Operations Management Quiz Questions And Answers
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- 1.
1. A large office which has a typing pool, a copying department and all the managers in a large suite of offices is an example of:
- A.
A line process
- B.
A batch process
- C.
A project process
- D.
A continuous process
Correct Answer
B. A batch processExplanation
A large office which has a typing pool, a copying department, and all the managers in a large suite of offices is an example of a batch process. In a batch process, similar tasks or activities are grouped together and processed in batches. In this case, the typing pool and copying department can be considered as separate batches, where similar tasks are performed together. The managers in the large suite of offices can also be considered as a separate batch, as they are performing similar managerial tasks. This type of process allows for efficient use of resources and can result in increased productivity.Rate this question:
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- 2.
A company makes necklaces with attached letters. Department A makes up the chains and letters. Department B assembles the necklaces when orders are received. Departments A and B are, respectively:
- A.
Make-to-stock, make-to-stock
- B.
Make-to-stock, make-to-order
- C.
Make-to-order, make-to-stock
- D.
Make-to-order, make-to-order
Correct Answer
B. Make-to-stock, make-to-orderExplanation
Department A is responsible for making the chains and letters, which indicates that they produce the necklaces in advance without any specific customer order. This aligns with the concept of make-to-stock, where products are made based on anticipated demand. On the other hand, Department B assembles the necklaces when orders are received, implying that they customize the necklaces based on individual customer requests. This corresponds to the make-to-order approach, where products are made specifically for each customer order. Therefore, the correct answer is make-to-stock, make-to-order.Rate this question:
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- 3.
A company makes necklaces with attached letters. Department A makes up the chains and letters. Department B assembles the necklaces when orders are received. Department B would be primarily concerned with:
- A.
Forecasting customer orders
- B.
Planning capacity
- C.
Use of overtime
- D.
Delivery time
- E.
A and B
Correct Answer
D. Delivery timeExplanation
Department B would be primarily concerned with delivery time because they are responsible for assembling the necklaces when orders are received. Their main focus would be ensuring that the completed necklaces are delivered to customers within the agreed-upon timeframe. This involves coordinating with Department A to ensure that the chains and letters are ready for assembly in a timely manner, as well as managing any potential delays or issues that may arise during the assembly process.Rate this question:
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- 4.
An entrepreneur is planning to start a factory to produce specialized plastic containers. She has decided to choose either a line or batch process and has selected two possible sites, one in a small town and one in a big city. She has discovered the following facts: Small Town City Capital Not readily available Readily available Labor Unskilled available All types of labor Market Small Large Based on the information just presented, which of the following should be chosen?
- A.
Line in city
- B.
Line in small town
- C.
Batch in city
- D.
Batch in small town
Correct Answer
A. Line in cityExplanation
Based on the information provided, the entrepreneur should choose a line process in the city. This is because the capital is readily available in the city, which would be necessary for setting up a factory. Additionally, the city offers a larger market, which would provide more potential customers for the specialized plastic containers. The availability of all types of labor in the city would also be beneficial for the factory's operations.Rate this question:
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- 5.
Identify the correct statement from the given choices.
- A.
A batch process is characterized by jumbled flow while the line process is characterized by a regular sequential flow.
- B.
The project form of operations is characterized by difficult planning and scheduling rules.
- C.
Batch production is synonymous to mass production systems.
- D.
All the above
- E.
A & B
Correct Answer
E. A & BExplanation
The correct statement from the given choices is "A & B". This means that both statement A ("A batch process is characterized by jumbled flow while the line process is characterized by a regular sequential flow") and statement B ("The project form of operations is characterized by difficult planning and scheduling rules") are correct.Rate this question:
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- 6.
Which of the following statements regarding Dell Computer is false?
- A.
Dell is a practitioner of the mass customization process
- B.
Dell builds its computers overseas in order to gain a low-cost advantage.
- C.
Dell keeps very little inventory of finished goods.
- D.
Dell utilizes a global supply chain, but assembles its computers in the U.S.
- E.
Dell's research focuses on manufacturing issues, not computer part design
Correct Answer
B. Dell builds its computers overseas in order to gain a low-cost advantage.Explanation
Dell builds its computers overseas in order to gain a low-cost advantage. This statement is false because Dell actually assembles its computers in the U.S. rather than building them overseas. Dell utilizes a global supply chain, but the assembly of its computers takes place in the U.S. This allows Dell to have better control over the manufacturing process and ensure quality control.Rate this question:
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- 7.
A product-focused process is commonly used to produce
- A.
