Operations Management: Processes and Supply Chains, 12e (Krajewski)
Chapter 1 Using Operations to Create Value
1.1 Role of Operations in an Organization
1) Operations management refers to the direction and control of inputs that transform processes into
products and services.
Answer: TRUE
Difficulty: Easy
Keywords: operations management, inputs, process, transformation
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Describe the role of operations in an organization and its historical evolution over time.
2) As a functional area of a business, Operations translates materials and services into outputs.
Answer: TRUE
Difficulty: Easy
Keywords: operations management, inputs, process, transformation
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Describe the role of operations in an organization and its historical evolution over time.
3) The three main line functions of any business include Operations, Finance and Marketing.
Answer: TRUE
Difficulty: Easy
Keywords: operations, finance, marketing
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Describe the role of operations in an organization and its historical evolution over time.
4) Support functions in an organization include Accounting, Human Resources and Engineering.
Answer: TRUE
Difficulty: Easy
Keywords: accounting, human resources, engineering
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Describe the role of operations in an organization and its historical evolution over time.
5) Regardless of how departments like Accounting, Engineering, Finance, and Marketing function in an
organization, they are all linked together through:
A) management.
B) processes.
C) customers.
D) stakeholders.
Answer: B
Difficulty: Moderate
Keywords: departments, functions, processes
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Describe the role of operations in an organization and its historical evolution over time.
6) The foundations of modern manufacturing and technological breakthroughs were inspired by the
creation of the mechanical computer by:
A) Charles Babbage.
B) James Watt.
C) Eli Whitney.
D) Frederick Taylor.
Answer: A
Difficulty: Moderate
Keywords: Charles Babbage
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Describe the role of operations in an organization and its historical evolution over time.
7) Which of these Great Moments in Operations and Supply Chain Management did not occur in the 20th
century?
A) invention of the assembly line
B) publication of the Toyota Production Systems book
C) establishment of railroads
D) strategic planning for achieving product variety
Answer: C
Difficulty: Moderate
Keywords: history, railroad
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Describe the role of operations in an organization and its historical evolution over time.
8) Operations management refers to the systematic design, direction, and control of ________ that
transform ________ into products and services.
Answer: processes, inputs
Difficulty: Moderate
Keywords: process, input, transform, product, service
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Describe the role of operations in an organization and its historical evolution over time.
9) The three mainline functions of any business are ________, ________, and ________.
Answer: operations, finance, marketing
Difficulty: Moderate
Keywords: operations, finance, marketing, functions of a firm
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Describe the role of operations in an organization and its historical evolution over time.
10) What are the three key functions of a firm and what is each responsible for?
Answer: The three main functions of a firm are operations, finance, and marketing. The operations
function transforms material and service inputs into product and service outputs. The finance function
generates resources, capital and funds from investors and sales of the firm's goods and services in the
marketplace. The marketing function is responsible for producing sales revenue of the outputs.
Difficulty: Moderate
Keywords: manufacturing process, service process
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Describe the role of operations in an organization and its historical evolution over time.
1.2 A Process View
1) A process involves transforming inputs into outputs.
Answer: TRUE
Difficulty: Easy
Keywords: process, inputs, outputs
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
2) Every process has a customer.
Answer: TRUE
Difficulty: Easy
Keywords: process, customer relationship
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
3) A nested process refers to a process within a process.
Answer: TRUE
Difficulty: Easy
Keywords: nested process
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
4) At the level of the firm, service providers offer just services and manufacturers offer just products.
Answer: FALSE
Difficulty: Moderate
Keywords: manufacturing, service, similarity, goods, services
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
5) At the process level, it is much easier to distinguish whether the process is providing a service or
manufacturing a product.
Answer: TRUE
Difficulty: Moderate
Keywords: manufacturing process, service process, goods, services
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
6) Manufacturing processes tend to be capital intensive.
Answer: TRUE
Difficulty: Easy
Keywords: manufacturing process, service process, capital intensive, labor intensive
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
7) Quality is more easily measured in a service process than in a manufacturing process.
Answer: FALSE
Difficulty: Moderate
Keywords: manufacturing process, service process, quality
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
8) Contact with the customer is usually higher in a manufacturing process than in a service process.
Answer: FALSE
Difficulty: Easy
Keywords: manufacturing process, service process, customer contact
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
9) At the level of the firm, service providers do not just offer services and manufacturers do not just offer
products.
Answer: TRUE
Difficulty: Easy
Keywords: manufacturing process, service process
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
10) Which of these statements about processes is not true?
A) A process can have its own set of objectives.
B) A process can involve work flow that cuts across departmental boundaries.
C) A process can require resources from several departments.
D) A process can exist without customers.
Answer: D
Difficulty: Moderate
Keywords: process, customer relationship
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
11) Operations management is part of a production system that can be described in the following manner:
Organization: inputs→processes→outputs.
Which one of the following correctly describes a production system?
A) Airline: pilots→planes→transportation
B) Bank: tellers→computer equipment→deposits
C) Furniture manufacturer: wood→sanding→chair
D) Telephone company: satellites→cables→communication
Answer: C
Difficulty: Moderate
Keywords: production system, input, process, output
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Reflective Thinking
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
Table 1.1
You are the Production Manager for the toy manufacturing process at the ABC Company.
12) Use the information provided in Table 1.1. An example of an internal customer is:
A) the lumber company.
B) the Receiving Department at ABC.
C) the Shipping Department at ABC.
D) the toy store at the mall.
Answer: C
Difficulty: Moderate
Keywords: internal customer
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Reflective Thinking
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
13) Use the information provided in Table 1.1. An example of an internal supplier is:
A) the lumber company.
B) the Receiving Department at ABC.
C) the Shipping Department at ABC.
D) the toy store at the mall.
Answer: B
Difficulty: Moderate
Keywords: internal supplier
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Reflective Thinking
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
14) Use the information provided in Table 1.1. An example of an external customer is:
A) the lumber company.
B) the Customer Service Department at ABC.
C) the Shipping Department at ABC.
D) the toy store at the mall.
Answer: D
Difficulty: Moderate
Keywords: external customer
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Reflective Thinking
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
15) Use the information provided in Table 1.1. An example of an external supplier is:
A) the lumber company.
B) the Receiving Department at ABC.
C) the Customer Service Department at ABC.
D) the toy store at the mall.
Answer: A
Difficulty: Moderate
Keywords: external supplier
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Reflective Thinking
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
16) Which of the following is an example of a nested process?
A) At the start of the new semester, a student first pays tuition and then goes to the bookstore.
B) A customer service representative verifies a caller's account information.
C) A candidate's intent to graduate is checked for financial holds by the Bursar and for degree
requirements by Advising before the diploma mill prints their sheepskin.
D) A stockbroker calls a client and advises her to sell silver short.
Answer: C
Difficulty: Easy
Keywords: nested process
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
17) Which of the following statements is more of a general characteristic of a manufacturing organization,
as compared to a service organization?
A) Short-term demand tends to be highly variable.
B) Operations are more capital intensive.
C) Outputs are more intangible.
D) Quality is more difficult to measure.
Answer: B
Difficulty: Moderate
Keywords: manufacturing organization, service organization, capital intensity
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
18) Which one of the following statements is more of a general characteristic of a service organization, as
compared to a manufacturing organization?
A) Output can be inventoried.
B) The response time is longer.
C) There is less customer contact.
D) Quality is not easily measured.
Answer: D
Difficulty: Moderate
Keywords: manufacturing organization, service organization, facilities
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
19) Manufacturing processes usually have:
A) physical, durable output.
B) high levels of customer contact.
C) output that cannot be inventoried.
D) low levels of capital intensity.
Answer: A
Difficulty: Moderate
Keywords: manufacturing organization, service organization, physical output
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
20) Service processes usually have:
A) physical, durable output.
B) low levels of customer contact.
C) output that can be inventoried.
D) shorter response times.
Answer: D
Difficulty: Moderate
Keywords: manufacturing organization, service organization, capital intensity
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
21) A(n) ________ is any activity or group of activities that takes one or more inputs, transforms and adds
value to them, and provides one or more outputs for its customers.
Answer: process
Difficulty: Moderate
Keywords: process, activity, input, value
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
22) List and briefly describe five differences between services and manufacturing. Processes provide
examples to illustrate your arguments.
Answer:
Manufacturing Processes
Service Processes
Physical, durable products
Intangible, perishable products
Output can be produced, stored, and
transported
Can't be stored and transported
Customers can be part of the input and
Low customer contact
part of the process
Have days to deliver
Must be offered within minutes
Capital intensive
Labor intensive
Quality easily measured
Quality not easily measured
Examples will vary.
Difficulty: Moderate
Keywords: manufacturing process, service process
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
23) Identify a large employer in your hometown. Describe this organization's inputs, processes, and outputs.
Answer: Answers will vary based on the employer selected.
Difficulty: Moderate
Keywords: input, process, output
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Describe the process view of operations in terms of inputs, processes, outputs, information flows,
suppliers, and customers.
1.3 A Supply Chain View
1) A core process is a set of activities that delivers value to external customers.
Answer: TRUE
Difficulty: Moderate
Keywords: core process, supply chain
Learning Outcome: Compare common approaches to supply chain design
AACSB: Application of Knowledge
Learning Obj.: Describe the supply chain view of operations in terms of linkages between core and support
processes.
2) The supplier relationship process selects the suppliers of services, materials and information, while the
order fulfillment process facilitates the timely and efficient flow of these items into the firm.
Answer: FALSE
Difficulty: Moderate
Keywords: supplier relationship, process, order fulfillment process
Learning Outcome: Compare common approaches to supply chain design
AACSB: Application of Knowledge
Learning Obj.: Describe the supply chain view of operations in terms of linkages between core and support
processes.
3) One distinction between core processes and support processes is that core process can cut across the
organization while support processes do not.
Answer: FALSE
Difficulty: Moderate
Keywords: core process, process analysis
Learning Outcome: Compare common approaches to supply chain design
AACSB: Application of Knowledge
Learning Obj.: Describe the supply chain view of operations in terms of linkages between core and support
processes.
4) A set of activities that delivers value to external customers is a:
A) supply chain.
B) core process.
C) support process.
D) system.
Answer: B
Difficulty: Moderate
Keywords: activity, core process
Learning Outcome: Compare common approaches to supply chain design
AACSB: Application of Knowledge
Learning Obj.: Describe the supply chain view of operations in terms of linkages between core and support
processes.
5) Budgeting, recruiting, and scheduling are examples of a:
A) development.
B) core process.
C) support process.
D) system.
Answer: C
Difficulty: Moderate
Keywords: activity, support process
Learning Outcome: Compare common approaches to supply chain design
AACSB: Application of Knowledge
Learning Obj.: Describe the supply chain view of operations in terms of linkages between core and support
processes.
6) The process that facilitates the placement of orders and identifies, attracts, and builds relationships
with external customers is called the:
A) customer relationship process.
B) new service development process.
C) order fulfillment process.
D) supplier relationship process.
Answer: A
Difficulty: Moderate
Keywords: process, customer relationship
Learning Outcome: Compare common approaches to supply chain design
AACSB: Application of Knowledge
Learning Obj.: Describe the supply chain view of operations in terms of linkages between core and support
processes.
7) The process that includes the activities required to produce and deliver the service or product to the
external customer is called the:
A) customer relationship process.
B) new service development process.
C) order fulfillment process.
D) supplier relationship process.
Answer: C
Difficulty: Moderate
Keywords: process, order fulfillment
Learning Outcome: Compare common approaches to supply chain design
AACSB: Application of Knowledge
Learning Obj.: Describe the supply chain view of operations in terms of linkages between core and support
processes.
8) Which of these business processes typically lies within the realm of operations?
A) complaint handling
B) customer relationship
C) help desks
D) waste management
Answer: B
Difficulty: Moderate
Keywords: process, customer relationship
Learning Outcome: Compare common approaches to supply chain design
AACSB: Application of Knowledge
Learning Obj.: Describe the supply chain view of operations in terms of linkages between core and support
processes.
9) The cumulative work of the processes of a firm is a(n) ________.
Answer: supply chain
Difficulty: Moderate
Keywords: processes, supply chain
Learning Outcome: Compare common approaches to supply chain design
AACSB: Application of Knowledge
Learning Obj.: Describe the supply chain view of operations in terms of linkages between core and support
processes.
10) ________ provide vital resources and inputs to core processes.
Answer: Support processes
Difficulty: Moderate
Keywords: support process, core process
Learning Outcome: Compare common approaches to supply chain design
AACSB: Application of Knowledge
Learning Obj.: Describe the supply chain view of operations in terms of linkages between core and support
processes.
1.4 Operations Strategy
1) A firm's core competencies should determine its core processes.
Answer: TRUE
Difficulty: Easy
Keywords: core competency, core process
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Define an operations strategy and its linkage to corporate strategy and market analysis.
2) Firm A wants to enter a foreign market and has a skill that is difficult to duplicate. Firm B desires this
skill, so Firm A works with Firm B in an arrangement known as a joint venture.
Answer: FALSE
Difficulty: Moderate
Keywords: strategic alliance
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Define an operations strategy and its linkage to corporate strategy and market analysis.
3) The framework for carrying out all of an organization's functions is:
A) the competitive priority.
B) the corporate strategy.
C) the market analysis.
D) the organizational design.
Answer: B
Difficulty: Moderate
Keywords: corporate strategy
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Define an operations strategy and its linkage to corporate strategy and market analysis.
4) In response to social and political moves to discourage cigarette smoking, major cigarette
manufacturers have had to diversify into other products. Identifying the pressures against smoking is an
example of:
A) environmental scanning.
B) market segmentation.
C) flow strategy.
D) mission statement development.
Answer: A
Difficulty: Moderate
Keywords: environmental scanning, strategy
Learning Outcome: Discuss the role of operations management in corporate social responsibility and sustainability
AACSB: Reflective Thinking
Learning Obj.: Define an operations strategy and its linkage to corporate strategy and market analysis.
5) A company realizes that recent layoffs at its primary company reflect potential falling demands for its
customers' products, and hence for its own products. The company has engaged in:
A) flow strategy.
B) market segmentation.
C) mission statement redefinition.
D) environmental scanning.
Answer: D
Difficulty: Moderate
Keywords: environmental scanning
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Define an operations strategy and its linkage to corporate strategy and market analysis.
6) Core competencies are:
A) product or service attributes that represent the needs of a particular market segment.
B) another name for competitive priorities.
C) various flow strategies.
D) the unique resources and strengths that management considers when formulating strategy.
Answer: D
Difficulty: Moderate
Keywords: core competency, strategy
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Define an operations strategy and its linkage to corporate strategy and market analysis.
7) Which of the following is an example of a core competency?
A) facilities
B) top quality
C) low-cost operations
D) on-time delivery
Answer: A
Difficulty: Moderate
Keywords: core competency
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Define an operations strategy and its linkage to corporate strategy and market analysis.
8) Price, quality, and the degree of customization are all examples of:
A) volume needs.
B) other needs.
C) product needs.
D) delivery system needs.
Answer: C
Difficulty: Moderate
Keywords: needs assessment
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Define an operations strategy and its linkage to corporate strategy and market analysis.
9) The Gap, Inc. has targeted teenagers and young adults in need of casual clothes, and through its
GapKids stores, the parents or guardians of infants through 12-year-olds. This is an example of:
A) market segmentation.
B) a collaborative effort between the company and its customers.
C) a needs assessment.
D) a mission statement.
Answer: A
Difficulty: Moderate
Keywords: market segmentation
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Define an operations strategy and its linkage to corporate strategy and market analysis.
10) One form of strategic alliance is the ________, in which two firms agree to cooperate to produce a
product or service together.
Answer: joint venture
Difficulty: Moderate
Keywords: joint alliance
Learning Outcome: Compare common approaches to supply chain design
AACSB: Application of Knowledge
Learning Obj.: Define an operations strategy and its linkage to corporate strategy and market analysis.
11) What are four core processes in a firm and how are they related?
Answer: The customer relationship process identifies, attracts, and builds relationships with external
customers and facilitates the placement of orders. The order fulfillment process includes activities
required to produce and deliver the service or product to the external customer. The new service/product
development process designs and develops new services or products, which may be to customer
specifications. The supplier relationship process selects the suppliers of services, materials, and
information and facilitates the flow of these items into the firm. All of these processes exist to provide a
service or product to the customer.
Difficulty: Moderate
Keywords: core process, customer relationship, service/product development, order fulfillment, supplier
relationship
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Define an operations strategy and its linkage to corporate strategy and market analysis.
1.5 Competitive Priorities and Capabilities
1) Competitive priorities are the means by which operations implements the firm's corporate strategies.
Answer: FALSE
Difficulty: Moderate
Keywords: competitive priority, corporate strategy
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
2) Flexibility is a possible competitive priority.
Answer: TRUE
Difficulty: Easy
Keywords: flexibility, competitive priority
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
3) A firm once made purchasing decisions based on which supplier had the lowest cost. But once cash
flow was healthy, purchasing decisions were made based on the fastest delivery of goods and services by
firms. In this case, delivery speed is clearly the order qualifier.
Answer: FALSE
Difficulty: Moderate
Keywords: competitive priority, order qualifier
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
4) Admission to the prestigious school had become so competitive that a high GPA is no longer enough to
separate one fresh-faced high school student from another. Today's outstanding candidate must also
demonstrate their involvement in a myriad of extracurricular activities in order to be admitted. It seems
that good grades are now:
A) a needs assessment.
B) order qualifiers.
C) order winners.
D) a mission statement.
Answer: B
Difficulty: Easy
Keywords: order qualifier
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Reflective Thinking
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
5) The first three cars I bought all fell apart around 50,000 miles. It was called planned obsolescence and
no one seemed to care until companies entered the market that promised 70,000, then 80,000, and finally
100,000 mile warranties. What sets a great car apart from a good one now is not the quality, which is
assumed, but performance, safety and fuel economy. A car that can achieve all three is highly sought after.
In the automotive market, performance, safety and fuel economy are sterling examples of:
A) order winners.
B) a needs assessment.
C) order qualifiers.
D) a mission statement.
Answer: A
Difficulty: Easy
Keywords: order winner
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Reflective Thinking
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
6) You are interested in buying a laptop computer. Your list of considerations include the computer's
speed in processing data, its weight, screen size, and price. You consider a number of different models,
and narrow your list based on speed and monitor screen size, then finally select a model to buy based on
its weight and price. In this decision, weight and price are examples of:
A) order qualifiers.
B) a needs assessment.
C) order winners.
D) a mission statement.
Answer: C
Difficulty: Easy
Keywords: order winner
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Reflective Thinking
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
7) Competitive priorities:
A) may change over time.
B) are the cost, quality, time and flexibility dimensions that a process or supply chain actually possesses
and is able to deliver.
C) are used to distinguish between a service that is considered and one that is actually purchased.
D) are developed by a review of internal operations capabilities.
Answer: A
Difficulty: Easy
Keywords: competitive priorities
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
8) You are interested in buying a laptop computer. Your list of considerations include the computer's
speed in processing data, its weight, screen size and price. You consider a number of different models,
and narrow your list based on its speed and monitor screen size, then finally select a model to buy based
on its weight and price. In this decision, speed and monitor screen size are examples of:
A) order winners.
B) a mission statement.
C) a needs assessment.
D) order qualifiers.
Answer: D
Difficulty: Easy
Keywords: order qualifier
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Reflective Thinking
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
9) Using an airline example for competitive priorities, the process capability of handling service needs of
all market segments and promotional programs would be best described by:
A) top quality.
B) variety.
C) consistent quality.
D) delivery speed.
Answer: B
Difficulty: Easy
Keywords: variety, competitive priorities
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
10) A company's ability to quickly introduce a new service or product would be best described as:
A) volume flexibility.
B) variety.
C) consistent quality.
D) development speed.
Answer: D
Difficulty: Easy
Keywords: development speed, competitive priorities
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
11) A business focusing on increasing the efficiency of its operations is more directly addressing:
A) volume flexibility.
B) variety.
C) consistent quality.
D) low-cost.
Answer: D
Difficulty: Easy
Keywords: efficiency, low-cost, competitive priority
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
12) While other suppliers bidding for the contract brought bids with lower per unit costs, Orchard
wanted to take delivery based on the fact that the components they were using were machined to their
exacting specifications 99.99999% of the time. Orchard's competitive priority was:
A) top quality.
B) consistent quality.
C) on-time delivery.
D) delivery speed.
Answer: B
Difficulty: Moderate
Keywords: competitive priorities
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
13) A popular haberdashery could take a customer's measurements in the afternoon and produce a dandy
suit ready for customer pickup by next morning. Their competitive priority was:
A) variety.
B) top quality.
C) delivery speed.
D) on-time delivery.
Answer: C
Difficulty: Moderate
Keywords: competitive priorities
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Reflective Thinking
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
14) For students not wanting a traditional major in marketing or accounting, for example, the college
decided to create a general business major, which allowed any combination of the easiest business
courses to comprise the program. The competitive priority achieved in this example is:
A) customization.
B) delivery speed.
C) consistent quality.
D) low-cost.
Answer: A
Difficulty: Easy
Keywords: customization, competitive priority
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Reflective Thinking
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
15) A company's ability to support varying rates of production is best described as:
A) volume flexibility.
B) variety.
C) consistent quality.
D) development speed.
Answer: A
Difficulty: Moderate
Keywords: volume flexibility, competitive priorities
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
16) A firm gains competitive advantage by outperforming competitors in terms of competitive priorities,
which fall into four major groups: ________, ________, ________, and ________.
Answer: cost, quality, time, flexibility
Difficulty: Moderate
Keywords: competitive priorities, cost, quality, time, flexibility
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
17) ________ is the elapsed time between receiving a customer's order and filling it.
Answer: Lead time
Difficulty: Easy
Keywords: time, delivery speed
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
18) ________ measures the frequency with which delivery-time promises are met.
Answer: On-time delivery
Difficulty: Moderate
Keywords: on-time delivery
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
19) ________ is the ability to accelerate or decelerate the rate of production quickly to handle large
fluctuations in demand.
Answer: Volume flexibility
Difficulty: Easy
Keywords: volume flexibility, demand fluctuations
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
20) Every sub-contractor knew that their quality had to be excellent to be considered for the project; it
was their ability to deliver on time that would secure the lucrative contract. Quality was recognized as
being an ________, but on-time delivery was the ________.
Answer: order qualifier, order winner
Difficulty: Moderate
Keywords: order qualifier, order winner
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Reflective Thinking
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
21) Explain what an operations strategy is and the importance of competitive priorities. Give an example
from an organization (public or private, manufacturing or service).
Answer: An operations strategy is the means by which operations implements the firm's corporate
strategy. Competitive priorities are the key capabilities that operations must develop to compete
successfully in a market segment. Possible competitive priorities include low-cost operation,
high-performance design, consistent quality, delivery speed, on-time delivery, development speed,
customization, and volume flexibility. Examples will vary.
Difficulty: Moderate
Keywords: operations strategy competitive priorities
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
22) Name the two competitive priorities for quality and give an example of each.
Answer: The two competitive priorities are top quality, which is the determination of the level of
operations performance required in making a product or performing a service, and consistent quality,
which measures the frequency with which the product or service meets design specifications. Examples
will vary.
Difficulty: Moderate
Keywords: competitive priorities, top quality, consistent quality
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
23) Name the three competitive priorities for time and give an example of each.
Answer: The three competitive priorities for time are delivery speed, on-time delivery, and
development speed. Delivery speed refers to the elapsed time between receiving a customer's order and
filling it. On-time delivery measures the frequency with which delivery-time promises are met.
Development speed measures how quickly a new product or service is introduced. Examples will vary.
Difficulty: Moderate
Keywords: competitive priorities, delivery speed, on-time delivery, development speed
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern
of decisions can develop organizational capabilities.
1.6 Addressing the Trends and Challenges in Operations Management
1) Most products today are composites of global materials and services from throughout the world.
Answer: TRUE
Difficulty: Moderate
Keywords: globalization, products
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
2) The increased global presence of many firms has lessened the burden to behave ethically.
Answer: FALSE
Difficulty: Easy
Keywords: ethics, global presence
Learning Outcome: Discuss the influences of the global competitive environment on operations management
AACSB: Ethical Understanding and Reasoning
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
3) The Internet of Things is a trend that affects operations and supply chain management in a minor way.
Answer: FALSE
Difficulty: Easy
Keywords: technology, challenges, internet
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Information Technology
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
4) In an assembly operation at a furniture factory, six employees assembled an average of 450 custom
chairs per 5-day week. What is the labor productivity of this operation?
A) 90 chairs per worker per day
B) 20 chairs per worker per day
C) 15 chairs per worker per day
D) 75 chairs per worker per day
Answer: C
Difficulty: Moderate
Keywords: labor productivity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
5) A manufacturing process requires 12 minutes of labor to make 10 units of product. Which of the
following actions will increase productivity?
1. Increase labor per 10 units of production
2. Decrease labor per 10 units of production
3. Increase number of units per 10 minutes of labor
4. Decrease number of units per 12 minutes of labor
A) 1 and 3 only
B) 2 and 4 only
C) 1 and 4 only
D) 2 and 3 only
Answer: D
Difficulty: Easy
Keywords: labor productivity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
6) The details of weekly output and input for a fabrication process are as follows: output is 400 units, with
a standard selling price of $100 per unit. For the week, total labor costs are: 10 workers at 40 hours for the
week, are paid $15 per hour. Total material costs for the 400 units are $5,000. Weekly overhead is charged
at the rate of 1.5 times the labor costs. What is the multifactor productivity for the week?
A) 0.02
B) 0.75
C) 1.50
D) 2.00
Answer: D
Difficulty: Easy
Keywords: multifactor productivity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
Table 1.2
The Abco Company manufactures electrical assemblies. The current process uses 10 workers and
produces 200 units per hour. You are considering changing the process with new assembly methods that
increase output to 300 units per hour, but will require 14 workers. Particulars are as follows:
OUTPUT (UNITS / HOUR)
NUMBER OF WORKERS
MATERIAL COST / HOUR
CURRENT PROCESS
200
10
$120
NEW PROCESS
300
14
$150
Workers are paid at a rate of $10 per hour, and overhead is charged at 140% (or 1.4 times) labor costs.
Finished switches sell for $20 / unit.
7) Use the information provided in Table 1.2. What is the multifactor productivity of the current process?
A) less than or equal to 8.0
B) greater than 8.0 but less than or equal to 10.0
C) greater than 10.0 but less than or equal to 12.0
D) greater than 12.0
Answer: C
Difficulty: Moderate
Keywords: multifactor productivity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
8) Use the information provided in Table 1.2. What is the multifactor productivity of the new process?
A) less than or equal to 8.0
B) greater than 8.0 but less than or equal to 10.0
C) greater than 10.0 but less than or equal to 12.0
D) greater than 12.0
Answer: D
Difficulty: Moderate
Keywords: multifactor productivity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
9) Use the information provided in Table 1.2. Based on your productivity calculations, what decision
should you make?
A) implement the new process
B) stay with the current process
C) need more information to make a decision
D) Either process is acceptable (since the multi-factor productivities are the same).
Answer: A
Difficulty: Moderate
Keywords: multifactor productivity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
10) It takes the Blacksburg shipyard twenty six weeks with 500 workers to build a small tanker. Material
costs are $32 million and overhead costs are $2 million. Workers cost $40 per hour including benefits and
work 40 hours per week. The ship sells for $75 million. What is the multifactor productivity ratio?
A) less than 1.0
B) greater than 1.0 but less than or equal to 2.0
C) greater than 2.0 but less than or equal to 3.0
D) greater than 3.0
Answer: B
Difficulty: Moderate
Keywords: multifactor productivity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
11) Which of the following would be considered an advantage of global competition?
A) ability to safeguard proprietary technology in working with offshore suppliers
B) a recent climate of low political risk and lessening nationalization
C) high levels of worker skills in foreign countries mean less required training
D) strong global competition and increased worldwide demand
Answer: D
Difficulty: Moderate
Keywords: global competition
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Diverse and Multicultural Work Environments
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
12) With regards to globalized operations and cost advantages, what China is to manufacturing, India is
to:
A) services.
B) human resources.
C) finance.
D) supply chain.
Answer: A
Difficulty: Moderate
Keywords: global competition
Learning Outcome: Discuss the influences of the global competitive environment on operations management
AACSB: Application of Knowledge
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
13) Companies that do not have operations in China find it difficult to compete based on the basis of low
prices with companies that do. Instead those companies tend to compete based on:
A) quality and social responsibility.
B) speed and small production runs.
C) luxury.
D) quality and small production runs.
Answer: B
Difficulty: Moderate
Keywords: global competition
Learning Outcome: Discuss the influences of the global competitive environment on operations management
AACSB: Application of Knowledge
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
14) Which of the following statements about "big data" is false?
A) The data must be organized and analyzed to be of any use.
B) Firms use high-powered analytical models to sift through the data
C) Data may be collected instantly or over a period of months.
D) It is not necessary for operations managers to be involved in implementation of "big data" processes.
Answer: D
Difficulty: Moderate
Keywords: technology, internet, data
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Information Technology
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
15) The question of whether a manufacturer has rights to utilize data collected from a health monitoring
device to improve future versions of the product is a concern of:
A) privacy.
B) technology.
C) security.
D) hardware costs.
Answer: A
Difficulty: Moderate
Keywords: technology, internet, data
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Information Technology
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
16) The utilization of sensor data to detect deteriorating machine parts prior to product failure is an
example of which operations management application?
A) Product design and development
B) Inventory management
C) Preventive maintenance
D) Logistics
Answer: C
Difficulty: Moderate
Keywords: technology, internet, data
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Information Technology
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
17) Productivity is defined as ________ divided by ________.
Answer: output, input
Difficulty: Moderate
Keywords: output, input, productivity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
18) Half of the world's greenhouse gases are produced by only ________ nations.
Answer: seven
Difficulty: Moderate
Keywords: environment, greenhouse gas
Learning Outcome: Discuss the role of operations management in corporate social responsibility and sustainability
AACSB: Ethical Understanding and Reasoning
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
19) In order to utilize the capabilities of the internet of things, the organizational roles of ________ and
________ will have to become more aligned, although they are traditionally two separate functional areas.
Answer: operations management, information technology
Difficulty: Challenging
Keywords: internet, technology
Learning Outcome: Discuss the role of operations management in corporate social responsibility and sustainability
AACSB: Information Technology
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
20) How has global competition affected productivity? Cite specific examples and reference the
productivity equation to support your thesis.
Answer: Examples will vary; students should argue that the increase in global competition has
increased productivity for those firms that have survived. Firms that fail (or have already failed) to
effectively compete with new competition suffer from reduced sales, so the numerator in the productivity
equation will be lower, perhaps without a commensurate decrease in the denominator, resulting in
reduced productivity. Firms that are effectively competing against global competition probably have
higher levels of productivity. Global operations might include cheaper or better raw materials and labor,
resulting in a smaller denominator and higher productivity. Global competition might also inject new
management techniques and leaner operations if some services are outsourced to specialist companies.
Difficulty: Moderate
Keywords: productivity, raw materials, labor
Learning Outcome: Discuss the influences of the global competitive environment on operations management
AACSB: Application of Knowledge
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
21) What are some disadvantages of globalization?
Answer: Operations in other countries can have disadvantages. A firm may have to relinquish
proprietary technology if it turns over some of its component manufacturing to offshore suppliers or if
suppliers need the firm's technology to achieve desired quality and cost goals. Political risks may also be
involved. Each nation can exercise its sovereignty over the people and property within its borders. The
extreme case is nationalization, in which a government may take over a firm's assets without paying
compensation. Exxon and other large multinational oil firms are scaling back operations in Venezuela
due to nationalization concerns. Further, a firm may actually alienate customers back home if jobs are lost
to offshore operations. Employee skills may be lower in foreign countries, requiring additional training
time. South Korean firms moved much of their sports shoe production to low-wage Indonesia and China,
but they still manufacture hiking shoes and in-line roller skates in South Korea because of the greater
skills required. In addition, when a firm's operations are scattered globally, customer response times can
be longer. Coordinating components from a wide array of suppliers can be challenging.
Difficulty: Moderate
Keywords: globalization
Learning Outcome: Discuss the influences of the global competitive environment on operations management
AACSB: Application of Knowledge
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
22) What are some ethical issues that are prevalent in organizations that have a global operations
presence?
Answer: Some countries are more sensitive than others about conflicts of interest, bribery,
discrimination against minorities and women, minimum-wage levels, and unsafe workplaces. Managers
must decide whether to design and operate processes that do more than just meet local standards. In
addition, technological change brings debates about data protection and customer privacy. In an
electronic world, businesses are geographically far from their customers, so a reputation of trust is
paramount.
Difficulty: Moderate
Keywords: ethical issues, ethics, globalization
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Ethical Understanding and Reasoning
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
23) Barry's Tire Service completed 100 tire changes, six brake jobs, and 16 alignments in an eight-hour day
with his standard crew of six mechanics. A brake specialist costs $16 per hour, a tire changer costs $8 per
hour, and an alignment mechanic costs $14 per hour. The materials cost for a day was $2,000, and
overhead cost was $500.
a. What is the shop's labor productivity if the retail price for each respective service is $60, $150, and $40?
b. What is the multifactor productivity, if the crew consisted of two of each type mechanic?
Answer:
a.
= $157/hr
b.
= 2.43
Difficulty: Moderate
Keywords: labor productivity, multifactor productivity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
24) Table 1.3
The Abco Company manufactures electrical assemblies. The current process uses 10 workers and
produces 200 units per hour. You are considering changing the process with new assembly methods that
increase output to 300 units per hour, but will require 14 workers. Particulars are as follows:
OUTPUT (UNITS / HOUR)
NUMBER OF WORKERS
MATERIAL COST / HOUR
CURRENT PROCESS
200
10
$120
NEW PROCESS
300
14
$150
Workers are paid at a rate of $10 per hour, and overhead is charged at 140% (or 1.4 times) labor costs.
Finished switches sell for $20/unit.
a. Calculate the multifactor productivity for the current process.
b. Calculate the multifactor productivity for the new process.
c. Determine if the new process should be implemented.
Answer:
a.
=
= 11.11
b.
=
= 12.35
c. The new process increases multifactor productivity and should be implemented.
Difficulty: Moderate
Keywords: labor productivity, multifactor productivity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
25) The three person crew worked their way through the neighborhood, mowing lawns, edging, applying
fertilizer and weed treatments where necessary and collecting all the clippings for use as mulch as part of
their new green initiative. Their pricing scheme appears in Table A and the mix of orders and service
costs appear in Table B:
a. What is their multifactor productivity for these orders in the prestigious Edmond Oaks neighborhood?
b. Which of the service combinations provided by them is the most productive service combination from
a multifactor perspective?
c. What is their labor productivity for the same mix of orders?
Table A: Price List
SERVICE
Mow lawn
Edge
Fertilizer treatment
Weed prevention treatment
Multiple services
PRICE
$75
$20
$120
$80
5% discount times
the number of
services
LABOR
1 hr
.25
.25
.25
MATERIAL
$2
$1
$45
$25
Workers are paid at a rate of $10 per hour, and overhead is charged at 120% (or 1.2 times) labor costs. For
a customer that gets both mowing and edging, their $95 bill would be discounted for two services times
5% for a total of 10% off the $95 straight charge for a cost of $85.50. A customer receiving three services
would get a 15% discount off their service bill. Labor hours shown in Table A are total hours for the
three-person crew.
Table B: Orders Processed
SERVICE
Mow lawn & edge
Mow lawn, edge, and fertilize
Mow lawn, edge, and weed prevention treatment
Mow lawn & fertilize
# Customers
6
3
2
2
Answer:
a. Multifactor Productivity Overall
Total Revenue = $86 × 6 + $182.75 × 3 + $148.75 × 2 + $175.50 × 2 = $1,709.75
Labor Cost = $12.50 × 6 + $15 × 3 + $15 × 2 + $12.50 × 2 = $175
Material Cost = $3 × 6 + $48 × 3 + $28 × 2 + $47 × 2 = $312
Overhead Cost = 1.2 × ($12.50 × 6 + $15 × 3 + $15 × 2 + $12.50 × 2) = $210
Multifactor Productivity =
Multifactor Productivity = 2.45
b. Multifactor Productivity by Service
Mow & Edge =
= 2.8
Mow & Edge & Fertilize =
= 2.26
Mow & Edge & Weed =
Mow & Fertilize =
= 2.44
= 2.36
The package with the highest multifactor productivity is the Mow & Edge
c. Overall Labor Productivity.
Total Revenue = $85.59 × 6 + $182.75 × 3 + $148.75 × 2 + $175.50 × 2 = $1,709.75
Labor Cost = $12.50 × 6 + $15 × 3 + $15 × 2 + $12.50 × 2 = $175
Labor Productivity =
Labor Productivity = 9.77
Difficulty: Challenging
Keywords: labor productivity, multifactor productivity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
26) The three-person crew worked their way through the neighborhood, testing doorknobs and windows
and slipping past security systems like a team of ninjas. Of course, they weren't ninjas, but a crew of
brazen burglars, hoping to grab cash and other valuables to fence at the next level of their supply chain.
Fortune smiles on them on this day in the prestigious Edmond Oaks neighborhood. A lawn maintenance
crew is creating a tremendous racket mowing and edging lawns, which completely drowns out the
sounds of breaking glass. Details of the day's haul appear in Table C.
a. What is the multifactor productivity?
b. What is the labor productivity?
Table C: The Haul
ITEM
Krugerrand
Flat screen TV
$200 cash
Lava lamp
Rolex watch
SALES PRICE
$1,500
$250
$200
$5
$180
LABOR
1 hr
.25
.05
.15
.10
MATERIAL
$2
$1
$45
$25
$1
Workers are paid at a flat rate of 20% of the sales price of the merchandise. Materials cost
represents the cost of gasoline and surgical gloves, and overhead is 20% of the sales price of
the merchandise.
