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Question Paper
Operations Management - I (MB241): October 2007
• Answer all questions.
• Marks are indicated against each question.

1. Which of the following falls under the purview of coordinating activities?

(a) Compare work progress to schedule
(b) Decide on the number of shifts
(c) Plan product and service mix
(d) Respond to customer inquiries about status of orders
(e) Arrange supplier and subcontractor networks.
(1 mark)
2. Reliance Industries, a leading corporation in India, has been looking at diversifying into various
business areas. In the year 2007, ‘Reliance’ opened huge grocery stores called ‘Reliance Fresh’ in a few
big cities, promising to provide customers all types of fresh grocery under single roof. Which of the
following operations strategy did ‘Reliance’ adopt as a competitive weapon?
(a) Product variety and facility size
(b) Convenience and location
(c) Shorter product cycle
(d) Production flexibility
(e) Low-cost process.
(1 mark)
3. Good forecasting is the foundation of good operations management. Which of the following statements
is/are true about forecasting?
I. Forecasting helps to predict the future with absolute accuracy.
II. It helps to predict future customer demands for product or services.
III. Forecasting is used in process design, capacity & facilities planning etc.
IV. Forecasting includes both long-term & short-term estimates of demand for each product or
service.
(a) Only (I) above
(b) Both (I) and (II) above
(c) Both (II) and (III)above
(d) (I), (II) and (III) above
(e) (II), (III) and (IV) above.
(1 mark)
4. The success of Delphi technique depends on the talent of the coordinator, however, there are certain
shortcomings. Which of the following is/are the main problems inherent in Delphi technique?
I. Members opinions might be influenced by a socially dominant individual.
II. Members may fear loss of credibility if they back away from a publicly stated opinion.
III. Coordinator obtains ideas & forecast from all the participants.
IV. There is absence of bias on the part of the panel of experts.
(a) Only (I) above
(b) Both (I) and (II) above
(c) Both (I) and (III)above
(d) (I), (II) and (III) above
(e) (II), (III) and (IV) above.
(1 mark)
5. A model that evaluates all the possible combination of mixtures and finds the optimal solution that
satisfies all the requirements at the least possible cost is referred to as
(a) Constrained optimization model
(b) Fixed order period system
(c) Economic order quantity model
(d) Fixed order quantity system
(e) Break even analysis.

10/28/2007
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(1 mark)
6. The operations manager must be able to identify the problems for the application of linear programming
technique with all of the following characteristics except
(a) The problem has a well-defined single objective
(b) There are no alternative courses of action to solve the problem
(c) The decision variables are continuous
(d) The decision variables can accept any non-negative or fractional values within specified range
(e) The objective and the constraints are linear functions.
(1 mark)
7. In an organization, control of a job, the methods or functions used in carrying out the job, and
relationships that exist among the jobs are manipulated in such a way to attain higher productivity and
operational efficiency. What is this concept called?
(a) Job analysis
(b) Job specification
(c) Job design
(d) Job evaluation
(e) Job enrichment.
(1 mark)
8. The Predetermined Motion Time Studies (PMTS) are useful in
I. Developing standards.
II. Control and auditing.
III. Benchmarking.
IV. Performance evaluation.
(a) (I), (II) and (III) above
(b) (I), (II) and (IV) above
(c) (I), (III) and (IV) above
(d) (II), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
(1 mark)
9. When the price reduces, customers tend to buy large volumes of products/services till a point. How is
the curve likely to be affected in such ‘price–volume (demand)’ relationship?
(a) The curve tends to be parabola
(b) The curve becomes almost vertical
(c) The curve becomes almost horizontal
(d) The curve tends to retard
(e) The curve after a significant rise; declines abruptly.
(1 mark)
10. In 1939, colonel Harland D. Sanders started Kentucky, which is now popularly known as ‘KFC’
Kentucky Fried Chicken. In Jan 2000, it was known that KFC uses genetically manipulated organism
and not the real chickens. These organisms are kept alive by tubes inserted into their bodies to pump
blood and nutrients. They have no beaks, no feathers and no feet but four or more legs (drumsticks).
Their bone structure is dramatically shrunk to get more meat out of them. This resulted in an increase of
profits for KFC. Which of the following process designing decision had KFC taken?
(a) Flexibility
(b) Forward integration
(c) Backward Integration
(d) Degree of Automation
(e) Quality level and degree of customer contact.
(1 mark)
11. A firm uses simple exponential smoothing constant with α = 0.1 to forecast demand. The forecast for
the 1st week of February was 500 units, whereas actual demand turned out to be 450 units. Forecasting
the demand for the 2nd week of February assuming that the actual demand during the 2nd week of
February turned out to be 505 units, calculate the demand forecast for the 3rd week of February
assuming the subsequent actual demand to be 516 units.
(a) 495 units
(b) 496 units
(c) 498 units
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(d) 497 units

(e) 494 units.
(2 marks)
12. Which of the following is the objective of job specialization?
(a) To avoid discrimination of any kind in wage administration
(b) To provide basis for classification of new or changed jobs
(c) To determine the position and place of a job in the organizational hierarchy
(d) To result in high-speed and low-cost production by the technique of perfection
(e) To ensure employee satisfaction with respect to the compensation.
(1 mark)
13. Process planning is essential for designing and implementing a work system that will produce that
required quantity of goods and services. Which of the following charts show material requirements, sub-
assembly operations that are involved in making a mechanical assembly?
(a) Assembly charts
(b) Process charts
(c) Gantt chart
(d) Histogram
(e) Operating characteristic curve.
(1 mark)
14. Firms conduct facility location analysis where they evaluate different locations and finally choose an
optimum location to start their operations. The following are the circumstances that necessitate the need
for selection of facility location, except
(a) When the business is newly started
(b) When the expansion to the existing plant is not possible
(c) When a firm wants to establish new branches
(d) When the landlord does not renew the lease
(e) When a firm has to design its internal structure to satisfy its production and service
requirements.
(1 mark)
15. ‘Crispy Pizza’, a fast food retailer wants to set up its outlet in such a place so that it can provide just-
in-time delivery to its customers, reduce transportation cost and enhance its service and efficiency.
Which of the following factor should influence its location decision?
(a) Market Proximity
(b) Integration with other parts of the organization
(c) Availability of labor and skills
(d) Site Cost
(e) Regional Regulations.
(1 mark)
16. The company should select location that best suits the products it offers, the location of its customers
and materials and other criteria that are specific to the company. Which of the following is/are the
location evaluation technique(s) or model(s) used by the managers?
I. Break Even Analysis.
II. Point Rating Method.
III. Transportation method of linear programming.
IV. ABC classification.
(a) Only (I) above
(b) Both (I) and (II) above
(c) Both (I) and (IV) above
(d) (I), (II) and (III) above
(e) (II), (III) and (IV) above
(1 mark)
17. Companies have several objectives of various importance levels while selecting a site or location.
Which of the following underlying statements is/are true for Point rating method?
I. The superior site is the one that ends up with more points.
II. The potential sites are evaluated with respect to every factor a company is looking for.
III. The significance of point rating method is the relative importance of tangible cost factors when
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compared to intangible cost factors.

