APICS CPIM-Part-2 Practice Test - Questions Answers, Page 14

The change in level of work-in-process (WIP) inventory is the most appropriate indicator to evaluate the effectiveness of the detailed capacity planning processes for a firm that produces a moderate variety of products to stock in a single plant.Detailed capacity planning is the process of determining the quantity and timing of resources, such as labor, equipment, and materials, needed to execute the master production schedule (MPS) at the work center level1.The MPS is a plan that specifies the quantity and timing of end items to be produced in a given time period2.The change in level of WIP inventory is a measure of the difference between the amount of WIP inventory at the beginning and at the end of a period3. WIP inventory consists of partially completed products or components that are waiting for further processing or assembly.

The change in level of WIP inventory can indicate how well the detailed capacity planning processes are aligned with the MPS and the actual demand. A positive change in WIP inventory means that more products or components are being produced than consumed, which implies that there is excess capacity or insufficient demand. A negative change in WIP inventory means that more products or components are being consumed than produced, which implies that there is insufficient capacity or excess demand. A zero or minimal change in WIP inventory means that the production and consumption rates are balanced, which implies that there is optimal capacity and demand. Therefore, by monitoring the change in level of WIP inventory, the firm can evaluate whether its detailed capacity planning processes are effective in meeting customer needs and expectations, as well as minimizing inventory costs and maximizing resource utilization.

The other options are not as appropriate indicators to evaluate the effectiveness of the detailed capacity planning processes for a firm that produces a moderate variety of products to stock in a single plant. Units of output per direct labor hour is a measure of labor productivity, which indicates how efficiently labor is used to produce output. However, labor productivity does not reflect the effectiveness of detailed capacity planning processes, because it does not account for other factors that affect production, such as equipment, materials, quality, or demand. Percentage of master schedule attained is a measure of schedule performance, which indicates how well the actual production matches the planned production. However, schedule performance does not reflect the effectiveness of detailed capacity planning processes, because it does not account for other factors that affect production, such as capacity constraints, resource availability, or customer satisfaction. Level of finished goods inventory is a measure of inventory management, which indicates how much inventory is available to meet customer orders. However, finished goods inventory does not reflect the effectiveness of detailed capacity planning processes, because it does not account for other factors that affect production, such as product variety, lead time, or quality.

The most appropriate action by the master scheduler is to forward the request to senior management. According to theTime Fence Control (MRP and Supply Chain Planning Help) - Oracle, the demand time fence is a period within which the planning process does not consider forecast demand when calculating actual demand, and the planning time fence is a period within which the planning process does not alter the current material plan or master schedule. The master scheduler can make changes to the master schedule within the planning time fence, but only with approval from senior management. The request from marketing falls between the demand and the planning time fences, which means that it may affect the current material plan or master schedule, as well as the capacity and resource requirements of the production system. Therefore, the master scheduler should forward the request to senior management, who can evaluate the impact and feasibility of the request, and decide whether to approve or reject it.

Collaborative planning, forecasting, and replenishment (CPFR) is a set of actions taken by supply chain partners to plan and communicate tasks to meet customer demand while reducing cost.It includes business planning, sales forecasting, and replenishment of raw materials and finished goods1. CPFR typically would be most effective for a regional headquarters for a large home improvement retailer, because this type of organization can benefit from the following advantages of CPFR:

CPFR can strengthen the supply chain partner relationships between the regional headquarters and its suppliers, distributors, and stores, by enhancing trust, transparency, and coordination2.

CPFR can provide analysis of sales and order forecast which improves the forecast accuracy, by using customer inputs and data from partners in the value chain, as well as advanced analytical tools and techniques3.

CPFR can manage the demand chain and proactively eliminate problems before they appear, by identifying and resolving potential issues or conflicts in the planning, forecasting, and replenishment processes4.

CPFR can allow collaboration on future requirements and plans, by involving all the relevant stakeholders in the decision-making process and aligning their goals and expectations5.

