Processes And Technology Chapter 6 10e Test Bank Answers

Chapter 6:
Processes and Technology

True/False

1. A process is a group of unrelated tasks with specific inputs and outputs.

Difficulty: Easy

Learning Objective: LO 1

1. ___________ specifies what tasks need to be done and how they are to be coordinated among functions, people, and organizations.
   1. Process design
   2. Process strategy
   3. Process planning
   4. Process selection
2. Planning, analyzing, and improving processes is the function of operations management.

Difficulty: Easy

Learning Objective: LO 1

1. What term best describes the organization’s overall approach for producing goods and providing services?
   1. process selection
   2. process strategy
   3. vertical integration
   4. horizontal integration
2. A firm’s process strategy defines the extent of customer involvement in providing a service.

Difficulty: Easy

Learning Objective: LO 1

1. Producing a high volume of a single product is a characteristic of
   1. projects.
   2. batch production.
   3. mass production.
   4. continuous production.
2. Most of the operations in batch production involve assembly rather than fabrication.

Difficulty: Easy

Learning Objective: LO 2

1. Process planning determines how a manufactured good is produced or a service is provided.

Difficulty: Easy

Learning Objective: LO 1

1. Companies that control the production of virtually all of the parts that go into a product are said to be horizontally integrated.

Difficulty: Moderate

Learning Objective: LO 1

1. Outsourcing occurs when a company cannot or will not make all the parts that go into a product.

Difficulty: Easy

Learning Objective: LO 1

1. Which of the following is NOT a factor in deciding to outsource?
   1. speed
   2. reliability
   3. quality
   4. distance
2. Supplier reliability is often an important consideration in outsourcing decisions.

Difficulty: Easy

Learning Objective: LO 1

1. One-of-a-kind production of a product based on a customer’s unique specifications is a called
   1. a project.
   2. batch production.
   3. mass production.
   4. continuous production.
2. Customers are rarely involved in a project that takes an extended period of time to complete.

Difficulty: Easy

Learning Objective: LO 2

1. Batch production is also known as a job shop because it creates more jobs than any of the other process choices.

Difficulty: Easy

Learning Objective: LO 2

1. Mass production is characterized by high volumes of a customized product for a mass market.

Difficulty: Easy

Learning Objective: LO 2

1. Mass production is often associated with assembly lines.

Difficulty: Easy

Learning Objective: LO 2

1. Mass production is characterized by the use of specialized equipment and workers with limited skills.

Difficulty: Easy

Learning Objective: LO 2

1. __________ production is characterized by very high volumes of commodity products.
   1. Project
   2. Batch
   3. Mass
   4. Continuous
2. __________ examines the cost tradeoffs associated with demand volume when selecting a process.
   1. Outsourcing
   2. Breakeven analysis
   3. Point of indifference
   4. Process plan
3. Vertical integration is the degree to which a firm produces the parts that go into its products.

Difficulty: Easy

Learning Objective: LO 1

1. The best process strategy is usually found on the diagonal of the product-process matrix.

Ans. True

Difficulty: Moderate

Learning Objective: LO 2

1. What term best describes a set of documents that detail manufacturing and service delivery specifications?
   1. assembly charts
   2. process strategy
   3. process plans
   4. process flowcharts
2. In general, processes should be analyzed for continuous improvement only after a breakthrough improvement.

Ans. False

Difficulty: Moderate

Learning Objective: LO 5

1. Process analysis yields a set of documents detailing manufacturing and service delivery specifications.

Ans. False

Difficulty: Moderate

Learning Objective: LO 5

1. The basic tools of process analysis include process flowcharts, diagrams and maps.

Ans. True

Difficulty: Moderate

Learning Objective: LO 5

1. A process flowchart is a useful tool for analyzing a process because it often highlights nonproductive activities.

Difficulty: Easy

Learning Objective: LO 5

1. Process innovation reflects the total redesign of a process for a breakthrough improvement.

Difficulty: Easy

Learning Objective: LO 5

1. Two approaches to process improvement include continuous and breakthrough.

Ans. True

Difficulty: Moderate

Learning Objective: LO 3

1. Process innovation is most successful in organizations that view their systems as a set of functional areas vying for limited resources.

Ans. False

Difficulty: Hard

Learning Objective: LO 5

1. What is a useful tool in beginning the redesign of a process?
   1. high-level process map
   2. flowchart
   3. assembly chart
   4. break-even analysis
2. Breakthrough improvement is often implemented when opportunities for continuous improvement have been exhausted.

