MGT 302 - Exam 1

If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units, which of the following is the capacity utilization rate? 2.33 300 1.33 1.00 0.75

0.75 300 units of output divided by 400 units best operating level = 0.75

Using the assembly-line balancing procedure, which of the following is the theoretical minimum number of workstations if the task times for the six tasks that make up the job are 4, 6, 7, 2, 6, and 5 minutes, and the cycle time is 10 minutes? 6 5 None of these 8 3

3 Using equation 6.4, (4 + 6 + 7 + 2 + 6 + 5) / 10 = 3.

Using the assembly-line balancing procedure, which of the following is the required cycle time in minutes per unit if the daily production time is 480 minutes and the required daily output is 50 units? 50 0.104 Cannot be determined from the information above 480 9.6

9.6 Using equation 6.3, 480 minutes / 50 units = 9.6 minutes per unit.

The optimal utilization rate of a service operation is context specific. Planning for low utilization rates is appropriate when both the degree of uncertainty and the stakes are high as in emergency response services. Which of the following services should plan for a high utilization rate? A stage performance A hospital ambulance service An expensive restaurant A customer help line The fire department

A stage performance Answers A, B, C and E are eliminated because service quality declines as utilization nears 100%. All sports teams like sellouts, not only because of the virtually 100 percent contribution margin of each customer, but because a full house creates an atmosphere that pleases customers, motivates the home team to perform better, and boosts future ticket sales. Stage performances share this phenomenon.

Which of these expressions is Little's Law? Inventory = Throughput rate × Flow time Inventory/Flow time = Throughput rate: All of the above Throughput Rate/Inventory = 1/Flow Time Inventory/Throughput Rate = Flow time

All of above Each of these math expressions is equivalent and each expresses the relationships known as Little's Law.

What is an important difference between capacity planning in services as contrasted to capacity planning in manufacturing operations? Location All of these Time Utilization impacts service Demand volatility

All of these: Location Time Utilization impacts service Demand volatility Although capacity planning in services is subject to many of the same issues as manufacturing capacity planning, and facility sizing can be done in much the same way, there are several important differences. Service capacity is more time and location dependent, it is subject to more volatile demand fluctuations, and utilization directly impacts service quality.

What is the name of the process in which one company studies the processes of another firm in order to identify best practices? Business analytics Benchmarking Outsourcing Continuous improvement Forecasting

Benchmarking Firms have long studied the best practices of successful firms through the process called benchmarking.

The customer order decoupling point determines the position of what in the supply chain?

Inventory Inventory allows different processes in the supply chain to operate independently and thus can decouple those processes. The storage of inventory separates the customer ordering and manufacturing processes.

Capacity planning involving consideration of production scheduling and inventory position is characterized by which one of the following time durations? Upcoming Long-range Current Short-range Intermediate-range

Short-range Short range: less than one month. This is tied into the daily or weekly scheduling process and involves making adjustments to eliminate the variance between planned and actual output.

What is the term used to describe individuals or organizations that are influenced by the actions of the firm? phere of influence Corporate relatives Reporting parties Stakeholders Society

Stakeholders Those who are influenced by the actions of the firm are called stakeholders. This group obviously includes shareholders, but many others as well, such as customers, vendors, and communities.

Which historical development in OSCM relates to the ability of a firm to maintain balance in a system, considering the ongoing economic, employee, and environmental viability of the firm? Eco-consciousness Sustainability Global partnering Total quality management Regeneration

Sustainability Sustainability is a recent trend in the field of OSCM. It recognizes that no firm operates in a vacuum, and long-term considerations often should take precedence over short-term financial results.

A difference between project and continuous flow categories of process flow structures is which two of the following? The size and bulk of the product Discrete parts moving from workstation to workstation Degree of equipment specialization Profit per unit Being a "Virtual Factory"

The size and bulk of the product In a project layout, the product (by virtue of its bulk or weight) remains in a fixed location. Continuous processes are usually highly automated and, in effect, constitute one integrated machine.

