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Operations Management

2 nd Edition

WORKBOOK

Operations Management 2 n d Edition WORKBOOK Icfai Center for Management Research Road # 3, Banjara

Icfai Center for Management Research

Road # 3, Banjara Hills, Hyderabad 500 034

Icfai, March 2007. All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, used

in a spreadsheet, or transmitted in any form or by any means – electronic,

mechanical, photocopying or otherwise – without prior permission in writing from

Icfai.

Operations Management (2

nd

ISBN 81-314-1126-5

Edition) – Workbook

Ref. No. OM WB – 03 2K7 35

For any clarification regarding this book, students may please write to Icfai giving the above

reference, and page number.

While every possible care has been taken in preparing this book, Icfai welcomes suggestions from students for improvement in future editions.

Part A

Contents

Multiple Choice Questions

3-67

Multiple Choice – Answers and Explanations

71-136

Part B

Paper I

Paper I – Model Test 1

139-148

Paper I – Model Test 2

149-159

Paper I – Model Test 1 – Answers and Explanations

163-172

Paper I – Model Test 2 – Answers and Explanations

173-184

Paper II

Paper II – Model Test 1

187-196

Paper II – Model Test 2

197-207

Paper II – Model Test 1 – Answers and Explanations

211-221

Paper II – Model Test 2 – Answers and Explanations

222-231

Detailed Contents

Part One: Introduction to Operations Management

1. OPERATIONS MANAGEMENT – AN OVERVIEW

Operations Management Decisions

The Historical Evolution of Operations Management

Computers and Advanced Operations Technology

2. OPERATIONS STRATEGY

Operations Strategy as a Competitive Weapon

Elements of Operations Strategy

Developing an Operations Strategy

Financial and Economic Analysis in Operations

3. FORECASTING DEMAND

Forecasting in Operations

Forecast Components

Demand Forecasting Process

Forecasting Methods

Selecting a Forecasting Method

Measures of Forecasting Accuracy

Monitoring and Controlling Forecasts

Part Two: Design of Facilities and Jobs

4. ALLOCATING RESOURCES TO STRATEGIC ALTERNATIVES

Allocation Decisions in Operations Strategy

Linear Programming in Operations Management

Formulation of Linear Programming Problems

Solution of Linear Programming Problems

The Transportation Problem in Linear Programming

5. DESIGN OF PRODUCTION PROCESSES

Process Planning and Design

Major Factors Affecting Process Design Decisions

Types of Process Designs

Process Planning Aids Selecting the Type of Process Design

iv

6. FACILITY LOCATION AND LAYOUT

Importance of Location

Factors Affecting the Location Decisions

General Steps in Location Selection and Location Decision Process

Location Evaluation Methods

Locating Service Facilities

Facility Layout

Basic Layout Formats

Developing a Process Layout

Developing a Product Layout

Developing a Cellular Manufacturing Layout

Japanese Approaches and Trends in Manufacturing Layouts

Service Facility Layouts

7. JOB DESIGN

Job Design Fundamentals

Considerations in Job Design

Work Environment

Uses of Job Design

8. WORK MEASUREMENT

Uses of Setting Work Standards

Work Measurement Techniques

Part Three: Operations Planning and Control

9. AGGREGATE PLANNING AND CAPACITY PLANNING

Overview of Planning Activities

The Aggregate Planning Process

Strategies for Developing Aggregate Plans

Aggregate Planning Techniques

Master Production Schedule

Implementing Aggregate Plans and Master Schedules

Capacity Planning

10. FUNDAMENTALS OF INVENTORY CONTROL

Purpose of Inventories

Inventory Costs

Inventory Systems

Economic Order Quantity Model

Inventory Classifications Models

v

11. PURCHASE MANAGEMENT

Importance of Purchasing

Organizing Purchasing

Responsibilities of a Purchasing Manager

Purchasing Process

Duties of Buyers

Make-or-Buy Decisions

Ethics in Buying

12. MATERIALS MANAGEMENT

Necessity of Materials Management

Functions of Materials Management

Materials Management Technology

Materials Management Techniques

13. MATERIALS REQUIREMENT PLANNING

Fundamentals of Materials Requirement Planning

Components of an MRP System

Advantages and Disadvantages of an MRP System

Problems in Implementing MRP Systems

Manufacturing Resource Planning (MRP II)

