CHAPTER 1 - INTRODUCTION 
 
1. Operations management is applicable ...   
a. mostly to the service sector 
b. to services exclusively 
c. mostly to the manufacturing sector  
d. to all firms, whether manufacturing and service 
e. to the manufacturing sector exclusively   
 
2. Which of the following are the primary functions of all organizations? 
a. operations, marketing, and human resources   
b. marketing, human resources, and finance/accounting   
c. sales, quality control, and operations   
d. marketing, operations, and finance/accounting  
e. research and development, finance/accounting, and purchasing  
 
3. Which  of  the  following  would  not  be  an  operations  function  in  a  fast-food 
restaurant? 
a. advertising and promotion 
b. designing the layout of the facility  
c. maintaining equipment  
d. making hamburgers and fries   
e. purchasing ingredients 
 
4. The five elements in the management process are ...  
a. plan, direct, update, lead, and supervise   
b. accounting/finance, marketing, operations, and management   
c. organize, plan, control, staff, and manage  
d. plan, organize, staff, lead, and control  
e. plan, lead, organize, manage, and control   
 
5. Which of the following is not an element of the management process?   
a. Controlling 
b. Leading 
c. Planning 
d. Pricing 
e. staffing  
 
6. An operations manager is not likely to be involved in 
a. the  design  of  goods  and  services  to  satisfy  customers'  wants  and 
needs   
b. the  quality  of  goods  and  services  to  satisfy  customers'  wants  and 
needs   
c. the identification of customers' wants and needs   
d. work scheduling to meet the due dates promised to customers   
e. maintenance schedules  
 
7. All  of  the  following  decisions  fall  within  the  scope  of  operations management 
except for ...  
a. financial analysis    
b. design of goods and processes   
c. location of facilities  
d. managing quality   
e. All of the above fall within the scope of operations management.  
 
 
 
 
 
 
 
 
 For questions 8 and 9 
True  Value  Jeans  currently  produces  60  pairs  of  jeans  in  an  8-hour  day.  The 
costs of production include: 
 
Raw material  $10.00/pair  

Labor  3 workers, $20/hour  

Energy  $1/hour of machine time  

Machines   3 machines, $10/hour 

 
8. Calculate  the  labor  productivity  for  True  Value,  i.e.,  the  number  of  jeans  that 
can be produced with one hour of labor. 
Labor productivity  = Output/labor hrs  
= 60/(3*8)  
= ​2.5 pairs of jeans per labor hr 
 
9. What is the multifactor productivity for True Value? 
Multifactor productivity = Output / (Labor cost + Material cost +  
E
​ nergy cost+ Machine Cost)  
= 60/ [(3 workers *8 hrs*$20) + (60 *$10) +  
  ​($1*  3  machines  *  8  hrs)+  ($10*  3 machines * 8 hrs] 
= ​0.044 pairs of jeans per $ input  
  
10. The  total  of  all  outputs  produced  by  the  transformation  process  divided  by 
the total of the inputs is … 
a. utilization  
b. greater in manufacturing than in services  
c. defined only for manufacturing firms   
d. multifactor productivity   
e. none of the above   
 
11. Productivity can be improved by ...  
a. increasing inputs while holding outputs steady   
b. decreasing outputs while holding inputs steady   
c. increasing inputs and outputs in the same proportion   
d. decreasing inputs while holding outputs steady   
e. none of the above   
 
 12. Three commonly used productivity variables are ...  
a. quality, external elements, and precise units of measure   
b. labor, capital, and management   
c. technology, raw materials, and labor   
d. education, diet, and social overhead   
e. quality, efficiency, and low cost   
 
13. The  service  sector  has  lower  productivity  improvements  than  the 
manufacturing sector because ...  
a. the service sector uses less skilled labor than manufacturing   
b. the quality of output is lower in services than manufacturing  
c. services usually are labor-intensive    
d. service sector productivity is hard to measure   
e. none of the above   
 
14. Productivity  tends  to  be  more  difficult  to  improve  in  the  service  sector 
because the work is ...  
a. often difficult to automate   
b. typically labor-intensive   
c. frequently processed individually   
d. often an intellectual task performed by professionals   
e. all of the above   
 
15. Which  of  the  following  statements  about  trends in operations management is 
false?   
a. Job specialization is giving way to empowered employees.   
b. Local or national focus is giving way to global focus.   
c. Environmentally-sensitive production is giving way to low-cost focus.   
d. Rapid  product  development  is  partly  the  result  of  shorter  product 
cycles.   
e. All of the above statements are true.  
 
