27. Which of the following statements regarding Arnold Palmer Hospital is false?
a. The hospital uses a wide range of quality management techniques.
b. The culture of quality at the hospital includes employees at all levels.
c. The hospital scores very hi
d. The hospital's high quality is measured by low readmission rates, not patient satisfaction.
28. Arnold Palmer Hospital uses which of the following quality management techniques?
a. Pareto charts
b. flow charts
c. benchmarking
d. Just-in-Time
e. The hospital uses all of the above techniques.
e. The hospital uses all of the above techniques.
29. Which of the following statements best describes the relationship between quality management and product strategy?
a. Product strategy is set by top management; quality management is an independent activity.
b. Quality management is important to the l
d. Managing quality helps build successful product strategies.
30. "Quality is defined by the customer" is
a. an unrealistic definition of quality
b. a user-based definition of quality
c. a manufacturing-based definition of quality
d. a product-based definition of quality
e. the definition proposed by the American So
b. a user-based definition of quality
31. "Making it right the first time" is
a. an unrealistic definition of quality
b. a user-based definition of quality
c. a manufacturing-based definition of quality
d. a product-based definition of quality
e. the definition proposed by the American Societ
c. a manufacturing-based definition of quality
32. Three broad categories of definitions of quality are
a. product quality, service quality, and organizational quality
b. user-based, manufacturing-based, and product-based
c. internal, external, and prevention
d. low-cost, response, and differentiation
b. user-based, manufacturing-based, and product-based
33. According to the manufacturing-based definition of quality,
a. quality is the degree of excellence at an acceptable price and the control of variability at an
acceptable cost
b. quality depends on how well the product fits patterns of consumer prefere
d. quality is the degree to which a specific product conforms to standards
34. The role of quality in limiting a firm's product liability is illustrated by
a. ensuring that contaminated products such as impure foods do not reach customers
b. ensuring that products meet standards such as those of the Consumer Product Safety Act
c
e. All of the above are valid.
35. Which of the following is not one of the major categories of costs associated with quality?
a. prevention costs
b. appraisal costs
c. internal failures
d. external failures
e. none of the above; they are all major categories of costs associated with q
e. none of the above; they are all major categories of costs associated with quality
36. All of the following costs are likely to decrease as a result of better quality except
a. customer dissatisfaction costs
b. inspection costs
c. scrap costs
d. warranty and service costs
e. maintenance costs
e. maintenance costs
37. Which of the following statements is not true?
a. Self-promotion is not a substitute for quality products.
b. Inferior products harm a firm's profitability and a nation's balance of payments.
c. Product liability transfers from the manufacturer to the
c. Product liability transfers from the manufacturer to the retailer once the retailer accepts
delivery of the product.
38. "Employees cannot produce goods that on average exceed the quality of what the process is capable of producing" expresses a basic element in the writings of
a. Vilfredo Pareto
b. Armand Feigenbaum
c. Joseph M. Juran
d. W. Edwards Deming
e. Philip B. C
d. W. Edwards Deming
39. "Quality Is Free," meaning that the costs of poor quality have been understated, is the work of
a. W. Edwards Deming
b. Joseph M. Juran
c. Philip B. Crosby
d. Crosby, Stills, and Nash
e. Armand Feigenbaum
c. Philip B. Crosby
40. The philosophy of zero defects is
a. the result of Deming's research
b. unrealistic
c. prohibitively costly
d. an ultimate goal; in practice, 1 to 2% defects is acceptable
e. consistent with the commitment to continuous improvement
e. consistent with the commitment to continuous improvement
41. Based on his 14 Points, Deming is a strong proponent of
a. inspection at the end of the production process
b. an increase in numerical quotas to boost productivity
c. looking for the cheapest supplier
d. training and knowledge
e. all of the above
d. training and knowledge
42. Stakeholders who are affected by the production and marketing of poor quality products include
a. stockholders, employees, and customers
b. suppliers and creditors, but not distributors
c. only stockholders, creditors, and owners
d. suppliers and dist
a. stockholders, employees, and customers
43. Regarding the quality of design, production, and distribution of products, an ethical requirement for management is to
a. determine whether any of the organization's stakeholders are violated by poor quality products
b. gain ISO 14000 certification fo
a. determine whether any of the organization's stakeholders are violated by poor quality products
44. If 1 million passengers pass through the St. Louis Airport with checked baggage each month, a successful Six Sigma program for baggage handling would result in how many passengers with misplaced luggage?
