Complete Test Bank Chapter 14 Sales And Operations Planning - Operations Management 2e Canadian Test Bank by Roberta S. Russell. DOCX document preview.
CHAPTER 14
THE SALES AND OPERATIONS PLANNING PROCESS
CHAPTER LEARNING OBJECTIVES
1. Provide an overview of the sales and operations planning (S&OP) process. Sales and operations planning (S&OP) is a structured collaborative process for matching supply and demand. The sales plan and operations plan are expressed in aggregate terms, hence the name aggregate planning. The objectives of S&OP are to establish a company-wide game plan for allocating resources and to develop an economic strategy for meeting demand. S&OP should take into account demand forecasts, company policies, strategic objectives, financial constraints, and capacity constraints.
2. Describe strategies companies can use to adjust capacity to satisfy fluctuating demand. When demand fluctuates, companies can use the following strategies to manage capacity:
- Produce at a constant rate and use inventory to absorb fluctuations in demand (level production)
- Hire and fire workers to match demand (chase demand)
- Maintain resources for high-demand levels (peak demand)
- Increase or decrease working hours (overtime and undertime)
- Subcontract work to other firms
- Use part-time workers
- Provide the service or product at a later time period (backorder)
When one of these strategies is selected, a company is said to have a pure strategy for meeting demand. When two or more are selected, a company has a mixed strategy.
3. Describe strategies companies can use to manage demand. Companies can use the following strategies to manage demand:
- Shift demand into other time periods with incentives, sales promotions, and advertising campaigns.
- Offer products or services with countercyclical demand patterns.
- Partner with suppliers to reduce information distortion along the supply chain.
4. Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy. There are several quantitative techniques for aggregate planning, including the linear programming model, the transportation method, the linear decision rule, the search decision rule, and the management coefficient model.
2. Explain hierarchical production and capacity planning. And calculate available-to-promise quantities. Production and capacity plans are developed at several levels of detail. The process of deriving more detailed production and capacity plans from the aggregate plan is called disaggregation. Collaborative planning sets production plans in concert with suppliers and trading partners. Available-to-promise often involves collaboration along a supply chain.
Levels of production planning: sales and operations plan → master production plan → materials requirements plan → shop floor schedule
Levels of capacity planning: resource requirements plan → rough-cut capacity plan → capacity requirements plan → input/output control
6. Describe the issues related to revenue management in services and c alculate single order quantities. Aggregate planning for services is somewhat different from that for manufacturing because services cannot be inventoried and demand and capacity for services is difficult to predict. The variation in demand is usually more severe and occurs over shorter time frames. Fortunately, the constraining resource in most services is labour, which is quite flexible. Services use part-time workers, overtime, and undertime. Revenue management is a special aggregate planning tool for industries with time-sensitive products and segmented customer classes.
TRUE-FALSE STATEMENTS
1. Sales and operations planning is an aggregate planning process that determines the capacity needed to meet immediate demand.
Difficulty: Medium
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
AACSB: Reflective Thinking
2. An aggregate operations plan specifies the production quantities for an entire product family or product line.
Difficulty: Medium
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
Blooms: Knowledge
AACSB: Reflective Thinking
3. One objective of sales and operations planning is to develop a companywide game plan to satisfy production.
Difficulty: Medium
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
Blooms: Knowledge
AACSB: Reflective Thinking
4. An operations plan is an input into the sales and operations planning process.
Difficulty: Medium
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
Blooms: Knowledge
AACSB: Reflective Thinking
5. Financial constraints are one of the major inputs of the sales and operations planning process.
Difficulty: Medium
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
Blooms: Knowledge
AACSB: Reflective Thinking
6. Implementing a companywide game plan for allocating resources addresses the long-standing battle between operations and marketing.
