TEST BANK for Operations and Supply Chain Management 10th Edition by Roberta S. Russell and Bernard

Russell & Taylor / Operations & Supply Chain Management, 10th edition

Test Bank

Chapter 1: Operations Management

True/False

1. Operations management is only concerned with the day-to-day operations of a firm’s productive systems.

Ans: False, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

2. A warehouse operation is an example of a physical transformation process.

Ans: False, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

3. A supply chain is a series of activities from supplier to customer that adds value to a product or service.

Ans: True, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

4. Human resources management provides product demand estimates that are used in production decisions.

Ans: False, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

5. A retail operation is an example of an exchange transformation process.

Ans: True, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

6. Which of the following is a functional areas of operations management? a. information technology b. legal c. compliance d. human resources Ans: False, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None

7. Operations management designs, operates, and improves marketing systems.

Ans: False, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

8. An operations manager benefits from an integrated view of business organizations.

Ans: True, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

9. The systematic analysis of work methods is known as operations research.

Ans: False, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

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10. Which of the following best fits the definition of lean production? a. a system that prizes efficiency and quantity b. a system that prizes efficiency and quality c. a system that prizes flexibility and quantity d. a system that prizes flexibility and quality Ans: D, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

11. The adaptation of mass production to emphasize quality and flexibility, rather than efficiency, is known as lean production.

Ans: True, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

12. Because of a global recession in the late 2000s ,companies started focusing on the most critical factors to sustain their business during the downturn.

Ans: True, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

13. Sustainability is concerned with the following a. profits b. global supply chains c. sustain the health of people in the long term d. increasing market share Ans: C, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

14. An effective strategic positioning strategy considers all of the following expect a. strengths and weaknesses of the organization b. needs of the marketplace c. the strategic management team d. positions of competitors Ans: True, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

15. Globalization requires that firms compete only on cost and not quality, speed or flexibility.

Ans: False, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

16. Companies pursue globalization for all of the following reasons except a. gain access to global markets b. increase shipping costs c. be more responsive to changes in demand d. build reliable sources of supply Ans: C, LO: 3, Bloom: C, Difficulty: Moderate, AACSB: None

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17. The European Union requires that strict quality and environmental standards be met before companies can do business with member countries.

Ans: True, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

18. A major challenge and opportunity for many firms is the globalization of the supply chain.

Ans: True, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

19. Globalization has affected manufacturing but not service operations.

Ans: False, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

20. Two-thirds of today’s businesses operate globally.

Ans: True, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

21. In 2010, the US surpassed China as the world’s largest manufacturer.

Ans: False, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

22. China has reshaped the way firms compete globally.

Ans: True, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

23. Increases in productivity enable a nation to raise its standard of living.

Ans: True, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

24. What is the most common measure of competitiveness? a. GDP b. wage rates c. productivity d. manufacturing output Ans: True, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

25. Multifactor productivity is best defined as a. a single output and a single input b. multiple outputs and a single input

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c. a single output and multiple inputs d. multiple outputs and multiple inputs Ans: C, LO: 4, Bloom: C, Difficulty: Moderate, AACSB: None

26. Deployment is a step in strategy formulation that evaluates the alignment between core competencies and order winners.

Ans: False, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

27. Positioning is a step in strategy formulation that defines how firms will compete in the marketplace.

Ans: True, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

28. Which of the following best describes order qualifier? a. the lowest cost product b. the product with the most features c. the features that make an item considered for purchase d. the features that wins orders in the marketplace Ans: C, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

29. An order qualifier is the characteristic of a product that wins orders in the marketplace.

Ans: False, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

30. Core competencies tend to be processes and not products or technologies.

Ans: True, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

31. Which of the following is the first step in strategy formulation? a. defining a primary task b. assessing core competencies c. determining order winners and order qualifiers d. positioning the firm Ans: A, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

32. Identify the option below that is associated with strategy deployment a. unveiling strategies with fanfare

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b. creating plans that are more than 5 years in the future c. converting the firm’s order winners and qualifiers int specific performance requirements d. developing plans that have a variety of meanings to different departments and functional areas Ans: C, LO: 6, Bloom: C, Difficulty: Moderate, AACSB: None

33. Companies that compete on innovation establish a corporate culture that does the following except a. discourages risk taking b. challenges the status quo c. accepts failure as part of the learning process d. celebrates success Ans: A, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

34. Firms compete in the marketplace based on cost, speed, quality and flexibility.

Ans: True, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

Multiple Choice

35. Operations management is concerned with the _________ of a firm’s productive systems. a. design b. operation c. improvement d.

All of these answer choices are correct.

Ans: D, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

36. The transformation process associated with health care is best described as a. locational b. exchange c. physiological d. informational Ans: C, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

37. Which of the following is not one of the four primary functional areas of a firm? a. human resources b. legal c. marketing Copyright ©2020 John Wiley & Sons, Inc.

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d.

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operations

Ans: B, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

38. All of the following are responsibilities of operations managers except a. acquiring financial resources b. managing inventories c. planning production d. scheduling production Ans: A, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

39. Which of the following is not an event or concept associated with the quality revolution? a.

TQM (total quality management) b.

Internet c.

Six Sigma d.

JIT Ans: B, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

40. Linear programming, waiting line, simulation, and PERT/CPM are all elements of which era of operations and supply chain management? a) Quality Research b) Operations Research c) Internet Revolution d) Globalization Ans: B, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

41. Dividing a job into a series of small tasks, each performed by a different worker, is known as a. craft production b. scientific management c. division of labor d. interchangeable parts Ans: C, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

42.

The most recent era in the evolution of operations and supply chain management is a. Internet Revolution b. Sustainability c. Globalization

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d. Quality Revolution Ans: B, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

43.

Sustainability, in its broadest sense, include(s) a. using resources wisely. b. treating workers with respect. c. establishing a business model of shared values. d. All of these answer choices are correct.

Ans: D, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

44. Mass production is well suited to all of the following except a. producing large volumes of goods quickly. b. adapting quickly to changes in market demand. c. producing standardized products for a large market. d.

All of these answer choices are correct.

Ans: B, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

45. The major factors impacting globalization of the supply chain include all the following except a. falling trade barriers. b. the Internet. c. declining union membership. d. All these answer choices are correct.

Ans: C, LO: 3, Bloom: K, Difficulty: Hard, AACSB: None

46. Companies go global to a. take advantage of favorable costs. b. keep abreast of trends and access new technologies. c. build reliable sources of supply. d. All of these answer choices are correct.

Ans: D, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

47. A manager of a global supply chain is concerned with all the following except a. timeliness. b. quality. c. social issues. d. All of these answer choices are correct.

Ans: D, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

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48. The ratio of a firm’s monthly output to the number of labor hours used in the same month would be a measure of a. labor productivity. b. capital productivity. c. machine productivity. d. multifactor productivity.

Ans: A, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

49. The production system that prizes flexibility and quality over efficiency and quantity is known as a. mass production. b. craft production. c. lean production. d. electronic commerce.

Ans: C, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

50. Telco Inc., a manufacturing firm, is calculating its monthly productivity report. From the following data calculate the labor productivity.

Labor rate $20 Machine rate $15 Units produced 50,000 Labor hours 4,000 Machine hours 2,000 Cost of materials $20,000 Cost of energy $5,000 a. 0.370 b. 0.625 c. 1.500 d. 1.667 Ans: B, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None Solution: Labor productivity=50,000/80,000=0.625

51. Telco Inc., a manufacturing firm, is calculating its monthly productivity report. From the following data calculate the machine productivity.

Labor rate $20 Machine rate $15 Units produced 50,000 Labor hours 4,000 Machine hours 2,000 Cost of materials $20,000 Cost of energy $5,000 a. 0..370 b. 0.625

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c. 1.500 d. 1.667 Ans: D, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None Solution: Machine productivity=50,000/30000=1.667

52. Telco Inc., a manufacturing firm, is calculating its monthly productivity report. From the following raw data calculate the multifactor productivity.

Labor rate $20 Machine rate $15 Units produced 50,000 Labor hours 4,000 Machine hours 2,000 Cost of materials $20,000 Cost of energy $5,000 a. 0.370 b. 0.625 c. 1.500 d. 1.667 Ans: A, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None Multi-factor productivity=50,000/135,000=0.370

53. Snacknow, a food service firm, is calculating its monthly productivity report. From the following raw data calculate the labor productivity.

Labor rate $10 Units produced 10,000 Labor hours 1,000 Cost of materials $2000 Cost of energy $500 a. 0.220 b. 0.476 c. 0.800 d. 1.000 Ans: D, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None Solution: Labor productivity=10,000/10,000=1.000

54. Snacknow, a food service firm, is calculating its monthly productivity report. From the following data calculate the energy productivity.

Labor rate $10 Units produced 10,000 Labor hours 1,000 Cost of materials $2000 Cost of energy $500 a. 0.220 b. 2

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c. 10 d. 20 Ans: D, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None Energy productivity=10,000/500=20

55. Snacknow, a food service firm, is calculating its monthly productivity report. From the following data calculate the multifactor productivity.

Labor rate $20 Units produced 10,000 Labor hours 1,000 Cost of materials $2000 Cost of energy $500 a. 0.220 b. 0.476 c. 0.800 d. 1.000 Ans: C, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

Multi-factor productivity=10,000/12,500=0.800

56. _____________ is how the mission of a firm is accomplished. a. Strategy b. Design c. An operational decision d. None of these answer choices is correct.

Ans: A, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

57. _____________ represents what the firm is in the business of doing. a. Primary task b. Core competency c. Positioning d. Deploying Ans: A, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

58. _____________ is what the firm does better than anyone else. a. Primary task b. Core competency c. Positioning d. Deploying Ans: B, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

59. _____________ are the characteristics of a product that qualify it to be considered for purchase by a customer. a. Order winners

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b. Order qualifiers c. Core competency d. Positioning Ans: B, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

60. _____________ is the characteristic of a product that wins the order in the marketplace. a. Order winners b. Order qualifiers c. Core competency d. Positioning Ans: A, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

61. ______________ focus(es) the organization on common goals that can be translated into measurable objectives. a. Order winners b. Core competency c. Positioning d. Deploying the strategy Ans: D, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

62. Companies that compete on ______________ are able to produce a wide variety of products in response to customer needs. a. cost b. speed c. flexibility d. quality Ans: C, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

63. Companies that compete on ______________ pursue the elimination of all waste. a. cost b. speed c. flexibility d. quality Ans: D, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

64. Companies that compete on ______________ recognize the advantages of time-based competition. a. cost b. speed c. flexibility d. quality Ans: B, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

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65. Companies that compete on ______________ focus on pleasing customers and satisfying their expectations. a. cost b. speed c. flexibility d. quality Ans: D, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

66. The balanced scorecard examines a firm’s performance in all the following critical areas except a. finances b. customers c. processes d. All of these answer choices are correct.

Ans: D, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

67. The ____________ function helps strategy evolve by creating new ways of delivering a firm’s competitive priorities. a. finance b. marketing c. operations d. None of the answer choices is correct.

Ans: C, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

68. Companies that compete on _________________ establish a corporate culture that encourages risk. a. Innovation b. Quality c. Flexibility d. Cost Ans: A, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

69. A(n) ____________ strategy involves a series of integrated decisions on processes, facilities, technology, quality, capacity, etc. a. finance b. marketing c. operations d. None of these answer choices is correct.

Ans: C, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

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Short Answer

70. Briefly describe how operations can be viewed as a transformation process.

Operations is often defined as a transformation process. Inputs such as raw materials, labor, equipment, and capital are transformed into outputs (goods and services).

Customer feedback is used to adjust the transformation process. An objective of the operations manager is to ensure that the transformation process operates efficiently and the outputs of the process have greater value than the sum of the inputs. In this way the transformation process creates value, making it possible to view the transformation process as a value chain extending from supplier to customer.

Ans: Essay, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

71. Briefly describe the four primary functional areas of a firm. How is operations related to them?

The four primary functional areas of a firm are marketing, finance, operations, and human resources. For most firms, operations is the technical core or “hub” of the organization, interacting with the other functional areas and suppliers to produce goods and services for customers. For example, marketing provides sales forecasts to operations and operations provides marketing with product availability information, lead time estimates and delivery schedules. Operations provides finance with inventory and production data, capital budgeting and equipment requests, and technology plans.

Finance provides the capital resources for financing inventory and securing more capital equipment. Operations relies on human resources to meet its personnel needs—hiring, training, and evaluating workers.

Ans: Essay, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

72.

What is productivity and how is it measured?

Productivity is the ratio of output to input. Output can be expressed in units or dollars.

Single factor productivity compares output to individual inputs, such as labor hours, investment in equipment, or material usage. Multifactor productivity relates output to a combination of inputs, such as labor and capital. Total factor productivity compares the quantity of goods and services produced with all the inputs used to produce them.

Ans: Essay, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

73. What can lead to increases in productivity?

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Productivity increases when firms become more efficient, expand, achieve breakthroughs that enable output increases to occur with reduced inputs, downsize while maintaining output with fewer inputs, and retrench with output and inputs decreasing, but inputs decreasing at a faster rate than output.

Ans: Essay, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

Additional M/C questions: 74. Scientific management is __________. a. the management of scientists working in a company b. the management of scientific experiments so that they will align with the company’s strategy c. the use of observation, measurement, and analysis to identify the best method to perform a job d. another name for the division of labor Ans: C, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

75. Henry Ford famously applied __________. a. interchangeable parts b. linear programing c. theories of motivation d. mass production Ans: D, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

76. Supply chain management is aimed at managing the flow of __________. a. information b. products c. services d. All of these answer choices are correct Ans: D, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

77. Globalization has__________ the risk of disruptions in operations and supply chain activities; it has also provided __________ flexibility in responding to disruptions. a. decreased; less b. increased; less c. decreased; more d. increased; more Ans: D, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

78. Today, approximately ____% of businesses operate globally through global markets, global operations, global financing a. 67 b. 75 c. 85 Copyright ©2020 John Wiley & Sons, Inc.

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d. 90 Ans: A, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

79. If the units produced by a factory increased by 10% and the labor hours decreased by 10%, then the labor productivity __________. a. decreased by 20% b. increased by 20% c. increased by 21% d. increased by 22% Ans: D, LO: 3, Bloom: K, Difficulty: Medium, AACSB: None

80. If the units produced by a factory increased by 10% and the labor productivity increased by 25%, then the labor hours __________. a. decreased by 15% b. decreased by 13% c. decreased by 12% d. decreased by 11% Ans: C, LO: 3, Bloom: K, Difficulty: Hard, AACSB: None

81. If the units produced by a factory decreased by 10% and the labor productivity increased by 25%, then the labor hours __________. a. decreased by 15% b. decreased by 26% c. decreased by 28% d. decreased by 35% Ans: C, LO: 3, Bloom: K, Difficulty: Hard, AACSB: None

82. If the units produced by a factory decreased by 10% and the labor productivity decreased by 25%, then the labor hours __________. a. decreased by 15% b. increased by 15% c. increased by 17% d. increased by 20% Ans: D, LO: 3, Bloom: K, Difficulty: Hard, AACSB: None

83. The labor productivity of a factory fell by 5% during each of three consecutive quarters. The labor hours didn’t show any significant change during this period. A new COO is committed to recover the existing level before the loss of productivity, and her goal is to achieve this by the end of next quarter, even though the labor hours will be 5% less. The COO’s goal is to increase the number of units produced by ____%. a. 15.0 b. 14.3 c. 10.0

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d. 9.75 Ans: D, LO: 3, Bloom: K, Difficulty: Hard, AACSB: None

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Supplement 1: Operational Decision-Making Tools: Decision Analysis

True/False

1. In a decision-making situation, the events that may occur in the future are known as a. payoffs. b. states of nature. c. decisions. d. decision tree.

Ans: a, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

2. When probabilities are assigned to states of nature the situation is referred to as a. decision-making under conditions of safety. b. decision-making under conditions of certainty. c. decision-making under conditions of risk. d. decision-making under uncertainty.

Ans: c, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

3. The outcome of a decision is referred to as a. a payoff. b. an event. c. a payoff table. d. state of nature.

Ans: a, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

4. The most widely used decision-making criterion for situations with risk is a. maximin. b. expected value. c. payoffs. d. Laplace.

Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

5. A decision criterion in which the decision payoffs are weighted by a coefficient of optimism is known as the a. Hurwicz criterion. b. Laplace criterion. c. Maximax criterion. d. Maximin criterion.

Ans: a, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

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6. The _____________ is a decision criterion in which each state of nature is weighted equally. a. maximin criterion b. minimax regret criterion c. LaPlace criterion d. Hurwicz criterion Ans: c, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

7. A _________ decision tree is a graphical method for analyzing decision situations that require a sequence of decisions over time. a. maximin b. maximax c. payoff d. sequential Ans: d, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

8. A decision criterion that results in the maximum of the minimum payoffs is called a a. maximin criterion. b. minimax regret criterion. c. maximax criterion. d. equal likelihood criterion.

Ans: a, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

9. Quantitative methods are tools available to operations managers to help make a decision or recommendation.

Ans: True, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

10. Quantitative methods are tools available to operations managers to help make a decision but not a recommendation.

Ans: False, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

11. ___________ is a quantitative technique supporting decision-making with uncertainty. a. Sequential decision tree b. Decision analysis c. Expected value of perfect information d. States of nature Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

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12. A(n) _________ is a quantitative technique supporting decision-making under uncertainty. a. event b. coefficient of optimism c. payoff table d. state of nature Ans: c, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

Multiple-Choice

13. When probabilities can be assigned to the occurrence of states of nature in the future, the situation is referred to as a. decision-making under risk. b. decision-making under certainty. c. decision-making under uncertainty. d. None of these answers is correct.

Ans: A, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

14. Which of the following techniques is the most widely used decision-making criterion under risk? a. maximax criterion b. minimax regret criterion c. expected value criterion d. Hurwicz criterion Ans: C, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

15. The maximum value of perfect information to the decision maker is known as a. the expected value of perfect information. b. the expected value of imperfect information. c. the minimum of the minimax regret. d. None of these answers is correct.

Ans: A, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

16. Fairco, a family business, is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three

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possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The following payoff table describes the decision situation.

Decision Large Investment Medium Investment Small Investment

States of Nature Increasing Demand Stable Demand $1,000,000 $500,000 $250,000

$400,000 $300,000 $125,000

Decreasing Demand -$600,000 -$200,000 $25,000

The best decision for Fairco using the maximax criterion would be to a. make the large investment. b. make the medium investment. c. make the small investment. d. choose increasing demand.

Ans: A, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: Fairco assumes increasing demand. The maximax equals $1,000,000. Make the large investment.

17. Fairco, a family business, is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The following payoff table describes the decision situation.

Decision Large Investment Medium Investment Small Investment

States of Nature Increasing Demand Stable Demand $1,000,000 $500,000 $250,000

$400,000 $300,000 $125,000

Decreasing Demand -$600,000 -$200,000 $25,000

The best decision for Fairco using the maximin criterion would be to a. make the large investment. b. make the medium investment. c. make the small investment. d. choose stable demand.

Ans: C, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: Fairco assumes deceasing demand. The maximin is $25,000. Make the small investment. , 18. Fairco, a family business, is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The following payoff table describes the decision situation.

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Decision Large Investment Medium Investment Small Investment

States of Nature Increasing Demand Stable Demand $1,000,000 $500,000 $250,000

$400,000 $300,000 $125,000

Test Bank

Decreasing Demand -$600,000 -$200,000 $25,000

The best decision for Fairco using the minimax regret decision criterion would be to a. make the large investment. b. make the medium investment. c. make the small investment. d. choose decreasing demand.

Ans: B, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: The maximum regret for each decision are: Large Investment $625,000 Medium Investment $500,000 Small Investment $750,000 Decision: Make the medium investment because $500,000 is the minimum.

19. Fairco, a family business, is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The following payoff table describes the decision situation.

Decision Large Investment Medium Investment Small Investment

States of Nature Increasing Demand Stable Demand $1,000,000 $500,000 $250,000

$400,000 $300,000 $125,000

Decreasing Demand -$600,000 -$200,000 $25,000

The best decision for Fairco using the Hurwicz criterion with a coefficient of optimism equal to 0.80 would be to a. make the large investment. b. make the medium investment. c. make the small investment. d. choose stable demand.

Ans: A, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: Large Investment $680,000 Medium Investment $360,000 Small Investment $205,000 The maximum is $680,000. Make the large investment.

Copyright ©2020 John Wiley & Sons, Inc.

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Test Bank

20. Fairco, a family business, is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The following payoff table describes the decision situation.

Decision Large Investment Medium Investment Small Investment

States of Nature Increasing Demand Stable Demand $1,000,000 $500,000 $250,000

$400,000 $300,000 $125,000

Decreasing Demand -$600,000 -$200,000 $25,000

The best decision for Fairco using the equal likelihood criterion would be to a. make the large investment. b. make the medium investment. c. make the small investment. d. choose increasing demand.

Ans: A, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: Large Investment $266,667 Medium Investment $200,000 Small Investment $133,333 The maximum is $266,667. Choose the large investment.

21. Fairco, a family business, is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The business believes that the probability for increasing, stable and decreasing product demand are 0.4, 0.5, and 0.1, respectively.

The following payoff table describes the decision situation.

Decision Large Investment Medium Investment Small Investment

States of Nature Increasing Demand Stable Demand (0.4) (0.5) $1,000,000 $500,000 $250,000

$400,000 $300,000 $125,000

Decreasing Demand (0.1) -$600,000 -$200,000 $25,000

The expected value for the large investment decision is a. $700,000. b. $540,000. c. $330,000. d. $165,000.

Ans: B, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Copyright ©2020 John Wiley & Sons, Inc.

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Test Bank

Solution: The expected value for Large Investment: $400,000 + $200,000 − $60,000 = $540,000

22. Fairco, a family business, is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The business believes that the probability for increasing, stable and decreasing product demand are 0.4, 0.5, and 0.1, respectively.

The following payoff table describes the decision situation.

Decision Large Investment Medium Investment Small Investment

States of Nature Increasing Demand Stable Demand (0.4) (0.5) $1,000,000 $500,000 $250,000

Decreasing Demand (0.1)

$400,000 $300,000 $125,000

-$600,000 -$200,000 $25,000

The expected value for the small investment decision is a. $540,000. b. $400,000. c. $330,000. d. $165,000.

Ans: D, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

The expected value for Small Investment $100,000 + 62,500 + $2,500 = $165,000

23. Fairco, a family business, is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The business believes that the probability for increasing, stable and decreasing product demand are 0.4, 0.5, and 0.1, respectively.

The following payoff table describes the decision situation.

Decision Large Investment Medium Investment Small Investment

States of Nature Increasing Demand Stable Demand (0.4) (0.5) $1,000,000 $500,000 $250,000

$400,000 $300,000 $125,000

Decreasing Demand (0.1) -$600,000 -$200,000 $25,000

The expected value for the medium investment decision is a. $600,000. b. $540,000.

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Test Bank

c. $330,000. d. $165,000.

Ans: C, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: The expected value for Medium Investment $200,000 + $150,000 − $20,000 = $330,000

24. Fairco, a family business, is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The business believes that the probability for increasing, stable and decreasing product demand are 0.4, 0.5, and 0.1, respectively.

The following payoff table describes the decision situation.

Decision Large Investment Medium Investment Small Investment

States of Nature Increasing Demand Stable Demand (0.4) (0.5) $1,000,000 $500,000 $250,000

$400,000 $300,000 $125,000

Decreasing Demand (0.1) -$600,000 -$200,000 $25,000

If the expected value criterion is used, then the best decision would be to a. make the large investment. b. make the medium investment. c. make the small investment. d. choose the stable demand.

Ans: A, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: The expected values are Large Investment $540,000 Medium Investment $333,000 Small Investment $170,000 The maximum is $540,000. Make the large investment.

25. Fairco, a family business is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The business believes that the probability for increasing, stable and decreasing product demand are 0.4, 0.5, and 0.1, respectively.

The following payoff table describes the decision situation.

Decision

States of Nature Increasing Demand Stable Demand (0.4) (0.5)

Copyright ©2020 John Wiley & Sons, Inc.

Decreasing Demand (0.1)

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Large Investment Medium Investment Small Investment

$1,000,000 $500,000 $250,000

$400,000 $300,000 $125,000

Test Bank

-$600,000 -$200,000 $25,000

The expected value of perfect information for Fairco is a. $602,500. b. $540,000. c. $62,500. d. $25,000.

Ans: C, LO: 1, Bloom: K, Difficulty: Hard, AACSB: None

Solution: $602,500 − $540,000 = $62,500

26. Kallie Inc., a small parts manufacturer, has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand. The following payoff table describes the company’s decision situation.

Decision Expand Facilities Acquire Competitor Subcontract Production

States of Nature High Demand Low Demand $2,000,000 $750,000 $250,000

-$1,250,000 -$500,000 $25,000

The best decision for Kallie Inc. using the maximax decision criterion is to a. expand facilities. b. acquire competitor. c. subcontract production. d. select high demand.

Ans: A, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: Kallie Inc. assumes expand facilities. The maximax is $2,000,000. Select high demand.

27. Kallie Inc., a small parts manufacturer, has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand. The following payoff table describes the company’s decision situation.

Decision Expand Facilities Acquire Competitor Subcontract Production

States of Nature High Demand Low Demand $2,000,000 $750,000 $250,000

-$1,250,000 -$500,000 $25,000

The best decision for Kallie Inc. using the maximin decision criterion is to a. expand facilities.

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Test Bank

b. acquire competitor. c. subcontract production. d. select high demand.

Ans: C, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: Kallie Inc. assumes expand facilities. The maximin is $250,000. Select subcontract production.

28. Kallie Inc., a small parts manufacturer, has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand. The following payoff table describes the company’s decision situation.

Decision Expand Facilities Acquire Competitor Subcontract Production

States of Nature High Demand Low Demand $2,000,000 $750,000 $250,000

-$1,250,000 -$500,000 $25,000

The best decision for Kallie Inc. using the minimax regret decision criterion is to a. expand facilities. b. acquire competitor. c. subcontract production. d. select high demand.

Ans: B, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: The minimax regret for each decision is Expand Facilities $1,275,000 Acquire Competitor $1,250,000 Subcontract Production $1,750,000 The minimum is acquire competitor.

29. Kallie Inc., a small parts manufacturer, has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand. The following payoff table describes the company’s decision situation.

Decision Expand Facilities Acquire Competitor Subcontract Production

States of Nature High Demand Low Demand $2,000,000 $750,000 $250,000

-$1,250,000 -$500,000 $25,000

The regret that is associated with the decision to acquire competitor when demand is low is Copyright ©2020 John Wiley & Sons, Inc.

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a. b. c. d.

Test Bank

$0. $525,000. $1,250,000. $1,275,000.

Ans: B, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: $25,000 + $500,000 = $525,000

30. Kallie Inc., a, small parts manufacturer, has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand. The following payoff table describes the company’s decision situation.

Decision Expand Facilities Acquire Competitor Subcontract Production

States of Nature High Demand Low Demand $2,000,000 $750,000 $250,000

-$1,250,000 -$500,000 $25,000

The best decision for Kallie Inc., using the Hurwicz decision criterion with a coefficient of optimism equal to 0.3 is to a. expand facilities. b. acquire competitor. c. subcontract production. d. make no decision.

Ans: C, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: The weighted values of each decision Expand Facilities −$275,000 Acquire Competitor −$125,000 Subcontract Production $92,500 Select the maximum: subcontract production.

31. Kallie Inc., a small parts manufacturer, has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand. The following payoff table describes the company’s decision situation.

Decision Expand Facilities Acquire Competitor Subcontract Production

States of Nature High Demand Low Demand $2,000,000 $750,000 $250,000

-$1,250,000 -$500,000 $25,000

The value of the Hurwicz decision criterion for subcontract production when the coefficient of optimism is 0.30 is Copyright ©2020 John Wiley & Sons, Inc.

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a. b. c. d.

Test Bank

$92,500. $182,500. $250,000. $275,000.

Ans: A, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: $75,000 + $12,500 = $92,500

32. Kallie Inc., a small parts manufacturer, has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand. The following payoff table describes the company’s decision situation.

Decision Expand Facilities Acquire Competitor Subcontract Production

States of Nature High Demand Low Demand $2,000,000 $750,000 $250,000

-$1,250,000 -$500,000 $25,000

The best decision for Kallie Inc. using the equal likelihood criterion is to a. expand facilities. b. acquire competitor. c. subcontract production. d. select high demand.

Ans: A, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: Expand Facilities $375,000 Acquire Competitor $125,000 Subcontract Production $137,500 The maximum is $375,000. Select expand facilities.

33. Kallie Inc., a, small parts manufacturer, has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand, with probabilities of 0.6 and 0.4, respectively. The following payoff table describes the company’s decision situation.

Decision Expand Facilities Acquire Competitor Subcontract Production

States of Nature High Demand Low Demand (0.6) (0.4) $2,000,000 $750,000 $250,000

-$1,250,000 -$500,000 $25,000

The expected value for the expand facilities decision is Copyright ©2020 John Wiley & Sons, Inc.

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a. b. c. d.

Test Bank

$250,000. $160,000. $700,000. $1,200,000.

Ans: C, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: $1,200,000 − $500,000 = $700,000

34. Kallie Inc., a small parts manufacturer, has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand, with probabilities of 0.6 and 0.4, respectively. The following payoff table describes the company’s decision situation.

Decision Expand Facilities Acquire Competitor Subcontract Production

States of Nature High Demand Low Demand (0.6) (0.4) $2,000,000 $750,000 $250,000

-$1,250,000 -$500,000 $25,000

The expected value for the acquire competitor decision is a. $250,000. b. $160,000. c. $700,000. d. $1,200,000.

Ans: A, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: $450,000 − $200,000 = $250,000

35. Kallie Inc., a small parts manufacturer, has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand, with probabilities of 0.6 and 0.4, respectively. The following payoff table describes the company’s decision situation.

Decision Expand Facilities Acquire Competitor Subcontract Production

States of Nature High Demand Low Demand (0.6) (0.4) $2,000,000 $750,000 $250,000

-$1,250,000 -$500,000 $25,000

The expected value for the subcontract production decision is a. $250,000 b. $160,000 Copyright ©2020 John Wiley & Sons, Inc.

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Test Bank

c. $700,000 d. $1,200,000 Ans: B, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: $150,000 + $10,000 = $160,000

36. A small parts manufacturer has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand, with probabilities of 0.6 and 0.4, respectively. The following payoff table describes the company’s decision situation.

Decision Expand Facilities Acquire Competitor Subcontract Production

States of Nature High Demand Low Demand (0.6) (0.4) $2,000,000 $750,000 $250,000

-$1,250,000 -$500,000 $25,000

The best decision according to the expected value criterion is a. Acquire Competitor. b. Expand Facilities. c. Subcontract Production. d. High Demand Ans: B, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: Expand Facilities $700,000 Acquire Facilities $250,000 Subcontract Production $160,000 Maximum = $700,000. Select expand facilities.

37. Kallie Inc., a small parts manufacturer, has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand, with probabilities of 0.6 and 0.4, respectively. The following payoff table describes the company’s decision situation.

Decision Expand Facilities Acquire Competitor Subcontract Production

States of Nature High Demand Low Demand (0.6) (0.4) $2,000,000 $750,000 $250,000

-$1,250,000 -$500,000 $25,000

The expected value of perfect information for Kallie Inc.is Copyright ©2020 John Wiley & Sons, Inc.

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a. b. c. d.

Test Bank

$1,210,000. $700,000. $510,000. $312,500.

Ans: C, LO: 1, Bloom: K, Difficulty: Hard, AACSB: None

Solution: $1,210,000 − $700,000 0 =$510,000

Short Answer

38. What is decision analysis?

Ans: Below, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Ans: Decision analysis is a set of quantitative techniques for decision-making situations in which uncertainty exists. Decision analysis is a generic technique that can be applied to a number of different types of operational decision-making areas. The study of decision analysis is useful because it provides a structured, systematic approach to decision-making that many decision makers follow intuitively without ever consciously thinking about it. Thus, decision analysis represents not only a collection of decisionmaking techniques but also an analysis of the logic underlying decision-making.

Difficulty: Moderate Feedback: Decision Analysis

39. Consider the following payoff table, where the amounts are in $ millions: State of Nature Decision Alternatives S1 S2 S3 d1 −1 3.5 6.5 d2 −0.35 0.95 1.25 d3 −3 x 4 d4 0 0 0 d5 −1 −1 −1 If you are using Hurwicz criterion with α = 0.45 (where α is the coefficient of optimism) and decide d3, then x is ______. a) unfeasible; there is no value of x that would make you choose d3 b) larger than 4 c) larger than 6.5 d) larger than 11.16 Ans: D, LO: 1, Bloom: A, Difficulty: Hard, AACSB: Reflective thinking

40. Consider the following payoff table with amounts in $ millions.

State of Nature

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Decision Alternatives S1 S2 d1 −1 3.5 d2 0 0.95 d3 −2.15 0.75 d4 0 0 d5 −1 −1

Test Bank

S3 3.75 1.25 4 0 −1

If you are using Hurwicz and decide d3, then the coefficient of optimism, α, is ______. a) undetermined; there is not enough information to find the answer b) unfeasible; there is no value of α that would make you choose d3 c) larger than 0.85 d) less than 0.83 Ans: C, LO: 1, Bloom: A, Difficulty: Hard, AACSB: Reflective thinking

41. Consider the following payoff table with amounts in $ millions.

State of Nature Decision Alternatives S1 S2 S3 d1 −1 1 3.8 d2 −1.1 y 2.5 d3 −0.3 0.75 1.35 d4 0 0 0 d5 x −0.1 −0.1 If you are using the maximin criterion and decide d4, then x is ______. a) at most −1 b) less than −1 c) any value d) cannot be determined without knowing the value of y Ans: C, LO: 1, Bloom: A, Difficulty: Hard, AACSB: Reflective thinking

42. Consider the following payoff table with amounts in $ millions.

Investment d1 d2 d3 d4

State of Nature S1 S2 3 0.5 4 0 6 −2 16 −10

The column with investments lists mutually exclusive investment decisions. If you use the expected value criterion and you are indifferent between investments d2 and d3, then the probability that you assign to the state of nature S2 is __________. a) at least 0.45

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Test Bank

b) at most 0.5 c) 0.5 d) at least 0.5 Ans: C, LO: 1, Bloom: A, Difficulty: Hard, AACSB: Reflective thinking

43. Consider the following payoff table with amounts in $ millions.

Investment d1 d2 d3 d4

State of Nature S1 S2 3 0.5 4 0 6 −2 16 −10

The column with investments lists mutually exclusive investment decisions. If you use the expected value criterion and you choose investment d2, then the probability that you assign to the state of nature S1 is __________. a) more than 0.25 and less than 0.67 b) more than 0.33 and less than 0.67 c) more than 0.25 and less than 0.5 d) more than 0.33 and less than 0.5 Ans: D, LO: 1, Bloom: A, Difficulty: Hard, AACSB: Reflective thinking

Copyright ©2020 John Wiley & Sons, Inc.

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Test Bank

Chapter 2: Quality Management

True/False

1. Six Sigma quality uses a statistical measure with a goal that equates to only a. 3.4 defects. b. 3.4 defects per thousand. c. 3.4 defects per million. d. 3.4 defects per billion.

Ans: c, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

2. With Six Sigma, the project team leader is known as a Black Belt.

Ans: True Difficulty: Moderate Learning Objective: LO 5

3. With Six Sigma, a teacher and mentor is known as a Green Belt.

Ans: False Difficulty: Moderate Learning Objective: LO 5

4. Quality levels in the United States were generally measured in defects per hundred before Six Sigma.

Ans: True Difficulty: Moderate Learning Objective: LO 5 5. Six Sigma is a recognized quality program based strictly on statistical process control.

Ans: False Difficulty: Easy Learning Objective: LO 5

6. Companies that have adopted Six Sigma view it as a short-term strategy for incremental quality improvement.

Ans: False Difficulty: Easy Copyright ©2020 John Wiley & Sons, Inc.

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Test Bank

Learning Objective: LO 5

7. The fundamental objective of Six Sigma is to focus on improvement by reducing a. customer interactions. b. waste. c. process variation. d. quality defects Ans: c, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

8. To satisfy a customer’s quality requirements companies often require the commitment to quality of their suppliers.

Ans: True Difficulty: Moderate Learning Objective: LO 4

9. Most members of a supply chain understand the importance of high quality because they are both customers and suppliers.

Ans: True Difficulty: Moderate Learning Objective: LO 4

10. Some companies enter into long-term relationships with suppliers who in return commit to meet delivery deadlines but not quality targets.

Ans: False Difficulty: Easy Learning Objective: LO 4

11. Globalization and foreign competition began to change consumers’ attitudes toward quality in the 1950s.

Ans: False Difficulty: Easy Learning Objective: LO 4

12. __________ advocated continuous process improvement to reduce variability and achieve conformance to design specifications. a. Juran Copyright ©2020 John Wiley & Sons, Inc.

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Test Bank

b. Crosby c. Taguchi d. Deming Ans: d, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

13. Deming emphasized final product inspection as a way to improve process quality.

Ans: False Difficulty: Easy Learning Objective: LO 3

14. Deming emphasized the use of statistical quality control techniques to reduce variability in the output of a process.

Ans: True Difficulty: Easy Learning Objective: LO 3

15. Deming believed that __________ define quality. a. management b. customers c. suppliers d. employees Ans: b, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

16. The Deming Wheel is also known as the plan-do-check-act (PDCA) cycle.

Ans: True Difficulty: Easy Learning Objective: LO 3

17. From the producer’s perspective, quality is determined by what the consumer wants and is willing to pay for.

Ans: False Difficulty: Moderate Learning Objective: LO 3

18. How well the product or service does what it is intended to do is known as a. fitness for use.

Copyright ©2020 John Wiley & Sons, Inc.

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Test Bank

b. reliability. c. conformance. d. performance Ans: a, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

19. The degree to which quality characteristics are designed into the product is known as quality of design.

Ans: True Difficulty: Easy Learning Objective: LO 1

20. ______________ relates to the basic operating characteristics of a product. a. Quality of conformance b. Quality of performance c. Quality of features d. Quality of design Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

21. The degree to which a product meets pre-established standards is known as a. quality of performance. b. quality of design. c. quality of conformance d. quality of reliability.

Ans: c, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

22. The courtesy and competence of the repair person can be one aspect of maintainability.

Ans: False Difficulty: Easy Learning Objective: LO 1

23. The probability that a product will operate properly within an expected time frame is known as quality of performance.

Ans: False Difficulty: Moderate Learning Objective: LO 1

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Test Bank

24. The dimension of quality related to the lifespan of a product before replacement is known as a. aesthetics. b. durability. c. reliability. d. serviceability.

Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

25. In a general sense the supplier makes the final judgment regarding quality.

Ans: False Difficulty: Easy Learning Objective: LO 1

26. The cost of measuring, testing, and analyzing are collectively known as a. appraisal costs. b. prevention costs. c. external failure costs. d. internal failure costs.

Ans: a, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

27. Customer complaint costs are an example of external failure costs.

Ans: True Difficulty: Moderate Learning Objective: LO 2

28. ISO 9000 certification is a major consideration for doing business within the United States and Europe Union.

Ans: True Difficulty: Moderate Learning Objective: LO 6

29. Statistical process control monitors and controls quality for both qualitative and quantitative variables.

Ans: True Difficulty: Hard Learning Objective: LO 3

30. Today, total quality management has been displaced by quality management systems.

Ans: True

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Test Bank

Difficulty: Hard Learning Objective: LO 3 31. ______________ represents a set of management principles that focus on quality improvement in all the functional areas within a company. a. Six Sigma b. Total quality management c. The Deming cycle d. ISO 9000 Ans: b, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

32. Employees’ role in quality management is becoming less important due to the implementation of supplier partnerships.

Ans: False Difficulty: Moderate Learning Objective: LO 4 33. The training and education of all employees on quality improvement is a basic principle of total quality management.

Ans: True Difficulty: Easy Learning Objective: LO 4

34. One principle of total quality management (TQM) is that upper management is solely responsible for providing the leadership for quality.

Ans: False Difficulty: Moderate Learning Objective: LO 4

35. Two team approaches to quality improvement are quality circles and process improvement teams.

Ans: True Difficulty: Moderate Learning Objective: LO 4 36. Benchmarking involves comparing a company’s quality to the best level of quality achieved by another company in the same industry.

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Learning Objective: LO 4 37. Service quality is more directly related to the interaction between customer and employee than is manufacturing quality.

Ans: True Difficulty: Moderate Learning Objective: LO 4 38. McDonald’s has a reputation for high-quality service resulting from the application of quality management principles.

Ans: True Difficulty: Moderate Learning Objective: LO 4

39 Quality management principles often do not apply to services because the customer has lower quality expectations.

Ans: False Difficulty: Moderate Learning Objective: LO 4

Multiple Choice

40. All of the following are parts of DMAIC except a) define. b) measure. c) analyze. d) improvise.

Ans: D. Difficulty: Moderate Learning Objective: LO 5

41. Which of the following is not a dimension of quality for a manufactured good? a. performance b. reliability c. courtesy

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d. durability Ans: C Difficulty: Easy Learning Objective: LO 1

42. All of the following are dimensions of quality for manufactured products, except a. conformance. b. reliability. c. durability. d. feasibility.

Ans: D Difficulty: Moderate Learning Objective: LO 1

43. The probability that a product will operate properly within an expected timeframe is the dimension of quality known as a. durability. b. reliability. c. performance. d. serviceability.

Ans: B Difficulty: Easy Learning Objective: LO 1

44. The degree to which a product meets pre-established standards is known as a. conformance. b. performance. c. reliability. d. None of these answer choices is correct.

Ans: A Difficulty: Easy Learning Objective: LO 1

45. Making sure that the product meets the design specifications during production is referred to as a. quality of design. b. process capability. c. fitness for use.

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d. quality of conformance.

Ans: D Difficulty: Easy Learning Objective: LO 1

46. __________________ advocated continuous improvement to the production process to achieve conformance to specifications and reduce variability. a. W. Edwards Deming b. Philip Crosby c. Kaoru Ishikawa d. Frederick Taylor Ans: A Difficulty: Moderate Learning Objective: LO 3

47. W. Edwards Deming believed that primary responsibility for quality improvement rested with a. the firm’s employees only. b. the firm’s management only. c. research engineers and consulting statisticians only. d. both the employees and management of the firm.

Ans: D Difficulty: Moderate Learning Objective: LO 3 48. W. Edwards Deming’s overall philosophy for achieving quality is embodied in a. his 14 points. b. his statement of purpose. c. his use of statistical control. d. None of these answer choices is correct.

Ans: A Difficulty: Easy Learning Objective: LO 3

49. A relationship between a firm and its supplier where the supplier agrees to meet the firms’ quality standards and the firm enters into a long-term purchasing agreement with the supplier is known as a. Outsourcing.

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b. vertical integration. c. partnering. d. conformance.

Ans: C Difficulty: Moderate Learning Objective: LO 4

50. Directly involving employees in the quality management process is referred to as a. partnering. b. a quality circle. c. Six Sigma. d. participative problem solving.

Ans: d Difficulty: Easy Learning Objective: LO 4

51. A production process consists of the following four stages with the average percentage of good quality at each stage as shown.

Stage 1 2 3 4

Average Percentage of Good Quality 0.92 0.95 0.96 0.93

What is the daily production yield for the company if daily input is 200 units? a. 192 units b. 188 units c. 184 units d. 156 units Ans: D Difficulty: Hard Learning Objective: LO 2 Solution: Yield = 0.92 × 0.95 × 0.96 × 0.93 × 200 = 156 units.

52. A production process consists of the following four stages with the average percentage of good quality at each stage as shown Stage

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Average Percentage

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of Good Quality 0.98 0.97 0.96 0.92

How many units must the company put into production each day to achieve a daily yield of 100 good units? a. approximately 119 units b. approximately 108 units c. approximately 106 units d. approximately 104 units Ans: A Difficulty: Hard Learning Objective: LO 2 Solution: Input = 100/(0.98 × 0.97 × 0.96 × 0.92) = 119 units

53. A production process consists of the following four stages with the average percentage of good quality at each stage as shown.

Stage 1 2 3 4

Average Percentage of Good Quality 0.95 0.95 0.93 0.97

What is the daily production yield for the company if daily input is 500 units? a. 485 units b. 465 units c. 407 units d. 400 units Ans: C Difficulty: Hard Learning Objective: LO 2 Solution: Yield = 500 × (0.95 × 0.95 × 0.93 × 0.97) = 407 units

54. A production process consists of the following four stages with the average percentage of good quality at each stage as shown.

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Stage 1 2 3 4

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Average Percentage of Good Quality 0.95 0.95 0.93 0.97

How many units must the company put into production each day to achieve a daily yield of 350 good units? a. approximately 430 units b. approximately 415 units c. approximately 468 units d. approximately 361 units Ans: A Difficulty: Hard Learning Objective: LO 2 Solution: Input = 350/(0.95 × 0.95 × 0.93 × 097) = 430 units

55. The costs associated with developing a quality management system are known as a) training costs. b) design costs. c) quality planning costs. d) information costs.

Ans: C Difficulty: Hard Learning Objective: LO 2

56. ______ failure costs include scrap, rework, and downtime. a) External b) Internal c) Process d) System Ans: B Difficulty: Moderate Learning Objective: LO 2

57. Which of the following quality tools display major causes of poor quality on a graph? a. Process flow chart b. Fishbone diagram c. Histogram

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d. Scatter diagram Ans: B Difficulty: Moderate Learning Objective: LO 3

58. Which of the following quality tools displays the frequency of data related to a quality problem? a. Fishbone diagram b. Histogram c. Scatter diagram d. Process flow chart Ans: B Difficulty: Moderate Learning Objective: LO 3

59. Which of the following quality tools displays the relationship between two variables on a graph? a. Process flow chart b. Fishbone diagram c. Histogram d. Scatter diagram Ans: D Difficulty: Moderate Learning Objective: LO 3

60. Which of the following quality tools displays the steps in a process on a graph? a. Process flow chart b. Fishbone diagram c. Histogram d. Scatter diagram Ans: A Difficulty: Moderate Learning Objective: LO 3

61. Modern Inc. manufactures low-cost tables at a processing cost of $80 per table. The company produces 100 units per day and averages 90% good quality resulting in 10% defective items. Fifty percent of the defective units are reworked prior to shipment to Modern’s distribution center.

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What is the product yield? a. 80 b. 85 c. 90 d. 95 Ans: D Difficulty: Moderate Learning Objective: LO 2 Solution: Yield = 100 × 0.90 + 10 × 0.50 = 95

62. Modern Inc. manufactures low-cost tables at a processing cost of $80 per table. The company produces 100 units per day and averages 90% good quality resulting in 10% defective items. Fifty percent of the defective units are reworked prior to shipment to Modern’s distribution center. The rework cost is $10 per unit.

The quality productivity ratio (QPR) is a. approximately 1.00. b. approximately 1.10. c. approximately 1.20. d. approximately 1.30.

Ans: C Difficulty: Moderate Learning Objective: LO 2 Solution: QPR = 95/($8000 + $50) × 100 = 1.18 63. Modern Inc. manufactures low-cost tables at a processing cost of $80 per table. The company produces 100 units per day and averages 90% good quality resulting in 10% defective items. Fifty percent of the defective units are reworked prior to shipment to Modern’s distribution center. The rework cost is $10 per unit.

If production is increased to 200 units per day, the quality productivity ratio (QPR) is a. approximately 1.00. b. approximately 1.10. c. approximately 1.20. d. approximately 1.30.

Ans: C Difficulty: Moderate Learning Objective: LO 2 Solution: QPR = 190/($16000 + $100) × 100 = 1.18 64. Modern Inc. manufactures low-cost tables at a processing cost of $80 per table. The company produces 100 units per day and averages 90% good quality resulting in 10% defective items. Fifty percent of the defective units are reworked prior to shipment to Modern’s distribution center. The rework cost is $10 per unit.

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If the percent good quality increases from 90% to 95%, the quality productivity ratio (QPR) is a. approximately 1.20. b. approximately 1.40. c. approximately 1.60. d. approximately 180.

Ans: A Difficulty: Moderate Learning Objective: LO 2 Solution: QPR = 97.5/($8000 + $25) × 100 = 1.21 65. Modern Inc. manufactures low-cost tables at a processing cost of $80 per table. The company produces 100 units per day and averages 90% good quality resulting in 10% defective items. Fifty percent of the defective units are reworked prior to shipment to Modern’s distribution center. The rework cost is $10 per unit.

If the rework cost is increased to $50 the quality productivity ratio (QPR) is a. approximately 1.10. b. approximately 1.15. c. approximately 1.20. d. approximately 125.

Ans: B Difficulty: Moderate Learning Objective: LO 2 Solution: QPR = 95/($8000 + $250) × 100 = 1.15 66. Modern Inc. manufactures low-cost tables at a processing cost of $80 per table. The company produces 100 units per day and averages 90% good quality resulting in 10% defective items. Fifty percent of the defective units are reworked prior to shipment to Modern’s distribution center. The rework cost is $10 per unit.

If the production cost is decreased to $70 the quality productivity ratio (QPR) is a. approximately 1.15. b. approximately 1.25. c. approximately 1.35. d. approximately 1.45.

Ans: C Difficulty: Moderate Learning Objective: LO 2 Solution: QPR = 95/($7000 + $50) × 100 = 1.35

67. Total quality management (TQM) was originated in the 1980s as a _____________ management approach to improve quality. a. Korean

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b. American c. Japanese d. European Ans: C Difficulty: Moderate Learning Objective; LO 3

68. Which of the following is not a basic principle of total quality management (TQM)? a. Quality must be measured. b. The quality standard is no defects. c. Quality can and must be managed. d. The producer defines quality.

Ans: D Difficulty: Moderate Learning Objective: LO 3

69. A ____________________ is a system that achieves customer satisfaction and complements other company systems. a. quality management system b. total quality system c. quality productivity system d. None of these answer choices is correct.

Ans: A Difficulty: Moderate Learning Objective: LO 3

70. Research has shown that companies achieving high customer satisfaction ratings a. attract new suppliers. b. retain existing customers. c. attract new employees. d. None of these answer choices is correct.

Ans: B Difficulty: Moderate Learning Objective: LO 4

71. A relationship between a company and a supplier based on mutual quality standards is called a. sourcing.

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b. partnering. c. sourcing and partnering d. None of these answer choices is correct.

Ans: B Difficulty: Moderate Learning Objective: LO 4

72. The primary means for gathering information from customers and measuring customer satisfaction is a. a sampling program. b. a phone interview. c. feedback from competitors. d. a survey.

Ans: D Difficulty: Moderate Learning Objective: LO 4

73. ACSI measures ________________ the goods and services of seven economic sectors. a. product quality of b. customer satisfaction with c. product demand for d. market share for Ans: B Difficulty: Moderate Learning Objective: LO 4 74. The customer of ________________ firm(s) interacts directly with the production process. a. a service b. a manufacturing c. both service and manufacturing d. None of these answer choices is correct.

Ans: A Difficulty: Moderate Learning Objective: LO 4 75. A(n) ____________ is the best level of quality achievement in one company that others seek to match or exceed. a. attribute

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b. target value c. benchmark d. variable Ans: C Difficulty: Moderate Learning Objective: LO 4

76. _____________________ is an important measure of service quality that is not difficult to measure. a. Timeliness b. Benchmarking c. Kaizen d. Participative problem solving Ans: A Difficulty: Moderate Learning Objective: LO 4

77. The Six Sigma quality goal is 3.4 defects per ___________________ opportunities. a. hundred b. thousand c. million d. billion Ans: C Difficulty: Easy Learning Objective: LO 5

78. At the heart of Six Sigma is the ____________________ strategy, a five-step process applied to improvement projects. a. continuous improvement b. breakthrough c. champion d. None of these answer choices is correct.

Ans: B Difficulty: Moderate Learning Objective: LO 5

79. Quality costs include the cost of _____________________. a. achieving good quality

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b. poor quality c. both achieving good quality and generating poor quality d. None of these answer choices is correct.

Ans: C Difficulty: Moderate Learning Objective: LO 2

80. The cost of achieving good quality includes a. prevention costs. b. internal failure costs. c. external failure costs. d. None of these answer choices is correct.

Ans: A Difficulty: Moderate Learning Objective: LO 2

81. The cost of achieving poor quality includes a. prevention costs. b. appraisal costs. c. internal failure costs. d. All of these answer choices are correct.

Ans: B Difficulty: Moderate Learning Objective: LO 2

82. The Baldridge Award was created in 1987 to _________________ in the U.S. a. stimulate growth of quality management b. stimulate economic growth c. recognize the best quality gurus d. None of these answer choices is correct.

Ans: A Difficulty: Moderate Learning Objective: LO 6

83. ISO in ISO 9000 is a. not an acronym for International Organization for Standardization. b. a word derived from a Greek word meaning equal. c. both a word derived from a Greek word meaning equal and not an acronym for

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International Organization for Standardization. d. None of these answer choices is correct.

Ans: C Difficulty: Moderate Learning Objective: LO 5

Short Answer

84. Briefly discuss four dimensions of quality a consumer looks for in manufactured products.

Student answers will vary depending of the dimensions they select. Among the dimensions that could be discussed are: a. Performance: the basic operating characteristics of a product. b. Features: the extra items added to the basic features c. Reliability: the probability that a product will operate properly within an expected time frame. d. Conformance: the degree to which a product meets pre-established standards. e. Durability: how long the product lasts before it must be replaced. f. Serviceability: the ease, speed, and facility of the repair process. g. Aesthetics: how the product looks, feels, smells, sounds, or tastes. h. Safety: assurance that the customer will not suffer injury or harm from a product. i. Other: subjective perceptions based on brand name, advertising, etc.

Learning Objective: LO 4 Level of Difficulty: Medium 85. What is quality of conformance from the producer’s perspective and how can it be achieved?

Once the product design has been determined, the producer perceives quality to be how effectively the production process is able to conform to the specifications required by the design. This is referred to as quality of conformance. What this means is that quality during production focuses on making sure that the product meets the specifications required by the design. From the producer’s perspective, goodquality products conform to specifications—they are well-made. Achieving quality of conformance depends on a number of factors, including the design of the production process (distinct from product design), the performance level of machinery, equipment and technology, the materials used, the training and supervision of employees and the degree to which statistical quality control techniques are used.

Learning Objective: LO 3 Level of Difficulty: Medium

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86. Briefly discuss the principles associated with total quality management (TQM).

Total quality management represents a set of management principles that focus on quality improvement as the driving force in all functional areas and at all levels in a company. These principles are a. the customer defines quality and customer satisfaction as the top priority, b. top management must provide the leadership for quality, c. quality is a strategic issues and requires a strategic plan, d. quality is the responsibility of all employees in the organization, e. all functions of the company must focus on continuous quality improvement to achieve strategic goals, f. quality problems are solved through cooperation among employees and management, g. problem solving and continuous quality improvement use statistical quality control methods, and h. training and education of all employees are the basis for continuous quality improvement.

Learning Objective: LO 3 Level of Difficulty: Medium

87. What is Kaizen and what role do employees play in Kaizen?

Kaizen is the Japanese word for continuous improvement, not only in the workplace but also in one’s personal life. In the workplace kaizen means involving everyone in a process of gradual, organized, and continuous improvement. Every employee in the organization should be involved in working together to make improvements. If an improvement is not a part of a continuous, ongoing process it is not considered kaizen.

Employees are most directly involved in kaizen when they are determining solutions to their own problems. Employees are the real experts in their immediate workspace. In its most basic form kaizen is a system in which employees identify many small improvements on a continual basis and implement these improvements themselves. Every employee is encouraged to be involved in the improvement process so that all employees feel that they are participating in quality improvements and remain excited about their jobs. All Six Sigma and TQM programs need this level of involvement to be successful.

Learning Objective: LO 4

88. What is a Six Sigma quality program?

A Six Sigma program is fundamentally a very organized and detailed process for improving quality. There is little doubt that Six Sigma is a direct descendant of the philosophy and principles of TQM. In its simplest form Six Sigma is based on Deming’s PDCA cycle and Juran’s assertion that “all quality improvement occurs on a project-by-

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project basis. Six Sigma is a process for developing and delivering near perfect products and services. The main idea is that if the number of defects in a process can be measured then it can be systematically determined how to eliminate them and get as close to zero defects as possible. In Six Sigma “as close to zero as possible” translates into a statistically-based numerical goal of 3.4 defects per million opportunities (DPMO), which means defects have been nearly eliminated. Through the reduction of variation of all processes, the overall performance of the company will be improved and significant cost savings will be realized.

Learning Objective: LO 5 Level of Difficulty: Medium

89. Briefly discuss the costs that are associated with achieving good quality.

The costs of a quality management program are prevention costs and appraisal costs.

Prevention costs are the costs of trying to prevent poor-quality products from reaching the customer. Prevention reflects the quality philosophy of “do it right the first time, the goal of a quality management program. Examples of prevention costs include quality planning costs, product design costs, process costs, training costs, and information costs.

Appraisal costs are the costs of measuring, testing, and analyzing materials, parts, products, and the production process to ensure that product quality specifications are being met. Examples of appraisal costs include inspection and testing, test equipment costs, and operator costs.

Learning Objective: LO 2 Level of Difficulty: Medium

90. Briefly discuss the cost of poor quality.

Costs associated with poor quality are also referred to as the cost of nonconformance, or failure costs. The cost of poor quality can be categorized as internal failure costs or external failure costs. Internal failure costs are incurred when poor-quality products are discovered before they are delivered to the customer. Examples of internal failure costs include scrap costs, rework costs, process failure costs, process downtime costs, pricedowngrading costs. External failure costs are incurred after the customer has received a poor-quality product and are primarily related to customer service. Examples of external failure costs include customer complaint costs, product return costs, warranty claims costs, product liability costs, and lost sales costs.

Level of Difficulty: Medium Learning Objective: LO 2

91. Briefly describe various Six Sigma tools and give an example of the use of each.

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QFD, Cause and Effect Matrix, FMEA, SPC, t-Tests, and DOE should all be discussed and related to quality management in particular and as a critical part of contemporary operations and supply chain management Learning Objective: LO 5 Level of Difficulty: Medium

91. Kaizen is __________. a. another name for a lean system b. the Japanese term for continuous improvement c. the Japanese term for reengineering d. another name for a quality circle

Ans: A Difficulty: Moderate Learning Objective: LO 4

92. Quality circles __________. a. were used in the 1970s but have been superseded by Six Sigma b. are small, mandatory groups of employees and their supervisor(s) c. follow an established procedure for identifying, analyzing, and solving qualityrelated or other problems d. have no moderators to allow the spontaneous and free interaction of its members Ans: C Difficulty: Moderate Learning Objective: LO 4

93. A t-test is __________. a. a statistical technique used in Six Sigma to collect, analyze, and interpret data b. a method to monitor a process over time to determine whether any variation in the process is the result of a cause or problem c. a statistical technique for analyzing potential reliability problems and weaknesses in a product or process d. a statistical measure to determine whether there is a statistical, not random, difference in the means of two groups of data Ans: C Difficulty: Moderate

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Learning Objective: LO 4

94. Designs of experiments (DOE) is __________. a. a statistical technique used in Six Sigma to collect, analyze, and interpret data b. a tool for analyzing potential reliability problems and weaknesses in a product or process c. a statistical measure used to determine whether there is a statistical, not random, difference in the means of two groups of data d. a structured, organized method for determining whether there is a statistical correlation between two variables Ans: A Difficulty: Moderate Learning Objective: LO 4

95. External failure costs include the following costs except __________ costs. a. price-downgrading b. product-return c. warranty claims d. lost sales Ans: A Difficulty: Moderate Learning Objective: LO 4

96. A factory has a yield-to-input (Y/I) ratio of 0.94 and the percentage of poor-quality products that can be reworked (R) is 89.1%. If the percentage of good products produced each day (G) is doubled but the yield-to-input ratio remains unchanged, then the percentage of poor-quality products that can be reworked must have __________. a. decreased to 44.6% b. decreased to 40% c. decreased to 37.81% d. There is not enough information to determine R. Ans: B Difficulty: Hard Learning Objective: LO 4

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97. A factory has a yield-to-input (Y/I) ratio of 0.94 and the percentage of poor-quality products that can be reworked (R) is 89.1%. A new production process will increase the percentage of good products produced each day (G) to 80%. What is the minimum value of R that must be achieved to improve the yield-to-input ratio to 0.95? a. 85% b. 79% c. 77.8% d. 75% Ans: D Difficulty: Medium Learning Objective: LO 4

98. The quality-productivity ratio increases if a. the production capacity is increased b. the rework cost increases c. the percentage of good products increases d. the production capacity is decreased Ans: C Difficulty: Medium Learning Objective: LO 4

99. A production process has a percentage of good products produced each day (G) of 75% and a percentage of poor-quality products that can be reworked of 50%. The unit processing cost and the rework cost are both $1 per unit. Its quality-productivity ratio, QPR, is __________. a. 79.78 b. 77.78 c. 75.79 d. 73.79 Ans: B Difficulty: Medium Learning Objective: LO 4

100. A production process has a percentage of good products produced each day (G) of 75%. What is the range of possible values for its quality-productivity ratio, QPR?

