MBA Operations Management - Test Bank - Chapter 14

Operations Management, 12e (Heizer/Render/Munson)
Chapter 14  Material Requirements Planning (MRP) and ERP

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Section 1   Dependent Demand

1) Wheeled Coach obtains competitive advantage through MRP in part because of their excellent record integrity and insistence on record accuracy.
Answer:  TRUE
Diff: 1
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

2) MRP is generally applicable to items with dependent demand.
Answer:  TRUE
Diff: 1
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

3) Reduced inventory levels and faster response to changes in demand are both benefits of MRP.
Answer:  TRUE
Diff: 1
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

4) A dependent demand item is so called because its demand is dependent on customer preferences.
Answer:  FALSE
Diff: 2
Learning Outcome:  Apply the process of material requirements planning (MRP)

5) The quantity required of a dependent demand item is computed from the demand for the final products in which the item is used.
Answer:  TRUE
Diff: 2
Learning Outcome:  Apply the process of material requirements planning (MRP)

6) Which of the following statements regarding Wheeled Coach is FALSE?

1. A) Wheeled Coach has found competitive advantage through MRP.
2. B) Wheeled Coach builds ambulances in a repetitive process.
3. C) Wheeled Coach's MRP system allowed the company to meet tight schedules, but caused inventory to rise.
4. D) Wheeled Coach's MRP system maintains excellent record integrity.
5. E) Low inventory and high quality are two positive outcomes of Wheeled Coach's use of MRP.

Answer:  C
Diff: 1
Learning Outcome:  Apply the process of material requirements planning (MRP)

7) Which of the following is NOT one of the four key tasks that Wheeled Coach insists are necessary for successful MRP implementation?

1. A) The material plan must meet both schedule requirements and facility capabilities.
2. B) The plan must be executed as designed.
3. C) Inventory investment must be minimized.
4. D) Excellent record integrity must be maintained.
5. E) The process must adhere to stringent quality control standards.

Answer:  E
Diff: 2
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

8) Demand for a given item is said to be dependent if:

1. A) it originates from the external customer.
2. B) there is a deep bill of material.
3. C) the finished products are mostly services (rather than goods).
4. D) there is a clearly identifiable parent.
5. E) the item has several children.

Answer:  D
Diff: 1
Learning Outcome:  Apply the process of material requirements planning (MRP)

9) Dependent demand and independent demand items differ in that:

1. A) for any product, all components are dependent-demand items.
2. B) the need for independent-demand items is forecast.
3. C) the need for dependent-demand items is calculated.
4. D) All of the above are true.
5. E) None of the above is true.

Answer:  D
Diff: 2
Learning Outcome:  Apply the process of material requirements planning (MRP)

10) Which of the following is NOT a key benefit of MRP?

1. A) increased quality
2. B) better response to customer orders
3. C) faster response to market changes
4. D) improved utilization of facilities and labor
5. E) reduced inventory levels

Answer:  A
Diff: 2
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

11) Wheeled Coach uses ________ as the catalyst for low inventory, high quality, tight schedules, and accurate records.
Answer:             material requirements planning or MRP
Diff: 1
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

12) ________ is a dependent demand technique that uses a bill of material, inventory, expected receipts, and a master production schedule to determine material requirements.
Answer:             Material requirements planning or MRP
Diff: 1
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

13) Describe the role of record accuracy in Wheeled Coach's successful use of MRP.
Answer:  Wheeled Coach's record integrity is excellent. Record accuracy is recognized as a fundamental ingredient of its successful MRP implementation. Its cycle counters are charged with material audits that not only correct errors but also investigate and correct problems.
Diff: 2
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

14) What is MRP? Identify four benefits from its use.
Answer:  MRP or material requirements planning is a dependent demand technique that uses a bill of material, inventory, expected receipts, and a master production schedule to determine material requirements. The benefits of MRP include (1) better response to customer orders, (2) faster response to market changes, (3) improved utilization of facilities and labor, and (4) reduced inventory levels.
Diff: 2
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

Section 2   Dependent Inventory Model Requirements

1) Lead times, inventory availability, and purchase orders outstanding are among the five things operations managers must know for effective use of dependent inventory models.
Answer:  TRUE
Diff: 2
Learning Outcome:  Apply the process of material requirements planning (MRP)

2) "Phantom bills" are bills of material for subassemblies that do not exist in reality.
Answer:  FALSE
Diff: 1
Key Term:  Phantom bills of material
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

3) Planning bills of material are bills of material for "kits" of inexpensive items such as washers, nuts, and bolts.
Answer:  TRUE
Diff: 2
Key Term:  Planning bill (or kit)
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

4) The time-phased product structure, unlike the bill of material, adds the concept of lead times.
Answer:  TRUE
Diff: 2
Key Term:  Lead time
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

5) If X consists of one A and one B, and each A consists of one F and two Gs, then A is the "parent" component of G.
Answer:  TRUE
Diff: 2
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

6) By convention, the top level in a product structure is designated level 1.
Answer:  FALSE
Diff: 2
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

7) Effective use of MRP and other dependent demand models does not require which of the following?

1. A) master production schedule
2. B) bill of materials
3. C) inventory availability
4. D) lead times
5. E) cost of individual components

Answer:  E
Diff: 2
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

8) Firms making many different final products use ________ to facilitate production scheduling.

