MBA Operations Management - Test Bank - Chapter 05a

Operations Management, 12e (Heizer/Render/Munson)
Chapter 5  Design of Goods and Services

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 Section 1   Goods and Services Selection

1) Regal Marine's attempts to keep in touch with customers and respond to the marketplace are made impossible because consumer tastes change and maritime engineering improves.
Answer:  FALSE
Diff: 1
Learning Outcome:  Describe major approaches to sales and operations planning

2) Product strategy may focus on developing a competitive advantage via differentiation, low cost, rapid response, or a combination of these.
Answer:  TRUE
Diff: 2
Learning Outcome:  Describe major approaches to sales and operations planning

3) The objective of the product decision is to develop and implement a product strategy that meets the demands of the marketplace with a competitive advantage.
Answer:  TRUE
Diff: 2
Key Term:  Product decision
Learning Outcome:  Describe major approaches to sales and operations planning

4) The four phases of the product life cycle are incubation, introduction, growth, and decline.
Answer:  FALSE
Diff: 2
Objective:  LO 5.1 Define product life cycle
Learning Outcome:  Describe major approaches to sales and operations planning

5) In the maturity stage of the product life cycle, operations managers will be particularly concerned with adding capacity or enhancing existing capacity to accommodate the increase in product demand.
Answer:  FALSE
Diff: 2

Objective:  LO 5.1 Define product life cycle
Learning Outcome:  Describe major approaches to sales and operations planning

6) Relatively few new product ideas, perhaps only 1 in 250, become successfully marketed products.
Answer:  TRUE
Diff: 2
Learning Outcome:  Describe major approaches to sales and operations planning

7) 3M's goal is to produce 30% of its profit from products introduced in the last 4 years.
Answer:  TRUE
Diff: 3
Learning Outcome:  Describe major approaches to sales and operations planning


8) Apple generates almost 60% of its revenue from products launched in the past 4 years.
Answer:  TRUE
Diff: 2
Learning Outcome:  Describe major approaches to sales and operations planning
9) Which of these statements regarding Regal Marine is TRUE?

1. A) Product design is a critical decision for the firm.
2. B) Regal uses a three-dimensional CAD system to shorten product development time.
3. C) Regal still uses some wooden parts and hand-produces some components.
4. D) Regal's use of CAD has resulted in a superior product.
5. E) All of the above are true.

Answer:  E
Diff: 2
Learning Outcome:  Describe major approaches to sales and operations planning

10) Regal Marine:

1. A) no longer builds boats with any wooden parts.
2. B) has replaced all human labor with robots.
3. C) treats the product design decision as critical to its success.
4. D) gets its competitive advantage by being the low-cost producer of boats designed by others.
5. E) designs several new boats each year, but contracts other firms for their manufacture.

Answer:  C
Diff: 2
Learning Outcome:  Describe major approaches to sales and operations planning

11) The three major elements of the product decision are:

1. A) selection, definition, and design.
2. B) goods, services, and hybrids.
3. C) strategy, tactics, and operations.
4. D) cost, differentiation, and speed of response.
5. E) legislative, judicial, and executive.

Answer:  A
Diff: 1
Key Term:  Product decision
Learning Outcome:  Describe major approaches to sales and operations planning

12) In which stage of the product life cycle should product strategy focus on process modifications as the product is being "fine-tuned" for the market?

1. A) introduction
2. B) growth
3. C) maturity
4. D) decline
5. E) incubation

Answer:  A
Diff: 2
Objective:  LO 5.1 Define product life cycle
Learning Outcome:  Describe major approaches to sales and operations planning

13) A product's life cycle is divided into four stages, which are:

1. A) introduction, growth, saturation, and maturity.
2. B) introduction, growth, stability, and decline.
3. C) introduction, maturity, saturation, and decline.
4. D) introduction, growth, maturity, and decline.
5. E) incubation, growth, maturity, and decline.

Answer:  D
Diff: 1
Objective:  LO 5.1 Define product life cycle
Learning Outcome:  Describe major approaches to sales and operations planning

14) When should product strategy focus on forecasting capacity requirements?

1. A) at the introduction stage of the product life cycle
2. B) at the growth stage of the product life cycle
3. C) at the maturity stage of the product life cycle
4. D) at the decline stage of the product life cycle
5. E) at the saturation stage of the product life cycle

Answer:  B
Diff: 2
Objective:  LO 5.1 Define product life cycle
Learning Outcome:  Describe major approaches to sales and operations planning

15) The analysis tool that lists products in descending order of their individual dollar contribution to the firm is:

1. A) decision tree analysis.
2. B) Pareto analysis.
3. C) breakeven analysis.
4. D) product-by-value analysis.
5. E) product life cycle analysis.

Answer:  D
Diff: 2
Key Term:  Product-by-value analysis
Learning Outcome:  Describe major approaches to sales and operations planning

16) At which stage of the product life cycle is product strategy likely to focus on improved cost control?

1. A) introduction
2. B) growth
3. C) maturity
4. D) saturation
5. E) inflation

Answer:  C
Diff: 2
Objective:  LO 5.1 Define product life cycle
Learning Outcome:  Describe major approaches to sales and operations planning

17) ________ is used to rank a company's products to determine which products represent the best use of the firm's resources, or, perhaps, to determine which products are to be eliminated.

1. A) Value analysis
2. B) Value engineering
3. C) Financial analysis
4. D) Product-by-value analysis
5. E) Product cost justification

Answer:  D
Diff: 2
Key Term:  Product-by-value analysis
Learning Outcome:  Describe major approaches to sales and operations planning

18) What percentage of sales from new products is indicative of industry leaders?

