Chapter 01

Operations and Supply Chain Management

Learning Objectives for Chapter 1

1. Understand why it is important to study operations and supply chain management.

2. Define efficient and effective operations.
3. Categorize operations and supply chain processes.
4. Contrast differences between services and goods producing processes.
5. Identify operations and supply chain management career opportunities.
6. Describe how the field has developed over time.
 

True / False Questions

 

1. Efficiency means doing the right things to create the most value for the company. 
True    False

2. Effectiveness means doing the right things to create the most value for the company. 
True    False

3. A doctor completes a surgical procedure on a patient without error. The patient dies anyway. In
operations management terms, we could refer to this doctor as being efficient but not effective. 
True    False

 
4. A worker can be efficient without being effective. 
True    False

5. A process can be effective without being efficient. 

True    False

6. Operations and supply management is defined as the design, operation, and improvement of
the systems that create and deliver the firm's primary products and services. 
True    False

7. The term "value" refers to the relationship between quality and the price paid by the
consumer. 
True    False

 
8. Attempting to balance the desire to efficiently use resources while providing a highly effective
service may create conflict between the two goals. 
True    False

9. Central to the concept of operations strategy are the notions of operations focus and trade-offs. 
True    False

10. Fashion retailers, in particular, need to have plenty of inventory on hand because demand is
so unpredictable. 
True    False

11. Today's leading retailers use operations and supply chain management techniques to match
supply and demand as closely and quickly as possible. 
True    False

12. "Concept-to-cash" refers to the idea of generating revenue from licensing of patent rights or
other intellectual property. 
True    False

13. OSM is concerned with management of the trickiest parts of the system that produces a good
or delivers a service. 
True    False

14. OSM is a functional field of business with clear line management responsibilities. 

True    False

 
15. The supply network as can be thought of as a pipeline through which cash, material and
information flows. 
True    False

16. Supply networks can not be constructed for every product or service. 

True    False

17. "Operations" refers to manufacturing and service processes used to transform resources

employed by a firm into products desired by customers. 
True    False

18. "Supply" refers to supply chain processes that move information and material to and from the
manufacturing and service processes of the firm. 
True    False

19. "Supply" includes inbound freight and inventory only. 

True    False

20. It is critical that a sustainable strategy meet the needs of shareholders and employees. It is
also highly desirable that it preserves the environment. 
True    False

21. Supply and demand planning is needed to coordinate the manufacturing, service, and supply
chain processes. 
True    False

 
22. Supply and demand planning involves forecasting demand, making intermediate term plans
for how demand will be met, controlling different types of inventory, but not the detailed weekly
scheduling of processes. 
True    False

23. All managers should understand the basic principles that guide the design of transformation
processes. 
True    False

24. OSM changes constantly because of the dynamic nature of competing in global business and
the constant evolution of information technology. 
True    False

25. Internet technology has made the sharing of reliable real-time information expensive. 
True    False

26. Use of systems like point-of-sale, radio-frequency identification tags, bar-code scanners, and
automatic recognition has made it more difficult to understand what all the information is saying. 
True    False

27. Operations and supply processes can be conveniently categorized as planning, sourcing,

making, and delivering. 
True    False

28. A major aspect of planning involves developing a set of metrics to monitor the supply chain. 
True    False

 
29. Returning involves processes for receiving worn-out, defective, and excess products back
from customers but does not involve support for customers who have problems with the product. 
True    False

30. Delivering is not considered in supply chain analysis when outside carriers are contracted to
move products to customers. 
True    False

31. Services are intangible processes that cannot be weighed or measured. 

True    False

32. Service innovations can be patented. 

True    False

33. Services are homogeneous. 

True    False

34. Services are defined and evaluated as a package of features that affect the five senses. 
True    False

35. Automobiles and appliances are classified as "pure goods." 

True    False

36. Core service providers integrate tangible goods into their product. 

True    False

 
37. Servitization refers to a company building service activities into its product offerings for
current users. 
True    False

38. Servitization is a nonsense word invented to describe the disappearance of manufacturing

from the US economy. 
True    False

39. In contrast to careers in finance and marketing, careers in OSM involve hands-on
involvement with people and processes. 
True    False

40. A bank branch manager position is not an OSM-type of job. 

True    False

41. A supply chain manager is an OSM job while a purchasing manager is not. 
True    False

42. Just in time (JIT) production was a major breakthrough in manufacturing philosophy

pioneered by the Japanese. 
True    False

43. Lean manufacturing refers to just in time production coupled with total quality control. 
True    False

44. The Baldrige National Quality Award was started under the direction of the National Institute
of Standards and Technology. 
True    False

 
45. The approach that advocates making revolutionary changes as opposed to evolutionary
changes is called creation theory. 
True    False

46. The approach that advocates making revolutionary changes as opposed to evolutionary

changes is called "business process reengineering." 
True    False

47. Business process reengineering is contrasted to total quality management which commonly

advocates incremental change. 
True    False

48. The "triple bottom line" relates to the economic, employee, and environmental impact of a
firm's strategy. 
True    False

49. Sustainability is the ability to maintain profits in a system. 

True    False

50. Raising senior management awareness of operations as a competitive weapon is not an issue

on OSM. 
True    False

 
 
Multiple Choice Questions
 

51. A reason for studying operations management (OSM) is which of the following? 
A. OSM is essential for understanding organizational behavior.
B. Most business graduates do OSM work regardless of their job title.
C. All managers should understand the basic principles that guide the design of transformation
processes.
D. OSM is a required course in all business degree programs.
E. OSM is the most rigorous business discipline.

52. The Goods-Services Continuum consists of which set of the following categories? 

A. No goods, some goods, even mix, some service, no service
B. Pure goods, core goods, core services, pure services
C. No service, some service, good service, excellent service
D. Self-service, help desk service, face-to-face service, service-with-a-smile
E. None of the above

53. Which of the following are defined as core goods? 

A. Chemicals
B. Airlines
C. Data storage systems
D. Hotels
E. None of the above

54. Current issues in OSM do not include: 

A. Coordinating relationships between organizations.
B. Making senior management aware that OSM can be a competitive weapon.
C. The triple bottom line.
D. Managing customer touch points.
E. Increasing global servitization networks.

 
55. Which of the following are not listed in the text as jobs in OSM? 
A. Department store manager
B. Project manager
C. Hospital administrator
D. Chief Information Officer
E. Call center manager

56. Which of the following is not a characteristic that distinguishes services from goods? 
A. Service jobs are unskilled.
B. A service is intangible.
C. Services are perishable.
D. Services are heterogeneous.
E. None of the above.

57. Which of the following is not a way that operations and supply processes are categorized? 
A. Planning
B. Return
C. Delivery
D. Selecting
E. Making

58. One of the package of features that make up a service are: 

A. Appearance
B. Facilitating goods
C. Packaging
D. Cost
E. Implied use

 
 

Fill in the Blank Questions

 

59. The ability to maintain balance in a system is referred to as _______________. 

________________________________________

 
60. Processes that are used to transform the resources into products are called
________________. 
________________________________________

 
 

Essay Questions
 

61. What are the five categories of supply chain processes?

1. ___________________
2. ___________________
3. ___________________
4. ___________________
5. ___________________ 

 
 
 

Fill in the Blank Questions

 

62. Doing something at the lowest possible cost is called: ________________. 

________________________________________

63. Value is the ratio of _______________________to _______________________ 

________________________________________

64. A pipeline through which material and information flows is a conception of a

_______________________. 
________________________________________

 
65. List five OSM job titles.
1. ___________________
2. ___________________
3. ___________________
4. ___________________
5. ___________________ 
________________________________________

66. What are three current issues in operations and supply management?

1. ___________________
2. ___________________
3. ___________________ 
________________________________________

 
 

Essay Questions
 

67. Discuss the role of efficiency and effectiveness in the creation of value. 

Chapter 02
Strategy and Sustainability

Learning Objectives for Chapter 2:

1. Compare how operations and supply chain strategy relates to marketing and finance.
2. Understand the competitive dimensions of operations and supply chain strategy.
3. Identify order winners and order qualifiers.
4. Understand the concept of strategic fit.
5. Describe how productivity is measured and how it relates to operations and supply chain
processes.
6. Explain how the financial markets evaluate a firm’s operations and supply chain
performance.