14. OPERATIONS SCHEDULING

Purpose of Scheduling

Scheduling Methods

Scheduling Activities

Scheduling by Type of Operations

Scheduling Personnel in Service Operations

Scheduling Techniques

15. ENTERPRISE RESOURCE PLANNING

Evolution of ERP

Business Process Reengineering

Business Modeling for ERP

ERP Implementation

ERP and Competitive Advantage

16. SUPPLY CHAIN MANAGEMENT

Business Drivers in Supply Chain Performance

Principles of Supply Chain Management

Forces Shaping Supply Chain Management

Supply Chain Management Framework

Customer Focus in Supply Chain Management Electronic Supply Chain Management

vi

17. JUST-IN-TIME (JIT) MANUFACTURING SYSTEM

The Concept of the JIT System

Advantages of JIT Systems

Characteristics of JIT Systems

18. PRODUCTIVITY AND QUALITY MANAGEMENT

Productivity

The Strategic Role of Quality

Role of Inspection in Quality Control

The Cost of Quality

Statistical Concepts in Quality Control

Computers in Quality Control

Concept of TQM

19. FACILITIES AND MAINTENANCE MANAGEMENT

Facilities Management

Necessity of Maintenance Management

Types of Maintenance

Economics of Maintenance

Evaluation of Preventive Maintenance Policies

Maintenance Planning

Modern Approaches to Preventive Maintenance

Recent Trends in Maintenance

20. PROJECT MANAGEMENT

Necessity of Project Management

Network Modeling

Project Planning Methods

Project Crashing

Part Four: Technology and Globalization in Operations Management

21. TRENDS IN OPERATIONS TECHNOLOGY

Automation

Overview of Manufacturing Activities

Artificial Intelligence (AI)

Electronic Data Interchange (EDI)

22. GLOBALIZATION AND OPERATIONS MANAGEMENT

Significance of Globalization

Sources of Global Competitive Advantage

Difficulties in Managing Globalization

Changes in Operations Strategy Necessary due to Globalization

Managing Globalization Operations in Global Business Strategy

vii

Part A – Multiple Choice Questions: Relevant Chapters

Chapters

Title

Multiple Choice Questions

Chapter 1

Operations Management – An Overview

1-16

Chapter 2

Operations Strategy

17-40

Chapter 3

Forecasting Demand

41-86

Chapter 4

Allocating Resources to Strategic Alternatives

87-113

Chapter 5

Design of Production Processes

114-140

Chapter 6

Facility Location and Layout

141-186

Chapter 7

Job Design

187-200

Chapter 8

Work Measurement

201-216

Chapter 9

Aggregate Planning and Capacity Planning

217-243

Chapter 10

Fundamentals of Inventory Control

244-278

Chapter 11

Purchase Management

279-300

Chapter 12

Materials Management

301-333

Chapter 13

Materials Requirement Planning

334-360

Chapter 14

Operations Scheduling

361-408

Chapter 15

Enterprise Resource Planning

409-425

Chapter 16

Supply Chain Management

426-443

Chapter 17

Just-In-Time (JIT) Manufacturing System

444-460

Chapter 18

Productivity and Quality Management

461-493

Chapter 19

Facilities and Maintenance Management

494-529

Chapter 20

Project Management

530-557

Chapter 21

Trends in Operations Technology

558-582

Chapter 22

Globalization and Operations Management

583-600

Part A: Multiple Choice Questions

This section consists of multiple-choice questions that test the student’s

understanding of the basic concepts discussed in the textbook. Answering these

questions will help students quickly recollect the theories they’ve learnt and apply

them to real-life business situations.

Part A: Multiple Choice Questions

1.

On the basis of Hawthorne studies, Elton Mayo and his team concluded that

had

a major impact on employee

productivity.

a.

Physical work conditions

 

b.

Importance

and

recognition

given

to

employees

c.

Job content

d.

Fear of losing job

 

2.

Which company first adopted the concept

of scientific management in the assembly

line production system?

 

a.

General electric

 

b.

Ford motors

c.

General motors

 

d.

Westinghouse

3.

The computerization of operations began

when the first computer was installed in

General Electric Appliance Park in 1954.

What was the basic objective of computer

applications then?

 

a.

Reducing manpower

b.

Reducing clerical costs

 

c.

Enhancing worker safety

d.

Increasing production

4.

Operations management involves the

functions of planning, organizing,

controlling etc, in production systems. The

activity of encouraging employees through

praise, recognition and other intangibles is

part of which function?

 

a.

Controlling

b.

Motivating

c.

Coordinating

d.

Organizing

5.

