Final exam example problems

A newsvendor faces uniformly distributed demand and the critical ratio is 0.8. If the optimal quantity is ordered, which of the following statement is true? A) The newsvendor orders more than the average demand B) The newsvendor orders less than the average demand C) None of the above

A) The newsvendor orders more than the average demand

Under exponential smoothing, if we want our forecast to be more responsive/sensitive to the recent actual demand, then we should _____________ alpha. A) increase B) decrease C) not change D) the value of alpha doesn't matter

A) increase

The two general approaches to forecasting discussed in our text are A) qualitative and quantitative B) mathematical and statistical C) judgmental and qualitative D) historical and associative E) judgmental and associative

A) qualitative and quantitative

One advantage of a continuous review system is that less inventory is needed to precent stock outs as compared to a periodic review system

True

A regression model is used to forecast sales based on advertising dollars spent. The intercept is $500 and the slope is $35. The R-squared value is 0.90. Which is the best statement about this forecasting model? A) Even if no money is spent on advertising, the company realizes $35 of sales. B) For every $35 on advertising, sales are predicted to increase by $1. C) For every $1 spent on advertising, sales are predicted to increase by $35. D) The correlation coefficient between sales and advertising is 0.81

C) For every $1 spent on advertising, sales are predicted to increase by $35.

The primary purpose of the mean absolute deviation (MAD) in forecasting is to A) estimate the trend line B) eliminate forecast errors C) measure forecast accuracy D) seasonally adjust the forecast

C) measure forecast accuracy

An inventory management system that utilizes the EOQ with an automated re-order point is an example of a periodic review system

False

To prevent stock outs, you should increase the amount of safety stock. This is accomplished by increasing the order quantity.

False

Given a TSP problem with 13 nodes/locations, there are a total of 239,500,800 possible routes

True

In a single-period inventory problem with deterministic demand the order quantity should be equal to the expected demand

True

In constrained optimization problems, managers have control (i.e. they can change) over quantities called decision variables

True

Which of the following statements are true about time-series demand forecasting? A) It is based on the assumption that future demand is no dependent on past demand trends. B) The analysis of past demand (i.e. historical data) helps predict future demand. C) Time series methods are most useful for long-range forecast when the demand pattern is dependent on economic cycles. D) A and B E) A, B, and C

B) The analysis of past demand (i.e. historical data) helps predict future demand.

Which of the following is/are general forecasting principles discussed in our text? A) forecasts become more accurate with longer time horizons B) forecasts are rarely perfect C) forecasts are more accurate for individual items than for group of items D) all of the above E) none of the above

B) forecasts are rarely perfect

The objective of the EOQ is to A) minimize safety stock B) minimize stock outs C) minimize the order quantity D) minimize total inventory costs

D) minimize total inventory costs

Which of the following smoothing constants would make an exponential smoothing forecast equivalent to a naive forecast? A) 0 B) .25 C) .50 D) .75 E) 1

E) 1

A national consumer magazine reported the following correlations. The correlation between car weight and car reliability is -0.80. The correlation between car weight and annual maintenance cost is 0.20. Which of the following statements are true? I. Heavier cars tend to be less reliable II. Heavier cars tend to cost more to maintain. III. Car weight is related more strongly to reliability than to maintenance cost. A) I only B) II only C) III only D) I and II only E) I, II, and III

E) I, II, and III

Time-series data may exhibit which of the following behaviors? A) Growth trend B) random variations C) seasonality D) cycles E) all of the above

E) all of the above

Assuming that there is only a single server (i.e. m=1), a system in which the service rate is greater than the arrival rate is referred to as an unstable system, which indicates that there isn't enough service capacity to keep up with demand

False

Expected wait times in queue increase proportionally with arrival rates (i.e. if the arrival rate increases by 10%, you would then expect to wait in line about a 10% longer time)

False

Forming 2 individual lines, as opposed to 1 single line, reduces line jockeying

False

In a queuing system, increased variation is associated with shorter wait times

False

It is often easier to measure productivity in the service sector than it is for manufacturers

False

Mangement science is focused on using concepts from the social sciences (i.e. psychology and sociology) to solve operations problems

False

Operations Management is the process of transforming goods into services

False

Optimization methods are often near-sighted or myopic

False

The coefficient of variation for a highly-variable arrival process (such as a Poisson Process) is equal to 0

False

According to the assigned textbook reading, for a level capacity plan, the processing capacity is set at a uniform level throughout the period regardless of fluctuations in demand

True

According to the assigned textbook reading, yield management is commonly used in cases where the capacity is fixed (e.g. seats on an airplane or rooms in a hotel). It is based on the economic principles of supply and demand. When supply is low, prices go up; when supply is high, prices go down.

True

As the annual demand increases, the EOQ also increases, all other things held constant

True

Reneging occurs when a customer initially joins a queue, but then leaves before getting served

True

SKU stands for Stock Keeping Unit

True

Safety stock is needed due to uncertainties/variation in demand

True

The human relations movement was based on the recognition that factors outside of compensation/money contribute to worker productivity

True

The majority of Us jobs are in the service sector

True

Two important historical OM milestones, division of labor and specialization. are commonly attributed to Adam Smith

True

WIP inventories refer to items in process throughout a production process

True