Operations Management, 12e (Heizer/Render/Munson)
Chapter 7 Process Strategy
Section 1 Four Process Strategies
1) A firm’s process strategy is its approach to transforming resources into goods and services.
2) Intermittent processes are organized around processes.
3) In process-focused facilities, utilization of facilities is low.
4) The typical full-service restaurant uses a product-focused process.
5) Harley-Davidson, because it has so many possible combinations of products, utilizes the process
strategy of mass customization.
6) The assembly line is a classic example of a repetitive process.
7) The tool that calculates which process has the lowest cost at any specified production volume is a
crossover chart.
8) The term focused processes refers to the quest for increased efficiency, whether in goods or services, that
results from specialization.
9) A job shop is an example of a(n):
A) repetitive process.
B) continuous process.
C) line process.
D) intermittent process.
E) specialized process.
10) Three of the four types of processes are:
A) goods, services, and hybrids.
B) manual, automated, and service.
C) process focus, repetitive focus, and product focus.
D) modular, continuous, and technological.
E) input, transformation, and output.
11) Which of the following industries is most likely to have low equipment utilization?
A) auto manufacturing
B) commercial baking
C) television manufacturing
D) steel manufacturing
E) restaurants
12) A product-focused process is commonly used to produce:
A) high-volume, high-variety products.
B) low-volume, high-variety products.
C) high-volume, low-variety products.
D) low-variety products at either high– or low-volume.
E) high-volume products of either high- or low-variety.
13) Which one of the following products is most likely made in a job shop environment?
A) rolls of newsprint
B) custom furniture
C) television sets
D) cigarettes
E) canned vegetables
14) Which of the following products is likely to be assembled on a repetitive process line?
A) automobiles
B) custom personal computers
C) custom cakes
D) steel
E) beer
15) An assembly line is an example of a:
A) product-focused process.
B) process-focused process.
C) repetitive process.
D) line process.
E) specialized process.
16) Arnold Palmer Hospital uses which focus?
A) process
B) repetitive
C) product
D) mass customization
E) A and D
17) One of the similarities between process focus and mass-customization is:
A) the volume of outputs.
B) the use of modules.
C) many departments and many routings.
D) the variety of outputs.
E) All of the above are similarities.
18) Frito-Lay is to ________ focus as Harley Davidson is to ________ focus.
A) process, repetitive
B) product, repetitive
C) repetitive, product
D) process, product
E) product, mass customization
19) High fixed costs and low variable costs are typical of which approach?
A) product
B) process
C) mass customization
D) repetitive
E) A and C
20) Goods made to order are typical of ________ and ________ approaches while goods made to forecast
are typical of ________ and ________ approaches.
A) process, mass customization; repetitive, product
B) product, mass customization; repetitive, process
C) product, process; repetitive, mass customization
D) repetitive, product; mass customization, process
E) repetitive, process; mass customization, product
21) Align Technology uses a ________ approach to produce clear plastic removable aligners.
A) mass customization
B) product focus
C) process focus
D) repetitive focus
E) crossover
22) Which of the following companies use a mass customization approach?
A) Dell
B) Align Technology
C) Frito-Lay
D) Arnold Palmer hospital
E) A and B
23) Harley Davidson:
A) utilizes job shops to make each of its modules.
B) uses product focused manufacturing.
C) uses a large number of modules to build a small number of different bikes.
D) uses work cells to feed its assembly line.
E) All of the above are true.
24) Which of the following is FALSE regarding repetitive processes?
A) They use modules.
B) They allow easy switching from one product to the other.
C) They are the classic assembly lines.
D) They have more structure and less flexibility than a job shop layout.
E) They include the assembly of basically all automobiles.
25) Which of the following phrases best describes product focus?
A) low volume, high variety
B) Finished goods are usually made to order.
C) Processes are designed to perform a wide variety of activities.
D) high fixed costs, low variable costs
E) high inventory
26) Which of the following phrases best describes process focus?
A) low volume, high variety
B) Finished goods are usually made to a forecast and stored.
C) Operators are less broadly skilled.
D) high fixed costs, low variable costs
E) low inventory
27) Which of the following characteristics best describes repetitive focus?
A) It uses sophisticated scheduling to accommodate custom orders.
B) Its output is a standardized product produced from modules.
C) Operators are broadly skilled.
D) It is widely used for the manufacture of steel.
E) low volume, high variety
28) A quasi-custom product:
A) gets its apparent customization from the combinations available from a small number of modules.
B) is often the output of repetitive focus facilities.
C) is a valid description of a fast food sandwich.
D) only applies in services.
E) All but D are true.
29) Process A has fixed costs of $1000 and variable costs of $5 per unit. Process B has fixed costs of $500
and variable costs of $15 per unit. What is the crossover point between process A and process B?
A) 50 units
B) 200 units
C) $2,500
D) $5,000
E) $9,500
30) Process X has fixed costs of $10,000 and variable costs of $2.40 per unit. Process Y has fixed costs of
$9,000 and variable costs of $2.25 per unit. Which of the following statements is TRUE?
A) The crossover point is approximately 6667 units.
B) It is impossible for one process to have both of its costs lower than those of another process.
C) Process Y is cheaper than process X at all volumes.
D) Process X should be selected for very large production volumes.
E) Process X is more profitable than process Y and should be selected.
31) The crossover point is that production quantity where:
A) variable costs of one process equal the variable costs of another process.
B) fixed costs of a process are equal to its variable costs.
C) total costs equal total revenues for a process.
D) total costs for one process equal total costs for another process.
E) the process no longer loses money.
32) Product focused processes:
A) allow more customization, but are not very efficient.
B) are desirable because resource needs increase slowly with the complexity of a process.
C) are processes that are specialized for relatively few products or customer groups.
D) apply only to service firms, not to manufacturers.
E) are profitable because customers demand flexibility, not specialization.
33) An organization’s approach to transforming resources into goods and services is called its ________.
34) The process strategy that is organized around processes to facilitate low-volume, high-variety
processes is called a(n) ________.
35) ________ is a process strategy based on a product-oriented production process that uses modules.
36) ________ is a rapid, low-cost production process that caters to constantly changing unique customer
desires.
37) ________ represent an organization’s attempt to gain increased efficiency through specialization,
which can include, for example, concentrating on certain classes of customers.
38) Why is Harley-Davidson identified as a repetitive manufacturer, not a mass customizer?
39) What is the link between focused processes and specialization? What kinds of focus are possible?
40) How are modules useful in manufacturing processes?
41) What is mass customization?
42) Identify the four basic process strategies, and describe them in a complete sentence or two each.
43) In an affluent society, how do we produce a wide number of options for products at low cost? Hint:
Focus on how to address some of the major challenges of mass customization.
44) A product is currently made in a process-focused shop, where fixed costs are $9,000 per year and
variable costs are $50 per unit. The firm is considering a fundamental shift in process, to repetitive
manufacturing. The new process would have fixed costs of $90,000, and variable costs of $5. What is the
crossover point for these processes? For what range of outputs is each process appropriate?
45) Big John’s Manufacturing currently produces its lead product on a machine that has a variable cost of
$0.32 per unit, and fixed costs of $75,000. Big John is considering purchasing a new machine that would
drop the variable cost to $.28 per unit, but has fixed costs of $150,000. What is the cross-over point
between the two machines?
46) The local convenience store makes personal sized pizzas. Currently, its process makes complete
pizzas, fully cooked, for the customer. This process has a fixed cost of $20,000, and a variable cost of $1.75
per pizza. The owner is considering a different process that can make pizzas in two ways: completely
cooked (as before), or partially cooked and then flash frozen for the customer to finish heating at home.
This alternate process has a fixed cost of $24,000, but a lower variable cost (because much less energy is
used in baking) of $1.25 per pizza.
a. What is the crossover point between the existing process and the proposed process?
b. If the owner expects to sell 9,000 pizzas, should he get the new oven?
