1. Operations Management
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2nd Edition
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WORKBOOK
Icfai Center for Management Research
Road # 3, Banjara Hills, Hyderabad 500 034

2.  Icfai, March 2007. All rights reserved.
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No part of this publication may be reproduced, stored in a retrieval system, used
in a spreadsheet, or transmitted in any form or by any means – electronic,
mechanical, photocopying or otherwise – without prior permission in writing from
Icfai.
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Operations Management (2nd Edition) – Workbook
ISBN 81-314-1126-5
Ref. No. OM WB – 03 2K7 35
For any clarification regarding this book, students may please write to Icfai giving the above
reference, and page number.
While every possible care has been taken in preparing this book, Icfai welcomes suggestions
from students for improvement in future editions.

3. Contents
Part A
Multiple Choice Questions
3-67
Part B
Paper I
139-148
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Paper I – Model Test 1
71-136
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Multiple Choice – Answers and Explanations
149-159
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Paper I – Model Test 2
Paper I – Model Test 1 – Answers and Explanations
163-172
Paper I – Model Test 2 – Answers and Explanations
173-184
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Paper II
187-196
Paper II – Model Test 2
197-207
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Paper II – Model Test 1
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Paper II – Model Test 1 – Answers and Explanations
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Paper II – Model Test 2 – Answers and Explanations
211-221
222-231

4. Detailed Contents
Operations Management Decisions
The Historical Evolution of Operations Management
Computers and Advanced Operations Technology
2. OPERATIONS STRATEGY
3. FORECASTING DEMAND
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Forecasting in Operations
Forecast Components
Demand Forecasting Process
Forecasting Methods
Selecting a Forecasting Method
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Operations Strategy as a Competitive Weapon
Elements of Operations Strategy
Developing an Operations Strategy
Financial and Economic Analysis in Operations
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1. OPERATIONS MANAGEMENT – AN OVERVIEW
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Part One: Introduction to Operations Management
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Measures of Forecasting Accuracy
Monitoring and Controlling Forecasts
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Part Two: Design of Facilities and Jobs
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4. ALLOCATING RESOURCES TO STRATEGIC ALTERNATIVES
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Allocation Decisions in Operations Strategy
Linear Programming in Operations Management
Formulation of Linear Programming Problems
Solution of Linear Programming Problems
The Transportation Problem in Linear Programming
5. DESIGN OF PRODUCTION PROCESSES
Process Planning and Design
Major Factors Affecting Process Design Decisions
Types of Process Designs
Process Planning Aids
Selecting the Type of Process Design
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5. FACILITY LOCATION AND LAYOUT
7. JOB DESIGN
8. WORK MEASUREMENT
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Job Design Fundamentals
Considerations in Job Design
Work Environment
Uses of Job Design
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Importance of Location
Factors Affecting the Location Decisions
General Steps in Location Selection and Location Decision Process
Location Evaluation Methods
Locating Service Facilities
Facility Layout
Basic Layout Formats
Developing a Process Layout
Developing a Product Layout
Developing a Cellular Manufacturing Layout
Japanese Approaches and Trends in Manufacturing Layouts
Service Facility Layouts
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Uses of Setting Work Standards
Work Measurement Techniques
Part Three: Operations Planning and Control
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9. AGGREGATE PLANNING AND CAPACITY PLANNING
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Overview of Planning Activities
The Aggregate Planning Process
Strategies for Developing Aggregate Plans
Aggregate Planning Techniques
Master Production Schedule
Implementing Aggregate Plans and Master Schedules
Capacity Planning
10. FUNDAMENTALS OF INVENTORY CONTROL
Purpose of Inventories
Inventory Costs
Inventory Systems
Economic Order Quantity Model
Inventory Classifications Models
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6. 11. PURCHASE MANAGEMENT
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Importance of Purchasing
Organizing Purchasing
Responsibilities of a Purchasing Manager
Purchasing Process
Duties of Buyers
Make-or-Buy Decisions
Ethics in Buying
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Necessity of Materials Management
Functions of Materials Management
Materials Management Technology
Materials Management Techniques
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12. MATERIALS MANAGEMENT
13. MATERIALS REQUIREMENT PLANNING
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Fundamentals of Materials Requirement Planning
Components of an MRP System
Advantages and Disadvantages of an MRP System
Problems in Implementing MRP Systems
Manufacturing Resource Planning (MRP II)
14. OPERATIONS SCHEDULING
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Purpose of Scheduling
Scheduling Methods
Scheduling Activities
Scheduling by Type of Operations
Scheduling Personnel in Service Operations
Scheduling Techniques
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15. ENTERPRISE RESOURCE PLANNING
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Evolution of ERP
Business Process Reengineering
Business Modeling for ERP
ERP Implementation
ERP and Competitive Advantage
16. SUPPLY CHAIN MANAGEMENT
Business Drivers in Supply Chain Performance
Principles of Supply Chain Management
Forces Shaping Supply Chain Management
Supply Chain Management Framework
Customer Focus in Supply Chain Management
Electronic Supply Chain Management
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7. 17. JUST-IN-TIME (JIT) MANUFACTURING SYSTEM
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The Concept of the JIT System
Advantages of JIT Systems
Characteristics of JIT Systems
18. PRODUCTIVITY AND QUALITY MANAGEMENT
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Productivity
The Strategic Role of Quality
Role of Inspection in Quality Control
The Cost of Quality
Statistical Concepts in Quality Control
Computers in Quality Control
Concept of TQM
19. FACILITIES AND MAINTENANCE MANAGEMENT
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Facilities Management
Necessity of Maintenance Management
Types of Maintenance
Economics of Maintenance
Evaluation of Preventive Maintenance Policies
Maintenance Planning
Modern Approaches to Preventive Maintenance
Recent Trends in Maintenance
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20. PROJECT MANAGEMENT
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Necessity of Project Management
Network Modeling
Project Planning Methods
Project Crashing
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Part Four: Technology and Globalization in Operations Management
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21. TRENDS IN OPERATIONS TECHNOLOGY
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Automation
Overview of Manufacturing Activities
Artificial Intelligence (AI)
Electronic Data Interchange (EDI)
22. GLOBALIZATION AND OPERATIONS MANAGEMENT
Significance of Globalization
Sources of Global Competitive Advantage
Difficulties in Managing Globalization
Changes in Operations Strategy Necessary due to Globalization
Managing Globalization
Operations in Global Business Strategy
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8. Part A – Multiple Choice Questions: Relevant Chapters
Chapters
Title
Chapter 1
Operations Management – An Overview
Chapter 2
Operations Strategy
17-40
Chapter 3
Forecasting Demand
41-86
Chapter 4
Allocating Resources to Strategic Alternatives
Chapter 5
Design of Production Processes
Chapter 6
Facility Location and Layout
Chapter 7
Job Design
Chapter 8
Work Measurement
Chapter 9
Aggregate Planning and Capacity Planning
Chapter 10
Fundamentals of Inventory Control
244-278
Chapter 11
Purchase Management
279-300
Chapter 12
Materials Management
Chapter 13
Materials Requirement Planning
334-360
Chapter 14
Operations Scheduling
361-408
Chapter 15
Enterprise Resource Planning
409-425
Chapter 16
Supply Chain Management
426-443
Chapter 17
Just-In-Time (JIT) Manufacturing System
444-460
Chapter 18
Productivity and Quality Management
461-493
Chapter 19
Facilities and Maintenance Management
494-529
Chapter 20
Project Management
530-557
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141-186
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217-243
301-333
Trends in Operations Technology
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Globalization and Operations Management
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Chapter 22
1-16
187-200
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Chapter 21
Multiple Choice Questions

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Part A: Multiple Choice Questions
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This section consists of multiple-choice questions that test the student’s
understanding of the basic concepts discussed in the textbook. Answering these
questions will help students quickly recollect the theories they’ve learnt and apply
them to real-life business situations.

10. Part A: Multiple Choice Questions
a.
b.
c.
d.
3.
a.
b.
c.
d.
The computerization of operations began
when the first computer was installed in
General Electric Appliance Park in 1954.
What was the basic objective of computer
applications then?
Reducing manpower
Reducing clerical costs
Enhancing worker safety
Increasing production
Operations management involves the
functions
of planning, organizing,
controlling etc, in production systems. The
activity of encouraging employees through
praise, recognition and other intangibles is
part of which function?
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7.
a.
b.
c.
d.
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d.
Division of labor or specialization is an
outcome of ____________.
Industrial revolution
World War II
Scientific management
Computerization of production systems
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Which company first adopted the concept
of scientific management in the assembly
line production system?
General electric
Ford motors
General motors
Westinghouse
a.
b.
c.
Which of the following decision do not
fall within the basic scope of operations
management?
Analyzing the firm’s financial position
Designing a new assembly line
Determining the location of a new
distribution center
Improving product quality
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6.
8.
a.
b.
c.
d.
The decision of an operations manager
about what products to make and when is
part of which function?
Organizing
Directing
Planning
Coordinating
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d.
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a.
b.
On the basis of Hawthorne studies, Elton
Mayo and his team concluded that
________had a major impact on employee
productivity.
Physical work conditions
Importance and recognition given to
employees
Job content
Fear of losing job
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Controlling
Motivating
Coordinating
Organizing
5.
Decisions on production and process
design, facility location and layout etc, are
part of which decision category?
a.
b.
c.
d.
Strategic decisions
Tactical decisions
Operational decisions
All of the above
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a.
b.
c.
d.
9.
a.
b.
c.
d.
The decisions that operations managers
take can be broadly classified into various
categories. What is the usual time-frame
for tactical decisions?
Seven years or more
One or two years
Two to four months
A couple of weeks
10. Operations Management deals with which
of the following?
a. Design of products
b. Design of services
c. Acquisition of resources
d. All of the above
11. Operations Management involves the
activities
of
planning,
organizing,
controlling, directing, and coordinating in
production systems. These systems convert
resource inputs into products or services.
Centralization and/or decentralization of
operations fall under which of the
following activities?

