Chapter 1: Business Functions and Business Processes
TRUE/FALSE
1. One of the four functional areas of operation is Human Resources (HR).
ANS: T PTS: 1 REF: 2
2. Historically, businesses have had organizational structures that separated the functional areas, but
business schools have not been organized like that.
ANS: F PTS: 1 REF: 3
3. Information systems that are designed so functional areas share data are called integrated information
systems.
ANS: T PTS: 1 REF: 4
4. Sales forecasts are historical records of sales.
ANS: F PTS: 1 REF: 7
5. The business process of Cash Flow Management is handled under the Accounting and Finance
functional area of operation.
ANS: T PTS: 1 REF: 2 | 7
6. The functional area of Supply Chain Management (SCM) sets prices.
ANS: F PTS: 1 REF: 7 | 9
7. When manufacturing runs out of raw materials, it’s known as a stockout.
ANS: T PTS: 1 REF: 11
8. To avoid stockouts, manufacturers might carry extra raw materials. This excess is known as safety
stock.
ANS: T PTS: 1 REF: 11
9. Accounts receivable are recorded by the Human Resources department (HR).
ANS: F PTS: 1 REF: 12
10. The business function of government compliance falls under the Supply Chain Management functional
area of operation.
ANS: F PTS: 1 REF: 2 | 14
MULTIPLE CHOICE
1. Which of the following is a functional area of operation?

a. Packaging c. Shipping
b. Supply Chain Management d. Baking
ANS: B PTS: 1 REF: 2
2. Which business function is performed by Accounting and Finance?
a. Cost allocation and control c. Benefits
b. Taking sales orders d. Plant maintenance
ANS: A PTS: 1 REF: 2
3. What are the computers, people, procedures, and software that store, organize, and deliver information
in an organization?
a. The CPU c. Information systems
b. The Process System d. Personnel systems
ANS: C PTS: 1 REF: 3
4. Today’s managers are beginning to think in terms of business process. A business process cuts across
which functional areas of operation?
a. Marketing and Sales d. Human Resources
b. Supply Chain Management e. All of the above
c. Accounting and Finance
ANS: E PTS: 1 REF: 3
5. Information systems that can be designed so that functional areas of operation share data are called:
a. integrated information systems c. non-middleware information systems
b. complete information systems d. linked information systems
ANS: A PTS: 1 REF: 4
6. Estimates of future product demand, which are the amount of a product that customers will want to
buy, are called:
a. sales forecasts c. sales diving
b. sales divining d. sales deriving
ANS: A PTS: 1 REF: 7
7. Which of the following is an input to the Marketing and Sales functional area?
a. Production plans c. Per-unit cost
b. Raw material orders d. Accounts payable data
ANS: C PTS: 1 REF: 10
8. When purchasing a computer, the functional area responsible for handling the financial help for
purchasing that computer is:
a. Marketing and Sales c. Supply Chain Management
b. Accounting and Finance d. Human Resources
ANS: B PTS: 1 REF: 3
9. Successful business managers view their business operations from the perspective of a(n):
a. satisfied customer c. profitable sale
b. positive cash flow d. accurate sales forecast
ANS: A PTS: 1 REF: 4

10. When manufacturing runs out of raw material, it is known as a(n):
a. shortfall c. depletion
b. empty shelf d. stockout
ANS: D PTS: 1 REF: 11
11. ____ can result in management overinvesting in inventory.
a. Bulging raw materials c. Safety stock
b. Stockup d. Excess baggage
ANS: C PTS: 1 REF: 11
12. Which of the following outputs would emerge from the Accounting and Finance functional area?
a. Packaging orders c. Regulation compliance
b. Sales strategy d. Financial reports
ANS: D PTS: 1 REF: 13
13. Which of the following is an input to HR?
a. Personnel forecasts c. Layoff and recall company policy
b. Sales data d. Travel expense company policy
ANS: A PTS: 1 REF: 14
COMPLETION
1. ____________________ programs are core software used by companies to coordinate information in
every area of the business.
ANS:
Enterprise Resource Planning
ERP
Enterprise Resource Planning (ERP)
ERP (Enterprise Resource Planning)
PTS: 1 REF: 1
2. A collection of activities that takes one or more kinds of input and creates an output that is of value to
the customer is called a(n) ____________________.
ANS: business process
PTS: 1 REF: 1
3. The business functions of financial accounting, cost allocation and control, planning and budgeting,
and cash-flow management take place in the ____________________ functional area of operation.
ANS:
Accounting and Finance
A/F
Accounting and Finance (A/F)
A/F (Accouting and Finance)

