Question 1

An expansionist capacity strategy involves large,infrequent jumps in capacity,where a wait-and-see strategy involves smaller,more frequent jumps.

Accepted Answer

A) True 
 B)False

Question 2

Which one of the following factors usually motivates a smaller capacity cushion?

Accepted Answer

A) unevenly distributed demands 
B) high capital intensity 
C) high penalty costs for overtime usage 
D) requests for quick customer services 
A) unevenly distributed demands 
B) high capital intensity 
C) high penalty costs for overtime usage 
D) requests for quick customer services

Question 3

A wait-and-see capacity strategy minimizes the chances of lost sales due to insufficient capacity.

Accepted Answer

A) True 
 B)False

Question 4

Which one of the following factors usually calls for a larger capacity cushion?

Accepted Answer

A) uncertain demand 
B) high capital intensity 
C) more reliable equipment 
D) high worker flexibility 
A) uncertain demand 
B) high capital intensity 
C) more reliable equipment 
D) high worker flexibility

Question 5

Figure 6.1  
-A manager weighs three options for capacity cushion as depicted in Figure 1.If the dollar amounts expressed in the Figure 9.1 are cash flows,which option is optimal?

Accepted Answer

A) large cushion 
B) medium cushion 
C) small cushion 
D) Not enough information is given to select an option. 
A) large cushion 
B) medium cushion 
C) small cushion 
D) Not enough information is given to select an option.

Question 6

Table 6.1
The Union Manufacturing Company is producing two types of products: A and B.The demand forecasts,batch size,and time standards follow:
   Both products are produced on the same machine,called Mark I.
-Use the information in Table 6.1.The company works 250 days per year and operates two shifts,each covering 8 hours.If a 15 percent capacity cushion is maintained,how many hours of capacity can the company expect from each of its Mark I machines?

Accepted Answer

A) fewer than 3000 
B) between 3000 and 3500 
C) between 3501 and 4000 
D) more than 4000 
A) fewer than 3000 
B) between 3000 and 3500 
C) between 3501 and 4000 
D) more than 4000

Question 7

Table 6.8
The Summerville Vitamin Company manufactures bottles of animal-shaped chewable vitamins for children.This product line requires two work centers,tablet manufacturing and packaging.The tablet manufacturing work center has a current capacity of 140,000 bottles per month,and packaging is capable of 100,000 units per month.This year (year 0),monthly sales of the product line are expected to reach 100,000 units.Growth per month is projected at an additional 25,000 units through year 4 (i.e. ,125,000 per month in year #1,150,000 per month in year #2,etc. ).Pre-tax profits are expected to be $5 per unit throughout the 4-year planning period.Two alternatives are being considered:
-Use the information in Table 6.8.What is the pre-tax cash flow (net present value)for alternative #1 compared to the base case of doing nothing for the next four years?

Accepted Answer

A) less than or equal to $5.1 million 
B) more than $5.1 million but less than $5.3 million 
C) more than $5.3 million less than $5.5 million 
D) more than $5.5 million 
A) less than or equal to $5.1 million 
B) more than $5.1 million but less than $5.3 million 
C) more than $5.3 million less than $5.5 million 
D) more than $5.5 million

Question 8

The ________ is the set of consecutive time periods considered for planning purposes.

Accepted Answer

The answer of The ________ is the set of consecutive...

Question 9

A capacity cushion is the amount of inventory that a firm maintains to handle sudden increases in demand or temporary loss of production capacity.

Accepted Answer

A) True 
 B)False

Question 10

Figure 6.1  
-A manager weighs three options for capacity cushion as depicted in Figure 1.If the dollar amounts expressed in the Figure 9.1 are cash flows,what is the value of the optimal decision?

Accepted Answer

A) $11,700 
B) $11,500 
C) $12,300 
D) $10,500 
A) $11,700 
B) $11,500 
C) $12,300 
D) $10,500

Question 11

A larger capacity cushion may be required due to variation in demand,changing product mix,or supply uncertainty.

Accepted Answer

A) True 
 B)False

Question 12

If demand is increasing,and you also prefer to increase the time between capacity increments,then the size of increments should ________.

Accepted Answer

The answer of If demand is increasing,and you also prefer...

Question 13

________ is the degree to which equipment,space,or labor is currently being used.

Accepted Answer

The answer of ________ is the degree to which equipment,space,or...

Question 14

The capacity requirement for a year's output is inversely proportional to the total number of hours per year during which the process operates.

Accepted Answer

A) True 
 B)False

Question 15

Table 6.5
The T.H.King Company has introduced a new product line that requires two work centers,A and B for manufacture.Work Center A has a current capacity of 10,000 units per year,and Work Center B is capable of 12,500 units per year.This year (year 0),sales of the new product line are expected to reach 10,000 units.Growth is projected at an additional 1,000 units each year through year 5.Pre-tax profits are expected to be $30 per unit throughout the 5-year planning period.Two alternatives are being considered:
-Use the information in Table 6.5.What action,if any,should the King Company take?