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a. 75 to 80 b. 70 to 80 c. 70 to 75 d. There is not enough information to find out Ans: A Difficulty: Medium Learning Objective: LO 4

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Chapter 3: Statistical Quality Control

True/False

1. ____________involves monitoring and controlling a process to prevent poor quality. a. Process capability measures b. Statistical process control c. Pattern tests d. Control charts Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None,

2. Statistical process control is based on a philosophy of inspection as opposed to prevention.

Ans: False, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

3. One goal of statistical process control is to prevent a process from producing items that have to be scrapped or reworked.

Ans: True, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

4. Two types of variation associated with the output of a process are common cause (random) and special cause (nonrandom).

Ans: True, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

5. Control limits are based on the special cause (nonrandom) variation inherent in a process.

Ans: False, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

6. A process that is determined to be in control contains no variation.

Ans: False, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

7. Common cause (random) variation provides evidence that the process is not in control.

Ans: False, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

8. After ______________ is detected, the focus changes to identifying the root cause of the variation and eliminating it.

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a Cpk > 1 a Cpk < 1 common cause variation special cause variation

Ans: d, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

9. Process control is achieved by taking periodic samples from a process and plotting the sample points on a chart to determine if the process is within control limits.

Ans: True, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

10. When a control chart detects no special cause (nonrandom) variation in a process, the upper and lower control limits are the same value.

Ans: False, LO: 2, Bloom: K, Difficulty: Hard, AACSB: None

11. It is sometimes not necessary to determine new control limits after special cause (nonrandom) variation has been identified if the source has been eliminated without changing the process.

Ans: True, LO: 2, Bloom: K, Difficulty: Hard, AACSB: None

12. When Cpk differs from Cp it indicates the a. tolerance has changed. b. control limit has changed. c. process mean is centered. d. the process is mean is off center.

Ans: d, LO: 7, Bloom: C, Difficulty: Easy, AACSB: None

13. With a c-chart, the sample size is small and may contain only one item.

Ans: True, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

14. A ______ is used to monitor the proportion defective in the output of a process. a. c-chart b. p-chart c. 𝑥̅ -chart d. range chart Ans: b, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

15. control charts are used to monitor descriptive characteristics of the output of a process rather than measurable characteristics. a. Attribute b. Variable

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c. Pattern test d. Range Ans: a, LO:3, Bloom: K, Difficulty: Easy, AACSB: None

16. The formula used to determine the upper and lower control limits are based on product specification limits.

Ans: False, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

17. Variable control charts are used to monitor measurable characteristics of a process’s outputs rather than descriptive characteristics.

Ans: True, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

18. An x-bar and R-chart constructed to monitor and control a process use the same raw data.

Ans: True, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

19. Variable control charts are used for quantitative measures such as weight or time.

Ans: True, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

−−

20. Construction and use of an x -chart is based on an assumption that the sample points are normally distributed around the centerline.

Ans: True, LO: 4, Bloom: K, Difficulty: Hard, AACSB: None

21. The _______ is the difference between the smallest and largest values in a sample. a. attribute b. mean c. range d. variation Ans: c, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

22. The range measures the variation within samples versus the variation between samples.

Ans: True, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

23. It is possible to have low variation within samples while at the same time having high variation between sample means.

Ans: True, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

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24. One advantage of using a pattern test is that special cause variations may be identified before any points are plotted outside the control limits.

Ans: True, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

25. A pattern test can identify an out-of-control process even if all sample points are within control limits.

Ans: True, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

26. A control chart is in control when the plot of the sample points exhibits a pattern.

Ans: False, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

27. If the points plotted on a control chart display a pattern, it is called a a. pattern test. b. run. c. Trend. d. slope.

Ans: b, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

28. When constructing a control chart for the first time, all points should be within the control limits indicating the process is in control.

Ans: True, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

29. Process control charts are often used at a critical point after which it is difficult to correct or rework the process output.

Ans: True, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

30. Control charts visually show when a process is not within statistical control limits.

Ans: True, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

31. The popularity of Excel and other data analysis software has been a major factor in the increased use of statistical process control.

Ans: True, LO: 6, Bloom: K, Difficulty: Moderate, AACSB: None

32. Tolerances or specification limits are allowable variation prescribed in a product design.

Ans: True, LO: 7, Bloom: K, Difficulty: Moderate, AACSB: None

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33. ________ reflect the amount of common cause variation allowed in a process. a. Control limits b. Tolerances c. Process capability d. Statistical process control Ans: a, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

34. For a given process, the process capability ratio is not related to its specification limits.

Ans: False, LO: 7, Bloom: K, Difficulty: Moderate, AACSB: None

35. A process capability ratio __________ shows that a process is capable of producing output within its specification limits. a. of zero b. less than one c. equal to one d. greater than one Ans: d, LO: 7, Bloom: K, Difficulty: Easy, AACSB: None

36. All processes contain a certain amount of variation in their output.

Ans: True, LO: 7, Bloom: K, Difficulty: Easy, AACSB: None

37. A sequence of sample points that display a pattern is known as a run.

Ans: True, LO: 7, Bloom: K, Difficulty: Easy, AACSB: None

38. Statistical process control can prevent poor quality before it occurs if a pattern is evident in the plotted points.

Ans: True, LO: 7, Bloom: K, Difficulty: Moderate, AACSB: None

39. The ___________ indicates how much a process mean differs from the target specification value. a. 𝑥̅ -chart b. range chart c. process capability ratio d. process capability index Ans: True, LO: 7, Bloom: K, Difficulty: Moderate, AACSB: None

Multiple Choice Questions

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40. If a sample point plotted on a control chart is outside the control limits a. the evidence indicates the process is in control. b. the evidence indicates the process is out of control. c. the evidence is inconclusive. d. None of these answer choices is correct.

Ans: B, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None.

41. Which of the following could be responsible for variability that is special cause (nonrandom)? a. Broken machinery. b. Defective parts and materials. c. Operator error. d. All these answer choices are correct.

Ans: D, LO: 1, Bloom: K, Difficulty: Hard, AACSB: None

42. Common (random) variation of a process depends on all the following except a. errors due to lack of training. b. the equipment and machinery used. c. the operator. d. system used for measurement.

Ans: A, LO: 1, Bloom: K, Difficulty: Hard, AACSB: None

43. An attribute measure is a product characteristic such as a. weight. b. color. c. length. d. time.

Ans: B, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

44. A variable measure is a product characteristic such as a. color. b. smoothness. c. temperature d. good taste Ans: C, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

45. Which of the following services can be measured and monitored with control charts? a. Hospitals b. Airlines c. Banks

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d. All these answer choices are correct.

Ans: D, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

46. Control charts are typically used at the ___________ of a process. a. beginning. b. middle. c. end. d. All these answer choices are correct.

Ans: A, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

a. b. c. d.

47. Which of the following is not a primary purpose of statistical process control? to establish control limits to detect special cause variations to identify specification limits to determine when a process is not in control

Ans: C, LO:2, Bloom: K, Difficulty: Easy, AACSB: None

48. Four common types of control charts include all of the following except: −−

a. b. c. d.

x -chart t-chart p-chart c-chart

Ans: B, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

49. Which of the following is not a characteristic of a control chart? a. the centerline is determined using special cause (nonrandom) variations. b. the upper and lower control limits are based on special cause (nonrandom) variation. c. the centerline is determined by using the target value. d.

None of these answer choices is correct.

Ans: D, LO: 2, Bloom: K, Difficulty: Hard, AACSB: None

a. b. c. d.

50. Special cause (nonrandom) variation in a process is more likely to be detected with wider control limits narrow control limits wider specification limits narrow specification limits

Ans: B, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

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51. Which of the following statements concerning control chart limits is true? a. the smaller the value of z, the more narrow the control limits are and the more sensitive the chart is to changes in the production process b. the larger the value of z, the more narrow the control limits are and the more sensitive the chart is to changes in the production process c. the smaller the value of z, the wider the control limits are and the less sensitive the chart is to changes in the production process d. the larger the value of z, the more narrow the control limits are and the less sensitive the chart is to changes in the production process Ans: A, LO: 2, Bloom: K, Difficulty: Hard, AACSB: None

52. The basic purpose of control charts include(s) a. establishing control limits for a process. b. monitoring the process to indicate when it is out of control. c. both establishing control limits for a process and monitoring the process to indicate when it is out of control are basic purposes. d. None of these answer choices is correct.

Ans: C, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

53. The formulas for determining the upper and lower control limits are based on the number of standard deviations, z, from the process average. Management usually selects a z value of _______. a. one b. two c. three d. six Ans: C, LO:2, Bloom: K, Difficulty: Moderate, AACSB: None

54. When a control chart is first developed, if the process is found to be out of control, a. the control chart can be utilized. b. the control chart should not be utilized until more samples are taken, c. the process should be examined and corrections made before a new control chart is constructed. d. the process should be replaced by a new process.

Ans: C, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

55. A control chart that uses the actual number of defects per item to monitor a process is known as a a. p-chart b. c-chart c. R-chart

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−−

x -chart

d.

Ans: B, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

56. If a sample of 40 units of output found 500 defects, then the center line for monitoring the average number of defects per unit of output would be −

a. c = 40 −

b. c = 0.08 −

c. c = 12.5 −

d. c = 20,000 Ans: C, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None Solution: centerline = 500/40

57. If a sample of 40 units of output found 500 defects, then the 3-sigma upper −

control limit for the c chart would be a. 12.50 b. 23.11 c. 37.50 d. 75.00 Ans: B, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None Solution: UCL = 12.5 + 3 × SQRT(12.5) = 23.11

58. A company randomly selects 100 light bulbs every day for 40 days from its production process. If 600 defective light bulbs are found in the sampled bulbs then the estimate for the average percent defective would be a. 6.667 b. 0.167 c. 0.150 d. 0.250 Ans: C, LO:3, Bloom: K, Difficulty: Moderate, AACSB: None Solution: process average = 600/(100 × 40) = 0.15

59. A company randomly selects 100 light bulbs every day for 40 days from its production process. If 600 defective light bulbs are found in the sampled bulbs then the 3-sigma lower control limit would be a. 0.0357 b. 0.0429 c. 0.1500 d. 0.1857 Ans: B, LO: 32, Bloom: K, Difficulty: Moderate, AACSB: None Solution: LCL = .15 – 3 × SQRT(.15 × .85/100) = .0429

Copyright ©2017 John Wiley & Sons, Inc.

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60. Which of the following control charts is based on the number of defects within a sample? −−

a. b. c. d.

x R c p

Ans: C, LO:3, Bloom: K, Difficulty: Moderate, AACSB: None

61. Which of the following control charts is used to monitor the percent of defective items within a sample? −−

a. b. c. d.

x R c p

Ans: D, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

62. If the quality of a process’s output is determined by classifying the output as being defective or not defective, use a(n) ________control chart. −−

a. b. c. d.

x R c p

Ans: D, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

63. Which of the following control charts are based on sample sizes as small as one? −−

a. b. c. d.

x R c p

Ans: C, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

64. Which of the following control charts are often based on sample sizes equal to or larger than one hundred? −−

a. b. c. d.

x R c p

Ans: D, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

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65. Consider a production process that produces batteries. A quality engineer has taken 20 samples each containing 100 batteries. The total number of defective batteries observed over the 20 samples is 200. The centerline for the control chart constructed using z equal to two is a. 0.03 b. 0.04 c. 0.05 d. 0.10 Ans: D, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

Solution: 2100/(20 × 100) = 0.10

66. Consider a production process that produces batteries. A quality engineer has taken 20 samples each containing 100 batteries. The total number of defective batteries observed over the 20 samples is 200. The sample standard deviation is a. 0.03 b. 0.04 c. 0.05 d. 0.10 Ans: A, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

Solution: SQRT(.10 × .90/100) = .03

67. Consider a production process that produces batteries. A quality engineer has taken 20 samples each containing 100 batteries. The total number of defective batteries observed over the 20 samples is 200. The UCL for the control chart constructed using two sigma is a. 0.088 b. 0.094 c. 0.104 d. 0.160 Ans: D, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

Solution: UCL = .10 + 2 × .03 = .160

68. Consider a production process that produces batteries. A quality engineer has taken 20 samples each containing 100 batteries. The total number of defective batteries observed over the 20 samples is 200. The LCL for the control chat constructed using two sigma is a. 0.01 b. 0.04 c. 0.12 d. 0.16 Ans: B, LO:3, Bloom: K, Difficulty: Easy, AACSB: None

Solution: LCL = .10 – 2 × .03 = .04 Copyright ©2017 John Wiley & Sons, Inc.

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69. Consider a production process that produces tires. A quality engineer has taken 15 samples, each containing 200 tires. The total number of defective tires over the 15 samples is 340. The centerline for the control chart is a. 0.08 b. 0.11 c. 0.16 d. 0.21 Ans: B, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

Solution: 340/(15 × 200) = 0.11

70. Consider a production process that produces tires. A quality engineer has taken 15 samples, each containing 200 tires. The total number of defective tires over the 15 samples is 340. The sample standard deviation is a. 0.005 b. 0.011 c. 0.022 d. 0.028 Ans: C, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

Solution: SQRT(.11 × .89/200) = .022

71. Consider a production process that produces tires. A quality engineer has taken 15 samples, each containing 200 tires. The total number of defective tires over the 15 samples is 340. The UCL for the control chart constructed using two sigma is a. 0.025 b. 0.094 c. 0.122 d. 0.154 Ans: D, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

Solution: UCL = .11 + 2 × .022 = .154

72. Consider a production process that produces tires. A quality engineer has taken 15 samples, each containing 200 tires. The total number of defective tires over the 15 samples is 340. The LCL for the control chat constructed using two sigma is e. 0.022 f. 0.036 g. 0.048 h. 0.066 Ans: B, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

Solution: LCL = .11 – 2 × .022 = .066

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73. Easy Tax is a service company that prepares tax returns. An outside auditor has examined 20 samples each containing one completed tax return. The total number of defects observed over the 20 samples is 200. What type of control chart would you recommend? a. p-chart b. c-chart −−

c. x chart d. R chart Ans: B, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

74. Easy Tax is a service company that prepares tax returns. An outside auditor has examined 20 samples each containing one completed tax return. The total number of defects observed over the 20 samples is 200. The centerline for the control chart constructed is a. 5 b. 10 c. 15 d. 20 Ans: B, LO:3, Bloom: K, Difficulty: Easy, AACSB: None

Solution: centerline=200/20=10

75. Easy Tax is a service company that prepares tax returns. An outside auditor has examined 20 samples each containing one completed tax return. The total number of defects observed over the 20 samples is 200. The standard deviation for the control chart is a. 2.2 b. 3.2 c. 3.9 d. 4.5 Ans: B, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

Solution: standard deviation = Sqrt(10) = 3.2

76. Easy Tax is a service company that prepares tax returns. An outside auditor has examined 20 samples each containing one completed tax return. The total number of defects observed over the 20 samples is 200. The UCL for the control chart constructed using three sigma is a. 19.6 b. 26.7 c. 33.5 d. 50.0 Ans: A, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

Solution: UCL = 10 + 3 × 3.2 = 19.6

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77. Easy Tax is a service company that prepares tax returns. An outside auditor has examined 20 samples each containing one completed tax return. The total number of defects observed over the 20 samples is 200. The LCL for the control chart constructed using three sigma is a. -1.6 b. 0.4 c. 3.3 d. 6.5 Ans: B, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

Solution: LCL = 10 − 3 × 3.2 = 0.4 78. Marble Inc. makes countertops from a variety of high-end materials. To monitor the quality of its production processes the company randomly selects one countertop and counts the number of blemishes. The results for ten samples are shown below: Sample No. No. of Blemishes

1 17

2 19

3 15

4 18

5 16

6 14

7 15

8 16

9 15

10 15

Given the sample information above, the average number of defects per unit for this process would be a. 160 b. 80 c. 16 d. 10 Ans: C, LO:3, Bloom: K, Difficulty: Moderate, AACSB: None Solution: average number of defects = (17 + 19 + 5 + 18 + 16 + 14 + 15 + 16 + 14 + 15 + 15)/10 = 16

79. Marble Inc. makes countertops from a variety of high-end materials. To monitor the quality of its production processes the company randomly selects one countertop and counts the number of blemishes. The results for ten samples are shown below: Sample No. No. of Blemishes

1 17

2 19

3 15

4 18

5 16

6 14

7 15

8 16

9 15

10 15

Given the sample information above, the standard deviation of the number of defects for this process would be a. 16 b. 10 c. 4

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d. 0 Ans: C, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None Solution: Standard deviation = SQRT(16)

80. Marble Inc. makes countertops from a variety of high-end materials. To monitor the quality of its production processes the company randomly selects one countertop and counts the number of blemishes. The results for ten samples are shown below: Sample No. No. of Blemishes

1 17

2 19

3 15

4 18

5 16

6 14

7 15

8 16

9 15

10 15

Given the sample information above, the UCL using sigma = 3 for this process would be a. 36 b. 32 c. 30 d. 28 Ans: D, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None Solution: UCL = 16 + 3 × 4 = 28

81. Marble Inc. makes countertops from a variety of high-end materials. To monitor the quality of its production processes the company randomly selects one countertop and counts the number of blemishes. The results for ten samples are shown below: Sample No. No. of Blemishes

1 17

2 19

3 15

4 18

5 16

6 14

7 15

8 16

9 15

10 15

Given the sample information above, the LCL using sigma = 3 for this process would be a. 12 b. 8 c. 4 d. 0 Ans: D, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None Solution: UCL = 16 − 3 × 4 = 4

82. A control chart that reflects the amount of variation, or spread, present within each sample is known as a(n) a. p-chart b. c-chart

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c. R-chart −−

d. x -chart Ans: C, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

83. Which of the following control charts is used to control the variation within samples? −−

a. b. c. d.

x -chart R chart c-chart p-chart

Ans: B, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

84. Which of the following control charts is used to control the variation between samples? −−

a. b. c. d.

x -chart R-chart c-chart p-chart

Ans: A, LO:4, Bloom: K, Difficulty: Moderate, AACSB: None

85. Which of the following charts are frequently used together to monitor and control quality? −−

a. b. c.

p and x R and p c and R

d.

R and x

−−

Ans: D, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

86. Pizazz manufactures a 5.0 oz. energy drink of the same name. Because the cans are so small, consumers are concerned that they are not receiving the full 5 ounces in each can. A quality engineer at the company is charged with analyzing the filling process and ensuring accurate readings. On 15 different occasions over the past month, she has taken a sample of 6 energy drinks off the production line and recorded their weight. If the sum of the sample means is 80.20 ounces and the sum of the sample ranges is 12.68 ounces, what is the centerline of an R-chart for this process? a. .50

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b. .85 c. 1.20 d. 1.55 Ans: B, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

Solution: centerline = 12.68/15 = .85

87. Pizazz manufactures a 5.0 oz. energy drink of the same name. Because the cans are so small, consumers are concerned that they are not receiving the full 5 ounces in each can. A quality engineer at the company is charged with analyzing the filling process and ensuring accurate readings. On 15 different occasions over the past month, she has taken a sample of 6 energy drinks off the production line and recorded their weight. If the sum of the sample means is 80.20 ounces and the sum of the sample ranges is 12.68 ounces, the UCL for an R-chart of this process would be a. 0.0 b. 1.0 c. 1.7 d. 2.4 Ans: C, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

Solution: UCL = 2 × .85 = 1.7

88. Pizazz manufactures a 5.0 oz. energy drink of the same name. Because the cans are so small, consumers are concerned that they are not receiving the full 5 ounces in each can. A quality engineer at the company is charged with analyzing the filling process and ensuring accurate readings. On 15 different occasions over the past month, she has taken a sample of 6 energy drinks off the production line and recorded their weight. If the sum of the sample means is 80.20 ounces and the sum of the sample ranges is 12.68 ounces, the UCL for an R-chart of this process would be a. 0.0 b. 1.0 c. 1.7 d. 2.4 Ans: A, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

Solution: LCL = 0 × .85 = 0.0

89. Pizazz manufactures a 5.0 oz. energy drink of the same name. Because the cans are so small, consumers are concerned that they are not receiving the full 5 ounces in each can. A quality engineer at the company is charged with analyzing the filling process and ensuring accurate readings. On 15 different occasions over the past month, she has taken a sample of 6 energy drinks off the production line and recorded their weight. If the sum of the sample means is 80.20 ounces and the sum of the sample ranges is 12.68 ounces, the centerline for an X-bar chart of this process would be

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a. b. c. d.

Test Bank

4.75 5.00 5.35 5.69

Ans: C, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: centerline = 80.20/15 = 5.35 a. 90. Pizazz manufactures a 5.0 oz. energy drink of the same name. Because the cans are so small, consumers are concerned that they are not receiving the full 5 ounces in each can. A quality engineer at the company is charged with analyzing the filling process and ensuring accurate readings. On 15 different occasions over the past month, she has taken a sample of 6energy drinks off the production line and recorded their weight. If the sum of the sample means is 80.20 ounces and the sum of the sample ranges is 12.68 ounces, the UCL for an X-bar chart of this process would be5.00 b. 5.35 c. 5.76 d. 6.45 Ans: C, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

Solution: UCL = 5.35 + .48 × .85 = 5.76

a. b. c. d.

91. Pizazz manufactures a 5.0 oz. energy drink of the same name.

Because the cans are so small, consumers are concerned that they are not receiving the full 5 ounces in each can. A quality engineer at the company is charged with analyzing the filling process and ensuring accurate readings. On 15 different occasions over the past month, she has taken a sample of 6 energy drinks off the production line and recorded their weight. If the sum of the sample means is 80.20 ounces and the sum of the sample ranges is 12.68 ounces, the LCL for an Xbar chart of this process would be 4.50 4.65 4.79 4.94

Ans: D, LO:4, Bloom: K, Difficulty: Easy, AACSB: None

Solution: LCL = 5.35 − .48 × .85 = 4.94 92. Dumplings –To-Go (DTG) provides take-out dumplings and noodle dishes to customers at its chain of drive-through restaurants. The target for a customer’s waiting time is 3.0 minutes +/- 1 minute. Each month, one of the managers observes the drive-through process and collects a sample of 4 waiting times a day over a 6 day period. The data from one restaurant appears below. If DTG were to construct an X-bar chart from this data, the centerline would be

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Samples 1 5.4 2.8 5.7 4.1 2.9 3.3

1 2 3 4 5 6

a. b. c. d.

2 4.6 3.9 3.1 4.3 1.3 4.3

Observations (mins) 3 6.0 4.6 2.8 5.3 4.1 4.2

Test Bank

4 1.5 5.4 2.2 2.8 3.0 3.9

2.87 3.70 3.81 4.28

Ans: C, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: Centerline = (4.38 + 4.18 + 3.46 + 4.13 + 2.83 + 3.93)/6 = 3.81 93. Dumplings –To-Go (DTG) provides take-out dumplings and noodle dishes to customers at its chain of drive-through restaurants. The target for a customer’s waiting time is 3.0 minutes +/- 1 minute. Each month, one of the managers observes the drive-through process and collects a sample of 4 waiting times a day over a 6 day period. The data from one restaurant appears below. If DTG were to construct an X-bar chart from this data, the 3-sigma UCL would be Samples 1 5.4 2.8 5.7 4.1 2.9 3.3

1 2 3 4 5 6 a. b. c. d.

2 4.6 3.9 3.1 4.3 1.3 4.3

Observations (mins) 3 6.0 4.6 2.8 5.3 4.1 4.2

4 1.5 5.4 2.2 2.8 3.0 3.9

6.44 5.87 3.50 2.82

Ans: B, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: UCL = 3.81 + .73 × 2.82 = 5.87

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94. Dumplings –To-Go (DTG) provides take-out dumplings and noodle dishes to customers at its chain of drive-through restaurants. The target for a customer’s waiting time is 3.0 minutes +/− 1 minute. Each month, one of the managers observes the drive-through process and collects a sample of 4 waiting times a day over a 6 day period. The data from one restaurant appears below. If DTG were to construct an X-bar chart from this data, the 3-sigma LCL would be Samples 1 5.4 2.8 5.7 4.1 2.9 3.3

1 2 3 4 5 6 a. b. c. d.

2 4.6 3.9 3.1 4.3 1.3 4.3

Observations (mins) 3 6.0 4.6 2.8 5.3 4.1 4.2

4 1.5 5.4 2.2 2.8 3.0 3.9

0.00 1.00 1.76 2.82

Ans: C, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: LCL = 3.81 – (.73 × 2.82) = 1.76 95. Dumplings –To-Go (DTG) provides take-out dumplings and noodle dishes to customers at its chain of drive-through restaurants. The target for a customer’s waiting time is 3.0 minutes +/- 1 minute. Each month, one of the managers observes the drive-through process and collects a sample of 4 waiting times a day over a 6 day period. The data from one restaurant appears below. If DTG were to construct an R-chart from this data, the centerline would be

Samples 1 5.4 2.8 5.7 4.1 2.9 3.3

1 2 3 4 5 6

2 4.6 3.9 3.1 4.3 1.3 4.3

Observations (mins) 3 6.0 4.6 2.8 5.3 4.1 4.2

4 1.5 5.4 2.2 2.8 3.0 3.9

a. 1.00

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b. 2.82 c. 3.54 d. 3.81 Ans: B, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

Solution: Centerline = (4.5 + 2.6 + 3.54 + 2.5 + 2.8 + 1)/6 = 2.82 96. Dumplings –To-Go (DTG) provides take-out dumplings and noodle dishes to customers at its chain of drive-through restaurants. The target for a customer’s waiting time is 3.0 minutes +/- 1 minute. Each month, one of the managers observes the drive-through process and collects a sample of 4 waiting times a day over a 6 day period. The data from one restaurant appears below. If DTG were to construct an R-chart from this data, the 3-sigma UCL would be Samples 1 5.4 2.8 5.7 4.1 2.9 3.3

1 2 3 4 5 6 a. b. c. d.

2 4.6 3.9 3.1 4.3 1.3 4.3

Observations (mins) 3 6.0 4.6 2.8 5.3 4.1 4.2

4 1.5 5.4 2.2 2.8 3.0 3.9

6.42 5.87 5.63 5.01

Ans: A, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: UCL = 2.28 × 2.82 = 6.42 97. Dumplings –To-Go (DTG) provides take-out dumplings and noodle dishes to customers at its chain of drive-through restaurants. The target for a customer’s waiting time is 3.0 minutes +/- 1 minute. Each month, one of the managers observes the drive-through process and collects a sample of 4 waiting times a day over a 6 day period. The data from one restaurant appears below. If DTG were to construct an R-chart from this data, the 3-sigma LCL would be Samples 1 2 3 4

1 5.4 2.8 5.7 4.1

2 4.6 3.9 3.1 4.3

Copyright ©2017 John Wiley & Sons, Inc.

Observations (mins) 3 6.0 4.6 2.8 5.3

4 1.5 5.4 2.2 2.8

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5 6

2.9 3.3 a. b. c. d.

1.3 4.3

4.1 4.2

Test Bank

3.0 3.9

2.82 1.41 0.00 −1.41

Ans: C, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: UCL = 0 × 2.82 = 0 98. Dumplings –To-Go (DTG) provides take-out dumplings and noodle dishes to customers at its chain of drive-through restaurants. The target for a customer’s waiting time is 3.0 minutes +/- 1 minute. Each month, one of the managers observes the drive-through process and collects a sample of 4 waiting times a day over a 6 day period. The data for one restaurant appears below. Calculate the process capability ratio. Is this restaurant capable of meeting DTG standards?

Samples 1 2 3 4 5 6

1 5.4 2.8 5.7 4.1 2.9 3.3

2 4.6 3.9 3.1 4.3 1.3 4.3

Observations (mins) 3 6.0 4.6 2.8 5.3 4.1 4.2

4 1.5 5.4 2.2 2.8 3.0 3.9

a. yes b. no c. Cannot be determined from the above information Ans: b, LO: 4, Bloom: K, Difficulty: Hard, AACSB: None

Solution: Cp = (4 − 2)/(5.87 − 1.76) = .486; No

a. b. c. d.

99. In general, a process is considered to be in control for all the following conditions except no points are outside the control limits all points are above the centerline the points are randomly distributed following a normal population no pattern exists in the plotted points

Ans: B, LO: 7, Bloom: K, Difficulty: Easy, AACSB: None

100. A process is generally considered to be in control when a. there are no sample points outside the control limits

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b. most points are near the center line, without many being close to the control limits c. sample points are randomly distributed equally above and below the center line d. All of these answer choices are correct.

Ans: D, LO: 7, Bloom: K, Difficulty: Moderate, AACSB: None

101. For the process to be capable of meeting design specification the process capability index must be a. less than one (1.0) b. equal to or greater than one (1.0) c. less than zero (0.0) d. equal to or greater than zero (0.0) Ans: B, LO: 7, Bloom: K, Difficulty: Moderate, AACSB: None

a. 102. A company produces a product which is designed to weigh 10 oz., with a tolerance of + 0.5 oz. The process produces products with an average weight of 9.95 oz. and a standard deviation of 0.10 oz. The process capability ratio for this process is 1.67 b. 0 c. 0.8333 d. -1.67 Ans: A, LO: 7, Bloom: K, Difficulty: Hard, AACSB: None Solution: process capability ratio = 1.0/(6 × 0.1) = 1.67

103. A company produces a product which is designed to weigh 10 oz., with a tolerance of + 0.5 oz. The process produces products with an average weight of 9.95 oz. and a standard deviation of 0.10 oz. According to the process capability ratio is the process capable of meeting design specifications? a. No, the process capability ratio is less than 1.0 b. Yes, the process capability ratio is less than 1.0 c. No, the process capability ratio is greater than 1.0 d. Yes, the process capability ratio is greater than 1.0 Ans: D, LO: 7, Bloom: K, Difficulty: Hard, AACSB: None Solution: process capability ratio=1.0/(6 × 0.1) = 1.67

104. A company produces a product which is designed to weigh 10 oz., with a tolerance of + 0.5 oz. The process produces products with an average weight of 9.95 oz. and a standard deviation of 0.10 oz. The process capability index for this process is a. 1.50 b. −1.50 c. 1.83

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d. −1.83 Ans: A, LO: 7, Bloom: K, Difficulty: Hard, AACSB: None Solution: Process capability index = min{(.55/(3 × .1), (45/(3 × .1)} = min{1.83,1.50}=1.50

105. A company produces a product which is designed to weigh 10 oz., with a tolerance of + 0.5 oz. The process produces products with an average weight of 9.95 oz. and a standard deviation of 0.10 oz. According to the process capability index a. the process mean is off center having shifted to the right b. the process mean is off center having shifted to the left c. the process mean is centered on the design target d. None of these answer choices is correct.

Ans: A, LO: 7, Bloom: K, Difficulty: Hard, AACSB: None Solution: Process capability index=min{(.55/(3*.1),(45/(3*.1)}=min{1.83,1.50}=1.50

106. XYZ manufacturing has received an order to produce a rod 5 inches in diameter + .04 inch. In sample runs, the machine tool that will be making the rod has been able to produce rods with a mean diameter of 4.99 inches and a standard deviation of 0.011 inch. The process capability ratio for this process is a. −1.44 b. −1.21 c. 1.21 d. 1.44 Ans: C, LO: 7, Bloom: K, Difficulty: Hard, AACSB: None Solution: process capability ratio=0.08/(6*.011)=1.21

a. b. c. d.

107. XYZ manufacturing has received an order to produce a rod 5 inches in diameter + .04 inch. In sample runs, the machine tool that will be making the rod has been able to produce rods with a mean diameter of 4.99 inches and a standard deviation of 0.011 inch. The process capability index for this process is 0.91 1.51 −0.91 −1.51

Ans: A, LO:7, Bloom: K, Difficulty: Hard, AACSB: None Solution: process capability index=min{0.03/(3*.011),(0.05/(3*.011)}=min{0.91,1.51}=1.5

108.XYZ manufacturing has received an order to produce a rod 5 inches in diameter + .04 inch. In sample runs, the machine tool that will be making the rod has been able to produce rods with a mean diameter of 4.99 inches and a standard deviation of 0.011 inch. Which of the following statements is true?

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a. The process is capable of meeting design spec but is off-center. b. The process is capable of meeting design specs and is on-center. c. The process in incapable of meeting design specs.

Ans: C, LO: 7, Bloom: K, Difficulty: Hard, AACSB: None Solution: Cp < 1, so incapable.

Short Answer Questions

109. Briefly discuss attribute and variable quality measures.

Ans: Essay, LO: 2, Bloom: K, Difficulty: Hard, AACSB: None

Solution: The quality of a product or service can be evaluated using either an attribute of the product or service or a variable measure. An attribute is a product characteristic such as color, surface texture, or perhaps smell or taste. Attributes can be evaluated quickly with a discrete response such as good or bad, acceptable or unacceptable, or yes or no. Even if quality specifications are complex and extensive, a simple attribute test might be used to determine if a product or service is or is not defective. A variable measure is a product characteristic that is measured on a continuous scale such as length, width, time, or temperature. Because a variable evaluation is the result of a measurement it is sometimes referred to as a quantitative classification method. An attribute evaluation is sometimes referred to as a qualitative classification, since the response is not measured. Because it is a measurement, a variable typically provides more information about the product that does an attribute.

110.Using control charts, how do we evaluate whether a process is in control?

Ans: Essay, LO:2, Bloom: K, Difficulty: Hard, AACSB: None

Solution: Sample points are plotted on the control chart and the chart is examined to determine if the process is in control. Generally, a process will be considered to be in control if (a) there are no sample points outside the control limits, (b) most points are near the process average or center line, without too many close to the control limits, (c) approximately equal numbers of sample points occur above and below the center line, and (d) the points appear to be randomly distributed around the center line. If any of these conditions are violated, the process may be out of control.

111.

What is a c-chart and when is it used?

Ans: Essay, LO: 3, Bloom: K, Difficulty: Hard, AACSB: None

Solution:

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A c-chart is a type of attribute control chart. A c-chart uses the actual number of defects per item in a sample. A c-chart is used when it is not possible to compute a proportion defective and the actual number of defects must then be used. For example, it is possible to count the number of blemishes on a painted surface but we cannot compute a proportion because the total number of possible blemishes is not known. In such a situation the number of blemishes would be monitored using a c-chart.

_

112.

Why are x and R-charts used together?

Ans: Essay, LO: 4, Bloom: K, Difficulty: Hard, AACSB: None

Solution: When monitoring a variables characteristic, that is one that can be measured, it is possible for the process to lose control in terms of its central tendency (mean) and in terms of its variability (range). IN order for the process to be in control it must be in control with respect to its average and its variability. The two charts measure the process differently. It is possible for samples to have very narrow ranges, suggesting little process variability, but the sample averages might be beyond the control limits.

Conversely, it is possible for sample averages to be in control, but the ranges might be very large. IN order to monitor both the mean and the variability of a process using a variable measured on a continuous scale the two charts must be used together.

113.

What is the process capability ratio and how is it calculated?

Ans: Essay, LO: 7, Bloom: K, Difficulty: Hard, AACSB: None

Solution: Process capability refers to the natural variation of a process relative to the variation allowed by the design specifications. In other words, how capable is the process of producing acceptable units according to the design specifications? Process control charts are used for process capability to determine if an existing process is capable of meeting design specifications. There are three main elements associated with process capability—process variability (the natural range of variation of the process), the process center line (mean), and the design specifications.

114. For a p-chart, UCL = 0.58 and LCL = 0.26. Then p = ______.

a) There is not enough information to determine p b) 0.84 c) 0.58 d) 0.42 Ans: D, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

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115. For a p-chart, UCL = 0.58 and LCL = 0.26. Then the proportion of compliant

products is = ______. a) There is not enough information to determine q b) 0.16 c) 0.42 d) 0.58 Ans: D, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

Solution:1 − p = 1 − (UCL + LCL)/2 = 1 − 0.42 = 0.58

116. For a p-chart, UCL = 0.58 and LCL = 0.26. Then the overall percentage of compliant

items is ______%. a) There is not enough information to determine q b) 58 c) 42 d) 16 Ans: B, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

Solution:1 − p = 1 − (UCL + LCL)/2 = 1 − 0.42 = 0.58 = 58%

117. For a p-chart, UCL = 0.58 and LCL = 0.26. The standard deviation of the proportions

is ______. a) There is not enough information to determine the standard deviation of the proportions b) 0.16 c) 0.11 d) 0.05 Ans: D, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: σ = (UCL − LCL)/6 = = 0.05

118. For a p-chart, the standard deviation of the proportions is 0.066933. The number of

items in each sample is 45. Then p is ______. a) There is not enough information to determine p b) 0.25 c) 0.28 d) 0.32 Ans: C, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

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Solution: σ = 0.066933 = SQRT(p × (1 – p)/45) => 0.066933^2 × 45= p × (1 – p) → p = 0.28

119. For a p-chart, the standard deviation of the proportions is 0.084439. If p is 0.31, then

the number of items in each sample is ______. a) There is not enough information to determine the number of items in each sample b) 28 c) 30 d) 35 Ans: C, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: σ = 0.084439 = SQRT(0.31 × (1 – 0.31)/n) → 0.084439^2 × n= 0.2139→ n = 30

120. For a p-chart, the number of items in each sample is 30. The maximum width

(UCL – LCL) possible is ______. a) There is not enough information to determine the number of items in each sample b) 0.32 c) 0.43 d) 0.55 Ans: D, LO: 4, Bloom: K, Difficulty: Hard, AACSB: None

Solution: UCL − LCL = 6 × SQRT(p × (1 – p)/30), which is largest for p = 0.5 → max width = 6 × SQRT(0.25/30) = 0.55

121. A company produces electronic components designed to have a collector-emitted

voltage of 30 V (volts), with a tolerance of + 0.2 V. The production process produces components with an average collector-emitted voltage of 30.1 V and a standard deviation of 0.15 V. The process capability index for this production process is ______. a) b) c) d) Ans: D, LO: 4, Bloom: K, Difficulty: Hard, AACSB: None

Solution: Process capability index = min{(30.1 – 29.8)/(3 × 0.15), (30.2 – 30.1)/(3 × 0.15)} = min{0.67, 0.22} = 0.22

122. A company produces electronic components designed to have a collector-emitted

voltage of 30 V (volts), with a tolerance of + 0.2 V. The production process has a

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standard deviation of 0.15 V and a process capability index of 0.4. Then the average collector-emitted voltage of the units produced is ______. a) 29.98 b) 30.01 c) 30.02 d) 30.04 Ans: C, LO: 4, Bloom: K, Difficulty: Hard, AACSB: None

Solution: Process capability index = min{(x̅ – 29.8)/(3 × 0.15), (30.2 – x̅)/(3 × 0.15)} = 0.4 → x̅ = 30.02 123. A company produces electronic components designed to have a collector-emitted

voltage of 30 V (volts), with a tolerance of + 0.2 V. The production process produces components with an average collector-emitted voltage of 30.04 V. The process capability index is 0.6. Then the standard deviation of the collector-emitted voltages of the units produced is ______. a) 0.0889 b) 0.0079 c) 0.0071 d) 0.0069 Ans: A, LO: 4, Bloom: K, Difficulty: Hard, AACSB: None

Solution: Process capability index = min{(30.04 – 29.8)/(3 × σ), (30.2 – 30.04)/(3 × σ)} = min{(30.04 – 29.8), (30.2 – 30.04)}/(3 × σ) = 0.6 → 0.16/0.6 = 3 × σ → σ = 0.0889

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Supplement 3: Operational Decision-Making Tools: Acceptance Sampling

True/False

1. Acceptance sampling is not consistent with TQM’s philosophy of zero defects.

Ans: True, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

2. A sampling plan provides a set of guidelines for rejecting a lot.

Ans: False, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

3. With acceptance sampling, a lot is either rejected or accepted depending on the number of defects found in a sample.

Ans: True, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

4. The simplest form of a sampling plan is a double-sample attribute plan.

Ans: False, LO: 1, 5, Bloom: K, Difficulty: Easy, AACSB: None

5. Acceptance sampling involves the inspection of a non-random sample of n units selected from a larger lot.

Ans: False, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

6. Acceptance sampling is based on the premise that a lot contains some acceptable number of defective items.

Ans: True, LO: 1, Bloom: K, Difficulty: Hard, AACSB: None

7.

With a single-sample attribute plan a single sample of size n is selected randomly from a larger lot and each of the n items is inspected.

Ans: True, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

8. A lot is rejected if the number of defective units found in a random sample exceeds a predetermined acceptable number of defective units.

Ans: True, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

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9. The consumer’s risk is the probability of rejecting a lot that meets the acceptable quality level (AQL).

Ans: False, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

9. The consumer’s risk is the probability of accepting a lot in which the fraction of defective items exceeds the lot tolerance percent defective (LTPD).

Ans: True, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

10. An operating characteristics (OC) curve is a graph that measures the probability of accepting a lot with no defective items.

Ans: False, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

11. The average outgoing quality (AOQ) is a measure of the expected number of defective items that will pass on to the customer with the sampling plan selected.

Ans: True, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

12. Double-sampling plans are often less costly than single-sampling plans.

Ans: True, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

13. A multiple-sampling plan uses the smallest sample size of any sampling plan.

Ans: True, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

14. Choosing among a single-, double- and multiple-sampling plans is a strategic versus an economic decision.

Ans: False, LO: 1, 5, Bloom: K, Difficulty: Moderate, AACSB: None

MULTIPLE-CHOICE 16. The _________________ is the probability of rejecting a lot that has an acceptable quality level. a. producer’s risk. b. consumer’s risk. c. lot tolerance percent defective. d. acceptable quality level.

Ans: A, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

17. The _________________ is the probability of accepting a lot that has a higher percentage of defective items than the lot tolerance percent defective. a. producer’s risk b. sampling plan

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c. consumer’s risk d. average outgoing quality Ans: C, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

18. Six Sigma companies report defective parts a. per million. b. per thousand. c. per hundred. d. do not exist.

Ans: A, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

19. All the following reasons are reasons acceptance sampling is still used today except a. government regulations. b. contractual requirements. c. industry standards. d. total quality management principles.

Ans: D, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

20. The ________________ is the consumer’s willingness to accept lots with a small proportion of defective items a. sampling plan b. quality level c. consumer’s risk d. producer’s risk Ans: B, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

21. The _________________ represents the upper limit to the number of defective items a customer will accept in a lot. a. producer’s risk b. consumer’s risk c. average outgoing quality d. lot tolerance percent defective (LTPD) Ans: D, LO: 1 Bloom: K, Difficulty: Moderate, AACSB: None

22. A(n) ________________ curve is a graph showing the probability of accepting a lot for different quality levels with a specific sampling plan. a. operating characteristic (OC) b. average outgoing quality c. lot tolerance percent defective d. single-sample attribute Ans: A, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

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a. b. c. d.

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23. The ______________________ is the expected number of defective items that will pass on to the customer with a sampling. lot tolerance percent defective acceptable quality level average outgoing quality sampling plan

Ans: C, LO:4, Bloom: K, Difficulty: Moderate, AACSB: None

24. A multiple sampling plan is also referred to as a a. double sampling plan. b. triple sampling plan. c. sequential sampling plan. d. None of the answer choices is correct.

Ans: C, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

ESSAYS 25. Is acceptance sampling consistent with TQM? Ans: Acceptance sampling is a historical approach to quality control based on the premise that some acceptable number of defective items will result from the production process. The producer and consumer agree on the number of acceptable defects. The notion of a producer or consumer agreeing to any defects is contrary to the philosophy of TQM. The goal of companies that have adopted TQM is to achieve zero defects.

Acceptance sampling identifies defective items after the product is already finished, whereas TQM strives to prevent defects altogether. TQM companies do not believe that acceptance sampling is helpful in preventing poor quality or in ensuring good quality in the future.

Ans: , LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

26. What is the advantage of a multiple-sampling plan?

Ans: A multiple-sampling plan also referred to as a sequential sampling plan, generally employs the smallest sample size of many of the sampling plans used in acceptance sampling. In its most extreme form, individual items are inspected sequentially, and the decision to accept or reject a lot is based on the cumulative number of defective items. A multiple-sampling plan can result in small samples and, consequently, can be the least expensive of the sampling plans.

Ans:, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

27. If α = 0.05 and β = 0.10, then __________. a) AQL is 5 and LTPD is 10%

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b) the customer expects to accept lots that exceed the LTPD about 5% of the time and the company expects to reject that are as good or better than the AQL about 10% of the time c) the customer expects to accept lots that exceed the LTPD about 10% of the time and the company expects to reject that are as good or better than the AQL about 5% of the time d) the customer expects to accept lots that exceed the AQL about 5% of the time and the company expects to reject that are as good or better than the LTPD about 10% of the time Ans: C, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

28. A multiple-sampling plan __________. a) is also known as a sequential-sampling plan b) generally uses medium or small-sized samples compared with other sampling plans c) uses samples as small as 2 units d) All of the above choices are correct.

Ans: A, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

29. The operating characteristic (OC) curve __________. a) measures the probability of accepting a lot for different quality levels given a specific sample size and acceptance level b) indicates to management how effective the sampling plan is in discriminating between good and bad lots c) typically has the shape of the right half of a hill d) All of the above choices are correct.

Ans: D, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

30. In a single-sample attribute plan, which of the following choices is true about the lot size (N), the sample size (n), the acceptable number of defective items in a sample (c), and the actual number of defective items in a sample (d)? a) d ≤ c ≤ n ≤ N b) d ≤ c < n < N c) c ≤ n ≤ N; d ≤ n d) c < n < N; d ≤ n Ans: D, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

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File: ch04, Chapter 4: Product Design

True/False

1. Product design has a tremendous impact on the quality of a manufactured good or service.

Ans: True Difficulty: Easy Learning Objective: LO 1 Bloom’s: Comprehension 2. Dismantling and inspecting a competitor’s product to identify design features that might be used to improve your own product is known as reverse engineering.

Ans: True Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

3. An effective design process matches product characteristics with customer requirements.

Ans: True Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

4. Companies learn from their competitors by a. perceptual maps b. benchmarking c. reverse engineering d. all of these answer choices are correct Ans: D Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge: Knowledge

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5. Creating preliminary design models that are quickly tested and either discarded or further refined is known as rapid prototyping.

Ans: True Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

6. Form design refers to the physical appearance of a product.

Ans: True Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge 7. A product’s reliability is a function of the reliabilities of its component parts, but not a function of how those parts are arranged.

Ans: False Difficulty: Easy Learning Objective: LO 1 Bloom’s: Comprehension

8. To increase system reliability redundant parts can be built in to back up a failure.

Ans: True Difficulty: Easy Learning Objective: LO 1 Bloom’s: Comprehension

9. Products assembled in modules can be easier to repair and maintain.

Ans: True Difficulty: Easy Learning Objective: LO 1 Bloom’s: Comprehension

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c. maintainability d. usability Ans: B Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

11. _________________ is one way to gain the benefits of standardization without losing the advantage of variety and uniqueness. a. design for manufacturing b. design for supply chain c. production design d. modular design Ans: D Difficulty: Easy Learning Objective: LO 1 Bloom’s: Comprehension

12. Modular design combines standardized building blocks, or modules, to create unique finished products.

Ans: True Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

13. Design for manufacturing (DFM) guidelines promote a. ease of use for customers b. using more parts and subassemblies c. ease of assembly d. sustainable products Ans: B Difficulty: Medium Learning Objective: LO 1 Bloom’s: Knowledge

14. The final design consists of detailed drawings and specifications for the new product.

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Ans: True Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

15. Concurrent design utilizes all of the following except a. involving the supplier in the design process b. simultaneous design of products and processes c. cross-functional teams d. rapid prototyping Ans: D Difficulty: Medium Learning Objective: LO 1 Bloom’s: Knowledge

16. Establishing multifunctional design teams can help reduce the time-to-market.

Ans: True Difficulty: Easy Learning Objective: LO 1 Bloom’s: Comprehension

17. Concurrent design may involve simultaneously designing products and their production processes.

Ans: True Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

18. Concurrent design is often aided by the use of technology.

Ans: True Difficulty: Medium Learning Objective: LO 1 Bloom’s: Knowledge

19. One of the factors supporting the increase in new products has been advances in the technology available for designing products.

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Ans: True Difficulty: Easy Learning Objective: LO 2 Bloom’s: Comprehension

20. Product lifecyle management stores, retrieves, and updates design data from which stages? a. product concept b. service c. retirement d. all of the these answer choices are correct Ans: D Difficulty: Easy Learning Objective: LO 3 Bloom’s: Comprehension

21. Computer-aided manufacturing (CAM) has replaced computer-aided design (CAD) in the product design process.

Ans: False Difficulty: Easy Learning Objective: LO 2 Bloom’s: Knowledge

22. Collaborative product design (CPD) software provides interconnectivity among members of a product’s supply chain.

Ans: True Difficulty: Easy Learning Objective: LO 2 Bloom’s: Knowledge

23. Which of the following techniques are used in design quality reviews? a. fault tree analysis b. computer aided design (CAD) c. computer aided manufacturing (CAM) d. collaborative product design Ans: A Difficulty: Easy Learning Objective: LO 3 Copyright ©2020 John Wiley & Sons, Inc.

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Bloom’s: Knowledge

24. Computer-aided design (CAD) produces better products but always increases the time to design them.

Ans: False Difficulty: Easy Learning Objective: LO 2 Bloom’s: Comprehension

25. Value analysis is often utilized by a multifunctional product design team as part of design review.

Ans: True Difficulty: Easy Learning Objective: LO 3 Bloom’s: Comprehension

26. Which of the following are principles of design for environment except? a. using recycled materials b. treating workers fairly c. easily repaired products d. minimizing unnecessary packaging Ans: B Difficulty: Medium Learning Objective: LO 5 Bloom’s: Knowledge

27. Extended producer responsibility (EPR) is a concept that holds consumers responsible for their products following the products’ useful lives.

Ans: False Difficulty: Easy Learning Objective: LO 4 Bloom’s: Comprehension

28. Quality function deployment (QFD) consists of a series of matrix diagrams that define product design changes and the ramifications of implementing those changes.

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Ans: True Difficulty: Easy Learning Objective: LO 5 Bloom’s: Knowledge

29. The house of quality converts customer requirements into a. voice of the customer b. failure mode effects analysis c. Taguchi' quality loss function d. product design specifications Ans: D Difficulty: Easy Learning Objective: LO 6 Bloom’s: Knowledge

30. __________________ is a concept of incorporating the voice of the customer into technical product design. a. quality function deployment b. concurrent design c. value analysis d. maintainability Ans: True Difficulty: Easy Learning Objective: LO 6 Bloom’s: Knowledge

31. Quality Function Deployment (QFD) translates the voice of the customer into technical design requirements.

Ans: True Difficulty: Easy Learning Objective: LO 6 Bloom’s: Knowledge

32. Products designed to withstand variations in operating conditions are said to be robust.

Ans: True Difficulty: Easy Learning Objective: LO 6 Copyright ©2020 John Wiley & Sons, Inc.

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Bloom’s: Knowledge 33. The allowable range of the variation in a part’s design specification is called the signal-to-noise ratio.

Ans: False Difficulty: Easy Learning Objective: LO 6 Bloom’s: Knowledge

34. Reliability is the probability that a given part or product will perform its intended function for a specified length of time under adverse operating conditions.

Ans: False Difficulty: Easy Learning Objective: LO 6 Bloom’s: Knowledge

Multiple Choice

35. Design can provide a competitive edge by a. bringing products to market quickly. b. doing an even better job of satisfying customers. c. being easier to manufacture, use and repair. d. All these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 1 Bloom’s: Comprehension

36. Which of the following is not a characteristic of an effective product design process? a. matches product characteristics with customer requirements b. maximizes the revisions necessary to make a design workable c. ensures that customer requirements are met in the least costly and simplest manner d. reduces the time required to design a new product or service Ans: B Copyright ©2020 John Wiley & Sons, Inc.

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Difficulty: Medium Learning Objective: LO 1 Bloom’s: Application

37. All of the following are characteristics of an effective design process except a. increasing the design time for new products and services. b. meeting customer requirements in the least costly manner. c. matching product or service characteristics with customer requirements. d. minimizing the number of revisions needed to make the design workable.

Ans: A Difficulty: Medium Learning Objective: LO 1 Bloom’s: Application

38. Product design begins with a. a feasibility study. b. a form design. c. understanding the customer and identifying customer needs. d. pilot runs and final tests.

Ans: C Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge 39. If a firm’s design process is too lengthy a. a competitor may capture market share by being first to market. b. a competitor may lose market share by being first to market. c. a competitor may decide not to enter the market. d. None of these answers is correct.

Ans: A Difficulty: Medium Learning Objective: LO 1 Bloom’s: Application 40. Carefully dismantling and inspecting a competitor’s product to look for design features that can be incorporated into your own product is known as a. concurrent design. b. design for manufacturability. c. benchmarking.

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d. reverse engineering.

Ans: D Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

41. A feasibility study consists of all the following except a. a market analysis. b. an economic analysis. c. a technical and strategic analysis. d. a concurrent analysis.

Ans: D Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

42. ____________________ describe(s) what the product should do to satisfy customer needs. a. Performance specifications b. Benchmarks c. Perceptual maps d. Reverse engineering Ans: A Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

43. Creating a preliminary design that can be quickly tested and then either discarded or further refined is referred to as a. Benchmarking. b. rapid prototyping. c. concurrent design. d. perceptual mapping.

Ans: B Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

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44. The probability that a product will perform its intended function for a specified length of time under normal conditions is called a. benchmarking. b. perceptual mapping. c. Maintainability. d. Reliability.

Ans: D Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

45. Which of the following is a quantitative measure of reliability? a. reliability bar b. maintainability c. mean time between failures (MTBF) d. mean time to repair (MTTR) Ans: C Difficulty: Medium Learning Objective: LO 1 Bloom’s: Application 46. All of the following can improve a product’s reliability except a. simplifying product design. b. improving individual component reliability. c. changing the product warranty. d. adding redundant components..

Ans: C Difficulty: Medium Learning Objective: LO 1 Bloom’s: Analysis

47. Combining standardized building blocks in different ways to create unique finished products is known as a. rapid prototyping. b. robust design. c. modular design. d. concurrent design.

Ans: C Difficulty: Easy Copyright ©2020 John Wiley & Sons, Inc.

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Learning Objective: LO 1 Bloom’s: Knowledge

48. A company produces a product consisting of two components arranged as follows: 0.95

0.93

If both components must function for the product to function, then the product’s overall reliability is a. 0.950 b. 0.940 c. 0.930 d. 0.884 Ans: D Difficulty: Medium Learning Objective: LO 1 Bloom’s: Application

49. A company produces a product consisting of two components arranged as follows: 0.97

0.90

Both components must function for the product to function. To achieve an overall reliability of at least 0.95 without changing the reliability of the first component, the reliability of the second component would need to be a. at least 0.925 . b. at least 0.95. c. at least 0.97. d. at least 0.98.

Ans: D Difficulty: Medium Learning Objective: LO 1 Bloom’s: Application

50. A company produces a product consisting of two components arranged as follows: R1

R2

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If both components must function for the product to function, then the two components would need individual reliabilities of _______ to achieve an overall reliability of 0.90. a. R1 = 0.90 and R2 = 0.90 b. R1 = 0.95 and R2 = 0.95 c. R1 = 0.80 and R2 = 0.80 d. R1 = 0.85 and R2 = 0.85 Ans: B Difficulty: Medium Learning Objective: LO 1 Bloom’s: Application

51. A product consists of three components arranged as follows: R1 = 0.95

R2 = 0.90

R3 = 0.95

If all three components must function for the product to function, then the product’s overall reliability is approximately a. 0.812. b. 0.90. c. 0.933. d. 0.95.

Ans: A Difficulty: Medium Learning Objective: LO 1 Bloom’s: Application

52. The overall reliability of the following system is 0.90

0.95

0.95

0.95

a. greater than 1.00. b. 0.95.

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c. 0.90. d. 0.898.

Ans: D Difficulty: Hard Learning Objective: LO 1 Bloom’s: Evaluation

53. For the overall reliability of the following system to be 0.975 or greater the reliability of the backup component, Rb, must be Rb =?

0.99

0.95

0.99

a. at least 1.00. b. at least 0.896. c. at least 0.736. d. at least 0.534.

Ans: B Difficulty: Hard Learning Objective: LO 1 Bloom’s: Synthesis

54. The overall reliability of the following system is 0.85

0.90

0.89

0.94

0.93

a. 0.787. b. 0.85. c. 0.89. d. 0.919.

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Ans: D Difficulty: Hard Learning Objective: LO 1 Bloom’s: Evaluation

55. A product consists of three components arranged as follows: R1 = ?

R2 = 0.94

R3 = 0.98

If all three components must function for the product to function, and the product’s overall reliability must be at least 0.92, then the reliability of the first component, R1, must be a. at least 0.999. b. at least 0.84. c. at least 0.96. d. at least 0.972.

Ans: A Difficulty: Hard Learning Objective: LO 1 Bloom’s: Synthesis

56. If a product fails 10 times in 500 hours of operation, then its mean time between failures (MTBF) is a. 0.02 hour. b. 0.10 hour. c. 20 hours. d. 50 hours.

Ans: D Difficulty: Medium Learning Objective: LO 1 Bloom’s: Application

57. If a piece of equipment has a mean time between failures (MTBF) of 500 hours with a mean time to repair (MTTR) of 10 hours, then its uptime or average availability would be a. 0.020 or 2.00% b. 0.980 or 98.00% c. 0.500 or 50.00% Copyright ©2020 John Wiley & Sons, Inc.

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d. 1.000 or 100.00% Ans: B Difficulty: Medium Learning Objective: LO 1 Bloom’s: Analysis

58. The system availability for a system with a mean time between failures (MTBF) of 1000 hours and a mean time to repair (MTTR) of 50 hours would be a. 100.00% b. 97.50% c. 95.24% d. 4.76% Ans: C Difficulty: Medium Learning Objective: LO 1 Bloom’s: Analysis

59. Which of the following will not improve design for manufacture and assembly? a. minimizing the number of parts and subassemblies b. using standard parts when possible c. designing parts for limited, unique uses d. designing parts for many, varied uses Ans: C Difficulty: Easy Learning Objective: LO 1 Bloom’s: Comprehension

60. _____________________ involves taking into account the capabilities at each level of the supply chain when designing a product. a. Design for supplier b. Design for manufacturer c. Design for supply chain d. Design for competitor Ans: C Difficulty: Easy Learning Objective: LO 1 Bloom’s: Comprehension

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61. Functional design includes all the following except a. reliability. b. usability. c. form design. d. maintainability.

Ans: C Difficulty: Easy Learning Objective: LO 1 Bloom’s: Comprehension

62. Simultaneously designing new products and the processes to produce them is known as a. concurrent design. b. functional design. c. modular design. d. standard design.

Ans: A Difficulty: Easy Learning Objective: LO 1 Bloom’s: Knowledge

63. ____________________ is a software system that facilitates collaborative design and development among trading partners. a. Computer aided design b. Collaborative product design c. Computer aided engineering d. None of these answer choices is correct.

Ans: B Difficulty: Easy Learning Objective: LO 2 Bloom’s: Knowledge

64. ____________________ is a software system that assists in the creation, modification and analysis of design. a. Computer aided design b. Collaborative product design c. Computer aided engineering d. None of these answer choices is correct.

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Ans: A Difficulty: Easy Learning Objective: LO 2 Bloom’s: Knowledge

65. ____________________ is a software system that retrieves the description and geometry of a design from a database, and tests and analyzes that design on a computer screen. a. Computer aided design b. Collaborative product design c. Computer aided engineering d. None of these answer choices is correct.

Ans: C Difficulty: Easy Learning Objective: LO 2 Bloom’s: Knowledge

66. ____________________ is a software system that stores, retrieves and updates design data through the lifecycle of a product. a.

Computer aided design b.

Collaborative product design c.

Computer aided engineering d.

None of these answer choices is correct.

Ans: D Difficulty: Easy Learning Objective: LO 2 Bloom’s: Knowledge

67. Product lifecycle management is a software system that a. facilitates collaborative design and development among trading partners. b. stores, retrieves and updates design data through the lifecycle of a product. c. retrieves the description and geometry of a design from a database, and tests and analyzes that design on a computer screen. d. assists in the creation, modification and analysis of design.

Ans: B Difficulty: Easy Learning Objective: LO 2 Bloom’s: Comprehension Copyright ©2020 John Wiley & Sons, Inc.

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68. Failure mode and effects analysis (FMEA) is a. a software systems that uses computer graphics to assist in designing products. b. a systematic approach to analyzing the causes and effects of product failures. c. a visual method for analyzing the interrelationships among failures. d. a structured process that translates the voice of the customer into technical design requirements.

Ans: B Difficulty: Easy Learning Objective: LO 3 Bloom’s: Comprehension

69. Fault tree analysis (FTA) is a. a software systems that uses computer graphics to assist in designing products. b. a systematic approach to analyzing the causes and effects of product failures. c. a visual method for analyzing the interrelationships among failures. d. a structured process that translates the voice of the customer into technical design requirements.

Ans: C Difficulty: Easy Learning Objective: LO 3 Bloom’s: Knowledge

70. __________________________ is a procedure, used by multifunction design teams, to eliminate unnecessary features and functions from a product design. a. Failure mode and effects analysis b. Value analysis c. Fault tree analysis d. All of these answer choices are correct.