1. A) planning bills
2. B) modular bills
3. C) phantom bills
4. D) overdue bills
5. E) gross requirements bills

Answer:  B
Diff: 2
Key Term:  Modular bills
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

9) Which of the following statements best compares modular bills and phantom bills?

1. A) Both pertain to assemblies that are not inventoried.
2. B) There is no difference between the two.
3. C) Both pertain to assemblies that are inventoried.
4. D) Modular bills are used for assemblies that are not inventoried, unlike phantom bills.
5. E) Modular bills represent subassemblies that actually exist and are inventoried, while phantom bills represent subassemblies that exist only temporarily and are not inventoried.

Answer:  E
Diff: 2
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

10) A paint company mixes ten different base colors into 3,000 different color options. If production scheduling is organized around the ten different base colors , then the bills of material are classified as which of the following?

1. A) phantom
2. B) planning
3. C) modular
4. D) low-level
5. E) A and B

Answer:  C
Diff: 2
Key Term:  Modular bills
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

11) A grill assembly takes 20 washers. Instead of listing these washers separately, they are grouped into a single kit for production. How is the bill of material for the washers classified?

1. A) phantom bill
2. B) component bill
3. C) modular bill
4. D) low-level bill
5. E) planning bill

Answer:  E
Diff: 2
Key Term:  Planning bill (or kit)
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

12) The minimum record accuracy required for successful MRP is approximately which of the following?

1. A) lower than 90%
2. B) 90%
3. C) 95%
4. D) 97%
5. E) 99%

Answer:  E
Diff: 2
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

13) Consider the following product structure.


If the demand for product A is 50 units, how many units of component E will be needed?

1. A) 4
2. B) 100
3. C) 200
4. D) 250
5. E) 300

Answer:  E
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

14) Consider the following product structure.



If the demand for product A is 50 units, how many units of component E will be needed?

1. A) 50
2. B) 100
3. C) 150
4. D) 200
5. E) 300

Answer:  A
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

15) Low-level coding means that:

1. A) a final item has only a few levels in the BOM structure.
2. B) the code being used is the code for the lowest level in the BOM structure.
3. C) a component item is coded at the lowest level at which it appears in the BOM structure.
4. D) the top level of the BOM is below level zero and that BOMs are not organized around the finished product.
5. E) the lowest-paid staff member in the production department performs the coding.

Answer:  C
Diff: 2
Key Term:  Low-level coding
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

16) By convention, what is the top level in a product structure?

1. A) level 0
2. B) level 1
3. C) level T
4. D) level 10
5. E) level 100

Answer:  A
Diff: 2
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

17) Bills of material organized by major subassemblies or by product options are called ________.
Answer:  modular bills
Diff: 2
Key Term:  Modular bills
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

18) A(n) ________ is a bill of material for components, usually subassemblies, that exist only temporarily; they are never inventoried.
Answer:  Phantom bill of material
Diff: 2
Key Term:  Phantom bills of material
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

19) If the explosion of the bill of material tells MRP how much of each part is needed, how does MRP learn when each of these parts is needed?
Answer:  Timing is established with the time-phased product structure, which turns a bill of material on its side and adds lead times for each component. Each component is then offset to accommodate lead times.
Diff: 2
Key Term:  Lead time
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

20) What information is necessary for an operations manager to make effective use of a dependent inventory demand model?
Answer:  (1) Master production schedule (what is to be made, and when); (2) Specifications or bill of material (materials and parts required to make the product); (3) Inventory availability (what is in stock); (4) Purchase orders outstanding (what is on order, also called expected receipts); and (5) Lead times (how long does it takes to get various components)
Diff: 3
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

21) Consider the following product structure. Fifty units of Product A are needed. How many units of B, C, D, and E are needed?


Answer:  Item B: 50(2) = 100 units; Item C: 50( 3) = 150 units; Item D: 50(2)(1) + 50(3)(1) = 250 units; Item E: 50(3)(2) = 300 units
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

22) Consider the following product structure. Fifty units of Product A are needed. How many units of B, C, D, E, and F are needed?


Answer:  Item B: 50(1) = 50 units; Item C: 50(2) = 100 units; Item D: 50(1)(2) + 50(2)(1) = 200 units;
Item E: 50(1)(1) = 50 units; Item F: 50(1)(1)(4) + 50(2)(1) = 300 units
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

23) Consider the following product structure. Forty units of Product A are needed. How many units of B, C, D, E, F, and G are needed?


Answer:  Item B: 40(2) = 80 units; Item C: 40(3) = 120 units; Item D: 40(1) = 40 units;
Item E: 80(1) + 40(2) = 160 units; Item F: 120(1) = 120 units; Item G: 120(1) + 40(1) = 160 units
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)
24) Each R requires 3 of component S and 3 of material A; each S requires 3 of part T. The lead time for assembly of R is 1 week. The lead time for the manufacture of S is 2 weeks. The lead time for material A is 1 week. The lead time for the procurement of T is 4 weeks. Construct the time-phased product structure.
Answer:  Solution:

Diff: 2
AACSB:  Analytical thinking
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

25) Each X requires 2 of component Y and 1 of part W. Each Y requires 10 of Z. Each W requires 3 of Q and 2 of R. Lead times are X = 1 week, Y = 1 week, W = 2 weeks, R = 1 week, Z = 3 weeks, and Q = 3 weeks. Construct the time-phased product structure.
Answer:  Solution:

Diff: 2
AACSB:  Analytical thinking
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

26) Construct a product structure tree for a movie purchased in DVD format. Assume that it contains a single DVD disk. Don't be concerned with artwork—you may use labeled boxes for your parts and assemblies.
Answer:  Not all DVDs are alike in their construction, so student answers will vary. Here is a fairly generic version. Note that the primary container is a one-piece molded plastic "clamshell." There are three layers, 0, 1, and 2.

