Question 1

Outsourcing some production is a means of _________ a capacity constraint.

Accepted Answer

A)  identifying 
B)  modifying 
C)  supporting 
D)  overcoming 
E)  repeating 
A)  identifying 
B)  modifying 
C)  supporting 
D)  overcoming 
E)  repeating

Question 2

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. What would be his profit if he were to perform 5,000 HIV blood analyses?

Accepted Answer

A)  $0 
B)  $40,000 
C)  $60,000 
D)  $25,000 
E)  $100,000 
A)  $0 
B)  $40,000 
C)  $60,000 
D)  $25,000 
E)  $100,000

Question 3

Design capacity refers to the maximum output rate that can be achieved under ideal conditions.

Accepted Answer

A) True 
 B)False

Question 4

The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. How many cords of wood would he have to split with this machine to make a profit of $30,000?

Accepted Answer

A)  3,200 
B)  1,500 
C)  2,000 
D)  1,000 
E)  500 
A)  3,200 
B)  1,500 
C)  2,000 
D)  1,000 
E)  500

Question 5

Seasonal variations are often easier to deal with in capacity planning than random variations because seasonal variations tend to be:

Accepted Answer

A)  smaller. 
B)  larger. 
C)  predictable. 
D)  controllable. 
E)  less frequent. 
A)  smaller. 
B)  larger. 
C)  predictable. 
D)  controllable. 
E)  less frequent.

Question 6

Utilization is defined as the ratio of effective capacity to design capacity.

Accepted Answer

A) True 
 B)False

Question 7

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. What would be the county's annual profit if they were to process 4,000 prisoners per year at this new location?

Accepted Answer

A)  $0 
B)  $75,000 
C)  $50,000 
D)  $100,000 
E)  $300,000 
A)  $0 
B)  $75,000 
C)  $50,000 
D)  $100,000 
E)  $300,000

Question 8

Waiting line analysis can be useful for capacity design, especially for service systems.

Accepted Answer

A) True 
 B)False

Question 9

When the output is less than the optimal rate of output, the average unit cost will be:

Accepted Answer

A)  lower. 
B)  the same. 
C)  higher. 
D)  could be either higher or lower. 
E)  could be either higher, lower or the same. 
A)  lower. 
B)  the same. 
C)  higher. 
D)  could be either higher or lower. 
E)  could be either higher, lower or the same.

Question 10

The more current capacity exceeds desired capacity, the greater the opportunity for profit.

Accepted Answer

A) True 
 B)False

Question 11

The decision to outsource opens the firm up to certain risks, among them _________ and ________.

Accepted Answer

A)  lower costs; fewer task-specific investments 
B)  loss of direct control over operations; need to disclose proprietary information 
C)  access to greater expertise; greater demand variability 
D)  greater capacity rigidity; tight knowledge control 
E)  higher marketing costs; small orders 
A)  lower costs; fewer task-specific investments 
B)  loss of direct control over operations; need to disclose proprietary information 
C)  access to greater expertise; greater demand variability 
D)  greater capacity rigidity; tight knowledge control 
E)  higher marketing costs; small orders

Question 12

Given the following information, what would efficiency be?
Effective capacity = 50 units per day
Design capacity = 100 units per day
Actual output = 30 units per day

Accepted Answer

A)  40 percent 
B)  50 percent 
C)  60 percent 
D)  80 percent 
E)  90 percent 
A)  40 percent 
B)  50 percent 
C)  60 percent 
D)  80 percent 
E)  90 percent

Question 13

Outsourcing some production is a means of supporting a constraint.

Accepted Answer

A) True 
 B)False

Question 14

The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. If, for this machine, design capacity is 50 cords per day, effective capacity is 40 cords per day, and actual output is expected to be 32 cords per day, what would be its efficiency?

Accepted Answer

A)  100 percent 
B)  80 percent 
C)  75 percent 
D)  70 percent 
E)  0 percent 
A)  100 percent 
B)  80 percent 
C)  75 percent 
D)  70 percent 
E)  0 percent

Question 15

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. Increasing X's effective capacity to ensure that Y's utilization is maximized would be an example of ________ a(n) constraint.