1. A) 50%
2. B) 7.5%
3. C) 10 to 15%
4. D) above 75%
5. E) 20 to 25%

Answer:  A
Diff: 2
Learning Outcome:  Describe major approaches to sales and operations planning

19) Regal Marine's use of ________ has reduced product development time and reduced problems with tooling and production.
Answer:  CAD or Computer-aided Design
Diff: 2
Key Term:  Computer-aided design (CAD)
AACSB:  Information technology
Learning Outcome:  Describe major approaches to sales and operations planning

20) In the ________ phase of the product life cycle, the product design has begun to stabilize.
Answer:  growth
Diff: 2
Objective:  LO 5.1 Define product life cycle
Learning Outcome:  Describe major approaches to sales and operations planning

21) ________ lists products in descending order of the individual dollar contribution to the firm.
Answer:  Product-by-value analysis
Diff: 2
Key Term:  Product-by-value analysis
Learning Outcome:  Describe major approaches to sales and operations planning

22) What is the objective of the product decision?
Answer:  To develop and implement a product strategy that meets the demands of the marketplace with a competitive advantage.
Diff: 2
Key Term:  Product decision
Learning Outcome:  Describe major approaches to sales and operations planning

23) What is a product-by-value analysis, and what type of decisions does it help managers make?
Answer:  A product-by-value analysis lists products in descending order of their individual dollar contribution to the firm, as well as the total annual dollar contribution of the product. It helps managers evaluate possible strategies for each product. The report may also tell management which product offerings should be eliminated and which fail to justify further investment in research and development or capital equipment. The product-by-value report focuses management's attention on the strategic direction for each product.
Diff: 3
Key Term:  Product-by-value analysis
Learning Outcome:  Describe major approaches to sales and operations planning

24) "With respect to the product decision, managers must be able to accept risk and tolerate failure." Comment on why this is a necessary hazard in making new product decisions, given all the powerful tools and carefully built systems that support that decision.
Answer:  The vast majority of new product ideas do not become marketable products, and most marketable products are failures. Perhaps hundreds of designs accompany each success.
Diff: 2
Key Term:  Product decision
Learning Outcome:  Describe major approaches to sales and operations planning

25) Is it possible for a product's life cycle stage to affect its product strategy? In particular, describe how one product in growth and another in maturity might have different product strategies.
Answer:  There is no reason for the strategy to be static through the life cycle stages. Organizations often treat new products differently than older ones, in terms of support for changes, aggressiveness in pursuit of market, etc. In particular, growth is associated with stabilization of design, and with ensuring that sufficient capacity exists. Maturity is a time for high-volume operations and cost control.
Diff: 2
Objective:  LO 5.1 Define product life cycle
Learning Outcome:  Describe major approaches to sales and operations planning

Section 2   Generating New Products

1) Operations managers must be able to anticipate changes in which of the following?

1. A) product mix
2. B) product opportunities
3. C) the products themselves
4. D) product volume
5. E) all of the above

Answer:  E
Diff: 2
Learning Outcome:  Describe major approaches to sales and operations planning

2) Which of the following would likely cause a change in market opportunities based upon levels of income and wealth?

1. A) economic change
2. B) sociological and demographic change
3. C) technological change
4. D) political change
5. E) legal change

Answer:  A
Diff: 2
Learning Outcome:  Describe major approaches to sales and operations planning

3) Which of the following represents an opportunity for generating a new product?

1. A) understanding the customer
2. B) demographic change, such as decreasing family size
3. C) changes in professional standards
4. D) economic change, such as rising household incomes
5. E) All of the above are such opportunities.

Answer:  E
Diff: 2
Learning Outcome:  Describe major approaches to sales and operations planning

4) Identify factors that influence new product opportunities.
Answer:  Understanding the customer, economic change, sociological and demographic change, technological change, political/legal change, and other changes brought about through market practice, professional standards, suppliers, and distributors.
Diff: 2
Learning Outcome:  Describe major approaches to sales and operations planning

5) Provide some examples of recent product changes, i.e. new products that are replacing older ones.
Answer:  Answers will vary. The list in the text includes: TV to HDTV, radio to satellite radio, coffee shops to Starbucks lifestyle coffee, traveling circuses to Cirque du Soleil, land lines to cell phones, cell phone to iPhone, Walkman to iPod, and mops to Swiffers.
Diff: 2
AACSB:  Reflective thinking
Learning Outcome:  Describe major approaches to sales and operations planning

6) Aggressive new product development requires that organizations build structures internally that contain what features?
Answer:  They should have open communication with customers, innovative product development cultures, aggressive R&D, strong leadership, formal incentives, and training.
Diff: 3
Learning Outcome:  Describe major approaches to sales and operations planning

Section 3   Product Development

1) Quality function deployment refers to both (1) determining what will satisfy the customer and (2) translating those customer desires into a target design.
Answer:  TRUE
Diff: 2
Key Term:  Quality function deployment (QFD)
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

2) Which of the following is true regarding value engineering?

1. A) Value engineering occurs only after the product is selected and designed.
2. B) Value engineering creates fragile design.
3. C) Value engineering is oriented toward improvement of design.
4. D) Value engineering occurs during production when it is clear the product is a success.
5. E) Value engineering can save substantial amounts of product cost, but quality suffers.

Answer:  C
Diff: 2
Key Term:  Manufacturability and value engineering
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

3) Reducing the complexity of a product and improving a product's maintainability are activities of:

1. A) product lifecycle management (PLM).
2. B) product-by-value analysis.
3. C) manufacturability and value engineering.
4. D) organizing for product development.
5. E) design for destruction (DFD).

