PostTest, Practice Exam 1 & Practice Exam 2
Which of the following is included in the cost of goods sold? General and administrative expenses Overhead Revenue Standard cost
overhead The cost of goods is classically defined as consisting of direct labor, direct material, and overhead.
Given the following, what is the work center backlog? Average input: 100 units/week Average output: 100 units/week Current work in process: 160 units .63 weeks 1 week 1.6 weeks 2.6 weeks
1.6 weeks divide the current number of units (or hours) currently at the work center by the average output Backlog= 160 units/100 units of output per week = 1.6 weeks of load.
Which of the following time periods will result in a smoother forecast that is less swayed by random variability when using the moving average forecast technique? 2 months 3 months 6 months 12 months
12 Using more periods—in this case, 12—will smooth out random variation more. The potential downside is that the smoother forecast will make current trends harder to see.
A manufacturer forecasts annual sales of 70 units but actually sells only 5 units per month. What is the forecast error? 7.1% 14.3% 85.7% 116.7%
14.3% difference between actual demand and forecast demand, stated as an absolute value or as a percentage actual demand is 60 units, and the forecast error is 10/70 = 0.143 = 14.3%.
Which of the following techniques deals with the analysis and planning of logistics and manufacturing during short-, intermediate-, and long-term periods? Transportation management system Advanced planning and scheduling Materials requirements planning Distribution requirements planning
Advanced planning and scheduling Advanced planning and scheduling (APS) techniques deal with the analysis and planning of logistics and manufacturing during short-, intermediate-, and long-term time periods. The five main components of APS systems are demand planning, production planning, production scheduling, distribution planning, and transportation planning.
Which of the following statements is true of inventory when the final product design is continuously influenced by the customer? Large safety stocks must be maintained. Lot-size inventory increases to the finished goods level. Buffer inventory should be held closer to the raw material stage. Customer influence on the product design should not affect inventory levels.
Buffer inventory should be held closer to the raw material stage. Because the final configured item is often not determined until the actual customer order, leaving materials and components in an unfinished state significantly reduces stocked finished goods. The materials and components are then made- or assembled-to-order based on customer specifications. Increasing the lot-size inventory to the finished goods level will only build inventory as the company waits for a customer order with pre-designed configurations. Large safety stocks further increase the amount of finished goods maintained in inventory. Unless the customer requires only off-the-shelf products, the production and inventory functions must be flexible to build any customer configuration.
Which of the following capacity management techniques is most appropriately used to test the feasibility of the plans generated by material requirements planning? Capacity requirements planning Input/output control Rough-cut capacity planning Resource planning
Capacity requirements planning Capacity requirements planning (CRP) refers to the process of determining in detail the amount of labor and machine resources required to accomplish the tasks of production.
Which of the following methods often is employed to make high-variety, low-volume manufacturing operate in a repetitive mode? Flow manufacturing Project production Process layout Cellular manufacturing
Cellular Manufacturing Cellular manufacturing is a process that produces families of parts within a single line or cell of machines controlled by operators who work only within the line or cell. The ease of changeover makes it ideal for high-variety, low-volume products. The other answers are incorrect, as they refer to processes that are more specialized or less flexible and thus unsuited for this purpose.
Which of the following actions is most appropriate when bias is detected in a forecast? Introduce sales programs to reduce the bias. Change the forecasting method or the parameters. Delete the periods of demand that introduced the bias. Record the circumstances that created the bias.
Change the forecasting method or the parameters When bias exists, the forecasting method or its parameters should be changed. Deleting the periods that introduced the bias would not be an acceptable practice, although there may be occasions where the demand history must be adjusted to account for exceptional circumstances. Introducing sales programs does not remove the cause of the bias in the forecast. Recording the circumstances that created the bias may be useful but is not the most appropriate course of action.
Companies typically make final purchasing decisions based on which of the following supplier characteristics? Delivery reliability Product advertising Supplier fixed cost Free-on-board shipping
Delivery reliability Besides perfect quality, a key final purchasing decision point is delivery reliability. Ensuring that purchase deliveries arrive on time is an essential feature of supplier partnerships.
In addition to customer orders, the master production schedule (MPS) might handle which of the following types of demand? Parts list items Dependent demand Interplant orders Bill-of-material items
Dependent demand Interplant demand is usually handled by the master production scheduling system in a manner similar to customer orders.
What is earliest job due date an example of? Available-to-promise Infinite scheduling Dispatching Chase strategy
Dispatching Earliest job due date is actually one of the dispatching rules used to determine which job should be run first at an operation.