IV. Only tangible factors are assigned points.
(a) Only (I) above
(b) Both (I) and (II) above
(c) Both (I) and (IV) above
(d) (I), (II) and (III) above
(e) (II), (III) and (IV) above.
(1 mark)
18. The designing of a layout is a creative exercise. In Zuni Private Ltd., an industrial expert organizes all
the departments in such a manner that their activities become easy to be carried on with the issuing
and receiving departments. Which criteria has the expert utilized for a good layout in the firm?
(a) Maximum flexibility
(b) Maximum coordination
(c) Maximum visibility
(d) Minimum handling
(e) Maximum accessibility.
(1 mark)
19. Which of the following are the activities performed by purchase department?
I. Ensure that right type of material is purchased in right quantities at the right time.
II. Develop a network of vendors.
III. Provide necessary information about new products, materials and services to other departments.
IV. Obtain the right product at a lower cost.
(a) (I), (II) and (III) above
(b) (I), (II) and (IV) above
(c) (I), (III) and (IV) above
(d) (II), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
(1 mark)
20. F.W. Taylor proposed a systematic approach called the “shop system” and implemented it in Midvale
Steel Works to improve labor efficiency. Which of the following is/are the key concepts suggested by
Taylor?
I. Each worker should be assigned a task based on his skill, strength and ability to learn.
II. Standard output time is set for each task, using stopwatch studies.
III. Proper supervision by carefully selected and trained workers.
IV. Incentive pay systems to motivate workers.
(a) Both (I) and (II) above
(b) (I), (II) and (III) above
(c) (I), (II) and (IV) above
(d) (II), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
(1 mark)
21. The overall objective of designing a layout is to provide a smooth work flow of material through the
factory. A layout that involves grouping of all similar equipment or functions in one area is referred to
as?
(a) Job-Shop Layout
(b) Flow Shop Layout
(c) Group Technology Layout
(d) Hybrid Layout
(e) Fixed Position Layout.
(1 mark)
22. Kalyani Fertilizer Company has only 1000 tonnes of nitrate, 1800 tonnes of phosphate and 1200
tonnes of potash available per month. They can use these ingredients to make three basic fertilizers
namely Ganga, Jamuna and Saraswati. Ganga contains 5 percent nitrate, 10 percent phosphate and 5
percent potash by weight. Jamuna contains 5 percent nitrate, 10 percent phosphate and 10 percent
potash by weight. Saraswati contains 10 percent nitrate, 10 percent phosphate and 10 percent potash
by weight. The cost of the Nitrate is Rs. 8,000 per tonne, the cost of Phosphate is Rs. 2,000 per tonne
and the cost of potash is Rs. 5,000 per tonne. Apart from the three ingredients the rest part is inert
ingredient available in unlimited quantity, costing Rs. 250 per tonne. The selling prices of the basic
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fertilizers Ganga, Jamuna and Saraswati are Rs. 2,000, Rs.2,500 and Rs.3,000 per tonne respectively.
There is a constraint that the company must produce at least 6,000 tonnes of fertilizer Ganga per
month. Let G, J and S be the quantity (in tonnes) of Ganga, Jamuna and Saraswati to be manufactured.
Which of the following is the correct linear programming problem in order to maximize their monthly
profit?
(a) Max Z = 950G + 1,212.5J + 1,325S; Subject to: G + J + 2S ≤ 20,000; G + J + S ≥ 18,000; G + 2J
+ 2S ≤ 24,000; G ≥ 6, 000 and J, S ≥ 0
(b) Max Z = 950G +1,212.5J + 1,325S; Subject to: G + J + 2S ≥ 6, 000; G + J + S ≥ 18,000; G + 2J
+ 2S ≥ 24,000; G ≥ 20,000 and J, S ≥ 0
(c) Max Z = 1,325G +1,212.5J + 950S; Subject to: G + J + 2S ≥ 20,000; G + J + S ≥ 18,000; G + 2J
+ 2S ≥ 24,000; G ≤ 6,000 and G, J, S ≥ 0
(d) Min Z = 1,212.5G +950J + 1,325S; Subject to: G + J + 2S ≥ 18,000; G + J + S ≤ 20,000; G + 2J
+ 2S ≥ 24,000; G ≥ 6,000 and J, S ≥ 0
(e) Max Z = 950G + 1,212.5J + 1,325S; Subject to: G + J + 2S ≤ 20,000; G + J + S ≤ 18,000; G + 2J
+ 2S ≤ 24,000; G ≥ 6,000 and J, S ≥ 0.
(3 marks)
23. Which of the following statements is not true with respect to Linear Decision Rules (LDRs)?
(a) They are a set of equations for calculating aggregate output rate and inventory level for each
time period in a planning horizon
(b) This method guarantees an optimal solution and saves trial and error computations
(c) It overcomes the limitation of linear programming
(d) It determines the actual costs incurred by an organization
(e) They are a set of standards that can be applied to any organization without modification.
(1 mark)
24. Albi electronics’ production manager is evaluating a project. The cash flows associated with the project
are given below. The firm’s cost of capital is 15 percent. Find the Net Present Value for the project.
Year 0 1 2 3 4 5
Cash flows (Rs.‘000s) (2200) 900 850 700 650 500

(a) Rs. 305.82

(b) Rs. 9,960.00
(c) Rs.1,07,300.00
(d) Rs.1,14,200.00
(e) Rs.3,05,820.00.
(2 marks)
25. A high valued item has a tracking signal of 4 and has been forecast as shown in table. Compute the
tracking signal and indicate whether some corrective action is appropriate.
Period in years 1 2 3 4 5 6
Actual demand 80 92 71 83 90 102
Forecasted demand 78 79 83 79 80 83

(a) Action limit of 4 is not exceeded; therefore no action

(b) Action limit of 4 is exceeded; therefore shift to some other forecasting method
(c) Action limit of 4 is not exceeded; therefore increase the value of α
(d) Action limit of 4 is not exceeded; therefore decrease the value of α
(e) Action limit of 4 is exceeded; therefore ensure that α remains constant.
(2 marks)
26. Which of the following is not true about Cellular Manufacturing?
(a) Parts spend less time in waiting before they are processed and this results in a significant
decrease in in-process inventory levels
(b) Products have similar shapes and processing requirements
(c) The route of production through cells is more direct
(d) Cells are dedicated to a wide range of products
(e) Changeover times between batches of parts are considerably reduced.
(1 mark)
27. Which of the following are not among the reasons for holding raw materials as inventory?
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I. Larger shipments can result in reduced incoming freight costs and material handling cost.
II. Production of products as and when the customers demand them can be uneconomical.
III. Backlogs in customer orders may not always be allowed.
IV. Products can be shown to customers.

(a) (I), (II) and (III) above

(b) (I), (II) and (IV) above
(c) (I), (III) and (IV) above
(d) (II), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
(1 mark)

28. The method that considers several variables that are related to the variable being predicted is
(a) Exponential smoothing
(b) Weighted moving average
(c) Regression analysis
(d) Simple moving average
(e) Trend adjusted exponential smoothening.
(1 mark)
29. A forecast that projects a company’s sales is
(a) Economic forecast
(b) Technological forecast
(c) Demand forecast
(d) Market survey
(e) Resource forecast.
(1 mark)
30. The effectiveness of purchasing activities can be enhanced by proper organization and coordination of
the activities. Which of the following is true with regard to decentralized purchasing system?
(a) The individual departments are flexible to alter its purchasing policy on the basis of specific
requirements
(b) All the purchasing activities are carried out by a separate department
(c) The benefits of bulk purchasing can be realized
(d) Uniformity in maintaining purchase records
(e) It is effective for an organization with a number of production sites.
(1 mark)
31. A tracking signal
I. Is a measure of how well the forecast is predicting the actual values.
II. Is computed as mean absolute deviation (MAD) divided by the running sum of the forecast errors
(RSFE).
III. That is positive indicates that demand is greater than the forecast.
(a) Only (I) above
(b) Both (I) and (II) above
(c) Both (I) and (III) above
(d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
(1 mark)
32. To exercise proper control over the inventory items, organizations classify and categorize inventory
items allowing operations managers in devising control plans relevant and effective for items with
similar attributes. In which of the following methods the goods are classified on the basis of their
turnover?
(a) ABC
(b) VED
(c) FSND
(d) JIT
(e) RFID.
(1 mark)
33. Which of the following is/are the benefits of setting work standards?
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I. It acts as a basis to evaluate workers level of performance.

II. It helps in scheduling the departmental works.
III. It helps the managers to determine the appropriate compensation for the workers.
(a) Only (I) above
(b) Only (II) above
(c) Both (I) and (II) above
(d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
(1 mark)
34. There are various types of forecasting techniques. Decomposing a time series involves breaking down
past data into the components of
(a) Constants and variations
(b) Trends, cycles and random variations
(c) Strategy, tactical, and operational variations
(d) Long-term, short-term, and medium-term variations
(e) Independent and dependent variations.
(1 mark)
35. The facility layouts are differentiated by the types of work flow they entail and the work flow in turn is
dictated by the nature of the product. Grouping technology layout is one of the basic layout formats.
Which of the following is not a benefit of grouping technology layout?
(a) Highly automated
(b) Improved design
(c) Reduced in-process inventory
(d) Improved layout, routing and machine loading
(e) Increased manufacturing flexibility.
(1 mark)
36. Which of the following are not true with regard to assembly chart?
I. It is an instruction to make a given quantity of a particular item.
II. It shows in schematic form how a product is assembled.
III. It lists the operations necessary to produce the component.
IV. It is a correction or modification of an engineering drawing or bills of material.
(a) (I), (II) and (III) above
(b) (I), (II) and (IV) above
(c) (I), (III) and (IV) above
(d) (II), (III) and (IV) above.
(e) All (I), (II), (III) and (IV) above.
(1 mark)
37. One of the prime considerations of an operations manager when developing production-process designs
is the level of vertical integration. Which of the following are true in this regard?
I. It relieves an organization of a part of its purchasing function.
II. It provides flexibility in manufacturing.
III. Helps in obtaining economies of scale.
IV. Increases profits due to decentralized overheads.
(a) (I), (II) and (III) above
(b) (I), (II) and (IV) above
(c) (I), (III) and (IV) above
(d) (II), (III) and (IV) above.
(e) All (I), (II), (III) and (IV) above.
(1 mark)
38. Auburn machine Co. produces parts that are shipped nationwide. It has an opportunity to produce
plastic packaging cases, which are currently priced at Re.0.70 each. Annual demand depends largely on
economic conditions. If the company produces the cases itself, it must renovate an existing work area
and purchase a molding machine which will result in annual fixed costs of Rs. 8,000. Variable costs for
labor, materials and variable overheads are estimated at Re. 0.50 per case. What volume of production is
more profitable to produce the cases in-house rather than purchase them from outside supplier?
(a) Above 20,000 units
(b) Above 22,000 units
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(c) Above 40,000 units

