Chapter 09 Material Requirements Planning

MRP stands for Material Requirements Planning.

TRUE Material Requirements Planning (MRP)

Net change MRP reflects the exact status of each item managed by the system in "real time."

TRUE Net change systems are "activity" driven and requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Net change enables the system to reflect in "real time" the exact status of each item managed by the system.

Which of the following is an input to the master production schedule?

A. Bill of materials (BOM) file B. Inventory records file C. Exception reports D. Planned-order schedules ***E. None of the above

In an MRP program, the program accesses the status segment of an inventory record according to specific periods called which of the following?

A. Cubed time units ***B. Time buckets C. BOM units D. Time modules E. Time lines The MRP program accesses the status segment of the record according to specific time periods (called time buckets in MRP slang). These records are accessed as needed during the program run.

Which of the following is an input file necessary to run an MRP system?

A. Exception report B. Computer-aided-design files ***C. Inventory records file D. Personnel files E. Planned order schedule

Generally, determining lot sizes in MRP systems is simple.

FALSE Determination of lot sizes in an MRP system is a complicated and difficult problem.

The customer grace period is a time-span having some specified level of opportunity for the customer to make changes.

FALSE Management defines time fences as periods of time having some specified level of opportunity for the customer to make changes.

When implemented correctly, MRP links all areas of the business.

FALSE Material requirements planning is the key piece of logic that ties the production functions together from a material planning and control view. Page 293: (MRP is an) integral part of enterprise resource planning that ties together all the major functions of a firm.

"Projected available balance" is a term referring to unsold finished goods inventory.

FALSE Projected available balance is the amount of inventory not just unsold finished goods that is expected as of the end of a period.

Net change systemDr

A MRP system thatsvhhi calculates the impact of a change in the MRP data -the inventory status, Bill of materials or master schedule -immediately.

MRP is least valuable in industries where a number of products are made in batches using the same productive equipment.

FALSE MRP is most valuable in industries where a number of products are made in batches using the same productive equipment.

MRP is based on dependent demand.

TRUE MRP is based on dependent demand. Dependent demand is caused by the demand for a higher-level item. Tires, wheels, and engines are dependent demand items based on the demand for automobiles, for example.

The master production schedule states the number of items to be produced during specific time periods.

TRUE The master production schedule states the number of items to be produced during specific time periods.

Master production schedule (MPS)

A time-phased plan specifying how many and when the firm plan to build each end item.

Which of the following is the net requirement using an MRP program if the gross requirement is 1,250 and the inventory on hand is 50?

**A. 1,200 B. 1,300 C. 1,150 D. 2,450 E. None of the above 1,250 - 50 = 1,200. Net requirements are the amounts that are needed week by week in the future over and above what is currently on hand or committed to through an order already released and scheduled.

If annual demand is 6,125 units, annual holding cost is $5 per unit, and setup cost per order is $50, which of the following is the EOQ lot size?

**A. 350 B. 247 C. 23 D. 185 E. 78 From the equation: EOQ = 350 = Square root of (2 x 6125 x 50/5)

Which of the following industry types will not benefit greatly from the application of MRP?

**A. Fabricate-to-order B. Assemble-to-stock C. Assemble-to-order D. Manufacture-to-order E. None of the above

A product tree can do which of the following?

**A. Help to compute component usage B. Reduce product scrap C. Reduce labor overtime D. Reduce regular time labor E. Locate raw material supplies The BOM file is often called the product structure file or product tree because it shows how a product is put together. It contains the information to identify each item and the quantity used per unit of the item of which it is a part.

A BOM file is also called which of the following?

**A. Product tree B. Stocking plan C. Inventory usage record D. Production parts plan E. Time bucket schedule The BOM file is often called the product structure file or product tree because it shows how a product is put together.

Which of the following is most closely related to the reason a firm might implement MRP?

**A. So they can order the right parts B. So they can order parts sufficient for immediate use C. So they can insure that parts to arrive prior to when they are needed D. To assure appropriate quality levels E. To keep process costs between the LCL and the UCL MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. MRP also provides the schedule specifying when each of these items should be ordered or produced.

A modular bill of materials includes items with fractional options.

FALSE A super bill of materials includes items with fractional options.

An input to the material requirements planning (MRP) system is an exception report.

FALSE This bill of materials file is one of the three main inputs to the MRP program. The other two are the master schedule and the inventory records file.

Lot-for-lot (L4L) is the most common lot sizing technique.

TRUE Lot-for-lot (L4L) is the most common technique.

Which of the following is an input to the master production schedule (MPS)?