Answer:
a. Multifactor Productivity
Total Revenue = $1,500 + $250 + $200 + $5 + $180 = $2,135
Labor Cost = 20% × ($1,500 + $250 + $200 + $5 + $180) = $427
Material Cost = $2 + $1 + $45 + $25 + $1 = $74
Overhead Cost = 20% × ($1,500 + $250 + $200 + $5 + $180) = $427
Multifactor Productivity =
Multifactor Productivity = 2.30
b. Labor Productivity
Total Revenue = $1,500 + $250 + $200 + $5 + $180 = $2,135
Labor Cost = 20% × ($1,500 + $250 + $200 + $5 + $180) = $427
Labor Productivity =
Labor Productivity = 5
Difficulty: Moderate
Keywords: labor productivity, multifactor productivity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
27) What are some of the concerns operations managers must address regarding using the internet of
things? Cite a specific example.
Answer: Examples will vary, but students will mention concerns with technology, privacy, security, or
organizational roles. They may also discuss the challenges of implementing the hardware, gathering the
"big data", analysis of the data, and use of the data to aid in decision-making processes.
Difficulty: Moderate
Keywords: technology, internet, challenges
Learning Outcome: Discuss the influences of the global competitive environment on operations management
AACSB: Information Technology
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
1.7 Developing Career Skills With This Text
1) Understanding the concepts in this text will help you become an effective manager in any functional
area of business.
Answer: TRUE
Difficulty: Easy
Keywords: process design, supply chains
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand how to develop skills for your career using this text book.
2) Managing supply chains does not involve processes external to the firm.
Answer: FALSE
Difficulty: Easy
Keywords: process design, supply chains
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand how to develop skills for your career using this text book.
3) The effective operation of a firm and its supply chain is more important than the design and
implementation of its processes.
Answer: FALSE
Difficulty: Moderate
Keywords: process design, supply chains
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand how to develop skills for your career using this text book.
4) It is the sole responsibility of the operations function of an organization to design and operate
processes that are part of a supply chain.
Answer: FALSE
Difficulty: Moderate
Keywords: process design, supply chains
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand how to develop skills for your career using this text book.
5) Operations managers are involved at both the strategic and tactical levels of corporate strategy.
Answer: TRUE
Difficulty: Easy
Keywords: strategic level, tactical level
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Identify the latest trends in operations management, and understand how given these trends, firms
can address the challenges facing operations and supply chain managers in a firm.
6) If a retail store owner does not have a popular item in stock because he underestimated the forecasted
sales for that item, he most likely has a challenge with:
A) managing processes.
B) managing customer demand.
C) managing supply chains.
D) managing people.
Answer: B
Difficulty: Moderate
Keywords: process design, supply chains
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand how to develop skills for your career using this text book.
7) The key decisions to eliminate activities that do not add value while improving those that do are an
important part of:
A) managing processes.
B) managing customer demand.
C) managing supply chains.
D) managing people.
Answer: A
Difficulty: Moderate
Keywords: process design, supply chains
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand how to develop skills for your career using this text book.
8) ________ are often responsible for key performance measures such as cost and quality.
Answer: Operations Managers
Difficulty: Moderate
Keywords: process innovation, supply chains
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand how to develop skills for your career using this text book.
9) Each function of an organization is connected with operations through shared ________.
Answer: processes
Difficulty: Moderate
Keywords: process innovation, supply chains
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand how to develop skills for your career using this text book.
10) Effective management of its processes can allow a firm to reduce its ________ and also increase
________.
Answer: costs, customer satisfaction
Difficulty: Moderate
Keywords: process innovation, supply chains
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand how to develop skills for your career using this text book.
11) Explain the types of decisions that operations managers are involved in and how they are linked to a
firm's strategy.
Answer: Operations managers are involved in tactical decisions such as process improvement,
performance measurement, the management and planning of projects, staffing management, inventory
management, and resource scheduling. Operations manager's decisions should reflect corporate strategy.
These decisions have strategic impact because they allow the firm to gain a competitive advantage.
Difficulty: Moderate
Keywords: strategy, innovation, supply chains
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand how to develop skills for your career using this text book.
Operations Management: Processes and Supply Chains, 12e (Krajewski)
Chapter 2 Process Strategy and Analysis
2.1 Process Structure in Services
1) Process decisions are strategic in nature.
Answer: TRUE
Difficulty: Easy
Keywords: process strategy
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
2) No process can exist without at least one product or service.
Answer: TRUE
Difficulty: Easy
Keywords: process, product, service
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
3) All parts of an organization, as well as external suppliers and customers across the supply chain, need
to be involved to ensure that processes are providing the most value to their internal and external
customers.
Answer: TRUE
Difficulty: Easy
Keywords: supply chain process, business process
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
4) Processes, by their nature, are found only in the operations function of an organization.
Answer: FALSE
Difficulty: Easy
Keywords: operations function, process
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
5) Customer involvement reflects the ways in which customers become part of the process and the extent
of their participation.
Answer: TRUE
Difficulty: Moderate
Keywords: customer contact, customer participation, customer involvement
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
6) Service providers with a line process tend to move customers, materials, or information in a fixed
sequence from one operation to the next.
Answer: TRUE
Difficulty: Moderate
Keywords: line process, service provider, standard process
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
7) A moment of truth or service encounter is face-to-face interaction between the customer and a service
provider.
Answer: TRUE
Difficulty: Easy
Keywords: moment of truth, face-to-face interaction, customer, service provider
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
8) Divergence is the extent to which the process is customized with considerable latitude on how the
tasks are performed.
Answer: TRUE
Difficulty: Moderate
Keywords: divergence, customization
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
9) A front office structure features high levels of customer contact where the service provider interacts
directly with the internal or external customer.
Answer: TRUE
Difficulty: Easy
Keywords: front office process structure, customer contact, service provider interaction
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
10) Back office work is typically routine, with many steps having considerable divergence.
Answer: FALSE
Difficulty: Easy
Keywords: back office process structure, divergence
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
11) People processing services require:
A) a high degree of process structure.
B) high capital intensity.
C) physical presence.
D) hybrid low volume–capital intensive operations.
Answer: C
Difficulty: Moderate
Keywords: people processing services, physical presence
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
12) A politician conducting a town hall meeting, face-to-face with her constituents, is an example of:
A) back office.
B) passive contact.
C) active contact.
D) hybrid office.
Answer: C
Difficulty: Easy
Keywords: service processes, passive contact
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
13) An interior designer decorates homes for a clientele that wants a one-of-a-kind living space. This
service process can be described as:
A) divergent.
B) complex.
C) specialized.
D) hybrid.
Answer: A
Difficulty: Moderate
Keywords: service processes, process divergence
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
14) The process structure that best describes a waiter's position at a restaurant would be classified as:
A) front office.
B) back office.
C) hybrid office.
D) inner office.
Answer: A
Difficulty: Easy
Keywords: services processes, process structure, front office
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
15) Field service representatives are classified as:
A) back office.
B) hybrid office.
C) front office.
D) mid office.
Answer: C
Difficulty: Easy
Keywords: services processes, process structure, front office
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
16) A process that is primarily back office is:
A) a taxi driver.
B) a loan officer at a bank.
C) the payroll clerk that calculates your paycheck.
D) the hostess at a restaurant.
Answer: C
Difficulty: Moderate
Keywords: service processes, process structure, back office
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
17) Front offices typically emphasize:
A) low cost operations and on-time delivery.
B) top quality and customization.
C) on-time delivery and standardization.
D) top quality and low cost operations.
Answer: B
Difficulty: Easy
Keywords: services processes, process structure, front office
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
18) Back offices typically emphasize:
A) low cost operations and on-time delivery.
B) high divergence and customization.
C) on-time delivery and customization.
D) high customer contact and low cost operations.
Answer: A
Difficulty: Easy
Keywords: service processes, process structure, back office
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
19) What are three principles of process strategy that should govern choices that process designers make?
Provide examples of well-conceived process strategy choices to illustrate each of your three principles.
Answer: The three principles discussed in the text are: 1) The key to successful process decisions is to
make choices that fit the situation and that make sense together. They should not work at cross-purposes,
with one process optimized at the expense of other processes. A more effective process is one that
matches key process characteristics and has a close strategic fit. 2) Individual processes are the building
blocks that eventually create the firm's whole supply chain. The cumulative effect on customer
satisfaction and competitive advantage is huge. 3) Whether processes in the supply chain are performed
internally or by outside suppliers and customers, management must pay particular attention to the
interfaces between processes. Dealing with these interfaces underscores the need for cross-functional
coordination. Examples of process strategy choices will vary.
Difficulty: Moderate
Keywords: process decisions, process strategy
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
20) What are the different dimensions of customer contact in service processes? Provide an example of a
service that has high levels of customer contact and one that has very low levels of customer contact.
Answer: The dimensions of customer contact are physical presence, what is processed, contact intensity,
personal attention, and method of delivery. Examples will vary.
Difficulty: Moderate
Keywords: customer contact intensity, physical presence, personal attention, delivery method, what processed
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
21) Describe and highlight differences among the three process structures in services.
Answer: The three process structures form a continuum and are front office, hybrid office, and back
office. The front office structure is a process with high customer contact in which the service provider
interacts directly with the customer. This process is more complex and has considerable divergence. The
back office structure is a process with low customer contact in which the service provider interacts little
with the customer. The work tends to be standardized and routine, with line flows from one service
provider to the next with little variation. The hybrid office is a process with moderate levels of customer
contact and standard services with perhaps some options available. Work flow progresses from one
station to the next with some dominant paths apparent. Work is reasonably complex and some
customization exists in how the process is performed.
Difficulty: Moderate
Keywords: service process structure, front office, back office, hybrid office
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in services and how to position a service process on the
customer-contact matrix.
2.2 Process Structure in Manufacturing
1) A continuous flow process is characterized by a high degree of job customization.
Answer: FALSE
Difficulty: Moderate
Keywords: continuous flow process, customization
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
2) A job process has the highest level of customization of the process choices.
Answer: TRUE
Difficulty: Moderate
Keywords: job process, customization
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
3) Job processes generally have higher volumes than batch processes.
Answer: FALSE
Difficulty: Moderate
Keywords: job process, batch process, volume
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
4) In a line process, there is little variability in the products manufactured, and production and material
handling equipment are often specialized.
Answer: TRUE
Difficulty: Moderate
Keywords: line process, product variability, specialized equipment
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
5) Petroleum refineries typically use continuous flow processes.
Answer: TRUE
Difficulty: Moderate
Keywords: continuous flow process
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
6) The product-process matrix brings together the elements of volume, process, and quality.
Answer: FALSE
Difficulty: Moderate
Keywords: product-process matrix, manufacturing volume, process, quality
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
7) An off-diagonal position in the product-process matrix is typically more profitable than a position on
the diagonal.
Answer: FALSE
Difficulty: Easy
Keywords: product-process matrix, diagonal
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
8) A make-to-stock strategy involves holding items in stock for immediate delivery and is feasible for
standardized products with high volumes and reasonably accurate forecasts.
Answer: TRUE
Difficulty: Easy
Keywords: make-to-stock strategy, standardized products, volume, product forecasts
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
9) The degree of process divergence is what keeps a large batch process from being economically
produced using a line process.
Answer: TRUE
Difficulty: Moderate
Keywords: batch process, line process, divergence
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
10) Assemble-to-order strategy produces a wide variety of products from relatively few assemblies and
components after orders are received.
Answer: TRUE
Difficulty: Moderate
Keywords: assemble-to-order strategy
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
11) The principle of postponement is modeled by the worker that has known his assignment for several
weeks, but waits until the day before the product is to be delivered to begin production.
Answer: FALSE
Difficulty: Moderate
Keywords: postponement, procrastination
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
12) Which of the following is sometimes called mass production?
A) batch process and make-to-order strategy
B) line process and make-to-stock strategy
C) continuous flow process and assemble-to-order strategy
D) job process and make-to-order strategy
Answer: B
Difficulty: Moderate
Keywords: manufacturing processes, mass production, line, line process
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
13) A job process should be preferred when:
A) workforce and equipment are specialized.
B) products are made to stock type.
C) customization is high and volume is low.
D) customization is low and volume is high.
Answer: C
Difficulty: Moderate
Keywords: manufacturing processes, job process, customization, volume
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
14) Which of the following statements about process choice is best?
A) A batch process typically has a standard sequence of operations through the facility.
B) Automobiles and appliances are examples of products created using a continuous flow process.
C) Continuous flow processes are very capital intensive.
D) A custom cake operation is an example of a batch process.
Answer: C
Difficulty: Moderate
Keywords: manufacturing processes, process choice, continuous flow, capital, intensity
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
15) The product-process matrix used to analyze manufacturing operations brings together the elements
of:
A) volume, process, and intensity.
B) process, intensity, and product design.
C) intensity, volume, and process.
D) customization, volume, and process.
Answer: D
Difficulty: Moderate
Keywords: manufacturing processes, product-process matrix
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
16) Which one of the following statements about process management is best?
A) When customization must be high, equipment should be general purpose, and employees need to
perform a broader range of duties.
B) The traditional relationship between capital intensity and resource flexibility is that if one is high, so is
the other.
C) Creating a more capital-intensive process tends to reduce the fixed cost and raise the variable unit cost.
D) Economies of scope mean that a process should be devoted to a single product or service to achieve
high volumes.
Answer: A
Difficulty: Challenging
Keywords: manufacturing processes, process management, customization
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
17) A manufacturer that produces standard products in large volumes is likely to be using a(n):
A) make-to-stock strategy.
B) make-to-order strategy.
C) assemble-to-order strategy.
D) engineer-to-order strategy.
Answer: A
Difficulty: Easy
Keywords: production and inventory strategies, make-to-stock
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
18) The principle of postponement is employed by a producer using a(n):
A) make-to-stock strategy.
B) make-to-order strategy.
C) assemble-to-order strategy.
D) engineer-to-order strategy.
Answer: C
Difficulty: Moderate
Keywords: production and inventory strategies, assemble-to-order
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
19) A(n) ________ process would probably not be used to produce products before a customer has placed
a firm order.
Answer: job
Difficulty: Easy
Keywords: job process, make-to-order
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
20) Describe the differences among make-to-order, assemble-to-order, and make-to-stock strategies from
the producer's and from the customer's perspective.
Answer: A make-to-order strategy produces to customer specifications in low volumes; typically using
highly divergent job or batch processes that are highly flexible. This level of customization requires a
great deal of planning and control by the producer; the customer receives exactly what has been
requested which may literally be a one-of-a-kind item. The customer must suffer through a lead time
period during which the item is being fabricated. The assemble-to-order strategy produces wide variety
from relatively few assemblies in a line or batch process. The process does not require as much flexibility
and since the subassemblies are standardized, the production planning and supply chain management is
easier for the producer. The customer again receives exactly what is ordered (which may be precisely
what was desired) and the item could be one-of-a-kind. Again, the customer must wait for the item to be
produced, but this wait tends to be shorter than in a make-to-order system. The make-to-stock strategy
allows the producer to manufacture standardized items in high volumes based on a forecast. Production
planning and control is much simpler and inventory can be used as a buffer for variable demand. The
customer's order is filled immediately and the product is far from one-of-a-kind.
Difficulty: Moderate
Keywords: process strategy, make-to-order, make-to-stock, assemble-to-order
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
21) List and briefly define four different basic types of manufacturing processes.
Answer: The four basic process types are job process, batch process, line process, and continuous flow
process. A job process creates the flexibility needed to produce a variety of products or services in
significant quantities. Customization is relatively high, and volume for any one product or service is low.
A batch process differs from the job process with respect to volume, variety, and quantity. The primary
difference is that volumes are higher because the same or similar products or services are provided
repeatedly. A line process lies between the batch and continuous processes on the continuum, volumes
are high, and products or services are standardized. The continuous flow process is the extreme end of
high-volume, standardized production with rigid line flows.
Difficulty: Moderate
Keywords: batch, job, line, continuous flow
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
22) Sketch and discuss the product-process matrix for manufacturing.
Answer: The product-process matrix brings together the elements of volume, product design, and
process. It synchronizes the product to be manufactured with the process. Good manufacturing design
depends first on volume, so if high customization is needed, then volume is usually lower and vice versa.
The vertical dimension of the product-process matrix deals with divergence and flow. Combinations that
are best choices are reflected along the diagonal of the matrix.
Difficulty: Moderate
Keywords: product- process matrix, manufacturing, volume, customization, divergence, line-flow
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Understand the process structure in manufacturing and how to position a manufacturing process on
the product-process matrix.
2.3 Process Strategy Decisions
1) High customer involvement increases service provider productivity and makes quality measurement
easier.
Answer: FALSE
Difficulty: Moderate
Keywords: customer involvement, productivity, quality
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
2) Capital intensive automation is appropriate for both high and low volume operations.
Answer: FALSE
Difficulty: Moderate
Keywords: automation, capital intensity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
3) Fixed automation is appropriate for both line and continuous flow operations.
Answer: TRUE
Difficulty: Moderate
Keywords: fixed automation, continuous flow
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
4) The ability to reprogram machines is useful for both low-customization and high-customization
processes.
Answer: TRUE
Difficulty: Moderate
Keywords: customization, programmable automation
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
5) A toaster is an example of flexible automation.
Answer: FALSE
Difficulty: Moderate
Keywords: flexible automation
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
6) In a service process, capital intensity varies with volume in both front office and back office operations.
Answer: TRUE
Difficulty: Moderate
Keywords: capital intensity, front office service, back office service
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
7) Customer involvement is especially important for service process strategy decisions, particularly if
customer contact is high.
Answer: TRUE
Difficulty: Moderate
Keywords: service process, customer contact
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
8) Additive manufacturing capabilities, such as 3D printing, prevent firms from achieving substantial
economies of scope.
Answer: FALSE
Difficulty: Moderate
Keywords: service process, economies of scope
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
9) Which of the following statements about customer involvement is best?
A) In service industries, customer contact is of minor importance.
B) High task divergence and flexible process flows require more flexibility of the process's employees,
facilities and equipment.
C) A firm that produces standardized products often seeks customer specifications.
D) When customer involvement is highly customized, a process is more likely to use a
standardized-services process rather than a customized-services process.
Answer: B
Difficulty: Moderate
Keywords: customer involvement
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
10) Active customer contact and personalized attention can lower cost to the customer by:
A) increasing the capital intensity.
B) trading fixed costs for an equivalent variable cost.
C) substituting customer efforts for those of the service provider.
D) lowering the level of technology involved.
Answer: C
Difficulty: Moderate
Keywords: customer contact, cost
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
Scenario 2.4
A company is considering two options for the production of a part needed downstream in the
manufacturing process. Particulars are as follows:
Specialized automation
General automation:
Fixed Costs = $9,000 / month
Fixed Costs = $3,000 / month
Variable Cost / Unit = $2
Variable Cost / Unit = $5
11) Use Scenario 2.4 to answer this question. What is the monthly break-even quantity for choosing
between the two automation approaches?
A) 1,000 units
B) 2,000 units
C) 6,000 units
D) 12,000 units
Answer: B
Difficulty: Easy
Keywords: capital-intensive operations, automation, break even quantity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
12) Use Scenario 2.4 to answer this burning question. For a monthly volume of 3,000 units, which
automation approach should be chosen?
A) specialized automation
B) general automation
C) Either approach is acceptable, because costs are the same for either option at 3,000 units.
D) Can't be determined with information given.
Answer: A
Difficulty: Moderate
Keywords: automation, total cost, low-cost option
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
13) Use Scenario 2.4 to solve this problem. What does the company save each month by selecting this
low-cost option compared to the higher-cost option (for monthly requirements of 3,000 units)?
A) $1,000
B) $3,000
C) $6,000
D) Can't be determined with information given.
Answer: B
Difficulty: Moderate
Keywords: automation, total cost
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
Scenario 2.6
You currently purchase a part used in your production process from an outside supplier, and have
decided to begin making this part in-house. You have two equipment options for moving production
in-house: special-purpose equipment and general-purpose equipment. Cost information for these two
options is as follows:
ALTERNATIVE
Special-Purpose Equipment
General-Purpose Equipment
FIXED COST
$200,000 per year
$50,000 per year
VARIABLE COST
$15 per unit
$20 per unit
14) Use Scenario 2.6 to answer this question. What is the break even quantity between the two options?
A) 30,000 units per year
B) 40,000 units per year
C) 50,000 units per year
D) 60,000 units per year
Answer: A
Difficulty: Easy
Keywords: capital-intensive operations, general-purpose equipment, special-purpose equipment, break even
quantity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
15) Use Scenario 2.6 to answer this question. What are total costs under the Special-Purpose Equipment
option for an annual quantity of 40,000 units?
A) $400,000
B) $500,000
C) $800,000
D) $850,000
Answer: C
Difficulty: Easy
Keywords: general-purpose equipment, special-purpose equipment, total cost
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
16) Use Scenario 2.6 to answer this question. What are total costs under the General-Purpose Equipment
option for an annual quantity of 40,000 units?
A) $400,000
B) $450,000
C) $800,000
D) $850,000
Answer: D
Difficulty: Easy
Keywords: general-purpose equipment, special-purpose equipment, total cost
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
17) Use Scenario 2.6 to solve this riddle. For what range of output is the General-Purpose Equipment the
low-cost option?
A) 0-30,000 units per year
B) 30,000 or more units per year
C) 40,000 or more units per year
D) 0-40,000 units per year
Answer: A
Difficulty: Moderate
Keywords: general-purpose equipment, special-purpose equipment, total cost
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
18) Use Scenario 2.6 to answer this question. For what range of output is the Special-Purpose Equipment
the low-cost option?
A) 30,000 or more units per year
B) 0 - 30,000 units per year
C) 0 - 40,000 units per year
D) 40,000 or more units per year
Answer: A
Difficulty: Moderate
Keywords: general-purpose equipment, special-purpose equipment, total cost, low-cost option
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
19) Use Scenario 2.6 to solve this mystery. At an annual requirement of 40,000 units, what does the
company save per year by selecting the lower-cost option?
A) $150,000
B) $300,000
C) $50,000
D) $40,000
Answer: C
Difficulty: Easy
Keywords: general-purpose equipment, special-purpose equipment, total cost, low-cost option
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
20) A higher level of fixed automation can be justified by:
A) decreased labor productivity.
B) longer cycle time.
C) higher demand volumes.
D) lower sales.
Answer: C
Difficulty: Moderate
Keywords: fixed automation, volume
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
21) Which one of the following statements about flexible automation is best?
A) Investment cost is lower when a transfer machine handles many operations.
B) Chemical processing plants and oil refineries mainly utilize programmable automation.
C) It is an automatic process that can be reprogrammed to handle various products.
D) It achieves top efficiency; accommodating new products is difficult and costly.
Answer: C
Difficulty: Moderate
Keywords: flexible automation, reprogramming
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
22) With flexible automation, the ability to reprogram instructions can be useful in:
A) line flow, but not flexible flow, operations.
B) flexible flow, but not line flow, operations.
C) either line flow or flexible flow operations.
D) situations in which top efficiency is mandatory, but only if volumes are high.
Answer: C
Difficulty: Moderate
Keywords: flexible automation, reprogramming, line flow
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
23) Higher volume in a process is generally associated with:
A) more resource flexibility.
B) more capital intensity.
C) greater customer involvement.
D) fewer opportunities for standardization.
Answer: B
Difficulty: Moderate
Keywords: volume, process, capital intensity
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
24) Which of the following statements regarding resource flexibility is best?
A) Training is a small part of worker flexibility.
B) Specialization of employees is consistent with worker flexibility.
C) Worker flexibility is not a priority if the process is subject to hourly or seasonal peaks in demand.
D) Resource flexibility requires employees to be able to perform a broad range of duties, and equipment
usually must be more general purpose.
Answer: D
Difficulty: Moderate
Keywords: resource flexibility, flexible workforce
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
25) Which of the following statements concerning resource flexibility is best?
A) Flexible equipment is useful to companies with low production volumes and high customization.
B) Investment in general-purpose equipment is warranted if the firm expects to sell more than the
break-even amount.
C) Manufacturing efficiency increases with general-purpose equipment.
D) Resource flexibility is crucial for line-flow processing.
Answer: A
Difficulty: Moderate
Keywords: resource flexibility, volume, customization
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
26) Suppose that competitive priorities call for offering a wide variety of customized services. Which of
the following process decisions would be more likely?
A) more capital intensity
B) more resource flexibility
C) more process automation
D) less customer involvement
Answer: B
Difficulty: Challenging
Keywords: resource flexibility, customized service
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
27) Which statement about economies of scope is not true?
A) Economies of scope are often attained through programmable automation.
B) Economies of scope bring together two competitive priorities—customization and low price.
C) Economies of scope reflect the ability to produce multiple products more cheaply in combination than
separately.
D) Economies of scope reflect low capital intensity and high resource flexibility.
Answer: D
Difficulty: Moderate
Keywords: economies of scope, capital intensity, resource flexibility
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
28) Which of the following statements about additive manufacturing capabilities is not true?
A) Changes in product design are difficult and costly to incorporate.
B) It allows firms to react to a wider variety of customer demands.
C) Three-dimensional (3D) printing technology is one example of additive manufacturing.
D) It enables firms to achieve substantial economies of scope.
Answer: A
Difficulty: Moderate
Keywords: service process, economies of scope
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
29) Two manufacturing processes are being considered for making a new product. Process #1 is less
capital intensive, with fixed costs of $50,000 per year and variable costs of $700 per unit. Process #2 has
fixed costs of $400,000 annually, with variable costs of $200 per unit.
a. What is the break-even quantity for the two processes?
b. If annual sales are expected to be 600 units, which process should be selected?
c. If lowest overall costs per year is your overall objective, for what range of annual production quantities
should you select Process #1? Process #2?
d. Operations and Engineering have found a way to reduce the cost of Process #2, such that the fixed
costs for this process decrease from $400,000 to $300,000 annually. All other costs remain the same
(Process #1 fixed = $50,000 / year, Process #1 variable = $700 / unit, Process #2 variable = $200 / unit). What
is the new break even quantity between the two processes?
e. Does this change the process selection for the annual sales volume of 600 units? If so, for what range of
annual production quantities should you select Process #1 and Process #2?
Answer:
a. $50,000 + $700(Q) = $400,000 + $ 200(Q)
$500(Q) = $350,000 →
Q = 700 units per year
b. Process #1: $50,000 + $700(600) = $470,000
Process #2: $400,000 + $200(600) = $520,000
Process #1 should be selected, since it will save $50,000 compared to Process #2 at an annual volume of
600 units.
c. In part b, we have seen that Process #1 is the better choice at volumes below the break even quantity
of 700 units per year. Therefore,
Process #1 should be selected for volumes from 0 - 700 units per year;
Process #2 should be selected for volumes of 700 or more units per year.
d.
$50,000 + $700(Q) = $300,000 + $ 200(Q)
$500(Q) = $250,000 → Q = 500 units per year
e.
In this case,
Process #1: $50,000 + $700(600) = $470,000
Process #2: $300,000 + $200(600) = $420,000
Process #2 should be selected, since it will now save $50,000 compared to Process #1 at an annual volume
of 600 units.
Process #1 should be selected for volumes from 0 – 500 units per year;
Process #2 should be selected for volumes of 500 or more units per year.
Difficulty: Moderate
Keywords: general-purpose equipment, special-purpose equipment, break even quantity, total cost, low-cost option
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
30) The break-even graph shown below represents the cost structure associated with a flexible production
process and one that is fixed (less flexible). Using the information displayed in the graph, determine the
cost structures associated with the two alternative production methods.
Answer: The Fixed alternative has a fixed cost of $17,000.
The Flexible alternative has a fixed cost of $28,000.
Their point of intersection is at an output volume of 55,000 units, which results in a cost of $41,750.
For the Fixed alternative, $41,750 = $17,000 + 55,000 × VC
VC = ($41,750 - $17,000)/55,000
VC = $0.45
For the Flexible alternative, $41,750 = $28,000 + 55,000 × VC
VC = ($41,750 - $28,000)/55,000
VC = $0.25
Difficulty: Moderate
Keywords: general-purpose equipment, special-purpose equipment, break even quantity, total cost, low-cost option
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
31) An entrepreneur considers three possibilities for the production of her new product. One alternative,
a job process, would have fixed costs of $22,000 and a per unit cost of $11.63. The large batch option
would have a fixed cost of $54,000 and a per unit cost of $8.82. The line process would have a fixed cost of
$85,000 and a per unit cost of $7.33. Graph the total cost lines and determine over what range of output
each production alternative is superior.
Answer: The Line alternative total cost line has the equation 85,000 + 7.33x
The Large Batch alternative total cost line equation is 54,000 + 8.82x
The Job alternative total cost line equation is 22,000 + 11.63x
We know that the alternative with the lowest fixed cost must initially be superior and the alternative with
the lowest variable cost must ultimately be the cheapest alternative, so our answer begins at 0 output
with Job and ends at infinity (or at least very large output with Line).
At a volume of 11,388 the Job process becomes more expensive than the Large Batch process.
54,000 + 8.82x = 22,000 + 11.63x
32,000 = 2.81x
x = 11,388
At a volume of 20,805 the Line process becomes less expensive than the Large Batch process.
85,000 + 7.33x = 54,000 + 8.82x
31,000 = 1.49x
x = 20,805
The Line and Job processes' point of indifference is immaterial since the Large Batch process cost is lower
than both at their intersection point.
The ranges for each alternative are:
Job 0 - 11,388 units
Large Batch 11,388 - 20,805 units
Line 20,805 - infinite demand
Difficulty: Challenging
Keywords: break-even quantity, total cost
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Analytical Thinking
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
32) ________ is the ease with which employees and equipment can handle a wide variety of products,
output levels, duties, and functions.
Answer: Resource flexibility
Difficulty: Moderate
Keywords: resource flexibility
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
33) ________ reflects the ways in which customers become part of the process and the extent of their
participation.
Answer: Customer involvement
Difficulty: Moderate
Keywords: customer involvement, customer participation
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
34) ________ is the mix of equipment and human skills in a process.
Answer: Capital intensity
Difficulty: Moderate
Keywords: capital intensity, equipment, human skills
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
35) ________ automation produces only one type of product or part in a sequence of simple operations.
Answer: Fixed
Difficulty: Moderate
Keywords: fixed automation
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
36) ________ automation can handle various products through programmability.
Answer: Flexible
Difficulty: Moderate
Keywords: flexible automation, programmable automation
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
37) Provide examples of three different processes that rely on the customer for approximately 100% of the
process; about 50%; and about 0%. What unique challenges exist for operations and supply chain
managers and process designer in each one of these scenarios?
Answer: Examples will vary. Some students might argue that the process designer must be more careful
to error-proof the process that relies more heavily on the customer while the manager takes a greater role
in a process that does not rely on the customer. The burden for training shifts from an internal to an
external focus as the customer becomes a bigger part of the production process. Students should also
comment on customer buy-in for the final product and the appropriateness of a limited number and type
of processes for customer involvement.
Difficulty: Moderate
Keywords: customer involvement
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
38) Comment on the need for flexibility in both the workforce and capital equipment. What process types
and production situations require greater flexibility?
Answer: As the authors indicate, high task divergence and flexible process flows require more
flexibility of the process's resources – its employees, facilities, and equipment. Employees need to
perform a broad range of duties, and equipment must be general purpose. Otherwise, resource utilization
will be too low for economical operations. Highly task divergent operations are required when customers
have unique needs; casting these needs in the product-process matrix suggests that job processes and
batch processes, both large and small, would benefit from flexibility. In the customer-contact matrix, both
front office and hybrid office types would reap the benefits of greater worker and equipment flexibility.
Difficulty: Moderate
Keywords: resource flexibility, flexible workforce
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
39) Define economies of scope, and identify how they relate to flexible automation.
Answer: Economies of scope are the ability to produce multiple products more cheaply in combination
than separately. Flexible automation provides economies of scope by allowing the producer to use the
same productive resource to make intermediate volumes of a range of products, resulting in a shorter
payback period for the capital equipment than if it were fixed automation.
Difficulty: Moderate
Keywords: economies of scope, flexible automation
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Explain the major process strategy decisions and their implications for operations.
2.4 Strategic Fit
1) Front offices generally emphasize top quality and customization.
Answer: TRUE
Difficulty: Easy
Keywords: front-office, customer contact, service, internal customer, external customer
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Discuss how process decisions should strategically fit together.
2) When volume is higher, automation and capital intensity are more likely.
Answer: TRUE
Difficulty: Moderate
Keywords: back office, line process
Learning Outcome: Describe the main types of operations processes and layouts in manufacturing and in services
AACSB: Application of Knowledge
Learning Obj.: Discuss how process decisions should strategically fit together.
3) Which one of the following statements on the concept of focused factories is best?
A) emphasizes economies of scale, rather than diseconomies of scale
B) prefers larger facilities producing all of the products or services the company offers
C) reduces the range of demands placed on an operation so management can concentrate on fewer tasks
D) emphasizes flexibility rather than cost
Answer: C
Difficulty: Moderate
Keywords: focused factory
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Discuss how process decisions should strategically fit together.
4) One method for a factory to gain operational focus is to:
A) build large enough factories to produce all products and services the company offers.
B) hire more specialists and supervisors to control the operations.
C) reorganize existing facilities to the plant-within-plant (PWP) approach.
D) remodel stores to create the effect of many small boutiques under one roof.
Answer: C
Difficulty: Moderate
Keywords: focus, process, plants within plants
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Discuss how process decisions should strategically fit together.
5) A firm that chooses to compete based on delivery speed and variety would most likely have:
A) a make-to-order production and inventory strategy.
B) an assemble-to-order production and inventory strategy.
C) a make-to-stock production and inventory strategy.
D) an engineer-to-order production and inventory strategy.
Answer: B
Difficulty: Moderate
Keywords: assemble-to-order, delivery speed
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Discuss how process decisions should strategically fit together.
6) Which one of the following statements on the concept of gaining focus is best?
A) Focused factories maximize the amount of customization.
B) Small sizes of many focused factories make it difficult to compete on the basis of shorter lead times.
C) Plants within plants are different operations within a facility that can have individualized competitive
priorities and processes.
D) Focused factories are large factories producing all the products that the company offers.
Answer: C
Difficulty: Moderate
Keywords: focus, process, plants within plants
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Discuss how process decisions should strategically fit together.
7) ________ are different operations within a facility with individualized competitive priorities, processes,
and workforces under the same roof.
Answer: Plants within plants
Difficulty: Moderate
Keywords: plants within plants, PWP
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Discuss how process decisions should strategically fit together.
8) Is an executive MBA program at your school a plant within a plant? Explain your reasoning.
Answer: Answers will vary. The definition offered for plants within plants is different operations
within a facility with individualized competitive priorities, processes and workforces under the same roof.
Depending on the crossover of faculty and co-location of facilities, this question will merit a different
response from university to university.
Difficulty: Moderate
Keywords: plants within plants, PWP
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Discuss how process decisions should strategically fit together.
2.5 Strategies for Change
1) Reengineering is the fundamental rethinking and radical redesign of processes to improve
performance dramatically.
Answer: TRUE
Difficulty: Easy
Keywords: process reengineering, redesign, rethinking
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
2) With a dramatic flourish, the team leader tore the employee orientation guidelines into pieces. He then
distributed blank pieces of paper to the team and asked them to envision the perfect orientation process
without regard to how it has always been done. This team is probably engaging in process reengineering.
Answer: TRUE
Difficulty: Easy
Keywords: process reengineering, clean-slate
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
3) More often than not, process improvement takes place whether or not a process is reengineered.
Answer: TRUE
Difficulty: Easy
Keywords: reengineering, process improvement
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
4) Process analysis is the documentation and detailed understanding of how work is performed and how
it can be redesigned.
Answer: TRUE
Difficulty: Easy
Keywords: process analysis
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
5) Process improvement teams that focus on processes that cut across departmental boundaries have the
silo mentality.
Answer: FALSE
Difficulty: Easy
Keywords: silo, improvement teams, process analysis
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
6) Which one of the following statements concerning the role of process reengineering is best?
A) Reengineering is the fundamental rethinking and radical redesign of business processes.
B) Reengineering efforts should focus on one functional department at a time.
C) Information technology should be kept separate from reengineering initiatives.
D) Reengineering requires an attitude of incremental improvement.
Answer: A
Difficulty: Moderate
Keywords: reengineering, radical redesign, information technology
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
7) Which of these tools is considered a primary enabler of process reengineering?
A) supply chain partners
B) information technology
C) logistics
D) infrastructure
Answer: B
Difficulty: Moderate
Keywords: process reengineering, information technology
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
8) A team consisting of members from each functional area affected by the process change is referred to
as a(n):
A) reengineering team.
B) cross-functional team.
C) process team.
D) improvement team.
Answer: B
Difficulty: Moderate
Keywords: cross-functional team
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Interpersonal Relations and Teamwork
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
9) A process selected for reengineering should be a:
A) core process.
B) front-office process.
C) hybrid office.
D) back office process.
Answer: A
Difficulty: Moderate
Keywords: reengineering, core process
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
10) Process analysis focuses on:
A) how work is actually done.
B) who is responsible for the customer.
C) the customer's needs.
D) the number of steps in between supplier and customer.
Answer: A
Difficulty: Easy
Keywords: process analysis
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
11) A systematic approach to process analysis includes the step:
A) reengineering.
B) integration.
C) order fulfillment.
D) define scope.
Answer: D
Difficulty: Moderate
Keywords: define scope, process analysis, systematic approach
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
12) Performance measures such as average response times, repair times, and percent defective are
referred to as:
A) benchmarks.
B) metrics.
C) targets.
D) tactics.
Answer: B
Difficulty: Moderate
Keywords: metrics, performance measures
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
13) Widespread participation in process analysis is essential not only because of the work involved but
also because:
A) employees tend to neglect their regular work duties, thus no one falls too far behind.
B) it builds commitment.
C) no one can analyze a process by himself.
D) a silo mentality should prevail and this requires large numbers of workers.
Answer: B
Difficulty: Moderate
Keywords: process analysis, participation, commitment
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Interpersonal Relations and Teamwork
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
14) ________ is the documentation and detailed understanding of how work is performed and how it can
be redesigned.
Answer: Process analysis
Difficulty: Moderate
Keywords: process analysis
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
15) The first step of the systematic approach to process analysis is ________.
Answer: identify opportunities
Difficulty: Moderate
Keywords: identify opportunities, process analysis
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
16) The "Define" step of the Six Sigma Process Improvement Model entails establishing the ________ and
boundaries of the process to be analyzed.
