Pretest

Question 1

A mass production shop with a continuous layout where products follow the same process is also known as:

a) a flow shop
b) intermittent
c) discrete
d) a job shop

Answer 1

a) a job shop.

In a flow shop, the machines and the operators process a standard, uninterrupted material flow. The same operations are performed for each production run. The layout is designed to facilitate a product flow.

Question 2

A company losing market share due to price competition should incorporate which of the following techniques?

a) Value chain analysis
b) Hoshin planning
c) Activity-based costing
d) subcontracting

Answer 2

a) Value chain analysis

Value chain analysis is an examination of all links a company uses to produce and deliver its products and services, starting from the origination point and continuing through delivery to the final customer.

Question 3

A workstation can produce 100 pencils per hour and possibly 20,000 per year. This is a measure of the workstation’s hourly and annual:

a) production
b) capacity
c) load
d) utilization

Answer 3

b) capacity

Capacity is the capability of a worker, plant, work center, machine, plant, or organization to produce output per time period.

Question 4

Which production planning method maintains a stable inventory level while varying production to meet demand?

a) Critical path method
b) Chase production method
c) Critical chain method
d) Level loading method

Answer 4

b) Chase production method

The chase production method seeks to keep inventory levels stable while varying production levels based on demand. This method typically has higher costs associated with varying staffing and overtime.

Question 5

The shared perception of the organization’s future, or what the organization will achieve, is known as its:

a) sales and operations plan
b) strategic plan
c) mission
d) vision

Answer 5

d) vision

An organization’s vision describes the organization as it would appear in a future successful state.

The strategic plan defines which actions will be taken by an organization to support its mission and achieve its goals. The mission statement is a short statement of why an organization exists (i.e., it outlines the organization’s purpose for existing). Sales and operations planning is related to an organization’s ability to match its supply with demand.

Question 6

Three critical functions within demand management include customer relationship management, demand planning, and:

a) engineering design
b) supplier relationship management
c) marketing management
d) operations management

Answer 6

c) marketing management

Three critical functions within demand management include marketing management, customer relationship management, and demand planning.

Question 7

Which of the following activities represents reverse logistics?

a) Rescheduling a future order to an earlier date.
b) Reinspecting outdated inventories to determine whether they can still be used or sold.
c) Returning goods to the seller for repair, remanufacture, or recycling activity.
d) Moving incomplete material back to an earlier work center

Answer 7

c) Returning goods to the seller for repair, remanufacture, or recycling activity.

Reverse logistics is concerned with the management of the flow of products and materials from the customer back through the supply chain to the originating source.

Question 8

A fashion house has forecasted the next season’s colors and styles. Distribution plans have been drawn up that will send the majority of heavier items (e.g., sweaters) to distributors in colder regions, while a larger quantity of t-shirts and lighter fabric garments will be distributed in warmer regions. This is an example of what kind of manufacturing environment?

a) Make-to-stock
b) Engineer-to-order
c) Assemble-to-order
d) Make-to-order

Answer 8

a) Make-to-stock

A make-to-stock environment relies on forecasting not only for supply and production but also for distribution, ensuring that appropriate products are distributed to the right locations. An assemble-to-order environment relies on forecasting for supply and component production, but from that point it uses actual orders for assembly and distribution. The point where push becomes pull is then wherever actual orders dictate activity rather than relying on forecasts.

Question 9

Which of the following types of files is a key input to material requirements planning (MRP)?

a) Work center master file
b) Routing file
c) Supplier master file
d) Bill of material

Answer 9

d) Bill of material

The bill of material (BOM) is a listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly, showing the required quantity of each. When the MRP BOM explosion occurs, the BOM enables the identification of all items and quantities that need to be replenished. The routing file includes the operations to be performed, their sequence, the various work centers involved, and the standards for setup and run. The supplier master file contains the detail on suppliers used by the company and is considered part of the MRP output for purchase replenishment. The work center file contains the detail on the productive resources that are available for MRP production order output.

Question 10

Which of the following is a type of weighted moving average forecasting technique in which past observations are geometrically discounted according to their age?

a) Seasonality
b) Qualitative
c) Delphi method
d) Exponential smoothing

Answer 10

d) Exponential smoothing

Exponential smoothing is a type of weighted moving average forecasting technique in which past observations are geometrically discounted according to their age. It gives more weight to the most recent demand information.