16. A  foundry  produces  circular  utility  access  hatches  (manhole  covers).  If  120 
covers are produced in a 10-hour shift, the productivity of the line is ...  
a. 1.2 covers/hr   
b. 2 covers/hr  
c. 12 covers/hr   
d. 1200 covers/hr   
e. none of the above  
 
17. A  foundry  produces  circular  utility  access  hatches  (manhole  covers). 
Currently,  120  covers  are  produced  in a 10-hour shift.  If labor productivity can 
be increased by 20%, it would then be … 
a. 14.4 covers/hr 
b. 24 covers/hr   
c. 240 valves/hr   
d. 1200 covers/hr   
e. none of the above   
18. Gibson  Valves produces cast bronze valves on an assembly line. If 1600 valves 
are produced in an 8-hour shift, the productivity of the line is ... 
a. 2 valves/hr 
b. 40 valves/hr 
c. 80 valves/hr 
d. 200 valves/hr 
e. 1600 valves/hr 
 
19. Gibson  Valves  produces  cast  bronze  valves  on  an  assembly  line,  currently 
producing  1600  valves  each  8-hour  shift.  If  the  productivity  is  increased  by 
10%, it would then be ... 
a. 180 valves/hr 
b. 200 valves/hr   
c. 220 valves/hr    
d. 880 valves/hr   
e. 1760 valves/hr  
 
20. The  Dulac  Box  plant  produces  500  cypress  packing  boxes  in  two  10-hour 
shifts. What is the productivity of the plant?   
a. 25 boxes/hr 
b. 50 boxes/hr   
c. 5000 boxes/hr   
d. none of the above   
e. not enough data to determine productivity  
 
 
 
 
 
 
CHAPTER 2 - QUALITY MANAGEMENT 
 
1. "Quality is defined by the customer" is ...  
a. an unrealistic definition of quality  
b. a user-based definition of quality   
c. a manufacturing-based definition of quality   
d. a product-based definition of quality   
e. the definition proposed by the American Society for Quality  
 
2. "Making it right the first time" is ...  
a. an unrealistic definition of quality   
b. a user-based definition of quality   
c. a manufacturing-based definition of quality   
d. a product-based definition of quality   
e. the definition proposed by the American Society for Quality  
 
3. Three broad categories of definitions of quality are ...  
a. product quality, service quality, and organizational quality   
b. user-based, manufacturing-based, and product-based   
c. internal, external, and prevention 
d. low-cost, response, and differentiation 
e. Pareto, Shewhart, and Deming 
 
4. All  of  the  following  costs  are  likely  to  decrease  as  a  result  of  better  quality 
except ...  
a. customer dissatisfaction costs   
b. inspection costs   
c. scrap costs   
d. warranty and service costs   
e. maintenance costs   
 
5. A successful TQM program incorporates all of the following except   
a. continuous improvement 
b. employee involvement 
c. Benchmarking 
d. centralized decision-making authority 
e. none  of  the  above;  a  successful  TQM  program  incorporates  all  of  the 
above 
 
 6. "Kaizen" is a Japanese term meaning ...  
a. a foolproof mechanism  
b. just-in-time (JIT)   
c. a fishbone diagram   
d. setting standards   
e. continuous improvement 
 
7. Quality circles members are  
a. paid according to their contribution to quality   
b. external  consultants  designed  to  provide  training  in  the  use  of  quality 
tools  
c. always machine operators   
d. all trained to be facilitators   
e. none of the above; all of the statements are false  
 
8. ISO 9000 seeks standardization in terms of   
a. products   
b. production procedures  
c. suppliers' specifications   
d. procedures to manage quality  
e. all of the above   
 
9. A quality loss function includes all of the following costs except  
a. the cost of scrap and repair   
b. the cost of customer dissatisfaction   
c. inspection, warranty, and service costs   
d. sales costs   
e. costs to society  
 
10. Among  the  tools  of  TQM,  the  tool  ordinarily  used  to  aid  in  understanding  the 
sequence of events through which a product travels is a ...  
a. Pareto chart 
b. Process chart 
c. Check sheet 
d. Taguchi map 
e. Poka-yoke 
 
 
 
 11. Pareto charts are used to ...  
a. identify inspection points in a process  
b. outline production schedules  
c. organize errors, problems, or defects   
d. show material flow   
e. all of the above 
 
