EXAMINATION 1, Version D
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. At a factory, the transformation process is the physical change of raw materials and components
into products.
a) True
b) False
2. Companies that compete based on flexibility often cannot compete based on cost.
a) True
b) False
3. Analyzing customer preferences is an ongoing process.
a) True
b) False
4. Service organizations can also benefit from supply chain management.
a) True
b) False
5. In using quality function deployment, conducting focus groups is one way to find out precisely what
features customers want in the product.
a) True
b) False
6. Upper and lower control limits are usually set at  6 standard deviations from the mean.
a) True
b) False
7. Operations Management is responsible for increasing the organization’s efficiency, which means
the company will be able to __________.
a) add to the engineering process
b) take for granted current operations
c) increase the number of positions under the manager’s position
d) eliminate activities that do not add value
e) increasing purchasing opportunities
8. What are long-term decisions that set the direction for the entire organization called?
a) tactical
b) operational
c) directional
d) distant
e) strategic
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9. A key feature of scientific management is that workers are motivated only by
__________________.
a) love
b) power
c) challenging work
d) money
e) fame
10. Which of the following would not be considered a core competency that a company might have?
a) a highly trained workforce
b) an inefficient distribution system
c) skills in attracting and raising capital
d) use of information technology
e) quality control techniques
11. Which type of technology has had the greatest impact on business?
a) process technology
b) information technology
c) environmental technology
d) safety technology
e) product technology
12. 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
13. With respect to competitive priorities, intermittent operations compete more on
_______________ compared to repetitive operations.
a) cost and features
b) durability and cost
c) availability and reliability
d) flexibility and delivery
e) durability and features
14. 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
15. 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
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16. The definition of quality that involves the product functioning as expected without failure is
a) Performance
b) Conformance
c) Reliability
d) Standardization
e) Endurance
17. Employees of the organization who receive goods or services from others in the company are
a) Internal customers
b) Ultimate customers
c) Downstream customers
d) Operators
e) External customers
18. Costs of quality inspections, testing, test equipment, and labs are examples of
a) Internal failure
b) External failure
c) Appraisal
d) Prevention
e) Replacement
19. P-charts are used to measure:
a) continuous variation
b) intermittent random variation
c) proportion of items in a sample that are defective
d) the count of defective parts
e) proportion of items in a sample that are good
20. On a control chart, what separates common from assignable causes of variation?
a) x-bar lines
b) Control limits
c) Specification limits
d) Production limits
e) Mean divided by standard deviation
21. What is a control chart that monitors changes in the dispersion or variability of a process?
a) x-bar chart
b) R-chart
c) p-chart
d) c-chart
e) OC chart
22. The broad view of JIT is now often termed __________________________.
a) vendor-managed inventory
b) business process reengineering
c) lean production
d) cycle time management
e) e-distribution
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costs.
23. The ultimate goal of JIT is to produce products in a lot size of
a) 100 or fewer
b) N= (DT (1+X))/C
c) The inverse of the carrying cost
d) One
e) The capacity of the factory
24. Something you would not expect to see in a just-in-time work environment is
a) Order
b) Clutter
c) Ample space
d) Tools in their place
e) Cleanliness
The following problems are worth ten (10) points each.
1. Birdie Par owns a company that makes golf gloves. She is thinking about introducing a new glove,
which would require an additional fixed cost of $20,000 per year. The variable costs for the new glove
have been estimated to be $5 per glove.
a) If she sells the new glove for $15, how many must she sell to break even?
QBE = FC/SP-VC = $20,000/$15-$5 = $20,000/$10 = 2,000 gloves
b) If she sells 3,000 gloves at the $15 price, what will the contribution to profit be?
Profit = Revenue – Cost = 3,000*$15-[$20,000+(3,000*$5)=$45,000-[$20,000+$15,000] =
$45,000-$35,000 = $10,000
2. A firm produces 1500 units per day using four workers on a five-hour shift. On average, 12% of
the units produced are defective and must be scrapped. What is the labor productivity for nondefective units?
P = O/I = [1500-(.12*1500)]/4*5 = [1500-180]/20 = 1320/20 = 66 units/hour
3. Insourcing incurs a fixed cost of $1000 and a $5 variable cost. Outsourcing incurs a fixed cost of
$2000 and a $2 variable cost. What is the indifference point?
Qind = FCmake-FCbuy/VCbuy-VCmake = $1000-$2000/$2-$5 = -$1000/-$3 = ~333 units
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