OSCM: Connect Ch 5

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

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

Q = FC / (R-v)

A capacity cushion is _______ minus _______ demand. It is used when there is uncertainty about future demand.

capacity; expected

A bottleneck operation is the step whose _________ is _________ than that of other steps in the sequence of operations.

capacity; lower

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

cyclical stable

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

Design capacity minus allowances such as personal time and maintenance is known as _____.

effective capacity

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

Effective capacity is always ______ design capacity.

less than

It is an assumption of cost-volume analysis that a comparison of capacity alternatives is made on _______.

one product

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

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. Multiple choice question.

systems

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 stay.

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 can affect competitiveness. - Capacity decisions affect operating costs.

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

- Consider which life cycle stage the product is in. - Make provisions for possible future expansion. - Take into account the acquisition of capacity chunks. - 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 fixed costs. - The level of expertise available in-house. - The available capacity - The nature of demand - The level of quality available/desired

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

- Efficiency - Utilization - Bottleneck management

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

- Employee absenteeism - Inventory shortages - Machine breakdowns

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 improvements will typically increase capacity?

- Increasing productivity - Standardizing output - Reducing changeover times

Long-term capacity alternatives include which of the following?

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

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

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

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

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 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 the key questions to be answered when making capacity planning decisions?

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

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?

________ 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.

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

True or false: 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

Which of the following is the correct formula for utilization?

Utilization = (Actual output / Design capacity) x 100%

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

break-even point

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

capacity cushion