Basic Business Test Quiz

The correct answer is distribution channel. A distribution channel refers to the path or route through which goods or products move from the producer to the final consumer. It involves various intermediaries such as wholesalers, retailers, and agents who help in the movement of goods and ensure they reach the end-users efficiently. The distribution channel plays a crucial role in delivering the right product, at the right place, and at the right time, thus bridging the gap between producers and consumers.

The correct answer is that a company's strategic plan is a statement of goals and objectives for a long-range period. This means that it is a document that outlines the company's overall vision and direction for the future, typically spanning several years. It includes the company's goals and objectives, which serve as a guide for decision-making and resource allocation. The strategic plan helps the company align its activities and resources towards achieving its long-term goals and objectives.

The correct answer is supply, manufacture, distribution. This answer accurately reflects the sequential flow of activities in a typical supply chain. First, the supply phase involves sourcing raw materials or components needed for production. Then, the manufacture phase involves transforming these inputs into finished goods. Finally, the distribution phase involves delivering the finished products to customers or retailers. This order of activities ensures a smooth and efficient flow of goods from the initial supply to the final customer.

The physical distribution system involves activities related to the movement and storage of goods from the point of production to the point of consumption. Transportation, warehousing, and material handling are all integral parts of this system as they involve the movement, storage, and handling of goods. However, forecasting of customer orders is not a part of the physical distribution system. Forecasting of customer orders is more related to demand planning and inventory management, which are separate functions from the physical distribution system.

When selecting a site for a factory, one of the key elements to consider is the cost and availability of transportation. This is important because transportation costs can significantly impact the overall cost of production and distribution. If transportation costs are high or if there is limited availability of transportation options, it can affect the profitability and efficiency of the factory. Therefore, considering the cost and availability of transportation is crucial in order to optimize the logistics and supply chain operations of the factory.

Material handling is considered a function of physical distribution because it involves the movement, storage, and control of materials throughout the supply chain. This includes activities such as loading and unloading, packaging, transportation, and inventory management. Effective material handling ensures that products are delivered to the right place, at the right time, and in the right condition, thereby optimizing the flow of goods and reducing costs.

Conformance refers to the act of meeting the specified requirements. This means that a product or service must adhere to the predetermined standards and criteria set by the customer or industry. It involves ensuring that all aspects of the product or service align with the agreed-upon specifications, such as quality, functionality, design, and performance. By meeting the specified requirements, a company can demonstrate its commitment to delivering a product that meets the expectations and needs of its customers.

The objective of scheduling is to meet delivery dates. This means that the scheduling process aims to ensure that all tasks and activities are planned and executed in a way that allows the final product or service to be delivered to the customer on time. Meeting delivery dates is crucial for customer satisfaction and maintaining a good reputation for the company. It involves coordinating resources, managing timelines, and prioritizing tasks to ensure that all steps of the production or service delivery process are completed within the specified time frame.

The line haul cost is given as $1.50 per mile and the product will move 400 miles. Therefore, the total line haul cost for moving the product would be 1.50 * 400 = $600. The cost per hundredweight can be calculated by dividing the total cost by the weight of the product. Since 1 hundredweight is equal to 100 pounds, the cost per hundredweight would be 600 / (40,000/100) = $1.50.

Engineer-to-order manufacturing involves designing and producing custom-made products according to specific customer requirements. This process requires extensive engineering and customization, which often leads to longer production and delivery times compared to other manufacturing types. Make-to-order manufacturing involves producing goods based on customer orders, but with less customization than engineer-to-order. Make-to-stock manufacturing involves producing goods in anticipation of customer demand, allowing for quicker delivery times. Assemble-to-order manufacturing involves combining pre-made components to fulfill customer orders, which can also result in shorter delivery times compared to engineer-to-order.

In an engineer to order company, the delivery time is longer than an assemble-to-order company. This is because engineer to order companies customize products based on specific customer requirements, which requires additional time for design, engineering, and production. On the other hand, assemble-to-order companies have pre-designed and pre-engineered components that can be quickly assembled to meet customer demands, resulting in shorter delivery times.

Working overtime is the quickest way to increase production in the current week. This is because overtime allows the existing workforce to work additional hours without the need for hiring or training new workers. It can be implemented immediately and does not require additional resources or coordination with external parties. This option also ensures that the company maintains control over the production process and can meet the customer request within the desired timeframe.

