Question 1. A process is replicated in another country where wages are 50 percent lower.

Staffing and
processing times are identical. What would be the effect on the costs of direct labor?

a) Costs of direct labor would be 50 percent lower.

b) Costs of direct labor would be the same.
c) Costs of direct labor would be 50 percent higher.
d) Cannot determine from the given information.

Question 2. You and three of your friends run a car wash for a fund-raiser. Between interior and exterior
cleaning, you spend about 40 minutes per vehicle. You are so successful that the next day you invite four
more friends to help. How does this impact the labor content?

a) The labor content goes up.

b) The labor content stays the same.
c) The labor content goes down.
d) Cannot determine from the given information.

Question 3. How does the takt time change as the demand rate increases?

a) The takt time increases.

b) The takt time stays the same.
c) The takt time decreases.
d) Cannot determine from the given information.

Question 4. How does the target manpower change as the demand rate increases?

a) The target manpower increases.

b) The target manpower stays the same.
c) The target manpower decreases.
d) Cannot determine from the given information.

Question 5. What happens to the target manpower if the labor content is doubled?

a) The target manpower increases by 50 percent.

b) The target manpower doubles.
c) The target manpower decreases by 50 percent.
d) The target manpower decreases by a factor of 2.
Question 6. Four employees at a fast-food restaurant each perform one of the four activities in serving a
customer: greet customer, take order, process order, and deliver order. The processing time for each
activity is given as follows:

Activity Processing time per customer

Greet customer 2 seconds
Take order 30 seconds
Process order 60 seconds
Deliver order 5 seconds

Assume demand is unlimited. If each employee is paid $7.50 per hour, what is the cost of direct labor
associated with serving one customer?

a) $0.80
b) $7.50
c) $0.50
d) $0.125

Question 7. Four employees at a fast-food restaurant each perform one of the four activities in serving a
customer: greet customer, take order, process order, and deliver order. The processing time for each
activity is given as follows:

Activity Processing time per customer

Greet customer 2 seconds
Take order 30 seconds
Process order 60 seconds
Deliver order 5 seconds

Assume demand is unlimited. What is the labor content associated with serving one customer?

a) 60 seconds per customer

b) 24.25 seconds per customer
c) 97 seconds per customer
d) 388 seconds per customer.
Question 8. Four employees at a fast-food restaurant each perform one of the four activities in serving a
customer: greet customer, take order, process order, and deliver order. The processing time for each
activity is given as follows:

Activity Processing time per customer

Greet customer 2 seconds
Take order 30 seconds
Process order 60 seconds
Deliver order 5 seconds

Assume demand is unlimited. What is the average labor utilization?

a) 162%
b) 68%
c) 50%
d) 40%

Question 9. Four employees at a fast-food restaurant each perform one of the four activities in serving a
customer: greet customer, take order, process order, and deliver order. The processing time for each
activity is given as follows:

Activity Processing time per customer

Greet customer 2 seconds
Take order 30 seconds
Process order 60 seconds
Deliver order 5 seconds

Assume demand is unlimited. What is the total idle time?

a) 35.75 seconds
b) 60 seconds
c) 97 seconds
d) 143 seconds

Question 10. Which of the following statements about process efficiency is FALSE?

a) A process is efficient if it is able to achieve a high flow rate with few resources.
b) Cost of direct labor goes up if flow rate goes up.
c) Revenue goes up if flow rate goes up.
d) Cycle time goes up if flow rate goes down.
Question 11. What will be the percentage change in cost of direct labor if flow rate goes up by 25%
while other factors remain unchanged?

a) Goes up by 20%
b) Goes down by 20%
c) Goes up by 80%
d) Goes down by 80%

Question 12. Patients use a self-serve kiosk to confirm their arrival at an outpatient clinic. They then
proceed to the receptionist to update any personal information. After that, a nurse will record the
patient’s vital signs. A physician will then consult with the patient and prescribe appropriate treatments.
The patient will then visit the checkout station to settle payment and schedule the next appointment, if
needed. Processing times and other information on the process are presented in the table below:

Resource Process Processing time Number of Wage rate

(minutes per workers ($per hour)
patient)
Self-service Check in 1 n/a n/a
Receptionist Update 5 2 15
information
Nurse Record vital signs 10 3 30
Physician Treat patient 30 5 100
Checkout Collect payment 10 2 15

What is the cost of direct labor per patient if demand is unlimited?

a) $6500/patient
b) $1950/patient
c) $65/patient
d) $217/patient

Question 13. Patients use a self-serve kiosk to confirm their arrival at an outpatient clinic. They then
proceed to the receptionist to update any personal information. After that, a nurse will record the
patient’s vital signs. A physician will then consult with the patient and prescribe appropriate treatments.
The patient will then visit the checkout station to settle payment and schedule the next appointment, if
needed. Processing times and other information on the process are presented in the table below:

Resource Process Processing time Number of Wage rate

(minutes per workers ($per hour)
patient)
Self-service Check in 1 n/a n/a
 Receptionist Update 5 2 15
information
Nurse Record vital signs 10 3 30
Physician Treat patient 30 5 100
Checkout Collect payment 10 2 15

What would be the best process improvement idea from the following proposals, assuming an unlimited
demand?

a) Increase check-in capacity

b) Increase the pay for the receptionists
c) Hire more physicians
d) Move some work from the receptionist to the checkout clerk

Question 14. C&A uses two steps to make a toy. Step 1 takes 20 seconds. Step 2 takes 15 seconds. Each
step is staffed by one worker, for a total of two workers. Each worker is paid $15 per hour. Assume
wages are a variable cost. Each toy is sold for $20. Material costs are $5 per toy and fixed costs are $500
per hour. Assume demand is unlimited. What will be the impact on C&A’s profit per hour if the
processing time of step 1 is reduced by 5 seconds?

a) No impact on profit
b) Cannot be determined
c) 41% increase
d) 373% increase

Question 15. C&A operates three eight-hour shifts to produce 600 gallons of a chemical per day. It
requires 12 minutes of labor to produce a gallon of the chemical. What is C&A’s takt time in minutes per
gallon, and what is the target manpower?

a) 0.3, 40
b) 0.8, 15
c) 0.04, 5
d) 2.4, 5

Question 16. Which of the following statements about target manpower is TRUE?

a) Target manpower gives the maximum number of resources required to meet demand.
b) The only way to compute target manpower is through cycle time.
c) The target manpower calculation assumes that all resources are utilized at 100%.
d) The target manpower calculation accounts for idle time in the process.
Question 17. Which of the following statements about takt time and cycle time is TRUE?

a) If takt time is longer than cycle time, target manpower will be higher than current staff level.
b) If takt time is longer than cycle time, target manpower will be lower than current staff level.
c) Supply matches demand when takt time is shorter than cycle time.
d) Supply is less than demand when takt time is equal to cycle time.

Question 18. What happens to takt time if demand rate is doubled?

a) Increases by 50%
b) Decreases by 50%
c) No change
d) Takt time doubles

Question 19. Labor content is increased by 10% while takt time remains the same. What is the
percentage change in target manpower?

a) Increases by 10%
b) Decreases by 10%
c) No change
d) Cannot be determined

Question 20. Both takt time and labor content are increased by 10%. What happens to target
manpower?

a) Increases by 10%
b) Decreases by 10%
c) No change
d) Cannot be determined

Question 21. C&A Fast Food has four activities in serving a customer: greet customer, take order,
process order, and deliver order. Each activity is staffed by one employee (for a total of four employees).
The processing time for each activity is given as follows:

Activity Processing time per customer

Greet customer 2 seconds
Take order 30 seconds
Process order 60 seconds
Deliver order 5 seconds