PTS: 1 REF: 2
4. One example of the business function that happens in the human resource area of operation would be
____________________.
ANS:
Recruiting and hiring
Training
Payroll
Benefits
Government compliance
PTS: 1 REF: 2
5. A(n) ____________________ includes the computers, people, procedures, and software that store,
organize, and deliver information.
ANS:
information system
IS
information system (IS)
IS (information system)
PTS: 1 REF: 3
6. Information systems designed so that functional areas share data are called ____________________.
ANS:
integrated information systems
integrated IS
integrated information systems (IIS)
IIS
PTS: 1 REF: 4
7. A shortfall of raw materials is known as a(n) ____________________.
ANS: stockout
PTS: 1 REF: 11
8. To avoid stockouts, manufacturers might carry extra raw materials known as ____________________.
ANS: safety stock
PTS: 1 REF: 11
SHORT ANSWER
1. Describe the difference between functional areas of operation and business processes. Give an example
of a business process.
ANS:

Most companies have four main functional areas of operation. Each area comprises a variety of
narrower business functions, which are activities specific to that functional area of operation.
Recall that a business process is a collection of activities that takes one or more kinds of input and
creates an output that is of value to the customer.
Thinking in terms of business processes helps managers to look at their organization from the
customer’s perspective. For example, suppose that a customer wants to purchase a new computer.
PTS: 1 REF: 2-3
2. What are integrated information systems?
ANS:
Sharing data effectively and efficiently between and within functional areas leads to more efficient
business processes. Information systems can be designed so that functional areas share data. These
systems are called integrated information systems.
PTS: 1 REF: 4
3. Give some examples of Marketing and Sales in a small business such as a coffee shop or some other
simple example.
ANS:
For the most part, this is a cash business and does not require formal record keeping, but you still need
to keep track of your customers so that you can send flyers to repeat customers or send occasional
thank you notes. Thus, your records must show not only the amount of sales, but also must identify
repeat customers.
Product development can be done informally in such a simple business; you gather information about
who buys which kind of lemonade and note what customers say about each product. You also
analyze historical sales records to spot trends that are not obvious.
PTS: 1 REF: 6-7
4. Choose an example company and give situations for each business process in the accompanying
figure. Depending on your major or interest, choose one functional area of operation.

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Figure 1-1 Examples of functional areas of operation and their business functions
ANS:
Depending on the company chosen, and the major, answers will vary. For example, if a student is
interested in HR in an engineering firm, they might discuss the process for recruiting and hiring a
graduating senior from their university. Then they could describe some training courses the new
engineer would take. Payroll and benefits to the new employee should be discussed. Finally,
government compliance such as the equal opportunity act could also be mentioned.
PTS: 1 REF: 2
5. What departments are involved in the business process of selling a new smartphone?
ANS:
Refer to the accompanying figure for answers:
Figure 1-2 Sample business processes related to the sale of a smartphone

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PTS: 1 REF: 3
6. Describe the material order process in the accompanying figure:
Figure 1-3 A process view of business operations
ANS:
When production is alerted to a new order, if raw materials are needed for this order, then production
prompts purchasing to arrange for the purchase and delivery of raw materials. Accounting must pay
for those raw materials. They are delivered to the Logistics function and then sent to production to
make the order.
PTS: 1 REF: 5

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Chapter 2: The Development of Enterprise Resource Planning Systems
TRUE/FALSE
1. Individual information systems for each functional area in a company are known as silos.
ANS: T PTS: 1 REF: 20
2. Silos of information are also known as stovepipes.
ANS: T PTS: 1 REF: 20
3. The complex hardware and software that goes into an ERP system was not available until the 1970s.
ANS: F PTS: 1 REF: 21
4. The capabilities of computer hardware doubling every 18 months is known as Gates’ Law.
ANS: F PTS: 1 REF: 21
5. Scalability means that the capacity of a piece of equipment can be increased by adding new hardware.
ANS: T PTS: 1 REF: 22
6. The software that holds data in an organized fashion is known as a database management system, or a
DBMS.
ANS: T PTS: 1 REF: 22
7. Materials requirements prediction (MRP) software allows a plant manager to plan production and raw
materials requirements by guess-timation.
ANS: F PTS: 1 REF: 23
8. The direct computer-to-computer exchange of standard business documents is known as EDI, or
electronic data interchange.
ANS: T PTS: 1 REF: 23
9. The functional model of business and management was useful for decades and is still the current
school of thought.
ANS: F PTS: 1 REF: 24
10. SAP expanded into international markets but kept the software in a single language, German, and a
single currency, the Euro.
ANS: F PTS: 1 REF: 26
11. SAP’s R/3 can only run on mainframe computers.
ANS: F PTS: 1 REF: 27

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12. SAP’s goal was to develop a standard software product that could be configured to meet the needs of
each company.
ANS: T PTS: 1 REF: 26
13. Old systems are known as legacy systems.
ANS: T PTS: 1 REF: 27
14. Open architecture encourages software companies are encouraged to develop add-on software
products that can be integrated with existing software, such as SAP’s R/3.
ANS: T PTS: 1 REF: 27
15. In the accompanying figure, data is entered into the system once and then used throughout the
organization.
Figure 2-4 Data flow within an integrated information system
ANS: T PTS: 1 REF: 29
16. An ERP system allows data to be entered once, and then used throughout the organization.
ANS: T PTS: 1 REF: 29
17. An ERP module is a module that automates a specific business function.
ANS: F PTS: 1 REF: 31
18. A company’s level of data integration is highest when the company uses one vendor to supply all of its
ERP modules.

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ANS: T PTS: 1 REF: 31
19. An important consideration in minimizing the risk of fraud and abuse is defining limits on the dollar
value of business transactions that certain employees can process.
ANS: T PTS: 1 REF: 32
20. A best practice is the best, most efficient way of handling a certain business process.
ANS: T PTS: 1 REF: 34
21. One benefit of ERP systems is that ERP integrates people and data while eliminating the need to
update and repair many separate computer systems.
ANS: T PTS: 1 REF: 36
22. A large company will likely spent $1 million on ERP implementation, which includes software and
training.
ANS: F PTS: 1 REF: 37
23. Not every company is a good match with the constraints inherent in ERP.
ANS: T PTS: 1 REF: 37
24. SAP’s internal programming language is Visual Basic.
ANS: F PTS: 1 REF: 38
25. A return on investment (ROI) is an assessment of an investment project’s value, calculated by dividing
the value of the project’s benefits by the project’s cost.
ANS: T PTS: 1 REF: 39
MULTIPLE CHOICE
1. Individual information systems for each functional area in a company are known as:
a. silos c. tubers
b. bagpipes d. separated systems
ANS: A PTS: 1 REF: 20
2. The complex software and hardware required for ERP systems was not available until the
a. 1960s c. 1980s
b. 1970s d. 1990s
ANS: D PTS: 1 REF: 21
3. The observation that the number of transistors built onto a computer chip doubles every 18 months is
known as:
a. Moore’s Law c. Doubletake
b. Gate’s Prophesy d. Acceleration
ANS: A PTS: 1 REF: 21

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4. When a piece of equipment’s capacity is exceeded, its capacity can be increased by adding new
hardware. This is commonly known as:
a. adaptability c. scalability
b. middleware d. computability
ANS: C PTS: 1 REF: 22
5. In the 1980s, ____, the technology that holds data in an organized fashion, existed for ERP
development.
a. spreadsheets c. client/server architecture
b. DBMS d. word-processors
ANS: B PTS: 1 REF: 22
6. ____ software allows a plant manager to plan production and raw materials requirements by working
backward from the sales forecast.
a. DBMS c. MRP
b. EDI d. EFT
ANS: C PTS: 1 REF: 23
7. The direct computer-to-computer exchange of standard business documents is known as:
a. MRP c. EDI
b. e-mail d. DDS
ANS: C PTS: 1 REF: 23
8. In a process-oriented company, the flow of information and management activity is ______, in line
with the flow of materials and products.
a. horizontal across functions
b. vertical from top level management down through the hierarchical management structure
c. vertical through functions
d. horizontal from marketing and sales to inventory and production
ANS: A PTS: 1 REF: 24
9. Software ____ are individual programs that can be purchased, installed, and run separately, but extract
data from the common database.
a. nodes c. modules
b. chunks d. tidbits
ANS: C PTS: 1 REF: 26
10. In ______, third-party software companies are encouraged to develop add-on software products that
can be integrated with existing software.
a. open architecture c. integrated pieces
b. clip-ons d. piecemeal nodes
ANS: A PTS: 1 REF: 27
11. ____ is SAP’s biggest competitor.
a. J.D. Edwards c. Microsoft
b. PeopleSoft d. Oracle
ANS: D PTS: 1 REF: 28

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12. Old information and computer systems are known as ______.
a. dinosaurs c. legacy systems
b. passe systems d. relics
ANS: C PTS: 1 REF: 27
13. Which ERP package is a popular software choice for managing human resources and financial
activities at universities?
a. SAP c. Microsoft Dynamics
b. PeopleSoft d. J.D. Edwards
ANS: B PTS: 1 REF: 27-28
14. Which R/3 module records sales orders?
a. SD c. PP
b. MM d. QM
ANS: A PTS: 1 REF: 29
15. Which of the following modules in SAP ERP maintains production information?
a. SD c. PP
b. MM d. QM
ANS: C PTS: 1 REF: 29
16. The ______ module helps the company manage fixed-asset purchases (plant and machinery) and
related depreciation.
a. Plant Maintenance c. Materials Management
b. Asset Management d. Product Planning
ANS: B PTS: 1 REF: 30
17. Which of the following module in SAP is a set of tools that can automate the activities in SAP ERP?
a. Workflow c. Financial Accounting
b. Controlling d. Project System
ANS: A PTS: 1 REF: 31
18. When top management is queried on the reasons for implementing ERP systems, the overriding
answer is ____.
a. cost saving c. increased profitability
b. control d. inventory management
ANS: B PTS: 1 REF: 31
19. Which R/3 module records transactions in the general ledger?
a. CO c. FI
b. WF d. PS
ANS: C PTS: 1 REF: 31
20. After a company chooses the modules they want to implement, they must decide on ____ options,
which allow the customer to customize the modules to fit their business to some extent.
a. settings c. flexible
b. configuration d. tandem

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ANS: B PTS: 1 REF: 32
21. As part of the ______ process, a company can define any number of tolerance groups with a range of
limits, and can then assign employees to these tolerance groups.
Figure 2-6 A customization example: tolerance groups to set transaction limits
a. manufacturing c. configuration
b. development d. programming
ANS: C PTS: 1 REF: 32
22. Which of the following is a benefit to running an ERP system?
a. Global integration
b. Elimination of updating and repairing multiple systems
c. Capability to manage operations, not just monitor them
d. All of the above are benefits
ANS: D PTS: 1 REF: 36
23. An ERP system for a large company will cost ____, including software, training, and implementation.
a. $100-500 million c. $1-5 billion
b. $1-5 million d. $50,000-$500,000
ANS: A PTS: 1 REF: 37
24. SAP’s internal programming language is called:
a. R/3 c. Visual Basic
b. C++ d. ABAP
ANS: D PTS: 1 REF: 38
25. One assessment of a project’s value is calculated by the:
a. DVT c. ROI
b. PMT d. PPT
ANS: C PTS: 1 REF: 39
26. Bumpy rollouts of ERP systems are usually caused by:

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a. software problems c. hardware problems
b. people problems d. configuration problems
ANS: B PTS: 1 REF: 40
COMPLETION
1. ____________________ states that the number of transistors on a computer chip doubles every 24
months.
ANS: Moore’s Law
PTS: 1 REF: 21
2. A central-local computer arrangement is called ____________________ architecture.
ANS:
client server
client/server
client-server
PTS: 1 REF: 22
3. ____________________ means that the capacity of a piece of equipment can be increased by adding
new hardware.
ANS:
Scalable
Scalability
PTS: 1 REF: 22
4. The software that holds that data in an organized fashion, and that allows for the easy retrieval of data,
is the ____________________.
ANS:
database management system
DBMS
database management system (DBMS)
DBMS (database management system)
PTS: 1 REF: 22
5. ____________________ software allows a plant manager to plan production and raw materials
requirements by working backward from the sales forecast.
ANS:
MRP
material requirements planning
material requirements planning (MRP)
MRP (material requirements planning)
PTS: 1 REF: 23

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6. The prediction of future sales is the ____________________.
ANS: sales forecast
PTS: 1 REF: 23
7. ____________________ is the direct computer-to-computer exchange of standard business
documents.
ANS:
Electronic data interchange
EDI
Electronic data interchange (EDI)
EDI (electronic data interchange)
PTS: 1 REF: 23
8. Originially, in English, SAP was an acronym for ____________________.
ANS: Systems Analysis and Program Development
PTS: 1 REF: 25
9. In ____________________, third-party software companies are encouraged to develop add-on
software products that can be integrated with existing software.
ANS: open architecture
PTS: 1 REF: 27
10. Old systems are known as ____________________.
ANS: legacy systems
PTS: 1 REF: 27
11. SAP’s biggest competitor is ____________________.
ANS: Oracle
PTS: 1 REF: 28
12. The ____________________ records sales orders and scheduled deliveries. Information about the
customer (pricing, address and shipping instructions, billing details, and so on) is maintained and
accessed from this module.
ANS:
Sales and Distribution
SD
Sales and Distribution (SD)
SD (Sales and Distribution)
PTS: 1 REF: 29

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Test Bank For Concepts In Enterprise Resource Planning, 4th Edition

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