How can lead time offset be described? Adding safety lead time to offset unforeseen manufacturing problems Establishing planned order release dates by the duration of the lead time Compensating for the difference between actual and planned lead times Scheduling material to be delivered earlier than the required date
Establishing planned order release dates by the duration of the lead time Lead time offset is the process of back scheduling from the need date by the item lead time to establish an order release date.
In which facility would product unit costs most likely be reduced through a setup reduction program? AHighHighLongManyManyFacility BHighLowShortFewManyFacility CLowHighLongManyFewFacility DLowLowShortFewFew Facility A Facility B Facility C Facility D
Facility C Low production volume means that a lot of small orders are released, high product variety means that a number of different products can be produced, and many operations per product means that a lot of setup is being performed.
When designing a forecasting system, which of the following principles of forecasting needs to be integrated into the design in order to improve the forecast system over time? Forecasts are more accurate for groups or families. Forecasts are more accurate for nearer time periods. Forecasts are usually wrong. Forecasts should include an estimate of error.
Forecasts should include an estimate of error An effective forecasting system must have a method of estimating and managing forecast error built into its design. The other answers refer to the general condition of forecasting that is assumed in every system
Which function of inventory involves the purchase of additional inventory by buyers who expect prices to rise? Anticipation Hedge Transportation Fluctuation
Hedge Purchasing additional inventory is a hedge against future price increases, leading to reduced overall costs if an increase does occur.
Which of the following quantitative techniques responds the quickest to trends? Expert opinion High alpha factor exponential smoothing Seasonal index Moving average
High alpha factor exponential smoothing High alpha factor exponential smoothing responds the quickest to trends. A moving average does not respond well to trends. Expert opinion is a qualitative technique that does not determine trends well, and seasonal indexes are not used for trend calculations.
How should a forecast for snowmobile sales for the coming year be constructed? In the same schedule as production In the same schedule as shipping In weeks In the same schedule as customer orders
In the same schedule as customer orders The forecast should be constructed in the same schedule as that in which sales from customer orders are expected for the coming year. Note that the forecast will probably need a seasonality component due to the nature of the product. The production schedule will be influenced by the expected lead time required to produce the snowmobiles, and it will precede the shipping schedule for the snowmobiles. The shipping schedule will be influenced by the arrivals from production and the lead times required to deliver the snowmobiles through the delivery supply chain to finally reach the customer who placed the order. The schedules throughout the supply chain will be in the time increments needed for each to coordinate with all the other components of the snowmobile supply chain.
What type of demand inventory ordering model includes fixed reorder cycles, fixed reorder quantities, optional replenishment, and hybrid models? Material requirements planning Kanban Drum-buffer-rope Independent
Independent independent demand inventory ordering models include fixed reorder cycles, fixed reorder quantities, optional replenishment, and hybrid models, among others. Dependent demand inventory ordering models include material requirements planning, kanban, and drum-buffer-rope.
Projections based on historical sales information are which of the following types of forecasting methods? Quantitative Extrinsic Intrinsic Qualitative
Intrinsic Intrinsic forecasts are based on internal factors, such as an average of past sales, knowledge of seasonal spending habits, etc
Which of the following identifies all of the components of a physical distribution system? Material handling, transportation, warehouses, distribution inventory, protective packaging, and order processing and communication Material handling, transportation, warehouses, distribution inventory, protective packaging, and reverse logistics Material handling, transportation, warehouses, distribution inventory, order processing and communication, and reverse logistics Material handling, transportation, warehouses, protective packaging, order processing and communication, and services
Material handling, transportation, warehouses, distribution inventory, protective packaging, and order processing and communication Reverse logistics and services are not considered to be parts of a physical distribution system.
Which of the following is typically a production activity control (PAC) responsibility in a flow manufacturing environment? Coordinating changes in customer orders Determining the capacity required each day Determining the cost of production daily Monitoring the output of each production line
Monitoring the output of each production line PAC is responsible for executing the master production schedule and material requirements plan. It releases work orders to manufacturing and monitors work order completion, work-in-process, lead times, work center efficiency, operation times, etc.
New Safety Stock Equation
New Safety Stock = Old Safety Stock x Square Root of (New Lead Time Interval/Old Lead Time Interval)
Which of the following definitions best describes capacity planning? Extra capacity that is added to a system after capacity for expected demand is calculated Resources needed to produce the projected level of work over a time horizon Process of determining the amount of capacity required for production in the future Ability to do rough-cut capacity planning using a simulated master production schedule
Process of determining the amount of capacity required for production in the future The goal of capacity planning is to determine how much capacity is going to be required to execute the firm's production plans.
