Deck 13: Sales and Operations Planning

Question 1

Decisions being made about the aggregate production plans represent what type of planning?

A)Strategic level planning
B)Tactical planning
C)Detailed operational planning
D)Long-term planning

Answer 1

Tactical planning

Question 2

If a make-to-stock manufacturing firm with highly seasonal demand follows a chase demand strategy, which of the following is likely to be true?

A)Inventory will fluctuate significantly during the year.
B)The production rate must be set equal to the demand in the heaviest demand period, and it must stay at that level all year.
C)It will be easy to keep the workforce size stable.
D)The firm likely will have higher capital investment than if it followed a level plan.

Answer 2

The firm likely will have higher capital investment than if it followed a level plan.

Question 3

Zanda Corp. and Jones Corp. are identical in every way (products produced, costs, demand, etc.) except for one. Zanda uses a level production plan while Jones prefers a chase production plan. Which of the following is most likely to be true?

A)Zanda will have higher investment in plant and equipment.
B)Zanda will have higher hiring and firing costs.
C)Zanda will have higher inventory carrying costs.
D)Zanda will have lower total production costs.

Answer 3

Zanda will have higher inventory carrying costs.

Question 4

Zanda Corporation is preparing an aggregate production plan for its product for the next four months. The company's expected monthly demand is given in the following chart. The company will have 100 units in inventory at the beginning of the month and wishes to maintain at least 100 units at the end of each month. Following is other critical data: Production cost per unit = $125
Inventory carrying cost per month per unit = $10 (based on ending month inventory)
Hiring cost per worker = $50
Firing cost per worker = $100
Beginning number of workers = 25
Each worker can produce 25 units per month. What is the total cost of a CHASE plan (using hiring/firing)?

A)$379,800
B)$379,000
C)$381,100
D)$380,300

Question 5

Wiedmer Corporation is preparing an aggregate production plan for widgets for the next four months. The company's expected monthly demand is given in the following chart. The company will have 50 widgets in inventory at the beginning of the first month and wishes to maintain at least that number at the end of each month.Following is other critical data: Production cost per unit = $50
Inventory carrying cost per month per unit = $10 (based on ending month inventory)
Hiring cost per worker = $300
Firing cost per worker = $200
Beginning number of workers = 16
Each worker can produce = 50 units per month.LEVEL PLAN What is the regular monthly actual production for a level plan?

A)800
B)1,000
C)1,250
D)1,500

Question 6

Generally speaking, the sales function and operations function differ in objectives. Which of the following is NOT one of those differences?

A)Sales prefers detailed forecasts for setting bonuses, operations prefers aggregate forecasts.
B)Sales prefers many product variations, operations prefers few variations.
C)Sales emphasizes revenue, operations emphasizes cost minimization.
D)All of these.

Question 7

Each month the sales and operations team at Johnson Company meets to develop plans for each of the next six months. This process is known as:

A)Collaborative planning and forecasting.
B)Rolling planning horizons.
C)Unconstrained planning.
D)Continuous planning.

Question 8

Jones Corporation is preparing an aggregate production plan for washers for the next four quarters. The company's expected quarterly demand is given in the following chart. The company will have 1,000 washers in inventory at the beginning of the year and wishes to maintain at least that number at the end of each quarter. Following is other critical data: Production cost per unit = $250
Inventory carrying cost per quarter per unit = $10 (based on quarter-ending inventory)
Hiring cost per worker = $1,000
Firing cost per worker = $2,000
Beginning number of workers = 10
Each worker can produce 100 units per quarter.Any worker on the staff at the end of the year will not be fired at that time. If Jones prefers a level plan, what will be the regular production rate per quarter?

A)5,000 units
B)4,000 units
C)6,000 units
D)Regular production will vary each month.

Question 9

Zanda Corporation is preparing an aggregate production plan for its product for the next four months. The company's expected monthly demand is given in the following chart. The company will have 100 units in inventory at the beginning of the month and wishes to maintain at least 100 units at the end of each month. Following is other critical data: Production cost per unit = $125
Inventory carrying cost per month per unit = $10 (based on ending month inventory)
Hiring cost per worker = $50
Firing cost per worker = $100
Beginning number of workers = 25
Each worker can produce 25 units per month. The total inventory carrying cost of a chase plan is:

A)$6,000
B)$4,000
C)$5,000
D)$4,500

Question 10

Zanda Corp. and Jones Corp. are identical in every way (products produced, costs, demand, etc.) except for one. Zanda uses a level production plan while Jones prefers a chase production plan. Which of the following is most likely to be true?

A)Jones will have higher investment in plant and equipment.
B)Jones will have higher hiring and firing costs.
C)Jones will have lower inventory carrying costs.
D)All of the options are true.

Question 11

Which of the following is true concerning sales and operations planning?

A)Once the plan is finalized, it should not be changed during the planning period.
B)There is a specific set of steps all firms should follow in the sales and operations planning process.
C)A benefit of the process is that the firm should achieve high service levels with lower inventory.
D)All of these are true.

Question 12

The focus of an aggregate production plan, in general, is on all of the following EXCEPT:

A)The intermediate-term future rather than the very short-term future.
B)Product lines rather than specific items.
C)Facilities and capital equipment rather than labor and inventory.
D)Inventory levels rather than new plants.
E)All of these are the focus of an aggregate production plan.

Question 13

Jones Corporation is preparing an aggregate production plan for washers for the next four quarters. The company's expected quarterly demand is given in the following chart. The company will have 1,000 washers in inventory at the beginning of the year and wishes to maintain at least that number at the end of each quarter. Following is other critical data: Production cost per unit = $250
Inventory carrying cost per quarter per unit = $10 (based on quarter-ending inventory)
Hiring cost per worker = $1,000
Firing cost per worker = $2,000
Beginning number of workers = 10
Each worker can produce 100 units per quarter.Any worker on the staff at the end of the year will not be fired at that time. Given this data, what is the inventory carrying cost of a LEVEL plan?

A)$100,000
B)$700,000
C)$70,000
D)$7,000

Question 14

Which type of aggregate production plan is likely to have the LEAST negative impact on the local community and the workforce?

A)Chase plan with hiring and firing
B)Chase plan with overtime
C)Level plan
D)The plans do not differ in their impact on the local community and the workforce.

Question 15

Wiedmer Corporation is preparing an aggregate production plan for widgets for the next four months. The company's expected monthly demand is given in the following chart. The company will have 50 widgets in inventory at the beginning of the first month and wishes to maintain at least that number at the end of each month.Following is other critical data: Production cost per unit = $50
Inventory carrying cost per month per unit = $10 (based on ending month inventory)
Hiring cost per worker = $300
Firing cost per worker = $200
Beginning number of workers = 16
Each worker can produce = 50 units per month.LEVEL PLAN What is the total inventory carrying cost for the level plan?

A)0
B)$6,000
C)$8,000
D)$6,500

Question 16

Which of the following is NOT one of the costs considered in aggregate production planning?

A)Subcontracting cost.
B)Capital equipment cost.
C)Inventory cost.
D)Firing (layoff) cost.
E)All of these are considered in aggregate production planning.

Question 17

If a company strongly prefers that its aggregate output plan be closer to a level plan than a chase plan, this implies that it is concerned about minimizing:

A) Inventory carrying costs.
B) Hiring and layoff costs.
C) Cost of subcontracting.
D) Both A and C.
E) Both B and C.

Question 18

If a make-to-stock manufacturing firm with highly seasonal demand follows a level production strategy, which of the following is likely to be true?

A)Inventory will fluctuate significantly during the year.
B)The production rate must be set equal to the demand in the heaviest demand period, and stay at that level all year.
C)It will be difficult to keep the workforce size stable.
D)The firm must make sure that its maximum capacity is at least as high as the heaviest demand period.

Question 19

Wiedmer Corporation is preparing an aggregate production plan for widgets for the next four months. The company's expected monthly demand is given in the following chart. The company will have 50 widgets in inventory at the beginning of the first month and wishes to maintain at least that number at the end of each month.Following is other critical data: Production cost per unit = $50
Inventory carrying cost per month per unit = $10 (based on ending month inventory)
Hiring cost per worker = $300
Firing cost per worker = $200
Beginning number of workers = 16
Each worker can produce = 50 units per month.LEVEL PLAN What is the total cost of the level plan?

A)$250,000
B)$260,700
C)$252,700
D)$258,000

Question 20

Jones Corporation is preparing an aggregate production plan for washers for the next four quarters. The company's expected quarterly demand is given in the following chart. The company will have 1,000 washers in inventory at the beginning of the year and wishes to maintain at least that number at the end of each quarter. Following is other critical data: Production cost per unit = $250
Inventory carrying cost per quarter per unit = $10 (based on quarter-ending inventory)
Hiring cost per worker = $1,000
Firing cost per worker = $2,000
Beginning number of workers = 10
Each worker can produce 100 units per quarter.Any worker on the staff at the end of the year will not be fired at that time. Given this data, what is the total cost of a LEVEL plan?

A)$5,000,000
B)$5,110,000
C)$5,140,000
D)$5,740,000

Question 21

Wiedmer Corporation is preparing an aggregate production plan for widgets for the next four months. The company's expected monthly demand is given in the following chart. The company will have 50 widgets in inventory at the beginning of the first month and wishes to maintain at least that number at the end of each month.Following is other critical data: Production cost per unit = $50
Inventory carrying cost per month per unit = $10 (based on ending month inventory)
Hiring cost per worker = $300
Firing cost per worker = $200
Beginning number of workers = 16
Each worker can produce = 50 units per month.LEVEL PLAN What is the inventory carrying cost of a chase plan accomplished through hiring and firing?