Diff: 2
AACSB:  Reflective thinking
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

27) A manufacturing company is trying to determine the cost of materials used to produce an A. If Fs cost $1 and Ds cost $2 how much does it cost to produce an A (in F and D materials only)?

Answer:  Using the explosion shows that 10 Ds and 16 Fs are needed to produce 1 A. Thus, the cost is 10($2) + 16($1) = $36.
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

28) Four A washers, five B washers, two C bolts, and a D bolt are required to make one grill parts kit. If 100 grill parts kits are needed, how many more washers will be consumed than bolts?
Answer:  Using MRP explosion gives A = 400, B = 500, C = 200, and D = 100.
Since A and B are washers and C and D are bolts, the difference is 400 + 500 - 200 - 100 = 600 more washers used than bolts.
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 14.1 Develop a product structure
Learning Outcome:  Apply the process of material requirements planning (MRP)

Section 3   MRP Structure

1) If 100 units of Q are needed and 10 are already in stock, then the gross requirement is 100 and the net requirement is 90.
Answer:  TRUE
Diff: 1
Key Term:  Net requirements plan
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

2) Gross material requirements do not take into account the amount of inventory on hand.
Answer:  TRUE
Diff: 1
Key Term:  Gross material requirements plan
Objective:  LO 14.2 Build a gross requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

3) When safety stock is deemed absolutely necessary, the usual policy is to build it into (increase) the inventory requirement of the MRP logic.
Answer:  TRUE
Diff: 2
Key Term:  Material requirements planning (MRP)
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

4) Consider the following product structure.



If the demand for product A is 30 units, and there are 10 units of B on hand and none of C, how many units of part D will be needed?

1. A) 3
2. B) 40
3. C) 70
4. D) 90
5. E) 110

Answer:  C
Diff: 3
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

5) It is week 1 and there are currently 20 As in stock. We need 300 As at the start of week 5. If there are scheduled receipts planned for week 3 and week 4 of 120 As each and A has a lead time of 1 week, when and how large of an order should be placed to meet the requirement of 300 As?

1. A) Week 1, 300 As
2. B) Week 1, 40 As
3. C) Week 5, 40 As
4. D) Week 4, 40 As
5. E) Week 4, 300 As

Answer:  D
Diff: 2
Key Term:  Net requirements plan
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

6) If safety stock is desired, it should be built into which portion of MRP?

1. A) module level
2. B) purchased component
3. C) raw materials
4. D) finished goods
5. E) all of the above

Answer:  E
Diff: 3
Key Term:  Material requirements planning (MRP)
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

7) A material requirements plan contains information with regard to all of the following EXCEPT:

1. A) quantities and required delivery dates of all subassemblies.
2. B) quantities and required delivery dates of final products.
3. C) the capacity needed to provide the projected output rate.
4. D) inventory on hand for each final product.
5. E) inventory on hand for each subassembly.

Answer:  C
Diff: 2
Key Term:  Material requirements planning (MRP)
AACSB:  Reflective thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

8) Which of the following best describes a gross material requirements plan?

1. A) a schedule that shows total demand for an item, and when it must be ordered from a supplier or when production must be started
2. B) an intermediate range plan for the scheduling of families of products
3. C) a chart illustrating whether capacity has been exceeded
4. D) a table that corrects scheduled quantities for inventory on hand
5. E) a schedule showing which products are to be manufactured and in what quantities

Answer:  A
Diff: 2
Key Term:  Gross material requirements plan
Objective:  LO 14.2 Build a gross requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

9) Which of the following statements regarding the gross material requirements plan is TRUE?

1. A) It shows total demand for an item.
2. B) It shows when an item must be ordered from a supplier or when production must be started.
3. C) It combines a master production schedule with the time-phased schedule.
4. D) It requires several inputs, including an accurate bill of material.
5. E) All of the above are true.

Answer:  E
Diff: 2
Key Term:  Gross material requirements plan
Objective:  LO 14.2 Build a gross requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

10) An order for 110 units of Product M has been placed. There are currently 30 units of Product M on hand. Each M requires 4 units of Component N. There are 20 units of N on hand. What are the net requirements for N?

1. A) 150
2. B) 170
3. C) 300
4. D) 320
5. E) 440

Answer:  C
Diff: 2
Key Term:  Net requirements plan
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

11) An order for 50 units of Product A and 60 of B has been placed. There are currently 25 units of Product B on hand. Each A requires 2 units of Part C; each B requires 5 units of C. There are 160 units of C available. What are the net requirements for C?

1. A) 115
2. B) 175
3. C) 240
4. D) 690
5. E) 700

Answer:  A
Diff: 3
Key Term:  Net requirements plan
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

12) An order for 110 units of Product A has been placed. There are currently 60 units of Product A on hand. Each A requires 4 units of Part B. There are 20 units of B available. What are the net requirements for B?

