OM Chapter 13

An aggregate plan satisfies forecast demand by potentially adjusting all EXCEPT which of the following? A) production rates B) labor levels C) inventory levels D) overtime work E) facility capacity

E) facility capacity

Which of the following is NOT an input to S&OP? A) capacity decisions B) supply-chain support C) workforce D) inventory on hand E) master production schedule

E) master production schedule

Mixed strategies in aggregate planning may utilize inventory, work force, and production rate changes over the planning horizon.

True

One motive for using demand-influencing aggregate planning options is to create uses for excess capacity within an organization.

True

One of the four things needed for aggregate planning is a logical overall unit for measuring sales and output.

True

One question that operations managers must answer when generating an aggregate plan is whether prices or other factors should be changed to influence demand.

True

Finding an ideal mixed strategy is complicated by the huge number of possible strategies.

True

Graphical techniques are easy to understand and use, but are not well-suited for generating optimal strategies.

True

In aggregate planning, the amount of overtime and the size of the work force are both adjustable elements of capacity.

True

What directly results from disaggregation of an aggregate plan? A) a master production schedule B) priority scheduling C) a transportation matrix D) a capacity-demand matrix E) detailed work schedules

A) a master production schedule

Disaggregation: A) breaks the aggregate plan into greater detail. B) transforms the master production schedule into an aggregate plan. C) calculates the optimal price points for yield management. D) converts product schedules and labor assignments to a facility-wide plan. E) is an assumption required for the use of the transportation model in aggregate planning.

A) breaks the aggregate plan into greater detail.

Which of the following aggregate planning strategies is a demand option? A) changing price B) subcontracting C) varying production levels D) changing inventory levels E) using part-time workers

A) changing price

The objective of aggregate planning is to meet forecast demand while ________ over the planning period. A) minimizing cost B) maximizing service level C) minimizing stock out D) minimizing fixed cost E) all of the above

A) minimizing cost

Under which of the following do planning tasks associated with job assignments, ordering, job scheduling, and dispatching typically fall? A) short-range plans B) intermediate-range plans C) long-range plans D) mission-related planning E) strategic planning

A) short-range plans

Which of the following actions is consistent with the use of level scheduling? A) use inventory to meet demand requirements B) use overtime to meet higher-than-average demand requirements C) vary production levels to meet demand requirements D) vary work force to meet demand requirements E) none of the above

A) use inventory to meet demand requirements

A manager is applying the transportation model of linear programming to solve an aggregate planning problem. Demand in period 1 is 100 units, and in period 2, demand is 150 units. The manager has 125 hours of regular employment available for $10/hour each period. In addition, 50 hours of overtime are available for $15/hour each period. If holding costs are $2 per unit each period, how many hours of regular employment should be used in period 1? (Assume demand must be met in both periods 1 and 2 for the lowest possible cost and that production is 1 unit per hour.) A) 100 B) 125 C) 150 D) 50 E) none of the above

B) 125

Which of these is among the demand options of aggregate planning? A) subcontracting B) back-ordering during high-demand periods C) changing inventory levels D) varying workforce size E) varying production rates through overtime or idle time

B) back-ordering during high-demand periods

Which choice below best describes the counterseasonal product demand option? A) producing such products as lawnmowers and sunglasses during the winter B) developing a mix of products that smoothes out their demands C) lowering prices when demand is slack D) using subcontractors only when demand is excessive E) the breaking of the aggregate plan into finer levels of detail

B) developing a mix of products that smoothes out their demands

Under which of the following do planning tasks associated with production planning and budgeting, as well as setting employment, inventory, and subcontracting levels, typically fall? A) short-range plans B) intermediate-range plans C) long-range plans D) demand options E) strategic planning

B) intermediate-range plans

To use revenue management strategies, a business should have which combination of costs? A) high variable and high fixed B) low variable and high fixed C) high variable and low fixed D) low variable and low fixed E) either A or B

