Midterm Exam Summer 2003

 

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3. You will be given 120 minutes to finish.

Please mark your responses to the questions below.

1. Which one of the following statements regarding operations management is true?

A. Inputs to a production system include capital and materials, but not human resources.

B. Operations management deals only with manufacturing organizations because service organizations do not have tangible outputs.

C. Typical inputs to a production system are processes and consumer goods.

D. Customer participation and information on performance are two special types of inputs to a production system.

2. Operations management is part of a production system that can be described in the following manner: Organization: inputs-processes-outputs. Which one of the following correctly describes a production system?

A. Airline: pilots-planes-transportation

B. Bank: tellers-computer equipment-deposits

C. Furniture manufacturer: wood-sanding-chair

D. Telephone company: satellites-cables-communication

3. Which of the following skill areas is NOT fundamental to operations managers?

A. Quantitative analysis

B. Knowledge of information systems

C. Understanding of international business

D. Advertising tactics

4. Competitive priorities state the dimensions on which a firm can excel. Which one of the following statements about each dimension is TRUE?

A. Emphasizing low price is most appropriate for differentiated products in the growth stage of demand.

B. A firm that intends to excel at high-performance design quality can succeed only when its production volume is very high.

C. McDonald's is a typical example of an organization that excels at volume flexibility rather than quality consistency.

D. For a firm that gives top priority to customization, volumes for any individual product tend to be low.

5. Competitive priorities define the dimensions on which companies should excel in producing their products or services. Which one of the following statements is TRUE?

A. A firm that competes on the dimension of volume flexibility is more likely to manufacture products that experience a seasonal demand variation.

B. It is impossible for a firm to improve cost and quality simultaneously.

C. A firm offering little customization cannot compete simultaneously on the dimension of consistent quality.

D. A firm that competes on the dimension of customization tends have operating systems that are inflexible.

6. An ethnic restaurant, in serving a lovely, four-hour, seven-course dinner for two for $150, is

giving particular emphasis to which dimension of competitive priorities?

A. Price

B. Consistent quality

C. Fast delivery time

D. High-performance quality

7. Which of the service strategies amounts to designing operations to include processes devoted to producing standardized services and processes devoted to assembling standardized offerings for a specific customer's needs?

A. Standardized-services strategy

B. Assemble-to-order service strategy

C. Customized-services strategy

D. Make-to-stock services strategy

8. Firms that produce high volumes of relatively few standardized products, for which reasonably accurate forecasts are available, are most likely to use a

A. make-to-stock strategy.

B. assemble-to-order service strategy.

C. make-to-order strategy.

D. flexible-flow strategy.

9. A manufacturer of upscale upholstered furniture can produce hundreds of a particular style of sofa, no two alike, to meet customers" selection of fabric and wood. The manufacturer is most likely using a

A. make-to-stock strategy.

B. assemble-to-order strategy.

C. make-to-order strategy.

D. mass production strategy.

10. A firm producing medical equipment to customer specifications is most likely using a

A. make-to-stock strategy.

B. assemble-to-order strategy.

C. make-to-order strategy.

D. mass production strategy.

11. Five dimensions must be considered in making decisions on process. Which one of the following correctly identifies all five major process decisions?

A. capital intensity, resource flexibility, facility location, vertical integration, and process choice

B. product or service life cycle, capital intensity, vertical integration, process choice, and customer involvement

C. capital intensity, process choice, inventory placement, resource flexibility, and customer involvement

D. capital intensity, resource flexibility, vertical integration, customer involvement, and process choice

12. A job process would be preferred when

A. workforce and equipment are specialized.

B. products are made to stock type.

C. customization is high and volume is low.

D. customization is low and volume is high.

13. Which one of the following processes is more likely to have the greatest capital intensity?

A. a process with more of its products or services in the early stage of their life cycles

B. a process using customization as its competitive priority

C. a process with high production volumes

D. a process with a flexible flows

14. Which of the following is an example of BACKWARD integration for an automobile manufacturer?

A. installation of robotic welding equipment on the factory floor

B. creation of a marketing plan to offer a factory rebate upon the purchase of a new car

C. opening new company-owned car dealerships

D. acquisition of a sheet metal company that is a major supplier to the automobile industry

15. Which one of the following is an example of FORWARD integration?

A. a personal computer manufacturer deciding to produce its own keyboards

B. a local bank opening branch offices in neighboring states

C. an automobile company opening a plant to manufacture spark plugs

D. a personal computer manufacturer opening retail computer sales stores

16. Suppose that competitive priorities call for offering a wide variety of customized services. Which of the following process decisions would be more likely?

