Exam 4: Strategic Capacity Management

In decision tree analysis the time value of money is ignored because you are only concerned with cash costs.

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.

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? __________________

Describe the relationship between capacity utilization and quality in a service operation.