Accounting
Anthropology
Archaeology
Art History
Banking
Biology & Life Science
Business
Business Communication
Business Development
Business Ethics
Business Law
Chemistry
Communication
Computer Science
Counseling
Criminal Law
Curriculum & Instruction
Design
Earth Science
Economic
Education
Engineering
Finance
History & Theory
Humanities
Human Resource
International Business
Investments & Securities
Journalism
Law
Management
Marketing
Medicine
Medicine & Health Science
Nursing
Philosophy
Physic
Psychology
Real Estate
Science
Social Science
Sociology
Special Education
Speech
Visual Arts
Finance
Q:
Fixed administrative
Variable Costing Absorption Costing
Product Cost Period Cost Product Cost Period Cost
Q:
Which of the following is not one of the Ten Critical Decisions of Operations Management?
A) location strategy
B) human resources and job design
C) managing quality
D) design of goods and services
E) determining the financial leverage position
Q:
Variable administrative
Q:
Ethical and social dilemmas arise because stakeholders of a business have conflicting perspectives.
Q:
Fixed selling
Q:
Measuring the impact of a capital acquisition on productivity is an example of multifactor productivity.
Q:
Variable selling
Q:
Productivity is the total value of all inputs to the transformation process divided by the total value of the outputs produced.
Q:
Fixed manufacturing overhead
Q:
A knowledge society is one that has migrated from work based on knowledge to one based on manual work.
Q:
Variable manufacturing overhead
Q:
In the past half-century, while the number of people employed in manufacturing in the United States has decreased slightly, the output per worker has increased significantly.
Q:
Direct labor
Q:
Manufacturing now constitutes the largest economic sector in postindustrial societies.
Q:
Direct materials
Q:
Productivity is more difficult to improve in the service sector.
Q:
Identify the treatment of each of the following costs under variable costing and absorption costing:
Variable Costing Absorption Costing
Product Cost Period Cost Product Cost Period Cost
Q:
Customer interaction is often high for manufacturing processes, but low for services.
Q:
Sales less variable production costs. Contribution margin ratio 9
Essay Questions
Q:
Shewhart's contributions to operations management came during the Scientific Management Era.
Q:
Contribution margin divided by sales. Contribution format 6
Q:
Henry Ford is known as the Father of Scientific Management.
Q:
A costing method that includes all manufacturing costs. Product costs 1
Q:
In order to have a career in operations management, one must have a degree in statistics or quantitative methods.
Q:
Sales less cost of goods sold. Variable costing 5
Q:
"How much inventory of this item should we have?" is within the critical decision area of managing quality.
Q:
An income statement format that focuses on cost behavior. Contribution margin 3
Q:
The operations manager performs the management activities of planning, organizing, staffing, leading, and controlling of the OM function.
Q:
A costing method that includes only variable manufacturing costs. Period costs 2
Q:
One reason to study operations management is to learn how people organize themselves for productive enterprise.
Q:
Maximum number of units that can be produced in the period. Absorption costing 8
Q:
An example of a "hidden" production function is money transfers at banks.
Q:
Sales less variable expenses. Manufacturing margin 10
Q:
Operations management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs.
Q:
Costs that are expensed in the period they are incurred. Operating capacity 4
Q:
All organizations, including service firms such as banks and hospitals, have a production function.
Q:
Direct labor, direct materials, and manufacturing overhead. Gross margin 7
Q:
Because Hard Rock Cafes are themed restaurants, operations managers focus their layout design efforts on attractiveness while paying little attention to efficiency.
Q:
Match the following
Q:
Some of the operations-related activities of Hard Rock Caf include designing meals and analyzing them for ingredient cost and labor requirements.
Q:
Given the following data, calculate the total product cost per unit under absorption costing.
Direct labor $3.50 per unit
Direct materials $1.25 per unit
Overhead
Total variable overhead $41,400
Total fixed overhead $150,000
Expected units to be produced 18,000 units
A. $4.75 per unit
B. $7.05 per unit
C. $13.08 per unit
D. $15.38 per unit
E. $16 per unit
Q:
A simulation model is designed to arrive at a single specific numerical answer to a given problem.
Q:
By starting random number intervals at 01, not 00, the top of each range is the cumulative probability.
Q:
Given the following data, calculate product cost per unit under absorption costing.
Direct labor $7 per unit
Direct materials $1 per unit
Overhead
Total variable overhead $20,000
Total fixed overhead $90,000
Expected units to be produced 40,000 units
A. $8 per unit
B. $8.50 per unit
C. $10.25 per unit
D. $10.75 per unit
E. $12 per unit
Q:
Simulation models that are based on the generation of random numbers may fail to give the same solution in repeated use to any particular problem.
Q:
Simulation models are inexpensive to design and use.
Q:
Given the following data, calculate product cost per unit under variable costing.
Direct labor $8 per unit
Direct materials $3 per unit
Overhead
Total variable overhead $30,000
Total fixed overhead $85,000
Expected units to be produced 50,000 units
A. $7 per unit
B. $13.30 per unit
C. $11.00 per unit
D. $11.60 per unit
E. $16.50 per unit
Q:
Front Company had net income of $72,500 based on variable costing. Beginning and ending inventories were 800 units and 1,200 units, respectively. Assume the fixed overhead per unit was $7.90 for both the beginning and ending inventory. What is net income under absorption costing?
A. $69,340
B. $75,660
C. $88,300
D. $56,700
E. $72,900
Q:
Like mathematical and analytical models, simulation is restricted to using the standard probability distributions.
Q:
Simulation provides optimal solutions to problems.
Q:
Pact Company had net income of $972,000 based on variable costing. Beginning and ending inventories were 7,800 units and 5,200 units, respectively. Assume the fixed overhead per unit was $3.61 for both the beginning and ending inventory. What is net income under absorption costing?
A. $962,614
B. $1,018,923
C. $925,077
D. $969,400
E. $981,379
Q:
Kluber, Inc. had net income of $900,000 based on variable costing. Beginning and ending inventories were 55,000 units and 52,000 units, respectively. Assume the fixed overhead per unit was $1.25 for both the beginning and ending inventory. What is net income under absorption costing?
A. $833,125
B. $903,750
C. $966,875
D. $896,250
E. $900,000
Q:
Simulation allows managers to test the effects of major policy decisions on real-life systems without disturbing the real system.
Q:
Jeter Corporation had net income of $212,000 based on variable costing. Beginning and ending inventories were 6,000 units and 10,000 units, respectively. Assume the fixed overhead per unit was $4 for both the beginning and ending inventory. What is net income under absorption costing?
A. $252,000
B. $228,000
C. $244,000
D. $276,000
E. $212,000
Q:
One effective use of simulation is to study problems for which the mathematical models of operations management are not realistic enough.
Q:
Virtually all large-scale simulations take place on computers, but small simulations can be conducted by hand.
Q:
Aces, Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,000 rackets and sold 4,900. At year-end, the company reported the following income statement using absorption costing.
Sales (4,900 $90) $441,000
Cost of goods sold (4,900 $38) 186,200
Gross margin $254,800
Selling and administrative expenses 75,000
Net Income $179,800
Production costs per tennis racket total $38, which consists of $25 in variable production costs and $13 in fixed production costs (based on the 6,000 units produced). Ten percent of total selling and administrative expenses are variable. Compute net income under variable costing.
A. $194,100
B. $165,500
C. $311,000
D. $240,500
E. $233,000
Q:
Simulation is usually capable of producing a more appropriate answer to a complex problem than can be obtained from a mathematical model.
Q:
Wind Fall, a manufacturer of leaf blowers, began operations this year. During this year, the company produced 10,000 leaf blowers and sold 8,500. At year-end the company reported the following income statement using absorption costing:
Sales (8,500 $45) $382,500
Cost of goods sold (8,500 $20) 170,000
Gross margin $212,500
Selling and administrative expenses 60,000
Net income $152,500
Production costs per leaf blower total $20, which consists of $16 in variable production costs and $4 in fixed production costs (based on the 10,000 units produced). Fifteen percent of total selling and administrative expenses are variable. Compute net income under variable costing.
