LSU ISDS 3115: Ch. 7 Test Bank

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

True

True/False: Expected output is sometimes referred to as rated capacity.

True

True/False: Fixed costs are those costs that continue even if no units are produced.

True

True/False: Flexible manufacturing systems, because of easily changed control programs, are able to perform such tasks as manufacturing one-of-a-kind parts economically.

True

Which one of the following technologies is used only for material handling, not actual production or assembly? a. robots b. CNC c. CAD d. AGVs e. FMS

d. AGVs

True/False: A decision tree for analyzing capacity would have future demands or market favorability as the decision alternatives.

False

True/False: A decision tree indicates at what quantity profit changes from negative to positive.

False

True/False: A process map with the addition of a time axis becomes a process chart.

False

True/False: Activity times should not be included in a service blueprint.

False

True/False: An example of the postponement strategy for improving service productivity is having the customer wait until you have sufficient time to serve the customer.

False

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

False

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

False

True/False: Building an additional warehouse is an incremental expansion, not a one-step expansion.

False

True/False: Capacity decisions are based on technological concerns, not demand forecasts.

False

True/False: Dell's approach to personal computer manufacturing is to use a product focus, which gives the company its low-cost competitive advantage.

False

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

False

True/False: Process maps use distance, but not time, to show the movement of material, product, or people through a process.

False

True/False: Production technology has had a major impact on services, but as yet there has been little reduction in service labor requirements.

False

True/False: Professional services typically require low levels of labor intensity.

False

True/False: Successful process redesign focuses on departmental areas where small, continuous improvements can be made.

False

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

False

True/False: The typical full-service restaurant uses a product-focused process.

False

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

False

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

True

True/False: A useful tactic for increasing capacity is to redesign a product in order to get more throughput.

True

True/False: A value-stream map includes both (1) inventory quantities, and (2) symbols for customers and suppliers.

True

True/False: Automated storage and retrieval systems are commonly used in distribution facilities of retailers.

True

True/False: Changes in capacity may lead, lag, or straddle the demand.

True

True/False: In process-focused facilities, equipment utilization is low.

True

True/False: In selecting new equipment and technology, decision-makers look for flexibility—the ability to respond with little penalty in time, cost, or customer value.

True

True/False: Intermittent processes are organized around processes.

True

True/False: One essential ingredient of mass customization is modular design.

True

True/False: 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

True/False: One use of camera-and-computer-based vision systems is to replace humans doing tedious and error-prone visual inspection activities.

True

True/False: Optical checkout scanners and ATMs are examples of technology's impact on services.

True

True/False: Price changes are useful for matching the level of demand to the capacity of a facility.

True

True/False: Process control is the use of information technology to monitor and control a physical process.

True

True/False: Processes can be environmentally friendly and socially responsible while still contributing to profitable strategies.

True

True/False: Service blueprinting is a process analysis technique that focuses on the customer and the provider's interaction with the customer.

True

True/False: The assembly line is a classic example of a repetitive process.

True

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

True

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

True

True/False: Time-function mapping is a flow diagram with time added to the horizontal axis.

True

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 approximately a. $20,920 b. $26,160 c. $49,840 d. $70,920 e. $106,990

a. $20,920

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. The weighted contribution of this product is approximately a. 0.133 b. 0.200 c. 0.40 d. 0.667 e. $1.667

a. 0.133

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. The crossover point between process A and process B is a. 50 units b. 200 units c. $2,500 d. $5,000 e. $9,500

a. 50 units

If demand exceeds capacity at a new facility, an organization can use which of the following to move demand to an existing facility? a. aggressive marketing b. lower prices at all facilities c. build a facility of the correct size d. add a complementary product e. reduce lead times

a. aggressive marketing

Computer-integrated manufacturing (CIM) includes manufacturing systems that have a. computer-aided design, a flexible manufacturing system, inventory control, warehousing and shipping integrated b. transaction processing, management information systems, and decision support systems integrated c. automated guided vehicles, robots, and process control d. robots, automated guided vehicles, and transfer equipment e. all of the above

a. computer-aided design, a flexible manufacturing system, inventory control, warehousing and shipping integrated

A drawing of the movement of material, product, or people is a a. flow diagram b. process chart c. service blueprint d. process map e. none of the above

a. flow diagram

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 build a smaller facility c. is suffering from diseconomies of scale d. has utilization higher than efficiency e. has efficiency higher than utilization

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

Which of the following is not one of the essential ingredients for mass customization? a. high machine utilizations b. personnel and facility flexibility c. reliance on modular design d. rapid throughput e. very effective scheduling

a. high machine utilizations

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. inexpensive rates for weekend phone calls b. appointments c. reservations d. first-come, first-served e. none of the above

a. inexpensive rates for weekend phone calls

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 modestly skilled d. high fixed costs, low variable costs e. raw material inventories are high relative to the value of the product

a. low volume, high variety

The use of information technology to monitor and control a physical process is known as a. process control b. computer-aided design c. information numeric control d. numeric control e. none of the above

a. process control

Strategies for improving productivity in services are a. separation, self-service, automation, and scheduling b. lean production, strategy-driven investments, automation, and process focus c. reduce inventory, reduce waste, reduce inspection, and reduce rework d. high interaction, mass customization, service factory, and just-in-time e. none of the above

a. separation, self-service, automation, and scheduling

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 in 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 statements regarding Dell Computer is false? a. Dell is a practitioner of the mass customization process. b. Dell builds its computers overseas in order to gain a low-cost advantage. c. Dell keeps very little inventory of finished goods. d. Dell utilizes a global supply chain, but assembles its computers in the U.S. e. Dell's research focuses on manufacturing issues, not computer part design.

b. Dell builds its computers overseas in order to gain a low-cost advantage.

