31) Tim subtracted his cash outflows for 2015 from his cash inflows for the same period to arrive at his
________.
32) Describe the differences between level, chase, and mixed production plans. Use the forecast in the
table to show the differences by creating a plan of each type. There is no beginning inventory and regular
production capacity is 350 units. Overtime costs $10 extra and is limited to 50 units per month.
Subcontracting is limited to 100 units per month and costs $15 per unit. Back orders cost $40 per unit and
there is a cost of $5 per month to hold a unit in inventory. There is room for only 100 units in inventory.
Month
Forecast
January
250
February
300
March
500
April
350
33) 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 has 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. Develop a minimum cost
production plan if the forecast must be met and costs must be minimized.
Month
Forecast
January
250
February
200
March
300
April
400
May
500
January
250
February
200
March
300
April
400
May
500
34) Create a level plan with a zero ending inventory for the forecast shown in the table. There is no
beginning inventory and regular production capacity is 300 units. Overtime costs $15 extra and is limited
to 25 units per month and subcontracting is limited to 60 units per month and costs $10 per unit. Back
orders cost $50 per unit and there is a cost of $5 per month to hold a unit in inventory. What is the total
plan cost above the regular production cost?
Month
Forecast
Regular
Overtime
Subcontracting
Ending
Inventory
January
250
February
300
March
400
April
350
January
250
300
February
300
300
March
400
300
April
350
300
35) Create a minimum cost chase plan for the forecast shown in the table. There is no beginning inventory
and regular production capacity is 350 units. Overtime costs $20 extra and is limited to 50 units per
month and subcontracting is limited to 100 units per month and costs $15 per unit. Back orders cost $40
per unit and there is a cost of $5 per month to hold a unit in inventory. There is room for only 100 units in
inventory. What is the total plan cost above regular production cost?
Month
Forecast
Regular
Overtime
Subcontracting
Ending
Inventory
January
250
February
400
March
500
April
350
Month
Forecast
Regular
Overtime
Subcontracting
Ending
Inventory
January
250
250
0
February
400
350
50
0
March
500
350
50
100
0
April
350
350
0
Diff: 2
Reference: 10.2 Major Approaches to S&OP
Keywords: chase production plan
AACSB: Analytical Thinking
LO: 10.3: Generate multiple alternative sales and operations plans for a firm.
36) 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
Month
Forecast
Regular
Production
Cash
Inflows
Cash
Outflows
Cumulative
January
250
250
7500
6250
1250
February
200
200
6000
5000
2250
March
300
300
9000
7500
3750
April
400
400
12,000
10,000
5750
Diff: 2
Reference: 10.2 Major Approaches to S&OP
Keywords: cash flow analysis, net cash flow
AACSB: Analytical Thinking
LO: 10.3: Generate multiple alternative sales and operations plans for a firm.
37) Describe how both top-down and bottom-up planning work and the situations where one approach is
superior to the other.
10.3 Organizing for and Implementing S&OP
1) An organization has developed three alternate sales and operations plans for the coming six months
and now must choose between them. They should consider:
A) how their plan will impact supply chain partners.
B) what the cash flows are like.
C) how flexible the plan is.
D) All of these are useful criteria for a sales and operation plan.
2) A company pondering the implementation of S&OP should first:
A) build the managerial support and infrastructure needed to make S&OP a success.
B) adopt S&OP as part of the organization’s normal planning process.
C) elevate the decision-making authority of the sales and marketing team.
D) decide whether to commoditize the services offered with their products.
3) Sales and operations planning is a necessary task for all companies, but is never a source of competitive
advantage.
4) Last month, the sales and operations plan showed projections from January through April. This month,
the sales and operations plan shows projections from February through May. This is an example of a
rolling planning horizon.
5) Sales and operations plans must be updated as time progresses, so most firms establish a(n) ________.
6) There are three phases to sales and operations planning implementation. The first phase, during which
employees are trained, information systems implemented, and ideal products are identified for initial
efforts is called ________.
7) An organization with twenty people developing sales and operations plans might receive twenty
different proposals. What are some factors an organization might consider when deciding among these
alternative plans? Provide a ranking for your factors and support your ranking with examples from
recent business news media.
8) Your book describes three phases in the implementation of sales and operations planning in an
organization. What are the three phases and what takes place in each?
10.4 Services Considerations
1) The Super Bowl is right around the corner and Gowgem Hotels is aquiver with anticipation. They’d
like to price their rooms at their three city locations, next to the stadium, near the airport, and in the
suburbs, as high as possible but still achieve 100% occupancy. The approach they should take to this
opportunity is:
A) yield management.
B) a tiered workforce.
C) a load profile.
D) a chase plan.
2) As potato harvest season approaches, the number of year-round llama wranglers is insufficient to meet
the demand, so a few wranglers are hired just for the month it takes to haul the harvest down from the
mountains to the anxious potato-festival crowd. This approach to meeting the labor requirements is
called:
A) a tiered workforce.
