1. Which one of the following is an aggressive alternative for aggregate
planning?
a. use seasonal inventories to buffer the manufacturing process from
variations in customer demand.
b. offer complementary products or services with contra-cyclical demand
requirements.
c. use overtime and undertime to change workforce levels.
d. use subcontracting to overcome short-term capacity shortages.
2. Which of the following factors is (are) NOT included in ordering cost ?
a. bill paying.
b. obsolescence.
c. purchasing department overhead costs.
d. inspecting incoming inventory.
e. development and authorization of purchase orders.
3. Possible decision variables that should be considered for aggregate plans
include:
a. equipment rental.
b. extra labor shifts.
c. backordering.
d. all of the above.
e. none of the above.
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4. Regarding the master production schedule (MPS) :
a. the external suppliers are sent copies of the MPSs in advance.
b. the time horizon of the MPSs must equal the time horizon of the
selected aggregate plan.
c. the capacity requirements of the MPSs must equal or exceed the available capacity of the selected aggregate plan.
d. all of the above.
e. none of the above.
5. Which of the following statements regarding the economic order quantity
( EOQ ) is true?
f. if materials handling costs were to drop, the inventory carry cost per unit of an item would decrease and the EOQ would also decrease.
g. the EOQ model assumes a variable demand pattern.
h. the EOQ model combines several different item orders to the same supplier.
i. if an order quantity is larger than the EOQ, the annual holding (carry)
cost for inventory exceeds the annual ordering cost.
6. In the basic EOQ model, if lead time increases from 3 to 6 days, the EOQ
will:
a. double.
b. increase, but not double.
c. remain the same.
d. decrease by a factor of '2'.
7. Consider a piecemeal replenishment situation where the production rate is
100 units per day, the demand (consumption) rate is 4 units per day, and the
economic production lot size is 500 units. Which of the following statements
is true?
a. the average inventory per cycle is 250 units.
b. the average inventory per cycle is greater than 250 units.
c. the rate of buildup in inventory during the production cycle is
less than 100 units per day.
d. the rate of buildup in inventory during the production cycle is greater
than, or equal to 400 units per day.
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8. An item experiences an annual demand of 7,200 units. It costs $8.00 to hold
the item in inventory for one year and $16.00 to place an order. If the EOQ
model is used, what is the time between orders?
a. less than 1 week.
b. greater than 1 week but <= 2 weeks.
c. greater than 2 weeks but <= 3 weeks.
d. greater than 3 weeks.
9. Annual demand for a product is 1,600 units, and the holding cost is $2.00 per
unit per year. The cost of setting up the production line is $25.00 . There are
200 working days per year. The production manager decided to produce 200
units each time she started production. If it takes her 4 days to produce the
200 units, what was her production rate?
a. 80 units per day.
b. 60 units per day.
c. 50 units per day.
d. 100 units per day.
e. 40 units per day.
10. Judith Thompson is the manager of the student center cafeteria. She orders
frozen pizzas and bakes them on the premises. She anticipates a weekly
demand of ten (10) pizzas. The cafeteria is open 45 weeks a year, 5 days a
week. The ordering cost is $15.00 and the holding cost is $0.40 per pizza per
year. What is the optimal number of pizzas Judith should order?
a. 184
b. 9
c. 5
d. 28
e. none of the above.
11. Given the data in the previous question, the pizza vendor has a four (4) day
leadtime, and Judith wants to maintain 1 pizza for safety stock. What is the
least cost reorder point ?
a. 10
b. 8
c. 4
d. 9
e. none of the above.
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12. The annual demand for a product is 1,000 units. The company orders 200 units
each time an order is placed. The leadtime is six (6) days. There are 250 work-
ing days per year. If the reorder point is 50 units, what safety stock are they
using ?
a. 22
b. 4
c. 26
d. 28
e. none of the above.
13. A manager is using the normal distribution to determine the safety stock for a
product. The z-value of 2.33 would be associated with what service level ?
a. 95%
b. 97.5%
c. 98%
d. 99%
e. none of the above.
TRUE or FALSE: ( select the one correct response )
14. Average inventory per cycle equals average inventory per year.
TRUE FALSE
15. If lead time is zero, the reorder point ( ROP ) equals the optimal number of
backorders.
TRUE FALSE
. 16. When using ABC analysis, class C items should be reviewed frequently.
TRUE FALSE
17. An inventory chase strategy matches demand during the aggregate plan-
ning horizon by varying either the workforce level or the production rate.
TRUE FALSE
18. The aggregate plan will specify the number and type of goods and services
to be produced on a daily and weekly basis, as consumer demand and eco-
nomic conditions change.
TRUE FALSE
19. Production rate change costs follow a non-linear pattern.
TRUE FALSE
20. Aggregate plans should be developed to minimize costs in each period.
TRUE FALSE
21. Each aggregate plan should specify, as a minimum, a level of inventory,
labor force, and subcontracting.
TRUE FALSE
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22. Normally, property taxes are a non-relevant cost.
TRUE FALSE
23. Today, the definition of the quasi-unit is usually determined at the corporate
level.
TRUE FALSE
24. The graph or chart method of aggregate planning guarantees an optimal
minimum cost solution.
TRUE FALSE
25. If desired, a planner can eliminate inventory stockouts in one or all
generated aggregate plans.
TRUE FALSE
26. The lowest cost aggregate plan is usually generated by a chase strategy.
TRUE FALSE
27. It is assumed today that the demand for goods and services is unalterable in
aggregate planning.
TRUE FALSE
28. Good practice dictates postponement of production overtime until all
inventories have been exhausted in the aggregate plan.
TRUE FALSE
29. The linear decision rule is a computer model that uses a search procedure
to look for the minimum cost combination of values for labor force size
and production rate.
TRUE FALSE
30. Normally, subcontracting costs are a 'relevant cost' in aggregate planning.
TRUE FALSE
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31. Corporate policies can be embedded into aggregate plans at any time
during their development.
TRUE FALSE
32. Each of the 3 pure or principal aggregate planning strategies and their
variations require very different amounts and forms of cost data.
TRUE FALSE
33. When an aggregate planning problem is viewed as one of allocating
capacity to meet forecasted demand, it can be formulated in a linear
programming format.
TRUE FALSE
34. 'Service level' is the chance, measured in percent, that there will be
a stockout.
TRUE FALSE
35. Safety stock is ignored when computing the reorder point under
variable demand.
TRUE FALSE