Operations Management Final Exam

Front 1

1) Which of the following statements is true regarding the leverage of supply-chain savings?
A) Supply chain leverage is about the same for all industries.
B) Supply chain savings exert more leverage as the firm's purchases are a smaller percent of sales.
C) Supply chain leverage depends only upon the percent of sales spent in the supply chain.
D) Supply chain savings exert more leverage as the firm has a lower net profit margin.
E) None of the above is true.

Back 1

D) Supply chain savings exert more leverage as the firm has a lower net profit margin.

Front 2

2) Which one of the following statements about purchasing is true?
A) Purchasing is always more efficient than making an item.
B) Purchasing has an impact on the quality of the goods and services sold.
C) Competitive bidding is a major factor in long-term cost reductions.
D) Purchasing provides a major opportunity for price increases.
E) The cost of purchases as a percent of sales is often small.

Back 2

B

Front 3

3) The transfer of some of what are traditional internal activities and resources of a firm to outside vendors is
A) not allowed by the ethics code of the Supply Management Institute
B) keiretsu
C) outsourcing
D) a standard use of the make or buy decision
E) offshoring

Back 3

c

Front 4

4) In supply-chain management, ethical issues
A) may be guided by the principles and standards of the Institute for Supply Management
B) become more complex the more global is the supply chain
C) may be guided by company rules and codes of conduct
D) are particularly important because of the enormous opportunities for abuse
E) All of the above are true.

Back 4

e

Front 5

5) Which one of the following is not a supply-chain strategy?
A) virtual companies
B) short-term relationships with few suppliers
C) negotiation with many suppliers
D) vertical integration
E) keiretsu

Back 5

b

Front 6

6) Which of the following best describes vertical integration?
A) to develop the ability to produce the specified good more efficiently than before
B) to develop the ability to produce products which complement the original product
C) to build long-term partnerships with a few suppliers
D) to produce goods or services previously purchased
E) to sell products to a supplier or a distributor

Back 6

d

Front 7

7) The "bullwhip" effect
A) results in increasing fluctuations at each step of the sequence
B) increases the costs associated with inventory in the supply chain
C) occurs because of distortions in information in the supply chain
D) occurs as orders are relayed from retailers to wholesalers
E) all of the above

Back 7

e

Front 8

8) Hewlett-Packard withholds customization of its laser printers as long as possible. This is an example of
A) postponement
B) standardization
C) vendor-managed inventory
D) backward integration
E) timely customization

Back 8

a

Front 9

9) A grocery store is trying to find a new vendor for carrots. Its three criteria are 1. Freshness, 2. Lot Size, and 3.
Cost with factor weights of .6, .1, and .3 respectively. What would a vendor with ratings of 6, 8, and 10 in the
three respective categories score as a weighted total?
A) 1
B) 9.8
C) 24
D) 7.4
E) none of the above

Back 9

d

Front 10

10) Consider a firm with a 2007 net income of $20 million, revenue of $60 million and cost of goods sold of $25
million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant &
equipment, what is the inventory turnover?
A) 42.00 B) 4.16 C) 10.00 D) 12.50 E) 20.00

Back 10

d

Front 11

11) What is the practice of moving a business process to a foreign country but retaining control of it?
A) outsourcing
B) exporting
C) backsourcing
D) farshoring
E) offshoring

Back 11

e

Front 12

12) Which of the following is not true regarding core competencies?
A) They may represent a small portion of an organization's total business.
B) They may include unique production methods.
C) They may be good candidates for outsourcing.
D) They may include proprietary technology or information.
E) They may include specialized knowledge.

Back 12

c

Front 13

13) What theory states that you should allow another firm to perform work activities for your company if that
company can do it more productively than you can?
A) theory of core competencies
B) theory of comparative advantage
C) theory of competitive advantage
D) theory of outsourcing
E) theory of offshoring

Back 13

b

Front 14

14) Which of the following are possible outsourcing risks?
I. Incorrectly identifying a core competency as non-core
II. Setting savings goals too high
III. Inability to control product development, quality
IV. Non-responsive provider
V. Currency fluctuations
A) III, IV, V B) I, II, IV C) II, III, V D) I, III, V E) I, II, III, IV, V

Back 14

e

Front 15

15) The reason behind most outsourcing failures is
A) unable to handle increased logistic complexity
B) lack of understanding and analysis before decision
C) costs were higher than predicted
D) labor was less productive than predicted
E) decision was rushed

Back 15

b

Front 16

16) Which of the following is a function of inventory?
A) to take advantage of quantity discounts
B) to hedge against inflation
C) to decouple the firm from fluctuations in demand and provide a stock of goods that will provide a
selection for customers
D) to decouple or separate parts of the production process
E) All of the above are functions of inventory.