12. The  process  improvement  technique  that  sorts  the  "vital few" from the "trivial 
many" is ...  
a. Taguchi analysis 
b. Pareto analysis 
c. Benchmarking 
d. Deming analysis 
e. Yamaguchi analysis 
 
13. A  customer  service  manager  at a retail clothing store has collected numerous 
customer  complaints  from  the  forms  they  fill  out  on  merchandise  returns.  To 
analyze  trends  or  patterns  in  these  returns,  she  has  organized  these 
complaints  into  a  small  number  of  categories.  This  is  most  closely  related  to 
the ... tool of TQM.  
a. Taguchi loss function 
b. cause and effect diagram 
c. scatter diagram 
d. histogram   
e. process control chart  
 
14. A fishbone diagram is also known as a ...  
a. Cause-and-effect diagram 
b. Poka-yoke diagram 
c. Kaizen diagram 
d. Kanban diagram 
e. Taguchi diagram  
 
15. "Poka-yoke" is the Japanese term for ...  
a. card   
b. foolproof   
c. continuous improvement 
d. fishbone diagram 
e. just-in-time production  
 16. When a sample measurement falls inside the control limits, it means that ...  
a. each unit manufactured is good enough to sell   
b. the process limits cannot be determined statistically   
c. the process output exceeds the requirements   
d. if there is no other pattern in the samples, the process is in control  
e. the process output does not fulfill the requirements 
 
17. Which of the following is false regarding control charts? 
a. Values  above  the  upper  control  limits  always  imply  that  the  product’s 
quality is exceeding expectations 
b. Control  charts  are  built  so  that  new  data  can  be  quickly  compared  to 
past performance data 
c. Control charts graphically present data 
d. Control charts plot data over time 
e. None of the above is false.   
 
18. What  refers  to  training  and  empowering  frontline  workers to solve a problem 
immediately?  
a. just-in-time  
b. Poka-yoke 
c. benchmarking  
d. Kaizen 
e. service recovery 
 
19. Which  of  the  determinants  of  service  quality  involves  having  the  customer's 
best interests at heart? 
a. Access 
b. Courtesy 
c. credibility  
d. responsiveness  
e. tangibles  
 
20. Which  of  the  determinants  of  service  quality  involves  performing  the  service 
right the first time?  
a. access   
b. courtesy  
c. credibility   
d. reliability  
e. responsiveness  
CHAPTER 4 - PRODUCT DESIGN 
 
1. Operations  managers  must  be  able  to  anticipate  changes  in  which  of  the 
following? 
a. product mix 
b. product opportunities 
c. the products themselves 
d. product volume 
e. all of the above 
 
2. In  which  stage  of  the  product  life  cycle  should  product  strategy  focus  on 
process modifications? 
a. Introduction 
b. Growth 
c. Maturity 
d. Decline 
e. None of the above 
 
3. A product's life cycle is divided into four stages, which are ... 
a. introduction, growth, saturation, and maturity 
b. introduction, growth, stability, and decline 
c. introduction, maturity, saturation, and decline 
d. introduction, growth, maturity, and decline 
e. none of the above 
 
4. Which  of  the  following  statements  regarding  product  life  cycle  and 
profitability is true? 
a. Profit  is  highest  in  the  growth  life  cycle  phase  because  the  product  is 
new and unique. 
b. Profit  is  lowest  in  the  growth  stage  of  the  life  cycle  because  costs  are 
so high. 
c. Profit is at its greatest in the decline stage of the product life cycle 
d. Breakeven is attained in the growth stage of the product life cycle. 
e. Cash flow turns positive in the maturity phase. 
 
 
 
 
 
 For questions 5 to 7 
Examine the systems given below.  
 