1. A) 20
2. B) 120
3. C) 180
4. D) 240
5. E) 440

Answer:  C
Diff: 2
Key Term:  Net requirements plan
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

13) In MRP, the number of units projected to be available at the beginning of each time period refers to:

1. A) net requirements.
2. B) scheduled receipts.
3. C) planned order releases.
4. D) projected on hand.
5. E) the amount necessary to cover a shortage.

Answer:  D
Diff: 2
Key Term:  Material requirements planning (MRP)
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

14) Distortion in MRP systems can be minimized when safety stock is held at the:

1. A) purchased component or raw material level.
2. B) work-in-process level.
3. C) finished goods level.
4. D) A and B
5. E) A and C

Answer:  E
Diff: 2
Key Term:  Material requirements planning (MRP)
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

15) ________ are the result of adjusting gross requirements for inventory on hand and scheduled receipts.
Answer:  Net material requirements (or Net requirements plans)
Diff: 2
Key Term:  Net requirements plan
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

16) Explain the difference between a gross requirements plan and a net requirements plan.
Answer:  A gross requirements plan is a schedule that shows the total demand for an item (prior to subtraction of on-hand inventory and scheduled receipts) and (1) when it must be ordered from suppliers or (2) when production must be started to meet its demand by a particular date. A net requirements plan adjusts gross requirements for inventory on hand and scheduled receipts.
Diff: 2
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

17) The large parts of a playground A-frame (from which to hang a swing or glider) consist of a ridge pole, four legs, and two side braces. Each pair of legs fastens to the ridge with one fastener set. Each side brace requires two fastener sets for attachment to the legs. Each fastener set includes one zinc-plated bolt, one lock-washer, and one nut.

There is one order outstanding, to make 80 frame kits. There are 200 legs in inventory. There are no other large items in inventory, and no scheduled receipts. Fasteners are available from the small parts area.

1. Draw the product structure tree
2. Calculate the net requirements to fulfill the outstanding order.

Answer:  Solution:

Part	GR	OH	NR
A-frame	80		80
Ridge pole	80		80
Side braces	160		160
Legs	320	200	120
Fastener set	440		440

Diff: 2
Key Term:  Net requirements plan
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

18) An order for 120 units of Product M has been made. There are currently 30 units of Product M on hand. Each M requires 4 units of Component N. There are 20 units of N on hand.
(a) Calculate the net requirements for M.
(b) Calculate the gross requirements for N.
(c) Calculate the net requirements for N.
Answer:  (a) 120 - 30 = 90; (b) 90 × 4 = 360; (c) 360 - 20 = 340
Diff: 2
Key Term:  Net requirements plan
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

19) An order for 110 units of Product A has been made. There are currently 60 units of Product A on hand. Each A requires 2 units of Part B. There are 30 units of B available.
(a) Calculate the net requirements for A.
(b) Calculate the gross requirements for B.
(c) Calculate the net requirements for B.
Answer:  (a) 110 - 60 = 50; (b) 50 × 2 = 100; (c) 100 - 30 = 70
Diff: 2
Key Term:  Net requirements plan
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

20) An order has been placed for 50 units of Product A and 60 units of Product B. There are currently 35 units of Product B on hand. Each A requires 2 units of Part C; each B requires 5 units of C. There are 160 units of C available.
(a) Calculate the net requirements for B.
(b) Calculate the gross requirements for C.
(c) Calculate the net requirements for C.
Answer:  (a) 60 - 35 = 25; (b) 50 × 2 + 25 × 5 = 225; (c) 225 - 160 = 65
Diff: 2
Key Term:  Net requirements plan
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

21) (a) Consider the product structure shown below. Assuming 1 A is to be made, how many units of each of the other items would need to be made?
(b) If there are 20 of every item except A in on-hand inventory, how many As can be assembled?

Answer:
(a) Item B: 1, Item C: 3, Item E: 3, Item D: 2(3) + 4(1) = 10 , Item F: 2(3) + 10 = 16
(b) To find how many As can be constructed, first consume all Bs and Cs to make 6As with 14 Bs left and 2Cs. Thus more Cs are needed. Consume 20 Ds and 10 Es to make 10 additional Cs. Thus there are now 12 Cs and 14 Bs on hand, use these to produce 4 more As. This leaves 10 Bs, 20 Fs, and 10Es. Since no more Cs can be constructed, no more As can be constructed. Thus the maximum number of As that can be assembled is 6 + 4 = 10.
Diff: 3
Key Term:  Net requirements plan
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

22) Product A is made from 2 Bs and 1 C. Lead times for A, B, and C are 2, 3, and 2 weeks respectively. Currently there are 2 Bs and a 5 Cs on hand, with 5 of each scheduled to arrive at the end of week 1. If 20 As are needed during week 4, can the order be completed (it is the start of week 0 currently)?
Answer:  To produce 20 As requires 40 Bs and 20 Cs at the start of week 2. Since the lead time for B is greater than 2 weeks the order cannot be completed on time.
Diff: 2
Key Term:  Net requirements plan
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

Section 4   MRP Management

1) In MRP, a "bucket" refers to a fixed order quantity, such as an EOQ.
Answer:  FALSE
Diff: 2
Key Term:  Buckets
Learning Outcome:  Apply the process of material requirements planning (MRP)

2) Time fences divide that segment of the master schedule that can be revised from that section that is "not to be rescheduled."
Answer:  TRUE
Diff: 2
Key Term:  Time fences
Learning Outcome:  Apply the process of material requirements planning (MRP)

3) MRP is an excellent tool for scheduling components with variable lead times.
Answer:  FALSE
Diff: 1
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

4) What is the process of tracing upward in the bill of material from the component to the parent item in order to determine the cause for the component requirement?