Ans. True

Difficulty: Moderate

Learning Objective: LO 5

1. Capital budgeting techniques are often one of the inputs used for technology decisions.

Ans. True

Difficulty: Moderate

Learning Objective: LO 6

1. What type of technology decisions that involve the outlay of funds?
   1. break-even analysis
   2. capital investment
   3. capital budgeting
   4. replacement analysis
2. Technology decisions are often a significant factor in process planning.

Ans. True

Difficulty: Moderate

Learning Objective: LO 6

Multiple Choice

1. A firm’s process strategy defines all of the following except its
2. capital intensity.
3. process flexibility.
4. vertical integration.
5. process selection.

Difficulty: Moderate

Learning Objective: LO 1

37. The extent to which the firm will produce the inputs and control the outputs of each stage of the production process is known as

1. vertical integration.
2. process flexibility.
3. process planning.
4. capital intensity.

Difficulty: Moderate

Learning Objective: LO 1

38. The ease of adjusting resources in response to changes in demand defines a firm’s

1. vertical integration.
2. process flexibility.
3. customer involvement.
4. capital intensity.

Difficulty: Easy

Learning Objective: LO 1

39. Variable demand and small-to-moderate quantities produced to-order are characteristics usually associated with

1. mass production.
2. continuous production.
3. projects.
4. batch production.

Difficulty: Moderate

Learning Objective: LO 2

40. Most of the operations in batch production involve

1. fabrication.
2. assembly.
3. continuous processing.
4. outsourcing.

Difficulty: Easy

Learning Objective: LO 2

41. A print shop is an example of which of the following process choices?

1. project
2. batch production
3. continuous production
4. mass production

Difficulty: Easy

Learning Objective: LO 2

42. Which of the following is not an advantage of batch production?

1. frequent changes in product mix
2. flexibility
3. customization of output
4. quality reputation

Difficulty: Moderate

Learning Objective: LO 2

43. Disadvantages of batch production include all of the following except

1. high per-unit costs.
2. frequent changes in product mix.
3. flexibility.
4. scheduling problems.

Difficulty: Hard

Learning Objective: LO 2

44. Complex scheduling problems are most likely to occur with which process type?

1. mass production
2. batch production
3. continuous production
4. None of these answer choices is correct.

Difficulty: Moderate

Learning Objective: LO 2

45. Which of the following is not a characteristic of mass production?

1. made-to-stock
2. stable demand
3. high product variety
4. high product volume

Difficulty: Easy

Learning Objective: LO 2

46. Mass production systems tend to employ

1. specialized equipment and limited labor skills.
2. specialized equipment and specialized labor skills.
3. general purpose equipment and limited labor skills.
4. general purpose equipment and specialized labor skills.

Difficulty: Easy

Learning Objective: LO 2

47. One disadvantage of mass production is its

1. efficiency.
2. speed of production.
3. low per-unit costs.
4. lack of responsiveness.

Difficulty: Easy

Learning Objective: LO 2

48. Steel, paper, paints, and chemicals are examples of products that use

1. batch production.
2. repetitive production.
3. continuous production.
4. mass production.

Difficulty: Moderate

Learning Objective: LO 2

49. As process selection moves up the diagonal from project to continuous production

1. demand volume increases.
2. product variety increases.
3. capital intensity decreases.
4. flexibility increases.

Difficulty: Moderate

Learning Objective: LO 3

50. A company is considering producing a product for a new market. The fixed cost required for manufacturing and delivering the product is $50,000. Labor and material costs are estimated to be approximately $25 per product. If the product is sold for $35.00 each, the firm’s breakeven volume would be

1. 50,000 units
2. 5,000 units
3. 2,500 units
4. 500 units

Difficulty: Hard

Learning Objective: LO 3

Solution: BE=50,000/(35-25)=5,000 units

51. If a firm can sell a product for $40 each, then what is the volume needed to breakeven if the fixed cost of production is $125,000 and labor and material costs are $30. per item?

1. 125,000
2. 12,500
3. 4,167
4. 3,250

Difficulty: Hard

Learning Objective: LO 3

52. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives.

The breakeven volume for Process A is

1. 50,000 units.
2. 62,500 units.
3. 30,000 units.
4. 20,000 units.

