Exam 6: Strategic Capacity Planning for Products and Services

Capacity decisions often involve a long-term commitment of resources which, when implemented, are difficult or impossible to modify without major added costs.

Production units have an optimal rate of output where:

When buying component parts, risk does not include:

Capacity increases are usually acquired in fairly large "chunks" rather than in smooth increments.

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. How many rosebushes would she have to produce and sell in order to make a profit of $6,000?

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. If the holding area at this new location has design and effective capacities of 10,000 and 7,500 prisoners processed annually, respectively, and 5,000 prisoners will be processed per year, what will be the utilization of the holding area?

Capacity in excess of expected demand that is intended to offset uncertainty is a:

The term capacity refers to the maximum quantity an operating unit can process over a given period of time.

Which of the following would tend to reduce effective capacity?

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. If her available land has design and effective capacities of 3,000 and 2,000 rosebushes per year respectively, and she plans to grow 1,200 rosebushes each year on this land, what will be the utilization of this land?

Doctor J. is considering purchasing a new blood analysis machine to test for HIV; it will cost $60,000. He estimates that he could charge $25.00 for an office visit to have a patient's blood analyzed, while the actual cost of a blood analysis would be $5.00. How many HIV blood analyses would he have to perform in order to break even?

Utilization is defined as the ratio of:

The ratio of actual output to design capacity is:

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. If her available land has design and effective capacities of 3,000 and 2,000 rosebushes per year, respectively, and she expects to be 80 percent efficient in her use of this land, how many rosebushes does Rose plan to grow each year on this land?

A market constraint can be overcome by:

An example of an external factor that influences effective capacity is government safety regulations.

The impact that a significant change in capacity will have on a key vendor is a:

Operation X feeds into operation Y. Operation X has an effective capacity of 55 units per hour. Operation Y has an effective capacity of 50 units per hour. Finding a way to increase Y's effective capacity would be an example of ________ a constraint.

Given the following information, what would utilization be? Effective capacity = 20 units per day Design capacity = 60 units per day Actual output = 15 units per day

The break-even quantity can be determined by dividing the fixed costs by the difference between the revenue per unit and the variable cost per unit.