OPERATIONS MANAGEMENT TEST 1

Answer all questions. Use the answer sheet provided to TICK your answers in the boxes
provided. Do not use red-coloured pens.

1. Which of the following is not one of The Ten Critical Decisions of Operations
Management?
a. Layout design
b. Maintenance
c. Process and capacity design
d. Mass customization
e. Supply chain management
d (Why study OM? moderate)

2. Which of the following statements is true?

a. Almost all services and almost all goods are a mixture of a service and a tangible
product.
b. A pure good has no tangible product component.
c. A pure service has only a tangible product component.
d. There is no such thing as a pure good.
e. None of the above is a true statement.
a (Operations in the service sector, difficult)

3. Which of the following is not a typical service attribute?

a. intangible product
b. easy to store
c. customer interaction is high
d. simultaneous production and consumption
e. difficult to resell
b (Operations in the service sector, moderate)

4. Current trends in operations management include all of the following except

a. just-in-time performance
b. rapid product development
c. mass customization
d. empowered employees
e. All of the above are current trends.
e (Exciting new trends in operations management, moderate)

5. 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
 c (The productivity challenge, moderate)
6. 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
b (The productivity challenge, moderate)

7. In time series, which of the following cannot be predicted?

a. large increases in demand
b. technological trends
c. seasonal fluctuations
d. random fluctuations
e. large decreases in demand
d (Time-series forecasting, moderate)

8. 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
d (Time-series forecasting, moderate)

9. Which time series model below assumes that demand in the next period will be equal to the
most recent period's demand?
a. naive approach
b. moving average approach
c. weighted moving average approach
d. exponential smoothing approach
e. none of the above
a (Time-series forecasting, easy)

10. 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
c (Time-series forecasting, moderate)
11. 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
c (Time-series forecasting, moderate)

12. 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
c (Time-series forecasting, moderate)

13. 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
a (Time-series forecasting, moderate)

14. 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
b (Time-series forecasting, moderate)

15. 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
a (Goods and services selection, moderate)
16. When should product strategy focus on forecasting capacity requirements?
a. at the introduction stage of the product life cycle
b. at the growth stage of the product life cycle
c. at the maturity stage of the product life cycle
d. at the decline stage of the product life cycle
e. none of the above
b (Goods and services selection, easy)

17. Which of the following represent an opportunity for generating a new product?
a. understanding the customer
b. demographic change, such as decreasing family size
c. changes in professional standards
d. economic change, such as rising household incomes
e. All of the above are such opportunities.
e (Generating new products, moderate)

18. 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
e (Product development, moderate)

19. 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
d (Time-based competition, moderate)

20. Group technology requires that

a. each component be identified by a coding scheme that specifies the type of processing
and the parameters of the processing
b. a specific series of engineering drawings be prepared
c. all bills of material be prepared using the same format
d. engineering change notices be linked to each of the bills of material and engineering
notices
e. the final products be standardized
a (Defining the product, moderate)
21. Which of the following is true about ISO 14000 certification?
a. It is not a prerequisite for ISO 9000 certification.
b. It deals with environmental management.
c. It offers a good systematic approach to pollution prevention.
d. One of its core elements is life-cycle assessment.
e. All of the above are true.
e (International quality standards, moderate)

22. The goal of inspection is to

a. detect a bad process immediately
b. add value to a product or service
c. correct deficiencies in products
d. correct system deficiencies
e. all of the above
a (The role of inspection, moderate)

23. A quality circle holds a brainstorming session and attempts to identify the factors
responsible for flaws in a product. Which tool do you suggest they use to organize their
findings?
a. Ishikawa diagram
b. Pareto chart
c. process chart
d. control charts
e. activity chart
a (Tools of TQM, moderate)

24. If a sample of parts is measured and the mean of the measurements is outside the control
limits, the process is
a. in control, but not capable of producing within the established control limits
b. out of control and the process should be investigated for assignable variation
c. within the established control limits with only natural causes of variation
d. monitored closely to see if the next sample mean will also fall outside the control
limits
e. none of the above
b (Tools of TQM, moderate)

25. A production manager at a pottery factory has noticed that about 70 percent of defects
result from impurities in raw materials, 15 percent result from human error, 10 percent
from machine malfunctions, and 5 percent from a variety of other causes. This manager is
most likely using
a. a Pareto chart
b. a scatter diagram
c. a Taguchi loss function
d. a cause and effect diagram
e. a flow chart
 a (Tools of TQM, easy)