Ans: B Difficulty: Easy Learning Objective: LO 3 Bloom’s: Knowledge

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71. Which of the following techniques would most likely be used to systematically analyze product failures? a. concurrent design b. quality function deployment c. failure mode and effects analysis d. value analysis Ans: C Difficulty: Easy Learning Objective: LO 3 Bloom’s: Comprehension

72. The ability to meet present needs without compromising those of future generations is a concept in product design known as a. reusability. b. maintainability. c. reliability. d. sustainability.

Ans: D Difficulty: Easy Learning Objective: LO 4 Bloom’s: Knowledge

73. All of the following are principles of green product design except a. use new materials. b. use less materials. c. involve the entire supply chain. d. change the paradigm of design.

Ans: A Difficulty: Medium Learning Objective: LO 4 Bloom’s: Application

74. ___________________ is a concept where companies are held responsible for their product even after its useful life. a. Design for disposal or reuse b. Sustainability c. Extended producer responsibility d. Environmentally safe people Ans. C Copyright ©2020 John Wiley & Sons, Inc.

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Difficulty: Easy Learning Objective: LO 4 Bloom’s: Knowledge

75. With ___________________, consumers are encouraged to use the product efficiently, repair it when possible and dispose of it responsibly. a. green sourcing b. green manufacture c. recycling and reuse d. green consumption Ans: D Difficulty: Easy Learning Objective: LO 4 Bloom’s: Comprehension

76. With ___________________, suppliers are encouraged to suggest more environmentally friendly materials, methods and processes. a. green sourcing b. green manufacture c. recycling and reuse d. green consumption Ans: A Difficulty: Easy Learning Objective: LO 4 Bloom’s: Comprehension

77. Design for the environment includes all the following concepts except a. design for disposal or reuse. b. sustainability. c. extended producer responsibility. d. environmentally safe people.

Ans. D Difficulty: Medium Learning Objective: LO 4 Bloom’s: Analysis

78. Quality function deployment (QFD) is a. a software systems that uses computer graphics to assist in designing products.

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b. a systematic approach to analyzing the causes and effects of product failures. c. a visual method for analyzing the interrelationships among failures. d. a structured process that translates the voice of the customer into technical design requirements.

Ans: D Difficulty: Easy Learning Objective: LO 5 Bloom’s: Knowledge

79. A structured process that translates the voice of the customer into technical design requirements is known as a. quality function deployment (QFD). b. failure mode and effects analysis (FMEA). c. concurrent design. d. robust product design.

Ans: A Difficulty: Easy Learning Objective: LO 5 Bloom’s: Knowledge

80. Which of the following is a quantitative measure of maintainability? a. design for manufacture (DFM) b. mean time to repair (MTTR) c. mean time between failures (MTBF) d. quality function deployment (QFD) Ans: B Difficulty: Easy Learning Objective: LO 6 Bloom’s: Comprehension

81. When a product is designed to withstand variations in environmental and operating conditions, it is known as a. robust design. b. design for change. c. design for modification. d. design for tolerance.

Ans: A Difficulty: Medium Copyright ©2020 John Wiley & Sons, Inc.

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Learning Objective: LO 6 Bloom’s: Application

82. The Taguchi Quality Loss Function implies that a a. customer’s dissatisfaction increases geometrically as the actual value deviates from the target value. b. customer’s satisfaction increases geometrically as the actual value deviates from the target value. c. customer’s dissatisfaction decreases geometrically as the actual value deviates from the target value. d. customer’s preferences are strongly oriented towards conforming to specifications.

Ans: A Difficulty: Medium Learning Objective: LO 6 Bloom’s: Application

83. As a part of design for robustness, Taguchi believes that a. consistent errors can be more easily corrected than random errors. b. parts within tolerance limits may produce assemblies that are not within limits. c. consumers have a strong preference for product characteristics near their ideal value. d. All of these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 6 Bloom’s: Comprehension

Essay

84. Briefly discuss the characteristics of an effective design process.

Ans: An effective design process (1) matches product or service characteristics with customer requirements; (2) ensures that customer requirements are met in the simplest and least costly manner; (3) reduces the time required to design a new product or service; and (4) minimizes the revisions necessary to make a design workable.

Level of Difficulty: Easy Learning Objective: LO 1 Copyright ©2020 John Wiley & Sons, Inc.

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Bloom’s: Comprehension

85. What does a feasibility study consist of and how is it related to the design process?

Ans: Once marketing has taken the ideas that are generated and the customer needs that are identified from the first stage of the design process and formulated alternative product and service concepts, the promising concepts undergo a feasibility study that includes several types of analyses beginning with a market analysis. Market researchers use customer surveys, interviews, focus groups, and market tests to determine whether there is enough demand for the proposed product to justify further investment in it. If the demand potential exists, then there is an economic analysis that looks at estimates of production and development costs and compares them to estimated sales volume. A price range for the product that is compatible with the market segment and image of the new product is discussed. Quantitative techniques may be used to evaluate the profit potential of the project. Finally, there are technical and strategic analysis that answer such questions as: “does the new product require new technology?”; “does the company have the capability to support the new product?”; “is the new product compatible with the core business of the firm?”

Learning Objective: LO 1 Level of Difficulty: Medium Bloom’s: Analysis

86. Briefly discuss three performance characteristics considered during the functional design phase of a product.

Ans: Functional design is concerned with how the product performs. Three performance characteristics considered during the functional design phase are reliability, maintainability, and usability. Reliability is the probability that a given part or product will perform its intended function for a specified length of time under normal conditions of use. Maintainability, also called serviceability, refers to the ease and/or cost with which a product or service is maintained or repaired.

Usability is what makes a product or service easy to use and a good fit for its targeted customer.

Learning Objective: LO 1 Level of Difficulty: Easy Bloom’s: Comprehension

87. What role does simplification play in the design process?

Ans: Production design is concerned with how the product will be made. Designs that are difficult to make often result in poor-quality products. Engineers tend to Copyright ©2020 John Wiley & Sons, Inc.

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overdesign products, with too many features, options, and parts. Design simplification attempts to reduce the number of parts, subassemblies, and options in a product. It also means avoiding tools, separate fasteners, and adjustments. By employing simplification, designers hope to make it easier to build and assemble higher quality products faster and less costly than they otherwise could.

Learning Objective: LO 1 Level of Difficulty: medium Bloom’s: Application

88. List at least four design for manufacture guidelines that promote good design practice.

Ans: Design for manufacture guidelines that promote good design practice include: (1) minimizing the number of parts and subassemblies; (2) avoiding tools, separate fasteners, and adjustments; (3) using standard parts; (4) designing parts for many uses; (5) designing for ease of assembly and minimal handling; and (6) allowing for efficient and adequate testing and replacement of parts.

Learning Objective: LO 1 Level of Difficulty: Medium Bloom’s: Application

89. List five ways that design quality can be improved.

Ans: Design quality can be improved by (1) reviewing designs to prevent failures and ensure value; (2) designing for the environment; (3) measuring design quality; (4) using quality function deployment (QFD); and (5) designing for robustness.

Learning Objective: LO 1 Level of Difficulty: Medium Bloom’s: Application

90.

What are some of the questions/inquiries one would ask regarding every material, every part, and every operation in value analysis?

Ans: The writer should address the question “can we live without it?” Does it do more than is required? Does it cost more than it is worth? Can something else do a better job? Can it be made by a less costly method? Can it be made cheaper, better, faster by someone else?

Learning Objective: LO 1 Level of Difficulty: Medium Bloom’s: Analysis Copyright ©2020 John Wiley & Sons, Inc.

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Multiple Choice

91. In a regional swimming meet, the 4 × 100–meter relay is about to begin. One of the teams of four swimmers went out for dinner last night and unknowingly ate some food that occasionally causes cramps. If a swimmer gets cramps, she can’t continue swimming. Suppose that the likelihood of each swimmer getting cramps is 10%. Then the probability that the team will be able to complete the 4 × 100– meter relay is ________. a. 0.90 b. 0.81 c. 0.66 d. 0.50 Ans. C Difficulty: Medium AACSB: Reflective thinking Bloom’s level: Application Learning Objective: LO2

92. Which of the following statements is false about the reliability of a system? a. The product of the mean time between failures (MTBF) and the failure rate is 1 b. Redundancy decreases reliability. c. Increased complexity in the product design decreases reliability. d. The reliability of a system with 2 components in parallel with individual reliabilities R1 and R2 is: R1 + R2 – R1 × R2 Ans. B Difficulty: Hard AACSB: Reflective thinking Bloom’s level: Evaluation Learning Objective: LO2

93. You are evaluating the service availability for two providers. Unfortunately, you don’t know their mean times between failures, MTBF1 and MTBF2, or their mean times to repair, MTTR1 and MTTR2, but you do know the ratios: MTTR1/MTBF1 = 0.05 and MTTTR2/MTBF2 = 0.04. Then ________. a. you would choose provider 1, even though you cannot compare the two service availabilities. b. you would choose provider 2, even though you cannot compare the two service availabilities.

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c. you would choose provider 1 because its service availability is 95.24%, which is higher than that of provider 2. d. you would choose provider 2 because its service availability is 96.15%, which is higher than that of provider 1.

Ans. d Difficulty: Hard AACSB: Analytic Bloom’s level: Evaluation Learning Objective: LO2

94. You need to evaluate 3 service providers, A, B, and C. Their mean times between failures are 65, 75, and 80 hours respectively. Their mean times to repair are 3, 2, and 1 hours respectively. However, you receive a report that the mean time to repair for provider C is actually larger than 1 hour. What is the maximum value of the mean time to repair of provider C that would make you choose provider C? a. 2.1155 b. 2.1355 c. 2.1455 d. 2.1555 Ans: b Difficulty: Hard AACSB: Analytic Bloom’s level: Evaluation Learning Objective: LO2

95. There are two alternative designs for a system, shown below.

First design: 0.90

x

0.90

0.92

0.95

Second design:

R1 = 0.99

R2 = 0.932

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What is the minimum reliability of component x that would make you prefer the first design over the second? a. 0.703 b. 0.723 c. 0.743 d. 0.763 Ans. D Difficulty: Hard AACSB: Analytic Bloom’s level: Synthesis Learning Objective: LO2 96. If a product on average fails 0.5 times in 250 hours of operation, then its mean time between failures (MTBF) is ________. a. 0.5 hours b. 125 hours c. 250 hours d. 500 hours Ans: d Difficulty: Medium AACSB: Reflective thinking Bloom’s level: Application Learning Objective: LO 2

97. To evaluate the profit potential of a new product, which of the following quantitative techniques is not used? a. Cost/benefit analysis b. Internal rate of return c. Decision theory d. Perceptual maps Ans: d Difficulty: Medium AACSB: Reflective thinking Bloom’s level: Application Learning Objective: LO 4

98. Functional design involves ______. a. reliability, maintainability, and usability b. perceptual maps c. reverse engineering Copyright ©2020 John Wiley & Sons, Inc.

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d. a feasibility study Ans: A Difficulty: Medium AACSB: Reflective thinking Bloom’s level: Application Learning Objective: LO 4

99. Production design involves ______. a. reliability, maintainability, and usability b. perceptual maps c. reverse engineering d. simplification, standardization, modularity, and design for supply chain Ans: D Difficulty: Medium AACSB: Reflective thinking Bloom’s level: Application Learning Objective: LO 4

100. Modular design involves ______. a. reverse engineering b. designing a product so that it can be produced easily and economically c. minimizing the number of parts and subassemblies d. combining standardized building blocks in a variety of ways Ans: d Difficulty: Medium AACSB: Reflective thinking Bloom’s level: Application Learning Objective: LO 4

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Chapter 5: Service Design

True/False

1. The service sector accounts for over 80 percent of employment in the United States.

Ans: True Difficulty: Moderate Learning Objective: LO 1

2. Service design and improvement techniques cannot be applied to societal problems such as education, healthcare, and government services.

Ans: False Difficulty: Easy Learning Objective: LO 1

3. It is widely accepted that the effective design and the efficient operation of services are critical to the health of the U.S. economy.

Ans: True Difficulty: Moderate Learning Objective: LO 1

4. What term is best described as acts, deeds, or performances that provide a customer time, place, form, or psychological utility. a. goods b. services c. queues d. jobs Ans: b, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

5. Almost all consumer products consist of some combination of facilitating goods and facilitating services.

Ans: True Difficulty: Easy Learning Objective: LO 2

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6. Service companies are centralized and geographically concentrated.

Ans: False Difficulty: Easy Learning Objective: LO 2 7. In general, a service and its delivery system are inseparable.

Ans: True Difficulty: Easy Learning Objective: LO 2

8. What term best describes the target market and the desired customer experience. a. performance specifications b. design specifications c. service package d. service concept Ans: d, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

9. Which of the following is NOT a goal of the front office customer interface? a. courtesy b. transparency c. standardization d. usability Ans: d, LO: 3, Bloom: C, Difficulty: Easy, AACSB: None

10. When designing a service, performance specifications are converted into design specifications, and finally, delivery specifications, Ans: True Difficulty: Medium Learning Objective: LO 3

11. What term is best defined as a specialized flow chart used for service processes? a. service blueprinting b. servicescapes c. line of interaction d. line of influence Ans: a, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

12. Which of the following is NOT part of the service-process matrix?

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a. b. c. d.

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Professional service Service shop Service mall Mass service

Ans: c, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None

13. The distribution is the probability distribution most commonly used to describe service times.

Ans: True Difficulty: Moderate Learning Objective: LO 4 14. The tradeoff between the cost of improved service and the cost of making customers wait provides the basis of a. servicescape b. waiting line analysis c. service blueprinting d. service package Ans: b, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

15. A single waiting line model can be applied to every type of waiting line system.

Ans: False Difficulty: Easy Learning Objective: LO 5

16. Which of the following does NOT increase the size of the waiting line? a. service operations are understaffed b. arrival rate is larger than service rate c. customers do not arrive at a constant rate d. customers arrive at a Poisson’s distribution rate Ans: d, LO: 5, Bloom: C, Difficulty: Easy, AACSB: None

17. Waiting lines form because customers arrival times and service times are not always equal.

Ans: True Difficulty: Easy Learning Objective: LO 5

18. The calling population is the source of customers used in waiting line analysis.

Ans: True

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Difficulty: Easy Learning Objective: LO 5

19. The number of arrivals per unit time to a service facility is often described by a a. exponential negative distribution. b. normal distribution. c. Poisson distribution. d. Weibull distribution.

Ans: c, LO: 5, Bloom: C, Difficulty: Easy, AACSB: None

20. Balking occurs when a customer waiting in a line moves from one line to another because he believes it is moving faster.

Ans: False Difficulty: Moderate Learning Objective: LO 5

21. If service times are exponentially distributed then service rates are normally distributed.

Ans: False Difficulty: Moderate Learning Objective: LO 5

22. What is the result to a queue if the average service rate is smaller than the average arrival rate? a. The line size goes to 0. b. Nothing. c. The line size grows infinitely long. d. The line size stays the same.

Ans: c, LO: 5, Bloom: C, Difficulty: Easy, AACSB: None

23. Queue discipline specifies the order in which waiting customers are served.

Ans: True Difficulty: Moderate Learning Objective: LO 5

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24. The number of parallel servers in waiting line analysis is referred to as the number of phases.

Ans: False Difficulty: Moderate Learning Objective: LO 5

25. The constant average values of operating characteristics a system attains after a long time is referred to as a steady state.

Ans: True Difficulty: Moderate Learning Objective: LO 5

26. As the level of service improves in a waiting line system the cost of service usually increases.

Ans: True Difficulty: Easy Learning Objective: LO 5

27. Service quality in waiting line systems sometimes depends on the psychology of waiting.

Ans: True Difficulty: Moderate Learning Objective: LO 5

28. A waiting line system is said to have a finite calling population if the size of the population of customers from which arrivals originate is known.

Ans: True Difficulty: Moderate Learning Objective: LO 5

29. Waiting line analysis should be applied only to situations with an infinite calling population.

Ans: False Difficulty: Moderate

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Learning Objective: LO 5

30. What term best refers to the number of parallel servers in a waiting line system? a. single-phase b. multiple-phase c. channels d. queue Ans: c, LO: 5, Bloom: C, Difficulty: Easy, AACSB: None

31. In general, as the level of service improves, the cost of service increases.

Ans: True Difficulty: Moderate Learning Objective: LO 5

32. One of the basic assumptions for the single-server model is that the calling population is finite.

Ans: False Difficulty: Moderate Learning Objective: LO 5

Multiple Choice

33. Which of the following is not a characteristic of a service? a. Intangible b. Variable output c. Difficult to emulate d. Perishable Ans: C Difficulty: Easy Learning Objective: LO 2 34. Which of the following is not a characteristic of a service? a. Tangible b. Variable output c. Difficult to emulate d. Perishable

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Ans: A Difficulty: Easy Learning Objective: LO 2 35. In a waiting line system, the ___________ reflects the probability that the server is busy and the customer must wait. utilization factor queue discipline average number of customers in the system probability the system is idle

a. b. c. d.

Ans: A Difficulty: Easy

Learning Objective: LO 2 36. A dentist office is an example of a a. service factory. b. mass service. c. service shop. d. professional service.

Ans: D Difficulty: Easy Learning Objective: LO 3

37. An airline is an example of a a. service factory. b. mass service. c. service shop. d. professional service.

Ans: A Difficulty: Easy Learning Objective: LO 3

38. A grocery store is an example of a a. service factory. b. mass service. c. service shop. d. professional service.

Ans: B Difficulty: Easy

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Learning Objective: LO 3

39. A teacher is an example of a a. service factory. b. mass service. c. service shop. d. professional service.

Ans: C Difficulty: Easy Learning Objective: LO 3

40. Which of the following is not a basic element of a waiting line? a. arrivals b. servers c. cost of waiting d. waiting line structure Ans: C Difficulty: Easy Learning Objective: LO 5

a. b. c. d.

41. The ________________ is the source of customers for a waiting line system. calling population arrival rate service line channel service line phase

Ans: A Difficulty: Easy Learning Objective: LO 5

42. The number of arrivals per unit of time at a service facility can frequently be described by a normal distribution.

Poisson distribution. binomial distribution.

Beta distribution.

a. b. c. d.

Ans: B Difficulty: Moderate

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Learning Objective: LO 5

43. The ______________ refers to the order in which waiting customers are served. calling population queue discipline number of channels service rate

a. b. c. d.

Ans: B Difficulty: Moderate

Learning Objective: LO 5

44. The number of channels in a queuing process a. denotes the number of servers in sequence a customer must go through. b. denotes the size of the calling population. c. denotes the number of parallel servers for servicing arriving customers. d. denotes the average queue length.

Ans: C Difficulty: Moderate Learning Objective: LO 5

a. b. c. d.

45. In general, as the number of servers in a waiting line system increases, service cost increases and waiting cost decreases. service cost decreases and waiting cost increases. both service cost and waiting cost increase. both service cost and waiting cost decrease.

Ans: A Difficulty: Easy Learning Objective: LO 5

a. b. c. d.

Ans: D

46. If the average time to serve a customer is 3 minutes, then the service rate, µ, is 3 per hour.

12 per hour.

16 per hour.

20 per hour.

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Difficulty: Moderate Learning Objective: LO 5 Solution: µ =60/3=20 per hour

47. If, on average, it takes 90 seconds to serve a customer then the hourly service rate, µ, is 90 per hour.

40 per hour.

30 per hour.

1.5 per hour.

a. b. c. d.

Ans: B Difficulty: Moderate

Learning Objective: LO 5 Solution: µ=60/(90/60)=40 per hour

48. Consider an espresso stand with a single barista. Customers arrive at the rate of 20 per hour according to a Poisson distribution. Service times are exponentially distributed with a mean service time of 2 minutes per customer.

What is the service rate per hour for the espresso stand?

30 customers 20 customers 15 customers 2 customers

a. b. c. d.

Ans: A Difficulty: Moderate

Learning Objective: LO 5 Solution: µ=60/2=30 per hour

49. Consider an espresso stand with a single barista. Customers arrive at the stand at the rate of 28 per hour according to a Poisson distribution. Service times are exponentially distributed with a service rate of 35 customers per hour. The probability that the server is busy is 0.20 0.60 0.80 1.00

a. b. c. d.

Ans: C Difficulty: Moderate

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Learning Objective: LO 5 Solution: P=28/35=0.20

50. Consider an espresso stand with a single barista. Customers arrive at the stand at the rate of 28 per hour according to a Poisson distribution. Service times are exponentially distributed with a service rate of 35 customers per hour. The probability that the server is idle is 0.20 0.60 0.80 1.00

a. b. c. d.

Ans: A Difficulty: Moderate

Learning Objective: LO 5 Solution: Po=1-28/35=0.20

51. Consider an espresso stand with a single barista. Customers arrive at the stand at the rate of 28 per hour according to a Poisson distribution. Service times are exponentially distributed with a service rate of 35 customers per hour. The probability that there are exactly 3 customers in the system is 0.0000 0.1024 0.4096 0.5120

a. b. c. d.

Ans: B Difficulty: Moderate Learning Objective: LO 5

Solution: P3=(28/35)*(28/35)*28/35*0.20=0.1024

52. Consider an espresso stand with a single barista. Customers arrive at the stand at the rate of 28 per hour according to a Poisson distribution. Service times are exponentially distributed with a service rate of 35 customers per hour. The probability that there are more than 2 customers in the system is 0.128 0.488 0.512 0.640

a. b. c. d.

Ans: C Difficulty: Hard

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Learning Objective: LO 5 Solution: P2ormore=1-(P0+P1+P3)=1-(0.2+0.16+0.1024)=0.512

53. Consider an espresso stand with a single barista. Customers arrive at the stand at the rate of 28 per hour according to a Poisson distribution. Service times are exponentially distributed with a service rate of 35 customers per hour. The average number of customers waiting in line for service is 4.0 3.8 3.5 3.2

a. b. c. d.

Ans: D Difficulty: Moderate

Learning Objective: LO 5 Solution: Lq=28*28/(35*7)=3.2

54. Consider an espresso stand with a single barista. Customers arrive at the stand at the rate of 28 per hour according to a Poisson distribution. Service times are exponentially distributed with a service rate of 35 customers per hour. The average number of customers in the system (i.e., waiting and being served) is a. 4.0 b. 3.8 c. 3.2 d. 2.0 Ans: A Difficulty: Moderate Feedback: Waiting Line Analysis for Service Improvement Learning Objective: LO 5 Solution: L=28/(35-28)=4.0

55. Consider an espresso stand with a single barista. Customers arrive at the stand at the rate of 28 per hour according to a Poisson distribution. Service times are exponentially distributed with a service rate of 35 customers per hour. The average time in minutes a customer spends waiting in line for service is a. 0.114 minute. b. 0.143 minute. c. 6.84 minutes. d. 8.58 minutes.

Ans: C Difficulty: Hard Feedback: Waiting Line Analysis for Service Improvement

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Learning Objective: LO 5 Solution: Wq=28/(35*7)*60=6.84

56. Consider an espresso stand with a single barista. Customers arrive at the stand at the rate of 28 per hour according to a Poisson distribution. Service times are exponentially distributed with a service rate of 35 customers per hour. The average time in minutes a customer spends in the system (i.e., waiting and being served) is a. 0.114 minute b. 0.143 minute c. 6.84 minutes d. 8.58 minutes Ans: D Difficulty: Moderate Feedback: Waiting Line Analysis for Service Improvement Learning Objective: LO 5 Solution: W=1/(35-28)*60=8.58

57. Consider an espresso stand with a single barista. Customers arrive to the stand at the rate of 28 per hour according to a Poisson distribution. Service times are exponentially distributed with a service rate of 35 customers per minute. If the arrival rate remains at 28 customers per hour and the stand’s manager wants to have the average time a customer spends in the system (i.e., wait time and service time) to be a maximum of 6 minutes on average, then the service rate must a. decrease by 2 to 33 customers per hour. b. decrease by 3 to 32 customers per hour. c. increase by 3 to 38 customers per hour. d. increase by 2 to 37 customers per hour.

Ans: C Difficulty: Hard Feedback: Waiting Line Analysis for Service Improvement Learning Objective: LO 5 Solution: 6/60 = 0.1 hr.; 0.1 = 1/(µ − 28); µ = 38

58. A small diner has one employee and a counter with seating for 8 customers. The diner does not package food for takeout. Customers arrive at the diner at the rate of 20 per hour (Poisson distributed). Service times are exponentially distributed and average 24 per hour. Customers that arrive when all seats are taken do not enter the diner. What is the probability that there are no customers in the diner? a. 0.2067 b. 0.7933 c. 0.8333

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d. 0.1667 Ans: a Difficulty: Moderate Feedback: Waiting Line Analysis for Service Improvement Learning Objective: LO 5 Solution: Use Excel Exhibit 5.2

59. A small diner has one employee and a counter with seating for 8 customers. The diner does not package food for take out. Customers arrive at the diner at the rate of 20 per hour (Poisson distributed). Service times are exponentially distributed and average 24 per hour. Customers that arrive when all seats are taken do not enter the diner. What is the probability that the diner is full and an arriving customer does not enter? a. 0.8333 b. 0.1667 c. 0.2067 d. 0.0481 Ans: D Difficulty: Hard Feedback: Waiting Line Analysis for Service Improvement Learning Objective: LO 5 Solution: Use Excel Exhibit 5.2

60. A small diner has one employee and a counter with seating for 8 customers. The diner does not package food for takeout. Customers arrive at the diner at the rate of 20 per hour (Poisson distributed). Service times are exponentially distributed and average 24 per hour. Customers that arrive when all seats are taken do not enter the diner. What is the average number of customers in the diner? a. 2.0432 b. 2.8364 c. 3.7536 d. 5.4837 Ans: B Difficulty: Moderate Feedback: Waiting Line Analysis for Service Improvement Learning Objective: LO 5 Solution: Use Excel Exhibit 5.2

61. A small diner has one employee and a counter with seating for 8 customers. The diner does not package food for takeout. Customers arrive at the diner at the rate

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of 20 per hour (Poisson distributed). Service times are exponentially distributed and average 24 per hour. Customers that arrive when all seats are taken do not enter the diner. What is the average number of customers waiting (average queue length)?

2.0432 2.8364 3.9785 5.9782

a. b. c. d.

Ans: A Difficulty: Hard Feedback: Waiting Line Analysis for Service Improvement Learning Objective: LO 5 Solution: Use Excel Exhibit 5.2

62. A small diner has one employee and a counter with seating for 8 customers. The diner does not package food for takeout. Customers arrive at the diner at the rate of 20 per hour (Poisson distributed). Service times are exponentially distributed and average 24 per hour. Customers that arrive when all seats are taken do not enter the diner. What is the average time a customer spends in the diner? a. 3 minutes b. 5.975 minutes c. 6.44 minutes d. 8.94 minutes Ans: D Difficulty: Moderate Feedback: Waiting Line Analysis for Service Improvement Learning Objective: LO 5 Solution: Use Excel Exhibit 5.2

63. A small diner has one employee and a counter with seating for 8 customers. The diner does not package food for takeout. Customers arrive at the diner at the rate of 20 per hour (Poisson distributed). Service times are exponentially distributed and average 24 per hour. Customers that arrive when all seats are taken do not enter the diner. What is the average time a customer spends waiting? a. 2.5 minutes b. 3.0 minutes c. 6.44 minutes d. 24 minutes Ans: C Difficulty: Hard Feedback: Waiting Line Analysis for Service Improvement Learning Objective: LO 5

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Solution: Use Excel Exhibit 5.2

64. A service counter employs two servers. On average, a server requires 8 minutes to process a customer and service times follow an exponential distribution. Customers arrive at the counter at the rate of 12 per hour according to a Poisson distribution. The service rate per server for this system is 3.75 customers per hour.

7.5 customers per hour.

8 customers per hour.

16 customers per hour.

a. b. c. d.

Ans: B Difficulty: Moderate Feedback: Waiting Line Analysis for Service Improvement Learning Objective: LO 5 Solution: Use Excel Exhibit 5.3

65. A service counter employs two servers. On average, a server requires 8 minutes to process a customer and service times follow an exponential distribution. Customers arrive at the counter at the rate of 12 per hour according to a Poisson distribution. The probability that there are no customers in the system is 0.800 0.536 0.369 0.111

a. b. c. d.

Ans: D Difficulty: Hard Feedback: Waiting Line Analysis for Service Improvement Learning Objective: LO 5 Solution: Use Excel Exhibit 5.3

a. b. c. d.

66. A service counter employs two servers. On average, a server requires 8 minutes to process a customer and service times follow an exponential distribution. Customers arrive at the counter at the rate of 12 per hour according to a Poisson distribution. The probability that an arriving customer must wait for service is 0.7111 0.8000 0.8576 0.9327

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Ans: A Difficulty: Hard Feedback: Waiting Line Analysis for Service Improvement Learning Objective: LO 5 Solution: Use Excel Exhibit 5.3

67. A service counter employs two servers. On average, a server requires 8 minutes to process a customer and service times follow an exponential distribution. Customers arrive at the counter at the rate of 12 per hour according to a Poisson distribution. On average, the total number of customers in the system (i.e., waiting and being served) would be 1.600 2.844 3.200 4.444

a. b. c. d.

Ans: D Difficulty: Hard Learning Objective: LO 5

Solution: Use Excel Exhibit 5.3

68. A service counter employs two servers. On average, a server requires 8 minutes to process a customer and service times follow an exponential distribution. Customers arrive at the counter at the rate of 12 per hour according to a Poisson distribution. The average number of customers waiting to be served would be 4.444 2.844 1.600 0.893

a. b. c. d.

Ans: B Difficulty: Hard Learning Objective: LO 5

Solution: Use Excel Exhibit 5.3

69. A service counter employs two servers. On average a server requires 8 minutes to process a customer and service times follow an exponential distribution. Customers arrive at the counter at the rate of 12 per hour according

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to a Poisson distribution. The average amount of time, in minutes, spent in the system (i.e., waiting and being served) is approximately 0.237 minutes 14.22 minutes 22.20 minutes 33.30 minutes

a. b. c. d.

Ans: C Difficulty: Hard Learning Objective: LO 5

Solution: Use Excel Exhibit 5.3

70. A service counter employs two servers. On average, a server requires 8 minutes to process a customer and service times follow an exponential distribution.

Customers arrive at the counter at the rate of 12 per hour according to a Poisson distribution. The average amount of time spent by a customer waiting in line is approximately a. 0.370 minutes b. 2.844 minutes c. 14.22 minutes d. 22.20 minutes Ans: C Difficulty: Hard Learning Objective: LO 5 Solution: Use Excel Exhibit 5.3

Short Answer

71. Do waiting lines only form when the service operation is understaffed?

Explain?

Ans: No. Waiting lines form because people or things arrive at the servicing function, or server, faster than they can be served. This does not mean that the service operation is understaffed or does not have the capacity to handle the influx of customers. Most businesses and organizations have sufficient serving capacity available to handle its customers in the long run. Waiting lines result because customers do not arrive at a constant rate, nor are they all served in an equal amount of time. Customers arrive at random times, and the time required to serve each

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individually is not the same. A waiting line is continuously increasing and decreasing in length and in the long-run approaches an average length and waiting time.

Difficulty: Moderate Learning Objective: LO 5

72. What are the basic elements of a waiting line? Define each.

Ans: The basic elements of a waiting line are the arrivals, the servers, and the waiting line structure. The simplest type of waiting line system is a single server with a single queue.

Difficulty: Moderate Learning Objective: LO 5

73. What is a calling population in terms of a waiting line system?

Ans: The calling population is the source of the customers to the waiting line system.

The calling population can be either infinite or finite. An infinite calling population assumes such a large number of potential customers that it is always possible for one more customer to arrive and be served. A grocery store is an example of an infinite calling population. A finite calling population has a specific, countable number of potential customers. All the customers are waiting in line at the same time; that is, it may occur that there is not one more customer to serve.

Difficulty: Hard Learning Objective: LO 5

74. What is queue discipline and queue length?

Ans: The queue discipline is the order in which waiting customers are served. The most common type of queue discipline is first come, first served. However, other disciplines are possible. Sometimes customers are scheduled according to a predetermined appointment, or parts are run through a machine center on a last in first out basis. In manufacturing jobs are sometimes run with the shortest processing time first. Queues can be of an infinite or finite size or length. An infinite queue can be of any size, with no upper limit, and is the most common queue structure. A finite queue is limited in size.

Difficulty: Moderate Learning Objective: LO 5

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75. Briefly describe the traditional cost relationship in waiting line analysis.

Ans: There is generally an inverse relationship between the cost of providing service and the cost of making customers wait. As the level of service, reflected by the number of servers, goes up, the cost of service increases, whereas waiting cost decreases. In the traditional view of waiting line analysis, the level of service should coincide with the minimum point of the total cost curve.

Difficulty: Easy Learning Objective: LO 5

76. How are waiting line costs and service quality related?

Ans: The contemporary approach to quality management is to assume that the traditional quality-cost relationship is a short-run perspective that understates the potential long-term loss of business from poor quality service. In the long run, a higher level of quality will gain market share and increase business and thus is more cost effective. Further, as the company focuses on improving service quality, the cost of achieving good quality will be less because of innovations in processes and work design that will result. This is the philosophy of “zero defects” which in waiting line analysis means “no waiting”. This level of better-quality, quicker service, will, in the long run increase business and be more profitable that the traditional view implies.

Difficulty: Moderate Learning Objective: LO 5

77. How can psychology be used to improve waiting lines? Provide an example.

Ans: In some instances, it is not possible to reduce waiting times. When these situations occur, the problem of providing quality service often depends more on psychological solutions. In other words, the organization will try to make waiting more palatable. For example, providing distractions while customers wait to make the wait seem shorter, providing accurate estimates of wait times when a customer joins the queue, making it possible for waiting customers to view television, listen to music, look in a mirror, read magazines, or purchase snacks can all make waits seems shorter. For especially long lines, line layout can make the wait seem shorter by keeping the line moving. Thus, some amusement parks use lines that “snake” around in order to keep moving which gives the customer the impression that they are getting closer to the server (ride).

Difficulty: Moderate Learning Objective: LO 5

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78. The reservation center at an airline receives calls that follow a Poisson distribution with mean 5 calls per minute. The probability that no calls are received in a given one-minute period is __________%. a) 0.0034 b) 0.0067 c) 0.0135 d) 0.6738 Ans: D, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: Reflective thinking

79. The reservation center at an airline receives calls that follow a Poisson distribution with mean 5 calls per minute. The probability that at most 3 calls are received in a given one-minute period is __________%. a) 14.04 b) 22.50 c) 26.50 d) 28.04 Ans: C, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: Reflective thinking

80. The reservation center at an airline receives calls that follow a Poisson distribution with mean 5 calls per minute. The probability that at least 8 calls are received in a given one-minute period is __________%. a) 12.32 b) 13.30 c) 14.32 d) 15.02 Ans: B, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: Reflective thinking

81. The reservation center at an airline receives calls that follow a Poisson distribution with mean 5 calls per minute. The probability that at least 2 calls are received in a given two-minute period is __________%. (Note: you can assume that the number of calls received in two different minutes are independent.) a) 97.27 b) 96.57 c) 94.27 d) 93.57 Ans: A, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: Reflective thinking

82. Births in a hospital have a Poisson distribution with a mean of 1.8 births per hour.

The probability of having exactly 4 births in a given hour is __________.

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a) 0.0523 b) 0.0659 c) 0.0723 d) 0.0859 Ans: C , LO: 5, Bloom: K, Difficulty: Moderate, AACSB: Reflective thinking

83. Births in a hospital have a Poisson distribution with a mean of 1.8 births per hour.

The probability of having at least 2 births in a given hour is __________. a) 0.537 b) 0.507 c) 0.487 d) 0.447 Ans: A, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: Reflective thinking

84. Births in hospital A have a Poisson distribution with a mean of 1.8 births per hour. Births of in hospital B have a Poisson distribution with a mean of 2.1 births per hour. The probability of having at exactly 7 births in total from both hospitals in a given hour is __________. a) 0.0682 b) 0.0631 c) 0.0592 d) 0.0551 Ans: D, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: Reflective thinking

85. Births in hospital A have a Poisson distribution with a mean of 1.8 births per hour. Births of in hospital B have a Poisson distribution with a mean of λ births per hour. What must be the value of λ so that the probability of having at exactly 7 births in total from both hospitals in a given hour is 0.1? a) 2.99 b) 3.09 c) 3.21 d) 3.40 Ans: B, LO: 5, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

86. Births in hospital A have a Poisson distribution with a mean of λA births per hour.

Births of in hospital B have a Poisson distribution with a mean of λB births per hour.

What are possible values of λA and λB so that the probability of having at exactly 7 births in total from both hospitals in a given hour is 0.1486? a) λA = 1.8 and λB = 5.2

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b) λA = 2 and λB = 5.2 c) λA = 1.8 and λB = 5 d) λA = 2 and λB = 5 Ans: B, LO: 5, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

87. Births in hospital A have a Poisson distribution with a mean of λA = 2.3 births per hour. Births of in hospital B have a Poisson distribution with a mean of λB = 2.7 births per hour. If the probability of observing exactly n births in total from both hospitals in a given hour is 0.1755, then n = __________. a) 7 b) 6 c) 5 d) 4 Ans: C, LO: 5, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

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Chapter 6: Processes and Technology

True/False

1.

A process is a group of unrelated tasks with specific inputs and outputs.

Ans: False Difficulty: Easy Learning Objective: LO 1

2. ___________ specifies what tasks need to be done and how they are to be coordinated among functions, people, and organizations. a. Process design b. Process strategy c. Process planning d. Process selection Ans: a, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

3.

Planning, analyzing, and improving processes is the function of operations management.

Ans: True Difficulty: Easy Learning Objective: LO 1 4.

What term best describes the organization’s overall approach for producing goods and providing services? a. process selection b. process strategy c. vertical integration d. horizontal integration Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

5.

A firm’s process strategy defines the extent of customer involvement in providing a service.

Ans: True Difficulty: Easy Learning Objective: LO 1

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Producing a high volume of a single product is a characteristic of a. projects. b. batch production. c. mass production. d. continuous production.

Ans: d, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

7.

Most of the operations in batch production involve assembly rather than fabrication.

Ans: False Difficulty: Easy Learning Objective: LO 2 8.

Process planning determines how a manufactured good is produced or a service is provided.

Ans: True Difficulty: Easy Learning Objective: LO 1

9.

Companies that control the production of virtually all of the parts that go into a product are said to be horizontally integrated.

Ans: False Difficulty: Moderate Learning Objective: LO 1

10.

Outsourcing occurs when a company cannot or will not make all the parts that go into a product.

Ans: True Difficulty: Easy Learning Objective: LO 1

11. a. b. c. d.

Which of the following is NOT a factor in deciding to outsource? speed reliability quality distance

Ans: d, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

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12.

Supplier reliability is often an important consideration in outsourcing decisions.

Ans: True Difficulty: Easy Learning Objective: LO 1 13.

One-of-a-kind production of a product based on a customer’s unique specifications is a called a. a project. b. batch production. c. mass production. d. continuous production.

Ans: a, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

14.

Customers are rarely involved in a project that takes an extended period of time to complete.

Ans: False Difficulty: Easy Learning Objective: LO 2

15.

Batch production is also known as a job shop because it creates more jobs than any of the other process choices.

Ans: False Difficulty: Easy Learning Objective: LO 2

16.

Mass production is characterized by high volumes of a customized product for a mass market.

Ans: False Difficulty: Easy Learning Objective: LO 2

17.

Mass production is often associated with assembly lines.

Ans: True Difficulty: Easy Learning Objective: LO 2

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18.

Mass production is characterized by the use of specialized equipment and workers with limited skills.

Ans: True Difficulty: Easy Learning Objective: LO 2

19. __________ production is characterized by very high volumes of commodity products. a. Project b. Batch c. Mass d. Continuous Ans: d, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

20. __________ examines the cost tradeoffs associated with demand volume when selecting a process. a. Outsourcing b. Breakeven analysis c. Point of indifference d. Process plan Ans: d, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

21.

Vertical integration is the degree to which a firm produces the parts that go into its products.

Ans: True Difficulty: Easy Learning Objective: LO 1

22.

The best process strategy is usually found on the diagonal of the product-process matrix.

Ans. True Difficulty: Moderate Learning Objective: LO 2

23.

What term best describes a set of documents that detail manufacturing and service delivery specifications? a. assembly charts b. process strategy

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c. process plans d. process flowcharts Ans: c, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

24.

In general, processes should be analyzed for continuous improvement only after a breakthrough improvement.

Ans. False Difficulty: Moderate Learning Objective: LO 5

25.

Process analysis yields a set of documents detailing manufacturing and service delivery specifications.

Ans. False Difficulty: Moderate Learning Objective: LO 5

26.

The basic tools of process analysis include process flowcharts, diagrams and maps.

Ans. True Difficulty: Moderate Learning Objective: LO 5

27.

A process flowchart is a useful tool for analyzing a process because it often highlights nonproductive activities.

Ans: True Difficulty: Easy Learning Objective: LO 5

28.

Process innovation reflects the total redesign of a process for a breakthrough improvement.

Ans: True Difficulty: Easy Learning Objective: LO 5

29.

Two approaches to process improvement include continuous and breakthrough.

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Difficulty: Moderate Learning Objective: LO 3

30.

Process innovation is most successful in organizations that view their systems as a set of functional areas vying for limited resources.

Ans. False Difficulty: Hard Learning Objective: LO 5

31.

What is a useful tool in beginning the redesign of a process? a. high-level process map b. flowchart c. assembly chart d. break-even analysis

Ans: c, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

32.

Breakthrough improvement is often implemented when opportunities for continuous improvement have been exhausted.

Ans. True Difficulty: Moderate Learning Objective: LO 5

33.

Capital budgeting techniques are often one of the inputs used for technology decisions.

Ans. True Difficulty: Moderate Learning Objective: LO 6

34.

What type of technology decisions that involve the outlay of funds? a. break-even analysis b. capital investment c. capital budgeting d. replacement analysis

Ans: c, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

35.

Technology decisions are often a significant factor in process planning.

Ans. True Difficulty: Moderate

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Learning Objective: LO 6

Multiple Choice 36. A firm’s process strategy defines all of the following except its a. capital intensity. b. process flexibility. c. vertical integration. d. process selection.

Ans: D Difficulty: Moderate Learning Objective: LO 1

37. The extent to which the firm will produce the inputs and control the outputs of each stage of the production process is known as a. vertical integration. b. process flexibility. c. process planning. d. capital intensity.

Ans: A Difficulty: Moderate Learning Objective: LO 1 38. The ease of adjusting resources in response to changes in demand defines a firm’s a. vertical integration. b. process flexibility. c. customer involvement. d. capital intensity.

Ans: B Difficulty: Easy Learning Objective: LO 1

39. Variable demand and small-to-moderate quantities produced to-order are characteristics usually associated with a. mass production. b. continuous production. c. projects.

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d. batch production.

Ans: D Difficulty: Moderate Learning Objective: LO 2

40. Most of the operations in batch production involve a. fabrication. b. assembly. c. continuous processing. d. outsourcing.

Ans: A Difficulty: Easy Learning Objective: LO 2

41. A print shop is an example of which of the following process choices? a. project b. batch production c. continuous production d. mass production Ans: B Difficulty: Easy Learning Objective: LO 2

42. Which of the following is not an advantage of batch production? a. frequent changes in product mix b. flexibility c. customization of output d. quality reputation Ans: A Difficulty: Moderate Learning Objective: LO 2

43. Disadvantages of batch production include all of the following except a. high per-unit costs. b. frequent changes in product mix. c. flexibility. d. scheduling problems.

Ans: C

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Difficulty: Hard Learning Objective: LO 2

44. Complex scheduling problems are most likely to occur with which process type? a. mass production b. batch production c. continuous production d. None of these answer choices is correct.

Ans: B Difficulty: Moderate Learning Objective: LO 2 45. Which of the following is not a characteristic of mass production? a. made-to-stock b. stable demand c. high product variety d. high product volume Ans: C Difficulty: Easy Learning Objective: LO 2

46. Mass production systems tend to employ a. specialized equipment and limited labor skills. b. specialized equipment and specialized labor skills. c. general purpose equipment and limited labor skills. d. general purpose equipment and specialized labor skills.

Ans: A Difficulty: Easy Learning Objective: LO 2

47. One disadvantage of mass production is its a. efficiency. b. speed of production. c. low per-unit costs. d. lack of responsiveness.

Ans: D Difficulty: Easy Learning Objective: LO 2

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48. Steel, paper, paints, and chemicals are examples of products that use a. batch production. b. repetitive production. c. continuous production. d. mass production.

Ans: C Difficulty: Moderate Learning Objective: LO 2

49. As process selection moves up the diagonal from project to continuous production a. demand volume increases. b. product variety increases. c. capital intensity decreases. d. flexibility increases.

Ans: A Difficulty: Moderate Learning Objective: LO 3

50. A company is considering producing a product for a new market. The fixed cost required for manufacturing and delivering the product is $50,000. Labor and material costs are estimated to be approximately $25 per product. If the product is sold for $35.00 each, the firm’s breakeven volume would be a. 50,000 units b. 5,000 units c. 2,500 units d. 500 units Ans: B Difficulty: Hard Learning Objective: LO 3 Solution: BE=50,000/(35-25)=5,000 units

51. If a firm can sell a product for $40 each, then what is the volume needed to breakeven if the fixed cost of production is $125,000 and labor and material costs are $30. per item? a. 125,000 b. 12,500

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c. 4,167 d. 3,250 Ans: B Difficulty: Hard Learning Objective: LO 3

52. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives.

Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B $750,000 $23

The breakeven volume for Process A is a. 50,000 units. b. 62,500 units. c. 30,000 units. d. 20,000 units.

Ans: A Difficulty: Hard Learning Objective: LO 3 Solution: 500,000/(35-25)=50,000 units

53. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives.

Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B $750,000 $23

The break-even volume for Process B is a. 50,000 units. b. 62,500 units. c. 30,000 units. d. 20,000 units.

Ans: B Difficulty: Hard Learning Objective: LO 3 Solution: 750000/(35-23)=62,500 units

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54. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B $750,000 $23

If total demand (volume) is 120,000 units, then the company should a. select Process A with a profit of $940,000 to maximize profit b. select Process B with a profit of $450,000 to maximize profit c. select Process A with a profit of $700,000 to maximize profit d. select Process B with a profit of $690,000 to maximize profit Ans: C Difficulty: Hard Learning Objective: LO 3 Solution: Profit=120,000*($35-$25)-$500,000=$700,000

55. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B $750,000 $23

If total demand (volume) is 150,000 units, then the company should a. select Process A with a profit of $1,300,000 to maximize profit b. select Process B with a profit of $750,000 to maximize profit c. select Process A with a profit of $1,000,000 to maximize profit d. select Process B with a profit of $1,050,000 to maximize profit Ans: D Difficulty: Hard Learning Objective: LO 3 Solution: Profit=150,000*($35-$23)-$750,000=$1,050,000

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56. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B $750,000 $23

For what level of volume (output) would the firm prefer Process A to Process B? a. for all volume levels greater than 75,000 b. for all volume levels greater than 97,500 c. for all volume levels greater than 117,500 d. for all volume levels greater than 125,000 Ans: D Difficulty: Hard Learning Objective: LO 3 Solution: $500,000+$25v=$750,000+$23v; v=125,000

57. A company is considering producing an item that can be sold for $37.50 per unit. If the fixed costs for setting up production are $225,000 and the variable cost per unit for the item is $35 then the breakeven volume for this item is a. 6,000 units. b. 6,429 units. c. 72,500 units. d. 90,000 units.

Ans: D Difficulty: Hard Learning Objective: LO 3 Solution: $225,000/($37.50-$35.00)=90,000 units

58. All the following are factors influencing the outsourcing decision except a. capacity. b. expertise. c. quality. d. product variety.

Ans. D Difficulty: Moderate Learning Objective: LO 1

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59. The product-process matrix includes all the following process types except mass production. stable production. continuous production. batch production.

a. b. c. d.

Ans. B Difficulty: Moderate

Learning Objective: LO 2

60. Which of the following is not associated with the sourcing continuum?

Joint venture In-house production Strategic alliance Single contract

a. b. c. d.

Ans. B Difficulty: Hard

Learning Objective: LO 1

61. Technology decisions typical in operations management include all the following areas except a. information technology. b. product technology. c. process technology. d. communication technology.

Ans. D Difficulty: Moderate Learning Objective: LO 6

a. b. c. d.

62. Processes are analyzed for all the following reasons except speed-time-to-completion. for environmental considerations. to increase sustainability.

All these answer choices are correct.

Ans. D Difficulty: Moderate Learning Objective: LO 4

63. All the following are basic tools of process analysis except a. flowcharts.

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b. diagrams. c. maps. d. spreadsheets.

Ans. D Difficulty: Moderate Learning Objective: LO 5 64. The first step in building a flowchart is to a. define process boundaries. b. map out the process c. determine objectives d. None of these answer choices is correct.

Ans: C Difficulty: Moderate Learning Objective: LO 5 65. Which of the following is not a standard label of the symbols used for the construction of a process flowchart? a. Improve b. Transport c. Operation d. Delay Ans. A Difficulty: Moderate Learning Objective: LO 5

66. Process flowcharts document a. productive activities. b. nonproductive activities. c. Both productive and nonproductive activities. d. None of these answers is correct.

Ans. C Difficulty: Moderate Learning Objective: LO 5 67. Existing processes should be analyzed for improvement on a a. Continual basis. b. Sporadic basis

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c. As needed basis d. None of these answer choices is correct.

Ans. A Difficulty: Moderate Learning Objective: LO 5 68. When opportunities for continuous improvement of a process have been exhausted, it may be time to a. redesign or innovate. b. shut down the process. c. subcontract the production. d. All of these answer choices are correct.

Ans. A Difficulty: Moderate Learning Objective: LO 5

69. Typical performance improvement resulting from a process innovation project ranges from a. 5 to 10%. b. 25 to 50%. c. 50 to 100%. d. 100 to 200%.

Ans. C Difficulty: Moderate Learning Objective: LO 5 70. A high-level process map, useful in the beginning the redesign of a process, contain(s) a. detailed steps associated with each activity. b. essential building blocks of the main activities. c. both detailed steps and essential building blocks. d. None of these answer choices is correct.

Ans. B Difficulty: Moderate Learning Objective: LO 5

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a. b. c. d.

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design principles. strategic directives. customer requirements. model validation.

Ans. B Difficulty: Hard Learning Objective: LO 5

72. Technology decisions a. involve large sums of money. b. definefuture capabilities. c. set the stage for competitive interactions. d. All of these answer choices are correct.

Ans. D Difficulty: Moderate Learning Objective: LO 6 73. Capital budgeting techniques, used to evaluate new technology, often examine a. purchase cost. b. operating costs. c. annual savings. d. All of these answer choices are correct.

Ans. D Difficulty: Moderate Learning Objective: LO 6

74. Which of the following is not a capital budgeting technique? a. Revenue enhancement b. Replacement analysis c. Risk and uncertainty d. All of these answer choices are correct.

Ans. D Difficulty: Moderate Learning Objective: LO 6

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75. Which of the following is not an example of product technology? a. CAD b. PLM c. FMS d. CAE Ans. A Difficulty: Moderate Learning Objective: LO 6 76. Which of the following is not an example of manufacturing technology? a. Robots b. AGV c. E-procurement d. Conveyors Ans. C Difficulty: Moderate Learning Objective: LO 6 Short Answer Questions

77. What is a process strategy and how does it affect the firm?

Ans: A process strategy is an organization’s overall approach for physically producing goods and providing services. Process decisions should reflect how the firm has chosen to compete in the marketplace, reinforce product decisions, and facilitate the achievement of corporate goals. A firm’s process strategy defines its: (1) capital intensity, or mix of capital and labor; (2) process flexibility; (3) degree of vertical integration; and (4) level of customer involvement in the production process.

Difficulty: Hard Learning Objective: LO 1 78.List some noneconomic factors that can influence a firm’s outsourcing decision.

Ans: There are several noneconomic factors that can influence or dominate the economic considerations of an outsourcing decision. Among these are: (1) the level of capacity at which the company is operating; (2) the capability to provide quality parts consistently; (3) the speed with which goods can be provided by a supplier; (4)

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the reliability of suppliers; and (5) the expertise of the firm and its willingness to release valuable product information to a supplier.

Difficulty: Moderate Learning Objective: LO 1

79. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives: Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B $750,000 $23

What must be the demand if you are indifferent between process A and B? a) 120,000 b) 122,000 c) 125,000 d) 126,000 Ans: C, LO: 3, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

80. A company is evaluating which of two alternatives should be used to produce a product that will sell for $p per unit. The following cost information describes the two alternatives: Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B $750,000 $23

What must be the price p so that the breakeven for process A is 42,000? a) 35.5 b) 36.9 c) 37.5 d) 38.9 Ans: B, LO: 3, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

81. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives:

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Process A Fixed Cost $500,000 Variable Cost per Unit $25

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Process B FCB $23

What must be the fixed cost for process B, FCB, so that the profits for process B are $275,000? a) $495,000 b) $505,000 c) $515,000 d) $525,000 Ans: D, LO: 3, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

82. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives: Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B FCB $23

What must be the fixed cost for process B, FCB, so that the breakeven for process B is 50,000? a) $600,000 b) $625,000 c) $650,000 d) $675,000 Ans: A, LO: 3, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

83. A company is evaluating which of two alternatives should be used to produce a product that will sell for $p per unit. The following cost information describes the two alternatives: Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B $750,000 $23

What must be the price p so that the breakeven for process A is equal to the breakeven for process B? a) Processes A and B have different breakeven points for all possible prices p. b) 28 Copyright ©2020 John Wiley & Sons, Inc.

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c) 29 d) 30 Ans: C, LO: 3, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

84. A company is evaluating which of two alternatives should be used to produce a product that will sell for $p per unit. The following cost information describes the two alternatives: Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B $750,000 $23

What must be the price p so that the profit for process A is equal to the profit for process B? a) There is no price p for which the profits of both processes would be equal. b) 28 c) 29 d) 30 Ans: A, LO: 3, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

85. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives: Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B $750,000 VCB

If the demand is 70000, what must be the variable cost of process B, VCB, so that its profits are 50% larger than for process A? a) $18 b) $20 c) $21 d) $22 Ans: B, LO: 3, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

86. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives:

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Process A Fixed Cost $500,000 Variable Cost per Unit $25

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Process B $750,000 VCB

If the demand is 70000 and you choose process A, then VCB is __________. a) larger than $20.83 b) less than $20.83 c) larger than $21.43 d) less than $21.43 Ans: C, LO: 3, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

87. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives: Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B $750,000 VCB

If the demand is 70000 and breakeven for process B is 50% than for process B, then VCB is __________. a) $24 b) $25 c) $25.50 d) $25.75 Ans: B, LO: 3, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

88. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives: Process A Fixed Cost $500,000 Variable Cost per Unit $25

Process B FCB $23

What must be the fixed cost for process B, FCB, so that the breakeven for process B is 10% larger than for process A? a) $615,000 b) $630,000 Copyright ©2020 John Wiley & Sons, Inc.

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c) $645,000 d) $660,000 Ans: D, LO: 3, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

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Chapter 7: Capacity and Facilities

True/False

1. Capacity can be increased in one large step or incrementally.

Ans: True Difficulty: Easy Learning Objective: LO 1

2. For a given facility, the __________ equals the percent of capacity utilization that minimizes unit cost. a. capacity cushion b. best operating level c. diseconomies of scale d. economies of scale Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

3. The capacity cushion for a facility equals one minus utilization.

Ans: True Difficulty: Moderate Learning Objective: LO 1

4. Product layouts are sometimes referred to as functional layouts because they group similar activities together.

Ans: False Difficulty: Easy Learning Objective: LO 2

5. The major layout concern for a process layout is where to locate departments or functional areas relative to each other.

Ans: True Difficulty: Moderate Learning Objective: LO 2

6. The major advantage of a process layout over a product layout is Copyright ©2020 John Wiley & Sons, Inc.

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a. b. c. d.

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efficiency storage space inventory reduction flexibility

Ans: d, LO: 2, Bloom: C, Difficulty: Easy, AACSB: None

7. Line balancing strives to minimize bottlenecks in a process layout.

Ans: False Difficulty: Moderate Feedback: Basic Layouts Learning Objective: LO 3

8. __________ refers to the arrangement of machines, processes, departments, and other areas within a facility. a. Facility layout b. Process layout c. Product layout d. Cellular layout Ans: a, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

9. The basic objective of the facility layout decision is to ensure a smooth flow of inventory through the system.

Ans: True Difficulty: Easy Learning Objective: LO 2

10. A process layout arranges activities sequentially.

Ans: False Difficulty: Moderate Learning Objective: LO 2

11. A process layout groups similar activities together according to the functions they perform.

Ans: True Difficulty: Moderate Learning Objective: LO 2

12. General as opposed to specific purpose equipment is typically found in a process layout.

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Ans: True Difficulty: Easy Learning Objective: LO 2

13. The major advantage of a product layout over a process layout is a. grouping activities together b. general purpose equipment c. efficiency d. flexibility Ans: c, LO: 2, Bloom: C, Difficulty: Easy, AACSB: None

14. Material storage and movement are directly affected by facility layout decisions.

Ans: True Difficulty: Easy Learning Objective: LO 2

15. Product layouts have a higher degree of flexibility than process layouts.

Ans: False Difficulty: Easy Learning Objective: LO 2

16. Fixed-position layouts are used for projects when the product cannot be easily moved.

Ans: True Difficulty: Easy Learning Objective: LO 2

17. Shipbuilding is an example of production system requiring a process layout.

Ans: False Difficulty: Easy Learning Objective: LO 2

18. Equipment utilization is typically very high in processes with a fixed-position layout.

Ans: False Difficulty: Easy Learning Objective: LO 2

19. Minimizing material handling cost is an important objective for a process layout.

Ans: True Difficulty: Moderate Learning Objective: LO 2 Copyright ©2020 John Wiley & Sons, Inc.

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20. A relationship diagram provides a standard format for displaying manager preferences for department locations.

Ans: True Difficulty: Moderate Learning Objective: LO 3

21. A schematic diagram using weighted lines to denote location preference is called a a. precedence diagram. b. relationship diagram. c. line balancing. d. cellular layout.

Ans: b, LO: 3, Bloom: C, Difficulty: Easy, AACSB: None

22. Block diagramming is a design tool for process layouts that takes into account the number of adjacent and non-adjacent moves.

Ans: True Difficulty: Moderate Learning Objective: LO 3

23. Most service facilities utilize fixed-position layouts.

Ans: False Difficulty: Easy Learning Objective: LO 2

24. Most service facilities utilize a. process layouts. b. product layouts. c. cellular layouts. d. hybrid layouts.

Ans: a, LO: 2, Bloom: C, Difficulty: Easy, AACSB: None

25. With a product layout the purpose of line balancing is to ______ the amount of work at each workstation. a. increase b. decrease c. equalize d. calibrate Ans: a, LO: 3, Bloom: C, Difficulty: Easy, AACSB: None

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26. Line balancing is constrained by precedence requirements and cycle time restrictions.

Ans: True Difficulty: Hard Learning Objective: LO 3

27. Line balancing is a procedure that requires cycle time to be the same as flow time.

Ans: False Difficulty: Easy Learning Objective: LO 3

28. Precedence requirements reflect physical restrictions on the order in which operations are performed in a product layout.

Ans: True Difficulty: Moderate Learning Objective: LO 3

29. The maximum amount of time a product spends at any workstation is known as the a. flow time. b. bottleneck time. c. cycle time. d. balance delay.

Ans: c, LO: 3, Bloom: C, Difficulty: Easy, AACSB: None

30. The __________ refers to the maximum amount of time a product is allowed to spend at each workstation. a. actual cycle time b. desired cycle time c. flow time d. balance delay Ans: b, LO: 3, Bloom: C, Difficulty: Easy, AACSB: None

31. The balance delay is calculated by subtracting efficiency in percent from one hundred.

Ans: True Difficulty: Moderate Learning Objective: LO 3

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32. The line balancing procedure uses heuristics to specify which work elements are allocated to each workstation.

Ans: True Difficulty: Moderate Learning Objective: LO 3

33. Cellular layouts combine the flexibility of process layouts with the efficiency of product layouts.

Ans: True Difficulty: Moderate Learning Objective: LO 4

34. Which of the following is NOT an advantage of cellular layouts? a. reduced material handing b. reduced set-up times c. reduced work in process inventory d. reduced training for workers Ans: d, LO: 4, Bloom: C, Difficulty: Easy, AACSB: None

35. A flexible manufacturing system (FMS) combines flexibility with higher efficiency.

Ans: True Difficulty: Easy Learning Objective: LO 4

36. The efficiency of a flexible manufacturing system (FMS) comes from reductions in setup and waiting times.

Ans: True Difficulty: Hard Learning Objective: LO 4

37. Single model and mixed model assembly lines are similar in layout and operation.

Ans: False Difficulty: Moderate Learning Objective: LO 4

38. A mixed-model assembly line processes each model in large batch sizes.

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Learning Objective: LO 4

39. The time to complete a task in a mixed-model assembly line can vary from model to model.

Ans: True Difficulty: Easy Learning Objective: LO 4

Multiple Choice

40. Which of the following is not a capacity expansion strategy? a. Capacity lead strategy b. Capacity lag strategy c. Capacity stability strategy d. Average capacity Ans: C Difficulty: Easy Learning Objective: LO 1 41. Capacity is defined as the a. minimum capability to produce. b. maximum capability to produce. c. average capability to produce. d. None of these answer choices is correct.

