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Adding a complementary product to what is currently being produced is a demand management
strategy used when
a. demand exceeds capacity
b. capacity exceeds demand for a product which has stable demand
c. the existing product has seasonal or cyclical demand
d. price increases have failed to bring about demand management
e. efficiency exceeds 100 percent
An organization whose capacity is on that portion of the average unit cost curve that falls as output
a. has a facility that is below optimum operating level and should build a larger facility
b. has a facility that is above optimum operating level and should build a smaller facility
c. is suffering from diseconomies of scale
d. has utilization higher than efficiency
e. has efficiency higher than utilization
Which of the following is false regarding capacity expansion?
a. "Average" capacity sometimes leads demand, sometimes lags it.
b. If "lagging" capacity is chosen, excess demand can be met with overtime or subcontracting.
c. Total cost comparisons are a rather direct method of comparing capacity alternatives.
d. Capacity may only be added in large chunks.
e. All of the above are true.
The basic break-even model can be modified to handle more than one product. This extension of
the basic model requires
a. price and sales volume for each product
b. price and variable cost for each product, and the percent of sales that each product represents
c. that the firm have very low fixed costs
d. that the ratio of variable cost to price be the same for all products
e. sales volume for each product
A location decision for an appliance manufacturer would tend to have a(n)
a. cost focus
b. labor focus
c. revenue focus
d. environmental focus
e. education focus
6. Which of the following is usually not one of the top considerations in choosing a country for a
a. availability of labor and labor productivity
b. exchange rates
c. attitude of governmental units
d. zoning regulations
e. location of markets
7. The center-of-gravity method does not take into consideration the
a. location of markets
volume of goods shipped to the markets
value of the goods shipped
combination of volume and distance
center-of-gravity method considers none of the above
8. Which of the following worker characteristics would likely be least important for U.S. firms
looking to open up call centers in different countries?
a. willing to accept low wages
b. have a high level of education
c. speak English
d. possess an in-depth knowledge of American popular culture
e. are young
Because the fixed-position layout problem is so difficult to solve on-site, operations managers
virtually never employ this layout strategy
utilize this approach only for construction projects such as bridges and office towers
increase the size of the site
often complete as much of the project as possible off-site
utilize this layout only for defense contractors
Which of the following constitutes a major trend influencing office layouts?
A process layout problem consists of 4 departments, each of which can be assigned to one of
four rooms. The number of different solutions to this problem is _____, although not all of them
may have different material handling costs.
12. "A special arrangement of machinery and equipment to focus on production of a single product
or group of related products" describes what layout type?
a. fixed-position layout
b. intermittent production
c. focused factory
d. work cell
e. warehouse layout
13. The most common tactic followed in process-layout planning is to arrange departments or work
centers so they
a. minimize the cost of skilled labor
b. maximize the machine utilization
c. allocate the available space equally to all the departments
d. minimize the costs of material handling
none of the above
Ambient conditions, spatial layout and functionality, and signs, symbols, and artifacts are all
indicators of imbalance on an assembly line
indicators that cross-docking has been successful
elements of customization in a warehouse layout
elements of servicescapes
elements of successful office layouts
The production process of ABC manufacturing is as shown in the following figure:
A product in this operation needs to go through only one of the painting operations:
15. Which one of the operations is a bottleneck operation?
16. What is the bottleneck of the system?
17. What is the throughput time?
18. If the company operates 8 hours a day, 6 days/week, what is the weekly capacity?
a. 144 units
b. 96 units
c. 288 units
d. 240 units
19. Suppose that a second assembly machine is added, and it takes the same time as the original
assembly machine. What is the new weekly capacity?
20. The staff training center at a large regional hospital provides training sessions in CPR to all
employees. Assume that the capacity of this training system was designed to be 1200 employees
per year. Since the training center was first put in use, the program has become more complex,
so that 1050 now represents the most employees that can be trained per year. In the past year,
950 employees were trained. The efficiency of this system is approximately _____ and its
utilization is approximately _____.
a. 79.2 percent; 90.5 percent
b. 90.5 percent; 79.2 percent
c. 87.5 percent; 950 employees
d. 950 employees; 1050 employees
e. 110.5 percent; 114.3 percent
A product sells for $5 and has unit variable costs of $3. This product accounts for $20,000 in
annual sales, out of the firm's total of $60,000. The weighted contribution of this product is
Fabricators, Inc. wants to increase capacity by adding a new machine. The fixed costs for
machine A are $90,000, and its variable cost is $15 per unit. The revenue is $21 per unit. The
break-even point for machine A is
cannot be calculated from the information provided
23. A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per
year, and variable costs 0.30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with
variable costs of $0.35 per unit. If demand is expected to be 10 million units, which plant offers the
lowest total cost?
a. Plant A, because it is cheaper than Plant B for all volumes under 8,000,000 units
b. neither Plant A nor Plant B, because the crossover point is at 10 million units
c. Plant A, because it is cheaper than Plant B for all volumes
d. Plant B, because it has the lower variable cost per unit
e. Plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units
24. A full-service restaurant is considering opening a new facility in a specific city. The table
below shows its ratings of four factors at each of two potential sites.
