Chapter 5 Learnsmart
When an organization faces seasonal variations in demand, which approach is most appropriate in making decisions about changing capacity?
Attempt to smooth out capacity requirements.
Which of the following are not the key questions to be answered when making capacity planning decisions?
From whom should we purchase the capacity Why is the capacity needed?
Place the following steps for resolving constraint issues in order:
Identify the most pressing constraint. If it cannot be easily overcome, go to the next step. Change the operation to achieve maximum benefit, given the constraint. Make sure all other parts of the process support the constraint. Explore and evaluate alternatives for overcoming the constraint. Repeat until the level of constraints is acceptable.
Which of the following situations causes a misjudgment of a firm's capacity requirements?
Marketing personnel are overly optimistic in their predictions Predictions focus mainly on the potential revenue that will be earned
The biggest risk in not taking a systems approach to capacity is that the system will be unbalanced due to a ______.
bottleneck operation
The volume at which total cost and total revenue are equal is referred to as the ______.
break-even point
True or false: In evaluating capacity alternatives, both financial and qualitative analyses must be performed.
true
The amount of capacity in excess of expected demand, given uncertainty about expected demand, is an organization's ______.
capacity cushion
A capacity cushion is ___ minus ____ demand. It is used when there is an uncertainty about future demand.
capacity, expected
The difference between the cash received from sales and other sources and the cash outflow for labor, materials, overhead, and taxes is known as _____.
cash flow
Long-term capacity planning decisions relate to ______ of capacity.
overall level
Process improvements, batch production, and time to change equipment settings are ______ factors that influence effective capacity.
process
Uniformity of output is a ______ factor in determining effective capacity.
product and service
In the context of forecasting capacity requirements, identify some of the basic demand patterns.
stable, cyclical
Before increasing capacity, it is important to make sure an organization's ____ ____ can handle the ramp up.
supply chain
The big-picture approach to capacity changes is also called the ______ approach.
systems
True or false: Globalization simplifies capacity decisions because there are more, cheaper options.
False
True or false: The more uniform production output is, the less effective capacity the operation has.
False
With cost-volume analysis, what is the assumption regarding variable cost per unit?
It is the same regardless of volume
Which of the following is the correct formula for the break-even point?
Q= FC/ R-v
Which of the following improvements will typically increase capacity?
Standardizing output Reducing changeover times Increasing productivity
A hotel room illustrates several of the challenges associated with planning service capacity. Which of the following illustrate these?
There is high demand during certain times of the year. An empty hotel room cannot be stored for future use. A hotel room must be in a location a customer would like to stay.
Increasing ____ allows the firm to be more responsive to changing market conditions
flexibility
Which of the following factors are probable reasons for actual output being less than the effective capacity?
Inventory shortages Employee absenteeism Machine breakdowns
True or false: Capacity requirements are often closely linked to the stage of the life cycle that a product or service is in.
True
Improving which of the following aspects of a firm's operations can increase its capacity?
Utilization Bottleneck management Efficiency
Which of the following are the key questions to be answered when making capacity planning decisions?
When is the capacity needed? What kind of capacity is needed? How much capacity is needed?
Which of the following is not a reason for diseconomies of scale?
Construction costs increase more quickly as the facility size increases.
_____ is the quantity at which two competing alternatives are equivalent.
An indifference point
Which of the following statements accurately reflect the (strategic) importance of capacity decisions?
Capacity decisions impact how well a firm can meet its demand. Capacity decisions affect operating costs. Capacity decisions can affect competitiveness.
Which of the following are ways to enhance the development of capacity strategies?
Consider which life cycle stage the product is in. Take into account the acquisition of capacity chunks. Make provisions for possible future expansion. Consider the overall impact on the system and environment. Decide whether to use a following or leading strategy.
Place the following steps in the capacity planning process in the correct order.
Estimate future capacity requirements. Evaluate existing capacity and identify gaps. Identify alternatives for meeting requirements. Conduct financial analyses of each alternative. Assess key qualitative issues for each alternative. Select, implement, and monitor the best alternative to pursue.
Which of the following statements about variability in capacity planning/forecasting is/are true?
Service systems have considerable variability in service requests, making capacity planning challenging. Service systems have considerable variability in service time, making capacity planning challenging.
Which of the following are points for consideration when deciding whether to outsource or produce in-house?
The level of expertise available in-house. Demand patterns. The fixed costs. The nature of demand The available capacity The level of quality available/desired
Which of the following is the correct formula for utilization?
actual output/ design capacity x 100%
Which of the following is the correct formula for efficiency?
actual output/ effective capacity X 100%
With _____, increasing the output rate results in increasing the average unit cost, if the output rate is more than the optimal rate.
diseconomies of scale
Design capacity minus allowances such as personal time and maintenance is known as _____.
effective capacity
Effective capacity is always ______ design capacity.
less than
A constraint ____ the performance of a system in achieving its _____
limits, goals
Design capacity is the ____output rate a process is ____ for.
maximum, designed
Long-term capacity alternatives include which of the following?
Expanding an existing facility Opening branch facilities Contracting an existing facility Closing branch facilities Relocating existing operations
Which of the following describes a tracking capacity strategy?
It adds capacity incrementally to keep pace with increasing demand.
Which of the following describes a following capacity strategy?
It builds capacity when demand exceeds current capacity.
Which of the following are correct formulas for profit?
P = RQ - (FC + vQ) P = (R-v)Q - FC
Which of the following are additional questions that should be asked in making capacity planning decisions, beyond the initial key questions?
Should capacity be changed all at once? What are the potential risks? How much will it cost?
Which of the following are assumptions for cost-volume analysis?
The variable cost per unit does not change. Per unit revenue exceeds per unit variable cost. There is only one product. Everything produced can be sold. The variable cost per unit is the same regardless of the volume. Revenue per unit exceeds variable cost per unit. The revenue per unit is the same regardless of volume.
Two important terms in financial analysis are ____ flow and ____ value
cash, present
When two competing alternatives are equivalent in a cost-volume analysis, a decision-maker has reached a(n) ______.
indifference point
It is an assumption of cost-volume analysis that a comparison of capacity alternatives is made on _______.
one product
Capacity often refers to an upper limit on the ______.
rate of output