Difficulty: Hard
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
AACSB: Reflective Thinking
7. An economic strategy for adjusting demand can include adjusting capacity or managing demand.
Difficulty: Medium
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
AACSB: Reflective Thinking
8. Reconciliation of the sales plan and the operations plan may include adjusting capacity and/or managing demand.
Difficulty: Medium
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
Blooms: Comprehension
AACSB: Reflective Thinking
9. Adjusting capacity and managing demand are two economic strategies for meeting demand.
Difficulty: Medium
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Comprehension
AACSB: Reflective Thinking
10. Overtime and undertime are common strategies for adjusting demand.
Difficulty: Easy
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Knowledge
AACSB: Reflective Thinking
11. A chase demand strategy is one of several alternatives available for managing demand.
Difficulty: Medium
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Knowledge
AACSB: Reflective Thinking
12. Inventory holding costs are an important consideration for the level production strategy.
Difficulty: Medium
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Comprehension
AACSB: Reflective Thinking
13. When demand fluctuations are extreme, using overtime and undertime is a feasible strategy for adjusting capacity.
Difficulty: Medium
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Comprehension
AACSB: Reflective Thinking
14. Subcontracting is a feasible alternative for adjusting capacity provided the supplier can reliably meet quality and time requirements.
Difficulty: Medium
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Comprehension
AACSB: Reflective Thinking
15. One of several strategies for managing demand is to shift it into other time periods using incentives, sales promotions, and advertising.
Difficulty: Medium
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Comprehension
AACSB: Reflective Thinking
16. A mixed strategy for adjusting capacity is simpler and easier to implement than any pure strategy.
Difficulty: Medium
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Knowledge
AACSB: Reflective Thinking
17. Most companies use mixed strategies for managing demand.
Difficulty: Medium
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Comprehension
AACSB: Reflective Thinking
18. The level strategy for adjusting capacity is only appropriate when there is no variation in demand.
Difficulty: Medium
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Comprehension
AACSB: Reflective Thinking
19. A chase strategy involves hiring and firing workers so that production matches demand.
Difficulty: Medium
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Comprehension
AACSB: Reflective Thinking
20. The transportation method is used for aggregate planning when the strategy for adjusting capacity is hiring and firing workers.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Comprehension
AACSB: Reflective Thinking
21. Disaggregation is the process of breaking a sales and operations plan into more detailed plans.
Difficulty: Medium
Learning Objective: Explain hierarchical production and capacity planning, and calculate available-to-promise quantities.
Section Reference: 14.5 The Hierarchical Nature of Planning
Blooms: Comprehension
AACSB: Reflective Thinking
22. Sharing information and synchronizing production across the supply chain is known as disaggregation.
Difficulty: Medium
Learning Objective: Explain hierarchical production and capacity planning, and calculate available-to-promise quantities.
Section Reference: 14.5 The Hierarchical Nature of Planning
Blooms: Knowledge
AACSB: Reflective Thinking
23. Yield management seeks to maximize profit from time-sensitive products and services.
Difficulty: Hard
Learning Objective: Describe the issues related to revenue management in services and calculate single order quantities.
Section Reference: 14.6 Aggregate Planning for Services
Blooms: Comprehension
AACSB: Reflective Thinking
MULTIPLE CHOICE QUESTIONS
24. All of the following are inputs to the aggregate production planning process except
a) demand forecasts.
b) financial constraints.
c) sales plans.
d) capacity constraints.
Difficulty: Medium
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
AACSB: Reflective Thinking
25. Which of the following is not a step in the monthly S&OP Planning Process?
a) mid-month reports
b) demand planning
c) supply planning
d) pre-S&OP meeting
Difficulty: Medium
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
Blooms: Knowledge
AACSB: Reflective Thinking
26. Sales and operations planning is used primarily for which of the following planning horizons?
a) short-term
b) intermediate
c) long-term
c) indefinite
Difficulty: Medium
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
Blooms: Knowledge
AACSB: Reflective Thinking
27. Adjusting available capacity by hiring and firing workers to match demand is an example of a(n) ___ strategy.
a) level production
b) chase demand
c) mixed production
d) optimal production
Difficulty: Easy
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Comprehension
AACSB: Reflective Thinking
28. The primary cost associated with the level production strategy is the cost of
a) holding inventory.
b) hiring and firing workers.
c) overtime.
d) outsourcing (subcontracting).
Difficulty: Medium
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Comprehension
AACSB: Reflective Thinking
29. Problems associated with using a part-time workers strategy for adjusting capacity include all of the following except
a) high turnover.
b) accelerated training requirements.
c) scheduling difficulties.
d) high retirement costs.
Difficulty: Easy
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Comprehension
AACSB: Reflective Thinking
30. Maintaining resources for high levels of customer service is consistent with which of the following capacity strategies?
a) chase demand
b) level production
c) peak demand
d) subcontracting
Difficulty: Easy
Learning Objective: Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.