11. Operations Management
a.
b.
c.
d.
a.
b.
c.
d.
i, ii, iii
iii, iii, iv
i, iii, iv
i, ii, iii, iv
a.
b.
c.
d.
i & ii
ii & iii
i & iii
i, ii & iii
18. Product design is one of the factors that an
operations manager must consider while
designing a production system. Product
design can be based on a customized or a
standard production design system. What
does a customized product design system
primarily focus on?
a. Quality and on-time delivery
b. Reducing costs
c. Costs and quality
d. Mass production
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13. Operations Research uses mathematical
techniques to solve complex problems.
When was the concept of operations
research first introduced?
a. In the early 1940s during World War II
b. In the late 1920s during Hawthorne studies
c. In 1911 for the moving assembly line
production by Ford
d. In the 1880s at Midvale Steel Works
17. Which of the following are among the key
objectives of an operations manager?
i. Maximizing customer satisfaction
ii. Minimizing inventory
iii. Maximizing resource utilization
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12. The term ‘Production Management’ was
replaced by a more general term
‘Operations Management’ in the 1970s.
What led to the enlargement of the field
and use of the new term?
i. Inclusion of purchasing function
ii. Inclusion of dispatch and other related
activities
iii. Inclusion of services related concepts and
procedures
iv. Inclusion of manufacturing technologies
Rise in quality of products
Reduction in labor costs
Higher maintenance costs
Greater efficiency of the production
process
of
Planning
Organizing
Directing
Controlling
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b.
c.
d.
Frederick Taylor
Henry Ford
Elton Mayo
Adam Smith
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b.
c.
d.
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14. Who was involved in the Hawthorne
experiments at the Western Electric plant?
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15. Which of the following technologies helps
perform tasks that are repetitive or
hazardous for a human being to perform?
a. CAD
b. FMS
c. Expert systems
d. Moving assembly line
16. Computerization
has
significantly
improved the production process. Which
of the following is not an advantage of
computerization in the production process?
4
19. Which of the following is not categorized
among indirect costs?
a. Administrative costs
b. Maintenance costs
c. Labor costs
d. Rentals
20. Who generally develops corporate
objectives that are unique to each
organization?
a. Frontline managers
b. Top-level managers
c. Middle level managers
d. Production supervisors
21. What factors must managers consider
while formulating corporate objectives?
a. Market conditions
b. Political environment
c. Economic environment
d. All of the above

12. Part A
22. Rainbow Electronics manufactures a
limited number of models of television
sets. What kind of product design system
does the company have?
a.
Designing the production system
b.
Product/service design and development
c.
a.
b.
c.
d.
Technology
development
d.
Allocation of
alternatives
Technical feasibility
Marketing feasibility
Economic feasibility
Production feasibility
i & ii
ii & iii
i & iii
iii & iv
strategic
27. Which among the following products are
generally customized as per user
requirements?
i. Industrial boilers
ii. Turbines
iii. Televisions
iv. Ceiling fans
a.
b.
c.
d.
i and ii
ii and iii
iii and iv
iv and i
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b.
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d.
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28. Which stage of the product life cycle is
characterized by exponential growth of
sales volume?
a. Introduction stage
b. Growth stage
c. Maturity stage
d. Decline stage
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ii.
iii.
iv.
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23. Feasibility studies are part of the new
product development process. The
feasibility test generally focuses on which
of the following aspects?
resources
and
of
Customized production design
Standardized product design
Stock-to-order
Assemble-to-order
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Subsidiary units
Strategic business units
Franchise centers
Sister concerns
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a.
b.
c.
d.
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24. Large organizations are often divided into
separate operating divisions that operate as
autonomous
business
units
with
independent control. What are such units
called?
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25. Nucor, a steel producer, competes
successfully with larger integrated steel
producers by processing steel scrap rather
than producing steel from iron ore. What
advantage does the company gain through
this kind of production process?
a.
b.
c.
d.
Production flexibility
Better quality
Lower costs
Batch process facility
26. Selecting product design, production
system, and inventory policy for finished
goods fall under which component of
operations strategy?
29. Pick the statement that pertains to the
relationship between the role of operations
department and the product life cycle.
a. The role of operations department
increases as the product moves up the
lifecycle
b. The role of operations department
decreases as the product moves up the
lifecycle
c. There is no change in the role of
operations department across the lifecycle
d. The role of operations department
increases or decreases as the product
moves up the lifecycle
30. What is the basic use of a prototype during
the new product development process?
a. A prototype is used to test the technical
and economical feasibility
b. A prototype helps test the product
performance under standard conditions
c. A prototype is developed as part of test
marketing
d. None of the above
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13. Operations Management
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Project
A
B
C
Initial
investment
Expected annual
income from the
project
Rs.2,00,000
Rs.2,50,000
Rs.1,50,000
Rs.10,00,000
Rs.12,00,000
Rs.8,00,000
36. Calculate the payback period for Project A
a.
b.
c.
d.
5 years
4 years
3 years
6 years
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33. How is strategic planning different from
operations planning?
a. Strategic planning is concerned with longterm planning while operational planning
involves short-term day-to-day planning
b. Strategic planning is concerned with shortterm
day-to-day
planning
while
operational planning involves long-term
planning
c. Operational planning involves selection of
target markets and distribution channels
d. Both strategic planning and operational
planning are long-term in nature
(Questions 36 to 39) The given data below
shows the initial investment of three projects
and their payback periods. Use this data to
answer the following four questions.
of
32. Developing an operations strategy is an
important function of an operations
manager. The operations strategy should
basically be in accordance with which of
the following?
a. Organization strategy
b. Marketing strategy
c. Competitor strategy
d. Both a and c
a.
b.
c.
d.
itself as a financial supermarket. Which
type of competitive advantage strategy
does the bank seek to focus on?
Quality
Product variety
Convenience
Low cost
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31. Availability of raw materials and nearness
to markets are some of the factors that are
considered while making decisions
regarding
plant
location.
Which
component of operations strategy deals
with decisions such as plant location?
a. Allocation of resources to strategic
alternatives
b. Technology
selection
and
process
development
c. Product design and development
d. Facility planning
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34. Which of the following is not a
characteristic of operations strategy?
a. It should be fixed so as to support a
product through its entire lifecycle
b. It should accommodate future changes in
market demand
c. It should focus on having short-term
operational superiority over competitors
d. It should be consistent with strategies in
other functional areas such as marketing,
finance and human resources
35. HDFC Bank offers deposits, loans,
insurance products, mutual funds, trading
in stocks, etc, under one roof and positions
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37. What is the payback period for Project B?
a.
b.
c.
d.
5.0 years
4.8 years
3.8 years
4.5 years
38.
a.
b.
c.
d.
Calculate the payback period for Project C.
5.0 years
4.8 years
5.3 years
4.5 years
39. Based on the results for product A, B and
C, which is the best investment in terms of
faster returns?
a. Project A
b. Project B
c. Project C
d. Either project A or C
40. Allocation of resources to strategic
alternatives is a component of operations
strategy. What is the main objective of this
component?
a. To minimize efficiency
b. Optimize the use of resources for best
strategic use

14. Part A
i. The price of the commodity
ii. The prices of the available complimentary
goods
iii. The customer tastes and preferences
iv. Price of substitutes
a.
b.
c.
d.
i and ii
ii and iii
i, ii, and iii
i, ii, iii, and iv
42. _________is the ability of an organization
to adjust quickly to true changes in the
base level of demand.
Stability
Responsiveness
Repetitiveness
Controlling
43. The numerical difference between forecast
demand and actual demand is called
___________.
b.
Forecast error
c.
Forecast variance
d.
Forecast noise
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44. A forecast made by using exponential
smoothing was found to be over-optimistic
to the most recent trends in demand.
Which of the following is the most suitable
corrective action possible to make the
forecast more realistic?
Increase the value of α
Decrease the value of α
Shift to some other forecasting method
Ensure that α remains constant
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a.
b.
c.
d.
45. If the demand for a product is stable and is
representative of the future, what should
be the value of α used to forecast the
demand for the product?
a.
b.
Low
High
46. Organizations generally use
forecasts to develop which
following plans?
a. Financial plans
b. Facilities plans
c. Marketing plans
d. All of the above
demand
of the
47. Which of the following methods is
judgmental and subjective in nature and
based on the estimates and opinions of
individuals?
a. Time series methods
b. Delphi method
c. Exponential smoothing
d. Regression analysis
48. Which of the following statements is not
true about demand?
a. Dependent demand is forecasted
b. If a manufacturer produces tires, the
demand for the tires is a dependent
demand
c. MRP systems help determine demand for
items with dependent demand
d. Exponential smoothing is used to
determine independent demand
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b.
c.
d.
Medium
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41. Demand for a commodity is most likely to
depend upon which of the following?
c.
d.
of
Ensure capacity expansion
Maintain proximity to resources
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c.
d.
49. Which of the following statements about
demand forecasting is not true?
a.
b.
c.
d.
Forecasts are more accurate for shorter
time horizons
Regression analysis produces more
accurate forecasts than moving average
A 6-month moving average forecast is
more accurate than a 3-month moving
average forecast
Forecasts are created using only
quantitative data
50. Identify the statistical techniques that use
historical data collected over a period of
time to predict future demand.
a.
b.
c.
d.
Time-series methods
Qualitative methods
Nonparametric methods
Causal methods
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15. Operations Management
52. Which of the following measures provide
information on the extent of forecast error
in relative terms?
a.
b.
c.
d.
Mean absolute deviation
Mean square error
Mean forecast error
Mean absolute percentage error
a.
b.
c.
d.
Capacity planning
New product development
Spare parts inventory
Capital funds
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54. Demand for a product is influenced by
many factors. Which of the following is
not a factor that influences product
demand?
a. Price of the product
b. Price of the substitutes
c. Income levels of the consumers
d. Extent of accuracy of demand forecasts
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55. Which of the following is not a
consequence of underestimation of
demand?
a. Increase in supply lead time
b. Increase in loss of orders
c. Increase in customer switching
d. Increased locking up of working capital as
inventory
56. Which of the following demand estimates
are very detailed and used to plan and
schedule production operations?
a. Short-term demand
b. Medium-term demand
c. Long-term demand
d. All of the above
8
58. Forecasting demand has a direct impact on
which of the following two functions of
management.
a. Planning and organizing
b. Directing and control
c. Organizing and staffing
d. Planning and controlling
59. In Delphi method, independent opinions
and predictions are made by a panel of
experts and summarized by a competent
mediator. The success of this method is
not dependent on which of the following?
a. The presence of a socially dominant
individual
b. The geographical distance between the
experts
c. Tendency towards groupthink
d. Competency of coordinator
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undertaken by operations managers does
not generally require long-range forecast?
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Cost and accuracy
Data availability
Projected time span
Plant capacity
of
a.
b.
c.
d.
57. Raw materials demand forecast is derived
from which of the following type of
forecast?
a. Short-term demand forecast
b. Aggregate product demand forecast
c. Labor demand forecast
d. All of the above
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51. Which of the following is not considered
by operations managers before selecting a
method for forecasting the future demand?
60. The demand for generator sets for twelve
consecutive months from January to
December is given as 78, 80, 85, 82, 84,
85, 87, 88, 86, 89, 86, 87. Calculate the
approximate demand for January of the
next year using the simple moving
averages method. Assume the time period
to be a six month moving average.
a. 82
b. 83
c. 86
d. 87
61. The sum of weights used in weighted
moving average method should be equal to
_________.
a. 1
b. 10
c. 100
d. Zero
62. How are weights in the weighted moving
average method calculated?

