AS Level Business chapter 4: Operations management MCQs with answers
By Team Megalecture · Updated 4 Nov 2026
54 exam-style questions on Operations management, each with the answer and a short explanation. Ten of them are below to try. The chapter test draws ten fresh questions each time and is marked the moment you finish, with your score by topic.
Try each one, then open the answer. These ten stay the same; the test draws new ones every time.
1. Why might a business deliberately avoid operating at 100% capacity utilisation?
A
it would result in the lowest possible fixed cost per unit
B
it would make workers less productive by leaving them idle
C
it leaves room for urgent orders and for maintenance
D
full capacity use is illegal in most countries
Show answer
Answer: C. Running at 100% leaves no room for repairs, breakdowns or a sudden order, so quality and delivery can suffer. Lower fixed cost per unit is a benefit of high utilisation, not a reason to avoid it.
2. A business changes from JIC to JIT inventory management. What is the likely effect on its working capital?
A
the business requires a larger overdraft to pay for storage
B
trade payables become smaller as suppliers are paid
C
more cash is tied up in inventory held in the warehouse
D
less cash is tied up in stock, so more is available
Show answer
Answer: D. Lower inventory means less money is invested in stock, releasing cash and reducing the need for short-term finance. This benefit must be weighed against the risk of stock-outs.
3. A restaurant buys vegetables and meat, its chefs cook them in the kitchen and the meals are served to customers. Which part of the transformational process is the cooking?
A
an output
B
the process
C
an input
D
feedback
Show answer
Answer: B. Inputs (ingredients, staff, equipment) are converted by the process (cooking) into outputs (meals). Cooking is the conversion stage, not an input or an output.
4. A firm produces 6,400 units a month using a maximum capacity of 8,000 units. It installs a new machine that raises its maximum capacity to 10,000 units but demand does not change. What is its new capacity utilisation?
A
125%
B
36%
C
64%
D
80%
Show answer
Answer: C. New utilisation = 6,400 ÷ 10,000 × 100 = 64%, down from 80%. More capacity with unchanged output lowers the utilisation.
5. A clothing manufacturer replaces 40 machinists with computer-controlled cutting and sewing machines. Which is the most likely effect on its costs?
A
fixed costs rise and variable cost per unit falls
B
fixed costs fall and variable cost per unit rises
C
both fixed costs and variable cost per unit rise
D
fixed costs stay the same and variable cost per unit rises
Show answer
Answer: A. Buying machinery adds depreciation and finance costs (fixed), while fewer workers means lower labour cost per unit (variable). The cost structure moves towards higher fixed and lower variable costs.
6. A firm outsources its production of a key component. Which is the greatest risk?
A
the component will become more expensive to store in the warehouse
B
the firm will have to pay for spare capacity in its own factory
C
the supplier will take over the firm's design team
D
the supplier might deliver late or produce poor quality
Show answer
Answer: D. A firm that outsources depends on its supplier and cannot directly control quality or delivery. Problems could halt production and damage its own reputation.
7. A business has fixed costs of $60,000 a month. Its output rises from 6,000 units to 8,000 units as capacity utilisation improves. What is the change in fixed cost per unit?
A
falls from $10.00 to $7.50
B
stays at $10.00
C
rises from $7.50 to $10.00
D
falls from $10.00 to $3.75
Show answer
Answer: A. Fixed cost per unit = fixed costs ÷ output: 60,000 ÷ 6,000 = $10.00, then 60,000 ÷ 8,000 = $7.50. Fixed costs stay the same in total, so spreading them over more units lowers the average.
8. A car factory runs a continuous assembly line making thousands of identical vehicles, with each stage passing the product on to the next. Which operations method is this?
A
flow production
B
batch production
C
mass customisation
D
job production
Show answer
Answer: A. Flow production is continuous, standardised production on a production line. It gives low unit costs at high volume but needs high capital investment and is inflexible.
9. An inventory control chart for a component shows a maximum inventory level of 900 units, a buffer of 150 units, a re-order level of 450 units and a lead time of 4 days. Inventory falls in a straight line. What is the daily usage?
A
225 units
B
75 units
C
187.5 units
D
112.5 units
Show answer
Answer: B. Inventory falls from the re-order level (450) to the buffer (150) during the lead time, so usage = (450 − 150) ÷ 4 = 75 units a day. Dividing the whole re-order level by the lead time forgets that the buffer is still in stock when the delivery arrives.
10. A pharmacy buys extra supplies of cough medicine each October, in case a large number of customers fall ill in winter. Which approach to inventory is this?
A
job production
B
Just in Case (JIC)
C
zero-based budgeting
D
Just in Time (JIT)
Show answer
Answer: B. Holding extra inventory as a safeguard against uncertain demand or supply is Just in Case management. It avoids running out, but costs more to store.
54, each with the answer and a short explanation, across 3 topics: The nature of operations, Inventory management, Capacity utilisation and outsourcing. Every chapter test draws ten of them, so you can take it many times.
Is the AS Level Business chapter 4 test free?
Yes. The test, the answers and the explanations are free and need no sign-up. Sign in only if you want your scores kept across devices.
How is the chapter test marked?
The moment you press Finish: your score, the right answer and an explanation for every question, and the ones you got wrong saved in My mistakes to retry.