(d) Above 42,000 units
(e) Above 48,000 units.
(2 marks)
39. Which of the following belongs to primary applications of work sampling?
(a) Time study
(b) Standard data
(c) Predetermined motion time study
(d) Employee self timing
(e) Performance measurement.
(1 mark)
40. Which of the following is not an advantage of Job Specialization?
(a) It results in lower production time or higher productivity by the learning curve effect due to
repetition
(b) It results in simpler work instructions and easy production control because of consistency in
work assignment
(c) It always results in higher work satisfaction
(d) There is ease in recruiting new workers because fewer skills are required
(e) There is scope for higher degree of mechanization or automation.
(1 mark)
41. Organizations usually opt for in-house production for which of the following reasons?
I. To have control over all value chain activities.
II. To put excess plant capacity to productive use.
III. To maintain a multiple source policy.
IV. To ensure that the design of a product is kept a secret.
(a) (I), (II) and (III) above
(b) (I), (II) and (IV) above
(c) (I), (III) and (IV) above
(d) (II), (III) and (IV) above.
(e) All (I), (II), (III) and (IV) above.
(1 mark)
42. Green Bluff Warehouse has a contract to ship 100 boxes per day of Washington apples to a distributor.
They order apple boxes in quantities of 3,000 per order from a supplier who always delivers them in 10
days. How much inventory is still on hand when they place an order for more boxes?
(a) 100 boxes
(b) 1,000 boxes
(c) 1,200 boxes
(d) 1,500 boxes
(e) 1,800 boxes.
(1 mark)
43. Three products should be produced. The amount A of the first product should be no more than one-half
the total production of all three products. This constraint would be written as
(a) 2A − 3B − C ≥ 0
(b) A/2 − B − C ≤ 0
(c) A − B/2 − C/2 ≤ 0
(d) A/2 − B/2 − C/2 ≤ 0
(e) A − B − C/2 ≥ 0.
(1 mark)
44. Supermarket Supply Co. distributes grocery products to customers in Mexico. Demand for canned corn
averages 280 cases per month. Lead time to obtain a shipment is about a month, and demand during the
lead time is normally distributed with a standard deviation of 60 cases. The company estimates its
ordering cost at Rs. 8.00 per order, carrying cost at Rs. 2.40 per case per year and stockout cost at Rs.
2.00 per case. The EOQ disregarding stockout costs is
(a) 150 cases/order
(b) 175 cases/order
(c) 185 cases/order
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(d) 200 cases/order

(e) 250 cases/order.
(1 mark)
45. Training and developing personnel include all of the following decisions and activities except
(a) Establishing work centric environment
(b) Encourage employees to seek perfection in their tasks
(c) Support employees in training programs
(d) Giving more challenging job assignments
(e) Guide by informing correct work methods.
(1 mark)
46. The process of master production schedule involves planning of activities. A master production
schedule must
(a) Include only demand from product sales
(b) Not be influenced by the aggregate plan
(c) Not be involved with customer order processing
(d) Be visible to all levels of management
(e) Be used for JIT plan.
(1 mark)
47. A department store discovered that in a four-month period, the best forecast can be determined by using
50 percent of the sales for the most recent month, 20 percent of the sales of two months ago, 10 percent
of the sales of three months ago, and 20 percent of the sales of four months ago. Which forecasting
method should the store use to forecast demand?
(a) Simple Moving Average
(b) Linear Regression
(c) Time Series Analysis
(d) Weighted Moving Average
(e) Exponential smoothing.
(1 mark)
48. Which of the following is the correct flow-process chart representation for an activity of going to a
stock location, visually locate item, inspect and confirm stock number, count number in stock, enter
value in computer, update status card, wait for computer analysis, check safety stock bar codes, check
job stock bar codes, send computer printout to office, wait for office acknowledgement, inspect record
for accuracy, file inventory printout locally, return to office location and file inventory record disks?

(a) ⇒ − О − − О − О − ∇ − О − О − D − О − D − − О − ⇒ −∇
(b) ⇒−О−О− −О−О− −∇−О−D−О−О−D−∇−⇒
(c) О−⇒− −О−О− −∇−О−D−О−О−⇒−∇−О−D
(d) ⇒−О− −О−О−О−D−О−О−О−D− −∇−⇒−∇
(e) О − ⇒ − − О − О − D − О − О − О − D − − О −∇ − ⇒ − ∇.
(2 marks)
49. In the straight line equation for regression where Y = a + bX, X is
(a) The Y intercept
(b) The time period
(c) The dependent variable
(d) The slope of the line
(e) The variable being predicted.
(1 mark)
50. The transportation Linear programming cost analysis for a plant-location study covering possible sites
X, Y and Z is complete except for final evaluation of cell AY in figure given below. Complete the
evaluation cell AY, make any changes justified and compute the optimal cost.
Demand
X Y Z
A − 5 + 2 9 10
10
B 10 − 6 + 3 18
15 3
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C + 9 8 − 6 12
5 7
15 15 10 40

(a) Rs. 215

(b) Rs. 250
(c) Rs. 261
(d) Rs. 275
(e) Rs. 284.
(2 marks)
51. The demand over the past 9 months for a new breakfast cereal is shown in Table. Develop a forecast for
October using a 5-period moving average.

Month Jan Feb March April May June Jul Aug Sept
Demand 70 76 75 80 92 87 93 114 105
(Round off the value to the nearest integer)
(a) 98 units
(b) 101 units
(c) 201 units
(d) 208 units
(e) 298 units.
(1 mark)
52. Dolly Milk and Drinks company has thought of introducing a drink that can be an instant breakfast
drink for adults who want a quick nutritious breakfast, a tasty snack drink for children and a health
supplement for elderly people. Dolly Milk’s main competitors were considered to be bacon, eggs,
breakfast cereals, coffee and other breakfast alternatives and also other soft drinks, fruits juices and
thirst quenchers. After analyzing results from prototype testing, the company planned to introduce the
instant breakfast drink in different flavors of chocolate, vanilla, and strawberry in attractive packages
available in different quantities. Which of the following would be the next step Dolly Milk and Drinks
company should follow in its new product development process?
(a) Dolly Milk and Drinks should test the drink under standard conditions and defects are to be
noted
(b) Dolly Milk and Drinks must test its product in few selected cities
(c) Dolly Milk and Drinks should check the economical feasibility
(d) Dolly Milk and Drinks should develop the mission statement of its company
(e) Dolly Milk and Drinks should develop and prepare the sales, cost and profit projections for
determining success of the company objectives.
(2 marks)
53. Which of the following is not a major component of inventory cost?
(a) Storage cost
(b) Insurance cost
(c) Taxes
(d) Cost of spoilage and obsolescence
(e) Direct labor costs.
(1 mark)
54. In which of the following work measurement techniques, the timing role of analyst is to record times for
several cycles of the tasks, and judge and record pace?
(a) Time study
(b) Standard data
(c) Pre-determined time study
(d) Work sampling
(e) Historical analysis.
(1 mark)
55. Which of the following is not among the steps involved in the time study?
(a) Job identification
(b) Job division
(c) Job analysis
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(d) Pace rating the workers

(e) Consideration of allowances.
(1 mark)
56. Which of the following costs is not relevant to aggregate production planning?
(a) Basic production costs
(b) Costs associated with changes in the production rate
(c) Inventory holding costs
(d) Distribution costs
(e) Shortage costs.
(1 mark)
57. With the transportation technique, the initial feasible solution can be generated in any fashion one
chooses. The only constraint is that the transportation method
(a) Uses both qualitative and quantitative factors
(b) Performs a cost-volume analysis
(c) Determines the best pattern of shipments from several points of supply to several points of
demand
(d) Finds the location of a distribution center that minimizes distribution costs
(e) The solution is not degenerate.
(1 mark)
58. A product to be manufactured comprises of the following activities with precedence and task times:
Time
S. No. Activity Precedence
(in seconds)
1 A – 30
2 B – 20
3 C – 25
4 D – 30
5 E – 35
6 F – 45
7 G – 40
8 H – 30
9 I A, B 40
10 J D, E 35
11 K F, G 30
12 L C, J 25
13 M I, L 50
14 N – 40
15 O M, N 25
16 P H, K, O 35
Balance the assembly line by calculating the cycle time considering the capacity of 300 units in a shift
of 450 minutes and find the line efficiency after line balancing.
(a) 99.07%
(b) 98.07%
(c) 97.07%
(d) 96.07%
(e) 95.07%.
(3 marks)
59. The information obtained by analyzing a job in the organization contains facts and information about
the job and the employees. Which of the following processes contain information about the job
identification, job summary, and nature of reporting relationships?
(a) Job description
(b) Job specification
(c) Job rotation
(d) Job enrichment
(e) Job analysis.
(1 mark)
60. What is/are the major difference(s) in focus between location decision in the service sector and in the
manufacturing center?
I. The focus in manufacturing is revenue maximization, while the focus in service is cost
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minimization.
II. The focus in service is revenue maximization, while the focus in manufacturing is cost
minimization.
III. The focus in manufacturing is on labor, while the focus in service is on raw materials.
(a) Only (I) above
(b) Only (II) above
(c) Only (III) above
(d) Both (I) and (III) above
(e) Both (II) and (III) above.
(1 mark)
61. Comfort Zone Furniture has plants is Boston, Dallas and Seattle which ship to four demand locations,
with transportation cost per unit as shown. Use the northwest-corner method to determine optimal
transportation cost.

Demand Location
W1 W2 W3 W4
3 5 7 4
Boston 50
Supply 6 8 5 2 50
Dallas
plants
1 9 7 3 50
Seattle

20 60 30 40 150

(a) Rs.310
(b) Rs.410
(c) Rs.510
(d) Rs.610
(e) Rs.740.
(2 marks)
62. Which of the following aggregate planning strategies requires ‘stable employment of personnel’ to be
most effective?
(a) Varying production rates through overtime or idle time
(b) Varying the workforce size in response to the output requirements
(c) Back-ordering during high-demand periods
(d) Subcontracting
(e) Varying size of inventory.
(1 mark)
63. The aggregate planning strategies of varying inventory level and back ordering during periods of high
demand has which of the following disadvantages in common?
(a) Customers may go elsewhere
(b) Holding costs
(c) Quality of output may suffer
(d) It is difficult to exactly match supply with demand
(e) Managing agreements with unions on wages, hiring costs and layoffs.
(1 mark)
64. The disadvantages of product layout include
I. High volume is required because of the large investment needed to set up the process.
II. Seeks the best personnel and machine utilization in repetitive or continuous production.
III. There is a lack of flexibility in handling a variety of products.
IV. Work stoppage at any one point ties up the whole operation.
(a) Both (I) and (II) above
(b) Both (I) and (III) above
(c) (I), (II) and (III) above
(d) (I), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
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(1 mark)
65. Which of the following is not true about constrained optimization models?
(a) An optimization model reduces the feasible solutions for complex problem to a manageable
number
(b) Optimization models make the decision-making process more objective
(c) Optimization models enable the decision-maker to solve practical problems mathematically
(d) Only an experienced and skilled modeler can formulate a practical problem into an optimization
model
(e) Non-quantifiable criteria do not affect the effectiveness of the solution.
(1 mark)
66. The Evergreen Garden Tractor Co. has extra capacity that can be used to produce gears that the
company is now buying for Rs.10 each. If Evergreen makes the gears, it will incur materials costs of
Rs.3 per unit, labor costs of Rs.4 per unit and variable overhead costs of Rs.1 per unit. The annual fixed
cost associated with the unused capacity is Rs.8,000. Demand over the next year is estimated at 4,000
units. Estimate the cost to making and buying the gears.
(a) Cost to make is Rs.40,000, cost of buying is Rs.48,000
(b) Cost to make is Rs.48,000, cost of buying is Rs.48,000
(c) Cost to make is Rs.48,000, cost of buying is Rs.40,000
(d) Cost to make is Rs.40,000, cost of buying is Rs.40,000
(e) Cost to make is Rs.49,000, cost of buying is Rs.40,000
(2 marks)
67. Which of the following constitutes the objectives of Job design?
(a) Job content
(b) Specialization
(c) Technical feasibility
(d) Tools and equipment
(e) Atmosphere.
(1 mark)
68. Which of the following systems allow both sidetracking and backtracking in the product flow route?
(a) Discrete unit manufacturing
(b) Process manufacturing
(c) Cellular manufacturing
(d) Process focused production
(e) Delivery of services using a product focused production system.
(1 mark)
69. The general manager of a building materials production plant feels that the demand for plasterboard
shipments may be related to the number of construction permits issued in the country during the
previous quarter. The manager has collected the data as shown in table below. Using least square
method, find the number of plasterboard shipments when the number of construction permits is 30.
Construction Permits 15 9 40 20 25 25 15 35
Plasterboards Shipments 6 4 16 6 13 9 10 16
(Round off your answer to nearest integer.)
(a) 13
(b) 8
(c) 7
(d) 10
(e) 9.
(2 marks)
70. Market proximity is most important for which of the following industries?
(a) Paper industry
(b) Textile industry
(c) Petrochemical industry
(d) Hospitality industry
(e) FMCG industry.
(1 mark)
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71. One of the key objectives of any business organization is to reach to a position where it is able to attract
more customers than its competitors. Organizations in order to gain such a competitive advantage will
follow all of the following except
(a) Identify their distinct competencies
(b) Determine the choice of products and markets
(c) Perform financial analysis of business investment
(d) Employ its strengths in product functionalities and process capabilities
(e) Adapt flexible capacity and an adaptive production process.
(1 mark)
72. Which among the following is the average of the errors made by the forecast over a period of time
without considering the direction of error?
(a) Mean Square Error
(b) Mean Forecast Error
(c) Mean Absolute Deviation
(d) Mean Absolute Percentage Error
(e) Tracking Signal.
(1 mark)
73. Consider the following linear programming problem:
Maximize: 4X + 10Y; Subject to constraints: 3X + 4Y ≤ 480; 4X + 2Y ≤ 360; X, Y ≥ 0
Find the maximum possible profit for the objective function.
(a) 1,520
(b) 1,500
(c) 1,200
(d) 1,220
(e) 1,320.
(1 mark)
74. Value analysis involves the coordinated efforts of the engineering, production and purchasing personnel
and helps in reviewing purchase activities to ensure that expenditures result in the receipt of appropriate
value. Which of the following is the correct sequence in the procedure of value analysis?
I. Gather all information about the product design, costs, scrap rates etc.
II. Evaluate the alternatives on criteria like cost and feasibility and eliminate the non- feasible
alternatives.
III. Examine all the products that are being reordered and identify each product needs and
improvements.
IV. Form a team that includes experts from various functional areas that are related to the functions
performed by the material.
V. Refine the feasible alternatives and select the optimal alternative.
VI. Generate all alternatives by generating new ideas and evaluate different ways of accomplishing
the tasks.
(a) I, IV, II, III, VI, V
(b) III, I, IV, VI, II, V
(c) IV, V, III, I, II, VI
(d) III, I, IV II, V, VI
(e) I, IV, II, V, III, VI.
(1 mark)
75. Which of the following is not true for purchasing function?
(a) A small saving in the cost of the material can have a significant impact on the total performance
of an organization
(b) Centralized purchasing vests maximum purchasing power with the buyer
(c) The primary responsibility of purchase manager includes vendor development, selection of
suppliers and contract negotiation
(d) While selecting a vendor the only concern is to select the vendor who has quoted the lowest
price
(e) Whenever a new item is indented management has to take a make-or-buy decision.
(1 mark)
76. Wendell Engineering Works manufactures automotive gears. The organization cannot adopt a varying
workforce strategy because of the nature of the job, which requires skilled workers. Since training and
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hiring/layoff costs would be significant, the organization decided to follow a varying inventory strategy
to meet the fluctuating demand requirements.

May June July August

Opening stock 1000 1068 664 28
Demand 4300 4100 4500 4200
Working days 26 22 23 24
Number of workers: 24
Productivity per worker: 7 units per day
Shortage cost = Rs.15 per unit
Inventory holding cost = Rs. 6 per unit.
• Find shortage cost that incurred for the month of August.
(a) Rs. 1,100
(b) Rs. 2,100
(c) Rs. 2,800
(d) Rs. 3,100
(e) Rs. 4,100.
(2 marks)
77. The activity of sensing a need for ordering materials, placing an order, determining time for getting the
material delivered, receiving the material, and using the material is called
(a) Inventory level
(b) Inventory cycle
(c) Lead time
(d) Safety stock
(e) Demand rate.
(1 mark)
78. Fixed costs usually associated with the production of a lot internally or the placing of an order
externally with a vendor are
(a) Setup costs
(b) Holding costs
(c) Carrying costs
(d) Stockout costs
(e) Economies of scale.
(1 mark)
79. Mehta Enterprises Ltd. (MEL) produces two products coded P25 and P75. Each of these two products
undergo three stages of processing. The time required for processing each unit of the two products and
the profit contribution per unit are given below:
Available capacity per day
Particulars P25 P75
(Machine hours)
Process I (Machine hours) 12 12 420
Process II (Machine hours) 3 6 150
Process III (Machine hours) 8 4 240
Profit contribution (Rs.) 250 350
Using the simplex method of linear programming, find which of the following is the first departing
variable?
(a) S1
(b) S2
(c) S3
(d) X1
(e) X2.
(1 mark)
80. Chinese toy manufacturer Xing fu Nantong Group Ltd. last year opened their Indian subsidiary at Plata
Export Processing Zone, near Kolkata. The forecast and actual demand for their product in last six
months are as follows:
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Month May June July August September October

