EXAMINATION 1, Version A



EXAMINATION 1, Version A

Use a Scantron Form No. 886-E to record your choice of the best answer to each of the following questions. You have the full period to answer the questions.

The following questions are worth three (3) points each.

1. Every business is managed through what three major functions?

a) accounting, finance, and marketing

b) engineering, finance, and operations management

c) accounting, purchasing, and human resources

d) accounting, engineering, and marketing

e) finance, marketing, and operations management

2. What are long-term decisions that set the direction for the entire organization called?

a) tactical

b) operational

c) directional

d) distant

e) strategic

3. What is a concept that takes a total system approach to creating efficient operations?

a) lean systems

b) enterprise resource planning

c) customer relationship management

d) management science

e) management information systems

4. Which of the following is not considered one of the four broad categories of competitive priorities?

a) technology

b) cost

c) quality

d) flexibility

e) time

5. Which of the following competitive priorities typically requires the use of more general-purpose equipment?

a) technology

b) cost

c) quality

d) flexibility

e) time

6. When does productivity increase?

a) inputs increase while outputs remain the same

b) inputs decrease while outputs remain the same

c) outputs decrease while inputs remain the same

d) inputs and outputs increase proportionally

e) none of the above

7. A company’s product design supports it business strategies by

a) designing products that appeal to its customers

b) designing as many products as possible

c) including the company’s mission somewhere in the product

d) designing products that aid strategic planning activities

e) designing the company’s strategy

8. In break-even analysis, what is the break-even point?

a) the quantity where revenue equals total cost

b) the quantity where revenue equals fixed cost

c) the quantity where revenue equals variable cost

d) the quantity beyond which the firm starts to lose money

e) the quantity where variable cost equals fixed cost

9. Which type of operation is used to produce many different products with varying process requirements in lower volumes?

a) intermittent

b) repetitive

c) continuous

d) downstream

e) gateway

10. The time between order placement and the receipt of goods is called ___________________.

a) receipt time

b) lead time

c) allowance time

d) processing time

e) waiting time

11. What refers to owning or controlling sources of raw materials and components?

a) Backward integration

b) Horizontal integration

c) Encapsulating integration

d) Forward integration

e) Subsuming integration

12. What is the common term for a process of developing a long-term relationship with a supplier based on mutual trust, shared vision, shared information, and shared risks?

a) Marrying

b) Cohabitating

c) Sharing

d) Partnering

e) Diversifying

13. One common definition of quality is , which focuses on measuring how well the product or service meets targets and tolerances determined by its designers.

a) Fitness for use

b) Value for price paid

c) Technical perception

d) Judgmental evaluation

e) Conformance to specifications

14. Giving workers responsibility for seeking out quality problems and correcting them is

a) Continuous improvement

b) Passing the buck

c) Brainstorming

d) Employee empowerment

e) Employee involvement

15. Costs of quality inspections, testing, test equipment, and labs are examples of costs.

a) Internal failure

b) External failure

c) Appraisal

d) Prevention

e) Replacement

16. ISO 9000 is

a) An award for quality given annually by the U.S. Government

b) An approach to quality management that was developed in Japan by Deming

c) A set of international quality standards and a certification process for companies

d) An approach for managing self-directed teams

e) An approach for product design

17. What technique determines whether a batch of goods should be accepted or rejected?

a) Statistical process control

b) Acceptance sampling

c) Fishbone diagramming

d) Scatter plotting

e) Experimental design

18. The center line of a control chart represents what?

a) Range

b) Standard deviation

c) Mean

d) Mean divided by standard deviation

e) Skewness

19. Suppose that you want to monitor the average ounces of a process that fills beer cans. Which control chart would be appropriate?

a) x-bar chart

b) R-chart

c) p-chart

d) c-chart

e) OC chart

20. Operations management is the business function that plans, coordinates, and controls the resources needed to produce a company’s products and services.

a) True

b) False

21. Companies that compete based on flexibility often cannot compete based on cost.

a) True

b) False

22. Product design and process selection decisions are typically made separately.

a) True

b) False

23. The amount of outsourcing in industry is increasing.

a) True

b) False

24. A variable is a product characteristic that has a discrete value and can be counted.

a) True

b) False

The following problems are worth ten (10) points each.

1. A firm produces shirts using three workers. On Wednesday, Madeline completed 110 shirts in 6 hours, Federico completed 90 shirts in 7 hours, and Susan completed 130 shirts in 9 hours. What was the overall productivity of the firm?

Output: O = 110 + 90 + 130 = 330 shirts Input: I = 6 + 7 + 9 = 22 hours

[pic]

2. Blaster Radio Company is trying to decide whether or not to introduce a new model. If they introduce it, there will be additional fixed costs of $400,000 per year. The variable costs have been estimated to be $20 per radio.

a) If Blaster sells the new radio model for $30 per radio, how many must they sell to break even?

[pic]

b) If Blaster sells 70,000 of the new radio model at the $30 price, what will the contribution to profit be?

Profit = R – TQ = (SP * Q) – (FC + (VC * Q)) = ($30*70,000)-($400,000 + ($20 * 70,000)) =

$2,100,000-($400,000 + $1,400,000) = $300,000

3. Sportsworld, Inc. currently incurs $100,000 in annual purchasing costs, and each purchase order costs the firm approximately $3. Third-Party Logistics, Inc. is willing to perform purchasing services for Sportsworld at a $50,000 annual fixed retainer plus $7 per purchase order. Sportsworld currently places 10,000 orders per year.

a) What is the current total cost of purchasing for Sportsworld?

TC = FC + (VC * Q) = $100,000 + ($3 * 10,000) = $130,000

b) What would the cost of purchasing be if Third-Party Logistics were used?

TC = FC + (VC * Q) = $50,000 + ($7 * 10,000) = $120,000

c) What is the indifference point for the two alternatives?

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OPM101 - Formulas

Spring 2009

Examination 1

Chapter 2:

[pic]; [pic]

P2 - later productivity measure, P1 – earlier productivity measure

Chapter 3:

[pic]

TC – total cost, FC – fixed cost, VC – variable cost/unit

Q – number of units R – revenue, SP – selling price/unit, QBE – break even quantity

Chapter 4:

Cost to buy: [pic]

Cost to make: [pic]

Indifference point: [pic]

TC – total cost, FC – fixed cost, VC – variable cost/unit, Q – number of units,

QIND – indifference point

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