DSCI 7S

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, what is the approximate net present value of this investment?

(a) $20,920

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

(a) .02 seconds per chip

A product sells for $5, and has unit variable costs of $3. This product accounts for $20,000 in annual sales, out of the firm's total of $60,000. When performing multi product break-even analysis, what is the weighted contribution of this product?

(a) 0.113

An assembly line has 10 stations with times of 1,2,3,4,.....10, respectively. What is the bottleneck time?

(a) 18.18% of the throughput time

In "drum,buffer,rope," what provides the schedule, ie.e the pace of production?

(a) drum

Utilization will always be lower than efficiency because

(a) effective capacity is less than design capacity

An organization whose capacity is on that portion of the average unit cost curve that falls as output rises

(a) has a facility that is below optimum operating level and should build a larger facility

Which of the following represents an aggressive approach to demand management in the service sector when demand and capacity are not particularly well matched?

(a) lower resort hotel room prices on Wednesdays

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

(b) 9

The staff training center at a large regional hospital provides training sessions in CPR to all employees. Assume that the capacity of this training system was designed to by 1200 employees per year. Since the training center was first put into use, the program has become more complex, so that 1050 now represents the most employees that can be trained per year. In the past year, 950 employees were trained. The efficiency of this system is approximately _____ and its utilization is approximately _____.

(b) 90.5%; 79.2%

Consider a production line with five stations. Station 1 can produce a unit in 9 minutes. Station 2 can produce a unit in 10 minutes. Station 3 has two identical machines, each of which can process a unit in 12 minutes (each unit only needs to be produced on one of the two machines. Station 4 can produce a unit in 5 minutes. Station 5 can produce a unit in 8 minutes. Which station is the bottleneck station?

(b) Station 2

Effective capacity is the

(b) capacity a firm expects to achieve given the current operation constraints

The basic break-even model can be modified to handle more than one product. This extension of the basic model requires

(b) price and variable cost for each product, and the percent of sales that each product represents

Basic break-even analysis typically assumes that

(b) variable costs and revenues increase in direct proportion to the volume of production

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?

(d) $80,000

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?

(d) 15,000 units

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

(d) 35

The Academic Computing Center has five trainers available in its computer labs to provide training sessions to students. Assume that the design capacity of the system is 1900 students per semester and that orientation session is 1500, what is the efficiency of the system?

(d) 87.7%

TOC strives to reduce the effect of constraints by:

(d) A and B (a) offloading work from constrained workstations (b) increasing constrained workstation capability

Which of the following is FALSE regarding capacity expansion

(d) Capacity may only be added in large chunks

Which of the following costs would be incurred even if no units were produced?

(d) building rental costs

What is sometimes referred to as rated capacity?

(d) expected output

Net present value will be greater

(d) for a 4% discount rate than for a 6% discount rate

Break-even analysis can be used by a firm that produces more than one product, but

(d) the break-even point depends upon the proportion of sales generated by each of the products

What is a common method used to increase capacity with a lag strategy?

(e) A and B (a) overtime (b) subcontracting

Which of the following techniques in NOT a technique for dealing with a bottleneck?

(e) All are techniques for dealing with bottlenecks. -Schedule throughput to match the capacity of the bottleneck -Increase the capacity of the constraint -Have cross-trained employees available to keep the constraint at full operation -develop alternate routings

The theory of constraints has its origins in

(e) Goldratt and Cox's book, The Goal: A Process of Ongoing Improvement

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

(e) bottlenecks should be moved to the end of the system process

Of the four approaches to capacity expansion, the approach that "straddles" demand:

(e) choices A and C are both correct (a) uses incremental expansion (c) at some time leads demand, and at other times lags

Net present value

(e) is the discounted value of a series of future cash receipts

Break-even is the number of units at which

(e) total revenue equals total cost

Which of the following statements regarding fixed costs is TRUE?

(b) while fixed costs are ordinarily constant with respect to volume, they can "step" upward if volume increases result in additional fixed costs

Christopher's Cranks uses a machine that can produce 100 cranks per hour. The firm operates 12 hours per day, five days per week. Due to regularly scheduled preventive maintenance, the firm expects the machine to be running during approximately 95% of the available time. Based on experience with other products, the firm expects to achieve an efficiency level for the cranks of 85%. What is the expected weekly output of cranks for this company?

(c) 4845

Lag and straddle strategies for increasing capacity have what main advantage over a leading strategy?

(c) They delay capital expenditure

Which of the following represents a common way to manage capacity in the service sector?

(c) changes in staffing levels

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

(c) less than $30,000

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

(c) the existing product has seasonal or cyclical demand

TOC was popularized by

(a) Goldratt and Cox