DSC2006

NATIONAL UNIVERSITY OF SINGAPORE

DSC2006 – OPERATIONS MANAGEMENT

Name of examiner: Dr. Qi Mei

Time Allowed: 2 Hours

INSTRUCTIONS TO CANDIDATES

1. This is a CLOSED BOOK Examination: Students are allowed to bring in one A4-sized double sided
notes and an approved calculator.

2. This examination paper contains 45 MCQs and comprises 11 printed pages including this cover
page.

3. Use the MCQ scan card to answer ALL questions.

4. Upon finishing the exam, you must return both the exam question paper and the MCQ scan card (0 for
your grades if anyone of them is missing).

5. Write your MCQ scan card No: _______________________________

6. Write your student Matric No: _______________________________

7. Write your Seat #: _________________________________________

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Questions 1 to 4 are based on the following: Consider the following flow process which consists of
three process steps performed by three machines. Work is processed in batches at each step. Before a
batch is processed at Step 1, the machine in step 1 has to be set up. During a setup, the machine is
unable to process any product. No setups are needed at step 2 and step 3.

1. Assume that the batch size is 50 parts, which step is the bottleneck?
A. Step 1
B. Step 2
C. Step 3
D. Step 1 and step 2
E. Step 1 and step 3

2. Using batch size of 40 parts, what is the capacity of the whole process? (Pick the closest answer!)
A. 1/100 batch per minute
B. 1/90 batch per minute
C. 1/80 batch per minute
D. 1/31.5 batch per minute
E. 0.48 batch per hour

3. What batch size maximizes the capacity of the whole process? (Pick the closest answer!)
A. 10 parts
B. 20 parts
C. 30 parts
D. 40 parts
E. 50 parts

4. Using batch size of 30 parts, how long would it take to produce the first 20 parts starting with an
empty system? Assume that the parts in the same batch have to stay together (no smaller transfer
batches allowed) when transfer to step 2 and to step 3. However, a finished part can leave the
system the moment it completes at Step 3. (Pick the closest answer!)
A. 120 minutes
B. 150 minutes
C. 180 minutes
D. 185 minutes
E. 210 minutes
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5. A point which is outside of the lower control limit on an R-chart:

A. is an indication that no cause of variation is present
B. should be ignored because it signifies better than average quality
C. should be investigated because an assignable cause of variation might be present
D. should be ignored unless another point is outside that limit
E. is impossible since the lower limit is always zero

6. The purpose of control charts is to:

A. estimate the proportion of output that is acceptable
B. weed out defective items
C. determine if the output is within tolerances/specifications
D. distinguish between random variation and assignable variation in the process
E. provide meaningful work for quality inspectors

7. The range chart (R-chart) is most likely to detect a change in:

A. Proportion
B. Mean
C. number defective
D. Variability
E. sample size

8. Effective inventory management includes

A. minimize holding costs
B. indicate how much to order / make
C. minimize ordering costs
D. indicate when to order / re-order /make
E. all of above

9. In A-B-C analysis, the typical percentage of the number of items in inventory for A items is about:
A. 10 -20%
B. 20 -50%
C. 50 -70%
D. 70 -80%
E. 80% and above

10. In the basic EOQ model, if annual demand doubles, the effect on the EOQ is:
A. It doubles.
B. It is four times of its previous amount.
C. It is half of its previous amount.
D. It is about 70+ percent of its previous amount.
E. It increases by about 40+ percent.

11. In the basic EOQ model, an annual demand of 400 units, an ordering cost of $5, and a holding cost of
$1 per unit per year will result in an EOQ of:
A. 40
B. square root of 40
C. square root of 400
D. square root of 4000
E. none of above
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12. A company operates 7/24 to meet an annual demand of 18,250 units. Its production setup cost is
$10 per setup, holding cost is $0.125 per unit per day, and its production rate is 250 units per day.
What is the optimal production quantity that minimizes total average annual holding and setup
costs?
A. 100
B. 1000
C. Square root of 100
D. Square root of 1000
E. none of above

13. In our quantity discount model, with holding costs given as a percentage of unit purchasing price, in
order for EOQ at the lowest price to be optimal, it must
A. have the lowest TIC
B. be feasible
C. be to the left of the piece break quantity for that price
D. have the largest quantity compared to all other EOQs
E. none of above

14. In basic EOQ model, if lead time increases from 5 to 10 days, the EOQ will:
A. double
B. increase, but not double
C. decrease by a factor of 2
D. remain the same
E. none of above

15. Which of the following about basic EOQ model is false:

A. A decrease in demand will decrease the EOQ
B. If the actual order quantity is smaller than the EOQ, the annual holding costs is less than the
annual ordering costs
C. An increase in holding costs will decrease the EOQ value
D. In the EOQ formula there is an inverse relationship between setup and holding costs
E. Annual holding costs and annual ordering costs are the same at the EOQ point

16. The introduction of quantity discounts will cause the optimum order quantity to be:
A. smaller
B. unchanged
C. greater
D. smaller or unchanged
E. unchanged or greater

17. Which of the following concerning smaller batch size of production is true?
A. processes hold less inventory
B. processes is more flexible
C. quality problems are easier to detect
D. all of above
E. none of above
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18. Aggregate planning requires which of the following information?