High-volume, high-variety products
- B.
Low-volume, high-variety products
- C.
High-volume, low-variety products
- D.
Low-variety products at either high- or low-volume
- E.
High-volume products of either high- or low-variety
Correct Answer
C. High-volume, low-variety productsExplanation
A product-focused process is commonly used to produce high-volume, low-variety products. This means that the process is designed to efficiently produce a large quantity of a limited range of products. This type of process is often used in industries such as automotive manufacturing, where a small number of models are produced in large quantities. The focus is on achieving economies of scale and maximizing production efficiency.Rate this question:
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- 8.
Harley Davidson
- A.
Utilizes job shops to make each of its modules
- B.
Uses product focused manufacturing
- C.
Uses a large number of modules to build a small number of different bikes
- D.
Uses work cells to feed its assembly line
- E.
All of the above are true.
Correct Answer
D. Uses work cells to feed its assembly lineExplanation
Harley Davidson utilizes work cells to feed its assembly line. This means that the company has organized its manufacturing process into small, self-contained work cells, where each cell is responsible for a specific task or module. These work cells then feed their completed modules into the assembly line, allowing for a more efficient and streamlined production process. This method allows Harley Davidson to have better control over the quality and timing of each module, ultimately leading to a smoother assembly line and the production of high-quality motorcycles.Rate this question:
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- 9.
When done correctly, mass customization
- A.
Increases pressure on supply chain performance
- B.
Helps eliminate the guesswork that comes with sales forecasting
- C.
Drives down inventories
- D.
Increases pressure on scheduling
- E.
. all of the above
Correct Answer
E. . all of the aboveExplanation
Mass customization refers to the practice of producing goods or services that are tailored to meet the specific needs and preferences of individual customers. When done correctly, it increases pressure on supply chain performance because it requires efficient coordination and communication between various stakeholders. It also helps eliminate the guesswork that comes with sales forecasting as products are made based on actual customer orders. This, in turn, drives down inventories as there is less need for stockpiling finished goods. Additionally, mass customization increases pressure on scheduling as production processes need to be flexible and responsive to accommodate individual customer requests. Therefore, all of the given options are correct.Rate this question:
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- 10.
In mass service and service factory quadrants of the service process matrix, the operations manager could focus on all of the following except
- A.
Automation
- B.
Standardization
- C.
Tight quality control
- D.
Removing some services
- E.
Customization
Correct Answer
E. CustomizationExplanation
In the mass service and service factory quadrants of the service process matrix, the operations manager could focus on automation, standardization, tight quality control, and removing some services to improve efficiency and reduce costs. However, customization is not a priority in these quadrants as the focus is on providing standardized and efficient services to a large number of customers.Rate this question:
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- 11.
Which of the following statements regarding ethical and environmentally friendly processes is true?
- A.
Operations managers can be environmentally sensitive, but they must avoid following a low cost strategy.
- B.
Processes can be environmentally friendly or socially responsible, but not both.
- C.
Operations managers can be environmentally sensitive and still follow a low cost strategy.
- D.
Using energy-efficient lighting saves so little that it should not be labeled environmentally friendly.
- E.
The only business strategy consistent with ethical and environmentally sensitive management is the differentiation strategy.
Correct Answer
C. Operations managers can be environmentally sensitive and still follow a low cost strategy.Explanation
This statement suggests that operations managers can prioritize environmental concerns while still implementing cost-saving measures. It implies that being environmentally friendly does not necessarily mean sacrificing a low cost strategy. This indicates that it is possible for businesses to adopt sustainable practices without compromising on their financial goals.Rate this question:
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- 12.
1. FedEx chose Memphis, Tennessee, as its U.S. hub because
- A.
The city is in the center of the U.S., geographically
- B.
The airport has relatively few hours of bad weather closures
- C.
It needed a means to reach cities to which it did not have direct flights
- D.
The firm believed that a hub system was superior to traditional city-to-city flight scheduling
- E.
All of the above are true.
Correct Answer
B. The airport has relatively few hours of bad weather closuresExplanation
FedEx chose Memphis, Tennessee, as its U.S. hub because the airport has relatively few hours of bad weather closures. This means that the airport in Memphis is less likely to experience weather-related disruptions, allowing FedEx to maintain a more reliable and efficient operation. By selecting a location with fewer weather closures, FedEx can minimize delays and ensure timely delivery of packages to its customers.Rate this question:
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- 13.
Which of the following statements regarding FedEx is true?
- A.
. Its hub in Memphis, Tennessee, was selected because of its low cost.
