OM5 C5
Test Bank
1
Chapter 5—Technology and Operations Management
Multiple Choice
Problems #1 and #2
1. A company is considering two alternative technologies for manufacturing a product. The cost
data are shown below.
A
B
Fixed Cost
$10,000
$25,000
Variable Cost
$30/unit
$5/unit
The breakeven volume is _____.
a. less than or equal to 200 units
b. more than 200 but less than or equal to 300 units
c. more than 300 but less than or equal to 400 units
d. more than 400 units
2. If the forecast volume is less than 600 units, which technology alternative should the
company choose?
a. Technology alternative A
b. Technology alternative B
Problems #3 to #5
3. A firm must make a choice between a manual and a semi-automatic production process for a
new product line. The following are the costs for each process:
Alternative
Fixed Cost
Variable Cost
Manual
$100,000
$75.00
Semi-Automatic
$300,000
$50.00
The breakeven volume is _____.
a. less than or equal to 2000 units
b. more than 2000 but less than or equal to 4000 units
c. more than 4000 but less than or equal to 6000 units
d. more than 6000 but less than or equal to 8000 units
4. If the forecast annual production volume is 5,000 units, which technology alternative should
the firm choose?
OM5 C5
Test Bank
a. Manual
b. Semi-automatic
5. If the forecast annual production volume is 10,000 units, which technology alternative should
you choose?
a. Manual
b. Semi-automatic
Problems #6 to #8
A company is investigating two automated approaches for its production process. It has
collected the following cost information about each:
Alternative
Fixed Cost
Variable Cost
CNC
$ 80,000
$2.75
FMS
$190,000
$1.25
6. The breakeven volume is _____.
a. less than or equal to 20,000 units
b. more than 20,000 but less than or equal to 40,00 units
c. more than 40,000 but less than or equal to 60,000 units
d. more than 60,000 but less than or equal to 80,000 units
7. If the forecast annual production volume is 50,000 units, which technology alternative should
the company choose?
a. CNC
b. FMS
3
$80,000 + ($2.75)X = $190,000 + ($1.25)X => ($1.50)X = $110,000 => X = 73,333
b.
CNC: TC = $80,000 + ($2.75)(50,000) = $217,000
FMS: TC = $190,000 + ($1.25)(50,000) = $252,000
CNC is more economical by $35,000
CNC: TC = $80,000 + ($2.75)(100,000) = $355,000
FMS: TC = $190,000 + ($1.25)(100,000) = $315,000
FMS is more economical by $40,000
8. If the forecast annual production volume is 100,000 units, which technology alternative
should the company choose?
a. FMS
b. CNC
Problems #9 to #11
9. A manufacturing firm is considering three alternatives for automation. They anticipate the
annual production volume to be 75,000 units. The costs for each alternative are as shown:
Alternative
2
Annual Fixed Costs
$180,000
Variable Cost/Unit
$0.55
What sales price must be charged for Alternative 1 to break even?
a. Less than or equal to $2.00
b. More than $2.00 but less than or equal to $3.00
c. More than $3.00 but less than or equal to $4.00
d. More than $4.00 but less than or equal to $5.00
10. What sales price must be charged for Alternative 2 to break even?
a. Less than or equal to $2.00
b. More than $2.00 but less than or equal to $3.00
c. More than $3.00 but less than or equal to $4.00
d. More than $4.00 but less than or equal to $5.00
11. What sales price must be charged for Alternative 3 to break even?
a. Less than or equal to $2.00
b. More than $2.00 but less than or equal to $3.00
OM5 C5
Test Bank
4
c. More than $3.00 but less than or equal to $4.00
d. More than $4.00 but less than or equal to $5.00
12. Database systems, artificial intelligence programs, and voice-recognition software are
examples of _____.
a.
hard technology
b.
soft technology
c.
computer numerical software
d.
integrated operating software
13. _____ consist of two or more computer-controlled machines or robots linked by automated
handling devices such as transfer machines, conveyors, and transport systems.
a.
Computer-aided design/computer-aided engineering (CAD/CAE) systems
b.
Computer-aided manufacturing (CAM) systems
c.
Enterprise planning systems (EPSs)
d.
Flexible manufacturing systems (FMSs)
14. _____ involves computer control of a manufacturing process, such as determining tool
movements and cutting speeds.
a.
