1. A small heath food manufacturer produces two main types of granola treats. Changing production from one type to the other costs $300. Demand for its best-selling Tropical-Granola bar is 60,000 bars per year. Each bar costs $1 to produce. Holding costs are estimated as 9% annually.

a. What is the optimal production batch size for Tropical-Granola?
a. 1,414
b. 14,142
c. 2,000
d. 20,000

2. A small heath food manufacturer produces two main types of granola treats. Changing production from one type to the other costs $300. Demand for its best-selling Tropical-Granola bar is 60,000 bars per year. Each bar costs $1 to produce. Holding costs are estimated as 9% annually.

b. In an attempt to improve the freshness of its products, the manufacturer would like to reduce batch size by a half (i.e., if currently it is Q, she would like it to be Q/2) by reducing the setup cost. What should the new setup cost be?
a. $150
b. $300
c. $450
d. $75

3. A small heath food manufacturer produces two main types of granola treats. Changing production from one type to the other costs $300. Demand for its best-selling Tropical-Granola bar is 60,000 bars per year. Each bar costs $1 to produce. Holding costs are estimated as 9% annually.
c. The company also makes a No-Bake-Bar but does not sell as many units of this product as it does of Tropical-Granola. All associated costs for the two products are about equal and they are manufactured using the same production line. What should the average cycle inventory for No Bake-Bar be compared to Tropical-Granola?
a. No-Bake-Bar would have the same cycle inventory
b. More information is needed.
c. No-Bake-Bar would have higher cycle inventory
d. No-Bake-Bar would have lower cycle inventory

4. A small heath food manufacturer produces two main types of granola treats. Changing production from one type to the other costs $300. Demand for its best-selling Tropical-Granola bar is 60,000 bars per year. Each bar costs $1 to produce. Holding costs are estimated as 9% annually.
d. The company is considering purchasing new flexible equipment that would let it produce both products in the same batch without requiring any changeover. What would the optimal batch size using the new equipment be?
a. It would be lower than the current optimal batch size for Tropical-Granola plus the optimal batch size for No-Bake bar.
b. It would equal the square root of the current optimal batch size for Tropical-Granola plus the square root of the optimal batch size for No-Bake bar.
c. It would be higher than the current optimal batch size for Tropical-Granola plus the optimal batch size for No-Bake bar.
d. It would equal the current optimal batch size for Tropical-Granola plus the optimal batch size for No-Bake bar.

5. Weekly demand for tires at Bargain-Tires is normally distributed a mean of 1,000 tires and a standard deviation of 100 tires. It takes 1 week for an order of additional tires to be supplied.
a. Currently the store orders more tires when 1,100 are left in inventory. What is the store's current Service-Level?
a. 84.13%
b. 34.13%
c. 100%
d. 86.43%

6. Weekly demand for tires at Bargain-Tires is normally distributed a mean of 1,000 tires and a standard deviation of 100 tires. It takes 1 week for an order of additional tires to be supplied.
b. In an attempt to save on holding costs, the operation manager suggested placing an order when 1,050 are left on-hand. How would that affect the company?
a. It would lower average inventory but would also reduce service-level
b. It would not change average inventory and would not change service-level
c. It would not change average inventory and would increase service-level
d. It would lower average inventory with no change to service-level

7. Weekly demand for tires at Bargain-Tires is normally distributed a mean of 1,000 tires and a standard deviation of 100 tires. It takes 1 week for an order of additional tires to be supplied.
c. The owner would like to ensure no stock-outs in 67% of cycles. What is the appropriate safety stock that should be carried?
a. 75 units
b. 44 units
c. 67 units
d. 167 units

8. Weekly demand for tires at Bargain-Tires is normally distributed a mean of 1,000 tires and a standard deviation of 100 tires. It takes 1 week for an order of additional tires to be supplied.
d. Another idea considered is requiring customers to make appointments in an attempt to decrease demand variability. The company believes this would not affect the quantity and rate of demand and does not wish to change its service-level. What would the effect on its operations be be?
a. It would increase the Re-Order but not change average inventory.
b. It would increase the Re-Order and increase average inventory
c. It would decrease the Re-Order and lower average inventory
d. It would not change the Re-Order point or average inventory.

9. A fashion retailer sells an average of 400 high-end winter coats during the peak winter season. Seasonal sales are normally distributed with a standard deviation of 20 coats per season. She pays $60 for each coat, which sells for $120. Coats that are unsold at the end of the season are usually discounted significantly and offered for $40. The coats are made overseas and have to be ordered before the beginning of the season. The supplier only manufactures winter fashion items in early spring and will not provide more items until the next selling season.
a. What is the optimal service level?
a. 25%
b. 50%
c. 100%
d. 75%