Ans: B Difficulty: Easy Learning Objective: LO 1 42. The two critical decisions concerning capacity include a. When to increase and how much to increase. b. When to increase and where to locate. c. How much to increase and where to locate. d. None of these answer choices is correct.

Ans: B Difficulty: Easy Learning Objective: LO 1

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43. The ______________________ for a facility is the percent of capacity utilization that minimizes cost. a. best operating level b. capacity cushion c. diseconomies of scale d. economies of scale Ans: A Difficulty: Easy Learning Objective: LO 1

44. When higher levels of output cost less per unit to produce, the facility realizes a. best operating level. b. capacity cushion. c. diseconomies of scale. d. economies of scale.

Ans: D Difficulty: Easy Learning Objective: LO 1

45. When higher levels of output cost more per unit to produce, the facility realizes a. best operating level. b. capacity cushion. c. diseconomies of scale. d. economies of scale.

Ans: C Difficulty: Easy Learning Objective: LO 1 46. The ______________________ is the percent of demand held in reserve for unexpected occurrences. a. best operating level b. capacity cushion c. diseconomies of scale d. economies of scale Ans: B Difficulty: Easy Learning Objective: LO 1

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47. Facility design has an impact on a. quality. b. productivity. c. both quality and productivity. d. None of these answer choices is correct.

Ans: C Difficulty: Easy Learning Objective: LO 2 48. Which of the following is not an objective of facility layout? a. Minimize material handling costs b. Utilize space efficiently c. Utilize labor efficiently d. Maximize bottlenecks Ans: D Difficulty: Easy Learning Objective: LO 2 49. Which one of the following is not an example of a basic facility layout? a. Fixed-position b. Mixed-model c. Product d. Process Ans: B Difficulty: Moderate Feedback: Basic Layout Learning Objective: LO 2 50. Which of the following is not an objective of effective layouts? a. reduce material handling costs b. increase the number of bottlenecks c. eliminate waste and redundant activities d. improve communication and interaction among workstations Ans: B Difficulty: Easy Learning Objective: LO 2 51. Which of the following statements is true? a. product layouts are flexible; process layouts are efficient b. product layouts are efficient; process layouts are flexible c. product and process layouts are equally flexible; neither are efficient d. product and process layout are equally efficient; neither are flexible Ans: B

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Difficulty: Easy Learning Objective: LO 2

52. Similar activities are grouped together in departments or work centers according to the function with a __________ layout. a. process b. fixed-position c. hybrid d. traditional Ans: A Difficulty: Easy Learning Objective: LO 2

53. Which of the following describes a process layout? a. Equipment is general purpose and the workers are unskilled. b. Equipment is specialized and the workers are highly skilled. c. Equipment is general purpose and the workers are highly skilled. d. Equipment is specialized and the workers are unskilled.

Ans: C Difficulty: Moderate Learning Objective: LO 2

54. The material storage space required for in-process inventory is typically larger in a a. cellular manufacturing layout. b. product layout. c. fixed-position layout. d. process layout.

Ans: D Difficulty: Easy Learning Objective: LO 2 55. Material handling equipment that can follow multiple paths, move in any direction, and carry large loads of in-process inventory is most likely to be associated with a _________ layout a. process b. product c. fixed-position d. None of these answer choices is correct.

Ans: A

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Difficulty: Easy Learning Objective: LO 2 56. With a ___________ layout, activities are arranged in a line according to the sequence of operations. a. product b. process c. fixed-position d. cellular Ans: A Difficulty: Easy Learning Objective: LO 2 57. A ____________ provides historical data on the movement of parts and materials between departments. a. manufacturing chart b. block diagram c. relationship diagram d. load summary chart Ans: D Difficulty: Easy Learning Objective: LO 3 58. Two techniques used to design process layouts are a. block diagramming and assembly line balancing. b. relationship diagramming and assembling line balancing. c. relationship diagramming and assembly line balancing. d. block diagramming and relationship diagramming.

Ans: D Difficulty: Moderate Learning Objective: LO 3

59. A format for displaying manager preferences for departmental locations is known as a. relationship diagram. b. process diagram. c. block diagram. d. hybrid diagram.

Ans: A Difficulty: Moderate Learning Objective: LO 3

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60. One of the best known computerized packages available for designing process layouts is CRAFT. CRAFT stands for a. computerized relationship activity and flow technique. b. computerized relative allocation of facilities technique. c. computerized relative assembly and flow technology. d. computerized relationship assembly flow time.

Ans: B Difficulty: Moderate Learning Objective: LO 3 61. A company produces shovels in five departments. The average number of loads transported between the five departments per month is given in the load summary chart.

(Insert 2 x 3 grid – see page 268) Load Summary Chart from/to Department 1 1 2 3 30 4 5 -

Department 2 3 30 30 40 30 -

4 25 -

5 20 20 -

Determine the number nonadjacent loads. a. 25 b. 30 c. 50 d. 60 Ans: D Difficulty: Hard Learning Objective: LO 3 Solution: 1-3 and 3-1 are nonadjacent; 30+30=60 loads

62. A company produces shovels in five departments. The average number of loads transported between the five departments per month is given in the load summary chart.

(Insert 2 x 3 grid – see page 268) Load Summary Chart from/to Department 1 1 -

Department 2 3 10 -

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4 -

5 -

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2 3 4 5

30 -

40 15

30 -

25 -

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20 -

Determine the number nonadjacent loads. a. 25 b. 30 c. 50 d. 60 Ans: D Difficulty: Hard Learning Objective: LO 3 Solution: 1-3 and 3-1 are nonadjacent; 30+30=60 loads

63. A schematic diagram that uses weighted lines to denote location preference is known as a a. block grid. b. block diagram. c. a relationship grid. d. a relationship diagram.

Ans: D Difficulty: Moderate Learning Objective: LO 3 64. Most service organizations use a. product layouts. b. fixed-position layouts. c. process layouts. d. cellular layouts.

Ans: C Difficulty: Easy Learning Objective: LO 3 65. A type of service layout designed to encourage browsing and increase impulse purchasing is known as a a. freeflow layout. b. grid layout. c. loop layout. d. spine layout.

Ans: A Difficulty: Moderate

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Learning Objective: LO 3 66. A company hopes to achieve a daily output of 200 units during 6 hours of production time. Assuming there is no lost time during the 6 hours of production, the desired cycle time to achieve the targeted level of output is a. 3.0 minutes b. 1.8 minutes c. 1.5 minutes d. 0.03 minutes Ans: B Difficulty: Moderate Learning Objective: LO 3 Solution: Cd = 6 × 60/200 = 1.8 minutes

67. A ________layout encourages customer familiarity, has low costs, and is easy to clean. a. freeflow layout b. grid layout c. spine layout d. loop layout Ans: B Difficulty: Easy Learning Objective: LO 3

a.

68. The process of equalizing the amount of work at each workstation in a product layout is known as a. block diagramming. b. precedence requirements. c. line balancing. d. cycle time analysis.

Ans: C Difficulty: Easy Learning Objective: LO 3

69. With line balancing the maximum amount of time the product is allowed to spend at each workstation is known as the a. cycle time. b. flow time.

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c. efficiency of the line. d. balance delay.

Ans: A Difficulty: Easy Learning Objective: LO 3 70. To maximize an assembly line’s efficiency the a. line’s balance delay must be minimized. b. line’s balance delay must be maximized. c. cycle time must be less than the flow time. d. flow time must be less than the cycle time.

Ans: A Difficulty: Moderate Learning Objective: LO 3

71. A company has a target output rate of 40 units every five hours when its line is fully operational. To achieve this target the firm must have a desired cycle time of a. more than 12.50 minutes. b. more than 10.00 minutes. c. 7.5 minutes or less. d. 8 minutes or less.

Ans: C Difficulty: Moderate Learning Objective: LO 3 Solution: Cd = 5 × 60/40 = 7.5 minutes

72. A company wants to produce 150 units during a 7-hour day. The desired cycle time needed to achieve this level of output is a. 3.5 minutes. b. 3.25 minutes. c. 3.00 minutes. d. 2.8 minutes.

Ans: D Difficulty: Moderate Learning Objective: LO 3 Solution: Cd = 7 × 60/150 = 2.8 minutes

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73. In a product layout, the process of assigning tasks to work stations is referred to as _________ balancing. a. station b. product c. line d. work Ans: C Difficulty: Easy Learning Objective: LO 3

74. Cycle time refers to the a. time required for a product to go through a process layout. b. time between finished units coming off an assembly line. c. time needed to complete the tasks at a workstation. d. difference between task time and workstation time.

Ans: B Difficulty: Moderate Learning Objective: LO 3 75. An assembly line consists of three workstations (WS) with each station’s activity time as shown.

WS 1 5 minutes

WS 2 3 minutes

WS 3 4 minutes

The flow time for items on this line would be a. 5 minutes. b. 3 minutes. c. 4 minutes. d. 12 minutes.

Ans: D Difficulty: Moderate Learning Objective: LO 3 Solution: FT = 5 + 3 + 4 = 12 minutes

76. An assembly line consists of three workstations (WS) with each station’s activity time as shown.

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WS 1 5 minutes

WS 2 3 minutes

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WS 3 4 minutes

The cycle time for this line is a. 5 minutes. b. 3 minutes. c. 4 minutes. d. 12 minutes.

Ans: A Difficulty: Moderate Learning Objective: LO 3 Solution: Cycle time = Max{5,3,4} = 5 minutes 77. An assembly line consists of three workstations (WS) with each station’s activity time as shown.

WS 1 5 minutes

WS 2 3 minutes

WS 3 4 minutes

When fully operational this line could assemble _______ completed items every 60 minutes. a. 20 b. 15 c. 12 d. 5 Ans: C Difficulty: Moderate Learning Objective: LO 3 Solution: Cycle time = Max{5,3,4} = 5 minutes; 60/5 = 12 items every 60 minutes

78. An assembly line consists of three workstations (WS) with each station’s activity time as shown.

WS 1 5 minutes

WS 2 3 minutes

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WS 3 4 minutes

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When fully operational the maximum output for this line in 8 hours of production time would be a. 40 units b. 96 units c. 120 units d. 160 units Ans: b Difficulty: Hard Learning Objective: LO 3 Solution: Cycle time = Max{5,3,4} = 5 minutes; Output = 480 minutes/5 = 96 items

79. If the line currently assembles 10 units every hour when fully functional, then the line’s balance delay at this rate of output is WS 1 5 minutes a. b. c. d.

WS 2 3 minutes

WS 3 4 minutes

66.67 % 33.33% 80.00% 20.00%

Ans: D Difficulty: Hard Learning Objective: LO 3 Solution: Balance delay=1 − (12/15) = 0.20 or 20%

80. Which of the following is not an area of advantage of cellular layouts? a. material handling b. setup time c. capital investment d. control Ans: C Difficulty: Moderate Learning Objective: LO 4

81. Which of the following is not an area of disadvantage of cellular layouts? a. cell balance b. work-in-process inventory

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c. capital investment d. training and scheduling Ans: C Difficulty: Moderate Learning Objective: LO 4

82. Which one of the following factors is not important to the design and operation of a mixed-model assembly line? a. model sequencing b. line balancing c. u-shaped lines d. All of these answer choices is correct.

Ans: D Difficulty: Moderate Learning Objective: LO 4 83. is a group technology technique that reorders part routing matrices to identify families of parts with similar processing requirements. a) Process flow analysis b) Production flow analysis c) Cycle analysis d) Group analysis Ans: B Difficulty: Moderate Learning Objective: LO 4

84. Which of the following is not an advantage of cellular layouts? a) easier to automate b) easier to control c) increased work-in-process inventory d) reduced setup time Ans: C Difficulty: Moderate Learning Objective: LO 4

a. b. c. d.

85. Which one of the following is not an example of a hybrid facility layout?

Fixed-position Mixed-model Cellular Flexible manufacturing

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Ans: A Difficulty: Moderate Learning Objective: LO 4

Short Answer Questions

86. Briefly describe facility layout and the different objectives involved with facility layout decision.

Ans: Facility layout refers to the arrangement of machines, processes, departments, workstations, storage areas, aisles, and common areas within an existing or proposed facility. The basic objective of the layout decision is to ensure a smooth flow of work, material, people, and information through the system. Effective layouts also: minimize material handling costs, utilize space and labor efficiently, eliminate bottlenecks, facilitate communication, eliminate waste, incorporate safety and security measures, promote product and service quality, encourage proper maintenance, provide for visual control, provide for greater flexibility, and increase capacity.

Difficulty: Hard Learning Objective: LO 2

87. Briefly compare the storage and movement of material in a process layout and in a product layout.

Ans: Storage space in a process layout is large to accommodate the large amount of inprocess inventory. In-process inventory is high because material moves from work center to workcenter in batches waiting to be processed. Finished goods inventory, however, is low because the goods are being made for a particular customer and are shipped out to that customer on completion. A product layout needs material moved in one direction along the assembly line and always in the same pattern. Conveyors are the most common material handling equipment for product layouts. Storage space is quite small along the assembly line because in-process inventory is consumed in the assembly of the product as it moves down the assembly line. However, finished goods inventory may require a separate warehouse for storage before they are shipped to dealers or stores to be sold.

Difficulty: Hard Learning Objective: LO 2

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88. Briefly describe a cellular layout and its objectives.

Ans: Cellular layouts are based on the concept of group technology whereby dissimilar machines or activities are grouped into work centers called cells to process families of parts or customers with similar requirements. The cells are arranged in relation to each other so that material movement is minimized. Large machines that cannot be split between cells are located near to the cells that use them. The layout of machines within each cell resembles a small assembly line. The objective of cellular layouts is to combine the flexibility of a process layout with the efficiency of a product layout.

Difficulty: Moderate Learning Objective: LO 4

89. What type of layout is commonly used in services? What are some of the objectives associated with service layouts?

Ans: Most service organizations use process layouts because of the variability in customer requests for service. While service layouts are designed in much the same way as process layouts in manufacturing firms, the objectives are often different. For example, instead of minimizing the flow of materials through the system, services may seek to minimize the flow of paperwork, or maximize customer exposure to as many goods as possible. Service layouts are also concerned with the circulation of customer traffic through the facility, the allocation of space to departments, the location of special displays, the efficiency of checkout procedures, and protection from pilferage.

Difficulty: Moderate Learning Objective: LO 2

90. What are the advantages of a cellular layout?

Ans: Among the advantages of a cellular layout are: (1) reduced material handling and transit time; (2) reduced setup times; (3) reduced work-in-process inventories; (4) better use of human resources; (5) easier to control; and (6) easier to automate.

Difficulty: Moderate Learning Objective: LO 4 91. Briefly list the disadvantages of a cellular layout.

Among the disadvantages of cellular layouts are: (1) inadequate part families; (2) poorly balanced cells; (3) expanded training and scheduling of workers; and (4) increased capital investment.

Difficulty: Moderate

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Learning Objective: LO 4

92. Briefly describe the two constraints under which assembly line balancing must operate.

Ans: Assembly line balancing operates under two constraints: precedence requirements and cycle time restrictions. Precedence requirements are physical restrictions on the order in which operations are performed on the assembly line. Cycle time refers to the maximum amount of time the product is allowed to spend at each workstation if the targeted production rate is to be reached. Cycle time can also be viewed as the time between completed items coming off the assembly line.

Difficulty: Hard Learning Objective: LO 3 93. Describe a flexible manufacturing system (FMS).

A flexible manufacturing system (FMS) consists of numerous programmable machine tools connected by an automated material handling system and controlled by a common computer network. It is different from traditional automation which is fixed for a specific task. An FMS combines flexibility with efficiency. The flexibility comes from the ability to change tools automatically while the efficiency is derived from reductions in setup and queue times.

Difficulty: Medium Learning Objective: 4

94. Capacity decisions affect __________. a) development of new products b) vertical integration c) economies of scale d) horizontal integration Ans: C, LO: 1, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

95. The best operating level for a facility is the percent of capacity utilization that __________. a) is as close to 100% of capacity as possible b) maximizes profits c) minimizes fixed cost d) minimizes average unit cost Ans: D, LO: 1, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

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96. The average cost per chip placement for printed circuit-board assembly is 32 cents in factories with a volume of 25 million placements, 15 cents in factories with 200 million placements, and 10 cents in factories with 800 million placements. This is an example of __________. a) vertical integration b) a capacity cushion c) economies of scale d) Moore’s law Ans: C, LO: 1, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

97. Which of the following does not explain economies of scale? a) operating efficiency increases as workers gain experience b) the company controls or owns its main suppliers c) operating costs increase less than proportional to the outputs level d) quantity discounts for material purchases Ans: B, LO: 1, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

98. Capacity cushions __________. a) are higher in capital intensive industries with less flexibility and higher costs b) are usually 20% or 10% and sometimes zero but never negative c) are the percent of capacity not utilized d) are the maximum expansion that could be carried out before diseconomies of scale begin Ans: C, LO: 1, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

99. A block diagram is a __________. a) type of schematic layout diagram that includes space requirements b) format for displaying manager preferences for department locations c) schematic diagram that uses weighted lines to denote location preferences d) a graphical representation of a load summary chart Ans: A, LO: 3, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

100. The basic objective of the layout decision is to __________. a) arrange activities in a line according to the sequence of operations needed b) minimize the number of nonadjacent loads c) ensure a smooth flow of work, material, people, and information through the system d) conform to manager preferences

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Ans: C, LO: 2, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

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101. A production facility consists of five units, arranged as shown in the diagram below.

1

3

2

4

5

Assume that the forklift used is very flexible and allows diagonal movements (e.g., units 1 and 4 are adjacent).

The table below shows the load summary:

From/To 1 2 3 4 5 1 80 50 25 25 2 200 50 150 3 60 40 50 4 100 60 5 50

The total number of nonadjacent loads is __________. a) 50 b) 75 c) 175 d) 225 Ans: D, LO: 3, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

102. A production facility consists of five units, arranged as shown in the diagram below.

1

3

2

4

5

Assume that the forklift used is very flexible and allows diagonal movements (e.g., units 1 and 4 are adjacent).

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The table below shows the load summary:

From/To 1 2 3 4 5 1 80 50 25 25 2 200 50 150 3 60 40 50 4 100 60 5 50

If units 5 and 4 switch places, the total number of nonadjacent would be __________. a) 50 b) 75 c) 175 d) 225 Ans: C, LO: 3, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

103. A production facility consists of five units, arranged as shown in the diagram below.

1

3

2

4

5

Assume that the forklift used is very flexible and allows diagonal movements (e.g., units 1 and 4 are adjacent).

The table below shows the load summary:

From/To 1 2 3 4 5 1 80 50 25 25 2 200 50 150 3 60 40 50 4 100 60 5 50

If units 5 and 4 switch places, the total number of nonadjacent would be __________.

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a) 25, and that is the minimum possible total nonadjacent loads b) 175, and that is the total possible total nonadjacent loads c) 25, but the total nonadjacent loads can be lower d) 175, but the total nonadjacent loads can be lower Ans: C, LO: 3, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

104. A production facility consists of five units, arranged as shown in the diagram below.

1

3

2

4

5

Assume that the forklift used is very flexible and allows diagonal movements (e.g., units 1 and 4 are adjacent).

The table below shows the load summary:

From/To 1 2 3 4 5 1 80 50 25 25 2 200 50 150 3 60 40 50 4 100 60 5 50

By relocating the production units, the minimum possible number of nonadjacent loads is __________. a) 0 b) 25 c) 65 d) 85 Ans: C, LO: 3, Bloom: K, Difficulty: Hard, AACSB: Analysis

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Chapter 8: Human Resources

True/False

1. Successful quality-oriented firms recognize the importance of their _________ when developing a competitive strategy. a. customers b. employees c. managers d. suppliers Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

2. In successful quality management companies, employees are given all of the following EXCEPT a. broad latitude in their jobs b. encouraged to improvise c. provided detailed ways to perform their jobs d. use their initiative Ans: c, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None

3. With total quality management (TQM), employees receive broad job training giving them more flexibility in where they can work Ans: True Difficulty: Moderate Learning Objective: LO 1

4. Companies with a quality focus generally give their employees the authority to make decisions that will improve quality.

Ans: True Difficulty: Easy Learning Objective: LO 1

5. Achieving strategic quality goals for quality and customer satisfaction often requires teamwork and group participation.

Ans: True Difficulty: Moderate Learning Objective: LO 1

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6.Scientific management divides jobs into their most elemental activities to simplify job design.

Ans: True Difficulty: Easy Learning Objective: LO 2

7.Flexibility has traditionally been used as a measure of job efficiency.

Ans: False Difficulty: Easy Learning Objective: LO 2

8.Scientific management involves breaking down jobs into elemental activities.

Ans: True Difficulty: Moderate Learning Objective: LO 2

9. Which of the following is best defined by the willingness of an employee to perform as needed to attain a goal or objective? a. incentives b. motivation c. empowerment d. vertical job enlargement Ans: b, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

10. Studies have shown that the success of Japanese companies is due to cultural factors.

Ans: False Difficulty: Moderate Learning Objective: LO 2

11. Studies have shown that the success of Japanese companies is due to management practices.

Ans: True Difficulty: Moderate Learning Objective: LO 2

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12. For most industrialized countries, the difference between a company’s success and failure is dependent on the capability of its human resources.

Ans: True Difficulty: Easy Learning Objective: LO 3

13. Because services are labor intensive, human resources is becoming a more important strategic factor for service companies.

Ans: True Difficulty: Easy Learning Objective: LO 3

14. Which of the following is best defined by an employee who learns more than one job in the organization? a. Job rotation b. job enrichment c. cross training d. empowerment Ans: c, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

15. One of the prerequisites to job rotation is cross-training.

Ans: True Difficulty: Moderate Learning Objective: LO 3

16. Which of the following is best defined as giving employees the authority and responsibility to innovate and act on their own? a. horizontal job enlargement b. vertical job enlargement c. job rotation d. empowerment Ans: d, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

e.

17. An alternative workplace is a combination of nontraditional work locations and practices that supplement or replace the traditional office.

Ans: True Difficulty: Moderate

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Learning Objective: LO 3

18. The motivation for companies to create alternative workplaces is primarily financial.

Ans: True Difficulty: Easy Learning Objective: LO 3

19. A piece-rate wage plan rewards employees for attaining company goals and objectives.

Ans: False Difficulty: Moderate Learning Objective: LO 3

20. In a piece-rate wage system, pay is based on the efficiency of the overall process.

Ans: False Difficulty: Easy Learning Objective: LO 3

21. One advantage of an individual piece-rate system is that it provides strong incentives to ensure high quality.

Ans: False Difficulty: Easy Learning Objective: LO 3

22. While still an important issue, diversity issues in U.S. companies are on the decline.

Ans: False Difficulty: Moderate Learning Objective: LO 4

23. According to the U.S. Bureau of Statistics very few people entering the workforce over the past decade were members of minority groups.

Ans: False Difficulty: Moderate

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Learning Objective: LO 4

24. Globalization has resulted in an overall reduction in diversity related issues in the workplace.

Ans: False Difficulty: Moderate Learning Objective: LO 4

25. In the U.S, affirmative action and equal opportunity are basically the same.

Ans: False Difficulty: Moderate Learning Objective: LO 4

26. By managing ________, a company can gain a competitive edge because all employees are given an opportunity to do their best. a. diversity b. gain sharing c. profit sharing d. sustainability Ans: a, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

e.

27. Fitting the task to the person in a work environment is known as a. job analysis. b. job design c. task analysis d. ergonomics Ans: d, LO: 5, Bloom: C, Difficulty: Easy, AACSB: None

e.

28. Determining worker capabilities and responsibilities for a job is known as a. worker analysis. b. job analysis. c. environmental analysis. d. task analysis.

Ans: a, LO: 5, Bloom: C, Difficulty: Easy, AACSB: None

e.

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29. Job design includes determining the characteristics a worker needs to meet the job requirements.

Ans: True Difficulty: Moderate Learning Objective: LO 5

30. The interface of workers with machines is probably the least important aspect of job design.

Ans: False Difficulty: Easy Learning Objective: LO 5

31. A _________ is a graph showing the steps of a job or how a set of jobs fit together into the overall flow of the production process. a. worker-machine chart b. process flowchart c. motion study d. learning curve Ans: True Difficulty: Moderate Learning Objective: LO 6

32. A worker-machine chart illustrates the amount of time a worker and a machine are working or idle.

Ans: True Difficulty: Easy Learning Objective: LO 6

33. A worker-machine chart determines whether worker and machine tasks are strategically aligned.

Ans: False Difficulty: Moderate Learning Objective: LO 6

34. The formal study of the individual human motions used to perform a task was developed by Frank and Lillian Gilbreth.

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Ans: True Difficulty: Moderate Learning Objective: LO 6

35. A graph that reflects the fact that repetition of tasks improves worker performance is referred to as a a. learning curve. b. motion study. c. worker machine chart. d. scientific management Ans: a, LO: 7, Bloom: C, Difficulty: Easy, AACSB: None

36. An 80% learning curve describes an improvement rate of 80% each time production doubles.

Ans: False Difficulty: Moderate Feedback: Learning Curves Learning Objective: LO 7

37. Learning curves are useful for measuring work improvement for repetitive, simple jobs requiring short times to complete.

Ans: False Difficulty: Moderate Learning Objective: LO 7

38. Learning curves have limited application for assembly lines with short, repetitive jobs.

Ans: True Difficulty: Easy Learning Objective: LO 7

Multiple Choice 39. Changing management’s traditional control-oriented relationship with employees to one of cooperation, mutual trust, and teamwork requires a a. short term commitment to aggressive contractual planning. b. medium term commitment to dramatic organizational design.

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c. long term focus commitment as a key part of the strategic design. d. None of these answer choices is correct.

Ans. C Difficulty: Easy Learning Objective: LO 1 40. Achieving a company’s strategic goals for quality and customer satisfaction require a. team work. b. group participation. c. both team work and group participation. d. None of these answer choices is correct.

Ans. C Difficulty: Easy Learning Objective: LO 1

41.

Which of the following is not a serious disadvantage of scientific management? a. workers become bored b. opportunities to acquire new skills sets is limited c. workers are required to perform repetitive motions d. worker output is increased Ans. D Difficulty: Easy Learning Objective: LO 1

42. Motivation is a willingness to work hard because doing so a. satisfies employer needs. b. satisfies employee needs. c. satisfies both employee and employer needs. d. None of these answer choices is correct.

Ans. B Difficulty: Moderate Learning Objective: LO 1

43. Which of the following elements has not been shown to improve motivation? a. fair treatment of workers b. negative feedback and punishment c. empowerment d. restructuring of jobs Ans. B

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Difficulty: Moderate Learning Objective: LO 1

44. All of the following are advantages of task specialization except a. increased output. b.lower labor costs. c. reduced boredom. d.minimal training.

Ans: C Difficulty: Moderate Learning Objective: LO 1 45. Scientific management involves all the following except a. breaking down jobs into their simplest elements. b. eliminating unnecessary motions. c. hiring only highly trained workers. d. assigning tasks to workers.

Ans: C Difficulty: Moderate Learning Objective: LO 1

46.

The development of the assembly line by Henry Ford is based on the principles of a. scientific management. b. mass production. c. both scientific management and mass production. d. None of these answer choices is correct.

Ans: C Difficulty: Moderate Learning Objective: LO 1

47. Research has shown the success of Japanese companies operating production facilities in the United States is due to a. cultural factors. b. management practices. c. superior training/education of American workers. d. None of these answer choices is correct.

Ans: B Difficulty: Moderate

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Learning Objective: LO 3

48. Which of the following is not a contemporary trend in human resource management? a. cross training b. flexible work schedules c. telecommuting d. reduced work week for full time employees Ans: B Difficulty: Moderate Learning Objective: LO 3

49. Assigning a worker a complete unit of work with clearly defined start and end points is referred to as a. vertical job enlargement. b.job rotation. c. horizontal job enlargement. d.empowerment.

Ans: C Difficulty: Moderate Learning Objective: LO 3

50. Allowing employees more control over their own work and some of the supervisory responsibilities is known as a. vertical job enlargement. b.empowerment. c. horizontal job enlargement. d.cross training.

Ans: A Difficulty: Moderate Learning Objective: LO 3

51. ______________ gives employees the responsibility and authority to make decisions. a. Cross training b.Empowerment c. Job rotation d.Horizontal job enlargement Ans: B Difficulty: Easy

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Learning Objective: LO 3

52. Which of the following is not a principle for job enrichment? a. provide additional authority and freedom b. vertical job enlargement c. make periodic reports available to workers d. introduce simple, repetitive tasks Ans: C Difficulty: Moderate Learning Objective: LO 3

53. Advantages of empowerment include all of the following except a. more attention to product quality. b.higher productivity. c. limits conflicts with middle management. d.more satisfying work.

Ans: C Difficulty: Easy Learning Objective: LO 3

54. Empowerment involves giving employees _________________ to make decisions. a. responsibility b. authority c. both responsibility and authority d. None of these answer choices is correct.

Ans: C Difficulty: Moderate Learning Objective: LO 3

55. Advantages of telecommuting include all of the following except a. reduced turnover. b.decreased absenteeism and leave usage. c. flexible work schedules. d.direct visual surveillance of employees.

Ans: D Difficulty: Moderate Learning Objective: LO 3

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56. A trend among service companies, in particular, is the use of a. temporary and part-time employees. b. telecommuting. c. flexible work schedules. d. teamwork.

Ans: C Difficulty: Moderate Learning Objective: LO 3 57. An incentive plan that encourages employees to achieve a company’s goals and objectives is referred to as a. a piece-rate wage plan. b.gainsharing. c. profit sharing. d.overtime.

Ans: B Difficulty: Moderate Learning Objective: LO 3 58.

The two traditional forms of employee compensation include a. hourly wage and individual incentive. b. hourly wage and profit sharing. c. salary and individual incentive. d. hourly wage and gainsharing.

Ans: A Difficulty: Easy Learning Objective: LO 3 59. In a piece-rate wage system a worker’s pay is based on a. total output. b. job rating. c. job classification. d.total time.

Ans: A Difficulty: Easy Learning Objective: LO 3

60. __________________ is an incentive plan that joins employees in common to achieve company objectives in which they share in the gains.

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a. Profit sharing b. Gainsharing c. Performance pay d. None of these answer choices is correct.

Ans: B Difficulty: Easy Learning Objective: LO 3 61.

Which of the following developments has resulted in global diversity issues? a. globalization of companies b. global teams c. global outsourcing d. All of these answer choices are correct.

Ans. D Difficulty: Moderate Learning Objective: LO 4 62.

The process of creating a work environment where employees can contribute to their full potential is a. managing diversity. b. equal opportunity. c. affirmative action. d. None of these answer choices is correct.

Ans. A Difficulty: Moderate Learning Objective: LO 4

63.

Setting goals and timetables to increase the level of participation by women and minorities to attain parity levels in a company’s workforce is called a. diversity. b. equal opportunity. c. affirmative action. d. None of these answer choices is correct.

Ans. C Difficulty: Moderate Learning Objective: LO 4

64.

Managing ___________________ includes education, awareness, communication, fairness and commitment.

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a. diversity b. equal opportunity c. affirmative action d. None of these answer choices is correct.

Ans. A Difficulty: Moderate Learning Objective: LO 4

65. The elements of job design include a. task analysis. b.worker analysis. c. environmental analysis. d.All of these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 5

66. Determining how tasks fit together to form a job is referred to as a. worker analysis. b.task analysis. c. environmental analysis. d.ergonomics.

Ans: B Difficulty: Easy Learning Objective: LO 5

67. Fitting the task to the employee in a work environment is known as a. motivation. b. worker analysis. c. ergonomics. d. task analysis.

Ans: C Difficulty: Moderate Learning Objective: LO 5

68. _________________ refers to the physical location of a job and the requisite surroundings. a. Task analysis

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b. Worker analysis c. Methods analysis d. Environmental analysis Ans: D Difficulty: Moderate Learning Objective: LO 5

69. Which of the following would most likely be used to redesign or improve existing jobs? a. methods analysis b technology analysis c environmental analysis d task analysis Ans: A Difficulty: Moderate Learning Objective: LO 6

70. A(n) __________________ is used to graphically analyze how the steps of a job fit together into the overall flow of the production process. a. methods analysis b.process flowchart c. task analysis d.environmental analysis Ans: B Difficulty: Moderate Learning Objective: LO 6 71. ______________ involves the horizontal movement of a worker between two or more jobs. a. Cross training b.Empowerment c. Alternative workplace d. Job rotation Ans: D Difficulty: Moderate Learning Objective: LO 6 72. Motion study, the study of the individual human motions used in a task, was developed by a. Henry Ford.

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b.F. W. Taylor. c. Frank and Lillian Gilbreth. d.Frederick Herzberg.

Ans: C Difficulty: Moderate Learning Objective: LO 6

73. The amount of time a worker and a machine are working or idle on a job is illustrated by a a. process flowchart. b.worker analysis. c. task analysis. d.worker-machine chart.

Ans: D Difficulty: Moderate Learning Objective: LO 6 74. The gradual shift from treating employees as a replaceable part to embracing them as a valuable resource was primarily brought about by the trend toward a. globalization. b.quality management. c. scientific management. d.customization.

Ans: B Difficulty: Easy Learning Objective: LO 6

75. ___________ illustrate the improvement rate of workers as a job is repeated. a) Learning curves b) Process curves c) Learning charts d) Process charts Ans: A Difficulty: Moderate Learning Objective: LO 6

76. The principles of motion study relate to all of the following categories except

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a. the human body. b.the efficient use of capital. c. the workplace. d.the efficient use of equipment and machinery.

Ans: B Difficulty: Moderate Learning Objective: LO 6

77. A graph that illustrates the improvement rate of workers, as a job is repeated, is known as a a) learning curve. b) process flowchart. c) worker-machine chart. d) task analysis chart.

Ans: A Difficulty: Moderate Learning Objective: LO 7

78. A learning curve illustrates that increasing the number of cumulative units produced ________ the labor required per unit. a) increases b) eliminates c) decreases d) does not impact Ans: C Difficulty: Moderate Learning Objective: LO 7

79. A learning curve reflects the fact that a) each time the number of units produced doubles, the processing time per unit decreases by a constant percentage. b) each time the number of units produced doubles, the processing time per unit increases by a constant percentage. c) each time the number of units produced doubles, the processing time per unit increases by 10%. d) each time the number of units produced doubles, the processing time per unit remains the same.

Ans: A Difficulty: Moderate

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Learning Objective: LO 7

80. A 90% learning curve indicates a) a 90% increase in processing time per unit as output doubles. b) a 90% decrease in processing time per unit as output doubles. c) a 10% increase in processing time per unit as output doubles. d) a 10% decrease in processing time per unit as output doubles.

Ans: D Difficulty: Moderate Learning Objective: LO 7

81. The direct labor time required to produce the first sailboat of a particular model was 3,000 hours. If the company believes that an 80% learning curve applies to the production of this model sailboat, then the direct labor time required to produce the second boat is estimated to be a. 600 hours. b.2,400 hours. c. 3,600 hours. d.4,000 hours.

Ans: B Difficulty: Moderate Learning Objective: LO 7 Solution: Labor time=3,000 hours*0.80=2,400 hours.

82. A company has accepted a contract to produce a special electric motor. The number of direct labor hours required to produce the first motor is 250. If an 85% learning curve applies to the production of motors then the number of labor hours needed to produce the 4th motor is a) 212.5 hours. b) 180.6 hours. c) 153.5 hours. d0 37.5 hours Ans: B Difficulty: Hard Learning Objective: LO 7 Solution: Labor time = 250 hours × 0.85 × 0.85 = 180.6 hours

83. The direct labor times required to produce the first four units of a new product are shown below:

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Unit Number Direct Labor Hours 1 1,200 2 1,020 3 927.5 4 867 Based on this data the estimated learning or improvement rate is a. 100%. b.90%. c. 85%. d.80%.

Ans: C Difficulty: Hard Learning Objective: LO 7 Solution: Learning = 1020/1200 = 0.85, or 85% 84. The direct labor hours required to produce the first two units of a new product are 2,000 and 1,800, respectively. Using a 90% learning rate the company would estimate the direct labor hours for the fifth unit to be a) 1692.4 hours. b. 1620.0 hours. c. 1566.0 hours. d. 1523.2 hours.

Ans: C Difficulty: Hard Learning Objective: LO 7 Solution: t5=2000/5.152=1566 85. Which of the following is not a true statement regarding learning curves? a. Learning curves can help managers project labor requirements. b. Learning curves are not affected by product modifications. c. Learning curves are useful in developing production scheduling plans. d. Learning curves can help make overall product cost estimates.

Ans: B Difficulty: Moderate Learning Objective: LO 7

Short Answer Questions

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86. How has the trend toward quality management changed the way companies view their employees?

Ans: The traditional view of employees or labor was not so much as a valuable resource, but as a replaceable part of the production process that had to be closely controlled and managed. The trend toward quality management changed this perspective. W. E. Deming emphasized that good employees, who are always improving, are the key to successful quality management and a company’s ultimate survival. Deming pointed out that if a company hopes to attain its quality goals, and have good customer service, its employees must be committed and involved. Moreover, the company must make a commitment to its employees and provide them with the training and skills necessary to succeed. To be successful, companies must view their employees as a key component in their strategic design.

Difficulty: Hard Learning Objective: LO 1

87. Briefly describe the principles of scientific management.

Ans: Scientific management breaks down a job into its simplest elements and motions, eliminating unnecessary motions, and then divided the tasks among several workers so that each would require only minimal skill. This system enabled companies to hire large numbers of cheap, unskilled laborers, who were basically interchangeable and easily replaced. In this system, the timing of job elements by a stopwatch, enabled management to develop standard times for producing one unit of output. Workers were then paid according to their total output in a piece-rate system.

Difficulty: Moderate Learning Objective: LO 2

88. Briefly discuss the advantages and disadvantages of scientific management.

Ans: The advantages of scientific management were essentially increased output and lower labor costs. Workers could easily be replaced and trained at low cost, taking advantage of a large pool of cheap labor. Because of low-cost mass production, the U.S. standard of living was increased enormously. It also allowed unskilled, uneducated workers to gain employment based solely on their willingness to work hard physically at jobs that were mentally undemanding. Among the serious disadvantages of scientific management was the fact that workers frequently became bored and dissatisfied with the numbing repetition of simple job tasks that required little thought. The low skill level that was required meant that workers did not have the opportunity to advance in their jobs.

Furthermore, repetitive tasks requiring the same monotonous physical motions, resulted in physical injuries and mental fatigue.

Difficulty: Moderate Learning Objective: LO 2

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89. In what ways have advances in information technologies changed the working environment?

Ans: Advances in information technology have greatly changed the working environment, especially in services. Because services rely heavily on information technology and communication, services need employees who are technically skilled and can communicate effectively with customers. They also need flexible employees who can apply these skills to a variety of tasks, and who are continually trained to keep up with rapid advances in information technology. Increasing technological advances in equipment and machinery have also resulted in manufacturing work that is more technically sophisticated. Employees are required to be better educated, have greater skills, and have greater technical expertise.

Difficulty: Hard Learning Objective: LO 3

90. What is the difference between cross-training and job rotation?

Ans: In cross-training an employee learns more than one job in the company. This provides a safety measure for the company providing more job coverage in the event of employee resignations and absenteeism, or sudden increases in a specific job activity.

Job rotation is not exactly the same as cross-training. Job rotation requires cross-training, but also includes the horizontal movement between two or more jobs according to a plan or schedule.

Difficulty: Moderate Learning Objective: LO 3

91. What is empowerment and why is it important to total quality management (TQM)?

Ans: Empowerment is giving employees responsibility and authority to make decisions.

For TQM programs to work, it is generally conceded that employees must be empowered so that they are willing to innovate and act on their own in an atmosphere of trust and respect. Five of W. E. Deming’s 14 points for quality improvement relate to employee empowerment.

Difficulty: Hard Learning Objective: LO 3

92. List 5 of the attributes of good job design identified by Frederick Herzberg.

Ans: Student answers will vary, but should include 5 of the following attributes identified

by Frederick Herzberg.

1. An appropriate degree of repetitiveness 2. An appropriate degree of attention and mental absorption 3. Some employee responsibility for decisions and discretion

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4. Employee control over their own job 5. Goals and achievement feedback 6. A perceived contribution to a useful product or service 7. Opportunities for personal relationships and friendships 8. Some influence over the way work is carried out in groups Use of skills Difficulty: Moderate Learning Objective: LO 5

93. Define the 3 categories of the elements of job design.

Ans: Task analysis determines how to do each task and how all the tasks fit together to form a job. It includes defining the individual tasks, and determining their most efficient sequence, their duration, their relationship with other tasks, and their frequency. Worker analysis determines the characteristics the worker must possess to meet the job requirements, the responsibilities the worker will have in the job and how the worker will be rewarded. Environmental analysis refers to the physical location of the job in the production or service facility and the environmental conditions that must exist. These conditions include things such as proper temperature, lighting, ventilation, and noise.

Difficulty: Moderate Learning Objective: LO 5

94. List the 3 categories of the principles of motion study and give 2 rules for each category.

Ans: Student answers will vary but the 3 categories and the rules of each are as follows: a. Efficient use of the human body: i. Work should be simplified, rhythmic, and symmetric. ii. Hand/arm motions should be coordinated and simultaneous. iii. The full extent of physical capabilities should be employed; a part of the body should perform; the hand should never be idle. iv. Energy should be conserved by letting machines perform tasks when possible, minimizing the distance of movements, and physical momentum should be in favor of the worker. v. Tasks should be simple, requiring minimal eye contact and minimal muscular effort, with no unnecessary motions, delays, or idleness. b.Efficient Arrangement of the Workplace: i. All tools, materials, and equipment should have a designated, easily accessible location that minimizes the motions required to get them. ii. Seating and the general work environment should be comfortable and healthy c. Efficient Use of Equipment: i. Equipment and mechanized tools enhance work abilities. ii. The use of foot-operated mechanized equipment that relieves the hand/arms of work should be maximized.

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iii. Equipment should be constructed and arranged to fit worker use.

Difficulty: Hard Learning Objective: LO 6

95. Briefly discuss the advantages and disadvantages of using learning curves.

Ans: Learning curves can help managers project labor and budgeting requirements when developing production scheduling plans. Also, knowing how many labor hours are required over a production schedule can aid in determining the number of workers to employ. When managers are able to estimate the number of labor hours required for a product can improve product cost estimates used in bidding for jobs, as well as helping to set final product selling prices. However, managers must remember that modifications to products can negate learning curve effects, and improvement rates can also be derived from sources other than learning. Finally, relying on an industry-derived learning rate may be inappropriate for a particular company.

Difficulty: Hard Learning Objective: LO 7

96. You assign two workers, Alice and Bob, to complete a series of nearly identical projects. Working by herself, Alice takes 2 hours to complete the first project. Bob, who has less experience, takes 3 hours working by himself to complete the first project.

Assume Alice and Bob can work together without negative or positive interactions (i.e., they don’t slow down or speed up each other), and that they have the same 90% learning curve.

Both workers working as a team require __________ hours to complete the first project. a) 5 b) 1.5 c) 1.2 d) 1.1 Ans: C, LO: 8, Bloom: K, Difficulty: Medium, AACSB: Analysis

97. You assign two workers, Alice and Bob, to complete a series of nearly identical projects. Working by herself, Alice takes 2 hours to complete the first project. Bob, who has less experience, takes 3 hours working by himself to complete the first project.

Assume Alice and Bob can work together without negative or positive interactions (i.e., they don’t slow down or speed up each other), and that they have the same 90% learning curve.

Both workers working as a team require __________ hours to complete the second project. a) 1.50

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b) 1.35 c) 1.20 d) 1.08 Ans: D, LO: 8, Bloom: K, Difficulty: Hard, AACSB: Analysis

98. You assign two workers, Alice and Bob, to complete a series of nearly identical projects. Working by herself, Alice takes 2 hours to complete the first project. Bob, who has less experience, takes 3 hours working by himself to complete the first project.

Assume Alice and Bob can work together without negative or positive interactions (i.e., they don’t slow down or speed up each other).

If both workers working as a team require 54 minutes to complete the second project, the team has a __________% learning curve. a) 90 b) 85 c) 80 d) 75 Ans: D, LO: 8, Bloom: K, Difficulty: Hard, AACSB: Analysis

99. You assign two workers, Alice and Bob, to complete a series of nearly identical projects. Working by herself, Alice takes 2 hours to complete the first project. Bob, who has less experience, takes 3 hours working by himself to complete the first project.

Assume Alice and Bob can work together without negative or positive interactions (i.e., they don’t slow down or speed up each other), and that they have the same 85% learning curve.

Both workers working as a team require __________ minutes to complete the fourth project. a) 58 b) 52 c) 50 d) 49 Ans: B, LO: 8, Bloom: K, Difficulty: Hard, AACSB: Analysis

100. You assign two workers, Alice and Bob, to complete a series of nearly identical projects. Working by herself, Alice takes 2 hours to complete the first project. Bob, who has less experience, takes 3 hours working by himself to complete the first project.

Assume Alice and Bob can work together without negative or positive interactions (i.e., they don’t slow down or speed up each other), and that they have the same 85% learning curve.

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Suppose Alice is assigned to another project so that the third project has to be completed

by Bob working by himself. He would take __________ minutes to complete it. a) 95 b) 93 c) 91 d) 90 Ans: B, LO: 8, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

101. You assign two workers, Alice and Bob, to complete a series of nearly identical projects. Working by herself, Alice takes 2 hours to complete the first project. Bob, who has less experience, takes 3 hours working by himself to complete the first project.

Assume Alice and Bob can work together without negative or positive interactions (i.e., they don’t slow down or speed up each other), and that they have the same 85% learning curve.

Both workers working as a team require __________ minutes to complete the third project. a) 46 b) 51 c) 53 d) 56 Ans: D, LO: 8, Bloom: K, Difficulty: Hard, AACSB: Analysis

102. You assign two workers, Alice and Bob, to complete a series of nearly identical projects. Working by herself, Alice takes 2 hours to complete the first project. Bob, who has less experience, takes 3 hours working by himself to complete the first project.

Assume Alice and Bob can work together without negative or positive interactions (i.e., they don’t slow down or speed up each other). Suppose Bob is assigned to another project so that the third project has to be completed by Alice working by herself. If she takes 53.4 minutes to complete the project, then she has a __________% learning curve. a) 60 b) 65 c) 70 d) 75 Ans: A, LO: 8, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

103. You assign two workers, Alice and Bob, to complete a series of nearly identical projects. Working by herself, Alice takes 2 hours to complete the first project. Bob, who has less experience, takes 3 hours working by himself to complete the first project.

Assume Alice and Bob can work together without negative or positive interactions (i.e.,

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they don’t slow down or speed up each other). If both workers working as a team require 36.4 minutes to complete the third project, the team has a __________% learning curve. a) 60 b) 65 c) 70 d) 75 Ans: B, LO: 8, Bloom: K, Difficulty: Hard, AACSB: Analysis

104. You assign two workers, Alice and Bob, to complete a series of nearly identical projects. Working by herself, Alice takes 2 hours to complete the first project, and she has an 80% learning curve. Bob, who has less experience, takes 3 hours working by himself to complete the first project, but he has a 60% learning curve. Assume Alice and Bob can work together without negative or positive interactions (i.e., they don’t slow down or speed up each other). Both workers working as a team require __________ minutes to complete the fourth project. a) 39 b) 37 c) 35 d) 33 Ans: C, LO: 8, Bloom: K, Difficulty: Hard, AACSB: Analysis

105. You assign two workers, Alice and Bob, to complete a series of nearly identical projects. Working by herself, Alice takes 2 hours to complete the first project, and she has an 80% learning curve. Bob, who has less experience, takes 3 hours working by himself to complete the first project, but he has a 60% learning curve. Assume Alice and Bob can work together without negative or positive interactions (i.e., they don’t slow down or speed up each other). Both workers working as a team require __________ minutes to complete the third project. a) 41 b) 43 c) 45 d) 45.5 Ans: A, LO: 8, Bloom: K, Difficulty: Hard, AACSB: Analysis

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Supplement 8: Operational Decision-Making Tools: Work Measurement

True/False 1. Determining the length of time it takes to do a job is known as a. standard time. b. learning curve. c. work measurement. d. cycle time.

Ans: c, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

2. The historical objective behind work measurements and time studies was to a. develop a fair method of job evaluation and payment. b. provide an aspect of control over workers. c. provide motivation for work. d. increase quality improvements.

Ans: a, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None

3. Under normal circumstances and conditions, the time required by an average worker to perform a job once is referred to as the a. standard. b. cycle time. c. normal elemental time d. time study.

Ans: a, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

4. The basic principle underlying an incentive piece-rate wage system is that a. management pays more for more work. b. workers make money for more work. c. allows for easy determination of a normal or fair rate of output. d. workers produce more if they are paid for the additional output.

Ans: d, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None,

5. The normal time to perform a job is calculated by a. dividing the standard time by the elemental average.

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b. dividing the elemental average by the standard time. c. summing the elemental normal times. d. None of the answer choices are correct.

Ans: c, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None

6. The allowance factor is a a. reduction in the standard time. b. percentage increase in the normal cycle time. c. a component of normal time. d. a component of average time.

Ans: b, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None

7. A ______ is a statistical sample distribution, where the number of cycles is the sample size. a. motion time b. work sampling c. time study d. average cycle time Ans: c, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

8. Which of the following is a negative aspect to time studies? a. Workers often do not like to be the subject of a time study. b. They are costly to conduct. c. Workers are sometimes unwilling to cooperate. d. All of the answer choices are correct.

Ans: d, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None

9. Rating worker performance is typically an objective, easy task that can be done by any employee.

Ans: False Difficulty: Easy Ans: False, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

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10. Work sampling is best defined as a. a technique for determining the proportion of time a worker or machine is idle. b. a technique for determining the proportion of time a worker spends on activities. c. a technique for determining the elemental normal times. d. a technique for breaking a job down into its elements.

Ans: a, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

11. Which of the following is NOT a benefit of work sampling as compared to time studies? a. easier to perform b. cheaper c. large number of observations d. no stopwatch used Ans: c, LO: 2, Bloom: C, Difficulty: Easy, AACSB: None

12. Work sampling tends to be more disruptive on the workplace than time studies.

Ans: False Difficulty: Moderate Ans: False, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

Multiple Choice

13. _____________ time is the time required by an average worker to perform a job under normal circumstances and conditions. a. Stopwatch b. Standard c. Allowance d. Average Ans: B Difficulty: Moderate Ans: B, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

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14. In a time study, the normal time is computed as a. the elemental average time multiplied by the rating factor. b. the elemental average time divided by the rating factor. c. the elemental average time minus the rating factor. d. the elemental average time plus the rating factor.

Ans: A Difficulty: Hard Ans: A, LO: 1, Bloom: K, Difficulty: Hard, AACSB: None

15. In a time study the standard time is calculated as a. the normal cycle time plus the allowance factor. b. the normal cycle time minus the allowance factor. c. the normal cycle time divided by (1 + allowance factor). d. the normal cycle time multiplied by (1 + allowance factor).

Ans: D Difficulty: Hard Ans: D, LO: 1, Bloom: K, Difficulty: Hard, AACSB: None

16. The normal times for basic, generic micro motions developed by an outside organization in a laboratory-type environment are referred to as a. standard times. b. normal times. c. predetermined motion times. d. elemental times.

Ans: C Difficulty: Moderate Ans: C, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

17. Advantages of using a predetermined motion time system include all of the following except a. worker cooperation and compliance are not required. b. ignores job context within which a single motion takes place. c. workplace is not disrupted. d. eliminates the need for subjectively determining performance ratings.

Ans: B Difficulty: Moderate Ans: B, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

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18. As part of its quality-improvement program a company is conducting a time study for a particular job. The time study encompassed 10 job cycles, and the results include the following cumulative times and performance rating factors for each element.

Element 1 2 3 4 5

t (min) 3.33 4.5 2.85 5.05 1.53

RF 1.10 1.00 1.05 1.10 0.90

The standard time for this job using an allowance factor of 16% is a. 1.809 minutes. b. 2.098 minutes. c. 1.530 minutes. d. 2.233 minutes.

Ans: B Difficulty: Hard Ans: B, LO: 1, Bloom: K, Difficulty: Hard, AACSB: None

Solution: ST = 1.809 × (1 + 0.16) = 2.028

19. As part of its quality-improvement program a company is conducting a time study for a particular job. The time study encompassed 10 job cycles, and the results include the following cumulative times and performance rating factors for each element. An allowance factor of 16% is assumed.

Element 1 2 3 4 5

t (min) 3.33 4.5 2.85 5.05 1.53

RF 1.10 1.00 1.05 1.10 0.90

The normal cycle time for this job would be a. 1.809 minutes. b. 2.098 minutes. c. 1.530 minutes. d. 2.233 minutes.

Ans: A Difficulty: Hard Ans: A, LO: 1, Bloom: K, Difficulty: Hard, AACSB: None

Solution: NT = 1.809

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20. As part of a time study a particular job was analyzed. The study included 20 job cycles and the following cumulative times and performance rating factors for each element were reported: Element 1 2 3 4

t (min) 12.22 9.55 14.5 11.21

RF 1.10 1.05 0.90 0.95

Assuming an allowance factor of 15%, the standard time for this job would be a. b. c. d.

4.35 minutes.

3.67 minutes.

2.712 minutes.

2.358 minutes.

Ans: C Difficulty: Hard Ans: C, LO: 1, Bloom: K, Difficulty: Hard, AACSB: None

Solution: ST = 2.358 × (1 + 1.15) = 2.712

21. How many cycles should be used in a time study in order to be 95% confident that the time-study average job cycle time is within 5% of the true average job cycle time?

Assume that the average job cycle time is 2.67 minutes, and the standard deviation of the sample is 0.72 minutes. a. 36 cycles b. 72 cycles c. 98 cycles d. 112 cycles Ans: D Difficulty: Moderate Ans: D, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: n = 112

22. How many cycles should be used in a time study in order to be 98% confident that the time-study average job cycle time is within 4% of the true average job cycle time?

Assume that the average job cycle time is 4.25 minutes and the standard deviation of the sample is 0.65 minutes. a. 55 cycles b. 70 cycles c. 80 cycles d. 95 cycles Ans: C

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Difficulty: Moderate Ans: C, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: n = 80

23. For a particular time study a company would like to be 95% confident that the average job cycle time is within 2% of the true average job cycle time. Assume that the average job cycle time was 6.53 minutes, and the standard deviation of the sample is 1.26 minutes. The number of cycles that should be used in this time study would be a. 174. b. 358. c. 463. d. 864.

Ans: B Difficulty: Moderate Ans: B, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: n = 358

24. A work sampling study is being conducted on a loading machine in a warehouse.

How many observations should be taken if management wants to be 95% confident the estimate is within +6% of the actual proportion of time the loader is busy if management believes the loading machine is in use 70% of the time? a. 125 observations b. 175 observations c. 225 observations d. 275 observations Ans: C Difficulty: Moderate Ans: C, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None Solution: n = 225 observations

25. Management believes a critical piece of equipment is busy 85% of the time. How many observations should be taken if management wants to be 98% confident the estimate is within +2.5% of the actual proportion of time the equipment is in use? a. 250 observations b. 525 observations c. 757 observations d. 1,108 observations Ans: D Difficulty: Moderate Ans: D, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

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Solution: n = 1,108 observations

26. How many observations should be taken to be 95% confident of being within +5% of the actual time a machine is busy if it is believed that the machine is in use 75% of the time? a. 1,200 observations b. 772 observations c. 364 observations d. 289 observations Ans: D Difficulty: Moderate Ans: D, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: n = 289 observations

27. For a particular time study a company would like to be 90% confident that the average job cycle time is within 5% of the true average job cycle time. Assume that the average job cycle time is 15.76 minutes and the standard deviation of the sample is 3.2 minutes. The number of cycles that should be used in this time study would be a. 45. b. 93. c. 127. d. 236.

Ans: A Difficulty: Moderate Ans: A, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: n = 45

28. How many observations should be taken to be 90% confident of being within +2% of the actual time a machine is busy if it is believed that the machine is in use 70% of the time? a. 2,021 observations b. 1,421 observations c. 789 observations d. 365 observations Ans: B Difficulty: Moderate Ans: B, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

Solution: n = 1,421 observations

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29. As part of a time study a particular job was analyzed. The study included 20 job cycles and the following cumulative times and performance rating factors for each element were reported: Element 1 2 3 4

t (min) 54.64 49.67 42.98 51.37

RF 1.05 1.10 0.95 0.95

Assuming an allowance factor of 20% the standard time for this job would be a. b. c. d.

10.08 minutes.

12.10 minutes.

14.73 minutes.

16.58 minutes.

Ans: B Difficulty: Hard Ans: B, LO: 2, Bloom: K, Difficulty: Hard, AACSB: None

Solution: ST = 12.10 minutes

Short Answer Questions

30. Briefly discuss the advantages and disadvantages of a predetermined motion time system.

Ans: There are several advantages of using a predetermined motion time system. It enables a standard time to be developed for a new job before the job is even part of the production process. Worker cooperation and compliance are not necessary, and the workplace is not disrupted. Performance ratings are included in the motion times, eliminating this subjective part of developing standard times. There are also disadvantages with a predetermined motion time system. It ignores the job context within which a single motion takes place. It is also possible that the predetermined motion times may not reflect the skill level, training, or abilities of workers in a specific industry.

Difficulty: Moderate Ans: LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

31. List the steps in work sampling.

Ans: The steps in work sampling are

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a. define the job activities b. determine the number of observations in the work sample c. determine the length of the sampling period d. conduct the work sampling study and record the observations e. periodically recompute the number of observations Difficulty: Moderate Ans: LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

32. What is work sampling and what is its primary use?

Ans: Work sampling is a technique used for determining the proportion of time a worker or machine spends on various activities. A work sample can indicate the proportion of time a worker is busy or idle or performing a task or how frequently a machine is idle or in use. The primary uses of work sampling are to determine the ratio delay, which is the percentage of time a worker or machine is delayed or idle, and to analyze jobs that have non-repetitive tasks. The information from a work sample can be useful in designing or redesigning jobs, developing job descriptions, and determining the level of work output that can be expected from a worker for use in planning.

Difficulty: Moderate Ans: , LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None,

33. A company has 45 professional employees, who work analyzing and updating large files on computers. Management believes that these employees actually spend about 15% of their time waiting for files to be down- and uploaded, as well as copied to and read from their hard drives, and it is evaluating purchasing state-of-the-art solid state drives, whose speed is estimated to be 10 times faster than that of the existing computers. For this purpose, the company wants to perform a work sampling study to determine the proportion of time employees are waiting for files to be available, as described above.

The company wants to determine this proportion within ±2%, with a 95% degree of confidence. The number of observations required is __________. a) 1123 b) 1225 c) 1315 d) 1325 Ans: B, LO: 1, Bloom: A, Difficulty: Moderate, AACSB: Reflective thinking

34. A company has 45 professional employees, who work analyzing and updating large files on computers. Preliminary, management believes that these employees actually spend about 15% of their time waiting for files to be down- and uploaded, as well as copied to and read from their hard drives, and it is evaluating purchasing state-of-the-art solid state drives, whose speed is estimated to be 10 times faster than that of the existing computers. For this purpose, the company wants to perform a work sampling study to Copyright ©2020 John Wiley & Sons, Inc.

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determine the proportion of time employees are waiting for files to be available, as described above. The company wants to determine this proportion within ±2%, with a 95% degree of confidence. If after gathering some data, management estimates that the number of observations required is 1537, then the updated estimate of the proportion of time spent by employees waiting for files to be available is __________. a) 18% b) 19% c) 20% d) 21% Ans: B, LO: 1, Bloom: A, Difficulty: Moderate, AACSB: Reflective thinking

35. A company has 45 professional employees, who work analyzing and updating large files on computers. Management wishes to determine the proportion of time employees spend in each of these two activities. For a given allowable error margin and confidence level, which proportion p of time spent analyzing files would require the largest number of observations? a) There is not enough information to answer the question. b) p = 0.25 c) p = 0.33 d) p = 0.50 Ans: D, LO: 1, Bloom: A, Difficulty: Hard, AACSB: Reflective thinking

36. A company has 45 professional employees, who work analyzing and updating large files on computers. Management believes that these employees actually spend about 15% of their time waiting for files to be down- and uploaded, as well as copied to and read from their hard drives, and it is evaluating purchasing state-of-the-art solid state drives, whose speed is estimated to be 10 times faster than that of the existing computers. For this purpose, the company wants to perform a work sampling study to determine the proportion of time employees are waiting for files to be available, as described above.

The company wants to determine this proportion within ±2%, with a 95% degree of confidence. However, management wants to limit the number of observations to 500. The actual degree of accuracy in determining the proportion would change from within ±2% to __________. a) ±1% b) ±2.5% c) ±3% d) ±3.5% Ans: C, LO: 1, Bloom: A, Difficulty: Hard, AACSB: Reflective thinking

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Chapter 9: Project Management True/False 1. Which of the following best defines a unique, one-time operational activity or effort is referred to as a process? a. project b. activity c. objective d. schedule Ans: c, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

2. In general, projects are subject to less uncertainty than other types of processes.

Ans: False Difficulty: Easy Learning Objective: LO 1

3. Which of the following is NOT a primary element of project management? a. scheduling b. costing c. control d. planning Ans: b, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None

4. A typical project team is cross-functional consisting of members throughout an organization.

Ans: True Difficulty: Easy Learning Objective: LO 1

5. A(n) ___________ provides a common understanding of and justification for a project. a. activity b. work breakdown structure c. objective d. project scope Ans: d, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

e.