True / False Questions

 

1. An operations and supply strategy must be integrated with the organization's corporate
strategy. 
True    False

 
2. One of the competitive dimensions that form the competitive position of a company when
planning their strategies is cost. 
True    False

 
3. One of the competitive dimensions that form the competitive position of a company when
planning their strategies is delivery speed. 
True    False

4. One of the competitive dimensions that form the competitive position of a company when
planning their strategies is making the best trade-off. 
True    False

5. The process when a company seeks to match the benefits of a successful position while
maintaining its existing position by adding new features, services, and technologies into its
current portfolio is called flexibility. 
True    False

6. The process when a company seeks to match the benefits of a successful position while
maintaining its existing position by adding new features, services, and technologies into its
current portfolio it is called straddling 
True    False

 
7. By following a straddling strategy, firms can broaden their capabilities and effectively compete
with more focused firms in markets requiring low cost for success. 
True    False

8. An order winner is a set of criteria that differentiates the products or services of one firm from
another. 
True    False

9. An order winner is a set of screening criteria that permits a firm's products to be considered as
possible candidates for purchase. 
True    False

10. An order qualifier is a set of screening criteria that permits a firm's products to be considered
as possible candidates for purchase. 
True    False

11. Activity-system maps show how a company's strategy is delivered through a set of tailored
activities. 
True    False

12. Activity-system maps are useful in understanding how well a system of activities fits the
overall company's strategy. 
True    False

13. Activity-system maps depict the geographic reach of a company's business strategies. 

True    False

 
14. Operations and supply strategy are not important issues to investors who tend to focus on
growth, dividends and earnings per share. 
True    False

15. Investors pay close attention to efficiency and productivity measures like net income per
employee because they are interested in how well the firm manages its workforce relations. 
True    False

16. During a recession, efficient firms often have an opportunity to increase market share while
maintaining profitability. 
True    False

17. An operations strategy must resist change because of the long term nature of equipment and
personnel investments. 
True    False

18. Operations and supply strategy can be viewed as part of a planning process that coordinates
operational goals with those of the larger organization. 
True    False

19. Infrastructure decisions within operations strategy include the selection of the appropriate
technology, the role of inventory and the location of facilities. 
True    False

20. Infrastructure decisions within operations strategy include the selection of the logic associated
with the planning and control systems. 
True    False

 
21. Once an operations strategy is adopted and articulated, the primary emphasis becomes
perfecting the system of activities that make up the strategy through detailed refinements over a
long period of time. 
True    False

22. The job of operations strategy is to deliver the most feature-rich, highest quality product at
the lowest price within specified parameters of delivery time and customization. 
True    False

23. Wall Street analysts are not particularly concerned with how efficient companies are from an
operations and supply management view. 
True    False

24. Productivity is a relative measure. 

True    False

25. In a partial measure of productivity the denominator of the ratio would include all resources
used or all inputs. 
True    False

26. In a multifactor measure of productivity the numerator of the ratio would include all
resources used or all inputs. 
True    False

27. The operations and supply activities of the firm need to strategically support the competitive
priorities of the firm. 
True    False

 
28. The triple bottom line considers evaluating the firm against social, economic, and
environmental criteria. 
True    False

29. Sustainability means meeting a firm's current needs without excessively compromising the
ability of future generations to meet their own needs. 
True    False

 
 

Multiple Choice Questions

 

30. Which of the following is not a major strategic operational competitive dimension that forms
a company's competitive position? 
A. Cost or price
B. Delivery speed
C. Delivery reliability
D. Management acumen
E. Coping with changes in demand

31. A major competitive dimension that forms a company's strategic operational competitive
position in their strategic planning is which of the following? 
A. Cost or price
B. Focus
C. Automation
D. Straddling
E. Activity-system mapping

32. When developing an operations and supply strategy, which of the following is an important
product-specific criterion to consider? 
A. Technical liaison
B. Learning curve
C. Competitor's product performance
D. Production lot-size
E. Total quality management

 
33. In development of an operations and supply strategy, which of the following would be an
important product-specific criteria to consider? 
A. Focus
B. Production lot-size
C. Supplier after-sale support
D. Learning curve
E. Total quality management

34. When a company seeks to match the benefits of a successful position while maintaining its
existing position in offering customers a variety of differing services, what is this process called? 
A. Operations capability analysis
B. Straddling
C. Order qualifying
D. Order winning
E. Inter-functional analysis

35. An activity-based map is which of the following? 

A. A network guide to route airlines
B. A listing of activities that make up a project
C. A network that shows how a company's strategy is delivered to customers
D. A facility layout schematic noting what is done where
E. A timeline displaying major planned events

36. Which of the following is not a measure of operations and supply management efficiency
used by Wall Street? 
A. Inventory turnover
B. Revenue per employee
C. Receivable turnover
D. Earnings per share
E. Asset turnover

 
37. Which of the following is a measure of operations and supply management efficiency used by
Wall Street? 
A. Dividend payout ratio
B. Current ratio
C. Receivable turnover
D. Earnings per share growth
E. Financial leverage

38. Which of the following is a partial measure of productivity? 

A. Output/Materials
B. Output/(Labor + Capital + Energy)
C. Output/All resources used
D. Output/Inputs
E. All of the above

39. Which of the following is a multifactor measure of productivity? 

A. Output/(Materials)
B. Output/(Labor + Capital + Energy)
C. Output/All resources used
D. Output/Inputs
E. All of the above

40. Which of the following is a total measure of productivity? 

A. Output/Materials
B. Output/(Labor + Capital + Energy)
C. Output/Labor
D. Output/Inputs
E. All of the above

 
41. If all you knew about a production system was that total daily output was 400 units and the
total labor necessary to produce the 400 units was 350 hours, what kind of productivity measure
could you use to compute productivity? 
A. Partial measure
B. Multifactor measure
C. Total measure
D. Global measure
E. All of the above

42. If all you knew about a production system was that total daily output was 400 units and the
total labor necessary to produce the 400 units was 350 hours, and the total materials used were
425 units, what kind of productivity measure could you use to compute productivity? 
A. Partial measure
B. Multifactor measure
C. Total measure
D. A and B above
E. B and C above

43. The total output from a production system in one day is 500 units and the total labor
necessary to produce the 500 units is 350 hours. Using the appropriate productivity measure,
which of the following numbers represents the resulting productivity ratio? 
A. 1.000
B. 1.428
C. 0.700
D. 0.411
E. None of the above

44. The total output from a production system in one day is 900 units and the total labor
necessary to produce the 900 units is 900 hours. Using the appropriate productivity measure,
what is the resulting productivity ratio? 
A. 1.000
B. 1.428
C. 0.700
D. 0.411
E. None of the above

 
45. Larry's Auto Body Repair Shop had revenues that averaged $60,000 per week in April and
$50,000 per week in May. During both months, the shop employed six full-time (40 hours/week)
workers. In April the firm also had four part-time workers working 25 hours per week but in May
there were only 2 part-time workers and they only worked 10 hours per week. What is the
percentage change in labor productivity from April to May for Larry's Auto Body Repair? 
A. 17.65
B. -15.84
C. 8.97
D. -1.76
E. 19.23

46. Various financial data for SunPath Manufacturing for 2010 & 2011 follow.

   
What is the percentage change in SunPath's total productivity measure between 2010 & 2011? 
A. -9.22
B. 2.33
C. -0.53
D. 2.88
E. 10.39

 
47. Various financial data for SunPath Manufacturing for 2010 & 2011 follow.

   
What is the percentage change in the energy partial productivity measure for SunPath between
2010 & 2011? 
A. -9.22
B. 2.33
C. -0.53
D. 2.88
E. 10.39

48. Various financial data for SunPath Manufacturing for 2010 & 2011 follow.

   
What is the percentage change in the labor partial productivity measure for SunPath between
2010 & 2011? 
A. -9.22
B. 2.33
C. -0.53
D. 2.88
E. 10.39

 
49. Various financial data for SunPath Manufacturing for 2010 & 2011 follow.

   
What is the percentage change in the multifactor labor and raw materials productivity measure
for SunPath between 2010 & 2011? 
A. -9.22
B. 2.33
C. -0.53
D. -2.88
E. 10.39

 
 

Fill in the Blank Questions

 

50. What is a criterion or product characteristic that differentiates a product from the products of
competitors in a way meaningful to the market called? ____________________ 
________________________________________

51. A diagram showing how a company's strategy is delivered through a set of tailored activities
is called what? _____________________ 
________________________________________

52. The triple-bottom-line evaluates the firm against what three criteria?

1. _____________________
2. _____________________
3. _____________________ 
________________________________________

 
53. People who provide capital to the firm through stock purchases and other financial
instruments are called: _____________________ 
________________________________________

54. Individuals or organizations that are influenced, either directly or indirectly, by the actions of
the firm are called: _____________________ 
________________________________________

55. Name five common measures of operations and supply management efficiency used by Wall
Street.
1. _____________________
2. _____________________
3. _____________________
4. _____________________
5. _____________________ 
________________________________________

 
 

Essay Questions
 

56. Describe a specific example of the trade-offs between any two of the competitive
dimensions. 

 
 
57. Explain the role that "order qualifiers" and "order winners" play as the interface between
marketing and operations. 

Chapter 04
Production Processes

Learning Objectives for Chapter 4

1. Understand the idea of production process mapping.

2. Define Little’s law.
3. Demonstrate how production processes are organized.
4. Explain the trade-offs that need to be considered when designing a production processes.
5. Describe the product-process matrix.
6. Recognize how break-oven analysis is just as important in operations and supply chain
management as it is in other functional areas.
7. Understand how to design and analyze an assembly line.

