Deck 6: Managing Capacity

Question 1

The ________ capacity strategy attempts to adjust the current capacity to a level equivalent to the current demand.

Answer 1

match

Question 2

In a decision tree,outcome points are under direct control of the decision maker and show the results of choices.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

The maximum output capability of a system,allowing for no adjustments for scheduled or unscheduled maintenance is the ________.

Question 5

Which of the following statements about capacity strategies is NOT correct?

A) Lead capacity strategy can be used to preempt competitors who might be planning to expand their own capacity.
B) A lag capacity strategy tends to have greater productivity due to higher utilization levels.
C) A match capacity strategy tends to avoid periods of high under- or overutilization.
D) A lag capacity strategy would be well-suited for a period of high growth.

Question 6

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

Question 7

Describe the three capacity strategies and the advantages of each.

Question 8

Define theoretical and rated capacity and name four factors that affect a company's capacity.Indicate how each factor impacts rated capacity.

Question 9

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) 100 bottles/minute
B) 95 bottles/minute
C) 90 bottles/minute
D) 85 bottles/minute

Question 10

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.

Question 11

Which of the following is NOT an appropriate measure of capacity?

A) square yards of carpet installed per hour
B) number of cars assembled per month
C) thickness of laminate on a desktop
D) printed pages per minute

Question 12

A lead capacity strategy has the advantage of:

A) a reduced risk of overbuilding.
B) greater productivity due to high utilization levels.
C) ensuring adequate capacity during all types of growth.
D) the ability to put off large investments as long as possible.

Question 13

Which of the following statements about theoretical capacity is best?

A) Theoretical capacity allows adjustments for preventive maintenance.
B) Running a factory at this level for a short time is often better than permanently raising resource levels.
C) Theoretical capacity levels are usually lower than rated capacity levels.
D) Theoretical capacity levels take into account that machines occasionally break and that workers occasionally call in sick.

Question 14

A collection of companies decides to work together for a while to provide service for what they see as a short term window of opportunity.These firms plan to coordinate their activities by deploying sophisticated information systems to share critical data.Each of these companies is skilled at one or two core activities - design,manufacturing,distribution,marketing,and so on.This association of companies can be described as a(n)________.

Question 15

A firm's capacity can be limited by members of its supply chain.

Question 16

Virtual supply chains have the advantage of efficiency,but this advantage is gained in a trade-off with decreased flexibility.

Question 17

Building rental and depreciation on capital equipment are examples of fixed costs.

Question 18

Capacity is the capability of a worker,machine,work center,plant,or organization to produce output per time period.

Question 19

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.

Question 20

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.

Question 21

An example of a variable cost is:

A) a payment to your raw materials supplier.
B) a lease payment on a piece of equipment.
C) a mortgage payment on buildings.
D) a monthly licensing fee for a software package.

Question 22

The ________ is the output volume level where the firm realizes a $0 net profit.

Question 23

The first three rooms took The Painter a total of 9 hours to paint.If the learning curve rate is 85%,how long will it take The Painter to paint all 20 rooms in Stately Wayne Manor?

A) less than 20 hours
B) between 20 and 30 hours
C) between 31 and 40 hours
D) more than 40 hours

Question 24

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

A) FC > VC.
B) VC > FC.
C) VC > R.
D) BEP > VC.

Question 25

Which of the following statements about learning curves is best?

A) Learning improvements always follow a constant pattern.
B) Frequent design changes and reengineering have no effect on learning rates.
C) Underestimated learning effects may cause overestimation of capacity needs.
D) An eighty percent learning curve means that each unit takes twenty percent less time to produce than its immediate predecessor.

