Question 1

Expected output is sometimes referred to as rated capacity.

Accepted Answer

A) True 
 B)False  True

Question 2

Define fixed costs.

Accepted Answer

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

Question 3

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?

Accepted Answer

A)  machine A 
B)  machine B 
C)  either machine A or machine B 
D)  no purchase because neither machine yields a profit at that volume 
E)  purchase both machines since they are both profitable 
A)  machine A 
B)  machine B 
C)  either machine A or machine B 
D)  no purchase because neither machine yields a profit at that volume 
E)  purchase both machines since they are both profitable D

Question 4

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

Accepted Answer

Net presen

Question 5

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 6

The process time of a system is equivalent to the

Accepted Answer

A)  process time of the bottleneck 
B)  sum of all workstation times 
C)  shortest workstation time 
D)  mean workstation time 
E)  median workstation time 
A)  process time of the bottleneck 
B)  sum of all workstation times 
C)  shortest workstation time 
D)  mean workstation time 
E)  median workstation time

Question 7

Effective capacity is the

Accepted Answer

A)  maximum output of a system in a given period 
B)  capacity a firm expects to achieve given the current operating constraints 
C)  average output that can be achieved under ideal conditions 
D)  minimum usable capacity of a particular facility 
E)  sum of all of the organization's inputs 
A)  maximum output of a system in a given period 
B)  capacity a firm expects to achieve given the current operating constraints 
C)  average output that can be achieved under ideal conditions 
D)  minimum usable capacity of a particular facility 
E)  sum of all of the organization's inputs

Question 8

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 9

TOC strives to reduce the effect of constraints by

Accepted Answer

A)  offloading work from constrained workstations 
B)  increasing constrained workstation capability 
C)  changing workstation order to reduce process cycle time 
D)  A and B 
E)  A, B, and C 
A)  offloading work from constrained workstations 
B)  increasing constrained workstation capability 
C)  changing workstation order to reduce process cycle time 
D)  A and B 
E)  A, B, and C

Question 10

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 40 percent; strong acceptance has a probability of 60 percent. The payoffs are as follows. Small job shop, moderate market = $24,000; Small job shop, strong market = $54,000. Medium job shop, moderate market = $20,000; medium job shop, strong market = $64,000. Large job shop, moderate market = -$2,000; large job shop, strong market = $96,000. Which capacity choice should the firm make?

Accepted Answer

The expected values for the th

Question 11

__________ analysis finds the point at which costs equals revenues.

Accepted Answer

The answer of __________ analysis finds the point at which...

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

A firm is about to undertake the manufacture of a product, and 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?

Accepted Answer

The payoffs are as follows: small job sh

Question 14

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

Accepted Answer

Breakeven is defined as the volume for w

Question 15

The three main strategies for increasing capacity are

Accepted Answer

A)  leading, lag, straddle 
B)  fast, normal, slow 
C)  before, during, after 
D)  leading, behind, mixed 
E)  none of the above 
A)  leading, lag, straddle 
B)  fast, normal, slow 
C)  before, during, after 
D)  leading, behind, mixed 
E)  none of the above

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Distinguish between utilization and efficiency.

Accepted Answer

Both are ratios, not item counts. Both u

Question 18

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

Accepted Answer

A)  demand exceeds capacity 
B)  capacity exceeds demand for a product which has stable demand 
C)  the existing product has seasonal or cyclical demand 
D)  price increases have failed to bring about demand management 
E)  efficiency exceeds 100 percent 
A)  demand exceeds capacity 
B)  capacity exceeds demand for a product which has stable demand 
C)  the existing product has seasonal or cyclical demand 
D)  price increases have failed to bring about demand management 
E)  efficiency exceeds 100 percent

Question 19

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?
 Suppose that the secretary has an equal chance of providing either 0, 2, or 6 new clients each month. Should the firm hire the secretary?

Accepted Answer

BEP= 10(200)/(400)= 5 clients

Question 20

Which of the following is False regarding capacity expansion?

Accepted Answer

A)  "Average" capacity sometimes leads demand, sometimes lags it. 
B)  If "lagging" capacity is chosen, excess demand can be met with overtime or subcontracting. 
C)  Total cost comparisons are a rather direct method of comparing capacity alternatives. 
D)  Capacity may only be added in large chunks. 
E)  All of the above are true. 
A)  "Average" capacity sometimes leads demand, sometimes lags it. 
B)  If "lagging" capacity is chosen, excess demand can be met with overtime or subcontracting. 
C)  Total cost comparisons are a rather direct method of comparing capacity alternatives. 
D)  Capacity may only be added in large chunks. 
E)  All of the above are true.

Exam9: Capacity and Constraint Management

Expected output is sometimes referred to as rated capacity.

Define fixed costs.

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

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

The process time of a system is equivalent to the

Effective capacity is the

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

TOC strives to reduce the effect of constraints by

__________ analysis finds the point at which costs equals revenues.

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

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

The three main strategies for increasing capacity are

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

Distinguish between utilization and efficiency.

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

Which of the following is False regarding capacity expansion?

Operations and Productivity

Operations Strategy in a Global Environment

Project Management

Forecasting

Design of Goods and Services

Managing Quality

Statistical Process Control

Process Strategy

Location Strategies

Layout Strategies

Human Resources, Job Design, and Work Measurement

Supply-Chain Management

Outsourcing as a Supply-Chain Strategy

Inventory Management

Aggregate Planning

Material Requirements Planning MRP and ERP

Short-Term Scheduling

Just-In-Time and Lean Options

Maintenance and Reliability

Decision-Making Tools

Linear Programming

Transportation Models

Waiting-Line Models

Learning Curves

Simulation

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