in which to base the time between orders in a periodic review system? a) replenishment lead time or EOQ calculations b) replenishment lead time or bottleneck cycle time c) convenience or replenishment lead time d) convenience or EOQ calculations e) convenience or bottleneck cycle time Ans: d Section Ref: Periodic Review System Level: moderate

55. What does TBO stand for? a) time-based optimization b) target-based ordering c) target-based optimization d) time-based ordering e) time between orders Ans: e Section Ref: Periodic Review System Level: moderate

56. In a periodic review system, if you are basing your time between orders on the EOQ, what should be its length in weeks? a) EOQ / 52 b) EOQ / average weekly demand c) average weekly demand / EOQ d) 52 / EOQ e) (EOQ)(average weekly demand) Ans: b

Section Ref: Periodic Review System Level: moderate

57. Consider a periodic review inventory system with a lead time of two weeks and a review period of seven weeks. If the standard deviation of weekly demand is 200 and the desired cycleservice level is 86%, what should the safety stock equal? a) 305 b) 516 c) 600 d) 648 e) 1944 Ans: d Solution: R = dL + SS; see Appendix B SS = zdL Section Ref: Periodic Review System Level: moderate

58. Consider a periodic review system with a lead time of two weeks and a review period of seven weeks. If the average demand per week is 1000 units and 300 units of safety stock are held, what should the target inventory level be? a) 7300 b) 1300 c) 9000 d) 9300 e) 3300 Ans: d Hint: TI = d(RP + L) + SS; see Appendix B SS = zdL Section Ref: Periodic Review System Level: moderate

59. Consider a periodic review system. The target inventory level is 1000 units. It is time to review the item, and the on-hand inventory level is 200 units. How many units should be ordered? a) 800 b) 1000 c) 1200 d) the EOQ amount e) the safety stock amount Ans: a Hint: TI = d(RP + L) + SS; see Appendix B SS = zdL; Q = TI - OH Section Ref: Periodic Review System Level: moderate

60. What implies that about 20% of the inventory items will account for about 80% of the inventory value? a) Little’s law b) Friedman’s law c) Pablo’s proposition d) Keyne’s law e) Pareto’s law Ans: e Section Ref: ABC Inventory Classification Level: easy

61. The ranking in ABC inventory analysis is based on what? a) annual dollar usage b) annual demand in units c) alphabetical order d) unit price e) item number Ans: a Section Ref: ABC Inventory Classification Level: easy

62. ABC inventory assumes that a company’s inventory is ____ equal and _______________ the same level of _________. a) fully, does demand approximately, costs b) counted, requires control for, profit c) not, does not need, control d) not, does not need, ordering e) not, does not need, sales Ans: c Section Ref: ABC Inventory Classification Level: easy

63. Which of the following statements is true? a) Periodic counting and cycle counting generally both count every item in stock. b) Periodic counting and cycle counting generally both do not count every item in stock. c) Periodic counting generally counts every item in stock, whereas annually cycle counting generally does not daily. d) Cycle counting generally counts every item in stock, whereas periodic counting generally does not. e) Periodic counting generally occurs more frequently than cycle counting.

Ans: c Section Ref: Inventory Record Accuracy Level: moderate

64. Suppose that a plant manager uses economic batch sizes for production of a product.

Suppose further that the setup cost is $50 per batch, the holding cost per unit per year is $10, the annual demand is 30,000 units, the firm operates (and experiences demand) 300 days per year, and the production rate per day is 1000 units. What will be the maximum inventory level that this product ever reaches? a) 577 b) 30 c) 519 d) 27,000 e) 58 Ans: c

 d 2DS I MAX = Q1 −   d  p H 1 −   p Section Ref: Mathematical Models for Determining Order Quantity Level: moderate Hint: EPQ =

65. Mary’s Flower Boutique needs to ship finished goods from its manufacturing facility to its distribution warehouse. Annual demand for the Flower Boutique is 2000 flowers. Flower Boutique can ship the flowers via regular parcel service (3 days transit time), premium parcel service (1 day transit time), or via public carrier (5 days transit time). What is the average annual transportation inventory for each alternative? a) 19.7, 6.6, 32.9 b) 20, 7, 50 c) 1, 15, 30 d) 25, 46, 99 e) 20, 6.6, 47.0 Ans: a Solution: ATI (regular service) = (3) (2400) / 365 = 19.7 ATI (premium service) = (1) (2400) / 365 = 6.6 ATI (public service) = (5) (2400) / 365 = 32.9 Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

66. For product W, a firm has an annual holding cost percentage of 20%, an ordering cost of $110 per order, and annual demand of 15,000 units. The following price schedule applies to the firm’s purchases.

Units Ordered Price Per Unit 1-250 $30.00 251-500 $28.00 501-750 $26.00 ≥ 751 $25.00 What is the optimal order quantity? a) 251 b) 501 c) 696 d) 751 e) 812 Ans: e Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

67. A computer company has annual demand of 20,000. They want to determine EOQ for circuit boards which have an annual holding cost (H) of $10/unit, and an ordering cost (S) of $75. The purchasing lead time is 5 days. What is the TC and reorder point ( R) ? a) 300 units, $3,000 b) 400 units, $5,477 c) 200 units, $2,000 d) 350 units, $5, 277 e) 400 units, $5,350 Ans: b Solution: 2DS 2 * 20,000 * $75 Q= = = 548 units H $10 R = 20,000 / 250 days x 5 days = 400 units TC = (20,000/548 x $75) + (548 / 2 x $10) = $ 2,737 + $ 2,740 = $ 5,477 Section Ref: Periodic Review System Level: moderate

68. What is the formula for calculating the maximum inventory level? a) Imax = H(1-d/p) b) Imax = Q(1-d/p) c) Imin = Q(1-s/p) d) Imax = Q(1-d/s) e) Imin = Q(1-d/h) Ans: b Solution: Section Ref: Mathematical Models for Determining Order Quantity

Level: moderate

69. How can both the JIT and EOQ inventory theories effectively be reconciled? a) They can’t. A firm must choose either one or the other. b) by using MRP c) by considering the setup cost as a variable instead of a parameter d) by applying Kanban cards to the EOQ system e) by assuming a finite production rate Ans: c Section Ref: Justifying Smaller Order Quantities Level: moderate

70. Consider the following all-units quantity discount schedule and calculated EOQs. Units Ordered Price Per Unit EOQ at that Price 0-999 $36.00 1200 1,000-1,999 $32.00 1450 2,000-4,999 $30.00 2500 5,000-8,000 $26.00 2780 ≥ 8,000 $20.00 6000 Which of the following sets of order quantities is guaranteed to contain the optimal solution? a) {1450, 2500} b) {1450, 999} c) {0, 1000, 2000, 5000, 8000} d) {1200, 1450, 2500, 2780, 6000} e) {2500, 5000, 8000} Ans: e Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

71. What is the formula for calculating the average transportation inventory (ATI)? a) ATI = tD / 365/2 b) ATI = tU / 365 c) ATI = tD / 180x2 d) ATI = txD + 365 e) ATI = tD / 365 Ans: e Section Ref: Mathematical Models for Determining Order Quantity Level: hard

72. When is the basic EOQ model a special case of the EPQ model? a) The demand per day approaches the demand per year. b) The production rate per day approaches 0. c) The production rate per day approaches infinity. d) The back order cost approaches infinity. e) d/p = 1.

Ans: c Section Ref: Inventory Management Across the Organization Level: hard

73. Consider the basic EOQ model. If annual demand doubles, what happens to the total annual setup and holding cost? a) It doubles. b) It increases by 41.42%. c) It remains the same. d) The impact depends upon the value of the setup cost. e) It quadruples (increases by 400%).

Ans: b Section Ref: Mathematical Models for Determining Order Quantity Level: hard

74. Which of the following is not an identified reason why manufacturing firms do not use optimal EOQ order quantities? a) do not have known uniform demand b) some suppliers have a minimum order quantity c) how the material is shipped d) what the sales price is e) insufficient storage space Ans: d Section Ref: Why Companies Don’t Always Use the Optimal Order Quantity Level: moderate

75. Which of the following is not one of the six ways to use inventory? a) seasonal inventory b) JIT inventory c) pipeline inventory d) hedge inventory e) MRO inventory Ans: b Section Ref: How Companies Use Their Inventory Level: hard

76. The inventory objective of customer service is measured by any of the following except _______________. a) weeks of supply b) percentage of dollar volume shipped on schedule c) idle time due to component and material shortages d) percentage of orders shipped on schedule e) percentage of line items shipped on schedule Ans: a Section Ref: Relevant Inventory Costs Level: hard

True/False

77. World-class companies are known for having zero WIP inventory in their facilities.

Ans: False Section Ref: How Companies Use Their Inventory Level: hard

78. Firms that “chase” demand by hiring more workers have less need for anticipation inventory.

Ans: True Section Ref: How Companies Use Their Inventory Level: moderate

79. Anticipation inventory is also called cycle stock.

Ans: False Section Ref: How Companies Use Their Inventory Level: easy

80. When order quantities are higher, average transportation inventory is higher.

Ans: False Section Ref: How Companies Use Their Inventory Level: hard

81. A long production run implies a large setup cost per unit.

Ans: False Section Ref: Objectives of Inventory Management Level: moderate

82. Inventory turnover is the reciprocal of weeks of supply.

Ans: False Section Ref: Objectives of Inventory Management Level: moderate

83. Inventory turnover is the reciprocal of years of supply.

Ans: True Section Ref: Objectives of Inventory Management Level: hard

84. In general, if car company A has a smaller weeks of supply than car company B does, then car company A is using its inventory more effectively.

Ans: True Section Ref: Objectives of Inventory Management Level: hard

85. Any inventory turnover less than 4 is considered to be poor performance.

Ans: False Section Ref: Objectives of Inventory Management Level: moderate

86. Even if the company already owns the storage space and incurs no additional expense for storing the inventory, we still include the cost of that storage space as part of holding costs.

Ans: False Section Ref: Relevant Inventory Costs Level: moderate

87. Whenever demand exceeds supply, the company experiences a lost sale.

Ans: False Section Ref: Relevant Inventory Costs Level: moderate

88. Even though loss of customer goodwill is an intangible cost, it is considered a type of shortage cost.

Ans: True Section Ref: Relevant Inventory Costs Level: moderate

89. Lot-for-lot ordering is commonly used in materials requirements planning systems.

Ans: True Section Ref: Mathematical Models for Determining Order Quantity Level: hard

90. A min-max inventory system implies a larger average inventory than a periodic review inventory system.

Ans: False Section Ref: Mathematical Models for Determining Order Quantity Level: hard

91. In the basic EOQ model, the maximum inventory level equals the economic order quantity.

Ans: True Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

92. The reorder point is used in determining the order quantity in the periodic review system.

Ans: False Section Ref: Periodic Review System Level: moderate

93. Under a periodic review system, enough inventory must be carried to protect against stockout for the replenishment lead time plus the review period.

Ans: True Section Ref: Periodic Review System Level: moderate

94. The two major decisions to be made when using the periodic review system are the target inventory level and the order quantity.

Ans: False Section Ref: Periodic Review System Level: hard

95. In a periodic review system, the time between orders should never be based on the EOQ calculation.

Ans: False Section Ref: Periodic Review System Level: moderate

96. In general, companies use periodic review systems for items that are expensive and/or critical to the company.

Ans: False Section Ref: The Single-Period Inventory Model Level: moderate

97. The single-period inventory model objective is to balance the sale of a unit with the cost incurred for each unit sold.

Ans: False Section Ref: The Single-Period Inventory Model Level: hard

98. Inventory record accuracy is especially critical for master production schedule users.

Ans: True Section Ref: Inventory Management Within OM: How it All Fits Together Level: easy

99. Manufacturing’s cost efficiency is not affected by inventory decisions.

Ans: False Section Ref: Inventory Management Across the Organization Level: moderate

100. Inventory management is a key component of effective supply chain performance.

Ans: True Section Ref: The Supply Chain Link Level: easy

101. Risk costs are obsolescence, damage deterioration, theft, insurance and taxes.

Ans: True Section Ref: Relevant Inventory Costs Level: easy

102. Inventory management, order policies, storage and movement of goods, are not areas where significant gains in sustainability can be make for companies Ans: False Section Ref: Sustainability Link Level: easy

Essay

103. What does WIP stand for?

Ans: work-in-process Section Ref: How Companies Use Their Inventory Level: easy

104. What are items used in support of manufacturing and maintenance called?

Ans: maintenance, repair, and operational (MRO) inventory Section Ref: How Companies Use Their Inventory

Level: easy

105. What inventory function protects against supply shortages?

Ans: speculative inventory Section Ref: Objectives of Inventory Management Level: easy

106. What is another name for speculative inventory?

Ans: hedge inventory Section Ref: Objectives of Inventory Management Level: moderate

107. What is the formula for inventory turnover?

Ans: inventory turnover = annual cost of goods sold / average inventory in dollars Section Ref: Objectives of Inventory Management Level: moderate

108. What are the three major categories of holding costs?

Ans: capital costs, storage costs, and risk costs Section Ref: Relevant Inventory Costs Level: moderate

109. When a company experiences a stockout, what are the two possibilities?

Ans: back order and lost sale Section Ref: Determining Order Quantities Level: moderate

110. Discuss some of the factors on how much safety stock will be kept on hand.

Ans: The amount of safety stock to hold depends on the variability of demand and lead time and the desired order-cycle service level.

Section Ref: Determining Safety Stock Levels Level: moderate

111. Describe advantages and disadvantages of periodic review systems.

Ans: An advantage is that inventory is counted only at specific time intervals. You do not need to monitor the inventory level between review periods. This system also makes sense when you order several different items from a supplier. A potential disadvantage includes the varying replenishment levels, possibly precluding, for example, quantity discounts. Also, the average inventory level will be larger than under reorder point systems.

Section Ref: Periodic Review System Level: hard

112. Define periodic review system.

Ans: Requires periodic reviews of the on-hand quantity to determine the size of the replenishment order.

Section Ref: Periodic Review System Level: moderate

113. List some advantages of small order quantities.

Ans: improved customer responsiveness, reduced cycle inventory, reduced work-in-process inventory, and reduced inventories of raw materials and purchased components Section Ref: Justifying Smaller Order Quantities Level: moderate

114. What are the characteristics of a single-period inventory model?

Ans: They are sold at their regular price only during a single time period. Demand for these products is highly variable but follows known probability distribution. Salvage value of these products is less than its original costs.

Section Ref: The Single-Period Inventory Model Level: hard

115. What are the two methods for checking record accuracy and what do they do?

Ans: Periodic and cycle counting; Periodic counting is when a physical inventory is taken periodically, usually annually. Cycle counting is when pre-specified items are counted daily.

Section Ref: Inventory Record Accuracy Level: moderate

Problems

116. If a firm has an annual demand of 50,000 units and average transit time (in days) is 15, what is the average transportation inventory?

Ans: 2055 Section Ref: How Companies Use Their Inventory Level: easy

117. Suppose that the annual cost of goods sold is $4,000,000, annual sales amount to $6,000,000, and average inventory in dollars equals $2,000,000. What is the inventory turnover?

Ans: 2 Section Ref: Objectives of Inventory Management Level: moderate

118. What is the target inventory if Frank’s dairy inventory review is every 7 days and they consume an average of 15 cases of milk cartons every day? Frank’s new milk carton supplier says they can deliver an order every 5 days. While Frank’s material coordinator says they should order 45 cases at a time, what is their target inventory level if they do not want to maintain a safety stock?

Ans: 180 Section Ref: Periodic Review System Level: moderate

119. Tom’s tire shop annual demand is 1,460 tires and they are capable of producing 2,920 tires per year per shift. Tom’s production manager plans to order 12 tires at a time. What is the maximum inventory level?

Ans: 6 Section Ref: Mathematical Models for Determining Order Quantity Level: easy

120. Suppose that the annual EOQ cost (ordering plus inventory holding) for a product stored in a warehouse is $10,000. What would the total company EOQ cost be if the firm decided to equally allocate the demand among five warehouses instead of one?

Ans: $22,361 Section Ref: Mathematical Models for Determining Order Quantity Level: hard

121. Consider a firm with an annual demand of 6000 units, a setup cost of $20 per order, and an annual holding cost per unit of $2. If the company purchases 1200 units every time that they order, what are the total annual setup and holding costs?

Ans: $1300 Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

122. Troy Enterprises uses a continuous review inventory control system. The firm operates 50 weeks per year, with an annual demand of 50,000 units, an ordering cost of $35 per order, a holding cost of $1 per unit per year, a lead time of 3 weeks, and a standard deviation of demand during lead time equal to 216.51 units. (a) How many units should be ordered at a time (rounded to the nearest unit)? (b) What is the reorder point if a 94% order-cycle service level is desired?

Ans: (a) 1871; (b) 3337 Section Ref: Mathematical Models for Determining Order Quantity Level: hard

123. Jefferson Products offers the following all-units quantity discount schedule for its 4 feet by 8 feet sheets of quality plywood.

Order Size Price 1-9 sheets $25 10-49 sheets $23 50-99 sheets $21 100 sheets or more $18 Washington Home Furnishings orders plywood from Jefferson Products. The firm has an ordering cost of $50, an annual inventory holding cost percentage of 20%, and an annual demand of 250 sheets. What should the order size be every time that an order is placed?

Ans: 100 units Section Ref: Mathematical Models for Determining Order Quantity Level: moderate

124. For a continuous review policy, 92% order-cycle service level, and standard deviation of replenishment lead time of 189.31 units, how many units of safety stock should be held?

Ans: 266 Section Ref: Determining Safety Stock Levels Level: moderate

125. For a continuous review policy, if the standard deviation of replenishment lead time is 171.58 units and 266 units of safety stock are held, what is the implied order-cycle service level?

Ans: 93.943% Section Ref: Determining Safety Stock Levels Level: hard

126. Consider a periodic review system with a lead time of 2 weeks, a review period of 4 weeks, average weekly demand of 100 units, standard deviation of weekly demand of 20 units, and a desired cycle-service level of 90%. (a) What is the target inventory level? (b) If it is time to review the item and 10 units are on hand, how many units should be ordered?

Ans: (a) (100)(2+4) + 63 = 663 units; (b) 663 – 10 = 653 units Section Ref: Periodic Review System Level: hard

127. Suppose that your company sells a product for which the annual demand is 10,000 units.

Holding costs are $1.00 per unit per year, and setup costs are $200 per order (a) What is the economic order quantity for your product? (b) What is the total annual cost of ordering and holding? (c) Now suppose that instead of purchasing the product, you decide to produce it yourself.

Assume the same demand and cost structure as above. In addition, your average production rate would be 200 units per day, and you have 200 working days per year. What batch size should you use? (d) Given your answer to part c, now what is the total annual cost of ordering and holding? (e) What conclusions can you make regarding the impact of production rate on the holding and ordering costs?

Ans:(a) 2000 units; (b) $2000; (c) 2309 units; (d) $2020; (e) The lower the production rate, the lower the “effective holding cost,” which implies larger batch sizes and lower total costs.

Section Ref: Inventory Management Across the Organization Level: hard

Short Answer

128. What is ABC Widget Company's inventory turns if it sells goods whose cost is $7,350,000 and its average inventory is $1,225,000?

Ans: 6 Section Ref: Objectives of Inventory Management Level: moderate

129. The textbook discusses that in the service industry it is not uncommon for retailers not to be able to __________ specific merchandise.

Ans: locate Section Ref: Inventory in Service Organizations Level: easy

130. The inventory method that places a maximum order when the on-hand inventory falls below a predetermined minimum level is called the ____________.

Ans: Min-mas system.

Section Ref: Determining Order Quantities Level: moderate

131. The reorder point for a product that is delivered two days after an order is placed and whose average daily demand is 100 is __________________.

Ans: 200 Section Ref: Mathematical Models for Determining Order Quantity Level: easy

132. What is the total annual inventory cost (using basic EOQ )of a product whose annual demand is 12,000 units, daily demand is 40, daily production is 60, order cost is $80, and holding cost is $6? (Round to the nearest dollar.)

Ans: $3,394.

Section Ref: Mathematical Models for Determining Order Quantity Level: hard

133. What is the basic EOQ for a product whose annual demand is 48000 with setup cost $15 and holding cost $5?

Ans: 219 Section Ref: Mathematical Models for Determining Order Quantity Level: hard

134. What is the maximum inventory of a product that is produce in batches of 1000 when 500 units are produced per day and 250 units are sold per day?

Ans: 500 Section Ref: Mathematical Models for Determining Order Quantity Level: hard

135. What is the EPQ for a product whose annual demand is 48,000 with setup cost = $15, holding cost = $6, daily demand 1,250, and daily production = 1500?

Ans: 1200 Section Ref: Mathematical Models for Determining Order Quantity Level: hard

136. What is the total annual inventory cost (using basic EPQ )of a product whose annual demand is 15,000 units, daily demand is 40, daily production is 60, order cost is $80, and holding cost is $6? (Round to the nearest dollar.)

Ans: $2,191.

Section Ref: Mathematical Models for Determining Order Quantity Level: hard

137. How much safety stock should an organization hold if it wants to provide a 95% order-cycle service level for an item whose annual demand is 12000 units with standard deviation of 300 units per year and 30 units during lead time. The organization uses 1.96 standard deviations for this purpose.

Ans: 588 Section Ref: Why Companies Don't Always Use the Optimal Order Quantity Level: moderate

File: ch13, Chapter 13: Aggregate Planning

Multiple Choice

1. A company’s ____________ plan is a statement of the resources available to the operations group during the next 6 to 18 months. a) project b) master c) strategic d) aggregate e) tactical Ans: d Section Ref: The Role of Aggregate Planning Level: easy

2. Sales and operations planning integrates the medium-range functional plans for all except which of the following? a) marketing b) operations c) human resources d) engineering e) finance Ans: c Section Ref: The Role of Aggregate Planning Level: moderate

3. All of the following are detailed by the aggregate plan except for? a) purchases of components from vendors b) the aggregate production rate c) subcontracting d) the amount of overtime authorized e) back ordering of customer orders Ans: a Section Ref: The Role of Aggregate Planning Level: hard

4. The Marketing Plan identifies all but which of the following: a) targeted market segments

b) necessary market share c) quality d) flexibility e) resources Ans: e Section Ref: The Role of Aggregate Planning Level: moderate

5. The Production Plan is usually updated and reevaluated: a) weekly b) monthly c) quarterly d) semi-annually e) annually Ans: b Section Ref: The Role of Aggregate Planning Level: moderate

6. The goal of developing an aggregate plan using composite product information is: a) group like things together b) reduce the number of calculations c) keep it simple for senior management d) help marketing plan e) provide detail reports Ans: b Section Ref: The Role of Aggregate Planning Level: moderate

7. The master production schedule is reviewed: a) annually b) semi-annually c) quarterly d) monthly e) weekly Ans: e Section Ref: The Role of Aggregate Planning Level: moderate

8. The master production schedule is typically stated as:

a) resource requirements b) sales quotas c) work-in-process d) specific finished goods e) composite products Ans: d Section Ref: The Role of Aggregate Planning Level: moderate

9. The next level down in the planning process after development of the aggregate plan is the _____________. a) materials requirements plan b) engineering plan c) rough-cut capacity plan d) master production schedule e) purchasing plan Ans: d Section Ref: The Role of Aggregate Planning Level: moderate

10. What type of aggregate plan maintains a constant workforce and produces the same amount of product in each time period? a) uniform b) level c) chase d) mixed e) steady Ans: b Section Ref: The Role of Aggregate Planning Level: easy

11. For the level aggregate plan, fluctuations in demand are absorbed by ________________. a) inventory and subcontracting b) back orders and price changes c) inventory and back orders d) price changes and subcontracting e) subcontracting and back orders Ans: c Section Ref: The Role of Aggregate Planning Level: hard

12. A disadvantage of the level aggregate plan is _________________. a) workforce instability b) excess hiring c) layoffs d) possible poor customer service from extensive use of backorders e) excessive purchase of additional tools and equipment Ans: d Section Ref: The Role of Aggregate Planning Level: moderate

13. In a level production plan, equipment capacity is set equal to a) number of trained and qualified operators b) average demand c) mean demand d) maximum number of equipment minus 10% contingency reserves e) peak demand Ans: b Section Ref: Types of Aggregate Plans Level: easy

14. Raissa’s Pizza parlor has an average monthly demand of 1200 pizzas. Statistically, each employee can produce 10 pizzas per hour. The parlor is open 20 days each month. How many employees must they need to meet the demand using a level aggregate plan? a) 4 b) 5 c) 6 d) 7 e) 8 Ans: c Solution: 1200 / 20 = 60 / 10 = 6 Section Ref: Types of Aggregate Plans Level: easy

15. Using a level production plan how many oil changes must each employee be capable of to meet a weekly demand of 1400 oil changes in a five day work week if there are 4 employees? a) 40 b) 50 c) 60 d) 70

e) 80 Ans: d Solution: 1400 / 5 = 280 / 4 = 70 Section Ref: Types of Aggregate Plans Level: moderate

16. . What type of aggregate plan sets labor and equipment capacity to satisfy demand each period? a) uniform b) level c) chase d) mixed e) steady Ans: c Section Ref: Types of Aggregate Plans Level: easy

17. An advantage of the chase aggregate plan is ____________________________. a) workforce instability b) excess hiring c) space requirements d) minimizes finished good holding costs e) excessive purchase of additional tools and equipment Ans: d Section Ref: Types of Aggregate Plans Level: moderate

18. What type of aggregate plan keeps a stable workforce and uses backorders to compensate for excess demand needs? a) uniform b) level c) chase d) hybrid e) steady Ans: d Section Ref: Types of Aggregate Plans Level: easy

19. Using a chase strategy with the following 4 month demand and starting employee count, how many employees will be fired and how many will be hired if each employee can fix 20 engines per period?

November = 1920 Starting Employee Count = 90 December = 2160 January = 1440 February = 1200 a) 12, 12 b) 12, 14 c) 13, 16 d) 18, 48 e) 14, 14 Ans: d Solution: Nov demand prod rate Emply need period hire fire

Dec

Jan

Feb

25 25

10 10

15 15

12 12

96 6 0

108 12 0

72 0 36

60 0 12

6+12 = 18 to hire 36+12 = 48 to fire Section Ref: Types of Aggregate Plans Level: easy

20. A proactive marketing approach in aggregate planning involves ____________________. a) varying inventory levels b) modifying work force size c) back orders d) shifting the demand patterns to level demand fluctuations e) varying overtime rate Ans: d Section Ref: Aggregate Planning Options Level: moderate

21. Which of the following is an advantage of producing at average demand levels? a) inventory fluctuates b) allows for a lower investment in capacity c) minimizes space needs for inventory d) minimizes finished good holding costs e) makes it difficult to calculate average production Ans: b Section Ref: Types of Aggregate Plans

Level: moderate

22. Companies that use back orders are asking their customers to ___________________. a) resubmit their orders b) wait for delivery of the product c) check back to see what their last order was d) receive the product immediately and pay for it later e) send back their last order Ans: b Section Ref: Aggregate Planning Options Level: moderate

23. A difficulty with back orders, even when the customer waits, can be ________________. a) finding space to store the product b) extra administrative costs c) added inventory holding costs d) possible deterioration of the product e) that other customers will want back orders also Ans: b Section Ref: Aggregate Planning Options Level: moderate

24. Shifting demand makes sense when the company has ______________________. a) lots of space for inventory b) low inventory carrying costs c) equipment that is highly flexible with respect to production volume changes d) high fixed costs and low variable costs e) excess capacity Ans: d Section Ref: Aggregate Planning Options Level: hard

25. What is the most common method for increasing output capacity? a) outsourcing b) hiring temps c) overtime d) back orders e) purchasing more machines Ans: c

Section Ref: Aggregate Planning Options Level: moderate

26. Which of the following is not typical of overtime? a) 50% wage premium b) quality may decrease c) productivity decreases d) workers’ output rate increases e) cost of labor per unit increases Ans: b Section Ref: Aggregate Planning Options Level: hard

27. One disadvantage of using undertime is a) employee hourly rate decreases b) employee hourly rate increases c) product labor cost decreases d) product labor cost increases e) product labor cost is constant Ans: d Section Ref: Aggregate Planning Options Level: moderate

28. Which of the following best describes subcontracting? a) provides additional output capacity during periods of high demand b) it is a strategic decision c) cost per unit is less for subcontracting d) used when a company has no in-house capability e) it defines the company’s core business Ans: a Section Ref: Aggregate Planning Options Level: hard

29. Which of the following is not true for firing permanent employees? a) Deciding who will go and who will stay is difficult. b) Keeping senior employees is always the least cost effective approach. c) It can involve severance pay. d) Valuable knowledge may leave with the employee. e) It can harm morale.

Ans: b Section Ref: Aggregate Planning Options Level: moderate

30. In evaluating the current situation, the ____________ is the percentage of normal capacity at which the company is currently operating. a) point of departure b) amount of subcontracting needed c) magnitude of the change d) duration of the change e) rated capacity Ans: a Section Ref: Evaluating the Current Situation Level: easy

31. When you are considering different production planning approaches, the magnitude of change: a) is not important from an aggregate planning perspective. b) larger changes need more dramatic measures. c) drives the point of departure. d) reduces the point of departure. e) modifies the duration of change.

Ans: b Section Ref: Evaluating the Current Situation

32. The comparison of aggregate plans is difficult when they produce different quantities and thus _________. a) have different ending inventories b) have different staffing levels c) have different amounts of overtime d) have different amounts of subcontracting e) have different revenues Ans: a Section Ref: Developing the Aggregate Plan Level: moderate

33 The first step in developing the production plan is: a) identification of the point of departure. b) identification of the magnitude of change. c) identification of the duration of change

d) development of the target aggregate plan rate. e) selection of the aggregate plan that matches your company’s objectives.

Ans: e Section Ref: Developing the Aggregate Plan Level: moderate

34. Evaluating an aggregate plan in terms of employment stability is using what perspective? a) cost b) customer service c) quality d) operations e) human resources Ans: e Section Ref: Developing the Aggregate Plan Level: moderate

35. Evaluating an aggregate plan in terms of inventory levels is using what perspective? a) cost b) customer service c) quality d) operations e) human resources Ans: a Section Ref: Developing the Aggregate Plan Level: hard

36. Evaluating an aggregate plan in terms of number of back orders is using what perspective? a) cost b) customer service c) quality d) operations e) human resources Ans: b Section Ref: Developing the Aggregate Plan Level: moderate

37. Which of the following is not an input to the aggregate planning process? a) beginning workforce

b) demand forecast c) beginning inventory d) master production schedule e) overtime available per period Ans: d Section Ref: Developing the Aggregate Plan Level: moderate

38. Once you implement a new aggregate plan you must then: a) begin the planning process again. b) evaluate the plan’s performance in terms of cost. c) evaluate the plan’s performance in terms of customer service. d) evaluate the plan’s performance in terms of human resources. e) evaluate the plan’s performance in terms of cost and human resources.

Ans: e Section Ref: Developing the Aggregate Plan Level: easy

39. When evaluating the production plan you should use all but which of the following: a) total/unit cost b) inventory levels c) number of back orders d) effect on marketing plan e) effect on workforces Ans: d Section Ref: Developing the Aggregate Plan Level: moderate

40. For the following data, verify the amount of employees needed.

Cost Data Labor cost Regular 20 $/hr Over Time 30 $/hr Hiring 250 $/employee Firing 400 $/employee Inventory Holding 10 $/unit/period Shortage 15 $/unit/period material 45 $/unit/period Capacity

Jan Feb

Demand 400 250

Mar April May

275 325 350

Workforce Inventory Production rate Regular time Over time

beginning 15 employees initial 100 units

available

8 hrs/unit 160 hrs/period/employee 40 hrs/period/employee

a) 20 b) 5 c) 34 d) 25 e) 15 Ans: e Solution: Net cumulative demand = 1600 – 100 = 1500 units Step 2: 1500 / 5 periods = 300 units Step 3: 300 units; 300/8 / 160 = 15 employees Section Ref: Aggregate Plans for Companies With Tangible Products Level: hard

41. A demand-based option in which the operations department uses inventories and back orders to react to demand fluctuations is called a) hyperactive b) inactive c) proactive d) reactive e) retroactive Ans: d Section Ref: Aggregate Planning Options Level: easy

42. When a company’s product is nontangible (a service), which of the following is no longer a viable option? a) hiring permanent employees b) subcontracting c) inventory d) working overtime e) increasing normal capacity Ans: c Section Ref: Aggregate Plans for Service Companies with Nontangible Products Level: easy

43. A demand-based option in which the marketing tries to shift demand patterns to minimize demand fluctuations is called a) hyperactive b) inactive c) proactive d) reactive e) retroactive Ans: c Section Ref: Aggregate Planning Options Level: easy

44. What is it called when a publishing company has decided to send the technical information development elsewhere and have no in-house capability? a) outsourcing b) subcontracting c) subsidiary d) affiliate e) partner Ans: a Section Ref: Aggregate Planning Options Level: easy

45. If you allocate scarce resources to customers at prices that maximize the yield to the company you are using: a) level aggregate planning b) chase production planning c) price fixing d) yield management e) price compression Ans: d Section Ref: Aggregate Plans for Service Companies with Nontangible Products Level: easy

46. Which of the following is not typically indicated as part of the resources authorized in an aggregate plan? a) number of machines to be used b) size of the workforce c) authorized level of overtime and undertime d) number of units to be subcontracted e) level of inventory held Ans: a

Section Ref: The Role of Aggregate Planning Level: moderate

47. Which of the following is not a primary objective of the master production schedule? a) minimize shipping costs b) achieve the desired customer service level. c) make the best use of the company’s resources: material, labor, and equipment. d) ensure that the inventory investment is at the appropriate level e) none of the answer choices are correct Ans: a Section Ref: The Role of Aggregate Planning Level: moderate

48. Which of the following is not a way to increase capacity? a) Change depreciation methods. b) Use overtime. c) Employ temporary workers. d) Subcontract. e) Use alternative manufacturing processes.

Ans: a Section Ref: Aggregate Plans for Service Companies with Nontangible Products Level: easy

49. Accounting uses the aggregate plan for all the following except: a) projecting cash flows b) making short term loans c) calculating the capital needed to support operations d) projecting earnings e) benchmarking operation effectiveness Ans: b Section Ref: Aggregate Planning Across the Organization Level: easy

50. The aggregate plan helps manufacturing with all of the following except: a) whom to employ b) how much work to subcontract c) how much inventory can be held d) when to add/subtract employees e) when to use overtime

Ans: a Section Ref: Aggregate Planning Across the Organization Level: easy

51. UPS is a company that hires a very high number of __________ and _________ workers. a) steady, part time b) older, wiser c) seasonal, full time d) part time, overtime e) seasonal , part time Ans: e Section Ref: The Role of Aggregate Planning Level: hard

52. Which of the following is not typically contained in the marketing plan? a) product design b) target markets c) new products d) profit margin e) competitive focus Ans: a Section Ref: The Role of Aggregate Planning Level: hard

53. The master production schedule is shared: a) only internally. b) only with management. c) only to marketing and engineering. d) to all members of the executive team, exclusively. e) to all members of the supply chain.

Ans: e Section Ref: The Supply Chain Link Level: easy

54. What are the two primary objectives of aggregate planning? a) material availability and supplier size b) total cost and production rate c) input rate and training for employees d) output rate and workforce size e) transportation rate and workforce size

Ans: d Section Ref: The Supply Chain Link Level: easy

True/False

55. The aggregate plan is usually updated and reevaluated monthly by the operations group.

Ans: True Section Ref: The Role of Aggregate Planning Level: hard

56. The chase aggregate plan maintains a constant workforce and produces the same amount of product in each time period.

Ans: False Section Ref: The Role of Aggregate Planning Level: easy

57. An advantage of the chase aggregate plan is that it minimizes finished good holding costs.

Ans: True Section Ref: Types of Aggregate Plans Level: moderate

58. An advantage of producing at average demand levels is that it allows for a lower investment in capacity.

Ans: True Section Ref: Types of Aggregate Plans Level: moderate

59. Shifting demand makes sense when the company has high fixed costs and low variable costs.

Ans: True Section Ref: Aggregate Planning Options

Level: hard

60. Overtime is the most common method for increasing output capacity.

Ans: True Section Ref: Aggregate Planning Options Level: moderate

61. In evaluating the current situation, the point of departure is the size of the change that is needed.

Ans: False Section Ref: Aggregate Planning Options Level: easy

62. The comparison of aggregate plans is difficult when they produce different quantities and have different ending inventories.

Ans: True Section Ref: Evaluating the Current Situation Level: moderate

63. When a company’s product is nontangible (a service), inventory is no longer a viable option.

Ans: True Section Ref: Aggregate Plans for Service Companies with Nontangible Products Level: moderate

64. A master production schedule is more specific (tactical) than an aggregate plan.

Ans: True Section Ref: Aggregate Plans for Service Companies with Nontangible Products Level: moderate

65. The master production schedule is a statement of upcoming demand.

Ans: False Section Ref: The Role of Aggregate Planning

Level: moderate

66. A primary objective of the master production schedule is to achieve the desired customer service level.

Ans: True Section Ref: The Role of Aggregate Planning Level: moderate

67 Sales and operations planning can be used in a variety of business environments.

Ans: True Section Ref: The Role of Aggregate Planning Level: easy

68. The purpose of the aggregate plan is to develop production rates and authorize resources that accommodate the engineering plan.

Ans: False Section Ref: The Role of Aggregate Planning Level: moderate

69. The financial plan indicates the sources and uses of funds, expected cash flows, anticipated profits and projected budgets.

Ans: True Section Ref: The Role of Aggregate Planning Level: moderate

70. There are a limited number of options that are applicable to a hybrid aggregate plan.

Ans: False Section Ref: Types of Aggregate Plans Level: moderate

71. Demand-based options include two reactive options and two proactive options.

Ans: False Section Ref: Aggregate Planning Options Level: easy

72. During overtime worker productivity increases due to the increase salary received Ans: False Section Ref: Aggregate Planning Options Level: moderate

73. Nontangible capacity can be added by the use of an on-call labor pool.

Ans: True Section Ref: Aggregate Planning Within OM: How It All Fits Together Level: moderate

74. Aggregate planning, master production scheduling, and rough-cut capacity affect a select area of the organization.

Ans: False Section Ref: Aggregate Planning Across the Organization Level: moderate

75. Demand patterns cannot be smoothed through pricing incentives, reduced prices for outof-season purchases, or nonprime service times.