a. 3.4
b. 6.0
c. 34
d. 2700
e. 6 times the mont
a. 3.4
45. Which of the following is true about ISO 14000 certification?
a. It is not a prerequisite for ISO 9000 certification.
b. It deals with environmental management.
c. It offers a good systematic approach to pollution prevention.
d. One of its core elemen
e. All of the above are true.
46. Suppose that a firm has historically been achieving "three-sigma" quality. If the firm later changes its quality management practices such that begins to achieve "six-sigma" quality, which of the following phenomena will result?
a. The average number
d. The average number of defects will be cut by 99.87%.
47. To become ISO 9000 certified, organizations must
a. document quality procedures
b. have an onsite assessment
c. have an ongoing series of audits of their products or service
d. all of the above
e. none of the above
d. all of the above
48. Total quality management emphasizes
a. the responsibility of the quality control staff to identify and solve all quality-related problems
b. a commitment to quality that goes beyond internal company issues to suppliers and customers
c. a system where
b. a commitment to quality that goes beyond internal company issues to suppliers and customers
49. A successful TQM program incorporates all of the following except
a. continuous improvement
b. employee involvement
c. benchmarking
d. centralized decision-making authority
e. none of the above; a successful TQM program incorporates all of the above
d. centralized decision-making authority
50. "Kaizen" is a Japanese term meaning
a. a foolproof mechanism
b. just-in-time (JIT)
c. a fishbone diagram
d. setting standards
e. continuous improvement
e. continuous improvement
51. Which of the following statements regarding "Six Sigma" is true?
a. The term has two distinct meanings�one is statistical; the other is a comprehensive quality system.
b. Six Sigma means that about 94 percent of a firm's output is free of defects.
c.
a. The term has two distinct meanings�one is statistical; the other is a comprehensive quality system.
52. Quality circles members are
a. paid according to their contribution to quality
b. external consultants designed to provide training in the use of quality tools
c. always machine operators
d. all trained to be facilitators
e. none of the above; all of
e. none of the above; all of the statements are false
53. Techniques for building employee empowerment include
a. building communication networks that include employees
b. developing open, supportive supervisors
c. moving responsibility from both managers and staff to production employees
d. building high-mo
e. All of the above are techniques for employee empowerment.
54. Building high-morale organizations and building communication networks that include employees are both elements of
a. ISO 9000 certification
b. Six Sigma certification
c. employee empowerment
d. Taguchi methods
e. the tools of TQM
c. employee empowerment
55. The process of identifying other organizations that are best at some facet of your operations and then modeling your organization after them is known as
a. continuous improvement
b. employee empowerment
c. benchmarking
d. copycatting
e. patent infring
c. benchmarking
56. ISO 9000 seeks standardization in terms of
a. products
b. production procedures
c. suppliers' specifications
d. procedures to manage quality
e. all of the above
d. procedures to manage quality
57. Costs of dissatisfaction, repair costs, and warranty costs are elements of cost in the
a. Taguchi Loss Function
b. Pareto chart
c. ISO 9000 Quality Cost Calculator
d. process chart
e. none of the above
a. Taguchi Loss Function
58. A quality loss function includes all of the following costs except
a. the cost of scrap and repair
b. the cost of customer dissatisfaction
c. inspection, warranty, and service costs
d. sales costs
e. costs to society
d. sales costs
59. Pareto charts are used to
a. identify inspection points in a process