1. A) net requirements planning
2. B) time fencing
3. C) pegging
4. D) backtracking
5. E) leveling

Answer:  C
Diff: 2
Key Term:  Pegging
Learning Outcome:  Apply the process of material requirements planning (MRP)

5) In MRP, system nervousness is caused by:

1. A) management's attempt to continually respond to minor changes in production requirements.
2. B) the use of the lot-for-lot approach.
3. C) management's marking part of the master production schedule as "not to be rescheduled".
4. D) the use of phantom bills of material.
5. E) management's attempt to evaluate alternative plans before making a decision.

Answer:  A
Diff: 2
Key Term:  System nervousness
Learning Outcome:  Apply the process of material requirements planning (MRP)

6) What is one of the tools that is particularly useful in reducing system nervousness in an MRP system?

1. A) modular bills
2. B) time phasing
3. C) time fences
4. D) lot sizing
5. E) closed loop system

Answer:  C
Diff: 2
Key Term:  Time fences
Learning Outcome:  Apply the process of material requirements planning (MRP)

7) ________ are a way of allowing a segment of the master schedule to be designated as "not to be rescheduled."
Answer:  Time fences
Diff: 2
Key Term:  Time fences
Learning Outcome:  Apply the process of material requirements planning (MRP)

8) ________ are the time units in a material requirements planning (MRP) system.
Answer:  Buckets
Diff: 2
Key Term:  Buckets
Learning Outcome:  Apply the process of material requirements planning (MRP)

9) A working MRP system allows a firm to react to even minor changes in production requirements. Discuss both the advantage and disadvantage of having such ability.
Answer:  The advantage is that it allows the firm to react quickly and, conceivably, to minimize costs.  The disadvantage is that the reaction to a large number of minor changes may introduce instability (nervousness) into the purchasing and production departments, which can create havoc.
Diff: 2
Key Term:  System nervousness
AACSB:  Reflective thinking
Learning Outcome:  Apply the process of material requirements planning (MRP)

10) What are time fences? Why are they used?
Answer:  Time fences allow a segment of the master schedule to be designated as "not to be rescheduled." They are used to reduce system nervousness in MRP environments.
Diff: 2
Key Term:  Time fences
Learning Outcome:  Apply the process of material requirements planning (MRP)

11) Explain what is meant by "nervousness" of the MRP schedule. Provide an example. Name two tools that are particularly useful in reducing system nervousness in MRP systems.
Answer:  Nervousness is the reaction to a large number of minor changes, which may introduce instability and havoc into the purchasing and production departments. Two tools for reducing system nervousness are time fences and pegging.
Diff: 2
Key Term:  System nervousness
Learning Outcome:  Apply the process of material requirements planning (MRP)

Section 5   Lot-Sizing Techniques

1) The lot-for-lot lot-sizing technique is particularly appropriate when demand is not very smooth and set up cost is small compared to holding cost.
Answer:  TRUE
Diff: 2
Key Term:  Lot-for-lot
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

2) In general, the lot-for-lot approach should be used whenever economical.
Answer:  TRUE
Diff: 2
Key Term:  Lot-for-lot
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

3) MRP can be effective only if very accurate lot sizes are calculated in advance.
Answer:  FALSE
Diff: 2
Key Term:  Lot-sizing decision
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

4) Which of the following lot-sizing techniques results in the lowest holding costs?

1. A) lot-for-lot
2. B) EOQ
3. C) POQ
4. D) Wagner-Whitin algorithm
5. E) the quantity discount model

Answer:  A
Diff: 2
Key Term:  Lot-for-lot
AACSB:  Reflective thinking
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

5) Which of the following statements is TRUE about the MRP plan when using lot-for-lot ordering?

1. A) The quantity of gross requirements for a child item is always equal to the quantity of planned order releases for its parent.
2. B) The quantity of gross requirements for a child item is equal to the quantity of planned order release(s) multiplied by the number of child items used in the parent assembly.
3. C) The quantity of gross requirements for a child item is always equal to the quantity of gross requirements for its parent.
4. D) The quantity and gross requirements for a child item is always equal to the quantity of net requirements for its parent.
5. E) All of the above are true.

Answer:  B
Diff: 2
Key Term:  Lot-for-lot
AACSB:  Reflective thinking
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

6) What lot-sizing technique is generally preferred when inventory holding costs are extremely high?

1. A) lot-for-lot
2. B) EOQ
3. C) POQ
4. D) the Wagner-Whitin algorithm
5. E) All of the above are appropriate for the situation.

Answer:  A
Diff: 2
Key Term:  Lot-for-lot
AACSB:  Reflective thinking
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

7) For the lot-sizing technique known as lot-for-lot to be appropriate:

1. A) future demand should be known for several weeks.
2. B) setup cost should be relatively small.
3. C) annual volume should be rather low.
4. D) item unit cost should be relatively small.
5. E) the independent demand rate should be very stable.