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. It is too expensive when volumes are low or flexibility is required. d. It is widely used for the manufacture of steel. e. Its costs are often known only after a job is done.

b. Its output is a standardized product produced from modules.

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

Standard Register a. has dozens of U.S. plants in its Forms Division b. groups people and machines into departments that perform specific activities c. utilizes a product strategy to keep production volume high d. obtains its low-cost advantage by not spending money on CAD systems e. obtains its low-cost advantage by specializing in a relatively small number of products

b. groups people and machines into departments that perform specific activities

Which one of the following products is most likely made in a job shop environment? a. a daily newspaper 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

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

Fred's Fabrication, Inc. wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $70,000. The variable cost for A is $9.00 per unit and for B, $14.00. The revenue generated by the units processed on these machines is $20 per unit. The crossover between machine A and machine B is a. 4,000 units, with A more profitable at low volumes b. 4,000 dollars, with A more profitable at low volumes c. 4,000 units, with B more profitable at low volumes d. 4,000 dollars, with B more profitable at low volumes e. none of the above

c. 4,000 units, with B more profitable at low volumes

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

Which of the following statements regarding ethical and environmentally friendly processes is true? a. Operations managers can be environmentally sensitive, but they must avoid following a low cost strategy. b. Processes can be environmentally friendly or socially responsible, but not both. c. Operations managers can be environmentally sensitive and still follow a low cost strategy. d. Using energy-efficient lighting saves so little that it should not be labeled environmentally friendly. e. The only business strategy consistent with ethical and environmentally sensitive management is the differentiation strategy.

c. Operations managers can be environmentally sensitive and still follow a low cost strategy.

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; there is no crossover point. 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; there is no crossover point.

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

Making environmentally sound products through efficient processes a. is unprofitable, as long as recyclable materials prices are soft b. is known as lean manufacturing c. can still be profitable d. is easier for repetitive processes than for product-focused processes e. none of the above

c. can still be profitable

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 system using an automated work cell controlled by electronic signals from a common centralized computer facility is called a(n) a. adaptive control system b. robotics c. flexible manufacturing system d. automatic guided vehicle (AGV) system e. manufacturing cell

c. flexible manufacturing system

"Operators simply load new programs, as necessary, to produce different products" describes a. CAD b. automated guided vehicles c. flexible manufacturing systems d. vision systems e. process control

c. flexible manufacturing systems

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 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 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

Which of the following transformations generally has the highest equipment utilization? a. process-focused process b. repetitive process c. product-focused process d. specialized process e. modular process

c. product-focused process

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

When decision trees are used to analyze capacity decisions, a. "do nothing" is not a possible decision alternative b. probabilities must be assigned to each of the decision alternatives c. states of nature are often demand-based, as in "market favorability" d. states of nature must be known with certainty e. fixed costs are not relevant

c. states of nature are often demand-based, as in "market favorability"

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 which 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

One fundamental difference between a process chart and a process map is that a. the process chart uses a time dimension while a process map is not time-oriented b. the process chart includes the supply chain, while the process map stays within an organization c. the process chart is more like a table, while the process map is more like a schematic diagram d. the process chart focuses on the customer and on the provider's interaction with the customer, while the process map does not deal directly with the customer e. None of these is true, because a process chart and a process map are the same thing.

c. the process chart is more like a table, while the process map is more like a schematic diagram

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. The break-even point for machine A is a. $90,000 dollars b. 90,000 units c. $15,000 dollars d. 15,000 units e. cannot be calculated from the information provided

d. 15,000 units

The Academic Computing Center has five trainers available in its computer labs to provide training sessions to students. Assume that the capacity of the system is 1900 students per semester and the utilization is 90%. 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. 75% d. 87.7% e. 90%

d. 87.7%

"Automatic placement and withdrawal of parts and products into and from designated places in a warehouse" describes a. AGV b. CAD/CAM c. CIM d. ASRS e. FMS

d. ASRS

Which of the following is true regarding the concept of flexibility? a. It is the ability to change production rates with little penalty in time, cost, or customer value. b. It can be accomplished with sophisticated electronic equipment. c. It may involve modular, movable, even cheap equipment. d. All of the above are true. e. None of the above is true.

d. All of the above are true.

Which of the following is true regarding vision systems? a. They are consistently accurate. b. They are modest in cost. c. They do not become bored. d. All of the above are true. e. None of the above is true.

d. All of the above are true.