B) low variable and high fixed

Dependence on an external source of supply is found in which of the following aggregate planning strategies? A) varying production rates through overtime or idle time B) subcontracting C) using part-time workers D) back ordering during high demand periods E) hiring and laying off

B) subcontracting

In aggregate planning, which one of the following is not a basic option for altering demand? A) promotion B) subcontracting C) back ordering D) pricing E) personal selling

B) subcontracting

In the service sector, which of the following aggregate planning strategies might direct your client to a competitor? A) using part-time workers B) subcontracting C) changing inventory level D) varying production rates through overtime or idle time E) varying work force size by hiring or layoffs

B) subcontracting

Industries in which revenue management techniques are easiest to apply are those where: A) use tends to be predictable, and pricing tends to be fixed. B) use tends to be predictable, and pricing tends to be variable. C) use tends to be uncertain, and pricing tends to be fixed. D) use tends to be uncertain, and pricing tends to be variable. E) All of the above, i.e., there is no difference.

B) use tends to be predictable, and pricing tends to be variable.

Which of these aggregate planning strategies is a capacity option? A) back ordering B) using part-time workers C) counterseasonal product mixing D) changing price E) promotion

B) using part-time workers

A firm practices a pure chase strategy. Production last quarter was 1000. Demand over the next four quarters is estimated to be 900, 700, 1000, and 1000. Hiring cost is $20 per unit, and layoff cost is $5 per unit. Over the next year, what will be the sum of hiring and layoff costs? A) $500 B) $2,500 C) $7,500 D) $7,000 E) $12,500

C) $7,500

What is the typical time horizon for aggregate planning? A) less than a month B) up to 3 months C) 3 to 18 months D) over one year E) over 5 years

C) 3 to 18 months

Which of the following statements about aggregate planning is TRUE? A) An advantage of the counterseasonal product and service mixing option is that it matches seasonal fluctuations without hiring/training costs. B) In aggregate planning, back orders are a means of manipulating supply while part-time workers are a way of manipulating product or service demand. C) A pure chase strategy allows lower inventories when compared to a pure level scheduling. D) A disadvantage of subcontracting is that it may require skills or equipment outside the firm's areas of expertise. E) The option of varying workforce size by hiring or layoffs is used where the size of the labor pool is small.

C) A pure chase strategy allows lower inventories when compared to a pure level scheduling.

Which of the following statements regarding aggregate planning is TRUE? A) In a pure level strategy, production rates or work force levels are adjusted to match demand requirements over the planning horizon. B) A pure level strategy allows lower inventories when compared to pure chase and hybrid strategies. C) Mixed strategies in aggregate planning may utilize inventory, work force, and production rate changes over the planning horizon. D) Because service firms have no inventory, the pure chase strategy does not apply. E) A disadvantage of the option of changing inventory levels is that it forces abrupt production changes.

C) Mixed strategies in aggregate planning may utilize inventory, work force, and production rate changes over the planning horizon.

Which of the following is NOT one of the four things needed for aggregate planning? A) a logical overall unit for measuring sales and output B) a method to determine the relevant costs C) a mathematical model that will minimize costs over the intermediate planning period D) an aggregate demand forecast for an intermediate planning period E) All of these are needed for aggregate planning.

C) a mathematical model that will minimize costs over the intermediate planning period

Which of the following characteristics makes revenue management UNATTRACTIVE to organizations that have perishable inventory? A) demand can be segmented B) service can be sold in advance of consumption C) capacity is easily changed D) variable costs are low and fixed costs are high E) demand fluctuates

C) capacity is easily changed

A firm uses graphical techniques in its aggregate planning efforts. Over the next twelve months (its intermediate period), it estimates the sum of demands to be 105,000 units. The firm has 250 production days per year. In January, which has 22 production days, demand is estimated to be 11,000 units. A graph of demand versus level production will show that: A) the January requirement is below level production of 420 units. B) level production is approximately 1000 units per day. C) level production of 420 units per day is below the January requirement. D) level production is approximately 420 units per month. E) the firm must hire workers between December and January.

C) level production of 420 units per day is below the January requirement.

