Chap 014 1v2r5
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Chapter 14 - Material Requirements Planning
Chapter 14 Material Requirements Planning Learning Objectives for Chapter 14: 1. 2. 3. 4.
Describe what MRP is and where it is best applied. Understand the source of the information used by the system. Demonstrate how to do an MRP “explosion.” 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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Chapter 14 - Material Requirements Planning
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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Chapter 14 - Material Requirements Planning
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
14-3
Chapter 14 - Material Requirements Planning
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
14-4
Chapter 14 - Material Requirements Planning
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 setup costs or capacity limitations. True False
14-5
Chapter 14 - Material Requirements Planning
30. The lot-for-lot (L4L) lot sizing technique minimizes carrying cost by taking into 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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Chapter 14 - Material Requirements Planning
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 ing, sales, manufacturing, and the other functions in a firm. True False
14-7
Chapter 14 - Material Requirements Planning
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 tree B. Stocking plan C. Inventory usage record D. Production parts plan E. Time bucket schedule
49. Which of the following industry types has high expected benefits from the application of MRP? A. Fabricate-to-stock B. Fabricate-to-order C. Assemble-to-stock D. Continuous process E. Service and repair parts
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Chapter 14 - Material Requirements Planning
50. Which of the following industry types has high expected benefits from the application of MRP? A. Fabricate-to-order B. Hospitals C. Assemble-to-order D. Aircraft manufacturers E. Oil refineries
51. Which of the following industry types will not benefit greatly from the application of MRP? A. Fabricate-to-order B. Assemble-to-stock C. Assemble-to-order D. Manufacture-to-order E. None of the above
52. A product structure tree can do which of the following? A. Help to compute component usage B. Reduce product scrap C. Reduce labor overtime D. Reduce regular time labor E. Locate raw material supplies
53. Which of the following is an input to the master production schedule (MPS)? A. Inventory records file B. The aggregate plan C. The bill of materials D. The exception report E. Planned order schedules
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Chapter 14 - Material Requirements Planning
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 parts B. So they can order parts sufficient for immediate use C. So they can insure that parts to arrive prior to when they are needed D. To assure appropriate quality levels E. To keep process costs between the LCL and the UCL
57. MRP systems seek to achieve which of the following? A. Minimize lot sizes B. Determine the number of dependent demand items needed C. Relieve capacity bottlenecks D. Provide a yardstick for future improvements E. Improve on JIT methods
14-10
Chapter 14 - Material Requirements Planning
58. Which of the following is an input to the master production schedule? A. Prototype products from product development B. Aggregate component schedule C. Peg reports D. Exception reports E. Forecasts of demand from random customers
59. Which of the following is an input to the master production schedule? A. Bill of materials (BOM) file B. Inventory records file C. Exception reports D. Planned-order schedules E. None of the above
60. Which of the following is an input file necessary to run an MRP system? A. Bill of materials (BOM) file B. Quality management report C. Exception reports D. Planned-order schedules E. Purchasing contracts
61. Which of the following is an input file necessary to run an MRP system? A. Exception report B. Computer-aided-design files C. Inventory records file D. Personnel files E. Planned order schedule
62. Which of the following is not a production activity report generated by MRP? A. Exception report B. Planning report C. Performance control report D. Planned-order schedules E. Bill of materials report
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Chapter 14 - Material Requirements Planning
63. In an MRP program, the program accesses the status of any file in specific periods called which of the following? A. Cubed time units B. Time buckets C. BOM units D. Time modules E. 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 file B. Modular bill of materials file C. Super bill of materials file D. Exception report file E. Peg record file
65. We would expect to see which of the following in an MRP system's inventory transactions file? A. End items produced B. Late/early delivery records C. Scrap parts D. Labor efficiency E. Computer errors
66. In a typical inventory status record which of the following would you not expect to see? A. Scrap allowance B. Order quantity C. Gross requirements D. Planned-order releases E. Lost items
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Chapter 14 - Material Requirements Planning
67. Which of the following is considered a primary report in an MRP system? A. Planning reports B. Performance reports C. Exception reports D. Planned order schedules E. Cycle counting reports
68. Which of the following is considered a secondary report in an MRP system? A. Planned order schedule B. Performance reports C. Inventory record D. Firm orders from known customers E. Engineering change reports
69. Which of the following is considered a primary report in an MRP system? A. Planned order schedule B. Peg report C. Planning report D. Inventory accuracy report E. 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. 1,200 B. 1,300 C. 1,150 D. 2,450 E. None of the above
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Chapter 14 - Material Requirements Planning
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. 1,000 B. 950 C. 500 D. 400 E. 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. 5,000 B. 4,500 C. 3,800 D. 1,200 E. 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. 670 B. 600 C. 530 D. 70 E. None of the above
74. Which of the following can be used for lot sizing in an MRP system? A. Low-level coding B. Time bucket size C. Least unit cost D. Inventory record file E. Peg inventory
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Chapter 14 - Material Requirements Planning
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 demand B. Minimized carrying costs C. Minimized set-up costs D. A just in time management philosophy E. 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. 350 B. 247 C. 230 D. 185 E. 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. 2,000 B. 1,200 C. 1,000 D. 300 E. 200
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Chapter 14 - Material Requirements Planning
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 Quantity B. Lot for lot C. Least total cost D. Least unit cost E. 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. Kanban B. Just-in-time system C. MRP D. Least unit cost E. 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 quantity B. Lot-for-lot C. Least total cost D. Least unit cost E. 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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Chapter 14 - Material Requirements Planning
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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Chapter 14 - Material Requirements Planning
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
Chapter 14 Material Requirements Planning Answer Key
True / False Questions
1. MRP stands for Manufacturing Requirements Planning. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
2. MRP stands for Material Requirements Planning. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
3. All firms maintain bill of materials (BOM) files, which are simply a sequencing of everything that goes into a final product. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14-19
Chapter 14 - Material Requirements Planning
4. MRP is based on dependent demand. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
5. MRP is most valuable in industries where a number of products are made in batches using the same productive equipment. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
6. The master production schedule a master production schedule, which states the number of items to be produced during specific time periods. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
7. MRP is least valuable in industries where a number of products are made in batches using the same productive equipment. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-20
Chapter 14 - Material Requirements Planning
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
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
9. MRP provides the schedule specifying when each part and component of an end item should be ordered or produced. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
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: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: 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
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14-21
Chapter 14 - Material Requirements Planning
12. A master production schedule is an essential input to a material requirements planning (MRP) system. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
13. A necessary input to the material requirements planning (MRP) system is an exception report. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14. A necessary input to the material requirements planning (MRP) system is an inventory records file. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
15. An output of MRP is a bill of materials (BOM) file. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14-22
Chapter 14 - Material Requirements Planning
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
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
18. A modular bill of materials includes items with fractional options. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
19. A modular bill of materials is the term for an item that can be produced and stocked as a subassembly. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-23
Chapter 14 - Material Requirements Planning
20. The MRP program performs its analysis from the bottom up of the product structure trees, imploding requirements level by level. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
21. Net change MRP systems are "activity" driven. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
14-24
Chapter 14 - Material Requirements Planning
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
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
23. In a net change MRP system requirements and schedules are considered rigid and never updated. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
24. Net change MRP reflects the exact status of each item managed by the system in "real time." TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
25. Low level coding in MRP indicates the exact status of each item managed by the system in "real time." FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14-25
Chapter 14 - Material Requirements Planning
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
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
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: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
28. Generally, determining lot sizes in MRP systems is simple. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
29. A lot-for-lot (L4L) lot sizing technique does not take into setup costs or capacity limitations. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
14-26
Chapter 14 - Material Requirements Planning
30. The lot-for-lot (L4L) lot sizing technique minimizes carrying cost by taking into setup costs and capacity limitations. FALSE
AACSB: Analytic Difficulty: Medium Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
31. Lot-for-lot (L4L) is the most common lot sizing technique. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
