1. Which of the following is not a type of operations?

A. goods production
B. storage/transportation
C. entertainment
D. communication
E. all the above involve operations
All of these involve taking inputs and transforming them.

42. Technology choices seldom affect:

A. costs.
B. productivity.
C. union activity.
D. quality.
E. flexibility.
Union activity can affect a firm's technology choices, but not the other way around.

43. Measurements taken at various points in the transformation process for control
purposes are called:
A. plans
B. directions
C. controls
D. feedback
E. budgets
Feedback is used to monitor and improve processes.

44. Budgeting, analysis of investment proposals, and provision of funds are activities
associated with the _______ function.
A. operation
B. marketing
C. purchasing
D. finance
E. internal audit
These are the primary tasks for the finance function.

45. Which one of the following would not generally be classified under the heading of
transformation?
A. assembling
B. teaching
C. staffing
D. farming
E. consulting
Staffing doesn't involve transforming resources so much as it involves acquiring them.

46. Manufacturing work sent to other countries is called:

A. downsized
B. outsourced
C. internationalization
D. vertical integration
E. entrepreneurial ship
Outsourcing is increasingly a part of operations management.

47. Product design and process selection are examples of _______ decisions.
A. financial
B. tactical
C. system design
D. system operation
E. forecasting
These major decisions affect decisions made at lower levels.

48. The responsibilities of the operations manager are:

A. planning, organizing, staffing, procuring, and reviewing
B. planning, organizing, staffing, directing, and controlling
C. forecasting, designing, planning, organizing, and controlling
D. forecasting, designing, operating, procuring, and reviewing
E. designing and operating
The scope of operations management ranges across the organization.

49. Knowledge skills usually don't include:

A. process knowledge
B. accounting skills
C. communication skills
D. global knowledge
E. all of the above
Communication skills generally are considered to be people skills.

50. Which of the following is not true about systems approach?

A. A systems viewpoint is almost always beneficial in decision making.
B. A systems approach emphasizes interrelationships among subsystems.
C. A systems approach concentrates on efficiency within subsystems.
D. A systems approach is essential whenever something is being redesigned or improved.
E. All of the above are true.
Subsystem efficiency doesn't necessarily translate into overall system efficiency.

51. What is credited with gains in industrial productivity, increased standards of living and
affordable products?
A. personal computers
B. the internet
C. mass transportation
D. assembly lines
E. multi-level marketing
Mass production has played a prominent role in increasing standards of living.

52. Production systems with customized outputs typically have relatively:

A. high volumes of output
B. low unit costs
C. high amount of specialized equipment
D. fast work movement
E. skilled workers
Skilled workers are necessary to accommodate the variation inherent in customized outputs.

53. Which is not a significant difference between manufacturing and service operations?
A. cost per unit
B. uniformity of output
C. labor content of jobs
D. customer contact
E. measurement of productivity
Manufacturing operations aren't necessarily more or less efficient than service operations.

54. Which of the following is not a characteristic of service operations?

A. intangible output
B. high customer contact
C. high labor content
D. easy measurement of productivity
E. low uniformity of output
The productivity of service operations is often hard to measure.

55. Which of the following is a recent trend in business?

A. pollution control
B. total quality management
C. supply chain management
D. competition from foreign manufacturers
E. technological change
Supply chain management involves a broader systemic view of operations.

56. Farming is an example of:

A. an obsolete activity
B. a virtual organization
C. non-manufactured goods
D. a growth industry
E. customized manufacturing
Farm operations are not manufacturing operations.

57. Dealing with the fact that certain aspects of any management situation are more
important than others is called:
A. analysis of tradeoffs
B. sensitivity analysis
C. recognition of priorities
D. analysis of variance
E. decision table analysis
Solutions tend to be targeted toward higher priority aspects of a situation.

58. The fact that a few improvements in a few key areas of operations will have more
impact than many improvements in many other areas is consistent with the:
A. Irwin phenomenon
B. Pareto phenomenon
C. Stevenson phenomenon
D. Tellier phenomenon
E. Adam Smith phenomenon
Pareto phenomena direct our attention to the difference between the "important few" and the
"trivial many."

59. The process of comparing outputs to previously established standards to determine if

corrective action is needed is called:
A. planning
B. directing
C. controlling
D. budgeting
E. disciplining
Controls are used to maintain performance.

60. Which of the following does not relate to system design?

A. altering the system capacity
B. location of facilities
C. inventory management
D. selection and acquisition of equipment
E. physical arrangement of departments
Inventory management is a system operation decision area.
61. Taking a systems viewpoint with regard to operations in today's environment
increasingly leads decision-makers to consider ______________ in response to the
___________.
A. flexibility; pressure to be more efficient
B. offshoring; need to promote domestic production
C. sustainability; threat of global warming
D. technology; impact of random variation
E. forecasting; stabilization of demand
Sustainability is a relatively recent operations management consideration.

62. Some companies attempt to maximize the revenue they receive from fixed operating
capacity by influencing demands through price manipulation. This is an example of
__________________:
A. Illegal price discrimination
B. Collusion
C. Volume analysis
D. Revenue management
E. Outsourcing
Revenue management is used to ensure that as much perishable capacity as possible is sold.

63. Which of the following is not an ongoing trend in manufacturing?

A. globalization
B. quality improvement
C. flexibility and agility
D. mass production for greater economies of scale
E. technological advances
Manufacturers are moving away from mass production for economies of scale.