Answer:  C
Diff: 2
Key Term:  Manufacturability and value engineering
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

4) Quality function deployment (QFD):

1. A) determines what will satisfy the customer.
2. B) translates customer desires into the target design.
3. C) is used early in the design process.
4. D) is used to determine where to deploy quality efforts.
5. E) all of the above

Answer:  E
Diff: 1
Key Term:  Quality function deployment (QFD)
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

5) A graphic technique for defining the relationship between customer desires and product (or service) is:

1. A) product lifecycle management.
2. B) the house of quality.
3. C) the moment of truth.
4. D) the assembly drawing.
5. E) modular design.

Answer:  B
Diff: 2
Key Term:  House of quality
Objective:  LO 5.3 Build a house of quality
Learning Outcome:  Describe major approaches to sales and operations planning

6) A result of concurrent engineering in product design is:

1. A) speedier product development.
2. B) lower quality.
3. C) less customer demand.
4. D) higher costs.
5. E) all of the above.

Answer:  A
Diff: 2
Key Term:  Concurrent engineering
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

7) The Japanese method of organizing for product design features:

1. A) teams.
2. B) product managers (champions).
3. C) distinct departments with assigned tasks.
4. D) a single organization without subdivision or individual teams.
5. E) none of the above.

Answer:  D
Diff: 2
Learning Outcome:  Describe major approaches to sales and operations planning

8) Manufacturability and value engineering has which of the following benefits?

1. Reduced complexity of the product
2. Reduction of environmental impact

III.  Additional standardization of components

1. Robust design
2. Improved job design and safety
3. A) I, III, V
4. B) II, IV
5. C) I, III, IV
6. D) IV
7. E) I, II, III, IV, V

Answer:  E
Diff: 2
Key Term:  Manufacturability and value engineering
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

9) ________ is a process for determining customer requirements and translating them into attributes that each functional area can understand and act upon.
Answer:  Quality function deployment or QFD
Diff: 2
Key Term:  Quality function deployment (QFD)
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

10) The ________ is a part of the quality function deployment process that utilizes a planning matrix to relate customer "wants" to "how" the firm is going to meet those "wants."
Answer:  House of quality
Diff: 2
Key Term:  House of quality
Objective:  LO 5.3 Build a house of quality
Learning Outcome:  Describe major approaches to sales and operations planning

11) Identify the benefits associated with manufacturability and value engineering.
Answer:  Benefits include immediate cost reduction, reduced product complexity, additional standardization of components, improvement of functional aspects of the product, improved job design and job safety, improved maintainability (serviceability) of the product, and robust design.
Diff: 3
Key Term:  Manufacturability and value engineering
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

12) What is quality function deployment (QFD)?
Answer:  QFD refers to both (1) determining what will satisfy the customer and (2) translating those customer desires into the target design.
Diff: 2
Key Term:  Quality function deployment (QFD)
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

13) Identify the 7 steps involved in building the house of quality.
Answer:  (1) Identify customer wants. (2) Identify how the good/service will satisfy customer wants. (3) Relate customer wants to product hows. (4) Identify relationships between the firm's hows. (5) Develop importance ratings. (6) Evaluate competing products. (7) Determine the desirable technical attributes, your performance, and the competitor's performance against these attributes.
Diff: 3
Key Term:  House of quality
Objective:  LO 5.3 Build a house of quality
Learning Outcome:  Describe major approaches to sales and operations planning

Section 4   Issues for Product Design

1) Computer-aided design (CAD) refers to the use of specialized computer programs to direct and control manufacturing equipment.
Answer:  FALSE
Diff: 2
Key Term:  Computer-aided design (CAD)
AACSB:  Information technology
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

2) Robust design ensures that small variations in production or assembly do not adversely affect the product.
Answer:  TRUE
Diff: 2
Key Term:  Robust design
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

3) Modular design exists only in tangible products; it makes no sense in services.
Answer:  FALSE
Diff: 2
Key Term:  Modular design
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

4) Which of the following is TRUE regarding computer-aided design?

1. A) It is too expensive to use in most manufacturing and design settings.
2. B) It is an obsolete technology.
3. C) It results in longer development cycles for virtually all products.
4. D) It is the use of computers to interactively design products and prepare engineering documentation.
5. E) It is the use of information technology to control machinery.

Answer:  D
Diff: 2
Key Term:  Computer-aided design (CAD)
AACSB:  Information technology
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

5) Which of the following is TRUE concerning advantages of CAD?

1. A) It provides accurate information flows to other departments.
2. B) Most product costs are determined at the design stage.
3. C) Design options are easier to review before final commitments are made.
4. D) Virtually all products have their development cycle shortened.
5. E) All of the above are true.

Answer:  E
Diff: 2
Key Term:  Computer-aided design (CAD)
AACSB:  Information technology
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

6) What is the use of information technology to control machinery?

1. A) CAM
2. B) CAD
3. C) QFD
4. D) DFMA
5. E) STEP

Answer:  A
Diff: 2
Key Term:  Computer-aided manufacturing (CAM)
AACSB:  Information technology
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

7) Bridget's Hamburger Stand uses only 7 ingredients but offers 15 different burgers. This process is known as:

1. A) Robust design.
2. B) QFD.
3. C) Modular design.
4. D) CAD.
5. E) Value analysis.

Answer:  C
Diff: 2
Key Term:  Modular design
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

8) Value analysis takes place:

1. A) when the product is selected and designed.
2. B) during the initial stages of production when something needs to be done to assure product success.
3. C) when the product is first conceived.
4. D) during the production process when it is clear that the new product is a success.
5. E) when the product cost is very low.

Answer:  D
Diff: 2
Key Term:  Value analysis
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning


9) What technology "builds" products by laying down successive thin layers of plastic, metal, glass, or ceramics?

