Exam 5: Strategic Capacity Management

Low rates of capacity utilization in service organizations are never appropriate.

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

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, what is the capacity cushion? __________________

If demand for product A were forecast at 1,000,000 units for the coming year and your factory has one machine capable of producing 75,000 units per month, how much of product A might you plan to acquire through outsourcing? _______________

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

A capacity cushion is the amount of capacity less than expected demand.

A chance node on a decision tree has four possible outcomes, each worth $100,000.The probabilities of the outcomes occurring are assessed as 10%, 27%, 43%, and 20%.What is the expected value of this chance node? ____________________

A decision tree problem does not need probabilities or payoffs to generate a solution.

Capacity planning is generally viewed in three time durations: immediate, intermediate, and indeterminate.

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

Capacity flexibility means having the ability to rapidly increase or decrease production levels or to shift production capacity quickly from one product or service to another.

A chance node on a decision tree has four possible outcomes worth $10,000, $20,000, $30,000, and -$100,000, respectively.The probabilities of these outcomes occurring are assessed as 10%, 25%, 50%, and 15%, correspondingly.What is the expected value of this chance node? _________________________

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, what is the capacity utilization rate? ____________________

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

In solving a decision tree problem, calculations start at the ends of the "branches" of the tree and work backward to the base of the tree.

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.

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

A piece of equipment with twice the capacity of another piece typically costs twice as much to purchase and to operate.

Which of the following models uses a schematic model of the sequence of steps in a problem and the conditions and consequences of each step?

Capacity planning that involves hiring, layoffs, some new tooling, minor equipment purchases, and subcontracting is considered as which one of the following planning horizons?