BAN 530 Name

VES/VPM May 15, 2008

EXAM IV
Spring 2008

DIRECTIONS:

 Answer the multiple-choice questions directly on the exam by circling the BEST
answer. You do NOT need to show your work for multiple choice questions.

 Your answers to the problems and short answers should start and be presented on
separate pages for each problem. For problems, you MUST show your work. If
you use a calculator, set up the problem on the exam sheet then show the answer
you obtained from your calculator. If you use software, embed the output in your
examination document.

 Return the exam with your results.

 Your work will be graded based on content and presentation.

 You must work on your own. No collaboration is allowed.

 You may use your notes, textbook, statistical packages, computer software, or
other pre-printed material.

 The exam may be delivered to me at The University Center between 6:00 and
6:30 p.m. on 15 May. Exams may be given to Dr. Dina Flores at The University
Center or delivered to my office on campus prior to that time. Exams may be e-
mailed to me by 8:00 p.m. on Thursday, May 15, 2007.

 Acknowledge your understanding of the directions by signing below. You must

turn in this page with your exam. If you e-mail your exam, you must include a
signed copy of this page (you may FAX it separately or scan the page with your
signature and include it with your e-mail).

I, , understand that I must complete this exam

on my own. By signing below I am indicating that I did not seek help from anyone and
the submitted work is solely my own.

Signature Date
 BAN 530
Spring 2008
Exam IV

Part A. [37 total points in this section] Multiple Choice (1 point each). Circle the
BEST answer on the test sheet.

1. When defining reliability for a product or a system it is important to specify

a. definition of a failure
b. normal operating conditions
T
c. e M TBF
d. a and b
e. MTBF

2. The kanban in the JIT demonstration we conducted in class was a(n)

a. card d. red pen

b. golf ball e. empty space between stations
c. packing peanut

3. Department A
A
Department B U
X X
Department C U
O
Department D

Based on this Muther grid

a. Department A must not be located close to Department D.
b. Department A must not be located close to Department C.
c. Department B must be located close to Department C.
d. Location X is preferred over Location U
e. Department C must not be located near Department D.

4. It is important to have good preventive maintenance in an operation. With a good

preventive maintenance program in place, there is no need for breakdown
maintenance.

a. True b. False
5. The primary objective of both manufacturing and service layouts is always
efficiency.
a. True b. False

$
B
C

0 10 20 30 40 50 60 70 80
Units (1,000’s)

6. Marketing has forecast potential sales for our new retail outlet to be 75,000 units.
Based on the total cost curves shown above, what would be the best location for our
new retail outlet?

a. A
b. B
c. C
d. Either A or C – We are indifferent between these two locations.
e. Either A or B – We are indifferent between these two locations.

7. Actual output for a process is 200 units per day. Design capacity is 300 units is
day. Effective capacity is 260 units per day. The efficiency of this process is
a. 66.7% d. 35.7%
b. 76.9% e. 130%
c. 86.7%
8. Using the information in the previous problem, what is the utilization of this
process?
a. 66.7% d. 35.7%
b. 76.9% e. 130%
c. 86.7%

A company used the transportation model to evaluate location alternatives for a new
factory. Answer the next two questions using these printouts from POM for Windows.

Destination 1 Destination 2 Destination 3

A 30
B 10 20
C 30
Las Vegas 20
Total Cost = 320

Destination 1 Destination 2 Destination 3

A 30
B 30
C 30
San Francisco 10 10
Total Cost = 270

9. Based on these printouts the best location for a new factory would be
a. A d. San Francisco
b. B e. Las Vegas
c. C

10. This analysis method allows the company to select a location alternative that
a. minimizes total costs.
b. minimizes the cost of transporting product from factories to destinations.
c. provides the best customer service.
d. provides the most transportation mode alternatives.
e. the best range of qualitative alternatives.

11. Which of the following actions would likely reduce a company’s need for
decoupling inventory?
a. Increasing the number of raw material suppliers.
b. Determining whether customers would accept a smaller selection of
merchandise.
c. Implementing a preventative maintenance program.
d. Reducing the incidence of shrinkage.
e. Improving the quality of incoming raw materials.
12. The inventory management system discussed in class where inventory is stored in
two locations with the quantity in the second location equal to the demand during
lead time is called
a. safety stock system d. modified MRP
b. hidden inventory system e. modified ROP
c. two-bin system

13. The inventory management system where we receive orders on a regular schedule
but the quantity received varies is called
a. EOQ/ROP d. Economic Lot Size
b. Single Period Model e. Fixed-Period System
c. Probabilistic Model

14. An appropriate technique for studying non-repetitive jobs, such as those performed
by secretaries and maintenance technicians, is

a. work measurement d. work sampling

b. Gantt charts e. MTM
c. stopwatch time study

15. Giving a worker a larger portion of the total task by horizontal loading is called
a. specialization. d. job enrichment
b. ergonomics e. job enlargement
c. job design

16. Incorporation of human factors in the design of the workplace is called

a. specialization. d. job enrichment
b. ergonomics e. job enlargement
c. job design

17. One premise of supply chain management is

a. long-term relationships with fewer suppliers.
b. encouraging more suppliers to provide leverage during negotiations.
c. focusing negotiations on initial price of purchased products.
d. limiting information sharing to protect trade secrets.
e. all are premises of supply chain management.

