Exam 6: Managing Capacity

A firm is more likely to develop the internal capacity to perform activities that are strategically important to its success than it is to outsource those activities.

A company with fixed costs of $10,000 per month has a target price of $165 for their sole product,a heat shield for masonry fireplaces.What level of output represents their break-even point if their variable cost for producing is $35 per unit?

An entrepreneur identifies a product that he knows will sell like crazy if he can only figure out a way to bring it to her area.The idea is so fantastic that I can't tell you what it is,so we will just refer to it as X.The entrepreneur has identified four ways to bring X to the masses; she can import it,she can smuggle it,she can try to produce it on her own,and she can have a local reputable producer make it for her.The fixed and variable costs for each of these alternatives are shown below.What is her best course of action if she believes the demand will be 55,000 units?

A firm is able to meet current demand.If it adopts a lead capacity strategy,then it is probably making the assumption that demand will increase in the future.

If a firm cannot make a profit regardless of output volume,then:

Total cost to produce is the sum of expenses incurred regardless of output plus the variable cost per unit of business activity multiplied by ________.

Consider the system composed of four processes linked by a conveyor belt.There is no storage between these processes pictured below and market demand exceeds the company's ability to produce.Which statement is best?

A Seattle entrepreneur must decide on the size of a latte stand to construct.The manager has narrowed the choice down to large or small.If he builds large and experiences low demand he could grin and bear it for a $200 daily profit,lower prices ($225 daily profit),or hire street performers to attract attention ($175 daily profit).If he builds small and experiences high demand he could do nothing ($175 profit per day),stay open longer hours (profit of $225/day),improve processes ($250/day profit),or raise prices ($200/day profit).Building large for high demand has an expected payoff of $250/day and building small for low demand has an expected payoff of $175/day.There is a 0.7 probability of high demand and 0.3 probability of low demand.Sketch a decision tree for this scenario and determine what size stand should be constructed to slake the unquenchable thirst of caffeine addicts.

When demand is uncertain,the expected value criterion may be used.To do so,demand-level scenarios and their ________ must be identified.

An example of a variable cost is:

A traditional university classroom has room for 30 students and is scheduled for use during 12 consecutive one hour periods from 8:00 a.m.to 8:00 p.m.in the spring semester.Its theoretical capacity is therefore half of its rated capacity.

In general,higher conformance quality reduces capacity since the extra care taken during production slows the output rate.

The average waiting time on a Thursday night for a table at a popular Chinese restaurant is 30 minutes.If customers arrive at the rate of four per hour and both the service and arrival rates are Poisson distributed,what is the average service time?

Learning curve theory suggests that productivity will increase as people and systems learn to perform tasks more efficiently.

For a given fixed cost and revenue,as the variable cost rises,the break-even point also rises.

Consider the system composed of four processes linked by a conveyor belt.There is no storage between these processes pictured below and market demand of 40 units per hour drives the conveyor belt.Assume that no defective units are made.Which statement is best?

The process step that limits throughput for the entire process chain is the ________.

A bottling machine has a theoretical capacity of 100 bottles per minute.During every ten hour shift it operates continuously but is shut down once for 30 minutes for cleaning,inspection,and lubrication.What is its rated capacity?

A busy toll highway that has four toll collectors for northbound traffic is an example of a single-channel,single-phase system.

Students arrive at a professor's office every 20 minutes during final exam week according to a Poisson distribution.What is the probability that the professor's one hour afternoon nap will not be disrupted by any student arrivals?