Exam 8: Capacity and Constraint Management

A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years.If the cost of capital is 5 percent,the net present value of this investment is:

Fixed costs are those costs that continue even if no units are produced.

In the service sector,scheduling customers is a type of ________ management,while scheduling the workforce is a type of ________.

To find the throughput time with simultaneous processes,compute the time over all paths and choose the shortest path through the system.

In "drum,buffer,rope," the ________ acts like signals between workstations.

A firm is considering adding a second secretary to answer phone calls and make appointments.The cost of the secretary will be $10/hour and she will work 200 hours each month.If each new client adds $400 of profit to the firm,how many clients must the secretary arrange for the firm to break even?

Changes in capacity may lead,lag,or straddle the demand.

Define variable costs.What special assumption is made about variable costs in the textbook?

A firm is about to undertake the manufacture of a product,and it is weighing three capacity alternatives: small job shop,large job shop,and repetitive manufacturing.The small job shop has fixed costs of $3,000 per month,and variable costs of $10 per unit.The larger job shop has fixed costs of $12,000 per month and variable costs of $3 per unit.The repetitive manufacturing plant has fixed costs of $30,000 and variable costs of $1 per unit.Demand for the product is expected to be 1,000 units per month with "moderate" market acceptance,but 2,000 under "strong" market acceptance.The probability of moderate acceptance is estimated to be 60 percent; strong acceptance has a probability of 40 percent.The product will sell for $25 per unit regardless of the capacity decision.Which capacity choice should the firm make?

A local business owner is considering adding another employee to his staff in an effort to increase the number of hours that the store is open per day.If the employee will cost the owner $4,000 per month and the store takes in $50/hour in revenue with variable costs of $15/hour,how many hours must the new employee work for the owner to break even?

The staff training center at a large regional hospital provides training sessions in CPR to all employees.Assume that the capacity of this training system was designed to be 1800 employees per year.Since the training center was first put in use,the program has become more complex,so that 1400 now represents the most employees that can be trained per year.In the past year,1350 employees were trained.Calculate the efficiency and the utilization of this system.

Capacity decisions are based on technological concerns,not demand forecasts.

What is the fundamental distinction between design capacity and effective capacity? Provide a brief example.

What are the four limitations of the net present value technique?

How is break-even analysis useful in the study of the capacity decision? What limitations does this analytical tool have in this application?

A product is currently made in a process-focused shop,where fixed costs are $9,000 per year and variable cost is $50 per unit.The firm sells the product for $200 per unit.What is the break-even point for this operation? What is the profit (or loss)on a demand of 200 units per year?

Which of the following is FALSE regarding capacity expansion?

Of the four approaches to capacity expansion,the approach that "straddles" demand:

Identify,in proper sequence,the steps in the process of recognizing and managing constraints.

Basic break-even analysis typically assumes that: