Chapter 7S
Answer: TRUE
1) Fixed costs are those costs that continue even if no units are produced.
Answer: FALSE
1) The bottleneck time is always at least as long as the throughput time.
Answer: B
10) The basic break-even model can be modified to handle more than one product. This extension of the basic model requires: A) price and sales volume for each product. B) price and variable cost for each product, and the percent of sales that each product represents. C) that the firm have very low fixed costs. D) that the ratio of variable cost to price be the same for all products. E) sales volume for each product.
Answer: E
10) Which of the following is not one of the four principles of bottleneck management? 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.
Answer: A
11) TOC was popularized by: A) Goldratt and Cox. B) Ford. C) Taguchi. D) Deming. E) Motorola and GE.
Answer: D
12) TOC strives to reduce the effect of constraints by: A) offloading work from constrained workstations. B) increasing constrained workstation capability. C) changing workstation order to reduce throughput time. D) A and B E) A, B, and C
Answer: Break-even
12) ________ analysis finds the point at which costs equal revenues.
Answer: E
13) The theory of constraints has its origins in: A) linear programming theory. B) the theory of economies of scale. C) material requirements planning. D) the theory of finite capacity planning. E) Goldratt and Cox's book, The Goal: A Process of Ongoing Improvement.
Answer: Fixed
13) ________ cost is the cost that continues even if no units are produced.
Answer: E
14) Which of the following techniques is NOT a technique for dealing with a bottleneck? A) Schedule throughput to match the capacity of the bottleneck. B) Increase the capacity of the constraint. C) Have cross-trained employees available to keep the constraint at full operation. D) Develop alternate routings. E) All are techniques for dealing with bottlenecks.
Answer: A
15) In "drum, buffer, rope," what provides the schedule, i.e. the pace of production? A) drum B) buffer C) rope D) all three of the above in combination E) none of the above
Answer: Variable costs are those that vary with the number of units produced. Linearity (or proportionality) is assumed.
16) Define variable costs. What special assumption is made about variable costs in the textbook?
Answer: rope
16) In "drum, buffer, rope," the ________ acts like signals between workstations.
Answer: The theory of constraints is the body of knowledge that deals with anything that limits an organization's ability to achieve its goals.
17) Describe the theory of constraints in a sentence.
Answer: Breakeven is defined as the volume for which costs equal revenue. It is useful to know the break-even point for each capacity alternative under consideration. In reality, costs may not be as linear as they are assumed to be in this model.
17) How is break-even analysis useful in the study of the capacity decision? What limitations does this analytical tool have in this application?
Answer: The five-step process of the theory of constraints includes: Step 1: Identify the constraints. Step 2: Develop a plan for overcoming the identified constraints. Step 3: Focus resources on accomplishing Step 2. Step 4: Reduce the effects of the constraints by offloading work or by expanding capability. Make sure that the constraints are recognized by all those who can have an impact on them. Step 5: When one set of constraints is overcome, go back to Step 1 and identify new constraints.
18) Identify, in proper sequence, the steps in the process of recognizing and managing constraints.
Answer: A bottleneck operation is the one that limits output in the production sequence. Consequently, to increase throughput of the facility, the bottleneck output must be increased.
19) Explain the importance of a bottleneck operation in a production sequence.
Answer: FALSE
2) Break-even analysis identifies the volume at which fixed costs and revenue are equal.
Answer: FALSE
2) To find the throughput time with simultaneous processes, compute the time over all paths and choose the shortest path through the system.
Answer: FALSE
3) Break-even analysis is a powerful analytical tool, but is useful only when the organization produces a single product.
Answer: TRUE
3) The theory of constraints is a body of knowledge that deals with anything that limits an organization's ability to achieve its goals.
Answer: E
4) Break-even is the number of units at which: 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.
Answer: FALSE
4) Substantial research has proved that the only successful method of dealing with bottlenecks is to increase the bottleneck's capacity.
Answer: B
5) 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 processed 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? A) Station 1 B) Station 2 C) Station 3 D) Station 4 E) Station 5
Answer: B
5) Which of the following statements regarding fixed costs is TRUE? 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.
Answer: A
6) A tortilla chip workstation produces 1,000 chips in 20 seconds. What is its bottleneck time? A) .02 seconds per chip B) 50 chips per second C) 20 seconds D) 6000 chips per minute E) 20,000 seconds
Answer: D
6) Which of the following costs would be incurred even if no units were produced? A) raw material costs B) direct labor costs C) transportation costs D) building rental costs E) purchasing costs
Answer: D
7) 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? A) 4 B) 9 C) 18 D) 35 E) 7
Answer: B
7) Basic break-even analysis typically assumes that: A) revenues increase in direct proportion to the volume of production, while costs increase at a decreasing rate as production volume increases. B) variable costs and revenues increase in direct proportion to the volume of production. C) both costs and revenues are made up of fixed and variable portions. D) costs increase in direct proportion to the volume of production, while revenues increase at a decreasing rate as production volume increases because of the need to give quantity discounts. E) All of the above are assumptions in the basic break-even model.
Answer: B
8) A work system has five stations that have process times of 5, 9, 4, 9, and 8. What is the bottleneck time? A) 4 B) 9 C) 18 D) 35 E) 7
Answer: D
8) 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? A) $90,000 dollars B) 90,000 units C) $15,000 dollars D) 15,000 units E) 4,286 units
Answer: D
9) Break-even analysis can be used by a firm that produces more than one product, but: A) the results are estimates, not exact values. B) the firm must allocate some fixed cost to each of the products. C) each product has its own break-even point. D) the break-even point depends upon the proportion of sales generated by each of the products. E) None of these statements is true.