16. Part A
64. Which of the following is not a benefit
that an operations manager gains when
using the exponential smoothing method?
a. Easy availability of standard software
packages
b. Less computational requirements
c. Larger data storage space
d. Greater accuracy in forecasts
68. In the equation Y = a + bX, what is ‘a’
termed as?
a.
b.
c.
d.
Value of the dependent variable
Value of the independent variable
Slope of the line
Y intercept or constant value
69. What is the relation between the slope of
the line and the trend line in regression
analysis?
a.
If the slope is positive, then the trend line
increases positively
If the slope is positive, then the trend line
decreases negatively
There is no relationship between the slope
and the trend line
If the slope is negative, then the trend line
increases positively
b.
c.
d.
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65. Maximum weightage is given in the
exponential smoothing method for demand
values in which of the following time
periods?
a. Latest time period
b. Earliest time period
c. Average of latest and oldest time periods
d. Sum of latest and oldest time periods
Only i
Only ii
i and ii
i, ii, and iii
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63. Which of the following forecasting
methods are used when the demand for a
product is influenced by seasonal
tendencies?
a. Delphi method
b. Simple moving average method
c. Exponential smoothing
d. All of the above
a.
b.
c.
d.
of
Simple moving average method
Future forecast
Trial & error
Exponential smoothing
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a.
b.
c.
d.
n
WMAt
∑C A
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a.
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66. What is the formula for calculating the
weighted moving average?
=
t
t
t =1
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b.
WMAt+1 =
∑C A
t =1
t
t
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n +1
c.
d.
WMAt+1 =
WMAt-1 =
∑C A
t =1
t
t
n -1
∑C A
t =1
t
t
67. Why is the constant α used in exponential
smoothing method?
i. To show effects of past demand
ii. To smooth out the effects of any noise
iii. To predict future trends in demand
70. If the sales of a refrigerator model rose
from 15000 units to 20000 units between
two consecutive time periods due to 5%
increase in advertising expenditure. What
is the value of the slope?
a.
b.
c.
d.
33.33
6.67
3.33
250
71. Short-range
decisions
vary
from
purchasing, job scheduling, and project
assignment to machine scheduling. Which
of the following forecasting methods can
be used for such decisions?
a.
b.
c.
d.
Exponential smoothing
Linear regression analysis
Multiple regression analysis
Delphi method
72. Identify the forecasting method that can be
used when data collection proves very
expensive.
a. Moving averages method
b. Delphi method
9

17. Operations Management
c.
d.
a.
b.
c.
d.
Qualitative methods
Time series methods
Causal methods
None of the above
74. Identify the relationship between cost of
forecasting and accuracy of forecasting.
a.
b.
c.
d.
Cost is directly proportional to extent of
accuracy
Cost is indirectly proportional to extent of
accuracy
Accuracy is independent of costs
Cost is inversely proportional to extent of
accuracy
(Questions 75 to 79) Use the data given in the
table below to answer the following five
questions related to forecast errors.
Actual Demand
510
510
510
O
500
540
550
515
550
se
520
545
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75. Calculate the Mean Absolute Deviation
(MAD).
a. 5
b. 6
c. 30
d. 20
76. The Mean Square Error (MSE) for the
given data is ______________.
a. 250
b. 100
c. 50
d. 75
77. Calculate the mean forecast error.
a. 2
b. 10
10
79.
a.
b.
c.
d.
Calculate the Tracking Signal (TS).
1.67
2.67
3.67
4.67
80. For forecasting purposes, firms need to
take into consideration various factors or
components. Which of the following is
associated with average sales over a given
period of time?
a. Trend component
b. Seasonal component
c. Cyclical component
d. Base demand
nl
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Demand Forecast
78. Mean Absolute Percentage Error (MAPE)
for the given data is __________.
a. 5.72
b. 3.14
c. 1.14
d. 2.56
20
09
73. Which of the following forecasting
methods give 100% accurate forecasts?
7
5
of
Regression analysis
Exponential smoothing
Cl
as
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c.
d.
81. The demand for luxury products may be
linked with the business cycle, as sales
usually increase during the boom phase
and slow-down during recession. What
component of forecasting is described
here?
a.
b.
c.
d.
Trend component
Seasonal component
Cyclical component
Base demand
82. When LG increased the advertising budget
by 40%, the sales of its televisions
doubled. On this basis, LG prepared an
aggressive demand forecast for the next
year. What component of demand did LG
consider as part of its forecast?
a.
b.
c.
d.
Cyclical component
Promotional component
Trend component
Irregular component
83. Which of the following is an example of
the trend component of forecast?

18. Part A
d.
c.
d.
88. Constrained optimization models consist
of three major components. Which of the
following is not a component of these
models?
a.
b.
c.
d.
Decision variables
Nature of demand
Objective functions
Constraints
89. Linear programming is a mathematical
constrained optimization model used to
maximize or minimize the linear functions
of a large number of variables, subject to
certain constraints. Linear programming
cannot help obtain solutions for which of
the following?
nl
y
84. Identify the correct sequence of steps taken
as part of the demand forecasting process.
a. Identify influencing factors – understand
objectives – identify customer segments –
select forecasting technique
b. Identify influencing factors – identify
customer segments – understand objectives
– select forecasting technique
c. Identify customer segments – understand
objectives – identify influencing factors –
select forecasting technique
d. Understand
objectives
–
identify
influencing factors – identify customer
segments – select forecasting technique
b.
Feasible solutions are reduced to
manageable numbers
Provides optimal solution for the whole
organization
Enables decision-makers to perform whatif analysis
Provides optimal solutions that are always
practical
20
09
c.
a.
of
b.
The demand for gold has reduced as the
price of gold has increased
The promotional expenditure of Airtel’s
GSM service was hiked based on demand
forecast
The demand for camera mobile phones in
India has increased steeply since 2001
The demand for wrist watches has been
fluctuating for quite some time
Cl
as
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a.
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85. Which of the following demand
forecasting techniques is divided into static
and adaptive methods?
a. Qualitative methods
b. Time series methods
c. Causal methods
d. All of the above
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BS
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86. Trend and seasonal components play an
important role in demand forecasting. In
which of the following forecasting
methods are estimates of trend and
seasonal components assumed to not vary
from year to year?
a. Exponential smoothing
b. Static forecasting method
c. Regression analysis
d. Simple moving average
87. Constrained optimization models are
useful techniques enabling operations
managers to compute the amount of
resources to be allocated to each strategic
alternative. Which of the following is not a
benefit of using a constrained optimization
model?
a.
b.
c.
d.
Profitability
Cost effectiveness
Motivation
Productivity
90. Identify the term that describes the
solution satisfying all the restrictions of a
linear programming problem.
a.
b.
c.
d.
Initial solution
Basic solution
Feasible solution
Final solution
91. In linear programming, a statement such as
the ‘number of labor hours available is
600’ is identified as a ___________.
a.
b.
c.
d.
Constraint
Slack variable
Objective function
Decision variable
92. Identify the mathematical technique used
to determine the optimal utilization of
resources in an organization.
11

19. Operations Management
Exponential smoothing
Regression analysis
Linear programming
Decision tree analysis
a.
b.
c.
d.
20
09
98. What is the appropriate production
combination for the two models to gain
maximum profits?
a. x = 300, y = 300
b. x = 600, y = 0
c. x = 250, y = 100
d. x = 200, y = 200
99. While constructing a linear programming
problem, certain assumptions are made.
Which of these is not such an assumption?
a. Proportionality
b. Optimality
c. Divisibility
d. Additivity
O
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(Questions 94 to 98) Atul Tele-Products
manufactures two telephone models using two
different raw material grades. One (x) is of
superior quality and the other (y) inferior
(second grade). The profit per unit for the
model using superior quality raw material is
Rs.200 and that of the other is Rs150. The
maximum demand for both telephones is 600
units. Production should not exceed demand
and total machine time available for both types
of telephones together is 650 hours. Besides,
one superior quality telephone can be produced
in two hours while one unit of inferior quality
telephone can be produced every hour. Answer
the following five questions using the
information given above.
97. If the number of superior quality
telephones produced in a month is 200 and
inferior quality telephones is 200, then
what is the maximum profit (in rupees)
that the company gets?
a. Rs. 75000
b. Rs. 70000
c. Rs. 76500
d. Rs. 78500
of
93. When arriving at production plan decisions
by using linear programming, which of the
following is not considered a constraint?
a. Market
b. Capacity
c. Destination requirements
d. Inventory space
2x + y ≤ 600
x + 2y ≤ 600
x + y ≤ 650
x + y ≤ 600
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a.
b.
c.
d.
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94. If Atul Tele-Products wants to maximize
profits, what should be the objective
function?
a. Maximize Z = 2x + 4y
b. Maximize Z = 200x + 150y
c. Maximize Z = 600x + 650y
d. Maximize Z = 2x + y
What is the constraint on machine hours?
2x + y ≤ 650
x + 2y ≤ 650
2x + y ≤ 600
x + 2y ≤ 600
Fo
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95.
a.
b.
c.
d.
96. What is the constraint on demand?
12
100. If the objective function is a maximizing
function, which of the following can be
considered for it?
a. Profits
b. Inventory
c. Advertising expenditure
d. Production costs
(Questions 101 to 104) The diagram represents
the solution for a linear programming problem
where ABCS is the feasible region. Use the
diagram to answer the following four
questions.

20. Part A
Y
D
120
20
09
100
80
A
S
60
of
40
20
O (0,0)
20
40
60
x + y = 40
2x +3y = 120
3x + 2y = 120
x + y = 60
O
a.
b.
c.
d.
se
102. Identify the corner points of the feasible
region from the above diagram.
U
(0,0), (80,0), (60,0), (40,0)
(40,0), (80,0), (60,80), (60,0)
(40,0), (80,0), (80,60), (60,0)
(0,60), (40,0), (80,0), (80,60)
BS
a.
b.
c.
d.
103. What is the equation of the line passing
through (80,0)?
x = 80
y = 80
x + y = 80
x - y = 80
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a.
b.
c.
d.
104. Find the minimum value of the objective
function where minimize Z = 20x + 35y.
a.
b.
c.
d.
2100
1600
800
3700
100
80
120
X
105. Which of the following statements is not
characteristic of linear programming?
a. The linear programming problem should
have a well-defined single objective to
achieve
b. The objective function and constraints of
the linear programming problem must be
linear functions
c. Decision variables of the linear
programming
problem
should
be
continuous in nature
d. The resources considered in the linear
programming problem should have
unlimited supply
nl
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101. Identify the constraint represented by the
line passing through the coordinates
(40, 0) and (0,60).
Cl
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s
C
B
106. Identify the correct sequence of steps to
formulate a linear programming problem.
i. Identify the objective function
ii. Identify decision variables
iii. Identify constraints
a.
b.
c.
d.
ii, i, and iii
i, ii, and iii
iii, ii, and i
ii, iii, and i
107. Where does the optimum solution lie on
the graph in the graphical method of
solving a linear programming problem?
13

21. Operations Management
114. Onio Designs provides industrial designing
services to various automobile companies
in India. This is an example of
___________.
a. Job shop production
b. Batch manufacturing
c. Standardized service
d. Customized service
115. In the emerging business scenario, it has
become essential for operations managers
to manage the structure of their
organizations, not merely their operations.
What does the term ‘structure’ include?
a. Number of plants and their individual
capacities
b. Choices in equipment and process
technology
c. Production control and workforce
management
d. All of the above
nl
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109. The sequence of steps in moving from one
basic solution to another in a simplex
method is known as ____________.
a. Integration
b. Iteration
c. Allocation
d. Summation
20
09
108. In the simplex method of solving a linear
programming problem, the ‘lesser than or
equal to’ inequality is converted into
equality by ___________ to the left hand
side of the inequality.
a. Adding a slack variable
b. Subtracting a slack variable
c. Adding a function
d. Subtracting a function
113. The concept of linear programming does
not consider any synergetic effects among
decision variables while calculating their
total value for the objective function or the
constraints they are associated with. This
is part of which assumption of linear
programming?
a. Proportionality
b. Additivity
c. Divisibility
d. Certainty
of
On the X axis
On the Y axis
In the feasible region
Outside the feasible region
Cl
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a.
b.
c.
d.
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110. Identify the typical objective function of a
transportation problem.
a. To minimize the sum of all quantities
transported
b. To minimize the sum of all production
costs
c. To minimize the sum of all transportation
costs
d. All of the above
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BS
111. Which among the following is not a
method used in developing an initial
feasible solution for a transportation
problem?
a. North-West corner method
b. Least cost method
c. Vogel’s approximation method
d. Stepping stone method
112. Of all the methods used to determine the
initial feasible solution in transportation
problems, which is said to be most
effective?
a. North-West corner method
b. Lest cost method
c. Vogel’s approximation method
d. Both a & b
14
116. Keeping other things constant, when the
price of a commodity decreases, the
demand for the commodity __________.
a. Does not change
b. Increases continuously
c. Increases to a certain level
d. Decreases
117. To attain its objective of profit
maximization, L&T decided to acquire a
mine in Australia thereby owning sources
of raw material supplies. What is this
process of expanding ownership called?
a. Horizontal integration
b. Forward integration
c. Backward integration
d. Diagonal integration