Section Reference: 14.2 Strategies for Managing Capacity
Blooms: Knowledge
AACSB: Reflective Thinking
31. Strategies for proactive demand management would not include
a) shifting demand into other time periods.
b) offering products or services with countercyclical demand patterns.
c) partnering with suppliers to reduce information distortion along the supply chain.
d) using subcontracting to meet unexpected high demand levels.
Difficulty: Medium
Learning Objective: Describe strategies companies can use to manage demand.
Section Reference: 14.3 Strategies for Managing Demand
Blooms: Comprehension
AACSB: Reflective Thinking
32. Examining the idles of resources and creating a demand for those resources is part of which of the following demand management strategies?
b) countercyclical product offerings
c) information sharing
d) resource allocation
Difficulty: Medium
Learning Objective: Describe strategies companies can use to manage demand.
Section Reference: 14.3 Strategies for Managing Demand
Blooms: Comprehension
AACSB: Reflective Thinking
33. Retailers encouraging earlier holiday gift buying is an example of which of the following demand management strategies?
a) demand shifting
b) countercyclical product offerings
c) information sharing
d) resource allocation
Difficulty: Easy
Learning Objective: Describe strategies companies can use to manage demand.
Section Reference: 14.3 Strategies for Managing Demand
Blooms: Comprehension
AACSB: Reflective Thinking
34. The most effective aggregate planning strategy depends on
a) the demand distribution.
b) the competitive position.
c) the firm’s cost structure.
d) all of the above.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for aggregate Planning
AACSB: Reflective Thinking
35. An optimizing technique originally developed for aggregate planning in a paint factory is the
a) linear decision rule.
b) search decision rule.
c) management coefficients model.
d) transportation technique.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
AACSB: Reflective Thinking
36. The search decision rule (SDR) is an algorithm that
a) solves a set of four quadratic equations.
b) finds the minimum cost for combinations of different workforce levels and production rates.
c) uses regression analysis to improve the consistency of production planning decisions.
d) requires that a linear cost function be used.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Knowledge
AACSB: Reflective Thinking
37. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 75,000 |
2 | 100,000 |
3 | 75,000 |
4 | 125,000 |
Beginning Workforce = 35 workers
Production per Employee = 1,250 units per quarter
Hiring Cost = $500 per worker
Firing Cost = $1,000 per worker
Inventory Carrying Cost = $20 per unit per quarter
If a chase demand strategy is used then the number of workers hired at the start of quarter 2 is
a) 10.
b) 20.
c) 35.
d) 80.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
AACSB: Analytic
38. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 75,000 |
2 | 100,000 |
3 | 75,000 |
4 | 125,000 |
Beginning Workforce = 35 workers
Production per Employee = 1,250 units per quarter
Hiring Cost = $500 per worker
Firing Cost = $1,000 per worker
Inventory Carrying Cost = $20 per unit per quarter
If a chase demand strategy is used then the total firing cost for the plan is
a) $10,000.
b) $15,000.
c) $20,000.
d) $25,000.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
39. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 75,000 |
2 | 100,000 |
3 | 75,000 |
4 | 125,000 |
Beginning Workforce = 35 workers
Production per Employee = 1,250 units per quarter
Hiring Cost = $500 per worker
Firing Cost = $1,000 per worker
Inventory Carrying Cost = $20 per unit per quarter
If a level production strategy is used then the required quarterly output is
a) 75,000.
b) 87,350.
c) 93,750.
d) 125,000.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
40. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 75,000 |
2 | 100,000 |
3 | 75,000 |
4 | 125,000 |
Beginning Workforce = 35 workers
Production per Employee = 1,250 units per quarter
Hiring Cost = $500 per worker
Firing Cost = $1,000 per worker
Inventory Carrying Cost = $20 per unit per quarter
If a level production strategy is used then the number of workers required for the plan is
a) 35.
b) 75.
c) 100.
d) 125.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
41. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 75,000 |
2 | 100,000 |
3 | 75,000 |
4 | 125,000 |
Beginning Workforce = 35 workers
Production per Employee = 1,250 units per quarter
Hiring Cost = $500 per worker
Firing Cost = $1,000 per worker
Inventory Carrying Cost = $20 per unit per quarter
If a level production strategy is used then the inventory at the end of quarter 3 is
a) 18,750 units.
b) 12,500 units.
c) 25,650 units.