Question 11

An organization that sells industrial and consumer packaging to manufacturers wants to generate a strategic-level long-term extrinsic forecast to help determine whether to expand, contract, or leave capacity as it is. Given information on the level of correlation and leading versus lagging, which indicator would be the best choice for this organization to use in the extrinsic forecast if they want to restrict themselves to simple regression analysis?

a) Leading and 55% correlated: Manufacturers’ orders for non-defense capital goods
b) Lagging and 60% correlated: change in labor cost per unit of output
c) Leading and 72% correlated manufacturers’ new orders for consumer goods/materials
d) Lagging and 79% correlated: ratio of manufacturing and trade inventories to sales

Answer 11

c) Leading and 72% correlated manufacturers’ new orders for consumer goods/materials

Extrinsic forecasting is a type of quantitative forecasting that works to find a link between information that is externally available and demand. If there is a link, it is called correlation, and a greater level of correlation is preferable to a lower level. The best information that can be used is leading indicators because these economic or demographic indicators tend to be among the first types of data that can show a change in a trend. Therefore, the correct answer is the leading indicator that has the highest level of correlation. Note that extrinsic forecasts tend to be more useful for large aggregations, such as total company sales, than for individual product sales.

Question 12

Product inventory that is accumulated by the manufacturer in advance of the peak selling season is an example of:

a) transportation inventory
b) hedge inventory
c) anticipation inventory
d) fluctuation inventory

Answer 12

c) anticipation inventory

Anticipation inventories are accumulated above basic pipeline stock to cover projected increases in sales or plant shutdowns and vacations.

Question 13

The term for a forecasting technique that uses an average of a certain number of observations, with each new observation added and the oldest observation dropped, is:

a) moving average
b) seasonality
c) trend
d) exponential smoothing

Answer 13

a) moving average

A moving average is an arithmetic average of a certain number (n) of the most recent observations. As each new observation is added, the oldest observation is dropped.

Question 14

When customer orders are received in a make-to-stock environment, they consume:

a) finished goods
b) work-in-process
c) raw materials
d) component inventory

Answer 14

a) finished goods

Customers purchase finished goods in a make-to-stock environment. Raw materials and component inventories are used to make finished goods and are not normally sold. Work-in-process inventory refers to items in the process of being converted into finished goods.

Question 15

A manufacturer places a replenishment order to replace sold or used items every two months. This is an example of what kind of inventory model?

a) Min-max system
b) Perpetual inventory system
c) Two-bin inventory system
d) Fixed reorder cycle

Answer 15

d) Fixed reorder cycle

A fixed reorder cycle inventory model is a form of independent demand management. An order is placed every n time units (e.g., months, days). The quantity in each order is variable and reflects inventory used/sold. The aim is to replenish inventory to the maximum inventory desired.

Question 16

Preventive maintenance—comprising adjustments, replacements, and basic cleanliness—is used to forestall machine breakdowns. With regular preventive maintenance, what can be expected to happen to the cost of failure and poor quality?

a) it will be reduced in the short term
b) it will be reduced in the long term
c) it will increase in the short term
d) it will increase in the long term

Answer 16

b) it will be reduced in the long term

Preventive maintenance ensures that production quality is maintained and that delivery schedules are met. A well-cared-for machine is also more likely to last longer and suffer fewer problems. Increased investment in prevention will initially make costs rise, because failure costs will not immediately drop. Investing in quality has a long-term positive return on investment.

Question 17

Order promising is the process of:

a) entering an order
b) staging order content
c) making a delivery commitment
d) routing the order for credit approval

Answer 17

c) making a delivery commitment

Order promising is the process of making a delivery commitment.

Question 18

What is the definition of data governance?

a) Science of examining raw data with the purpose of drawing conclusions about that information
b) Process of ensuring that a database remains an accurate reflection of the universe of discourse it is modeling or representing
c) Practice of examining large databases in order to generate new information
d) Overall management of the accessibility, usability, reliability, and security of data used to ensure data record accuracy

Answer 18

d) Overall management of the accessibility, usability, reliability, and security of data used to ensure data record accuracy

Data governance is a set of processes that ensures that important data assets are formally managed throughout the enterprise.

Question 19

A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow is called a:

a) hoshin plan
b) business plan
c) resource plan
d) strategic plan

Answer 19

b) business plan

A business plan is a statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow.