Decisions on production and process

design, facility location and layout etc, are

part of which decision category?

 

a.

Strategic decisions

 

b.

Tactical decisions

c.

Operational decisions

 

d.

All of the above

 

6.

Which of the following decision do not fall within the basic scope of operations

management?

a.

Analyzing the firm’s financial position

 

b.

Designing a new assembly line

 

c.

Determining

the

location

of

a

new

distribution center

 

d.

Improving product quality

 

7.

Division of labor or specialization is an

outcome of

a.

Industrial revolution

 

b.

World War II

c.

Scientific management

 

d.

Computerization of production systems

 

8.

The decision of an operations manager

about what products to make and when is

part of which function?

 

a.

Organizing

b.

Directing

c.

Planning

d.

Coordinating

9.

The decisions that operations managers

take can be broadly classified into various

categories. What is the usual time-frame

for tactical decisions?

 

a.

Seven years or more

b.

One or two years

c.

Two to four months

d.

A couple of weeks

10.

Operations Management deals with which

of the following?

 

a.

Design of products

b.

Design of services

c.

Acquisition of resources

 

d.

All of the above

 

11.

Operations Management involves the

activities of planning, organizing,

controlling, directing, and coordinating in

production systems. These systems convert resource inputs into products or services. Centralization and/or decentralization of operations fall under which of the following activities?

Operations Management

a.

Planning

b.

Organizing

 

c.

Directing

d.

Controlling

 

12.

The term ‘Production Management’ was

replaced by a more general term

‘Operations Management’ in the 1970s.

What led to the enlargement of the field

and use of the new term?

 

i.

Inclusion of purchasing function

 

ii.

Inclusion

of

dispatch

and

other

related

activities

iii.

Inclusion of services related concepts and

procedures

 

iv.

Inclusion of manufacturing technologies

a.

i, ii, iii

b.

iii, iii, iv

c.

i, iii, iv

d.

i, ii, iii, iv

13.

Operations Research uses mathematical

techniques to solve complex problems.

When was the concept of operations

research first introduced?

 

a.

In the early 1940s during World War II

b.

In the late 1920s during Hawthorne studies

c.

In 1911 for the moving assembly line

production by Ford

 

d.

In the 1880s at Midvale Steel Works

 

14.

Who was involved in the Hawthorne

experiments at the Western Electric plant?

a.

Frederick Taylor

 

b.

Henry Ford

 

c.

Elton Mayo

d.

Adam Smith

15.

Which of the following technologies helps

perform tasks that are repetitive or

hazardous for a human being to perform?

a.

CAD

b.

FMS

c.

Expert systems

 

d.

Moving assembly line

 

16.

Computerization has significantly improved the production process. Which of the following is not an advantage of computerization in the production process?

a.

Rise in quality of products

 

b.

Reduction in labor costs

 

c.

Higher maintenance costs

 

d.

Greater

efficiency

of

the

production

process

17.

Which of the following are among the key

objectives of an operations manager?

 

i.

Maximizing customer satisfaction

ii.

Minimizing inventory

 

iii.

Maximizing resource utilization

 

a.

i & ii

b.

ii & iii

c.

i & iii

d.

i, ii & iii

 

18.

Product design is one of the factors that an

operations manager must consider while

designing a production system. Product

design can be based on a customized or a

standard production design system. What

does a customized product design system

primarily focus on?

 

a.

Quality and on-time delivery

 

b.

Reducing costs

 

c.

Costs and quality

d.

Mass production

19.

Which of the following is not categorized

among indirect costs?

 

a.

Administrative costs

b.

Maintenance costs

 

c.

Labor costs

d.

Rentals

20.

Who

generally

develops corporate

objectives

that

are

unique

to

each

organization?

 

a.

Frontline managers

b.

Top-level managers

 

c.

Middle level managers

 

d.

Production supervisors

21.

What factors must managers consider

while formulating corporate objectives?

a.

Market conditions

 

b.

Political environment

 

c.

Economic environment

 

d.

All of the above

 

22.

Rainbow Electronics manufactures a limited number of models of television sets. What kind of product design system does the company have?

a.

Customized production design

b.

Standardized product design

c.

Stock-to-order

d.

Assemble-to-order

23.

Feasibility studies are part of the new

product development process. The

feasibility test generally focuses on which

of the following aspects?

i.

Technical feasibility

ii.

Marketing feasibility

iii.

Economic feasibility

iv.

Production feasibility

a.

i & ii

b.

ii & iii

c.

i & iii

d.

iii & iv

24.