Ans: False Section Ref: Aggregate Planning Options Level: moderate

Essay

76. What are the characteristics of the marketing plan?

Ans: intended to meet the objectives of the strategic plan; identifies the sales needed to achieve the profitability level, growth rate, and the return on investment stated in the strategic plan; detailed are the targeted market segments, necessary market share, competitive focus, such as price, quality, flexibility, or time, expected profit margins, and new products needed Section Ref: The Role of Aggregate Planning Level: hard

77. What are the difficulties associated with back orders?

Ans: Customers may take their business elsewhere resulting in lost sales. Even when customers wait, there may be extra administrative costs, such as higher shipping costs for overnight delivery.

Section Ref: Aggregate Planning Options Level: hard

78. What are the capacity-based options in aggregate planning?

Ans: overtime, undertime, subcontracting, hiring and firing, hiring temps Section Ref: Aggregate Planning Options Level: moderate

79. What are the characteristics of overtime?

Ans: typically involves a 50% wage premium; cost of labor per unit increases; the more overtime used, the more likely it is that productivity and quality will decrease Section Ref: Aggregate Planning Options Level: hard

80. What are the characteristics of undertime?

Ans: normally results from reduced demand and a desire not to build inventory; does not cost the company a wage premium, but increases the labor cost per unit; employee morale may suffer Section Ref: Aggregate Planning Options Level: hard

81. What are the disadvantages for hiring permanent employees?

Ans: requires the administrative work of identifying the position, communicating with potential applicants, evaluating the materials submitted by applicants, interviewing, verifying employment and references, running background checks, verifying physical condition, making offers, and completing negotiations; after hiring the company must set up health insurance, payroll, security ID and badge, computer log-in, phone extension, etc.; and output is normally lower and mistakes typically higher during training Section Ref: Aggregate Planning Options Level: hard

82. What are the disadvantages for firing permanent employees?

Ans: Excessive firing can lead to increased unemployment compensation premiums.

Typically there is also severance pay. Valuable knowledge may leave with the employee. It can harm morale. Deciding who will go and who will stay is difficult.

Section Ref: Aggregate Planning Options Level: hard

83. What are the steps involved in developing the aggregate plan?

Ans: (1) Choose the kind of aggregate plan: level, chase, or hybrid. (2) Calculate the aggregate production rate. (3) Calculate the size of the workforce. (4) Test the aggregate plan and calculate costs. (5) Evaluate the plan in terms of cost, customer service, human resources, and operations.

Section Ref: Developing the Aggregate Plan Level: moderate

84. What are the inputs to the aggregate planning process?

Ans: beginning workforce, production standard per hour, regular time available per worker per period, demand forecast, beginning inventory, overtime available per period, and cost data Section Ref: Developing the Aggregate Plan Level: moderate

85. Discuss some of the human resource concerns you should have when evaluating the production plan.

Ans: (1) Achieve the desired customer service level. (2) Make the best use of the company’s resources. (3) Are the workers putting in excessive overtime one month and doing little the next? How does this plan affect the workforce? Does it lower morale or does it provide stability for the workers?

Section Ref: Developing the Aggregate Plan Level: moderate

86. Briefly discuss a negative outcome of using a level production plan in a nontangible (service) organization.

Ans: There will be insufficient employees to handle the demand. This can result in lost business and negative impact to the overall customer satisfaction.

Section Ref: Aggregate Plans for Companies With Nontangible Products Level: moderate

87. Explain the Reactive vs. Proactive Demand-based options.

Ans: Reactive uses finished goods inventory, absorbing fluctuations and developing a stable work environment; backorders for fluctuations are used and can be costly. Proactive shifts the demand, incentives are used to minimize fluctuations.

Section Ref: Aggregate Planning Options Level: moderate

Problems

Reference: Input data for problems 88-91 follows: Cost data Regular time labor cost per hour Overtime time labor cost per hour Subcontracting cost per unit (labor only) Back order cost per unit per period Inventory holding cost per unit per period Hiring cost per employee Firing cost per employee

$10 $15 $80 $20 $10 $500 $400

Capacity data Beginning workforce Beginning inventory Beginning back orders Production standard per unit (hours) Regular time available per period (hours) Overtime time available per period (hours)

40 employees 0 units 0 units 2 hours of labor per unit 160 hours per period per employee 30 hours per period per employee

Demand data Period 1 Period 2 Period 3 Period 4

3,920 units 2,480 units 2,200 units 3,280 units

Period 5 Period 6 Period 7 Period 8

3,800 units 4,340 units 4,820 units 4,600 units

88. Develop a level aggregate plan using inventory and back orders (data given above). (a) What is the production rate per period? (b) No overtime is to be used. What is the required workforce level and how many workers are hired or fired at the beginning of period 1? (c) What is the maximum ending inventory and when does it occur? (d) What is the maximum amount of back orders and when does it occur? (e) What is the total cost? (f) What is the cost per unit?

Ans: (a) 3,680 units; (b) 46 workers, so 6 must be hired; (c) 2,840 units at end of period 4; (d) 240 units at end of period 1; (e) $716,000; f) $24.32 Section Ref: Developing the Aggregate Plan Level: moderate

89. Develop a chase aggregate plan without inventory and back orders. Do no hiring or firing. When demand exceeds regular production, use overtime up to its maximum and then subcontracting. When demand is less than regular production, use undertime (data given above). (a) What are the total hours of overtime per employee for the plan? (b) How many total units are produced using subcontracting? (c) What are the total hours of undertime per employee for the plan? (d) What is the total cost? (e) What is the cost per unit?

Ans: (a) 154 hours; (b) 2,480; (c) 86 hours; (d) $802,800; (e) $27.27 Section Ref: Developing the Aggregate Plan Level: moderate

90. Develop a chase aggregate plan without inventory and back orders. Use no undertime or subcontracting. When demand exceeds regular plus maximum overtime production, hire enough employees to meet demand, working as much overtime as possible. When demand is less than regular time production, fire just enough workers to avoid undertime (you may then use a minimal amount of overtime to get production back up to demand) (data given above). (a) What is the workforce at the end of the last period? How many total were hired? How many total were fired? (b) How many total units were produced using overtime? (c) What is the total cost? (d) What is the cost per unit?

Ans: (a) 51 workers, with 26 hired and 15 fired; (b) 3,600 units; (c) $643,800; (d) $21.87 Section Ref: Developing the Aggregate Plan Level: moderate

91. Develop a hybrid aggregate plan with inventory, but no back orders. Also, use no undertime and no subcontracting. Also use no firing, since the company is projecting a 20% annual growth rate per year over the next several years. When demand minus opening inventory exceeds regular plus maximum overtime production, hire enough employees to meet demand, working as much overtime as possible. When demand is less than regular time production, work no overtime and add to inventory (data given above). (a) What is the workforce at the end of the last period? How many total were hired? (b) How many total units were produced using overtime? (c) What is the maximum ending inventory and when does it occur? (d) What is the total cost? (e) What is the cost per unit?

Ans: (a) 49 workers, with 9 hired; (b) 1,840 units; (c) 2,120 units at end of period 4; (d) $685,900; (e) $23.30 Section Ref: Developing the Aggregate Plan Level: hard

92. Sam’s dry cleaning store has 3 employees who fold the clothes. Each employee can fold 45 shirts every hour. Assuming a level aggregate program how many employees will Sam need if to meet a demand of 1600 shirts per day if everyone works an 8 hour shift? a) 3 b) 5 c) 7 d) 12 e) 35 Ans: b Section Ref: Types of Aggregate Plans Level: easy

93. If Frank has 200 chickens in stock and he forecasts the following monthly demands.

Using a level production plan how many chickens will Frank need to supply each month to meet the demand?

January = 300 February =250 March = 180 April = 175 May =200 June = 240 July = 220 a) 175 b) 195 c) 223 d) 232 e) 1565 Ans: b Section Ref: Types of Aggregate Plans Level: easy

94. Given the following calculate (a) cost using a level production plan, (b) cost using a chase aggregate plan, and identify the lowest cost option. In the level production plan backorders are allowed but for each unfilled order it costs the company $10/unit. The employees work an 8 hour day and overtime is not allowed Demand Period 1 240 Initial Employees 6

Period 2

235

Capacity/employee Hourly Period 3 265 cost/employee Period 4 220 Inventory Holding Period 5 220 Shortage Cost Period 6 260 Hiring Cost Firing Cost a) A=5834, B = 5472, C = level b) A=5472, B = 5834, C = level c) A=5834, B = 5472, C = chase d) A=5472, B = 5834, C = chase e) A =5834, B = 5472, C = either

40 $18 $20 $10 $230 $190

Ans: c Level Production Plan Production 240 240 240 240 240 240

Over/short 0 5 -25 20 20 -20

Cumulative 0 5 -20 0 20 0 Total

Inventory Cost $0 $50 ($200) 0 $400 0 $ 650.00

Employee Cost $864 $864 $864 $864 $864 $864 $5,184

Chase Production Plan Total Production Hire Fire Employee Period 1 6 0 0 6 Period 2 5.875 0 0 6 Period 3 6.625 1 0 7 Period 4 5.5 0 1 6 Period 5 5.5 0 0 6 Period 6 6.5 1 0 7 Total 2 1 38 Cost $460 $190 $5,472 Section Ref: Aggregate Plans For Companies With Tangible Products Level: moderate Demand 240 235 265 220 220 260

Reference: Using the following for questions 95, 96, & 97 Labor Labor Cost regular

24

$/hr

#units Period 1 Period 2

200 150

over time

32

$/hr

hiring firing

125 200

$/employee $/employee

initial fabrication regular time

2 3.6 160

over time

40

employee hrs/unit hr/time period/employee hr/time period/employee

Period 3 Period 4

185 210

Capacity employee

95. Calculate the total cost to meet the demand using a chase production plan without using overtime. a) $72,960 b) $73,460 c) $73,660 d) $76,800 e) $77,175 Ans: c Section Ref: Aggregate Plans for Service Companies With Nontangible Products Level: moderate

96. Calculate the total cost to meet the demand using a chase production plan with overtime.

Once overtime is approved the workers are on the job 12 hours each day for the full period. a) $72,960 b) $73,460 c) $73,660 d) $76,800 e) $77,175 Ans: e Section Ref: Aggregate Plans for Service Companies With Nontangible Products Level: moderate

97. Calculate the total cost to meet the demand using a level production plan with overtime.

Once overtime is approved the workers are on the job 12 hours each day for the full period.

Each unit that cannot be completed with a level product plan costs the firm $150. Assume that the employees can only finish a whole unit and round up/down accordingly. a) $72,960 b) $73,460

c) $75,870 d) $76,800 e) $77,175 Ans: c Section Ref: Aggregate Plans for Service Companies With Nontangible Products Level: moderate

Short Answer

98. If the marketing plan does not meet the strategic business objectives, top management and marketing revise either the _________ or the ___________.

Ans: objectives, marketing plan Section Ref: The Role of Aggregate Planning

99. The master production schedule is a(n) ______ production schedule and is typically stated as _______ finished goods.

Ans: anticipated, specific Section Ref: The Role of Aggregate Planning Level: moderate

100. ___________________ is an important advantage of level production plans.

Ans: Workforce stability Section Ref: The Role of Aggregate Planning Level: easy

101. An important advantage of chase aggregate plans is that they ____________________.

Ans: minimize finished goods holding cost Section Ref: Types of Aggregate Plans Level: easy

102. Subcontracting has unattractive ________________________ effects.

Ans: cost Section Ref: Aggregate Planning Options

Level: easy

103. At CCM _________ and ___________ is the basis for all planning, manufacturing, and supply chain activities.

Ans: sales, operations planning Section Ref: Types of Aggregate Plans Level: hard

104. In the level production plan you do not add ______, _____ or ______ to meet peak demand.

Ans: people (personnel), tools, equipment Section Ref: Types of Aggregate Plans Level: moderate

105. In proactive option demand-based aggregate planning, marketing tries to _____ the _____ pattern.

Ans: shift, demand Section Ref: Aggregate Planning Options Level: easy

106. Subcontracting provides _____ output capacity during periods of ______.

Ans: additional, high demand Section Ref: Aggregate Planning Options Level: easy

107. In a level production plan, if you do not allow backorders, you will need to ensure the _____ is sufficient to meet the average demand.

Ans: workforce Section Ref: Developing the Aggregate Plan Level: hard

File: ch14, Chapter 14: Resource Planning

Multiple Choice

1. What does ERP stand for? a) educational resources planning b) end routing procedure c) enterprise reliability production d) enterprise resource planning e) easy resource planning Ans: d Section Ref: Enterprise Resource Planning Level: easy

2. ERP is software designed for _____ and ______ business processes. a) calculating, budgeting b) deleting, changing c) organizing, managing d) organizing, budgeting e) selecting, managing Ans: c Section Ref: Enterprise Resource Planning Level: easy

3. What is an information system designed to integrate internal and external members of the supply chain? a) material requirements planning b) master production schedule c) capacity requirements planning d) aggregate planning e) enterprise resource planning Ans: e Section Ref: Enterprise Resource Planning Level: easy

4. Owens Corning reported savings of ______________ by using ERP. a) $6 million b) $16 million

c) $65 million d) $600 million e) $660 million Ans: c Section Ref: Enterprise Resource Planning Level: hard

5. Which of the following is not one of the four basic categories of ERP modules? a) finance and accounting b) information systems c) sales and marketing d) production and materials management e) human resources Ans: b Section Ref: Enterprise Resource Planning Level: moderate

6. Which ERP module includes investment management? a) finance and accounting b) information systems c) sales and marketing d) production and materials management e) human resources Ans: a Section Ref: Enterprise Resource Planning Level: moderate

7. Which ERP module handles billing? a) finance and accounting b) information systems c) sales and marketing d) production and materials management e) human resources Ans: c Section Ref: Enterprise Resource Planning Level: hard

8. Which ERP module includes work-flow analysis? a) finance and accounting

b) information systems c) sales and marketing d) production and materials management e) human resources Ans: e Section Ref: Enterprise Resource Planning Level: hard

9. What proportion of U.S. companies with greater than $1 billion in annual revenues has implemented ERP? a) 10% b) 20% c) 40% d) 75% e) 95% Ans: c Section Ref: Enterprise Resource Planning Level: hard

10. The ERP system provides a single interface: a) to operations only. b) to operations and inventory control only. c) to external members of the supply chain as well. d) to the company management structure only. e) to customers only.

Ans: c Section Ref: The Evolution of ERP Level: moderate

11. Second generation ERP systems addressed the first generation deficiency of: a) inadequate statistics b) interdepartmental communications c) integrated modules d) continuous planning capabilities e) forecasting capabilities Ans: d Section Ref: The Evolution of ERP Level: moderate

12. ERP systems provide _____ and _____ benefits. a) tangible, HR b) intangible, marketing c) marketing, operation d) tangible, intangible e) CEO, CFO Ans: d Section Ref: The Benefits of ERP Level: moderate

13. Second-generation ERP systems are referred to as ___________ software. a) scheduling b) MRP c) inventory management d) MPS e) SCM Ans: e Section Ref: Enterprise Resource Planning Level: moderate

14. _______________ MRP is an MRP system that includes production planning, master production scheduling, and capacity requirements planning. a) Fully-integrated b) Closed-loop c) Open-loop d) Wide-range e) Enterprise Ans: b Section Ref: The Cost of ERP Systems Level: easy

15. The most critical factors for successful EPR implementation are ______ and _________ ______. a) leadership, top management commitment b) leadership, technological transfer management c) management, technological transfer management d) funding, top management commitment e) leadership, detailed technical specifications Ans: a Section Ref: The Cost of ERP Systems Level: moderate

16. What information system enables companies to have the right material in the right amounts available at the right time? a) manufacturing resources planning b) multifunctional requirements planning c) material requirements planning d) material relationships planning e) manufacturing requirements planning Ans: c Section Ref: The Cost of ERP Systems Level: easy

17. Companies use ____________ to check that enough work is scheduled for operations and that the amount of work scheduled is feasible. a) capacity management b) closed-loop requirements planning c) cut requirements planning d) capacity resources planning e) capacity requirements planning Ans: e Section Ref: The Cost of ERP Systems Level: easy

18. Independent demand is the demand for ______________. a) finished products b) subassemblies c) parts d) raw materials e) components Ans: a Section Ref: Material Planning Systems Level: easy

19. In the mid-1970s, MRPII was developed. One of its major components is: a) leadership b) inventory management c) operations execution d) strategic management e) marketing

Ans: c Section Ref: Material Planning Systems Level: moderate

20. Which of the following most closely describes dependent demand? a) demand generated by suppliers b) demand that is seasonal c) demand estimates using regression analysis d) demand derived from finished products e) demand for repair parts Ans: d Section Ref: Material Planning Systems Level: moderate

21. A computer-based information system designed to manage dependent demand inventory is _____________. a) manufacturing resources planning b) multifunctional requirements planning c) material relationships planning d) material requirements planning e) manufacturing requirements planning Ans: d Section Ref: Material Planning Systems Level: moderate

22. The ____________ file lists the materials needed to build a product. a) master production schedule b) bill of material c) inventory records d) material needs e) build structure Ans: b Section Ref: Material Planning Systems Level: moderate

23. CRP systems are used to check that the amount of work: a) meets the MRP directive. b) meets the ERP directive. c) will make a profit. d) is feasible.

e) meets OSHA requirements.

Ans: d Section Ref: An Overview of MRP Level: easy

24. The ____________ details the company’s planned products, quantity, and the schedule used by marketing when promising deliveries. a) master production schedule b) bill of material c) inventory records d) material product sales e) promised deliveries Ans: a Section Ref: Types of Demand Level: moderate

25. The ____________ is (are) checked for the materials on hand and those that need to be procured. a) master production schedule b) bill of material c) inventory records d) material inventories e) promised deliveries Ans: c Section Ref: Objectives of MRP Level: moderate

26. MRP develops a ____________ that shows future demand, supply and inventories by time period. a) DSI report b) snapshot forecast c) requirements plan d) material movements schedule e) time-phased schedule Ans: e Section Ref: Types of Demand Level: moderate

27. In MRP, the starting points for each part and material needed to accomplish the master production schedule are the ___________________. a) net requirements b) gross requirements c) planned releases d) scheduled receipts e) planned receipts Ans: b Section Ref: Types of Demand Level: moderate

28. Which of the following is not true concerning replenishment orders? a) They are generated when there is not enough inventory. b) MRP specifies when to place the order. c) The order may be for material from a supplier. d) They are orders for the final product. e) The order may be for material from the manufacturing floor.

Ans: d Section Ref: Types of Demand Level: moderate

29. Which of the following is an objective of MRP? a) Keep priorities updated and valid. b) Keep track of material movements on the shop floor. c) Provide information for expediting orders. d) Allocate scarce parts to products. e) Provide information for activity based costing.

Ans: a Section Ref: Types of Demand Level: moderate

30. The authorized MPS is a statement of ______________________________. a) manufacturing orders that have been authorized for release to the shop floor b) which workers are authorized to work on which machines c) what the company expects to build and when it expects to build it d) authorized payments to vendors e) where different end products are authorized to be manufactured Ans: c Section Ref: Types of Demand Level: moderate

31. The quantity of the replenishment order is based on the __________________________. a) capacity available b) size of the item c) number of workers available d) inventory space available e) lot sizing rule used Ans: e Section Ref: Types of Demand Level: moderate

32. Information that may be contained in the inventory records file includes all except which of the following? a) part numbers b) run times for manufactured parts c) part names d) lead times e) safety stock requirements Ans: b Section Ref: Objectives of MRP Level: moderate

33. The time interval necessary to either manufacture or purchase an item is its ______________. a) time fence b) lead time c) safety time d) time bucket e) receipt time Ans: b Section Ref: Objectives of MRP Level: moderate

34. Information in the inventory records file that can change with inventory transactions includes the ________. a) part number b) lot size rule c) projected inventory level d) lead time e) safety stock requirement

Ans: c Section Ref: Objectives of MRP Level: hard

35. An error in replenishment ordering can result from a(n) _____________________________. a) inaccuracy in the inventory records file b) breakdown of equipment c) expediting of an order d) circumstance of working excessive overtime e) error in accounts receivables Ans: a Section Ref: Objectives of MRP Level: hard

36. What is a technique for improving inventory record accuracy? a) cycle counting b) drum, buffer, rope c) Kanban d) tracking signal e) statistical process control Ans: a Section Ref: Objectives of MRP Level: moderate

37. Gross requirements for finished products are taken from ________________________. a) the inventory records file b) the order entry file c) the authorized MPS d) the bill of materials file e) forecasted sales Ans: c Section Ref: MRP Inputs Level: moderate

38. When there is insufficient inventory to satisfy the forecast for a particular period a(n) _____________ order must be placed. a) BOM b) restock c) inventory request d) MPS

e) MRP Ans: d Section Ref: MRP Inputs Level: moderate

39. Scheduled receipts are _________________________________________. a) planned orders b) planned orders offset by lead time c) gross requirements offset by lead time d) gross requirements minus inventory e) replenishment orders that have been placed but not yet received Ans: e Section Ref: MRP Inputs Level: moderate

40. For every scheduled receipt in an MRP table, there is also in the organization a(n) __________________. a) shop floor order b) order that has been placed but not yet been received c) planned order d) period order e) dispatch list Ans: b Section Ref: MRP Inputs Level: hard

41. For any period the beginning inventory, plus any replenishment orders due, less the gross requirement equals is called the __________________________. a) planned orders b) projected available quantity c) scheduled receipts d) lead time e) safety stock Ans: b Section Ref: MRP Inputs Level: moderate

42. The beginning inventory for any time period is equal to _____________________________________.

a) safety stock plus gross requirements from the previous period b) scheduled receipts plus projected available quantity c) planned orders plus scheduled orders d) projected available quantity from at the end of the previous period e) gross requirements less scheduled orders Ans: d Section Ref: MRP Inputs Level: moderate

43. Which of the following is not true for planned orders? a) They are necessary only for finished products. b) They result when there is not enough inventory to cover the gross requirements. c) The quantity is calculated using the lot-sizing rule. d) The lead time is required to determine when the order should be placed. e) The inventory records file is updated for the order.

Ans: a Section Ref: MRP Inputs Level: moderate

44. The MRP file that contains data on specific materials used to make final products and their correct quantities is the ______________________. a) authorized master production schedule b) bill of materials file c) inventory records file d) part status file e) routing file Ans: b Section Ref: MRP Inputs Level: moderate

45. When there is insufficient inventory to cover the gross requirements for a period a) an MRP is placed b) an ERP is placed c) a planned order is placed d) a scheduled order is placed e) a rush order occurs Ans: c Section Ref: MRP Inputs Level: moderate

46. The MRP input listing the intermediate assemblies, subassemblies, component parts, raw materials, and the quantities of each needed to produce one final product is the ___________________________. a) authorized master production schedule b) bill of materials file c) inventory records file d) part status file e) assembly time chart Ans: b Section Ref: MRP Inputs Level: moderate

47. Which of the following is not true concerning indented bills of materials? a) Subsequent levels are indented further to the right. b) Children are indented toward the right. c) The highest level parents are closest to the left margin. d) Quantity required is shown for each part number. e) Lead times determine how far children are indented.

Ans: e Section Ref: MRP Inputs Level: hard

48. A visual depiction of the subassemblies and components that are needed to produce a finished product is called a(n) ______________________. a) assembly time chart b) product structure tree c) peg d) product chart e) blueprint Ans: b Section Ref: MRP Inputs Level: moderate

49. An item that has no parents is a(n) ______________. a) subassembly b) end item c) child item d) intermediate assemble e) component Ans: b

Section Ref: MRP Inputs Level: hard

50. The cumulative lead time is _______________________________. a) the sum of the lead times for all the components b) the sum of the lead time and the safety time c) the number of time buckets used in the MRP d) the longest route in terms of time from the low level items to the end item in the product structure tree e) lead time less the safety time Ans: d Section Ref: MRP Inputs Level: hard

51. The lead time can be less than the cumulative lead time when _________________________. a) the company has inventory on hand b) the order has already been shipped c) the supply chain is well tuned d) there is no safety time e) the order is expedited Ans: a Section Ref: MRP Inputs Level: moderate

52. The gross requirements of a given component part are determined from ______________________. a) scheduled receipts plus projected available b) gross requirements of the parent c) planned orders of the parent d) projected available of the end item e) planned orders of the end item Ans: c Section Ref: The MRP Explosion Process Level: moderate

53. Which of the following is not true for action notices that are produced by MRP systems? a) An action notice is produced when a planned order needs to be released. b) An action notice is produced when due dates of orders need to be adjusted. c) An action notice is produced when the lead time is not sufficient for a planned order.

d) An action notice is produced when inventory is moved to the manufacturing floor. e) They indicate actions that need to be taken by inventory planners.

Ans: d Section Ref: The MRP Explosion Process Level: moderate

54. The current time period is referred to as __________________. a) time zero b) the point of departure c) the start time d) the action bucket e) this year Ans: d Section Ref: The MRP Explosion Process Level: moderate

55. A positive quantity in the current period’s planned order row means that ___________________. a) lead time is too long b) the projected available is negative c) gross requirements are too large d) the planned order is due to be completed in the current period e) an order must be released Ans: e Section Ref: The MRP Explosion Process Level: moderate

56. Production and inventory planners release orders to ________________________. a) the expediter b) either an external supplier or to the shop floor c) the logistics manager d) either the shop floor or to the warehouse e) marketing Ans: b Section Ref: The MRP Explosion Process Level: moderate

57. An order released to a supplier authorizes ______________________________________. a) the shipment of the material so that it arrives as needed

b) movement of the material from the warehouse to the supplier c) the sending of information concerning production to the supplier d) accounting to set up an accounts receivable entry e) the logistics manager to start investigating shipment options Ans: a Section Ref: The MRP Explosion Process Level: moderate

58. An action notice is generated ________________________________________. a) for planned orders in any period b) only for orders that are to be released to the shop floor c) only for movements to and from the warehouse d) only when marketing needs to be notified e) when a planned order needs to be released Ans: e Section Ref: The MRP Explosion Process Level: hard

59. If an order is not scheduled to arrive in time, the planner tries to ________________. a) find a replacement order b) cancel the order c) split the order in two d) expedite the order e) talk marketing into changing the due date Ans: d Section Ref: The MRP Explosion Process Level: moderate

60. Which of the following is not a lot size rule? a) lot for lot b) fixed order quantity c) overall factors d) least total costs e) parts period balancing Ans: c Section Ref: The MRP Explosion Process Level: moderate

61. Different lot size rules determine the quantity of the order and __________________.

a) the quality b) change the frequency of replenishment orders c) how projected available is calculated d) the lead time e) the backorder cost Ans: b Section Ref: The MRP Explosion Process Level: moderate

62. If setup costs are essentially zero (negligible when compared to carrying costs), which approach should be used for lot sizing? a) lot for lot b) fixed order quantity c) period order quantity with POQ = 6 periods d) period order quantity with POQ = 2 periods e) period order quantity with POQ = 4 periods Ans: a Section Ref: Action Notices Level: hard

63. Selection of the lot size rule to be used should be based on minimizing ____________________. a) the order size b) late shipments c) total processing time d) quality problems e) the sum of ordering and carrying costs Ans: e Section Ref: Action Notices Level: easy

64. Capacity requirements planning uses data from _________________________. a) MRP b) rough-cut capacity planning c) aggregate planning d) MPS e) the bill of labor file Ans: a Section Ref: Action Notices Level: moderate

65. For capacity requirements planning, loads for critical work centers are calculated based on ___________. a) open external supplier orders and planned external supplier orders b) gross requirements for the end product c) open shop orders and planned shop orders d) safety stock e) the sum of ordering and carrying costs Ans: c Section Ref: The Role of Capacity Requirements Planning (CRP) Level: moderate

66. Which of the following is not a direct input to capacity requirements planning? a) planned shop orders b) open shop orders c) setup time and run time per unit for shop orders d) current inventory levels e) quantity for shop orders Ans: d Section Ref: The Role of Capacity Requirements Planning (CRP) Level: moderate

67. With capacity requirements planning, the calculated workload for a work center is compared with ___________. a) available capacity b) calculated workloads for other work centers c) the cost of expanding the work center d) standard capacity e) design capacity Ans: a Section Ref: The Role of Capacity Requirements Planning (CRP) Level: moderate

68. If the available capacity at a work center is not adequate, the company can __________________. a) decrease run times per piece b) authorize overtime c) expedite d) decrease order quantities e) hold up payment

Ans: b Section Ref: The Role of Capacity Requirements Planning (CRP) Level: moderate

69. Capacity requirements planning enables the company to evaluate ____________________. a) employee morale b) its suppliers c) its manufacturing costs d) quality e) how well it is using its critical work centers Ans: e Section Ref: The Role of Capacity Requirements Planning (CRP) Level: moderate

70. Dell practices _____________________________. a) focused customization b) make to stock production c) mass merchandising d) mass customization e) frozen assembly schedules Ans: d Section Ref: Enterprise Resource Planning Level: hard

71. Which of the following is not a major supplier of ERP systems? a) SAP AG b) PeopleSoft c) Oracle d) Infor.com e) IBM Ans: e Section Ref: The Benefits of ERP Level: hard

72. Setup time is changed: a) once each day regardless of product changes. b) each time the operator begins the machine. c) each time the machine is prepared to produce the desired item quantity. d) for each shift that works on the desired item quantity manufacturing. e) on rare occasions if it takes significant time.

Ans: c Section Ref: The Role of Capacity Requirements Planning (CRP) Level: easy

73. According to the textbook, most manufacturing operations, production or inventory control planners are responsible for working with MRP. Planners are typically responsible for all except which of the following: a) end item inventory items b) subassemblies inventory items c) component inventory items d) raw material pricing e) supplier delays Ans: d Section Ref: Resource Planning Across the Organization Level: moderate

74. Which of the following does not share a common ERP database? a) internal to the organization b) suppliers c) customers d) the supply chain e) CEO strategic plan Ans: e Section Ref: The Supply Chain Link Level: easy 75. Which of the following is not an intangible benefit of ERP? a) improved customer response b) better integration between systems c) global sharing of information d) increased flexibility e) improved on-time delivery performance Ans: e Section Ref: The Benefits of ERP Level: hard

True/False

76. Material requirements planning is an information system designed to integrate internal and external members of the supply chain.

Ans: False Section Ref: Enterprise Resource Planning Level: moderate

77. The primary objective of ERP is to integrate all departments and functions, internal and external, onto a single computer system to serve the enterprise’s needs.

Ans: True Section Ref: Enterprise Resource Planning Level: moderate

78. ERP systems are more commonly found in small companies than in large ones.

Ans: False Section Ref: Enterprise Resource Planning Level: hard

79. ERP modules are fully integrated.

Ans: True Section Ref: Enterprise Resource Planning Level: moderate

80. Supply chain intelligence enables strategic decision-making along the supply chain.

Ans: True Section Ref: The Evolution of ERP Level: moderate

81. ERP and e-commerce systems should not interface with each other.

Ans: False Section Ref: The Evolution of ERP Level: hard

82. MRP develops a time-phased schedule that shows future demand, supply and inventories by time period.

Ans: True Section Ref: Types of Demand Level: moderate

83. The company forecasts dependent demand based on independent demand input.

Ans: False Section Ref: Types of Demand Level: moderate

84. The authorized MPS is a statement of what the company expects to build and when it expects to build it.

Ans: True Section Ref: Types of Demand Level: moderate

85. An error in replenishment ordering can result from an inaccuracy in the inventory records file.

Ans: True Section Ref: Objectives of MRP Level: hard

86. Gross requirements for finished products are taken from the order entry file.

Ans: False Section Ref: MRP Inputs Level: moderate

87. Scheduled receipts are replenishment orders that have been placed but not yet received.

Ans: True Section Ref: MRP Inputs Level: moderate

88. For any period the beginning inventory, plus any replenishment order due, less the gross requirement equals planned orders.

Ans: False Section Ref: MRP Inputs Level: moderate

89. A product structure tree is a visual depiction of the subassemblies and components that are needed to produce a finished product.

Ans: True Section Ref: MRP Inputs Level: easy

90. An end item has no parents.

Ans: True Section Ref: MRP Inputs Level: hard

91. The lead time can be less than the cumulative lead time when the company has inventory on hand.

Ans: True Section Ref: MRP Inputs Level: moderate

92. The gross requirements of a given component part are determined from planned orders of the parent.

Ans: True Section Ref: The MRP Explosion Process Level: moderate

93. Production and inventory planners release orders to the expediter.

Ans: False Section Ref: The MRP Explosion Process Level: moderate

94. The explosion process calculates the demand for the parent of the children.

Ans: False Section Ref: The Role of Capacity Requirements Planning (CRP) Level: moderate

95. An order released to the shop floor authorizes withdrawal of the needed materials and the start of production.

Ans: True Section Ref: The MRP Explosion Process Level: hard

96. If an order is not scheduled to arrive in time, the planner tries to cancel the order.

Ans: False Section Ref: The MRP Explosion Process Level: easy

97. Under the lot for lot rule, order sizes are essentially determined directly from gross requirements.

Ans: True Section Ref: Action Notices Level: moderate

98. Capacity requirements planning enables the company to evaluate how well it is using its critical work centers.

Ans: True Section Ref: The Role of Capacity Requirements Planning (CRP) Level: moderate

99. Companies use a single lot-sizing technique to standardize processes.

Ans: False Section Ref: The Role of Capacity Requirements Planning (CRP) Level: moderate

100. The three types of lot size rules are FOQ, L4L, and POQ. Ans: True Section Ref: Comparison of Lot Sizes Level: easy

Essay

101. Explain how Dell Computer has become able to implement mass customization.

Ans: Dell begins assembly of a customer’s order almost immediately after receiving the order.

To do this, Dell must carefully manage its component inventories, knowing availability of needed components to complete the assembly. Information regarding the order is sent to members of its supply chain to assure on-time delivery of the finished computer.

Section Ref: Enterprise Resource Planning Level: hard

102. List the major users of ERP systems.

Ans: managers, employees, suppliers, and customers Section Ref: Enterprise Resource Planning Level: moderate

103. What is the primary objective of ERP? Ans: Integrate all departments and functions, internal and external, onto a single computer system to serve the enterprise’s needs.

Section Ref: Enterprise Resource Planning Level: hard

104. What are the objectives of second-generation ERP systems?

Ans: leverage existing systems to increase efficiency in handling transactions, improve decisionmaking, and to support e-commerce Section Ref: Enterprise Resource Planning Level: hard

105. What are some technological motivations for implementing ERP systems?

Ans: replace disparate systems; improve quality and visibility of information; integrate business processes and systems; replace older, obsolete systems; and acquire systems that can support future business growth Section Ref: The Evolution of ERP Level: hard

106. What transactions can cause information in the inventory records file to change?

Ans: releasing new orders, receiving previously ordered material, withdrawing inventory, canceling orders, correcting inventory record errors, and adjusting for rejected shipments Section Ref: Objectives of MRP Level: hard

107. What are the characteristics of indented bills of materials?

Ans: The highest-level item is closest to the left margin. Components going into that item are indented to the right. Subsequent levels are indented further to the right. Quantity required is shown for each part number.

Section Ref: MRP Inputs Level: hard

108. Under what conditions are action notices generated?

Ans: if a planned order needs to be released in the current period, when due dates of orders need to be adjusted, or when there is insufficient lead time for a planned replenishment order Section Ref: The MRP Explosion Process Level: hard

109. Name some lot size rules.

Ans: least unit cost, least total costs, parts period balancing, fixed order quantity, lot for lot, and period order quantity Section Ref: The MRP Explosion Process Level: moderate

110. Discuss the difference between the production and inventory control planners’ release order to external suppliers versus the shop floor.

Ans: Release orders to the suppliers authorizes the shipment of the materials so it arrives as needed. Orders released to the shop authorize withdrawal of the needed materials and the start of production.

Section Ref: Action Notices Level: moderate

111. Describe how workload is computed for a work center for capacity requirements planning.

Ans: MRP data for planned shop orders and open shop orders are used. For each order, the run time per unit is multiplied by the quantity and added to the setup time to calculate the total time for the order. The total times are added together for each time period to calculate the workload for the work center for each time period.

Section Ref: The Role of Capacity Requirements Planning (CRP) Level: hard

112. Discuss how MRP reports are used by the production and inventory planners.

Ans: These reports are used to (1) generate purchasing requisitions and (2) develop schedules of different activities to be done on the manufacturing floor.

Section Ref: Resource Planning Within OM: How It all Fits Together Level: moderate

Problems

113. Given the following data: Usage per Lead Time Item Parent (weeks) J 3 K 3 2 L 1 1 M 2 2 N 4 3 O 2 2 P 1 1 Q 6 2 The end product J is made from components K, L, and M. K is made from N and O. O is made from P and Q. (a) What is the replenishment lead time for J, assuming there are no inventories? (b) Calculate the gross requirements for each of the components if the company plans to build 10 of its J model. Assume that there are no beginning inventories. (c) Calculate the gross requirements for each of the components if the company plans to build 10 of its J model if you have these beginning inventories: 60 N and 60 O.

(d) What is the replenishment lead time if the company plans to build 10 of its J model, assuming the beginning inventories given in (c) above?

Ans: (a) 9 weeks; (b) 10 J, 30 K, 10 L, 20 M, 120 N, 60 O, 60 P, and 360 Q; (c) 10 J, 30 K, 10 L, 20 M, 60 N, 0 O, 0 P, and 0 Q; (d) 8 weeks Section Ref: MRP Inputs Level: moderate

114. Given the following data: Usage per Lead Time Item Parent (weeks) J 1 K 4 2 L 2 3 M 4 1 N 1 4 O 5 2 P 3 2 Q 8 1 R 2 3 S 4 2 The end product J is made from components K and L. K is made from M and N. L is made from O and P. P is made from Q, R, and S. (a) What is the replenishment lead time for J, assuming there are no inventories? (b) Calculate the gross requirements for each of the components if the company plans to build 10 of its J model. Assume that there are no beginning inventories. (c) Calculate the gross requirements for each of the components if the company plans to build 10 of its J model if you have these beginning inventories: 20 K, 10 L, and 30 P. (d) What is the replenishment lead time if the company plans to build 10 of its J model, assuming the beginning inventories given in (c) above?

Ans: (a) 9 weeks; (b) 10 J, 40 K, 20 L, 160 M, 40 N, 100 O, 60 P, 480 Q, 120 R, and 240 S; (c) 10 J, 20 K, 10 L, 80 M, 20 N, 50 O, 0 P, 0 Q, 0 R, and 0 S; (d) 7 weeks Section Ref: MRP Inputs Level: moderate

115. Given the following data: Usage per Lead Time Item Parent (weeks) J 1 K 4 3 L 2 2 M 4 3 N 1 1 O 2 2 The end product J is made from components K, and L. K is made from M, N, and O. (a) What is the replenishment lead time for J, assuming there are no inventories?

