chap 014

Chapter 14 - Material Requirements Planning

Chapter 14Material Requirements Planning

Learning Objectives for Chapter 14:

1. Describe what MRP is and where it is best applied.2. Understand the source of the information used by the system.3. Demonstrate how to do an MRP “explosion.”4. Explain how order quantities are calculated in MRP systems.

True / False Questions

1. MRP stands for Manufacturing Requirements Planning. True False

2. MRP stands for Material Requirements Planning. True False

3. All firms maintain bill of materials (BOM) files, which are simply a sequencing of everything that goes into a final product. True False

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4. MRP is based on dependent demand. True False

5. MRP is most valuable in industries where a number of products are made in batches using the same productive equipment. True False

6. The master production schedule a master production schedule, which states the number of items to be produced during specific time periods. True False

7. MRP is least valuable in industries where a number of products are made in batches using the same productive equipment. True False

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8. MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. True False

9. MRP provides the schedule specifying when each part and component of an end item should be ordered or produced. True False

10. The deeper one looks into the product creation sequence, the more the requirements of dependent demand items tend to become more "lumpy." True False

11. The deeper one looks into the product creation sequence, the more the requirements of dependent demand items tend to smooth out and become even over time. True False

12. A master production schedule is an essential input to a material requirements planning (MRP) system. True False

13. A necessary input to the material requirements planning (MRP) system is an exception report. True False

14. A necessary input to the material requirements planning (MRP) system is an inventory records file. True False

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15. An output of MRP is a bill of materials (BOM) file. True False

16. A BOM file is often called a product structure file or product tree because it enumerates all of the component parts of the end item product. True False

17. Computing the quantity of each component that goes into a finished product requires expanding (or exploding) each item in a product structure file and summing at all levels. True False

18. A modular bill of materials includes items with fractional options. True False

19. A modular bill of materials is the term for an item that can be produced and stocked as a subassembly. True False

20. The MRP program performs its analysis from the bottom up of the product structure trees, imploding requirements level by level. True False

21. Net change MRP systems are "activity" driven. True False

22. In a net change MRP system requirements and schedules are updated whenever a transaction is processed that has an impact on the item. True False

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23. In a net change MRP system requirements and schedules are considered rigid and never updated. True False

24. Net change MRP reflects the exact status of each item managed by the system in "real time." True False

25. Low level coding in MRP indicates the exact status of each item managed by the system in "real time." True False

26. In a net change MRP program, a change in one item will result in a completely new inventory plan and schedule for every item in the master production schedule. True False

27. Since MRP systems focus on batch or lot-sized orders and JIT is focused on individual item production, the two systems are incompatible and cannot work together. True False

28. Generally, determining lot sizes in MRP systems is simple. True False

29. A lot-for-lot (L4L) lot sizing technique does not take into account setup costs or capacity limitations. True False

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30. The lot-for-lot (L4L) lot sizing technique minimizes carrying cost by taking into account setup costs and capacity limitations. True False

31. Lot-for-lot (L4L) is the most common lot sizing technique. True False

32. The economic order quantity (EOQ) lot sizing technique produces or acquires exactly the amount of product that is needed each time period with none carried over into future periods. True False

33. The economic order quantity (EOQ) lot sizing technique uses the "square root formula" to balance set-up cost, carrying cost and cost of stock-outs. True False

34. The economic order quantity (EOQ) lot sizing technique uses the "square root formula" to balance set-up cost and carrying cost. True False

35. The least total cost method (LTC) lot-sizing technique calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal. True False

36. The least unit cost method (LUC) lot-sizing technique calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal. True False

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37. The least unit cost method of lot-sizing technique adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost. True False

38. The least unit cost method of lot-sizing technique adds ordering, stock-out and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost. True False

39. "Projected available balance" is a term referring to unsold finished goods inventory. True False

40. Projected available balance is the amount of inventory that is expected as of the beginning of a period. True False

41. The three main inputs to an MRP system are the bill of materials, the master schedule and the inventory records file. True False

42. Enterprise Resource Planning (ERP) evolved from Materials Requirements Planning (MRP). True False

43. Enterprise resource planning (ERP) is a computer system that integrates application programs in accounting, sales, manufacturing, and the other functions in a firm. True False

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44. When implemented correctly, MRP links all areas of the business. True False

45. ERP vendors have set new standards in information integration that can cause significant cost to a company. True False

