SCMA 331- Exam 2 Chap 7 Supplement, SCMA 331- Exam 2 Chap 7, SCMA 331- Exam 2 Chap 8, SCMA 331- Exam 2 Chap 9, SCMA 331 Ch 5, SCMA 331 Chapter 5 Supplement:

An organization's approach to transforming resources into goods and services is called its ________.

process strategy

In "drum, buffer, rope," the ________ acts like signals between workstations.

rope

The capacity planning strategy that delays adding capacity until capacity is below demand, then adds a capacity increment so that capacity is above demand, is said to ________ demand.

straddle

________ is actual output as a percent of design capacity.

Utilization

The tool that calculates which process has the lowest cost at any specified production volume is a crossover chart.

True

The net present value of $10,000 to be received in exactly three years is considerably greater than $10,000.

False

The typical full-service restaurant uses a product-focused process.

False

To find the throughput time with simultaneous processes, compute the time over all paths and choose the shortest path through the system.

False

Utilization is the number of units a facility can hold, receive, store, or produce in a period of time.

False

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 B) $26,160 C) $49,840 D) $70,920 E) $106,990

A) $20,920

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

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 multiproduct break-even analysis, what is the weighted contribution of this product? A) 0.133 B) 0.200 C) 0.40 D) 0.667 E) $1.667

A) 0.133

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 B) 100% of the throughput time C) 550% of the throughput time D) 50% of the throughput time E) 1.82% of the throughput time

A) 18.18% of the throughput time

Process A has fixed costs of $1000 and variable costs of $5 per unit. Process B has fixed costs of $500 and variable costs of $15 per unit. What is the crossover point between process A and process B? A) 50 units B) 200 units C) $2,500 D) $5,000 E) $9,500

A) 50 units

TOC was popularized by: A) Goldratt and Cox. B) Ford. C) Taguchi. D) Deming. E) Motorola and GE.

A) Goldratt and Cox

Which of the following products is likely to be assembled on a repetitive process line? A) automobiles B) custom personal computers C) custom cakes D) steel E) beer

A) automobiles

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

A) drum

Utilization will always be lower than efficiency because: A) effective capacity is less than design capacity. B) effective capacity is greater than design capacity. C) effective capacity equals design capacity. D) expected output is less than actual output. E) expected output is less than rated capacity.

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. B) has a facility that is above optimum operating level and should reduce facility size. C) is suffering from diseconomies of scale. D) has utilization higher than efficiency. E) has expected output higher than rated capacity.

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

Which of the following phrases best describes process focus? A) low volume, high variety B) Finished goods are usually made to a forecast and stored. C) Operators are less broadly skilled. D) high fixed costs, low variable costs E) low inventory

A) low volume, high variety

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 B) appointments C) reservations D) first-come, first-served rule E) none of the above

A) lower resort hotel room prices on Wednesdays

Align Technology uses a ________ approach to produce clear plastic removable aligners. A) mass customization B) product focus C) process focus D) repetitive focus E) crossover

A) mass customization

Arnold Palmer Hospital uses which focus? A) process B) repetitive C) product D) mass customization E) A and D

A) process

Goods made to order are typical of ________ and ________ approaches while goods made to forecast are typical of ________ and ________ approaches. A) process, mass customization; repetitive, product B) product, mass customization; repetitive, process C) product, process; repetitive, mass customization D) repetitive, product; mass customization, process E) repetitive, process; mass customization, product

A) process, mass customization; repetitive, product

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

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 be 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 ________. A) 79.2 percent; 90.5 percent B) 90.5 percent; 79.2 percent C) 87.5 percent; 950 employees D) 950 employees; 1050 employees E) 110.5 percent; 114.3 percent

B) 90.5 percent; 79.2 percent

Which of the following characteristics best describes repetitive focus? A) It uses sophisticated scheduling to accommodate custom orders. B) Its output is a standardized product produced from modules. C) Operators are broadly skilled. D) It is widely used for the manufacture of steel. E) low volume, high variety

B) Its output is a standardized product produced from modules.

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

B) Station 2

Which of the following is FALSE regarding repetitive processes? A) They use modules. B) They allow easy switching from one product to the other. C) They are the classic assembly lines. D) They have more structure and less flexibility than a job shop layout. E) They include the assembly of basically all automobiles.

B) They allow easy switching from one product to the other.

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.

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

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

Which one of the following products is most likely made in a job shop environment? A) rolls of newsprint B) paper forms C) television sets D) cigarettes E) canned vegetables

B) paper forms

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.

B) price and variable cost for each product, and the percent of sales that each product represents.

