Professor Blake

OPM 101
Name__________________________
Spring 2009
EXAMINATION 1, Version B

Use a Scantron Form No. 886-E to record your choice of the best answer to each of the
following questions. You have the full period to answer the questions.
The following questions are worth three (3) points each.
1. At a factory, the transformation process is a (an)
components into products.
a) locational
b) imperceptible
c) hypothetical
d) irreversible
e) physical

change of raw materials and

2. Operations management is responsible for orchestrating all the resources needed to produce the final
product. This includes all of the following except ______________________________________.
a) obtaining customer feedback
b) arranging schedules
c) managing inventory
d) controlling quality
e) designing work methods
3. A key feature of scientific management is that workers are motivated only by __________________.
a) love
b) power
c) challenging work
d) money
e) fame
4. Which of the following competitive priorities typically requires the use of more general-purpose
equipment?
a) technology
b) cost
c) quality
d) flexibility
e) time
5. Studying the practices of companies considered best in class and comparing the performance of our
company against their performance is
a) competition
b) copying
c) frustration
d) benchmarking
e) notching
6. In break-even analysis, in order to make a profit the company must
a) sell above the break-even point
b) sell below the break-even point
c) sell at a loss
d) sell at the break-even point
e) sell on consignment

Professor Blake

OPM 101
Name__________________________
Spring 2009

7. Which product and service strategy is used to produce standard components that can be combined to
customer specifications?
a) assemble-to-deliver
b) make-to-stock
c) assemble-to-order
d) make-to-order
e) make-to-package
8. Which activity appears to be most frequently outsourced by large companies?
a) Purchasing
b) Marketing
c) Finance
d) Accounting
e) Manufacturing
9. According to several studies, what are the three most important criteria for selecting suppliers?
a) Price, quality, fast delivery
b) Quality, fast delivery, on-time delivery
c) Price, flexibility, on-time delivery
d) Quality, flexibility, fast delivery
e) Price, quality, on-time delivery
10. The discussion in the textbook implies that information sharing has shifted power in the supply chain the
most to which group?
a) Suppliers
b) Manufacturers
c) Distributors
d) Retailers
e) Individual consumers
11. The definition of quality that involves the product functioning as expected without failure is
a) Performance
b) Conformance
c) Reliability
d) Standardization
e) Endurance
12. Warranty claims, customer complaints, and costs of litigation are examples of
a) Internal failure
b) External failure
c) Appraisal
d) Prevention
e) Replacement
13. The Baldrige Award is intended to
a) Demonstrate that American companies are better than their foreign competitors
b) Certify suppliers
c) Reward and stimulate quality initiatives
d) Focus national attention on manufacturing
e) Add structure to TQM

costs.

Professor Blake

OPM 101
Name__________________________
Spring 2009

14. What technique answers the question of whether the process is functioning properly or not?
a) Fishbone diagramming
b) Acceptance sampling
c) Statistical process control
d) Scatter plotting
e) Experimental design
15.Six-sigma quality implies how many average defects per million?
a) 3.4
b) 6
c) 2600
d) 3
e) 6
16. What measures the difference between the largest and smallest observations in a set of data?
a) Range
b) Coefficient of variation
c) Coefficient of kurtosis
d) Coefficient of skewness
e) Standard deviation
17. At a factory, the transformation process is the physical change of raw materials and components into
products.
a) True
b) False
18. Companies that compete based on cost generally also allow a lot of product customization.
a) True
b) False
19. Companies that compete based on flexibility often cannot compete based on cost.
a) True
b) False
20. Productivity = input/output.
a) True
b) False
21. The make-to-stock product and service strategy has the shortest delivery lead time among the possible
strategies, but the customer has no involvement in product design.
a) True
b) False
22. Manufacturers typically represent the beginning of a supply chain.
a) True
b) False
23. Quality at the source involves inspecting goods after they are produced.
a) True
b) False
24. Acceptance sampling occurs after the product has been produced.
a) True
b) False

Professor Blake

OPM 101
Name__________________________
Spring 2009

The following problems are worth ten (10) points each.

1. A firm produces 1500 units per day using four workers on a five-hour shift. On average, 12% of the
units produced are defective and must be scrapped. What is the labor productivity (of all the workers on
the shift) for non-defective units?
O 1500 (.12 * 1500) 1500 180 1320
P

66_units/w ork - hours

I
4*5
20
20
2. Birdie Par owns a company that makes golf gloves. She is thinking about introducing a new glove, which
would require an additional fixed cost of $20,000 per year. The variable costs for the new glove have
been estimated to be $5 per glove.
a) If she sells the new glove for $15, how many must she sell to break even?
FC
$20,000 $20,000
Q BE

2000_gloves
SP VC $15 $5
$10
b) If she sells 3,000 gloves at the $15 price, what will the contribution to profit be?
Profit = R (FC + (VC * Q)) = (3000 * $15) ($20,000 + ($5 * 3000)) = $45,000 - $35,000 = $10,000
3. Simuelson Industries can produce its own motors for a $60,000 fixed monthly cost and a $50 variable
cost per unit. Alternatively, Simuelson Industries can purchase the motors from an outside supplier for
$50,000 per month and $58 per unit.
a) What is the indifference point?
FC MAKE FC BUY $60,000 $50,000 $10,000
Q IND

1,250_moto rs
VC BUY VC MAKE
$58 $50
$8
b) What option should be chosen if monthly demand is 1200 units?
TC MAKE FCMAKE (VC MAKE Q) $60,000 ($50 * 1200) $60,000 $60,000 $120,000
TC BUY FC BUY (VCBUY Q) $50,000 ($58 * 1200) $50,000 $69,600 $119,600
Thus, it would be a little less expensive to outsource.

Professor Blake

OPM 101
Name__________________________
Spring 2009

OPM101 - Formulas
Spring 2009
Examination 1
Chapter 2:
Productivi ty

P P1
output
O
;P ; P 2
[100_for_pe rcentage]
input
I
P1

P2 - later productivity measure, P1 earlier productivity measure

Chapter 3:
TC FC (VC)Q
R (SP)Q
FC (VC)Q BE (SP)Q BE
Q BE

FC
SP VC

TC total cost, FC fixed cost, VC variable cost/unit

Q number of units R revenue, SP selling price/unit, Q BE break even quantity
Chapter 4:
Cost to buy:
Cost to make:
Indifference point:

TC BUY FC BUY (VC BUY Q)

TC MAKE FCMAKE (VC MAKE Q)

FC MAKE FCBUY
TC BUY TC MAKE Q IND
VC BUY VC MAKE

TC total cost, FC fixed cost, VC variable cost/unit, Q number of units,

QIND indifference point