Operations Management Fundamentals Exam

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Operations Fundamentals Mid-Term
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Name:_________________________________
Date:______________________
Multiple Choice: select the best answer; each worth 2 points for a total of 50 points.
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
Operations Fundamentals Mid-Term
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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
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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
Operations Fundamentals Mid-Term
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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
Operations Fundamentals Mid-Term
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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
Operations Fundamentals Mid-Term
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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
Operations Fundamentals Mid-Term
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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. (10 points)  D: 2,000 cases/year  CO: $200/order  CH: $4/case/year  Q: ?  R: ?  L: 1.5 weeks  P: $100/case  T: ?  TS: ?
Operations Fundamentals Mid-Term
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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 (10 points)
Operations Fundamentals Mid-Term
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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: (Worth 10 points)
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)
Operations Fundamentals Mid-Term
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29. Complete the Factoring Rate Method table and determine which location is the best choice. (10 points) 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
Operations Fundamentals Mid-Term
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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. (10 points)
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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