MGT613 Operation Management Test Bank Solved MCQS

Chapert 3c by William Stevenson

81. A manager uses the following equation to predict monthly receipts: Yt = 40,000 + 150t. What is the forecast for
July if t = 0 in April of this year?
A. 40,450 (http://www.vuzs.info/)
B. 40,600
C. 42,100
D. 42,250
E. 42,400
July would be period 3, so the forecast would be 40,000 + 150(3).

82. In trend-adjusted exponential smoothing, the trend adjusted forecast (TAF) consists of:
A. an exponentially smoothed forecast and a smoothed trend factor (http://www.vuzs.info/)
B. an exponentially smoothed forecast and an estimated trend value
C. the old forecast adjusted by a trend factor
D. the old forecast and a smoothed trend factor
E. a moving average and a trend factor
Both random variation and the trend are smoothed in TAF models.

83. In the "additive" model for seasonality, seasonality is expressed as a ______________ adjustment to the
average; in the multiplicative model, seasonality is expressed as a __________ adjustment to the average.
A. quantity, percentage (http://www.vuzs.info/)
B. percentage, quantity
C. quantity, quantity
D. percentage, percentage
E. qualitative, quantitative
The additive model simply adds a seasonal adjustment to the de-seasonalized forecast. The multiplicative model adjusts the
de-seasonalized forecast by multiplying it by a season relative or index.

84. Which technique is used in computing seasonal relatives?

A. double smoothing
B. Delphi
C. Mean Squared Error (MSE)
D. centered moving average
E. exponential smoothing
The centered moving average serves as the basis point for computing seasonal relatives.

85. A persistent tendency for forecasts to be greater than or less than the actual values is called:
A. bias
B. tracking
C. control charting
D. positive correlation
E. linear regression
Bias is a tendency for a forecast to be above (or below) the actual value.

86. Which of the following might be used to indicate the cyclical component of a forecast?
A. leading variable
B. Mean Squared Error (MSE)
C. Delphi technique
D. exponential smoothing
E. Mean Absolute Deviation (MAD)
Leading variables, such as births in a given year, can correlate strongly with long-term phenomena such as cycles.

87. The primary method for associative forecasting is:

A. sensitivity analysis
B. regression analysis
C. simple moving averages
D. centered moving averages
E. exponential smoothing
Regression analysis is an associative forecasting technique.

88. Which term most closely relates to associative forecasting techniques?

A. time series data
B. expert opinions
C. Delphi technique
D. consumer survey
E. predictor variables
Associate techniques use predictor variables.

89. Which of the following corresponds to the predictor variable in simple linear regression?
A. regression coefficient
B. dependent variable
C. independent variable
D. predicted variable
E. demand coefficient
Demand is the typical dependent variable when forecasting with simple linear regression.

90. The mean absolute deviation (MAD) is used to:

A. estimate the trend line
B. eliminate forecast errors
C. measure forecast accuracy
D. seasonally adjust the forecast
E. all of the above
MAD is one way of evaluating forecast performance.

91. Given forecast errors of 4, 8, and - 3, what is the mean absolute deviation?
A. 4
B. 3
C. 5
D. 6
E. 12
Convert each error into an absolute value and then average.

92. Given forecast errors of 5, 0, - 4, and 3, what is the mean absolute deviation?
A. 4
B. 3
C. 2.5
D. 2
E. 1
Convert each error into an absolute value and then average.
93. Given forecast errors of 5, 0, - 4, and 3, what is the bias?
A. - 4
B. 4
C. 5
D. 12
E. 6
Sum the forecast errors.

94. Which of the following is used for constructing a control chart?

A. mean absolute deviation (MAD)
B. mean squared error (MSE)
C. tracking signal (TS)
D. bias
E. none of the above
The mean squared error leads to an estimate for the sample forecast standard deviation.

95. The two most important factors in choosing a forecasting technique are:
A. cost and time horizon
B. accuracy and time horizon
C. cost and accuracy
D. quantity and quality
E. objective and subjective components
More accurate forecasts cost more but may not be worth the additional cost.

