Production & Logistics

What is the term for a company's reserves involved in producing and delivering goods?

• Supply Chain

• Inventory

• Capacity

Answer explanation

The term 'Inventory' refers to a company's reserves of goods that are used in the production and delivery process. It includes raw materials, work-in-progress, and finished products, making it essential for operations.

1. What do we call the maximum rate of output that can be achieved from a production process?
   
   
   

• 1. Plant

• 1. Economies of Scale

• 1. Capacity

Answer explanation

The maximum rate of output from a production process is referred to as 'Capacity'. It indicates the highest level of production that can be achieved under normal conditions.

1. What is a network of organizations involved in producing and delivering raw materials and finished products called?

• 1. Supply Chain

• 1. Component

• 1. Inventory

Answer explanation

A supply chain is a network of organizations that work together to produce and deliver raw materials and finished products. It encompasses all steps from sourcing to delivery, making 'Supply Chain' the correct answer.

1. Outsourcing means manufacturing products in-house rather than buying from other companies.

• • True

• • False

Answer explanation

Outsourcing refers to obtaining goods or services from external sources rather than producing them in-house. Therefore, the statement is false.

1. Lead time is the time needed to perform an activity, such as delivering a product.

• • True

• • False

Answer explanation

True. Lead time refers to the total time required to complete an activity, such as the time taken to deliver a product from order to receipt.

1. A "component" is a collective term for all facilities used in production.

• • True

• • False

Answer explanation

The statement is false because a component typically refers to a part of a larger system, while facilities used in production are better described as resources or equipment, not components.

1. "Inventory" and "stock" mean the same thing in American English.

• • True

• • False

Answer explanation

In American English, 'inventory' and 'stock' are often used interchangeably to refer to the goods and materials a business holds for sale or production. Therefore, the statement is true.

1. "Economies of scale" refers to the maximum rate of output that can be achieved from a production process.

• • True

• • False

Answer explanation

False. Economies of scale refer to the cost advantages that a business obtains due to the scale of operation, not the maximum output rate. It means that as production increases, the cost per unit typically decreases.

Which of the following is an example of economies of scale?

• A bakery that introduces a new type of bread.

• A car manufacturer that reduces the cost per vehicle by producing 100,000 cars instead of 10,000.

• A restaurant offering a new menu item to attract more customers.

Answer explanation

The correct choice is the car manufacturer, as economies of scale occur when increased production lowers the cost per unit. Producing 100,000 cars instead of 10,000 allows for cost reductions through efficiencies.

Which of the following costs decreases as a company experiences economies of scale?

• Variable cost

• Fixed cost

• Total costs per unit

Answer explanation

As a company experiences economies of scale, the total costs per unit decrease because fixed costs are spread over more units, reducing the average cost per unit produced.