- B.
Memphis, Tennessee, is the only hub in the company's global flight network.
- C.
FedEx believes the hub system helps reduce mishandling and delays due to better controls.
- D.
FedEx uses a hub system in the U.S., but a city-to-city network in other countries
- E.
Memphis is FedEx's only hub airport in the United States.
Correct Answer
C. FedEx believes the hub system helps reduce mishandling and delays due to better controls.Explanation
FedEx believes that their hub system helps reduce mishandling and delays due to better controls. This means that by centralizing operations at their hub in Memphis, Tennessee, they are able to have more oversight and control over the handling and movement of packages. This helps to minimize the chances of mishandling or delays in delivery.Rate this question:
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- 14.
Which of the following is usually not one of the top considerations in choosing a country for a facility location?
- A.
Availability of labor and labor productivity
- B.
Exchange rates
- C.
Attitude of governmental units
- D.
Zoning regulations
- E.
Location of markets
Correct Answer
D. Zoning regulationsExplanation
Zoning regulations are usually not one of the top considerations in choosing a country for a facility location. When selecting a country for facility location, businesses typically prioritize factors such as the availability of labor and labor productivity, exchange rates, the attitude of governmental units, and the location of markets. Zoning regulations, which determine how land can be used in a specific area, are important for local planning and development but are not usually the primary concern when deciding on a country for facility location.Rate this question:
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- 15.
Which of these factors would be considered when making a location decision at the region/community level?
- A.
Government rules, attitudes, stability, incentives
- B.
Cultural and economic issues
- C.
Zoning restrictions
- D.
Environmental impact issues
- E.
Proximity to raw materials and customers
Correct Answer
E. Proximity to raw materials and customersExplanation
When making a location decision at the region/community level, one of the factors that would be considered is the proximity to raw materials and customers. This is important because being close to raw materials reduces transportation costs and ensures a steady supply, while being close to customers allows for efficient distribution and quick response to their needs. Therefore, considering the proximity to raw materials and customers helps in optimizing logistics and ensuring smooth operations for a business.Rate this question:
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- 16.
A firm is seeking a new factory location, and is considering several countries worldwide. In some of these countries, child labor is prevalent; in others, working conditions and worker safety are inferior to conditions in the U.S. An operations manager paying attention to __________will factor these issues into the location decision.
- A.
Ethical and social responsibility issues
- B.
Critical success factors
- C.
Factor rating systems
- D.
Geographic information systems
- E.
Regression models
Correct Answer
A. Ethical and social responsibility issuesExplanation
An operations manager paying attention to ethical and social responsibility issues will factor in the prevalence of child labor and inferior working conditions and worker safety in different countries when making the decision on the new factory location. This shows that the manager is considering the impact of their decision on society and taking into account the ethical implications of their choice.Rate this question:
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- 17.
Which of the following statements regarding "proximity" in the location decision is false?
- A.
Service organizations find that proximity to market is the most critical primary location factor.
- B.
Manufacturers want to be near customers when their product is bulky, heavy, or fragile.
- C.
Perishability of raw materials is a good reason for manufacturers to locate near the supplier, not the customer.
- D.
. Reduction in bulk is a good reason for a manufacturer to locate near the supplier
- E.
Clustering among fast food chains occurs because they need to be near their labor supply.
Correct Answer
E. Clustering among fast food chains occurs because they need to be near their labor supply.Explanation
Clustering among fast food chains occurs not because they need to be near their labor supply, but because they benefit from being near each other due to factors such as increased customer traffic and shared advertising opportunities. The statement is false because labor supply is not the primary reason for the clustering of fast food chains.Rate this question:
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- 18.
Which of the following is the best example of the proximity rule that, for service firms, proximity to market is the most important location factor?
- A.
Soft drinks are bottled in many local plants, where carbonated water is added to proprietary syrups that may have been shipped long distances
- B.
Few people will travel out-of state for a haircut.
- C.
Patients will travel very long distances to have their hernia surgeries performed at Shouldice Hospita
- D.
Furniture makers choose to locate near the source of good hardwoods, even though it means locating near other furniture manufacturers
- E.
Metal refiners (smelters) locate near mines to accomplish significant weight reduction near the metal's source
Correct Answer
B. Few people will travel out-of state for a haircut.Explanation
The best example of the proximity rule for service firms is that few people will travel out-of-state for a haircut. This demonstrates that proximity to the market is crucial for service firms as customers are unlikely to travel long distances for such services. This highlights the importance of being conveniently located to attract and serve customers effectively.Rate this question:
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- 19.
