Introduction To Materials Management 8th Edition By Chapman - Test Bank

INTRODUCTION TO MATERIALS MANAGEMENT CHAPTER 1 ANSWERS TO PROBLEMS 1.1 Sales 100% 100% Cost of manufacturing 60% 50% Other costs 30% Profit (percent of Sales) Therefore a 10% reduction in the cost of manufacturing would produce a 100% increase in profit. 1.2 Profit = Sales – (direct costs + overhead) 0.20 = Sales – (0.60 × Sales + 0.30) Sales = 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. Note the cost of overhead has been left unchanged in this problem. 1.3 a. Weekly cost of goods sold = $12,000,000 = $240,000 50 1.4 a. Reduction in WIP = $480,000 Weekly cost of goods sold = $30,000,000 = 50 $600,000 90% 30% 80% 10% 20% 2 Value of 8 weeks’ WIP = 8 × $240,000 = $1,920,000 b. Value of 6 weeks’ WIP = 6 × $240,000 = $1,440,000 Value of 10 weeks' WIP b. Value of 5 weeks' WIP Reduction in WIP Annual saving = = = 10 × $600,000 = 5 × $600,000 = = $6,000,000 $3,000,000 $3,000,000 1.5 Using $1 million as the units: Sales $10.0 20% × $3,000,000 = As a % of sales 100% 35% 25% 35% 95% 5% $600,000 Direct material Direct labor Overhead Profit $.5 $3.5 2.5 3.5 9.5 a. From the above we can say: (in millions or M$) Sales = = direct material + direct labor + overhead + profit (now 1M$) .35(sales) + .25(sales) + 3.5 M$+ 1.0 M$ = 4.5 M$ .40 (Sales) Sales = 11.25 M$ = 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 1⁄2 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. 3 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 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 3. Which of the following is the best statement about the operating environment in which operations management functions? a. b. c. d. 4. Which of a. b. c. d. 5. Which of input? a. b. c. d. 6. Which of a. b. c. d. e. most organizations do not need to worry about competition customers are more demanding government regulation is not important for companies price is more important than quality the following statements is best regarding order winners? they persuade a company's customers to choose its product they are the same in every market they are the same as order qualifiers, only better they are present in every product the following strategies has the shortest delivery lead time and the least customer make-to-order configure-to-order assemble-to-order make-to-stock the following statements is best? the supply chain includes all activities and processes to provide a product or service to a customer. material in the supply chain usually flows from producer to customer. the supply chain contains only one supplier. all of the above are true. a and b only are true. 4 7. Companies A and B supply company C, which supplies customers D and E. Which of the following statements is best? a. b. c. d. 8. Which of a. b. c. d. the supply chain for company A includes B, C, D, and E. the supply chain for company B includes A, C, D and E. the supply chain for company C includes A, B, D, and E. all the above are true. the following statements is best? the basic elements of a supply chain are supply, production, and distribution the elements of a supply chain are interdependent design information generally flows from customer to supplier all the above are true 9. Delivery lead time for an engineer-to-order product includes which of the following? a. Design, purchase, manufacture, assemble, ship b. Design, manufacture, assemble, ship c. Purchase, manufacture, assemble, ship d. Purchase, assemble, ship 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. I and II only c. I and III only d. II and III only 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. b. c. d. e. all of the above are true I and II only are true I, II and III only are true I, II and IV only are true II, III and IV only are true 12. Which of I. Manufacturing planning and control. the following is normally a major activity of materials management? II. Physical supply/distribution. a. both I and II b. neither I nor II c. I only d. II only 5 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. IandII 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. b. c. d. 15. Which of a. b. c. d. e. 16. Which of a. b. c. d. e. I and II only II and III only I and III only all the above are primary activities the following is (are) input(s) to manufacturing planning and control? product description process description available facilities quantities to be produced all the above are inputs the following is NOT an activity of physical supply/distribution? transportation factory inventory warehousing packaging material handling 17. Materials I. There are trade-offs between customer service and the cost of providing the service. management can be considered a balancing act because: II. Priority and capacity must be balanced. a. neither I nor II b. I only c. II only d. IandII 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% 6 19. Which of the following are generally considered overall objectives of an organization? I. II. III. IV. Providing good customer service. Maintaining low levels of inventory investment. Optimizing use of resources. 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 20. The I. To manage materials in a production operation. purpose of the materials management concept is: 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 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 23. Performance measures in a supply chain: 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 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 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 statement is best? 7 d. Sticking with local competition e. Cutting cost after the design phase 26. Postponement is best described as: a. Delaying payment to a supplier until the goods have been sold b. Delaying the removal of inventory until the last possible moment c. Delaying the customer-specific differentiation until the last possible moment d. Delaying the change to the BOM until the old components have been used up 27. Postponement is best used with items that: a. Have a long lead time and many product configurations b. Are standardized and have short lead times c. Experience a yield that you won’t know until the product is complete d. Suppliers with poor delivery performance 28. A channel master in a supply chain a. Initiates integration of a supply chain b. Is the final customer in a supply chain c. Is the largest member of a supply chain d. Controls the raw material supplies in a supply chain 29. The process of managing the recovery, recycling and reuse of material is called a. Kaizen b. Heijunka c. Reverse logistics d. Return material authorization 30. If the manufacturing lead time of an item is reduced by 50% the work in process inventory: a. Does not change b. Is reduced by approximately 70% c. Is reduced by approximately 50% d. More information is needed for this problem Answers. 