b. outline production schedules
c. organize errors, problems, or defects
d. show material flow
e. all of the above
c. organize errors, problems, or defects
60. The "four Ms" of cause-and-effect diagrams are
a. material, machinery/equipment, manpower, and methods
b. material, methods, men, and mental attitude
c. named after four quality experts
d. material, management, manpower, and motivation
e. none of the
a. material, machinery/equipment, manpower, and methods
61. Among the tools of TQM, the tool ordinarily used to aid in understanding the sequence of events through which a product travels is a
a. Pareto chart
b. process chart
c. check sheet
d. Taguchi map
e. poka-yoke
b. process chart
62. The process improvement technique that sorts the "vital few" from the "trivial many" is
a. Taguchi analysis
b. Pareto analysis
c. benchmarking
d. Deming analysis
e. Yamaguchi analysis
b. Pareto analysis
63. A production manager at a pottery factory has noticed that about 70 percent of defects result from impurities in raw materials, 15 percent result from human error, 10 percent from machine malfunctions, and 5 percent from a variety of other causes. Thi
a. a Pareto chart
64. A customer service manager at a retail clothing store has collected numerous customer complaints from the forms they fill out on merchandise returns. To analyze trends or patterns in these returns, she has organized these complaints into a small numbe
b. cause and effect diagram
65. A manager tells her production employees, "It's no longer good enough that your work fall anywhere within the specification limits. I need your work to be as close to the target value as possible." Her thinking is reflective of
a. internal benchmarkin
d. Taguchi concepts
66. A fishbone diagram is also known as a
a. cause-and-effect diagram
b. poka-yoke diagram
c. Kaizen diagram
d. Kanban diagram
e. Taguchi diagram
a. cause-and-effect diagram
67. If a sample of parts is measured and the mean of the measurements is outside the control limits, the process is
a. in control, but not capable of producing within the established control limits
b. out of control and the process should be investigated
b. out of control and the process should be investigated for assignable variation
68. A quality circle holds a brainstorming session and attempts to identify the factors responsible for flaws in a product. Which tool do you suggest they use to organize their findings?
a. Ishikawa diagram
b. Pareto chart
c. process chart
d. control char
a. Ishikawa diagram
69. When a sample measurement falls inside the control limits, it means that
a. each unit manufactured is good enough to sell
b. the process limits cannot be determined statistically
c. the process output exceeds the requirements
d. if there is no other p
d. if there is no other pattern in the samples, the process is in control
70. Which of the following is false regarding control charts?
a. Values above the upper control limits always imply that the product's quality is exceeding expectations.
b. Control charts are built so that new data can be quickly compared to past performa
a. Values above the upper control limits always imply that the product's quality is exceeding expectations.
71. The goal of inspection is to
a. detect a bad process immediately
b. add value to a product or service
c. correct deficiencies in products
d. correct system deficiencies
e. all of the above
a. detect a bad process immediately
72. Which of the following is not a typical inspection point?
a. upon receipt of goods from your supplier
b. during the production process
c. before the product is shipped to the customer
d. at the supplier's plant while the supplier is producing
e. after
e. after a costly process
73. A good description of "source inspection" is inspecting
a. materials upon delivery by the supplier
b. the goods at the production facility before they reach the customer
c. the goods as soon as a problem occurs
d. goods at the supplier's plant
e. one'