Answer: scope
Difficulty: Easy
Keywords: process scope, boundary
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
17) ________ are performance measures that are established for a process and the steps within it.
Answer: Metrics
Difficulty: Easy
Keywords: metric
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
18) Gaps between actual and desired performance are called ________.
Answer: disconnects
Difficulty: Moderate
Keywords: gap, disconnect
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
19) A(n) ________ means that a department focuses on its own tasks without understanding the role and
processes of departments outside its own organizational boundaries.
Answer: silo mentality
Difficulty: Moderate
Keywords: silo mentality
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
20) The authors list six key elements of reengineering. Pick any three and describe their contribution to
the reengineering effort.
Answer: The six elements are:
1. Critical processes - focus on core business processes to reengineer, leave normal processes to
incremental improvement
2. Strong leadership - senior executives must actively support reengineering or the effort will fail
3. Cross-functional teams - the team must be composed of each functional area affected by the change
4. Information technology - a primary enabler; most reengineering projects design processes around
information flows
5. Clean slate philosophy - discard the old way of doing things and consider the way the customer wants
to deal with the company
6. Process analysis - the reengineering team must understand things about the current process, how it
performs, and have a grasp on the performance metrics
Difficulty: Moderate
Keywords: process reengineering, redesign, rethinking
Learning Outcome: Discuss operations and operations management as a competitive advantage for the
organization
AACSB: Application of Knowledge
Learning Obj.: Compare and contrast the two commonly used strategies for change, and understand a systematic
way to analyze and improve processes.
2.6 Defining, Measuring, and Analyzing the Process
1) Flowcharts, service blueprints, and process charts are effective for defining and measuring processes.
Answer: TRUE
Difficulty: Easy
Keywords: flowchart, process definition
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
2) In a swim lane flowchart, the line of visibility is used to separate the process steps in view of the
customer from those hidden from view of the customer.
Answer: FALSE
Difficulty: Moderate
Keywords: swim lane flowchart, service blueprint
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
3) A service blueprint is a flowchart of a service process that shows which of its steps has high customer
contact.
Answer: TRUE
Difficulty: Moderate
Keywords: service blueprint, service process, flowchart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
4) Formal work measurement techniques estimate average times for each step in a process by relying on
the judgment of skilled observers.
Answer: TRUE
Difficulty: Easy
Keywords: work measurement, labor standard, average process times
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
5) Elemental standard time data can help managers develop time standards for new work before
production begins.
Answer: TRUE
Difficulty: Moderate
Keywords: elemental standard data
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
6) The predetermined data approach eliminates the need for time studies.
Answer: TRUE
Difficulty: Moderate
Keywords: predetermined data approach, time studies
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
7) A predetermined data approach to time standards can be completed before actual production begins.
Answer: TRUE
Difficulty: Moderate
Keywords: predetermined data approach
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
8) Work sampling can be used to estimate the proportion of time spent by people or machines on
activities.
Answer: TRUE
Difficulty: Moderate
Keywords: work sampling, proportion
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
9) When using work sampling, the times of day when the analyst collects the sample data should be
selected at random over the length of the study.
Answer: TRUE
Difficulty: Moderate
Keywords: work sampling, data collection
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
10) A learning curve is a line showing the relationship between processing time and the cumulative
quantity of a product or service produced.
Answer: TRUE
Difficulty: Moderate
Keywords: learning curve analysis
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
11) The learning curve for a process depends on the rate of learning and the actual or estimated time for
the first unit processed.
Answer: TRUE
Difficulty: Moderate
Keywords: learning curve analysis
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
12) The best data analysis tool for recording which gas pump most customers use would be a checklist.
Answer: TRUE
Difficulty: Moderate
Keywords: data analysis, checklist
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
13) The general principle that 80% of a company's complaints are generated by 20% of its product or
service issues is known as the Pareto concept.
Answer: TRUE
Difficulty: Moderate
Keywords: Pareto chart, Pareto principle
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
14) A scatter diagram is a graphical technique that shows whether two variables may be related.
Answer: TRUE
Difficulty: Moderate
Keywords: scatter diagram, variables
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
15) A fishbone diagram identifies which category is most frequently observed out of all the categories for
which you have data.
Answer: FALSE
Difficulty: Moderate
Keywords: fishbone diagram, cause-and-effect diagram
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
16) A flowchart traces the flow of all except the following:
A) information through a process.
B) customers through a process.
C) equipment through a process.
D) safety regulations through a process.
Answer: D
Difficulty: Moderate
Keywords: flowchart, information, customers, equipment
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
17) A flowchart created at the strategic level of an organization should show:
A) core processes and their linkages.
B) details of a process as bracketed by its scope.
C) individual steps that may have been aggregated at a higher level of analysis.
D) areas that are seen and unseen by the customer.
Answer: A
Difficulty: Moderate
Keywords: flowchart, strategic decision making
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
18) Cross-functional coordination is at particular risk where:
A) there is low process divergence.
B) there are handoffs in the process.
C) swim lane flowcharts are utilized.
D) it is not possible to create a flowchart.
Answer: B
Difficulty: Moderate
Keywords: handoff, coordination, cross functional coordination
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Interpersonal Relations and Teamwork
Learning Obj.: Discuss how to define, measure, and analyze processes.
19) A swim lane flowchart is an appropriate tool to use when:
A) the process features only intangible outputs.
B) the process involves more than one department.
C) the process scope is difficult to define.
D) the process has a person or group of people at a workstation or with a customer.
Answer: B
Difficulty: Moderate
Keywords: swim lane flowchart, process definition tool
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
20) An effective tool for showing steps of a service process with a high level of customer contact is a:
A) Pareto chart.
B) flowchart.
C) service blueprint.
D) check sheet.
Answer: C
Difficulty: Moderate
Keywords: service blueprint, customer contact, process definition tool
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
21) A process chart activity that changes, creates, or adds something is a(n):
A) operation.
B) transportation.
C) inspection.
D) delay.
Answer: A
Difficulty: Easy
Keywords: process chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
22) A process chart activity that checks or verifies something but does not change it is a(n):
A) operation.
B) transportation.
C) inspection.
D) delay.
Answer: C
Difficulty: Easy
Keywords: process chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
23) Which one of the following groups of activities is likely to be shown on a process chart?
A) operation, inspection, delay
B) operation, capital intensity, flow strategy
C) transportation, material flow, physical layout
D) storage, delay, personnel involved
Answer: A
Difficulty: Moderate
Keywords: process chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
24) The five categories of activities (operation, transportation, inspection, delay, and storage) are used in
which of the following methods of process analysis?
A) multiple-activity chart
B) process chart
C) capital budgeting
D) flow diagram
Answer: B
Difficulty: Moderate
Keywords: process chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
25) A process chart activity that occurs when something is put away until a later time is a(n):
A) storage.
B) transportation.
C) inspection.
D) delay.
Answer: A
Difficulty: Easy
Keywords: process chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
26) A professor can grade a quiz in 30 seconds. Over the course of an academic year he has 6 sections of a
course with an average of 30 students with 10 quizzes in each section. If he is paid $40 an hour, how
much is his annual quiz-grading labor cost to the university?
A) $60
B) $100
C) $600
D) $36,000
Answer: C
Difficulty: Moderate
Keywords: annual labor cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
27) A professor's graduate assistant can grade a quiz in 40 seconds. Over the course of an academic year
he assists with 6 sections of a course with an average of 30 students with 10 quizzes in each section. If he
is paid $8 an hour, how much is his annual quiz-grading labor cost to the university?
A) $60
B) $160
C) $576
D) $576,000
Answer: B
Difficulty: Moderate
Keywords: annual labor cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
28) A professor can grade a quiz in 2 minutes. Over the course of an academic year he has 6 sections of a
course with an average of 25 students with 10 quizzes in each section. If he is paid $40 an hour, how
much is his annual quiz-grading labor cost to the university?
A) $250
B) $500
C) $1,000
D) $2,000
Answer: D
Difficulty: Moderate
Keywords: annual labor cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
29) Highly customized job processes and processes that are highly divergent require the use of:
A) the time study method.
B) the elemental standard data approach.
C) the predetermined data approach.
D) the work sampling method.
Answer: B
Difficulty: Moderate
Keywords: elemental standard data
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
Scenario 2.1
Garman observes a worker assembling peanut valves and records the data displayed in the table.
Time (seconds)
21
25
30
Observations
15
12
12
30) Use the information in Scenario 2.1 to answer this question. What is the average time for this job
element?
A) 15 seconds
B) 20 seconds
C) 25 seconds
D) 30 seconds
Answer: C
Difficulty: Moderate
Keywords: time study, average time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
31) Use the information in Scenario 2.1. What is the normal time for this job element if the rating factor is
80%?
A) 15 seconds
B) 20 seconds
C) 25 seconds
D) 30 seconds
Answer: B
Difficulty: Moderate
Keywords: time study, normal time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
32) Use the information in Scenario 2.1. What is the standard time for this job element if the allowance for
the process is 25%?
A) 15 seconds
B) 20 seconds
C) 25 seconds
D) 30 seconds
Answer: C
Difficulty: Moderate
Keywords: time study, standard time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
Scenario 2.2
Garman observes a worker assembling peanut valves and records the data displayed in the table.
Time (seconds)
10
15
20
Observations
18
25
17
33) Use the information in Scenario 2.2. What is the average time for this job element?
A) 15.06 seconds
B) 14.92 seconds
C) 13.42 seconds
D) 11.19 seconds
Answer: B
Difficulty: Moderate
Keywords: time study, average time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
34) Use the information in Scenario 2.2. What is the normal time for this job element if the rating factor is
75%?
A) 15.06 seconds
B) 14.92 seconds
C) 13.42 seconds
D) 11.19 seconds
Answer: D
Difficulty: Moderate
Keywords: time study, normal time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
35) Use the information in Scenario 2.2. What is the standard time for this job element if the allowance for
the process is 20%?
A) 15.06 seconds
B) 14.92 seconds
C) 13.42 seconds
D) 11.19 seconds
Answer: C
Difficulty: Moderate
Keywords: time study, standard time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
36) Garman observes a worker assembling peanut valves and records the data displayed in the table.
What is the normal time for this job element if the worker is rated at 80%?
Time (seconds)
20
25
30
35
Observations
10
15
12
12
A) less than 23 seconds
B) greater than or equal to 23 seconds but less than 26 seconds
C) greater than or equal to 26 seconds but less than 29 seconds
D) greater than or equal to 29 seconds
Answer: A
Difficulty: Moderate
Keywords: time study, normal time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
37) Keith assembles peanut valves and the recorded data is displayed in the table. What is the normal
time for this job element if he is rated at 75%?
Time (minutes)
2.5
3.0
3.5
Observations
15
23
27
A) greater than or equal to 3 minutes
B) less than 3 minutes but greater than or equal to 2.6 minutes
C) less than 2.6 minutes but greater than or equal to 2.2 minutes
D) less than 2.2 minutes
Answer: C
Difficulty: Moderate
Keywords: time study, normal time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
Scenario 2.3
A job consists of three elements. Twenty observations for each element were timed, and the resulting data
are shown in the following table. A performance rating has also been assigned for each element, as shown
in the table. The job has an allowance of 15% of normal time.
Element
#1
#2
#3
Performance Rating (%)
70
110
90
Average Element Time
(in minutes)
3.6
2.5
3.1
38) Use the information in Scenario 2.3. What is the normal time for job element #1?
A) greater than or equal to 3 minutes
B) less than 3 minutes but greater than or equal to 2.6 minutes
C) less than 2.6 minutes but greater than or equal to 2.2 minutes
D) less than 2.2 minutes
Answer: C
Difficulty: Easy
Keywords: time study, normal time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
39) Use the information in Scenario 2.3. What is the normal time for job element #2?
A) greater than or equal to 3 minutes
B) less than 3 minutes but greater than or equal to 2.6 minutes
C) less than 2.6 minutes but greater than or equal to 2.2 minutes
D) less than 2.2 minutes
Answer: B
Difficulty: Easy
Keywords: time study, normal time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
40) Use the information in Scenario 2.3. What is the normal time for job element #3?
A) greater than or equal to 3 minutes
B) less than 3 minutes but greater than or equal to 2.6 minutes
C) less than 2.6 minutes but greater than or equal to 2.2 minutes
D) less than 2.2 minutes
Answer: B
Difficulty: Easy
Keywords: time study, normal time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
41) Use the information in Scenario 2.3. What is the normal time for the entire job?
A) greater than or equal to 10.0 minutes
B) less than 10.0 minutes but greater than or equal to 8.5 minutes
C) less than 8.5 minutes but greater than or equal to 7.0 minutes
D) less than 7.0 minutes
Answer: C
Difficulty: Moderate
Keywords: time study, normal time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
42) Use the information in Scenario 2.3. What is the standard time for the entire job?
A) greater than or equal to 10.0 minutes
B) less than 10.0 minutes but greater than or equal to 8.5 minutes
C) less than 8.5 minutes but greater than or equal to 7.0 minutes
D) less than 7.0 minutes
Answer: B
Difficulty: Moderate
Keywords: time study, standard time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
Scenario 2.5
A job consists of three distinct work elements that were timed with a highly accurate Swiss watch by a
trained industrial engineer. The engineer recorded ten observations listed in the following table. All
recorded times are in seconds.
Element 1
15
17
16
13
15
14
16
14
15
16
Element 2
23
25
23
26
25
23
24
25
23
22
Element 3
45
51
52
49
46
43
51
50
49
49
43) Use the data in Scenario 2.5 to answer this question. If the performance rating factor is 15%, what is
the average time for Element 1?
A) 15.1 seconds
B) 16.61 seconds
C) 19.1 seconds
D) 14.44 seconds
Answer: A
Difficulty: Moderate
Keywords: time study
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
44) Use the data in Scenario 2.5 to answer this question. If the rating factor is 1.15, what is the normal time
for Element 2?
A) 23.9 seconds
B) 27.5 seconds
C) 28.1 seconds
D) 31.6 seconds
Answer: B
Difficulty: Moderate
Keywords: time study
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
45) Use the data in Scenario 2.5 to answer this question. If the rating factor is 1.15, what is the normal time
for Element 3?
A) 44.3 seconds
B) 55.8 seconds
C) 50.9 seconds
D) 48.5 seconds
Answer: B
Difficulty: Moderate
Keywords: time study
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
46) Use the data in Scenario 2.5 to answer this question. If the rating factor is 15% for all the elements,
what is the normal process time for the entire job?
A) 109.27 seconds
B) 82.62 seconds
C) 100.63 seconds
D) 95.02 seconds
Answer: C
Difficulty: Moderate
Keywords: time study
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
47) Use the data in Scenario 2.5 to answer this question. If the rating factor is 10% for all the elements and
the allowance is 15% for the whole process, what is the standard process time for the job?
A) 110.69 seconds
B) 82.62 seconds
C) 109.27 seconds
D) 95.02 seconds
Answer: A
Difficulty: Moderate
Keywords: time study
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
48) A time study analyst is attempting to determine the standard time for a work element. She observes a
worker performing the work element at a higher-than-average pace. How will this fact be reflected in the
time standard that is eventually created?
A) The frequency of the work element per cycle will be increased.
B) The proportion of allowance time will be increased above 1.0.
C) The performance rating factor will be set greater than 1.0.
D) The normal time for the work element will be increased.
Answer: C
Difficulty: Challenging
Keywords: performance rating factor
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
49) A manager is interested in setting a time standard for a machining operation. Which one of the
following is least likely to be of use?
A) time-study method
B) elemental standard data approach
C) predetermined data approach
D) work sampling method
Answer: D
Difficulty: Moderate
Keywords: work sampling
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
50) Which of the following is not an advantage of the predetermined data approach to work
measurement?
A) Standards can be set before production begins.
B) New work methods can be compared without conducting a time study.
C) Performance ratings are not needed to derive standards.
D) The approach is particularly applicable to firms with a flexible flow strategy.
Answer: D
Difficulty: Moderate
Keywords: predetermined data
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
51) Which work measurement technique breaks down tasks into a series of generic micromotions?
A) time study method
B) elemental standard data approach
C) predetermined data approach
D) work-sampling method
Answer: C
Difficulty: Moderate
Keywords: micro-motion, work measurement, predetermined data
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
52) Work sampling is most often used in situations in which:
A) a time standard is needed for a repetitive job.
B) an estimate of the proportion of the time spent on a particular activity is needed.
C) it is important to keep the sample size down.
D) special training is required for the observer, and stopwatches must be used.
Answer: B
Difficulty: Moderate
Keywords: work sampling
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
53) A work sampling method is used to determine the proportion of the time a machine is idle. The
following information was gathered on a random basis.
Day
Monday
Tuesday
Wednesday
Thursday
No. Times
Machine Idle
4
2
4
2
Total No. of
Observations
12
8
10
10
What is the proportion of idle time observed for this machine?
A) less than or equal to 5%
B) greater than 5% but less than or equal to 15%
C) greater than 15% but less than or equal to 25%
D) greater than 25%
Answer: D
Difficulty: Easy
Keywords: work sampling
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
54) A work sampling method is used to determine the proportion of the time a worker is idle. The
following information was gathered on a random basis.
Time
8:00 - 10:00 am
10:00 am - 12:00 pm
1:00 - 3:00 pm
3:00 - 5:00 pm
No. of Times
Clerk Idle
2
3
2
1
Total No. of
Observations
6
8
7
9
What is the proportion of idle time observed for this worker?
A) less than or equal to 5%
B) greater than 5% but less than or equal to 10%
C) greater than 10% but less than or equal to 20%
D) greater than 20%
Answer: D
Difficulty: Easy
Keywords: work sampling
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
55) A work sampling method is used to determine the proportion of the time a worker is idle. The
following information was gathered on a random basis.
Day
Monday
Tuesday
Wednesday
Thursday
No. of Times
Clerk Idle
8
8
7
7
Total No. of
Observations
26
32
28
34
What is the proportion of idle time observed for this worker?
A) less than or equal to 5%
B) greater than 5% but less than or equal to 10%
C) greater than 10% but less than or equal to 20%
D) greater than 20%
Answer: D
Difficulty: Easy
Keywords: work sampling
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
56) The first unit of production takes 12 hours to produce and the learning rate is expected to be 80
percent. How long will it take to produce the fourth unit?
A) less than or equal to 7.0 hours
B) greater than 7.0 hours but less than or equal to 7.5 hours
C) greater than 7.5 but less than or equal to 8.0 hours
D) greater than 8.0 hours
Answer: C
Difficulty: Moderate
Keywords: learning curve, learning effect, labor
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
57) The first unit of production takes 12 hours to produce and the learning rate is expected to be 80
percent. How long will it take to produce the sixth unit?
A) less than or equal to 6.0 hours
B) greater than 6.0 hours but less than or equal to 7.7 hours
C) greater than 7.7 but less than or equal to 9.5 hours
D) greater than 8.0 hours
Answer: B
Difficulty: Moderate
Keywords: learning curve, learning effect, labor
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
58) The first unit of production takes 20 hours to produce and the learning rate is expected to be 90
percent. How long will it take to produce the fourth unit?
A) less than or equal to 12.0 hours
B) greater than 12.0 hours but less than or equal to 15.0 hours
C) greater than 15.0 but less than or equal to 18.0 hours
D) greater than 18.0 hours
Answer: C
Difficulty: Moderate
Keywords: learning curve, learning effect, labor
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
59) The first unit of production takes 20 hours to produce and the learning rate is expected to be 90
percent. How long will it take to produce the eighth unit?
A) less than or equal to 12.0 hours
B) greater than 12.0 hours but less than or equal to 15.0 hours
C) greater than 15.0 but less than or equal to 18.0 hours
D) greater than 18.0 hours
Answer: B
Difficulty: Moderate
Keywords: learning curve, learning effect, labor
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
60) The first unit of production takes 20 hours to produce and the learning rate is expected to be 90
percent. How long will it take to produce the twelfth unit?
A) less than or equal to 11.0 hours
B) greater than 11.0 hours but less than or equal to 13.0 hours
C) greater than 13.0 but less than or equal to 15.0 hours
D) greater than 15.0 hours
Answer: C
Difficulty: Moderate
Keywords: learning curve, learning effect, labor
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
Table 2.15
An analyst notes the time that customer appointments end with a tax preparer that is assigned customers
requiring only the 1040EZ form. The times indicated in the table represent the departure times of the first
eight clients for one tax preparation specialist. The 1040EZ tax forms among the different customers are
very similar. The tax preparer started the first return at 12:00pm.
Customer #
1
2
3
4
5
6
7
8
Time
12:45 pm
1:22 pm
1:55 pm
2:26 pm
2:56 pm
3:24 pm
3:50 pm
4:15 pm
61) Which statement about Table 2.15 is best?
A) Learning effects are not present because the time between successive customer departures is not
always shorter than the preceding time.
B) Learning effects are present, but the actual percentage reduction cannot be determined.
C) Learning effects are present because in general the time between successive departures drops.
D) Learning effects are present here, but the actual percentage reduction cannot be determined.
Answer: C
Difficulty: Moderate
Keywords: learning curve analysis
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
62) Based on the data in Table 2.15 which value is closest to the learning rate for the tax preparer?
A) 80%
B) 82%
C) 87%
D) 92%
Answer: B
Difficulty: Moderate
Keywords: learning curve analysis
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
63) Based on Table 2.15, how long should it take the tax preparer to complete the 16th return of the day?
A) 16 minutes
B) 19 minutes
C) 21 minutes
D) 24 minutes
Answer: C
Difficulty: Challenging
Keywords: learning curve analysis
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
64) A process troubleshooter has to decide which problem to address first with his or her cause-and-effect
diagram. The data analysis tool that will help him decide which problem to tackle first is a:
A) scatter diagram.
B) check sheet.
C) flowchart.
D) Pareto chart.
Answer: D
Difficulty: Moderate
Keywords: Pareto chart, relative problem frequency
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
65) A manager of a fiberglass molding operation suspects that the number of process failures is related to
the number of total units produced of a particular product. A tool most useful in this analysis would be a:
A) checklist.
B) cause-and-effect diagram.
C) Pareto chart.
D) scatter diagram.
Answer: D
Difficulty: Moderate
Keywords: scatter diagram
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
66) Which one of the following techniques will help management trace customer complaints directly to
the process involved?
A) cause-and-effect diagram
B) quality circles
C) quality engineering
D) specification management
Answer: A
Difficulty: Moderate
Keywords: cause-and-effect diagram
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
67) A restaurant manager tracks complaints from the diner satisfaction cards that are turned in at each
table. The data collected from the past week's diners appear in the following table.
Complaint
Food taste
Food temperature
Order mistake
Slow service
Table/utensils dirty
Too expensive
Frequency
27
9
5
19
47
9
Using a classic Pareto analysis, what top categories comprise 80% of the total complaints?
A) Table/utensils dirty
B) Table/utensils dirty, Food taste, Slow service
C) Food taste, Food temperature, Order mistake, Slow service, Table/utensils dirty
D) Food taste, Food temperature, Order mistake, Slow service, Too expensive
Answer: B
Difficulty: Moderate
Keywords: Pareto analysis
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
68) A restaurant manager tracks complaints from the diner satisfaction cards that are turned in at each
table. The data collected from the past week's diners appear in the following table.
Complaint
Food taste
Food temperature
Order mistake
Slow service
Table/utensils dirty
Too expensive
Frequency
80
9
2
16
47
4
Using a classic Pareto analysis, what bottom categories comprise about 20% of the total complaints?
A) Order mistake, Too expensive, Food temperature
B) Slow service, Order mistake
C) Food taste, Food temperature, Slow service
D) Food taste, Table/utensils dirty
Answer: A
Difficulty: Moderate
Keywords: Pareto analysis
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
69) A farmer that has been well-trained in the scientific method divides his acreage into several plots and
plants the same variety of hay in each. He varies the amount of fertilizer applied to each plot and
carefully records the yield, in bales per acre, for each of the plots. Which of these tools would be the best
to help him analyze the effect of fertilizer application on hay yield?
A) cause and effect diagram
B) scatter diagram
C) Pareto chart
D) flow chart
Answer: B
Difficulty: Moderate
Keywords: scatter diagram
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
70) Which of the following analyses is best suited for a scatter diagram?
A) A professor plots a student's exam score against the number of homework problems the student
completed prior to the exam.
B) A professor determines a student's letter grade based on their final course average.
C) A professor determines the curve on the most recent exam by categorizing students into groups called
A, B, C, etc.
D) A professor studies his student evaluations and classifies complaints into broad categories such as
Assign More Homework and Make Exams More Challenging.
Answer: A
Difficulty: Moderate
Keywords: scatter diagram
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
71) A restaurant manager tracks complaints from the diner satisfaction cards that are turned in at each
table. The data collected from the past week's diners have been plotted and appear in the following graph.
The number of complaints for each category is with each bar.
How was the value for the point represented by the triangle calculated?
A)
B)
C)
D)
Answer:
D
Difficulty: Moderate
Keywords: Pareto analysis
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
72) ________ is represented in a process flow chart when an outgoing arrow from one step splits into two
or more arrows that lead to different boxes.
Answer: Divergence
Difficulty: Moderate
Keywords: decision point, divergence, flow chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
73) A(n) ________ shows processing steps grouped according to which company department is
responsible for performing them.
Answer: swim lane flowchart
Difficulty: Moderate
Keywords: swim lane flowchart, flow chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
74) The ________ in a service blueprint separates which steps are in view of the customer from those that
aren't.
Answer: line of visibility
Difficulty: Moderate
Keywords: line of visibility, service blueprint
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
75) ________ is the process of creating labor standards based on the judgment of skilled observers.
Answer: Work measurement
Difficulty: Easy
Keywords: work measurement
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
76) The time added to adjust for factors such as fatigue or equipment malfunction is called ________.
Answer:
allowance, allowance time
Difficulty: Moderate
Keywords: allowance, allowance time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
77) ________ involves estimating the proportion of time spent by people and machines on activities,
based on a large number of observations.
Answer: Work sampling
Difficulty: Moderate
Keywords: work sampling
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
78) The ________ can be represented by a line called a learning curve.
Answer: learning effect
Difficulty: Moderate
Keywords: learning effect, learning curve
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
79) An eighty percent learning curve means that for each doubling of output, the time required to
complete the last task is ________ percent less than before.
Answer: twenty
Difficulty: Moderate
Keywords: learning effect, learning curve
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
80) A(n) ________ is a form used to record the frequency of occurrence of certain product or service
characteristics related to quality.
Answer: checklist
Difficulty: Moderate
Keywords: checklist
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
81) A(n) ________ is a bar chart on which the factors are plotted in decreasing order of frequency along
the horizontal axis.
Answer: Pareto chart
Difficulty: Moderate
Keywords: Pareto chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
82) A(n) ________ would be a useful tool to determine the effect that the number of practice problems
solved correctly has on the midterm score.
Answer: scatter diagram
Difficulty: Moderate
Keywords: scatter diagram
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
83) A(n) ________ is a diagram that relates a key quality problem to its potential causes.
Answer: cause-and-effect diagram
Difficulty: Moderate
Keywords: cause-and-effect, fishbone, Ishikawa
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
84) How can flowcharts and process charts be used to study and improve operations? Include
descriptions of these two tools, the types of questions that can be addressed with them, and the extent to
which teams can be used.
Answer: Flowcharts trace the flow of information, customers, employees, equipment, or material
through a process. Process charts record all the activities performed by a person or a machine, at a
workstation, with a customer, or on materials. Answers will vary.
Difficulty: Moderate
Keywords: flowchart, information flow, customer flow, employee flow, material flow
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
85) The sales team has just finished creating a process chart of the sales-call process. After fifteen minutes
of high-fiving, they decide to tape the flowchart to the conference room wall and stand back a safe
distance admiring the many symbols on the chart. You join them, and while you don't know much about
sales calls, your expertise in process analysis and improvement is well-respected. What would you look
for in the chart that would let you know whether their sales-call process was well-conceived?
Answer: Flowcharts trace the flow of information, customers, employees, equipment, or material
through a process. At a glance, you might count the number of symbols representing transportation,
inspection, and delays, since these process steps are typically not value-adding. You might also check for
loops in the process and determine why there is a need to recirculate the information, customers, material,
or workers through some of the process steps. Were these loops added because process steps are not
always performed correctly the first time? Another general flow chart element to examine is the degree of
branching. Are decision points clearly indicated and is there an unambiguous method for the worker or
customer to realize which branch is the most appropriate one to take as they move forward through the
process? Finally, you should realize that the flowchart was constructed by a group that is probably not
accustomed to flowcharting (after all, they are in sales) so you might confirm that the process that has
been charted is truly an "as-is" representation of the process and not a "hoped for" or "according to policy"
representation.
Difficulty: Moderate
Keywords: flowchart, customer flow, employee flow, process improvement
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
86) You have been hired as an external consultant to improve processes at a business. You are unfamiliar
with exactly how the work is currently done but are intimately familiar with charting techniques and
data analysis tools. What is a general sequence for use of these tools and why should you use them in the
sequence you specify?
Answer: Because you are unfamiliar with the process, you should first use a flowchart, service blueprint,
or process chart. This diagram will give you a big-picture view of what is currently happening. Once you
are more familiar with the organization and the departmental responsibilities, it might be helpful to
re-cast this flowchart in the form of a swim lane flowchart to identify handoffs in the process flow. Flow
charts in general will also provide some insight into key data collection points where workers might use
checklists to collect some data. After data has been collected, elementary data analysis may be performed
using a histogram, Pareto chart, and scatter diagram as appropriate. The tallest/leftmost bar on a Pareto
chart can be the head of the first fishbone diagram (if the bars represent problems). Once the largest
problem is solved, more data can be collected to verify that improvements in the process have taken
place.
Difficulty: Challenging
Keywords: checklist, histogram, Pareto chart, fishbone, cause-and-effect, flowchart, service blueprint
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
87) Consider the four steps in a time study. If an analyst were to make a mistake, during which step
would the impact on the standard time be the greatest? Explain your reasoning.
Answer: The four steps are selecting work elements, timing the elements, determining the sample size,
and setting the standard. Answers will vary as to the step that has the greatest impact on the standard
time determination. If the work elements are not selected properly, then the analyst may include too
many process steps, thereby inflating the standard time or too few, which would result in a standard time
that is too low. A stopwatch error can also be too high or too low and might have the same impact. If the
task is a 40-yard dash and the organization is an NFL team, those consequences can be disastrous. A
sample size that is too small might result in some measurement error that could fall either way, but a
sample that is too large would simply result in more time and effort expended collecting data than
necessary. This large sample would yield a more accurate estimate than is absolutely necessary. Setting
the standard improperly can again overestimate or underestimate the true standard time depending on
the nature of the mathematical error.
Difficulty: Moderate
Keywords: time study
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
88) Explain why a sampling schedule is important in a work sampling study.
Answer: A sampling schedule should determine when the workers are to be observed because the
observations are just snapshots of time. In addition, the observation times should be randomized to avoid
biases in worker performance.
Difficulty: Moderate
Keywords: work sampling, schedule
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
89) Compare and contrast the method of time study to the method of work sampling. What are the
strengths and limitations of each, and for which applications are they best suited?
Answer: Both are direct observation methods. However, a time study observes several cycles of work
elements to determine a time standard, whereas work sampling takes "snapshots" of the facility to
determine the percentage of time engaged in an activity. Time studies require experienced analysts,
should not be used for tasks that vary each time, and are many times found to be objectionable to workers.
Work sampling does not require special training and is generally accepted by workers because it tends to
examine activities of the group rather than of the individual. In addition, many work sampling studies
can be conducted simultaneously.
Difficulty: Challenging
Keywords: time study, work sampling
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
90) A manager of a company producing computer chips knows that in the early stages of production for a
new product, the expenditures exceed receipts, whereas in the latter stages, the reverse is true. Give an
explanation for this phenomenon.
Answer: The learning curve theory states that the direct labor costs will exceed the average in the early
stages of production, whereas the reverse is true in the latter stages. Pricing is often predicted on average
costs.
Difficulty: Challenging
Keywords: learning curves, direct labor
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
91) An industrial engineer observes a brand new process and develops time standards for several of the
manual components of the production line. What are the implications of learning effects on the time
standards and the line balance? What could be done to address this situation?
Answer: The learning curve theory states that the labor requirement will be greater in the early stages of
production and lower as workers enjoy several repetitions of their jobs. A line balance that is performed
using inflated times will have increased idle time and decreased efficiency as learning effects occur. The
industrial engineer can compensate for learning effects by applying a smaller performance rating factor
(or allowance factor if downtime is an issue). If the industrial engineer is unsure of the workers' learning
rate, the line can be balanced, and then a second study performed to rebalance it.
Difficulty: Challenging
Keywords: learning curves, output rate, time standard, line balance
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
92) How could a fishbone chart be used to design a new process?
Answer: Also called a cause-and-effect diagram, the classic fishbone chart relates a key quality problem
to its potential causes. Instead of placing a problem at the head of the fish, the process designers might
place the desired process outcome at the head of the fish, e.g., "100% accuracy in order fulfillment" and
then fill out the skeletal structure with elements that can help achieve this desired process outcome.
Difficulty: Moderate
Keywords: fishbone diagram, cause-and-effect diagram
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Discuss how to define, measure, and analyze processes.
93) Create a flowchart that displays the proper sequential use of the major graphical tools in Chapter 2,
"Process Strategy and Analysis." Include a note next to each tool that explains how the output of one tool
is used as the input for the following tool.
Answer: A flowchart shows a big picture view of the process. The output from this step is a view that
shows appropriate points for data collection using a checklist. Once the checklist has been deployed, the
data that has been collected can be analyzed by a histogram or a Pareto chart (if data can be categorized)
or a scatter diagram (if coordinate data fall more naturally into continuous distributions). Finally, the
tallest bar in the Pareto chart serves as the input to a fishbone (or cause-and-effect) diagram as the
fishbone's head.
Difficulty: Moderate
Keywords: flowchart, checklist, histogram, Pareto, scatter, fishbone, cause-and-effect
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
94) An existing insurance application process requires manual keying of three different forms by a team
of data entry operators. The three forms' input times appear in the following table along with the
numbers of each type of form anticipated for the coming year. A proposed refinement in the process
would reduce the number of forms but make each slightly longer. This would be combined with a search
of public records on the World Wide Web as necessary. These times and quantities appear in the lower
half of the table. If the labor rate for the data entry operators is the same, which method is preferable?
Form
Part A – Existing Method
Part B – Existing Method
Part C – Existing Method
P art A – Proposed Method
Part B – Proposed Method
Web Search – Proposed Method
Time to Input
(minutes)
3
3
4
4
4
2
Quantity
(forms/year)
1,200,000
1,200,000
1,100,000
1,200,000
1,200,000
650,000
Answer: Annual Labor Cost = (Time to Perform Process) × (Number of Times Performed/Year)
Existing Method
Part A 3 minutes × 1,200,000 = 3,600,000
Part B 3 minutes × 1,200,000 = 3,600,000
Part C 4 minutes × 1,100,000 = 4,400,000
Proposed Method
Part A 4 minutes × 1,200,000 = 4,800,000
Part B 4 minutes × 1,200,000 = 4,800,000
Part C (web) 2 minutes × 650,000 = 1,300,000
Total Proposed Process: 10,900,000 minutes - A savings of 700,000 minutes/year
Difficulty: Moderate
Keywords: annual labor cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
95) The labor time for successive units produced is plotted in the graph shown below. What is the
learning percentage reflected by this graph?
Answer: The first unit takes 20 units of time and the 16th unit takes 8.19 of the same time units. From
the first to the 16th unit there are four doublings of output, each with an identical reduction in percentage
of time needed for the last unit. In the absence of the classic learning curve formula, a student might set
up a goal seek in Excel to find the appropriate learning curve percentage or use a trial and error approach
with POM for Windows.
Difficulty: Challenging
Keywords: learning curve
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
96) A discount store is experiencing an unacceptable number of dissatisfied customers leaving from the
checkout process. Information from customer complaints about the checkout process was collected and is
found in the following table. Construct a Pareto chart to identify the significant problems.
Problem Type
Cashier slow
Price check required
Line too long
Cashier unfriendly
Total Problems
15
9
22
4
Answer:
Difficulty: Moderate
Keywords: Pareto chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
97) Develop a fishbone diagram from the perspective of a pizza restaurateur to troubleshoot the pizza
delivery process to determine why weekend pizza deliveries are usually late. Make sure your diagram
includes at least four bones and ten ribs.
Answer: Answers will vary, but the head of the fishbone diagram should show "late pizza delivery on
the weekend" as the problem to be studied. Major bones might include materials, manpower, machinery,
methods, procedures, other, policies, among others. Specific statements for ribs will provide the greatest
variety but might include a lack of ingredients, mislabeled ingredients, poor handwriting, computer
glitch, ovens of insufficient capacity, poorly trained employees, low staffing levels, poor delivery vehicles,
and directionally-challenged drivers, among others.
Difficulty: Moderate
Keywords: fishbone diagram
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
98) Because a telephone customer service center has experienced several problems, it has begun to
analyze the data from customer complaints. The first step was to construct the following table. Use this
data to build a Pareto chart to help identify the "vital few" problems.
Process Failure
Person not available
Incorrect information given
Phone line busy
Long delay
Phone tree confusing
People unfriendly
Total Failures
5
12
7
39
20
17
Answer:
Difficulty: Moderate
Keywords: Pareto chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
99) The semester project came back from the copy store and to her horror, the project leader has just
noticed that the left side y-axis of a key Pareto chart was cut off due to a printing error. The bar chart
component uses the missing left side y-axis and the cumulative percentage line on the Pareto chart uses
the right side y-axis. The project leader is pretty sure that the total number of observations in all
combined categories is 200. Can you help her develop estimates of the counts for each of the five
categories?
Answer:
Category
MC
FB
TF
SA
PB
The actual counts for the five categories are:
Count
104
42
40
8
6
Some allowance should be made for alignment in reading the graph's right hand y-axis and matching up
the location of the cumulative percentage markers for each category. Because the total number of
observations equals 200, the percentages on the right side y-axis can be multiplied by 200 to yield
estimates of the count values. Based on a rough reading:
MC = 200 × 52.5 = 105
FB = 200 × (72.5 - 52.5) = 40
TF = 200 × (92.5 - 72.5) = 40
SA = 200 × (97.5 - 92.5) = 10
PB = 200 × (100 - 97.5) = 5
Difficulty: Moderate
Keywords: Pareto chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
100) Develop a process chart for a manual car wash.
