OM final exam set

True of False: Work in process inventory is devoted to maintenance, repair, and operating materials.

False

True or False? A p-chart is appropriate to plot the number of typographic errors per page of text.

False

True or False? Insurance and taxes on inventory are part of the costs known as setup or ordering costs.

False

True or False? The purpose of process control is to detect when natural causes of variation are present.

False

True or False? Work-in-process inventory is devoted to maintenance, repair, and operating materials.

False

An inventory decision rule states, "When the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered." Which of the following statements is TRUE? One hundred is the reorder point, and 14 is the order quantity. Correct Fourteen is the reorder point, and 100 is the order quantity. The number 100 is a function of demand during lead time. Fourteen is the safety stock, and 100 is the reorder point. None of these is true.

Fourteen is the reorder point, and 100 is the order quantity.

Which of the following is FALSE concerning enterprise resource planning (ERP)? It attempts to automate and integrate the majority of business processes. It shares common data and practices across the enterprise. It is inexpensive to implement. It provides and accesses information in a real-time environment. ERP software promises reduced transaction costs.

It is inexpensive to implement.

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

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

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

a master production schedule

ABC analysis

divides on-hand inventory into three classifications on the basis of annual dollar volume.

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

facility capacity

Pareto Principle

focus resources on the few critical inventory parts and not the many trivial ones.

Types of Inventory

raw materials, work in process, finished goods

Dependent demand

- the demand for item is dependent upon the demand for some other item in the inventory

independent demand models

1. Basic economic order quantity (EOQ) model 2. Production order quantity model 3. Quantity discount model

Functions of Inventory

1. To provide a selection of goods for anticipated demand and to separate the firm from fluctuations in demand 2. To decouple or separate various parts of the production process 3. To take advantage of quantity discounts 4. To hedge against inflation

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

Poka-yoke is the Japanese term for: A) card. B) foolproof. C) continuous improvement. D) fishbone diagram. E) just-in-time production.

B) foolproof.

Which lot-sizing technique orders the quantity needed during a predetermined time between orders? A) economic order quantity B) periodic order quantity C) lot-for-lot D) time fencing E) part-period balancing

B) periodic order quantity

A Six Sigma program has how many defects per million? A) 3.4 B) 34 C) 1000 D) 6 times the standard deviation E) 2700

A) 3.4

A specific product has demand during lead time of 100 units, with a standard deviation during lead time of 25 units. What safety stock (approximately) provides a 95% service level? A) 41 B) 55 C) 133 D) 140 E) 165

A) 41

) Which of the following items is mostly likely managed using a single-period order model? A) Christmas trees B) canned food at the grocery store C) automobiles at a dealership D) metal for a manufacturing process E) gas sold to a gas station

A) Christmas trees

PDCA, developed by Shewhart, stands for which of the following? A) Plan-Do-Check-Act B) Plan-Develop-Check-Accept C) Problem-Develop Solution-Check-Act D) Problem-Do-Continue-Act E) Prepare-Develop-Create-Assess

A) Plan-Do-Check-Act

A production manager at a pottery factory has noticed that about 70 percent of defects result from impurities in raw materials, 15 percent result from human error, 10 percent from machine malfunctions, and 5 percent from a variety of other causes. This manager is most likely using: A) a Pareto chart. B) a scatter diagram. C) a quality loss function. D) a cause-and-effect diagram. E) a flowchart.

A) a Pareto chart.

The goal of inspection is to: A) detect a bad process immediately. B) add value to a product or service. C) correct deficiencies in products. D) correct system deficiencies. E) all of the above

A) detect a bad process immediately.

If a sample of items is taken and the mean of the sample is outside the control limits, the process is: A) likely out of control and the cause should be investigated. B) in control, but not capable of producing within the established control limits. C) within the established control limits with only natural causes of variation. D) monitored closely to see if the next sample mean will also fall outside the control limits. E) producing high quality products.

A) likely out of control and the cause should be investigated.

The "four Ms" of cause-and-effect diagrams are: A) material, machinery/equipment, manpower, and methods. B) material, methods, men, and mental attitude. C) named after four quality experts. D) material, management, manpower, and motivation. E) mentality, motivation, management, and manpower.

A) material, machinery/equipment, manpower, and methods.

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

Consider the following product structure. If the demand for product A is 50 units, how many units of component E will be needed? 250 200 100 500 4

A=50 B=2A ==>(=50*2=100) C=3A+ 1B ==>((3*50)+(1*100)=250) E=2C ==>(2*250=500) =500

Dependent demand and independent demand items differ in that: for any product, all components are dependent-demand items. the need for independent-demand items is forecast. the need for dependent-demand items is calculated. All of these are true. None of these is true.

All of these are true.