Which of the following roles of a finished goods warehouse deals with the grouping of different items into an order? Kitting Product mixing Service Transportation consolidation
Product Mixing Product mixing deals with the grouping of different items into an order and the economies that warehouses can provide in doing this. Without a distribution center, customers would have to order and pay LTL transport from each source. Using a distribution center, orders can be placed and delivered from a central location.
Which of the following statements best describes flow manufacturing? Production is performed by a team created especially for that purpose. Production is performed by a series of subcontractors. Production is performed on a small range of products using the same sequence of operations. Production is performed in lots passing through functional departments.
Production is performed on a small range of products using the same sequence of operations. Flow manufacturing is concerned with the production of a small number of high-volume standard products produced repetitively or in a continuous manufacturing environment. Flow production does not mean that subcontractors are used. Since the products are highly standardized, relatively small in variety, and produced repetitively, special manufacturing teams are not needed. The production resources are usually organized into some form of work cell, not in lots passing through functional departments as in a job shop.
With which of the following modes of transportation does the carrier typically have the highest fixed costs? Rail Air Road Water
Rail In contrast to variable costs, fixed costs do not change with the volume of goods carried. Railways have large fixed costs, for example, tracks, terminals, and vehicles.
What is production activity control responsible for? Purchasing components Releasing work orders to manufacturing Running capacity requirements planning Creating the material requirements plan
Releasing work orders to manufacturing Production activity control is the function of routing and dispatching the work to be accomplished through the production facility.
Which plan bridges strategic and business plans with the master production schedule and execution plans? Sourcing and purchasing Project Sales and operations Expansion
Sales and operations Executed properly, the sales and operations planning process links the strategic plans for the business with its execution and reviews performance measurements for continuous improvement.
Which of the following functions does the drum-buffer-rope (DBR) method perform? Buffers all work centers Minimizes inventory Schedules a constraint Develops pull between operations
Schedules a constraint The basic goal of the DBR method is to recognize that all processes contain a weak link or constraint that limits the productive output of the entire system. The purpose of the DBR method is to schedule production around the constraint and not to minimize inventory. In fact, the DBR method calls for a buffer of inventory to be present to ensure that a problem does not cause the constraint to go idle.
Which of the following factors must be known in order to compute economic order quantity (EOQ)? Setup cost Forecast variation Lead time Safety stock
Setup Cost The four components of the EOQ formula are annual usage, order cost, carrying cost percentage, and unit cost. Setup cost is part of the order cost.
In a market where customers accept a standardized product offering, which of the following situations is characteristic of the production environment? Supplier partnering likely will be on a pull system. Work in process (WIP) represents the largest cost of inventory. Work centers are dedicated to producing a wide range of different products. The master schedule typically is stated for the finished product level.
The master schedule typically is stated for the finished product level. Because products are standardized with no modification, planning at the master schedule level is performed for the finished good. Finished goods inventories, not WIP, represent the largest cost of inventory. Work centers used for make-to-stock products are dedicated to producing a limited range of similar products. Production planning and scheduling in an MTS environment uses an MRP push system where, in turn, demand from suppliers is also based on the MRP push.
Which of the following statements is true for a company that uses the first-in, first-out method of evaluating inventory in a market where prices are decreasing? The cost reported will be an average of the old and the new. The difference between the old and the new will be stated as a variance. The replacement value of products will be overstated. The replacement value of products will be understated.
The replacement value of products will be overstated. In a period of rising prices, replacement is at a higher price than the assumed cost. This method does not reflect current prices, and replacement will be understated. The reverse is true in a falling price market. For example, an opening purchase order arrives for 10 units at $2.00 and a second purchase order arrives for 10 units at $1.00. The price is falling and is therefore lower than the assumed cost. Therefore, the replacement cost of the item will be overstated.
Which of the following describes the breakeven point? Target profit is maximized. Fixed expenses and fixed costs equal total revenue. Fixed costs equal total revenue. Total revenue equals total cost.
Total revenue equals total cost. The breakeven point is the intersection of the total revenue and total cost curves.
Which of the following factors has the greatest impact on reducing transportation inventory? Fuel surcharges Safety stock Shipment size Transit time
Transit time The average amount of inventory that is in transit at any given time is a function of the average transit time in days. Reducing the average transit time in days is the only way to reduce transportation inventory levels. This can be done by using faster modes of transport or by selecting suppliers that are closer to the organization. This reduces both cost and lead times. If faster transport is used, its increased cost may offset any cost savings. The other answers are less significant given shorter transit times.
