44) What is a drawback of ISO 9000 certification?
A) It is bureaucratic and costly for many firms.
B) It is an impossible standard to achieve.
C) It is losing its prominence in international business.
D) It is ineffective in improving processes.
E) It is ineffective in bringing about quality improvement.
45) Sound-Rite Audio wants to enter the European market but realizes that consumer tastes are not
uniform across countries. To be able to accommodate demands for local responsiveness,
Sound-Rite Audio should
A) ignore national differences in consumer tastes and preferences.
B) decentralize production activities to the major national or regional markets.
C) ensure that the manufacturing processes in all units are identical.
D) standardize the product coming out of all manufacturing units.
E) refrain from hiring host country managers.
46) Finder Technologies Inc. has manufacturing units in Canada. The country’s stable economic
and political environment helps the firm gain competitive advantage by lowering production costs
and improving product quality. Other things being equal, the benefits realized from such a strategy
can be typically referred to as
A) economies of scope.
B) location economies.
C) a production possibility frontier.
D) factor endowments.
E) logistics economies.
47) When considering foreign direct investment in a country, what is one situation that will benefit
a company?
A) presence of supporting industries
B) market with many other foreign competitors
C) lack of intellectual property rights laws
D) presence of a communist political system
E) appreciation of local currency
48) Posh Pools Inc. was ready to sign an agreement to build a new facility in a foreign nation when
it learned that the local currency in that nation had appreciated significantly in the past week. How
might this affect the company’s decision to build the new facility?
A) The company will want to make more foreign direct investment in that country.
B) There will be a decrease in the dollar cost of products exported from that nation which benefits
Posh Pools.
C) This will diminish the attractiveness of this country as a manufacturing base for Posh Pools.
D) This will transform the country into a low-cost location and make it more desirable for
manufacturing.
E) This will decrease the amount of imports brought into the country and make it more attractive
for manufacturing.
49) The cost to manufacture one unit of Killian Audio Products’ best-selling hearing aid, the Zone,
is $67.50. The CFO of the company determines that if the company expands the output of its
biggest U.S. plant by 20 percent, the unit cost would be only $42.50. This analysis is based on the
concept of
A) minimum efficient scale.
B) lean production.
C) Six Sigma.
D) economies of scale.
E) total quality management.
50) The level of output at which most plant-level scale economies are exhausted is known as
A) mass customization.
B) break-even point.
C) minimum efficient scale.
D) just-in-time.
E) lean production.
51) As the global market for eyeglass products has become extremely competitive in recent
months, U-See Products’ newly appointed CFO believes the company should address its minimum
efficient scale and attempt to lower it. What is a consequence of a low minimum efficient scale?
A) prevents a firm from utilizing capital equipment fully
B) leads to centralized production in a single location or a limited number of locations
C) prevents a firm from accommodating demands for local responsiveness
D) increases the unit cost of products
E) allows a firm to hedge against currency risk by manufacturing the same product in several
locations
52) A-1 Athletic Shoes has wide variety in its product line. A firm with a wide product variety will
find it
A) difficult to achieve shorter product runs.
B) difficult to increase its product sales.
C) difficult to reduce its unit costs.
D) easy to realize economies of scale.
E) easy to reach optimum production efficiency.
53) Producing a standardized product in large volumes will
A) result in diseconomies of scale.
B) increase production efficiency.
C) increase production costs.
D) result in shorter production runs.
E) result in a high minimum efficient scale of output.
54) Calvin Manufacturing purchased new equipment that reduces setup times when employees
change templates between production runs. This equipment has also improved quality control
measures throughout the entire manufacturing process. What type of technology is Calvin
Manufacturing using?
A) TQM
B) lean production
C) downstream
D) JIT
E) Six Sigma
55) One objective of lean production is to
A) reduce the quality of a product to keep unit costs low.
B) reduce setup times for complex equipment.
C) replace product variety with standardized output.
D) decrease utilization of individual machines through scheduling.