Large organizations are often divided into

separate operating divisions that operate as

autonomous business units with

independent control. What are such units

called?

a.

Subsidiary units

b.

Strategic business units

c.

Franchise centers

d.

Sister concerns

25.

Nucor, a steel producer, competes

successfully with larger integrated steel

producers by processing steel scrap rather

than producing steel from iron ore. What

advantage does the company gain through

this kind of production process?

a.

Production flexibility

b.

Better quality

c.

Lower costs

d.

Batch process facility

26.

Selecting product design, production system, and inventory policy for finished goods fall under which component of operations strategy?

Part A

a.

Designing the production system

 

b.

Product/service design and development

 

c.

Technology

 

selection

and

process

development

 

d.

Allocation

of

resources

to

strategic

alternatives

 

27.

Which among the following products are

generally customized as per user

requirements?

 

i.

Industrial boilers

ii.

Turbines

 

iii.

Televisions

iv.

Ceiling fans

a.

i and ii

b.

ii and iii

 

c.

iii and iv

d.

iv and i

28.

Which stage of the product life cycle is

characterized by exponential growth of

sales volume?

 

a.

Introduction stage

 

b.

Growth stage

 

c.

Maturity stage

d.

Decline stage

29.

Pick the statement that pertains to the

relationship between the role of operations

department and the product life cycle.

 

a.

The

role

of

operations department

increases as the product moves up the

lifecycle

 

b.

The

role

of

operations department

decreases as the product moves up the

lifecycle

 

c.

There

is

no

change

in

the

role

of

operations department across the lifecycle

d.

The role of operations department

increases or decreases as the product

moves up the lifecycle

 

30.

What is the basic use of a prototype during

the new product development process?

 

a.

A prototype is used to test the technical

and economical feasibility

 

b.

A prototype helps test the product performance under standard conditions

c.

A prototype is developed as part of test marketing

d.

None of the above

 

Operations Management

31.

Availability of raw materials and nearness to markets are some of the factors that are considered while making decisions regarding plant location. Which component of operations strategy deals with decisions such as plant location?

a.

Allocation

of

resources

to

strategic

alternatives

 

b.

Technology

selection

and

process

development

 

c.

Product design and development

 

d.

Facility planning

 

32.

Developing an operations strategy is an

important function of an operations

manager. The operations strategy should

basically be in accordance with which of

the following?

 

a.

Organization strategy

 

b.

Marketing strategy

c.

Competitor strategy

d.

Both a and c

 

33.

How is strategic planning different from

operations planning?

 

a.

Strategic planning is concerned with long-

term planning while operational planning

involves short-term day-to-day planning

 

b.

Strategic planning is concerned with short-

term day-to-day planning while

operational planning involves long-term

planning

c.

Operational planning involves selection of

target markets and distribution channels

 

d.

Both strategic planning and operational

planning are long-term in nature

 

34.

Which

of

the

following

is

not

a

characteristic of operations strategy?

a.

It should be fixed so as to support a

product through its entire lifecycle

 

b.

It should accommodate future changes in

market demand

 

c.

It should focus on having short-term

operational superiority over competitors

 

d.

It should be consistent with strategies in other functional areas such as marketing, finance and human resources

35.

HDFC Bank offers deposits, loans, insurance products, mutual funds, trading in stocks, etc, under one roof and positions

itself as a financial supermarket. Which type of competitive advantage strategy does the bank seek to focus on?

a.

Quality

b.

Product variety

c.

Convenience

d.

Low cost

(Questions 36 to 39) The given data below

shows the initial investment of three projects

and their payback periods. Use this data to

answer the following four questions.

Project

Initial

Expected annual

investment

income from the

project

 

A Rs.10,00,000

Rs.2,00,000

 

B Rs.12,00,000

Rs.2,50,000

 

C Rs.8,00,000

Rs.1,50,000

36.

Calculate the payback period for Project A

a.

5 years

b.

4 years

c.

3 years

d.

6 years

37.

What is the payback period for Project B?

a.

5.0 years

b.

4.8 years

c.

3.8 years

d.

4.5 years

38.

Calculate the payback period for Project C.

a.

5.0 years

b.

4.8 years

c.

5.3 years

d.

4.5 years

39.

Based on the results for product A, B and

C, which is the best investment in terms of

faster returns?

a.

Project A

b.

Project B

c.

Project C

d.

Either project A or C

40.

Allocation of resources to strategic

alternatives is a component of operations strategy. What is the main objective of this

component?

a.