Answer: Answers will vary, but a typical answer might look like the following process chart:
Difficulty: Challenging
Keywords: process chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
101) Develop a process chart for one of the following:
1) Researching and writing a paper for your Operations Management class
2) Managing, developing and completing a team project for a Finance (or other) class
3) Planning for your job interview process as you approach graduation (including resume preparation,
developing interview skills, researching company backgrounds, etc.)
4) Studying and developing a process improvement plan for a business or other process you are familiar
with (e.g., fast food restaurant, obtaining tickets to a university-sponsored event, dry cleaners, book
purchases for next term, and the like)
Answer: Answers will vary, but should follow the approach used to develop the following process
chart for a manual car wash. The process chart should include all value adding and non-value adding
steps, and a summary of the steps and times that recap the process.
Difficulty: Moderate
Keywords: process chart
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
102) A pilot work study has been conducted on a new operation with four work elements. The following
times, in seconds, were obtained using a time study.
a. What is the normal time for this operation?
b. If an allowance of 20 percent is used, what is the standard time for this task?
Answer:
Rating
Average
Normal
Work Element Factor
Time
Times
1
1.10
13.0
14.3
2
1.05
28.0
29.4
3
0.85
10.0
8.5
a. Normal time = 14.3 + 29.4 + 8.5 = 52.2 seconds
b. Standard time = (52.2)(1.20) = 62.64 seconds
Difficulty: Moderate
Keywords: time study, normal time, standard time
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
103) An undergraduate business student studies diligently in the library late in the term in anticipation of
an outstanding performance on her final exams. She asks a friend to spy on her at random intervals to
determine what percentage of time she is actually studying. Over the course of three days, her friend
records the following observations:
Observation Period
Monday
Tuesday
Wednesday
Times
Studying
19
22
9
Times Not
Studying
4
4
2
Observations
23
26
11
Based on this work sample, what percentage of time was the student actually studying?
Answer: Total observations = 60
Number of observations student was studying = 50
% of time studying = 50 / 60 = 83.3%
Difficulty: Moderate
Keywords: work sampling study, work sample
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
Scenario 2.5
A job consists of three distinct work elements that were timed with a highly accurate Swiss watch by a
trained industrial engineer. The engineer recorded ten observations and assigned the performance rating
that is recorded in the bottom row of the table under the corresponding work element. All recorded times
are in seconds.
Element 1
15
17
16
13
15
14
16
14
15
16
110
Element 2
23
25
23
26
25
23
24
25
23
22
115
Element 3
45
51
52
49
46
43
51
50
49
49
105
104) The allowance factor assigned is 20% for the data recorded. The rating factor for Element 1 is 10%,
for Element 2 is 15%, and for Element 3 is 5%. What is the standard time for the three-element job?
Answer: The average for Element 1 is 15.1 seconds; the average for Element 2 is 23.9 seconds; the
average for Element 3 is 48.5 seconds.
The normal time for Element 1 is 16.61 seconds; the normal time for Element 2 is 27.49 seconds; the
normal time for Element 3 is 50.93 seconds.
Add them all up to get 95.03 seconds and multiply by 1.20 to get a standard time for the job of 114.04
seconds.
Difficulty: Moderate
Keywords: time study
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Discuss how to define, measure, and analyze processes.
2.7 Improving and Controlling Process Improvements
1) A group of people, who are knowledgeable about the process and its disconnects, meets to propose
ideas for change in a rapid-fire manner. Such a session is called a brainstorming session.
Answer: TRUE
Difficulty: Easy
Keywords: brainstorming, process ideas
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Interpersonal Relations and Teamwork
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
2) Brainstorming sessions can be effectively conducted on the Internet using software that allows one
person to see another's ideas and build on them.
Answer: TRUE
Difficulty: Easy
Keywords: brainstorming, Internet software
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Information Technology
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
3) The bursar's office at a large state school sends a team to the bookstore on campus to see how they
handle customers and process payments. This is an example of functional benchmarking.
Answer: FALSE
Difficulty: Moderate
Keywords: functional benchmarking, internal benchmarking
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
4) All forms of benchmarking are best applied in situations where long-term continuous improvement is
desired.
Answer: TRUE
Difficulty: Moderate
Keywords: benchmarking
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
5) Benchmarking is a continuous, systematic procedure that measures a firm's products, services, and
processes against those of industry leaders.
Answer: TRUE
Difficulty: Moderate
Keywords: benchmarking, measure, industry leader
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
6) Which of these questions is not one of the initial round questions typically used to uncover
opportunities during a process redesign?
A) What is being done?
B) When is it being done?
C) Who is doing it?
D) Why are we doing it?
Answer: D
Difficulty: Moderate
Keywords: process redesign, questioning, brainstorming
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
7) Brainstorming sessions must have:
A) all participants together in the same room.
B) a mechanism for evaluation of the ideas as they are surfaced.
C) a means of implementing ideas as they are surfaced.
D) a way for all participants to communicate.
Answer: D
Difficulty: Easy
Keywords: brainstorming
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Interpersonal Relations and Teamwork
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
8) Xerox benchmarked its distribution system against that of L. L. Bean's. This is an example of:
A) competitive benchmarking.
B) internal benchmarking.
C) functional benchmarking.
D) disaggregate benchmarking.
Answer: C
Difficulty: Moderate
Keywords: benchmarking, functional
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
9) Benchmarking studies must have:
A) a direct competitor for comparison.
B) a team composed of at least one member from each department in the organization.
C) a team composed of at least one member from each department in the organization plus one customer
of each process output.
D) quantitative goals.
Answer: D
Difficulty: Moderate
Keywords: benchmarking, data, quantitative goals
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
10) An accounting firm realizes it is woefully inadequate at cultivating new clients. It is allowed to
observe a rival firm perform the new-client cultivation process in hopes of gleaning improved methods it
can adopt. This is an example of:
A) competitive benchmarking.
B) functional benchmarking.
C) internal benchmarking.
D) generic benchmarking.
Answer: A
Difficulty: Moderate
Keywords: benchmarking, competitive
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
11) An accounting professor realizes she is woefully inadequate at performing research. She discusses the
art of research with a colleague and gains important insights that permit her to establish a research
agenda. This is an example of:
A) competitive benchmarking.
B) functional benchmarking.
C) internal benchmarking.
D) generic benchmarking.
Answer: C
Difficulty: Moderate
Keywords: benchmarking, internal
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
12) An accounting firm realizes it is woefully inadequate at cultivating new clients. It is allowed to
observe a law firm perform the new-client cultivation process in hopes of gleaning improved methods it
can adopt. This is an example of:
A) competitive benchmarking.
B) functional benchmarking.
C) internal benchmarking.
D) generic benchmarking.
Answer: B
Difficulty: Moderate
Keywords: benchmarking, functional
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
13) Which of these benchmarking metrics is not suitable for a support process?
A) average employee turnover rate
B) total cost of payroll processes per $1,000 revenue
C) the impression that applicants have as they submit applications
D) number of accepted jobs as a percent of job offers
Answer: C
Difficulty: Easy
Keywords: benchmarking metrics
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
14) When managing processes, it is vital that:
A) attention is paid to competitive priorities and strategic fit.
B) design teams are allowed to function creatively and set their own charter.
C) design teams are not held accountable since their involvement ends once the new process rolls out.
D) the organization is not satisfied unless fundamental reengineering changes are made.
Answer: A
Difficulty: Moderate
Keywords: managing processes, competitive priorities, strategic fit
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
15) When managing processes, it is vital that:
A) design teams are allowed to function creatively and set their own charter.
B) the organization is not satisfied unless fundamental reengineering changes are made.
C) sound project management practices are used to implement the redesigned process.
D) people are redesigned at the same time the process is redesigned.
Answer: C
Difficulty: Moderate
Keywords: managing processes, project implementation
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
16) Good process management should include:
A) a mechanism for identifying what goes wrong and who is responsible.
B) a method for creating self-directed work teams.
C) at least half time dedicated to each employee's self-actualization.
D) an infrastructure for continuous improvement.
Answer: D
Difficulty: Moderate
Keywords: managing processes, continuous improvement
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
17) A(n) ________ is a method where a group of people, knowledgeable about the process and its
disconnects, propose ideas for change in a rapid-fire manner.
Answer: brainstorming session
Difficulty: Moderate
Keywords: brainstorming
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Interpersonal Relations and Teamwork
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
18) ________ is a continuous, systematic procedure that measures a firm's products, services, and
processes against those of industry leaders.
Answer: Benchmarking
Difficulty: Moderate
Keywords: benchmarking
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
19) The bursar's office at your university decides to benchmark the collections department of a credit
agency to improve their own collection rate. This is an example of ________.
Answer: functional benchmarking
Difficulty: Moderate
Keywords: benchmarking, functional benchmarking
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
20) ________ is based on comparison of processes with a direct adversary in industry.
Answer: Competitive benchmarking
Difficulty: Moderate
Keywords: benchmarking, competitive benchmarking
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
21) ________ data is probably the easiest to obtain compared to other types of benchmarking data.
Answer: Internal benchmarking
Difficulty: Moderate
Keywords: internal, internal benchmarking
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
22) ________ involves using an organizational unit with superior performance as the ideal for other
departments.
Answer: Internal benchmarking
Difficulty: Moderate
Keywords: benchmarking, internal
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
23) Provide examples for each of the three types of benchmarking.
Answer: Examples will vary, but the three types are competitive, functional, and internal. Competitive
benchmarking is comparison with a direct competitor; functional benchmarking is a comparison with
similar functions outside the firm but not of a direct competitor; and internal benchmarking is a
comparison with another department or function in the same company.
Difficulty: Moderate
Keywords: benchmarking, competitive, internal, functional
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
24) The authors discuss seven mistakes when managing processes, arguing that failure to manage
processes is ultimately a failure to manage the business. What are any four of those mistakes?
Answer: Answers will vary depending on which four mistakes are chosen. The full list of seven
mistakes are:
1. Not Connecting with Strategic Issues. Is particular attention being paid to core processes, competitive
priorities, impact of customer contact and volume, and strategic fit during process analysis?
2. Not Involving the Right People in the Right Way. Does process analysis closely involve the people
performing the process, or those closely connected to it as internal customers and suppliers?
3. Not Giving the Design Teams and Process Analysts a Clear Charter, and then Holding Them Accountable. Does
management set expectations for change and maintain pressure for results? Does it allow paralysis in
process improvement efforts by requiring excessive analysis?
4. Not Being Satisfied Unless Fundamental "Reengineering" Changes are Made. Is the radical change from
process reengineering the expectation? If so, the cumulative effect of many small improvements that
could be made incrementally could be lost. Process management efforts should not be limited to
downsizing or to reorganization only, even though jobs may be eliminated or the structure changed. It
should not be limited to big technological innovation projects, even though technological change occurs
often.
5. Not Considering the Impact on People. Are the changes aligned with the attitudes and skills of the people
who must implement the redesigned process? It is crucial to understand and deal with the people side of
process changes.
6. Not Giving Attention to Implementation. Are processes redesigned, but never implemented? A great job
of flowcharting and benchmarking is of only academic interest if the proposed changes are not
implemented. Sound project management practices are required.
7. Not Creating an Infrastructure for Continuous Process Improvement. Is a measurement system in place to
monitor key metrics over time? Is anyone checking to see whether anticipated benefits of a redesigned
process are actually being realized?
Difficulty: Challenging
Keywords: processes, managing processes
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
25) Suppose you have owned and operated your own package delivery business for a year. You would
like to engage in competitive benchmarking to make sure your business is run as smoothly as possible.
What firms and processes would you consider for benchmarking? Defend your choices of these firms and
processes. What specific metrics would you focus on and why? How could the data be reliably collected
at your own business?
Answer: Answers will vary, but processes that might be considered are the pick up and delivery
processes, sorting, billing, customer service, and many others. The student might identify some processes
as being more crucial to customer satisfaction or more tightly coupled with their own corporate strategy,
or perhaps processes that they feel are the most difficult to master. Metrics include the percent of on-time
delivery, fraction of correct bills, profit per package, number of days delivery, fill rate of delivery vehicles,
and many others. The data may be collected via information technology in the field or automatically
collected as packages pass delivery checkpoints. Customer satisfaction data can be collected by comment
cards or by customer service representatives staffing a calling center.
Difficulty: Moderate
Keywords: benchmarking, competitive benchmarking
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Analytical Thinking
Learning Obj.: Identify the commonly used approaches for effectively improving and controlling processes.
Operations Management: Processes and Supply Chains, 12e (Krajewski)
Chapter 3 Quality and Performance
3.1 Costs of Quality
1) The investment a company makes in training employees to perform their duties and redesigning
products and processes to improve them would be categorized as prevention costs.
Answer: TRUE
Difficulty: Moderate
Keywords: prevention cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
2) Appraisal costs are associated with preventing defects before they happen.
Answer: FALSE
Difficulty: Moderate
Keywords: appraisal cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
3) An example of an internal failure cost would be warranty cost.
Answer: FALSE
Difficulty: Moderate
Keywords: internal failure cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
4) From an ethical standpoint, it is not a requirement to consider the greater societal effects of decisions
that reduce the costs of quality.
Answer: FALSE
Difficulty: Easy
Keywords: quality, ethics
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Ethical Understanding and Reasoning
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
5) Since an employee's responsibility is to move production along, it is ethical to knowingly pass
defective services or products to internal or external customers when capacity is tight.
Answer: FALSE
Difficulty: Easy
Keywords: quality, ethics
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Ethical Understanding and Reasoning
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
6) When a process fails to satisfy a customer:
A) it is quite often the customer's fault.
B) it is considered a defect.
C) it is time to reengineer the process.
D) it is usually half the customer's fault and half the company's fault.
Answer: B
Difficulty: Easy
Keywords: process defect
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
7) Which of the following would be considered a prevention cost of quality?
A) inspecting incoming raw materials
B) training workers to perform their jobs
C) issuing a recall of defective product before another customer is injured
D) performing a 24 hour burn-in on every item produced to make sure it works before it is shipped
Answer: B
Difficulty: Easy
Keywords: prevention cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
8) Which of the following would be considered an appraisal cost of quality?
A) training workers to perform their jobs
B) purchasing better tools for workers to perform their jobs
C) repairing an item under the warranty
D) running a functional test on each item before it is boxed for shipment
Answer: D
Difficulty: Moderate
Keywords: appraisal cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
9) A prime example of an internal failure cost is the:
A) labor cost associated with inspecting every item produced.
B) labor cost associated with repairing an item returned under warranty.
C) material cost of a piece of stock metal that has had too large a hole drilled in it.
D) material cost of the paint applied to the case of a finished unit.
Answer: C
Difficulty: Moderate
Keywords: internal failure cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
10) A professor, dissatisfied with a product he's purchased, bad mouths the product to his class, resulting
in decreased market share (since the students believe everything he tells them). The manufacturer suffers:
A) an internal failure cost.
B) an external failure cost.
C) a prevention cost.
D) an appraisal cost.
Answer: B
Difficulty: Easy
Keywords: internal failure cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
11) Improving quality seems to be a strategic weapon in gaining market share. However, improving
quality entails allocation of resources and effort. As greater effort is expended to stop defects before they
occur, which one of the following costs increases?
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
Answer: A
Difficulty: Easy
Keywords: prevention cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
12) Which one of the following is a consequence of internal failures?
A) increased customer service
B) increased inventory costs
C) increased productivity
D) decreased lead time
Answer: B
Difficulty: Moderate
Keywords: internal failure
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
13) Increasing the quality level by better products and processes may:
A) allow a company to raise the price of the product.
B) move a company closer to a competitive priority of price.
C) reduce prevention costs.
D) ensure that the trade-off between prevention costs and other costs of poor quality is worthwhile.
Answer: A
Difficulty: Moderate
Keywords: quality level, price
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
14) Which one of the following is considered to be an appraisal cost?
A) cost of quality audits
B) cost of supplier programs
C) cost of rework
D) cost of process design
Answer: A
Difficulty: Moderate
Keywords: appraisal cost, audit costs
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
15) Which one of the following statements is true?
A) Appraisal costs decrease as quality level decreases.
B) Appraisal costs increase as the variation of output increases.
C) Appraisal costs increase as the variation of output decreases.
D) Appraisal costs increase as quality level increases.
Answer: B
Difficulty: Moderate
Keywords: appraisal cost, quality costs
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
16) A cost that is incurred if some aspect of a service must be performed again is called a(n):
A) yield loss.
B) prevention cost.
C) appraisal cost.
D) rework cost.
Answer: D
Difficulty: Moderate
Keywords: rework cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
17) When errors have been made while producing a product such that the item must be discarded, the
resultant cost is called a(n):
A) warranty.
B) scrap cost.
C) rework cost.
D) external failure cost.
Answer: B
Difficulty: Moderate
Keywords: yield loss, scrap cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
18) Which one of the following is part of prevention costs?
A) the costs of quality audits
B) the costs resulting from scrap
C) the costs of improving process design and product design
D) the costs of lawsuits from injury from use of the product
Answer: C
Difficulty: Challenging
Keywords: prevention cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
19) Which one of the following is a potential consequence of external failures?
A) longer lead times
B) less rework
C) more litigation costs
D) lower product costs
Answer: C
Difficulty: Moderate
Keywords: external failure
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
20) At which of the following steps will the cost of detecting product defects be the highest?
A) customer
B) process
C) final testing
D) raw material
Answer: A
Difficulty: Moderate
Keywords: external failure
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
21) The internal failure known as ________ occurs when an item is unfit for further processing.
Answer: scrap
Difficulty: Moderate
Keywords: scrap, yield loss
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
22) ________ is an internal cost of quality incurred when a process step must be performed again or
fixed before an item can be shipped.
Answer: Rework
Difficulty: Easy
Keywords: scrap, yield loss
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
23) ________ costs arise when a defect is discovered after the customer has received the product or service.
Answer: External failure
Difficulty: Moderate
Keywords: external failure cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
24) ________ costs are associated with preventing defects before they happen.
Answer: Prevention
Difficulty: Easy
Keywords: prevention cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
25) Illustrate the differences between prevention and appraisal costs using a restaurant setting as an
example.
Answer: Prevention costs are associated with preventing defects before they happen. In a restaurant,
this would be the expense associated with training employees how to take an order, prepare food, bus
tables or in mistake-proofing systems. Appraisal costs are incurred in assessing the level of performance
of the firm's processes. In a restaurant this might be inspections by managers, reviewing and acting on
customer satisfaction cards, or testing prepared dishes.
Difficulty: Moderate
Keywords: prevention cost, appraisal cost
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
26) What is the long-term impact of unethical business practices on product and service quality?
Answer: Firms that produce better quality services or products can expect to earn a premium for that
higher quality. They can also expect to grow and prosper over time because of their ability to create true
value for customers. Firms that engage in deception, however, undermine the ability and competence of
their employees and demean their relationship with external customers. The unfortunate message these
firms send to their employees, who are also their internal customers, is that management views them as
being less capable of producing quality services or products than their counterparts in ethical firms.
Under these conditions employees are also less likely to be motivated to put forth their best effort. The
message unethical firms send to their external customers is that their product or service cannot effectively
compete with that of others and so they must engage in deception in order to be profitable. Employees of
firms that attempt to profit by deceiving customers are less likely to create true value for customers
through product or service improvements that can enhance the customers' experience. That erodes a
firm's ability to compete now and in the future.
Difficulty: Moderate
Keywords: dimensions of quality
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Ethical Understanding and Reasoning
Learning Obj.: Define the four major costs of quality, and their relationship to the role of ethics in determining the
overall costs of delivering products and services.
3.2 Total Quality Management and Six Sigma
1) One of the principles that total quality management (TQM) stresses is customer satisfaction.
Answer: TRUE
Difficulty: Easy
Keywords: TQM, customer satisfaction
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
2) The notion of internal customers applies to all parts of a firm.
Answer: TRUE
Difficulty: Easy
Keywords: TQM, internal customer
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
3) Internal customers are those that have some familial relation working at the business providing the
good or service.
Answer: FALSE
Difficulty: Easy
Keywords: internal customer
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
4) Quality at the source refers to the effort to catch and correct any mistakes as they are being made by
those that are making them.
Answer: TRUE
Difficulty: Easy
Keywords: quality at the source, TQM
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
5) People often evaluate the quality of a service on the basis of psychological impressions.
Answer: TRUE
Difficulty: Easy
Keywords: TQM, psychological impressions
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
6) The Six Sigma five-step approach contains the elements define, measure, analyze, improve, and
control.
Answer: TRUE
Difficulty: Moderate
Keywords: Six Sigma, define, measure, analyze, improve, control
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
7) Applying Six Sigma to service processes is more challenging than for manufacturing processes.
Answer: TRUE
Difficulty: Moderate
Keywords: Six Sigma, service processes, manufacturing processes
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
8) Because Six Sigma involves the elimination of defects, it can only be applied in manufacturing
processes.
Answer: FALSE
Difficulty: Easy
Keywords: Six Sigma
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
9) The Six Sigma improvement model can be applied both to projects involving incremental
improvements to processes and to projects requiring major changes.
Answer: TRUE
Difficulty: Moderate
Keywords: Six Sigma
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
10) "Quality at the source" implies:
A) less expensive raw materials.
B) lower scrap.
C) higher rework costs.
D) more final-test inspectors.
Answer: B
Difficulty: Moderate
Keywords: quality at the source, TQM
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
11) Which one of the following statements is a key feature of both TQM and Six Sigma?
A) Quality is primarily the responsibility of all employees in the organization.
B) Quality is primarily the responsibility of the quality control department.
C) Quality is primarily the responsibility of the production department.
D) Quality is primarily the responsibility of top management.
Answer: A
Difficulty: Moderate
Keywords: TQM, total quality management, Six Sigma
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
12) A firm's internal program in employee involvement includes which of the following considerations?
A) defining who is the customer
B) supplier management
C) product availability
D) psychological impressions
Answer: A
Difficulty: Easy
Keywords: TQM, total quality management, defining the customer
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
13) The TQM wheel features ________ at its center.
A) incremental improvement
B) customer satisfaction
C) employee teams
D) leadership
Answer: B
Difficulty: Easy
Keywords: TQM wheel, customer satisfaction
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
14) As an operations manager, which definition of quality do you have the most control over?
A) conformance to specifications
B) support
C) psychological impressions
D) value
Answer: A
Difficulty: Moderate
Keywords: quality conformance
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
15) Quality measured with reference to price is captured by the notion of:
A) conformance to specifications.
B) value.
C) fitness for use.
D) psychological impressions.
Answer: B
Difficulty: Easy
Keywords: quality, value
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
16) If a product initially fails to live up to the customer's expectations, which dimension of quality might
salvage the sale and the company's reputation?
A) psychological impressions
B) fitness for use
C) support
D) value
Answer: C
Difficulty: Moderate
Keywords: quality, value, support
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
17) As he entered his broker's office for the first time, the young associate professor was dazzled by its
tasteful accoutrements and the offer of a double tall, split shot, skinny, hazelnut latte. He knew his lottery
winnings would be safe here, thanks to his:
A) broker's conformance to specifications.
B) broker's fitness for use.
C) broker's support.
D) own psychological impressions.
Answer: D
Difficulty: Easy
Keywords: quality, psychological impressions
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
18) The 15-year-old car didn't dazzle students or members of the opposite sex, but it started every
morning and evening and got the professor to his destination on time, thereby scoring high on the:
A) psychological impressions scale of quality.
B) fitness for use scale of quality.
C) support scale of quality.
D) bells and whistles scale of quality.
Answer: B
Difficulty: Easy
Keywords: quality, fitness for use
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
19) One of the main challenges in developing the proper culture for TQM is to:
A) define customer for each employee.
B) suspend reward systems based on quantity.
C) institute an equitable employee recognition program.
D) get buy-in from the customer.
Answer: A
Difficulty: Easy
Keywords: TQM culture, total quality management, defining the customer
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
20) Continuous improvement is a philosophy that:
A) uses problem-solving techniques within work teams.
B) ensures there are plenty of quality inspectors to find areas for improvement.
C) waits until a big problem occurs, then systematically solves it.
D) encourages the hiring of statistical process control specialists to reduce the need for current employees
to learn statistical methods.
Answer: A
Difficulty: Moderate
Keywords: continuous improvement, TQM
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
21) When considering the plan-do-study-act cycle for problem solving, evaluating how closely a project's
results correspond to the initial goals set for the work is part of the ________ step.
A) plan
B) do
C) study
D) act
Answer: C
Difficulty: Moderate
Keywords: continuous improvement, PDSA, plan, do study, act
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
22) When considering the plan-do-study-act cycle for problem solving, instructing other employees in the
use of the new process occurs in the ________ step.
A) plan
B) do
C) study
D) act
Answer: D
Difficulty: Moderate
Keywords: continuous improvement, PDSA, plan, do study, act
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
23) When considering the plan-do-study-act cycle for problem solving, quantitative goals are set for
process improvement in the ________ step.
A) plan
B) do
C) study
D) act
Answer: A
Difficulty: Moderate
Keywords: continuous improvement, PDSA, plan, do study, act
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
24) Which of these elements is not part of the Deming Wheel?
A) plan
B) design
C) study
D) act
Answer: B
Difficulty: Moderate
Keywords: continuous improvement, PDSA, plan, do study, act
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
25) What is one reason that Six Sigma is more difficult to apply to service processes?
A) There is no manual that suggests how Six Sigma can be applied to services.
B) The work product is more difficult to see.
C) There is no way to measure process capability of a service product.
D) The National Six Sigma Society cautions against using it for services.
Answer: B
Difficulty: Moderate
Keywords: Six Sigma, service processes
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
26) Which step of the Six Sigma DMAIC procedure monitors the process to make sure high performance
levels are maintained?
A) Define
B) Measure
C) Analyze
D) Improve
E) Control
Answer: E
Difficulty: Moderate
Keywords: Six Sigma, improvement model, DMAIC
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
27) Which step of the Six Sigma DMAIC procedure involves identifying data sources and preparing a
data collection plan?
A) Define
B) Measure
C) Analyze
D) Improve
E) Control
Answer: B
Difficulty: Moderate
Keywords: Six Sigma, improvement model, DMAIC
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
28) Consumers consider five aspects when defining quality. Which one of the following is least likely to
be one of these aspects?
A) value
B) fitness for use
C) psychological impressions
D) individual development
Answer: D
Difficulty: Moderate
Keywords: quality dimensions
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
29) ________ is an approach to teamwork that moves responsibility for decisions farther down the
organizational chart—to the level of the employee actually doing the job.
Answer: Employee empowerment
Difficulty: Moderate
Keywords: TQM, total quality management, employee involvement
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
30) ________ are small groups of supervisors and employees who meet to identify, analyze, and solve
production and quality problems.
Answer: Problem-solving teams or quality circles
Difficulty: Moderate
Keywords: quality circle, employee problem solving, teams
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
31) Defects are caught and corrected where they were created under a(n) ________ philosophy.
Answer: quality at the source
Difficulty: Moderate
Keywords: TQM, quality at the source
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
32) Small groups of employees and supervisors that meet to identify, analyze, and solve process and
quality problems are known as ________.
Answer: quality circles
Difficulty: Moderate
Keywords: quality circles
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
33) The customer's assessment of quality with reference to the price paid for the good or service is known
as ________.
Answer: value
Difficulty: Moderate
Keywords: value
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
34) ________ is a comprehensive and flexible system for achieving, sustaining, and maximizing business
success through intensive data analysis and process management, improvement and reengineering.
Answer: Six Sigma
Difficulty: Moderate
Keywords: Six Sigma
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
35) Full-time teachers and leaders of teams involved in Six Sigma projects are referred to as ________.
Answer: black belts
Difficulty: Moderate
Keywords: Six Sigma, black belt
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
36) ________ refers to how well the product or service performs its intended purpose.
Answer: Fitness for use
Difficulty: Moderate
Keywords: quality, fitness for use
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
37) What are any three dimensions of quality and which one accurately describes how you assess
education?
Answer: Answers will vary on the educational assessment portion of this question. The dimensions of
quality mentioned by the authors include conformance to specifications, value, fitness for use, support,
and psychological impressions.
Difficulty: Moderate
Keywords: dimensions of quality
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
38) Provide examples of the three main tenets of total quality management as applied to this operations
management course.
Answer: Answers will vary depending on the student's experiences in operations management. The
three tenets of TQM discussed by the authors include customer satisfaction, employee involvement, and
continuous improvement.
Difficulty: Moderate
Keywords: TQM, total quality management, customer satisfaction, employee involvement, continuous
improvement
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
39) Why is employee empowerment important in a total quality management program?
Answer: With TQM, everyone is expected to contribute to the overall improvement of quality. Each
employee must identify his or her customers, and for many employees their internal customers may
outnumber their external customers. Once customers are identified, means of satisfying those customers
must be identified and acted on. Empowerment moves the responsibility farther down the organizational
chart and allows employees to independently make changes in what they do in order to satisfy their
customers.
Difficulty: Moderate
Keywords: employee empowerment
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
40) What are the steps in the Six Sigma improvement model and how do they relate to the PDSA cycle?
Answer: The Six Sigma improvement model contains the steps define, measure, analyze, improve, and
control. The PDSA cycle contains the steps plan, do, study, and act. Both approaches call for
improvement of current processes using a management-by-data approach, i.e., experimentation followed
by analysis and then a change in methods if improvement can be achieved. The PDSA cycle suggests
continuous improvement; the Six Sigma improvement model has no direct statement of iteration. Once
the process is improved by the Six Sigma approach, emphasis is shifted toward controlling the improved
process rather than improving it further.
Difficulty: Moderate
Keywords: Six Sigma, PDSA
Learning Outcome: Describe the advantages and disadvantages of various production strategies such as lean,
Theory of Constraints, JIT, and Six Sigma
AACSB: Application of Knowledge
Learning Obj.: Explain the basic principles of total quality management (TQM) and Six Sigma.
3.3 Acceptance Sampling
1) Acceptance sampling is the application of statistics to determine if the quality of incoming materials
should be accepted or rejected.
Answer: TRUE
Difficulty: Easy
Keywords: acceptance sampling
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Understand how acceptance sampling and process performance approaches interface in a supply
chain.
2) An acceptable quality level is measured as the proportion of defective items a buyer is willing to
tolerate.
Answer: TRUE
Difficulty: Moderate
Keywords: acceptance sampling
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Understand how acceptance sampling and process performance approaches interface in a supply
chain.
3) While acceptance sampling does determine if incoming materials should be accepted or rejected, it
does not limit the buyer's risk of accepting bad-quality parts or rejecting good-quality parts.
Answer: FALSE
Difficulty: Moderate
Keywords: acceptance sampling
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Understand how acceptance sampling and process performance approaches interface in a supply
chain.
4) In acceptance sampling, the proportion defective that the buyer will allow in an incoming shipment is:
A) the acceptable random sample (ARS).
B) the upper control limit (UCL).
C) the lower control limit (LCL).
D) the acceptable quality level (AQL).
Answer: D
Difficulty: Moderate
Keywords: acceptance sampling, AQL
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Understand how acceptance sampling and process performance approaches interface in a supply
chain.
5) In acceptance sampling, when the random sample passes the buyer's incoming test (low number of
defects found), the next action taken is to:
A) accept the entire lot of incoming materials.
B) do additional testing to reduce the risk of accepting a bad-quality lot.
C) place the lot on hold and wait for additional lots from this seller to be tested to assure consistent good
quality.
D) 100% inspect the lot because some defects were found.
Answer: A
Difficulty: Easy
Keywords: acceptance sampling, AQL
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Understand how acceptance sampling and process performance approaches interface in a supply
chain.
6) ________ is the application of statistical techniques to determine if the quality of incoming materials
should be accepted or rejected, based on the testing of a sample of parts.
Answer: Acceptance sampling
Difficulty: Easy
Keywords: AQL, acceptance sampling
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Understand how acceptance sampling and process performance approaches interface in a supply
chain.
7) In acceptance sampling, the ________ is the proportion defective that the buyer will allow in an
incoming shipment.
Answer: acceptable quality level (AQL)
Difficulty: Moderate
Keywords: AQL acceptance sampling
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Understand how acceptance sampling and process performance approaches interface in a supply
chain.
3.4 Statistical Process Control
1) Statistical process control (SPC) is the application of statistical techniques to determine whether a
quantity of material should be accepted or rejected.
Answer: FALSE
Difficulty: Moderate
Keywords: SPC, statistical process control
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
2) Common causes of variation are the purely random, unidentifiable sources of variation that are
unavoidable with the current process.
Answer: TRUE
Difficulty: Moderate
Keywords: common causes of variation
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
3) Assignable causes of variation include any variable-causing factors that can be identified and
eliminated.
Answer: TRUE
Difficulty: Moderate
Keywords: assignable causes of variation
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
4) On a control chart, a type I error occurs when the employee concludes that the process is in control
when it is actually out of statistical control.
Answer: FALSE
Difficulty: Moderate
Keywords: control chart, type I error
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
5) Convicting an innocent defendant is an example of a type II error.
Answer: FALSE
Difficulty: Moderate
Keywords: control chart, type II error
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
6) Wider limits on a control chart result in lower probability of a type I error.
Answer: TRUE
Difficulty: Moderate
Keywords: control chart, type II error
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
7) A process is monitored with a control chart. The process is correctly judged to be in-control once the
results from the most recent sample are plotted. Therefore, all of the output produced at that time is
good.
Answer: FALSE
Difficulty: Challenging
Keywords: control chart, sample
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
8) One chart commonly used for quality measures based on product or service attributes is the
Answer: FALSE
chart.
Difficulty: Moderate
Keywords: x-bar chart, variables, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
9) Process centering is shown by an
Answer: TRUE
chart.
Difficulty: Easy
Keywords: x-bar chart, centering
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
10) The process
and R-charts are developed using a sample size of 5, but the technician mistakenly
looks up A2, D3, and D4 values for a sample size of 7. If these charts are put into daily use, the
manufacturer will mistakenly ship more bad product than had the charts been constructed correctly.
Answer: FALSE
Difficulty: Moderate
Keywords: x-bar, R charts, process control
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
11) The advantage of variable measurements is that they can be quickly counted compared to attribute
measurements.
Answer: FALSE
Difficulty: Moderate
Keywords: variable measurements, attribute measurements
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
12) Which of the following would be a "common" cause of variation?
A) random sources
B) a machine in need of repair
C) an untrained worker
D) a defective raw material
Answer: A
Difficulty: Easy
Keywords: common and random causes of variation
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
13) In Statistical Process Control, ________ are used to detect defects and determine if the process has
deviated from design specifications.
A) flowcharts
B) cause-and-effect diagrams
C) process capability charts
D) control charts
Answer: D
Difficulty: Easy
Keywords: Statistical Process Control, SPC
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
14) A sampling plan is best for evaluating quality when:
(1) Inspection costs are high
(2) Inspection costs are low
(3) Non-destructive testing is available
(4) Destructive testing is required
A) 1 and 3
B) 1 and 4
C) 2 and 3
D) 2 and 4
Answer: B
Difficulty: Moderate
Keywords: Statistical Process Control, sampling
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
15) Which one of the following statements about quality control is true?
A) Measurement by attributes is a simple yes or no decision.
B) Complete inspection is used when inspection cost is high.
C) Sampling inspection is used when the cost of passing a defective unit is high relative to the cost of
inspection.
D) Measurement by variables is often used when the quality specifications are complex.
Answer: A
Difficulty: Moderate
Keywords: quality control, measurement of attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
16) Which one of the following statements relating to quality is true?
A) Sampling procedures based on measurement by variables should be used when quality specifications
are complex.
B) A distribution of sample means has more variance than the process distribution itself.
C) The distribution of sample means can be approximated by the normal distribution.
D) Sampling is a better approach than 100 percent inspection when the cost of accepting a defective item
is very high.
Answer: C
Difficulty: Moderate
Keywords: normal distribution, mean, sample means
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
17) When should complete inspection be used?
A) when inspection tests are destructive
B) when inspection tasks are monotonous
C) when the cost of product failure is high relative to the inspection costs
D) when quality is a competitive priority
Answer: C
Difficulty: Moderate
Keywords: complete inspection
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
18) An operator of a filling machine plotted the weights of each bag she filled for three weeks. At the
same time, a quality inspector randomly took groups of five bags of the same output and plotted the
average weights of the samples. The inspector's sampling distribution will:
A) have greater variability than the operator's distribution.
B) have less variability than the operator's distribution.
C) show if the output has been produced to the operator's specifications.
D) have a mean five times greater than the operator's distribution.
Answer: B
Difficulty: Moderate
Keywords: variance, SPC
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
19) In SPC, the distribution of sample means:
A) can be approximated by the normal distribution.
B) will have greater variability than the process distribution.
C) will always have a mean greater than the process distribution because of the sample size.
D) cannot be used for control charts because the variability is understated.
Answer: A
Difficulty: Moderate
Keywords: SPC, distribution, sample mean
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
20) The three sigma limits for a process whose distribution conforms to the normal distribution include
approximately:
A) 50% of the observed values, in the long run.
B) 68% of the observed values, in the long run.
C) 95% of the observed values in the long run.
D) 99% of the observed values in the long run.
Answer: D
Difficulty: Moderate
Keywords: SPC, distribution limits
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
21) Regarding control charts, a type I error refers to concluding that the process is:
A) in control when it is not in control.
B) incapable when it is capable.
C) out of control when it is in control.
D) capable when it is not capable.
Answer: C
Difficulty: Moderate
Keywords: type I errors, SPC, process control
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
22) An example of a type I error would be:
A) throwing away a perfectly good banana.
B) counting a student's multiple choice response correct when it is actually incorrect.
C) releasing a guilty defendant.
D) counting a student's multiple choice response correct when it is actually correct.
Answer: A
Difficulty: Moderate
Keywords: type I and type II errors, process control
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
23) An example of a type II error would be:
A) counting a student's True/False response incorrect when it is actually correct.
B) convicting an innocent defendant.
C) eating food that you were unaware was spoiled.
D) counting a student's True/False response incorrect when it is actually incorrect.
