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Chapter 14 MRP and ERP

True/False 1. MRP works best if the inventory items have dependent demand. Answer: True Page: 635 Difficulty: Easy 2. Low level coding represents items less than $18 per unit. Answer: False Page: 641 Difficulty: Easy 3. Independent demand tends to be more 'lumpy' than dependent demand meaning that we need large quantities followed by periods of no demand. Answer: False Page: 635 Difficulty: Medium 4. Lumpy demand for components results primarily from the periodic scheduling of batch production. Answer: True Page: 635 Difficulty: Easy 5. MRP is used within most MRPII and ERP systems. Answer: True Page: 636 Difficulty: Easy Learning Objective: AS 6. The master production schedule states which end items are to be produced both when and how many. Answer: True Page: 637 Difficulty: Easy 7. Net requirements equal gross requirements minus safety stock. Answer: False Page: 637 Difficulty: Easy 8. The master schedule needs to be for a period long enough to cover the stacked or cumulative lead time necessary to produce the end items. Answer: True Page: 637 Difficulty: Easy 9. Initially, a master production schedule - the output from MRP - may not represent a feasible schedule. Answer: True Page: 637 Difficulty: Medium 10. MRP, considering inventory position, bills of material, open purchase orders and lead times guarantees a feasible production plan if the inputs to MRP are accurate. Answer: False Page: 637 Difficulty: Hard

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11. The bill of materials indicates how much material will be needed to produce the quantities on a given master production schedule. Answer: False Page: 638 Difficulty: Hard Learning Objective: Ref 12. A bill of materials contains a listing of all the assemblies, parts, and materials needed to produce one unit of an end item. Answer: True Page: 638 Difficulty: Easy Learning Objective: Ref 13. The bill of materials contains information on lead times and current inventory position on every component required to produce the end item. Answer: False Page: 638 Difficulty: Medium 14. The inventory records contain information on the status of each item by time period. Answer: True Page: 641 Difficulty: Easy 15. An assembly-time chart indicates gross and net requirements taking into account the current available inventory. Answer: False Page: 641 Difficulty: Medium 16. MRPII did not replace or improve the basic MRP. Answer: True Page: 652 Difficulty: Medium 17. The gross requirements at one level of an MRP plan determine the gross requirements at the next lower level continuing on down to the lowest levels shown on the bill of material. Answer: False Page: 638 Difficulty: Hard 18. Gross requirements for any given component is equal to the net requirements of that component's immediate parent multiplied by the quantity per parent. Answer: False Page: 638 Difficulty: Hard 19. The term pegging refers to identifying the parent items that have generated a given set of material requirements for a part or subassembly. Answer: True Page: 647 Difficulty: Medium 20. A net-change MRP system is one that is updated periodically but not less frequently than once a week. Answer: False Page: 648 Difficulty: Hard 21. One reason that accurate bills of material are important is that errors at one level become magnified at lower levels because of the multiplication process used by MRP.

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Answer: True

Page: 638

Difficulty: Medium

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22. A regenerative MRP system is one that is updated continuously - every time there is a schedule change. Answer: False Page: 648 Difficulty: Hard 23. One of the primary output reports of MRP concerns changes to planned orders. Answer: True Page: 648 Difficulty: Medium Learning Objective: AS 24. Safety time is sometimes used in MRP rather than safety stock quantities. Answer: True Page: 649 Difficulty: Medium 25. Lot-for-lot ordering in MRP provides coverage for some predetermined number of periods using forecasted demand to extend beyond the orders already received for those periods. Answer: False Page: 649 Difficulty: Medium 26. MRP output reports are divided into two main groups daily and weekly. Answer: False Page: 648 Difficulty: Easy Learning Objective: AS 27. In MRP, EOQ models tend to be less useful for materials at the lowest levels than for upper level assemblies of the bill of materials since higher-level assemblies have larger dollar investments. Answer: False Page: 641 Difficulty: Hard 28. Load reports show capacity requirements for departments or work centers which may be more or less than the capacity available in that work center. Answer: True Page: 654 Difficulty: Hard 29. ERP began in manufacturing organizations but has spread into service organizations. Answer: True Page: 656 Difficulty: Easy 30. MRP II is simply an improved version of MRP that processes faster and can plan for a larger number of end items. Answer: False Page: 652 Difficulty: Hard 31. Lot-for-lot ordering in MRP eliminates the holding costs for parts that are carried over to other periods. Answer: True Page: 641 Difficulty: Medium Learning Objective: Ref 32. Capacity requirements planning (CRP) is also known as MRP+. Answer: False Page: 653 Difficulty: Medium