A. Inventory records file ***B. The aggregate plan C. The bill of materials D. The exception report E. Planned order schedules

A modular bill of materials is the term for an item that can be produced and stocked as a subassembly.

TRUE A modular bill of materials is the term for a buildable item that can be produced and stocked as a subassembly.

A master production schedule is an input to a material requirements planning (MRP) system.

TRUE Generally, the master schedule deals with end items and is a major input to the MRP process.

A lot-for-lot (L4L) lot sizing technique does not take into account setup costs or capacity limitations.

TRUE Lot-for-lot (L4L) is the most common technique. It: • Sets planned orders to exactly match the net requirements. • Produces exactly what is needed each week with none carried over into future periods. • Minimizes carrying cost. • Does not take into account setup costs or capacity limitations.

MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item.

TRUE MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item.

MRP is most valuable where a number of products are made in batches using the same productive equipment.

TRUE MRP is most valuable in industries where a number of products are made in batches using the same productive equipment.

MRP provides the schedule specifying when each part and component of an end item should be ordered or produced.

TRUE MRP provides the schedule specifying when each of these items should be ordered or produced.

Time fences are periods of time having some specified level of opportunity for the customer to make changes.

TRUE Management defines time fences as periods of time having some specified level of opportunity for the customer to make changes.

In a net change MRP system requirements and schedules are updated whenever a transaction is processed that has an impact on the item.

TRUE Net change systems are "activity" driven and requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Net change enables the system to reflect in "real time" the exact status of each item managed by the system.

Net change MRP systems are "activity" driven.

TRUE Net change systems are "activity" driven and requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Net change enables the system to reflect in "real time" the exact status of each item managed by the system.

Projected available balance is the amount of inventory that is expected as of the beginning of a period.

TRUE Projected available balance is the amount of inventory that is expected as of the end of a period (or the beginning of the next period).

The economic order quantity (EOQ) lot sizing technique uses the "square root formula" to balance set-up cost and carrying cost.

TRUE The EOQ model balances setup and holding costs

Manufacturing firms maintain bill of materials (BOM) files, which are simply a sequencing of everything that goes into a final product.

TRUE The bill of materials (BOM) file contains the complete product description, listing not only the materials, parts, and components but also the sequence in which the product is created.

A Bill of Materials file is often called a product structure file or product tree because it shows how a product is put together.

TRUE The bill of materials file is often called the product structure file or product tree because it shows how a product is put together.

The least total cost method (LTC) lot-sizing technique calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal.

TRUE The least total cost method (LTC) is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal.

The least unit cost method of lot-sizing technique adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost.

TRUE The least unit cost method is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost.

The time-phased plan specifying how many and when the firm plans to build each end item is called the master production schedule (MPS).

TRUE The master production schedule (MPS) is the time-phased plan specifying how many and when the firm plans to build each end item.

The deeper one looks into the product creation sequence, the more the requirements of dependent demand items tend to become more "lumpy."

TRUE The requirements of dependent demand items tend to become more and more lumpy as we go farther down into the product creation sequence.

The three main inputs to an MRP system are the bill of materials, the master schedule and the inventory records file.

TRUE This BOM file is one of the three main inputs to the MRP program. (The other two are the master schedule and the inventory records file.)

An input to the material requirements planning (MRP) system is an inventory records file.

TRUE This BOM file is one of the three main inputs to the MRP program. The other two are the master schedule and the inventory records file.

Computing the quantity of each component that goes into a finished product can be done by expanding (or exploding) each item in a product structure file and summing at all levels.

TRUE To compute the amount of each item needed at the lower levels, each item would need to be expanded ("exploded") and summed. A more efficient procedure is to store parts data in simple single-level lists. That is, each item and component is listed showing only its parent and the number of units needed per unit of its parent.

Material requirements planning (MRP)

The logic for determining the number of parts, components, and materials needed to produce a product.

Which of the following is an input file necessary to run an MRP system?

**A. Bill of materials (BOM) file B. Quality management report C. Exception reports D. Planned-order schedules E. Purchasing contracts

Bill of materials (BOM)

A computer file that contains the complete product description, listing the materials, parts, and components, and also the sequence in which the product is created.

Enterprise resource planning (ERP)

A computer system that integrates application programs in accounting, sales, manufacturing, and the other functions in a firm.

Available to promise

A feature of MRP systems that identifies the difference between the number of units currently included in the master schedule and the actual firm customer orders

Which of the following is the net requirement using an MRP program if the gross requirement is 1,000 and the inventory on hand is 500?

