Operations Management Unit 1

What is the maximum variable cost per unit a firm to break even with a fixed cost of $400,000.00 if they project they can sell 25,000 units at a selling price of $75.00? $89 $69 $79 $59 $49

$59

Saber Electronics has been making components for its navigation system for years. The company is currently in the process of deciding whether it should purchase the components from others. The costs of manufacturing in-house include: direct labor $1.50 per unit, material $2 per unit, variable overhead $1 per unit, and fixed cost $15,000 per year. One supplier offers a price of $5.50 per unit, but it will also charge a shipping cost of $0.50 per unit. What is the indifference point between making and buying the components? 15,000 units $15,000 10,000 units $10,000

10,000 units

Saber Electronics has been making components for its navigation systems for years. The company is currently in the process of deciding whether it should purchase the components from others. Inhouse production includes a fixed annual cost of $15,000 and a variable cost of $4.50 per unit (including labor, material, and overhead). One supplier has agreed to offer a unit cost of $5.50, but it will also charge a shipping cost of $0.50 per unit. What is the indifference point between making and buying the components and over what demand range is each option best? 15,000 units; Buy if demand > 15,000 and Make if demand < 15,000 10,000 units; Buy if demand > 10,000 and Make if demand < 10,000 10,000 units; Buy if demand < 10,000 and Make if demand >10,000 15,000 units; Buy if demand < 15,000 and Make if demand > 15,000

10,000 units; Buy if demand < 10,000 and Make if demand >10,000

The owner of Joe's Pizza is considering purchasing a new oven to bake the restaurant's signature vegan pizza. The oven costs $25,000. The variable costs are estimated to be $5.00 per pizza, including the costs of flour, yeast, cheese, veggie toppings, etc. If the pizzas sell for $15.00 each, what is the break-even point for the oven? 2,500 pizzas $2,500 $25,000 5,000 pizzas $5,000

2500 pizzas

If inputs increase by 30% and outputs decrease by 15%, what is the percentage change in productivity? 34.62% decrease 15% increase 15% decrease 100% decrease 11.54% increase

34.62% decrease

An airline has determined that its baggage handlers can handle 12,000 bags per shift when 3 baggage handlers are on shift. What is the baggage handler productivity? 12,000 bags/shift 2,000 bags/handler 14,000 bags/shift 4,000 bags/handler 4,000 bags/shift

4000 bags/handler

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? 0 units 6,250 units 40 units 3,000 units 12,500 units

6250 units

Approximately what percentage of new ideas do not make it past the screening stage? 90% 30% 50% 80% 60%

80%

Which of the following best describes operations strategy? It states what business the organization is in. It specifies the design and use of resources to support the business strategy. It defines the long-range business plan for the organization. It focuses on performing operations tasks well, even better than competitors.

It specifies the design and use of resources to support the business strategy.

Which of the following is a correct sequence for relating product design, process selection, and arrangement of equipment in the factory? Product design determines process selection, which determines arrangement of equipment. Process selection determines arrangement of equipment, which determines product design. Arrangement of equipment determines process selection, which determines product design. Product design determines arrangement of equipment, which determines process selection. Process selection determines product design, which determines arrangement of equipment.

Product design determines process selection, which determines arrangement of equipment.

Which of the following is true with respect to strategic and tactical decisions? Tactical decisions focus on more specific day-to-day decisions. Strategic decisions are bound by tactical decisions. Tactical decisions determine the direction for strategic decisions. Strategic decisions are made more frequently and routinely.

Tactical decisions focus on more specific day-to-day decisions.

In break-even analysis, what is the break-even point? The quantity where revenue equals fixed cost The quantity beyond which the firm starts to lose money The quantity where revenue equals variable cost The quantity where revenue equals total cost The quantity where variable cost equals fixed cost

The quantity where revenue equals total cost

Going beyond a basic partnership, an expanded partnership between a firm and its supplier implies trust. mutual respect. open and frequent communications. honesty. a commitment to helping each other succeed.

a commitment to helping each other succeed

A quality circle is an approach for the use of control charts. an inspection stamp found on meat. a symbol used on flowcharts. a team of volunteer production employees and their supervisors who meet regularly to solve quality problems. an award for quality improvements.

a team of volunteer production employees and their supervisors who meet regularly to solve quality problems

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. For the milk products manufacturer the lumber company is a tier one supplier. a tier two supplier. a tier three supplier. a tier four supplier. not in the supply chain.

a tier three supplier

Reverse engineering is acquiring a competitor's product and relabeling it for sale. acquiring a competitor's product and studying its design features. reengineering a failing product. changing your mind on the previous design. altering the basic design based on user input.

