Chapter 9- Material Requirements Planning

Chapter 9
Material Requirements Planning
Learning Objectives for Chapter 9:
1.
2.
3.
4.

Describe what MRP is and where it is best applied.

Understand the source of the information used by the system.
Demonstrate how to do an MRP explosion.
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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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

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Chapter 9- Material Requirements Planning

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?
____________________
________________________________________

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Chapter 9- Material Requirements Planning

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. _______________
________________________________________

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Chapter 9- Material Requirements Planning

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.

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Chapter 9- Material Requirements Planning

Chapter 14 Material Requirements Planning Answer Key

True / False Questions

1. MRP stands for Manufacturing Requirements Planning.

FALSE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

2. MRP stands for Material Requirements Planning.

TRUE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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Chapter 9- Material Requirements Planning

4. MRP is based on dependent demand.

TRUE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Medium
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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.
FALSE

AACSB: Analytic
Difficulty: Medium
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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Chapter 9- Material Requirements Planning

12. A master production schedule is an essential input to a material requirements planning

(MRP) system.
TRUE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

FALSE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 3
Taxonomy: Knowledge
Topic: An Example Using MRP

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

FALSE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 3
Taxonomy: Knowledge
Topic: An Example Using MRP

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

TRUE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 3
Taxonomy: Knowledge
Topic: An Example Using MRP

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 3
Taxonomy: Knowledge
Topic: An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 3
Taxonomy: Knowledge
Topic: An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 3
Taxonomy: Knowledge
Topic: An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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Chapter 9- Material Requirements Planning

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.
FALSE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 3
Taxonomy: Knowledge
Topic: An Example Using MRP

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.
FALSE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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

FALSE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Medium
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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

TRUE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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.
FALSE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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.
FALSE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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.
FALSE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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.
FALSE

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Medium
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Medium
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Medium
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Medium
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 3
Taxonomy: Knowledge
Topic: An Example Using MRP

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

AACSB: Analytic
Difficulty: Medium
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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Chapter 9- Material Requirements Planning

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.

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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.

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Medium
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Medium
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Medium
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Analysis
Topic: Lot Sizing in MRP Systems

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Analysis
Topic: Lot Sizing in MRP Systems

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Analysis
Topic: Lot Sizing in MRP Systems

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Analysis
Topic: Lot Sizing in MRP Systems

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Analysis
Topic: Lot Sizing in MRP Systems

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Chapter 9- Material Requirements Planning

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)

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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

AACSB: Analytic
Difficulty: Medium
Learning Objective: 4
Taxonomy: Analysis
Topic: Lot Sizing in MRP Systems

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Medium
Learning Objective: 4
Taxonomy: Analysis
Topic: Lot Sizing in MRP Systems

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

Fill in the Blank Questions

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 3
Taxonomy: Knowledge
Topic: An Example Using MRP

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Chapter 9- Material Requirements Planning

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Knowledge
Topic: Lot Sizing in MRP Systems

84. In MRP, how is demand information for a level 0 (zero) item derived?
_________________________
From the master production scheduling process

AACSB: Analytic
Difficulty: Medium
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: Knowledge
Topic: From Push to Pull and Where MRP Can Be Used

86. What does it mean when a super bill of materials specifies half of a component part in an
assembly? ___________________________________________________
It means that 50% of the units assembled will include that component and 50% will not.

AACSB: Analytic
Difficulty: Medium
Learning Objective: 3
Taxonomy: Knowledge
Topic: An Example Using MRP

14-44

Chapter 9- Material Requirements Planning

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? ______
1,000

AACSB: Analytic
Difficulty: Easy
Learning Objective: 4
Taxonomy: Analysis
Topic: Lot Sizing in MRP Systems

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? ____________
200

AACSB: Analytic
Difficulty: Medium
Learning Objective: 4
Taxonomy: Analysis
Topic: Lot Sizing in MRP Systems

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

1. _______________
2. _______________
3. _______________
1. Bill of materials 2. Master schedule 3. Inventory records file

AACSB: Analytic
Difficulty: Medium
Learning Objective: 2
Taxonomy: Knowledge
Topic: Material Requirements Planning System Structure and An Example Using MRP

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? ______________
Level 2

AACSB: Analytic
Difficulty: Easy
Learning Objective: 3
Taxonomy: Knowledge
Topic: An Example Using MRP

14-45

Chapter 9- Material Requirements Planning

91. Name three major ERP software vendors.

1. _______________
2. _______________
3. _______________
1. Oracle 2. SAP 3. i2 Technologies

AACSB: Analytic
Difficulty: Easy
Learning Objective: 3
Taxonomy: Knowledge
Topic: An Example Using MRP

Essay Questions

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

A satisfactory answer to this question will require the student to extrapolate from Chapter 13,
page 412-14 into the MRP context. The discussion in Chapter 13 essentially assumes the
perfection of inventory (and bill of material) records. However, the discussion in Chapter 13
indicates that perfect agreement between the computer files and actual storeroom content may
be rare instead of common. Inaccurate inventory records may cause, for example, orders of
excess inventory or for assembly to be scheduled even though there is an inadequate supply of
components to support that assembly. Either occurrence can cause significant waste of
resources, time and money. No MRP system can deliver positive results when the basic input
data is faulty. A good way to summarize this is the old adage "garbage-in, garbage-out."

AACSB: Analytic
Difficulty: Medium
Learning Objective: 4
Taxonomy: Synthesis
Topic: Lot Sizing in MRP Systems

14-46