26. A manager tells her production employees, "It's no longer good enough that your work fall
anywhere within the specification limits. I need your work to be as close to the target value
as possible." Her thinking is reflective of
a. internal benchmarking
b. Six Sigma
c. ISO 9000
d. Taguchi concepts
e. process control charts
d (Tools of TQM, moderate)

27. The causes of variation in statistical process control are

a. cycles, trends, seasonality, and random variations
b. producer's causes and consumer's causes
c. mean and range
d. natural causes and assignable causes
e. Type I and Type II
d (Statistical Process Control (SPC), moderate)

28. Which of the following is true regarding the process capability index Cpk?
a. A Cpk index value of 1 is ideal, meaning all units meet specifications.
b. The larger the Cpk, the more units meet specifications.
c. The Cpk index can only be used when the process centerline is also the specification
centerline.
d. Positive values of the Cpk index are good; negative values are bad.
e. None of the above is true.
b (Process capability, moderate)

29. The local newspaper receives several complaints per day about typographic errors. Over a
seven-day period, the publisher has received calls from readers reporting the following
number of errors: 4, 3, 2, 6, 7, 3, and 9. Based on these data alone, what type of control
chart(s) should the publisher use?
a. p-chart
b. c-chart
c. x -chart
d. R-chart
e. x - and R-charts
b (Statistical Process Control (SPC), moderate)
30. Plots of sample ranges indicate that the most recent value is below the lower control limit.
What course of action would you recommend?
a. Since there is no obvious pattern in the measurements, variability is in control.
b. One value outside the control limits is insufficient to warrant any action.
c. Lower than expected dispersion is a desirable condition; there is no reason to
investigate.
d. The process is out of control; reject the last units produced.
e. Variation is not in control; investigate what created this condition.
e (Statistical Process Control (SPC), difficult)

31. To set x -chart upper and lower control limits, one must know the process central line,
which is the
a. average of the sample means
b. total number of defects in the population
c. percent defects in the population
d. size of the population
e. average range
a (Statistical Process Control (SPC), moderate)

32. A manager wishes to build a 3σ range chart for a process. The sample size is five, the
mean of sample means is 16.01, and the average range is 5.3. From Table S6.1, the
appropriate value of D3 is 0, and D4 is 2.115. The UCL and LCL for this range chart are
a. 33.9 and 11.2
b. 33.9 and 0
c. 11.2 and 0
d. 6.3 and 0
e. 31.91 and 0.11
c (Statistical Process Control (SPC), moderate)

33. Which of the following products is likely to be assembled on a repetitive process line?
a. automobiles
b. personal computers
c. dishwashers
d. television sets
e. all of the above
e (Four process strategies, moderate)

34. Which of the following phrases best describes product focus?

a. low volume, high variety
b. finished goods are usually made to order
c. processes are designed to perform a wide variety of activities
d. high fixed costs, low variable costs
e. raw material inventories are low relative to the value of the product
d (Four process strategies, difficult)
35. Which of the following phrases best describes process focus?
a. low volume, high variety
b. finished goods are usually made to a forecast and stored
c. operators are modestly skilled
d. high fixed costs, low variable costs
e. raw material inventories are high relative to the value of the product
a (Four process strategies, difficult)

36. Process X has fixed costs of $10,000 and variable costs of $2.40 per unit. Process Y has
fixed costs of $9,000 and variable costs of $2.25 per unit. Which of the following
statements is true?
a. The crossover point is approximately 6667 units.
b. It is impossible for one process to have both of its costs lower than those of another
process.
c. Process Y is cheaper than process X at all volumes; there is no crossover point.
d. Process X should be selected for very large production volumes.
e. Process X is more profitable than process Y and should be selected.
c (Four process strategies, moderate)

37. A product sells for $5, and has unit variable costs of $3. This product accounts for $20,000
in annual sales, out of the firm's total of $60,000. The weighted contribution of this product
is approximately
a. 0.133
b. 0.200
c. 0.40
d. 0.667
e. $1.667
a (Break-even analysis, moderate)

38. A shop wants to increase capacity by adding a new machine. The firm is considering
proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for
machine B, $75,000. The variable cost for A is $15.00 per unit and for B, $18.00. The
revenue generated by the units processed on these machines is $22 per unit. If the
estimated output is 9,000 units, which machine should be purchased?
a. machine A
b. machine B
c. either machine A or machine B
d. no purchase because neither machine yields a profit at that volume
e. purchase both machines since they are both profitable
d (Break-even analysis, moderate)