1. A) CAM
2. B) STEP
3. C) 3-D printing
4. D) replicator
5. E) virtual reality

Answer:  C
Diff: 2
Key Term:  3-D printing
AACSB:  Information technology
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning
10) 3-D printing is an extension of:

1. A) modular design.
2. B) quality function deployment.
3. C) robust design.
4. D) concurrent engineering.
5. E) computer-aided design.

Answer:  E
Diff: 2
Key Term:  3-D printing
AACSB:  Information technology
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

11) 3-D printing has proven to be particularly advantageous for:

1. A) prototype development and custom products.
2. B) modular design.
3. C) quality function deployment.
4. D) robust design.
5. E) computer-aided design.

Answer:  A
Diff: 2
Key Term:  3-D printing
AACSB:  Information technology
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

12) ________ provides a format allowing the electronic transmittal of three-dimensional data.
Answer:  Standard for the exchange of product data or STEP
Diff: 2
Key Term:  Standard for the exchange of product data (STEP)
AACSB:  Information technology
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning


13) The use of information technology to control machinery is called ________.
Answer:  computer-aided manufacturing or CAM
Diff: 2
Key Term:  Computer-aided manufacturing (CAM)
AACSB:  Information technology
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

14) If a design can be produced to requirements even when the production process has unfavorable conditions, the design is said to be ________.
Answer:  robust
Diff: 2
Key Term:  Robust design
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning
15) Products or services designed in easily segmented components are known as ________ designs.
Answer:  modular
Diff: 2
Key Term:  Modular design
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

16) ________ reviews successful products for improvement during the production process.
Answer:  Value analysis
Diff: 2
Key Term:  Value analysis
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

17) Identify at least three general benefits derived from CAD.
Answer:  Faster development, better products, and accurate flow of information to other departments.
Diff: 2
Key Term:  Computer-aided design (CAD)
AACSB:  Information technology
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning

18) Explain the difference between value analysis and value engineering.
Answer:  Value engineering is concerned with reducing cost and improving function in a preproduction setting, while value analysis, with similar aims, takes place during production, when the product has shown that it will succeed. Techniques are similar.
Diff: 2
Key Term:  Value analysis
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning


19) Discuss the advisability of using modular assemblies in manufacturing. (What are the advantages and disadvantages?) To what extent can these arguments be applied to service products?
Answer:  Modules are easily segmented components. They add flexibility to production and marketing. They allow mix-and-match of components (customization at point of customer contact). Use of modules usually means fewer parts, less design and tooling expense. Disadvantages include using a module in a product for which a more specific component would have been better. It also may be possible that a module is more expensive than a product-specific version would be because it has to function properly for multiple products. Modules do exist in services, as in fast-food meals built to customer specification.
Diff: 3
Key Term:  Modular design
AACSB:  Reflective thinking
Objective:  LO 5.2 Describe a product development system
Learning Outcome:  Describe major approaches to sales and operations planning
Section 5   Product Development Continuum

1) Rapidly developing products and moving them to the market is part of time-based competition.
Answer:  TRUE
Diff: 2
Key Term:  Time-based competition
Objective:  LO 5.4 Explain how time-based competition is implemented by OM
Learning Outcome:  Describe major approaches to sales and operations planning

2) The enhancement of existing products is an external product development strategy.
Answer:  FALSE
Diff: 1
Key Term:  Time-based competition
Objective:  LO 5.4 Explain how time-based competition is implemented by OM
Learning Outcome:  Describe major approaches to sales and operations planning

3) Boeing's 737 airplane and Hewlett-Packard's printer business are examples of using enhancements and migrations of existing products to build on a ________.

1. A) product template
2. B) product pulpit
3. C) product platform
4. D) product dais
5. E) product foundation

Answer:  C
Diff: 2
Objective:  LO 5.4 Explain how time-based competition is implemented by OM
Learning Outcome:  Describe major approaches to sales and operations planning


4) Which of the following is an example of an external product development strategy?

1. A) new internally developed products
2. B) enhancements to existing products
3. C) alliances
4. D) migrations of existing products
5. E) All of the above are examples of internal product development strategy.

Answer:  C
Diff: 2
Key Term:  Alliances
Objective:  LO 5.4 Explain how time-based competition is implemented by OM
Learning Outcome:  Describe major approaches to sales and operations planning

5) Which of the following product development strategies has the highest product development risk?

1. A) acquiring the developer
2. B) alliances
3. C) joint ventures
4. D) new internally developed products
5. E) purchasing technology

Answer:  D
Diff: 2
Objective:  LO 5.4 Explain how time-based competition is implemented by OM
Learning Outcome:  Describe major approaches to sales and operations planning
6) Rapidly developing products and moving them to the market is referred to as ________.
Answer:  time-based competition
Diff: 1
Key Term:  Time-based competition
Objective:  LO 5.4 Explain how time-based competition is implemented by OM
Learning Outcome:  Describe major approaches to sales and operations planning

7) Boeing's 737 airplane and Hewlett-Packard's printer business are examples of using enhancements and migrations of existing products to build on a(n) ________.
Answer:  product platform
Diff: 3
Objective:  LO 5.4 Explain how time-based competition is implemented by OM
Learning Outcome:  Describe major approaches to sales and operations planning

8) What is time-based competition?
Answer:  Time-based competition is competition that is based on time. It involves rapid development of products and moving them to market. Often, the first company into production may have its product adopted as the "standard."
Diff: 2
Key Term:  Time-based competition
Objective:  LO 5.4 Explain how time-based competition is implemented by OM
Learning Outcome:  Describe major approaches to sales and operations planning


