BSTAT 382 ULL Zhu Test 2

1. A product has a demand of 4000 units per year. Ordering cost is $20, and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost ________ per year in total annual inventory (holding and setup) costs

$800 Total cost = 200*$4/2 + 4000*$20/200 = $800

A product sells for $5 and has unit variable costs of $3. This product accounts for $20,000 in annual sales, out of the firm's total of $60,000. When performing multiproduct break-even analysis, what is the weighted contribution of this producT?

.133 (1-3/5)*20000/6000 = .1333

1. Suppose that papers for a newspaper stand cost $.40 and sell for $.80. they currently have no salvage value. If the stand owner is able to find an outlet that would provide a salvage value of $.10 what would be the increase in service level?

.7

Which of the following costs would be incurred even if no units were produced

BUILDING RENTAL COSTS

1. Clothing chain wants to build a distribution center that is centrally located for its eight retail outlets. It will most likely employ which of the following tools of analysis?

Center of gravity method

Which of the following represents a common way to manage capacity in the service sector

Change in staffing levels

What statement regarding proximity in the location decision is FALSE?

Clustering among fast food chains occurs because they need to be near their labor supply. location clustering for high traffic flows

1. Which type of processing system would gasoline be produced from crude oil?

Continuous

Which of the following regarding center of gravity method is FALSE

Designed to minimize maximum possible distance to any of the locations

1. ROP models indicate to managers the time between orders.

FALSE

1. Repetitive processing systems repetitively rotate production through small batches of a variety of products

FALSE

TRUE or FALSE: the fact that most types of firms are located in every decision of the country suggests that in many cases, location decisions are not overly important; one location typically is as good as another.

FALSE

The net present value of $10,000 to be received in exactly three years is considerably greater than $10,000

FALSE

TRUE OR FALSE: break-even analysis is a powerful analytical took, but is only useful when the organization produces a single product

FALSE, MULTIPLE PRODUCTS

Utilization is defined as the ratio of effective capacity to design

FALSE, Utilization is the ratio of actual output to design capacity

TRUE or FALSE: The center of gravity method find the location of a centralized facility such as a distribution center that will maximized the organizations revenue

FALSE, find centralized facility like a distribution center that will minimize transportation costs

Which of the following methods is best considers intangible cost related to a location decision?

Factor -rating method

Community attitudes, zoning restrictions, and quality of labor force are likely to be considered in which of the following location decision methods?

Factor rating method can be considered intangible factors

1. TRUE or FALSE: Location decisions are basically one-time decisions usually made by new organizations

False, location decisions are not just for new businesses changed their locations for various reasons like cost, proximity to market and locations of their

TRUE OR FALSE: The bottleneck time is always at least as long as the throughput time

False, the bottleneck time is the longest time required by any station while the throughput time is the sum of all required station times

What is an example of the proximity rule that, for service firms, proximity to market is the most important location factor?

Few people travel out of state for a routine hair cut

Net present value will be greater:

For a 4% discount rate than or a 6% discount rate

The method for evaluating alternatives that uses their total-cost lines is

Locational cost-profit-volume analysis

Which of the following is the case where capacity is measured in terms of inputs

Number of passenger seats that can be filled per day on an airline route

A location decision for a traditional department store would tend to have what type of focus?

REVENUE FOCUS

Tangible costs include which of the following?

TAXES is an tangible cost

1. In some service industries, facility layout may influence sales volume and customer attitudes.

TRUE

1. TRUE or FALSE: An example of regional factor in location planning is the location of our markets and other existing potential

TRUE

1. TRUE or FALSE: The ratio of labor costs per day to productivity in units per day is the labor costs per unit

TRUE

1. TRUE or FALSE: for service organizations, the dominant factor in location analysis usually are market-related

TRUE

TRUE OR FALSE: Fixed costs are those costs that continue even if no units are produced

TRUE

TRUE or FALSE: Design capacity refers to the maximum output rate that can be achieved under ideal conditions

TRUE

TRUE or FALSE: The theory of constraints is a body of knowledge that deals with anything that limits an organizations ability to achieve its goals

TRUE

TRUE or FALSE: for service and retail stores, a prime factor in location analysis is customer access

TRUE

TRUE or FALSE: increasing productivity and also quality will result in increased effective capacity

TRUE

TRUE or FAlSE: The graphic approach to locational cost-volume analysis displays the range of volume over which each location is preferable

TRUE

The factor rating methods can consider both tangible and intangible costs

TRUE

The term capacity refers to the maximum quantity an operating unit can process over a given period of time

TRUE

Break-even analysis can be used by a firm that produces more than one product, but:

The break-even point depends upon the proportion of sales generated by each of the products

Effective capacity is

The capacity a firm expects to achieve given the current operating constraints

Basic break-even analysis typically assumes that

Variable costs and revenues increase in direct proportion to the volume of production

On the crossover chart where the costs of two or more location alternatives have been plotted, the quantity at which two costs curves cross is the quantity where:

Where total costs of the two alternative locations are equal

1. In a single-period model, if shortage and excess costs are equal, then the optimum service level is:

a. .5

1. A certain type of computer costs $1,000, and the annual holding cost is 25% of the value of the item. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity?

a. 110 Q = sqrt (2*10000*$150/(.25*$1000))= 109.5

1. If daily demand is normally distributed with a mean of 15 and standard deviation of 5, and lead time is constant at 4 days, a 90 percent service level will require how much safety stock?

a. 13 units

1. In the basic EOQ model, if D = 6000 per year, S = $100 and holding cost = $5 per unit per month, what is the economic order quantity?

a. 141 b. Q= sqrt(2*6000*$100/($5*12))= 141.4

1. The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units, setup cost is $50, holding cost is $12 per unit per year, the daily demand rate is 10 and the daily production rate is 100. What is the production order quantity for this problem?

a. 183

1. A product has a demand of 4000 units per year. Ordering cost is $20, and holding cost is $4 per unit per year. The cost-minimizing solution for this product is to order:

a. 200 units per order b. Q= Sqrt (2*4000*$20/4) = 200

1. A manufacturer is contemplating a switch from buying to producing a certain item. Setup cost would be the same as ordering cost. The production rate would be about double the usage rate. Compared to the EOQ, the maximum inventory would be approximately

a. 30 percent lower

1. In a single -period model, if a shortage is four times excess cost, then the optimum service level is ___ percent

a. 80%

1. A work system has 5 stations that have process times of 5,9,4,9 & 8. What is the bottleneck time?

a. 9, the highest station time in a work system

1. The fixed period inventory system requires more safety stock than a fixed-quantity system because:

a. A stockout can occur during the review period as well as during the lead time

If demand is not uniform and constant, then stockout risks can be controlled by

a. Adding safety stock

1. Which of the following items is most likely managed using a single-period order model?

a. Christmas trees, selling Christmas trees is not a year-round business activity

1. TRUE OR FALSE :Break-even analysis identifies the volume at which fixed costs and revenue are equal

a. FALSE, break even analysis identifies the volume at which total costs and revenue are equal.

TRUE OR FALSE: Understocking an inventory item is a sure sign of inadequate inventory control

a. FALSE, having an occasional stockout is not necessarily a sign on inadequate inventory control.

Product-oriented layouts tend to have high levels of work-in-process inventorieS

a. FALSE, process-oriented tend to have high levels of work-in-process inventories

1. In the quantity discount model, the cost of acquiring goods (product cost) is not a factor in determining lot size.

a. FALSE, the cost of acquiring goods is a part of the total cost and it is a factor in determining lot size.

1. TRUE or FALSE: The first step in developing location alternative is identifying important factors

a. FALSE, the first step is deciding on the criteria for evaluating the alternatives

1. TRUE or FALSE: Retail business generally prefer locations that are not near other retailers as it reduces their competition

a. FALSE: retailers may locate one another because of the higher traffic and convenience to customers

1. TRUE OR FALSE: To find the throughput time with simultaneous process, compute the time over all paths and choose the shortest path through the system.

a. False the throughput time is the time it takes a unit to go through production from start to end

1. A quantity discount will lower the reorder point

a. False, the reorder point is independent of quantity discounts

1. Q is to ___ systems as P is to __ systems.

a. Fixed quantity, fixed period

1. Given the same demand, setup/ ordering costs, and carrying costs, the EPQ calculated using incremental replenishment will be __ if instantaneous replenishment was assumed

a. Greater than the EOQ; EPQ will be larger than the EOQ

1. Which of the following techniques are techniques for dealing with bottleneck?

a. Increase the capacity of the constraint b. Schedule throughput to match the capacity of the bottleneck c. Have cross-trained employees available to keep the constrain at full operation d. NOT A TECHNIQUE: move a bottle neck to the end of a system process

1. The main trait of a single-period model is that:

a. Inventory has limited value after a certain period of time

Which of the following statements regarding the production order quantity model is TRUE

a. It relaxes the assumption that all the order quantity is received at one time

Which of the following are 3 of the 4 principles of bottleneck management

a. Lost time at the bottleneck is a lost system capacity b. Increased bottleneck capacity is increased system capacity c. Release work orders to the system at the bottlenecks capacity pace d. NOT A PRINCIPLE: bottle necks should be moved to the end of the system process.

