Exam 5: Strategic Capacity Management

At some point, the size of a growing plant can become too large and diseconomies of scale become a capacity planning problem.

If the actual output of a piece of equipment during an hour is 500 units and its best operating level is at a rate of 400 units per hour, which of the following is the capacity utilization rate?

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

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.

The objective of strategic capacity planning is to determine the overall capacity level of capital intensive resources (including facilities, equipment, and overall labor force size) that best supports the company's long-range competitive strategy.

In a decision tree problem involving capacity planning, there was a random outcome node with three random outcomes (A,B, and C) which followed a decision node.The probabilities for A, B and C: P(A)=0.4, P(B) = 0.6 and P(C) = 0.2.Payoff following A,B and C respectively are $10000, $5000 and $2000.Expected value of that random outcome node is:

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

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

The frequency of adding to productive capacity should balance the costs of upgrading too frequently and the costs of upgrading too infrequently.

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

The capacity cushion is the ratio of capacity used to the best capacity level.

When deciding to add capacity to a factory, which of the following need not be considered?

In practice, achieving a perfectly balanced plant is usually both impossible and undesirable.

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

The smaller the capacity cushion, the better.

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

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.