True / False Questions

 

1. Process selection refers to the strategic decision of choosing the volume of output to produce in
a manufacturing facility depending upon the way that facility produces. 
True    False

2. Process selection refers to the strategic decision of selecting which kind of production
processes to use to produce a product or provide a service. 
True    False

3. A continuous process indicates production of discrete parts moving from workstation to
workstation at a controlled rate. 
True    False

 
4. One difference between an assembly line process flow and a continuous process flow is that on
the assembly line the flow is discrete rather than continuous. 
True    False

5. One trade-off illustrated by the product-process matrix is between flexibility and cost. 
True    False

6. The choice of which process structure to select is generally a function of the volume
requirements for the product. 
True    False

 
7. One methodology used to evaluate equipment investment decisions where the investment
entails a large initial investment, fixed costs, and variable costs is break-even analysis. 
True    False

8. Break-even analysis can only be used in production equipment decision making when dealing
solely with fixed costs, no variable costs. 
True    False

9. A general purpose machine is less capable than a special purpose machine in certain tasks but
can perform a broader variety of tasks. 
True    False

10. Break-Even Analysis can be used to help decide whether to perform a task with a special
purpose machine or with a general purpose machine. 
True    False

11. The product-process matrix shows the relationship between process structures and product
volume and variety characteristics. 
True    False

12. The assembly-line balancing procedure determines the precedence relationships of

manufacturing tasks. 
True    False

13. Assembly lines are a special case of a project layout. 

True    False

 
14. In assembly-line balancing the theoretical minimum number of workstations is found by the
ratio of the sum of all task times divided by the cycle time. 
True    False

15. The efficiency of an assembly-line is found by the ratio of the sum of all task times divided
by the cycle time. 
True    False

16. For the purposes of assembly-line balancing, cycle time is found by dividing production time
per day by the required units of output per day. 
True    False

17. In balancing an assembly line workstation cycle time has to be less than the time between
successive units coming off the end of the line. 
True    False

18. If the sum of the task times required to produce a product is 45 minutes and the cycle time for
the same product is 10 minutes. Thus, the theoretical minimum number of workstations is 5 using
the assembly-line balancing procedure. 
True    False

19. The first step in balancing an assembly line is to specify the precedence relationships among
tasks to be performed on the line. 
True    False

20. The term "assembly line" refers to progressive assembly linked by some material handling
device. 
True    False

 
21. If the sum of the task times required to produce a product is 80 minutes and the cycle time for
the same product is 15 minutes, the theoretical minimum number of workstations is 8 using the
assembly-line balancing procedure. 
True    False

22. In designing a production layout a flexible line layout might have the shape of a "U". 
True    False

23. In designing an assembly line a mixed-model line layout is often used by JIT manufacturers. 
True    False

24. The objective of a mixed-model line layout is to meet the demand for a variety of products
and avoid building high inventories. 
True    False

25. Workcenter layouts allocate dissimilar machines into cells to work on products that have
dissimilar processing requirements. 
True    False

26. A project layout is characterized by a relatively low number of production units in

comparison with process and product layout formats. 
True    False

27. A project layout is characterized by a high degree of task ordering. 

True    False

 
28. Assembly line balancing means assigning all necessary tasks to a series of workstations so
that each workstation has no more than can be done in the workstation cycle time and so that idle
time across all workstations is minimized. 
True    False

29. Inventory turn is the cost of goods sold divided by the average inventory value. 
True    False

30. Inventory turn is a better measure than the total value of inventory for comparative purposes
because it is a relative measure. 
True    False

31. Little's law says there is a long-term relationship between the inventory, throughput, and flow
time of a production system in steady state. 
True    False

 
 

Multiple Choice Questions

 

32. Which of the following is not considered a major process flow structure? 

A. Work Center
B. Project
C. Assembly line
D. Fabrication
E. Continuous Flow

 
33. A difference between project and continuous flow categories of process flow structures is
which two of the following? 
A. The size of the product
B. Discrete parts moving from workstation to workstation
C. Degree of equipment specialization
D. Being a "Virtual Factory"
E. Both A & C

34. Assume a fixed cost for a process of $15,000. The variable cost to produce each unit of
product is $10 and the selling price for the finished product is $25. Which of the following is the
number of units that has to be produced and sold to break-even? 
A. 500 units
B. 667 units
C. 790 units
D. 900 units
E. 1,000 units

35. Assume a fixed cost for a process of $120,000. The variable cost to produce each unit of
product is $35, and the selling price for the finished product is $50. Which of the following is the
number of units that has to be produced and sold to break-even? 
A. 5,000 units
B. 6,000 units
C. 8,000 units
D. 11,000 units
E. 12,000 units

 
36. You are hired as a consultant to decide if your client should purchase a new, highly
specialized, piece of equipment. The product to be produced by this equipment is forecast to have
a total world wide demand of 15,000 units over the entire product life. The initial investment to
acquire and install the equipment is $256,000. The variable cost to produce each unit will be $15
and the selling price for the finished product will be $30. Which of the following best describes
the situation the firm is facing? 
A. The company will recover its initial investment
B. The company's total margin will be less than its investment
C. It's a good investment
D. The break-even is lower than the 15,000 units that are expected to sell
E. All of the above

37. In a workcenter machine A has a ten minute set-up time per batch and a two minute per unit
run time. Machine B performs the identical function but has a set-up time of thirty minutes and a
one minute run time per unit. The workcenter makes products in batches ranging from one unit to
one hundred units. Assuming capacity is not a limitation on either machine, on which batches
should machine B be used? 
A. All batches should be run on machine B
B. Batches of more than 20 units should be run on machine B
C. Batches of fewer than 80 units should be run on machine B
D. Batches with up to 50 units should be run on machine B
E. No batches should be run on machine B

38. Which of the following is a basic type of process structure? 

A. Process flow diagram
B. Product matrix
C. Process matrix
D. Workcenter
E. Manual assembly

39. Which of the following is not a basic type of process structure? 

A. Product-process matrix
B. Workcenter
C. Manufacturing cell
D. Assembly line
E. Continuous process

 
40. Which of the following basic types of process structures is one which equipment or work
processes are arranged according to the progressive steps by which the product is made? 
A. Project
B. Workcenter
C. Manufacturing cell
D. Assembly line
E. Continuous process

41. Which of the following basic types of process structures is one which similar equipment or
functions are grouped together? 
A. Project
B. Workcenter
C. Manufacturing cell
D. Assembly line
E. Continuous process

42. The placement of which of the following is not determined by process structure decisions? 
A. Departments
B. Workgroups
C. Workstations
D. Machines
E. Emergency exits

43. Using the assembly-line balancing procedure, which of the following is the required cycle
time if the production time in minutes per day is 480 and the required output per day in units is
50? 
A. 0.104
B. 50
C. 9.6
D. 480
E. Cannot be determined from the information above

 
44. Using the assembly-line balancing procedure, which of the following is the required cycle
time if the production time in minutes per day is 1440 and the required output per day in units is
2000? 
A. 0.72
B. 1.388
C. 250
D. 500
E. Cannot be determined from the information above

45. Using the assembly-line balancing procedure, which of the following is the theoretical
minimum number of workstations if the task times for the six tasks that make up the job are 4, 6,
7, 2, 6, and 5 minutes, and the cycle time is 10 minutes? 
A. 3
B. 5
C. 6
D. 8
E. None of the above

46. Using the assembly-line balancing procedure, which of the following is the theoretical
minimum number of workstations if the task times for the eight tasks that make up the job are 7,
4, 7, 8, 9, 4, 3 and 6 minutes, and the cycle time is 8 minutes? 
A. 3
B. 5
C. 6
D. 8
E. None of the above