Answer: C
Difficulty: Moderate
Keywords: type I and type II errors, process control
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
24) Regarding control charts, changing from three-sigma limits to two-sigma limits:
A) increases the probability of concluding nothing has changed, when in fact it has.
B) increases the probability of searching for an assignable cause when none exists.
C) decreases the probability that the process average will change.
D) decreases the probability that defects will be generated by the process.
Answer: B
Difficulty: Moderate
Keywords: SPC, sigma limits, type I and type II errors, process control
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
25) Regarding control charts, changing from two-sigma limits to three-sigma limits:
A) increases the probability of concluding nothing has changed, when in fact it has.
B) increases the probability of searching for a cause when none exists.
C) decreases the probability that the process average will change.
D) decreases the probability that defects will be generated by the process.
Answer: A
Difficulty: Moderate
Keywords: SPC, sigma limits
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
26) The UCL and LCL for an
chart are 25 and 15 respectively. The central line is 20, and the process
variability is considered to be in statistical control. The results of the next six sample means are 18, 23, 17,
21, 24, and 16. What should you do?
A) Nothing; the process is in control.
B) Explore the assignable causes because the second, fourth, and fifth samples are above the mean.
C) Explore the assignable causes because there is a run.
D) Explore the assignable causes because there is a trend.
Answer: A
Difficulty: Moderate
Keywords: SPC, process control, assignable causes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
27) The underlying statistical distribution for the p-chart is:
A) Poisson.
B) binomial
C) percentage.
D) normal.
Answer: B
Difficulty: Moderate
Keywords: p-chart, binomial distribution
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
28) A company is interested in monitoring the variability in the weight of the fertilizer bags it produces.
An appropriate control chart would be:
A) an
chart.
B) a p-chart.
C) a c-chart.
D) an R-chart.
Answer: D
Difficulty: Moderate
Keywords: SPC, process control, variability
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
29) A company is interested in monitoring the average time it takes to serve its customers. An
appropriate control chart would be:
A) an
chart.
B) a p-chart.
C) a c-chart.
D) an R-chart.
Answer: A
Difficulty: Moderate
Keywords: SPC, control chart, mean, central tendency, center line
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
30) A company is interested in monitoring the number of scratches on Plexiglass panels. The appropriate
control chart to use would be:
A) an
chart.
B) a p-chart.
C) a c-chart.
D) an R-chart.
Answer: C
Difficulty: Challenging
Keywords: process control, SPC, defects
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
31) Which alternative will increase the probability of detecting a shift in the process average?
A) increasing the control limit spread
B) taking smaller samples
C) taking smaller samples more frequently
D) taking larger samples more frequently
Answer: D
Difficulty: Moderate
Keywords: SPC, process control, sample
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
32) Five samples of size 4 were taken from a process. A range chart was developed that had LCLR = 0 and
UCLR = 2.50. Similarly, an average chart was developed with the average range from the five samples,
with LCL = 15.0 and LCL = 24.0. The ranges for each of the five samples were 1.75, 2.42, 2.75, 2.04, and
2.80, respectively. The values of the sample average for each sample were 19.5, 22.3, 17.4, 20.1, and 18.9,
respectively. What can you tell management from this analysis?
A) The process variability is out of control, and we cannot make a statement about the process average.
B) The process variability is out of control, but the process average is in control.
C) The process variability and the process average are out of control.
D) We cannot tell if the process variability or the process average is out of control.
Answer: A
Difficulty: Challenging
Keywords: SPC, process control, process variability, process average
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
33) Historically, the average time to service a customer complaint has been 3 days and the standard
deviation has been 0.50 day. Management would like to specify the control limits for an
chart with a
sample size of 10- and 3- sigma limits. The LCL for the chart would be:
A) less than 2.40.
B) greater than 2.40 but less than or equal to 2.45.
C) greater than 2.45 but less than or equal to 2.50.
D) greater than 2.50.
Answer: D
Difficulty: Moderate
Keywords: SPC, lower control limit, x-bar chart
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
34) Historically, the average time to service a customer complaint has been 3 days and the standard
deviation has been 0.50 day. Management would like to specify the control limits for an
chart with a
sample size of 10- and 3- sigma limits. Suppose the average service time from the next 10 samples yielded
the following result: 3.2, 2.1, 3.6, 2.8, 3.9, 3.5, 2.7, 4.1, 2.6, and 3.3 days. What conclusion can be drawn?
A) Assuming the process variability is in control, the process average is also in statistical control.
B) Assuming the process average is in control, the process average is out of statistical control.
C) The sample size should be increased.
D) No conclusion can be drawn because there is insufficient data.
Answer: A
Difficulty: Moderate
Keywords: SPC, process control, process variability
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
35) Historically, the average time to service a customer complaint has been 3 days and the standard
deviation has been 0.50 day. Management would like to specify the control limits for an
chart with a
sample size of 10 and 3- sigma limits. The UCL for the chart would be:
A) less than or equal to 3.30.
B) greater than 3.30 but less than or equal to 3.40.
C) greater than 3.40 but less than or equal to 3.50.
D) greater than 3.50.
Answer: C
Difficulty: Moderate
Keywords: SPC, control limit, x-bar chart
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
Table 5.11
Factors for Calculating Three-Sigma Limits for the
Size of
Sample
(n)
2
3
4
5
6
7
8
9
10
Chart and R-Chart
Factor for UCL
and LCL for
x-bar-Charts
A2
Factor for
LCL for
R-Charts
D3
Factor for
UCL for
R-Charts
D4
1.880
1.023
0.729
0.577
0.483
0.419
0.373
0.337
0.308
0
0
0
0
0
0.076
0.136
0.184
0.223
3.267
2.575
2.282
2.115
2.004
1.924
1.864
1.816
1.777
Source: 1950 ASTM Manual on Quality Control of Materials, copyright American Society for Testing
Materials. Reprinted with permission.
36) Thermostats are subjected to rigorous testing before they are shipped to air conditioning technicians
around the world. Results from the last five samples are shown in the table. Calculate control limits for a
chart that will monitor performance to target. The correct control limits as (LCL,UCL) are:
Unit #
1
2
3
4
5
Sample 1
73.5
71.3
70.0
71.1
70.8
Sample 2
70.8
71.0
72.6
70.6
70.7
Sample 3
72.2
73.1
71.9
70.3
70.7
Sample 4
73.6
72.7
72.4
74.2
73.5
Sample 5
71.0
72.2
73.3
73.6
71.1
A) (70.46, 73.39).
B) (68.94,74.89).
C) (69.71,74.14).
D) (69.80,74.05).
Answer:
A
Difficulty: Moderate
Keywords: SPC, control charts, variables
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
37) Thermostats are subjected to rigorous testing before they are shipped to air conditioning technicians
around the world. Results from the last five samples are shown in the table. Calculate control limits for a
chart that will monitor process consistency. The correct control limits as (LCL,UCL) are:
Unit #
1
2
3
4
5
Sample 1
73.5
71.3
70.0
71.1
70.8
Sample 2
70.8
71.0
72.6
70.6
70.7
Sample 3
72.2
73.1
71.9
70.3
70.7
Sample 4
73.6
72.7
72.4
74.2
73.5
Sample 5
71.0
72.2
73.3
73.6
71.1
A) (-5.37,5.37).
B) (0.00,5.37).
C) (0.00,6.03).
D) (0.00,6.12).
Answer: B
Difficulty: Moderate
Keywords: SPC, control charts, variables
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
38) Thermostats are subjected to rigorous testing before they are shipped to air conditioning technicians
around the world. Results from the last five samples are shown in the table. Create control charts that will
fully monitor the process and indicate the result of X-bar and R-chart analysis.
Unit #
1
2
3
4
5
Sample 1
73.5
71.3
70.0
71.1
70.8
Sample 2
70.8
71.0
72.6
70.6
70.7
Sample 3
72.2
73.1
71.9
70.3
70.7
Sample 4
73.6
72.7
72.4
74.2
73.5
Sample 5
71.0
72.2
73.3
73.6
71.1
A) x bar and r chart are both out of control
B) x bar chart is in control but r chart is out of control
C) x bar chart is out of control but r chart is in control
D) x bar and r chart are both in control
Answer: D
Difficulty: Moderate
Keywords: SPC, control charts, variables
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
39) Construct a 3-sigma R-chart for the length in centimeters of a part from the following table. What is
the upper control limit of your R-chart?
Sample #
1
2
3
4
5
6
7
8
9
10
A) .032
B) 0.51
C) 0.73
D) 2.28
Answer:
Observation 1
0.486
0.499
0.496
0.495
0.472
0.473
0.495
0.525
0.497
0.495
Observation 2
0.499
0.506
0.5
0.506
0.502
0.495
0.512
0.501
0.501
0.505
Observation 3
0.493
0.516
0.515
0.483
0.526
0.507
0.49
0.498
0.517
0.516
Observation 4
0.511
0.494
0.488
0.487
0.469
0.493
0.471
0.474
0.506
0.511
C
Difficulty: Moderate
Keywords: SPC, control charts, variables
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
40) Construct a 3-sigma x-bar chart for the length in centimeters of a part from the following table. What is
the upper control limit?
Sample #
1
2
3
4
5
6
7
8
9
10
A) 0.522
B) 0.509
C) 0.496
D) 0.475
Answer:
Observation 1
0.486
0.499
0.496
0.495
0.472
0.473
0.495
0.525
0.497
0.495
Observation 2
0.499
0.506
0.5
0.506
0.502
0.495
0.512
0.501
0.501
0.505
Observation 3
0.493
0.516
0.515
0.483
0.526
0.507
0.49
0.498
0.517
0.516
Observation 4
0.511
0.494
0.488
0.487
0.469
0.493
0.471
0.474
0.506
0.511
A
Difficulty: Moderate
Keywords: SPC, control charts, variables
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
41) Construct 3-sigma X-bar and R-charts using the data in the table. What conclusions can you draw
about the state of control for this process?
Sample #
1
2
3
4
5
6
7
8
9
10
Observation 1
0.486
0.499
0.496
0.495
0.472
0.473
0.495
0.525
0.497
0.495
Observation 2
0.499
0.506
0.5
0.506
0.502
0.495
0.512
0.501
0.501
0.505
Observation 3
0.493
0.516
0.515
0.483
0.526
0.507
0.49
0.498
0.517
0.516
Observation 4
0.511
0.494
0.488
0.487
0.469
0.493
0.471
0.474
0.506
0.511
A) X-bar chart is out of control but the R-chart is in control
B) the X-bar chart is out of control and the R-chart is also out of control
C) the X-bar chart and the R-chart are both in control
D) the X-bar chart is in control but the R-chart is out of control
Answer: C
Difficulty: Moderate
Keywords: SPC, control charts, variables
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
42) The defect rate for a product has historically been about 2.0%. What are the upper and lower control
chart limits if you wish to use a sample size of 100 and 3-sigma limits? All answers are in (LCL,UCL)
format.
A) (0.00, 0.048)
B) (0.00, 0.062)
C) (0.00, 0.059)
D) (0.00, 0.067)
Answer: B
Difficulty: Moderate
Keywords: SPC, p-chart, c-chart, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
43) The defect rate for a product has historically been about 5.0%. What is the upper control chart limit if
you wish to use a sample size of 50 and 3-sigma limits?
A) 0.082
B) 0.112
C) 0.142
D) 0.172
Answer: C
Difficulty: Moderate
Keywords: SPC, p-chart, c-chart, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
44) The defect rate for a product has historically been about 7.0%. What is the upper control chart limit if
you wish to use a sample size of 20 and 3-sigma limits?
A) 0.186
B) 0.203
C) 0.222
D) 0.241
Answer: D
Difficulty: Moderate
Keywords: SPC, p-chart, c-chart, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
45) The consultant suspiciously eyed the c-chart that Chickenverks used to monitor the number of broken
eggs in each 100 egg carton. "You know you really should be using a p-chart," the consultant commented
with an air of superiority. "What's the difference between a p-chart and a c-chart in this application?" the
long time Chickenverks employee asked with an obvious edge to his voice. "Well," the consultant replied,
"the difference is:
A) the width of the three sigma limits for the c-chart is 100 times greater than those of the p-chart."
B) the three-sigma p-chart will catch problems earlier than the three sigma c-chart."
C) the three-sigma c-chart will catch problems earlier than the three sigma p-chart."
D) well, OK, you got me. The charts will look and behave the same for all practical purposes."
Answer: D
Difficulty: Moderate
Keywords: SPC, attributes, p-chart, c-chart
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
46) Historically, the average proportion of defective bars has been 0.015. Samples will be of 100 bars each.
Construct a p-chart using z = 3. What is the value of UCL?
A) less than or equal to 0.050
B) greater than 0.050 but less than or equal to 0.060
C) greater than 0.060 but less than or equal to 0.070
D) greater than 0.070
Answer: B
Difficulty: Moderate
Keywords: SPC, upper control limit, p-chart
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
47) Historically, the average proportion of defective bars has been 0.015. Samples will be of 100 bars each.
Construct a p-chart using z = 3. What is the value of LCL?
A) less than or equal to 0.01
B) greater than 0.01 but less than or equal to 0.02
C) greater than 0.02 but less than or equal to 0.03
D) greater than 0.03
Answer: A
Difficulty: Moderate
Keywords: SPC, lower control limit, p-chart
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
Table 5.3
Sample Number
1
2
3
4
5
Number Defective
1
4
2
4
0
48) Samples of 100 checks each were taken at a bank from an encoding machine (which records the
amount of a check) over a five-day period. Details are summarized in Table 5.3. If the bank were to use
the average proportion defective from these five samples as the central line for a process control chart,
what would be the central line?
A) less than or equal to 0.01
B) greater than 0.01 but less than or equal to 0.02
C) greater than 0.02 but less than or equal to 0.03
D) greater than 0.03
Answer: C
Difficulty: Moderate
Keywords: SPC, process control, center line, p-chart
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
49) Use the information from Table 5.3. What is the upper control limit (UCL) if the bank were to use z = 2
and a sample size of 100?
A) less than or equal to 0.02
B) greater than 0.02 but less than or equal to 0.04
C) greater than 0.04 but less than or equal to 0.06
D) greater than 0.06
Answer: C
Difficulty: Moderate
Keywords: SPC, upper control limit, p-chart
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
50) Four samples of 100 each were taken from an assembly line, with the following results:
Sample Number
1
2
3
4
Number Defective
6
12
2
8
Using the historical average as the central line of the chart, which one of the following is the limit for an
attributes control chart with z = 2?
A) UCL > 0.1 and LCL > 0.03
B) UCL > 0.1 and LCL < 0.03
C) UCL < 0.1 and LCL > 0.03
D) UCL < 0.1 and LCL < 0.03
Answer: B
Difficulty: Moderate
Keywords: SPC, control limit, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
Table 5.4
The manager of Champion Cooling Company has recently implemented a statistical process control
method. The accompanying table shows the recorded temperatures of five different samples of walk-in
coolers that were produced in the previous month.
Unit 1
Unit 2
Unit 3
Unit 4
Unit 5
Sample 1
104.0
106.4
101.8
105.6
100.6
Sample 2
100.1
104.4
103.6
101.4
100.7
Sample 3
101.1
100.4
103.0
101.0
104.9
Sample 4
102.0
105.9
104.6
102.1
107.0
Sample 5
102.7
105.4
106.1
102.5
102.0
51) Using the data in Table 5.4, what is the value of the center line for the chart that monitors performance
to target?
A) 3.9
B) 102.0
C) 103.2
D) 103.7
Answer: C
Difficulty: Moderate
Keywords: SPC, center line, variables, control chart
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
52) Use the information in Table 5.4. The first point plotted on the x-bar chart has a value of:
A) 104.3.
B) 103.7.
C) 102.0.
D) 103.2.
Answer: B
Difficulty: Moderate
Keywords: SPC, control chart, variables
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
53) Use the information in Table 5.4. The upper control limit for the x-bar chart with three sigma limits is:
A) 105.9.
B) 103.7.
C) 103.2.
D) 102.3.
Answer: A
Difficulty: Challenging
Keywords: SPC, UCL, control chart
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
54) Use the information in Table 5.4. The center line of the R-chart is:
A) 4.4.
B) 3.9.
C) 4.8.
D) 5.9.
Answer: C
Difficulty: Moderate
Keywords: SPC, R-chart
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
55) Use the data in Table 5.4. What would be the best chart to construct to monitor how consistent the
production process is?
A) p-chart
B) c-chart
C) x-bar chart
D) R-chart
Answer: D
Difficulty: Moderate
Keywords: SPC, R-chart, variables
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
56) If an x-bar chart is constructed using the data in Table 5.4, what conclusion can be reached?
A) The process is in control.
B) The process is out of control.
C) The process is capable.
D) The process is both capable and in control.
Answer: A
Difficulty: Moderate
Keywords: SPC, variables, x-bar chart, process control
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
57) A hotel tracks the number of complaints per month. When the process is in control, there is an
average of 35 complaints per month. Assume that a 2-sigma control limit is used. What is the lower
control limit?
A) less than or equal to 15
B) more than 15 but less than or equal to 20
C) more than 20 but less than or equal to 25
D) more than 25
Answer: C
Difficulty: Moderate
Keywords: SPC, control limit, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
58) A hotel tracks the number of complaints per month. When the process is in control, there is an
average of 35 complaints per month. Assume that a 2-sigma control limit is used. What is the upper
control limit?
A) less than or equal to 35
B) more than 35 but less than or equal to 45
C) more than 45 but less than or equal to 55
D) more than 55
Answer: C
Difficulty: Moderate
Keywords: SPC, control limit, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
59) A hotel tracks the number of complaints per month. When the process is in control, there is an
average of 35 complaints per month. Assume that a 2-sigma control limit is used. The next four months
have 33, 27, 29, and 43 complaints. What should management do?
A) Look for assignable causes because the process is in control.
B) Look for assignable causes because the process is out of control.
C) Look for common causes because the process is out of control.
D) Do nothing; the process is in control.
Answer: D
Difficulty: Moderate
Keywords: SPC, control limit, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
60) ________ of variation are the purely random, unidentifiable sources of variation that are unavoidable
with the current process.
Answer: Common causes
Difficulty: Moderate
Keywords: common causes of variation
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
61) ________ of variation include any variation-causing factors that can be identified and eliminated.
Answer: Assignable causes
Difficulty: Moderate
Keywords: assignable causes of variation
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
62) A(n) ________ specifies the sample size, the time between successive samples, and decision rules that
determine when action should be taken.
Answer: sampling plan
Difficulty: Moderate
Keywords: sampling, sampling plan, sample
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
63) Jerry watched in awe as Warren went to 2 sigma limits from the company-mandated 3 sigma limits,
thereby increasing the likelihood of a type ________ error.
Answer: I
Difficulty: Moderate
Keywords: type I error limits
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
64) The poultry farmer was aghast when the grocery store revealed their new weapon in the war on poor
quality. They planned to use a(n) ________ to monitor the rotten eggs found in the cartons of farm fresh
free range eggs that he supplied. The poultry farmer was well-versed in quality and knew their choice to
be the right one; nevertheless he was upset about this level of scrutiny and what he perceived as a lack of
trust.
Answer: p-chart or c-chart
Difficulty: Moderate
Keywords: attributes, p-chart, c-chart
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
65) When is it advantageous to use sampling rather than complete inspection?
Answer: Sampling is advantageous when testing is destructive or when the cost of inspection is high
relative to the cost of passing a defect.
Difficulty: Moderate
Keywords: sampling, inspection
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
66) What is the relationship between type I and type II errors and the width of the upper and lower
control limits on SPC charts? Propose a mechanism for determining SPC chart limit widths based upon
the financial consequences of type I and type II errors.
Answer: Type I and type II errors move in opposite directions, that is, as the chance of a type I error
increases, the chance of a type II error decreases. As the width of SPC control limits increases, the chance
of a type I error decreases (and the chance of a type II error increases). The width of control limits might
be balanced based upon the cost incurred from false positives and false negatives in the course of
monitoring the process. The cost associated with a type I error, sometimes called producer's risk, is that a
process that is actually in control is stopped and effort is spent troubleshooting the process. The process
might be adjusted, suppliers contacted, etc., all in the name of fixing a problem that in actuality, doesn't
exist. The direct financial impact is the labor cost of troubleshooting and the lost productive capacity. The
cost associated with a type II error, sometimes called a consumer's risk, is that defective product will
reach the hands of a consumer and fail, potentially resulting in warranty repair or replacement, negative
word of mouth from a dissatisfied customer, and litigation. Depending on the product, these costs could
be substantial. A producer might choose to balance the costs with a calculation similar to expected
monetary value. A producer might choose to lower the EMV of the type II costs to something they could
pay out (or have insurance for).
Difficulty: Challenging
Keywords: SPC, control charts, Type I errors, Type II errors
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
67) The UCL and LCL for an
chart are 100 ounces and 95 ounces, respectively. The sample size is 5.
The inspector looks at the very next unit and finds that it is 108 ounces. What can you conclude? Why?
Answer: Nothing yet. The weight of an individual unit is not relevant for the chart. You must compare
the average of a sample, which will balance the high and low observations.
Difficulty: Moderate
Keywords: SPC, process control, x-bar chart
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
68) Discuss the situations under which each of the following charts would be best:
chart, p-chart, and
c-chart.
Answer: The
chart is used to observe the mean of the process. It uses variable-type measurements.
The p-chart uses a yes-no type of classification–typically "defective or not defective." It uses attribute-type
variables. It is beneficial when it is difficult to use a variable type of measurement. The c-chart is used for
situations in which a product can have more than one defect per unit.
Difficulty: Moderate
Keywords: SPC, x-bar chart, p-chart, c-chart, variables, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
69) Hassan was the company plotter. Give him any data set and he could plot a graph that was not only
accurate, but also aesthetically pleasing. One afternoon he took some attribute data and plotted it as a
p-chart. When Saba, his supervisor, saw the plot he insisted it be discarded and in its place a c-chart
should be constructed. Hassan made the c-chart and noticed that when he placed the two charts one on
top of the other, the lines created by the data points were exactly the same shape. Has our plotting
colleague made a mistake? If not, why should there be these two types of charts when the data generate
identical lines?
Answer: The p-chart uses a yes-no type of classification–typically "defective or not defective." This
yes/no, two-valued data is binomially distributed, and one way to consider the "p" in p-chart is the
proportion defective. The c-chart is used for situations in which a product can have more than one defect
per unit. The "c" in c-chart is therefore the count of defects in an item. This data is governed by the
Poisson distribution. It is natural that the two plots would display the same shape; the binomial
distribution is a special case of the Poisson distribution. The p-chart allows the user to work with a
variable sample size, either by averaging samples sizes or dealing with specific sample sizes on a point by
point basis. The c-chart requires a constant sample size. For a constant sample size and attribute data, the
two charts should arrive at the same conclusion of either in or out of control and can be superposed.
Difficulty: Challenging
Keywords: SPC, p-chart, c-chart, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
70) How does SPC help companies implement continuous improvement programs?
Answer: The feedback from out-of-control signals from control charts should be used to eliminate
assignable-cause variation from the process. By using SPC over a long time period, the quality of the
process should improve.
Difficulty: Moderate
Keywords: SPC, control charts, continuous improvement
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
71) Thermostats are subjected to rigorous testing before they are shipped to air conditioning technicians
around the world. Results from the last five samples are shown in the table. Is the process under control?
Unit #
1
2
3
4
5
Sample 1
73.5
71.3
70.0
71.1
70.8
Answer:
=
=
UCL
=
Sample 2
70.8
71.0
72.6
70.6
70.7
Sample 3
72.2
73.1
71.9
70.3
70.7
Sample 4
73.6
72.7
72.4
74.2
73.5
=
= 71.93
= 2.54
+ A2
Sample 5
71.0
72.2
73.3
73.6
71.1
= 71.93 + 0.577 × 2.54 = 73.394
LCL
=
- A2
= 71.93 - 0.577 × 2.54 = 70.462
UCLR = D4
= 2.115 × 2.54 = 5.372
LCLR = D3
= 0.0 × 2.54 = 0.0
R-chart is in control
x-bar chart is in control
Difficulty: Moderate
Keywords: SPC, control charts, variables
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
72) Construct a 3-sigma
and R-chart for the length in centimeters of a part from the following table.
Sample #
1
2
3
4
5
6
7
8
9
10
Observation 1
0.486
0.499
0.496
0.495
0.472
0.473
0.495
0.525
0.497
0.495
Observation 2
0.499
0.506
0.5
0.506
0.502
0.495
0.512
0.501
0.501
0.505
Observation 3
0.493
0.516
0.515
0.483
0.526
0.507
0.49
0.498
0.517
0.516
Observation 4
0.511
0.494
0.488
0.487
0.469
0.493
0.471
0.474
0.506
0.511
Answer:
= .4981,
= .0321
Control limits for R-chart:
UCL = D4
= 2.282(.0321) = .073
LCL = D3
= 0(.0321) = 0.00
Control limits for
UCL, LCL =
chart:
± A2 = .4981 ± .729(.0321) = .522, .475
The process is in control.
Difficulty: Moderate
Keywords: SPC, control charts, control limits
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
73) The management of a line that fills cereal boxes wants the box filled at 32.2 ounces. When the process
is in control, the standard deviation is .1 ounces.
a. Construct the upper and lower control limits for a 3-sigma x-bar chart using a sample size of five.
b. The results from the last 10 samples follow. Is the process in control?
Answer: x-bar = 32.2, σ = .1
Control limits for
chart:
UCL, LCL =
± 3σ = 32.2 ± 3(.1) = 32.5, 31.9
The process is in control.
Difficulty: Moderate
Keywords: SPC, control charts, control limits, variables
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
74) The defect rate for a product has historically been about 2.0%. What are the upper and lower control
chart limits if you wish to use a sample size of 100 and 3-sigma limits?
Answer:
UCLp =
+ zσp = 0.02 +
LCLp =
- zσp = 0.02 -
= 0.062
= -0.022 → 0
Difficulty: Moderate
Keywords: SPC, control charts, control limits, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
75) The quality control technician grew weary of measuring pistons that came off the line, so he decided
to make a fixture that would tell him whether the piston fell within product specifications. The fixture
had two holes, one the exact width of the upper specification (24 cm) and one slightly smaller than the
lower specification (21 cm). If the piston fit through the smaller hole, it would be too small and therefore
rejected. If the piston didn't fit through the larger hole, it was too large and would be rejected. Just to test
his idea, he used the traditional measurement system and his new system on the next eight samples. The
data and the two charts he constructed are shown below. Why aren't the plotted points forming similar
shapes between the two graphs? Evaluate the advantages and disadvantages of his proposed system.
Sample 1
Sample 2
Sample 3
Sample 4
Sample 5
Sample 6
Sample 7
Sample 8
Sample 9
Sample 10
29.5
22.9
25.9
25.3
24.7
28.4
21.9
26.9
25.5
23.9
23
20.1
23.6
23.2
25.1
29.7
23.5
21.1
27.6
28.6
20.9
23.7
23
29.8
20.6
27.1
24.9
28.1
26.3
21.7
24.9
26.9
24.3
22.3
23
23.7
24.2
20.2
27.2
20.6
Answer: The points don't form similar shapes due to the nature of the data generating functions. The
x-bar chart is from a process that creates a continuous random variable stream. The c-chart takes the same
data and converts it to attribute data that can generate signals (errors) for being either too high or too low.
The judgments made by the go/no-go gauge are accurate and this approach is often faster than taking a
continuous measurement and meticulously recording the observations. The speed comes at the expense
of information about the process. With the c-chart, an observer can tell that defects are being produced,
almost three per sample, but there is no way to tell if the output is consistently too large, too small, or a
mix of the two. The x-bar chart will provide information as to the direction of the production error,
thereby providing process troubleshooting with some focus.
Difficulty: Challenging
Keywords: SPC, control charts, control limits, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
76) Samples of size 4 were taken from a process that had a target of 25 ounces with upper and lower
specification limits of 30 ounces and 20 ounces respectively. Create the appropriate control charts and
determine whether the process is in control.
Sample 1
Sample 2
Sample 3
Sample 4
Sample 5
Sample 6
Sample 7
Sample 8
Sample 9
Sample 10
29.5
22.9
25.9
25.3
24.7
28.4
21.9
26.9
25.5
23.9
23.0
22
23.6
23.2
25.1
29.7
23.5
26.2
27.6
28.6
22.0
23.7
23.0
29.8
24.5
27.1
24.9
28.1
26.3
21.7
24.9
26.9
24.3
22.3
23.0
23.7
24.2
20.2
27.2
20.6
Answer: This is variables data, so x-bar and R charts are the appropriate control charts for this process.
The overall process average is 25, with a standard deviation of 2.406
The chart calculations are summarized in this table:
Sample 1
Sample 2
Sample 3
Sample 4
Sample 5
Sample 6
Sample 7
Sample 8
Sample 9
Sample 10
X bar
24.85
23.88
24.20
25.15
24.33
27.23
23.63
25.35
26.65
24.895
CenterX
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
UCLx
28.70
28.70
28.70
28.70
28.70
28.70
28.70
28.70
28.70
28.70
LCLx
21.30
21.30
21.30
21.30
21.30
21.30
21.30
21.30
21.30
21.30
Range
7.50
4.90
2.90
7.50
2.10
6.00
3.00
7.90
2.10
8.00
Rbar
5.08
5.08
5.08
5.08
5.08
5.08
5.08
5.08
5.08
5.08
UCLr
11.59
11.59
11.59
11.59
11.59
11.59
11.59
11.59
11.59
11.59
LCLr
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Both charts reflect a process that is in control.
Difficulty: Challenging
Keywords: SPC, control charts, control limits, process capability
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
77) A process with a target of 25 was used to generate the following data points. Is the process properly
centered?
Sample 1
Sample 2
Sample 3
Sample 4
Sample 5
Sample 6
Sample 7
Sample 8
Sample 9
Sample 10
29.5
22.9
25.9
25.3
24.7
28.4
21.9
26.9
25.5
23.9
23
20.1
23.6
23.2
25.1
29.7
23.5
21.1
27.6
28.6
20.9
23.7
23
29.8
20.6
27.1
24.9
28.1
26.3
21.7
24.9
26.9
24.3
22.3
23
23.7
24.2
20.2
27.2
20.6
Answer:
X bar
24.6
23.4
24.2
25.2
23.4
27.2
23.6
24.1
26.7
23.7
The sample means and ranges are contained in this table
Range
8.6
6.8
2.9
7.5
4.5
6
3
7.9
2.1
8
The overall average is 24.6, and the average range is 5.73., so the process is not centered.
Using a value of 0.729 for the A2 lookup from Table 5.1 yields:
UCL = 24.6 + 0.729*5.73 = 28.8
LCL = 24.6 - .729*5.73 = 20.4
The chart is in control.
Difficulty: Challenging
Keywords: SPC, control charts, control limits, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
78) A professor records the number of students who complain each week throughout the semester. If the
class size is forty students, what are 3-sigma control limits for this class? Construct a control chart and
interpret the data.
Week
number
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Answer:
σp =
Complaints
5
2
7
1
3
2
8
1
3
5
4
6
3
1
4
=
= .09167
=
UCLp =
+ zσp = 0.09167 + 3
LCLp =
- zσp = 0.09167 - 3
= .045625
= 0.2285
= -0.0452 → 0
The process is in control.
Difficulty: Moderate
Keywords: SPC, control charts, p-chart, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
79) A bank randomly looks at loan applications and checks them for errors. Ten applications and the
number of errors identified on the applications are found in the following table. When the process is
working correctly, the average number of errors found is 2. Construct a c-chart to determine if the process
is in control.
Application
number
1
2
3
4
5
6
7
8
9
10
Number of
errors
3
0
1
0
3
2
4
4
1
1
Answer:
UCLc =
LCLc =
+z
+z
= 1.90 - 3
= 1.90 + 3
= 6.04
= -2.24 → 0
The process is in control.
Difficulty: Moderate
Keywords: SPC, control charts, c-chart, attributes
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Describe how to construct process control charts and use them to determine whether a process is out
of statistical control.
3.5 Process Capability
1) Process capability determines whether a process is capable of producing the product or services that
customers demand.
Answer: TRUE
Difficulty: Easy
Keywords: process capability
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
2) Process capability can be addressed when:
A) assignable causes are present.
B) a process is in statistical control.
C) a process is in statistical control but assignable causes are present.
D) the nominal value equals the tolerance regardless of assignable causes.
Answer: B
Difficulty: Moderate
Keywords: process capability, process control
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
3) A metal-cutting operation has a target value of 20 and consistently averages 19.8 with a standard
deviation of 0.5. The design engineers have established an upper specification limit of 22 and a lower
specification limit of 18. Which statement concerning this process is true?
A) The process capability ratio is 1.46.
B) The process capability index is 1.33.
C) The process is in control.
D) None of these is true.
Answer: D
Difficulty: Moderate
Keywords: process capability ratio, process capability index
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
4) A metal-cutting operation has a target value of 20 and consistently averages 19.8 with a standard
deviation of 0.5. The design engineers have established an upper specification limit of 22 and a lower
specification limit of 18. What is the process capability index?
A) 1.20
B) 1.33
C) 1.46
D) 1.66
Answer: A
Difficulty: Moderate
Keywords: process capability index
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
5) The upper and lower control limits for a component are 0.150 cm. and 0.120 cm., with a process target
of .135 cm. The process standard deviation is 0.004 cm. and the process average is 0.138 cm. What is the
process capability index?
A) 1.00
B) 1.25
C) 1.50
D) 1.75
Answer: A
Difficulty: Moderate
Keywords: process capability index
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
6) The upper and lower specifications for a service are 10 min. and 8 min., respectively. The process
average is 9 min. and the process capability ratio is 1.33. What is the process standard deviation?
A) 0.1
B) 0.15
C) 0.20
D) 0.25
Answer: D
Difficulty: Moderate
Keywords: process capability ratio, process standard deviation
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
7) MKS Inc., produces meter sticks that have a target length of 100 centimeters with upper and lower
specification limits of 100.05 and 99.95 centimeters respectively. Their existing process produces meter
sticks with an average length of 99.97 centimeters and a standard deviation of 0.015 centimeters. What is
their process capability index?
A) 0.44
B) 0.83
C) 1.26
D) 1.78
Answer: A
Difficulty: Moderate
Keywords: process capability ratio, process capability index
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
8) MKS Inc., produces meter sticks that have a target length of 100 centimeters with upper and lower
specification limits of 100.05 and 99.95 centimeters respectively. They are considering the purchase of a
new machine that can hold a process output average exactly to target with a standard deviation of 0.02.
Which would their process capability index be if they splurged and purchased the new machine?
A) 0.44
B) 0.83
C) 1.26
D) 1.78
Answer: B
Difficulty: Moderate
Keywords: process capability ratio, process capability index
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
9) MKS Inc., produces meter sticks that have a target length of 100 centimeters with upper and lower
specification limits of 100.05 and 99.95 centimeters respectively. Their existing process produces meter
sticks with an average length of 100.00 centimeters and a standard deviation of 0.015 centimeters. What is
their current process capability index?
A) 0.44
B) 0.83
C) 1.11
D) 1.26
Answer: C
Difficulty: Moderate
Keywords: process capability ratio, process capability index
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
10) A laser eye surgery process has tolerances of plus or minus .001 inches. What does the process
standard deviation need to be in order for this process to have a capability ratio of 1.33?
A) 0.025 inches
B) 0.0015 inches
C) 0.015 inches
D) 0.00025 inches
Answer: D
Difficulty: Moderate
Keywords: process capability ratio, process standard deviation
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
11) A laser surgery process has tolerances of plus or minus .01 inches. What does the process standard
deviation need to be in order for this process to have a capability ratio of 1.00?
A) 0.02 inches
B) 0.0033 inches
C) 0.002 inches
D) 0.033 inches
Answer: B
Difficulty: Moderate
Keywords: process capability ratio, process standard deviation
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
12) A manufacturer embarking on a Six Sigma program sets the goal of having true Six Sigma capability
for all processes by the end of the month. If their current process capability index on a key metric is less
than 2.0 and the process capability ratio is 1.0, what must happen with the process standard deviation?
A) The process standard deviation must be doubled.
B) The process standard deviation must be reduced by a factor of six.
C) The process standard deviation must be cut in half.
D) The process tolerances should be doubled.
Answer: C
Difficulty: Moderate
Keywords: process capability ratio, process standard deviation
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
13) A manufacturer embarking on a Six Sigma program sets the goal of having true Six Sigma capability
for all processes by the end of the month. If their current process capability index on a key metric is less
than 2.0 and the process capability ratio is 1.5, what must happen with the process standard deviation?
A) The process standard deviation must be reduced by 25%.
B) The process standard deviation must be reduced by 33%.
C) The process standard deviation must be reduced by 50%.
D) The process standard deviation must be reduced by 67%.
Answer: A
Difficulty: Moderate
Keywords: process capability ratio, process standard deviation
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
14) A manufacturer embarking on a Six Sigma program sets the goal of having true Six Sigma capability
for all processes by the end of the month. If their current process capability index on a key metric is less
than 2.0 and the process capability ratio is 1.70, what must happen with the process standard deviation?
A) The process standard deviation must be reduced by 50%.
B) The process standard deviation must be reduced by 33%.
C) The process standard deviation must be reduced by 25%.
D) The process standard deviation must be reduced by 15%.
Answer: D
Difficulty: Moderate
Keywords: process capability ratio, process standard deviation
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
15) A manufacturer embarking on a Six Sigma program sets the goal of having true Six Sigma capability
for all processes by the end of the month. If their current process capability index on a key metric is less
than 2.0 and the process capability ratio is 1.25, what must happen with the process standard deviation?
A) The process standard deviation must be reduced by about 25%.
B) The process standard deviation must be reduced by about 37%.
C) The process standard deviation must be reduced by about 50%.
D) The process standard deviation must be reduced by about 67%.
Answer: B
Difficulty: Moderate
Keywords: process capability ratio, process standard deviation
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
16) A firm targeting Six Sigma quality will use a process capability ratio of ________ as their goal.
Answer: 2.0
Difficulty: Moderate
Keywords: process capability, Six Sigma
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
17) What is the difference between the Cp and Cpk measures? Provide an example of a situation in which
a process might perform well on one measure but poorly on the other.
Answer: The process capability ratio, Cp, is the tolerance width of the process divided by the natural
spread of the data generated by that process. The process capability index, Cpk, measures the potential for
a process to generate defective outputs relative to either upper or lower specifications. A process that has
a narrow spread but is off center (target) by either too high or too low could perform well when analyzed
with the Cp measure but poorly using the Cpk measure.
Difficulty: Moderate
Keywords: Cp, Cpk, process capability
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Application of Knowledge
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
18) The upper and lower specification limits for a component are 3.98 and 4.02 inches, respectively. The
process standard deviation is .004, and the process average is 4.005 inches. Is this process capable of
achieving four-sigma performance (the four-sigma performance target value is 1.33)?
Answer: First calculate the process capability index:
C = Minimum of
pk
=
= [2.08, 1.25] = 1.25
The process capability index of 1.25 indicates that the process is not currently capable of four-sigma
performance. However, this does not tell us if the issue is with process variability or centering. The
process capability ratio is then calculated to check process variability:
C =
p
=
= 1.67
A process capability ratio of 1.67 indicates that four-sigma performance can be met with regard to
variability. Work must be done on the process to improve centering in order to achieve four-sigma
process performance. With its current center of 4.005, it is not capable of meeting the specifications.
Difficulty: Moderate
Keywords: process capability, Cp, Cpk
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
19) MKS Inc., produces meter sticks that have a target length of 100 centimeters with upper and lower
specification limits of 100.05 and 99.95 centimeters respectively. Their existing process produces meter
sticks with an average length of 99.97 centimeters and a standard deviation of 0.015 centimeters. They are
considering the purchase of a new machine that can hold a process output average exactly to target with
a standard deviation of 0.02. Which machine will provide a better process capability index?
Answer: Existing Process:
C = Minimum of
pk
= Minimum of =
= [1.78, 0.44] = 0.44
New Process:
C = Minimum of
pk
= Minimum of
= [0.83, 0.83] = 0.83
The New Process is more capable than the existing process.
Difficulty: Moderate
Keywords: process, capability
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
20) A manufacturer enjoys both a Cpk and a CP = 2.0. How high does the process mean have to drift (in
number of standard deviations) away from target in order to result in a 1% chance of making a product
out of specification? Illustrate this situation (both before shift and after shift) with a diagram.
Answer: Initially the process has a Cpk and a CP = 2.0, and the natural spread of the data is well within
the upper and lower specification limits.
The process shifts an amount (delta) so it now has a new mean that is equal to the original mean plus
delta as shown in equation 1.
1.
μ2 = μ1 + δ
2.
Z=
3.
USL = μ2 + 2.33σ
4.
μ2 = USL - 2.33σ
5.
= 2.33
=2
6.
USL - μ1 = 6σ
7.
USL = 6σ + μ1
8. 6σ + μ1 = μ2 + 2.33σ = μ1 + δ + 2.33σ
9. 6σ = δ + 2.33σ
10. 3.66σ = δ
Equation 2 illustrates a z-score that will produce 99% of output within the upper specification limit and
1% of output outside the upper specification limit. The value 2.326 is found in the standard normal table
in the appendix.
Equations 3 and 4 show a rearrangement of terms in equation 2.
Equation 5 demonstrates the original situation with a CP = 2.0, focusing on the upper half of the equation
in the manner of a CPK calculation.
Equations 6 and 7 rearrange terms from equation 5 and equation 8 relates equations 7 and 3 by virtue of
their equality to the USL, and then substitutes the results from equation 1.
Equation 9 shows the collection of terms, dropping the original mean since it is added to both sides of
equation 8. Finally, equation 10 shows that a process mean shift up of 3.673 standard deviations will
result in 1% defective output produced.
Difficulty: Challenging
Keywords: process capability
Learning Outcome: Apply basic statistical process control (SPC) methods
AACSB: Analytical Thinking
Learning Obj.: Explain how to determine whether a process is capable of producing a service or product to
specifications.
3.6 International Quality Documentation Standards and Awards
1) ISO 9001:2008 standards provide strict guidelines for how products are to be produced.
Answer: FALSE
Difficulty: Moderate
Keywords: ISO 9001:2008
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
2) The Baldrige Performance Excellence Program considers a company's business results but ISO
9001:2008 registration does not.
Answer: TRUE
Difficulty: Moderate
Keywords: Baldrige, ISO 9001:2008
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
3) Financial and market results are one consideration of the Baldrige Performance Excellence Program.
Answer: TRUE
Difficulty: Moderate
Keywords: Baldrige, results
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
4) Strategic planning is given the most weight among the Baldrige Performance Excellence Program.
Answer: FALSE
Difficulty: Moderate
Keywords: Baldrige, strategic planning
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
5) The ISO 9001:2008 standard:
A) emphasizes corporate leadership as a means of determining who receives the award.
B) has the greatest number of points awarded for business results.
C) is awarded by the U.S. government each year.
D) addresses quality system documentation.
Answer: D
Difficulty: Moderate
Keywords: ISO 9001:2008, standards, documentation
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
6) Which of these ISO standards has the greatest number of organizations certified as of 2009?
A) ISO 9001:2008.
B) ISO 14000:2004.
C) ISO 19000:2008.
D) ISO 26000:2010.
Answer: A
Difficulty: Moderate
Keywords: ISO 9001:2008, social responsibility
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
7) The Baldrige Performance Excellence Program:
A) involves a rigorous review process that often helps the companies define what quality means to them,
regardless of the outcome.
B) focuses on large manufacturing companies because of the impact they have on the economy.
C) is a set of standards governing the requirements for documentation of a quality program.
D) was devised by the International Organization for Standardization for companies doing business in
Europe.
Answer: A
Difficulty: Moderate
Keywords: MBNQA, Baldrige
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
8) The Baldrige Performance Excellence Program:
A) focuses on large manufacturing companies because of the impact they have on the economy.
B) involves seven major criteria that are built on the base of customer satisfaction.
C) is a set of standards governing the requirements for documentation of a quality program.
D) was devised by the International Organization for Standardization for companies doing business in
Europe.
Answer: B
Difficulty: Moderate
Keywords: MBNQA, Baldrige, customer satisfaction
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
9) Among the seven criteria in the Baldrige Performance Excellence Program, which has the greatest
weight in scoring?
A) Leadership
B) Customer Focus
C) Operations Focus
D) Results
Answer: D
Difficulty: Moderate
Keywords: MBNQA, Baldrige, customer satisfaction
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
10) The Baldrige Performance Excellence Program is administered by:
A) NASA.
B) NIST.
C) NORAD.
D) NOOB.
Answer: B
Difficulty: Easy
Keywords: MBNQA, Baldrige, customer satisfaction
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
11) ________ is the international standard governing documentation of a quality program.
Answer: ISO 9001:2008
Difficulty: Moderate
Keywords: ISO 9001:2008, international standard, quality documentation
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
12) The ________ section of the Baldrige Performance Excellence Program has the greatest emphasis.
Answer: business results
Difficulty: Challenging
Keywords: Baldrige award, business results
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
13) Explain the difference between the Baldrige Performance Excellence Program and ISO 9001:2008.
Answer: The Baldrige Performance Excellence Program is a U.S. award that promotes, recognizes, and
publicizes quality strategies and achievement. ISO 9001:2008, on the other hand, is an international set of
standards for documenting quality procedures. Organizations are certified to the ISO 9001:2008 standards
by external examiners.
Difficulty: Moderate
Keywords: Baldrige, ISO 9001:2008
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
14) What are the benefits of ISO certification?
Answer: ISO certification bestows significant external and internal benefits. The external benefits come
from the potential sales advantage that companies in compliance have. Companies looking for a supplier
will more likely select a company that has demonstrated compliance with ISO documentation standards,
all other factors being equal. Consequently, more and more firms are seeking certification to gain a
competitive advantage. Internal benefits can be substantial. Registered companies report an average of 48
percent increased profitability and 76 percent improvement in marketing. The British Standards Institute,
a leading third-party auditor, estimates that most ISO 9000-registered companies experience a 10 percent
reduction in the cost of producing a product because of the quality improvements they make while
striving to meet the documentation requirements. Certification in ISO 9001:2008 requires a company to
analyze and document its procedures, which is necessary in any event for implementing continuous
improvement, employee involvement, and similar programs. The guidelines and requirements of the ISO
documentation standards provide companies with a jump-start in pursuing TQM programs.
Difficulty: Moderate
Keywords: Baldrige, ISO 9001:2008
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Describe International Quality Documentation Standards and the Baldridge Performance Excellence
Program.
3.7 Systems Approach to Total Quality Management
1) Continuous improvement is one of the four pillars of TQM.
Answer: TRUE
Difficulty: Easy
Keywords: total quality management, continuous improvement
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Understand the systems approach to total quality management.
2) The focus of total quality management is always on the needs of the customer.
Answer: TRUE
Difficulty: Easy
Keywords: total quality management, customer focus
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Understand the systems approach to total quality management.
3) It is not necessary for lower-level employees to be engaged or involved in TQM.
Answer: FALSE
Difficulty: Easy
Keywords: total quality management
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Understand the systems approach to total quality management.
4) Most companies fall short in achieving their quality objectives due to a failure of managing processes.
Answer: FALSE
Difficulty: Moderate
Keywords: total quality management
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Understand the systems approach to total quality management.
5) Training employees on how to utilize a statistical quality tool would be an example of the intersection
between employee involvement and analytical process thinking.
Answer: TRUE
Difficulty: Moderate
Keywords: total quality management
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Understand the systems approach to total quality management.
6) A quality-focused CEO who promotes a culture of quality is an example of which of the four TQM
pillars?
A) Management Commitment and Leadership
B) Continuous Improvement
C) Employee Involvement
D) Analytical Process Thinking
Answer: A
Difficulty: Easy
Keywords: total quality management
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Understand the systems approach to total quality management.
7) Rejecting product materials due to poor quality of the samples would be an example of which TQM
pillar?
A) Management Commitment and Leadership
B) Continuous Improvement
C) Employee Involvement
D) Analytical Process Thinking
Answer: D
Difficulty: Moderate
Keywords: total quality management
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Understand the systems approach to total quality management.
8) Management by fact is required for which of the following intersections within the TQM systems
approach?
A) Management Commitment and Leadership and Continuous Improvement
B) Continuous Improvement and Employee Involvement
C) Employee involvement and Analytical Process Thinking
D) Analytical Process Thinking and Management Commitment and Leadership
Answer: D
Difficulty: Moderate
Keywords: total quality management
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Understand the systems approach to total quality management.
9) With respect to the systems approach of TQM, failure to manage the ________ is where most
companies fall short in achieving quality objectives.
Answer: intersections
Difficulty: Moderate
Keywords: total quality management
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Understand the systems approach to total quality management.
10) ________ of employees to do their jobs with decision-making autonomy is required for the
intersection between employee involvement and continuous improvement.
Answer: Empowerment
Difficulty: Moderate
Keywords: total quality management
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Understand the systems approach to total quality management.
11) The TQM pillar of ________ involves the use of tools such as process control and process capability.
Answer: Analytical Process Thinking
Difficulty: Easy
Keywords: total quality management
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Understand the systems approach to total quality management.
12) Describe the systems approach for total quality management by outlining the four pillars of TQM and
discussing challenges organizations face in implementing this approach.
Answer: Answers will vary but should address the challenges of establishing the cultural changes
throughout, and at all levels of, the entire firm. The four pillars of the systems approach of TQM as
outlined in the chapter are continuous improvement, employee involvement, management commitment
and leadership, and analytical process thinking. Ineffectively managing the intersections between the
four pillars are why most companies fail to achieve quality objectives. Attempting to adopt some of the
pillars without perspective of this overlap or relatedness within the system will not achieve a true culture
of quality. It's also crucial to have consistency of purpose, thinking, and action that reinforce the culture
of long-term quality.
Difficulty: Moderate
Keywords: total quality management
Learning Outcome: Discuss the total cost of quality and compare the common methods of managing quality
AACSB: Application of Knowledge
Learning Obj.: Understand the systems approach to total quality management.
Operations Management: Processes and Supply Chains, 12e (Krajewski)
Chapter 4 Capacity Planning
4.1 Planning Long-Term Capacity
1) Capacity is the maximum rate of output of a process.
Answer: TRUE
Difficulty: Easy
Keywords: capacity, maximum output rate
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
2) Capacity can be expressed by output or input measures.
Answer: TRUE
Difficulty: Easy
Keywords: capacity, input measures, output measures
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
3) Input measures of capacity are inherently more accurate than output measures of capacity.
Answer: FALSE
Difficulty: Moderate
Keywords: input measures, output measures, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
4) Utilization is the degree to which equipment, space, or labor is currently being used.
Answer: TRUE
Difficulty: Easy
Keywords: utilization, equipment used, space used, labor used
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
5) One reason economies of scale drive down cost is the spreading of fixed costs.
Answer: TRUE
Difficulty: Moderate
Keywords: economies of scale, fixed cost
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
6) Diseconomies of scale is a concept that states that the average unit cost of a service or good can be
reduced by increasing its output rate.
Answer: FALSE
Difficulty: Easy
Keywords: diseconomies of scale, average unit cost, output rate
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
7) Long-term capacity plans deal with:
A) investments in new facilities.
B) workforce size.
C) inventories.
D) overtime budgets.
Answer: A
Difficulty: Moderate
Keywords: long-term capacity, new facilities
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
8) Long-term capacity decisions that confront managers include all of the following except:
A) capital equipment.
B) additional land.
C) buildings.
D) workforce size.
Answer: D
Difficulty: Moderate
Keywords: long-term capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
9) Regarding the measurement of capacity, when a firm provides a relatively small number of
standardized products and services:
A) capacity cannot be determined reliably.
B) input measures are typically used.
C) output measures are typically used.
D) utilization becomes equal to capacity.
Answer: C
Difficulty: Moderate
Keywords: output measure, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
10) One of the many steps in the production of toothpaste is to screw the caps on the tubes, which is still a
manual process, performed by one man, Mr. Bucket. Which statement about this situation is best?
A) This is most appropriate for an output measure of capacity.
B) This is most appropriate for an input measure of capacity.
C) Utilization of the worker at this process step cannot be measured as it is a manual process.
D) In this case, the capacity of this step is not the maximum rate of output.
Answer: A
Difficulty: Moderate
Keywords: capacity, maximum output rate
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
11) Input measures include such metrics as:
A) the number of customers served per hour.
B) the number of trucks produced per day.
C) the number of machine hours available.
D) the number of bills processed in a week.
Answer: C
Difficulty: Moderate
Keywords: input measure, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
12) The degree to which equipment, space, or labor is being used is commonly referred to as:
A) capacity.
B) output.
C) utilization.
D) cushion.
Answer: C
Difficulty: Moderate
Keywords: utilization, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
13) Although the fire marshal had declared the capacity of the classroom at 45 students, the introduction
to operations management class was so popular, the average attendance was 55 students, literally
standing room only. Shouts of "You the man!" accompanied the successful solution of problems such as
this: What is the utilization of the operations management professor?
A) 122%
B) 100%
C) 55 students
D) 45 students
Answer: A
Difficulty: Easy
Keywords: utilization, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
14) Although the fire marshal had declared the capacity of the classroom at 55 students, the introduction
to operations management class was so popular, the average attendance was 75 students, literally
standing room only. Squeals of excitement accompanied the successful solution of problems such as this:
What is the utilization of the operations management professor?
A) 100%
B) 136%
C) 75
D) 55
Answer: B
Difficulty: Easy
Keywords: utilization, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
15) The test bank author abandoned his teaching duties when he was in the zone working on a test bank.
Normally scheduled to teach nine hours per week during the semester, he generally made his way to one
three hour class a week, one where his students could propose devious problems that were sure to
confound generations of test takers. What is the test bank author's utilization for his teaching duties?
A) three hours
B) nine hours
C) 33%
D) 300%
Answer: C
Difficulty: Moderate
Keywords: utilization, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
16) A manufacturing plant is capable of producing 10 tons of product per day when it runs three shifts
with no breakdowns and plenty of raw materials. Over the past week, the plant has produced an average
of 7.3 tons per day because the third shift has devoted much of their time to preventive maintenance.
What is the utilization of the plant?
A) 10 tons/day
B) 7.3 tons/day
C) 137%
D) 73%
Answer: D
Difficulty: Moderate
Keywords: utilization, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
17) A manufacturing plant is capable of producing 10 tons of product per day when it runs three shifts
with no breakdowns and plenty of raw materials. Over the past week, the plant has produced an average
of 7.3 tons per day since the third shift has devoted much of their time to preventive maintenance. What
is the capacity of the plant?
A) 10 tons/day
B) 7.3 tons/day
C) 73%
D) 137%
Answer: A
Difficulty: Moderate
Keywords: utilization, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
18) The transition from economies of scale to diseconomies of scale:
A) is more likely to occur in a service operation.
B) is more likely to occur in a manufacturing operation.
C) is more likely to occur when utilization is low.
D) contains the point at which average unit costs are at their lowest.
Answer: D
Difficulty: Moderate
Keywords: economies of scale, diseconomies of scale
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
19) ________ is the maximum rate of output for a process.
Answer: Capacity
Difficulty: Easy
Keywords: capacity, maximum rate of output
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
20) Capacity decisions should be linked closely to ________ and ________ throughout the organization.
Answer: processes, supply chains
Difficulty: Moderate
Keywords: capacity decision, strategy, process, supply chains
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
21) ________ is the degree to which equipment, space, or labor is currently being used.
Answer: Utilization
Difficulty: Easy
Keywords: utilization, use of equipment, space, labor
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
22) The ________ concept states that the average unit cost of a service or good can be reduced by
increasing its output rate.
Answer: economies of scale
Difficulty: Easy
Keywords: economies of scale
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
23) ________ occurs when the average cost per unit increases as the facility's size increases.
Answer: Diseconomies of scale
Difficulty: Moderate
Keywords: diseconomies of scale
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
24) Define utilization and give a service process example of it.
Answer: Utilization is expressed as a percent and is the degree to which equipment, space, or labor is
currently being used. Examples will vary.
Difficulty: Easy
Keywords: utilization, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
25) Discuss the relationship between setup time and utilization.
Answer: Setup time is the time required to adjust a process when switching from making one product
to another and is unproductive time in the sense that no product is being built during the setup.
Utilization is the ratio of the average output rate to the maximum capacity. As output rate increases, the
resource is more productive and utilization rises. Setups enable output but do not create it, so the faster a
setup can be performed, the more of the total time is productive, thus increasing utilization.
Difficulty: Moderate
Keywords: setup time, utilization
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
26) Give four principal reasons economies of scale can occur when output increases. Provide examples of
each for a service firm.
Answer: The four reasons are spreading fixed costs, reducing construction costs, cutting costs of
purchased materials, and finding process advantages. Examples will vary, but spreading fixed costs
might include managers' salaries, rent, and utilities applied to a larger output volume. In construction,
the costs of architect's fees, permits, rental of construction equipment, and land might be the same
regardless of the size of the store front under consideration. Higher volume of purchased materials might
allow the purchasing firm to take advantage of price breaks or delivery scheduling. Finally, process
advantages could include more efficient technology, like card readers at gas pumps, RFID for inventory
tags, etc.
Difficulty: Moderate
Keywords: economies of scale, output
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
27) Lucy's Pancake House, a no-frills diner along a major interstate, has discovered that if precious
employee time is not wasted on frivolous duties such as cleaning work surfaces, properly storing
ingredients, and pest control, they can achieve an average output rate of 25 customers per hour. If the
diner was designed to accommodate a maximum of 30 customers per hour, what is the utilization?
Answer:
Utilization =
Utilization =
× 100%
× 100% = 83.3%
Difficulty: Easy
Keywords: utilization, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
28) The seven-person maintenance function at a hospital performs both preventive and corrective
maintenance on hundreds of items each month. All the workers are scheduled for 40 hours per week and
there are four weeks in a month. It is the goal of the maintenance department to achieve 90% utilization
with a mix of two-thirds preventive maintenance and one-third corrective maintenance. How many
hours each month are spent performing corrective maintenance if they achieve their 90% utilization and
correct/preventive mix targets?
Answer:
Utilization =
Utilization =
× 100%
× 100% = 90% ×
Corrective Hours = 30% × 7 × 40 × 4
Corrective Hours = 336 hours
Difficulty: Moderate
Keywords: utilization, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
29) The seven-person maintenance function at a hospital performs both preventive and corrective
maintenance on hundreds of items each month. All the workers are scheduled for 40 hours per week and
there are four weeks in a month. It is the goal of the maintenance department to achieve 90% utilization
with a mix of two-thirds preventive maintenance and one-third corrective maintenance. How many
hours each month are spent performing preventive maintenance if they achieve their 90% utilization and
correct/preventive mix targets?
Answer:
Utilization =
Utilization =
× 100%
× 100% = 90% ×
Preventive Hours = 60% × 7 × 40 × 4
Preventive Hours = 672 hours
Difficulty: Moderate
Keywords: utilization, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Define long-term capacity and its relationship with economies and diseconomies of scale.
4.2 Capacity Timing and Sizing Strategies
1) A capacity cushion is the amount of inventory that a firm maintains to handle sudden increases in
demand or temporary loss of production capacity.
Answer: FALSE
Difficulty: Moderate
Keywords: capacity cushion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
2) A larger capacity cushion may be required due to variation in demand, changing product mix, or
supply uncertainty.
Answer: TRUE
Difficulty: Moderate
Keywords: capacity cushion, variation in demand, changing product mix, supply uncertainty
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
3) A smaller capacity cushion may be preferred if a process is highly capital intensive.
Answer: TRUE
Difficulty: Moderate
Keywords: capacity cushion, capital intensity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
4) A larger capacity cushion can help firms uncover process inefficiencies, so they can find ways to
correct them.
Answer: FALSE
Difficulty: Moderate
Keywords: capacity cushion, process inefficiencies
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
5) Capacity cushions may be lowered if companies smooth the output rate by raising prices when
inventory is low and decreasing prices when it is high.
Answer: TRUE
Difficulty: Moderate
Keywords: capacity cushion, output rate, changes in pricing, inventory levels
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
6) An expansionist capacity strategy involves large, infrequent jumps in capacity, where a wait-and-see
strategy involves smaller, more frequent jumps.
Answer: TRUE
Difficulty: Moderate
Keywords: expansionist strategy, wait-and-see strategy, size and timing of capacity increases
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
7) A wait-and-see capacity strategy minimizes the chances of lost sales due to insufficient capacity.
Answer: FALSE
Difficulty: Moderate
Keywords: expansionist strategy, lost sales, insufficient capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
8) A firm may preempt the expansion of competitive firms by using an expansionist capacity strategy and
announcing a large capacity expansion.
Answer: TRUE
Difficulty: Moderate
Keywords: expansionist strategy, capacity expansion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
9) An expansionist capacity strategy minimizes the risks of overexpansion due to overly optimistic
demand forecasts.
Answer: FALSE
Difficulty: Moderate
Keywords: wait-and-see strategy, overexpansion, demand forecasts
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
10) Large, infrequent jumps in capacity are characteristic of companies that:
A) have an expansionist strategy.
B) have a wait-and-see strategy.
C) have low utilization.
D) have high utilization.
Answer: A
Difficulty: Moderate
Keywords: expansionist capacity strategy
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
11) Which one of the following factors usually motivates a smaller capacity cushion?
A) unevenly distributed demands
B) high capital intensity
C) high penalty costs for overtime usage
D) requests for quick customer services
Answer: B
Difficulty: Moderate
Keywords: capacity cushion, capital intensity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
12) Which one of the following factors usually calls for a larger capacity cushion?
A) uncertain demand
B) high capital intensity
C) more reliable equipment
D) high worker flexibility
Answer: A
Difficulty: Moderate
Keywords: capacity cushion, demand variability
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
13) Which one of the following statements about capacity cushions is best?
A) Companies with flexible flow processes tend to have small capacity cushions.
B) Companies with high capital costs tend to have large capacity cushions.
C) Companies that have considerable customization tend to have larger capacity cushions.
D) Constant demand rates require larger-capacity cushions.
Answer: C
Difficulty: Moderate
Keywords: capacity cushion, customization
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
14) Which one of the following statements concerning capacity cushions is best?
A) Large capacity cushions are used more often when future demand is level and known.
B) Small capacity cushions are preferred in capital intensive firms.
C) Capacity cushions are used primarily in manufacturing organizations, not in service organizations.
D) Small cushions are used in organizations where the products and services produced often change.
Answer: B
Difficulty: Moderate
Keywords: capacity cushion, capital intensity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
15) If a system is well balanced, which one of the following changes usually calls for a larger capacity
cushion?
A) higher capital intensity
B) higher worker flexibility
C) requests for fast delivery times
D) higher inventories
Answer: C
Difficulty: Moderate
Keywords: balanced system, cushion capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
16) It takes a service rep an average of two minutes to take a customer's information. Over the course of a
work week, the rep handles 160 calls a day during her eight hour shift. What is the service rep's capacity
cushion?
A) 20%
B) 33%
C) 50%
D) 67%
Answer: B
Difficulty: Moderate
Keywords: capacity cushion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
17) It takes a service rep an average of two and a half minutes to take a customer's information. Over the
course of a work week, the rep handles 160 calls a day during her eight hour shift. What is the service
rep's capacity cushion?
A) 16%
B) 33%
C) 50%
D) 66%
Answer: A
Difficulty: Moderate
Keywords: capacity cushion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
18) An expansionist capacity strategy:
A) lags behind demand.
B) reduces the risk of overexpansion based on overly optimistic demand forecasts.
C) can preempt expansion by competitors by announcing a large capacity expansion.
D) meets capacity shortfalls with overtime, temporary workers, subcontracting, and stockouts.
Answer: C
Difficulty: Moderate
Keywords: capacity cushion, capacity expansion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
19) A wait-and-see capacity strategy:
A) involves small, frequent jumps in capacity.
B) minimizes the chance of lost sales due to insufficient capacity.
C) can result in economies of scale and a fast rate of learning, yielding reduced manufacturing costs.
D) stays ahead of demand.
Answer: A
Difficulty: Moderate
Keywords: capacity cushion, capacity jumps
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
20) ________ is the amount of reserve capacity that a firm maintains to handle a sudden increase in
demand or temporary losses of production capacity.
Answer: Capacity cushion
Difficulty: Moderate
Keywords: capacity cushion, reserve capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
21) If demand is increasing, and you also prefer to increase the time between capacity increments, then
the size of increments should ________.
Answer: increase
Difficulty: Moderate
Keywords: demand increase, time between capacity increments
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
22) What factors should be considered when selecting the appropriate capacity cushion? How does the
choice of capacity cushion relate to other decisions in operations management? To other functional areas?
Answer: The appropriate size of the capacity cushion varies by industry. Large cushions are necessary
when future demand is uncertain, resource flexibility is low, product mix changes, uncertainty exists
regarding suppliers, and employee absenteeism and penalty costs for overtime and subcontracting exist.
Small-capacity cushions reduce costs and expose problems in the system. Capacity cushions are linked to
competitive priorities, quality management, capital intensity, resource flexibility, inventory, scheduling,
and location. Obviously, many of these decisions cut across functional boundaries.
Difficulty: Challenging
Keywords: capacity cushion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
23) Define each of the following capacity strategies: expansionist, wait-and-see, and follow-the-leader.
Answer: Expansionist means large, infrequent jumps in capacity. Wait-and-see means smaller and more
frequent jumps. Follow-the-leader means to expand when others do.
Difficulty: Moderate
Keywords: capacity strategy, expansionist, wait-and-see, follow-the-leader
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
24) Depict the expansionist strategy graphically as a plot of capacity against time and discuss the benefits
of adopting this strategy.
Answer:
The expansionist means large, infrequent jumps in capacity. Several factors favor the expansionist
strategy. Expansion can result in economies of scale and a faster rate of learning, thus helping a firm
reduce its costs and compete on price. This strategy might increase the firm's market share or act as a
form of preemptive marketing. By making a large capacity expansion or announcing that one is imminent,
the firm can preempt the expansion of other firms. These other firms must sacrifice some of their market
share or risk burdening the industry with overcapacity. To be successful, however, the preempting firm
must have the credibility to convince the competition that it will carry out its plans and must signal its
plans before the competition can act.
Difficulty: Moderate
Keywords: capacity strategy, expansionist
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
25) What is a capacity cushion? Provide examples of capacity cushions in a university setting and an
automotive producer.
Answer: The term capacity cushion refers to the amount of reserve capacity a process uses to handle
sudden increases in demand or temporary losses of production capacity. It measures the amount by
which the average utilization (in terms of total capacity) falls below 100%. Examples will vary, but in the
academic milieu may include adjunct faculty, off-campus apartments, and online sections of a class. In
the automotive setting cushions could include parts inventory, subcontractors, and excess/idled
equipment.
Difficulty: Moderate
Keywords: capacity cushion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Understand the main differences between the expansionist and wait-and-see capacity timing and
sizing strategies.
4.3 A Systematic Approach to Long-Term Capacity Decisions
1) A process's capacity requirement states the future process capacity needed to meet projected customer
demands, and includes an allowance for the desired capacity cushion.
Answer: TRUE
Difficulty: Moderate
Keywords: capacity requirement, customer demand, capacity cushion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
2) A planning horizon is defined as the set of consecutive time periods considered for planning purposes.
Answer: TRUE
Difficulty: Moderate
Keywords: time horizon
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
3) Output measures are used for estimating capacity requirements when product variety and process
divergence are high.
Answer: FALSE
Difficulty: Moderate
Keywords: input measures, capacity requirements, product variety, process divergence
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
4) Kristen made a batch of chocolate chip cookie dough and then had to clean the utensils and mixing
bowl before she made a batch of oatmeal raisin cookie dough. The time spent cleaning the bowl and
utensils is an example of setup time.
Answer: TRUE
Difficulty: Easy
Keywords: setup time
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
5) As the desired capacity cushion increases, the processing hours required for a year's demand decrease.
Answer: FALSE
Difficulty: Moderate
Keywords: capacity cushion, capacity requirement
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
6) The capacity requirement for a year's output is inversely proportional to the total number of hours
available from a single capacity unit per year.
Answer: TRUE
Difficulty: Moderate
Keywords: capacity requirement
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
7) Cash flow is the difference between the flows of funds into and out of an organization over a period of
time.
Answer: TRUE
Difficulty: Easy
Keywords: cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
8) When a firm makes a long-term capacity decision, selecting the base case alternative means doing
nothing and losing orders from any demand that exceeds current capacity, or incurring costs due to
excess capacity.
Answer: TRUE
Difficulty: Moderate
Keywords: base case alternative, capacity decisions, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
9) The time required to change a machine from making one product or service to the next is called:
A) cycle time.
B) setup time.
C) queue time.
D) hold time.
Answer: B
Difficulty: Easy
Keywords: setup time
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
10) A well-educated operations manager used the capacity requirements equation to determine the
number of crackerbox welders to purchase for the shop, given the standard time per unit, hours available
per machine, among other relevant parameters. He studied the answer, 12.6, and concluded that:
A) he had made a mistake, since it isn't possible to purchase a fractional welder.
B) he needed to decrease his desired capacity cushion to bring him up to an even thirteen welders.
C) he should buy twelve welders and spend 50% more time per part to reach the 12.6 figure.
D) he should buy twelve welders and use all of them at 5% overtime to achieve the necessary output.
Answer: D
Difficulty: Moderate
Keywords: capacity, cushion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
11) A well-educated operations manager used the capacity requirements equation to determine the
number of crackerbox welders to purchase for the shop, given the standard time per unit, hours available
per machine, among other relevant parameters. He studied the answer, 2.2, and concluded that:
A) he had made a mistake, since it isn't possible to purchase a fractional welder.
B) he needed to decrease his desired capacity cushion to bring him up to exactly three welders.
C) he should buy two welders and authorize 10% overtime to reach the 2.2 figure.
D) he should buy two welders and reduce the time per part by 10% to reduce the capacity need to two
welders.
Answer: C
Difficulty: Moderate
Keywords: capacity, cushion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
12) The single milling machine at Stout Manufacturing was severely overloaded last year. The plant
operates eight hours per day, five days per week, and 50 weeks per year. Management prefers a capacity
cushion of 15 percent. Two major types of products are routed through the milling machine. The annual
demand for product A is 3,000 units and 2,000 units for product B. The batch size for A is 20 units and 40
units for B. The standard processing time for A is 0.5 hours/unit and 0.8 hours/unit for B. The standard
setup time for product A is 2 hours and 8 hours for product B. How many new milling machines are
required if Stout does not resort to any short-term capacity options?
A) no new machines
B) 1 or 2 new machines
C) 3 or 4 new machines
D) more than 4 new machines
Answer: B
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, select alternative
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
Table 4.1
The Union Manufacturing Company is producing two types of products: A and B. The demand forecasts,
batch size, and time standards follow:
Demand forecast (units/yr)
Batch size (units/batch)
Processing time (hr/unit)
Setup time (hr/batch)
Product A
1,000
20
3.2
10
Product B
4,000
10
4.5
20
Both products are produced on the same machine, called Mark I.
13) Using Table 4.1, what is the total number of hours required of Mark I equipment for the next year?
A) fewer than 29,000 hours
B) between 29,000 and 30,000 hours
C) between 30,000 and 31,000 hours
D) more than 31,000 hours
Answer: B
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
14) Use the information in Table 4.1. The company works 250 days per year and operates two shifts, each
covering 8 hours. If a 15 percent capacity cushion is maintained, how many hours of capacity can the
company expect from each of its Mark I machines?
A) fewer than 3,000
B) between 3,000 and 3,500
C) between 3,501 and 4,000
D) more than 4,000
Answer: B
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
15) Use the information in Table 4.1. How many Mark I machines are required to produce Union
Manufacturing's yearly production?
A) fewer than 4 machines
B) more than 4 but fewer than or equal to 6 machines
C) more than 6 but fewer than or equal to 8 machines
D) more than 8 machines
Answer: D
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, select alternative
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
16) A standard work year is 2,080 hours at the Luther Mill and it takes about 2 hours to fill a customer
order. The manager at the mill is always concerned about employee idle time, so he aims for a capacity
cushion of two percent. Last year saw 15,000 customer orders at the mill and the manager has a new
Mercedes in mind as a company car, so he hopes that there is an increase of 10% in customer orders for
next year. How many workers will the manager need to have at the mill next year?
A) 10
B) 13
C) 16
D) 19
Answer: C
Difficulty: Moderate
Keywords: capacity requirement
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
17) A standard work year is 2,000 hours at the Luther Mill and it takes about an hour and a half to fill a
customer order. The manager at the mill is always concerned about employee idle time, so he aims for a
capacity cushion of two percent. Last year saw 15,000 customer orders at the mill and the manager has a
new John Deere in mind as a company car, so he hopes that there is an increase of 15% in customer orders
for next year. How many workers will the manager need to have at the mill next year?
A) 10
B) 13
C) 16
D) 19
Answer: B
Difficulty: Moderate
Keywords: capacity requirement
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
18) A standard work year is 2,000 hours at the Luther Mill and it takes about an hour and a half to fill a
customer order. Last year saw 15,000 customer orders at the mill and the manager has a new John Deere
in mind as a company car, so he hopes that there is an increase of 15% in customer orders for next year. If
the manager hires fourteen workers, what is the capacity cushion?
A) 7.6%
B) 8.2%
C) 6.9%
D) 8.8%
Answer: A
Difficulty: Moderate
Keywords: capacity requirement
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
19) A standard work year is 2,000 hours at the Luther Mill and it takes about an hour and a half to fill a
customer order. Last year saw 25,000 customer orders at the mill and the manager has a rebuilt Ford 9N
in mind as a company car, so he hopes that there is an increase of 2% in customer orders for next year. If
the manager hires twenty workers, what is the capacity cushion?
A) 3.8%
B) 3.1%
C) 5.1%
D) 4.3%
Answer: A
Difficulty: Moderate
Keywords: capacity requirement
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
20) The Southeast Manufacturing Company is producing two types of products: A and B. Demand
forecasts for next year and other production-related information are provided in the following table:
Demand forecast (units/yr)
Batch size (units/batch)
Processing time (hr/unit)
Setup time (hr/batch)
Product A
4,000
80
2.5
18
Product B
12,000
150
2.0
24
Both of these products are produced at the same workstation, called the Automatic Lathe. Currently, the
company has 12 automatic lathes, and financial constraints prevent any expansion for the next year. It
works 250 days per year with two 8-hour shifts and desires a 25 percent capacity cushion. Which one of
the following alternatives will allow next year's demand to be fully covered?
A) Do nothing.
B) Increase the capacity cushion to 30 percent.
C) Increase the batch size of product B to 300 units.
D) Decrease the capacity cushion by 1 percent.
Answer: C
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, select alternative
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
21) The lock box department at Bank 21 handles the processing of monthly loan payments to the bank,
monthly and quarterly premium payments to a local insurance company, and bill payments for 85 of the
bank's largest commercial customers. The payments are processed by machine operators, with one
operator per machine. An operator can process one payment in 0.25 minute. Setup times are negligible in
this situation. A capacity cushion of 20 percent is needed for the operation. The average monthly (not
annual) volume of payments processed through the department currently is 400,000. However, it is
expected to increase by 20 percent. The department operates eight hours per shift, two shifts per day, 260
days per year. How many machines (not operators) are needed to satisfy the new total processing
volume? (Round up to the next whole integer.)
A) fewer than 7
B) 7
C) 8
D) more than 8
Answer: C
Difficulty: Challenging
Keywords: capacity requirement, evaluate alternatives, select alternative
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
22) A company's production facility, consisting of two identical machines, currently caters only to
product A. The annual demand for the product is 4,000 units. Management has now decided to introduce
another product, B, which uses the same facilities as that of product A. Product B has an annual demand
of 2,000 units. In view of the uncertainties involved in producing two products, management desires to
have an overall 10 percent capacity cushion. Given the following additional information, how many more
machines are required? (Assume 8 hours/shift, 2 shifts/day, 250 days/year, and that no overtime is
allowed).
A) No additional machines are necessary.
B) One additional machine is necessary.
C) Two additional machines are necessary.
D) More than two additional machines are necessary.
Answer: C
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, select alternative
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
23) The Northern Manufacturing Company is producing products A and B, using the same machine
called MASAC27A. Demand forecasts for next year and other production-related information are
provided in the following table.
