PART I.

Multiple Choice.

1. A new backpack that has a zipper which is broken due to a supplier problem is indicative of a quality problem resulting from assignable cause variations. True or False?

2. A defect occurs only because of abnormal variations in input variables. True or False?

3. C&A operates a dry cleaning service. Which of the following is an input variable for C&A?

A. Stains left on garments after dry cleaning

B. The average satisfaction of the customers

C. Weather conditions

D. The temperature of the dry cleaning machine

4. C&A's potato chip filling process has a lower specification limit of 9.5 oz. and an upper specification limit of 10.5 oz. The standard deviation is 0.3 oz. and the mean is 10 oz. What is the process capability index for the chip filling process?

A. 3.33

B. 1.11

C. 0.56

D. 0.33

5. Consider a product with 500 components. Each component has a defect probability of 0.015%. What is the defect probability of the final product?

A. 0%

B. 0.015%

C. 7.23%

D. 92.77%

6. Measuring inventory in terms of dollars tells us whether the amount of inventory is large or not. True or False ?

7. The actual inventory holding cost incurred by an item depends on how long it actually spends in inventory. True or False ?

8. Which of the following is an example of raw material inventory for C&A Bakery?

A. Flour

B. Cupcake mix prepared from scratch

C. Ovens

D. Cupcakes freshly out of the oven

9. C&A has on average $6000 in inventory and its daily sales are $200. What are C&A's weekly inventory turns (assuming demand occurs seven days a week)?

A. 85.7 B. 28.6 C. .23 D. 0.3

10. Average inventory is reported as an _____________ in a publicly traded company's ____________.

A. income, income statement B. asset, income statement C. asset, balance sheet D. income, balance sheet

11. As demand increases, the optimal economic order quantity increases at the same rate of demand. True or False?

12. When solving for an optimal order quantity in the presence of order quantity restrictions, a rule of thumb is to order at a feasible quantity closest to the economic order quantity. True or False?

13. Which of the following is TRUE regarding the economic order quantity (EOQ) model?

A. Demand rate is dependent on order quantity.

B. Ordering cost per order is dependent on order quantity.

C. Holding cost per unit per year is independent of order quantity.

D. Holding cost per unit per year is dependent on the selling price per unit.

14. As demand increases, the sum of ordering and holding costs per period for the economic order quantity _______ at a rate _________ than demand.

A. increases, faster B. decreases, faster C. increases, slower D. decreases, slower

15. Product ___________ refers to the situation when customers are willing to purchase a less preferred version when their most preferred version is not available.

A. substitution B. promotion C. economy D. sustainability

16. A critical ratio of 0.8 means there is an 80% chance that demand is less than or equal to the optimal order quantity. True or False?

17. The in-stock probability cannot be greater than the critical ratio. True or False?

18. The ________ function provides the probability that an outcome is a certain level or ________.

A. density, lower B. distribution, lower C. density, higher D. distribution, higher

19. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. How many units should be ordered to achieve a 99.7% in-stock probability?

A. 1310 B. 1340 C. 1650 D. 1695

20. The difference between the __________ and _____________ is the mismatch costs in the newsvendor model.

A. maximum profit, expected profit B. maximum profit, expected sales C. minimum profit, expected profit D. minimum profit, expected sales

This is the end of the multiple choice or True/False section. Please include detailed solutions for the problem solving parts, thank you.

PART II: Problem Solving Answer the following questions in the space provided below each question. Be absolutely as neat/brief/elegant as possible but show all work (how you got the answer). I value correctness much more than "blah, blah, blah." That said, I can only award partial credit to wrong answers if justifications are provided.

21. C&A manufactures treats for dogs. Six samples each of five bags of treats were randomly selected and weighed, yielding the following data:

Bag (lbs)

Sample

1

2

3

4

5

1

10.2

11.8

10.1

5.9

8.6

2

8.9

11.2

12.4

7.6

5.9

3

10.6

8.8

7.6

11.3

9.9

4

9.6

6.5

12.5

10.4

6.9

5

5.9

8.6

10.3

11.8

10.1

6

12.1

7.3

5.9

10.8

11.1

What would be the upper and lower control limits of a 3-sigma chart?

22. D&F reports annual sales of $20 million, cost of goods sold of $10 million, inventory of $5 million, and net income of $1 million. What is D&F's monthly inventory turns and month-of-supply?

23. Company C&A sells 600 bottles of a dietary supplement per week at $100 per bottle. The supplement is ordered from a supplier who charges Company C&A $30 per order and $50 per bottle. Company C&A's annual holding cost percentage is 40%. Assume Company C&A operates 50 weeks in a year. What order quantity minimizes Company C&A's total ordering and holding cost per year?

A. 300

B. 212

C. 42

D. 30

24. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. Store A purchases the product for $10 each unit and sells each for $30. Inventory is salvaged for $5. What is its expected profit if Store A's order quantity is 525 units?.

Section C.

E10-14 The following information is available for Aikman Company. January 1, 2017 2017 December 31, 2017 Raw material inventory $21,000 $30,000 Work in process inventory 13,500 17,200 Finished goods inventory 27,000 21,000 Materials purchased $150,000 Direct labor 220,000 Manufacturing overhead 180,000 Sales revenue 910,000 Instructions (a) Compute cost of goods manufactured. (b) Prepare an income statement through gross profit. (c) Show the presentation of the ending inventories on the December 31, 2017, balance sheet. (d) How would the income statement and balance sheet of a merchandising company be different from Aikman's financial statements?The S&P index futures price is $4000. A single S&P 500 index futures contract invoice price equals ($250) x (Index Price). The initial margin per contract is $45,000 and the maintenance margin is $35,000 per contract. What level of the S&P index futures price will lead to a margin call if you sell one S&P index futures contract? Assume that a country is currently producing at a level of output equal to $600 billion. The government decides to increase expenditures by $25 billion, and the nation's MPC is 0.8. Based on the spending multiplier, what is the nation's new level of total output (in billions of dollars)? billion dollars Click or tap the numbers or use your keyboard to type. If you're not sure, just take a guess. 1 2 N 4 15 6 7 8 9 DoQuestion 3 (35 points): Type A financial institution has the following portfolio of over-the-counter options on sterling: Position Call Delta of Option -1.000 Gamma of Option Vega of Option 0.5 Call 2.2 1.8 -500 0.8 Put 0.6 0.2 -2.000 -0.40 0.7 Call 1.3 -500 0.70 1.8 1.4 A additional traded option is available with a delta of 0.6, a gamma of 1.5, and a vega of 0.8. a. Estimate the delta, gamma and vega of the portfolio? How can they be interpreted? b. What position in sterling would make the portfolio delta neutral? c. What position in the additional traded option and in sterling would make the portfolio both gamma neutral and delta neutral