e. one's own work, as well as the work done at the previous work station
74. "Poka-yoke" is the Japanese term for
a. card
b. foolproof
c. continuous improvement
d. fishbone diagram
e. just-in-time production
b. foolproof
75. What refers to training and empowering frontline workers to solve a problem immediately?
a. just-in-time
b. poka-yoke
c. benchmarking
d. kaizen
e. service recovery
e. service recovery
76. A recent consumer survey conducted for a car dealership indicates that, when buying a car, customers are primarily concerned with the salesperson's ability to explain the car's features, the salesperson's friendliness, and the dealer's honesty. The de
a. communication, courtesy, and credibility
77. Marketing issues such as advertising, image, and promotion are important to quality because
a. they define for consumers the tangible elements of a service
b. the intangible attributes of a product (including any accompanying service) may not be defin
b. the intangible attributes of a product (including any accompanying service) may not be defined by the consumer
78. Which of the determinants of service quality involves having the customer's best interests at heart? a. access
b. courtesy
c. credibility
d. responsiveness
e. tangibles
c. credibility
79. Which of the determinants of service quality involves performing the service right the first time? a. access
b. courtesy
c. credibility
d. reliability
e. responsiveness
d. reliability
28. If a sample of items is taken and the mean of the sample is outside the control limits the process is
a. out of control and the cause should be established
b. in control, but not capable of producing within the established control limits
c.within the
a. out of control and the cause should be established
29. The causes of variation in statistical process control are
a. cycles, trends, seasonality, and random variations
b. producer's causes and consumer's causes
c. mean and range
d. natural causes and assignable causes
e. Type I and Type II
d. natural causes and assignable causes
30. Natural variations
a. affect almost every production process
b. are the many sources of variation that occur when a process is under control
c. when grouped, form a pattern, or distribution
d. are tolerated, within limits, when a process is under cont
e. All of the above are true.
31. Natural variations
a. are variations that are to be identified and eliminated
b. are variations that can be traced to a specific cause
c. are the same as assignable variations
d. lead to occasional false findings that processes are out of control
e. p
d. lead to occasional false findings that processes are out of control
32. Assignable variation
a. is a sign that a process is under control
b. is to be identified and eliminated
c. is the same as random variation
d. is variation that cannot be traced to a specific cause
e. leads to a steep OC curve
b. is to be identified and eliminated
33. Assignable causes
a. are not as important as natural causes
b. are within the limits of a control chart
c. depend on the inspector assigned to the job
d. are also referred to as "chance" causes
e. are causes of variation that can be identified and rem
e. are causes of variation that can be identified and removed
34. Control charts for variables are based on data that come from
a. acceptance sampling
b. individual items
c. averages of small samples
d. averages of large samples
e. the entire lot
c. averages of small samples
35. The purpose of an X chart is to determine whether there has been a
a. gain or loss in uniformity
b. change in the percent defective in a sample
c. change in the central tendency of the process output
d. change in the number of defects in a sample
e. c
c. change in the central tendency of the process output
36. Statistical process control charts
a. display the measurements on every item being produced
b. display upper and lower limits for process variables or attributes, and signal when a process is no longer in control
c. indicate to the process operator th
b. display upper and lower limits for process variables or attributes, and signal when a process is no longer in control
37. A sample of parts is measured. The mean of this sample is in the middle of the control limits, but some individual parts measure too low for design specifications and other parts measure too high. Which of the following is true?
a. The process is out
b. The process is in control, but not capable of producing within the established control limits.
38. The Central Limit Theorem
a. is the theoretical foundation of the c-chart
b. states that the average of assignable variations is zero
c. allows managers to use the normal distribution as the basis for building some control charts
d. states that the av
c. allows managers to use the normal distribution as the basis for building some control charts
39. For an x-bar chart where the standard deviation is known, the Upper Control Limit
a. is 3*? below the mean of sample means for a 3? control chart
b. is 3*? above the mean of sample means for a 3? control chart
c. is 3*? / (sqrt)n below the mean of sam
d. is 3*? / (sqrt)n above the mean of sample means for a 3? control chart
40. Up to three standard deviations above or below the centerline is the amount of variation that statistical process control allows for
a. Type I errors
b. about 95.5% variation
c. natural variation
d. all types of variation
e. assignable variation
c. natural variation
41. A manager wants to build 3 control limits for a process. The target value for the mean of the process is 10 units, and the standard deviation of the process is 6. If samples of size 9 are to be taken, the UCL and LCL will be
a. -8 and 28
b. 16and4
c.
b. 16and4
42. The type of inspection that classifies items as being either good or defective is
a. variable inspection
b. attribute inspection
c. fixed inspection
d. all of the above
e. none of the above
b. attribute inspection
43. The x-bar chart tells us whether there has been a
a. gain or loss in dispersion
b. change in the percent defective in a sample
c. change in the central tendency of the process output
d. change in the number of defects in a sample
e. none of the above
c. change in the central tendency of the process output
44. The mean and standard deviation for a process for which we have a substantial history are x = 120 and = 2. For the variable control chart, a sample size of 16 will be used. What is the mean of the sampling distribution?