96. The degree of management involvement in short range forecasts is:

A. none
B. low
C. moderate
D. high
E. total
Short range forecasting tends to be fairly routine.

97. Which of the following is not necessarily an element of a good forecast?

A. estimate of accuracy
B. timeliness
C. meaningful units
D. low cost
E. written
A good forecast can be quite costly if necessary.

98. Current information on _________ can have a significant impact on forecast accuracy:
A. prices
B. promotion
C. inventory
D. competition
E. all of the above
Demand in the future could be subject to decision-making prompted by prices, promotions, inventory or competition.
Accuracy will be affected if these are (or are not) taken into consideration.

99. A managerial approach toward forecasting which seeks to actively influence demand is:
A. reactive
B. proactive
C. influential
D. protracted
E. retroactive
Simply responding to demand is a reactive approach.

100. Customer service levels can be improved by better:

A. mission statements
B. control charting
C. short term forecast accuracy
D. exponential smoothing
E. customer selection
More accurate short-term forecasts enable organization's to better accommodate customer requests. (http://www.vuzs.info/)
MGT613 Operation Management Test Bank Solved MCQS
Chapert 3d by William Stevenson
101. Given the following historical data, what is the simple three-period moving average forecast for period 6?

A. 67
B. 115
C. 69
D. 68
E. 68.67
Average demand from periods 3 through 5.

102. Given the following historical data and weights of .5, .3, and .2, what is the three-period moving average
forecast for period 5?

A. 144.20
B. 144.80
C. 144.67
D. 143.00
E. 144.00
Multiply period 4 (144) by .5, period 3 (148) by .3 and period 2 (142) by .2, then sum these products.

103. Use of simple linear regression analysis assumes that:

A. Variations around the line are random.
B. Deviations around the line are normally distributed.
C. Predictions are to be made only within the range of observed values of the predictor variable.
D. all of the above
E. none of the above
A through C are important assumptions underpinning simple linear regression.

104. Given forecast errors of - 5, - 10, and +15, the MAD is:
A. 0
B. 10
C. 30
D. 175
E. none of these
Convert these errors into absolute value, then average.

105. Develop a forecast for the next period, given the data below, using a 3-period moving average.

Feedback: Average demand from periods 3 through 5.

106. Consider the data below:

Using exponential smoothing with alpha = .2, and assuming the forecast for period 11 was 80, what would the forecast for
period 14 be?

Feedback: The forecast error in period 13 (2.84) is multiplied by the smoothing constant. This is then added to the period 13
forecast to get the period 14 forecast.

107. A manager is using exponential smoothing to predict merchandise returns at a suburban branch of a
department store chain. Given a previous forecast of 140 items, an actual number of returns of 148 items, and a
smoothing constant equal to .15, what is the forecast for the next period?

Feedback: The forecast error in the previous period is multiplied by the smoothing constant. This is then added to the
previous period's forecast to get the upcoming period's forecast.

108. A manager is using the equation below to forecast quarterly demand for a product:
Yt = 6,000 + 80t where t = 0 at Q2 of last year
Quarter relatives are Q1 = .6, Q2 = .9, Q3 = 1.3, and Q4 = 1.2.
What forecasts are appropriate for the last quarter of this year and the first quarter of next year?
For Q4 of this year t = 6
For Q1 of next year t = 7

Feedback: Adjust de-seasonalized forecasts by the quarterly seasonal relatives.

109. Over the past five years, a firm's sales have averaged 250 units in the first quarter of each year, 100 units in the
second quarter, 150 units in the third quarter, and 300 units in the fourth quarter. What are appropriate quarter
relatives for this firm's sales? Hint: Only minimal computations are necessary.

Feedback: Since a trend is not present, quarter relatives are simply a percentage of average, which is 200 units.

110. A manager has been using a certain technique to forecast demand for gallons of ice cream for the past six
periods. Actual and predicted amounts are shown below. Would a naive forecast have produced better results?