Demand forecast (units/yr)
Batch size (units/batch)
Processing time (hr/unit)
Setup time (hr/batch)
Product A
4,000
80
2.5
16
Product B
12,000
150
2.0
12
The company works 250 days per year and operates 2 shifts each day, each shift covering 8 hours. If 25
percent of capacity cushion is maintained throughout the year, how many machines (MASAC27A) does
the company need next year to meet the demand? (Round your answer up to the next whole machine.)
A) fewer than 11 machines
B) 11 machines
C) 12 machines
D) more than 12 machines
Answer: C
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, select alternative
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
24) George P. Burdell owns a hot tub store that is experiencing significant growth. Burdell is trying to
decide whether to expand the store's capacity, which currently is at $750,000 in sales per quarter. He is
thinking about expanding to the $850,000 level. The before-tax profit from additional sales is 20 percent.
Sales are seasonal, with peaks in the spring and summer quarters. Forecasts of capacity requirements,
expressed in ($000) sales per quarter, for next year (year 2) are:
Quarter
1
2
3
4
($000)
720
800
890
690
Demand in year 3 and beyond is expected to exceed $850,000 per quarter. Burdell is considering
expansion at the end of the fourth quarter of this year (year 1). How much would before-tax profits in
year 2 increase because of this expansion?
A) less than $28,000
B) more than $28,000 but less than $32,000
C) more than $32,000 but less than $36,000
D) more than $36,000
Answer: D
Difficulty: Moderate
Keywords: capacity requirement, before-tax profit
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
25) Sleep Tight Motel has the opportunity to purchase an adjacent plot of land. Building on this land
would increase their capacity from the current sales level of $515,000/year to $600,000/year. Sleep Tight
experiences a 20 percent before-tax profit margin. It wishes to estimate the additional before-tax profits
that the expansion will produce. Using the following information, how much more before-tax cash flow
would be realized just in year 10 alone?
Year
1
2
3
4
5
6
7
8
9
10
Capacity Requirement
(Annual Sales)
$515,000
$517,000
$520,000
$525,000
$540,000
$560,000
$565,000
$575,000
$600,000
$620,000
A) less than or equal to $20,000
B) greater than $20,000 but less than or equal to $25,000
C) greater than $25,000 but less than or equal to $30,000
D) greater than $30,000
Answer: A
Difficulty: Moderate
Keywords: capacity requirement, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
26) Innovative Inc. is experiencing a boom for the products it has introduced recently. The estimated
annual sales projected for the next five years are given in the following table. The current capacity is
equivalent to only $100 million sales. The company is considering the alternative of expanding capacity to
an equivalent of $250 million sales. Assume a 25 percent pretax profit margin. What is the increase in
total pretax cash flow (summed over all years) that would be enjoyed because of the expansion?
Year
1
2
3
4
5
Annual Sales
(in $ million)
100
140
170
200
250
A) less than or equal to $40 million
B) more than $40 million but less than or equal to $70 million
C) more than $70 million but less than or equal to $100 million
D) more than $100 million
Answer: C
Difficulty: Moderate
Keywords: capacity requirement, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
27) John Owen owns a drugstore that is experiencing significant growth. Owen is trying to decide
whether to expand its capacity, which currently is $200,000 in sales per quarter. Sales are seasonal.
Forecasts of capacity requirements, expressed in sales per quarter for the next year, follow.
Quarter
1
2
3
4
($000)
240
180
220
260
Owen is considering expanding capacity to the $250,000 level in sales per quarter. The before-tax profit
margin from additional sales is 15 percent. How much would before-tax profits increase next year
because of this expansion?
A) less than $15,000
B) more than $15,000 but less than $16,000
C) more than $16,000 but less than $17,000
D) more than $17,000
Answer: C
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
Scenario 4.5
The T. H. King Company has introduced a new product line that requires two work centers, A and B for
manufacture. Work Center A has a current capacity of 10,000 units per year, and Work Center B is
capable of 12,500 units per year. This year (year 0), sales of the new product line are expected to reach
10,000 units. Growth is projected at an additional 1,000 units each year through year 5. Pre-tax profits are
expected to be $30 per unit throughout the 5-year planning period. Two alternatives are being
considered:
1) Expand both Work Centers A and B at the end of year 0 to a capacity of 15,000 units per year, at a
total cost for both Work Centers of $200,000;
2) Expand Work Center A at the end of year 0 to 12,500 units per year, matching Work Center B, at a
cost of $100,000, then expanding both Work Centers to 15,000 units per year at the end of year 3, at an
additional cost at that time of $200,000.
The King Company will not consider projects that don't show a 5th year positive net present value using
a discount rate of 15%.
28) Use the information in Scenario 4.5. What is the pre-tax cash flow (net present value) for alternative #1
compared to the base case of doing nothing for the next five years?
A) negative pre-tax cash flow
B) more than $0 but less than $40,000
C) more than $40,000 but less than $80,000
D) more than $80,000
Answer: C
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
29) Use the information in Scenario 4.5. What is the pre-tax cash flow (net present value) for alternative #2
compared to the base case of doing nothing for the next five years?
A) negative pre-tax cash flow
B) more than $0 but less than $40,000
C) more than $40,000 but less than $80,000
D) more than $80,000
Answer: B
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
30) Use the information in Scenario 4.5. What action, if any, should the King Company take?
A) Do nothing–neither alternative provides a positive net present value after five years.
B) Select Alternative #1.
C) Select alternative #2.
D) Either alternative may be selected, since the positive net present values are the same after five years.
Answer: B
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
Scenario 4.6
Burdell Labs is a diagnostic laboratory that does various tests (blood tests, urine tests, etc.) for doctors'
offices in the Indianapolis area. Test specimens are picked up at the doctors' offices and are transported to
the testing facility, with uniform arrivals throughout the day. All tests go through two testing centers in
the testing facility, Test Center A and Test Center B. A has a current capacity of 1,000 units per week, and
B is capable of 1,500 units per week. The facility operates 50 weeks per year. This year (year 0), test
volumes are expected to reach 1,000 units per week. Growth per week is projected at an additional 200
units through year 5 (i.e., 1,200 per week in year #1, 1,400 per week in year #2, etc.). Pre-tax profits are
expected to be $5 per test throughout the 5-year planning period. Two alternatives are being considered:
1) Expand both Test Centers A and B at the end of year 0 to a capacity of 2,000 units per week, at a total
cost for both Test Centers of $300,000;
2) Expand Test Center A at the end of year 0 to 1,500 units per week, matching Test Center B, at a cost of
$100,000, then expanding both Test Centers to 2,000 units per year at the end of year 3, at an additional
cost at that time of $250,000.
Burdell Labs will not consider projects that don't show a 5th year positive net present value using a
discount rate of 15%.
31) Use the information in Scenario 4.6. What is the pre-tax cash flow (net present value) for alternative #1
compared to the base case of doing nothing for the next five years?
A) negative pre-tax cash flow
B) more than $0 but less than $80,000
C) more than $80,000 but less than $160,000
D) more than $160,000
Answer: C
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
32) Use the information in Scenario 4.6. What is the pre-tax cash flow (net present value) for alternative #2
compared to the base case of doing nothing for the next five years?
A) negative pre-tax cash flow
B) more than $0 but less than $80,000
C) more than $80,000 but less than $160,000
D) more than $160,000
Answer: D
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
33) Use the information in Scenario 4.6. What action, if any, should the Burdell Labs take?
A) Do nothing–neither alternative provides a positive net present value after five years.
B) Select Alternative #1.
C) Select alternative #2.
D) Either alternative may be selected, since the positive net present values are the same after five years.
Answer: C
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
Scenario 4.7
The B. Sharp Company has a rapidly growing product line that requires two work centers, X and Y for
manufacture. Work Center X has a current capacity of 50,000 units per year, and Work Center Y is
capable of 55,000 units per year. This year (year 0), sales of the product line are expected to reach 50,000
units. Growth is projected at an additional 3,000 units each year through year 3. Pre-tax profits are
expected to be $60 per unit throughout the 3-year planning period. Two alternatives are being
considered:
1) Expand both Work Centers X and Y at the end of year 0 to a capacity of 60,000 units per year, at a
total cost for both Work Centers of $500,000;
2) Expand Work Center X at the end of year 0 to 55,000 units per year, matching Work Center Y, at a
cost of $300,000, then expanding both Work Centers to 60,000 units per year at the end of year 2, at an
additional cost at that time of $350,000.
The Sharp Company will not consider projects that don't show a 3rd year positive net present value using
a discount rate of 20%.
34) Use the information in Scenario 4.7. What is the pre-tax cash flow (net present value) for alternative #1
compared to the base case of doing nothing for the next five years?
A) negative pre-tax cash flow
B) more than $0 but less than $100,000
C) more than $100,000 but less than $200,000
D) more than $200,000
Answer: D
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
35) Use the information in Scenario 4.7. What is the pre-tax cash flow (net present value) for alternative #2
compared to the base case of doing nothing for the next five years?
A) negative pre-tax cash flow
B) more than $0 but less than $100,000
C) more than $100,000 but less than $200,000
D) more than $200,000
Answer: C
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
36) Use the information in Scenario 4.7. What action, if any, should the Sharp Company take?
A) Do nothing–neither alternative provides a positive net present value after three years.
B) Select Alternative #1.
C) Select alternative #2.
D) Either alternative may be selected, since the positive net present values are the same after three years.
Answer: B
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
Scenario 4.8
The Summerville Vitamin Company manufactures bottles of animal-shaped chewable vitamins for
children. This product line requires two work centers, tablet manufacturing and packaging. The tablet
manufacturing work center has a current capacity of 140,000 bottles per month, and packaging is capable
of 100,000 units per month. This year (year 0), monthly sales of the product line are expected to reach
100,000 units. Growth per month is projected at an additional 25,000 units through year 4 (i.e., 125,000 per
month in year #1, 150,000 per month in year #2, etc.). Pre-tax profits are expected to be $5 per unit
throughout the 4-year planning period. Two alternatives are being considered:
1) Expand both tablet manufacturing and packaging at the end of year 0 to a capacity of 200,000 units
per month, at a total cost for both work centers of $2,250,000;
2) Expand packaging at the end of year 0 to 140,000 units per year, matching tablet manufacturing, at a
cost of $1,200,000, then expanding both work centers to 200,000 units per month at the end of year 2, at an
additional cost at that time of $1,400,000.
Summerville will not consider projects that don't show a 4th year positive net present value using a
discount rate of 25%.
37) Use the information in Scenario 4.8. What is the pre-tax cash flow (net present value) for alternative #1
compared to the base case of doing nothing for the next four years?
A) less than or equal to $5.1 million
B) more than $5.1 million but less than $5.3 million
C) more than $5.3 million less than $5.5 million
D) more than $5.5 million
Answer: D
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
38) Use the information in Scenario 4.8. What is the pre-tax cash flow (net present value) for alternative #2
compared to the base case of doing nothing for the next four years?
A) less than or equal to $5.1 million
B) more than $5.1 million but less than $5.3 million
C) more than $5.3 million less than $5.5 million
D) more than $5.5 million
Answer: C
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
39) Use the information in Scenario 4.8. What action, if any, should Summerville take?
A) Find another option–neither alternative provides a positive net present value after four years.
B) Select Alternative #1.
C) Select alternative #2.
D) Either alternative may be selected, since the positive net present values are the same after four years.
Answer: B
Difficulty: Moderate
Keywords: capacity requirement, evaluate alternatives, cash flow
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
40) In the context of capacity requirements planning, which of these phrases best describes the term base
case?
A) the do-nothing alternative
B) thinking outside the box
C) working smarter, not harder
D) working harder, not smarter
Answer: A
Difficulty: Easy
Keywords: base case
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
41) A process's ________ is what its capacity should be for some future time period to meet the demand of
its customers, allowing for the desired capacity cushion.
Answer: capacity requirement
Difficulty: Moderate
Keywords: capacity requirement
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
42) A process's ________ is the length of time it takes to switch from making one type of product to
another.
Answer: setup time
Difficulty: Moderate
Keywords: setup
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
43) The ________ is the set of consecutive time periods considered for planning purposes.
Answer:
planning horizon
Difficulty: Easy
Keywords: planning horizon
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
44) A ________ is the difference between demand and current capacity.
Answer: capacity gap
Difficulty: Easy
Keywords: capacity gap
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
45) ________ are more appropriate measures of capacity in situations where a task that is initially difficult
and time-consuming to perform becomes second-nature and short in duration.
Answer: Input measures
Difficulty: Moderate
Keywords: input measures
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
46) The ________ is the act of doing nothing and losing orders from any demand that exceeds capacity, or
incurs costs because capacity is too large.
Answer: base case
Difficulty: Easy
Keywords: base case
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
47) What are the four steps involved in making capacity decisions?
Answer: The steps are: 1) estimate future capacity requirements, 2) identify gaps by comparing
requirements with alternatives, 3) develop alternative plans for filling the gaps, and 4) evaluate
alternatives, both qualitatively and quantitatively, and make a final choice.
Difficulty: Moderate
Keywords: capacity decision, steps
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
48) A printing company works on three types of printing jobs, each of which could be produced on the
same model printing machine. The predicted annual demands and typical order sizes are shown in the
table. The company has 2,000 production hours available each year and requires a 10% capacity cushion
to allow for preventive maintenance, breakdowns, and other unforeseen circumstances. How many
printing machines must they have under these circumstances?
Job Type
Demand
Process time per unit
Average order size
setup time (hours)
Job A
6,000
.8
40
1
Job B
4,000
.75
100
.75
Job C
5,000
.25
50
.5
Answer:
M=
= 5.15 → 6
Difficulty: Moderate
Keywords: utilization, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
49) A printing company works on three types of printing jobs, each of which could be produced on the
same model printing machine. The predicted annual demands and typical order sizes are shown in the
table. The company has 2,000 production hours available each year and requires a 10% capacity cushion
to allow for preventive maintenance, breakdowns, and other unforeseen circumstances. They have floor
space for five printing machines. If the time needed to set up a printing machine to switch from one job to
the next is identical for all three job types, what must their setup time be to achieve their required output?
Job Type
Demand
Process time per unit
Average order size
Job A
6,000
.8
40
Job B
4,000
.75
100
Job C
5,000
.25
50
Answer: It can't be done; the production time required is 4,800 + 3,000 + 1,250 = 9,050 hours, which
exceeds the 9,000 hours available. The setup time would need to be a negative one-sixth of an hour in
order to meet the five machine limit.
M=
= 5.00
5 × 1,800 = [4,800 + 150s] + [3,000 + 40s] + [1,250 + 100s]
9,000 - 4,800 - 3,000 - 1,250 = 290s
-50 = 290s
s = -.1724 hours
Difficulty: Challenging
Keywords: utilization, capacity
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
50) The single milling machine at Fred's Manufacturing was severely overloaded last year. The plant
operates 8 hours per day, 5 days per week, and 50 weeks per year. Management prefers a capacity
cushion of 20 percent. Two major types of products are routed through the milling machine. The annual
demand for product A is 4,000 units and 3,000 units for product B. The batch size for A is 20 units and 30
units for B. The standard processing time for A is 0.5 hours/unit and 0.8 for B. The standard setup time for
product A is 2 hours and 8 hours for product B. How many new milling machines are required if Fred's
does not resort to any short-term capacity options?
Answer:
M=
where M = number of machines required, D = number of units forecast per year, p = processing time in
hours per unit, N = total number of hours per year that the process operates, C = desired capacity cushion,
Q = number of units in each batch, and s = setup time.
M=
= 3.5 → 4 machines
Difficulty: Moderate
Keywords: capacity requirement
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
51) The Union Manufacturing Company is producing two types of products: A and B. The demand
forecasts, batch size, and time standards for the Mark I operation follow:
Demand forecast (units/yr)
Batch size (units/batch)
Processing time (hr/unit)
Setup time (hr/batch)
Product A
1,000
20
3.2
10
Product B
4,000
10
4.5
20
The company works 250 days per year and operates 2 shifts, each covering 8 hours. If a 20 percent
capacity cushion is maintained, how many new Mark I machines are required if Union does not resort to
any short-term capacity options?
Answer:
M=
where M = number of machines required, D = number of units forecast per year, p = processing time (in
hours per unit), N = total number of hours per year that the process operates, C = desired capacity cushion,
Q = number of units in each batch, and s = setup time.
M=
= 9.28 → 10 machines
Difficulty: Moderate
Keywords: capacity requirement
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
52) Larry's Wickets, Inc. is producing two types of products: A and B. Both are produced at the same
machining operation. Because of demand uncertainties, the operations manager obtained three demand
forecasts (pessimistic, expected, and optimistic). The demand forecasts, batch sizes (units/batch),
processing times (hr/unit), and setup times (hr/batch) follow.
The machines operate on two 8-hour shifts, 5 days per week, and 50 weeks per year. The manager wants
to maintain a 20 percent capacity cushion.
a. What is the minimum number of hours required of the machining equipment for the next year?
b. How many hours of capacity can the company expect from each machine?
c. What is the minimum number of machines needed (assuming no reliance on short-term options)?
d. What is the maximum number of machines needed (assuming no reliance on short-term options)?
Answer:
a. 81,800 hours
b. 3,200 hours
c. 26 machines
d. 34 machines
Difficulty: Challenging
Keywords: capacity cushion, capacity requirement
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
53) The T. H. King Company has introduced a new product line that requires two work centers, A and B
for manufacture. Work Center A has a current capacity of 10,000 units per year, and Work Center B is
capable of 12,500 units per year. This year (year 0), sales of the new product line are expected to reach
10,000 units. Growth is projected at an additional 1,000 units each year through year 5. Pre-tax profits are
expected to be $30 per unit throughout the 5-year planning period. Two alternatives are being
considered:
1) Expand both Work Centers A and B at the end of year 0 to a capacity of 15,000 units per year, at a
total cost for both Work Centers of $200,000;
2) Expand Work Center A at the end of year 0 to 12,500 units per year, matching Work Center B, at a
cost of $100,000, then expanding both Work Centers to 15,000 units per year at the end of year 3, at an
additional cost at that time of $200,000.
The King Company will not consider projects that don't show a 5th year positive net present value using
a discount rate of 15%. What are the pre-tax cash flows for the two alternatives compared to the base case
of doing nothing for the next five years, and what action, if any, should the company take?
Answer:
The following table summarizes demand and output capabilities for the two alternatives:
Alternative #1 Net Present Value (in $000s)
= -200 + 30/1.15 + 60/(1.15)2 + 90/(1.15)3 + 120/(1.15)4 + 150/(1.15)5
= -200 + 26.1 + 45.4 + 59.2 + 68.6 + 74.6 = $73.9
Alternative #2 Net Present Value (in $000s)
= -100 + 30/1.15 + 60/(1.15)2 + (75 - 200)/(1.15)3 + 120/(1.15)4 + 150/(1.15)5
= -100 + 26.1 + 45.4 - 82.2 + 68.6 + 74.6 = $32.5
Both alternatives have a positive net present value after five years at a discount rate of 15%. However,
Alternative #1 has a higher net present value after the five-year period ($73,900 versus $32,500) and
should therefore be the alternative selected.
Difficulty: Challenging
Keywords: evaluating alternatives, net present value, pre-tax cash flow, discount rate
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
54) Burdell Labs is a diagnostic laboratory that does various tests (blood tests, urine tests, etc.) for doctors'
offices in the Indianapolis area. Test specimens are picked up at the doctors' offices and are transported to
the testing facility, with uniform arrivals throughout the day. All tests go through two testing centers in
the testing facility, Test Center A and Test Center B. A has a current capacity of 1,000 units per week, and
B is capable of 1,500 units per week. The facility operates 50 weeks per year. This year (year 0), test
volumes are expected to reach 1,000 units per week. Growth is projected at an additional 200 units each
week through year 5 (i.e., 1,200 per week in year #1, 1,400 per week in year #2, etc.). Pre-tax profits are
expected to be $5 per test throughout the 5-year planning period. Two alternatives are being considered:
1) Expand both Test Centers A and B at the end of year 0 to a capacity of 2,000 units per week, at a total
cost for both Test Centers of $300,000;
2) Expand Test Center A at the end of year 0 to 1,500 units per week, matching Test Center B, at a cost of
$100,000, then expanding both Test Centers to 2,000 units per year at the end of year 3, at an additional
cost at that time of $250,000.
Burdell Labs will not consider projects that don't show a 5th year positive net present value using a
discount rate of 15%. What are the pre-tax cash flows for the two alternatives compared to the base case
of doing nothing for the next five years, and what action, if any, should Burdell take?
Answer:
The following table summarizes demand and output capabilities for the two alternatives:
Alternative #1 Net Present Value (in $000s)
= -300 + 50/1.15 + 100/(1.15)2 + 150/(1.15)3 + 200/(1.15)4 + 250/(1.15)5
= -300 + 43.5 + 75.6 + 98.6 + 114.4 + 124.3 = $156.4
Alternative #2 Net Present Value (in $000s)
= -100 + 50/1.15 + 100/(1.15)2 + (125 - 250)/(1.15)3 + 200/(1.15)4 + 250/(1.15)5
= -100 + 43.5 + 75.6 - 82.2 + 114.4 + 124.3 = $175.6
Both alternatives have a positive net present value after five years at a discount rate of 15%. However,
Alternative #2 has a higher net present value after five years ($175,600 versus $156,400) and should
therefore be the alternative selected.
Difficulty: Challenging
Keywords: evaluating alternatives, net present value, pre-tax cash flow, discount rate
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Identify a systematic four-step approach for determining long-term capacity requirements and
associated cash flows.
4.4 Tools for Capacity Planning
1) Waiting line models are often used for capacity planning.
Answer: TRUE
Difficulty: Easy
Keywords: waiting line model, capacity planning
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Describe how the common tools for capacity planning such as waiting-line models, simulation, and
decision trees assist in capacity decisions.
2) Which of the following descriptions about waiting line models is best?
A) They account for major events such as competitor actions.
B) They account for the random, independent behavior of many customers.
C) They assume that each branch can give the highest expected payoff.
D) They deal with the certainty and stability in demand.
Answer: B
Difficulty: Moderate
Keywords: waiting line model
Learning Outcome: Apply waiting-line theories and models
AACSB: Application of Knowledge
Learning Obj.: Describe how the common tools for capacity planning such as waiting-line models, simulation, and
decision trees assist in capacity decisions.
3) What information would managers use to choose the best cost-effective capacity to balance customer
service with the cost of adding capacity?
A) decision trees
B) diseconomies of scale
C) capacity cushion
D) waiting line models
Answer: D
Difficulty: Moderate
Keywords: waiting line model
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Describe how the common tools for capacity planning such as waiting-line models, simulation, and
decision trees assist in capacity decisions.
4) When future demand is uncertain and sequential decisions are involved in capacity planning, a
manager should use a:
A) waiting line model.
B) cash flow analysis.
C) decision tree.
D) gap analysis.
Answer: C
Difficulty: Moderate
Keywords: decision tree, capacity planning
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Describe how the common tools for capacity planning such as waiting-line models, simulation, and
decision trees assist in capacity decisions.
Figure 4.1
5) A manager weighs three options for capacity cushion as depicted in Figure 4.1. If the dollar amounts
expressed in the figure are cash flows, which option is optimal?
A) large cushion
B) medium cushion
C) small cushion
D) Not enough information is given to select an option.
Answer: B
Difficulty: Moderate
Keywords: decision tree, capacity planning, cushion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Describe how the common tools for capacity planning such as waiting-line models, simulation, and
decision trees assist in capacity decisions.
6) A manager weighs three options for capacity cushion as depicted in Figure 4.1. If the dollar amounts
expressed in the figure are cash flows, what is the value of the optimal decision?
A) $11,700
B) $11,500
C) $12,300
D) $10,500
Answer: A
Difficulty: Moderate
Keywords: decision tree, capacity planning, cushion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Describe how the common tools for capacity planning such as waiting-line models, simulation, and
decision trees assist in capacity decisions.
7) A manager weighs three options for capacity cushion as depicted in Figure 4.1. If the dollar amounts
expressed in the figure are costs, what is the optimal decision?
A) large cushion
B) medium cushion
C) small cushion
D) Not enough information is given to select an option.
Answer: C
Difficulty: Moderate
Keywords: decision tree, capacity planning, cushion
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Analytical Thinking
Learning Obj.: Describe how the common tools for capacity planning such as waiting-line models, simulation, and
decision trees assist in capacity decisions.
8) A capacity decision in a call center, such as the number of customer service representatives to answer
the phone during a peak period, can be addressed using a(n) ________.
Answer: waiting-line (queuing) model
Difficulty: Easy
Keywords: waiting-line models, queuing
Learning Outcome: Apply waiting-line theories and models
AACSB: Application of Knowledge
Learning Obj.: Describe how the common tools for capacity planning such as waiting-line models, simulation, and
decision trees assist in capacity decisions.
9) Extremely complex service capacity problems for which there are no optimizing equations should be
analyzed using ________.
Answer: simulation
Difficulty: Easy
Keywords: simulation
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Describe how the common tools for capacity planning such as waiting-line models, simulation, and
decision trees assist in capacity decisions.
10) ________ are useful capacity analysis tools when the future is uncertain and capacity decisions can be
made in a sequential fashion.
Answer:
Decision trees
Difficulty: Moderate
Keywords: decision tree
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Describe how the common tools for capacity planning such as waiting-line models, simulation, and
decision trees assist in capacity decisions.
11) Capacity planning requires a demand forecast for an extended period of time into the future. What
concerns would you have regarding an extended forecast as a capacity planner?
Answer: Unfortunately, forecast accuracy declines as the forecasting horizon lengthens. In addition,
anticipating what competitors will do increases the uncertainty of demand forecasts. Demand during any
period of time may not be evenly distributed; peaks and valleys of demand may (and often do) occur
within the time period.
Difficulty: Moderate
Keywords: forecasting
Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing
processes
AACSB: Application of Knowledge
Learning Obj.: Describe how the common tools for capacity planning such as waiting-line models, simulation, and
decision trees assist in capacity decisions.
12) What is a waiting line model, and what information can it provide?
Answer: Waiting line models use probability distributions to estimate delay times, line length, and
utilization.
Difficulty: Moderate
Keywords: waiting line model, capacity planning
Learning Outcome: Apply waiting-line theories and models
AACSB: Application of Knowledge
Learning Obj.: Describe how the common tools for capacity planning such as waiting-line models, simulation, and
decision trees assist in capacity decisions.
Operations Management: Processes and Supply Chains, 12e (Krajewski)
Chapter 7 Project Management
7.1 Defining and Organizing Projects
1) A project is an interrelated set of activities that has a definite starting and ending point.
Answer: TRUE
Difficulty: Easy
Keywords: project activities, start, end
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Explain the major activities associated with defining and organizing a project.
2) Projects often cut across organizational lines.
Answer: TRUE
Difficulty: Easy
Keywords: project, organizational lines
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Explain the major activities associated with defining and organizing a project.
3) Projects, and the application of project management, facilitate the implementation of operations
strategy.
Answer: TRUE
Difficulty: Easy
Keywords: project management, operations strategy
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Explain the major activities associated with defining and organizing a project.
4) Project managers should be able to organize a set of disparate activities.
Answer: TRUE
Difficulty: Moderate
Keywords: project manager, disparate activities
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Explain the major activities associated with defining and organizing a project.
5) A pure project organizational structure houses the project in a specific functional area.
Answer: FALSE
Difficulty: Moderate
Keywords: pure project, functional structure
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Explain the major activities associated with defining and organizing a project.
6) Scope creep is one of the primary causes of project failure.
Answer: TRUE
Difficulty: Easy
Keywords: scope creep, project failure
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Explain the major activities associated with defining and organizing a project.
7) The project's objective statement should contain:
A) slack time and activities.
B) scope, time frame, and allocated resources.
C) strengths and weaknesses of subcontractors.
D) activities, completion times, and incentives.
Answer: B
Difficulty: Moderate
Keywords: project objective statement, scope
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Explain the major activities associated with defining and organizing a project.
8) A project organization structure where team members are assigned to the project and work exclusively
for the project manager is called:
A) a matrix structure.
B) a fixed structure.
C) a pure project structure.
D) a functional structure.
Answer: C
Difficulty: Moderate
Keywords: project, organizational structure
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Explain the major activities associated with defining and organizing a project.
9) A(n) ________ is an interrelated set of activities that has a definite starting and ending point and that
results in a unique outcome for a specific allocation of resources.
Answer: project
Difficulty: Easy
Keywords: project activities
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Explain the major activities associated with defining and organizing a project.
10) Heidi was part of a project team that retained their roles within the organization and was on loan to
the project due to her technical expertise. In effect, she reported to two bosses, one in her functional area
and also to the project manager. Heidi is operating within a(n) ________ organizational structure.
Answer: matrix
Difficulty: Moderate
Keywords: matrix
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Explain the major activities associated with defining and organizing a project.
11) What are the primary responsibilities of a Project Manager? Briefly describe these responsibilities for a
project manager whose team is purchasing a new machine and installing it in a manufacturing process.
Answer: Best answers will include the following points, describing the manager's role in the purchase
and installation of the new machine: 1. Facilitator: resolves conflicts; leads with a system view; blends
project interaction, resources and deliverables with firm as a whole; 2. Communicator: informs senior
management and other stakeholders of project's progress and need for additional resources;
communicates with project team to achieve best performance; 3. Decision Maker: organize team meetings;
define how team decisions will be made; determine how to communicate to senior management; make
tough decisions if necessary.
Difficulty: Moderate
Keywords: project manager, selecting
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Explain the major activities associated with defining and organizing a project.
12) What characteristics should be considered when selecting project team members? Briefly describe
these characteristics for members of a project team assigned to improve a teller's job in a bank.
Answer: Best answers should include the following in the context on the job improvement project: 1.
Technical Competence: capable of completing activities assigned to them; 2. Sensitivity: to interpersonal
conflicts within the team; help mitigate these issues and any problems dealing with upper level
management; 3. Dedication: capable of solving problems outside immediate expertise by involving others
as needed; display persistence and initiative for completing the project in a timely fashion.
Difficulty: Moderate
Keywords: project team member, selecting
Learning Outcome: Describe the goals and stages of project management
AACSB: Interpersonal Relations and Teamwork
Learning Obj.: Explain the major activities associated with defining and organizing a project.
7.2 Constructing Project Networks
1) The work breakdown structure is a statement of all work that has to be completed.
Answer: TRUE
Difficulty: Moderate
Keywords: WBS, work breakdown structure
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Describe the procedure for constructing a project network.
2) The network diagram is a planning method that is designed to depict the relationships between
activities.
Answer: TRUE
Difficulty: Moderate
Keywords: network diagram, activities
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Describe the procedure for constructing a project network.
3) A relationship that determines the sequence for undertaking activities is a precedence relationship.
Answer: TRUE
Difficulty: Easy
Keywords: precedence relationship
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Describe the procedure for constructing a project network.
4) In a network diagram, an activity:
A) is the largest unit of work effort consuming both time and resources that a project manager can
schedule and control.
B) is the smallest unit of work effort consuming both time and resources that a project manager can
schedule and control.
C) should always be something the company has had experience with.
D) must always have a single, precise estimate for the time duration.
Answer: B
Difficulty: Moderate
Keywords: activity, smallest unit of work
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Describe the procedure for constructing a project network.
5) Activity times for a project are estimated by all except which of the following methods?
A) the use of dowsing rods
B) managerial opinions based on similar prior experiences
C) statistical methods based on actual past experience
D) estimates using learning curve models to improve replications and estimate accuracy
Answer: A
Difficulty: Moderate
Keywords: activity times, estimating activity times
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Describe the procedure for constructing a project network.
6) The ________ is a statement of all work that has to be completed.
Answer: work breakdown structure (WBS)
Difficulty: Moderate
Keywords: WBS, work breakdown structure
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Describe the procedure for constructing a project network.
7) ________ determines the sequence for undertaking activities.
Answer: Precedence relationship
Difficulty: Moderate
Keywords: precedence relationship, sequence of activities
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Describe the procedure for constructing a project network.
8) Following the project defining and organizing phase, project planning involves five steps. List and
briefly describe these five planning steps as applied to writing a term paper for an Operations
Management class.
Answer: The following points should be included in the best answers: 1. Define the work breakdown
structure: develop a list of all work to be completed on the project; 2. Diagram the network: develop a
PERT/CPM diagram showing all activities and precedence requirements for the project; 3. Develop the
schedule: define the project's critical path, duration, and earliest and latest start and finish times for each
activity; 4. Analyze cost—time trade-offs: determine normal time and costs for the project, as well as crash
time and costs; using project crashing techniques, find a minimum cost schedule for completing the
project; 5. Assess project risks: develop a risk management plan, including such areas as strategic fit,
service/product attributes, team capabilities and operations risks.
Difficulty: Moderate
Keywords: project planning, steps
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Describe the procedure for constructing a project network.
7.3 Developing the Project Schedule
1) A critical path is any sequence of activities between a project's start and finish.
Answer: FALSE
Difficulty: Moderate
Keywords: critical path activities
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Develop the schedule of a project.
2) The earliest start time is never the same as the latest start time.
Answer: FALSE
Difficulty: Easy
Keywords: earliest start time, latest start time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
3) To obtain the latest start and latest finish time in a network diagram, we must work forward through
the network.
Answer: FALSE
Difficulty: Moderate
Keywords: latest start time, latest finish time
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Develop the schedule of a project.
4) A Gantt chart is a project schedule that superimposes project activities on a time line.
Answer: TRUE
Difficulty: Moderate
Keywords: Gantt chart, project schedule
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Develop the schedule of a project.
5) A project has three paths. A-B-C has a length of 25 days. A-D-C has a length of 15 days. Finally, A-E-C
has a length of 20 days. Which one of the following statements is true?
A) A-D-C is the critical path.
B) A-B-C has the most slack.
C) The expected duration of this project is 25 days.
D) The expected duration of this project is 25 + 15 + 20 = 60 days.
Answer: C
Difficulty: Moderate
Keywords: project, duration
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
6) The earliest start time for an activity is equal to the:
A) smallest earliest finish time of all of its immediate predecessors.
B) largest earliest finish time of all of its immediate predecessors.
C) smallest late start time of any of its immediate predecessors.
D) largest late finish time of all of its immediate predecessors.
Answer: B
Difficulty: Moderate
Keywords: activity, earliest start time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
7) Assume that activity G has the following times:
Early start time = 7 days
Early finish time = 13 days
Late start time = 15 days
Late finish time = 21 days
Which of the following statements is true about activity G?
A) Activity G takes 14 days to complete.
B) Activity G has a slack time of 8 days.
C) Activity G is on the critical path.
D) Activity G takes 2 days to complete.
Answer: B
Difficulty: Moderate
Keywords: activity slack
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
8) Activity slack is defined as:
A) latest start time minus earliest start time.
B) earliest start time minus latest start time.
C) earliest finish time minus latest finish time.
D) latest finish time minus earliest start time.
Answer: A
Difficulty: Moderate
Keywords: activity slack, latest start time, earliest start time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
9) Which one of the following best describes the critical path of a PERT/CPM network?
A) the sequence of activities between a project's start and finish that takes the longest time to complete
B) the sequence of activities between a project's start and finish that has the maximum amount of activity
slack
C) the set of activities that has no precedence relationships
D) the sequence of activities that has the lowest normal activity cost
Answer: A
Difficulty: Moderate
Keywords: critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
Figure 7.1
10) For the network shown in Fig. 7.1, which of the following is the critical path?
A) ABCDEF
B) ABEF
C) ACDF
D) ACEF
Answer: C
Difficulty: Easy
Keywords: activity network, critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
11) For the network shown in Fig. 7.1, what is the project duration?
A) 6
B) 15
C) 13
D) 14
Answer:
B
Difficulty: Easy
Keywords: activity network, critical path, duration
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
Figure to accompany Table 7.1
Table 7.1
Activity
A
B
C
D
E
F
G
Activity
Time
2
1
3
7
3
4
Earliest
Start
0
2
2
3
5
5
11
Earliest
Finish
3
5
10
8
11
15
Latest Start
0
3
2
4
5
11
Latest
Finish
2
4
5
11
11
11
15
Slack
0
1
0
3
0
0
12) Using the information shown in Table 7.1, what is the slack time for activity D?
A) 1
B) 4
C) 6
D) 7
Answer: A
Difficulty: Easy
Keywords: activity, network, critical path, activity slack
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
13) Using the information shown in Table 7.1, what is the earliest finish time for activity A?
A) 0
B) 2
C) 3
D) 4
Answer: B
Difficulty: Easy
Keywords: activity network, critical path, earliest finish
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
14) Using the information shown in Table 7.1, what is the latest start time for activity E?
A) 2
B) 3
C) 5
D) 8
Answer: D
Difficulty: Easy
Keywords: activity network, critical path, latest start
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
15) Using the information shown in Table 7.1, what is the activity time for activity F?
A) 5
B) 11
C) 6
D) 1
Answer: C
Difficulty: Easy
Keywords: activity network, critical path, activity time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
16) Refer to the Figure to accompany Table 7.1. Which one of the following is the critical path?
A) ABDG
B) ABEG
C) ACEG
D) ACFG
Answer: D
Difficulty: Easy
Keywords: activity network, critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
17) Using the information shown in Table 7.1, what is the project duration?
A) 15
B) 14
C) 12
D) 10
Answer: A
Difficulty: Easy
Keywords: activity network, critical path, duration
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
Figure 7.2
18) Which one of the following statements regarding Figure 7.2 is true?
A) Activity S cannot finish until activity T finishes.
B) Activity T cannot begin until activity U is completed.
C) Activity U cannot begin until activities S and T have been completed.
D) Activity V cannot begin until activity S has been completed.
Answer: C
Difficulty: Moderate
Keywords: activity precedence
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Develop the schedule of a project.
19) Which one of the following conditions violates the assumptions of PERT/CPM networks?
A) Some activities can have zero variance.
B) Costs increase linearly as activity time is reduced below its normal time.
C) Two activities tied together by an arc are overlapping and can be worked on simultaneously.
D) There can be more than one critical path in a network.
Answer: C
Difficulty: Moderate
Keywords: assumption, PERT and CPM networks
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Develop the schedule of a project.
