Quiz 14: Sales and Operations Planning

Operations managers find very few types of linear program models applicable today because finding an optimal solution is no longer a concern.

In general, the objective function for linear programming problems in operations is one of minimizing costs.

A formulation for a linear programming model consists of a decision variable, a constraint, and several objective functions.

The objective function is a linear relationship that either minimizes or maximizes some value.

The formulation for a linear programming problem cannot include more than one decision variable.

The constraints in a linear programming formulation define the feasible solution space.

Linear programming is a mathematical modelling technique based on linear relationships.

While all linear programming problems have a single objective function, very few, if any, have constraints.

A linear programming model's constraints are nonlinear relationships that describe the restrictions placed on the decision variables.

Linear programming problems with two decision variables can be solved graphically.

Most real-world linear programming problems are solved graphically.

The feasible solution space contains the values for the decision variables that satisfy the majority of the linear programming model's constraints.

The optimal solution for a linear programming problem will always occur at an extreme point.

The simplex method used for solving linear programming problems uses matrix algebra to solve simultaneous equations.

Because linear programming provides an optimal solution, sensitivity analysis is never an important consideration.

___ represent a restriction on decision variable values for a linear programming problem. A) Surpluses B) Constraints C) Extreme points D) Optimal points

The simplex method is a solution method used for linear programming problems that have A) no constraints. B) at least one constraint. C) at least two constraints. D) at least three constraints.

The area that contains the values that satisfies all the constraints in a linear programming problem is known as the ___ space. A) optimal solution B) non-optimal solution C) feasible solution D) infeasible solution

The optimal solution for a linear programming problem will always occur A) when the slack price equals the surplus price. B) when the surplus price equals the slack price. C) at an extreme point. D) at a non-extreme point.

The constraint 3x₁ + 6x₂ ≥ 48 is converted to an equality by A) adding a slack variable. B) subtracting a surplus variable. C) adding both a slack variable and a surplus variable. D) subtracting both a slack variable and a surplus variable.

A company produces product A and product B. Each product must go through two processes. Each A produced requires two hours in process 1 and five hours in process 2. Each B produced requires six hours in process 1 and three hours in process 2. There are 80 hours of capacity available each week in each process. Each A produced generates $6.00 in profit for the company. Each B produced generates $9.00 in profit for the company. If the company produces 6 units of A and 9 units of B the company's objective function is A) $6.00A + $9.00B. B) $9.00A + $6.00B. C) $6.00A - $9.00B. D) $6.00A*$9.00B.

A company produces product A and product B. Each product must go through two processes. Each A produced requires two hours in process 1 and five hours in process 2. Each B produced requires six hours in process 1 and three hours in process 2. There are 80 hours of capacity available each week in each process. Each A produced generates $6.00 in profit for the company. Each B produced generates $9.00 in profit for the company. If the company produces 6 units of A and 9 units of B the constraint for process 1 is represented by A) 2A + 5B ≤ 80. B) 2A + 6B ≥ 80. C) 2A + 6B < 80. D) 2A + 6B ≤ 80.

A company produces product A and product B. Each product must go through two processes. Each A produced requires two hours in process 1 and five hours in process 2. Each B produced requires six hours in process 1 and three hours in process 2. There are 80 hours of capacity available each week in each process. Each A produced generates $6.00 in profit for the company. Each B produced generates $9.00 in profit for the company. If the company produces 6 units of A and 9 units of B the capacity constraint for Process 2 is A) 5A + 3B ≥ 80. B) 6A + 3 B ≤ 80. C) 5A + 3B ≤ 80. D) 5A + 3B < 80.

A company produces product A and product B. Each product must go through two processes. Each A produced requires two hours in process 1 and five hours in process 2. Each B produced requires six hours in process 1 and three hours in process 2. There are 80 hours of capacity available each week in each process. Each A produced generates $6.00 in profit for the company. Each B produced generates $9.00 in profit for the company. If the company produces 6 units of A and 9 units of B the value of the objective function is equal to A) $36. B) $81. C) $108. D) $117.