Forecast demand 7000 6500 8000 7000 8000 8000
Actual demand 7000 8000 8500 8000 7500 7300

The mean absolute deviation of the above data is

(a) 500
(b) 700
(c) 800
(d) 900
(e) 1,000.
(1 mark)
81. Perfect Gearboxes Ltd. has four factories and four warehouses. The transportation cost per unit is given
as below.
Warehouse Supply
Factory W1 W2 W3 W4 (units)
F1 80 120 145 65 100
F2 55 95 60 80 60
F3 115 50 90 135 85
F4 70 55 105 120 80
Requirement (units) 120 45 90 70 325
Using least cost method find the transportation cost for the given matrix.
(a) Rs. 14,500
(b) Rs. 15,500
(c) Rs. 20,450
(d) Rs. 22,350
(e) Rs. 24,350.
(2 marks)
82. Which of the following is the process of determination of the tasks which comprise the job and the
skills, knowledge, abilities and responsibilities required of the worker for successful performance of the
job and which differentiate one job from all others?
(a) Human Resource Planning
(b) Socialization
(c) Selection
(d) Job Analysis
(e) Performance appraisal.
(1 mark)
83 On the basis of the following demand information, calculate the trend-adjusted forecast for October.

Month July August September

Demand in Units 52 59 64
Given, Initial estimate = 45, α = 0.23. Initial trend = 0, β = 0.18.
(Round off the value to the nearest integer)
(a) 45
(b) 55
(c) 65
(d) 70
(e) 72.
(2 marks)
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Suggested Answers
Operations Management - I (MB241): October 2007
1. Answer : (d)
Reason : Responding to customer inquiries about status of orders is a coordinating activity
• Compare work progress to schedule is a controlling activity.
Following are planning decisions :
• Decide on the number of shifts
• Plan product and service mix
Following is categorized as organizing activity :
• Arrange supplier and subcontractor networks.
2. Answer : (a)
Reason : Reliance is offering variety of fruits, vegetables in a large store, this allows them to display their variety
and thus benefit from economies of scale.
3. Answer : (e)
Reason : Forecasting helps to predict the future but not with absolute accuracy. As future demand or future cann
be accurately predicted for product/service. Hence (I) does not apply to forecasting.
Statements (II), III & (IV) are relevant to the forecasting.
4. Answer : (b)
Reason : (I) & (II) are the main problems inherent in Delphi technique.
(III) It is a step taken by the coordinator a Delphi method to obtain opinions and predictions from ex
member through questionnaire.
(IV) absence of bias is an advantage associated with Delphi method.
5. Answer : (a)
Reason : Constrained optimization model is a mathematical approach that evaluates all possible combination
mixtures & finds the optimal solution that satisfies all the requirements at the least possible cost.
6. Answer : (b)
Reason : Linear programming is appreciable to solve those problems which have alternative courses of action.
7. Answer : (c)
Reason : In the organization, control of a job, the methods or functions used in carrying out the job,
relationships that exist among the jobs are manipulated in such a way to attain higher productiv
operational efficiency, and quality. This concept is known as the Job Design.
8. Answer : (e)
Reason : Developing, Control and auditing, Bench marking and Performance evaluation are useful in
predetermined Motion Time Studies (PMTS).
9. Answer : (c)
Reason : When prices are reduced, customer buys large volumes of products/services, till a point, after which
curve becomes almost horizontal.
10. Answer : (c)
Reason : Backward integration is expansion of ownership of the production distribution chain backwards.
towards the source of supply. In the above case, KFC by utilizing R&D and biotechnology, is produ
genetically altered organisms more or less only ‘flesh’ to increase their profits rather than buying
chickens, as real chicken increases the cost of production such as removing feathers, beaks, feet etc. &
the mass of flesh is comparatively lower than that in mutant birds.
11. Answer : (c)
Reason : Ft = Ft-1 + α (At-1 − Ft-1) = 500 + 0.1 (450 −500) = 495 units.

Actual Demand Old forecast Forecast error Correction New forecast (Ft )
Week At-1 Ft-1 At-1 − Ft-1 α (At-1 − Ft-1) Ft-1 + α (At-1 − Ft-1)
1 450 500 − 50 −5 495
2 505 495 10 1 496
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Feb. 15 516 496 20 2 498

12. Answer : (d)
Reason : To result in high-speed and low-cost production by the technique of perfection is an objective
specialization.
13. Answer : (a)
Reason : Assembly charts show material requirement, sub-assembly operations quality checks and assem
operations that are involved in making a mechanical assembly etc. In other words it provides an ove
macro view of the movement of components and sub- assemblies in the process of producing a finis
product.
(b) Process charts: they include extra information like description of various steps involved, t
frequency, time for each step, the distance traveled and so on.
(c) Gantt: is a simple bar chart used specifically to schedule operations.
(d) Histogram is a bar graph of frequency distribution and is not applicable here.
(e) Operating characteristic curve is an important feature of acceptance plans and shows how wel
acceptance plan differentiates between good and bad lots.
14. Answer : (e)
Reason : (a), (b), (c) and (d) are correct
(e) When a firm designs a structure internal to the firm that satisfies its production and ser
requirements, this internal structure is called as “Layout” Layout is designed only after the fac
location is determined. Hence this statement is inapplicable here.
15. Answer : (a)
Reason : The above Fast food outlet wants to be located close to the market so that it provides just-in-time deliv
reduce its transportation cost and increase its service and efficiency. Hence the factor that influenced
decision is ‘Market Proximity’
(b) Integration with other parts of the organization – an organization that already has some plants and w
to establish a new plant would like to locate it near to the existing plants so that its work can
integrated with that of other plants
(c) Inapplicable here as this factor considers the “availability of labor and skills’ rather than the ma
location.
(d) Site Cost –here the management is concerned with cost associated with the site in general in relatio
customers need.
(e) Inapplicable here as the firm here is primarily concerned with location in terms of better service to
customers rather than laws of the region.
16. Answer : (d)
Reason : (I),(II) and (III) are correct location evaluation methods used by the managers.
(IV)-Incorrect: items are classified on the basis of their annual consumption value. Category “A” repres
the materials of high usage value (per annum) and so forth.
17. Answer : (d)
Reason : Statements (I), (II) and (III) are correct for point rating method
(IV) –Incorrect, because Only intangible factors are assigned points in this method.
18. Answer : (b)
Reason : A Maximum coordination is carried out by an industrial expert to ensure that the work or the task is car
out easily
(a) Incorrect: The question has not highlighted about the modification that has to been done with
changing environment. It only deals with the coordination of departments. And not their modifica
with changing times or environment.
(c) Incorrect: It’s not concerned with the visibility of the departments rather than the query concerned w
the coordination of work.
(d) Incorrect: the query is not highlighting the discomfort levels, like sunlight, heat, noise, vibrations etc
(e) Incorrect: inapplicable here.
19. Answer : (e)
Reason : Following are the activities performed by purchase department:
I. Ensure that right type of material is purchased in the right quantities at the right time.
II. Develop a network of vendors.
III. Provide necessary information about new products, materials and services to other departments.
IV. Obtain the right product at a lower cost.
20. Answer : (e)
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Reason : F.W. Taylor proposed a systematic approach called “shop system” and implemented in Midvale S
Works to improve labor efficiency. Few key concepts are:
I. Each worker should be assigned a task based on his skill, strength and ability to learn.
II. Standard output time is set for each task, using stopwatch studies.
III. Proper supervision by carefully selected and trained supervisors.
IV. Incentive pay systems to motivate workers.
21. Answer : (a)
Reason : Process layouts also known as Job-shops layouts, involve grouping of similar equipment or function
one area.
(b) Incorrect: Product layouts also called as flow-shop layouts, involve arrangement of equipm
according to the progressive steps by which a product is made.
(c) Incorrect as in group technology layout dissimilar machine is grouped into cells and each
functions like a product layout, within a process layout.
(d) Incorrect: combination of process layout, product layout and several types of layouts comb
together is called as hybrid layout.
(e) Incorrect: In this, the movement of all machines and men to the product remains stationary. A m
component of the product is fixed in a particular location and all requirements are brought to
location.
22. Answer: (e)
Reason : Let us first find out the cost of the fertilizers Ganga, Jamuna and Saraswati as follows:
Fertilizer Nitrate Phosphate Potash Inert
Ganga 5% 10% 5% 80%
Jamuna 5% 10% 10% 75%
Saraswati 10% 10% 10% 70%
Cost per tonne. (Rs.) 8,000 2,000 5,000 250
Cost of Ganga = 0.05 × 8, 000 + 0.1 × 2, 000 + 0.05 × 5, 000 + 0.80 × 250 = Rs.1, 050
Cost of Jamuna = 0.05 × 8,000 + 0.1 × 2,000 + 0.10 × 5,000 + 0.75 × 250 = Rs.1, 287.5
Cost of Saraswati = 0.10 × 8,000 + 0.1 × 2,000 + 0.10 × 5,000 + 0.70 × 250 = Rs.1,675
Let G, J and S be the quantity (in tonnes) of Ganga, Jamuna and Saraswati to be manufactured.
Then The total profit Z = (Selling price- Cost price) × (Quantity of fertilizer)
= (2,000- 1,050) G + (2,500-1287.5) J + (3,000-1,675) S
= 950 G+ 1,212.5 J+ 1,325 S
The constraints in the resources are, the total quantity of chemicals actually available this month. G, J,
0
0.05 G + 0.05 J + 0.10 S ≤ 1,000 or 5 G + 5 J + 10 S ≤ 1,00,000
0.10 G + 0.10 J + 0.10 S ≤ 1,800 or 10 G + 10 J + 10 S ≤ 1,80,000
0.05 G + 0.10 J + 0.10 S ≤ 1,200 or 5 G + 10 J + 10 S ≤ 1,20,000
G ≥ 6, 000
Therefore the linear programming problem can be formulated as :
Maximize: Z = 950 G+ 1,212.5 J+ 1,325 S; G, J, S ≥ 0.
Subject to constraints: 5 G + 5 J + 10 S ≤ 1,00,000
10 G + 10 J + 10 S ≤ 1,80,000
5 G + 10 J + 10 S ≤ 1,20,000 and
G ≥ 6, 000.
23. Answer: (e)
Reason : Linear Decision Rules (LDRs) are a set of equations for calculating optimal workforce, aggregate output
and inventory level for each time period in a planning horizon. One of the drawbacks of LDRs is that
must be custom tailored to fit each organization.
Hence, from above discussion, we can infer that option (e) is not true with respect to Linear Decision R
(LDRs).
Option (a) is true because it is the definition for Linear Decision Rules (LDRs).
Option (b) is true because similar to linear programming, this method guarantees an optimal solution
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saves trial and error computations.