a. 1/8 (0.125)
b. 0.5
c. 2
d. 4
e. none of the above
45. Jars of pickles are sampled and weighed. Sample measures are plotted on control charts. The ideal weight should be precisely 11 oz. Which type of chart(s) would you recommend?
a. p-charts
b. c-charts
c. x(bar)- and R-charts
d. x(bar)-, but not R-chart
c. x(bar)- and R-charts
46. If x(bar) = 23 oz, ? =0.4 oz, and n=16, the (+-)3? control limits will be
a. 21.8 to 24.2 ounces
b. 23 ounces
c. 22.70 to 23.30 ounces
d. 22.25 to 23.75 ounces
e. none of the above
c. 22.70 to 23.30 ounces
47. The usual purpose of an R-chart is to signal whether there has been a
a. gain or loss in dispersion
b. change in the percent defective in a sample
c. change in the central tendency of the process output
d. change in the number of defects in a sample
e
a. gain or loss in dispersion
48. A manager wishes to build a 3 range chart for a process. The sample size is five, the mean of sample means is 16.01, and the average range is 5.3. From Table S6.1, the appropriate value of D3
is 0, and D4 is 2.115. The UCL and LCL for this range chart
c. 11.2 and 0
49. Plots of sample ranges indicate that the most recent value is below the lower control limit. What course of action would you recommend?
a. Since there is no obvious pattern in the measurements, variability is in control.
b. One value outside the contr
e. Variation is not in control; investigate what created this condition.
50. To set x -chart upper and lower control limits, one must know the process central line, which is the
a. average of the sample means
b. total number of defects in the population
c. percent defects in the population
d. size of the population
e. average
a. average of the sample means
51. According to the text, the most common choice of limits for control charts is usually
a. � 1 standard deviation
b. � 2 standard deviations
c. � 3 standard deviations
d. � 3 standard deviations for means and � 2 standard deviations for ranges
e. none o
c. � 3 standard deviations
52. Which of the following is true of a p-chart?
a. The lower control limit is found by subtracting a fraction from the average number of defects.
b. The lower control limit indicates the minimum acceptable number of defects.
c. The lower control limit ma
d. The lower control limit may be at zero.
53. The normal application of a p-chart is in
a. process sampling by variables
b. acceptance sampling by variables
c. process sampling by attributes
d. acceptance sampling by attributes
e. none of the above
c. process sampling by attributes
54. The statistical process chart used to control the number of defects per unit of output is the
a. x -chart
b. R-chart
c. p-chart
d. AOQ chart
e c-chart
e c-chart
55. The c-chart signals whether there has been a
a. gain or loss in uniformity
b. change in the number of defects per unit
c. change in the central tendency of the process output
d. change in the percent defective in a sample
e. change in the AOQ
b. change in the number of defects per unit
56. The local newspaper receives several complaints per day about typographic errors. Over a seven- day period, the publisher has received calls from readers reporting the following number of errors: 4, 3, 2, 6, 7, 3, and 9. Based on these data alone, wha
b. c-chart
57. A manufacturer uses statistical process control to control the quality of the firm's products. Samples of 50 of Product A are taken, and a defective/acceptable decision is made on each unit sampled. For Product B, the number of flaws per unit is count
b. p-chart for A, c-chart for B
58. A nationwide parcel delivery service keeps track of the number of late deliveries (more than 30 minutes past the time promised to clients) per day. They plan on using a control chart to plot their results. Which type of control chart(s) would you reco
c.c-cherts
59. A run test is used
a. to examine variability in acceptance sampling plans
b. in acceptance sampling to establish control
c. to examine points in a control chart to check for natural variability
d. to examine points in a control chart to check for nonr
d. to examine points in a control chart to check for nonrandom variability
60. Which of the following is true regarding the process capability index Cpk?
a. A Cpk index value of 1 is ideal, meaning all units meet specifications.
b. The larger the Cpk, the more units meet specifications.
c. The Cpk index can only be used when the
b. The larger the Cpk, the more units meet specifications.