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. All of the above are true.

d. Capacity may only be added in large chunks.

Which of the following technologies would enable a cashier to scan the entire contents of a shopping cart in seconds? a. ASRS b. AGV c. CAD/CAM d. RFID e. FMS

d. RFID

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

Utilization in process-oriented facilities is frequently low because a. the postponement strategy for improving service productivity is being used b. scheduling in process-oriented facilities is not very complex c. with high fixed costs, utilization is not very important d. excess capacity for peak demands is desirable e. low raw material inventories cause machines to be idled

d. excess capacity for peak demands is desirable

What is sometimes referred to as rated capacity? a. efficiency b. utilization c. effective capacity d. expected output e. design capacity

d. expected output

Service blueprinting a. provides the basis to negotiate prices with suppliers b. mimics the way people communicate c. determines the best time for each step in the process d. focuses on the provider's interaction with the customer e. can only be successful with two-dimensional processes

d. focuses on the provider's interaction with the customer

Net present value will be greater a. as a fixed set of cash receipts occurs later rather than earlier b. as the total of the cash receipts, made in same time periods, 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

Advances in technology a. have impacted the manufacturing sector only b. have had only limited impact on services c. have failed to change the level of customer interaction with an organization d. have had dramatic impact on customer interaction with services and with products e. have dramatically changed health care, but have not changed retailing

d. have had dramatic impact on customer interaction with services and with products

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. raw material inventories are low relative to the value of the product

d. high fixed costs, low variable costs

In mass service and professional service, the operations manager should focus on a. automation b. equipment maintenance c. sophisticated scheduling d. human resources e. all of the above

d. human resources

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

A fabrication company wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $75,000. The variable cost for A is $15.00 per unit and for B, $18.00. The revenue generated by the units processed on these machines is $21 per unit. If the estimated output is 5000 units, which machine should be purchased? a. machine A b. machine B c. either machine A or machine B d. no purchase because neither machine yields a profit at that volume e. purchase both machines since they are both profitable

d. no purchase because neither machine yields a profit at that volume

A shop wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $75,000. The variable cost for A is $15.00 per unit and for B, $18.00. The revenue generated by the units processed on these machines is $22 per unit. If the estimated output is 9,000 units, which machine should be purchased? a. machine A b. machine B c. either machine A or machine B d. no purchase because neither machine yields a profit at that volume e. purchase both machines since they are both profitable

d. no purchase because neither machine yields a profit at that volume

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

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

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. is only possible when the focus strategy of service productivity improvement is in use e. All but d are true.

e. All but d are true.

An organization's process strategy a. will have long-run impact on efficiency and flexibility of production b. is the same as its transformation strategy c. must meet various constraints, including cost d. is concerned with how resources are transformed into goods and services e. All of the above are true.

e. All of the above are true.

Value Stream Mapping a. is a variation on time function mapping b. examines the supply chain to determine where value is added c. extends time function mapping back to the supplier d. starts with the customer and works backwards e. All of the above are true.

e. All of the above are true.

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.

Which of the following is true regarding opportunities to improve service processes? a. Automation can do little to improve service processes, because services are so personal. b. Layout is of little consequence, since services seldom use an assembly line. c. If a work force is strongly committed, it need not be cross-trained and flexible. d. All of the above are true. e. None of the above is true.

e. None of the above is true.

Ethical and environmentally friendly processes include which of the following? a. emission controls b. recycling c. efficient use of resources d. reduction of waste by-products e. all of the above

e. all of the above

Flexibility can be achieved with a. movable equipment b. inexpensive equipment c. sophisticated electronic equipment d. modular equipment e. all of the above

e. all of the above

Process redesign a. is the fundamental rethinking of business processes b. can focus on any process c. tries to bring about dramatic improvements in performance d. focuses on activities that cross functional lines e. all of the above

e. all of the above

When done correctly, mass customization a. increases pressure on supply chain performance b. helps eliminate the guesswork that comes with sales forecasting c. drives down inventories d. increases pressure on scheduling e. all of the above

e. all of the above

Which of the following are typical of process control systems? a. They have sensors. b. The digitized data are analyzed by computer, which generates feedback. c. Their sensors take measurements on a periodic basis. d. The sensors' measurements are digitized. e. all of the above

e. all of the above

Which of the following products is likely to be assembled on a repetitive process line? a. automobiles b. personal computers c. dishwashers d. television sets e. all of the above

e. all of the above

In mass service and service factory quadrants of the service process matrix, the operations manager could focus on all of the following except a. automation b. standardization c. tight quality control d. removing some services e. customization

e. customization

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 is not one of the four approaches to capacity expansion? a. average capacity with incremental expansion b. lead demand with incremental expansion c. lag demand with incremental expansion d. lead demand with one-step expansion e. lag demand with one-step expansion

e. lag demand with one-step expansion

Which of the following industries is likely to have low equipment utilization? a. auto manufacturing b. commercial baking c. television manufacturing d. chemical processing 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