Introduction to Operations and Supply Chain Management, 4e (Bozarth/Handfield)
Chapter 10 Sales and Operations Planning (Aggregate Planning)
Learning Objective 10-1
1) Detailed planning and control is riskier than strategic planning.
2) Sales and operations planning indicates how the organization will use its tactical capacity
resources to meet expected customer demand.
3) Compared to other levels of planning, detailed planning and control offers the greatest ability
to adjust capacity.
4) Within the context of the planning cycle, the planning that takes place at the highest levels of
the firm is called:
A) strategic planning.
B) operational planning.
C) tactical planning.
D) detailed planning and control.
5) Planning numbers are somewhat aggregated (month by month) in what planning level?
A) strategic planning
B) operational planning
C) tactical planning
D) detailed planning and control
6) There are few, if any, options for adjusting capacity levels for managers involved in what
planning level?
A) strategic planning
B) operational planning
C) tactical planning
D) detailed planning and control
7) To develop a superior plan, sales and operations planning must consider:
A) customer demand.
B) capabilities of suppliers.
C) capabilities of logistics service providers.
D) All of these must be considered when performing S&OP.
8) What is the purpose of S&OP and what takes place at the strategic, tactical, and detailed
planning and control levels?
Learning Objective 10-2
1) Bottom-up planning should be used when the product/service mix is unstable and resource
requirements vary greatly across the offerings.
2) The alternative production strategies of level, chase, or mixed that are available in top-down
planning cannot be used in bottom-up planning.
3) Last month a firm made 100 model A’s using all of their available labor. If they have already
taken orders for 150 model A’s for next month, then their planning value must be 1.5.
4) Planning values are used in bottom-up planning, but cannot be used in top-down planning.
5) When the products and services have very different resource requirements and the mix is
unstable from one period to the next, bottom-up planning works best.
6) At the beginning of the semester, you decide to devote 12 hours a week outside of class time
to your operations management studies, regardless of scheduled tests, assignments, or project
due dates. This is a level plan approach to your favorite course.
7) Net cash flow is the difference between the value added and the cash on hand at the end of the
period.
8) Willow Trees Inc. makes seven different products, four of which are within their first year of
existence. The demands for all products, especially the newest ones, are not well known. The
newest products are intended to complement their existing products and take different materials,
different processes, and an entirely different set of labor skills for production. Which of these
statements regarding their likely sales and operations planning activities is BEST?
A) The planning values for the oldest items in the product line should be used for the new items
in the product line.
B) Willow Trees Inc. should avoid using sales and operations planning until their product line
matures.
C) Willow Trees Inc. should use top-down planning.
D) Willow Trees Inc. should use bottom-up planning.
9) Seventy percent of a house painter’s business is exterior work and the other thirty percent is
interior. The average exterior paint job takes 20 hours of labor and $400 of paint and primer, but
the average interior job takes only 6 hours of labor and $75 of paint and primer. If he gets 20
service calls for the coming month, which of the following resource requirements is correct?
A) The painter has supply costs of $4750 for next month.
B) The painter has a labor demand of 260 hours for next month.
C) The painter has supply costs of $6050 for next month.
D) The painter has a labor demand of 204 hours for next month.
10) Forty percent of a house painter’s business is exterior work and the other sixty percent is
interior. The average exterior paint job takes 30 hours of labor and $500 of paint and primer, but
the average interior job takes only 6 hours of labor and $80 of paint and primer. If he gets 25
service calls for the coming month and 30 calls for the month after that, which of the following
resource requirements is correct?
A) The painter has supply costs of greater than $13,500 but less than $13,600 for the next two
months.
B) The painter has a labor demand of greater than 800 hours but less than 850 hours for the next
two months.
C) The painter has supply costs of greater than $13,400 but less than $13,500 for the next two
months.
D) The painter has a labor demand of greater than 850 hours but less than 900 hours for the next
two months.
11) This graph of expected sales level and expected output shows:
A) a chase production plan is being used.
B) a level production plan is being used.
C) a mixed production plan is being used.
D) planning levels have been computed.
12) The standard equation used by Gigi Enterprises for production planning is Production =
Demand. The sales and operations planner is probably using:
A) a mixed production approach.
B) a level production approach.
C) a chase production approach.
D) a bottom-up planning approach.
13) A company has a sales forecast for the following five months as shown in the table. If they
have a beginning inventory of 100 units, what amount should be produced under a level plan in
order for them to have an ending inventory of zero units at the end of the five-month period?
Month
Forecast
January
350
February
400
March
300
April
500
May
350
A) 320 units per month
B) 360 units per month
C) 400 units per month
D) 440 units per month
14) A company has a sales forecast for the following five months as shown in the table. If they
have a beginning inventory of 350 units, what amount should be produced under a level plan in
order for them to have an ending inventory of zero units at the end of the five month period?