A company produces product A and product B. Each product must go through two processes. Each A produced requires two hours in process 1 and five hours in process 2. Each B produced requires six hours in process 1 and three hours in process 2. There are 80 hours of capacity available each week in each process. Each A produced generates $6.00 in profit for the company. Each B produced generates $9.00 in profit for the company. If the company produces 6 units of A and 9 units of B the amount of slack (in hours) for process 1 is A) 0 hours. B) 14 hours. C) 66 hours. D) 80 hours.

A variable subtracted from a model constraint in a ≥ linear programming model to make it an equality is known as a/an: A) slack variable B) surplus variable C) constraint variable D) solution variable

For a less than or equal to (≤) constraint, the shadow price represents the A) amount you would be willing to pay for one additional unit of a resource. B) amount you at which you would be willing to sell one additional unit of a resource. C) difference between the slack price and the surplus price. D) difference between the surplus price and the slack price.

Which of the following provides managers with a convenient means for analyzing resource usage? A) sensitivity range B) marginal value C) objective function D) constraints

How is linear programming useful to an operations manager?

Briefly define the components that comprise a linear programming model.

What is meant by the term "shadow price" in linear programming?

Discuss the purpose of, and the difference between, a slack variable and a surplus variable.

Provide an overview of the sales and operations planning (S&OP) process.

Describe strategies companies can use to adjust capacity to satisfy fluctuating demand.

Describe strategies companies can use to manage demand.

Use quantitative techniques to evaluate a demand scenario and select an appropriate S&OP strategy.

Explain hierarchical production and capacity planning. And calculate available-to-promise quantities.

Describe the issues related to revenue management in services and c alculate single order quantities.

Sales and operations planning is an aggregate planning process that determines the capacity needed to meet immediate demand.

An aggregate operations plan specifies the production quantities for an entire product family or product line.

One objective of sales and operations planning is to develop a companywide game plan to satisfy production.

An operations plan is an input into the sales and operations planning process.

Financial constraints are one of the major inputs of the sales and operations planning process.

Implementing a companywide game plan for allocating resources addresses the long-standing battle between operations and marketing.

An economic strategy for adjusting demand can include adjusting capacity or managing demand.

Reconciliation of the sales plan and the operations plan may include adjusting capacity and/or managing demand.

Adjusting capacity and managing demand are two economic strategies for meeting demand.

Overtime and undertime are common strategies for adjusting demand.

A chase demand strategy is one of several alternatives available for managing demand.

Inventory holding costs are an important consideration for the level production strategy.

When demand fluctuations are extreme, using overtime and undertime is a feasible strategy for adjusting capacity.

Subcontracting is a feasible alternative for adjusting capacity provided the supplier can reliably meet quality and time requirements.

One of several strategies for managing demand is to shift it into other time periods using incentives, sales promotions, and advertising.

A mixed strategy for adjusting capacity is simpler and easier to implement than any pure strategy.

Most companies use mixed strategies for managing demand.

The level strategy for adjusting capacity is only appropriate when there is no variation in demand.

A chase strategy involves hiring and firing workers so that production matches demand.

The transportation method is used for aggregate planning when the strategy for adjusting capacity is hiring and firing workers.

Disaggregation is the process of breaking a sales and operations plan into more detailed plans.

Sharing information and synchronizing production across the supply chain is known as disaggregation.

Yield management seeks to maximize profit from time-sensitive products and services.

All of the following are inputs to the aggregate production planning process except A) demand forecasts. B) financial constraints. C) sales plans. D) capacity constraints.

Which of the following is not a step in the monthly S&OP Planning Process? A) mid-month reports B) demand planning C) supply planning D) pre-S&OP meeting

Sales and operations planning is used primarily for which of the following planning horizons? A) short-term B) intermediate C) long-term C) indefinite

Adjusting available capacity by hiring and firing workers to match demand is an example of a(n) ___ strategy. A) level production B) chase demand C) mixed production D) optimal production

The primary cost associated with the level production strategy is the cost of A) holding inventory. B) hiring and firing workers. C) overtime. D) outsourcing (subcontracting).

Problems associated with using a part-time workers strategy for adjusting capacity include all of the following except A) high turnover. B) accelerated training requirements. C) scheduling difficulties. D) high retirement costs.

