Operations and Supply Chain Management The Core 6th Edition TB

CHAPTER 1
1) Which of the following is a reason for studying operations and supply chain management
(OSCM)?
A) OSCM is essential for understanding organizational behavior.

B) Most business graduates do OSCM work regardless of their job title.
C) All managers should understand the basic principles that guide the design of
transformation processes.
D) OSCM is a required course in all business degree programs.
E) OSCM is the most rigorous business discipline.
2) Which of the following sets of categories the Goods-Services Continnuum consists of?
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 these.
3) Which of the following are defined as core goods?
A) Chemicals.
B) Airlines.
C) Data storage systems.
D) Hotels.
E) None of these.
4) Current issues in OSCM do not include _____________blank.
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A) coordinating relationships between organizations
B) making senior management aware that OSCM can be a competitive weapon
C) managing customer touch points
D) increasing global supply chain employment
5) Which of the following are not listed in the text as jobs in OSCM?
A) Department store manager.

B) Project manager.
C) Hospital administrator.
D) Data center manager.
E) Call center manager.
6) 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 these.
7) Which of the following is not a way that operations and supply processes are
categorized?
A) Planning.
B) Returning.
C) Delivering.
D) Selecting.
E) Making.
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8) One of the "package of features" that makes up a service is _____________blank.
A) appearance.
B) facilitating goods.
C) packaging.
D) cost.
E) implied use.
9) Which of the following is not a measure of operations and supply chain management
efficiency used by Wall Street?
A) Inventory turnover.
B) Days inventory.
C) Receivable turnover.
D) Earnings per share.
E) Asset turnover.
10) 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) Receivables turnover.
D) Earnings per share growth.
E) Financial leverage.
11) Managing customer touch points becomes a concern under current issues in OCSM when
_____________blank.
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A) complaints arise about shaking hands with customers in cultures that is frowned upon
B) firms striving to become superefficient begin to scrimp on staffing and training
customer support personnel
C) a firm has a workforce trained in specifically diverse situations and the correct level of
service may be hard to discern
D) firms market global products
E) senior executives fail to recognize the contribution OCSM can make to their success
12) When considering the concept of value, how is quality defined?
A) By the price of the product.

B) By the producer’s reputation in the industry.
C) By the weight of the product.
D) By the attractiveness of the product, considering its features and durability.
E) By the product’s uniqueness relative to other similar products.
13) All other things remaining the same, if the revenue or sales decreases, asset turnover ratio
will _____.
A) decrease
B) increase
C) stay the same
D) will decrease, but the amount of change will depend on the profit margin
E) decrease and will decrease, but the amount of change will depend on the profit margin
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14) Which of the following is the most appropriate regarding inventory turnover?
A. Inventory turnover increases as average inventory decreases, while other things remain the
same.
B. Inventory turnover is an efficiency measure.
C. Inventory turnover is unaffected by changes in annual sales.
A) Choice A
B) Choice B
C) Choice C
D) Choices A and B only
E) Choices A, B and C will hold
15) Identify the most appropriate answer regarding cash conversion cycle.
A. Is also known as cash-to-cash cycle.
B. Cash conversion cycle goes down if payable period goes up.
C. Cash conversion cycle goes up if average inventory goes up.
A) Choice A
B) Choice B
C) Choice C
D) Choices A and B are correct
E) Choices A, B and C are all correct
16) Efficiency means doing the right things to create the most value for the company.
⊚ true
⊚ false
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17) Effectiveness means doing the right things to create the most value for the company.
⊚ true
⊚ false
18) 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
19) A worker can be efficient without being effective.

⊚ true
⊚ false
20) A process can be effective without being efficient.

⊚ true
⊚ false
21) Operations and supply chain 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
22) The term "value" refers to the relationship between quality and the price paid by the
consumer.
⊚ true
⊚ false
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23) Attempting to balance the desire to efficiently use resources while providing a highly
effective service may create conflict between the two goals.
⊚ true
⊚ false
24) Central to the concept of operations strategy are the concepts of operations focus and
trade-offs.
⊚ true
⊚ false
25) OSCM is concerned with management of the trickiest parts of the system that produces a
good or delivers a service.
⊚ true
⊚ false
26) OSCM is a functional field of business with clear line management responsibilities.
⊚ true
⊚ false
27) The supply network can be thought of as a pipeline through which cash, material, and
information flow.
⊚ true
⊚ false
28) Supply networks cannot be constructed for every product or service.

⊚ true
⊚ false
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29) "Operations" refers to manufacturing and service processes used to transform resources
employed by a firm into products desired by customers.
⊚ true
⊚ false
30) "Supply Chain" refers to processes that move information and material to and from the
manufacturing and service processes of the firm.
⊚ true
⊚ false
31) "Supply Chain" includes only inbound freight and inventory.

⊚ true
⊚ false
32) 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
33) Planning is where a firm must determine how anticipated demand will be met with
available resources.
⊚ true
⊚ false
34) Although planning involves determining how the various supply chain processes
(sourcing, making, delivering, and returning) will be met, planning itself is not considered a
supply chain process.
⊚ true
⊚ false
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35) The supply chain processes mentioned in the textbook are: planning, sourcing, delivering,
and returning only.
⊚ true
⊚ false
36) All managers should understand the basic principles that guide the design of
transformation processes.
⊚ true
⊚ false
37) Operations and supply management changes constantly because of the dynamic nature of
competing in global business and the constant evolution of information technology.
⊚ true
⊚ false
38) Internet technology has made the sharing of reliable real-time information expensive.
⊚ true
⊚ false
39) Capturing information directly from the source through such systems as point-of-sale,
radio-frequency identification tags, bar-code scanners, and automatic recognition has had little
impact on Operations and Supply Chain Management.
⊚ true
⊚ false
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40) 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
41) Operations and supply chain processes can be conveniently categorized as planning,
sourcing, making, and delivering only.
⊚ true
⊚ false
42) A major aspect of planning involves developing a set of metrics to monitor the supply
chain.
⊚ true
⊚ false
43) 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
44) Delivering is not considered in supply chain analysis when outside carriers are contracted
to move products to customers.
⊚ true
⊚ false
45) Services are intangible processes that cannot be weighed or measured.

⊚ true
⊚ false
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46) Service innovations can be patented.
⊚ true
⊚ false
47) Services are homogeneous.

⊚ true
⊚ false
48) Services are defined and evaluated as a package of features that affect the five senses.
⊚ true
⊚ false
49) Automobiles and appliances are classified as "pure goods."

⊚ true
⊚ false
50) Core service providers integrate tangible goods into their product.
⊚ true
⊚ false
51) "Product-service bundling" refers to a company building service activities into its product
offerings for its customers.
⊚ true
⊚ false
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52) In contrast to careers in finance and marketing, careers in OSCM include hands-on
involvement with people and processes.
⊚ true
⊚ false
53) A bank branch manager position is not an OSCM job.

⊚ true
⊚ false
54) A supply chain manager is an OSCM job while a purchasing manager is not.
⊚ true
⊚ false
55) Just-in-time (JIT) production was a major breakthrough in manufacturing philosophy

pioneered by the Japanese.
⊚ true
⊚ false
56) Lean manufacturing refers to just-in-time production coupled with total quality control.
⊚ true
⊚ false
57) The Baldrige National Quality Award was started under the direction of the National
Institute of Standards and Technology.
⊚ true
⊚ false
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58) The approach that advocates making revolutionary changes as opposed to evolutionary
changes is called creation theory.
⊚ true
⊚ false
59) The approach that advocates making revolutionary changes as opposed to evolutionary
changes is called "Business Process Reengineering."
⊚ true
⊚ false
60) Business Process Reengineering, which seeks revolutionary change, is contrasted with
total quality management which commonly advocates incremental change.
⊚ true
⊚ false
61) The "triple bottom line" relates to the economic, employee, and environmental impact of
a firm's strategy.
⊚ true
⊚ false
62) Sustainability is the ability to maintain profits in a system.

⊚ true
⊚ false
63) Raising senior management awareness of OSCM as a competitive weapon is not an

important issue.
⊚ true
⊚ false
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64) Green and Black Belt Programs teach Six-Sigma quality tools to managers at many
corporations.
⊚ true
⊚ false
65) The central idea of supply chain management is to apply a total system approach to
managing the flow of information, materials, and services from raw material suppliers through
factories and warehouses to the end customer.
⊚ true
⊚ false
66) The term "electronic commerce" refers to the buying and selling of electronic products
and devices.
⊚ true
⊚ false
67) The term "electronic commerce" refers to the use of the Internet as an essential element
of business activity.
⊚ true
⊚ false
68) "Business Analytics" involves the analysis of data through a unique combination of linear
programming, game theory, and queuing theory to better solve business problems.
⊚ true
⊚ false
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69) The mathematical results of Business Analytics are used to automate decision making
and eliminate the decision maker.
⊚ true
⊚ false
70) Operations and supply chain strategy are not important issues to investors who tend to
focus on growth, dividends, and earnings per share.
⊚ true
⊚ false
71) 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
72) During a recession, efficient firms often have an opportunity to increase market share
while maintaining profitability.
⊚ true
⊚ false
73) Wall Street analysts are not particularly concerned with how efficient companies are from
an operations and supply management view.
⊚ true
⊚ false
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Answer Key
Test name: Chap 01_6e
1) C
2) B
3) C
4) D
5) D
6) A
7) D
8) B
9) D
10) C
11) B
12) D
13) A
14) D
15) E
16) FALSE
17) TRUE
18) TRUE
19) TRUE
20) TRUE
21) TRUE
22) TRUE
23) TRUE
24) TRUE
25) FALSE
26) TRUE
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27) FALSE
28) FALSE
29) TRUE
30) TRUE
31) FALSE
32) FALSE
33) TRUE
34) FALSE
35) FALSE
36) TRUE
37) TRUE
38) FALSE
39) FALSE
40) FALSE
41) FALSE
42) TRUE
43) FALSE
44) FALSE
45) TRUE
46) FALSE
47) FALSE
48) TRUE
49) FALSE
50) TRUE
51) TRUE
52) TRUE
53) FALSE
54) FALSE
55) TRUE
56) TRUE
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57) TRUE
58) FALSE
59) TRUE
60) TRUE
61) TRUE
62) FALSE
63) FALSE
64) TRUE
65) TRUE
66) FALSE
67) TRUE
68) FALSE
69) FALSE
70) FALSE
71) FALSE
72) TRUE
73) FALSE
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CHAPTER 2
1) Which of the following is not a major strategic operational competitive dimension that
forms a company's competitive position?
A) Management acumen.
B) Coping with changes in demand.
C) Cost or price.
D) Delivery speed.
E) Delivery reliability.
2) Which of the following major competitive dimension forms a company's strategic

operational competitive position in their strategic planning?
A) Cost or price.
B) Focus.
C) Automation.
D) Straddling.
E) Activity-system mapping.
3) When developing an operations and supply chain 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.
4) In development of an operations and supply chain strategy, which of the following may
be an important product-specific criterion to consider?
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A) Focus.
B) Production lot-size.
C) Supplier after-sale support.
D) Learning curve.
E) Total quality management.
5) A company seeks to match the benefits of a successful position while maintaining its
existing position in offering customers a variety of differing services. How is this process called?
A) Operations capability analysis.

B) Straddling.
C) Order qualifying.
D) Order winning.
E) Inter-functional analysis.
6) Which of the following is an activity-system map?
A) A network guide to route airlines.

B) A listing of activities that make up a project.
C) A diagram 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.
7) 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
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A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) All of these
8) Which of the following is a multifactor measure of productivity?

A. Output / (Materials)
C. Output / All resources used
D. Output / Inputs
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) All of these
9) Which of the following is a total measure of productivity?

A. Output / Materials
C. Output / Labor
D. Output / Inputs
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A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) All of these
10) 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
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) All of these
11) 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
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A) Choice A
B) Choice B
C) Choice C
D) Choice A and B
E) Choice B and C
12) 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) 1.429
C) 0.700
D) 0.411
E) None of these
13) 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 these
14) 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 two 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?
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A) −20.00%
B) −15.82%
C) 8.98%
D) 2.3%
E) −25.00%
F) None of these
15) Various financial data for SunPath Manufacturing for 2015 and 2016 follow.
2015 2016
Output: Sales $300,000 $330,000

Input: Labor $ 40,000 $ 43,000
Raw Materials: $ 45,000 $ 51,000
Energy: $ 10,000 $ 9,000
Capital Employed: $250,000 $262,000
Other: $ 2,000 $ 6,000
What is the percentage change in SunPath’s total productivity measure between 2015 and 2016?
A) − 9.22%
B) 2.33%
C) − 0.53%
D) 2.88%
E) 10.39%
F) None of these
2015 2016
Output: Sales $300,000 $330,000

Input: Labor $ 40,000 $ 43,000
Raw Materials: $ 45,000 $ 51,000
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Energy: $ 10,000 $ 9,000
Other: $ 2,000 $ 6,000
What is the percentage change in the energy partial productivity measure for SunPath between
2015 and 2016?
A) −9.22%
B) 2.33%
C) −0.53%
D) 2.88%
E) 22.2%
F) None of these
2015 2016
Output: Sales $300,000 $330,000

Input: Labor $ 40,000 $ 43,000
Raw Materials: $ 45,000 $ 51,000
Energy: $ 10,000 $ 9,000
Other: $ 2,000 $ 6,000
What is the percentage change in the labor partial productivity measure for SunPath between
2015 and 2016?
A) −9.22%
B) 2.27%
C) −0.53%
D) 2.88%
E) 10.39%
F) None of these
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2015 2016
Output: Sales $300,000 $330,000

Input: Labor $ 40,000 $ 43,000
Raw Materials: $ 45,000 $ 51,000
Energy: $ 10,000 $ 9,000
Other: $ 2,000 $ 6,000
What is the percentage change in the multifactor labor and raw materials productivity measure
for SunPath between 2015 and 2016?
A) −9.22%
B) 2.33%
C) −0.51%
D) −2.88%
E) 10.39%
F) None of these
19) What is meant by the term "operations effectiveness?"
A) Products produced in sufficient volume to meet demand.

B) Products produced at the lowest price in the industry.
C) Operations that run without error and with no surprises for top management.
D) Operations that can adapt quickly and efficiently to new and evolving conditions.
E) Performing activities in a manner that best implements strategic priorities at minimum
cost.
20) Decisions that relate to the design of the processes and the infrastructure needed to
support these processes relate to which OSCM concept?
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A) Sustainability.
B) Competitive dimensions of OSCM.
C) Making trade-offs.
D) integrating operations and supply chain strategy with a firm's operational capabilities.
E) Supply chain risk.
21) Triple bottom line is a phrase that captures which of the following?
A. The concept that shareholders like economic, environmental and societal stewardship
affecting shareholders and stake holders.
B. The concept that firms should consider economic prosperity, environmental stewardship and
social responsibility affecting shareholders and stake holders.
C. The concept that sustainability, social awareness and profitability are three important
measures for a firm affecting shareholders and stake holders.
D. The concept that firms should consider economic prosperity, environmental stewardship and
social responsibility affecting only shareholders.
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) None of the above
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22) Which of the following lists contains only competitive dimensions of a firm discussed in
the text?
A. Cost or price, Triple bottom line, order winners
B. Delivery speed, delivery reliability, order qualifiers
C. Cost or price, delivery speed, delivery reliability, new product design
D. Cost or price, delivery speed, delivery reliability, flexibility and new product introduction
speed
E. Triple bottom line, delivery speed, deliver reliability, supplier after sale support
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E
23) Choose the most accurate description in the context of operations and supply chain from
the following lists.
A. Order winners and order qualifiers are two ways of describing market-oriented dimensions of
a product.
B. Order winners differentiates a product or service from another while order qualifiers are built
in features.
C. Order winners are built in features and order qualifiers are necessary features.
D. Order qualifier is a screening criterion while order winner is a differentiating criterion.
E. Order winners may have been order qualifiers before.
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A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E
24) In a firm, if the employees attend a training program, then the time to assemble one unit
reduces by 10%. Training program will _____________blank.
A. increase the labor productivity only
B. increase the multifactor productivity only
C. increase both labor and multifactor productivity
D. decrease capital productivity
E. have no effect on productivity.
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E
25) In a firm, all other things remaining the same, if the material usage per unit of final
product decreases to half of the current usage, then the firm will _____________blank.
A) double the material productivity

B) increase the multifactor productivity
C) double the material productivity and increase the multifactor productivity
D) decrease capital productivity
E) have no effect on productivity.
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26) An operations and supply chain strategy must be integrated with the organization's
corporate strategy.
⊚ true
⊚ false
27) One of the competitive dimensions that form the competitive position of a company when
planning their strategies is cost.
⊚ true
⊚ false
planning their strategies is delivery speed.
⊚ true
⊚ false
planning their strategies is making the best trade-off.
⊚ true
⊚ false
30) 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
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31) 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
32) 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
33) An order winner is a set of criteria that differentiates the products or services of one firm
from another.
⊚ true
⊚ false
34) 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
35) An order qualifier is a screening criterion that permits a firm's products to even be
considered as possible candidates for purchase.
⊚ true
⊚ false
36) Activity-system maps show how a company's strategy is delivered through a set of
tailored activities.
⊚ true
⊚ false
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37) Activity-system maps are useful in understanding how well a system of activities fits the
overall company's strategy.
⊚ true
⊚ false
38) Activity-system maps depict the geographic reach of a company's business strategies.
⊚ true
⊚ false
39) An operations strategy must resist change because of the long-term nature of equipment
and personnel investments.
⊚ true
⊚ false
40) 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
41) Infrastructure decisions within operations strategy include the selection of the appropriate
technology, the role of inventory, and the location of facilities.
⊚ true
⊚ false
42) Infrastructure decisions within operations strategy include the selection of the logic
associated with the planning and control systems.
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⊚ true
⊚ false
43) 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
44) The job of operations and supply chain 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
45) Productivity is a relative measure.

⊚ true
⊚ false
46) In a partial measure in productivity, the denominator of the ratio would include all
resources used or all inputs.
⊚ true
⊚ false
47) In a multifactor measure in productivity, the numerator of the ratio would include all
resources used or all inputs.
⊚ true
⊚ false
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48) The triple bottom line considers evaluating the firm against social, economic, and
environmental criteria.
⊚ true
⊚ false
49) Sustainability means meeting a firm's current needs without excessively compromising
the ability of future generations to meet their own needs.
⊚ true
⊚ false
50) The social impact of the triple bottom line concept pertains to fair and beneficial business
practices toward labor, the community, and the region in which a firm conducts its business.
⊚ true
⊚ false
51) A firm's business practices toward its labor force pertain mainly to the economic aspect
of the triple bottom line concept.
⊚ true
⊚ false
52) According to the economic aspect of the triple bottom line concept, the firm is required to
compensate shareholders by paying dividends and growing the value of their common stock
faster than their competitors.
⊚ true
⊚ false
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53) Within a sustainability framework, the economic dimension of the triple bottom line
concept goes beyond just profit for the firm but also provides lasting economic benefit to society.
⊚ true
⊚ false
54) Within a sustainability framework, the environmental dimension of the triple bottom line
concept has to do with labor, the community, and the region in which a firm conducts its
business.
⊚ true
⊚ false
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Answer Key
1) A
2) A
3) A
4) C
5) B
6) C
7) A
8) B
9) D
10) A
11) D
12) B
13) A
14) C
15) D
16) E
17) B
18) C
19) E
20) D
21) B
22) D
23) D
24) C
25) C
26) TRUE
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27) TRUE
28) TRUE
29) FALSE
30) FALSE
31) TRUE
32) FALSE
33) TRUE
34) FALSE
35) TRUE
36) TRUE
37) TRUE
38) FALSE
39) FALSE
40) TRUE
41) FALSE
42) TRUE
43) FALSE
44) FALSE
45) TRUE
46) FALSE
47) FALSE
48) TRUE
49) FALSE
50) TRUE
51) FALSE
52) FALSE
53) TRUE
54) FALSE
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CHAPTER 3
1) In time series data depicting demand which of the following is not considered a
component of demand variation?
A) Trend
B) Seasonal
C) Cyclical
D) Variance
E) Autocorrelation
2) Which of the following is not one of the basic forecasting types discussed in the text?
A) Qualitative
B) Time series analysis
C) Causal relationships
D) Simulation
E) Force field analysis
3) In most cases, demand for products or services can be broken down into several
components. Which of the following is not considered as a component of demand?
A) Average demand for a period.

B) A trend.
C) Seasonal elements.
D) Past data.
E) Autocorrelation.
4) In most cases, demand for products or services can be broken into several components.
Which of the following is considered as a component of demand?
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A) Cyclical elements.
B) Future demand.
C) Past demand.
D) Inconsistent demand.
E) Level demand.
5) In most cases, demand for products or services can be broken into several components.
Which of the following is considered as a component of demand?
A) Forecast error.
B) Autocorrelation.
C) Previous demand.
D) Consistent demand.
E) Repeat demand.
6) Which of the following forecasting methodologies is considered as a time series

forecasting technique?
A) Simple moving average.

B) Market research.
C) Leading indicators.
D) Historical analogy.
E) Simulation.
7) Which of the following forecasting methodologies is considered as a time series

forecasting technique?
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A) Delphi method.
B) Exponential averaging.
C) Simple movement smoothing.
D) Weighted moving average.
E) Simulation.
8) In business forecasting, what is usually considered as a short-term time period?
A) Four weeks or less.

B) More than three months.
C) Six months or more.
D) Less than three months.
E) One year.
9) In business forecasting, what is usually considered as a medium-term period?
A) Six weeks to one year.

B) Three months to two years.
C) One to five years.
D) One to six months.
E) Six months to six years.
10) In business forecasting, what is usually considered as a long-term time period?
A) Three months or longer.

B) Six months or longer.
C) One year or longer.
D) Two years or longer.
E) Ten years or longer.
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11) In general, which forecasting time frame compensates most effectively for random
variation and short-term changes?
A) Short-term forecasts.
B) Quick-time forecasts.
C) Long range forecasts.
D) Medium-term forecasts.
E) Rapid change forecasts.
12) In general, which forecasting time frame best identifies seasonal effects?
13) In general, which forecasting time frame is best to detect general trends?
14) Which of the following forecasting methods can be used for short-term forecasting?
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A) Simple exponential smoothing.
B) Delphi technique.
C) Market research.
D) Hoskins-Hamilton smoothing.
E) Serial regression.
15) Which of the following considerations is not a factor in deciding which forecasting model
a firm should choose?
A) Time horizon to forecast.

B) Product.
C) Accuracy required.
D) Data availability.
E) Analyst availability.
16) A company wants to forecast demand using the simple moving average. If the company
uses four prior yearly sales values (i.e., year 2014 = 100, year 2015 = 120, year 2016 = 140, and
year 2017 = 210), which of the following is the simple moving average forecast for year 2018?
A) 100.5
B) 140.0
C) 142.5
D) 145.5
E) 155.0
17) A company wants to forecast demand using the simple moving average. If the company
uses three prior yearly sales values (i.e., year 2015 = 130, year 2016 = 110, and year 2017 =160),
which of the following is the simple moving average forecast for year 2018?
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A) 100.5
B) 122.5
C) 133.3
D) 135.6
E) 139.3
18) A company wants to forecast demand using the weighted moving average. If the
company uses two prior yearly sales values (i.e., year 2016 = 110 and year 2017 = 130), and we
want to weight year 2016 at 10% and year 2017 at 90%, which of the following is the weighted
moving average forecast for year 2018?
A) 120
B) 128
C) 133
D) 138
E) 142
19) A company wants to forecast demand using the weighted moving average. If the
company uses three prior yearly sales values (i.e., year 2015 = 160, year 2016 = 140 and year
2017 = 170), and we want to weight year 2015 at 30%, year 2016 at 30% and year 2017 at 40%,
which of the following is the weighted moving average forecast for year 2018?
A) 170
B) 168
C) 158
D) 152
E) 146
20) Which of the following is among the major reasons that exponential smoothing has
become well accepted as a forecasting technique?
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A) Accurate and easy to use.
B) Sophistication of analysis.
C) Predicts turning points.
D) Captures patterns in historical data.
E) Ability to forecast lagging data trends.
21) The exponential smoothing method requires which of the following data to forecast the
future?
A) The most recent forecast.