9) Identify the external product development strategies; describe each in a sentence or two.
Answer:  The external product development strategies include alliances, joint ventures, and purchase of technology or expertise by acquiring the developer. Alliances are cooperative agreements that allow firms to remain independent, but use complementing strengths to pursue strategies consistent with their individual missions. Joint ventures are combined ownership to pursue new products or markets. Purchasing technology or expertise is usually accomplished by acquiring entrepreneurial firms that have already developed the technology that fits the mission. The issue then becomes fitting the purchased organization, its technology, and its product line into the buying firm, rather than a product development issue.
Diff: 3
Objective:  LO 5.4 Explain how time-based competition is implemented by OM
Learning Outcome:  Describe major approaches to sales and operations planning

Section 6   Defining a Product

1) The "make-or-buy" decision distinguishes between what an organization chooses to produce and what it chooses to purchase from suppliers.
Answer:  TRUE
Diff: 2
Key Term:  Make-or-buy decision
Objective:  LO 5.5 Describe how products and services are defined by OM
Learning Outcome:  Describe major approaches to sales and operations planning
2) Group technology enables the grouping of parts into families based on similar processing requirements.
Answer:  TRUE
Diff: 2
Key Term:  Group technology
AACSB:  Information technology
Objective:  LO 5.5 Describe how products and services are defined by OM
Learning Outcome:  Describe major approaches to sales and operations planning

3) An engineering drawing shows the:

1. A) dimensions, tolerances, materials, and finishes of a component.
2. B) dimensions, tolerances, cost, and sales or use volume of a component.
3. C) materials, finishes, machining operations, and dimensions of a component.
4. D) cost, materials, tolerances, and lead-time for a component.
5. E) cost, dimensions, and machining operations for a component.

Answer:  A
Diff: 2
Key Term:  Engineering drawing
Objective:  LO 5.5 Describe how products and services are defined by OM
Learning Outcome:  Describe major approaches to sales and operations planning


4) The dimensions, tolerances, materials, and finishes of a component are typically shown on a(n):

1. A) assembly chart.
2. B) engineering drawing.
3. C) bill of material.
4. D) assembly drawing.
5. E) route sheet.

Answer:  B
Diff: 2
Key Term:  Engineering drawing
Objective:  LO 5.5 Describe how products and services are defined by OM
Learning Outcome:  Describe major approaches to sales and operations planning

5) What identifies components by a coding scheme that specifies size, shape, and the type of processing (such as size)?

1. A) engineering drawing
2. B) group technology
3. C) bill of material
4. D) assembly drawing
5. E) assembly chart

Answer:  B
Diff: 2
Key Term:  Group technology
AACSB:  Information technology
Objective:  LO 5.5 Describe how products and services are defined by OM
Learning Outcome:  Describe major approaches to sales and operations planning
6) Which of the following typically shows the hierarchy of components, their description, and the quantity of each required to make one unit of a product?

1. A) an engineering drawing
2. B) an assembly drawing
3. C) a bill of material
4. D) an assembly chart
5. E) a route sheet

Answer:  C
Diff: 2
Key Term:  Bill of material (BOM)
Objective:  LO 5.5 Describe how products and services are defined by OM
Learning Outcome:  Describe major approaches to sales and operations planning


7) The hierarchy of components, their description, and the quantity of each required to make one unit of a product are documented on:

1. A) a group technology listing.
2. B) a route sheet.
3. C) a bill of material.
4. D) an engineering drawing.
5. E) a work order.

Answer:  C
Diff: 2
Key Term:  Bill of material (BOM)
Objective:  LO 5.5 Describe how products and services are defined by OM
Learning Outcome:  Describe major approaches to sales and operations planning

8) Group technology requires that:

1. A) each component be identified by a coding scheme that specifies size, shape, and the type of processing.
2. B) a specific series of engineering drawings be prepared.
3. C) all bills of material be prepared using the same format.
4. D) engineering change notices be linked to each of the bills of material and engineering notices.
5. E) the final products be standardized.

Answer:  A
Diff: 2
Key Term:  Group technology
AACSB:  Information technology
Objective:  LO 5.5 Describe how products and services are defined by OM
Learning Outcome:  Describe major approaches to sales and operations planning

9) A drawing that shows the dimensions, tolerances, materials, and finishes of a component is a(n) ________.
Answer:  engineering drawing
Diff: 1
Key Term:  Engineering drawing
Objective:  LO 5.5 Describe how products and services are defined by OM
Learning Outcome:  Describe major approaches to sales and operations planning
10) A listing of the hierarchy of components, their description, and the quantity of each required to make one unit of product is the ________.
Answer:  bill of material
Diff: 2
Key Term:  Bill of material (BOM)
Objective:  LO 5.5 Describe how products and services are defined by OM
Learning Outcome:  Describe major approaches to sales and operations planning


Section 7   Documents for Production

1) A work order is a list of the hierarchy of components, their description, and the quantity of each required to make one unit of the product.
Answer:  FALSE
Diff: 2
Key Term:  Work order
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning

2) An assembly drawing lists the operations necessary to produce the component.
Answer:  FALSE
Diff: 2
Key Term:  Assembly drawing
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning

3) An assembly chart shows an exploded view of the product, usually a three-dimensional or isometric drawing.
Answer:  FALSE
Diff: 2
Key Term:  Documents for production
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning

4) Which of the following shows in schematic form how a product is assembled?

1. A) an engineering drawing
2. B) an assembly routing
3. C) an assembly chart
4. D) a route sheet
5. E) a process sheet

Answer:  C
Diff: 2
Key Term:  Assembly chart
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning
5) A route sheet provides a(n):

1. A) exploded view of the product.
2. B) instruction to make a given quantity of a particular item.
3. C) schematic showing how the product is assembled.
4. D) sequence of operations necessary to produce the component.
5. E) set of detailed instructions about how to perform a task.