System A System B 

 
5. Calculate the reliability of System A 
System A reliability = [.95 + (.05) (.90)] * .95 * [.95 + (.05) (.90)]   
=​ 0.9405  
 
6. Calculate the reliability of System B 
System B reliability = [.90 + (.10) (.90)] x [.90 + (.10) (.90)] x [.90 + (.10) (.90)]  
= ​0.9703 
 
7. Which system is more reliable, A or B? 
System B is more reliable 
 
8. Quality function deployment (QFD) … 
a. determines what will satisfy the customer 
b. translates customer desires into the target design 
c. is used early in the design process 
d. is used to determine where to deploy quality efforts 
e. all of the above 
 
9. Which of the following makes products that are friendlier to the environment? 
a. using less materials 
b. more recycled materials 
c. using less energy 
d. using less harmful ingredients 
e. all of the above 
 
 
 
 
 
 
 10. An operations manager's ethical responsibilities 
a. are limited to the production phase of product life cycle 
b. are limited to following published laws and regulations 
c. extend  from  design,  to  production,  to  final  destruction/disposition  of  a 
product 
d. do not include being efficient with the firm's resources 
e. need not consider a product design's impact on the entire economy 
 
11. Which of the following product development strategies has the highest risk? 
a. acquiring the developer 
b. alliances 
c. joint ventures 
d. new internally developed products 
e. purchasing technology 
 
12. Value analysis takes place ...  
a. when the product is selected and designed   
b. during  the  initial  stages  of  production  when  something  needs  to  be 
done to assure product success   
c. when the product is first conceived   
d. during  the  production  process  when  it  is  clear  the  new  product  is  a 
success   
e. when the product cost is very low   
 
13. The  dimensions,  tolerances,  materials,  and  finishes  of  a  component  are 
typically shown on a(n) 
a. assembly chart 
b. engineering drawing 
c. bill of material 
d. assembly drawing 
e. route sheet 
 
14. A process sheet is a type of 
a. assembly drawing 
b. assembly chart 
c. route sheet 
d. work order 
e. bill of materials 
 
 15. Which  of  the  following  documents  lists  the  operations  (including  assembly 
and  inspection)necessary  to  produce  the  component  with  the  material 
specified in the bill of material? 
a. an engineering drawing 
b. an assembly drawing 
c. a route sheet 
d. an assembly chart 
e. an operations chart 
 
16. The  document  for  production  that  gives  the  instruction  to  make  a  given 
quantity of a particularitem, usually to a given schedule, is ... 
a. the work order 
b. the route sheet 
c. the bill of information 
d. the assembly chart 
e. the value analysis 
 
17. Which of the following is not a service design technique used to reduce cost? 
a. increasing customer interaction 
b. delaying customization 
c. automation 
d. modularizing the product 
e. reducing customer interaction 
 
18. Modern ATM machines are an automated example of a service design that ... 
a. reduces customer interaction 
b. modularizes the service 
c. delays service customization 
d. has no moment of truth 
e. has insufficient quality function deployment 
 
19. Which  of  the  following  scenarios  illustrates  a  moment  that  exceeds  the 
customer's expectations? 
a. an express mail service that guarantees overnight delivery 
b. a flight attendant that responds shortly after being called 
c. a hairdresser that cuts your hair at the right length 
d. a professor that contacts people in several companies to find you a job 
e. a bank that sends you monthly account statements 
 
 20. The role of decision trees in product design is … 
a. to  rank  products  in  descending  order  of  their  dollar  contribution  to  the 
firm 
b. to better understand the customers' wants 
c. to calculate the expected value of each course of action 
d. to calculate the value of quality function deployment 
e. to calculate the value of the moment of truth 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 5 - SERVICE DESIGN 
 
1. Which of the following is not a service design technique used to reduce cost?   
a. increasing customer interaction 
b. delaying customization 
c. Automation 
d. modularizing the product 
e. reducing customer interaction  
 
2. Which  of  the  following  examples  involves customer participation in the design 
of the service?   
a. investing in a mutual fund   
b. buying a life insurance policy   
c. providing the stockbroker with the desired distribution of the portfolio  
d. seeing a movie at the theater   
e. eating at a fast-food restaurant   
 
3. Modern ATM machines are an automated example of a service design that   
a. reduces customer interaction   
b. modularizes the service  
c. delays service customization   
d. has no moment of truth   
e. has insufficient quality function deployment 
 
4. For  a  full-time  college  student,  which  of  the  following  moments  of  truth 
exemplifies the customer's standard expectations?   
a. Your advisor made you wait, even though you had an appointment.   
b. You had to visit more than once to reach your academic advisor.   
c. Your advisor was competent, helpful, and understanding.   
d. Your advisor failed to keep her appointment with you.   
e. Your advisor offered to work with you after regular work hours.  
 
5. Which  service  design  technique(s)  would  ordinarily  not  be  appropriate  for 
full-service restaurant meals?  
a. modularizing the product   
b. customization as late in the process as possible   
c. reducing customer interaction   
d. the moment of truth   
e. All of the above are appropriate.  
  