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 10,000,000 units
- B.
Plant B, because it is cheaper than Plant A for all volumes over 10,000,000 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.
Neither Plant A nor Plant B, because the crossover point is at 10 million units
Correct Answer
B. Plant B, because it is cheaper than Plant A for all volumes over 10,000,000 unitsExplanation
Plant B offers the lowest total cost for volumes over 10,000,000 units. This is because even though Plant B has a higher fixed cost compared to Plant A, its lower variable cost per unit compensates for the higher fixed cost at higher volumes. As the demand is expected to be 10 million units, which is exactly the crossover point, Plant B becomes the more cost-effective option.Rate this question:
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- 20.
Which of the following statements regarding Starbucks Coffee is false?
- A.
The firm plans to open three new cafes per day around the world
- B.
The firm uses GIS to evaluate most site decision
- C.
The firm's cafes are exclusively in traditional settings: malls, tourist areas, and airports
- D.
The firm places cafes into ever more innovative locations
- E.
The firm put cafes in Japan, even though that country had no GIS data available
Correct Answer
C. The firm's cafes are exclusively in traditional settings: malls, tourist areas, and airportsExplanation
The given answer states that the firm's cafes are exclusively in traditional settings such as malls, tourist areas, and airports. However, this is false because the firm puts cafes in ever more innovative locations, indicating that they are not limited to traditional settings.Rate this question:
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- 21.
Which of the following is most likely to affect the location strategy of a manufacturing firm?
- A.
Appearance/image of the area
- B.
Utility costs
- C.
Purchasing power of drawing area
- D.
Competition in the area
- E.
Parking availability
Correct Answer
B. Utility costsExplanation
Utility costs can significantly impact the location strategy of a manufacturing firm. High utility costs can increase the operational expenses of the firm, affecting its profitability. Therefore, a manufacturing firm is likely to consider utility costs when deciding on the location of its facilities. Lower utility costs in a particular area can make it more attractive for the firm as it can help reduce expenses and improve the overall competitiveness of the business.Rate this question:
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- 22.
1.What two numbers are contained in the daily report to the CEO of Walt Disney Parks & Resorts regarding the six Orlando parks?
- A.
Yesterday’s forecasted attendance and yesterday’s actual attendance
- B.
Yesterday’s actual attendance and today’s forecasted attendance
- C.
Yesterday’s forecasted attendance and today’s forecasted attendance
- D.
Yesterday’s actual attendance and last year’s actual attendance
- E.
Yesterday’s forecasted attendance and the year-to-date average daily forecast error
Correct Answer
A. Yesterday’s forecasted attendance and yesterday’s actual attendanceExplanation
The daily report to the CEO of Walt Disney Parks & Resorts contains two numbers: yesterday's forecasted attendance and yesterday's actual attendance. These numbers provide valuable information about the accuracy of the attendance forecasts and the actual number of visitors to the Orlando parks on a given day.Rate this question:
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- 23.
2. Forecasts
- A.
Become more accurate with longer time horizons
- B.
Are rarely perfect
- C.
Are more accurate for individual items than for groups of items
- D.
. all of the above
- E.
None of the above
Correct Answer
B. Are rarely perfectExplanation
Forecasts are rarely perfect because they are based on assumptions and predictions about the future, which can be influenced by various factors such as changes in market conditions, unexpected events, and uncertainties. Even with longer time horizons, forecasts can still be subject to errors and inaccuracies due to the inherent complexity and unpredictability of the future. Therefore, it is unlikely for forecasts to be completely accurate, making the statement "are rarely perfect" the correct answer.Rate this question:
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- 24.
3. The three major types of forecasts used by business organizations are
- A.
Strategic, tactical, and operational
- B.
Economic, technological, and demand
- C.
Exponential smoothing, Delphi, and regression
- D.
Causal, time-series, and seasonal
- E.
Departmental, organizational, and territorial
Correct Answer
B. Economic, technological, and demandExplanation
The correct answer is economic, technological, and demand. Business organizations use economic forecasts to understand the overall economic conditions and trends that may impact their operations. Technological forecasts help organizations anticipate advancements in technology that may affect their products or services. Demand forecasts are used to predict customer demand for a product or service, helping organizations plan their production and inventory levels. These three types of forecasts are essential for organizations to make informed decisions and stay competitive in the market.Rate this question:
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- 25.
4. Which of the following is not a type of qualitative forecasting?
- A.
Executive opinions
- B.
Sales force composites
- C.
Consumer surveys
- D.
