Deck 9: Capacity Planning and Facility Location

Question 1

The best operating level is the volume of output that results in the ____________________.

A) lowest average unit cost
B) most revenue
C) maximum use of machinery
D) best quality
E) optimum product mix

Answer 1

A

Question 2

Investments in building or purchasing long-term production facilities are inherently risky due to __________.

A) uncertainty in forecasting future demands
B) unexpected changes in interest rates
C) durability of materials
D) corporate mergers
E) rapid technology changes

Answer 2

A

Question 3

When discussing the capacity of a facility, we need what two types of information?

A) the amount of available capacity and the productivity of workers
B) the speed of the machines and the availability of labor
C) the amount of available capacity and the effectiveness of capacity use
D) the investment in equipment and the availability of labor
E) the investment in equipment and the number of workers

Answer 3

C

Question 4

Which of the following is a reason capacity and location decisions are usually made simultaneously?

A) in order to get them in the operating budget on a consistent basis
B) it makes it easier to understand capacity
C) often there is not enough time available to separate them
D) they require the same types of information
E) the size of a new facility may affect its location

Question 5

If capacity is excessive, a company may have to ______________________.

A) decide how to use a partially empty facility
B) outsource
C) back-order
D) use group technology
E) raise prices

Question 6

The maximum output rate that can be sustained under normal conditions is _______________________.

A) utilization
B) design capacity
C) effective capacity
D) ultimate capacity
E) temporary capacity

Question 7

Input measures of capacity work better when a company produces _____________________.

A) discrete items
B) a single product
C) liquids
D) many different products
E) off-the-shelf items

Question 8

Which of the following is not a measure of output capacity?

A) cars per shift
B) labor hours consumed
C) revenues per day
D) TVs sold per day
E) patients served per month

Question 9

Capacity planning can occur at all but which level:

A) organization
B) division
C) assembly line
D) machine level
E) board of directors level

Question 10

The maximum output that can be achieved by a facility is ____________.

A) lead time
B) storage space
C) capacity
D) productivity
E) cycle counting

Question 11

Capacity planning is difficult because

A) Board of directors set the requirements
B) the mathematical requirements are difficult
C) the planning stages always require global considerations
D) there is no one way to measure it
E) it is easy to confuse the service organization and manufacturing organization measurements

Question 12

Capacity planning is complicated by the fact that ___________________.

A) capital markets are complex
B) existing facilities may become obsolete
C) capacity is difficult to define
D) capacity is usually purchased in chunks, rather than smooth increments
E) depreciation must be calculated

Question 13

Which of the following does not contribute to the sustainability of design capacity?

A) scheduled machine maintenance
B) overtime
C) overstaffing
D) using equipment to the maximum
E) subcontracting

Question 14

Which of the following is not a factor in capacity planning?

A) approach used to measure capacity
B) economies of scale
C) prepare to deal with capacity in "chunks"
D) proximity to suppliers
E) identify the best operating level

Question 15

Effective capacity is

A) the maximum input rate that can be sustained under normal conditions
B) the maximum output rate that can be sustained under normal conditions
C) the maximum input rate that can be sustained under ideal conditions
D) the maximum output rate that can be sustained under ideal conditions
E) the maximum percent measure of how well available capacity is being used

Question 16

Capacity decisions at the strategic level include ____________________.

A) investment in new facilities and equipment
B) size of workforce
C) inventory buffers
D) day-to-day use of machines
E) composition of the workforce

Question 17

An example of an input measure of capacity is _____________________.

A) floor space in square feet
B) number of patients per month
C) number of pizzas per day
D) revenues per day
E) number of cars per shift

Question 18

_____________________ capacity can serve to intimidate and preempt competitors from entering the market.

A) Design
B) Flexible
C) Extra
D) Effective
E) Focused

Question 19

The maximum output rate that can be achieved by a facility under ideal conditions is _________________.

A) utilization
B) design capacity
C) effective capacity
D) ultimate capacity
E) temporary capacity

Question 20

The ratio of actual output rate to capacity is ____________________________.

A) effectiveness
B) cycle time
C) throughput
D) utilization
E) productivity

Question 21

The concept of diseconomies of scale ________________________.

A) states that the average cost of a unit produced is reduced when the amount of output increases
B) is not realistic
C) is not valid for regulated industries
D) states that beyond a certain point the cost of each additional unit made increases
E) is an approach for measuring unusable output

Question 22

Decision trees are useful when the alternatives are __________ and involve __________

A) local, senior management
B) in parallel, certainty
C) in sequence, uncertainty
D) in sequence, certainty
E) in parallel, certainty

Question 23

Capacity cushions can be helpful if ______________________.

A) demand is greater than expected
B) sales need to be buffered from production
C) total quality management fails
D) productivity is too high
E) there is excess capacity

Question 24

Compared to large facilities, focused factories _____________________.

A) bring economies of scale
B) have much bureaucracy
C) are ancient history
D) lead to higher average inventories
E) are more flexible

Question 25

The first step in making a capacity planning decision is ______________________.

A) evaluate capacity alternatives
B) implementation
C) identify capacity requirements
D) develop capacity alternatives
E) weight capacity objectives

Question 26

The cost per unit is $36.74 at the best operating level. When the output is higher, the unit cost will be what?

A) lower
B) the same
C) higher
D) could be higher or lower
E) could be higher, lower or the same

Question 27

Last month TMJG Co. started producing a new product called Thingamajigs from its new plant. Sales were quite good for the first couple of weeks. Unfortunately, a technological innovation was then announced by a competitor. This innovation will almost completely eliminate the demand for Thingamajigs. As a result, TMJG has decided to shut down and dismantle the plant next week. The average cost per unit will be highest if the plant was _________________________.

A) a small facility
B) in the right location
C) a large facility
D) just-in-time
E) a medium facility

Question 28

Evaluate capacity alternatives can include use of ______________________________.

A) the Delphi method
B) estimated market shares
C) demographic factors
D) econometric forecasting
E) decision trees

Question 29

According to the textbook, one of the fastest-growing trends today is

A) Leveraging technology
B) PWP
C) focused plants
D) developing a large network of subcontractors
E) developing a large focused distribution chain

Question 30

One benefit PWP provides over independent plants is

A) increased production output
B) increased design capacity capabilities
C) reduction of unnecessary layers of bureaucracy
D) reduction in transportation costs
E) improved supplier relationships

Question 31

_____________________ can perform a number of tasks to help a company focus on its core capabilities.

A) A plant within a plant
B) Agile manufacturing
C) Total Quality Management
D) Just-In-Time
E) Subcontractor networks

Question 32

_____________________ facilities may not be the best approach in today's business environment that has short product and technological life cycles and in which flexibility is more important than ever before.

A) Large
B) Small
C) Leased
D) Self-operating
E) Agile

Question 33

Large facilities can benefit from the concept of _____________________ by creating a plant within a plant (PWP).

A) just-in-time
B) focused factories
C) economies of scale
D) supply chain
E) hierarchical management

Question 34

Economies of scale occur when a company is operating _______________________.

A) at its best operating level and increases its output
B) at its best operating level and decreases its output
C) below its best operating level and decreases its output
D) above its best operating level and increases its output
E) below its best operating level and increases its output

Question 35

Which of the following information items is not contained in decision trees?

A) points in time when decisions are made
B) ) decision alternatives
C) chance event probabilities
D) probability of choosing decision alternatives
E) outcomes, such as estimated profits

Question 36

Management has decided to add capacity incrementally in smaller chunks as needed, rather than purchasing one large facility. This decision ____________________.

A) is very risky
B) will result in low initial costs
C) will ultimately result in lower costs per unit if demand increases rapidly
D) positions the company to be well prepared for high demand in the future
E) can lead to a large amount of excess capacity

Question 37

A focused factory is one that ____________________.

A) produces many products with options
B) is small and highly specialized
C) has a large number of management specialists
D) is vertically integrated
E) is located at the center of demand

Question 38

Long-term capacity requirements are identified on the basis of _____________________.

