Final Exam

Consider a firm with an annual net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, what is the inventory turnover?

12.50

Fabricators, Inc. wants to increase capacity by adding a new machine. The fixed costs for machine A are $90,000, and its variable cost is $15 per unit. The revenue is $21 per unit. What is the break-even point for machine A

15,000 units

A product has a demand of 4000 units per year. Ordering cost is $20, and holding cost is $4 per unit per year. The cost-minimizing solution for this product is to order:

200 units per order.

Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time is four days. The service level is 95%. What should the reorder point be (rounded to the closest integer) ? (Z-value of the normal distribution is 1.65)

37

A certain type of computer costs $1,000, and the annual holding cost is 20% of the value of the item. Annual demand is 10,000 units, and the order cost is $20 per order. What is the approximate economic order quantity?

40

A manufacturing plant averaged $740 of raw materials, $230 of work-in-process inventory, and $1030 of finished goods inventory during the month. If the cost of goods sold this month amounted to $10,000, what is the inventory turnover for the month?

5

Process A has fixed costs of $1000 and variable costs of $5 per unit. Process B has fixed costs of $500 and variable costs of $15 per unit. What is the crossover point between process A and process B?

50 units

The assumptions of the production order quantity model are met in a situation where annual demand is 50,000 units, setup cost is $20, holding cost is $10 per unit per year, the daily demand rate is 20 and the daily production rate is 100. What is the production order quantity for this problem?

500

Which of the following statements regarding the reorder point is TRUE? E

A) The reorder point is that quantity that triggers an action to restock an item. B) There is a reorder point even if lead time and demand during lead time are constant. C) The reorder point is larger than d × L if safety stock is present. D) A shorter lead time implies a smaller reorder point. E) All of the above are true.

A firm that employs a response strategy should minimize inventory throughout the supply chain.

False

A rice mill in south Louisiana purchases the trucking firm that transports packaged rice to distributors is an example of backward integration.

False

ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities used.

False

An example of the postponement strategy for improving service productivity is having the customer wait until you have sufficient time to serve the customer.

False

Break-even analysis identifies the volume at which fixed costs and revenue are equal

False

Harley-Davidson, because it has so many possible combinations of products, utilizes the process strategy of mass customization.

False

Supply chain decisions are not generally strategic in nature, because purchasing is not a large expense for most firms.

False

The EOQ model is best suited for items whose demand is dependent on other products.

False

The bottleneck time is always at least as long as the throughput time.

False

The supply chain for a brewery would include raw ingredients such as hops and barley but not the manufactured goods such as bottles and cans.

False

The supply chain management opportunity called postponement involves delaying deliveries to avoid accumulation of inventory at the customer's site.

False

The supply chain management technique to designate one member to monitor and manage inventory is called VMI (Vendor managed inventory).

False

The typical full-service restaurant uses a product-focused process.

False

To find the throughput time with simultaneous processes, compute the time over all paths and choose the shortest path through the system.

False

When using the low-cost strategy for supply chain management, a firm should use buffer stocks to ensure speedy supply.

False

With the "many suppliers" sourcing strategy, the order usually goes to the supplier that offers the highest quality.

False

Work-in-process inventory is devoted to maintenance, repair, and operating materials.

False

Which of the followings regarding the production order quantity model is TRUE?

It relaxes the assumption that all the order quantity is received at one time.

Consider a production line with five stations. Station 1 can produce a unit in 9 minutes. Station 2 can produce a unit in 10 minutes. Station 3 has two identical machines, each of which can process a unit in 12 minutes (each unit only needs to be processed on one of the two machines. Station 4 can produce a unit in 5 minutes. Station 5 can produce a unit in 8 minutes. Which station is the bottleneck station?

Station 2

_____describes the coordination of all supply chain activities, starting with raw materials and ending with a satisfied customer.

Supply Chain Management

At the economic order quantity model, the optimal order quantity occurs when holding costs are equal to setup costs.

True

Design capacity is the theoretical maximum output of a system in a given period under ideal conditions.

True

In cycle counting, the frequency of item counting and stock verification usually varies from item to item depending upon the item's classification.

True

In process-focused facilities, utilization of facilities is low.

True

In the production order quantity (POQ) model, inventory does not arrive in a single moment but flows in at a steady rate, resulting in a larger production/order quantity than in an otherwise identical EOQ problem.

True

In the quantity discount model, it is possible to have a cost-minimizing solution where annual ordering costs do not equal annual carrying costs.

True

Many Suppliers sourcing strategy is particularly common when the products being sourced are commodities.

True

Outsourcing refers to transferring a firm's activities that have traditionally been internal to external suppliers.

True

Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage.

True

Service blueprinting is a process analysis technique that focuses on the customer and the provider's interaction with the customer.

True

The assembly line is a classic example of a repetitive process.

True

The reorder point is the inventory level at which action is taken to replenish the stocked item.

True

The service level is the probability that demand will not be greater than supply during lead time; it is the complement of the probability of a stockout.

True

A fried chicken fast-food chain that acquired feed mills and poultry farms has performed which of the following?

backward integration

Effective capacity is the

capacity a firm expects to achieve given the current operating constraints

In the mass service and service factory quadrants of the service process matrix, the operations manager could focus on all of the following except

customization.

A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store. The furniture maker is practicing which of the following?

drop shipping

Service blueprinting

focuses on the provider's interaction with the customer.

A product-focused process is commonly used to produce

high-volume, low-variety products.

Which sourcing strategy is particularly common when the products being sourced are commodities?

many suppliers

Which of the following is NOT one of the strategies for improving service productivity?

mass customization

Goods made to order are typical of ________ and ________ approaches while goods made to forecast are typical of ________ and ________ approaches

process, mass customization; repetitive, product

Frito-Lay is to ________ focus as Harley Davidson is to ________ focus

product, repetitive

Which of the following is NOT one of the risk mitigation tactics for the supply chain risk category of suppliers failing to deliver?

require overnight delivery

Which of the following is NOT one of the four main types of inventory?

safety stock inventory

A restaurant runs a special promotion on lobster and plans to sell twice as many lobsters as usual. When this large order is sent to the distributor, the distributor assumes the large size is a trend, not a one-time event. The distributor therefore places an even larger order with the lobsterman. This behavior is the result of which of the following?

the bullwhip effect

A disadvantage of the "few suppliers" sourcing strategy is

the high cost of changing partners.

Which of the following would NOT generally be a motive for a firm to hold inventories?

to minimize holding costs

Which of the following is NOT an advantage of a virtual company?

total control over the organization