To minimize efficiency

b.

Optimize the use of resources for best strategic use

c.

Ensure capacity expansion

d.

Maintain proximity to resources

41.

Demand for a commodity is most likely to depend upon which of the following?

i.

The price of the commodity

ii.

The prices of the available complimentary

goods

iii.

The customer tastes and preferences

iv.

Price of substitutes

a.

i and ii

b.

ii and iii

c.

i, ii, and iii

d.

i, ii, iii, and iv

42.

is

the ability of an organization

to adjust quickly to true changes in the

base level of demand.

a.

Stability

b.

Responsiveness

c.

Repetitiveness

d.

Controlling

43.

The numerical difference between forecast

demand and actual demand is called

a.

Standard deviation

b.

Forecast error

c.

Forecast variance

d.

Forecast noise

44.

A forecast made by using exponential

smoothing was found to be over-optimistic

to the most recent trends in demand.

Which of the following is the most suitable

corrective action possible to make the

forecast more realistic?

a.

Increase the value of α

b.

Decrease the value of α

c.

Shift to some other forecasting method

d.

Ensure that α remains constant

45.

If the demand for a product is stable and is

representative of the future, what should be the value of α used to forecast the demand for the product?

a.

Low

b.

High

 

Part A

c.

Medium

 

d.

Can take any value

 

46.

Organizations

generally

use

demand

forecasts

to

develop

which

of

the

following plans?

 

a.

Financial plans

b.

Facilities plans

c.

Marketing plans

d.

All of the above

47.

Which of the following methods is

judgmental and subjective in nature and

based on the estimates and opinions of

individuals?

 

a.

Time series methods

 

b.

Delphi method

 

c.

Exponential smoothing

 

d.

Regression analysis

48.

Which of the following statements is not

true about demand?

 

a.

Dependent demand is forecasted

 

b.

If

a

manufacturer

produces

tires,

the

demand

for

the

tires

is

a

dependent

demand

 

c.

MRP systems help determine demand for

items with dependent demand

 

d.

Exponential smoothing is used to

determine independent demand

 

49.

Which of the following statements about

demand forecasting is not true?

 

a.

Forecasts are more accurate for shorter

time horizons

 

b.

Regression analysis produces more

accurate forecasts than moving average

 

c.

A

6-month

moving

average

forecast

is

more

accurate

than

a

3-month

moving

average forecast

 

d.

Forecasts

are

created

using

only

quantitative data

 

50.

Identify the statistical techniques that use

historical data collected over a period of

time to predict future demand.

 

a.

Time-series methods

 

b.

Qualitative methods

c.

Nonparametric methods

d.

Causal methods

 

Operations Management

51.

Which of the following is not considered by operations managers before selecting a method for forecasting the future demand?

a.

Cost and accuracy

 

b.

Data availability

c.

Projected time span

d.

Plant capacity

 

52.

Which of the following measures provide

information on the extent of forecast error

in relative terms?

 

a.

Mean absolute deviation

 

b.

Mean square error

 

c.

Mean forecast error

d.

Mean absolute percentage error

 

53.

Which of the following decisions

undertaken by operations managers does

not generally require long-range forecast?

a.

Capacity planning

 

b.

New product development

 

c.

Spare parts inventory

d.

Capital funds

 

54.

Demand for a product is influenced by

many factors. Which of the following is

not a factor that influences product

demand?

a.

Price of the product

 

b.

Price of the substitutes

 

c.

Income levels of the consumers

d.

Extent of accuracy of demand forecasts

 

55.

Which

of

the

following

is

not

a

consequence

of

underestimation

of

demand?

a.

Increase in supply lead time

 

b.

Increase in loss of orders

c.

Increase in customer switching

d.

Increased locking up of working capital as

inventory

 

56.

Which of the following demand estimates

are very detailed and used to plan and

schedule production operations?

 

a.

Short-term demand

 

b.

Medium-term demand

 

c.

Long-term demand

 

d.

All of the above

57.

Raw materials demand forecast is derived from which of the following type of forecast?

a.

Short-term demand forecast

 

b.

Aggregate product demand forecast

 

c.

Labor demand forecast

 

d.

All of the above

 

58.

Forecasting demand has a direct impact on

which of the following two functions of

management.

 

a.

Planning and organizing

 

b.

Directing and control

 

c.

Organizing and staffing

 

d.

Planning and controlling

59.