Back 16

e

Front 17

17) Which of the following is not one of the four main types of inventory?
A) maintenance/repair/operating supply inventory
B) work-in-process inventory
C) raw material inventory
D) safety stock inventory
E) All of these are main types of inventory.

Back 17

d

Front 18

18) ABC analysis is based upon the principle that
A) more time should be spent on class "C" items because there are more of them
B) an item is critical if its unit price is high
C) all items in inventory must be monitored very closely
D) there are usually a few critical items, and many items which are less critical
E) an item is critical if its usage is high

Back 18

d

Front 19

19) The primary purpose of the basic economic order quantity model shown below is
Q* =
2 · D · S
H
A) to calculate the reorder point, so that replenishments take place at the proper time
B) to minimize the sum of setup cost and holding cost
C) to maximize the customer service level
D) to calculate the optimum safety stock
E) to minimize the sum of carrying cost and holding cost

Back 19

b

Front 20

20) A certain type of computer costs $1,000, and the annual holding cost is 25%. Annual demand is 10,000 units, and
the order cost is $150 per order. What is the approximate economic order quantity?
A) 70 B) 110 C) 600 D) 183 E) 16

Back 20

b

Front 21

21) In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ
will
A) increase by 200%
B) increase, but more data is needed to say by how much
C) increase by 100%
D) increase by about 41%
E) either increase or decrease

Back 21

d

Front 22

22) Which of the following statements about the basic EOQ model is true?
A) If annual demand were to double, the EOQ would increase.
B) If the ordering cost were to double, the EOQ would rise.
C) If the carrying cost were to increase, the EOQ would fall.
D) If annual demand were to double, the number of orders per year would increase.
E) All of the above statements are true.

Back 22

e

Front 23

23) For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model was 200 units and
the total annual inventory (carrying and setup) cost was $600. The inventory carrying cost per unit per year for
this item is
A) $2.00
B) $3.00
C) $150.00
D) $1.50
E) not enough data to determine

Back 23

b

Front 24

24) An inventory decision rule states "when the inventory level goes down to 14 gearboxes, 100 gearboxes will
be ordered." Which of the following statements is true?
A) One hundred is the reorder point, and 14 is the order quantity.
B) Fourteen is the safety stock, and 100 is the reorder point.
C) The number 100 is a function of demand during lead time.
D) Fourteen is the reorder point, and 100 is the order quantity.
E) None of the above is true.

Back 24

d

Front 25

25) Which of the following statements about quantity discounts is false?
A) The cost-minimizing solution may or may not be where annual holding costs equal annual ordering costs.
B) The larger annual demand, the less attractive a discount schedule will be.
C) In inventory management, item cost becomes relevant to inventory decisions only when a quantity
discount is available.
D) The smaller the ordering cost, the less attractive a discount schedule will be.
E) If carrying costs are expressed as a percentage of value, EOQ is larger at each lower price in the discount
schedule.

Back 25

b

Front 26

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

Back 26

C) 3 to 18 months

Front 27

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

Back 27

B) minimizing cost

Front 28

28) Which of the following is not one of the four things needed for aggregate planning?
A) a method for determining costs, such as hiring, layoffs, and inventory costs, associated with production
schedules
B) an aggregate demand forecast for an intermediate planning period
C) a logical overall unit for measuring sales and output
D) a mathematical model that will minimize costs over the intermediate planning period
E) All of these are needed for aggregate planning.

Back 28

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

Front 29

29) Which of the following statements about aggregate planning is true?
A) Aggregate planning uses the adjustable part of capacity to meet production requirements.
B) Work station loading and job assignments are examples of aggregate planning.
C) Advertising/promotion is a way of manipulating product or service supply.
D) Overtime/idle time is a way of manipulating product or service demand.
E) All of the above are true.

Back 29

A) Aggregate planning uses the adjustable part of capacity to meet production requirements.

Front 30

30) As the level of management working on a forecast increases the __________ associated with the forecast also
__________.
A) duration, increases
B) accuracy, increases
C) duration, decreases
D) cost, decreases
E) both A and D

Back 30

A) duration, increases

Front 31

31) To what level of detail does a master production schedule go?
A) total number of push mowers that Snapper should produce
B) quantity and timing for purchase of components used to make final products
C) quantity and timing for production of every final product
D) total number of each individual product should be produced
E) total number of cars to be produced by a manufacturer

Back 31

B) quantity and timing for purchase of components used to make final products

Front 32

32) Which of these is among the demand options of aggregate planning?
A) varying workforce size
B) subcontracting
C) back-ordering during high-demand periods
D) changing inventory levels
E) All of the above are demand options.

