Exam 4: Strategic Capacity Management

The basic notion of economies of scale is that as a plant gets larger and volume increases, the average cost per unit of output drops.

When evaluating capacity, managers need to consider both resource inputs and product outputs.

Capacity can be defined as the amount of available resource inputs relative to requirements for output over a particular period of time.

Compared with a service operation, a manufacturing operation's capacity is which of the following?

The capacity focus concept can be put into practice through a mechanism called which of the following?

The capacity utilization rate is found by dividing best operating level by capacity used.

The smaller the capacity cushion the better.

Best operating level is usually a multiple of the level of capacity for which a process was designed.

Economies of scope exist when multiple products can be produced at a lower cost in combination than they can separately.

In practice, achieving a perfectly balanced plant is usually desirable but impossible.

If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units, which of the following is the capacity cushion?

Capacity can be defined as the ability to hold, receive, store, or accommodate.

The ability to rapidly and inexpensively switch production from one product to another enables what are sometimes referred to as:

Making adjustments to eliminate the variance between planned and actual output is tied into intermediate range capacity planning.

The probability of each occurrence at a decision tree chance node is the reciprocal of the number of possibilities at the chance node.

Overtime and personnel transfers are solutions to capacity problems in the intermediate term.

In a decision tree, the only time probabilities are applied to a decision node is when the decision is being made by someone else such as you customer or your competitor.

Best operating level is the volume of output at which average unit cost is minimized.