Option (c) is true because it overcomes the limitation of linear programming by taking into account n
linear cost relationships.
Option (d) is true it determines the actual costs incurred by an organization.
24. Answer : (e)
n
CFt
Reason : NPV =
∑ (1 + i)
t =1
t
–I
5
CFt
=
∑ (1 + i)
t =1
t
– 2200

900 850 700 650 500

+ + + +
2 3 4
= (1.15) (1.15) (1.15) (1.15) (1.15) 5 – 2200

= 305.82 (in Rs.’000s)

= 305.82 × 1000 = Rs.3,05,820.
25. Answer : (a)
Reason :
Actual
Forecast A-F
Period Demand (A-F)
Demand F
A
1 80 78 2 2
2 92 79 13 13
3 71 83 -12 12
4 83 79 4 4
5 90 80 10 10
6 102 83 19 19
Totals 36 60

1 ⎛ n ⎞ 60
⎜⎜ ∑ A t − Ft ⎟⎟
MAD = n ⎝ t =1 ⎠ = 6 = 10
n (Actual demand − Forecast demand) 36
∑ = = 3.6
Tracking Signal = i = 1 MAD 10

Action limit of 4 is not exceeded. Therefore, no action necessary.

26. Answer : (d)
Reason : In Cellular Manufacturing, total production area is divided into cells, each cell consisting of a grou
dissimilar machines which work on products that have similar shapes and processing requirements.
layout used in this type of manufacturing is similar to a product layout in that the cells are dedicated
limited range of products.
All the other options i.e., (a), (b), (c) and (e) are true for Cellular Manufacturing.
27. Answer : (d)
Reason : Following are not the reasons for holding raw materials as inventory, but are the reasons for hold
finished goods as inventory.
II. Production of products as and when the customers demand them can be uneconomical.
III. Backlogs in customer orders may not always be allowed.
IV. Products can be shown to customers.
Larger shipments can result in reduced incoming freight costs and material handling cost, is a reason
holding raw materials as inventory.
28. Answer : (c)
Reason : The method that considers several variables that are related to the variable being predicted is regres
analysis.
29. Answer : (c)
Reason : A forecast that projects a company’s sales is a demand forecast.
30. Answer : (a)
Reason : The individual departments are flexible to alter its purchasing policy on the basis of specific requireme
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belongs to decentralized purchasing system.

All other options are true for centralized purchasing system.
31. Answer : (c)
Reason : A tracking signal
I. Is a measure of how well the forecast is predicting the actual values
III. That is positive indicates that demand is greater than the forecast.
Tracking signal is computed as the running sum of the forecast errors (RSFE) divided by the m
absolute deviation (MAD).
32. Answer : (c)
Reason : In FSND classification the goods are classified on the basis of their turnover.
33. Answer : (e)
Reason : Following are the benefits of setting work standards:
I. It acts as a basis to evaluate workers level of performance.
II. It helps in scheduling the departmental works.
III. It helps the managers to determine the appropriate compensation for the workers.
34. Answer : (b)
Reason : For forecasting purposes the firms need to take into considerations various factors or components. The
major forecast components are base demand, seasonal factors, trends, cyclical factors, promotions and
irregular component.
35. Answer : (e)
Reason : Grouping technology layout is one of the basic layout formats. Following are benefit of group technolo
• Highly automated
• Improved design
• Reduced raw materials and purchases
• Improved layout, routing, and machine loading
Reduced manufacturing flexibility is a disadvantage of Grouping technology layout
36. Answer : (c)
Reason : Assembly chart shows in schematic form how a product is assembled. All other options are not true.
37. Answer : (a)
Reason : Vertical integration
I. Relieves an organization of a part of its purchasing function.
II. Provides flexibility in manufacturing.
III. Helps in obtaining economies of scale.
Increase in profits is not due to decentralized overheads, but through centralized overheads
38. Answer : (c)
Reason: The break-even point is the volume of production where the total costs to make equal the total costs to b
TC to make = TC to buy
FC+VC(V) = P(V)
8000 + 0.50V= 0.70V
0.20 V = 8000
V = 40,000 units.
For volume above 40,000 units it is more economical to make the cases in-house
39. Answer : (e)
Reason : Three primary applications of work sampling are (i) Ratio delay (ii) Performance measurement (iii) T
standards.
40. Answer : (c)
Reason : Specialization of labour is a two-edged sword in job design as it has both potential advantages
disadvantages. Becoming a specialist in some particular area can provide a worker a great sense of pr
The fewer the tasks a worker does and the narrower the range of his responsibilities, the more skilled
efficient the worker becomes, up to a point.
However, specialization is not preferable for some jobs because, if specialized, they become monoton
and boring for workers. Therefore, it results in loss of work satisfaction.
Hence, from above discussion, we can infer that option (c) is not an advantage of Job Specialization.
Option (a) is an advantage of Job Specialization because it results in lower production time and hig
productivity by the Learning Curve Effect due to repetition.
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Option (b) is an advantage of Job Specialization as it results in simpler work instructions and e
production control because of consistence in work assignment.
Option (d) is an advantage of Job Specialization as there is ease in recruiting new workers because fe
skills are required.
Option (e) is an advantage of Job Specialization because there is scope for higher degree of mechaniza
or automation.
41. Answer : (b)
Reason : Organizations usually opt for in-house production for the following reasons:
I. To have control over all value chain activities.
II. To put excess plant capacity to productive use.
IV. To ensure that the design of a product is kept a secret.
To maintain a multiple source policy, is reason for organizations to opt for outsourcing.
42. Answer : (b)
Reason : There is a 10 – day delivery time.
Therefore, Green Bluff must have a 10-day supply of boxes on hand when they reorder. Wi
demand of 100 boxes per day, the inventory on hand (reorder point) must be:
Reorder point = (demand rate)(lead time)
Reorder point = 100 boxes/day × 10 days = 1000 boxes.
43. Answer : (d)
Reason : A/2 - B/2 - C/2 ≤ 0.
44. Answer : (a)
2AO 2 (280 x12) (8)
= = 150 cases / order
Reason : EOQ = C 2.40 .
45. Answer : (a)
Reason : Establishing work centric environment is a activity concerning ‘organizing function’. All other options
decisions and activities concerning training and developing personnel.
46. Answer : (d)
Reason : A master production schedule must be visible to all levels of management. All other options are false w
regard to MPS.
47. Answer : (d)
Reason : Weighted Moving Average considers the most recent data as high importance.
48. Answer : (d)
Reason : ⇒ − О − −О−О−О−D−О−О−О−D− −∇−⇒−∇
Description of Method Activity
Walk to storage location
Visually locate item
Inspect and confirm stock number
Count number in stock
Enter value in computer
Update status card
Wait for computer analysis
Check safety stock bar codes
Check job stock bar codes
Send computer printout to office
Wait for office acknowledgement
Inspect record for accuracy
File inventory printout locally
Return to office location
File inventory record disks
49. Answer : (b)
Reason : In the straight line equation for regression where Y = a + bX, X is the time period.
50. Answer : (a)
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Reason : Non Optimal Solution