A)0
B)$200
C)$1,000
D)$2,000

Question 22

You are sitting next to a person in business class on a flight from Los Angeles to Sydney, Australia. You mention to that person that you got your ticket two months ago for only $12,500. The person responds that she bought her ticket two days ago for $7,800. This sometimes happens because airlines often use an approach called:

A)Capacity management.
B)Yield management.
C)Load management.
D)Workforce leveling.

Question 23

Which of the following is an advantage of a chase production strategy (as compared to a level plan)?

A)Low investment in equipment.
B)High inventory carrying cost.
C)Lower inventory investment.
D)All of these.

Question 24

John Jones, senior VP for Zanda Corp., is looking at three alternative aggregate production plans for the next six-month period. At his company, demand varies by month with substantial month-to-month differences. The three alternatives are a "pure level plan," which keeps an absolutely constant workforce, a "pure chase plan" relying on hiring and layoffs, and a hybrid plan. He is most likely to find that the hybrid plan:

A)Has lower inventory carrying cost than the level plan and lower hiring/layoff cost than the chase plan.
B)Has higher hiring/layoff cost than the chase plan and higher inventory carrying cost than the level plan.
C)Has lower inventory carrying cost than the chase plan and higher hiring/layoff cost than the level plan.
D)None of these.

Question 25

Dave's Stove-Top Popcorn currently has three full-time employees who are each paid $1,500 per month. An employee can only work a maximum of 100 hours per month because production normally takes place at night. They do receive $1,500 even if they do not work 100 hours, however. Part-time employees can be hired at a cost of $25 per hour. Dave's Stove-Top Popcorn has forecasted that demand for the next six months will be as follows: What is the total cost if Dave hires one more full-time employee to meet additional demand?

A)$30,750
B)$36,000
C)$40,750
D)$52,500

Question 26

Dave's Stove-Top Popcorn currently has three full-time employees who are each paid $1,500 per month. An employee can only work a maximum of 100 hours per month because production normally takes place at night. They do receive $1,500 even if they do not work 100 hours, however. Part-time employees can be hired at a cost of $25 per hour. Dave's Stove-Top Popcorn has forecasted that demand for the next six months will be as follows: What is the total cost if Dave relies on part-time employees to meet additional demand?

A)$43,500
B)$53,500
C)$70,500
D)$77,500

Question 27

Wiedmer Corporation is preparing an aggregate production plan for widgets for the next four months. The company's expected monthly demand is given in the following chart. The company will have 50 widgets in inventory at the beginning of the first month and wishes to maintain at least that number at the end of each month.Following is other critical data: Production cost per unit = $50
Inventory carrying cost per month per unit = $10 (based on ending month inventory)
Hiring cost per worker = $300
Firing cost per worker = $200
Beginning number of workers = 16
Each worker can produce = 50 units per month.LEVEL PLAN What is the total cost of a chase plan which uses only hiring/firing?

A)$257,000
B)$257,400
C)$257,600
D)$257,900

Question 28

Wiedmer Corporation is preparing an aggregate production plan for widgets for the next four months. The company's expected monthly demand is given in the following chart. The company will have 50 widgets in inventory at the beginning of the first month and wishes to maintain at least that number at the end of each month.Following is other critical data: Production cost per unit = $50
Inventory carrying cost per month per unit = $10 (based on ending month inventory)
Hiring cost per worker = $300
Firing cost per worker = $200
Beginning number of workers = 16
Each worker can produce = 50 units per month.LEVEL PLAN What is the total cost of hiring and firing the workers in a chase plan which uses only hiring and firing?

A)0
B)$800
C)$5,000
D)$6,400

Question 29

John Jones, senior VP for Zanda Corp., is looking at three alternative aggregate production plans for the next six-month period. At his company, demand varies by month with substantial month-to-month differences. The three alternatives are a "pure level plan," which keeps an absolutely constant workforce, a "pure chase plan" relying on hiring and layoffs, and a hybrid plan. He is most likely to find that the pure level plan:

A)Has lower inventory carrying cost than the hybrid plan.
B)Has higher hiring/layoff cost than the chase plan.
C)Has higher hiring/layoff cost than the hybrid plan.
D)None of these.

Question 30

How does aggregate planning for services differ from aggregate production planning for products?

A)There is no difference.
B)Demand for products typically is stated as the number of hours of labor required, whereas demand for services is generally stated as the number of units of service desired.
C)Most service plans are based primarily on labor requirements.
D)Service plans make extensive use of inventory to meet demand.