22. Part A
a.
b.
c.
d.
i and ii
i and iii
ii, iii, and iv
i, ii, and iii
a.
b.
c.
d.
20
09
124. ABC Corp. to match the diversity in
customer orders wants to produce products
in small batches. Which type of process
design would be economically feasible for
ABC?
Assembly line
Continuous processing
Discrete unit processing
Job shop process
125. Which of the following forms the basis for
designing factory buildings and facility
layouts?
a.
b.
c.
d.
Operations strategy
Production planning
Process planning
Product design
126. When Hindustan Smelters Ltd. decided to
manufacture lead ingots, the management
decided to develop a process plan for the
same. Which of the following factors
should the operations manager at
Hindustan Smelters Ltd. keep in mind
when developing a process plan?
se
O
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120. Organizations must be flexible to increase
or maintain their market share. The ability
of the production system to shift quickly
from producing one product to another is
called _____________.
a. Product flexibility
b. Demand flexibility
c. Volume flexibility
d. Customer flexibility
Lower unit costs
Lower initial investments
Ease of planning
Reduced worker training
of
119. What are the basic objectives of process
planning and design?
i. To produce products with desired quality
ii. To produce products at the right time
iii. To produce products in required quantities
iv. To produce products below competitor
prices
a.
b.
c.
d.
Cl
as
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118. The factor that is not considered by
operations managers while making their
decisions on backward integration.
a. Level of training for distributor employees
b. Capabilities to consume and market the
products
c. Anticipate changes in net return on assets
d. Availability of funds
BS
U
121. In an assembly chart, the process of
inspection is generally represented by a
__________.
a. Square
b. Circle
c. Triangle
d. Pentagon
Fo
rI
122. Which of the following is not an
advantage of process-focused production?
a. Small work-in-process inventory
b. Less manufacturing cycle time
c. Low initial investment
d. Better product mix available to meet
customer demand
123. Which of the following is not an
advantage of the product focused
production system?
a.
b.
c.
d.
Nature of demand
Degree of vertical integration
Employee skill level requirements
Quality level and degree of customer
contact
127. Demand for Pepsi cola is seasonal. It has a
very high demand during summer and
minimal demand during winter season.
Which of the following assumptions is
false with respect to the seasonality of
demand of Pepsi cola?
a.
b.
c.
d.
As demand is seasonal Pepsi cola should
not be produced in winter season
Pepsi cola should be produced throughout
the year but with varying outputs
Finished goods inventory must be stocked
to meet high demand during summer
All the above statements are false.
15

23. Operations Management
c.
It helps in pooling the R&D and design
efforts
d.
It helps in achieving economies of scale
20
09
134. What are the characteristics of process
focused systems?
i.
Operations are grouped according to the
type of processes
ii. Production is performed on products on a
start and stop basis
iii. Products move from department to
department in batches
iv. Products are produced irrespective of
diversity in customer orders
a.
b.
c.
d.
i and ii
iii and iv
i, ii, and iii
ii, iii, and iv
135. Coding of parts in a manufacturing plant is
done to ensure the identification of each
part and its characteristics. What is the
difficulty in adopting this approach?
se
O
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130. Assume that Eastside, a readymade
garment retailer, acquired a textile mill to
produce different fabrics. What kind of
integration strategy has the retailer
adopted?
a. Forward integration
b. Backward integration
c. Horizontal integration
d. Lateral integration
Product-focused systems
Process-focused systems
Group technology
All of the above
of
129. Identify which of the following is not an
advantage of vertical integration.
a. It reduces the over-dependency on the
purchasing function
b. It helps decentralize the overheads
a.
b.
c.
d.
Cl
as
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128. Which of the following is not a factor
affecting backward integration?
a. Cost of producing components versus cost
of buying them
b. Investments
necessary
to
produce
components in-house
c. Anticipated changes in net return on
assets, if production of components is
undertaken
d. Ability of the organization to market its
products
Fo
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BS
U
131. There are various types of process designs
that are generally used by organizations. In
which type of process design, products or
services tend to flow along linear paths
without backtracking or sidetracking?
a. Product-focused systems
b. Process-focused systems
c. Group technology
d. All the above
132. Steel and Chemical industries generally
implement which type of process design?
a.
b.
c.
d.
Discreet unit manufacturing
Process manufacturing
Job shop process
Both a & c
133. Which of the following process design
systems entail high initial investment?
16
a.
b.
c.
d.
It provides a clear picture of the steps
involved in producing the part
It results in standardization of part design
It leads to grouping of the parts into
families
It requires high employee skills
136. Which of the following is not an
advantage of cellular manufacturing?
a.
b.
c.
d.
Lesser machine changeover time
Lower cost of training
Reduction in material handling costs
Increase in the in-process inventory
137. Which of the following types of charts
indicate operations by circles and
inspections by squares?
a.
b.
c.
d.
Assembly charts
Gantt charts
Flow charts
None of the above
138. Which type of production systems has high
diversity in product design and small batch
size?

24. Part A
140. In what way is a typical product-focused
system distinct when compared to a
process focused system?
a. Lower fixed costs and higher variable
costs
b. Higher fixed costs and lower variable
costs
c. Higher fixed costs and higher variable
costs
d. Lower fixed costs and lower variable costs
144. What do you understand by the term
‘facility layout’?
a. A list of facilities provided by the
organization to the consumers
b. The physical distribution of various
departments for ease in production
c. The location of employees inside the
organization
d. Layout of safety equipment in an
organization
145. Layouts are differentiated by the types of
workflow they entail. Workflow in turn is
dictated by the nature of the product.
Which of the following statements is true
about product layout?
a. Equipment is dedicated to the manufacture
of a narrow product line
b. Equipment is flexible to produce a wide
range of products
c. Material
handling
cost
increases
significantly
d. It is used for manufacturing customized
products
i and iv
ii, iii, iv
i, ii, iii
ii and iv
BS
a.
b.
c.
d.
U
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O
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141. Which of the following reasons persuade
companies to set up facilities in export
promotion zones, technology parks and
industrial estates?
i. Tax holidays and exemption from importexport barriers
ii. Availability of infrastructure
iii. Low loan interest rates
iv. Low cost of manpower
Healthcare industry
Call center
20
09
139. Which of the following is not true about a
product-focused system?
a. Presence of initial fixed costs
b. Presence of low variable costs
c. The total cost of production increases as
the output volume increases
d. Low variations in products
c.
d.
of
Job shop production systems
Cellular manufacturing systems
Batch production systems
Product focused systems
Cl
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a.
b.
c.
d.
Fo
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142. Which of the following is a major factor in
selection of a location for an aluminum
factory?
a. Proximity to final consumer
b. Proximity to input sources
c. Proximity to sea port
d. All of the above
143. For which of the following industries is
proximity to markets a must?
a. Telecom industry
b. Textile industry
146. Which of the following involves the use of
layout planning tools like templates and
two-dimensional cut-outs of equipment
drawn to scale?
a. Graphic and schematic analysis
b. Load distance model
c. Computer models
d. CRAFT model
147. Cotton yarn manufacturing units are
generally concentrated in select areas of
the country as yarn production requires
certain ideal levels of humidity. What
factor influences selection of plant location
in this case?
a. Site cost
b. Conducive politico-economic situation
c. Suitability of climate
d. Availability of amenities
148. Which of the following is not a primary
objective of facility location and layout
decisions?
17

25. Operations Management
150. Which of the following types of layout is
used when the product manufactured is
bulky, heavy or fragile?
a. Product layout
b. Process layout
c. Fixed position layout
d. Group technology layout
155. In which of the following situations is
there no need for selecting a facility
location?
a. When a business has just started
b. When expansion of the existing plant is
possible
c. When a business wants to establish new
branches/plants
d. When government regulations mandate
that the business has to shift its location
156. Firms conduct facility location analysis
where they evaluate different locations and
finally choose an optimum location to start
operations.
Arrange
the
following
activities related to facility location
planning in a logical sequence.
i. Design layout
ii. Select location
iii. Search for a location
iv. Revise layout
a.
b.
c.
d.
i, ii, iii, iv
ii, iii, i, iv
iii, ii, i, iv
iv, iii, ii, i
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151. Which of the following techniques is not
associated with taking suitable location
decisions?
a. Cost-profit-volume analysis
b. Factor analysis
c. Linear programming
d. CRAFT analysis
Fixed position layout
Hybrid layout
20
09
149. Which of the following is not an
advantage of selecting an ‘optimum
location’ for a plant?
a. Reduction of transportation costs of raw
material and finished goods
b. Competitive advantage due to proximity to
market
c. Low labor-cost
d. Cost of technology
c.
d.
of
b.
c.
d.
To set up a plant of the right size and right
design
To serve the customer better
To optimize production cost
To use best available technology
Cl
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a.
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152. Which of the following organizations
selects a particular location from a marketoriented approach?
a. A retailer
b. A manufacturer
c. A software development center
d. A content development center
Fo
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153. Which of the following is not a type of
facility layout?
a. Process layout
b. Product layout
c. Employee layout
d. Hybrid layout
154. ‘It is also called the cellular manufacturing
layout.’ Identify the layout from the
following.
a. Process layout
b. Grouping technology layout
18
157. Rahul wanted to set up a small scale
printing press to print books for
individuals interested in publishing their
work for a small audience. Which is the
right location for Rahul to establish a
printing press to cater to this kind of
market?
a. Near paper mills
b. In a town/city
c. In a village where cost of labor is cheap
d. Near the manufacturer of printing
machines
158. There are many factors affecting the
selection of a facility location. Which of
the following factors would deter a firm
from setting up operations in a particular
location?
a. Low labor costs
b. High transportation costs
c. Availability of public utility services
d. Benefit of tax holidays