Demand
X Y Z
A - 5 + 2 9 10

10
B 10 - 6 + 3 18

15 3
C + 9 8 - 6 12

5 7
15 15 10 40
Evaluate cell AY as shown in Fig above
Path : AY to BY to BZ to CZ to CX to AX to AY
Cost: +2-6+3-6+9-5 = -3 (Rs 3 cost savings)
Therefore, change 7 units (the smallest entry in the negative cells.
Cost : 3 x 5 + 12 x 9 + 7 x 2 + 8 x 6 + 10 x 3 = Rs 215
Demand
X Y Z
A -5 +2 9 10
3→ →→ →7
10
B ↑ 10 ↓ -6 +3 18
↑ 8→ →→ →10
15 3
C ↑ +9 8 ↓ -6 12
12← ←← ←← ←← ↓
8 7
Supply 15 15 10 40
51. Answer : (a)
Reason : The demand over the past 9 months for a new breakfast cereal is show in Table. Develop a forecast
November using a 5-period moving average

Month Jan Feb March April May June Jul Aug Sept
Demand 70 76 75 80 92 87 93 114 105
5-month moving average for the demand of product at the beginning of October was
Forecast for the month of October is average of demand during May, June, July, August and September
1
= 5 × (sum of preceding five months’ demand)
1
= 5 × (92 + 87 + 93 + 114 + 105)
491
= 5 = 98.2 units
52. Answer : (b)
Reason : Following a successful prototype test, the new product manager of a company should do market testi
by introducing the new product in few selected cities.
53. Answer : (e)
Reason : Direct labor costs is not a major component of inventory. All other options are major component
inventory.
54. Answer : (a)
Reason : In time study the timing role of analyst is to record time for several cycles of the tasks and judge
record pace.
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55. Answer : (c)

Reason : Job analysis is not a step in the time study.
Following are the steps involved in time study:
• Job identification
• Job division
• Pace rating the workers
• Considerations of allowances
56. Answer : (d)
Reason : Distribution costs is not a cost associated with the aggregate planning costs. All others are costs associ
with aggregate planning costs
57. Answer : (c)
Reason : The transportation method determines the best pattern of shipments from several points of suppl
several points of demand.
58. Answer : (a)
Reason :
40 sec
N

30 sec
A 40 sec
I 25 sec O
20 sec
B
50 sec M
25 sec
C
25 sec
L 35 sec P
30 sec
D

35 sec J
E 35 sec

45 sec
F
30 sec
40 sec K
G

30 sec
H
Capacity is 300 units in 450 minutes.
operation time per day 450 × 60
Cycle time C= output per day 300 = 90 seconds.
So, in the new assembly line cycle time could be at the most 90 seconds.
Time Unassigned Feasible
Station Task (in Time Remaining
sec) (in sec) Tasks
S1 A 30 60 B, N
B 20 40 N
N 40 0 None
S2 C 25 65 D, E
D 30 35 E
E 35 0 None
S3 F 45 45 G
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G 40 5 None
S4 K 30 60 J, L
J 35 25 L
L 25 0 None
S5 I 40 50 M
M 50 0 None
S6 H 30 60 O, P
O 25 35 P
P 35 0 None
Therefore, actual number of workstations, Na = 6.
T 535
Efficiency = Na x C = × 90 = 99.07%.
6

59. Answer : (a)

Reason : Job description contains the information and facts about the job identification, job summary, relation
with the supervisors, peers, subordinates, location in the hierarchy, machine tools equipment u
materials used, responsibilities, conditions of work, location of work, posture- standing, sitting- walk
speed, accuracy, health, health hazards, occupational diseases etc, hazards etc.
60. Answer : (b)
Reason : The focus in service is revenue maximization, while the focus in manufacturing is cost minimization.
61. Answer : (e)
Reason :
Demand Location
W1 W2 W3 W4 Suppl
3 5 7 4
Boston 50
20 30
Supply 6 8 5 2 50
Dallas
plants 30 20
1 9 7 3 50
Seattle
10 40
20 60 30 40 150
= 3 x 20 + 30 x 5 + 30 x 8 + 20 x 5 + 10 x 7 + 40 x 3
= 60 + 150 + 240 + 100 + 70 + 120
= Rs 740.
62. Answer : (e)
Reason : Varying size of inventory requires ‘stable employment of personnel’ to be most effective.
63. Answer : (a)
Reason : The aggregate planning strategies of varying inventory level and back ordering during periods of h
demand has disadvantages in common i.e., customers may go elsewhere.
64. Answer : (d)
Reason : The disadvantages of product layout are:
I. High volume is required because of the large investment needed to set up the process.
III. There is a lack of flexibility in handling a variety of products.
IV. Work stoppage at any one point ties up the whole operation.
65. Answer : (e)
Reason : This is not true for COM. The solution obtained for the model is not always the optimal solution for
real problem underlying the model. This is because models evaluate the solutions only with respect
few quantifiable criteria. Non quantifiable criteria like worker motivation level that are not taken
account while evaluating the alternatives often affect the effectiveness of the solution arrived at throug
model.
(a) This is a true statement about Constrained Optimization Model (COM). An optimization model i
informative that it reduces the feasible solutions for an otherwise complex problem to a manage
number. It also clarifies the situation for the decision-maker, enabling him to evaluate the alternati
(b) This is a true statement for COM. Optimization models make the decision-making process m
objective. They help resolve the disagreement of conflicting constraints and help the decision-m
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to obtain an acceptable solution.

(c) This is a true statement for COM. Optimization models enable the decision maker to solve prac
problems mathematically, or by using a computer, which is otherwise not possible.
(d) This is a true statement for COM. Optimization models also have inherent drawbacks. They
sometimes result in poor decisions. Only an experienced and skilled modeler can formulate a prac
problem into an optimization model. Omission of any of the decision variables or constraints co
result in a disastrous situation wherein the solution obtained is far from being optimal.
66. Answer : (d)
Reason : We assume that the unused capacity has no alternative use.
Cost to make : VC/unit = materials + labor + overhead
= 3 x 4000 + 4 x 4000 + 1 x 4000
= Rs. 40,000 /-
Cost to buy = P x Q
= 10 x 4000
= Rs. 40,000 /-
Cost to make is Rs 40,000, cost of buying is Rs. 40,000
67. Answer : (c)
Reason : (a) and (b) belong to considerations in Job design; (d) and (e) belong to work environment of Job desig
68. Answer : (d)
Reason : In Process Focused Production, similar equipment or functions are grouped together. In this typ
design, products flow through the facilities on irregular paths. This system allows both backtracking
sidetracking in the product flow route.
Discrete Unit Manufacturing refers to the production of distinct products like radio or television se
These products can be made in batches, and the system can be shifted to produce other products in simi
batches.
Process Manufacturing involves the movement of materials between operations such as screenin
crushing, storing, mixing, blending, fermenting, evaporating, distilling etc. It is widely applied in ceme
plastic, paper, chemical, steel and brewing industries.
In Delivery of Services using a Product Focused Production System, services are administered
customers while they move in a queue or in a linear route. Services delivered by waiters in restauran
make use of this system.
In Cellular manufacturing total production area is divided into cells, each cell consisting of a group
dissimilar machines which work on products that have similar shapes and processing requirements.
69. Answer : (a)
Reason :
X Y
(Permits) (Shipments)
XY X2 Y2
15 6 90 225 36
9 4 36 81 16
40 16 640 1,600 256
20 6 120 400 36
25 13 325 625 169
25 9 225 625 81
15 10 150 225 100
35 16 560 1,225 256
184 80 2,146 5,006 950
∑ X =184; ∑ Y = 80; n = 8 pairs of observation;

184 80
X= = 23 Y = =10
8 8

b=
( )( )
∑ XY − n X Y
2
2
( )
∑X − n X
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2146 − 8(23)(10)
=
5006− 8(23)(23)