46. ERP vendors have set new standards in information integration that can significantly benefit a company. True False

47. Materials Requirements Planning (MRP) evolved from Enterprise Resource Planning (ERP). True False

Multiple Choice Questions

48. A BOM file is called which of the following? A. Product structure treeB. Stocking planC. Inventory usage recordD. Production parts planE. Time bucket schedule

49. Which of the following industry types has high expected benefits from the application of MRP? A. Fabricate-to-stockB. Fabricate-to-orderC. Assemble-to-stockD. Continuous processE. Service and repair parts

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50. Which of the following industry types has high expected benefits from the application of MRP? A. Fabricate-to-orderB. HospitalsC. Assemble-to-orderD. Aircraft manufacturersE. Oil refineries

51. Which of the following industry types will not benefit greatly from the application of MRP? A. Fabricate-to-orderB. Assemble-to-stockC. Assemble-to-orderD. Manufacture-to-orderE. None of the above

52. A product structure tree can do which of the following? A. Help to compute component usageB. Reduce product scrapC. Reduce labor overtimeD. Reduce regular time laborE. Locate raw material supplies

53. Which of the following is an input to the master production schedule (MPS)? A. Inventory records fileB. The aggregate planC. The bill of materialsD. The exception reportE. Planned order schedules

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54. Which of the following is one of the main purposes of a MRP system? A. Educate personnel in basic work rules.B. To determine the amount of materials needed to produce each end item.C. Stimulate the work force.D. Decrease labor requirements.E. Increase inventory accuracy.

55. One of the main purposes of a MRP system is which of the following? A. Track inventory levels.B. Create productive capacity.C. Decrease layers of management.D. Develop schedules specifying when each component should be ordered or produced.E. Upgrade manufacturing's professionalism.

56. Which of the following is most closely related to the reason a firm might implement MRP? A. So they can order the right partsB. So they can order parts sufficient for immediate useC. So they can insure that parts to arrive prior to when they are neededD. To assure appropriate quality levelsE. To keep process costs between the LCL and the UCL

57. MRP systems seek to achieve which of the following? A. Minimize lot sizesB. Determine the number of dependent demand items neededC. Relieve capacity bottlenecksD. Provide a yardstick for future improvementsE. Improve on JIT methods

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58. Which of the following is an input to the master production schedule? A. Prototype products from product developmentB. Aggregate component scheduleC. Peg reportsD. Exception reportsE. Forecasts of demand from random customers

59. Which of the following is an input to the master production schedule? A. Bill of materials (BOM) fileB. Inventory records fileC. Exception reportsD. Planned-order schedulesE. None of the above

60. Which of the following is an input file necessary to run an MRP system? A. Bill of materials (BOM) fileB. Quality management reportC. Exception reportsD. Planned-order schedulesE. Purchasing contracts

61. Which of the following is an input file necessary to run an MRP system? A. Exception reportB. Computer-aided-design filesC. Inventory records fileD. Personnel filesE. Planned order schedule

62. Which of the following is not a production activity report generated by MRP? A. Exception reportB. Planning reportC. Performance control reportD. Planned-order schedulesE. Bill of materials report

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63. In an MRP program, the program accesses the status of any file in specific periods called which of the following? A. Cubed time unitsB. Time bucketsC. BOM unitsD. Time modulesE. Time lines

64. Which of the following files allows us to retrace a material requirement upward in the product structure through each level, identifying each parent item that created the demand? A. Planning bill of materials fileB. Modular bill of materials fileC. Super bill of materials fileD. Exception report fileE. Peg record file

65. We would expect to see which of the following in an MRP system's inventory transactions file? A. End items producedB. Late/early delivery recordsC. Scrap partsD. Labor efficiencyE. Computer errors

66. In a typical inventory status record which of the following would you not expect to see? A. Scrap allowanceB. Order quantityC. Gross requirementsD. Planned-order releasesE. Lost items

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67. Which of the following is considered a primary report in an MRP system? A. Planning reportsB. Performance reportsC. Exception reportsD. Planned order schedulesE. Cycle counting reports

68. Which of the following is considered a secondary report in an MRP system? A. Planned order scheduleB. Performance reportsC. Inventory recordD. Firm orders from known customersE. Engineering change reports

69. Which of the following is considered a primary report in an MRP system? A. Planned order scheduleB. Peg reportC. Planning reportD. Inventory accuracy reportE. Aggregate production plan report

70. Which of the following is the net requirement using an MRP program if the gross requirement is 1,250 and the inventory on hand is 50? A. 1,200B. 1,300C. 1,150D. 2,450E. None of the above