10. A fashion retailer sells an average of 400 high-end winter coats during the peak winter season. Seasonal sales are normally distributed with a standard deviation of 20 coats per season. She pays $60 for each coat, which sells for $120. Coats that are unsold at the end of the season are usually discounted significantly and offered for $40. The coats are made overseas and have to be ordered before the beginning of the season. The supplier only manufactures winter fashion items in early spring and will not provide more items until the next selling season.
b. If the optimal service level is 87.5%, how many coats should be ordered at the beginning of the season?
a. 350
b. 368
c. 418
d. 423

11. A catalog mail order retailer has threerepresentative to take orders. If a representative is busy, the next caller is put on hold. For simplicity, assume that any number of incoming calls can be put on hold and that nobody hangs up in frustration over a long wait. Suppose that, on average, one call comes in every 3 minutes and that it takes a representative an average of 5 minutes to take an order. Both inter-arrival and activity times are exponentially distributed. The company estimates that each minute a customer is kept on hold costs it $5 in customer dissatisfaction and loss of future business.
a. What is the proportion of time that the CSR is busy (server utilization)?
a. 33%
b. 75%
c. 60%
d. 55%

12. A catalog mail order retailer has threerepresentative to take orders. If a representative is busy, the next caller is put on hold. For simplicity, assume that any number of incoming calls can be put on hold and that nobody hangs up in frustration over a long wait. Suppose that, on average, one call comes in every 3 minutes and that it takes a representative an average of 5 minutes to take an order. Both inter-arrival and activity times are exponentially distributed. The company estimates that each minute a customer is kept on hold costs it $5 in customer dissatisfaction and loss of future business.
b. If utilization is 50%, what is the average number of customers on hold?
a. 2.82
b. 2
c. 0.28
d. 0.5

13. A catalog mail order retailer has threerepresentative to take orders. If a representative is busy, the next caller is put on hold. For simplicity, assume that any number of incoming calls can be put on hold and that nobody hangs up in frustration over a long wait. Suppose that, on average, one call comes in every 3 minutes and that it takes a representative an average of 5 minutes to take an order. Both inter-arrival and activity times are exponentially distributed. The company estimates that each minute a customer is kept on hold costs it $5 in customer dissatisfaction and loss of future business.
c. If the average queue length is 1 customer, what is the average time a customer is on hold?
a. 20 minutes
b. 12 minutes
c. 1.67 minutes
d. 3 minutes

14. A catalog mail order retailer has threerepresentative to take orders. If a representative is busy, the next caller is put on hold. For simplicity, assume that any number of incoming calls can be put on hold and that nobody hangs up in frustration over a long wait. Suppose that, on average, one call comes in every 3 minutes and that it takes a representative an average of 5 minutes to take an order. Both inter-arrival and activity times are exponentially distributed. The company estimates that each minute a customer is kept on hold costs it $5 in customer dissatisfaction and loss of future business.
d. If the average queue length is 1 customer, what is the hourly cost to the company as a result of customers having to wait?
a. $100 /hour
b. $5 /hour
c. $60 /hour
d. $300 /hour

15. Metric Burger's best-selling hamburger is the "200 Grams" signature patty. It is known that burgers are normally distributed with a mean of 200 grams and a standard deviation of 3 grams. The restaurant owner monitors production by randomly examining (and tasting) 9 units daily and calculating their average weight. Satisfaction surveys have shown that customers are pleased if burgers are between 197 and 203 grams.
a. Determine the 3-sigma control limits for the burger sample weight data?
a. (188, 212)
b. (197,203)
c. (182,218)
d. (191,209)

16. Metric Burger's best-selling hamburger is the "200 Grams" signature patty. It is known that burgers are normally distributed with a mean of 200 grams and a standard deviation of 3 grams. The restaurant owner monitors production by randomly examining (and tasting) 9 units daily and calculating their average weight. Satisfaction surveys have shown that customers are pleased if burgers are between 197 and 203 grams.
b. During one day the following weight were recorded (in grams): 195, 196, 201, 196, 198, 195, 196, 198, 195. If the control limits are (202,198) is the process in-control?
a. No
b. Yes
c. Only some of the units are.
d. Inconclusive

17. Metric Burger's best-selling hamburger is the "200 Grams" signature patty. It is known that burgers are normally distributed with a mean of 200 grams and a standard deviation of 3 grams. The restaurant owner monitors production by randomly examining (and tasting) 9 units daily and calculating their average weight. Satisfaction surveys have shown that customers are pleased if burgers are between 197 and 203 grams.
c. What is the process Capability Ratio (Cpk)?
a. Cpk = 1.33
b. Cpk = 1
c. Cpk = 0.33
d. Cpk = 0.67

18. Metric Burger's best-selling hamburger is the "200 Grams" signature patty. It is known that burgers are normally distributed with a mean of 200 grams and a standard deviation of 3 grams. The restaurant owner monitors production by randomly examining (and tasting) 9 units daily and calculating their average weight. Satisfaction surveys have shown that customers are pleased if burgers are between 197 and 203 grams.
d. What is the probability that burgers will be within the customers' desired size specifications?
a. 95.45%
b. 99.73%
c. 68.26%
d. 66.67%