16. If the expected annual demand on a facility is $8 million in products per year and the design capacity is $10 million a year, what is its percent capacity cushion? a. negative 20% b. negative 25% c. 20% d. 25%

d. 25%

ou have just determined the actual number of workstations that will be used on an assembly line to be 8 using the assembly-line balancing procedure. The cycle time of the line is 10 minutes and the sum of all that tasks required on the line is 60 minutes. Which of the following is the correct value for the resulting line's efficiency? 0.500 0.750 None of these 0.650 0.850

0.750 Using equation 6.5, [60 / (8 x 10)] = 0.750.

If the actual output of a piece of equipment during an hour is 500 units and its best operating level is at a rate of 400 units per hour, which of the following is the capacity utilization rate? 1.33 100 0.75 1.25 1.00

1.25 500 units of output divided by 400 units best operating level = 1.25

Various financial data for SunPath Manufacturing for 2015 and 2016 follow. 2015 Output: Sales $300,000 Inputs: Labor $40,000 Raw Materials $45,000 Energy $10,000 Capital Employed $250,000 Other $2,000 2016 Output: Sales $330,000 Inputs: Labor $43,000 Raw Materials $51,000 Energy $9,000 Capital Employed $262,000 Other $6,000 What is the percentage change in the labor partial productivity measure for SunPath between 2015 and 2016?

2.33 The labor partial productivity measure for 2015 is $300,000 divided by $40,000 or 7.5. For 2016 it is $330,000 divided by $43,000 or 7.67. The percentage change between 2015 and 2016, then, is (7.67 - 7.5)/7.5 or 0.17 divided by 7.5 = 2.33%.

oosier Manufacturing operates a production shop that is designed to have the lowest unit production cost at an output rate of 100 units per hour. In the month of July, the company operated the production line for a total of 175 hours and produced 16,900 units of output. What was its capacity utilization rate for the month?

96.6% Capacity utilization is computed as (Capacity Used)/(Best Operating Level). The best operating level is that level of output for which unit cost is minimized and therefore the system is most efficient. This problem is slightly different than most in the text because it gives capacity per hour (CPH). Multiply CPH by the number of hours worked (HW) to get the best operating level for the month. Utilization would then be calculated as: [(CPH)(HW)].

Dell Computer's primary consumer business takes orders from customers for specific configurations of desktop and laptop computers. Customers must select from a certain model line of computer and choose from available parts, but within those constraints may customize the computer as they desire. Once the order is received, Dell assembles the computer as ordered and delivers it to the customer. What type of manufacturing process is described here?

Assemble-to-order Because the computers are made from a fixed set of parts that a customer can choose from, this process would be considered assemble-to-order.

Which of the following basic types of process structures is one which equipment or work processes are arranged according to the progressive steps by which the product is made? Project Manufacturing cell Assembly line Continuous process Workcenter

Assembly line An assembly line is where work processes are arranged according to the progressive steps by which the product is made.

Operations and supply chain management is concerned with the design and management of the entire system that has what function? Creates and delivers a firm's products and services Operates the distribution of goods Procures, sells and transports goods Supplies goods and services to customers Employs people and produces a product

Creates and delivers a firm's products and services All of these are involved in OSCM to some extent, but OSCM covers it all. It is concerned with the entire system that produces and delivers the goods and/or services of the firm.

Compared with a service operation, a manufacturing operation's capacity is which of the following? Subject to more volatile demand fluctuations Utilization more directly impacts quality More dependent on time and location More capable of reacting to demand fluctuations Demand can be smoothed by inventory policies

Demand can be smoothed by inventory policies Service capacity is more time- and location-dependent, (than manufacturing capacity) it is subject to more volatile demand fluctuations, and utilization directly impacts service quality. Also, unlike goods, services cannot be stored for later use.

What are the two characteristics of a product or service that define quality? Speed of delivery and adherence to design specifications Design quality and process quality Feature set and aesthetics Customer service and after-sales support Appearance and feel

Design quality and process quality Two main characteristics define quality. First, a certain level of quality can be designed into the product by specifying certain features, materials, components, etc - this is called design quality. Second, the level to which the process adheres to the design also affects quality by things such as fit and finish, and full functionality - this is called process quality.

The ability to rapidly and inexpensively switch production from one product to another enables what are sometimes referred to as: Economies of shipping Economies of shape Economies of size Economies of scope Economies of scale

Economies of scope Flexible manufacturing systems and simple easily set-up equipment permit rapid low-cost switching from one product to another, enabling what are sometimes referred to as economies of scope.