47. You have just determined the actual number of workstations that will be used on an assembly
line to be 6 using the assembly-line balancing procedure. The cycle time of the line is 5 minutes
and the sum of all that tasks required on the line is 25 minutes. Which of the following is the
correct value for the resulting line's efficiency? 
A. 0.500
B. 0.833
C. 0.973
D. 0.990
E. None of the above

 
48. You have just determined the actual number of workstations that will be used on an assembly
line to be 8 using the assembly-line balancing procedure. The cycle time of the line is 10 minutes
and the sum of all that tasks required on the line is 60 minutes. Which of the following is the
correct value for the resulting line's efficiency? 
A. 0.500
B. 0.650
C. 0.750
D. 0.850
E. None of the above

49. When balancing an assembly line, which of the following is not a way to reduce the longest
task time below the required workstation cycle time? 
A. Upgrade the equipment
B. Assign a roaming helper to support the line
C. Split the task between two workstations
D. Speed up the assembly line transfer mechanism
E. Use a more skilled worker

50. The long-term relationship between the inventory, throughput, and flow time of a production
system in steady state is called which of the following? 
A. Peterson's Rule
B. Murphy's Law
C. Little's Law
D. Robert's Rule
E. None of the above

 
 

Fill in the Blank Questions

 

51. Assume a fixed cost for a process of $100,000. The variable cost to produce each unit of
product is $10, and the selling price for the finished product is $50. Ignoring inventory, how
many units must the firm sell to break-even? ______________________ 
________________________________________

 
52. Using the assembly-line balancing procedure, what is the required cycle time if the
production time in minutes per day is 2,400 and the required output per day in units is 1,200?
______________________ 
________________________________________

53. Using the assembly-line balancing procedure, which of the following is the theoretical
minimum number of workstations if the task times for the six tasks that make up the job are 7, 4,
7, 5, 3 and 6 minutes, and the cycle time is 8 minutes?
______________________ 
________________________________________

54. You have just determined the actual number of workstations that will be used on an assembly
line to be 15 using the assembly-line balancing procedure. The cycle time of the line is 30
seconds and the sum of all that tasks required on the line is 10 minutes. What is the line's
efficiency? ______________________ 
________________________________________

55. Give an example of a project layout. ______________________ 

________________________________________

56. The formula: (Inventory = Throughput rate x Flow time) is known as

______________________ 
________________________________________

 
 
Essay Questions
 

57. Describe the implications of the product-process matrix for process design in a competitive
situation. 

 
 

58. Differentiate between a workcenter and a manufacturing cell. 

 
 

59. Assume that you are offered a new piece of equipment for $10,000. The equipment will
produce 10,000 units per year with a margin of $6.00 per unit. Demand for the product being
produced has been 2,000 units per year. Your current equipment is fully depreciated and can
produce the 2,000 units per year at but at a margin of only $4.00 per unit. Should you purchase
the new equipment? Under what conditions? 

 
 
60. A manufacturer has identified the options for acquiring a machined part. It can make the part
on a numerically controlled lathe for $150 per unit (including materials.) It can make the part on
a standard lathe for $250 per unit Document1Document1 It can make the part on a machining
center for $50 per unit (also including materials.) The manufacturer can acquire a standard lathe
for $10,000. It could acquire a numerically controlled lathe for $100,000. A machining center
would cost $350,000. It has also found that it can purchase the part for $350 per unit. 

Chapter 07
Projects

Learning Objectives for Chapter 7:

1. Explain what project management is and why it is important.

2. Identify the different ways projects can be structured.
3. Describe how projects are organized into major subprojects.
4. Understand what a project milestone is.
5. Determine the “critical path” for a project.
6. Demonstrate how to “crash,” or reduce the length, of a project.

True / False Questions

 

1. Project management can be defined as planning, directing, and controlling resources to meet
the technical, cost, and time constraints of the project. 
True    False

2. A project may be defined as a series of related jobs directed toward some major output and
requiring a significant period of time to perform. 
True    False

3. The second step in managing a project is writing the Statement of Work. 

True    False

 
4. An event unit package is a subdivision of a project. 
True    False

5. Complex projects are often subdivided into a series of tasks that are typically configured to be
not longer than several months in duration. 
True    False

6. A work breakdown structure is used in project management but it is not used when the critical
path method is involved. 
True    False

7. The fact that organizations are flattening is one of the reasons that project management is
important. 
True    False

 
8. The Gantt chart is an example of a project control chart. 
True    False

9. Upper level management must decide between pure, functional, and matrix structures as ways
to organize projects. 
True    False

10. One of the disadvantages of a pure project organizational structure is that the project manager
has full authority over the project. 
True    False

11. One of the advantages of a functional project organizational structure is that a team member
can work on several projects. 
True    False

12. A matrix project attempts to blend properties of functional and pure project structures. 
True    False

13. A matrix project structure is often referred to as a "skunk works." 

True    False

14. A disadvantage of a matrix project organizational structure is that a project manager is held
responsible for successful completion of the project. 
True    False

15. The critical path of activities in a project is the sequence of activities that form the shortest
chain in a project network of activities. 
True    False

 
16. CPM is an abbreviation for Critical Path Method. 
True    False

17. In CPM the late start time estimate is the latest time you can start an activity and still keep the
entire project on schedule. 
True    False

18. The critical path in a project is that sequence of activities that consume the longest amount of
time in a project network of activities. 
True    False

19. The critical path in a CPM analysis is always the shortest path through the network. 
True    False

20. Slack activity time is the difference between the early start and the late finish of a project
activity time. 
True    False

21. In a CPM analysis if you subtract the late finish from the early finish the result is the activity's
slack time. 
True    False

22. In a CPM analysis if you subtract the early finish from the late finish the result is the activity's
slack time. 
True    False

 
23. The critical path in a CPM analysis is found by locating the activities times with zero slack. 
True    False

24. Calculating the early start and early finish times for each activity in a CPM analysis does not
provide any useful information. 
True    False

25. The project indirect costs associated with a project include overhead, facilities, and resource
opportunity costs. 
True    False

26. The activity direct costs associated with a project might include giving workers overtime to
complete a project in less-than the expected time. 
True    False

27. You are managing a project and need to cut the cost of the project. You decide to transfer
workers to another job to cut the project's costs. Costs associated with transferring the workers
are an example of project indirect costs. 
True    False

28. Using the Time-Cost CPM model, the crash time is the shortest possible time allowed for
each activity in the project. 
True    False

29. In the Time-Cost CPM model, cost is a linear function of time. 

True    False

 
30. When reducing the planned duration of a project using the Time-Cost CPM model we select
the activity to crash by determining the cost of each alternative and selecting the one whose cost
is the greatest. 
True    False

31. One of the assumptions made using CPM is that project activities can be identified with clear
beginning and ending points. 
True    False

32. One of the assumptions made using CPM is that project activity sequence relationships can be
specified and networked. 
True    False

33. One criticism of using CPM analysis in project management is that the zero slack path
through a network may not be the ultimate determinant of the project completion time. 
True    False

34. Project management software available today combines CPM and other scheduling aids, like
Gantt charting, to aid in tracking progress of project completion. 
True    False

35. One of the criticisms of CPM analysis is that the act of specifying the activities and
formalizing the network limits the flexibility required to handle changing situations as the project
progresses. 
True    False

36. A project milestone is a specific event to be reached by a particular point in time. 

True    False

 
37. Breakthrough projects are those that provide fundamental improvements to existing products. 
True    False

38. Derivative projects are those which address incremental changes to products or processes. 
True    False

39. Alliances and partnerships between organizations are focused on "breakthrough" projects. 

True    False

40. Earned Value Management (EVM) is a technique for measuring project progress in an

objective manner. 
True    False

 
 

Multiple Choice Questions

 

41. A project can be subdivided into which of the following? 

A. Job orders
B. Subjobs
C. Work Package
D. Sub-paths
E. Events and decisions

42. A project starts out as which of the following? 

A. A Statement of Work
B. Critical Path Method (CPM)
C. A series of milestones
D. A Gantt chart
E. A latest-start-time estimate

 
43. What is a work breakdown structure? 
A. A list of the activities making up the higher levels of the project
B. A definition of the hierarchy of project tasks, subtasks, and work packages
C. A depiction of the activities making up a project
D. A Gantt chart
E. A structure that is incompatible with the Critical Path Method

44. Which of the following is a reason that project management is important? 

A. Organizations do not allow hastily planned projects
B. Organizational hierarchies are becoming more robust
C. The firm's reputation is not a concern since projects are invisible to the outside world
D. Projects are a way to promote effective leadership
E. It is usually more important to complete a project on time than to complete it correctly