Which of the following is NOT one of the successful techniques for controlling the cost of labor in services? A) accurate scheduling of labor-hours to assure quick response to customer demand B) an on-call labor resource that can be added or deleted to meet unexpected demand C) little flexibility in worker hours to decrease the burden on management D) flexibility of individual worker skills that permits reallocation of available labor E) flexibility in rate of output or hours of work to meet changing demand

C) little flexibility in worker hours to decrease the burden on management

Top executives tend to focus their attention on which type of forecasts? A) short-range B) intermediate-range C) long-range D) weather E) the forecast for the next day's absentee levels

C) long-range

Frito-Lay uses aggregate planning to match capacity with demand because of the ________ associated with its specialized processes. A) high variable cost and high fixed cost B) high variable cost and low fixed cost C) low variable cost and high fixed cost D) low variable cost and low fixed cost E) none of the above

C) low variable cost and high fixed cost

Which of the following is NOT an advantage of level scheduling? A) stable employment B) lower absenteeism C) matching production exactly with sales D) lower turnover E) more employee commitment

C) matching production exactly with sales

In level scheduling, what is kept uniform from month to month? A) product mix B) inventory levels C) production/workforce levels D) demand levels E) sub-contracting levels

C) production/workforce levels

Which of the following aggregate planning options is NOT associated with manipulation of product or service demand? A) price cuts or discounts B) promotion C) subcontracting D) counterseasonal products or services E) advertising

C) subcontracting

Which choice best describes level scheduling? A) Daily production is variable from period to period. B) Subcontracting, hiring, and layoffs manipulate supply. C) Price points are calculated to match demand to capacity. D) Inventory goes up or down to buffer the difference between demand and production. E) Overtime is used to handle seasonal demand fluctuations.

D) Inventory goes up or down to buffer the difference between demand and production.

Which of the following is the term used for intermediate-range capacity planning with a time horizon of three to eighteen months? A) material requirements planning B) enterprise resource planning C) strategic planning D) aggregate planning E) job scheduling

D) aggregate planning

Revenue (or yield) management is best described as: A) a situation where management yields to labor demands. B) a situation where the labor union yields to management demands. C) a process designed to increase the rate of output. D) allocation of scarce resources to customers at prices that will maximize revenue. E) management's selection of a product mix yielding maximum profits.

D) allocation of scarce resources to customers at prices that will maximize revenue.

Which of the following aggregate planning strategies is a capacity option? A) influencing demand by changing price B) counterseasonal product mixing C) influencing demand by extending lead times D) changing inventory levels E) influencing demand by back ordering

D) changing inventory levels

A firm uses the pure chase strategy of aggregate planning. It produced 1000 units in the last period. Demand in the next period is estimated at 800, and demand over the next six periods (its aggregate planning horizon) is estimated to average 900 units. Which of the following tactics would be most representative of following a chase strategy? A) add 100 units to inventory in the next period B) add 200 units to inventory in the next period C) hire workers to match the 100-unit difference D) lay off workers to match the 200-unit difference E) implement a lower price point to increase demand

D) lay off workers to match the 200-unit difference

What is the effort to plan the coordination of demand forecasts with functional areas of the firm and its supply chain? A) enterprise resource planning B) material requirements planning C) capacity planning D) sales and operations planning E) new product development

D) sales and operations planning

"An optimal plan for minimizing the cost of allocating capacity to meet demand over several planning periods" best describes which of the following? A) the linear decision rule B) simulation C) the management coefficients model D) the transportation method E) graphical methods

D) the transportation method

Which of the following aggregate planning methods does not work if hiring and layoffs are possible? A) the linear decision rule B) simulation C) the management coefficients model D) the transportation method E) graphical methods

D) the transportation method

Aggregate planning would entail which of the following production aspects at BMW for a 12-month period? A) number of cars with a hi-fi stereo system to produce B) number of two-door vs. four-door cars to produce C) number of green cars to produce D) total number of cars to produce E) B, C, and D

D) total number of cars to produce

Which of the following is NOT consistent with level scheduling? A) varying the use of subcontracting B) finding alternative work for employees during low-demand periods C) using built-up inventory to meet demand requirements D) varying production levels and/or work force to meet demand requirements E) All of the above are inconsistent with the pure level strategy.