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71. Which of the following is the net requirement using an MRP program if the gross requirement is 1,000 and the inventory on hand is 500? A. 1,000B. 950C. 500D. 400E. 350

72. Which of the following is the planned-order release using an MRP program if the gross requirement is 5,000 and the inventory on hand is 1,200? A. 5,000B. 4,500C. 3,800D. 1,200E. None of the above

73. Which of the following is the planned-order release using an MRP program if the gross requirement is 670 and the inventory on hand is 600? A. 670B. 600C. 530D. 70E. None of the above

74. Which of the following can be used for lot sizing in an MRP system? A. Low-level codingB. Time bucket sizeC. Least unit costD. Inventory record fileE. Peg inventory

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75. Which of the following is not a lot sizing technique used in MRP systems? A. Lot-for-lot (L4L)B. Economic order quantity (EOQ)C. Least total cost (LTC)D. Least unit cost (LUC)E. Warehouse loading factor (WLF)

76. Under the lot-for-lot (L4L) lot sizing technique as used in MRP, we would expect which of the following? A. A consistent lag of supply behind demandB. Minimized carrying costsC. Minimized set-up costsD. A just in time management philosophyE. Minimized quality problems

77. If annual demand is 6,125 units, annual holding cost is $5 per unit, and setup cost per order is $50, which of the following is the EOQ lot size? A. 350B. 247C. 230D. 185E. 78

78. If annual demand is 12,000 units, annual holding cost is $15 per unit, and setup cost per order is $25, which of the following is the EOQ lot size? A. 2,000B. 1,200C. 1,000D. 300E. 200

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79. Which of the following is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal? A. Economic Order QuantityB. Lot for lotC. Least total costD. Least unit costE. ABC analysis

80. Which of the following is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot size in which these are most nearly equal? A. KanbanB. Just-in-time systemC. MRPD. Least unit costE. Least total cost

81. Which of the following is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost? A. Economic order quantityB. Lot-for-lotC. Least total costD. Least unit costE. Inventory item averaging

Fill in the Blank Questions

82. What is the name for demand caused by the demand for a higher level item? ____________________ ________________________________________

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83. What is the name for a bill of materials that includes items with fractional options? ______________________ ________________________________________

84. In MRP, how is demand information for a level 0 (zero) item derived? _________________________ ________________________________________

85. What is the name given to the manufacturing software that combines MRP and JIT logic? ____________________ ________________________________________

86. What does it mean when a super bill of materials specifies half of a component part in an assembly? ___________________________________________________ ________________________________________

87. What is the planned-order release using an MRP program if the gross requirement is 1,600 and the inventory on hand is 600? ______ ________________________________________

88. If annual demand is 1,000 units, annual holding cost is $0.50 per unit, and the cost per order is $10, what is the EOQ? ____________ ________________________________________

89. What are the three main inputs to an MRP program?1. _______________2. _______________3. _______________ ________________________________________

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90. Demand in for an item located in level 3 of a product structure tree depends on demand for an item in the next higher level. What is that level called? ______________ ________________________________________

91. Name three major ERP software vendors.1. _______________2. _______________3. _______________ ________________________________________

Essay Questions

92. Discuss the importance of inventory record accuracy to an MRP system.

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Chapter 14 Material Requirements Planning Answer Key

True / False Questions

1. MRP stands for Manufacturing Requirements Planning. FALSE

AACSB: AnalyticDifficulty: EasyLearning Objective: 1Taxonomy: KnowledgeTopic: From Push to Pull and Where MRP Can Be Used

2. MRP stands for Material Requirements Planning. TRUE


3. All firms maintain bill of materials (BOM) files, which are simply a sequencing of everything that goes into a final product. TRUE

AACSB: AnalyticDifficulty: EasyLearning Objective: 2Taxonomy: KnowledgeTopic: Material Requirements Planning System Structure and An Example Using MRP

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4. MRP is based on dependent demand. TRUE


5. MRP is most valuable in industries where a number of products are made in batches using the same productive equipment. TRUE


6. The master production schedule a master production schedule, which states the number of items to be produced during specific time periods. TRUE


7. MRP is least valuable in industries where a number of products are made in batches using the same productive equipment. FALSE


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8. MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. TRUE


9. MRP provides the schedule specifying when each part and component of an end item should be ordered or produced. TRUE


10. The deeper one looks into the product creation sequence, the more the requirements of dependent demand items tend to become more "lumpy." TRUE