39. Which of the following costs would be incurred even if no units were produced?
 a. raw material costs
b. direct labor costs
c. transportation costs
d. building rental costs
e. purchasing costs
d (Break-even analysis, moderate)

40. The staff training center at a large regional hospital provides training sessions in CPR to all
employees. Assume that the capacity of this training system was designed to be 1200
employees per year. Since the training center was first put in use, the program has become
more complex, so that 1050 now represents the most employees that can be trained per
year. In the past year, 950 employees were trained. The efficiency of this system is
approximately _____ and its utilization is approximately _____.
a. 79.2 percent; 90.5 percent
b. 90.5 percent; 79.2 percent
c. 87.5 percent; 950 employees
d. 950 employees; 1050 employees
e. 110.5 percent; 114.3 percent
b (Capacity, moderate)

41. Effective capacity is the

a. maximum output of a system in a given period
b. capacity a firm expects to achieve given the current operating constraints
c. average output that can be achieved under ideal conditions
d. minimum usable capacity of a particular facility
e. sum of all of the organization's inputs
b (Capacity, moderate)

42. Design capacity is the

a. average output that can be achieved under ideal conditions
b. actual production over a specified time period
c. maximum usable capacity of a particular facility
d. maximum theoretical output of a system in a given period under ideal conditions
e. capacity a firm expects to achieve given the current operating constraints
d (Capacity, moderate)

43. Which of the following statements regarding fixed costs is true?

a. Fixed costs rise by a constant amount for every added unit of volume.
b. While fixed costs are ordinarily constant with respect to volume, they can "step"
upward if volume increases result in additional fixed costs.
c. Fixed costs are those costs associated with labor and materials.
d. Fixed costs equal variable costs at the break-even point.
e. Fixed cost is the difference between selling price and variable cost.
b (Break-even analysis, moderate)
44. Which of the following is false regarding capacity expansion?
a. "Average" capacity sometimes leads demand, sometimes lags it.
b. If "lagging" capacity is chosen, excess demand can be met with overtime or
subcontracting.
c. Total cost comparisons are a rather direct method of comparing capacity alternatives.
d. Capacity may only be added in large chunks.
e. All of the above are true.
d (Capacity, moderate)

45. Which of the following is most likely to affect the location decision of a service firm rather
than a manufacturing firm?
a. energy and utility costs
b. attitude toward unions
c. parking and access
d. cost of shipping finished goods
e. labor costs
c (Service location strategy, moderate)

46. A county wants to build one centrally-located processing facility to serve the county's four
recycling drop-off locations. The four drop-offs have characteristics as given in the table
below. What is the approximate center of gravity of these four locations?

Location X-coordinate Y-coordinate Tonnage

Drop-off point A 1 8 10
Drop-off point B 6 7 35
Drop-off point C 6 2 25
Drop-off point D 4 7 50

a. 4.75, 6.04
b. 17, 24
c. 33.5, 135.4
d. 6, 4.25
e. 570, 725
a (Methods of evaluating location alternatives, moderate)
47. A full-service restaurant is considering opening a new facility in a specific city. The table
below shows its ratings of four factors at each of two potential sites.

Factor Weight Gary Mall Belt Line

Affluence of local population .20 30 30
Traffic flow .40 50 20
Parking availability .20 30 40
Growth potential .20 10 30

The score for Gary Mall is _____ and the score for Belt Line is ______.
a. 120; 120
b. 22; 24
c. 18; 120
d. 34; 28
e. none of the above
d (Methods of evaluating location alternatives, moderate)

48. Which of the following is the best example of clustering?

a. Furniture manufacturers locate in small towns all across the United States, wherever
old-time craftsmanship survives.
b. Many companies are incorporated in Delaware because of favorable tax laws.
c. Fast food restaurants choose their locations based on low-cost labor and traffic counts.
d. Software firms locate in Silicon Valley because of the abundance of scientific and
technical college graduates.
e. Sugar mills are located to be central to a group of sugar cane farms.
d (Factors that affect location decisions, easy)

49. A manufacturing firm finds a location that has a significant cost advantage over
alternatives, but rejects that location because the educational infrastructure was insufficient
to train the firm's workers in its special production technologies. The firm's action
illustrates the link between __________ and location.
a. innovation
b. clustering
c. tax incentives
d. globalization
e. proximity
a (The strategic importance of location, easy)

50. 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
Hospital.
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.
b (Factors that affect location decisions, moderate)