d) 31,250 units.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
42. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 75,000 |
2 | 100,000 |
3 | 75,000 |
4 | 125,000 |
Beginning Workforce = 35 workers
Production per Employee = 1,250 units per quarter
Hiring Cost = $500 per worker
Firing Cost = $1,000 per worker
Inventory Carrying Cost = $20 per unit per quarter
If a level production strategy is used then the cost of the level production plan (inventory costs plus hiring and firing costs) is
a) $20,000.
b) $645,000.
c) $1,250,000.
d) $1,270,000.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
AACSB: Analytic
43. A company is developing a linear programming model for its aggregate production plan. If It = units in inventory at the end of period t, Pt = units produced in period t, and Dt = demand in period t, then the company’s demand constraint to ensure that demand is met in quarter 3 is
a) D3 = I2 – I3 + P3.
b) D3 = I3 + P3.
c) D3 = I3 – I2 + P3.
d) D3 = I2 – I3 + P2.
Difficulty: Hard
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
AACSB: Analytic
44. A company is developing a linear programming model for its aggregate production plan. If Wt = workforce size for period t, Ht = number of workers hired for period t, and Ft = number of workers fired for period t, then the company’s workforce constraint for period 2 is
a) W2 = W1 + F2 – H2.
b) W2 = H2 – F2.
c) W2 = W1 + H2 – F2.
d) W2 = H2 – F2 – W1.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Analysis
AACSB: Analytic
45. A company is developing a linear programming model for its aggregate production plan. If It = units in inventory at the end of period t, Pt = units produced in period t, and Dt = demand in period t, then the company’s demand constraint to ensure that demand is met in quarter 2 is
a) D2 = I2 – I1 + P2.
b) D2 = I1 + P2.
c) D2 = I2 + I1 + P2.
d) D2 = I1 + P2 – I2.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Analysis
AACSB: Analytic
46. A company is developing a linear programming model for its aggregate production plan. If Wt = workforce size for period t, Ht = number of workers hired for period t, and Ft = number of workers fired for period t, then the company’s workforce constraint for period 4 is
a) W4 = W3 – H4 + F4.
b) W4 = W3 + H4 – F4.
c) W4 = W3 + H3 – F3.
d) W4 = W3 + H4.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Analysis
AACSB: Analytic
47. A company is developing a linear programming model for its aggregate production plan. Each worker can produce 500 units per quarter. If Wt = workforce size in period t and Pt = number of units produced in period t, then the production constraint for period 3 is
a) W3 = 500P3.
b) P3 = W3 – 500.
c) P3 = 500W3.
d) P3 = W3/500.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Analysis
AACSB: Analytic
48. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 25,000 |
2 | 50,000 |
3 | 35,000 |
4 | 60,000 |
Beginning Workforce = 50 workers
Production per Employee = 250 units per quarter
Hiring Cost = $1000 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $15 per unit per quarter
If a chase demand strategy is used then the number of workers hired at the start of quarter 2 is
a) 0.
b) 50.
c) 100.
d) 200.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
49. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 25,000 |
2 | 50,000 |
3 | 35,000 |
4 | 60,000 |
Beginning Workforce = 50 workers
Production per Employee = 250 units per quarter
Hiring Cost = $1000 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $15 per unit per quarter
If a chase demand strategy is used then the number of workers fired at the start of quarter 3 is
a) 0.
b) 50.
c) 60.
d) 100.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
50. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 25,000 |
2 | 50,000 |
3 | 35,000 |
4 | 60,000 |
Beginning Workforce = 50 workers
Production per Employee = 250 units per quarter
Hiring Cost = $1000 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $15 per unit per quarter
If a chase demand strategy is used then the total hiring and firing cost of the plan is
a) $340,000.
b) $250,000.
c) $125,000.
d) $90,000.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
51. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 25,000 |
2 | 50,000 |
3 | 35,000 |
4 | 60,000 |
Beginning Workforce = 50 workers
Production per Employee = 250 units per quarter
Hiring Cost = $1000 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $15 per unit per quarter
If a level production strategy is used then the required output per quarter is
a) 60,000 units.
b) 42,500 units.
c) 35,000 units.
d) 25,000 units.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
52. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 25,000 |
2 | 50,000 |
3 | 35,000 |
4 | 60,000 |
Beginning Workforce = 50 workers
Production per Employee = 250 units per quarter
Hiring Cost = $1000 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $15 per unit per quarter
If a level production strategy is used then the inventory at the end of quarter 3 is
a) 0.