B) Precise actual demand for the past several years.
C) The value of the smoothing constant delta.
D) Overall industry demand data.
E) Tracking values.
22) Given a prior forecast demand value of 230, a related actual demand value of 250, and a
smoothing constant alpha of 0.1, what is the exponential smoothing forecast value for the
following period?
A) 230
B) 232
C) 238
D) 248
E) 250
23) If a firm produced a standard item with relatively stable demand, the smoothing constant
alpha (reaction rate to differences) used in an exponential smoothing forecasting model would
tend to be in which of the following ranges?
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A) 5% to 10%
B) 20% to 50%
C) 20% to 80%
D) 60% to 120%
E) 90% to 100%
24) If a firm produced a product that was experiencing growth in demand, the smoothing
constant alpha (reaction rate to differences) used in an exponential smoothing forecasting model
would tend to be which of the following?
A) Close to zero.
B) A very low, less than 0.1.
C) The more rapid the growth, the higher alpha.
D) The more rapid the growth, the lower alpha.
E) 0.5 or higher.
25) Given a prior forecast demand value of 1,100, a related actual demand value of 1,000,
and a smoothing constant alpha of 0.3, what is the exponential smoothing forecast value?
A) 1,000
B) 1,030
C) 1,070
D) 1,130
E) 970
26) A company wants to generate a forecast for unit demand for year 2018 using exponential
smoothing. The actual demand in year 2017 was 120. The forecast demand in year 2017 was
110. Using this data and a smoothing constant alpha of 0.1, which of the following is the
resulting year 2018 forecast value?
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A) 100
B) 110
C) 111
D) 114
E) 120
27) As a consultant you have been asked to generate a unit demand forecast for a product for
year 2018 using exponential smoothing. The actual demand in year 2017 was 750. The forecast
demand in year 2017 was 960. Using this data and a smoothing constant alpha of 0.3, which of
the following is the resulting year 2018 forecast value?
A) 766
B) 813
C) 897
D) 1,023
E) 1,120
28) A company wants to forecast demand using the simple moving average. The company
uses four positive prior yearly (2014, 2015, 2016 and 2017) sales values. All yearly sales figures
are unique (no repetitions). Which of the following is most accurate about the moving average
forecast for year 2018?
A. Has to be smaller than at least one of the four yearly sales figures.
B. Has to be larger than at least one of the four yearly sales figures.
C. Has to be between the smallest and largest yearly sales figures.
D. Has to greater than all four yearly sales figures.
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A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice A, B and C only
29) As a consultant, you have been asked to generate a unit demand forecast for a product for
year 2018 using exponential smoothing. You have data for the past three years, the forecast and
the actual are the same for the first period of your data (3 years ago). Which of the following is
the most accurate?
A. Forecast for year 2018 will be higher than the actual for 2017, if your α is close to 1.0
B. Forecast for 2018 will be between all the actual sales
C. Exponential smoothing is a type of weighted average forecasting method
A) Choice A.
B) Choice B.
C) Choice C.
D) Choice B and C only.
E) None of the above.
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30) As a consultant, you have been thinking about choosing the “right” alpha (smoothing
constant) for forecasting using exponential smoothing. Which of the following is the most
accurate about alpha?
A. If alpha is high, speed of reaction to changes in actually low.
B. If a firm produces standard product with relatively stable demand, alpha should be small.
C. Products experiencing growth should be assigned higher alpha value.
D. Alpha could be more than 1.0, and in this case (1-alpha) will become negative to make up for
it.
A) Choice A.
B) Choice B.
C) Choice C.
D) Choice D.
E) Choice B and C.
31) Using the exponential smoothing model for forecasting, the smoothing constant alpha
determines the level of smoothing and_____________blank
A) the slope of the growth curve.

B) the speed of reaction to differences between forecasts and actual results.
C) the intercept on the Y-axis.
D) the next forecast error.
E) a measure of forecast accuracy.
32) The least squares method refers to _____________blank
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A) a computation in linear regression.
B) selecting participants for the Delphi Technique.
C) time series decomposition into smaller and smaller units.
D) determining the smallest sources of error in a forecast.
E) calculating the running sum of forecast errors.
33) Which of the following forecasting methods is considered a causal forecasting technique?
A) Exponential smoothing.
B) Weighted moving average.
C) Linear regression.
D) Historical analogy.
E) Market research.
34) If the intercept value of a linear regression model is 40, the slope value is 40, and the
value of X is 40, which of the following is the resulting forecast value using this model?
A) 120
B) 1,600
C) 1,640
D) 2,200
E) 64,000
35) A company hires you to develop a linear regression forecasting model. Based on the
company's historical sales information, you determine the intercept value of the model to be
1,200. You also find the slope value is −50. If after developing the model you are given a value
of X = 10, which of the following is the resulting forecast value using this model?
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A) −1,800
B) 700
C) 1,230
D) 1,150
E) 12,000
36) Which of the following is a possible source of bias error in forecasting?
A) Failing to include the right variables.

B) Using the wrong forecasting method.
C) Employing less sophisticated analysts than necessary.
D) Using incorrect data.
E) Using standard deviation rather than MAD.
37) Which of the following is used to describe the degree of error?
A) Weighted moving average

B) Regression
C) Moving average
D) Forecast as a percent of actual
E) Mean absolute deviation
38) A company has actual unit demand for three consecutive years of 124, 126, and 135. The
respective forecasts for the same three years are 120, 120, and 130. Which of the following is the
resulting MAD value that can be computed from this data?
A) 1
B) 3
C) 5
D) 15
E) 123
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39) A company has actual unit demand for four consecutive years of 100, 105, 135, and 150.
The respective forecasts were 120 for all four years. Which of the following is the resulting
MAD value that can be computed from this data?
A) 2.5
B) 10
C) 20
D) 22.5
E) 30
40) If you were selecting from a variety of forecasting models based on MAD, which of the
following MAD values from the same data would reflect the most accurate model?
A) 0.2
B) 0.8
C) 1.0
D) 10.0
E) 100.0
41) A company has calculated its running sum of forecast errors to be 500 and its mean
absolute deviation is exactly 35. Which of the following is the company's tracking signal?
A) Cannot be calculated based on this information.

B) About 14.3.
C) More than 35.
D) Exactly 35.
E) About 0.07.
42) A company has a MAD of 10. It wants to have a 99.7 percent control limits on its
forecasting system. The most recent tracking signal value is 3.1. What can the company conclude
from this information?
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A) The forecasting model is operating acceptably.
B) The forecasting model is out of control and needs to be corrected.
C) The MAD value is incorrect.
D) The upper control value is less than 20.
E) It is using an inappropriate forecasting methodology.
43) You are hired as a consultant to advise a small firm on forecasting methodology. Based
on your research you find the company has a MAD of 3. Its wants to have a 99.7 percent control
limits on its forecasting system. Company most recent tracking signal value is 15. What should
be your report to the company?
A) The forecasting model is operating acceptably.

B) The forecasting model is out of control and needs to be corrected.
C) The MAD value is incorrect.
D) The upper control value is less than 20.
E) The company is using an inappropriate forecasting methodology.
44) Which of the following is the portion of observations you would expect to see lying
within −3MAD and +3MAD range.
A) 57.05 %
B) 88.95 %
C) 98.36 %
D) 99.85 %
E) 100 %
45) Which of the following is the portion of observations you would expect to see lying
within −2MAD and +2MAD range.
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A) 57.04%
B) 89.04%
C) 98.33%
D) 99.86%
E) 100.00%
46) You are using an exponential smoothing model for forecasting. The running sum of the
forecast error statistics (RSFE) are calculated each time a forecast is generated. You find the last
RSFE to be 34. Originally, the forecasting model used was selected because it's relatively low
MAD of 0.4. To determine when it is time to reevaluate the usefulness of the exponential
smoothing model you compute tracking signals. Which of the following is the resulting tracking
signal?
A) 85
B) 60
C) 13.6
D) 12.9
E) 8
47) Heavy sales of umbrellas during a rain storm is an example of which of the following?
A) A trend.
B) A causal relationship.
C) A statistical correlation.
D) A coincidence.
E) A fad.
48) Which of the following forecasting methods is considered a qualitative forecasting

technique?
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A) Simple moving average.
B) Market research.
C) Linear regression.
D) Exponential smoothing.
E) Multiple regression.
49) Which of the following forecasting methods uses executive judgment as its primary
component for forecasting?
A) Historical analogy.
B) Time series analysis.
C) Panel consensus.
D) Market research.
E) Linear regression.
50) Which of the following forecasting methods is very dependent on selection of the right
individuals who will judgmentally be used to actually generate the forecast?
A) Time series analysis.

B) Simple moving average.
C) Weighted moving average.
D) Delphi method.
E) Panel consensus.
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51) Collaborative Planning, Forecasting, and Replenishment (CPFR) is a web-based tool used
to coordinate demand forecasting, production and purchase planning, and inventory
replenishment between supply chain trading partners. In practice CPFR often doesn't deliver on
its' promise because _____________blank.
A) Computer systems at supplier companies cannot be made to work with each other.
B) Forecast errors accumulate as data exchanges are made down the supply chain culminating in
the “feast or famine” phenomena known as the “bullwhip effect.”
C) Firms in a supply chain may not trust each other sufficiently to share information openly.
D) conflicting objectives between the profit-maximizing vendor and the cost-minimizing
customer give rise to adversarial supply chain relationships.
A) All of these
B) B and D
C) A and C
D) A, C, and D
E) C and D
52) There are no differences in strategic and tactical forecasting. A forecast is a mathematical
projection and its ultimate purpose should make no difference to the analyst.
⊚ true
⊚ false
53) For every forecasting problem there is one best forecasting technique.
⊚ true
⊚ false
54) A good forecaster is one who develops special skills and experience at one forecasting
technique and is capable of applying it to widely diverse situations.
⊚ true
⊚ false
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55) Continual review and updating in light of new data is a forecasting technique called
second guessing.
⊚ true
⊚ false
56) Cyclical influences on demand are often expressed graphically as a linear function that is
either upward or downward sloping.
⊚ true
⊚ false
57) Cyclical influences on demand may come from occurrences such as political elections,
war, or economic conditions.
⊚ true
⊚ false
58) Trend lines are usually the last things considered when developing a forecast.
⊚ true
⊚ false
59) Time series forecasting models make predictions about the future based on analysis of
past data.
⊚ true
⊚ false
60) In a forecasting model using simple exponential smoothing the data pattern should
remain stationary.
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⊚ true
⊚ false
61) In a forecasting model using simple moving average, the shorter the time span used for
calculating the moving average, the closer the average follows volatile trends.
⊚ true
⊚ false
62) In the weighted moving average forecasting model, the weights must add up to one times
the number of data points.
⊚ true
⊚ false
63) Experience, trial, and error are the simplest ways to choose weights for the weighted
moving average forecasting model.
⊚ true
⊚ false
64) Bayesian analysis is the simplest way to choose weights for the weighted moving average
forecasting model.
⊚ true
⊚ false
65) The weighted moving average forecasting model uses a weighting scheme to modify the
effects of individual data points. This is its major advantage over the simple moving average
model.
⊚ true
⊚ false
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66) A central premise of exponential smoothing is that more recent data is less indicative of
the future than data from the distant past.
⊚ true
⊚ false
67) The equation for exponential smoothing states that the new forecast is equal to the old
forecast plus the error of the old forecast.
⊚ true
⊚ false
68) Exponential smoothing is always the best and most accurate of all forecasting models.
⊚ true
⊚ false
69) In the simple exponential smoothing forecasting model, you need at least 30 observations
to set the smoothing constant alpha.
⊚ true
⊚ false
70) In exponential smoothing, it is desirable to use a higher smoothing constant when

forecasting demand for a product experiencing high growth.
⊚ true
⊚ false
71) The value of the smoothing constant alpha in an exponential smoothing model is between
0 and 1.
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⊚ true
⊚ false
72) Single exponential smoothing lags changes in demand.
⊚ true
⊚ false
73) Exponential smoothing forecasts always lag behind the actual occurrence but can be
corrected somewhat with a trend adjustment.
⊚ true
⊚ false
74) To correct the trend, we need two smoothing constants.
⊚ true
⊚ false
75) A restriction in using linear regression is that it assumes that past data and future
projections fall on or near a straight line.
⊚ true
⊚ false
76) Regression is a functional relationship between two or more correlated variables, where
one or more variables are used to predict a single variable of interest.
⊚ true
⊚ false
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77) Linear regression is not useful for aggregate planning.
⊚ true
⊚ false
78) The standard error of the estimate in the linear regression is not useful for judging the fit
between the data and the regression line when doing forecasts.
⊚ true
⊚ false
79) Decomposition of a time series means identifying and separating the time series data into
its components.
⊚ true
⊚ false
80) A time series is defined in the text as chronologically ordered data that may contain one
or more components of demand variation: trend, seasonal, cyclical, autocorrelation, and random.
⊚ true
⊚ false
81) It is difficult to identify the trend in time series data.
⊚ true
⊚ false
82) In decomposition of time series, it is relatively easy to identify cycles and autocorrelation
components.
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⊚ true
⊚ false
83) We usually associate the word "seasonal" with recurrent periods of repetitive activity that
happen on other than an annual cycle.
⊚ true
⊚ false
84) Because the factors governing demand for products are very complex, all forecasts of
demand contain error.
⊚ true
⊚ false
85) Random errors can be defined as those that cannot be explained by the forecast model
being used.
⊚ true
⊚ false
86) Random errors in forecasting occur when an undetected secular trend is not included in a
forecasting model.
⊚ true
⊚ false
87) The MAD is used to generate tracking signals.

⊚ true
⊚ false
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88) MAD statistics can be used to generate tracking signals.
⊚ true
⊚ false
89) RSFE in forecasting stands for "reliable safety function error."

⊚ true
⊚ false
90) In forecasting, RSFE stands for "running sum of forecast errors."

⊚ true
⊚ false
91) A tracking signal (TS) can be calculated using the arithmetic sum of forecast deviations
divided by the MAD.
⊚ true
⊚ false
92) A true forecast is when it is consistently low or high.
⊚ true
⊚ false
93) In causal relationship forecasting leading indicators are used to forecast occurrences.
⊚ true
⊚ false
94) Multiple regression analysis uses several regression models to generate a forecast.
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⊚ true
⊚ false
95) Multiple regression is the best forecasting method when several factors influence a
variable.
⊚ true
⊚ false
96) Qualitative forecasting techniques generally take advantage of the knowledge of experts
and therefore do not require much judgment.
⊚ true
⊚ false
97) Market research is a quantitative method of forecasting.

⊚ true
⊚ false
98) When forecasting demand for a new product, it is typical to produce a model from
historical data of similar or competing products.
⊚ true
⊚ false
99) Collaborative planning, forecasting, and replenishment (CPFR) integrates all the
members of the supply chain.
⊚ true
⊚ false
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Answer Key
1) D
2) E
3) D
4) A
5) B
6) A
7) D
8) D
9) B
10) D
11) A
12) D
13) C
14) A
15) B
16) C
17) C
18) B
19) C
20) A
21) A
22) B
23) A
24) C
25) D
26) C
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27) C
28) E
29) D
30) E
31) B
32) A
33) C
34) C
35) B
36) A
37) E
38) C
39) C
40) A
41) B
42) A
43) B
44) C
45) B
46) A
47) B
48) B
49) C
50) D
51) E
52) FALSE
53) FALSE
54) FALSE
55) FALSE
56) FALSE
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57) TRUE
58) FALSE
59) TRUE
60) TRUE
61) TRUE
62) FALSE
63) TRUE
64) FALSE
65) TRUE
66) FALSE
67) FALSE
68) FALSE
69) FALSE
70) TRUE
71) TRUE
72) TRUE
73) TRUE
74) TRUE
75) TRUE
76) TRUE
77) FALSE
78) FALSE
79) TRUE
80) TRUE
81) FALSE
82) FALSE
83) FALSE
84) TRUE
85) TRUE
86) FALSE
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87) FALSE
88) TRUE
89) FALSE
90) TRUE
91) TRUE
92) FALSE
93) FALSE
94) FALSE
95) TRUE
96) FALSE
97) FALSE
98) TRUE
99) TRUE
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CHAPTER 4
1) The ability to rapidly and inexpensively switch production from one product to another
enables what are sometimes referred to as _____________blank
A) economies of scale.
B) economies of size.
C) economies of shape.
D) economies of scope.
E) economies of shipping.
2) Capacity planning that involves hiring, layoffs, some new tooling, minor equipment
purchases, and subcontracting is considered as which one of the following planning horizons?
A) Intermediate-range.
B) Long-range.
C) Short-range.
D) Current.
E) Upcoming.
3) Capacity planning involving acquisition or disposal of fixed assets such as buildings,

equipment or facilities is considered as which one of the following planning horizons?
B) Long-range.
C) Short-range.
D) Current.
E) Upcoming.
4) If the best operating level of a piece of equipment is at a rate of 400 units per hour and
the actual output during an hour is 300 units, which of the following is the capacity utilization
rate?
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A) 0.75
B) 1.00
C) 1.33
D) 2.33
E) 300
5) If the actual output of a piece of equipment during an hour is 500 units and its best
operating level is at a rate of 400 units per hour, which of the following is the capacity utilization
rate?
A) 0.75
B) 1.00
C) 1.25
D) 1.33
E) 100
6) If the best operating level of a piece of equipment is at a rate of 400 units per hour and
the actual output during an hour is 300 units, which of the following is the capacity cushion?
A) 25%
B) 100 units per hour.
C) 75%
D) 125%
E) 133%
7) The capacity focus concept can be put into practice through a mechanism called which of
the following?
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A) Best operating level (BOL).
B) Plant within a plant (PWP).
C) Total quality management (TQM).
D) Capacity utilization rate (CUR).
E) Zero-changeover-time (ZXT).
8) The way to build in greater flexibility in your workers is to do which of the following?
A) Pay higher wages to motivate a willingness to do a variety to tasks.

B) Provide a broader range of training.
C) Provide a wide variety of technology to augment workers skills.
D) Institute a "pay for skills" program.
E) Use part-time employees with specialized skills as needed.
9) When deciding to add capacity to a factory which of the following not need to be
considered?
A) Maintaining system balance.

B) The frequency of capacity additions.
C) Use of external capacity.
D) Immediate product demand.
E) Availability of raw materials.
10) Which of the following is not a step used in determining production capacity
requirements?
A) Forecasting to predict product sales.

B) Forecasting raw material usage.
C) Projecting availability of labor.
D) Calculating equipment and labor needs.
E) Projecting equipment availability.
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11) Which of the following models uses a schematic model of the sequence of steps in a
problem and the conditions and consequences of each step?
A) Probability indexing.
B) Johnson's sequencing rule.
C) Decision trees.
D) Activity System Maps.
E) Decision mapping.
12) Compared with a service operation, which of the following is correct for a manufacturing
operation's capacity?
A) More dependent on time and location.

B) Subject to more volatile demand fluctuations.
C) Utilization more directly impacts quality.
D) Demand can be smoothed by inventory policies.
E) More capable of reacting to demand fluctuations.
13) At a decision point in a decision tree, which machine would you select when trying to
maximize payoff when the anticipated benefit of selecting machine A is $45,000 with a
probability of 90%; the expected benefit of selecting machine B is $80,000 with a probability of
50% and the expected benefit of selecting machine C is $60,000 with a probability of 75%?
A) Machine A
B) Machine B
C) Machine C
D) You would be indifferent between machines A and C
E) You would be indifferent between machines A and B
14) What is an important difference between capacity planning in services as contrasted to

capacity planning in manufacturing operations?
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A) Time.
B) Location.
C) Demand volatility.
D) Utilization impacts service quality.
E) All of these.
15) Capacity planning involving consideration of production scheduling and inventory

position is characterized by which one of the following time durations?
B) Long-range.
C) Short-range.
D) Current.
E) Upcoming.
16) Planning service capacity involves consideration of the mean arrival rate and the mean
service rate. When the mean arrival rate exceeds or gets too close to the mean service rate the
quality of the service declines. The operating point is the ratio of mean service rate to mean
arrival rate. According to the text, what is the best operating point for the typical service
operation?
A) 120%
B) 100%
C) 90%
D) 70%
E) 57%
17) The optimal utilization rate of a service operation is context specific. Planning for low
utilization rates is appropriate when both the degree of uncertainty and the stakes are high as in
emergency response services. Which of the following services should plan for a high utilization
rate?
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A) The fire department.
B) An expensive restaurant.
C) A hospital ambulance service.
D) A stage performance.
E) A customer help line.
18) In designing a general service facility, capacity should be such that the target rate of
service utilization (ρ), in order to get the best general-purpose design, should be
_____________blank
A) less than 0.6 (or 60%), so that your system would be within the zone of service with
maximum possible utilization within that.
B) more than 0.6 (or 60%) so that your system would have a good utilization.
C) about 0.7 (70%) so that your system would be in the zone of service with maximum
possible utilization within that.
D) more than 1.0 (100%) so that the servers are fully utilized, even if the customers had
to wait a little.
E) between 0.9 (90%) and 1.0 (100%) so that the utilization of the system is ideal.
19) Precise capacity design or the rate of service utilization (ρ), is application specific. Which
of the following is correct?
A) It could be close to 100% for a sports arena.

B) It could be as low as 0.5 for hospital emergency room.
C) As the degree of uncertainty in demand increases, higher ρ may be appropriate.
D) All of the above choices are correct.
E) Both it could be close to 100% for a sports arena and it could be as low as 0.5 for
hospital emergency room.
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20) In a decision tree problem involving capacity planning, there was a random outcome
node with three random outcomes (A,B, and C) which followed a decision node. The
probabilities for A, B and C: P(A)=0.4, P(B) = 0.6 and P(C) = 0.2. Payoff following A,B and C
respectively are $10000, $5000 and $2000. Expected value of that random outcome node is
_____________blank
A) $7400
B) $7000
C) $17000
D) Cannot be determined since there is something wrong with the data given.
E) $5666
21) Capacity can be defined as the ability to hold, receive, store, or accommodate.
⊚ true
⊚ false
22) When evaluating capacity, managers need to consider both resource inputs and product
outputs.
⊚ true
⊚ false
23) Capacity can be defined as the amount of available resource inputs relative to
requirements for output over a particular period of time.
⊚ true
⊚ false
24) The capacity utilization rate is found by dividing best operating level by capacity used.
⊚ true
⊚ false
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25) The objective of strategic capacity planning is to provide an approach for determining the
overall capacity level of labor-intensive resources.
⊚ true
⊚ false
26) The objective of strategic capacity planning is to determine the overall capacity level of
capital-intensive resources (including facilities, equipment, and overall labor force size) that best
supports the company's short-range competitive strategy.
⊚ true
⊚ false
27) The objective of strategic capacity planning is to determine the overall capacity level of
capital-intensive resources (including facilities, equipment, and overall labor force size) that best
supports the company's long-range competitive strategy.
⊚ true
⊚ false
28) Best operating level is usually a multiple of the level of capacity for which a process was
designed.
⊚ true
⊚ false
29) Best operating level is the volume of output at which average unit cost is minimized.
⊚ true
⊚ false
30) At some point, the size of a growing plant can become too large and diseconomies of
scale becomes a capacity planning problem.
⊚ true
⊚ false
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31) Long-range capacity planning requires top management participation.
⊚ true
⊚ false
32) Overtime and personnel transfers are solutions to capacity problems in the intermediate
term.
⊚ true
⊚ false
33) Capacity planning is generally viewed in three-time durations: Immediate, Intermediate,

and Indeterminate.
⊚ true
⊚ false
34) The basic notion of economies of scale is that as a plant gets larger and volume increases,
the average cost per unit of output drops.
⊚ true
⊚ false
35) A piece of equipment with twice the capacity of another piece typically costs twice as
much to purchase and to operate.
⊚ true
⊚ false
36) The problem of keeping demand sufficiently high to keep a large factory busy is a sales
issue and not a diseconomy of scale.
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⊚ true
⊚ false
37) A production facility works best when it focuses on a fairly limited set of production
objectives.
⊚ true
⊚ false
38) A production facility develops virtuosity and works best when it focused on a widely
varied set of production objectives.
⊚ true
⊚ false
39) Making adjustments to eliminate the variance between planned and actual output is tied
into intermediate range capacity planning.
⊚ true
⊚ false
40) The ultimate in plant flexibility is the one-hour-changeover time plant.

⊚ true
⊚ false
41) Capacity flexibility means having the ability to rapidly increase or decrease production
levels, or to shift production capacity quickly from one product or service to another.
⊚ true
⊚ false
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42) Economies of scope exist when multiple products can be produced at a lower cost in
combination than they can separately.
⊚ true
⊚ false
43) The frequency of adding to productive capacity should balance the costs of upgrading too
frequently and the costs of upgrading too infrequently.
⊚ true
⊚ false
44) Outsourcing is a common source of external capacity.

⊚ true
⊚ false
45) Sharing capacity is a common source of external capacity.

⊚ true
⊚ false
46) A capacity cushion is the amount of capacity less than expected demand.
⊚ true
⊚ false
47) A decision tree problem does not need probabilities or payoffs to generate a solution.
⊚ true
⊚ false
48) In solving a decision tree problem, calculations start at the ends of the "branches" of the
tree and work backwards to the base of the tree.
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⊚ true
⊚ false
49) The probability of each occurrence at a decision tree chance node is the reciprocal of the
number of possibilities at the chance node.
⊚ true
⊚ false
50) In a decision tree, the only time probabilities are applied to a decision node is when the
decision is being made by someone else such as you customer or your competitor.
⊚ true
⊚ false
51) Low rates of capacity utilization in service organizations are never appropriate.
⊚ true
⊚ false
52) The smaller is the capacity cushion the better it is.

⊚ true
⊚ false
53) The larger the capacity cushion the better.