Maintaining resources for high levels of customer service is consistent with which of the following capacity strategies? A) chase demand B) level production C) peak demand D) subcontracting

Strategies for proactive demand management would not include A) shifting demand into other time periods. B) offering products or services with countercyclical demand patterns. C) partnering with suppliers to reduce information distortion along the supply chain. D) using subcontracting to meet unexpected high demand levels.

Examining the idles of resources and creating a demand for those resources is part of which of the following demand management strategies? A) demand shifting B) countercyclical product offerings C) information sharing D) resource allocation

Retailers encouraging earlier holiday gift buying is an example of which of the following demand management strategies? A) demand shifting B) countercyclical product offerings C) information sharing D) resource allocation

The most effective aggregate planning strategy depends on A) the demand distribution. B) the competitive position. C) the firm's cost structure. D) all of the above.

An optimizing technique originally developed for aggregate planning in a paint factory is the A) linear decision rule. B) search decision rule. C) management coefficients model. D) transportation technique.

The search decision rule (SDR) is an algorithm that A) solves a set of four quadratic equations. B) finds the minimum cost for combinations of different workforce levels and production rates. C) uses regression analysis to improve the consistency of production planning decisions. D) requires that a linear cost function be used.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 35 workers Production per Employee = 1,250 units per quarter Hiring Cost = $500 per worker Firing Cost = $1,000 per worker Inventory Carrying Cost = $20 per unit per quarter If a chase demand strategy is used then the number of workers hired at the start of quarter 2 is A) 10. B) 20. C) 35. D) 80.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 35 workers Production per Employee = 1,250 units per quarter Hiring Cost = $500 per worker Firing Cost = $1,000 per worker Inventory Carrying Cost = $20 per unit per quarter If a chase demand strategy is used then the total firing cost for the plan is A) $10,000. B) $15,000. C) $20,000. D) $25,000.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 35 workers Production per Employee = 1,250 units per quarter Hiring Cost = $500 per worker Firing Cost = $1,000 per worker Inventory Carrying Cost = $20 per unit per quarter If a level production strategy is used then the required quarterly output is A) 75,000. B) 87,350. C) 93,750. D) 125,000.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 35 workers Production per Employee = 1,250 units per quarter Hiring Cost = $500 per worker Firing Cost = $1,000 per worker Inventory Carrying Cost = $20 per unit per quarter If a level production strategy is used then the number of workers required for the plan is A) 35. B) 75. C) 100. D) 125.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 35 workers Production per Employee = 1,250 units per quarter Hiring Cost = $500 per worker Firing Cost = $1,000 per worker Inventory Carrying Cost = $20 per unit per quarter If a level production strategy is used then the inventory at the end of quarter 3 is A) 18,750 units. B) 12,500 units. C) 25,650 units. D) 31,250 units.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 35 workers Production per Employee = 1,250 units per quarter Hiring Cost = $500 per worker Firing Cost = $1,000 per worker Inventory Carrying Cost = $20 per unit per quarter If a level production strategy is used then the cost of the level production plan (inventory costs plus hiring and firing costs) is A) $20,000. B) $645,000. C) $1,250,000. D) $1,270,000.

A company is developing a linear programming model for its aggregate production plan. If I_t = units in inventory at the end of period t, P_t = units produced in period t, and D_t = demand in period t, then the company's demand constraint to ensure that demand is met in quarter 3 is A) D₃ = I₂ - I₃ + P₃. B) D₃ = I₃ + P₃. C) D₃ = I₃ - I₂ + P₃. D) D₃ = I₂ - I₃ + P₂.

A company is developing a linear programming model for its aggregate production plan. If W_t = workforce size for period t, H_t = number of workers hired for period t, and F_t = number of workers fired for period t, then the company's workforce constraint for period 2 is A) W₂ = W₁ + F₂ - H₂. B) W₂ = H₂ - F₂. C) W₂ = W₁ + H₂ - F₂. D) W₂ = H₂ - F₂ - W₁.

A company is developing a linear programming model for its aggregate production plan. If I_t = units in inventory at the end of period t, P_t = units produced in period t, and D_t = demand in period t, then the company's demand constraint to ensure that demand is met in quarter 2 is A) D₂ = I₂ - I₁ + P₂. B) D₂ = I₁ + P₂. C) D₂ = I₂ + I₁ + P₂. D) D₂ = I₁ + P₂ - I₂.