Computer-aided design/computer-aided engineering (CAD/CAE) systems
b.
Computer-aided manufacturing (CAM) systems
c.
Enterprise resource planning (ERP) systems
d.
Flexible manufacturing systems (FMSs)
15. Which of the following enables engineers to design, analyze, test, simulate, and manufacture
products before they physically exist?
a.
Computer numerical control (CNC) machines
b.
Computer-aided design/computer-aided engineering (CAD/CAE) systems
c.
Computer-integrated manufacturing systems (CIMs)
d.
Computer-aided manufacturing (CAM) systems
16. Computer-aided manufacturing (CAM) has advantages over conventional manufacturing
approaches under many conditions. Which of the following is NOT such a condition?
a.
When homogeneous parts are manufactured
b.
When frequent design changes are made
c.
When the manufacturing process is complex
d.
When expert operator skills and close control are required
OM5 C5
Test Bank
17. According to the National Research Council, companies with computer-integrated
manufacturing system experience have been able to _____.
a.
improve quality by a factor of ten
b.
increase equipment utilization to 100 percent
c.
decrease engineering design costs by up to 30 percent
d.
reduce work-in-process time by 80 percent
18. Which of the following statements is TRUE about enterprise resource planning (ERP)
systems?
a.
It is a business strategy designed to learn more about customers’ wants, needs, and
behaviors.
b.
It gives each function or department the ability to set up its own database.
c.
Customer ordering and production scheduling are its real-time transaction processing
systems.
d.
It consists of a single module.
19. Which of the following would NOT be included in a typical customer relationship
management (CRM) system?
a.
Market segmentation and analysis
b.
Effective complaint resolution
c.
Cross-selling goods and services
d.
Supply chain inventory management
20. Customer relationship management (CRM) helps firms gain competitive advantage by all
of the following EXCEPT:
a.
by providing real-time transaction processing.
b.
by segmenting markets based on demographic and behavioral characteristics
c.
by tracking sales trends and advertising effectiveness.
d.
by identifying which customers should be the focus of targeted marketing initiatives.
21. Information technology has significantly affected health care. Which of the following is
NOT an outcome?
a.
Cost reduction
b.
Revenue enhancement
c.
Faster exchange of handwritten charts between physicians and nurses
d.
Improved clinical efficiency and patient care
22. Which of the following is NOT an activity handled by a return facilitator?
a.
Recommending a new supplier
b.
Repairing the manufactured good
c.
Requesting money back for a customer
d.
Invoking the service guarantee
23. Apple computer would best be described as what type of company?
a.
Business to business (B2B)
b.
Business to customer (B2C)
c.
Customer to customer (C2C)
d.
Government to customer (G2C)
24. General Electric (GE) would best be described as what type of company?
a.
Business to business (B2B)
b.
Business to customer (B2C)
c.
Customer to customer (C2C)
d.
Government to customer (G2C)
25. Which of the following activities is NOT a part of a return facilitator’s activities?
a.
Being an Internet enabler
b.
Returning a manufactured good or delivered service
c.
Requesting money back for a customer
d.
Invoking the service guarantee
26. Which of the following is NOT a major characteristic of a customer relationship
management (CRM) system?
a.
Predicts various Web characteristics that would be most attractive to customers
b.
Identifies the possible fraudulent transactions
c.
Monitors the quality levels of products
d.
Forecasts customer retention
27. Filing individual federal tax returns would best be described as what type of value chain?
a.
Business to business (B2B)
b.
Business to customer (B2C)
c.
Customer to customer (C2C)
d.
Government to customer (G2C)
7
28. High scalability is most related to _____.
a.
low incremental cost
b.
high fixed cost
c.
sales revenue
d.
diseconomies of scale
29. Infinite scalability is most related to _____.
a.
high variable cost
b.
high fixed cost
c.
high scalability
d.
low scalability
True/False Questions
1. Computer chips and microprocessors are examples of hard technology.
2. MySQL database system is an example of soft technology.
3. Integrated operating systems (IOSs) include various hard and soft technologies.
4. E-service refers to using the Internet and technology to provide services that create and
deliver time, place, information, entertainment, and exchange value to customers and/or support
the sale of goods.
5. Numerical control (NC) machine tools enable the machinist’s skills to be duplicated by a
programmable device (originally punched paper tape) that controls the movements of a tool
used to make complex shapes.