Answer:  B
Diff: 2
Key Term:  Lot-for-lot
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

8) Which of the following statements regarding lot-sizing is TRUE?

1. A) EOQ principles should be followed whenever economical.
2. B) Too much concern with lot-sizing results in false accuracy.
3. C) Lot-for-lot cannot be modified for scrap allowance or process constraints.
4. D) The Wagner-Whitin algorithm simplifies lot size calculations.
5. E) All of the above are true.

Answer:  B
Diff: 2
Key Term:  Lot-sizing decision
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

9) Which lot-sizing technique orders the quantity needed during a predetermined time between orders?

1. A) economic order quantity
2. B) periodic order quantity
3. C) lot-for-lot
4. D) time fencing
5. E) part-period balancing

Answer:  B
Diff: 2
Key Term:  Periodic order quantity (POQ)
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

10) What does the POQ interval equal?

1. A) the number of periods of average demand covered by the safety stock
2. B) the same number of periods that are on the "not to be rescheduled" side of the time fence
3. C) EOQ / maximum gross requirement
4. D) the number of periods until the incoming projected on hand runs out
5. E) EOQ / average demand per period

Answer:  E
Diff: 2
Key Term:  Periodic order quantity (POQ)
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

11) Which of the following is TRUE regarding the POQ lot-sizing method?

1. A) Each POQ interval is recalculated at the time of the order release.
2. B) Each order quantity and POQ interval are recalculated at the time of the order release.
3. C) The POQ interval and all order quantities remain fixed throughout the planning horizon.
4. D) Each order quantity is recalculated at the time of the order release.
5. E) POQ lot sizes are always at least as large as the EOQ lot sizes would be.

Answer:  D
Diff: 2
Key Term:  Periodic order quantity (POQ)
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

12) Which MRP lot-sizing technique should be considered to be the goal (i.e., the technique of choice under ideal conditions)?

1. A) Wagner-Whitin
2. B) EOQ
3. C) lot-for-lot
4. D) POQ
5. E) Silver-Meal

Answer:  C
Diff: 2
Key Term:  Lot-for-lot
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

13) ________ is a lot-sizing technique that generates exactly what is required to meet the plan.
Answer:  Lot-for-lot
Diff: 2
Key Term:  Lot-for-lot
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

14) You have seen several methods for lot sizing in MRP. Why is lot sizing important in MRP? Can too much concern be given to lot sizing?
Answer:  Lot sizing is important because, at the very least, it impacts costs. But too much attention can be paid to lot sizing, which can result in false accuracy due to MRP dynamics. Also, several lot-sizing methods may all produce satisfactory results. Finally, proper lot size is often not possible to determine until after actual requirements are known.
Diff: 2
Key Term:  Lot-sizing decision
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

15) Why will the POQ almost always outperform the EOQ as an MRP lot-sizing technique?
Answer:  Both methods produce a balance between setup and holding costs, but the POQ does not create excess inventory as the EOQ does. In other words, the EOQ may result in ending inventory in a period that is insufficient to satisfy the following period's demand. The POQ never does that.
Diff: 2
Key Term:  Periodic order quantity (POQ)
AACSB:  Reflective thinking
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

16) A very simple product (A) consists of a base (B) and a casting (C). The base consists of a plate (P) and three fasteners (F). There are currently 30 castings and 100 bases on hand. Final assembly takes one week. The casting has a lead time of three weeks. All other parts have one-week lead times. There are no scheduled receipts. All components use the lot-for-lot technique. The master schedule requires 80 units of product A in week 5 and 120 in week 8. Produce the MRP for the upcoming eight weeks. Produce a list of all planned order releases.
Answer:
Diff: 3
Key Term:  Planned order release
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

17) Consider the following requirements for a certain product.

Period	1	2	3	4	5	6	7	8
Gross requirements	0	200	200	500	0	400	0	400

Beginning inventory = 500 units
Setup cost = $500 per setup
Lead time = 1 week
Holding cost = $3 per unit per week

1. Develop the lot-for-lot MRP table.
2. Calculate the total relevant costs.

Answer:  There are three setups at $500 each, totaling $1,500. There are 500 units held in period 1 and 2, and 300 in period 3. The holding costs are 1300 units × $3 per unit, for a total of $3,900. Total relevant costs are $5,400.

Diff: 2
Key Term:  Planned order release
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

18) Clancy's Motors has the following demand to meet for custom manufactured fuel injector parts. The holding cost for that item is $.75 per month and each setup costs $150. Lead time is 0 months. Calculate the planned order releases using: (a) the EOQ technique, and (b) the POQ technique.
What are the costs of each plan, including the holding cost of any inventory left over after month 7?