Question 26

The MBA program at the University of Central Oregon features seven team-taught courses,five credit hours apiece.Each team is composed of somewhat reluctant professors in two distinct disciplines,each of which brings his own perspective to the topic du jour.The program is difficult to coordinate and makes transferring course credit in and out of the program near impossible,so the MBA Redesign Committee spends three years crafting a new program that features twenty one courses,two credit hours each,that will unfortunately take 18 months to complete compared to the current program's 12 months.The current MBA program brings in about 60 students each semester with the main selling point being the integration between disciplines.It is thought that if the new program can be successfully marketed as an easy fit with other MBA programs in the area,the ability to transfer credits in might attract as many as 70 new students each semester.If the new program is unveiled but the market is still interested in integrated courses,enrollment in the new program might drop to 40 students per semester.If this were the case,the new courses could be scheduled at the same time in the same room and might attract 65 students each semester (with a 0.6 probability)or might attract as few as 50 students with a 0.4 probability.If the existing program is retained but the market is seeking courses that are more transferable,then enrollment in the existing program might fall to 45 new students per semester.If this happens,then the existing courses might be broken in half each night into two classes back to back.Doing so has a .7 probability of increasing new student demand to 65 but has a .3 probability of increasing demand to 55.The MBA Director believes that the market is ready for a less integrated program,and she pegs the probability of that hunch at 0.6,with a 0.4 probability that the market prefers the current integrated program.What is the difference in expected outcomes between the two alternatives?

A) 2.2 new students per semester
B) 3.2 new students per semester
C) 3.4 new students per semester
D) 4.4 new students per semester

Question 27

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

Question 28

Saul Goodman represents several clients and bills by the hour at a reasonable $500 per.He forgot to record the time it took to complete each activity,but he knows his eight hour day was spent representing 13 clients involved in one high profile case.He also remembers that Walt told him once that his learning curve percentage was 80%.How many hours should Saul bill his first client?

A) one hour eight minutes and forty five seconds
B) one hour two minutes and thirty six seconds
C) fifty six minutes and twenty eight seconds
D) fifty minutes and five seconds

Question 29

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.Which of these methods is never the preferred alternative?

A) Import
B) Produce
C) Smuggle
D) Outsource

Question 30

A company with fixed costs of $200,000 per month believes that they have this holiday season's hot selling item,a towel that folds itself into a variety of shapes so you can turn your own home into a cruise ship cabin.They believe they can sell 100,000 units and need to determine a minimum price that will cover their fixed and variable costs,with the latter being $45 per unit.

A) $45.20
B) $46.50
C) $46.80
D) $47.00

Question 31

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) Import
B) Produce
C) Smuggle
D) Outsource

Question 32

A learning percentage of 80 means that each time output is doubled,it takes ________ percent less time to produce than before.

Question 33

A subdivision is planned for forty houses,each with its own in-ground swimming pool.A contractor estimates it will take him 30 hours to build the first pool and that there is a 90% learning curve associated with this process.How long will it take to build the last pool?

A) 27.2 hours
B) 23.9 hours
C) 20.5 hours
D) 17.1 hours

Question 34

Four entrepreneurial students want to open a shaved ice business during the coming summer.Maxine thinks that demand will be high and therefore they should purchase a large stand and acquire a premium ice shaving machine.Minnie feels strongly that demand will be low and that they should purchase a tarp and some basic hand tools to work the ice.Midelia is pretty sure that demand will fall in-between these two extremes,so they can get by with a shack and a used ice shaving machine.Their financial wizard of the bunch,Probableah,has estimated the costs,revenues,and likelihoods of each level of demand and created the table shown below.What is the expected profit for this venture?

A) $1700
B) $2300
C) $2900
D) $3300

Question 35

A haberdashery conducts an exhaustive analysis and calculates their profit function as 4x² + 3x - 57.What is their fixed cost?

A) 4
B) 4x²
C) 57
D) 3x

Question 36

A ninety percent learning curve is steeper than an eighty percent learning curve.

Question 37

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?

A) between 60 and 70 units
B) between 70 and 80 units
C) between 80 and 90 units
D) between 90 and 100 units

Question 38

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

Question 39

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

Question 40

Saul Goodman represents several clients and bills at $400 per hour.He forgot to record the time it took to complete each activity,but he knows his eight hour day was spent representing three clients involved in one high profile case.He also remembers that Walt told him once that his learning curve percentage was 85%.How much more should Saul bill his first client than his third client?

A) about $277
B) about $292
C) about $303
D) about $283

Question 41

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.Develop a graph showing the ideal alternative across a range of demand that reflects all decision points.

Question 42

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?

A) greater than 3 but less than 4 per hour
B) greater than 4 but less than 5 per hour
C) greater than 5 but less than 6 per hour
D) cannot be determined from the information provided.

Question 43

A major computer manufacturer is interested in establishing a customer service center to handle business for the next decade.They conduct exhaustive research on land and construction costs,utilities,tax breaks,and wages at three sites,Oklahoma City,Austin,and Nashville.Answer these questions using these costs as displayed in the table below.
Graph the total cost curves and indicate the range of output that is best for each prospective site.What are the assumptions you have made in this analysis?