Back 32

C) back-ordering during high-demand periods

Front 33

33) Which of these aggregate planning strategies adjusts capacity to match demand?
A) using part-time workers
B) changing price
C) back ordering
D) counterseasonal product mixing
E) None of the above is a capacity option.

Back 33

A) using part-time workers

Front 34

34) Which of the following statements about aggregate planning is true?
A) The development of mathematical models has allowed aggregate planners to discontinue use of
trial-and-error methods.
B) A pure chase strategy allows lower inventories when compared to pure level scheduling.
C) Disaggregation turns the master production schedule into an intermediate term master plan.
D) In aggregate planning, back orders are a means of manipulating supply while part-time workers are a
way of manipulating product or service demand.
E) All of the above are true.

Back 34

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

Front 35

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

Back 35

C) lay off workers to match the 200 unit difference

Front 36

36) Which of the following statements best compares modular bills and phantom bills?
A) Modular bills represent subassemblies that actually exist and are inventoried, while phantom bills
represent subassemblies that exist only temporarily and are not inventoried.
B) Both pertain to assemblies that are inventoried.
C) There is no difference between the two.
D) Modular bills are used for assemblies that are not inventoried, unlike phantom bills.
E) Both pertain to assemblies that are not inventoried.

Back 36

A) Modular bills represent subassemblies that actually exist and are inventoried, while phantom bills

Front 37

Given the following bill of material
If the demand for product A is 50 units, what will be the gross requirement for component E?
A) 100 B) 4 C) 200 D) 300 E) 250

Back 37

D) 300

Front 38

38) It is week 1 and there are currently 20 As in stock. The MPS calls for 300 As at the start of week 5. If there are
scheduled receipts planned for week 3 and week 4 of 120 As each and A has a lead time of 1 week when and
how large of an order should be placed to meet the requirement of 300 As?
A) Week 5, 40 A s
B) Week 4, 300 A s
C) Week 1, 40 A s
D) Week 1, 300 A s
E) Week 4, 40 A s

Back 38

E) Week 4, 40 A s

Front 39

39) The MPS calls for 50 units of Product A and 60 of B. There are currently 25 of Product B on hand. Each A
requires 2 of Part C; each B requires 5 of C. There are 160 units of C available. The net requirements for C are
A) 690 B) 700 C) 115 D) 240 E) 175

Back 39

C) 115

Front 40

40) In MRP, system nervousness is caused by
A) management's marking part of the master production schedule as "not to be rescheduled"
B) the use of phantom bills of material
C) management's attempt to evaluate alternative plans before making a decision
D) the use of the lot-for-lot approach
E) management's attempt to continually respond to minor changes in production requirements

Back 40

E) management's attempt to continually respond to minor changes in production requirements

Front 41

41) Material requirements plans specify
A) the quantities of the product families that need to be produced
B) whether one should use phantom bills of material or not
C) the costs associated with alternative plans
D) the quantity and timing of planned order releases
E) the capacity needed to provide the projected output rate

Back 41

D) the quantity and timing of planned order releases

Front 42

42) Which of the following lot-sizing techniques results in the lowest holding costs?
A) lot-for-lot
B) EOQ
C) Wagner-Whitin algorithm
D) the quantity discount model
E) part-period balancing

Back 42

A) lot-for-lot

Front 43

43) Which of the following statements regarding lot-sizing is true?
A) Too much concern with lot-sizing results in false accuracy.
B) Lot-for-lot cannot be modified for scrap allowance or process constraints.
C) The Wagner-Whitin algorithm simplifies lot size calculations.
D) EOQ principles should be followed whenever economical.
E) All of the above are true.

Back 43

A) Too much concern with lot-sizing results in false accuracy.

Front 44

44) MRP II is accurately described as
A) MRP software designed for services
B) a new generation of MRP software that extends MRP to planning and scheduling functions
C) an enhancement of MRP that plans for all levels of the supply chain
D) MRP with a new set of computer programs that execute on microcomputers
E) MRP augmented by other resource variables

Back 44

E) MRP augmented by other resource variables

Front 45

45) Which of the following is false concerning enterprise resource planning (ERP)?
A) It shares common data and practices across the enterprise.
B) It is inexpensive to implement.
C) It attempts to automate and integrate the majority of business processes.
D) All of the above are true.

Back 45

B) It is inexpensive to implement.