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33. Project Management approaches can help in a conversion to an ERP system. Answer: True Page: 656 Difficulty: Easy 34. As long as a forecast is plus or minus 10%, MRP works well. Answer: False Page: 635 Difficulty: Medium 35. ERP represents an expanded effort to integrate standardized record-keeping that shares information among different areas of an organization. Answer: True Page: 656 Difficulty: Easy 36. Back flushing takes place after the production has been completed Answer: True Page: 651 Difficulty: Easy 37. Before a schedule receipt can take place, and order must be placed with a vendor. Answer: True Page: 641 Difficulty: Easy 38. MRP really doesnt apply to services since raw material isnt required. Answer: False Page: 651 Difficulty: Easy 39. ERP implementation requires support from and a direct mandate from the CEO because it impacts so many different functional areas. Answer: True Page: 656 Difficulty: Medium 40. ERP automates the tasks involved in performing a business process, such as order fulfillment and financial reporting. Answer: True Page: 656 Difficulty: Medium Multiple Choice 41. Which of the following most closely describes dependent demand? A) demand generated by suppliers B) estimates of demand using regression analysis of independent variables C) derived demand D) demands placed on suppliers by their customers E) net material requirements Answer: C Page: 635 Difficulty: Easy

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42. ERP implementation probably won't require: A) cross functional teams B) more than three or four months to install C) intensive training D) high funding for both initial cost and maintenance E) frequent upgrades after installation Answer: B Page: 656 Difficulty: Hard 43. A computer-based information system designed to handle ordering and scheduling of dependentdemand inventories is: A) computer aided manufacturing (CAM) B) computer integrated manufacturing (CIM) C) economic order quantity (EOQ) D) material requirements planning (MRP) E) economic run size (ERS) Answer: D Page: 635 Difficulty: Easy Learning Objective: IT 44. The development and application of MRP depended upon two developments: (1) the recognition of the difference between independent and dependent demand, and (2): A) computers B) development of the EOQ model C) inventory control systems D) blanket purchase orders E) the internet Answer: A Page: 636 Difficulty: Medium 45. The output of MRP is: A) gross requirements B) net requirements C) a schedule of requirements for all parts and end items D) inventory reorder points E) economic order quantities and reorder points Answer: C Page: 648 Difficulty: Easy 46. Which one of the following is not an input in an MRP system? A) planned-order schedules B) bill of materials C) master production schedule D) inventory records E) All are inputs. Answer: A Page: 637 Difficulty: Easy

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47. The MRP input stating which end items are to be produced, when they are needed, and what quantities are needed, is the: A) master schedule B) bill-of-materials C) inventory-records D) assembly-time chart E) net-requirements chart Answer: A Page: 637 Difficulty: Easy 48. In an MRP master schedule, the planning horizon is often separated into a series of times periods called: A) pegging B) lead times C) stacked lead times D) time buckets E) firm, fixed and frozen Answer: D Page: 648 Difficulty: Medium 49. The MRP input listing the assemblies, subassemblies, parts, and raw materials needed to produce one unit of finished product is the: A) master production schedule B) bill-of-materials C) inventory-records D) assembly-time chart E) net-requirements chart Answer: B Page: 638 Difficulty: Easy Learning Objective: AS 50. A visual depiction of the subassemblies and components that are needed to produce and/or assemble a product is called a(n): A) assembly time chart B) product structure tree C) MRP II D) pegging E) Gantt chart Answer: B Page: 638 Difficulty: Medium Learning Objective: AS 51. The MRP input storing information on the status of each item by time period (e.g., scheduled receipts, lead time, lot size) is the: A) master production schedule B) bill-of-materials C) inventory-records D) assembly-time chart E) net-requirements chart Answer: C Page: 641 Difficulty: Easy

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52. Which one of the following most closely describes net material requirements? A) gross requirements - amount on-hand - scheduled receipts B) gross requirements - planned receipts C) gross requirements - order releases + amount on-hand D) gross requirements - planned order releases E) gross requirements - amount on-hand + planned order releases Answer: A Page: 641 Difficulty: Medium 53. In MRP, "scheduled receipts" are: A) identical to "planned-order receipts" B) identical to "planned-order releases" C) open orders (that is, ordered before the first time bucket, but not delivered yet) D) "net requirements" E) available to promise inventory Answer: C Page: 641 Difficulty: Medium 54. In MRP, under lot-for-lot ordering, "planned-order receipts" are: A) identical to "scheduled receipts" B) identical to "planned-order releases" C) open orders (that is, ordered before the first time bucket, but not delivered yet) D) "gross requirements" E) available to promise inventory Answer: B Page: 649 Difficulty: Medium 55. Under lot-for-lot, order sizes for component parts are essentially determined directly from which one of the following? A) gross requirements B) net requirements C) economic order quantity D) gross requirements - net requirements E) net requirements - amount on-hand Answer: B Page: 649 Difficulty: Medium 56. In MRP, the gross requirements of a given component part are calculated from: A) net requirements + amount on-hand. B) gross requirements of the immediate parent C) planned orders of the end item D) net requirements of end item E) planned orders of the immediate parent Answer: E Page: 641 Difficulty: Medium