1. What is a main advantage of a product- oriented layout?

a. Low variable cost per unit

1. What are true about process layouts when compared to product layouts?

a. Lower span of supervision b. Lower rates of output c. Higher in-process inventories d. NOT TRUE: lower unit costs

1. Industrial location analysis typically attempts to:

a. Minimize costs

1. Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time is four days. The service level is 95%. What should the reorder point be?

a. More than 40

1. What is the difference between P and Q inventory systems?

a. ORDERING SIZE & ORDERING SPACING

1. What are important factors is retail layout design?

a. Opportunity to influence customer attitudes a. Traffic patterns and traffic flow b. Degree of contact with the customer c. NOT IMPORTANT: cost minimization

1. Which of the following is a requirement of Q systems?

a. Perpetual inventory system

1. A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per year, and variable costs $0.30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with variable costs of $0.35 per unit. If annual demand is expected to be 10 million units, which plant offers the lowest total cost?

a. Plant a is cheaper than B for volume over 8,000,000 total cost= fixed cost + variable cost (units)

1. A production order quantity problem has a daily demand rate =10, daily production rate =50. The production quantity is 612 units. What is the average inventory for this problem?

a. Q*(1-(d/p))/2 b. 612*(1-(10/50))/2 245

1. In the production order quantity model, the fraction of inventory that is used immediately and not stored is represented by the ratio of ____

a. Ratio of demand to production rate

In which type of operation are you like to see only minor variations in the product or service being produced using the same process and the same equipment

a. Repetitive production

1. Which of the following is NOT one of the four main types of inventory?

a. Safety stock inventory b. FOUR MAIN TYPES i. Raw material inventory ii.4Maintenance/repair/operating inventory iii. Finished-goods inventory iv. Work-in-process incentory

What are common to repetitive and product-oriented layouts

a. Standardized products, low unit costs & high rate of output b. NOT COMMON: ability to adjust to changes in demand

1. The fixed-period inventory model can have a stockout during the review period as well as during the lead time, which is why fixed period systems require more safety stock than fixed-quantity systems.

a. TRUE

1. The difference between the production order quantity model and the basic EOQ model is that the effective annual holding cost per unit is reduced in the production order quantity model because the entire order does not arrive at once.

a. TRUE, The average inventory is calculated as Q*(1-(d/p))/2, which is smaller than the average inventory of the EOQ model

1. One function of inventory is to take advantage of quantity discounts

a. TRUE, buy more than you need now to get quantity discounts

1. As a general rule, continuous processing systems produce products with very little variety

a. TRUE, continuous processing systems tend to be used when a high volume of non-discrete, high standardized output is desired

1. Carrying costs is a function of order size, the larger the order quantity, the higher the inventory carrying costs.

a. TRUE, larger order quantities lead to higher inventory carrying costs.

1. TRUE or FALSE: An example of intangible cost, as it relates to location decisions, is the quality of education

a. TRUE, quality of education is an intangible cost

1. Which of the following statements is false about quantity discounts is FALSE?

a. The larger the annual demand, the less attractive a discount schedule will be. b. TRUE STATEMENTS: i. If carrying costs are expressed as a percentage of value, EOQ is larger at each lower price in the discount schedule ii. The cost-minimizing solution may or may not be where annual holding costs equal annual ordering costs iii. In inventory management, item costs becomes relevant to order quantity decisions when a quantity discount is available.

1. Cycle time is computed as:

a. daily operating time divided by scheduled output

Efficiency is defined as the ratio of

actual output to effective capacity

When a location evaluation includes both quantitative and qualitative inputs, z technique that can be used is:

factor rating method

Evaluating location alternatives by comparing their composite scores involves which of the following

factor- rating analysis

true or false: n the simple EOQ model, if annual demand were to increase, the EOQ would increase proportionately.

false

1. Which of these products would be most apt to involve the use of a single-period model?

fresh fish

The reason fast food restaurants are often found in close proximity to each other is:

location clustering near high traffic flows

Cultural differences, customer preferences, labor and resources are factors relating to

location decisions

1. Nearness to raw materials would be most important to a:

manufactoring compnay

1. If setup costs are reduced by substantial reduction in set up time, the production order quantity is also reduced.

true

1. TRUE OR FALSE: Interest, insurance and opportunity costs are all associates with holding cost.

true

1. TRUE OR FALSE: one important use of inventories in manufacturing is to decouple operations through the use of work-in-process inventories

true

1. TRUE OR FALSE: the average inventory level and the number of orders per year are inversely related: as one increases the other decreases

true