Online Instructor’s Manual to accompany
Introduction to Materials Management Sixth Edition Tony Arnold Steve Chapman Lloyd Clive
Upper Saddle River, New Jersey Columbus, Ohio
__________________________________________________________________________________
Copyright © 2008 by Pearson Education, Inc., Upper Saddle River, New Jersey 07458. All rights reserved. Printed in the United States of America. This publication is protected by Copyright and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. For information regarding permission(s), write to: Rights and Permissions Department. Instructors of classes using Arnold, Chapman, and Clive’s Introduction to Materials Management, Sixth Edition, may reproduce material from the instructor’s manual for classroom use. . 10 9 8 7 6 5 4 3 2 1
ISBN-13: 978-0-13-59838-6 ISBN-10: 0-13-159838-4
ii
CONTENTS
Chapter 1: Introduction to Materials Management................................................................... 1 Chapter 2: Production Planning System ...................................................................................
9
Chapter 3: Master Scheduling................................................................................................... 21 Chapter 4: Material Requirements Planning............................................................................. 32 Chapter 5: Capacity Management............................................................................................. 59 Chapter 6: Production Activity Control.................................................................................... 68 Chapter 7: Purchasing ............................................................................................................... 82 Chapter 8: Forecasting .............................................................................................................. 90 Chapter 9: Inventory Fundamentals........................................................................................ 102 Chapter 10: Order Quantities .................................................................................................. 113 Chapter 11: Independent Demand Ordering Systems............................................................. 125 Chapter 12: Physical Inventory and Warehouse Management ............................................... 139 Chapter 13: Physical Distribution.............................................................................................149 Chapter 14: Products and Processes .........................................................................................160 Chapter 15: Just-in-Time Manufacturing..................................................................................170 Chapter 16: Total Quality Management ...................................................................................181
iii
INTRODUCTION TO MATERIALS MANAGEMENT CHAPTER 1 ANSWERS TO PROBLEMS 1.1
Sales 100% 100% Cost of manufacturing 60% 50% Other costs 30% 90% 30% 80% Profit (percent of Sales) 10% 20% Therefore a 10% reduction in the cost of manufacturing would produce a 100% increase in profit. 1.2
Profit = 0.20 = Sales =
Sales – (direct costs + overhead) Sales – (0.60 × Sales + 0.30) 0.5 = 1.25 = 125% 0.4 To increase profits from 10% to 20% takes a 25% increase in sales but only a 10% decrease in costs. Good materials management can have a direct impact on profit.
1.3
a. Weekly cost of goods sold Value of 10 weeks’ WIP = b. Value of 7 weeks’ WIP = Reduction in WIP Annual saving =
1.4
a. Weekly cost of goods sold Value of 12 weeks' WIP = b. Value of 5 weeks' WIP = Reduction in WIP Annual saving =
=
$15,000,000 =
50 10 × $300,000 7 × $300,000
= = = 20% × $900,000 =
=
$3,000,000 $2,100,000 $900,000 $180,000
$40,000,000 =
50 12 × $800,000 5 × $800,000
= = = 20% × $5,600,000
1
$300,000
$800,000
$9,600,000 $4,000,000 $5,600,000 = $1,120,000
1.5
Using $1 million as the units: Sales Direct material Direct labor Overhead Profit
$10.0 $3.5 2.5 3.5
9.5 $.5
As a % of sales 100% 35% 25% 35% 95% 5%
a. From the above we can say: (in millions or M$) Sales = direct material + direct labor + overhead + profit (now 1M$) = .35(sales) + .25(sales) + 3.5 M$+ 1.0 M$ .40 (Sales) = 4.5 M$ Sales = 11.25 = 11.25 × $1,000,000 = $11,250,000 Therefore there must be a $1.25 million increase in sales. b. To increase profit by $500,000 there must be a $500,000 reduction in cost. Therefore direct material must be reduced by $500,000. It therefore takes 2 ½ times the sales dollars to obtain the profit that would be realized in material reductions. c. As for b. Direct labor would have to be reduced by $500,000.
2
MULTIPLE CHOICE QUESTIONS 1.
Select the best answer to the following: a. traditionally the supply-production-distribution functions have reported to different departments b. the supply, production and distribution functions are part of a total system c. materials flow into an organization, are processed in some way and distributed to the consumer d. all the above are correct e. none of the above is correct
2.
Manufacturing is important to the economy because: a. it generates wealth b. it supports service industries c. it adds value to products d. all of the above e. none of the above
3.
Which of the following is the best statement about the operating environment in which operations management functions? a. most organizations do not need to worry about competition b. customers are more demanding c. government regulation is not important for companies d. price is more important than quality e. none of the above is true
4.
Which of the following statements is best regarding order winners? a. they persuade a company's customers to choose its product b. they are the same in every market c. they are the same as order qualifiers, only better d. they are present in every product e. all the above are true
5.
Which of the following strategies has the shortest delivery lead time and the least customer input? a. engineer-to-order b. make-to-order c. assemble-to-order d. make-to-stock
3
6.
Which of the following statements is best? a. the supply chain includes all activities and processes to provide a product or service to a customer. b. material in the supply chain usually flows from producer to customer. c. the supply chain contains only one supplier. d. all of the above are true. e. a and b only are true.
7.
Companies A and B supply company C, which supplies customers D and E. Which of the following statements is best? a. the supply chain for company A includes B, C, D, and E. b. the supply chain for company B includes A, C, D and E. c. the supply chain for company C includes A, B, D, and E. d. all the above are true.
8.
Which of the following statements is best? a. the basic elements of a supply chain are supply, production, and distribution b. the elements of a supply chain are interdependent c. design information generally flows from customer to supplier d. all the above are true
9.
Which of the following is the best statement about the environment in which operations management functions? a. most organizations do not need to worry about competition b. world-wide competition is not significant for most companies c. government regulation is not important for companies d. customers are more demanding e. none of the above is true
10. If a firm wishes to maximize profit, which of the following objectives are in conflict? I. Maximize customer service. II. Minimize production costs. III. Minimize inventory costs. IV. Minimize distribution costs. a. all the above b. none of the above c. I and II only d. I and III only e. II and III only
4
11. Which of the following statements is best? I. The conflict between marketing, finance and production centers on customer service, disruption to production, and inventory levels. II. Marketing's objectives can be met with higher inventories. III. Finance's objectives can be met with higher inventories. IV. Production's objectives can be met with higher inventories. a. all of the above are true b. I and II only are true c. I, II and III only are true d. I, II and IV only are true e. II, III and IV only are true 12. Which of the following is normally a major activity of materials management? I. Manufacturing planning and control. II. Physical supply/distribution. a. both I and II b. neither I nor II c. I only d. II only 13. The objective of materials management is to: I. Provide the required level of customer service. II. Maximize the use of the firm's resources. a. I only b. II only c. I and II d. neither I nor II 14. Which of the following is/are primary activities of manufacturing planning and control? I. Production planning. II. Implementation and control. III. Inventory management. a. I and II only b. II and III only c. I and III only d. all the above are primary activities 15. Which of the following is (are) input(s) to manufacturing planning and control? a. product description b. process description c. available facilities d. quantities to be produced e. all the above are inputs
5
16. Which of the following is NOT an activity of physical supply/distribution? a. transportation b. factory inventory c. warehousing d. packaging e. materials handling 17. Materials management can be considered a balancing act because: I. There are trade-offs between customer service and the cost of providing the service. II. Priority and capacity must be balanced. a. neither I nor II b. I only c. II only d. I and II 18. If the cost of manufacturing (direct labor and materials) is 50% of sales and profit is 15% of sales, what would the profit percentage be if the direct costs of manufacturing was reduced from 50% to 47%? a. 3% b. 6% c. 12% d. 15% e. 18% 19. Which of the following are generally considered overall objectives of an organization? I. Providing good customer service. II. Maintaining low levels of inventory investment. III. Optimizing use of resources. IV. Providing sufficient return on investment. a. I and II only b. I, II and III only c. I, III and IV only d. all the above
6
20. The purpose of the materials management concept is: I. To manage materials in a production operation. II. To have purchasing support the needs of production. III. To have production support the needs of purchasing. a. II and III only b. I and II only c. I, II and III d. I and III only 21. Making a pizza at a fast-food restaurant would be considered a form of: a. Engineer to order b. Assemble to order c. Make to stock d. Make to order e. None of the above 22. Metrics in a supply chain are: a. Governed by the International Metric Commission b. Measurements of performance c. A charge passed on to customers d. Not used on transportation e. Do not apply to the supply chain 23. Performance measures in a supply: a. Should be objective b. Are viewed mostly by finance c. Must be measurements of one parameter only d. Concentrate on cost only e. Are not used once a process is automated 24. Which statement is best? a. Performance standards are set by the supplier b. Performance standards set the goal c. Performance measurements show how well you did d. Both b and c are correct e. None of the above applies to the supply chain 25. Savings in the supply chain mostly are the result of: a. Members in the chain sharing information b. Being able to ship in larger quantities c. Members having clout with suppliers d. Sticking with local competition e. Cutting cost after the design phase
7
Answers. 1 d 2 d 10 a 11 d 19 d 20 b
3 b 12 a 21 b
4 a 13 c 22 b
5 d 14 d 23 a
6 e 15 e 24 d
8
7 c 16 b 25 a
8 d 17 d
9 e 18 e
PRODUCTION PLANNING SYSTEM CHAPTER 2 ANSWERS TO PROBLEMS 2.1
Ending inventory = =
2.2
Total working days = 19 + 20 + 21 = 60 Average daily production = 500 ÷ 60 =
8.3 units
Total working days = 22 + 21 + 20 = 63 Average daily production = 20,000 ÷ 63 =
317.5 units
2.3
opening inventory + production – demand 400 + 800 – 900 = 300 units
2.4
Month 1 production Month 2 production Month 3 production
= = =
19 × 8.3 20 × 8.3 21 × 8.3
= = =
157.7 units 166 units 1174.3 units
2.5
Month 1 production Month 2 production Month 3 production
= = =
22 × 317.5 = 21 × 317.5 = 20 × 317.5 =
6985 units 6667.5 units 6350 units
2.6 d ast ed production ed inventory
500
1
2
3
4
5
6
700
700
1100
1600
1100
800
1000
1000
1000
1000
1000
1000
800
1100
1000
400
300
500
1
2
3
4
5
6
100
120
130
140
120
110
720
130
130
130
130
130
130
780
130
140
140
130
140
160
2.7 Period Forecast demand Planned production Planned inventory
100
Total production = Period production =
720 + 100 – 160 = 780 ÷ 6 =
9
780 units 130 units
Total
2.8 Period Forecast demand Planned production Planned inventory
500
Total production = Period production =
1
2
3
4
5
1300
1200
800
600
917
917
917
117
−167 −50
5700 + 300 –500 5500 ÷ 6 =
6
Total
800
1000
5700
917
917
917
5500
267
383
300
= 5500 units 917 units
2.9 Period
1
Forecast demand Planned production Planned inventory
9
5
9
9
32
8
8
8
8
32
−1
2
1
0
0
2
3
4
Total
a. 8 units b. period 1, minus 1 c. 9 units, ending inventory = 4 units 2.10
a. There is a stockout of 1 unit in period one. The cost will be: Stockout cost: 1 × $500 = $500 Carrying cost: 3 × $50 = 150 Total cost: = $650 c. Total period inventory = 0 + 5 + 3 + 4 = 12 units The cost will be = $50 × 12 = $600 Since there are no stockouts this will be the total cost of the plan.
10
2.11
a. b. c. d.
Total production = Daily production = The monthly production for May The ending inventory for May
Month
May
Working days Forecast demand Planned production Planned inventory
100
530 + 130 – 100 = 560 560/70 = 8 units = 168 units = 153 units
Jun
Jul
Aug
Total
21
19
20
10
70
115
125
140
150
530
168
152
160
80
560
153
180
200
130
Jan
Feb
Mar
Apr
May
20
22
20
20
18
19
119
1200
1300
800
700
700
900
5600
874
961
874
874
787
830
5200
274
−65
9
183
270
200
2.12 Month Working days Forecast demand Planned production Planned inventory
600
Total production = 5600 + 200 – 600 = 5200 Daily production = 5200 ÷ 119 = 43.7 units per day There will be a stockout of 65 units in February.
11
Jun
Total
2.13
Total production = 300 + 1080 – 200 = 1180 units Number of weeks available for production = 5.5 Average weekly level production = 1180 = 214.5 units 5.5 The nearest quantity that can be produced is 200 units on two shifts. In the second week there is a shutdown so production in that week that will be only 100 units. Total production so far = 5 × 200 + 100 = 1100 units The balance of 80 units can be made in week four when extra help is available. Opening inventory = 200 units Week Forecast demand Planned production Planned inventory
200
1
2
3
4
5
6
Total
120
160
240
240
160
160
1080
200
100
200
280
200
200
1180
280
220
180
220
260
300
2.14
Ending backlog = demand + opening backlog – production = 700 + 500 − 800 = 400 units
2.15
Total production
= demand + opening backlog – ending backlog = 3800 + 900 – 200 = 4500 units Weekly production = 4500 ÷ 6 = 750 units Week Forecast demand Planned production Planned backlog
900
1
2
3
4
5
6
Total
600
700
700
700
600
500
3800
750
750
750
750
750
750
4500
750
700
650
600
450
200
12
2.16 Desired ending backlog = 1200 Note: All weekly production amounts determined using standard rounding rules. Total production = demand + opening backlog – ending backlog = 6800 + 1100 – 1200 = 6700 units Weekly production = 6700 ÷ 6 = 1117 units Week Forecast demand Planned production Planned backlog
2.17
1100
1
2
3
4
5
6
Total
1200
1100
1200
1200
1100
1000
7300
1117
1117
1117
1117
1117
1117
7200
1183
1166
1249
1332
1315
1198
Total production = 112,500 + 9000 – 11,500 = 110,000 units Daily production = 110,000 ÷ 75 = 1466.67 units Number of workers required = 1466.67/14 = 104.76 → 105 Actual daily production = 105 × 14 = 1470 units
Month
1
Working days Forecast demand Planned production Planned inventory
11500
2
3
4
Total
20
24
12
28000
27500
28500
28500 112500
29400
35280
17640
27930 110250
12900
20680
9820
13
19
9250
75
2.18
Total production = 17900 + 800 – 1000 = 17700 Daily production = 17700/117 = 151.28 units Number of workers required = 151.28/9 = 16.81 → Actual daily production = 17 × 9 = 153 units Month
1
Working days Forecast demand Planned production Planned inventory
1000
17 workers
2
3
4
5
6
Total
20
24
12
22
20
19
2800
3000
2700
3300
2900
3200 17900
3060
3672
1836
3366
3060
2907 17901
1260
1932
1068
1134
1294
1001
117
It is not possible to meet the ending inventory target because of the extra fraction of a worker needed. The only way to do it would be to reduce the number of workers to 16 at some point.
14
MULTIPLE CHOICE QUESTIONS 1.
The ability of manufacturing to produce goods and services is called: a. scheduling b. production planning c. capacity d. routing e. none of the above
2.
Priority in production planning relates to: a. what should come first b. how much of what is needed and when c. capacity d. an objective of the firm e. none of the above
3.
Which of the following is an input to the production plan? a. strategic business plan b. financial plan c. market plan d. engineering plan e. all of the above are inputs
4.
Which of the following plans has the longest planning horizon and the least level of detail? a. strategic business plan b. production plan c. master production schedule d. all of the above have the same level of detail e. none of the above
5.
In terms of INCREASING level of detail, which is the best sequence of activities? I. Material requirements planning. II. Master production scheduling. III. Production planning. a. I, II and III b. I, III, and II c. II, III, and I d. II, I, and III e. III, II, and I
15
6.
Over the time span of the production plan, which of the following can usually be varied to change capacity? a. work force b. inventories c. plant and equipment d. all of the above e. a and b above
7.
Which of the following is a characteristic of a production plan? a. time horizons are five years b. the production plan is for individual items c. the only objective is to have an efficient plant d. all of the above are characteristics of a production plan e. none of the above is characteristic of a production plan
8.
Determining the need for labor, machines, physical resources to meet the production objectives of the firm is called: a. production control b. production planning c. capacity planning d. all of the above e. none of the above
9.
