MCQ
1. What does SCOM stand for?
A) Supply Chain and Operations Management
B) Strategic Cost Optimization Method
C) Service and Customer Order Management
D) Systematic Control of Materials
2. __________ is the acronym for the widely used quality management standards that help companies
document their processes (example: ISO 9001).
3. (True / False) In a process layout (functional layout), similar machines are grouped together in the same
area.
Question 1: Break-Even Analysis (Evaluating a New Service)
A local coffee shop is considering adding fresh-baked bagels to its menu. The shop owner estimates the
following costs:
⚫ Fixed costs per year (oven lease, additional labor, display case): $8,500
⚫ Variable costs per bagel (ingredients, packaging): $0.75
⚫ Selling price per bagel: $2.50
Required:
a. Calculate the break-even quantity for bagels using the algebraic formula.
b. If the owner forecasts selling 6,000 bagels in the first year, what will be the total contribution to profit?
c. How many bagels must be sold to achieve a profit target of $5,000 per year?
Question 2: REL Chart
a. Explain the meaning of each rating code (A, E, I, O, U). What does the code ‘X’ typically represent, and why is it
not used in this chart?
b. Fill the Relationship
Raw Material
Receiving Cutting Assembly Finishing Shipping
Storage
Receiving
Raw Material
Storage
Cutting
Assembly
Finishing
c. Briefly explain one advantage and one disadvantage of using a REL chart compared to a purely quantitative
method like the Quadratic Assignment Problem (QAP).
Question 3: Forecast Error
A retail store tracks the monthly demand for a popular winter jacket. The table below shows actual sales and
forecasts for the past 6 months.
Month Actual Demand (Dt) Forecast (Ft)
1 150 140
2 180 190
3 200 210
4 220 215
5 170 180
6 190 185
Required:
Calculate the following five forecast error measures for the 6-month period. Show your calculations clearly.
1. CFE (Cumulative Forecast Error / Bias)
2. MSE (Mean Squared Error)
3. MAD (Mean Absolute Deviation)
4. MAPE (Mean Absolute Percent Error) – express as a percentage
5. Eˉ (Average Forecast Error / Mean Bias)
Question 4: Lot Sizing
The museum gift shop sells bird feeders. Weekly demand is 18 units, and the museum operates 52
weeks per year. Each feeder costs $60 from the supplier. The cost to place an order is $45, and the
annual holding cost is 25% of the unit cost (so H=$15 per unit per year). Currently, the museum
orders in lot sizes of 390 units. The supplier’s lead time for delivery is 3 weeks. The museum pays
for the inventory from the moment the supplier ships the order.
The supplier offers an alternative: if the museum increases its order quantity to 468 units, the supplier
will give priority and reduce the lead time to 2 weeks.
Answer the following:
• For the current policy (Q=390 units, L=3 weeks):
a) Compute the average cycle inventory (units) and pipeline inventory (units).
b) Compute the total annual cost consisting of ordering cost, cycle holding cost, and pipeline holding
cost.
• Compute the Economic Order Quantity (EOQ) ignoring the lead time change. What is the total annual
cost (ordering + cycle holding + pipeline holding) if the museum uses the EOQ? Assume the lead time
remains 3 weeks for the pipeline inventory.
• For the alternative policy (Q=468, L=2 weeks):
a) Compute the average cycle inventory and pipeline inventory.
b) Compute the total annual cost (ordering + cycle holding + pipeline holding).