Front 46

46) On the crossover chart where the costs of two or more location alternatives have been plotted, the quantity at
which two cost curves cross is the quantity at which
A) fixed costs equal variable costs for one location
B) variable costs are equal for two alternative locations
C) fixed costs are equal for two alternative locations
D) total costs are equal for two alternative locations
E) total costs are equal for all alternative locations

Back 46

D) total costs are equal for two alternative locations

Front 47

47) A regional bookstore chain is about to build a distribution center that is centrally located for its eight retail
outlets. It will most likely employ which of the following tools of analysis?
A) linear programming
B) assembly line balancing
C) load-distance analysis
D) center-of-gravity model
E) all of the above

Back 47

D) center-of-gravity model

Front 48

48) A county wants to build one centrally-located processing facility to serve the county's four recycling drop-off
locations. The four drop-offs have characteristics as given in the table below. What is the approximate center of
gravity of these four locations?
Location X-coordinate Y-coordinate Tonnage
Drop-off point A 1 8 10
Drop-off point B 6 7 35
Drop-off point C 6 2 25
Drop-off point D 4 7 50
A) 33.5, 135.4 B) 4.75, 6.04 C) 570, 725 D) 17, 24 E) 6, 4.25

Back 48

B) 4.75

Front 49

49) The transportation method, when applied to location analysis
A) maximizes revenues
B) minimizes total fixed costs
C) minimizes the movement of goods
D) minimizes total production and transportation costs
E) minimizes total transportation costs

Back 49

D) minimizes total production and transportation costs

Front 50

50) Traffic counts and purchasing power analysis of drawing area are techniques associated with
A) the factor rating method
B) a manufacturing location decision
C) the transportation method
D) an industrial location decision
E) a retail or professional service location decision

Back 50

E) a retail or professional service location decision

Front 51

51) The main issue in designing process layouts concerns the relative positioning of
A) raw materials
B) supervisors to their employees
C) departments
D) safety devices
E) entrances, loading docks, etc.

Back 51

C) departments

Front 52

52) The most common tactic followed in process-layout planning is to arrange departments or work centers so they
A) maximize the machine utilization
B) minimize the costs of material handling
C) minimize the cost of skilled labor
D) allocate the available space equally to all the departments
E) none of the above

Back 52

B) minimize the costs of material handling

Front 53

53) Which of the statements below best describes office layout?
A) groups workers, their equipment, and spaces/offices to provide for movement of information
B) addresses the layout requirements of large, bulky projects such as ships and buildings
C) allocates shelf space and responds to customer behavior
D) deals with low-volume, high-variety production
E) seeks the best personnel and machine utilization in repetitive or continuous production

Back 53

A) groups workers, their equipment, and spaces/offices to provide for movement of information

Front 54

54) Ambient conditions, spatial layout and functionality, and signs, symbols, and artifacts are all
A) elements of customization in a warehouse layout
B) elements of successful office layouts
C) indicators that cross-docking has been successful
D) elements of servicescapes
E) indicators of imbalance on an assembly line

Back 54

D) elements of servicescapes

Front 55

55) The major problem addressed by the warehouse layout strategy is
A) requiring frequent contact close to one another
B) minimizing difficulties caused by material flow varying with each product
C) addressing trade-offs between space and material handling
D) balancing product flow from one work station to the next
E) none of the above

Back 55

C) addressing trade-offs between space and material handling

Front 56

56) The common measures of a queuing system's performance include
A) average time each customer spends in the system, maximum queue length, probability of a specific
number of customers in the system
B) average time each customer spends in the system, probability that the service system will be idle, average
time each customer spends in the queue
C) probability that the service facility will be idle, average queue length, probability that the waiting time
will exceed a specified duration
D) average queue length, maximum time a customer may spend in the queue, the utilization factor for the
system
E) none of the above

Back 56

B) average time each customer spends in the system, probability that the service system will be idle, average
time each customer spends in the queue

Front 57

57) A waiting line, or queuing, system has three parts, which are
A) distribution of arrival times, discipline while waiting, and distribution of service times
B) arrival discipline, queue discipline, and service sequencing
C) arrival rate, service rate, and utilization rate
D) sequencing policy, penalty for reneging, and expediting of arrivals
E) arrival or inputs, queue discipline or the waiting line itself, and the service facility

Back 57

E) arrival or inputs, queue discipline or the waiting line itself, and the service facility

Front 58

58) The potential restaurant customer who says to her husband, "The line looks too long; let's eat somewhere else,"
is an illustration of which element of queue discipline?
A) first-in, first-out
B) random departure
C) balk
D) renege
E) none of the above

Back 58

C) balk

Front 59

59) Arrivals or inputs to a waiting-line system have characteristics that include
A) population's statistical distribution
B) population size
C) population behavior
D) A and C
E) A, B, and C

Back 59

E) A, B, and C

Front 60

60) Which of the following represents an unlimited queue?
A) restaurant with no outside seating and limited capacity due to fire department restrictions
B) drive-through lane at a fast-food restaurant
C) toll booth serving automobiles on an interstate
D) faculty office with limited seating during office hours
E) small barbershop with only 5 chairs for waiting customers

Back 60

C) toll booth serving automobiles on an interstate