B) offloading.
C) labor management.
D) yield management.
3) A major retailer has recently deployed self-checkout stands at the front of the store. As long as you
don’t have items like paint, cold medicine, beer, fruits, or vegetables in your shopping cart, you can check
out quickly in one of these lines. This retailer is providing a prime example of:
A) a tiered workforce.
B) offloading.
C) yield management.
D) a constraint.
4) A routine flight from LaGuardia Airport to Will Rogers Airport may have passengers that have paid
radically different ticket prices. These prices fluctuate based on an approach called yield management.
5) A home improvement store adds several workers to the garden center in the summer in order to meet
the demands of do–it-yourselfers for their dazzling array of plants. Once gardening season is over, both
the workers’ jobs (and the plants they sold) will perish. The home improvement store is following an
offloading strategy.
6) A hotel using yield management would ________ prices if demand is higher than expected only if the
expected result is ________.
7) An organization that meets seasonal swings in demand by hiring and then laying off temporary
workers while maintaining a few full-time permanent workers is employing a(n) ________ strategy.
8) What are the possibilities for matching capacity to sales and vice versa when doing S&OP in a service
environment?
10.5 Linking S&OP throughout the Supply Chain
1) Which of these is NOT an advantage of linking sales and operations planning throughout the supply
chain?
A) increased sales revenue
B) greater coordination
C) improved productivity
D) fewer disruptions in the flow of goods and services
2) Each entity in a supply chain should produce its own sales and operations plan independent of the
other members in order to improve the overall cost performance in a supply chain.
3) Sales and operations planning across a supply chain is similar in nature to collaborative planning,
forecasting, and replenishment.
4) How can and why should a firm link S&OP throughout the supply chain?
10.6 Applying Optimization Modeling to S&OP
1) A company that makes the rocket widget has one machine capable of producing this unique item. The
machine requires an attendant, who works 40 hours a week for $12 per hour and has made himself
available for a maximum of 8 hours of overtime. It costs $20 per hour to run the machine and it is capable
of producing 10,000 rocket widgets per hour. The widgets sell for $10 per hundred and cost $1 per
hundred in materials. If the production manager wishes to develop a sales and operations plans using an
optimization model, which of the following statements is valid?
A) The objective function should limit overtime to less than 8 hours per week.
B) The objective function should maximize the amount of rocket widgets produced.
C) The objective function should be to minimize costs.
D) None of these statements will help plan production using optimization modeling.
2) A company that makes the rocket widget has one machine capable of producing this unique item. The
machine requires an attendant, who works 40 hours a week for $12 per hour and has made himself
available for a maximum of 8 hours of overtime. It costs $20 per hour to run the machine and it is capable
of producing 10,000 rocket widgets per hour. The widgets sell for $10 per hundred and cost $1 per
hundred in materials. If the production manager wishes to develop a sales and operations plans using an
optimization model, which of the following statements is valid?
A) A constraint should limit overtime to less than 8 hours per week.
B) The objective function should maximize the amount of rocket widgets produced.
C) The objective function must be to minimize the overtime.
D) A constraint should limit the cost to run the machine to less than or equal to $20 per hour.
3) A company that makes the rocket widget has one machine capable of producing this unique item. The
machine requires an attendant, who works 40 hours a week for $12 per hour and has made himself
available for a maximum of 8 hours of overtime. It costs $20 per hour to run the machine and it is capable
of producing 10,000 rocket widgets per hour. It is possible to outsource some production, as long as the
total output is limited to less than ten percent of total output. The widgets sell for $10 per hundred and
cost $1 per hundred in materials. If the production manager wishes to develop a sales and operations
plans using an optimization model, which of the following statements is valid?
A) A constraint should limit the cost of materials to less than or equal to $1.
B) A constraint should be to limit outsourced output to less than 10% of total output.
C) The objective function must be to produce at least 10,000 rocket widgets per hour.
D) A constraint should limit the cost to run the machine to less than or equal to $20 per hour.
4) The objective function of an optimization modeling approach to S&OP should not allow available labor
or equipment time to be exceeded.
5) A constraint in an optimization modeling approach to S&OP should not allow overscheduling of
equipment time.
6) A(n) ________ limits our ability to increase profits or cut costs by reducing the set of possible solutions
in an optimization model.
7) A(n) ________ is a formula that is the goal of an optimization model for S&OP.
8) 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. Develop an objective function and
constraints to solve this problem.
Month
Forecast
January
250
February
200
March
300
April
400
May
500
9) It costs $20 to make a single unit using regular production and $25 to make a single unit using
overtime production. Total overtime production is limited to 50 units for the five-month period. The
manufacturing plant has a regular production capacity of 300 units per month and no units in inventory
at the start of the planning period. There is a $10 per unit charge for holding inventory at the end of each
month and the ending inventory of the five-month planning period should be zero. Develop an objective
function and constraints to solve this problem.
Month
Forecast
August
250
September
200
October
300
November
400
December
500