Operations Management Fundamentals Exam

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

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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.

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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

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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

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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

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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

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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: ?

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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)

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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)

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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

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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