Difficulty: Hard

Learning Objective: LO 3

Solution: 500,000/(35-25)=50,000 units

53. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives.

The break-even volume for Process B is

1. 50,000 units.
2. 62,500 units.
3. 30,000 units.
4. 20,000 units.

Difficulty: Hard

Learning Objective: LO 3

Solution: 750000/(35-23)=62,500 units

54. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives

If total demand (volume) is 120,000 units, then the company should

1. select Process A with a profit of $940,000 to maximize profit
2. select Process B with a profit of $450,000 to maximize profit
3. select Process A with a profit of $700,000 to maximize profit
4. select Process B with a profit of $690,000 to maximize profit

Difficulty: Hard

Learning Objective: LO 3

Solution: Profit=120,000*($35-$25)-$500,000=$700,000

55. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives

If total demand (volume) is 150,000 units, then the company should

1. select Process A with a profit of $1,300,000 to maximize profit
2. select Process B with a profit of $750,000 to maximize profit
3. select Process A with a profit of $1,000,000 to maximize profit
4. select Process B with a profit of $1,050,000 to maximize profit

Difficulty: Hard

Learning Objective: LO 3

Solution: Profit=150,000*($35-$23)-$750,000=$1,050,000

56. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives

For what level of volume (output) would the firm prefer Process A to Process B?

1. for all volume levels greater than 75,000
2. for all volume levels greater than 97,500
3. for all volume levels greater than 117,500
4. for all volume levels greater than 125,000

Difficulty: Hard

Learning Objective: LO 3

Solution: $500,000+$25v=$750,000+$23v; v=125,000

57. A company is considering producing an item that can be sold for $37.50 per unit. If the fixed costs for setting up production are $225,000 and the variable cost per unit for the item is $35 then the breakeven volume for this item is

1. 6,000 units.
2. 6,429 units.
3. 72,500 units.
4. 90,000 units.

Difficulty: Hard

Learning Objective: LO 3
Solution: $225,000/($37.50-$35.00)=90,000 units

58. All the following are factors influencing the outsourcing decision except

1. capacity.
2. expertise.
3. quality.
4. product variety.

Ans. D

Difficulty: Moderate

Learning Objective: LO 1

59. The product-process matrix includes all the following process types except

1. mass production.
2. stable production.
3. continuous production.
4. batch production.

Ans. B

Difficulty: Moderate

Learning Objective: LO 2

60. Which of the following is not associated with the sourcing continuum?

1. Joint venture
2. In-house production
3. Strategic alliance
4. Single contract

Ans. B

Difficulty: Hard

Learning Objective: LO 1

61. Technology decisions typical in operations management include all the following areas except

1. information technology.
2. product technology.
3. process technology.
4. communication technology.

Ans. D

Difficulty: Moderate

Learning Objective: LO 6

1. Processes are analyzed for all the following reasons except
   1. speed-time-to-completion.
   2. for environmental considerations.
   3. to increase sustainability.
   4. All these answer choices are correct.
      Ans. D
      Difficulty: Moderate

Learning Objective: LO 4

1. All the following are basic tools of process analysis except
   1. flowcharts.
   2. diagrams.
   3. maps.
   4. spreadsheets.

Ans. D
Difficulty: Moderate

Learning Objective: LO 5

1. The first step in building a flowchart is to
   1. define process boundaries.
   2. map out the process
   3. determine objectives
   4. None of these answer choices is correct.

Difficulty: Moderate

Learning Objective: LO 5

1. Which of the following is not a standard label of the symbols used for the construction of a process flowchart?
   1. Improve
   2. Transport
   3. Operation
   4. Delay

Ans. A
Difficulty: Moderate

Learning Objective: LO 5

1. Process flowcharts document
   1. productive activities.
   2. nonproductive activities.
   3. Both productive and nonproductive activities.
   4. None of these answers is correct.

Ans. C
Difficulty: Moderate

Learning Objective: LO 5

1. Existing processes should be analyzed for improvement on a
   1. Continual basis.
   2. Sporadic basis
   3. As needed basis
   4. None of these answer choices is correct.

Ans. A
Difficulty: Moderate

Learning Objective: LO 5

1. When opportunities for continuous improvement of a process have been exhausted, it may be time to
   1. redesign or innovate.
   2. shut down the process.
   3. subcontract the production.
   4. All of these answer choices are correct.