(b) Calculate the gross requirements for each of the components if the company plans to build 10 of its J model. Assume that there are no beginning inventories. (c) Calculate the gross requirements for each of the components if the company plans to build 10 of its J model if you have these beginning inventories: 20 K and 80 M. (d) What is the replenishment lead time if the company plans to build 10 of its J model, assuming the beginning inventories given in (c) above?

Ans: (a) 7 weeks; (b) 10 J, 40 K, 20 L, 160 M, 40 N, and 80 O; (c) 10 J, 20 K, 20 L, 0 M, 20 N, and 40 O; (d) 6 weeks Section Ref: MRP Inputs Level: moderate

116. Given the following data: Usage per Lead Time Beginning Lot Size Item Parent (weeks) Inventory Rule J 3 0 L4L K 3 2 40 L4L L 4 1 60 L4L The end product J is made from components K and L. The authorized MPS calls for 10 J to be completed in week 4 and 30 J to be completed in week 7. (a) What are the gross requirements for K and L? (b) What are the planned orders for K and L? Ans: (a) for K - 30 in week 1 and 90 in week 4, for L - 40 in week 1 and 120 in week 4; (b) for K - 80 in week 2, for L - 100 in week 3 Section Ref: MRP Inputs Level: moderate

117. Given the following data: Usage per Lead Time Beginning Lot Size Item Parent (weeks) Inventory Rule J 1 0 L4L K 3 1 40 FOQ = 200 L 4 3 40 L4L M 2 1 400 L4L N 1 1 200 L4L The end product J is made from components K and L. Component K is made from M and N. The authorized MPS calls for 10 J to be completed in week 2, 30 J to be completed in week 3, 40 J to be completed in week 5, and 50 J to be completed in week 6. There is a scheduled receipt of 120 L in week 2. (a) What are the gross requirements for K, L, M and N? (b) What are the planned orders for K, L, M and N? Ans: (a) for K - 30 in week 1, 90 in week 2, 120 in week 4, and 150 in week 5; for L - 40 in week 1, 120 in week 2, 160 in week 4, and 200 in week 5; for M - 400 in week 1 and 400 in week 4; for N - 200 in week 1 and 200 in week 4; (b) for K - 200 in week 1, and 200 in week 4; for L 160 in week 1 and 200 in week 2; for M - 400 in week 3; for N - 200 in week 3

Section Ref: MRP Inputs Level: hard

118. Given the following data: Usage per Lead Time Beginning Lot Size Item Parent (weeks) Inventory Rule J 1 0 L4L K 8 1 850 FOQ = 2,000 L 6 1 1,250 L4L The end product J is made from components K and L. The authorized MPS calls for 200 J to be completed in week 3, 300 J to be completed in week 5, and 300 J to be completed in week 6.

There is a scheduled receipt of 400 L in week 2. (a) What are the gross requirements for K and L? (b) What are the planned orders for K and L? Ans: (a) for K - 1,600 in week 2, 2,400 in week 4, and 2,400 in week 5; for L - 1,200 in week 2, 1,800 in week 4, and 1,800 in week 5; (b) for K - 2,000 in week 1, 2,000 in week 3, and 2,000 in week 4; for L - 1,350 in week 3 and 1,800 in week 4 Section Ref: MRP Inputs Level: moderate

Reference: Use the following data for questions 119 & 120 Lot Size Bill of Material Rule Door hinges

2

FOQ = 10

4

FOQ = 40

screws (h) knobs

24 FOQ = 50

Week Door Gross Requirements

Beginning Inventory

Stain

1

1

2

FOQ = 10

1 week 3 weeks

4 FOQ = 25 FOQ = 25

1 week 1 week

2 screws (k)

3

Lead Time 2 weeks 4 weeks

4

5

6 6

screw Door hinges (h) knobs screw (K) Stain 2 20 30 5 15 10

7

8

9 10

119. For the data provided determine the Inventory Record using a FOQ lot size rule for the hinge.

Ans: Week Door Gross Requirements Hinge Gross Requirements Hinge Projected Available Hinge Planned Orders

1

2

3

4

5

6

7

8

9

0

0

0

0

0

6

0

0

10

0

0

0

0

24

0

0

40

0

20 40

20

20

20 40

60

36

36

76

36

screw screw Door hinges (h) knobs (K) Stain 2 20 30 5 15 10 Section Ref: The MRP Explosion Process Level: moderate Beginning Inventory

120. For the data provided determine the Inventory Record using a FOQ lot size rule for the screw (H).

Ans: Week Door Gross Requirements Screw (H) Gross Requirements Screw (H) Projected Available Screw (H) Planned Orders Beginning Inventory

1 0

2 0

3 0

4 0

5 0

6 6

7 0

8 0

9 10

0

0

0

0

144

0

0

240

0

30

30

30 180 36 36 150 250 Door hinges screw (h) knobs screw (K) Stain 2 20 30 5 15 10 Section Ref: The MRP Explosion Process Level: moderate

286

36

0

121. Given the following data: Period 1 2 3 4 5 6 7 8 Gross Requirements 20 20 50 50 80 80 50 50 The beginning inventory is 0 and there are no scheduled receipts. The order cost is $50 and the holding cost is $1 per part per period. (a) What are the order costs, carrying costs, and totals cost over the 8 periods using the lot-for-lot size rule? (b) What are the order costs, carrying costs, and totals cost over the 8 periods using the fixed order quantity rule with FOQ = 100?

(c) What are the order costs, carrying costs, and totals cost over the 8 periods using the period order quantity rule with POQ = 2?

Ans: (a) order costs = $400, carrying costs = $0, and total costs = $400; (b) order costs = $200, carrying costs = $340, and total costs = $540; (c) order costs = $200, carrying costs = $200, and total costs = $400 Section Ref: Action Notices Level: moderate

122. Given the following data: Period 1 2 3 4 5 6 7 8 9 Gross Requirements 70 30 90 30 80 20 90 60 80 The beginning inventory is 0 and there are no scheduled receipts. The order cost is $90 and the holding cost is $1 per part per period. (a) What are the order costs, carrying costs, and totals cost over the 9 periods using the lot-for-lot size rule? (b) What are the order costs, carrying costs, and totals cost over the 9 periods using the fixed order quantity rule with FOQ = 100? (c) What are the order costs, carrying costs, and totals cost over the 9 periods using the period order quantity rule with POQ = 3?

Ans: (a) order costs = $810, carrying costs = $0, and total costs = $810; (b) order costs = $540, carrying costs = $370, and total costs = $910; (c) order costs = $270, carrying costs = $550, and total costs = $820 Section Ref: Action Notices Level: moderate

123. Given the following data: Run Time Per unit in Standard Hours 0.45 0.25 0.70 0.15 0.60 0.20 0.55 0.15 0.80 0.35

Item Setup Time Number Period Quantity (Hours) KE738 3 400 3.6 KR376 4 550 2.7 KM276 4 800 1.6 KW718 5 200 4.0 KJ395 5 350 3.9 KA729 3 100 5.6 KP237 4 700 1.0 KF823 5 300 7.2 KH489 3 600 6.6 KE812 3 300 3.9 (a) What are the workloads for periods 3, 4, and 5? (b) There are 168 hours of operating time per machine each period. How many machines should be operated for periods 3, 4, and 5?

Ans: (a) 804.7 hours for period 3, 1,087.8 hours for period 4, and 300.1 hours for period 5; (b) 5 machines for period 3, 7 machines for period 4, and 2 machines for period 5 Section Ref: The Role of Capacity Requirements Planning (CRP) Level: moderate

124. Given the following data: Run Time Per unit in Standard Hours 0.25 0.55 0.70 0.25 0.40 0.30 0.65

Item Setup Time Number Period Quantity (Hours) KE738 3 600 7.6 KR376 4 350 3.7 KM276 4 700 7.6 KW718 3 400 5.0 KJ395 4 250 8.9 KA729 3 500 3.6 KP237 4 600 5.0 (a) What are the workloads for periods 3 and 4? (b) There are 168 hours of operating time per machine each period. How many machines should be operated for periods 3 and 4?

Ans: (a) 416.2 hours for period 3, and 1,197.7 hours for period 4; (b) 3 machines for period 3, and 8 machines for period 4 Section Ref: The Role of Capacity Requirements Planning (CRP) Level: moderate

Short Answer

125. Scheduling all the activities that must be done by a due date from that point of view is called ________________ scheduling.

Ans: backward Section Ref: Enterprise Resource Planning Level: easy

126. ____________________ uses a database that supports processes across functional areas.

Ans: Enterprise Resource Planning (ERP) Section Ref: Enterprise Resource Planning Level: moderate

127. Computer programs that are designed to improve supply chain decision making are called __________________ software.

Ans: Supply Chain Management (SCM) Section Ref: The Evolution of ERP Level: moderate

128. Supply chain intelligence enables ______________ along the supply chain.

Ans: strategic decision making Section Ref: The Evolution of ERP Level: moderate

129. A(n) __________ sets up and runs ERP systems.

Ans: Application Service Provider (ASP) Section Ref: The Evolution of ERP Level: moderate

130. The most critical factors in successful ERP programs are __________________ and _________________.

Ans: leadership, top management commitment Section Ref: The Cost of ERP Systems Level: moderate

131. A ____________________ is the primary output of an MRP system.

Ans: schedule of replenishment orders Section Ref: Types of Demand Level: hard

132. MRP systems require ______________________, ______________________, and ______________________ as inputs.

Ans: bill of materials, authorized master production schedule, and inventory records Section Ref: Types of Demand Level: hard

133. Items that are sold as complete or repair parts are called ______________________.

Ans: end items Section Ref: MRP Inputs Level: easy

134. _______________ assumes that we make enough of everything to build the required quantity, ignoring beginning inventory.

Ans: RCCP (Rough Cut Capacity Planning) Section Ref: The Role of Capacity Requirements Planning (CRP) Level: hard

135. _________________ uses planned order releases from the MRP, which considers beginning inventory.

Ans: CRP (Capacity Requirements Planning) Section Ref: The Role of Capacity Requirements Planning (CRP) Level: hard

136. ___________________ uses the planned orders generated by MRP to evaluate the feasibility of long-term or blanket contracts and to determine delivery need.

Ans: Purchasing Section Ref: Resource Planning within OM: How It All Fits Together Level: hard

137. The three criteria for selecting an ERP system include _____________, ________________, and _______________.

Ans: functionality, ease of use, and TCO (total cost of ownership) Section Ref: The Costs of ERP Systems Level: hard

File: ch15, Chapter 15: Scheduling

Multiple Choice

1. Which of the following is not a feature of flow operations? a) a process layout b) fixed routings c) special-purpose equipment and tooling d) high volume production e) high levels of labor and equipment utilization Ans: a Section Ref: High-Volume Operations Level: moderate

2. Flow operations can be ________ or ________ operations. a) intermittent, continuous b) intermittent, repetitive c) repetitive, single shot d) repetitive, continuous e) single shot, continuous Ans: d Section Ref: High-Volume Operations Level: easy

3. Scheduling in the high-volume environment is typically done through what? a) priority rules b) line design and balancing c) Thompson’s rule d) Simpson’s rule e) Johnson’s rule Ans: b Section Ref: High-Volume Operations Level: moderate

4. Which of the following is not a feature of job-shop operations? a) a process layout b) highly skilled employees c) special-purpose equipment and tooling

d) highly customized products e) low volume production Ans: c Section Ref: High-Volume Operations Level: moderate

5. A well designed high-volume system will minimize _________ inventory and reduce _____________for the product or service. a) work-in-process, throughput time b) raw material, storage capacity c) finished, throughput time d) work-in-process, storage capacity e) finished, transportation cost Ans: a Section Ref: High-Volume Operations Level: moderate

6. Which of the following techniques loads jobs up to a predetermined capacity level? a) finite loading b) infinite loading c) forward scheduling d) backward scheduling e) input/output control Ans: a Section Ref: Low-Volume Operations Level: easy

7. A progress chart shows the relationship between: a) a Gantt chart and PERT chart b) vacation schedule and work schedule c) forecast and historical performance d) planned and actual performance e) planned and actual efficiency Ans: d Section Ref: Low-Volume Operations Level: easy

8. Which of the following techniques loads jobs without regard to the capacity available to do the work?

a) finite loading b) infinite loading c) forward scheduling d) backward scheduling e) input/output control Ans: b Section Ref: Low-Volume Operations Level: easy

9. The two different approaches to load work centers in job-shop scheduling are __________________. a) load chart and process chart b) finite loading and infinite loading c) input control and output control d) fixed routings and line balancing e) makespan and linear programming Ans: b Section Ref: Low-Volume Operations Level: moderate

10. Which of the following scheduling techniques tends to break down over the long term? a) input/output control b) infinite loading c) forward scheduling d) backward scheduling e) finite loading Ans: d Section Ref: Scheduling Work Level: moderate

11. Which of the following scheduling techniques can be used to identify resource bottlenecks? a) finite loading b) infinite loading c) forward scheduling d) backward scheduling e) input/output control Ans: b Section Ref: Scheduling Work Level: hard

12. Which of the following scheduling techniques determines the earliest possible completion time for a job? a) finite loading b) infinite loading c) forward scheduling d) backward scheduling e) input/output control Ans: c Section Ref: Scheduling Work Level: easy

13. Which of the following is most likely the reason you may have to wait at the doctor’s office? a) infinite loading b) finite loading c) forward scheduling d) backward scheduling e) none of these answer choices are correct Ans: b Section Ref: Scheduling Work Level: moderate

14. Slack can be calculated if _______________________. a) infinite loading and finite loading are used together b) infinite loading and forward scheduling are used together c) finite loading and backward scheduling are used together d) finite loading and forward scheduling are used together e) forward scheduling and backward scheduling are used together Ans: e Section Ref: Scheduling Work Level: moderate

15. Which of the following techniques determines when the job must begin in order to be completed by the due date? a) infinite loading b) finite loading c) forward scheduling d) backward scheduling e) input/output control Ans: d Section Ref: Scheduling Work

Level: easy

16. If the schedule shows a 5 day slack between the end of Task A and start of Task B, this means: a) you must start Task B as soon as Task A ends. b) Task B start is late. c) Task A is taking longer to complete. d) Task A and Task B should be performed concurrently. e) Task B start can be delayed up to 5 days after Task A’s scheduled completion.

Ans: e Section Ref: Scheduling Work Level: easy

17. Which of the following techniques is used to monitor work flow at individual work centers? a) infinite loading b) finite loading c) forward scheduling d) backward scheduling e) input/output control Ans: e Section Ref: Scheduling Work Level: easy

18. Which of the following scheduling rules is a global priority rule? a) first come, first served b) last come, first served c) earliest due date d) shortest processing time e) slack per remaining operations Ans: e Section Ref: How to Sequence Jobs Level: moderate

19. Slim-Quick Inc. produces a variety of nutritional diet products. Management wants to evaluate the performance of Work Center 10, the bottleneck in the packaging line. They are particularly worried about the backlogging problem in the work center. The following input/output report is given.

Input Information Period 1 2 3 Planned Input (hours) 110 80 130

Actual Input (hours)

80

120

100

Output Information Period 1 2 3 Planned Output (hours) 100 100 100 Actual Output (hours) 80 70 110 The initial backlog was 100 hours. Based on the above information, calculate the backlog hours of Work Center 10 at the end of period 3. a) 100 b) 110 c) 140 d) 150 e) 200 Ans: c Solution: Planned Input (hours)

110

80

130

Actual Input (hours)

80

120

100

Deviation Cumulative Deviation

-30 -30

40 10

-30 -20

Planned Output (hours) Actual Output (hours) Deviation Cumulative Deviation

100 80 -20 -20

100 70 -30 -50

100 110 10 -40

Backlog hours 0 50 Total backlog hours = 100 + 40 or 140 Section Ref: Scheduling Work Level: hard

-10

20. Quick-Slim Inc. produces a variety of nutritional diet products. Management wants to evaluate the performance of Work Center 10, the bottleneck in the packaging line. The following input report is given.

Input Information Period 1 2 3 Planned Input (hours) 110 80 130 Actual Input (hours) 80 120 100 Calculate the cumulative deviation of the input at the end of period 3. a) -20 b) -30 c) 10 d) 20 e) 30 Ans: a

Solution: Planned Input (hours)

110

80

130

Actual Input (hours)

80

120

100

Deviation -30 Cumulative -30 Deviation Section Ref: Scheduling Work Level: hard Level: moderate

40

-30

10

-20

21. A Dallas firm manufactures dishwashing liquid. The manager wants to evaluate the performance of station 3, the bottleneck in the filling operation. The following output report is given.

Output Information Period 1 2 3 Planned Output (hours) 100 100 100 Actual Output (hours) 80 70 110 Calculate the cumulative deviation of the output at the end of period 3. a) -20 b) -40 c) 10 d) 20 e) 40 Ans: b Solution: Output Information Period 1 Planned Output 100 (hours) Actual Output (hours) 80 Deviation -20 Cumulative Deviation -20 Section Ref: Scheduling Work Level: moderate

2

3

100

100

70 -30 -50

110 10 -40

22. What is Period 3’s standard hour deviation for Frank’s manufacturing firm, based on the following input/output information?

Input Information Period 1 2 3 4 Planned Input 48 68 54 62 Actual Input 47 72 56 48 Output

Information Period Planned Output Actual Output a) 4, -5 b) -3, 2 c) 3, -2 d) 2, -2 e) -14, 2

1 50 52

Ans d Solution: Input Information Period 1 Planned Input 48 Actual Input 47 Deviation -1 Cumulative Deviation -1 Output Information Period 1 Planned Output 50 Actual Output 52 Deviation 2 Cumulative Deviation 2 Section Ref: Scheduling Work Level: moderate

2 65 60

3 55 53

4 65 67

2 68 72 4 3

3 54 56 2 5

4 62 48 -14 -9

2 65 60 -5 -3

3 55 53 -2 -5

4 65 67 2 -3

23. Which of the following is not an assumption of priority rules? a) There is no variability in the setup time. b) There is no variability in the run time of the job. c) Multiple jobs are waiting to be processed. d) Only a single job is waiting to be processed. e) None of these answer choices are correct.

Ans: d Section Ref: Scheduling Work Level: moderate

24. Operation sequencing creates a work center plan based on available _______ and ______. a) capacity, priorities b) demand, priorities c) capacity, demand d) capacity, rules e) staff, management

Ans: a Section Ref: Scheduling Work Level: moderate

25. The following jobs are waiting to be scheduled. Today is day 9. Determine the sequence of jobs by using SPT as a priority rule.

Job Number Arrival Date (day #) Processing Time (days) Due Date (day #) A 4 2 12 B 5 12 30 C 1 6 21 D 2 1 14 E 3 10 28 a) D-A-C-E-B b) B-E-C-A-D c) C-D-E-A-B d) B-A-E-D-C e) A-D-C-E-B Ans: a Solution: Determine sequencing by shortest “processing time” column Section Ref: Scheduling Work Level: moderate

26. The following jobs are waiting to be scheduled. Today is day 9. Determine the sequence of jobs by using LPT as a priority rule.

Job Number Arrival Date (day #) Processing Time (days) A 4 2 B 5 12 C 1 6 D 2 1 E 3 10 a) D-A-C-E-B b) B-E-C-A-D c) C-D-E-A-B d) B-A-E-D-C e) A-D-C-E-B Ans: b Solution: Determine sequencing by longest “processing time” column Section Ref: Scheduling Work Level: moderate

Due Date (day #) 12 30 21 14 28

27. The following jobs are waiting to be scheduled. Today is day 9. Determine the sequence of jobs by using EDD as a priority rule.

Job Number Arrival Date (day #) Processing Time (days) Due Date (day #) A 4 2 12 B 5 12 30 C 1 6 21 D 2 1 14 E 3 10 28 a) D-A-C-E-B b) B-E-C-A-D c) C-D-E-A-B d) B-A-E-D-C e) A-D-C-E-B Ans: e Hint: EDD (the job due the earliest has the highest priority); sequence using the “Due date” column.

Section Ref: Scheduling Work Level: moderate

28. The following jobs are waiting to be scheduled. Today is day 9. Determine the sequence of jobs by using FCFS as a priority rule.

Job Number Arrival Date (day #) Processing Time (days) Due Date (day #) A 4 2 12 B 5 12 30 C 1 6 21 D 2 1 14 E 3 10 28 a) D-A-C-E-B b) B-E-C-A-D c) C-D-E-A-B d) B-A-E-D-C e) A-D-C-E-B Ans: c Hint: FCFS (jobs are processed in the order in which they arrive at a machine or work center); sequence by “arrival date” column.

Section Ref: Scheduling Work Level: moderate

29. The following jobs are waiting to be scheduled. Today is day 9. Determine the sequence of jobs by using LCFS as a priority rule.

Job Number Arrival Date (day #) Processing Time (days) Due Date (day #) A 6 2 12 B 1 12 30 C 10 6 21 D 12 1 14

E

3

10

28

a) D-C-A-E-B b) A-B-C-D-E c) B-E-A-C-D d) B-E-C-A-D e) B-E-C-D-A Ans: a Hint: LCFS (the last job into the work center or at the top of the stack is processed first); sequence by “arrival date” column, highest number first.

Section Ref: Scheduling Work Level: moderate

30. The jobs listed below have not yet been scheduled. Today is day 0. Using the critical-ratio technique, in what sequence would you schedule these jobs?

Job Due Date A 3 B 10 C 5 D 12 E 8 a) B-E-C-D-A b) A-D-C-E-B c) A-C-E-B-D d) A-C-D-E-B e) E-C-D-A-B

Duration (days) 1 11 4 6 8

Ans: a Hint: Job A B C D E

Due Date

Duration Remaining 3 10 5 12 8

B E C Section Ref: Scheduling Work Level: moderate

1 11 4 6 8

-2 1 -1 -6 0 D

A

31. The jobs listed below have not yet been scheduled. Using the S/RO technique, in what sequence would you schedule these jobs?

Job Slack Remaining Operations A 3 1

B 10 C 5 D 12 E 8 a) B-E-C-D-A b) A-D-C-E-B c) A-C-E-B-D d) A-C-D-E-B e) E-C-D-A-B Ans: a Hint: Job A B C D E

11 4 6 8

Slack Remaining S/RO 3 1 4 10 11 1.90909 5 4 2.25 12 6 3 8 8 2

B E C Section Ref: Scheduling Work Level: moderate

D

A

32. Using the S/RO rule, which of the following jobs will be scheduled first? a) the first job that arrives at a work center b) the job with the least slack per remaining operations c) the job with the highest slack per remaining operations d) the job with the smallest ratio of time remaining until due date to process time remaining e) the job with the largest ratio of time remaining until due date to process time remaining Ans: b Section Ref: Scheduling Work Level: moderate

33. If using CR as the priority rule, which of the following jobs will be scheduled first? a) the first job arrives at a work center b) the job with the least slack per remaining operations c) the job with the highest slack per remaining operations d) the job with the smallest ratio of time remaining until due date to process time remaining e) the job with the largest ratio of time remaining until due date to process time remaining Ans: d Section Ref: Scheduling Work Level: moderate

34. What does job flow time measure? a) the time a job spends in the shop b) due-date performance c) the amount of time it takes to finish a batch of jobs d) job tardiness e) job lateness Ans: a Section Ref: How to Sequence Jobs Level: easy

35. If your company is concerned with customer response time you will measure scheduling effectiveness in terms of: a) job reject rates b) job profit ratio c) response time d) input time e) makespan Ans: c Section Ref: Measuring Performance Level: easy

36. What does makespan measure? a) WIP inventory b) due-date performance c) the amount of time it takes to finish a batch of jobs d) job tardiness e) job lateness Ans: c Section Ref: Measuring Performance Level: easy

37. A measure of response time is: a) makespan b) job flow time c) due date d) job lateness e) job schedule time Ans: b Section Ref: Measuring Performance Level: easy

38. What does average number of jobs in the system measure? a) WIP inventory b) due-date performance c) makespan d) job tardiness e) job lateness Ans: a Section Ref: Measuring Performance Level: easy

39. Which of the following is a measure of whether the job is done ahead of, on, or behind schedule? a) average number of jobs in system b) mean flow time c) makespan d) job tardiness e) job lateness Ans: e Section Ref: Measuring Performance Level: easy

40. Sweet-Dreams Inc. manufactures custom pillows. Five jobs are waiting to be processed. Job A has a flow time of 8 days, job B has a flow time of 10 days, job C has a flow time of 15 days, job D has a flow time of 20 days, and job E has a flow time of 27 days. What is the mean flow time? a) 8 days b) 10 days c) 7 days d) 0 days e) 16 days Ans: e Solution: 8+10+15+20+27=80/5=16 Section Ref: Measuring Performance Level: easy

41. Heavy Eyes Inc. manufactures custom pillows. Five jobs are waiting to be processed using the SPT priority rule. Their processing times are shown in the following table. What is the mean flow time?

Job Processing Time

A B C D E a) 57 days b) 11.4 days c) 17 days d) 5.4 days e) 27 days

6 2 10 8 1

Ans: d Solution: 6+2+10+8+1=27/5=5.4 Section Ref: Measuring Performance Level: moderate

42. The following jobs must be processed in the Super Clean motor shop. Assume that the company operates seven days per week. Using FCFS as the priority rule, calculate average job tardiness.

Due Job Arrival Comp Date A Nov. 1 8 16 F Nov. 5 12 10 E Nov. 6 12 15 B Nov. 4 12 11 C Nov. 2 20 21 D Nov. 3 5 13 a) 0 b) 6 c) .5 d) -2.833 e) -8 Ans: c Hint: Job

Arrival

Comp

A C D B F E

Nov. 1 Nov. 2 Nov. 3 Nov. 4 Nov. 5 Nov. 6

8 20 5 12 12 12

Due Date

Lateness Tardiness 16 21 13 11 10 15

Section Ref: Measuring Performance Level: moderate

-8 -1 -8 1 2 -3 -17 -2.83333

0 0 0 1 2 0

3 0.5

43. Sweet-Dreams Inc. manufactures custom pillows. Five jobs are waiting to be processed using the SPT priority rule. Their processing times are shown in the following table. What is the average number of jobs in the system?

Job Processing Time A 8 B 2 C 4 D 6 E 7 a) 66 b) 13.2 c) 27 d) 5.4 e) 3.38 Ans: e Solution: B 2 C 4 D 6 E 7 A 8 Total = 27/5=5.4 mean 27/8=3.38 Section Ref: Measuring Performance Level: moderate

44. Green Inc. manufactures a variety of wooden desks. Five jobs are waiting to be processed using the LPT priority rule. Their processing times are shown in the following table. What is the makespan?

Job Processing Time A 8 B 2 C 4 D 6 E 7 a) 66 b) 13.2 c) 27 d) 5.4 e) 2.4 Ans: c Solution: A 8 E 7

D 6 C 4 B 2 Total = 27 (makespan = completion time of last job – beginning time of 1st job) Section Ref: Measuring Performance Level: moderate

45. A greater number of jobs in the system implies what? a) a higher work-in-process inventory level and a longer response time b) a lower work-in-process inventory level and a longer response time c) a higher work-in-process inventory level and a shorter response time d) a lower work-in-process inventory level and a shorter response time e) more jobs will certainly be tardy.

Ans: a Section Ref: Measuring Performance Level: moderate

46. Job A is due on day 15, and it is finished on day 12. What is its lateness? a) –3 b) 0 c) 3 d) both -3 and 3 e) none of these answer choices are correct Ans: a Solution: 15-12 = 3; ahead of schedule Section Ref: Measuring Performance Level: moderate

47. Which of the following is a measure of how long after the due date the job is completed? a) job belatedness b) mean flow time c) makespan d) job overdueness e) job tardiness Ans: e Section Ref: Measuring Performance Level: easy

48. Which of the following scheduling rules is often considered the fairest rule?

a) first come, first served b) last come, first served c) earliest due date d) shortest processing time e) longest processing time Ans: a Section Ref: Measuring Performance Level: moderate

49. Which of the following scheduling rules minimizes the average number of jobs in the system? a) first come, first served b) last come, first served c) earliest due date d) shortest processing time e) longest processing time Ans: d Section Ref: Measuring Performance Level: moderate

50. Which of the following scheduling rules minimizes mean job flow time? a) first come, first served b) last come, first served c) earliest due date d) shortest processing time e) longest processing time Ans: d Section Ref: Measuring Performance Level: moderate

51. Using the following data, calculate the average job lateness.

Job Completion Date Due Date A 15 12 B 11 24 C 25 22 D 18 19 a) -2 days b) 3 days c) 13 days d) -8 days e) 1.5 days

Ans: a Solution: A 15-12= 3 B 11-24= -13 C 25-22= 3 D 18-19= -1 Total = -8/4=-2 Section Ref: Measuring Performance Level: moderate

52. Using the following data, calculate the average job tardiness.

Job Completion Date Due Date A 15 12 B 11 24 C 25 22 D 18 19 a) 6 days b) 1.5 days c) -2 days d) -8 days e) 3 days Ans: b Hint: Job A B C D

Completion Date 15 11 25 18

Due Date 12 24 22 19

lateness tardiness 3 -13 3 -1 -8 -2

3 0 3 0 6 1.5

Section Ref: Measuring Performance Level: moderate

53. Five jobs must be scheduled. Each of the jobs must be processed on two machines (A and B) in the same order. The processing times are listed below. According to Johnson’s rule, in what order should the jobs be processed?

Job Machine A Machine B A 6 30 B 23 2 C 1 7 D 4 3 E 8 8 a) C-B-D-A-E b) C-D-A-E-B c) B-E-A-D-C

d) C-A-E-D-B e) C-D-E-B-A Ans: d Hint: C 1 7 D 4 3 A 6 30 E 8 8 B 23 2 Section Ref: Comparing Priority Rules Level: moderate

54. What does “negative lateness” mean? a) The job is finished after its due date. b) The job is finished on its due date. c) The job is finished before its due date. d) The job is not finished. e) The job has not started.

Ans: c Section Ref: Comparing Priority Rules Level: moderate

55. Job A is due on day 15, and it is finished on day 12. What is its tardiness? a) –3 b) 0 c) 3 d) both -3 and 3 e) none of these answer choices are correct Ans: b Solution: 15-12 = 3; still on schedule thus 0 Section Ref: Measuring Performance Level: moderate

56. Seven jobs must be scheduled. Each of the jobs must be processed on two machines (A and B) in the same order. The processing times are listed below. According to Johnson’s rule, in what order should the jobs be processed?

Job Machine A Machine B A 6 25 B 12 2 C 11 7 D 4 3 E 7 8

F G a) A-E-C-G-D-B-F b) A-C-E-G-D-B-F c) F-B-D-G-C-E-A d) F-D-B-G-E-C-A e) G-D-B-F-A-E-C

9 18

1 5

Ans: a Solution: A 6 25 E 7 8 C 11 7 G 18 5 D 4 3 B 12 2 F 9 1 Section Ref: Comparing Priority Rules Level: moderate

57. Which of the following sequencing rules is used for minimizing makespan in a two-stage, unidirectional process? a) FCFS b) S/RO c) SPT d) CR e) Johnson’s rule Ans: e Section Ref: Comparing Priority Rules Level: easy

58. Which of the following is the least effective tactic for managing a bottleneck station? a) Assign extra workers to the bottleneck station if necessary in order to keep it running. b) Increase the production rate at the bottleneck station. c) Inspect items just as soon as they come out of the bottleneck station. d) Subcontract part of the workload at that station to other companies. e) Assign your best people to that station to improve efficiency.

Ans: c Section Ref: Sequencing Jobs Through Two Work Centers Level: hard

59. Consider a production line with five stations. Stations one through five can process a unit in 10, 15, 20, 5, and 12 minutes, respectively. What is the maximum throughput per hour? a) 6 units b) 4 units c) 3 units d) 12 units e) 5 units Ans: c Section Ref: Scheduling Bottlenecks Level: moderate

60. Consider a production line with five stations. The first station can process a unit in 8 minutes. The second station has two identical machines, each of which can process a unit in 18 minutes (each unit only needs to be processed on one of the two machines). The third station can process a unit in 4 minutes. The fourth station has two different machines, one can process a unit in 5 minutes, and the other one can process a unit in 9 minutes (each unit needs to be processed on both machines). The fifth station can process a unit in 10 minutes. Which station is the bottleneck station? a) Station 1 b) Station 2 c) Station 3 d) Station 4 e) Station 5 Ans: e Section Ref: Scheduling Bottlenecks Level: hard

61. Which of the following statements is not a valid scheduling principle? a) Balance the process rather than the flow. b) Non-bottleneck usage is determined by some other constraint in the system. c) Usage and activation of a resource are the same. d) The process batch should be variable. e) An hour lost at a bottleneck resource is an hour lost forever.

Ans: c Section Ref: Scheduling Bottlenecks Level: moderate

62. What is throughput? a) the quantity of finished goods that can be sold b) the quantity of items moved at the same time from one resource to the next c) the quantity of work-in-process inventory

d) the quantity produced at a resource before the resource is switched over to produce another product e) the average flow time of the system Ans: a Section Ref: Scheduling Bottlenecks Level: easy

63. What is a process batch? a) the quantity of finished goods that can be sold b) the quantity of items moved at the same time from one resource to the next c) the quantity of work-in-process inventory d) the quantity produced at a resource before the resource is switched over to produce another product e) the set of machines used to make products Ans: d Section Ref: Scheduling Bottlenecks Level: easy

64. What is a transfer batch? a) the quantity of finished goods that can be sold b) the quantity of items moved at the same time from one resource to the next c) the quantity of work-in-process inventory d) the quantity produced at a resource before the resource is switched over to produce another product e) the quantity of items needed to attain a full truckload (TL) shipping rate Ans: b Section Ref: Scheduling Bottlenecks Level: easy

65. The process batch should: a) match the transfer batch. b) exceed the transfer batch. c) be smaller than the transfer batch. d) be fixed. e) be variable.

Ans: e Section Ref: Scheduling Bottlenecks Level: moderate

66. Which of the following statements is not true? a) An hour lost at a bottleneck is an hour lost forever. b) An hour lost at a non-bottleneck is just a mirage. c) Bottlenecks determine throughput and system inventory. d) The transfer batch does not have to equal the process batch. e) Lead times are predetermined.

Ans: e Section Ref: Scheduling Bottlenecks Level: moderate

67. Which of the following is mostly like to be an internal resource constraint? a) increasing market demand b) raw material shipping problems c) decreasing market demand d) no overtime e) a regular bottleneck in the product process Ans: e Section Ref: Scheduling Bottlenecks Level: moderate

68 Which of the following is mostly like to be a market constraint? a) strike at the supplier’s plant b) raw material shipping problems c) decreasing market demand d) no overtime e) a regular bottleneck in the product process Ans: c Section Ref: Scheduling Bottlenecks Level: moderate

69. Which of the following is mostly like to be a policy constraint? a) strike at the supplier’s plant b) raw material shipping problems c) decreasing market demand d) no overtime e) a regular bottleneck in the product process Ans: d Section Ref: Scheduling Bottlenecks Level: moderate

70. Only Roses Flower Shop currently operates 7 days per week. The staffing needs for each day are shown in the following table. Each of the employees must have two consecutive days off in a week. (Since Monday is used as the first day of the pay week, an employee cannot be off on both Sunday and Monday.) What is the minimum number of employees that needs to be hired?

Days of Week Monday Tuesday Wednesday Thursday Friday Saturday Sunday Staff Need 2 3 4 4 5 4 6 a) 5 b) 6 c) 7 d) 8 e) 9 Ans: b Solution: need 6 on Sunday; a schedule can then be further developed to cover all other days Section Ref: Scheduling for Service Organizations Level: hard

71. Jim-O’s fast focus restaurant is opening up a new branch. Based on demand forecast the following service personnel levels are anticipated. What is the number of employees needed for Thursday-Friday pair?

Days of Week Monday Tuesday Wednesday Thursday Friday Saturday Sunday Staff needs 5 4 3 4 6 6 5 a) 7 b) 9 c) 10 d) 11 e) 12 Ans: c Solution: Using Step 1 and 2 of the technique developed by Tibrewala, Philippe, and Brown, Thursday (4) + Friday (6) = 10 Section Ref: Scheduling for Service Organizations Level: easy

72. Jim-O’s fast focus restaurant is opening up a new branch. Based on demand forecast the following service personnel levels are anticipated. What days will employee #1 have off?

Days of Week Monday Tuesday Wednesday Thursday Friday Saturday Sunday Staff needs 5 4 4 3 6 6 5 a) Mon - Tue b) Tue - Wed c) Wed - Thur d) Thur - Fri e) Fri - Sat

Ans: c Solution: M T 9 T W 8 W Th 7 Th F 9 F St 12 St S 11 Section Ref: Scheduling for Service Organizations Level: moderate

73. When were Gantt charts developed? a) early 1800s b) early 1900s c) early 1920s d) early 1940s e) early 1960s Ans: b Section Ref: High-Volume Operations Level: hard

74. Optimized production technology (OPT) was introduced by Eli ____________________. a) Goldratt b) Manning c) Jefferson d) Rosenblatt e) Strasburg Ans: a Section Ref: Sequencing Jobs Through Two Work Centers Level: hard

True/False

75. Flow operations are often related to high volume production.

Ans: True Section Ref: High-Volume Operations Level: easy

76. A Gantt chart is usually used for a company with low flexibility in both product variation and product volume.

Ans: False Section Ref: High-Volume Operations Level: moderate

77. A Gantt chart is a basic scheduling tool for low-volume systems.

Ans: True Section Ref: High-Volume Operations Level: moderate

78. In a service organization, a doctor’s office is a good example of finite loading.

Ans: True Section Ref: Scheduling Work Level: moderate

79. Forward scheduling sometimes causes inventory buildup if items are not delivered by the due date.

Ans: True Section Ref: Scheduling Work Level: moderate

80. Backward scheduling determines the earliest possible completion time for a job.

Ans: False Section Ref: Scheduling Work Level: easy

81. The backlog at a work center increases when the work center receives more work than it finishes.

Ans: True Section Ref: Scheduling Work Level: easy

82. Priority rules are more useful in sequencing jobs in high-volume systems than in low-volume systems.

Ans: False Section Ref: Scheduling Work Level: moderate

83. A local priority rule sets priority based only on the jobs waiting at that individual work center.

Ans: True Section Ref: Scheduling Work Level: easy

84. If using critical ratio (CR) as the scheduling rule, the job with the smallest ratio of time remaining until due date to the processing time remaining has the lowest priority.

