Question 1

Which of the following techniques is not a technique for dealing with a bottleneck?

Accepted Answer

A)  Schedule throughput to match capacity of the bottleneck. 
B)  Increase capacity of the constraint. 
C)  Have cross-trained employees available to keep the constraint at full operation. 
D)  Develop alternate routings. 
E)  All are tools for dealing with bottlenecks. 
A)  Schedule throughput to match capacity of the bottleneck. 
B)  Increase capacity of the constraint. 
C)  Have cross-trained employees available to keep the constraint at full operation. 
D)  Develop alternate routings. 
E)  All are tools for dealing with bottlenecks.

Question 2

The net present value of $10,000 to be received in exactly three years is considerably greater than $10,000.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

The five-step process of the theory of c

Question 4

A product sells for $5, and has unit variable costs of $3. This product accounts for $20,000 in annual sales, out of the firm's total of $60,000. When performing multiproduct break-even analysis, the weighted contribution of this product is approximately

Accepted Answer

A)  0.133. 
B)  0.200. 
C)  0.40. 
D)  0.667. 
E)  $1.667. 
A)  0.133. 
B)  0.200. 
C)  0.40. 
D)  0.667. 
E)  $1.667.

Question 5

What techniques exist for dealing with bottlenecks? Which of these leads to increased capacity? Which of these leads to more throughput without adding capacity? Do any of these techniques fail to increase throughput?

Accepted Answer

Five techniques are available to deal wi

Question 6

________ is a means of determining the discounted value of a series of future cash receipts.

Accepted Answer

Net presen

Question 7

A local business owner is considering adding another employee to his staff in an effort to increase the number of hours the store is open per day.
a. 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?
b. The employee again costs $4000 and has agreed to work 120 hours. If variable costs remain at $15/hour and revenue is uncertain with a 40% chance of being $40/hour, 35% chance of being $20/hour, and 25% chance of being $35/hour should the owner hire the employee?

Accepted Answer

A - BEP = 4000/(50 - 15) = 114

Question 8

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%, the net present value of this investment is approximately

Accepted Answer

A)  $20,920. 
B)  $26,160. 
C)  $49,840. 
D)  $70,920. 
E)  $106,990. 
A)  $20,920. 
B)  $26,160. 
C)  $49,840. 
D)  $70,920. 
E)  $106,990.

Question 9

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?

Accepted Answer

BEP = 60 units; TR =

Question 10

What is sometimes referred to as rated capacity?

Accepted Answer

A)  efficiency 
B)  utilization 
C)  effective capacity 
D)  expected output 
E)  design capacity 
A)  efficiency 
B)  utilization 
C)  effective capacity 
D)  expected output 
E)  design capacity

Question 11

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%, the net present value of this investment is

Accepted Answer

A)  greater than $80,000. 
B)  greater than $130,000. 
C)  less than $30,000. 
D)  impossible to calculate, because no interest rate is given. 
E)  impossible to calculate, because variable costs are not known. 
A)  greater than $80,000. 
B)  greater than $130,000. 
C)  less than $30,000. 
D)  impossible to calculate, because no interest rate is given. 
E)  impossible to calculate, because variable costs are not known.

Question 12

Health Care Systems of the South is about to buy an expensive piece of diagnostic equipment. The company estimates that it will generate uniform revenues of $500,000 for each of the next eight years. What is the present value of this stream of earnings, at an interest rate of 6%? What is the present value if the machine lasts only six years, not eight? If the equipment cost $2,750,000, should the company purchase it?

Accepted Answer

S = R ∗ X = 500,000 ∗ 6.210 = $3,105,000

Question 13

A product is currently made in a process-focused shop, where fixed costs are $10,500 per year and variable cost is $40 per unit. The firm sells the product for $190 per unit. What is the break-even point for this operation? What is the profit (or loss) on a demand of 300 units per year?

Accepted Answer

BEP = 70 units; TR =

Question 14

Break-even is the number of units at which

Accepted Answer

A)  total revenue equals price times quantity. 
B)  total revenue equals total variable cost. 
C)  total revenue equals total fixed cost. 
D)  total profit equals total cost. 
E)  total revenue equals total cost. 
A)  total revenue equals price times quantity. 
B)  total revenue equals total variable cost. 
C)  total revenue equals total fixed cost. 
D)  total profit equals total cost. 
E)  total revenue equals total cost.

Question 15

A firm sells two products. Product R sells for $20; its variable cost is $6. Product S sells for $50; its variable cost is $30. Product R accounts for 60% of the firm's sales, while S accounts for 40%. The firm's fixed costs are $4 million annually. Calculate the firm's break-even point.

Accepted Answer

The contribution for product R is 70% of

Question 16

Break-even analysis is a powerful analytical tool, but is useful only when the organization produces a single product.

Accepted Answer

A) True 
 B)False

Question 17

The process time of a system is always at least a long as the process cycle time.

Accepted Answer

A) True 
 B)False

Question 18

A tortilla chip workstation produces 1,000 chips in 20 seconds. Its process time is

Accepted Answer

A)  .02 seconds per chip. 
B)  50 chips per second. 
C)  20 seconds. 
D)  6000 chips per minute. 
E)  60 chips per minute. 
A)  .02 seconds per chip. 
B)  50 chips per second. 
C)  20 seconds. 
D)  6000 chips per minute. 
E)  60 chips per minute.

Question 19

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

Accepted Answer

Design capacity is the theoretical maxim

Question 20

A firm is weighing three capacity alternatives: small, medium, and large job shop. Whatever capacity choice is made, the market for the firm's product can be "moderate" or "strong." The probability of moderate acceptance is estimated to be 20%; strong acceptance has a probability of 80%. The payoffs are as follows. Small job shop, moderate market = $44,000; Small job shop, strong market = $75,000. Medium job shop, moderate market = $60,000; medium job shop, strong market = $89,000. Large job shop, moderate market = -$15,000; large job shop, strong market = $102,000. Which capacity choice should the firm make?

Accepted Answer

The expected values for the three decisi

Exam 27: Capacity and Constraint Management

Which of the following techniques is not a technique for dealing with a bottleneck?

The net present value of $10,000 to be received in exactly three years is considerably greater than $10,000.

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

A product sells for $5, and has unit variable costs of $3. This product accounts for $20,000 in annual sales, out of the firm's total of $60,000. When performing multiproduct break-even analysis, the weighted contribution of this product is approximately

What techniques exist for dealing with bottlenecks? Which of these leads to increased capacity? Which of these leads to more throughput without adding capacity? Do any of these techniques fail to increase throughput?

________ is a means of determining the discounted value of a series of future cash receipts.

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%, the net present value of this investment is approximately

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?

What is sometimes referred to as rated capacity?

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%, the net present value of this investment is

A product is currently made in a process-focused shop, where fixed costs are $10,500 per year and variable cost is $40 per unit. The firm sells the product for $190 per unit. What is the break-even point for this operation? What is the profit (or loss) on a demand of 300 units per year?

Break-even is the number of units at which

A firm sells two products. Product R sells for $20; its variable cost is $6. Product S sells for $50; its variable cost is $30. Product R accounts for 60% of the firm's sales, while S accounts for 40%. The firm's fixed costs are $4 million annually. Calculate the firm's break-even point.

Break-even analysis is a powerful analytical tool, but is useful only when the organization produces a single product.

The process time of a system is always at least a long as the process cycle time.

A tortilla chip workstation produces 1,000 chips in 20 seconds. Its process time is

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

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