Capsim Exam

Before you schedule a production order, you should...

consider your left over inventory from last year

Issuing dividends

Giving money to shareholders per share each year. This slightly helps increase your stock price when you have excess cash

What is reliability?

How long the product will last. The more reliable, the more it costs to produce

What is age?

How old customers perceive your product to be

When should you consider borrowing money so you don't have to receive an emergency loan?

If your projected December 31 cash position is negative or close to zero

When a product's positioning (Performance/Size) is updated, what happens to the product's age?

It cuts in half

What is an emergency loan?

It is a one-year bailout loan from an emergency lender. It comes with a very high interest rate

What happens to the age of a new product?

It will have an age of 0 on its release date

What happens to high tech products if you update them every year?

Keeps positioning on the cutting edge and product's age closer to 0

What customer segment(s) does your company sell your product to?

Low tech and high tech

What is one of the most important decisions marketing makes?

Sales forecasting

Why is Production after Adjustment slightly lower than Production Schedule?

Some units will have defects and will be thrown out

What is it called when you run out of units to sell during the year?

Stock out

What does it mean to issue stock?

To sell shares common stock to the public

You can produce ________ your capacity by running a full ________

Twice ; second shift

What is key to sales forecasting?

applying the growth rate to last year's sales

How is capacity in the production interface represented?

the number of units that can be produced in one shift (although, the sensor industry uses plants with two shifts)

What does it mean to borrow current debt?

they are one-year loans that are paid off January 1 next year

What is the "best case" scenario for production?

using 12 months as a baseline, and ordering an extra month or two worth of inventory

If your revision does not complete until next year...

you will not be able to make updates next year

How much more inventory should you produce than your forecast?

10%

What three options do you have if you have excess cash?

Retire Bonds, Retire Stock, and Issue Dividends to Shareholders

What is Contribution Margin defined as in the simulation?

Sales - Variable Costs

Two of the scoring methods you are measured on in the simulation

Sales and contribution margin

After your company purchases capacity, how much time does it take to be able to use the added capacity?

1 year

What two things should you consider when purchasing capacity?

1. Capacity purchases take a year to implement. In other words, if you buy capacity this year, you won't be able to use it until next year 2. Adding capacity is quite expensive. Don't purchase more than you will need during the next year or two, as it is costly to have idle capacity in a factory not being properly utilized

What does it mean to borrow long-term debt?

Bond issues that are due in 10 years

What are the three ways to raise capital in finance?

Borrowing current debt, issuing stock, and borrowing long-term debt

Retiring stock

Buying back shares of common stock from the public. This reduces the number of shares outstanding, but this is best reserved when you have excess cash

What does promo budget determine?

Customer Awareness, and your Sales Budget determines Customer Accessibility

Retiring long-term debt

Paying back bonds early prior to their 10-year due dates. This helps reduce interest payments, but is typically best used in later rounds

What decisions are made in the R&D department?

Performance, size, and reliability

Two expectations customers have that are part of the Customer Buying Criteria

Positioning and price

What is the least important feature for low tech customers?

Positioning. Not updating your product each year will allow the product to age towards their preference (3 years).

What is a low tech customer's top priority when purchasing a product?

Price

What decisions are made in the marketing department?

Price, forecast, and sales budget

What department decisions are key to executing your plan?

R&D

What could a high reliability do if you're trying to keep prices low?

hurt your Contribution Margin

Positioning is comprised of a product's...

performance and size