The function of setting the limits or levels of manufacturing operations based on the market plan and resource availability is called: a. production planning b. production activity level c. capacity planning d. all of the above e. none of the above
10. A statement of a schedule of requirements for individual end items is called: a. a master production schedule b. a material requirements plan c. a production plan d. a capacity plan e. none of the above 11. Which of the following statements is most appropriate regarding production planning? a. a high level of detail is not needed b. a translation must be made from product demand to capacity demand c. product groups based on similarity of manufacturing process should be used in planning d. all of the above are true e. none of the above is true
16
12. Which of the following statements is best about sales and operations planning? a. it provides an means of updating the material requirements plan b. it includes only the marketing and production plans c. it is usually updated on a monthly basis d. it has no effect on inventory levels 13. Which of the following are characteristics of an MRPII system? I. It incorporates the plans of marketing, production and finance. II. It is a fully integrated planning and control system. III. It has feedback from the bottom up. a. I only b. II only c. III only d. I, II and III 14. For the purposes of production planning, product groups should be established on the basis of: a. market segments b. similarity of manufacturing process c. the availability of materials d. the availability of machinery e. all of the above 15. Which of the following is a basic strategy in developing a production plan? a. hybrid strategy b. production leveling c. chase strategy d. a and b above e. b and c above 16. A production planning strategy which turns away extra demand is called: a. production leveling b. demand matching c. hybrid strategy d. all of the above e. none of the above 17. Which basic production planning strategy will build inventory and avoid the costs of excess capacity? a. demand matching (chase) b. production leveling c. subcontracting d. all the above e. none of the above
17
18. Which basic production planning strategy avoids hiring and layoff costs and the costs of excess capacity? a. demand matching b. operation smoothing c. subcontracting d. all the above e. none of the above 19. If the opening inventory is 100 units, the sales are 500 units and the ending inventory is 200 units, then manufacturing must produce: a. 300 units b. 400 units c. 500 units d. 600 units e. none of the above 20. Over a 10-week period the cumulative sales are forecast at 10,000 units, the opening inventory is 200 units and the closing inventory is to be 100 units. What should be the weekly planned production for level production? a. 990 b. 1000 c. 1010 d. 1030 e. none of the above 21. Firms will generally make-to-stock when: a. demand is unpredictable b. there are many product options c. delivery lead times are long d. all of the above e. none of the above 22. Firms will generally make-to-order when: a. products are produced to customer specifications b. there are many product options c. product is expensive to make and store d. all of the above e. none of the above
18
23. Which of the following information is needed to develop a make-to-stock production plan? I. Forecast by time period for the production plan. II. Opening inventory. III. Opening backlog of customer orders. IV. Desired ending inventory. a. I, II and III b. I, II and IV c. 1, III and IV d. II, III and IV e. none of the above 24. If the old backlog was 200 units, the forecast for the next period is 500 units, and production for the next period is 600 units, what will be the backlog at the end of the next period? a. 100 units b. 200 units c. 300 units d. 700 units e. 800 units 25. ____________ is concerned with long-term planning of manufacturing activity: a. Sales and operations planning b. Master production scheduling c. MRP d. Production activity control e. Master planning 26. Which of the following is NOT a rule of Sales and Operations Planning? a. Product Groups need not be decided b. Planning units of measure need to be decided c. A planning horizon must include new product development time d. Performance review periods to be compared should be decided 27. Which of the following is a complete closed loop planning system that develops plans for all materials and operations? a. Capacity requirements planning b. Enterprise resource planning c. Supply chain management d. Material requirements planning
19
Answers. 1 c 2 b 10 a 11 d 19 d 20 a
3 e 12 c 21 e
4 a 13 d 22 d
5 e 14 b 23 b
6 e 15 e 24 a
20
7 e 16 e 25 a
8 c 17 b 26 a
9 a 18 c 27 b
MASTER SCHEDULING CHAPTER 3 ANSWERS TO PROBLEMS 3.1 Week
1
2
3
4
5
6
Forecast sales
10
50
25
50
10
15
20
70
45
95
85
70
Projected available MPS
30
100
100
3.2 Week Forecast sales Projected available MPS
300
1
2
3
4
5
6
200
300
350
200
150
150
100
0
50
50
100
150
200
400
200
200
200
1
2
3
4
Total
220
300
200
200
250
150
150
150
200
200
200
200
1
2
3
4
Total
120
180
100
120
520
0
20
120
0
200
200
3.3 Production Plan Quarter Forecast sales Projected available Production plan
270
Mailbox A. Lot size: 200 Quarter Forecast sales Projected available MPS scheduled
120
21
920
Mailbox B. Lot size: 200 Quarter Forecast sales Projected available MPS scheduled
150
1
2
3
4
Total
100
120
100
80
400
250
130
30
150
200
200
400
3.4 Production plan Week Forecast Projected available Production plan
2000
Model A. Week Forecast Projected available
1500
MPS
2
3
3000
3500
3500
4000 14000
3000
3500
4000
4000
4000
4000
4000
4000
1
2
3
4
Total
500
4
8500
2000
2000 2500
2000
1500
3500 1000
3000
2000
Model B. Week Forecast Projected available MPS
1
Total
4000
4000
1
2
3
4
Total
1000
1500
1000
2000
5500
1500
0
3000
1000
2000
4000
22
3.5 Master production schedule Week 1 2
3
4
5
6
Product A
205
Product B Product C Total production
205
205
205
205
205
205
205
205
205
205
1
2
3
4
5
6
Product A
280
210
140
70
0
125
Product B
60
20
185
350
460
340
Product C
205
360
310
260
210
160
Total inventory
545
590
635
680
670
625
1
2
3
4
5
Total
Model A
175
125
125
150 112.5
687.50
Model B
66
132 181.5
99 148.5
627.00
241
257 306.5
Inventory Week
3.6
205
a. Week
Total hours
249
261 1314.50
b. The total hours required (1314.50) exceeds the total hours available (5 X 260 = 1300). If possible, schedule some of the work from Week 3 into Weeks 1 and 2, and also work overtime. 3.7 Week Customer orders MPS ATP
1
2
3
4
5
70
70
20
40
10
30
6
100
100
100
10
50
100
23
3.8 Week Customer orders MPS
1
2
3
4
5
21
14
9
30
30
30
9
16
18
ATP
6 3
3.9 Week Customer orders MPS
1
2
3
4
10 50
50
50
ATP
2
0
40
Week
1
2
3
4
5
6
7
8
Forecast sales Projected available ATP
45
50
40
40
40
40
30
15
10
5
6
7
60
18
8
9 10
3.10
0
100
100
100
100
10
20
30
85
3.11 On hand: 60 units Week Customer orders MPS ATP
1
2
3
4
5
6
20
50
30
30
50
30
100
100
30
0
20
1
2
3
4
5
6
7
8
50
50
30
60
50
40
30
15
3.12 On hand: 50 units Week Customer orders MPS ATP
0
100
100
100
100
10
0
30
85
24
10
3.13 Week
1
2
3
4
5 40
6
7
8
Customer orders MPS
70
10
50
40
15
20
15
100
100
100
ATP
20
−30
50
Possible action is to promise delivery of 20 in week 5 and the balance in week 6. The ATP for week 1 would become 0, for week 3, 0 and for week 6, 40. 3.14 Week
1
2
3
4
Forecast Customer orders Projected available balance MPS
80
80
80
70
100
90
50
40
40
150
70
0
140
200
3.15 Week
1
2
3
4
Forecast Customer orders Projected available balance MPS
50
50
50
50
60
30
60
20
0
70
10
60
60
100
100
3.16 Period
1
2
3
4
5
6
Forecast Customer orders PAB
20
21
22
20
28
25
19
18
20
18
30
22
1
43
23
3
33
8
20
MPS ATP
1
60
60
4
8
25
MULTIPLE CHOICE QUESTIONS 1.
The information needed to develop a master production schedule will be got from: a. the production plan b. the forecast of individual end items c. inventory levels for individual end items d. all of the above e. none of the above
2.
The MPS is a vital link the production planning system because it: I. Keeps priorities valid. II. Forms the basis for determining the capacity needed. III. Is input to the material requirements plan. IV. Is input to the production plan. a. I, II, III and IV b. I, II and III c. I, II and IV d. II, IIII and IV e. 1, 3 and 4
3.
The MPS: a. b. c. d. e.
4.
facilitates order promising works with individual end products is an agreed-upon plan between production and marketing all of the above none of the above
The functions of a master production schedule are to: I. Plan material components II. Plan capacity requirements III. Keep priorities valid a. I, II and III b. I, II and not III c. I, III and not II d. II, III and not I e. none of the above is a function of the MPS
26
5.
Which of the following are objectives of an MPS? I. Maintain the desired level of customer service. II. Keep the sales department happy. III. Make the best use of material, labor and equipment. IV. Maintain inventory investment as required. a. only I is an objective b. only I and II are objectives c. only I, II and III are objectives d. only I, III and IV are objectives e. only II, III and IV are objectives
6.
The process of checking the MPS against available capacity is called: a. capacity planning b. shop-floor control c. rough-cut capacity planning d. capacity control e. process checking
7.
In an assemble-to-order company, at which level should master scheduling take place? a. the component/subassembly level b. the end item level c. the raw material/component level d. it does not matter, any level will do e. none of the above levels
8.
The final assembly schedule (FAS): a. schedules customer orders as they are received based on components planned in the MPS b. is used with make-to-order products c. is used with make-to-stock products d. a and b above e. none of the above
9.
Which of the following statements is best regarding the master production schedule? a. it is an agreed-upon plan between marketing and manufacturing b. if it is poorly done we can expect past-due schedules and unreliable delivery promises c. it is a plan for specific end items that manufacturing expects to make over some period in the future d. all of the above are true e. none of the above is true
27
10. The portion of inventory or production not committed to customer orders is called: a. free stock b. available to promise c. excess production d. waste e. excess capacity 11. If there are customer orders the projected available is based on: a. forecast demand b. customer orders c. the greater of forecast demand and customer orders d. the opinion of the planner 12. Which of the following is (are) true about time fences in a master production schedule system? I. Changes far out in the planning horizon can be made with little or no cost to manufacturing. II. In the "frozen zone," capacity and materials are committed to specific orders. III. Changes in the near future on the planning horizon are less costly to make than changes far out. a. I, II and not III b. II, III and not I c. I, III and not II d. I, II, and III e. none of the above 13. Which of the following is NOT an input to the master production schedule? a. sales forecast for items b. current inventory status c. final assembly schedule d. customer orders e. production plan 14. The MPS is constrained by: I. The availability of material. II. Available capacity. III. Inventory policies. IV. Production plan. a. all of the above b. I, II, III only c. I and II only d. II and III only e. none of the above
28
15. Given the following data, complete the table. There are 30 on hand. Order quantity is 60 units. Week 1 2 3 4 Forecast 20 30 50 20 Projected available Scheduled receipts a. the projected available in week 3 is 40 b. the projected available in week 4 is 30 c. there is a scheduled receipt in week 4 d. a and b are true e. b and c are true 16. Given the following table, calculate the ATP. There are 50 units on hand. Week 1 2 3 4 5 Customer orders 20 20 15 30 10 Scheduled receipts 50 ATP a. the ATP in week one is 10 b. the ATP in week one is 30 c. the ATP in week one is 5 d. the ATP in week two is 10 e. the ATP in week three is 35 17.
The time span for which plans are made is called the: a. time fence b. planning horizon c. time bucket d. forecast period e. none of the above
18.
The final assembly schedule is used: a. in a make-to-stock environment b. in a make-to-order environment c. in a assemble-to-order environment d. in any of the above e. in none of the above
19. The PAB is calculated in which way for periods after the demand time fence? a. PAB = prior period PAM or on-hand balance + MPS – customer orders b. PAB = prior period PAB or on-hand balance + MPS + customer orders c. PAB = prior period PAB or on-hand balance + MPS – customer orders d. PAB = prior period PAB + MPS – greater of customer orders or forecast e. PAB = prior period PAB + MPS + greater of customer orders or forecast
29
20. Which of the following is the term applied to a master schedule for a purchased item? a. Supplier scheduling b. Master scheduling c. Material scheduling d. Purchase order 21. Which of the following is a contract between manufacturing and marketing? a. Production plan b. Master schedule c. Forecast d. Customer order 22. Master scheduling is a balancing act between which of the following? a. Forecasts and orders b. Inventory and customer service c. Supply and demand d. Forecast and inventory 23. Which of the following modules follows the Sales and Operations Plan? a. Business planning b. Production planning c. Master scheduling d. Material requirements planning 24. Sales forecasting and resource capacity planning are two components of which of the following? a. Master scheduling b. Sales and operations planning c. Production Plan d. Master production schedule
30
Answers. 1 d 2 b 10 b 11 c 19 c 20 d
3 d 12 a 21 b
4 d 13 c 22 c
5 d 14 a 23 c
6 c 15 b 24 c
31
7 a 16 c
8 a 17 b
9 d 18 c
MATERIAL REQUIREMENTS PLANNING CHAPTER 4 ANSWERS TO PROBLEMS 4.1
Each X requires 2 As. Each A requires 2 Cs. Therefore each X requires 4 Cs. Each Y requires 2 C Total Cs. required
50 Xs require 200 Cs. 100 Ys require 200 Cs. 400
A
4.2 B (2) E (2) G (4) F (3)
C (4)
D (4)
F (1) G (2) H (2)
Number of Gs required. Each A requires 2 Bs Each B requires 2 Es = Each E requires 4 Gs = Each A requires 4 Cs. Each C requires 2 Gs = Total Gs required =
4 Es for each A 16 Gs for each A 8 Gs for each A 24 Gs for each A
32
4.3 Part A Lead time: 1 week Part B Lead time: 1 week Part C Lead time: 1 week Part D Lead time: 1 week Part E Lead time: 2 weeks
Week Planned order receipt Planned order release Planned order receipt Planned order release Planned order receipt Planned order release Planned order receipt Planned order release Planned order receipt Planned order release
1
2
3
200 200 200 200 200 200 200 200 200
4.4 Week Gross requirements Projected available Net requirements Planned order receipt Planned order release
40
1 20 20
4
2 15 5
3 10 35 15 40
40
33
4 20 15
5 200
4.5 Part A
Part B
Part C
Part D
Part E
Part F
Week Gross requirements Projected available Net requirements Planned order receipt Planned order release Gross requirements Projected available Net requirements Planned order receipt Planned order release Gross requirements Projected available Net requirements Planned order receipt Planned order release Gross requirements Projected available Net requirements Planned order receipt Planned order release Gross requirements Projected available Net requirements Planned order receipt Planned order release Gross requirements Projected available Net requirements Planned order receipt Planned order release
1
2
3
4
100 200 0 180 180
20 180
100 100 100 100 380 0 380 380 380 180 0 180 180 180 100 0 100 100 100
34
5 100 0 100 100
4.6 Week Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
1 20 40
3 35
4 25
20 0
2 65 100 55 0
20 0
0
100
0
95 5 100 0
1 30 50 30
2 25
3 10
4 10
5
45 5 50
35
4.7 Week Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
10
50
35
4.8 Part H Lead time 1 week
Part I Lead time 2 weeks
Part J Lead time 1 week
Part K Lead time 1 week
Week Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
1
2
3 50 0 50 50
4
0
50
80
100 100 0
160 0
0 160 160
80
80
5 80 0 80 80
160 320 400
400
80
480 400
400 80
36
0 80 80
80
4.9 Part Y Lead time 2 weeks Lot Size: 50 Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Part Z Lead time 1 week Lot Size: 100 Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
Week 1
2
3
30 30 30
4 30
0
0
20 30 50
50
Week
20
1
2 100
3
4
20
20 80 100
20
20
100
37
4.10 Part A Lead time: 1 week
Part B Lead time: 1 week
Part C Lead time: 1 week
Part D Lead time: 1 week
Part E Lead time: 1 week
Week Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
1
2
3
4
5 100 0 100 100
100 200 100 100
100
0 100 100
0
100 100 0 100 100
0
0
0
0
0
100
300
300
0 300 300
100
100
38
0 100 100
Part F Lead time: 1 week
Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
100 0 200
100
100
4
5
4.11 Part X Lead time: 1 week Lot size:20 Part Y Lead time: 2 weeks Lot size: 50 Part Z Lead time: 2 weeks Lot size: lot-for-lot Part W Lead time: 1 week Lot size: 400
Week Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
1
10
2
15 20 15
3 5
15
10
15 5 20
20
30
30
60 50 20
10 5
15 10 10 20
20 60 20
10 40 50
10
50
0
0
90 90 0
40 0
0 40 40
350
350
40 50 0 400
39
350 50 400
350
4.12
Item Low-level code
A 0
B 2
C 1
D 2
E 1
F 0
4.13
Item Low-level code
A 0
B 0
C 3
D 1
E 2
F 2
G 2
H 3
1
2
3
4
J 3
4.14 LowLevel code
Week Part A
0
Lead time: 1 week Lot-forlot Part F
0
Lead time: 1 week Lot-forlot Part B
1
Lead time: 2 weeks Lot size: 300
Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
5
60
70
0 60 60
0 70 70
60
70
100
100
60 200
40
200
140
0 100 100
70 140
70
70
Part C
1
Lead time: 2 weeks Lot-forlot Part D
2
Lead time: 2 weeks Lot size: 300 Part E
2
Lead time: 3 weeks Lot size: 500
Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
120 120 0 100
100 300 200
100 0 100 100
140 0 140 140
140
140
200
60
160 140 300
160
160
160
160
160
300
400
100
140
300
160
The low-level code for part D is 2. There is a planned order release of 300 for part D in week 1. There are no planned order releases for part E. There is a planned order release of 100 for Part C in week 1 and 140 in week 2.
41
4.15
LowLevel code
Week Part A
0
Lead time: 1 week Lot-forlot Part B
2
Lead time: 1 week Lot-forlot Part C
1
Lead time: 2 weeks Lot-forlot Part D
2
Lead time: 1 week Lot-forlot
1
Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
20
20
2
3
20 20 80
4
5
100
50
0 80 80 50
0 50 50
80
210
100
220
10
0 90 90
300
90
80
160 0 160 160 160
42
80
50
0 80 80 50
0 50 50
190 200 10
10
10
Part E
2
Lead time: 1 week Lot-forlot
Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
90 0 90 90 90
4.16 Lowlevel code
Week Part A
0
Lead time: 1 week Lot-forlot Part B
0
Lead time: 1 week Lot-forlot
1
Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
2
3
4
5
100 0 100 100 100
50 0 50 50 50
43
Part C
2
Lead time: 1 week Lot-forlot Part D
1
Lead time: 1 week Lot-forlot Part E
3
Lead time: 1 week Lot size: 500 Part F
3
Lead time: 1 week Lot-forlot
Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
100 100 0 200
200
50
0 200 200 50
0 50 50
100 0 100 100 100
400 40 500 400 500
50
200
50
0 200 200 50
0 50 50
500
200
44
50
4.17 Initial MRP Week Gross requirements Scheduled receipts PAB Net requirements Planned order receipt Planned order release Revised MRP Week Gross requirements Scheduled receipts PAB Net requirements Planned order receipt Planned order release
1 50 100
50
1 50 100
50
2 125 200 125
3 100
2 125 200 125
3 150
25
−25 25
4 60 200 165
4 60 200 115
5 40 125
5 40 75
Possible actions include expediting the scheduled receipt in week 4 to week 3. 4.18 Initial MRP Week Gross requirements Scheduled receipts Projected available Net requirements Planned order receipt Planned order release
50
1 70 100 80
2 40
3 80
4 50
5 40
40
60 40 100 100
10
70 30 100
100
45
MRP record at the end of week one Week Gross requirements Scheduled receipts Projected available 50 Net requirements Planned order receipt Planned order release
2 40 10
3 100 100 10
100
46
4 50
5 40
6 40
60 40 100 100
20
80 20 100
MULTIPLE CHOICE QUESTIONS 1.
In the diagram below the independent demand item is: X 1
a. b. c. d. e.
2
3
4
X 1 2 3 4
2.
_______ is a set of priority planning techniques for planning component items below the _________: a. Material requirements planning; end item level b. Master production scheduling; the market plan c. Production planning; end item level d. all of the above e. none of the above
3.
The objectives of material requirements planning are to: a. issue orders to purchasing and manufacturing b. keep priorities current c. determine requirements d. all of the above e. b and c above
4.
Which of the following is (are) elements in an MRP system? a. the computer b. bills of material c. inventory records d. all of the above e. none of the above
5.
A set of priority planning techniques for planning component items below the end item level is called: a. master scheduling b. material requirements planning c. capacity planning d. production control e. none of the above
47
6.
A major input to an MRP system is: a. the production plan b. the capacity plan c. shop-floor activity planning and control d. the master schedule e. none of the above
7.
The document that shows the component parts and the number of parts needed to make one of an assembly or subassembly is called: a. a route sheet b. a material requirements plan c. a bill of material d. a material requisition e. none of the above
8.
A product tree shows: a. the parts that go into making a product b. the subassemblies used in making the product c. the sequence in which parts go together d. all of the above e. none of the above
9.
Which of the following statements is best? a. a part number identifies one part only b. a part has one and only one part number c. the same part on different bills of material will have the same part number d. all of the above are true e. none of the above is true
10. Which of the following statements is best? A B D
a. b. c. d. e.
C E
item A is the parent of item B item D is on level 3 item A is a parent of item D all of the above are true none of the above is true
48
11. A multi-level bill of material: I. Reflects the way the product will be manufactured. II. Is produced by the engineering department. III. Is a parts list only and does not contain subassemblies. a. only I is true b. only II is true c. only III is true d. I and II are true e. I, II and III are true 12. A bill of material whose purpose is to simplify forecasting, master production scheduling and material requirements planning is called: a. a summarized parts list b. where-used bill c. planning bill d. structured bill e. multi-purpose bill 13. Which of the following statements is best? a. a where-used report is the same as a pegging report b. a where-used report shows all the components that go into assembly c. a pegging report shows all the parents for a component d. a where-used report shows only those parents for which there is an existing requirement e. pegging reports show only the parents for which there are requirements 14. The ability to relate the demand for an item shown on an MRP record back to the particular parent causing the demand is called: a. where-used b. relating c. pegging d. any one of the above e. none of the above
49
15. The lead time for each item is 1 week. If an order for 50 of A is to be delivered in week 5, in what week will there be a planned order RELEASE for item B? A B D a. b. c. d. e.
C E
5 4 3 2 1
16. Which statement is correct? a. planned order releases show when the order is needed b. when an order is released, it becomes a planned order c. scheduled receipts show when goods were put into inventory d. all of the above are correct e. none of the above is correct 17. Which statement is correct? a. a product tree shows the parts that go into making a product b. a part has one and only one part number c. net requirements = gross requirements – on-hand inventory – scheduled receipts d. all of the above are correct e. none of the above is correct 18. In material requirements planning the process of placing the exploded requirements in the proper time periods, based on the assembly lead times involved, is known as: a. exploding b. offsetting c. netting d. all of the above e. none of the above
50
19. Which statement is best? a. the planned order release of the parent generates the gross requirement of the component b. the planned order release of the parent becomes the net requirement of the component c. the planned order release of the component becomes the order receipt of the parent d. all of the above are true e. none of the above is true 20. Which of the following statements is best about released orders? a. a scheduled receipt is a released order b. an open order is a released order c. a planned order release is a not a released order d. all of the above are true e. none of the above are true 21. Which of the following is NOT true of an MRP record? a. the current time is the beginning of the first period b. the number of periods in the record is called the planning horizon c. an item is considered to be available at the end of the time bucket in which it is required d. the projected on-hand balance is for the end of the period e. the immediate or most current period is called the action bucket 22. In the following product trees the low level code of item D is: A
F
B
C
D
a. 0 b. 1 c. 2
D
G
E
d. e.