In Delphi method, independent opinions

and predictions are made by a panel of

experts and summarized by a competent

mediator. The success of this method is

not dependent on which of the following?

a.

The

presence

of

a

socially dominant

individual

 

b.

The

geographical

distance

between

the

experts

 

c.

Tendency towards groupthink

 

d.

Competency of coordinator

60.

The demand for generator sets for twelve

consecutive months from January to

December is given as 78, 80, 85, 82, 84,

85, 87, 88, 86, 89, 86, 87. Calculate the

approximate demand for January of the

next year using the simple moving

averages method. Assume the time period

to be a six month moving average.

 

a.

82

b.

83

c.

86

d.

87

61.

The sum of weights used in weighted

moving average method should be equal to

a.

1

b.

10

c.

100

d.

Zero

62.

How are weights in the weighted moving average method calculated?

a.

b.

c.

d.

63.

a.

b.

c.

d.

64.

a.

b.

c.

d.

65.

a.

b.

c.

d.

66.

a.

b.

c.

d.

67.

i.

ii.

iii.

Simple moving average method

Future forecast Trial & error

Exponential smoothing

Which of the following forecasting

methods are used when the demand for a

product is influenced by seasonal

tendencies?

Delphi method

Simple moving average method

Exponential smoothing

All of the above

Which of the following is not a benefit

that an operations manager gains when

using the exponential smoothing method?

Easy

software

packages

Less computational requirements

Larger data storage space

Greater accuracy in forecasts

Maximum weightage is given in the

exponential smoothing method for demand

values in which of the following time

periods?

Latest time period Earliest time period

Average of latest and oldest time periods

Sum of latest and oldest time periods

What is the formula for calculating the

weighted moving average?

availability

of

standard

WMA

t

n

= C

t

A

t

t = 1

n

WMA t+1 =

t

n

= 1

+ 1

WMA t+1 =

t = 1

C A

t

C A

t

t

t

n-1

WMA t-1 =

t = 1

C A

t

t

Why is the constant α used in exponential smoothing method?

To show effects of past demand

To smooth out the effects of any noise

To predict future trends in demand

Part A

a.

Only i

b.

Only ii

c.

i and ii

d.

i, ii, and iii

 

68.

In the

equation Y =

a

+ bX, what is

‘a’

termed as?

 

a.

Value of the dependent variable

 

b.

Value of the independent variable

c.

Slope of the line

 

d.

Y intercept or constant value

 

69. What is the relation between the slope of

the line and the trend line in regression

analysis?

a. If the slope is positive, then the trend line

increases positively

b. If the slope is positive, then the trend line

decreases negatively

c. There is no relationship between the slope

and the trend line

d. If the slope is negative, then the trend line

increases positively

70. If the sales of a refrigerator model rose

from 15000 units to 20000 units between

two consecutive time periods due to 5%

increase in advertising expenditure. What

is the value of the slope?

a. 33.33

b. 6.67

c. 3.33

d. 250

71. Short-range decisions vary from

purchasing, job scheduling, and project

assignment to machine scheduling. Which

of the following forecasting methods can

be used for such decisions?

a. Exponential smoothing

b. Linear regression analysis

c. Multiple regression analysis

d. Delphi method

72. Identify the forecasting method that can be used when data collection proves very expensive.

a. Moving averages method

b. Delphi method

Operations Management

c.

Regression analysis

d.

Exponential smoothing

73.

Which of the following forecasting methods give 100% accurate forecasts?

a.

Qualitative methods

b.

Time series methods

c.

Causal methods

d.

None of the above

74.

Identify the relationship between cost of

forecasting and accuracy of forecasting.

a.

Cost is directly proportional to extent of

accuracy

b.

Cost is indirectly proportional to extent of

accuracy

c.

Accuracy is independent of costs

d.

Cost is inversely proportional to extent of

accuracy

(Questions 75 to 79) Use the data given in the

table below to answer the following five

questions related to forecast errors.

Demand Forecast

Actual Demand

500

510

510

510

520

515

540

550

550

545

75.

Calculate the Mean Absolute Deviation

(MAD).

a.

5

b.

6

c.

30

d.

20

76.

The Mean Square Error (MSE) for the

given data is

a.

250

b.

100

c.

50

d.

75

77.

Calculate the mean forecast error.

a.

2

b.

10

c.

7

d.

5

78.

Mean Absolute Percentage Error (MAPE) for the given data is

a.

5.72

b.

3.14

c.

1.14

d.

2.56

79.

Calculate the Tracking Signal (TS).

a.