Month	1	2	3	4	5	6	7
Requirement	100	150	200	150	100	150	250

Answer:  (a) The annual holding cost = ($0.75/month)(12 months) = $9.00
Average monthly demand = 1100 / 7 = 157 units
Annualized demand = 157(12) = 1884 units
The EOQ = sq rt[2(1884)(150)/9] = 251 units
Order 251 units in months 1, 3, 4, 6, and 7
Total inventory held = 0 + 151 + 1 + 52 + 153 + 53 + 154 + 155 = 719 units
Setup costs = 5($150) = $750
Holding cost = 719($0.75) = $539
Total cost = $750 + $539 = $1289

(b) POQ Interval = 251 / 157 = 1.59, rounded to 2 months.
Order 250 units in month 1, 350 in month 3, 250 in month 5, and 250 in month 7
Total inventory held = 0 + 150 + 0 + 150 + 0 + 150 + 0 + 0 = 450 units
Setup costs = 4($150) = $600
Holding cost = 450($0.75) = $338
Total cost = $600 + $338 = $938
POQ performs much better in this example.
Diff: 2
Key Term:  Periodic order quantity (POQ)
AACSB:  Analytical thinking
Objective:  LO 14.4 Determine lot sizes for lot-for-lot, EOQ, and POQ
Learning Outcome:  Apply the process of material requirements planning (MRP)

19) Consider the bill of material for Product J and the data given in the following table. The gross requirements for J are 200 units in week 6 and 250 units in week 8. Develop the MRP tables for each item for an 8-week planning period. Use the lot-for-lot lot-sizing rule.

Item	Lead Time	Quantity on Hand	Scheduled receipts
J	1	0
K	2	20	30 in week 2
L	2	0
M	1	20	10 in week 1

Answer:
Diff: 2
Key Term:  Planned order release
AACSB:  Analytical thinking
Objective:  LO 14.3 Build a net requirements plan
Learning Outcome:  Apply the process of material requirements planning (MRP)

Section 6   Extensions of MRP

1) Smoothing a resource requirements profile to stay within capacity limits may increase setup costs.
Answer:  TRUE
Diff: 2
Key Term:  Closed-loop MRP system
Objective:  LO 14.6 Describe closed-loop MRP
Learning Outcome:  Apply the process of material requirements planning (MRP)

2) Closed-loop MRP systems allow production planners to move work between time periods to smooth the load or to at least bring it within capacity.
Answer:  TRUE
Diff: 2
Key Term:  Closed-loop MRP system
Objective:  LO 14.6 Describe closed-loop MRP
Learning Outcome:  Apply the process of material requirements planning (MRP)

3) Operations splitting sends pieces to the next operation before the entire lot is completed on the previous operation.
Answer:  FALSE
Diff: 2
Key Term:  Closed-loop MRP system
Objective:  LO 14.6 Describe closed-loop MRP
Learning Outcome:  Apply the process of material requirements planning (MRP)

4) Capacity planning in closed-loop MRP:

1. A) utilizes feedback about workload from each work center.
2. B) may make use of resource requirements profiles (load reports).
3. C) may smooth work center loads with such tactics as overlapping and lot splitting.
4. D) does not add capacity, but rather seeks effective use of existing capacity.
5. E) All of the above are true.

Answer:  E
Diff: 2
Key Term:  Closed-loop MRP system
Objective:  LO 14.6 Describe closed-loop MRP
Learning Outcome:  Apply the process of material requirements planning (MRP)

5) If a load report (resource requirements profile) shows a work center scheduled beyond capacity:

1. A) the company must add capacity by enlarging the facility.
2. B) the company must add capacity by such tactics as overtime and subcontracting.
3. C) the work center's load may be smoothed by such tactics as operations splitting or lot splitting.
4. D) the aggregate plan must be revised.
5. E) the Wagner-Whitin algorithm should be used to rebalance the load.

Answer:  C
Diff: 2
Key Term:  Load report
Objective:  LO 14.6 Describe closed-loop MRP
Learning Outcome:  Apply the process of material requirements planning (MRP)

6) MRP II is accurately described as:

1. A) MRP software designed for services.
2. B) MRP with a new set of computer programs that execute on microcomputers.
3. C) material resource planning.
4. D) an enhancement of MRP that plans for all levels of the supply chain.
5. E) a new generation of MRP software that extends MRP to planning and scheduling functions.

Answer:  C
Diff: 2
Key Term:  Material requirements planning II (MRP II)
Objective:  LO 14.5 Describe MRP II
Learning Outcome:  Apply the process of material requirements planning (MRP)

7) A(n) ________ provides feedback to the capacity plan, master production schedule, and production plan so planning can be kept valid at all times.
Answer:  closed-loop MRP system
Diff: 2
Key Term:  Closed-loop MRP system
Objective:  LO 14.6 Describe closed-loop MRP
Learning Outcome:  Apply the process of material requirements planning (MRP)

8) A(n) ________ can illustrate whether a work center has been scheduled beyond its capacity.
Answer:  load report or resource requirements profile
Diff: 2
Key Term:  Load report
Objective:  LO 14.6 Describe closed-loop MRP
Learning Outcome:  Apply the process of material requirements planning (MRP)

9) ________ is a system that allows, with MRP in place, inventory data to be augmented by other resource variables.
Answer:  Material requirements planning II or material resource planning or MRP II
Diff: 2
Key Term:  Material requirements planning II (MRP II)
Objective:  LO 14.5 Describe MRP II
Learning Outcome:  Apply the process of material requirements planning (MRP)

10) Describe the tactics for load smoothing in MRP.
Answer:  Overlapping—sends pieces to the second operation before the entire lot is completed on the first operation; Operations splitting—sends the lot to two different machines for the same operation; Lot splitting—breaks up the order and runs part of it earlier (or later) in the schedule.
Diff: 3
Key Term:  Closed-loop MRP system
Objective:  LO 14.5 Describe MRP II
Learning Outcome:  Apply the process of material requirements planning (MRP)

