To use revenue management strategies, a business should have which combination of costs?

A) high variable and high fixed

B) low variable and high fixed

C) high variable and low fixed

D) low variable and low fixed

E) either A or B

Answer: B) low variable and high fixed

Industries in which revenue management techniques are easiest to apply are those where:

A) use tends to be predictable, and pricing tends to be fixed.

B) use tends to be predictable, and pricing tends to be variable.

C) use tends to be uncertain, and pricing tends to be fixed.

D) use tends to be uncertain, and pricing tends to be variable.

E) All of the above, i.e., there is no difference.

Answer: B) use tends to be predictable, and pricing tends to be variable.

Revenue (or yield) management is best described as:

A) a situation where management yields to labor demands.

B) a situation where the labor union yields to management demands.

C) a process designed to increase the rate of output.

D) allocation of scarce resources to customers at prices that will maximize revenue.

E) management's selection of a product mix yielding maximum profits.

Answer: D) allocation of scarce resources to customers at prices that will maximize revenue.

Revenue management is MOST likely to be used in which one of the following situations?

A) a fast food restaurant with wide demand fluctuations during the day

B) a dental clinic that wants to fill its appointment book

C) a firm with a good counterseasonal product mix

D) a shipping company that can change its fleet size easily

E) an airline attempting to fill "perishable" seats at maximum revenue

Answer: E) an airline attempting to fill "perishable" seats at maximum revenue

Which of the following characteristics makes revenue management UNATTRACTIVE to organizations that have perishable inventory?

A) demand can be segmented

B) service can be sold in advance of consumption

C) capacity is easily changed

D) variable costs are low and fixed costs are high

E) demand fluctuates

Answer: C) capacity is easily changed

A hotel room that goes unrented and an airline seat that goes unsold are both examples of perishable inventory in services.

Answer: TRUE

Aggregate planning for service firms that provide intangible output deals mainly with:

A) smoothing the production rate and finding the optimal size of the workforce.

B) capital investment decisions.

C) centralized purchasing.

D) centralized production.

E) planning for human resource requirements and managing demand.

Answer: E) planning for human resource requirements and managing demand.

Which of the following statements regarding aggregate planning in services is FALSE?

A) Approaches to aggregate planning differ by the type of service provided.

B) Some service organizations conduct aggregate planning in exactly the same way as manufacturing firms, but with demand management taking a more active role.

C) Aggregate planning in some service industries may be easier than in manufacturing.

D) Labor is the primary aggregate planning vehicle.

E) Level scheduling is far more common than using a chase strategy.

Answer: E) Level scheduling is far more common than using a chase strategy.

Which of the following is NOT one of the successful techniques for controlling the cost of labor in services?

A) accurate scheduling of labor-hours to assure quick response to customer demand

B) an on-call labor resource that can be added or deleted to meet unexpected demand

C) little flexibility in worker hours to decrease the burden on management

D) flexibility of individual worker skills that permits reallocation of available labor

E) flexibility in rate of output or hours of work to meet changing demand

Answer: C) little flexibility in worker hours to decrease the burden on management

Aggregate planning for fast food restaurants is very similar to aggregate planning in manufacturing, but with much smaller units of time.

Answer: TRUE

Techniques for controlling the cost of labor in services include accurate scheduling of labor hours to assure quick response to customer demand, on-call labor for unexpected demand, flexibility of labor skills for reallocation of available labor, and flexibility in rate of output or hours of work to meet changing demand.

Answer: TRUE

A manager is applying the transportation model of linear programming to solve an aggregate planning problem. Demand in period 1 is 100 units, and in period 2, demand is 150 units. The manager has 125 hours of regular employment available for $10/hour each period. In addition, 50 hours of overtime are available for $15/hour each period. If holding costs are $2 per unit each period, how many hours of regular employment should be used in period 1?

A manager is applying the transportation model of linear programming to solve an aggregate planning problem. Demand in period 1 is 100 units, and in period 2, demand is 150 units. The manager has 125 hours of regular employment available for $10/hour each period. In addition, 50 hours of overtime are available for $15/hour each period. If holding costs are $2 per unit each period, how many hours of regular employment should be used in period 1? (Assume demand must be met in both periods 1 and 2 for the lowest possible cost and that production is 1 unit per hour.)

A) 100

B) 125

C) 150

D) 50

E) none of the above

Answer: B) 125

Which of the following aggregate planning methods does not work if hiring and layoffs are possible?

A) the linear decision rule

B) simulation

C) the management coefficients model

D) the transportation method

E) graphical methods

Answer: D) the transportation method

A firm uses graphical techniques in its aggregate planning efforts. Over the next twelve months (its intermediate period), it estimates the sum of demands to be 105,000 units. The firm has 250 production days per year. In January, which has 22 production days, demand is estimated to be 11,000 units. A graph of demand versus level production will show that:

A) the January requirement is below level production of 420 units.

B) level production is approximately 1000 units per day.

C) level production of 420 units per day is below the January requirement.

D) level production is approximately 420 units per month.

E) the firm must hire workers between December and January.

Answer: C) level production of 420 units per day is below the January requirement.

"An optimal plan for minimizing the cost of allocating capacity to meet demand over several planning periods" best describes which of the following?

A) the linear decision rule

B) simulation

C) the management coefficients model

D) the transportation method

E) graphical methods

Answer: D) the transportation method

A firm practices a pure chase strategy. Production last quarter was 1000. Demand over the next four quarters is estimated to be 900, 700, 1000, and 1000. Hiring cost is $20 per unit, and layoff cost is $5 per unit. Over the next year, what will be the sum of hiring and layoff costs?

A) $500

B) $2,500

C) $7,500

D) $7,000

E) $12,500

Answer: C) $7,500

The transportation method of linear programming is an optimizing approach to aggregate planning.

Answer: TRUE

Graphical techniques are easy to understand and use, but are not well-suited for generating optimal strategies.

Answer: TRUE

Which of the following actions is consistent with the use of level scheduling?

A) use inventory to meet demand requirements

B) use overtime to meet higher-than-average demand requirements

C) vary production levels to meet demand requirements

D) vary work force to meet demand requirements

E) none of the above

Answer: A) use inventory to meet demand requirements

A firm uses the pure chase strategy of aggregate planning. It produced 1000 units in the last period. Demand in the next period is estimated at 800, and demand over the next six periods (its aggregate planning horizon) is estimated to average 900 units. Which of the following tactics would be most representative of following a chase strategy?

A) add 100 units to inventory in the next period

B) add 200 units to inventory in the next period

C) hire workers to match the 100-unit difference

D) lay off workers to match the 200-unit difference

E) implement a lower price point to increase demand

Answer: D) lay off workers to match the 200-unit difference