45. In a Gantt chart the horizontal axis is usually which of the following? 
A. Activities
B. Cost
C. Profit
D. Time
E. Milestones

46. Which of the following is a graphic project report used in project management? 

A. Project proposal
B. Approved project plan
C. Humphrey chart
D. Equipment and supplies chart
E. Cost and performance tracking schedule

 
47. An advantage of a pure project where self-contained teams work full time on a project is
which of the following? 
A. Team members can work on several projects
B. Functional area is a "home" after the project is completed
C. There are duplicated resources
D. Lines of communication are shortened
E. Overall organizational policies and goals can be ignored

48. Some of the advantages of a functional project where the project is housed in a functional
division include which of the following? 
A. The project manager has full authority over the project
B. Team pride, motivation, and commitment are high
C. A team member can work on several projects
D. Needs of the client are secondary
E. None of the above

49. A series of projects that are organized in such a way that each project utilizes people from
different functional areas is using which of the following organizational structures? 
A. Matrix project
B. Integrated Task Force
C. Functional project
D. Pure project
E. Cross-functional flexible team

50. You are looking at a chart that has the terms BCWS, BCWP and AC indicating lines on the
chart. What kind of chart are you looking at? 
A. Gantt Chart
B. PERT Chart
C. Bar/Milestone Chart
D. Total Program Cost Breakdown
E. EVM Chart

 
51. PERT is an abbreviation for which of the following methodologies? 
A. Product Evaluation Result and Treatment
B. Programming and Evaluation Realization Technology
C. Program Evaluation and Review Technique
D. Process Evaluation and Review Technology
E. It is a name, not an abbreviation for anything

52. You have just been assigned to oversee a series of projects. Functional areas will loan you
personnel for each project and separate project managers will be responsible for separate projects.
These project managers will report to you. Which project management structure is being used? 
A. Pure Project
B. Task force
C. Matrix Project
D. Functional Project
E. PERT

53. You have been placed in charge of a large project. Shortened communication lines are
required to insure quick resolution of problems as they arise. You recognize that the project is
going to take a lot of time and require a lot of team pride, motivation, and commitment by all
members. Which project management strucTURE should you use in this situation? 
A. Pure Project
B. Task force
C. Matrix Project
D. Functional Project
E. PERT

 
54. A simple project listing of five activities and their respective time estimates are presented
below:

Using CPM, which activities make up the critical path? 

A. A, C, D, E
B. A, B, D, E
C. A, C, B, D, E
D. A, D, E
E. None of the above

55. A simple project listing of five activities, their predecessors and their respective time
estimates are presented below:

Using CPM, what is the Latest Finish Time for the last activity in this project (i.e., the total time
to complete the project)? 
A. 10 days
B. 7 days
C. 8 days
D. 12 days
E. 9 days

 
56. A simple project listing of five activities, their predecessors and their respective time
estimates are presented below:

Using the CPM, which activities have slack in this project? 

A. A
B. B
C. C
D. D
E. C and E

57. A company must perform a maintenance project consisting of seven activities. The activities,
their predecessors, and their respective time estimates are presented below:

Using CPM, which activities make up the critical path? 

A. A, B, D, F, G
B. A, C, E, F, G
C. A, C, B, F, E
D. A, D, E
E. None of the above

 
58. A company must perform a maintenance project consisting of seven activities. The activities,
their predecessors, and their respective time estimates are presented below:

Using CPM, what is the Latest Finish Time for the last activity in this project (i.e., the total time
to complete the project)? 
A. 9 days
B. 10 days
C. 11 days
D. 12 days
E. 13 days

 
59. A company must perform a maintenance project consisting of seven activities. The activities,
their predecessors, and their respective time estimates are presented below:

Using CPM, which activities have slack in this project? 

A. A, B, C
B. B, D
C. Only C
D. C, E
E. F, G

60. For an activity in a CPM analysis, the Early Finish time is 8 and the Late Finish time is 10.
Which of the following statements is true? 
A. The Late Finish is 12
B. The Early Finish is 10
C. The slack for this activity is 2
D. The duration of this activity is 2
E. The activity is on the critical path

61. For an activity in a CPM analysis the Early Finish time is 20 and the Late Finish time is 20.
Which of the following statements is true? 
A. The activity's late start must happen before its early start
B. The activity is on the critical path
C. The slack for this activity is 20
D. The duration of this task is zero
E. The duration of this task is 20

 
62. A listing of immediate predecessor activities is important information in a CPM analysis for
which of the following reasons? 
A. It specifies the relationships in the CPM network of activities
B. It provides useful timing information
C. It includes cost information
D. It is the probability information required in the final step of CPM
E. None of the above

63. You have just performed a CPM analysis and have found that more than one path through the
project network has zero slack values. What can you conclude? 
A. You have incorrectly performed the analysis
B. You have multiple critical paths
C. Only one path is optimal
D. More than one path is optimal
E. The project will not be completed by the desired time

64. You have the following time and cost information below for use in a Time-Cost CPM
Scheduling model.

What are the three costs per unit of time to expedite each activity? 
A. A=$300, B=$200, C=$300
B. A=$100, B=$200, C=$400
C. A=$200, B=$200, C=$200
D. A=$100, B=$400, C=$300
E. A=$200, B=$300, C=$400

 
65. Below are the data for a Time-Cost CPM Scheduling model analysis. The time is in days and
the costs include both direct and indirect costs.

What are the total time of this project and total normal cost? 
A. Total time is 13 days, total cost is $1200
B. Total time is 12 days, total cost is $1700
C. Total time is 11 days, total cost is $1600
D. Total time is 10 days, total cost is $1750
E. Total time is 9 days, total cost is $1700

66. Below are the data for a Time-Cost CPM Scheduling model analysis. The time is in days and
the costs include both direct and indirect costs.

If you crash this project to reduce the total time by one day what is the total time of the project
and total cost? 
A. Total time is 13 days, total cost is $1500
B. Total time is 12 days, total cost is $2000
C. Total time is 12 days, total cost is $2300
D. Total time is 11 days, total cost is $1850
E. Total time is 11 days, total cost is $2350

 
67. Below are the data for a Time-Cost CPM Scheduling analysis. The time is in days and the
costs include both direct and indirect costs.

If you crash this project to reduce the total time by four days, what is the total time of the project
and total cost? 
A. Total time is 10 days, total cost is $2500
B. Total time is 9 days, total cost is $2300
C. Total time is 8 days, total cost is $2750
D. Total time is 8 days, total cost is $1850
E. Total time is 9 days, total cost is $2350

 
68. You have collected the data for a Time-Cost CPM Scheduling model analysis. The time is in
days and the project "direct costs" are given below.

The indirect costs for the project are determined on a daily duration basis. If the project lasts 16
days the total indirect costs are $400, 15 days they will be $250, 14 days they will be $200, and
13 days they will be $100. If you crash this project by one day what is the total (i.e., direct and
indirect) project cost? 
A. $2150
B. $2300
C. $2400
D. $2450
E. $2500

 
69. You have collected the data for a Time-Cost CPM Scheduling model analysis. The time is in
days and the project "direct costs" are given below.

The indirect costs for the project are determined on a daily duration basis. If the project lasts 16
days the total indirect costs are $400, 15 days they will be $250, 14 days they will be $200, and
13 days they will be $100. At what day do we achieve the lowest total project cost (i.e., direct
plus indirect costs)? 
A. 16 days
B. 15 days
C. 14 days
D. 13 days
E. 12 days

70. You know when you have arrived at the optimal solution in using the Time-Cost CPM
Scheduling model analysis when what happens? 
A. You have found the critical path
B. You have run out of crash time
C. You no longer have a linear relationship with costs
D. You have reached the minimum total cost
E. You have run out of crash costs

71. In CPM analysis it is generally expected that the relationship between activity direct costs and
project indirect costs will be which of the following? 
A. Positively related
B. Optimally related
C. Negatively related
D. Not related
E. Fractionally related

 
72. Which of the following is an assumption made in using CPM analysis? 
A. Project activities flow together without distinct boundaries
B. Activities' sequential relationships can be specified and networked
C. Project management should focus on crashing activities
D. There is never a work stoppage in any activity until it is complete
E. There are no learning curve effects in setting activity time

73. Which of the following is a criticism made about CPM analysis? 

A. Project activity sequencing relationships can be specified and networked
B. Project control should focus on the critical path
C. Projects can change over time and networks can be inaccurate
D. CPM does not foresee changes while the project is under way
E. The pessimistic time estimate is usually closest to the actual time

74. An assumption of CPM analysis is that project activities can be identified and have a clear
beginning and ending point. Which of the following is a valid criticism of this assumption? 
A. Complex projects can change over time and networks become inaccurate
B. Project control cannot always focus on the critical path
C. The critical path through the network can change when activities are crashed
D. It is not necessarily true that the critical path is the longest path through the network
E. None of the above

 
 

Fill in the Blank Questions

 

75. What is that sequence of activities that consume the longest amount of time in a project
network of activities called? _______________________________ 
________________________________________

76. What are "project milestones?" _________________________________________ 

________________________________________

 
77. You have collected the data for a Time-Cost CPM Scheduling model analysis. The time is in
days and the project "direct costs" are given below.