A. 1,000 B. 950 **C. 500 D. 400 E. 350 1,000 - 500 = 500. Net requirements are the amounts that are needed week by week in the future over and above what is currently on hand or committed to through an order already released and scheduled.

If annual demand is 12,000 units, annual holding cost is $15 per unit, and setup cost per order is $25, which of the following is the EOQ lot size?

A. 2,000 B. 1,200 C. 1,000 D. 300 **E. 200 From the equation: EOQ = 200 = Square root of (2 x 12,000 x 25/15)

Which of the following is the planned-order release using an MRP program if the gross requirement is 670 and the inventory on hand is 600?

A. 670 B. 600 C. 530 **D. 70 E. None of the above Using net requirements, the program calculates when orders should be received to meet these requirements. This can be a simple process of just scheduling orders to arrive according to the exact net requirements or a more complicated process where requirements are combined for multiple periods. This schedule of when orders should arrive is referred to as "planned-order receipts." Since there is typically a lead time associated with each order, the next step is to find a schedule for when orders are actually released. Offsetting the "planned-order receipts" by the required lead time does this. This schedule is referred to as the "planned-order release." 670 - 600 = 70.

Which of the following is the planned-order release using an MRP program if the gross requirement is 5,000, inventory on hand is 1,200 and planned receipts are 800?

A. 7,000 B. 4,200 **C. 3,000 D. 2,000 E. 1,200 5,000 - 1,200 - 800 = 3,000. Using net requirements, the program calculates when orders should be received to meet these requirements. This can be a simple process of just scheduling orders to arrive according to the exact net requirements or a more complicated process where requirements are combined for multiple periods. This schedule of when orders should arrive is referred to as "planned-order receipts." Since there is typically a lead time associated with each order, the next step is to find a schedule for when orders are actually released. Offsetting the "planned-order receipts" by the required lead time does this. This schedule is referred to as the "planned-order release."

Under the lot-for-lot (L4L) lot sizing technique as used in MRP, we would expect which of the following?

A. A consistent lag of supply behind demand **B. Minimized carrying costs C. Minimized set-up costs D. A just in time management philosophy E. Minimized quality problems Lot-for-lot (L4L) is the most common technique. It: • Sets planned orders to exactly match the net requirements. • Produces exactly what is needed each week with none carried over into future periods. • Minimizes carrying cost. • Does not take into account setup costs or capacity limitations. Because the logic of lot-for-lot says the production quantity will exactly match the required quantity, no inventory will be left at the end. Without any inventory to carry over into the next week, there is zero holding cost. However, lot-for-lot requires a setup cost each week. Lot-for-lot causes high setup costs.

Which of the following is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal?

A. Economic Order Quantity B. Lot for lot **C. Least total cost D. Least unit cost E. ABC analysis The least total cost method is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal.

Which of the following is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost?

A. Economic order quantity B. Lot-for-lot C. Least total cost **D. Least unit cost E. Inventory item averaging The least unit cost method is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost.

Which of the following is one of the main purposes of a MRP system?

A. Educate personnel in basic work rules **B. To determine the amount of materials needed to produce each end item. C. Stimulate the work force D. Decrease labor requirements E. Increase inventory accuracy MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. MRP also provides the schedule specifying when each of these items should be ordered or produced.

We would expect to see which of the following in an MRP system's inventory status file?

A. End items produced B. Late/early delivery records **C. Scrap parts D. Labor efficiency E. Computer errors The inventory status file is kept up to date by posting inventory transactions as they occur. These changes occur because of stock receipts and disbursements, scrap losses, wrong parts, canceled orders, and so forth.

Which of the following is not a production activity report generated by MRP?

A. Exception report B. Planning report C. Performance control report D. Planned-order schedules **E. Bill of materials report

Which of the following industry types have high expected benefits from the application of MRP?

A. Fabricate-to-stock B. Fabricate-to-order ***C. Assemble-to-stock D. Continuous process E. Service and repair parts See exhibit 9.2.

Which of the following is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot size in which these are most nearly equal?

A. Kanban B. Just-in-time system C. MRP D. Least unit cost **E. Least total cost The least total cost method is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal.

Which of the following is not a lot sizing technique used in MRP systems?

A. Lot-for-lot (L4L) B. Economic order quantity (EOQ) C. Least total cost (LTC) D. Least unit cost (LUC) **E. Warehouse loading factor (WLF) The lot-sizing techniques presented are lot-for-lot (L4L), economic order quantity (EOQ), least total cost (LTC), and least unit cost (LUC). Warehouse loafing factor is not a lot sizing technique.

