Operations Management – Chapter 12

1. MRP works best if the inventory items have dependent demand.

• True
• False

TRUE MRP is best for dependent demand scenarios.

2. Low level coding represents items less than $18 per unit.

• True
• False

FALSE Low-level coding codes items at their lowest BOM levels.

3. Independent demand tends to be more ‘lumpy’ than dependent demand meaning that we need large quantities followed by periods of no demand.

• True
• False

FALSE Dependent demand is more lumpy.

4. Lumpy demand for components results primarily from the periodic scheduling of batch production.

• True
• False

TRUE Batch production leads to lumpy demand for components.

5. MRP is used within most MRP II and ERP systems.

• True
• False

TRUE MRP II and ERP systems incorporate MRP.

6. The master production schedule states which end items are to be produced, in addition to when and how many.

• True
• False

TRUE These are critical inputs into MRP.

7. Net requirements equal gross requirements minus safety stock.

• True
• False

FALSE If safety stock is required, net requirements will be higher.

8. The master schedule needs to be for a period long enough to cover the stacked or cumulative lead time necessary to produce the end items.

• True
• False

TRUE This ensures that materials plans can be adequately formulated.

9. Initially, a master production schedule – the output from MRP – may not represent a feasible schedule.

• True
• False

TRUE Management must make more detailed capacity requirements planning to determine whether these more specific capacity requirements can be met and some adjustments in the master production schedule may be required.

10. MRP, considering inventory position, bills of material, open purchase orders and lead times guarantees a feasible production plan if the inputs to MRP are accurate.

• True
• False

FALSE MRP may lead to an infeasible production plan if capacity requirements are not considered.

11. The bill of materials indicates how much material will be needed to produce the quantities on a given master production schedule.

• True
• False

FALSE The bill of materials indicates how much material will be needed to produce one unit of the item in question.

12. A bill of materials contains a listing of all the assemblies, parts, and materials needed to produce one unit of an end item.

• True
• False

TRUE The bill of materials indicates how much material will be needed to produce one unit of the item in question.

13. The bill of materials contains information on lead times and current inventory position on every component required to produce the end item.

• True
• False

FALSE Inventory records contain this information.

14. The inventory records contain information on the status of each item by time period.

• True
• False

TRUE Inventory records also contain information on lead times and current inventory position.

15. An assembly-time chart indicates gross and net requirements taking into account the current available inventory.

• True
• False

FALSE Assembly-time charts have to do with capacity, not inventory.

16. MRP II did not replace or improve the basic MRP.

• True
• False

TRUE MRP II incorporates basic MRP.

17. The gross requirements at one level of an MRP plan determine the gross requirements at the next lower level continuing on down to the lowest levels shown on the bill of material.

• True
• False

FALSE Released order quantities at one level determine gross requirements at the next lower level.

18.  The gross requirements value for any given component is equal to the net requirements of that component’s immediate parent multiplied by the quantity per parent.

• True
• False

FALSE Released order quantities for the parent lead to gross requirements of the child.

19. The term pegging refers to identifying the parent items that have generated a given set of material requirements for a part or subassembly.

• True
• False

TRUE Pegging ties items to their parents.

20.  A net-change MRP system is one that is updated periodically but not less frequently than once a week.

• True
• False

FALSE A net-change system is updated as transactions occur.

21. One reason that accurate bills of material are important is that errors at one level become magnified at lower levels because of the multiplication process used by MRP.

• True
• False

TRUE Small higher-level errors can be magnified into larger lower-level errors.

22.  A regenerative MRP system is one that is updated continuously – every time there is a schedule change.

• True
• False

FALSE Regenerative systems are updated periodically.

23. One of the primary output reports of MRP concerns changes to planned orders.

• True
• False

TRUE Changes to planned orders can be outputs from MRP systems.

24.  Safety time is sometimes used in MRP rather than safety stock quantities.

• True
• False

TRUE Safety time is a substitute for safety stock.

25.  Lot-for-lot ordering in MRP provides coverage for some predetermined number of periods using forecasted demand to extend beyond the orders already received for those periods.

• True
• False

FALSE This is fixed-period ordering.

26.  MRP output reports are divided into two main groups – daily and weekly.

• True
• False

FALSE The two groups are primary and secondary.

27. In MRP, EOQ models tend to be less useful for materials at the lowest levels than for upper level assemblies of the bill of materials since higher-level assemblies have larger dollar investments.