Ans: False

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Difficulty: Moderate Learning Objective: LO 1

6. Control, one of the basic elements of a project plan, involves a set of procedures for monitoring and evaluating progress and performance.

Ans: True Difficulty: Moderate Learning Objective: LO 1 7. What is term for a project benefit that cannot be measured in a tangible way? a. soft return b. fuzzy return c. intangible return d. non-monetary return Ans: a, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

Difficulty: Moderate Learning Objective: LO 1

8. The upper level of a work breakdown structure for a project highlights summary activities and/or major components.

Ans: True Difficulty: Moderate Learning Objective: LO 1

9. Global projects are rarely concerned with cultural differences among team members because English is the universal business language.

Ans: False Difficulty: Easy Learning Objective: LO 2 10. Asian cultures tend to embrace project management’s methodical approach more than western cultures.

Ans: True Difficulty: Moderate Learning Objective: LO 2

11. Issues of cultural diversity in project management should only be addressed if and when they arise.

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Learning Objective: LO 2 12. A ________ provides a visual display of the project schedule that includes scheduled start times, finish times, and available slack. a. work breakdown structure b. PERT c. Gantt chart d. critical path Ans: c, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

13. ___________ is recognized as the most critical element in the project management process. a. Critical path b. Project scheduling c. Communication d. Time management Ans: b, LO: 3, Bloom: C, Difficulty: Easy, AACSB: None

14. Which of the following is NOT a key element of project control? a. time management b. cost management c. diversity management d. quality management Ans: c, LO: 4, Bloom: C, Difficulty: Easy, AACSB: None

Ans: True Difficulty: Moderate Learning Objective: LO 4

15. Two key elements of project control are time management and cost management.

Ans: True Difficulty: Moderate Learning Objective: LO 4

16. Enterprise project management refers to the management and control of a large, complex project.

Ans: False Difficulty: Moderate Learning Objective: LO 4

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17. Managing quality is not an important part of project management.

Ans: False Difficulty: Easy Learning Objective: LO 4

18. The principles of total quality management (TQM) cannot be applied to project management.

Ans: False Difficulty: Moderate Learning Objective: LO 4

19. __________ reports a project’s performance by tracking its forecasted completion date and anticipated budget variations. a. Earned value analysis b. Enterprise project management c. Activity scheduling d. The critical path Ans: d, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

20. Management and control of a companywide portfolio of projects is known as enterprise project management.

Ans: True Difficulty: Easy Learning Objective: LO 4

21. PERT stands for a. program enterprise and resource technique. b. project enterprise and resource technique. c. program evaluation and review technique. d. project evaluation and review technique.

Ans: c, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

Ans: False Difficulty: Easy Learning Objective: LO 5

22. Slack represents the amount of time an activity can be delayed without delaying the project completion time.

Ans: True

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Difficulty: Moderate Learning Objective: LO 5

23. With an activity-on-node (AON) network diagram, the nodes indicate the precedence relationships and the arrows represent the project’s activities.

Ans: False Difficulty: Moderate Learning Objective: LO 5

24. A dummy variable is an activity inserted into the AOA network diagram to show a precedence relationship, but does not represent any passage of time.

Ans: True Difficulty: Moderate Learning Objective: LO 5

25. Unlike PERT, CPM incorporates probabilistic time estimates into the project management process.

Ans: False Difficulty: Moderate Learning Objective: LO 5

26. What is the longest path through a network? a. AOA network b. AON network c. critical path d. project network Ans: b, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

Ans: False Difficulty: Moderate Learning Objective: LO 5 27. The critical path is the longest path through the project’s network.

Ans: True Difficulty: Moderate Learning Objective: LO 5

28. The earliest start time for the first activity in a project is generally at time zero.

Ans: True Difficulty: Moderate Learning Objective: LO 5

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29. Indirect costs always increase as a project’s duration increases.

Ans: True Difficulty: Moderate Feedback: Project Crashing Learning Objective: LO 5 30. Activities that are not on a project’s critical path have zero slack.

Ans: False Difficulty: Moderate Learning Objective: LO 5

31. Microsoft Project is a software package that supports CPM/PERT analysis.

Ans: True Difficulty: Moderate Learning Objective: LO 7 32. Crashing activities with positive slack reduces a project’s duration.

Ans: False Difficulty: Moderate Learning Objective: LO 7 33. A project’s duration can be reduced by crashing activities on the critical path.

Ans: True Difficulty: Moderate Learning Objective: LO 7 34. In general, crashing costs decrease as a project’s duration is systematically reduced to a target value.

Ans: False Difficulty: Moderate Learning Objective: LO 7

Multiple Choice

35. Which of the following is not a basic element in a project plan? a. Objectives

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b. Personnel c. Contract requirements d. All of these answer choices are correct.

Ans: D Difficulty: Moderate Learning Objective: LO 1

36. Which of the following is not a general characteristic of a project? a. a project has a unique purpose b. a project has more certainty c. a project has more uncertainty d. a project often draws resources from various areas in the organization Ans: B Difficulty: Easy Learning Objective: LO 1

37. The project management process encompasses a. planning. b. scheduling. c. control. d. All of these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 1

38. A(n) _______________ is a project team structure that includes members from different functional areas. a. matrix organization b. project network c. organizational breakdown structure d. work breakdown structure Ans: A Difficulty: Moderate Learning Objective: LO 1

39. The _______________ is a document that provides a common understanding, justification, and expected result for a project. a. statement of work b. work breakdown structure c. scope statement d. responsibility assignment matrix Ans: C.

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Difficulty: Moderate Learning Objective: LO 1

40. A(n) ______________ breaks down a project into components, subcomponents, activities, and tasks. a. work breakdown structure (WBS) b. scope statement c. responsibility assignment matrix (RAM) d. organizational breakdown structure (OBS) Ans: A Difficulty: Moderate Learning Objective: LO 1

41. Which of the following is the universal business language most often utilized when managing global projects? a. French b. Spanish c. English d. Chinese Ans: C Difficulty: Moderate Learning Objective: LO 2

42. Diversity among project team members brings different a. views. b. experiences. c. values. d. All of these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 2

43. Which area of the world takes a lot of holidays potentially impacting project schedules? a. Asia. b. Southern Europe c. North America d. None of these answer choices is correct.

Ans: B Difficulty: Easy

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Learning Objective: LO 2

44. Which area of the world employs a more methodically approach to business that values patience and relationship building? a. Asia. b. Southern Europe c. North America d. None of these answer choices is correct.

Ans: A Difficulty: Easy Learning Objective: LO 2

45. Project managers must address cultural diversity in a. project planning b. project scheduling. c. project control. d. None of these answer choices is correct.

Ans: A Difficulty: Easy Learning Objective: LO 2

46. A bar graph displaying when activities are scheduled to start, when they will be finished, and where extra time is available is known as a a. PERT chart. b. work breakdown structure (WBS). c. Gantt chart. d. responsibility assignment matrix (RAM).

Ans: C Difficulty: Easy Learning Objective: LO 3

47. One disadvantage of Gantt charts, especially for large projects, is that it does not a. clearly show precedence relationships. b. indicate activity start times. c. indicate activity finish times. d. use bars to represent activities.

Ans: A Difficulty: Moderate

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Learning Objective: LO 3

48. Which of the following is one of the oldest and most widely used scheduling technique? a. PERT b. CPM c. Gantt d. Microsoft Project Ans: C Difficulty: Easy Learning Objective: LO 3

49. Which of the following is not one of the basic steps involved in developing a schedule? a. define the activities b. sequence the activities c. estimate the time required to complete each activity d. identify the project cost Ans: D Difficulty: Moderate Learning Objective: LO 3

50. _______________ relationship is the sequential relationship of project activities to each other. a. Precedence b. Scheduling c. Slack d. Prior Ans: A Difficulty: Easy Learning Objective: LO 3

51. The single most important criterion for the success of many projects is that a. it be finished on time. b. the quality meet minimum standards. c. the costs are minimized. d. None of these answer choices is correct.

Ans: A

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Difficulty: Moderate Learning Objective: LO 3

52. The key elements of project control include all the following except a. time management. b. cost management. c. material management. d. communication.

Ans: C Difficulty: Moderate Learning Objective: LO 4 A standard procedure for numerically measuring a project’s progress is referred to as a. program evaluation and review technique (PERT). b. critical path method (CPM). c. Gantt chart. d. earned value analysis.

Ans: D Difficulty: Moderate 53.

Learning Objective: LO 4

54. ________________ is the process of making sure a project progresses to a successful completion. a. Project planning b. Project scheduling c. Project control d. None of these answer choices is correct.

Ans: C Difficulty: Easy Learning Objective: LO 4

55. For an activity-on-node (AON) network, a. arrows represent activities and nodes represent events. b. nodes represent activities and arrows indicate precedence relationships. c. arrows represent events and nodes indicate precedence relationships. d. nodes indicate precedence relationships and arrows indicates the length of the activity time.

Ans: B Difficulty: Moderate

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Learning Objective: LO 5

56. Which of the following is not used to calculate probabilistic time estimates? a) optimistic b) most likely c) least likely d) pessimistic Ans: C Difficulty: Moderate Learning Objective: LO 5

57. In project management the term slack refers to the amount of time a. to complete an activity without delaying the project. b. an activity can be delayed without delaying the project. c. needed to complete the entire project. d. required to complete the project’s critical activities.

Ans: B Difficulty: Moderate Learning Objective: LO 5

58. The longest path through a project network is referred to as the a. activity-on-node path. b. path of greatest slack. c. critical path. d. noncritical path.

Ans: C Difficulty: Easy Learning Objective: LO 5

59. In general, the earliest finish time for an activity is equal to a. earliest start time + activity time estimate. b. earliest start time – activity time estimate. c. earliest start time – slack time. d. earliest start time + slack time.

Ans: A Difficulty: Moderate Learning Objective: LO 5

60. In general, the latest finish time for an activity is equal to a. latest finish time minus the activity time estimate. b. the minimum of the latest start times for the activities that immediately follow.

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c. the maximum of the latest start times for the activities that immediately follow. d. the average of the latest start times for the activities that immediately follow.

Ans: B Difficulty: Hard Learning Objective: LO 5 61. For activities on a project’s critical path, a. earliest start time (ES) equals latest start time (LS). b. earliest start time (ES)is greater than latest start time (LS). c. earliest start time (ES) is less than latest start time (LS). d. earliest start time (ES) equals latest finish time (LF).

Ans: A Difficulty: Moderate Learning Objective: LO 5

62. The slack time for an activity can be computed as a. latest start time (LS) – latest finish time (LF). b. earliest start time (ES) + earliest finish time (EF). c. latest start time (LS) – earliest start time (ES). d. latest finish time (LF) + earliest finish time (EF).

Ans: C Difficulty: Moderate Learning Objective: LO 5

63. The _______________ probability distribution is typically used to describe uncertain activity times in a project. a. beta b. normal c. binomial d. exponential Ans: A Difficulty: Moderate Learning Objective: LO 5

A project consists of the following activities: Activity A

Activity Predecessor ---

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Time (weeks) 5

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B C D E F

A A B C D,E

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8 3 7 6 10

Table XX 64. Using Table XX, the earliest finish (EF) time for activity D is a. 7 weeks. b. 13 weeks. c. 20 weeks. d. 30 weeks.

Ans: C Difficulty: Moderate Learning Objective: LO 5

65. Using Table XX, the earliest start time for activity F is a. 30 weeks. b. 20 weeks. c. 14 weeks. d. 13 weeks.

Ans: B Difficulty: Moderate Learning Objective: LO 5

66.

Using Table XX, the latest start (LS) time for activity B is a. 5 weeks. b. 8 weeks. c. 13 weeks. d. 14 weeks.

Ans: A Difficulty: Moderate Learning Objective: LO 5

67. Using Table XX, the critical path for this project consists of activities a. A-B-C-D-E-F. b. A-C-E-F. c. A-B-C-F. d. A-B-D-F. Ans: D Difficulty: Moderate

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Learning Objective: LO 5

68. Using Table XX, the time complete the entire project is a. 20 weeks. b. 30 weeks. c. 36 weeks. d. 39 weeks.

Ans: B Difficulty: Moderate Learning Objective: LO 5

69. Using Table XX, the amount of slack associated with activity C is a. 0 weeks. b. 3 weeks. c. 6 weeks. d. None of these answer choices is correct.

Ans: c Difficulty: Moderate Learning Objective: LO 5

A project consists of the following four activities with activity times in days: Activity Predecessor Time A 6 B A 5 C A 4 D B,C 8 Table YY 70. Using Table YY, the earliest finish (EF) time for activity C is a. 4 days. b. 6 days. c. 10 days. d. 11 days.

Ans: C Difficulty: Moderate Learning Objective: LO 5

71. Using Table YY, the earliest start (ES) time for activity B is a. 5 days. b. 6 days. c. 11 days. d. 14 days.

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Ans: B Difficulty: Moderate Learning Objective: LO 5

72. Using Table YY, the latest start (LS) time for activity D is a. 8 days. b. 11 days. c. 19 days. d. 12 days.

Ans: B Difficulty: Moderate Learning Objective: LO 5

73. Using Table YY, the critical path for this project is a. A-B-C. b. A-C-D. c. A-B-D. d. A-B-C-D. Ans: C Difficulty: Moderate Learning Objective: LO 5

74. Using Table YY, the time to complete the entire project would be a. 23 days. b. 19 days. c. 17 days. d. 11 days.

Ans: B Difficulty: Moderate Learning Objective: LO 5

75. Using Table YY, the amount of slack associated with activity C is a. 4 days. b. 3 days. c. 2 days. d. 1 day.

Ans: D Difficulty: Moderate Learning Objective: LO 6

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76. The estimated mean time for an activity with a most likely time (m) equal to 11 days, the optimistic time (a) equal to 6 days, and the pessimistic time (b) equal to 18 days is a. 9.67 days. b. 11 days. c. 11.33 days. d. 11.67 days.

Ans: C Difficulty: Moderate Solution: t = (6 + 4 × 11 + 18)/6 = 11.33 days.

Learning Objective: LO 6

77. The estimated variance for an activity with a most likely time (m) equal to 11 days, the optimistic time (a) equal to 6 days, and the pessimistic time (b) equal to 18 days is a. 2 days. b. 4 days. c. 6 days. d. 11 days.

Ans: B Difficulty: Moderate Solution: Variance = ((18 − 6)/6)2 = 4 days Learning Objective: LO 6 78. The estimated mean time for an activity with a most likely time (m) equal to 12 weeks, an optimistic time (a) equal to 9 weeks, and a pessimistic time (b) equal to 18 weeks is a. 13.0 weeks. b. 12.75 weeks. c. 12.5 weeks. d. 9.0 weeks.

Ans: C Difficulty: Moderate Solution: t = (18 + 4 × 12 + 9)/6 = 12.5 weeks Learning Objective: LO 6

79. The estimated variance for an activity with a most likely time (m) equal to 12 weeks, an optimistic time (a) equal to 9 weeks, and a pessimistic time (b) equal to 18 weeks is a. 3.75 weeks. b. 1.50 weeks. c. 5.25 weeks. d. 0.25 weeks.

Ans: D Difficulty: Moderate

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Solution: variance = ((18 − 9)/6)2 = 0.25 weeks Learning Objective: LO 6

The following table of probabilistic time estimates (in weeks) and activity predecessors are provided for a project.

Activity A B C D E

Time Estimates (weeks) a m b 3 4 2 6 5

5 8 3 9 9

7 10 5 12 15

Activity Predecessor -A A B, C D

Table ZZ 80. Using Table ZZ, the expected time to complete activity A is a. 5.00 weeks. b. 7.33 weeks. c. 7.67 weeks. d. 8.00 weeks.

Ans: A Difficulty: Moderate Solution: t = (3 +4 × 5 + 7)/6 = 5.0 weeks Learning Objective: LO 6 81. Using Table ZZ, the variance for activity E is a. 1.291 weeks b. 1.667 weeks. c. 2.582 weeks. d. 2.778 weeks.

Ans: D Difficulty: Moderate Solution: variance = ((15 − 5)/6)2 = 2.778 weeks Learning Objective: LO 6

82. Using Table ZZ, the earliest start (ES) time for activity D is a. 8.17 weeks. b. 12.67 weeks.

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c. 18.33 weeks. d. 21.67 weeks.

Ans: B Difficulty: Hard Learning Objective: LO 6

83. Using Table ZZ, the earliest finish time for activity C is a. 5.00 weeks. b. 8.17 weeks. c. 9.50 weeks. d. 12.67 weeks.

Ans: B Difficulty: Hard Learning Objective: LO 6

84. Using Table ZZ, the critical path for the project consists of activities a. A-B-C-D-E b. A-B-C-E c. A-B-D-E d. A-B-C-D Ans: C Difficulty: Hard Learning Objective: LO 6

85. Using Table ZZ, how much slack is associated with activity C? a. 0 weeks. b. 4.50 weeks. c. 12.67 weeks. d. 31.00 weeks.

Ans: B Difficulty: Hard Learning Objective: LO 6

86. Using Table ZZ, the expected time to complete the project is a. 34.17 weeks. b. 33.23 weeks. c. 31.00 weeks. d. 21.67 weeks.

Ans: C Difficulty: Hard

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Learning Objective: LO 6 87. Using Table ZZ, the variance of the project’s total completion time is a. 5.472 weeks. b. 5.222 weeks. c. 4.872 weeks. d. 3.752 weeks.

Ans: B Difficulty: Hard Learning Objective: LO 6

88. Using Table ZZ, the probability that the project could be completed in 34 weeks or less is approximately a. 86 percent. b. 89 percent. c. 91 percent. d. 96 percent.

Ans: C Difficulty: Hard Solution: Z = (34 − 31)/2.285 = 1.31, Pr. = 0.91 Learning Objective: LO 6

89. Using Table ZZ, the probability that the project will take longer than 33 weeks to complete is approximately a. 0.19. b. 0.32. c. 0.68. d. 0.81.

Ans A Difficulty: Hard Solution: Z = (33 − 31)/2.285 = 0.875, Pr. = 0.19Learning Objective: LO 6

90. The reduction in one or more activities normal time to shorten the project duration is called a. crashing. b. scheduling. c. adjusting. d. None of these answer choices is correct.

Ans: A Difficulty: Easy

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Learning Objective: LO 7

91. Which of the following statements is generally true regarding the relationship between project crashing costs and indirect costs? a. both crashing costs and indirect costs are highest when the project is shortened b. only indirect costs increase when the project is shortened c. both are unaffected by the length of the project d. crashing costs increase when the project is shortened while indirect costs decrease when the project is shortened Ans: d Difficulty: Moderate Learning Objective: LO 7

A project consists of the following four activities with activity times in days: Activity A B C D

Predecessor A A B,C

Normal Time 6 5 4 8

Crash Time 4 4 2 5

Normal Cost $ 500 200 600 750

Crash Cost $ 700 500 1000 1500

Table CC 92. Using table CC, which of the activities has the largest total allowable crash time? a. A b. B c. C d. D Ans: D Difficulty: Moderate Learning Objective: LO 7

93. Using table CC, what is the total allowable crash time for activity B? a. 5 b. 1 c. 2 d. 0 Ans: B Difficulty: Moderate

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Learning Objective: LO 7

94.

Using table CC, which of the activities has the lowest crash cost per day? a. A b. B c. C d. D Ans: A Difficulty: Moderate Learning Objective: LO 7

95. Using table CC, what is the crash cost per day for activity B? a. 100 b. 200 c. 250 d. 300 Ans: D Difficulty:

Learning Objective: LO 7

Short Answer

96. Briefly discuss project management and what it involves.

Ans: Project management is the management of the work to develop and implement an innovation or change in an existing operation. It encompasses planning the project and controlling the project activities, subject to resource and budget constraints, to keep the project on schedule.

Difficulty: Easy Learning Objective: LO 1

97. Why have projects taken on a more crucial role in operations management?

Ans: In recent years, projects have become more pervasive in organizations. The nature of the global business environment is such that new machinery and equipment, as well as new production processes and computer support systems, are constantly evolving. This

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provides the capability of developing new products and services, which generates consumer demand for even greater product diversity. As a result, a larger proportion of total organizational effort now goes toward project-oriented activities than in the past.

Thus, the planning and management of projects has taken on a more crucial role in operations management.

Difficulty: Moderate Learning Objective: LO 4

98. Briefly describe the makeup of the project management team.

Ans: The project management team is typically cross-functional, consisting of a group of individuals selected from other areas in the organization or from outside the organization because of their special skills, expertise, and experience related to the project activities.

Members of the engineering staff are often assigned to project work because of their technical skills, especially if the project is related to production processes or equipment.

The project team may also include managers and staff personnel from specific areas related to the project. Workers can also be involved on the project team if their job is a function of the project activity.

Difficulty: Easy Learning Objective: LO 1

99. What is a scope statement?

Ans: The scope statement is a document that provides a common understanding of a project. It includes a justification for the project that describes which factors created a need within the company for the project. It also includes an indication of what the expected results of the project will be and what will constitute project success. The scope statement might also include a list of the types of planning reports and documents that are part of the project management process.

Difficulty: Moderate Learning Objective: LO 1

100. The following table of probabilistic time estimates (in weeks) and activity predecessors are provided for a project.

Activity A B C

Time Estimates (weeks) a m b 3 5 3

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4 8 5

8 9 8

Activity Predecessor -A A

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D E F

7 4 2

9 7 5

11 11 9

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B, C C D, E

The expected time to complete activity A is __________. a) 4.00 weeks b) 4.50 weeks c) 4.75weeks d) 5.00 weeks Ans: B, LO: 6, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking Solution: t = (3 +4 × 4 + 8)/6 = 4.5 weeks

101. The following table of probabilistic time estimates (in weeks) and activity predecessors are provided for a project.

Activity A B C D E F

Time Estimates (weeks) a m b 3 5 3 7 4 2

4 8 5 9 7 5

8 9 8 11 11 9

Activity Predecessor -A A B, C C D, E

The variance for activity F is __________. a) 1.291 weeks b) 1.361 weeks c) 1.578 weeks d) 1.778 weeks Ans: B, LO: 6, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking Solution: variance = ((9 − 2)/6)2 = 1.361 weeks

102. The following table of probabilistic time estimates (in weeks) and activity predecessors are provided for a project.

Activity

Time Estimates (weeks) a m b

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Activity

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A B C D E F

3 5 3 7 4 2

4 8 5 9 7 5

8 9 8 11 11 9

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Predecessor -A A B, C C D, E

The earliest start (ES) time for activity D is __________. a) 7.67 weeks b) 8.17 weeks c) 12.67 weeks d) 13.17 weeks Ans: C, LO: 6, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

103. The following table of probabilistic time estimates (in weeks) and activity predecessors are provided for a project.

Activity A B C D E F

Time Estimates (weeks) a m b 3 5 3 7 4 2

4 8 5 9 7 5

8 9 8 11 11 9

Activity Predecessor -A A B, C C D, E

The earliest finish time for activity C is __________. a) 4.50 weeks b) 9.67 weeks c) 12.17 weeks d) 12.83 weeks Ans: B, LO: 6, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

104. The following table of probabilistic time estimates (in weeks) and activity predecessors are provided for a project.

Time Estimates

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Activity

a

(weeks) m b

A B C D E F

3 5 3 7 4 2

4 8 5 9 7 5

8 9 8 11 11 9

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Activity Predecessor -A A B, C C D, E

The critical path for the project consists of activities __________. a) A-B-C-D-E-F b) A-B-D-F c) A-C-D-E d) A-B-E-D Ans: B, LO: 6, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

105. The following table of probabilistic time estimates (in weeks) and activity predecessors are provided for a project.

Activity A B C D E F

Time Estimates (weeks) a m b 3 5 3 7 4 2

4 8 5 9 7 5

8 9 8 11 11 9

Activity Predecessor -A A B, C C D, E

The slack is associated with activity C is __________ weeks. a) 0 b) 1.25 c) 2.50 d) 5.17 Ans: B, LO: 6, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

106. The following table of probabilistic time estimates (in weeks) and activity predecessors are provided for a project.

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Activity A B C D E F

Time Estimates (weeks) a m b 3 5 3 7 4 2

4 8 5 9 7 5

8 9 8 11 11 9

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Activity Predecessor -A A B, C C D, E

The expected time to complete the project is __________ weeks. a) 22.00 b) 23.83 c) 26.33 d) 28.83 Ans: C, LO: 6, Bloom: K, Difficulty: Hard, AACSB: Analytic

107. The following table of probabilistic time estimates (in weeks) and activity predecessors are provided for a project.

Activity A B C D E F

Time Estimates (weeks) a m b 3 5 3 7 4 2

4 8 5 9 7 5

8 9 8 11 11 9

Activity Predecessor -A A B, C C D, E

The variance of the project’s total completion time is __________ weeks. a) 2.94 b) 3.19 c) 4.11 d) 5.00 Ans: A, LO: 6, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking

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108. The following table of probabilistic time estimates (in weeks) and activity predecessors are provided for a project.

Activity A B C D E F

Time Estimates (weeks) a m b 3 5 3 7 4 2

4 8 5 9 7 5

8 9 8 11 11 9

Activity Predecessor -A A B, C C D, E

The probability that the project could be completed in 28 weeks or less is approximately __________ %. a) 97.3 b) 83.5 c) 81.3 d) 77.5 Ans: B, LO: 6, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking Solution: Z = (28 – 26.33)/1.1759 = 0.97, Pr. = 0.835

109. The following table of probabilistic time estimates (in weeks) and activity predecessors are provided for a project.

Activity A B C D E F

Time Estimates (weeks) a m b 3 5 3 7 4 2

4 8 5 9 7 5

8 9 8 11 11 9

Activity Predecessor -A A B, C C D, E

The probability that the project will take longer than 30 weeks is approximately __________ %. a) 1.42 b) 1.51 c) 1.62

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d) 1.71 Ans: C, LO: 6, Bloom: K, Difficulty: Hard, AACSB: Reflective thinking Solution: Z = (30 – 26.33)/1.1759 = 2.14, Pr. = 1.62%

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Chapter 10: Supply Chain Management: Strategy and Design

True/False

1. Supply chains for services are easier to define than supply chains for manufactured goods.

Ans: False Difficulty: Easy Learning Objective: LO 1

2. The supply chain for a service tends to be more compacted and less extended than a supply chain for a manufactured good.

Ans: True Difficulty: Moderate Learning Objective: LO 1

3. Because value chain and supply chain have similar meanings, they are often used interchangeably.

Ans: True Difficulty: Moderate Learning Objective: LO 1

4. Globalization and advances in information technology are primary reasons why supply chain management has become a competitive priority for companies.

Ans: True Difficulty: Easy Learning Objective: LO 1

5. A supply chain is sometimes referred to as a demand-driven value chain.

Ans: True Difficulty: Moderate Learning Objective: LO 1

6. A supply chain encompasses only the activities associated with the flow of goods.

Ans: False Difficulty: Easy Learning Objective: LO 1

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7. Suppliers are upstream members of a supply chain.

Ans: True Difficulty: Easy Learning Objective: LO 1

8. An ongoing risk management process builds resiliency into the supply chain.

Ans: True Difficulty: Moderate Learning Objective: LO 1

9. Final end-use customers are upstream members of a supply chain.

Ans: False Difficulty: Easy Learning Objective: LO 1

10. Traditionally, each supply chain member was viewed as a separate, stand-alone entity focused on its own goals.

Ans: True Difficulty: Moderate Learning Objective: LO 1

11. Supply chain uncertainty and variability may result in incomplete and late orders.

Ans: True Difficulty: Moderate Learning Objective: LO 1

12. Companies address uncertainty in their supply chains by . a. Increasing the bull whip effect b. Decreasing inventory c. Increasing inventory d. Increasing transportation distances Ans: a Difficulty: Moderate Learning Objective: LO 1

13. Supply chain management focuses managing a. customer demand

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b. suppliers for manufactured products c. the flow of manufactured goods, services, and related information. d. customer uncertainty Ans: c Difficulty: Moderate Learning Objective: LO 1

14. Suppliers and customers rarely participate in the design of a supply chain.

Ans: False Difficulty: Moderate Learning Objective: LO 1

15. The bullwhip effect occurs when a. slight to moderate demand variability becomes magnified as demand information is transmitted back upstream. b. slight to moderate demand variability becomes magnified as supply information is transmitted back upstream. c. slight to moderate demand variability becomes magnified as demand information is transmitted back downstream. d. slight to moderate demand variability becomes magnified as supply information is transmitted back downstream.

Ans: a Difficulty: Moderate Learning Objective: LO 1

16. Increasing supply chain transparency only magnifies the bullwhip effect.

Ans: False Difficulty: Moderate Learning Objective: LO 1

17. A supply chain consists of an integrated group of processes to source, make, and store products.

Ans: False Difficulty: Easy Learning Objective: LO 1

18. One way to cope with the bullwhip effect is for supply chain members to share demand information.

Ans: True Difficulty: Moderate

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Learning Objective: LO 1

19. Sustainability is defined by the United Nations as a. sacrificing the present needs to ensure the needs of future generations are not met. b. sacrificing the present needs to ensure the needs of future generations met. c. meeting the present needs to ensure the needs of future generations are not met. d. meeting the present needs to ensure the needs of future generations are met.

Ans: d Difficulty: Moderate Learning Objective: LO 2

19. Going green has become one of the most visible recent trends in operations and supply chain management.

Ans: True Difficulty: Easy Learning Objective: LO 2

20. Where does the impetus for sustainability in the supply come from? a. Upstream b. Downstream c. Within the company d. Government regulations Ans: b Difficulty: Easy Learning Objective: LO 2

21. The same quality management program on reducing waste can also be used to meet sustainability goals.

Ans: True Difficulty: Easy Learning Objective: LO 2

22. ____________ is the essential link for coordination among all supply chain members. a. Customers b. Suppliers

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c. Risk management d. Information Ans: d Difficulty: Easy Learning Objective: LO 3

23. E-business replaces physical exchange processes with electronic ones.

Ans: True Difficulty: Easy Learning Objective: LO 3

24. A computer-to-computer exchange of business documents in a standard format is known as a. radio frequency identification (RFID) b. electronic data interchange (EDI) c. collaborative planning forecasting and replenishment (CPFR) d. internet of things (IoT) Ans: b Difficulty: Easy Learning Objective: LO 3

25. What technology allows for the wireless transfer of data? a. Internet of things (IoT) b. Electronic data interchange (EDI) c. Radio frequency identification (RFID) d. Point of sale Ans: c Difficulty: Moderate Learning Objective: LO 3

26. What software helps integrate many of the supply chain components by sharing and organizing information and data among supply chain members. a. Collaborative planning, forecasting, and replenishment (CPFR) b. Radio frequency identification (RFID) c. Blockchains d. Enterprise resource planning (ERP) Ans: True

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Difficulty: Moderate Learning Objective: LO 3

27. Getting the members of a supply chain to collaborate and work together is called supply chain integration.

Ans: True Difficulty: Easy Learning Objective: LO 3

28. Collaborative planning, forecasting and replenishment (CFPR) is a process where the more influential member of the supply chain dictates schedules to ensure customer demand is satisfied.

Ans: False Difficulty: Easy Learning Objective: LO 3

29. Collaborative planning, forecasting, and replenishment (CPFR) is a useful tool supporting supply chain integration.

Ans: True Difficulty: Moderate Learning Objective: LO 3

30. Company resource plan (CRP) is a software that integrates the components of a company by sharing and organizing information and data.

Ans: False Difficulty: Moderate Learning Objective: LO 3

31. Fill rate is one of the three key performance indicators in measuring supply chain performance.

Ans: True Difficulty: Moderate Learning Objective: LO 4

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32. What is the purpose of the supply chain operations reference (SCOR) model? a. Provide internal metrics for the supply chain for customers b. Provide internal metrics for customers for supply chain management c. Provide a cross-industry standards for supply chain management d. Provide a cross-industry standards for customers Ans: c Difficulty: Moderate Learning Objective: LO 4

Multiple Choice

33. The suppliers in a supply chain are referred to as ______________ supply chain members. downstream midstream upstream None of these answer choices is correct.

a. b. c. d.

Ans: C Difficulty: Easy Learning Objective: LO 1

34. Distributors, warehouses, and retailers are referred to as _____________ supply chain members. downstream upstream procurement None of these answer choices is correct.

a. b. c. d.

Ans: A Difficulty: Easy Learning Objective: LO 1

35. The purchasing of goods and services from suppliers is called sourcing. offshoring. procurement.

None of these choices is correct.

a. b. c. d.

Ans: C Difficulty: Easy

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Learning Objective: LO 1

36. A demand-driven value chain is considered to be a global supply chain that is organized according to all the following overlapping areas of responsibility except a. supply management. b. demand management. c. product management. d. process management.

Ans: D Difficulty: Hard

Learning Objective: LO 1

37. Supply chain processes include procurement. production. distribution.

All of these answer choices are correct.

a. b. c. d.

Ans: D Difficulty: Moderate Learning Objective: LO 1

38. Which of the following refers to an approach to risk management that aggregates risk? a. Risk pooling b. Risk optimizing c. Risk capturing d. None of these answer choices is correct.

Ans: A Difficulty: Moderate Learning Objective: LO 1

39. Supply chain management focuses on integrating and managing the flow of a. services. b. information. c. goods.

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d. All of these answer choices are correct.

Ans: D Difficulty: Moderate Learning Objective: LO 1

40. The bullwhip effect can increase inventories. increase demand. increase customer service levels. increase capacity.

a. b. c. d.

Ans: A Difficulty: Moderate Learning Objective: LO 1

41. All the following are approaches used in risk pooling within a supply chain except reducing the number and variety of parts. encouraging large orders. combining inventories from multiple locations into one location.

None of these answer choices is correct.

a. b. c. d.

Ans: B Difficulty: Moderate Learning Objective: LO 1

42. Information sharing among supply chain members will typically result in all of the following except faster response times. early problem detection. an increased bullwhip effect. greater trust and confidence among supply chain members.

a. b. c. d.

Ans: C Difficulty: Easy Learning Objective: LO 1

43. One way to reduce the bullwhip effect is for supply chain members to a. make ordering decisions independently of each other. b. create demand forecasts independently of other supply chain members. c. share demand forecasts with other supply chain members.

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d. restrict information flows between supply chain members.

Ans: C Difficulty: Moderate

Learning Objective: LO 1

44. Which of the following is not a key to effective supply chain management? a. communication among members b. independence among members c. collaboration among members d. trust among members Ans: B Difficulty: Easy Learning Objective: LO 1

45. Increased uncertainty and variability in a supply chain typically results in a. faster deliveries. b. more accurate order fulfillment. c. larger inventories. d. lower costs.

Ans: C Difficulty: Moderate Learning Objective: LO 1

46. The United Nations defines sustainability as meeting _________ needs without compromising the ability of ______ generations to meet their needs. a. future, present b. present, future c. present, present d. future, future Ans: B Difficulty: Easy Learning Objective: LO 2

47. Sustainability is also referred to as a. going green.

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b. keeping green. c. sustaining green. d. None of these answer choices is correct.

Ans. A Difficulty: Easy Learning Objective: LO 2

48. A common misconception of U.S. companies is that requiring suppliers in developing countries to use green practices is not feasible because a. developing countries do not face the same governmental, social and cultural pressures. b. green manufacturing methods will require costly new equipment and processes. c. the customer market for products designed for green attributes is soft. d. All of these answer choices are correct.

Ans. D Difficulty: Moderate Learning Objective: LO 2

49. Companies resist establishing green supply chains for all the following reasons except that the market is soft for products with green attributes. green manufacturing requires costly new equipment and practice. green initiatives lower costs because fewer resources are consumed. green practices face additional government, societal and cultural pressures.

a. b. c. d.

Ans: C Difficulty: Moderate Learning Objective: LO 2

50. The impetus for commitment to sustainability generally comes from ____________ in the supply chain and moves __________ to suppliers. a. upstream, downstream b. downstream, upstream c. midstream, upstream d. downstream, midstream Ans. B Difficulty: Moderate

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Learning Objective: LO 2

51. Which of the following is not one of the three key performance indicators (KPI) used to measure supply chain performance? inventory turnover postponement rate inventory days of supply fill rate

a. b. c. d.

Ans: B Difficulty: Moderate

Learning Objective: LO 4

52. A computer-to-computer exchange of business documents in a standard format is known as e-business. electronic data interchange (EDI). radio frequency identification (RFID). point-of-sale data.

a. b. c. d.

Ans: B Difficulty: Easy Learning Objective: LO 3

53. All the following are enablers of efficient supply chain management except a. bar codes. b. price tags. c. RFID tags. d. the Internet.

Ans: B Difficulty: Moderate Learning Objective: LO 3

54. E-business replaces _________ processes with ___________ ones. a. physical, electronic b. electronic, physical c. physical, physical d. electronic, electronic

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Ans: A Difficulty: Easy Learning Objective: LO 3

55. In general, it can be said of a modern supply chain that ________ information has the effect of ________ inventory. a. increasing, decreasing b. decreasing, increasing c. increasing, increasing d. decreasing, decreasing Ans: A Difficulty: Easy Learning Objective: LO 3

56. _______________________ is not a perceived advantage of radio frequency identification (RFID) technology.

Loss of personal privacy Reduced stock-outs Prevention of fraud or theft Lower distribution costs

a. b. c. d.

Ans: A Difficulty: Moderate Learning Objective: LO 3

57. Supply chain integration does not involve __________________ among supply chain members. providing information collaborating on replenishment reducing competition coordinating work flows

a. b. c. d.

Ans: C Difficulty: Moderate

Learning Objective: LO 3

58. Information technology supports supply chain integration through a. information sharing and collaborative planning.

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b. workflow coordination. c. adoption of new methods and technologies. d. All of these answer choices are correct.

Ans: D Difficulty: Moderate Learning Objective: LO 3

59. Information sharing in support of supply chain integration includes all the following types except a. demand data. b. inventory stocks. c. cost and profit data. d. production and shipping schedules.

Ans: C Difficulty: Easy Learning Objective: LO 3

60. Inventory turnover is computed by a. dividing the cost of goods sold by the average aggregate inventory value. b. dividing the average aggregate inventory value by costs of goods sold. c. multiplying the average aggregate inventory value by cost of goods sold. d. subtracting cost of goods sold from the average aggregate inventory value.

Ans: a Difficulty: Hard Learning Objective: LO 4

61. A company that produces small electric motors for treadmills had cost of goods sold last year of $241,000,000. The average value of inventory for raw materials, work-in-process, and finished goods are shown in the table below: Raw Materials Work-In-Process Finished Goods

$12,379,000 $7,631,000 $9,275,000

If the company operates 365 days a year, the days of supply being held in inventory is a. 44.4 days. b. 27.4 days.

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c. 8.2 days. d. 0.1 day.

Ans: A Difficulty: Hard Solution: Days of supply=$29,285,000/($241,000,000/365 days)=44.4 days Learning Objective: LO 4

62. A company that produces specialized video equipment had cost of goods sold last year of $127,000,000. The average value of inventory for raw materials, work-in-process, and finished goods are shown in the table below: Raw Materials Work-In-Process Finished Goods

$6,189,000 $2,541,000 $3,710,000

If the company operates 50 weeks per year, then the number of inventory turns would be 1.4 turns.

4.4 turns.

9.0 turns.

10.2 turns.

a. b. c. d.

Ans: D Difficulty: Hard Solution: Inventory turns=$127,000,000/$12,440,000=10.2 turns Learning Objective: LO 4

63. A company that produces specialized video equipment had cost of goods sold last year of $127,000,000. The average value of inventory for raw materials, work-in-process, and finished goods are shown in the table below: Raw Materials Work-In-Process Finished Goods

$6,189,000 $2,541,000 $3,710,000

If the company operates 50 weeks per year, then the weeks of supply in inventory would be a. 4.9 weeks. b. 0.1 week. c. 10.2 weeks.

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d. 35.8 weeks.

Ans: A Difficulty: Hard Solution: Weeks of supply=$12,440,000/($127,000,000/50 weeks)=4.9 weeks Learning Objective: LO 4

64. A company that produces printer cartridges had cost of goods sold last year of $629,462,423. The average value of inventory for raw materials, work-inprocess, and finished goods are shown in the table below: Raw Materials Work-In-Process Finished Goods

$7,367,528 $22,893,232 $16,523,451

If the company operates 50 weeks per year, then the number of inventory turns would be a. 3.7 turns. b. 2.5 turns. c. 13.5 turns. d. 28.3 turns.

Ans: C Difficulty: Hard Solution: Number of turns=$629,462,423/$46,784,211=13.5 turns Learning Objective: LO 4

65. A company that produces printer cartridges had cost of goods sold last year of $629,462,423. The average value of inventory for raw materials, work-inprocess, and finished goods are shown in the table below: Raw Materials

$7,367,528

Work-In-Process Finished Goods

$22,893,232 $16,523,451

If the company operates 50 weeks per year, then the weeks of supply in inventory would be a. 3.7 weeks. b. 2.5 weeks. c. 13.5 weeks. d. 28.3 weeks.

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Ans: A Difficulty: Hard Solution: Weeks of supply=$46,784,211/($629,462,423/50 weeks)=3.7 weeks Learning Objective: LO 3

66. The fraction of orders filled by a distribution center or warehouse within a specific time period is referred to as the inventory turnover. inventory supply time. fill rate. aggregate orders processed.

a. b. c. d.

Ans: C Difficulty: Moderate Learning Objective: LO 4

67. Which of the following is not a key performance indicator used in supply chain management?

Fill rate Days of supply Cost of goods Inventory turns

a. b. c. d.

Ans: C Difficulty: Moderate Learning Objective: LO 4

68. All of the following are performance metrics in the SCOR system, except a) perfect order fulfillment. b) production flexibility. c) value-added productivity. d) asset fulfillment.

Ans: D Difficulty: Hard Learning Objective: LO 4

Short Answer Questions

69. What is a supply chain?

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Ans: A supply chain encompasses all activities associated with the flow and transformation of goods and services from the raw materials stage through to the end user (customer), as well as the associated information flows. In essence, it is all the assets, information and processes that provide supply.

Difficulty: Easy Learning Objective: LO 1

70. Who are the upstream and downstream supply chain members?

Ans: The supply chain begins with suppliers. These suppliers are referred to as upstream supply chain members while the distributors, warehouses, and eventual end-use customers are referred to as downstream supply chain members.

Difficulty: Moderate Learning Objective: LO 1

71. What processes comprise the supply chain and how are the processes integrated?

Ans: The supply chain can be viewed as an integrated group of business processes and activities with the same goal of providing customer satisfaction. These processes include the procurement of services, materials, and components from suppliers; production of the products and services; and distribution of products to the customer including taking and filling orders. Information and information technology tie these processes together and integrates them into the supply chain.

Difficulty: Moderate Learning Objective: LO 1

72. List and define four information technology supply chain enablers.

Ans: Some of the more important supply chain enablers include: a. Electronic data interchange (EDI) that links supply chain members for order processing, accounting, inventory control and distribution. b. Radio frequency identification (RFID) that uses radio waves to transfer data between a scanner and an item such as a package or shipping container. c. Barcodes which contain identifying information about products as they flow through the supply chain including product description, item number, source and destination, handling procedures, etc. d. Internet that allows companies to communicate with suppliers, customers, shippers and other businesses around the world, instantaneously.

Difficulty: Moderate Learning Objective: LO 3

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73. List and explain the three key supply chain performance indicators.

Ans: Students should address inventory turns, average aggregate value of inventory, and fill rates.

Difficulty: Moderate Learning Objective: LO 1

74. What is the bullwhip effect and how does it occur?

Ans: The bullwhip effect is created when supply chain members make ordering decisions with an eye to their own self-interest and/or do not have accurate demand information from adjacent supply chain members. Distorted information or the lack of information, such as inaccurate demand data of forecasts, from the customer can ripple back upstream through the supply chain and magnify demand variability at each stage. This can result in high buffer inventories, poor customer service, missed production schedules, wrong capacity plans, inefficient shipping, and high costs. This phenomenon is known as the bullwhip effect. It occurs when slight-to-moderate demand variability becomes magnified as demand information is transmitted back upstream in the supply chain.

Difficulty: Moderate Learning Objective: LO 1

75. What is the role of information and information technology in managing the supply chain?

Ans: Information is the essential link that ties together all supply chain members and processes. Computers and information technology enable real-time, online communications throughout the supply chain enabling the efficient flow of products and services through the supply chain. Supply chain experts like to use the phrase: “in modern supply chain management, information replaces inventory.” While not literally true, some inventory is needed in the supply chain, information does change the way the supply chain is managed which can reduce the need for high levels of inventory.

Difficulty: Moderate Learning Objective: LO 3

76. Which of the following assertions is not true about RFID technology? a) it is costlier than using barcodes b) recently it has been standardized c) it works through radio waves, which don’t go through metal

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d) All of the above are correct.

Ans: B, LO: 3, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

77. All of the following were estimated benefits from the use of RFID technology except __________. a) prevention of product shrinkage, vendor fraud b) inventory visibility, which would enable a 50% reduction in inventory levels c) reduction of distribution center costs d) on-shelf monitoring, which would decrease stock-outs in stores Ans: B, LO: 3, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

78. All of the following are reasons that explain why the Internet has the biggest impact of all technologies on supply chain management, except __________. a) It has eliminated geographic barriers. b) It adds speed and accessibility to the supply chain. c) It has shifted the advantage in the transaction process from the buyer to the seller, because it makes it easier for suppliers to reach more clients. d) It allows companies to reduce uncertainty and inventory.

Ans: C, LO: 3, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

79. Which of the following choices is not true about DELL build-to-order model? a) DELL sends out orders to suppliers through the Internet every few hours or less. b) DELL suppliers are able to access the company’s inventories and production plans. c) DELL suppliers receive weekly feedback on how well they are meeting shipping schedules. d) DELL allows the customer to follow their purchase in real time from order to delivery.

Ans: C, LO: 4, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

80. Collaborative planning, forecasting, and replenishment (CPFR) __________. a) allows mass customization b) allows early detection of problems c) builds trust and confidence d) allows higher capacity utilization Ans: D, LO: 3, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

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81. If costs of goods sold for a fiscal year are $125,000,000, markup is 10%, and inventory turns are 32.5, then its average aggregate value of inventory was $__________. a) 3,461,538 b) 3,846,154 c) 4,230,769 d) None of these figures is correct.

Ans: B, LO: 4, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking 82. If the average aggregate value of the inventory is $38,716,000, the markup is 10%, and the days of supply are 36.7, then the cost of goods sold is $__________. a) 311,850,000 b) 346,500,000 c) 385,000,000 d) 423,500,000 Ans: C, LO: 4, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

83. The supply chain operations reference model __________. a) was pioneered by DELL b) is based on the use of RFID technology c) is a supply chain diagnostic tool d) is a forecasting tool that allows reduced inventory Ans: C, LO: 4, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

84. Which of the following choices is not true about the supply chain operations reference model? a) The open-ended nature of its processes makes it similar to kaizen. b) It’s purpose is to define a company’s current supply chain process and compare it to other companies’. c) It is organized around a set of six primary management processes. d) There are over 250 SCOR metrics organized within a three-tiered hierarchy Ans: A, LO: 4, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

85. The SCOR mark __________. a) is a methodology to control inventory widely used in the electronics industry b) is a set of standards for use of RFID technology c) benchmarks a company’s current supply chain performance against its competitors’ metrics d) is an alternative to the Six Sigma DMAIC steps

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Ans: C, LO: 4, Bloom: K, Difficulty: Medium, AACSB: Reflective thinking

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Chapter 11: Global Supply Chain Procurement and Distribution

True/False

1. Outsourcing is a relatively new phenomenon used strictly by multinationals.

Ans: False Difficulty: Moderate Learning Objective: LO 1

2. Outsourcing and sourcing have the same meaning and are often used interchangeably.

Ans: False Difficulty: Easy Learning Objective: LO 1

3. _________ involves sourcing from an outside supplier goods and services that were previously produced in-house. a) Sourcing b) Outsourcing c) Procurement d) Continuous replenishment Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

4. Companies use outsourcing as a strategic move to transfer their core competencies to their suppliers.

Ans: False Difficulty: Moderate Learning Objective: LO 1

5. Which of the following is NOT an advantage of outsourcing? a) Outsourcing firm can focus on core competencies b) Greater flexibility c) Expertise to do all things well d) Provide more control Ans: c, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

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6. Outsourcing supports vertical integration of a firm's supply chain.

Ans: False Difficulty: Moderate Learning Objective: LO 1

7. Many companies are outsourcing in countries where higher prices for supplies are offset by lower quality.

Ans: False Difficulty: Moderate Learning Objective: LO 1

8. Procurement involves the selection of a supplier.

Ans: False Difficulty: Moderate Learning Objective: LO 1

9. Which of the following is best defined as the purchasing of goods and services from suppliers? a) outsourcing b) procurement c) continuous replenishment d) sourcing Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

Ans: True Difficulty: Easy Learning Objective: LO 1

10. Purchasing can be classified according to two broad categories: direct (manufacturing inputs) and indirect (operating inputs).

Ans: True Difficulty: Hard Learning Objective: LO 2

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b) Outsourcing c) Reverse auction d) E-auction Ans: a, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

Ans: True Difficulty: Moderate Learning Objective: LO 2 12. In a reverse auction a customer posts contracts for products available for bids from potential suppliers on the Internet.

Ans: True Difficulty: Moderate

13. E-marketplaces are sites on the Internet where companies can find new business partners.

Ans: True Difficulty: Moderate Learning Objective: LO 2

14. Distribution includes all of the following EXCEPT a) warehousing b) transportation c) storing products and materials d) production Ans: d, LO: 3, Bloom: C, Difficulty: Easy, AACSB: None

15. Logistics includes distribution and transportation activities within a supply chain.

Ans: True Difficulty: Easy Learning Objective: LO 3

16. In today's competitive environment, speed is often the most important factor in logistics.

Ans: True Difficulty: Moderate Learning Objective: LO 3

17. Box retailers are some of the largest facilities in the United States.

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Ans: False Difficulty: Moderate Learning Objective: LO 3

18. Distributors deal only in very large quantities providing infrequent deliveries.

Ans: False Difficulty: Moderate Learning Objective: LO 3

19. _______________ are often used to run the day-to-day operations of a distribution center. a) Warehouse management systems b) Transportation management systems c) Production management systems d) Order management systems Ans: a, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

20. Postponement moves some manufacturing steps into the warehouse or distribution center.

Ans: True Difficulty: Moderate Learning Objective: LO 3

21. A transportation management system controls activities at a facility's dock and schedules appointments.

Ans: False Difficulty: Hard Learning Objective: LO 3

22. Cross-docking allows a distribution center to direct incoming shipments from one shipping dock to another within 48 hours to fill outgoing orders.

Ans: True Difficulty: Moderate Learning Objective: LO 3

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23. Distribution outsourcing allows companies to focus on their core competencies.

Ans: True Difficulty: Easy Learning Objective: LO 3

24. Transportation involves the movement of a product within a warehouse or distribution center.

Ans: False Difficulty: Moderate Learning Objective: LO 3

25. Information technology is an enabler of globalization for middle-tier companies.

Ans: True Difficulty: Moderate Learning Objective: LO 3

26. Globalization decreases the need for a well-planned domestic supply chains.

Ans: False Difficulty: Easy Learning Objective: LO 3

27. Which of the following is best defined as the movement of some manufacturing steps into the distribution center? a) postponement b) cross-docking c) delayed differentiation d) make-to-order Ans: a, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

28. Cross docking is one of the reasons Wal-Mart has such an efficient supply chain.

Ans: True Difficulty: Moderate Learning Objective: LO 3 29. Which of the following transportation modes is the most expensive? a) Package delivery Copyright ©2020 John Wiley & Sons, Inc.

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b) Air c) Intermodal d) Pipeline Ans: b, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

30. The combination of several modes of transportation is called intermodal transportation.

Ans: True Difficulty: Moderate Learning Objective: LO 4

31. _______ is best suited to fast and reliable shipments of small items. a) Air b) Trucking c) Package delivery d) Intermodal Ans: c, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

32. Which of the following is NOT an obstacle to global supply chain management? a) Ever-changing regulations b) Excessive shipping modes c) Trade groups d) Different business practices Ans: b, LO: 5, Bloom: C, Difficulty: Easy, AACSB: None

33. A value-added tax is based on the total cost of producing a product and not the value added by the supply chain partner.

Ans: False Difficulty: Moderate Learning Objective: LO 5

34. International trading is viewed as business as usual for any sized firm.

Ans: False Difficulty: Moderate Learning Objective: LO 5

35. The proliferation of nation trading groups has increased tariffs and decreased duties.

Ans: False Difficulty: Moderate

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Learning Objective: LO 5

36. Most favored-nation (MFN) status is an agreement where members of the WTO extend to other members the most favorable treatment given to any trade partner.

Ans: True Difficulty: Easy Learning Objective: LO 5

37. Landed cost includes the cost of storing and transporting a product, but not the cost of producing it.

Ans: False Difficulty: Moderate Learning Objective: LO 5

38. International trade specialists help firms overcome obstacles associated with importing products.

Ans: False Difficulty: Hard Learning Objective: LO 5

Multiple Choice Questions

39. What a company does best is often referred as the firm’s core a) capabilities b) activities. c) competencies. d) competitiveness.

Ans: C. Difficulty: Easy Learning Objective: LO 1 38. Requiring suppliers to deliver goods when demanded by the customer is called

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a) periodic delivery. b) continuous delivery. c) on-demand delivery. d) All of these answer choices are correct.

Ans: C Difficulty: Moderate Learning Objective: LO 1

39. Companies use ______________ teams to facilitate communication and information sharing and to coordinate processes between suppliers and customers. a) customer-care b) cross-enterprise c) supplier-enhancement d) None of these answer choices is correct.

Ans: C Difficulty: Moderate Learning Objective: LO 1

40. The purchasing of goods and services from suppliers is called a) sourcing. b) outsourcing. c) procurement. d) None of these answer choices is correct.

Ans: C Difficulty: Easy Learning Objective: LO 1

41. The selection of suppliers is called a) sourcing. b) outsourcing. c) procurement. d) None of these answer choices is correct.

Ans: A Difficulty: Easy Learning Objective: LO 1

42. The decision to purchase goods and services that were produced in-house from an outside supplier is called

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a) sourcing. b) outsourcing. c) procurement. d) None of these answer choices is correct.

Ans: B Difficulty: Easy Learning Objective: LO 1

43. The three main categories of goods and services that a company tend to outsource include all the following except a) original equipment manufacturer (OEM). b) maintenance, repair, and operation (MRO). c) corporate services. d) everyday equipment (EDE).

Ans: D Difficulty: Easy Learning Objective: LO 1

44. Supplying orders in a short period of time according to a predetermined schedule is called a) periodic delivery. b) continuous delivery. c) on-demand delivery. d) All of these answer choices are correct.

Ans: B Difficulty: Moderate Learning Objective: LO 1

45. Partnerships between customers and suppliers are beneficial because they a) provide security and stability. b) reduce the need for global suppliers. c) enhance competition in the supply chain. d) require suppliers to build facilities near the customer.

Ans: A Difficulty: Moderate Learning Objective: LO 1 46. Partnerships between customers and suppliers require suppliers to provide

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a) higher quality. b) prompt delivery. c) lower prices. d) All of these answer choices are correct.

Ans: D Difficulty: Moderate Learning Objective: LO 1

47. Companies often outsource to e) focus on core competencies. f) achieve greater flexibility. g) reduce costs. h) All of these answer choices are correct.

Ans: D Difficulty: Moderate Learning Objective: LO 1

48. Benefits of e-procurement include all of the following except a) lower prices. b) faster delivery. c) fewer transactions. d) reduced labor.

Ans: C Difficulty: Moderate Learning Objective: LO 2

49. E-procurement is most often used for i) direct products. j) indirect products. k) finished products. l) international products.

Ans: B Difficulty: Moderate Learning Objective: LO 2

50. The products that go directly into the production process of a product are called a. direct products. b. indirect products.

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c. finished products. d. None of these answer choices is correct.

Ans: A Difficulty: Easy Learning Objective: LO 2

51. Companies that purchase ___________________ over the Internet tend to do it with suppliers with whom they have an established relationship. a. direct products b. indirect products c. finished products d. international products Ans: A Difficulty: Moderate Learning Objective: LO 2

52. ______________ is a formal process of collecting, analyzing, cleansing, and classifying spending data. a. Spend analysis b. Budget analysis c. Spend classifying d. Budget classifying Ans: B Difficulty: Moderate Learning Objective: LO 2

53. Spend analysis is a formal process for __________________________ spending data. a) collecting b) cleansing c) classifying d) All of these answer choices are correct.

Ans: D Difficulty: Moderate Learning Objective: LO 2

54. Spend analysis strives to a) reduce procurement costs. b) improve the efficiency of the procurement process.

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c) reduce procurement costs and improve the efficiency of the procurement process. d) None of these answer choices is correct.

Ans: C Difficulty: Moderate Learning Objective: LO 2

55. _________ are websites where companies and suppliers conduct business-to-business activities. a) E-procurements b) E-marketplaces c) Reverse auctions d) None of these answer choices is correct.

Ans: B Difficulty: Moderate Learning Objective: LO 2

56. With _________, customers posts contracts for items it want to purchase so that suppliers can bid on. a) e-procurement b) e-marketplaces c) reverse auctions d) None of these answer choices is correct.

Ans: C Difficulty: Moderate Learning Objective: LO 2

57. Distribution includes all of the following activities except a. packaging. b. storing. c. shipping. d. sourcing.

Ans: D Difficulty: Moderate Learning Objective: LO 3

58. The primary focus of distribution in terms of what it accomplishes is a. logistics. b. order fulfillment.

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c. customer service. d. maintaining inventories.

Ans: B Difficulty: Moderate Learning Objective: LO 3

59. _________________ is the process of ensuring on-time delivery of customers’ orders. a. Logistics b. Order fulfillment c. Customer service. d. Maintaining inventories Ans: B Difficulty: Moderate Learning Objective: LO 3

60. Distribution and transportation are often referred to as a. logistics. b. order fulfillment. c. customer service. d. maintaining inventories.

Ans: A Difficulty: Moderate Learning Objective: LO 3

61. Distribution centers generally ship products to a. retailers. b. customers. c. suppliers. d. warehouses.

Ans: A Difficulty: Easy Learning Objective: LO 3

62. The driving force behind transportation and distribution in a highly competitive environment is a. quality. b. cost. c. flexibility.

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d. speed.

Ans: D Difficulty: Moderate Learning Objective: LO 3

63. Retailers expect suppliers to make frequent delivery of merchandise that includes a mix of different products in small quantities in what is called a a. mixed pallet. b. partial pallet. c. mixed truckload. d. partial truckload.

Ans: A Difficulty: Moderate Learning Objective: LO 3

64. With ________________, some of the manufacturing activities are moved into the warehouse or distribution center. a. postponement b. vendor managed inventories c. cross docking d. None of these answer choices is correct.

Ans: A Difficulty: Moderate Learning Objective: LO 3

65. Rival companies pooling their distribution resources to reduce cost are engaging in a. collaborative logistics. b. distribution outsourcing. c. cross docking. d. None of these answer choices is correct.

Ans: A Difficulty: Moderate Learning Objective: LO 3

66. The trend in distribution that allows companies to focus on their core competencies is called a. collaborative logistics. b. distribution outsourcing.

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c. cross docking. d. None of these answer choices is correct.

Ans: B Difficulty: Moderate Learning Objective: LO 3

67. Which of the following is not a feature of a warehouse management system? a. warehouse optimization b. order tracking c. vendor management d. custom labeling and packaging Ans: C Difficulty: Moderate Learning Objective: LO 3

68. With vendor-managed inventory, a. distributors generate orders. b. retailers place orders. c. customers place orders. d. manufacturers place orders.

Ans: D Difficulty: Moderate Learning Objective: LO 3

69. Which mode of transportation transports products in liquid form? a) pipeline b) ocean by ship c) pipeline and ocean by ship d) airline Ans: C Difficulty: Moderate Learning Objective: LO 4

70. The most common mode of transporting products is a. railroad. b. trucking. c. package delivery.

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d. water.

Ans: B Difficulty: Easy Learning Objective: LO 4

71. The mode of transportation that utilizes the most containers is a. water. b. intermodal. c. trucking. d. rail.

Ans: B Difficulty: Easy Learning Objective: LO 4

72. Long life, high capital cost, and low operating costs are associated with which mode of transportation? a. pipeline b. trucking c. airline d. None of these answer choices is correct.

Ans: A Difficulty: Moderate Learning Objective: LO 4

73. In a supply chain, __________________ is the movement of a product from one location to another as it makes its way to the final customer. a) distribution b) transportation c) material handling d) None of these answer choices is correct.