Ans: False Section Ref: Scheduling Work Level: moderate

85. If using slack per remaining operations (S/RO) as the scheduling rule, the job with the least slack per remaining operations has the highest priority.

Ans: True Section Ref: Scheduling Work Level: moderate

86. Makespan has a link to customer due dates.

Ans: False Section Ref: Measuring Performance Level: moderate

87. Makespan is a measure of WIP. Ans: False Section Ref: Measuring Performance Level: moderate

88. If customer service is important to the company, average job lateness is probably a more relevant measurement than average job tardiness.

Ans: False Section Ref: Measuring Performance Level: moderate

89. EDD always minimizes mean job flow time.

Ans: False Section Ref: Measuring Performance Level: moderate

90. Negative lateness means the job is finished before the due date.

Ans: True Section Ref: Comparing Priority Rules Level: easy

91. Firms should balance the flow rather than the process.

Ans: False Section Ref: Sequencing Jobs Through Two Work Centers Level: moderate

92. Schedules should be established by considering all constraints simultaneously.

Ans: True Section Ref: Scheduling Bottlenecks Level: moderate

93. Usage and activation of a resource are not the same.

Ans: True Section Ref: Scheduling Bottlenecks Level: moderate

94. According to the text, a system’s input is determined by three kinds of constraints: internal resource constraint, market constraint, and policy constraint.

Ans: False Section Ref: Theory of Constraints Level: moderate

95. The transfer batch should always equal the process batch.

Ans: False Section Ref: Scheduling Bottlenecks Level: hard

96. The process batch should be variable.

Ans: True Section Ref: Scheduling Bottlenecks Level: moderate

97. Using the Tibrewala, Phillippe, and Brown technique for a Monday through Sunday work week a regular, full time employee can end up with a Sunday-Monday set of days off.

Ans: False Section Ref: Developing a Workforce Schedule Level: moderate

98. Marketing uses flow time metrics to determine if deliveries are made on time.

Ans: False Section Ref: Scheduling Across the Organization Level: moderate

Essay

99. What are some important considerations to make when developing an operational schedule?

Ans: Are there some activities that can be done in parallel? Can the schedule be arranged to avoid bottlenecks? Can some of the tasks be done by someone else? Are there some activities that can be postponed to another time? Are additional tasks created because of the sequence that

is followed? For each task, we need to know what must be done, how long it should take to do, who must do it, and what its priority is.

Section Ref: High-Volume Operations Level: hard

100. What are the two major kinds of Gantt charts?

Ans: load chart and progress chart Section Ref: High-Volume Operations Level: easy

101. Based on the definition in the ninth edition of the APICS Dictionary, what is operation sequencing?

Ans: a technique for short-term planning of actual jobs to be run in each work center based on capacity and priorities Section Ref: Scheduling Work Level: moderate

102. Discuss how companies can benefit from both infinite and finite loading.

Ans: Infinite loading identifies the company’s resource bottlenecks for a proposed schedule so that planners can find solutions proactively. Finite loading develops the operational schedule that suits the available capacity. Each provides a different view for a broader overall planning purpose.

Section Ref: Scheduling Work Level: moderate

103. Define what slack is.

Ans: Slack is the amount of time a job can be delayed and still be finished by its due date.

Section Ref: Scheduling Work Level: easy

104. Define job lateness.

Ans: Job lateness is a measure of whether the job is done ahead of, on, or behind schedule.

Section Ref: Measuring Performance Level: moderate

105. Define job tardiness.

Ans: Job tardiness is a measure of how long after the due date the job is completed.

Section Ref: Measuring Performance Level: moderate

106. Define Johnson’s rule.

Ans: Johnson’s rule is a technique for minimizing makespan in a two-stage unidirectional process.

Section Ref: Comparing Priority Rules Level: moderate

107. Optimized production technology (OPT) was introduced by whom in the late 1970s, and what does it do?

Ans: Eli Goldratt introduced OPT, and it is a technique used to schedule bottleneck systems.

Section Ref: Sequencing Jobs Through Two Work Centers Level: moderate

108. What is a transfer batch?

Ans: the quantity of items moved at the same time from one resource to another Section Ref: Scheduling Bottlenecks Level: moderate

109. What are the three kinds of constraints defined by TOC? Ans: internal resource constraint, market constraint, and policy constraint Section Ref: Scheduling Bottlenecks Level: moderate

110. What does the term “floating employees” refer to?

Ans: Floating employees perform a number of services and are assigned where they are needed each day.

Section Ref: Theory of Constraints Level: moderate

111. What are the three steps for the Johnson’s Rule?

Ans: Step 1 – List jobs and processing time for each activity; Step 2 – Find shortest activity processing time among the jobs not yet scheduled. If the shortest Processing time is for a 1st activity, schedule that job in the earliest available position in the job sequence. If the shortest processing time is for 2nd activity, schedule that job in the last available position in the job sequence. When you schedule a job eliminate it from further consideration; Step 3 – Repeat step 2 until you have put all activities for the jobs in the schedule Section Ref: Sequencing Jobs Through Two Work Centers Level: moderate

Problems

112. Desire Inc. produces a variety of pediatric nutritional products. Management wants to evaluate the performance of Work Center 17, the bottleneck in the packaging line. Managers are particularly worried about the backlogging problem in the work center. The following input/output report is given.

Input Information Period 1 2 3 Planned Input (hours) 100 80 130 Actual Input (hours) 80 100 100 Output Information Period 1 2 3 Planned Output (hours) 100 100 100 Actual Output (hours) 100 70 110 The initial backlog was 50 hours. Based on the above information, calculate the backlog hours of Work Center 17 for periods 1, 2, and 3, respectively.

Ans: period 1 = 30, period 2 = 60, period 3 = 50 Section Ref: Scheduling Work Level: moderate

113. Terry’s cycle shop standard hour input/output report is below. Calculate the output deviation and backlog hours for periods 1, 2, 3, and 4.

Input Information Period 6 7 8 9 Planned Input 59 68 54 62 Actual Input 55 72 62 48

Output Information

Period Planned Output Actual Output Backlog

6 50 52

7 65 60

8 55 53

9 65 67

75

Ans: Output deviation = -3, -12, -9 and 19; Backlog = 78, 87, 84 and 56 Section Ref: Scheduling Work Level: moderate

114. Job A has a flow time of 20 days, job B has a flow time of 13 days, job C has a flow time of 12 days, and job D has a flow time of 15 days. If the time it takes to finish all four jobs (as a whole batch) is 15 days, what is the average number of jobs in the system?

Ans: 4 jobs Section Ref: Measuring Performance Level: moderate

115. Using the following data, calculate the average job lateness and average job tardiness.

Job Completion Date Due Date A 13 10 B 19 24 C 25 20 D 18 18 Ans: lateness = 0.75 days, tardiness = 2 days Section Ref: Measuring Performance Level: moderate

116. What is the mean job flow time for Bob’s body and fender shop for the following repair jobs? Fender job finishes day 8; hood replacement finishes day 7, front end repair finished day 4, trunk fix finishes on day 12, and the door repair finishes on day 6.

Ans: 7.4 Section Ref: Measuring Performance Level: moderate

117. Perfect Inc manufactures a variety of wooden chairs. The following data were reported by the control system for order processing at the assembly station. The current date is day 100. The number of remaining operations and the work time remaining includes the operations at the assembly station. All jobs are available for processing, and none have been started yet.

Remaining Work Time Job Due Date Operations Remaining

A 110 10 B 115 9 C 118 1 D 106 8 E 120 5 Using the S/RO priority rule, sequence the above jobs.

9 5 7 4 12

Ans: A-D-B-E-C Section Ref: Measuring Performance Level: moderate

118. Jackie is the owner and the manager of an auto repair company. In order to be fair to all the customers, Jackie decides to use the FCFS priority rule in job sequencing. Currently, four cars need to be repaired. Assume that the cars arrive in the order listed, that is, A first, then B, then C, then D. The estimated labor times (in days) and promise dates are shown in the following table.

Customers usually do not pick up their cars early. Today is day 0.

Car Estimated Labor Time Promise Date A 5 5 B 10 18 C 1 12 D 3 15 Based on the FCFS sequence, calculate the following performance measures: (a) makespan, (b) average job flow time, (c) average number of jobs in the system, (d) average job tardiness.

Ans: (a) 19 days, (b) 4.75 days, (c) 2.89 jobs, (d) 2 days Section Ref: Measuring Performance Level: moderate

119. The following jobs need to be processed at J. J. Rupper’s work center.

Job Arrival Date Production Days Needed Due Date A 5 20 75 B 15 30 95 C 17 16 70 D 20 10 125 E 25 18 105 In what sequence would the jobs be ranked according to the following rules: (a) FCFS, (b) SPT, (c) LPT, (d) EDD? Ans: (a) A-B-C-D-E, (b) D-C-E-A-B, (c) B-A-E-C-D, (d) C-A-B-E-D Section Ref: How to Sequence Jobs Level: moderate

120. The following jobs are waiting to be processed at J. J. Rupper’s work center.

Job Production Days Needed Due Date A 20 135

B 30 190 C 16 140 D 10 125 E 18 150 Customers usually do not pick up orders before the due date. Today is day 100. Using the SPT priority rule, calculate the (a) mean flow time, (b) average number of jobs in the system, and (c) average job tardiness.

Ans: (a) 47.6 days, (b) 2.53 jobs, (c) 6.6 days Section Ref: How to Sequence Jobs Level: moderate

121. The following jobs must be processed in the Super Clean motor center. Assume that the company operates seven days per week.

Job Arrival Date Work Required (in Days) Due Date A Nov. 1 8 Nov. 16 B Nov. 4 1 Nov. 11 C Nov. 2 20 Nov. 21 D Nov. 3 5 Nov. 13 E Nov. 6 3 Dec. 2 F Nov. 5 4 Dec. 10 Today is November 10. If the company decides to use EDD as the priority rule, calculate the (a) average flow time, (b) average number of jobs in the system, and (c) average job tardiness.

Ans: (a) 22.2 days, (b) 3.24 jobs, (c) 10 days Section Ref: How to Sequence Jobs Level: moderate

122. Six jobs are to be processed through a two-stage operation. The first operation involves drill pressing, and the second involves lathing. Process times are as follows Job Operation 1 Operation 2 A 15 12 B 11 24 C 25 22 D 18 19 E 10 15 F 8 9 Determine a sequence that will minimize the total completion time for these jobs.

Ans: F-E-B-D-C-A Section Ref: Comparing Priority Rules Level: moderate

123. Steve’s Steak House currently operates 7 days per week. The staffing needs for each day are shown in the following table. Each of the employees must have two consecutive days off in a

week. (Since Monday is used as the first day of the pay week, an employee cannot be off on Sunday and Monday.) Develop a schedule to satisfy staffing needs as well as minimize excess capacity by using the technique developed by Tibrewala, Philippe, and Brown.

Days of Week Monday Tuesday Wednesday Thursday Friday Saturday Sunday Staff Need 3 2 4 2 5 4 5 Ans: 6 workers minimum, one possible (but not unique schedule) is as follows: Employee Monday Tuesday Wednesday Thursday Friday Saturday 1 off off × × × × 2 × × off off × × 3 off off × × × × 4 × × off off × × 5 × × × × off off 6 off off × × × × Section Ref: Scheduling for Service Organizations Level: hard

Sunday × × × × × ×

Short Answer

124. Load and progress charts are examples of _____________________.

Ans: Gantt charts Section Ref: Low-Volume Operations Level: easy

125. Operational schedules that consider work center capacity use ________________.

Ans: finite loading Section Ref: Scheduling Work Level: moderate

126. The formula (due date - remaining processing time)/(number of remaining operations measures the ___________________.

Ans: critical ratio Section Ref: How to Sequence Jobs Level: hard

127. The time a job spends in the shop is called its __________________.

Ans: flow time

Section Ref: Measuring Performance Level: moderate

128. What is the formula for makespan?

Ans: (last job completion time) - (first job starting time) Section Ref: Measuring Performance Level: hard

129. The greater the number of jobs in the system, the longer the queues and subsequently the longer the ____________.

Ans: job flow times Section Ref: Measuring Performance Level: moderate

130. If all jobs are available at the same time, their flow time is the same as their _____________.

Ans: completion time Section Ref: Comparing Priority Rules Level: easy

131. A scheduling technique for jobs that follow the same path through two operations is ___________.

Ans: Johnson's Rule Section Ref: Sequencing Jobs Through Two Work Centers Level: moderate

132. Eli Goldratt's bottleneck scheduling system is called _____________.

Ans: optimized production technology (opt) Section Ref: Scheduling Bottlenecks Level: moderate

133. Eli Goldratt's approach to continuous improvement is called ____________.

Ans: theory of constraints

Section Ref: Theory of Constraints Level: moderate

134. Under OPT, lead times are _____________ rather than ________________.

Ans: scheduled, predetermined Section Ref: Scheduling Bottlenecks Level: hard

135. Employees who perform a variety of services and are assigned where they are needed each day are said to ________________.

Ans: float Section Ref: Scheduling for Service Organizations Level: moderate

136. Service organizations use different techniques such as _____________, ___________, and ____________ for effective use of service capacity.

Ans: appointments, reservations, posted schedules Section Ref: Scheduling For Service Organizations Level: hard

File: ch16, Chapter 16: Project Management

Multiple Choice

1. What is a unique, one-time event that is intended to achieve an objective in a given time period? a) a project b) a job c) a task d) an activity e) an event Ans: a Section Ref: Project Life Cycle Level: easy

2. Which of the following is not characteristic of a project? a) has a specific objective b) has multiple activities c) typically performed by external consultants d) activities have defined precedence relationships e) to be completed in a specified time period Ans: c Section Ref: Project Life Cycle Level: moderate

3. Which of the following is not characteristic of a project? a) has a life cycle b) uses no resources c) involves a unique, one-time event d) consists of several tasks e) typically some activities may be done simultaneously Ans: b Section Ref: Project Life Cycle Level: moderate

4. Which of the following would probably not benefit from the use of critical path scheduling? a) constructing a new bridge over the Mississippi River b) moving the company’s credit card center to a new city

c) building a new natural gas pipeline d) receiving orders for the company’s products by phone e) developing a new computer system for financial planning Ans: d Section Ref: Project Life Cycle Level: moderate

5. Which phase in the project life cycle involves identifying the need for the project? a) conception b) feasibility analysis or study c) planning d) execution e) termination Ans: a Section Ref: Project Life Cycle Level: moderate

6. Which phase in the project life cycle involves evaluating expected costs, benefits, and risks? a) conception b) feasibility analysis or study c) planning d) execution e) termination Ans: b Section Ref: Project Life Cycle Level: moderate

7. Which phase in the project life cycle involves analyzing the work to be done and developing time estimates for completing each of the activities? a) conception b) feasibility analysis or study c) planning d) execution e) termination Ans: c Section Ref: Project Life Cycle Level: moderate

8. Which phase in the project life cycle involves analyzing the project risk?

a) conception b) feasibility analysis or study c) planning d) execution e) termination Ans: c Section Ref: Project Life Cycle Level: moderate

9. Which phase in the project life cycle involves carrying out the activities that make up the project? a) conception b) feasibility analysis or study c) planning d) execution e) termination Ans: d Section Ref: Project Life Cycle Level: easy

10. Which phase in the project life cycle involves ending the project? a) conception b) feasibility analysis or study c) planning d) execution e) termination Ans: e Section Ref: Project Life Cycle Level: easy

11. Which of the following is not a benefit of network planning techniques? a) graphical display of the project, including the relationships and sequence of activities b) estimate of the expected project length c) resources are clearly identified d) identification of activities that are critical to the timely completion of the project e) identification of the amount of slack associated with individual activities Ans: c Section Ref: Network Planning Techniques Level: moderate

12. Two type of network diagramming notation include: a) AON and AOA b) AON and Node c) AON and NOA d) Node and AOA e) Node and Arrow Ans: a Section Ref: Network Planning Techniques Level: moderate

13. Actions that consume resources and/or time are project ______________________. a) events b) activities c) nodes d) arrows e) tasks Ans: b Section Ref: Network Planning Techniques Level: moderate

14. _____________________ structure the sequencing of activities. a) Evaluation of costs b) Crashings c) Work breakdowns d) Backschedules e) Precedence relationships Ans: e Section Ref: Network Planning Techniques Level: moderate

15. Project managers use network planning techniques to ________________________. a) evaluate costs b) assign resources to activities c) estimate how long it will take to assign activities d) calculate the expected completion time of the project e) invert activities Ans: d Section Ref: Network Planning Techniques Level: moderate

16. What does AON stand for? a) action-oriented-network b) activity-on-network c) activity-on-node d) activity-oriented-network e) activity-overrun-network Ans: c Section Ref: Network Planning Techniques Level: moderate

17. Which of the following is not a step involved in using network planning techniques? a) define deliverables b) describe the project c) diagram the network d) monitor the project’s progression e) estimate the project’s completion time Ans: a Section Ref: Network Planning Techniques Level: moderate

18. The critical path is the sequential path of interrelated activities which has the ____________________. a) most activities b) longest time c) most nodes d) most events e) most arrows Ans: b Section Ref: Network Planning Techniques Level: moderate

19. If a delay in an activity will delay completion of the whole project, the activity ____________________. a) is on the critical path b) has slack c) is costly d) is a dummy e) is represented by a node Ans: a

Section Ref: Network Planning Techniques Level: moderate

20. The longest connected route through the path network is the ______________________. a) planning matrix b) final deliverable c) crash path d) connector e) critical path Ans: e Section Ref: Network Planning Techniques Level: easy

21. The sum of the activity times on the critical path determines _____________________. a) total slack available b) total labor time required for the project c) minimum time to complete the project d) the number of milestones e) amounting of crashing that needs to be done Ans: c Section Ref: Network Planning Techniques Level: moderate

22. When we are unsure about the duration of project activities, we use _____________________ time estimates. a) variable b) probabilistic c) estimated d) deterministic e) cumulative Ans: b Section Ref: Network Planning Techniques Level: moderate

23. We use _____________________ time estimates when we can make a reliable estimate. a) variable b) probabilistic c) estimated d) deterministic e) cumulative

Ans: d Section Ref: Network Planning Techniques Level: moderate

24. The process of calculating ES and EF ______________________________. a) requires only a forward pass through the network b) requires only a backward pass through the network c) requires both a forward and backward pass through the network d) cannot be accomplished until slack is first determined e) is sufficient for calculating the critical path Ans: a Section Ref: Network Planning Techniques Level: moderate

25. The process of calculating LS and LF _____________________________. a) requires only a forward pass through the network b) requires only a backward pass through the network c) requires both a forward and backward pass through the network d) cannot be accomplished until slack is first determined e) is sufficient for calculating the critical path Ans: b Section Ref: Network Planning Techniques Level: moderate

26. The last project activity ES and LS times are: a) different b) calculated using termination rules c) the same d) required probabilistic calculations e) involving risk analysis Ans: c Section Ref: Network Planning Techniques Level: moderate

27. In making a forward pass through a network, three activities are immediate predecessors for activity T. What is the early start time for activity T? a) the smallest ES for the three activities that are immediate predecessors for activity T b) the largest ES for the three activities that are immediate predecessors for activity T c) the smallest EF for the three activities that are immediate predecessors for activity T

d) the largest EF for the three activities that are immediate predecessors for activity T e) the activity time for activity T Ans: d Section Ref: Network Planning Techniques Level: hard

28. In making a forward pass through a network, activities L, M, and P are immediate predecessors for activity T, which has an activity time of 7. The early start times for activities L, M, and P are 22, 17, and 27, respectively. The early finish times for activities L, M, and P are 29, 27, and 33, respectively. What is the early start time for activity T? a) 17 b) 24 c) 27 d) 33 e) 40 Ans: d Solution: P’s EF is 33 thus is the ES for T Section Ref: Network Planning Techniques Level: moderate

29. In making a forward pass through a network, activities L, M, and P are immediate predecessors for activity T, which has an activity time of 7. The early start times for activities L, M, and P are 22, 17, and 27, respectively. The early finish times for activities L, M, and P are 29, 27, and 33, respectively. What is the early finish time for activity T? a) 17 b) 24 c) 27 d) 33 e) 40 Ans: e Solution: P’s EF is 33; T duration is 7; 33+7=40 Section Ref: Network Planning Techniques Level: hard

30. In making a backward pass through a network, activity L has an activity time of 4 and immediately precedes activities M, P, and T. The late start times for activities M, P, and T are 22, 17, and 27, respectively. The late finish times for activities M, P, and T are 29, 27, and 33, respectively. What is the late finish time for activity L? a) 13 b) 17 c) 22 d) 33

e) 37 Ans: b Solution: P’s ES is 17 thus is L’s LF Section Ref: Network Planning Techniques Level: moderate

31. In making a backward pass through a network, activity L has an activity time of 4 and immediately precedes activities M, P, and T. The late start times for activities M, P, and T are 22, 17, and 27, respectively. The late finish times for activities M, P, and T are 29, 27, and 33, respectively. What is the late start time for activity L? a) 13 b) 17 c) 22 d) 33 e) 37 Ans: a Solution: L can start on the 13 (+4=17) Section Ref: Network Planning Techniques Level: hard

32. In making a backward pass through a network, activity T immediately precedes three activities. What is the late finish time for activity T? a) the smallest LS for the three activities that activity T immediately precedes b) the largest LS for the three activities that activity T immediately precedes c) the smallest LF for the three activities that activity T immediately precedes d) the largest LF for the three activities that activity T immediately precedes e) the activity time for activity T Ans: a Section Ref: Network Planning Techniques Level: hard

33. Activities on the critical path _______________________________________. a) are the ones with the longest activity times b) always are connected directly to dummy activities c) have LS equal to LF d) have ES equal to EF e) have no slack Ans: e Section Ref: Network Planning Techniques Level: moderate

34. In critical path scheduling, slack is computed as the difference between ______________________. a) latest and earliest times b) optimistic and pessimistic times c) mean and modal times d) finish and start times e) observed and predicted times Ans: a Section Ref: Network Planning Techniques Level: hard

35. Given this information about an activity: ES = 10, EF = 15, LS = 26, and LF = 31. The amount of slack associated with the activity is ____________________. a) 32 b) 5 c) 21 d) 16 e) 11 Ans: d Solution: LS-ES or LF – EF; both equal 16 Section Ref: Network Planning Techniques Level: moderate

36. Given this information about an activity: ES = 10, EF = 18, LS = 28, and LF = 36. The amount of slack associated with the activity is ____________________. a) 38 b) 8 c) 18 d) 26 e) 10 Ans: c Solution: LS-ES or LF – EF; both equal 18 Section Ref: Network Planning Techniques Level: moderate

37. Given this information about an activity: ES = 10, EF = 20, LS = 29, and LF = 39. The amount of slack associated with the activity is ____________________. a) 29 b) 9 c) 19

d) 38 e) 10 Ans: c Solution: LS-ES or LF – EF; both equal 19 Section Ref: Network Planning Techniques Level: moderate

38. Which of the following can be calculated for an activity once ES, EF, LS, and LF have been calculated for the activity? a) expected project duration b) slack time c) potential for crashing d) variance in project duration e) the relative time position for when the activity will be completed Ans: b Section Ref: Network Planning Techniques Level: easy

39. With probabilistic time estimates for activities, (o) denotes the _______________________. a) median time b) original time c) optimistic time d) pessimistic time e) most likely time Ans: c Section Ref: Network Planning Techniques Level: easy

40. With probabilistic time estimates for activities, (p) denotes the _______________________. a) median time b) probable time c) optimistic time d) pessimistic time e) most likely time Ans: d Section Ref: Network Planning Techniques Level: easy

41. With probabilistic time estimates, when we calculate the expected time for an activity, we treat each activity time estimate as a random variable derived from a ______________ probability distribution. a) normal b) beta c) gamma d) Poisson e) uniform Ans: b Section Ref: Network Planning Techniques Level: moderate

42. The formula to calculate an activity’s probabilistic expected time is a) ET = ( M+4*O+P)/6 b) ET = ( P+4*O+M)/6 c) ET = ( P+4*M+O)/6 d) ET = ( P+3*M+O)2/6 e) ET = ( M+3*O+P)/4 Ans: c Section Ref: Network Planning Techniques Level: moderate

43. An activity in a network diagram has an optimistic time estimate of five days, a most likely time estimate of seven days, and a pessimistic time estimate of 15 days. Its expected time is _________________. a) 5 days b) 7 days c) 8 days d) 10 days e) 15 days Ans: c Solution: 15 + (4x7) + 5 /6 = 15+28+5 / 6 = 48/6 = 8 Section Ref: Network Planning Techniques Level: moderate

44. Joe’s radio tower fabrication company has developed the following milestone project schedule. What is the expected time duration for the project?

ACTIVITY PRECEDENCE P M O A Complete design None 4 3 2 B Develop BOM A 2 1 1 C Order Materials B 3 2 1 D Site Selection A 7 4 3

E F

Receive Materials Obtain permits Begin fabrication facility development

G a) 9 b) 10 c) 14 d) 14.33 e) 17.33 f) 21

C A, D

6 4

3 2

2 1

E, F

6

5

3

Ans: d Solution: A 18/6=3 B 7/6=1.2 C 12/6=2 D 26/6=4.3 E 20/6=3.3 F 13/6=2.2 G 29/6=4.8 ADFG 14.3 AFG 10 ABCEG 14.3 Section Ref: Network Planning Techniques Level: hard

45. What can be used to display graphically the scheduled times for activities? a) an AOA network diagram b) an AON network diagram c) a project structure tree d) a Gantt chart e) an affinity diagram Ans: d Section Ref: Network Planning Techniques Level: hard

46. In monitoring the progress of a project, it is important to focus on _____________________________. a) activities on the critical path b) activities with long completion times c) activities with large slacks d) initiating events e) terminating events Ans: a Section Ref: Network Planning Techniques

Level: moderate

47. An activity in a network diagram has an optimistic time estimate of seven days, a most likely time estimate of 11 days, and a pessimistic time estimate of 19 days. Its variance is _________. a) 2 b) 4 c) 6 d) 12 e) 24 Ans: b Solution: [19-7/6]sqrt = 12/6 = 2 sq’d = 4 Section Ref: Estimating the Probability of Completion Dates Level: moderate

48. There are four activities on the critical path, and they have standard deviations of 1, 2, 4, and 2. The standard deviation of the critical path is ______. a) 3 b) 5 c) 9 d) 16 e) 25 Ans: b Solution: 1+2+4+2 = 9; 9/2 = 5 Section Ref: Estimating the Probability of Completion Dates Level: hard

49. There are four activities on the critical path, and they have variances of 1, 2, 4, and 2. The variance of the critical path is _______. a) 3 b) 5 c) 9 d) 16 e) 25 Ans: c Solution: 1+2+4+2 = 9 Section Ref: Estimating the Probability of Completion Dates Level: moderate

50. Which functional group is not concerned with project management outcomes? a) Marketing

b) Operations c) Purchasing d) Administration e) Information Systems Ans: d Section Ref: Project Management Across The Organization Level: easy

51. The probability of completing a project in a specified amount of time is being calculated.

For a particular path through the project, the ______________ shows the path’s number of standard deviations that the specified time is past the expected path completion time. a) m-value b) z-value c) sigma-value d) s-value e) alpha-value Ans: b Section Ref: Estimating the Probability of Completion Dates Level: moderate

52. Crashing a schedule is reducing a project completion time by ___________________. a) renegotiating with management b) realign tasks in parallel c) rearranging all tasks d) throwing additional resources to the critical path e) throwing less resources to the critical path Ans: d Section Ref: Reducing Project Completion Time Level: moderate

53. For projects whose activities have probabilistic time estimates, the probability of completing the project in a specified amount of time is determined by __________________________. a) the expected time for the critical path only b) the standard deviation for the critical path only c) the expected time and standard deviation for the critical path only d) the expected times for all paths e) the expected times and standard deviations for the critical path and paths whose expected times are close to that of the critical path Ans: e Section Ref: Estimating the Probability of Completion Dates Level: hard

54. Joe’s tower fabrication company client would like to know what the probability is of completing the project in 60 days rather than the 58 estimated days. Based on Z values what is the probability that Joes’ tower fabrication will be able to meet the request if the variance is 1.25? a) -1.6 b) 1.6 c) -1.79 d) 1.79 e) 2 Ans: d Solution: 60-58 / sq rt 1.25 = 2/1.12 = 1.79 Section Ref: Estimating the Probability of Completion Dates Level: hard

55. In calculating the estimated probability of completion value a negative number is obtained.

This means: a) your calculation is wrong. b) the project will be delayed. c) the specified completion time is later than the expected completion time. d) the specified completion time is earlier than the expected completion time. e) the variance is incorrect.

Ans: d Section Ref: Estimating the Probability of Completion Dates Level: hard

56. Which of the following is not a valid reason for reducing the time spent finishing a particular project? a) deadlines b) promised completion dates c) penalty clauses for late completion d) the project started too early e) the need to put resources on a new project Ans: d Section Ref: Reducing Project Completion Time Level: moderate

57. You may be able to speed up completion of a project by _______________________. a) reducing the standard deviation of activities b) recalculating the critical path

c) making additional resources available d) adding slack to critical activities e) redoing some of the activities Ans: c Section Ref: Reducing Project Completion Time Level: moderate

58. Which of the following is not an example of a method that can be used to reduce the time to complete an activity? a) work on other activities b) faster shipments of materials c) use special equipment d) work overtime e) work around the clock Ans: a Section Ref: Reducing Project Completion Time Level: easy

59. Shortening the total time for completing a project by incurring higher costs from shortening activities is ________. a) normal cost b) backward pass c) crashing d) leveling e) project control Ans: c Section Ref: Reducing Project Completion Time Level: moderate

60. Shortening a project is called ______________ the project. a) reducing b) crashing c) cutting short d) wrecking e) shaking Ans: b Section Ref: Reducing Project Completion Time Level: moderate

61. Which of the following information about activities is not needed in determining how to crash a project? a) the normal cost b) the crash cost c) the crash time estimate d) the normal time estimate e) how many dummy activities there are Ans: e Section Ref: Reducing Project Completion Time Level: moderate

62. Which of the following is not included in the approach for crashing projects? a) Determine which activity requires the most time. b) Crash the least expensive activity first. c) Determine how much the project needs to be reduced. d) Calculate the total costs associated with crashing the project. e) Determine which activities on the critical path can be reduced.

Ans: a Section Ref: Reducing Project Completion Time Level: moderate

63. An approach for getting projects done faster and more consistently at or before the project due date is ____________________. a) business process reengineering b) PERT c) project inversion d) backcasting e) the critical chain approach Ans: e Section Ref: The Critical Chain Approach Level: moderate

64. In the critical chain approach, the focus is on _______________________. a) deliverables b) making activity times certain c) project milestones d) the final due date of the project e) individual activities Ans: d Section Ref: The Critical Chain Approach Level: hard

65. Which of the following is not characteristic of the critical chain approach? a) It can help get projects done faster and more consistently at or before the project due date. b) The focus is on project milestones. c) The idea is that project activities are uncertain. d) Safety time is added to project time estimates. e) Safety time is placed at the end of the critical path.

Ans: b Section Ref: The Critical Chain Approach Level: moderate

66. Which of the following is not characteristic of adding safety time in the critical chain approach? a) Probability and statistics provide no insights into the adding of safety time. b) It can be added by basing time estimates on pessimistic experiences. c) It is added at the end of the critical path. d) It can be added by having more safety factors added at each level of management. e) It can be added to offset possible global reductions in project length made by top management Ans: a Section Ref: The Critical Chain Approach Level: hard

67. One way of wasting safety time in the critical chain approach is multitasking, which involves ___________. a) waiting until the last minute to start a project b) interaction among project activities c) having the computer operating system do everything d) using a person or resource for more than one project e) reversing the order of the activities Ans: d Section Ref: The Critical Chain Approach Level: moderate

68. A feeding buffer protects a ______ path from delays in a __________. a) shortest, buffer overflow b) noncritical, critical path c) critical, noncritical path d) critical, longest variance e) noncritical, longest variance

Ans: c Section Ref: The Critical Chain Approach Level: easy

69. An activity has eight weeks allotted to it, but we should be able to do it in five weeks.

Waiting three weeks before getting started on it is an example of the _____________________. a) project buffer approach b) common sense approach c) professor approach d) academic approach e) student syndrome Ans: e Section Ref: The Critical Chain Approach Level: easy

70. Removing safety time from the individual activities and putting the total safety time at the end of the critical path creates a(n) ___________________. a) project safety net b) project buffer c) overconfident project manager d) activity shortage e) larger number of activities Ans: b Section Ref: The Critical Chain Approach Level: moderate

71. PERT is credited with reducing the duration of the Polaris missile project by _________________. a) one year b) two years c) three years d) four years e) five years Ans: b Section Ref: Network Planning Techniques Level: hard

72. Which of the following represents a way to waste safety time? a) dependencies between activities b) multitasking

c) student syndrome d) waiting until the last minute to do a task e) all of these answer choices are correct Ans: e Section Ref: The Critical Chain Approach Level: hard

73. Who is responsible for the success and failure of a project? a) CEO b) Program Manager c) Project Manager d) Project Sponsor e) Functional Manager Ans: c Section Ref: Project Life Cycle Level: easy

True/False

74. A project is a unique, one-time event that is intended to achieve an objective in a given time period.

Ans: True Section Ref: Network Planning Techniques Level: easy

75. Planning consists of adjusting the concept to meet the demand.

Ans: False Section Ref: Network Planning Techniques Level: easy

76. The termination phase in the project life cycle involves identifying the need for the project.

Ans: False Section Ref: Network Planning Techniques Level: easy

77. CPM was originally developed to conceive and plan maintenance projects in chemical plants.

Ans: False Section Ref: Network Planning Techniques Level: moderate

78. Precedence relationships structure the sequencing of activities.

Ans: True Section Ref: Network Planning Techniques Level: moderate

79. Project managers use network planning techniques to assign resources to activities.

Ans: False Section Ref: Network Planning Techniques Level: moderate

80. The two kinds of network diagrams are activity-on-arrow and activity-on-node.

Ans: True Section Ref: Network Planning Techniques Level: moderate

81. In network diagramming, dashed lines represent precedence relationships.

Ans: False Section Ref: Network Planning Techniques Level: moderate

82. In network diagramming, arrows represent precedence relationships.

Ans: True Section Ref: Network Planning Techniques Level: moderate

83. Backward scheduling develops the LS and LF times.

Ans: False Section Ref: Network Planning Techniques Level: easy

84. If a delay in an activity will delay completion of the whole project, the activity has slack.

Ans: False Section Ref: Network Planning Techniques Level: moderate

85. The sum of the activity times on the critical path determines the total slack available.

Ans: False Section Ref: Network Planning Techniques Level: moderate

86. When we are unsure about the duration of project activities, we use probabilistic time estimates.

Ans: True Section Ref: Network Planning Techniques Level: moderate

87. In making a forward pass through a network, three activities are immediate predecessors for activity T. The early start time for activity T is the largest EF for the three activities that are immediate predecessors for activity T. Ans: True Section Ref: Network Planning Techniques Level: hard

88. In critical path scheduling, slack is computed as the difference between finish and start times.

Ans: False Section Ref: Network Planning Techniques Level: hard

89. With probabilistic time estimates for activities, (m) denotes the mean time.

Ans: False Section Ref: Network Planning Techniques Level: hard

90. An activity in a network diagram has an optimistic time estimate of five days, a most likely time estimate of seven days, and a pessimistic time estimate of 15 days. Its expected time is eight days.

Ans: True Section Ref: Network Planning Techniques Level: hard

91. A Gantt chart can be use to display graphically the scheduled times for activities.

Ans: True Section Ref: Network Planning Techniques Level: hard

92. The probability of completing a project in a specified amount of time is being calculated.

For a particular path through the project, the z-value shows the path’s number of standard deviations that the specified time is past the expected path completion time.

Ans: True Section Ref: Reducing Project Completion Time Level: moderate

93. For projects whose activities have probabilistic time estimates, the probability of completing the project in a specified amount of time is determined by the standard deviation for the critical path only.

Ans: False Section Ref: Estimating the Probability of Completion Dates Level: hard

94. Crashing is shortening the total time for completing a project by incurring higher costs from shortening activities.

Ans: True Section Ref: Reducing Project Completion Time Level: moderate

95. An approach for getting projects done faster and more consistently at or before the project due date is the critical chain approach.

Ans: True Section Ref: The Critical Chain Approach Level: moderate

96. The TOC focuses on correct placement of buffers.

Ans: False Section Ref: The Critical Chain Approach Level: moderate

97. Removing safety time from the individual activities and putting the total safety time at the end of the critical path creates a project buffer.

Ans: True Section Ref: The Critical Chain Approach Level: moderate

98. Accounting uses project management information to provide a time line for the marketing program.

Ans: False Section Ref: Project Management OM Across The Organization Level: easy

Essay

99. List and briefly describe the phases in the project life cycle.

Ans: Conception identifies the need for the project. Feasibility analysis or study evaluates expected costs, benefits, and risks of the project. Planning involves analyzing the work to be done and developing time estimates for completing each of the activities. Execution is carrying out the activities that make up the project. Termination involves ending the project Section Ref: Project Life Cycle Level: hard

100. What are the benefits of network planning techniques?

Ans: graphical display of the project, including the relationships and sequence of activities; estimate of the expected project length; identification of activities that are critical to the timely completion of the project; and identification of the amount of slack associated with individual activities Section Ref: Network Planning Techniques Level: moderate

101. What are the steps involved in using network planning techniques?

Ans: (1) Describe the project. (2) Diagram the network. (3) Estimate the project’s completion time. (4) Monitor the project’s progression.

Section Ref: Network Planning Techniques Level: hard

102. Discuss how to develop the critical path variance.

Ans: First, you must calculate each critical path activity variance using the formula Activity Variance = ((p-o)/6)2. Then the sum of all critical path activities variances are summed for a total critical path variance.

Section Ref: Estimating the Probability of Completion Dates Level: moderate

103. Identify the variables required to predict the probability of meeting a project completion date.

Ans: You must have the expected completion time of the path in question, the specified completion date, and the variance of the path in question.

Section Ref: Estimating the Probability of Completion Dates Level: moderate

104. What are valid reasons for reducing the time spent finishing a particular project?

Ans: deadlines, promised completion dates, penalty clauses for late completion, and the need to put resources on a new project Section Ref: Reducing Project Completion Time Level: hard

105. Define crashing as it relates to project management.

Ans: Crashing is reducing the completion time of the project.