⊚ true
⊚ false
54) The capacity cushion is the ratio of capacity used to the best capacity level.
⊚ true
⊚ false
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55) When a firm's design capacity is less than the capacity required to meet its demand, it is
said to have a negative capacity cushion.
⊚ true
⊚ false
56) In decision tree analysis the time value of money is ignored because you are only
concerned with cash costs.
⊚ true
⊚ false
57) In practice, achieving a perfectly balanced plant is usually desirable but impossible.
⊚ true
⊚ false
58) In practice achieving a perfectly balanced plant is usually both impossible and
undesirable.
⊚ true
⊚ false
59) Because services cannot be stored for later use, service managers consider time as one of
their supplies or resources.
⊚ true
⊚ false
Version 1 13
Answer Key
1) D
2) A
3) B
4) A
5) C
6) B
7) B
8) B
9) D
10) B
11) C
12) D
13) C
14) E
15) C
16) D
17) D
18) C
19) A
20) D
21) TRUE
22) TRUE
23) TRUE
24) FALSE
25) FALSE
26) FALSE
Version 1 14
27) TRUE
28) FALSE
29) TRUE
30) TRUE
31) TRUE
32) FALSE
33) FALSE
34) TRUE
35) FALSE
36) FALSE
37) TRUE
38) FALSE
39) FALSE
40) FALSE
41) TRUE
42) TRUE
43) TRUE
44) TRUE
45) TRUE
46) FALSE
47) FALSE
48) TRUE
49) FALSE
50) FALSE
51) FALSE
52) FALSE
53) FALSE
54) FALSE
55) TRUE
56) FALSE
Version 1 15
57) FALSE
58) TRUE
59) TRUE
Version 1 16
CHAPTER 5
1) Which of the following is an advantage of a pure project where self-contained teams
work full time on a project?
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.
2) 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 these.
3) 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.
4) A project can be subdivided into which of the following?
Version 1 1
A) Job orders.
B) Sub-jobs.
C) Work packages.
D) Sub-paths.
E) Events and decisions.
5) A project starts out with 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.
6) 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.
7) In a Gantt chart the horizontal axis is usually _____.
A) activities
B) cost
C) profit
D) time
E) milestones
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8) 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.
9) 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.
10) 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.
11) 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?
Version 1 3
A) Pure Project.
B) Task force.
C) Matrix Project.
D) Functional Project.
E) PERT.
12) You have been placed in charge of a large project. Shortened communication lines are
required to ensure 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.
13) What does "EVM" stand for?
A) Extra Value Materials—premium quality raw materials at the project site.

B) Enterprise Vacation Matrix—a chart indicating team members planned vacation
absences
C) Earned Value Management–a technique for measuring project progress objectively.
D) Early Vision Management—a technique used in early project planning meetings for
activities that set expectations to highlight and avoid "scope creep."
E) External Variance Measurement—identifying the degree to which project time and
cost variances were due to forces and issues uncontrollable by the project manager.
14) The major goal of critical path analysis is to _____.
Version 1 4
A) Estimate the project's completion date
B) Identify and manage the critical path
C) Determine the latest feasible start date
D) Provide a visual aid that indicates precedent and antecedent relationships
E) To determine when each activity in the project should be scheduled
15) A simple project listing of five activities and their respective time estimates are presented
below:
Activity Immediate Predecessor Time in Days
A None 1
B A 2
C A 1
D B and C 3
E D 2
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 these
16) A simple project listing of five activities, their predecessors, and their respective time
estimates are presented below:
A None 3
B A 2
C A 1
D B and C 3
E D 4
Using CPM, what is the Latest Finish Time for the last activity in this project (i.e., the total time
to complete the project)?
Version 1 5
A) 10 days
B) 7 days
C) 8 days
D) 12 days
E) 9 days
17) A simple project listing of five activities, their predecessors, and their respective time
estimates are presented below:
A None 2
B A 2
C A 1
D B and C 3
E D 1
Using the CPM, which activities have slack in this project?
A) A
B) B
C) C
D) D
18) A company must perform a maintenance project consisting of seven activities. The
activities, their predecessors, and their respective time estimates are presented below:
Activity Designation Immediate Time in
Predecessor Days
Break down both machines A None 3
Clean machine 1 B A 3
Clean machine 2 C A 3
Re-set machine 1 D B 4
Re-set machine 2 E C 2
Re-calibrate both F D and E 1
machines
Final test G F 2
Using CPM, which activities make up the critical path?
Version 1 6
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 these
Predecessor Days
Re-calibrate both machines F D and E 1
Final test G F 2
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
Predecessor Days
Version 1 7
Re-calibrate both machines F D and E 1
Final test G F 1
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
21) For an activity in a CPM analysis, the early start time is 8 and the late start 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.
22) 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.
23) A listing of immediate predecessor activities is important information in a CPM analysis

for which of the following reasons?
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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 these.
24) 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) The analysis is performed incorrectly.

B) There are 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.
25) 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?
Activity Normal Time Crash Time Normal Cost Crash Cost
A 3 2 $400 $ 600
B 5 3 $600 $1200
C 4 1 $300 $1500
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
26) 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?
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Activity Immediate Predecessor Normal Crash Normal Crash
Time Time Cost Cost
A None 3 2 $200 $400
B A 4 3 $300 $600
C A 1 1 $200 $200
D B and C 3 2 $500 $550
E D 2 1 $500 $900
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.
27) 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?
Activity Immediate Normal Crash Normal Crash
Predecessor Time Time Cost Cost
A None 3 2 $200 $400
B A 4 3 $300 $600
C A 1 1 $300 $300
D B and C 3 2 $500 $550
E D 2 1 $500 $900
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.
28) 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?
Version 1 10
Predecessor Time Time Cost Cost
A None 3 2 $200 $400
B A 4 3 $300 $600
C A 1 1 $300 $300
D B and C 3 2 $500 $550
E D 2 1 $500 $900
A) Total time is 10 days, total cost is $2,500.

B) Total time is 9 days, total cost is $2,300.
C) Total time is 8 days, total cost is $2,750.
D) Total time is 8 days, total cost is $14,800.
29) 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?
Predecessor Time Time Cost(Direct) Cost(Direct)
A None 3 2 $300 $400
B A 3 3 $100 $100
C A 1 1 $200 $200
D B and C 3 2 $400 $550
E D 2 1 $500 $900
F E 3 3 $200 $200
G F 2 2 $100 $100
A) $2,150
B) $2,300
C) $2,400
D) $2,450
E) $2,500
Version 1 11
30) 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)?
Predecessor Time Time Cost(Direct) Cost(Direct)
A None 3 2 $300 $400
B A 3 3 $100 $100
C A 1 1 $200 $200
D B and C 3 2 $400 $550
E D 2 1 $500 $900
F E 3 3 $200 $200
G F 2 2 $100 $100
A) 16 days
B) 15 days
C) 14 days
D) 13 days
E) 12 days
31) You have arrived at the optimal solution using Time-Cost CPM Scheduling model
analysis. When it had happened?
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.
32) In CPM analysis it is generally expected that the relationship between activity direct costs
and project indirect costs will be _____.
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A) positively related
B) optimally related
C) negatively related
D) not related
E) fractionally related
33) In a project analysis using three time estimates with more than one critical path existing,
how does the project manager decide which variances to use in arriving at the probability of
meeting the project due date?
A) The project manager averages the variances and uses that.

B) The project manager uses the smallest variance in order to get the highest probability
of on-time completion.
C) The project manager uses the variances considered most correct.
D) The project manager uses the largest variances in order to understate the probability of
on-time completion.
E) The project manager uses the most likely estimate plus the amount of slack time in the
project.
34) You have just used the network planning model and found the critical path length is 30
days and the variance of the critical path is 25 days. The probability that the project will be
completed in 33 days or less is equal to (2 decimal accuracy) _____.
A) 0.73
B) 0.55
C) 0.12
D) 0.27
E) 0.60
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35) You have just used the network planning model and found the critical path length is 60
days and there are two critical paths. The standard deviation of the first critical path is 10 days
and the s.d. of the second critical path is 15 days. The probability that the project will be
completed in 70 days or less is equal to (2 decimal accuracy) _____.
A) 0.84
B) 0.25
C) 0.16
D) 0.75
E) 0.66
36) You have just used the network planning model for a county road resurfacing project and
found that the critical path length is 40 days and the standard deviation of the critical path is 10
days. Suppose you want to pick a time (in days) within which you will complete the project with
90% confidence level. What should be that time (in days and round to the nearest whole
number.)?
A) 40
B) 13
C) 45
D) 29
E) 53
37) The fact that organizations are flattening is one of the reasons that project management is
important.
⊚ true
⊚ false
38) Breakthrough projects are those that provide fundamental improvements to existing
products.
⊚ true
⊚ false
Version 1 14
39) Derivative projects are those which address incremental changes to products or processes.
⊚ true
⊚ false
40) 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
41) Project management can be defined as planning, directing, and controlling resources to
meet the technical, cost, and time constraints of the project.
⊚ true
⊚ false
42) Upper-level management must decide between pure, functional, and matrix structures as
ways to organize projects.
⊚ true
⊚ false
43) The second step in project management is writing the statement of work.
⊚ true
⊚ false
44) An event unit package is a subdivision of a project.

⊚ true
⊚ false
Version 1 15
45) 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
46) A project milestone is a specific event to be reached at a particular point in time.

⊚ true
⊚ false
47) One of the disadvantages of a pure project organizational structure is that the project
manager has full authority over the project.
⊚ true
⊚ false
48) One of the advantages of a functional project organizational structure is that a team
member can work on several projects.
⊚ true
⊚ false
49) A matrix project attempts to blend properties of functional and pure project structures.
⊚ true
⊚ false
50) A matrix project structure is often referred to as a "skunkworks".

⊚ true
⊚ false
Version 1 16
51) A disadvantage of a matrix project organizational structure is that a project manager is
held responsible for successful completion of the project.
⊚ true
⊚ false
52) The Gantt chart is an example of a project control chart.

⊚ true
⊚ false
53) Earned Value Management (EVM) is a technique for measuring project progress in an
objective manner.
⊚ true
⊚ false
54) The valuations in an Earned Value Management (EVM) analysis must be either profits or
revenue.
⊚ true
⊚ false
55) Earned Value Management (EVM) has the capability to combine measurements of scope,
schedule, and cost in a project.
⊚ true
⊚ false
56) The critical path of activities in a project is the sequence of activities that forms the
shortest chain in a project network of activities.
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⊚ true
⊚ false
57) CPM is an abbreviation for critical path method.

⊚ true
⊚ false
58) The critical path in a project is that sequence of activities that consumes the longest
amount of time in a project network of activities.
⊚ true
⊚ false
59) The critical path in a CPM analysis is always the shortest path through the network.
⊚ true
⊚ false
60) A work breakdown structure is used in project management but it is not used when the
critical path method is involved.
⊚ true
⊚ false
61) 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
62) Slack activity time is the difference between the early start and the late finish of a project
activity time.
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⊚ true
⊚ false
63) In a CPM analysis if you subtract the late finish from the early finish the result is the
activity's slack time.
⊚ true
⊚ false
64) In a CPM analysis if you subtract the early start from the late start the result is the
activity's slack time.
⊚ true
⊚ false
65) The critical path in a CPM analysis is found by locating the activities times with zero
slack.
⊚ true
⊚ false
66) Calculating the early start and early finish times for each activity in a CPM analysis does
not provide any useful information.
⊚ true
⊚ false
67) One of the assumptions made using CPM is that project activities can be identified with
clear beginning and ending points.
⊚ true
⊚ false
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68) One of the assumptions made using CPM is that project activity sequence relationships
can be specified and networked.
⊚ true
⊚ false
69) The project indirect costs associated with a project include overhead, facilities, and
resource opportunity costs.
⊚ true
⊚ false
70) 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
71) 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
72) Using the Time-Cost CPM model, the crash time is the shortest possible time allowed for
each activity in the project.
⊚ true
⊚ false
73) In the Time-Cost CPM model, cost is assumed to be a linear function of time.
⊚ true
⊚ false
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74) 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
75) The Project Management Institute operates a website with the most up-to-date
information about project management software.
⊚ true
⊚ false
76) Project management software available today combines CPM and other scheduling aids,
like Gantt charting, to aid in tracking progress of project completion.
⊚ true
⊚ false
Version 1 21
Answer Key
1) D
2) C
3) A
4) C
5) A
6) B
7) D
8) E
9) E
10) C
11) C
12) A
13) C
14) E
15) B
16) D
17) C
18) A
19) C
20) D
21) C
22) B
23) A
24) B
25) E
26) B
Version 1 22
27) D
28) C
29) A
30) B
31) D
32) C
33) D
34) A
35) D
36) E
37) TRUE
38) FALSE
39) TRUE
40) TRUE
41) TRUE
42) TRUE
43) FALSE
44) FALSE
45) TRUE
46) TRUE
47) FALSE
48) TRUE
49) TRUE
50) FALSE
51) FALSE
52) TRUE
53) TRUE
54) FALSE
55) TRUE
56) FALSE
Version 1 23
57) TRUE
58) TRUE
59) FALSE
60) FALSE
61) TRUE
62) FALSE
63) FALSE
64) TRUE
65) TRUE
66) FALSE
67) TRUE
68) TRUE
69) TRUE
70) TRUE
71) FALSE
72) TRUE
73) TRUE
74) FALSE
75) TRUE
76) TRUE
Version 1 24
CHAPTER 6
1) A difference between project and continuous flow categories of process flow structures is
which two of the following? (Select all that apply.)
A) The size and bulk of the product.

B) Discrete parts moving from workstation to workstation.
C) Degree of equipment specialization.
D) Being a "Virtual Factory".
E) Profit per unit.
2) Regarding the measures of inventory managing efficiency, identify the most appropriate
answer. (Select all that apply.)
A) Total average value of inventory is equal to the selling price multiplied by finished
goods inventory.
B) Inventory turn is the annual cost of goods sold multiplied by average inventory.
C) Days of supply is the inverse of inventory turns × 365.
D) Inventory turn is the annual cost of goods sold divided by average inventory.
3) In studying positioning of inventory in supply chains, which, if any, of the following is

most appropriate? (Select all that apply.)
A) As order decoupling point moves towards source, inventory investment goes down.
B) As order decoupling point moves towards the source, customer lead time gets longer.
C) As order decoupling point moves towards the source, inventory investment increases.
D) As order decoupling point moves towards the source, customer lead time is
unchanged.
4) In studying product-process matrix describing layout strategies, which of the following is

most appropriate? (Select all that apply.)
Version 1 1
A) As you move from project to manufacturing cell to continuous process, product
volume increases while standardization increases.
B) As you move from project to manufacturing cell to continuous process, product
volume decreases while standardization decreases.
C) As you move from project to manufacturing cell to continuous process, product
volume increases while standardization decreases.
D) As you move from project to manufacturing cell to continuous process, product
volume decreases while standardization increases.
5) Using the assembly-line balancing procedure, which of the following is the required
cycle time if the daily production time is 480 minutes and the required daily output is 50 units?
A) 0.104
B) 50
C) 9.6
D) 480
E) Cannot be determined.
6) Using the assembly-line balancing procedure, which of the following is the required
cycle time if the production time in minutes per day is 1,440 and the required output per day in
units is 2,000?
A) 0.72
B) 1.388
C) 250
D) 500
E) Cannot be determined.
7) 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?
Version 1 2
A) 3
B) 5
C) 6
D) 8
E) None of these
8) 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 these
9) You have determined that the actual number of workstations that will be used on an
assembly line is 6, using the assembly-line balancing procedure. The cycle time of the line is 5
minutes and the sum of all 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 these
10) You have determined that the actual number of workstations that will be used on an
assembly line is 8, using the assembly-line balancing procedure. The cycle time of the line is 10
minutes and the sum of all tasks required on the line is 60 minutes. Which of the following is the
correct value for the resulting line's efficiency?
Version 1 3
A) 0.500
B) 0.650
C) 0.750
D) 0.850
E) None of these
11) 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.
12) Which of the following is not a step in developing a manufacturing cell layout?
A) Grouping parts into families that follow a common sequence of steps.

B) Identifying dominant flow patterns of parts families as a basis for location of
processes.
C) Physically grouping machines and processes into cells.
D) Disposing of left-over machinery and outsourcing ungrouped processes.
E) None of the above.
13) Which of the following is not considered a major work flow structure?
A) Workcenter.
B) Project.
C) Assembly line.
D) Fabrication.
E) Continuous Flow.
Version 1 4
14) 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.
15) 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.
16) Which of the following basic types of process structures is one where equipment or work
processes are arranged according to the progressive steps the product is made of?
A) Project.
B) Workcenter.
D) Assembly line.
17) Which of the following basic types of process structures is one where similar equipment
or functions are grouped together?
Version 1 5
A) Project.
B) Workcenter.
D) Assembly line.
18) The placement of which of the following is not determined by production process
organization decisions?
A) Departments.
B) Workgroups.
C) Workstations.
D) Machines.
E) Emergency exits.
19) According to Little's Law, which of the following ratios is used to find throughput rate?
A) Cycle time/Process time.

B) Throughput time/Process velocity.
C) Process velocity/Throughput time.
D) Inventory/Flow time.
E) Value added time/Process velocity.
20) According to Little's Law, which of the following can be used to estimate work-in-
process inventory?
A) Process time/Cycle time.

B) Throughput rate × Flow time.
C) Process velocity/Flow time.
D) Set up time/Throughput rate.
E) Value added time/Process velocity.
Version 1 6
21) A firm fills its customer's orders from finished goods inventory. It is _____
A) a make-to-order firm.
B) an engineer-to-order firm.
C) a make-to-stock firm.
D) a customer service firm.
E) an assemble to order firm.
22) A firm will work with a customer to design the product, and then make it from purchased
materials, parts, and components. This firm is called _____
A) a make-to-order firm.
B) an engineer-to-order firm.
C) a make-to-stock firm.
D) a customer service firm.
E) an assemble to order firm.
23) Which of these expressions is Little's Law?
A) Inventory/Flow time = Throughput rate

B) Inventory/Throughput Rate = Flow time
C) Inventory = Throughput rate × Flow time
D) Throughput Rate/Inventory = 1/Flow Time
E) All of the above
24) 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
Version 1 7
25) 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
26) A continuous process indicates production of discrete parts moving from workstation to
workstation at a controlled rate.
⊚ true
⊚ false
27) 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
28) One trade-off illustrated by the product-process matrix is between flexibility and cost.
⊚ true
⊚ false
29) The volume requirements for the product is one dimension of the choice of which process
structure to select.
⊚ true
⊚ false
30) The product-process matrix shows the relationship between process structures and
product volume.
Version 1 8
⊚ true
⊚ false
31) The term "assembly line" refers to progressive assembly linked by some material
handling device.
⊚ true
⊚ false
32) Workcenter layouts allocate dissimilar machines into cells to work on products that have
dissimilar processing requirements.
⊚ true
⊚ false
33) A project layout is characterized by a relatively low number of units produced in

comparison with process and product layout formats.
⊚ true
⊚ false
34) A project layout is characterized by a high degree of task ordering.

⊚ true
⊚ false
35) The closer the customer is to the customer order decoupling point the longer it takes the
customer to receive the product.
⊚ true
⊚ false
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36) The closer the customer is to the customer order decoupling point the more quickly the
customer receives the product.
⊚ true
⊚ false
37) An engineer-to-order firm will work with the customer to design the product, and then
make it from purchased materials, parts, and components.
⊚ true
⊚ false
38) A make-to-order firm will work with the customer to design the product, and then make it
from purchased materials, parts, and components.
⊚ true
⊚ false
39) The time needed to respond to a customer's order is called the customer response time.
⊚ true
⊚ false
40) The focus in the make-to-stock environment is on providing finished goods where and
when the customers want them.
⊚ true
⊚ false
41) An example of an assemble-to-order firm is Dell Technologies.

⊚ true
⊚ false
Version 1 10
42) The essential issue in satisfying customers in the make-to-stock environment is to balance
the level of finished inventory against the level of service to the customer.
⊚ true
⊚ false
43) The essential issue in satisfying customers in the make-to-stock environment is to balance
the cost of the finished item against the willingness of the consumer to pay for it.
⊚ true
⊚ false
44) Assembling-to-order means moving the customer order decoupling point from finished
goods to components.
⊚ true
⊚ false
45) A high-level map or diagram of a supply chain process can be useful to understand how
material flows and where inventory is held.
⊚ true
⊚ false
46) Little's law can be thought of as a relationship between units and time.
⊚ true
⊚ false
47) Little's law states that supply chain processes can be regarded as unrelated and thus
treated and analyzed separately.
⊚ true
⊚ false
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48) A process map shows the physical location of the various processes within a supply
chain.
⊚ true
⊚ false
49) Workstation cycle time is the time between successive units coming off the end of the
assembly line.
⊚ true
⊚ false
50) The assembly-line balancing procedure determines the precedence relationships of

manufacturing tasks.
⊚ true
⊚ false
51) In assembly-line balancing the theoretical minimum number of workstations is found by

a ratio of the sum of all task times divided by the cycle time.
⊚ true
⊚ false
52) The efficiency of an assembly-line is found by a ratio of the sum of all task times divided
by the cycle time.
⊚ true
⊚ false
53) For the purposes of assembly-line balancing, the required workstation cycle time is found
by dividing production time per day by the required units of output per day.
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⊚ true
⊚ false
54) 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
55) 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, the theoretical minimum number of workstations is 5
using the assembly-line balancing procedure.
⊚ true
⊚ false
56) The first step in balancing an assembly line is to specify the precedence relationships
among tasks to be performed on the line.
⊚ true
⊚ false
57) The term "assembly line" refers to progressive assembly linked by some material
handling device.
⊚ true
⊚ false
58) 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
Version 1 13
59) In designing a production layout, a flexible line layout might have the U-shape.
⊚ true
⊚ false
Version 1 14
Answer Key
1) [A, D]
2) [C, D]
3) [A, B]
4) [A, D]
5) C
6) A
7) A
8) C
9) B
10) C
11) D
12) D
13) D
14) D
15) A
16) D
17) B
18) E
19) D
20) B
21) C
22) B
23) E
24) FALSE
25) TRUE
26) FALSE
Version 1 15
27) TRUE
28) TRUE
29) TRUE
30) TRUE
31) TRUE
32) FALSE
33) TRUE
34) TRUE
35) FALSE
36) TRUE
37) TRUE
38) FALSE
39) FALSE
40) TRUE
41) TRUE
42) TRUE
43) FALSE
44) TRUE
45) TRUE
46) TRUE
47) FALSE
48) FALSE
49) TRUE
50) FALSE
51) TRUE
52) FALSE
53) TRUE
54) FALSE
55) TRUE
56) TRUE
Version 1 16
57) TRUE
58) FALSE
59) TRUE
Version 1 17
CHAPTER 7
1) Platform service business model describes an approach where _____.
1.a) consumers and producers/service creators are brought together for a social cause.
2.b) transaction provider connects the customer and providers and collects the charges.
3.c) an example of a transaction provider would be eBay.
4.d) another model of manufacture is described.
A) Option A
B) Option B
C) Option C
D) Option D
2) Which of the following is a suggestion for managing queues that is mentioned in the
textbook?
A) Put up a serpentine lane to keep people from jumping ahead in line.

B) Use humor to defuse a potentially irritating situation.
C) Segment the customers.
D) Assure customers that the wait is fair and inform them of the queue discipline.
E) Tell people in the queue that each will be served as soon as possible.
3) Which of the following is not a suggestion for managing queues presented in the
textbook?
A) Try to divert your customer's attention when waiting.

B) Segment the customers.
C) Encourage customers to come during a slack period.
D) Train your servers to be friendly.
E) Periodically close the service channel to temporarily disperse the line.
4) Which of the following is a suggestion for managing queues presented in the textbook?
Version 1 1
A) Train your servers to be friendly.
B) Tell customers that the line should encourage them to come during slack periods.
C) Give each customer a number.
D) Periodically close the service channel to temporarily disperse the line.
E) Use humor to defuse a potentially irritating situation.
5) Which of the following are the three major components of a queuing system?
A) The source population, how customers exit the system, and the queuing discipline.
B) The number of servers, the service speed, and the waiting line.
C) The source population, how the customer exits the system, and the servicing system.
D) The source population and the way customers arrive at the system, the serving
systems, and how customers exit the system.
E) The service speed, the queue discipline, and the waiting line.
6) Which of the following is a suggestion for managing queues that is mentioned in the
textbook?
A) Put up a serpentine lane to keep people from jumping ahead in line.

B) Use humor to defuse a potentially irritating situation.
C) Train your servers to be friendly.
D) Assure customers that the wait is fair and inform them of the queue discipline.
E) Tell people in the queue that each will be served as soon as possible.
7) Which of the following is not a suggestion for managing queues presented in the
textbook?
Version 1 2
A) Train your servers to be friendly.
B) Segment the customers.
C) Determine an acceptable waiting time for your customers.
D) Inform your customers of what to expect.
E) Encourage customers to come during slack periods.
8) In essence, a queuing system includes several major components. Which of the following
is not one of them?
A) Source population.
B) Servicing system.
C) How the customer exits the system.
D) The queue discipline.
E) None of these.
9) Which of the following is an example of a finite population in a queuing system?
A) People waiting to place their order at a fast-food restaurant.

B) The departmental faculty in line at the copy machine.
C) People waiting in line at an ATM.
D) Patients seeking help in a hospital emergency room.
E) Taxpayers calling for assistance from the IRS.
10) Which of the following is not a queue discipline discussed in the textbook?
A) First come, first served.

B) Last in, first out.
C) Limited needs.
D) Shortest processing time.
E) Best customer first.
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11) Which of the following queue disciplines is discussed in the textbook?
A) Emergencies first.
B) Garner-Whitten formula.
C) Newest customer first.
D) Patient customers last.
E) None of these.
12) Buying a ticket for a college football game where there are multiple windows to buy the
ticket, which of the following types describes the queuing system line structure?
A) Single channel, single phase.