A. forecast of expected demand
B. current levels of inventory
C. policies regarding employment levels
D. all of above
E. none of above

19. Aggregate planners seek to match supply with demand:

A. at minimum overall cost
B. by staying within company policy
C. keeping inventories at a minimum
D. all of above
E. none of above

20. The direct result of disaggregating the aggregate plan is the:

A. marketing plan
B. production plan
C. rough-cut capacity plan
D. master production schedule
E. material requirements plan

21. Which one of the following most closely describes net material requirements?
A. gross requirements - amount on-hand - scheduled receipts
B. gross requirements - planned receipts
C. gross requirements - order releases + amount on-hand
D. gross requirements - planned order releases
E. gross requirements - amount on-hand + planned order releases

22. In MRP, under lot-for-lot ordering, "planned-order receipts" are:

A. identical to "scheduled receipts"
B. identical to "planned-order releases"
C. open orders (that is, ordered before the first time bucket, but not delivered yet)
D. "gross requirements"
E. available to promise inventory

23. The identification of parent items is called:

A. Paternity
B. Pegging
C. Requirement I.D.
D. Relationship tracking
E. Master Scheduling
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24. Which of the following is not usually necessary in order to have an effective MRP system?
A. a computer and software
B. an accurate bill of materials
C. lot-for-lot ordering
D. an up-to-date master schedule
E. integrity of file data

Questions 25 and 26 are based on the following: Use the product structure given below (numbers
inside brackets indicate multiplicity).

25. If the net requirements for items A, B, and C are 5, 10, and 5 units respectively, how many units of
item F do we need? Assume no initial on hand stocks.
A. 44
B. 160
C. 170
D. 230
E. None of above

26. If there are 100 units initial on-hand inventory for item D, how many units of item F do we need?
A. 80
B. 160
C. 190
D. 210
E. None of above

Questions 27 to 31 are based on the following: Best-law.sg is a recent start-up trying to cater to
customers in search of legal services who are intimidated by the idea of talking to a lawyer or simply too
lazy for entering a law office. Unlike traditional law firms, Best-law.sg allows for extensive interaction
between lawyers and their customers via telephone and the internet. This process is used in the upfront
part of the customer interaction, largely consisting of answering some basic customer questions prior to
entering a formal relationship.

In order to allow customers to interact with the firm’s lawyers (in fact, the firm rents out lawyers from
the prestigious law firm Cohen, Fisher, Pearson, Terwiesch and Partners), customers are encouraged to
send emails to best-lawyer@best-law.sg. From there, the incoming emails are distributed to the lawyer
who is currently “on call”. Given the broad skills of the lawyers, each lawyer can respond to each and
every incoming request.
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Emails arrive from 8am to 6pm at a rate of 10 emails per hour (coefficient of variation for the inter-
arrivals is 1). At each moment in time, there is exactly one lawyer “on call”, i.e. sitting at his/her desk,
waiting for incoming emails. It takes the lawyer, on average, 5 minutes to write a response email. The
standard deviation of this service time is 4 minutes.

27. What is the average time a customer has to wait for a response to her/his email, ignoring any
transmission times?
A. 2 Minutes
B. 2.5 Minutes
C. 18 Minutes
D. 20.5 Minutes
E. None of above

28. How many emails on average will a lawyer have received at the end of a 10 hour day?
A. 10
B. 12
C. 100
D. 120
E. None of above

29. While not responding to emails, the lawyer on call is encouraged to actively pursue cases that
potentially could lead to large settlements. How much time on a typical average 10h day can a
lawyer dedicate to this activity (Assume the lawyer can instantly switch between emails and work on
a settlement)?
A. 600 minutes
B. 120 minutes
C. 100 minutes
D. 80 minutes
E. None of above

To increase the responsiveness of the firm, the board of best-law.sg proposes a new operating policy.
Under the new policy, the response would be highly standardized, reducing the standard deviation for
writing the response email to 0.5 minutes. The average writing time would remain unchanged.