AACSB: AnalyticDifficulty: MediumLearning Objective: 2Taxonomy: KnowledgeTopic: Material Requirements Planning System Structure and An Example Using MRP

11. The deeper one looks into the product creation sequence, the more the requirements of dependent demand items tend to smooth out and become even over time. FALSE


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12. A master production schedule is an essential input to a material requirements planning (MRP) system. TRUE


13. A necessary input to the material requirements planning (MRP) system is an exception report. FALSE


14. A necessary input to the material requirements planning (MRP) system is an inventory records file. TRUE


15. An output of MRP is a bill of materials (BOM) file. FALSE


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16. A BOM file is often called a product structure file or product tree because it enumerates all of the component parts of the end item product. TRUE


17. Computing the quantity of each component that goes into a finished product requires expanding (or exploding) each item in a product structure file and summing at all levels. TRUE

AACSB: AnalyticDifficulty: EasyLearning Objective: 3Taxonomy: KnowledgeTopic: An Example Using MRP

18. A modular bill of materials includes items with fractional options. FALSE


19. A modular bill of materials is the term for an item that can be produced and stocked as a subassembly. TRUE


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20. The MRP program performs its analysis from the bottom up of the product structure trees, imploding requirements level by level. FALSE


21. Net change MRP systems are "activity" driven. TRUE


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22. In a net change MRP system requirements and schedules are updated whenever a transaction is processed that has an impact on the item. TRUE


23. In a net change MRP system requirements and schedules are considered rigid and never updated. FALSE


24. Net change MRP reflects the exact status of each item managed by the system in "real time." TRUE


25. Low level coding in MRP indicates the exact status of each item managed by the system in "real time." FALSE


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26. In a net change MRP program, a change in one item will result in a completely new inventory plan and schedule for every item in the master production schedule. FALSE


27. Since MRP systems focus on batch or lot-sized orders and JIT is focused on individual item production, the two systems are incompatible and cannot work together. FALSE

AACSB: AnalyticDifficulty: EasyLearning Objective: 4Taxonomy: KnowledgeTopic: Lot Sizing in MRP Systems

28. Generally, determining lot sizes in MRP systems is simple. FALSE


29. A lot-for-lot (L4L) lot sizing technique does not take into account setup costs or capacity limitations. TRUE


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30. The lot-for-lot (L4L) lot sizing technique minimizes carrying cost by taking into account setup costs and capacity limitations. FALSE

AACSB: AnalyticDifficulty: MediumLearning Objective: 4Taxonomy: KnowledgeTopic: Lot Sizing in MRP Systems

31. Lot-for-lot (L4L) is the most common lot sizing technique. TRUE


32. The economic order quantity (EOQ) lot sizing technique produces or acquires exactly the amount of product that is needed each time period with none carried over into future periods. FALSE


33. The economic order quantity (EOQ) lot sizing technique uses the "square root formula" to balance set-up cost, carrying cost and cost of stock-outs. FALSE


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34. The economic order quantity (EOQ) lot sizing technique uses the "square root formula" to balance set-up cost and carrying cost. TRUE


35. The least total cost method (LTC) lot-sizing technique calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal. TRUE


36. The least unit cost method (LUC) lot-sizing technique calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal. FALSE


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37. The least unit cost method of lot-sizing technique adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost. TRUE


38. The least unit cost method of lot-sizing technique adds ordering, stock-out and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost. FALSE


39. "Projected available balance" is a term referring to unsold finished goods inventory. FALSE


40. Projected available balance is the amount of inventory that is expected as of the beginning of a period. TRUE


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41. The three main inputs to an MRP system are the bill of materials, the master schedule and the inventory records file. TRUE


42. Enterprise Resource Planning (ERP) evolved from Materials Requirements Planning (MRP). TRUE


43. Enterprise resource planning (ERP) is a computer system that integrates application programs in accounting, sales, manufacturing, and the other functions in a firm. TRUE


44. When implemented correctly, MRP links all areas of the business. FALSE


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45. ERP vendors have set new standards in information integration that can cause significant cost to a company. FALSE


46. ERP vendors have set new standards in information integration that can significantly benefit a company. TRUE


47. Materials Requirements Planning (MRP) evolved from Enterprise Resource Planning (ERP). FALSE


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Multiple Choice Questions

48. A BOM file is called which of the following? A. Product structure treeB. Stocking planC. Inventory usage recordD. Production parts planE. Time bucket schedule


49. Which of the following industry types has high expected benefits from the application of MRP? A. Fabricate-to-stockB. Fabricate-to-orderC. Assemble-to-stockD. Continuous processE. Service and repair parts