E) increase the level of minimum efficient scale of output.
56) Mass customization provides companies with the ability to meet which two goals?
A) centralized production and long production runs
B) product standardization and economies of scale
C) high fixed costs and multiple production facilities
D) low cost and product customization
E) local responsiveness and decentralized production
57) One problem with a mass production system is that it
A) results in short production runs.
B) fails to realize economies of scale.
C) reduces the number of defects and eliminates waste.
D) helps to accommodate consumer preferences for product diversity.
E) creates massive inventories that have to be stored in large warehouses.
58) A ________ includes a grouping of various types of machinery, a common materials handler,
and a computer to control the production of a family of parts or products.
A) specialized asset
B) dynamic capability
C) turnkey project
D) flexible machine cell
E) just-in-time inventory
59) What is a consequence of using flexible machine cells?
A) It fails to adapt to the production of different products.
B) It generally results in stockpiles of partly finished products.
C) It improves capacity utilization and reduces wastes.
D) It increases setup time for complex equipment.
E) It adds to the cost structure of a firm.
60) When a company achieves mass customization via flexible manufacturing technologies, it
increases the company’s
A) cost structure.
B) waste.
C) customer responsiveness.
D) learning effects.
E) externalities.
61) ClearWater Engineers Inc. wants to be able to customize products for different national
markets and, in turn, increase its customer responsiveness. However, the fixed costs associated
with its production are high. These functions will be performed most efficiently if ClearWater
Engineers
A) sets up a new production facility that is well suited for mass production.
B) establishes multiple manufacturing facilities in each major national market.
C) increases each manufacturing unit’s minimum efficient scale of output.
D) adopts flexible manufacturing technologies to help achieve mass customization.
E) locates its production unit in countries that have fluctuations in exchange rates.
62) Flexible manufacturing technologies are specially targeted at enabling companies to
A) establish multiple manufacturing facilities in each major national market.
B) build large inventories.
C) achieve product standardization across markets.
D) increase their work in progress.
E) produce customized products without a significant cost penalty.
63) What term refers to the production of a variety of end products at a unit cost that could once be
achieved only through bulk production of a standardized output?
A) decentralization of production
B) just-in-time inventory
C) mass customization
D) economies of scale
E) minimum efficient scale
64) Small electronic parts have a high value-to-weight ratio, which means that they
A) are cheap to produce and don’t weigh very much.
B) weigh very little but are expensive.
C) can cost less when mass produced.
D) are poor candidates for international shipments.
E) are taxed at a higher rate.
65) A product’s value-to-weight ratio affects location decisions primarily because of its influence
on
A) transportation costs.
B) shelf life.
C) work-in-progress inventory.
D) inventory turnover.
E) capacity utilization.
66) Two product features impact location decisions. Which of the two reduces the need for local
responsiveness?
A) product’s ability to serve universal needs
B) product’s life cycle
C) product’s packaging
D) product’s flexible manufacturing technology
E) product’s value-to-weight ratio
67) Sweet Stuff Sugar Source ships product all over the world. Since the product it ships has a low
value-to-weight ratio, transportation costs are
A) taxed by both the importer and exporter.
B) a large percentage of the total cost.
C) absorbed by the importer.
D) not factored into the total cost.
E) a small percentage of the total cost.
68) Products with high value-to-weight ratios tend to
A) be expensive to transport.
B) increase in weight after processing.
C) be restricted under trade barriers.
D) be expensive and not weigh very much.
E) have a low inventory turnover.
69) Which product is best manufactured in multiple locations close to major markets to reduce
transportation costs?
A) pharmaceuticals
B) petroleum products
C) books
D) magazines
E) electronics
70) What is an example of a product with a low value-to-weight ratio?
A) jewelry
B) electronic components
C) musical instruments
D) paint
E) pharmaceuticals
71) When determining the location decision for industrial products like steel, what should a
company keep in mind?
A) They serve needs that are the same all over the world.