Which of the following can be used for lot sizing in an MRP system?

A. Low-level coding B. Time bucket size **C. Least unit cost D. Inventory record file E. Peg inventory The lot-sizing techniques presented are lot-for-lot (L4L), economic order quantity (EOQ), least total cost (LTC), and least unit cost (LUC). Low level coding, time bucket size, inventory record files and peg inventory are not lot sizing techniques but least unit cost is. Hence C is the correct answer.

MRP systems seek to achieve which of the following?

A. Minimize lot sizes ***B. Determine the number of dependent demand items needed C. Relieve capacity bottlenecks D. Provide a yardstick for future improvements E. Improve on JIT methods MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. MRP also provides the schedule specifying when each of these items should be ordered or produced. MRP is based on dependent demand. Dependent demand is caused by the demand for a higher-level item.

Which of the following is considered a secondary report in an MRP system?

A. Planned order schedule ***B. Exceptions reports C. Inventory record D. Firm orders from known customers E. Engineering change reports

Which of the following files allows us to retrace a material requirement upward in the product structure through each level, identifying each parent item that created the demand?

A. Planning bill of materials file B. Modular bill of materials file C. Super bill of materials file D. Exception report file ***E. Peg record file

Which of the following is considered a primary report in an MRP system?

A. Planning reports B. Performance reports C. Exception reports ***D. Planned order schedules E. Cycle counting reports

Which of the following is an input to the master production schedule?

A. Prototype products from product development B. Aggregate component schedule C. Peg reports D. Exception reports ***E. Forecasts of random demand from customers

In a typical inventory status record which of the following would you not expect to see?

A. Scrap allowance B. Order quantity C. Gross requirements D. Planned-order releases **E. Lost items The inventory status file is kept up to date by posting inventory transactions as they occur. These changes occur because of stock receipts and disbursements, scrap losses, wrong parts, canceled orders, and so forth.

One of the main purposes of a MRP system is which of the following?

A. Track inventory levels B. Create productive capacity C. Decrease layers of management **D. Develop schedules specifying when each component should be ordered or produced. E. Upgrade manufacturing's professionalism MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. MRP also provides the schedule specifying when each of these items should be ordered or produced.

The economic order quantity (EOQ) lot sizing technique produces or acquires exactly the amount of product that is needed each time period with none carried over into future periods.

FALSE EOQ assumes that parts are used continuously during the period. The lot sizes generated by EOQ do not always cover the entire number of periods. For example, the EOQ might provide the requirements for 4.6 periods (when another EOQ would be needed).

The lot-for-lot (L4L) lot sizing technique minimizes carrying cost by taking into account setup costs and capacity limitations.

FALSE Lot-for-lot (L4L) is the most common technique. It • Sets planned orders to exactly match the net requirements. • Produces exactly what is needed each week with none carried over into future periods. • Minimizes carrying cost. • Does not take into account setup costs or capacity limitations

Low level coding in MRP indicates the exact status of each item managed by the system in "real time."

FALSE Low-level coding (is where) each item is placed at the lowest level at which it appears in the structure hierarchy.

MRP stands for Manufacturing Requirements Planning.

FALSE Material Requirements Planning (MRP)

In a net change MRP program, a change in one item will result in a completely new inventory plan and schedule for every item in the master production schedule.

FALSE Net change systems are "activity" driven and requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Net change enables the system to reflect in "real time" the exact status of each item managed by the system.

The economic order quantity (EOQ) lot sizing technique uses the "square root formula" to balance set-up cost, carrying cost and cost of stock-outs.

FALSE The EOQ model balances setup and holding costs.

The MRP program performs its analysis from the bottom up of the product structure trees, imploding requirements level by level.

FALSE The MRP program performs its analysis from the top of the product structure downward, calculating requirements level by level.

The least unit cost method (LUC) lot-sizing technique calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal.

FALSE The least unit cost method is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost.

The least unit cost method of lot-sizing adds ordering, stock-out and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost.

FALSE The least unit cost method is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost.

The time-phased plan specifying how many and when the firm plans to build each end item is called the Materials Requirements Plan (MRP.)

FALSE The master production schedule (MPS) is the time-phased plan specifying how many and when the firm plans to build each end item.

The deeper one looks into the product creation sequence, the more the requirements of dependent demand items tend to smooth out and become even over time.

FALSE The requirements of dependent demand items tend to become more and more lumpy as we go farther down into the product creation sequence.

An output of MRP is a bill of materials (BOM) file.

FALSE This BOM file is one of the three main inputs to the MRP program. (The other two are the master schedule and the inventory records file.)