1.67

b.

2.67

c.

3.67

d.

4.67

80.

For forecasting purposes, firms need to

take into consideration various factors or

components. Which of the following is

associated with average sales over a given

period of time?

a.

Trend component

b.

Seasonal component

c.

Cyclical component

d.

Base demand

81.

The demand for luxury products may be

linked with the business cycle, as sales

usually increase during the boom phase

and slow-down during recession. What

component of forecasting is described

here?

a.

Trend component

b.

Seasonal component

c.

Cyclical component

d.

Base demand

82.

When LG increased the advertising budget

by 40%, the sales of its televisions

doubled. On this basis, LG prepared an

aggressive demand forecast for the next

year. What component of demand did LG

consider as part of its forecast?

a.

Cyclical component

b.

Promotional component

c.

Trend component

d.

Irregular component

83.

Which of the following is an example of the trend component of forecast?

a.

The demand for gold has reduced as the price of gold has increased

b.

The promotional expenditure of Airtel’s GSM service was hiked based on demand forecast

c.

The demand for camera mobile phones in

India has increased steeply since 2001

d.

The demand for wrist watches has been

fluctuating for quite some time

84.

Identify the correct sequence of steps taken

as part of the demand forecasting process.

a.

Identify influencing factors – understand

objectives – identify customer segments –

select forecasting technique

b.

Identify influencing factors – identify

customer segments – understand objectives

– select forecasting technique

c.

Identify customer segments – understand

objectives – identify influencing factors –

select forecasting technique

d.

Understand objectives – identify

influencing factors – identify customer

segments – select forecasting technique

85. Which of the following demand

forecasting techniques is divided into static

and adaptive methods?

a.

Qualitative methods

b.

Time series methods

c.

Causal methods

d.

All of the above

86.

Trend and seasonal components play an

important role in demand forecasting. In

which of the following forecasting

methods are estimates of trend and

seasonal components assumed to not vary

from year to year?

a.

Exponential smoothing

b.

Static forecasting method

c.

Regression analysis

d.

Simple moving average

87.

Constrained optimization models are

useful techniques enabling operations managers to compute the amount of resources to be allocated to each strategic alternative. Which of the following is not a benefit of using a constrained optimization model?

Part A

a.

Feasible

solutions

are

reduced

to

manageable numbers

 

b.

Provides optimal solution for the whole organization

c.

Enables decision-makers to perform what-

if analysis

d.

Provides optimal solutions that are always

practical

88.

Constrained optimization models consist

of three major components. Which of the

following is not a component of these

models?

a.

Decision variables

 

b.

Nature of demand

c.

Objective functions

d.

Constraints

89.

Linear programming is a mathematical

constrained optimization model used to

maximize or minimize the linear functions

of a large number of variables, subject to

certain constraints. Linear programming

cannot help obtain solutions for which of

the following?

 

a.

Profitability

b.

Cost effectiveness

 

c.

Motivation

d.

Productivity

90.

Identify the term that describes the

solution satisfying all the restrictions of a

linear programming problem.

 

a.

Initial solution

 

b.

Basic solution

c.

Feasible solution

d.

Final solution

91.

In linear programming, a statement such as

the ‘number of labor hours available is

600’ is identified as a

 

a.

Constraint

b.

Slack variable

 

c.

Objective function

d.

Decision variable

92.

Identify the mathematical technique used to determine the optimal utilization of resources in an organization.

Operations Management

a.

Exponential smoothing

b.

Regression analysis

c.

Linear programming

d.

Decision tree analysis

93.

When arriving at production plan decisions

by using linear programming, which of the

following is not considered a constraint?

a.

Market

b.

Capacity

c.

Destination requirements

d.

Inventory space

(Questions 94 to 98) Atul Tele-Products

manufactures two telephone models using two

different raw material grades. One (x) is of

superior quality and the other (y) inferior

(second grade). The profit per unit for the

model using superior quality raw material is

Rs.200 and that of the other is Rs150. The

maximum demand for both telephones is 600

units. Production should not exceed demand

and total machine time available for both types

of telephones together is 650 hours. Besides,

one superior quality telephone can be produced

in two hours while one unit of inferior quality

telephone can be produced every hour. Answer

the following five questions using the

information given above.

94.

If Atul Tele-Products wants to maximize

profits, what should be the objective

function?

a.

Maximize Z = 2x + 4y

b.

Maximize Z = 200x + 150y

c.

Maximize Z = 600x + 650y

d.

