Test Bank ch 1 for Introduction to Materials Management 6th ed PDF

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Test Bank for Introduction to Materials Management 6th ed ...

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Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Operations management works in a complex environment affected by: A) the economy B) competition C) government regulations D) all of the above Answer: D Explanation:

A) B) C) D)

2) ________ means that the manufacturer does not start to make the product until a customer's order is received. A) Make- to- stock B) Make- to- order C) Engineer- to- order D) Assembly- to- order Answer: B Explanation:

2)

A) B) C) D)

3) A ________ function is needed to transform our resources into useful goods. A) service B) production C) resource material D) extraction Answer: B Explanation:

1)

3)

A) B) C) D)

4) Generally a supplier must meet set minimum requirements to be considered a viable competitor in 4) the marketplace. Customer requirements may be based on price, quality, delivery, and so forth and are called ________. A) order price B) order flexibility C) order winners D) order qualifiers Answer: C Explanation:

A) B) C) D)

1

5) Demand information usually flows from: A) supplier to customer C) product to supplier Answer: D Explanation:

5) B) customer to products D) customer to supplier

A) B) C) D)

6) ________ means that the product is made from standard components that the manufacturer can inventory and assemble according to a customer order. A) Make- to- stock B) Make- to- order C) Engineer- to- order D) Assemble- to- order Answer: D Explanation:

A) B) C) D)

7) ________ means that the supplier manufacturers the goods and sells from finished goods inventory A) Assembly- to- order B) Engineer- to- order C) Make- to- stock D) Make- to- order Answer: C Explanation:

8)

A) B) C) D)

9) ________ usually flow from supplier to customers and design. A) Demand information B) Services C) Product or services D) Product Answer: C Explanation:

7)

A) B) C) D)

8) Since it is virtually impossible to be the best in every dimension of competition, firms should in general strive to provide a ________ level of acceptance for each of the order qualifiers but ________ try to be the best in the market for the order winner(s). A) maximum, should B) maximum, should not C) minimal, should D) minimal, should not Answer: C Explanation:

6)

A) B) C) D)

2

9)

10) For the products or services they buy, customers expect: A) no pre- sale service B) lower quality C) a fair price D) no after- sale service Answer: C Explanation:

10)

A) B) C) D)

SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.

11) Identify the basic inputs to the manufacturing planning and control system.

11)

Answer: There are five basic inputs to the manufacturing planning and control system. (1) The product description shows how the product will appear at some stage of production. (2) Process specifications describe the steps necessary to make the end product. (3) The time needed to perform operations is needed and usually expressed in standard time, which is the time taken by an average operator, working at a normal pace, to perform the task. (4) available facilities. And, (5) Quantities required which comes from forecasts, customer orders, orders to replace finished- goods inventory, and the material requirements plan. Explanation: 12) Fill in the missing data in the profit and loss statement below.

Revenue Cost of Goods Sold Direct Material Direct Labor Factory Overhead Total Cost of Goods Sold Gross Profit

Dollars $1,000,000

12) Percent of Sales 100%

$500,000 ________ $200,000

______ 20% 20% $900,000 $100,000

90% _____

Answer: Direct Labor is $200,000; Direct Material represents 50% of Sales, and Gross Profit represents 10% of Sales. Explanation: 13) Identify and briefly describe the primary activities carried out in manufacturing planning and control.

13)

Answer: Manufacturing planning and control are responsible for the planning and control of the flow of materials through the manufacturing process. The primary activities are: production planning (to be able to meet the demands of the market place through forecasting, master planning, material requirements planning, and capacity planning), implementation and control (to put into action and achieve the production plans), and inventory management (to provide materials or supplies to the production process). These three activities work together. Explanation:

3

14) Consider the following situation: If the cost of manufacturing which includes direct material and direct labor is 70% of sales and profit is 10% of sales, what would be the improvement in profit, if through your better planning and control, the cost of manufacturing was reduced from 70% of sales to 50% of sales? How much would sales have to increase to provide the same increase in profits?

14)

Answer: Profit would increase or improve by 200%; Sales would have to increase 20%. Explanation: 15) If the cost of manufacturing which includes direct material and direct labor is 70% of sales and profit is 10% of sales, what would be the improvement in profit, if through your better planning and control, the cost of manufacturing was reduced from 70% of sales to 50% of sales?

15)

Answer: Profit would increase or improve by 200%. Explanation: 16) Using the data below, to achieve a $60,000 increase in revenue, how much would sales have to increase?

Revenue Cost of Goods Sold Direct Material Direct Labor Factory Overhead Total Cost of Goods Sold Gross Profit

Dollars $1,000,000

Percent of Sales 100%

$500,000 $200,000 $200,000

50% 20% 20% $900,000 $100,000

90% 10%

Dollars $1,200,000

Answer: Revenue Cost of Goods Sold Direct Material Direct Labor Factory Overhead Total Cost of Goods Sold Gross Profit Explanation:

16)

$600,000 $240,000 $200,000

Percent of Sales 100%

50% 20% 17% $1,040,000 $160,000

87% 13%

17) Why is materials management seen as a "balancing act"? Answer: The objective is to be able to deliver what customers want, when and where they want it, and do so at a minimum cost. To achieve this objective, materials management must make trade- offs between the level fo customer service and the cost of providing that service. As a rule, costs rise as the service level increases, and materials management must find that combination of inputs to maximize service and minimize costs. Explanation:

4

17)

18) What factors or major challenges are currently shaping production control's demand environment?