64. Which of the following is not a benefit of using models in decision making?
A. They provide a standardized format for analyzing a problem.
B. They serve as a consistent tool for evaluation.
C. They are easy to use and less expensive than dealing with the actual situation.
D. All of the above are benefits.
E. None of the above is a benefit.
Models are useful tools for making decisions without confronting the actual situation with all of its
complexity.

65. Modern firms increasingly rely on other firms to supply goods and services instead of
doing these tasks themselves. This increased level of _____________ is leading to
increased emphasis on ____________ management.
A. outsourcing; supply chain
B. offshoring; lean
C. downsizing; total quality
D. optimizing; inventory
E. internationalization; intercultural
Supply chain management takes a more systemic view of the firm, its operations, and its
suppliers.

66. Operations and sales are the two ________ functions in businesses.
A. strategic
B. tactical
C. support
D. value-adding
E. line
Others are support functions.
 67. Marketing depends on operations for information regarding ___________.
A. productivity
B. lead time
C. cash flow
D. budgeting
E. corporate intelligence
Marketing uses lead time information to make promises to customers.

68. Two widely used metrics of variation are the __________ and the _________.
A. mean; standard deviation
B. productivity ratio; correlation
C. standardized mean; assignable deviation
D. randomized mean; standardized deviation
E. normal distribution; random variation
The mean and standard deviation summarize important facets regarding the variation in a
process.

69. Which of the following statements about variation is FALSE?

A. Variation prevents a production process from being as efficient as it can be.
B. Some variation can be prevented.
C. Variation can either be assignable or random.
D. Any variation makes a production process less productive.
E. Random variation generally cannot be influenced by managers.
The choice to offer customers greater variety might increase variation but increase productivity
even more.

70. Which of the following is essential to consider with respect to managing a process to
meet demand?
A. strategy
B. demand forecasts
C. capacity
D. random variability
E. all of the above
All of these play a role in determining whether a process can meet demand.

MGT613 Operation Managment Solved MCQS Chapert 2 a by Stevenson

Competitiveness, Strategy, and Productivity

1. An example of a strategic operations management decision is the choice of where to locate.

TRUE
Location decisions are strategic in nature.

2. An example of an operational operations management decision is inventory level management.

TRUE
Inventory management is an operational decision.

3. Government statistics are a good source of data about productivity trends in the service sector.
FALSE
The service sector is often omitted in government statistics.

4. An example of a tactical operations management decision is determining employment levels.

TRUE
Staffing is an ongoing, tactical decision.

5. Productivity is defined as the ratio of output to input.

TRUE
Divide outputs by inputs to get productivity.

6. Productivity is defined as the ratio of input to output.

FALSE
Productivity is the ratio of outputs to inputs.

7. Competitiveness relates to the profitability of an organization in the marketplace.

FALSE
Competitiveness relates to how effectively an organization meets the wants and needs of customers
relative to other organizations that offer similar goods or services.

8. If people would only work harder, productivity would increase.

FALSE
Working harder can actually reduce productivity in some cases.

9. Tracking productivity measures over time enables managers to judge organizational

performance and decide where improvements are needed.
TRUE
Productivity trends direct attention toward problems and opportunities.

10. Productivity is directly related to the ability of an organization to compete.

TRUE
A more productive organization is a more competitive organization.

11. A characteristic that was once an order winner may become an order qualifier, and vice versa.
TRUE
Order qualifiers and order winners are shaped by the environment.

12. Outsourcing tends to improve quality but at the cost of lowered productivity.
FALSE
Outsourcing can lead to both quality and productivity improvements.

13. Productivity tends to be only a very minor factor in an organization's ability to compete.
FALSE
An organization's ability to compete is directly affected by its productivity.

14. An organization that is twice as productive as its competitor will be twice as profitable.
FALSE
Productivity advantages don't necessarily translate into profitability advantages.

15. National productivity is determined by averaging the productivity measures of various

companies or industries.
FALSE
National productivity is determined by dividing inputs by outputs across a national economy; averaging
industry measures would lead to a distorted estimate.

16. Wage and salary increases that are not accompanied by productivity increases tend to exert
inflationary pressures on a nation's economy.
TRUE
True increases in standards of living come about through productivity improvements.

17. Global competition really only applies to multi-national organizations.

FALSE
Domestic-only organizations experience competition from organizations in other countries.
18. A business that is rated highly by its customers for service quality will tend to be more
profitable than a business that is rated poorly.
TRUE
Service quality is a powerful tool for improving profitability.

19. Services often don't fit simple yield measurements.

TRUE
Comparing one service output to another is difficult to do accurately.

20. A mission statement should provide a guide for the formulation of strategies for the
organization.
TRUE
Strategy-making is constrained by the mission statement.

1. The hierarchy and sequence of planning and decision-making is: mission, organizational
strategy, tactics, and operational decisions.
TRUE
Mission is at the highest level of the hierarchy, while operation decisions are at the lowest.

22. Strategy includes both organizational and functional strategies.

TRUE
Organizational strategies shape functional strategies.

23. Organizational strategy should be determined without considering the realities of functional
area strengths and weaknesses since they can be changed to meet our strategy.
FALSE
Functional strengths and weaknesses serve as the building blocks of organizational strategy.

24. Mission statements should be as specific as possible regarding exactly how they will be
accomplished.
FALSE
Mission statements are very long-term and should provide enough room to accommodate major changes
in direction.

25. Improving efficiency will guarantee a similar improvement in productivity.

FALSE
Efficiency is narrower than productivity.

26. As long as we match a competitor on quality and price we will gain market share.
FALSE
We usually have to better a competitor to win market share.

27. Environmental scanning is a search for events or trends that present either threats or
opportunities to the organization.
TRUE
These events or trends should be taken into account when strategy is being formulated.