Maximize Z = 2x + y

95.

What is the constraint on machine hours?

a.

2x + y 650

b.

x + 2y 650

c.

2x + y 600

d.

x + 2y 600

96.

What is the constraint on demand?

a. 2x + y 600

b. x + 2y 600

c. x + y 650

d. x + y 600

97. If the number of superior quality

telephones produced in a month is 200 and

inferior quality telephones is 200, then

what is the maximum profit (in rupees)

that the company gets?

a. Rs. 75000

b. Rs. 70000

c. Rs. 76500

d. Rs. 78500

98. What is the appropriate production

combination for the two models to gain

maximum profits?

a. x = 300, y = 300

b. x = 600, y = 0

c. x = 250, y = 100

d. x = 200, y = 200

99. While constructing a linear programming

problem, certain assumptions are made.

Which of these is not such an assumption?

a. Proportionality

b. Optimality

c. Divisibility

d. Additivity

100.If the objective function is a maximizing

function, which of the following can be

considered for it?

a. Profits

b. Inventory

c. Advertising expenditure

d. Production costs

(Questions 101 to 104) The diagram represents

the solution for a linear programming problem

where ABCS is the feasible region. Use the

diagram to answer the following four

questions.

Part A

Y D 120 100 80 A S 60 40 20 B C O (0,0) 20
Y
D
120
100
80
A
S
60
40
20
B
C
O (0,0)
20
40 60
80 100
120
X

101.Identify the constraint represented by the

line passing through the coordinates

(40, 0) and (0,60).

a. x + y = 40

b. 2x +3y = 120

c. 3x + 2y = 120

d. x + y = 60

105.Which of the following statements is not

characteristic of linear programming?

a. The linear programming problem should

have a well-defined single objective to

achieve

b. The objective function and constraints of

the linear programming problem must be

linear functions

102.Identify the corner points of the feasible

c. Decision

variables

of

the

linear

region from the above diagram.

programming

problem

should

be

a. (0,0), (80,0), (60,0), (40,0)

b. (40,0), (80,0), (60,80), (60,0)

c. (40,0), (80,0), (80,60), (60,0)

d. (0,60), (40,0), (80,0), (80,60)

103.What is the equation of the line passing

through (80,0)?

a. x = 80

b. y = 80

c. x + y = 80

d.

104.Find the minimum value of the objective

x - y = 80

function where minimize Z = 20x + 35y.

a. 2100

b. 1600

c. 800

d. 3700

continuous in nature

d. The resources considered in the linear

programming problem should have

unlimited supply

106.Identify the correct sequence of steps to

formulate a linear programming problem.

i. Identify the objective function

ii. Identify decision variables

iii. Identify constraints

a.

b. i, ii, and iii

c. iii, ii, and i

d. ii, iii, and i

107.Where does the optimum solution lie on the graph in the graphical method of solving a linear programming problem?

ii, i, and iii

Operations Management

a. On the X axis

b. On the Y axis

c. In the feasible region

d. Outside the feasible region

108.In the simplex method of solving a linear

programming problem, the ‘lesser than or

equal to’ inequality is converted into

to the left hand

side of the inequality.

equality by

a. Adding a slack variable

b. Subtracting a slack variable

c. Adding a function

d. Subtracting a function

109.The sequence of steps in moving from one

basic solution to another in a simplex

method is known as

a. Integration

b. Iteration

c. Allocation

d. Summation

110.Identify the typical objective function of a

transportation problem.

a. To

minimize

the

sum of

all

quantities

113.The concept of linear programming does not consider any synergetic effects among decision variables while calculating their

total value for the objective function or the constraints they are associated with. This is part of which assumption of linear

programming?

a. Proportionality

b. Additivity

c. Divisibility

d. Certainty

114.Onio Designs provides industrial designing

services to various automobile companies

in India. This is an example

of

a. Job shop production

b. Batch manufacturing

c. Standardized service

d. Customized service

115.In the emerging business scenario, it has

become essential for operations managers

to manage the structure of their

organizations, not merely their operations.

What does the term ‘structure’ include?

a. Number

of

plants and their individual

transported

capacities

b. To minimize the sum of all production

Choices

b. in

equipment

and

process

costs

technology

c. To minimize the sum of all transportation

c. control

Production

and

workforce

costs

management

d. All of the above

111.Which among the following is not a

method used in developing an initial

feasible solution for a transportation

problem?

a. North-West corner method

b. Least cost method

c. Vogel’s approximation method

d. Stepping stone method