Exam 27: Capacity and Constraint Management

A shop wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $75,000. The variable cost for A is $15.00 per unit and for B, $18.00. The revenue generated by the units processed on these machines is $22 per unit. If the estimated output is 9,000 units, which machine should be purchased?

Adding a complementary product to what is currently being produced is a demand management strategy used when

Substantial research has proved that the only successful method of dealing with bottlenecks is to increase the bottleneck's capacity.

The capacity planning strategy that delays adding capacity until capacity is below demand, then adds a capacity increment so that capacity is above demand, is said to ________ demand.

A work system has five stations that have process times of 5, 9, 4, 9, and 8. What is the process time of the system?

A work system has five stations that have process times of 5, 9, 4, 9, and 8. What is the process cycle time of the system?

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

A new machine tool is expected to generate receipts as follows: $5,000 in year one; $3,000 in year two, nothing in the next year, and $2,000 in the fourth year. At an interest rate of 6%, what is the present value of these receipts? Is this a better present value than $2,500 each year over four years? Explain.

Net present value

An assembly line has 10 stations with process times of 1, 2, 3, 4, …, 10 respectively. The process time of the system is

An organization whose capacity is on that portion of the average unit cost curve that falls as output rises

The staff training centre 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 2400 employees per year. Since the training centre was first put in use, the program has become more complex, so that 1800 now represents the most employees that can be trained per year. In the past year, 1475 employees were trained. Calculate the efficiency and the utilization of this system.

Which of the following is false regarding capacity expansion?

Net present value will be greater

Fred's Fabrication, Inc. wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $70,000. The variable cost for A is $9.00 per unit and for B, $14.00. The revenue generated by the units processed on these machines is $20 per unit. The crossover between machine A and machine B is

A fleet repair facility has the capacity to repair 850 trucks per month. However, due to scheduled maintenance of their equipment, management feels that they can repair no more than 725 trucks per month. Last month, two of the employees were absent several days each, and only 483 trucks were repaired. What are the utilization and efficiency of the repair shop?

Describe how EMV might be used to analyse a capacity decision.

The Theory of Constraints strives to reduce the effect of constraints by

________ cost is the cost that continues even if no units are produced.

Describe the theory of constraints in a sentence.