A) the current trend of the economy
B) the expected lifetime of the facility
C) demographic factors
D) forecasts of future demand
E) future political events

Question 39

Operating a facility close to its best operating level is clearly important because

A) it reduces fixed cost
B) it reduces overtime requirements
C) of impact on costs
D) of impact on employees bonuses
E) it increases production

Question 40

In the 1980s retail sales were dominated by large department stores. However, in the 1990s gains in sales were made by specialty stores because __________________________________.

A) the large department stores started moving out of shopping malls, and their new locations were not nearly as effective
B) customers got tired of trying to find sales clerks who would help them in the large department stores
C) the specialty stores always had donuts and coffee for their customers
D) consumer preferences change very rapidly, and the specialty stores can focus on a specific set of customers and respond to their unique needs
E) parking is more readily available at the specialty stores

Question 41

It takes many pounds of milk to make one pound of cheese. Therefore, there are many cheese factories in dairy states because ________________________.

A) of reputation
B) "cheeseheads" eat a lot of cheese
C) of transportation costs
D) making cheese is a batch process
E) customers prefer domestic cheese

Question 42

With respect to globalization, which of the following would not be considered an important location consideration?

A) vertical integration
B) trade barriers
C) culture
D) language barriers
E) foreign markets

Question 43

Location decisions are particularly important because __________________________.

A) typically they are made rather frequently
B) they entail a high cost, short-term commitment
C) there are so many potential locations
D) they have a major impact on product design
E) they can have a large impact on operating costs and revenues

Question 44

Expected values are

A) forecasted sales prices
B) forecasted revenues
C) average value of chance events
D) weighted value of the chance events
E) exponential value of the chance events

Question 45

Disadvantages of globalization include ________________________________.

A) use of cheap labor in certain countries
B) increased stigma due to locating factories overseas
C) reduction of trade barriers
D) increased sales in foreign markets
E) political risks for countries with unstable governments

Question 46

The first step managers need to take when making facility location decisions is ___________________.

A) begin negotiations with governments for several potential locations
B) identify specific location possibilities
C) gather information on location alternatives
D) evaluate specific sites
E) identify the location factors that are dominant for the business

Question 47

The first step in the factor rating method for evaluating location alternatives is what?

A) select a scale by which to evaluate each alternative relative to each factor
B) evaluate each alternative relative to each factor
C) select the alternative with the highest score
D) identify dominant factors
E) assign weights to factors reflecting the importance of each factor relative to the other factors

Question 48

Local wage rates, presence of local unions, and attitudes of local workers would be major factors for location decisions for businesses that ________________________.

A) are labor intensive
B) have perishable products
C) have high transportation costs
D) have need for specific raw materials
E) provide in-home services

Question 49

Which of the following has the least to do with location analysis?

A) sources of transportation
B) reduction in trade barriers
C) information technology reducing need for proximity
D) retail stores locating near each other
E) automation of factories

Question 50

Issues that need to be considered in location globally include all of the following except ______________.

A) different cultures
B) FEC accounting requirements
C) language barriers
D) different laws
E) different business practices

Question 51

A facility location factor that is important for both service and manufacturing organizations is locating close to ________________________.

A) labor supply
B) sources of transportation
C) suppliers
D) warehouses
E) natural resources

Question 52

The least likely reason for a U.S. firm to choose to locate a factory in a foreign country is _____________.

A) climate
B) natural resources
C) markets
D) cheaper suppliers
E) lower labor costs

Question 53

When evaluating location alternatives the firm should look at

A) only qualitative factors
B) only quantitative factors
C) both qualitative and quantitative factors
D) weighted average values
E) decision support models only

Question 54

In facility location zoning restrictions, soil conditions, and access roads for trucks are ________________.

A) community considerations
B) site considerations
C) quality of life issues
D) hardly ever important
E) cultural considerations

Question 55

Locating close to customers is least important for ______________________.

A) bakeries
B) movie theaters
C) flower shops
D) diamond mines
E) gas stations

Question 56

Solving a decision tree that involves maximizing profit includes ______________________.

A) using probabilities to calculate expected values for decision points
B) calculating from left to right
C) selecting the decision alternative with the highest expected value
D) calculating expected values for all chance events before considering decision nodes
E) inverting decision nodes

Question 57

Service organizations such as restaurants, movie theaters, and banks focus on locating near ____________.