Ans. A
Difficulty: Moderate

Learning Objective: LO 5

1. Typical performance improvement resulting from a process innovation project ranges from
   1. 5 to 10%.
   2. 25 to 50%.
   3. 50 to 100%.
   4. 100 to 200%.

Ans. C
Difficulty: Moderate

Learning Objective: LO 5

1. A high-level process map, useful in the beginning the redesign of a process, contain(s)
   1. detailed steps associated with each activity.
   2. essential building blocks of the main activities.
   3. both detailed steps and essential building blocks.
   4. None of these answer choices is correct.

Ans. B
Difficulty: Moderate

Learning Objective: LO 5

1. The first step in process innovation is to determine
   1. design principles.
   2. strategic directives.
   3. customer requirements.
   4. model validation.

Ans. B
Difficulty: Hard

Learning Objective: LO 5

1. Technology decisions
   1. involve large sums of money.
   2. definefuture capabilities.
   3. set the stage for competitive interactions.
   4. All of these answer choices are correct.

Ans. D
Difficulty: Moderate

Learning Objective: LO 6

1. Capital budgeting techniques, used to evaluate new technology, often examine
   1. purchase cost.
   2. operating costs.
   3. annual savings.
   4. All of these answer choices are correct.

Ans. D
Difficulty: Moderate

Learning Objective: LO 6

1. Which of the following is not a capital budgeting technique?
   1. Revenue enhancement
   2. Replacement analysis
   3. Risk and uncertainty
   4. All of these answer choices are correct.

Ans. D
Difficulty: Moderate

Learning Objective: LO 6

1. Which of the following is not an example of product technology?
   1. CAD
   2. PLM
   3. FMS
   4. CAE

Ans. A
Difficulty: Moderate

Learning Objective: LO 6

1. Which of the following is not an example of manufacturing technology?
   1. Robots
   2. AGV
   3. E-procurement
   4. Conveyors

Ans. C
Difficulty: Moderate

Learning Objective: LO 6

Short Answer Questions

77. What is a process strategy and how does it affect the firm?

Difficulty: Hard

Learning Objective: LO 1

78.List some noneconomic factors that can influence a firm’s outsourcing decision.

Difficulty: Moderate

Learning Objective: LO 1

79. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives:

What must be the demand if you are indifferent between process A and B?

a) 120,000

b) 122,000

c) 125,000

d) 126,000

80. A company is evaluating which of two alternatives should be used to produce a product that will sell for $p per unit. The following cost information describes the two alternatives:

What must be the price p so that the breakeven for process A is 42,000?

a) 35.5

b) 36.9

c) 37.5

d) 38.9

81. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives:

What must be the fixed cost for process B, FC_B, so that the profits for process B are $275,000?

a) $495,000

b) $505,000

c) $515,000

d) $525,000

82. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives:

What must be the fixed cost for process B, FC_B, so that the breakeven for process B is 50,000?

a) $600,000

b) $625,000

c) $650,000

d) $675,000

83. A company is evaluating which of two alternatives should be used to produce a product that will sell for $p per unit. The following cost information describes the two alternatives:

What must be the price p so that the breakeven for process A is equal to the breakeven for process B?

a) Processes A and B have different breakeven points for all possible prices p.

b) 28

c) 29

d) 30

84. A company is evaluating which of two alternatives should be used to produce a product that will sell for $p per unit. The following cost information describes the two alternatives:

What must be the price p so that the profit for process A is equal to the profit for process B?

a) There is no price p for which the profits of both processes would be equal.

b) 28

c) 29

d) 30

85. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives:

If the demand is 70000, what must be the variable cost of process B, VC_B, so that its profits are 50% larger than for process A?

a) $18

b) $20

c) $21

d) $22

86. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives:

If the demand is 70000 and you choose process A, then VC_B is __________.

a) larger than $20.83

b) less than $20.83

c) larger than $21.43

d) less than $21.43

87. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives:

If the demand is 70000 and breakeven for process B is 50% than for process B, then VC_B is __________.

a) $24

b) $25

c) $25.50

d) $25.75

88. A company is evaluating which of two alternatives should be used to produce a product that will sell for $35 per unit. The following cost information describes the two alternatives:

What must be the fixed cost for process B, FC_B, so that the breakeven for process B is 10% larger than for process A?

a) $615,000

b) $630,000

c) $645,000

d) $660,000