18)

Answer: The key factors are several. First, customers are never satisfied. Also supply chains are large and must be continually managed. Product life cycles are getting shorter and shorter. Production control requires a vast amount of data that must be managed. There is an emphasis on profit margins that are being continually squeezed. Finally, there are an increasing number of alternatives. Explanation: 19) Using the data below, if direct materials can be reduced by 10% and direct labor by 5%, the improvement in profit would be:

Revenue Cost of Goods Sold Direct Material Direct Labor Factory Overhead Total Cost of Goods Sold Gross Profit

Dollars $1,000,000

Percent of Sales 100%

$500,000 $200,000 $200,000

50% 20% 20% $900,000 $100,000

90% 10%

Dollars $1,000,000

Answer: Revenue Cost of Goods Sold Direct Material Direct Labor Factory Overhead Total Cost of Goods Sold Gross Profit Explanation:

19)

$450,000 $190,000 $200,000

Percent of Sales 100%

45% 19% 20% $840,000 $160,000

84% 16%

20) Discuss the activities involved in physical supply and distribution.

20)

Answer: Physical supply and distribution includes all the activities involved in moving goods, from the supplier to the beginning of the production process, and from the end of the production process to the consumer. The activities involved are transportation, distribution inventory, warehousing, packaging, materials handling, and order entry. Explanation: TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

21) Services are physical objects, something we can touch, feel, or see. Answer: True Explanation:

False

22) In recent years attention has moved away from the concept of supply chain management (SCM). Answer: True Explanation:

21)

False

5

22)

23) Just- in- time (JIT) concepts were originally developed by Motorola and other American companies in the 1970s. Answer: True Explanation:

False

24) Assembly- to- order means that the customer's specifications require unique engineering design or significant customization. Answer: True Explanation:

29)

False

30) More and more companies are subcontracting some of their work to suppliers, keeping only their most important core competencies as internal activities. Answer: True Explanation:

28)

False

29) Order winners and qualifiers for any product or market combinations are static. Answer: True Explanation:

27)

False

28) Regulation of business by the various levels of government is extensive. Answer: True Explanation:

26)

False

27) Service companies are in the business of converting raw materials to a form that is of far more value and use to the consumer than the original raw materials. Answer: True Explanation:

25)

False

26) General economic conditions seldom influence the demand for a company's products or services and the availability of inputs. Answer: True Explanation:

24)

False

25) Since competition is international and aggressive, successful companies provide quality that not only meets customers' high expectations but exceeds them. Answer: True Explanation:

23)

False

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30)

Answer Key Testname: C1

1) D 2) B 3) B 4) C 5) D 6) D 7) C 8) C 9) C 10) C 11) There are five basic inputs to the manufacturing planning and control system. (1) The product description shows how the product will appear at some stage of production. (2) Process specifications describe the steps necessary to make the end product. (3) The time needed to perform operations is needed and usually expressed in standard time, which is the time taken by an average operator, working at a normal pace, to perform the task. (4) available facilities. And, (5) Quantities required which comes from forecasts, customer orders, orders to replace finished- goods inventory, and the material requirements plan. 12) Direct Labor is $200,000; Direct Material represents 50% of Sales, and Gross Profit represents 10% of Sales. 13) Manufacturing planning and control are responsible for the planning and control of the flow of materials through the manufacturing process. The primary activities are: production planning (to be able to meet the demands of the marke place through forecasting, master planning, material requirements planning, and capacity planning), implementation and control (to put into action and achieve the production plans), and inventory management (to provide materials or supplies to the production process). These three activities work together. 14) Profit would increase or improve by 200%; Sales would have to increase 20%. 15) Profit would increase or improve by 200%. Dollars Percent of Sales 16) Revenue $1,200,000 100% Cost of Goods Sold Direct Material $600,000 50% Direct Labor $240,000 20% Factory Overhead $200,000 17% Total Cost of Goods Sold $1,040,000 87% Gross Profit $160,000 13% 17) The objective is to be able to deliver what customers want, when and where they want it, and do so at a minimum cost To achieve this objective, materials management must make trade- offs between the level fo customer service and the cost of providing that service. As a rule, costs rise as the service level increases, and materials management must find that combination of inputs to maximize service and minimize costs. 18) The key factors are several. First, customers are never satisfied. Also supply chains are large and must be continually managed. Product life cycles are getting shorter and shorter. Production control requires a vast amount of data that must be managed. There is an emphasis on profit margins that are being continually squeezed. Finally, there are an increasing number of alternatives. Dollars Percent of Sales 19) Revenue $1,000,000 100% Cost of Goods Sold Direct Material $450,000 45% Direct Labor $190,000 19% Factory Overhead $200,000 20% Total Cost of Goods Sold $840,000 84% Gross Profit $160,000 16%

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Answer Key Testname: C1

20) Physical supply and distribution includes all the activities involved in moving goods, from the supplier to the beginning of the production process, and from the end of the production process to the consumer. The activities involved are transportation, distribution inventory, warehousing, packaging, materials handling, and order entry. 21) FALSE 22) FALSE 23) FALSE 24) FALSE 25) TRUE 26) FALSE 27) FALSE 28) TRUE 29) FALSE 30) TRUE

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