A. $146,500
B. $158,500
C. $237,500
D. $206,500
E. $246,500
Q:
The idea behind simulation is threefold: (1) to imitate a real-world situation mathematically, (2) then to study its properties and operating characteristics, and (3) finally to draw conclusions and make action decisions based on the results of the simulation.
Q:
Fields Cutlery, a manufacturer of gourmet knife sets, produced 20,000 sets and sold 23,000 units during the current year. Beginning inventory under absorption costing consisted of 3,000 units valued at $66,000 (Direct materials $12 per unit; Direct labor, $3 per unit; Variable Overhead, $2 per unit, and Fixed overhead, $5 per unit.) All manufacturing costs have remained constant over the 2-year period. At year-end the company reported the following income statement using absorption costing:
Sales (23,000 $45) $1,035,000
Cost of goods sold (23,000 $22) 506,,000
Gross margin $529,000
Selling and administrative expenses 115,000000
Net income $414,000
60% of total selling and administrative expenses are variable. Compute net income under variable costing.
A. $414,000
B. $399,000
C. $529,000
D. $429,000
E. $644,000
Q:
All forms of simulation are based on probability or chance.
Q:
Tim's Tools, a manufacturer of cordless drills, began operations this year. During this year, the company produced 20,000 units and sold 18,000 units. At year-end the company reported the following income statement using absorption costing:
Sales (18,000 $30) $540,000
Cost of goods sold (18,000 $14) 252,000
Gross margin $288,000
Selling and administrative expenses 90,000
Net income $198,000
Production costs per unit total $14, which consists of $12.90 in variable production costs and $1.10 in fixed production costs (based on the 20,000 units produced). 60% of total selling and administrative expenses are variable. Compute net income under variable costing.
A. $307,800
B. $198,000
C. $195,800
D. $288,000
E. $220,000
Q:
Simulation has numerous applications in modern business, but few of these are in the area of operations.
Q:
Decko Industries reported the following monthly data:
Units produced 52,000 units
Sales price $33 per unit
Direct materials $1.50 per unit
Direct labor $2.50 per unit
Variable overhead $3.50 per unit
Fixed overhead $234,000 in total
What is the company's contribution margin for this month if 50,000 units were sold?
A. $1,326,000
B. $1,716,000
C. $1,275,000
D. $1,650,000
E. $1,450,000
Q:
Operations Management, 10e (Heizer/Render)
Module F Simulation
True/False
Q:
What is Red and White's net income under variable costing if 980 units are sold and operating expenses are $12,000?
A. $(1,380)
B. $(2,000)
C. $2,700
D. $6,620
E. $10,620
Q:
Complete the following table in preparation for a Monte Carlo simulation. The expected demand is 3.52. Demand
Probability
Cumulative Probability
Interval of Random Numbers 0 .1 2 11-23 3 .5 4 86-00
Q:
What is Red and White's net income under absorption costing if 980 units are sold and operating expenses are $12,000?
A. $(1,380)
B. $(2,000)
C. $2,700
D. $6,620
E. $10,620
Q:
Complete the following table in preparation for a Monte Carlo simulation. Demand
Probability
Cumulative Probability
Interval of Random Numbers 1 01-20 2 21-25 3 26-50 4 51-80 5 81-00
Q:
What is the Red and White's contribution margin for this month if 980 units were sold?
A. $38,000
B. $18,620
C. $24,500
D. $50,000
E. $21,560
Q:
Create a distribution of random numbers that would result in average demand per period for a Monte Carlo simulation that is equivalent to the expected demand per period using the data given by the chart below. Demand
Probability
Cumulative Probability
Interval of Random Numbers 0
.1 1
.15 2
.4 3
.15 4
.2
Q:
Swola Company reports the following annual cost data for its single product.
Normal production level 75,000 units
Direct materials $1.25 per unit
Direct labor $2.50 per unit
Variable overhead $3.75 per unit
Fixed overhead $300,000 in total
This product is normally sold for $25 per unit. If Swola increases its production to 200,000 units, while sales remain at the current 75,000 unit level, by how much would the company's income increase or decrease under variable costing?