3 4
23. Which of the following statements is best? a. every item has more than one low-level code b. net requirements = gross requirements + on-hand + scheduled receipts c. each part has at least one part number, depending on where it is used d. all of the above are true e. none of the above is true
51
24. Given the following product tree, the parent of B is: A B D a. b. c. d. e.
C E
A B C D E
25. Given the following parents and components, how many Bs are required to make an X? Quantities are shown in brackets. Parent X A Component A(2) B(2) B(1) D(1) a. b. c. d. e.
1 2 3 4 5
26. Which of the following are controlled by the materials planner? a. firm planned orders b. planned orders c. released orders d. exception messages e. all of the above
52
27.
B
A C
E
D
F
C
G
The lead time for each item is 2 weeks. If an order for 100 of A is to be delivered in week 6, in what week will there be a planned order RELEASE for item B? a. 5 b. 4 c. 3 d. 2 e. 1
Use the following MRP record and your calculations to answer the following two questions. The component has an order quantity of 100, a safety stock of ten, and a lead time of one period. Complete the following MRP record. Week 1 Gross requirements 25 Scheduled receipts 100 Projected available 30 Net requirements Planned order receipt Planned order release
2 80
3 20
4 80
28. Complete the above MRP record. Which of the following statements is correct? a. a planned order for 50 should be released in period two b. the projected available in period three is 55 c. the projected available in period three is five d. the net requirement in period two is 20 e. the net requirement in period three is ten 29. The net requirement in period three is: a. 0 b. 5 c. 10 d. 15
53
30. Which of the following statements is best regarding part numbering systems? a. significant part numbering systems are difficult to maintain b. it is easier to remember numbers than letters c. a random number is an identifier not a descriptor d. all of the above are true 31. Which of the following is elapsed time from recognition of a need until the time that need is satisfied? a. Production time b. Lead time c. Cycle time d. Schedule 32. Which of the following comes directly from external customers? a. Dependent demand b. Independent demand c. Bill of materials d. Order quantity 33. Service parts experience which of the following types of demand? a. Independent b. Dependent c. Independent and Dependent d. None of the above 34. In material requirements planning, the process of placing the exploded requirements in the proper time periods, based on the assembly lead times involved, is known as: a. scheduling b. offsetting c. netting d. all of the above e. none of the above 35. A bill of material for an item must change: a. when a component changes b. when there is a change in the use of the item c. when the item is used in another parent d. never e. if the item is fully interchangeable
54
36. Three inputs to the MRP process are: a. production activity control, purchasing, and the production plan b. inventory status, the master production schedule, and the product structure c. the master production schedule, inventory status, and the capacity requirements plan d. the product structure, production activity control, and inventory status e. the product structure, production activity control, and the master production schedule 37. Which of the following statements is true? I. Firm planned orders are planned orders frozen by the planner. II. Released orders are planned orders that have been released by the computer. III. The planner should not release an order unless satisfied the order can be carried out. a. I and II only b. I and III only c. II and III only d. I, II, and III e. none of the statements is true 38. Given the following product tree, how many product structure relationships are there? a. 1 b. 2 c. 3 d. 4 e. 5 39. The document that shows the component parts and the number of parts needed to make one of an assembly or subassembly is called: a. a route sheet b. a material requirements plan c. a bill of material d. a material requisition e. none of the above
55
40. In the product structure diagram below item X has _______________ demand and item 2 has _______________ demand. A B D (2) a. b. c. d. e.
C D
E
dependent, dependent dependent, independent independent, independent independent, dependent none of the above answers are correct
The following two questions use the information in this MRP record. The lead time is 3 weeks. Week 1 2 Gross requirements 60 50 Scheduled receipts 100 Projected available 40 90 Net requirements Planned order receipt Planned order release 100
3 60
4 70
30
5 20 40
41. The projected available to be shown in week three is: a. b. c. d. e.
0 75 125 175 none of the above
X 1
2
42. The net requirement for week four is: a. 25 b. 50 c. 75 d. 200 e. any of the above
56
3
4
43. The beginning projected available is: a. 10 b. 40 c. 60 d. 100 e. cannot be determined from the data 44. Which of the following statements is best? a. the same part on different bills of material has different part numbers b. a part number identifies one part only c. a significant part numbering system should always be used d. all of the above are true e. none of the above are true
57
Answers. 1 a 10 a 19 a 28 b 37 b
2 11 20 29 38
a a d d e
3 12 21 30 39
d c c d c
4 13 22 31 40
d e c b d
5 14 23 32 41
b c e b a
6 15 24 33 42
58
d c a c c
7 16 25 34 43
c e e b e
8 17 26 35 44
d d a a b
9 18 27 36
d b a e
CAPACITY MANAGEMENT CHAPTER 5 ANSWERS TO PROBLEMS 5.1
Weekly available time=
4 × 16 × 5 =
5.2
Hours actually worked
=
5.3
Rated capacity
=
320 × .75 × 1.15
5.4
Rated capacity
=
7 × 16 × 5 × .85 × 1.10
= 492.8 standard hours
5.5
Rated capacity
=
3 × 8 × 5 × .75 × 1.25 =
112.5 standard hours
5.6
Demonstrated capacity
5.7
Measured capacity
=
5.8
Utilization Efficiency
75 ÷ 80 = 93.75% 85 ÷ 75 = 113.33%
5.9
Time available = 3 × 40 × 4 Utilization = 360 ÷ 480 Efficiency = 468 ÷ 360 Demonstrated Capacity =
5.10
5.11
5.12
= =
=
320 hours
320 × .75
= =
240 276 standard hours
50 + 45 + 40 + 55 4 1050 ÷ 11
=
= 480 hours = 75% = 130% 468 ÷ 4 =
Available hours = 12,000 Hours actually worked = 10,000 Standard hours produced = Utilization = 10,000 ÷ 12,000 Efficiency = 11,480 ÷ 10,000 Demonstrated (measured) capacity = Time required =
1.3 + 0.3 × 200
Actual hours =
standard hours (efficiency) (utilization)
Time required = Actual hours =
2.0 + 0.2 × 500 = 102 = 1.2 × .75
47.5 hours per week
95.5 hours per week
117 standard hours per week
11,480 = 83.3% = 114.8% 11,480 ÷ 50 = =
59
=
229.6 standard hours
61.3 standard hours =
61.3 = 1.3 × .70
102 standard hours 113.33 hours
67.36 hours
5.13 Order quality Release orders 120 340 Planned orders 560 780
Setup time (hours)
Run time (hours/piece)
Total time (hours)
300
1.00
0.10
31.00
200
2.50
0.30
62.50
300
3.00
0.25
78.00
500
2.00
0.15
77.00
Total time (standard hours)
248.50
5.14 Order quality Release orders 125 345 Planned orders 565 785
Setup time (hours)
Run time (hours/piece)
200
0.25
0.10
20.25
70
0.40
0.05
3.90
80
1.00
0.20
17.00
35
0.50
0.15
5.75
Total time (standard hours)
5.15
46.90
Open orders for parts
Planned orders for parts
Week
1
2
3
1
2
3
123
12
8
5
0
5
10
456
15
5
5
0
10
15
Lead report Week Released load Planned load Total load
123 456 123 456
Total time (hours)
1 38 18 0 0 56
2 26 8 17 13 64
3 17 8 32 18 75
60
5.16 Week
18
19
20
Released load
150
155
100
70
475
0
0
80
80
160
Total load
150
155
180
150
635
Rated capacity
150
150
150
150
600
0
−5
−30
0
−35
Planned load
(over)/under
21
Total
5.17
10
Operation time (days) 111 2
20
130
30
155
Operation number
Work center
Queue time (days)
Arrival date
Finish date
3
127
131
4
5
134
142
1
2
145
147
Stores
150
5.18
10
Operation time (days) 110 4
20
120
30
130
Operation number
Work center
Queue time (days)
Arrival date
Finish date
3
176
182
2
4
185
190
3
2
193
197
Stores
200
61
MULTIPLE CHOICE QUESTIONS 1.
__________ is responsible for determining the capacity required and with methods of making the capacity available. a. Production planning b. Master production scheduling c. Production activity control d. Capacity planning e. Material requirements planning
2.
__________ is responsible for capacity planning at the master production schedule level and _____ at the material requirements planning level: I. Resource planning. II. Rough-cut capacity planning. III. Capacity requirements planning. a. I and II b. I and III c. II and III d. none of the above
3.
Available capacity in production planning is: a. the amount of inventory that can be held in a warehouse b. the quantity of work that can be performed in a given period of time c. a measure of the ability of a plant to consume raw materials d. all of the above e. none of the above
4.
________ are generated by the priority planning system and involve the translation of the priorities, generally given in units of product or some common unit, into hours of work required at each work center in each time period: a. Capacity requirements b. Capacity bills c. Work center reports d. all of the above e. none of the above
5.
Rated capacity is calculated taking into account work center ________ and ________ . I. historical data II. utilization III. efficiency a. I and II b. I and III c. II and III d. none of the above
62
6.
A work center consists of 2 machines working 8 hours a day and 5 days a week. Historically, utilization has been 80% and the efficiency 90%. The effective capacity, to the nearest hour, would be: a. 80 hours b. 40 hours c. 30 hours d. 50 hours e. 58 hours
7.
The available capacity will be influenced by: I. Product specification. II. Product mix. III. Work effort. IV. Units of measurement a. I, II and III only b. I, II and IV only c. II, III and IV only d. III only e. IV only
8.
The percentage of time the work center is active compared to the available time is called: a. efficiency b. effectiveness c. utilization d. Murphy's factor e. up-time
9.
The ratio of standard hours of work produced to hours actually worked is called: a. efficiency b. effectiveness c. utilization d. Murphy's factor e. up-time
10. (Available time) × (utilization) × (efficiency) is called: a. effectiveness b. useful capacity c. demonstrated capacity d. rated capacity e. work time
63
11. Which of the following is NOT an input needed in capacity requirements planning? a. open shop orders b. planned order releases c. routings d. time standards e. rough-cut capacity 12. Information on the standard times for an operation will be found in: a. the work center file b. the routing file c. the master file d. the product file e. the production file 13. Which of the following is the best statement? a. open shop orders appear as scheduled receipts in the MRP b. information on queue and wait time can be obtained from the work center file c. the Gregorian calendar is suitable for production planning d. a and b are true e. b and c are true 14. A ________ shows the capacity required at each work center based on planned and released orders for each time period of the plan. a. work center profile b. load profile c. scheduled order profile d. work-to-be-done report e. work center file 15. One hundred units of part A are to be processed on a work center. The setup time is 2 hours and the run time per piece is 10 minutes. The total standard time will be: a. 2 hours 10 minutes b. 3 hours 40 minutes c. 10 minutes d. 1000 minutes e. 1120 minutes 16. In the short run, capacity can be altered by any of the following EXCEPT: a. scheduling overtime b. selecting alternate routings c. reallocating the work force d. purchasing new equipment e. subcontracting out
64
17. A report that shows the future capacity requirements based on released and planned orders for each time period of the plan is called: a. load report b. capacity report c. order report d. dispatch list e. none of the above 18. Over the previous three weeks a work center produced 36, 43, and 35 standard hours of work. What is the measured capacity? a. 114 standard hours b. 36 standard hours c. 38 standard hours d. 43 standard hours e. cannot be determined with this data 19. A work center was available for work 80 hours, produced 74 standard hours of work and actually worked 67 hours. What is the efficiency of the work center? a. 92.5% b. 110.4% c. 108.1% d. 119.4% 20. In one week a work center produced 130 standard hours of work. The actual hours worked was 114. The efficiency is: a. 80.8% b. 87.7% c. 92.3% d. 114.0% 21. Determining the need for labor, machines, and resources to meet the production objectives of the firm is called: a. production control b. sales and operations planning c. capacity planning d. all of the above 22. (Available time) × (utilization) × (efficiency) is called: a. effectiveness b. useful capacity c. demonstrated capacity d. rated capacity e. work time
65
23. In one week a work center produces 130 standard hours of work. The hours scheduled are 120, and 105 hours are actually worked. The utilization is: a. 80.8% b. 87.5% c. 92.3% d. 108.3% e. 123.8%
66
Answers. 1 d 2 c 10 d 11 e 19 b 20 d
3 b 12 b 21 c
4 a 13 d 22 d
5 c 14 b 23 b
6 e 15 e
67
7 a 16 d
8 c 17 a
9 a 18 c
PRODUCTION ACTIVITY CONTROL CHAPTER 6 ANSWERS TO PROBLEMS 6.1
Required capacity = 3.5 + 0.233 × 600 = 143.3 standard hours
6.2
Queue at work center A Work center A operation time Wait time Move time from A to B Queue at work center B Work center B operation time Wait time Move time from B to stores Total manufacturing lead time
6.3
(550+ + 560) ÷ 5530
6.4
Queue at work center A Work center A operation time Wait time at A Move time from A to B Queue at work center B Work center B operation time Wait time at B Move time from B to stores Total manufacturing lead time
6.5
(313 + 300) ÷ 6400 =
= =
25 × 60 50 + 100 × 5
= =
35 × 60 60 + 100 × 5
=
= = = = = = = = = =
1500 minutes 550 minutes 300 minutes 40 minutes 2100 minutes 560 minutes 300 minutes 180 minutes 5530 minutes 92 hours and 10 minutes
20.07% = =
40 × 60 60 + 50 × 5
= =
35 × 60 30 + 50 × 6
10%
68
= = = = = = = = = =
2400 minutes 310 minutes 600 minutes 60 minutes 2100 minutes 330 minutes 480 minutes 120 minutes 6400 minutes 106 hours and 40 minutes
6.6 PART B
OP.
OP.
S/A OP.
OP.
PART C
SKY3 OP.
PART
170
175
180
OP.
185
190
195
200
WORKING
6.7
PART C
SUBASSY
PART PART B
FINAL OP 20
OP 10
ASSY
OP 30
TOOLING 90
95
100
105
110
115
120
DAYS
69
125
130
6.8
Q Q1 Q2
= = =
100 units 60 units 40 units
SUA RunA SUB RunB Transit time
= = = = =
a.
MLT for A = Transit time MLT for B = Total MLT
b.
MLT for A (Q1)= 50 + 9 × 60 Transit time MLT for B (Q) = 30 + 6 × 100 Total MLT Saving in MLT by overlapping
50 minutes 9 minutes per piece 30 minutes 6 minutes per piece 20 minutes
50 + 9 × 100 = = 30 + 6 × 100 = =
950 20 630 1600
= = = = =
minutes minutes minutes minutes
590 minutes 20 630 1240 minutes 1600 – 1240 = 360 minutes
Instructor's note. Ask the students to prove that Q2 will arrive at operation B shortly before Q1 runs out. 6.9
MLT before overlapping. Work centre 10: 50 + 200 × 5 Transit time Work centre 20: 100 + 200 × 7 Total MLT MLT after overlapping. Work centre 10: 50 + 75 × 5 Transit time Work centre 20: 100 + 200 × 7 Total MLT Saving in MLT MLT = 50 + 9 × 100 MLT = 50 + 9 × 50 Saving in lead time
= = = = =
1050 minutes 30 minutes 1500 minutes 2580 minutes 43 hours
= = = = = =
425 minutes 30 minutes 1500 minutes 1955 minutes 32 hours and 35 minutes 10 hours and 25 minutes
6.10
a. b. c.
= = =
950 minutes 500 minutes 450 minutes
6.11
MLT = 50 + 50 + 50 × 9 = Reduction in MLT =
550 minutes 400 minutes
6.12
MLT before splitting MLT after splitting =
= 4×60 + 50 × 3
6.13
240 + 240 + (50 × 3)
= 630 minutes 70
4×60 + 100 × 3 = = 390 minutes
540 minutes
Lead time increases by 90 minutes. MLT increases. 6.14a. Available capacity for each department = (8hrs-1hr) / day x five days = 35 hrs per week Let X= the number of benches produced Capacity in number of benches for the cut and sand department 2 * 5 min * X + 3 * X = 35 * 60 minutes per hour X = 161.5 benches per week Capacity in number of benches for the assembly and paint department (10 + 5 minutes) * X = 35 * 60 minutes per hour X = 140 benches per week Maximum capacity per week is 140 benches. 6.14b. Hours per week cut and sand = 5 hrs (setup) +140 * (2 * 5 + 3) / 60 = 35 hours 20 minutes Hours per week assembly and paint = 5 hrs (setup) + 140 * 15/60 = 40 hrs per week 6.14c The cut and sand employee has almost one hour per day of excess capacity. If he could use this time to help setup and teardown the assembly and paint department then the overall capacity would increase. Theoretically if all work was shared the total output could reach 150 benches per week. 6.15
Available capacity = 80 hours per week Let x = number of W’s to produce TimeB + TimeC = 80 hours 2 + 0.1x + 2 + 0.15 (2x) = 80 hours .4x = 76 x = 190 Produce 190 W’s a week. Produce 150 Ss, 450 Ts, and 300 Us per week.
6.16
Available capacity = 120 hours per week Let x = number of Ss to produce = 120 hours TimeT + TimeU 7 + 0.1(3x) + 8 + 0.2 (2x) = 120 hours .7x = 105 x = 150 Produce 150 S’s a week. Or: 3 x 150 = 450 T’s and 2 x 150 = 300 U’s per week
71
6.17 Period
1
2
3
4
Total
Planned input
35
37
36
41
149
Actual input
33
33
31
43
140
Cumulative variance
−2
−6
−11
−9
Planned output
40
40
40
40
160
Actual output
39
35
40
38
152
Cumulative variance
−1
−6
−6
−8
Planned backlog
32
27
24
20
21
Actual backlog
32
26
24
15
20
1
2
3
4
6.18 Period
5
Total
Planned input
78
78
78
78
78
390
Actual input
82
80
74
82
84
402
4
6
2
6
12
Cumulative variance Planned output
80
80
80
80
80
400
Actual output
87
83
74
80
84
408
7
10
4
4
8
Cumulative variance Planned backlog
45
43
41
39
37
35
Actual backlog
45
40
37
37
39
39
72
6.19 Job
A B
Process Arrival time date (days) 5 123 2
124
Due date 142 144
Operation Sequencing rule due FCFS EDD ODD SPT date 132 1 2 3 3 131
C 3 131 140 129 Jobs A & B will be on time, and Job C will be late.
2
3
2
1
3
1
1
2
6.20 Job
A
6.21
Work center 10 Start Stop day day 1 7
Work center 20 Start Stop day day 8 10
C
8
16
17
20
B
17
21
22
23
Critical Ratio
= Actual time remaining Lead time remaining Lead time Actual time remaining Order Due date remaining A 87 12 12 B 95 26 20 C 100 21 25 Sequence to run in: B, A, C.
73
CR 1 0.77 1.19
MULTIPLE CHOICE QUESTIONS 1.
________ is concerned with very short-term detailed planning of the flow of orders through manufacturing: a. Production planning b. Master production scheduling c. MRP d. Production activity control e. Master planning
2.
Planning the flow of work requires production activity control to: I. Be sure the material needed is available. II. Be sure the tooling needed is available. III. Schedule the start and stop dates at each work center. IV. Advise the plant supervisor of future orders. a. all of the above b. I, II and III c. I, II and IV d. II, III and IV e. I, III and IV
3.
The activities of production activity control can be classified as: I. Planning. II. Implementation. III. Control. IV. Process control. a. I, II and III b. I, II and IV c. II, III and IV d. I, III and IV e. all of the above
4.
Work authorization can be classified under the function of: a. planning b. scheduling c. implementation d. load leveling e. control
74
5.
Which of the following are characteristics of intermittent manufacturing? I. Work centers are arranged according to the routing. II. Work centers are dedicated to producing a limited range of similar products. III. Work flow through the shop is not constant. IV. Throughput times are generally high. a. I and II b. I and III c. I and IV d. II and III e. III and IV
6.