The Delphi method
- E.
Moving average
Correct Answer
E. Moving averageExplanation
Moving average is not a type of qualitative forecasting because it is a quantitative forecasting method. Qualitative forecasting methods rely on subjective opinions, judgments, and insights to make predictions, while quantitative methods use historical data and mathematical models to forecast future outcomes. The moving average, on the other hand, is a quantitative method that calculates the average of a set of data points over a specific period of time to identify trends and patterns. Therefore, it does not fall under the category of qualitative forecasting.Rate this question:
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- 26.
5. Which of the following techniques uses variables such as price and promotional expenditures, which are related to product demand, to predict demand?
- A.
Associative models
- B.
Exponential smoothing
- C.
Weighted moving average
- D.
Time series
- E.
All of the above
Correct Answer
A. Associative modelsExplanation
Associative models use variables such as price and promotional expenditures, which are related to product demand, to predict demand. These models analyze the relationship between these variables and demand patterns to make accurate predictions. Associative models are useful in understanding the impact of various factors on demand and can be used for forecasting and decision-making purposes.Rate this question:
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- 27.
6. Which of the following statements about time series forecasting is true?
- A.
It is based on the assumption that future demand will be the same as past demand.
- B.
. It makes extensive use of the data collected in the qualitative approach.
- C.
The analysis of past demand helps predict future demand.
- D.
Because it accounts for trends, cycles, and seasonal patterns, it is more powerful than causal forecasting.
- E.
All of the above are true.
Correct Answer
C. The analysis of past demand helps predict future demand.Explanation
The statement "The analysis of past demand helps predict future demand" is true because time series forecasting relies on historical data to identify patterns and trends that can be used to make predictions about future demand. By analyzing past demand, patterns such as seasonality, trends, and cycles can be identified and incorporated into the forecasting model to make accurate predictions about future demand. This statement is true and is a fundamental principle of time series forecasting.Rate this question:
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- 28.
Time series data may exhibit which of the following behaviors?
- A.
Trend
- B.
Random variations
- C.
Seasonality
- D.
Cycles
- E.
They may exhibit all of the above
Correct Answer
E. They may exhibit all of the aboveExplanation
Time series data refers to a sequence of observations recorded at regular intervals over time. These observations can display various behaviors. Trend refers to a long-term increase or decrease in the data. Random variations are unpredictable fluctuations in the data. Seasonality refers to regular patterns that occur at fixed intervals, such as daily, weekly, or yearly. Cycles are repetitive patterns that occur over longer periods. Therefore, time series data can exhibit all of these behaviors, making the given answer correct.Rate this question:
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- 29.
What is the approximate forecast for May using a four-month moving average? Nov. Dec. Jan. Feb. Mar. April 39 36 40 42 48 46
- A.
38
- B.
42
- C.
43
- D.
44
- E.
47
Correct Answer
D. 44 -
- 30.
. John’s House of Pancakes uses a weighted moving average method to forecast pancake sales. It assigns a weight of 5 to the previous month’s demand, 3 to demand two months ago, and 1 to demand three months ago. If sales amounted to 1000 pancakes in May, 2200 pancakes in June, and 3000 pancakes in July, what should be the forecast for August?
- A.
2400
- B.
2511
- C.
2067
- D.
3767
- E.
1622
Correct Answer
B. 2511Explanation
The weighted moving average method assigns different weights to different time periods based on their relevance. In this case, the weight of 5 is assigned to the previous month's demand, 3 to demand two months ago, and 1 to demand three months ago. To calculate the forecast for August, we multiply the demand in each month by their respective weights and sum them up. (2200 * 5) + (3000 * 3) + (1000 * 1) = 11000 + 9000 + 1000 = 21000. Therefore, the forecast for August would be 21000 / (5 + 3 + 1) = 2511.Rate this question:
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- 31.
A six-month moving average forecast is better than a three-month moving average forecast if demand
- A.
Is rather stable
- B.
Has been changing due to recent promotional efforts
- C.
Follows a downward trend
- D.
Follows a seasonal pattern that repeats itself twice a year
- E.
Follows an upward trend
Correct Answer
D. Follows a seasonal pattern that repeats itself twice a yearExplanation
A six-month moving average forecast is better than a three-month moving average forecast if demand follows a seasonal pattern that repeats itself twice a year because a longer time period will capture more data points and provide a smoother average. This is particularly useful for seasonal patterns that have a longer cycle, as it allows for better identification of the overall trend and helps to eliminate short-term fluctuations. By using a six-month moving average, the forecast will be more accurate in predicting future demand during each seasonal cycle.Rate this question:
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- 32.
