OMIS 430 quiz 5

Which of the following is not a reason for economies of scale?

Decision making becomes easier as output rates increase.

Which of the following describes a leading capacity strategy?

It builds capacity in anticipation of future demand increases.

With cost-volume analysis, what is the assumption regarding variable cost per unit?

It is the same regardless of volume

Which of the following are correct formulas for profit?

P = (R-v)Q - FC P = RQ - (FC + vQ)

Which of the following is the correct formula for the break-even point?

Q=FC/R−v

In which of the following cases can the emphasis on efficiency, over utilization, be misleading?

When the effective capacity is low compared to design capacity

A bottleneck operation os the step whose ___ is ____ than that of other steps in the sequence of operations

capacity, lower

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

Two important terms in financial analysis are _______ flow and _________ value.

cash; present

Effective capacity is the _______ capacity ______ allowances such as maintenance.

design ; minus

Utilization is the ratio of actual output to _________ capacity. It is expressed as a _________.

design, percent

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

With _____, increasing the output rate results in decreasing the average unit cost, if the output rate is less than the optimal rate.

economies of scale

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

Increasing _______allows the firm to be more responsive to changing market conditions.

flexibility

When two competing alternatives are equivalent in a cost-volume analysis, a decision-maker has reached a(n) ______.

indifference point

The three primary capacity strategies are

leading, following, and tracking

Effective capacity is always ______ design capacity.

less than

A constraint _________ the performance of a system in achieving its

limits: goals

A constraint ___________ the performance of a system in achieving its _________.

limits; goal

Design capacity is the _________ output rate a process is _______ for.

maximum; designed

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

Capacity often refers to an upper limit on the ______.

rate of output

Place the following steps in the capacity planning process in the correct order.

read the book

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

A common approach by managers in determining how to allocate scarce funds is to rank investment proposals by taking into account ______.

time value of money

Capacity requirements are often closely linked to the stage of the life cycle that a product or service is in.

true

True or false: In evaluating capacity alternatives, both financial and qualitative analyses must be performed.

true

A hotel room illustrates several of the challenges associated with planning service capacity. Which of the following illustrate these?

-An empty hotel room cannot be stored for future use. -There is high demand during certain times of the year. -A hotel room must be in a location a customer would like to st

Which of the following statements accurately reflect the (strategic) importance of capacity decisions?

-Capacity decisions affect operating costs. -Capacity decisions impact how well a firm can meet its demand. -Capacity decisions can affect competitiveness.

Which of the following are ways to enhance the development of capacity strategies?

-Consider the overall impact on the system and environment. -Decide whether to use a following or leading strategy.

Which of the following are ways to enhance the development of capacity strategies?

-Decide whether to use a following or leading strategy. -Consider the overall impact on the system and environment.

Which of the following are points for consideration when deciding whether to outsource or produce in-house?

-Demand patterns. -The level of expertise available in-house. -The fixed costs.

Which of the following are the key questions to be answered when making capacity planning decisions?

-How much capacity is needed? -What kind of capacity is needed? -When is the capacity needed?

Which of the following factors are probable reasons for actual output being less than the effective capacity?

-Machine breakdowns -Employee absenteeism -Inventory shortages

Which of the following are ways to enhance the development of capacity strategies?

-Make provisions for possible future expansion. -Consider which life cycle stage the product is in. -Take into account the acquisition of capacity chunks.

Which of the following are assumptions for cost-volume analysis?

-Per unit revenue exceeds per unit variable cost. -There is only one product. -The variable cost per unit does not change.

Which of the following situations causes a misjudgment of a firm's capacity requirements?

-Predictions focus mainly on the potential revenue that will be earned -Marketing personnel are overly optimistic in their predictions

Long-term capacity alternatives include which of the following?

-Relocating existing operations -Expanding an existing facility -Opening branch facilities -Contracting an existing facility -Closing branch facilities

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 improvements will typically increase capacity?

-Standardizing output -Increasing productivity -Reducing changeover times

Which of the following are points for consideration when deciding whether to outsource or produce in-house?

-The nature of demand -The level of quality available/desired -The available capacity

Which of the following are assumptions for cost-volume analysis?

-There is only one product. -The variable cost per unit does not change. -Per unit revenue exceeds per unit variable cost.

Which of the following are additional questions that should be asked in making capacity planning decisions, beyond the initial key questions?

-What are the potential risks? -Should capacity be changed all at once? -How much will it cost?

Which of the following are not the key questions to be answered when making capacity planning decisions?

-Why is the capacity needed? -From whom should we purchase the capacity?

In the context of forecasting capacity requirements, identify some of the basic demand patterns.

-cyclical -stable

Place the following steps for resolving constraint issues in order:

1. Identify the most pressing constraint. If it cannot be easily overcome, go to the next step.2. Change the operation to achieve maximum benefit, given the constraint. 3. Make sure all other parts of the process support the constraint. 4. Explore and evaluate alternatives for overcoming the constrain. 5. Repeat until the level of constraints is acceptable.

Which of the following are assumptions of cost-volume analysis?

=Everything produced can be sold. =The variable cost per unit is the same regardless of the volume. =The revenue per unit is the same regardless of volume. -Revenue per unit exceeds variable cost per unit.

Which of the following is not a reason that makes service capacity more difficult to plan than manufacturing capacity?

Amount of inventory required.

_____ is the quantity at which two competing alternatives are equivalent.

An indifference point

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 is not a reason for diseconomies of scale?

Construction costs increase more quickly as the facility size increases.

Improving which of the following aspects of a firm's operations can increase its capacity?

Efficiency Utilization Bottleneck management

Which of the following is the correct formula for utilization?

Utilization = (Actual output/Designcapacity) x 100%

Which of the following are not the key questions to be answered when making capacity planning decisions?

Why is the capacity needed? From whom should we purchase the capacity?

The volume at which total cost and total revenue are equal is referred to as the ______.

break-even point

A capacity cushion is _________ minus __________ demand. It is used when there is ______________ about future demand.

capacity ; expected ; uncertainty

The amount of capacity in excess of expected demand, given uncertainty about expected demand, is an organization's ______.

capacity cushion