Assume demand is unlimited. If one additional employee is added to the bottleneck activity, what will be
the percentage change in process capacity?
a) 100%
b) 50%
c) 2%
d) Cannot be determined

Question 22. C&A Fast Food has four activities in serving a customer: greet customer, take order,
process order, and deliver order. Each activity is staffed by one employee (for a total of four employees).
The processing time for each activity is given as follows:

Activity Processing time per customer

Greet customer 2 seconds
Take order 30 seconds
Process order 60 seconds
Deliver order 5 seconds

Assume demand is unlimited. Each employee is paid $7.50 per hour. If one additional employee is added
to the bottleneck activity, what will be the cost of direct labor in $ per customer?

a) 0.50
b) 0.3125
c) 0.25
d) 0.125

Question 23. C&A Fast Food has four activities in serving a customer: greet customer, take order,
process order, and deliver order. Each activity is staffed by one employee (for a total of four employees).
The processing time for each activity is given as follows:

Activity Processing time per customer Wage rate ($ per hour)

Greet customer 2 seconds 5
Take order 30 seconds 5
Process order 60 seconds 15
Deliver order 5 seconds 8

Assume demand is unlimited. If one additional employee is added to the bottleneck activity, what will be
the cost of direct labor in $ per customer?

a) 0.275
b) 0.3125
c) 0.40
d) 0.50
Question 24. C&A Fast Food has four activities in serving a customer: greet customer, take order,
process order, and deliver order. Each activity is staffed by one employee (for a total of four employees).
The processing time for each activity is given as follows:

Activity Processing time per customer Wage rate ($ per hour)

Greet customer 2 seconds 5
Take order 30 seconds 5
Process order 60 seconds 15
Deliver order 5 seconds 8

Assume demand is unlimited. Which of the following conclusions can be drawn?

a) Adding two employees at the current bottleneck activity is the minimum change in manpower
necessary to increase process capacity.
b) Adding one employee at a non-bottleneck activity will cause a larger decrease in the cost of direct
labor than adding one employee at the bottleneck activity.
c) Adding two employees at the current bottleneck activity will increase average labor utilization more
than adding one employee.
d) Adding two employees at the current bottleneck activity will not increase the process capacity more
than adding one employee.
Question 25. C&A Fast Food has four activities in serving a customer: greet customer, take order,
process order, and deliver order. Each activity is staffed by one employee (for a total of four employees).
The processing time for each activity is given as follows:

Activity Processing time per customer Wage rate ($ per hour)

Greet customer 2 seconds 5
Take order 30 seconds 5
Process order 60 seconds 15
Deliver order 5 seconds 8

Assume demand is unlimited. If two additional employees are added to the current bottleneck activity,
what will be the cost of direct labor in $ per customer?

a) 0.525
b) 0.50
c) 0.40
d) 0.3125

Question 26. C&A Fast Food has four activities in serving a customer: greet customer, take order,
process order, and deliver order. Each activity is staffed by one employee (for a total of four employees).
The processing time for each activity is given as follows:

Activity Processing time per customer Wage rate ($ per hour)

Greet customer 2 seconds 5
Take order 30 seconds 5
Process order 60 seconds 15
Deliver order 5 seconds 8

Assume demand is unlimited. If two additional employees are added to the current bottleneck activity,
what will be the average labor utilization?

a) 0.400
b) 0.475
c) 0.558
d) Cannot be determined.
Question 27. There are five activities in making one toy: cutting, sewing, stuffing, assembling, and
packaging. The activities have to be carried out in this order. The processing time of each activity is given
below:

Activity Processing time

(minutes per toy)
Cutting 10
Sewing 10
Stuffing 5
Assembling 5
Packaging 25

Demand rate is 4 toys per hour. Currently we have worker A in charge of cutting, worker B in charge of
sewing and stuffing, and worker C in charge of assembling and packaging. Which of the following
strategies will increase the process capacity by balancing the line?

a) Adding one additional worker to assembling.

b) Adding two additional workers to assembling.
c) Moving packaging to worker A.
d) Moving assembling to worker B.
e) Moving sewing to worker A.

