Basic Industrial interview questions

150 questions with answers (IND-001 to IND-150). Try each one aloud before reading the answer.

Work Study & Ergonomics

IND-001 · What is productivity?

Productivity is the ratio of output to input (output ÷ input). It can be partial (labour or machine productivity) or total-factor, covering all inputs together.

IND-002 · What is the difference between method study and time study?

Method study examines and improves *how* the work is done. Time study (work measurement) establishes *how long* a qualified worker takes to do it at a defined pace.

IND-003 · What is work study?

Work study is the systematic examination of human work. It combines method study and work measurement to find the most effective use of resources and to set performance standards.

IND-004 · What is standard time?

Standard time is the time a qualified worker needs to complete a task at a normal pace, plus allowances. Standard time = normal time + allowances for personal needs, fatigue and delays.

IND-005 · What is normal time in a time study?

Normal time is the observed time adjusted for the worker's pace: normal time = observed time × performance rating. It is the time an average qualified worker would take at standard pace.

IND-006 · What is performance rating?

Performance rating compares the observed worker's pace with a defined normal pace, expressed as a percentage. A worker faster than normal is rated above 100%, a slower worker below 100%.

IND-007 · What are allowances in time study?

Allowances are extra time added to normal time for personal needs, fatigue and unavoidable delays (PF&D). They make the standard achievable over a full shift.

IND-008 · What is a therblig?

A therblig is one of the elementary hand motions defined by Frank and Lillian Gilbreth, such as search, grasp, transport loaded and release. Analysing therbligs helps remove unnecessary motions.

IND-009 · What is a flow process chart?

A flow process chart records the sequence of operations, inspections, transports, delays and storages for a product or worker. Times and distances are often noted to find improvement opportunities.

IND-010 · What are the five ASME process chart symbols?

Operation (circle), inspection (square), transport (arrow), delay (D shape) and storage (inverted triangle). A combined activity, such as operation with inspection, is shown as a circle inside a square.

IND-011 · What is ergonomics?

Ergonomics (human factors) designs work, equipment and environments to fit human capabilities and limitations. Its goals are safety, comfort, reduced fatigue and higher productivity.

IND-012 · What is anthropometry?

Anthropometry is the measurement of human body dimensions such as stature, reach and sitting height. Designers use percentile data, commonly the 5th to 95th, to size workplaces and equipment.

IND-013 · What is work sampling?

Work sampling (activity sampling) takes many random, instantaneous observations to estimate the proportion of time spent on activities or idle. It suits long or irregular jobs where stopwatch study is impractical.

Production Planning & Control

IND-014 · What is production planning and control (PPC)?

PPC decides what, how much and when to produce, and then controls execution against the plan. Its core functions are routing, loading, scheduling, dispatching, expediting (follow-up) and inspection.

IND-015 · What is the difference between routing and scheduling?

Routing defines the path and sequence of operations and machines a product follows. Scheduling assigns start and finish times to those operations.

IND-016 · What is dispatching?

Dispatching is releasing orders and authorizing work to start according to the schedule. It includes issuing job cards, materials, tools and drawings to the shop floor.

IND-017 · What is aggregate planning?

Aggregate planning sets overall production rates, workforce and inventory levels for product families over a medium-term horizon, typically 3–18 months. It balances capacity against forecast demand at minimum cost.

IND-018 · What is a master production schedule (MPS)?

An MPS states which end items will be produced, in what quantities and in which time periods. It disaggregates the aggregate plan and drives MRP.

IND-019 · What is MRP?

Material requirements planning calculates the quantity and timing of component and raw-material requirements. Its inputs are the MPS, the bill of materials and inventory records.

IND-020 · What is a bill of materials (BOM)?

A BOM is a structured list of all assemblies, subassemblies, parts and raw materials needed to make a product, with quantities per parent. It is often shown as a product structure tree.

IND-021 · What is the difference between independent and dependent demand?

Independent demand, such as finished goods, comes from the market and must be forecast. Dependent demand, such as components, is calculated from the demand for parent items.