30. How would the amount of time that a lawyer dedicates to the search for large settlement cases
change with this new policy?
A. It would go up
B. It would go down
C. It would remain unchanged
D. Cannot be determined

31. What is the average time a customer has to wait for the response to her /his email with this new
policy?
A. 5.05 minutes
B. 10.225 minutes
C. 12.625 minutes
D. 14.135 minutes
E. None of above
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Questions 32 and 33 are based on the following: Marisol is new to town and is in the market for cellular
phone service. She has settled on Wildcat Cellular, which will give her a free phone if she signs a one-
year contract. Wildcat offers several calling plans. One plan that she is considering is called “Pick Your
Minutes”. Under this plan, she would specify a quantity of minutes, say x, per month that she would
buy at 5¢ per minute. Hence, her upfront cost would be $0.05x. If her usage is less than this quantity x
in a given month, she loses the minutes. If her usage in a month exceeds this quantity x, she would have
to pay 40¢ for each extra minute (that is, each minute used beyond x). For example, if she contracts for
x=120 minutes per month and her actual usage is 40 minutes, her total bill is $120*0.05 = $6.00.
However, if actual usage is 130 minutes, her total bill would be $120*0.05 + (130 – 120)*0.40 = $10.00.
The same rates apply whether the call is local or long distance. Once she signs the contract, she cannot
change the number of minutes specified for the one-year contract. Marisol estimates that her monthly
needs are best approximated by the Normal distribution, with a mean of 250 minutes and a standard
deviation of 24 minutes.

32. If Marisol chooses the “Pick Your Minutes” plan described above, how many minutes should she
contract for? (Pick the closest answer.)
A. 250
B. 260
C. 270
D. 280
E. 290

33. A friend who is studying in the NUS BBA program advises Marisol to increase her monthly
contracted minutes to 280, to reduce her “40¢-per-minute payments.” Under this recommended
contract, what’s the probability that Marisol can avoid the 4¢0-per-minute payments? (Pick the
closest answer.)
A. 12%
B. 34%
C. 67%
D. 89%
E. 95%

34. JIT philosophy suggests that workers are …

A. Assets
B. Liabilities
C. Interchangeable
D. Replaceable
E. To be phased out

35. In the JIT philosophy, the ideal lot size is:

A. the economic order quantity (EOQ)
B. the economic run size (EPQ)
C. one unit
D. None of above
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36. Which of the following is characteristic of the JIT philosophy?

A. Inventories are an asset.
B. Lot sizes are optimized by formula.
C. Vendors are co-workers, essentially other departments of our organization.
D. Queues are a necessary investment.
E. all of above

37. A potential obstacle to conversion to a JIT system is:

A. lack of management commitment
B. lack of worker cooperation
C. supplier resistance
D. all of above
E. none of above

38. Which of the following contributes to the competitive advantage enjoyed by firms using JIT/lean
production?
A. Backup employees to cover for absenteeism
B. 100% inspection to remove defects
C. Dedicated equipment to reduce unit costs
D. Safety stocks to prevent stock-outs
E. Greater flexibility to cope with change

39. With regard to suppliers, JIT systems typically involve:

A. delivery of large lots on short notice
B. the highest quality at the lowest price
C. long-term relationships
D. multiple suppliers to assure continuous availability
E. dedicated staging areas for material

40. A common objective of both MRP and JIT is to:

A. smooth production
B. minimize inventory
C. obtain high quality
D. reduce overhead
E. eliminate inventory

41. Which of the following is not a goal of supply chain management?

A. fewer suppliers and long-term relationship
B. small lot sizes
C. on time deliveries
D. lowest possible transportation costs
E. more frequent delivery
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42. Logistics includes all of these except:

A. the movement of materials within a production facility
B. incoming shipments of goods or materials
C. outgoing shipments of goods or materials
D. customer selection
E. returned goods processing

43. Small changes in consumer demand can result in large variations in orders placed by suppliers due
to ___
A. Supply chain
B. Safety stock requirement
C. Lead time effect
D. Bullwhip effect
E. FCFS scheduling

44. Which of the following is not a benefit of effective supply chain management?
A. lower inventory costs
B. higher productivity
C. shorter lead times
D. greater customer loyalty
E. none of above

45. Which of the following is a barrier to integration of separate organizations in the supply chain?
I. conflicting objectives of the companies in the chain.
II. different level of capacity of the companies in the chain.
III. reluctance of the organizations in the chain to allow other organizations access to their data.
A. I only
B. I and II
C. II and III
D. I and III
E. I, II and III
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END OF PAPER