Question 20

Which of the following manufacturing strategies is most appropriate when the customer is heavily involved in the product design?

a) Engineer-to-order
b) Make-to-order
c) Make-to-stock
d) Assemble-to-order

Answer 20

a) Engineer-to-order

In an engineer-to-order environment, customer specifications for products require unique engineering design and significant customization. The customer is usually very involved in the product design. With assemble-to-order, the product can be assembled after receipt of a customer’s order; with make-to-order, the product is manufactured using a combination of standard items and custom-modified items after receipt of a customer’s order; and, with make-to-stock, products are usually finished based on forecasts before receipt of a customer order.

Question 21

Sales for a concrete block manufacturer correlate directly with new home starts. The company would likely use which forecasting method?

a) Seasonality
b) Moving average
c) Extrinsic
d) Trend

Answer 21

c) Extrinsic

Extrinsic forecasting correlates with indicators external to an organization that may influence demand.

Question 22

What is the term for a distinctive characteristic of a good or service that may be provided by an option, an accessory, or an attachment?

a) Standard
b) Portfolio
c) Variable
d) Feature

Answer 22

d) Feature

A feature is a distinctive characteristic of a good or service that may be provided by an option, an accessory, or an attachment.

Question 23

Sales and operations plans perform which of the following actions?

a) Reconcile all supply, demand, and new product plans at the aggregate level and tie to the business plan.
b) Take into account the forecast, the production plan, and other important considerations such as the backlog, the availability of material, the availability of capacity, and management policies and goals.
c) Describe how to marshal and determine actions to support the mission, goals, and objectives of an organization.
d) Determine in detail the amount of labor and machine resources required to accomplish the tasks of production.

Answer 23

a) Reconcile all supply, demand, and new product plans at the aggregate level and tie to the business plan.

The sales and operations planning process must reconcile all supply, demand, and new product plans at the aggregate level and tie to the business plan.

Question 24

A manager has factored in an additional three days for an order to protect against fluctuations in lead time. If all processes run smoothly, a work center might be able to complete orders ahead of time. What is this additional time called?

a) Frozen bucket
b) Planning horizon
c) Safety lead time
d) Efficiency

Answer 24

c) Safety lead time

Safety lead time is extra time added to normal lead time to protect against unexpected fluctuations in lead time. This would allow a product to be completed before its actual due date.

Question 25

Creating an extensive distribution system in order to reduce shipment time to customers conflicts with which of the following objectives?

a) Best customer service
b) Increased customer service
c) Lowest distribution costs
d) Lowest production costs

Answer 25

c) lowest distribution costs

Increasing the number of warehouses to reduce transit times to customers increases distribution costs.

Question 26

The way to avoid a constraint downstream is by:

a) lowering system throughput
b) lowering constraint throughput
c) establishing a space buffer
d) establishing a material buffer

Answer 26

c) establishing a space buffer

A space buffer is located immediately downstream of the constraint, and it protects against downtime downstream from the constraint. The size allowed should be enough to protect against any reasonably foreseeable downtime. Usually this buffer is empty.

Question 27

Resource planning takes place at which of the following levels?

a) Master production schedule
b) Shop floor execution
c) Material requirements planning
d) Business plan

Answer 27

d) Business plan

Resource planning addresses capacity planning conducted at the business plan level.

Question 28

Input/output control is a technique for monitoring the:

a) master production schedule
b) capacity requirements plan
c) production plan
d) material requirements plan

Answer 28

b) capacity requirements plan

Input/output control is a technique in which the actual input and output of a work center is compared with the planned input and output developed by capacity requirements planning.

Question 29

Which of the following entities or conditions impacts demand by providing expectations that products will be sold at a fair price, that higher quality is required, that delivery lead time is negligible, that before- and after-sales service is available, and that products and their volumes are flexible?

a) Customers
b) Sales and marketing
c) Customs
d) competition

Answer 29

a) Customers

Both consumers and industrial customers have become much more demanding, and suppliers have responded by improving the range of characteristics they offer. Some of the characteristics and selections customers expect in the products and services they buy are a fair price, higher-quality products and services, better delivery lead time, better pre- and after-sales service, and product and volume flexibility.

Question 30

Owners’ equity is defined as:

a) the value at which an asset is carried on a balance sheet.
b) an entry recording a sum received, listed on the right-hand side or column of an account.
c) an amount of credit extended to a borrower.
d) the residual claim by the company’s owners or shareholders to the company’s assets less its liabilities.

Answer 30

d) the residual claim by the company’s owners or shareholders to the company’s assets less its liabilities.