b) 5,000.
c) 10,000.
d) 17,500.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
53. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 25,000 |
2 | 50,000 |
3 | 35,000 |
4 | 60,000 |
Beginning Workforce = 50 workers
Production per Employee = 250 units per quarter
Hiring Cost = $1000 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $15 per unit per quarter
If a level production strategy is used then the number of workers required is
a) 125.
b) 170.
c) 250.
d) 325.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
54. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 25,000 |
2 | 50,000 |
3 | 35,000 |
4 | 60,000 |
Beginning Workforce = 50 workers
Production per Employee = 250 units per quarter
Hiring Cost = $1000 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $15 per unit per quarter
If a level production strategy is used then the total cost of the plan (hiring cost, firing cost and inventory carrying cost) is
a) $120,000.
b) $377,500.
c) $675,000.
d) $795,000.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
55. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 37,500 |
2 | 45,000 |
3 | 25,000 |
4 | 62,500 |
Beginning Workforce = 125 workers
Production per Employee = 500 units per quarter
Hiring Cost = $750 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $10 per unit per quarter
If a chase demand strategy is used then the number of workers hired in quarter 4 is
a) 0.
b) 15.
c) 75.
d) 125.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
56. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 37,500 |
2 | 45,000 |
3 | 25,000 |
4 | 62,500 |
Beginning Workforce = 125 workers
Production per Employee = 500 units per quarter
Hiring Cost = $750 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $10 per unit per quarter
If a chase demand strategy is used the number of workers fired in quarter 3 is
a) 0.
b) 40.
c) 50.
d) 75.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
57. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 37,500 |
2 | 45,000 |
3 | 25,000 |
4 | 62,500 |
Beginning Workforce = 125 workers
Production per Employee = 500 units per quarter
Hiring Cost = $750 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $10 per unit per quarter
If a chase demand strategy is used the total hiring and firing costs for the production plan is
a) $67,500.
b) $135,000.
c) $202,500.
d) $337,500.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
58. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 37,500 |
2 | 45,000 |
3 | 25,000 |
4 | 62,500 |
Beginning Workforce = 125 workers
Production per Employee = 500 units per quarter
Hiring Cost = $750 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $10 per unit per quarter
If a level production strategy is used the number of units to produce each quarter is
a) 42,500.
b) 85,000.
c) 62,500.
d) 37,500.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
59. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 37,500 |
2 | 45,000 |
3 | 25,000 |
4 | 62,500 |
Beginning Workforce = 125 workers
Production per Employee = 500 units per quarter
Hiring Cost = $750 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $10 per unit per quarter
If a level production strategy is used the number of workers required each quarter is
a) 50.
b) 75.
c) 85.
d) 125.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
60. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 37,500 |
2 | 45,000 |
3 | 25,000 |
4 | 62,500 |
Beginning Workforce = 125 workers
Production per Employee = 500 units per quarter
Hiring Cost = $750 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $10 per unit per quarter
If a level production strategy is used the number of units in inventory at the end of quarter 3 is
a) 0.
b) 2,500.
c) 5,000.
d) 20,000.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
61. The following information relates to a company’s aggregate production planning activities:
Quarter | Demand Forecast |
1 | 37,500 |
2 | 45,000 |
3 | 25,000 |
4 | 62,500 |
Beginning Workforce = 125 workers
Production per Employee = 500 units per quarter
Hiring Cost = $750 per worker
Firing Cost = $1,500 per worker
Inventory Carrying Cost = $10 per unit per quarter
If a level production strategy is used the total cost of the production plan (hiring cost, firing cost, and inventory cost) is
a) $60,000.
b) $275,000.
c) $335,000.
d) $610,000.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Blooms: Application
AACSB: Analytic
62. Which of the following is considered to be a pure strategy in aggregate planning?
a) chase
b) transportation method
c) linear decision rule
d) all of the above
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
AACSB: Reflective Thinking
63. The process of breaking an aggregate plan into more detailed plans is referred to as
a) collaborative planning.
b) hierarchical planning.
c) disaggregation.
d) rough-cut planning.
Difficulty: Hard
Learning Objective: Explain hierarchical production and capacity planning, and calculate available-to-promise quantities.
Section Reference: 14.5 The Hierarchical Nature of Planning
Blooms: Comprehension
AACSB: Reflective Thinking
64. The difference between planned production and customer orders is known as
a) the master production schedule.
b) available-to-promise.
c) capable-to-promise.
d) the disaggregate plan.
Difficulty: Medium
Learning Objective: Explain hierarchical production and capacity planning, and calculate available-to-promise quantities.
Section Reference: 14.5 The Hierarchical Nature of Planning
Blooms: Comprehension
AACSB: Reflective Thinking
65. In capacity planning, the feasibility of the sales and operations production plan is verified by a
a) resource requirements plan.
b) rough-cut capacity plan.
c) capacity requirements plan.
d) master production schedule.
Difficulty: Medium
Learning Objective: Explain hierarchical production and capacity planning, and calculate available-to-promise quantities.
Section Reference: 14.5 The Hierarchical Nature of Planning
Blooms: Comprehension
AACSB: Reflective Thinking
66. Given the information below, the number of available-to-promise units in period 2 is
Period | ||||||
On Hand = 100 | 1 | 2 | 3 | 4 | 5 | 6 |
Forecast | 200 | 250 | 200 | 300 | 200 | 200 |
Customer Orders | 150 | 125 | 100 | 250 | 150 | 250 |
Master Production Schedule | 400 | 400 | 400 | |||
Available-to-Promise | ||||||
a) 400
b) 150
c) 50
d) 0
Difficulty: Medium
Learning Objective: Explain hierarchical production and capacity planning, and calculate available-to-promise quantities.
Section Reference: 14.5 The Hierarchical Nature of Planning
Blooms: Application
AACSB: Analytic
67. Given the information below, the number of available-to-promise units in period 4 is
Period | ||||||
On Hand = 100 | 1 | 2 | 3 | 4 | 5 | 6 |
Forecast | 200 | 250 | 200 | 300 | 200 | 200 |
Customer Orders | 150 | 125 | 100 | 250 | 150 | 250 |
Master Production Schedule | 400 | 400 | 400 | |||
Available-to-Promise | ||||||
a) 400
b) 150
c) 50
d) 0
Difficulty: Medium
Learning Objective: Explain hierarchical production and capacity planning, and calculate available-to-promise quantities.
Section Reference: 14.5 The Hierarchical Nature of Planning
Blooms: Application
AACSB: Analytic
68. Given the information below, the number of available-to-promise units in period 6 is
Period | ||||||
On Hand = 100 | 1 | 2 | 3 | 4 | 5 | 6 |
Forecast | 200 | 250 | 200 | 300 | 200 | 200 |
Customer Orders | 150 | 125 | 100 | 250 | 150 | 250 |
Master Production Schedule | 400 | 400 | 400 | |||
Available-to-Promise | ||||||
a) 400
b) 150
c) 50
d) 0
Difficulty: Medium
Learning Objective: Explain hierarchical production and capacity planning, and calculate available-to-promise quantities.
Section Reference: 14.5 The Hierarchical Nature of Planning
Blooms: Application
AACSB: Analytic
69. Given the information below, the number of available-to-promise units in period 4 is
Period | ||||||
On Hand = 200 | 1 | 2 | 3 | 4 | 5 | 6 |
Forecast | 300 | 250 | 300 | 300 | 200 | 200 |
Customer Orders | 250 | 200 | 250 | 200 | 150 | 250 |
Master Production Schedule | 500 | 700 | ||||
Available-to-Promise | ||||||
a) 500
b) 100
c) 200
d) 350
Difficulty: Medium
Learning Objective: Explain hierarchical production and capacity planning, and calculate available-to-promise quantities.
Section Reference: 14.5 The Hierarchical Nature of Planning
Blooms: Application
AACSB: Analytic
70. Given the information below, the number of available-to-promise units in period 1 is
Period | ||||||
On Hand = 200 | 1 | 2 | 3 | 4 | 5 | 6 |
Forecast | 300 | 250 | 300 | 300 | 200 | 200 |
Customer Orders | 250 | 200 | 250 | 200 | 150 | 250 |
Master Production Schedule | 500 | 700 | ||||
Available-to-Promise | ||||||
a) 700
b) 500
c) 250
d) 0
Learning Objective: Explain hierarchical production and capacity planning, and calculate available-to-promise quantities.