CPFR can combine planning, forecasting and logistic activities, by integrating the best practices in sales and marketing (e.g.such as category management) to supply chain planning and execution processes2.

The other options are not as suitable for CPFR as a regional headquarters for a large home improvement retailer. A distributor with a few major customers and many smaller customers may not have enough incentives or resources to implement CPFR with all its customers, especially the smaller ones who may have low volumes or high variability in demand. A manufacturer that sells directly to a large number of firms may face challenges in coordinating and communicating with all its customers, as well as managing the complexity and diversity of their demand patterns. A company that has a large number of geographically dispersed suppliers may encounter difficulties in establishing trust and transparency with its suppliers, as well as ensuring the quality and reliability of their products or services.

Product price is most effective in influencing demand in the introduction phase of the product life cycle. The product life cycle is a concept that describes the stages that a product goes through from its development to its decline. The introduction phase is the first stage, when the product is launched into the market and consumers are made aware of its existence and benefits. In this phase, product price can have a significant impact on the demand for the product, depending on the following factors:

The degree of product innovation: If the product is highly innovative and offers a unique value proposition to customers, it may have a high price elasticity of demand, meaning that customers are willing to pay a high price for it regardless of the availability of substitutes or competitors1.This is often the case for products that create a new market or category, such as the iPhone or the Kindle2.On the other hand, if the product is not very innovative and offers a similar value proposition to existing products, it may have a low price elasticity of demand, meaning that customers are sensitive to price changes and will switch to cheaper alternatives or competitors if the price is too high1.This is often the case for products that enter an existing market or category, such as generic drugs or copycat products3.

The degree of market competition: If the product faces little or no competition in the market, it may have more pricing power and flexibility, meaning that it can charge a high price and still generate high demand4.This is often the case for products that have a strong brand image, a loyal customer base, or a patent protection5.On the other hand, if the product faces high competition in the market, it may have less pricing power and flexibility, meaning that it has to charge a low price or offer discounts and promotions to attract and retain customers4. This is often the case for products that have a weak brand image, a low customer loyalty, or a short product life cycle.

Therefore, product price can be an effective tool to influence demand in the introduction phase of the product life cycle, depending on how innovative and competitive the product is. A high price can signal quality, exclusivity, and differentiation, while a low price can signal affordability, accessibility, and penetration.

In a lean environment, the batch-size decision for planning ''A'' items would be done by lot-for-lot (L4L).A lean environment is a production system that aims to eliminate waste and maximize value by applying the principles and practices of lean manufacturing1.''A'' items are the most important items in an inventory system, based on the Pareto principle or the 80/20 rule, which states that 80% of the effects come from 20% of the causes2.Lot-for-lot (L4L) is an inventory ordering policy that orders exactly the quantity needed to meet the demand for each period3.

The reason why L4L is the preferred batch-size decision for planning ''A'' items in a lean environment is because it minimizes the inventory holding costs and reduces the risk of obsolescence or deterioration of the items3. L4L also supports the concept of pull production, which is a key element of lean manufacturing.Pull production is a method of controlling the flow of materials and information by producing only what is requested by the downstream customers or processes4. L4L aligns the production and consumption rates of ''A'' items, which are typically high-demand and high-value items, and avoids overproduction or underproduction. L4L also enables faster feedback and learning, as well as better responsiveness to customer needs and expectations.

The other options are not as suitable for planning ''A'' items in a lean environment.Least total cost is an inventory ordering policy that orders the quantity that minimizes the sum of ordering costs and holding costs5. However, this policy does not consider the demand variability or customer service level, and may result in large batch sizes that increase inventory levels and waste.Min-max is an inventory ordering policy that orders a fixed quantity whenever the inventory level falls below a minimum level6. However, this policy does not reflect the actual demand or consumption rate, and may result in excess inventory or stockouts. Periodic order quantity is an inventory ordering policy that orders a variable quantity at fixed time intervals. However, this policy does not synchronize the production and consumption rates, and may result in mismatched supply and demand.