14-27
Chapter 14 - Material Requirements Planning
34. The economic order quantity (EOQ) lot sizing technique uses the "square root formula" to balance set-up cost and carrying cost. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
14-28
Chapter 14 - Material Requirements Planning
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
39. "Projected available balance" is a term referring to unsold finished goods inventory. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
40. Projected available balance is the amount of inventory that is expected as of the beginning of a period. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14-29
Chapter 14 - Material Requirements Planning
41. The three main inputs to an MRP system are the bill of materials, the master schedule and the inventory records file. TRUE
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
42. Enterprise Resource Planning (ERP) evolved from Materials Requirements Planning (MRP). TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
43. Enterprise resource planning (ERP) is a computer system that integrates application programs in ing, sales, manufacturing, and the other functions in a firm. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
44. When implemented correctly, MRP links all areas of the business. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-30
Chapter 14 - Material Requirements Planning
45. ERP vendors have set new standards in information integration that can cause significant cost to a company. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
46. ERP vendors have set new standards in information integration that can significantly benefit a company. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
47. Materials Requirements Planning (MRP) evolved from Enterprise Resource Planning (ERP). FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-31
Chapter 14 - Material Requirements Planning Multiple Choice Questions
48. A BOM file is called which of the following? A. Product structure tree B. Stocking plan C. Inventory usage record D. Production parts plan E. Time bucket schedule
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
49. Which of the following industry types has high expected benefits from the application of MRP? A. Fabricate-to-stock B. Fabricate-to-order C. Assemble-to-stock D. Continuous process E. Service and repair parts
AACSB: Analytic Difficulty: Medium Learning Objective: 1 Taxonomy: Knowledge Topic: 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-order B. Hospitals C. Assemble-to-order D. Aircraft manufacturers E. Oil refineries
AACSB: Analytic Difficulty: Medium Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-32
Chapter 14 - Material Requirements Planning
51. Which of the following industry types will not benefit greatly from the application of MRP? A. Fabricate-to-order B. Assemble-to-stock C. Assemble-to-order D. Manufacture-to-order E. None of the above
AACSB: Analytic Difficulty: Medium Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
52. A product structure tree can do which of the following? A. Help to compute component usage B. Reduce product scrap C. Reduce labor overtime D. Reduce regular time labor E. Locate raw material supplies
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
53. Which of the following is an input to the master production schedule (MPS)? A. Inventory records file B. The aggregate plan C. The bill of materials D. The exception report E. Planned order schedules
AACSB: Analytic Difficulty: Medium Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-33
Chapter 14 - Material Requirements Planning
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.
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
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.
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
56. Which of the following is most closely related to the reason a firm might implement MRP? A. So they can order the right parts B. So they can order parts sufficient for immediate use C. So they can insure that parts to arrive prior to when they are needed D. To assure appropriate quality levels E. To keep process costs between the LCL and the UCL
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-34
Chapter 14 - Material Requirements Planning
57. MRP systems seek to achieve which of the following? A. Minimize lot sizes B. Determine the number of dependent demand items needed C. Relieve capacity bottlenecks D. Provide a yardstick for future improvements E. Improve on JIT methods
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
58. Which of the following is an input to the master production schedule? A. Prototype products from product development B. Aggregate component schedule C. Peg reports D. Exception reports E. Forecasts of demand from random customers
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
59. Which of the following is an input to the master production schedule? A. Bill of materials (BOM) file B. Inventory records file C. Exception reports D. Planned-order schedules E. None of the above
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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Chapter 14 - Material Requirements Planning
60. Which of the following is an input file necessary to run an MRP system? A. Bill of materials (BOM) file B. Quality management report C. Exception reports D. Planned-order schedules E. Purchasing contracts
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
61. Which of the following is an input file necessary to run an MRP system? A. Exception report B. Computer-aided-design files C. Inventory records file D. Personnel files E. Planned order schedule
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
62. Which of the following is not a production activity report generated by MRP? A. Exception report B. Planning report C. Performance control report D. Planned-order schedules E. Bill of materials report
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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Chapter 14 - Material Requirements Planning
