FOM Final Exam
A certain type of computer costs $1,000, and the annual holding cost is 20% of the value of the item. Annual demand is 1,000 units, and the order cost is $40 per order. What is the economic order quantity?
20
What is inventory percentage? (Percent invested in inventory)
40.2%
In the example above, what is Weeks of supply?
40.7
A production order quantity problem has a daily demand rate = 10 and a daily production rate = 50. The production order quantity for this problem is approximately 600 units. What is the maximum inventory for this problem?
480
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
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
The annual demand for an item is 10,000 units. The cost to process an order is $75 and the annual inventory holding cost is 20% of item cost. What is the optimal order quantity, given the following price breaks for purchasing the item?
5000
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)
55
Departments A, B, C, and D need to be assigned to four rooms 1, 2, 3, and 4. These rooms are arranged in a row, in that order, with 20 meters between each. The departmental work flows are contained in the table below. What is the material handling total of assigning A-1, B-2, C-3, D-4?
5500
An assembly line is assigned as follows. Station 1- task A, B, and C. Station 2- task D. Station 3- task E and F. The task times are 7, 3, 2, 9, 4, and 5 minutes respective to A, B, C, D, E, and F. Calculate the efficiency. (Assume that there is no precedence relationships between the tasks, i.e. they can be performed in any order)
83.3%
If a factory wants to cut its current lot size in half, by what proportion must setup cost change? ___ A) Setup cost must be cut to one fourth its current value. B) Setup cost must also be cut in half from its current value. C) Setup cost must double from its current value. D) Cannot be determined. E) Setup cost must quadruple from its current value.
A) Setup cost must be cut to one fourth its current value.
A product has annual demand of 100,000 units. The plant manager wants production to follow a four-hour cycle. Based on the following data, what setup cost will enable the desired production cycle? ____daily demand = 400 per day (250 days per year), daily production = 4000 units per day, H = $40 per unit per year, and Q = 200 A) $3.60 B) $7.20 C) $15.60 D) $18.00 E) $25.20
B) $7.20
A production line is to be designed to make 500 El-More dolls per day. Each doll requires 11 activities totaling 16 minutes of work. The factory operates 750 minutes per day. What is the required cycle time for this assembly line? A) 0.5 minutes B) 1.5 minutes C) 2 minutes D) 5,500 minutes E) 4.26 minutes
B) 1.5 minutes
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? A) postponement B) drop shipping C) channel assembly D) passing the buck E) float reduction
B) drop shipping
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? A) double marginalization B) the bullwhip effect C) CPFR D) postponement E) vendor-managed inventory
B) the bullwhip effect
A work cell is scheduled to build 120 digital light processor (DLP) assemblies each week. These assemblies are later installed into home theater projection systems. The work cell has 7.5 hours of productive work each day, six days per week. What is takt time for this cell? A) 12 minutes B) 18.6 minutes C) 22.5 minutes D) 30 minutes E) 36.2 minutes
C) 22.5
Lead time for cakes is 2 days with daily demand of 10 cakes and a safety stock of ½ a day. Each container (kanban) holds 5 cakes. What is the correct number of kanbans? A) 1 B) 4 C) 5 D) 10 E) 25
C) 5
A manufacturer took the following actions to reduce inventory. Which of these is generally NOT accepted as a JIT action? A) It used a pull system to move inventory. B) It produced in ever smaller lots. C) It picked the supplier that offered the lowest price based on quantity discounts. D) It required deliveries directly to the point of use. E) It worked to reduce the company's in-transit inventory.
C) It picked the supplier that offered the lowest price based on quantity discounts.
Which of the following is specifically characterized by the elimination of waste through a focus on exactly what the customer wants? ____ A) Just-in-time (JIT) B) Toyota Production System (TPS) C) Lean operations D) kanban E) Material requirements planning (MRP)
C) Lean operations
Which of the following is NOT a source of variability? ____ A) Employees, machines, and suppliers produce units late. B) Customer demand is unknown. C) Suppliers deliver units conforming to standards. D) Engineering drawings are inaccurate. E) Drawings or specifications are incomplete.
C) Suppliers deliver units conforming to standards.
