Question 1

Net present value will be greater:

Accepted Answer

A) as a fixed set of cash receipts occurs later rather than earlier. 
B) if the future value of a cash flow is smaller. 
C) for one end-of-year receipt of $1200 than for twelve monthly receipts of $100 each. 
D) for a 4% discount rate than for a 6% discount rate. 
E) All of the above are true. 
A) as a fixed set of cash receipts occurs later rather than earlier. 
B) if the future value of a cash flow is smaller. 
C) for one end-of-year receipt of $1200 than for twelve monthly receipts of $100 each. 
D) for a 4% discount rate than for a 6% discount rate. 
E) All of the above are true.

Question 2

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 percent,the net present value of this investment is:

Accepted Answer

A) greater than $80,000 but less than $130,000. 
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 but less than $130,000. 
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 3

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 that 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 that 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 4

Which of the following statements regarding fixed costs is TRUE?

Accepted Answer

A) Fixed costs rise by a constant amount for every added unit of volume. 
B) While fixed costs are ordinarily constant with respect to volume,they can "step" upward if volume increases result in additional fixed costs. 
C) Fixed costs are those costs associated with direct labor and materials. 
D) Fixed costs equal variable costs at the break-even point. 
E) Fixed cost is the difference between selling price and variable cost. 
A) Fixed costs rise by a constant amount for every added unit of volume. 
B) While fixed costs are ordinarily constant with respect to volume,they can "step" upward if volume increases result in additional fixed costs. 
C) Fixed costs are those costs associated with direct labor and materials. 
D) Fixed costs equal variable costs at the break-even point. 
E) Fixed cost is the difference between selling price and variable cost.

Question 5

Which of the following is not one of the four principles of bottleneck management?

Accepted Answer

A) Release work orders to the system at the bottleneck's capacity pace. 
B) Lost time at the bottleneck is lost system capacity. 
C) Increasing capacity at non-bottleneck stations is a mirage. 
D) Increased bottleneck capacity is increased system capacity. 
E) Bottlenecks should be moved to the end of the system process. 
A) Release work orders to the system at the bottleneck's capacity pace. 
B) Lost time at the bottleneck is lost system capacity. 
C) Increasing capacity at non-bottleneck stations is a mirage. 
D) Increased bottleneck capacity is increased system capacity. 
E) Bottlenecks should be moved to the end of the system process.

Question 6

Why is the capacity decision important?

Accepted Answer

The capacity decision is important for s

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Consider the assembly line below.The three fabrication operations run in parallel,such that each batch of 20 units only needs to go through one of the three fabrication operations.After that,each batch needs to go through both assembly operations,which occur simultaneously (specifically,10 components are made for each unit in the fabrication stage-some components are then assembled in the Assembly 1 area while others are assembled in the Assembly 2 area).The units are packaged and made ready for shipment in the final stage.   What is the bottleneck time per batch of this operation?

Accepted Answer

A) 24 min. 
B) 8 min. 
C) 88 min. 
D) 34 min. 
E) 3 min. 
A) 24 min. 
B) 8 min. 
C) 88 min. 
D) 34 min. 
E) 3 min.

Question 9

Describe how EMV might be used to analyze a capacity decision.

Accepted Answer

The EMV for each capacity decision (perh

Question 10

A work system has five stations that have process times of 5,9,4,9,and 8.What is the bottleneck time?

Accepted Answer

A) 4 
B) 9 
C) 18 
D) 35 
E) 7 
A) 4 
B) 9 
C) 18 
D) 35 
E) 7

Question 11

Fabricators,Inc.wants to increase capacity by adding a new machine.The fixed costs for machine A are $90,000,and its variable cost is $15 per unit.The revenue is $21 per unit.What is the break-even point for machine A?

Accepted Answer

A) $90,000 dollars 
B) 90,000 units 
C) $15,000 dollars 
D) 15,000 units 
E) 4,286 units 
A) $90,000 dollars 
B) 90,000 units 
C) $15,000 dollars 
D) 15,000 units 
E) 4,286 units

Question 12

A retailer is considering building a large store.If the local economy experiences expansion,the firm expects the store to earn a $2,000,000 profit next year.If the local economy experiences a contraction,the firm expects the store to lose $400,000 next year.Analysts estimate a 20% chance for the local economy to experience an expansion next year (hence an 80% chance for contraction).What is the expected monetary value (EMV)of building the large store?

Accepted Answer

A) $1,600,000 
B) $720,000 
C) $2,000,000 
D) $80,000 
E) $1,520,000 
A) $1,600,000 
B) $720,000 
C) $2,000,000 
D) $80,000 
E) $1,520,000

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

A tortilla chip workstation produces 1,000 chips in 20 seconds.What is its bottleneck time?

Accepted Answer

A) .02 seconds per chip 
B) 50 chips per second 
C) 20 seconds 
D) 6000 chips per minute 
E) 20,000 seconds 
A) .02 seconds per chip 
B) 50 chips per second 
C) 20 seconds 
D) 6000 chips per minute 
E) 20,000 seconds

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

A useful tactic for increasing capacity is to redesign a product in order to facilitate more throughput.

Accepted Answer

A) True 
 B)False

Question 17

The Theory of Constraints (TOC)was popularized by:

Accepted Answer

A) Goldratt and Cox. 
B) Ford. 
C) Taguchi. 
D) Deming. 
E) Motorola and GE. 
A) Goldratt and Cox. 
B) Ford. 
C) Taguchi. 
D) Deming. 
E) Motorola and GE.

Question 18

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 19

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 net 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 20

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

Exam 20: Capacity and Constraint Management

Net present value will be greater:

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 percent,the net present value of this investment is:

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

Which of the following statements regarding fixed costs is TRUE?

Which of the following is not one of the four principles of bottleneck management?

Why is the capacity decision important?

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

Describe how EMV might be used to analyze a capacity decision.

A work system has five stations that have process times of 5,9,4,9,and 8.What is the bottleneck time?

Fabricators,Inc.wants to increase capacity by adding a new machine.The fixed costs for machine A are $90,000,and its variable cost is $15 per unit.The revenue is $21 per unit.What is the break-even point for machine A?

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

A tortilla chip workstation produces 1,000 chips in 20 seconds.What is its bottleneck time?

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

A useful tactic for increasing capacity is to redesign a product in order to facilitate more throughput.

The Theory of Constraints (TOC)was popularized by:

Break-even is the number of units at which:

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

Operations and Productivity

Operations Strategy in a Global Environment

Project Management

Forecasting

Design of Goods and Services

Managing Quality

Process Strategy

Location Strategies

Layout Strategies

Human Resources,job Design,and Work Measurement

Supply Chain Management

Inventory Management

Aggregate Planning and Sop

Material Requirements Planning Mrpand ERP

Short-Term Scheduling

Lean Operations

Maintenance and Reliability

Sustainability in the Supply Chain

Statistical Process Control

Supply Chain Management Analytics

Decision-Making Tools

Linear Programming

Transportation Models

Waiting-Line Models

Learning Curves

Simulation

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