acquiring a competitor's product and studying its design features

Price fluctuations follow all but which of the following marketing promotions? Rebates Advertising Coupons Price discounts Quantity discounts

advertising

Which of the following is NOT a primary responsibility used in operations management? job design and work measurement facility layout advertising strategy quality management location analysis

advertising strategy

Which of the following would NOT be considered a core competency that a company might have? quality control techniques a highly trained workforce an inefficient distribution system skills in attracting and raising capital use of information technology

an inefficient distribution system

Costs of quality inspections, testing, test equipment, and labs are examples of __________ costs. appraisal prevention external failure internal failure replacement

appraisal

All of the following are characteristics of partnership relations EXCEPT which? Are strategic in nature Share a common vision Share short- and long-term plans Are "arms-length" in nature Have a long-term orientation

are "arms length" in nature

Which product and service strategy is used to produce standard components that can be combined to customer specifications? Make-to-stock Make-to-order Make-to-package Assemble-to-deliver Assemble-to-order

assemble-to-order

Which of the following specifically relates to dimensions of quality in service organizations? conformance to specifications durability features atmosphere serviceability

atmosphere

What term refers to owning or controlling sources of raw materials and components? Backward integration Encapsulating integration Forward integration Horizontal integration Subsuming integration

backward integration

Which of the following is NOT a remedy for the bullwhip effect? Eliminate gaming. Eliminate order batching. Stabilize prices. Base forecasts on demand coming from the immediate downstream customer. Make POS information available to all levels of the supply chain.

base forecasts on demand coming from the immediate downstream customer

The classes that you are taking at the university use a ___________ process. batch line continuous recycle project

batch

________ is studying the practices of companies considered "best in class" and comparing the performance of your company against theirs. Frustration Competition Benchmarking Copying Notching

benchmarketing

What technique is based on computing the quantity of goods a company needs to sell to just cover its costs? Net present value Activity based costing Internal rate of return Break-even analysis Variable costing

break-even analysis

Which term refers to inaccurate or distorted demand information created in the supply chain? Battle axe effect Lasso effect Bullwhip effect Whirlpool effect Reverse effect

bullwhip effect

One common definition of quality is __________, which focuses on measuring how well the product or service meets targets and tolerances determined by its designers. conformance to specifications value for price paid technical perception judgmental evaluation fitness for use

conformance to specifications

What is the process whereby shipments are transferred directly from inbound trailers to outbound trailers? Directdocking Transferdocking Crossdocking Simuldocking Nodocking

crossdocking

Product design develops as many products as possible. defines the characteristics of a product. develops products that aid strategic planning activities. includes the company's mission somewhere in the product. does not include the design of service.

defines the characteristics of a product

The plan-do-study-act cycle is often called the Quality circle. Continuous improvement cycle. Action wheel. Deming wheel. TQM activity approach.

deming wheel

Which refers to the use of common and interchangeable parts? Design automation Design specification Design reduction Design standardization Design simplification

design standardization

Which of the following is an important cost of poor quality? advertisement Fixed cost labor dissatisfied customers overhead

dissatisfied customers

What type of warehouse is used for short-term storage, consolidation, and product mixing? General Tactical Distribution Strategic Customized

distribution

The expected operational life of a product is called reliability. serviceability. performance. durability. conformance.

durability

When did operations management emerge as a formal field of study? during the late 1950s and early 1960s during the late 1970s and early 1980s during the early 1900s during the nineteenth century during World War II

during the late 1950s and early 1960s

Operations Management is responsible for increasing the organization's efficiency, which means the company will be able to: increase the number of positions under the manager's position. take for granted current operations. eliminate activities that do not add value. increase purchasing opportunities. add to the engineering process.

eliminating activities that do not add value

Giving workers responsibility for seeking out quality problems and correcting them is employee empowerment. passing the buck. employee involvement. continuous improvement. brainstorming.

employee empowerment

The process of monitoring the external environment is called what? environmental perusal environmental scrutiny environmental inspection environmental scanning environmental examination

environmental scanning

Warranty claims, customer complaints, and costs of litigation are examples of __________ costs. internal failure appraisal prevention external failure replacement

external failure

Which of the following typically represents the beginning of a supply chain? Retailers Manufacturers Wholesalers Inspectors External suppliers

external suppliers

Which of the following is an operations decision related to the structure of the production process? quality control measures management policies worker pay facility characteristics organization of operations

facility characteristics

Which business function is responsible for managing cash flow, current assets, and capital investments? marketing finance accounting purchasing operations management

finance

Every business is managed through what three major functions? accounting, engineering, and marketing engineering, finance, and operations management accounting, finance, and marketing accounting, purchasing, and human resources finance, marketing, and operations management

finance, marketing, operations management

With respect to competitive priorities, intermittent operations compete more on _____________ compared to repetitive operations. flexibility and delivery cost and features durability and features availability and reliability durability and cost

flexibility and delivery

Service design differs from product design by considering customer needs. including marketing personnel in the decision-making process. focusing more on intangible service elements. defining performance standards.

focusing more on intangible service elements.

