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Problem 8-1

A newly formed firm must decide on a plant location. There are two alternatives under consideration:
locate near the major raw materials or locate near the major customers. Locating near the raw materials
will result in lower fixed and variable costs than locating near the market, but the owners believe there
would be a loss in sales volume because customers tend to favor local suppliers. Revenue per unit will
be $187 in either case.

Annual fixed costs ($ millions)


Variable cost per unit
Expected annual demand (units)

Omaha Kansas City


$ 1.1
$ 1.2
$ 32
$ 46
9,650
10,700

Using the above information, determine which location would produce the greater profit. (Omit the "$"
sign in your response.)

Omaha

would produce the greater gross profit of $

395750

Problem 8-3
A small producer of machine tools wants to move to a larger building, and has identified two alternatives.
Location A has annual fixed costs of $130,000 and variable costs of $10,000 per unit; location B has
annual fixed costs of $330,000 and variable costs of $8,000 per unit. The finished items sell for $12,000
each.
a. At what volume of output would the two locations have the same total cost?

Volume of output

100

units

b-1. For what range of output would location A be superior?

Range of output

0 to

100

b-2. For what range would B be superior?

Range of output

100

or more

Problem 8-4
A company that produces pleasure boats has decided to expand one of its lines. Current facilities are
insufficient to handle the increased workload, so the company is considering three alternatives, A (new
location), B (subcontract), and C (expand existing facilities).
Alternative A would involve substantial fixed costs but relatively low variable costs: fixed costs would
be $255,000 per year, and variable costs would be $540 per boat. Subcontracting would involve a cost
per boat of $2,540, and expansion would require an annual fixed cost of $59,000 and a variable cost of
$1,060 per boat.

a. Find the range of output for each alternative that would yield the lowest total cost. (Leave no cells
blank - be certain to enter "0" wherever required. Round your answers to the nearest whole
number.)

377

or

more

to

40

40

to

377

b. Which alternative would yield the lowest total cost for an expected annual volume of 340 boats?
A
B
C

Problem 8-9
Location Score
Factor
(100 points each)
Convenience
Parking facilities
Display area
Shopper traffic
Operating costs
Neighborhood

Weight
.15
.20
.18
.27
.10
.10

A
86
78
90
91
98
88

B
85
78
89
92
95
91

C
78
92
90
85
90
85

1.00

a. Using the above factor ratings, calculate the composite score for each location. (Do not round
intermediate calculations. Round your final answers to 2 decimal places.)
Location

Composite Score

87.87

87.81

86.75

b. Determine which location alternative (A, B, or C) should be chosen on the basis of maximum
composite score.

A
B
C

Problem 8-12
A toy manufacturer produces toys in five locations throughout the country. Raw materials (primarily
barrels of powdered plastic) will be shipped from a new, centralized warehouse whose location is to be
determined. The monthly quantities to be shipped to each location are the same. A coordinate system
has been established, and the coordinates of each location have been determined as shown. Determine
the coordinates of the centralized warehouse. (Round and to 1 decimal place and optimal points
to the nearest whole number.)
(x,y)
7,7
8,3
6,6
4,1
6,3

Location
A
B
C
D
E

6.2

: Thus, location optimal at (

).

Problem 8-13
A clothing manufacturer produces womens clothes at four locations in Mexico. Relative locations have
been determined, as shown in the table below. The location of a central shipping point for bolts of cloth
must now be determined. Weekly quantities to be shipped to each location are also shown in the table.
Determine the coordinates of the location that will minimize distribution costs. (Round and to 1
decimal place and optimal points to the nearest whole number.)

Location
A
B
C
D

6.1

(x,y)
4,7
6,9
4,9
9,5

, =

7.3

Weekly
Quantity
15
20
25
30

: Thus, location optimal at (

).

MC Qu. 17 When service firms such as retailers or bank...


When service firms such as retailers or banks make growth-spurred location decisions, typically these involve:
finding new sources of resources to replace exhausted ones.
adding new locations rather than expanding existing ones.

closing down existing locations and opening new ones elsewhere.


expanding existing locations rather than adding new ones.
downsizing existing locations and opening new ones elsewhere.

MC Qu. 19 In regards to supply chain management and th...


In regards to supply chain management and the location decision, a primary challenge is to address
_______________ distribution.
insourced vs. outsourced
strategic vs. tactical
local vs. global
centralized vs. decentralized
anticipatory vs. reactive

MC Qu. 20 In general, managing global operations is ma...


