supp 7 quiz

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? $1,600,000 $720,000 $2,000,000 $80,000 $1,520,000

$80,000

A tortilla chip workstation produces 1,000 chips in 20 seconds. What is its bottleneck time? .02 seconds per chip 50 chips per second 20 seconds 6000 chips per minute 20,000 seconds

.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? 0.133 0.200 0.40 0.667 $1.667

0.133

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? $90,000 dollars 90,000 units $15,000 dollars 15,000 units 4,286 units

15,000 units

An assembly line has 10 stations with times of 1, 2, 3, 4, , 10, respectively. What is the bottleneck time? 18.18% of the throughput time 100% of the throughput time 550% of the throughput time 50% of the throughput time 1.82% of the throughput time

18.18% of the throughput time

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? 4 9 18 35 7

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? 1350 students 1710 students 78.9% 87.7% 90%

87.7%

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 ________. 79.2 percent; 90.5 percent 90.5 percent; 79.2 percent 87.5 percent; 950 employees 950 employees; 1050 employees 110.5 percent; 114.3 percent

90.5 percent; 79.2 percent

Which of the following techniques is NOT a technique for dealing with a bottleneck? 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. All are techniques for dealing with bottlenecks.

All are techniques for dealing with bottlenecks.

Which of the following is not one of the four principles of bottleneck management? Release work orders to the system at the bottleneck's capacity pace. Lost time at the bottleneck is lost system capacity. Increasing capacity at non-bottleneck stations is a mirage. Increased bottleneck capacity is increased system capacity. Bottlenecks should be moved to the end of the system process.

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

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

Capacity may only be added in large chunks.

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

Choices uses incremental expansion and at some times leads demand, and at other times lags are both correct.

The theory of constraints has its origins in: linear programming theory. the theory of economies of scale. material requirements planning. the theory of finite capacity planning. Goldratt and Cox's book, The Goal: A Process of Ongoing Improvement.

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

TOC was popularized by: Goldratt and Cox. Ford. Taguchi. Deming. Motorola and GE.

Goldratt and Cox.

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? Station 1 Station 2 Station 3 Station 4 Station 5

Station 2

Lag and straddle strategies for increasing capacity have what main advantage over a leading strategy? They are cheaper. They are more accurate. They delay capital expenditure. They increase demand. All of these are advantages.

They delay capital expenditure.

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

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

Which of the following costs would be incurred even if no units were produced? raw material costs direct labor costs transportation costs building rental costs purchasing costs

building rental costs

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

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

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

changes in staffing levels

In "drum, buffer, rope," what provides the schedule, i.e. the pace of production? drum buffer rope all three of these in combination None of these

drum

Utilization will always be lower than efficiency because: effective capacity is less than design capacity. effective capacity is greater than design capacity. effective capacity equals design capacity. expected output is less than actual output. expected output is less than rated capacity

effective capacity is less than design capacity.

What is sometimes referred to as rated capacity? efficiency utilization effective capacity expected output design capacity

expected output

An organization whose capacity is on that portion of the average unit cost curve that falls as output rises: has a facility that is below optimum operating level and should build a larger facility. has a facility that is above optimum operating level and should reduce facility size. is suffering from diseconomies of scale. has utilization higher than efficiency. has expected output higher than rated capacity.

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? lower resort hotel room prices on Wednesdays appointments reservations first-come, first-served rule None of these

lower resort hotel room prices on Wednesdays

TOC strives to reduce the effect of constraints by: offloading work from constrained workstations. increasing constrained workstation capability. changing workstation order to reduce throughput time. offloading work from constrained workstations and increasing constrained workstation capability offloading work from constrained workstations, increasing constrained workstation capability, and changing workstation order to reduce throughput time

offloading work from constrained workstations and increasing constrained workstation capability

What is a common method used to increase capacity with a lag strategy? overtime subcontracting new facilities new machinery overtime and subcontracting

overtime and subcontracting

The basic break-even model can be modified to handle more than one product. This extension of the basic model requires: price and sales volume for each product. price and variable cost for each product, and the percent of sales that each product represents. that the firm have very low fixed costs. that the ratio of variable cost to price be the same for all products. sales volume for each product.

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

Break-even analysis can be used by a firm that produces more than one product, but: the results are estimates, not exact values. the firm must allocate some fixed cost to each of the products. each product has its own break-even point. the break-even point depends upon the proportion of sales generated by each of the products. None of these statements is true.

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

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

the existing product has seasonal or cyclical demand.

Break-even is the number of units at which: total revenue equals price times quantity. total revenue equals total variable cost. total revenue equals total fixed cost. total profit equals total cost. total revenue equals total cost.

total revenue equals total cost.

Basic break-even analysis typically assumes that: revenues increase in direct proportion to the volume of production, while costs increase at a decreasing rate as production volume increases. variable costs and revenues increase in direct proportion to the volume of production. both costs and revenues are made up of fixed and variable portions. 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. All of these are assumptions in the basic break-even model.

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