Deck 13: Aggregate Planning

Question 1

One motive for using demand-influencing aggregate planning options is to create uses for excess capacity within an organization.

Answer 1

True

Question 2

Advertising and promotion are methods of manipulating product or service supply in aggregate planning.

Answer 2

False

Question 3

Because service firms do not inventory their output, pure chase strategy is not appropriate.

Answer 3

False

Question 4

The level scheduling strategy allows lower inventories than the pure chase strategy.

Question 5

Graphical techniques are easy to understand and use, but are not well-suited for generating optimal strategies.

Question 6

In aggregate planning, one of the adjustable elements of capacity is the extent of subcontracting.

Question 7

The only objective of aggregate planning is to minimize the cost of matching capacity to demand over the planning period.

Question 8

One of the four things needed for aggregate planning is a logical overall unit for measuring sales and output.

Question 9

Aggregate planning occurs over the medium or intermediate future of 3 to 18 months.

Question 10

Mixed strategies in aggregate planning utilize inventory, work force, and production rate changes over the planning horizon.

Question 11

The strategies of aggregate planning are broadly divided into demand options and capacity options.

Question 12

The aggregate planning process usually includes expediting and dispatching of individual products.

Question 13

Finding an ideal mixed strategy is complicated by the huge number of possible strategies.

Question 14

Aggregate planning in manufacturing ties organizational strategic goals to a production plan.

Question 15

One of the demand options of aggregate planning is to vary the workforce by hiring or layoffs.

Question 16

Disaggregation is the process of breaking the aggregate plan into greater detail; one example of this detail is the Master Production Schedule.

Question 17

The use of part-time workers as an aggregate planning option may be less costly than using full-time workers, but may also reduce quality levels.

Question 18

In aggregate planning, the amount of overtime and the size of the work force are both adjustable elements of capacity.

Question 19

One question that operations managers must ask when generating an aggregate plan is what factors are likely to influence demand and by how much.

Question 20

Plans for new product development generally fall within the scope of aggregate planning.

Question 21

Disaggregation

A) breaks the aggregate plan into greater detail
B) transforms the master production schedule into an aggregate plan
C) calculates the optimal price points for yield management
D) converts product schedules and labor assignments to a facility-wide plan
E) is an assumption required for the use of the transportation model in aggregate planning

Question 22

Aggregate planning would entail which of the following production aspects at BMW for a 12 month period?

A) number of cars with a hi-fi stereo system to produce
B) number of two-door vs. four-door cars to produce
C) number of green cars to produce
D) total number of cars to produce
E) B, C, and D

Question 23

Which of the following statements about aggregate planning is false?

A) Hiring, layoffs, overtime, and subcontracting are methods of manipulating capacity.
B) Aggregate planning produces a plan detailing which products are made and in what quantities.
C) Yield management is a way of manipulating product or service demand.
D) Aggregate planning uses the adjustable part of capacity to meet production requirements.
E) The transportation method is an optimizing technique for aggregate planning.

Question 24

Which of the following would most likely fall under the scope of only an operations manager?

A) research and development
B) new product plans
C) capital investments
D) facility location and expansion
E) setting inventory levels

Question 25

Frito-Lay uses aggregate planning to match capacity with demand because of the __________ associated with its specialized processes.

A) high variable cost and high fixed cost
B) high variable cost and low fixed cost
C) low variable cost and high fixed cost
D) low variable cost and low fixed cost
E) none of the above

Question 26

Planning tasks associated with loading, sequencing, expediting, and dispatching typically fall under

A) short-range plans
B) intermediate-range plans
C) long-range plans
D) mission-related planning
E) strategic planning

Question 27

Which of the following inputs helps an aggregate planner select the rate of output for a facility over the next 3 to 18 months?

A) facility capacity
B) inventory on hand
C) workforce size
D) demand forecasts
E) all of the above

Question 28

Which of the following is the term used for medium range capacity planning with a time horizon of three to eighteen months?

A) material requirements planning
B) short-range planning
C) strategic planning
D) aggregate planning
E) none of the above

Question 29

Aggregate planning for fast food restaurants is very similar to aggregate planning in manufacturing, but with much smaller units of time.

Question 30

The transportation method of linear programming is an optimizing approach to aggregate planning.