A fried chicken fast-food chain that acquired feed mills and poultry farms has performed which of the following? A) horizontal integration B) forward integration C) backward integration D) current transformation E) job expansion
C) backward integration
A bakery uses 5 kanban containers that each holds 3 cakes. Daily demand is 10 cakes and safety stock is 5 cakes. What is the lead time? A) 8 days B) 5 days C) 3 days D) 1 day E) 1/2 day
D) 1 day
Which one of the following scenarios represents the use of a kanban to reduce inventories? ____ A) A supervisor tells the operators to stay busy and start producing parts for next month. B) A "supplier" work center signals the downstream workstation that a batch has been completed. C) A supervisor signals to several work centers that the production rate should be changed. D) A "customer" work center signals to the "supplier" workstation that more parts are needed. E) An operator asks the next station's operator to help him fix his machine.
D) A "customer" work center signals to the "supplier" workstation that more parts are needed.
All EXCEPT which of the following statements about ABC analysis are true? A) In ABC analysis, inventory may be categorized by measures other than dollar volume. B) ABC analysis categorizes on-hand inventory into three groups based on annual dollar volume. C) ABC analysis is an application of the Pareto principle. D) ABC analysis suggests that all items require the same high degree of control. E) ABC analysis suggests that there are the critical few and the trivial many inventory items.
D) ABC analysis suggests that all items require the same high degree of control.
Which of the followings regarding the production order quantity model is TRUE? A) It applies only to items produced in the firm's own production departments. B) It relaxes the assumption that the demand rate is constant. C) It minimizes the total production costs. D) It relaxes the assumption that all the order quantity is received at one time. E) It minimizes inventory.
D) It relaxes the assumption that all the order quantity is received at one time.
Which of the following statements regarding a pull system is TRUE? ____ A) Large lots are pulled from upstream stations. B) Work is pulled to the downstream stations before it is actually needed. C) Manufacturing cycle time is increased. D) Problems become more obvious. E) None of the above is true of a pull system.
D) Problems become more obvious.
The fixed-position layout would be MOST appropriate in which of the following settings? A) a fast-food restaurant B) a doctor's office C) a casual dining restaurant D) a cruise ship assembly facility E) a washing machine assembly line
D) a cruise ship assembly facility
Which one of the following is a characteristic of a JIT partnership? A) third-party logistics never used B) maximal product specifications imposed on supplier C) active pursuit of vertical integration D) removal of incoming inspection E) frequent deliveries in large lot quantities
D) removal of incoming inspection
Which of the following is NOT one of the risk mitigation tactics for the supply chain risk category of suppliers failing to deliver? A) use multiple suppliers B) effective contracts with penalties C) subcontractors on retainer D) require overnight delivery E) pre-planning
D) require overnight delivery
Which of the following is NOT one of the four main types of inventory? A) raw material inventory B) work-in-process inventory C) maintenance/repair/operating supply inventory D) safety stock inventory E) finished-goods inventory
D) safety stock inventory
A disadvantage of the "few suppliers" sourcing strategy is: A) the risk of not being ready for technological change. B) the lack of cost savings for customers and suppliers. C) possible violations of the Sherman Antitrust Act. D) the high cost of changing partners. E) the suppliers are less likely to understand the broad objectives of the procuring firm and the end
D) the high cost of changing partners.
Which of the following would NOT generally be a motive for a firm to hold inventories? A) to decouple various parts of the production process B) to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand C) to take advantage of quantity discounts D) to minimize holding costs E) to hedge against inflation
D) to minimize holding costs
Which of the following statements regarding the reorder point is TRUE? 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.
E) All of the above are true.
Which of the following reduces product handling, inventory, and facility costs, but requires both (1) tight scheduling and (2) accurate inbound product information? A) phantom-docking B) random stocking C) ASRS D) customizing E) cross-docking
E) cross-docking
Which of the following is NOT an advantage of a virtual company? A) speed B) flexibility C) low capital investment D) specialized management expertise E) total control over the organization
E) total control over the organization
What is the primary reason why retailers tend to locate high-draw items around the periphery of the store? A) More shelf space for those popular items is available around the periphery. B) There will be less congestion of customers than there would be in the middle. C) This arrangement will help to maximize customer exposure to other items in the store. D) It is easier to put large advertising signs on the outside walls right next to the items. E) This arrangement allows customers to travel through the store as quickly as possible.