28. Standardization has the advantage of reducing variability.

TRUE
Standardization leads to reduced variability.

29. Traditional strategies of business organizations have tended to emphasize cost minimization
or product differentiation.
TRUE
Time- and quality-based strategies are more recent developments.
30. The majority of our textbook deals with tactical operations that support established functional
strategies.
TRUE
This represents the majority of on-going decision-making in operations.

31. Quality-based strategies focus on customer satisfaction by ensuring that each product is
carefully and thoroughly inspected prior to delivery to prevent sending out bad product.
FALSE
Quality strategies are based on avoiding quality problems.

32. Time-based strategies focus on reducing the time required to accomplish certain activities,
such as new product development or delivery to the customer.
TRUE
Being first to market or responding quickest to customer wants can be attractive strategies.

33. Functional strategies should be designed to directly support a firm's mission.

FALSE
Functional strategies should support organizational strategy.

34. Companies are required to use environmental scanning because of both federal and state
regulations regarding environmental pollution control.
FALSE
Companies are not required to use scanning, but not using scanning is risky.

35. The Balanced Scorecard is an attractive tool to use in the formation of strategy.
FALSE
The Balanced Scorecard is used for the implementation of strategy.

36. One major shortcoming of the Balanced Scorecard is that it doesn't tend to take into account
sustainability issues.
TRUE
Companies need to be aware of the impact they are having in these areas and respond accordingly.

37. Competitiveness doesn't include:

A. Productivity
B. Effectiveness
C. Profitability
D. Operations Strategy
E. Operations Management
A company can be competitive relative to similar companies and still be unprofitable if the competitive
environment is inherently unprofitable.

38. Product design and choice of location are examples of _______ decisions.
A. strategic
B. tactical
C. operational
D. customer focused
E. design
These decisions are made high in the hierarchy.

39. Scheduling personnel is an example of an operations management:

A. mission implementation
B. operational decision
C. organizational strategy
D. functional strategy
E. tactical decision
Staffing level decisions are made low in the hierarchy.

40. Productivity is expressed as:

A. output plus input
B. output minus input
C. output times input
D. output divided by input
E. input divided by output
Productivity is the ratio of outputs to inputs.

See Also

1. Which of the following is not a type of operations?

A. goods production
B. storage/transportation
C. entertainment
D. communication
E. all the above involve operations
All of these involve taking inputs and transforming them.

42. Technology choices seldom affect:

A. costs.
B. productivity.
C. union activity.
D. quality.
E. flexibility.
Union activity can affect a firm's technology choices, but not the other way around.

43. Measurements taken at various points in the transformation process for control purposes are
called:
A. plans
B. directions
C. controls
D. feedback
E. budgets
Feedback is used to monitor and improve processes.

44. Budgeting, analysis of investment proposals, and provision of funds are activities associated
with the _______ function.
A. operation
B. marketing
C. purchasing
D. finance
E. internal audit
These are the primary tasks for the finance function.

45. Which one of the following would not generally be classified under the heading of
transformation?
A. assembling
B. teaching
C. staffing
D. farming
E. consulting
Staffing doesn't involve transforming resources so much as it involves acquiring them.

46. Manufacturing work sent to other countries is called:

A. downsized
B. outsourced
C. internationalization
D. vertical integration
E. entrepreneurial ship
Outsourcing is increasingly a part of operations management.

47. Product design and process selection are examples of _______ decisions.
A. financial
B. tactical
C. system design
D. system operation
E. forecasting
These major decisions affect decisions made at lower levels.

48. The responsibilities of the operations manager are:

A. planning, organizing, staffing, procuring, and reviewing
B. planning, organizing, staffing, directing, and controlling
C. forecasting, designing, planning, organizing, and controlling
D. forecasting, designing, operating, procuring, and reviewing
E. designing and operating
The scope of operations management ranges across the organization.

49. Knowledge skills usually don't include:

A. process knowledge
B. accounting skills
C. communication skills
D. global knowledge
E. all of the above
Communication skills generally are considered to be people skills.

50. Which of the following is not true about systems approach?

A. A systems viewpoint is almost always beneficial in decision making.
B. A systems approach emphasizes interrelationships among subsystems.
C. A systems approach concentrates on efficiency within subsystems.
D. A systems approach is essential whenever something is being redesigned or improved.
E. All of the above are true.
Subsystem efficiency doesn't necessarily translate into overall system efficiency.

51. What is credited with gains in industrial productivity, increased standards of living and
affordable products?
A. personal computers
B. the internet
C. mass transportation
D. assembly lines
E. multi-level marketing
Mass production has played a prominent role in increasing standards of living.

52. Production systems with customized outputs typically have relatively:

A. high volumes of output
B. low unit costs
C. high amount of specialized equipment
D. fast work movement
E. skilled workers
Skilled workers are necessary to accommodate the variation inherent in customized outputs.

53. Which is not a significant difference between manufacturing and service operations?
A. cost per unit
B. uniformity of output
C. labor content of jobs
D. customer contact
E. measurement of productivity
Manufacturing operations aren't necessarily more or less efficient than service operations.

54. Which of the following is not a characteristic of service operations?

A. intangible output
B. high customer contact
C. high labor content
D. easy measurement of productivity
E. low uniformity of output
The productivity of service operations is often hard to measure.

55. Which of the following is a recent trend in business?

A. pollution control
B. total quality management
C. supply chain management
D. competition from foreign manufacturers
E. technological change
Supply chain management involves a broader systemic view of operations.

56. Farming is an example of:

A. an obsolete activity
B. a virtual organization
C. non-manufactured goods
D. a growth industry
E. customized manufacturing
Farm operations are not manufacturing operations.