A) suppliers
B) roads
C) intersections
D) their customers
E) potential workers

Question 58

Which of the following is least likely to be a consideration in facility location?

A) the design of the production process
B) mistakes in choosing a location can be difficult to correct
C) often there are a number of acceptable locations
D) expanding capacity at a current location may be an option
E) location decisions can have a major impact on operating costs and revenues

Question 59

Which of the following is not a quality-of-life factor?

A) climate
B) a desirable lifestyle
C) good schools
D) a low crime rate
E) room for customer parking

Question 60

An excellent procedure that can be used with location factors that are qualitative is __________________.

A) the transportation method
B) break-even analysis
C) the factor rating method
D) the center of gravity approach
E) the load-distance method

Question 61

In choosing a location, the _____________________ provides an easy way to calculate X and Y coordinates for a good starting point.

A) transportation method
B) break-even approach
C) factor rating method
D) center of gravity approach
E) load-distance method

Question 62

Input measures of capacity work better when a company produces a single product.

Question 63

Which of the following is not an example of factory focus?

A) Ann Taylor
B) Sears
C) Limited Too
D) The Gap
E) The Limited

Question 64

Scheduled machine maintenance is one of the determinants of effective capacity.

Question 65

The method which relies on a specific algorithm to evaluate the cost impact of adding potential location sites to the network of existing facilities is ______________________________.

A) cost-volume analysis
B) the transportation method
C) factor rating analysis
D) linear regression analysis
E) the load-distance model

Question 66

To plot the break-even line one end of the line is the y-intercept point. The other line point

A) requires the center of gravity calculation
B) is established by the finance department
C) is arbitrary but usually the expected volume
D) is not arbitrary
E) is derived from the location analysis

Question 67

Capacity planning is complicated by the fact that capacity is usually purchased in chunks, rather than smooth increments.

Question 68

Which of the following is not a valid assumption of the break?even model?

A) only one product is involved
B) everything which is produced will be sold
C) the revenue per unit will be the same regardless of volume
D) the fixed cost per unit will be the same regardless of volume
E) the variable cost per unit will be the same regardless of volume

Question 69

Capacity decisions at the strategic level include the size of workforce.

Question 70

Which of the following is not a step in the load-distance model?

A) solve algebraically for the best location
B) identify loads
C) select the site with the lowest load-distance score
D) identify distances
E) calculate the load-distance score for each location

Question 71

At the break-even point, _____________________.

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 72

The first level of capacity planning is at the strategic level.

Question 73

A location analysis has been narrowed down to two locations, A and B. The main factors in the decision will be supply of raw materials, which has a weight of 50, and labor cost, which has a weight of 50. The ratings for raw materials and labor are: for A, 3 and 4, respectively; for B, 5 and 3, respectively. Using the factor rating method, the manager should ______________________.

A) be indifferent between these locations
B) choose location A
C) choose location B
D) reject both locations
E) determine the capacity before deciding

Question 74

For a break-even graph, the total cost for each possible location is plotted against __________________.

A) fixed costs
B) variable costs
C) profit margin
D) quantity
E) price

Question 75

The load-distance model frequently utilizes _____________________ distance, which is the shortest distance between two points using only north-south and east-west movements.

A) curvilinear
B) Euclidean
C) rectilinear
D) direct
E) vertical

Question 76

Capacity planning and location analysis are decisions that must be made by _______________ working together.

A) accounting, marketing and operations
B) marketing and finance
C) finance, marketing and operations
D) accounting, marketing and finance
E) marketing and operations

Question 77

The center of gravity approach

A) identifies the precise location for the new distribution site
B) identifies where the trucking firm should be located
C) may identify a location that may not be feasible to locate to
D) relies on GPS coordinates for all calculations
E) relies on which transportation method is selected

Question 78

Which of the following is not part of decision trees?

A) decision points
B) decision alternatives
C) decision events
D) chance events
E) outcomes

Question 79

An example of an output measure of capacity is labor hours.

Question 80

For fixed costs of $10,000, revenue per unit of $20, and variable cost per unit of $10, the break-even quantity is ______________________.

A) 10
B) 500
C) 1,000
D) 2,000
E) 10,000