61. If the Cpk index exceeds 1
a. the AQL must be smaller than the LTPD
b. must be less than one-third of the difference between the specification and the process mean
c. the x-bar chart must indicate that the process is in control
d. the process is capab
b. must be less than one-third of the difference between the specification and the process mean
62. The statistical definition of Six Sigma allows for 3.4 defects per million. This is achieved by a Cpk index of
a. 0
b. 1
c. 1.33
d. 1.67
e. 2
e. 2
63. A Cpk index of 1.00 equates to a defect rate of
a. five percent
b. 3.4 defects per million
c. 2.7 per 1,000 items
d. 97.23 percent
e. one percent
c. 2.7 per 1,000 items
64. Acceptance sampling
a. is the application of statistical techniques to the control of processes
b. was developed by Walter Shewhart of Bell Laboratories
c. is used to determine whether to accept or reject a lot of material based on the evaluation of a
c. is used to determine whether to accept or reject a lot of material based on the evaluation of a sample
65. Acceptance sampling's primary purpose is to
a. estimate process quality
b. estimate lot quality
c. detect and eliminate defectives
d. decide if a lot meets predetermined standards
e. determine whether defective items found in sampling should be replac
d. decide if a lot meets predetermined standards
66. An acceptance sampling plan's ability to discriminate between low quality lots and high quality lots is described by
a. a Gantt chart
b. the Central Limit Theorem
c. a process control chart
d. an operating characteristics curve
e. a range chart
d. an operating characteristics curve
67. Acceptance sampling
a. may involve inspectors taking random samples (or batches) of finished products and measuring
them against predetermined standards
b. may involve inspectors taking random samples (or batches) of incoming raw materials and measuri
e. All of the above are true.
68. Which of the following statements on acceptance sampling is true?
a. Acceptance sampling draws samples from a population of items, tests the sample, and accepts
the entire population if the sample is good enough, and rejects it if the sample is poor e
d. All of the above are true.
69. Acceptance sampling is usually used to control
a. the number of units output from one stage of a process which are then sent to the next stage
b. the number of units delivered to the customer
c. the quality of work-in-process inventory
d. incoming lot
d. incoming lots of purchased products
70. An operating characteristic (OC) curve describes
a. how many defects per unit are permitted before rejection occurs
b. the sample size necessary to distinguish between good and bad lots
c. the most appropriate sampling plan for a given incoming produc
d. how well an acceptance sampling plan discriminates between good and bad lots
71. An operating characteristics curve shows
a. upper and lower product specifications
b. product quality under different manufacturing conditions
c. how the probability of accepting a lot varies with the population percent defective
d. when product speci
c. how the probability of accepting a lot varies with the population percent defective
72. Producer's risk is the probability of
a. accepting a good lot
b. rejecting a good lot
c. rejecting a bad lot
d. accepting a bad lot
e. none of the above
b. rejecting a good lot
73. Which of the following is true regarding the relationship between AOQ and the true population percent defective?
a. AOQ is greater than the true percent defective.
b. AOQ is the same as the true percent defective.
c. AOQ is less than the true percent
c. AOQ is less than the true percent defective.
74. Average outgoing quality (AOQ) usually
a. worsens with inspection
b. stays the same with inspection
c. improves with inspection
d. may either improve or worsen with inspection
e. is the average quality before inspection
c. improves with inspection
75. A Type I error occurs when
a. a good lot is rejected
b. a bad lot is accepted
c. the number of defectives is very large
d. the population is worse than the AQL
e. none of the above
a. a good lot is rejected
76. A Type II error occurs when
a. a good lot is rejected
b. a bad lot is accepted
c. the population is worse than the LTPD
d. the proportion of defectives is very small
e. none of the above
b. a bad lot is accepted
77. In most acceptance sampling plans, when a lot is rejected, the entire lot is inspected and all defective items are replaced. When using this technique the AOQ
a. worsens (AOQ becomes a larger fraction)
b. improves (AOQ becomes a smaller fraction)
c. i
b. improves (AOQ becomes a smaller fraction)
78. An acceptance sampling plan is to be designed to meet the organization's targets for product quality and risk levels. Which of the following is true?
a. n and c determine the AQL.
b. AQL, LTPD, and collectively determine n and c.
c. n and c are determ
b. AQL, LTPD, and collectively determine n and c.