26. Part A
20
09
163. Companies can follow certain guidelines
when trying to analyze possible locations
and identify an optimal one since it is
expensive and time-consuming. What is
the correct sequence of guidelines a
company can follow when evaluating
locations?
a. Define location objectives – relate
objectives to criteria – Identify relevant
decision criteria – evaluate alternative
locations – select the best location
b. Identify relevant decision criteria – define
location objectives – relate objectives to
criteria – evaluate alternative locations –
select the best location
c. Define location objectives – identify
relevant decision criteria – relate
objectives to the criteria – evaluate
alternative locations – select the best
location
d. Define location objectives – identify
relevant decision criteria – evaluate
alternative locations – relate objectives to
criteria – select the best location
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161. Many auto-ancillary units have set up
facilities close to facilities of auto majors
like Hyundai and Ford near Chennai.
Which of the following factors would have
primarily led to this decision?
a. Site cost
b. Proximity to markets
c. Need for safety requirements
d. Availability of services like electricity,
drainage, and waste disposal
Low interest loans
Availability of prime real estate
of
160. Process layouts are also known as ______.
a. Functional layouts
b. Fixed position layout
c. Flow-shop layouts
d. Straight-line layouts
c.
d.
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159. The basic raw material for a cement
manufacturing unit is limestone and the
major consumers are the government, real
estate and individual consumers. Which is
the best possible location to build a cement
plant?
a. Close to sea port
b. Close to cities where consumption is high
c. Close to the raw material source
d. Within special economic zones or export
processing zones
U
se
162. Which of the following is not considered a
benefit derived by companies setting up
operations in special export zones (SEZ)?
a. Good infrastructure support
b. Tax holidays
164. Though there is no standard procedure,
certain guidelines can be used for making
a location decision. The first guideline is to
define location objectives. Whose views
and requirements are not considered when
defining them?
Cost Volume Relationships of Two Locations
BS
Revenue
Fo
rI
TC2
TC1
Cost
FC1
FC2
V0
Volume of sales
19

27. Operations Management
a.
b.
c.
d.
165. Which of the following is similar for the
two locations?
a.
b.
c.
d.
Revenue
Fixed cost
Variable cost
Total cost
166. If fixed cost at a location is Rs.500,000,
variable cost per unit Rs.30, and price per
unit Rs.50. Calculate the number of units a
firm should produce to break even?
20,000
10,000
25,000
15,000
se
O
(Questions 167 to 169) The table below gives
details about fixed costs and variable costs for
three different locations. Answer the following
three questions using information given in the
table.
Fixed cost /Yr Variable cost /
Unit
Chandigarh Rs. 4,00,000
300
Gurgaon
Rs. 4,50,000
285
Delhi
Rs. 5,00,000
275
BS
U
Location
Fo
rI
167. Which of the following locations would
have the highest total cost per year if
annual output of a firm located there is
1000 units?
a.
b.
c.
d.
Chandigarh
Gurgaon
Delhi
Both Delhi and Gurgaon
168. Which of the following locations would
have the highest annual profit if the annual
production is 1000 units and selling price
per unit is Rs.1000?
20
170. Which of the following is not an
advantage of a good layout?
a. It reduces material handling costs
b. It reduces congestion in the plant
c. It reduces space utilization
d. It increases machine utilization
171. Under which type of layout are similar
machines and equipment grouped to carry
out the production process.
a. Process layout
b. Product layout
c. Fixed position layout
d. Hybrid layout
nl
y
a.
b.
c.
d.
169. Which plant location would you select if
you were the authority to make the final
decision?
a. Chandigarh
b. Gurgaon
c. Delhi
d. Any of the above
20
09
(Questions 165 & 166) The above figure
presents cost-volume-profit analysis. Based on
the figure, answer the following two questions.
Chandigarh
Gurgaon
Delhi
Both Chandigarh and Gurgaon
of
Owners and promoters
Employees
Customers
Competitors
Cl
as
s
a.
b.
c.
d.
172. What type of machine is used in a process
layout?
a. Specially designed machines
b. General purpose machines
c. Machines
that
help
manufacture
standardized products
d. All of the above
173. Which of the following is an advantage of
process layouts?
a. Increased production time
b. Increased work-in-progress
c. Increased accumulation of work
d. Increased utilization of men and material
174. Which type of layout is designed to
produce standardized products?
a. Process layout
b. Product layout
c. Fixed position layout
d. Hybrid layout

28. Part A
Used for studying workflow in an
assembly line
Evaluates thousands of alternative layouts
in a short period
Analyses
and
minimizes
material
movements costs in a plant
Two dimensional drawings are used to
determine the best layout
q.
r.
s.
a.
b.
c.
d.
20
09
p.
i/p, ii/q, iii/r, iv/s
i/q, ii/p, iii/r, iv/s
i/r, ii/q, iii/p, iv/s
i/q, ii/r, iii/p, iv/s
181. Different types of layout of service
facilities exist based on degrees of
customer contact. In which of the
following layouts is internal work of
employees given secondary importance?
O
nl
y
177. Managers can use various models like
mathematical models, computer models,
and physical models to develop a process
layout. Which among the following helps
find the best process layout by evaluating
thousands of alternative layouts very
quickly?
a. Graphic and schematic analysis
b. CRAFT model
c. Load distance model
d. Line balancing
CRAFT model
Load distance model
Line balancing
Graphic & schematic analysis
of
176. In a fabrication and assembly plant,
fabrication is done on __________ layout
while
assembly
is
done
on
______________ layout.
a. Product, process
b. Process, product
c. Product, fixed position
d. Fixed position, product
i.
ii.
iii.
iv.
Cl
as
s
175. Which of the following manufacturing
processes requires using a fixed position
layout?
a. Petroleum distillation
b. Beer manufacturing
c. Ship-building
d. Cement manufacturing
Fo
rI
BS
U
se
178. Different
types
of
products
are
manufactured using a process layout. As
workflow differs from product to product,
managers focus on minimizing the
movement of materials as it can hike
material movement costs. Which of the
following models aims at minimizing these
costs?
a. Graphic and schematic analysis
b. CRAFT model
c. Load distance model
d. Line balancing
179. In which of the following countries were
compact production layouts developed due
to space constraints?
a. USA
b. Japan
c. India
d. China
180. Match the following models used to
develop layouts with their respective
features.
a.
b.
c.
d.
Layouts focusing on customer receiving
and servicing
Layouts focusing on technology
Layouts focusing on physical materials
processing
Layouts focusing on production efficiency
182. Which of the following service providers
uses both customer focus layouts and
process focus layouts as part of its service
facility layout?
a.
b.
c.
d.
Banks
Hospitals
Restaurants
Call center
183. The following table gives the volume of
quantities to be shipped to four markets.
The X and Y coordinate values of the
location that would help minimize
transportation costs are also given. Use the
center of gravity method to identify
coordinates for the optimal location to set
up a warehouse to service the four markets
with minimal transportation costs.
21

29. Operations Management
4
12
10
5
4
6
14
13
VOLUME
(‘000)
60
90
110
100
10.75, 9.06
10.05, 8.11
9.06. 10.75
8.11, 10.06
184. Which of the following is not a location
evaluation method?
a. Point rate method
b. Center of gravity method
c. Analytic Delphi method
d. Historical analogy method
They consider non linear cost relationships
They can be generalized to all
organizations
187. ________ is the basis for job analysis, job
description and job specification.
a. Job rotation
b. Job design
c. Job enrichment
d. Job enlargement
188. ________ describes the tasks, duties and
responsibilities of a job.
a. Job analysis
b. Job enrichment
c. Job description
d. Empowerment
189. ___________ investigates job content, the
physical conditions in which the job is
carried out, and qualifications necessary to
carry out job responsibilities.
a. Job description
b. Job analysis
c. Job profile
d. Job specification
Fo
rI
BS
U
se
O
nl
y
185. Analytic Delphi Method helps managers
take complex multi-location decisions.
Give the correct sequence of steps to be
taken as part of such location decisions.
a. Form panels - Identify trends and
opportunities - Determine directions and
strategic goals of the organization Develop
alternatives
Prioritize
alternatives
b. Identify trends and opportunities Determine directions and strategic goals of
the organization - Form panels - Develop
alternatives - Prioritize alternatives
c. Identify trends and opportunities - Form
panels - Determine directions and strategic
goals of
organization - Prioritize
alternatives - Develop alternatives
d. Form panels - Determine directions and
strategic goals of the organization Prioritize
alternatives - Develop
alternatives - Identify trends and
opportunities
c.
d.
20
09
Y
of
a.
b.
c.
d.
X
Cl
as
s
Distribution
Center
A
B
C
D
186. Linear Decision Rules (LDRs) are a set of
equations for calculating the optimal
workforce, aggregate output rate and
inventory level for each time period in a
planning horizon. Which of the following
is not true about LDRs?
a. They provide optimum solutions for the
problems
b. They
eliminate
trial
and
error
computations
22
190. What does an effective job design ensure?
a. Employees are paid above expectations
b. Jobs are consistent with organizational
goals
c. Proper measurement of work done by each
employee
d. All the above
191. The Job Characteristics Model developed
by Richard Hackman and Greg Oldham
includes five characteristics. They are skill
variety, task identity, task significance,
autonomy and feedback. Match the
following terms with their respective
description.
i. Skill variety
ii. Task significance
iii. Autonomy
iv. Feedback
p.
q.
Influence of job on individuals inside &
outside the organization
Flexibility, independence, and discretion in
the job

30. Part A
i/q, ii/p, iii/s, iv/r
i/p, ii/q, iii/r, iv/s
i/r, ii/q, iii/p, iv/s
i/r, ii/p, iii/q, iv/s
192. Which of the following is not
consequence of a good job design?
a. Improved efficiency
b. Improved productivity
c. Increase in worker inputs
d. Increase in motivation
a
i, ii, iv
i, iii, iv
i, ii, iii
ii, iii, iv
O
a.
b.
c.
d.
U
It gives the detailed set of activities to be
performed on the job
It describes the physical conditions in
which the job is done and qualifications
for the job.
It describes the duties and responsibilities
of a job.
All of the above
BS
b.
se
194. What do you understand by the term job
content?
a.
Fo
rI
c.
d.
195. Job content is the key to job design as it
influences other aspects of human resource
management. Job content helps clarify
which of the following aspects?
i.
ii.
iii.
iv
196. Job specialization at work has many
advantages for the organization. Which of
the following is not an advantage resulting
from this?
a. Ease in recruiting new workers because
fewer skills are required
b. Lower production time and higher
productivity levels
c. Lower flexibility in job rotation
d. Larger scope for mechanization or
automation of processes
197. Which of the following is an advantage of
work specialization for a manager?
a. Lower work satisfaction
b. Ease of supervision and training workers
c. Reduced scope for improvement because
of limited perspective of workers
d. Hidden costs of worker dissatisfaction
resulting from absenteeism and high
employee turnover
nl
y
193. The job design developed should be
feasible for employees as well as the
organization. Feasibility is required in
which of the following areas?
i. Technical feasibility
ii. Economic feasibility
iii. Political feasibility
iv. Behavioral feasibility
i and ii
iii and iv
i, ii, and iii
i, ii, iii, iv
20
09
a.
b.
c.
d.
a.
b.
c.
d.
of
Skill sets and abilities needed for the job
Extent of information given to employees
on their performance
Cl
as
s
r.
s.
Qualifications
Skill sets
Nature of training programs
Level of motivation
198. Which of the following types of
compensation is a basic need and is not a
tool used for employee motivation?
i. Fixed salary
ii. Promotion
iii. Health insurance
iv. Bonus
a.
b.
c.
d.
Only i
ii, iii and iv
i, iii and iv
i, ii, iii, iv
199. Which of the following is a form of
monetary benefit given to employees in an
organization?
a. Rewards
b. Titles
c. Promotions
d. Low interest loans
200. Identify the correct sequence of activities
to be performed by the human resource
manager.
23