57. Dealing with the fact that certain aspects of any management situation are more important
than others is called:
A. analysis of tradeoffs
B. sensitivity analysis
C. recognition of priorities
D. analysis of variance
E. decision table analysis
Solutions tend to be targeted toward higher priority aspects of a situation.

58. The fact that a few improvements in a few key areas of operations will have more impact than
many improvements in many other areas is consistent with the:
A. Irwin phenomenon
B. Pareto phenomenon
C. Stevenson phenomenon
D. Tellier phenomenon
E. Adam Smith phenomenon
Pareto phenomena direct our attention to the difference between the "important few" and the "trivial
many."
59. The process of comparing outputs to previously established standards to determine if
corrective action is needed is called:
A. planning
B. directing
C. controlling
D. budgeting
E. disciplining
Controls are used to maintain performance.

60. Which of the following does not relate to system design?

A. altering the system capacity
B. location of facilities
C. inventory management
D. selection and acquisition of equipment
E. physical arrangement of departments
Inventory management is a system operation decision area.

61. Taking a systems viewpoint with regard to operations in today's environment increasingly
leads decision-makers to consider ______________ in response to the ___________.
A. flexibility; pressure to be more efficient
B. offshoring; need to promote domestic production
C. sustainability; threat of global warming
D. technology; impact of random variation
E. forecasting; stabilization of demand
Sustainability is a relatively recent operations management consideration.

62. Some companies attempt to maximize the revenue they receive from fixed operating capacity
by influencing demands through price manipulation. This is an example of __________________:
A. Illegal price discrimination
B. Collusion
C. Volume analysis
D. Revenue management
E. Outsourcing
Revenue management is used to ensure that as much perishable capacity as possible is sold.

63. Which of the following is not an ongoing trend in manufacturing?

A. globalization
B. quality improvement
C. flexibility and agility
D. mass production for greater economies of scale
E. technological advances
Manufacturers are moving away from mass production for economies of scale.

64. Which of the following is not a benefit of using models in decision making?
A. They provide a standardized format for analyzing a problem.
B. They serve as a consistent tool for evaluation.
C. They are easy to use and less expensive than dealing with the actual situation.
D. All of the above are benefits.
E. None of the above is a benefit.
Models are useful tools for making decisions without confronting the actual situation with all of its
complexity.

65. Modern firms increasingly rely on other firms to supply goods and services instead of doing
these tasks themselves. This increased level of _____________ is leading to increased emphasis
on ____________ management.
A. outsourcing; supply chain
B. offshoring; lean
C. downsizing; total quality
D. optimizing; inventory
E. internationalization; intercultural
Supply chain management takes a more systemic view of the firm, its operations, and its suppliers.

66. Operations and sales are the two ________ functions in businesses.
A. strategic
B. tactical
C. support
D. value-adding
E. line
Others are support functions.

67. Marketing depends on operations for information regarding ___________.

A. productivity
B. lead time
C. cash flow
D. budgeting
E. corporate intelligence
Marketing uses lead time information to make promises to customers.

68. Two widely used metrics of variation are the __________ and the _________.
A. mean; standard deviation
B. productivity ratio; correlation
C. standardized mean; assignable deviation
D. randomized mean; standardized deviation
E. normal distribution; random variation
The mean and standard deviation summarize important facets regarding the variation in a process.

69. Which of the following statements about variation is FALSE?

A. Variation prevents a production process from being as efficient as it can be.
B. Some variation can be prevented.
C. Variation can either be assignable or random.
D. Any variation makes a production process less productive.
E. Random variation generally cannot be influenced by managers.
The choice to offer customers greater variety might increase variation but increase productivity even
more.

70. Which of the following is essential to consider with respect to managing a process to meet
demand?
A. strategy
B. demand forecasts
C. capacity
D. random variability
E. all of the above
All of these play a role in determining whether a process can meet demand.

See Also

Forcasting
1. Forecasting techniques generally assume an existing causal system that will continue to exist
in the future.
TRUE
Forecasts depend on the rules of the game remaining reasonably constant.

2. For new products in a strong growth mode, a low alpha will minimize forecast errors when
using exponential smoothing techniques.
FALSE
If growth is strong, alpha should be large so that the model will catch up more quickly.

3. Once accepted by managers, forecasts should be held firm regardless of new input since many
plans have been made using the original forecast.
FALSE
Flexibility to accommodate major changes is important to good forecasting.

4. Forecasts for groups of items tend to be less accurate than forecasts for individual items
because forecasts for individual items don't include as many influencing factors.
FALSE
Forecasting for an individual item is more difficult than forecasting for a number of items.

5. Forecasts help managers plan both the system itself and provide valuable information for using
the system.
TRUE
Both planning and use are shaped by forecasts.

6. Organizations that are capable of responding quickly to changing requirements can use a
shorter forecast horizon and therefore benefit from more accurate forecasts.
TRUE
If an organization can react quicker, its forecasts need not be so long term.

7. When new products or services are introduced, focus forecasting models are an attractive
option.
FALSE
Because focus forecasting models depend on historical data, they're not so attractive for newly introduced
products or services.

8. The purpose of the forecast should be established first so that the level of detail, amount of
resources, and accuracy level can be understood.
TRUE
All of these considerations are shaped by what the forecast will be used for.

9. Forecasts based on time series (historical) data are referred to as associative forecasts.
FALSE
Forecasts based on time series data are referred to as time-series forecasts.

10. Time series techniques involve identification of explanatory variables that can be used to
predict future demand.
FALSE
Associate forecasts involve identifying explanatory variables.