6. Which  of  the  following  scenarios  illustrates  a  moment  that  exceeds  the 
customer's expectations?   
a. an express mail service that guarantees overnight delivery ‘ 
b. a flight attendant that responds shortly after being called   
c. a hairdresser that cuts your hair at the right length   
d. a professor that contacts people in several companies to find you a job   
e. a bank that sends you monthly account statements 
 
7. Which  of  the  following  scenarios  illustrates  a  moment  that  meets  the 
customer's expectations?   
a. a  sales  clerk  that  called  you  by  your  name  on  your  second  visit  to  the 
store   
b. an express mail service that guarantees same day delivery   
c. a flight attendant that responds shortly after being called   
d. a professor that contacts people in several companies to find you a job   
e. a  sales  clerk  at  the  clothing  store  that  asked  you  to  wait  for  a  minute 
as soon as a wealthy looking customer entered the store   
 
For questions 8 and 9 
The  ticket  booth  on  the ABC campus is operated by one person, who is selling 
tickets  for  the  annual  competition  soccer  game  on  Saturday.  The  ticket seller 
can  serve  an  average  of  12  customers  per  hour  (Poisson  distributed);  on 
average,  8  customers  arrive  to  purchase  tickets  each  hour  (Poisson 
distributed).  
 
Known 

 
 
8. Determine the average time a ticket buyer must wait 

 
 
 
 
 9. Determine the portion of time the ticket seller is busy 

 
 
For questions 10-15 
The  computer  lab  at  State  University  has  a  help  desk  to  assist  students 
working on computer spreadsheet assignments. The students patiently form a 
single  line  in  front of the desk to wait for help. Students are served based on a 
first-come,  first-served  priority rule. On average, 15 students per hour arrive at 
the  help  desk.  Student  arrivals  are  best described using a Poisson distribution. 
The  help  desk  server  can  help  an  average  of  20  students  per  hour,  with  the 
service rate being described by an exponential distribution. 
 
10. Calculate the average utilization of the help desk server 

 
 
11. Calculate the average number of students in the system 

 
 
12. Calculate the average number of students waiting in line 

 
 
13. Calculate the average time a student spends in the system 

 
 
14. Calculate the average time a student spends waiting in line 

 
 
 15. Calculate the probability of having more than 4 students in the system 
The  probability  that  there  are  more  than  four  students  in  the  system  equals 
one  minus  the  probability  that  there  are  four  or  fewer students in the system. 
We use the following formula. 

 
0.2374  (23.74  percent)  chance  of  having  more  than  four  students  in  the 
system. 
 
16. At a restaurant, which of the following is a ‘core’ part of the service? 
a. The meal 
b. The environment in which food is served 
c. The provision of the meal  
d. The preparation of food 
 
17. What is the task in product or service design? 
a. Assessing internal resource constraints from an operations perspective. 
b. Reviewing the organisation’s competitive position in the market. 
c. Gathering  information  from  customers  and  non-customers  in  order  to 
understand needs or expectations. 
d. Identifying likely suppliers of key product or service components. 
 
18. The following is NOT part of a service concept for a restaurant?  
a. A relaxing atmosphere  
b. An attractive environment  
c. Three waiters and a chef  
d. Well cooked and presented meal 
 
19. Where should product or service design start?  
a. With the marketing department  
b. With the customer  
c. With the operations manager  
d. With human resources, operations, and marketing 
 
 20. Why is good product and service design important?  
a. Products  and  services  are  usually  the  first  thing  customers  see  of  a 
company, so they should have an impact.  
b. Products are the last thing a customer sees of a company.  
c. Operations  managers’  pay  is  determined  by  the  quality  of  product 
design.  
d. The visual appeal of a product is the most important factor in selling it. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 6 - PROCESS DESIGN AND FACILITIES 
 
For questions 1 to 5 
The  TLB  Yogurt Company must be able to make 600 party cakes in a 40-hour 
week.  