A manufacturing company has entered into a new contract with a major supplier of raw materials used in the manufacturing process. Under the new arrangement, called vendor managed inventory, the supplier manages their raw material inventory inside the manufacturer's plant, and only bills the manufacturer when the manufacturer consumes the raw material. How is this likely to affect the manufacturer's inventory turnover ratio? It will increase We need more information to answer this question It will decrease It may increase or decrease It will remain unchanged

It will increase This agreement would reduce the average amount of money the firm has invested in raw material, so the inventory turnover ratio should increase

Capacity planning involving acquisition or disposal of fixed assets such as buildings, equipment or facilities is considered as which one of the following planning horizons? Short-range Upcoming Intermediate-range Long-range Current

Long-range Long range: greater than one year. Where productive resources (such as buildings, equipment, or facilities) take a long time to acquire or dispose of, long-range capacity planning requires top management participation and approval.

At a decision point in a decision tree, which machine would you select when trying to maximize payoff when the anticipated benefit of selecting machine A is $45,000 with a probability of 90%; the expected benefit of selecting machine B is $80,000 with a probability of 50% and the expected benefit of selecting machine C is $60,000 with a probability of 75%? Machine A Machine C You would be indifferent between machines A and B Machine B You would be indifferent between machines A and C

Machine C EMV of Machine A = 0.9 x 45,000 = 40,500; EMV of Machine B = 0.5 x $80,000 = $40,000; and EMV of Machine C = 0.75 x 60,000 = $45,000. Since $45,000>$40,500>$40,000 you would select Machine C.

The capacity focus concept can be put into practice through a mechanism called which of the following? Total quality management (TQM) Best operating level (BOL) Capacity utilization rate (CUR) Plant within a plant (PWP) Zero-changeover-time (ZXT)

Plant within a plant (PWP) The capacity focus concept can be operationalized through the mechanism of plant within a plant (PWP).

Which of the following is not a basic type of process structure? Manufacturing cell Assembly line Workcenter Continuous process Product-process matrix

Product-process matrix The formats by which a facility is arranged are defined by the general pattern of work flow; there are five basic structures (project, workcenter, manufacturing cell, assembly line, and continuous process).

Shell Oil Company's motto "People, Planet and Profit" is a real-world implementation of what OSCM concept? Marketing strategy Strategy, information, and processes Corporate motto Supply chain strategy Triple bottom line

Triple bottom line The triple bottom line recognizes that the firm has obligations to society and the environment in addition to the economic success of the firm. These three are the corners of the triple bottom line concept.

Live Trap Corporation received the data below for its rodent cage production unit. OUTPUT 50,000 cages Sales price: $3.50 per unit INPUT Production time 620 labor hours Wages $7.50per hour Raw materials (total cost) $30,000 Component parts (total cost) $15,350 Find the total productivity in Units Sold and Dollars of Sales per Dollar Input.

Units sold 1.00 per dollar input Sales (dollars) $ 3.50 per dollar input Total productivity could be expressed two ways here based on how you express output: in units sold, or dollars of sales. Units sold: 50,000/((620 × $7.50) + $30,000 + $15,350) = 1.00 units sold per dollar input Dollars of sales: (50,000 × 3.5)/((620 × $7.50) + $30,000 + $15,350) = $3.50 dollars in sales per dollar input

Which of the following basic types of process structures is one which similar equipment or functions are grouped together? Continuous process Workcenter Manufacturing cell Project Assembly line

Workcenter A workcenter layout is where similar equipment or functions are grouped together,

Expando, Inc., is considering the possibility of building an additional factory that would produce a new addition to their product line. The company is currently considering two options. The first is a small facility that it could build at a cost of $6 million. If demand for new products is low, the company expects to receive $10 million in discounted revenues (present value of future revenues) with the small facility. On the other hand, if demand is high, it expects $12 million in discounted revenues using the small facility. The second option is to build a large factory at a cost of $9 million. Were demand to be low, the company would expect $10 million in discounted revenues with the large plant. If demand is high, the company estimates that the discounted revenues would be $14 million. In either case, the probability of demand being high is .40, and the probability of it being low is .60. Not constructing a new factory would result in no additional revenue being generated because the current factories cannot produce these new products.

a. Calculate the NPV for the following NPV Small facility $4.8 million = (0.6*10 + 0.4*12) - 6 NPV Do nothing $0 million NPV Large facility $ 2.6 million = (0.6*10 + 0.4*14) - 9 b. The best decision to help Expando is to build the small facility.