79. A lot that is accepted by acceptance sampling
a. has more defects than existed before the sampling
b. has had all its defects removed by 100% inspection
c. will have the same defect percentage as the LTPD
d. has no defects present
e. All of the above
e. All of the above are false.
80. Which of the following statements about acceptance sampling is true?
a. The steeper an OC curve, the better it discriminates between good and bad lots.
b. Acceptance sampling removes all defective items.
c. Acceptance sampling of incoming lots is repl
a. The steeper an OC curve, the better it discriminates between good and bad lots.
81. Which of the following is true regarding the average outgoing quality level?
a. An AOQ value of 1 is ideal, because all defects have been removed.
b. AOQ is always greater than AQL but less than LTPD.
c. AOQ rises (worsens) following inspection of fai
d. AOQ is very low (very good) for extremely poor quality lots.
16. What is sometimes referred to as rated capacity?
a. efficiency
b. utilization
c. effective capacity
d. expected output
e. design capacity
d. expected output
17. Effective capacity is the
a. maximum output of a system in a given period
b. capacity a firm expects to achieve given the current operating constraints
c. average output that can be achieved under ideal conditions
d. minimum usable capacity of a parti
b. capacity a firm expects to achieve given the current operating constraints
18. Which of the following represents an aggressive approach to demand management in the service sector when demand and capacity are not particularly well matched?
a. inexpensive rates for weekend phone calls
b. appointments
c. reservations
d. first-come,
a. inexpensive rates for weekend phone calls
19. The Academic Computing Center has five trainers available in its computer labs to provide training sessions to students. Assume that the capacity of the system is 1900 students per semester and the utilization is 90%. If the number of students who act
d. 87.7%
20. Christopher's Cranks uses a machine that can produce 100 cranks per hour. The firm operates 12 hours per day, five days per week. Due to regularly scheduled preventive maintenance, the firm expects the machine to be running during approximately 95% of
c. 4845
21. The staff training center at a large regional hospital provides training sessions in CPR to all employees. Assume that the capacity of this training system was designed to be 1200 employees per year. Since the training center was first put in use, the
b. 90.5 percent; 79.2 percent
22. Which of the following represents a common way to manage capacity in the service sector?
a. appointments
b. reservations
c. changes in staffing levels
d. first-come, first served service rule
e. "early bird" specials in restaurants
c. changes in staffing levels
23. If demand exceeds capacity at a new facility, an organization can use which of the following to move demand to an existing facility?
a. aggressive marketing
b. lower prices at all facilities
c. build a facility of the correct size
d. add a complementa
a. aggressive marketing
24. Adding a complementary product to what is currently being produced is a demand management strategy used when
a. demand exceeds capacity
b. capacity exceeds demand for a product which has stable demand
c. the existing product has seasonal or cyclical d
c. the existing product has seasonal or cyclical demand
25. An organization whose capacity is on that portion of the average unit cost curve that falls as output rises
a. has a facility that is below optimum operating level and should build a larger facility
b. has a facility that is above optimum operating le
a. has a facility that is below optimum operating level and should build a larger facility
26. Of the four approaches to capacity expansion, the approach that "straddles" demand
a. uses incremental expansion
b. uses one-step expansion
c. at some times leads demand, and at other times lags
d. works best when demand is not growing but is stable
e
e. Choices a and c are both correct.