18. Which of the following is NOT a component of holding cost?

a. purchase price d. risk of obsolescence
b. insurance e. inventory shrinkage
c. cycle count costs

19. There are methods available to adjust the basic EOQ/ROP model for such things
as quantity discounts, variation in lead time, and variation in demand.
a. True b. False
20. It is okay to round the EOQ because of such things as standard package sizes
because
a. the EOQ is just an estimate.
b. you should never round the EOQ.
c. the TC curve is relatively flat near the EOQ.
d. the TC curve slopes sharply up near the EOQ.
e. Deming said it is okay.

21. The EOQ/ROP inventory management system is best suited for

a. irregular demand items. d. near-constant demand items.
b. items such as Easter candy e. dependent demand items.
c. decoupling inventory.

22. Aggregate planning is

a. short-term planning d. chase strategy
b. level scheduling e. long-term planning
c. intermediate-term planning

23. The tool my secretary used to justify hiring a receptionist to answer my phone is
a. time study d. Pareto analysis
b. ROI e. work sampling
c. methods analysis

24. An alternative to time studies that divides the job into small basic elements
sometimes called Therbligs that have widely accepted times is called
a. methods analysis d. work sampling
b. ergonomics e. job analysis
c. predetermined time standards

25. __________________________ should always be done before doing a time study.

a. Methods analysis d. Ergonomic study.

b. Job enlargement study e. Training
c. Focus groups

26. Time study should be conducted on a subject who is

a. the best worker d. the worst worker
b. an average trained worker e. all workers
c. a randomly selected worker

27. Which of the following is used to help set prices and set quotas for workers?
a. Average observed time d. Normal time
b. Adjusted time e. Standard time
c. Greenwich meridian time
28. Based on our class discussion, ______________________ are the most important
asset of an organization.

a. Workers d. Cash balance

b. Quality processes e. Total assets
c. Most costly equipment

29. The following data have been collected using stopwatch time study.

Observation in minutes PR
1 2 3 4 5
Element A 8 10 9 15 9 110

Average observed time in minutes is

a. 9 d. 51
b. 10.2 e. 11.22
c. 1,122

30. The in-class demonstration of JIT vs traditional manufacturing, showed that

changing from a push system to a pull system
a. reduced the production rate of the line
b. decreased the idle time at all stations
c. reduced inventory without reducing output
d. required increased attention by the supervisor
e. none of these

31. Which do you get when you disaggregate the aggregate plan?
a. subcontract list d. inventory level plan
b. master schedule e. staffing plan
c. backorder list

32. In aggregate planning, we develop a plan for matching capacity with demand on
an individual item-by-item basis.

a. True b. False

33. Computer-based information system that translates master schedule requirements for
end items into time-phased requirements for sub-assemblies, components, and raw
materials is the definition of
a. ERP d. EOQ
b. MRP e. SAP
c. ROP
34. In the demonstration of JIT we moved from
a. MRP to JIT d. SPC to JIT
b. EOQ to JIT e. L-4-L to EOQ
c. a push to a pull system

35. The model which evaluates a location decision based exclusively upon an
economic comparison of total production costs is:

a. center-of-gravity method
b. locational break-even (or cost-volume) analysis.
c. factor-rating method.
d. transportation model.
e. geographic information systems model.

36. Work sampling revealed the following data for maintenance technicians working
from a centralized maintenance shop? Your maintenance technicians are very highly
paid.

Walking to the job site to repair a machine 253

Working on machine 325
Filling out repair tickets 225

An appropriate action to consider as a result of this analysis could be

a. decentralize the maintenance operation

b. computerize the repair ticket process
c. have a lower paid clerk fill out the repair ticket
d. provide golf carts to travel to repair locations from centralized shop
e. all might be considered.

37. The location analysis technique that allows for the inclusion of both quantitative
and qualitative inputs is

a. Locational Cost-Profit-Volume (Breakeven) Analysis

b. Factor Rating
c. Transportation Model
d. Center of Gravity Model
e. Delphi Analysis
Part B [36 total points in this section] Multiple Choice (3 points each). Circle the
BEST answer on the test sheet.

38. A location analysis has been narrowed down to these locations. The critical
factors, their weights, and the ratings for each location are shown below. If the
selection criterion is to select the location with the greatest composite (weighted)
score, which location would you recommend?

