MGMT Exam 2

For the basic EOQ model, what is the formula for the total annual cost?

(D/Q)S + (Q/2)H

If the EOQ is ordered, which of the following is true?

Annual ordering cost is equal to annual holding cost

Percentage of orders shipped on schedule is a good measure of finished goods customer service if

all orders and customers have similar value.

The ranking in ABC inventory analysis is based on what?

annual dollar usage

What costs are considered in the basic EOQ model?

annual ordering costs + annual holding costs

Which is the primary inventory function that is activated after coupons are distributed to customers?

anticipation inventory

Causes of variation that can be identified and eliminated are called

assignable

JIT is applied to

both manufacturing and service organizations

the person that comes from the top ranks of an organization and is responsible for providing direction and overseeing all aspects of a six-sigma implementation process is called a

champion

Which of the following is a characteristic of bottom-round management?

consensus management by committees or teams

On a control chart, what separates common from assignable causes of variation?

control limits

The number of kanbans or containers needed at a workstation is dependent on

demand rate

Which of the following is a role of JIT management?

developing an incentive system to reward workers for their efforts

JIT considers waste anything that

does not add value

The advantages of cell manufacturing using a U-shaped cell include

easy reach and flexibility for workers

What does EPQ stand for?

economic production quantity

The central belief of the JIT philosophy is

elimination of waste

In a JIT environment, workers need to

feel secure in their jobs

Being able to keep costs low while changing the volume of production is an example of

flexibility

A process chart is a

graph that shows whether a sample falls within the common range

With regard to suppliers, JIT typically requires

information sharing

According to JIT, __________ is carried to cover up a wide variety of problems, such as poor quality, demand uncertainty, and slow delivery.

inventory

Which of the below is NOT one of the three components of the holding costs?

item costs

What is the term that means giving workers authority to stop the production line when quality problems are encountered?

jidoka

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 ___________________.

kaizen blitz

JIT uses a pull system where communication starts with either the customer or with the _________ workstation in the production line.

last

Which of the following is an assumption of the basic EOQ model?

lead time is known and constant

Which inventory function helps firms garner quantity discounts?

lot size inventory

Uniform Plant Loading

making the same mix of products every day in small quantities

The range is an example of what?

measures of variability

The ultimate goal of JIT is to produce products in a lot size of

one unit

Which basic EOQ assumption does the EPQ model relax?

orders arrive at once

JIT considers __________ to be a company's most precious resource.

people

Regular inspections and maintenance designed to keep a machine operational is __________ maintenance.

preventive

JIT is a _______ system.

pull

Variation in the production process leads to

quality defects

Which of the following is an assumption of the basic EOQ model?

quantity discounts are not considered

Common causes of variation are also known as

random causes

The benefits of long-term relationships with a small number of suppliers include

receiving payments at regular intervals rather than on delivery of goods

JIT is often mistakenly assumed to

refer to only just-in-time manufacturing.

Holding costs have three components: capital, storage, and

risk costs

JIT manufacturing cannot succeed if ____ costs are too high

set up

What is the term for an adjustment of a machine after making one product type so that production can begin for another product type?

setup

All of the following affect holding costs EXCEPT

setup cost

A SKU is a ______________ at a _____________ geographic location.

specific item, particular

The technique of fixed-order quantity involves a company

specifying the number of units to order whenever an order is placed

Which inventory function provides a cushion against unexpected supply shortage?

speculative inventory

What is a distribution called when the same numbers of observations are below the mean as are above the mean?

symmetric

Which of the following is used in determining the order quantity in the periodic review system?

target inventory level

In a periodic review inventory system, how many units are ordered?

target inventory level - on hand balance

The different characteristics that can be measured by control charts can be divided into what two groups?

variables and attributes

Beliefs that help define the JIT philosophy include ________.

visibility

The formula to calculate weeks of supply is?

weeks of supply = average inventory on hand in dollars/average weekly usage in dollars

What does WIP stand for?

work in process

JIT flexibility refers to

workers being able to perform many different tasks

What is the probability of a Type I error for a control chart with limits set at + 3 standard deviations from the mean?

.26%

For the standard normal distribution, how much confidence is provided within 2 standard deviations above and below the mean?

95.44%

Adding backups ALWAYS increases the reliability of the system even if the backup is less reliable than the original reliability. Select one: a. True b. False

A

A control chart is a schematic diagram of the sequence of steps involved in an operation or process. Select one: A. True B. False

B

A series system is composed of the components #1, #2 and #3, with respective reliabilities of 0.85, 0.82 and 0.90. The management is concerned with the low reliability of the system, and would like to add backups to enhance the reliability of the system. Due to the high cost, only one of the three components can receive the backup. Which component do you think should receive the backup? Select one: a. Component #3, b/c the last one is always the decisive element. b. Component #2, b/c it's the weakest link of the system. c. Component #2, b/c the middle one has the most crucial role in a series system. d. Component #1, b/c it can negatively impact the subsequent components. e. Component #3, b/c strengthening the strongest component benefits the system the most.

B

What technique answers the question of whether the process is functioning properly or not? a. scatter plotting b. statistical process control c. acceptance sampling d. fishbone diagramming e. experimental design

B

Suppose a product has two parts, both of which must be working in order for the product to function. The reliability of the first part is 0.8, and the reliability of the second part is 0.9. What is the reliability of the product? Note: Series formula: Rs = R1*R2*... Parallel formula: Rs = 1-(1-R1)*(1-R2)... Select one: a. 0.85 b. 1.70 c. 0.72 d. None of the other answers is correct e. 0.98

C ( .8 * .9) = .72

On a control chart, what separates common from assignable causes of variation?

Control Limits

What are the three areas for Inventory objectives?

Customer service, cost-efficient operations, and minimum inventory investment

Which of the following is associated with descriptive statistics? a. process capability index b. proportion c. control chart d. standard deviation

D

Which of the following is an assumption of the basic EOQ model?

Demand is known and constant

What is the term for the probability that a value falling outside the control limits is still due to normal variation? Select one: a. Normalization anomaly b. Beta risk c. Standard deviation irregularity d. Type II error e. Type I error

E

Hand tools, lubricants, and cleaning supplies are usually examples of what?

MRO inventory

Which of the following inventory functions does NOT involve end products sold to customers?

MRO inventory

_____________________ is the probability that demand during lead time will NOT exceed on-hand inventory.

Order-cycle service level

Which basic EOQ assumption does the EPQ model relax?

Orders arrive at once

What implies that about 20% of the inventory items will account for about 80% of the inventory value?

Paretos law

For the basic EOQ model, how many units should be ordered each time that an order is placed?

SQRT(2*DS/H)

The formula for calculating safety stock, when an estimate of demand during lead time and its standard deviation are known, is which of the following?

SS = z*σdL

Which of the below statements is not true with regards to Safety Stock (SS) in the EOQ model?

SS affects the value of order quantity (EOQ)

What is the first step that should be taken if an observation falls below the lower control limit on a control chart?

Search for assignable causes

An x-bar chart is an example of what?

Statistical Process Control

When is the basic EOQ model a special case of the EPQ model?

The production rate per day approaches infinity

What is the replenishment of inventory at the customer's facility?

Vendor-managed inventory