 
 
1. Draw and label a precedence diagram 

 
 
2. Compute cycle time 
Cycle Time = (40 x 60)/600 
=4​ minutes 
 
 
3. Compute the theoretical minimum number of workstations 
Minimum number of workstations = 16/4 
= ​4 
 
4. Balance the assembly line 

 
 
5. Calculate its efficiency.  
Efficiency = 16/(4x4) 
=​ 1 o
​ r ​100%  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 12 - FORECASTING 
 
1. 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   
 
2. 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 
 
3. 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 
 
4. Gradual, long-term movement in time series data is called … 
a. Seasonal variation 
b. Cycles 
c. Trends 
d. Exponential variation 
e. Random variation   
 
5. Which of the following is not present in a time series?   
a. Seasonality 
b. Operational variations 
c. Trend 
d. Cycles 
e. Random variations  
 
 6. 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  
 
7. 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  
 
8. 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   
 
9. Which  time  series  model  uses  past  forecasts  and  past  demand  data  to 
generate a new forecast? 
a. naive   
b. moving average 
c. weighted moving average 
d. exponential smoothing 
e. regression analysis  
 
 10. 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  
 
11. 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  
 
12. Given  an  actual  demand  of  61,  a  previous  forecast of 58, and an α 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  
 
13. Given forecast errors of -1, 4, 8, and -3, what is the mean absolute deviation?  
a. 2 
b. 3 
c. 4 
d. 8 
e. 16 
 
14. A time series trend equation is 25.3 + 2.1 X. What is your forecast for period 7?  
a. 23.2 
b. 25.3 
c. 27.4 
d. 40.0 
e. cannot be determined 
 15. A  forecasting  method  has  produced  the  following  over  the  past  five  months. 
What is the mean absolute deviation?  
 
Actual  Forecast 

10  11 

8  10 

10  8 

6  6 

9  8 
 
a. -0.2 
b. -1.0 
c. 0.0 
d. 1.2 
e. 8.6  
 
16. The  last  four months of sales were 8, 10, 15, and 9 units. The last four forecasts 
were 5, 6, 11, and 12 units. The Mean Absolute Deviation (MAD) is ...  
a. 2 
b. -10 
c. 3.5 
d. 9 
e. 10.5  
 
17. Demand for a certain product is forecast to be 800 units per month, averaged 
over  all  12  months  of  the  year.  The  product  follows  a  seasonal  pattern,  for 
which  the January monthly index is 1.25. What is the seasonally-adjusted sales 
forecast for January?  
a. 640 units 
b. 798.75 units 
c. 800 units 
d. 1000 units 
e. cannot be calculated with the information given 
  
 18. A  seasonal  index for a monthly series is about to be calculated on the basis of 
three  years'  accumulation  of  data.  The  three  previous  July  values  were  110, 
150,  and  130.  The  average  over  all  months  is  190.  The  approximate  seasonal 
index for July is ... 
a. 0.487 
b. 0.684 
c. 1.462 
d. 2.053 
e. cannot be calculated with the information given 
 
19. For  a  given  product  demand,  the  time  series  trend  equation  is  53  -  4  X.  The 
negative sign on the slope of the equation ... 
a. is a mathematical impossibility   
b. is  an  indication  that  the  forecast  is  biased,  with  forecast  values  lower 
than actual values 
c. is an indication that product demand is declining   
d. implies that the coefficient of determination will also be negative  
e. implies that the RSFE will be negative  
 
20. Yamaha  manufacturers  which  set  of  products  with  complementary  demands 
to address seasonal fluctuations?  
a. golf clubs and skis  
b. swimming suits and winter jackets  
c. jet skis and snowmobiles  
d. pianos and guitars  
e. ice skates and water skis 
 
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 13 - INVENTORY MANAGEMENT 
 
1. 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.  
 
2. 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.   
 
3. 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.   
 
4. The  primary  purpose  of  the  basic  economic  order  quantity  model  shown 
below is . . . 

 
a. to  calculate  the  reorder  point,  so  that  replenishments  take  place at the 
proper time   
b. to minimize the sum of carrying cost and holding cost   
c. to maximize the customer service level   
d. to minimize the sum of setup cost and holding cost   
e. to calculate the optimum safety stock  
  
5. 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  
 
6. A  product  has  demand  of  4000  units  per  year.  Ordering  cost  is  $20  and 
holding  cost  is  $4  per  unit  per  year.  The  cost-minimizing  solution  for  this 
product is to order . . . 
a. all 4000 units at one time   
b. 200 units per order   
c. every 20 days   
d. 10 times per year   
e. none of the above   
 
7. An  inventory  decision  rule  states  "when  the  inventory  level  goes  down  to  14 
gearboxes,  100  gearboxes  will  be  ordered."  Which of the following statements 
is true?   
a. One hundred is the reorder point, and 14 is the order quantity. 
b. Fourteen is the reorder point, and 100 is the order quantity.  
c. The number 100 is a function of demand during lead time.  
d. Fourteen is the safety stock, and 100 is the reorder point. 
e. None of the above is true.  
 