In general, managing global operations is made easier by __________ and __________.
political uncertainty; currency devaluation
differentiation strategies; diversified markets
low interest rates; price-sensitive customers
cost-leadership strategies; labor productivity
freer trade; technology

MC Qu. 22 Locational cost-profit-volume analysis assum...


Locational cost-profit-volume analysis assumes:
(I) nonlinear variable costs.
(II) fixed costs that are constant over the range of possible output.
(III accurate estimates regarding the required level of output.
(IV) multiple products.
I, III, and IV only
II and III only
I, II, and III only
II, III, and IV only
I, II, III, and IV

MC Qu. 27 Which of the following is not a location opt...


Which of the following is not a location option that management can consider in location planning?
Expand an existing facility.
Add a new location.

Relocate from one location to another.


Do nothing.
All of the choices.

MC Qu. 33 Having facilities, personnel, and operations...


Having facilities, personnel, and operations located around the world is called:
nondomestic operations.
diversified operations.
globalization.
worldwide presence.
virtual organization.

MC Qu. 35 Location options do not usually include:


Location options do not usually include:
expansion.
a contract.
adding new facilities.
moving.
doing nothing.

MC Qu. 61 Which of the following is least important as...


Which of the following is least important as a consideration for a firm at the beginning of a supply chain?
access to end consumers
access to resources
proximity to customers
access to transportation infrastructure
access to productive labor

Concept Check
1.
What considerations determine the flexibility of the equipment used to create the product?
The product itself, the product variety, and the volume of the demand
2.
Why is it expensive to shut down a continuous process?

Due to the large volume of output of the operation.


3.
Why do assembly lines have little need for flexible equipment?
Each workstation is designed for a specific task.
4.
How can assembly lines create variety?
By combining individual modules
5.
How are process capabilities best matched to product or service requirements?
By understanding the Product-Process Matrix
6.
Most manufacturers seek which of the following goals?
To achieve the efficiency of a continuous process
MC Qu. 40 Key aspects of the process selection challen...
Key aspects of the process selection challenge include _________ and __________.
information technology; marketing strategy
process flexibility; marketing strategy
capital intensity; process flexibility
marketing strategy; operations strategy
capacity planning; marketing strategy

MC Qu. 44 Job shops tend to be __________ while contin...


Job shops tend to be __________ while continuous processes tend to be __________.
in services; in manufacturing
short-term and capital intensive; long-term and labor intensive
small scale and flexible; large-scale and inflexible
standardized; customized
low cost-per-unit; high cost-per-unit

MC Qu. 46 In an environment in which demand is both su...


In an environment in which demand is both substantial and stable, __________ technology tends to be the best
choice.
batch production
fixed automation
project production
programmable automation
flexible automation

MC Qu. 49 The type of processing system which is used ...


The type of processing system which is used for highly standardized products is:
continuous.
intermittent.
project.
batch.
unit.

MC Qu. 54 In which type of operation are you likely to...


In which type of operation are you likely to see, at most, only minor variations in the product or service being
produced using the same process and the same equipment?
a project
a job shop
repetitive production
batch processing
intermittent production

MC Qu. 56 An operations strategy for process selection...


An operations strategy for process selection should recognize that:
process selection seldom requires technical expertise.
engineering "white elephants" are uncommon.
there is little need to manage technology.
flexibility is not always the best choice.
most technical skills can be contracted out to consultants.

MC Qu. 57 Layout planning is required because of:(I) e...


Layout planning is required because of:
(I) efficient operations.
(II) accidents or safety hazards.

(III) new products or services.


(IV) morale problems.
I and II
II and IV
I and III
II, III, and IV
I, II, III, and IV

MC Qu. 60 Which type of processing system tends to pro...


Which type of processing system tends to produce the most product variety?
assembly
job shop
batch
continuous
project

MC Qu. 73 Layout design has many objectives, one of wh...


Layout design has many objectives, one of which is:
reduce bottlenecks.
move materials and workers simultaneously.
use workers and space efficiently.
hold material handling costs to 27 percent or less.
install computer terminals every 500 feet.

MC Qu. 65 Which one of the following is not considered...


Which one of the following is not considered an important factor in service layout design?
cost minimization and product flow
frequency of orders
customer attitude and image
intensity of contact with the customer
customer preferences with regard to variety

MC Qu. 66 The type of layout which features department...


The type of layout which features departments or other functional groupings in which similar activities are performed
is:
process.

product.
fixed-position.
mass.
unit.