Question 31

The planning tasks associated with staffing, production, inventory, and sub-contracting levels typically fall under

A) short-range plans
B) intermediate-range plans
C) long-range plans
D) demand options
E) strategic planning

Question 32

The management coefficients model is a formal planning model built around a manager's experience and performance.

Question 33

Which of the following statements about aggregate planning is true?

A) Advertising/promotion is a way of manipulating product or service supply.
B) Work station loading and job assignments are examples of aggregate planning.
C) Overtime/idle time is a way of manipulating product or service demand.
D) Aggregate planning uses the adjustable part of capacity to meet production requirements.
E) All of the above are true.

Question 34

The objective of aggregate planning is to meet demand while __________ over the planning period.

A) minimizing cost
B) maximizing service level
C) minimizing stock out
D) minimizing fixed cost
E) all of the above

Question 35

A hotel room that goes unrented and an airline seat that goes unsold are both examples of perishable inventory in services.

Question 36

Controlling the cost of labor in services involves quick response to consumer demand, on-call labor for unexpected demand, flexibility of labor for reallocation, and flexibility of hours or rate of output of individual workers.

Question 37

Aggregate planning is capacity planning for

A) the long range
B) the intermediate range
C) the short range
D) typically one to three months
E) typically three or more years

Question 38

Which of the following is not one of the four things needed for aggregate planning?

A) a logical overall unit for measuring sales and output
B) a method for determining costs, such as hiring, layoffs, and inventory costs, associated with production schedules
C) a mathematical model that will minimize costs over the intermediate planning period
D) an aggregate demand forecast for an intermediate planning period
E) All of these are needed for aggregate planning.

Question 39

The typical time horizon for aggregate planning is

A) less than a month
B) up to 3 months
C) 3 to 18 months
D) over one year
E) over 5 years

Question 40

Top executives tend to focus their attention on which type of forecasts?

A) short-range
B) medium-range
C) long-range
D) weather
E) the forecast for the next day's absentee levels

Question 41

Which choice below best describes the counterseasonal demand option?

A) producing such products as lawnmowers and sunglasses during the winter
B) developing a mix of products that smoothes out their demands
C) lowering prices when demand is slack
D) using subcontractors only when demand is excessive
E) the breaking of the aggregate plan into finer levels of detail

Question 42

Which of the following aggregate planning strategies is a "capacity option"?

A) influencing demand by changing price
B) counterseasonal product mixing
C) influencing demand by extending lead times
D) changing inventory levels
E) influencing demand by back ordering

Question 43

In aggregate planning, which one of the following is not a basic option for altering demand?

A) promotion
B) subcontracting
C) back ordering
D) pricing
E) All are demand options.

Question 44

Which of the following is not consistent with a pure level strategy?

A) varying the use of subcontracting
B) finding alternative work for employees during low-demand periods
C) using built-up inventory to meet demand requirements
D) varying production levels and/or work force to meet demand requirements
E) All of the above are inconsistent with the pure level strategy.

Question 45

Which choice best describes level scheduling?

A) Daily production is variable from period to period.
B) Subcontracting, hiring, and layoffs manipulate supply.
C) Price points are calculated to match demand to capacity.
D) Inventory goes up or down to buffer the difference between demand and production.
E) Seasonal demand fluctuations are matched without hirings or layoffs.

Question 46

Which of the following statements about aggregate planning is true?

A) The development of mathematical models has allowed aggregate planners to discontinue use of trial-and-error methods.
B) In aggregate planning, back orders are a means of manipulating supply while part-time workers are a way of manipulating product or service demand.
C) A pure chase strategy allows lower inventories when compared to pure level scheduling.
D) Disaggregation turns the master production schedule into an intermediate term master plan.
E) All of the above are true.

Question 47

Which of the following aggregate planning strategies is a "demand option"?

A) changing price
B) subcontracting
C) varying production levels
D) changing inventory levels
E) using part-time workers

Question 48

Which of the following aggregate planning strategies is known to lower employee morale?

A) yield management
B) counterseasonal product and service mixing
C) changing inventory levels
D) varying work force size by hiring or layoffs
E) back ordering during high demand periods

Question 49

Which of these aggregate planning strategies adjusts capacity to match demand?

A) back ordering
B) using part-time workers
C) counterseasonal product mixing
D) changing price
E) None of the above is a capacity option.