Summary:
Current method: MAD = 3.67; MSE = 16.8; 2s Control limits 8.2 (OK)
Naïve method: MAD = 4.40; MSE = 30.0; 2s Control limits 11.0 (OK)
Feedback: Either MSE or MAD should be computed for both forecasts and compared. The demand data are stable.
Therefore, the most recent value of the series is a reasonable forecast for the next period of time, justifying the naïve
approach. The current method is slightly superior both in terms of MAD and MSE. Either method would be considered in
control.

See Also
MGT613 Operation Management Text Book Solved MCQS
Chapert 2d by William Stevenson
61. Gourmet Pretzels bakes soft pretzels on an assembly line. It currently bakes 800 pretzels each 8-hour shift. If the
production is increased to 1,200 pretzels each shift, then productivity will have increased by:
A. 50% (http://www.vuzs.info/)
B. 33%
C. 25%
D. 67%
Divide the difference in productivity by the original productivity.

62. The weekly output of a fabrication process is shown below together with data for labor and material inputs.
Standard selling price is $125 per unit. Overhead is charged weekly at the rate of $1,500 plus .5 times direct labor
cost. Assume a 40-hour week and an hourly wage of $16. Material cost is $10 per foot. What is the average
multifactor productivity?

A. 1.463
B. 1.457 (http://www.vuzs.info/)
C. 1.431
Calculate multifactor productivity for each week, then average the two.

63. The Balanced Scorecard is a useful tool for helping managers translate their strategy into action in the following areas:
A. Sustainability; Flexibility; Efficiency; Technology
B. Customers; Financial; Internal Business Processes; Learning and Growth
(http://www.vuzs.info/)C. Customization; Standardization; Efficiency; Effectiveness
D. The Environment; The Community; Suppliers; Other Stakeholders
E. Strategy; Tactics; Productivity; Profitability
These are the four core areas addressed by the Balanced Scorecard.

64. A firm pursuing a strategy based on customization and variety will tend to structure and manage its supply
chain to accommodate more _____________ than a firm pursuing a strategy based on low-cost and high-volume.
A. Variation (http://www.vuzs.info/)
B. Streamlined flow
C. Quality
D. Capacity
E. Productivity

Customization and variety lead to variation that must be accommodated.

65. Unique attributes of firms that give them a competitive edge are called ______________.
A. Functional strategies
B. Balanced scorecards
C. Supply chains
D. Core competencies
E. Sustainable initiatives
Core competencies can be translated into competitive advantage.

66. Years ago in the overnight delivery business, providing package tracking capability gave some firms a
competitive advantage. Now, all firms must offer this capability simply to be in this line of business. This is an
example of ______________ becoming ____________ over time.
A. Tactical implications; strategic
B. Strategic implications; tactical
C. Order winners; order qualifiers
D. Profitability factors; productivity factors
E. Order qualifiers; order winners
What is an order qualifier and what is an order winner changes over time.

67. For firms competing in worldwide markets, conducting __________________ is more complex, since what works
in one country or region might not work in another.
A. Productivity analysis
B. Environmental analysis
C. Strategy implementation
D. Sustainability analysis

E. Growth forecasting
Environmental analysis takes into account the relevant factors in the environment; there are more of these if there are more
markets to consider.

68. Increasing the service offered to the customer makes it more difficult to compete on the basis of ______.
A. order qualifiers
B. customization
C. quality
D. price
E. flexibility
More extensive service can be more costly, and more costly outputs make price-based strategies more difficult.

69. ___________ is generally used to facilitate an organization strategy that emphasizes low cost.
A. Speed to market
B. Flexibility
C. Customization
D. Sustainability
E. None of the above
All of these would actually lead to higher costs.

70. Which of the following factors would tend to reduce productivity?

A. improvements in workplace safety
B. reductions in labor turnover

C. more inexperienced workers

D. reductions in the scrap rate
E. none of the above
More inexperienced workers tend to be less productive.

71. Suppose a country's productivity last year was 84. If this country's productivity growth rate of 5% is to be
maintained, this means that this year's productivity will have to be _______.
A. 88.2 (http://www.vuzs.info/)
B. 79.8
C. 82.8
D. 78.9
E. 4.2
Multiply 84 by 1.05 and then subtract 84 from this product.