Section Reference: 14.5 The Hierarchical Nature of Planning
Blooms: Application
AACSB: Analytic
71. Which of the following is part of capacity planning in relation to hierarchical planning?
a) master production schedule
b) material requirements plan
c) resource plan requirements
d) shop floor schedule
Difficulty: Medium
Learning Objective: Explain hierarchical production and capacity planning, and calculate available-to-promise quantities.
Section Reference: 14.5 The Hierarchical Nature of Planning
Blooms: Knowledge
AACSB: Reflective Thinking
72. A bagel company bakes a specialty bagel that it sells by the dozen every day. These specialty bagels can only be baked early in the morning before the store opens for business. The company estimates that the daily demand (in dozens) for its specialty bagel is distributed as follows:
Demand (dozens) | Probability |
1 | 0.10 |
2 | 0.20 |
3 | 0.15 |
4 | 0.25 |
5 | 0.30 |
Specialty bagels are sold by the dozen only at a cost of $9.00 per dozen. The cost to make one bagel is $0.50. Leftover specialty bagels are sold by the dozen the next day for a 50% discount. The bagel company’s cost of overestimating demand, Co, is
a) $1.50.
b) $3.00.
c) $4.50.
d) $6.00.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Learning Objective: Describe the issues related to revenue management in services and calculate single order quantities.
Section Reference: 14.6 Aggregate Planning for Services
Blooms: Application
AACSB: Analytic
73. A bagel company bakes a specialty bagel that it sells by the dozen every day. These specialty bagels can only be baked early in the morning before the store opens for business. The company estimates that the daily demand (in dozens) for its specialty bagel is distributed as follows:
Demand (dozens) | Probability |
1 | 0.10 |
2 | 0.20 |
3 | 0.15 |
4 | 0.25 |
5 | 0.30 |
Specialty bagels are sold by the dozen only at a cost of $9.00 per dozen. The cost to bake each bagel is $0.50. Leftover specialty bagels are sold by the dozen the next day for a 50% discount. The bagel company’s cost of underestimating demand, Cu, is
a) $9.00.
b) $6.00.
c) $4.50.
d) $3.00.
Difficulty: Medium
Learning Objective: Describe the issues related to revenue management in services and calculate single order quantities.
Section Reference: 14.6 Aggregate Planning for Services
Blooms: Application
AACSB: Analytic
74. A bagel company bakes a specialty bagel that it sells by the dozen every day. These specialty bagels can only be baked early in the morning before the store opens for business. The company estimates that the daily demand (in dozens) for its specialty bagel is distributed as follows:
Demand (dozens) | Probability |
1 | 0.10 |
2 | 0.20 |
3 | 0.15 |
4 | 0.25 |
5 | 0.30 |
Specialty bagels are sold by the dozen only at a cost of $9.00 per dozen. The cost to make one bagel is $0.50. Leftover specialty bagels are sold by the dozen the next day for a 50% discount. The optimal number of specialty bagels that should be baked tomorrow (in dozens) is
a) 5 dozen.
b) 4 dozen.
c) 3 dozen.
d) 2 dozen.
Difficulty: Medium
Learning Objective: Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.
Section Reference: 14.4 Quantitative Techniques for Aggregate Planning
Learning Objective: Describe the issues related to revenue management in services and calculate single order quantities.
Section Reference: 14.6 Aggregate Planning for Services
Blooms: Application
AACSB: Analytic
75. A hot dog vendor must decide on Monday how many hot dogs to have available for the coming Saturday’s football game. Each hot dog costs the vendor $3.00 and is sold for $5.00. After the game any unsold hot dogs are discounted and sold to the university cafeteria for $1.75. The vendor believes that the demand for hot dogs follows the probability distribution shown below:
Demand for Hot Dogs | Probability |
1000 | 0.30 |
1500 | 0.20 |
2000 | 0.30 |
2500 | 0.15 |
3000 | 0.05 |
The vendor’s cost of underestimating demand, Cu, is
a) $3.00.
b) $1.75.
c) $2.00.
d) $3.25.
Difficulty: Medium
Learning Objective: Describe the issues related to revenue management in services and calculate single order quantities.