31. Operations Management
i. Job analysis
ii. Job description
iii. Job design
b.
d.
206. Which of the following is not an
allowance considered under the time study
technique of work measurement?
a.
b.
c.
d.
Contingency allowance
Interference allowance
Dearness allowance
Relaxation allowance
(Questions 207 & 208) A time study of a
production
worker
in
a
component
manufacturing plant produced the following
results: Cycle time = 3.75 minutes; worker
performance rating = 90 percent. Answer the
following two questions using this information.
i and ii
i and iii
i, ii and iv
i, ii, and iii
U
a.
b.
c.
d.
se
O
nl
y
202. Which of the following are benefits of
setting work standards?
i. It helps improve machine utilization by
reducing idle time
ii. It helps compare efficiency of different
work methods
iii. It helps a manager delegate work to all
employees
iv. It provides benchmarks for evaluating
workers’ performance
c.
of
201. The different techniques used in work
measurement are time study, historical
analysis, standard data, work sampling,
and predetermined motion time data
systems. Each has a different way of
measuring time. How is it done in time
study?
a. Using standard table
b. Using past record
c. Using stop watch
d. Using formula
The average of observations made always
represents time required to perform each
elemental task
Workers behave differently than usual
while conducting a time study
Observations are recorded repeatedly
across several workers to arrive at the
standard time
Normal time is the product of average
cycle time and worker rating
20
09
a.
i, ii, iii
ii, iii, i
i, iii, ii
iii, i, ii
Cl
as
s
a.
b.
c.
d.
205. Which of the following statements gives
an incorrect description of a feature of
time study?
Fo
rI
BS
203. Which of the following work measurement
methods does not use historical or stored
data but uses several random observations
in the work environment?
a. Standard data technique
b. Predetermined motion time study
c. Work sampling
d. Historical analysis
204. Which of the following is not a technique
used for setting work standards?
a. Time study
b. Work sampling
c. Delphi method
d. Predetermined motion time systems
24
207. Calculate the normal time for the job.
a.
b.
c.
d.
3.75 minutes
3.375 minutes
3.455 minutes
3.565 minutes
208. If allowances are 12 per cent of the job
time, calculate the standard time required
for the job.
a.
b.
c.
d.
3.375 minutes
3.775 minutes
3.835 minutes
3.965 minutes
209. Identify the technique of setting work
standards that uses recorded standard time
data for each of the basic motions
associated with performing a task and
summing them up to determine the time
required to perform the whole task.

32. Part A
i and ii
ii and iii
iii and iv
iv and i
215. Work standards techniques generally find
use in which of the following operations?
a. Operations planning
b. Operations scheduling
c. Operations control
d. All of the above
216. Three of the most widely used
predetermined motion-time data systems
are MTM, MOST and work factors.
Expand MOST.
a. Maynard Operations Sequence Technique
b. Myer’s Operations Sequence Technique
c. Motion Operations Sequence Technique
d. Maynard Operations Scheduling
Technique
se
O
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211. ___________ is a technique of analyzing
work by making several observations,
usually at random, to see the relative
frequency with which various elemental
activities take place.
a. Time study
b. Standard data
c. Historical analysis
d. Work sampling
a.
b.
c.
d.
20
09
210. Which of the following statements
correctly describes the difference between
Standard Data Technique and Predetermined Motion Time Study in work
measurement?
a. PMTS has to be measured by taking
observations while Standard Data provides
standard times for common movements
b. Standard data provides time for basic
movements while PMTS provides time for
job-specific motions
c. PMTS provides time for basic motions
while Standard Data provides time for jobspecific motions
d. PMTS has to be measured by looking at
the standard table while Standard Data
technique uses observations
214. Which of the following are drawbacks of
using employee self-timing, a technique of
work measurement?
i. Low costs
ii. Low accuracy
iii. Does not take allowance into consideration
iv. Less time consuming
of
Time study
Pre-determined Motion Time Study
Standard data
Historical analysis
Cl
as
s
a.
b.
c.
d.
Fo
rI
BS
U
212. One of the primary applications of work
sampling is to find the percentage of time
an employee or equipment was occupied,
or left idle. What is the name given to this
application of work sampling?
a. Ratio delay
b. Performance measurement
c. Time standards
d. Employee self-timing
213. Which of the following primary
applications of work sampling are used to
identify the standard time for completion
of a task?
a. Ratio delay
b. Performance measurement
c. Time standards
d. None of the above
217. Which of the following is not a pure
planning strategy used for developing
aggregate plans?
a.
b.
c.
d.
Varying utilization of the workforce
Varying workforce size in response to
output requirements
Varying size of inventory
Varying the compensation method
218. __________ translates the aggregate plan
into a detailed plan that specifies the exact
timing for production of each unit.
a.
b.
c.
d.
Master production schedule
Total production schedule
Primary production schedule
Alternative production schedule
219. Which of the following is not an aggregate
planning technique?
25

33. Operations Management
Time series analysis
Graphical method
Linear programming
Heuristic methods
Jun
221. Which of the following is not a pure
planning strategy used as part of aggregate
planning?
a.
b.
c.
d.
Back-order strategy
Maintaining fixed plant capacity
Sub-contracting
Varying workforce utilization
222. Which of the following is not a function
under capacity requirement planning?
U
223. Operations planning activities can be longrange, medium-range or short-range.
Aggregate planning typically fall under
which category?
Long range
Medium range
Short range
Both a & b
BS
a.
b.
c.
d.
2700
2800
2750
26
25
25
26
In addition, the following information is given:
20
09
Opening stock of inventory = 500 units,
Inventory holding cost = Rs.20/unit/month,
Worker productivity = 4 units/day, Worker
strength = 25, Shortage cost (due to lost sales)
= Rs.10/unit
Answer the following four questions based on
the above given information
225. What is the change in inventory on hand
after meeting demand for Product X for
the month of June?
a.
b.
c.
d.
300 units
200 units
100 units
0 units
226. Assume that opening stock for the month
of July is 500 units. What is the inventory
carrying cost for that month?
nl
y
se
c.
d.
Identifying material requirement
Defining how resources can be best
employed to meet market demand
Allocating production among plants
Determining monthly production
schedules
O
a.
b.
2600
Working
Days
Heuristic approach
Computer search
Linear decision rules
Linear programming
Sept
of
a.
b.
c.
d.
Aug
Demand
220. Which model is based on historical
aggregate planning data available with an
organization?
Jul
Cl
as
s
a.
b.
c.
d.
a.
b.
c.
d.
Rs.6000
Rs.3000
Rs.4000
Rs.2000
227. Calculate
August?
a.
b.
c.
d.
the
closing
inventory
for
300 units
200 units
0 units
100 units
228. What is the shortage cost (due to lost sales)
in the month of September if the opening
inventory for the month is zero units?
a.
b.
c.
d.
a.
b.
c.
d.
Fo
rI
224. A production plan does not contain
information about which of the following?
Production process
Inventory requirements
Suppliers
Customers
(Questions 225 to 228) The aggregate demand
for product X for the next four months is given
in the following table:
26
Rs.3000
Rs.2500
Rs.2000
Rs.1500
229. What is the basic use of the computer
simulation method, a type of optimal
model used in aggregate planning?

34. Part A
230. A Master Production Schedule (MPS) is
based on which of the following?
a.
b.
c.
d.
Amount of inventory needed for the end
product
Estimation of overall demand for the end
product
Confirmed customer orders for the end
product
All of the above
231. Identify the false statement from the
following about Master Production
Schedule and Master Schedule Formation.
c.
se
d.
Fo
rI
BS
U
(Questions 232 & 233) The demand forecast
for metal rollers used in manufacturing printing
machines for the next three months is 60, 55,
65. The number of orders booked at the start of
the MPS planning period is 55, 60, 65
respectively. Given, Inventory on hand = 75,
Lead time = 1 month, Production lot size = 100
units. Answer the following two questions.
232. What is the projected inventory at the end
of the second month?
a.
b.
c.
d.
234. What is meant by ‘rolling through time,’
associated with implementing aggregate
plans and master schedules?
a. Development of initial aggregate plans
b. Revising and updating aggregate plans
c. Development of the initial master
production schedule
d. Revising and updating master production
schedule
235. It is important to determine adequate
production capacity to meet forecast
demand levels and to determine whether or
not sub-contracting and/or overtime has to
be used. This activity is associated with
which of the following?
a. Capacity planning
b. Aggregate planning
c. Scheduling
d. Demand forecasting
nl
y
b.
MPS of make-to-order organizations deals
only with final products
MPS for assemble-to-order organizations
concentrates
on
scheduling
major
components assembled to make a product
after orders are received
Back orders are common in make-to-stock
organizations
There is no finished goods inventory in
make-to-order production
O
a.
90 units
55 units
75 units
80 units
20
09
d.
a.
b.
c.
d.
of
c.
To develop a master production schedule
To identify variables for developing the
plan
To evaluate the performance of a specific
plan
All of the above
Cl
as
s
a.
b.
55 units
60 units
65 units
70 units
233. What would be the projected inventory at
the end of the third month if orders for the
month increase to 80 from 65?
236. Which of the following is not associated
with capacity planning?
a. Identifying available and required capacity
b. Evaluation and summing up of capacities
c. Identifying the right layout design for the
desired capacity
d. Identifying gaps in capacity and plugging
them with sub-contracting, overtime, etc.
237. Identify the correct sequence of steps
associated with capacity planning.
i. Identify current capacity
ii. Forecast future capacity
iii. Identify and evaluate sources to meet
capacity requirements
iv. Select the most appropriate alternative
a.
b.
c.
d.
i, ii, iii, iv
i, iii, ii, iv
iii, i, ii, iv
iii, ii, i, iv
238. The capacity utilization rate measures
capacity level at which a production
process is operating. Identify the correct
formula for capacity utilization rate.
27

35. Operations Management
Capacity utilizatio n rate =
c.
Capacity utilization rate =
d.
Capacity utilizatio n rate =
Capacity used
Capacity used
Capacity avaialable
× 100
× 100
Available time × Utilization
Capacity avaialable
Capacity available
Available time × Utilizatio n
× 100
×100
239. Which of the following cannot be a reason
for decrease in per unit cost when volume
of production increases?
a.
b.
c.
d.
Decrease in fixed costs
Adoption of efficient processes
Adoption of automation
Increased complexity in operations
240. When the scale of production is increased
after a certain point, economies of scale
can become diseconomies of scale. What
can be the possible reasons for
diseconomies of scale?
U
Services cannot be produced in
anticipation of demand
Services cannot be stored
A service firm with a single office can
efficiently serve customers in another
geographical area
Production and consumption of a service
go together
BS
b.
c.
se
241. Which of the following statements does
not correctly represent the characteristics
of services?
a.
Fo
rI
d.
242. The two major sources of inputs that
influence master production schedule are
forecasts and customer orders. Identify the
correct combination from the following.
i. Make-to-stock environment : Takes inputs
from forecasts in deciding the MPS
ii. Make-to-order environment : Takes inputs
from customer demand in deciding the
MPS
28
a.
b.
c.
d.
Only iii
Only i
Both iii & iv
Both i & ii
243. Operations planning activities can be longrange, medium range or short range in
nature. Process planning typically falls
under which category?
a. Long-range planning
b. Medium-range planning
c. Short-range planning
d. Both b & c
244. Carrying costs represent cost incurred
while inventories are stored in warehouses
or stores. Which of the following is not
associated with carrying costs?
a. Insurance costs
b. Maintenance costs
c. Cost of obsolescence
d. Material receiving costs
nl
y
Complexities in operations
High cost of modification & replacement
Distribution and storage costs
All of the above
O
a.
b.
c.
d.
iii. Make-to-stock environment : Takes inputs
from customer demand in deciding the
MPS
iv. Make-to-order environment : Takes inputs
from forecasts in deciding the MPS
20
09
b.
Capacity available
of
Capacity utilizatio n rate =
Cl
as
s
a.
245. Organizations maintain buffer stocks to
overcome which of the following
conditions?
a. Demand is greater than expected
b. Supply is more than expected
c. Demand is less than expected
d. Supply matches demand
246. On what basis do organizations fix reorder
level for raw material under the EOQ
model?
a. Recommendations of finance managers
b. Estimated demand during lead-time
c. Recommendations of suppliers
d. Estimated sales for a financial year
247. Which of the following is not an
assumption that underlines the EOQ
model?
a. The lead-time for material delivery is
known with certainty and remains constant
b. The total holding cost of inventory is
proportional to the number of inventory
items stored