IND-022 · What is a bottleneck?

A bottleneck is a resource whose capacity is less than the demand placed on it. It limits the throughput of the whole system.

IND-023 · What is the difference between a job shop and a flow shop?

A job shop makes low-volume, high-variety jobs with differing routings on general-purpose machines. In a flow shop all jobs follow the same machine sequence, typically at higher volume.

IND-024 · What is capacity?

Capacity is the maximum output rate of a system per unit time. Design capacity is the ideal maximum. Effective capacity is lower because it allows for product mix, maintenance and scheduling losses.

IND-025 · What is manufacturing lead time?

Manufacturing lead time is the total time from order release to completion. It includes setup, processing, move, queue and wait times, and queue time usually dominates.

IND-026 · What is ERP?

Enterprise resource planning is an integrated software system that links manufacturing, finance, HR, sales and supply chain on a common database. It evolved from MRP and MRP II.

Inventory Management

IND-027 · What is inventory?

Inventory is stock held for future use or sale. It includes raw materials, work-in-process (WIP), finished goods and MRO (maintenance, repair and operating) supplies.

IND-028 · Why do firms hold inventory?

To decouple operations, buffer against demand and supply uncertainty, gain economies of scale in ordering, anticipate seasonal demand and fill the pipeline during transit.

IND-029 · What is the difference between ordering cost and holding cost?

Ordering (setup) cost is incurred per order, regardless of quantity: admin, transport, setup. Holding (carrying) cost is the cost of keeping one unit in stock per period: capital, storage, insurance and obsolescence.

IND-030 · What is the reorder point?

The reorder point is the inventory level at which a replenishment order is placed. ROP = demand rate × lead time + safety stock.

IND-031 · What is safety stock?

Safety stock is extra inventory held to protect against variability in demand or lead time. It reduces the probability of a stockout during the replenishment lead time.

IND-032 · What is ABC analysis?

ABC analysis classifies items by annual usage value (annual demand × unit cost). Typically A items are about 10–20% of items but 70–80% of value, and C items are many low-value items needing little control.

IND-033 · What is VED analysis?

VED classifies items as Vital, Essential or Desirable according to how critical they are to operations. It is widely used for spare parts, where a stockout of a vital item stops production.

IND-034 · What is a stockout?

A stockout occurs when demand cannot be met from available inventory. It results in backorders or lost sales, plus goodwill and expediting costs.

IND-035 · What is replenishment lead time?

The time between placing an order and receiving the goods into usable stock. It includes supplier processing, transit and receiving or inspection time.

IND-036 · What is the difference between fixed-order-quantity and fixed-period systems?

In a fixed-order-quantity (Q) system, a fixed quantity is ordered when stock reaches the reorder point, which needs continuous review. In a fixed-period (P) system, stock is reviewed at fixed intervals and a variable quantity is ordered up to a target level.

IND-037 · What is inventory turnover?

Inventory turnover = cost of goods sold ÷ average inventory value. Higher turnover means inventory moves faster and less capital is tied up.

IND-038 · What is a two-bin system?

Stock is kept in two bins. When the first bin is empty, a replenishment order is placed and the second bin, sized to cover lead-time demand, is used. It is a simple visual Q system for low-value C items.

IND-039 · What is FSN analysis?

FSN classifies items as Fast-moving, Slow-moving or Non-moving according to consumption rate. It helps identify obsolete stock and set storage locations.

Operations Research

IND-040 · What is operations research?

Operations research applies mathematical modelling, statistics and optimization to decision-making problems. Typical tools are linear programming, queueing, simulation, network models and inventory models.

IND-041 · What is linear programming?

Linear programming optimizes (maximizes or minimizes) a linear objective function subject to linear equality or inequality constraints and non-negativity of the decision variables.

IND-042 · What is the feasible region in LP?

The set of all points that satisfy every constraint, including non-negativity. In LP it is a convex polygon or polyhedron. If a bounded optimum exists, it occurs at a corner point.