B) Single channel, multiphase.
C) Multichannel, single phase.
D) Multichannel, multiphase.
E) None of these.
13) Buying food at a large food store with multiple checkout counters, which of the following
types describes the queuing system line structure?

E) None of these.
14) Getting an autograph from a famous person might involve standing in which type of the
queuing line structure?
Version 1 4
E) None of these.
15) In a college registration process, several department heads have to approve an individual
student's semester course load. What is the queuing system line structure?

E) None of these.
16) Standing in line to buy a ticket for a movie where there are multiple windows to buy
tickets is which type of the queuing system line structure?

E) None of these.
17) A roller coaster ride in an amusement park employs which type of the queuing system
line structure?
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E) None of these.
18) Machine breakdown and repair in a twelve-machine factory having one repair mechanic
would represent which type of the queuing system line structure?

E) None of these.
19) Assume the service rate for a queue in a truck-loading operation is 2 trucks per hour.
Using the infinite queuing notion for the models presented in the textbook, which of the
following is the average service time?
A) 2 hours.
B) 1 hour.
C) 0.5 hour.
D) 0.25 hour.
E) None of these.
20) For an infinite queuing situation, if the arrival rate for loading trucks is 5 trucks per hour,
what is the mean time between arrivals?
Version 1 6
A) 5 hours.
B) 2.5 hours.
C) 0.2 hour.
D) 0.1 hour.
E) None of these.
21) A company is concerned about the number of customers that have to wait for service in
their customer service department. Assume the rate at which customers arrive is 12 per hour.
Using the infinite queuing notion for the models presented in the textbook, which of the
following is the mean time between arrivals?
A) 12 minutes.
B) 6 minutes.
C) 2 minutes.
D) 1 minute.
E) None of these.
22) Which of the following is a characteristic that can be used to guide the design of service
systems?
A) Services cannot be inventoried.

B) Services are all similar.
C) Quality work means quality service.
D) Services businesses are inherently entrepreneurial.
E) Even service businesses have internal services.
23) Which of the following refers to the physical presence of the customer in a service
system?
Version 1 7
A) Creation of the service.
B) Customer contact.
C) Intermittent production.
D) Continuous production.
E) None of these.
24) Which of the following is an alternative possible service encounter included in the
service-system design matrix?
A) Mail contact.
B) Warranty.
C) Sales call.
D) Field service.
E) None of these.
25) Which of the following is an alternative possible service encounter included in the
service-system design matrix?
A) Face-to-face distance.
B) Internet.
C) Questionnaire response.
D) Automated teller machine (ATM).
E) Response card encounter.
26) In the service-system design matrix, a face-to-face total customization service encounter
is expected to have which of the following?
Version 1 8
A) Low sales opportunity.
B) Low production efficiency.
C) High production efficiency.
D) Low degree of customer/server contact.
E) None of these.
27) In the service-system design matrix, a mail contact service encounter is expected to have
which of the following?
A) High sales opportunity.

B) High degree of customer/server contact.
D) Low sales opportunity.
E) None of these.
28) In the service-system design matrix, a face-to-face loose specs service encounter is
expected to have which of the following?
A) Low sales opportunity.

B) Low production efficiency.
D) Low degree of customer/server contact.
E) None of these.
29) In the service-system design matrix, an internet and on-site technology service encounter
is expected to have which of the following?
Version 1 9
A) High sales opportunity.
B) High degree of customer/server contact.
C) Low production efficiency.
D) High production efficiency.
E) None of these.
30) There are many applications of poka-yokes in service organizations. _____ is one of the
three-T's used to classify poka-yokes?
A) Task
B) Time
C) Teamwork
D) Trust
E) Talent
31) There are many applications of poka-yokes in service organizations. _____ is one of the
three-T's used to classify poka-yokes?
A) Talent
B) Teamwork
C) Trust
D) Treatment
E) Time
32) Which of the following is considered a high-contact service operation?
A) On-line brokerage house.

B) Internet sales for a department store.
C) Physician practice.
D) Telephone life insurance sales and service.
E) Automobile repair.
Version 1 10
33) The service blueprint makes a distinction between _____
A) high and low customer contact aspects of the service.

B) those parts of the service performed before payment from those performed after
payment.
C) standardized elements of the service and those distinctive customized aspects of the
service.
D) customers desiring good service and customers unconcerned with service quality.
E) low and high value-added aspects of the service.
34) The "line of visibility" is a feature of _____
A) a single-channel, single phase queuing system.

B) the service blueprint.
C) an entertainment activity for people waiting in line for a service.
D) a waiting line that allows visibility of the server(s) tending to customers in front of
you.
E) None of these
35) Every service has a service package, which is defined as a bundle of goods and services
provided in some environment. The service package consists of five features. Which of the
following is not one of these features?
A) Supporting facility.
B) Facilitating services.
C) Information.
D) Explicit Services.
E) Implicit Services.
36) According to the text, the main differences separating Amazon from other on line
retailors are all of the following except _____
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A) website and the gigantic list of product offerings.
B) multi-tiered strategy any one can sell anything.
C) you can return products.
D) you can setup website with links to Amazon and get paid for click throughs.
E) can be your personal shopping assistant.
37) In designing service systems, as you go from mail contact to phone contact to face to face
total customization, which of the following is the most appropriate?
A) Sales opportunity decreases while degree of customer/server contact increases.

B) Sales opportunity decreases while degree of customer/server contact decreases.
C) Sales opportunity increases while degree of customer/server contact decreases.
D) Sales opportunity increases while degree of customer/server contact increases.
38) Assuming a 24-hour operation in a warehouse, and an arrival following Poisson

distribution with mean rate of 36 per day and service (unloading using a single bay) following
exponential distribution with a rate of 48 trucks per day, answer the following question. What is
the expected waiting time in the system (in hours) for a typical truck?
A) 2 hours
B) 1 hour
C) 1.5 hour
D) 0.25 hour
E) 0.5 hour
39) Assuming a 24-hour operation in a warehouse, and an arrival following Poisson

distribution with mean rate of 36 per day and service (unloading using a single bay) following
exponential with a rate of 48 trucks per day, answer the following question. What is the expected
number of trucks in the system?
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A) 2.25
B) 1.5
C) 2
D) 1
E) 3
40) Customers arrive at a single self-serve coffee machine in a busy mall at the rate of 20 per
hour, following Poisson distribution. Each customer takes exactly 90 seconds to get his or her
coffee. What is the expected number of customers in queue at this coffee machine?
A) 0.25
B) 1.5
C) 0.5
D) 2.0
E) 3.0
41) Customers arrive at a common queue at the coffee station with two identical coffee
machines in a busy mall at the rate of 48 per hour, following Poisson distribution. Each customer
mixes his or her specialty coffee taking 2 minutes on an average following an exponential
process. What is the expected number of customers in the system at this coffee station?
A) Infinity
B) 2.844
C) 2.444
D) 4.444
E) 3
42) Effective management of services requires a clear focus on understanding operations, so

much so, that it may even require the exclusion of consideration of marketing or personnel.
⊚ true
⊚ false
Version 1 13
43) Services often take the form of repeated encounters involving face-to-face interactions.
⊚ true
⊚ false
44) The term "encounter" is defined by Webster's Dictionary as "meeting in conflict or battle"
and is used to also designate meetings between consumers and service systems.
⊚ true
⊚ false
45) A service system with a high degree of customer contact is less difficult to control than a
low degree of customer contact service system.
⊚ true
⊚ false
46) Because little or no inventory is carried in a service operation, it is easy to separate the
operations management functions from marketing in services.
⊚ true
⊚ false
47) It is difficult to separate the operations management functions from marketing in

services.
⊚ true
⊚ false
48) The service-system design matrix identifies five alternative forms of service encounters.
⊚ true
⊚ false
Version 1 14
49) The service-system design matrix identifies six forms of service encounters.
⊚ true
⊚ false
50) The "service blueprint" is a classification of services.

⊚ true
⊚ false
51) Poka-yokes are procedures that block the inevitable mistake from becoming a service
defect.
⊚ true
⊚ false
52) Poka-yoke is roughly translated from Japanese as "quality management."

⊚ true
⊚ false
53) Poka-yoke is roughly translated from Japanese as "avoid mistakes."

⊚ true
⊚ false
54) An important aspect of service products is that they cannot be inventoried.

⊚ true
⊚ false
Version 1 15
55) Customer contact refers to creation of the service.
⊚ true
⊚ false
56) The work process involved in providing the service must involve the physical presence of
the customer in the system.
⊚ true
⊚ false
57) The central problem in virtually every waiting line situation is a trade-off decision
balancing the costs of adding services with the costs of waiting.
⊚ true
⊚ false
58) Ideally in waiting line or queuing analysis we want to balance the cost of service with the
cost of waiting.
⊚ true
⊚ false
59) The customer arrivals in a queuing system come almost exclusively from finite
populations.
⊚ true
⊚ false
60) The customer arrivals in a queuing system come almost exclusively from infinite
populations.
⊚ true
⊚ false
Version 1 16
61) A finite population in waiting line management refers to a population that is large enough
in relation to the service system so that the change in population size caused by subtraction or
additions to the population does not significantly affect the system probabilities.
⊚ true
⊚ false
62) An infinite population in waiting line management refers to a population that is large
enough in relation to the service system so that the change in population size caused by
subtraction or additions to the population does not significantly affect the system probabilities.
⊚ true
⊚ false
63) A variable arrival rate is more common in waiting line management than a constant
arrival rate.
⊚ true
⊚ false
64) A constant arrival rate is more common in productive systems than a variable arrival rate.
⊚ true
⊚ false
65) Arrival characteristics in a queuing analysis include the length of the queue.
⊚ true
⊚ false
66) The Poisson probability distribution is used in waiting line management when we are
interested in the number of arrivals to a queue during some fixed time period.
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⊚ true
⊚ false
67) The demand on a hospital's emergency medical services is considered a controllable

arrival pattern.
⊚ true
⊚ false
68) The demand on a hospital's emergency medical services is considered an uncontrollable

arrival pattern.
⊚ true
⊚ false
69) Gas stations, loading docks, and parking lots have infinite potential length of lines for
their queuing systems.
⊚ true
⊚ false
70) Highest-profit customer first is a queue discipline discussed in the textbook.

⊚ true
⊚ false
71) Longest waiting time in line is a queue discipline discussed in the textbook.
⊚ true
⊚ false
72) Best customer last is a queue discipline discussed in the textbook.
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⊚ true
⊚ false
73) A car wash is an example of a single channel, multiphase queuing system.

⊚ true
⊚ false
74) A tellers' window in a bank is an example of a single channel, multiphase queuing

system.
⊚ true
⊚ false
75) The admissions system in a hospital for patients is an example of a single channel, single
phase queuing system.
⊚ true
⊚ false
76) There are different queuing models to fit different queuing situations.
⊚ true
⊚ false
77) In a practical sense, an infinite queue is one that includes every possible member of the
served population.
⊚ true
⊚ false
78) In a waiting line situation, multiple lines occur only when there are multiple servers.
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⊚ true
⊚ false
79) The term "queue discipline" involves the art of controlling surly and unruly customers
who have become irritated by waiting.
⊚ true
⊚ false
80) In a practical sense, a finite population is one that potentially would form a very long line
in relation to the capacity of the serving system.
⊚ true
⊚ false
81) A department of 25 machines is kept running by three operators who respond to

randomly occurring equipment problems. An analyst who wanted to know how much production
was being lost by machines waiting for service could use queuing theory analysis to find out.
⊚ true
⊚ false

randomly occurring equipment problems. When an operator is absent, the amount of production
being lost by machines waiting for service increases. The analyst can use queuing theory analysis
to determine whether to pay overtime to an operator from a different shift or not.
⊚ true
⊚ false

randomly occurring equipment problems. An analyst wanting to know whether to add a fourth
operator or downsize to two operators would be helped by using queuing theory analysis.
Version 1 20
⊚ true
⊚ false
Version 1 21
Answer Key
1) [B, C]
2) C
3) E
4) A
5) D
6) C
7) C
8) D
9) B
10) B
11) A
12) C
13) C
14) A
15) B
16) C
17) A
18) A
19) C
20) C
21) E
22) A
23) B
24) A
25) B
26) B
Version 1 22
27) D
28) B
29) D
30) A
31) D
32) C
33) A
34) B
35) B
36) C
37) D
38) A
39) E
40) A
41) D
42) FALSE
43) TRUE
44) TRUE
45) FALSE
46) FALSE
47) TRUE
48) FALSE
49) TRUE
50) FALSE
51) TRUE
52) FALSE
53) TRUE
54) TRUE
55) FALSE
56) FALSE
Version 1 23
57) TRUE
58) TRUE
59) FALSE
60) FALSE
61) FALSE
62) TRUE
63) TRUE
64) FALSE
65) FALSE
66) TRUE
67) FALSE
68) TRUE
69) FALSE
70) TRUE
71) TRUE
72) FALSE
73) TRUE
74) FALSE
75) FALSE
76) TRUE
77) FALSE
78) FALSE
79) FALSE
80) FALSE
81) TRUE
82) TRUE
83) TRUE
Version 1 24
CHAPTER 8
1) In an overview of the major operations planning activities in a typical organization,
which of the following activities precedes aggregate sales and operations planning?
A) Process planning.
B) Workforce scheduling.
C) Master production scheduling.
D) Materials requirements planning.
E) Order scheduling.
2) In an overview of the major operations planning activities in a typical logistics

organization, which of the following activities follows aggregate sales and operations planning?
C) Vehicle loading.
3) In an overview of the major operations planning activities in a typical service

organization, which of the following activities follows aggregate sales and operations planning?
C) Master scheduling.
4) In an overview of the major operations planning activities in a typical logistics

organization, which of the following activities immediately follows aggregate sales and
operations planning?
Version 1 1
B) Strategic capacity planning.
C) Vehicle dispatching.
D) Vehicle capacity planning.
E) Warehouse receipt planning.
5) The main purpose of aggregate operations planning is to specify the optimal combination
of _____.
A) workforce levels and inventory on hand

B) inventory on hand and financing costs for that inventory
C) the strategic plan and the products available for sale
D) the workforce level and the degree of automation
E) operational costs and the cash flow to support operations
6) In conducting aggregate operations planning there are a number of required inputs.

Which of the following are inputs considered external to the firm?
A) Inventory levels and market demand.

B) Raw material availability and competitor's behavior.
C) Current workforce and economic conditions.
D) Current physical capacity and market demand.
E) Subcontractor capacity and inventory levels.

Which of the following are inputs considered external to the firm?
Version 1 2
A) Competitor behavior and economic conditions.
B) Market demand and inventory levels.
C) Subcontractor capacity and current workforce.
D) Economic conditions and current physical capacity.
E) Raw material availability and inventory levels.

Which of the following are considered inputs internal to the firm?
A) Inventory levels and economic conditions.

B) Market demand and subcontractor capacity.
C) Current physical capacity and current workforce.
D) Competitor behavior and current workforce.
E) Current physical capacity and raw material availability.
9) _____ is a production planning strategy presented in the textbook?
A) Level
B) Strategic
C) Balanced
D) Synchronous
E) Optimal
10) _____ is(are) considered a "pure" production planning strategy?
A) Variable workforce, stable work hours.

B) Lag demand.
C) Level playing field.
D) Stable workforce, variable work hours.
E) Product warehouse.
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11) Matching the production rate to the order rate by hiring and laying off employees as the
order rate varies which of the following is(are) "pure" production planning strategy?
A) Stable workforce, variable work hours.

B) Chase.
C) Level.
D) Meeting demand.
E) Minimizing inventory.
12) Maintaining a stable workforce working at a constant output rate while shortages and
surpluses are absorbed by fluctuating inventory levels, order backlogs, and allowing lost sales
which of the following is(are) production planning strategy?
A) Stable workforce, variable work hours.

B) Chase.
C) Level.
D) Full employment.
E) Skill maintenance.
13) _____ are relevant to aggregate operations planning?
A) Sunk costs
B) Transaction costs
C) Backordering costs
D) Legal costs
E) Fixed costs
14) Which of the following methods discussed in the text requires generating several
alternative aggregate plans?
Version 1 4
A) Trial and error.
B) Production smoothing.
C) Graphing and charting.
D) Aggregate plan simulation.
E) Cut and try.
15) Using the cut-and-try method for aggregate operations planning we can determine the
production requirement in units of product. If the beginning inventory is 100 units, the demand
forecast is 1,200, and the necessary safety stock is 20% of the demand forecast, which of the
following is the production requirement?
A) 1,200
B) 1,300
C) 1,340
D) 1,500
E) 1,540
16) Using the cut-and-try method for aggregate operations planning we can determine the
production requirement in units of product. If the beginning inventory is 500 units, the demand
forecast is 1,000, and the necessary safety stock is 10% of the demand forecast, which of the
following is the production requirement?
A) 1,000
B) 600
C) 550
D) 450
E) 100
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17) Using the cut-and-try method for aggregate operations planning, we can back calculate
beginning inventory if we knew the values of other relevant variables. What should have been
the initial inventory in units of demand, if the production requirement in units of product is 900,
demand forecast is 1,000, and the necessary safety stock is 20 percent of the demand forecast,
Choose the right answer for the beginning inventory.
A) 300
B) 500
C) 100
D) 1,900
E) Cannot find it
18) Using the cut-and-try method for aggregate operations planning, we can calculate the
ending inventory and then calculate the safety stock as a percent of forecast demand. Suppose
that the beginning inventory is 300, the production requirement in units of product is 1,350,
demand forecast is 1,500, what is the ending inventory and percent safety stock?
A) 200 and 10%

B) 150 and 10%
C) 300 and 20%
D) 450 and 30%
E) 150 and 20%
19) Using constant workforce and varying inventory and stock out, what would be the
constant workforce? Production required in periods 1,2 and 3 respectively are 1,200, 1,500 and
900 units. One worker during the panning horizon can produce two units in one day. Number of
work days are 22 in period 17 in period 2 and 21 in period 3. Assume that the beginning
inventory and the ending inventory required are 300 units each. What is the number of workers
required during the planning horizon of three periods?
Version 1 6
A) 60
B) 600
C) 35
D) 30
E) 300
20) From an operational perspective yield management is the most effective under which of
the following circumstances?
A) Demand cannot be segmented by customer.

B) Inventory is perishable.
C) Fixed costs are low and variable costs are high.
D) The customer is a "captive" of the system.
E) The firm doing yield management is very profitable.
21) From an operational perspective yield management is the least effective under which of
A) Demand can be segmented by customer.

B) The product can be sold in advance.
C) Demand is highly variable.
D) Fixed costs are high and variable costs are low.
E) Demand is stable and close to capacity.
22) From an operational perspective yield management is the least effective under which of
Version 1 7
A) Demand can be segmented by customer.
B) The product can be sold in advance.
C) The product can be kept to be sold when demand is stronger.
D) Fixed costs are high and variable costs are low.
E) Demand is highly variable.
23) Which of the following is not one of the "number of interesting issues that arise in yield
management with"?
A) Pricing structures must appear logical to the customer and justify different prices.
B) Designing yield management programs that cannot be imitated by a competitor.
C) How to handle variability in customer arrivals, duration, and interval.
D) Managing the service process.
E) Training workers and managers to work in a yield management environment.
24) Sales and operations planning is a process designed to meet an order backlog.
⊚ true
⊚ false
25) The objective of the aggregate operations plan is to ensure that the marketing and sales
plans are realistic.
⊚ true
⊚ false
26) The aggregate operations plan translates annual and quarterly business plans into broad
labor and output plans for the intermediate term of 3 to 18 months.
⊚ true
⊚ false
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27) The sales and operations planning process consists of a series of meetings.
⊚ true
⊚ false
28) The sales and operations planning process is made up of a variety of analytical techniques
that interact to produce short and intermediate term goals.
⊚ true
⊚ false
29) The aggregate operations plan differs in virtually every aspect in service organizations as
contrasted with manufacturing organizations.
⊚ true
⊚ false
30) The sales and marketing plans are typically developed separately from the aggregate
operations plan as a way of cross-checking results to ensure the integrity of assumptions about
the future.
⊚ true
⊚ false
31) Aggregate sales and operations planning occur in a company about every 3 to 18 months.
⊚ true
⊚ false
32) Aggregation in sales and operations planning is by groups of customers on the supply
side and by product families on the demand side of the firm's supply chain.
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⊚ true
⊚ false
33) The International Aggregate Planning Society (IAPS) has developed aggregate operations
planning guidelines that are followed by a majority of manufacturing firms.
⊚ true
⊚ false
34) The operations plan should not be updated but should be followed precisely until the
longest-term planning horizon has passed.
⊚ true
⊚ false
35) Aggregate planning techniques are developed from the master schedule and the strategic
capacity plan.
⊚ true
⊚ false
36) In a services organization, strategic capacity planning follows process planning.

⊚ true
⊚ false
37) In a logistics organization, vehicle dispatching immediately precedes vehicle loading.

⊚ true
⊚ false
38) Order scheduling is the step in the aggregate operations planning process that
immediately follows material requirements planning.
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⊚ true
⊚ false
39) The master production schedule is a crucial input into the aggregate operations plan.
⊚ true
⊚ false
40) In services, once the aggregate staffing level is determined, the focus is on short-term
workforce and customer scheduling.
⊚ true
⊚ false
41) The main purpose of the aggregate production plan is to specify the optimal combination
of workforce level and inventory on hand.
⊚ true
⊚ false
42) In aggregate operations planning, the variable "production rate" refers to the number of
units completed per unit of time.
⊚ true
⊚ false
43) The aggregate operations planning, variable "workforce level" refers to the number of
workers needed to accomplish the planned production.
⊚ true
⊚ false
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44) The aggregate operations plan variable "inventory on hand" refers to the balance of
unused inventory carried over from the previous time period.
⊚ true
⊚ false
45) Subcontracting is viewed as a risky strategy because the firm may lose control of product
design and pricing.
⊚ true
⊚ false
46) Because a level production strategy does not require adjustment in the short-to-medium
term, aggregate sales and operations planning is not required.
⊚ true
⊚ false
47) Firms facing cyclical demand fluctuations would be wise to introduce complementary
products whose cycles are the same as their current products.
⊚ true
⊚ false
48) Firms that match the production rate to the order rate by hiring and laying off employees
as the order rate varies are following what is known as the chase strategy.
⊚ true
⊚ false
49) Accurate medium-range planning increases the likelihood of operating within the limits
of a budget.
⊚ true
⊚ false
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50) Fixed and variable costs incurred in producing a given product type in a given time
period are relevant aggregate operations planning costs.
⊚ true
⊚ false
51) Backordering costs incurred in producing a given product type in a given time period are
relevant aggregate operations planning costs.
⊚ true
⊚ false
52) Foregone profit margins are considered as relevant aggregate operations planning costs.
⊚ true
⊚ false
53) Costs incurred in hiring, training and laying off personnel are considered relevant
aggregate operations planning costs.
⊚ true
⊚ false
54) The widespread adoption of computing technology has led to the virtual abandonment of
simple cut-and-try charting and graphical methods to develop aggregate operations plans.
⊚ true
⊚ false
55) The increasing complexity of modern operations management has made simple cut-and-
try charting and graphical methods formerly used to develop aggregate operations plans
impractical and obsolete.
Version 1 13
⊚ true
⊚ false
56) A firm with seasonal variation normally plans on a month-to-month basis.

⊚ true
⊚ false
57) Having a safety stock of inventory can reduce the likelihood of backorders.
⊚ true
⊚ false
58) Using the cut-and-try approach is the most accurate way of finding the minimum-cost
solution.
⊚ true
⊚ false
59) Yield management is the process of allocating the right type of capacity to the right type
of customer at the right prices and at the right time to maximize revenue or yield.
⊚ true
⊚ false
60) The essence of yield management is the ability to manage supply.

⊚ true
⊚ false
61) One of the conditions that makes yield management effective is when inventory is easily
stored and held for a time when demand is stronger.
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⊚ true
⊚ false
62) Yield management is an important tool that can be used to shape demand patterns.
⊚ true
⊚ false
63) A rate fence is a person who books airline seats at low rates far in advance and sells the
seats at a profit later.
⊚ true
⊚ false
64) A rate fence is a logical justification for different prices for what is essentially the same
service.
⊚ true
⊚ false
65) Pricing for a service should primarily relate to the cost of providing the service and has
little to do with capacity issues the service provider might face.
⊚ true
⊚ false
Version 1 15
Answer Key
1) A
2) C
3) B
4) D
5) A
6) B
7) A
8) C
9) A
10) D
11) B
12) C
13) C
14) E
15) C
16) B
17) A
18) B
19) D
20) B
21) E
22) C
23) B
24) FALSE
25) FALSE
26) TRUE
Version 1 16
27) TRUE
28) FALSE
29) FALSE
30) FALSE
31) FALSE
32) FALSE
33) FALSE
34) FALSE
35) FALSE
36) TRUE
37) FALSE
38) TRUE
39) FALSE
40) TRUE
41) TRUE
42) TRUE
43) TRUE
44) TRUE
45) FALSE
46) FALSE
47) FALSE
48) TRUE
49) TRUE
50) TRUE
51) TRUE
52) FALSE
53) TRUE
54) FALSE
55) FALSE
56) FALSE
Version 1 17
57) TRUE
58) FALSE
59) TRUE
60) FALSE
61) FALSE
62) TRUE
63) FALSE
64) TRUE
65) FALSE
Version 1 18
CHAPTER 9
1) The acronym ERP stands for _____
A) Executive Reliability Profile—a human resources program that identifies fast-track

middle managers.
B) Erratic Response Parameter—a quality metric indicating that a process is in or out of
statistical control.
C) Enterprise Resource Planning—a data base of that ties together all application
programs in a firm.
D) Emergency Response Plan—a document required by government indicating planned
responses to emergency situations.
E) Elevated Reply Protocol—a list of executives authorized to deal with difficult
customer concerns.
2) 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.
3) One of the main purposes of a MRP system is to _____
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.
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4) Which of the following is the most closely related to the reason a firm might implement
MRP?
A) They can order the right parts.