Owners’ equity is the working capital employed in a company, computed by deducting the book value of the liabilities from the book value of the assets.

Question 31

What is capacity requirements planning (CRP) primarily used for?

a) Prioritizing manufacturing orders
b) Calculating available capacity
c) Balancing work center capacity and load
d) Validating the master production schedule

Answer 31

c) Balancing work center capacity and load

The purpose of CRP is to show any imbalances between capacity and load by work center. Available capacity is calculated outside of CRP but is used as an input.

Question 32

Forecasters and users of forecasts use information on forecast accuracy to understand the reliability and relevance of the data as they are used to determine demand characteristics, variation, and:

a) reliability of the sales and operations planning process
b) sustainability
c) stability
d) customer predictability

Answer 32

c) stability

Forecasters and users of forecasts use information on forecast accuracy to understand the reliability and relevance of the data as they are used to determine demand characteristics, variation, and stability.

Question 33

Which of the following tools uses mathematical algorithms or logic to perform optimization or simulation on finite capacity scheduling?

a) Manufacturing resource planning
b) Enterprise resources planning
c) Collaborative planning, forecasting, and replenishment
d) Advanced planning and scheduling

Answer 33

d) Advanced planning and scheduling

Advanced planning and scheduling uses advanced mathematical algorithms or logic to perform optimization or simulation on finite capacity scheduling, sourcing, capital planning, resource planning, forecasting, demand management, and others.

Question 34

In lean manufacturing, costs are reduced by reducing:

a) mismatches between work pace and machine-designed pace.
b) waste.
c) variability.
d) interruptions to the product workflow.

Answer 34

b) waste

In lean manufacturing, costs are reduced by reducing waste within a system.

Question 35

Which of the following is true if material and capacity resources are to be planned effectively?

a) Only interplant demand requires attention to detail.
b) All sources of demand must be identified.
c) Service parts do not need to be considered in the analysis.
d) All sources of demand must be identified with the exception of promotions.

Answer 35

b) All sources of demand must be identified.

Demand management requires that all sources of demand be included to effectively plan materials and capacity.

Question 36

A customer contacts a manufacturer’s salesperson and wants to purchase all production supply and capacity for a given item. Which of the following values will the salesperson need to obtain from his company to respond to his customer?

a) Master schedule
b) Available-to-promise
c) Rough-cut capacity plan
d) Capable-to-promise

Answer 36

d) Capable-to-promise

Capable-to-promise is the process of committing orders against available capacity as well as inventory. This process may involve multiple manufacturing or distribution sites.

Question 37

The primary objective of lean production is to reduce:

a) waste.
b) inventories.
c) lead times.
d) labor costs.

Answer 37

a) waste.

Lean production aims to eliminate all non-value-added activities (waste) from product design and production and management of the supply chain and customers. Although the reduction of inventories, costs, and lead times may be goals within a lean production program, none of these are, by themselves, the primary objective of lean production.

Question 38

The term “jidoka” refers to the process of:

a) leveling production to match the rate of sales.
b) eliminating waste and continually improving processes.
c) halting the production process when a defect occurs.
d) combining loads from multiple suppliers.

Answer 38

c) halting the production process when a defect occurs.

“Jidoka” is the Japanese term for the practice of stopping the production line when a defect occurs. The other terms do not fit the definition of jidoka.

Question 39

Which of the following approaches to forecasting is based on intuitive or judgmental evaluation?

a) Seasonality
b) Moving average
c) Qualitative
d) Trend

Answer 39

c) Qualitative

Qualitative forecasting is based on intuitive or judgmental evaluation. It is generally used when data are scarce, not available, or no longer relevant.

Question 40

Which of the following activities in the physical distribution system creates time value by placing the product close to the customer?

a) Distribution inventories
b) Order processing and communication
c) Warehousing
d) Materials handling

Answer 40

a) Distribution inventories

Distribution inventory includes all finished goods inventory at any point in the distribution system. Distribution inventories create time value by placing the product close to the customer.

Question 41

Which of the following is a critical factor in the supplier selection process?

a) Supplier’s lot-sizing techniques
b) Supplier’s manufacturing capability
c) Supplier’s use of material requirements planning
d) Supplier’s bottleneck location

Answer 41

b) Supplier’s manufacturing capability

One of the prime criteria for selecting a supplier is the ability of the supplier to deliver the needed items in the right quantities at the right time.