AACSB: AnalyticDifficulty: MediumLearning Objective: 1Taxonomy: KnowledgeTopic: From Push to Pull and Where MRP Can Be Used

50. Which of the following industry types has high expected benefits from the application of MRP? A. Fabricate-to-orderB. HospitalsC. Assemble-to-orderD. Aircraft manufacturersE. Oil refineries


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51. Which of the following industry types will not benefit greatly from the application of MRP? A. Fabricate-to-orderB. Assemble-to-stockC. Assemble-to-orderD. Manufacture-to-orderE. None of the above


52. A product structure tree can do which of the following? A. Help to compute component usageB. Reduce product scrapC. Reduce labor overtimeD. Reduce regular time laborE. Locate raw material supplies


53. Which of the following is an input to the master production schedule (MPS)? A. Inventory records fileB. The aggregate planC. The bill of materialsD. The exception reportE. Planned order schedules


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54. Which of the following is one of the main purposes of a MRP system? A. Educate personnel in basic work rules.B. To determine the amount of materials needed to produce each end item.C. Stimulate the work force.D. Decrease labor requirements.E. Increase inventory accuracy.


55. One of the main purposes of a MRP system is which of the following? A. Track inventory levels.B. Create productive capacity.C. Decrease layers of management.D. Develop schedules specifying when each component should be ordered or produced.E. Upgrade manufacturing's professionalism.


56. Which of the following is most closely related to the reason a firm might implement MRP? A. So they can order the right partsB. So they can order parts sufficient for immediate useC. So they can insure that parts to arrive prior to when they are neededD. To assure appropriate quality levelsE. To keep process costs between the LCL and the UCL


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57. MRP systems seek to achieve which of the following? A. Minimize lot sizesB. Determine the number of dependent demand items neededC. Relieve capacity bottlenecksD. Provide a yardstick for future improvementsE. Improve on JIT methods


58. Which of the following is an input to the master production schedule? A. Prototype products from product developmentB. Aggregate component scheduleC. Peg reportsD. Exception reportsE. Forecasts of demand from random customers


59. Which of the following is an input to the master production schedule? A. Bill of materials (BOM) fileB. Inventory records fileC. Exception reportsD. Planned-order schedulesE. None of the above


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60. Which of the following is an input file necessary to run an MRP system? A. Bill of materials (BOM) fileB. Quality management reportC. Exception reportsD. Planned-order schedulesE. Purchasing contracts


61. Which of the following is an input file necessary to run an MRP system? A. Exception reportB. Computer-aided-design filesC. Inventory records fileD. Personnel filesE. Planned order schedule


62. Which of the following is not a production activity report generated by MRP? A. Exception reportB. Planning reportC. Performance control reportD. Planned-order schedulesE. Bill of materials report


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63. In an MRP program, the program accesses the status of any file in specific periods called which of the following? A. Cubed time unitsB. Time bucketsC. BOM unitsD. Time modulesE. Time lines


64. Which of the following files allows us to retrace a material requirement upward in the product structure through each level, identifying each parent item that created the demand? A. Planning bill of materials fileB. Modular bill of materials fileC. Super bill of materials fileD. Exception report fileE. Peg record file


65. We would expect to see which of the following in an MRP system's inventory transactions file? A. End items producedB. Late/early delivery recordsC. Scrap partsD. Labor efficiencyE. Computer errors


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66. In a typical inventory status record which of the following would you not expect to see? A. Scrap allowanceB. Order quantityC. Gross requirementsD. Planned-order releasesE. Lost items


67. Which of the following is considered a primary report in an MRP system? A. Planning reportsB. Performance reportsC. Exception reportsD. Planned order schedulesE. Cycle counting reports


68. Which of the following is considered a secondary report in an MRP system? A. Planned order scheduleB. Performance reportsC. Inventory recordD. Firm orders from known customersE. Engineering change reports


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69. Which of the following is considered a primary report in an MRP system? A. Planned order scheduleB. Peg reportC. Planning reportD. Inventory accuracy reportE. Aggregate production plan report


70. Which of the following is the net requirement using an MRP program if the gross requirement is 1,250 and the inventory on hand is 50? A. 1,200B. 1,300C. 1,150D. 2,450E. None of the above

AACSB: AnalyticDifficulty: EasyLearning Objective: 4Taxonomy: AnalysisTopic: Lot Sizing in MRP Systems