The term "break even point" refers to the point at which a company's revenues are equal to its total costs. This means that the company is neither making a profit nor incurring a loss. At this point, the company has covered all of its expenses and is generating enough revenue to cover its costs. It is an important metric for businesses to determine their profitability and financial stability.

To find the number of pallet positions needed, we need to divide the total number of cartons by the number of cartons on each pallet. In this case, there are 15,000 cartons and 20 cartons on each pallet. Dividing 15,000 by 20 gives us 750 pallets. Since the warehouse can store pallets 5 high, we divide 750 by 5 to get 150 pallet positions needed. Therefore, the correct answer is 150.

In a JIT manufacturing environment, waste refers to any process that does not add value. This means that any activity or step in the production process that does not contribute to the final product or meet the customer's requirements is considered wasteful. This includes activities such as excessive inventory, unnecessary transportation, overproduction, waiting time, and defects. The goal of JIT manufacturing is to eliminate or minimize these non-value-added processes in order to improve efficiency, reduce costs, and increase customer satisfaction.

In an "assemble to order" manufacturing environment, many different end items are created by assembling a small number of components. This means that the components are produced and stocked in advance, and when an order is received, the items are assembled according to the customer's specifications. This allows for greater flexibility and customization compared to "make to stock," where items are produced in advance and stocked without customization, or "make to order," where items are produced from scratch for each individual order. "Engineer to order" refers to the production of highly customized products designed specifically for each customer.

The income statement of a company provides a summary of the company's revenues, expenses, and net income or loss. It shows the cost of products sold, which represents the direct costs associated with producing or purchasing the goods that were sold during a specific period. This includes the cost of raw materials, labor, and overhead expenses directly related to the production process. By including the cost of products sold in the income statement, the company can calculate its gross profit margin and assess the profitability of its core operations.

The level strategy aims to produce a consistent number of units each month to meet the demand. To calculate the number of units to be produced in the first month, we need to divide the total number of units (1000) by the total number of working days in the four months (20 + 21 + 19 + 22 = 82). So, 1000 units divided by 82 working days equals approximately 12.19 units per day. Multiplying this by the number of working days in the first month (20) gives us approximately 243.8 units. Since we cannot produce a fraction of a unit, the correct answer is 244 units.

Forecasts are a prelude to business planning because they provide valuable information about future market conditions, customer demand, and industry trends. By analyzing forecasts, organizations can make informed decisions about production levels, inventory management, marketing strategies, and resource allocation. Forecasts help businesses anticipate potential challenges and opportunities, allowing them to develop effective strategies and stay competitive in the market. Without forecasts, businesses would be operating blindly, making it difficult to plan and allocate resources efficiently.

In a fixed location warehouse system, each SKU has an assigned location, which means that the space in the warehouse is not optimally utilized. This leads to poor cube utilization, as the available space is not efficiently used. As a result, the warehouse may not be able to store as many items as it could if a different storage system was implemented. This can lead to inefficiencies in inventory management and potentially higher costs for the warehouse.

Physical distribution refers to the process of moving finished goods from the production facility to the customer. It involves activities such as packaging, transportation, warehousing, and order fulfillment. This term specifically focuses on the physical movement and logistics involved in delivering the products to the end consumer. Supply chain, on the other hand, encompasses the entire network of organizations and activities involved in the production, distribution, and delivery of goods or services. While supply chain includes physical distribution, it also includes other aspects such as procurement, manufacturing, and demand planning. Therefore, physical distribution is the most appropriate term to describe the movement of finished goods from production to the customer.

The average cost per unit can be calculated by adding the fixed cost to the total variable cost and then dividing by the number of units produced. In this case, the fixed cost is $1,000 and the variable cost per unit is $5.00. So, the total variable cost for 4,000 units would be 4,000 units multiplied by $5.00, which is $20,000. Adding the fixed cost of $1,000 to the total variable cost of $20,000 gives a total cost of $21,000. Dividing this by the number of units produced (4,000) gives an average cost per unit of $5.25.

Pareto's law, also known as the 80/20 rule, states that roughly 80% of the effects come from 20% of the causes. This principle suggests that a small percentage of the group, typically 20%, is responsible for a large percentage, usually 80%, of the outcomes or results. It is commonly observed in various fields, such as economics, business, and social sciences, where a minority has a significant impact compared to the majority.

When establishing a cycle count program, the primary objective should be to identify the causes of inventory errors. This is important because it allows the company to understand why inventory errors occur and take necessary steps to prevent them in the future. By identifying the causes, the company can implement improved inventory management practices, enhance accuracy, and minimize financial discrepancies. Correcting inventory records, reducing headcount, and eliminating physical inventory are not the primary objectives of a cycle count program, although they may be secondary benefits.