63. In an MRP program, the program accesses the status of any file in specific periods called which of the following? A. Cubed time units B. Time buckets C. BOM units D. Time modules E. Time lines
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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 file B. Modular bill of materials file C. Super bill of materials file D. Exception report file E. Peg record file
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
65. We would expect to see which of the following in an MRP system's inventory transactions file? A. End items produced B. Late/early delivery records C. Scrap parts D. Labor efficiency E. Computer errors
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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Chapter 14 - Material Requirements Planning
66. In a typical inventory status record which of the following would you not expect to see? A. Scrap allowance B. Order quantity C. Gross requirements D. Planned-order releases E. Lost items
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
67. Which of the following is considered a primary report in an MRP system? A. Planning reports B. Performance reports C. Exception reports D. Planned order schedules E. Cycle counting reports
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
68. Which of the following is considered a secondary report in an MRP system? A. Planned order schedule B. Performance reports C. Inventory record D. Firm orders from known customers E. Engineering change reports
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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Chapter 14 - Material Requirements Planning
69. Which of the following is considered a primary report in an MRP system? A. Planned order schedule B. Peg report C. Planning report D. Inventory accuracy report E. Aggregate production plan report
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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. 1,200 B. 1,300 C. 1,150 D. 2,450 E. None of the above
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Analysis Topic: 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. 1,000 B. 950 C. 500 D. 400 E. 350
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
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Chapter 14 - Material Requirements Planning
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. 5,000 B. 4,500 C. 3,800 D. 1,200 E. None of the above
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
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. 670 B. 600 C. 530 D. 70 E. None of the above
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
74. Which of the following can be used for lot sizing in an MRP system? A. Low-level coding B. Time bucket size C. Least unit cost D. Inventory record file E. Peg inventory
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
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Chapter 14 - Material Requirements Planning
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)
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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 demand B. Minimized carrying costs C. Minimized set-up costs D. A just in time management philosophy E. Minimized quality problems
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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. 350 B. 247 C. 230 D. 185 E. 78
AACSB: Analytic Difficulty: Medium Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
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Chapter 14 - Material Requirements Planning
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. 2,000 B. 1,200 C. 1,000 D. 300 E. 200
AACSB: Analytic Difficulty: Medium Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
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 Quantity B. Lot for lot C. Least total cost D. Least unit cost E. ABC analysis
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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Chapter 14 - Material Requirements Planning
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. Kanban B. Just-in-time system C. MRP D. Least unit cost E. Least total cost
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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 quantity B. Lot-for-lot C. Least total cost D. Least unit cost E. Inventory item averaging
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
Fill in the Blank Questions
82. What is the name for demand caused by the demand for a higher level item? ____________________ Dependent demand
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
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Chapter 14 - Material Requirements Planning
83. What is the name for a bill of materials that includes items with fractional options? ______________________ Super bill of materials
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
84. In MRP, how is demand information for a level 0 (zero) item derived? _________________________ From the master production scheduling process
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
85. What is the name given to the manufacturing software that combines MRP and JIT logic? ____________________ Flow management
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
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: Analytic Difficulty: Medium Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
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Chapter 14 - Material Requirements Planning
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Medium Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
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Chapter 14 - Material Requirements Planning
91. Name three major ERP software vendors. 1. _______________ 2. _______________ 3. _______________ 1. Oracle 2. SAP 3. i2 Technologies
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
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 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: Analytic Difficulty: Medium Learning Objective: 4 Taxonomy: Synthesis Topic: Lot Sizing in MRP Systems
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Chapter 14 Material Requirements Planning Learning Objectives for Chapter 14: 1. 2. 3. 4.