71. Which of the following is the net requirement using an MRP program if the gross requirement is 1,000 and the inventory on hand is 500? A. 1,000B. 950C. 500D. 400E. 350


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72. Which of the following is the planned-order release using an MRP program if the gross requirement is 5,000 and the inventory on hand is 1,200? A. 5,000B. 4,500C. 3,800D. 1,200E. None of the above


73. Which of the following is the planned-order release using an MRP program if the gross requirement is 670 and the inventory on hand is 600? A. 670B. 600C. 530D. 70E. None of the above


74. Which of the following can be used for lot sizing in an MRP system? A. Low-level codingB. Time bucket sizeC. Least unit costD. Inventory record fileE. Peg inventory


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75. Which of the following is not a lot sizing technique used in MRP systems? A. Lot-for-lot (L4L)B. Economic order quantity (EOQ)C. Least total cost (LTC)D. Least unit cost (LUC)E. Warehouse loading factor (WLF)


76. Under the lot-for-lot (L4L) lot sizing technique as used in MRP, we would expect which of the following? A. A consistent lag of supply behind demandB. Minimized carrying costsC. Minimized set-up costsD. A just in time management philosophyE. Minimized quality problems


77. If annual demand is 6,125 units, annual holding cost is $5 per unit, and setup cost per order is $50, which of the following is the EOQ lot size? A. 350B. 247C. 230D. 185E. 78

AACSB: AnalyticDifficulty: MediumLearning Objective: 4Taxonomy: AnalysisTopic: Lot Sizing in MRP Systems

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78. If annual demand is 12,000 units, annual holding cost is $15 per unit, and setup cost per order is $25, which of the following is the EOQ lot size? A. 2,000B. 1,200C. 1,000D. 300E. 200


79. Which of the following is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal? A. Economic Order QuantityB. Lot for lotC. Least total costD. Least unit costE. ABC analysis


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80. Which of the following is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot size in which these are most nearly equal? A. KanbanB. Just-in-time systemC. MRPD. Least unit costE. Least total cost


81. Which of the following is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost? A. Economic order quantityB. Lot-for-lotC. Least total costD. Least unit costE. Inventory item averaging


Fill in the Blank Questions

82. What is the name for demand caused by the demand for a higher level item? ____________________ Dependent demand


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83. What is the name for a bill of materials that includes items with fractional options? ______________________ Super bill of materials


84. In MRP, how is demand information for a level 0 (zero) item derived? _________________________ From the master production scheduling process


85. What is the name given to the manufacturing software that combines MRP and JIT logic? ____________________ Flow management


86. What does it mean when a super bill of materials specifies half of a component part in an assembly? ___________________________________________________ It means that 50% of the units assembled will include that component and 50% will not.

AACSB: AnalyticDifficulty: MediumLearning Objective: 3Taxonomy: KnowledgeTopic: An Example Using MRP

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87. What is the planned-order release using an MRP program if the gross requirement is 1,600 and the inventory on hand is 600? ______ 1,000


88. If annual demand is 1,000 units, annual holding cost is $0.50 per unit, and the cost per order is $10, what is the EOQ? ____________ 200


89. What are the three main inputs to an MRP program?1. _______________2. _______________3. _______________ 1. Bill of materials 2. Master schedule 3. Inventory records file


90. Demand in for an item located in level 3 of a product structure tree depends on demand for an item in the next higher level. What is that level called? ______________ Level 2


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91. Name three major ERP software vendors.1. _______________2. _______________3. _______________ 1. Oracle 2. SAP 3. i2 Technologies


Essay Questions

92. Discuss the importance of inventory record accuracy to an MRP system.

A satisfactory answer to this question will require the student to extrapolate from Chapter 13, page 412-14 into the MRP context. The discussion in Chapter 13 essentially assumes the perfection of inventory (and bill of material) records. However, the discussion in Chapter 13 indicates that perfect agreement between the computer files and actual storeroom content may be rare instead of common. Inaccurate inventory records may cause, for example, orders of excess inventory or for assembly to be scheduled even though there is an inadequate supply of components to support that assembly. Either occurrence can cause significant waste of resources, time and money. No MRP system can deliver positive results when the basic input data is faulty. A good way to summarize this is the old adage "garbage-in, garbage-out."

AACSB: AnalyticDifficulty: MediumLearning Objective: 4Taxonomy: SynthesisTopic: Lot Sizing in MRP Systems

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true false questions

mrp program

output of mrp

mrp explosion

imploding requirements

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net change mrp systems

product structure file