What type of warehouse is used for long-term storage? Distribution Strategic Customized General Tactical

general

Quality has gained such prominence because organizations have gained an understanding of the high cost of poor quality. have found a low-cost process to keep some employees busy. are following the latest management fad. have identified an employee perk, membership in quality circles. understand poor quality is of minimal cost and something to do.

have gained an understanding of the high cost of poor quality

The quantity that equates the cost of making a product to the cost of buying the product is generally called what? Neutrality point Point of equality Indifference point Point of optimality No such point can exist

indifference point

Electronic commerce and the creation of the virtual marketplace are application examples of information technology. safety technology. process technology. environmental technology. product technology.

information technology

Suppose that on Monday the cost of inputs sums to $1,000, and the value of outputs sums to $4,000. For which of the following values on Tuesday would productivity increase? inputs = $1,100, outputs = $4,200 inputs = $850, outputs = $3,600 inputs = $1,000, outputs = $3,900 inputs = $1,100, outputs = $4,000 inputs = $2,000, outputs = $8,000

inputs = $850, outputs = $3,600

When does productivity increase? Outputs decrease while inputs remain the same. Inputs and outputs increase proportionally. Inputs and outputs decrease proportionally. Inputs increase while outputs remain the same. Inputs decrease while outputs remain the same.

inputs decrease while outputs remain the same

What term refers to processes or activities that are completed in-house? Outsource Insource Homesource Supplysource Ownsource

insource

Which type of operation is used to produce many different products with varying process requirements in lower volumes? Repetitive Intermittent Downstream Continuous Gateway

intermittent

Machine downtime due to failures in the process, scrap, and rework are examples of __________ costs. appraisal internal failure prevention replacement external failure

internal failure

The Japanese term for continuous improvement is kaizen. muda. poka-yoke. kanban. automation.

kaizen

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? Multifactor productivity will decrease. Machine productivity will decrease. Labor productivity will decrease. Multifactor productivity will increase. Labor productivity will increase.

labor productivity will decrease

External failure costs include employee training. quality inspections. litigation costs resulting from product liability issues. scrap. rework.

litigation costs resulting from product liability issues

When making competitive priority decisions the firm needs to focus on the one competitive priority at the exclusion of all others. ensure the PWP is correctly established. make trade-off decisions. select the correct supply chain. isolate the competing internal departments.

make trade-off decisions

Which product and service strategy has the longest delivery lead time? Assemble-to-deliver Make-to-package Make-to-stock Make-to-order Assemble-to-order

make-to-order

Which product and service strategy is typically seen in repetitive operations? Make-to-stock Make-to-package Assemble-to-deliver Assemble-to-order Make-to-order

make-to-stock

Operations management is responsible for orchestrating all the resources needed to produce the final product. This includes all of the following EXCEPT arranging schedules. controlling quality. managing cash flow. managing inventory. designing work methods.

managing cash flow

Which business function is responsible for sales, generating customer demand, and understanding customer wants and needs? human resources finance marketing operations management purchasing

marketing

___________ is a vital link between customers and product design. Accounting Marketing Engineering Operations The Internet

marketing

Which of the following is a variable cost? Overhead Insurance Taxes Materials Land rent

materials

Which of the following is NOT typically considered to be a core competency? market understanding workforce mission technology facilities

mission

Services that have some areas with little customer contact and others with high customer contact are classified as mixed services. quasi-manufacturing. pure services. manufacturing. quasi-services.

mixed services

Which of the following is NOT an example of a value-added activity? making a wedding cake moving components to a warehouse for storage until the factory needs them removing iron ore from the ground and shipping it to a steel mill filling the underground gasoline tanks at a service station moving luggage from a cab to the airport ticket counter

moving components to a warehouse for storage until the factory needs them

Suppose that a plant has a daily productivity of 200 parts per employee. What can we conclude? The daily productivity is excellent. The plant is not earning profits. The plant can hire more workers and still earn profits. The plant must be highly automated. No specific conclusion can be made.

no specific conclusion can be made

In product screening, issues such as "Will we need new facilities and equipment?" and "Can the material for production be readily obtained?" are addressed by finance. accounting. operations. engineering. marketing.

