OM EXAM 200 QUESTIONS AND CORRECT ANSWERS WITH
RATIONALE LATEST 2026 ALREADY GRADED A+ ASSURED
PASS
The Operations Management (OM) exam is a comprehensive assessment
covering the design, operation, and improvement of production and service
systems. Key topics include process analysis (capacity, efficiency, utilization,
layouts), quality management (TQM, Six Sigma, ISO 9000, DMAIC), supply
chain management (vertical integration, outsourcing, logistics), inventory
management (EOQ, cycle counting, holding costs), aggregate planning (level
vs. chase strategies), forecasting (qualitative and quantitative methods), lean
systems (JIT, waste reduction, Kaizen), project management (Gantt charts,
CPM), and facility location analysis. The exam emphasizes practical
application of formulas, metrics, and strategic decision-making to optimize
operations.
1. What is operations management?
A. The management of financial resources to maximize shareholder value
B. The design, operation, and improvement of the systems that create and
deliver the firm's primary products and services
C. The process of marketing and selling products to customers
D. The management of human resources to improve employee satisfaction
Answer: B
Rationale: Operations management is the design, planning, control, and
improvement of the production system that transforms inputs into finished goods
and services, creating value for the organization .
2. Which of the following is a primary function of operations management?
A. Financial auditing
B. Supply chain management
C. Employee recruitment
D. Advertising campaigns
Answer: B
Rationale: Supply chain management is a core responsibility within operations,
involving the coordination of materials, information, and finances from suppliers
to customers .
3. The transformation process in operations management involves:
, A. Converting money into profit
B. Converting inputs into outputs
C. Converting employees into managers
D. Converting raw data into information
Answer: B
Rationale: The transformation process is the core of operations—converting
inputs (labor, materials, capital) into outputs (goods and services) that provide
value .
4. Which of the following is an example of a good rather than a service?
A. Legal advice
B. A smartphone
C. A haircut
D. Airline travel
Answer: B
Rationale: A smartphone is a tangible physical product (a good). Legal advice, a
haircut, and airline travel are all intangible services .
5. Which of the following is a characteristic of a service operation?
A. High inventory levels
B. Intangible output
C. Easy to measure productivity
D. Separation of production and consumption
Answer: B
Rationale: Services are intangible—they cannot be touched, stored, or
inventoried like physical goods. They are often produced and consumed
simultaneously .
6. Which of the following is a key competitive priority in operations?
A. Cost leadership
B. Market capitalization
C. Brand recognition
D. Employee satisfaction
Answer: A
Rationale: Cost leadership is a core competitive priority focused on minimizing
production and operational expenses to offer the lowest price in the market .
7. Which of the following is a characteristic of a good (product)?
A. Intangible
B. Produced and consumed simultaneously
, C. Can be kept in inventory
D. High customer interaction
Answer: C
Rationale: Goods are tangible and can be kept in inventory. Services are
intangible, produced and consumed simultaneously, and often have high customer
interaction .
8. What is a bottleneck in an operations process?
A. Task with the lowest cost
B. Task performed by multiple workers
C. Longest task in the process
D. A task that can be skipped
Answer: C
Rationale: A bottleneck is the longest task in a process, which limits the overall
capacity and throughput of the entire system .
9. What is design capacity?
A. The maximum output a system can achieve under ideal conditions
B. The maximum output under normal, realistic conditions
C. The minimum output required to break even
D. The average output over a year
Answer: A
Rationale: Design capacity is the theoretical maximum output a system can
achieve under ideal conditions, without any downtime or inefficiencies .
10. A company has a design capacity of 1,000 units per day, an effective capacity
of 800 units per day, and actual output of 600 units per day. What is the
utilization?
A. 60%
B. 75%
C. 80%
D. 85%
Answer: A
Rationale: Utilization = Actual output ÷ Design capacity = 600 ÷ 1,000 = 60% .
11. A company has a design capacity of 1,000 units per day, an effective capacity
of 800 units per day, and actual output of 600 units per day. What is the efficiency?
A. 60%
B. 75%
C. 80%
, D. 85%
Answer: B
Rationale: Efficiency = Actual output ÷ Effective capacity = 600 ÷ 800 = 75% .
12. Which of the following is an example of a long-term capacity decision?
A. Hiring temporary staff
B. Building a new factory
C. Adjusting work schedules
D. Ordering raw materials
Answer: B
Rationale: Building a new factory is a long-term capacity decision that involves
significant capital investment and has lasting strategic implications .
13. The break-even point occurs when:
A. Profit is maximized
B. Revenue equals total cost
C. Variable cost exceeds revenue
D. Demand increases
Answer: B
Rationale: At break-even, total revenue equals total cost, resulting in zero profit .
14. The formula for break-even quantity is:
A. Fixed cost ÷ (Price + Variable cost)
B. Fixed cost ÷ (Price - Variable cost)
C. (Price - Variable cost) ÷ Fixed cost
D. Variable cost ÷ (Price - Fixed cost)
Answer: B
Rationale: Break-even quantity = Fixed cost ÷ (Price - Variable cost per unit).
The denominator is the contribution margin per unit .
15. Which of the following is a variable cost?
A. Rent
B. Raw materials
C. Insurance
D. Salaries of permanent staff
Answer: B
Rationale: Raw materials are a variable cost because they change with
production volume. Rent, insurance, and permanent staff salaries are fixed costs .
