Name: ________ Module 3 CHAPTER 6: MANAGING QUALITY

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TRUE/FALSE
1. 2. 3. 4. 5. 6. 7. Productivity usually increases at the expense of quality. Quality can be used to differentiate products. The definition of quality adopted by The American Society for Quality Control is a customeroriented definition. A company's reputation can be impacted by its quality. ISO 14000's primary focus is with environmental management standards. TQM is important because quality influences all of the ten decisions made by operations managers. Kaizen is the Japanese word for the ongoing process of incremental improvements. 8. 9. 10. 11. 12. 13. 14. 15. 16. Quality circles empower employees to improve productivity by finding solutions to workrelated problems in their work area.

The quality loss function indicates that costs related to poor quality are low as long as the product is within acceptable specification limits. The essence of Pareto's rule is that 80% of the problems are the result of 20% of the causes. A fish-bone chart is also known as an Ishikawa diagram. A cause-and-effect diagram helps identify the source of a problem. As long as sample measurements fall within the control limits, the process is in control. Use of "poka-yoke" should lead to use of fewer inspection points. Quality characteristics can only be measured as attributes. Customer expectation is the standard against which the service is judged.

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MULTIPLE CHOICE
17. "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 Society for Quality Control 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 Which of the following is true about ISO 14000 certification? a. It is a prerequisite for ISO 9000 certification. b. It indicates a higher level of adherence to standards than ISO 9000. c. It is only sought by companies exporting their goods. d. It deals with environmental management. e. It is of little interest to European companies. 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 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 "Poka-yoke" is the Japanese term for a. card b. foolproof c. continuous improvement d. fishbone diagram e. just-in-time production

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23.

A worker operates a shear press. She notices that the metal sheets she is cutting have curled edges. Who should get the first "shot" at solving the problem? a. the foreman b. a member of the quality control department c. the operator herself d. an engineer e. the employee's supervisor

PROBLEMS
24. Perform a Pareto analysis on the following information: Reason for unsatisfying check-out at store Frequency Unfriendly cashier 27 Incorrect change 4 Cashier too slow 9 Price check 34 Poorly bagged merchandise 2 Slow receiving check approval 3 25. Construct a cause-and-effect diagram showing why a student might be dissatisfied with the cafeteria.

SUPPLEMENT 7: CAPACITY PLANNING

TRUE/FALSE
26. 27. 28. 29. 30. Changes in capacity may lead or lag the demand. Fixed costs are those costs that continue even if no units are produced. Break-even analysis helps identify the volume at which fixed costs and revenue are equal. One limitation of the net present value approach to investments is that investments with identical net present values may have very different cash flows. The net present value of $10,000 to be received in exactly three years is considerably greater than $10,000.

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MULTIPLE CHOICE
31. Effective capacity is the a. maximum output of a system in a given period b. the 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 particular facility e. sum of all of the organization's inputs

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Design capacity is the a. average output that can be achieved under ideal conditions b. actual production over a specified time period c. maximum usable capacity of a particular facility d. maximum output of a system in a given period e. the capacity a firm expects to achieve given the current operating constraints 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 and the utilization is 90%. If the number of students who actually got their orientation session is 1500, what is the efficiency of the system? a. 1350 students b. 1710 students c. 75% d. 87.7% e. 90% 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 proportion to the volume of production c. both costs and revenues are made up of fixed and variable portions d. costs increase in direct proportion to the volume of production, while revenues increase at a decreasing rate as production volume increases because of the need to give quantity discounts e. All of the above are assumptions in the basic break-even model. Which of the following costs would be incurred even if no units are produced? a. raw material costs b. direct labor costs c. transportation costs d. building rental costs e. purchasing costs

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A shop wants to increase capacity by adding a new machine. The firm is considering proposals
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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. The revenue generated by the units processed on these machines is $22 per unit. If the estimated output is 13,000 units, which machine should be purchased? a. machine A b. machine B c. either machine A or machine B d. no purchase because neither machine yields a profit at that volume e. purchase both machines since they are both profitable 37. 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 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 of $100 each d. for a 4% discount rate than for a 6% discount rate e. All of the above are true.

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PROBLEMS
39. An executive conference center has the physical ability to handle 1,100 participants. However, conference management personnel believe that only 1,000 participants can be handled effectively for most events. The last event, although forecasted to have 1,000 participants, resulted in the attendance of only 950 participants. What are the utilization and efficiency of the conference facility? Design Capacity = 1,100 trucks Effective Capacity = 1,000 trucks Actual Output = 950 trucks

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A fleet repair facility has the capacity to repair 800 trucks per month. However, due to scheduled maintenance of their equipment, management feels that they can repair no more than 600 trucks per month. Last month, two of the employees were absent several days each, and only 400 trucks were repaired. What are the utilization and efficiency of the repair shop? Design Capacity = 800 trucks Effective Capacity = 600 trucks Actual Output = 400 trucks

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The local convenience store makes personal pan pizzas. Currently, their oven can produce 50 pizzas per hour. It is has a fixed cost of $2,000, and a variable cost of $0.25 per pizza. The owner
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is considering a bigger oven that can make 75 pizzas per hour. It has a fixed cost of $3,000, but a variable cost of $0.20 per pizza. a. What is the crossover point? b. If the owner expects to sell 9,000 pizza, should he get the new oven? 42. A product is currently made in a process-focused shop, where fixed costs are $8,000 per year and variable cost is $40 per unit. The firm currently sells 200 units of the product at $200 per unit. A manager is considering a repetitive focus to lower costs (and lower prices, thus raising demand). The costs of this proposed shop are fixed costs = $24,000 per year and variable costs = $10 per unit. If a price of $80 will allow 400 units to be sold, what profit (or loss) can this proposed new process expect? Do you anticipate that the manager will want to change the process? Explain.

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