Which of the following files is used by PAC for planning? I. Shop order master file. II. Shop order detail file. III. Item master file. IV. Routing file. a. all of the above will be used for planning b. I and II c. I and III d. II and III e. III and IV
7.
Which of the following files will contain information on manufacturing lead time and quantity on hand? a. item master b. bill of material c. work center file d. shop order detail file e. industrial engineer's file
8.
The ____ shows the total standard time required to produce one end product in each work centre required for its manufacture: a. work center bill b. routing file c. capacity bill d. bill of material e. none of the above
9.
Which file contains information on the efficiency and utilization of a work center? a. efficiency file b. utilization file c. routing file d. work center file e. either a or b
75
10. A shop order for 1000 pieces is to be processed on work station 123. The setup time is 4 hours and the run time per piece is .08 hours. What is the required capacity on this work center in standard hours? a. 4.08 b. 0.08 c. 80 d. 84 e. 4000 11. All of the following are elements of manufacturing lead time EXCEPT: a. design time b. setup time c. run time d. wait time e. move time 12. Which of the following statements is best? a. the largest element of manufacturing lead time is queue b. the larger the load, the longer the queue c. if queue is reduced, the lead time and work in process will be reduced d. all of the above are true e. none of the above is true 13. A scheduling system in which the last operation on a routing is scheduled first and for completion on the due date is called: a. forward scheduling b. backward scheduling c. infinite scheduling d. finite scheduling e. none of the above 14. A scheduling system that assumes the required capacity will always be available is called: a. forward scheduling b. backward scheduling c. infinite scheduling d. finite scheduling e. none of the above 15. Which of the following statements is best? a. implementation is achieved by issuing a shop order to manufacturing b. engineering drawings, bills of material and routings may be included in a shop packet c. the dispatch list is the instrument of priority control d. all of the above are true e. none of the above is true
76
16. Which of the following are methods of reducing manufacturing lead time? I. Subcontracting. II. Forward scheduling. III. Operation overlapping. IV. Operation splitting. a. all of the above b. I and II c. II and III d. II and III e. III and IV 17. Operation overlapping means: a. the same job running on two machines at the same time b. using alternate routings c. moving work to the next operation as a group of pieces is completed d. running two or more jobs at the same time e. locating work centers close together to reduce materials handling 18. Which of the following statements is best? a. a bottleneck (capacity constraint resource) will control the throughput of all products processed by it b. a time buffer should be established before a CCR c. work centers feeding a CCR should work at full capacity d. a and b are true e. b and c are true 19. Which of the following statements is true? I. Throughput is the total volume of production passing through a facility. II. Throughput is controlled by the total capacity of a system. III. Work centers feeding bottlenecks should be 100% utilized. a. I only is true b. I and II only are true c. II and III only are true d. II only is true e. III only is true 20. Which of the following statements is best? a. using a non-bottleneck 100% of the time produces 100% utilization b. time saved at a non-bottleneck saves nothing c. the capacity of a system depends on the capacity of the bottleneck d. a and b only are true e. b and c only are true
77
21. Which of the following is NOT a principle of managing bottlenecks? a. a time buffer should be established after each bottleneck b. the rate of material fed to a bottleneck should be controlled c. do anything to increase the capacity of a bottleneck d. use alternate routings e. change the schedule 22. If the previous backlog was 20 units, the planned input was 25 units and the planned output was 30 units the planned backlog would be: a. 5 units b. 10 units c. 15 units d. 20 units e. 25 units 23. The following information is to be used in this and the next question. For the last week a work center had a planned input of 40 standard hours and an actual input of 36 standard hours. The planned output was 40, the actual output 42 standard hours and the beginning backlog was 30 hours. The cumulative input variance was: a. 0 b. –2 c. +2 d. –4 e. +4 24. The planned backlog was: a. 30 b. 36 c. 40 d. 42 e. 66 25. Which of the following dispatching rules ignore due dates? a. first come, first served b. earliest operation due date c. shortest processing time d. a and b above both ignore due dates e. a and c above both ignore due dates
78
26. Given the following information, which sequence will the orders be run in?
a. b. c. d. e.
ORDER A B C ABC BCA ACB CBA BAC
CRITICAL RATIO 1.5 1.0 0.7
27. If today is manufacturing day 100 and an order has a due date of 120 and a lead time remaining of 25 days, the critical ratio would be: a. 0.8 b. 1.2 c. 1.25 d. 0.25 e. 0.2 28. In a drum-buffer-rope scheduling system, the "drum" represents which of the following? a. a drum of jobs to be selected b. the master schedule for the operation c. a safety stock of material d. the constraint against too much being loaded into the master schedule 29. Which of the following is concerned with very short-term detailed planning of the flow of orders through manufacturing? a. sales and operations planning b. master production scheduling c. MRP d. production activity control 30. A scheduling system that assumes the required capacity will NOT always be available is called: A. forward scheduling B. backward scheduling C. infinite scheduling D. finite scheduling
79
31. An order for 100 of a product is processed on work center 123. The setup time is 60 minutes and the run time is 5 minutes per piece. If the order is run on two machines in the work center, and the setups are made simultaneously, the elapsed time will be: a. 560 minutes b. 500 minutes c. 250 minutes d. 310 minutes 32. The selection and sequencing of available jobs to be run at individual work stations and the assignment of these jobs to workers is called: a. dispatching b. scheduling c. priority management d. production control 33. Given the following data, which job(s) will be late if the shortest process time sequencing rule is used? Today is day 100. Job Process Due Time Date A 4 104 B 1 106 C 5 109 a. all jobs will be on time b. A and B will be late c. A and C will be late d. B and C will be late 34. Operation overlapping means: a. the same job running on two machines at the same time b. using alternate routings c. moving work to the next operation as a group of pieces is completed d. running two or more jobs at the same time on the same machine e. locating work centers close together to reduce materials handling 35. Priority rules should be which of the following? I. Simple to use. II. Clear to users so they can understand them. III. Followed without question. IV. Consistent with the objectives of the planning system. a. all the above b. I, II, and III only c. I, II, and IV only d. II, III, and IV only e. none of the above
80
Answers. 1 d 10 d 19 a 28 b
2 11 20 29
b a e d
3 12 21 30
a d a d
4 13 22 31
c b c d
5 14 23 32
e c e a
6 15 24 33
81
e d a c
7 16 25 34
a e e e
8 17 26 35
c c d a
9 d 18 d 27 a
PURCHASING CHAPTER 7 ANSWERS TO PROBLEMS 7.1 Profit would increase from 10% of sales to 12% of sales. This would represent a 20% increase in profits. 7.2
Factor
Weight
Supplier
7.3
Rating of Suppliers A B
Ranking of Suppliers A B
Function
8
8
9
64
Cost
5
9
5
45
25
Technical 7 Credit terms 2 RANKING
5 8
7 4
35 16 160
49 8 154
Fixed cost = Variable cost = Unit (average) cost =
$5000 $5.00 per unit 5000 + 5.00 = 10,000
72
$5.50
Price looks high and there should be some room to negotiate.
82
MULTIPLE CHOICE QUESTIONS 1.
Which of the following is an objective of purchasing? I. Obtain goods and services of the required specification and quality. II. Obtain goods and services at the lowest cost. III. Be sure the best possible service and delivery are provided by the supplier. a. I only b. II only c. III only d. IV only e. all are objectives of purchasing.
2.
Which of the following is NOT a step in the purchasing cycle? a. receipt and analysis of purchase requisition b. selection of vendor c. make up the specification for the product d. issue a purchase order e. receive and accept the goods.
3.
Purchasing departments usually have the responsibility and authority to: a. legally commit the company to a contract b. satisfy the needs of the user department c. determine price and source d. all of the above e. none of the above.
4.
______ originates with the department or person who will be the ultimate user: a. A purchase requisition b. A purchase order c. Vendor selection d. any of the above e. none of the above.
5.
The decision on what is the "best buy" involves consideration of: a. functional requirements b. price c. quantity required d. all of the above e. none of the above.
6.
____________ is concerned with the end use of the item and what it is expected to do: a. Quantity required b. Functional specification c. Production department d. all of the above e. none of the above.
83
7.
Which of the following is NOT a phase in providing user satisfaction? I. Quality and production planning. II. Quality and product design. III. Quality and manufacturing. IV. Quality and use. a. all the above are phases in providing user satisfaction b. I only c. II only d. III only e. IV only.
8.
Functional specifications set out: a. how the product is to work b. the purpose for which the product is required c. all those aspects or characteristics of a product that are determined by its final use d. none of the above.
9.
From the buyer's point of view the best quality is: a. the most expensive b. the least expensive c. that which is best adapted to a particular use d. that which technically does the best job e. none of the above.
10. Which of the following statements is best in describing quality by specification? a. standard specifications are set by government and non-government agencies b. specifications are usually more costly to develop than using a brand c. specifications tend to ensure more equitable competition d. all of the above are true e. none of the above are true. 11. Which of the following applies to standard products? a. their prices are comparatively stable b. they are quoted on the basis of list price less discounts c. they are purchased ONLY after firm quotations d. only a and b above apply e. all of the above apply. 12. Products should be specified by brand because: a. price levels of brand items are low b. the number of potential suppliers is restricted c. it is difficult to develop accurate specifications for an item d. all of the above e. a and b above.
84
13. In which of the following situations would a company probably specify by brand? a. when buying small quantities b. when the item to be bought is patented c. when the item to be bought is made to an industry standard d. a and b above e. b and c above. 14. Which of the following is FALSE regarding description of a product by specification? a. allows purchase from a number of sources b. developing specifications is an inexpensive process c. the minimum specifications set by the buyer are likely to become the maximum furnished by the supplier d. all the above e. b and c above. 15. Which of the following is an advantage of specifying by company-developed specification? a. the cost of establishing specifications is low b. it is always possible to draw up specifications for any product c. unless a performance specification is used, the buyer takes responsibility for performance d. all of the above are advantages e. none of the above is an advantage. 16. Which of the following is the most important responsibility of a purchasing officer? a. getting the best price b. getting the best quality c. selecting the best source d. ensuring goods are delivered on time e. none of the above. 17. Which of the following is NOT a factor to consider when selecting a supplier? a. technical ability b. manufacturing capability c. reliability d. price e. political affiliation. 18. Buyers should realize that when they make a continuing purchase they buy more than the vendor's product. They also buy the supplier's: a. managerial capabilities b. procurement capabilities c. production capabilities d. technical capabilities e. all the above.
85
19. Which of the following will help a purchasing officer select potential sources of supply? a. trade journals b. purchasing department's own records c. advertising d. all the above e. none of the above. 20. Supplier goodwill is necessary because: a. the buyer can expect price concessions b. the buyer can expect presents from the vendor c. the buyer and vendor depend upon each other for communication and problem solving d. all of the above e. none of the above. 21. When using the "ranking method" of evaluating suppliers: a. each supplier is ranked for overall suitability b. important factors are selected and assigned a "weight" c. suppliers are rated against each factor d. weight and rating of each supplier is multiplied for each factor and the total taken as the ranking of the supplier e. all the above are used. 22. Which of the following is (are) a qualification(s) of a good supplier? a. has adequate plant and facilities b. has a sound financial position c. has reasonable prices d. all the above are qualifications of a good supplier e. none of the above is a qualification of a good supplier. 23. Vendors' costs are important to a purchasing agent because: a. they help in estimating a fair price b. they help in negotiating a fair price c. cost determines market price d. a vendor is entitled to a profit just because he is in business e. a and b above. 24. Special items will generally be purchased on the basis of a quotation. The purchasing agent will select on the basis of: a. the lowest price b. the most reliable bidder c. the preference of the department that will use the item d. consideration of all the above e. none of the above.
86
25. In comparing prices, which of the following factors should be considered? a. base price b. F.O.B. point c. installation and tooling costs d. all the above should be considered e. none of the above should be considered. 26. A fair price is: a. the lowest price b. the lowest price that ensures a constant supply of the quality and allows the seller to make a profit c. a competitive price d. all the above e. b and c above. 27. Which of the following is a function of supplier scheduling and follow-up? a. selecting suppliers b. establishing specifications c. releasing orders d. price determination e. negotiation. 28. Which of the following statements is true about planner/buyers? I. Planner/buyers handle more components than planners do. II. Planner/buyers issue material releases to suppliers. III. Planner/buyers establish supplier delivery priorities. IV. Planner/buyers negotiate prices with suppliers. a. I and II are true b. II and III are true c. III and IV are true d. I, II, and III are true e. II, III, and IV are true. 29. Which of the following statements is true? a. in contract buying, price and delivery are negotiated each time an order is released. b. contract buying assures suppliers they have a given amount of business and commits them to allocating that amount of their capacity to the customer c. contract buying is useful for short term purchases d. EDI does not eliminate much of the paper work associated with buying e. none of the above is true.
87
30. Intranet stands for... a. a net that includes all who are connected to it. b. an external net that can be used by all people c. an internal net normally used within the boundaries of the company d. an net shared by two or more companies e. none of the above
88
Answers. 1 e 9 c 17 e 25 d
2 10 18 26
c d e e
3 11 19 27
d d d c
4 12 20 28
a c c b
5 13 21 29
d d e b
6 14 22 30
89
b b d c
7 a 15 e 23 e
8 c 16 c 24 d
FORECASTING CHAPTER 8 ANSWERS TO PROBLEMS 8.1
Forecast for month 4
=
255 + 279 + 231 3
=
255
Forecast for month 5
=
279 + 231 + 228 3
=
246
8.2
1
Actual demand 60
2
70
3
40
4
50
57
5
70
53
6
65
53
Month
7
Forecast
62
8.3
1
Actual demand 102
2
91
3
95
4
105
96
5
94
97
6
100
98
7
109
100
8
92
101
9
101
100
10
98
101
Month
11
Forecast
97
90
8.4
Forecast for February
8.5
Forecast
=
= (.15)(135) + (.85)(122) =
(.2)(85) + (.8)(100) =
123.95 = 124
97
8.6
1
Actual demand 260
Forecast demand 250
2
230
248
3
225
244
4
245
240
5
250
241
Month
6
243
8.7
1
Actual demand 102
2
91
3
95
96
4
105
96
5
94
98
6
100
97
7
109
98
8
92
100
9
101
98
10
98
99
Month
11
Forecast
99
The difference between the two forecasts for Month 11 = 2 (99-97).
91
8.8
1
Actual demand 103
2
112
101
3
113
104
4
120
106
5
126
110
6
128
114
7
138
118
8
141
123
Week
9
Forecast 100
128 140 ÷ 175 =
8.9
Seasonal index =
8.10
Average quarterly demand = Forecast for first quarter =
8.11
.80
200 200 × 0.8 =
160
Average month’s demand = 1800 ÷ 12 = 150 January seasonal index = 95 ÷ 150 = 0.6 January forecast = 0.6 × 2000 ÷ 12 = 100
92
8.12 Month
Average demand
Seasonal index
January
30
0.28
February
50
0.46
March
85
0.78
April
110
1.01
May
125
1.15
June
245
2.25
July
255
2.34
August
135
1.24
September
100
0.92
October
90
0.83
November
50
0.46
December
30
0.28
Total
1305
8.13 Month
Seasonal index
Forecast
January
0.28
47
February
0.46
77
March
0.78
130
April
1.01
168
May
1.15
192
June
2.25
375
July
2.34
390
August
1.24
207
September
0.92
153
October
0.83
138
November
0.46
77
December
0.28
47
93
8.14
Deseasonalized April demand
1440 ÷ 2.5 = 576 units
=
8.15 Quarter 1
Actual Seasonal Depersonalized demand index demand 130 0.62 210
2
170
1.04
163
3
375
1.82
206
4
90
0.52
173
Total
765
a. Deseasonalized last month's demand = 150 ÷ 1.2 = 125 b. Deseasonalized forecast for next month = alpha (last period’s deseasonalized demand) + (1 – alpha) (last period’s deseasonalized forecast) = .25 (125) + (1 – 0.25) (100) = 106.25 = 0.2 × 125 + .8 × 100 = 105 c. Forecast of seasonal demand = 0.8 × 106.25 = 85
8.16
8.17 Actual Absolute demand deviation 1.14 342.85
Month
Forecast
December
300
January
400
1.52
457.14
February
200
0.76
228.57
March
150
0.57
171.42
Total
1050
Absolute deviation 25
8.18 Period
Forecast
1
110
Actual demand 85
2
110
105
5
3
110
120
10
4
110
100
10
5
110
90
20
Total
550
70
MAD = 14
94
8.19
100
Actual demand 105
Absolute deviation 5
2
105
95
10
3
110
90
20
4
115
135
20
5
120
105
15
6
125
120
5
Total
675
650
75
Period
Forecast
1
MAD = 12.5 8.20 Period Forecast Actual Deviation
Cumulative Tracking deviation signal 10 0.67
1
100
110
10
2
105
90
−15
−5
−0.33
3
110
85
−25
−30
−2.00
4
115
110
−5
−35
−2.33
5
120
105
−15
−50
−3.33
6
125
95
−30
− 80
−5.33
Period 6. Yes. From period 2 on, all tracking signals are negative and increasingly so. This indicates demand is falling short of forecast.
95
MULTIPLE CHOICE QUESTIONS 1.
Which of the following statements is best statement about forecasting? I. It must be done by all who wish to meet the demands of the future. II. Companies who make to order to NOT have to forecast. a. I and II are true b. I only is true c. II only is true d. neither I nor II are true
2.
Which of the following is NOT a component of a demand pattern? a. trend b. standard deviation c. seasonal variation d. random variation e. all of the above are components of a demand pattern
3.
Given this product tree which item(s) should be forecast? A B D a. b. c. d. a.
4.
C E
only A A, B and C D and E B, C, D, and E all items should be forecast
Which of the following is the best statement about the general principles of forecasting? a. forecasts are more accurate for larger groups of items b. forecasts are more accurate for nearer periods of time c. every forecast should include an estimate of error d. all of the above are general principles of forecasting e. none of the above is a general principle of forecasting
96
5.
Which of the following statements is best? a. dependent demand items should be forecast b. a forecast for sales next week will not be as accurate as for a year from now c. forecasts for families of products should be built up from individual product forecasts d. all of the above are true e. none of the above is true
6.
Which of the following statements is best? a. if we wish to forecast demand, then past sales must be used for the forecast b. forecasts made in dollars for total sales should be used for manufacturing c. forecasts should be made for all items, models, and options manufactured d. all of the above are true e. none of the above is true
7.
A firm manufactures a line of vacuum cleaners composed of standard, custom and deluxe models. All are essentially the same except for the options and add-ons. What should they forecast? a. the total of all models b. each model c. each model and add the forecasts together d. all of the above e. none of the above
8.
Which of the following is NOT true? a. number of orders shipped is a good measure of demand for an item b. circumstances relating to historical data should be recorded c. demand for different groups should be recorded separately d. none of the above is true
9.
