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5. W. Edward Deming believed that achieving 14. In terms of minimum efficient scale of output,
better quality requires the commitment of everyone in a the "unit cost curve" rises with output until a certain
company. output level is reached, at which point further increases
in output realize little reduction in unit costs.
True False
True False
6. In terms of Six Sigma, the higher the number of
“sigmas,” the greater the number of errors. 15. A wide product variety makes it easier for a firm
to increase its production efficiency and thus reduce its
unit costs.
True False
True False
7. In international business, production and
logistics functions need not accommodate demands for 16. Flexible manufacturing technologies allow a
local responsiveness. company to produce a wider variety of end products at a
unit cost that at one time could be achieved only
True False through the mass production of a standardized output.
True False 29. A firm that sources its product components from
internal suppliers has fewer subunits to control than a
22. Since refined sugar has a low value-to-weight firm that sources from independent suppliers.
ratio, even if it is shipped halfway around the world,
their transportation costs account for a very small True False
percentage of total costs.
30. A firm that enters long-term alliances may limit
True False its strategic flexibility by the commitments it makes to
its alliance partners.
23. The strategic role of establishing a foreign
production facility is to produce labor-intensive products True False
at as low a cost as possible.
31. Under a just-in-time inventory system, a
True False company can reduce the amount of working capital it
needs to finance inventory, freeing capital for other uses
24. A source of improvement in the capabilities of a and/or lowering the total capital requirements of the
foreign production site is the pressure to customize a enterprise.
product to the demands of consumers in a particular
nation. True False
44. The principal tool that most managers now use 48. Which of the following companies adheres to
to increase the reliability of their product offering is the total quality management steps identified by W.
_____, a statistically based methodology for improving Edward Deming?
product quality. It is a direct descendant of the total
quality management philosophy. A. Unisorn Inc. believes in empowering employees
by reducing interactions between them and their
A. Six Sigma supervisors.
B. lean manufacturing B. Galaxy Inc. empowers its employees to report
C. just-in-time inventory problems or recommend improvements without any
D. ISO 9000 fear.
E. mass customization C. New Run Inc. bases its work standards solely on
numbers or quotas.
45. The Six Sigma methodology is a direct D. Ovion Inc. believes that the management is not
descendant of the _____ philosophy that was widely responsible for training employees in new skills.
adopted, first by Japanese companies and then E. Tirex Inc. endorses that the achievement of better
American companies during the 1980s and early 1990s. quality is solely dependent on the lower management.
A. total quality management 49. Which of the following best describes the
B. enterprise resource planning relationship between the number of “sigmas” and the
C. business process reengineering number of errors?
D. just-in-time
E. business process outsourcing
A. The higher the number of "sigmas," the greater
46. The total quality management philosophy was the number of errors.
developed by a number of American consultants. Which B. If the number of "sigmas" is a positive value, then
of the following individuals is one of them? the number of errors is always a negative value.
C. The higher the number of "sigmas," the smaller
A. W. Edward Deming the number of errors.
B. Philip Kotler D. The number of "sigmas" is independent of the
C. Michael Porter number of errors.
D. Henry Ford E. If the number of "sigmas" is negative, then the
E. Valerie Zeithaml number of errors is always positive.
47. Which of the following is true of W. Edward 50. A statistically based philosophy that aims to
Deming's beliefs about the total quality management reduce defects, boost productivity, eliminate waste, and
philosophy? cut costs throughout a company is known as _____.
A. Uvicon Inc. will be better prepared to hedge 66. Producing a standardized product in large
against potential adverse moves in currencies than Bionor volumes will:
Inc.
B. Uvicon Inc. will benefit from centralizing its A. result in diseconomies of scale.
production activities and Bionor Inc. from decentralizing. B. increase production efficiency.
C. Uvicon Inc. will have more bargaining power over C. increase production costs.
contract manufacturers than Bionor Inc. D. result in shorter production runs.
D. Uvicon Inc. will be better enabled to adapt to E. result in a high minimum efficient scale of output.
changes in consumer demand in regional markets than
Bionor Inc. 67. Adopting flexible manufacturing technology to
E. Uvicon Inc. will be better prepared to produce a wide variety of end products results in:
accommodate demands for local responsiveness than
Bionor Inc. A. increased setup times for complex equipment.
B. increased utilization of individual machines.
63. Which of the following statements is true about C. reduced quality control.
minimum efficient scale of output? D. increased unit cost of products.
E. diseconomies of scale.
A. With lesser utilization of capital equipment, the
chances of a firm realizing economies of scale increases. 68. Which of the following is an objective of lean
B. A plant must avoid operating at the minimum production?
efficient scale of output to realize all major plant-level
scale economies.
A. Reducing the quality of a product to keep unit E. It adds to the cost structure of a firm.
costs low
B. Reducing setup times for complex equipment 73. Flexible manufacturing technologies help a
C. Replacing customized production with mass company achieve mass customization, which increases
production its _____.
D. Decreasing utilization of individual machines
through scheduling A. cost structure
E. Increasing the level of minimum efficient scale of B. waste
output C. customer responsiveness
D. learning effects
69. Mass customization reconciles the two goals of: E. externalities
A. mass production and long production runs. 74. Amber Engineers Inc. wants to be able to
B. standardization and economies of scale. customize products for different national markets and in
C. high fixed costs and single production facility. turn increase its customer responsiveness. However, the
D. low cost and product customization. fixed costs associated with its production are high.
E. local responsiveness and decentralized Hence, these functions will be performed most
production. efficiently if Amber Engineers Inc.:
70. Which of the following is an implication of a A. sets up a production facility that is well suited for
mass production system? mass production.
B. establishes multiple manufacturing facilities in
A. It results in short production runs each major national market.
B. It fails to realize economies of scale C. increases each manufacturing unit's minimum
C. It reduces the number of defects and eliminates efficient scale of output.
waste. D. adopts flexible manufacturing technologies to
D. It helps to accommodate consumer preferences help achieve mass customization.
for product diversity E. locates its production unit in countries that have
E. It creates massive inventories that have to be drastic fluctuations in exchange rates.
stored in large warehouses.
75. Flexible manufacturing technologies enable
71. A _____ includes a grouping of various types of companies to:
machinery, a common materials handler, and a
computer to control the production of a family of parts A. establish multiple manufacturing facilities in each
or products. major national market.
B. build large inventories.
A. specialized asset C. achieve product standardization across markets.
B. dynamic capability D. increase their work in progress.
C. turnkey project E. produce customized products without a
D. flexible machine cell significant cost penalty.
E. just-in-time inventory
76. _____ refers to the production of a variety of
72. Which of the following is a consequence of using end products at a unit cost that could once be achieved
flexible machine cells? only through bulk production of a standardized output.
79. A product's value-to-weight ratio affects location 84. Which of the following holds true for products
decision primarily because of its influence on: with low value-to-weight ratios?
A. whether the product serves universal needs. 85. Which of the following statements is true of
B. the product’s life cycle. industrial products such as steel?
C. the product’s packaging.
D. the availability of flexible manufacturing A. They serve needs that are the same all over the
technology. world.
E. whether the product is produced using B. They have drastic national differences in
environmental friendly methods. consumer taste and preference.
C. The need for local responsiveness for these
81. Which of the following is true of high value-to- products is more than consumer products.
weight ratio products? D. It makes sense to produce these products in
multiple locations close to major markets.
A. They tend to have greater weight than other E. A plant must operate at the highest minimum
products. efficient scale of output for these products.
B. Their transportation costs account for a very
small percentage of total costs.
86. Which of the following is true of a product that E. Silver Times Inc. customizes heavy machines
serves universal needs? without the use of flexible manufacturing technologies.
87. Concentration of production makes most sense 91. Which of the following firms should concentrate
when: its production in a decentralized location?
89. Which of the following firms should concentrate A. Outsourcing production to developing countries
its production in a centralized location? B. Inshoring production into the home country
C. Selling product patents and technology to
A. Jupiter Inc. operates in an industry where the competitors
fixed costs are high and services of supporting industries D. Refraining from international trade
are of prime importance. E. Establishing top-to-bottom manufacturing
B. Star Goal Inc. manufactures consumer products operations
like processed food, apparel, and cosmetics for which
national differences in consumer taste and preference are 93. Which of the following is a hidden cost to basing
wide. production in a foreign location?
C. Uranious Inc. operates in an economy where
volatile fluctuations in exchange rates are frequently A. Low employee turnover
expected. B. Low labor costs
D. Earth Ventures Inc. is a mining company that C. Poor product quality
exports iron ore—a product with low value-to-weight D. Expensive higher education system
ratio—to various countries. E. Low inventory turnover
D. Local managers should not be empowered to
94. Which of the following is the initial reason for enhance their factories strategic standing within the
the establishment of a foreign production facility? corporation.
E. The strategy opposes the empowerment of local
A. Employee turnover is high. managers to enhance their factories strategic standing
B. Product quality is low. within the corporation.
C. Inventory turnover is low.
D. Exchange rate fluctuations are high. 98. The flow of skills and product offerings from
E. Labor costs are low. foreign subsidiary to home country and from foreign
subsidiary to foreign subsidiary is known as _____.
95. Which of the following is a result of pressure
from the headquarters of a company to customize a A. dumping
product to the demands of consumers A. centers B. reverse mentoring
that do not generate valuable knowledge. C. cultural relativism
B. globally dispersed centers of excellence. D. global learning
C. liabilities that add to the cost structure of the E. learning effects
company.
D. sweatshops where unskilled labor churns out low- 99. Due to the upward migration in the strategic role
cost goods. of foreign production sites, they are now viewed as:
E. low quality manufacturing centersin a particular
nation at a foreign production site?
A. centers that do not generate valuable knowledge.
A. Development of additional capabilities B. globally dispersed centers of excellence.
B. Centralization of production activities C. liabilities that add to the cost structure of the
C. Long production runs of standardized output company.
D. Low demand for local responsiveness. D. sweatshops where unskilled labor churns out low-
E. Basing production facilities in a single location. cost goods.
E. low quality manufacturing centers.
96. Which of the following is a source of
improvement in the capabilities of foreign factories? 100. Which of the following statements is true about
make-or-buy decisions?
A. The need to manufacture a product that serves
universal needs A. Make-or-buy decisions are applicable only to
B. Market stagnation in the country in which the physical products and not service activities.
factory is located B. Historically, most outsourcing decisions have
C. Apathy of the headquarters of a company toward involved the manufacture of physical products.
the foreign production facility C. Information technology companies in the United
D. Abundance of advanced factors of production in States are testing code in-house and outsourcing the code
the nation in which the factory is located writing process.
E. Decline in the education level of the country's D. Domestic businesses do not suffer from problems
population where the factory is located regarding outsourcing decisions.
E. Volatile exchange rate movements complicate
97. Which of the following is true according to the outsourcing decisions.
transnational strategy?
101. The Maroon Apparel company controls the
A. Foreign facilities are viewed as nothing more weaving, dyeing, cutting, and sewing of its merchandise.
than low-cost production facilities. Apart from these activities, it also manufactures
B. Valuable knowledge resides only in a firm’s buttons, zips, buckles, and other accessories for its
domestic operations. apparel. This is done in order to exercise tight control
C. Foreign sites can take the lead role for the design over its manufacturing processes and to reduce
of products to serve important regional markets. production costs. This strategy of the company is known
as _____.
B. It facilitates the transfer of proprietary product
A. vertical integration technology.
B. unrelated diversification C. It increases the number of subunits in an
C. horizontal integration organization.
D. mass customization D. It eliminates the need to invest in specialized
E. conglomerate diversification assets.
E. It prevents a firm from maintaining flexibility.
102. Which of the following is a recent trend among
international businesses regarding make-or-buy 106. A firm should make a component internally
decisions? rather than contracting it out to a supplier when:
A. Foreign facilities are considered nothing more A. substantial investments in specialized assets can
than low-cost production facilities. be avoided.
B. Research and design operations are restricted to B. the firm uses proprietary product technology
home-country production facilities. that helps in gaining competitive advantage.
C. Manufacturing facilities are being based in each C. it wants to reduce the number of subunits in the
major national market. organization.
D. Firms are avoiding time-based competition with D. the optimal location for manufacturing a product
each other. is beset by political risks.
E. Outsourcing decisions are expanding to embrace E. different tax regimes and exchange rate
the production of service activities. movements increase the complexity of transfer pricing
decisions.
103. A(n) _____ refers to an asset designed to
perform a specific task, whose value is significantly 107. If a firm possesses proprietary product
reduced in its next-best use. technology, the best option for that firm would be to:
A. increases the total capital required by a firm. 132. Geminia System, manufacturer of car
B. leaves a firm without a buffer stock of inventory. components, wants to set up a system that will help in
C. increases inventory holding costs, such as sending invoices to its customers once orders for input
warehousing and storage costs. supply are placed. Which of the following should the
D. is less efficient than traditional system in spotting company use to perform this function?
and fixing defective inputs.
E. lowers a company’s profitability as measured by A. Computer-aided design system
return on capital invested. B. Lean production
C. Just-in-time inventory system
128. Which of the following is a consequence of using D. Electronic data interchange
just-in-time inventory systems? E. Social networking
A. depend on one supplier for an important input. 134. Which of the following is a result of using
B. outsource the production of inputs only to electronic data interchange systems?
advanced countries.
C. hold an excess buffer stock of inventory. A. It helps a firm decentralize materials
D. source inputs from several suppliers located in management decisions to the plant level.
different countries. B. It helps achieve longer productions runs in
E. avoid using electronic data interchange. manufacturing units.
C. It excludes customers from the system.
130. Firms now typically use _____ via the Internet to D. It helps firms in reducing their inventory turnover.
coordinate the flow of materials into manufacturing, E. It delays the realization of economies of scale.
through manufacturing, and out to customers.
135. Which of the following has caused proprietary
software solutions to implement electronic data
interchange systems obsolete?