Describe what MRP is and where it is best applied. Understand the source of the information used by the system. Demonstrate how to do an MRP “explosion.” 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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Chapter 14 - Material Requirements Planning
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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Chapter 14 - Material Requirements Planning
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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Chapter 14 - Material Requirements Planning
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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Chapter 14 - Material Requirements Planning
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 setup costs or capacity limitations. True False
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Chapter 14 - Material Requirements Planning
30. The lot-for-lot (L4L) lot sizing technique minimizes carrying cost by taking into 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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Chapter 14 - Material Requirements Planning
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 ing, sales, manufacturing, and the other functions in a firm. True False
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Chapter 14 - Material Requirements Planning
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 tree B. Stocking plan C. Inventory usage record D. Production parts plan E. Time bucket schedule
49. Which of the following industry types has high expected benefits from the application of MRP? A. Fabricate-to-stock B. Fabricate-to-order C. Assemble-to-stock D. Continuous process E. Service and repair parts
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Chapter 14 - Material Requirements Planning
50. Which of the following industry types has high expected benefits from the application of MRP? A. Fabricate-to-order B. Hospitals C. Assemble-to-order D. Aircraft manufacturers E. Oil refineries
51. Which of the following industry types will not benefit greatly from the application of MRP? A. Fabricate-to-order B. Assemble-to-stock C. Assemble-to-order D. Manufacture-to-order E. None of the above
52. A product structure tree can do which of the following? A. Help to compute component usage B. Reduce product scrap C. Reduce labor overtime D. Reduce regular time labor E. Locate raw material supplies
53. Which of the following is an input to the master production schedule (MPS)? A. Inventory records file B. The aggregate plan C. The bill of materials D. The exception report E. Planned order schedules
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Chapter 14 - Material Requirements Planning
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 parts B. So they can order parts sufficient for immediate use C. So they can insure that parts to arrive prior to when they are needed D. To assure appropriate quality levels E. To keep process costs between the LCL and the UCL
57. MRP systems seek to achieve which of the following? A. Minimize lot sizes B. Determine the number of dependent demand items needed C. Relieve capacity bottlenecks D. Provide a yardstick for future improvements E. Improve on JIT methods
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Chapter 14 - Material Requirements Planning
58. Which of the following is an input to the master production schedule? A. Prototype products from product development B. Aggregate component schedule C. Peg reports D. Exception reports E. Forecasts of demand from random customers
59. Which of the following is an input to the master production schedule? A. Bill of materials (BOM) file B. Inventory records file C. Exception reports D. Planned-order schedules E. None of the above
60. Which of the following is an input file necessary to run an MRP system? A. Bill of materials (BOM) file B. Quality management report C. Exception reports D. Planned-order schedules E. Purchasing contracts
61. Which of the following is an input file necessary to run an MRP system? A. Exception report B. Computer-aided-design files C. Inventory records file D. Personnel files E. Planned order schedule
62. Which of the following is not a production activity report generated by MRP? A. Exception report B. Planning report C. Performance control report D. Planned-order schedules E. Bill of materials report
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Chapter 14 - Material Requirements Planning
63. In an MRP program, the program accesses the status of any file in specific periods called which of the following? A. Cubed time units B. Time buckets C. BOM units D. Time modules E. 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 file B. Modular bill of materials file C. Super bill of materials file D. Exception report file E. Peg record file
65. We would expect to see which of the following in an MRP system's inventory transactions file? A. End items produced B. Late/early delivery records C. Scrap parts D. Labor efficiency E. Computer errors
66. In a typical inventory status record which of the following would you not expect to see? A. Scrap allowance B. Order quantity C. Gross requirements D. Planned-order releases E. Lost items
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Chapter 14 - Material Requirements Planning
67. Which of the following is considered a primary report in an MRP system? A. Planning reports B. Performance reports C. Exception reports D. Planned order schedules E. Cycle counting reports
68. Which of the following is considered a secondary report in an MRP system? A. Planned order schedule B. Performance reports C. Inventory record D. Firm orders from known customers E. Engineering change reports
69. Which of the following is considered a primary report in an MRP system? A. Planned order schedule B. Peg report C. Planning report D. Inventory accuracy report E. 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. 1,200 B. 1,300 C. 1,150 D. 2,450 E. None of the above
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Chapter 14 - Material Requirements Planning