IND-043 · What is an objective function?

The mathematical expression to be optimized, such as maximize Z = 3x₁ + 5x₂ (profit) or minimize total cost. Its coefficients are the contribution or cost per unit of each decision variable.

IND-044 · What is a slack variable?

A non-negative variable added to a ≤ constraint to convert it to an equality. Its value is the unused amount of that resource.

IND-045 · What is a surplus variable?

A non-negative variable subtracted from a ≥ constraint to convert it to an equality. Its value is the amount by which the left side exceeds the minimum requirement.

IND-046 · What is the transportation problem?

It finds the minimum-cost shipment plan from m sources with given supplies to n destinations with given demands, where the unit shipping cost of each route is known.

IND-047 · What is a balanced transportation problem?

One where total supply equals total demand. If they differ, a dummy source or destination with zero cost is added to absorb the difference.

IND-048 · What is the assignment problem?

It assigns n jobs to n agents one-to-one so that total cost or time is minimized. It is a special case of the transportation problem with all supplies and demands equal to 1.

IND-049 · What is the Hungarian method?

An algorithm for the assignment problem. Subtract row minima, then column minima, and cover all zeros with the minimum number of lines. If fewer than n lines are needed, adjust by the smallest uncovered value and repeat; then make the assignment on the zeros.

IND-050 · What is the graphical method of solving LP?

For two-variable problems, plot each constraint, shade the feasible region and evaluate the objective at each corner point, or slide an iso-profit line. The best corner is optimal.

IND-051 · What is duality in linear programming?

Every LP (the primal) has a related dual LP. At optimality their objective values are equal, and the dual variables are the shadow prices of the primal constraints.

IND-052 · Name three methods for finding an initial basic feasible solution to a transportation problem.

North-West Corner rule, Least Cost (matrix minimum) method and Vogel's Approximation Method (VAM). VAM usually gives the solution closest to optimal.

Queueing Theory & Simulation

IND-053 · What is queueing theory?

Queueing theory is the mathematical study of waiting lines. It predicts measures such as queue length, waiting time and server utilization so that service capacity can be designed economically.

IND-054 · What are the elements of a queueing system?

The arrival process, the service mechanism (distribution and number of servers), the queue discipline, the system capacity and the size of the calling population.

IND-055 · What is Kendall's notation?

A/B/c/K/N/D: arrival distribution / service distribution / number of servers / system capacity / population size / queue discipline. For example, M/M/1 means Poisson arrivals, exponential service and one server, with K = ∞, N = ∞ and FCFS assumed.

IND-056 · What does "M" mean in M/M/1?

M stands for Markovian (memoryless). Arrivals follow a Poisson process (exponential interarrival times) and service times are exponential.

IND-057 · What are λ and μ in queueing?

λ is the mean arrival rate (customers per unit time). μ is the mean service rate of one busy server. Mean interarrival time is 1/λ and mean service time is 1/μ.

IND-058 · What is server utilization?

Utilization ρ = λ/(cμ) is the fraction of time the servers are busy, where c is the number of servers. A steady state exists only if ρ < 1.

IND-059 · What is queue discipline?

The rule for choosing the next customer to serve. Examples are FCFS (first come, first served), LCFS, SIRO (service in random order) and priority rules.

IND-060 · What are balking, reneging and jockeying?

Balking: refusing to join a queue that looks too long. Reneging: leaving the queue after waiting a while. Jockeying: switching between parallel queues.

IND-061 · What is simulation?

Simulation builds a model that imitates how a real system operates over time. Experiments on the model show how the system behaves under different conditions when analytical solutions are impractical.

IND-062 · What is Monte Carlo simulation?

Monte Carlo simulation samples random numbers from the probability distributions of uncertain inputs and repeats the calculation many times. The result is a distribution of outcomes, not a single value.

IND-063 · What are random numbers in simulation?

Independent values uniformly distributed on (0, 1). Computers generate pseudo-random numbers with deterministic algorithms such as linear congruential generators, then transform them into the required distributions.