• True
• False

FALSE EOQ is more useful at lower levels since lower-level items often have less lumpy demand.

28.  Load reports show capacity requirements for departments or work centers which may be more or less than the capacity available in that work center.

• True
• False

TRUE Load reports facilitate the formulation of feasible production schedules.

29. ERP began in manufacturing organizations but has spread into service organizations.

• True
• False

TRUE Over time ERP has spread into a wide variety of organizations.

30.  MRP II is simply an improved version of MRP that processes faster and can plan for a larger number of end items.

• True
• False

FALSE MRP II takes into account capacity requirements.

31. Lot-for-lot ordering in MRP eliminates the holding costs for parts that are carried over to other periods.

• True
• False

TRUE Lot-for-lot ordering minimizes holding costs.

32. Capacity requirements planning (CRP) is an important feature in MRP+.

• True
• False

FALSE CRP is a feature of MRP II.

33. Project Management approaches can help in a conversion to an ERP system.

• True
• False

TRUE ERP conversions can be complex projects.

34.  As long as a forecast is plus or minus 10%, MRP works well.

• True
• False

FALSE MRP needs accurate forecasts.

35. ERP represents an expanded effort to integrate standardized record-keeping that shares information among different areas of an organization.

• True
• False

TRUE ERP is intended to facilitate consistent decision-making across the organization.

36. Back flushing takes place after the production has been completed.

• True
• False

TRUE Records are updated based on end-item production.

37. Before a schedule receipt can take place, and order must be placed with a vendor.

• True
• False

TRUE A scheduled receipt is an order that has already been placed.

38. MRP really doesn’t apply to services since raw material isn’t required.

• True
• False

FALSE MRP can be used in services.

39. ERP implementation requires support and a direct mandate from the CEO because it impacts so many different functional areas.

• True
• False

TRUE ERP implementation is an organization-wide initiative.

40. ERP automates the tasks involved in performing a business process, such as order fulfillment and financial reporting.

• True
• False

TRUE ERP extends beyond purchasing and materials management.

41. Which of the following most closely describes dependent demand?

• A. demand generated by suppliers
• B. estimates of demand using regression analysis of independent variables
• C. erived demand
• D. demands placed on suppliers by their customers
• E. net material requirements

C

42. ERP implementation probably won’t require:

• A. cross functional teams
• B. just a few weeks to install
• C. intensive training
• D. high funding for both initial cost and maintenance
• E. frequent upgrades after installation

B

43. A computer-based information system designed to handle ordering and scheduling of dependent-demand inventories is:

• A. computer aided manufacturing (CAM)
• B. computer integrated manufacturing (CIM)
• C. economic order quantity (EOQ)
• D. material requirements planning (MRP)
• E. conomic run size (ERS)

D

44. The development and application of MRP depended upon two developments:

(1) the recognition of the difference between independent and dependent demand, and (2):

• A. computers
• B. development of the EOQ model
• C. inventory control systems
• D. blanket purchase orders
• E. the internet

A

45. The output of MRP is:

• A. gross requirements
• B. net requirements
• C. a schedule of requirements for all parts and end items
• D. inventory reorder points
• E. economic order quantities and reorder points

C

46. Which one of the following is not an input in an MRP system?

• A. planned-order schedules
• B. bill of materials
• C. master production schedule
• D. inventory records
• E. All are inputs.

A

47. The MRP input stating which end items are to be produced, when they are needed, and what quantities are needed, is the:

• A. master schedule
• B. bill-of-materials
• C. inventory-records
• D. assembly-time chart
• E. net-requirements chart

A

48. In an MRP master schedule, the planning horizon is often separated into a series of times periods called:

• A. pegging
• B. lead times
• C. stacked lead times
• D. time buckets
• E. firm, fixed and frozen

D

49. The MRP input listing the assemblies, subassemblies, parts, and raw aterials needed to produce one unit of finished product is the:

• A. master production schedule
• B. bill-of-materials
• C. inventory-records
• D. assembly-time chart
• E. net-requirements chart

B

50. A visual depiction of the subassemblies and components that are needed to produce and/or assemble a product is called a(n):

• A. assembly time chart
• B. product structure tree
• C. MRP II
• D. pegging
• E. Gantt chart