Which of the following statements is best regarding forecasting techniques? a. qualitative techniques are based on judgment b. techniques that use external economic indicators are classified as extrinsic c. intrinsic techniques use historical data d. all of the above are true e. none of the above is true
10. What important assumption is made about statistical (quantitative) forecasting methods? a. the past is a valid indicator of the future b. demand trend is seldom linear c. seasonal variations are small d. random variations are small e. all of the above
97
11. Which of the following methods can be used to forecast the demand for a NEW product? a. equation fitting b. moving averages c. qualitative techniques d. all of the above e. none of the above 12. A forecasting technique that takes the average demand for some past number of periods is called: a. trend time analysis b. moving average c. exponential smoothing d. none of the above e. all of the above 13. Demand over the past three months has been 700, 750, and 900. Using a three-month moving average, what is the forecast for month four? a. 700 b. 750 c. 900 d. 783 e. 822 13. The old forecast was for 200 units and last month's sales were 225 units. If α (alpha) is 0.2 what is the forecast for next month? a. 200 b. 225 c. 212½ d. 205 e. 210 14. Select the one best answer from the following: a. demand fluctuations that depend on the time of the year, week or day are called seasonality b. The seasonal index is an estimate of how much the demand during the season will be above or below the average demand c. seasonality ALWAYS occurs in summer, winter, spring and fall d. a and b are true e. b and c are true
98
15. If the average quarterly demand is 200 units and the first quarter demand is 350 units, what is the seasonal index for the quarter? a. .57 b. 200 c. 350 d. 1.75 e. none of the above 16. Select the one best answer from the following: a. deseasonalized data should be used for forecasting b. seasonalize the base forecast to predict actual demand for future periods c. actual sales should only be compared on a month-to-month basis d. a and b are best e. b and c are best 17. If the February demand for a product is 5,000 units and the seasonal index for February is 0.75, what is the deseasonalized February demand? a. 3,750 b. 6,667 c. 8,750 d. 10,000 e. 15,000 18. Forecast error will be caused by: a. random variation from the average demand b. errors in forecasting average demand c. differences in lead times d. a and b above e. none of the above 19. Select the one best answer from the following: a. the mean absolute deviation can be used as a measure of forecast error b. usually forecast error is distributed normally about the average demand c. in a normal distribution the error will be within 1 MAD of the average about 60% of the time d. all the above are true e. none of the above is true
99
20. Select the one best answer from the following: a. forecasts do not need to be tracked b. forecast error does not need to be measured c. when actual demand exceeds a reasonable error, it should be investigated to discover the cause of the error d. all the above are true e. none of the above is true 21. Forecasts are far more accurate for which of the following? a. Short term b. Individual items c. Product families d. End use components 22. Forecasts are far more accurate for which of the following? a. Short term b. Individual items c. Product families d. End use components 23. Which of the following is good for short-range forecasts, can detect trends, but lags the trend? a. Exponential smoothing b. Stable forecasting c. Forecast smoothing d. Moving average 24. Which of the following is NOT a source of demand? a. Internal customers b. External customers c. Stockholders d. Spare parts
100
Answers. 1 b 2 b 10 a 11 c 19 d 20 d
3 a 12 b 21 c
4 d 13 d 22 b
5 e 14 d 23 a
6 e 15 a 24 c
101
7 a 16 d
8 a 17 d
9 d 18 a
INVENTORY FUNDAMENTALS CHAPTER 9 ANSWERS TO PROBLEMS 11 × 10,000 365
Average annual inventory in transit
9.2
Average annual reduction in inventory in transit = 3 × $2,000,000 365
9.3
Annual carrying cost =
(.10 + .06 + .07)($1,000,000)
9.4
Annual carrying cost =
(0.1 + 0.25 + 0.5)($10,000) = $8,500
9.5
Average ordering cost = Annual ordering cost =
$90,000 + $25= $35 9,000 35 × $9,000 = $315,000
Annual ordering cost = Annual carrying cost =
$75,000 + $25 × 5,000 = $200,000 (.08 + .06 + .10)($250,000) = $60,000
9.6
=
=
9.1
=
9.7
Sales Production Ending inventory Average inventory Inventory cost
Quarter Quarter Quarter Quarter Total $ 1 2 3 4 1000 2000 3000 2000 8000 2000
2000
2000
2000
1000
1000
0
0
500
1000
500
0
1500
3000
1500
0
102
6000
301.4 units =
$16,438.36
$230,000
9.8 Quarter 1 Forecast demand Production Ending inventory Average inventory Inventory cost
Quarter 2
Quarter 3
Quarter 4
Total $
5000
8000
8000
9000
30000
7500
7500
7500
7500
30000
2500
2000
1500
0
1250
2250
1750
750
7500
13500
10500
4500
36000
Annual cost of carrying safety stock = $6 × 4 × 100 = $2,400 9.9 Quarter 1 Forecast demand Production Ending inventory Average inventory Inventory cost
9.10
Quarter 2
Quarter 3
Total $
3000
4000
7000
6000
20000
5000
5000
5000
5000
20000
2000
3000
1000
0
1000
2500
2000
500
3000
7500
6000
1500
Owners' equity = =
assets – liabilities $2,000,000 – $1,600,000
9.11
Assets =
9.12
Revenue Direct labor = $700,000 Direct material = $900,000 Factory overhead = $700,000 Gross margin General and administrative expense Net income
9.13
Quarter 4
liabilities + owners' equity =
Profit would increase by $200,000
103
18000
= $400,000
$4,000,000 + $1,200,000 = $5,200,000 $3,000,000 = = = =
$2,300,000 $700,000 $300,000 $400,000
9.14
a.
Turns ratio
=
annual cost of goods sold average inventory
=
$12,000,000 $2,500,000
=
4.8
b.
Average inventory = annual cost of goods sold = $12,000,000 = $1,200,000 turns 10 Reduction in inventory = $2,500,000 − $1,200,000 = $1,300,000 c.
9.15
9.16
Annual savings
= 20% × $1,300,000
= $260,000
a.
Turns ratio
=
$30,000,000 $10,000,000
=
3
b.
Average inventory
=
$30,000,000 10
=
$3,000,000
c.
Reduction in inventory Annual savings
Average daily usage = Days of supply =
= =
$10,000,000 – $3,000,000 = $7,000,000 20% × $7,000,000 = $1,400,000
7200 ÷ 240 = 600 ÷ 30 =
9.17
1
Annual unit usage 21000
2
5000
3
1600
$3
$4,800
4
12000
$1
$12,000
5
1000
6
50
$50
$2,500
7
800
$2
$1,600
8
10000
$3
$30,000
9
4000
$1
$4,000
10
5000
$1
$5,000
Part number
Total
Unit cost $ $1
Annual $ usage $21,000
$40 $200,000
$100 $100,000
$380,900
104
30 units 20 days
Part number 2
Annual $ Cumulative Cumulative Cumulative Class usage $ usage % $ usage % of items $200,000 $200,000 52.51 10 A
5
$100,000
$300,000
78.76
20
A
8
$30,000
$330,000
86.64
30
B
1
$21,000
$351, 000
92.15
40
B
4
$12,000
$363,000
95.30
50
B
10
$5,000
$368,000
96.61
60
C
3
$4,800
$372,800
97.87
70
C
9
$4,000
$376,800
98.92
80
C
6
$2,500
$379,300
99.58
90
C
7
$1,600
$380,900
100.00
100
C
9.18
1
Annual unit usage 200
2
Part number
Unit cost $
Annual $ usage
$10
$2,000
15000
$4
$60,000
3
60000
$6 $360,000
4
15000
$15 $225,000
5
1400
$10
$14,000
6
100
$50
$5,000
7
25000
$2
$50,000
8
700
$3
$2,100
9
25000
$1
$25,000
10
7500
$1
$7,500
Total
$750,600
105
Part number 3
Annual $ Cumulative Cumulative Cumulative Class usage $ usage % $ usage % of items $360,000 $360,000 47.96 10 A
4
$225,000
$585,000
77.94
20
A
2
$60,000
$645,000
85.93
30
B
7
$50,000
$695, 000
92.59
40
B
9
$25,000
$720,000
95.92
50
B
5
$14,000
$734,000
97.79
60
C
10
$7,500
$741,500
98.79
70
C
6
$5,000
$746,500
99.45
80
C
8
$2,100
$748,600
99.73
90
C
1
$2,000
$750,600
100.00
100
C
106
MULTIPLE CHOICE QUESTIONS 1.
Which of the following statements is best about inventory management? a. inventories and production can be managed separately b. inventory is not important at the production planning level c. inventories are usually insignificant on the balance sheet d. all the above are true e. none of the above is true
2.
___________ are materials that have entered the production process and ___________ are materials that are used in the production process but do not become part of the product. I. Raw materials II. Work in process III. Finished goods IV. Maintenance, repair and operational supplies a. I and II b. II and III c. III and IV d. I and III e. II and IV
3.
Inventories that are built up in advance of a peak selling season, a promotion program or a plant shut-down are known as: a. lot-size inventories b. transportation inventories c. safety stocks d. anticipation inventories e. none of the above
4.
Transportation inventories can be reduced by: a. reducing transportation time b. reducing order quantities c. increasing order quantities d. reducing the order point e. none of the above
5.
Items that are purchased or manufactured in quantities greater than needed immediately create ________ inventories: a. anticipation b. lot size c. hedge d. any of the above e. none of the above
107
6.
Select the one best of the following statements: a. inventories allow manufacturing to level out production and to satisfy peak demand b. inventories allow manufacturing to reduce production runs, reducing unit cost c. inventories allow manufacturers to operate different work centers at the same output d. all the above are true e. none of the above is true
7.
Which of the following company objectives are in conflict? I. Maximize customer service. II. Low-cost plant operation. III. Minimum inventory investment. a. I, II and III b. I and II, not III c. I and III, not II d. II and III, not I e. none
8.
In managing inventory, the problem is to balance the inventory investment with: I. Customer service. II. Costs associated with changing production levels. III. Costs of placing orders. IV. Transportation costs. a. II and III only b. III and IV c. I, II and III only d. II, III and IV only e. I, II, III, and IV
9.
Which of the following costs are relevant to inventory management decisions? a. carrying costs b. ordering costs c. capacity-related costs d. all the above e. none of the above
10. Which of the following is NOT a cost of carrying inventory? a. capital costs b. storage costs c. purchase cost d. all the above e. none of the above
108
11. Which of the following are considered ordering costs? I. Production control costs. II. Lost capacity costs. III. Risk costs. a. I, II and III b. I and II c. I and III d. II and III e. none of the above 12. Which of the following statements is NOT true? a. the annual cost of ordering depends on the number of orders per year b. the annual cost of ordering can be reduced by ordering less at any one time c. the annual cost of carrying inventory can be decreased by ordering less at one time d. all the above are true e. none of the above is true 13. Which of the following costs would NOT be included in the cost of placing an order? a. setup costs b. costs of placing a purchase order c. back-order costs d. all the above e. none of the above 14. Which of the following would NOT be included in calculating inventory carrying costs? a. capital costs b. ordering costs c. obsolescence costs d. all the above e. none of the above 15. Which of the following equations is correct? a. Assets = liabilities + revenue b. Profit = revenue + owners equity c. Liabilities = assets – owners equity d. Revenue = accounts receivable – liabilities 16. If the annual cost of goods sold is $10,000,000 and the average inventory is $2,000,000, what is the turns ratio? a. $8,000,000 b. 5 c. 0.2 d. 20% e. cannot be calculated from the information given
109
17. If there are 20 working days in a month, the monthly usage is 660 units, and there are 100 units on hand, approximately how many days’ supply are there? a. 3 b. 5 c. 7 d. 33 18. Which of the following statements is most accurate? a. about 20% of the items will usually account for about 80% of the total value b. 'A' class items should have the tightest possible control c. the general rule using the ABC approach is to have plenty of everything in stock d. a and b only are true e. none of the above is true 19. Of the following statements: I. 'A' items usually account for about 70%−80% of the total usage value. II. About 50% of the items usually account for 50% of the value. III. 'C' items should be given the top priority in inventory management. a. I and II are true b. II and III are true c. I and III are true d. only III is true e. only I is true 20. Which of the following statements is best? a. two items with the same part number but in two different inventories would be one stock keeping unit (SKU) b. two white shirts of different sizes in the same inventory would be one SKU c. two items with the same part number in the same inventory would be one SKU d. all the above are true e. none of the above is true 21. Delivery of goods from a supplier is in transit for 14 days. If the annual demand is 2600 units, what is the average annual inventory in transit? a. 99.7 units b. 100 units c. 1.97 units d. cannot be determined from the data given
110
22. A company carries an average annual inventory of $1,000,000. If the cost of capital is 10%, storage costs are 8%, and risk costs are 7%, what does it cost per year to carry this inventory? a. $100,000 b. $80,000 c. $70,000 d. $250,000 e. cannot be determined from the data given 23. Which of the following would not be considered work-in-process inventory? I. Finished goods in the stockroom. II. Processed material waiting for inspection. III. Raw materials not issued. IV. Components in queue ahead of a milling machine. a. I and II b. I and III c. I and IV d. II and III 24. Which of the following are reasons for keeping inventory? I. To allow for goods in transit. II. To build up stock for seasonal demand. III. To reduce production costs. IV. To guard against uncertainty in supply and demand. a. I, II and III only b. II, III and IV only c. II and IV only d. all the above are valid reasons 25. Given the following information, calculate the inventory turns. Sales = $200,000,000 Cost of sales = $160,000,000 Average inventory = $ 40,000,000 Carrying cost = 12% a. 0.20 b. 0.25 c. 4.0 d. 5.0
111
26. All of the following are reasons to keep inventory EXCEPT: a. Allow flexibility in production scheduling b. Couple supply with demand c. Meet fluctuations in product demand d. Provide a safeguard against delivery time variations
112
Answers. 1 e 9 d 17 a 25 c
2 10 18 26
e c d b
3 d 11 b 19 e
4 a 12 b 20 c
5 b 13 c 21 a
6 a 14 b 22 d
113
7 a 15 c 23 b
8 e 16 b 24 d
ORDER QUANTITIES CHAPTER 10 ANSWERS TO PROBLEMS 10.1 and 10.2 Order quantity (units) 1000 500 a.
Average inventory
=
b.
Orders per year
=
order quantity 2 annual demand order quantity =
c. Inventory carrying cost $1000
10.3
d.
Annual ordering cost =
e.
Total annual cost = = = = =
a.
EOQ =
b.
Number of orders per year
500
10.4
5.2
Q×c×i
2 A×S Q
c. + d.
A S c i
250
$520
260
$1020
$1260
400,000 units $32 $8.00 20% 2 AS = ic
2 x 400,000 x32 = 4, 000units .2 x8
=
A Q
c. Cost of ordering Cost of carrying
= AS = Q = Qic = 2
Total Cost
114
=
400,000 4000
$500
=
100
400,000 × 32 = $3200 4000 4000 × .20 × 8 = $3200 2 = $6400
10.4
A = S = i =
$800,000 $32 20%
a. EOQ =
2 x800,000 x32 = $16, 000 .2
2 AS = i
b. Number of orders per year = Q
A
c. Cost of ordering
=
=
Cost of carrying
=
AS Q Qic 2
= 16,000
800,000 × 32 = $1600 16,000 $16,000 × .2 = $1600 2 = $3200
=
Total Cost d. Results are not the same. 10.5
EOQ =
A S C i
= = = =
10,000 units $200 $10.00 20%
2 x10,000 x 200 = 1414units = 1414 x$10 = $14,140 .2 x10
10.6 No discount Unit price
Discount
$10.00
$9.70
Lot size (dollars)
$5, 480.00
$9,700.00
Average inventory Number of orders per year Purchase cost (dollars) Carrying cost (dollars) 20% Ordering cost—$30 per order Total cost (dollars)
$2,740.00
$4,850.00
18.25
10
$100,000.00
$97,000.00
$548.00
$970.00
$547.45
$300.00
$101,095.45
$98,270.00
Savings (dollars)
$2,825.45
115
800,000 = 50
10.7
A = 400,000 units = $3,200,000 C = $8.00
S = $32 i = 20%
EOQ = $32,000 = or 32,000/8 = 4,000 units Discounted order quantity = 5000 units or Discount on $40,000 order = 3%. No discount Unit price
$40,000 × .97
Discount
$8.00
$7.76
Lot size (dollars)
$32,000.00
$38,800.00
Average inventory Number of orders per year Purchase cost (dollars) Carrying cost (dollars) 20% Ordering cost—$30 per order Total cost (dollars)
$16,000.00
$19,400.00
100
80
$3,200,000.00 $3,104,000.00 $3,200.00
$3,880.00
$3,200.00
$2,560.00
$3,206,400.00 $3,110,440.00
Savings (dollars)
$95,960.00
10.8
1
2500
50
New Lot Size = K√ AD 250
2
900
30
150
3
121
11
55
Item
Annual Demand
√AD
116
=
$38,800
10.9
1
Annual Demand $14,400
Orders per Year 5
2
$4,900
5
70
3
$1,600
5
40
Totals
$20,900
15
230
Item
√ AD 120
K = 230 ÷ 15 = 15.33 10.10 Item
Annual Usage
Present orders per year
Present Lot Size
√ AD
New Lot Size
New Orders per year = K√ AD N = AD /Q $2,208.33 10.19
1
$22,500
6
$3,750.00
150
2
$5,625
6
$937.50
75
$1,104.17
5.10
3
$1,600
6
$266.67
40
$588.89
2.72
Totals
$29,725
18
$4,954.17
265
$3,901.39
18.00
Average inventory
10.11 Item
$2,477.08
Annual Usage
Present orders per year
Present Lot Size
$1,950.69
√ AD
New Lot Size
New Orders per year = K√ AD N = AD /Q $1,500.00 6.67
1
$10,000
4
$2,500.00
100
2
$6,400
4
$1,600.00
80
$1,200.00
5.33
3
$3,600
4
$900.00
60
$900.00
4.00
4
$1,600
4
$400.00
40
$600.00
2.67
5
$400
4
$100.00
20
$300.00
1.33
$22,000
20
$5,500.00
300
$4,500.00
20.00
Totals
Average inventory
$2,750.00
K = 300 ÷ 20 = 15
117
$2,250.00
10.12 EOQ = 1150 units Usage = 15,600 units per year = 15600 ÷ 52 = 300 units per week Period order quantity = 1150 ÷ 300 = 3.8 Î 4 weeks 10.13 Weekly average demand = POQ = 300 ÷ 80.77 = Week Net requirements Planned order receipts
4200 ÷ 52 = 80.77 units per week 3.7 Î 4 weeks
1
2
3
4
5
6
7
8
Total
100
75
90
90
85
70
80
40
630
355
275
Planned order period 1 = 355 units Planned order period 5 = 275 units 10.14 EOQ = 200 units Week 1 Net 75 requirements Planned 200 order receipt Ending 125 inventory
2
3
4
5
6
7
8
9
10
Total
100
60
0
100
80
70
60
0
60
605
200 25
165
200 165
65
185
200 115
55
55
195
1150
Weekly average demand = 605 ÷ 10 = 60.5 units per week POQ = 200÷60.5 = 3.3 Î 3 weeks Week 1 2 3 Net 75 100 60 requirements Planned 235 order receipt Ending 160 60 0 inventory
4
5
6
7
8
9
10
Total
0
100
80
70
60
0
60
605
60
0
560
250 0
150
118
120 70
0
60
10.15 A = 120 x 52 = 6,240 S = $600 i = .16 c = $24 Demand rate = 120 per week Production rate = 300 per week EOQ = SQRT((2 x 6240 x 600) / (.16 x 24 x (1 – 120/300))) = 1803 units
119
MULTIPLE CHOICE QUESTIONS 1.
Which of the following are NOT assumptions on which the economic order quantity (EOQ) is based? a. demand is relatively constant and known b. the item is produced continuously c. order preparation costs, inventory carrying costs and lead times are constant and known d. replacement occurs all at once e. all of the above are true assumptions
2.
In developing the standard economic order quantity formula the following assumption(s) is (are) made: a. demand for the item is relatively uniform b. replenishment is in lots or batches that arrive at once c. lead time is constant d. all of the above are assumed e. none of the above is assumed
3.
In determining the economic order quantity (EOQ) the following costs are considered: a. costs of a stockout and ordering costs b. costs of a stockout and inventory holding costs c. ordering costs and inventory carrying costs d. ordering costs and costs of changing production levels e. inventory holding costs and costs of changing production levels
4.
If the order quantity is increased the annual cost of carrying inventory will: a. increase b. decrease c. remain the same d. not be affected e. none of the above
5.
Assuming the cost per order is constant, increasing the order quantity will cause annual ordering costs to: a. decrease b. increase c. remain the same d. increase at a decreasing rate e. cannot be determined
120
6.
In the simple EOQ model annual inventory carrying costs and annual ordering costs vary: a. according to the time of year b. with seasonally adjusted demand c. with the order quantity d. do not vary in any way e. in an unknown manner
7.
