Operations Fundamentals Mid-Term

Multiple Choice: select the best answer;

1. Operation Management is a set of activities that forms goods and service by?

a. Transforming inputs into outputs.

b. Managing raw material and inventory.

c. Efficient and effective processes.

d. Transforming ideas into action.

2. What three functions are necessary in order to produce a product or deliver a service?

a. IT, Finance and Sales

b. Operations, Finance and IT

c. Marketing, Operations and Finance

d. Strategic planning, Marketing and Sales

3. When defining the supply chain, which does NOT belong?

a. A global network of organizations and activities that supplies a firm with goods and services.

b. Specialize expert knowledge, instant communications, and cheaper transportation.

c. Organizations rely on other organization's product and services to reduce cost.

d. Raw materials received and stored in inventory for operations.

4. The operations management process includes which of the following?

a. Planning

b. Organizing

c. Staffing

d. Leading

e. Controlling

f. All the above

5. The objective of Inventory Management is to......

a. Ensure product is available to meet customer demands.

b. Strike a balance between inventory investment and customer service.

c. Minimize costs of buy raw materials.

d. Maintain enough raw materials for production.

6. Inventory management solves what two basic issues?

a. The amount of raw material needed for production and customers.

b. The cost of raw materials and the timing when the materials are needed.

c. How much and when to order.

d. How much goods and services are needed to meet demand and how to deliver the goods and services.

7. Which type of demand is influenced by the market?

a. Dependent

b. Independent

c. Co-dependent

d. Inherent

8. Which demand exhibits on-again, off again patterns?

a. Dependent

b. Independent

c. Co-dependent

d. Inherent

9. The Economic Order Quantity is used to assist an organization to determine?

a. The amount of goods customers need to order to be consider economical.

b. The desired inventory level.

c. The level of product needed to meet demands.

d. The amount of of production runs an organization needs to complete to become cost effective.

Operations Fundamentals Mid-Term

10. The following are components of what type of inventory cost: order preparation expenses, mailing charges, shipping cost?

a. Total cost

b. Ordering cost

c. Holding cost

d. Maintenance cost

11. The following are components of what type of inventory cost: finance charges, warehousing, and shelf space, handling equipment, bookkeeping, insurance, taxes or spoilage?

a. Total cost

b. Ordering cost

c. Holding cost

d. Maintenance cost

12. Ordering costs ______________ as the order size increases.

a. Declines

b. Increases

c. Constant

d. No effect

13. Holding costs are __________ regardless of the number of units ordered.

a. Declines

b. Increases

c. Constant

d. No effect

14. An inventory system can be designed by defining two inventory rules:

a. Order Quantity and Re-order Point

b. Ordering and Holding

c. Order Quantity and Inventory Quantity

d. Production cycle and Customer Demands

15. Units that an organization will carry over and above Q in order to meet contingency is known as?

a. Overflow stock

b. Extra inventory

c. Safety Stock

d. Safety inventory

16. Savings are realized through reduced ordering cost and lower cost of buying is a result of?

a. Quantity Discount

b. Vendor Discount

c. Inventory Discount

d. Sales Quantity

17. The production order quantity model helps organizations by?

a. Finding the correct inventory amount needed to support production at the most economical cost of the inventory system.

b. Finding the best batch size for production at the most economical cost of the inventory system.

c. Finding the correct amount of units needed to support demand.

d. None of the above.

18. What type of decision would political risks, cultural issues and exchange rates be part of?

a. Site

b. Region

c. Country

d. Rural

19. What type of decision would taxes, labor availability and environmental regulations part of?

a. Site

b. Region

c. Country

d. Rural

20. The most popular method of evaluating locations is?

a. The Factor- Rating Method

b. Location Cost-Volume Analysis

c. Center-of-Gravity Method

d. Transportation Model

21. Method used to find a distribution center that will minimize distribution costs?

a. The Factor- Rating Method

b. Location Cost-Volume Analysis

c. Center-of-Gravity Method

d. Transportation Model

22. Method used to determine the best routes to ship from several points of supply (sources) to points of demands (destination) to minimize production and shipping costs.

a. The Factor- Rating Method

b. Location Cost-Volume Analysis

c. Center-of-Gravity Method

d. Transportation Model

23. Which of the following is NOT a goal of a plant, office or retail layout?

a. Higher utilization of space, equipment, and people

b. Improved flow of information, materials, or people

c. Improved use of utility resources.

d. Improved employee morale and safe working conditions

e. Improved customer/client interaction

24. Ambient conditions, spatial layout, signs, symbols or artifacts are part of which layout concept?

a. Cross-docking

b. Workcell

c. Servicescapes

d. Product-oriented

25. The integration of external network of vendors or partners into firm's strategy is what type of management?

a. Human resource management

b. Inventory management

c. Quality Management

d. Supply chain management

26. ABC Company has a demand for 2000 units each year. The cost of each unit is $100. It costs ABC $200 to place an order and $4 to carry a unit in the stock pear year. Further, the supplier needs week and a half to deliver their order. Assume 50 weeks to a year.

a. Calculate the Total Annual Cost of the System.

D: 2,000 cases/year

 CO: $200/order

 CH: $4/case/year

 Q: ?  R: ?

 L: 1.5 weeks

 P: $100/case  T: ? TS: ?

27. The VAHC Lab uses 500 test kits each year. CO = $10, CH = $2/ kit/ year. Orders of fewer than (A) 73 kits cost $60/case; (B) 73 through 144 kits cost $55/ kit; and (C) larger orders cost $50/ kit.

Determine which order volume provides the best discount in terms of savings

28. Ashlee's Beach Chairs Company produces upscale beach chairs. Annual demand for the chairs is estimated at 1,000 units. The frames are made in batches before the final assembly process. Ashlee's final assembly department needs frames at a rate of 20 per week. Ashlee's frame department can produce 25 frames per week.

The setup cost is $100/setup, the annual holding cost per frame is $4, and the cost of production $30 a frame. The company operates 50 weeks per year. Set up an optimum inventory system for Ashlee that would minimize the annual cost of the inventory system. Find the following:

a. Production quantity (Q)

b. Number of production runs

c. Length of production run (tp)

d. Peak inventory

e. Average inventory

f. Idle time (ti)

g. Cycle time

h. Number of cycles

i. Total annual inventory cost (T)

j. Total annual cost of the system (TS)

29. Complete the Factoring Rate Method table and determine which location is the best choice. Key Success Factors Weight Scores (Out of 100) Weighted scores China Taiwan China Taiwan

Labor market .20 80 60

People to car ratio .05 50 60

Per capita income .10 80 80

Tax structure .40 70 70

Education & health .25 60 70

Totals

30. Drew Rosen Corp. is considering adding a fourth plant to its three existing plants in Decatur, Minneapolis and Carbondale. Both St. Louis and East St. Louis are being considered. Evaluating only the transportation costs per units as provided, decide which site is provides the least cost.

From Existing Plants

To Decatur Minneapolis Carbondale Demand

Blue Earth $20 $17  $21 250

Ciro $25 $27 $20 200

Desmoines $22 $25 $22 350

Capacity 300 200 150

From Proposed Plants To East St. Louis

St. Louis

Blue Earth $29 $27

Ciro $30 $28

Desmoines $30 $31

Capacity 150 150

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