Inventory is used to decouple supply from the demand. This means that inventory acts as a buffer between the supply and demand of a product. By having inventory, a company can ensure that there is always enough supply available to meet the demand, even if there are fluctuations in demand or delays in the supply chain. This helps to prevent stockouts and allows for smoother operations.

A fixed location warehouse refers to a warehouse that has a set layout and designated storage areas for different items. The major disadvantage of this type of warehouse is that cube utilization is poor. This means that the available space in the warehouse is not efficiently utilized, resulting in wasted storage capacity. This can lead to higher costs as more space is required to store the same amount of goods, reducing overall efficiency and profitability.

Cycle counting is a process where inventory is counted on a pre-determined schedule. It involves regularly counting a small portion of inventory to ensure accuracy and identify any discrepancies. This method helps to maintain accurate inventory records, minimize disruptions in operations, and reduce the need for full physical inventory counts.

Forecasts are typically more accurate for the near future than they are for the longer future because the near term holds less uncertainty. In the short term, there are fewer variables and factors that can affect the outcome, making it easier to make predictions. As time goes on, more unknowns and uncertainties come into play, making it harder to accurately forecast long-term outcomes. Therefore, the near term is more predictable and less prone to unexpected changes or events.

Maintaining inventory is a reason to improve customer service because it ensures that products are readily available and can be delivered to customers in a timely manner. By having sufficient inventory, businesses can meet customer demands promptly, avoid stockouts, and provide a wider range of choices. This leads to increased customer satisfaction and loyalty, as customers are more likely to have their needs met and have a positive experience with the company.

The correct answer is Zone system. In a zone system, the warehouse is divided into different zones or areas, and each order picker is assigned a specific zone to pick orders from. This system helps in improving efficiency and reducing the time taken to pick orders, as each picker is familiar with their assigned zone and can quickly locate and pick the required items. It also helps in reducing errors and confusion by ensuring that each picker is responsible for a specific area.

Throughput is the measure of the total volume of production passing through a facility. It represents the amount of work or output completed within a specific period of time. This includes all the products or services that are successfully produced and delivered by the facility. It is an important metric to assess the efficiency and productivity of a facility or production process.

An independent demand item refers to a finished product or component that is directly demanded by customers or end-users. Among the given options, a spare part for a jet engine is most likely an independent demand item as it is a specific component that is needed to replace a damaged or worn-out part in a jet engine. The other options, such as an inventoried sub-assembly for a printer, a manufactured sub-assembly in a car, and a purchased component for a fork truck, are all intermediate products or components that are used in the manufacturing or assembly process of the final product.

In a total employee involvement company, a supervisor's primary role is coaching. This means that the supervisor focuses on guiding and developing employees, providing feedback, and helping them improve their skills and performance. Coaching involves setting goals, providing support, and promoting continuous learning and growth. This approach emphasizes collaboration, empowerment, and fostering a positive work environment. It encourages employees to take ownership of their work, make decisions, and contribute actively to the company's success.

Accessibility refers to the ease with which the cubes or pallets can be reached and retrieved in a warehouse. It is an important factor to consider in order to maximize cube utilization. If the cubes are easily accessible, it becomes easier to load and unload them, resulting in efficient material handling. This also helps in optimizing the put away speed, as the cubes can be quickly and conveniently placed in the desired positions. Additionally, good accessibility reduces material handling costs by minimizing the time and effort required to access the cubes.

A normal distribution is a statistical concept that represents a symmetrical probability distribution of a random variable. It is often graphed as a bell-shaped curve because the majority of the data points cluster around the mean, with fewer data points in the tails. This shape indicates that the data is evenly distributed around the mean and follows a specific pattern. Therefore, the correct answer is a bell-shaped curve.

To calculate the safety stock, we need to consider the Mean Absolute Deviation (MAD) and the desired service level. The MAD is given as 100. The service level required is 99.9999%, which corresponds to a z-score of 4.417. Using the formula for safety stock = z-score * MAD, we can calculate the safety stock as 4.417 * 100 = 441.7. However, since safety stock should be a whole number, we round it up to the nearest whole number, which is 442. Therefore, the safety stock needed to ensure the product is in stock 99.9999% of the time is 442. Since the on-hand quantity is 200, the final answer should be 442 - 200 = 242. However, the given answer is 300, which is incorrect.

