PRACTICE QUESTIONS FOR THE FINAL
This document is intended only for practice and review to prepare for the final. It is not reflective
of the length, exact questions or importance of certain topics on the final and it not exhaustive in
the topics it covers. It should only be considered as a complement to your class notes, slides,
cases, in‐class exercises and problems. This set of questions focus more on the second half of the
course. Please refer back to the practice questions from the midterm to prepare for questions on
the content from the first half of the course.
1. If we reduce the set up costs, order quantity (EOQ) should increase. True or False?
2. An advantage of a make‐to‐stock process is which of the following?
A. Rapid delivery of a standard product.
B. All units of output are unique.
C. It responds directly to customer orders.
D. It allows the firm to avoid inventory costs.
E. It combines the best features of other processes.
You have decided to open a mail‐order shoe business once you graduate from Georgetown. One
of the problems you face is that you have to print the catalog and order all your items before the
selling season, and there is no opportunity to re‐order or change the catalog once the selling
season begins. You can purchase shoes for $12 per unit from your supplier and sell them for $20
per unit. If you are left with any shoes at the end of the season, you can sell them through a
discount outlet for $10 per unit. You estimate that total demand during the season will be
normally distributed with mean 1000 and standard deviation 100.
3. What is the critical fractile?
A. 0.2
B. 0.8
C. 0.4
D. 0.5
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4. How many shoes should you order?
A. Approximately 1000
B. Approximately 915
C. Approximately 1085
D. Approximately 1078
E. Approximately 922
5. How would the order size change if the selling price during the season increases?
A. Remains the same
B. Decreases
C. Increases
D. Not enough information
6. What kind of an inventory model would be the most appropriate for a functional product that
requires an efficient supply chain?
A. EOQ
B. Newsvendor
C. Indifferent between a) and b)
D. None of the above.
7. Which one of the following is NOT a step in the Six Sigma Roadmap?
A. Design
B. Measure
C. Analyze
D. Improve
E. Control
8. Which of the following statements is FALSE?
A. Functional products have long life‐cycles.
B. The demand for innovative products is more predictable.
C. The profit margins for innovative products are higher.
D. Functional products have lower stock‐out rates.
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9. Which of the following statements regarding supply chain design is FALSE?
A. Vertical integration can reduce supply risks.
B. Horizontal integration can increase market power of the firm.
C. Collaboration problems are increased due to vertical integration.
D. Horizontal integration can deter entry by competitors.
10. Which of the following is a result of the Bullwhip Effect?
A. High operational efficiency
B. Lower supply chain costs
C. Higher inventories
D. Higher customer satisfaction
11. Safety stock can be defined as the amount of inventory carried in addition to the expected
demand. True or False?
12. Safety stock can be computed when using the economic order quantity inventory model by
multiplying a "z" value representing the number of standard deviations to achieve a service level
or probability by the standard deviation of daily demand. True or False?
13. Safety stock can be computed when using the economic order quantity inventory model by
multiplying a "z" value representing the number of standard deviations to achieve a service level
or probability by the standard deviation of lead time. True or False?
14. Which of the following is the set of all cost components that make up the economic‐order
quantity total cost (TC) function?
A. Annual purchasing cost, annual ordering cost, fixed cost
B. Annual holding cost, annual ordering cost, unit cost
C. Annual holding cost, annual ordering cost, annual purchasing cost
D. Annual lead time cost, annual holding cost, annual purchasing cost
E. Annual unit cost, annual set up cost, annual purchasing cost
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15. To take into consideration demand uncertainty in reorder point (R) calculations, what do we add
to the product of the average daily demand and lead time in days when calculating the value of
R?
A. The product of average daily demand times a standard deviation of lead time
B. A "z" value times the lead time in days
C. The standard deviation of vendor lead time times the standard deviation of demand
D. The product of lead time in days times the standard deviation of lead time
E. The product of the standard deviation of demand variability and a "z" score relating to a
specific service probability
16. It is impossible to have zero variability in processes. True or False?
17. Variation that is inherent in a production process itself is called assignable variation. True or
False?
18. Which of the following product categories includes fashionable clothing, personal computers and
other products that typically have a very brief life cycle?
A. Functional products
B. Dysfunctional products
C. Innovative products
D. Bullwhip products
E. Low value‐density products
19. Which of the following role of supply chain management is more critical for innovative products?
A. Physical conversion of raw materials to final products delivered to customers.
B. Matching supply with demand.
C. Both are equally critical.
D. None of the above.
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20. Which of the following is not an example of an innovative product?
A. Digital cameras
B. Cell‐phones
C. Fashion designs
D. Coffee
E. MP3 players.
21. Which of the following is more likely to attract legal scrutiny or antitrust investigations?
A. Upstream Vertical Integration
B. Downstream Vertical Integration
C. Horizontal Integration
D. None of the above.
22. Which of the following statements regarding the Bullwhip effect is false?
A. It increases supply chain costs
B. It leads to a higher inventory throughout the supply chain
C. Variability increases as we go downstream in the supply chain.
D. Is caused by decentralized decision‐making.
23. Variation that is inherent in a production process itself is called common variation. True or False.
24. List advantages and disadvantages of a push system and of a pull system.
25. Which of the following is not a characteristic of functional products?
A. Low contribution margin
B. Low margin of error in the forecast at the time production is committed
C. High stock‐out rate
D. Lower proportion of products sold at markdown rates
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26. For which products should a firm try to reduce lead times even if it is costly?
A. Functional products
B. Innovative products
C. All products
D. None of the above
27. Lean operations recommend batches of smallest size possible. What may prevent one from using
batch sizes of 1?
28. If the average inventory value is $45,000 and the annual cost of goods sold is $100,000, what is
the number of inventory turns?
29. Provide one example of how supply chain management can be a source of competitive
advantage.
30. List four main differences in decisions/strategies under physically efficient and functionally
responsive supply chains.
31. List two operational and two organizational reasons to outsource.
32. List three reasons to not outsource.
33. Based on our discussion of the Sport Obermeyer case, please list three operational constraints
faced by Sport Obermeyer. How would you recommend that Sport Obermeyer go about relaxing
these constraints?
34. Zara produces more than 70% of their products on reactive capacity. Why is this a good decision
for them?
35. List three differences for Sport Obermeyer between sourcing from China vs. Hong Kong.
36. Why is Timbuk2 able to utilize an extremely efficient process?
37. While Zara runs its supply chain at 50% utilization, Timbuk2 runs its SF plant at 100% utilization.
Which one is operating correctly and why?