Deck 11: Capacity Planning

Question 1

Which of the following statements is true about facilities decisions?

A) They are generally short-range.
B) They are not critical because they determine only future availability of output.
C) They involve all organizational units and are often made at the highest corporate level.
D) They are simple and easy to analyze.

Answer 1

They involve all organizational units and are often made at the highest corporate level.

Question 2

Aggregate planning costs do NOT include

A) hiring and layoff costs.
B) part-time labor costs.
C) subcontracting costs.
D) inventory ordering costs.

Answer 2

inventory ordering costs.

Question 3

Aggregate planning differs from scheduling in that

A) the former refers to the long range and the latter refers to the short range.
B) the former is concerned with allocating available resources and the latter with the acquisition of resources.
C) the former refers to the long range and the latter refers to the medium range.
D) the former is concerned with the acquisition of resources and the latter with allocating available resources.

Answer 3

the former is concerned with the acquisition of resources and the latter with allocating available resources.

Question 4

Why is it dangerous to justify capacity expansion using economies of scale?

A) It is far too specific to use as a basis for capacity decisions.
B) Volume, capacity, and process considerations are looked at individually.
C) The common notion that unit costs decline for larger facilities due to size is not always accurate.
D) It requires consideration of quality, dependability, and flexibility.

Question 5

The most popular type of facility used by Fortune 500 companies is

A) product-focused.
B) process-focused.
C) market-focused.
D) general-purpose.

Question 6

Which of the following is NOT a factor affecting the elements of a facilities strategy?

A) Cost of facilities.
B) Likely behavior of competitors.
C) Business strategy.
D) Whether the company uses make-to-stock or assemble-to-order.

Question 7

In aggregate planning,

A) the concern is over a long-range planning horizon.
B) output levels are set in the face of certain demand.
C) "aggregate" implies that planning is done for a single overall measure of output or at most a few products.
D) firms should never consider overtime, hiring, firing, or subcontracting.

Question 8

The aggregate planning problem

A) should consider only supply management options.
B) affects only marketing and production, but human resources are not involved in decisions.
C) should consider only demand management options.
D) needs to consider multiple trade-offs such as customer service level, inventory levels, labor force stability, and costs.

Question 9

Which of the following statement(s)correctly describes aggregate planning?

A) Aggregate planning is concerned with matching supply and demand of output.
B) Aggregate planning determines not only the output levels planned but also the appropriate resource mix to be used.
C) The aim of aggregate planning is to set overall output levels for the medium-range future.
D) All of the above.

Question 10

The type of strategy used with respect to the amount of capacity cushion when "the cost or consequence of running out is approximately in balance with the cost of excess capacity" is called:

A) small cushion.
B) large cushion.
C) moderate cushion.
D) none of the above.

Question 11

Which of the following statements regarding capacity is NOT true?

A) Capacity can be measured in several units such as hours of output, number of units produced, number of customers served, and the like.
B) Effective capacity is generally less than the theoretical capacity.
C) Capacity is the maximum output that could be produced over a period of time.
D) The maximum output of a process is not a meaningful measure.

Question 12

Which of the following is NOT true about aggregate planning in service organizations?

A) A time horizon of 12 months, on average, is used.
B) Both supply and demand variables can be changed.
C) Inventory and capacity trade-offs are required.
D) Facilities are considered fixed.

Question 13

The ABC Cement Corporation produces a high-quality cement that is supplied to construction companies.The potential demand and the probability of each potential demand quantity are given for the upcoming year: Assuming manufacturing capacity of 700,000 tons,the estimated capacity cushion

A) is 340,000 tons.
B) is 360,000 tons.
C) is >1,000,000 tons.
D) cannot be computed from this information.

Question 14

One option for altering the pattern of demand through aggregate planning is

A) using overtime.
B) carrying inventory.
C) subcontracting.
D) pricing.

Question 15

Which of the following functions is NOT affected directly by the facilities decision?

A) Operations.
B) Marketing.
C) Finance.
D) All of the above are directly affected.

Question 16

Under a level strategy,variations in demand are managed by

A) varying the number of workers.
B) using advertising and price changes.
C) varying inventory levels.
D) all of the above.

Question 17

A small capacity cushion

A) maximizes utilization.
B) is used when capacity is inexpensive.
C) means that the cushion is 0%.
D) is a competitive disadvantage.

Question 18

A firm produces 12 different services and has capacity to service 360,000 customers per year.A total of 24 service workers are employed.If 270,000 customers receive service during a particular year,what is the capacity cushion during that year?

A) 25%.
B) 50%.
C) 75%.
D) There is not enough information to determine the answer.

Question 19

A large capacity cushion is appropriate when

A) a make-to-stock process is used.
B) a firm is attempting to capture market share in a growing industry.
C) the market for its products or services is shrinking.
D) a firm wants its capacity to match average demand.

Question 20

Facilities decisions

A) are medium-range capacity decisions.
B) should consider one of the five crucial questions of how much, how large, when, where, and what type.
C) constrain all other capacity decisions.
D) require planning for one year only.

Question 21

Assume you have been assigned the task of identifying a level strategy aggregate production plan for the coming year.You have been informed that beginning inventory is 0 units,your plan should provide an ending inventory for the year equal to 0 units,and you have been provided the following forecasts of aggregate demand.What should be the planned rate of quarterly production?

A) 6,250 units
B) 6,000 units
C) 5,750 units
D) 5,500 units

Question 22

Inventory carrying costs typically include which of the following?

A) The cost of capital invested in inventory.
B) Storage costs.
C) Obsolescence and deterioration costs.
D) All of the above.

Question 23

There are four basic types of facility choices.Which of the following statements concerning facility choice is NOT true?