8. Which  of  the  following  statements  regarding  the  production  order  quantity 
model is true?  
a. It  applies  only  to  items  produced  in  the  firm's  own  production 
departments. 
b. It  relaxes  the  assumption  that  all  the  order  quantity  is  received  at  one 
time. 
c. It relaxes the assumption that the demand rate is constant.  
d. It minimizes the total production costs.  
e. It minimizes inventory.  
 
 
9. The  assumptions  of  the  production  order  quantity  model  are  met  in  a 
situation  where  annual  demand  is  3650  units, setup cost is $50, holding cost is 
$12  per  unit  per  year,  the  daily  demand  rate  is  10  and  the  daily  production 
rate is 100. The production order quantity for this problem is approximately   
a. 139   
b. 174  
c. 184  
d. 365  
e. 548  
 
10. A  production  order  quantity  problem  has  daily  demand  rate  =  10  and  daily 
production  rate  =  50.  The  production  order  quantity  for  this  problem  is 
approximately  612  units.  The  average  inventory  for  this  problem  is 
approximately … 
a. 61   
b. 245 
c. 300 
d. 306 
e. 490 
 
For questions 11 to 13 
The  TransCanada  Lumber  Company  and  Mill  processes  10,000  logs  annually, 
operating  250  days  per  year.  Immediately  upon  receiving  an  order,  the 
logging company's supplier begins delivery to the lumber mill at the rate of 60 
logs  per  day.  The  lumber  mill  has  determined  that  the  ordering  cost  is  $1600 
per  order,  and  the  cost  of  carrying  logs  in  inventory  before  they  are 
processed is $15 per log on an annual basis.  
 
Known 

 
  
11. Determine the optimal order size  

 
 
12. Determine the total inventory cost associated with the optimal order quantity 

 
 
13. Determine the number of operating days required to receive an order  
Known 

 
The number of operating days to receive the entire order is  

 
 
14. The  amount  of  denim  used  daily  by  the  Southwest  Apparel  Company  in  its 
manufacturing  process  to  make  jeans is normally distributed with an average 
of  4000  yards  of  denim  and  a  standard deviation of 600 yards. The lead time 
required to receive an order of denim from the textile mill is a constant 7 days. 
Determine  the  safety  stock  and  reorder  point  if  the  company  wants  to  limit 
the probability of a stockout and work stoppage to 5%. 
  
 
15. A  specific  product  has  demand  during  lead  time  of  100  units,  with  a standard 
deviation  of  25  units.  What  safety  stock  (approximately)  provides  a  95% 
service level?   
a. 41   
b. 55 
c. 133 
d. 140 
e. 165 
 
16. Demand  for  dishwasher  water  pumps  is  8  per  day.  The standard deviation of 
demand  is  3  per  day,  and  the  order  lead time is four days. The service level is 
95%. What should the reorder point be?  
a. about 18 
b. about 24 
c. about 32 
d. about 38 
e. more than 40  
 
17. If  daily  demand  is  constant  at  10  units  per  day,  and  lead  time  averages  12 
days  with  a  standard  deviation  of 3 days, 95 percent service requires a safety 
stock of approximately ...  
a. 28 units 
b. 30 units 
c. 49 units 
d. 59 units 
e. 114 units  
  
18. If  demand  is  not  uniform  and  constant,  then  stockout  risks  can  be  controlled 
by ... 
a. increasing the EOQ 
b. placing an extra order 
c. raising the selling price to reduce demand 
d. adding safety stock 
e. reducing the reorder point  
 
19. The purpose of safety stock is to ... 
a. replace failed units with good ones   
b. eliminate the possibility of a stockout   
c. eliminate the likelihood of a stockout due to erroneous inventory tally   
d. control  the  likelihood  of  a  stockout  due  to  the  variability  of  demand 
during lead time   
e. protect the firm from a sudden decrease in demand  
 
20. If  daily  demand  is  normally  distributed  with  a  mean  of  15  and  standard 
deviation  of  5, and lead time is constant at 4 days, 90 percent service level will 
require safety stock of approximately ... 
a. 7 units   
b. 10 units   
c. 13 units 
d. 16 units 
e. 26 units  
 
 
 
 
 

GOOD LUCK!