11. A consumer survey is an easy and sure way to obtain accurate input from future customers
since most people enjoy participating in surveys.
FALSE
Most people do not enjoy participating in surveys.

12. The Delphi approach involves the use of a series of questionnaires to achieve a consensus
forecast.
TRUE
A consensus among divergent perspectives is developed using questionnaires.

13. Exponential smoothing adds a percentage (called alpha) of last period's forecast to estimate
next period's demand.
FALSE
Exponential smoothing adds a percentage to the last period's forecast error.

14. The shorter the forecast period, the more accurately the forecasts tend to track what actually
happens.
TRUE
Long-term forecasting is much more difficult to do accurately.

15. Forecasting techniques that are based on time series data assume that future values of the
series will duplicate past values.
FALSE
Time-series forecast assume that future patterns in the series will mimic past patterns in the series.

16. Trend adjusted exponential smoothing uses double smoothing to add twice the forecast error
to last period's actual demand.
FALSE
Trend adjusted smoothing smoothes both random and trend-related variation.

17. Forecasts based on an average tend to exhibit less variability than the original data.
TRUE
Averaging is a way of smoothing out random variability.

18. The naive approach to forecasting requires a linear trend line.

FALSE
The naïve approach is useful in a wider variety of settings.

19. The naive forecast is limited in its application to series that reflect no trend or seasonality.
FALSE
When a trend or seasonality is present, the naïve forecast is more limited in its application.

20. The naive forecast can serve as a quick and easy standard of comparison against which to
judge the cost and accuracy of other techniques.
TRUE
Often the naïve forecast performs reasonably well when compared to more complex techniques.

21. A moving average forecast tends to be more responsive to changes in the data series when
more data points are included in the average.
FALSE
More data points reduce a moving average forecast's responsiveness.

22. In order to update a moving average forecast, the values of each data point in the average
must be known.
TRUE
The moving average cannot be updated until the most recent value is known.

23. Forecasts of future demand are used by operations people to plan capacity.
TRUE
Capacity decisions are made for the future and therefore depend on forecasts.

24. An advantage of a weighted moving average is that recent actual results can be given more
importance than what occurred a while ago.
TRUE
Weighted moving averages can be adjusted to make more recent data more important in setting the
forecast.

25. Exponential smoothing is a form of weighted averaging.

TRUE
The most recent period is given the most weight, but prior periods also factor in.

26. A smoothing constant of .1 will cause an exponential smoothing forecast to react more quickly
to a sudden change than a smoothing constant value of .3.
FALSE
Smaller smoothing constants result in less reactive forecast models.

27. The T in the model TAF = S+T represents the time dimension (which is usually expressed in
weeks or months).
FALSE
The T represents the trend dimension.

28. Trend adjusted exponential smoothing requires selection of two smoothing constants.
TRUE
One is for the trend and one is for the random error.

29. An advantage of "trend adjusted exponential smoothing" over the "linear trend equation" is its
ability to adjust over time to changes in the trend.
TRUE
A linear trend equation assumes a constant trend; trend adjusted smoothing allows for changes in the
underlying trend.

30. A seasonal relative (or seasonal indexes) is expressed as a percentage of average or trend.
TRUE
Seasonal relatives are used when the seasonal effect is multiplicative rather than additive.

31. In order to compute seasonal relatives, the trend of past data must be computed or known
which means that for brand new products this approach can't be used.
TRUE
Computing seasonal relatives depends on past data being available.

32. Removing the seasonal component from a data series (de-seasonalizing) can be accomplished
by dividing each data point by its appropriate seasonal relative.
TRUE
Deseasonalized data points have been adjusted for seasonal influences.

33. If a pattern appears when a dependent variable is plotted against time, one should use time
series analysis instead of regression analysis.
TRUE
Patterns reflect influences such as trends or seasonality that go against regression analysis assumptions.

34. Curvilinear and multiple regression procedures permit us to extend associative models to
relationships that are non-linear or involve more than one predictor variable.
TRUE
Regression analysis can be used in a variety of settings.

35. The sample standard deviation of forecast error is equal to the square root of MSE.
TRUE
The MSE is equal to the sample variance of the forecast error.
36. Correlation measures the strength and direction of a relationship between variables.
TRUE
The association between two variations is summarized in the correlation coefficient.

37. MAD is equal to the square root of MSE which is why we calculate the easier MSE and then
calculate the more difficult MAD.
FALSE
MAD is the mean absolute deviation.

38. In exponential smoothing, an alpha of 1.0 will generate the same forecast that a naïve forecast
would yield.
TRUE
With alpha equal to 1 we are using a naïve forecasting method.

39. A forecast method is generally deemed to perform adequately when the errors exhibit an
identifiable pattern.
FALSE
Forecast methods are generally considered to be performing adequately when the errors appear to be
randomly distributed.

40. A control chart involves setting action limits for cumulative forecast error.
FALSE
Control charts set action limits for the tracking signal.
41. A tracking signal focuses on the ratio of cumulative forecast error to the corresponding value
of MAD.
TRUE
Large absolute values of the tracking signal suggest a fundamental change in the forecast model's
performance.

42. The use of a control chart assumes that errors are normally distributed about a mean of zero.
TRUE
Over time, a forecast model's tracking signal should fluctuate randomly about a mean of zero.

43. Bias exists when forecasts tend to be greater or less than the actual values of time series.
TRUE
A tendency in one direction is defined as bias.

44. Bias is measured by the cumulative sum of forecast errors.

TRUE
Bias would result in the cumulative sum of forecast errors being large in absolute value.

45. Seasonal relatives can be used to de-seasonalize data or incorporate seasonality in a forecast.
TRUE
Seasonal relatives are used to de-seasonalize data to forecast future values of the underlying trend, and
they are also used to re-seasonalize de-seasonalized forecasts.

46. The best forecast is not necessarily the most accurate.

TRUE
More accuracy often comes at too high a cost to be worthwhile.

47. A proactive approach to forecasting views forecasts as probable descriptions of future

demand, and requires action to be taken to meet that demand. http://www.vuzs.info
FALSE
Proactive approaches involve taking action to influence demand.
48. Simple linear regression applies to linear relationships with no more than three independent
variables.
FALSE
Simple linear regression involves only one independent variable.

49. An important goal of forecasting is to minimize the average forecast error.

FALSE
Regardless of the model chosen, so long as there is no fundamental bias average forecast error will be
zero.

50. Forecasting techniques such as moving averages, exponential smoothing, and the naive
approach all represent smoothed (averaged) values of time series data.
FALSE
The naïve approach involves no smoothing.

51. In exponential smoothing, an alpha of .30 will cause a forecast to react more quickly to a large
error than will an alpha of .20.
TRUE
Larger values for alpha result in more responsive models.

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52. Forecasts based on judgment and opinion don't include
A. executive opinion
B. salesperson opinion
C. second opinions
D. customer surveys
E. Delphi methods
Second opinions generally refer to medical diagnoses, not demand forecasting.

53. In business, forecasts are the basis for:

A. capacity planning
B. budgeting
C. sales planning
D. production planning
E. all of the above
A wide variety of areas depend on forecasting.

54. Which of the following features would not generally be considered common to all forecasts?
A. Assumption of a stable underlying causal system.
B. Actual results will differ somewhat from predicted values.
C. Historical data is available on which to base the forecast.
D. Forecasts for groups of items tend to be more accurate than forecasts for individual items.
E. Accuracy decreases as the time horizon increases.
In some forecasting situations historical data are not available.

55. Which of the following is not a step in the forecasting process?

A. determine the purpose and level of detail required
B. eliminate all assumptions
C. establish a time horizon
D. select a forecasting model
E. monitor the forecast
We cannot eliminate all assumptions.

56. Minimizing the sum of the squared deviations around the line is called:
A. mean squared error technique
B. mean absolute deviation
C. double smoothing
D. least squares estimation
E. predictor regression
Least squares estimations minimizes the sum of squared deviations around the estimated regression
function.

57. The two general approaches to forecasting are:

A. mathematical and statistical
B. qualitative and quantitative
C. judgmental and qualitative
D. historical and associative
E. precise and approximation
Forecast approaches are either quantitative or qualitative.

58. Which of the following is not a type of judgmental forecasting?

A. executive opinions
B. sales force opinions
C. consumer surveys
D. the Delphi method
E. time series analysis
Time series analysis is a quantitative approach.

59. Accuracy in forecasting can be measured by:

A. MSE
B. MRP
C. MAPE
D. MTM
E. A & C
MSE is mean squared error; MAPE is mean absolute percent error.

60. Which of the following would be an advantage of using a sales force composite to develop a
demand forecast?
A. The sales staff is least affected by changing customer needs.
B. The sales force can easily distinguish between customer desires and probable actions.
C. The sales staff is often aware of customers' future plans.
D. Salespeople are least likely to be influenced by recent events.
E. Salespeople are least likely to be biased by sales quotas.
Members of the sales force should be the organization's tightest link with its customers.

61. Which phrase most closely describes the Delphi technique?

A. associative forecast
B. consumer survey
C. series of questionnaires
D. developed in India
E. historical data
The questionnaires are a way of fostering a consensus among divergent perspectives.

62. The forecasting method which uses anonymous questionnaires to achieve a consensus
forecast is:
A. sales force opinions
B. consumer surveys
C. the Delphi method
D. time series analysis
E. executive opinions
Anonymity is important in Delphi efforts.

63. One reason for using the Delphi method in forecasting is to:
A. avoid premature consensus (bandwagon effect)
B. achieve a high degree of accuracy
C. maintain accountability and responsibility
D. be able to replicate results
E. prevent hurt feelings
A bandwagon can lead to popular but potentially inaccurate viewpoints to drown up other important
considerations.

64. Detecting non-randomness in errors can be done using:

A. MSEs
B. MAPs
C. Control Charts
D. Correlation Coefficients
E. Strategies
Control charts graphically depict the statistical behavior of forecast errors.

65. Gradual, long-term movement in time series data is called:

A. seasonal variation
B. cycles
C. irregular variation
D. trend
E. random variation
Trends move the time series in a long-term direction.

66. The primary difference between seasonality and cycles is:

A. the duration of the repeating patterns
B. the magnitude of the variation
C. the ability to attribute the pattern to a cause
D. the direction of the movement
E. there are only 4 seasons but 30 cycles
Seasons happen within time periods; cycles happen across multiple time periods.

67. Averaging techniques are useful for:

A. distinguishing between random and non-random variations
B. smoothing out fluctuations in time series
C. eliminating historical data
D. providing accuracy in forecasts
E. average people
Smoothing helps forecasters see past random error.

68. Putting forecast errors into perspective is best done using

A. Exponential smoothing
B. MAPE
C. Linear decision rules
D. MAD
E. Hindsight
MAPE depicts the forecast error relative to what was being forecast.

69. Using the latest observation in a sequence of data to forecast the next period is:
A. a moving average forecast
B. a naive forecast
C. an exponentially smoothed forecast
D. an associative forecast
E. regression analysis
Only one piece of information is needed for a naïve forecast.