D) varying production levels and/or work force to meet demand requirements

Which of the following aggregate planning strategies is known to lower employee morale? A) yield management B) counterseasonal product and service mixing C) changing inventory levels D) varying work force size by hiring or layoffs E) back ordering during high demand periods

D) varying work force size by hiring or layoffs

Which of the following is consistent with a pure chase strategy? A) vary production levels to meet demand requirements B) vary work force to meet demand requirements C) vary production levels and work force to meet demand requirements D) little or no use of inventory to meet demand requirements E) All of the above are consistent with a pure chase strategy.

E) All of the above are consistent with a pure chase strategy.

Which of the following statements regarding aggregate planning in services is FALSE? A) Approaches to aggregate planning differ by the type of service provided. B) Some service organizations conduct aggregate planning in exactly the same way as manufacturing firms, but with demand management taking a more active role. C) Aggregate planning in some service industries may be easier than in manufacturing. D) Labor is the primary aggregate planning vehicle. E) Level scheduling is far more common than using a chase strategy.

E) Level scheduling is far more common than using a chase strategy.

Revenue management is MOST likely to be used in which one of the following situations? A) a fast food restaurant with wide demand fluctuations during the day B) a dental clinic that wants to fill its appointment book C) a firm with a good counterseasonal product mix D) a shipping company that can change its fleet size easily E) an airline attempting to fill "perishable" seats at maximum revenue

E) an airline attempting to fill "perishable" seats at maximum revenue

Disaggregation is the process of breaking the aggregate plan into greater detail; one example of this detail is the master production schedule.

True

Aggregate planning for service firms that provide intangible output deals mainly with: A) smoothing the production rate and finding the optimal size of the workforce. B) capital investment decisions. C) centralized purchasing. D) centralized production. E) planning for human resource requirements and managing demand.

E) planning for human resource requirements and managing demand.

Which of the following aggregate planning options attempts to manipulate product or service demand? A) inventories B) part-time workers C) subcontracting D) overtime/idle time E) price cuts

E) price cuts

Which of the following would most likely fall under the scope of only an operations manager? A) research and development B) new product plans C) capital investments D) facility location/capacity E) setting inventory levels

E) setting inventory levels

Advertising and promotion are methods of manipulating product or service supply in aggregate planning.

False

Because service firms do not inventory their output, a pure chase strategy is not appropriate.

False

One of the demand options of aggregate planning is to vary the workforce by hiring or layoffs.

False

Plans for new product development generally fall within the scope of aggregate planning.

False

The aggregate planning process usually includes dispatching of individual jobs.

False

The level scheduling strategy allows lower inventories than the pure chase strategy.

False

The objective of aggregate planning is usually to meet forecast demand while smoothing employment and driving down inventory levels over the planning period.

False

A hotel room that goes unrented and an airline seat that goes unsold are both examples of perishable inventory in services.

True

Aggregate planning for fast food restaurants is very similar to aggregate planning in manufacturing, but with much smaller units of time.

True

Aggregate planning in manufacturing ties organizational strategic goals to a production plan.

True

Aggregate planning occurs over the medium or intermediate future of 3 to 18 months.

True

Techniques for controlling the cost of labor in services include accurate scheduling of labor hours to assure quick response to customer demand, on-call labor for unexpected demand, flexibility of labor skills for reallocation of available labor, and flexibility in rate of output or hours of work to meet changing demand.

True

The strategies of aggregate planning are broadly divided into demand options and capacity options.

True

The transportation method of linear programming is an optimizing approach to aggregate planning.

True

The use of part-time workers as an aggregate planning option may be less costly than using full-time workers, but it may also reduce quality levels.

True

When developing an aggregate plan, one of the adjustable elements of capacity is the extent of subcontracting.

True