While working a simple EOQ problem, you notice that, with a certain lot size, the annual ordering cost is exactly the same value as the annual inventory carrying cost. Which of the following is true? a. the lot size is the economic order quantity b. total cost is at its maximum c. the annual carrying cost will decrease if the order quantity is increased d. all of the above e. none of the above; the phenomenon is merely a coincidence
8.
A firm uses $20,000 of an item per year. The carrying cost is 25%, the cost of ordering is $10 and the order quantity is $1,000. The annual total cost of carrying plus ordering would be: a. $2,500 b. $5,000 c. $100 d. $325 e. none of the above
9.
For a particular item the usage is 2000 units per year, the ordering cost is $10, the inventory carrying cost is 20% and the unit cost is $5. The economic order quantity is: a. 20 units b. 200 units c. 2000 units d. 400 units e. 4000 units
10. If the economic order quantity is to be calculated in DOLLARS, then: a. the annual demand must be stated in dollars b. ordering costs MUST be stated on a per UNIT basis c. carrying costs are stated in dollars per unit d. all the above are true e. none of the above is true
121
11. A supplier offers a quantity discount. Which of the following will influence the decision to accept the discount or not? a. purchase cost b. cost of carrying inventory c. cost of placing one order d. all of the above are relevant e. none of the above is relevant 12. If a purchase discount is taken: 1. There is a saving in purchase cost. 2. Ordering costs are reduced. 3. Carrying costs are increased. 4. There is not necessarily a net saving. a. all the above are true b. 2 and 3 are true c. 3 and 4 are true d. 2 and 4 are true e. 3 and 4 are true 13. For a certain group of items the cost of carrying inventory and the cost of placing orders is not exactly known but is about the same for all the items. The company has calculated K = 20 for these items. If one item has an annual demand (A) = $10,000 the NEW order quantity should be: a. $2,000 b. $10,000 c. $20,000 d. $50,000 e. none of the above 14. Which of the following statements is correct? a. you must know the ordering cost to use the EOQ concept b. quantity discounts will not change the total inventory costs of the item c. inventory levels can be lowered by raising the order quantity d. if stock is not received all at once into inventory then EOQ formula can be modified and used e. none of the above is correct 15. The EOQ for an item is 5500 units and the annual demand is 78,000 units. What is the period order quantity? a. 14.18 b. 0.27 c. 3.67 d. 4 e. cannot be determined from the given data
122
16. Which of the following statements is best? I. The EOQ should be used with lumpy demand. II. Transportation cost should be included in the cost of ordering. III. Anticipation inventory should be built based on capacity and future demand. a. I and II only are true b. I and III only are true c. II and III only are true d. all the above are true e. none of the above are true 17. Using the POQ method of ordering, calculate the total cost of carrying and ordering inventory for the 6 week period shown. Use a POQ = 3 weeks for your answer. Week Net requirements Planned order receipts Ending inventory
1 60
2 40
3 10
4 50
Cost to place an order = $100.00 Cost to carry inventory = $1.00 per unit per week Annual demand = 1,500 units Cost per unit = $200.00 Opening inventory = 0 units a. $140 b. $280 c. $340 d. $400 e. none of the above
123
5 20
6 30
Answers. 1 b 2 d 10 a 11 d
3 c 12 a
4 a 13 a
5 a 14 d
6 c 15 c
124
7 a 16 c
8 d 17 c
9
b
INDEPENDENT DEMAND ORDERING SYSTEMS CHAPTER 11 ANSWERS TO PROBLEMS 11.1 Average inventory = Order point
=
1600 + 100 = 2 4 × 125 + 200 =
900 units
10 × 100 + 200 2 6 × 100 + 200 =
=700 units
700 units
11.2 Average inventory = Order point
=
11.3 Period 1
Actual Deviation Deviation demand squared 500 0 0
2
600
100
10000
3
425
−75
5625
4
450
−50
2500
5
600
100
10000
6
575
75
5625
7
375
−125
15625
8
475
−25
625
9
525
25
625
10
475
−25
625
Total
5000
51250
Average demand = 500 units Sum of the squares of deviations = 51250 Average square deviation = 51250 ÷ 10 = 5125 Sigma = 5125 = 71.59 units
125
800 units
11.4 Period Actual Deviation Deviation demand squared 1 1700 −300 90000 2
2100
100
10000
3
1900
−100
10000
4
2200
200
40000
5
2000
0
0
6
1800
−200
40000
7
2100
100
10000
8
2300
300
90000
9
2100
100
10000
10
1800
−200
40000
Total
20000
0
340000
Average demand = 2000 units Sum of the squares of deviations = 340,000 Average of the squares of the devation = 340,000 ÷ 10 = 34,000 Sigma = 34,000 = 184.39 units 11.5
a. b.
11.6
Safety stock Order point Safety stock Order point
= = = =
zero DDLT + SS = 200 + 0 = 200 units 1.04 × 150 = 156 units 156 + 200 = 356 units
Safety factors taken from Figure 11.5 Service Level 75 80 85 90 95 99.99
Safety Factor 0.67 0.84 1.04 1.28 1.65 4.00
Safety Stock 67 84 104 128 165 400
Change in Safety Stock 17 20 24 37 235
126
11.7
Orders per year = 10,000 ÷ 750 = 13.33 Service level = 12.33 ÷ 13.33 × 100 = 92.5% Safety stock = 1.42 × 150 = 213 units Hint: Use the average of the SF for 90% and 94% i.e. 1.28 and 1.56 Average inventory = 750 ÷ 2 + 213 = 588 units Order point = 10,000 × 2 + 213 = 598 units 52
11.8
Orders per year
=
Service level = Safety stock = Average inventory =
11.9
Order point
=
Orders per year
=
Service level = Safety stock = Average inventory = Order point
=
250 × 52 800 15.25 ÷ 16.25 1.56 × 175 800 + 273 2 250 × 3 + 273
=
16.25
= = =
94% 273 units 673 units
=
1023 units
500 × 52 2500 9.4 ÷ 10.4 01.28 × 100 2500 + 128 2 500 × 4 + 128
=
10.4
= = =
90.4% 128 units 1378 units
=
2128 units
11.10 SIGMA (LTI)
= SIGMA (FI)
LTI FI
3 1 = 173 units
= 100
11.11 Safety stock (new) = Safety stock (old) = 200
int erval[ new] int erval[ old ]
5 3
= 258 units
127
11.12 New safety stock = =
Old safety stock 150
3 1
Old lead time New lead time
= 260 units
11.13 New safety stock =
200
6 = 173 units 8
11.14 New safety stock =
8 6
200
= 231 units
11.15 Week 1
Actual Deviation Deviation Demand squared 2100 100 10000
2
1700
-300
90000
3
2600
600
360000
4
1400
-600
360000
5
1800
-200
40000
6
2300
300
90000
7
2200
200
40000
8
1600
-400
160000
9
2100
100
10000
10
2200
200
40000
Totals
20000
0
1200000
128
a. Average squared deviation
= 1,200,000 ÷ 10 = 120,000
b. Sigma
= 120, 000 = 346 units
b. Sigma for lead time interval c. Order per year
= 10 − 1 10
c. Service level
=
d. Safety factor d. Safety stock
= 1.28 = 1.28 × 489
e. Order point
=
2 1
= 346
100, 000 10 , 000
= 489 units
= 10
= 90%
= 626 units
100 , 000 × 2+ 626 = 4,472 units 52
11.16 Sigma Service
= =
489 units 20 – 1 = 95% 20 Safety factor = 1.65 Safety stock required = 1.65 × 489 Change in safety stock = 807 – 626 Cost of increased service level =
11.17 Number of orders per year
= 807 units = 181 units 181 × $10.00 = $1,810
=
10,000 = 40 250 Number of orders without stockout = 0.9 × 40 = 36 Number of stocks per year = 4
11.18 Distribution center A
Transit time: 2 weeks Order quantity: 100 units
Week
1
2
3
4
5
Forecast
50
50
35
50
110
75
40
90
80
100
100
In transit Projected available Planned order release
100 75
25
129
Distribution center B
Transit time: 1 week Order quantity: 200 units
Week
1
2
3
4
5
Forecast
95
100
115
80
70
55
140
60
190
In transit Projected available Planned order release
200 50
155
200
200
Central supply
Lead time: 2 weeks Order quantity: 500 units
Week
1
Forecast Scheduled receipts Projected available Planned order release
400
400
2
3
4
300
100
200
100
0
300
5
300
500
11.19 Distribution center A
Transit time: 2 weeks Order quantity: 500 units
Week
1
2
3
4
5
Forecast
300
200
150
175
200
In transit Projected available Planned order release
500 200
50
375
175
200
400
500
130
Distribution center B
Transit time: 2 weeks Order quantity: 200 units
Week
1
2
3
4
5
Forecast
50
75
100
125
150
100
25
125
0
50
In transit Projected available Planned order release
150
200
200
Central supply
Lead time: 1 week Order quantity: 600 units
Week
1
2
3
Forecast Scheduled receipts Projected available Planned order release
200
500
200
200
300
100
11.20
a. b.
11.21
400
4
5
600
D = 200 units per week L = 1 week R = 2 weeks SS = 100 units Target level (T) = D(R + L) + SS = 200(2 + 1) + 2 x 400 = 1,000 units Q
= =
D = L = R = SS = Target level (T) Order =
T – (on hand) 1,000 – 600 = 400 units 20 cases per day 3 days 5 days 40 cases = D(R + L) + SS = 20(5 + 3) + 40
200 – 90 = 110 cases
131
=
200 cases
MULTIPLE CHOICE QUESTIONS 1.
Which of the following are basic systems for determining when to order INDEPENDENT demand items? I. Order point system II. Periodic review system III. Material Requirements Planning a. I only b. II only c. I and II d. I and III e. II and III
2.
Which of the following statements is best? a. order point = DDLT + SS b. average inventory = Q ÷ 2 + SS c. safety stock is always needed d. a and b are true c. d and c are true
3.
When using the order point system which of the following is true? a. order quantities are usually fixed b. the order point depends upon the demand during the lead time plus safety stock c. time intervals between orders are constant d. a and b above e. b and c above
4.
Which of the following statements is true about safety stock? a. it must always be carried b. it depends only on the amount of demand c. it depends on the required service level d. all the above are true e. none of the above is true
5.
Select the description which most closely fits the term ORDER POINT: a. the time it takes to replenish an item in inventory. b. extra inventory of an item carried to protect against variations in demand during lead time c. a listing of components required to manufacture a product d. the time when an order should be placed e. none of the above
132
6.
Select the description which most closely fits the term SAFETY STOCK: a. the time it takes to replenish an item in inventory. b. extra inventory of an item carried to protect against variations in demand during lead time c. a listing of components required to manufacture a product d. the time when an order should be placed e. none of the above
7.
Select the description which most closely fits the term LEAD TIME: a. the time it takes to replenish an item in inventory b. extra inventory of an item carried to protect against variations in demand during lead time c. a listing of components required to manufacture a product d. the time when an order should be placed e. none of the above
8.
Among other things the amount of safety stock carried will depend upon: a. the frequency of reorder b. the service level desired c. variability of demand during the lead time d. all the above e. a and b above
9.
Which of the following statements is best? a. safety stock depends on the service level desired b. safety stock depends on the length of the lead time c. safety stock depends on the variation of demand during the lead time d. all of the above are correct e. none of the above is correct
10. If the standard deviation of demand is 100 units and the average demand is 1000 units, then we can be 95% confident that actual sales will be 1000 units plus or minus about: a. 100 units b. 150 units c. 200 units d. 300 units e. 400 units 11. Which of the following statements is best? a. most demand patterns tend to be stable and predictable b. the most common predictable pattern is called a normal distribution c. the normal curve can be described by its average (mean) and the variation of actual demand about the average d. all the above are true e. only and b are true
133
12. If the sum of the absolute deviations of demand was 500 for 10 periods, MAD would be: a. 5 b. 500 c. 50 d. 0.02 e. none of the above 13. Management states that they will tolerate one stockout every year for a specific item. If 10 orders are placed for the item each year the service level desired is: a. 80% b. 85% c. 90% d. 95% e. none of the above 14. The average demand for an item is 1000 per month. The mean absolute deviation of monthly demand is 300 units. The MAD for yearly sales will be approximately: a. 3600 units b. 12,000 units c. 1040 units d. 3464 units e. none of the above 15. Given that the lead time is 1 week and the sigma is 100 units, if the lead time changes to 2 weeks then the sigma would change to about: a. 200 units b. 180 units c. 160 units d. 140 units e. 120 units 16. Management is willing to tolerate one stockout every 2 years for a specific item. If 10 orders are placed for the item each year the service level desired is: a. 80% b. 85% c. 90% d. 95% e. none of the above 17. Which of the following is the best statement? a. stockouts do not cost money because customers are willing to wait b. the cost of a stockout will vary depending on the market served, the customer, and competition c. stockouts can occur at any time in the inventory cycle d. stockouts do not depend on the frequency of reorder e. all the above statements are true
134
18. Which of the following systems are used to determine when the order point is reached? I. Two-bin system. II. Perpetual inventory system. III. Periodic inventory system. IV. Safety stock system. a. all are used to tell when the order point is reached b. I and II are used c. I, II and III are used d. I and III are used e. II and III are used 19. ____________ is an inventory record system that keeps a continuous account of transactions as they occur: a. Perpetual inventory system b. Periodic inventory system c. Two-bin system d. Safety stock system e. All the above keep a continuous account 20. The demand placed on a factory or a central warehouse by distribution centers is considered: a. dependent b. independent c. uniform d. all of the above e. none of the above 21. An order system in which the order quantity is allowed to vary and the order cycle is fixed is called the: a. periodic review system b. two-bin system c. reorder point system d. red-tag system e. none of the above 22. If the lead time is 1 week, the review period 4 weeks, the average demand 100 units per week and the safety stock is 50 units, the target level will be: a. 150 units b. 200 units c. 250 units d. 300 units e. 550 units
135
23. Using the periodic review system the target level is: a. forecast demand during lead time b. forecast demand during the review period c. the sum of a and b d. the sum of a and b plus the safety stock e. none of the above 24. If the lead time is 1 week, the review period 1 week, the average demand 100 units per week and the safety stock is 50 units, the target level will be: a. 150 units b. 200 units c. 250 units d. 300 units e. none of the above 25. Which of the following is correct? a. order quantities are fixed in the periodic review system b. the two-bin system is an example of the order point system c. the safety stock does not depend upon the frequency of reorder d. all of the above are true e. none of the above is true 26. Which of the following statements is best? I. In a pull system central supply determines what is needed by the distribution centers II. In a push system all decisions are made by the distribution centers. III. An advantage of a pull system is central coordination a. I and II only are true b. II and III only are true c. I and III only are true d. all the above are true e. none of the above are true 27. Which of the following are objectives of distribution inventory management? I. To provide the required level of customer service. II. To minimize the costs of transportation and handling. III. To always have enough of everything on hand so there are no stockouts. IV. To be able to interact with the factory so as to minimize scheduling problems. a. all the above are objectives b. I, II and III c. I, II and IV d. I, III and IV e. II, III and IV
136
28. The distribution inventory management system which forecasts when the various demands will be made by the system on central supply is called: a. pull system b. push system c. distribution requirements planning d. inventory replenishment e. order point system 29. If the on hand inventory is 40 units, the safety stock 20 units and the target level is 120 units then an order should be placed for: a. 100 units b. 80 units c. 60 units d. 40 units e. 20 units 30. For a given item the lead time is 1 week, the on hand inventory is 50 units, demand is 20 units per week, safety stock is set at 3 weeks supply and the item is ordered every 2 weeks. The order quantity should be: a. 70 units b. 60 units c. 50 units d. 40 units e. 120 units
137
Answers. 1 c 9 d 17 b 25 b
2 10 18 26
d c b e
3 11 19 27
d d a c
4 12 20 28
c c a c
5 13 21 29
e c a b
6 14 22 30
138
b c e a
7 a 15 d 23 d
8 d 16 d 24 c
PHYSICAL INVENTORY AND WAREHOUSE MANAGEMENT CHAPTER 12 ANSWERS TO PROBLEMS 12.1
5000 ÷ 30 = Pallet positions =
167 pallets 167 ÷ 3 = 55.67
12.2
Number of pallets needed = Number of pallet positions =
12.3
Number of pallets positions per row Number of pallets =
12.4
Pallet positions per row = Pallets in 4 rows =
7000 ÷ 30 234 ÷ 4
Pallets 5 4 4 10 14 37
= =
233.33 Î 234 pallets 58.5 Î 59
= 57 × 3 × 2
60 × 12 ÷42 17 × 3 × 4
12.5 SKU A B C D E Total
Î 56
= =
20 × 12 ÷ 42 = 57.14 = 342 pallets
17.14 Î 17 204
Positions Required 2 2 2 4 5 15
a. Pallet positions needed = 15 b. In 15 pallet positions there is room for 45 pallets Cube utilization = 37 ÷ 45 × 100% c. If racking is used they would require 37 ÷ 3 = 12.33 positions 12.6 SKU A B C D E F G Total
Pallets 14 17 40 33 55 22 34 215
Positions Required 4 5 10 9 14 6 9 57
139
Î
13 pallet
a. 57 b. In 57 pallet positions there is room for 228 pallets Cube utilization = 215 ÷ 228 = 94.3% c. Pallet positions needed = 215 ÷ 4 = 53.75 Î 54 12.7 a. Part number A
Shelf Inventory % % Within Difference count record difference Tolerance tolerance? 650 635 15 2.31 Y ±3
B
1205
1205
0
0.00
±0
Y
C
1350
1500
-150
-11.11
±5
N
D
77
80
-3
-3.90
±5
Y
E
38
40
-2
-5.26
±3
N
3320
3460
Total
A, B, and D, are within tolerance. b. Accuracy by item = 3 / 5 x 100% = 60% 12.8 a. Part number A
Shelf Inventory % % Within Difference count record difference Tolerance tolerance? 75 80 -5 -6.67 N ±3
B
120
120
0
0.00
±0
Y
C
1400
1500
-100
-7.14
±5
N
D
75
76
-1
-1.33
±5
Y
E
68
66
2
2.94
±2
N
1738
1842
Total
b. Accuracy by item = 2 / 5 x 100% = 40%
140
12.9
A
1100
Count frequency per year 12
B
1650
4
6600
27.2
26
C
2250
2
4500
18.5
18
Total counts
24300
Workdays per year
250
Counts per day
97.2
Numbers of counts per year 45,600
Number of Classification items
Numbers of counts per year 13200
% of Total Counts 54.3
Counts per Day 53
97
12.10
A
1900
Count frequency per year 24
B
3000
4
C
5100
1
12,000 5,100
Total counts
62,700
Workdays per year
250
Counts per day
250.8
Number of Classification items
% of Total Counts 72.7
Counts per Day 182
19.1
48
8.1
20
250
Due to rounding the total counts for some items may be off. A decision could be made to always round up the counts per day.
141
MULTIPLE CHOICE QUESTIONS 1.
Which of the following statements are true about warehouse operation? I. The major operating cost is labor. II. Labor productivity depends on warehouse layout. III. Capital costs are those of transport and space. a. all the above b. I and II only c. I and III only d. II and III only e. I only.
2.
The operating costs of a warehouse will depend on: I. The type of material handling equipment used. II. The stock location system used. III. The warehouse layout. a. all the above b. I and II only c. I and III only d. II and III only e. I only.
3.
Which of the following is NOT a warehouse activity? a. receiving b. identifying c. dispatching d. order picking e. transportation.
4.
Which of the following statements is best? a. the complexity of a warehouse operation will depend on the number of SKUs handled, the quantities of each SKU and the number of orders received and filled b. most of the activity in a warehouse is material handling c. warehouse management is NOT concerned with space utilization and effective use of labor and equipment d. a and b are true e. b and c are true.
142
5.
Which of the following statements is best? a. inventory is stored only on the floor b. a pallet position is a position where pallets are stored c. accessibility means being able to get at the goods with a minimum amount of work d. there is always a tradeoff between accessibility and cube utilization e. none of the above statements is true.