Section Ref: Reducing Project Completion Time Level: easy

106. What information about activities is needed in determining how to crash a project?

Ans: the normal cost and time estimate, and the crash cost and time estimate, activities on the critical path Section Ref: Reducing Project Completion Time Level: moderate

107. What is involved in the approach for crashing projects?

Ans: Determine how much the project needs to be reduced. Determine which activities on the critical path can be reduced. Crash the least expensive activity first, the second least expensive second, and so on until you have shortened the project to the desired length. Calculate the total costs associated with crashing the project.

Section Ref: Reducing Project Completion Time Level: moderate

108. What are the characteristics of the critical chain approach?

Ans: It can help get projects done faster and more consistently at or before the project due date.

The focus is on the final due date for the project. The idea is that project activities are uncertain.

Safety time is added to project time estimates and is placed at the end of the critical path.

Section Ref: The Critical Chain Approach Level: moderate

109. Name and describe the three ways to add safety time in the critical chain approach.

Ans: by basing time estimates on a pessimistic experience, by having more safety factors added at each level of management, and by inflating our time estimate to offset possible global reductions in project length made by top management Section Ref: The Critical Chain Approach Level: hard

110. Name and describe the three ways to waste safety time in the critical chain approach.

Ans: the student approach, which involves delaying the start of an activity because we think its time estimate is too long; multitasking, which involves using a person or resource for more than

one project; and dependencies between activities in which delays accumulate and advances are wasted Section Ref: The Critical Chain Approach Level: hard

Problems

111. Consider a project having the following seven activities: Immediate Activity Predecessors Time (weeks) A none 3 B A 5 C B 4 D B 5 E C 3 F D 8 G E, F 3 (a) What is the critical time? (b) What is the critical path? (c) What is the slack for each activity?

Ans: (a) 24 weeks; (b) A-B-D-F-G; (c) A - 0 weeks, B - 0 weeks, C - 6 weeks, D - 0 weeks, E - 6 weeks, F - 0 weeks, and G - 0 weeks Section Ref: Network Planning Techniques Level: moderate

112. Consider a project having the following seven activities: Immediate Activity Predecessors Time (weeks) A none 4 B none 6 C A 9 D A 7 E B 4 F D, E 5 G F 4 (a) What is the critical time? (b) What is the critical path? (c) What is the slack for each activity?

Ans: (a) 20 weeks; (b) A-D-F-G; (c) A - 0 weeks, B - 1 week, C - 7 weeks, D - 0 weeks, E - 1 week, F - 0 weeks, and G - 0 weeks Section Ref: Network Planning Techniques Level: moderate

113. Consider a project having the following ten activities: Immediate Activity Predecessors Time (weeks) A none 7 B none 3 C A 5 D A, B 6 E C, D 4 F D 4 G C 9 H E, G 8 I E, F 6 J H, I 5 (a) What is the critical time? (b) What is the critical path? (c) What is the slack for each activity?

Ans: (a) 34 weeks; (b) A-C-G-H-J; (c) A - 0 weeks, B - 8 weeks, C - 0 weeks, D - 4 weeks, E - 4 weeks, F - 6 weeks, G - 0 weeks, H - 0 weeks, I - 6 weeks, and J - 0 weeks Section Ref: Network Planning Techniques Level: hard

114. Consider a project having the following seven activities: Optimistic Most likely Pessimistic Immediate Time (o) Time (m) Time (p) Activity Predecessors (weeks) (weeks) (weeks) A none 4 7 9 B none 3 5 8 C A 2 4 6 D A, B 6 9 9 E C, D 5 5 5 F B 2 5 9 G E, F 3 3 6 (a) What is the expected time for each activity? (b) What is the expected project completion time? (c) What is the critical path? (d) What is the variance for each activity? (e) What are the expected time and variance of each path? (f) What is the probability that the project will be completed in less than 22 weeks?

Ans: (a) A - 6.83 weeks, B - 5.17 weeks, C - 4 weeks, D - 8.50 weeks, E - 5 weeks, F - 5.17 weeks, and G - 3.50 weeks; (b) 23.83 weeks; (c) A-D-E-G; (d) A - 0.69, B - 0.69, C - 0.44, D 0.25, E - 0, F - 1.36, and G - 0.25; (e) A-C-E-G - expected time is 19.33 weeks, variance is 1.38; A-D-E-G - expected time is 23.83 weeks, variance is 1.19; B-D-E-G - expected time is 22.17 weeks, variance is 1.19; B-F-G - expected time is 13.83 weeks, variance is 2.30; (f) for A-D-E-G the probability is 0.562, for B-D-E-G the probability is 0.953, so the overall probability is 0.562*0.953 = 0.536

Section Ref: Network Planning Techniques Level: hard

115. Consider a project having the following seven activities: Optimistic Most likely Immediate Time (o) Time (m) Activity Predecessors (weeks) (weeks) A none 2 3 B A 4 4 C A 3 5 D B 5 5 E B, C 3 6 F D 4 5 G E, F 3 3

Pessimistic Time (p) (weeks) 4 8 7 5 7 9 7

(a) What is the expected time for each activity? (b) What is the expected project completion time? (c) What is the critical path? (d) What is the variance for each activity? (e) What are the expected time and variance of each path? (f) What is the probability that the project will be completed in less than 24 weeks?

Ans: (a) A - 3 weeks, B - 4.67 weeks, C - 5 weeks, D - 5 weeks, E - 5.67 weeks, F - 5.50 weeks, and G - 3.67 weeks; (b) 21.83 weeks; (c) A-B-D-F-G; (d) A - 0.11, B - 0.44, C - 1.44, D - 0, E 0.44, F - 0.69, and G - 0.44; (e) A-B-D-F-G - expected time is 21.83 weeks, variance is 1.67; AB-E-G - expected time is 17.00 weeks, variance is 1.44; A-C-E-G - expected time is 17.33 weeks, variance is 1.44; (f) 0.552 Section Ref: Network Planning Techniques Level: hard

116. Consider a project having the following ten activities: Optimistic Most likely Immediate Time (o) Time (m) Activity Predecessors (weeks) (weeks) A none 1 5 B A 6 6 C A 3 5 D A 2 4 E B, C 4 4 F D 4 7 G E 2 2 H E, F 7 8 I F 4 6 J G, H, I 3 5 (a) What is the expected time for each activity? (b) What is the expected project completion time? (c) What is the critical path?

Pessimistic Time (p) (weeks) 9 6 9 6 4 8 8 9 9 7

(d) What is the variance for each activity? (e) What are the expected time and variance of each path? (f) What is the probability that the project will be completed in less than 30 weeks?

Ans: (a) A - 5 weeks, B - 6 weeks, C - 5.33 weeks, D - 4 weeks, E - 4 weeks, F - 6.67 weeks, G 3 weeks, H - 8 weeks, I - 6.17 weeks, and J - 5 weeks; (b) 28.67 weeks; (c) A-D-F-H-J; (d) A 1.78, B - 0, C - 1.00, D - 0.44, E - 0, F - 0.44, G - 1.00, H - 0.11, I - 0.69, and J - 0.44; (e) A-B-EG-J - expected time is 23.00 weeks, variance is 3.22; A-B-E-H-J - expected time is 28.00 weeks, variance is 2.33; A-C-E-G-J - expected time is 22.33 weeks, variance is 4.22; A-C-E-H-J expected time is 27.33 weeks, variance is 3.33; A-D-F-H-J - expected time is 28.67 weeks, variance is 3.21; A-D-F-I-J - expected time is 26.84 weeks, variance is 3.79; (f) for A-D-F-H-J the probability is 0.771, for A-B-E-H-J the probability is 0.905, for A-C-E-H-J the probability is 0.928, and for A-D-F-I-J the probability is 0.948, so the overall probability is 0.771*0.905*0.928*0.948 = 0.648 Section Ref: Network Planning Techniques Level: hard

117. For the following project, Activity Precedence P A None 17 B A 13 C A 20 D A 15 E C, D 24 F B, E 20 G B 17 H G, F 8 What is: a) estimated time for each activity (ET) b) critical path activities c) each activity variance d) critical path variance

M 15 12 17 14 21 19 15 4

O 13 9 15 13 18 16 10 3

Ans:

Activity A B C D E F G H

Precedence None A A A C, D B, E B G, F

P 17 13 20 15 24 20 17 8

M O E.T. Variance 15 13 15 0.44 12 9 11.67 0.44 17 15 17.17 0.69 14 13 14 0.11 21 18 21 1 19 16 18.67 0.44 15 10 14.5 1.36 4 3 4.5 0.69

Critical Path Yes No Yes No Yes Yes No Yes Total

Critical Path Variance 0.44 0.69 1.00 0.44 0.69 3.28

Section Ref: Network Planning Techniques Level: hard

118. For the project in question #7 what is the Z factor probability that the project will be complete on the 79th day?

Ans: Z=(DT-EFPath)√σ2 path = (79-76.33)/√3.28= 1.47 Section Ref: Network Planning Techniques Level: moderate

119. Consider a project having the following seven activities: Normal Normal Crash Crash Maximum Immediate Time Cost Time Cost Weeks Activity Predecessors (weeks) ($) (weeks) ($) Reduced A none 4 3,000 3 5,000 1 B A 9 5,000 7 8,000 2 C A 4 7,000 4 7,000 0 D B, C 6 6,000 4 8,000 2 E C 8 4,000 6 8,000 2 F D 3 4,000 2 9,000 1 G E, F 4 2,000 2 7,000 2 (a) What is the expected project completion time? (b) What is the critical path? (c) What is the most economical way and how much will it cost to reduce the completion time of the project by three weeks? By five weeks?

Ans: (a) 26 weeks; (b) A-B-D-F-G; (c) three weeks - reduce D by 2 weeks at a cost of $2,000 and reduce B by one week at a cost of $1,500 - total cost is $3,500, five weeks - for the fourth week reduce B a second week at a cost of $1,500 and reduce A by one week at a cost of $2,000 - total cost is $3,500+$3,500 = $7,000 Section Ref: Reducing Project Completion Time Level: moderate

120. Consider a project having the following seven activities: Normal Normal Crash Immediate Time Cost Time Activity Predecessors (weeks) ($) (weeks) A none 4 3,000 3 B none 3 5,000 2 C A 9 2,000 7 D A, B 2 3,000 2 E B 9 4,000 6 F C, D 8 4,000 6 G E, F 5 2,000 3 (a) What is the expected project completion time?

Crash Cost ($) 6,000 7,000 4,000 3,000 7,000 9,000 5,000

Maximum Weeks Reduced 1 1 2 0 3 2 2

(b) What is the critical path? (c) What is the most economical way and how much will it cost to reduce the completion time of the project by three weeks? By five weeks?

Ans: (a) 26 weeks; (b) A-C-F-G; (c) three weeks - reduce C by 2 weeks at a cost of $2,000 and reduce G by one week at a cost of $1,500 - total cost is $3,500, five weeks - for the fourth week reduce G a second week at a cost of $1,500 and reduce F by one week at a cost of $2,500 - total cost is $3,500+$4,000 = $7,500 Section Ref: Reducing Project Completion Time Level: moderate

121. Consider a project having the following ten activities: Normal Normal Crash Crash Maximum Immediate Time Cost Time Cost Weeks Activity Predecessors (weeks) ($) (weeks) ($) Reduced A none 7 3,000 6 6,000 1 B A 8 5,000 6 9,000 2 C A 2 2,000 1 3,000 1 D A 4 3,000 4 3,000 0 E B, C 9 4,000 7 6,000 2 F C, D 6 4,000 4 9,000 2 G E 2 3,000 2 3,000 0 H E, F 9 4,000 7 7,000 2 I G 1 4,000 1 4,000 0 J H, I 8 2,000 6 7,000 2 (a) What is the expected project completion time? (b) What is the critical path? (c) What is the most economical way and how much will it cost to reduce the completion time of the project by three weeks? by five weeks?

Ans: (a) 41 weeks; (b) A-B-E-H-J; (c) three weeks - reduce E by 2 weeks at a cost of $2,000 and reduce H by one week at a cost of $1,500 - total cost is $3,500, five weeks - for the fourth week reduce H a second week at a cost of $1,500 and reduce B by one week at a cost of $2,000 - total cost is $3,500+$3,500 = $7,000 Section Ref: Reducing Project Completion Time Level: moderate

122. Consider a project activity that has an optimistic time of 3 weeks, a most likely time of 10 weeks, and a pessimistic time of 25 weeks. What is the expected time for that activity?

Ans: 11.33 weeks Section Ref: Network Planning Techniques Level: easy

Short Answer

123. Every project has a ____________________.

Ans: Life Cycle Section Ref: Project Life Cycle Level: easy

124. Projects vary in terms of objectives but each has a _______________ of activities.

Ans: sequence Section Ref: Project Life Cycle Level: moderate

125. In politics, a _______________ is a candidate’s ____________ of the resources need to run a successful political campaign.

Ans: feasibility study, assessment Section Ref: Project Life Cycle Level: hard

126. CPM was initially developed to plan and _______________ maintenance projects in chemical plants.

Ans: coordinate Section Ref: Network Planning Techniques Level: moderate

127. Project managers can evaluate whether the __________ risk of completing the project on schedule is acceptable.

Ans: probability Section Ref: Network Planning Techniques Level: hard

128. Critical path shows the _______________ completion time for the project.

Ans: minimum Section Ref: Network Planning Techniques Level: easy

129. Deterministic time estimate makes a _______________ time estimate for each project ___________.

Ans: single; activity Section Ref: Network Planning Techniques Level: moderate

130. The most likely time completion date is the _______________ of the beta distribution.

Ans: mode Section Ref: Network Planning Techniques Level: hard

131. Planning a project is critical but _______________ is even more important.

Ans: monitoring Section Ref: Network Planning Techniques Level: moderate

132. In crashing a project you first consider _______________ activities on the _______.

Ans: reducing, critical path Section Ref: Reducing Project Completion Time Level: moderate

133. In the TOC, if delays exceed the feeding buffer, the project completion date is still protected by the ____________.

Ans: project buffer Section Ref: The Critical Chain Approach Level: moderate

134. The project management approach indicates the timing and the quantity of resources needed. For manufacturing, this input is needed to develop a valid __________.

Ans: MPS Section Ref: The Supply Chain Link Level: hard

135. PERT stands for ___________________.

Ans: Project Evaluation & Review Technique Section Ref: Network Planning Techniques Level: moderate

File: supA, Supplement A: Spreadsheet Modeling: An Introduction

Multiple Choice

1. Which of the following models is “built” in the user’s head and represents the most common form of model? a) physical model b) mathematical model c) mental model d) spreadsheet model e) visual model Ans: c Section Ref: What are Models?

Level: easy

2. A road atlas represents which type of model? a) physical model b) mathematical model c) mental model d) spreadsheet model e) visual model Ans: e Section Ref: What are Models?

Level: easy

3. Which of the following models involves objects that represent other objects? a) physical model b) mathematical model c) mental model d) spreadsheet model e) visual model Ans: a Section Ref: What are Models?

Level: easy

4. Which of the following models uses equations and relationships among quantities to represent situations? a) physical model

b) mathematical model c) mental model d) spreadsheet model e) visual model Ans: b Section Ref: What are Models?

Level: easy

5. Which of the following is a means of implementing mathematical models? a) physical model b) spiritual model c) mental model d) spreadsheet model e) visual model Ans: d Section Ref: What are Models?

Level: easy

6. Controllable inputs are also called _________________________. a) decision variables b) parameters c) regulated inputs d) regulated variables e) dominant variables Ans: a Section Ref: What are Models?

Level: easy

7. Uncontrollable inputs are also called _______________________. a) decision variables b) parameters c) unregulated inputs d) unregulated variables e) recessive variables Ans: b Section Ref: What are Models?

Level: easy

8. A model __________ inputs into ______.

a) estimates, transformation b) transformation, estimates c) transforms, outputs d) makes, parameters e) modifies, decision variables Ans: c Section Ref: What are Models?

Level: easy

9. A model needs to do more than transform inputs to outputs; it must also: a) modify the process b) adjust the controllable inputs c) have a purpose d) control the output e) be accurate Ans: c Section Ref: What are Models?

Level: moderate

10. Models can also be described as: a) an abstraction of the real situation b) an accurate representation of the real situation c) the decision d) absolute representation of reality e) a general view of reality Ans: a Section Ref: What are Models?

Level: moderate

11. A(n) _______________ is a quantity or factor that depends on how the inputs are related to one another. a) observation b) element c) equation d) integer constraint e) output Ans: e Section Ref: What are Models?

Level: easy

12. One of the first things you must do in developing a model is: a) select the correct modeling software. b) consult a transformation text book. c) determine the formulas that are required. d) define the logic necessary to transform the inputs into the outputs. e) backwards calculate what inputs are required for the defined inputs.

Ans: d Section Ref: The Spreadsheet Modeling Process Level: moderate

13. A _________________ is a specific set of conditions that could occur in the real situation. a) parameter b) scenario c) sensitivity set d) break-even set e) circumstance Ans: b Section Ref: The Spreadsheet Modeling Process Level: moderate

14. Research has shown that most spreadsheet developers believe their products: a) accurately reflect reality. b) are error free. c) are the best solution. d) are eloquent solutions to the decision. e) deserve more credit.

Ans: b Section Ref: The Spreadsheet Modeling Process Level: moderate

15. __________________ analysis deals with studying the changes to the output of the model as one or more of the inputs change. a) Scenario b) Transformation c) Decision d) Sensitivity e) Change Ans: d Section Ref: The Spreadsheet Modeling Process Level: moderate

16. If the model produces the numerically correct values, it is said to be: a) flexible b) adjustable c) a transformation d) accurate e) inaccurate Ans: d Section Ref: The Spreadsheet Modeling Process Level: easy

17. Break-even analysis is one special case of _________________ analysis. a) scenario b) transformation c) sensitivity d) decision e) change Ans: c Section Ref: Evaluating Spreadsheet Models Level: hard

18. If a model produces numerically correct values for the outputs for any legitimate values of inputs, it is said to be a) flexible b) adjustable c) a transformation d) accurate e) inaccurate Ans: a Section Ref: The Spreadsheet Modeling Process Level: easy

19. What are the most important three dimensions along which a spreadsheet model should be evaluated? a) aesthetic, correct, and flexible b) aesthetic, documented, and flexible c) correct, documented, and flexible d) aesthetic, correct, and documented e) correct, documented, and random

Ans: c Section Ref: Evaluating Spreadsheet Models Level: moderate

20. The key to spreadsheet model flexibility is to keep all the ___________ of the model separate from the ______________ of the model. a) inputs; formulas b) inputs; outputs c) outputs; formulas d) constraints; formulas e) parameters; decision variables Ans: a Section Ref: Evaluating Spreadsheet Models Level: moderate

21. More times than not, modelers tend to ignore making the model flexible because: a) they don’t know how. b) it takes too much time. c) it provides little benefit. d) they believe the model is a onetime use item. e) they want to keep the model modification control to themselves.

Ans: d Section Ref: The Spreadsheet Modeling Process Level: easy

22. The principle, “Do not hard-code an input directly into a formula,” is the main feature of spreadsheet ________________. a) correctness b) documentation c) aesthetics d) flexibility e) randomness Ans: d Section Ref: Evaluating Spreadsheet Models Level: moderate

23. What are the most common useful numerical formats? a) date, currency, and percentage b) date, time, and custom c) time, custom, and number

d) number, custom, and percentage e) number, currency, and percentage Ans: e Section Ref: Evaluating Spreadsheet Models Level: hard

24. To add Cell Comments for a cell in Excel, right-click and choose ____________________. a) Insert Comment b) Format Cells… c) Hyperlink… d) Insert… e) Pick From List…

Ans: a Section Ref: Evaluating Spreadsheet Models Level: hard

25. You can insert __________________ for a cell to add explanatory information about a calculation or assumption that does not have to be in the model itself. a) Cell Explanations b) Cell Descriptions c) Cell Comments d) Cell Information e) Cell Documentation Ans: c Section Ref: Evaluating Spreadsheet Models Level: moderate

26. What are the two main reasons why one should break up larger calculations into smaller ones in spreadsheet modeling? a) to speed solution time and to determine intermediate values b) to speed solution time and to avoid errors c) so the formula can fit on the formula line and to speed solution time d) to avoid errors and to determine intermediate values e) so the formula can fit on the formula line and to avoid errors Ans: d Section Ref: Evaluating Spreadsheet Models Level: hard

27. In the custom footer box in Excel, what symbol precedes the set of brackets containing the commands “[File],” “[Tab],” “[Date],” or “[Time]?” a) * b) % c) # d) @ e) & Ans: e Section Ref: Evaluating Spreadsheet Models Level: hard

28. Which of the following is not one of the standard items included in a footer? a) file name b) author name c) user name d) date e) time Ans: c Section Ref: Evaluating Spreadsheet Models Level: hard

29. Which of the following is not one of the standard items included in a footer? a) worksheet name b) author name c) solution time d) date e) time Ans: c Section Ref: Evaluating Spreadsheet Models Level: moderate

30. Which of the following does not have a button for automatic insertion into the custom footer box? a) file name b) worksheet name c) author name d) date e) time Ans: c Section Ref: Evaluating Spreadsheet Models Level: moderate

31. In the custom footer box, which of the following is the command to insert the worksheet name? a) &[worksheet] b) &[tab] c) &[work] d) &[sheet] e) &[page] Ans: b Section Ref: Evaluating Spreadsheet Models Level: hard

32. In Excel, the command to print row and column headings is checked under which menu/submenu? a) Print b) Page Setup c) Tools d) View e) Insert Ans: b Section Ref: Evaluating Spreadsheet Models Level: hard

33. In Excel, the command to print formulas is checked under which menu/submenu? a) Print b) Page Setup c) Tools d) Edit e) Insert Ans: c Section Ref: Evaluating Spreadsheet Models Level: hard

34. When the “Formulas” box is checked under Tools/Options/View, what happens to the size of the columns? a) The widths are cut in half. b) There’s no change in the column size. c) The widths are doubled. d) Columns containing items are doubled in size and empty columns are cut in half. e) Their widths are automatically expanded to the size of the printed formulas.

Ans: c Section Ref: Evaluating Spreadsheet Models Level: hard

35. Using Excel, what method other than the algebraic one can be used to find the breakeven quantity? a) Goal Seek b) Find c) Search d) Break Even e) Steepest Ascent Ans: a Section Ref: Evaluating Spreadsheet Models Level: moderate

36. In Excel, Goal Seek is found under which menu option? a) Insert b) Edit c) File d) Tools e) Data Ans: d Section Ref: Evaluating Spreadsheet Models Level: hard

37. ___________________ perform repetitive what-if analysis quickly and easily in Excel. a) What-If Tables b) Repetitive Tables c) Sensitivity Tables d) Scenario Tables e) Data Tables Ans: e Section Ref: Evaluating Spreadsheet Models Level: easy

38. One mistake Excel users make in forming the DATA TABLE is: a) use too large data steps. b) use incorrect addressing. c) forget to leave the first cell blank in the data column.

d) forget to label the columns. e) modify the default settings.

Ans: c Section Ref: Evaluating Spreadsheet Models Level: easy

39. In Excel, to center a label that continues across several cells, highlight the cells, go to Format/Cell/Alignment, and click on _____________________. a) Center b) Center across selection c) Justify d) Fill e) General Ans: b Section Ref: Evaluating Spreadsheet Models Level: moderate

40. Formulas are entered into Excel by first typing which key? a) ^ b) & c) # d) ! e) = Ans: e Section Ref: Evaluating Spreadsheet Models Level: moderate

41. In Excel, you can copy text labels by using the: a) @ b) & c) + d) = e) – Ans: d Section Ref: Evaluating Spreadsheet Models Level: moderate

42. In Excel, __________________ references change when you copy them. a) absolute

b) comparative c) analogous d) relative e) correlative Ans: d Section Ref: Evaluating Spreadsheet Models Level: moderate

43. In Excel, ___________________ references do not change when you copy them. a) absolute b) comparative c) analogous d) relative e) correlative Ans: a Section Ref: Evaluating Spreadsheet Models Level: moderate

44. In Excel, ___________________ references are indicated by the lack of a dollar sign character preceding either the column or the row reference. a) absolute b) comparative c) analogous d) relative e) correlative Ans: d Section Ref: Evaluating Spreadsheet Models Level: moderate

45. In Excel, ___________________ references are indicated by a dollar sign character preceding the column and the row reference. a) absolute b) comparative c) analogous d) relative e) correlative Ans: a Section Ref: Evaluating Spreadsheet Models Level: moderate

46. In Excel, which function key toggles between relative and absolute cell referencing when editing a formula? a) F1 b) F2 c) F3 d) F4 e) F5 Ans: d Section Ref: Evaluating Spreadsheet Models Level: hard

47. In Excel, which function takes a range of values as its input and returns the largest value from that range? a) SUP b) LARGE c) BIG d) HIGH e) MAX Ans: e Section Ref: Evaluating Spreadsheet Models Level: easy

48. In Excel, which function takes a range of values as its input and returns the smallest value from that range? a) INF b) SMALL c) LITTLE d) MIN e) LOW Ans: d Section Ref: Evaluating Spreadsheet Models Level: moderate

49. In Excel, what does the formula “=MAX(B25:D25)” do? a) It returns the largest value in either cell B25 or cell D25. b) It converts all values in the range between B25 and D25 to the highest value in that range. c) Whichever of B25 or D25 is lowest, it converts that value to the other one. d) It returns the largest value among cells B25, C25, and D25. e) It maximizes the formulas in each of the cells in the range between B25 and D25.

Ans: d

Section Ref: Evaluating Spreadsheet Models Level: moderate

50. How many arguments does the MATCH function in Excel take? a) 1 b) 2 c) 3 d) 4 e) 5 Ans: c Section Ref: Evaluating Spreadsheet Models Level: moderate

51. In Excel, what are the three arguments that a MATCH function takes? a) Lookup_value, Match_type, and Lookup_array b) Lookup_value, Match_type, and Array c) Lookup_value, Column_num, and Lookup_array d) Array, Row_num, and Column_num e) Lookup_array, Row_num, and Column_num Ans: a Section Ref: Evaluating Spreadsheet Models Level: hard

52. In Excel, what are the three arguments that an INDEX function takes? a) Lookup_value, Match_type, and Lookup_array b) Lookup_value, Match_type, and Array c) Lookup_value, Column_num, and Lookup_array d) Array, Row_num, and Column_num e) Lookup_array, Row_num, and Column_num Ans: d Section Ref: Evaluating Spreadsheet Models Level: hard

53. In the Excel MATCH function, which “Match_type” forces the MATCH function to look for an exact match of Lookup_value in Lookup_array? a) 10 b) 0 c) –1 d) 1 e) E

Ans: b Section Ref: Evaluating Spreadsheet Models Level: moderate

54. In the Excel MATCH function, which argument is the value that we want to test? a) Lookup_array b) Array c) Value d) Match_type e) Lookup_value Ans: e Section Ref: Evaluating Spreadsheet Models Level: moderate

55. In the Excel MATCH function, which argument defines the range of values for which you want to look for a match? a) Lookup_array b) Range c) Array d) Lookup_value e) Match_type Ans: a Section Ref: Evaluating Spreadsheet Models Level: moderate

56. What does it mean when the formula result of the MATCH function in Excel equals 2? a) Two items matched the Lookup_value. b) The item labeled “2” matched the Lookup_value. c) The Lookup_value was found in the second position of the Lookup_array. d) An error occurred. e) The closest item to the Lookup_value was within two units of that value.

Ans: c Section Ref: Evaluating Spreadsheet Models Level: moderate

57. Up to how many arguments can the INDEX function in Excel take? a) 1 b) 2 c) 3

d) 4 e) 5 Ans: c Section Ref: Evaluating Spreadsheet Models Level: moderate

58. In Excel, what combination of functions can produce the label for an item that equals a given number? a) MAX and INDEX b) MAX and MIN c) MATCH and INDEX d) MATCH and MAX e) ABS and MAX Ans: c Section Ref: Evaluating Spreadsheet Models Level: moderate

59. Which Excel function takes as inputs two separate ranges, then multiplies each pair of numbers in the ranges, and then adds up all these individual products? a) RANGE b) RANGEPRODUCT c) PRODUCTSUM d) SUMPRODUCT e) DOTPRODUCT Ans: d Section Ref: Evaluating Spreadsheet Models Level: easy

60. Which of the following is equivalent to “=SUMPRODUCT(A1:A4,B1:B4)”? a) A1*A4 + B1*B4 b) A1*B1 + A2*B2 + A3*B3 + A4*B4 c) (A1+A4)*(B1+B4) d) (A1+A2+A3+A4)*(B1+B2+B3+B4) e) A1 + A4*B1 + B4 Ans: b Section Ref: Evaluating Spreadsheet Models Level: moderate

61. Which of the following is equivalent to “=SUMPRODUCT(A1:A4,B2:B5)”?

a) A1*A4 + B2*B5 b) A1*B2 + A2*B3 + A3*B4 + A4*B5 c) (A1+A4)*(B2+B5) d) (A1+A2+A3+A4)*(B2+B3+B4+B5) e) This is an invalid function.

Ans: b Section Ref: Evaluating Spreadsheet Models Level: moderate

62. Which of the following is equivalent to “=SUMPRODUCT(A1:A4,B2:B6)”? a) A1*A4 + B2*B6 b) A1*B2 + A2*B3 + A3*B4 + A4*B5 c) (A1+A4)*(B2+B6) d) (A1+A2+A3+A4)*(B2+B3+B4+B5+B6) e) This is an invalid function.

Ans: e Section Ref: Evaluating Spreadsheet Models Level: moderate

63. To edit formulas in Excel, you can either double-click on the cell or hit: a) F1 b) F2 c) F3 d) F4 e) F5 Ans: b Section Ref: Evaluating Spreadsheet Models Level: moderate

64. In Excel, what are the keystrokes for the “Cut” command? a) Ctrl-C b) Ctrl-V c) Ctrl-X d) Ctrl-Z e) Ctrl-Q Ans: c Section Ref: Useful Spreadsheet Tips Level: hard

65. In Excel, what are the keystrokes for the “Paste” command? a) Ctrl-C b) Ctrl-V c) Ctrl-X d) Ctrl-Z e) Ctrl-P Ans: b Section Ref: Useful Spreadsheet Tips Level: hard

66. In Excel, what are the keystrokes for the “Copy” command? a) Ctrl-C b) Ctrl-V c) Ctrl-X d) Ctrl-Z e) Ctrl-Q Ans: a Section Ref: Useful Spreadsheet Tips Level: hard

67. In Excel, how can one select cells in a range without using the mouse? a) Ctrl+Arrow Keys b) Alt+Arrow Keys c) Tab+Arrow Keys d) F1+Arrow Keys e) Shift+Arrow Keys Ans: e Section Ref: Useful Spreadsheet Tips Level: hard

68. In Excel, the command to print Cell Comments is selected under which menu/submenu? a) Print b) Page Setup c) Tools d) View e) Insert Ans: b Section Ref: Useful Spreadsheet Tips Level: hard

69. In Excel, what is the shortcut to view formulas on the spreadsheet? a) Ctrl+’ b) Ctrl+` c) Ctrl+F d) Ctrl+^ e) Ctrl+~ Ans: b Section Ref: Important Excel Formulas Level: hard

70. In Excel, which function returns the number of cells containing numerical values? a) CELLS(range) b) NUMBER(range) c) VALUES(range) d) COUNT(range) e) NUMBERS(range) Ans: d Section Ref: Important Excel Formulas Level: moderate

71. In Excel, which function returns the square root? a) ROOT(number) b) SQR(number) c) SQRT(number) d) SQUAREROOT(number) e) ROOT2(number) Ans: c Section Ref: Important Excel Formulas Level: moderate

72. What Excel feature works backwards to find the value of an input quantity that causes an output quantity to have a particular value? a) Goal Seek b) Goal Snitch c) FIRSTCOME d) FIRSTSERVE e) PARTVALUE$ Ans: a Section Ref: Evaluating Spreadsheet Models Level: moderate

True/False

73. The most common form of models are mathematical models.

Ans: False Section Ref: What are Models?

Level: moderate

74. There are a number of different model types which do not share any commonalities.

Ans: False Section Ref: What are Models?

Level: moderate

75. One reason for models is the need to make a decision.

Ans: True Section Ref: What are Models?

Level: moderate

76. Inputs are quantities or factors that affect the situation.

Ans: True Section Ref: What are Models?

Level: moderate

77. Controllable inputs are sometimes called parameters.

Ans: False Section Ref: What are Models?

Level: moderate

78. The benefits of including a particular factor in a model must be weighed against the decreased complexity of the model resulting from its inclusion.

Ans: False

Section Ref: What are Models?

Level: moderate

79. Research has shown that most spreadsheet model developers believe their products to be error-free, but this assessment is usually wrong.

Ans: True Section Ref: The Spreadsheet Modeling Process Level: hard

80. A common practice of scenario analysis is to examine the base case, best case, and worst case scenarios.

Ans: True Section Ref: The Spreadsheet Modeling Process Level: moderate

81. Sometimes the things you learn about the real situation during the modeling process are even more important than the numerical results of the model.

Ans: True Section Ref: Evaluating Spreadsheet Models Level: moderate

82. Spreadsheet flexibility implies that the user should enter each input only once in the model.

Ans: True Section Ref: Evaluating Spreadsheet Models Level: moderate

83. A scenario is a specific set of conditions that helps identify the inputs that cause the most change in the outputs.

Ans: False Section Ref: Evaluating Spreadsheet Models Level: moderate

84. In a spreadsheet, it is better to write a smaller number of more complex formulas than to write a larger number of simple formulas.

Ans: False Section Ref: Evaluating Spreadsheet Models Level: moderate

85. One reason for intermediate spreadsheet calculations is management is often interested in more detail than the final results.

Ans: True Section Ref: Evaluating Spreadsheet Models Level: moderate

86. In the custom footer box, the command to insert the worksheet name is “&[Tab]”.

Ans: True Section Ref: Evaluating Spreadsheet Models Level: hard

87. In the custom footer box, there is a button to automatically insert the page number.

Ans: True Section Ref: Evaluating Spreadsheet Models Level: hard

88. For the Goal Seek feature in Excel, it doesn’t matter whether you use absolute or relative references.

Ans: True Section Ref: Evaluating Spreadsheet Models Level: moderate

89. Once you run Goal Seek in Excel, you cannot revert back to the original values.

Ans: False Section Ref: Evaluating Spreadsheet Models Level: hard

90. When you change one or more model inputs, Excel automatically updates the associated Data Table.

Ans: True Section Ref: Evaluating Spreadsheet Models Level: moderate

91. For the Data Table feature in Excel, it does matter whether you use absolute or relative references.

Ans: False Section Ref: Evaluating Spreadsheet Models Level: moderate

92. In Excel, the only way to center a label that continues across multiple cells is to edit the cell and use the space key.

Ans: False Section Ref: Evaluating Spreadsheet Models Level: moderate

93. In Excel, relative references are indicated by the lack of a dollar sign character preceding either the column or the row reference.

Ans: True Section Ref: Evaluating Spreadsheet Models Level: moderate

94. In Excel, absolute references are indicated by the lack of a dollar sign character preceding either the column or the row reference.

Ans: False Section Ref: Evaluating Spreadsheet Models Level: moderate

95. In Excel, relative references do not change when you copy them.

Ans: False Section Ref: Evaluating Spreadsheet Models Level: moderate

96. In Excel, absolute references do not change when you copy them.

Ans: True Section Ref: Evaluating Spreadsheet Models Level: moderate

97. In Excel, part of a formula’s references can be relative while another part can be absolute.

Ans: True Section Ref: Evaluating Spreadsheet Models Level: moderate

98. In general, when using large dollar amounts, always use the cents, but small dollar amounts can be rounded off to whole numbers.

Ans: False Section Ref: Evaluating Spreadsheet Models Level: easy

99. Many seemingly complex spreadsheet models really comprise only a handful of truly distinct formulas.

Ans: True Section Ref: Useful Spreadsheet Tips Level: moderate

100. In Excel, you should delete unused worksheets of a workbook.

Ans: True Section Ref: Useful Spreadsheet Tips Level: moderate

101. In Excel, when moving a formula to another cell, it is better to use Copy and Paste rather than Cut and Paste.

Ans: False Section Ref: Useful Spreadsheet Tips Level: moderate

102. If you use the Excel Stacked column chart option, you must select the individual data sets and the sum of the data sets.

Ans: False Section Ref: Evaluating Spreadsheet Models Level: moderate

103. The MATCH function in Excel returns the value from the range in the position specified.

Ans: False Section Ref: Important Excel Formulas Level: moderate

104. The MATCH function in Excel returns the relative position in the array that matches the lookup value.

Ans: True Section Ref: Important Excel Formulas Level: moderate

105. Suppose that the formula in cell C8 is “=H2+$P6”. If cell C8 is copied to cell E10, the formula in cell E10 will be “=J4+$P8”.

Ans: True Section Ref: Evaluating Spreadsheet Models Level: moderate

106. Suppose that the formula in cell C8 is “=H2+$P6”. If cell C8 is copied to cell E7, the formula in cell E7 will be “=J1+R5”.

Ans: False Section Ref: Evaluating Spreadsheet Models Level: moderate

107. Excel’s INDEX function requires the user to use all three arguments for a valid response.

Ans: False Section Ref: Evaluating Spreadsheet Models Level: moderate

Essay

108. Describe five main types of models.

Ans: Mental models are “built” in our heads and are used to make decisions. These represent the most common form of models. Visual models use graphics or diagrams to represent real objects or situations. Physical models involve objects that represent other objects. Mathematical models use equations and relationships among quantities to represent situations. Spreadsheet models are a means of implementing mathematical models.

Section Ref: What are Models?

Level: hard

109. Define an output.

Ans: An output is a quantity or a factor that depends on how the inputs are related to one another.

Section Ref: What are Models?

Level: moderate

110. Define and describe a model.

Ans: A model is a purposeful representation of the key factors in a situation and the relationships among them. It is an abstraction of the real situation, and should incorporate enough detail so the results meet the current needs, but omit unnecessary details.

Section Ref: What are Models?

Level: moderate

111. Describe and discuss the two different types of model inputs.

Ans: Inputs are quantities or factors that affect the situation. Inputs are controllable or uncontrollable. Controllable, within reason, are quantities or factors that a decision maker can change. Uncontrollable inputs are quantities or factors that are important to the situation but are outside the decision maker’s direct control.