Answer:  D
Diff: 2
Key Term:  Route sheet
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning


6) An assembly drawing:

1. A) shows, in schematic form, how the product is assembled.
2. B) shows an exploded view of the product.
3. C) lists the operations, including assembly and inspection, necessary to produce the component with the material specified in the bill of material.
4. D) provides detailed instructions on how to perform a given task.
5. E) describes the dimensions and finish of each component.

Answer:  B
Diff: 2
Key Term:  Assembly drawing
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning

7) An assembly chart:

1. A) shows graphically how the product is assembled.
2. B) shows an exploded view of the product.
3. C) lists the operations, including assembly and inspection, necessary to produce the component with the material specified in the bill of material.
4. D) provides detailed instructions on how to perform a given task.
5. E) describes the dimensions and finish of each component.

Answer:  A
Diff: 2
Key Term:  Assembly chart
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning

8) A process sheet is a type of:

1. A) assembly drawing.
2. B) assembly chart.
3. C) route sheet.
4. D) work order.
5. E) bill of material.

Answer:  C
Diff: 2
Key Term:  Route sheet
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning
9) Which of the following documents lists the operations necessary to produce the component with the material specified in the bill of material?

1. A) an engineering drawing
2. B) an assembly drawing
3. C) a route sheet
4. D) an assembly chart
5. E) an operations chart

Answer:  C
Diff: 2
Key Term:  Route sheet
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning

10) A restaurant kitchen contains a wall poster that shows, for each sandwich on the menu, a sketch of the ingredients and how they are arranged to make the sandwich. This is an example of a(n):

1. A) assembly drawing.
2. B) route sheet.
3. C) bill of material.
4. D) work order.
5. E) assembly chart.

Answer:  A
Diff: 2
Key Term:  Assembly drawing
AACSB:  Reflective thinking
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning

11) A document for production that gives the instruction to make a given quantity of a particular item, usually to a given schedule, is a(n):

1. A) work order.
2. B) route sheet.
3. C) bill of information.
4. D) assembly chart.
5. E) value analysis.

Answer:  A
Diff: 2
Key Term:  Work order
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning

12) An exploded view of the product is a(n) ________.
Answer:  assembly drawing
Diff: 2
Key Term:  Assembly drawing
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning
13) How does configuration management manifest itself when you ask for service on your automobile?
Answer:  Configuration management is used by every automobile manufacturer to track all of the changes between and during a model year. To be specific about the part that is needed, the VIN (vehicle identification number) is often used.
Diff: 3
Key Term:  Configuration management
AACSB:  Reflective thinking
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning


14) Briefly explain how product life-cycle management (PLM) impacts product design.
Answer:  PLM is an umbrella of software programs that attempts to bring together many phases of product design and manufacture. PLM products often start with product design (CAD/CAM); move on to design for manufacture and assembly (DFMA); and then into product routing, materials, layout, assembly, maintenance and even environmental issues.
Diff: 3
Key Term:  Product life-cycle management (PLM)
AACSB:  Information technology
Objective:  LO 5.6 Describe the documents needed for production
Learning Outcome:  Describe major approaches to sales and operations planning

Section 8   Service Design

1) The customer may participate in the design of, and in the delivery of, services.
Answer:  TRUE
Diff: 2
Objective:  LO 5.7 Explain how the customer participates in the design and delivery of services
Learning Outcome:  Describe major approaches to sales and operations planning

2) The moment-of-truth is the crucial moment between the service provider and the customer that exemplifies, enhances, or detracts from the customer's expectations.
Answer:  TRUE
Diff: 2
Objective:  LO 5.7 Explain how the customer participates in the design and delivery of services
Learning Outcome:  Describe major approaches to sales and operations planning

3) According to PCN analysis, the consumer's process domain typically includes the set of activities at the beginning of the process chain.
Answer:  FALSE
Diff: 2
Key Term:  Process-chain-network (PCN) analysis
AACSB:  Reflective thinking
Objective:  LO 5.7 Explain how the customer participates in the design and delivery of services
Learning Outcome:  Describe major approaches to sales and operations planning
4) According to PCN analysis, firms intending to provide a value offering that focuses on customization should be positioned more toward the consumer's process domain.
Answer:  TRUE
Diff: 2
Key Term:  Process-chain-network (PCN) analysis
Objective:  LO 5.7 Explain how the customer participates in the design and delivery of services
Learning Outcome:  Describe major approaches to sales and operations planning


5) Which of the following is NOT a service design technique used to increase service efficiency?

1. A) increase customer interaction
2. B) delay customization
3. C) automation
4. D) modularization
5. E) limit the options

Answer:  A
Diff: 2
Objective:  LO 5.7 Explain how the customer participates in the design and delivery of services
Learning Outcome:  Describe major approaches to sales and operations planning

6) What type of analysis focuses on the ways in which processes can be designed to optimize interaction between firms and their customers?

1. A) PCN
2. B) BOM
3. C) OI
4. D) DFMA
5. E) PLM

Answer:  A
Diff: 2
Key Term:  Process-chain-network (PCN) analysis
Objective:  LO 5.7 Explain how the customer participates in the design and delivery of services
Learning Outcome:  Describe major approaches to sales and operations planning

7) According to PCN analysis, service operations exist only within the area(s) of:

1. A) independent processing.
2. B) independent processing and surrogate interaction.
3. C) independent processing and direct interaction.
4. D) surrogate interaction and direct interaction.
5. E) independent processing, surrogate interaction, and direct interaction.

Answer:  D
Diff: 2
Key Term:  Process-chain-network (PCN) analysis
Objective:  LO 5.7 Explain how the customer participates in the design and delivery of services
Learning Outcome:  Describe major approaches to sales and operations planning
8) According to PCN analysis, which process region includes process steps in which one participant is acting on another participant's resources, such as their information, materials, or technologies?