Increasing the number of periods in a moving average will accomplish greater smoothing, but at the expense of
- A.
Manager understanding
- B.
Accuracy
- C.
Stability
- D.
Responsiveness to changes
- E.
All of the above are diminished when the number of periods increases.
Correct Answer
D. Responsiveness to changesExplanation
Increasing the number of periods in a moving average will result in greater smoothing of the data. However, this also means that the moving average will be less responsive to changes in the data. As more periods are included in the calculation, the moving average becomes slower to reflect the impact of new data points, reducing its ability to quickly respond to changes in the underlying data. Therefore, the responsiveness to changes is diminished when the number of periods increases.Rate this question:
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- 33.
Which of the following statements comparing the weighted moving average technique and exponential smoothing is true?
- A.
Exponential smoothing is more easily used in combination with the Delphi method.
- B.
More emphasis can be placed on recent values using the moving average
- C.
Exponential smoothing is considerably more difficult to implement on a computer
- D.
Exponential smoothing typically requires less record keeping of past data
- E.
Exponential smoothing allows one to develop forecasts for multiple periods, whereas weighted moving averages does not.
Correct Answer
D. Exponential smoothing typically requires less record keeping of past dataExplanation
Exponential smoothing typically requires less record keeping of past data. This is because exponential smoothing assigns exponentially decreasing weights to past data, giving more weight to recent data and less weight to older data. As a result, only the most recent data needs to be stored and used in the calculation, reducing the amount of record keeping required. In contrast, weighted moving average technique requires keeping track of the weights assigned to each period's data, which requires more record keeping.Rate this question:
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- 34.
Given an actual demand of 103, a previous forecast value of 99, and an alpha of .4, the exponential smoothing forecast for the next period would be
- A.
94.6
- B.
97.4
- C.
100.6
- D.
101.6
- E.
103.0
Correct Answer
C. 100.6Explanation
Exponential smoothing is a forecasting method that assigns more weight to recent data points. It is calculated by taking the previous forecast value and adjusting it based on the actual demand and the smoothing factor (alpha). In this case, the previous forecast value is 99, and the actual demand is 103. With an alpha of .4, the exponential smoothing forecast for the next period would be 0.4 * 99 + 0.6 * 103 = 39.6 + 61.8 = 101.4, which is closest to 100.6. Therefore, the correct answer is 100.6.Rate this question:
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- 35.
Given an actual demand of 61, a previous forecast of 58, and an of .3, what would the forecast for the next period be using simple exponential smoothing?
- A.
45.5
- B.
57.1
- C.
58.9
- D.
61.0
- E.
65.5
Correct Answer
C. 58.9Explanation
The forecast for the next period using simple exponential smoothing is calculated by adding the previous forecast (58) to the product of the smoothing factor (0.3) and the difference between the actual demand (61) and the previous forecast (58). Therefore, the forecast for the next period would be 58 + (0.3 * (61 - 58)) = 58.9.Rate this question:
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- 36.
Which of the following values of alpha would cause exponential smoothing to respond the most slowly to forecast errors?
- A.
0.10
- B.
0.20
- C.
0.40
- D.
0.80
- E.
Cannot be determined
Correct Answer
A. 0.10Explanation
A smaller value of alpha (0.10) would cause exponential smoothing to respond the most slowly to forecast errors. This is because alpha determines the weight given to the most recent observation when calculating the forecast. A smaller alpha means less weight is given to the most recent observation, causing the forecast to change more slowly and respond more slowly to any errors in the forecast.Rate this question:
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- 37.
The primary purpose of the mean absolute deviation (MAD) in forecasting is to
- A.
Estimate the trend line
- B.
Eliminate forecast errors
- C.
Measure forecast accuracy
- D.
Seasonally adjust the forecast
- E.
All of the above
Correct Answer
C. Measure forecast accuracyExplanation
The mean absolute deviation (MAD) is a statistical measure used to assess the accuracy of a forecast. It calculates the average absolute difference between the actual values and the forecasted values. By measuring forecast accuracy, MAD helps in evaluating the effectiveness of forecasting models and identifying any biases or errors in the forecasts. Therefore, the primary purpose of MAD in forecasting is to measure forecast accuracy.Rate this question:
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- 38.
Which of the following statements regarding Amazon.com is false?
- A.
The company was opened by Jeff Bezos in 1995.
- B.
B. The company was founded as, and still is, a "virtual retailer" with no inventory.
- C.