B) They can order parts sufficient for immediate use.
C) 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.
5) 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.
6) Which of the following industry types have 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.
7) Which of the following industry types have high expected benefits from the application
of MRP?
Version 1 2
A) Fabricate-to-order.
B) Hospitals.
C) Assemble-to-order.
D) Aircraft manufacturers.
E) Oil refineries.
8) 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 these.
9) From the list below select the item that the master scheduler does not do to ensure good
master scheduling.
A) Include all demands from product sales, warehouse replenishment, spares, and
interplant requirements.
B) Be involved with customer order promising.
C) Be visible to all levels of management.
D) Trade off conflicts to make it likely that manufacturing will meet its goals.
E) Identify and communicate all problems.
10) Freezing the master schedule is _____
Version 1 3
A) not truly feasible because down the road it will become slushy again.
B) a commitment to precisely follow the master schedule in the future.
C) done to avoid the chaos of expediting and resultant overdue orders.
D) preserves the master schedule until it is ready to be used.
E) rarely attempted by manufacturing firms.
11) “Available to promise” identifies the difference between the units currently in the master
schedule and _____
A) inventory records file.

B) demand forecasts.
C) bill of materials.
D) firm customer orders.
E) inventory on hand.
12) 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 these.
13) Which of the following is an input file necessary to run an MRP system?
A) Bill of materials (BOM) file.

B) Quality management report.
E) Purchasing contracts.
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14) Which of the following is an input file necessary to run an MRP system?
A) Exception reports.
B) Computer-aided-design files.
C) Inventory records file.
D) Personnel files.
E) Planned order schedule.
15) Which of the following is not a production activity report generated by MRP?
A) Exception reports.
B) Planning reports.
C) Performance control reports.
E) Bill of materials reports.
16) Which of the following is considered a primary report in an MRP system?
A) Planning reports.
B) Performance reports.
D) Planned order schedules.
E) Cycle counting reports.
17) Which of the following is considered a secondary report in an MRP system?
Version 1 5
A) Exceptions reports.
B) Planned order schedule.
C) Inventory record.
D) Exceptions reports.
E) Firm orders from known customers.
F) Inventory record.
G) Engineering change reports.
H) Firm orders from known customers.
I) Engineering change reports.
18) Which of the following is considered a primary report in an MRP system?
A) Planned order schedule.

B) Peg reports.
C) Planning reports.
D) Inventory accuracy reports.
E) Aggregate production plan reports.
19) 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 reports.
E) Planned order schedules.
20) Which of the following is an input to the master production schedule?
Version 1 6
A) Prototype products from product development.
B) Aggregate component schedule.
C) Peg reports.
D) Exception reports.
E) Forecasts of demand from customers.
21) A BOM file is also called _____.
A) product tree
B) stocking plan
C) inventory usage record
D) production parts plan
E) time bucket schedule
22) A product tree can do _____.
A) help to compute component usage

B) reduce product scrap
C) reduce labor overtime
D) reduce regular time labor
E) locate raw material supplies
23) In an MRP program, the program accesses the status segment of an inventory record
according to specific periods called _____.
A) cubed time units

B) time buckets
C) BOM units
D) time modules
E) time lines
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24) 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.
25) We would expect to see which of the following in an MRP system's inventory status file?
A) End items produced.

B) Late/early delivery records.
C) Scrap losses.
D) Labor efficiency.
E) Computer errors.
26) 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.
27) Which of the following is the net requirement when using an MRP program if the gross
requirement is 1,250 and the inventory on hand is 50?
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A) 1,200
B) 1,300
C) 1,150
D) 2,450
E) None of these
28) Which of the following is the net requirement when 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
29) Which of the following is the planned-order release when using an MRP program if the
gross requirement is 5,000, inventory on hand is 1,200, and planned receipts are 800?
A) 7,000
B) 4,200
C) 3,000
D) 2,000
E) 1,200
30) Which of the following is the planned-order release when using an MRP program if the
gross requirement is 670 and the inventory on hand is 600?
Version 1 9
A) 670
B) 600
C) 530
D) 70
E) None of these
31) In a MRP problem, A is a MPS item. Every A requires 2 B’s and 3 C’s. Every B requires
5 C’s. All lead times are two periods. All initial inventory values are 0. Use lot-for-lot method for
order quantities for all items. If gross requirement for A is 500 in period 8, what will be the
planned order release for B in period 4?
A) 0
B) 1,000
C) 500
D) 1,500
E) 6,500
5 C’s. All lead times are two periods. Initial inventory values for A is 100, B is 200 and C is 0.
Use lot-for-lot method for order quantities for all items. If gross requirement for A is 800 in
period 9, what will be the planned order release for B in period 5?
A) 1,600
B) 1,400
C) 700
D) 800
E) 1,200
Version 1 10
5 C’s. All lead times are one period. Initial inventory values for all items are 0. Use lot-for-lot
method for order quantities for all items. If gross requirement for A is 400 in period 10, what will
be the planned order release for C in period 8?
A) 800
B) 1,600
C) 6,800
D) 6,000
E) 1,200
5 C’s. All lead times are two periods. All initial inventory values are 0. Use lot-for-lot method for
order quantities for all items. What is the low level code (LLC) for B and C?
A) LLC for B is 2 and C is 1.

B) LLC for both B and C are 2.
C) LLC for B is 1 and C is 2.
D) LLC for B is 0 and C is 1.
E) LLC for all items are 1.
35) Which of the following can be used for lot sizing in a MRP system?
A) Low-level coding.
B) Time bucket size.
C) Least unit cost.
D) Inventory record file.
E) Peg inventory.
36) Which of the following is not a lot sizing technique used in a MRP systems?
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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).
37) Under the lot-for-lot (L4L) lot sizing technique as used in a MRP, we would expect
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.
38) 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) 23
D) 185
E) 78
39) 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?
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A) 2,000
B) 1,200
C) 1,000
D) 300
E) 200
40) 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.
41) 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.
42) 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?
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A) Economic order quantity.
B) Lot-for-lot.
C) Least total cost.
D) Least unit cost.
E) Inventory item averaging.
43) When implemented correctly, MRP links all areas of the business.
⊚ true
⊚ false
44) MRP stands for manufacturing requirements planning.

⊚ true
⊚ false
45) MRP stands for material requirements planning.

⊚ true
⊚ false
46) MRP is based on dependent demand.

⊚ true
⊚ false
47) 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
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48) MRP provides the schedule specifying when each part and component of an end item
should be ordered or produced.
⊚ true
⊚ false
49) The deeper one looks into the product creation sequence, the more the requirements of
dependent demand items tend to become more lumpy.
⊚ true
⊚ false
50) 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
51) MRP is most valuable where a number of products are made in batches using the same
productive equipment.
⊚ true
⊚ false
52) MRP is least valuable in industries where a number of products are made in batches using
the same productive equipment.
⊚ true
⊚ false
53) The master production schedule states the number of items to be produced during specific
time periods.
⊚ true
⊚ false
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54) A master production schedule is an input to a material requirements planning (MRP)
system.
⊚ true
⊚ false
55) The time-phased plan specifying how many and when the firm plans to build each end
item is called the materials requirements plan (MRP.)
⊚ true
⊚ false
56) The time-phased plan specifying how many and when the firm plans to build each end
item is called the master production schedule (MPS).
⊚ true
⊚ false
57) Time fences are periods of time having some specified level of opportunity for the
customer to make changes.
⊚ true
⊚ false
58) The customer grace period is a time-span having some specified level of opportunity for
the customer to make changes.
⊚ true
⊚ false
59) “Available to promise” is the difference between the number of units in the master
schedule and the firm customer orders.
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⊚ true
⊚ false
60) Manufacturing firms maintain bill of materials (BOM) files, which are simply a
sequencing of everything that goes into a final product.
⊚ true
⊚ false
61) An input to the material requirements planning (MRP) system is an exception report.
⊚ true
⊚ false
62) An input to the material requirements planning (MRP) system is an inventory records
file.
⊚ true
⊚ false
63) An output of MRP is a bill of materials (BOM) file.

⊚ true
⊚ false
64) A BOM file is often called a product structure file or product tree because it shows how a
product is put together.
⊚ true
⊚ false
65) Computing the quantity of each component that goes into a finished product can be done
by expanding (or exploding) each item in a product structure file and summing at all levels.
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⊚ true
⊚ false
66) A modular bill of materials includes items with fractional options.

⊚ true
⊚ false
67) A modular bill of materials is the term for an item that can be produced and stocked as a
subassembly.
⊚ true
⊚ false
68) The three main inputs to an MRP system are the bill of materials, the master schedule and
the inventory records file.
⊚ true
⊚ false
69) The MRP program performs its analysis from the bottom up of the product structure
trees, imploding requirements level by level.
⊚ true
⊚ false
70) Net change MRP systems are "activity" driven.

⊚ true
⊚ false
71) In a net change MRP system, requirements and schedules are updated whenever a
transaction is processed that has an impact on the item.
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⊚ true
⊚ false
72) In a net change MRP system, requirements and schedules are considered rigid and never
updated.
⊚ true
⊚ false
73) Net change MRP reflects the exact status of each item managed by the system in "real
time."
⊚ true
⊚ false
74) 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
75) When formulating an MRP schedule it is assumed there will be a singular source of
demand for products.
⊚ true
⊚ false
76) It is assumed that there are sufficient quantities of a given material to satisfy initial
demands when developing a master schedule.
⊚ true
⊚ false
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77) Low level coding in MRP indicates the exact status of each item managed by the system
in "real time."
⊚ true
⊚ false
78) "Projected available balance" is a term referring to unsold finished goods inventory.
⊚ true
⊚ false
79) Projected available balance is the amount of inventory that is expected only at the
beginning of a period.
⊚ true
⊚ false
80) Generally, determining lot sizes in MRP systems is simple.

⊚ true
⊚ false
81) A lot-for-lot (L4L) lot sizing technique does not take into account setup costs or capacity
limitations.
⊚ true
⊚ false
82) The lot-for-lot (L4L) lot sizing technique minimizes carrying cost by taking into account
setup costs and capacity limitations.
⊚ true
⊚ false
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83) Lot-for-lot (L4L) is the most common lot sizing technique.
⊚ true
⊚ false
84) 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
85) The economic order quantity (EOQ) lot sizing technique uses the "square root formula"
to balance setup cost, carrying cost and cost of stock-outs.
⊚ true
⊚ false
86) The economic order quantity (EOQ) lot sizing technique uses the "square root formula"
to balance setup cost and carrying cost.
⊚ true
⊚ false
87) The least total cost (LTC) method 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
88) The least unit cost (LUC) method 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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89) The least unit cost (LUC) 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
90) The least unit cost (LUC) method of lot-sizing 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
91) The least unit cost (LUC) method is a more complete analysis that accounts for ordering
or setup costs that might change with order size.
⊚ true
⊚ false
92) If the ordering or setup costs remain constant, the least unit cost (LUC) method is more
attractive
⊚ true
⊚ false
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Answer Key
1) C
2) B
3) D
4) A
5) B
6) C
7) C
8) D
9) D
10) C
11) D
12) E
13) A
14) C
15) E
16) D
17) A
17) D
17) A
17) D
18) A
19) B
20) E
21) A
22) A
23) B
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24) E
25) C
26) E
27) A
28) C
29) C
30) D
31) B
32) E
33) A
34) C
35) C
36) E
37) B
38) A
39) E
40) C
41) E
42) D
43) FALSE
44) FALSE
45) TRUE
46) TRUE
47) TRUE
48) TRUE
49) TRUE
50) FALSE
51) TRUE
52) FALSE
53) TRUE
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54) TRUE
55) FALSE
56) TRUE
57) TRUE
58) FALSE
59) TRUE
60) TRUE
61) FALSE
62) TRUE
63) FALSE
64) TRUE
65) TRUE
66) FALSE
67) TRUE
68) TRUE
69) FALSE
70) TRUE
71) TRUE
72) FALSE
73) TRUE
74) FALSE
75) FALSE
76) FALSE
77) FALSE
78) FALSE
79) FALSE
80) FALSE
81) TRUE
82) FALSE
83) TRUE
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84) FALSE
85) FALSE
86) TRUE
87) TRUE
88) FALSE
89) TRUE
90) FALSE
91) TRUE
92) FALSE
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CHAPTER 10
1) The cause-and-effect diagram _____________blank. (Choose the most inclusive
answers.)
A) is also referred to as Show cause diagram

B) is also referred to as fishbone diagram
C) is also referred to as opportunity flow diagram
D) is one of the analytical tools in DMAIC analysis
2) Comparing traditional view of the cost of variability and Taguchi’s view of cost of
variability. (Select all that apply.)
A) Both views are about the same.

B) Traditional view holds that as long as the product is within specification, there is no
difference.
C) Taguchi’s view holds that closer to the midpoint of specifications better it is.
D) None of the above.
3) The philosophical leaders of the quality movement, Philip Crosby, W. Edwards Deming,
and Joseph M. Juran, had the same general message about what it took to achieve outstanding
quality. Which of the following was not part of that message?
A) Quality is free.
B) Leadership from senior management.
C) Customer focus.
D) Total involvement of the workforce.
E) Continuous improvement.
4) The philosophical leaders of the quality movement, Philip Crosby, W. Edwards Deming,
and Joseph M. Juran, had the same general message about what it took to achieve outstanding
quality. Which of the following was part of that message?
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A) Fourteen steps for quality management.
B) Quality is free.
C) Customer focus.
D) Zero defects.
E) Six Sigma.
5) The Malcolm Baldrige award selection process helps improve quality and productivity by
_____________blank.
A) stimulating foreign based suppliers of American companies to improve quality

B) reporting quality levels among American firms
C) identifying American firms with the most difficult quality problems
D) providing feedback to applicants by the examiners
E) helping Baldrige award winners increase their sales
6) Which of the following are eligible companies to be considered for the Baldrige Award?
A) Auditing firms.
B) Offshore suppliers to U.S. companies.
C) Firms operating only outside the U.S..
D) State government agencies.
E) None of these.
7) Which of the following are not eligible to be considered for the Baldrige Award?
A) Small businesses.
B) Health care organizations.
C) Educational institutions.
D) State highway patrol organizations.
E) Nuclear power plants.
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8) The primary purpose of the Malcolm Baldrige National Quality Award is
_____________blank
A) to encourage the spread of statistical quality control.

B) to improve human resource development and management in manufacturing.
C) to help companies review and structure their quality programs.
D) to prove that American firms were competitive in quality.
E) to emphasize the use of quantitative methods in process management.
9) Applicants for the Baldrige Award for total quality management must submit an
application of up to 50 pages that details the processes and results of their activities under seven
major categories. Which of the following is one of those categories?
A) DMAIC.
B) Customer and Market focus.
C) Standardization.
D) Control.
E) Inspection protocols.
10) The Malcolm Baldrige National Quality Award is given to organizations that have done
A) Instituted a Six Sigma approach to total quality control.

B) Demonstrated a high level of product quality.
C) Demonstrated outstanding quality in their products and processes.
D) Have a world-class quality control function.
E) Most significantly improved their product quality levels.
11) Which of the following is not a category reported in applying for the Baldrige Award?
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A) Corporate leadership.
B) Use of statistical quality control tools.
C) Business results.
D) Consumer and market focus.
E) Strategic planning.
12) The dimension of design quality that concerns the sensory characteristics of the product
is which of the following?
A) Features.
B) Serviceability.
C) Perceived quality.
D) Reputation.
E) Aesthetics.
13) The dimension of design quality that concerns the consistency of performance over time
or the probability of failing is which of the following?
A) Response.
B) Serviceability.
C) Reliability.
D) Reputation.
E) Perceived quality.
14) The dimension of design quality that concerns secondary characteristics is which of the
following?
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A) Features.
B) Serviceability.
C) Reliability.
D) Reputation.
E) Perceived quality.
15) Which of the following is a dimension of design quality?
A) Price.
B) Features.
C) Color.
D) Weight.
E) Quality at the source.
16) Which of the following is a dimension of design quality?
A) Aesthetics.
B) Price.
C) Quality at the source.
D) Distribution.
E) Leadership.
17) Which of the following are basic assumptions that justify an analysis of the costs of
quality?
A) Failures are caused.

B) Prevention is more expensive.
C) Performance can be learned.
D) Rules of thumb don't always work.
E) Appraisal costs are less than prevention costs.
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18) which of the following is the cost of quality classification?
A) Material costs.
B) Prevention costs.
C) Variable overhead.
D) Direct labor.
E) Inventory costs.
19) Which of the following are the costs of quality classification for costs such as scrap,
rework, or repair?
A) Appraisal costs.
C) External failure costs.
D) Internal failure costs.
E) Rework and wastage.
20) Which of the following are the costs of quality classification for costs such as inspection,
testing, and other tasks to ensure that the product or process is acceptable?
A) Appraisal costs.
D) Internal failure costs.
E) Checking costs.
21) Which of the following are the costs of quality classification for costs such as defects that
pass through the system, such as customer warranty replacements, loss of customer or goodwill,
handling complaints, and product repair?
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A) Appraisal costs.
D) Customer return cost.
E) Workmanship costs.
22) The International Organization for Standardization (ISO) has written standards that apply
to quality management and assurance for businesses. Which of the following are not among the
standards ISO has developed?
A) ISO 9000 quality management requirements.

B) ISO 26000 socially responsible behavior.
C) ISO 17000 composition of boards of directors.
D) ISO 14000 environmental management systems.
E) ISO/TS 16949, aligns existing American, German, French, and Italian automotive
quality standards within the global automotive industry.
23) Looking outside the organization to examine what industry competitors and excellent
performers outside of your industry are doing in a particular process is called
_____________blank.
A) industrial espionage
B) unethical
C) external benchmarking
D) hiring an outside expert
E) reverse engineering
24) DPMO refers to _____________blank
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A) defects per million parts.
B) defects per many units.
C) defects per million operations.
D) defects per million opportunities.
E) defects per million.
25) An analytical tool used in six sigma quality improvement programs is which of the
following?
A) Leadership.
B) Continuous improvement.
C) Quick response.
D) Partnership diagrams.
E) Checksheets.
26) Which of the following is not an analytical tool used in Six Sigma quality improvement
programs?
A) Run charts.
B) Pass charts.
C) Cause-and-effect diagrams.
D) Flowcharts.
E) Pareto charts.
27) A flow chart as part of a Six Sigma quality improvement process might be found in
which DMAIC category?
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A) Define.
B) Measure.
C) Analyze.
D) Improve.
E) Control.
28) A fishbone diagram as part of a Six Sigma quality improvement process might be found
in which DMAIC category?
A) Define.
B) Measure.
C) Analyze.
D) Improve.
E) Control.
29) An opportunity flow diagram as part of a six sigma quality improvement process might
be found in which DMAIC category?
A) Define.
B) Measure.
C) Analyze.
D) Improve.
E) Control.
30) A Pareto chart as part of a Six Sigma quality improvement process might be found in
which DMAIC category?
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A) Define.
B) Measure.
C) Analyze.
D) Improve.
E) Control.
31) Which of the following is an analytical tool used in Six Sigma quality improvement
programs?
A) Leadership.
B) Pareto Charts.
C) Management by fact.
D) Continuous improvement.
E) Kaizen.
32) Which of the following is not an analytical tool used in Six Sigma quality improvement
programs?
A) Flowcharts.
B) Run charts.
C) Control charts.
D) Pareto diagrams.
E) Decision diagrams.
33) Failure mode and effect analysis is used in Six Sigma projects. It involves which of the
following?
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A) Closely examining each rejected part to determine the cause.
B) A careful sampling plan.
C) Calculating a risk priority number for each possible failure.
D) Reporting the effect each failure has had on a customer.
E) Multivariate testing.
34) Design of experiments is a statistical methodology often used in Six Sigma projects. It
aims to accomplish which of the following?
A) Keep careful track of the occurrences of each possible defect.

B) Determine the cause-and-effect relationships between process variables and output.
C) Report defects to management on a Pareto chart.
D) Carefully change each individual process variable until the cause of a defect is found.
E) Eliminate defects by finding out whom or what is causing them.
35) You have just used the capability index (Cpk) formulas to compute the two values "min
[2.0, 2.5]". Which of the following is the proper interpretation of these numbers?
A) The true capability index value is exactly 1.

B) The mean of the production process has shifted to the left of the design limits.
C) The mean of the production process has shifted to the right of the design limits.
D) The mean has not shifted at all.
E) None of these.
[1, 1]". Which of the following is the proper interpretation of these numbers?
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A) The true capability index value is exactly 1.
E) None of these.
[1.5, 1.0]". Which of the following is the interpretation of these numbers?
A) The true capability index value is 1.

E) The true capability index value is between 1.5 and 1.
38) The capability index is _____________blank
A) the ratio of the range of values produced by a process divided by the range of values
allowed by the design specification.
B) the ratio of the range of values allowed by the design specifications divided by the
range of values produced by the process.
C) the ratio of the capacity of a process (in units) divided by the annual unit demand.
D) the overhead generated by a piece of equipment divided by the overhead absorbed by
that piece of equipment.
E) the number of minutes in a machining cycle that a piece of equipment can capably
operate without human intervention.
39) Quality control charts usually have a central line and upper and lower control limit lines.
Which of the following is not a reason that the process being monitored with the chart should be
investigated?
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A) A large number of plots are close to the upper or lower control lines.
B) Erratic behavior of the plots.
C) A single plot falls above or below the control limits.
D) A change in raw materials or operators.
E) A run of five above the central line.
40) Quality control charts usually have a central line and upper and lower control limit lines.
Which of the following are reasons that the process being monitored with the chart should be
investigated?
A) A single plot falls above or below the control limits.

B) Normal behavior.
C) A large number of plots are on or near the central line.
D) No real trend in any direction.
E) A change in raw materials or operators.
41) If there are 120 total defects from 10 samples, each sample consisting of 10 individual
items in a production process, which of the following is the fraction defective that can be used in
a p-chart for quality control purposes?
A) 120
B) 10
C) 8
D) 1.2
E) 0.8
42) If there are 400 total defects from 8 samples, each sample consisting of 20 individual
items in a production process, which of the following is the fraction defective that can be used in
a p-chart for quality control purposes?
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A) 400
B) 160
C) 2.5
D) 1.0
E) 0.4
43) You want to determine the upper control line for a p-chart for quality control purposes.
You take several samples of a size of 100 items in your production process. From the samples
you determine the fraction defective is 0.05 and the standard deviation is 0.02. If the desired
confidence level is 99.7 percent, which of the following is the resulting UCL value for the line?
A) 0.39
B) 0.11
C) 0.06
D) 0.05
E) None of these
44) You want to determine the lower control line for a p-chart for quality control purposes.
You take several samples of a size of 50 items in your production process. From the samples you
determine the fraction defective is 0.006 and the standard deviation is 0.001. If the desired
confidence level is 99.7 percent, which of the following is the resulting LCL value for the line?
A) 0.0
B) 0.002
C) 0.003
D) 0.004
E) None of these
45) You want to determine the control lines for a p-chart for quality control purposes. If the
desired confidence level is 99 percent, which of the following values for Z would you use in
computing the UCL and LCL?
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A) 0.99
B) 2
C) 2.58
D) 3
E) None of these
total number of defects from all samples is 2,500, the number of samples is 100, and the sample
size is 50, which of the following would be the standard deviation used in developing the control
lines?
A) 0.4900
B) 0.2499
C) 0.1556
D) 0.0707
E) 0.02499
total number of defects from all samples is 560, the number of samples is 70, and the sample size
is 80, which of the following would be the standard deviation used in developing the control
lines?
A) 0.9000
B) 0.4556
C) 0.0335
D) 0.0011
E) 0.0112
48) For which of the following should we use a p-chart to monitor process quality?
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A) Defective electrical switches.
B) Errors in the length of a pencil.
C) Weight errors in cans of soup.
D) Temperature of entrees in a restaurant.
E) Letter grades on a final examination.
49) For which of the following should we use a p-chart to monitor process quality?
A) The dimensions of brick entering a kiln.

B) Lengths of boards cut in a mill.
C) The weight of fluid in a container.
D) Grades in a freshman pass/fail course.
E) Temperatures in a classroom.
50) A lumber supplier might use which method to monitor knot holes in each piece of
lumber?
A) p-charts.
B) x̄-charts.
C) c-charts.
D) Capability index.
E) None of these.
51) <p>With which of the following should we use an -chart based on sample means to
monitor process quality?
A) Grades in a freshman pass/fail course.