This arrangement will help to maximize customer exposure to other items in the store.
ABC analysis classifies inventoried items into three groups, usually based on annual units or qualities used.
false
In the simple EOQ model, if the carrying cost were to double, the EOQ would also double
false
The dominant problem associated with the fixed-position layout is that workers are fixed in position, and they cannot be reassigned
false
The number of kanbans decreases as safety stock is increased
false
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
a sequence of kanbans pushes material through the manufacturing process
false
customer demand will always remain an unknown, so it is not considered a source of variability
false
process-oriented layouts typically have low levels of work-in-process inventory
false
safety stock in inventory systems depends only on the average demand during the lead time
false
the biggest advantage of a product layout is its flexibility to handle a varied product mix
false
the supply chain for a brewery would include raw ingredients such as hops and barely but not the manufactured goods such as bottles and cans
false
the supply chain management technique to designate one member to monitor and manage inventory is called VMI (Vendor managed inventory)
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
One of the major advantages of process-oriented layouts is: A) high equipment utilization. B) large work-in-process inventories. C) flexibility in equipment and labor assignment. D) smooth and continuous flow of work. E) small work-in-process inventories.
flexibility in equipment and labor assignment.
The concept of customizing in a warehouse layout: A) is possible, but it causes serious loss of oversight of the quality function. B) cannot be considered seriously in today's high efficiency factories. C) is theoretically sound, but several years away in practice. D) incorporates value-added activities in warehouses. E) locates stock wherever there is an open location
incorporates value-added activities in warehouses.
Which sourcing strategy is particularly common when the products being sourced are commodities? A) few suppliers B) many suppliers C) keiretsu D) vertical integration E) virtual companies
many suppliers
The central problem in product-oriented layout planning is: A) minimizing material handling within workstations. B) minimizing labor movement between workstations. C) equalizing the space allocated to the different workstations. D) maximizing equipment utilization. E) minimizing the imbalance in the workloads among workstations.
minimizing the imbalance in the workloads among workstations.
"A special arrangement of machinery and equipment to focus on production of a single product or group of related products" describes a work cell layout type
true
Many suppliers sourcing strategy is particularly common when the products being sourced are commondities
true
Product storage is an example of waste in the sense that no value is added
true
Servicescape refers to the physical surrounding in which the service is delivered.
true
The concept of customizing in a warehouse layout incorporates value-added activities in warehouses
true
The product-oriented layout's main objective is to equalize the task time for each station
true
a blanket order is a long-term purchase commitment to a supplier for items that are to be delivered against short-term releases to ship
true
cross-docking processes items as they are received, rather than placing them in storage
true
drop shipping means the supplier will ship directly to the end customer, rather than to the seller
true
hidden problems are generally uncovered during the process of reducing inventory
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 the production order quality (POQ) model, inventory does not arrive in a single moment but flows in at a steady rate, resulting in a larger production/order quality than in an otherwise identical EOQ problem
true
in the quality discount model, it is possible to have a cost-minimizing solution where annual ordering costs do not equal to annual carrying costs
true
one guideline for a retail layout is to locate high-draw items around the periphery of the store
true
outsourcing refers to transferring a firm's activities that have traditionally been internal to external suppliers
true
reducing setup costs reduces lot size and reduces average inventory
true
retail inventory that is unaccounted for between receipt and time is known as shrinkage
true
the 5Ss - sort/segregate, simplify/straighten, shine/sweep, standardize, and sustain/self-disciple - are important to lean production because they act as a means to reduce waste.
true
the first step in reducing setup times is the separation of setup into preparation activities and actual setup, so that as much work as possible can be done while the machine or process is operating
true
the service level is probability that demand will not be greater than supply during lead time; it is the complement of the probability of a stockout
true
variability in manufacturing can occur because engineering drawings or specifications are incomplete or inaccurate
true
work cell layout refers to a special arrangement of machinery and equipment to focus on production of a single product or group of related products
true