1. A) independent processing
2. B) surrogate interaction
3. C) direct interaction
4. D) resource processing
5. E) process domain interaction

Answer:  B
Diff: 2
Key Term:  Process-chain-network (PCN) analysis
Objective:  LO 5.7 Explain how the customer participates in the design and delivery of services
Learning Outcome:  Describe major approaches to sales and operations planning


9) The ________ is the crucial moment between the service provider and the customer that exemplifies, enhances, or detracts from the customer's expectations.
Answer:  moment of truth
Diff: 2
Objective:  LO 5.7 Explain how the customer participates in the design and delivery of services
Learning Outcome:  Describe major approaches to sales and operations planning

10) Within PCN analysis, a(n) ________ is a sequence of steps that accomplishes an identifiable purpose (of providing value to process participants).
Answer:  process chain
Diff: 2
Key Term:  Process chain
Objective:  LO 5.7 Explain how the customer participates in the design and delivery of services
Learning Outcome:  Describe major approaches to sales and operations planning

11) Identify the methods of service design that can increase service efficiency and limit customer interaction.
Answer:  Limit the options, delay customization, modularization, automation, and focusing design on the moment of truth.
Diff: 2
Objective:  LO 5.7 Explain how the customer participates in the design and delivery of services
Learning Outcome:  Describe major approaches to sales and operations planning

12) Identify and briefly describe the three process regions from PCN analysis.
Answer:  Direct interaction includes process steps that involve interaction between participants. Surrogate interaction includes process steps in which one participant is acting on another participant's resources, such as their information, materials, or technologies. Independent processing includes steps in which the participant is acting on resources where it has maximum control.
Diff: 2
Key Term:  Process-chain-network (PCN) analysis
Objective:  LO 5.7 Explain how the customer participates in the design and delivery of services
Learning Outcome:  Describe major approaches to sales and operations planning
Section 9   Application of Decision Trees to Product Design

1) The expected value of each course of action in a decision tree is determined by starting at the beginning of the tree (the left-hand side) and working toward the end of the tree (the right).
Answer:  FALSE
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 5.8 Apply decision trees to product issues
Learning Outcome:  Describe major approaches to sales and operations planning


2) The role of decision trees in product design is to:

1. A) rank products in descending order of their dollar contribution to the firm.
2. B) better understand the customers' wants.
3. C) calculate the expected value of each course of action.
4. D) calculate the value of quality function deployment.
5. E) calculate the value of the moment of truth.

Answer:  C
Diff: 1
Objective:  LO 5.8 Apply decision trees to product issues
Learning Outcome:  Describe major approaches to sales and operations planning

3) Payoffs, alternatives, and expected monetary values are terms associated with:

1. A) virtual reality.
2. B) product life-cycle management.
3. C) quality function deployment.
4. D) decision trees.
5. E) make-or-buy analysis.

Answer:  D
Diff: 1
Objective:  LO 5.8 Apply decision trees to product issues
Learning Outcome:  Describe major approaches to sales and operations planning

4) In analyzing product design decisions, decision trees determine the ________ of each course of action.
Answer:  expected value or EMV
Diff: 2
Objective:  LO 5.8 Apply decision trees to product issues
Learning Outcome:  Describe major approaches to sales and operations planning

5) JDI, Inc. is trying to decide whether to make or buy a part (#J-45FPT). Purchasing the part would cost $1.50 each. If they design and produce it themselves, it will result in a per unit cost of $0.75. However, the design investment would be $50,000. Further, they realize that for this type of part, there is a 30% chance that the part will need to be redesigned at an additional cost of $50,000. Regardless of whether they make or buy the part, JDI will need 100,000 of these parts. Using decision trees analysis and EMV, what should JDI do? Show the decision tree.
Answer:  Since the expected values represent costs, JDI should select the lowest expected value, and make the part. Its expected monetary value (cost) is $140,000 versus $150,000 for the buy decision.


Diff: 2
AACSB:  Analytical thinking
Objective:  LO 5.8 Apply decision trees to product issues
Learning Outcome:  Describe major approaches to sales and operations planning

6) Tri-products is trying to decide whether to make or buy an accessory item for one of their products. It is projected that this item will sell for $10 each. If the item is outsourced, there is virtually no cost other than the $6 per unit that they would pay their supplier. Internally, they have two choices. Process A requires an investment of $120,000 for design and equipment, but results in a $4 per unit cost. Process B requires only a $100,000 investment, but its per unit cost is $5. Regardless of whether the item is subcontracted or produced internally, there is a 50% chance that they will sell 50,000 units, and a 50% chance that they will sell 100,000 units. Draw the decision tree appropriate to the alternatives and outcomes stated. Using the decision tree and EMV, what is their best choice?
Answer:  Process A promises the highest profit with an EMV of $330,000.


Diff: 3
AACSB:  Analytical thinking
Objective:  LO 5.8 Apply decision trees to product issues
Learning Outcome:  Describe major approaches to sales and operations planning

7) A company manufactures specialty pollution-sensing devices for the offshore oil industry. One particular device has reached maturity, and the company is considering whether to replace it with a newer model. Technologies have not changed dramatically, so the new device would have similar functionality to the existing one, but would be smaller and lighter in weight. The firm's three choices are: (1) keep the old model, (2) design a replacement device with internal resources, (3) and purchase a new design from a firm that is one of its suppliers. The market for these devices will be either "receptive" or "neutral" of the replacement model. The financial estimates are as follows: Keeping the old design will yield a profit of $6 million dollars. Designing the replacement internally will yield $10 million if the market is "receptive," but a $3 million loss if the market is "neutral." Acquiring the new design from the supplier will profit $4 million under "receptive," $1 million under "neutral." The company feels that the market has a 70 percent chance of being "receptive" and a 30 percent chance of being "neutral." Draw the appropriate decision tree. Calculate expected value for all courses of action. What action yields the highest expected value?
Answer:

The three expected monetary values are:
Develop replacement internally: $10,000,000 × .7 - $3,000,000 × .3 = $6.1 million
Purchase new design: $4,000,000 × .7 + $1,000,000 × .3 = $3.1 million
Stay with current design: $6 million
The company should choose the highest value, and develop a replacement product design with internal resources.
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 5.8 Apply decision trees to product issues
Learning Outcome:  Describe major approaches to sales and operations planning

8) A swim club is designing a new pool to replace its old pool. The new pool would need to last for 10 years since the club is planning on relocating after 10 years. A concrete shell would cost $100,000 and last for all 10 years. Another option is to install a vinyl liner that would cost only $75,000 to install. However, the vinyl is not guaranteed to last for all 10 years, and it has a 33% chance of breaking down. Repair of the vinyl would cost $40,000 and would extend the life of the vinyl liner to the 10-year mark. If both options are acceptable to the swim club, which one minimizes their cost?
Answer:

EMV(in thousands) of vinyl is .33(115) + .67(75) = $88.2
EMV(in thousands) of concrete is $100
The club should install the vinyl option to minimize cost.
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 5.8 Apply decision trees to product issues
Learning Outcome:  Describe major approaches to sales and operations planning

9) A company producing apps for a social networking site is deciding which path to pursue. The first is to create an app that has universal appeal but faces a crowded market. This app, A, would have sales of 100,000 copies at $1 each under ideal conditions, but under tough conditions would have sales of only 60,000 copies at $.80 each. The other app, B, would have sales of 500,000 units at $.50 each under ideal conditions but sales would be reduced to 10,000 units at $.50 each under tough conditions. If ideal and rough conditions occur with the same frequency, which app should the company produce? Note: both apps cost the same amount to develop.
Answer:

EMV(in thousands) of App A is .5(100) + .5(48) = $74
EMV(in thousands) of App B is .5(250) + .5(5) = $127.5
The company should pursue App B to maximize expected revenue.
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 5.8 Apply decision trees to product issues
Learning Outcome:  Describe major approaches to sales and operations planning

10) A company is deciding if it should design an advertising system for use on Twitter©. The first option is to skip out on designing, with no net costs or gains. The second option is System A, which would result in additional sales of either $50,000 under good conditions or $10,000 under bad conditions. The final choice is System B, which would increase sales by $20,000 under both good and bad conditions. Suppose that good conditions are twice as likely as bad conditions. Which option should the company pursue if developing a system costs $25,000?
Answer:

EMV of System A is 2/3(25000) + (-15,000)/3 = $11,666.67
EMV of System B is - $5,000
EMV of nothing is $0.
Thus the company should develop system A.
Diff: 3
AACSB:  Analytical thinking
Objective:  LO 5.8 Apply decision trees to product issues
Learning Outcome:  Describe major approaches to sales and operations planning

11) A company looking for venture capitalist funding is deciding on the design of its operating system (OS) for its new phone. The first option is to simply buy the OS from another company. This would result in sales of either 10,000 units if the market is not crowded with similar phones, or sales of only 3,000 units if the market is crowded. If the company decides to design its own OS, the phone would have sales of 70,000 units if the OS was popular, but sales of only 2,000 if the OS was a failure. Suppose that to recoup the cost of designing their own OS the company would need to sell twice as many phones as when they simply buy the OS for the profit from the scenarios to be equal. Which option should the company choose if the probability that the market is crowded is 50% and the probability that the OS is popular is 75%?
Answer: 

EMV of buy OS is .5(3000) + .5(10000) = 6500 units
EMV of design OS is .75(70000) + .25(2000) = 53,000 units
However, the firm needs to sell twice as many designed OS phones as bought OS phones for equal profit, so that means 6500 bought OS phones are worth 13,000 designed OS phones. Since 13,000 is less than the 53,000 expected sales from the designed OS, the company should design their own OS.
Diff: 3
AACSB:  Analytical thinking
Objective:  LO 5.8 Apply decision trees to product issues
Learning Outcome:  Describe major approaches to sales and operations planning

12) A company is deciding if it should design a product in-house or outsource the design. If outsourced, the cost for a low bidder would be $40,000, and the cost for an expensive bidder would be $100,000. To design in-house would require overtime for an already stretched design team with total costs of $70,000. If all three designs (in-house, low bid, high bid) are equal in quality and the likelihood of finding a low bidder is 60% (meaning that 40% of the time the firm will have to hire the expensive bidder), should the company outsource design or do it in-house?
Answer:


EMV of outsource is .4(100,000) + .6(40,000) = $64,000
EMV of in-house is $70,000
Thus to minimize costs the firm should outsource the design.
Diff: 2
AACSB:  Analytical thinking
Objective:  LO 5.8 Apply decision trees to product issues
Learning Outcome:  Describe major approaches to sales and operations planning

Section 10   Transition to Production

1) Transition to production refers to the act of moving a product to production from what?

1. A) inventory
2. B) the supplier
3. C) the market
4. D) development
5. E) the wholesaler

Answer:  D
Diff: 1
Learning Outcome:  Describe major approaches to sales and operations planning
----------------------------------

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Principles of Operations Management: Sustainability and Supply Chain Management, 10th Edition, 2017
Operations Research: An Introduction, 10th Edition, Hamdy A. Taha, 2017
Introduction to Operations and Supply Chain Management, 4th Edition, Cecil B. Bozarth, Robert B. Handfield, 2016 
Operations Management: Processes and Supply Chains, 11th Edition, Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman, 2016

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6. Operations Research: An Introduction, 10th Edition, Hamdy A. Taha, 2017
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