6. Industrial robots automate the skills that most humans can readily perform.
7. Computer-integrated manufacturing systems combine hardware, software, database
management, and communications to automate and control a broad range of production
OM5 C5
Test Bank
activities.
8. Procter & Gamble use bricks-and-mortar intermediaries.
9. Flexible manufacturing systems integrate machines or robots with automated handling
devices to route work, load tools, and control operations.
10. Bar codes are the modern successor to RFID tags.
11. Enterprise resource planning (ERP) systems consist of a single module that is implemented
to maintain the level of autonomy.
12. Enterprise resource planning systems are designed to build customer relationships and
loyalty.
13. Customer relationship management (CRM) systems aids in tracking sales trends and
advertising effectiveness by customer and market segment.
14. E-communication changes the operation, speed, and efficiency of the value chain.
15. The prominent vendors of enterprise resource planning (ERP) software are SAP and Oracle.
16. Because of the Internet and e-commerce, all parts of the value chain can immediately know
and react to changes in demand and supply. Thus, tight integration of the components of the
value chain is no longer required.
17. Technology provides the capability of eliminating many of the traditional components of
value chains.
OM5 C5
Test Bank
9
18. An intermediary specializes in handling all aspects of customers returning a manufactured
good or invoking service guarantees.
19. Information technology has been equally important to business to business, business to
customer, and customer to customer interactions.
20. FedEx is an example of a customer-to-customer value chain.
21. One of the major benefits of technology has been its impact on sustainability.
22. Offshoring is a phenomenon by which the same or an increased quality and quantity of
goods and/or services are created using fewer natural resources.
23. Return facilitators specialize to getting reusable packaging/shipping material (containers,
crates, and pallets) back to manufacturers.
24. The acronym ICT stands for information and communication technology.
25. Scalability is a phenomenon by which the same or an increased quality and quantity of
goods and/or services are created using fewer natural resources.
26. A sociotechnical system integrates technology, people, and processes.
27. High scalability is the capability to serve additional customers at high incremental variable
costs.
28. Low scalability was one of the reasons for failure of many early Internet-based companies.
29. Information-intensive businesses have the potential to be infinitely scalable.
OM5 C5
Test Bank
Case Study Questions (To reward students who attend class, listen and learn, and take
good class notes on the case discussion and/or student team presentation.)
1. Which one of the following statements concerning the Bracket International—The RFID
Decision case study is TRUE?
a. Bracket International won back the Wolf Furniture work using RFID systems.
b. Misreads are zero for RFID technology.
c. The maturity phase of the product/firm/technology life cycle is where a “fast follower”
executes their adoption of technology.
d. Bar coding took 10 seconds to scan per item, while RFID took zero seconds to scan per
item.
2. Which of the following statements regarding Bracket International (BI) case study is TRUE?
a. BI currently uses RFID to monitor 8,850 items per day at its three factories.
b. RFID scan times are at least ten times faster than bar coding scan times.
c. BI lost its big customer, Home Depot, because it could not respond quickly enough to their
changes in order size and job specifications.
d. The net present value analysis over five years is positive, based on case data.
Problems for Manual Grading, Take-Home Exams and Partial Credit (Also, review the
OM Instructor’s Manual for end-of-chapter questions/problems)
1. Differentiate between hard technology and soft technology.
2. List some of the key issues that organizations face in using technology.
11
3. Discuss the role of technology in productivity.
4. Discuss the components, hardware, and software of a computer-integrated manufacturing
system (CIMS).
5. Explain the concept of enterprise resource planning (ERP) systems.
6. How does customer relationship management (CRM) help a firm gain competitive
OM5 C5
Test Bank
advantage?
7. What are the benefits and challenges of technology?
8. A key factor that affects technology decisions is scalability. Define scalability. Explain the
difference between high scalability, infinite scalability, and low scalability.
13
9. Explain the concept of industrial robots.
10. Allied Inc. is considering the purchase of a new piece of equipment. Relevant data are
shown below.
Annual Fixed Cost
$700,000
Variable Cost per Unit
$ 75
Revenue per Unit
$ 200
a.
Using this information, determine the breakeven volume.
b.
If the anticipated demand for the product is 5,000 units, should Allied purchase the new
equipment?
a.
Let X = number of units produced.
Total cost = 700,000 + 75X
Total revenue = 200X
700,000 + 75X = 200X
700,000 = 125X
X = 5,600 units
b.