B) They have drastic national differences in consumer taste and preference.
C) The need for local responsiveness for these products is more than consumer products.
D) It makes sense to produce these products in multiple locations close to major markets.
E) A plant must operate at the highest minimum efficient scale of output for these products.
72) When manufacturing a product that serves universal needs, a company should remember that it
A) becomes necessary to customize the product to suit small consumer groups.
B) becomes necessary to accommodate demands for local responsiveness.
C) increases the attractiveness of concentrating production at an optimal location.
D) is difficult to serve national differences in consumer taste and preference.
E) is always attractive to globally disperse production to all major markets.
73) Concentration of production makes most sense when
A) trade barriers are low.
B) the product’s value-to-weight ratio is low.
C) important exchange rates are volatile.
D) flexible manufacturing technology does not exist.
E) the production technology has low fixed costs.
74) A business would want to concentrate its production facilities in a centralized location when
A) the production technology has a low minimum efficient scale.
B) the production technology has low fixed costs.
C) the product serves universal needs.
D) flexible manufacturing technologies are unavailable.
E) the product’s value-to-weight ratio is low.
75) Based on the information provided, which of these firms should concentrate its production in a
centralized location?
A) Mercury Inc. operates in an industry where the fixed costs are high, and services of supporting
industries are of prime importance.
B) In-the-Now Inc. manufactures products like apparel and cosmetics for which national
differences in consumer taste and preference are wide.
C) QuickFloors Inc. operates in an economy where volatile fluctuations in exchange rates are
frequently expected.
D) Down-to-Earth Corp. is a mining company that exports quartz—a product with low
value-to-weight ratio—to various countries.
E) Bronze Inc. customizes heavy machines without the use of flexible manufacturing
technologies.
76) When is decentralization of manufacturing facilities most appropriate?
A) when the product serves universal needs
B) when exchange rates are expected to remain relatively stable
C) when the product’s value-to-weight ratio is high
D) when there are few trade barriers
E) when the production technology has low fixed costs
77) The decentralization of production would be the best choice for
A) Martin Inc., which is in an industry where national differences in politics, economy, and culture
have a substantial impact on cost of production.
B) Dahl Inc., which operates in an industry where volatile fluctuations in important exchange rates
are expected.
C) Sudser Technology, which manufactures industrial machines and equipment that serve
universal needs.
D) Glitzy Inc., which customizes jewelry in precious metal and stones with the aid of flexible
manufacturing technologies.
E) Denti-Kleen Inc., which uses a production technology that has high fixed costs and high
minimum efficient scale.
78) What are some automobile companies doing in situations where neither centralization nor
decentralization of production is feasible?
A) outsourcing production to developing countries
B) inshoring production into the home country
C) selling product patents and technology to competitors
D) refraining from international trade
E) establishing top-to-bottom manufacturing operations
79) As a way to save costs, The Foundry Inc. set up a factory in a foreign country to produce the
component parts it uses in the farm equipment it manufactures. The technology at this factory is
kept to a minimum and management has no say in purchasing or production decisions. What type
of factory is Foundry Inc. using?
A) server
B) outpost
C) contributor
D) source
E) offshore
80) The Jackson Group decides that the best way to get around the exorbitant tariff barriers it
encounters when shipping products to Malaysia is to build a factory there, with the same standards
as the home factory, and allow that factory to serve the Malaysian market. What type of factory is
the Jackson Group going to build?
A) server
B) outpost
C) contributor
D) source
E) offshore
81) Charcoal Corp. is an electronics retail giant with offices in Atlanta. The company decides to
build a facility in Silicon Valley where new products can be developed since this area is known for
technological innovation. Which type of facility is Charcoal Corp. building?
A) server factory
B) outpost factory
C) lead factory
D) contributor factory
E) offshore factory
82) ________ is a hidden cost to basing production in a foreign location.
A) Low employee turnover
B) Low labor cost
C) Poor product quality
D) Expensive higher education system
E) Low inventory turnover