Ans: B Difficulty: Moderate Learning Objective: LO 4

74. For some manufacturing companies, transportation can run as much as _____________ of total production cost, and run as high as _____________ of revenue. a) 20 percent, 6 percent

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b) 30 percent, 10 percent c) 40 percent, 14 percent d) None of these answer choices is correct.

Ans: A Difficulty: Moderate Learning Objective: LO 4

75. Which mode of transportation is the most cost effective for transporting raw materials? a) Pipeline b) Railroad c) Trucking d) Intermodal Ans: B Difficulty: Easy Learning Objective: LO 4

76. Internet transportation exchanges bring together shippers who post __________ and carriers that post __________ in order to arrange shipments. a) loads, capacity b) capacity, loads c) loads, loads d) capacity, capacity Ans: A Difficulty: Easy Learning Objective: LO 4

77. Intermodal combines several modes of shipment. The most common intermodal combination globally is a) truck-water-rail-truck b) truck-rail-truck-water c) rail-water-rail-truck d) None of these answer choices is correct.

Ans: A Difficulty: Moderate Learning Objective: LO 4

78. Factors driving globalization of the supply chain include all of the following except

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a. international trade agreements. b. advances in information technology. c. lower-cost transportation. d. government intervention.

Ans: D Difficulty: Moderate Learning Objective: LO 5

79. Landed cost includes a. value added tax. b. duties. c. customs. d. All of these answer choices are correct.

Ans: D Difficulty: Moderate Learning Objective: LO 5

80. Which of the following is not an obstacle to global supply chain management? a. increased documentation b. differences in communication technology c. decreased delivery times d. different business practices Ans: C Difficulty: Easy Learning Objective: LO 5

81. International trade specialists include all of the following except a. export packers. b. finance brokers. c. purchasing agents. d. duty specialists.

Ans: B Difficulty: Hard Learning Objective: LO 5

82. Which of the following countries is not an important U.S. trading partner? a. Canada b. Mexico

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c. China d. Russia Ans: D Difficulty: Easy Learning Objective: LO 5

83. Which of the following factors are responsible for the creation and expansion of a global marketplace? a. The dissolution of Communism in Eastern Europe and the creation of the European Union. b. Emerging markets in China and growing Asian export-driven economies. c. Falling trade barriers and the establishment of new trade agreements. d. All of these answer choices are correct.

Ans: D Difficulty: Moderate Learning Objective: LO 5

84. Nations have joined together to form trading groups with no a. import tax. b. tariffs. c. duties. d. All of these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 5

85. _________________ companies use web-based technologies that directly link to customers’ websites to eliminate obstacles to global trade. a. International trade logistics (ITL) b. Global trade facilitators (GTF) c. International trade solutions (ITS) d. None of these answer choices is correct.

Ans: A Difficulty: Easy Learning Objective: LO 5

86. United States companies usually adhere to which of the following models for doing business in China?

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a. Employ local third party trading agents. b. Develop a wholly owned foreign enterprise. c. Develop their own international procurement offices. d. All of these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 5

87. Moving production related operations from foreign countries back to domestic locations is called a. reverse globalization. b. inverse trade agreements. c. The Nationalization of trade movement. d. None of these answer choices is correct.

Ans: A Difficulty: Easy Learning Objective: LO 5

88. The _________________, also known as the 10+2 initiative, reduces terrorism by utilizing the latest tracking and tracing, and communication and reporting technologies. a. security within initiative b. secure freight initiative c. secure borders initiative d. None of these answer choices is correct.

Ans: B Difficulty: Easy Learning Objective: LO 5

Short Answers

89. Explain the difference between procurement and sourcing? Between sourcing and outsourcing?

Ans: Procurement involves purchasing and sourcing the selection of a supplier.

Outsourcing involves shifting in-house production to an out-of-house supplier.

Difficulty: Moderate Learning Objective: LO 1

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90. List several of the advantages associated with outsourcing.

Ans: Outsourcing allows firms to focus on core competencies, reduce costs, increase flexibility, improve quality, and access to expertise and technology.

Difficulty: Moderate Learning Objective: LO 1

91. What are the advantages associated with e-procurement?

Ans: The advantages include faster transactions, lower transaction costs, lower prices for goods, reduced labor, reduced paper, and faster delivery.

Difficulty: Moderate Learning Objective: LO 2

92. List and explain the major components of a warehouse management system.

Ans: Order management - orders received on-line, added, modified, or canceled in real time Labor management - plans, manages and reports on performance of warehouse personnel Warehouse optimization - optimizes placement of items Transportation management systems - consolidates and builds economical loads and select carriers Order tracking - track inbound and outbound shipments yard management - schedules dock appointments Custom labeling and packaging - special packaging; bar coding Difficulty: Moderate Learning Objective: LO 3

93. List and discuss the seven different modes of transportation.

Ans: Rail - low value, high-density, bulk products, raw materials and intermodal containers: not as economical for small loads, slower less flexible than trucking Trucking - main mode of transport in the US, small loads based on point to point service, flexible; more reliable less damage than rails, more expensive than rails for long distance Air - most expensive and fastest mode, lightweight and small packages, high value, perishable goods, less theft Package delivery - small packages, fast and reliable, increased as result of e-business Water - low cost shipping mode, primary means of international shipping, slowest Intermodal - combines truck, water and rail; uses containers Pipeline - transports products in liquid form; high capital cost and economical use, long life and low operating cost

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Difficulty: Moderate Learning Objective: LO 4

94. List and discuss some of the forces driving globalization.

Ans: Improvements in transportation information technology Internet World Trade Organization Regional Trade Agreements (NAFTA, EU) Dissolution of communism Spread of free-market systems Difficulty: Moderate Learning Objective: LO 5

95. Identify some of the obstacles to global supply chain management.

Ans: increased documentation duties, tariffs, high landed costs, limited shipping modes differences in communication technology, different business practices and language barriers, numerous players, security issues since 9/11 Difficulty: Moderate Learning Objective: LO 5

96. Explain the concept of landed cost and discuss how it is used to make global sourcing decisions.

Ans: landed cost - the total cost of producing, storing, shipping, transporting, duties and value added taxes, customs, etc. knowing landed cost allows a firm to make more informed decisions and help avoid sticker shock, compare to domestic source Difficulty: Moderate Learning Objective: LO 5

97. Which of the following choices is not true about reverse auctions? a) They are also known as e-auctions. b) The roles of buyer and seller are reversed. c) They are open for a specified time frame, and vendors can bid once in that time frame. d) They are sometimes used by companies only to determine the lowest price, without any intention of awarding a contract.

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Ans: C, Difficulty: Moderate, Learning Objective: LO 2, Bloom: K, AACSB: Reflective thinking

98. A warehouse management system (WMS) __________. a) facilitates cross-docking b) places each item in storage in a specific location c) locates an item out of storage, packs the item, and ships it d) All of the above choices are correct.

Ans: D, Difficulty: Moderate, Learning Objective: LO 3, Bloom: K, AACSB: Reflective thinking

99. Which of the following choices is not true about cross-docking? a) It is facilitated by a warehouse management system. b) It is a system originated in Japan. c) It allows a distribution center to eliminate costly putaway and picking operations. d) It entails goods crossing from one dock to another usually in 48 hours or less.

Ans: C, Difficulty: Moderate, Learning Objective: LO 3, Bloom: K, AACSB: Reflective thinking

100. Which of the following choices is not true about vendor-managed inventory? a) It allows rival companies to collaborate in distribution. b) It is a form of role reversal, in which the responsibility for planning shifts to the manufacturer. c) It is usually an integral part of supply chain collaboration. d) It makes forecasting by manufacturers easier.

Ans: A, Difficulty: Moderate, Learning Objective: LO 3, Bloom: K, AACSB: Reflective thinking

101. Collaborative logistics __________. a) shifts the responsibility of planning to the manufacturer b) allows rival companies to collaborate in distribution c) makes forecasting by manufacturers easier d) is usually an integral part of supply chain collaboration Ans: B, Difficulty: Moderate, Learning Objective: LO 3, Bloom: K, AACSB: Reflective thinking

102. Which of the following choices is not true about postponement?

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a) It allows lead times to be reduced so that demand can be met more quickly. b) It usually means that a distributor must stock a large number of inventory items at the warehouse. c) It flows the orders through an order management system. d) It can create higher inventory-carrying costs.

Ans: C, Difficulty: Moderate, Learning Objective: LO 3, Bloom: K, AACSB: Reflective thinking

103. Which of the following choices is not true about spend analysis? a) It attempts to answer the questions: How much is being spent? With which suppliers?

Is the promised value being realized? b) It allows companies to focus on their core competencies. c) It is a formal process of collecting, cleansing, classifying, and analyzing spending data. d) Its goal is to improve the efficiency of the procurement process.

Ans: B, Difficulty: Moderate, Learning Objective: LO 3, Bloom: K, AACSB: Reflective thinking

104. Which of the following choices is not true about continuous replenishment? a) Goods and services are provided as they are needed. b) For the supplier, it means more large-batch orders. c) It allows companies to minimize its inventory levels. d) It improves the customer’s flexibility to deal with sudden market changes.

Ans: B, Difficulty: Moderate, Learning Objective: LO 3, Bloom: K, AACSB: Reflective thinking

105. Which of the following choices is not true about e-marketplaces? a) They are also known as e-hubs. b) They are websites in which companies and suppliers conduct business-to-business activities. c) They provide a neutral ground on the Internet where companies can streamline supply chains and find new business partners. d) Currently they don’t offer request-for-quote services because of the lack of a common platform.

Ans: D, Difficulty: Moderate, Learning Objective: LO 5, Bloom: K, AACSB: Reflective thinking

106. Which of the following choices is true about distribution centers and warehousing? a) Distribution centers are typically separated from warehousing and storage.

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b) Because of the Internet, companies have added more frequent orders in smaller amounts to the way they distribute goods. c) Retailers have pushed inventory and storage and final configuration downstream the supply chain. d) The annual cost of warehousing in the US exceeds $847 billion.

Ans: B, Difficulty: Moderate, Learning Objective: LO 5, Bloom: K, AACSB: Reflective thinking

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Chapter 12: Forecasting True/False

1. Forecasts based on mathematical formulas are referred to as a. opinion forecasts. b. past experience forecasts. c. qualitative forecasts. d. quantitative forecasts.

Ans: d, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

2. Because of globalization of markets, managers are finding it increasingly more difficult to create accurate demand forecasts.

Ans: True Difficulty: Moderate Learning Objective: LO 1

3. Forecasting customer demand is often a key to providing good quality service.

Ans: True Difficulty: Easy Learning Objective: LO 1

4. One way to deal with the bullwhip effect is to develop and share the forecasts with other supply chain members.

Ans: True Difficulty: Easy Learning Objective: LO 1

5. Qualitative forecasts use mathematical techniques and statistical formulas.

Ans: False Difficulty: Moderate Learning Objective: LO 1

6. In today’s competitive environment, effective supply chain management requires absolute demand forecasts.

Ans: False Difficulty: Moderate Learning Objective: LO 1

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7. Sharing demand forecasts with supply chain members has resulted in an increased bullwhip effect.

Ans: False Difficulty: Moderate Learning Objective: LO 1

8. Because of advances in technology, many service industries no longer require accurate forecasts to provide high quality service.

Ans: False Difficulty: Moderate Learning Objective: LO 1 9. The type of forecasting method used depends entirely on whether the supply chain is continuous replenishment or not.

Ans: False Difficulty: Moderate Learning Objective: LO 1

10. Continuous replenishment systems rely heavily on extremely accurate long-term forecasts.

Ans: False Difficulty: Easy Learning Objective: LO 1

11. The type of forecasting method selected depends on a. time frame. b. demand behavior. c. causes of behavior. d. All of these answer choices are correct.

Ans: c, LO: 2, Bloom: C, Difficulty: Easy, AACSB: None

12. A gradual, long-term up or down movement of demand over time is referred to as a a. trend. b. seasonal pattern. c. cycle. d. correlation.

Ans: a, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

13. A seasonal pattern is an oscillating movement in demand that occurs periodically over the short-run and is repetitive.

Ans: True Difficulty: Moderate

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Learning Objective: LO 2

14. Short-midrange forecasts tend to use quantitative models that forecast demand based on historical demand.

Ans: True Difficulty: Moderate Learning Objective: LO 2

15. Long-range quantitative forecasts are used to determine future demand for all of the following EXCEPT a. new products. b. markets. c. customers. d. facilities.

Ans: c, LO: 2, Bloom: C, Difficulty: Easy, AACSB: None

16. The trend toward continuous replenishment in supply chain design has shifted the need for accurate forecasts from a. long-term to short-term. b. short-term to long-term. c. short-term to mid-term. d. long-term to mid-term.

Ans: a, LO: 2, Bloom: C, Difficulty: Easy, AACSB: None

17. Because of heightened competition resulting from globalization, most companies find little strategic value in long-range forecasts.

Ans: True Difficulty: Moderate Learning Objective: LO 2

18. Movements in demand that do not follow a given pattern are referred to as a. assignable variations. b. random variations. c. cycles. d. trends.

Ans: b, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

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19. Many companies are shifting from long-term to short-term forecasts for strategic planning.

Ans: False Difficulty: Moderate Learning Objective: LO 2

20. The demand behavior for skis is considered cyclical.

Ans: False Difficulty: Moderate Learning Objective: LO 2

21. The long-term strategic planning process is dependent upon qualitative forecasting methods.

Ans: True Difficulty: Moderate Learning Objective: LO 2

22. The Delphi method generates forecasts based on informed judgments and opinions from knowledgeable individuals.

Ans: True Difficulty: Moderate Learning Objective: LO 2

23. The most common type of forecasting method for long-term strategic planning is based on quantitative modeling Ans: False Difficulty: Moderate Learning Objective: LO 2

24. Time series methods use historical data to predict future demand.

Ans: True Difficulty: Moderate Learning Objective: LO 3

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25. Which of the following is best defined as soliciting forecasts about technological advances from experts? a. Delphi method b. data mining c. regression forecasting d. exponential smoothing Ans: a, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

26. ___________ is an averaging method for forecasting that reacts more strongly to recent changes in demand. a. Moving average b. Exponential smoothing c. Linear trend line d. Linear regression Ans: b, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

27. Time series methods assume that demand patterns in the past are a good predictor of demand in the future.

Ans: True Difficulty: Moderate Learning Objective: LO 3

28. The moving average method is used for creating forecasts when there is no variation in demand.

Ans: False Difficulty: Moderate Learning Objective: LO 3

29. Because of ease of use and simplicity, exponential smoothing is preferred over smoothing average.

Ans: False Difficulty: Moderate Learning Objective: LO 3

30. The average, absolute difference between the forecast and demand is a popular measure of forecast error.

Ans: True Difficulty: Moderate

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Learning Objective: LO 4

31. The larger the mean absolute deviation (MAD) the more accurate the forecast.

Ans: False Difficulty: Moderate Learning Objective: LO 4

32. __________ is measured by the per-period average of the sum of forecast errors. a. Cumulative error b. Mean absolute deviation c. Tracking signal d. Mean absolute percent deviation Ans: a, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

33. Because of the development of advanced forecasting models, managers no longer track forecast error.

Ans: False Difficulty: Moderate Learning Objective: LO 4

34. ____________ is used for forecasting when there is a relationship between the dependent variable (demand) and one or more independent (explanatory) variables. a. Moving average b. Exponential smoothing c. Regression analysis d. Data mining Ans: c, LO: 6, Bloom: K, Difficulty: Easy, AACSB: None

35. Correlation in linear regression is a measure of the strength of the relationship between the dependent variable, demand, and an independent (explanatory) variable.

Ans: True Difficulty: Moderate Learning Objective: LO 6

36. A linear regression model that relates demand to time is known as a linear trend line.

Ans: True Difficulty: Moderate

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Learning Objective: LO 6

37. Linear regression relates two variables using a linear model.

Ans: True Difficulty: Moderate Learning Objective: LO 6

38. A correlation coefficient is a measure of the strength of the linear relationship between an independent and a dependent variable.

Ans: True Difficulty: Moderate Learning Objective: LO 6

39. Multiple regression analysis can be used to relate demand to two or more dependent variables.

Ans: False Difficulty: Moderate

Learning Objective: LO 6

Multiple Choice

41.

Forecast methods based on judgment, opinion, past experiences, or best guesses are known as ___________ methods. a. quantitative b. qualitative c. time series d. regression

Ans: B Difficulty: Easy Learning Objective: LO 1

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42. A forecast a. predicts what will occur in the future. b. results from an uncertain process. c. support strategic planning. d. All of these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 1

43. Forecasts of product demand determine how much a. inventory is needed. b. product to make. c. material to purchase from suppliers. d. All of these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 1

44.

The ______________ effect is caused in part by distortion in product demand information caused by inaccurate forecasts. a. bullwhip b. regression c. error d. None of these answer choices is correct.

Ans: A Difficulty: Easy Learning Objective: LO 1

45.

Continuous replenishment relies heavily on ____________term forecast. a. shortb. mediumc. longd. All of these answer choices are correct.

Ans: B Difficulty: Easy Learning Objective: LO 1

46.

In ___________________ replenishment, the supplier and customer care continuously update data. a. demand b. ongoing

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c. continuous d. forecasted Ans: B Difficulty: Easy Learning Objective: LO 1

47. ________________ demand is a key to providing good-quality service. a. Predicted b. Forecasted c. Anticipated d. Unknown Ans: B Difficulty: Easy Learning Objective: LO 1

48. A long-range forecast would normally not be used to a. design the supply chain. b. implement strategic programs. c. determine production schedules. d. plan new products for changing markets.

Ans: C Difficulty: Moderate Learning Objective: LO 2 49. A forecast where the current period’s demand is used as the next period’s forecast is known as a a. moving average forecast. b. naïve forecast. c. weighted moving average forecast. d. Delphi method.

Ans: B Difficulty: Moderate Learning Objective: LO 2

50. Which of the following is not a type of predictable demand behavior? a. trend b. random variation c. cycle d. seasonal pattern Ans: B

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Difficulty: Moderate Learning Objective: LO 2

51. A ___________ is an up-and-down movement in demand that repeats itself over a period of more than a year. a. trend b. seasonal pattern c. random variation d. cycle Ans: D Difficulty: Easy Learning Objective: LO 2

52. Selecting the type of forecasting method to use depends on a. the time frame of the forecast. b. the behavior of demand and demand patterns. c. the causes of demand behavior. d. All of these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 2

53. A qualitative procedure used to develop a consensus forecast is known as a. exponential smoothing. b. regression methods. c. the Delphi technique. d. naïve forecasting.

Ans: C Difficulty: Moderate Learning Objective: LO 2

54. The sum of the weights in a weighted moving average forecast must a. equal the number of periods being averaged. b. equal 1.00. c. be less than 1.00. d. be greater than 1.00.

Ans: B Difficulty: Easy

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Learning Objective: LO 3

a. b. c. d.

55. An exponential smoothing forecasting technique requires all of the following except the forecast for the current period. the actual demand for the current period. a smoothing constant. large amounts of historical demand data.

Ans: D Difficulty: Moderate Learning Objective: LO 3

56. Given the demand and forecast values below, the naïve forecast for September is Period Demand Forecast April 100 97 May 105 103 June 97 98 July 102 105 August 99 102 September a. 100.6. b. 99.0. c. 102.0. d. cannot be determined.

Ans: B Difficulty: Moderate Solution: Naïve forecast=99.0 Learning Objective: LO 3 57. The smoothing constant, α, in the exponential smoothing forecast a. must always be a value greater than 1.0. b. must always be a value less than 0.10. c. must be a value between 0.0 and 1.0. d. should be equal to the time frame for the forecast.

Ans: C Difficulty: Moderate Learning Objective: LO 3

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58. The closer the smoothing constant, α, is to 1.0 the a. greater the reaction to the most recent demand. b. greater the dampening, or smoothing, effect. c. more accurate the forecast. d. less accurate the forecast.

Ans: A Difficulty: Moderate Learning Objective: LO 3

59. The exponential smoothing model produces a naïve forecast when the smoothing constant, α, is equal to a. 0.00. b. 1.00. c. 0.50. d. 2.00 Ans: B Difficulty: Moderate Learning Objective: LO 3

60. The _______ method uses demand in the first period to forecast demand in the next period. a) naïve b) moving average c) exponential smoothing d) linear trend Ans: A Difficulty: Moderate Learning Objective: LO 3

61. The _________________ forecast method consists of an exponential smoothing forecast with a trend adjustment factor added to it. a) exponentially smoothed b) adjusted exponential smoothing c) time series d) moving average Ans: B Difficulty: Moderate Learning Objective: LO 3

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62. Given the following demand data for the past five months, the three-period moving average forecast for June is Period January February March April May

Demand 120 90 100 75 110

a. 103.33. b. 99.00. c. 95.00. d. 92.50 Ans: C Difficulty: Moderate Solution: Moving Average, MA3=95.00 Learning Objective: LO 3

63. Given the following demand data for the past five months, the four-period moving average forecast for June is Period January February March April May

Demand 120 90 100 75 110

a. 96.25. b. 99.00. c. 110.00. d. 93.75.

Ans: D Difficulty: Moderate Solution: Moving Average, MA4=93.75 Learning Objective: LO 3

64. A company wants to produce a weighted moving average forecast for April with the weights 0.40, 0.35, and 0.25 assigned to March, February, and January respectively.

If the company had demands of 5,000 in January, 4,750 in February, and 5,200 in March, then April’s forecast is a. 4983.33. b. 4992.50.

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c. 4962.50. d. 5000.00.

Ans: B Difficulty: Moderate Solution: Weighted Moving Average, WMA3=4992.50 Learning Objective: LO 3

65. The weighted moving average forecast for the fifth period, with weights of 0.15 for period 1, 0.20 for period 2, 0.25 for period 3, and 0.40 for period 4, using the demand data shown below is Period Demand 1 3,500 2 3,800 3 3,500 4 4,000 a. 3,760. b. 3,700. c. 3,650. d. 3,325.

Ans: A Difficulty: Moderate Solution: Weighted Moving Average, WMA3=3,760 Learning Objective: LO 3

66.

For the demand values and the January forecast shown in the table below the exponential smoothing forecast for March using α = 0.30 is Period January February March April

Demand 500 476 503

Forecast 480

a. 489. b. 486. c. 483. d. 480.

Ans: A Difficulty: Hard Solution: Exponential Smoothing, F3=489 Learning Objective: LO 3

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For the demand values and the January forecast shown in the table below the exponential smoothing forecast for March using α = 0.40 is Period January February March

Demand 1,250 1,225

Forecast 1,200

a. 1,200. b. 1,220. c. 1,222. d. 1,225.

Ans: C Difficulty: Hard Solution: Exponential Smoothing, F3=1,222.

Learning Objective: LO 3

68.

If the forecast for July was 3,300 and the actual demand for July was 3,250, then the exponential smoothing forecast for August using α = 0.20 is a. 3,300. b. 3,290. c. 3,275. d. 3,250.

Ans: B Difficulty: Moderate Solution: Exponential Smoothing, F2=3,290.

Learning Objective: LO 3

69.

Given the demand and forecast values shown in the following table, Period June July August September October

Demand 495 515 519 496 557

Forecast 484 506 528 506 550

calculate the three-period moving average forecast for November. a. 516. b. 528. c. 524. d. 515.

Ans: C

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Difficulty: Moderate Solution: Moving Average, MA3=524 Learning Objective: LO 3

70.

Given the demand and forecast values shown in the table below, Period June July August September October

Demand 495 515 519 496 557

Forecast 484 506 528 506 550

the exponential smoothing forecast for November using α = 0.35 is a. 552.45. b. 553.50. c. 554.55. d. 557.50.

Ans: A Difficulty: Moderate Solution: Exponential Smoothing, F6=552.45 Learning Objective: LO 3

71. Given the demand and forecast values shown in the table below, Period June July August September October

Demand 495 515 519 496 557

Forecast 484 506 528 506 550

the forecast error for September is a. 10.00. b. −10.00. c. 1.00. d. 39.00.

Ans: B Difficulty: Moderate Solution: E = −10.00 Learning Objective: LO 4

72. If forecast errors are normally distributed then Copyright ©2020 John Wiley & Sons, Inc.

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a. 1 MAD = 1σ b. 1 MAD ≈ 0.8 σ c. 0.8 MAD ≈ 1σ d. 1 MAD ≈ 1.96 σ Ans: B Difficulty: Moderate Learning Objective: LO 4

73.

A forecasting model has produced the following forecasts, Period January February March April May

Demand 120 110 115 125 130

Forecast 110 115 120 115 125

Error

the forecast error for February is a. 10. b. −10. c. −15. d. −5 Ans: D Difficulty: Moderate Solution: E = −5 Learning Objective: LO 4

74.

Given the demand and forecast values shown in the table below, Period June July August September October

Demand 495 515 519 496 557

Forecast 484 506 528 506 550

the mean absolute deviation (MAD) through the end of October is a. 9.20 b. -9.20 c. 1.00 d. 7.00 Ans: A Copyright ©2020 John Wiley & Sons, Inc.

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Difficulty: Hard Solution: MAD=9.20 Learning Objective: LO 4

75. The per-period average of cumulative error is called a. cumulative forecast variation. b. absolute error. c. average error. d. noise.

Ans: C Difficulty: Easy Learning Objective: LO 4

76. A forecasting model has produced the following forecasts: Period January February March April May

Demand 120 110 115 125 130

Forecast 110 115 120 115 125

Error

The mean absolute deviation (MAD) for the end of May is a. 7.0. b. 7.5. c. 10.0. d. 3.0 Ans: A Difficulty: Hard Solution: MAD=7.0 Learning Objective: LO 4 77. A forecasting model has produced the following forecasts: Period January February March April May

Demand 120 110 115 125 130

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Forecast 110 115 120 115 125

Error

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The mean absolute percent deviation (MAPD) for the end of May is a. 0.0250. b. 0.0583. c. 0.5830. d. 0.6670.

Ans: B Difficulty: Hard Solution: MAPD=0.0583 Learning Objective: LO 4

78. A forecasting model has produced the following forecasts: Period January February March April May

Demand 120 110 115 125 130

Forecast 110 115 120 115 125

Error

At the end of May the average error would be a. 7. b. 5. c. 3. d. 1.

Ans: C Difficulty: Moderate Solution: Ebar=3 Learning Objective: LO 4

79. A forecasting model has produced the following forecasts: Period January February March April May

Demand 120 110 115 125 130

Forecast 110 115 120 115 125

Error

At the end of May the tracking signal would be a. 0.000. b. 0.667. c. 1.333.

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d. 2.143.

Ans: D Difficulty: Hard Solution: Tracking Signal=2.143 Learning Objective: LO 4

80. The mean absolute percentage deviation (MAPD) measures the absolute error as a percentage of a. all errors. b. per-period demand. c. total demand. d. the average error.

Ans: C Difficulty: Moderate Learning Objective: LO 4

81.

A large positive cumulative error indicates that the forecast is probably a. higher than the actual demand. b. lower than the actual demand. c. unbiased. d. biased.

Ans: B Difficulty: Moderate Learning Objective: LO 4

82.

Which of the following statements concerning average error is true? a. A positive value indicates high bias, and a negative value indicates low bias. b. A positive value indicates zero bias, and a negative value indicates low bias. c. A negative value indicates zero bias, and a negative value indicates high bias. d. A positive value indicates low bias, and a negative value indicates high bias.

Ans: D Difficulty: Moderate Learning Objective: LO 4

83.

Which of the following is a reason why a forecast can go out of control? a. a change in trend b. an irregular variation such as unseasonable weather c. a promotional campaign

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d. All of these answer choices are correct.

Ans: D Difficulty: Moderate Learning Objective: LO 4

84.

Which of the following can be used to monitor a forecast to see if it is biased high or low? a. a tracking signal b. the mean absolute deviation (MAD) c. the mean absolute percentage deviation (MAPD) d. a linear trend line model Ans: A Difficulty: Moderate Learning Objective: LO 4

85.

A tracking signal is computed by a. multiplying the cumulative error by MAD. b. multiplying the absolute error by MAD. c. dividing MAD by the cumulative absolute error. d. dividing the cumulative error by MAD. Ans: D Difficulty: Moderate Learning Objective: LO 4

86. Regression forecasting methods relate _________to other factors that cause demand behavior. a) supply b) demand c) time d) money Ans: B Difficulty: Moderate Learning Objective: LO 6

87. Correlation is a measure of the strength of the a. nonlinear relationship between two dependent variables. b. nonlinear relationship between a dependent and independent variable. c. linear relationship between two dependent variables.

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d. linear relationship between a dependent and independent variable.

Ans: D Difficulty: Moderate Learning Objective: LO 6

88.

A mathematical technique for forecasting that relates the dependent variable to an independent variable is a. correlation analysis. b. exponential smoothing. c. linear regression. d. weighted moving average.

Ans: C Difficulty: Easy Learning Objective: LO 6

(Use the following information for the next five problems.)

The owner of Koffi, the sole coffee house located in a resort area, wants to develop a forecast based on the relationship between tourism and coffee drinks sold. He has generated the following data over the past 12 months: Tourists Month (thousands) January 22 February 25 March 34 April 30 May 15 June 10 July 8 August 6 September 10 October 15 November 18 December 20

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Coffee Drinks (per day) 132 175 210 150 60 50 45 40 35 75 110 140

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The data from using Data Analysis on Excel is as follows: SUMMARY OUTPUT Regression Statistics Multiple R 0.954141355 R Square 0.910385725 Adjusted R Square 0.901424297 Standard Error 18.57063782 Observations 12 ANOVA df Regression Residual Total

Intercept Tourists (thousands)

1 10 11

SS 35034.98077 3448.685892 38483.66667

MS 35034.98 344.8686

F 101.5894

Coefficients -11.5743276 6.389163997

Standard Error 12.46354188 0.633898777

t Stat -0.92865 10.07915

P-value 0.37494 1.48E-06

89. What is the approximate intercept, a? a. −11.6 b. 11.6 c. 6.4 d. −6.4 Ans: A Difficulty: Moderate Learning Objective: LO 6

90. What is the approximate slope, b? a. −11.6 b. 11.6 c. 6.4 d. −6.4 Ans: C Difficulty: Moderate Learning Objective: LO 6

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91. What is the forecasted number of coffee drinks sold if the number of tourists is 25 (thousand)? a. 128 b. 138 c. 148 d. 158 Ans. C Difficulty: Moderate Learning Objective: LO 6

92. What is the correlation? a. 0.95 b. 0.91 c. 0.90 d. 19 Ans. A Difficulty: Moderate Learning Objective: LO 6

93. What is the coefficient of determination? a. 0.95 b. 0.91 c. 0.90 d. 18 Ans. C Difficulty: Moderate Learning Objective: LO 6

94. Data mining uses and analyzes data that is stored in a. databases. b. data warehouses. c. data marts. d. All of these answer choices are correct.

Ans. D Difficulty: Moderate Learning Objective: LO 6

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95. _______________ can be subdivided into ________________ that store subsets of data. a. Databases, data warehouses b. Data warehouses, data marts c. Databases, data marts d. Data warehouses, databases Ans. B Difficulty: Moderate Learning Objective: LO 6

96. Association rule learning is a data-mining technique that a. discovers trends, predicts future events, and assesses possible course of action. b. searches for relationships between variables. c. identifies groups of data that fall naturally together. d. None of these answer choices is correct.

Ans. B Difficulty: Moderate Learning Objective: LO 6

97. Cluster analysis is a tool that a. discovers trends, predicts future events, and assesses possible course of action. b. searches for exact relationships between variables. c. identifies groups of data that fall naturally together. d. None of these answer choices is correct.

Ans. C Difficulty: Moderate Learning Objective: LO 6

98. Data mining a. discovers trends, predicts future events, and assesses possible course of action. b. searches for exact relationships between variables. c. identifies groups of data that fall naturally together. d. None of these answer choices is correct.

Ans. A Difficulty: Moderate Learning Objective: LO 6

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Short Answer

99. Discuss the importance of accurate forecasts in supply chain management.

Ans: A company’s supply chain encompasses all of the facilities, functions, and activities involved in producing a product or service from suppliers to customers. Supply chain functions such as purchasing, inventory, production, scheduling, and transportation are all affected in the short run by product demand and in the long run by new products and processes. Forecasts of product demand determine how much inventory is needed, how much product to make, and how much material to purchase from suppliers to meet forecasted customer needs. This in turn determines the kind of transportation that will be needed and where plants, warehouses and distribution centers will be located. Without accurate forecasts, large costs of costly inventory must be kept at each stage of the supply chain to compensate for the uncertainties of customer demand. If there are insufficient inventories, customer service suffers because of late deliveries and stock outs. This can be quite damaging to customer service and the need to have on-time delivery to compete in today’s competitive environment.

Difficulty: Hard Learning Objective: LO 1

100. Compare and contrast short-mid-range forecasts and long-range forecasts.

Ans: Forecasts are either short-to mid-range, or long-range. Short-range (to mid-range) forecasts are typically for daily, weekly, or monthly sales demand for up to approximately two years into the future, depending on the company and the type of industry. They are primarily used to determine production and delivery schedules and to establish inventory levels. A long-range forecast is usually for a period longer than two years into the future. A long-range forecast is normally used for strategic planning—to establish long-term goals, plan new products for changing markets, enter new markets, develop new facilities, develop technology, design the supply chain and implement strategic programs, such as TQM. It is important to remember that these classifications are generalizations and the line between short-and long-range forecasts is not always so distinct.

Difficulty: Moderate Learning Objective: LO 2

101. Explain the difference between qualitative and quantitative forecasting methods.

Ans: Qualitative forecasting methods are based on judgment, opinion, past experience, or best guesses. They are most useful for predicting the future when there is no past historical data to model or when the need exists to predict for the very long-term.

Quantitative forecasting methods are based on mathematical formulas. Examples of quantitative forecasting methods are time series and regression analysis.

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Difficulty: Moderate Learning Objective: LO 2

102. Explain how and why time series and regression forecasting methods differ.

Ans: Time series methods are statistical techniques that use historical data to predict future demand. Time series techniques assume that what has occurred in the past will continue to occur in the future. Regression (or causal) forecasting methods attempt to develop a mathematical relationship (in the form of a regression model) between demand and factors that cause demand to behave the way it does.

Difficulty: Moderate

Learning Objective: LO 3

103. The following table provides information about actual and forecasted demand for January through March:

Period Jan Feb Mar Total

Demand * * * 86500

Forecast * * * 82750

The MAD for the three-month period is 2250. Then the tracking signal is __________. a) −1.67 b) 0.6 c) 1.67 d) There is not enough information to determine the tracking signal.

Ans: C, Difficulty: Moderate, Learning Objective: LO 4, Bloom: K, AACSB: Reflective thinking

104. The following table provides information about two variables: the independent variable X and the dependent variable Y. x p 0

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y 0 q

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Assume that p × q ≠ 0. The linear regression equation for this data set is __________. a) y = q – (1/p) x b) y = q(1 – 1/p x) c) y = p – (1/q) x d) There is not enough information to determine the linear regression equation.

Ans: B, Difficulty: Hard, Learning Objective: LO 6, Bloom: K, AACSB: Analytic

105. The following table provides information about two variables: the independent variable X and the dependent variable Y. x p 0

y 0 q

Assume that p × q ≠ 0. The coefficient of determination for the linear regression is __________. a) 0 b) 1 c) p/q d) There is not enough information to determine the linear regression equation.

Ans: B, Difficulty: Hard, Learning Objective: LO6, Bloom: K, AACSB: Analytic

106. The following table provides information about two variables: the independent variable X and the dependent variable Y. x p 0

y 0 q

Assume that p × q ≠ 0. The correlation coefficient for the linear regression is __________. a) 0 b) ±1, but there is not enough information to determine the sign c) −1 d) –(p × q)/|p × q| Ans: D, Difficulty: Hard, Learning Objective: LO6, Bloom: K, AACSB: Analytic

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107. The following table provides information about two variables: the independent variable X and the dependent variable Y. x p 0

y 0 q

Assume that p × q ≠ 0. The linear regression equation predicts that when x = p/2, y = __________. a) 2q b) q/2 c) ±2q, but there is not enough information to determine the sign d) ±q/2, but there is not enough information to determine the sign Ans: B, Difficulty: Moderate, Learning Objective: LO6, Bloom: K, AACSB: Reflective thinking

108. The following table provides information about two variables: the independent variable X and the dependent variable Y. x p 0

y 0 q

Assume that p × q ≠ 0. The linear regression equation predicts that when x = p/3, y = __________. a) 2q/3 b) q/3 c) ±2q/3, but there is not enough information to determine the sign d) ±q/3, but there is not enough information to determine the sign Ans: A, Difficulty: Moderate, Learning Objective: LO6, Bloom: K, AACSB: Reflective thinking

109. The following table provides information about two variables: the independent variable X and the dependent variable Y. x p 0

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y 0 q

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Assume that p × q ≠ 0. The sum of errors squared (Σε² = Σ(yactual − ypredicted)²) for the linear regression equation is __________. a) (p + q)/2 b) 1 c) 1/2 d) 0 Ans: D, Difficulty: Moderate, Learning Objective: LO6, Bloom: K, AACSB: Reflective thinking

110. You want to develop a forecast of the number of drinks sold each day at your specialty drinks shop as a function of the maximum temperature of the day. The following table provides information about the max temperature and the number of drinks sold for the last ten days: Max temperature 70 65 72 75 80 82 75 77 68 75

Number of drinks sold 258 220 260 262 295 300 250 265 240 270

Use MS Excel, a statistical program, or simply the web to do a linear regression. The approximate slope of the linear regression equation is __________. a) 3.27 b) 4.17 c) 4.38 d) 4.45 Ans: B, Difficulty: Moderate, Learning Objective: LO6, Bloom: K, AACSB: Reflective thinking

111. You want to develop a forecast of the number of drinks sold each day at your specialty drinks shop as a function of the maximum temperature of the day. The following table provides information about the max temperature and the number of drinks sold for the last ten days: Copyright ©2020 John Wiley & Sons, Inc.

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Max temperature 70 65 72 75 80 82 75 77 68 75

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Number of drinks sold 258 220 260 262 295 300 250 265 240 270

Use MS Excel, a statistical program, or simply the web to do a linear regression. The coefficient of determination is __________. a) 0.96 b) 0.93 c) 0.86 d) 0.75 Ans: C, Difficulty: Moderate, Learning Objective: LO6, Bloom: K, AACSB: Reflective thinking

112. You want to develop a forecast of the number of drinks sold each day at your specialty drinks shop as a function of the maximum temperature of the day. The following table provides information about the max temperature and the number of drinks sold for the last ten days: Max temperature 70 65 72 75 80 82 75 77 68 75

Number of drinks sold 258 220 260 262 295 300 250 265 240 270

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Use MS Excel, a statistical program, or simply the web to do a linear regression. The forecasted number of drinks sold if the max temperature reached 85 degrees is __________. a) 311 b) 310 c) 309 d) 308 Ans: D, Difficulty: Moderate, Learning Objective: LO6, Bloom: K, AACSB: Reflective thinking

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Chapter 13: Inventory Management

True/False

1. Seasonal inventory allows a firm to maintain a smooth production flow throughout the year.

Ans: True Difficulty: Easy Learning Objective: LO 1

2. _________ involves buying larger amounts of inventory in anticipation of future price increases. a. Hedging b. Continuous c. Periodic d. Work in process Ans: a, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

3. ________ inventories provide independence between different stages of the production process. a. Seasonal b. Continuous c. Buffer d. Work in process Ans: c, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

Ans: True Difficulty: Moderate Learning Objective: LO 1 4. The objective of inventory management is to keep enough inventory on-hand to satisfy customer demand without regard to cost effectiveness.

Ans: False Difficulty: Easy Learning Objective: LO 1

5. The conventional approach to inventory management is to maintain a level of inventory that reflects a compromise between inventory cost and customer service.

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Ans: True Difficulty: Moderate Learning Objective: LO 1

6.

As the level of inventory increases to provide better customer service, quality-related customer service costs decrease.

Ans: True Difficulty: Moderate Learning Objective: LO 1

7. The ability to effectively satisfy internal or external demand in a timely, efficient manner is referred to as the level of a. customer demand. b. customer service. c. inventory. d. dependent demand.

Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

8. Dependent demand is determined by external market conditions.

Ans: False Difficulty: Moderate Learning Objective: LO 2

9. Inventory can take the form of a. raw materials. b. items being transported. c. tools and equipment. d. All of the answer choices are correct.

Ans: d, LO: 2, Bloom: C, Difficulty: Easy, AACSB: None

10. Finished product is an example of a dependent demand item.

Ans: False Difficulty: Easy Learning Objective: LO 2

11. Carry costs and ordering costs are inversely related.

Ans: True

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Difficulty: Moderate Learning Objective: LO 2

12. Dependent demand items are typically products for use by the final customer.

Ans: False Difficulty: Moderate Learning Objective: LO 2

13. Dependent demand items consist of component parts or materials used in the production process to produce a final product.

Ans: True Difficulty: Moderate Learning Objective: LO 2

14. Which of the following is a cost associated with inventory? a. holding costs b. ordering costs c. shortage costs d. All of the answer choices are correct.

Ans: d, LO: 2, Bloom: C, Difficulty: Easy, AACSB: None

15. Product deterioration, spoilage, breakage, and obsolescence are examples of shortage costs.

Ans: False Difficulty: Moderate Learning Objective: LO 2

16. Shortage costs are easier to determine than carrying costs or ordering costs.

Ans: False Difficulty: Moderate Learning Objective: LO 2

17. Which of the following is NOT an example of a carrying cost? a. facility storage b. stockouts c. material handling Copyright ©2020 John Wiley & Sons, Inc.

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d. labor Ans: b, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

18. Inventory management is concerned with how much to order and when to order.

Ans: True Difficulty: Moderate Learning Objective: LO 3

19. Continuous inventory systems are primarily intended for lower cost items because they are easier to use, and require fewer resources.

Ans: False Difficulty: Moderate Learning Objective: LO 3

20. Continuous inventory systems are also referred to as a fixed-order-quantity system.

Ans: True Difficulty: Moderate Learning Objective: LO 3

21. Periodic inventory systems initiate a new order when the level of inventory falls to the reorder point.

Ans: False Difficulty: Moderate Learning Objective: LO 3

22. In ABC analysis, each class of inventory requires different levels of inventory monitoring and control.

Ans: True Difficulty: Moderate Learning Objective: LO 3 23. The _________ is the level of inventory that prompts a new order to be placed in a continuous inventory system. a. economic order quantity b. service level c. reorder point d. safety stock Ans: c, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

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24. The order quantity for a periodic inventory system remains constant.

Ans: False Difficulty: Easy Learning Objective: LO 3

25. The periodic inventory system is often preferred for a. low quantity, low value items. b. high quantity, low value items. c. low quantity, high value items. d. high quantity, high value items.

Ans: b, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

26. The time between orders is variable and the order quantity is constant in the periodic inventory system.

Ans: False Difficulty: Moderate Learning Objective: LO 3

27. Continuous inventory systems often incorporate information technology to improve the speed and accuracy of data entry and retrieval.

Ans: True Difficulty: Moderate Learning Objective: LO 3

28. The ABC classification system is a method for classifying inventory based on the percentage of total value and the percentage of total quantity.

Ans: True Difficulty: Moderate Learning Objective: LO 3

29. Class A items in the ABC classification system require less monitoring and control than Class C items.

Ans: False Difficulty: Moderate Learning Objective: LO 3

30. The economic order quantity (EOQ) model determines the optimal order size that minimizes a. total annual inventory. b. total annual inventory costs.

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c. total annual orders. d. total annual ordering costs.

Ans: b, LO: 4, Bloom: C, Difficulty: Easy, AACSB: None

31. For a given annual demand, total annual ordering cost is independent of order size.

Ans: False Difficulty: Hard Learning Objective: LO 4

32. The EOQ model determines the optimal order size that minimizes the sum of carrying costs and shortage costs.

Ans: False Difficulty: Easy Learning Objective: LO 4

33. The ________ is the time between receipts of orders in an inventory cycle. a. safety stock b. lead time c. order cycle d. transportation time Ans: c, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

34. The number of orders can be calculated by dividing the daily demand rate, d, by the order quantity, Ans: False Difficulty: Moderate Learning Objective: LO 4

35. The average inventory can be calculated by dividing the annual demand, D, by 2.

Ans: False Difficulty: Easy Learning Objective: LO 4

36. The economic order quantity occurs when the annual carrying cost is equal to the annual ordering cost.

Ans: True Difficulty: Easy Learning Objective: LO 4

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37. With the economic order quantity (EOQ) model, the number of orders increases as the order size decreases.

Ans: True Difficulty: Moderate Learning Objective: LO 4

38. With the economic order quantity (EOQ) model, increasing the order quantity reduces inventory carrying cost.

Ans: False Difficulty: Moderate Learning Objective: LO 4

39. The production quantity model, a variation of the basic EOQ model, assumes noninstantaneous replenishment.

Ans: True Difficulty: Hard Learning Objective: LO 4

40. The quantity discount model evaluates whether using an order size that qualifies for a price discount is always less cost effective than using the economic order quantity.

Ans: False Difficulty: Easy Learning Objective: LO 4

41. A quantity discount is a price discount available if a predetermined number of units is ordered.

Ans: True Difficulty: Moderate Learning Objective: LO 4

42. With the quantity discount model, the basic EOQ total cost formula is modified to include a term, PD, calculated by taking the purchase price multiplied by annual demand.

Ans: True Difficulty: Moderate Learning Objective: LO 4

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43. With the quantity discount model, the first price point examined is the one associated with the EOQ quantity calculated using the basic model.

Ans: True Difficulty: Moderate Learning Objective: LO 4

44. When demand is uncertain, a safety stock is often added to the expected demand during lead time to prevent a stockout.

Ans: True Difficulty: Moderate Learning Objective: LO 5

45. Maintaining a desired service level influences the level of safety stock.

Ans: True Difficulty: Moderate Learning Objective: LO 5

46. Drugstores are one example of a business using a periodic inventory system because of their dependence on vendor-managed inventory.

Ans: True Difficulty: Moderate Learning Objective: LO 6

47. The order quantity cannot be calculated for a periodic inventory system that experiences variable demand.

Ans: False Difficulty: Moderate Learning Objective: LO 6

Multiple Choice

48. A company may purchase larger amounts of inventory for all the following reasons except a. to reduce inventory carrying costs. b. to take advantage of quantity discounts. c. as a hedge against future price increases. d. to obtain lower prices purchasing in volume.

Ans: A Difficulty: Moderate Learning Objective: LO 1

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49. Inventory management includes all the following activities except determining a. the amount of inventory to keep in stock. b. customer demand . c. how much to order. d. when to order.

Ans: B Difficulty: Easy Learning Objective: LO 1

50. ________________ is additional inventory kept at various stages of the production process to provide independence between stages to avoid work stoppages. a. Safety stock b. Buffer stock c. Finished stock d. None of these answer choices is correct.

Ans: B Difficulty: Easy Learning Objective: LO 1

51. ________________ is additional inventory kept on hand to meet variations in product demand. a. Safety stock b. Buffer stock c. Finished stock d. None of these answer choices is correct.

Ans: A Difficulty: Easy Learning Objective: LO 1

52. Inventory costs _________________ when higher levels of inventory are needed to improve customer service. a. decrease b. stay the same c. increase d. cannot be estimated Ans: C Difficulty: Moderate Learning Objective: LO 2

53. Customer service is defined as the ability to satisfy ______________ demand.

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a. internal b. external c. internal and external d. None of these answer choices is correct.

Ans: C Difficulty: Moderate Learning Objective: LO 2

54. The traditional approach to inventory management is to maintain a level of inventory that a. minimizes inventory cost. b. maximizes customer service. c. maintains a balance between inventory cost and customer service. d. None of these answer choices is correct.

Ans: C Difficulty: Moderate Learning Objective: LO 1

55. Which of the following is not considered a form of inventory? a. items being transported b. tools and equipment c. purchased parts and supplies d. backorders Ans: D Difficulty: Easy Learning Objective: LO 2

56. Which of the following is not an example of inventory carried to satisfy independent demand? a. spare parts b. finished product c. raw materials d. All the answer choices are correct.

Ans: C Difficulty: Moderate Learning Objective: LO 2

57. ___________ demand items are used in the process of producing a final product. a. Dependent b. Independent c. Seasonal d. Cyclical

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Ans: A Difficulty: Moderate Learning Objective: LO 2

58. Receiving, handling, and shipping costs are examples of a. shortage costs. b. carrying costs. c. ordering costs. d. None of these answer choices is correct.

Ans: C Difficulty: Moderate Learning Objective: LO 2

59. In general, as the order size increases a. ordering costs decrease and carrying costs increase. b. ordering costs increase and carrying costs decrease. c. both ordering and carrying costs increase. d. both ordering and carrying costs decrease.

Ans: A Difficulty: Moderate Learning Objective: LO 2

60. The _______________ classification system classifies inventory according to its dollar value to the firm. a. periodic b. continuous c. ABC d. EOQ Ans: C Difficulty: Moderate Learning Objective: LO 3

61. A service level of 95% means there is a 0.95 probability a. of a stockout. b. that supply will exceed demand. c. that demand will be met during the lead time. d. None of these answer choices is correct.

Ans: D Difficulty: Moderate Learning Objective: LO 3

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62. A continuous inventory system is also known as a a. fixed-time period system b. fixed-order quantity system c. fixed-lead time system d. fixed-amount system Ans: B Difficulty: Easy Learning Objective: LO 3

63. A periodic inventory system is also known as a a. fixed-time period system. b. fixed-order quantity system. c. fixed-lead time system. d. fixed-amount system.

Ans: A Difficulty: Easy Learning Objective: LO 3

64. A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate.

If the cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00, then the economic order quantity for napkins is a. 62,500 boxes. b. 10,000 boxes. c. 5,000 boxes. d. 2,500 boxes.

Ans: C Difficulty: Moderate Learning Objective: LO 4

65. A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate.

The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the economic order quantity each time an order is placed, then ______orders are placed during the year. a. 13 b. 15 c. 20 d. 25 Ans: A Difficulty: Moderate Learning Objective: LO 4

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66. A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate over the 365 days that it is open. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the economic order quantity then the time between orders (order cycle) is a. 125 days. b. 75.3 days. c. 32.8 days. d. 29.2 days.

Ans: D Difficulty: Moderate Learning Objective: LO 4

67. A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate.

The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the economic order quantity then the total annual inventory cost for napkins is a. $62,500. b. $5,000. c. $2,500. d. $1,250.

Ans: B Difficulty: Moderate Learning Objective: LO 4

68. A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate.

The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the economic order quantity then the average inventory for napkins is a. 62,500 boxes. b. 31,250 boxes. c. 5,000 boxes. d. 2,500 boxes.

Ans: D Difficulty: Moderate Learning Objective: LO 4

69. Annual demand for a product is 40,000 units. The product is used at a constant rate over the 365 days the company is open every year. The annual holding cost for the product is estimated to be $2.50 per unit and the cost of placing each order is $125.00. If the company orders according to the economic order quantity (EOQ) formula then its optimal order size for this product is a. 2,000 units.

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b. 4,000 units. c. 20,000 units. d. 40,000 units.

Ans: A Difficulty: Moderate Learning Objective: LO 4

70. Annual demand for a product is 40,000 units. The product is used at a constant rate over the 365 days the company is open every year. The annual holding cost for the product is estimated to be $2.50 per unit and the cost of placing each order is $125.00. If the company orders according to the economic order quantity (EOQ) formula, then ________ orders are placed annually. a. 5 b. 10 c. 15 d. 20 Ans: D Difficulty: Moderate Learning Objective: LO 4

71. Annual demand for a product is 40,000 units. The product is used at a constant rate over the 365 days the company is open every year. The annual holding cost for the product is estimated to be $2.50 per unit, and the cost of placing each order is $125.00. If the company orders according to the economic order quantity (EOQ) formula, then the time between orders (order cycle time) is a. 18.25 days. b. 24.33 days. c. 36.5 days. d. 73 days.

Ans: A Difficulty: Moderate Learning Objective: LO 4

72. Annual demand for a product is 40,000 units. The product is used at a constant rate over the 365 days the company is open every year. The annual holding cost for the product is estimated to be $2.50 per unit and the cost of placing each order is $125.00. If the company orders according to the economic order quantity (EOQ) formula then its total annual inventory cost for this product is a. $100,000. b. $50,000. c. $5,000. d. $2,500.

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Ans: C Difficulty: Moderate Learning Objective: LO 4

73. Annual demand for a product is 40,000 units. The product is used at a constant rate over the 365 days the company is open every year. The annual holding cost for the product is estimated to be $2.50 per unit and the cost of placing each order is $125.00. If the company orders according to the economic order quantity (EOQ) formula, then its average inventory level for this product is a. 20,000 units. b. 10,000 units. c. 2,500 units. d. 1,000 units.

Ans: D Difficulty: Moderate Learning Objective: LO 4

74. Which of the following is not an assumption of the EOQ model? a. demand is known and constant b. no shortages allowed c. lead time is determined by quantity ordered d. order quantity is received all at once Ans: C Difficulty: Moderate Learning Objective: LO 4

75. The economic order quantity is most widely used for determining how much to order in a. a periodic inventory system. b. a continuous inventory system. c. an on-demand inventory system. d. None of these answer choices is correct.

Ans: B Difficulty: Moderate Learning Objective: LO 4

76. The quantity discount model considers a. purchase price. b. carrying cost. c. ordering cost. d. All of these answer choices are correct.

Ans: D

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Difficulty: Easy Learning Objective: LO 4

77. Which of the following is not an assumption of the EOQ model? a) demand rate is known and constant b) shortages are allowed c) lead time is constant d) order quantity is received all at once Ans: B Difficulty: Moderate Learning Objective: LO 4

78. From a supplier perspective, the purpose of a quantity discount is to get the customer to buy a. more than the economic order quantity. b. less than the economic order quantity. c. the economic order quantity. d. None of these answer choices is correct.

Ans: A Difficulty: Easy Learning Objective: LO 4

79. Consider a university that purchases replacement chairs for its classrooms. The purchasing manager knows that the annual demand for replacement chairs is 500.

The pricing schedule is as follows: Order Size Price 100–199 $130 200–499 $122 500+ $120 For the next nine problems, use the following Excel solution to this quantity discount problem with constant carrying cost.

Carrying cost = Ordering cost = Annual Demand =

Quantity 100 200 500

Price $130 $122 $120

$

15

$

200 500

Q 115.47 115.47 115.47

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Discount Q 115.47 200.00 500.00

$ $ $

Total Cost 66,732.05 63,000.00 63,950.00

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80. What is the economic order quantity? a. 100 b. 115.47 c. 200 d. 500 Ans: B Difficulty: Moderate Learning Objective: LO 4

81. What is the inventory ordering cost using the economic order quantity? a. $200 b. $500 c. $866 d. $1,000 Ans: C Difficulty: Moderate Learning Objective: LO 4

82. What is the carrying cost using the economic order quantity? a. $750 b. $866 c. $1,500 d. $3,750 Ans: C Difficulty: Moderate Learning Objective: LO 4

83. What is the annual purchase cost using the economic order quantity? a. $60,000 b. $61,000 c. $65,000 d. None of these answer choices is correct.

Ans: C Difficulty: Moderate Learning Objective: LO 4

84. What is the discount order quantity using a purchase price of $130? a. 100 b. 115.47

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c. 200 d. 500 Ans: B Difficulty: Moderate Learning Objective: LO 4

85. What is the discount order quantity using a purchase price of $122? a. 100 b. 115.47 c. 200 d. 500 Ans: C Difficulty: Moderate Learning Objective: LO 4

What is the discount order quantity using a purchase price of $120? a. 100 b. 115.47 c. 200 d. 500 Ans: D Difficulty: Moderate Learning Objective: LO 4

86. What is the optimal order quantity? a. 100 b. 115.47 c. 200 d. 500 Ans: C Difficulty: Moderate Learning Objective: LO 4

87. What is the approximate minimum total cost associated with the optimal order quantity? a. $66,750 b. $66,732 c. $63,950 d. $63,000 Ans: D

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Difficulty: Moderate Learning Objective: LO 4

88. For a quantity discount problem, the order quantity selected is the one that minimizes the total annual _________ cost. a. inventory b. carrying c. ordering d. purchase Ans: A Difficulty: Easy Learning Objective: LO 4

89. The demand for an electronic component is normally distributed with an average daily demand of 500 units and a standard deviation of 50. The lead-time for the component is 9 days. If a service level of 95% is desired then the company’s reorder point for this component is approximately a. 3,785 units. b. 4,500 units. c. 4,627units. d. 4,747units.

Ans: D Difficulty: Moderate Learning Objective: LO 5

90. The demand for an electronic component is normally distributed with an average daily demand of 500 units and a standard deviation of 50. The lead time for the component is 9 days. If a service level of 95% is desired, then the company’s safety stock for this component is approximately a. 150 units. b. 247 units. c. 336 units. d. 740 units.

Ans: B Difficulty: Moderate Learning Objective: LO 5

91. The demand for an electronic component is normally distributed with an average daily demand of 500 units, and a standard deviation of 50. The lead time for the component is 9 days. If the company sets a reorder point of 4,650 for this component then its service level is approximately a. 50 percent.

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b. 84 percent. c. 92 percent. d. 98 percent.

Ans: B Difficulty: Moderate Learning Objective: LO 5 92. A product’s usage is normally distributed with a weekly average demand of 2,000 units and a weekly standard deviation of 125. The lead time for the product is 4 weeks. If the company would like to have a service level of 90% for this product then the reorder point is approximately a. 8,320 units. b. 9,218 units. c. 10,134 units. d. 11,244 units.

Ans: a Difficulty: Moderate Learning Objective: LO 5 93. A product’s usage is normally distributed with a weekly average demand of 2,000 units and a weekly standard deviation of 125. The product’s lead time is 4 weeks.

Currently, the reorder point for this product is 8,200. If the company would like to have a service level of 95% for this product then a. it must decrease its safety stock by approximately 412 units. b. it must decrease its safety stock by approximately 212 units. c. it must increase its safety stock by approximately 412 units. d. it must increase its safety stock by approximately 212 units.

Ans: D Difficulty: Moderate Learning Objective: LO 5

Short Answer 95. List several types of uncertainty that may contribute to higher inventory levels.

Ans: -receive poor quality materials from supplier -produce quality defects in the production system -unanticipated changes in demand -poor forecasts -variations in delivery times -variations in lead times -uncertain production schedules Difficulty: Moderate Learning Objective: LO 1

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96. Explain the relationship between ordering costs and carrying costs in the economic order quantity (EOQ) model.

Ans: Ordering costs react inversely to carrying costs. As the size of the order increases, fewer orders are required, reducing ordering costs. However, ordering larger amounts results in higher inventory levels and higher carrying costs. In general, as the order size increases, ordering costs decrease and carrying costs increase.

Difficulty: Moderate Learning Objective: LO 4

97. List and discuss the costs used to determine carrying cost, holding cost and shortage cost.

Ans: -facility storage (rent, depreciation, utilities, security, taxes, insurance) -material handling equipment -labor -record keeping -cost of working capital -product deterioration (spoilage, breakage, obsolescence, pilferage) Difficulty: Moderate Learning Objective: LO 2

98.

Briefly compare and contrast a continuous inventory system to a periodic inventory system listing the advantages and disadvantages of each.

Ans: There are two basic types of inventory systems: a continuous (or fixed-orderquantity) system and a periodic (or fixed-time-period) system. In a continuous system, an order is placed for the same constant amount whenever the inventory on hand decreases to a certain level, whereas in a periodic system, an order is placed for a variable amount after the passage of a specific period of time. A positive feature of a continuous system is that the inventory is continuously monitored, so management always knows the inventory status. This is advantageous for critical items such as replacement parts or supplies.

However, maintaining a continual record of the inventory on hand can also be costly. In the periodic inventory system the inventory level is not monitored at all during the time interval between orders, so it has the advantage of little or required record keeping. The disadvantage is less direct control which typically results in larger inventory levels for a periodic inventory system than in a continuous system to guard against unexpected stockouts early in the fixed period.

Difficulty: Moderate Learning Objective: LO 3

99. Explain when it is better to use the continuous inventory system and when it is better to use the periodic inventory system. Discuss how the ABC classification system provides guidance in selecting one versus the other.

Ans: The continuous inventory system provides for greater monitoring and control. If the economic order quantity is used total annual inventory cost is minimized. This system is

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best suited for high value, low quantity items. The periodic inventory system provides no monitoring and minimal control. It requires almost no record keeping. This system is best suited for low value, high quantity items.

Difficulty: Moderate Learning Objective: LO 3

100. Make a list of the basic steps involved in using the quantity discount model and discuss each.

Ans: First calculate the economic order quantity. Based on this quantity determine the price based on this order size. Calculate the total annual inventory cost which includes carrying cost, ordering costs and purchasing cost. Determine the minimal quantity that qualifies for the next price discount. Using this quantity and the new price calculate the total annual inventory cost which includes carrying cost, ordering costs and purchasing cost. Repeat the last step for all quantity/price options. Select the order size, Q, with the lowest total annual cost.