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. 1,000 B. 950 C. 500 D. 400 E. 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. 5,000 B. 4,500 C. 3,800 D. 1,200 E. 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. 670 B. 600 C. 530 D. 70 E. None of the above
74. Which of the following can be used for lot sizing in an MRP system? A. Low-level coding B. Time bucket size C. Least unit cost D. Inventory record file E. Peg inventory
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Chapter 14 - Material Requirements Planning
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 demand B. Minimized carrying costs C. Minimized set-up costs D. A just in time management philosophy E. 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. 350 B. 247 C. 230 D. 185 E. 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. 2,000 B. 1,200 C. 1,000 D. 300 E. 200
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Chapter 14 - Material Requirements Planning
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 Quantity B. Lot for lot C. Least total cost D. Least unit cost E. 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. Kanban B. Just-in-time system C. MRP D. Least unit cost E. 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 quantity B. Lot-for-lot C. Least total cost D. Least unit cost E. Inventory item averaging
Fill in the Blank Questions
82. What is the name for demand caused by the demand for a higher level item? ____________________ ________________________________________
14-16
Chapter 14 - Material Requirements Planning
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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Chapter 14 - Material Requirements Planning
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
Chapter 14 Material Requirements Planning Answer Key
True / False Questions
1. MRP stands for Manufacturing Requirements Planning. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
2. MRP stands for Material Requirements Planning. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
3. All firms maintain bill of materials (BOM) files, which are simply a sequencing of everything that goes into a final product. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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Chapter 14 - Material Requirements Planning
4. MRP is based on dependent demand. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
5. MRP is most valuable in industries where a number of products are made in batches using the same productive equipment. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
6. The master production schedule a master production schedule, which states the number of items to be produced during specific time periods. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
7. MRP is least valuable in industries where a number of products are made in batches using the same productive equipment. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-20
Chapter 14 - Material Requirements Planning
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
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
9. MRP provides the schedule specifying when each part and component of an end item should be ordered or produced. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
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: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: 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
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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Chapter 14 - Material Requirements Planning
12. A master production schedule is an essential input to a material requirements planning (MRP) system. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
13. A necessary input to the material requirements planning (MRP) system is an exception report. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14. A necessary input to the material requirements planning (MRP) system is an inventory records file. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
15. An output of MRP is a bill of materials (BOM) file. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14-22
Chapter 14 - Material Requirements Planning
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
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
18. A modular bill of materials includes items with fractional options. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
19. A modular bill of materials is the term for an item that can be produced and stocked as a subassembly. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-23
Chapter 14 - Material Requirements Planning
20. The MRP program performs its analysis from the bottom up of the product structure trees, imploding requirements level by level. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
21. Net change MRP systems are "activity" driven. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
14-24
Chapter 14 - Material Requirements Planning
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
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
23. In a net change MRP system requirements and schedules are considered rigid and never updated. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
24. Net change MRP reflects the exact status of each item managed by the system in "real time." TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
25. Low level coding in MRP indicates the exact status of each item managed by the system in "real time." FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14-25
Chapter 14 - Material Requirements Planning
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
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
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: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
28. Generally, determining lot sizes in MRP systems is simple. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
29. A lot-for-lot (L4L) lot sizing technique does not take into setup costs or capacity limitations. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
14-26
Chapter 14 - Material Requirements Planning
30. The lot-for-lot (L4L) lot sizing technique minimizes carrying cost by taking into setup costs and capacity limitations. FALSE
AACSB: Analytic Difficulty: Medium Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
