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. Which business function is responsible for planning, coordinating, and controlling the resources
needed to produce a company’s products and services?
a) engineering
b) finance
c) human resources
d) marketing
e) operations management
3. What concept involves breaking down the production of a product into a series of small,
elementary tasks, each of which is performed by a different worker?
a) division of labor
b) interchangeable parts
c) scientific management
d) the Hawthorne effect
e) operations research
4. What term describes the process of obtaining goods or services from an outside provider?
a) outproviding
b) transferization
c) outsourcing
d) subsourcing
e) supersourcing
5. 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
6. Service design differs from product design by including __________________________.
a) customer needs
b) marketing personnel in the decision making process
c) speed
d) quality
e) the esthetic and psychological benefits of the product
1
7. 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
8. Service organization supply chains are:
a) similar to manufacturing organizations.
b) NOT similar to service organizations.
c) very unique.
d) not a consideration when planning a service organization.
e) universally government regulated.
9. What term refers to processes or activities that are completed in-house?
a) Ownsource
b) Insource
c) Homesource
d) Outsource
e) Supplysource
10. In six-sigma the level of defects is reduced to approximately
a) 0
b) 1.4 parts per million
c) 2.4 parts per million
d) 3.4 parts per million
e) 4.4 parts per million
11. A quality circle is
a) An approach for the use of control charts
b) An award for quality improvements
c) An inspection stamp found on meat
d) A team of volunteer production employees and their supervisors who meet regularly to
solve quality problems
e) A symbol used on flow charts
12. What tool is useful in helping everyone develop a clear picture of how an operation or process
works?
a) Control chart
b) Pareto analysis
c) Checklist
d) Flowchart
e) Scatter diagram
13. What measures the central tendency of a set of data?
a) Coefficient of variation
b) Variance
c) Standard deviation
d) Mean
e) Range
2
14. What measures the difference between the largest and smallest observations in a set of
data?
a) Range
b) Coefficient of variation
c) Coefficient of kurtosis
d) Coefficient of skewness
e) Standard deviation
15. What is a control chart that monitors changes in the mean value of a process?
a) x-bar chart
b) R-chart
c) p-chart
d) c-chart
e) OC chart
16. JIT considers waste anything that
a) Fits in a waste basket
b) Reduces production capacity
c) Has been discarded
d) Cannot be recycled
e) Does not add value
17. JIT uses a pull system where communication starts with either the customer or with the
_________ work station in the production line.
a) First
b) Bottleneck
c) Dominant
d) Most expensive
e) Last
18. Quality in just-in-time is centered on building quality into the
a) Product
b) Maintenance of equipment
c) Process
d) Distribution system
e) Workforce
19. The need to offer a greater variety of product choices to customers of a traditionally standardized
product is the challenge of flexibility.
a) True
b) False
20. Productivity gains in the service sector have been much lower than that of manufacturing.
a) True
b) False
21. Repetitive operations are used to produce many different products with varying process
requirements in lower volumes.
a) True
b) False
3
22. The amount of outsourcing in industry is increasing.
a) True
b) False
23. A useful tool for translating customers’ everyday language into specific technical requirements is
quality function deployment.
a) True
b) False
24. An important task in quality control is to find out the range of natural random variation in a
process.
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 hourly productivity of the firm?
P = O/I = 110+90+130/6+7+9 = 330/22 = 15 shirts/hour
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?
QBE = FC/SP-VC = $400,000/$30-$20 = $400,000/$10 = 40,000 radios
b) If Blaster sells 70,000 of the new radio model at the $30 price, what will the contribution to
profit be?
P = revenue – total cost = 70,000*$30 – [$400,000+(70,000*$20)]
= $2,100,000 – [$400,000+$1,400,000] = $2,100,000-$1,800,000 = $300,000
3. Simuelson Industries can produce its own motors for a $60,000 fixed monthly cost and a $50
variable cost per unit. Alternatively, Simuelson Industries can purchase the motors from an outside
supplier for $50,000 per month and $58 per unit.
a) What is the indifference point?
QIND = FCmake-ECbuy/VCbuy-VCmake=$60,000-$50,000/$58-$50 =
$10,000/$8 = 1,250 motors
b) What option should be chosen if monthly demand is 1200 units?
Make: FC+(VC*Q) = $60,000+($50*1200) = $60,000+$60,000 = $120,000
Buy: FC+(VC*Q) = $50,000+($58*1200) = $50,000+$69,600 = $119,600
Choose outsourcing
4