Deck 10: Capacity Planning

Question 1

Diseconomies of scale mean that inefficiencies occur when an organization gets too big.

Answer 1

True

Question 2

Experience curves generally display a linear relationship between labor and quantity produced.

Answer 2

False

Question 3

Capacity management is a strategic long-term business decision.

Answer 3

True

Question 4

Low utilization suggests that equipment is being underused.

Question 5

Capacity is only measured in terms of output.

Question 6

Capacity measures must be tailored to fit specific situations.

Question 7

Output measures are generally employed to assess processes that have a high degree of customization.

Question 8

The decision to outsource is seldom part of a capacity decision-making process.

Question 9

Meals served would not be an appropriate measure of capacity for a restaurant.

Question 10

Capacity only has to do with building square footage.

Question 11

The effective capacity can be maintained for an extended period of time.

Question 12

The more variation a company has in demand,the easier it is to determine the capacity requirement of a facility.

Question 13

Capacity decisions are relevant to supply chains and individual companies.

Question 14

Utilization is based on average capacity.

Question 15

Uncertain demand requires cushion capacity.

Question 16

For machines,the peak capacity is also known as the rated capacity.

Question 17

A wait-and-see capacity strategy is most appropriate in a fast-growing industry that does not require major facilities.

Question 18

Capacity decisions only have to do with expansion and not with shrinking capacity.

Question 19

Economies of scale suggest that products will have a lower per unit cost.

Question 20

Experience curves express an inverse relationship between labor and the quantity produced.

Question 21

How does economy of scale result in an increase in effective capacity?

A)Because more time will be spent processing instead of setting up
B)Because setup time will be increased
C)Because quantity discounts will be less
D)Because average inventory levels are decreased
E)Because fewer managers are needed

Question 22

Which of the following is not a measure of capacity?

A)Number of meals served in a restaurant
B)Visitors per day at a zoo
C)Number of packages delivered per day
D)Chairs made per day
E)Demand for services provided

Question 23

Capacity strategies refer to all of the following aspects of capacity management except

A)Timing of expansion
B)Timing of contraction
C)Sizing of facilities
D)Linkage with business plans
E)Economies of scale

Question 24

A capacity gap is the difference between projected demand and current capacity.

Question 25

Incorporating flexibility into a design is a way to vary capacity.

Question 26

Utilization is the ratio of what variable to effective/peak capacity?

A)Average output
B)Minimum output
C)Maximum output
D)Desired output
E)Weekly output

Question 27

Revenue management focuses on maximizing revenue rather than simply maximizing utilization.

Question 28

Capacity decisions have to do with all the following except

A)Equipment
B)Workers
C)Space
D)Financing
E)All of these options

Question 29

In services,capacity must be available when the customer wants the service.

Question 30

Yield management attempts to reshape the demand curve.

Question 31

An experience curve displays the relationship between total direct labor per unit and

A)Annual quantity of products produced
B)Average quantity of products produced
C)Cumulative quantity of products produced
D)Years of worker experience
E)Difficulty of product design

Question 32

Because services have much more volatile demand than manufactured products,capacity planning must look at the averages instead of peak periods.

Question 33

The variability of demand will determine the amount of capacity cushion that is required.

Question 34

A bottleneck is the step in a process that has the longest cycle time.

Question 35

The maximum output rate a process can achieve in the short-term under ideal conditions refers to

A)Effective capacity
B)Peak capacity
C)Average capacity
D)Minimum capacity
E)Economic capacity

Question 36

In a typical experience curve,the time per unit for the first 100 to 200 units

A)Increases slowly
B)Increases rapidly
C)Decreases slowly
D)Decreases rapidly
E)Remains constant

Question 37

Using input measures to assess capacity is more common when

A)A business has customized products
B)A business has standardized products
C)A business has standardized services
D)Demand is volatile
E)Demand is constant

Question 38

Qualitative factors are relatively unimportant in capacity decisions.

Question 39

What term describes the situation when the benefits associated with a company increasing in size outweigh the benefits?

A)Economies of scale
B)Diseconomies of scale
C)Capacity strategy
D)Effective capacity
E)Peak capacity

Question 40

As service utilization increases,costs and service quality will also increase.

Question 41

What type of service business is more likely to seek 100% utilization?

A)Emergency rooms
B)Private-practice doctor's office
C)Mail-order distribution centers
D)Restaurants
E)Bank drive thru lanes

Question 42

Yield management is probably not effective for which of the following items?

A)Movie theaters
B)Restaurants
C)Selling cars
D)Apartment rentals
E)Airlines

Question 43

Describe three ways capacity planning for services are different than capacity planning for manufacturing.

Question 44

Describe a process to assess future capacity needs.

Question 45

Which of the following is not a term used to describe service capacity?

A)Time
B)Location
C)Demand volatility
D)Square footage
E)Service quality

Question 46

The amount of capacity that is unused on average refers to what term?

A)Capacity cushion
B)Outsourced capacity
C)Peak capacity
D)Effective capacity
E)Capacity factor

Question 47

Why should services be near to the customer?