MC Qu. 67 Which of the following is not true about pro...


Which of the following is not true about process layouts when they are compared to product layouts?
higher in-process inventories
lower span of supervision
lower rates of output
more involved cost accounting
lower unit costs

MC Qu. 76 In a product layout, the task of deciding ho...


In a product layout, the task of deciding how to assign work to specific stations is referred to as:
process balancing.
task allocation.
line balancing.
work allocation.
station balancing.

MC Qu. 79 A production line is to be designed for a jo...


A production line is to be designed for a job with three tasks. The task times are .3 minutes, 1.4 minutes, and .7
minutes. The minimum cycle time in minutes is:
.3.
.7.
1.4.
2.4.
.8.

MC Qu. 51 Giving a worker a larger portion of the tota...


Giving a worker a larger portion of the total task is known as job:
expansion.
enrichment.
enlargement.

rotation.
elimination.

MC Qu. 53 Asking a group of employees at a particular ...


Asking a group of employees at a particular level to take on more responsibility is a form of ___________ loading,
also known as job __________.
horizontal; enlargement
horizontal; rotation
vertical; rotation
vertical; enrichment
horizontal; enrichment

MC Qu. 54 Which of the following is not an advantage o...


Which of the following is not an advantage of time-based pay systems?
labor cost stability
incentives to increase output
ease of administration
stability of output
ease of pay computations

MC Qu. 56 Methods analysis is particularly valuable wh...


Methods analysis is particularly valuable when it is used on jobs that:
(I) are high in labor content.
(II) are done frequently.
(III) involve a high degree of automation and mechanization.
(IV) are unsafe, tiring, unpleasant, and/or noisy.
I, II, III, and IV
I, II, and IV only
II and III only
II and IV only
I and III only

MC Qu. 57 Behavioral approaches to job design include:


Behavioral approaches to job design include:
specialization.
ergonomics.
job rotation.

flow process charts.


simo charts.

MC Qu. 58 A major advantage of job specialization in b...


A major advantage of job specialization in business is increased:
motivation.
opportunity for advancement.
opportunity for self-fulfillment.
productivity.
job enrichment.

MC Qu. 62 A behavioral approach to job design which in...


A behavioral approach to job design which increases responsibility for planning and coordinating tasks is job:
enlargement.
rotation.
enrichment.
involvement.
enhancement.

MC Qu. 65 A simo chart includes:


A simo chart includes:
delay.
storage.
transportation.
left/right hand movements.
inspection.

MC Qu. 90 In work sampling, observations should be tak...


In work sampling, observations should be taken:
at the same time each day.
within a short period of time.
at randomly determined times.
once every hour.
once every day.

1.

If this new product is a low volume item with a large cost of passing along defective products,
what inspection plan would you recommend?
Intensive inspection
Intensive inspection

2.
Why should Jim Peterson collect the mean and range data for each sample rather than just the
mean measurements?
The range data allows process variability changes to be seen.
The range data allow s process variability changes to be seen.

3.
What might a higher frequency of sampling detect that a lower frequency of sampling might miss?
For example, what might sampling every 30 minutes detect that might be missed if samples are
taken every 4 hours?
High frequency fluctuations in the process.
High frequency fluctuations in the process.

4.
The oven process is charted, no points fall outside the control limits, and run tests do not indicate
anything special, so:
The process is stable.
The process is stable.

5.
Michelle would also like to monitor the percentage of items coming out of the oven that display
unacceptable surface cracking. Which chart should she use?
p-chart
p-chart

6.
The oven is a costly, irreversible process. In which place would you recommend inspection be
done?
Before the oven to ensure good parts are going into the oven

Before the oven to ensure good parts are going into the oven

7.

Michelle would like to improve the oven process; which do you recommend?
Add a sensor to alert the workers when the items have reached the proper temperature so that
they may remove the items promptly.
Add a sensor to alert the w orkers w hen the items have reached the proper temperature so that they may remove the items promptly.