Section Ref: What Are Models Level: moderate

112. What are the six steps to developing an effective spreadsheet model?

Ans: 1. Draw a picture to better understand the situation. Identify parameters, decision variables, and outputs. Define the logic necessary to transform the inputs into the outputs. 2. Sketch out a plan for the model. Determine the necessary formulas. 3. Develop the base case spreadsheet

model, including color-coding and labeling. 4. Test the spreadsheet model using trial values.

Verify the results by hand, if possible. 5. Use the model to perform the needed analysis. 6.

Document the model so that others can easily understand it.

Section Ref: The Spreadsheet Modeling Process Level: hard

113. What are the five guidelines for good spreadsheet documentation?

Ans: 1. Include descriptive text labels for all numerical inputs and calculations. 2. Use numerical formatting. 3. Apply appropriate cell formatting. 4. Insert Cell Comments for key cells. 5. Print a copy of the spreadsheet itself with row and column headings, gridlines, and a footer. Also, print a copy of the spreadsheet formulas.

Section Ref: Evaluating Spreadsheet Models Level: hard

114. What are the two main reasons why one should break up larger calculations into smaller ones in spreadsheet modeling?

Ans: To determine intermediate values and to avoid errors.

Section Ref: Evaluating Spreadsheet Models Level: moderate

115. What is a primary reason why recommended footers contain the date and time?

Ans: So the user will always know which copy was printed last.

Section Ref: Evaluating Spreadsheet Models Level: moderate

116. Describe how a Data Table functions in Excel.

Ans: The user provides a list of input values. The Data Table then inserts this range of input values, one at a time, into a specified cell. Excel calculates the spreadsheet and remembers the results. Then the Data Table inserts the next input number into the range, repeating the process.

The user completely controls the values.

Section Ref: Evaluating Spreadsheet Models Level: hard

117. Describe the difference between an XY graph and a Line graph.

Ans: For an XY graph, the X (horizontal) axis contains a quantitative variable. In a Line graph, the horizontal axis serves as a category axis.

Section Ref: Evaluating Spreadsheet Models Level: moderate

118. How do you know that you have a relative reference in Excel?

Ans: There is no dollar sign character preceding either the column or row reference.

Section Ref: Evaluating Spreadsheet Models Level: moderate

119. What is the advantage of using a Stacked Column chart?

Ans: The contribution of each factor on the total score can be displayed.

Section Ref: Evaluating Spreadsheet Models Level: moderate

120. Describe the difference between the MAX and MIN Excel functions.

Ans: The MAX function takes a range of values as its input and returns the maximum value from that range. The MIN function takes a range of values as its input and returns the minimum value from that range.

Section Ref: Evaluating Spreadsheet Models Level: easy

121. Describe the “IF” function in Excel.

Ans: The format is: IF(logical test, value if true, value if false). It checks whether “logical test” is true or false. If true, the result of the function is the “value if true”. If false, the result is the “value if false”.

Section Ref: Important Excel Formulas Level: hard

122 List and discuss the three basic arguments in the MATCH Excel function.

Ans: The three arguments are Lookup_value, Lookup_array and Match_type. Lookup_value is the value that will be tested while Lookup_array defines the range of values you want to look for a match in. The Match type argument defines if you want to look for an exact match or other type of match.

Section Reference: Evaluating Spreadsheet Models Level: moderate

123. What are the three types of charts available in Excel to illustrate model results?

Ans: XY chart, column chart, and stacked chart Section Ref: Evaluating Spreadsheet Models Level: easy

Short Answer

124. Although there are a number of different model types, _________ exist among them.

Ans: commonalities Section Ref: What are Models?

Level: easy

125. Models transform inputs into ________________________ Ans: outputs Section Ref: What are Models?

Level: easy

126. __________ is the model that contains the “default” or “given” values for the inputs Ans: Base case Section Ref: The Spreadsheet Modeling Process Level: easy

127. A model is correct if it produces the _______________ correct _________ for the outputs for the current values of the inputs Ans: numerically, values Section Ref: Evaluating Spreadsheet Models Level: moderate

128. Ideally, a spreadsheet model should be ________________________ Ans: self-documenting Section Ref: Evaluating Spreadsheet Models Level: easy

129. Data tables perform _____________ what-if ___________ quickly and easily.

Ans: repetitive, analysis Section Ref: Evaluating Spreadsheet Models Level: moderate

130. __________ and ___________ cell referencing allows you to write one formula and then copy it.

Ans: Relative, absolute Section Ref: Evaluating Spreadsheet Models Level: moderate

131. Absolute references do _____________ change when you copy them.

Ans: not Section Ref: Evaluating Spreadsheet Models Level: easy

132. You can edit Excel formulas by either double-click the cell, or _________________ Ans: hit F2 key Section Ref: Evaluating Spreadsheet Models Level: moderate

133. The sample standard deviation is found by using the Excel ___________ function.

Ans: STDEV Section Ref: Important Excel Formulas Level: moderate

134. Excel’s COUNT function returns the ______ of cells containing numerical values.

Ans: number Section Ref: Important Excel Formulas Level: easy

135. The Excel function that multiplies corresponding numbers in the two ranges and returns the sum of those products is the ________________ function.

Ans: SUMPRODUCT Section Ref: Important Excel Formulas Level: easy

136. The MATCH function returns the ________________ position in the array that matches the lookup value.

Ans: relative Section Ref: Important Excel Formulas Level: moderate

137. The Excel function that returns the z-value of the standard normal distribution corresponding to a cumulative probability of p is _______ Ans: NORMSINV(p) Section Ref: Important Excel Formulas Level: hard

138. A _________________ is a picture or diagram identifying controllable and uncontrollable inputs and outputs.

Ans: model schematic Section Ref: What is a Model?

Level: hard

File: supB, Supplement B: Introduction to Optimization

Multiple Choice

1. In Linear Programming models, what do you want to do with the objective? a) upsize or downsize b) rightsize or wrongsize c) maximize or minimize d) memorize e) popularize Ans: c Section Ref: Introduction Level: easy

2. In Linear Programming models, over what quantities do you have control? a) decision variables b) parameters c) constraints d) objective variables e) coefficients Ans: a Section Ref: Introduction Level: easy

3. A mathematical model in which one is trying to maximize or minimize some quantity while satisfying a set of constraints is a(n): a) objective model b) constrained model c) constrained optimization problem d) decision model e) excel model Ans: c Section Ref: Introduction Level: easy

4. Human intelligence is not needed in which of the following steps of solving optimization problems? a) writing the problem formulation in words

b) writing the algebraic formulation of the problem c) developing a spreadsheet model d) solving the problem e) interpreting the results Ans: d Section Ref: Introduction Level: moderate

5. Large-scale optimization software can handle how many decision variables and constraints? a) dozens b) hundreds c) thousands d) millions e) all of these answer choices are correct Ans: e Section Ref: Introduction Level: easy

6. Once you’ve written the algebraic formulation of the problem, the next setup involved in Solving Optimization Problems is: a) develop test cases b) examine the results and make corrections c) analyze and interpret the results d) set up the Solver settings e) write the problem formulation Ans: d Section Ref: Introduction Level: moderate

7. A ____________________ contains explicit definitions of the decision variables, an algebraic expression of the objective function, and algebraic statements of the constraints. a) composition b) derivation c) manipulation d) formulation e) regurgitation Ans: d Section Ref: Algebraic Formulation Level: easy

8. When formulating optimization problems, which of the following represent the typical sequence? a. (1) text-based formulation, (2) diagram, (3) algebraic formulation b. (1) text-based formulation, (2) algebraic formulation, (3) diagram c. (1) diagram, (2) algebraic formulation, (3) text-based formulation d. (1) diagram, (2) text-based formulation, (3) algebraic formulation e. (1) algebraic formulation, (2) diagram, (3) text-based formulation Ans: d Section Ref: Algebraic Formulation Level: moderate

9. A diagram of the situation can help _______ the problem as well as be a(n) ______ _______ tool. a) structure, valuable communication b) define, algebraic development c) bound, formulation development d) unbound, formulation development e) structure, unbounded formulation Ans: a Section Ref: Algebraic Formulation Level: moderate

10. The algebraic formulation of an optimization problem must state what three things? a) decision variables, random variables, and parameters b) decision variables, random variables, and constraints c) decision variables, random variables, and objective function d) random variables, parameters, and objective function e) decision variables, objective function, and constraints Ans: e Section Ref: Algebraic Formulation Level: moderate

11. The text-based formulation of an optimization problem should state what three things? a) decision variables, random variables, and parameters b) decision variables, objective function, and constraints c) decision variables, random variables, and constraints d) decision variables, random variables, and objective function e) random variables, parameters, and objective function Ans: b Section Ref: Algebraic Formulation

Level: moderate

12. What are the allowable constraint relationship types in optimization problems? a) <, >, = b) <, >, =, ≤, ≥ c) =, ≤, ≥ d) <, >, ≤, ≥ e) ≠, =, ≤, ≥ Ans: c Section Ref: Algebraic Formulation Level: moderate

13. Suppose that a firm makes gears (G) and axles (A). Each gear requires 15 minutes of labor and each axle requires 30 minutes of labor. One thousand hours of labor are available. How should the labor constraint(s) be written? a) G + A ≤ 1000 b) .25G + .5A ≤ 1000 c) G ≤ 15 and A ≤ 30 d) .25G + .5A ≥ 1000 e) 15G + 30A ≤ 1000 Ans: b Section Ref: Algebraic Formulation Level: moderate

14. If a firm is using a linear program to determine production amounts of its chairs and tables, which of the following constraints must be in the model? a) non-negativity b) labor hours c) machine hours d) profit maximization e) wood availability Ans: a Section Ref: Algebraic Formulation Level: hard

15. If C represents the number of chairs produced, which of the following is a proper nonnegativity constraint? a) C ≠ 0 b) C > 0 c) C ≥ 0

d) C < 0 e) C ≤ 0 Ans: c Section Ref: Algebraic Formulation Level: moderate

16. Which type of constraint does not allow the solution for a decision variable of an optimization problem to be less than zero? a) negativity b) positivity c) anti-negativity d) feasibility e) non-negativity Ans: e Section Ref: Algebraic Formulation Level: moderate

17. What does LP stand for? a) Linear Partition b) Linear Program c) Large-Scale Program d) Linear Parameter e) Linear Parallelism Ans: b Section Ref: Algebraic Formulation Level: easy

18. Testing of the LP model should include __________ and _____________. a) extreme case, base case b) extreme case, test values c) base case, minimum value d) base case, test values e) test value, maximum value Ans: d Section Ref: Algebraic Formulation Level: moderate

19. How can the following Linear Program be characterized?

Min X + Y

Subject to X ≤ 20 Y≤5 X + Y ≥ 40 X, Y ≥ 0 a) bounded and feasible b) unbounded and feasible c) bounded and infeasible d) unbounded and infeasible e) this is not a Linear Program Ans: c Section Ref: Algebraic Formulation Level: hard

20. Consider the following three functions: f(x) = 6x2 g(x, y) =4x – 3y + 19 h(x, y) = 3xy Which of the following is true regarding the linearity of the functions? a) none of the functions is linear b) all three functions are linear c) g(x, y) is linear, but f(x) and h(x, y) are not linear d) g(x, y) and h(x, y) are linear, but f(x) is not linear e) h(x, y) is linear, but f(x) and g(x, y) are not linear Ans: c Section Ref: Algebraic Formulation Level: moderate

21. Sausage and Cheese Ltd. prepares three gift packages containing sausages and cheeses. The “Tasters,” “Succulent,” and “Gourmet” gift packages contain 3 sausages and 6 cheeses, 5 sausages and 4 cheeses, and 6 sausages and 5 cheeses, respectively. There are 2500 sausages and 3000 cheeses available for packing, and demand is unlimited. Profits are $2.50, $3.50, and $4.00 for the “Tasters,” “Succulent,” and “Gourmet” gift packages, respectively. The goal is to maximize profits. Let T, S, and G represent the number of gift packages produced of type “Tasters,” “Succulent,” and “Gourmet,” respectively. What is the objective function for this linear program? a) Max T + S + G b) Max 2.5T + 3.5S + 4G c) Min T + S + G d) Max 10(T + S + G) e) Max 9T + 9S + 11G Ans: b Section Ref: Algebraic Formulation Level: moderate

22. Sausage and Cheese Ltd. prepares three gift packages containing sausages and cheeses. The “Tasters,” “Succulent,” and “Gourmet” gift packages contain 3 sausages and 6 cheeses, 5 sausages and 4 cheeses, and 6 sausages and 5 cheeses, respectively. There are 2500 sausages and 3000 cheeses available for packing, and demand is unlimited. Profits are $2.50, $3.50, and $4.00 for the “Tasters,” “Succulent,” and “Gourmet” gift packages, respectively. The goal is to maximize profits. Let T, S, and G represent the number of gift packages produced of type “Tasters,” “Succulent,” and “Gourmet,” respectively. What is the constraint describing the sausage capacity? a) 2.5T + 3.5S + 4G ≤ 2500 b) 3T + 5S + 6G ≥ 2500 c) 9T + 9S + 11G ≤ 2500 d) 0.8333T + 1.9444S + 2.1818G ≤ 2500 e) 3T + 5S + 6G ≤ 2500 Ans: e Section Ref: Algebraic Formulation Level: moderate

23. Dane’s aircraft muffler manufacturers have 1500 linear feet of steel on hand to manufacture the three top selling muffler sets. Super mufflers (S) provide $285 profit and common (C) mufflers’ profit margin is $310, while the deluxe (D) muffler set provides a $400 profit margin.

It costs Dane $310, $295, and $400 to build each muffler set, respectively. What is the objective function of Dane’s aircraft muffler manufacturing? a) Min S, C and D b) MAX S, C, and D c) Max 285S + 310C + 400D d) Min 285S + 310C + 400D e) Max 310S + 295C + 400D Ans: c Section Ref: Algebraic Formulation Level: moderate

24. How can the following Linear Program be characterized?

Min X + Y Subject to X ≥ 20 Y ≥ -5 X + Y ≤ 23 a) bounded and feasible b) unbounded and feasible c) bounded and infeasible d) unbounded and infeasible e) this is not a Linear Program

Ans: a Section Ref: Outcomes of Linear Programming Problems Level: hard

25. Consider the following two functions: g(x, y) =4x – 3y + 21 h(x, y) = 13xy Which of the following is true regarding the linearity of the functions? a) neither of the functions is linear b) both functions are linear c) g(x, y) is linear, but h(x, y) is not linear d) h(x, y) is linear, but g(x, y) is not linear e) h(x, y) is not linear, and g(x, y) is only linear when y ≥ 0 Ans: c Section Ref: Algebraic Formulation Level: moderate

26. Capital Co. is considering which of five different projects to undertake in order to maximize its net present value (NPV). Define Xi as a binary (0-1) variable that equals 1 if project i is undertaken and 0 otherwise, for i = 1,2,3,4,5. The NPV and required capital (in thousands) for each project are listed below.

Project Net Present Value Capital Required 1 60 7 2 50 10 3 40 6 4 20 3 5 30 12 Which of the following represents the constraint stating that project 1 can be undertaken only if project 5 is undertaken? a) X1 + X5 ≤ 1 b) X1 - X5 ≤ 0 c) X5 - X1 ≤ 0 d) X1 - X5 ≤ 1 e) X5 - X1 ≤ 1 Ans: b Section Ref: Outcomes of Linear Programming Problems Level: hard

27. Capital Co. is considering which of five different projects to undertake in order to maximize its net present value (NPV). Define Xi as a binary (0-1) variable that equals 1 if project i is undertaken and 0 otherwise, for i = 1,2,3,4,5. The NPV and required capital (in thousands) for each project are listed below.

Project Net Present Value 1 60 2 50 3 40 4 20 5 30 What is the proper objective function? a) Max X1 + X2 + X3 + X4 + X5 b) Min 60X1 + 50X2 + 40X3 + 20X4 + 30X5 c) Max 7X1 + 10X2 + 6X3 + 3X4 + 12X5 d) Max 60X1 + 50X2 + 40X3 + 20X4 + 30X5 e) Min 7X1 + 10X2 + 6X3 + 3X4 + 12X5

Capital Required 7 10 6 3 12

Ans: d Section Ref: Outcomes of Linear Programming Problems Level: hard

28. Which of the following statements is not correct? a) A function with multiple variables can be linear. b) If a constraint is violated, then the problem is infeasible. c) A Linear Program as described in Supplement B can have more than one objective function if it has only one constraint. d) Non-negativity constraints should be added to Linear Programs when the decision variable represents units of production. e) An unbounded solution to a mathematical program may occur if there is not a constraint stopping the objective function value from continuing towards -∞.

Ans: c Section Ref: Outcomes of Linear Programming Problems Level: hard

29. How can the following Linear Program be characterized?

Max X + Y Subject to X ≤ 34 X, Y ≥ 0 a) bounded and feasible b) unbounded and feasible c) bounded and infeasible d) unbounded and infeasible e) this is not a Linear Program Ans: b Section Ref: Outcomes of Linear Programming Problems Level: hard

30. Capital Co. is considering five different projects. Define Xi as a binary (0-1) variable that equals 1 if project i is undertaken and 0 otherwise, for i = 1,2,3,4,5. Which of the following represents the constraint(s) stating that projects 2, 3, and 4 cannot all be undertaken simultaneously? a) X2 + X3 + X4 ≤ 3 b) X1 + X2 + X3 + X4 + X5 ≤ 3 c) X2 + X3 + X4 ≤ 1 d) X2 + X3 + X4 ≤ 2 e) X2 + X3 ≤ 1 and X3 + X4 ≤ 1 Ans: d Section Ref: Outcomes of Linear Programming Problems Level: hard

31. Consider the following three functions: g(x, y) = 4x – 3y + 21 h(x, y, z) = 13x2 + y + 3z i(z) = z Which of the following is true regarding the linearity of the functions? a) none of the functions is linear b) all three functions are linear c) h is linear, but g and i are not linear d) i is linear, but g and h are not linear e) g and i are linear, but h is not linear Ans: e Section Ref: Algebraic Formulation Level: moderate

32. What is the optimal solution to the following linear program?

Max 2X + Y Subject to 2X + 2Y ≥ 40 X + Y ≤ 10 X≥0 Y≥0 a) the solution is unbounded b) (0, 20) c) (10, 0) d) (20, 0) e) the program is infeasible Ans: e Section Ref: Algebraic Formulation Level: hard

33. Which of the following is not one of the steps in setting up the Solver optimization problem? a) specify the target cell b) specify the objective cell c) specify the changing cell(s) d) specify the constraints e) specify the Solver options Ans: d Section Ref: Setting Up and Running Solver Level: moderate

34. Solver provides many options for the solution process. For LPs, the two most commonly used are: a) assume linear model, assume negative b) assume non-linear model, assume negative c) assume non-linear model, assume non-negative d) assume linear model, assume non-negative e) assume non-linear model, assume non-negative Ans: d Section Ref: Setting Up and Running Solver Level: moderate

35. Riker Co. is considering which of four different projects to undertake in order to maximize its net present value (NPV). Define Xi as a binary (0-1) variable that equals 1 if project i is undertaken and 0 otherwise, for i = 1,2,3,4. The NPV and required capital (in millions) for each project are listed below.

Project Net Present Value Capital Required 1 60 7 2 50 10 3 40 6 4 20 3 Which of the following represents the constraint(s) stating that project 1 must be undertaken and at least one of the other projects must be undertaken? a) X1 + X2 ≤ 1, and X1 + X3 ≤ 1, and X1 + X4 ≤ 1 b) X1 ≥ 1, and X2 + X3 + X4 ≥ 1 c) X1 + X2 ≥ 1, and X1 + X3 ≥ 1, and X1 + X4 ≥ 1 d) X1 ≥ 1, and X2 + X3 + X4 ≤ 3 e) X1 + X2 + X3 + X4 ≥ 2 Ans: b Section Ref: Outcomes of Linear Programming Problems Level: hard

36. Consider a mathematical program where Xi represents the amount produced of item i (i = 1,2,3,4), and you want the total amount produced over all four items to equal either 100, 120, 140, or 200. If you define qi as binary (0-1) variables (i = 1,2,3,4) and add the constraint q1 + q2 + q3 + q4 = 1, what other constraint do you need to add to the program? a) 100q1 + 120q2 + 140q3 + 200q4 =560 b) X1 + X2 + X3 + X4 =560 c) X1 + X2 + X3 + X4 = 100q1 + 120q2 + 140q3 + 200q4 d) 100X1 + 120X2 + 140X3 + 200X4 = q1 + q2 + q3 + q4 e) X1 + X2 + X3 + X4 ≤ 200 Ans: c Section Ref: Outcomes of Linear Programming Problems Level: hard

37. Consider the mathematical program below. Which of the following choices represents an upper bound to the problem?

Max 10 – X2 Subject to X≥3 a) X = 10 b) X = 5 c) X = 3.5 d) X = -6 e) X = 0 Ans: e Section Ref: Outcomes of Linear Programming Problems Level: hard

38. What is the optimal solution (X, Y, Z) to the following linear program?

Max 2X + 4Y + 6Z Subject to Z≤0 X + Y + Z ≤ 20 X, Y, Z ≥ 0 a) (0, 0, 20) b) (20, 0, 0) c) (0, 20, 0) d) (20, 20, 20) e) the solution is unbounded Ans: c Section Ref: Algebraic Formulation Level: hard

39. Consider the following constraints from a two-variable Linear Program.

(1) X ≥ 0 (2) Y ≥ 0 (3) X + Y ≤ 50 If constraints (2) and (3) are binding, what is the optimal solution (X, Y)? a) (0, 0) b) (0, 50) c) (50, 0) d) (50, 50) e) not enough information is provided to answer the problem Ans: c Section Ref: Solver Solution Reports Level: hard

40. Uhura Enterprises provides consulting services for customers. Consultants are brought in for two-hour shifts. A consultant will spend one full hour with a customer. The customers remain for that hour and then leave. Each consultant is paid $25 per hour. Let Xi represent the number of consultants starting their shift at hour i, (i = 1,2,3,4). The firm wishes to minimize salary costs while satisfying demand. Customer demand is as follows.

1:00-2:00 4 2:00-3:00 5 3:00-4:00 10 4:00-5:00 4 5:00-6:00 8 What is the proper objective function? a) Min 4X1 + 5X2 + 10X3 + 4X4 b) Min 9X1 + 15X2 + 14X3 + 12X4 c) Max 9X1 + 15X2 + 14X3 + 12X4 d) Max 25X1 + 25X2 + 25X3 + 25X4 e) Min 50X1 + 50X2 + 50X3 + 50X4 Ans: e Section Ref: Outcomes of Linear Programming Problems Level: hard

41. Uhura Enterprises provides consulting services for customers. Consultants are brought in for two-hour shifts. A consultant will spend one full hour with a customer. The customers remain for that hour and then leaves. Each consultant is paid $25 per hour. Let Xi represent the number of consultants starting their shift at hour i, (i = 1,2,3,4). The firm wishes to minimize salary costs while satisfying demand. Customer demand is as follows.

1:00-2:00 4 2:00-3:00 5 3:00-4:00 10 4:00-5:00 4 5:00-6:00 8

Suppose that if consultants start shifts at both 1:00 and 2:00, then the firm will incur an additional fixed cost of $100 (for secretarial support). Let Y be a binary (0-1) variable that equals 1 if this event occurs, and 0 otherwise. Which of the following would “activate” Y (i.e., which would force Y to equal 1 when it is supposed to)? (In the options below, Y and qi are binary (0-1) variables.) a) X1 + X2 ≤ 5000Y b) X1 ≤ 5000Y and X2 ≤ 5000Y c) X1 + X2 ≥ 5000Y d) X1 + X2 ≥ Y e) X1 ≤ 5000q1 and X2 ≤ 5000q2 and q1 + q2 ≤ 1 + Y Ans: e Section Ref: Outcomes of Linear Programming Problems Level: hard

42. Uhura Enterprises provides consulting services for customers. Consultants are brought in for two-hour shifts. A consultant will spend one full hour with a customer. The customers remain for that hour and then leave. Each consultant is paid $25 per hour. Let Xi represent the number of consultants starting their shift at hour i, (i = 1,2,3,4). The firm wishes to minimize salary costs while satisfying demand. Customer demand is as follows.

1:00-2:00 4 2:00-3:00 5 3:00-4:00 10 4:00-5:00 4 5:00-6:00 8 Suppose that two of the customers scheduled to arrive at 1:00 could be rescheduled to arrive at 2:00. Which of the following sets of constraints would allow for this rescheduling option? (In the options below, q and qi are binary (0-1) variables.) a) X1 ≥ 4 and X2 ≥ 5 and X1 ≥ 2 and X2 ≥ 7 b) X1 ≥ 4 and X2 + X3 ≥ 15 and X1 ≥ 2 and X2 + X3 ≥ 17 c) 50X1 ≥ 4 and 50X2 + 50X3 ≥ 15 and 50X1 ≥ 2 and 50X2 + 50X3 ≥ 17 d) X1 ≥ 4 – 5000q and X2 + X3 ≥ 15 – 5000q and X1 ≥ 2 –5000(1-q) and X2 + X3 ≥ 17 –5000(1-q) e) X1 ≥ 4 + 5000q and X2 + X3 ≥ 15 + 5000q and X1 ≥ 2 + 5000(1-q) and X2 + X3 ≥ 17 + 5000(1-q) Ans: d Section Ref: Outcomes of Linear Programming Problems Level: hard

43. Consider the Linear Program below. Which of the choices represents the best (tightest) lower bound?

Max 2X + Y Subject to X + Y ≤ 10 X, Y ≥ 0 a) (∞, -∞) b) (-∞, -∞)

c) (0, 0) d) (5, 0) e) (25, 16) Ans: d Section Ref: Algebraic Formulation Level: hard

44. How can the following Linear Program be characterized?

Min X + 2Y Subject to X ≤ 20 Y≤5 X, Y ≥ -40 a) bounded and feasible b) unbounded and feasible c) bounded and infeasible d) unbounded and infeasible e) this is not a Linear Program Ans: a Section Ref: Outcomes of Linear Programming Problems Level: hard

45. How can the following Linear Program be characterized?

Min X + 2Y Subject to X ≤ 20 X, Y ≥ -40 a) bounded and feasible b) unbounded and feasible c) bounded and infeasible d) unbounded and infeasible e) this is not a Linear Program Ans: b Section Ref: Outcomes of Linear Programming Problems Level: hard

46. Consider the following constraints from a two-variable Linear Program.

(1) X ≥ 0 (2) Y ≥ 0 (3) X + Y ≤ 20 (4) 2X + 5Y ≤ 70 If constraints (3) and (4) are binding, what is the optimal solution (X, Y)?

a) (0, 20) b) (20, 0) c) (10, 10) d) (0, 14) e) (35, 0) Ans: c Section Ref: Solver Solution Reports Level: hard

47. Which of the following statements is correct? a) Given a Linear Program with a maximization objective, the optimal objective function value may increase if a ≥ constraint is added to the program. b) Given a Linear Program with a maximization objective, the optimal objective function value may increase if a ≤ constraint is added to the program. c) Given a Linear Program with a minimization objective, the optimal objective function value cannot increase if a ≥ constraint is added to the program. d) Given a Linear Program with a minimization objective, the optimal objective function value cannot increase if a ≤ constraint is added to the program. e) Given a Linear Program with a maximization objective, the optimal objective function value may decrease if a ≥ constraint is added to the program.

Ans: e Section Ref: Algebraic Formulations Level: hard

48. Consider the following three functions: g(x, y) = 4x – 9y2 h(x, y, z) = 13x + y + 3z -6 i(y, z) = z - y Which of the following is true regarding the linearity of the functions? a) none of the functions is linear b) all three functions are linear c) h is linear, but g and i are not linear d) i is linear, but g and h are not linear e) h and i are linear, but g is not linear Ans: e Section Ref: Algebraic Formulations Level: moderate

49. Consider the following constraints from a two-variable Linear Program.

(1) X ≥ 0 (2) Y ≥ 0 (3) 10X + 4Y ≤ 110

(4) 5X - Y ≤ 40 If constraints (3) and (4) are binding, what is the optimal solution (X, Y)? a) (11, 0) b) (0, 27.5) c) (0, -40) d) (9, 5) e) not enough information is provided to answer the problem Ans: d Section Ref: Solver Solution Reports Level: hard

50. For an optimization problem a(an) __________________ violates at least one of the constraints. a) infeasible solution b) inoptimal solution c) suboptimal solution d) unbounded solution e) simplex solution Ans: a Section Ref: Algebraic Formulations Level: easy

51. If the solution to an optimization problem violates two constraints but satisfies three, it is a(an) ________. a) suboptimal solution b) infeasible solution c) inoptimal solution d) unbounded solution e) simplex solution Ans: b Section Ref: Algebraic Formulations Level: easy

52. George Dantzig developed the ___________________ in 1947 to solve Linear Programs. a) Complex Method b) Multiplex Method c) Simplex Method d) Superplex Method e) Perplex Method Ans: c Section Ref: Algebraic Formulations

Level: easy

53. When was the Simplex Method developed? a) 1927 b) 1937 c) 1947 d) 1957 e) 1967 Ans: c Section Ref: Algebraic Formulations Level: hard

54. The two primary Excel tools for diagnosing problems in models are ___________________. a) Error Auditing and Formula Checking b) Error Auditing and Formula Auditing c) Error Checking and Formula Auditing d) Error Checking and Formula Checking e) Error Diagnosing and Formula Debugging Ans: c Section Ref: Solver Basics Level: hard

55. Which Excel tool provides solutions to Linear Programs? a) Solver b) Answer c) Simplexer d) Computer e) Goal Seek Ans: a Section Ref: Solver Basics Level: easy

56. What in Excel Solver corresponds to the objective function in the algebraic model? a) Optimization Cell b) Target Cell c) Changing Cell d) Constraint Cell e) Parameter Cell Ans: b

Section Ref: Solver Basics Level: moderate

57. What in Excel Solver corresponds to the decision variables in the algebraic model? a) Optimization Cells b) Target Cells c) Changing Cells d) Decision Cells e) Parameter Cells Ans: c Section Ref: Solver Basics Level: moderate

58. A constraint in Excel Solver consists of what three pieces of information? a) Target Cell, relationship operator, and Constraint b) Target Cell, Changing Cells, and Constraint c) Cell Reference, relationship operator, and Constraint d) Cell Reference, Changing Cells, and Constraint e) Target Cell, Changing Cells, and Cell Reference Ans: c Section Ref: Solver Basics Level: moderate

59. In the Excel Solver “Add Constraint” box, what two additional choices are available under the relationship operator list besides ≤, ≥, and =? a) gin and bin b) int and gin c) big and int d) inf and bin e) int and bin Ans: e Section Ref: Solver Basics Level: hard

60. In the “Solver Options” box of Excel Solver, what should be checked to ensure that all decision variables are ≥ 0? a) Assume Linear Model b) Use Automatic Scaling c) Assume Positive d) Assume Non-Negative

e) Assume Nonzero Ans: d Section Ref: Solver Basics Level: moderate

61. In the “Solver Options” box of Excel Solver, what should be checked to ensure that the Simplex Method is used to solve the model? a) Assume Non-Negative b) Use Automatic Scaling c) Newton d) Dantzig e) Assume Linear Model Ans: e Section Ref: Solver Basics Level: moderate

62. In the “Solver Parameters” box of Excel Solver, what is clicked to actually solve the problem? a) “GO” b) “OK” c) “SOLVE” d) “CLOSE” e) “START” Ans: c Section Ref: Solver Basics Level: moderate

63. Constraints at their limits at the optimal solution of a Linear Program, that is, with the lefthand-side value equal to the right-hand-side value, are called _________________________. a) equality constraints b) non-binding constraints c) binding constraints d) limiting constraints e) synergistic constraints Ans: c Section Ref: Interpreting the Solution Level: easy

64. Constraints that are not at their limits at the optimal solution of a Linear Program, that is, with the left-hand-side value not equal to the right-hand-side value, are called _________________________. a) inequality constraints b) non-binding constraints c) binding constraints d) limiting constraints e) shadow constraints Ans: b Section Ref: Interpreting the Solution Level: easy

65. To retain model flexibility while using Solver you must: a) use appropriate color codes b) enter specific values c) ensure the inputs and outputs are separated d) use only cell references e) use Slack Ans: d Section Ref: Interpreting the Solution Level: easy

66. At the optimal solution of a Linear Program, the difference between the right-hand-side value and the left-hand-side value of a constraint is the ____________________. a) shadow b) difference c) shortfall d) slack e) cushion Ans: d Section Ref: Solver Solution Reports Level: easy

67. Three reports are available when Solver has successfully found an optimal solution. These are _______. a) Answer Report, Sensitivity Report, and Limits Report b) Answer Report, Sensitivity Report, and Constraints Report c) Answer Report, Limits Report, and Constraints Report d) Solution Report, Sensitivity Report, and Limits Report e) Solution Report, Sensitivity Report, and Constraints Report Ans: a

Section Ref: Solver Solution Reports Level: moderate

68. The Answer Report Target Cell, Adjustable Cell, and Constraint sections all include: a) base value, original value b) original value, final value c) base value, final value d) original value, test value e) bounded value, un-bounded value Ans: b Section Ref: Solver Solution Reports Level: moderate

69. The ________________________ for a constraint is the amount the optimal objective value will change if the right-hand-side of the constraint is increased by one unit. a) Changing Price b) Opportunity Cost c) Shadow Price d) Opportunity Price e) Shadow Cost Ans: c Section Ref: Solver Solution Reports Level: easy

70. One use of the Answer report is: a) to develop the final answer. b) to duplicate the output results in a new form. c) as a debugging tool. d) as a duplication tool. e) as a results summary printout.

Ans: c Section Ref: Solver Solution Reports Level: moderate

71. What do you need to do before using Solver? a) take an Excel class b) enter solver settings into Excel c) define all constraints d) enter Solver options e) have a working, flexible spreadsheet model

Ans: e Section Ref: Solver Basics Level: moderate

True/False

72. In Linear Programming (LP) problems, all of the relationships among the variables are linear.

Ans: True Section Ref: Introduction Level: moderate

73. In Linear Programming, users have control over quantities called parameters.

Ans: False Section Ref: Introduction Level: moderate

74. The advantage of formal optimization modeling is that it can simultaneously consider the effects of alternate decisions to produce the best overall decision according to the objective.

Ans: True Section Ref: Introduction Level: moderate

75. The algebraic formulation of an optimization problem states the decision variables, objective function, and constraints in algebraic form.

Ans: True Section Ref: Algebraic Formulation Level: moderate

76. Strict inequalities (<, >) are not used in optimization problems.

Ans: True Section Ref: Algebraic Formulation Level: moderate

77. Not-equals-to constraints (≠) are allowable in optimization problems.

Ans: False Section Ref: Algebraic Formulation Level: moderate

78. The constraints in an optimization model must all be of one type, for example, all ≤, all ≥, or all =.

Ans: False Section Ref: Algebraic Formulation Level: moderate

79. All mathematical programs should include non-negativity constraints.

Ans: False Section Ref: Algebraic Formulation Level: hard

80. Given a Linear Program with a minimization objective, the optimal objective function value may decrease if a ≥ constraint is added to the program.

Ans: False Section Ref: Algebraic Formulation Level: hard

81. A feasible solution to an optimization problem is a particular combination of decision variables that satisfies some of the constraints.

Ans: False Section Ref: Algebraic Formulation Level: moderate

82. The optimal solution to an optimization problem is the feasible solution with the largest (for a “min” problem) objective function value.

Ans: False Section Ref: Algebraic Formulation Level: moderate

83. An optimal solution to an optimization problem is always feasible.

Ans: True Section Ref: Algebraic Formulation Level: moderate

84. George Dantzig developed the Simplex Method in 1947.

Ans: True Section Ref: Algebraic Formulation Level: hard

85. There is no single way to set up a Linear Program in a spreadsheet.

Ans: True Section Ref: Spreadsheet Model Development Level: moderate

86. In Excel Solver, the Decision Cells correspond to the decision variables in the algebraic model.

Ans: False Section Ref: Setting Up and Running Solver Level: moderate

87. In Excel Solver, the Target Cell corresponds to the objective function in the algebraic model.

Ans: True Section Ref: Setting Up and Running Solver Level: moderate

88. The four steps to setting up an optimization problem with Excel Solver are easy if you have previously completed the algebraic formulation and spreadsheet model.

Ans: True Section Ref: Setting Up and Running Solver Level: moderate

89. Excel Solver restricts the constraints to either >= or =.

Ans: False Section Ref: Setting Up and Running Solver Level: easy

90. With Excel Solver, the Target Cell can contain either a formula or a value.

Ans: False Section Ref: Setting Up and Running Solver Level: hard

91. With Excel Solver, the range for the Changing Cells box must be entered with absolute references ($ signs).

Ans: False Section Ref: Setting Up and Running Solver Level: moderate

92. If all constraints are not fully consumed, the final result is not an optimal solution.

Ans: False Section Ref: Interpreting the Solution Level: easy

93. Slack values for non-binding constraints are equal to 0.

Ans: False Section Ref: Solver Solution Reports Level: hard

94. When an LP is solved, there is only one possible outcome.

Ans: False Section Ref: Outcomes of Linear Programming Problems Level: moderate

95. Solver’s check for a model being linear is not perfect.

Ans: True Section Ref: Outcomes of Linear Programming Problems Level: easy

96. Sensitivity reports show what will happen if certain problem parameters are changed from their current values.

Ans: True Section Ref: Solver Solution Reports Level: easy

Essay

97. Describe the primary advantage of optimization modeling.

Ans: It can simultaneously consider the effects of alternate decisions to produce the best overall decision according to the objective.

Section Ref: Introduction Level: hard

98. What are the steps involved in solving optimization problems?

Ans: (1) Understand the problem, perhaps by drawing a diagram which represents the problem.

(2) Write a problem formulation in words, including decision variables, objective function, and constraints. (3) Write the algebraic formulation of the problem, including (a) defining the decision variables, (b) writing the objective function, and (c) writing the constraints. (4) Develop a spreadsheet model. (5) Set up the Solver settings and solve the problem. (6) Examine the results and make corrections to the model. (7) Analyze and interpret the results.

Section Ref: Introduction Level: hard

99. Explain what differentiates a Linear Program from a Nonlinear Program.

Ans: All of the relationships among the decision variables are linear. In other words, combinations of variables can be added (subtracted) to (from) one another, but there are no nonlinear expressions involving variables, such as C2, G/C, or C .