Accepted Answer

A) Do nothing-neither alternative provides a positive net present value after five years. 
B) Select Alternative #1. 
C) Select alternative #2. 
D) Either alternative may be selected,since the positive net present values are the same after five years. 
A) Do nothing-neither alternative provides a positive net present value after five years. 
B) Select Alternative #1. 
C) Select alternative #2. 
D) Either alternative may be selected,since the positive net present values are the same after five years.

Question 16

Table 6.8
The Summerville Vitamin Company manufactures bottles of animal-shaped chewable vitamins for children.This product line requires two work centers,tablet manufacturing and packaging.The tablet manufacturing work center has a current capacity of 140,000 bottles per month,and packaging is capable of 100,000 units per month.This year (year 0),monthly sales of the product line are expected to reach 100,000 units.Growth per month is projected at an additional 25,000 units through year 4 (i.e. ,125,000 per month in year #1,150,000 per month in year #2,etc. ).Pre-tax profits are expected to be $5 per unit throughout the 4-year planning period.Two alternatives are being considered:
-Use the information in Table 6.8.What action,if any,should Summerville take?

Accepted Answer

A) Find another option-neither alternative provides a positive net present value after four years. 
B) Select Alternative #1. 
C) Select alternative #2. 
D) Either alternative may be selected,since the positive net present values are the same after four years. 
A) Find another option-neither alternative provides a positive net present value after four years. 
B) Select Alternative #1. 
C) Select alternative #2. 
D) Either alternative may be selected,since the positive net present values are the same after four years.

Question 17

________ is the amount of reserve capacity that a firm maintains to handle a sudden increase in demand or temporary losses of production capacity.

Accepted Answer

The answer of ________ is the amount of reserve capacity...

Question 18

A larger capacity cushion can help firms uncover process inefficiencies,so they can find ways to correct them.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following descriptions about waiting line models is best?

Accepted Answer

A) They account for major events such as competitor actions. 
B) They account for the random,independent behavior of many customers. 
C) They assume that each branch can give the highest expected payoff. 
D) They deal with the certainty and stability in demand. 
A) They account for major events such as competitor actions. 
B) They account for the random,independent behavior of many customers. 
C) They assume that each branch can give the highest expected payoff. 
D) They deal with the certainty and stability in demand.

Question 20

Sleep Tight Motel has the opportunity to purchase an adjacent plot of land.Building on this land would increase their capacity from the current sales level of $515,000/year to $600,000/year.Sleep Tight experiences a 20 percent before-tax profit margin.It wishes to estimate the additional before-tax profits that the expansion will produce.Using the following information,how much more before-tax cash flow would be realized just in year 10 alone?

Accepted Answer

A) less than or equal to $20,000 
B) greater than $20,000 but less than or equal to $25,000 
C) greater than $25,000 but less than or equal to $30,000 
D) greater than 30,000 
A) less than or equal to $20,000 
B) greater than $20,000 but less than or equal to $25,000 
C) greater than $25,000 but less than or equal to $30,000 
D) greater than 30,000

Exam 6: Capacity Planning

An expansionist capacity strategy involves large,infrequent jumps in capacity,where a wait-and-see strategy involves smaller,more frequent jumps.

Which one of the following factors usually motivates a smaller capacity cushion?

A wait-and-see capacity strategy minimizes the chances of lost sales due to insufficient capacity.

Which one of the following factors usually calls for a larger capacity cushion?

Figure 6.1 -A manager weighs three options for capacity cushion as depicted in Figure 1.If the dollar amounts expressed in the Figure 9.1 are cash flows,which option is optimal?

The ________ is the set of consecutive time periods considered for planning purposes.

A capacity cushion is the amount of inventory that a firm maintains to handle sudden increases in demand or temporary loss of production capacity.

Figure 6.1 -A manager weighs three options for capacity cushion as depicted in Figure 1.If the dollar amounts expressed in the Figure 9.1 are cash flows,what is the value of the optimal decision?

A larger capacity cushion may be required due to variation in demand,changing product mix,or supply uncertainty.

If demand is increasing,and you also prefer to increase the time between capacity increments,then the size of increments should ________.

________ is the degree to which equipment,space,or labor is currently being used.

The capacity requirement for a year's output is inversely proportional to the total number of hours per year during which the process operates.

________ is the amount of reserve capacity that a firm maintains to handle a sudden increase in demand or temporary losses of production capacity.

A larger capacity cushion can help firms uncover process inefficiencies,so they can find ways to correct them.

Which of the following descriptions about waiting line models is best?

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