31. Lot-for-lot (L4L) is the most common lot sizing technique. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
14-27
Chapter 14 - Material Requirements Planning
34. The economic order quantity (EOQ) lot sizing technique uses the "square root formula" to balance set-up cost and carrying cost. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
14-28
Chapter 14 - Material Requirements Planning
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
39. "Projected available balance" is a term referring to unsold finished goods inventory. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
40. Projected available balance is the amount of inventory that is expected as of the beginning of a period. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14-29
Chapter 14 - Material Requirements Planning
41. The three main inputs to an MRP system are the bill of materials, the master schedule and the inventory records file. TRUE
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
42. Enterprise Resource Planning (ERP) evolved from Materials Requirements Planning (MRP). TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
43. Enterprise resource planning (ERP) is a computer system that integrates application programs in ing, sales, manufacturing, and the other functions in a firm. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
44. When implemented correctly, MRP links all areas of the business. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-30
Chapter 14 - Material Requirements Planning
45. ERP vendors have set new standards in information integration that can cause significant cost to a company. FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
46. ERP vendors have set new standards in information integration that can significantly benefit a company. TRUE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
47. Materials Requirements Planning (MRP) evolved from Enterprise Resource Planning (ERP). FALSE
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-31
Chapter 14 - Material Requirements Planning Multiple Choice Questions
48. A BOM file is called which of the following? A. Product structure tree B. Stocking plan C. Inventory usage record D. Production parts plan E. Time bucket schedule
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
49. Which of the following industry types has high expected benefits from the application of MRP? A. Fabricate-to-stock B. Fabricate-to-order C. Assemble-to-stock D. Continuous process E. Service and repair parts
AACSB: Analytic Difficulty: Medium Learning Objective: 1 Taxonomy: Knowledge Topic: 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-order B. Hospitals C. Assemble-to-order D. Aircraft manufacturers E. Oil refineries
AACSB: Analytic Difficulty: Medium Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-32
Chapter 14 - Material Requirements Planning
51. Which of the following industry types will not benefit greatly from the application of MRP? A. Fabricate-to-order B. Assemble-to-stock C. Assemble-to-order D. Manufacture-to-order E. None of the above
AACSB: Analytic Difficulty: Medium Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
52. A product structure tree can do which of the following? A. Help to compute component usage B. Reduce product scrap C. Reduce labor overtime D. Reduce regular time labor E. Locate raw material supplies
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
53. Which of the following is an input to the master production schedule (MPS)? A. Inventory records file B. The aggregate plan C. The bill of materials D. The exception report E. Planned order schedules
AACSB: Analytic Difficulty: Medium Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-33
Chapter 14 - Material Requirements Planning
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.
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
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.
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
56. Which of the following is most closely related to the reason a firm might implement MRP? A. So they can order the right parts B. So they can order parts sufficient for immediate use C. So they can insure that parts to arrive prior to when they are needed D. To assure appropriate quality levels E. To keep process costs between the LCL and the UCL
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
14-34
Chapter 14 - Material Requirements Planning
57. MRP systems seek to achieve which of the following? A. Minimize lot sizes B. Determine the number of dependent demand items needed C. Relieve capacity bottlenecks D. Provide a yardstick for future improvements E. Improve on JIT methods
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
58. Which of the following is an input to the master production schedule? A. Prototype products from product development B. Aggregate component schedule C. Peg reports D. Exception reports E. Forecasts of demand from random customers
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
59. Which of the following is an input to the master production schedule? A. Bill of materials (BOM) file B. Inventory records file C. Exception reports D. Planned-order schedules E. None of the above
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14-35
Chapter 14 - Material Requirements Planning
60. Which of the following is an input file necessary to run an MRP system? A. Bill of materials (BOM) file B. Quality management report C. Exception reports D. Planned-order schedules E. Purchasing contracts
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
61. Which of the following is an input file necessary to run an MRP system? A. Exception report B. Computer-aided-design files C. Inventory records file D. Personnel files E. Planned order schedule
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
62. Which of the following is not a production activity report generated by MRP? A. Exception report B. Planning report C. Performance control report D. Planned-order schedules E. Bill of materials report
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14-36
Chapter 14 - Material Requirements Planning
63. In an MRP program, the program accesses the status of any file in specific periods called which of the following? A. Cubed time units B. Time buckets C. BOM units D. Time modules E. Time lines