No, because the demand is smaller than the breakeven point.
11. A company is considering two alternative technologies for manufacturing a product. The
cost data are shown below.
A
B
Fixed Cost
$10,000
$25,000
Variable Cost
$35/unit
$15/unit
OM5 C5
Test Bank
14
What is the breakeven volume, and under what circumstances should A be chosen?
12. A firm must make a choice between a manual and a semi-automatic production process for a
new product line. Following are the costs for each process:
Alternative
Fixed Cost
Variable Cost
Manual
$200,000
$85.00
Semi-Automatic
$500,000
$55.00
a.
Above what breakeven production quantity would the semi-automatic alternative be
preferred?
b.
Which process is more economical for an annual production volume of 5,000 units?
c.
Which process is more economical for an annual production volume of 9,000 units?
a.
$200,000 + ($85)X = $500,000 + ($55)X => ($30)X = $300,000 => X = 10,000
13. A company is investigating two automated approaches for its production process. It has
collected the following cost information about each:
Alternative
Fixed Cost
Variable Cost
CNC
$ 85,000
$2.70
FMS
$195,000
$1.30
a.
At what point of production will the firm be indifferent to which process it wants?
b.
Which process is more economical for an annual production volume of 50,000 units?
c.
Which process is more economical for an annual production volume of 100,000 units?
OM5 C5
Test Bank
15
14. A manufacturing firm is considering three alternatives for automation. They anticipate the
annual production volume to be 7,000 units. The costs for each alternative are as shown:
Alternative
1
2
3
Annual Fixed Costs
50,000
$190,000
$350,000
Variable Cost/Unit
$0.65
$0.55
$0.40
a.
What sales price must be charged for Alternative 1 to break even?
b.
What sales price must be charged for Alternative 2 to break even?
c.
What sales price must be charged for Alternative 3 to break even?
$50,000 + ($.65)(7,000) = 7000S => S = $7.79
b.
$190,000 + ($.55)(7,000) = 7000S => S = $27.69
$350, 000 + ($.40)(7,000) = 7000S => S = $50.40
15. Rogers Manufacturing Company makes high quality canvas tents. Their production manager
is considering a change from its manual system of stitching to an automated system. The
following are the costs for the two systems:
System
Fixed Cost
Variable Cost
Manual
$35,000
$12.50
Automated
$80,000
$ 8.50
a.
What would the savings be if demand is 70,000 tents and the automated system is used?
b.
What would the savings be if demand is 20,000 tents and the automated system is used?
TC = $35,000 + ($12.50)(70,000) = $910,000
TC = $80,000 + ($8.50)(70,000) = $675,000
Automated will save $235,000
b.
TC = $35,000 + ($12.50)(20,000) = $285,000
TC = $80,000 + ($ 8.50)(20,000) = $250,000
a.
$85,000 + ($2.70)X = $195,000 + ($1.30)X => ($1.40)X = $110,000 => X = 78,572
b.
CNC: TC = $85,000 + ($2.70)(50,000) = $220,000
FMS: TC = $195,000 + ($1.30)(50,000) = $260,000
CNC is more economical by $40,000
CNC: TC = $85,000 + ($2.70)(100,000) = $355,000
FMS: TC = $195,000 + ($1.30)(100,000) = $325,000
FMS is more economical by $30,000
OM5 C5
16. Janice Smith is an expert at calligraphy. However, it is found that a specialized robot can
imitate Janice’s work perfectly. Variable costs are 75% of selling price and fixed costs are
$190,000 for the robot system.
a.
How many pieces must be produced to break even assuming she sells
each piece for $200?
b.
How many pieces must be produced to break even if she sells them for $250 and variable
costs drop to 70% of selling price?
$200X = $190,000 + (.75)($200)X => ($50)X = $190,000 => X = 3,800
b.
$250X = $190,000 + (.70)($250)X => ($75)X = $190,000 => X = 2,533
17. Highgrove Industries must decide which process technology to adopt given the information
below.
Cost
Technology A
Technology B
Technology C
Price per unit
$3
$3
$3
Fixed costs per year
$80,000
$120,000
$130,000
Variable costs per unit
$2.20
$1.85
$1.65
Which one of the process technologies would you recommend they adopt based on breakeven
analysis if they wish to minimize demand risks?