Frito-Lay is to ________ focus as Harley Davidson is to ________ focus. A) process, repetitive B) product, repetitive C) repetitive, product D) process, product E) product, mass customization

B) product, repetitive

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.

B) variable costs and revenues increase in direct proportion to the volume of production.

________ analysis finds the point at which costs equal revenues.

Break-even

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? A) 5100 B) 5700 C) 4845 D) 969 E) 6783

C) 4845

Process X has fixed costs of $10,000 and variable costs of $2.40 per unit. Process Y has fixed costs of $9,000 and variable costs of $2.25 per unit. Which of the following statements is TRUE? A) The crossover point is approximately 6667 units. B) It is impossible for one process to have both of its costs lower than those of another process. C) Process Y is cheaper than process X at all volumes. D) Process X should be selected for very large production volumes. E) Process X is more profitable than process Y and should be selected.

C) Process Y is cheaper than process X at all volumes.

Lag and straddle strategies for increasing capacity have what main advantage over a leading strategy? A) They are cheaper. B) They are more accurate. C) They delay capital expenditure. D) They increase demand. E) All of the above are advantages.

C) They delay capital expenditure.

Product focused processes: A) allow more customization, but are not very efficient. B) are desirable because resource needs increase slowly with the complexity of a process. C) are processes that are specialized for relatively few products or customer groups. D) apply only to service firms, not to manufacturers. E) are profitable because customers demand flexibility, not specialization.

C) are processes that are specialized for relatively few products or customer groups.

Which of the following represents a common way to manage capacity in the service sector? A) appointments B) reservations C) changes in staffing levels D) first-come, first-served service rule E) "early bird" specials in restaurants

C) changes in staffing levels

A product-focused process is commonly used to produce: A) high-volume, high-variety products. B) low-volume, high-variety products. C) high-volume, low-variety products. D) low-variety products at either high- or low-volume. E) high-volume products of either high- or low-variety.

C) high-volume, low-variety products.

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: A) greater than $80,000 but less than $130,000. B) greater than $130,000. C) less than $30,000. D) impossible to calculate, because no interest rate is given. E) impossible to calculate, because variable costs are not known.

C) less than $30,000.

Three of the four types of processes are: A) goods, services, and hybrids. B) manual, automated, and service. C) process focus, repetitive focus, and product focus. D) modular, continuous, and technological. E) input, transformation, and output.

C) process focus, repetitive focus, and product focus.

An assembly line is an example of a: A) product-focused process. B) process-focused process. C) repetitive process. D) line process. E) specialized process.

C) repetitive process

Adding a complementary product to what is currently being produced is a demand management strategy used when: A) demand exceeds capacity. B) capacity exceeds demand for a product that has stable demand. C) the existing product has seasonal or cyclical demand. D) price increases have failed to bring about demand management. E) efficiency exceeds 100 percent.

C) the existing product has seasonal or cyclical demand.

Net present value will be greater: A) as a fixed set of cash receipts occurs later rather than earlier. B) if the future value of a cash flow is smaller. C) for one end-of-year receipt of $1200 than for twelve monthly receipts of $100 each. D) for a 4% discount rate than for a 6% discount rate. E) All of the above are true.

D) for a 4% discount rate than for a 6% discount rate.

Which of the following phrases best describes product focus? A) low volume, high variety B) Finished goods are usually made to order. C) Processes are designed to perform a wide variety of activities. D) high fixed costs, low variable costs E) high inventory

D) high fixed costs, low variable costs

A job shop is an example of a(n): A) repetitive process. B) continuous process. C) line process. D) intermittent process. E) specialized process.

D) intermittent process.

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.

D) the break-even point depends upon the proportion of sales generated by each of the products.

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? A) $1,600,000 B) $720,000 C) $2,000,000 D) $80,000 E) $1,520,000

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? A) $90,000 dollars B) 90,000 units C) $15,000 dollars D) 15,000 units E) 4,286 units

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? A) 4 B) 9 C) 18 D) 35 E) 7

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 effective capacity equals 90% of design capacity. If the number of students who actually got their orientation session is 1500, what is the efficiency of the system? A) 1350 students B) 1710 students C) 78.9% D) 87.7% E) 90%

D) 87.7%

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

D) A and B

Which of the following is FALSE regarding capacity expansion? A) "Average" capacity sometimes leads demand, sometimes lags it. B) If "lagging" capacity is chosen, excess demand can be met with overtime or subcontracting. C) Total cost comparisons are a rather direct method of comparing capacity alternatives. D) Capacity may only be added in large chunks. E) In manufacturing, excess capacity can be used to do more setups, shorten production runs, and drive down inventory costs.

D) Capacity may only be added in large chunks.

