Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

If the unit cost to buy something is less than the variable cost to make it, the decision to make or buy is based solely on the fixed costs.

Accepted Answer

A) True 
 B)False

Question 3

The method of financial analysis which focuses on the length of time it takes to recover the initial cost of an investment 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 4

The first, and perhaps most important, step in constraint management is to ____________ the most pressing constraint.

Accepted Answer

A)  improve 
B)  support 
C)  identify 
D)  elevate 
E)  modify 
A)  improve 
B)  support 
C)  identify 
D)  elevate 
E)  modify

Question 5

Given the following data for a make-or-buy decision: $$\begin{array} { l l l } 
\text { Alternative } & \text { Fixed Cost } & \text { Variable Cost } \
\hline  \text { Buy } & \$ 0 \text { per year } & \$ 8 \text { per unit } \
\text { Make } & \$ 100,000 \text { per year } & \$ 4 \text { per unit }
\end{array}$$ What would be your cost savings for the preferred alternative, for 32,000 units per year, compared to the other alternative?

Accepted Answer

The answer of Given the following data for a make-or-buy...

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Maximum capacity refers to the upper limit of:

Accepted Answer

A)  inventories. 
B)  demand. 
C)  supplies. 
D)  rate of output. 
E)  finances. 
A)  inventories. 
B)  demand. 
C)  supplies. 
D)  rate of output. 
E)  finances.

Question 8

At the break-even point:

Accepted Answer

A)  output equals capacity. 
B)  total cost equals total revenue. 
C)  total cost equals profit. 
D)  variable cost equals fixed cost. 
E)  variable cost equals total revenue. 
A)  output equals capacity. 
B)  total cost equals total revenue. 
C)  total cost equals profit. 
D)  variable cost equals fixed cost. 
E)  variable cost equals total revenue.

Question 9

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. What would the potential profit be if he were to split 4,000 cords of wood with this machine?

Accepted Answer

A)  $0 
B)  $200,000 
C)  $100,000 
D)  $75,000 
E)  $50,000 
A)  $0 
B)  $200,000 
C)  $100,000 
D)  $75,000 
E)  $50,000

Question 10

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 11

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 12

What is the break-even quantity for the following situation? FC = $1,200 per week
VC = $2 per unit
Rev = $6 per unit

Accepted Answer

A)  100 
B)  200 
C)  600 
D)  1,200 
E)  300 
A)  100 
B)  200 
C)  600 
D)  1,200 
E)  300

Question 13

Efficiency is defined as the ratio of:

Accepted Answer

A)  actual output to effective capacity. 
B)  actual output to design capacity. 
C)  design capacity to effective capacity. 
D)  effective capacity to actual output. 
E)  design capacity to actual output. 
A)  actual output to effective capacity. 
B)  actual output to design capacity. 
C)  design capacity to effective capacity. 
D)  effective capacity to actual output. 
E)  design capacity to actual output.

Question 14

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?

Accepted Answer

A)  12,000 
B)  2,400 
C)  3,000 
D)  1,000 
E)  5,000 
A)  12,000 
B)  2,400 
C)  3,000 
D)  1,000 
E)  5,000

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

Which of the following is the case where capacity is measured in terms of inputs?

Accepted Answer

A)  steel mill 
B)  electrical power plant 
C)  restaurant 
D)  petroleum refinery 
E)  airline 
A)  steel mill 
B)  electrical power plant 
C)  restaurant 
D)  petroleum refinery 
E)  airline

Question 17

Which of the following is not a strategy to manage service capacity?

Accepted Answer

A)  hiring extra workers 
B)  backordering 
C)  pricing and promotion 
D)  part-time workers 
E)  subcontracting 
A)  hiring extra workers 
B)  backordering 
C)  pricing and promotion 
D)  part-time workers 
E)  subcontracting

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 break even?

Accepted Answer

A)  1,600 
B)  2,400 
C)  2,000 
D)  1,000 
E)  1,500 
A)  1,600 
B)  2,400 
C)  2,000 
D)  1,000 
E)  1,500

Question 20

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.

Exam 5: Strategic Capacity Planning for Products and Services

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

If the unit cost to buy something is less than the variable cost to make it, the decision to make or buy is based solely on the fixed costs.

The method of financial analysis which focuses on the length of time it takes to recover the initial cost of an investment is:

The first, and perhaps most important, step in constraint management is to ____________ the most pressing constraint.

Given the following data for a make-or-buy decision: Alternative Fixed Cost Variable Cost Buy \ 0 per year \ 8 per unit Make \ 100,000 per year \ 4 per unit What would be your cost savings for the preferred alternative, for 32,000 units per year, compared to the other alternative?

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

Maximum capacity refers to the upper limit of:

At the break-even point:

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

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

What is the break-even quantity for the following situation? FC = $1,200 per week VC = $2 per unit Rev = $6 per unit

Efficiency is defined as the ratio of:

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.

Which of the following is the case where capacity is measured in terms of inputs?

Which of the following is not a strategy to manage service capacity?

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

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 break even?

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

Introduction to Operations Management

Competitiveness, Strategy, and Productivity

Forecasting

Product and Service Design

Extension: Reliability

Extension: Decision Theory

Process Selection and Facility Layout

Work Design and Measurement

Extension: Learning Curves

Location Planning and Analysis

Extension: The Transportation Model

Management of Quality

Quality Control

Extension: Acceptance Sampling

Aggregate Planning and Master Scheduling

MRP and ERP

Inventory Management

Jit and Lean Operations

Extension: Maintenance

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 .