47) A firm is about to undertake the manufacture of a product, and it is weighing the process
configuration options. There are two intermittent processes under consideration, as well as a repetitive
focus. The smaller intermittent process has fixed costs of $3,000 per month and variable costs of $10 per
unit. The larger intermittent process has fixed costs of $12,000 per month and variable costs of $2 per unit.
A repetitive focus plant has fixed costs of $50,000 per month and variable costs of $1 per unit.
a. At what output does the large intermittent process become cheaper than the small one?
b. At what output does the repetitive process become cheaper than the larger intermittent process?
48) An organization is considering three process configuration options. There are two different
intermittent processes, as well as a repetitive focus. The smaller intermittent process has fixed costs of
$3,000 per month and variable costs of $10 per unit. The larger intermittent process has fixed costs of
$12,000 per month and variable costs of $2 per unit. A repetitive focus plant has fixed costs of $50,000 per
month and variable costs of $1 per unit.
a. If the company produced 20,000 units, what would be its cost under each of the three choices?
b. Which process offers the lowest cost to produce 40,000 units? What is that cost?
49) A product is currently made in a process-focused shop, where fixed costs are $8,000 per year and
variable cost is $40 per unit. The firm currently sells 200 units of the product at $200 per unit. A manager
is considering a repetitive focus to lower costs (and lower prices, thus raising demand). The costs of this
proposed shop are fixed costs = $24,000 per year and variable cost = $10 per unit. If a price of $80 will
allow 400 units to be sold, what profit (or loss) can this proposed new process expect? Do you anticipate
that the manager will want to change the process? Explain.
50) Brandon’s computer shop is considering two different configuration options. The first one is to have
each computer built by the sales associates when they have free time. The second option is to hire a
dedicated assembly technician. Option A has variable costs of $50 per computer and no fixed costs.
Option B has a fixed cost of $1,000 but variable costs of only $5 per computer. What is the cross-over
point?
51) A non-profit organization is planning a raffle to raise money. It has two options for tickets. The first
option is to do the tickets by hand, with fixed costs of $50 and variable costs of $.05 per ticket. The second
option is to outsource production. This would result in fixed costs of $500 and variable costs of $.01. If the
organization plans to sell 10,000 tickets which option should it choose?
52) Kirstin is thinking about opening a Chinese restaurant and needs to buy a rice cooker. Machine A has
fixed costs of $100 and variable costs of $1/pound. Machine B has fixed costs of $500 and variable costs of
$.1/pound. If Kirstin plans to sell 100 pounds of rice, which machine should she choose? What is the
cross-over point?
53) Bridget is considering how to get to work over the summer. She has two options. Option A is to buy a
seasonal bus pass for $100. Option B is to pay $.25 for each ride. Identify the fixed and variable costs for
each option. If she has to ride both to and from work, how many days of work would it take for the
seasonal pass to cost the same amount as Option B?
54) Karla’s candle factory is considering two different manufacturing options. Option A is highly
automated with fixed costs of $25,000 and variable costs of $.1/candle. Option B uses hand labor with
fixed costs of $10,000 and variable costs of $.5/candle. If demand for Karla’s candles is 25,000, which
option should she pick?
55) Mary is considering purchasing a machine from one of two suppliers. Supplier A’s machine has an
annual fixed cost of $10,000 and a unit variable cost of $2.10. Supplier B’s machine has an annual fixed
cost of $16,000 and a unit variable cost of $3.00. How large should Mary’s annual demand be in order to
make Supplier B’s machine the better choice?
Section 2 Selection of Equipment
1) When selecting new equipment and technology, decision makers look for flexibility—the ability to
respond with little penalty in time, cost, or customer value.
2) What have restaurants such as Steakhouses and Stacked Restaurants used to replace their traditional
paper menus?
A) spoken descriptions
B) singing descriptions
C) menus painted on the walls
D) index cards containing a picture of each item
E) iPad menus