Section Reference: 14.6 Aggregate Planning for Services
Blooms: Application
AACSB: Analytic
76. A hot dog vendor must decide on Monday how many hot dogs to have available for the coming Saturday’s football game. Each hot dog costs the vendor $3.00 and is sold for $5.00. After the game any unsold hot dogs are discounted and sold to the university cafeteria for $1.75. The vendor believes that the demand for hot dogs follows the probability distribution shown below:
Demand for Hot Dogs | Probability |
1000 | 0.30 |
1500 | 0.20 |
2000 | 0.30 |
2500 | 0.15 |
3000 | 0.05 |
The vendor’s cost of overestimating demand, Co, is
a) $5.00.
b) $3.00.
c) $1.75.
d) $1.25.
Difficulty: Medium
Learning Objective: Describe the issues related to revenue management in services and calculate single order quantities.
Section Reference: 14.6 Aggregate Planning for Services
Blooms: Application
AACSB: Analytic
77. A hot dog vendor must decide on Monday how many hot dogs to have available for the coming Saturday’s football game. Each hot dog costs the vendor $3.00 and is sold for $5.00. After the game any unsold hot dogs are discounted and sold to the university cafeteria for $1.75. The vendor believes that the demand for hot dogs follows the probability distribution shown below:
Demand for Hot Dogs | Probability |
1000 | 0.30 |
1500 | 0.20 |
2000 | 0.30 |
2500 | 0.15 |
3000 | 0.05 |
The optimal number of hot dogs the vendor should order for next Saturday’s game is
a) 1000.
b) 1500.
c) 2000.
d) 3000.
Difficulty: Medium
Learning Objective: Describe the issues related to revenue management in services and calculate single order quantities.
Section Reference: 14.6 Aggregate Planning for Services
Blooms: Application
AACSB: Analytic
78. A hotel manager must decide how many rooms to overbook. Room rates are $125 per night and each room costs $45 to maintain. A bumped customer is sent to another hotel at a cost of $75. Given the distribution of no-shows below, how many rooms should the manager overbook?
No-Shows | Probability |
7 | 0.15 |
8 | 0.20 |
9 | 0.15 |
10 | 0.15 |
11 | 0.10 |
12 | 0.10 |
13 | 0.05 |
14 | 0.05 |
15 | 0.05 |
a) Overbook 9 rooms.
b) Overbook 10 rooms.
c) Overbook 11 rooms.
d) Overbook 12 rooms.
Difficulty: Medium
Learning Objective: Describe the issues related to revenue management in services and calculate single order quantities.
Section Reference: 14.6 Aggregate Planning for Services
AACSB: Analytic
79. Which of the following is not a characteristic of aggregate planning for services?
a) Labour is usually the most constraining resource for services.
b) Service capacity must be provided at the appropriate place and time.
c) Demand for services is easy to predict.
d) Capacity for services is difficult to predict.
Difficulty: Medium
Learning Objective: Describe the issues related to revenue management in services and calculate single order quantities.
Section Reference: 14.6 Aggregate Planning for Services
AACSB: Reflective Thinking
80. Yield management can be used to address all of the following problems except
a) overbooking.
b) portioning demand into fare classes.
c) single order quantities.
d) backorders.
Difficulty: Easy
Learning Objective: Describe the issues related to revenue management in services and calculate single order quantities.
Section Reference: 14.6 Aggregate Planning for Services
Blooms: Comprehension
AACSB: Reflective Thinking
81. Which of the following seeks to maximize the yield of time sensitive products and services?
a) capacity management
b) demand management
c) production management
d) revenue management
Difficulty: Easy
Learning Objective: Describe the issues related to revenue management in services and calculate single order quantities.
Section Reference: 14.6 Aggregate Planning for Services
AACSB: Reflective Thinking
SHORT-ANSWER ESSAY QUESTIONS
82. What is aggregate planning and what alternatives are generally feasible when developing the aggregate production plans?
Difficulty: Medium
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
AACSB: Reflective Thinking; Communication
83. Briefly discuss the two primary objectives of aggregate planning.
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
AACSB: Reflective Thinking; Communication
84. What are the outputs of aggregate planning?
Difficulty: Medium
Learning Objective: Provide an overview of the sales and operations planning (S&OP) process.
Section Reference: 14.1 The Sales and Operations Planning Process
Blooms: Comprehension
AACSB: Reflective Thinking; Communication
85. Briefly describe what revenue management is and identify the common types of problems addressed by revenue management.
Difficulty: Medium
Learning Objective: Describe the issues related to revenue management in services and calculate single order quantities.
Section Reference: 14.6 Aggregate Planning for Services
Blooms: Synthesis
AACSB: Reflective Thinking; Communication
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