36. Part A
249. Which of the following costs are
considered by a firm as part of calculating
inventory costs?
i. Holding costs
ii. Acquisition costs
iii. Ordering costs
iv. Stock out costs
a.
b.
c.
d.
i, ii and iii
ii, iii and iv
i, iii and iv
i, ii, iii, iv
254. Which of the following are correct reasons
for organizations to hold raw material
inventories?
i. Obtaining raw materials from suppliers
exactly when needed for production
schedules is not always possible
ii. Products can be shown to customers
iii. Quantity discounts can result from larger
purchase quantities
iv. Larger shipments can result in reduced
incoming freight costs and material
handling costs
a.
b.
c.
d.
i and ii
ii and iii
i, ii and iv
i, iii, and iv
255. Which of the following is not an
assumption of the EOQ model?
se
O
nl
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250. What does the EOQ inventory model
primarily attempt to minimize?
a. The number of items ordered
b. The number of orders placed
c. Total inventory costs
d. The safety stock
500 units
800 units
1000 units
200 units
20
09
248. Opportunity cost is associated with which
basic category of inventory cost?
a. Carrying costs
b. Ordering costs
c. Purchase costs
d. Stock-out costs
a.
b.
c.
d.
of
d.
The cost of ordering varies and is
dependent on the quantity ordered
The price of the inventory item is
independent of order quantity
Cl
as
s
c.
BS
U
251. Which of the following is not a primary
cost involved in maintaining inventories?
a. Carrying cost
b. Ordering cost
c. Stock-out cost
d. Purchase cost
Fo
rI
252. Which of the following terms refers to the
time lag between the point of order and
receiving the material?
a. Lead-time
b. Slack time
c. Reorder time
d. Order time
253. In a level production plant, if opening
inventory was 500 units, sales forecast was
for 1300 units and closing inventory at the
end of the period was 200 units, how many
units were produced?
a.
b.
c.
d.
Demand for a product or its usage rate is
constant over a period of time
Supply rate is always greater than or equal
to usage rate
The lead-time for material delivery is
known with certainty and it remains
constant
The purchase price per unit varies
depending upon quantity ordered
256. Suppose a company consumes a particular
product at an average of 50 units /week. It
costs Rs.200 to order and Rs.0.50 per unit
per week to hold the item in inventory.
Compute the EOQ.
a. 100 units
b. 200 units
c. 150 units
d. 300 units
257. According to which inventory system
inventory is continuously checked and a
new order placed when the level of
inventory reaches the reorder point?
a. Q system
b. P system
29

37. Operations Management
259. Semi-finished items stored temporarily and
used to finish production are termed
_________.
a. Raw material inventory
b. Work-in-progress inventory
c. Finished products inventory
d. None of the above
q.
r.
s.
a.
b.
c.
d.
These costs arise when inventory is
damaged
Loss of customer goodwill is a
consequence of these costs
Discounts are given by suppliers on these
costs
These costs are fixed and come down with
increase in size of purchase
i/r, ii/q, iii/p, iv/s
i/p, ii/q, iii/r, iv/s
i/r, ii/p, iii/q, iv/s
i/r, ii/p, iii/s, iv/q
265. Which inventory model is also referred to
as the reorder point system?
a. P system
b. Q system
c. EOQ
d. None of the above
nl
y
260. Manufacturers maintain buffer stocks of
_________to meet unprecedented increase
in demand.
a. Raw materials
b. Work-in-progress
c. Finished products
d. None of the above
p.
20
09
258. Why do organizations maintain an
inventory of finished goods?
a. To avoid bottlenecks in the production
process
b. To avoid backlogs in customer order
c. To smoothen production flow
d. To reduce material handling costs
264. Match the following inventory costs with
their related descriptions.
i. Purchasing costs
ii. Carrying costs
iii. Ordering costs
iv Stock-out costs
of
EOQ system
Fixed order period system
Cl
as
s
c.
d.
U
se
O
261. A firm decides on quantity of material
ordered to maintain various inventory
costs. Which of the following costs does
not influence quantities ordered by the
firm?
a. Purchase cost
b. Carrying cost
c. Ordering cost
d. Hiring cost
BS
262. Suppliers offer discounts to manufacturers
based on which of the following type of
costs?
Purchase costs
Carrying costs
Ordering costs
Stock-out costs
Fo
rI
a.
b.
c.
d.
263. Which of the following does not come
under carrying costs?
a.
b.
c.
d.
30
Pilferage
Spoilage
Maintenance costs
Material-receiving costs
266. What do you understand by the term ‘lead
time’
associated
with
inventory
management?
a. Time required for depleting inventory once
replenished
b. Time required for replenishing inventory
after placing an order
c. Time required for inventory to reach the
reorder point
d. Time required for inventory to reach the
safety stock limit
267. In the EOQ model, why is the reorder level
set equal to the number of units estimated
to be used during lead time?
i. To ensure that inventory is just about zero
when the time for replenishment comes
ii. To maintain the lowest possible inventory
costs
iii. To increase carrying costs
iv. To ensure that sufficient inventory is
available before replenishment

38. Part A
269. Which of the following costs are not
considered part of EOQ?
a. Purchasing costs
b. Carrying costs
c. Ordering costs
d. Stock-out costs
of
maintaining
274. The quantity at which an order is placed
for inventory replenishment is _________.
a. Safety stock
b. Reorder level
c. Buffer stock
d. Cycle stock
275. Lead time is assumed to remain constant.
This is a condition associated with which
of the following inventory systems?
a. Q-System
b. P-System
c. EOQ
d. Fixed Order Quantity system
276. Organizations come up with many reasons
for holding inventory at various stages of
production. Which of the following is not
a suitable reason for holding raw material
inventory?
a. Obtaining raw materials from suppliers
when needed to maintain production
schedules is not always possible
b. Quantity discounts can result from larger
purchase quantities
c. Larger shipments can reduce incoming
freight and material handling costs
d. Producing and transporting in larger
batches reduces material-handling and
production costs
se
O
nl
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(Questions 270 to 273) A production facility
uses a certain type of raw material in its
production process for which details are given
below. Annual Demand = 300000 units,
Quantity per order = 75000 units, Fixed cost
per order = Rs.2000, Holding cost per unit =
Rs.5, Item cost per unit = Rs.10. Using the
EOQ model, answer the following four
questions.
cost
20
09
268. If the lead time for replenishing inventory
in a production facility is 7 days and daily
demand is 25 units, calculate the reorder
point at which the firm should order
inventory replenishment.
a. 150 units
b. 175 units
c. 180 units
d. 185 units
273. Calculate total
inventory.
a. Rs.458000
b. Rs.3158000
c. Rs.233000
d. Rs.933000
of
i and ii
ii and iii
iii and iv
i and iv
Cl
as
s
a.
b.
c.
d.
BS
U
270. Calculate total ordering costs incurred in a
year.
a. Rs.6000
b. Rs.8000
c. Rs.10000
d. Rs.12000
Fo
rI
271. Calculate holding costs per order.
a. Rs.37500
b. Rs.75000
c. Rs.150000
d. Rs.300000
272. Calculate total variable cost.
a. Rs.300000
b. Rs.3000000
c. Rs.75000
d. Rs.750000
277. In which of the following types of
classification of inventory are items
classified based on annual consumption
value?
a. ABC
b. VED
c. FSND
d. Both b & c
278. Which of the following is the basic
objective of economic order quantity
purchasing?
a. Minimizing total inventory cost
b. Minimizing transport cost
31

39. Operations Management
279. Which of the following factors should a
purchase department consider while
purchasing materials and supplies from a
supplier?
i. Low price
ii. High quality
iii. Good after sales service
d.
280. Value analysis is an organized effort to
control cost of _____________.
a.
b.
c.
d.
Materials purchased
Materials exported
New product development
Marketing efforts
a
Fo
rI
283. Which of the following is not
characteristic of traditional purchasing?
a.
b.
c.
d.
Delivery schedule is left to the buyer
Purchases are in large quantities
Multiple sources of supply
Standardized packaging for all types of
components
284. For which of the following purchase
activities
of
a
bio-pharmaceutical
company, the purchase manager is more of
a facilitator than a decision-maker?
32
d.
order Purchase
Purchase
Purchase
nl
y
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U
Processing requisition for materials and
supplies
Locating suppliers or vendors
Negotiating purchasing contracts
All of the above
BS
b.
c.
d.
Purchase indent - Purchase
Quotation
Purchase indent - Quotation –
order
Quotation - Purchase indent –
order
Purchase order - Quotation –
indent
287. The review of inputs to get the best kind of
output at the least cost while designing a
product is called ______.
282. What are the tasks of a purchase
department in an organization?
a.
a.
c.
O
Vendor development
Selection of suppliers
Contract negotiation
Quality control
Vendor relations
Procurement
Creating goodwill for the company among
vendors
Public relations
286. Identify the logical sequence that best
represents a simple purchase process.
b.
281. Which of the following is not a primary
responsibility of the purchase department?
a.
b.
c.
d.
285. The purchase department is not
responsible for which of the following
activities in a production-centric firm?
a.
b.
c.
i and ii
i and iii
ii and iii
i, ii, and iii
Procurement requests
Safety of procured material
Contract execution
Negotiation process
of
a.
b.
c.
d.
a.
b.
c.
d.
20
09
Minimizing storage cost
Minimizing ordering costs
Cl
as
s
c.
d.
a.
b.
c.
d.
Cost reengineering
Industrial engineering
Value engineering
Cost accounting
288. Which of the following does not influence
vendor selection?
a.
b.
c.
d.
Cost
Delivery and quality
Service and reliability
None of the above
289. If the material requirement in the various
production facilities of India Metallics
Company differs significantly, which type
of purchasing system is most suitable for
the company?
a.
b.
c.
d.
Centralized purchasing
Decentralized purchasing
A combination system
Outsource the purchasing function