1.
Which of the following sample sizes has the most narrow sampling distribution?
800
800

2.
In which step of the control process are the characteristics defined?
Define
Define

3.
When plotting sample statistics on a control chart, 99.7% of the sample statistic values are
expected to fall within plus/minus how many sigma?
3
3

4.
We measure the following values: 100, 90, 110. What is the range?
20
20

5.
A customer has specified that a tolerance of 10 to 20 mm is acceptable. Our process has a
standard deviation of 2 mm. What is the Cp?
0.833

0.833

6.
p-bar is 0.1, n = 20. What is sigma?
0.067

Problem 10-1
Specifications for a part for a DVD player state that the part should weigh between 25.3 and 26.3
ounces. The process that produces the parts has a mean of 25.8 ounces and a standard deviation of .26
ounce. The distribution of output is normal. Use Table-A.
a. What percentage of parts will not meet the weight specs? (Round your "z" value and final answer
to 2 decimal places. Omit the "%" sign in your response.)

5.46

Percentage of parts

b. Within what values will 99.74 percent of sample means of this process fall, if samples of n = 9 are
taken and the process is in control (random)? (Round your answers to 2 decimal places.)

Lower value

25.54

, Upper value

26.06

Problem 10-2
An automatic filling machine is used to fill 1-liter bottles of cola. The machines output is approximately
normal with a mean of .91 liter and a standard deviation of .04 liter. Output is monitored using means of
samples of 26 observations. Use Table-A.
a. Determine upper and lower control limits that will include roughly 97 percent of the sample means
when the process is in control. (Do not round intermediate calculations. Round your answers to
4 decimal places.)

Upper control limits:

.9270

Lower control limits:

.8930

liter
liter

b. Given these sample means: 1.005, 1.001, .998, 1.002, .995, and .999, is the process in control?
Yes
No

Problem 10-5

Using samples of 190 credit card statements, an auditor found the following:
Use Table-A.
Sample
Number with errors

1
4

2
2

3
6

4
8

a. Determine the fraction defective in each sample. (Round your answers to 4 decimal places.)
Sample

Fraction defective

.0211

.0105

.0316

.0421

b. If the true fraction defective for this process is unknown, what is your estimate of it? (Round your
answer to 1 decimal place. Omit the "%" sign in your response.)

2.6

Estimate

c. What is your estimate of the mean and standard deviation of the sampling distribution of fractions
defective for samples of this size? (Round your intermediate calculations and final answers to 4
decimal places.)

Mean

.0263

Standard deviation

.0116

d. What control limits would give an alpha risk of .03 for this process? (Round your intermediate
calculations to 4 decimal places. Round your "z" value to 2 decimal places and other answers
to 4 decimal places.)

z=

2.17

.0011

to

.0515

e. What alpha risk would control limits of .047 and .006 provide? (Round your intermediate
calculations to 4 decimal places. Round your "z" value to 2 decimal places and "alpha risk"
value to 4 decimal places.)

z=

1.78

, alpha risk =

.8233

f. Using control limits of .047 and .006, is the process in control?


yes
no

g. Suppose that the long-term fraction defective of the process is known to be 2 percent. What are the
values of the mean and standard deviation of the sampling distribution? (Round your intermediate
calculations and final answers to 2 decimal places.)

Mean

.02

Standard deviation

.01

h. Construct a control chart for the process, assuming a fraction defective of 2 percent, using two-sigma
control limits. Is the process in control?
Yes
No

Problem 10-7
The postmaster of a small western town receives a certain number of complaints each day about mail
delivery.

Number of complaints

1 2 3
4 10 14

4
8

5
9

6
6

DAY
7 8 9 10 11 12 13 14
5 13 13 7 6 4 2 9

a. Determine three-sigma control limits using the above data. (Round your intermediate calculations
to 4 decimal places and final answers to 3 decimal places. Leave no cells blank - be certain to
enter "0" wherever required. Round up any negative control limit value to zero.)

UCL

16.266

LCL

b. Is the process in control?


Yes

No

MC Qu. 50 Quality control tools are not really used to...


Quality control tools are not really used to fix quality so much as they are used to:
highlight when processes are not capable.
point out when random variation is present.
alert when corrective action is needed.
monitor the quality of incoming shipments or outgoing finished goods.
initiate team-building exercises.

MC Qu. 53 Acceptance sampling, when it is used, is use...


Acceptance sampling, when it is used, is used:
(I) before production.
(II) during production.
(III) after production.
I only
I and III only
I and II only
II and III only
I, II, and III

MC Qu. 57 A time-ordered plot of representative sample...


A time-ordered plot of representative sample statistics is called a(n):
Gantt chart.
simo chart.
control chart.
up-down matrix.
standard deviation table.

MC Qu. 58 A control chart used to monitor the process ...


A control chart used to monitor the process mean is the:
p-chart.
R-chart.
x-bar chart.
c-chart.
Gantt chart.