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Operations Fundamentals Mid-Term
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Operations Fundamentals Mid-Term

Name:_________________________________ Date:______________________
Multiple Choice: Select the most appropriate answer for each question.
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 include 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 goods customer can order before organizations realize a loss.
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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
19. What type of decision would taxes, labor availability and environmental regulations part
of?
a. Site
b. Region
c. Country
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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. What 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
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25. Match the ten strategic operations management to the correct description. Put the
appropriate letter in the answer column. (10 pts.)
Decisions Answer Description of decision
Design of goods and
services
A. The integration capacity needs, staffing,
technology, and inventory requirements
to determine efficient flow of materials,
people or information
Managing Quality B. Decisions that consider facility capacity,
production demands, and staff necessary
to maintain a reliable and stable process
Process strategy C. Consider ordering and holding decisions to
optimize.
Location strategies D. Determine customer’s quality
expectations
Layout strategies E. Integration of external network of vendors
or partners into firm’s strategy.
Human Resources F. Determining where to place the factory
while considering customers, labor
sources, costs, infrastructure, logistics and
government.
Supply-chain
management
G. Determines how the product will be made
or how the service will be delivered.
Inventory management H. How to recruit workers, motivate and
retain them with the right skills
Scheduling I. Determine schedule that best utilizes staff
and facilities to meet customer demands
Maintenance J. Define what is needed in each of the other
OM decision
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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.
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.
a. Determine the optimal order quantity.
28. 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.
a. Determine which order volume gives the most discount.
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29. 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.
Find the optimal batch quantity.
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30. 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.
Find the total cost of the system.
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31. Using the Factoring Rate Method table which location is best?
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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32. 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 best.
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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