Difficulty: Moderate Learning Objective: LO 4

101. A store carries a popular food item. The average demand for this product is 15 units per day, with a standard deviation of 3.5 units. The stock is checked weekly. Suppose that at one particular occasion when the stock is being checked, there are 5 units in stock. The lead time to receive an order is 3 days. If the store wants to maintain a 95% service level, then the order size for this period is __________. a) 163 b) 164 c) 166 d) 167 Ans: B, Difficulty: Moderate, Learning Objective: LO6, Bloom: K, AACSB: Reflective thinking

102. A store carries a popular food item. The average demand for this product is 15 units per day, with a standard deviation of 3.5 units. The stock is checked weekly. Suppose that at one particular occasion when the stock is being checked, there are 5 units in stock. The store wants to maintain a 95% service level. If the order size for this period is 180, then the lead time must be __________ days. a) 2 b) 3 c) 4 d) 5

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Ans: C, Difficulty: Moderate, Learning Objective: LO6, Bloom: K, AACSB: Reflective thinking

103. A store carries a popular food item. The average demand for this product is 15 units per day. The stock is checked weekly. Suppose that at one particular occasion when the stock is being checked, there are 5 units in stock. The lead time to receive an order is 5 days, and the store wants to maintain a 95% service level. If the order size for this period is 190, then the standard deviation of the demand must be __________ units. a) 2 b) 2.5 c) 3 d) 3.5 Ans: B, Difficulty: Moderate, Learning Objective: LO6, Bloom: K, AACSB: Reflective thinking

104. A store carries a popular food item. The stock is checked weekly. At one particular occasion when the stock is being checked, there are 6 units in stock, and the order size for the period is 198. The lead time to receive an order is 4 days, the store wishes to maintain a 95% service level, and the standard deviation of the demand is 3 units. Then the average demand for this product must be __________. a) 17 b) 16 c) 15 d) 14 Ans: A, Difficulty: Moderate, Learning Objective: LO6, Bloom: K, AACSB: Reflective thinking

105. The annual carrying cost for a product is $115, the ordering cost is $1,150, and the annual demand is estimated to be 1,000 units. The optimal order size with the basic EOQ model is __________ units. a) 100 b) 101 c) 141 d) 142 Ans: D, Difficulty: Moderate, Learning Objective: LO4, Bloom: K, AACSB: Reflective thinking

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106. The annual carrying cost for a product is $115, the ordering cost is $1,150, and the annual demand is estimated to be 1,000 units. The number of orders per year with the basic EOQ model is __________ times. a) 4 b) 5 c) 6 d) 7 Ans: D, Difficulty: Moderate, Learning Objective: LO4, Bloom: K, AACSB: Reflective thinking

107. The annual carrying cost for a product is $115, the ordering cost is $1,150, and the annual demand is estimated to be 1,000 units. Assume that the company is closed on Sundays, Thanksgiving, and Christmas. The orders cycle (time between orders) with the basic EOQ model is __________ days. a) 44 b) 43 c) 42 d) 41 Ans: A, Difficulty: Moderate, Learning Objective: LO4, Bloom: K, AACSB: Reflective thinking

108. The annual carrying cost for a consumer product is $115, the ordering cost is $1,150, and the annual demand is estimated to be 1,000 units. This product sells to the consumer at $810 and has an 80% markup. The minimum total inventory cost with the basic EOQ model is $__________. a) 178,263 b) 178,264 c) 466,263 d) 466,264 Ans: C, Difficulty: Moderate, Learning Objective: LO5, Bloom: K, AACSB: Reflective thinking

109. The annual carrying cost for a consumer product is $115, the ordering cost is $1,150, and the annual demand is estimated to be 1,000 units. This product sells to the consumer at $810 and has an 80% markup. The supplier offers a 20% discount for orders equal to or larger than 150. Should the store take advantage of this discount or should it order the basic EOQ order size? The store should __________. a) order the basic EOQ order size because the total inventory cost taking advantage of the discount is $376,292, which is larger than the min total inventory cost using EOQ

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b) take advantage of the discount, because the associated total inventory cost is $376,292, which is smaller than the min total inventory cost using EOQ c) order the basic EOQ order size, but if the discount were 25% instead of 20%, it should take advantage of the discount d) take advantage of the discount, because the associated total inventory cost is $391,292, which is smaller than the min total inventory cost using EOQ Ans: B, Difficulty: Moderate, Learning Objective: LO4, Bloom: K, AACSB: Reflective thinking

110. The annual carrying cost for a consumer product is $115, the ordering cost is $1,150, and the annual demand is estimated to be 1,000 units. This product sells to the consumer at $810 and has an 80% markup. The supplier offers a discount for orders equal to or larger than 150. What must be the discount offered by the supplier if the total inventory cost taking advantage of the discount is $417,250? a) 15% b) 12.5% c) 11.1% d) 10.9% Ans: C, Difficulty: Moderate, Learning Objective: LO4, Bloom: K, AACSB: Reflective thinking

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File: ch14, Chapter 14: The Sales and Operations Planning Process

True/False

1. Which of the following is best defined as a process for coordinating supply and demand? a. demand planning b. sales management c. supply planning d. sales and operations planning Ans: d, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

2. Implementing a companywide game plan for allocating resources addresses the longstanding battle between operations and finance.

Ans: False Difficulty: Hard Learning Objective: LO 1

3. An economic strategy for adjusting demand can include adjusting capacity or managing demand.

Ans: True Difficulty: Moderate Learning Objective: LO 1

4. An aggregate operations plan specifies the production quantities for a. an entire product family or product line. b. component parts c. labor d. individual products Ans: a, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

5. One objective of sales and operations planning is to develop a companywide game plan to satisfy production.

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Ans: False Difficulty: Moderate Learning Objective: LO 1

6. An input into sales and operations planning is the a. sales plan. b. operations plan. c. demand forecasts. d. inventory levels.

Ans: c, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

7. Financial constraints are one of the major inputs of the sales and operations planning process.

Ans: True Difficulty: Moderate Learning Objective: LO 1 8. Overtime and undertime are common strategies for adjusting demand.

Ans: False Difficulty: Easy Learning Objective: LO 2

9. The level strategy for adjusting capacity is only appropriate when there is no variation in demand.

Ans: False Difficulty: Moderate Learning Objective: LO 2

10. A chase strategy involves hiring and firing workers so that a. production trails demand. b. production matches demand. c. production exceeds demand. d. None of these answer choices are correct.

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Ans: b, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

11. Inventory holding costs are an important consideration for the level production strategy.

Ans: True Difficulty: Moderate Learning Objective: LO 2

12. When demand fluctuations are extreme using overtime and undertime is a feasible strategy for adjusting capacity.

Ans: False Difficulty: Moderate Learning Objective: LO 2

13. Subcontracting is a feasible alternative for adjusting capacity provided the supplier can reliably meet quality and time requirements.

Ans: True Difficulty: Moderate Learning Objective: LO 2

14. A chase demand strategy is one of several alternatives available for managing demand.

Ans: False Difficulty: Moderate Learning Objective: LO 2

15. One of several strategies for managing demand is to shift it into other time periods using a. incentives. b. sales promotions. c. advertising. d. All of the choices are correct.

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Ans: d, LO: 3, Bloom: C, Difficulty: Easy, AACSB: None

16. A mixed strategy for adjusting capacity is simpler and easier to implement than any pure strategy.

Ans: False Difficulty: Moderate Learning Objective: LO 3

17. Which of the following is best defined as staffing for high levels of customer service? a. peak b. overtime c. chase d. level Ans: a, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

18. The transportation method is used for aggregate planning when the strategy for adjusting capacity is hiring and firing workers.

Ans: False Difficulty: Moderate Learning Objective: LO 4

19. Aggregate planning involves the process of determining the timing and quantity of production for an individual item over an intermediate time frame.

Ans: False Difficulty: Easy Learning Objective: LO 4

20. With a pure strategy for aggregate planning only one capacity variable is changed.

Ans: True Difficulty: Easy Learning Objective: LO 4

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21. Most companies use mixed strategies for production planning.

Ans: True Difficulty: Easy Learning Objective: LO 4

22. _____________ is the process of breaking a sales and operations plan into more detailed plans. a. Collaborative planning b. Capacity planning c. Production planning d. Disaggregation Ans: d, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

23. Sharing information and synchronizing production across the supply chain is known as a. collaborative planning. b. capacity planning. c. production planning. d. demand planning.

Ans: a, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

24. Which of the following is a strategy of revenue management? a. multiple order quantities b. restrict demand c. fare classes d. underbooking Ans: c, LO: 6, Bloom: K, Difficulty: Easy, AACSB: None

25. Which of the following is best defined as the quantity of items that can be produced and made available at a later date? a. available-to-promise b. capable-to-promise c. make-to-order d. make-to-stock Ans: b, LO: 6, Bloom: K, Difficulty: Easy, AACSB: None

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Multiple Choice

26. All of the following are inputs to the aggregate production planning process except a. demand forecasts. b. financial constraints. c. sales plans. d. capacity constraints.

Ans: C Difficulty: Moderate Learning Objective: LO 1

27. Which of the following is an output of sales and operations planning? a. company policies b. demand forecasts c. operations plans d. capacity constraints Ans: C Difficulty: Easy Learning Objective: LO 1

28. Sales and operations planning is an aggregate planning process for a(n)______________ time horizon. a. short-term b. intermediate c. long-term d. infinite Ans: B Difficulty: Easy Learning Objective: LO 1

29. The term aggregate planning reflects the fact that plans are developed for ___________, rather than _____________.

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a. b. c. d.

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product families, individual products product lines, product families competitor products, product families competitor products, individual products

Ans: A Difficulty: Easy Learning Objective: LO 1

30. Strategies for proactive demand management would not include a. shifting demand into other time periods. b. offering products or services with countercyclical demand patterns. c. partnering with suppliers to reduce information distortion along the supply chain. d. using subcontracting to meet unexpected high demand levels.

Ans: D Difficulty: Moderate Learning Objective: LO 1

31. Which of the following is an objective to sales and operations planning? a. Develop an economic strategy for meeting demand. b. Develop a marketing strategy for meeting demand. c. Develop an operations strategy for meeting demand. d. None of these answer choices is correct.

Ans: A Difficulty: Easy Learning Objective: LO 1

32. The most effective aggregate planning strategy depends on a. the demand distribution b. the competitive position c. the firm’s cost structure d. All of these answer choices are correct.

Ans: D Difficulty: Moderate Learning Objective: LO 1

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33. Adjusting available capacity by hiring and firing workers to match demand is an example of a(n) ________ strategy. a. level production b. chase demand c. mixed production. d. optimal production.

Ans: B Difficulty: Easy Learning Objective: LO 2

34. The primary cost associated with the level production strategy is the cost of a. holding inventory. b. hiring and firing workers. c. overtime. d. outsourcing (subcontracting).

Ans: A Difficulty: Moderate Learning Objective: LO 2

35. Problems associated with using a part-time workers strategy for adjusting capacity include all of the following except a. high turnover. b. accelerated training requirements. c. scheduling difficulties. d. high retirement costs.

Ans: D Difficulty: Easy Learning Objective: LO 2

36. Which of the following is not a strategy for adjusting capacity? a. level production b. subcontracting c. backordering d. product substitution Ans: D

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Difficulty: Easy Learning Objective: LO 2

37. Which of the following is not a strategy for managing demand? a. Shifting demand into other time periods. b. Create demand for idle resources. c. Redirecting demand to a competitor. d. Partnering with suppliers to minimize information distortion.

Ans: C Difficulty: Easy Learning Objective: LO 3

38. Shifting demand into other time periods can be accomplished through a. Advertising b. Sales promotions c. Incentives d. All of these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 3

39. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 75,000 2 100,000 3 75,000 4 125,000 Beginning Workforce = 35 workers Production per Employee = 1,250 units per quarter Hiring Cost = $500 per worker Firing Cost = $1,000 per worker Inventory Carrying Cost = $20 per unit per quarter If a chase demand strategy is used, then the number of workers hired at the start of quarter 2 is a. 10 b. 20 c. 35

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d. 80 Ans: B Difficulty: Moderate Learning Objective: LO 4 Solution: Number of workers hired at start of quarter 2 = (100,000 − 75,000)/1,250 = 20 workers

40. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 37,500 2 45,000 3 25,000 4 62,500 Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a chase demand strategy is used, then the number of workers hired at the start of quarter 4 is a. 0 b. 15 c. 75 d. 125 Ans: C Difficulty: Moderate Learning Objective: LO 4 Solution: Number of workers hired at the start of quarter 4 = (62,500 − 25,000)/500 = 75 workers

41. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 37,500 2 45,000 3 25,000 4 62,500 Beginning Workforce = 125 workers Production per Employee = 500 units per quarter

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Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a chase demand strategy is used, the number of workers fired at the start of quarter 3 is a. 0 b. 40 c. 50 d. 75 Ans: B Difficulty: Moderate Learning Objective: LO 4 Solution: Number of workers fired at start of period 3 = (25,000 − 45,000)/500 = −40 workers

42. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 37,500 2 45,000 3 25,000 4 62,500 Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a chase demand strategy is used, the total hiring and firing costs for the production plan is a. $67,500 b. $135,000 c. $202,500 d. $337,500 Ans: C Difficulty: Moderate Learning Objective: LO 4 Solution: Total hiring and firing cost for the production plan = 50($1500) + 15($750) + 40($500) + 75($750) = $202,500

43. The following information relates to a company’s aggregate production planning activities:

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Quarter Demand Forecast 1 37,500 2 45,000 3 25,000 4 62,500 Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a level production strategy is used, the number of units to produce each quarter is a. 42,500 b. 85,000 c. 62,500 d. 37,500 \Ans: A Difficulty: Moderate Learning Objective: LO 4 Solution: Production each quarter = (37,500 + 45,000 + 25,000 + 62,500)/4 = 42,500 units

44. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 37,500 2 45,000 3 25,000 4 62,500 Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a level production strategy is used, the number of workers required each quarter is a. 50 b. 75 c. 85 d. 125 Ans: C Difficulty: Moderate Learning Objective: LO 4 Solution: Number of workers each quarter = 42,500/500 = 85 workers

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45. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 37,500 2 45,000 3 25,000 4 62,500 Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a level production strategy is used, the number of units in inventory at the end of quarter 3 is a. 0 b. 2,500 c. 5,000 d. 20,000 Ans: D Difficulty: Moderate Learning Objective: LO 4 Solution: Number of units in inventory at the end of quarter 3 = 3(42,500) − 37,500 − 45,000 − 25,000 = 20,000 units 46. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 37,500 2 45,000 3 25,000 4 62,500 Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a level production strategy is used, the total cost of the production plan (hiring cost, firing cost, and inventory cost) is a. $60,000 b. $275,000 c. $335,000

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d. $610,000 Ans: C Difficulty: Moderate Learning Objective: LO 4 Solution: 40($1,500) + 5000($10) + 2500($10) + 20,000($10) = $335,000

47. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 25,000 2 50,000 3 35,000 4 60,000 Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a chase demand strategy is used, then the number of workers hired at the start of quarter 2 is a. 0 b. 50 c. 100 d. 200 Ans: C Difficulty: Moderate Learning Objective: LO 4 Solution: Number of workers hired at start of period 2 = 25,000/250 = 100 workers

48. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 25,000 2 50,000 3 35,000 4 60,000 Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter

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If a chase demand strategy is used, then the number of workers fired at the start of quarter 3 is a. 0 b. 50 c. 60 d. 100 Ans: C Difficulty: Moderate Learning Objective: LO 4 Solution: Number of workers fired at the start of period 3 = 200 − 140 = 60 workers

49. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 25,000 2 50,000 3 35,000 4 60,000 Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a chase demand strategy is used, then the total hiring and firing cost of the plan is a. $340,000 b. $250,000 c. $125,000 d. $90,000 Ans: A Difficulty: Moderate Learning Objective: LO 4 Solution: Total hiring and firing cost = 50($1000) + 100($1000) + 60($1500) + 100($1000) = $340,000

50. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 25,000 2 50,000 3 35,000

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4 60,000 Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a level production strategy is used, then the required output per quarter is a. 60,000 units. b. 42,500 units. c. 35,000 units. d. 25,000 units.

Ans: B Difficulty: Moderate Learning Objective: LO 4 Solution: (60,000 + 42,500 + 35,500 + 25,000)/4 = 42,500 units

51. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 25,000 2 50,000 3 35,000 4 60,000 Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a level production strategy is used, then the inventory at the end of quarter 3 is a. 0 b. 5,000 c. 10,000 d. 17,500 Ans: D Difficulty: Moderate Learning Objective: LO 4 Solution: Inventory at the end of quarter 3 = 42,500 − 25,000 + 42,500 − 50,000 + 42,500 − 35,000 = 17,500 units

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52. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 25,000 2 50,000 3 35,000 4 60,000 Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a level production strategy is used, then the number of workers required is a. 125 b. 170 c. 250 d. 325 Ans: B Difficulty: Moderate Learning Objective: LO 4 Solution: Number of workers required = 42,500/250 = 170 workers

53. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 25,000 2 50,000 3 35,000 4 60,000 Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a level production strategy is used, then the total cost of the plan (hiring cost, firing cost, and inventory carrying cost) is a. $120,000 b. $377,500 c. $675,000 d. $795,000 Ans: D Difficulty: Moderate

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Learning Objective: LO 4 Solution: Total cost of the plan = 50($1000) + 100($1000) + 60($1500) + 100($1000) + 17,500($15) + 10,000($15) + 17,500($15) = $795,000

54. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 75,000 2 100,000 3 75,000 4 125,000 Beginning Workforce = 35 workers Production per Employee = 1,250 units per quarter Hiring Cost = $500 per worker Firing Cost = $1,000 per worker Inventory Carrying Cost = $20 per unit per quarter If a chase demand strategy is used, then the total firing cost for the plan is a. $10,000 b. $15,000 c. $20,000 d. $25,000 Ans: C Difficulty: Moderate Learning Objective: LO 4 Solution: The firing cost of the plan = 20($1000) = $20,000

55. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 75,000 2 100,000 3 75,000 4 125,000 Beginning Workforce = 35 workers Production per Employee = 1,250 units per quarter Hiring Cost = $500 per worker Firing Cost = $1,000 per worker Inventory Carrying Cost = $20 per unit per quarter If a level production strategy is used, then the required quarterly output is a. 75,000

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b. 87,350 c. 93,750 d. 125,000 Ans:C Difficulty: Moderate Learning Objective: LO 4 Solution: The required units per quarter = (75,000 + 100,000 + 75,000 + 125,000)/4 = 93,750 units

56. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 75,000 2 100,000 3 75,000 4 125,000 Beginning Workforce = 35 workers Production per Employee = 1,250 units per quarter Hiring Cost = $500 per worker Firing Cost = $1,000 per worker Inventory Carrying Cost = $20 per unit per quarter If a level production strategy is used, then the number of workers required for the plan is a. 35 b. 75 c. 100 d. 125 Ans: B Difficulty: Moderate Learning Objective: LO 4 Solution: Number of workers required = 93,750/1250 = 75 workers

57. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 75,000 2 100,000 3 75,000 4 125,000 Beginning Workforce = 35 workers Production per Employee = 1,250 units per quarter

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Hiring Cost = $500 per worker Firing Cost = $1,000 per worker Inventory Carrying Cost = $20 per unit per quarter If a level production strategy is used, then the inventory at the end of quarter 3 is a. 18,750 b. 12,500 c. 25,650 d. 31,250 Ans: D Difficulty: Moderate Learning Objective: LO 4 Solution: Inventory at the end of period 3 = 93,750 − 75,000 + 93,750 − 100,000 + 93,750 − 75,000 = 31,250 units

58. The following information relates to a company’s aggregate production planning activities: Quarter Demand Forecast 1 75,000 2 100,000 3 75,000 4 125,000 Beginning Workforce = 35 workers Production per Employee = 1,250 units per quarter Hiring Cost = $500 per worker Firing Cost = $1,000 per worker Inventory Carrying Cost = $20 per unit per quarter If a level production strategy is used, then the cost of the level production plan (inventory costs plus hiring and firing costs) is a. $20,000 b. $645,000 c. $1,250,000 d. $1,270,000 Ans: D Difficulty: Moderate Learning Objective: LO 4 Solution: The total cost of the level plan = 40($500) + 18,750($20) + 12,500($20) + 31,750($20) = $1,270,000

59. A company is developing a linear programming model for its aggregate production plan. If It = units in inventory at the end of period t, Pt = units produced in period t,

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and Dt = demand in period t, then the company’s demand constraint to ensure that demand is met in quarter 3 is a. D3 = I2 – I3 + P3 b. D3 = I3 + P3 c. D3 = I3 – I2 + P3 d. D3 = I2 – I3 + P2 Ans: A Difficulty: Hard Learning Objective: LO 4

60. A company is developing a linear programming model for its aggregate production plan. If Wt = workforce size for period t, Ht = number of workers hired for period t, and Ft = number of workers fired for period t, then the company’s workforce constraint for period 2 is a. W2 = W1 + F2 – H2 b. W2 = H2 – F2 c. W2 = W1 + H2 – F2 d. W2 = H2 – F2 – W1 Ans: C Difficulty: Moderate Learning Objective: LO 4

61. A company is developing a linear programming model for its aggregate production plan. If It = units in inventory at the end of period t, Pt = units produced in period t, and Dt = demand in period t, then the company’s demand constraint to ensure that demand is met in quarter 2 is a. D2 = I2 – I1 + P2 b. D2 = I1 + P2 c. D2 = I2 + I1 + P2 d. D2 = I1 + P2 – I2 Ans: D Difficulty: Moderate Learning Objective: LO 4

62. A company is developing a linear programming model for its aggregate production plan. If Wt = workforce size for period t, Ht = number of workers hired for period t,

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and Ft = number of workers fired for period t, then the company’s workforce constraint for period 4 is a. W4 = W3 – H4 + F4 b. W4 = W3 + H4 – F4 c. W4 = W3 + H3 – F3 d. W4 = W3 + H4 Ans: B Difficulty: Moderate Learning Objective: LO 4

63. A company is developing a linear programming model for its aggregate production plan. Each worker can produce 500 units per quarter. If Wt = workforce size in period t and Pt = number of units produced in period t, then the production constraint for period 3 is a. W3 = 500P3 b. P3 = W3 − 500 c. P3 = 500W3 d. P3 = W3/500 Ans: C Difficulty: Moderate Learning Objective: LO 4

64. An optimizing technique originally developed for aggregate planning in the paint factory is the a. linear decision rule. b. search decision rule. c. management coefficients model. d. transportation technique.

Ans: A Difficulty: Moderate Learning Objective: LO 4

65. The search decision rule (SDR) is an algorithm that a. solves a set of four quadratic equations. b. finds the minimum cost for combinations of different workforce levels and production rates. c. uses regression analysis to improve the consistency of production planning decisions.

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d. requires that a linear cost function be used.

Ans: B Difficulty: Moderate Learning Objective: LO 4

66. The process of breaking an aggregate plan into more detailed plans is referred to as a. collaborative planning. b. hierarchical planning. c. disaggregation. d. rough-cut planning.

Ans: A Difficulty: Hard Learning Objective: LO 5

67. Given the information below, the number of available-to-promise units in period 2 is Period On Hand = 100 1 2 3 4 5 6 Forecast 200 250 200 300 200 200 Customer Orders 150 125 100 250 150 250 Master Production Schedule 400 400 400 Available-to-Promise a. 400 b. 150 c. 50 d. 0 Ans: D Difficulty: Moderate Learning Objective: LO 5

68. Given the information below, the number of available-to-promise units in period 4 is Period On Hand = 100 1 2 3 4 5 6 Forecast 200 250 200 300 200 200 Customer Orders 150 125 100 250 150 250 Master Production Schedule 400 400 400 Available-to-Promise a. 400 b. 150

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c. 50 d. 0 Ans: D Difficulty: Moderate Learning Objective: LO 5

69. Given the information below, the number of available-to-promise units in period 6 is Period On Hand = 100 1 2 3 4 5 6 Forecast 200 250 200 300 200 200 Customer Orders 150 125 100 250 150 250 Master Production Schedule 400 400 400 Available-to-Promise a. 400 b. 150 c. 50 d. 0 Ans: D Difficulty: Moderate Learning Objective: LO 5

70. Given the information below, the number of available-to-promise units in period 4 is Period On Hand = 200 1 2 3 4 5 6 Forecast 300 250 300 300 200 200 Customer Orders 250 200 250 200 150 250 Master Production Schedule 500 700 Available-to-Promise a. 500 b. 100 c. 200 d. 350 Ans: B Difficulty: Moderate Learning Objective: LO 5

71. Given the information below, the number of available-to-promise units in period 1 is

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a. b. c. d.

On Hand = 200 Forecast Customer Orders Master Production Schedule Available-to-Promise 700 500 250 0

Period 1 2 300 250 250 200 500

3 300 250

4 300 200 700

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5 200 150

6 200 250

Ans: D Difficulty: Moderate Learning Objective: LO 5

72. In capacity planning, the feasibility of the sales and operations production plan is verified by a a. resource requirements plan. b. rough-cut capacity plan. c. capacity requirements plan. d. master production schedule.

Ans: A Difficulty: Moderate Learning Objective: LO 5

73. The difference between planned production and customer orders is known as a. the master production schedule. b. available-to-promise. c. capable-to-promise. d. the disaggregate plan.

Ans: B Difficulty: Moderate Learning Objective: LO 5

74. Which of the following is not a characteristic of aggregate planning for services? a. labor is usually the most constraining resource for services b. service capacity must be provided at the appropriate place and time c. demand for services is easy to predict

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d. capacity for services is difficult to predict Ans: C Difficulty: Moderate Learning Objective: LO 6

75. Yield management can be used to address all of the following problems except a. overbooking. b. portioning demand into fare classes. c. single order quantities. d. backorders.

Ans: D Difficulty: Easy Learning Objective: LO 6

76. A bagel company bakes a specialty bagel that it sells by the dozen every day. These specialty bagels can only be baked early in the morning before the store opens for business. The company estimates that the daily demand (in dozens) for its specialty bagel is distributed as follows: Demand (dozens) Probability 1 0.10 2 0.20 3 0.15 4 0.25 5 0.30 Specialty bagels are sold by the dozen only at a cost of $9.00 per dozen. The cost to bake each bagel is $0.50. Leftover specialty bagels are sold by the dozen the next day for a 50% discount. The bagel company’s cost of underestimating demand, Cu, is a. $9.00 b. $6.00 c. $4.50 d. $3.00 Ans: D Difficulty: Moderate Solution: Cu = $3.00 Learning Objective: LO 6

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77. A bagel company bakes a specialty bagel that it sells by the dozen every day. These specialty bagels can only be baked early in the morning before the store opens for business. The company estimates that the daily demand (in dozens) for its specialty bagel is distributed as follows: Demand (dozens) Probability 1 0.10 2 0.20 3 0.15 4 0.25 5 0.30 Specialty bagels are sold by the dozen only at a cost of $9.00 per dozen. The cost to make one bagel is $0.50. Leftover specialty bagels are sold by the dozen the next day for a 50% discount. The bagel company’s cost of overestimating demand, Co, is a. $1.50 b. $3.00 c. $4.50 d. $6.00 Ans: A Difficulty: Moderate Solution: Co = $1.50 Learning Objective: LO 6

78. A bagel company bakes a specialty bagel that it sells by the dozen every day. These specialty bagels can only be baked early in the morning before the store opens for business. The company estimates that the daily demand (in dozens) for its specialty bagel is distributed as follows: Demand (dozens) Probability 1 0.10 2 0.20 3 0.15 4 0.25 5 0.30 Specialty bagels are sold by the dozen only at a cost of $9.00 per dozen. The cost to make one bagel is $0.50. Leftover specialty bagels are sold by the dozen the next day for a 50% discount. The optimal number of specialty bagels that should be baked tomorrow (in dozens) is a. 5 dozen. b. 4 dozen. c. 3 dozen. d. 2 dozen.

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Ans: B Difficulty: Moderate Learning Objective: LO 6

79. A hot dog vendor must decide on Monday how many hot dogs to have available for the coming Saturday’s football game. Each hot dog costs the vendor $3.00 and is sold for $5.00. After the game any unsold hot dogs are discounted and sold to the university cafeteria for $1.75. The vendor believes that the demand for hot dogs follows the probability distribution shown below: Demand for Hot Dogs Probability 1000 0.30 1500 0.20 2000 0.30 2500 0.15 3000 0.05 The vendor’s cost of underestimating demand, Cu, is a. $3.00 b. $1.75 c. $2.00 d. $3.25 Ans: C Difficulty: Moderate Solution: Cu = $2.00 Learning Objective: LO 6

80. A hot dog vendor must decide on Monday how many hot dogs to have available for the coming Saturday’s football game. Each hot dog costs the vendor $3.00 and is sold for $5.00. After the game any unsold hot dogs are discounted and sold to the university cafeteria for $1.75. The vendor believes that the demand for hot dogs follows the probability distribution shown below: Demand for Hot Dogs Probability 1000 0.30 1500 0.20 2000 0.30 2500 0.15 3000 0.05 The vendor’s cost of overestimating demand, Co, is a. $5.00 b. $3.00 c. $1.75 d. $1.25

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Ans: D Difficulty: Moderate Solution: Co = $1.25 Learning Objective: LO 6

81. A hot dog vendor must decide on Monday how many hot dogs to have available for the coming Saturday’s football game. Each hot dog costs the vendor $3.00 and is sold for $5.00. After the game any unsold hot dogs are discounted and sold to the university cafeteria for $1.75. The vendor believes that the demand for hot dogs follows the probability distribution shown below: Demand for Hot Dogs Probability 1000 0.30 1500 0.20 2000 0.30 2500 0.15 3000 0.05 The optimal number of hot dogs the vendor should order for next Saturday’s game is a. 1000 b. 1500 c. 2000 d. 3000 Ans: C Difficulty: Moderate Learning Objective: LO 6

82. A hotel manager must decide how many rooms to overbook. Room rates are $125 per night and each room costs $45 to maintain. A bumped customer is sent to another hotel at a cost of $75. Given the distribution of no-shows below, how many rooms should the manager overbook?

No-Shows Probability 7 0.15 8 0.20 9 0.15 10 0.15 11 0.10 12 0.10 13 0.05 14 0.05 15 0.05 a. 9 rooms.

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b. 10 rooms. c. 11 rooms. d. 12 rooms.

Ans: B Difficulty: Moderate Learning Objective: LO 6

Short Answer Questions

82. What is aggregate planning and what alternatives are generally feasible when developing the aggregate production plans?

Ans: Aggregate planning determines the resource capacity a firm will need to meet its demand over an intermediate time horizon—6 to 12 months in the future. The term aggregate is used because the plans are developed for product lines or product families, rather than individual products. Within this time frame it is usually not feasible to increase capacity by building new facilities or purchasing new equipment; however, it is feasible to hire or lay off workers, increase or deduce the workweek, add an extra shift, subcontract out work, use overtime, or build up and deplete inventory levels.

Difficulty: Moderate Learning Objective: LO 1

83. Briefly discuss the two primary objectives of aggregate planning.

Ans: There are two objectives to aggregate planning: (1) to establish a companywide game plan for allocating resources, and (2) to develop an economic strategy for meeting demand. The first objective refers to the long-standing battle between the firm’s marketing and production functions. Marketing will sometimes make unrealistic sales projections that production is expected to meet. Production employees who are evaluated on keeping manufacturing costs down may be reluctant to accept orders that incur higher processing costs. The job of aggregate planning is to match forecasted demand with available capacity. If capacity is inadequate it can sometimes be expanded, but at a cost.

An analysis of whether the extra revenue is worth the extra cost must be performed.

Difficulty: Moderate Learning Objective: LO 1

84. What are the outputs of aggregate planning?

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Ans: The outputs of aggregate planning include production per month or quarter by product or service family, the size of the workforce, and the amount of regular, overtime, and subcontracted production required. Inventory and backlog levels are projected, along with the number of units or dollars to be backordered or lost. For companies that outsource most of their production, the aggregate plan also includes where the production will take place. For services, the aggregate plan outlines how much work can be completed (or new work accepted) in a specified time period.

Difficulty: Moderate Learning Objective: LO 1

85. Your company makes a product for which quarterly demand is shown in the following table: Quarter Spring Summer Fall Winter Hiring cost = Firing cost = Inventory carrying cost = Regular prod. cost per unit = Production per employee = Beginning workforce =

Sales forecast 16500 18000 20500 22000 180 per worker 600 per worker 2 per unit per quarter 1.5 125 units per quarter 154 workers

If the company uses level production strategy, the number of workers needed each quarter is __________. a) 155 b) 154 c) 153 d) 152 Ans: B, Difficulty: Moderate, Learning Objective: LO4, Bloom: Application AACSB: Reflective thinking

86. Your company makes a product for which quarterly demand is shown in the following table: Quarter Spring Summer

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Sales forecast 16500 18000

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Fall Winter Hiring cost = Firing cost = Inventory carrying cost = Regular prod. cost per unit = Production per employee = Beginning workforce =

Test Bank

20500 22000 180 600 2 1.5 125 154

per worker per worker per unit per quarter units per quarter workers

If the company uses level production strategy, the inventory at the end of fall is __________ units. a) 4,000 b) 3,750 c) 3,000 d) 2,750 Ans: D, Difficulty: Moderate, Learning Objective: LO4, Bloom: Application AACSB: Reflective thinking

87. Your company makes a product for which quarterly demand is shown in the following table: Quarter Spring Summer Fall Winter Hiring cost = Firing cost = Inventory carrying cost = Regular prod. cost per unit = Production per employee = Beginning workforce =

Sales forecast 16500 18000 20500 22000 180 600 2 1.5 125 154

per worker per worker per unit per quarter units per quarter workers

If the company uses level production strategy, the total cost of production is __________. a) $136,620 b) $136,500 c) $134,620 d) $134,500

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Ans: D, Difficulty: Moderate, Learning Objective: LO4, Bloom: Application AACSB: Reflective thinking

88. Your company makes a product for which quarterly demand is shown in the following table: Quarter Spring Summer Fall Winter Hiring cost = Firing cost = Inventory carrying cost = Regular prod. cost per unit = Production per employee = Beginning workforce =

Sales forecast 16500 18000 20500 22000 180 600 2 1.5 125 154

per worker per worker per unit per quarter units per quarter workers

If the company uses chase demand strategy, the number of workers required for fall is __________. a) 144 b) 164 c) 174 d) 176 Ans: B, Difficulty: Moderate, Learning Objective: LO4, Bloom: Application AACSB: Reflective thinking

89. Your company makes a product for which quarterly demand is shown in the following table: Quarter Spring Summer Fall Winter

Copyright ©2020 John Wiley & Sons, Inc.

Sales forecast 16500 18000 20500 22000

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Hiring cost = Firing cost = Inventory carrying cost = Regular prod. cost per unit = Production per employee = Beginning workforce =

180 600 2 1.5 125 154

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per worker per worker per unit per quarter units per quarter workers

If the company uses chase demand strategy, at the end of summer, __________. a) 12 workers need to be hired b) 20 workers need to be hired c) 12 workers need to be fired d) 20 workers need to be fired Ans: B, Difficulty: Moderate, Learning Objective: LO4, Bloom: Application AACSB: Reflective thinking

90. Your company makes a product for which quarterly demand is shown in the following table: Quarter Spring Summer Fall Winter Hiring cost = Firing cost = Inventory carrying cost = Regular prod. cost per unit = Production per employee = Beginning workforce =

Sales forecast 16500 18000 20500 22000 180 600 2 1.5 125 154

per worker per worker per unit per quarter units per quarter workers

If the company uses chase demand strategy, the total hiring cost is __________. a) $2,160 b) $3,960 c) $7,920 d) $8,020 Ans: C Difficulty: Moderate Learning Objective: LO4 Bloom: Application AACSB: Reflective thinking Copyright ©2020 John Wiley & Sons, Inc.

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91. Your company makes a product for which quarterly demand is shown in the following table: Quarter Spring Summer Fall Winter Hiring cost = Firing cost = Inventory carrying cost = Regular prod. cost per unit = Production per employee = Beginning workforce =

Sales forecast 16500 18000 20500 22000 180 600 2 1.5 125 154

per worker per worker per unit per quarter units per quarter workers

If the company uses chase demand strategy, the total cost of production is __________. a) $134,500 b) $134,620 c) $136,500 d) $136,620 Ans: D, Difficulty: Moderate, Learning Objective: LO4 Bloom: Application AACSB: Reflective thinking

92. Your company makes a product for which quarterly demand is shown in the following table: Quarter Spring Summer Fall Winter Hiring cost = Firing cost = Inventory carrying cost = Regular prod. cost per unit =

Copyright ©2020 John Wiley & Sons, Inc.

Sales forecast 220000 195000 235000 245000 300 750 1.25 2.75

per worker per worker per unit per quarter

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Production per employee = 1250 units per quarter Beginning workforce = 154 workers

Determine whether level production or chase demand would more economically meet the demand. The best strategy between level production and chase demand is __________. a) level production with a total production cost of $2,533,125 b) chase demand with a total production cost of $2,533,125 c) level production with a total production cost of $2,494,580 d) chase demand with a total production cost of $2,494,580 Ans: D, Difficulty: Hard, Learning Objective: LO4, Bloom: Evaluation AACSB: Reflective thinking

93. Your company makes a product for which quarterly demand is shown in the following table: Quarter Spring Summer Fall Winter Hiring cost = Firing cost = Inventory carrying cost = Regular prod. cost per unit = Production per employee = Beginning workforce =

Sales forecast 220000 195000 235000 245000 300 750 1.25 2.75 1250 154

per worker per worker per unit per quarter units per quarter workers

How high would firing cost (per employee) need to be for the company to be indifferent between level production and chase demand strategies? a) $2,563.75 b) $2,635.75 c) $2,653.75 d) $2,663.75 Ans: D, Difficulty: Hard, Learning Objective: LO4, Bloom: Evaluation AACSB: Reflective thinking

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94. Your company makes a product for which quarterly demand is shown in the following table: Quarter Spring Summer Fall Winter Hiring cost = Firing cost = Inventory carrying cost = Regular prod. cost per unit = Production per employee = Beginning workforce =

Sales forecast 220000 195000 235000 245000 300 750 1.25 2.75 1250 154

per worker per worker per unit per quarter units per quarter workers

What is the maximum per-unit inventory carrying cost that would make the company choose the level production strategy? a) $0.60 b) $0.57 c) $0.54 d) $0.50 Ans: B, Difficulty: Hard, Learning Objective: LO4, Bloom: Evaluation AACSB: Reflective thinking

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File: ch15; Chapter 15: Resource Planning

True/False

1. Material requirements planning (MRP) translates the master production schedule into requirements for components, subassemblies, and a. raw materials. b. supplier orders. c. capacity plan. d. work orders.

Ans: a, LO: 2, Bloom: C, Difficulty: Easy, AACSB: None

2. One objective of material requirements planning (MRP) is to utilize all available capacity.

Ans: False Difficulty: Easy Learning Objective: LO 2

3. A material requirements planning (MRP) system serves as both an inventory control system and as a production scheduling system.

Ans: True Difficulty: Moderate Learning Objective: LO 2

4. The difference between independent and dependent demand is that a. independent demand is calculated and dependent demand is forecasted. b. independent demand is forecasted and dependent demand is calculated. c. independent demand is based on suppliers and dependent demand is based on customers. d. independent demand is based on customer and dependent demand is based on suppliers.

Ans: a, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None

5. A forecast of dependent demand requirements is one of the major inputs into the MRP process.

Ans: False Difficulty: Moderate Learning Objective: LO 1

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6. Complex products typically do not require material requirements planning (MRP) to plan production or monitor inventory levels.

Ans: False Difficulty: Moderate Learning Objective: LO 2

7. The master production schedule (MPS) is a major input for the MRP process.

Ans: True Difficulty: Easy Learning Objective: LO 2

8. The total length of time required to manufacture a product is called its a. total lead time. b. cumulative lead time. c. master lead time. d. cycle lead time.

Ans: b, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

9. Modular bills of material are used to group small, loose parts together into a kit.

Ans: False Difficulty: Moderate Learning Objective: LO 1

10. Information concerning on-hand quantities, lot sizes, and lead time can be found in the a. master production schedule (MPS). b. modular bill of materials. c. item master file. d. product structure file.

Ans: c, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

e.

11. _________ are used in MRP to determine work or purchase order quantities. a. Load levelings b. Overloads c. Cycle countings d. Lot sizing rules Ans: d, LO: 2, Bloom: C, Difficulty: Easy, AACSB: None

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12. Gross requirements at one level of a product structure generate gross requirements at the next level.

Ans: False Difficulty: Moderate Learning Objective: LO 2

13. The periodic order quantity (POQ) lot sizing technique places orders every demand period.

Ans: False Difficulty: Moderate Learning Objective: LO 2

14. The quantities reported on a master production schedule may reflect a combination of actual and forecasted demand.

Ans: True Difficulty: Moderate Learning Objective: LO 2

15. The quantities displayed on a master production schedule represent production and NOT actual demand.

Ans: True Difficulty: Moderate Learning Objective: LO 2

16. A phantom bill of material is appropriate when a product consists of assemblies that are later combined to form a variety of final products.

Ans: False Difficulty: Moderate Learning Objective: LO 2

17. Because the item master file is an input into the MRP process, it should be routinely updated to reflect any revisions or changes.

Ans: True Difficulty: Moderate Learning Objective: LO 2

18. ______________ is taking the physical count of inventory at various time during the year. a. Annual inventory b. Period order quantity

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c. Cycle counting d. Netting Ans: c, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

e.

Ans: False Difficulty: Moderate Learning Objective: LO 2

19. A matrix is used to organize and display the information generated by the MRP process.

Ans: True Difficulty: Moderate Learning Objective: LO 2

20. Effective capacity is determined by multiplying the rated capacity by utilization and efficiency.

Ans: True Difficulty: Moderate Learning Objective: LO 3

21. What is used to resolve underloaded and overloaded capacity conditions? a. Load leveling b. Load profile c. Lot for lot (L4L) d. Time phasing Ans: a, LO: 3, Bloom: C, Difficulty: Easy, AACSB: None

e.

Learning Objective: LO 3

22. Capacity requirements planning (CRP) converts the material plan into labor and machine workloads.

Ans: True Difficulty: Easy Learning Objective: LO 3

23. Capacity requirements planning (CRP) has three major inputs: (1) planned order releases, (2) routing files, and a. closed order files. b. open order files. c. fixed capacity plan.

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d. dynamic capacity plan.

Ans: b, LO: 3, Bloom: C, Difficulty: Easy, AACSB: None

Ans: True Difficulty: Moderate Learning Objective: LO 3

24. A load profile displays underloads and overloads.

Ans: True Difficulty: Easy Learning Objective: LO 3 25. What is a software that manages a company’s business processes by sharing information across functional areas? a. customer relationship management (CRM) b. materials resource planning (MRP) c. enterprise resource planning (ERP) d. product lifecycle management (PLM) Ans: c, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

26. The application modules that comprise the ERP system are designed to support only customer relationship management processes.

Ans: False Difficulty: Moderate Learning Objective: LO 5

27. ERP is beneficial because it transforms transactional data into information that can be used to support decision making.

Ans: True Difficulty: Moderate Learning Objective: LO 5

28. ERP application modules can be used alone or in combination.

Ans: True Difficulty: Moderate Learning Objective: LO 5

29. Best-of-breed enterprise resource planning (ERP) implementation refers to what? a. The implementation the best ERP software from a single vendor. b. The selection of ERP modules from different vendors.

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c. The integration of ERP software with customer relationship management (CRM) software. d. The integration of ERP software with supply chain management (SCM) software.

Ans: b, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

Ans: True Difficulty: Moderate Learning Objective: LO 5

30. The last stage in ERP implementation involves analyzing business processes.

Ans: False Difficulty: Easy Learning Objective: LO 5

31. Customer relationship management (CRM) software plans and executes business processes that involve customer interactions.

Ans: True Difficulty: Moderate Learning Objective: LO 5

32. Customer relationship management systems change the focus from managing products to managing customers.

Ans: True Difficulty: Moderate Learning Objective: LO 5

33. Supply chain management (SCM) software plans and executes business processes related to a manufacturing firm.

Ans: False Difficulty: Easy Learning Objective: LO 5

34. Cloud computing involves on-demand IT services.

Ans: True Difficulty: Easy Learning Objective: LO 6

Multiple Choice Copyright ©2020 John Wiley & Sons, Inc.

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35. Material requirements planning (MRP) is a useful for all of the following except a. dependent demand items. b. discrete demand items. c. independent demand items. d. erratic orders.

Ans: C Difficulty: Moderate Learning Objective: LO 2

36. All of the following are inputs into the MRP process except a. the master production schedule. b. the product structure file. c. the item master file. d. the planned order report.

Ans: D Difficulty: Easy Learning Objective: LO 2

37. The product structure file provides all of the following information except a. the product’s demand. b. the items that go into the product. c. a brief description of each item. d. when and in what quantity each item is needed in the assembly process.

Ans: A Difficulty: Easy Learning Objective: LO 2

38. A phantom bill of material is used a. to group small, loose parts together. b. when the product is manufactured in major subassemblies. c. for subassemblies that are immediately consumed in the next stage of production. d. when due dates have not been calculated.

Ans: C Difficulty: Moderate Learning Objective: LO 2

39. A _______________ of material is used to plan the production of products with many optional features. a. K-bill

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b. modular bill c. phantom bill d. time-phased bill Ans: B Difficulty: Moderate Learning Objective: LO 2

40. The item master file contains all the following except a. on-hand quantities. b. lead times. c. planned order releases. d. on-order quantities.

Ans: C Difficulty: Moderate Learning Objective: LO 2

41. The MRP process of subtracting on-hand quantities and scheduled receipts from gross requirements to produce net requirements is referred to as a. cycle counting. b. lot sizing. c. exploding. d. netting.

Ans: D Difficulty: Moderate Learning Objective: LO 2

42. The MRP process of determining requirements for lower level items based on the master production schedule is referred to as a. lot sizing. b. netting. c. backward scheduling. d. exploding.

Ans: D Difficulty: Moderate Learning Objective: LO 2

43. ______________ is a lot sizing technique that orders for multiple demand periods. a. Lot-for-lot (L4L) b. Periodic order quantity (POQ) c. Economic order quantity(EOQ) d. Multiple order quantity (MOQ) Ans: B

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Difficulty: Moderate Learning Objective: LO 2

44. Given the following Product Structure Record A B(3) D(2)

C(2) E(1)

D(3)

G(2)

G(3)

G(3)

The number of E’s required for each A is a. b. c. d.

1.

2.

3.

4.

Ans: C Difficulty: Moderate Learning Objective: LO 1

45. Given the following Product Structure Record A B(3) D(2) G(3)

C(2) E(1)

D(3)

G(2)

G(3)

The number of D’s required for each A is a. b. c. d.

2.

3.

6.

12.

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Ans: D Difficulty: Moderate Learning Objective: LO 1

46. Given the following Product Structure Record A B(3) D(2)

C(2) E(1)

G(3)

D(3)

G(2)

G(3)

The number of G’s required for each A is a. 40. b. 20. c. 18. d. 3.

Ans: A Difficulty: Moderate Learning Objective: LO 1

47. Given the following MRP matrix for Item D: ITEM: D Lot Size: Min 100 LT: 2 Gross Requirements Schedule Receipts Project on Hand 120 Net Requirements Planned Order Receipts Planned Order Releases

1 60

2 90 150

3 150

Period 4 5 150 180

6 270

7 120

The planned order release for period 3 is a. 100. b. 160. c. 270. d. 300.

Ans: B Difficulty: Hard Learning Objective: LO 2

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48. Given the following MRP matrix for Item D: ITEM: D Lot Size: Min 100 LT: 2 Gross Requirements Schedule Receipts Project on Hand 120 Net Requirements Planned Order Receipts Planned Order Releases

1 60

2 90 150

3 150

Period 4 5 150 180

6 270

7 120

3 150

Period 4 5 150 180

6 270

7 120

3

Period 4

6

7

The planned order release for period 5 is a. 100. b. 120. c. 160. d. 270.

Ans: B Difficulty: Hard Learning Objective: LO 2

49. Given the following MRP matrix for Item D: ITEM: D Lot Size: Min 100 LT: 2 Gross Requirements Schedule Receipts Project on Hand 120 Net Requirements Planned Order Receipts Planned Order Releases

1 60

2 90 150

The planned order receipt for period 6 is a. 100. b. 120. c. 160. d. 270.

Ans: D Difficulty: Hard Learning Objective: LO 2

50. Given the following MRP matrix for Item D: ITEM: D Lot Size: Min 100

LT: 2

Copyright ©2020 John Wiley & Sons, Inc.

1

2

5

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Gross Requirements Schedule Receipts Project on Hand 120 Net Requirements Planned Order Receipts Planned Order Releases

60

90 150

150

150

180

Test Bank

270

120

The projected on hand quantity at the end of period 3 is a. 0. b. 20. c. 60. d. 70.

Ans: D Difficulty: Hard Learning Objective: LO 2

51. Given the following MRP matrix for Item C: ITEM: C Lot Size: POQ LT: 2 Gross Requirements Schedule Receipts Project on Hand 100 Net Requirements Planned Order Receipts Planned Order Releases

1 70

2 90 200

3 150

Period 4 5 150 180

6 290

7 120

8 150

If each order cost $500 and the holding cost is $0.75 per item per period, the periodic order quantity is a. 3 periods of requirements b. 2 periods of requirements c. 1 period of requirements d. 0 period of requirements Ans: A Difficulty: Hard Learning Objective: LO 2

52. Given the following MRP matrix for Item C: ITEM: C Lot Size: POQ LT: 2 Gross Requirements Schedule Receipts Project on Hand 100 Net Requirements Planned Order Receipts

1 70

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2 90 200

3 150

Period 4 5 150 180

6 290

7 120

8 150

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Planned Order Releases

If each order cost $500 and the holding cost is $0.75 per item per period, then using the Periodic Order Quantity lot sizing technique, the planned order release for period 1 is a. 270. b. 290. c. 340. d. 560.

Ans: C Difficulty: Hard Learning Objective: LO 2

53. Given the following MRP matrix for Item C: ITEM: C Lot Size: POQ LT: 2 Gross Requirements Schedule Receipts Project on Hand 100 Net Requirements Planned Order Receipts Planned Order Releases

1 70

2 90 200

3 150

Period 4 5 150 180

6 290

7 120

8 150

If each order cost $500 and the holding cost is $0.75 per item per period, then using the Periodic Order Quantity lot sizing technique, the planned order release for period 4 is a. 270. b. 290. c. 340. d. 560.

Ans: B Difficulty: Hard Learning Objective: LO 2

54. Given the following MRP matrix for Item C: ITEM: C Lot Size: POQ LT: 2 Gross Requirements Schedule Receipts Project on Hand 100 Net Requirements Planned Order Receipts Planned Order Releases

1 70

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2 90 200

3 150

Period 4 5 150 180

6 290

7 120

8 150

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If each order cost $500 and the holding cost is $0.75 per item per period, then using the Periodic Order Quantity lot sizing technique, the projected on hand at the end of period 7 is a. 330. b. 270. c. 0. d. 140.

Ans: C Difficulty: Hard Learning Objective: LO 2

55. Given the following Product Structure Record A

B(2)

E(2)

C(3)

F(3)

F(2)

D(6)

G(3)

E(3)

H(1)

F(2)

I(1)

The number of I’s required for each A is a. b. c. d.

1.

2.

6.

12.

Ans: C Difficulty: Moderate Learning Objective: LO 1

56. Given the following Product Structure Record A

B(2)

E(2)

C(3)

F(3)

F(2)

D(6)

G(3)

E(3)

H(1)

F(2)

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I(1)

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The number of F’s required for each A is a. 6. b. 12. c. 18. d. 24.

Ans: D Difficulty: Moderate Learning Objective: LO 1

57. Given the following Product Structure Record A

B(2)

E(2)

C(3)

F(3)

F(2)

D(6)

G(3)

E(3)

H(1)

F(2)

I(1)

The number of G’s required to assemble 10 A’s is a. 9. b. 10. c. 90. d. 180.

Ans: C Difficulty: Moderate Learning Objective: LO 1

58. Given the following MRP matrix for Item E: ITEM: E Lot Size: L4L LT: 3 Gross Requirements Schedule Receipts Project on Hand 500 Net Requirements Planned Order Receipts Planned Order Releases

1 200

2 100

3 200 300

Period 4 5 200 300

6 200

7 300

The planned order releases for period 1 is a. 300. b. 200.

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c. 75. d. 0.

Ans: D Difficulty: Hard Learning Objective: LO 2

59. Given the following MRP matrix for Item E: ITEM: E Lot Size: L4L LT: 3 Gross Requirements Schedule Receipts Project on Hand 500 Net Requirements Planned Order Receipts Planned Order Releases

1 200

2 100

3 200 300

Period 4 5 200 300

6 200

7 300

6 200

7 300

The projected on hand quantity at the end of period 3 is a. 0. b. 100. c. 300. d. 500.

Ans: C Difficulty: Hard Learning Objective: LO 2

60. Given the following MRP matrix for Item E: ITEM: E Lot Size: L4L LT: 3 Gross Requirements Schedule Receipts Project on Hand 500 Net Requirements Planned Order Receipts Planned Order Releases

1 200

2 100

3 200 300

Period 4 5 200 300

The planned order releases for period 3 is a. 300. b. 200. c. 75. d. 0.

Ans: B Difficulty: Hard Learning Objective: LO 2

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61. Given the following MRP matrix for Item E: ITEM: E Lot Size: L4L LT: 3 Gross Requirements Schedule Receipts Project on Hand 500 Net Requirements Planned Order Receipts Planned Order Releases

1 200

2 100

3 200 300

Period 4 5 200 300

6 200

7 300

The planned order releases for period 4 is a. 300. b. 200. c. 75. d. 0.

Ans: A Difficulty: Hard Learning Objective: LO 2

62. A firm has the following gross requirements for Item F. If ordering costs are $60 per order and carrying costs are $0.50 per period.

Item F LT: 1 Gross Requirements Schedule Receipts Project on Hand 100 Net Requirements Planned Order Receipts Planned Order Releases

1 60

Period 2 3 40 80

4 60

If L4L ordering is used the planned order releases is a. 40 in period 1 and 0 in period 3 b. 80 in period 2 and 60 in period 3 c. 60 in period 2 and 80 in period 3 d. 0 in period 1 and 40 in period 3 Ans: B Difficulty: Hard Learning Objective: LO 2

63. A firm has the following gross requirements for Item F. If ordering costs are $60 per order and carrying costs are $0.50 per period.

Item F LT: 1

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1

Period 2 3

4

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60

40

80

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60

If EOQ lot sizing is used the minimum order quantity is a. 85 b. 100 c. 120 d. 150 Ans: C Difficulty: Hard Learning Objective: LO 2

64. A firm has the following gross requirements for Item F. If ordering costs are $60 per order and carrying costs are $0.50 per period.

Item F LT: 1 Gross Requirements Schedule Receipts Project on Hand 100 Net Requirements Planned Order Receipts Planned Order Releases

1 60

Period 2 3 40 80

4 60

If EOQ lot sizing is used to set the minimum order quantity, then the planned order releases is a. 40 in period 1 and 0 in period 3 b. 0 in period 2 and 80 in period 3 c. 120 in period 2 and 120 in period 3 d. 100 in period 2 and 100 in period 3 Ans: C Difficulty: Hard Learning Objective: LO 2

65. A firm has the following gross requirements for Item F. If ordering costs are $60 per order and carrying costs are $0.50 per period.

Item F LT: 1 Gross Requirements Schedule Receipts Project on Hand Net Requirements

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1 60

Period 2 3 40 80

4 60

100

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Planned Order Receipts Planned Order Releases

If EOQ lot sizing is used to set the minimum order quantity, then the projected on hand quantity at the end of period 3 is a. 40. b. 0. c. 100. d. 20.

Ans: A Difficulty: Hard Learning Objective: LO 2

66. A firm has the following gross requirements for Item F. If ordering costs are $60 per order and carrying costs are $0.50 per period.

Item F LT: 1 Gross Requirements Schedule Receipts Project on Hand 100 Net Requirements Planned Order Receipts Planned Order Releases

1 60

Period 2 3 40 80

4 60

If the periodic order quantity lot sizing rule is used, the number of period’s worth of requirements is a. 0. b. 1. c. 2. d. 3.

Ans: C Difficulty: Hard Learning Objective: LO 2

67. A firm has the following gross requirements for Item F. If ordering costs are $60 per order and carrying costs are $0.50 per period.

Item F LT: 1 Gross Requirements Schedule Receipts Project on Hand 100 Net Requirements Planned Order Receipts Planned Order Releases

Copyright ©2020 John Wiley & Sons, Inc.

1 60

Period 2 3 40 80

4 60

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If the periodic order quantity lot sizing rule is used, then planned order releases in Period 2 is a. 40 in period 1. b. 60 in period 2. c. 120 in period 3. d. 140 in Period 2.

Ans: D Difficulty: Hard Learning Objective: LO 2

68. Given the following Product Structure Record A

B(3)

E(2)

C(2)

E(3)

D(4)

F(2)

F(3)

G(2)

The number of E’s required for each A is a. 3. b. 6. c. 12. d. 24.

Ans: C Difficulty: Moderate Learning Objective: LO 1

69. Given the following Product Structure Record A

B(3)

E(2)

C(2)

E(3)

D(4)

F(2)

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F(3)

G(2)

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The number of F’s required for each A is a. 2. b. 3. c. 12. d. 16.

Ans: D Difficulty: Moderate Learning Objective: LO 1

70. Given the following Product Structure Record A

B(3)

E(2)

C(2)

E(3)

D(4)

F(2)

F(3)

G(2)

The number of G’s required for each A is a. 2. b. 8. c. 12. d. 24.

Ans: B Difficulty: Moderate Learning Objective: LO 1

71. Which of the following is not a major input into capacity requirements planning (CRP)? a. planned order releases b. routing file c. load profiles for each work center d. open orders file Ans: C Difficulty: Moderate Learning Objective: LO 3

72. A load profile compares a. requirements for all lower-level items to higher-level items. b. cumulative lead times to projected lead times.

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c. the quantities in which items should be produced to actual demand. d. released and planned orders with work center capacity.

Ans: D Difficulty: Moderate Learning Objective: LO 3

73. All of the following can be used for underloaded conditions except a. acquiring additional work. b. pushing work back. c. pulling work ahead. d. reducing normal capacity.

Ans: B Difficulty: Moderate Learning Objective: LO 3

74. Which of the following would not be used for an overloaded condition? a. pulling work ahead b. rerouting jobs to alternative work centers c. pushing work back d. splitting lots between two or more machines Ans: A Difficulty: Moderate Learning Objective: LO 3

75. _____________________ is a software that organizes and manages a firms business processes by sharing information across functional areas. a. Materials requirement planning (MRP) b. Enterprise requirements planning (ERP) c. Product lifecycle management (PLM) d. None of these answer choices is correct.

Ans: B Difficulty: Easy Learning Objective: LO 5

76. ERP systems consist of a series of __________________ that can be used alone or in concert. a. accounting applications b. application modules c. personal computers d. None of these answer choices is correct.

Ans: B

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Difficulty: Easy Learning Objective: LO 5

77. Which one of the following is not one of the four main categories of ERP modules? a. Finance/Accounting b. Sales/Marketing c. Human Resources d. Information Technology Ans: D Difficulty: Easy Learning Objective: LO 5

78. ______________ refers to the selection of ERP modules from different vendors. a. Integrated systems b. Best-of-breed c. Purchase optimization d. None of these answer choices is correct.

Ans: B Difficulty: Easy Learning Objective: LO 5

79. In ERP systems, advanced analytical capabilities that support decision making collectively is called business a. intelligence. b. support systems. c. decision protocol. d. None of these answer choices is correct.

Ans: A Difficulty: Moderate Learning Objective: LO 5

80. _______________________ software plans and executes business processes involving customer interaction. a. Product lifecycle management b. Customer relationship management c. Supply chain management d. ERP Ans: B Difficulty: Moderate Learning Objective: LO 5

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81. ________________________ software plans and executes business processes involving supplier interaction. a. Product lifecycle management b. Customer relationship management c. Supply chain management d. ERP Ans: C Difficulty: Moderate Learning Objective: LO 5

82. ____________________ software manages the design interaction between suppliers and customers. a. Product lifecycle management b. Customer relationship management c. Supply chain management d. ERP Ans: B Difficulty: Moderate Learning Objective: LO 5

83. Enterprise application integration software, which breaks down complex business processes into a series of transactions between applications, typically uses which of the following programming languages? a. EDI b. XML c. SCM d. PLM Ans: B Difficulty: Easy Learning Objective: LO 6

84. With _________________, customers can bundle together the services that they need and not purchase the entire system. a. cloud computing b. service-oriented architecture c. software as a service d. XML Ans: B Difficulty: Moderate Learning Objective: LO 6

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85. With _________________, on-demand IT services are provided over the Internet. a. cloud computing b. service-oriented architecture c. software as a service d. XML Ans: A Difficulty: Moderate Learning Objective: LO 6

Short Answer

86. How does MRP differ from traditional inventory control systems?

Ans: Material requirements planning (MRP) is a computerized inventory control and production planning system. The main objective of any inventory system is to ensure that material is available when needed. One objective of MRP is to maintain the lowest possible level of inventory. MRP does this by determining when component items are needed and scheduling them to be ready at that time, no earlier and no later. MRP was the first inventory system to recognize that inventories of raw materials, components, and finished goods may need to be handled differently. In the process of planning inventory levels for these various types of goods, the system also planned purchasing activities (for raw materials and purchased components), manufacturing activities (for component parts and assemblies), and delivery schedules (for finished products). Thus, the system was more than an inventory system; it became a production scheduling system as well. With its computerized data base, MRP is able to keep track of the relationship of job orders so that if a delay in one aspect of production is unavoidable, other related activities can be rescheduled, too. MRP systems have the ability to keep schedules valid and up to date.