Section Ref: Algebraic Formulation Level: hard

100. Define feasible solution, infeasible solution, and optimal solution.

Ans: A feasible solution is a particular combination of decision variables that satisfies all of the constraints. An infeasible solution violates at least one of the constraints. The optimal solution is the feasible solution with the largest (for a “max” problem) or smallest (for a “min” function) objective function value.

Section Ref: Algebraic Formulation Level: moderate

101. Describe guidelines for spreadsheet model development.

Ans: (1) Develop a correct, flexible, and documented model. (2) Divide the worksheet into three sections: one for the decision variables, one for the objective function, and one for the constraints. (3) Use the algebraic formulation and the natural structure of the problem to guide the structure of the spreadsheet. (4) Use one cell for each decision variable. (5) Store the coefficients of the objective function in separate cells, and use another cell to store a formula that calculates the value of the objective function (by referring to the decision variable cells and the coefficient cells). (6) Likewise, store the coefficients of the constraints in cells, and write formulas to compute the “left-hand-side” value of each constraint. Then store the “right-hand-side” value of each constraint next to this formula for easy comparison.

Section Ref: Spreadsheet Model Development Level: hard

102. What are the four steps to setting up an optimization problem with Excel Solver?

Ans: (1) Specify the Target Cell (corresponds to the objective function in the algebraic model).

(2) Specify the Changing Cells (corresponds to the decision variables in the algebraic model). (3) Specify the constraints. (4) Specify Solver Options.

Section Ref: Setting Up and Running Solver Level: hard

103. A constraint in Excel Solver consists of what three pieces of information?

Ans: (1) Cell Reference, (2) relationship operator, and (3) Constraint Section Ref: Setting Up and Running Solver Level: moderate

104. After running a Linear Program in Excel Solver, what message do you hope to see in the “Solver Results” box?

Ans: “Solver found a solution. All constraints and optimality conditions are satisfied.”

Section Ref: Interpreting the Solution Level: hard

105. What are the three reports available when Solver has successfully found an optimal solution?

Ans: (1) Answer Report, (2) Sensitivity Report, and (3) Limits Report Section Ref: Solver Solution Reports Level: moderate

106. Discuss how the Solver Sensitivity Report is fundamentally different than the other reports.

Ans: The Sensitivity report contains information that is not directly available in the spreadsheet model. The report provides information on what will happen when certain changes are made to the model.

Section Ref: Solver Solution Reports Level: moderate

107. When is a Linear Program unbounded?

Ans: Being unbounded means that the objective value can increase (for a maximization problem) or decrease (for a minimization problem) without bound, that is, without ever running into a constraint.

Section Ref: Outcomes of Linear Programming Problems Level: moderate

108. Describe what steps one should use if the Solver Results box says, “The conditions for Assume Linear Model are not satisfied”?

Ans: You should verify that the problem is linear, make sure all spreadsheet formulas involving variables are linear, or try to solve the model again to correct the message.

Section Ref: Outcomes of Linear Programming Problems Level: moderate

Problems

109. Formulate the following as a linear programming problem.

The Ski Company makes skis and snowboards. They are currently planning their operations for October-December, and have just an exclusive signed contracts to sell up to 4,000 pairs of skis and as many snowboards as they can make, to a company that owns several sporting goods stores. The profit that Ski will make is $53 for each pair of skis and $67 for each snowboard. Every pair of skis will require 7 hours from Department A and 12 hours from Department B. Every snowboard will require 5 hours from Department A and 19 hours from Department B. The total hours planned for October-December is 44,535 hours in Department A and 93,217 hours in Department B. Ans: Let x1 = number of pairs of skis and x2 = number of snowboards.

Max 53x1 + 67x2 Subject to x1 > 0, x2 > 0 x1 < 4,000 7x1 + 5x2 < 44,535 12x1 + 19x2 < 93,217 Section Ref: Outcomes of Linear Programming Problems Level: moderate

110. Formulate the following as a linear programming problem.

Jan lives in the country and is having a garage sale tomorrow. She has decided to sell some fresh baked goods in conjunction with the sale. She has excellent recipes for apple pie and for apple turnovers. She has 20.83 pounds of apples. Each pie will require 1.6 pounds of apples and each turnover will require 0.22 pounds of apples. She has discovered that she is short of both flour and sugar and does not want to make another trip to the store tonight. She has 5.7 pounds of flour and 200 grams of sugar. Each pie will require 0.6 pounds of flour and 11 grams of sugar. Each turnover will require .02 pounds of flour and 3 grams of sugar.

She will sell pies for $6 each and turnovers for $0.75 each. She has decided to make 8 pies at most, because she is concerned about how well they will sell.

Ans: Let x1 = number of apple pies and x2 = number of apple turnovers Max 6x1 + 0.75x2 subject to x1 > 0, x2 > 0 x1 < 8 1.6 x1 + 0.22 x2 < 20.83 0.6 x1 + 0.02 x2 < 5.7 11 x1 + 3 x2 < 200 Section Ref: Outcomes of Linear Programming Problems Level: moderate

111. Formulate the following as a linear program.

Joe’s Sports Shop is sponsoring a weekly boomerang-throwing contest as part of its spring promotions. Anyone may enter, but the boomerangs used must be purchased at the shop.

Demand is unlimited. Two models can be made: the regular model (with a profit of $2 each) and the super model (which yields a $5 profit). However, production facilities are limited. A regular boomerang requires 1 hour of carving and 2 hours of finishing, while a

super boomerang takes 3 hours to carve and 2 hours to finish. The skilled crafters employed by the shop have indicated they will spend no more than 75 hours carving and 100 hours finishing boomerangs per week. The owner wishes to allocate production in order to maximize profits.

Ans: Let R = # of regular models produced Let S = # of super models produced Max 2R + 5S Subject to R + 3S ≤ 75 2R + 2S ≤ 100 R, S ≥ 0 Section Ref: Algebraic Formulation Level: moderate

112. Formulate the following as a linear program.

Frank’s art class must provide instructions on painting (P), carving (C), and clay modeling (M). Frank has a limited material budget of $3,000. The costs per student usage for the supplies are $25, $18, and $14, respectively. Frank must provide instruction and practice opportunities for each method. What is the optimum combination of art supplies Frank should procure for the class?

Ans: Let P = painting, C = carving and M = clay modeling Max P + C + M Subject to 25P + 18C + 14M <=3000 (dollars, $) P, C, M >= 0 Section Ref: Outcomes of Linear Programming Problems Level: moderate

113. Formulate the following as a linear program.

Dane’s aircraft muffler manufacturers have 1000 linear feet of steel on hand to manufacture the three top selling muffler sets. Super mufflers (S) provide $35 profit and common (C) mufflers’ profit margin is $31, while the deluxe (D) muffler set provides a $40 profit margin. It takes 31 hours to make the super muffler, 29 hours to manufacture the common muffler, and 40 hours to build the deluxe muffler. If Dane is limited to 200 hours a month what is the optimum combination of mufflers to manufacture to maximize his profits?

Ans: Let S –=supper muffler, C = common muffler and D = deluxe muffler Max 35S + 31C + 40 D Subject to 31S + 29C + 40D <= 200 (dollars, $) S, C, D >= 0 Section Ref: Outcomes of Linear Programming Problems Level: moderate

114. HEAVY, Inc. produces two lines of heavy equipment, earthmoving and forestry. The largest member of the earthmoving equipment line (the E-7) and the largest member of the forestry equipment line (the F-7) are produced in the same departments and with the same equipment. HEAVY’s marketing manager has judged that the firm will be able to sell as many E-7s or F-7s as the firm can produce. The contribution margins are $15,000 for each E-7 and $14,000 for each F-7. There are 170 hours available in department A and 185 hours available in department B. Each E-7 produced uses 10 hours in department A and 20 hours in department B. Each F-7 uses 15 hours in department A and 10 hours in department B. Furthermore, in order to maintain the current market position, senior management has decreed that it is necessary to build at least one F-7 for every three E-7s produced. Finally, a major dealer has ordered a total of at least five E-7s and F-7s (in any combination) for next month, so at least that many must be produced. Formulate a Linear Program to determine the best production policy for next month.

Ans: Let E = # of E-7s produced Let F = # of F-7s produced Max 15,000E + 14,000F Subject to 10E + 15F ≤ 170 20E + 10F ≤ 185 3F ≥ E E+F≥5 E,F ≥ 0 Section Ref: Outcomes of Linear Programming Problems Level: hard

115. The Village Butcher Shop traditionally makes its meat loaf from a combination of lean ground beef and ground pork. The ground beef contains 80 percent meat and 20 percent fat, and costs the shop 80 cents per pound; the ground pork contains 68 percent meat and 32 percent fat, and costs 60 cents per pound. Formulate a linear program to determine the amount each kind of meat that the shop should use in each pound of meat loaf if it wants to minimize its cost and to keep the fat content of the meat loaf to no more than 25 percent.

Ans: Let B = the pounds of ground beef used in each pound of meat loaf Let P = the pounds of ground pork used in each pound of meat loaf Min 80B + 60P Subject to 0.20B + 0.32P <= 0.25 B+P=1 B, P >= 0 Section Ref: Outcomes of Linear Programming Problems Level: hard

116. The management at Highly Technical Services (HTS) wants to develop a model that will help allocate technicians’ time between service calls to government contract customers, private industry contract customers, and new customers. A maximum of 80 hours of technician time is

available over the 2-week planning period. To satisfy cash-flow requirements, at least $1000 in revenue (per technician) must be generated during the 2-week period. Technician time for government customers generates $40 per hour, while time for private industry customers generates $30 per hour, and technician time for new customers only generates an average of $5 per hour because in many cases a new customer contact does not provide billable services. To ensure that the new customer contacts are being maintained, the number of new customer contacts must be at least 45% of the government and private industry contract contacts. For the revenue and policy requirements stated, HTS would like to determine how to allocate technician time between regular customers and new customers in order to maximize the total number of customers contacted during the 2-week period. Technicians require an average of 45 minutes for each contract contact and 1 hour for each new customer contact. Develop a linear programming model that will enable HTS to optimally allocate technician time between regular customers and new customers.

Ans: Let Xn = the number of hours spent on new customers Let Xg = the number of hours spent on government contract customers Let Xp = the number of hours spent on private industry contract customers Max Xn + 1.333Xg + 1.333Xp Subject to Xn + Xg + Xp <= 80 (no more than 80 hrs of time) Xn − .6Xg − .6Xp >= 0 (at least 45% of contacts are new customers) 5Xn + 40Xg + 30Xp >= 1000 (make at least $1000 in revenue) Xn, Xg, Xp >= 0 (non-negativity constraints) Section Ref: Outcomes of Linear Programming Problems Level: hard

117. Car Phones, Inc. (CP), sells two models of cell phones: Model A and Model B. Records show that 3 hours of sales time are used for each Model A cell phone that is sold and 5 hours of sales time for each Model B telephone. A total of 600 hours of sales time is available for the next 4-week period. In addition, management planning policies call for minimum sales goals of 100 units for Model A and 80 units for Model B. Furthermore, the number of phones that CP makes is limited by its critical process, the plastic injection molding machine, which can produce a maximum of 1500 phones per 4-week period. CP makes a $40 profit contribution for each Model A sold and a $50 profit contribution for each Model B sold. Formulate a Linear Program that can be used to determine the optimal production amounts CP for the next 4-week period.

Ans: Let A = the number of A-model phones produced Let B = the number of B-model phones produced Max 40A + 50B Subject to 3A + 5B <= 600 (no more than 600 sales hours) A + B <= 1500 (no more than 1500 phones) A >= 100 (at least 100 units of A) B >= 80 (at least 80 units of B) A, B >= 0 (non-negativity constraints) Section Ref: Outcomes of Linear Programming Problems Level: moderate

118. A caterer must prepare from five fruit drinks in stock exactly 500 gallons of a punch containing at least 20% orange juice, 10% grapefruit juice, and 5% cranberry juice. If inventory data are as shown below, formulate a linear program that can be used to determine the optimal quantity of each fruit drink that the caterer should use to obtain the required composition at minimum total cost.

Orange Grapefruit Cranberry Supply, Cost Juice, Juice, (%) Juice, (%) (gallons) ($ per gal.) (%) Drink 40 40 0 200 1.50 A Drink B 5 10 20 400 0.75 Drink C 100 0 0 100 2.00 Drink 0 100 0 50 1.75 D Drink E 0 0 5 800 0.25 Ans: Let A = the number of gallons of drink A to use B = the number of gallons of drink B to use C = the number of gallons of drink C to use D = the number of gallons of drink D to use E = the number of gallons of drink E to use Min 1.50A + .75B + 2.00C + 1.75D + .25E Subject to A + B + C + D + E = 500 (produce 500 gal. punch) .4A + .05B + C >= 100 (at least 100 gal. OJ) .4A + .1B + D >= 50 (at least 50 gal. GJ) .2B + .05E >= 25 (at least 25 gal. CJ) A <= 200 (inventory of drink A) B <= 400 (inventory of drink B) C <= 100 (inventory of drink C) D <= 50 (inventory of drink D) E <= 800 (inventory of drink E) A, B, C, D, E >= 0 (non-negativity constraints) Section Ref: Outcomes of Linear Programming Problems Level: hard

119. A leather goods factory manufactures five styles of handbags, whose variable contributions are $30, $40, $45, $25, and $60 per dozen, respectively. The products must pass through four work centers and the man-hours available in each are: clicking (700), paring (600), stitching (400), and finishing (900). Hourly requirements for each dozen handbags are: Style Click Pare Stitch Finish 341 3 8 2 6 262 4 3 1 0 43 2 2 0 2 784 2 1 3 4 5-A 5 4 4 3 To prevent adding to inventory levels already on hand, the production manager, after reviewing the weekly sales forecasts, has specified that no more than 100, 50, 90, 70, and 30 dozen of each

style respectively may be produced. Each handbag is made from five materials as specified in the following table: Style Leather Fabric Backing Lining Accessories 341 0 1 4 2 3 262 4 0 7 4 4 43 5 7 6 2 0 784 6 4 1 1 2 5-A 2 3 3 0 4 Total Available: 300 400 1000 900 1600 Formulate a linear program to determine the production policy that will maximize profits.

Ans: Let A = the number of style 341 made (in dozens) Let B = the number of style 262 made (in dozens) Let C = the number of style 43 made (in dozens) Let D = the number of style 784 made (in dozens) Let E = the number of style 5-A made (in dozens) Max 30A+ 40B + 45C + 25D + 60E Subject to 3A + 4B + 2C + 2D + 5E <= 700 (clicking production limit) 8A + 3B + 2C + D + 4E <= 600 (paring production limit) 2A + B + 3D + 4E <= 400 (stitching production limit) 6A + 2C + 4D + 3E <= 900 (finishing production limit) 4B + 5C + 6D + 2E <= 300 (leather materials limit) A + 7C + 4D + 3E <= 400 (fabric materials limit) 4A + 7B + 6C + D + 3E <= 1000 (backing materials limit) 2A + 4B + 2C + D <= 900 (lining materials limit) 3A + 4B + 2D + 4E <= 1600 (accessories materials limit) A <= 100 (manager’s maximum for A) B <= 50 (manager’s maximum for B) C <= 90 (manager’s maximum for C) D <= 70 (manager’s maximum for D) E <= 30 (manager’s maximum for E) A, B, C, D, E >= 0 (non-negativity constraints) Section Ref: Outcomes of Linear Programming Problems Level: hard

120. A portfolio manager in charge of a bank portfolio has $10 million to invest. The securities available for purchase, as well as their respective quality ratings, maturities, and yields, are shown in the table below: Quality Scales Bond Years to Yield to After-tax Bond Type Name Maturity Maturity yield Moody’s Bank’s A Municipal AA 2 9 4.3% 4.3% B Agency AA 2 15 5.4 2.7 C Government AAA 1 4 5.0 2.5 D Government AAA 1 3 4.4 2.2 E Municipal BA 5 2 4.5 4.5 The bank places the following policy limitations on the portfolio manager’s actions: 1. Government and agency bonds must total at least $4 million.

2. The average quality of the portfolio cannot exceed 1.4 on the bank’s quality scale. (Note that a low number on this scale means a high-quality bond.)

3. The average years to maturity of the portfolio must not exceed 5 years.

Assuming that the objective of the portfolio manager is to maximize after-tax earnings and that the tax rate is 50%, formulate a linear program that can be used to determine how much money to invest in each type of bond.

Ans: Let A = millions of dollars invested in bond type A Let B = millions of dollars invested in bond type B Let C = millions of dollars invested in bond type C Let D = millions of dollars invested in bond type D Let E = millions of dollars invested in bond type E Max .043A + .027B + .025C + .022D + .045E Subject to A + B + C + D + E <= 10 (max. of $10 million to invest) B + C + D >= 4 (policy #1: min. government and agency bonds) 0.6A + 0.6B − 0.4C − 0.4D + 3.6E <= 0 (policy #2: quality) 4A + 10B − C − 2D − 3E <= 0 (policy #3: maturity) A, B, C, D, E  0 (non-negativity constraints) Section Ref: Outcomes of Linear Programming Problems Level: hard

Short Answer

121. _________ are limitations or requirements that must be satisfied.

Ans: Constraints Section Ref: Introduction Level: easy

122. Constrained optimization models can be used to either ____________ or ___________ some quantity based on a set of constraints Ans: maximize, minimize Section Ref: Introduction Level: moderate

123. The process of thinking about a problem in a structured way often leads to ________ to making a better decision.

Ans: Base insights Section Ref: Introduction Level: easy

124. One step in solving optimization problems is to write a problem _______________ in words.

Ans: formulation Section Ref: Introduction Level: moderate

125. A formulation is a formal, ____________ statement of a constrained optimization problem Ans: algebraic Section Ref: Algebraic Formulation Level: easy

126. The basic idea for optimization of problems is to find the values of __________ variables that ____________ (minimize) the objective function value, while staying within the _________ .

Ans: decision, maximize, constraints Section Ref: Introduction Level: moderate

127. It is good practice to ____________ the units and the __________ represented by objective function.

Ans: include, quantities Section Ref: Algebraic Formulation Level: moderate

128. A specific combination of values of the decision variables such that at least one of the constraints is violated results in a(n) ______________________.

Ans: infeasible solution Section Ref: Algebraic Formulation Level: easy

129. The value of the constraint expression to the left of the ≤, ≥, or = signs is __________.

Ans: LHS

Section Ref: Spreadsheet Model Development Level: easy

130. Excel’s Solver Add-In solves _____________ problems.

Ans: optimization Section Ref: Setting Up and Running Solver Level: moderate

131. In Solver, the __________ is the cell that you want to maximize or minimize.

Ans: Target Cell Section Ref: Setting Up and Running Solver Level: moderate

132. Solver’s Changing Cells corresponds to the ________ in the algebraic model.

Ans: decision variables Section Ref: Setting Up and Running Solver Level: moderate

133. It is possible to solve a 2-variable problem with a __________________ to find an optimal solution.

Ans: graphical approach Section Ref: Outcomes of Linear Programming Problems Level: hard

File: supC, Supplement C: Waiting Line Models

Multiple Choice

1. Which of the following is not considered to be an element of a waiting line system? a) the average amount of time customers spend waitingthe priorities used for controlling the line b) the customer population source c) the service system d) the arrival and service patterns e) the average amount of time customers spend waitingthe priorities used for controlling the line

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Ans: ae Section Ref: Elements of Waiting Lines Level: moderate

2. One challenge in designing waiting lines is to obtain service systems with _______ but not ______ amounts of capacity. a) adequate, excessive b) adequate, expensive c) low cost, cheap d) justifiable, noticeable e) infinite, excessive

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Ans: a Section Ref: Elements of Waiting Lines Level: moderate

3. Which of the following is not considered to be an element of a waiting line system? a) the customer population source b) the average number of customers waiting in linethe service system c) the average number of customers waiting in linethe service system d) the arrival and service patterns e) the priorities used for controlling the line

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Ans: bc Section Ref: Elements of Waiting Lines Level: moderate

4. Which of the following is not considered to be an element of a waiting line system? a) the customer population source b) the service system

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c) the average number of customers in the system d) the arrival and service patterns e) the priorities used for controlling the line Ans: c Section Ref: Elements of Waiting Lines Level: moderate

5. Which of the following is not considered to be an element of a waiting line system? a) the customer population source b) the service system c) the arrival and service patterns d) the average amount of time a customer spends in the system e) the priorities used for controlling the line

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Ans: d Section Ref: Elements of Waiting Lines Level: moderate

6. Which of the following is not considered to be an element of a waiting line system? a) the customer population source b) the service system c) the arrival and service patterns d) the priorities used for controlling the line e) the system utilization rate Ans: e Section Ref: Elements of Waiting Lines Level: moderate

7. A customer population is called _______________ when the number of potential new customers is affected by the number of customers already in the system. a) finite b) infinite c) dependent d) independent e) biased Ans: a Section Ref: Elements of Waiting Lines Level: easy

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8. A customer population is called _______________ when the number of potential new customers is not affected by the number of customers already in the system. a) finite b) infinite c) dependent d) independent e) unbiased

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Ans: b Section Ref: Elements of Waiting Lines Level: easy

9. Which of the following is least likely to be considered an infinite customer population? a) customers in an amusement park b) a class of 500 students who might visit their professor during office hours c) a class of 10 students who might visit their professor during office hours d) customers in a grocery store e) cars taking Exit 76 off of a freeway during rush hour

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Ans: c Section Ref: Elements of Waiting Lines Level: moderate

10. Which of the following is least likely to be considered an infinite customer population? a) customers in an amusement park b) a class of 500 students who might visit their professor during office hours c) customers in a grocery store d) planes waiting to take off at an airport e) cars taking Exit 76 off of a freeway during rush hour

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Ans: d Section Ref: Elements of Waiting Lines Level: moderate

11. Which of the following is least likely to be considered an infinite customer population? a) customers in an amusement park b) a class of 500 students who might visit their professor during office hours c) customers in a grocery store d) cars taking Exit 76 off of a freeway during rush hour e) fast food restaurant employees waiting to use the restroom Ans: e Section Ref: Elements of Waiting Lines Level: moderate

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12. Which of the following is least likely to be considered an infinite customer population? a) subassemblies in a just-in-time manufacturing environment b) customers in an amusement park c) a class of 500 students who might visit their professor during office hours d) customers in a grocery store e) cars taking Exit 76 off of a freeway during rush hour

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Ans: a Section Ref: Elements of Waiting Lines Level: moderate

13. Which of the following is least likely to be considered a finite customer population? a) subassemblies in a just-in-time manufacturing environment b) customers in an amusement park c) fast food restaurant employees waiting to use the restroom d) planes waiting to take off at an airport e) a class of 10 students who might visit their professor during office hours

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Ans: b Section Ref: Elements of Waiting Lines Level: moderate

14. Which of the following is least likely to be considered a finite customer population? a) subassemblies in a just-in-time manufacturing environment b) fast food restaurant employees waiting to use the restroom c) a class of 500 students who might visit their professor during office hours d) planes waiting to take off at an airport e) a class of 10 students who might visit their professor during office hours

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Ans: c Section Ref: Elements of Waiting Lines Level: moderate

15. Which of the following is least likely to be considered a finite customer population? a) subassemblies in a just-in-time manufacturing environment b) fast food restaurant employees waiting to use the restroom c) planes waiting to take off at an airport d) customers in a grocery store e) a class of 10 students who might visit their professor during office hours Ans: d Section Ref: Elements of Waiting Lines Level: moderate

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16. Which of the following is least likely to be considered a finite customer population? a) subassemblies in a just-in-time manufacturing environment b) fast food restaurant employees waiting to use the restroom c) planes waiting to take off at an airport d) a class of 10 students who might visit their professor during office hours e) cars taking Exit 76 off of a freeway during rush hour

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Ans: e Section Ref: Elements of Waiting Lines Level: moderate

17. What occurs when a customer decides not to enter the waiting line? a) balkingvacillating b) walking c) reneging d) balkingvacillating e) jockeying Ans: ad Section Ref: Elements of Waiting Lines Level: easy

18. What occurs when a customer enters a waiting line but decides to exit before being served? a) balking b) walking c) reneging d) vacillating e) jockeying Ans: c Section Ref: Elements of Waiting Lines Level: easy

19. What occurs when a customer enters one line and then switches to a different line in an effort to reduce his or her waiting time? a) balking b) walking c) reneging d) vacillating e) jockeying Ans: e

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Section Ref: Elements of Waiting Lines Level: easy

20. A single-line, multiple-server system has _____ ______ in terms of waiting times than the same system with a line for each server. a) poorer performance b) similar performance c) better performance d) comparable performance e) reduced performance Ans: c Section Ref: Elements of Waiting Lines Level: easy

21. Which of the following is not one of the characteristics that define a service system? a) the number of customers b) the number of waiting lines c) the number of servers d) the arrival and service patterns e) the service priority rules Ans: a Section Ref: Elements of Waiting Lines Level: moderate

22. In waiting line terminology, what is another name for server? a) clerk b) channel c) host d) concierge e) provider Ans: b Section Ref: Elements of Waiting Lines Level: moderate

23. System server capacity is a function of ______ and _______. a) phase, lines b) time, lighting c) facilities, management d) facilities, proficiency e) utilization, proficiency

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Ans: d Section Ref: Elements of Waiting Lines Level: moderate

24. Services require a single activity or a series of activities and are identified by what term? a) round b) step c) phase d) activity set e) facet Answer: c Section Ref: Elements of Waiting Lines Level: moderate

25. Which of the following waiting line systems best describes a drive-through car wash? a) single-server, single-phase b) single-server, multi-phase c) multi-server, single-line, single-phase d) multi-server, multi-line, single-phase e) multi-server, multi-phase Ans: a Section Ref: Elements of Waiting Lines Level: hard

26. If only two cars can physically fit between the ordering and pay window of a fast-food drivethrough, the waiting line system has a ____ _____ waiting line. a) constrained server b) finite size c) infinite size d) multi-phase e) single service Ans: b Section Ref: Elements of Waiting Lines Level: easy

27. Which of the following waiting line systems best describes a drive-through service at a fastfood restaurant, where the order is placed at the first service point, the order is paid for at the second service point, and the food is picked up at the third service point? a) single-server, single-phase

b) single-server, multi-phase c) multi-server, single-line, single-phase d) multi-server, multi-line, single-phase e) multi-server, multi-phase Ans: b Section Ref: Elements of Waiting Lines Level: hard

28. Which of the following waiting line systems best describes a bank with a single waiting line that feeds customers to multiple identical servers? a) single-server, single-phase b) single-server, multi-phase c) multi-server, single-line, single-phase d) multi-server, multi-line, single-phase e) multi-server, multi-phase Ans: c Section Ref: Elements of Waiting Lines Level: hard

29. Which of the following waiting line systems best describes a grocery store, where each register has its own line and server? a) single-server, single-phase b) single-server, multi-phase c) multi-server, single-line, single-phase d) multi-server, multi-line, single-phase e) multi-server, multi-phase Ans: d Section Ref: Elements of Waiting Lines Level: hard

30. Which of the following waiting line systems best describes a men’s clothing store, where one of the sales clerks first assists the customer in selecting the material and style and then one of the tailors measures the customer to ensure a custom-fitted suit? a) single-server, single-phase b) multi-server, multi-phasesingle-server, multi-phase c) multi-server, single-line, single-phase d) multi-server, multi-line, single-phase e) multi-server, multi-phasesingle-server, multi-phase Ans: be Section Ref: Elements of Waiting Lines Level: hard

31. Waiting line models typically assume that customer arrival rates are represented by what distribution? a) Poisson b) Gaussian c) Weibull d) Cauchy e) exponential Ans: a Section Ref: Elements of Waiting Lines Level: moderate

32. Waiting line models typically assume that service times are represented by what distribution? a) Poisson b) normal c) Weibull d) exponentialhypergeometric e) exponentialhypergeometric Ans: ed Section Ref: Elements of Waiting Lines Level: moderate

33. In a well designed waiting line system it is the variability in _____ and ______ patterns that causes waiting lines. a) server, customer b) poisson, exponential c) arrival, service d) arrival, poisson e) service, exponential Ans: c Section Ref: Elements of Waiting Lines Level: moderate

34. When calculating waiting line metrics you must ensure that the arrival rate and service rate are: a) for the same day. b) for the same probability. c) for the same site. d) for the same time period. e) for the same utilization factor.

Ans: d Section Ref: Elements of Waiting Lines Level: moderate

35. Customers generally consider which of the following priority rules to be the fairest? a) quickest service requirements first b) longest service requirements first c) first-come, first-served d) best customers first e) highest profit customer first Ans: c Section Ref: Elements of Waiting Lines Level: easy

36. For which of the following priority rules are the customers waiting times most likely to be proportional to their respective service times? a) quickest service requirements firstfirst come, first served b) longest service requirements first c) quickest service requirements firstfirst-come, first-served d) best customers first e) emergencies first

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Ans: ac Section Ref: Elements of Waiting Lines Level: hard

37. Which of the following is not considered to be a valid performance measure of a waiting line system? a) the average number of customers waiting in line b) the customer population source c) the average number of customers in the system d) the average amount of time customers spend waiting e) the system utilization rate

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Ans: b Section Ref: Waiting Line Performance Measures Level: easy

38. A short waiting line may result from all of the following except: a) constant customer arrivals. b) excess capacity.

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c) exceptional server efficiency. d) demand surges. e) a properly designed system.

Ans: d Section Ref: Waiting Line Performance Measures Level: easy

39. Which of the following is not considered to be a valid performance measure of a waiting line system? a) the average number of customers waiting in line b) the average number of customers in the system c) the service system d) the average amount of time customers spend waiting e) the system utilization rate

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Ans: c Section Ref: Waiting Line Performance Measures Level: easy

40. Which of the following is not considered to be a valid performance measure of a waiting line system? a) the average number of customers waiting in line b) the average number of customers in the system c) the average amount of time customers spend waiting d) the arrival pattern e) the system utilization rate

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Ans: d Section Ref: Waiting Line Performance Measures Level: easy

41. Which of the following is not considered to be a valid performance measure of a waiting line system? a) the average number of customers waiting in line b) the average number of customers in the system c) the average amount of time customers spend waiting d) the system utilization rate e) the service pattern Ans: e Section Ref: Waiting Line Performance Measures Level: easy

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42. The average time customers spend waiting and the average time a customer spends in the system: a) are the same metric. b) use the same formula. c) are not considered. d) are different system metrics. e) only apply to multi-server systems.

Ans: d Section Ref: Waiting Line Performance Measures Level: easy

43. Which of the following is not considered to be a valid performance measure of a waiting line system? a) the priority used for controlling the line b) the average number of customers waiting in line c) the average number of customers in the system d) the average amount of time customers spend waiting e) the system utilization rate

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Ans: a Section Ref: Waiting Line Performance Measures Level: easy

44. Which of the following is not an assumption of the waiting line models presented in the textbook? a) the customers are patient b) customers come from a finite population c) customer arrival rate is described by a Poisson distribution d) service times are described by an exponential distribution e) the waiting line priority rule is first-come, first-served

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Ans: b Section Ref: Waiting Line Performance Measures Level: moderate

45. Which of the following is not an assumption of the waiting line models presented in the textbook? a) the customers are patient b) customers come from an infinite population c) customer arrival rate is described by a Gaussian distribution d) service times are described by an exponential distribution e) the waiting line priority rule is first-come, first-served

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Ans: c Section Ref: Waiting Line Performance Measures Level: moderate

46. Which of the following is not an assumption of the waiting line models presented in the textbook? a) the customers are patient b) customers come from an infinite population c) customer arrival rate is described by a Poisson distribution d) service times are described by a Normal distribution e) the waiting line priority rule is first-come, first-served

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Ans: d Section Ref: Waiting Line Performance Measures Level: moderate

47. Which of the following is not an assumption of the waiting line models presented in the textbook? a) the customers are patient b) customers come from an infinite population c) customer arrival rate is described by a Poisson distribution d) service times are described by an exponential distribution e) the waiting line priority rule is quickest service requirements first

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Ans: e Section Ref: Waiting Line Performance Measures Level: moderate

48. Which of the following is not an assumption of the waiting line models presented in the textbook? a) the customers are patient b) customers come from an infinite population c) customer arrival rate is described by a Poisson distribution d) service times are described by an exponential distribution e) the waiting line priority rule is longest service requirements first

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Ans: e Section Ref: Waiting Line Performance Measures Level: moderate

49. Which of the following is not an assumption of the waiting line models presented in the textbook? a) balking is allowed

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b) reneging is not allowed c) jockeying is not allowed d) customer arrival rate is described by a Poisson distribution e) service times are described by an exponential distribution Ans: a Section Ref: Waiting Line Performance Measures Level: moderate

50. Which of the following is not an assumption of the waiting line models presented in the textbook? a) balking is not allowed b) reneging is allowed c) jockeying is not allowed d) customer arrival rate is described by a Poisson distribution e) service times are described by an exponential distribution

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Ans: b Section Ref: Waiting Line Performance Measures Level: moderate

51. Which of the following is not an assumption of the waiting line models presented in the textbook? a) balking is not allowed b) reneging is not allowed c) jockeying is allowed d) customer arrival rate is described by a Poisson distribution e) service times are described by an exponential distribution

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Ans: c Section Ref: Waiting Line Performance Measures Level: moderate

52. Which of the following is not an assumption of the waiting line models presented in the textbook? a) the customers are patient b) customers come from an infinite population c) customer arrival rate is described by a Poisson distribution d) service times are described by an exponential distribution e) in a multi-phase system, a server can serve more than one customer at a time Ans: e Section Ref: Waiting Line Performance Measures Level: moderate

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53. For a single-server, single-line, single-phase waiting line system, where  represents the mean arrival rate of customers and  represents the mean service rate, what is the formula for the average utilization of the system? a)  /  b)  / (−) c) 2 / (−) d) 1 / (−) e)  / (−) Ans: a Section Ref: Single-Server Waiting Line Model Level: moderate

54. For a single-server, single-line, single-phase waiting line system, where  represents the mean arrival rate of customers and  represents the mean service rate, what is the formula for the average number of customers in the system? a)  /  b)  / (−) c) 2 / (−) d) 1 / (−) e)  / (−) Ans: b Section Ref: Single-Server Waiting Line Model Level: moderate

55. For a single-server, single-line, single-phase waiting line system, where  represents the mean arrival rate of customers and  represents the mean service rate, what is the formula for the average number of customers waiting in line? a)  /  b)  / (−) c) 2 / (−) pL d) 1 / (−) e)  / (−) Ans: c Section Ref: Single-Server Waiting Line Model Level: moderate

56. For a single-server, single-line, single-phase waiting line system, where  represents the mean arrival rate of customers and  represents the mean service rate, what is the formula for the average time spent in the system?

Commented [C1]: Ref pg 66 in PDF

a)  /  b)  / (−) c) 2 / (−) d) 1 / (−) e)  / (−) Ans: d Section Ref: Single-Server Waiting Line Model Level: moderate

57. For a single-server, single-line, single-phase waiting line system, where  represents the mean arrival rate of customers and  represents the mean service rate, what is the formula for the average time spent waiting in line? a)  /  b)  / (−) c) 2 / (−) d) 1 / (−) e)  / (−) pW Ans: e Section Ref: Single-Server Waiting Line Model Level: moderate

58. 50 = ________? a) 5 b) 0 c) undefined d) 1 e) 1/5 Ans: d Section Ref: Single-Server Waiting Line Model Level: moderate

59. 0! = _________? a) 0 b) 1 c) undefined d) −1 e)  Ans: b Solution: 0x0=0 Section Ref: Multiserver Waiting Line Model

Commented [C2]: Ref pdf pg 66

Level: moderate

60. 4! = _________? a) 0 b) 1 c) undefined d) 4 e) 24 Ans: e Solution: 4x3x2x1= 24 Section Ref: Multiserver Waiting Line Model Level: moderate

61. For a single-line, multi-server, single-phase waiting line system, where  represents the mean arrival rate of customers and  represents the mean service rate for each of s identical servers, what is the formula for the average utilization of the system? a)  /  b)  / (−) c)  / s d) s / (−) e)  / s(−) Ans: c Section Ref: Multiserver Waiting Line Model Level: moderate

62. Which system performance optionof the ways to change a waiting line system is related to the concept of division of labor? a) changing the priority rule b) changing the number of lines c) changing the number of phases d) changing customer arrival rates e) changing the number of service facilities Ans: c Section Ref: Changing Operational Characteristics Level: hard

63. Implementing process improvements or dedication of additional resources is one way to improve: a) priority rule applications b) the number of lines required

c) server efficiency d) service facilities e) arrival rates Ans: c Section Ref: Changing Operational Characteristics Level: moderate

64 An information desk at a rest stop receives requests for assistance (from one server). Assume that a Poisson probability distribution with a mean rate of 5 requests per hour can be used to describe the arrival pattern and that service times follow the exponential probability distribution, with a mean service rate of 1 request per minute. What is the probability that there are no requests for assistance in the system? a) 0% b) 8.3% c) −4% d) −400% e) 91.7% Ans: e  s −1 ( /  )n

Solution: P0 =   n =0

n!

+

( /  )s  1  s!