16. Which of the following is a fixed cost?
RATIONALE LATEST 2026 ALREADY GRADED A+ ASSURED
PASS
The Operations Management (OM) exam is a comprehensive assessment
covering the design, operation, and improvement of production and service
systems. Key topics include process analysis (capacity, efficiency, utilization,
layouts), quality management (TQM, Six Sigma, ISO 9000, DMAIC), supply
chain management (vertical integration, outsourcing, logistics), inventory
management (EOQ, cycle counting, holding costs), aggregate planning (level
vs. chase strategies), forecasting (qualitative and quantitative methods), lean
systems (JIT, waste reduction, Kaizen), project management (Gantt charts,
CPM), and facility location analysis. The exam emphasizes practical
application of formulas, metrics, and strategic decision-making to optimize
operations.
1. What is operations management?
A. The management of financial resources to maximize shareholder value
B. The design, operation, and improvement of the systems that create and
deliver the firm's primary products and services
C. The process of marketing and selling products to customers
D. The management of human resources to improve employee satisfaction
Answer: B
Rationale: Operations management is the design, planning, control, and
improvement of the production system that transforms inputs into finished goods
and services, creating value for the organization .
2. Which of the following is a primary function of operations management?
A. Financial auditing
B. Supply chain management
C. Employee recruitment
D. Advertising campaigns
Answer: B
Rationale: Supply chain management is a core responsibility within operations,
involving the coordination of materials, information, and finances from suppliers
to customers .
3. The transformation process in operations management involves:
, A. Converting money into profit
B. Converting inputs into outputs
C. Converting employees into managers
D. Converting raw data into information
Answer: B
Rationale: The transformation process is the core of operations—converting
inputs (labor, materials, capital) into outputs (goods and services) that provide
value .
4. Which of the following is an example of a good rather than a service?
A. Legal advice
B. A smartphone
C. A haircut
D. Airline travel
Answer: B
Rationale: A smartphone is a tangible physical product (a good). Legal advice, a
haircut, and airline travel are all intangible services .
5. Which of the following is a characteristic of a service operation?
A. High inventory levels
B. Intangible output
C. Easy to measure productivity
D. Separation of production and consumption
Answer: B
Rationale: Services are intangible—they cannot be touched, stored, or
inventoried like physical goods. They are often produced and consumed
simultaneously .
6. Which of the following is a key competitive priority in operations?
A. Cost leadership
B. Market capitalization
C. Brand recognition
D. Employee satisfaction
Answer: A
Rationale: Cost leadership is a core competitive priority focused on minimizing
production and operational expenses to offer the lowest price in the market .
7. Which of the following is a characteristic of a good (product)?
A. Intangible
B. Produced and consumed simultaneously
, C. Can be kept in inventory
D. High customer interaction
Answer: C
Rationale: Goods are tangible and can be kept in inventory. Services are
intangible, produced and consumed simultaneously, and often have high customer
interaction .
8. What is a bottleneck in an operations process?
A. Task with the lowest cost
B. Task performed by multiple workers
C. Longest task in the process
D. A task that can be skipped
Answer: C
Rationale: A bottleneck is the longest task in a process, which limits the overall
capacity and throughput of the entire system .
9. What is design capacity?
A. The maximum output a system can achieve under ideal conditions
B. The maximum output under normal, realistic conditions
C. The minimum output required to break even
D. The average output over a year
Answer: A
Rationale: Design capacity is the theoretical maximum output a system can
achieve under ideal conditions, without any downtime or inefficiencies .
10. A company has a design capacity of 1,000 units per day, an effective capacity
of 800 units per day, and actual output of 600 units per day. What is the
utilization?
A. 60%
B. 75%
C. 80%
D. 85%
Answer: A
Rationale: Utilization = Actual output ÷ Design capacity = 600 ÷ 1,000 = 60% .
11. A company has a design capacity of 1,000 units per day, an effective capacity
of 800 units per day, and actual output of 600 units per day. What is the efficiency?
A. 60%
B. 75%
C. 80%
, D. 85%
Answer: B
Rationale: Efficiency = Actual output ÷ Effective capacity = 600 ÷ 800 = 75% .
12. Which of the following is an example of a long-term capacity decision?
A. Hiring temporary staff
B. Building a new factory
C. Adjusting work schedules
D. Ordering raw materials
Answer: B
Rationale: Building a new factory is a long-term capacity decision that involves
significant capital investment and has lasting strategic implications .
13. The break-even point occurs when:
A. Profit is maximized
B. Revenue equals total cost
C. Variable cost exceeds revenue
D. Demand increases
Answer: B
Rationale: At break-even, total revenue equals total cost, resulting in zero profit .
14. The formula for break-even quantity is:
A. Fixed cost ÷ (Price + Variable cost)
B. Fixed cost ÷ (Price - Variable cost)
C. (Price - Variable cost) ÷ Fixed cost
D. Variable cost ÷ (Price - Fixed cost)
Answer: B
Rationale: Break-even quantity = Fixed cost ÷ (Price - Variable cost per unit).
The denominator is the contribution margin per unit .
15. Which of the following is a variable cost?
A. Rent
B. Raw materials
C. Insurance
D. Salaries of permanent staff
Answer: B
Rationale: Raw materials are a variable cost because they change with
production volume. Rent, insurance, and permanent staff salaries are fixed costs .
16. Which of the following is a fixed cost?