Question 42

Which of the following is true of product costs?

a) They are period costs.
b) They are allocated to the product.
c) They are non-manufacturing costs.
d) They vary with production.

Answer 42

b) They are allocated to the product.

Product costs are allocated by some method to the products being produced.

Question 43

A guitar retailer sells four Gibson Les Pauls and a Fender Telecaster in one week. The manager places an order to Gibson for four Les Pauls and another order to Fender for a single Telecaster. What is the name for this lot ordering technique?

a) Lot-for-lot
b) Batch ordering
c) Stock keeping
d) Min-max system

Answer 43

a) Lot-for-lot

Lot-for-lot is a lot-sizing technique that generates planned orders in quantities that equal the net requirements in each period.

Question 44

Which of the following is a characteristic of flow manufacturing?

a) Work centers are dedicated to producing similar products.
b) The sequence of operations depends on the part being manufactured.
c) Workers and equipment must be flexible.
d) Planning and control tasks are complicated.

Answer 44

a) Work centers are dedicated to producing similar products.

Flow manufacturing produces high-volume, standard products, so work centers are dedicated to producing similar products.

Question 45

A repetitive pattern of demand from year to year with some periods considerably higher than others is known as:

a) exponential smoothing.
b) seasonality.
c) a trend.
d) a qualitative forecast.

Answer 45

b) seasonality.

Seasonality is a repetitive pattern of demand from year to year (or other repeating time interval) with some periods considerably higher than others.

Question 46

Which of the following is a zoned inventory storage location system?

a) A manufacturer stocks finished goods in an automated storage and retrieval system (AS/RS).
b) A manufacturer stocks flammable goods in a designated area.
c) A manufacturer stores component parts near the cell that will be using them.
d) A work cell team stores the tools that are routinely use in a work cell in or near the cell.

Answer 46

b) A manufacturer stocks flammable goods in a designated area.

In a zoned inventory storage location system, goods are stored in a designated area of the warehouse based on their physical characteristics or frequency of use.

Question 47

Per the theory of constraints (TOC), in a plant producing a complex product with higher demand than can be produced at present, which would be the best way listed to find “the weakest link” in the manufacturing process?

a) Look for a fully utilized work center with work-in-process inventory accumulating before it but low work center utilization of direct downstream work centers.
b) Find the earliest point in the process where the cycle time is the lowest and the queue time for direct downstream work centers is the longest.
c) Look for the work center with the lowest utilization rate in the process.
d) Ensure that all work centers that can work at full capacity do so; then look for the work center with the longest cycle time.

Answer 47

a) Look for a fully utilized work center with work-in-process inventory accumulating before it but low work center utilization of direct downstream work centers.

In every system, there is one weakest link—the constraint that limits the system from achieving higher levels of its goal. How does one find a constraint in a complex manufacturing plant? This may be difficult in some situations, but often it is relatively straightforward. If work-in-process inventory is accumulating before a process or work center and processes downstream are waiting for inputs, and if the process or work center is working at full capacity, then it is the constraint.

Question 48

What is the cost of goods sold?

a) Actual cost of the operation of a unit assigned the responsibility of developing and producing a specific product
b) Accounting classification used on an asset sheet to reflect inventory value
c) Amount of direct materials, direct labor, and allocated overhead associated with products sold during a given period of time
d) Computation used to calculate retail costs for the sale of a product

Answer 48

c) Amount of direct materials, direct labor, and allocated overhead associated with products sold during a given period of time

The cost of goods sold determines the amount of direct materials, direct labor, and allocated overhead associated with the products sold.

Question 49

Which of the following is the process of combining statistical forecasting techniques and judgment to construct demand estimates for products/services across the supply chain from the supplier’s raw materials to the consumer’s needs?

a) Demand planning
b) Demand chain management
c) Demand forecasting
d) Demand management

Answer 49

a) Demand planning

Demand planning is the process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services across the supply chain from the supplier’s raw materials to the consumer’s needs.

Question 50

In the middle of April, an unusually large order comes in from a customer, at odds with forecast data. In May, the customer’s orders are more in line with forecasts. This could be the result of:

a) a shift in customer buying habits.
b) seasonal variation.
c) an exceptional event.
d) a new product roll-out.

Answer 50

c) an exceptional event.

Exceptional events might include a customer stockpiling product based on an anticipated strike, customer plant shutdowns or equipment failures, or severe weather keeping customers at home. Events such as these need to be recorded in the forecast notes to differentiate them from potential changes in a trend.