Consider the following financial data from the past year for Midwest Outdoor Equipment Corporation. Gross income $25,240,000 Total sales 24,324,000 Total credit sales 18,785,000 Net income 2,975,000 Cost of goods sold 12,600,000 Total assets 10,550,000 Average inventory 2,875,000 Average receivables 3,445,000

a. Compute the receivable turnover ratio The receivables turnover ratio is found by the formula (Annual Credit Sales)/(Average Accounts Receivable). Receivable turnover ratio 5.453 b. Compute the inventory turnover ratio The inventory turnover ratio is found by the formula (Cost of Goods Sold)/(Average Inventory Value). Inventory turnover ratio 4.383 c. Compute the asset turnover ratio The asset turnover ratio is found by the formula (Total Sales)/(Total Assets). Asset turnover ratio 2.306

The Avis Company is a car rental company and is located three miles from the Los Angeles airport (LAX). Avis is dispatching a bus from its offices to the airport every 2 minutes. The average traveling time (a round trip) is 20 minutes.

a. How many Avis buses are traveling to and from the airport? Number of Avis buses 10 The throughput rate is 30 buses per hour. The flow time is 20/60 = 1/3 hours. Inventory = Throughput × Flow time = 30 × 1/3 = 10 buses are traveling to and from the airport at any one time. b. The branch manager wants to improve the service and suggests dispatching buses every 0.5 minutes. She argues that this will reduce the average traveling time (a round trip) to 2.5 minutes . Is she correct? If your answer is negative, then what will the average traveling time be? No , average traveling time is 20 minutes. This reduces the average waiting time, but has no effect on the average traveling time. The average traveling time does not change and will remain 20 min. This would however result in 40 buses being in transit between the airport and the office at any given time.

12. How do you calculate "Value"? a. Quality / Price b. Quality * Price c. Price / Quality d. Price * Quality e. Price / (Average Price)

a. Quality / Price

13. Which is the following is a key component of IKEA's strategy? a. Serve customers who are happy to trade service for cost. b. Relying on third-party manufacturers to design its products. c. Sourcing from new suppliers each year to ensure innovation. d. Sourcing from the low-cost supplier to ensure greatest margin. e. High-touch service.

a. Serve customers who are happy to trade service for cost.

Money Laundry has 10 washers and 15 dryers. All orders are first sent to wash and then to dry. It takes on average 30 minutes to wash one order and 40 minutes to dry.

a. What is the capacity of the washing stage? Capacity of washing stage = 10 × 60/30 = 20 orders/hour b. What is the capacity of the drying stage? Capacity of drying stage = 15 × 60/40 = 22.50 orders/hour c. Identify the bottleneck(s). Washer d. What is the capacity of Money laundry? Capacity of Money laundry = 20 orders/hour e. If Money Laundry would like to increase the capacity by buying one more machine, should they buy a washer or a dryer? Washer The manager, Mr. Money, decided not to buy a machine. He still has 10 washers and 15 dryers. The manager estimates that on average Money Laundry receives eight orders every hour. The manager also finds that on average there are five orders in the washing stage and seven orders in the drying stage. f. What is the utilization of washers, on average? Average utilization = 8 orders/hour / 20 orders/hour = 40% g. What is the utilization of dryers, on average? Average utilization = 8 orders/hour / 22.5 orders/hour = 35.56% h. On average, how long does it take an order to finish the washing process, from the time the order is received? Inventory = 5, Throughput Rate = 8 orders/hour. Flow Time = Inventory/Throughput Rate = 5/8 = 0.625 hour or 37.50 minutes. i. On average, how long does it take an order to finish the drying process, from the time the order finishes the washing process? Inventory = 7, Throughput Rate = 8 order/hour. Flow Time = Inventory/Throughput Rate = 7/8 = 0.875 hour or 52.50 minutes. j. On average, how long does an order stay in Money Laundry? Inventory = 0.625 + 0.875 = 1.5 hour or 90.00 minutes.