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

D) building rental costs

What is sometimes referred to as rated capacity? A) efficiency B) utilization C) effective capacity D) expected output E) design capacity

D) expected output

One of the similarities between process focus and mass-customization is: A) the volume of outputs. B) the use of modules. C) many departments and many routings. D) the variety of outputs. E) All of the above are similarities.

D) the variety of outputs.

The crossover point is that production quantity where: A) variable costs of one process equal the variable costs of another process. B) fixed costs of a process are equal to its variable costs. C) total costs equal total revenues for a process. D) total costs for one process equal total costs for another process. E) the process no longer loses money.

D) total costs for one process equal total costs for another process.

Harley Davidson: A) utilizes job shops to make each of its modules. B) uses product focused manufacturing. C) uses a large number of modules to build a small number of different bikes. D) uses work cells to feed its assembly line. E) All of the above are true.

D) uses work cells to feed its assembly line.

What is a common method used to increase capacity with a lag strategy? A) overtime B) subcontracting C) new facilities D) new machinery E) A and B

E) A and B

Which of the following companies use a mass customization approach? A) Dell B) Align Technology C) Frito-Lay D) Arnold Palmer hospital E) A and B

E) A and B

High fixed costs and low variable costs are typical of which approach? A) product B) process C) mass customization D) repetitive E) A and C

E) A and C

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.

E) All are techniques for dealing with bottlenecks.

A quasi-custom product: A) gets its apparent customization from the combinations available from a small number of modules. B) is often the output of repetitive focus facilities. C) is a valid description of a fast food sandwich. D) only applies in services. E) All but D are true.

E) All but D are true.

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.

E) Bottlenecks should be moved to the end of the system process.

Of the four approaches to capacity expansion, the approach that "straddles" demand: A) uses incremental expansion. B) uses one-step expansion. C) at some times leads demand, and at other times lags. D) works best when demand is not growing but is stable. E) Choices A and C are both correct.

E) Choices A and C are both correct.

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.

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

Net present value: A) is gross domestic product less depreciation. B) is sales volume less sales and excise taxes. C) is profit after taxes. D) ignores the time value of money. E) is the discounted value of a series of future cash receipts.

E) is the discounted value of a series of future cash receipts.

Which of the following industries is most likely to have low equipment utilization? A) auto manufacturing B) commercial baking C) television manufacturing D) steel manufacturing E) restaurants

E) restaurants

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.

E) total revenue equals total cost.

________ is actual output as a percent of effective capacity.

Efficiency

Break-even analysis identifies the volume at which fixed costs and revenue are equal.

False

Break-even analysis is a powerful analytical tool, but is useful only when the organization produces a single product.

False

Capacity decisions are based on technological concerns, not demand forecasts.

False

Harley-Davidson, because it has so many possible combinations of products, utilizes the process strategy of mass customization.

False

Possible decision alternatives found in capacity EMV problems are future demands or market favorability.

False

Substantial research has proved that the only successful method of dealing with bottlenecks is to increase the bottleneck's capacity.

False

The bottleneck time is always at least as long as the throughput time.

False

________ cost is the cost that continues even if no units are produced.

Fixed

________ is a rapid, low-cost production process that caters to constantly changing unique customer desires.

Mass customization

________ is a means of determining the discounted value of a series of future cash receipts.

Net present value or NPV

________ is a process strategy based on a product-oriented production process that uses modules.

Repetitive focus

The term focused processes refers to the quest for increased efficiency, whether in goods or services, that results from specialization.

True

The theory of constraints is a body of knowledge that deals with anything that limits an organization's ability to achieve its goals.

True

________ is the number of units a facility can hold, store, receive, or produce in a period of time.

Throughput or Capacity

A firm's process strategy is its approach to transforming resources into goods and services.

True

A useful tactic for increasing capacity is to redesign a product in order to facilitate more throughput

True

Changes in capacity may lead, lag, or straddle the demand.

True

Design capacity is the theoretical maximum output of a system in a given period under ideal conditions.

True

Expected output is sometimes referred to as rated capacity.

True

Fixed costs are those costs that continue even if no units are produced.

True

In process-focused facilities, utilization of facilities is low.

True

Intermittent processes are organized around processes.

True

One limitation of the net present value approach to investments is that investments with identical net present values may have very different cash flows.

True

Price changes are useful for matching the level of demand to the capacity of a facility.

True

The assembly line is a classic example of a repetitive process.

True

In the service sector, scheduling customers is a type of ________ management, while scheduling the workforce is a type of ________.

demand; capacity

The process strategy that is organized around processes to facilitate low-volume, high-variety processes is called a(n) ________.

process focus