Sales and operations planning (S&OP) in a make-to-stock (MTS) environment is concerned with projecting inventory.S&OP is an integrated planning process that aligns demand, supply, and financial planning and is managed as part of a company's master planning1.MTS is a traditional production strategy that is used by businesses to match inventory with anticipated consumer demand2.Inventory is the quantity and value of materials and products that are available in stock or in transit3.

S&OP in an MTS environment is concerned with projecting inventory because inventory is the key link between demand and supply.Inventory can be classified into three types: raw materials, work-in-process, and finished goods3. S&OP aims to balance the inventory levels of these types with the expected demand and supply plans, as well as the financial objectives of the company. S&OP can help optimize inventory management by:

Reducing inventory costs, such as holding, ordering, and shortage costs3.

Improving inventory turnover, which is the ratio of sales to average inventory3.

Increasing inventory availability, which is the percentage of orders that can be fulfilled from stock3.

Enhancing inventory quality, which is the degree of conformance to specifications and standards3.

The other options are not as relevant for S&OP in an MTS environment as inventory.Item forecasts are estimates of future demand for specific products or services based on historical data, market trends, or customer inputs4. Item forecasts are an input to S&OP, not an output.S&OP uses item forecasts to generate aggregate demand plans for product families or categories, which are then matched with aggregate supply plans for production capacity or resources1.Backlog is the quantity of customer orders that have been received but not yet fulfilled3. Backlog is not applicable for S&OP in an MTS environment, because MTS products are produced before customer orders are received. MTS products are delivered from stock, not from backlog.Bookings are the quantity of customer orders that have been received and confirmed3. Bookings are also not applicable for S&OP in an MTS environment, because MTS products are not dependent on customer orders. MTS products are based on forecasted demand, not actual demand.

Return on investment (ROI) is a financial ratio that measures the profitability of an investment relative to its cost. ROI is calculated by dividing the net income (or profit) generated by the investment by the total cost of the investment. ROI is decreased by any activity that reduces the net income or increases the cost of the investment. Increasing cost of sales is an activity that decreases ROI because it reduces the net income generated by the sales revenue. Cost of sales (or cost of goods sold) is the direct cost of producing or purchasing the goods or services sold by an organization. Cost of sales includes materials, labor, and overhead costs. Increasing cost of sales means that the organization spends more money to produce or acquire the same amount of goods or services, which lowers its profit margin and ROI.

The sales and operations planning (S&OP) process is a cross-functional process that aligns the demand and supply plans of an organization. The S&OP process consists of several steps, such as data gathering, demand planning, supply planning, pre-S&OP meeting, executive S&OP meeting, and S&OP implementation. The output of the S&OP process is the production plan, which is a statement of the resources needed to meet the aggregate demand plan over a medium-term horizon. The production plan can be stated in different units of measure depending on the type of manufacturing environment. In a repetitive manufacturing environment, where the same or similar products are produced continuously or at regular intervals, the production plan can be stated in terms of the number of products planned for shipment. This unit of measure reflects the volume and mix of products that are expected to be sold and delivered to the customers. The number of products planned for shipment can also be used to calculate the capacity requirements, material requirements, and inventory levels for each product family.

The break-even point is the level of sales or output where the total revenue equals the total cost, and the profit is zero. The break-even point can be calculated in units or in dollars. To calculate the break-even point in units, the following formula can be used:

Break-even point in units = Fixed cost / (Selling price per unit - Variable cost per unit)

In this case, the fixed cost is $120,000, the selling price per unit is $20, and the variable cost per unit is $5. Plugging these values into the formula, we get:

Break-even point in units = 120,000 / (20 - 5) = 120,000 / 15 = 8,000

Therefore, the break-even point in units for Product X is 8,000. This means that the company needs to sell 8,000 units of Product X to cover its fixed and variable costs and make no profit or loss.