Exam9: Capacity and Constraint Management

A firm produces three products. Product A sells for $60; its variable costs are $20. Product B sells for $200; its variable costs are $120. Product C sells for $25; its variable costs are $10. Last year, the firm sold 1000 units of A, 2000 units of B, and 10,000 units of C. The firm has fixed costs of $320,000 per year. Calculate the break-even point of the firm.

Break-even analysis can be used by a firm that produces more than one product, but

The theory of constraints is a body of knowledge that deals with anything that limits an organization's ability to achieve its goals.

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

The basic break-even model can be modified to handle more than one product. This extension of the basic model requires

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

An executive conference center has the physical ability to handle 1,100 participants. However, conference management personnel believe that only 1,000 participants can be handled effectively for most events. The last event, although forecasted to have 1,000 participants, resulted in the attendance of only 950 participants. What are the utilization and efficiency of the conference facility?

Price changes are useful for matching the level of demand to the capacity of a facility.

In "drum, buffer, rope," what provides the schedule, i.e. the pace of production?

Explain the importance of a bottleneck operation in a production sequence.

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

A sugar mill receives sugar cane from farmers, extracts the juice, boils it into syrup, and then crystallizes the syrup into raw sugar. There has been an ongoing consolidation of sugar mills, and an increase in the capacity of those that remain. The number of mills in Louisiana was 48 in the 1960s, was 18 in 1999 and is currently 13. In 1999 the break-even point for a typical mill was 600,000 tons. But as the surviving mills have added capacity, the break-even point is now 1,000,000 tons. In 1999, the state's farmers produced 16,000,000 tons of cane, but by 2004, the crop was down to 13,000,000 tons. Analyze this situation with what you have learned about the capacity decision. Is the industry better off with fewer but larger mills, or not?

A graphic design studio is considering three new computers. The first model, A, costs $5000. Model B and C cost $3000 and $1000 respectively. If each customer provides $50 of revenue and variable costs are $20/customer, find the number of customers required for each model to break even.

In the service sector, scheduling customers is __________, and scheduling the workforce is __________.

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

Describe the theory of constraints in a sentence.

Lag and straddle strategies for increasing capacity have what main advantage over a leading strategy?

Which of the following statements regarding fixed costs is true?

Utilization is the number of units a facility can hold, receive, store, or produce in a period of time.

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 percent of the firm's sales, while S accounts for 40 percent. The firm's fixed costs are $4 million annually. Calculate the firm's break-even point.