A. more capital intensity

B. more resource flexibility

C. less outsourcing

D. less customer involvement

17. MORE fixed automation typically means

A. decreased labor productivity.

B. longer cycle time.

C. higher demand volumes.

D. lower sales.

18. Which one of the following statements concerning process reengineering is NOT true?

A. Reengineering is the fundamental rethinking and radical design of business processes.

B. Reengineering efforts should focus on functional departments.

C. Information technology is a major enabler of reengineering.

D. Reengineering requires a "clean slate" philosophy.

19. Which statement on reengineering and process improvement is best?

A. Only process improvement programs make use of cross-functional teams.

B. Process improvement focuses only on critical or core processes, such as order fulfillment.

C. Reengineering starts with a "clean slate" whereas process improvement looks for ways to incrementally improve.

D. Only reengineering focuses on business processes.

20. The five categories of activities (operation, transportation, inspection, delay, and storage) are used in which of the following methods of process analysis?

A. Multiple activity chart

B. Process chart

C. Capital budgeting

D. fFow diagram

21. Which one of the following basic patterns of demand is difficult to predict because it is affected by national or international events or because of a lack of demand history reflecting

the stages of demand from product development to decline?

A. Horizontal

B. Seasonal

C. Random

D. Cyclical

22. Using sales force estimates for forecasting has the advantage that

A. no biases exist in the forecasts.

B. statistical estimates of seasonal factors are more precise than any other approach.

C. forecasts of individual sale force members can be easily combined to get regional or national sales totals.

D. confusion between customer "wants" (wish list) and customer "needs" (necessary purchases) is eliminated.

23. Which one of the following is an example of a time series forecasting technique?

A. Survey analysis

B. Delphi method

C. Trend-adjusted exponential smoothing

D. Market research

24. The Delphi method of forecasting is useful when

A. judgment and opinion are the only bases for making informed projections.

B. a systematic approach to creating and testing hypotheses is needed and the data are usually gathered by sending a questionnaire to consumers.

C. historical data are available and the relationship between the factor to be forecast and other external or internal factors can be identified.

D. historical data is available and the best basis for making projections is to use past demand patterns.

25. When the underlying mean of a time series is very stable and there are no trend, cyclical, or seasonal influences,

A. a simple moving average forecast with n = 20 should outperform a simple moving average forecast with n = 3.

B. a simple moving average forecast with n = 3 should outperform a simple moving average forecast with n = 20.

C. a simple moving average forecast with n = 20 should perform about the same as a simple moving average forecast with n = 3.

D. an exponential smoothing forecast with alpha = 0.30 should outperform a exponential smoothing forecast with alpha = 0.01.

26. Which one of the following is most useful for measuring the bias in a forecast?

A. Cumulative sum of forecast errors

B. Standard deviation of forecast errors

C. Mean absolute deviation of forecast errors

D. Percentage forecast error in period t

27. Assume that a time series forecast is generated for future demand, and subsequently it is observed that the forecast method did not accurately predict the actual demand. Specifically, the forecast errors were found to be: Mean absolute percent error = 10% Cumulative sum of forecast errors = 0% Which one of the statements concerning this forecast is TRUE?

A. The forecast has no bias but has a positive standard deviation of errors.

B. The forecast has a positive bias and a standard deviation of errors equal to zero.

C. The forecast has no bias and has a standard deviation of errors equal to zero.

D. The forecast has a positive bias and a positive standard deviation of errors.

28. Which one of the following is an example of causal forecasting technique?

A. weighted moving average

B. linear regression

C. exponential smoothing

D. Delphi method

29. Demand for a new five-inch color TV during the last six periods has been as follows: 109 units in period 1, 110 in period 2, 103 in period 3, 170 in period 4, 81 in period 5 and 130 units in period 6. What is the forecast for period 7 if the company uses the simple moving average method with n = 4?

A. Less than or equal to 115

B. Greater than 115 but less than or equal to 120

C. Greater than 120 but less than or equal to 125

D. Greater than 125

30. It is now near the end of May and you must prepare a forecast for June for a certain product. The forecast for May was 900 units. The actual demand for May was 1000 units. You are using the exponential smoothing method with alpha = 0.20. The forecast for June is