A company is developing a linear programming model for its aggregate production plan. If W_t = workforce size for period t, H_t = number of workers hired for period t, and F_t = number of workers fired for period t, then the company's workforce constraint for period 4 is A) W₄ = W₃ - H₄ + F₄. B) W₄ = W₃ + H₄ - F₄. C) W₄ = W₃ + H₃ - F₃. D) W₄ = W₃ + H₄.

A company is developing a linear programming model for its aggregate production plan. Each worker can produce 500 units per quarter. If W_t = workforce size in period t and P_t = number of units produced in period t, then the production constraint for period 3 is A) W₃ = 500P₃. B) P₃ = W₃ - 500. C) P₃ = 500W₃. D) P₃ = W₃/500.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a chase demand strategy is used then the number of workers hired at the start of quarter 2 is A) 0. B) 50. C) 100. D) 200.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a chase demand strategy is used then the number of workers fired at the start of quarter 3 is A) 0. B) 50. C) 60. D) 100.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a chase demand strategy is used then the total hiring and firing cost of the plan is A) $340,000. B) $250,000. C) $125,000. D) $90,000.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a level production strategy is used then the required output per quarter is A) 60,000 units. B) 42,500 units. C) 35,000 units. D) 25,000 units.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a level production strategy is used then the inventory at the end of quarter 3 is A) 0. B) 5,000. C) 10,000. D) 17,500.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a level production strategy is used then the number of workers required is A) 125. B) 170. C) 250. D) 325.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 50 workers Production per Employee = 250 units per quarter Hiring Cost = $1000 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $15 per unit per quarter If a level production strategy is used then the total cost of the plan (hiring cost, firing cost and inventory carrying cost) is A) $120,000. B) $377,500. C) $675,000. D) $795,000.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a chase demand strategy is used then the number of workers hired in quarter 4 is A) 0. B) 15. C) 75. D) 125.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a chase demand strategy is used the number of workers fired in quarter 3 is A) 0. B) 40. C) 50. D) 75.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a chase demand strategy is used the total hiring and firing costs for the production plan is A) $67,500. B) $135,000. C) $202,500. D) $337,500.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a level production strategy is used the number of units to produce each quarter is A) 42,500. B) 85,000. C) 62,500. D) 37,500.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a level production strategy is used the number of workers required each quarter is A) 50. B) 75. C) 85. D) 125.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a level production strategy is used the number of units in inventory at the end of quarter 3 is A) 0. B) 2,500. C) 5,000. D) 20,000.

The following information relates to a company's aggregate production planning activities: Beginning Workforce = 125 workers Production per Employee = 500 units per quarter Hiring Cost = $750 per worker Firing Cost = $1,500 per worker Inventory Carrying Cost = $10 per unit per quarter If a level production strategy is used the total cost of the production plan (hiring cost, firing cost, and inventory cost) is A) $60,000. B) $275,000. C) $335,000. D) $610,000.

Which of the following is considered to be a pure strategy in aggregate planning? A) chase B) transportation method C) linear decision rule D) all of the above

The process of breaking an aggregate plan into more detailed plans is referred to as A) collaborative planning. B) hierarchical planning. C) disaggregation. D) rough-cut planning.

The difference between planned production and customer orders is known as A) the master production schedule. B) available-to-promise. C) capable-to-promise. D) the disaggregate plan.

In capacity planning, the feasibility of the sales and operations production plan is verified by a A) resource requirements plan. B) rough-cut capacity plan. C) capacity requirements plan. D) master production schedule.