The company is now a world-class leader in warehouse management and automation.
- D.
The company uses both United Parcel Service and the U.S. Postal Service as shippers.
- E.
Amazon obtains its competitive advantage through inventory management.
Correct Answer
B. B. The company was founded as, and still is, a "virtual retailer" with no inventory.Explanation
The given statement is false because Amazon.com was founded as an online bookstore by Jeff Bezos in 1995, but it has since expanded to sell a wide range of products and is no longer a "virtual retailer" with no inventory. Amazon now operates as a world-class leader in warehouse management and automation, using both United Parcel Service and the U.S. Postal Service as shippers. Its competitive advantage is obtained through efficient inventory management.Rate this question:
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- 39.
Which of the following is a function of inventory?
- A.
To decouple or separate parts of the production process
- B.
To decouple the firm from fluctuations in demand and provide a stock of goods that will provide a selection for customers
- C.
To take advantage of quantity discounts
- D.
To hedge against inflation
- E.
All of the above are functions of inventory.
Correct Answer
E. All of the above are functions of inventory.Explanation
Inventory serves multiple functions in a business. Firstly, it helps to decouple or separate different parts of the production process, allowing for smoother operations. Secondly, it acts as a buffer to decouple the firm from fluctuations in demand, ensuring that there is always stock available for customers. Additionally, inventory can be used to take advantage of quantity discounts, allowing the business to save costs. Lastly, inventory can serve as a hedge against inflation, as holding inventory can help mitigate the impact of price increases. Therefore, all of the statements provided are valid functions of inventory.Rate this question:
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- 40.
Which of the following would not generally be a motive for a firm to hold inventories?
- A.
To decouple or separate parts of the production process
- B.
To provide a stock of goods that will provide a selection for customers
- C.
To take advantage of quantity discounts
- D.
To minimize holding costs
- E.
All of the above are functions of inventory.
Correct Answer
D. To minimize holding costsExplanation
Holding inventory generally incurs costs such as storage, insurance, and obsolescence. Therefore, minimizing holding costs would not be a motive for a firm to hold inventories. The other options listed, such as decoupling parts of the production process, providing a selection for customers, and taking advantage of quantity discounts, are all valid reasons for a firm to hold inventories.Rate this question:
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- 41.
Which of the following is not one of the four main types of inventory?
- A.
Raw material inventory
- B.
Work-in-process inventory
- C.
Maintenance/repair/operating supply inventory
- D.
Safety stock inventory
- E.
All of these are main types of inventory.
Correct Answer
D. Safety stock inventoryExplanation
The given correct answer is "safety stock inventory." Safety stock inventory refers to the extra inventory that is held as a buffer to meet unexpected increases in demand or delays in supply. It is not considered one of the four main types of inventory, which include raw material inventory, work-in-process inventory, maintenance/repair/operating supply inventory, and finished goods inventory. Safety stock inventory is not a type of inventory that is actively used or consumed in the production process, but rather serves as a precautionary measure to ensure uninterrupted operations.Rate this question:
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- 42.
Which of the following statements about ABC analysis is false?
- A.
ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings.
- B.
In ABC analysis, "A" Items are tightly controlled, have accurate records, and receive regular review by major decision makers.
- C.
In ABC analysis, "C" Items have minimal records, periodic review, and simple controls.
- D.
ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings.
- E.
All of the above statements are true.
Correct Answer
D. ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings.Explanation
The correct answer is "ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings." This statement is false because ABC analysis categorizes items into different groups (A, B, and C) based on their importance and value. "A" items are the most important and tightly controlled, while "C" items have minimal records and simple controls. The analysis focuses on controlling the few most important items (A items) to achieve the majority of inventory savings, rather than controlling all items. Therefore, the statement contradicts the principles of ABC analysis.Rate this question:
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- 43.
All of the following statements about ABC analysis are true except
- A.
Inventory may be categorized by measures other than dollar volume
- B.
It categorizes on-hand inventory into three groups based on annual dollar volume
- C.
It is an application of the Pareto principle
- D.
It states that all items require the same degree of control
- E.
It states that there are the critical few and the trivial many inventory items
Correct Answer
D. It states that all items require the same degree of controlExplanation
ABC analysis categorizes inventory into three groups based on annual dollar volume, which means it does not categorize all items into the same degree of control. Therefore, the statement "it states that all items require the same degree of control" is not true.Rate this question:
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- 44.
All of the following statements about ABC analysis are true except
- A.
Inventory may be categorized by measures other than dollar volume
- B.