Annual dollar volumes =

Annual demand of an item X Cost per unit

Class A - high annual dollar volume Class B - medium annual dollar volume Class C - low annual dollar volume

A~15% of total inventory that represent 70%-80% of dollar volume B~ 30% of total inventory that represent 15%-25% of dollar volume C~ 55% of total inventory that represent 5% of dollar volume

A manager wants to build 3-sigma x-bar control limits for a process. The target value for the mean of the process is 10 units, and the standard deviation of the process is 6. If samples of size 9 are to be taken, what will be the upper and lower control limits, respectively? A) -8 and 28 B) 16 and 4 C) 12 and 8 D) 4 and 16 E) 8 and 12

B) 16 and 4

Cycle counting: A) is a process by which inventory records are verified once a year. B) eliminates annual inventory adjustments. C) provides a measure of inventory turnover. D) assumes that all inventory records must be verified with the same frequency. E) assumes that the most frequently used items must be counted more frequently.

B) eliminates annual inventory adjustments.

One of Britain's largest children's hospitals working with a Ferrari racing team is an example of: A) internal benchmarking. B) external benchmarking. C) Taguchi concepts. D) employee empowerment. E) corporate responsibility.

B) external benchmarking.

) An advantage of the fixed-period inventory system is that: A) safety stock will be lower than it would be under a fixed-quantity inventory system. B) there is no physical count of inventory items when an item is withdrawn. C) no inventory records are required. D) orders usually are for smaller order quantities. E) the average inventory level is reduced.

B) there is no physical count of inventory items when an item is withdrawn.

If the demand for product A is 30 units, and there are 10 units of B on hand and none of C, how many units of part D will be needed? 3 40 110 70 90

B=30-10=20 C=30 D=2B +1C ==>(20*2=40) + (1*30=30) = 70 70

A firm practices a 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 regarding control of service inventories is TRUE? A) Service inventory is a fictional concept, because services are intangible. B) Service inventory needs no safety stock, because there's no such thing as a service stockout. C) Effective control of all goods leaving the facility is one applicable technique. D) Service inventory has carrying costs but no setup costs. E) Good personnel selection, training, and discipline are easy.

C) Effective control of all goods leaving the facility is one applicable technique.

Which of the following statements is NOT true? A) Self-promotion is not a substitute for quality products. B) Inferior products harm a firm's profitability and a nation's balance of payments. C) Product liability transfers from the manufacturer to the retailer once the retailer accepts delivery of the product. D) Quality-be it good or bad-will show up in perceptions about a firm's new products, employment practices, and supplier relations. E) Legislation such as the Consumer Product Safety Act sets and enforces product standards by banning products that do not reach those standards.

C) Product liability transfers from the manufacturer to the retailer once the retailer accepts delivery of the product.

Jars of pickles are sampled and weighed. Sample measures are plotted on control charts. The ideal weight should be precisely 11 oz. Which type of chart(s) would you recommend? A) p-chart B) c-chart C) both an x-bar chart and an R-chart D) an x-bar chart, but not an R-chart E) both a p-chart and a c-chart

C) both an x-bar chart and an R-chart

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

The number of late insurance claim payouts per 100 should be measured with what type of control chart? A) x-bar chart B) R-chart C) p-chart D) c-chart E) either p-chart or c-chart

C) p-chart

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 of the following statements about ABC analysis is FALSE? A) ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings. B) In ABC analysis, "A" items should have tighter physical inventory control than "B" or "C" items have. C) In ABC analysis, forecasting methods for "C" items may be less sophisticated than for "A" items. D) ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings. E) Criteria other than annual dollar volume, such as high holding cost or delivery problems, can determine item classification in ABC analysis.

D) ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings.

What is a popular measurement scale for service quality that compares service expectations with service performance? A) COQ B) SPC C) KAIZEN D) SERVQUAL E) TQM

D) SERVQUAL

A manager tells her production employees, "It's no longer good enough that your work falls anywhere within the specification limits. I need your work to be as close to the target value as possible." Her thinking is reflective of: A) internal benchmarking. B) Six Sigma. C) ISO 9000. D) Taguchi concepts. E) process control charts.

D) Taguchi concepts.

Product X: It is week 1 and there are currently 20 units in stock. We need 300 units at the start of week 5. If there are scheduled receipts planned for week 3 and week 4 of 120 each. Product X has a lead time of 1 week. When and how large of an order should be placed to meet the requirement of 300? A) Week 1, 300 units B) Week 1, 40 units C) Week 5, 40 units D) Week 4, 40 units E) Week 4, 300 units

D) Week 4, 40 units

The number of defects after a hotel room cleaning (sheets not straight, smears on mirror, missed debris on carpet, etc.) should be measured using what type of control chart? A) x-bar chart B) R-chart C) p-chart D) c-chart E) either x-bar chart or R chart

D) c-chart

Which of the four major categories of quality costs is particularly hard to quantify? A) prevention costs B) appraisal costs C) internal failure costs D) external failure costs

D) external failure costs

When sample measurements falls inside the control limits, it means that: A) each unit manufactured is good enough to sell. B) the process limits cannot be determined statistically. C) the process output exceeds the requirements. D) if there is no other pattern in the samples, the process is in control. E) the process output does not fulfill the requirements.

D) if there is no other pattern in the samples, the process is in control.