IND-064 · What is the difference between discrete-event and continuous simulation?

In discrete-event simulation the system state changes only at specific event times, such as an arrival or a service completion. In continuous simulation the state changes continuously, usually modelled by differential equations.

IND-065 · What is steady state in a queueing system?

The condition in which the probabilities of system states no longer depend on time or on initial conditions. It requires utilization ρ < 1.

Statistical Quality Control

IND-066 · What is statistical quality control?

SQC uses statistical methods to monitor and improve quality. Its two main branches are statistical process control (control charts) and acceptance sampling.

IND-067 · What is a control chart?

A time-ordered plot of a quality statistic with a centre line and upper and lower control limits, usually at ±3σ of the statistic. Points outside the limits or non-random patterns signal assignable causes.

IND-068 · What is the difference between common causes and assignable causes?

Common (chance) causes are many small, inherent sources of random variation in a stable process. Assignable (special) causes are identifiable events, such as tool wear or a wrong material, that can be found and removed.

IND-069 · What is the difference between variables and attributes data?

Variables data are measured on a continuous scale, such as diameter in mm. Attributes data are counted or classified, such as defective or non-defective, or the number of defects.

IND-070 · What is acceptance sampling?

Inspecting a random sample from a lot and accepting or rejecting the whole lot based on the result. It is used when 100% inspection is too costly, too slow or destructive.

IND-071 · What is AQL?

The acceptable quality level is the poorest average quality level, such as percent defective, that is considered acceptable as a process average in a sampling plan. Lots at AQL have a high probability of acceptance.

IND-072 · What is an OC curve?

The operating characteristic curve plots the probability of accepting a lot against the lot's fraction defective for a given sampling plan. It shows how well the plan discriminates between good and bad lots.

IND-073 · What are producer's risk and consumer's risk?

Producer's risk (α) is the probability of rejecting a good lot, at AQL. Consumer's risk (β) is the probability of accepting a bad lot, at LTPD (lot tolerance percent defective).

IND-074 · What is the difference between a defect and a defective?

A defect is a single nonconformity to a requirement. A defective (nonconforming unit) is an item with one or more defects that make it unacceptable.

IND-075 · What is a c-chart?

A control chart for the number of defects per inspection unit when the unit size is constant. It is based on the Poisson distribution.

IND-076 · What is process capability?

Process capability is the ability of a stable process to produce output within specification limits. It is usually expressed by the indices Cp and Cpk, which compare the specification width with the process spread (6σ).

IND-077 · What is a histogram in quality control?

A bar chart showing the frequency distribution of measured data. It reveals the shape, centre and spread of a process and how they compare with the specification limits.

IND-078 · What are the seven basic quality tools?

Check sheet, histogram, Pareto chart, cause-and-effect (fishbone) diagram, scatter diagram, control chart, and stratification. Some lists use a flowchart instead of stratification.

Six Sigma

IND-079 · What does σ (sigma) represent in Six Sigma?

σ is the standard deviation, a measure of process spread. The "sigma level" counts how many standard deviations fit between the process mean and the nearest specification limit.

IND-080 · What is DMADV?

Define, Measure, Analyze, Design, Verify. It is the Design for Six Sigma (DFSS) roadmap used to create new products or processes, whereas DMAIC improves existing ones.

IND-081 · What is a defect opportunity?

Any measurable characteristic of a unit where a defect could occur and that matters to the customer. A circuit board with 100 solder joints has 100 solder-defect opportunities.

IND-082 · What is DPMO?

Defects per million opportunities = (number of defects ÷ (units × opportunities per unit)) × 10⁶. It allows processes of different complexity to be compared.

IND-083 · What is DPU?

Defects per unit = total defects ÷ total units inspected. Under a Poisson assumption, first-pass yield ≈ e^(−DPU).

IND-084 · What are the Six Sigma belt roles?