Question 50

Dependence on an external source of supply is found in which of the following aggregate planning strategies?

A) varying production rates through overtime or idle time
B) subcontracting
C) using part-time workers
D) back ordering during high demand periods
E) hiring and laying off

Question 51

Which of the following is not an advantage of level scheduling?

A) stable employment
B) lower absenteeism
C) matching production exactly with sales
D) lower turnover
E) more employee commitment

Question 52

Which of these is among the demand options of aggregate planning?

A) subcontracting
B) back-ordering during high-demand periods
C) changing inventory levels
D) varying workforce size
E) All of the above are demand options.

Question 53

In level scheduling, what is kept uniform from month to month?

A) product mix
B) inventory levels
C) production/workforce levels
D) demand levels
E) sub-contracting levels

Question 54

Which of the following is consistent with a pure chase strategy?

A) vary production levels to meet demand requirements
B) vary work force to meet demand requirements
C) vary production levels and work force to meet demand requirements
D) little or no use of inventory to meet demand requirements
E) All of the above are consistent with a pure chase strategy.

Question 55

Which of the following is not associated with manipulation of product or service demand?

A) price cuts or discounts
B) promotion
C) subcontracting
D) counterseasonal products or services
E) advertising

Question 56

What directly results from disaggregation of an aggregate plan?

A) a master production schedule
B) priority scheduling
C) a transportation matrix
D) a capacity-demand matrix
E) detailed work schedules

Question 57

Which of the following aggregate planning strategies might direct your client to a competitor?

A) using part-time workers
B) subcontracting
C) changing inventory level
D) varying production rates through overtime or idle time
E) varying work force size by hiring or layoffs

Question 58

Which of the following attempts to manipulate product or service demand?

A) inventories
B) part-time workers
C) subcontracting
D) overtime/idle time
E) price cuts

Question 59

A firm uses the pure chase strategy of aggregate planning. It produced 1000 units in the last period. Demand in the next period is estimated at 800, and demand over the next six periods (its aggregate planning horizon) is estimated to average 900 units. In following the chase strategy, the firm will

A) add 100 units to inventory in the next period
B) add 200 units to inventory in the next period
C) hire workers to match the 100 unit difference
D) lay off workers to match the 200 unit difference
E) implement a lower price point to increase demand

Question 60

Which of the following statements regarding aggregate planning is true?

A) In a pure level strategy, production rates or work force levels are adjusted to match demand requirements over the planning horizon.
B) A pure level strategy allows lower inventories when compared to pure chase and hybrid strategies.
C) In a mixed strategy, there are changes in both inventory and in work force and production rate over the planning horizon.
D) Because service firms have no inventory, the pure chase strategy does not apply.
E) All of the above are true.

Question 61

"Yield management" is best described as

A) a situation where management yields to labor demands
B) a situation where the labor union yields to management demands
C) a process designed to increase the rate of output
D) capacity allocation to different classes of customers in order to maximize profits
E) management's selection of a product mix yielding maximum profits

Question 62

Which of the following statements regarding aggregate planning in services is false?

A) When outputs are intangible, aggregate planning deals mainly with human resource requirements and managing demand.
B) Perishability of inventory is an important consideration of planning.
C) Aggregate planning in some service industries can be simpler than in manufacturing.
D) Labor is the primary aggregate planning vehicle.
E) Level scheduling is far more common than chase.

Question 63

Which of the following is not an ingredient for controlling labor cost in services?

A) accurate scheduling of labor-hours to assure quick response to customer demand
B) an on-call labor resource that can be added or deleted to meet unexpected demand
C) contract overseas labor to obtain a lower wage scale
D) flexibility of individual worker skills that permits reallocation of available labor
E) flexibility in rate of output or hours of work to meet changing demand

Question 64

A firm's demand in the next four quarters (its aggregate planning horizon) is forecast to be 80, 50, 40, and 90 units. Last quarter, the firm produced 60 units. If it uses level scheduling, the firm will.

A) hire workers to permit production of 65 units per quarter for the next four quarters
B) hire 20 workers
C) have an increase in inventory of 20 units in the next quarter
D) have a decrease in inventory of 5 units in the next quarter
E) change its workforce each quarter so that inventory does not change

Question 65

Industries in which quadrant of the Yield Management Matrix are traditionally associated with revenue management? (In other words, in which quadrant are yield management techniques easiest to apply?)