11) What do we mean by closed-loop MRP?
Answer:  It's a system that provides feedback to the capacity plan, master production schedule, and production plan so planning can be kept valid at all times.
Diff: 2
Key Term:  Closed-loop MRP system
Objective:  LO 14.6 Describe closed-loop MRP
Learning Outcome:  Apply the process of material requirements planning (MRP)

12) Jacquie Welkener, operations manager for ABC Technologies, must schedule work for the next five days. Each unit takes 30 minutes to process. Available capacity is 8 hours per day. The production order quantities are 12, 18, 20, 13, and 17 for Monday through Friday, respectively. What should be the production plan?
Answer:  Sixteen units should be produced each day. Thus, 4 units should be moved from Tuesday to Monday, 2 units should be moved from Wednesday to Tuesday, 2 units should be moved from Wednesday to Thursday, and 1 unit should be moved from Friday to Thursday.
Diff: 2
Key Term:  Closed-loop MRP system
AACSB:  Analytical thinking
Objective:  LO 14.6 Describe closed-loop MRP
Learning Outcome:  Apply the process of material requirements planning (MRP)

Section 7   MRP in Services

1) DRP is a time-phased stock-replenishment plan for all levels of a distribution network.
Answer:  TRUE
Diff: 2
Key Term:  Distribution resource planning (DRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

2) Which of the following statements regarding MRP in services is TRUE?

1. A) MRP is for manufacturing only, and it is not applicable to services.
2. B) MRP can be used in services, but only in those that offer very limited customization.
3. C) MRP only works in services for demand that is independent.
4. D) Services such as restaurant meals illustrate dependent demand, and they require product structure trees, bills-of-material, and scheduling.
5. E) None of the above is true.

Answer:  D
Diff: 2
Key Term:  Material requirements planning (MRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

3) Distribution resource planning (DRP) is:

1. A) a transportation plan to ship materials to warehouses.
2. B) a time-phased stock replenishment plan for all levels of a distribution network.
3. C) a shipping plan from a central warehouse to retail warehouses.
4. D) material requirements planning with a feedback loop from distribution centers.
5. E) a material requirements planning package used exclusively by warehouses.

Answer:  B
Diff: 2
Key Term:  Distribution resource planning (DRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

4) What is DRP?
Answer:  DRP is a time-phased stock replenishment plan for all levels of a distribution network.
Diff: 2
Key Term:  Distribution resource planning (DRP)
Learning Outcome:  Apply the process of material requirements planning (MRP)

Section 8   Enterprise Resource Planning (ERP)

1) Firms may discover that, rather than adapting ERP to the way they do business, they have to adapt the way they do business to accommodate the ERP software.
Answer:  TRUE
Diff: 2
Key Term:  Enterprise resource planning (ERP)
AACSB:  Information technology
Objective:  LO 14.7 Describe ERP
Learning Outcome:  Describe the process and applications of enterprise resource planning (ERP)

2) The supply-chain systems that result from using ERP in the grocery industry are called efficient consumer response (ECR) systems.
Answer:  TRUE
Diff: 2
Key Term:  Efficient consumer response (ECR)
AACSB:  Information technology
Objective:  LO 14.7 Describe ERP
Learning Outcome:  Describe the process and applications of enterprise resource planning (ERP)

3) Enterprise resource planning (ERP):

1. A) seldom requires software upgrade or enhancement.
2. B) does not integrate well with functional areas other than operations.
3. C) is inexpensive to implement.
4. D) automates and integrates the majority of business processes.
5. E) all of the above

Answer:  D
Diff: 2
Key Term:  Enterprise resource planning (ERP)
AACSB:  Information technology
Objective:  LO 14.7 Describe ERP
Learning Outcome:  Describe the process and applications of enterprise resource planning (ERP)

4) Which of the following is FALSE concerning enterprise resource planning (ERP)?

1. A) It attempts to automate and integrate the majority of business processes.
2. B) It shares common data and practices across the enterprise.
3. C) It is inexpensive to implement.
4. D) It provides and accesses information in a real-time environment.
5. E) ERP software promises reduced transaction costs.

Answer:  C
Diff: 2
Key Term:  Enterprise resource planning (ERP)
AACSB:  Information technology
Objective:  LO 14.7 Describe ERP
Learning Outcome:  Describe the process and applications of enterprise resource planning (ERP)

5) A(n) ________ system is packaged business software that automates and integrates the majority of business processes, shares common data and practices across the entire enterprise, and produces information in a real-time environment.
Answer:             enterprise resource planning or ERP
Diff: 2
Key Term:  Enterprise resource planning (ERP)
AACSB:  Information technology
Objective:  LO 14.7 Describe ERP
Learning Outcome:  Describe the process and applications of enterprise resource planning (ERP)

6) What does enterprise resource planning (ERP) allow an organization to do?
Answer:  It allows the organization to automate and integrate the majority of its business processes, to share common data and practices across the entire enterprise, and to produce information in a real-time environment.
Diff: 2
Key Term:  Enterprise resource planning (ERP)
AACSB:  Information technology
Objective:  LO 14.7 Describe ERP
Learning Outcome:  Describe the process and applications of enterprise resource planning (ERP)

----------------------------------

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