Champions or sponsors remove barriers. Master Black Belts coach and train. Black Belts lead projects full-time. Green Belts lead smaller projects part-time. Yellow Belts support teams with basic knowledge.

IND-085 · What is a CTQ?

A Critical-to-Quality characteristic is a measurable product or process attribute, with a target and limits, that is key to customer satisfaction. CTQs are derived from the voice of the customer.

IND-086 · What is VOC?

Voice of the customer is the process of capturing customers' stated and unstated needs through surveys, interviews, complaints and observation. These needs are then translated into CTQs.

IND-087 · What is a SIPOC diagram?

A high-level process map listing Suppliers, Inputs, Process (4–7 main steps), Outputs and Customers. It is used in the Define phase to set project scope.

IND-088 · What is a project charter in Six Sigma?

A document that states the business case, problem statement, goal, scope, team, milestones and expected benefits. The sponsor and team sign it to agree what the project will deliver.

IND-089 · What is a Pareto chart?

A bar chart of causes or defect categories sorted in descending frequency, with a cumulative-percentage line. It applies the 80/20 principle to focus effort on the vital few causes.

IND-090 · What is a fishbone (Ishikawa) diagram?

A cause-and-effect diagram with the problem at the head and possible causes grouped on the bones. The groups are often the 6Ms: Man, Machine, Method, Material, Measurement and Mother Nature (environment).

Lean Manufacturing & TPM

IND-091 · What is lean manufacturing?

A system for maximizing customer value by eliminating waste (muda). The seven wastes form the acronym TIMWOOD: Transport, Inventory, Motion, Waiting, Overproduction, Over-processing and Defects. Unused talent is often added as an eighth.

IND-092 · What is 5S?

A workplace organization method: Sort (Seiri), Set in order (Seiton), Shine (Seiso), Standardize (Seiketsu) and Sustain (Shitsuke). It creates a clean, orderly workplace where abnormalities are visible.

IND-093 · What are muda, mura and muri?

Muda is waste: activity that adds no value. Mura is unevenness in workload or flow. Muri is overburden on people or equipment. Lean tackles all three, and mura and muri often cause muda.

IND-094 · What is kaizen?

Continuous, incremental improvement that involves everyone from operators to managers. It is often run as short, focused kaizen events on a specific process.

IND-095 · What is Just-in-Time (JIT)?

Producing and delivering exactly what is needed, when it is needed, in the quantity needed. It minimizes inventory and exposes problems hidden by buffers.

IND-096 · What is kanban?

A visual signal, usually a card or an empty container, that authorizes production or withdrawal of a fixed quantity in a pull system. The number of kanbans caps the WIP.

IND-097 · What is the difference between push and pull production?

A push system produces according to forecasts or schedules and pushes output downstream. A pull system produces only to replace what the downstream process or customer has actually consumed.

IND-098 · What is poka-yoke?

Mistake-proofing: devices or methods that prevent an error from occurring or detect it immediately. Examples are asymmetric connectors, limit switches and part-presence sensors.

IND-099 · What is TPM?

Total Productive Maintenance maximizes overall equipment effectiveness with the involvement of everyone, especially operators doing autonomous maintenance. Its aims are zero breakdowns, zero defects and zero accidents.

IND-100 · What is OEE?

Overall Equipment Effectiveness = Availability × Performance × Quality. It measures the percentage of planned production time that is truly productive.

IND-101 · What is takt time?

Takt time = available production time ÷ customer demand in that time. It is the pace at which one unit must be completed to meet demand.

IND-102 · What is value stream mapping?

A visual map of all material and information flows needed to deliver a product, from supplier to customer. It separates value-added from non-value-added time and is used to design a leaner future state.

Supply Chain & Logistics

IND-103 · What is a supply chain?

The network of suppliers, manufacturers, warehouses, distributors, retailers and customers through which materials, products, information and money flow.

IND-104 · What is supply chain management?

The coordinated planning and control of material, information and financial flows across the supply chain. Its aim is to meet customer service targets at the lowest total cost.

IND-105 · What is logistics?