40. Part A
290. Which of the following is not an activity
performed by the purchase manager?
Vendor analysis and development
Supplier selection
Value analysis
ABC analysis
296. Which of the following is not mentioned
in a quotation?
a.
b.
c.
d.
i and ii
i and iii
i and iv
i, ii, iii, iv
O
Study the value of material
Review product design
Eliminate high-cost parts
Negotiate with suppliers
BS
c.
Is it possible to run the system without the
item?
Can the item be substituted with a standard
part?
Can the vendor supply the material at the
right time?
How much does the item cost?
U
b.
se
293. From the list of questions given below,
identify the one not considered under
value analysis.
a.
Fo
rI
d.
294. Purchase indents
__________.
a.
b.
c.
d.
are
also
called
Purchase requisitions
Purchase quotations
Purchase orders
Purchase information
295. Who generally issues a purchase indent?
a.
b.
User department
Purchase department
297. Which of the following authorizes
suppliers to supply materials/goods?
a. Purchase indent
b. Quotation
c. Purchase order
d. All of the above
298. In a centralized purchase system, which
department is responsible to the user
department for proper delivery of
components?
a. Supplier
b. Purchase department
c. Top management
d. Quality control department
nl
y
292. Which of the following is not part of value
analysis?
a.
b.
c.
d.
Price per unit
Delivery schedule
Terms and conditions
Name of the user department
of
Yellow pages
Newspapers
Websites
Business journals
a.
b.
c.
d.
20
09
291. Identify various sources that help purchase
managers obtain information about
potential vendors/suppliers.
i.
ii.
iii.
iv.
Vendor
Top management
Cl
as
s
a.
b.
c.
d.
c.
d.
299. India Rubber Ltd. requires on a continuous
basis a certain rubber component for their
product. When should the firm opt for
buying the component rather than
producing it in-house?
a. When the quantity of the part required is
huge
b. When the fixed cost to make the product is
less than buying costs
c. When the total cost to make the product is
less than buying costs
d. When the quantity of the part required is
small
300. Which of the following is not a reason for
organizations to opt for in-house
production?
a. To gain control over all value chain
activities
b. To put excess plant capacity to productive
use
c. To ensure that the design of a product is
kept secret
d. To take advantage of knowledge and
expertise of suppliers
33

41. Operations Management
Conveyance authorization card
Production authorization card
Vendor authorization card
Dual-card Kanban system
U
BS
It classifies inventory items based on the
size of resources required to control usage
value
The greater the usage value, the greater the
resources to be allocated to control usage
of an item
The system considers availability of
materials
Extent of allocation of resources is based
on value of the inventory
Fo
rI
b.
c.
d.
305. The following table gives the unit cost and
annual usage rates for different items.
Classify items based on their rupee volume
using ABC classification and identify them
under A-classification.
34
50
2
510
40
3
10
600
4
11
500
0.50
1,000
0.25
1,500
a.
b.
c.
d.
1&2
1&3
2&3
3&4
20
09
400
306. The departments involved in production
control are purchasing, receiving, raw
materials, and production department.
Which of the following tasks does the raw
material inventory department carry out?
i.
ii.
iii.
iv.
Repackaging and labeling incoming stock
Storing and protecting raw materials
Auditing existing raw materials
Unpacking incoming materials
a.
b.
c.
d.
i and ii
ii and iv
i, ii, and iii
i, ii, and iv
nl
y
O
se
Vendor analysis
Production control
Materials handling
Inventory control
304. Which of the following is not a
characteristic of the ABC inventory
classification system?
a.
1
6
303. Which of the following is not a function of
materials management?
a.
b.
c.
d.
Annual
usage
5
ABC
VED
FSND
FIFO
302. A Kanban system uses different types of
cards to initiate material transactions.
Which of the following type of Kanban
card authorizes a materials handling agent
to move the tray to a specified destination?
a.
b.
c.
d.
Cost per unit
(Rs)
Cl
as
s
a.
b.
c.
d.
Type of item
of
301. Materials managers should pay more
attention to items whose usage value or
consumption value is high and less
attention to items whose usage value is
low. Which inventory classification model
seeks to alter the expenses associated with
controlling materials according to their
usage value?
307. The shipping department is associated with
the materials handling function. Which of
the following tasks are carried out by this
department?
i. Staging or organizing orders to be shipped
ii. Weighing, labeling, and packing orders to
be shipped
iii. Physically checking orders to make sure
their content is consistent with the order
iv. Storing raw materials safely
a.
b.
c.
d.
i and iii
ii and iii
i and ii
i, ii, and iii
308. On what principle is ABC analysis based
upon?

42. Part A
309. An inventory records file does not contain
__________.
a. Characteristics of products
b. Information on inventory levels
c. Additional information like inventory item
number and description
d. Supplementary information for planning
purposes including vendor names, vendor
addresses, lead times and purchase
quantities
314. Which of the following is not a proper
approach to be followed by materials
managers?
a. Stock large volumes of materials to avoid
shortage
b. Maintain optimum levels of inventory to
avoid shortage
c. Supply materials to the required
workstation quickly to enable smooth
production
d. Procure materials, receive and store safely
for use in operations
315. Spykar Plastics recorded sales of Rs.60
lakhs for the year 2004-05. The profit
recorded is 20% of sales, while material
costs amount to 50% of sales. If the firm
saves Rs. three lakh in material costs,
calculate change in profit?
O
nl
y
310. Production control is one of the functions
of materials management. Which of the
following is not a function of the
production department associated with
production control function?
a. Monitoring flow of raw materials
b. Determining and adjusting inventory
storage capacity
c. Locating and receiving raw materials
d. Identifying material flow bottlenecks
i and ii
i, ii, and iii
i, ii, and iv
i, ii, iii, iv
20
09
d.
a.
b.
c.
d.
of
c.
An item is critical if its usage is high
There are usually a few critical items and
several items that are less critical
The safety stock (in terms of volume)
should be higher for A items than for C
items
An item is critical if its unit price is high
Cl
as
s
a.
b.
BS
U
se
311. Which of the following tasks are not
performed by the receiving department
under the production control function of
materials management?
a. Unpacking incoming orders
b. Processing requisitions for material
c. Inspecting the quality of incoming material
d. Preparing receiving reports
Fo
rI
312. The detailed study of complete material
flow process in a firm is termed ________.
a. Operations management
b. Inventory management
c. Materials management
d. Purchase management
313. How does shortage in materials affect a
firm’s functioning?
i. It breaks the flow of operations
ii. It delays delivery
iii. It increases operational efficiency
iv. It increases operational expenses
a.
b.
c.
d.
20% increase
25% increase
20% decrease
25% decrease
316. Which of the following is not an objective
of materials management?
a.
b.
c.
d.
To maintain low inventory turnover
To maintain cordial relations with
suppliers and supplying firms
To help increase effective utilization of
the firm’s capital
To keep searching for new products and
materials that can help the firm run
efficiently
317. Materials
management
comprises
production control, inventory control and
materials handling. Which of the following
departments is not associated with
production control function?
a.
b.
c.
d.
Purchase department
Raw material inventory department
Finished goods inventory department
Production department
35

43. Operations Management
a.
b.
c.
d.
Traffic
Physical distribution
Logistics
None of the above
20
09
323. The materials management function is also
referred to as a combination of three subfunctions: traffic, physical distribution and
logistics. Movement of finished goods falls
under which of these sub-functions of
materials management?
324. Which of the following category of robots,
based on the nature of their operations, can
change their sequence of tasks to suit the
operational process?
a.
b.
c.
d.
Playback robot
NC robot
Variable-sequence robot
Intelligent robot
se
O
nl
y
320. A raw material inventory department helps
production control by arranging for raw
materials to be readily used in the
production process. Which of the
following is not a task of raw material
inventory department?
a. Storing raw materials
b. Maintaining stocks of material at various
stages of production
c. Labeling raw materials to make them
ready for use
d. Arranging for replenishment of stocks in
liaison with purchase department
d.
To move materials to the required location
in a timely and cost-effective way without
affecting the primary objective of
production control and inventory control
All of the above
of
319. What does a typical materials receiving
report contain?
a. Quantity of material
b. Price of material
c. Technical specifications
d. Information on inventory levels
c.
Cl
as
s
318. Purchasing can be done through
centralized as well as decentralized
systems. Which of the following is not a
characteristic seen when large firms adopt
centralized purchasing?
a. Huge/voluminous purchases
b. Consistency in buying policies
c. Non-uniformity in maintaining records
d. Higher purchasing power
Fo
rI
BS
U
321. Materials
management
comprises
production control, inventory control and
materials handling. Which department is
not associated with inventory control
function?
a. Purchase department
b. Raw materials inventory department
c. Production department
d. Finished goods inventory department
322. What is the basic objective of materials
handling
function
under
materials
management?
a. To maintain stock of materials in various
stages of production and in desired
quantities
b. To direct and regulate movement of goods
through the entire manufacturing cycle
from the process of purchasing materials to
making the finished product
36
325. What does the concept of just-in-time
purchasing highlight?
a.
b.
c.
d.
Maintain bulky inventory
Maintain safety stock in case of adversity
Maintain minimum inventory till the next
replenishment
None of the above
326. JIT purchasing has many advantages over
traditional purchasing. Which among these
is not an advantage?
a.
b.
c.
d.
Reduction in carrying costs
Improved quality
Increased responsiveness
Reduced flexibility
327. Which company developed the Kanban
System?
a.
b.
c.
d.
General Motors
Toyota Motor Company
Ford Motor Company
Suzuki Motor Corporation

44. Part A
a.
b.
c.
d.
333. A Kanban system uses different types of
cards to initiate material transactions.
Which of the following type of Kanban
card authorizes the production department
to commence the production process?
Quantity used per
year
Cost per
unit
a.
b.
c.
1
2000
20
d.
2
4500
10
3
1500
35
4
3000
20
5
2500
O
se
U
BS
330. What is the least usage value of a material
that requires lowest allocation of
resources?
40000
35000
45000
42500
Fo
rI
a.
b.
c.
d.
Dual-card Kanban system
334. The primary objective of which of the
following approaches in operations
management is to identify the net
requirement of components needed to
manage the production process and meet
customer expectations?
nl
y
25
329. Use ABC analysis to identify the type of
material that has the most usage value.
Type 2
Type 4
Type 3
Type 5
Conveyance authorization card
Production authorization card
Vendor authorization card
Cl
as
s
Material
type
a.
b.
c.
d.
Type 4
Type 3
Type 1
Type 2
20
09
(Questions 329 to 332) Assume that JKL
Industries uses 5 types of materials in its
production process. The quantity of each type
of material used per year and the cost per unit
is given in the table below. Use this data to
answer the following four questions.
332. Which material falls under the C category
of ABC analysis?
of
328. Which of the following Kanban cards
authorizes a materials handling agent to
move the tray to a specified destination?
a. Vendor authorization card
b. Product authorization card
c. Conveyance authorization card
d. Both a & b
a.
b.
c.
d.
Capacity planning
Materials requirement planning
Master production schedule
Inventory management
335. An MRP system translates the demand for
products into raw material and component
requirements. What type of information is
required for successful operation of an
MRP system?
i.
Available inventory at the beginning of the
planning time period
ii. Information on production capacity that
helps anticipate and correct resource
shortage
iii. Number of customer orders pending
331. Which type of material can be classified
under ‘A’ category?
iv. Demand forecasts that specify the quantity
of products required
a.
b.
c.
d.
a.
b.
c.
d.
Type 1 and 2
Type 5
Type 2 and 3
Type 2
i, ii, and iii
i, iii, and iv
ii, iii, and iv
i, ii, iii, iv
37