306
= 774 = 0.395

a= Y -b X
= 10 – 0.395 x 23
= 0.915 ≈ 0.92.
Therefore, the linear regression equation can be written as:
Y =0.92 + 0.395 X.
Let X = 30
Y = 0.92 + 0.395 X 30 = 12.77 = 13 shipments
70. Answer : (d)
Reason : The market proximity is the prime consideration aspect for pure service providing organizations suc
hotels, hospitals, retail stores and theatres as they must be located close to the market.
71. Answer : (c)
Reason : Performing a financial analysis of business investment is not true. All other options are related to w
organization follow to reach to a position where it is able to attract more customers than its competitors.
72. Answer : (c)
Reason : Mean absolute deviation is the mean of the average of the errors made by the forecast over a period of t
without considering the direction of error.
73. Answer : (c)
Reason : By solving the equations we get the feasible corner points are (48, 84), (0,120), (0, 0), and (90, 0).
Maximize 4X + 10Y: Subject to 3X + 4Y = 480; 8X + 4Y = 720
(48, 84): 4 x 48 + 10 x 84 = 192 + 840 = 1032
(0,120): 4 x 0 + 10 x 120 = 0+ 1200 = 1200
(0, 0): 4 x 0+ 10 x 0 = 0 + 0 = 0
(90, 0): 4 x 90 + 10 x 0 = 360 + 0 = 360
74. Answer : (b)
Reason : The step -by- step procedure of value analysis is :
III. Examine all the products that are being reordered and identify each product needs and improveme
I. Gather all information about the product design, costs, scrap rates etc.
IV. Form a team that includes experts from various functional areas that are related to the funct
performed by the material
VI Generate all alternatives by generating new ideas and evaluate different ways of accomplishing
tasks
II. Evaluate the alternatives on criteria like cost and feasibility and eliminate the non- feas
alternatives
V. Refine the feasible alternatives and select the optimal alternative.
75. Answer : (d)
Reason : This is not true for purchasing function. While selecting a supplier from those listed in the vendor datab
before ordering an item, purchase managers have to ensure that the purchase is made on the m
advantageous terms. The lowest price does not always ensure for a supply at a low cost, since the sup
may attract other costs like rectification, in case defective material has been supplied. Hence quotation
examined for items such as delivery charges, discount structure, and other supplementary charges like
payable. The selection is also made on the basis of other criteria like quality, quantity and promptnes
deliveries. Purchase managers then select suppliers by rating their merit on relative scale, which is
known as vendor rating.
(a) This is true for purchasing function. Material procurement is a crucial job in many manufactu
organizations because of the high costs involved in buying them. A small saving in the cost of
material can have a significant impact on the total performance of an organization.
(b) This is true for the purchasing function. In many big companies where there are numbe
production sites require materials with same or similar specifications. In such cases, centralizatio
purchasing activities will pool all those requirements and thus avoid uneconomical purchases in sm
quantities.
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(c) This is a true statement for purchasing function. The purchase manager, who heads the purch
department, is responsible for developing purchase plans for each major product or service
accordance with the strategies of the organization. Purchase managers generally undertake
following activities to successfully carry out their responsibilities:
• Vendor development
• Selection of suppliers
• Contract negotiation and Communication Interface
(e) This is true for purchasing function. Whenever a new item is indented, an important issue addre
by purchase managers is the make-or-buy decision. The purchase department never orders
material without analyzing whether such an order is economical or not. It is often possible for
firm’s production department to manufacture parts (or materials) in-house at a lower cost, of be
quality and with faster deliveries, than what an external vendor would supply. On the other han
can also be economical to procure some materials from vendors, owing to their specialized sk
Purchase managers, with assistance of production engineers, generally do a make-or-buy analysis
materials.
76. Answer : (b)
Reason : Actual production = (No. working days) x (No. of workers) x (Productivity per day)
= 24 x 24 x 7 =4032.
Shortage ⇒ (opening stock + actual production) < Demand
Shortage (August) = Demand forecast – (Opening stock in August + Actual production in August)
= 4200– (28 + 4032)
= 4200 –4060
= 140 ( shortage )
Shortage = 140
Shortage cost = units shortage x per unit shortage cost
= 140 x Rs. 15
= Rs. 2,100 /-
77. Answer : (b)
Reason : Inventory cycle is the activity of sensing a need for ordering materials, placing an order, determining l
time for getting the material delivered, receiving the material, and using the material. This proces
continuously repeated for a material and is thus cyclical.
(a) This is a wrong answer. Inventory level is the amount of material actually on hand in inventory th
ready for use.
(c) This is the wrong answer. Lead time is the length of time required to replenish the inventory f
material from the time that need for additional material is sensed until the new order for the mate
is in inventory and ready for use.
(d) This is a wrong answer. DDLT is the number of units of a material demanded during the inven
replenishment process.
(e) This is a wrong answer. Demand rate is the number of units demanded by customers or produc
department per unit of time.
78 Answer : (a)
Reason : Fixed costs usually associated with the production of a lot internally or the placing of an order extern
with a vendor are setup or ordering costs.
79. Answer : (b)
Reason : Let the following notations be used:
X : Number of units of the product P25
Y : Number of units of the product P75
S1 : Slack time for process I
S2 : Slack time for process II
S3 : Slack time for process III
Z : Profit.
Maximize Z = 250X + 350Y + 0S1 + 0S2 + 0S3
Subject to : 12X + 12Y + S1 + 0S2 + 0S3 = 420
3X + 6Y + 0S1 + S2 + 0S3 = 150

p gg
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8X + 4Y + 0S1 + 0S2 + S3 = 240

X, Y, S1, S2, S3 ≥ 0
Table 1
Profit 250 350 0 0 0
Minimum
Variables
X Y S1 S2 S3 Ratio
Profit Variables Solution
420
0 S1 420 12 12 1 0 0
12 = 35
150
0 S2 150 3 6 0 1 0
6 = 25
240
0 S3 240 8 4 0 0 1
4 = 60
0 –250 –350 0 0 0

⎛ 420 150 240 ⎞

⎜ , , ⎟
Enter solution: Y Leave solution: Min ⎝ 12 6 4 ⎠ = 25, which corresponds to S2.
So, S2 will be the first departing variable.
80. Answer : (b)

1 ⎛ n ⎞
⎜⎜ ∑ A t − Ft ⎟⎟
Reason : Mean absolute deviation (MAD) = n ⎝ t =1 ⎠
Where,
At = Actual demand in the period
Ft = Forecast demand in the period
n = Number periods
⎛ 7000 − 7000 + 8000 − 6500 + 8500 − 8000 + 8000 − 7000 + ⎞
1 ⎜ ⎟
⎜ 7500 − 8000 + 7300 − 8000 ⎟
∴ MAD = 6 ⎝ ⎠
1
= 6 (0 + 1500 + 500 + 1000 + 500 + 700)
4200
= 6 = 700.
81. Answer : (e)
Reason : Least- Cost Method
Factory W1 W2 W3 W4 Supply
80 120 145 65
100
F1
30 70 30

55 95 60 80
60
F2
60
115 50 90 135 85
F3 40
45 40
70 55 105 120 80
F4 20
60 20
90
120
50 70
Requirement 60 45 325
30
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Algorithm:
i) Find least-cost cell in the matrix and allocate as maximum units as possible based on supply
requirement.
ii) Strike-out either column or row if it is completely satisfied.
iii) Ignore the cells in the column or row satisfied and consider rest of the cells in matrix to find n
least cost and allocate maximum units possible.
iv) Repeat the above steps till all the units are allocated.
Transportation cost = (30 x 145) + (70 x 65) + (60 x 55) + (45 x 50) + (40 x 90) +
(60 x 70) + (20 x 105)
= 4350 + 4550 + 3300 + + 2250 + 3600 + 4200 + 2100
= Rs. 24, 350 /-.
82. Answer : (d)
Reason : The process of determination of the tasks which comprise the job and the skills, knowledge, abilities
responsibilities required of the worker for successful performance of the job and which differentiate
job from all others is called Job analysis.
83. Answer : (b)
Reason : At = αDt + (1-α) (At-1 + Tt-1) Tt = β(At – At-1) + (1 – β)(Tt-1)
A1 = 0.23 × 52 + (1-0.23)(45+0) = 11.96 + 34.65 = 46.61
T1 = 0.18(46.61 – 45) + (1– 0.18)(0) = 0.2898
A2 = 0.23 × 59 + (1– 0.23)(46.61 + 0.2898) = 13.57+36.11 = 49.68
T2 = 0.18(49.68 – 46.61) + (1– 0.18) (0.2898) = 0.5526 + 0.2376 = 0.7902
A3 = 0.23 × 64 + (1– 0.23) (49.68 + 0.7902) = 14.72 + 38.86 = 53.58
T3 = 0.18(53.58 – 49.68) + (1 – 0.18) (0.7902) = 0.702 + 0.6479= 1.3499.
Trend adjusted forecast Ft:
F2 = A 1 + T 1
F3 = A 2 + T2
F4 = A 3 + T3
Trend adjusted
Demand (Dt) Smoothed value (At)
Month Trend (Tt) forecast values (Ft)
(in units) (in units)
(in units)
July 52 46.61 0.2898
August 59 49.68 0.79 46.89
September 64 53.58 1.3499 50.47
October 54.93 ~ 55
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