B) Tire pressures in an auto assembly plant.
C) Vehicles passing emissions inspection.
D) Computer software errors.
E) Number of units with missing operations.
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52) Which of the following should we use an R-chart to monitor process quality?
A) Grades in a freshman pass/fail course.

B) Tire pressures in an auto assembly plant.
C) Vehicles passing emissions inspection.
D) Computer software errors.
E) Number of units with missing operations.
53) Which of the following should we use an R-chart to monitor process quality?
A) Weighing trucks at a highway inspection station to determine if they are overloaded.

B) Deciding whether an airliner has sufficient fuel for its trip.
C) Student grades measured from 1 to 100.
D) Determining whether vehicles from a motor pool will run.
E) Determining the accuracy of a forecast of snow.
54) In monitoring process quality we might use which of the following statistics?
A) Absolute values.
B) Percentage deviation from tolerance centers.
C) "k" values for the sample mean.
D) Logarithmic control intervals.
E) Difference between the highest and lowest value in a sample.
55) <p>You are developing an -chart based on sample means. You know the standard
deviation of the sample means is 4, the desired confidence level is 99.7 percent, and the average
of the sample means is 24. Which of the following is your UCL?
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A) 36
B) 24
C) 12
D) 4
E) None of these
56) <p>You are developing an -chart based on sample means. You know the standard
deviation of the sample means is 4, the desired confidence level is 99 percent, and the average of
the sample means is 20. Which of the following is your LCL?
A) 36
B) 24
C) 9.68
D) 16.79
E) 30.32
57) You want to develop a three-sigma R-chart. You know the average range is 5 based on
several samples of size 10. Which of the following is the resulting UCL?
A) 20.9
B) 8.9
C) 7.02
D) 5
E) 3.1
58) You want to develop a three-sigma R-chart. You know the average range is 12 based on
several samples of size 6. Which of the following is the resulting LCL?
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A) 20.0
B) 18.3
C) 7.02
D) 5.6
E) 0.0
59) <p>If you are going to develop an -chart based on range statistics and you are using a
sample size of 12 for your charting purposes, which of the following is the A2 factor for the -
chart?
A) 0.37
B) 0.31
C) 0.27
D) 0.22
E) 0.18
60) If you are going to develop an R-chart based on range statistics and you are using a
sample size of 9 for your charting purposes, which of the following is the lower control limit D3
factor for the chart?
A) 0.08
B) 0.14
C) 0.18
D) 0.22
E) 0.29
61) If you are going to develop an R-chart based on range statistics and you are using a
sample size of 15 for your charting purposes, which of the following is the upper control limit
D4 factor for the chart?
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A) 1.65
B) 1.70
C) 1.76
D) 1.87
E) 1.92
62) Consider a sampling plan with n = 40 and c = 2 and given Acceptable quality level
(AQL), Lot tolerance percent defective (LTPD), producer’s risk (α) and consumer’s risk (β).
Suppose that c is decreased to 1, keeping AQL and LTPD unchanged, producer’s risk (α) will
_____________blank.
A) always increase
B) always decrease
C) sometime decrease
D) stay the same.
E) none of the above.
63) Consider a sampling plan with n = 40 and c = 1 and given Acceptable quality level
(AQL), Lot tolerance percent defective (LTPD), producer’s risk (α) and consumer’s risk (β).
Suppose that c is increased to 2, keeping AQL and LTPD unchanged, consumer’s risk (β) will
_____________blank.
A) always decrease
B) always increase
C) sometime decrease
D) stay the same.
E) none of the above.
64) All of the following are analytical tools for Six Sigma, except _____________blank.
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A) flowcharts
B) pareto charts
C) fishbone diagram
D) DPMO analytics
E) process control charts
65) Other things remaining the same, and assuming that is smaller than USL and larger than
LSL, if the standard deviation (σ) of the process increases, process capability index (Cpk) of the
process _____________blank.
A) stay the same

B) always increase
C) always decrease
D) sometimes increase
66) Total Quality Management (TQM) was defined in the textbook as managing the entire
organization so that it excels on all dimensions of products and services that are important to the
customer.
⊚ true
⊚ false
67) TQM is an acronym meaning "Total Quality Management."

⊚ true
⊚ false
68) An operational goal of total quality management is the careful design of the product or
service.
⊚ true
⊚ false
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69) An operational goal of total quality management is ensuring that the organization's
systems can consistently produce the product or service as it is designed.
⊚ true
⊚ false
70) An operational goal of total quality management is ensuring that the organization's
systems will never produce a defective product or service.
⊚ true
⊚ false
71) In 1997 the Malcolm Baldrige National Quality Improvement Act established the U.S.
annual award for total quality management.
⊚ true
⊚ false
72) Conformance quality is a strategic decision for a firm.

⊚ true
⊚ false
73) The Malcolm Baldrige National Quality Award represents the U.S. government's
endorsement of quality as an essential part of successful business strategy.
⊚ true
⊚ false
74) While business organizations can seek to achieve the Baldrige National Quality Award,
universities cannot.
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⊚ true
⊚ false
75) While small business organizations can seek to achieve the Baldrige National Quality
Award, hospitals cannot.
⊚ true
⊚ false
76) A quality guru named Philip Crosby defined quality as fitness for use.
⊚ true
⊚ false
77) A quality guru named Philip Crosby defined quality as conformance to requirements.
⊚ true
⊚ false
78) A quality guru named Joseph M. Juran defined quality as fitness for use.
⊚ true
⊚ false
79) A quality guru named Philip Crosby suggested that a general approach to quality
management should involve prevention, not inspection.
⊚ true
⊚ false
80) A quality guru named Joseph M. Juran is well known for his program structured around
"14 points" for management.
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⊚ true
⊚ false
81) Design quality refers to the inherent value of the product in the marketplace.
⊚ true
⊚ false
82) Fundamental to any quality program is the determination of quality specifications and the
costs of achieving (or not achieving) those specifications.
⊚ true
⊚ false
83) The term "conformance quality" refers to the relative level of performance of a product as
compared to competing products. For instance, certain luxury sedans are said to be of "higher
quality" than some low-priced subcompact automobiles.
⊚ true
⊚ false
84) "Quality at the source" refers to the degree to which a product or service design
specifications are met.
⊚ true
⊚ false
85) Design quality in products or services refers to the degree to which a product or service
design specifications are met.
⊚ true
⊚ false
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86) One of the definitions for the cost of quality is that it represents the costs attributable to
the production of quality that is not 100 percent perfect.
⊚ true
⊚ false
87) It is generally believed that the correct cost for a well-run quality management program
should be under 2.5 percent of sales.
⊚ true
⊚ false
88) W. Edwards Deming states that the correct cost for a well-run quality management
program should be under 0.5 percent of sales.
⊚ true
⊚ false
89) The International Organization for Standardization (ISO) is a specialized international

agency recognized by affiliates in more than 160 countries.
⊚ true
⊚ false
90) ISO 9000 is primarily concerned with environmental management.

⊚ true
⊚ false
91) ISO 14000 is primarily concerned with environmental management.

⊚ true
⊚ false
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92) ISO standards ask a company first to document and implement its systems for quality
management and then to verify, by means of an internal audit, the compliance of those systems
with the requirements of the standards.
⊚ true
⊚ false
93) Six Sigma refers to the philosophy and methods that some companies use to eliminate
defects in their products and processes.
⊚ true
⊚ false
94) A process that is in Six Sigma control will produce no more than two defects out of every
million units.
⊚ true
⊚ false
95) The term CTQ (critical-to-quality) is used in the "Define (D)" portion of the DMAIC
methodology.
⊚ true
⊚ false
96) The term CTQ stands for "Cost Through Quality", which is another way to express Philip
Crosby's idea that "Quality is Free."
⊚ true
⊚ false
97) One tool used in total quality management is the run chart.
⊚ true
⊚ false
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98) One statistical process control (SPC) tool used in total quality management is the Pareto
chart.
⊚ true
⊚ false
99) One of the tools common to all quality efforts is leadership.

⊚ true
⊚ false
100) An opportunity flow diagram is used to separate the value-added from the non-value-
added steps in a process.
⊚ true
⊚ false
101) An opportunity flow diagram is a time sequenced chart showing plotted values measuring
the flow of end product or components.
⊚ true
⊚ false
102) Design of experiments (DOE) refers to work done before production of early model
prototypes of a new product.
⊚ true
⊚ false
103) Design of experiments (DOE) is sometimes referred to as multivariate testing.

⊚ true
⊚ false
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104) Variation in production systems that is caused by factors that can be clearly identified and
possibly even managed is called assignable variation.
⊚ true
⊚ false
105) An example of assignable variation in a production system may be that workers are not
identically trained.
⊚ true
⊚ false
106) An example of assignable variation in a production system may be that a machine is not
adjusted properly.
⊚ true
⊚ false
107) Variation that is inherent in a production process itself is called assignable variation.
⊚ true
⊚ false
108) Variation that is inherent in a production process itself is called common variation.
⊚ true
⊚ false
109) It is impossible to have zero variability in production processes.

⊚ true
⊚ false
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110) Genichi Taguchi's view of the cost of quality is that variance is a discontinuous function.
⊚ true
⊚ false
111) The capability index is used to gauge economic changes in service systems.
⊚ true
⊚ false
112) The capability index (Cpk) calculates the percentage of items being produced within
specifications.
⊚ true
⊚ false
113) The capability index (Cpk) indicates the position of the mean and tails of a process's
variance relative to design specifications.
⊚ true
⊚ false
114) Process control is concerned with monitoring quality after the product or service has been
produced.
⊚ true
⊚ false
115) Statistical process control (SPC) involves testing random samples of output from a
process to determine whether the process is producing items within a preselected range.
⊚ true
⊚ false
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116) Attributes are quality characteristics that are classified as either conforming or not
conforming to specification.
⊚ true
⊚ false
117) Measurement by attributes means taking a sample, measuring the attribute in question
and determining the level of quality in the population from which the sample was drawn.
⊚ true
⊚ false
118) A p-chart has upper and lower control limits expressed as lines on the chart. As long as
the sample values fall between these two lines there is no need to investigate process behavior.
⊚ true
⊚ false
119) The p-chart is only useful for sampling that deals with continuous variables.
⊚ true
⊚ false
120) The value for Z used in quality control charts is based on the degree of confidence you
want to have in the resulting upper control limit (UCL) and lower control limit (LCL) values.
⊚ true
⊚ false
121) If the fraction defective is 0.12 based on a sample size of 16, the standard deviation used
in the p-chart is about 0.08.
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⊚ true
⊚ false
122) If the fraction defective is 0.4 based on a sample size of 100, the standard deviation used
in the p-chart is about 0.10.
⊚ true
⊚ false
123) To obtain a 99.7 percent confidence level in a p-chart we would use a value of 3 for Z.
⊚ true
⊚ false
124) Standard practice in statistical process control for variables is to set control limits so that
95 percent of the sample means will fall within the upper control limit (UCL) and lower control
limit (LCL.)
⊚ true
⊚ false
125) When it is desired to monitor the number of defects per unit, the p-chart is appropriate.
⊚ true
⊚ false
126) In variables sampling the actual measurements of the variable observed are used
regardless of whether the unit is good or bad.
⊚ true
⊚ false
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127) Acceptance sampling is performed on goods that already exist to determine what
percentage of items conforms to specifications.
⊚ true
⊚ false
128) In acceptance sampling, the number of units in the sample (n) is determined by the
interaction of the acceptable quality level (AQL), the lot tolerance percent defective (LTPD), the
probability of rejecting a high-quality lot (alpha), and the probability of accepting a low-quality
lot (beta).
⊚ true
⊚ false
129) In acceptance sampling, the value for the acceptance number (c) is determined by the
interaction of the acceptable quality level (AQL), the lot tolerance percent defective (LTPD), the
probability of rejecting a high-quality lot (alpha), and the probability of accepting a low-quality
lot (beta).
⊚ true
⊚ false
130) AQL stands for accepting questionable lots in production quality management.
⊚ true
⊚ false
131) LTPD in acceptance sampling stands for "lot tolerance for parts defective."
⊚ true
⊚ false
132) The Greek letter alpha (α) is associated with consumer's risk.
⊚ true
⊚ false
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133) The probability associated with rejecting a high-quality lot is denoted in acceptance
sampling with the Greek letter alpha (α).
⊚ true
⊚ false
134) The probability associated with accepting a low-quality lot is denoted in acceptance
sampling with the Greek letter alpha (α).
⊚ true
⊚ false
135) The producer's risk associated with rejecting a high-quality lot is denoted in acceptance
sampling with the Greek letter beta (β).
⊚ true
⊚ false
136) Total (100 percent) inspection can never be cost justified.

⊚ true
⊚ false
137) 100 percent inspection is justified when the cost of inspection is low.
⊚ true
⊚ false
138) Sampling plans are generally displayed graphically through the use of operating
characteristic (OC) curves.
⊚ true
⊚ false
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Answer Key
1) [B, D]
2) [B, C]
3) A
4) C
5) D
6) A
7) D
8) C
9) B
10) C
11) B
12) E
13) C
14) A
15) B
16) A
17) A
18) B
19) D
20) A
21) C
22) C
23) C
24) D
25) E
26) B
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27) A
28) C
29) D
30) B
31) B
32) E
33) C
34) B
35) B
36) D
37) C
38) B
39) D
40) A
41) D
42) C
43) B
44) C
45) C
46) D
47) C
48) A
49) D
50) C
51) B
52) B
53) C
54) E
55) A
56) C
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57) B
58) E
59) C
60) C
61) A
62) A
63) B
64) D
65) C
66) TRUE
67) TRUE
68) TRUE
69) TRUE
70) FALSE
71) FALSE
72) FALSE
73) TRUE
74) FALSE
75) FALSE
76) FALSE
77) TRUE
78) TRUE
79) TRUE
80) FALSE
81) TRUE
82) TRUE
83) FALSE
84) FALSE
85) FALSE
86) TRUE
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87) TRUE
88) FALSE
89) TRUE
90) FALSE
91) TRUE
92) FALSE
93) TRUE
94) FALSE
95) TRUE
96) FALSE
97) TRUE
98) TRUE
99) FALSE
100) TRUE
101) FALSE
102) FALSE
103) TRUE
104) TRUE
105) TRUE
106) TRUE
107) FALSE
108) TRUE
109) TRUE
110) FALSE
111) FALSE
112) FALSE
113) TRUE
114) FALSE
115) TRUE
116) TRUE
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117) FALSE
118) FALSE
119) FALSE
120) TRUE
121) TRUE
122) FALSE
123) TRUE
124) FALSE
125) FALSE
126) TRUE
127) TRUE
128) TRUE
129) TRUE
130) FALSE
131) FALSE
132) FALSE
133) TRUE
134) FALSE
135) FALSE
136) FALSE
137) FALSE
138) TRUE
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CHAPTER 11
1) Which of the following is not one of the categories of manufacturing inventory?
A) Raw materials.
B) Finished products.
C) Component parts.
D) Just-in-time.
E) Supplies.
2) Which of the following is one of the categories of manufacturing inventory?
A) Economic order inventory.

B) Work-in-process.
C) Quality units.
D) JIT inventory.
E) Re-order point.
3) What is the basic purpose of inventory analysis?
A) To provide precise inventory valuations when generating accounting records for the
firm's annual report.
B) Because there are costs for making each new production setup, inventory allows
management to reduce the number of setups.
C) To provide a safeguard for variation in raw material delivery time.
D) To take advantage of economic purchase order size.
E) To specify when items should be ordered and how large the order should be.
4) Firms keep supplies of inventory _____.
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A) to maintain dependence of operations
B) to provide a feeling of security for the workforce
C) to meet variation in product demand
D) to hedge against wage increases
E) in case the supplier changes the design
5) Which of the following is not a reason to carry inventory?
A) To provide a safeguard for variation in raw material delivery time.

B) To take advantage of economic purchase-order size.
C) To maintain independence of operations.
D) To meet variation in product demand.
E) To keep the stock out of the hands of competitors.
6) When developing inventory cost models, which of the following is (are) not included as
costs to place an order?
A) Phone calls.
B) Taxes.
C) Clerical.
D) Calculating quantity to order.
E) Postage.
7) When material is ordered from a vendor, which of the following is not a reason for delays
in the order arriving on time?
A) Normal variation in shipping time.

B) A shortage of material at the vendor's plant causing backlogs.
C) An unexpected strike at the vendor's plant.
D) A lost order.
E) Redundant ordering systems.
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8) Which of the following is not included as an inventory holding cost?
A) Annualized cost of materials.

B) Handling.
C) Insurance.
D) Pilferage.
E) Storage facilities.
9) Which of the following is usually included as an inventory holding cost?
A) Order placing.
B) Breakage.
C) Typing up an order.
D) Quantity discounts.
E) Annualized cost of materials.
10) In making any decision that affects inventory size, which of the following costs do not
need to be considered?
A) Holding costs.
B) Setup costs.
C) Ordering costs.
D) Fixed costs.
E) Shortage costs.
11) If a vendor has correctly used marginal analysis to select their stock levels for the day (as
in the newsperson problem), and the profit resulting from the last unit being sold (Cu) is $0.90
and the loss resulting from that unit if it is not sold (Co) is $0.50, which of the following is the
probability of the last unit being sold?
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A) Greater than 0.357.
B) Greater than 0.400.
C) Greater than 0.556.
D) Greater than 0.678.
E) None of these.
12) If a vendor has correctly used marginal analysis to select their stock levels for the day (as
in the newsperson problem), and the profit resulting from the last unit being sold (Cu) is $120
and the loss resulting from that unit if it is not sold (Co) is $360, which of the following is the
probability of the last unit being sold?
A) Greater than 0.90.

B) Greater than 0.85.
C) Greater than 0.75.
D) Greater than 0.25.
E) None of these.
13) Demand for organic super fresh lettuce in a local super market is 5 with probability 0.2; 6
with probability 0.3; 7 with probability 0.4 or 8 with probability 0.1. Unsold lettuce are given to
a food bank with a salvage value of $1.00 unit of the lettuce. Cost of the lettuce is $3.00 per unit.
Selling price is $6.00 per unit. Using single period model, what is the optimal order quantity in
number of units of lettuce the super market should use?
A) 7
B) 6
C) 5
D) 8
E) None of these
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14) Daily demand for fresh cauliflower in the ZZ-Warehouse store follows normal
distribution with mean 100 cartons and s.d. 20 cartons. The ZZ-Warehouse buys at a cost of
$50.00 per carton, sells it for $70.00 per carton. Unsold cartons are sold for $20.00 per carton.
What is the optimal order quantity, using the single period model?
A) 100
B) 80
C) 95
D) 110
E) 105
15) Which of the following is fixed-order quantity inventory model?
A) Economic order quantity model.

B) The ABC model.
C) Periodic replenishment model.
D) Cycle counting model.
E) P model.
16) Which of the following is fixed-time period inventory model?
A) The EOQ model.

B) The least cost method.
C) The Q model.
D) Periodic system model.
E) Just-in-time model.
17) Which of the following is a perpetual system for inventory management?
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A) Fixed-time period.
B) Fixed-order quantity.
C) P model.
D) First-in-first-out.
E) The wheel of inventory.
18) Which of the following is an assumption of the basic fixed-order quantity inventory
model?
A) Lead times are averaged.

B) Ordering costs are variable.
C) Price per unit of product is constant.
D) Back orders are allowed.
E) Stock-out costs are high.
19) Which of the following is not an assumption of the basic fixed-order quantity inventory
model?
A) Ordering or setup costs are constant.

B) Inventory holding cost is based on average inventory.
C) Diminishing returns to scale of holding inventory.
D) Lead time is constant.
E) Demand for the product is uniform throughout the period.
20) Which of the following is the symbol used in the textbook for the cost of placing an order
in the fixed-order quantity inventory model?
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A) C
B) TC
C) H
D) Q
E) S
21) Which of the following is the set of all cost components that make up the fixed-order
quantity total annual cost (TC) function?
A) Annual purchasing cost, annual ordering cost, fixed cost.

B) Annual holding cost, annual ordering cost, unit cost.
C) Annual holding cost, annual ordering cost, annual purchasing cost.
D) Annual lead time cost, annual holding cost, annual purchasing cost.
E) Annual unit cost, annual set up cost, annual purchasing cost.
22) If annual demand is 12,000 units, the ordering cost is $6 per order, and the holding cost is
$2.50 per unit per year, which of the following is the optimal order quantity using the fixed-order
quantity model?
A) 576
B) 240
C) 120.4
D) 60.56
E) 56.03
23) If annual demand is 50,000 units, the ordering cost is $25 per order, and the holding cost
is $5 per unit per year, which of the following is the optimal order quantity using the fixed-order
quantity model?
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A) 909
B) 707
C) 634
D) 500
E) 141
24) If annual demand is 35,000 units, the ordering cost is $50 per order, and the holding cost
is $0.65 per unit per year, which of the following is the optimal order quantity using the fixed-
order quantity model?
A) 5,060
B) 2,320
C) 2,133
D) 2,004
E) 1,866
25) Using the fixed-order quantity model, which of the following is the total ordering cost of
inventory given an annual demand of 36,000 units, a cost per order of $80, and a holding cost per
unit per year of $4?
A) $849
B) $1,200
C) $1,889
D) $2,267
E) $2,400
26) A company is planning for its financing needs and uses the basic fixed-order quantity
inventory model. Which of the following is the total cost (TC) of the inventory given an annual
demand of 10,000, setup cost of $32, a holding cost per unit per year of $4, an EOQ of 400 units,
and a cost per unit of inventory of $150?
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A) $1,501,600
B) $1,498,200
C) $500,687
D) $499,313
E) None of these
27) A company has recorded the last five days of daily demand on their only product. Those
values are 120, 125, 124, 128, and 133. The time from when an order is placed to when it arrives
at the company from its vendor is 5 days. Assuming the basic fixed-order quantity inventory
model fits this situation and no safety stock is needed, which of the following is the reorder point
(R)?
A) 120
B) 126
C) 630
D) 950
E) 1,200
28) A company has recorded the last six days of daily demand on a single product they sell.
Those values are 37, 115, 93, 112, 73, and 110. The time from when an order is placed to when it
arrives at the company from its vendor is 3 days. Assuming the basic fixed-order quantity
inventory model fits this situation and no safety stock is needed, which of the following is the
reorder point (R)?
A) 540
B) 270
C) 115
D) 90
E) 60
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29) Using the simple order quantity model in an inventory control problem, Kathy calculated
the order quantity to be 1000 units. In a review, she found out that the demand is actually double
that of the quantity she had used and the holding cost is only half that of the value she used, The
new economic order quantity using the correct data will be _____.
A) 1000
B) 2000
C) 1414
D) 707.1
E) Cannot be found without other cost information.
30) In ABC Printing, Queen’s black is a popular input with an annual demand of 50,000
gallons. Ordering cost of $50 per order, and the holding cost is $5 per unit per year; the
economic order quantity is 1000. Hence during the year, they used 1000 as the order quantity.
An audit of the costs revealed that the true ordering cost was only $25 and the true holding cost
was $10 per gallon per year. The correct order quantity would have been 500. How much did
ABC lose due to incorrect cost information during the year?
A) $0
B) $1250
C) −$1250
D) $500
E) Cannot be found without additional information.
31) Using the probability approach to determine an inventory safety stock and wanting to be
95 percent sure of covering inventory demand, which of the following is the number of standard
deviations necessary to have the 95 percent service probability assured?
A) 1.28
B) 1.64
C) 1.96
D) 2.00
E) 2.18
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32) Assuming no safety stock, what is the reorder point (R) given an average daily demand of
50 units, a lead time of 10 days?
A) 550
B) 500
C) 715
D) 450
E) 475
33) Assuming no safety stock, what is the reorder point (R) given an average daily demand of
78 units and a lead time of 3 days?
A) 421
B) 234
C) 78
D) 26
E) 312
34) To take into consideration demand uncertainty in reorder point (R) calculations, what do
we add to the product of the average daily demand and lead time in days when calculating the
value of R?
A) The product of average daily demand times a standard deviation of lead time.
B) A z value times the lead time in days.
C) The standard deviation of vendor lead time times the standard deviation of demand.
D) The product of lead time in days times the standard deviation of lead time.
E) The product of the standard deviation of demand variability and a z-score relating to a
specific service probability.
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35) In order to determine the standard deviation of usage during lead time in the reorder point
formula for a fixed-order quantity inventory model, which of the following must be computed
first?
A) Standard deviation of daily demand.