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57. The identification of parent items is called: A) Paternity B) Pegging C) Requirement I.D. D) Relationship tracking E) Master Scheduling Answer: B Page: 641 Difficulty: Medium 58. Periodic updating of an MRP system to account for all changes which have occurred within a given time interval is called: A) pegging B) planned order release C) net change D) regenerative E) exception report Answer: D Page: 648 Difficulty: Hard 59. An MRP system whose records are updated continuously is referred to as a(n): A) regenerative system B) batch-type system C) Plossl-Wright system D) net-change system E) gross-change system Answer: D Page: 648 Difficulty: Hard 60. Which is true of a net-change system? A) It is a batch-type system which is updated periodically. B) It is usually run at the beginning of each month. C) The basic production plan is modified to reflect changes as they occur. D) It is used to authorize the execution of planned orders. E) It indicates the amount and timing of future changes. Answer: C Page: 648 Difficulty: Hard 61. Which one of the following most closely describes the MRP approach that is used for components or subassemblies to compensate for variations in lead time? A) pegging B) safety stock C) increased order sizes D) safety time E) low-level coding Answer: D Page: 649 Difficulty: Hard

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62. Which of the following lot sizing methods does not attempt to balance ordering (or setup) and holding costs? A) economic order quantity B) economic run size C) lot-for-lot D) part-period E) all of the above Answer: C Page: 649 Difficulty: Hard Learning Objective: AS 63. When MRPII systems include feedback, they are known as: A) MRPIII B) Enterprise resource planning C) Circular MRP D) Feasible MRP E) Closed Loop MRP Answer: E Page: 653 Difficulty: Hard 64. The multiplication process used by MRP to determine lower level requirements is called: A) time-phasing B) pegging C) netting D) projecting E) exploding Answer: E Page: 641 Difficulty: Medium 65. _______ is choosing how many to order or make. A) Quantity determination B) Package sizing C) Lot sizing D) Grouping E) Aggregation Answer: C Page: 649 Difficulty: Medium 66. Which of the following is not usually necessary in order to have an effective MRP system? A) a computer and software B) an accurate bill of materials C) lot-for-lot ordering D) an up-to-date master schedule E) integrity of file data Answer: C Page: 637 Difficulty: Medium

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67. The _________ of ERP makes it valuable as a strategic planning tool. A) Internet base B) Rapid Batch capability C) Employee focus D) Real-time aspect E) Database structure Answer: D Page: 656 Difficulty: Hard 68. A recent effort to expand the scope of production resource planning by involving other functional areas in the planning process has been: A) material requirements planning B) capacity requirements planning C) manufacturing resources planning D) Just-In-Time planning E) multifunctional relationships planning Answer: C Page: 652 Difficulty: Easy 69. Which statement concerning MRP II is false? A) It is basically a computerized system. B) It can handle complex planning and scheduling quickly. C) It involves other functional areas in the production planning process. D) It involves capacity planning. E) It produces a production plan which includes all resources required. Answer: E Page: 652 Difficulty: Medium 70. Which of these items would be most likely to have dependent demand? A) X-Box batteries B) toy trains C) flowers D) chocolate chip cookies E) wrist watches Answer: A Page: 635 Difficulty: Medium Learning Objective: Ref 71. Which of these products would be most likely to have dependent demand? A) refrigerators B) automobile engines C) televisions D) brownies E) automobiles Answer: B Page: 635 Difficulty: Medium

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Essay 72. Using the product-tree shown, determine the following: (A) the quantity of component K that will be needed to assemble 80 units of P, assuming no on-hand inventory exists. (B) the quantity of component K needed to assemble 80 units of P, given on-hand inventory of 30 A's, 50 B's and 20 C's.

