OSC EXAM 1 QUESTIONS AND
ANSWERS GRADED A+ 2026
WIP (work-in-progress) is: - ANS The name for the inputs that are not yet outputs
What is the output for a law firm? - ANS A case that is resolved in some way (maybe it was
dropped, or settlement achieve, or a court decision rendered)
What is the input for a hospital? - ANS A sick or injured patient
What resource(s) does an airline use to create their output? - ANS All of them, passengers,
pilots, airports
Let's say a restaurant sells a meal for $20;spends 20% ($4) for the food ingredients;spends 40%
($8) for the labor directly involved in cooking and serving one meal;gets 60 customers per each
of 30 days per month; andincurs monthly fixed costs of $12,000.
What is the restaurant's monthly profit? - ANS 2,400, variable cost is ($4 + $8) (60/day) (30
days/mo) = $21,600. total sales is ($20/dish) (60 dishes/day) (30 days/mo) = $36,000/mo.Profit
= $36,000 - $21,600 - $12,000 = $2,400
Starting with the base case below, let's say a restaurant takes out non-value-adding process
steps and thereby cuts direct labor time by 5%. (Coincidentally, workers are happier, however
we don't factor that effect into our analysis here.) By how much does it increase its absolute
profit? Same base case as question 5 - ANS Total sales = ($20/dish) (60 dishes/day) (30
@COPYRIGHT 2026/2027 ALL RIGHTS RESERVED
1
, days/mo) = $36,000/mo.Variable cost = [$4 + (0.95 x $8)] (60/day) (30 days/mo) = $20,880.Profit
= $36,000 - $20,880 - $12,000 = $3,120.
% increase in profit = ($3,120 - $2,400) / $2,400 = 30%
Starting with the base case below, let's say a restaurant implements a lean op's initiative such
that it is able to increase capacity (the maximum throughput rate) by 5% without an increase in
fixed costs (that is, variable cost per meal does not change but the number of meals sold
increases by 5% but with no increase in fixed costs). Assuming the demand exists to take
advantage of the 5% capacity boost, by how much does the restaurant increase its absolute
profit? same base case - ANS answer= 30%. The new revenue is $20 x (1.05 x 1800) = $37,800
while the new variable cost is $12 x (1.05 x 1800) = $22,680 and fixed costs remain at $12,000
yielding total costs of $34,680 and profit of $$3120 which is an increase of $720 which is 30% of
$2400.
Starting with the base case below, let's say a restaurant improves its inventory management
practices and thereby reduces the variable cost of ingredients by 5%. By how much does it
increase its absolute profit? - ANS answer 15%, Total sales = ($20/dish) (60 dishes/day) (30
days/mo) = $36,000/mo.
Variable cost = [(0.95 x $4) + $8] (60/day) (30 days/mo) = $21,240.
Profit = $36,000 - $21,240 - $12,000 = $2,760.
% increase in profit = ($2,760 - $2,400) / $2,400 = 15%
Starting with the base case below, let's say a restaurant executes a successful marketing
campaign and thereby increases its demand by 5%. The higher demand necessitates renting
additional restaurant space and adding equipment and personnel, such that all costs go up by
the corresponding 5% (both fixed costs and variable costs go up by 5%). Under these
assumptions, does the demand increase yield the "multiplier effect" on profit similar to what we
found for the 5% operational improvement? - ANS No, the marketing campaign yielding a 5%
increase in demand yields the same 5% increase in profit.
IDEO is a firm that designs products. (If you haven't already seen it, below is a link to a video
describing how they went about designing a new shopping cart.) Here is a quote from IDEO's
founder, Dave Kelley:
"The point is, we're not expects in any given area. We're expects on the process of how you
design stuff. So we don't care if you give us a toothbrush, a tractor, a space shuttle, a chair, it's
@COPYRIGHT 2026/2027 ALL RIGHTS RESERVED
2
ANSWERS GRADED A+ 2026
WIP (work-in-progress) is: - ANS The name for the inputs that are not yet outputs
What is the output for a law firm? - ANS A case that is resolved in some way (maybe it was
dropped, or settlement achieve, or a court decision rendered)
What is the input for a hospital? - ANS A sick or injured patient
What resource(s) does an airline use to create their output? - ANS All of them, passengers,
pilots, airports
Let's say a restaurant sells a meal for $20;spends 20% ($4) for the food ingredients;spends 40%
($8) for the labor directly involved in cooking and serving one meal;gets 60 customers per each
of 30 days per month; andincurs monthly fixed costs of $12,000.
What is the restaurant's monthly profit? - ANS 2,400, variable cost is ($4 + $8) (60/day) (30
days/mo) = $21,600. total sales is ($20/dish) (60 dishes/day) (30 days/mo) = $36,000/mo.Profit
= $36,000 - $21,600 - $12,000 = $2,400
Starting with the base case below, let's say a restaurant takes out non-value-adding process
steps and thereby cuts direct labor time by 5%. (Coincidentally, workers are happier, however
we don't factor that effect into our analysis here.) By how much does it increase its absolute
profit? Same base case as question 5 - ANS Total sales = ($20/dish) (60 dishes/day) (30
@COPYRIGHT 2026/2027 ALL RIGHTS RESERVED
1
, days/mo) = $36,000/mo.Variable cost = [$4 + (0.95 x $8)] (60/day) (30 days/mo) = $20,880.Profit
= $36,000 - $20,880 - $12,000 = $3,120.
% increase in profit = ($3,120 - $2,400) / $2,400 = 30%
Starting with the base case below, let's say a restaurant implements a lean op's initiative such
that it is able to increase capacity (the maximum throughput rate) by 5% without an increase in
fixed costs (that is, variable cost per meal does not change but the number of meals sold
increases by 5% but with no increase in fixed costs). Assuming the demand exists to take
advantage of the 5% capacity boost, by how much does the restaurant increase its absolute
profit? same base case - ANS answer= 30%. The new revenue is $20 x (1.05 x 1800) = $37,800
while the new variable cost is $12 x (1.05 x 1800) = $22,680 and fixed costs remain at $12,000
yielding total costs of $34,680 and profit of $$3120 which is an increase of $720 which is 30% of
$2400.
Starting with the base case below, let's say a restaurant improves its inventory management
practices and thereby reduces the variable cost of ingredients by 5%. By how much does it
increase its absolute profit? - ANS answer 15%, Total sales = ($20/dish) (60 dishes/day) (30
days/mo) = $36,000/mo.
Variable cost = [(0.95 x $4) + $8] (60/day) (30 days/mo) = $21,240.
Profit = $36,000 - $21,240 - $12,000 = $2,760.
% increase in profit = ($2,760 - $2,400) / $2,400 = 15%
Starting with the base case below, let's say a restaurant executes a successful marketing
campaign and thereby increases its demand by 5%. The higher demand necessitates renting
additional restaurant space and adding equipment and personnel, such that all costs go up by
the corresponding 5% (both fixed costs and variable costs go up by 5%). Under these
assumptions, does the demand increase yield the "multiplier effect" on profit similar to what we
found for the 5% operational improvement? - ANS No, the marketing campaign yielding a 5%
increase in demand yields the same 5% increase in profit.
IDEO is a firm that designs products. (If you haven't already seen it, below is a link to a video
describing how they went about designing a new shopping cart.) Here is a quote from IDEO's
founder, Dave Kelley:
"The point is, we're not expects in any given area. We're expects on the process of how you
design stuff. So we don't care if you give us a toothbrush, a tractor, a space shuttle, a chair, it's
@COPYRIGHT 2026/2027 ALL RIGHTS RESERVED
2