B) Number of standard deviations for a specific service probability.
C) Stockout cost.
D) Economic order quantity.
E) Safety stock level.
36) If it takes a supplier four days to deliver an order once it has been placed and the standard
deviation of daily demand is 10, which of the following is the standard deviation of usage during
lead time?
A) 10
B) 20
C) 40
D) 100
E) 400
37) If it takes a supplier 25 days to deliver an order once it has been placed and the standard
deviation of daily demand is 20, which of the following is the standard deviation of usage during
lead time?
A) 50
B) 100
C) 400
D) 1,000
E) 1,600
38) If it takes a supplier two days to deliver an order once it has been placed and the daily
demand for three days has been 120, 124, and 125, which of the following is the standard
deviation of usage during lead time?
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A) 2.16
B) 3.06
C) 4.66
D) 5.34
E) 9.30
39) A company wants to determine its reorder point (R). Demand is variable and they want to
build a safety stock into R. If the average daily demand is 12, the lead time is 5 days, the desired
z value is 1.96, and the standard deviation of usage during lead time is 3, which of the following
is the desired value of R?
A) 6
B) 16
C) 61
D) 66
E) 79
40) A company wants to determine its reorder point (R). Demand is variable and they want to
build a safety stock into R. The company wants to have a service probability coverage of 95
percent. If average daily demand is 8, lead time is 3 days, and the standard deviation of usage
during lead time is 2, which of the following is the desired value of R?
A) 17.9
B) 19.7
C) 24.0
D) 27.3
E) 31.2
41) Which of the following is not necessary to compute the order quantity using the fixed-
time period model with safety stock?
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A) Forecast average daily demand.
B) Safety stock.
C) Inventory currently on hand.
D) Ordering cost.
E) Lead time in days.
42) Using the fixed-time period inventory model, and given an average daily demand of 200
units, 4 days between inventory reviews, 5 days for lead time, 120 units of inventory on hand, a z
of 1.96, and a standard deviation of demand over the review and lead time of 3 units, which of
the following is the order quantity?
A) 1,086
B) 1,686
C) 1,806
D) 2,206
E) 2,686
units, 10 days between inventory reviews, 2 days for lead time, 50 units of inventory on hand, a
service probability of 95 percent, and a standard deviation of demand over the review and lead
time of 8 units, which of the following is the order quantity?
A) 863
B) 948
C) 1,044
D) 1,178
E) 4,510
units, 3 days between inventory reviews, 1 day for lead time, 30 units of inventory on hand, a
service probability of 98 percent, and a standard deviation of daily demand is 3 units, which of
the following is the order quantity?
Version 1 14
A) 30.4
B) 36.3
C) 42.3
D) 56.8
E) 59.8
45) You would like to use the fixed-time period inventory model to compute the desired
order quantity for a company. You know that vendor lead time is 5 days and the number of days
between reviews is 7. Which of the following is the standard deviation of demand over the
review and lead time if the standard deviation of daily demand is 8?
A) 27.7
B) 32.8
C) 35.8
D) 39.9
E) 45.0
46) You would like to use the fixed-time period inventory model to compute the desired
order quantity for a company. You know that vendor lead time is 10 days and the number of days
between reviews is 15. Which of the following is the standard deviation of demand over the
review and lead time period if the standard deviation of daily demand is 10?
A) 25
B) 40
C) 50
D) 73
E) 100
47) Which of the following values for z should we use in as safety stock calculation if we
want a service probability of 98%?
Version 1 15
A) 1.64
B) 1.96
C) 2.05
D) 2.30
E) None of these
48) The Pareto principle is best applied to which of the following inventory systems?
A) EOQ.
B) Fixed-time period.
C) ABC classification.
D) Fixed-order quantity.
E) Single-period ordering system.
49) The 80-20 rule, that is the logic of the few having the greatest importance and the many
having little importance has been broadened to include inventory situations. The term often used
to refer to this logic is called _____.
A) The Peter Principle

B) The Pareto Principle
C) Little's Law
D) The Parkinson Rule
E) The Elitist Conspiracy
50) Which of the following are the recommended percentage groupings of the ABC
classifications of the dollar volume of products?
Version 1 16
A) A items get 15%, B items get 35%, and C items get 50%.
B) A items get 15%, B items get 45%, and C items get 40%.
C) A items get 25%, B items get 35%, and C items get 40%.
D) A items get 25%, B items get 15%, and C items get 60%.
E) A items get 20%, B items get 30%, and C items get 50%.
51) Using the ABC classification system for inventory, which of the following is a true
statement?
A) The "C" items are of moderate dollar volume.

B) You should allocate about 50% of the dollar volume to "B" items.
C) The "A" items are of low dollar volume.
D) The "A" items are of high dollar volume.
E) Inexpensive and low usage items are classified as "C" no matter how critical.
52) ABC inventory classification schemes divide inventory items into three groupings. What
are these groupings usually based upon?
A) Unit cost.
B) Lead time.
C) Criticality.
D) Weight.
E) Dollar volume.
53) Computer inventory systems are often programmed to produce a cycle count notice in
which of the following cases?
Version 1 17
A) When the record shows a near maximum balance on hand.
B) When the record shows positive balance but a backorder was written.
C) When quality problems have been discovered with the item.
D) When the item has become obsolete.
E) When the item has been misplaced in the stockroom.
54) You should visualize inventory as stacks of money sitting on forklifts, on shelves, and in
trucks and planes while in transit.
⊚ true
⊚ false
55) The average cost of inventory in the United States is 20 to 25 percent of its value.
⊚ true
⊚ false
56) Savings from reduced inventory result in increased profit.

⊚ true
⊚ false
57) The costs associated with reduced inventory result in lower profits.
⊚ true
⊚ false
58) Inventory is defined as the stock of any item or resource used in an organization.
⊚ true
⊚ false
Version 1 18
59) An inventory system is a set of policies and controls that monitors levels of inventory and
determines what levels should be maintained, when stock should be replenished, and how large
orders should be.
⊚ true
⊚ false
60) One of the basic purposes of inventory analysis in manufacturing and stockkeeping
services is to specify when items should be ordered.
⊚ true
⊚ false
services is to determine the level of quality to specify.
⊚ true
⊚ false
services is to determine how large the orders to vendors should be.
⊚ true
⊚ false
63) In inventory models, high holding costs tend to favor high inventory levels.
⊚ true
⊚ false
64) In inventory models, high holding costs tend to favor low inventory levels and frequent
replenishment.
⊚ true
⊚ false
Version 1 19
65) If the cost to change from producing one product to producing another were zero the lot
size would be very small.
⊚ true
⊚ false
66) Shortage costs are precise and easy to measure.

⊚ true
⊚ false
67) Inventory levels of dependent demand items are usually managed by calculations using
calculus-driven, cost-minimizing models.
⊚ true
⊚ false
68) When demands for various items are unrelated to each other it is referred to as
independent demand,
⊚ true
⊚ false
69) Some inventory situations involve placing orders to cover only one demand period or to
cover short-lived items at frequent intervals.
⊚ true
⊚ false
70) The optimal stocking decision in inventory management, when using marginal analysis,
occurs at the point where the benefits derived from carrying the next unit are more than the costs
for that unit.
Version 1 20
⊚ true
⊚ false
71) When stocked items are sold, the optimal inventory decision using marginal analysis is to
stock that quantity where the probable profit from the sale or use of the last unit is equal to or
greater than the probable losses if the last unit remains unsold.
⊚ true
⊚ false
72) The fixed-time period inventory system has a smaller average inventory than the fixed-
order quantity system because it must also protect against stockouts during the review period
when inventory is checked.
⊚ true
⊚ false
73) The fixed-order quantity inventory model favors less expensive items because average
inventory is lower.
⊚ true
⊚ false
74) The fixed-order quantity inventory model is more appropriate for important items such as
critical repair parts because there is closer monitoring and therefore quicker response to a
potential stockout.
⊚ true
⊚ false
75) The fixed-order quantity inventory model requires more time to maintain because every
addition or withdrawal is logged.
⊚ true
⊚ false
Version 1 21
76) Fixed-order quantity inventory models are "event triggered".
⊚ true
⊚ false
77) Fixed-order quantity inventory models are "time triggered".

⊚ true
⊚ false
78) Fixed-time period inventory models are "event triggered".

⊚ true
⊚ false
79) Fixed-time period inventory models are "time triggered".

⊚ true
⊚ false
80) Fixed-order quantity inventory systems determine the reorder point(R) and the order
quantity(Q) values.
⊚ true
⊚ false
81) Fixed-order quantity systems assume a random depletion of inventory, with less than an
immediate order when a reorder point is reached.
⊚ true
⊚ false
Version 1 22
82) The computation of a firm's inventory position is found by taking the inventory on hand
and adding it to the on-order inventory, and then subtracting back-ordered inventory.
⊚ true
⊚ false
83) The "sawtooth effect", named after turn-around artist Al "Chainsaw" Dunlap, is the
severe reduction of inventory and service levels that occurs when a firm has gone through a
hostile takeover.
⊚ true
⊚ false
84) The "sawtooth effect", is named after the jagged shape of the graph of inventory levels
over time.
⊚ true
⊚ false
85) Using the probability approach, we assume that the demand over a period of time is
normally distributed.
⊚ true
⊚ false
86) Safety stock can be defined as the amount of inventory carried in addition to the expected
demand.
⊚ true
⊚ false
Version 1 23
87) If demand for an item is normally distributed, we plan for demand to be twice the average
demand and carry two standard deviations worth of safety stock inventory.
⊚ true
⊚ false
88) Safety stock can be computed when using the fixed-order quantity inventory model by
multiplying a z value representing the number of standard deviations to achieve a service level or
probability by the standard deviation of periodic demand.
⊚ true
⊚ false
89) The key difference between a fixed-order quantity inventory model where demand is
known and one where demand is uncertain is in computing the reorder point.
⊚ true
⊚ false
90) Fixed-time period inventory models generate order quantities that vary from time period
to time period, depending on the usage rate.
⊚ true
⊚ false
91) The standard fixed-time period model assumes that inventory is never counted but
determined by EOQ measures.
⊚ true
⊚ false
92) Safety stock is not necessary in any fixed-time period system.

⊚ true
⊚ false
Version 1 24
93) In the fixed-time period model it is necessary to determine the inventory currently on
hand to calculate the size of the order to place with a vendor.
⊚ true
⊚ false
94) Price-break models deal with the fact that the selling price of an item varies with the
order size.
⊚ true
⊚ false
95) Price-break models deal with the fact that the selling price of an item generally increases
as the order size increases.
⊚ true
⊚ false
96) Price-break models deal with discrete or step changes in price as order size changes
rather than a per-unit change.
⊚ true
⊚ false
97) In a price-break model of lot sizing, to find the lowest-cost order quantity, it is sometimes
necessary to calculate the economic order quantity for each possible price.
⊚ true
⊚ false
Version 1 25
98) In a price-break model of lot sizing, to find the lowest-cost order quantity, it is sometimes
necessary to calculate the economic order quantity for each possible price and to check to see
whether the lowest cost quantity is feasible.
⊚ true
⊚ false
99) In a price-break model of lot sizing the lowest cost quantity is always feasible.
⊚ true
⊚ false
100) Cycle counting is a physical inventory-taking technique in which inventory is counted on

a frequent basis rather than once or twice a year.
⊚ true
⊚ false
Version 1 26
Answer Key
1) D
2) B
3) E
4) C
5) E
6) B
7) E
8) A
9) B
10) D
11) A
12) C
13) A
14) C
15) A
16) D
17) B
18) C
19) C
20) E
21) C
22) B
23) B
24) B
25) E
26) A
Version 1 27
27) C
28) B
29) B
30) B
31) B
32) B
33) B
34) E
35) A
36) B
37) B
38) B
39) D
40) D
41) D
42) B
43) A
44) C
45) A
46) C
47) C
48) C
49) B
50) A
51) D
52) E
53) B
54) TRUE
55) FALSE
56) TRUE
Version 1 28
57) FALSE
58) TRUE
59) TRUE
60) TRUE
61) FALSE
62) TRUE
63) FALSE
64) TRUE
65) TRUE
66) FALSE
67) FALSE
68) TRUE
69) TRUE
70) FALSE
71) TRUE
72) FALSE
73) FALSE
74) TRUE
75) TRUE
76) TRUE
77) FALSE
78) FALSE
79) TRUE
80) TRUE
81) FALSE
82) TRUE
83) FALSE
84) TRUE
85) TRUE
86) TRUE
Version 1 29
87) FALSE
88) TRUE
89) TRUE
90) TRUE
91) FALSE
92) FALSE
93) TRUE
94) TRUE
95) FALSE
96) TRUE
97) TRUE
98) TRUE
99) FALSE
100) TRUE
Version 1 30
CHAPTER 12
1) Which of the following is related to lean production?
A) A philosophy of waste elimination.

B) Lean consumption.
C) Never running out of inventory.
D) The Wahei-Subaru method.
E) Full use of capacity.
2) To develop a lean manufacturing system a firm might _____________blank.
A) Eliminate anything that does not add value for the customer
B) Standardize product configurations
C) Process design with product design
D) Adopt a kaizen philosophy
E) Implement top-down management controls
3) The Toyota Production System identified which of the following types of waste to be
eliminated?
A) Excess quality.
B) Overproduction.
C) Underproduction.
D) Environmental.
E) Over-thinking.
eliminated?
Version 1 1
A) Underproduction.
B) Excess quality.
C) Preventive maintenance.
D) Product defects.
E) Kaizen.
eliminated?
A) Excess quality.
B) Motion.
C) Excess capacity.
D) Underproduction.
E) Excess demand.
6) Lean _____________blank is not listed in the textbook as a component of a lean supply

chain?
A) customers
B) management
C) logistics
D) warehousing
E) procurement
7) In the context of a production process such as a manufacturing plant, what is the

technique used to identify all of the value-adding as well as non-value-adding processes that
materials are subjected to within a plant, from raw material coming into the plant through
delivery to the customer?
Version 1 2
A) Learn manufacturing.
B) Learn supply chain.
C) Kaizen.
D) Value stream mapping.
E) Learn production schedules.
8) Which of the following adresses elimination of waste under lean production?
A) Info-matic warehouse networks.

B) Outsourced housekeeping.
C) Quality at the source.
D) Backflush.
E) Bottom-round management.
9) In designing a lean production facility layout, a designer should _____________blank.
A) locate flexible workstations off line

B) link operations through a push system
C) design for work flow balance
D) balance capacity using job shop analysis
E) always keep operations on a single floor of the factory
10) In a lean production system, we expect to see _____________blank.
A) no extra inventory
B) extra inventory of critical parts held "just-in-case"
C) more parts and fewer standardized product configurations
D) managers being held responsible for quality of the work turned out
E) closer management-labor relationships
Version 1 3
11) Lean concepts discussed in the text do not include _____________blank.
A) group technology
B) quality at the source
C) just-in-time production
D) preventive maintenance
E) kaizen burst
12) Which of the following problems is not among those hidden when inventory levels are
excessively high?
A) Inadequate worker motivation.

B) Engineering design redundancies.
C) Paperwork backlogs.
D) Scrap.
E) Productive equipment downtime.
13) Which of the following is an element that addresses elimination of waste under lean
production?
A) Production ahead of demand.

B) Group plant loading technology.
C) Kanban production control system.
D) Minimized run times.
E) Full capacity utilization.
14) Group technology (GT) is credited with _____________blank.
Version 1 4
A) reducing waiting time between process operations
B) improving inventory discipline
C) reducing required workforce skills
D) improved labor relations
E) improved small group functioning
15) Which of the following statements holds true for kanban production control systems?
A) The authority to produce or supply additional parts comes from upstream operations.
B) In a paperless control system, containers can be used instead of cards.
C) The cards or containers make up the kanban push system.
D) They require substantial quantitative analysis prior to implementation.
E) They have not been successful outside of Japan and the United States.
16) In setting up a kanban control system you need to determine the number of kanban card
sets needed. If the expected demand during lead time is 25 per hour, the safety stock is 20% of
the demand during lead time, the container size is 5, and the lead time to replenish an order is 5
hours, what is the number of kanban card sets needed?
A) 5
B) 20
C) 27
D) 30
E) 34
17) In setting up a kanban control system you need to determine the number of kanban card
sets needed. If the expected demand during lead time is 50 per hour, the safety stock is 20% of
the demand during lead time, the container size is 4. If the lead time to replenish an order is 8
hours, what number of kanban card sets is needed?
Version 1 5
A) 60
B) 80
C) 90
D) 120
E) 150
18) You have been called in as a consultant to set up a kanban control system. The first thing
to do is to determine the number of kanban card sets needed. Your research shows that the
expected demand during lead time for a particular component is 150 per hour. You estimate the
safety stock should be set at 25% of the demand during lead time. The tote trays used as
containers can hold 8 units of stock and the lead time it takes to replenish an order is 2 hours.
Which of the following is the number of kanban card sets necessary to support this situation?
A) 42
B) 47
C) 68
D) 89
E) 94
you do is to determine the number of kanban card sets needed. Your research shows that the
expected demand during lead time for a particular component is 1,200 per hour. You estimate the
safety stock should be set at 5% of the demand during lead time. The tote trays used as
containers can hold 2 units of stock and the lead time to replenish an order is 10 hours. Which of
the following is the number of kanban card sets necessary to support this situation?
A) 5,000
B) 5,500
C) 6,300
D) 6,500
E) 7,000
Version 1 6
20) When implementing a lean production system, a stabilized schedule is achieved using
_____________blank.
A) level scheduling
B) demand pull
C) demand push
D) reduced lot sizes
E) bottom-round management
21) To implement lean production schedules a firm would _____________blank.
A) have excess capacity

B) force demand
C) hire a consultant
D) bottom-up management
E) implement kanban groups
22) In implementing a lean production system you should work with suppliers to
_____________blank.
A) open facilities near your factory

B) focus workstation capacities
C) backflush
D) provide quality at the source
E) reduce lead times
23) In implementing a lean production system you should work with suppliers to
_____________blank.
Version 1 7
A) calculate lead times
B) do quality circles
C) freeze windows
D) make frequent deliveries
E) achieve bottom-round management
24) To implement a flow process in developing a lean system a firm might

_____________blank.
A) improve capacity utilization

B) build product in anticipation of demand
C) reduce setup/changeover time
D) eliminate some fixed costs
E) implement groupware
25) Imagine comparing a manufacturing operation using regular lot-sizing and the same
operation with a kanban/lean production approach. What would be your expectations of the
difference between the total cost (i.e., inventory holding costs + setup/ordering costs) of each?
A) Inventory holding cost will increase nonlinearly with inventory.

B) Total costs will be lower for the regular lot-size operation.
C) Total costs will be lower for the kanban/lean production operation.
D) The order quantity will be larger for the kanban/lean production approach.
E) As long as the total quantity is the same, total costs will be the same.
26) An activity where the parts that go into each unit of a product are periodically removed
from inventory and accounted for based on the number of units produced. is called
_____________blank.
Version 1 8
A) frozen window
B) backflush
C) level schedule
D) group Technology
E) kanban
to do is to determine the number of kanban card sets needed. Your research shows that the
expected demand during lead time for a particular component is 150 per hour. You estimate the
safety stock should be set at 25 percent of the demand during lead time. The tote trays used as
containers can hold 8 units of stock, and the lead time it takes to replenish an order is 2 hours.
You found that the number of kanban cards needed is 47. Your client now tells you that they
miscalculated the demand and the true demand is 300 per hour. All other things remain the same.
What is the most appropriate answer from the choices below?
A) Number of kanban cardsets will stay the same

B) Number of kanban cardsets will decrease.
C) Number of kanban cardsets will be 94
D) Number of kanban cardsets will be 47
E) Number of kanban cardsets will be 23.5 (rounded to 24).
28) In a kanban card calculation problem, other things remaining the same (that is changing
only one variable at a time). Select the most appropriate answer.
A) Number of kanban cards required will increase linearly as demand increases.

B) Number of kanban cards required will decrease linearly as demand increases.
C) Number of kanban cards required will decrease nonlinearly as the container size
increases.
D) Number of kanban cards required will decrease linearly as the container size
increases.
E) Number of kanban cards required will increase linearly as demand increases and
number of kanban cards required will decrease nonlinearly as the container size increases.
Version 1 9
29) Consider the relationship between the number of kanban cars sets needed with safety
stock and the container size. Choose the most appropriate answer.
A) As safety stock increases, the number of kanban card sets needed will decrease.
B) As safety stock decreases, the number of kanban card sets needed will increase.
C) As container size increases, the number of kanban card sets needed will increase.
D) As container size increases, the number of kanban card sets needed will decrease.
E) As container size decreases, the number of kanban card sets needed will decrease.
30) Which of the following is a lean production technique that is not reported in the textbook
to have been successfully applied in service firms?
A) Organize problem-solving groups.

B) Upgrade housekeeping.
C) Upgrade quality.
D) Freeze windows.
E) Eliminate unnecessary activities.
31) Which of the following is a lean production technique that has been successfully applied
in service firms?
A) Decision trees.
B) Leveling the facility load.
C) kanban Card Systems.
D) Fully utilizing capacity.
E) Backflushing.
32) Lean production is an integrated set of activities designed to achieve high-volume

production using minimal inventories of raw materials, work-in-process, and finished goods.
Version 1 10
⊚ true
⊚ false
33) Henry Ford used JIT concepts as he streamlined his moving assembly lines to make
automobiles in the early 1900s.
⊚ true
⊚ false
34) Lean production replaced JIT in the 1990s because JIT did not address the problem of
reducing waste.
⊚ true
⊚ false
35) Lean production makes implementing green strategies in manufacturing processes more
difficult.
⊚ true
⊚ false
36) Respect for people is a key to Toyota's improvement ideas in manufacturing.

⊚ true
⊚ false
37) In Japanese manufacturing, automation and robotics are used extensively to perform dull
or routine jobs so employees are free to focus on important improvement tasks.
⊚ true
⊚ false
38) Subcontractor networks are not very important in Japanese manufacturing.
Version 1 11
⊚ true
⊚ false
39) Company unions in Japan exist to foster a cooperative relationship with management.
⊚ true
⊚ false
40) Firms in Japan tend to have short-term relationships with their suppliers and customers.
⊚ true
⊚ false
41) Automation is a key to lean procurement.

⊚ true
⊚ false
42) Applying lean concepts in manufacturing balances increases in cost with quality
improvement.
⊚ true
⊚ false
43) Applying lean concepts to logistics is difficult unless either the manufacturer or the
customer owns the logistics activities.
⊚ true
⊚ false
44) Lean production requires a "push & pull" system of inventory replenishment.
⊚ true
⊚ false
Version 1 12
45) A principle of value stream mapping is to concentrate on speeding up value-added
operations.
⊚ true
⊚ false
46) One of the aims of value stream mapping is to eliminate waste in a process.
⊚ true
⊚ false
47) Value stream mapping is used to visualize product flows through various processing
steps.
⊚ true
⊚ false
48) Value stream mapping is used to identify all of the value-adding as well as non-value-
adding processes that materials are subjected to within a plant.
⊚ true
⊚ false
49) Value stream mapping involves materials, not information.

⊚ true
⊚ false
50) A kaizen burst is a symbol on a value stream map.

⊚ true
⊚ false
Version 1 13
51) A kaizen burst is an overfilled kanban container.
⊚ true
⊚ false
52) Lean production is a management philosophy and a pull system throughout the plant.
⊚ true
⊚ false
53) Group technology is a philosophy wherein similar parts are grouped together and the
processes required to make the parts are arranged as a work cells.
⊚ true
⊚ false
54) Group technology cells help to eliminate movement and queue (wait) time between
operations.
⊚ true
⊚ false
55) Group technology includes the set of psychological tests and training exercises given to
group workers to ensure a high level of teamwork.
⊚ true
⊚ false
56) In the textbook, the expression "quality at the source" means that we need to purchase the
best quality a supplier or vendor can provide.
⊚ true
⊚ false
Version 1 14
57) "Quality at the source" requires factory workers to become their own inspectors.
⊚ true
⊚ false
58) JIT production means that we produce the product before it is required so the customer
does not wait for the product.
⊚ true
⊚ false
59) The goal of JIT production is to drive all inventory queues lower.
⊚ true
⊚ false
60) JIT is typically applied to nonrepetitive manufacturing.

⊚ true
⊚ false
61) JIT manufacturing forces a firm to work in a lower "water level" despite safety hazards.
⊚ true
⊚ false
62) Preventive maintenance is emphasized in lean production to ensure that flows are not
interrupted by downtime or malfunctioning equipment.
⊚ true
⊚ false
Version 1 15
63) Uniform plant loading is where you schedule production with different amounts of the
same product each day of the week to permit variations to meet changing demand requirements.
⊚ true
⊚ false
64) Uniform plant loading is a process of smoothing the production activity flow to dampen
the reaction waves that normally occur in response to schedule variations.
⊚ true
⊚ false
65) A kanban control system uses a signaling device to regulate JIT flows.
⊚ true
⊚ false
66) Kanban means "symbol" or "box" in Japanese.

⊚ true
⊚ false
67) Using the formula in the textbook the only parameters we need to determine the number
of kanban car sets is the average number of units demanded over some time period, the container
size, and the safety stock.
⊚ true
⊚ false
68) "Kanban Squares" is an educational game played in kanban training sessions.