Month
Forecast
January
525
February
600
March
650
April
750
May
875
A) 580 units per month
B) 595 units per month
C) 610 units per month
D) 640 units per month
15) A company has a sales forecast for the following five months as shown in the table. If they
have a beginning inventory of 225 units, what amount should be produced under a level plan in
order for them to have an ending inventory of zero units at the end of the five month period?
Month
Forecast
January
825
February
600
March
650
April
550
May
475
A) 580 units per month
B) 595 units per month
C) 585 units per month
D) 575 units per month
16) A company has a sales forecast for the following five months as shown in the table. If they
have a beginning inventory of 1225 units, what amount should be produced under a level plan in
order for them to have an ending inventory of zero units at the end of the five month period?
Month
Forecast
January
1575
February
1420
March
1680
April
1750
May
1975
A) 1,435 units per month
B) 1,595 units per month
C) 1,385 units per month
D) 1,515 units per month
17) What is the ending inventory level for April in the production plan shown in the table? All
entries in the table are in terms of sales units.
Month
Forecast
Regular
Production
Overtime
Production
Ending
Inventory
January
250
250
0
0
February
200
300
0
March
300
325
25
April
500
400
25
A) 150 units
B) 125 units
C) 100 units
D) 75 units
18) It costs $10 to make a single unit using regular production and $15 to make a single unit
using overtime production. Total overtime production is limited to 1000 units for the five month
period. The manufacturing plant has a regular production capacity of 250 units per month and
225 units in inventory at the start of the planning period. There is a $5 per unit charge for holding
inventory at the end of each month and a limit of 600 units ending inventory for any period.
What is the minimum cost production plan if the forecast must be met?
Month
Forecast
January
250
February
200
March
300
April
400
May
500
A) $15,850
B) $16,150
C) $16,500
D) $16,800
19) It costs $12 to make a single unit using regular production and $15 to make a single unit
using overtime production. Total overtime production is limited to 500 units for the five month
period. The manufacturing plant has a regular production capacity of 250 units per month and 50
units in inventory at the start of the planning period. There is a $5 per unit charge for holding
inventory at the end of each month and a limit of 250 units ending inventory for any period.
What is the lowest cost production plan if the forecast must be met?
Month
Forecast
January
250
February
200
March
300
April
400
May
500
A) $20,850
B) $19,750
C) $19,500
D) $20,550
20) It costs $12 to make a single unit using regular production and $15 to make a single unit
using overtime production. Total overtime production is limited to 500 units for the five month
period. The manufacturing plant has a regular production capacity of 250 units per month and 50
units in inventory at the start of the planning period. There is a $5 per unit charge for holding
inventory at the end of each month and a limit of 250 units ending inventory for any period.
What is the total number of units to be produced using overtime throughout the entire planning
period if the forecast must be met and costs are to be minimized?
Month
Forecast
January
250
February
200
March
300
April
400
May
500
A) 450
B) 500
C) 400
D) 350
21) It costs $10 to make a single unit using regular production and $15 to make a single unit
using overtime production. Finished units sell for $17 and are built to order. The manufacturing
plant has a regular production capacity of 250 units per month and no inventory at the start of the
planning period. What is the BEST net cash flow for the entire planning period if the
manufacturer uses a chase plan?
Month
Forecast
January
250
February
200
March
300
April
400
A) $6,800
B) $7,050
C) $7,300
D) $7,550
22) Regular production costs $25 per unit and selling a unit represents a cash inflow of $30 per
unit. Assume that all units reflected on the forecast will be sold. What is the cumulative net cash
flow at the end of April?
Month
Forecast
Regular Production
January
250
250
February
200
200
March
300
300
April
400
400
A) $10,000
B) $12,000
C) $5,750
D) $2,000
23) Regular production costs $15 per unit and selling a unit represents a cash inflow of $25 per
unit. Assume that all units reflected on the forecast will be sold. What is the net cash flow for
March?
Month
Forecast
Regular Production
January
250
250
February
200
200
March
300
300
April
400
400
A) $11,500
B) $7,500
C) $4,500
D) $3,000
24) Regular production costs $13 per unit and selling a unit represents a cash inflow of $28 per
unit. Assume that all units reflected on the forecast will be sold. What is the cumulative net cash
flow through March?
Month
Forecast
Regular Production
January
250
250
February
200
200
March
300
300
April
400
400
A) $11,250
B) $4,500
C) $8,400
D) $3,900
25) A(n) ________ production plan matches production in each time period with the sales
forecast.
26) A sales and operations plan that varies both production and inventory levels is called a(n)
________ production plan.
27) In order for ________ planning to work, the mix of products or services must be essentially
the same from one time period to the next or the products must have very similar resource
requirements.
28) A production planner can confirm future capacity requirements based on released or planned
orders by referring to a(n) ________.
29) Tim subtracted his cash outflows for 2015 from his cash inflows for the same period to arrive
at his ________.
30) Describe how both top-down and bottom-up planning work and the situations where one
approach is superior to the other.