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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 file B. Modular bill of materials file C. Super bill of materials file D. Exception report file E. Peg record file
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
65. We would expect to see which of the following in an MRP system's inventory transactions file? A. End items produced B. Late/early delivery records C. Scrap parts D. Labor efficiency E. Computer errors
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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Chapter 14 - Material Requirements Planning
66. In a typical inventory status record which of the following would you not expect to see? A. Scrap allowance B. Order quantity C. Gross requirements D. Planned-order releases E. Lost items
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
67. Which of the following is considered a primary report in an MRP system? A. Planning reports B. Performance reports C. Exception reports D. Planned order schedules E. Cycle counting reports
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
68. Which of the following is considered a secondary report in an MRP system? A. Planned order schedule B. Performance reports C. Inventory record D. Firm orders from known customers E. Engineering change reports
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
14-38
Chapter 14 - Material Requirements Planning
69. Which of the following is considered a primary report in an MRP system? A. Planned order schedule B. Peg report C. Planning report D. Inventory accuracy report E. Aggregate production plan report
AACSB: Analytic Difficulty: Easy Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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. 1,200 B. 1,300 C. 1,150 D. 2,450 E. None of the above
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Analysis Topic: 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. 1,000 B. 950 C. 500 D. 400 E. 350
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
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Chapter 14 - Material Requirements Planning
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. 5,000 B. 4,500 C. 3,800 D. 1,200 E. None of the above
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
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. 670 B. 600 C. 530 D. 70 E. None of the above
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
74. Which of the following can be used for lot sizing in an MRP system? A. Low-level coding B. Time bucket size C. Least unit cost D. Inventory record file E. Peg inventory
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
14-40
Chapter 14 - Material Requirements Planning
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)
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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 demand B. Minimized carrying costs C. Minimized set-up costs D. A just in time management philosophy E. Minimized quality problems
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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. 350 B. 247 C. 230 D. 185 E. 78
AACSB: Analytic Difficulty: Medium Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
14-41
Chapter 14 - Material Requirements Planning
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. 2,000 B. 1,200 C. 1,000 D. 300 E. 200
AACSB: Analytic Difficulty: Medium Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
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 Quantity B. Lot for lot C. Least total cost D. Least unit cost E. ABC analysis
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
14-42
Chapter 14 - Material Requirements Planning
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. Kanban B. Just-in-time system C. MRP D. Least unit cost E. Least total cost
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
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 quantity B. Lot-for-lot C. Least total cost D. Least unit cost E. Inventory item averaging
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
Fill in the Blank Questions
82. What is the name for demand caused by the demand for a higher level item? ____________________ Dependent demand
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
14-43
Chapter 14 - Material Requirements Planning
83. What is the name for a bill of materials that includes items with fractional options? ______________________ Super bill of materials
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Knowledge Topic: Lot Sizing in MRP Systems
84. In MRP, how is demand information for a level 0 (zero) item derived? _________________________ From the master production scheduling process
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
85. What is the name given to the manufacturing software that combines MRP and JIT logic? ____________________ Flow management
AACSB: Analytic Difficulty: Easy Learning Objective: 1 Taxonomy: Knowledge Topic: From Push to Pull and Where MRP Can Be Used
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: Analytic Difficulty: Medium Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
14-44
Chapter 14 - Material Requirements Planning
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
AACSB: Analytic Difficulty: Easy Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Medium Learning Objective: 4 Taxonomy: Analysis Topic: Lot Sizing in MRP Systems
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
AACSB: Analytic Difficulty: Medium Learning Objective: 2 Taxonomy: Knowledge Topic: Material Requirements Planning System Structure and An Example Using MRP
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
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
14-45
Chapter 14 - Material Requirements Planning
91. Name three major ERP software vendors. 1. _______________ 2. _______________ 3. _______________ 1. Oracle 2. SAP 3. i2 Technologies
AACSB: Analytic Difficulty: Easy Learning Objective: 3 Taxonomy: Knowledge Topic: An Example Using MRP
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 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: Analytic Difficulty: Medium Learning Objective: 4 Taxonomy: Synthesis Topic: Lot Sizing in MRP Systems
14-46
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