operations

At the retailer The Gap, which function plans and coordinates all the resources needed to design, produce, and deliver the merchandise to its various retail locations? human resources purchasing engineering marketing operations management

operations management

Which business function is responsible for planning, coordinating, and controlling the resources needed to produce a company's products and services? operations management engineering marketing human resources finance

operations management

What term refers to processes or activities that are completed by suppliers? Insource Vendorsource Homesource Supplysource Outsource

outsource

What term describes the process of obtaining goods or services from an outside provider? supersourcing outsourcing transferization subsourcing outproviding

outsourcing

Which of the following is a valid productivity measure? imperfect productivity measure multi-component productivity measure partial productivity measure multi-part productivity measure multi-output productivity measure

partial productivity measure

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? Cohabitating Marrying Partnering Diversifying Sharing

partnering

Operational efficiency is ensuring the right tasks are performed. performing operations tasks well. increasing the firm's output. decreasing the firm's input requirements. driving the business strategy.

performing operations tasks well.

Quality planning, employee training in quality measurement, and cost of maintaining records of information and data related to quality are __________ costs. replacement external failure prevention appraisal internal failure

prevention

According to several studies, what are the three most important criteria for selecting suppliers? Price, flexibility, on-time delivery Price, quality, on-time delivery Quality, fast delivery, on-time delivery Quality, flexibility, fast delivery Price, quality, fast delivery

price, quality, on-time delivery

TQM is __________, because it is designed to build quality into the product and process design. reactive standardized proactive strategic competitive

proactive

Which of the following is an argument in favor of having multiple suppliers? Consistency of input materials is achieved. Probability of assured supply is better. Deliveries can be scheduled more easily. Partnering becomes more possible. Quantity discounts may be achieved.

probability of assured supply is better

Evaluating a product idea to determine its likelihood of success is product windowing. technological forecasting. estimating. product screening. product evolution.

product screening

What are the three primary types of technology? product technology, process technology, and information technology product technology, process technology, and environmental technology environmental technology, information technology, and process technology information technology, environmental technology, and safety technology product technology, process technology, and safety technology

product technology, process technology, and information technology

Highly labor-intensive services are called quasi-services. pure services. quasi-manufacturing. mixed services. mixed manufacturing.

pure services

Which term is used to describe the companies that have low customer contact and are capital intensive, yet they provide a service? quasi-service organizations Industrial Revolution era operations management quasi-manufacturing organizations manufacturing organizations service organizations

quasi-manufacturing organizations

The definition of quality that involves the product functioning as expected without failure is endurance. reliability. conformance. performance. standardization.

reliability

All of the following may be inputs of a transformation process EXCEPT: information. managers. buildings. services. technology.

services

Collection of point-of-sale (POS) information is MOST useful for which bullwhip effect remedy? Allocating units based on past demand Eliminating order batching Filling orders based on a set percentage Stabilizing prices Sharing actual demand information

sharing actual demand information

Concurrent engineering is: simultaneously designing the product and the process. relying on marketing to determine specifications while product is in engineering. designing several new products at the same time. not used in operations management processes. simultaneously designing the product and developing the marketing sales brochure.

simultaneously designing the product and the process

What are long-term decisions that set the direction for the entire organization called? tactical operational directional distant strategic

strategic

A constant concern within purchasing departments is the issue of ethics in managing entry-level employees. websites. inventory. customers. suppliers.

suppliers

Not only does TQM encompass the entire organization, but it also stresses that quality is supplier driven. that quality is customer driven. the need to be "green." the need for ISO 9000 compliance. that quality is vendor driven.

that quality is customer driven

Throughput time is: the average amount of time a product takes to move through the system. a measurement of how well a company uses its resources. the proportion of time a resource is actually used. a measurement of performance relative to a standard.

the average amount of time a product takes to move through the system.

Maturity and decline are also referred to as the re-engineering stages. the early stages of the life cycle. the later stages of the life cycle. the manufacture stages. the life cycle.

the later stages of the life cycle

According to the financial calculations of the make-or-buy decision, if we need fewer units than the indifference point, then which option should we choose? Make Buy The option with the lower variable costs The option with the lower fixed and higher variable costs It is not profitable to choose either option

the option with the lower fixed and higher variable costs

Suppose that in week 1 a company produced 1,000 units using 60 labor hours. For which of the following values in week 2 would labor productivity decrease? units = 2,000, hours = 100 units = 1,500, hours = 95 units = 500, hours = 30 units = 2,000, hours = 120 units = 1,000, hours = 58

units = 1500, hours = 95

Which of the following is NOT an example of a value-added activity? manufacturing a radio waiting to see a doctor riding a train having a surgery having a haircut

waiting to see a doctor

When do rationing and shortage gaming occur? When supply exceeds demand When transportation workers go on strike When government contracts are awarded When marginal revenue exceeds marginal cost When demand exceeds supply

when demand exceeds supply