27. Which of the following is not one of the four approaches to capacity expansion?
a. average capacity with incremental expansion
b. lead demand with incremental expansion
c. lag demand with incremental expansion
d. lead demand with one-step expansion
e.
e. lag demand with one-step expansion
28. Which of the following is false regarding capacity expansion?
a. "Average" capacity sometimes leads demand, sometimes lags it.
b. If "lagging" capacity is chosen, excess demand can be met with overtime or subcontracting.
c. Total cost comparisons are
d. Capacity may only be added in large chunks.
29. Break-even is the number of units at which
a. total revenue equals price times quantity
b. total revenue equals total variable cost
c. total revenue equals total fixed cost
d. total profit equals total cost
e. total revenue equals total cost
e. total revenue equals total cost
30. Which of the following statements regarding fixed costs is true?
a. Fixed costs rise by a constant amount for every added unit of volume.
b. While fixed costs are ordinarily constant with respect to volume, they can "step" upward if
volume increases r
b. While fixed costs are ordinarily constant with respect to volume, they can "step" upward if
volume increases result in additional fixed costs.
31. Which of the following costs would be incurred even if no units were produced?
a. raw material costs
b. direct labor costs
c. transportation costs
d. building rental costs
e. purchasing costs
d. building rental costs
32. Basic break-even analysis typically assumes that
a. revenues increase in direct proportion to the volume of production, while costs increase at a decreasing rate as production volume increases
b. variable costs and revenues increase in direct proporti
b. variable costs and revenues increase in direct proportion to the volume of production
33. Fabricators, Inc. wants to increase capacity by adding a new machine. The fixed costs for machine A are $90,000, and its variable cost is $15 per unit. The revenue is $21 per unit. The break-even point for machine A is
a. $90,000 dollars
b. 90,000 uni
d. 15,000 units
34. A fabrication company wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $75,000. The variable cost for A is $15.00 per unit an
d. no purchase because neither machine yields a profit at that volume
35. Fred's Fabrication, Inc. wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $70,000. The variable cost for A is $9.00 per unit
c. 4,000 units, with B more profitable at low volumes
36. A shop wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $75,000. The variable cost for A is $15.00 per unit and for B, $18.00
d. no purchase because neither machine yields a profit at that volume
37. Break-even analysis can be used by a firm that produces more than one product, but
a. the results are estimates, not exact values
b. the firm must allocate some fixed cost to each of the products
c. each product has its own break-even point
d. the bre
d. the break-even point depends upon the proportion of sales generated by each of the products
38. The basic break-even model can be modified to handle more than one product. This extension of the basic model requires
a. price and sales volume for each product
b. price and variable cost for each product, and the percent of sales that each product r
b. price and variable cost for each product, and the percent of sales that each product represents
39. A product sells for $5, and has unit variable costs of $3. This product accounts for $20,000 in annual sales, out of the firm's total of $60,000. The weighted contribution of this product is approximately
a. 0.133
b. 0.200
c. 0.40
d. 0.667
e. $1.667
a. 0.133
40. When decision trees are used to analyze capacity decisions,
a. "do nothing" is not a possible decision alternative
b. probabilities must be assigned to each of the decision alternatives
c. states of nature are often demand-based, as in "market favorab
c. states of nature are often demand-based, as in "market favorability
41. Net present value
a. is gross domestic product less depreciation
b. is sales volume less sales and excise taxes
c. is profit after taxes
d. ignores the time value of money
e. is the discounted value of a series of future cash receipts
e. is the discounted value of a series of future cash receipts
42. Net present value will be greater
a. as a fixed set of cash receipts occurs later rather than earlier
b. as the total of the cash receipts, made in same time periods, is smaller
c. for one end-of-year receipt of $1200 than for twelve monthly receipts
d. for a 4% discount rate than for a 6% discount rate
43. A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years. If the cost of capital is 5 percent, the net present value of this investment is
a. greater than $80,000
b. greater than $130,000
c. less t
c. less than $30,000
44. A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years. If the cost of capital is 5 percent, the net present value of this investment is approximately
a. $20,920
b. $26,160
c. $49,840
d. $70,920
a. $20,920