Affluence of local population
The score for Gary Mall is _____ and the score for Belt Line is ______.
a. 120; 120
b. 22; 24
c. 18; 120
d. 34; 28
e. none of the above
25. East Texas Seasonings is preparing to build one processing center to serve its four sources of
seasonings. The four source locations are at coordinates shown below. Also, the volume from
each source is provided. What is the center of gravity?
a. X = 28.125; Y = 31.25
b. X = 22000; Y = 24000
c. X = 27.5; Y = 40
d. center of gravity = 28
e. none of the above
26. A production line is to be designed for a product whose completion requires 21 minutes of
work. The factory works 400 minutes per day. Can an assembly line with five workstations
make 100 units per day?
a. yes, with exactly 100 minutes to spare
b. no, but four workstations would be sufficient
c. no, it will fall short even with a perfectly balanced line
d. yes, but the line's efficiency is very low
e. cannot be determined from the information given
27. Four hundred and eighty minutes of production time are available per day. The schedule calls
for the production of 80 units per day. Each unit of the product requires 30 minutes of work.
What is the theoretical minimum number of workstations?
28. A production line is to be designed for a job with four tasks. The task times are 2.4 minutes,
1.4 minutes, 0.9 minutes, and 1.7 minutes. The maximum cycle time is ______ and the
minimum cycle time is ______ minutes.
a. 1.8; 1.4
b. 1.6; 0.9
c. 6.4; 2.4
d. 2.4; 0.9
e. none of these
29. An assembly line consists of 21 tasks grouped into 5 workstations. The sum of the 21 task
times is 85 minutes. Cycle time for the line is 20 minutes. The efficiency of this line is
a. 4.2 percent
b. 17 percent
c. 85 percent
d. 100 percent
e. none of the above
30. There are three individuals (A, B, and C) they can each fit into any of three office spaces (1,
2, and 3) off the corridor behind the desk. The distance 1-2 is 20 feet, 2-3 is 20 feet, and 1-3
is 40 feet. The matrix of work (trips per day) at the three centers is in the following table.
What is the lowest cost assignment for A-2, B-1, C-3?
a. 4200 feet
b. 3500 feet
c. 9000 feet
d. 150 feet
31. Given the following precedence diagram, if cycle time is 4 minutes, what is the total idle time?
d. cannot be determined from the information given
32. Given the above precedence diagram, if cycle time is 4 minutes and you assign tasks based on
ranked positional weight what activities are placed in station 2?
a. B, D
33.Suppose that the market has a 70% chance of being favorable and a 30% chance of being unfavorable.
A favorable market will yield a profit of $300,000, while an unfavorable market will yield a loss of
$20,000. What is the expected monetary value (EMV) in this situation?
34. A small producer of music boxes wants to move to a larger facility. Two alternative facilities have
been found. Site 1 has a fixed cost of $500,000 per year, with a variable cost of $25 per unit. Site 2 has a
fixed cost of $800,000 per year, but a variable cost of $22 per unit.
At what volume of output would the two locations have the same total cost?
None of above.
35. The causes of variation in statistical process control are:
A) cycles, trends, seasonality, and random variations.
B) producer's causes and consumer's causes.
C) mean and range.
D) natural causes and assignable causes.
E) Type I and Type II.
36. The number of defects after a hotel room cleaning (sheets not straight, smears on mirror,
missed debris on carpet, etc.) should be measured using what type of control chart?
A) x-bar chart
E) either x-bar chart or R chart
37. An x-bar control chart was examined, and no data points fell outside of the limits. Can this
process be considered in control?
A) Not yet, there could be a pattern to the points.
B) Not yet, the R-chart must be checked.
C) Not yet, the number of samples must be known.
E) Both A and B
38. If = 23 ounces, σ = 1.0 ounces, and n = 16, what will be the ± 3σ control limits for the x-bar
39. A manager wishes to build a 3-sigma range chart for a process. The sample size is five, the
mean of sample means is 28.5, and the average range is 3.9. From Table S6.1, the appropriate
value of D3 is 0, and D4 is 2.115. What are the UCL and LCL, respectively, for this range chart?
A) 30.75 and 26.25
B) 40.2 and 16.8
C) 11.2 and 0
D) 8.25 and 0
E) 32.4 and 24.6
40. The defect rate for a product has historically been about 1.5%. What are the upper and lower
control chart limits for a p-chart, if you wish to use a sample size of 50 and 3-sigma limits?
Answer: UCLp = + 3
LCLp = - 3
= 0.015 + 3 ×
= 0.015 - 3 ×
= -0.0366, or zero
41. A bank's manager has videotaped 20 different teller transactions to observe the number of
mistakes being made. Eight transactions had no mistakes, five had one mistake, five had two
mistakes, and two had three mistakes. Compute proper control limits at the 95% confidence
Answer: A c-chart should be used, and from Table S6.2, the z-value = 1.96
The mean c-bar = [8(0) + 5(1) + 5(2) + 2(3)]/20 = 1.05
UCLc = 1.05 + 1.96
LCLc = 1.05 − 1.96
= −-0.958 (or 0)
42. For the transportation problem below, construct an initial feasible solution using the
Answer: The lowest cost in the matrix is 7; assign 30 units to S2D2 and rule out all other cells in
D2. Now the lowest cost in the table is 8; assign 50 units to S3D1 and rule out all other cells in
S3. The smallest cost is now 9; assign 45 units to S1D3 and rule out all other S1. The remaining
assignments are 60 units to S2D4, 30 units to S2D1, and 25 units to S2D3. These assignments
are summarized in the table below.
43. Consider the transportation problem and its optimal solution in the tables below. What is
total shipping cost?
Dest. 4 SUPPLY
C) 300 units
44. Consider the transportation problem and its optimal solution in the tables below. The cell
Source 3 - Destination 3 is currently empty. What would be the change in the total shipping cost
if the largest possible amount were shipped using that route, leaving all the supply and demand
45. Consider the transportation problem and its initial solution in the table below. What is the
improvement index for the empty cell Source 1 - Destination 3?