72. The weekly output of a production process is shown below, together with data for labor and material inputs. The
standard inventory value of the output is $125 per unit. Overhead is charged weekly at the rate of $1500 plus .5
times direct labor cost. Assume a 40-hour week and an hourly wage of $16. Material cost is $10 per running foot.
What is the average multi-factor productivity for this process?
Calculate the weekly multi-factor productivities and then average.

73. A company has introduced a process improvement that reduces processing time for each unit, so that output is
increased by 25% with less material, but one additional worker required. Under the old process, five workers could
produce 60 units per hour. Labor costs are $12/hour, and material input was previously $16/unit. For the new
process, material is now $10/unit. Overhead is charged at 1.6 times direct labor cost. Finished units sell for $31
each. What increase in productivity is associated with the process improvement?

Divide the improvement in productivity by the productivity before the change. Multiply this ratio for the percent increase.

See Also
MGT613 Operation Managment Solved MCQS Chapert 2 a
by Stevenson
MGT613 Operation Managment Solved MCQS Chapert 2 a by Stevenson
Competitiveness, Strategy, and Productivity

1. An example of a strategic operations management decision is the choice of where to locate.

TRUE
Location decisions are strategic in nature.

2. An example of an operational operations management decision is inventory level management.

TRUE
Inventory management is an operational decision.

3. Government statistics are a good source of data about productivity trends in the service sector.
FALSE
The service sector is often omitted in government statistics.

4. An example of a tactical operations management decision is determining employment levels.

TRUE
Staffing is an ongoing, tactical decision.

5. Productivity is defined as the ratio of output to input.

TRUE
Divide outputs by inputs to get productivity.

6. Productivity is defined as the ratio of input to output.

FALSE
Productivity is the ratio of outputs to inputs.

7. Competitiveness relates to the profitability of an organization in the marketplace.

FALSE
Competitiveness relates to how effectively an organization meets the wants and needs of customers relative to other
organizations that offer similar goods or services.

8. If people would only work harder, productivity would increase.

FALSE
Working harder can actually reduce productivity in some cases.

9. Tracking productivity measures over time enables managers to judge organizational performance and decide
where improvements are needed.
TRUE
Productivity trends direct attention toward problems and opportunities.

10. Productivity is directly related to the ability of an organization to compete.

TRUE
A more productive organization is a more competitive organization.

11. A characteristic that was once an order winner may become an order qualifier, and vice versa.
TRUE
Order qualifiers and order winners are shaped by the environment.

12. Outsourcing tends to improve quality but at the cost of lowered productivity.
FALSE
Outsourcing can lead to both quality and productivity improvements.

13. Productivity tends to be only a very minor factor in an organization's ability to compete.
FALSE
An organization's ability to compete is directly affected by its productivity.

14. An organization that is twice as productive as its competitor will be twice as profitable.
FALSE
Productivity advantages don't necessarily translate into profitability advantages.

15. National productivity is determined by averaging the productivity measures of various companies or industries.
FALSE
National productivity is determined by dividing inputs by outputs across a national economy; averaging industry measures
would lead to a distorted estimate.

16. Wage and salary increases that are not accompanied by productivity increases tend to exert inflationary
pressures on a nation's economy.
TRUE
True increases in standards of living come about through productivity improvements.

17. Global competition really only applies to multi-national organizations.

FALSE (http://www.vuzs.info/)
Domestic-only organizations experience competition from organizations in other countries.

18. A business that is rated highly by its customers for service quality will tend to be more profitable than a
business that is rated poorly.
TRUE
Service quality is a powerful tool for improving profitability.

19. Services often don't fit simple yield measurements.

TRUE (http://www.vuzs.info/)
Comparing one service output to another is difficult to do accurately.

20. A mission statement should provide a guide for the formulation of strategies for the organization.
TRUE (http://www.vuzs.info/)
Strategy-making is constrained by the mission statement.

See Also