Question 1

Which of the following makes using present value approaches in capacity decisions difficult?

Accepted Answer

A)  The discount rate must be adjusted to account for inflation. 
B)  Some cash flows are positive and other cash flows are negative. 
C)  The payback period might not be long enough to justify a capacity decision. 
D)  Capacity decisions are made amidst much uncertainty, so cash flows cannot be estimated with great accuracy. 
E)  There is a cash outflow at the outset followed by, possibly, net cash inflows. 
A)  The discount rate must be adjusted to account for inflation. 
B)  Some cash flows are positive and other cash flows are negative. 
C)  The payback period might not be long enough to justify a capacity decision. 
D)  Capacity decisions are made amidst much uncertainty, so cash flows cannot be estimated with great accuracy. 
E)  There is a cash outflow at the outset followed by, possibly, net cash inflows. D

Question 2

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. How many prisoners would they have to process annually to break even at this new location?

Accepted Answer

A)  5,000 
B)  8,000 
C)  2,000 
D)  4,000 
E)  6,000 
A)  5,000 
B)  8,000 
C)  2,000 
D)  4,000 
E)  6,000 C

Question 3

In cost-volume analysis, costs that vary directly with volume of output are referred to as fixed costs because they are a fixed percentage of output levels.

Accepted Answer

A) True 
 B)False  False

Question 4

The first, and perhaps most important, step in constraint management is to ____________ the most pressing constraint.

Accepted Answer

A)  improve 
B)  support 
C)  identify 
D)  elevate 
E)  modify 
A)  improve 
B)  support 
C)  identify 
D)  elevate 
E)  modify

Question 5

Suppose operation X feeds directly into operation Y. All of X's output goes to Y, and Y has no other operations feeding into it. X has a design capacity of 80 units per hour and an effective capacity of 72 units per hour. Y has a design capacity of 100 units per hour. What is Y's maximum possible utilization?

Accepted Answer

A)  80 percent 
B)  72 percent 
C)  90 percent 
D)  70 percent 
E)  60 percent 
A)  80 percent 
B)  72 percent 
C)  90 percent 
D)  70 percent 
E)  60 percent

Question 6

The method of financial analysis which focuses on the length of time it takes to recover the initial cost of an investment is:

Accepted Answer

A)  payback. 
B)  net present value. 
C)  internal rate of return. 
D)  queuing. 
E)  cost-volume. 
A)  payback. 
B)  net present value. 
C)  internal rate of return. 
D)  queuing. 
E)  cost-volume.

Question 7

If the unit cost to buy something is less than the variable cost to make it, the decision to make or buy is based solely on the fixed costs.

Accepted Answer

A) True 
 B)False

Question 8

The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. How many cords of wood would he have to split with this machine to break even?

Accepted Answer

A)  5,000 
B)  3,000 
C)  2,000 
D)  1,000 
E)  0 
A)  5,000 
B)  3,000 
C)  2,000 
D)  1,000 
E)  0

Question 9

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. What would the profit be if she were to produce and sell 5,000 rosebushes?

Accepted Answer

A)  $0 
B)  $9,000 
C)  $15,000 
D)  $10,000 
E)  $30,000 
A)  $0 
B)  $9,000 
C)  $15,000 
D)  $10,000 
E)  $30,000

Question 10

Efficiency is defined as the ratio of:

Accepted Answer

A)  actual output to effective capacity. 
B)  actual output to design capacity. 
C)  design capacity to effective capacity. 
D)  effective capacity to actual output. 
E)  design capacity to actual output. 
A)  actual output to effective capacity. 
B)  actual output to design capacity. 
C)  design capacity to effective capacity. 
D)  effective capacity to actual output. 
E)  design capacity to actual output.

Question 11

Students at a major university must go through several registration steps. Officials have observed that it is typically the case that the waiting line at the fee-payment station is the longest. This would seem to suggest that the fee-payment station is the ___________ in the student registration process.

Accepted Answer

A)  capacity cushion 
B)  first station 
C)  bottleneck 
D)  economy of scale 
E)  diseconomy of scale 
A)  capacity cushion 
B)  first station 
C)  bottleneck 
D)  economy of scale 
E)  diseconomy of scale

Question 12

Which of the following is not a reason why capacity decisions are so important?