6.
If items were stacked against a wall as shown, the cube utilization would be:
a. b. c. d. e.
100 percent 80 percent 20 percent cannot be determined from the data given none of the above.
7.
In a floating location system: I. Goods are stored wherever there is appropriate space for them. II. The same SKU may be stored in several locations at the same time. III. An accurate and up-to-date information system is required. IV. The system is appropriate for all warehouses. a. all the above b. I, II and III c. I, II and IV d. II, III and IV e. none of the above is true.
8.
Which of the following statements is best? a. among other things, warehousing labor productivity will depend on warehouse layout b. all warehouses need to keep accurate records of where each item is located c. the space required in a warehouse will depend on the amount of labor used d. all of the above are true e. none of the above is true.
9.
Which of the following is a principle of merchandise location in the warehouse? a. group functionally related items together b. group physically similar items together c. group fast-moving items together d. all of the above e. none of the above.
143
10. Which of the following is NOT a method of order picking? a. area system b. floating location system c. zone system d. multi-order system e. all the above are methods of order picking. 11. Which of the following is NOT an advantage of point-of-use storage? a. materials are readily accessible to users b. material handling is reduced or eliminated c. central storage costs are reduced d. inventory record accuracy is easier to maintain e. material is accessible at all times. 12. Among other things a good physical control and security of inventory will depend on: I. A good part-numbering system. II. A well-trained work force. III. Free access to stock. a. I and II b. I and III c. II and III d. I only e. II only. 13. Which of the following is the best statement? a. a transaction occurs ONLY when goods are received or issued b. the steps in a transaction system are: identify the goods, verify quantity, record the transaction, and physically execute the transaction c. inventory is a tangible asset that is easy to lose track of unless properly controlled d. a and b are true e. b and c are true. 14. Which of the following statements are true about inventory accuracy? I. Inventory accuracy is essential for planning. II. It is important to find the cause of record error. III. Periodic audits of inventory will find the cause of record error. a. all the above b. I and II c. I and III d. II and III e. none of the above.
144
15. Which of the following are causes of inventory record errors? I. Unauthorized withdrawals of material. II. Unsecured stockroom. III. Audit capability. a. all the above b. I and II only c. I and III only d. II and III only e. I only. 16. Which of the following statements is best? I. It is not always practical to expect 100% inventory accuracy on all items. II. Variance is the amount of variation between an inventory record and a physical count. III. Tolerance is the amount of permissible variation between an inventory record and a physical count. a. all the above b. I and II only c. I and III only d. II and III only e. I only. 17. The three factors in good preparation for a physical inventory are: I. Housekeeping. II. Identification. III. Verification. IV. Training. a. I, II and III b. I, II and IV c. II, III and IV d. I, III and IV 18. Which of the following techniques can be used to select items for cycle counting? a. count all items once a year. b. count only “A” and “B” items c. base the frequency of count on annual dollar usage d. count all items the same number of times a year e. make a random audit of the items.
145
19. Which of the following are true when cycle counting inventory? I. Inventory should be audited for count and location. II. Cycle counts can be scheduled at regular intervals or special times. II. A good time to cycle count an item is when an order is placed. a. all the above b. I and II only c. I and III only d. II and III only e. I only. 20. Which of the following are advantages of cycle counting? I. Timely detection and correction of problems. II. Reduction of loss of production. III. Making use of spare labor. a. all the above b. I and II only c. I and III only d. II and III only e. I only. 21. Which of the following is NOT a basic stock location system? a. group functionally related items together b. locate all stock for fast access c. group fast-moving items together d. group physically similar items together e. locate working stock and reserve stock separately. 22. In a cycle counting system: a. all items are counted each month b. item counts are determined by their ABC classification c. the purpose is to correct inventory imbalances d. count the A items first, then B’s then C’s e. counts are done at the end of the business year 23. In a cycle counting system A items are usually: I. expensive items II. items which often experience imbalances III. difficult to get items a. b. c. d e.
I only I and II only I and III III only all of the above
146
24. Cycle counting uses which of the following methods? a. ABC method b. zone method c. location audit method d. a and b only e. all of the above 25.
A simple method of determining when an item should be cycle counted is: a. count when the item is ordered b. count each time the item is picked c. count each item once per month d. count items which have been in storage for a given period of time e. count items which don’t appear to be used often
147
Answers. 1 a 2 a 9 d 10 b 17 b 18 c 25 a
3 e 11 d 19 a
4 d 12 a 20 b
5 c 13 e 21 b
6 b 14 b 22 b
148
7 b 15 b 23 e
8 a 16 c 24 e
PHYSICAL DISTRIBUTION CHAPTER 13 ANSWERS TO PROBLEMS 13.1
Rail Transportation cost $500 In-transit inventory cost 14 days x $35 = Total cost $990
13.2
Sea Transportation cost $1000 Inventory carrying cost 6300 Total cost $7300
Truck $700 $490 4 days x 35 = $140 $840
Air $7500 300 $7800
It appears cheaper to ship by sea. However, they should take the shorter lead time into account. It means that they can get a more accurate forecast of what their actual assembly needs will be and will be able to respond to demand quicker. Inventory at the assembly plant should be reduced and there should be fewer disruptions to production. Also machine tools tend to have a number of options and the faster delivery time may avoid the customer changing their mind. 13.3
Line-haul cost = Line-haul cost per cwt. = Line-haul cost per cwt. = Saving per cwt.
$13.00 × 200 = $2,600 ÷ 300 = $2,600 ÷ 500 = =
13.4
Line-haul cost = Line-haul cost per unit =
$4.00 per mile × 1,000 $4,000 ÷ 500 units
=
13.5
Line-haul cost per unit =
$4,000 ÷ 800 units
=
13.6
Truck would be able to carry 10 × 2,000 =
20,000 pounds.
Present line-haul cost = $250 / 2,000 =
$0.125/pound
13.7
Proposed line-haul cost
=
TL Calgary to market Inventory-carrying cost LTL cartage = Total cost =
= $15.00 per unit = $6.00 per unit $6.00 per unit $27.00 per unit
Annual saving
=
$2,600 $8.67 per cwt $5.20 per cwt $3.47
$250 / 20,000
($28 – $27)(100,000)
149
=
miles =$4,000 $8.00 $5.00
=
$0.0125/pound
$100,000
13.8
Plant to customer LTL direct Plant to customer via warehouse: Plant to warehouse TL = Warehouse costs = Warehouse to customer = Total cost = Savings per cwt. Annual saving =
13.9
= $9 × 100,000
=
$40/cwt.
$20/cwt. $5/cwt. $6/cwt. $31/cwt. $9/cwt. = $900,000
Let x be the distance from central supply to the market boundary. LDCCS = 20 + 1x LDCDC = (20 + 50 + 4) +1(500 – x)
Costs of LDCCS and LDCDC are equal at the boundary 20 + 1x = 74 + 500 –1x 2x = 554 x = 277 LDC = $20 + $1 × 277 = $297 13.10 From warehouse: Plant to warehouse TOTAL cost Warehouse to customer LTL = Inventory carrying cost = Total cost = Direct from plant cost =
= $20.00/cwt. (TL + Inventory) $4.00/cwt. $5.00/cwt. $29.00/cwt. $35.000/cwt.
It’s cheaper to supply this market from the warehouse rather than from central supply because the cost per cwt. is $6 less. 13.11 a. b.
c.
Cost per cwt. shipping direct: LTL direct = $0.70 + $.30 × 115 = $35.20 Cost of shipping via the warehouse: TL to warehouse = $0.4 + $0.15 × 135 = $20.65 Warehouse costs = = 0.30 $30.65 LTL city B to city A = $0.70 + $0.30 × 30 = 9.70 The fixed cost concerns loading, handling and paperwork which is independent of distance traveled. See also Figure 13.3 and section in text on total transportation costs.
150
MULTIPLE CHOICE QUESTIONS 1.
Which of the following statements is best regarding distribution channels? a. There are only two members in any distribution channel. b. The transaction channel is concerned with transfer of ownership. c. The distribution channel is concerned with the transfer of goods d. all the above are true e. b and c only are true.
2.
The particular way materials move will depend upon: a. the channels of distribution the firm is using b. types of markets served c. characteristics of the product d. all of the above e. none of the above.
3.
Which of the following activities is NOT considered a function of physical distribution? a. transportation b. production control c. distribution inventory maintenance d. warehousing e. order processing.
4.
The two criteria for establishing a particular physical distribution system are: a. cost of the system and service level desired b. service level and cost of carrying inventory c. cost of transportation and cost of warehousing d. cost of transportation and materials handling e. cost of warehousing and cost of inventory.
5.
Which of the following statements is best? a. the objective of distribution management is to provide the required level of service at least cost b. there will be cost trade-off between the various activities in physical distribution c. distribution can operate separately from marketing and production d. a and b are true e. b and c are true.
6.
Which of the following statements is best? a. physical distribution provides a bridge between marketing and production b. physical distribution contributes towards creating demand c. replenishment orders to replace field warehouse stocks will not affect production d. a and b are true e. b and c are true.
151
7.
Which of the following are elements in the cost of carriage? I. Ways II. Vehicles III. Terminals a. I, II and III b. none of the above c. I and II d. I and III e. II and III.
8.
Which of the following statements is true? a. railways are best at moving small volumes of bulky goods over short distances b. road transport is the least flexible of all the modes c. air cargo should be used for fast service over short distances d. all of the above are true e. none of the above is true.
9.
A shipper moving expensive goods of small size from Boston to Seattle would likely use: a. air b. motor c. rail d. water e. none of the above.
10. Considering the service desired and the relative cost of the item, which of the following would you most likely ship by truck? a. regular shipments of cut flowers b. regular shipments of iron ore c. regular shipments of grain d. a and b above e. b and c above. 11. Which of the following is true? a. because of high capital cost, rail must have a large volume of traffic to justify the expense b. water transport requires low rates of energy per ton mile moved c. operating costs per ton mile tend to be low for trucks d. a and b above e. b and c above.
152
12. Of the five modes of transportation, which one requires the lowest capital investment? a. air b. motor c. rail d. water e. pipeline. 13. Which mode would provide the fastest service capability? a. air b. motor c. rail d. water. 14. Which of the following statements is FALSE? a. pipeline capital costs are high in comparison with other modes b. air cargo is generally used for low value bulky items c. truck transport is suitable for distribution of small volume goods to a dispersed market d. water transport is slower than rail e. rail transport is more suited to bulky low value items than road transport. 15. Which of the following is true? a. the service capability of mode depends only on transit time b. air transport is the most expensive mode c. reliability of service and area covered are not important in selecting a mode d. all of the above e. b and c above. 16. Which mode would provide the slowest service capability? a. air b. motor c. rail d. water. 17. A contract carrier provides: a. a service available to the general public b. a scheduled service c. published rates d. all of the above e. none of the above.
153
18. In which case(s) would you use common carriers instead of contract carriers? a. regular delivery by a food chain to its stores b. shipment to customers by a mail order house c. regular shipment of paper from a mill to its warehouse d. a and b above e. a and c above. 19. Which of the following types of transportation will provide the best service capability? a. common b. contract c. private d. all of the above are equal e. none of the above. 20. In which case(s) would you use contract carriers instead of common carriers? a. regular delivery by a food chain to its stores b. shipment to customers by a mail order house c. regular shipment of paper from a mill to its warehouse d. a and b above e. a and c above. 21. Which mode of transportation would cost the MOST per ton mile? a. air b. motor (truck) c. rail d. water. 22. Which mode of transportation would cost the LEAST per ton mile? a. air b. motor (truck) c. rail d. water. 23. Which of the following are elements in transportation cost? a. line haul b. pickup and delivery c. terminal handling d. all of the above e. none of the above.
154
24. Which of the following is correct? a. consolidating shipments reduces billing and collecting costs b. line-haul cost per hundredweight can be reduced by increasing the weight shipped c. shipping costs will be higher with common carriers than contract carriers d. all of the above e. none of the above. 25. A shipper wishing to reduce transportation costs will: a. ship only in small quantities b. ship to LTL lots c. use trucks for all his shipments d. all of the above e. none of the above. 26. Consolidating shipments will reduce which of the following costs? a. pickup and delivery b. terminal handling c. billing and collecting d. all of the above e. none of the above. 27. TOTAL line-haul costs will vary directly with: a. the distance moved b. the weight moved c. the density of the goods d. a and b above e. b and c above. 28. The rate charged by a carrier will vary with: I. The value of the goods. II. The density of the goods. III. The color of the goods. a. all the above b. I and II only c. I and III only d. II and III only e. I only.
155
29. To decrease shipping costs a shipper will: I. Increase the weight shipped. II. Consolidate shipments. III. Use a common carrier rather than contract carrier. a. all the above b. I and II only c. I and III only d. II and III only e. I only. 30. Which of the following statements is true? a. goods are stored in a distribution warehouse for long periods of time b. a depository for documents is an example of a security warehouse c. warehouses improve customer service d. a and b e. b and c. 31. Which of the following is NOT an important role of distribution centers? a. transportation consolidation b. in-transit inventory c. product mixing d. break-bulk storage e. customer service. 32. The market boundary is: a. a location beyond which a source cannot supply b. the line between two or more supply sources where the laid-down cost is the same c. an agreed-upon boundary beyond which competition will not sell d. the extent of a market area e. a legal limitation placed on the delivery of goods. 33. Which of the following is a basic role of packaging in distribution? I. Identify the product. II. Contain and protect the product. III. Contribute to physical distribution efficiency. IV. Be an important part of the marketing program. a. all the above b. I, II and III only c. I, II and IV only d. II, III and IV only e. none of the above.
156
34. The consolidation of several units into larger units for fewer handlings is called: a. unitization b. consolidation c. cube utilization d. packaging e. materials handling. 35. Which of the following statements is best regarding materials handling in distribution systems? I. One objective of materials handling is to increase cube utilization. II. Materials handling can increase the service level. III. Gasoline powered industrial trucks are used indoors. a. all the above are true b. I and II are true c. I and III are true d. II and III are true e. I only is true. 36. Which of the following statements is best? a. materials handling costs are relatively constant as warehouses are added but after a point will start to rise b. inventory costs remain constant as the number of warehouses increase c. packaging costs increase as the number of warehouses increase d. a and b are true e. a and c are true. 37. As more warehouses are added to a physical distribution system we can expect the cost of: a. TL and CL shipments to increase b. LCL and LTL shipments to decrease c. total transportation costs to decrease d. all of the above e. a and b above. 38. Which of the following is best? a. as more warehouses are added to a system, TL and CL shipment costs increase b. pickup and delivery costs are reduced by consolidation c. water transportation requires less energy per ton mile moved than any other mode d. all of the above are best e. none of the above is best.
157
39. Which of the following statements is true regarding goods in a reverse logistics system? a. Volumes are equal to the forward logistics system. b. They travel through the same terminals as the forward logistics system. c. The goods tend to be small in quantity. d. Little product information is required. e. All of the above are true. 40. Reverse logistics: a. calculates total delivery cost from customer to producer b. is the return of goods c. is easily automated d. is always done by a company’s carrier selection e. is best applied to small diverse markets
158
Chapter 13 Answers to multiple choice questions. 1 10 19 28 37
e a c b d
2 11 20 29 38
d d e b d
3 12 21 30 39
b b a e c
4 13 22 31 40
a a d b b
5 14 23 32
d b d b
6 15 24 33
159
d b d b
7 16 25 34
a d e a
8 17 26 35
e e d b
9 18 27 36
a b a a
PRODUCTS AND PROCESSES CHAPTER 14 ANSWERS TO PROBLEMS 14.1
Suggestion. Ask the class. They may have some pet peeves about products and you will get a good discussion.
14.2 Fixed cost
Variable cost
Volume (units)
Total cost
Unit cost
$200.00
$10.00
100
$1,200.00
$12.00
$200.00
$7.00
1000
$7,200.00
$7.20
$50.00
$15.00
20
$350.00
$17.50
$1,000.00
$1.00
2000
$3,000.00
$1.50
$500.00
$20.00
500
$10,500.00
$21.00
14.3
a.
Fixed cost
=
b.
Variable cost =
5 ÷ 60 × $30.00
c.
Total cost Units cost
= =
$200.00 + $2.50 × 500 $1450 ÷ 500 =
d.
Total cost Unit cost
= =
$200.00 + $2.50 × 1000 = $2700.00 $2700 ÷ 1000 = $2.70
14.4 Fixed cost Variable cost a.
$200.00
Heat treat in-house $28,000.00 $10.00
CEP where: FCA + VCAx $28,000 + $10x = $7x = x =
=
$2.50 = $1450.00 $2.90
Purchase services $0.00 $17.00
= 0 + $17.00x $28,000 4000
CEP is at 4000 units. b.
3,000 units is less than the CEP. Therefore purchase the services. 5,000 units is above the CEP. Therefore heat treat in-house.
c.
Unit cost for 3000 units Unit cost for 5,000 units
=0 + $17.00 = $17.00 = (25,000 + 5,000 × $10.00) ÷ 5000 = $15.60
160
14.5
Corner store: Fixed cost = $0.00, variable cost = $0.99 per pound Cross Towne Fixed cost = $2.80, variable cost = $0.69 per pound CEP: $0.00 + $0.99x = $2.80 + $0.69x $0.30x = $2.80 x = $9.3 pounds It is worth the trip if you buy 9.3 pounds of bananas. However, if Cross Towne has other bargains it might be worthwhile for fewer bananas. 14.6 Buy
Process A Process B
Setup
$40.00
$180.00
Tooling
$10.00
$20.00
Labor/unit
$4.00
$3.75
Material/unit Purchase $6.10 cost Total cost $2,440.00
$2.00
$2.00
$2,450.00
$2,500.00
$6.13
$6.25
Unit cost
$6.10
Use process A. Unit cost = $6.10 14.7
a.
CEP buying/semi.
$0 + $2.00x $0.70x x
b.
CEP semi/auto
$5,000 + $1.30x = $15,000 + $0.60x $0.70x = $10,000 x = 14,285.7 units
c.
i. ii. iii. iv. v.
5,000 units: Buy 6,000 units: Buy 8,000 units: Semiautomatic 10,000 units: Semiautomatic 20,000 units: Automatic
d.
i. ii. iii. iv. v.
Unit cost Unit cost Unit cost Unit cost Unit cost
= = = = =
= $5,000 + $1.30x = $5,000 = 7,142.8 units
$2.00 $2.00 ($5,000 + $1.30 × 8,000) ÷ 8,000 = $1.925 ($5,000 + $1.30 × 10,000) ÷ 10,000 = $1.80 ($15,000 + $0.60 × 20,000) ÷ 10,000 = $1.35
161
14.8
Wrong selection
62,000.00
42.8
Cumulative percent 42.8
Wrong size
50,000.00
34.5
77.2
Order canceled
15,000.00
10.3
87.6
Wrong address
3,000.00
2.1
89.7
15,000.00
10.3
100.00
145,000.00
100.00
Reason
Number
Other Total
Percent
14.9
B
Number $ $10,250
A
$5,720
30.7
85.8
D
$1,130
6.1
91.8
C
$820
4.4
96.2
E
$700
3.8
100.00
$18,620
100.0
Part
Total
Cumulative percent 55.0 55.0
Percent
162
MULTIPLE CHOICE QUESTIONS 1.
The process of making something less complex or less difficult is called: a: standardization b: simplification c: specialization d: any of the above e: none of the above
2.
Which of the following statements regarding standardization is true? I. All products made to a given specification will be interchangeable. II. A range of standard specifications can be established so that the range covers the majority of uses for the item. III. Standardization results in a larger variety of parts. a: I and II are true b: II and III are true c: I and III are true d: I, II and III are true e: none of the above is true
3.
The establishment of a common size for electric light sockets is an example of: a: simplification b: diversification c: standardization d: product focus e: none of the above
4.
The concentration of effort in a given field of endeavor is called: a: simplification b: concentration c: standardization d: all the above e: none of the above
5.