A. $187,500 increase.
B. $112,500 increase.
C. There will be no change in gross income.
D. $112,500 decrease.
Q:
Suppose the following random numbers (1, 34, 22, 78, 56, 98, 00, 82) were selected during a Monte Carlo simulation that was based on the chart below. What was the average demand per period for the simulation? What is the expected demand? Demand
Probability
Cumulative Probability
Interval of Random Numbers 0
.1 1
.15 2
.4 3
.15 4
.2
Q:
Complete the following table in preparation for a Monte Carlo simulation. Demand
Probability
Cumulative Probability
Interval of Random Numbers 0
.1 1
.15 2
.4 3
.15 4
.2
Q:
Swisher, Incorporated reports the following annual cost data for its single product:
Normal production level 30,000 units
Direct materials $6.40 per unit
Direct labor $3.93 per unit
Variable overhead $5.80 per unit
Fixed overhead $150,000 in total
This product is normally sold for $48 per unit. If Swisher increases its production to 50,000 units, while sales remain at the current 30,000 unit level, by how much would the company's income increase or decrease under variable costing?
A. $60,000 decrease.
B. $90,000 decrease.
C. There is no change in gross margin.
D. $90,000 increase.
Q:
Julie's Diamond Boutique is very concerned with its order policies related to one-carat diamond solitaires. Their current policy is to order 10 diamonds whenever their inventory reaches 6 diamonds (unless there is already an ordered delivery due). Currently there are 8 diamonds on hand. Orders are placed at the end of the month and take one month to arrive (e.g., if an order is placed at the end of month 1, it will be available at the beginning of month 3). The following distribution of monthly sales has been developed using historical sales. If Julie's does not have a diamond on hand, it will result in a lost sale. Use the following random numbers to determine the number of lost sales of one-carat solitaires at Julie's over 12 months. Monthly sales
Probability 3
.20 4
.30 5
.20 6
.20 7
.10 Random numbers for sales: 10, 24, 03, 32, 23, 59, 95, 34, 34, 51, 08, 48
Q:
The lunch counter at a small restaurant has difficulty handling the lunch business. Currently, there is only one cashier in a single-channel, single-phase system. The restaurant has collected information on the interarrival time, and service time distributions from past lunch hours. They are represented in the tables below. Use the following two-digit random numbers given below to simulate 10 customers through the checkout system. What is the average time in line, and average time in system? (Set first arrival time to the interarrival time generated by first random number. Interarrival time (minutes)
Probability Service time (minutes)
Probability 1
.20 1
.20 2
.20 2
.30 3
.30 3
.30 4
.20 4
.20 5
.10 Random numbers for interarrival times: 32, 73, 41, 38, 73, 01, 09, 64, 34, 44
Random numbers of service times: 84, 55, 25, 71, 34, 57, 50, 44, 95, 64
Q:
Alexis Co. reported the following information for May:
Part A
Units sold 5,000 units
Selling price per unit $800
Variable manufacturing cost per unit 520
Sales commission per unit - Part A 80
What is the contribution margin for Part A?
A. $1,000,000
B. $1,400,000
C. $3,600,000
D. $2,600,000
Q:
Sam's hardware store has an order policy of ordering 12 gallons of a specific primer whenever 7 gallons are on hand (unless there's already an ordered delivery due). The store would like to see how well their policy works. Assume that beginning inventory in period 1 is 10 units, that orders are placed at the end of the week to be received one week later. (In other words, if an order is placed at the end of week one, it is available at the beginning of week 3.) Assume that if inventory is not on hand, it will result in a lost sale. The weekly demand distribution obtained from past sales is found in the table below. Also, use the random numbers that are provided and simulate 10 weeks worth of sales. How many sales are lost? Weekly sales
Probability 3
.20 4
.30 5
.20 6
.20 Random numbers for sales: 37, 60, 79, 21, 85, 71, 48, 39, 31, 35