The purpose of a distribution warehouse is to move and mix goods. This means that the warehouse is not only used for storing goods, but also for the activities of transporting and combining different products. It serves as a hub for managing the flow of goods within a supply chain, ensuring that the right products are delivered to the right locations at the right time.

System nervousness refers to the instability or volatility of a system caused by frequent changes in requirements. When requirements change rapidly, it disrupts the planning and execution process, leading to uncertainty and inefficiency in the system. This can result in delays, rework, and increased costs. Therefore, rapid changes in requirements contribute to system nervousness.

When a company increases the number of warehouses from one to two, the safety stock will increase. The exact percentage of increase can be calculated based on factors such as demand variability, lead time variability, and desired service level. The increase in safety stock is necessary to account for the additional uncertainties and risks associated with managing inventory across multiple locations.

To calculate the annual inventory turns, we divide the annual cost of goods sold by the average inventory. In this case, the annual cost of goods sold is $40 million and the average inventory is $10 million. Thus, the inventory turns would be 40 million / 10 million = 4 turns. To increase the inventory turns to 20, the inventory would need to be reduced by 4 times. Therefore, the inventory would need to be reduced by $10 million x 4 = $40 million. Since the options only include reductions of $2 million, $4 million, $6 million, and $8 million, the correct answer is $8 million.

A purchased component would most likely be a dependent demand item because it is an item that is required as part of a larger product or assembly. The demand for the purchased component is dependent on the demand for the final product it is used in. In other words, the quantity of purchased components needed is determined by the production schedule or sales forecast of the final product. Safety gloves, office supplies, and items being shipped to customers are typically independent demand items, as their demand is based on individual customer needs or usage rather than being directly tied to the production or assembly of another product.

The cost of carrying inventory includes expenses such as heating and lighting a warehouse (I), obsolete inventory (II), labor to move material (III), and damaged inventory (IV). These costs are associated with storing and managing inventory and can significantly impact a company's profitability.

A normal distribution is a statistical distribution where most of the values are clustered near a central point, also known as the mean. This means that the majority of the data points in a normal distribution will be close to the average value, with fewer points further away from the mean. This distribution is often represented by a bell-shaped curve.

The company is using a push system because it makes all decisions regarding forecasting and orders centrally. In a push system, decisions are made based on forecasts and orders are pushed from the central location to the distribution network. This means that inventory is pushed out to the network based on anticipated demand, rather than being pulled by actual customer orders.

Back flushing is a system used in a JIT (Just-in-Time) environment to reduce the number of transactions. It involves automatically deducting the quantity of materials used in production from inventory records, without the need for a separate transaction. This helps streamline the production process and eliminates the need for manual recording of transactions, saving time and reducing the chances of errors.

In a factory where a variety of products are made, the most common unit of capacity is time. This is because time is a crucial factor in determining the efficiency and productivity of the manufacturing process. By measuring the time taken to produce each product, the factory can assess its overall capacity and make necessary adjustments to improve production efficiency. Time also helps in scheduling and planning production activities, ensuring that products are delivered on time to meet customer demands.

The throughput of a manufacturing process is determined by the efficiency and productivity of the work centers involved. Overloaded work centers can significantly impact the throughput as they may cause bottlenecks and delays in the process. When a work center is overloaded, it means that it is receiving more work than it can handle, leading to longer processing times and reduced overall throughput. Therefore, overloaded work centers can negatively affect the efficiency and productivity of the manufacturing process.

Consumer products such as film would be classified in a "Make to stock" manufacturing environment. In this type of environment, products are produced in anticipation of customer demand and are stocked in inventory. The production is not based on specific customer orders but rather on the forecasted demand for the product. This allows for faster delivery to customers as the products are readily available in stock.

Aggregate inventory management involves analyzing the cost and benefits associated with different classes of inventory. This includes determining the optimal amount of inventory to carry, considering factors such as storage costs, holding costs, and potential obsolescence. By evaluating the cost and benefits of carrying different classes of inventory, businesses can make informed decisions about inventory levels and allocation, ultimately maximizing profitability and efficiency.

Inventory areas should be locked except for during normal business hours because transactions might not be completed. This is important to ensure the accuracy and integrity of inventory records. If inventory areas are accessible at all times, there is a higher risk of unauthorized access and potential theft, which can result in discrepancies in inventory levels. By locking the inventory areas, it helps to control and monitor the movement of inventory, ensuring that proper procedures are followed and transactions are accurately recorded.