Capacity Management

Which of the following costs would be incurred even if no units were​ produced? A.raw material costs B.building rental costs C.direct labor costs D.transportation costs E.purchasing costs

B.building rental costs

Break-even is the number of units at which A.total profit equals total cost. B.total revenue equals total cost. C.total revenue equals price times quantity. D.total revenue equals total variable cost. E.total revenue equals total fixed cost.

B.total revenue equals total cost.

Utilization will always be lower than efficiency because A.False; Utilization and efficiency are equal in value. B. effective capacity equals design capacity. C. effective capacity is less than design capacity. D. effective capacity is greater than design capacity. E. ​False; Utilization is normally greater than efficiency.

C. effective capacity is less than design capacity.

Which of the following statements regarding fixed costs is true​? A.Fixed costs are those costs associated with direct labor and materials. B.Fixed costs rise by a constant amount for every added unit of volume. C.Fixed costs equal variable costs at the​ break-even point. D.Fixed cost is the difference between selling price and variable cost. E.While fixed costs are ordinarily constant with respect to​ volume, they can​ "step" upward if volume increases result in additional fixed costs.

E. While fixed costs are ordinarily constant with respect to​ volume, they can​ "step" upward if volume increases result in additional fixed costs.

Effective capacity is the A.average output that can be achieved under ideal conditions. B.maximum output of a system in a given period. C.sum of all of the​ organization's inputs. D.minimum usable capacity of a particular facility. E.capacity a firm expects to achieve given the current operating constraints.

E.capacity a firm expects to achieve given the current operating constraints.

Capacity decisions are based on technological​ concerns, not demand forecasts. (T/F)

F

​Break-even analysis identifies the volume at which fixed costs and revenue are equal. (T/F)

F

​Break-even analysis is a powerful analytical​ tool, but is useful only when the organization produces a single product. (T/F)

F

A useful tactic for increasing capacity is to redesign a product in order to get more throughput. (T/F)

T

Design capacity is the theoretical maximum output of a system in a given period under ideal conditions. (T/F)

T

Expected output is sometimes referred to as rated capacity. (T/F)

T