A) use tends to be predictable and price tends to be fixed
B) use tends to be predictable and price tends to be variable
C) use tends to be uncertain and price tends to be fixed
D) use tends to be uncertain and price tends to be variable
E) all of the above; there is no difference

Question 66

One reason complex models have not found widespread use and application is that

A) managers are lazy
B) managers cannot understand how they work
C) the models are inaccurate
D) good models are time-consuming and managers must often react swiftly to dynamic demand
E) the statement is false; complex models are widely used and accepted

Question 67

__________ is the process of breaking the aggregate plan into greater detail.

Question 68

Aggregate planning for service firms that provide intangible output deals mainly with

A) smoothing the production rate and finding the optimal size of the workforce
B) capital investment decisions
C) centralized purchasing
D) centralized production
E) planning for human resource requirements and managing demand

Question 69

__________ is an approach to determine the quantity and timing of production for the intermediate future.

Question 70

A firm uses graphical techniques in its aggregate planning efforts. Over the next twelve months (its intermediate period) it estimates the sum of demands to be 105,000 units. The firm has 250 production days per year. In January, which has 22 production days, demand is estimated to be 11,000 units. A graph of demand versus level production will show that

A) the January requirement is below level production of 420 units
B) level production is approximately 1000 units per day
C) level production of 420 units per day is below the January requirement
D) level production is approximately 420 units per month
E) the firm must hire workers between December and January

Question 71

Which of the following aggregate planning methods does not work if hiring and layoffs are possible?

A) the linear decision rule
B) simulation
C) the management coefficients model
D) the transportation method
E) graphical methods

Question 72

Which of the following uses regression to incorporate historical managerial performance into aggregate planning?

A) transportation method
B) simulation
C) linear decision rule
D) management coefficients model
E) keiretsu

Question 73

"An optimal plan for minimizing the cost of allocating capacity to meet demand over several planning periods" best describes

A) the linear decision rule
B) simulation
C) the management coefficients model
D) the transportation method
E) graphical methods

Question 74

Yield management is most likely to be used in which one of the following situations?

A) a fast food restaurant with wide demand fluctuations during the day
B) a dental clinic that wants to fill its appointment book
C) a firm with a good counterseasonal product mix
D) a shipping company that can change its fleet size easily
E) an airline attempting to fill "perishable" seats at maximum revenue

Question 75

Which of the following aggregate planning models is based primarily upon a manager's past experience?

A) the linear decision rule
B) simulation
C) the management coefficients model
D) the transportation method
E) graphical methods

Question 76

A manager is applying the transportation model of linear programming to solve an aggregate planning problem. Demand in period 1 is 100 units and in period 2 demand is 150 units. The manager has 125 hours of regular employment available for $10/hour each period. In addition, 50 hours of overtime are available for $15/hour each period. If holding costs are $2 per unit each period, how many hours of regular employment should be used in period 1 (assume demand must be met in both periods 1 and 2 for the lowest possible cost and that production is 1 unit per hour)?

A) 100
B) 125
C) 150
D) 50
E) none of the above

Question 77

To use yield management strategies a business should have which combination of costs?

A) high variable and high fixed
B) low variable and high fixed
C) high variable and low fixed
D) low variable and low fixed
E) either A or B

Question 78

Which of the following actions is consistent with the use of pure level strategy?

A) use inventory to meet demand requirements
B) use overtime to meet higher-than-average demand requirements
C) vary production levels to meet demand requirements
D) vary work force to meet demand requirements
E) none of the above

Question 79

Which of these is not a characteristic that makes yield management attractive to organizations that have perishable inventory?

A) demand can be segmented
B) service can be sold in advance of consumption
C) capacity is easily changed
D) variable costs are low and fixed costs are high
E) demand fluctuates

Question 80

A firm practices the pure chase strategy. Production last quarter was 1000. Demand over the next four quarters is estimated to be 900, 700, 1000, and 1000. Hiring cost is $20 per unit, and firing cost is $5 per unit. Over the next year, the sum of hiring and layoff costs will be

A) $500
B) $2,500
C) $7,500
D) $7,000
E) $12,500