A) Process-focused facilities generally have one technology, or at most two, and usually produce components or parts that are shipped to other facilities for further processing or assembly.
B) Market-focused facilities are typically located in the markets they serve, commonly serving local customers, and are frequently service firms.
C) Demand-focused facilities are quickly constructed and have the ability to serve global markets with fast order response times as warranted by the nature of customer demand.
D) General-purpose facilities are commonly used by smaller companies and may produce several types of products and use several different processes.

Question 24

Which of the following fits with a preemptive facilities strategy?

A) Wait and see what competitors do, then seek to match or exceed their capacity.
B) Create a positive capacity cushion to stimulate the market.
C) Reduce risk by allowing capacity to lag the market by a small amount.
D) All of the above.

Question 25

Matching supply and demand for the next four quarters best describes

A) facilities strategic decisions.
B) sales and operations planning decisions.
C) scheduling decisions.
D) none of the above.

Question 26

Which of the following statements best fits with the concept of a level aggregate planning strategy?

A) Results in a large amount of labor turnover at certain times of the year.
B) The rate of production output will be variable, depending on demand.
C) Changes in the workforce will absorb variations in demand.
D) None of the above.

Question 27

Which of the following represents the hierarchy of decisions concerning the capacity of operations ranging from long-term to short-term?

A) Facility planning to aggregate planning to scheduling, respectively.
B) Aggregate planning to scheduling to facility planning, respectively.
C) Scheduling to facility planning to aggregate planning, respectively.
D) Aggregate planning to facility planning to scheduling, respectively.

Question 28

Which of the following is true regarding sales and operations planning (S&OP)?

A) Follows a time horizon of more than 24 months, with updating of the plan quarterly.
B) Changes in facilities are the first step in the S&OP process.
C) Management can use S&OP to lower inventories or increase flexibility.
D) All of the above.

Question 29

If a facility has a utilization rate of 80%,and current output levels requires 3,328 hours annually,what is the facility's annual capacity?

A) 2,582 hours.
B) 3,785 hours.
C) 4,160 hours.
D) None of the above.

Question 30

Effective capacity is

A) also called theoretical capacity.
B) base capacity plus time for maintenance, breaks, and absenteeism.
C) the amount of capacity that can be used in planning for actual output.
D) all of the above.

Question 31

The output of the S&OP process is

A) an operations demand forecast.
B) a production schedule.
C) an aggregate production plan.
D) all of the above.

Question 32

Facility planning entails asking crucial questions,including all of the following EXCEPT

A) How much total capacity is needed?
B) How much capacity does the competition have?
C) Where should facilities be located?
D) When is the capacity needed?

Question 33

Correctly complete the following sentence.Aggregate planning typically

A) entails a planning horizon of about 12 months.
B) is an activity of matching supply with demand.
C) is done for a single, or a few, overall measures of output.
D) has all of the above features.

Question 34

Facilities planning,aggregate planning,and scheduling form a hierarchy of decisions extending from long range to medium range to short range,respectively,concerning the capacity of operations.

Question 35

Five primary factors were listed for consideration when making facility-planning decisions.Which of the following is NOT one of those factors?

A) Expected future demand.
B) Global concerns.
C) Purchased materials.
D) Expected competitive moves.

Question 36

Assume you have been assigned the task of identifying a chase strategy aggregate production plan for the coming year.You have been informed that beginning inventory is 500 units,your plan should provide an ending inventory for the year equal to 200 units,and you have been provided the following forecasts of aggregate demand.Knowing that the typical objective of chase plans is to avoid carrying inventory,what should you choose as the planned rate of production for the first quarter?

A) 6,250 units
B) 6,000 units
C) 5,750 units
D) 5,500 units

Question 37

Assume you have been assigned the task of identifying a level strategy aggregate production plan for the coming year.You have been informed that beginning inventory is 2,000 units,your plan should provide an ending inventory for the year equal to 500 units,and you have been provided the following forecasts of aggregate demand.What should be the planned rate of quarterly production?

A) 6,500 units
B) 6,000 units
C) 5,625 units
D) 5,375 units

Question 38

An assembly-line facility desiring enough flexibility to meet unexpected demand is likely to set planned utilization at

A) 100%.
B) 80%.
C) 60%.
D) 50% or less.

Question 39

The primary concern with having a large positive capacity cushion is

A) reduced customer satisfaction due to the high level of backorders.
B) underutilization of facility capacity.
C) greater likelihood of stock-outs and lost sales.
D) keeping cost of running out in balance with the cost of excess capacity.

Question 40

Which of the following statements best fits with the concept of economies of scale?

A) Lower per unit costs as the production scale is increased.
B) Gains in efficiency due to producing with a smaller facility.
C) Higher per unit costs due to problems with communication, coordination, and bureaucratic red tape.
D) Producing a greater variety of output that utilizes similar types of raw materials.

Question 41

A small cushion strategy is appropriate when capacity is inexpensive.

Question 42

Resolving inconsistencies between supply and demand must wait until the end of the annual S&OP process.

Question 43

One way of leveling a seasonal demand pattern is by developing complementary products or services.

Question 44

Describe the types of short-range,the medium-range,and the long-range capacity decisions.

Question 45

Capacity utilization = actual output/capacity x 100%.

Question 46

A single Ford plant builds a family of pickup trucks to serve the global market.This is an example of a market-focused facility.

Question 47

A wait-and-see facility approach uses a positive capacity cushion.

Question 48

Sales and operations planning is a stand-alone system that is used to match supply and demand using a cross-functional approach.

Question 49

It is possible in the short term for a firm to operate above 100% utilization.

Question 50

Describe the most important questions to be answered concerning facilities decisions.Apply the questions to a fast-food restaurant chain with expanding demand.