Question 44

Wally's Filling Station is manned by one capable attendant that can fill your tank and check your tires,oil,and water in 5 minutes.If four customers arrive each hour,and the service and arrival rates are governed by the Poisson distribution,what is the utilization of the attendant?

A) 0.33
B) 0.50
C) 0.66
D) 0.80

Question 45

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) The overall system output is 220 units/hr.
B) The overall system output is 70 units/hr.
C) The overall system output is 40 units/hr.
D) The overall system output is 55 units/hr.

Question 46

A wise professor crafts a midterm that is beautiful to behold,painful to take,and a chore to grade.The first exam takes almost an hour and a half to grade (89 minutes and 24.7 seconds to be precise)but the second one takes only seventy-six minutes to complete.Realizing that learning effects are at work,the professor looks at his social calendar and spots an important social engagement at this time on the following day,exactly 24 hours from now.How long will it take to grade the third exam? How long will it take to finish grading exams for the entire class of 30 students?

Question 47

In waiting line theory,a customer service attendant is a(n)________.

Question 48

The Theory of Constraints would support the statement that a chain is only as strong as its weakest link.

Question 49

Business at the Kwik-E-Mart is brisk,with one customer arriving at a rate of six per hour on average.Ringing up purchases is an easy matter for owner/operator Apu; he can usually do so in 2 minutes.If both arrival and service rates are Poisson distributed,how many customers are in the store on average?

A) 0.05
B) 0.16
C) 0.25
D) 0.50

Question 50

Consider the system composed of four processes linked by a conveyor belt.There is no storage between these processes pictured below.Which statement is best?

A) The overall system output is 220 units/hr.
B) The process that determines the system's capacity is process 4.
C) If process 3 experiences 5 minutes of unplanned downtime, the system's overall output is diminished.
D) Overall system improvement efforts should focus on process 1.

Question 51

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 50 units per hour drives the conveyor belt.Assume that no defective units are made.Which statement is best?

A) There are about 18 units in the process at any given time.
B) There is more actual time spent in Process 2 and Process 3 combined than in Process 1 and Process 4 combined.
C) The flow rate through Process 1 is the highest.
D) The flow rate through Process 4 is the highest.

Question 52

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.

Question 53

Saul Goodman represents several clients and bills at $400 per hour.He forgot to record the time it took to complete each activity,but he knows his eight hour day was spent representing three clients involved in one high profile case.He also remembers that Walt told him once that his learning curve percentage was 85%.How much more should Saul bill each of his three clients?

Question 54

A steady stream of eager fresh-faced students waits in line to register for spring semester classes.Students arrive at the rate of 100 per hour and it takes the registrar 30 seconds to check their schedule and verify they have paid in full.What is the average time waiting in line and the average number of people in line? How busy is the registrar?

Question 55

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?

A) The average time a unit spends in Process 1 is 2 and a half minutes.
B) The average time a unit spends in Process 2 is 5 minutes.
C) The flow time for a unit through the entire process is 33 minutes.
D) The flow rate through the entire process is 160 units per hour.

Question 56

Customers arrive at Rent a Wreck and hope to score an inexpensive and unsightly vehicle to use for what typically is a short period of time.About twenty customers show up in any hour of the day and it takes the customer service representative about two minutes to photocopy their driver's license and insurance card and take an impression of a credit card.Assume that the service and arrival rates are governed by the Poisson distribution; how long does it take for the average customer to clear the system?

A) 10 minutes
B) 6 minutes
C) 3.33 minutes
D) 3 minutes

Question 57

In operations and supply chain environments that must deal with random demand and variable processing time,it is virtually impossible to achieve very high capacity utilization levels and still provide acceptable customer service.

Question 58

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?

A) 0.00
B) 0.05
C) 0.15
D) 0.45

Question 59

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

Question 60

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

Question 61

Customers arrive at Rent a Wreck and hope to score an inexpensive and unsightly vehicle to use for what typically is a short period of time.About twenty customers show up in any hour of the day and it takes the customer service representative about two minutes to photocopy their driver's license and insurance card and take an impression of a credit card.Assume that the service and arrival rates are governed by the Poisson distribution.Calculate the system's vital statistics.