20) The ________ is the sequence of activities between a project's start and finish that takes the longest
time to complete.
Answer: critical path
Difficulty: Moderate
Keywords: critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Develop the schedule of a project.
21) ________ is the maximum length of time that an activity can be delayed without delaying the entire
project.
Answer: Activity slack
Difficulty: Moderate
Keywords: activity slack
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Develop the schedule of a project.
22) Explain the importance of the critical path in project management.
Answer: The critical path of activities determines the time duration of the project. Any slippage along
the critical path means the project will be delayed. The critical path also defines the activities requiring
the team's attention and focus to assure timely and cost effective completion of the project.
Difficulty: Moderate
Keywords: project critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Develop the schedule of a project.
23) Why do managers want to know the slack of activities?
Answer: Managers monitor activity slack reports to identify activities that have fallen behind schedule
or are dangerously close to doing so. Also, activities with large amounts of slack might afford a reduction
in resources so that other activities behind schedule can catch up.
Difficulty: Moderate
Keywords: activity slack
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Develop the schedule of a project.
24) Draw the network corresponding to the following information. Also, complete the table, identify the
critical path, and specify project completion time.
Activity
A
B
C
D
E
F
G
H
Activity
A
B
C
D
E
F
G
H
Immediate
Predecessor(s)
----A
B
B
C, D
D, E
G, F
Earliest
Start
Earliest
Finish
Time
(Weeks)
3
4
6
9
6
6
8
9
Latest
Start
Latest
Finish
Slack
Answer:
Activity
A
B
C
D
E
F
G
H
Earliest
Start
0
0
3
4
4
13
13
21
Earliest
Finish
3
4
9
13
10
19
21
30
Latest
Start
6
0
9
4
7
15
13
21
Latest
Finish
9
4
15
13
13
21
21
30
Slack
6
0
6
0
3
2
0
0
Critical path is B–D–G–H, and project completion time is 30 weeks.
Difficulty: Moderate
Keywords: early and late start and finish times, critical path, completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
25) Phoebe B. Beebee is constructing a canal for the annual canoe races and has identified eleven activities
that are required to complete this important project. She calculated early and late start times and early
and late finish times but spilled coffee all over her printout. Use the remaining information to reconstruct
the table for Phoebe B. Beebee and her new canoe canal.
Activity
A
B
C
D
E
F
G
H
I
J
K
Answer:
Activity
A
B
C
D
E
F
G
H
I
J
K
Predecessor
-A
A
B, E
C
E
D
G
G
F
H, I, J
Length
Early Start Late Start Early Finish Late Finish
12
20
42
28
42
53
70
42
50
53
72
4
81
91
The completed table appears below:
Predecessor
-A
A
B, E
C
E
D
G
G
F
H, I, J
Length
12
20
16
11
14
8
17
11
9
4
10
Early Start Late Start Early Finish Late Finish
0
0
12
12
12
22
32
42
12
12
28
28
42
42
53
53
28
28
42
42
42
69
50
77
53
53
70
70
70
70
81
81
70
72
79
81
50
77
54
81
81
81
91
91
Difficulty: Challenging
Keywords: critical path, network, early and late start and finish times
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Develop the schedule of a project.
7.4 Analyzing Cost-Time Trade-Offs
1) The normal cost is the amount of money it normally takes to complete an activity faster than its normal
time.
Answer: FALSE
Difficulty: Easy
Keywords: normal cost, activity time, normal time
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Analyze cost-time trade-offs in a project network.
2) A project manager should stop crashing a project if the time budget has been met or if the crash costs
have exceeded the savings in indirect and penalty costs.
Answer: TRUE
Difficulty: Moderate
Keywords: crash cost, penalty costs, indirect costs
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Analyze cost-time trade-offs in a project network.
Table 7.4
Activity
A
B
C
D
E
F
G
Predecessor
-A
-C
A
B
D, E, F
Time(weeks)
8
6
4
9
11
3
1
3) Using Table 7.4, what is the earliest completion time for this project?
A) 18 weeks
B) 19 weeks
C) 20 weeks
D) 21 weeks
Answer: C
Difficulty: Moderate
Keywords: completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
4) Using Table 7.4, what is the largest amount of slack that any activity in the project has?
A) zero weeks
B) two weeks
C) four weeks
D) six weeks
Answer: D
Difficulty: Moderate
Keywords: activity slack
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
5) Using Table 7.4, what is the minimum number of activities that would have to be delayed to cause an
increase in the project's earliest completion date?
A) one activity
B) two activities
C) three activities
D) four or more activities
Answer: A
Difficulty: Moderate
Keywords: activity delay, earliest completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
6) Using Table 7.4, what is the minimum number of activities that would have to be crashed to cause a
decrease in the project's earliest completion date?
A) one activity
B) two activities
C) three activities
D) four or more activities
Answer: A
Difficulty: Moderate
Keywords: crashing an activity, earliest completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
7) Using Table 7.4, what is the early start time for activity D?
A) week 9
B) week 4
C) week 7
D) week 0
Answer: B
Difficulty: Moderate
Keywords: activity, earliest start time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
8) Using Table 7.4, what is the latest finish time for activity C?
A) week 4
B) week 6
C) week 8
D) week 10
Answer: D
Difficulty: Moderate
Keywords: activity, latest finish time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
9) Using Table 7.4, what is the slack associated with activity B?
A) 1 week
B) 2 weeks
C) 3 weeks
D) None of these is the correct activity slack for B.
Answer: B
Difficulty: Moderate
Keywords: activity slack
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
Table 7.5
Activity
A
B
C
D
E
F
G
H
Predecessor
---A,B
C
A
D,E
G
Time (days)
8
6
3
10
8
5
3
4
10) Using Table 7.5, what is the earliest completion time of this project?
A) 23 days
B) 25 days
C) 27 days
D) 29 days
Answer: B
Difficulty: Moderate
Keywords: earliest project completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
11) Using Table 7.5, what is the latest start time for activity E?
A) day 8
B) day 10
C) day 12
D) day 14
Answer: B
Difficulty: Moderate
Keywords: activity, latest start time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
12) Using Table 7.5, what is the earliest that activity D can be finished?
A) 18 days
B) 8 days
C) 13 days
D) 25 days
Answer: A
Difficulty: Moderate
Keywords: activity, earliest completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
13) Disaster strikes and activity F takes 20 days instead of the anticipated 5 days. Using Table 7.5, how
much longer will the project last than initially estimated?
A) 15 days
B) 0 days
C) 7 days
D) 3 days
Answer: D
Difficulty: Moderate
Keywords: project latest finish time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
14) Using Table 7.5, every day the construction crew is on-site costs $1000. What activities would you
consider crashing to reduce the project completion cost?
A) Activity E
B) Activity F
C) Activity G
D) All of these activities would be candidates for crashing.
Answer: C
Difficulty: Moderate
Keywords: project completion cost, activity crashing
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
15) Using Table 7.5, how many days can activity C be delayed without changing the whole project's
earliest completion time?
A) 0 days
B) 2 days
C) 5 days
D) 7 days
Answer: D
Difficulty: Moderate
Keywords: activity slack
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
Table 7.6
Activity
A
B
C
Immediate
Predecessor(s)
----
Time (weeks)
3
4
2
D
E
F
A
A, B
A, B, C
4
5
2
G
H
I
D, E
E
E, F
1
6
2
J
K
L
G, H, I
H, I
I
4
3
6
16) Using Table 7.6, what is the critical path for this project?
A) B–E–H–K
B) B–E–H–J
C) A–E–G–J
D) C–F–I–L
Answer: B
Difficulty: Challenging
Keywords: critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
17) Using Table 7.6, suppose activity D can be shortened from four days to one day. Assume all other
activity times remain the same. How much shorter will the total project earliest completion time become?
A) zero days
B) one day
C) two days
D) three days
Answer: A
Difficulty: Challenging
Keywords: earliest completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
18) Using Table 7.6, suppose activity I is delayed, taking eight days to complete instead of two days.
Assume all other activity times remain the same. How much longer will the total project earliest
completion time become?
A) zero days
B) one or two days
C) three or four days
D) five or six days
Answer: C
Difficulty: Challenging
Keywords: project, earliest completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
19) Using Table 7.6, what is the latest start time for activity A?
A) day 0
B) day 1
C) day 2
D) day 3 or later
Answer: B
Difficulty: Challenging
Keywords: activity, latest start time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
Figure to accompany Table 7.7
Table 7.7
CRASH
NORMAL CRASH NORMAL
COST
ACTIVITY
TIME
TIME COST ($000s) ($000s)
A
4
2
8
14
B
3
2
9
11
C
4
4
10
10
D
5
3
10
15
E
4
1
11
14
F
1
1
6
6
AVAILABLE
WEEKS OF
CRASHING
CRASHING COST
/ WEEK
20) What is the critical path for the project shown in the above network and Table 7.7, using the normal times?
A) A-B-D-F
B) A-C-D-F
C) A-C-E-F
D) A-B-C-D-E-F
Answer: B
Difficulty: Easy
Keywords: critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
21) Determine the information missing from Table 7.7; then answer the following questions. How many
week(s) of crashing are available for activity D in Table 2.9?
A) 0
B) 1
C) 2
D) 6
Answer: C
Difficulty: Easy
Keywords: crash, cost / time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
22) How many week(s) of crashing are available for activity B in Table 7.7?
A) 0
B) 1
C) 2
D) 3
Answer:
B
Difficulty: Easy
Keywords: crash, cost / time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
23) How many weeks of crashing are available for activity C in Table 7.7?
A) 0
B) 1
C) 2
D) 6
Answer: A
Difficulty: Easy
Keywords: crash, cost / time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
24) What is the crashing cost per week for activity A in Table 7.7?
A) $2,000
B) $3,000
C) $4,000
D) This activity cannot be crashed.
Answer: B
Difficulty: Moderate
Keywords: crash, cost / time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
25) What is the crashing cost per week for activity E in Table 7.7?
A) $1,000
B) $2,000
C) $3,000
D) This activity cannot be crashed.
Answer: A
Difficulty: Moderate
Keywords: crash, cost / time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
26) What is the crashing cost per week for activity F in Table 7.7?
A) $2,000
B) $3,000
C) $4,000
D) This activity cannot be crashed.
Answer: D
Difficulty: Moderate
Keywords: crash, cost / time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
27) If a decision is made to crash activity D in Table 7.7 by one week, what is the cost for this one week of
crashing?
A) $3,000
B) $2,000
C) $2,500
D) This activity cannot be crashed.
Answer: C
Difficulty: Moderate
Keywords: crash, cost / time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
28) Which activity should be crashed first for the project shown in Table 7.7?
A) A
B) B
C) C
D) D
Answer: D
Difficulty: Challenging
Keywords: crash, cost / time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
Table 7.8
Activity
A
B
C
D
E
F
G
H
Predecessor
---A
B
A, C
B
E, D, G
Normal
Time
(days)
5
7
5
10
6
7
4
6
Crashing Crashing
Time (days) Cost/day
1
$200
1
$500
1
$200
2
$300
1
$400
2
$650
1
$500
1
$350
29) Using Table 7.8, what is the critical path for this project using the normal times?
A) A–D–H
B) C–F
C) B–E–H
D) B–G–H
Answer: A
Difficulty: Moderate
Keywords: critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
30) Using Table 7.8, what is the minimum completion time for this project after crashing?
A) 23 days
B) 21 days
C) 19 days
D) 17 days
Answer: D
Difficulty: Moderate
Keywords: project, critical path, minimum completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
31) Using Table 7.8, what is the minimum crashing cost to finish this project in 18 days?
A) $3,450
B) $850
C) $1,150
D) $1,500
Answer: B
Difficulty: Challenging
Keywords: crash, cost / time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
32) Using Table 7.8, what is the activity with the greatest amount of slack?
A) A
B) B
C) C
D) D
Answer: C
Difficulty: Moderate
Keywords: activity slack
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
33) Using Table 7.8, what is the latest start time for activity E?
A) day 7
B) day 8
C) day 9
D) day 10
Answer: C
Difficulty: Moderate
Keywords: activity slack
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
34) Using Table 7.8, what is the earliest possible completion time for activity E after crashing?
A) day 11
B) day 13
C) day 15
D) day 17
Answer: B
Difficulty: Moderate
Keywords: activity, earliest completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
Table 7.9
35) Using Table 7.9, what is the earliest completion time of this project if normal times are used for all
activities?
A) fewer than 13 weeks
B) 13 weeks
C) 14 weeks
D) more than 14 weeks
Answer: B
Difficulty: Moderate
Keywords: earliest completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
36) Using Table 7.9, what is the minimum time schedule for this project?
A) fewer than 8 weeks
B) 8 weeks
C) 9 weeks
D) more than 9 weeks
Answer: C
Difficulty: Challenging
Keywords: minimum time schedule
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
37) Using Table 7.9, if the project completion time has to be reduced by one week, which of the following
activities should be crashed to minimize the extra cost of earlier completion?
A) Activity B
B) Activity E
C) Activity H
D) Activity J
Answer: A
Difficulty: Moderate
Keywords: activity crashing, project, completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
38) Using Table 7.9, what is the difference, in dollars, between the minimum-time schedule and the
schedule created by crashing all activities to their limits? Assume that there are no indirect or penalty
costs.
A) less than or equal to $1,000
B) greater than $1,000 but less than or equal to $2,000
C) greater than $2,000 but less than or equal to $3,000
D) greater than $3,000
Answer: D
Difficulty: Challenging
Keywords: project crashing cost / time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
39) Using Table 7.9, if the project's normal earliest completion time is to be reduced by two weeks, what is
the minimum additional cost that will be incurred in achieving this two-week reduction?
A) less than or equal to $1,000
B) greater than $1,000 but less than or equal to $1,500
C) greater than $1,500 but less than or equal to $2,000
D) greater than $2,000
Answer: B
Difficulty: Challenging
Keywords: project crashing cost / time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
40) A project is currently scheduled to be finished on its normal earliest completion date. The project
manager has the opportunity to earn a bonus if the project can be completed three weeks ahead of
schedule. The increase in project direct costs related to crashing activities would be $40,000. Also, project
indirect costs are $15,000 per week. What is the smallest bonus that the project manager should accept if
he or she wants to avoid increasing overall project costs?
A) less than or equal to $5,000
B) greater than $5,000 but less than or equal to $10,000
C) greater than $10,000 but less than or equal to $15,000
D) greater than $15,000
Answer: A
Difficulty: Moderate
Keywords: activity crashing cost
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
41) You are given the following information about activity A:
Normal time
Crash time
Normal cost
Crash cost
= 9 weeks
= 7 weeks
= $20,000
= $30,000
What will it cost to complete activity A in 8 weeks?
A) less than or equal to $24,000
B) greater than $24,000 but less than or equal to $27,000
C) greater than $27,000 but less than or equal to $30,000
D) greater than $30,000
Answer: B
Difficulty: Moderate
Keywords: activity crashing cost
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
42) You are given the following information about activity B:
Normal time
Crash time
Cost to crash per week
Crash cost
= 9 weeks
= 5 weeks
= $2,000
= $41,000
What will it cost to complete activity B in 6 weeks?
A) less than or equal to $34,000
B) greater than $34,000 but less than or equal to $36,000
C) greater than $36,000 but less than or equal to $38,000
D) greater than $38,000
Answer: D
Difficulty: Moderate
Keywords: activity crashing cost
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
43) You are given the following information about activity F:
Normal time
Crash time
Crash cost
Cost to crash per week
= 16 weeks
= 10 weeks
= $45,000
= $2,000
What is the normal cost for activity F?
A) greater than or equal to $55,000
B) less than $55,000 but greater than or equal to $47,000
C) less than $47,000 but greater than or equal to $40,000
D) less than $40,000
Answer: D
Difficulty: Moderate
Keywords: activity crashing cost
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
44) A company could add $10,000 per week in revenues if the project depicted in Table 7.10 could be
shortened.
Table 7.10
Activity
A
B
C
Immediate
Predecessor(s)
--A
Time
(weeks)
7
9
8
D
E
F
A, B
B
C
8
9
10
G
H
I
D, E
E
F, G
5
10
5
Four possible options exist to crash activities: crash A by one week at a cost of $6,000; crash C by two
weeks at a cost of $15,000; crash E by one week at a cost of $2,000; and crash I one week at a cost of $7,000.
What is the maximum amount of additional profit that can be made by crashing an option (or options)?
A) less than or equal to $4,000
B) greater than $4,000 but less than or equal to $8,000
C) greater than $8,000 but less than or equal to $12,000
D) greater than $12,000
Answer: B
Difficulty: Moderate
Keywords: activity crashing, project completion
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
45) If a project has exactly one critical path, which of the following statements is true?
A) Crashing an activity on the critical path will always result in an increase in total project profits.
B) Activities on the critical path cannot be crashed.
C) Crashing an activity on the critical path will always result in a reduced total project completion time.
D) The best schedule is one in which all activities are crashed as much as possible.
Answer: C
Difficulty: Moderate
Keywords: crashing an activity, critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Analyze cost-time trade-offs in a project network.
46) The ________ is the shortest possible time to complete the activity.
Answer: crash time
Difficulty: Moderate
Keywords: crash time
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Analyze cost-time trade-offs in a project network.
47) The ________ is determined by starting with the normal time schedule and crashing activities along
the critical path in such a way that the costs of crashing do not exceed the savings in indirect and penalty
costs.
Answer: minimum-cost schedule
Difficulty: Moderate
Keywords: minimum cost schedule
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Analyze cost-time trade-offs in a project network.
48) Describe how time–cost tradeoffs for project activities should be identified and analyzed.
Answer: There are always time–cost tradeoffs in project management situations. Overall project length
is driven by the length of the critical path, so if it is necessary to finish the project more quickly, the
activities that should be shortened are those on the critical path. Whether the goal is to reduce the
project's length to avoid a penalty, meet a deadline, or to reach an incentive, the cheapest activities on the
critical path should be attacked first. If the objective is to minimize costs, then the project manager should
reduce the critical path by expediting activities until the increase in direct costs exceeds the savings that
can be gained. If the objective is to finish the project in a certain number of days, the project manager
must continue to reduce activity lengths until that target is reached regardless of expense.
Difficulty: Moderate
Keywords: time-cost tradeoffs, expediting project activities
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Analyze cost-time trade-offs in a project network.
49) The following table contains a list of activities, with early- and late-start and finish times and crash
costs for the network shown in the figure. All start and finish times and crash costs are on a per-week
basis. Each activity can be reduced by one week at the most.
a. Determine the uncrashed activity lengths for activities A though K.
b. Determine the minimum completion cost for this project if each week carries a fixed cost of $1,000.
Activity
A
B
C
D
E
F
G
H
I
J
K
ES
0
5
5
0
6
9
11
11
18
17
26
EF
5
9
11
6
10
14
17
18
26
21
34
LS
0
13
5
1
7
17
16
11
18
22
26
LF
5
17
11
7
11
22
22
18
26
26
34
Crash
Cost/week
$1,100
$250
$1,200
$350
$900
$875
$1,500
$500
$300
$625
$750
Answer: Activity lengths for A–K can be found by subtracting the early start of each activity from the
late start of each activity.
The activity lengths appear in this table:
a.
Activity
A
B
C
D
E
F
G
H
I
J
K
Length
5
4
6
6
4
5
6
7
8
4
8
LS
0
13
5
1
7
17
16
11
18
22
26
LF
5
17
11
7
11
22
22
18
26
26
34
Crash
Cost/week
$1,100
$250
$1,200
$350
$900
$875
$1,500
$500
$300
$625
$750
b.
The critical path is ACHIK = 34 weeks. Other paths are DEHIK = 33; ACGJK = 29; DEGJK = 28; and ABFJK
= 26. With a fixed cost of $1,000/week, the initial cost is 34 weeks @ $1,000 = $34,000.
The cheapest critical-path activity is I @ $300, so reducing I from 8 weeks to 7 weeks costs $300 but saves
$1,000, resulting in a net savings of $700.
The next cheapest critical-path activity is H @ $500, so reducing H from 7 weeks to 6 weeks costs $500 but
saves $1,000, for a net savings of $500.
The next cheapest critical-path activity is K @ $750, so reducing K from 8 weeks to 7 weeks costs $750 but
saves $1,000, for a net savings of $250.
The other two activities on the critical path are more expensive to crash than the penalty cost, so the
cheapest completion time is 34 weeks - 3 weeks (I, H, K) = 31 weeks for a cost of $31,000 plus the crash
costs of $300 + $500 + $750 = $32,550.
Difficulty: Moderate
Keywords: activity crashing, early and late start and finish times
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
50) The following table contains a list of activities, with precedence requirements and crash costs. All start
and finish times and crash costs are on a per-week basis.
a. Determine the project cost and duration without crashing.
b. Determine the least expensive project cost if the duration is to be 10% shorter than normal project
duration.
c. Determine the least expensive project cost if the duration is to be 20% shorter than normal project
duration.
d. Create a graph that shows project expediting cost plotted as a function of the reduction in project
duration.
Activity
A
B
C
D
E
F
G
H
Normal
Time
10
12
16
8
13
9
24
17
Crash Time
7
8
12
7
10
8
29
14
Normal
Cost
2,000
1,500
2,200
2,500
1,950
800
3,650
1,200
Crash Cost
2,600
2,000
3,000
3,000
2,275
1,000
4,000
1,800
Predecessor
A
A
B
C
D
E, F
G
Answer:
a. Crash costs per week are shown in the table. The uncrashed project duration is 80 weeks at a cost of
$15,800.
Activity
A
B
C
D
E
F
G
H
Normal
Time
10
12
16
8
13
9
20
17
Crash Time
7
8
12
7
10
8
15
14
Normal
Cost
2,000
1,500
2,200
2,500
1,950
800
3,650
1,200
Crash
Crash Cost cost/week
2,600
$ 200
2,000
125
3,000
200
3,000
500
2,275
108.33
1,000
200
4,000
70
1,800
200
b. The least expensive way to reduce the project duration by 10% (eight weeks) is by crashing activity G
by five weeks at a cost of $70 per week, followed by activity B for three weeks at a cost of $125 per week.
The total cost of the 72 week project is $725 extra, or $16,525.
c. Reducing the project by 20% from normal duration requires the actions indicated in part b, plus these
actions. The reduction of activity B by another week for $125, activity A by three weeks at $200/week,
activity H for three weeks at $200 per week, and activities E and F for one week each at $108.33 and $200
respectively. The total cost for the 64 week project is $2,358.33 above the normal cost, or $18,158.33.
d.
Difficulty: Moderate
Keywords: activity crashing, early and late start and finish times
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Analyze cost-time trade-offs in a project network.
7.5 Assessing and Analyzing Risks
1) Risk is a measure of the probability and consequences of not reaching a defined project goal.
Answer: TRUE
Difficulty: Moderate
Keywords: risk, probability measure
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Assess the risk of missing a project deadline.
2) The optimistic time is the probable time required to perform the activity.
Answer: FALSE
Difficulty: Easy
Keywords: optimistic time, probable time
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Assess the risk of missing a project deadline.
3) A risk-management plan contains all identified risks to a project plus the ways that they can be
circumvented.
Answer:
TRUE
Difficulty: Moderate
Keywords: risk-management plan
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Assess the risk of missing a project deadline.
4) A good risk management plan will contain which of these elements?
A) the project manager's tolerance level for risk
B) the number of acceptable outcomes
C) a prediction of the impact of each risk on the project
D) the number of unacceptable outcomes
Answer: C
Difficulty: Moderate
Keywords: risk-management plan
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Assess the risk of missing a project deadline.
5) A plan that identifies key threats to a project and prescribes ways to circumvent them is called a:
A) project plan.
B) contingency plan.
C) backup plan.
D) risk management plan.
Answer: D
Difficulty: Moderate
Keywords: risk management
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Assess the risk of missing a project deadline.
6) Which of these is not one of the four categories of project risk?
A) cost/benefit
B) operations
C) strategic fit
D) project team capability
Answer: A
Difficulty: Moderate
Keywords: risk management
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Assess the risk of missing a project deadline.
7) Information accuracy relative to the completeness of the work breakdown structure and
communication of timely information affect the:
A) strategic fit risk of a project.
B) operations risk of a project.
C) service/product attribute risk of a project.
D) cost/benefit risk of a project.
Answer: B
Difficulty: Moderate
Keywords: risk management, operations
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Assess the risk of missing a project deadline.
8) When using the beta distribution for estimating activity times:
A) an advantage is that the mode of the distribution is always equidistant from the end points of the
distribution.
B) the most likely time estimate can be positioned anywhere between the optimistic and pessimistic time
estimates.
C) we assume that the standard deviation is one-third the range between the optimistic and pessimistic
time estimates.
D) the most likely time estimate becomes the mean of the distribution.
Answer: B
Difficulty: Moderate
Keywords: beta distribution
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Assess the risk of missing a project deadline.
9) Following are four sets of most optimistic, most likely, and most pessimistic times (in weeks) for an
activity. Which one of the four sets will have a mean estimated time equal to the most likely time?
A) 1, 9, 9
B) 1, 5, 9
C) 1, 1, 9
D) 1, 5, 5
Answer: B
Difficulty: Moderate
Keywords: optimistic times, most likely times, pessimistic times
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
10) To calculate the probability of completing a project by a certain date:
A) the expected completion time of the project is taken to be the sum of the activity times on the shortest
path.
B) the variance of the distribution of project completion times is taken to be one-sixth the difference
between the latest finish time and the earliest finish time of the last activity in the project.
C) we assume that the activity durations are independent of each other so that the normal distribution
can be used.
D) we need only the parameters of the beta distribution for the finish node of the diagram.
Answer: C
Difficulty: Moderate
Keywords: project completion date, probability
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Assess the risk of missing a project deadline.
11) In making an estimate of the most pessimistic time for an activity, a manager deliberately estimates
this time too high (i.e., longer than it should be). What is the result of this action, assuming the beta
distribution is being used to make time estimates?
A) The most likely time for this activity will be larger than it should be.
B) The variance of the activity will be smaller than it should be.
C) The beta distribution will be symmetric around its mean.
D) The expected time for this activity will be larger than it should be.
Answer: D
Difficulty: Moderate
Keywords: activity, pessimistic time, beta distribution
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
Table 7.2
12) Using Table 7.2, what is the earliest expected time of completion of the whole project?
A) fewer than or equal to 19 weeks
B) greater than 19 but fewer than or equal to 21 weeks
C) greater than 21 but fewer than or equal to 24 weeks
D) greater than 24 weeks
Answer: D
Difficulty: Moderate
Keywords: project completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
13) Using Table 7.2, which activity will have the largest amount of slack?
A) Activity F
B) Activity C
C) Activity H
D) Activity A
Answer: C
Difficulty: Moderate
Keywords: activity slack
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
14) Using Table 7.2, if the expected times for activities A, G, and H increased by 2, 3, and 4 weeks,
respectively, by how many weeks would the project's earliest expected time of completion increase?
A) fewer than or equal to 2 weeks
B) greater than 2 weeks but fewer than or equal to 4 weeks
C) greater than 4 weeks but fewer than or equal to 6 weeks
D) greater than 6 weeks
Answer: C
Difficulty: Challenging
Keywords: expected activity time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
Table 7.3
15) Using Table 7.3, what is the earliest expected time of completion of the whole project?
A) fewer than or equal to 21 days
B) greater than 21 but fewer than or equal to 22 days
C) greater than 22 but fewer than or equal to 23 days
D) greater than 23 days
Answer: D
Difficulty: Moderate
Keywords: project, duration
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
16) Using Table 7.3, which activity is on the critical path?
A) Activity D
B) Activity F
C) Activity G
D) Activity K
Answer: C
Difficulty: Moderate
Keywords: activity, critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
17) Using Table 7.3, if the project is due to be completed in 28 days, what is the probability that the project
will be completed on or before the due date?
A) less than or equal to 75%
B) greater than 75% but less than or equal to 85%
C) greater than 85% but less than or equal to 95%
D) greater than 95%
Answer: C
Difficulty: Moderate
Keywords: project completion time, probability
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
18) Using Table 7.3, if the project manager wants at least a 98% probability that the project will be
completed on or before the due date, what is the shortest project due date that will satisfy the manager?
A) fewer than or equal to 28 days
B) greater than 28 days but fewer than or equal to 30 days
C) greater than 30 days but fewer than or equal to 32 days
D) greater than 32 days
Answer: B
Difficulty: Challenging
Keywords: due date, probability of completion
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
Table 7.13
All activity times for the project are in weeks.
Activity
A
B
C
D
E
F
G
H
Predecessor
---A
C
B
F
D, E, G
Optimistic
12
7
5
15
8
9
18
15
Most Likely
16
14
10
18
12
12
22
19
Pessimistic
25
22
14
25
18
15
29
27
19) Using Table 7.13, what is the critical path of this project?
A) A–D–H
B) C–E–H
C) B–F–G–H
D) C–E–H and B–F–G–H are both critical.
Answer: C
Difficulty: Moderate
Keywords: critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
20) Using Table 7.13, what is the expected time of completion of the project?
A) fewer than 60 weeks
B) between 60 and 65 weeks
C) between 65 and 70 weeks
D) greater than 70 weeks
Answer: C
Difficulty: Moderate
Keywords: project, duration
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
21) Using Table 7.13, what is the probability that the project will be completed in 65 or fewer weeks?
A) less than or equal to 20%
B) greater than 20% but less than or equal to 24%
C) greater than 24% but less than or equal to 28%
D) greater than 28%
Answer: A
Difficulty: Moderate
Keywords: project completion probability / time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
22) Using Table 7.13, if the expected time for activity H is changed to 25 weeks, by how many weeks will
the project's expected completion time increase?
A) It will increase by one week.
B) It will increase by three weeks.
C) It will increase by two weeks.
D) It will increase by four weeks.
Answer: D
Difficulty: Challenging
Keywords: activity, project expected completion time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
Table 7.14
You are responsible for managing a project with the following activities (times are given in weeks).
Task
A
B
C
D
E
Predecessor
-A
B
-D
Optimistic
5
7
8
11
12
Most Likely
8
10
10
15
14
Pessimistic
10
12
14
20
18
23) Using Table 7.14, what is the critical path and expected completion time for this project?
A) D–E; 29.5 weeks
B) A–B–C; 25 weeks
C) D–E; 27.5 weeks
D) A–B–C; 26.5 weeks
Answer: A
Difficulty: Moderate
Keywords: project critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
24) Using Table 7.14, which activity has the largest standard deviation, and how large is that standard
deviation?
A) Activity A; 0.83 weeks
B) Activity B; 1.25 weeks
C) Activity D; 1.5 weeks
D) Activity C; 1.25 weeks
Answer: C
Difficulty: Moderate
Keywords: standard deviation, variance, critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
25) Using Table 7.14, what is the probability of completing the project in 29 or fewer weeks?
A) less than or equal to 40%
B) greater than 40% but less than or equal to 45%
C) greater than 45% but less than or equal to 50%
D) greater than 50%
Answer: A
Difficulty: Moderate
Keywords: project, duration
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
26) Using Table 7.14, what is the probability that the project will take 16 or more weeks to complete?
A) less than or equal to 20%
B) greater than 20% but less than or equal to 25%
C) greater than 25% but less than or equal to 30%
D) greater than 30%
Answer: A
Difficulty: Moderate
Keywords: project, duration
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
27) Using Table 7.14, if the expected time for activity C is changed to 12 weeks, by how many weeks will
the project's expected completion time increase?
A) It will not change.
B) It will increase by one week.
C) It will increase by two weeks.
D) It will increase by three weeks.
Answer: A
Difficulty: Challenging
Keywords: project, duration
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
28) Assuming a beta distribution is being used, if the most pessimistic time for an activity increases by six
weeks, what will happen to the expected time for that activity?
A) It will increase by one week.
B) It will decrease by one week.
C) It will increase by six weeks.
D) It will remain the same.
Answer: A
Difficulty: Moderate
Keywords: beta distribution, pessimistic activity time
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
29) The probability that a project will be completed by its earliest expected completion date is:
A) 50 percent.
B) 95 percent.
C) 100 percent.
D) impossible to determine.
Answer: A
Difficulty: Moderate
Keywords: probability, project completion date
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
30) If the sum of the variances on the critical path (and all other network paths) is equal to zero, what is
the probability that the project will be completed by its earliest expected completion date?
A) 50 percent
B) 95 percent
C) 100 percent
D) It cannot be determined.
Answer: C
Difficulty: Moderate
Keywords: critical path expected variance, earliest expected completion date
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
31) The ________ is the shortest time in which an activity can be completed if all goes exceptionally well.
Answer: optimistic time
Difficulty: Moderate
Keywords: optimistic time
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Assess the risk of missing a project deadline.
32) To find the standard deviation of the critical path, you must first add the ________ of all activities on
the critical path.
Answer: variances
Difficulty: Challenging
Keywords: standard deviation, variance, critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
33) A(n) ________ identifies the key threats to a project and prescribes ways to work around them.
Answer: risk-management plan
Difficulty: Moderate
Keywords: project risk-management plan
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Assess the risk of missing a project deadline.
34) Consider the activities, durations, and predecessor relationships in the following network. Draw the
network and answer the questions that follow.
Activity
Description
A
B
C
D
E
F
G
H
I
J
Immediate
Predecessor(s)
--A
A
B
D, C
C
F
F
E, G, H
I
Optimistic
(Weeks)
4
2
8
1
6
2
2
6
4
1
Most Likely
(Weeks)
7
8
12
2
8
3
2
8
8
2
Pessimistic
(Weeks)
10
20
16
3
22
4
2
10
12
3
a. What is the expected time for activity B?
b. What is the variance for activity B?
c. Based on the calculation of estimated times, what is the critical path?
d. What is the estimated time of the critical path?
e. What is the activity variance along the critical path?
f. What is the probability of completion of the project before week 42?
Answer:
a. t =
e
b. σ2 =
= 9 weeks
2=
2 = 9.00
c. A–C–F–H–I–J
d. 40 Weeks
e. 1 + 1.78 + .11 + .44 + 1.78 + .11 = 5.22
f.
z=
=
= .875
therefore, the probability from the standard normal table is approximately .81. Note that the variability of
some non-critical path activities is large. Consideration might be given to those paths.
Activity
A
B
C
D
E
F
G
H
I
J
a
4
2
8
1
6
2
2
6
4
1
m
7
8
12
2
8
3
2
8
8
2
b
10
20
16
3
22
4
2
10
12
3
Expected
Time
7
9
12
2
10
3
2
8
8
2
Variance
1
9
1.78
0.11
7.11
0.11
0
0.44
1.78
0.11
Difficulty: Moderate
Keywords: expected time, variance, probability, activity, critical path
Learning Outcome: Describe the goals and stages of project management
AACSB: Analytical Thinking
Learning Obj.: Assess the risk of missing a project deadline.
7.6 Monitoring and Controlling Projects
1) The phase of project management that takes the most resources is the execution phase.
Answer: TRUE
Difficulty: Moderate
Keywords: project management, execution phase
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Identify the options available to monitor and control projects.
2) In addition to finishing the work, the project close out phase should include recording some
lessons-learned to carry forward to future projects.
Answer: TRUE
Difficulty: Easy
Keywords: project close out, lessons learned
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Identify the options available to monitor and control projects.
3) Which of these steps comes first in the project life cycle?
A) close out
B) definition and organization
C) execution
D) planning
Answer: B
Difficulty: Easy
Keywords: project life cycle
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Identify the options available to monitor and control projects.
4) A project manager hires a few new coders to help speed up the new software project and deliver the
package on time to an important client. The manager has engaged in:
A) resource leveling.
B) resource allocation.
C) resource acquisition.
D) resource enhancement.
Answer: C
Difficulty: Moderate
Keywords: resource acquisition
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Identify the options available to monitor and control projects.
5) The savvy project manager knew there would be a high demand for finish carpenters in late October,
so she started a crew early on one section of the house so they would be available to help elsewhere later
on. This project manager is engaging in:
A) resource allocation.
B) resource acquisition.
C) resource scheduling.
D) resource leveling.
Answer: D
Difficulty: Moderate
Keywords: resource leveling
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Identify the options available to monitor and control projects.
6) The phase of project management that takes the most resources is the ________, during which
managers focus on activities that pertain to deliverables.
Answer: execution phase
Difficulty: Moderate
Keywords: execution phase, resources
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Identify the options available to monitor and control projects.
7) ________ is an attempt to reduce the peaks and valleys in resource needs by shifting the schedules of
conflicting activities within their earliest and latest start dates.
Answer: Resource leveling
Difficulty: Moderate
Keywords: resource leveling
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Identify the options available to monitor and control projects.
8) The project manager and team can step back and examine how the project work was accomplished
during the ________ phase of the project.
Answer: close out
Difficulty: Moderate
Keywords: close out
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Identify the options available to monitor and control projects.
9) A project tracking system should collect information on three topics for the project manager. What are
these topics, why are they important, and what actions can the manager take to address any concerns that
surface?
Answer: The three topics are open issues, risks, and the schedule status. Open issues consist of any
ideas, concerns, or questions that were raised during the project life cycle that have yet to be resolved.
The tracking system should permit easy identification of these unresolved concerns for the manager and
team members. Similarly, the tracking system should provide the status of each risk and its potential
impact on project completion. These risks can be discussed at each project meeting. Finally, the project
tracking system should provide periodic monitoring of slack time in the project schedule to help protect
the critical path. As progress is made on all constituent activities, the tracking system should provide
current information on the level of risks in the project.
Difficulty: Moderate
Keywords: open issues, schedule status, risk
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Identify the options available to monitor and control projects.
10) What options do project managers have to alleviate resource problems? Briefly describe each method.
Answer: The methods are resource leveling, resource allocation, and resource acquisition. Resource
leveling can be used to reduce the peaks and valleys in resource needs by shifting the schedules of
conflicting activities within their earliest and latest start dates. Resource allocation attempts to shift
resources from activities with slack to those on the critical path where resources are overloaded. Resource
acquisition adds more of an overloaded resource to maintain the schedule of activity.
Difficulty: Moderate
Keywords: resource leveling, resource allocation, resource acquisition
Learning Outcome: Describe the goals and stages of project management
AACSB: Application of Knowledge
Learning Obj.: Identify the options available to monitor and control projects.