Accepted Answer

A)  overcoming 
B)  outsourcing 
C)  insourcing 
D)  cushioning 
E)  supporting 
A)  overcoming 
B)  outsourcing 
C)  insourcing 
D)  cushioning 
E)  supporting

Question 16

For fixed costs of $2,000, revenue per unit of $2, and variable cost per unit of $1.60, the break-even quantity is:

Accepted Answer

A)  1,000.00 
B)  1,250.00 
C)  2,250.00 
D)  5,000.00 
E)  3,000.00 
A)  1,000.00 
B)  1,250.00 
C)  2,250.00 
D)  5,000.00 
E)  3,000.00

Question 17

The ratio of actual output to effective capacity is:

Accepted Answer

A)  design capacity. 
B)  effective capacity. 
C)  actual capacity. 
D)  efficiency. 
E)  utilization. 
A)  design capacity. 
B)  effective capacity. 
C)  actual capacity. 
D)  efficiency. 
E)  utilization.

Question 18

The maximum possible output given a product mix, scheduling difficulties, personal time, and so on is:

Accepted Answer

A)  utilization. 
B)  design capacity. 
C)  efficiency. 
D)  effective capacity. 
E)  available capacity. 
A)  utilization. 
B)  design capacity. 
C)  efficiency. 
D)  effective capacity. 
E)  available capacity.

Question 19

The method of financial analysis which results in an equivalent interest rate is:

Accepted Answer

A)  payback. 
B)  net present value. 
C)  internal rate of return. 
D)  queuing. 
E)  cost-volume. 
A)  payback. 
B)  net present value. 
C)  internal rate of return. 
D)  queuing. 
E)  cost-volume.

Question 20

Which of the following is a key question in capacity planning?

Accepted Answer

A)  Should we make the product in-house or outsource it? 
B)  Where do we need the capacity? 
C)  When do we need the capacity? 
D)  Who will pay for the capacity change? 
E)  Should we change capacity all at once, or through several small changes? 
A)  Should we make the product in-house or outsource it? 
B)  Where do we need the capacity? 
C)  When do we need the capacity? 
D)  Who will pay for the capacity change? 
E)  Should we change capacity all at once, or through several small changes?

Exam 6: Strategic Capacity Planning for Products and Services

Outsourcing some production is a means of _________ a capacity constraint.

Design capacity refers to the maximum output rate that can be achieved under ideal conditions.

Seasonal variations are often easier to deal with in capacity planning than random variations because seasonal variations tend to be:

Utilization is defined as the ratio of effective capacity to design capacity.

Waiting line analysis can be useful for capacity design, especially for service systems.

When the output is less than the optimal rate of output, the average unit cost will be:

The more current capacity exceeds desired capacity, the greater the opportunity for profit.

The decision to outsource opens the firm up to certain risks, among them _________ and ________.

Given the following information, what would efficiency be? Effective capacity = 50 units per day Design capacity = 100 units per day Actual output = 30 units per day

Outsourcing some production is a means of supporting a constraint.

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. Increasing X's effective capacity to ensure that Y's utilization is maximized would be an example of ________ a(n) constraint.

For fixed costs of $2,000, revenue per unit of $2, and variable cost per unit of $1.60, the break-even quantity is:

The ratio of actual output to effective capacity is:

The maximum possible output given a product mix, scheduling difficulties, personal time, and so on is:

The method of financial analysis which results in an equivalent interest rate is:

Which of the following is a key question in capacity planning?

Introduction to Operations Management

Competitiveness

Forecasting

Product and Service Design

RELIABILITY – Static

Decision Theory– Static

Process Selection and Facility Layout

Work Design and Measurement

learning curve– Static

Location Planning and Analysis

The Transportation Model– Static

Management of Quality

Quality Control

Acceptance Sampling– Static

Aggregate Planning and Master Scheduling

MRP and ERP

Inventory Management

JIT and Lean Operations

Maintenance– Static

Supply Chain Management

Scheduling

Project Management

Management of Waiting Lines

Linear Programming

Filters

The decision to outsource opens the firm up to certain risks, among them _ and .