Accepted Answer

A)  Capacity limits the rate of output possible. 
B)  Capacity affects operating costs. 
C)  Capacity is a major determinant of initial costs. 
D)  Capacity is a long-term commitment of resources. 
E)  Capacity chunks can be added or deleted quickly and inexpensively. 
A)  Capacity limits the rate of output possible. 
B)  Capacity affects operating costs. 
C)  Capacity is a major determinant of initial costs. 
D)  Capacity is a long-term commitment of resources. 
E)  Capacity chunks can be added or deleted quickly and inexpensively.

Question 13

At the break-even point:

Accepted Answer

A)  output equals capacity. 
B)  total cost equals total revenue. 
C)  total cost equals profit. 
D)  variable cost equals fixed cost. 
E)  variable cost equals total revenue. 
A)  output equals capacity. 
B)  total cost equals total revenue. 
C)  total cost equals profit. 
D)  variable cost equals fixed cost. 
E)  variable cost equals total revenue.

Question 14

An alternative will have fixed costs of $10,000 per month, variable costs of $50 per unit, and revenue of $70 per unit. The break-even point volume is:

Accepted Answer

A)  100 
B)  2,000.00 
C)  500 
D)  1,000.00 
E)  800 
A)  100 
B)  2,000.00 
C)  500 
D)  1,000.00 
E)  800

Question 15

Stating capacity in dollar amounts generally results in a consistent measure of capacity regardless of the actual units of measure.

Accepted Answer

A) True 
 B)False

Question 16

According to the reading on restaurant sourcing practices, only fast-food restaurants are able to bring in outsourced foods.

Accepted Answer

A) True 
 B)False

Question 17

The current trend toward global operations has made capacity decisions much easier since we have the whole world in which to consider operations.

Accepted Answer

A) True 
 B)False

Question 18

Increasing productivity and also quality will result in increased effective capacity.

Accepted Answer

A) True 
 B)False

Question 19

When determining the timing and degree of capacity change, one can use the approach of:

Accepted Answer

A)  lead time flexibility strategy. 
B)  expand-early strategy. 
C)  go-with-the-flow strategy. 
D)  backordering. 
E)  delayed differentiation. 
A)  lead time flexibility strategy. 
B)  expand-early strategy. 
C)  go-with-the-flow strategy. 
D)  backordering. 
E)  delayed differentiation.

Question 20

Capacity planning requires an analysis of needs: what kind, how much, and when.

Accepted Answer

A) True 
 B)False

Exam 6: Strategic Capacity Planning for Products and Services

Which of the following makes using present value approaches in capacity decisions difficult?

In cost-volume analysis, costs that vary directly with volume of output are referred to as fixed costs because they are a fixed percentage of output levels.

The first, and perhaps most important, step in constraint management is to ____________ the most pressing constraint.

The method of financial analysis which focuses on the length of time it takes to recover the initial cost of an investment is:

If the unit cost to buy something is less than the variable cost to make it, the decision to make or buy is based solely on the fixed costs.

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. What would the profit be if she were to produce and sell 5,000 rosebushes?

Efficiency is defined as the ratio of:

Which of the following is not a reason why capacity decisions are so important?

At the break-even point:

An alternative will have fixed costs of $10,000 per month, variable costs of $50 per unit, and revenue of $70 per unit. The break-even point volume is:

Stating capacity in dollar amounts generally results in a consistent measure of capacity regardless of the actual units of measure.

According to the reading on restaurant sourcing practices, only fast-food restaurants are able to bring in outsourced foods.

The current trend toward global operations has made capacity decisions much easier since we have the whole world in which to consider operations.

Increasing productivity and also quality will result in increased effective capacity.

When determining the timing and degree of capacity change, one can use the approach of:

Capacity planning requires an analysis of needs: what kind, how much, and when.

Introduction to Operations Management

Competitiveness

Forecasting

Product and Service Design

RELIABILITY – Static

Decision Theory– Static

Process Selection and Facility Layout

Work Design and Measurement

learning curve– Static

Location Planning and Analysis

The Transportation Model– Static

Management of Quality

Quality Control

Acceptance Sampling– Static

Aggregate Planning and Master Scheduling

MRP and ERP

Inventory Management

JIT and Lean Operations

Maintenance– Static

Supply Chain Management

Scheduling

Project Management

Management of Waiting Lines

Linear Programming

Filters