Operations Management Chapter 9

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

1,000

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

Exra

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

FEC accounting requirements

_____________________ 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.

Large

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

Sears

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

Subcontractor networks

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 large facility

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

are labor intensive

Compared to large facilities, focused factories _____________________.

are more flexible

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

automation of factories

Economies of scale occur when a company is operating _______________________.

below its best operating level and increases its output

Capacity planning can occur at all but which level:

board of directors level

When evaluating location alternatives the firm should look at

both qualitative and quantitative factors

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

capacity

Capacity planning is complicated by the fact that ___________________.

capacity is usually purchased in chunks, rather than smooth increments

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

center of gravity approach

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

climate

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

consumer preferences change very rapidly, and the specialty stores can focus on a specific set of customers and respond to their unique needs

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

decide how to use a partially empty facility

Which of the following is not part of decision trees?

decision events

Evaluate capacity alternatives can include use of ______________________________.

decision trees

Capacity cushions can be helpful if ______________________.

demand is greater than expected

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

design capacity

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

developing a large network of subcontractors

Locating close to customers is least important for ______________________.

diamond mines

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

effective capacity

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

finance, marketing and operations

An example of an input measure of capacity is _____________________.

floor space in square feet

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

focused factories

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

forecasts of future demand

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

higher

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

identify capacity requirements

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

identify dominant factors

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

identify the location factors that are dominant for the business

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

in sequence, uncertainty

Capacity decisions at the strategic level include ____________________.

investment in new facilities and equipment

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

is arbitrary but usually the expected volume

A focused factory is one that ____________________.

is small and highly specialized

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

labor hours consumed

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

labor supply

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

lowest average unit cost

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

many different products

The center of gravity approach

may identify a location that may not be feasible to locate to

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

of impact on costs

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

of transportation costs

Disadvantages of globalization include ________________________________.

political risks for countries with unstable governments

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

probability of choosing decision alternatives

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

proximity to suppliers

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

quantity

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

rectilinear

One benefit PWP provides over independent plants is

reduction of unnecessary layers of bureaucracy

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

room for customer parking

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

scheduled machine maintenance

Solving a decision tree that involves maximizing profit includes ______________________.

selecting the decision alternative with the highest expected value

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

site considerations

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

solve algebraically for the best location

The concept of diseconomies of scale ________________________.

states that beyond a certain point the cost of each additional unit made increases

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

the amount of available capacity and the effectiveness of capacity use

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

the design of the production process

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

the factor rating method

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

the fixed cost per unit will be the same regardless of volume

Effective capacity is

the maximum output rate that can be sustained under normal conditions

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

the size of a new facility may affect its location

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 ______________________________.

the transportation method

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

their customers

Capacity planning is difficult because

there is no one way to measure it

Location decisions are particularly important because __________________________.

they can have a large impact on operating costs and revenues

At the break-even point, _____________________.

total cost equals total revenue

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

uncertainty in forecasting future demands

The ratio of actual output rate to capacity is ____________________________.

utilization

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

vertical integration

Expected values are

weighted value of the chance events

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

will result in low initial costs