⊚ true
⊚ false
Version 1 16
69) The term "freeze window" refers to the practice of building quality into the process and
not identifying quality by inspection.
⊚ true
⊚ false
70) One of the many lean techniques that have been successfully applied in service firms is
the upgrading of quality.
⊚ true
⊚ false
the upgrading of housekeeping.
⊚ true
⊚ false
leveling facility load.
⊚ true
⊚ false
the eliminating of unnecessary activities.
⊚ true
⊚ false
74) One of the few lean techniques that does not work well in service firms is demand-pull
scheduling.
Version 1 17
⊚ true
⊚ false
Version 1 18
Answer Key
1) A
2) A
3) B
4) D
5) B
6) B
7) D
8) C
9) C
10) A
11) E
12) A
13) C
14) A
15) B
16) D
17) D
18) B
19) C
20) A
21) A
22) E
23) D
24) C
25) C
26) B
Version 1 19
27) C
28) E
29) D
30) D
31) B
32) TRUE
33) TRUE
34) FALSE
35) FALSE
36) TRUE
37) TRUE
38) FALSE
39) TRUE
40) FALSE
41) TRUE
42) FALSE
43) FALSE
44) FALSE
45) FALSE
46) TRUE
47) TRUE
48) TRUE
49) FALSE
50) TRUE
51) FALSE
52) TRUE
53) TRUE
54) TRUE
55) FALSE
56) FALSE
Version 1 20
57) TRUE
58) FALSE
59) FALSE
60) FALSE
61) FALSE
62) TRUE
63) FALSE
64) TRUE
65) TRUE
66) FALSE
67) FALSE
68) FALSE
69) FALSE
70) TRUE
71) TRUE
72) TRUE
73) TRUE
74) FALSE
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CHAPTER 13
1) In the sourcing/purchasing design matrix, there are three variables: contract duration,
transaction costs and specificity (assume levels as short, medium and long for contract duration
and for the rest, low, medium and high). Vendor managed inventory belongs to
_____________blank
A) long contract duration, high transaction costs and low specificity.

B) short contract duration, high transaction costs and low specificity.
C) long contract duration, low transaction costs and low specificity.
D) long contract duration, high transaction costs and high specificity.
E) long contract duration, low transaction costs and high specificity.
2) The effect of the lack of synchronization among supply chain members is referred to
_____________blank.
A) forward buying
B) continuous replenishment
C) bullwhip effect
D) Metcalf's Law
E) being out of step
3) When using the supply chain uncertainty framework to classify supply chains, a supply
chain for functional products with an evolving supply process is called _____________blank.
A) efficient
B) forward looking
C) Agile
D) risk hedging
E) responsive
chain for functional products with a stable supply process is called _____________blank.
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A) efficient
B) forward looking
C) Agile
D) risk hedging
E) responsive
chain for innovative products with an evolving supply process is called _____________blank.
A) efficient
B) forward looking
C) Agile
D) risk hedging
E) responsive
chain for innovative products with a stable supply process is called _____________blank.
A) efficient
B) forward looking
C) Agile
D) risk hedging
E) responsive
7) Typically, which is the most challenging kind of supply chain to manage?
A) Agile supply chain.

B) Efficient supply chain.
C) Risk-hedging supply chain.
D) Erratic supply chain.
E) Responsive supply chain.
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8) Which of the following product categories includes fashionable clothing, personal
computers, and other products that typically have a very brief life cycle?
A) Functional products.
B) Dysfunctional products.
C) Innovative products.
D) Bullwhip products.
E) Value density products.
9) In outsourcing, which of the following internal activities and decision responsibilities

cannot be transferred to outside contractors?
A) Activities involving people.

B) Activities involving facilities.
C) Activities involving equipment.
D) Activities involving shareholders.
E) Activities involving technology.
10) Which of the following is an organizationally-driven reason for outsourcing?
A) Improve effectiveness by focusing on what the firm does best.

B) Turn fixed costs into variable costs.
C) Reduce costs through lowered cost structure and increased flexibility.
D) Improve risk management.
E) Improve credibility and image by associating with superior providers.
11) Which of the following is not an organizationally-driven reason for outsourcing?
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A) Improve effectiveness by focusing on what the firm does best.
B) Improve flexibility to meet changing demand for products and services.
C) Increase product and service value by improving response to customer needs.
D) Improve credibility and image by associating with superior providers.
E) All of these are organizationally-driven reasons for outsourcing.
12) Which of the following is an improvement-driven reason for outsourcing?
A) Shorten cycle time.

B) Improve effectiveness by focusing on what the firm does best.
C) Increase product and service value by improving response to customer needs.
D) Turn fixed costs into variable costs.
E) Reduce costs through a lower cost structure.
13) Which of the following is not an improvement-driven reason for outsourcing?
A) Improve quality and productivity.

B) Enhance effectiveness by focusing on what you do best.
C) Improve risk management.
D) Obtain expertise, skills and technologies not otherwise available.
E) Improve credibility and image by associating with superior providers.
14) Which of the following is not an improvement-driven reason to outsource?
A) Improve risk management.

B) Increase commitment in a noncore area.
C) Shorten cycle time.
D) Improve quality and productivity.
E) Obtain expertise, skills and technologies that are otherwise not available.
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15) When considering outsourcing, what should firms be sure to avoid?
A) Losing control of noncore activities that don't distinguish the firm.

B) Allowing outsourcing to develop into a substitute for innovation.
C) Giving the outsourcing partner opportunities to become a strong competitor.
D) Allowing employees transferred to the outsourcing partner to rejoin the firm.
E) Adverse corporate tax implications of asset transfers to the outsourcing partner.
16) Which of the following is one of the strategic characteristics to consider when deciding
how supplier relationships should be structured on the continuum between vertical integration
(do not outsource) to arm's length relationships (outsource)?
A) Cost.
B) Location.
C) Investment.
D) Coordination.
E) Control.
17) Which of the following the six-step process for green sourcing does not include?
A) Assess the opportunity.

B) Assess the supply base.
C) Confer with environmental groups.
D) Engage sourcing agents.
E) Institutionalize the sourcing strategy.
18) Which of the following the six-step process for green sourcing includes?
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A) Provide a press release to local (and perhaps national) media.
B) Include members of environmental groups in the decision.
C) Notify the state and federal environmental agencies of your plans.
D) Perform an environmental impact study.
E) Develop the sourcing strategy.
19) In the six-step process for green sourcing the initial step is "Assessing the Opportunity".
Which of the following is not among the five most common areas of relevant costs to be taken
into account?
A) Energy.
B) Packaging.
C) Water.
D) Engineering.
E) Recycling.
20) At which stage in the six-step process for green sourcing are metrics against which
vendors will be measured for the contract's duration defined?
A) Assessing the opportunity.

B) Engage internal supply chain sourcing agents.
C) Assess the supply base.
D) Implement the sourcing strategy.
E) Institutionalize the sourcing strategy.
21) Ownership costs are incurred after the initial purchase and are associated with the
ongoing use of the product or material. Which of the following is not an ownership cost listed in
the text?
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A) Financing costs.
B) Energy costs.
C) Taxes.
D) Maintenance and repair costs.
E) Supply network costs.
22) Acquisition costs include _____________blank costs.
A) quality
B) maintenance and repair
C) environmental
D) supply chain
E) customer dissatisfaction
23) Ownership costs include _____________blank.
A) environmental costs
B) warranty costs
C) supply chain costs
D) quality costs
E) taxes
24) Ownership costs incurred after the initial purchase and associated with the ongoing use of
the product or material purchased include _____________blank.
A) energy usage
B) purchase price
C) product liability costs
D) warranty costs
E) customer dissatisfaction costs
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25) Warranty costs are part of _____________blank.
A) acquisition cost
B) total cost of ownership
C) post-ownership costs
D) total cost of ownership and post-ownership costs
E) none of the above
26) First Among Best Solar Incorporated announces that they will take back free of cost, all
of their solar panels that are no longer useful. Till now, the cost of disposal was significant. This
action reduces _____________blank.
A) acquisition cost only

B) total cost of ownership only
C) post-ownership costs only
D) post-ownership costs and total cost of ownership
E) none of the above
27) The inventory turnover ratio used in measuring supply chain efficiency is found by the
following ratio: _____________blank.
A) Cost of goods sold/Average aggregate inventory value

B) Fixed costs/Variable costs
C) Sales costs/Marketing costs
D) Cost of goods sold/Cost to sell goods
E) Operations flow costs/Suppliers flow costs
28) The total value of all items held in inventory for the firm valued at cost is
_____________blank.
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A) cost of goods to be sold
B) average aggregate inventory value
C) weeks of supply
D) inventory turnover
E) none of these
29) If the average aggregate inventory value is $45,000 and the cost of goods sold is $10,000,
which of the following is weeks of supply?
A) 45,000
B) 234
C) 120
D) 23.4
E) 4.5
30) If the average aggregate inventory value is $1,200,000 and the cost of goods sold is
$600,000, which of the following is weeks of supply?
A) 1,040
B) 606
C) 104
D) 60.6
E) 2.0
31) If the average aggregate inventory value is $1,200,000 and the cost of goods sold is
$600,000, which of the following is inventory turnover?
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A) 60
B) 10.4
C) 2
D) 0.5
E) None of these
32) If the average aggregate inventory value is $100,000 and the cost of goods sold is
$450,000, which of the following is inventory turnover?
A) 19.23
B) 4.5
C) 0.8654
D) 0.2222
E) None of these
33) Other things remaining the same, if the average aggregate inventory value goes down,
then _____________blank
A) inventory turnover ratio and weeks of supply will both go down.

B) inventory turnover ratio will go down, but the weeks of supply will stay the same.
C) inventory turnover ratio and weeks of supply will both go up.
D) inventory turnover ratio will go up, but weeks of supply will go down.
E) inventory turnover ratio will stay the same, but weeks of supply will go down.
34) Other things remaining the same, if the cost of goods sold decreases, then
_____________blank
Version 1 10
A) inventory turnover ratio and weeks of supply will both go up.
B) inventory turnover ratio will go down, but the weeks of supply will go up.
C) inventory turnover ratio and weeks of supply will both go down.
D) inventory turnover ratio will go up, but weeks of supply will go down.
E) inventory turnover ratio will stay the same, but weeks of supply will go down.
35) Strategic sourcing is the development and management of supplier relationships to

acquire goods and services in a way that aids in achieving the immediate needs of the business.
⊚ true
⊚ false
36) Retailer behavior when stocking up during promotion periods (where the prices of goods
are reduced) is called backward buying.
⊚ true
⊚ false
37) The phenomenon that magnifies the variability in order quantities for goods as orders
move through the supply chain from the customer to the producer is called the bullwhip effect.
⊚ true
⊚ false
38) Functional products include staples that people buy in a wide range of retail outlets, such
as grocery stores and gas stations.
⊚ true
⊚ false
39) The optimal strategy for functional products is to use an efficient supply chain.
⊚ true
⊚ false
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40) The optimal strategy for functional products is to use a responsive supply chain.
⊚ true
⊚ false
41) The optimal strategy for innovative products is to use an efficient supply chain.
⊚ true
⊚ false
42) The best strategy for innovative products is to use either a responsive or an agile supply
chain.
⊚ true
⊚ false
43) A stable supply process is one where product volumes are high, demand is predictable
and there is a long product life.
⊚ true
⊚ false
44) A stable supply process is one where the manufacturing process and the underlying
technology are mature and the supply base is well established.
⊚ true
⊚ false
45) Firms producing functional products are forced to introduce a steady stream of
innovations in order to survive.
⊚ true
⊚ false
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46) Outsourcing is the act of moving some of a firm's internal activities and decision
responsibility to outside providers.
⊚ true
⊚ false
47) Outsourcing allows a firm to achieve an improved focus on its core competencies.
⊚ true
⊚ false
48) A financially-driven reason for outsourcing is that it can turn fixed costs into variable
costs.
⊚ true
⊚ false
49) A financially-driven reason for outsourcing is that it can shorten cycle time.
⊚ true
⊚ false
50) An organizationally-driven reason for outsourcing is that it can improve effectiveness by

focusing on what the firm does best.
⊚ true
⊚ false
51) An organizationally-driven reason for outsourcing is that it can transform the

organization.
⊚ true
⊚ false
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52) A financially-driven reason for outsourcing is that it can reduce costs through a lower
cost structure.
⊚ true
⊚ false
53) An improvement-driven reason for outsourcing is that it can increase product and service
value, customer satisfaction, and shareholder value.
⊚ true
⊚ false
54) A financially-driven reason for outsourcing is that it can help gain access to new markets,
especially in developing countries.
⊚ true
⊚ false
55) Logistics is a term indicating transportation choices for goods produced internationally
but consumed domestically.
⊚ true
⊚ false
56) Logistics is a term that refers to the management functions that support the complete
cycle of material flow, from the purchase and internal control of production materials; to the
planning and control of work-in-process; to the purchasing, shipping, and distribution of the
finished product.
⊚ true
⊚ false
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57) A firm that controls most of the activities in its supply chain is said to be vertically
integrated.
⊚ true
⊚ false
58) Green sourcing is only about finding new environmentally friendly technologies and
increasing the use of recyclable materials.
⊚ true
⊚ false
59) An important opportunity in green sourcing is waste reduction opportunities.

⊚ true
⊚ false
60) Green sourcing requires incorporating new criteria for evaluating alternatives.
⊚ true
⊚ false
61) The total cost of ownership (TCO) is an estimate of the cost of an item that includes all
the costs related to the procurement and use of an item, but does not include any of the costs
related to disposing of the item after it is no longer useful.
⊚ true
⊚ false
62) The total cost of ownership (TCO) can be categorized into three areas: acquisition costs,
ownership costs, and post-ownership costs.
⊚ true
⊚ false
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63) Overemphasis on purchase price frequently results in failure to address other significant
costs.
⊚ true
⊚ false
64) In conducting a total cost of ownership analysis, it is probably the best to use a team
representing the key functional areas.
⊚ true
⊚ false
65) Two common measures to evaluate supply chain efficiency are the consumer price index
and the beta flow system.
⊚ true
⊚ false
66) Two common measures to evaluate supply chain efficiency are the inventory turnover
and weeks-of-supply ratios.
⊚ true
⊚ false
67) Inventory turn values that are considered good differ by industry and the type of products
being handled.
⊚ true
⊚ false
68) Inventory turnover and weeks of supply are mathematically the inverse of one another.
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⊚ true
⊚ false
Version 1 17
Answer Key
1) E
2) C
3) D
4) A
5) C
6) E
7) A
8) C
9) D
10) A
11) D
12) A
13) B
14) B
15) C
16) D
17) C
18) E
19) D
20) E
21) C
22) A
23) C
24) A
25) D
26) D
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27) A
28) B
29) B
30) C
31) D
32) B
33) D
34) B
35) TRUE
36) FALSE
37) TRUE
38) TRUE
39) FALSE
40) FALSE
41) FALSE
42) TRUE
43) FALSE
44) TRUE
45) FALSE
46) TRUE
47) TRUE
48) TRUE
49) FALSE
50) TRUE
51) FALSE
52) TRUE
53) FALSE
54) TRUE
55) FALSE
56) TRUE
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57) TRUE
58) FALSE
59) TRUE
60) TRUE
61) FALSE
62) TRUE
63) TRUE
64) TRUE
65) FALSE
66) TRUE
67) TRUE
68) TRUE
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CHAPTER 14
1) As per the discussion on FedEx, the vision of the firm and the driver for comprehensive
technology strategy is _____________blank
A) delivery of the package is important and technology is not relevant.

B) information about a package is as important as the delivery itself but technology is
incidental.
C) delivery of the package is important though information about a package is incidental.
D) comprehensive technology is the only important thing.
E) information about the package is as important as the delivery of the package and that
drives comprehensive technology strategy.
2) Which of the following is not a coordinating activity related to information systems

involved in logistics planning?
A) Allocating resources.
B) Labor management.
C) Managing inventory levels.
D) Scheduling.
E) Order tracking.
3) 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.
4) Very few products are moved without at least part of their journey being by which mode
of transportation?
Version 1 1
A) Highway.
B) Rail.
C) Water.
D) Pipeline.
E) Air.
5) In the logistics-systems design matrix, volume, cost and speed of delivery are three
variables (assume three levels: low, moderate or high) used to describe attributes of
transportation modes. Rail is associated with _____________blank
A) moderate volume, moderate speed and high cost.

B) moderate volume, high speed and high cost.
C) high volume, moderate speed and low cost.
D) low volume, high cost and low speed.
E) high volume, high speed and high cost.
6) 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.

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A) Suppliers.
B) Free trade zones.
C) Political risk.
D) Gross national product.
E) Tariffs and customs duties.

A) Government barriers.
B) Trading blocs.
C) Environmental regulation.
D) Immigration rules.
E) Local labor costs.
9) 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.
10) An important issue in facility location analysis is business climate. An unfavorable

business climate could be indicated by _____________blank.
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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
F) none of the answers are correct
11) 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 costs.
D) Construction costs.
E) Regional costs.
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) Taxes.
cost. Which of the following are hidden costs that should be included in the analysis?
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A) Costs of of the loss of customer responsiveness.
B) Supplier costs.
C) Taxes.
E) Product life cycle costs.
14) 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) Costs of movement of preproduction material between locations.
C) Taxes.
E) Bribery costs.
15) Which of the following is not an infrastructure criterion 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.
16) How many free trade zones are there in the United States?
A) Less than 50.

B) Less than 100.
C) About 290.
D) More than 412.
E) About 310.
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17) An example of a trading bloc is _____________blank.
A) Pacific Alliance
B) Central American Free Trade Agreement countries
C) ISO-9000 companies
D) American Production and Inventory Control Society
E) Wal-Mart and its suppliers
18) According to the text, an important decision for multinational companies is the nation in
which to locate the home base for each business. Which of the following business activities does
not happen at the business's home base?
A) Core process technology is created.

B) A critical mass of production takes place.
C) The largest profits are recorded.
D) Strategy is created.
E) Core products are created.
19) Which of the following is not among the factors related to infrastructure in making
facility location decisions?
A) Satisfactory hotel accommodations.

B) Adequate air transportation.
C) Energy requirements.
D) Telecommunications requirements.
E) Willingness of local government to invest in infrastructure upgrades.
20) Which of the following is a plant location methodology that is good for locating a single
facility within a set of existing facilities based in distances and volumes of goods shipped?
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A) Factor-rating systems.
B) Centroid method.
C) Decision trees.
D) Linear programming.
E) Regression analysis.
21) 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.
22) The centroid method for plant location uses _____________blank.
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
23) 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?
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A) 100
B) 114
C) 130
D) 150
E) X coordinate cannot be computed from the data given
24) 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) 208
B) 227
C) 243
D) 389
E) X coordinate cannot be computed from the data given
25) 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
26) Which of the following is not mentioned in the text as a technique for identifying
potential sites for plants or other types of facilities?
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A) The centroid method.
B) Factor-rating systems.
C) Linear programming.
D) The transportation method of decision analysis.
E) Regression analysis.
27) Suppose that using the centroid method you found the best location for a communications
tower. The location happens to be in the middle of a pond. Then, you should locate the tower
_____________blank
A) at that location using water proof concrete and precast poles.

B) at the closest point outside the pond.
C) using some other method.
D) after considering qualitative factors such as geography, roads and utilities to help find
the exact location.
28) Using the transportation method for solving the optimal shipping a product from factories
to warehouses, as per text, you should use _____________blank
A) “≤” for constraints regarding factory capacity and “=” for constraints regarding
demand at warehouses.
B) “≥” for constraints regarding factory capacity and “≤” for constraints regarding
C) “=” for constraints regarding factory capacity and “≥” for constraints regarding
D) “≥” for constraints regarding factory capacity and “=” for constraints regarding
Version 1 9
29) A third-party logistics company is a firm that manages all or part of another company's
product delivery operations.
⊚ true
⊚ false
30) Logistics is the process of coordinating and moving material and other resources from
one location to another.
⊚ true
⊚ false
31) DHL and United Parcel Service are transportation companies that are prohibited from
functioning as a third-party logistics company the way Federal Express does.
⊚ true
⊚ false
32) Cross-docking is a practice used in the international shipping industry that facilitates port
utilization.
⊚ true
⊚ false
33) Cross-docking is an approach used in consolidation warehouses, where large shipments

are broken down into small shipments for local delivery in an area.
⊚ true
⊚ false
34) Hub-and-spoke systems combine the idea of consolidation and that of cross-docking.
⊚ true
⊚ false
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35) In a hub-and-spoke system each warehouse in the system acts as a spoke.
⊚ true
⊚ false
36) 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
37) Facility location analysis considers the competitive imperative to be close to customers as
to timeliness of deliveries.
⊚ true
⊚ false
38) Facility location analysis considers the competitive imperative of lowest total cost.
⊚ true
⊚ false
39) 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
40) 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.
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⊚ true
⊚ false
41) Facility location analysis considers the competitive imperative of locating near the
appropriate labor pool to take advantage of high technical skills.
⊚ true
⊚ false
42) An example of a positive business climate that might influence a facility location
decision is increasing governmental costs and increasing property taxes.
⊚ true
⊚ false
43) A favorable business climate in facility location decision making might include
government legislation of tax abatements.
⊚ true
⊚ false
44) 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
45) 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
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46) In facility location decision making the educational and skill levels of the labor pool must
match the company's needs.
⊚ true
⊚ false
47) 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
48) 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
49) Issues of product mix and capacity are strongly interconnected to the facility location
decision.
⊚ true
⊚ false
50) A free trade zone operates under different rules and laws than a foreign trade zone.
⊚ true
⊚ false
51) 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
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52) The objective of facility location analysis is to select the site with the lowest total cost.
⊚ true
⊚ false
53) Governmental barriers to enter and locate in many countries are increasing through
restrictive protectionist legislation.
⊚ true
⊚ false
54) Quality of life in a host community is not a major factor in making the facility location
decision.
⊚ true
⊚ false
55) In facility location decision making, the factor-rating system is one of the least used
general location techniques.
⊚ true
⊚ false
56) In facility location decision making, the factor-rating system is based on linear
programming.
⊚ true
⊚ false
57) 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.
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⊚ true
⊚ false
58) Facility location decisions are made using analytical techniques that are able to weigh a
large number of different variables equally.
⊚ true
⊚ false
59) Services typically have multiple site locations to maintain close contact with customers.
⊚ true
⊚ false
Version 1 15
Answer Key
1) E
2) B
3) D
4) A
5) C
6) B
7) D
8) D
9) A
10) F
11) A
12) B
13) A
14) B
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18) C
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20) B
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22) A
23) B
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25) B
26) D
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28) A
29) TRUE
30) TRUE
31) FALSE
32) FALSE
33) TRUE
34) TRUE
35) FALSE
36) TRUE
37) TRUE
38) TRUE
39) TRUE
40) TRUE
41) TRUE
42) FALSE
43) TRUE
44) TRUE
45) TRUE
46) TRUE
47) FALSE
48) FALSE
49) TRUE
50) FALSE
51) TRUE
52) TRUE
53) FALSE
54) FALSE
55) FALSE
56) FALSE
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58) FALSE
59) TRUE
Version 1 18

Operations and Supply Chain Management The Core 6th Edition TB

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Operations and Supply Chain Management The Core 6th Edition TB

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CHAPTER 1

A) OSCM is essential for understanding organizational behavior.

A) No goods, some goods, even mix, some service, no service.

3) Which of the following are defined as core goods?

4) Current issues in OSCM do not include _____________blank.

A) Department store manager.

A) Service jobs are unskilled.

A) Dividend payout ratio.

12) When considering the concept of value, how is quality defined?

A) By the price of the product.

B. Inventory turnover is an efficiency measure.

C. Inventory turnover is unaffected by changes in annual sales.

B. Cash conversion cycle goes down if payable period goes up.

C. Cash conversion cycle goes up if average inventory goes up.

19) A worker can be efficient without being effective.

20) A process can be effective without being efficient.

28) Supply networks cannot be constructed for every product or service.

31) "Supply Chain" includes only inbound freight and inventory.

45) Services are intangible processes that cannot be weighed or measured.

47) Services are homogeneous.

49) Automobiles and appliances are classified as "pure goods."

53) A bank branch manager position is not an OSCM job.

55) Just-in-time (JIT) production was a major breakthrough in manufacturing philosophy

62) Sustainability is the ability to maintain profits in a system.

63) Raising senior management awareness of OSCM as a competitive weapon is not an

Test name: Chap 01_6e

2) Which of the following major competitive dimension forms a company's strategic

A) Operations capability analysis.

6) Which of the following is an activity-system map?

A) A network guide to route airlines.

7) Which of the following is a partial measure of productivity?

B. Output / (Labor + Capital + Energy)

C. Output / All resources used

8) Which of the following is a multifactor measure of productivity?

B. Output / (Labor + Capital + Energy)

C. Output / All resources used

9) Which of the following is a total measure of productivity?

B. Output / (Labor + Capital + Energy)

Output: Sales $300,000 $330,000

Energy: $ 10,000 $ 9,000

Capital Employed: $250,000 $262,000

Other: $ 2,000 $ 6,000

Output: Sales $300,000 $330,000

Capital Employed: $250,000 $262,000

Other: $ 2,000 $ 6,000

Output: Sales $300,000 $330,000

Energy: $ 10,000 $ 9,000

Capital Employed: $250,000 $262,000

Other: $ 2,000 $ 6,000

Output: Sales $300,000 $330,000

Energy: $ 10,000 $ 9,000

Capital Employed: $250,000 $262,000

Other: $ 2,000 $ 6,000

19) What is meant by the term "operations effectiveness?"

A) Products produced in sufficient volume to meet demand.

B. Delivery speed, delivery reliability, order qualifiers

C. Cost or price, delivery speed, delivery reliability, new product design

D. Order qualifier is a screening criterion while order winner is a differentiating criterion.

E. Order winners may have been order qualifiers before.

B. increase the multifactor productivity only

C. increase both labor and multifactor productivity

D. decrease capital productivity

E. have no effect on productivity.