B

51. The MRP input storing information on the status of each item by time period (e. g. , scheduled receipts, lead time, lot size) is the:

• A. master production schedule
• B. bill-of-materials
• C. inventory-records
• D. assembly-time chart
• E. net-requirements chart

C

52. Which one of the following most closely describes net material requirements?

• A. gross requirements – amount on-hand – scheduled receipts
• B. gross requirements – planned receipts
• C. gross requirements – order releases + amount on-hand
• D. gross requirements – planned order releases
• E. gross requirements – amount on-hand + planned order releases

A

53. In MRP, “scheduled receipts” are:

• A. identical to “planned-order receipts”
• B. identical to “planned-order releases”
• C. open orders (that is, ordered before the first time bucket, but not delivered yet)
• D. net requirements”
• E. available to promise inventory

C

54. In MRP, under lot-for-lot ordering, “planned-order receipts” are:

• A. identical to “scheduled receipts”
• B. identical to “planned-order releases”
• C. open orders (that is, ordered before the first time bucket, but not delivered yet)
• D. “gross requirements”
• E. available to promise inventory

B

55. Under lot-for-lot, order sizes for component parts are essentially determined directly from which one of the following?

• A. gross requirements
• B. net requirements
• C. economic order quantity
• D. gross requirements – net requirements
• E. net requirements – amount on-hand

B

56. In MRP, the gross requirements of a given component part are calculated from:

• A. net requirements + amount on-hand.
• B. gross requirements of the immediate parent.
• C. planned orders of the end item.
• D. net requirements of end item.
• E. planned orders of the immediate parent.

E

57. The identification of parent items is called:

• A. Paternity
• B. Pegging
• C. Requirement I. D.
• D. Relationship tracking
• E. Master Scheduling

B

58. Periodic updating of an MRP system to account for all changes which have occurred within a given time interval is called:

• A. pegging
• B. planned order release
• C. et change
• D. regenerative
• E. exception report

D

59. An MRP system whose records are updated continuously is referred to as a(n):

• A. regenerative system
• B. batch-type system
• C. Plossl-Wright system
• D. net-change system
• E. gross-change system

D

60. Which is true of a net-change system?

• A. It is a batch-type system which is updated periodically.
• B. It is usually run at the beginning of each month.
• C. The basic production plan is modified to reflect changes as they occur.
• D. It is used to authorize the execution of planned orders.
• E. It indicates the amount and timing of future changes.

C

61. Which one of the following most closely describes the MRP approach that is used for components or subassemblies to compensate for variations in lead time?

• A. pegging
• B. safety stock
• C. increased order sizes
• D. safety time
• E. low-level coding

D

62.  Which of the following lot sizing methods does not attempt to balance ordering (or setup) and holding costs?

• A. economic order quantity
• B. economic run size
• C. lot-for-lot
• D. part-period
• E. all of the above

C

63.  When MRP II systems include feedback, they are known as:

• A. MRPIII
• B. Enterprise resource planning
• C. Circular MRP
• D. Feasible MRP
• E. Closed Loop MRP

E

64. The multiplication process used by MRP to determine lower level requirements is called:

• A. time-phasing
• B. pegging
• C. netting
• D. projecting
• E. exploding

E

65.  _______ is choosing how many to order or make.

• A. Quantity determination
• B. Package sizing
• C. Lot sizing
• D. Grouping
• E. Aggregation

C

66.  Which of the following is not usually necessary in order to have an effective MRP system?

• A. a computer and software
• B. an accurate bill of materials
• C. lot-for-lot ordering
• D. an up-to-date master schedule
• E. integrity of file data

C

67. The _________ of ERP makes it valuable as a strategic planning tool.

• A. Internet base
• B. Rapid Batch capability
• C. Employee focus
• D. Real-time aspect
• E. Database structure

D

68.  A recent effort to expand the scope of production resource planning by involving other functional areas in the planning process has been:

• A. material requirements planning
• B. capacity requirements planning
• C. manufacturing resources planning
• D. Just-In-Time planning
• E. multifunctional relationships planning

C

69. Which statement concerning MRP II is false?

• A. It is basically a computerized system.
• B. It can handle complex planning and scheduling quickly.
• C. It involves other functional areas in the production planning process.
• D. It involves capacity planning.
• E. It produces a production plan which includes all resources required.