Difficulty: Moderate Learning Objective: LO 2

87. What is the difference between independent and dependent demand?

Ans: The demand for the final product, or end items, is referred to as independent demand. Independent demand occurs outside of the firm and must be forecasted.

Dependent demand is the demand for component parts, subassemblies, and modules that comprise the end item. The requirements for dependent demand items are calculated, not

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forecasted. Because dependent demand is calculated and independent demand is forecasted different inventory control systems are used for each type. MRP is appropriate for dependent demand.

Difficulty: Hard Learning Objective: LO 1

88. When is it appropriate to use material requirements planning (MRP)?

Ans: MRP is a useful inventory and production control system for dependent and discrete demand items, complex products, job shop production, and assemble-to-order environments.

Difficulty: Moderate Learning Objective: LO 2

89. What is the master production schedule (MPS) and what role does in play in the material requirements planning (MRP) process?

Ans: The master production schedule (MPS) specifies which end items or finished products a firm is to produce, how many are needed, and when they are needed. The MPS works within the constraints of the production plan but produces a more specific schedule by individual products. The time frame is more specific as well. An MPS is usually expressed in days or weeks and may extend over several months to cover the complete manufacture of the items contained in the MPS. The MPS drives the MRP process. The schedule of finished products provided by the master schedule is needed before the MRP system can do its job of generating production schedules for component items.

Difficulty: Moderate Learning Objective: LO 2

90. What is a bill-of-material?

Ans: The bill of material for a product lists the items that go into the product, includes a brief description of each item, and specifies when and in what quantity each item is needed in the assembly process.

Difficulty: Easy Learning Objective: LO 2

91. What is Enterprise Resource Planning (ERP)?

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Ans: Enterprise Resource Planning (ERP) is software that organizes and manages a company’s business processes by sharing information across functional areas. It transforms transactional data like sales into useful information that supports business decisions in other parts of the company, such as manufacturing, inventory, procurement, invoicing, distribution, and accounting. In addition to managing all sorts of back-office functions, ERP connects with supply chain and customer management applications, helping businesses share information both inside and outside the company. Thus, ERP serves as the backbone for an organization’s information needs, as well as its e-business initiatives.

Difficulty: Moderate Learning Objective: LO 5

92. What steps are necessary to effectively implement Enterprise Resource Planning (ERP)?

Ans: Effective ERP implementation typically requires that a firm analyze its business processes, choose the ERP modules to implement, understand the level of sophistication needed for the business, finalize delivery and access, and link the system with its external partners.

Difficulty: Moderate Feedback: Learning Objective: LO 5

93. Which of the following choices is not true about material requirements planning? a) It is a computerized inventory control and production planning system. b) One of its objectives is to maintain the lowest possible level of inventory. c) It simplifies inventory control by handling inventories of raw materials, components, and finished goods in the same manner. d) It is useful for dependent and discrete demand times, complex products, job shop production, and assemble-to-order environments.

Ans: C, Difficulty: Moderate, Learning Objective: LO2, Bloom: K, AACSB: Reflective thinking

94. Which of the following choices is true about MRP (material requirements planning)? a) The MRP process has three major inputs: the master production schedule, the product structure file, and the K-bills. b) MRP systems are not very useful in industries in which the customer is allowed to choose among different options. c) The advantages of MRP are more evident when the manufacturing environment is complex and uncertain.

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d) MRP minimizes the level of inventory by scheduling components to be ready when they are needed or earlier, but not later.

Ans: C, Difficulty: Moderate, Learning Objective: LO2, Bloom: K, AACSB: Reflective thinking

95. The cumulative lead time __________. a) is the total length of time needed to manufacture a product b) is the sum of the lead times of all components of a product c) can be shortened by using major assemblies and subassemblies d) All of the above choices are correct.

Ans: A, Difficulty: Moderate, Learning Objective: LO2, Bloom: K, AACSB: Reflective thinking

96. Which of the following choices in not true about the master production schedule? a) It specifies which end items or finished products a firm is to produce, how many are needed, and when they are needed. b) It works within the constraints of the aggregate production plan and produced a schedule for product lines or families. c) It is usually expressed in days or weeks but may extend over several months. d) It drives the MRP process.

Ans: B, Difficulty: Moderate, Learning Objective: LO2, Bloom: K, AACSB: Reflective thinking

97. In a master production schedule (MPS) __________. a) the quantities represent demand, which can be actual customer orders and demand forecasts b) the feasibility is guaranteed from the start, since the MSP works within the constraints of the aggregate production plan c) all the quantities represent, directly or indirectly, finished products d) some companies set a fence time, within which no more changes to the MSP are allowed.

Ans: D, Difficulty: Moderate, Learning Objective: LO2, Bloom: K, AACSB: Reflective thinking

98. The product structure file __________. a) contains a bill of material when needed, i.e., for critical items b) specifies when each item is needed, which can best be described in a multilevel indented bill of material

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c) includes a brief description of each item d) All of the above choices are correct.

Ans: C, Difficulty: Moderate, Learning Objective: LO2, Bloom: K, AACSB: Reflective thinking

99. K-bills __________. a) are also known as modular bills of material b) reduce the processing time for orders for small, inexpensive items that are usually ordered infrequently in large quantities c) reduce the processing time for orders for small, inexpensive items that are usually ordered frequently in small quantities d) use a common prefix for related or similar parts such as fasteners, nuts, and bolts, so it’s easier to identify them Ans: B, Difficulty: Moderate, Learning Objective: LO2, Bloom: K, AACSB: Reflective thinking

100. If an automobile is available with three engine types, ten exterior colors, six interior colors, four types of interiors, and five types of car bodies, then there are __________. a) 28 possible model configurations and 28 bills of materials b) 3600 possible model configurations and 3600 modular bills of material, if a bill of material is used for each option rather than each combination of options c) 3600 possible model configurations and 28 modular bills of material, if a bill of material is used for each option rather than each combination of options d) 28 possible model configurations and 28 modular bills of material, if a bill of material is used for each option rather than each combination of options Ans: C, Difficulty: Moderate, Learning Objective: LO2, Bloom: K, AACSB: Reflective thinking

101. Which of the following choices is not true about capacity requirements planning? a) It is a computerized system that projects the load from a given material onto the capacity of a system. b) It is designed to identify overloads but is usually unable to identify underloads. c) It has three major inputs: planned order releases, a routing file, and an open orders file. d) It allows the MRP planner to level the load, by shifting requirements, reducing requirements, or temporarily expanding capacity.

Ans: B, Difficulty: Moderate, Learning Objective: LO3, Bloom: K, AACSB: Reflective thinking

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102. Which of the following choices is not true about capacity? a) It is affected by the mix of products and services, the choice of technology, the size of a facility, and the resources allocated. b) Effective capacity takes into account the efficiency with which a particular product or customer can be processed. c) Effective capacity in hours per day is the product of the number of machines or workers, the number of shifts, the utilization, and the efficiency. d) Rated capacity is the maximum output that can be achieved under normal operating conditions.

Ans: D, Difficulty: Moderate, Learning Objective: LO3, Bloom: K, AACSB: Reflective thinking

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File: ch16, Chapter 16: Lean Systems

True/False

1. _______ is a Japanese term that means fool proofing to prevent defects. a. Kaizen b. Andon c. Poka yoke d. Jidoka Ans: c, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

e.

Ans: False Difficulty: Easy Learning Objective: LO 1

2. Mass production means doing more with fewer workers, less inventory, and less space.

Ans: False Difficulty: Easy Learning Objective: LO 1

3. The individual generally credited with the development of lean production is a. Shigeo Shingo b. W. Edwards Deming c. Taiichi Ohno d. Genichi Taguchi e.

Ans: c, LO: 1 , Bloom: K, Difficulty: Easy, AACSB: None

4. In lean production, waste is defined as anything that does not add value to the product.

Ans: True Difficulty: Moderate Learning Objective: LO 1

5. General purpose machines are an example of flexible resources in lean production.

Ans: True

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Difficulty: Easy Learning Objective: LO 1

6. Producing items before they are needed is considered what type of waste under the principles of lean production? a. waiting b. overproduction c. overprocessing d. inventory Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

7. Waiting for parts to arrive or for machines to finish production is considered a form of waste under the principles of mass production.

Ans: False Difficulty: Moderate Feedback: Basic Elements of Lean Production Learning Objective: LO 1

8. The time required for a worker to complete one pass through the operations assigned to her is called the operator cycle time.

Ans: True Difficulty: Moderate Learning Objective: LO 1

9. Takt time is the pace at which production output is a. maximum. b. greater than customer demand. c. less than customer demand. d. equal to customer demand. e.

Ans: d, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

10. Manufacturing cells are comprised of groups of similar machines that process a family of parts.

Ans: False Difficulty: Moderate Learning Objective: LO 1

11. Taiichi Ohno observed that customers in American supermarkets pull items through the system based on what is needed to satisfy demand.

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Ans: True Difficulty: Moderate Learning Objective: LO 1

12. Push systems rely on predetermined production schedules often generated by computerized systems.

Ans: True Difficulty: Moderate Learning Objective: LO 1

13. _________ systems rely on customer demand. a. Push b. Pull c. Demand management d. Demand planning Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

14. Kanbans were derived from the two-bin inventory system.

Ans: True Difficulty: Moderate Learning Objective: LO 1

15. A kanban square is a marked area designated for holding a set quantity of output.

Ans: True Difficulty: Moderate Learning Objective: LO 1

16. Kanbans are used to maintain the discipline required of a push production system.

Ans: False Difficulty: Moderate Learning Objective: LO 1

17. The number of kanbans needed to maintain control in a pull system can be calculated from demand and lead time information.

Ans: True Difficulty: Moderate

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Learning Objective: LO 1

18. Small-lot production reduces lead time but increases quality problems.

Ans: False Difficulty: Moderate Learning Objective: LO 1

19. Small-lot production requires a. less space and lower capital investment. b. more space and lower capital investment. c. less space and higher capital investment. d. more space and higher capital investment.

Ans: a, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None

20. In small lot production, lower inventory levels do what? a. hide issues b. make process more dependent c. increase the number of kanbans d. increase storage costs. e.

Ans: b, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None

21. Setup time is NOT a component of the cumulative lead time for a manufactured product.

Ans: False Difficulty: Easy Learning Objective: LO 1

22. The lower inventory levels resulting from small-lot production hide problems in the production process.

Ans: False Difficulty: Moderate Learning Objective: LO 1

23. Internal setup activities can be performed when a process is running.

Ans: False Difficulty: Moderate Learning Objective: LO 1

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24. Reducing variability in production through more accurate demand forecasts is one way to create more uniform production levels.

Ans: True Difficulty: Moderate Learning Objective: LO 1

25. A poka-yoke is any foolproof device that prevents defects or injury from occurring.

Ans: True Difficulty: Moderate Learning Objective: LO 1

26. The authority for a worker to stop the production line when quality problems are encountered is known as a. total quality management. b. andon. c. poka-yoke d. jidoka.

Ans: d, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

27. Total productive maintenance combines preventive maintenance with kaizen.

Ans: False Difficulty: Moderate Learning Objective: LO 1

28. Lean concepts cannot be applied to services.

Ans: False Difficulty: Easy Learning Objective: LO 1

29. Flexible resources are one of the basic elements of lean production.

Ans: True Difficulty: Easy Learning Objective: LO 1

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30. The concept of cellular layouts was developed by a U.S. engineer in the 1920s.

Ans: True Difficulty: Hard Learning Objective: LO 1

31. The output of a manufacturing cell is changed by adding or removing workers.

Ans: True Difficulty: Easy Learning Objective: LO 1

32. The pull system was developed by Ohno to coordinate production between processes.

Ans: True Difficulty: Moderate Learning Objective: LO 1

33. Unlike a pull system, a push system prevents both overproduction and underproduction.

Ans: False Difficulty: Easy Learning Objective: LO 1

34. In the dual kanban system, a withdrawal kanban authorizes the movement of goods.

Ans: True Difficulty: Moderate Learning Objective: LO 1

35. One benefit of small lot production is that workers demonstrate fewer tendencies to let poor quality pass.

Ans: True Difficulty: Easy Learning Objective: LO 1

36. In lean production, a strong relationship exists between setup times and lot size.

Ans: True

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Difficulty: Moderate Learning Objective: LO 1

37. In a lean production system, kanban systems have been shown to handle large fluctuations in production requirements on the final assembly line with no problem.

Ans: False Difficulty: Easy Learning Objective: LO 1

38. Mixed-modeling sequencing is used at Toyota to create uniform production levels.

Ans: True Difficulty: Easy Learning Objective: LO 1 39. How many times does the question “Why?” need to be asked to typically find the root cause of a problem? a. 3 b. 4 c. 5 d. 6 Ans: c, LO: 1, Bloom: C, Difficulty: Easy, AACSB: None

40. What is a system that performs period inspection and maintenance to keep a machine in operation? a. breakdown maintenance b. repair maintenance c. preventive maintenance d. predictive maintenance Ans: c, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

41. Firms that adopt lean production experience reductions in employee training costs.

Ans: False Difficulty: Moderate Learning Objective: LO 2

42. Early adopters of lean production in the U.S. were unsuccessful because they tried to implement lean by slashing inventories by forcing their suppliers to make more frequent deliveries.

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Ans: True Difficulty: Moderate Learning Objective: LO 2

Multiple Choice

43. All of the following factors pressure companies for quicker response and shorter cycle times except a. demanding customers. b. longer product life cycles. c. globalization. d. All of the answer choices are correct.

Ans: B Difficulty: Easy Learning Objective: LO 1

44. ___________ is generally credited with the development of lean production. a. Frederick Taylor b. W. Edwards Deming c. Taiichi Ohno d. None of the answer choices is correct.

Ans: C Difficulty: Easy Learning Objective: LO 1 45. Which of the following is not a basic element of lean production? a. flexible resources b. pull system c. repetitive production d. small lot production Ans: C Difficulty: Moderate Learning Objective: LO 1

46. In lean production, waste is defined as a. overproduction. b. high levels of inventory.

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c. unnecessary movement. d. All of the answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 1

47. The pace at which production should take place to match the rate of customer demand is known as a. product flow time. b. jidoka time. c. kanban time. d. takt time.

Ans: D Difficulty: Moderate Learning Objective: LO 1

48. In a pull production system, a card that corresponds to a standard quantity of production is known as a(n) a. jidoka. b. andon. c. kanban. d. kaizen.

Ans: C Difficulty: Moderate Learning Objective: LO 1

49. In a pull system reducing the number of kanbans a. increases inventory making problems more visible. b. reduces inventory making problems less visible. c. reduces inventory making problems more visible. d. increases inventory making problems less visible.

Ans: C Difficulty: Hard Learning Objective: LO 1 50. A workstation’s output is 200 bottles of wine per hour. It takes 45 minutes to receive a withdrawal kanban of corks from the previous workstation. The withdrawal kanban is

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attached to a container holding 30 corks. The process uses a safety factor of 20 percent.

What is the number of withdrawal kanbans needed to support the bottling process? a. 4 b. 5 c. 6 d. 3 Ans: C Difficulty: Moderate Solution: N = (200 × 0.75 + 0.20 × 200 × 0.75)/30 = 6 Learning Objective: LO 1 51. A workstation’s output is 200 bottles of wine per hour. It takes 30 minutes to receive a withdrawal kanban of corks from the previous workstation. The withdrawal kanban is attached to a container holding 30 corks. The process uses a safety factor of 20 percent. What is the number of withdrawal kanbans needed to support the bottling process? a. 10 b. 2 c. 8 d. 4 Ans: D Difficulty: Hard Solution: N = (200 × 0.50 + 0.20 × 200 × 0.5)/30 = 4 Learning Objective: LO 1

52. A workstation must produce 400 units an hour. It takes 24 minutes to receive the necessary material for production from the previous workstation. Output is moved between workstations in containers holding 44 units. If the process uses a safety factor of 10%, then the amount of safety stock on average would be a. 16 b. 32 c. 8 d. 60 Ans: A Difficulty: Moderate Solution: S=0.10 × 400 × 0.40 = 16 Learning Objective: LO 1

53. A workstation must produce 400 units an hour. It takes 24 minutes to receive the necessary material for production from the previous workstation. Output is moved

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between workstations in containers holding 44 units. If the process uses a safety factor of 10%, then the number of kanbans that should be circulating between this workstation and the previous workstation is a. 2. b. 4. c. 6. d. 8.

Ans: B Difficulty: Moderate Solution: N = (400 × 0.40 + 0.10 × 400 × 0.40)/44 = 4 Learning Objective: LO 1

54. How many kanbans should circulate between two workstations if demand is 500 units per hour, lead time is 20 minutes, container sizes are 35, and the company uses a safety factor of 5%? a. 4 b. 5 c. 12 d. 8 Ans: B Difficulty: Moderate Solution: N = (500 × 0.33 + 0.05 × 500 × .33)/35 = 5 Learning Objective: LO 1

55. Which of the following statements concerning small-lot production is not true? a. small-lot production requires less space b. small-lot production requires more capital investment c. small-lot production simplifies transportation between workstations d. small-lot production allows processes to be moved closer together Ans: B Difficulty: Moderate Learning Objective: LO 1

56. Lower inventory levels make processes a. less dependent on each other while keeping bottlenecks hidden. b. less dependent on each other while revealing bottlenecks more quickly. c. more dependent on each other while revealing bottlenecks more quickly. d. more dependent on each other while keeping bottlenecks hidden.

Ans: C

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Difficulty: Moderate Learning Objective: LO 1

57. Which of the following is not a typical component of lead time? a. processing time b. maintenance time c. waiting time d. setup time Ans: B Difficulty: Moderate Learning Objective: LO 1

58. Improved scheduling of materials, workers, and machines will most generally affect a. processing time. b. move time. c. waiting time. d. setup time.

Ans: C Difficulty: Easy Learning Objective: LO 1

59. Which of the following is not a principle for reducing setup times? a. converting external setup to internal setup b. converting internal setup to external setup c. separating internal setup from external setup d. performing setup activities in parallel Ans: A Difficulty: Moderate Learning Objective: LO 1

60. ______________ setups can be performed in advance while the machine is running. a. Internal b. External c. Parallel d. Unnecessary Ans: B Difficulty: Easy

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Learning Objective: LO 1

61. A ___________ is a foolproof device that prevents defects from occurring. a. kaizen b. jidoka c. muda d. poka-yoke Ans: D Difficulty: Moderate Learning Objective: LO 1

62. The authority given to the worker to stop the production line if quality problems are encountered is known as a. kaizen. b. jidoka. c. poka-yoke d. muda.

Ans: B Difficulty: Moderate Learning Objective: LO 1

63. The concept of allocating extra time to a schedule for planning, problem solving, and maintenance is known as a. preventative scheduling. b. preventive maintenance. c. over capacity maintenance. d. under capacity scheduling.

Ans: D Difficulty: Moderate Learning Objective: LO 1

64. The benefits of lean production include all of the following except reduced a. inventory. b. product variety. c. costs. d. lead times.

Ans: B Difficulty: Easy

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65. All of the following are benefits expected from implementing lean production except a. better quality. b. shorter lead times. c. reduced capacity. d. improved sales.

Ans: C Difficulty: Moderate Learning Objective: LO 1

66. Lean production is difficult to implement when a. demand is highly variable. b. product variety is high. c. there are many unique products. d. All of these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 1

67. Combining the practice of preventive maintenance with the concepts of total quality is known as a. total preventive quality. b. total productive maintenance. c. quality breakdown maintenance. d. reliability assurance.

Ans: B Difficulty: Easy Learning Objective: LO 1

68. Mixed-model sequencing a. facilitates total productive maintenance. b. supports uniform production levels. c. increases product lead times. d. reduces worker productivity.

Ans: B Difficulty: Easy Learning Objective: LO 1

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69. Which of the following is not typically a component of lead time? a. move time. b. breakdown time. c. wait time. d. setup time.

Ans: B Difficulty: Easy Learning Objective: LO 1

70. A ____________ kanban is used to order material in advance of production. a. material b. supplier c. production d. withdrawal Ans: A Difficulty: Moderate Learning Objective: LO 1

71. Which of the following is not a benefit of lean production? a. greater flexibility b. increased capacity c. more customers d. more product variety Ans: C Difficulty: Easy Learning Objective: LO 1 72. Successful companies use lean to a. finely tune an operating system. b. overhaul an operating system. c. replace an operating system. d. None of these answer choices is correct.

Ans: A Difficulty: Moderate Learning Objective: LO 2

73. Which of the following are characteristic of lean applications U.S. soil? a. plants are larger

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b. deliveries from suppliers are less frequent c. Kanbans are kept very simple. d. All of these answer choices are correct.

Ans: D Difficulty; Easy Learning Objective: LO 2

74. American workers implementing lean prefer a. the slow pace of continuous improvement. b. the fast pace of kaizen blitzes. c. to never participate. d. to disrupt the process.

Ans: B Difficulty: Moderate Learning Objective: LO 2

75. Lean can have serious deficiencies when applied to companies that have a. high variability in demand. b. large variety of low-volume products. c. custom engineered products. d. All of these answer choices are correct.

Ans: D Difficulty: Moderate Learning Objective: LO 2 76. Lean and Six Sigma are a. natural partners for process improvement. b. natural partners for supply chain management. c. poor partners for process improvement. d. poor partners for supply chain improvement.

Ans: A Difficulty: Easy Learning Objective: LO 3 77. Value stream mapping (VSM) is a tool for a. reducing setup times. b. improving quality at the source. c. analyzing process flow. d. designing manufacturing cells.

Ans: C

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Difficulty: Moderate Learning Objective: LO 4

78. Analyzing process flow and eliminating waste is referred to as a. just-in-time. b. the Toyota Production System. c. value stream mapping d. total productive maintenance.

Ans: C Difficulty: Easy Learning Objective: LO 4

79. Which of the following is not a recommendation by the EPA concerning integrating lean and environmental initiatives? a. Use lean process tools to identify areas of environmental waste. b. Incorporate environmental, safety, and health data into value mapping. c. Add environmental waste to the seven wastes of lean. d. Use lean concepts to eliminate all environment waste.

Ans: D Difficulty: Moderate Learning Objective: LO 5

80. The most prevalent applications of lean include all the following except a. retailing. b. health care. c. food services. d. banking.

Ans: C Difficulty: Moderate Learning Objective: LO 6

81. Leaning a supply chain ____________ flow through a series of suppliers. a. pushes a smooth b. pulls a smooth c. pushes an intermittent d. pulls an intermittent Ans: B

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Difficulty: Moderate Learning Objective: LO 6

Short Answer

82. What role does the elimination of waste play in lean production?

Ans: The elimination of waste, or muda in Japanese, is a basic tenet of lean production.

Waste is viewed as anything other than the minimum amount of equipment, materials, parts, space and time necessary to add value to the product. In operations waste results from overproduction, waiting, unnecessary transporting of materials and parts, unnecessary steps in production, excessive inventory, rework and scrap. Lean production is the result of the mandate to eliminate waste in all its forms from the production process.

Difficulty: Moderate Learning Objective: LO 1

83. What is a manufacturing cell and what is its purpose?

Ans: Manufacturing cells group dissimilar machines together to process a family of parts with similar shapes or processing requirements. The layout of machines within the cell resembles a small assembly line and is usually U-shaped. Work is moved within the cell, ideally one unit at a time, from one process to the next by a worker moving about the cell in a prescribed path. Work normally flows through the cell in one direction and experiences little waiting. Changes of product mix within the cell are easy to accommodate. Changes in volume can be handled by adding workers or subtracting workers from the cell. Because cells produce similar items, setup times are low and lot sizes can be reduced. Movement from the cells to assembly lines occurs in small lots.

Manufacturing cells reduce waste because of their smaller size, workflow, and flexibility.

Difficulty: Hard Learning Objective: LO 1

84. How does the pull system differ from the push system?

Ans: In a push system, a schedule is prepared in advance for a series of workstations, and each workstation pushes its completed work to the next station even if the next station is not ready for it. This can lead to high work-in-process inventories. With the pull system, workers go back to previous stations and take only the parts or materials they need and

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can process immediately. When their output has been taken, workers at the previous station know it is time to start producing more, and they replenish the exact quantity that the subsequent station just took away. If their output is not taken, workers at the previous station simply stop production; no excess is produced. The pull system forces operations to work in coordination with one another. It prevents overproduction and under production since only necessary quantities are produced.

Difficulty: Moderate Learning Objective: LO 1

85. What is a kanban and how is it used in a pull system?

Ans: Kanban is the Japanese word for card. In the pull system, each kanban corresponds to a standard quantity of production or size of container. A kanban contains basic information such as a part number, brief description, type of container, unit load, preceding station, and subsequent station. Sometimes the kanban is color-coded to indicate raw materials or other stages of manufacturing. The information on the kanban does not change during production. The kanbans are used to exercise more control over the pull process on the shop floor and to encourage the continual reduction of inventory.

Difficulty: moderate Learning Objective: LO 1

86. What are the benefits of small-lot production?

Ans: Small-lot production requires less space and capital investment than systems that incur large inventories. By producing small amounts at a time, processes can be moved physically closer together and transportation between stations can be simplified. In small-lot production, quality problems are easier to detect and employees show less tendency to let poor quality pass. Lower inventory levels make processes more dependent on each other. This is beneficial because it reveals errors and bottlenecks more quickly and gives workers an opportunity to solve them.

Difficulty: moderate Learning Objective: LO 1

87. All of the following are elements of lean production, except __________. a) supplier networks b) kanbans c) cellular layouts d) varied production levels

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Ans: D, Difficulty: Moderate, Learning Objective: LO1, Bloom: K, AACSB: Reflective thinking

88. Which of the following choices is not true about lean production? a) It means doing more with less—less inventory, fewer workers, less space. b) It was coined to describe the Toyota Production System, widely recognized as the most efficient manufacturing system in the world. c) The terms “just-in-time” (JIT) and “lean production” are currently used interchangeably. d) It emphasizes elimination of waste but doesn’t focus on continuous improvement of operations.

Ans: D, Difficulty: Moderate, Learning Objective: LO1, Bloom: K, AACSB: Reflective thinking

89. The concept of flexible resources __________. a) includes multifunctional workers b) is usually not considered a core element of lean manufacturing c) was one of the last elements to be adopted by lean manufacturing d) is equivalent to the concept of kanbans Ans: A, Difficulty: Moderate, Learning Objective: LO1, Bloom: K, AACSB: Reflective thinking

90. Which of the following choices is not true about kanbans? a) Kanbans maintain the discipline of pull production by authorizing the production and movement of materials. b) There are many different types and variations of kanbans. c) Kanbans make the schedule of production. d) Toyota uses two types of kanbans: production kanbans and withdrawal kanbans.

Ans: C, Difficulty: Moderate, Learning Objective: LO1, Bloom: K, AACSB: Reflective thinking

91. What is the difference between the kanban system and the reorder point system? a) The reorder point system attempts to create a permanent ordering policy, whereas the kanban system encourages the continual reduction of inventory. b) Both concepts are equivalent, and there are no important differences. c) The reorder point system applies to the suppliers, whereas the kanban system applies to the production process. d) The reorder point system evolved into the kanban system with the widespread adoption of lean manufacturing.

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Ans: A, Difficulty: Moderate, Learning Objective: LO1, Bloom: K, AACSB: Reflective thinking

92. Which of the following choices is not true about small-lot production? a) Small-lots production requires less space and capital investment than systems that incur large inventories. b) It allows processes to be physically moved closer together. c) One of its disadvantages is that it maker errors harder to detect. d) It is difficult to coordinate in a push system.

Ans: C, Difficulty: Moderate, Learning Objective: LO1, Bloom: K, AACSB: Reflective thinking

93. One of the principles on which the SMED (single-minute exchange of dies) system is based is that it __________. a) converts external setups to internal setups b) streamlines all aspects of setup c) outsources external setups d) performs setup activities in series with maximum efficiency Ans: B, Difficulty: Moderate, Learning Objective: LO1, Bloom: K, AACSB: Reflective thinking

94. Total productive maintenance __________. a) combines the practice of preventive maintenance with the concept of total quality b) requires management to take a broader, strategic view of maintenance c) includes training and retraining workers to operate and maintain machines properly d) All of the above choices are correct.

Ans: D, Difficulty: Moderate, Learning Objective: LO2, Bloom: K, AACSB: Reflective thinking

95. Supplier networks __________. a) is about the interface between the company and its suppliers, but suppliers are not necessarily lean can and do work with lean customers b) usually don’t include supplier certification c) require imperatively that the source of supply be located close to the customer d) require uniform loads and medium-frequency deliveries Ans: C, Difficulty: Moderate, Learning Objective: LO2, Bloom: K, AACSB: Reflective thinking

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96. Which of the following is not a benefit of lean production? a) Lower costs b) Reduced inventory c) Reduced need for employee training d) Increased capacity Ans: C, Difficulty: Moderate, Learning Objective: LO2, Bloom: K, AACSB: Reflective thinking

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File: ch17, Chapter 17: Scheduling

True/False

1. Scheduling specifies when labor, equipment, and _______ are needed to produce a product. a. suppliers b. capacity c. customers d. facilities Ans: d, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

2. Scheduling is considered the _______ stage of the planning process. a. first b. last c. most important d. least important Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

3. The wide variety of jobs in a job shop makes scheduling easy.

Ans: False Difficulty: Easy Learning Objective: LO 1

4. Managers typically use multiple objectives when constructing a schedule.

Ans: True Difficulty: Easy Learning Objective: LO 1

5. Minimizing overtime is one of several objectives that could be considered when constructing a schedule.

Ans: True Difficulty: Easy Learning Objective: LO 1

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6. __________ is the scheduling and monitoring of day-to-day production in a job shop. a. The assignment method b. Production control c. Dispatching d. Load leveling e.

Ans: b, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

7. The scheduling function for mass production and job shop production are basically the same.

Ans: False Difficulty: Moderate Learning Objective: LO 1

8. Job shop scheduling is also known as shop floor control.

Ans: True Difficulty: Moderate Learning Objective: LO 1

9. Gantt charts show the planned and yet to be completed activities against total activities.

Ans: False Difficulty: Moderate Learning Objective: LO 1

10. The dispatch list contains the order in which work is assigned to a productive resource.

Ans: False Difficulty: Moderate Learning Objective: LO 1

11. The process of assigning work to limited resources is known as scheduling.

Ans: False Difficulty: Moderate Learning Objective: LO 2

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12. The assignment method of linear programming can be used to determine the best allocation of jobs to machines or workers to tasks.

Ans: True Difficulty: Easy Learning Objective: LO 2

13. In a job shop environment, the process of prioritizing jobs assigned to a productive resource is called a. resource planning. b. sequencing. c. opportunity costs. d. scheduling.

Ans: b, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

14. Tardiness is defined as the difference between a job’s a. flow time and makespan. b. makespan and cycle time. c. due date and completion date. d. due date and start date. e.

Ans: c, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

15. Sequencing involves determining the order in which jobs are released to the shop floor.

Ans: False Difficulty: Hard Learning Objective: LO 2

16. The sequence in which jobs should be processed is typically determined using linear programming.

Ans: False Difficulty: Moderate Learning Objective: LO 2

17. The time required for a job to move through the system is referred to as a. makespan. b. cycle time c. flow time. d. takt time.

Ans: c, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

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18. All sequencing rules strive to optimize both processing efficiency and due date performance.

Ans: False Difficulty: Moderate Learning Objective: LO 2 19. Johnson’s rule gives an optimal sequence for jobs processed serially through ______ processes.. a. 1 b. 2 c. 3 d. 4 e.

Ans: b, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

20. The shortest processing time (SPT) rule is most useful when the job shop is a. congested. b. not congested. c. at optimal utilization. d. below optimal utilization.

Ans: b, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

21. The longest processing time (LPT) rule tends to complete larger jobs in-house when subcontracting is anticipated.

Ans: True Difficulty: Moderate Learning Objective: LO 2

22. The first-come, first-served (FCFS) sequencing rule should be only used when operating at high levels of capacity.

Ans: False Difficulty: Moderate Learning Objective: LO 2

23. Input/output control provides the information necessary to regulate work flow in a job shop environment.

Ans: True Difficulty: Moderate Learning Objective: LO 2

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24. A work package travels with a job to specify what work needs to be done at a particular work station and where the job goes next.

Ans: True Difficulty: Easy Learning Objective: LO 2

25. Gantt charts show the planned but not the completed activities against a time scale.

Ans: False Learning Objective: LO 2

26. Finite scheduling _______ a resource beyond its fixed capacity. a. will not load b. will load c. will sequence d. will not sequence Ans: a, LO: 3, Bloom: C, Difficulty: Easy, AACSB: None

27. A manufacturing execution system is software that uses intelligent analytical tools and techniques to develop realistic schedules.

Ans: False Learning Objective: LO 3

28. Genetic algorithms are based on the natural selection properties of genetics.

Ans: True Learning Objective: LO 3

29. Increasing the capacity of a work center that is a bottleneck increases output.

Ans: True Difficulty: Moderate Learning Objective: LO 4

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30. The _________________ approach to scheduling concentrates on scheduling the bottleneck resources. a. assignment b. First come, first served c. Last come, last served d. theory of constraints Ans: d, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

31. With drum-buffer-rope (DBR), the bottleneck resource is always the buffer.

Ans: False Difficulty: Moderate Learning Objective: LO 4

32. Scheduling using the theory of constraints (TOC) requires that process batch sizes and transfer batch sizes always match.

Ans: False Difficulty: Moderate Learning Objective: LO 4

33. Typically, there are more options available when scheduling employees because labor is a very flexible resource.

Ans: True Difficulty: Moderate Learning Objective: LO 5

34. The assignment method of linear programming can be used for both loading and employee scheduling.

Ans: True Difficulty: Moderate Learning Objective: LO 5

Multiple Choice

35. Which of the following is not typically considered an objective of scheduling?

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a. minimizing job lateness b. maximizing time in the system c. minimizing overtime d. maximizing machine utilization Ans: B Difficulty: Easy Learning Objective: LO 1

36. ______________ specifies when the labor, equipment and facilities are needed to produce a good or to provide a service. a. Loading b. Scheduling c. Dispatching d. Shop floor control Ans: B Difficulty: Easy Learning Objective: LO 1

37. Which of the following is a possible objective in constructing a schedule. a. Minimizing idle time b. Minimizing response time c. Meeting customer due dates d. All of these answer choices are correct.

Ans: D Difficulty: Easy Learning Objective: LO 1

38. ______________ is the scheduling and monitoring of day-to-day production in a job shop. a. Loading b. Load Leveling c. Dispatching d. Shop floor control Ans: D Difficulty: Easy Learning Objective: LO 1

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39. The process of assigning work to limited resources is known as a. loading. b. sequencing. c. monitoring. d. dispatching Ans: A Difficulty: Easy Learning Objective: LO 2

40. The process of prioritizing jobs that have been assigned to a resource is called a. loading. b. monitoring. c. sequencing. d. input/output analysis.

Ans: C Difficulty: Easy Learning Objective: LO 2

41. If a job is ahead of schedule, then its critical ratio (CR) will be a. less than one. b. greater than one. c. equal to one. d. None of these answer choices is correct.

Ans: B Difficulty: Moderate Learning Objective: LO 2

42. If the work remaining is greater than the time remaining, the critical ratio (CR) will be a. less than one. b. greater than one. c. equal to one. d. None of these answer choices is correct.

Ans: A Difficulty: Moderate Feedback: Sequencing Learning Objective: LO 2

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43. The time required to complete a group of jobs is referred to as a. flow time. b. makespan. c. completion time. d. None of these answer choices is correct.

Ans: B Difficulty: Easy Feedback: Sequencing Learning Objective: LO 2

44. The sequencing rule that will minimize average job completion time for a set number of jobs to be processed on one machine is a. first-come-first served (FCFS). b. longest processing time (LPT). c. shortest process time (SPT). d. due date (DDATE).

Ans: C Difficulty: Moderate Feedback: Sequencing Learning Objective: LO 2

45. The sequencing rule that minimizes average tardiness for a set of jobs to be processed on one machine is a. first-come-first served (FCFS). b. longest processing time (LPT) c. shortest process time (SPT) d. due date (DDATE).

Ans: C Difficulty: Moderate Feedback: Sequencing Learning Objective: LO 2

46. If the following jobs are sequenced according to the first-come-first-served (FCFS) rule then the mean completion time in days for all jobs is (assume zero for today’s date)

Job A B C

Processing Time (days) 8 6 11

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D E

5 3

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10 8

a. 33 days. b. 22 days. c. 6.6 days. d. 4.4 days.

Ans: B Difficulty: Moderate Feedback: Sequencing Solution: Mean completion time = (8 + 14 + 25 + 30 + 33)/5 = 22 days Learning Objective: LO 2

47. If the following jobs are sequenced according to the FCFS rule then the mean tardiness (in days) for all jobs is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 5 days. b. 8.33 days. c. 10.6 days. d. 25 days.

Ans: C Difficulty: Moderate Feedback: Sequencing Solution: Mean tardiness = (0 + 0+ 8 + 20 + 25)/5 = 10.6 days Learning Objective: LO 2

48. If the following jobs are sequenced according to the FCFS rule then the maximum job tardiness (in days) is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

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a. 0 days. b. 8 days. c. 20 days. d. 25 days.

Ans: D Difficulty: Moderate Feedback: Sequencing Solution: Maximum job tardiness = MAX{0, 0 ,8, 20, 25} = 25 days Learning Objective: LO 2

49. If the following jobs are sequenced according to the FCFS rule, then the total number of jobs that would be late is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 4. b. 3. c. 2. d. 1.

Ans: B Difficulty: Moderate Feedback: Sequencing Solution: Total of jobs that would be late = COUNT{0, 0, 8, 20, 25} = 3 jobs Learning Objective: LO 2

50. If the following jobs are sequenced according to the FCFS rule then job C is completed on day (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 11. b. 17. c. 25.

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d. 30.

Ans: C Difficulty: Moderate Feedback: Sequencing Solution: Completion of job C = 8 + 6 + 11 = 25 days Learning Objective: LO 2

51. If the following jobs are sequenced according to the SPT rule then the mean completion time (in days) for all jobs is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 6.6 days. b. 16 days. c. 22 days. d. 33 days.

Ans: B Difficulty: Moderate Feedback: Sequencing Solution: Mean completion time = (3 + 8 + 14 + 22 + 33)/5 = 16 days Learning Objective: LO 2

52. If the following jobs are sequenced according to the SPT rule then the mean tardiness (in days) for all jobs is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 16 days. b. 13 days. c. 5.2 days. d. 3.2 days Ans: C Difficulty: Moderate

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Feedback: Sequencing Solution: Mean tardiness = (0 + 0 + 0 + 10 + 16)/5 = 5.2 days Learning Objective: LO 2

53. If the following jobs are sequenced according to the SPT rule then the maximum job tardiness (in days) is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 26 days b. 16 days c. 10 days d. 5.2 days Ans: B Difficulty: Moderate Feedback: Sequencing Solution: Maximum job tardiness = MAX{0, 0, 0, 10, 16} = 16 days Learning Objective: LO 2

54. If the following jobs are sequenced according to the SPT rule then the total number of jobs that would be late is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 0 jobs. b. 1 job. c. 2 jobs. d. 3 jobs.

Ans: D Difficulty: Moderate Feedback: Sequencing Solution: Number of jobs that would be late = COUNT{0, 0, 0, 10, 16} = 2 jobs Learning Objective: LO 2

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55. If the following jobs are sequenced according to the SPT rule then job B is completed on day (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 6. b. 14. c. 15. d. 22 Ans: B Difficulty: Moderate Feedback: Sequencing Solution: Completion for job B = 3 + 5 + 6 = 14 days Learning Objective: LO 2

56. If the following jobs are sequenced according to the LPT rule then the mean completion time (in days) for all jobs is (assume zero for today’s date) Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 118 days. b. 6.6 days. c. 33 days. d. 23.6 days Ans: D Difficulty: Moderate Feedback: Sequencing Solution: Mean completion time = (11 + 19 + 25 + 30 + 33)/5 = 23.6 days Learning Objective: LO 2

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57. If the following jobs are sequenced according to the LPT rule then the mean tardiness (in days) for all jobs is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 62 days. b. 12.4 days. c. 15.5 days. d. 25 days Ans: B Difficulty: Moderate Feedback: Sequencing Solution: Mean tardiness = (0 + 7 + 10 + 20 + 25)/5 = 12.4 days Learning Objective: LO 2

58. If the following jobs are sequenced according to the LPT rule then the maximum job tardiness (in days) is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 7 days. b. 10 days. c. 20 days. d. 25 days.

Ans: D Difficulty: Moderate Feedback: Sequencing Solution: Maximum job tardiness = MAX{0, 7, 10, 20, 25} = 25 days Learning Objective: LO 2

59. If the following jobs are sequenced according to the LPT rule then the total number of jobs that would be late is (assume zero for today’s date)

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Job A B C D E

Processing Time (days) 8 6 11 5 3

Test Bank

Due Date 12 15 17 10 8

a. 5 jobs. b. 4 jobs. c. 3 jobs. d. 2 jobs.

Ans: B Difficulty: Moderate Feedback: Sequencing Solution: Number of late jobs = COUNT{0, 7, 10, 20, 25} = 4 jobs Learning Objective: LO 2

60. If the following jobs are sequenced according to the LPT rule then job D would be completed on day (assume zero for today’s date )

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 5. b. 25. c. 30. d. 33.

Ans: C Difficulty: Moderate Feedback: Sequencing Solution: Job D’s completion time = 11 + 8 + 6 + 5 = 30 days Learning Objective: LO 2

61. If the following jobs are sequenced according to the SLACK rule then the mean completion time (in days) for all jobs is (assume zero for today’s date)

Job A B

Processing Time (days) 8 6

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Due Date 12 15

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C D E

11 7 3

Test Bank

17 10 8

a. 35 days. b. 20.8 days. c. 18.4 days. d. 7 days.

Ans: B Difficulty: Hard Feedback: Sequencing Solution: Solution: Mean completion time = (7 + 15 + 18 + 29 + 35)/5 = 20.8 days Learning Objective: LO 2

62. If the following jobs are sequenced according to the SLACK rule then the mean tardiness (in days) for all jobs is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 7 3

Due Date 12 15 17 10 8

a. 11.25 days. b. 9 days. c. 20 days. d. 12.5 days.

Ans: B Difficulty: Hard Feedback: Sequencing Solution: Mean tardiness = (0 + 3 + 10 + 12 + 20)/5 = 9 days Learning Objective: LO 2

63. If the following jobs are sequenced according to the SLACK rule then the maximum job tardiness (in days) is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 7 3

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a. 20 days. b. 12 days. c. 10 days. d. 7 days Ans: A Difficulty: Hard Feedback: Sequencing Solution: Maximum job tardiness = MAX{0, 3, 10, 12, 20) = 20 days Learning Objective: LO 2

64. If the following jobs are sequenced according to the SLACK rule then the total number of jobs that would be late is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 7 3

Due Date 12 15 17 10 8

a. 1 jobs. b. 2 jobs. c. 3 jobs d. 4 jobs Ans: D Difficulty: Hard Feedback: Sequencing Solution: Total jobs late = COUNT{0, 3, 10, 12, 20} = 4 jobs Learning Objective: LO 2

65. If the following jobs are sequenced according to the SLACK rule then job A would be completed on day (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 7 3

Due Date 12 15 17 10 8

a. 8. b. 7. c. 15.

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d. 12.

Ans: C Difficulty: Hard Feedback: Sequencing Solution: 8 + 7 = 15 days Learning Objective: LO 2

66. If the following jobs are sequenced according to the DDATE rule then the mean completion time (in days) for all jobs is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 16.4 days. b. 22.6 days. c. 28.7 days. d. 33.0 days Ans: A Difficulty: Moderate Feedback: Sequencing Solution: Mean completion time = (3 + 8 + 16 + 22 + 33)/5 = 16.4 days Learning Objective: LO 2

67. If the following jobs are sequenced according to the DDATE rule then the mean tardiness (in days) for all jobs is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 9.0 days. b. 5.4 days. c. 3.2 days. d. 2.8 days Ans: B Difficulty: Moderate Feedback: Sequencing

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Solution: Mean tardiness = (0 + 0 + 4 + 7 + 16)/5 = 5.4 days Learning Objective: LO 2

68. If the following jobs are sequenced according to the DDATE rule then the maximum job tardiness (in days) is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 12 days. b. 15 days. c. 16 days. d. 27 days.

Ans: C Difficulty: Moderate Feedback: Sequencing Solution: Maximum job tardiness = MAX{0, 0, 4, 7, 16} = 16 days Learning Objective: LO 2

69. If the following jobs are sequenced according to the DDATE rule then the total number of jobs that would be late is (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 5 jobs. b. 4 jobs. c. 3 jobs. d. 2 jobs.

Ans: C Difficulty: Moderate Feedback: Sequencing Solution: Total late jobs = COUNT{0, 0, 4, 7, 16} = 3 jobs Learning Objective: LO 2

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70. If the following jobs are sequenced according to the DDATE rule then job A would be completed on day (assume zero for today’s date)

Job A B C D E

Processing Time (days) 8 6 11 5 3

Due Date 12 15 17 10 8

a. 8. b. 12. c. 16. d. 22 Ans: C Difficulty: Moderate Feedback: Sequencing Solution: Completion for job A = 3 + 5 + 8 = 16 days Learning Objective: LO 2

71. Four products (1, 2, 3, and 4) must be processed on one of four machines (A, B, C, and D). The times required in minutes for each product on each machine are shown below.

Machine Product A B C D 1 10 9 16 12 2 8 14 17 5 3 19 20 11 7 4 8 18 5 10 If management wishes to assign products to machines so that the total time to complete all the products is minimized, then Product 1 is assigned to a. machine A. b. machine B. c. machine C. d. machine D. Ans: B` Difficulty: Hard Feedback: Sequencing Learning Objective: LO 2

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72. Four products (1, 2, 3, and 4) must be processed on one of four machines (A, B, C, and D). The times required in minutes for each product on each machine are shown below.

Machine Product A B C D 1 10 9 16 12 2 8 14 17 5 3 19 20 11 7 4 8 18 5 10 If management wishes to assign products to machines so that the total time to complete all the products is minimized, then Product 3 is assigned to a. machine A. b. machine B. c. machine C. d. machine D. Ans: D Difficulty: Hard Feedback: Sequencing Learning Objective: LO 2

73. Four products (1, 2, 3, and 4) must be processed on one of four machines (A, B, C, and D). The times required in minutes for each product on each machine are shown below.

Machine Product A B C D 1 10 9 16 12 2 8 14 17 5 3 19 20 11 7 4 8 18 5 10 If management wishes to assign products to machines so that the total time to complete all the products is minimized, then Product 4 is assigned to a. machine A. b. machine B. c. machine C. d. machine D. Ans: C Difficulty: Hard Feedback: Sequencing Learning Objective: LO 2

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74. Four products (1, 2, 3, and 4) must be processed on one of four machines (A, B, C, and D). The times required in minutes for each product on each machine are shown below.

Machine Product A B C D 1 10 9 16 12 2 8 14 17 5 3 19 20 11 7 4 8 18 5 10 If management assigns products to machines so that the total time to complete all jobs is minimized, then the time to complete Product 1 is a. 10 minutes. b. 9 minutes. c. 16 minutes. d. 12 minutes Ans: B Difficulty: Hard Feedback: Sequencing Learning Objective: LO 2

75. Four products (1, 2, 3, and 4) must be processed on one of four machines (A, B, C, and D). The times required in minutes for each product on each machine are shown below.

Machine Product A B C D 1 10 9 16 12 2 8 14 17 5 3 19 20 11 7 4 8 18 5 10 The minimum time required to complete all the products is a. 29 minutes. b. 27 minutes. c. 33 minutes. d. 36 minutes.

Ans: A Difficulty: Hard Feedback: Sequencing Learning Objective: LO 2

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76. The scheduling rule that minimizes the makespan time for a set of jobs that must be processed through a two-step system where every job follows the same sequence through the two processes is a. the shortest processing time (SPT). b. Johnson’s Rule. c. the assignment method. d. the minimal slack rule.

Ans: B Difficulty: Easy Feedback: Sequencing Learning Objective: LO 2

77. The following set of jobs must be processed serially through a two-step system. If Johnson’s Rule is used to sequence the jobs then the order in which the jobs would be performed is Job A B C D E

Process 1 12 8 7 10 5

Process 2 9 11 6 14 8

a. A-B-C-D-E b. C-B-E-D-A c. E-B-D-A-C d. D-E-B-A-C Ans: C Difficulty: Hard Feedback: Sequencing Learning Objective: LO 2

78. The following set of jobs must be processed serially through a two-step system. The times at each process are in hours. If Johnson’s Rule is used to sequence the jobs then the makespan time (in hours) for all jobs is Job A B C

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Process 1 12 8 7

Process 2 9 11 6

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D E

10 5

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14 8

a. 42 hours. b. 53 hours. c. 90 hours. d. 95 hours.

Ans: B Difficulty: Hard Feedback: Sequencing Learning Objective: LO 2

79. The following set of jobs must be processed serially through a two-step system. The times at each process are in hours. If Johnson’s Rule is used to sequence the jobs then Job C would start processing on operation 2 at Job A B C D E

Process 1 12 8 7 10 5

Process 2 9 11 6 14 8

a. hour 13. b. hour 26. c. hour 47. d. hour 53 Ans: C Difficulty: Hard Feedback: Sequencing Learning Objective: LO 2

80. The following set of jobs must be processed serially through a two-step system. The times at each process are in hours. If Johnson’s Rule is used to sequence the jobs then Job A would complete processing on operation 2 at Job A B C D E

Process 1 12 8 7 10 5

Process 2 9 11 6 14 8

a. hour 21.

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b. hour 35. c. hour 38. d. hour 47.

Ans: D Difficulty: Hard Feedback: Sequencing Learning Objective: LO 2

81. A ________ chart is used to show both planned and completed activities against a time scale. a. Gantt b. dispatch c. sequencing d. None of these answer choices is correct.

Ans: A Difficulty: Easy Feedback: Monitoring Learning Objective: LO 2

82. A _______________ is shop paperwork that travels with the job. a. makespan chart b. work package c. dispatch list d. None of these answer choices is correct.

Ans: B Difficulty: Easy Feedback: Monitoring Learning Objective: LO 2

83. A ________________ shows both planned and completed activities against a time scale. a. flow chart b. Gantt chart c. Pareto chart d. None of these answer choices is correct.

Ans: B Difficulty: Easy Feedback: Monitoring Learning Objective: LO 2

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84. _________________ provides the information to regulate the flow of work to and from a network of work centers. a. A dispatch list b. Input/output control c. A Gantt chart d. Drum-buffer-rope Ans: B Difficulty: Moderate Feedback: Monitoring Learning Objective: LO 2

85. _________________ scheduling involves loading work onto the work center, leveling the load, sequencing the work, and monitoring its progress. a. Finite b. Terminal c. Infinite d. Genetic Ans: C Difficulty: Moderate Feedback: Advanced Planning and Scheduling Systems Learning Objective: LO 3

86. With _________________ scheduling, loading and sequencing decisions are made at the same time. a. finite b. terminal c. infinite d. genetic Ans: A Difficulty: Moderate Feedback: Advanced Planning and Scheduling Systems Learning Objective: LO 3

87. The class of software, with libraries of algorithms and heuristics from which to choose, has become known as a. product life cycle (PLC). b. genetic algorithms. c. Advanced planning and scheduling (APS). d. None of these answer choices is correct.

Ans: C

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Difficulty: Easy Feedback: Advanced Planning and Scheduling Systems Learning Objective: LO 3

88. ______________ are based on natural selection properties of genetics. a. Manufacturing execution systems b. Genetic algorithms c. Finite scheduling systems d. Drum-buffer-rope schedules Ans: B Difficulty: Easy Feedback: Advanced Planning and Scheduling Systems Learning Objective: LO 3

89. A______________ monitors work status, machine status, material usage, and availability. a. drum-buffer-rope system b. manufacturing execution system c. planning and control system d. None of these answer choices is correct.

Ans: B Difficulty: Moderate Feedback: Advanced Planning and Scheduling Systems Learning Objective: LO 3

90. Theory of constraints is a _____________ scheduling approach that concentrates on scheduling the bottleneck. a. infinite b. finite c. genetic d. None of these answer choices is correct.

Ans: B Difficulty: Easy Feedback: Theory of Constraints Learning Objective: LO 4

91. To maintain the synchronization required for theory of constraints, Goldratt introduced the concept of

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a. drum-buffer-rope. b. transfer batches. c. manufacturing execution systems. d. None of these answer choices is correct.

Ans: A Difficulty: Easy Feedback: Theory of Constraints Learning Objective: LO 4

92. Identifying the bottleneck is the ______________ step in the theory of constraints scheduling procedure. a. first b. second c. last d. None of these answer choices is correct.

Ans: A Difficulty: Easy Feedback: Theory of Constraints Learning Objective: LO 4

93. Employee scheduling has _____________ options compared to work scheduling because labor is a ______________ resource. a. many, less flexible b. few, less flexible c. many, more flexible d. few, more flexible Ans: C Difficulty: Easy Feedback: Employee Scheduling Learning Objective: LO 5

94. The ________________ method of linear programming can be used to assign workers to different jobs. a. transportation b. differentiation c. assignment d. genetic Ans: C Difficulty: Easy Feedback: Employee Scheduling

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Learning Objective: LO 5

Short Answer Questions

95. What makes scheduling so difficult in a job shop?

Ans: Job shop scheduling is difficult because of the variety of jobs (or customers) that are processed, each with distinctive routing and processing requirements. In addition, although the volume of each customer order may be small, there are probably a great number of different orders in the shop at any one time. This necessitates planning for the production of each job as it arrives, scheduling its use of limited resources, and monitoring its progress through the system.

Difficulty: Easy Feedback: Objectives in Scheduling Learning Objective: LO 1

96. List some of the objectives in scheduling.

Ans: There are many different possible objectives in constructing a schedule, including: meeting customer due dates, minimizing job lateness, minimizing response time, minimizing completion time, minimizing time in the system, minimizing overtime, maximizing machine or labor utilization, minimizing idle time, and minimizing work-inprocess inventory.

Difficulty: Moderate Feedback: Objectives in Scheduling Learning Objective: LO 1

97. Why is monitoring an important component of job shop scheduling?

Ans: In a job shop environment, where jobs follow different paths through the shop, visit many different machine centers, and compete for similar resources, it is not always easy to keep track of the status of a job. When jobs are first released to the shop, it is relatively easy to observe the queue that they join and predict when their initial operations might be completed. As the job progresses, however, or the shop becomes more congested, it

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becomes increasingly difficult to follow the job through the system. Competition for resources (resulting in ling queues), machine breakdowns, quality programs, and setup requirements are just a few of the things that can delay a job’s progress. Monitoring develops progress reports on each job until it is completed and helps maintain reliable schedules in the system.

Difficulty: Moderate Feedback: Monitoring Learning Objective: LO 2

98. What is the difference between infinite scheduling and finite scheduling?

Ans: Infinite scheduling loads work without regard to capacity and then levels the load and sequences the jobs. Thus, leveling and sequencing decisions are made after overloads and underloads have been identified. This iterative process is very time consuming and not efficient. Finite scheduling assumes a fixed maximum capacity and will not load the resource beyond its capacity. Loading and sequencing decisions are made at the same time, so that the first jobs loaded onto a work center are of highest priority. Any jobs remaining after the capacity of the work center or resource has been reached are of lower priority and are scheduled for later time periods. This approach is easier than the infinite scheduling approach, but it will be successful only if the criteria for choosing the work to be performed, as well as capacity limitations, can be expressed accurately and concisely.

Difficulty: Moderate Feedback: Advanced Planning and Scheduling Systems Learning Objective: LO 3

99. Who developed the theory of constraints (TOC) and what is its approach to scheduling?

Ans: The theory of constraints (TOC) was developed by an Israeli physicist named Eliyahu Goldratt. Because he did not have a business or manufacturing background, Dr. Goldratt took a commonsense, intuitive approach to scheduling. He developed a software system that used mathematical programming and simulation to create a schedule that realistically considered the constraints of the manufacturing system. Dr. Goldratt’s first insight into the scheduling problem led him to simplify the number of variables considered. Instead of trying to balance the capacity of the manufacturing system, he thought it best to balance the flow of work through the system. He identified resources as bottleneck or non-bottleneck and noted that the system’s flow is controlled by the bottleneck resources. These resources should always have material to work on, should spend little time on nonproductive activities, should be fully staffed, and should be the focus of continuous improvement activities. Goldratt pointed out that an hour’s worth of production lost at a bottleneck reduces the output of the system by the same amount of time, whereas an hour lost at a non-bottleneck resource may have no effect at all.

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Consequently, Goldratt simplified the scheduling problem by initially scheduling the bottleneck resources and then the non-bottleneck ones. In this way production could be synchronized with the needs of the bottleneck and the system as a whole.

Difficulty: Hard Feedback: Theory of Constraints Learning Objective: LO 4

100. If the critical ratio is 0.5, the remaining processing time is 4 days, and the due date is on day 7, then today’s date is day __________. a) 2 b) 4 c) 5 d) 7 Ans: C, Difficulty: Moderate, Learning Objective: LO3, Bloom: K, AACSB: Reflective thinking

101. If the following jobs are scheduled according to the FCFS rule,

Job A B C D E

Processing Time (days) 18 2 20 2 10

Due Date 20 2 20 6 12

the mean completion time is __________ days. (Assume 0 for today’s date.) a) 10.4 b) 15.4 c) 25.4 d) 34.4 Ans: D, Difficulty: Moderate, Learning Objective: LO3, Bloom: K, AACSB: Reflective thinking

102. The following jobs are scheduled according to the FCFS rule.

Job A B

Processing Time (days) 18 2

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Due Date 20 2

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20 2 10

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20 6 12

The mean tardiness is __________ days. (Assume 0 for today’s date.) a) 34.4 b) 22.8 c) 10.4 d) 10.1 Ans: B, Difficulty: Moderate, Learning Objective: LO3, Bloom: K, AACSB: Reflective thinking

103. The following jobs are scheduled according to the FCFS rule.

Job A B C D E

Processing Time (days) 18 2 20 2 10

Due Date 20 2 20 6 12

The maximum tardiness is __________ days. (Assume 0 for today’s date.) a) 40 b) 36 c) 20 d) 18 Ans: A, Difficulty: Moderate, Learning Objective: LO3, Bloom: K, AACSB: Reflective thinking

104. The following jobs are scheduled according to the FCFS rule.

Job A B C D E

Processing Time (days) 18 2 20 2 10

Due Date 20 2 20 6 12

The minimum tardiness is __________ days. (Assume 0 for today’s date.)

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a) 36 b) 18 c) 8 d) 0 Ans: D, Difficulty: Moderate, Learning Objective: LO3, Bloom: K, AACSB: Reflective thinking

105. The following jobs are scheduled according to the FCFS rule.

Job A B C D E

Processing Time (days) 18 2 20 2 10

Due Date 20 2 20 6 12

The number of jobs that would be late is __________ days. (Assume 0 for today’s date.) a) 1 b) 3 c) 4 d) 5 Ans: C, Difficulty: Moderate, Learning Objective: LO3, Bloom: K, AACSB: Reflective thinking

106. The following jobs are scheduled according to the DDATE rule.

Job A B C D E

Processing Time (days) 18 2 20 2 10

Due Date 20 2 20 6 12

The mean completion time is __________ days. (Assume 0 for today’s date.) a) 9.2 b) 10.4 c) 20.8 d) 22.8

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Ans: C, Difficulty: Moderate, Learning Objective: LO3, Bloom: K, AACSB: Reflective thinking

107. The following jobs are scheduled according to the DDATE rule.

Job A B C D E

Processing Time (days) 18 2 20 2 10

Due Date 20 2 20 6 12

The mean tardiness is __________ days. (Assume 0 for today’s date.) a) 9.2 b) 10.4 c) 15.8 d) 20.8 Ans: A, Difficulty: Moderate, Learning Objective: LO3, Bloom: K, AACSB: Reflective thinking

108. The following jobs are scheduled according to the DDATE rule.

Job A B C D E

Processing Time (days) 18 2 20 2 10

Due Date 20 2 20 6 12

The maximum tardiness is __________ days. (Assume 0 for today’s date.) a) 40 b) 36 c) 32 d) 12 Ans: C, Difficulty: Moderate, Learning Objective: LO3, Bloom: K, AACSB: Reflective thinking

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109. The following jobs are scheduled according to the DDATE rule.

Job A B C D E

Processing Time (days) 18 2 20 2 10

Due Date 20 2 20 6 12

The number of jobs that would be late is __________. (Assume 0 for today’s date.) a) 4 b) 3 c) 2 d) 1 Ans: B, Difficulty: Moderate, Learning Objective: LO3, Bloom: K, AACSB: Reflective thinking

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