Specialization increases output and decreases costs by: a: enabling labor to develop speed and dexterity b: reducing setup time for each part c: allowing a company to make a wide variety of different products d: a and b above only e: none of the above
163
6.
Which of the following is an advantage of product specialization? a: it allows a large variety of finished goods to be made b: it lets the firm pay only for the skills required c: it allows labor to develop speed and dexterity d: all the above e: b and c above
7.
Standardization can reduce costs by: a: reducing inventories b: increasing lot sizes c: allowing the use of general purpose equipment d: all the above e: a and b only
8.
Which of the following statements is true? I. Serving similar customers with similar demand characteristics is an example of market focus. II. A company specializing in assembling cars is an example of process focus. III. A focused factory specializes in a wide product mix. a: I only is true b: I and II only are true c: I and III only are true d: II and III only are true e: all the above are true.
9.
Which of the following is an objective of product design? a: to design a product that will function as expected in the marketplace b: to design a product for minimum processing cost c: to design a product that will have minimum design costs d: all the above e: a and b above
10. Tolerance is: a: an allowable deviation from the desired result b: specified by process designers c: another word for variation d: none of the above e: a and b above
164
11. Which of the following are advantages of simultaneous engineering? I. Time to market is reduced. II. Avoids the need for marketing and design to work together. III. Less communication is necessary. a: I only is true b: I and II only are true c: I and III only are true d: II and III only are true e: all the above are true 12. Which of the following statements is/are true? a: product design is a major factor in determining the cost of a product b: product design is a major factor in the quality of a product c: product design is a trial and error process d: a and b above only e: all the above are true 13. General-purpose equipment: a: is designed for maximum flexibility b: is used extensively in intermittent manufacturing c: is designed and used to produce one or a few specific parts d: a and b only are true e: none of the above are true 14. Which of the following is a characteristic of special-purpose machinery? a: it can perform a variety of operations on a variety of work pieces b: capital costs are low compared to general purpose machinery c: it generally produces better quality than general purpose machinery d: all the above e: none of the above 15. In designing a process, which of the following needs to be considered? a: the volume to be produced b: the degree of customer involvement c: the desired quality level d: all the above e: none of the above
165
16. Which of the following statements is best about flow manufacturing? I. Work stations are located in the sequence needed to make the product. II. Work flows at a relatively constant rate. III. They can produce a wide variety of different products. IV. There is little buildup of inventory. a. all the above b. I, II and III are true c. I, II and IV are true d. II, III and IV are true e. I, III and IV are true 17. Which of the following statements is best regarding intermittent manufacturing? I. Goods are produced in lots or batches. II. General purpose machinery is mostly used. III. Each work station must be flexible. a. none of the above are true b. I, II and III are true c. I, II and IV are true d. II, III and IV are true e. I, III and IV are true 18. In a particular process, the fixed costs are calculated at $40,000 and the variable costs at $1.50 per unit. If 10,000 units are to be produced, what is the average cost per unit? a: $1.50 b: $2.00 c: $4.00 d: $5.50 e: none of the above 19. Which of the following are reasons a firm would buy a product rather than make it in its factory? a: secrecy of design b: utilizing idle workforce c: providing known and competitive prices d: all the above e: a and b only 20. Which of the following is/are characteristic(s) of line-flow manufacturing? a: requires less work-in-process inventory than intermittent manufacturing b: is suitable for high-volume items c: makes extensive use of special-purpose machinery d: all the above e: none of the above
166
21. What is the Cost Equalization Point for the two processes shown? Process A Process B Fixed cost $30.00 $120.00 Variable cost $3.00 $2.00 a: b: c: d: e:
$90.00 90 units 100 units 120 units none of the above
22. Intermittent manufacturing: a: is particularly suited to the production of low-volume items b: processes items in lots or batch c: generally uses general purpose machinery d: all the above e: none of the above 23. The cost equalization point: a: is used to show the potential profit of a process b: shows the lot size where costs are minimized c: is used to select the lowest cost of two or more alternative processes d: is the point where unit cost of a process are at a minimum e: uses all the above 24. Some purposes of continuous process improvement are: a: the reduction of worker fatigue and effort without reduction of levels of output b: the improvement of production processes and procedure c: the improvement of factory, department, and work-station layout to improve work flows d: improvement of levels of worker safety e: all the above 25. In selecting a project for method study, which of the following factors should be considered? a: human b: economic c: marketing d: all the above e. a and b only
167
26. Which of the following steps in method study ensures all elements of a job are studied? a: install b: select c: record d: examine e: none of the above 27. A disadvantage of intermittent manufacturing is: a. High inventories are required b. High flexibility is required c. No flexibility exists d. Work place utilization is minimized
168
Answers. 1 b 2 a 10 a 11 a 19 c 20 d
3 c 12 d 21 b
4 e 13 d 22 d
5 a 14 c 23 c
6 e 15 d 24 e
169
7 e 16 c 25 e
8 a 17 b 26 c
9 e 18 d 27 a
JUST-IN-TIME MANUFACTURING CHAPTER 15 ANSWERS TO PROBLEMS 15.1
a.
New EOQ
=
$20,000 √ 10/5
b.
Total average inventory before =
c.
Total average inventory after =
=
$28,284
10 x $20,000 = 2 5 × $28,284 2
=
$100,000
$70,710
15.2
Reduction in average inventory = $100,000 – $70,710 = $29,290 Reduction in carrying cost = 0.2 x $29,290 = $5,858
15.3
a.
EOQ =
2 x1000x10 = 100 units 20
b.
EOQ =
Annual demand =1000 units Carrying Cost = $20 per unit/year Setup Cost = $100/setup Run Cost = $2.00/unit After setup reduction, the setup cost = $10/setup
S
=
$15
2 x1000x10 = 32 units 20
c.
Total cost
Before: Setup $1,000.00 After: $312.50
=
Setup cost + carrying cost + run cost
Carrying Run Total Cost Unit Cost $1,000.00 $2,000.00 $4,000.00 $4.00 $320.00 $2,000 $2,632.50 $2.63 ↑ ↑ ↑ (1,000/32)x$10 (32/2)x$20 (1,000x$2)
32
170
($4,000.00/1,000) ($2,632.50/1,000)
15.4
A: 500/100 = B: 400/100 = C: 300/100 =
5 4 3 12
Since there is no common denominator for 5, 4 and 3, the minimum sequence will be 12 as follows: ABC, ABC, ABC, ABA. 15.5 Week
1
2
3
4
5
Model A
800
800
800
800
800
Model B
600
600
600
600
600
Model C
200
200
200
200
200
1600
1600
1600
1600
1600
Total
171
MULTIPLE CHOICE QUESTIONS 1.
Which of the following statements is best regarding JIT? I. It is a philosophy that relates to the way in which a manufacturing company organizes and operates its business. II. It is a set of techniques to make manufacturing more productive. III. It is concerned with adding value to the product. a. all the above are true b. I and II are best c. I and III are best d. II and III are best e. I only is best
2.
Which of the following statements is true? I. Value starts in the marketplace. II. Cost and value are the same thing. III. Counting and storing add value to the product. a. I and II b. I and III c. II and III d. I e. III
3.
If a company standardizes on the components that are used in different models it will: a. reduce waste b. reduce the variety of options offered to the customer c. reduce the length of production runs d. require the use of general-purpose machinery
4.
The ideal product is one that: I. Meets or exceeds the needs of the customer. II. Makes the best use of material. III. Can be manufactured at least cost. a. all the above b. I and II only c. II and III only d. I only
5.
Overproduction causes waste by: a. consuming unneeded raw materials and labor b. creating excess inventory c. causing confusion and hiding problems d. a and b e. all the above
172
6.
Which of the following are advantages of reducing inventory? I. Engineering changes can be made sooner. II. Quality can be improved. III. Less space is needed in manufacturing. IV. Lead time will be shorter. a. all the above b. only I, II and III c. only I, II and IV d. only II, III and IV e. only III and IV
7.
Which of the following is NOT an advantage of work cells? a. queue and lead time are reduced b. production activity control is simplified c. need for floor space is reduced d. immediate feedback e. maximum machine utilization
8.
Which of the following contribute to machine flexibility? a. small general-purpose machinery b. mobility of machines c. automated high-capacity machines d. a and b above e. b and c above
9.
Reduced setup has which of the following advantages? I. Reduced lot sizes. II. Reduce lead time and queue. III. Improved quality. a. all the above b. I and II only c. I and III only d. II and III only e. I only
10. Which of the following statements is best about quality? I. Quality can be inspected into a product. II. Poor quality has no effect on work flow. III. The process must be capable of producing the required quality consistently. IV. Machinery must be maintained in excellent condition. a. all the above b. I and II only c. II and III only d. III and IV only e. I and IV only
173
11. Which of the following concepts is needed to achieve uninterrupted material flow? a. uniform plant loading b. pull system c. valid schedules d. all the above are needed e. a and b only are needed 12. Linearity in a JIT environment means: a. produce small lot sizes b. plan level schedules c. each day achieve the plan, no more or less d. eliminate all idle time e. statistical process control 13. The buyer expects that a supplier will provide each of the following EXCEPT: a. the quality needed at all times b. information on competitors c. frequent deliveries d. improved quality and cost 14. Employee involvement in a JIT environment means: I. Operators must take responsibility for improving the process. II. Management must take more of a leadership role. III. Staff must be trainers and assist line people. a. all the above b. I and II only c. I and III only d. II and III only e. none of the above 15. Which of the following statements is best? I. JIT and manufacturing planning and control cannot work together. II. The JIT philosophy simplifies and reduces manufacturing planning and control problems. III. JIT requires a very good planning and control system. a. all the above are true b. I and II c. I and III d. II and III e. none of the above
174
16. JIT will influence master production scheduling by: a. reducing time fences and making the MPS more responsive to customer demand b. making it possible to use daily time buckets c. making the MPS more unstable d. a and b only e. b and c only 17. JIT practices will change the material requirements planning process by: a. reducing the number of levels in the bill of material b. making the bill of material more complex c. increasing the need for offsetting d. increasing the need for netting e. eliminating the need for MRP 18. Which of the following is a benefit to the purchaser in supplier partnerships? a. frequent deliveries on a just-in-time basis b. better quality c. improved performance and cost d. all the above e. a and b above only 19. A pull system is developed to provide which of the following? a. an alternative to a classic MRP system b. to provide only what is needed and when it is needed c. can only be used when demand is constant and known d. can only be used when demand is unknown e. none of the above 20. The primary purpose for establishing small-group improvement activities among production employees is: a. direct labor efficiency improvement b. improved scheduling c. morale improvement d. product improvement e. work methods improvement 21. Bills of material used for MRP planning in a JIT environment are likely to have which of the following characteristics? a. fewer "phantom" or "blow-through" assemblies b. increased complexity with regard to options c. weekly time buckets d. no need for where-used references e. fewer levels in product structures
175
22. Each of the following contributes to machine flexibility EXCEPT: a. ease of maintenance b. mobility c. variable speed d. multipurpose e. quick setup 23. The principle of cellular manufacturing is also known as: a. work cell layout b. clustered flow c. functional organization d. pull systems e. continuous flow
176
Answers. 1 a 2 d 10 d 11 d 19 b 20 c
3 a 12 c 21 e
4 a 13 b 22 a
5 e 14 a 23 e
6 a 15 d
177
7 e 16 d
8 d 17 a
9 a 18 d
TOTAL QUALITY MANAGEMENT CHAPTER 16 ANSWERS TO PROBLEMS 16.1
Number of standard deviations within tolerance = .001 ÷ .00033 = 3.03 Sigma is approximately 3. Therefore approximately 99.7% of shafts will be within tolerance. 16.2
Number of standard deviations within tolerance = .0007 ÷ .00033 = 2.12 Sigma is approximately 2. Therefore approximately 95.5% of shafts will be within tolerance.
16.3
CP
=
USL – LSL = 5.05 – 4.95 = 1.11 6σ 6(0.015) The CP is greater than one; therefore the process is capable.
16.4
CP
=
(USL – LSL) = 6 x .02
0.83
(.05 – ( - .05)) = 6 x .02
0.83
The CP is less than one and the process is not capable 16.5
CP
16.6
CP
=
USL – LSL = .765 – .735 = 6σ 6(.007) The CP is less than one and the process is not capable
0.71
=
1.43
USL – LSL = .765 – .735 = 6σ 6(.0035) The CP is greater than one and the process is capable
178
16.7
a.
Process centered on 0.75 Cpk = (USL – Mean) 3σ
or
(Mean – LSL) 3σ
=
.765 – .75 3 × .0035
or
.75 – .735 3 × .0035
=
1.43
or
1.43
Since Cpk is greater than 1.33, the process is capable. b.
Process centered on 0.74 Cpk = .765 – .74 = 2.38 3 × .0035
or
.74 – .735 = 3 × .0035
.48
Since the lower Cpk is less than 1, the process is not capable. Note that as a quick test the Cp is equal to the average of the upper Cpk and the lower Cpk 16.8
a.
Cpk =
8.1 – 7.93 = 2.38 3 × .02
or
= 7.93 – 7.9 = 3 × .02
.5
Since the lower Cpk is less than 1, the process is not capable. a.
Cpk =
8.1 – 7.98 = 2 or = 3 × .02
7.98 – 7.9 3 × .02
=
1.33
Since the lower Cpk is greater than 1.3, the process is capable. b.
Cpk =
8.1 – 8.04 = 1 or = 3 × .02
8.04 – 7.9 3 × .02
=
2.33
Since the lower Cpk is between 1 and 1.3, the process is marginally capable..
16.9 For this question students will have unique answers. You can refer to Figure 16.16. Their answers should show where improvements are needed and the interaction of features occur.
179
MULTIPLE CHOICE QUESTIONS 1.
Which of the following statements is best? a. the basic quality level of a product is specified by senior management b. manufacturing is responsible for meeting at least the minimum specifications of the product c. the product designer builds the quality level into the product by design and specification d. all the above are true e. a and b are true
2.
Which of the following is NOT a basic concept of total quality management? a. customer focus b. competitive supplier bidding c. continuous process improvement d. performance measures e. involvement of the total workforce
3.
Which of the following statements regarding TQM is best? I. TQM is organization wide and everyone's responsibility II. Customer focus is not a requirement of TQM. III. Only junior management is involved in TQM. a. I only is true b. II only is true c. III only is true d. I and II only are true e. all the above are true
4.
Giving people the authority to make decisions and take action in their work areas is called which of the following? a. teamwork b. organizational skills c. empowerment d. any of the above e. none of the above
5.
Which of the following statements is best regarding performance measures? I. They are not necessary for performance improvement. II. They should be appropriate and useful. III. They should be simple and easy for users to understand. a. I and II only b. I and III only c. II and III only d. all the above
180
6.
The cost of failure to control quality includes which of the following? a. scrap, rework and spoilage b. warranty charges c. returned materials d. all the above e. none of the above
7.
The costs of controlling quality include which of the following? a. prevention and appraisal costs b. prevention and process control costs c. appraisal and process control costs d. any of the above e. none of the above
8.
Which of the following is/are included in the cost of preventing poor quality? a. operator training b. final inspection c. warranty charges d. all the above are included in the costs of preventing poor quality e. none of the above is included in the costs of preventing poor quality
9.
Which of the following statements is best regarding process variation? I. All variation is due to chance. II. Chance variation is inherent in the process. III. Assignable variation is due to a specific cause. a. I and II are true b. I and III are true c. II and III are true d. I only is true e. II only is true
10. Chance variation in a process can be caused by which of the following? a. people b. machinery c. materials d. all the above e. none of the above 11. Which of the following can be used to describe the spread of the pattern of variability? a. arithmetic mean b. average c. range d. upper control limit e. none of the above
181
12. Which of the following statements is true if the standard deviation of a process is .02 and the average is 1? a. about 68.3% of the output will be within 1± .02 b. the specification limits are ± .02 c. the upper control limit is 1.02 d. all the above are true e. none of the above is true 13. The permissible limits of deviation from perfection is called which of the following? a. spread b. tolerance c. control limits d. process capability 14. Which of the following statements is best? I. The capability of a process is related to the product specification limits. II. Quality does not depend on the process used. III. Defects can only be produced by a shift in the mean. a. I only is true b. I and III only are true c. I and III only are true d. all the above are true e. none of the above is true 15. Which of the following statements is best if a process has a capability index (Cp) of 0.83? a. the process is capable b. the process is not capable c. cannot tell whether the process is capable or not from the information d. the product specifications are adequate 16. Which of the following statements is best if a process has a Cpk of between 1 and 1.33? a. the process is not capable b. the process is marginal c. the process is capable d. none of the above is true 17. The purpose of process control is to: a. make sure the process does not stop b. self-correct the process c. to show when there is a high probability of an assignable cause for defect d. to help designers develop the steps to automate a process e. all the above
182
18. Which of the following statements is correct regarding control charts? I. Specification limits are the same as control limits II. If there is no assignable cause of variation the process is in control III. A shift in the mean or average will show up on the X portion of the X and R chart a. I and II are true b. I and III are true c. II and III are true d. all the above are true e. none of the above is true 19. Which of the following statements is true regarding sample inspection? a. acceptance sampling requires 100% inspection b. one reason to sample inspect is because of human error c. the sample should be taken from the last parts produced because there is less chance of error d. there is no risk to either the consumer or producer 20. Which of the following statements is correct regarding acceptance sampling? a. sample inspection is 100% accurate b. the consumer's risk is that a lot with less than the acceptable number of defects will be accepted c. The producer's risk is that a batch with more than the acceptable number of defects will be rejected d. The cost of the sampling plan must be balanced against the consumer's risk and the producer's risk e. Lots are accepted when the consumer’s risk equals the producer’s risk 21. Under which of the following conditions is acceptance sampling appropriate? a. testing of the product is destructive b. time is available for 100% inspection c. the sample can be taken from the top of the batch d. the batch to be sampled is small e. sampling is a natural part of the process 22. Which of the following statements is true concerning ISO 9000 standards? I. They are intended to prevent nonconformities during all stages of inspection II. There is only one ISO 9000 standard and it only applies to manufacturing. III. ISO 9000 requires third party registration a. I only is true b. II only is true c. III only is true d. I and II are true e. All of the above are true
183
23. ISO 9000:2000 is designed as: a. a complete set of documentation to run any business b. a process approach to management c. a 12 step process d. a method of sampling to prevent defects in any process e. a set of technical standards to establish inspection limits 24. Which of the following statements is true concerning benchmarking? a. it seeks improvement by analyzing the internal process b. it studies only organizations in the same industry c. it studies the "best in class" organizations d. it is a process for determining performance measures for the shop floor 25. A House of Quality is used to: a. Organize a company into departments focusing on quality. b. Structure the engineering team. c. Translate customer needs into design specifications. d. Calculate specifications for desired cost reductions. e. Calculate capability of a process to meet customer specifications. 26. The voice of the customer is: a. The response heard from market promotions b. An expression for customer wants. c. The communication method used for network marketing. d. A measure of capability of a process. 27. QFD is an acronym for: a. Quality Function Deployment. b. Quality For Design. c. Quality Forms Development d. Quality through Frequent Delivery e. Queen For a Day 28. Six Sigma is a strategy designed to: a. Reduce defects. b. Measure the capability of the quality function. c. Calculate productivity. d. Increase the total output of processes. e. None of the above. 29. Six Sigma: a. Is only applicable if a process is repetitive. b. Is an offshoot of the 5-S program. c. Is an award sponsored by the Malcolm Baldridge Foundation. d. Is about more than measurement of parts production. e. a and b above only
184
30. The Top Six Sigma project managers are known as: a. Black Belts b. White Hats c. Best-In-Class d. World Class e. Biero
185
Answers. 1 e 10 d 19 b 28 a
2 11 20 29
b c d d
3 12 21 30
a a a a
4 c 13 b 22 c
5 c 14 a 23 b
6 d 15 b 24 c
186
7 a 16 b 25 c
8 a 17 c 26 b
9 c 18 c 27 a