E

70. Which of these items would be most likely to have dependent demand?

• A. Xbox batteries
• B. toy trains
• C. flowers
• D. chocolate chip cookies
• E. wrist watches

A

71. Which of these products would be most likely to have dependent demand?

• A. refrigerators
• B. automobile engines
• C. televisions
• D. brownies
• E. automobiles

B

72. Using the product tree shown, determine the following: SEE IMAGE

(A) the quantity of component K that will be needed to assemble 80 units of P, assuming no on-hand inventory of any components exists.

B) the quantity of component K needed to assemble 80 units of P, given on-hand inventory of 30 A’s, 50 B’s and 20 C’s.

A) [3 Ks per C x 2 Cs per A x 2 As per P] + [2 Ks per B x 5 Bs per P] + [3 Ks per C x 3 Cs per P] = 31 Ks per P. For 80 Ps, a total of 2,480 Ks will be needed.

B) With 30 As, 50 Bs and 20 Cs on-hand, K requirements are: [3 Ks per C x 2 Cs per A x (2 As per P – 30 As)] + [2 Ks per B x (5 Bs per P – 50 Bs)] + [3 Ks per C x (3 Cs per P – 20 Cs)]; for 80 Ps, a total of 2,140 Ks will be needed.

Feedback: Explode the bill of material.

73. The following is a list of components required to produce one unit of nd item P: P: 2 A’s, 3 B’s, 3 C’s A: 5 M’s, 2 R’s B: 1 D, 3 N’s. C: 1 T, 4 N’s M: 1 N Determine the number of N’s that will be needed to make 60 P’s in each of these cases:

(A) There are currently 10 P’s on hand.

(B) On-hand inventory consists of 15 P’s, 10A’s, 20 B’s, 10 C’s, 100 N’s, 300 T’s, and 200 M’s.

A) [1 N per M x 5 M per A x 2 A per P] + [3 N per B x 3 B per P] + [4 N per C x 3 C per P] = 31 N per P. For 60 P, N requirements are: [31 N per P x (60 P – 10 OH)] = 1,500 N.

B) A total of 945 Ns will be needed.

Feedback: Explode the bill of material.

74. Given the following information, construct a product tree diagram and develop a material requirements plan that will lead to 400 units of product P being available at the start of week 7. SEE IMAGE SEE IMAGE

Feedback: Items C and D must be planned last.

75. Develop a material requirements plan for end item P and its components, given the tree below. Assume that all lead times are one week, and that lot-for-lot ordering is used except for item F, which is ordered in multiples of 400 units. One hundred units of P should be available at the start of week 4 and at the start of week 8. Beginning inventories are: 20 P, 100 A, and 200 F. Scheduled receipts are: 800 F at the start of week 1. SEE IMAGE SEE IMAGE All items have zero balances except F, which carries 240 units forward from period 5.

Feedback: Item F must be planned last.

76. Given the following data, construct a material requirements plan which will result in 100 units of Parent #1 (P1) at the beginning of week 6, and 200 units of Parent #2 (P2) at the beginning of week 8: SEE IMAGE SEE IMAGE Item A has an on-hand balance of 70 units after week 7, Item B has an on-hand balance of 150 units after week 7, and Item C has an on-hand balance of 1,500 units after week 4.

Feedback: C’s gross requirements come from planned releases for A and B.

77. End item Alpha’s product structure tree and inventory information are as follows: SEE IMAGE

(A) If 50 units of Alpha are to be assembled, how many additional units of S will be needed? All parts can be ordered using lot-for-lot ordering, except M, which must be ordered in multiples of 40 units. [Hint: You don’t need to do an MRP plan. ]

(B) An order for 100 units of Alpha is scheduled to be shipped at the start of week 9. When is the earliest that any particular component must be started so that the order for Alpha will be ready to ship? Hint: You don’t need to do an MRP plan. ]

A) Gross requirements for S are 200 units, leading to net requirements for S of 100 units.

B) Additional units of W will have to be started at the beginning of week 1. Feedback: If 50 units of Alpha are to be assembled, then gross requirements for K will be 50 and gross requirements for M will be 100. Net requirements for K will be 20 and net requirements for M will be 70. K is ordered lot-for-lot, so its net requirements lead to gross requirements for S of 40 units. M is ordered in multiples of 40, so its order quantity of 80 units will lead to gross requirements for S of 160 units.