Location
Factor Wt. Never-Never Land Whoville North Pole

Labor Cost .4 60 90 70
Transport. Cost .3 70 80 90
Quality of Schools .1 90 70 70
Market Access .1 50 70 90
Utility Cost .1 80 70 80

a. Whoville d. North Pole, but do sensitivity analysis

b. North Pole e. Whoville, but do sensitivity analysis
c. Never-Never Land

39. A manufacturer of tables has collected the following data: Fixed cost for the
operation is $10,000; variable cost per table is $85; the tables sell for $250 each.
The breakeven point for this manufacturer is
a. 117.6 tables d. 60.6 tables
b. 40 tables e. $60.6
c. $40

40. A service garage uses 204 boxes of cleaning cloths a year. The boxes cost $12
each. The cost to place one order is $15, and the cost to hold one box in inventory
for a year is $2.40. The EOQ is
a. 40.4 boxes d. 626.7 boxes
b. 174.9 boxes e. 50.5 boxes
c. 156.5 boxes

41. Using the information in the previous question, what is our total holding and
ordering cost if we currently order 12 boxes at a time?
a. $ 14.40 d. $ 130.80
b. $269.40 e. $2,448.00
c. $255.00
42. If the owner of the service garage in the previous question orders the EOQ,
instead of 12 boxes at a time, how much will he save?
a. $121.20 d. $ 14.40
b. $ 60.60 e. $148.20
c. $269.40

43. A company sells an average of 35 tires per day. Lead time for an order of tires is
15 days. The supplier has never been late in delivering an order of tires. What
should the reorder point (ROP) be for tires?
a. 15 d. 150
b. 10 e. 25
c. 1.5

44. A job has an average observed cycle time of 4 minutes, a performance rating of 120
percent, and an allowance factor of 30 percent. Normal time for the job in minutes
is:

a. 4.8 d. 16.0
b. 6.25 e. none of these
c. 5.76

45. In the preceding question

a. The worker is working at a normal pace.
b. The worker is working faster than a normal pace.
c. The worker is working slower than a normal pace.
d. The worker is becoming fatigued
e. The time study analyst has made a mistake.

46. A job has a normal time of 5 minutes, a performance rating of 130 percent, and total
allowances of 20 percent. Standard time for the job in minutes is:

a. 4.8 d. 25.0
b. 6.25 e. none of these
c. 3.85
 A B C

47. The reliabilities of the three components in this system are:

A = .99
B = .95
C = .90

System reliability is

a. 0.85 d. 2.84
b. 0.95 e. 0.90
c. 0.99

48. In the previous problem, if an identical parallel backup component is provided for
component C, the new system reliability would be

a. 0.89 d. 0.93
b. 0.94 e. None of the above
c. 0.99

49. Using ABC analysis, which of these should be classified as A items?

ITEM UNIT COST ANNUAL USAGE OTHER

F-101 1.50 100,000 -
F-106 200.00 50,000 -
F-112 100.00 200 Only 1 source (in Tibet)
F-115 2.00 10,000 -
F-119 8.00 500 Will be replaced with new part in 2 months
F-122 19.00 1,000 -
F-125 3.00 60,000 -
F-130 10.00 1,000 -

a. F-106 d. F-106, F112, F-119

b. F-106, F-112 e. F-101
c. F-101, F-125, F-106
Part C [27 total points in this section] Problems (Points as shown). Answer on test
sheet. See cover page for more complete instructions. You MUST show your work and
include any computer printouts if applicable in order to receive full credit for your
answer.

50. (10 points) You are scheduling production for an order of 60 garage door openers
due to be shipped in week 7. Assume lot-for-lot ordering. Below is information
about the openers.
Item Lead Time On Hand Components
Opener 2 30 A(1), B(2), C(3)
A 1 10 D(2), F(3)
B 1 0 E(1), F(4)
C 2 20
D 1 30
E 2 5
F 3 5

a) Develop a product structure bill of materials.

b) Develop a net materials plan for E.

1 2 3 4 5 6 7
Gross Req.
Sch. Receipts
Pr. on hand
Net Require.
Pl. O.Receipt
Pl. O. Release

1 2 3 4 5 6 7
Gross Req.
Sch. Receipts
Pr. on hand
Net Require.
Pl. O.Receipt
Pl. O. Release

1 2 3 4 5 6 7
Gross Req.
Sch. Receipts
Pr. on hand
Net Require.
Pl. O.Receipt
Pl. O. Release
51. (10 points) Sower and Sons, Inc. wants to determine the best way to distribute
products from its 3 factories to its 4 distribution warehouses (DW) in order to
minimize transportation costs. It has collected the following data:

DW W DW X DW Y DW Z Supply
Factory A $132 $116 $250 $110 220
Factory B $220 $230 $180 $178 300
Factory C $152 $173 $196 $164 435
Demand 160 120 200 230

Use POM for Windows and completely interpret your printout including the implications
of the Dummy.
52. (7 points) Discuss why I said in class that you should first update your resume if
your boss tells you to implement an MRP system by the end of next month.

What are some of the things that you would have to do before implementing an
MRP system to be sure that your organization is ready for MRP? Be specific!