The indirect costs for the project are determined on a daily duration basis. If the project lasts 16
days the total indirect costs are $400, 15 days they will be $250, 14 days they will be $200, and
13 days they will be $100. If you crash this project by one day what is the total (i.e., direct and
indirect) project cost? ____________________ 
________________________________________

78. Below are the data for a Time-Cost CPM Scheduling analysis. The time is in days and the
costs include both direct and indirect costs.

If you crash this project to reduce the total time by four days, what is the total time of the project
and total cost? __________________ 
________________________________________

 
 
Essay Questions
 

79. Describe how CPM handles the trade-offs between time and cost in the scheduling of a
project. 

 
 

80. What is the criterion for determining whether a project activity is on the "critical path" or
not? 

Chapter 09
Location, Logistics, and Distribution

Learning Objectives for Chapter 9:

1. Describe what a third-party logistics provider is.

2. Assess the major issues that need to be considered in locating a plant or warehouse
facility.
3. Set up the transportation model to analyze location problems and how to use Excel Solver
to find solutions to these models.
4. Understand the centroid method for locating entities such as cell phone communication
towers.
5. Know how a factor-rating system can be used to narrow potential location sites.

True / False Questions

 

1. The local government's willingness to invest in upgrading infrastructure to the levels required
by a company is an important issue in a company's decision of where to locate a new facility. 
True    False

2. Facility location analysis considers the competitive imperative to be close to customers as to

timeliness of deliveries. 
True    False

 
3. Facility location analysis considers the competitive imperative of lowest total cost. 
True    False

4. Facility location analysis considers the competitive imperative of a favorable business climate
as indicated by the presence of other companies in the same industry. 
True    False

5. Facility location analysis considers the competitive imperative of locating near the appropriate
labor pool to take advantage of low wage costs and/or skill levels. 
True    False

6. Facility location analysis considers the competitive imperative of locating near the appropriate
labor pool to take advantage of high technical skills. 
True    False

 
7. An example of a positive business climate that might influence a facility location decision is
increasing governmental costs and increasing property taxes. 
True    False

8. A favorable business climate in facility location decision-making might include government
legislation of tax abatements. 
True    False

9. A favorable business climate in facility location decision-making might include local
government intervention to facilitate businesses locating in an area via subsidies. 
True    False

10. A favorable business climate in facility location decision-making might include local
government providing basic skill training for prospective members of the workforce. 
True    False

11. In facility location decision-making the educational and skill levels of the labor pool must
match the company's needs. 
True    False

12. In facility location decision-making matching the educational and skill levels of the labor
pool to a company's needs is even more important than the labor pool's willingness and ability to
learn. 
True    False

13. Because the world is becoming more highly interconnected, the proximity of an important
supplier's plants is not crucial in supporting lean production methods. 
True    False

 
14. Issues of Document1Document1 and capacity are strongly interconnected to the facility
location decision. 
True    False

15. A free trade zone operates under different rules and laws than a foreign trade zone. 
True    False

16. A free trade zone is typically a closed facility into which foreign goods can be brought
without being subject to the usual customs requirements. 
True    False

17. The objective of facility location analysis is to select the site with the lowest total cost. 
True    False

18. Governmental barriers to enter and locate in many countries are increasing through restrictive
protectionist legislation. 
True    False

19. Quality of life in a host community is not a major factor in making the facility location
decision. 
True    False

20. In facility location decision-making the factor-rating system is one of the least used general
location techniques. 
True    False

 
21. In facility location decision-making the factor-rating system is based on linear programming. 
True    False

22. A major problem in a plant location decision based on the factor-rating system is that simple
point-rating schemes do not account for the wide variance of costs that may occur within each
factor used in the analysis. 
True    False

23. Services typically have multiple site locations to maintain close contact with customers. 
True    False

24. Facility location decisions are made using analytical techniques that are able to weigh a large
number of different variables equally. 
True    False

25. A third-party logistics company is a firm that manages all or part of another company's
product delivery operations. 
True    False

26. DHL and United Parcel Service are transportation companies which are prohibited from
functioning as a third-party logistics company the way Federal Express does. 
True    False

 
 
Multiple Choice Questions
 

27. Which of the following is not a criterion that influences manufacturing plant or warehouse
facility location decisions? 
A. Proximity to customers
B. Historical cost
C. Infrastructure of a country
D. Quality of labor
E. Business climate

28. Which of the following is a not criterion that influences manufacturing plant or warehouse
facility location decisions? 
A. Suppliers
B. Free trade zones
C. Political risk
D. Gross national product
E. Tariffs and customs duties

29. Which of the following is not a criterion that influences manufacturing plant or warehouse
facility location decisions? 
A. Government barriers
B. Trading blocs
C. Environmental regulation
D. Immigration rules
E. Local labor costs

30. Which of the following is a criterion that influences manufacturing plant or warehouse

facility location decisions? 
A. Proximity to customers
B. Corporate policy
C. Competitor's locations
D. Competitive advantage
E. Host community politics

 
31. An important issue in facility location analysis is business climate. An unfavorable business
climate could be indicated by which of the following? 
A. Similar-sized businesses nearby
B. The willingness of local politicians to provide favorable treatment for a consideration
C. The presence of other foreign companies in the case of international locations
D. The local presence of companies in the same industry
E. An established educational institution nearby

32. One of the objectives of facility location analysis is to select a site with the lowest total cost.
Which of the following costs should be excluded from the analysis? 
A. Historical costs
B. Inbound distribution costs
C. Land
D. Construction
E. Regional costs

33. One of the objectives of facility location analysis is to select a site with the lowest total cost.
Which of the following costs should not be included in the analysis? 
A. Outbound distribution costs
B. Incidental costs
C. Energy costs
D. Hidden costs
E. Costs we can pass along to our customer

34. One of the objectives of facility location analysis is to select a site with the lowest total cost.
Which of the following are hidden costs that should be included in the analysis? 
A. Becoming less responsive to the customer
B. Supplier costs
C. Taxes
D. Construction costs
E. Product life cycle costs

 
35. One of the objectives in facility location analysis is to select a site with the lowest total cost.
Which of the following costs are hidden costs that should be included in the analysis? 
A. Infrastructure costs
B. Movement of preproduction material between locations
C. Taxes
D. Construction costs
E. Bribery costs

36. Which of the following is not an infrastructure criteria used in facility location analysis? 
A. Adequate school system
B. Adequate health care
C. Adequate transportation
D. Adequate low cost labor
E. Adequate public utility systems

37. How many free trade zones are there in the United States? 
A. Less than 50
B. Less than 100
C. About 260
D. More than 412
E. About 310

38. An example of a trading bloc is which of the following? 

A. North American Free Trade Agreement countries
B. Free trade zones
C. ISO-9000 companies
D. American Production and Inventory Control Society
E. Wal-Mart and its' suppliers

 
39. Which of the following is a plant location methodology good for locating a single facility
within a set of existing facilities based in distances and volumes of goods shipped? 
A. Factor-rating systems
B. Centroid method
C. Decision trees
D. Linear programming
E. Regression analysis

40. In which of the following situations should we not use the transportation method of linear
programming? 
A. To find a new site location for a plant
B. To minimize costs of shipping "n" units to "m" destinations
C. To maximize profits of shipping "n" units to "m" destinations
D. To determine which corner of a street intersection to locate a retail service facility
E. To locate a finished goods distribution warehouse

41. The centroid method for plant location uses which of the following data? 
A. Volume of goods to be shipped between existing points
B. Inbound transportation costs
C. Transport times between facilities
D. Correlation matrix of existing facilities
E. Probabilities and payoffs

42. Plant A is located at the (X, Y) coordinates of (100, 200) and has a volume of shipping of 500
units a day. Plant B is located at the (X, Y) coordinates of (150, 400) and has a volume of
shipping of 200 units a day. Using the centroid method, which of the following is the X
coordinate for the new plant location? 
A. About 100
B. About 115
C. About 130
D. About 150
E. X coordinate cannot be computed from the data given