It categorizes on-hand inventory into three groups based on annual dollar volume
- C.
It is an application of the Pareto principle
- D.
It states that all items require the same degree of control
- E.
It states that there are the critical few and the trivial many inventory items
Correct Answer
D. It states that all items require the same degree of control -
- 45.
The two most basic inventory questions answered by the typical inventory model are
- A.
Timing and cost of orders
- B.
Quantity and cost of orders
- C.
Timing and quantity of orders
- D.
Order quantity and service level
- E.
Ordering cost and carrying cost
Correct Answer
C. Timing and quantity of ordersExplanation
The correct answer is "timing and quantity of orders". In inventory management, the timing of orders refers to when to place an order to replenish inventory, while the quantity of orders refers to how much to order. These two factors are crucial in ensuring that inventory levels are maintained at an optimal level, preventing stockouts or excessive carrying costs. By determining the right timing and quantity of orders, businesses can effectively manage their inventory and meet customer demand efficiently.Rate this question:
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- 46.
Among the advantages of cycle counting is that it
- A.
Makes the annual physical inventory more acceptable to management
- B.
Does not require the detailed records necessary when annual physical inventory is used
- C.
Does not require highly trained people
- D.
Allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory
- E.
Does not need to be performed for less expensive items
Correct Answer
D. Allows more rapid identification of errors and consequent remedial action than is possible with annual pHysical inventoryExplanation
Cycle counting allows for more rapid identification of errors and subsequent remedial action compared to annual physical inventory. This is because cycle counting involves counting a small portion of inventory on a regular basis, allowing for quicker detection of discrepancies and immediate corrective measures. In contrast, annual physical inventory involves counting the entire inventory once a year, which can result in delays in identifying errors and taking necessary actions.Rate this question:
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- 47.
A certain type of computer costs $1,000, and the annual holding cost is 25%. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity?
- A.
16
- B.
70
- C.
110
- D.
183
- E.
600
Correct Answer
C. 110Explanation
The economic order quantity (EOQ) is a formula used to determine the optimal order quantity for a product that minimizes the total cost of ordering and holding inventory. It is calculated as the square root of (2 x annual demand x order cost / holding cost). In this case, the annual demand is 10,000 units, the order cost is $150, and the holding cost is 25% of the cost of the computer, which is $1,000. Plugging these values into the formula, we get the approximate EOQ as 110 units.Rate this question:
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- 48.
In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will
- A.
Increase by about 41%
- B.
Increase by 100%
- C.
Increase by 200%
- D.
Increase, but more data is needed to say by how much
- E.
Either increase or decrease
Correct Answer
A. Increase by about 41%Explanation
When the cost of placing an order doubles in the basic EOQ model, the EOQ (Economic Order Quantity) will increase by about 41%. This is because the EOQ is inversely proportional to the square root of the ordering cost. When the ordering cost doubles, the square root of the ordering cost also doubles, resulting in an increase in the EOQ. The exact increase is approximately 41%, which can be calculated using the formula for EOQ. Therefore, the correct answer is that the EOQ will increase by about 41%.Rate this question:
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- 49.
In thr basic EOQ model, if D=6,000 per year, S=$100, H=$5 per unit per month, the economic order quantity is approximately
- A.
24
- B.
100
- C.
141
- D.
490
- E.
600
Correct Answer
D. 490Explanation
The economic order quantity (EOQ) is a model used to determine the optimal order quantity that minimizes the total inventory costs. In this case, the demand (D) is given as 6,000 per year. The setup cost (S) is $100, and the holding cost (H) is $5 per unit per month. To calculate the EOQ, we can use the formula EOQ = √((2DS)/H). Plugging in the given values, we get EOQ = √((2 * 6,000 * 100)/5) = √(1,200,000) ≈ 490. Therefore, the economic order quantity is approximately 490.Rate this question:
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- 50.
A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is
- A.
Three times as large
- B.
One-third as large
- C.
Nine times as large
- D.
One-ninth as large
- E.
Cannot be determined
Correct Answer
B. One-third as largeExplanation
When the ordering cost decreases, the EOQ (Economic Order Quantity) increases. This is because with a lower ordering cost, it becomes more economical to order larger quantities of the product. In this case, the EOQ is initially 40. When the ordering cost decreases from $90 per order to $10, the EOQ becomes one-third as large. This means that the new EOQ is 40/3, which is approximately 13.33. Therefore, the answer is one-third as large.Rate this question:
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Mar 21, 2023Quiz Edited by
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Mar 27, 2012Quiz Created by
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