 1 − p   

−1

=

Section Ref: Larger-Scale Waiting Line Systems Level: hard

65. Most larger-scale waiting line systems use ________ simulation. a) finite queue b) finite customer c) nonexponential arrival d) discrete-event e) multi-phase Ans: d Section Ref: Larger-Scale Waiting Line Systems Level: hard

66. Consider a single-server queuing system (with Poisson arrivals and exponential service times). If the arrival rate is 30 units per hour, and each customer takes 30 seconds on average to be served, what is the average length of the line? a) 1.03 b) −1.03 c) 0.166 d) 0.333 e) 0.083

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Ans: e Solution: pW Section Ref: Larger-Scale Waiting Line Systems Level: hard

67. Consider a single-line, single-server waiting line system. The arrival rate λ is 80 people per hour, and the service rate μ is 120 people per hour. What is the probability of having 3 or more units in the system? a) 29.63% b) 33.33% c) 0.00% d) 9.88% e) 66.67% Ans: a Solution: (1-p)pn Section Ref: Larger-Scale Waiting Line Systems Level: moderate

68. Customers walk into a bank at an average rate of 20 per hour. On average, there are 5 people waiting in line to be served. How long does the average customer wait in line? a) 15 minutes b) 0.25 minutes c) 4 minutes d) 3 minutes e) 8 minutes Ans: a Solution: W = 1 / − = 1 / 20 – 5 = 1 / 15 Section Ref: Larger-Scale Waiting Line Systems Level: hard

69. Consider a single-server queuing system. If the arrival rate is 45 customers per hour and it takes 1 minute on average to serve a customer, what is the average waiting time in the waiting line in minutes? a) 3 b) 0.05 c) 4 d) 1.02 e) −1.02 Ans: a Solution: pW Section Ref: Larger-Scale Waiting Line Systems

Formatted: Superscript

Level: hard

70. Assume you have a single channel, single server, and single phase queue. Mean arrival rate is 80/hr and system capacity is 100/hr. What is the average number of customers in the system? a) 2 b) 8 c) 4 d) 80 e) 0 Ans: c Solution: 80 / 100 – 80 = 80 / 20 = 4 Section Ref: Single-Server Waiting Line Model Level: moderate 70. Consider a single-server queuing system (with Poisson arrivals and exponential service times). If the arrival rate is 26 units per hour, and the service rate is 35 units per hour, what is the average time that a unit spends in the system in minutes (waiting time plus service time)? a) 4.02 b) 0.1111 c) 0.0825 d) 4.95 e) 6.67 Ans: e Section Ref: Larger-Scale Waiting Line Systems Level: hard

71. Consider a single-line, single-server waiting line system. The arrival rate λ is 40 people per hour, and the service rate µ is 80 people per hour. What is the average number of customers in line? a) 0.5 b) 0.025 c) 1.0 d) 0.0125 e) 20.0 Ans: a Solution: 40 / 80 = 1 / 2 = .5 Section Ref: Larger-Scale Waiting Line Systems Level: moderate

72. From an operations view point, single-phase systems operators must: a) have greater skills be unionized b) adjust their work schedules

c) be capable of multi-tasking customers d) have greater skillsbe unionized e) be competitive Ans: da Section Ref: Waiting Line Models Within OM: How It All Fits Together Level: moderate

True/False

173. The two elements that define a waiting line system are (1) the population source of its customers and (2) the process or service system itself.

Ans: True Section Ref: Elements of Waiting Lines Level: easy

274. A waiting line occurs whenever there is less customer demand for a service than can be provided.

Ans: False Section Ref: Elements of Waiting Lines Level: moderate

375. A customer population is called finite when the number of potential new customers is not affected by the number of customers already in the system.

Ans: False Section Ref: Elements of Waiting Lines Level: easy

476. A customer population is called finite when the number of potential new customers is affected by the number of customers already in the system.

Ans: True Section Ref: Elements of Waiting Lines Level: easy

577. Visitors to a major amusement park would be considered a finite customer population.

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Ans: False Section Ref: Elements of Waiting Lines Level: moderate

678. Customers in a grocery store would be considered a finite customer population.

Ans: False Section Ref: Elements of Waiting Lines Level: moderate

779. Walking occurs when a customer decides not to enter the waiting line.

Ans: False Section Ref: Elements of Waiting Lines Level: moderate

880. Reneging occurs when a customer enters a waiting line but decides to exit before being served.

Ans: True Section Ref: Elements of Waiting Lines Level: easy

981. Vacillating occurs when a customer enters one line and then switches to a different line in an effort to reduce his or her waiting time.

Ans: False Section Ref: Elements of Waiting Lines Level: easy

1082. A single-line service system eliminates jockeying behavior.

Ans: True Section Ref: Elements of Waiting Lines Level: moderate

1183. A multiple-line service system provides an incentive for jockeying behavior.

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Ans: True Section Ref: Elements of Waiting Lines Level: moderate

1284. Customers typically consider a multiple-line service system to be fairer than a single-line service system.

Ans: False Section Ref: Elements of Waiting Lines Level: moderate

1385. A single-line service system is best when specialized servers are used.

Ans: False Section Ref: Elements of Waiting Lines Level: moderate

1486. Channel and server are synonymous in waiting line terminology.

Ans: True Section Ref: Elements of Waiting Lines Level: moderate

1587. Services require a single activity or a series of activities and are identified by the term phase.

Ans: True Section Ref: Elements of Waiting Lines Level: moderate

1688. Waiting line models typically assume that customer arrival rates are represented by the Gaussian distribution.

Ans: False Section Ref: Elements of Waiting Lines Level: moderate

1789. Waiting line models typically assume that service times are represented by the exponential distribution.

Ans: True Section Ref: Elements of Waiting Lines Level: moderate

1890. If the number of customers you can serve per time period is more than the average number of customers arriving, the waiting line grows infinitely.

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Ans: False Section Ref: Elements of Waiting Lines Level: moderate

1991. First-come, first-served is an unbiased priority rule.

Ans: False Section Ref: Elements of Waiting Lines Level: hard

2092. In a multi-server system, you must first verify that su > λ.

Ans: True Section Ref: Multiserver Waiting Line Model Level: moderate

2193. Changing the demand pattern by offering off-peak discounts represents an effective way to try to manage long waiting lines.

Ans: True Section Ref: Waiting Line Performance Measures Level: moderate

2294. Changing from a multi-line model to a single-line model is most appropriate when the company is concerned about fairness for its customers.

Ans: False Section Ref: Waiting Line Performance Measures Level: moderate

2395. There are many variations of the mathematical models for designing waiting lines.

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Ans: True Section Ref: Larger-Scale Waiting Line Systems Level: easy

2496. Discrete-event simulation of products allowallows the customer to define the system, arrival, and service patterns.

Ans: False Section Ref: Larger-Scale Waiting Line Systems Level: moderate

Essay

197. What are the two elements that define a waiting line system?

Answer: (1) the population source of its customers, (2) the process or service system itself Section Ref: Elements of Waiting Lines Level: easy

298. List some system changes one can make to try to improve waiting line performance.

Ans: customer arrival rates, number and type of service facilities, changing the number of phases, server efficiency, changing the priority rule, and changing the number of lines Section Ref: Changing Operational Characteristics Level: moderate

399. What are two ways to improve server efficiency?

Ans: process improvements or dedication of additional resources Section Ref: Changing Operational Characteristics Level: moderate

4100. How could you change the customer arrival rate of a waiting line system?

Ans: One could provide discounts or run special promotions during the non-peak hours to attract customers.

Section Ref: Changing Operational Characteristics

Level: moderate

5101. List examples of dedicating specific servers for specific transactions.

Ans: limit the number of items that can be processed at a particular cashier (e.g., 10 items or less); limit a cashier to cash-only transactions; or install self-service checkout systems Section Ref: Changing Operational Characteristics Level: moderate

6102. List possible priority rules for waiting line systems.

Ans: first-come, first served; best customers first; quickest service requirement first; largest service requirement first; and emergencies first Section Ref: Elements of Waiting Lines Level: moderate

7103. Describe the relative benefits of using a single-line system vs. a multi-line system.

Ans: Changing to a single-line model from a multi-line model is most appropriate when the company is concerned about fairness for its customers. A single line ensures that customers do not jockey in an attempt to gain an advantage over another customer. In addition, singleline systems perform better. On the other hand, multi-line systems easily accommodate specialty servers (express lanes). Also, they may be required when space considerations make a single line inconvenient.

Section Ref: Elements of Waiting Lines Level: hard

8104. What are the five characteristics that define a service system?

Ans: (1) the number of waiting lines, (2) the number of servers, (3) the arrangement of the servers, (4) the arrival and service patterns, and (5) the service priority rules Section Ref: Elements of Waiting Lines Level: moderate

9105. Identify the three assumptions the textbook uses for the single-line, multi-server, singlephase model.

Ans: There are identical servers, the service time distribution for each server is exponential, and the mean service time is 1/u.

Section Ref: Multiserver Waiting Line Model Level: hard

10106. What are some variations of the mathematical waiting line models that are not described in Supplement C?

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Ans: finite queue length, finite customer population, and non-exponential arrival and service times Section Ref: Larger-Scale Waiting Line Systems Level: hard

11107. Waiting line models typically assume what distribution(s)?

Ans: Poisson for customer arrivals and exponential for service times Section Ref: Elements of Waiting Lines Level: moderate

12108. Why do larger-scale waiting line systems use discrete-event simulation?

Ans: As waiting line systems become more complex, especially as they involve more than one phase, concise mathematical formulas in general do not exist for system performance measures.

Discrete-event simulation provides the ability to model arrival and service patterns and other aspects of the system.

Section Ref: Larger-Scale Waiting Line Systems Level: moderate 109. Which functional areas of the organization are concerned with Waiting Line Models and why?

Ans: Marketing (is concerned with response time for customers), Accounting (concerned of the cost the waiting line model used), Operations (focuses on response times for due-date delivery promising and design to resources need), and Purchasing (makes sure the funds are available for capital equipment).

Section Ref: Waiting Line Models Across The Organization Level: moderate

Problems

1110. Consider a single-line, single-server waiting line system. Suppose that there is only physical space for 2 units in the system (one in line and one being served). The arrival rate λ is 80 people per hour. The manager, Johnny Three Toes, has the choice among workers of different speeds to be the server. He wants to save money by hiring the slowest server that will result in an average number of units in the system (L) equal to 2. a) Using Johnny Three Toes’ strategy, what will the server’s service rate per hour () need to be?

Formatted: Tab stops: 0", Left

b) What is the probability of having 3 or more units in the system? c) What is wrong with Johnny Three Toes’ strategy?

Ans: (a) 120, (b) 29.63%, (c) Even though two customers will be in the system on average, more than two will sometimes be there but there isn’t room.

Section Ref: Larger-Scale Waiting Line Systems Level: hard

2111. The reference desk of a university library receives requests for assistance. Assume that a Poisson probability distribution with a mean rate of 10 requests per hour can be used to describe the arrival pattern and that service times follow the exponential probability distribution, with a mean service rate of 12 requests per hour. a) What is the probability that there are no requests for assistance in the system? b) What is the average number of requests that will be waiting for service? c) What is the average waiting time in minutes before service begins? d) What is the average time at the reference desk in minutes (waiting time plus service time)? e) What is the probability that a new arrival has to wait for service? f) Suppose that another helper could be hired to join the desk, and she would have the same service rate. Assuming that all patrons wait in a single line, what is the new average waiting time in minutes before service begins? g) Instead of the change in question f, suppose that a “super” librarian can be hired who can handle 16 requests per hour. Now what is the average waiting time in minutes before service begins?

Ans: (a) 16.67%, (b) 4.17 people, (c) 0.417 hours, (d) 0.5 hours, (e) 83.33%, (f) 0.0175 hours, (g) 0.10417 hours Section Ref: Larger-Scale Waiting Line Systems Level: hard

3112. Consider a single-line, single-server waiting line system. Suppose that customers arrive according to a Poisson distribution at an average rate of 100 per hour. The manager does not want customers to be in the system for longer than 12 minutes. How fast does the average (exponentially distributed) service time need to be in minutes in order to keep the manager satisfied?

Ans: 0.5714 minutes Section Ref: Larger-Scale Waiting Line Systems Level: hard

4113. Consider a single-line, single-server waiting line system. Suppose that customers arrive according to a Poisson distribution at an average rate of 60 per hour, and the average (exponentially distributed) service time is 45 seconds per customer. What is the average utilization of the system?

Ans: 75%

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Section Ref: Larger-Scale Waiting Line Systems Level: hard

5114. Consider a single-line, single-server waiting line system. Suppose that customers arrive according to a Poisson distribution at an average rate of 60 per hour, and the average (exponentially distributed) service time is 45 seconds per customer. What is the average number of customers in the system?

Ans: 3 Section Ref: Larger-Scale Waiting Line Systems Level: hard

6115. Consider a single-line, single-server waiting line system. Suppose that customers arrive according to a Poisson distribution at an average rate of 60 per hour, and the average (exponentially distributed) service time is 45 seconds per customer. What is the average number of customers waiting in line?

Ans: 2.25 Section Ref: Larger-Scale Waiting Line Systems Level: hard

7116. Consider a single-line, single-server waiting line system. Suppose that customers arrive according to a Poisson distribution at an average rate of 50 per hour, and the average (exponentially distributed) service time is 45 seconds per customer. What is the average time spent in the system (in minutes)?

Ans: 2 Section Ref: Larger-Scale Waiting Line Systems Level: hard

8117. Consider a single-line, single-server waiting line system. Suppose that customers arrive according to a Poisson distribution at an average rate of 50 per hour, and the average (exponentially distributed) service time is 45 seconds per customer. What is the average time spent in line (in minutes)?

Ans: 1.25 Section Ref: Larger-Scale Waiting Line Systems Level: hard

9118. Consider a single-line, single-server waiting line system. Suppose that customers arrive according to a Poisson distribution at an average rate of 50 per hour, and the average

(exponentially distributed) service time is 45 seconds per customer. What is the probability that 4 customers are in the system?

Ans: 5.72% Section Ref: Larger-Scale Waiting Line Systems Level: hard

10119. Consider a single-line, single-server waiting line system. Suppose that customers arrive according to a Poisson distribution at an average rate of 50 per hour, and the average (exponentially distributed) service time is 45 seconds per customer. What is the probability that  2 customers are in the system?

Ans: 75.59% Section Ref: Larger-Scale Waiting Line Systems Level: hard

11120. The university replication facility provides copier repair service for the university and for local businesses. Over the last year the mean arrival rate is 55 copiers a month. The repair facility uses two identical repair technicians who can repair an average of 30 copiers each month.

The university is considering changing out the copiers and expects that the average arrival time will drop to 25 copiers per month. This will allow them to reassign one of the technicians to other tasks. Assume the change has occurred and the system is set up as a single channel,channel; first come first serve, single server system. a) What is the utilization of the service center? b) What is the average number of copiers waiting in the system? c) What is the average number of copiers in the waiting line? d) What is the average time a copier is waiting to be repaired e) What is the average time the copier is in the waiting line? f) What is the probability that 6 copiers will be in the system at a given time?

Ans: a) 0.833 b) 5 c) 4.17 or 5 copiers since you cannot have a .17 copier d) .2 e) 0.1667 f) 5.58% Section Ref: Single Server Waiting Line Model Difficulty: hard

12121. The university replication facility provides copier repair service for the university and for local businesses. Over the last year the mean arrival rate is 55 copiers a month. The repair facility uses two identical repair technicians who can repair an average of 30 copiers each month.

The system is set up as a single channel, first come first served, multi-server system.

a) What is the utilization of the service center? b) What is the probability that no copiers will be in the system? c) What is the average number of copiers waiting in line? d) What is the average time a copier is waiting to be repaired? e) What is the average number of copiers in the system?

Ans a) 91.7% b) 4.33% c) 9.6 d) 0.176 e) 0.209 Section Ref: Multiserver Waiting Line Model Difficulty: hard

Short Answer

1122. Any time there is more customer demand for service than can be provided a _________ ____________ occurs.

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Ans: waiting line Section Ref: Elements of Waiting Lines Difficulty: easy

2123. In designing service systems, the main challenge is to design a system with ___________ but not _____ amounts of capacity.

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Ans: adequate, excessive Section Ref: Elements of Waiting Lines Difficulty: hard

3124. Arriving customer population is considered to be ____________ if the number waiting in line does not significantly affect the rate at which the population generates new customers.

Ans: infinite Section Ref: Elements of Waiting Lines Difficulty: moderate

4125. The term _________ refers to the activity or a series of service required activities.

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Ans: phase Section Ref: Elements of Waiting Lines Difficulty: moderate

5126. Waiting line models __________ ________ specifies the average number of customers per time period.

Ans: arrival rate Section Ref: Elements of Waiting Lines Difficulty: easy

6127. Waiting line priority rules determines _________ customer is served _________...

Ans: which, next Section Ref: Elements of Waiting Lines Difficulty: moderate

7128. _________

_________ are used to gain useful information about waiting line systems.

Ans: Performance measures Section Ref: Waiting Line Performance Measures Difficulty: moderate

8129. Customers often link long waits to ______ service.

Ans: poor-quality Section Ref: Waiting Line Performance Measures Difficulty: easy

9130. Service rate must be _____________ than __________ rate.

Ans: greater, arrival Section Ref: Single-Server Waiting Line Model Difficulty: hard

10131. In a single-line, multi-server, single phase model, customers form form a ________ line.

Ans: single Section Ref: Multiserver Waiting Line Model

Difficulty: easy

11132. Waiting line models are important to a company because they directly affect customer service _________.

Ans: perception Section Ref: Changing Operational Characteristics Difficulty: moderate

12133. Large-scale waiting line systems discrete-event simulation is run to _____ the behavior of the system.

Ans: mimic Section Ref: Large-scale Waiting Line Systems Difficulty: moderate

File: Supplement D, Supplement D: Master Scheduling and Rough-Ccut Capacity Planning Test Bank

Multiple Choice

1. The Master Production Schedule is often stated in: a) dollars b) rubles c) product specifications d) labor e) material requirements Ans: c Section Ref: Master Production Scheduling Level: hard easy

2. Which of the following is not part of the process for developing an MPS? a) The MRP system is run.An MPS is proposed. b) Rough-cut capacity planning is used. c) Evaluation occurs with regard to customer service, effective use of resources, and inventory investment. d) If capacity is insufficient, the MPS is modified or capacity is expanded. e) The MRP system is run. An MRP is proposed.

Ans: ea Section Ref: Developing an MPS Level: moderate

3. Demand management includes all but which of the following: a) company’s forecast b) order receiptsorder planning c) order-entry cd) order receiptsorder-promising e) physical distribution activities Ans: bd Section Ref: MPS As A Basis of Communication Level: moderate

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4. Which of the following is not a direct input into the MRP system? a) MPS b) aggregate planbill of material data c) inventory records d) aggregate planbill of material data e) None of these answer choices are correctnone of the above

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Formatted: Font: 12 pt

Ans: db Section Ref: Developing an MPS Level: hard

5. Which of the following is not one of the rows in an MPS record? a) time period (e.g., week) b) forecast c) planned ordersprojected available d) MPS e) planned ordersprojected available

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Ans: ec Section Ref: Rough-Cut Capacity Planning Level: moderate

6. What is the formula for projected available in an MPS record? a) beginning inventory + MPS shipment − forecasted demand b) MPS shipment from previous week − forecasted demand c) cumulative MPS shipments − cumulative forecasts d) forecasted demand − MPS shipment from previous week e) beginning inventory + forecasted demand − MPS shipment Ans: a Section Ref: Rough-Cut Capacity Planning Level: easy

7. What term refers to proven capacity calculated from actual performance data? a) manifested capacity b) established capacity c) demonstrated capacity

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d) confirmed capacity e) affirmed capacity Ans: c Section Ref: Rough-Cut Capacity Planning Level: easy

8. Which of the following is not a correctly stated step of the CPOPF method? a) Determine the appropriate planning factors using forecasted demand data. b) Multiply the MPS quantities by the appropriate planning factor. c) Sum capacity requirements for each resource by time period. d) Allocate capacity requirements to individual work centers based on historical percentages. e) Evaluate the workload at each resource to validate MPS feasibility.

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Ans: a Section Ref: Rough-Cut Capacity Planning Level: moderate

10. Which of the following is not a correctly stated step of the CPOPF method? a) Determine the appropriate planning factors using historical data. b) Multiply the MPS quantities by the appropriate planning factor. c) Sum capacity requirements for each resource by time period. d) Allocate capacity requirements to individual group work centers based on forecasted historical percentages. e) Evaluate the workload at each resource to validate MPS feasibility.

Ans: d Section Ref: Rough-Cut Capacity Planning Level: moderate

11. Demonstrated capacity is the ______ capacity ______ from the actual performance data. a) proven, calculated b) desired, derived c) historical, viewed d) forecasted, estimated e) extreme, targeted Ans: a Section Ref: Rough-Ccut- Capacity Planning Level: easy

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12. What data are added to create an extended MPS record that allows the firm to compute available-to-promise units? a) time period (e.g. weeks) b) forecast c) customer orders d) projected available e) MPS Ans: c Section Ref: Using the ATP Records Level: moderate

13. To evaluate the MPS in terms of customer service, the master scheduler checks that: a) promised raw material dates are met. b) purchasing is keeping up with requests. c) manufacturing is properly scheduling vacation time. d) promised profit margins are metpromised customer deliver dates are met. e) promised profit margins are met.promised customer deliver dates are met Ans: de Section Ref: Evaluating and Accepting the MPS Level: moderate

14. The MPS available-to-promise row shows: a) how many committed units the company has. b) how many units manufacturing will produce. c) inventory levels. d) how many uncommitted units the company has available. e) how many uncommitted units sales will promise to sell.

Ans: d Section Ref: Using the MPS Level: easy

15. In MPS terminology, what is another name for the current period? a) the hot seat b) the live wire

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c) the live basket d) the empty buck e) the action bucket Ans: e Section Ref: Using the ATP Records Level: easy

16. What establishes that point of time in the future inside of which changes to the MPS must be approved by a higher authority? a) demand time fence b) supply time fence c) authorized time fence d) frozen time fence e) planning time fence Ans: a Section Ref: Stabilizing the MPS Level: easy

17. What establishes a point of time in the future inside of which changes must be made by the master scheduler, and changes outside of which can be changed by system logic? a) demand time fence b) supply time fence c) system time fence d) frozen time fence e) planning time fence Ans: e Section Ref: Stabilizing the MPS Level: easy

18. What is the portion of the MPS called that lies between the current time and the demand time fence? a) gaseous b) frozen c) slushy d) mucky e) liquid

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Ans: b Section Ref: Stabilizing the MPS Level: moderate

19. What is the portion of the MPS called that lies between the demand time fence and the planning time fence? a) gaseous b) frozen c) slushy d) mucky e) liquid

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Ans: c Section Ref: Stabilizing the MPS Level: moderate

20. In the “liquid” portion of the MPS, the master scheduler generally has the authority to approve what changes? a) product mix b) changes needing extra resources (already authorized by the aggregate plan) c) product mix and changes needing extra resources (already authorized by the aggregate plan) both a and b d) neither product mix and changes needing extra resources (already authorized by the aggregate plan)a nor b e) there is not such a thing as a “liquid” portion of the MPS Ans: c Section Ref: Stabilizing the MPS Level: moderate

21. Which of the following statements is true? a) The “slushy” portion of the MPS comes sooner than the “liquid” portion of the MPS. b) The planning time fence occurs before the demand time fence. c) The “frozen” portion of the MPS occurs between the planning time fence and the demand time fence. d) The master scheduler has more authority during the “frozen” portion of the MPS than during the “slushy” portion of the MPS. e) The “liquid” portion of the MPS occurs before the demand time fence.

Ans: a Section Ref: Stabilizing the MPS

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Level: moderate

22. Which of the following statements is true? a) The “slushy” portion of the MPS comes later than the “liquid” portion of the MPS. b) The planning time fence occurs before the demand time fence. c) The “frozen” portion of the MPS occurs between the planning time fence and the demand time fence. d) The master scheduler has more authority during the “frozen” portion of the MPS than during the “slushy” portion of the MPS. e) The “liquid” portion of the MPS occurs after the demand time fence.

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Ans: e Section Ref: Stabilizing the MPS Level: moderate

23. What is the formula for projected available when using ATP MPS records? a) beginning inventory + MPS shipment − forecasted demand b) MPS shipment from previous week − forecasted demand c) beginning inventory + MPS shipment − (the greater of the period’s forecast or the actual customer orders promised for delivery that period) d) beginning inventory + MPS shipment − (the lesser of the period’s forecast or the actual customer orders promised for delivery that period) e) beginning inventory + forecasted demand − MPS shipment Ans: c Section Ref: Stabilizing the MPS Level: moderate

24. What is the formula for calculating the ATP quantity in the action bucket? a) MPS shipment − customer orders before next replenishment b) beginning inventory + MPS shipment − (the greater of this period’s forecast or the actual customer orders promised for delivery this period) c) beginning inventory + MPS shipment − forecasted demand d) beginning inventory + MPS shipment − customer orders before next replenishment e) beginning inventory + MPS shipment − customer orders this period Ans: d Section Ref: Using the ATP Records Level: moderate

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25. What is the formula for calculating the ATP quantity at future replenishment periods? a) MPS shipment − customer orders between the current MPS shipment and the next scheduled replenishment b) beginning inventory + MPS shipment − (the greater of the period’s forecast or the actual customer orders promised for delivery that period) c) beginning inventory + MPS shipment − forecasted demand d) beginning inventory + MPS shipment − customer orders between the current MPS shipment and the next scheduled replenishment e) beginning inventory + MPS shipment − customer orders that period Ans: a Section Ref: Using the ATP Records Level: moderate 26. A negative number in the projected available row is ___________ a problem. a) always b) never c) sometimes d) usually e) 50% Ans: c Section Ref: Using ATP Records Level: easy 27. A negative number in the available-to-promise row is ___________ a problem. a) sometimes b) always c) usually d) never e) 25% Ans: b Section Ref: Using ATP Records Level: easy

Problems

128. Consider the following partial MPS record. Beginning inventory is 80 units. When should the first MPS shipment be scheduled?

Period: 1 Forecast: 60 Projected Available: MPS: a) period 1 b) period 2 c) period 3 d) period 4 e) period 5

2 5

3 30

4 15

5 50

Ans: c Section Ref: Using the MPS Level: easy

229. Consider the following partial MPS record. Beginning inventory is 60 units. When should the first MPS shipment be scheduled?

Period: 1 Forecast: 60 Projected Available: MPS: a) period 1 b) period 2 c) period 3 d) period 4 e) period 5

2 5

3 30

4 15

5 50

Ans: b Section Ref: Using the MPS Level: easy

330. Consider the following partial MPS record. Beginning inventory is 120 units. When should the first MPS shipment be scheduled?

Period: 1 Forecast: 60 Projected Available: MPS: a) period 1 b) period 2 c) period 3 d) period 4

2 5

3 30

4 15

5 50

e) period 5 Ans: e Section Ref: Using the MPS Level: easy

431. Consider the following partial MPS record. Beginning inventory is 100 units. When should the first MPS shipment be scheduled?

Period: 1 Forecast: 60 Projected Available: MPS: a) period 1 b) period 2 c) period 3 d) period 4 e) period 5

2 5

3 30

4 15

5 50

Ans: d Section Ref: Using the MPS Level: easy

532. Consider the following partial MPS record. Beginning inventory is 40 units. The firm uses a fixed order quantity of 70 units. What is the projected available amount in period 2?

Period: 1 Forecast: 50 Projected Available: MPS: a) 55 b) 15 c) 70 d) 50 e) 125 Ans: a Section Ref: Using the MPS Level: moderate

2 5

3 40

4 25

5 50

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633. Consider the following partial MPS record. Beginning inventory is 40 units. The firm uses a fixed order quantity of 70 units. What is the projected available amount in period 3?

Period: 1 Forecast: 50 Projected Available: MPS:

2 5

3 40

4 25

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5 50

a) 45 b) 15 c) 70 d) 50 e) 155 Ans: b Section Ref: Using the MPS Level: moderate

734. Consider the following partial MPS record. Beginning inventory is 40 units. The firm uses a fixed order quantity of 70 units. What is the projected available amount in period 5?

Period: 1 Forecast: 50 Projected Available: MPS:

2 5

3 40

4 25

5 50

a) 70 b) 50 c) 10 d) 40 e) 220 Ans: c Section Ref: Using the MPS Level: moderate

835. Motorsports, Inc. builds two different types of motors. Model A has averaged 20,000 units annually, and Model B has average 30,000 units annually. The firm has historically used 80,000 direct labor hours and 10,000 hours of machine time per year to build Model A. Also, 150,000 annual direct labor hours have been allocated to Model B, along with 60,000 hours of annual machine time. What is the CPOPF planning factor for direct labor for Model A? a) 0.25 b) 4.00 c) 4.50

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d) 5.00 e) 4.60 Ans: b Section Ref: Rough-Cut Capacity Planning Level: easy

936. Motorsports, Inc. builds two different types of motors. Model A has averaged 20,000 units annually, and Model B has average 30,000 units annually. The firm has historically used 80,000 direct labor hours and 10,000 hours of machine time per year to build Model A. Also, 150,000 annual direct labor hours have been allocated to Model B, along with 60,000 hours of annual machine time. What is the CPOPF planning factor for direct labor for Model B? a) 0.20 b) 4.00 c) 7.00 d) 5.00 e) 4.60 Ans: d Section Ref: Rough-Cut Capacity Planning Level: easy

1037. Motorsports, Inc. builds two different types of motors. Model A has averaged 20,000 units annually, and Model B has average 30,000 units annually. The firm has historically used 80,000 direct labor hours and 10,000 hours of machine time per year to build Model A. Also, 150,000 annual direct labor hours have been allocated to Model B, along with 60,000 hours of annual machine time. What is the CPOPF planning factor for machine time for Model A? a) 0.50 b) 2.00 c) 1.40 d) 4.50 e) 0.33 Ans: a Section Ref: Rough-Cut Capacity Planning Level: easy

1138. Johnny Now, Inc. produces two different models of outhouses. Demand next period is expected to be 12,000 and 18,000 units for Models A and B, respectively. Model A has CPOPF planning factors of 0.75 and 0.60 for direct labor and machine time, respectively. Model B has

CPOPF planning factors of 0.50 and 0.80 for direct labor and machine time, respectively.

Historically department G uses 24% of the direct labor and machine time for these products, while department H uses the remaining 76%. What is the direct labor time requirement for department G next period? a) 4,320 hours b) 13,680 hours c) 18,000 hours d) 9,000 hours e) 5,184 hours Ans: a Section Ref: roughRough-cut Cut Capacity Planning Level: moderate

1239. Johnny Now, Inc. produces two different models of outhouses. Demand next period is expected to be 12,000 and 18,000 units for Models A and B, respectively. Model A has CPOPF planning factors of 0.75 and 0.60 for direct labor and machine time, respectively. Model B has CPOPF planning factors of 0.50 and 0.80 for direct labor and machine time, respectively.

Historically department G uses 24% of the direct labor and machine time for these products, while department H uses the remaining 76%. What is the machine time requirement for department H next period? a) 5,184 hours b) 13,680 hours c) 14,400 hours d) 21,600 hours e) 16,416 hours Ans: e Section Ref: roughRough-cut Cut Capacity Planning Level: moderate

1340. Johnny Now, Inc. produces two different models of outhouses. Demand next period is expected to be 12,000 and 18,000 units for Models A and B, respectively. Model A has CPOPF planning factors of 0.75 and 0.60 for direct labor and machine time, respectively. Model B has CPOPF planning factors of 0.50 and 0.80 for direct labor and machine time, respectively.

Historically department G uses 24% of the direct labor and machine time for these products, while department H uses the remaining 76%. What is the machine time requirement for department G next period? a) 5,184 hours b) 4,320 hours c) 7,200 hours d) 21,600 hours

e) 16,416 hours Ans: a Section Ref: Rough-Cut Capacity Planningrough-cut Capacity Planning Level: moderate

1441. Consider the following partial ATP MPS record. Beginning inventory is 40 units. The firm uses a fixed order quantity of 70 units. What is the projected available amount in period 2?

Period: 1 Forecast: 50 Customer Orders: Projected Available: Available-to-promise: MPS:

2 5 40

3 40 10

4 25 20

5 50 0

5

a) 0 b) 60 c) 70 d) 50 e) 55 Ans: d Section Ref: Developing an MPS Level: moderate

1542. Consider the following partial MPS record. Beginning inventory is 0 units. The firm uses a fixed order quantity of 60 units. Fill out the last two rows of the table.

Period: 1 Forecast: 60 Projected Available: MPS:

2 40

3 35

4 10

5 30

6 20

1 Projected Available: 0 MPS: 60 Section Ref: Developing an MPS Level: moderate

2 20 60

3 45 60

4 35

5 5

6 45 60

Ans:

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1643. Consider the following partial MPS record. Beginning inventory is 70 units. The firm uses a fixed order quantity of 100 units. Fill out the last two rows of the table.

Period: 1 Forecast: 80 Projected Available: MPS:

2 50

3 20

4 10

5 50

6 90

1 Projected Available: 90 MPS: 100 Section Ref: Developing an MPS Level: moderate

2 40

3 20

4 10

5 60 100

6 70 100

Ans:

1744. Consider the following partial MPS record. Beginning inventory is 70 units. The firm uses an order quantity of POQ = 2 periods. Fill out the last two rows of the table.

Period: 1 Forecast: 80 Projected Available: MPS:

2 50

3 20

4 10

5 50

6 90

1 Projected Available: 50 MPS: 60 Section Ref: Developing an MPS Level: moderate

2 0

3 10 30

4 0

5 90 140

6 0

Ans:

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1845. Engines Corp. builds two different types of motors. Model A has averaged 120,000 units annually, and Model B has average 230,000 units annually. The firm has historically used 80,000 direct labor hours and 210,000 hours of machine time per year to build Model A. Also, 250,000 annual direct labor hours have been allocated to Model B, along with 60,000 hours of annual machine time. Calculate the four relevant CPOPF planning factors.

Ans:

direct labor for Model A = 0.667 hrs./unit; machine time for Model A = 1.75 hrs./unit; direct labor for Model B = 1.087 hrs./unit; machine time for Model B = 0.261 hrs./unit Section Ref: Rough-Cut Capacity PlanningRough-cut Capacity Planning Level: moderate

1946. Engines Corp. builds two different types of motors in three departments. Historically, department X uses 20%, department Y uses 50%, and department Z uses 30% of direct labor and

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machine time, respectively. In the next quarter, demand for Model A is expected to be 40,000 units, and demand for Model B is expected to be for 50,000 units. The CPOPF planning factors are: direct labor for Model A = 0.667 hrs./unit, machine time for Model A = 1.75 hrs./unit, direct labor for Model B = 1.087 hrs./unit, machine time for Model B = 0.261 hrs./unit. Calculate the amount of labor and machine time that will need to be allocated to each of the three departments next quarter.

Ans: department X = 16,206 for labor and 16,610 for machines; department Y = 40,515 for labor and 41,525 for machines; department Z = 24,309 for labor and 24,915 for machines Section Ref: Rough-Ccut Capacity Planning Level: moderate

2047. Consider the following partial ATP MPS record. Beginning inventory is 20 units. The firm uses a fixed order quantity of 60 units. Fill out the rest of the table.

Period: 1 Forecast: 50 Customer Orders: Projected Available: Available-to-promise: MPS:

2 5 40

3 40 10

4 25 20

5 50 0

1 2 3 Projected Available: 30 20 40 Available-to-Promise: 30 40 MPS: 60 60 Section Ref: Rough-Ccut Capacity Planning Level: moderate

4 15

5 25 55 60

Ans:

5

True/False

148. The master production schedule is a statement of upcoming demand.

Ans: False Section Ref: MPS As A Basis of Communication Level: moderate

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249. A primary objective of the master production schedule is to achieve the desired customer service level.

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Ans: True Section Ref: Developing an MPS Level: moderate

350. A master production schedule incorporates production lead time.

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Ans: False Section Ref: Rough-Cut Capacity PlanningRough-Cut Planning Level: moderate

451. The projected available quantity row in an MPS record keeps track of how many units are available at the beginning of each time period.

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Ans: False Section Ref: Rough-Cut Capacity PlanningRough-Cut Planning Level: moderate

552. In an MPS record, the forecast row shows the forecasted supply for the product.

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Ans: False Section Ref: Rough-Cut Capacity PlanningRough-Cut Planning Level: moderate

653. In an MPS record, MPS shipments arrive at the beginning of the time period.

Ans: True Section Ref: Rough-Cut Capacity PlanningRough-Cut Planning Level: moderate

754. Consider an MPS record. An MPS shipment amount is always set equal to the absolute value of the amount in the projected available row if that amount is negative.

Ans: False

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Section Ref: Rough-Cut Capacity PlanningRough-Cut Planning Level: easy

855. The available-to-promise row in an extended MPS record shows how many committed units the company has available for delivery at a given time.

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Ans: False Section Ref: Using the ATP Records Level: moderate

956. Changes to the MPS that are requested inside of the demand time fence must be approved by a higher authority.

Ans: True Section Ref: Stabilizing the MPS Level: moderate

1057. In the “slushy” portion of the MPS, changes in the product mix are possible, but changes needing additional resources are not.

Ans: True Section Ref: Stabilizing the MPS Level: moderate 58. CPOPF is the acronym for Capacity Planning (using) Overall Promising Factors.

Ans: False Section Ref: Rough-Cut Capacity Planning Level: moderate

Essay

159. Discuss the Master scheduler responsibility.

Ans: The Master scheduler is responsible for managing, developing, reviewing, and maintaining the master schedule.

Section Ref: Master Production Scheduling

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Level: moderate

260. Discuss the master scheduler’s objectives when developing the MPS. Ans: Achieve the desired customer service level either by maintaining finished goods inventory or by scheduling completion of the item or service to meet the customer’s delivery needs. Make the best use of the company’s resources: material, labor, and equipment. Ensure that the inventory investment is at the appropriate level.

Section Ref: Objectives of Master Scheduling Level: hard

361. Describe what CPOPF is.

Ans: CPOPF is capacity planning using overall planning factors. IT is a simple, rough-cut capacity planning technique that develops a planning factor for each critical resources based on historical data.

Section Ref: Rough-cCut- Capacity Planning Level: hard

462. Discuss how the MPS is evaluated in terms of cost.

Ans: The master scheduler compares the MPS to the aggregate plan, which specifics available resources. If the MPS needs additional resources, the company many not achieve the objectives of the marketing plan and, consequently, the business plan.

Section Ref: Evaluation g and Accepting the MPS Level: moderate

563. Discuss why a negative number in the available-to-promise row is always a problem.

Ans: This means your company does not have enough inventory to cover the delivery.

Section Ref: Using the ATP Records.

Level: moderate

Short Answer

164. When Projected Available is negative, the Master Production Schedule must include ________________________.

Ans: an MPS shipment Section Ref: Using ATP Records DifficultyLevel: moderate

265. The ______ _____ shows how many products or services are planned for each time period.

Ans: aggregate plan Section Ref: Master Production Scheduling DifficultyLevel: hard

366. Beginning Inventory + MPS Shipment - maximum of (forecast and customer orders) is called ________________________.

Ans: Projected Available Section Ref: Using the MPS DifficultyLevel: moderate

467. In future periods, MPS Shipments - Customer orders between current and next scheduled MPS sShipment is called ________________________.

Ans: Available Available-to to-Promise Section Ref: Using the MPS DifficultyLevel: hard

568. In the current period, Available –to- Promise adds ________________________ to the formula used for future periods.

Ans: bBeginning Inventory Section Ref: Using the MPS DifficultyLevel: hard

669. The MPS is said to be ________________________ between the current time and the time needed for final assembly.

Ans: frozen Section Ref: Stabilizing the MPS DifficultyLevel: hardmoderate

770. The MPS is said to be ________________________ between final assembly and cumulative manufacturing lead times.

Ans: slushy Section Ref: Stabilizing the MPS DifficultyLevel: hard