Given the information below, the number of available-to-promise units in period 2 is A) 400 B) 150 C) 50 D) 0

Given the information below, the number of available-to-promise units in period 4 is A) 400 B) 150 C) 50 D) 0

Given the information below, the number of available-to-promise units in period 6 is A) 400 B) 150 C) 50 D) 0

Given the information below, the number of available-to-promise units in period 4 is A) 500 B) 100 C) 200 D) 350

Given the information below, the number of available-to-promise units in period 1 is A) 700 B) 500 C) 250 D) 0

Which of the following is part of capacity planning in relation to hierarchical planning? A) master production schedule B) material requirements plan C) resource plan requirements D) shop floor schedule

A bagel company bakes a specialty bagel that it sells by the dozen every day. These specialty bagels can only be baked early in the morning before the store opens for business. The company estimates that the daily demand (in dozens) for its specialty bagel is distributed as follows: Specialty bagels are sold by the dozen only at a cost of $9.00 per dozen. The cost to make one bagel is $0.50. Leftover specialty bagels are sold by the dozen the next day for a 50% discount. The bagel company's cost of overestimating demand, Co, is A) $1.50. B) $3.00. C) $4.50. D) $6.00.

A bagel company bakes a specialty bagel that it sells by the dozen every day. These specialty bagels can only be baked early in the morning before the store opens for business. The company estimates that the daily demand (in dozens) for its specialty bagel is distributed as follows: Specialty bagels are sold by the dozen only at a cost of $9.00 per dozen. The cost to bake each bagel is $0.50. Leftover specialty bagels are sold by the dozen the next day for a 50% discount. The bagel company's cost of underestimating demand, C_u, is A) $9.00. B) $6.00. C) $4.50. D) $3.00.

A bagel company bakes a specialty bagel that it sells by the dozen every day. These specialty bagels can only be baked early in the morning before the store opens for business. The company estimates that the daily demand (in dozens) for its specialty bagel is distributed as follows: Specialty bagels are sold by the dozen only at a cost of $9.00 per dozen. The cost to make one bagel is $0.50. Leftover specialty bagels are sold by the dozen the next day for a 50% discount. The optimal number of specialty bagels that should be baked tomorrow (in dozens) is A) 5 dozen. B) 4 dozen. C) 3 dozen. D) 2 dozen.

A hot dog vendor must decide on Monday how many hot dogs to have available for the coming Saturday's football game. Each hot dog costs the vendor $3.00 and is sold for $5.00. After the game any unsold hot dogs are discounted and sold to the university cafeteria for $1.75. The vendor believes that the demand for hot dogs follows the probability distribution shown below: The vendor's cost of underestimating demand, C_u, is A) $3.00. B) $1.75. C) $2.00. D) $3.25.

A hot dog vendor must decide on Monday how many hot dogs to have available for the coming Saturday's football game. Each hot dog costs the vendor $3.00 and is sold for $5.00. After the game any unsold hot dogs are discounted and sold to the university cafeteria for $1.75. The vendor believes that the demand for hot dogs follows the probability distribution shown below: The vendor's cost of overestimating demand, C_o, is A) $5.00. B) $3.00. C) $1.75. D) $1.25.

A hot dog vendor must decide on Monday how many hot dogs to have available for the coming Saturday's football game. Each hot dog costs the vendor $3.00 and is sold for $5.00. After the game any unsold hot dogs are discounted and sold to the university cafeteria for $1.75. The vendor believes that the demand for hot dogs follows the probability distribution shown below: The optimal number of hot dogs the vendor should order for next Saturday's game is A) 1000. B) 1500. C) 2000. D) 3000.

A hotel manager must decide how many rooms to overbook. Room rates are $125 per night and each room costs $45 to maintain. A bumped customer is sent to another hotel at a cost of $75. Given the distribution of no-shows below, how many rooms should the manager overbook? A) Overbook 9 rooms. B) Overbook 10 rooms. C) Overbook 11 rooms. D) Overbook 12 rooms.

Which of the following is not a characteristic of aggregate planning for services? A) Labour is usually the most constraining resource for services. B) Service capacity must be provided at the appropriate place and time. C) Demand for services is easy to predict. D) Capacity for services is difficult to predict.

Yield management can be used to address all of the following problems except A) overbooking. B) portioning demand into fare classes. C) single order quantities. D) backorders.

Which of the following seeks to maximize the yield of time sensitive products and services? A) capacity management B) demand management C) production management D) revenue management

What is aggregate planning and what alternatives are generally feasible when developing the aggregate production plans?

Briefly discuss the two primary objectives of aggregate planning.

What are the outputs of aggregate planning?

Briefly describe what revenue management is and identify the common types of problems addressed by revenue management.