The part of SCM that plans and executes the efficient movement and storage of goods, services and information. It covers inbound logistics from suppliers and outbound logistics to customers.

IND-106 · What do upstream and downstream mean in a supply chain?

Upstream refers to activities and partners towards the raw-material suppliers. Downstream refers to those towards the end customer.

IND-107 · What is a 3PL?

A third-party logistics provider is an external company that performs outsourced logistics services such as transportation, warehousing, freight forwarding and order fulfilment.

IND-108 · What is a distribution centre?

A facility that receives, stores, picks and ships goods to retailers or customers. Compared with a pure warehouse, it focuses on product flow and fast throughput.

IND-109 · What is cross-docking?

Unloading inbound shipments and transferring them directly to outbound vehicles with little or no storage, typically within 24 hours. It reduces inventory and handling.

IND-110 · What is vendor-managed inventory (VMI)?

An arrangement in which the supplier monitors the customer's inventory data and decides when and how much to replenish, within agreed limits.

IND-111 · What is procurement?

Procurement is the process of acquiring goods and services. It covers identifying needs, sourcing and selecting suppliers, negotiating contracts, ordering, receiving and paying.

IND-112 · What is the difference between single and multiple sourcing?

Single sourcing buys an item from one supplier, which gives closer partnership and volume leverage. Multiple sourcing uses several suppliers, which reduces supply risk and increases competition.

IND-113 · What are Incoterms?

International Commercial Terms published by the International Chamber of Commerce. They define buyer and seller responsibilities for delivery, risk transfer and costs, for example EXW, FOB, CIF and DDP.

IND-114 · What is reverse logistics?

The flow of products from customers back up the supply chain for returns, repair, remanufacturing, recycling or disposal.

Facility Layout & Material Handling

IND-115 · What is facility layout?

The physical arrangement of departments, machines, workstations, storage and aisles within a facility. Its goal is efficient flow of materials and people at minimum handling cost.

IND-116 · What are the basic types of plant layout?

Product (line) layout, process (functional) layout, fixed-position layout and cellular (group technology) layout. Hybrid layouts combine these types.

IND-117 · What is a product layout?

Equipment is arranged in the exact sequence of operations for one product or a narrow family. It suits high-volume, standardized production such as assembly lines.

IND-118 · What is a process layout?

Similar machines or functions are grouped into departments, such as all lathes together. It suits low-volume, high-variety job shops but causes long, complex material flows.

IND-119 · What is a fixed-position layout?

The product stays in one place and workers, materials and equipment come to it. It is used for very large or heavy products such as ships, aircraft and buildings.

IND-120 · What is a cellular layout?

Dissimilar machines are grouped into cells, each dedicated to processing a family of similar parts. This combines the flow efficiency of a product layout with the flexibility of a process layout.

IND-121 · What is group technology?

Group technology identifies and groups parts with similar design or manufacturing characteristics into part families. This lets setups, tooling and cells be shared.

IND-122 · What is material handling?

Material handling is the movement, storage, protection and control of materials throughout manufacturing and distribution. It adds cost but no value, so it should be minimized.

IND-123 · Name common types of material handling equipment.

Conveyors, cranes and hoists, forklift trucks, pallet jacks, automated guided vehicles (AGVs), industrial robots and automated storage and retrieval systems (AS/RS).

IND-124 · What is an AGV?

An automated guided vehicle is a driverless, battery-powered vehicle that moves materials along paths defined by wires, magnetic tape, lasers or vision navigation.

IND-125 · What is an AS/RS?

An automated storage and retrieval system is a computer-controlled system of high-density racks with storage/retrieval machines. It places and retrieves loads automatically.

IND-126 · What is facility location?

Facility location is the decision of where to site a plant or warehouse. It weighs costs, proximity to markets and suppliers, labour, infrastructure, taxes and risk.

Project Management

IND-127 · What is a Gantt chart?

A bar chart that shows project tasks against a time scale, with each bar's length equal to the task's duration. It is easy to read but does not clearly show dependencies.