Which of the following is a possible root cause of time series forecast bias? Insufficient data Trend changes Errors in monitoring the forecast Differences between sales and demand
Trend Changes Bias can be caused by issues with the forecasting technique, such as the lag that occurs when a trend changes. Trend changes may appear as spikes or dips in the data. Another potential root cause is when human bias was involved in making data estimates. Identifying the correct root cause is important; otherwise, inappropriate remedies might be applied.
A shipment of remote control components is delivered to a factory and immediately taken to a workstation ready to begin assembly. What is the name of this inventory management technique? Efficient Wall-to-wall inventory Lot control Lot-for-lot
Wall-to-wall inventory In wall-to-wall inventory management, materials enter a plant and are processed right away, as opposed to being logged in an inventory store until a later date.
When are final assembly schedules typically used? When production is a continuous flow process When products come from an engineer-to-order production strategy When there are many options and it is difficult to forecast which combination the customer will want When all assemblies are the same with no variation in product structure
When there are many options and it is difficult to forecast which combination the customer will want When there are many possible combinations of options, it can be impractical to store every possible configuration. Using a final assembly schedule, combinations are assembled based on customer order input.
Which of the following statements is true when production lead time is increased? Work-in-process inventory will decrease. Work-in-process inventory may be insufficient. Work-in-process inventory will increase. Component inventory will increase.
Work-in-process inventory will increase. When production takes longer, the raw materials, components, and subassemblies will spend more time in work-in-process. The size of the component inventory and the necessary inventories needed in production are unaffected by an increase in product lead times.
If the rate of sales of baby food follows the birth rate by six months, the birth rate statistic could serve as: an intrinsic factor. a dependent variable. a leading indicator. a life-cycle factor.
a leading indicator A leading indicator is a specific business activity index that indicates future trends. For example, housing starts is a leading indicator for the industry that supplies builders' hardware. The birth rate statistic is not a dependent variable, because the sale of baby food and the birth rate have a correlative relationship. Birth rate statistics are an extrinsic factor, not an intrinsic factor. The relation of baby food sales and the birth rate is not part of the product's life cycle.
What term is used for an error in which actual demand is consistently above or below the forecast demand? Random variation Forecast error Bias Cumulative demand variance
bias Bias is a consistent deviation from the mean in one direction, either high or low.
In a bill of material, the path that adds up to the greatest number of lead time periods defines the: cumulative lead time. lead time offset. delivery lead time. demand lead time.
cumulative lead time Cumulative lead time for an item consists of the longest lead time path for a given bill of material. Delivery and demand lead times are subsets of the cumulative lead time. The lead time offset is a technique used in MRP where a planned order receipt in one time period requires the release of that order in an earlier time period based on the lead time for the item.
If the replenishment lead time of two weeks is reduced by 50% and all other factors remain constant, the safety stock will most likely: increase by 50%. remain constant. decrease. double.
decrease. the following formula is used to determine a new safety stock when the lead time interval changes: New Safety Stock = Old Safety Stock x Square Root of (New Lead Time Interval/Old Lead Time Interval) Using the example of old safety stock of 150, an old lead time of two weeks, and a new lead time of one week (reduced by 50%, per this problem), the new safety stock becomes 106, which is a decrease from 150.
The optimal way to avoid a constraint downstream is by: lowering constraint throughput. lowering system throughput. establishing a space buffer. establishing a material buffer
establishing a space buffer. A space buffer is located immediately downstream of the constraint and protects against downtime downstream from the constraint. The size allowed should be enough to protect against any reasonably foreseeable downtime. Usually this buffer is empty. Lowering total system output will indeed reduce the possibility of a constraint, but then the entire productive system will be underutilized. Lowering the constraint throughput will have the effect of lowering the output of the entire productive system. A material buffer is used to protect the constrained process from running out of production due to problems occurring in predecessor non-constrained processes.
The available capacity that exists on nonconstraint resources beyond the capacity required to support the constraint is: capacity management. productive capacity. idle capacity. finite capacity.
idle In the theory of constraints, activation of any nonconstraint resource beyond what is necessary to support the constraint only produces unwanted and unnecessary inventory. It is better from a cost and throughput perspective to leave the resource idle.
Which financial document shows sources of revenue (sales in cash or as accounts receivable) followed by various types of expenses incurred throughout the period? General ledger Cash flow statement Income statement Balance statement
income statement An income statement is a summary of management's performance as reflected in the profitability of an organization over a certain period. It itemizes the revenues and expenses that led to the current profit or loss and indicates what may be done to improve the results.