 
43. Plant A is located at the (X, Y) coordinates of (200, 500) and has a volume of shipping of 400
units a day. Plant B is located at the (X, Y) coordinates of (300, 100) and has a volume of
shipping of 300 units a day. Using the centroid method, which of the following is the X
coordinate for the new plant location? 
A. About 227
B. About 243
C. About 389
D. X coordinate cannot be computed from the data given

44. A company wants to determine where they should locate a new warehouse. They have two
existing production plants (i.e., Plant A and Plant B) that will ship units of a product to this
warehouse. Plant A is located at the (X, Y) coordinates of (50, 100) and will have volume of
shipping of 250 units a day. Plant B is located at the (X, Y) coordinates of (150, 200) and will
have a volume of shipping of 150 units a day. Using the centroid method, which of the following
are the X and Y coordinates for the new plant location? 
A. (81,117)
B. (88, 138)
C. (117,102)
D. (76,123)
E. X and Y coordinates cannot be computed from the data given

45. What transportation mode has very high initial investment costs but gives a very low cost per
mile for products that are highly specialized and require no packaging? 
A. Highway
B. Rail
C. Water
D. Pipeline
E. Air

46. Very few products are moved without at least part of their journey being by which mode of
transportation? 
A. Highway
B. Rail
C. Water
D. Pipeline
E. Air

 
 
Fill in the Blank Questions
 

47. Name the five transportation modes discussed in the textbook.

1)____________________; 2)____________________;
3)____________________; 4)____________________;
5) ____________________ 
________________________________________

48. Name four methods of quantitative analysis that are useful in informing the facility location
decision. 1)____________________; 2)____________________; 3)____________________;
4)____________________ 
________________________________________

49. What is a closed area or compound into which foreign goods can be brought without being
subject to the normal customs requirements? ____________________ 
________________________________________

50. Three distribution centers, A, B, and C, are located at the following (X, Y) coordinates: A,
(20, 130); B, (180, 0); and C, (200, 200). A factory is to be constructed to distribute a new
product through these warehouses. The expected annual volumes expected to be shipped through
the three warehouses is forecast to be 20 million units through A, 100 million through B and 50
million through C. Using the centroid method, approximately what should the coordinates of the
new factory be? _________________ 
________________________________________

51. What is the name for a group of countries that have agreed on a set of special arrangements
governing the buying and selling of goods between member countries?
________________________ 
________________________________________

 
52. The text describes 14 "Issues in facility location." Name as many of these as you can.
1) ________________________ 2) ________________________
3) ________________________ 4) ________________________
5) ________________________ 6) ________________________
7) ________________________ 8) ________________________
9) ________________________ 10) ________________________
11) ________________________ 12) ________________________
13) ________________________ 14) ________________________ 
________________________________________

53. What are the two "hidden costs" that are often overlooked in determining the total cost of a
facility location decision?
__________________________________
__________________________________ 
________________________________________

 
 

Essay Questions
 

54. Compare and contrast the factor-rating system and the transportation method of linear
programming as used in facility location decisions. 

 
 

55. As a facility location consultant, how would you advise a client wanting to locate a retail
service facility differently than a client wanting to locate an on-line stock trading operation? 

 
 
56. What weight should be given to environmental pollution control regulations that differ from
location to location or from country to country in making facility location decisions? 

Chapter 14
Material Requirements Planning

Learning Objectives for Chapter 14:

1. Describe what MRP is and where it is best applied.

2. Understand the source of the information used by the system.
3. Demonstrate how to do an MRP “explosion.”
4. Explain how order quantities are calculated in MRP systems.

True / False Questions

 

1. MRP stands for Manufacturing Requirements Planning. 

True    False

2. MRP stands for Material Requirements Planning. 

True    False

3. All firms maintain bill of materials (BOM) files, which are simply a sequencing of everything
that goes into a final product. 
True    False

 
4. MRP is based on dependent demand. 
True    False

5. MRP is most valuable in industries where a number of products are made in batches using the
same productive equipment. 
True    False

6. The master production schedule a master production schedule, which states the number of
items to be produced during specific time periods. 
True    False

7. MRP is least valuable in industries where a number of products are made in batches using the
same productive equipment. 
True    False

 
8. MRP is a logical, easily understandable approach to the problem of determining the number of
parts, components, and materials needed to produce each end item. 
True    False

9. MRP provides the schedule specifying when each part and component of an end item should
be ordered or produced. 
True    False

10. The deeper one looks into the product creation sequence, the more the requirements of
dependent demand items tend to become more "lumpy." 
True    False

11. The deeper one looks into the product creation sequence, the more the requirements of
dependent demand items tend to smooth out and become even over time. 
True    False

12. A master production schedule is an essential input to a material requirements planning (MRP)
system. 
True    False

13. A necessary input to the material requirements planning (MRP) system is an exception
report. 
True    False

14. A necessary input to the material requirements planning (MRP) system is an inventory
records file. 
True    False

 
15. An output of MRP is a bill of materials (BOM) file. 
True    False

16. A BOM file is often called a product structure file or product tree because it enumerates all of
the component parts of the end item product. 
True    False

17. Computing the quantity of each component that goes into a finished product requires
expanding (or exploding) each item in a product structure file and summing at all levels. 
True    False

18. A modular bill of materials includes items with fractional options. 

True    False

19. A modular bill of materials is the term for an item that can be produced and stocked as a
subassembly. 
True    False

20. The MRP program performs its analysis from the bottom up of the product structure trees,
imploding requirements level by level. 
True    False

21. Net change MRP systems are "activity" driven. 

True    False

22. In a net change MRP system requirements and schedules are updated whenever a transaction
is processed that has an impact on the item. 
True    False

 
23. In a net change MRP system requirements and schedules are considered rigid and never
updated. 
True    False

24. Net change MRP reflects the exact status of each item managed by the system in "real time." 
True    False

25. Low level coding in MRP indicates the exact status of each item managed by the system in
"real time." 
True    False

26. In a net change MRP program, a change in one item will result in a completely new inventory
plan and schedule for every item in the master production schedule. 
True    False

27. Since MRP systems focus on batch or lot-sized orders and JIT is focused on individual item
production, the two systems are incompatible and cannot work together. 
True    False

28. Generally, determining lot sizes in MRP systems is simple. 

True    False

29. A lot-for-lot (L4L) lot sizing technique does not take into account setup costs or capacity
limitations. 
True    False

 
30. The lot-for-lot (L4L) lot sizing technique minimizes carrying cost by taking into account
setup costs and capacity limitations. 
True    False

31. Lot-for-lot (L4L) is the most common lot sizing technique. 

True    False

32. The economic order quantity (EOQ) lot sizing technique produces or acquires exactly the
amount of product that is needed each time period with none carried over into future periods. 
True    False

33. The economic order quantity (EOQ) lot sizing technique uses the "square root formula" to
balance set-up cost, carrying cost and cost of stock-outs. 
True    False

34. The economic order quantity (EOQ) lot sizing technique uses the "square root formula" to
balance set-up cost and carrying cost. 
True    False

35. The least total cost method (LTC) lot-sizing technique calculates the order quantity by
comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects
the lot in which these are most nearly equal. 
True    False

36. The least unit cost method (LUC) lot-sizing technique calculates the order quantity by
comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects
the lot in which these are most nearly equal. 
True    False

 
37. The least unit cost method of lot-sizing technique adds ordering and inventory carrying cost
for each trial lot size and divides by the number of units in each lot size, picking the lot size with
the lowest unit cost. 
True    False

38. The least unit cost method of lot-sizing technique adds ordering, stock-out and inventory
carrying cost for each trial lot size and divides by the number of units in each lot size, picking the
lot size with the lowest unit cost. 
True    False

39. "Projected available balance" is a term referring to unsold finished goods inventory. 