The longest sum of lead times is 8 (Alpha’s 2 weeks + H’s 4 weeks + W’s 2 weeks). This means that additional units of W will have to be started at the beginning of week 1.

78. Refer to this product-tree: SEE IMAGE

If 17 Ps are needed, and no on-hand inventory exists for any items, how many Cs will be needed?

• A. 8
• B. 16
• C. 136
• D. 204
• E. 272

E

79. Refer to this product-tree: SEE IMAGE

If 17 Ps are needed, and on-hand inventory consists of 10 As, 15 Bs, 20 Cs, 12 Ms, and 5 Ns, how many Cs are needed?

• A. 48
• B. 144
• C. 192
• D. 212
• E. 272

C

80. Refer to this product-tree: SEE IMAGE.

If 40 Ps are needed, and on-hand inventory consists of 15 Ps and 10 each of all other components and subassemblies, how many Cs are needed?

• A. 340
• B. 350
• C. 380
• D. 400
• E. 590

B

81. Bunny Helpers, Inc. has just received an order for 100 Deluxe Easter Baskets, which must be ready for delivery at the start of week six. An MRP planner has prepared the following table showing product structure, lead times (orders are lot-for-lot), and quantities on hand: SEE IMAGE Each Deluxe Basket contains two dark chocolate truffles and four carved chocolate eggs; additionally one bottle of Alka-Selzer is included for those who overindulge.

What is the net requirement for Dark Chocolate Truffles to fill this order?

• A. 100
• B. 140
• C. 150
• D. 180
• E. 200

C

82. Bunny Helpers, Inc. has just received an order for 100 Deluxe Easter Baskets, which must be ready for delivery at the start of week six. An MRP planner has prepared the following table showing product structure, lead times (orders are lot-for-lot), and quantities on hand: SEE IMAGE Each Deluxe Basket contains two dark chocolate truffles and four carved chocolate eggs; additionally one bottle of Alka-Selzer is included for those who overindulge.

When should an order for Carved Chocolate Eggs be released?

• A. t the start of week 2
• B. at the start of week 3
• C. at the start of week 4
• D. at the start of week 5
• E. at the start of week 6

A

83. Bunny Helpers, Inc. has just received an order for 100 Deluxe Easter Baskets, which must be ready for delivery at the start of week six. An MRP planner has prepared the following table showing product structure, lead times (orders are lot-for-lot), and quantities on hand: SEE IMAGE Each Deluxe Basket contains two dark chocolate truffles and four carved chocolate eggs; additionally one bottle of Alka-Selzer is included for those who overindulge. How many Dark Chocolate Eggs should be ordered?

• A. 310
• B. 450
• C. 500
• D. 550
• E. 600

A

84. Bunny Helpers, Inc. has just received an order for 100 Deluxe Easter Baskets, which must be ready for delivery at the start of week six. An MRP planner has prepared the following table showing product structure, lead times (orders are lot-for-lot), and quantities on hand: SEE IMAGE Each Deluxe Basket contains two dark chocolate truffles and four carved chocolate eggs; additionally one bottle of Alka-Selzer is included for those who overindulge.

If the firm is using a fixed period lot size of two periods, what is the order size for the first order?

• A. 120
• B. 200
• C. 280
• D. 160
• E. 150

B

85. Which of the following represents an attempt to balance the benefits of stability against the benefits of responding to new information?

• A. safety stock
• B. safety time
• C. bills of material
• D. time fences
• E. fixed-period lot sizing

D

86. Comparing known and expected capacity requirements with projected capacity availability is the job of _______.

• A. planned releases
• B. load reports
• C. lot sizing
• D. work loading
• E. time fencing

B

87.  ERP’s primary value comes from applications ________.

• A. deployment
• B. development
• C. interfaces
• D. integration
• E. networking

D

88. Net requirements for component J are as follows: 60 units in week 2, 40 units in week 3, and 60 units in week 5. If a fixed-period, two-period lot-sizing method is used, what will be the quantity of the first planned receipt?

• A. 60 units
• B. 120 units
• C. 180 units
• D. Cannot be determined
• E. None of the above

E

89. Net requirements for component J are as follows: 60 units in week 2, 40 units in week 3, and 60 units in week 5. If a fixed-period, three-period lot-sizing method is used, what will be the quantity of the first planned receipt?

• A. 60
• B. 100
• C. 160
• D. Cannot be determined
• E. None of the above

B