A firm uses the 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. At the current time, 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

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 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

Techniques for building employee empowerment include: A) building communication networks that include employees. B) developing open, supportive supervisors. C) moving responsibility from both managers and staff to production employees. D) building high-morale organizations. E) All of the above are techniques for employee empowerment.

E) All of the above are techniques for employee empowerment.

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.

An x-bar control chart was examined and no data points fell outside of the limits. Can this process be considered in control? A) Not yet, there could be a pattern to the points. B) Not yet, the R-chart must be checked. C) Not yet, the number of samples must be known. D) Yes. E) Both A and B

E) Both A and B

If the standard deviation of demand is six per week, demand is 50 per week, and the desired service level is 95%, approximately what is the statistical safety stock? A) 8 units B) 10 units C) 16 units D) 64 units E) Cannot be determined without lead time data.

E) Cannot be determined without lead time data.

Which of the following is not a typical inspection point? A) upon receipt of goods from your supplier B) when production or service is complete C) before the product is shipped to the customer D) at the supplier's plant while the supplier is producing E) after a costly process

E) after a costly process

ABC analysis divides on-hand inventory into three classes, generally based upon which of the following? A) item quality B) unit price C) the number of units on hand D) annual demand E) annual dollar volume

E) annual dollar volume

Which category of inventory holding costs has a much higher percentage than average for rapid-change industries such as PCs and cell phones? A) housing costs B) material handling costs C) labor cost D) investment costs E) pilferage, scrap, and obsolescence

E) pilferage, scrap, and obsolescence

Which of the following should be higher in P systems than Q systems? A) lead time B) demand C) order size D) order spacing E) safety stock

E) safety stock

What refers to training and empowering frontline workers to solve a problem immediately? A) just-in-time B) poka-yoke C) benchmarking D) kaizen E) service recovery

E) service recovery

If the process average is in control, then the process range must also be in control. True False

False

Insurance and taxes on inventory are part of the costs known as setup or ordering costs. True False

False

) True or False? Continuous improvement is based on the philosophy that any aspect of an operation can be improved.

True

Internal failure costs are associated with scrap, rework, and downtime. True False

True

Mistakes stemming from workers' inadequate training represent an assignable cause of variation. True False

True

The quantity required of a dependent demand item is computed from the demand for the final products in which the item is used. True False

True

True of False: A major challenge in inventory management is to maintain a balance between inventory investment and customer service.

True

True or False? A major challenge in inventory management is to maintain a balance between inventory investment and customer service.

True

True or False? Averages of small samples, not individual measurements, are generally used in statistical process control.

True

True or False? Kaizen is similar to TQM in that both are focused on continuous improvement.

True

True or False? Mean charts and range charts complement one another, one detecting shifts in process average, the other detecting shifts in process dispersion.

True

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

True

True or False? Some degree of variability is present in almost all processes.

True

True or False? The lot-for-lot lot-sizing technique is particularly appropriate when demand is not very smooth and set up cost is small compared to holding cost.

True

"The employee cannot produce products that on average exceed the quality of what the process is capable of producing" expresses a basic philosophy in the writings of: Armand Feigenbaum. Philip B. Crosby. W. Edwards Deming. Vilfredo Pareto. Joseph M. Juran.

W. Edwards Deming.

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

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

Enterprise resource planning (ERP): seldom requires software upgrade or enhancement. does not integrate well with functional areas other than operations. is inexpensive to implement. automates and integrates the majority of business processes. All of these

automates and integrates the majority of business processes.

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

breaks the aggregate plan into greater detail.

Effective use of MRP and other dependent demand models does not require which of the following? cost of individual components bill of materials master production schedule inventory availability lead times

cost of individual components

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? strategic planning intermediate-range plans long-range plans demand options short-range plans

intermediate-range plans

The economic order quantity (EOQ) model

is one of the most commonly used inventory-control techniques Important assumptions: Demand is known, constant, and independent Lead time is known and constant Receipt of inventory is instantaneous and complete Quantity discounts are not possible Only variable costs are setup (or ordering) and holding Stockouts can be completely avoided

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: the January requirement is below level production of 420 units. level production is approximately 1000 units per day. the firm must hire workers between December and January. level production of 420 units per day is below the January requirement. level production is approximately 420 units per month.

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? accurate scheduling of labor-hours to assure quick response to customer demand an on-call labor resource that can be added or deleted to meet unexpected demand flexibility in rate of output or hours of work to meet changing demand little flexibility in worker hours to decrease the burden on management flexibility of individual worker skills that permits reallocation of available labor

little flexibility in worker hours to decrease the burden on management

To use revenue management strategies, a business should have which combination of costs? high variable and high fixed low variable and high fixed high variable and low fixed low variable and low fixed either high variable and high fixed or low variable and high fixed

low variable and high fixed

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

master production schedule

setup cost

the cost to prepare a machine or process for manufacturing an order

holding costs

the costs of holding or "carrying" inventory over time

ordering costs

the costs of placing an order and receiving goods

Independent demand

the demand for item is independent of the demand for any other item in inventory