1d2d3b4a5e6e7c8d9a 10a 11d 12a 13c 14d 15e 16b 17d 18e 19d 20b 21b 22b 23a 24d 25a 26c 27a 28 a 29 c 30 c 8 ANSWERS TO PROBLEMS 2.1 2.2 2.3 2.4 2.5 2.6 Per F Ending inventory = = Total working days Average daily production Total working days = Average daily production Month 1 production Month 2 production Month 3 production Month 1 production Month 2 production Month 3 production Period Forecast Planned production = = = = = = 600 198.3 208.3 218.3 22  396.8 21  396.8 20  396.8 = = = = = = 157.7 units 166 units 1174.3 units 8729.6 units 8332.8 units 7936 units PRODUCTION PLANNING SYSTEM CHAPTER 2 opening inventory 400 + 700 – 900 = + production – demand 200 units 60 8 units = 19 + 20 + 21 = =48060 = 22 + 21 + 20 = 25,000  63 = 396.8 units =63 9 12 850 Plann Planned inventory 2.7 850 1050 125 125 125 130 3 4 5 550 Period Forecast demand Planned production Planned inventory 6 Total 100 Total production Period production = 700 + 100 – 150 = 750 units 750  6 = 125 units = 2.8 10 Period Forecast demand Planned production Planned inventory 3 4 5  –550 = 5250 units 875 units 6 Total 900 5600 200 2.9 Total production Period production = Period Forecast demand Planned production Planned inventory 550 5600 + 200 5250  6 = 1 = 2 3 4 Total 5 9 9 32 9 8 8 8 8 32 0 1 2 1 0 2.10 a. There is a stockout of 1 unit in period one. The cost will be: a. 8 units b. period 1, minus 1 c. 9 units, ending inventory = 4 units Stockout cost: 1  $500 Carrying cost: 3  $50 Total cost: = $500 = 150 = $650 0 + 5 + 3 + 4 = 12 units c. Total period inventory = The cost will be = $50  12 = $600 Since there are no stockouts this will be the total cost of the plan. 2.11 a. Total production = 530 + 130 – 100 = 560 b. Daily production = 560/70 = 8 units c. The monthly production for May d. The ending inventory for May Month May = 168 units = 153 units 11 Working days Forecast demand 21 115 168 153 Jun 19 125 152 180 Feb 22 1200 989 112 Jul Aug Total 20 10 70 Planned production Planned inventory 2.12 100 140 160 200 Mar 20 800 899 -13 130 Apr May 899 810 Month Jan Jun Total Working days Forecast demand Planned production Planned inventory 20 1300 899 99 854 5350 500 Total production Daily production = 5350  119 = 44.95 units per day There will be a stockout of 112 units in February and 13 units in March. = 5600 + 250 – 500 = 5350 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 = Week Forecast demand Planned production Planned inventory 2.14 Ending backlog = = 200 units 1 2 3 4 5 6 Total 2.15 Total production Weekly production = Week Forecast demand Planned production Planned backlog demand + opening backlog – ending backlog 3800 + 900 – 200 = 4500 units 4500  6 = 750 units = = 12 120 200 200 280 160 240 100 200 220 180 240 160 280 200 demand + opening backlog – production 700 + 450  800 = 350 units 1 2 3 4 5 6 Total 700 600 750 750 800 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 13 Week Forecast demand Planned production Planned backlog 1100 1 2 3 4 5 6 Total 1315 1198 2.17 Total production = Daily production = 112,500 + 9000 – 11,250 = 110,250 units 110,000  75 = 1470 units Number of workers required Actual daily production Month Working days Forecast demand = 1470/15 = 98 = 98  15 = 1470 units 1 20 2 24 3 12 4 19 Total 75 112500 110250 27500 28000 28500 28500 Planned production Planned inventory 11250 2.18 Total production = 17900 + 800 – 1000 = 17700 Daily production = 17700/117 = 151.28 units Number of workers required = 151.28/9 = 16.81  17 workers Actual daily production Month Working days Forecast demand Planned production Planned inventory = 17  9 = 153 units 1 2 3 4 5 6 Total 14 20 2800 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. 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. routing 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 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 16 13. Which of the following are characteristics of an MRPII system? I. It II. It III. It incorporates the plans of marketing, production and finance. is a fully integrated planning and control system. 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 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 17 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 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. b. c. d. e. I, II and III I, II and IV 1, III and IV II, III and IV none of the above 24. If the old 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 backlog was 200 units, the forecast for the next period is 500 units, and production for the 18 25. Which of the following 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 28. Which of the following represents the major reason for developing the production plan as part of Sales and Operations Planning? a. To decide how to best produce exactly what is in the sales plan b. To plan for resources required to produce to the agreed plan c. To plan a schedule for the production of individual products d. To plan the acquisition of new manufacturing facilities 29. Which of the following is true? I The strategic plan is stated in product terms II The strategic business plan is stated in financial terms III The strategic business plan is developed from the strategic plan a. b. c. d. e. I and II only I and III only II and III only I, II, and III None are correct 30. Which following best represents the concept of sustainability? a. The ability to make long production runs b. The ability to train labor effectively c. The ability to maintain the supplier base d. The ability to continue operation in the long term 31. When a company establishes a program to recycle or reuse products discarded or returned from customers it is typically called which of the following? a. Product return contract b. Reverse supply chain 19 c. Customer servicing d. Resupply planning 32. Which of the following is most true about Sales and Operations Planning a. b. c. d. 1c2b3e4a5e6e7e8c9a 10a 11d 12c 13d 14b 15e 16e 17b 18c 19d 20a 21e 22d 23b 24a 25a 26a 27b 28 b 29 c 31 b 32 d It usually is produced only once a year It usually includes only sales and manufacturing people It is typically done in financial terms It usually includes all functions at the executive level