Question 28. A possible drawback of having one employee in charge of all activities involved in serving
customers at a coffee shop is __________.

a) Low labor utilization

b) Unbalanced process
c) High idle time
d) Increased setups

Question 29. A possible drawback of having each employee specialize in one or several activities in
serving customers at a coffee shop is __________.

a) increased idle time

b) higher direct labor costs
c) increased equipment replication
d) increased processing time
Question 30. Which of the following is a fixed cost in operating a dental clinic?

a) Advertising in the local newspaper

b) Cost of dental checkup per patient
c) Health insurance coverage of each patient
d) Materials needed for procedures

Question 31. Which of the following is a variable cost in operating a dental clinic?

a) Hourly wages for full-time dental assistants

b) Utility costs for the office building
c) Material cost for metal fillings
d) Annual salary for the dentist

Question 32. In what situations is labor cost considered a fixed cost?

a) Making staffing decisions to match demand

b) Paying employees according to the units of products made or number of customers served
c) Paying employees by the hour even when they are idle
d) Paying suppliers for materials used in the production of products or services

Question 33. In what situation is labor cost considered a variable cost?

a) Making short-term staffing decisions to match resource availability

b) Making longer-term staffing decisions to match demand
c) Paying employees by the hour even when they are idle
d) Paying suppliers for materials used in the production of products or services

Question 34. Which of the following is NOT a process variable that has an impact on profits?

a) Demand-constrained vs. capacity-constrained

b) High margin vs. low margin.
c) High rate vs. low rate of interest on loans.
d) Bottleneck resource vs. nonbottleneck resource.
Question 35. Consider a capacity-constrained process producing a high profit margin product. What will
the impacts on revenue and profits be if processing time for the bottleneck resource is reduced by 10%
while everything else remains the same?

a) No impact on revenue or profits

b) Higher revenue and profits
c) Lower revenue and profits
d) Higher profits with no change in revenue

Question 36. Process improvements can help increase revenues if the process is __________-
constrained.

a) supply
b) demand
c) capacity
d) resource

Question 37. Consider a demand-constrained process producing a high profit margin product. What will
the impacts on revenue be if processing time for the bottleneck resource is reduced by 10% while
everything else remains the same?

a) No impact on revenue
b) 10% increase in revenue
c) 10% decrease in revenue
d) 5% increase in revenue

Question 38. C&A sells T-shirts for $15 each. Material costs are $2 per shirt and fixed costs are $300 per
hour including cost of labor. C&A currently employs two workers to make T-shirts, each of whom takes
two minutes to make one shirt. Assume that labor costs are considered fixed and the demand is
unlimited. How much profit does C&A make per hour?

a) $600
b) $450
c) $480
d) $900
Question 39. Among other products, C&A sells T-shirts for $15 each. Material costs are $2 per shirt and
fixed costs are $300 per hour. C&A currently employs two workers to make T-shirts, each of whom takes
two minutes to make one shirt. Assume that the first two workers' wages are considered fixed and the
demand is unlimited. C&A is considering moving one additional worker from elsewhere in the company
to make shirts. This worker’s wage will be treated as a variable cost, at $15 per hour. What is the impact
on C&A’s profit per hour, with three workers?

a) 78.1% decrease
b) 78.1% increase
c) 56.1% decrease
d) 56.1% increase

Question 40. C&A uses two steps to make a toy. Step 1 takes 20 seconds. Step 2 takes 15 seconds. Each
step is staffed by one worker, for a total of two workers. Each worker is paid $15 per hour. Assume
wages are a variable cost. Each toy is sold for $20. Material costs are $5 per toy. Fixed costs are $500 per
hour. Assume demand is unlimited. How much profit does C&A make per hour?

a) $3070
b) $2170
c) $1870
d) $1270