The desired daily output for an assembly line is 360 units. This assembly line will operate 450 minutes per day. The following table contains information on this product's task times and precedence relationships: TASK TIME(SECONDS) A 30 B 35 C 30 D 35 E 15 F 65 G 40 H 25 IMMEDIATE PREDECESSOR A -- B -- A C -- A D -- B E -- C F -- C G -- E, F H -- D, G

a. What is the required workstation cycle time to meet the desired output rate? Workstation cycle time: 75 seconds per unit C = production time per day/required output per day = (450 minutes/day)/360 units per day =1.25 minutes per unit or 75 seconds per unit b. Balance this line using the largest number of following tasks. Use the longest task time as a secondary criterion Work Station: I, II, III, IV Task: A-C-E, F, B-G, D-H Idle Time: 0, 10, 0, 15 c. What is the efficiency of your line balance, assuming it is running at the cycle time determined in part a? 91.7% Efficiency = T/ NaC = 275/4(75)= 0.917 or 91.7

11. Dimensions used to screen a product or service as a candidate for purchase are called a. order qualifiers. b. order winners. c. capacity cushions. d. activity-system maps.

a. order qualifiers.

9. The basic notion of economies of scale is that as a plant gets larger and volume increases a. the average cost per unit of output drops. b. the plant's ability to shift production capacity quickly from one product to another increases. c. The capacity cushion increases. d. The quality of the goods produced increase.

a. the average cost per unit of output drops.

Operations and supply chain __________ leverage(s) the vast amount of data in enterprise resource planning systems to make decisions related to managing resources. informatics analytics planning processes management

analytics With the advancements in information systems, and the resultant explosion in the amount of data available to managers, operations and supply chain analytics (and in a broader sense, business analytics) have evolved as a way to help managers use that information to make smart business decisions.

25. Your assembly line runs 24 hours a day, seven days a week. Daily production is 4,000 units. The process takes 12 hours for a unit to flow all the way through the process. Approximately, how many units of work-inprocess are in the assembly line? a. 167 b. 2,000 c. 4,000 d. 8,000 e. 48,000

b. 2,000

22. An assembly line operates 24 hours per day with a desired output of 288 units per day. What is the desired workstation cycle time to meet the desired output rate? a. 0.0833 minutes b. 5.0 minutes c. 12 minutes d. 5.0 hours e. 12 hours

b. 5.0 minutes

3. Which example below best exemplifies a "core service"? a. A car that is sold with a warrantee b. A company providing tours of New York City, including a free lunch c. Legal advice from your attorney d. Buying chemicals in bulk

b. A company providing tours of New York City, including a free lunch

14. Which of the following should be true if your facility's output equals the Best Operating Level? a. Labor costs are minimized b. Average unit cost is minimized c. Daily production is maximized d. Machine utilization is maximized

b. Average unit cost is minimized

5. is defined as doing something at the lowest possible cost. a. Effectiveness b. Efficiency c. Value d. Six Sigma

b. Efficiency

1. Which of the following is a total measure of productivity? a. Outputs / Material b. Outputs / Inputs c. Capital / Materials d. Capital / Inputs e. Quality / Price

b. Outputs / Inputs

7. Which of the following is a true statement about services? a. Services typically require a lower degree of customization b. Services are produced and consumed simultaneously c. Services do not often require interaction with the customer d. Services are more capital intensive and less labor intensive e. Service customers' needs and expectations are easier to identify and measure

b. Services are produced and consumed simultaneously

4. The "Triple Bottom Line" refers to evaluating a firm against a. their receivables-, inventory- and asset-turnover ratios. b. social, economic, and environmental criteria. c. strategy, vision and tactics. d. their revenues, margins, and profits.

b. social, economic, and environmental criteria.

10. When a company seeks to match the benefits of a successful position while maintaining its existing position, it is called a. operations capability analysis. b. straddling. c. order qualifying. d. order winning. e. economies of scale.

b. straddling.