IND-128 · What is a project?

A temporary endeavour with a defined start and finish, undertaken to create a unique product, service or result within scope, time and cost constraints.

IND-129 · What is CPM?

The critical path method is a network technique that uses deterministic activity durations. It identifies the longest path through the project network, which sets the minimum project duration.

IND-130 · What is the critical path?

The longest-duration path from project start to finish. Its activities have zero total float, so any delay to them delays the whole project.

IND-131 · What is float (slack) in a project network?

Float is the time an activity can be delayed without delaying the project (total float) or without delaying the next activity (free float).

IND-132 · What is the difference between AON and AOA networks?

In Activity-on-Node (AON), nodes are activities and arrows show precedence. In Activity-on-Arrow (AOA), arrows are activities and nodes are events. AOA may need dummy activities.

IND-133 · What is a dummy activity?

A zero-duration, zero-resource activity used in AOA networks. It shows a logical dependency correctly or avoids two activities sharing the same start and end nodes.

IND-134 · What is a milestone?

A significant event or checkpoint in a project with zero duration, such as design approval. Milestones are used to track progress.

IND-135 · What is a work breakdown structure (WBS)?

A hierarchical decomposition of the total project scope into deliverables and smaller work packages. These can then be estimated, assigned and controlled.

IND-136 · What is PERT?

The Program Evaluation and Review Technique is a network method that uses three time estimates per activity: optimistic, most likely and pessimistic. It handles uncertain durations and estimates completion probability.

IND-137 · What is the project triple constraint?

Scope, time and cost are interdependent constraints: changing one affects the others. Quality is often shown at the centre of the triangle.

IND-138 · What is crashing a project?

Shortening activity durations by adding resources, such as overtime or extra crews, at extra direct cost to reduce total project duration. Only critical activities are crashed.

Engineering Economics & Forecasting

IND-139 · What is the time value of money?

Money available now is worth more than the same amount in the future because it can earn interest. Cash flows at different times must be converted to an equivalent time before comparison.

IND-140 · What is the difference between simple and compound interest?

Simple interest is earned only on the principal: I = Pin. Compound interest is earned on the principal plus accumulated interest: F = P(1 + i)ⁿ.

IND-141 · What is present worth?

The equivalent value today of future cash flows, found by discounting them at the interest rate: P = F/(1 + i)ⁿ.

IND-142 · What is NPV?

Net present value is the sum of the present values of all cash inflows minus the present values of all outflows, at the minimum attractive rate of return. NPV > 0 means the investment is acceptable.

IND-143 · What is the payback period?

The time needed for cumulative net cash inflows to recover the initial investment. It is simple to calculate but ignores the time value of money (in its simple form) and cash flows after payback.

IND-144 · What is IRR?

The internal rate of return is the discount rate at which the NPV of a project equals zero. A project is acceptable if IRR ≥ MARR.

IND-145 · What is depreciation?

Depreciation allocates an asset's cost, less salvage value, over its useful life. It reflects loss of value from wear, age and obsolescence, and it matters for taxes.

IND-146 · What is the break-even point?

The output at which total revenue equals total cost, so profit is zero. BEP (units) = fixed cost ÷ (price − variable cost per unit).

IND-147 · What is the difference between fixed and variable costs?

Fixed costs, such as rent, salaries and depreciation, do not change with output in the relevant range. Variable costs, such as materials and direct labour per unit, change in proportion to output.

IND-148 · What is forecasting?

Forecasting estimates future demand or other variables using historical data, statistical models and judgment. It is the basis for capacity, production and inventory planning.

IND-149 · What is the difference between qualitative and quantitative forecasting?

Qualitative methods, such as the Delphi method, expert opinion and market surveys, rely on judgment and suit new products. Quantitative methods, such as time series and causal models, use historical numerical data.

IND-150 · What is a simple moving average forecast?

The average of the most recent n periods of actual demand, used as the forecast for the next period. A larger n gives more smoothing but slower response to change.

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