A)To keep out competition
B)Because the customer is normally involved in the service
C)To serve customers with limited transportation
D)To make services convenient
E)None of these options are reasons to be near customers

Question 48

As service utilization increases,what will the effect on quality be?

A)Quality levels will remain the same
B)Quality levels will increase
C)Quality levels will decrease
D)They will change inversely
E)The effect is random

Question 49

When is an aggressive expansion strategy most advantageous?

A)In a steady market
B)In a declining market
C)In a growing market
D)In a competitive market
E)In a dominant market

Question 50

A difference between projected demand and current capacity is

A)Capacity cushion
B)Capacity gap
C)Capacity projection
D)Required capacity
E)Resources needed

Question 51

What are the implications for utilization if the maximum capacity is increased,and everything else remains constant?

A)Utilization will stay the same
B)Utilization will increase
C)Utilization will decrease
D)Utilization will vary randomly
E)None of these options

Question 52

Put the following steps for assessing future capacity needs in the correct order.

A)i,ii,iii,iv
B)ii,i,iv,iii
C)iv,iii,ii,i
D)i,iv,iii,ii
E)iii,ii,iv,i

Question 53

Identify five factors that affect the size of a capacity cushion.

Question 54

Which of the following can serve as a substitute for adding capacity?

A)Incorporating flexibility
B)Capacity cushion
C)Aggressive expansion
D)Economies of scale
E)Master scheduling

Question 55

Why is it often difficult to match capacity and demand?

A)Capacity is expensive
B)Determining capacity is difficult
C)Capacity increases often come in large increments
D)Forecasting capacity is difficult
E)It is easy to match capacity and demand

Question 56

Which is not an approach for maximizing the utility of existing capacity?

A)Incorporating flexibility
B)Accounting for life-cycle stage
C)Dealing with capacity increments
D)Smoothing out capacity
E)Focusing on component's individual capacity

Question 57

Sketch and briefly describe an experience curve.

Question 58

Describe the implications of either a low or high utilization rate?

Question 59

A wait-and-see capacity strategy typically fits best with what type of industries?

A)Industries with fast growth
B)Industries with slow growth
C)Industries with no growth
D)Industries with negative growth
E)None of these options

Question 60

Which is a reason that services experience greater demand volatility for multiple reasons?

A)Services cannot be stored
B)More customer interaction
C)Different customer needs
D)Service demand is dependent on customer behavior
E)All of these options are reasons

Question 61

The Home-Cooking Gourmet provides four meal packs that can be prepared at home in four minutes.Each meal pack is prepared on a separate production line.The company works five days per week with a single shift for 8 hours.Management wants a 20% capacity cushion.All meals can be prepared on a standard assembly line.Assembly lines are added on the basis of demand.How many production lines are required for the following parameters?

Question 62

A local company supplies city schools with supply packages.How many assembly lines are needed if the company works 10 hours a day during July to meet demand.They wish to have a 20% capacity cushion.How many assembly lines should they have?

Question 63

The school supply company can process any of the course packs for shipping in the same amount of time,shown below.Should additional processing or shipping be expanded? That is,what is the bottleneck in this operation?

Question 64

A small hamburger stand has seating for 12 people.They are considering adding seating for 6 or 12 more people.Profit is currently 28,800 per year.The owner thinks the profit would be 46,080 if 6 additional seats and 63,360 if 12 more seats are added.What is the present value of each option,assuming a 15% discount rate for the next year?

Question 65

When are yield management techniques appropriate for an organization?

Question 66

The campus bookstore averages 150 customers per day.The store is open for 12 hours per day.Periodically,the store is not able to use the automated credit card machine and the average checkout time increases to 6 minutes.How many checkout lanes should the bookstore have if the manager wants a 30% capacity cushion?

Question 67

Identify three quantitative factors for making capacity decisions.

Question 68

A company runs an assembly line two shifts a day; however,the first shift runs the line 7.5 hours and the second shift runs the line 9 hours.The machine has a maximum output of 120 units per hour.Over the last 28 shifts,the first shift averaged 825 units a shift and the second shift averaged 972 units.Which shift better utilizes the machine?

Question 69

The campus bookstore averages 150 customers per day.The store is open for 12 hours per day,and each customer takes an average of 4 minutes to check out.How many checkout lanes should the bookstore have if the manager wants a 25% capacity cushion?

Question 70

What average output should a company have that has a maximum manufacturing capacity of 3000 units per week if they want to outperform other facilities in the company that maintain utilization rates of 88% ?

Question 71

Compare and contrast a "wait-and-see" capacity strategy with an "aggressive expansion" strategy.

Question 72

What is the utilization of a packaging machine that can package a maximum of 120 units per hour if the unit has averaged 108 units per hour over the last month?

Question 73

Identify five issues related to maximizing the utility of existing capacity.

Question 74

A company has two similar plants,one is small and the other is large.In terms of utilization,which plant is better utilized? The small plant can produce a maximum of 9,000 units a week,and the large plant can produce a maximum of 22,000 units a week.Over the last 16 weeks,the small plant averaged 8,100 units and the large plant averaged 20,200 units per week.

Question 75

Identify three factors that affect the estimation of capacity,and briefly describe each.