Which of the following manufacturing processes would most likely be characterized by a narrow range of standard products, low direct labor costs, and a high level of technical support for manufacturing? Batch Job shop Line Project
line Line is a type of manufacturing process used to produce a narrow range of standard items with identical or highly similar designs. Production volumes are high, production and material-handling equipment is specialized, and all products typically pass through the same sequence of operations.
A strategy of responding to customers' needs is referred to as: market-driven. competitive analysis. the voice of the customer. product analysis response.
market-driven responding to customer's needs
Which of the following warehouse activities involves bringing goods together and checking for omissions or errors in the order? Dispatching the shipment Marshalling the shipment Dispatching goods to storage Picking goods
marshalling the shipment When marshalling a shipment, goods making up a single order are brought together and checked for omissions or errors, and order records are updated accordingly. Picking is the process of selecting items from storage and bringing them to a marshalling area. Dispatching goods to storage is the process of sorting goods upon receipt and placing them in a storage area. Dispatching the shipment is the process of order packing, preparing shipping documents, and loading items on the correct transport vehicles.
Which of the following factors is likely to become LEAST important for a product that has moved from regular production to spare parts supply? Quality Customer service Delivery reliability Price
price Once a product has moved from regular production to intermittent spare parts supply, customer service, delivery reliability, and quality must remain high. Service parts are usually critical to the customer and must be available at all times with perfect quality. Since the item is no longer considered a "product," its price can become elastic and can be based on what the market will bear. Price, therefore, declines as an important factor, as customers will pay a premium when equipment has downtime.
Sales and operations planning (S&OP) is typically performed at which of the following levels? End item (finished goods) Product family Semi-finished goods Raw material
product family S&OP is typically performed at the product family level. End items are typically planned at the master schedule level, while raw material and semi-finished goods are typically planned at the MRP level.
Engineering seeks to have complex designs that are difficult to modify. This approach to manufacturing conflicts with which of the following concepts? Product innovation Product differentiation Product flexibility Product family
product flexibility Product flexibility is the ease with which current designs can be modified in response to changing market demands. It conflicts with rigid, complex designs.
Which of the following benefits of setup reduction is most immediate? Reduced work in process Improved quality Reduced queue time Reduced product cost
reduced product cost The time to set up a product has a direct cost that is a component of the overall cost of producing the item. When the setup time is reduced, not only is the cost of setup reduced; the lot size can also be reduced, along with queue and lead times. This will immediately decrease the overall cost of the product. The other answers will occur over time, but not immediately, as a result of setup time reduction.
Which of the following inventory evaluation methods best measures falling costs? First-in, first-out Standard cost Average cost Last-in, first-out
standard cost The standard cost consists of direct material, direct labor, and overhead. This cost remains fixed until a decision is made to update it as time passes to arrive at a new standard. Any variance between the standard and actual costs can be quantified to show how much actual costs have fallen or risen since the last standard cost update. The problem with the average cost method in changing processes (rising or falling) is that the cost used is not related to the actual cost. The last-in, first-out method assumes that the newest (last) item received into stock is the first sold. Given rising prices, replacement can be made at the current price. In a falling price market, existing inventory is overvalued.When the oldest (first) item in stock is sold first, rising prices cause the replacement cost to be higher than the assumed cost. This method does not reflect the current process, and replacement will be understated.
The economic order quantity (EOQ) for a manufactured part is the quantity at which: the costs of changing capacity are lowest. the ordering and carrying costs are equal. the replenishment lead time is shortest. the ordering costs are lowest.
the ordering and carrying costs are equal. The EOQ is a type of fixed order quantity model intended to minimize the combined costs of acquiring and carrying inventory. It is based on certain assumptions, including that demand is constant and known, the item is produced or purchased in batches continuously, order preparation and inventory carrying costs are constant and known, and replacement occurs all at once. Given these assumptions, the EOQ occurs when the ordering cost equals the carrying cost.
A calculated value that can signal the quality or validity of a forecast when it is in doubt is known as: bias. a smoothing factor. mean absolute deviation. a tracking signal.
tracking signal A tracking signal is the ratio of the cumulative algebraic sum of the deviations between the forecasts and the actual values to the mean absolute deviation. It is used to signal when the validity of the forecasting model might be in doubt.
Based on the information below, in what week would a planned order release be generated to satisfy the net requirement? Lead time: 3 weeks Order quantity: 100 Net requirement exists in: week 6 Net requirement quantity: 150 Week 1 Week 2 Week 3 Week 6
week 3 Because the net requirement exists in week 6, the planned order release is offset by the lead time of three weeks. Thus, the planned order release will be generated in week 6 - 3 weeks = week 3.