70. For the data given below, what would the naive forecast be for the next period (period #5)?

A. 58
B. 62
C. 59.5
D. 61
E. cannot tell from the data given
Period 5's forecast would be period 4's demand.

71. Moving average forecasting techniques do the following:

A. immediately reflect changing patterns in the data
B. lead changes in the data
C. smooth variations in the data
D. operate independently of recent data
E. assist when organizations are relocating
Variation is smoothed out in moving average forecasts.

72. Which is not a characteristic of simple moving averages applied to time series data?
A. smoothes random variations in the data
B. weights each historical value equally
C. lags changes in the data
D. requires only last period's forecast and actual data
E. smoothes real variations in the data
Simple moving averages can require several periods of data.

73. In order to increase the responsiveness of a forecast made using the moving average
technique, the number of data points in the average should be:
A. decreased
B. increased
C. multiplied by a larger alpha
D. multiplied by a smaller alpha
E. eliminated if the MAD is greater than the MSE
Fewer data points result in more responsive moving averages.

74. A forecast based on the previous forecast plus a percentage of the forecast error is:
A. a naive forecast
B. a simple moving average forecast
C. a centered moving average forecast
D. an exponentially smoothed forecast
E. an associative forecast
Exponential smoothing uses the previous forecast error to shape the next forecast.

75. Which is not a characteristic of exponential smoothing?

A. smoothes random variations in the data
B. weights each historical value equally
C. has an easily altered weighting scheme
D. has minimal data storage requirements
E. smoothes real variations in the data
The most recent period of demand is given the most weight in exponential smoothing.

76. Which of the following smoothing constants would make an exponential smoothing forecast
equivalent to a naive forecast?
A. 0
B. .01
C. .1
D. .5
E. 1.0
An alpha of 1.0 leads to a naïve forecast.

77. Simple exponential smoothing is being used to forecast demand. The previous forecast of 66
turned out to be four units less than actual demand. The next forecast is 66.6, implying a
smoothing constant, alpha, equal to:
A. .01
B. .10
C. .15
D. .20
E. .60
A previous period's forecast error of 4 units would lead to a change in the forecast of 0.6 if alpha equals
0.15.

78. Given an actual demand of 59, a previous forecast of 64, and an alpha of .3, what would the
forecast for the next period be using simple exponential smoothing?
A. 36.9
B. 57.5
C. 60.5
D. 62.5
E. 65.5
Multiply the previous period's forecast error (-5) by alpha and then add to the previous period's forecast.

79. Given an actual demand of 105, a forecasted value of 97, and an alpha of .4, the simple
exponential smoothing forecast for the next period would be:
A. 80.8
B. 93.8
C. 100.2
D. 101.8
E. 108.2
Multiply the previous period's forecast error (8) by alpha and then add to the previous period's forecast.

80. Which of the following possible values of alpha would cause exponential smoothing to
respond the most quickly to forecast errors?
A. 0
B. .01
C. .05
D. .10
E. .15
Larger values for alpha correspond with greater responsiveness.
See Also

1. A manager uses the following equation to predict monthly receipts: Yt = 40,000 + 150t. What is
the forecast for July if t = 0 in April of this year?
A. 40,450
B. 40,600
C. 42,100
D. 42,250
E. 42,400
July would be period 3, so the forecast would be 40,000 + 150(3).

82. In trend-adjusted exponential smoothing, the trend adjusted forecast (TAF) consists of:
A. an exponentially smoothed forecast and a smoothed trend factor
B. an exponentially smoothed forecast and an estimated trend value
C. the old forecast adjusted by a trend factor
D. the old forecast and a smoothed trend factor
E. a moving average and a trend factor
Both random variation and the trend are smoothed in TAF models.

83. In the "additive" model for seasonality, seasonality is expressed as a ______________

adjustment to the average; in the multiplicative model, seasonality is expressed as a __________
adjustment to the average.
A. quantity, percentage
B. percentage, quantity
C. quantity, quantity
D. percentage, percentage
E. qualitative, quantitative
The additive model simply adds a seasonal adjustment to the de-seasonalized forecast. The multiplicative
model adjusts the de-seasonalized forecast by multiplying it by a season relative or index.

84. Which technique is used in computing seasonal relatives?

A. double smoothing
B. Delphi
C. Mean Squared Error (MSE)
D. centered moving average
E. exponential smoothing
The centered moving average serves as the basis point for computing seasonal relatives.

85. A persistent tendency for forecasts to be greater than or less than the actual values is called:
A. bias
B. tracking
C. control charting
D. positive correlation
E. linear regression
Bias is a tendency for a forecast to be above (or below) the actual value.

86. Which of the following might be used to indicate the cyclical component of a forecast?
A. leading variable
B. Mean Squared Error (MSE)
C. Delphi technique
D. exponential smoothing
E. Mean Absolute Deviation (MAD)
Leading variables, such as births in a given year, can correlate strongly with long-term phenomena such
as cycles.
87. The primary method for associative forecasting is:
A. sensitivity analysis
B. regression analysis
C. simple moving averages
D. centered moving averages
E. exponential smoothing
Regression analysis is an associative forecasting technique.

88. Which term most closely relates to associative forecasting techniques?

A. time series data
B. expert opinions
C. Delphi technique
D. consumer survey
E. predictor variables
Associate techniques use predictor variables.

89. Which of the following corresponds to the predictor variable in simple linear regression?
A. regression coefficient
B. dependent variable
C. independent variable
D. predicted variable
E. demand coefficient
Demand is the typical dependent variable when forecasting with simple linear regression.