P A (2 B (5 C (3

K (2 C (2 D

K (3

K (3
Difficulty: Medium Answer:

73. The following is a list of components required to produce one unit of end item P: P: 2 A's, 3 B's, 3 C's A: 5 M's, 2 R's B: 1 D, 3 N's. C: 1 T, 4 N's M: 1 N Determine the number of N's that will be needed to make 60 P's in each of these cases: (A) There are currently 10 P's on hand. (B) On-hand inventory consists of 15 P's, 10A's, 20 B's, 10 C's, 100 N's, 300 T's, and 200 M's. Difficulty: Medium

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Answer: The product-structure tree:

74. Given the following information, construct a product tree diagram and develop a material requirements plan that will yield 400 units of product P at the start of week 7.

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Use the following form:

Difficulty: Medium

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Answer: Product structure:

75. Develop a material requirements plan for end item P and its components, given the tree below. Assume that all lead times are one week, and that lot-for-lot ordering is used except for item F, which is ordered in multiples of 400 units. One hundred units of P are needed at the start of each of weeks 4 and 8. Beginning inventories are: 20 P, 100 A, and 200 F. Scheduled receipts are: 800 F at the start of week 1.

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A (2 )

B (3 )

D (4 ) F (2 )
Difficulty: Hard Answer:

D F (2 )

C (2 )

76. Given the following data, construct a material requirements plan which will result in 100 units of Parent #1 (P1) at the beginning of week 6, and 200 units of Parent #2 (P2) at the beginning of week 8:

Difficulty: Hard

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Answer: Product structures:

P1

P2

A C (3

B (2

A (2 C (3

B C (4

C (4

77. The following table lists the components needed to assemble an end item, their lead-times, and quantities on-hand.

(A) If 50 units of the end item are to be assembled, how many additional units of S will be needed? All parts can be ordered using lot-for lot ordering, except M, which must be ordered in multiples of 40 units. [Hint: You don't need to do an MRP plan.] (B) An order for the end item is scheduled to be shipped at the start of week 9. When is the latest week that the initial component of this order can be started and still be ready to ship? [Hint: You don't need to do an MRP plan.] Difficulty: Medium

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Answer:

Multiple Choice The following information is for 78-80 Refer to this product-tree:

P A (2 B (3 C (4

M (3

N (4

C (4

D (5

78. If 17 Ps are needed, and no on-hand inventory exists, how many Cs will be needed? A) 8 B) 16 C) 136 D) 204 E) 272 Answer: E Difficulty: Medium Learning Objective: AS 79. If 17 Ps are needed, and on-hand inventory consists of 10 As, 15 Bs, 20 Cs, 12 Ms, and 5 Ns, how many Cs are needed? A) 48 B) 144 C) 192 D) 212 E) 272 Answer: C Difficulty: Hard

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80. If 40 Ps are needed, and on-hand inventory consists of 15 Ps and 10 each of all other components and subassemblies, how many Cs are needed? A) 340 B) 350 C) 380 D) 400 E) 590 Answer: B Difficulty: Hard The following information is for 81-83 Bunny Helpers, Inc. has just received an order for 100 Deluxe Easter Baskets, which must be ready for delivery at the start of week six. An MRP planner has prepared the following table showing product structure, lead times (orders are lot-for-lot), and quantities on hand:

Each Deluxe Basket contains two dark chocolate truffles and four carved chocolate eggs; additionally one bottle of Alka-Selzer is included for those who overindulge. 81. What is the net requirement for Dark Chocolate Truffles to fill this order? A) 100 B) 140 C) 150 D) 180 E) 200 Answer: C Difficulty: Medium 82. When should an order for Carved Chocolate Eggs be released? A) at the start of week 2 B) at the start of week 3 C) at the start of week 4 D) at the start of week 5 E) at the start of week 6 Answer: A Difficulty: Medium 83. How many Dark Chocolate Eggs should be ordered? A) 310 B) 450 C) 500 D) 550 E) 600 Answer: A Difficulty: Medium

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84. What is the economic part-period (EPP) for ordering this item? A) 2 B) 50 C) 100 D) 150 E) 200 Answer: E Difficulty: Medium 85. What is the part-period method lot size for the order for the first period? A) 120 B) 200 C) 280 D) 350 E) 450 Answer: C Difficulty: Medium 86. For which period will the second order be submitted using the part period lot sizing method? A) period 2 B) period 3 C) period 4 D) period 5 E) period 6 Answer: C Difficulty: Medium 87. What is the lot size for the second order using the part-period method? A) 80 B) 150 C) 170 D) 250 E) 230 Answer: E Difficulty: Medium 88. If the firm is using a fixed period lot size of two periods, what is the order size for the first order? A) 120 B) 200 C) 280 D) 160 E) 150 Answer: B Difficulty: Medium

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