A. Less than 925 units.

B. Greater than or equal to 925 units but less than 950 units.

C. Greater than or equal to 950 units but less than 1000 units.

D. Greater than or equal to 1000 units.

31. Which one of the following reasons creates a pressure for reducing inventories?

A. High interest or opportunity cost

B. On-time delivery requests from customers

C. Need for better labor or equipment utilization

D. Need for reduction in total payments to suppliers

32. Which one of the following statements about anticipation inventory is TRUE?

A. It is a portion of inventory that is reserved for the best customer.

B. It is a portion of inventory that is used to absorb only the variation in demand.

C. It is a portion of inventory that is used to absorb only the variation in supply.

D. It is a portion of inventory that is used to absorb variation in demand or supply.

33. Pipeline inventory is a type of inventory that is usually maintained by

A. gasoline suppliers only.

B. electrical utilities only.

C. any manufacturer moving materials from point to point.

D. a trucking company making emergency shipments.

34. One of the secondary levers for reducing safety stock inventory is to reduce

A. supply uncertainties.

B. setup cost.

C. capacity cushions.

D. delivery size.

35. For a company that manufactures most of its products as standards, more inventory should be placed

A. closer to the customer.

B. within the plant as work-in-process.

C. close to suppliers.

D. equally distributed between the plants and warehouses.

36. The goal of ABC analysis is to

A. determine the profitability of items.

B. estimate average volume per dollar value.

C. estimate dollar value per pound.

D. to identify the A items for better inventory control.

37. Even though the economic order quantity (EOQ) is optimal only when five assumptions are satisfied, it serves as a reasonable first approximation even when these assumptions do not quite apply. Which one of the following is not an assumption of the EOQ?

A. Decisions for one item can be made independently of decisions made for other items.

B. There is no uncertainty in lead time.

C. The amount of an order received is exactly equal to what was ordered, without any "short shipments" from a supplier or scrap losses in the shop.

D. Quantity discounts can be taken advantage of for large lot sizes.

38. The Lemma Company manufactures and sells 10 products. Ways have been found to cut both the setup and inventory holding costs in half. What effect will this have on the economic order quantities of the 10 products?

A. They will be reduced by a factor of 1.41.

B. They will not change.

C. They will be reduced by a factor of 2.00.

D. They will be increased by a factor of 1.41.

39. Sensitivity analysis on the economic order quantity (EOQ) formula can help the operations manager answer several questions on how to manage inventories. Which one of the following questions is NOT answered by EOQ sensitivity analysis?

A. How critical are errors in estimating demand (D), inventory holding cost (H), and setup cost (S)?

B. What should happen to lot sizes if interest rates drop?

C. What should happen to cycle inventory if the demand rate increases?

D. What should happen to lot sizes if supply and lead-time uncertainty increase?

40. Which one of the following statements represents an advantage of a Q system over the P system?

A. A perpetual inventory system is not mandatory.

B. Orders for multiple items from the same supplier can be combined more easily.

C. Fixed replenishment intervals are possible, which can be, administratively, quite convenient.

D. The Q system is more suited for quantity discounts and physical limitations.

41. Wood County Hospital consumed 400 boxes of bandages per week last year. The price of bandages was $80 per box, and the hospital operates 52 weeks per year. The cost of processing an order was $64, and the cost of holding one box throughout a full year was 20 percent of the value of the material. Last year the hospital ordered bandages, on average, once every two weeks, each time ordering 800 boxes. What extra cost did the hospital incur that could have been avoided if the EOQ concept had been applied?

A. Less than $650

B. More than $650 and less than $1050

C. More than $1050 and less than $1450

D. More than $1450

42. A neighborhood sportswear store sells a pair of Nike sneakers for $40. Due to the recent fitness craze, these shoes are in high demand: 50 pairs of shoes are sold per week. The ordering cost is $20/order, and the annual holding cost is 20 percent of selling price. If the store operates 52 weeks a year, what can you say about the current lot size of 235?

A. Too large

B. Too small

C. Just right

D. Cannot tell from the information given

43. The Franklin County Hospital is currently using a continuous review system to control its inventory. One of the items in inventory is an elastic band. The average demand for this item is 200 boxes per week, and the standard deviation in weekly demand is 50 boxes. If the lead time is 3 weeks and the hospital wants a 99 percent cycle-service level, what is the reorder point for this item? A normal table is appended to this exam.

A. Less than or equal to 650 boxes

B. Greater than 650 boxes but less than or equal to 750 boxes

C. Greater than 750 boxes but less than or equal to 850 boxes

D. Greater than 850 boxes

44. Jan Tuttle is the inventory manager of an art supply store. She uses a periodic review system for all oil paints. The number of periods between orders (P) for red #69 is 15 workdays. (The store operates 50 weeks/year, 5 workdays/week.) Additional information concerning red #69 follows. Demand = 30 units/workday Standard deviation of daily demand = 4 units/workday Lead time = 7 workdays Desired cycle-service level = 85% A normal table is appended to this exam. What is the target inventory level T for red #69?

A. Less than or equal to 550

B. Greater than 550 but less than or equal to 600

C. Greater than 600 but less than or equal to 650

D. Greater than 650

45. Please click here for the Normal Distribution table