90. The mean absolute deviation (MAD) is used to:

A. estimate the trend line
B. eliminate forecast errors
C. measure forecast accuracy
D. seasonally adjust the forecast
E. all of the above
MAD is one way of evaluating forecast performance.

91. Given forecast errors of 4, 8, and - 3, what is the mean absolute deviation?
A. 4
B. 3
C. 5
D. 6
E. 12
Convert each error into an absolute value and then average.

92. Given forecast errors of 5, 0, - 4, and 3, what is the mean absolute deviation?
A. 4
B. 3
C. 2.5
D. 2
E. 1
Convert each error into an absolute value and then average.
93. Given forecast errors of 5, 0, - 4, and 3, what is the bias?
A. - 4
B. 4
C. 5
D. 12
E. 6
Sum the forecast errors.

94. Which of the following is used for constructing a control chart?

A. mean absolute deviation (MAD)
B. mean squared error (MSE)
C. tracking signal (TS)
D. bias
E. none of the above
The mean squared error leads to an estimate for the sample forecast standard deviation.

95. The two most important factors in choosing a forecasting technique are:
A. cost and time horizon
B. accuracy and time horizon
C. cost and accuracy
D. quantity and quality
E. objective and subjective components
More accurate forecasts cost more but may not be worth the additional cost.

96. The degree of management involvement in short range forecasts is:

A. none
B. low
C. moderate
D. high
E. total
Short range forecasting tends to be fairly routine.

97. Which of the following is not necessarily an element of a good forecast?

A. estimate of accuracy
B. timeliness
C. meaningful units
D. low cost
E. written
A good forecast can be quite costly if necessary.

98. Current information on _________ can have a significant impact on forecast accuracy:
A. prices
B. promotion
C. inventory
D. competition
E. all of the above
Demand in the future could be subject to decision-making prompted by prices, promotions, inventory or
competition. Accuracy will be affected if these are (or are not) taken into consideration.

99. A managerial approach toward forecasting which seeks to actively influence demand is:
A. reactive
B. proactive
C. influential
D. protracted
E. retroactive
Simply responding to demand is a reactive approach.

100. Customer service levels can be improved by better:

A. mission statements
B. control charting
C. short term forecast accuracy
D. exponential smoothing
E. customer selection
More accurate short-term forecasts enable organization's to better accommodate customer requests.
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101. Given the following historical data, what is the simple three-period moving average forecast
for period 6?

A. 67
B. 115
C. 69
D. 68
E. 68.67
Average demand from periods 3 through 5.

102. Given the following historical data and weights of .5, .3, and .2, what is the three-period
moving average forecast for period 5?

A. 144.20
B. 144.80
C. 144.67
D. 143.00
E. 144.00
Multiply period 4 (144) by .5, period 3 (148) by .3 and period 2 (142) by .2, then sum these products.

103. Use of simple linear regression analysis assumes that:

A. Variations around the line are random.
B. Deviations around the line are normally distributed.
C. Predictions are to be made only within the range of observed values of the predictor variable.
D. all of the above
E. none of the above
A through C are important assumptions underpinning simple linear regression.

104. Given forecast errors of - 5, - 10, and +15, the MAD is:
A. 0
B. 10
C. 30
D. 175
E. none of these
Convert these errors into absolute value, then average.

105. Develop a forecast for the next period, given the data below, using a 3-period moving
average.

Feedback: Average demand from periods 3 through 5.

106. Consider the data below:

Using exponential smoothing with alpha = .2, and assuming the forecast for period 11 was 80, what would
the forecast for period 14 be?

Feedback: The forecast error in period 13 (2.84) is multiplied by the smoothing constant. This is then
added to the period 13 forecast to get the period 14 forecast.

107. A manager is using exponential smoothing to predict merchandise returns at a suburban

branch of a department store chain. Given a previous forecast of 140 items, an actual number of
returns of 148 items, and a smoothing constant equal to .15, what is the forecast for the next
period?

Feedback: The forecast error in the previous period is multiplied by the smoothing constant. This is then
added to the previous period's forecast to get the upcoming period's forecast.

108. A manager is using the equation below to forecast quarterly demand for a product:
Yt = 6,000 + 80t where t = 0 at Q2 of last year
Quarter relatives are Q1 = .6, Q2 = .9, Q3 = 1.3, and Q4 = 1.2.
What forecasts are appropriate for the last quarter of this year and the first quarter of next year?
For Q4 of this year t = 6
For Q1 of next year t = 7

Feedback: Adjust de-seasonalized forecasts by the quarterly seasonal relatives.

109. Over the past five years, a firm's sales have averaged 250 units in the first quarter of each
year, 100 units in the second quarter, 150 units in the third quarter, and 300 units in the fourth
quarter. What are appropriate quarter relatives for this firm's sales? Hint: Only minimal
computations are necessary.

Feedback: Since a trend is not present, quarter relatives are simply a percentage of average, which is
200 units.

110. A manager has been using a certain technique to forecast demand for gallons of ice cream
for the past six periods. Actual and predicted amounts are shown below. Would a naive forecast
have produced better results?

Summary:
Current method: MAD = 3.67; MSE = 16.8; 2s Control limits 8.2 (OK)
Naïve method: MAD = 4.40; MSE = 30.0; 2s Control limits 11.0 (OK)
Feedback: Either MSE or MAD should be computed for both forecasts and compared. The demand data
are stable. Therefore, the most recent value of the series is a reasonable forecast for the next period of
time, justifying the naïve approach. The current method is slightly superior both in terms of MAD and
MSE. Either method would be considered in control.

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