True    False

40. Projected available balance is the amount of inventory that is expected as of the beginning of
a period. 
True    False

41. The three main inputs to an MRP system are the bill of materials, the master schedule and the
inventory records file. 
True    False

42. Enterprise Resource Planning (ERP) evolved from Materials Requirements Planning (MRP). 
True    False

43. Enterprise resource planning (ERP) is a computer system that integrates application programs
in accounting, sales, manufacturing, and the other functions in a firm. 
True    False

 
44. When implemented correctly, MRP links all areas of the business. 
True    False

45. ERP vendors have set new standards in information integration that can cause significant cost
to a company. 
True    False

46. ERP vendors have set new standards in information integration that can significantly benefit a
company. 
True    False

47. Materials Requirements Planning (MRP) evolved from Enterprise Resource Planning (ERP). 
True    False

 
 

Multiple Choice Questions

 

48. A BOM file is called which of the following? 

A. Product structure tree
B. Stocking plan
C. Inventory usage record
D. Production parts plan
E. Time bucket schedule

49. Which of the following industry types has high expected benefits from the application of
MRP? 
A. Fabricate-to-stock
B. Fabricate-to-order
C. Assemble-to-stock
D. Continuous process
E. Service and repair parts

 
50. Which of the following industry types has high expected benefits from the application of
MRP? 
A. Fabricate-to-order
B. Hospitals
C. Assemble-to-order
D. Aircraft manufacturers
E. Oil refineries

51. Which of the following industry types will not benefit greatly from the application of MRP? 
A. Fabricate-to-order
B. Assemble-to-stock
C. Assemble-to-order
D. Manufacture-to-order
E. None of the above

52. A product structure tree can do which of the following? 

A. Help to compute component usage
B. Reduce product scrap
C. Reduce labor overtime
D. Reduce regular time labor
E. Locate raw material supplies

53. Which of the following is an input to the master production schedule (MPS)? 

A. Inventory records file
B. The aggregate plan
C. The bill of materials
D. The exception report
E. Planned order schedules

 
54. Which of the following is one of the main purposes of a MRP system? 
A. Educate personnel in basic work rules.
B. To determine the amount of materials needed to produce each end item.
C. Stimulate the work force.
D. Decrease labor requirements.
E. Increase inventory accuracy.

55. One of the main purposes of a MRP system is which of the following? 

A. Track inventory levels.
B. Create productive capacity.
C. Decrease layers of management.
D. Develop schedules specifying when each component should be ordered or produced.
E. Upgrade manufacturing's professionalism.

56. Which of the following is most closely related to the reason a firm might implement MRP? 
A. So they can order the right parts
B. So they can order parts sufficient for immediate use
C. So they can insure that parts to arrive prior to when they are needed
D. To assure appropriate quality levels
E. To keep process costs between the LCL and the UCL

57. MRP systems seek to achieve which of the following? 

A. Minimize lot sizes
B. Determine the number of dependent demand items needed
C. Relieve capacity bottlenecks
D. Provide a yardstick for future improvements
E. Improve on JIT methods

 
58. Which of the following is an input to the master production schedule? 
A. Prototype products from product development
B. Aggregate component schedule
C. Peg reports
D. Exception reports
E. Forecasts of demand from random customers

59. Which of the following is an input to the master production schedule? 

A. Bill of materials (BOM) file
B. Inventory records file
C. Exception reports
D. Planned-order schedules
E. None of the above

60. Which of the following is an input file necessary to run an MRP system? 

A. Bill of materials (BOM) file
B. Quality management report
C. Exception reports
D. Planned-order schedules
E. Purchasing contracts

61. Which of the following is an input file necessary to run an MRP system? 

A. Exception report
B. Computer-aided-design files
C. Inventory records file
D. Personnel files
E. Planned order schedule

62. Which of the following is not a production activity report generated by MRP? 

A. Exception report
B. Planning report
C. Performance control report
D. Planned-order schedules
E. Bill of materials report

 
63. In an MRP program, the program accesses the status of any file in specific periods called
which of the following? 
A. Cubed time units
B. Time buckets
C. BOM units
D. Time modules
E. Time lines

64. Which of the following files allows us to retrace a material requirement upward in the product
structure through each level, identifying each parent item that created the demand? 
A. Planning bill of materials file
B. Modular bill of materials file
C. Super bill of materials file
D. Exception report file
E. Peg record file

65. We would expect to see which of the following in an MRP system's inventory transactions
file? 
A. End items produced
B. Late/early delivery records
C. Scrap parts
D. Labor efficiency
E. Computer errors

66. In a typical inventory status record which of the following would you not expect to see? 
A. Scrap allowance
B. Order quantity
C. Gross requirements
D. Planned-order releases
E. Lost items

 
67. Which of the following is considered a primary report in an MRP system? 
A. Planning reports
B. Performance reports
C. Exception reports
D. Planned order schedules
E. Cycle counting reports

68. Which of the following is considered a secondary report in an MRP system? 

A. Planned order schedule
B. Performance reports
C. Inventory record
D. Firm orders from known customers
E. Engineering change reports

69. Which of the following is considered a primary report in an MRP system? 

A. Planned order schedule
B. Peg report
C. Planning report
D. Inventory accuracy report
E. Aggregate production plan report

70. Which of the following is the net requirement using an MRP program if the gross requirement
is 1,250 and the inventory on hand is 50? 
A. 1,200
B. 1,300
C. 1,150
D. 2,450
E. None of the above

 
71. Which of the following is the net requirement using an MRP program if the gross requirement
is 1,000 and the inventory on hand is 500? 
A. 1,000
B. 950
C. 500
D. 400
E. 350

72. Which of the following is the planned-order release using an MRP program if the gross
requirement is 5,000 and the inventory on hand is 1,200? 
A. 5,000
B. 4,500
C. 3,800
D. 1,200
E. None of the above

73. Which of the following is the planned-order release using an MRP program if the gross
requirement is 670 and the inventory on hand is 600? 
A. 670
B. 600
C. 530
D. 70
E. None of the above

74. Which of the following can be used for lot sizing in an MRP system? 
A. Low-level coding
B. Time bucket size
C. Least unit cost
D. Inventory record file
E. Peg inventory

 
75. Which of the following is not a lot sizing technique used in MRP systems? 
A. Lot-for-lot (L4L)
B. Economic order quantity (EOQ)
C. Least total cost (LTC)
D. Least unit cost (LUC)
E. Warehouse loading factor (WLF)

76. Under the lot-for-lot (L4L) lot sizing technique as used in MRP, we would expect which of
the following? 
A. A consistent lag of supply behind demand
B. Minimized carrying costs
C. Minimized set-up costs
D. A just in time management philosophy
E. Minimized quality problems

77. If annual demand is 6,125 units, annual holding cost is $5 per unit, and setup cost per order is
$50, which of the following is the EOQ lot size? 
A. 350
B. 247
C. 230
D. 185
E. 78

78. If annual demand is 12,000 units, annual holding cost is $15 per unit, and setup cost per order
is $25, which of the following is the EOQ lot size? 
A. 2,000
B. 1,200
C. 1,000
D. 300
E. 200

 
79. Which of the following is a dynamic lot-sizing technique that calculates the order quantity by
comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects
the lot in which these are most nearly equal? 
A. Economic Order Quantity
B. Lot for lot
C. Least total cost
D. Least unit cost
E. ABC analysis

80. Which of the following is a dynamic lot-sizing technique that calculates the order quantity by
comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects
the lot size in which these are most nearly equal? 
A. Kanban
B. Just-in-time system
C. MRP
D. Least unit cost
E. Least total cost

81. Which of the following is a dynamic lot-sizing technique that adds ordering and inventory
carrying cost for each trial lot size and divides by the number of units in each lot size, picking the
lot size with the lowest unit cost? 
A. Economic order quantity
B. Lot-for-lot
C. Least total cost
D. Least unit cost
E. Inventory item averaging

 
 

Fill in the Blank Questions

 

82. What is the name for demand caused by the demand for a higher level item?
____________________ 
________________________________________

 
83. What is the name for a bill of materials that includes items with fractional options?
______________________ 
________________________________________

84. In MRP, how is demand information for a level 0 (zero) item derived?
_________________________ 
________________________________________

85. What is the name given to the manufacturing software that combines MRP and JIT logic?
____________________ 
________________________________________

86. What does it mean when a super bill of materials specifies half of a component part in an
assembly? ___________________________________________________ 
________________________________________

87. What is the planned-order release using an MRP program if the gross requirement is 1,600
and the inventory on hand is 600? ______ 
________________________________________

88. If annual demand is 1,000 units, annual holding cost is $0.50 per unit, and the cost per order
is $10, what is the EOQ? ____________ 
________________________________________

89. What are the three main inputs to an MRP program?

1. _______________
2. _______________
3. _______________ 
________________________________________

 
90. Demand in for an item located in level 3 of a product structure tree depends on demand for an
item in the next higher level. What is that level called? ______________ 
________________________________________

91. Name three major ERP software vendors.

1. _______________
2. _______________
3. _______________ 
________________________________________

 
 

Essay Questions
 
92. Discuss the importance of inventory record accuracy to an MRP system