18. In a particular node on a decision tree, there is a 20% chance the firm will earn $12 million, a 70% chance they will earn $10 million, and a 10% chance they will earn $8 million. What is the expected value of this node? a. $7.0 million b. $10.0 million c. $10.2 million d. $28.0 million e. $30.0 million

c. $10.2 million

6. Consider the following financial data (in thousands of dollars) from the past year and compute the inventory turnover ratio. Total Sales 5,000 Cost of Goods Sold 2,000 Total Assets 2,500 Average Inventory 500 Average Receivables 1,000 a. 10 b. 5 c. 4 d. 2 e. 0.1

c. 4

23. You are the supervisor for an assembly line where on average 400 units are produced in an eight-hour shift. Your accountant walked the line and determined that there are 200 units currently in process in the line. How long does it take for a unit to flow through the assembly line from beginning to end? a. 30 minutes b. 2 hours c. 4 hours d. 16 hours e. 32 hours

c. 4 hours

24. Your assembly line has 24 hours of production time a day. The work-in-process inventory is known to be 2,000 units. What is the daily throughput rate if it takes 6 hours for a unit to flow through the process? a. 333.3 b. 500 c. 8,000 d. 32,000 e. 192,000

c. 8,000

20. Using the assembly-line balancing procedure, the number of workstations that will be used on an assembly line is 6. The cycle time of the line is 5 minutes and the sum of all the tasks required on the line is 25 minutes. What is the line's efficiency? a. 20% b. 50% c. 83% d. 120% e. 500%

c. 83%

17. If an automotive assembly plant's best operating level is 400 cars per day and the plant was currently operating at 360 cars per day, the percent capacity utilization would be a. negative 10% b. 10% c. 90% d. 111%

c. 90%

19. A production environment where pre-assembled components, subassemblies, and modules are put together in response to a specific customer order is called: a. Make to Order b. Make to Stock c. Assemble to Order d. Engineer to Order

c. Assemble to Order

21. You, John, and Qin are doing dishes at your Grandma's house. Qin is washing, John is rinsing, and you are drying. It quickly becomes obvious that John and Qin have slack, and you are the bottleneck. You get Nelson to help you dry (even though he is not as good at drying dishes as your are). John hands the first plate to you and you dry it, John hands the second plate to Nelson and he dries it, John hands the third plate to you and you dry it, etc. By adding Nelson to your process, you have illustrated what technique? a. Splitting the task b. Sharing the task c. Using parallel workstations d. Using a more skilled worker e. Quick changeover time

c. Using parallel workstations

15. A company is considering three options; do nothing, build a small factory, or build a large factory. A small factory cost $10M and the company expects it would generate additional discounted revenues of $15M in a growing economy and $14M in a stagnant economy. A large factory cost $12M and the company expects it would generate additional discounted revenues of $20M in a growing economy and $14M in a stagnant economy. Your economist has estimated the probability of a growing economy is 0.8 and a stagnant economy at 0.2, Using the expected value criterion, which option should the company pursue? a. do nothing b. build the small factory c. build the large factory

c. build the large factory

2. Which of the following would Miami University most likely NOT consider as part of its triple bottom line? a. Miami's relationship with the Oxford community b. Miami's tons of waste sent to landfill c. Miami's emission of greenhouse gases d. Miami's classroom capacity utilization rate

d. Miami's classroom capacity utilization rate

8. Two domestic airlines flying different routes with different seasonal demands exchange aircrafts when one's routes are heavily used and the other's are not. This strategy is known as: a. Straddling b. Mass customization c. Outsourcing d. Sharing capacity e. Product-Service bundling

d. Sharing capacity

A firm's strategy should describe how it intends to create and sustain value for _________. its employees its customers its chief executive officer its goods and services its current shareholders

its current shareholders A firm has a responsibility to its shareholders to create and sustain value in exchange for the shareholders' investment in the firm.

The assessment of the probability of a negative event against the aggregate severity of the related loss is called ___________. loss planning probability assignment failure analysis risk mapping risk factor rating

risk mapping Risk mapping analyzes the risk of certain events and the resultant cost of those events. Some risks may be so improbable or have such a low cost that the system may consider such losses a cost of doing business.