Deck 5: Strategic Capacity Management

Question 1

Economies of scale and the experience curve have opposite effects on capacity.

Answer 1

False

Question 2

The objective of strategic capacity planning is to determine the overall capacity level of capital intensive resources (including facilities,equipment and overall labor force size)that best supports the company's long-range competitive strategy.

Answer 2

True

Question 3

The capacity utilization rate is found by dividing best operating level by capacity used.

Answer 3

False

Question 4

Capacity flexibility means having the ability to rapidly increase or decrease production levels or to shift production capacity quickly from one product or service to another.

Question 5

When evaluating capacity,managers need to consider both resource inputs and product outputs.

Question 6

The objective of strategic capacity planning is to determine the overall capacity level of capital intensive resources (including facilities,equipment and overall labor force size)that best supports the company's short-range competitive strategy.

Question 7

At some point,the size of a growing plant can become too large and diseconomies of scale become a capacity planning problem.

Question 8

The frequency of additions to productive capacity should balance the costs of upgrading too frequently and the costs of upgrading too infrequently.

Question 9

Maximum practical capacity is defined by the federal Bureau of Economic Analysis as "That output obtained within the normal operating schedule of shifts per day and days per week excluding the use of high-cost and inefficient facilities".

Question 10

The point at which the scale economy curve and the experience curve intersect is called the capacity optimum.

Question 11

The PWP concept permits finding the best operating level for each department of the organization and thereby carries the focus concept down to the operating level.

Question 12

Subcontracting is a common source of external capacity.

Question 13

Capacity can be defined as the ability to hold,receive,store or accommodate.

Question 14

Economies of scope exist when multiple products can be produced at a lower cost in combination than they can separately.

Question 15

The ultimate in plant flexibility is a one-hour-changeover time plant.

Question 16

The experience curve is states that the more experience you have in a particular activity,the less surprised you will be when something goes wrong.

Question 17

Capacity can be defined as the amount of available resource inputs relative to requirements for output over a particular period of time.

Question 18

When plotted on a graph,the experience curve can't be expressed as logarithm.

Question 19

Maximum practical capacity is defined by the federal Bureau of Economic Analysis as "That output attained within the normal operating schedule of shifts per day and days per week including the use of high-cost inefficient facilities".

Question 20

Firms that make multiple products can produce the same number of each product with a given level of resource inputs and equal amounts of time.

Question 21

If the actual output of a piece of equipment during an hour is 500 units and it's best operating level is at a rate of 400 units per hour,which of the following is the capacity utilization rate?

A)0.75
B)1.00
C)1.25
D)1.33
E)100

Question 22

Capacity planning involving consideration of production scheduling and inventory position is characterized by which one of the following time durations?

A)Intermediate-range
B)Long-range
C)Short-range
D)Current
E)Upcoming

Question 23

In a decision tree,the only time probabilities are applied to a decision node is when the decision is being made by someone else such as your customer or your competitor.

Question 24

Which of the following is not a step used in determining production capacity requirements?

A)Forecasting to predict product sales
B)Forecasting raw material usage
C)Projecting availability of labor
D)Calculating equipment and labor needs
E)Projecting equipment availability

Question 25

The capacity focus concept can be put into practice through a mechanism called which of the following?

A)Best operating level (BOL)
B)Plants within plants (PWP)
C)Total quality management (TQM)
D)Capacity utilization rate (CUR)
E)Zero-changeover-time (ZXT)

Question 26

The way to build greater flexibility in your workers is to do which of the following?

A)Pay higher wages to motivate a willingness to do a variety to tasks
B)Require a broader range of training
C)Provide a wide variety of technology to augment workers skills
D)Institute a "pay for skills" program
E)Use part-time employees with specialized skills as needed

Question 27

When deciding to add capacity to a factory which of the following need not be considered?

A)Maintaining system balance
B)The frequency of capacity additions
C)Use of external capacity
D)Immediate product demand
E)Availability of raw materials

Question 28

If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units,which of the following is the capacity cushion?

A)33 percent
B)75 percent
C)90 percent
D)100 percent
E)133 percent

Question 29

The smaller the capacity cushion the better.

Question 30

In solving a decision tree problem,calculations start at the ends of the "branches" of the tree and work backwards to the base "trunk" of the tree.

Question 31

Sharing capacity is a common source of external capacity.

Question 32

Compared with a service operation,which of these statements is true for a manufacturing operation's capacity?

A)Manufacturing is more dependent on time and location
B)manufacturing is subject to more volatile demand fluctuations
C)Utilization more directly impacts quality
D)Demand can be smoothed by inventory policies
E)Manufacturing capacity is more capable of reacting to demand fluctuations

Question 33

Low rates of capacity utilization in service organizations are never appropriate.

Question 34

The probability of each occurrence at a decision tree chance node is the reciprocal of the number of possibilities at the chance node.

Question 35

Which of the following models uses a schematic model of the sequence of steps in a problem and the conditions and consequences of each step?

A)Linear programming
B)Johnson sequencing rules
C)Decision trees
D)Venn diagrams
E)Decision mapping

Question 36

Capacity planning involving acquisition or disposal of fixed assets such as buildings,equipment or facilities is considered as which one of the following planning horizons?

A)Intermediate-range
B)Long-range
C)Short-range
D)Current
E)Upcoming

Question 37

A capacity cushion is the amount of capacity less than expected demand.

Question 38

A decision tree problem does not need probabilities or payoffs to generate a solution.

Question 39

If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units,which of the following is the capacity utilization rate?

A)0.75
B)1.00
C)1.33
D)2.33
E)300

Question 40

Capacity planning involving hiring,layoffs,some new tooling,minor equipment purchases and subcontracting is considered as which one of the following planning horizons?

A)Intermediate range
B)Long range
C)Short range
D)Current
E)Upcoming

Question 41

If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units,what is the capacity utilization rate?

Question 42

What is a capacity cushion and why would a firm have one?

Question 43

If demand for product "A" were forecast at 1,000,000 units for the coming year and your factory has one machine capable of producing 4,500 units per week,how many similar machines might you plan to acquire?

Question 44

Describe the relationship between capacity utilization and quality in a service operation?

Question 45

A chance node on a decision tree has four possible outcomes worth $10,000,$20,000,$30,000 and minus $100,000 respectively.The probabilities of these outcomes occurring are assessed as 10%,25%,50% and 15% correspondingly.What is the expected value of this chance node?

Question 46

If demand for product "A" were forecast at 1,000,000 units for the coming year and your factory has trained labor and equipment sufficient to produce 150,000 units per month is the capacity cushion positive or negative?

Question 47

Factors to be taken into account in selecting capacity additions for both manufacturing and services include which four things discussed in this chapter?

Question 48

A chance node on a decision tree has four possible outcomes each worth $100,000.The probabilities of the outcomes occurring are assessed as 10%,27%,43% and 20%.What is the expected value of this chance node?

Question 49

If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units,what is the capacity cushion?

Question 50

If demand for product "A" were forecast at 1,000,000 units for the coming year and your factory has one machine capable of producing 75,000 units per month,how much of product "A" might you plan to acquire through outsourcing?

Question 51

At a decision point in a decision tree,which machine would you select when trying to maximize payoff when the anticipated benefit of selecting machine A is $45,000 with a probability of 90%;the expected benefit of selecting machine B is $80,000 with a probability of 50% and the expected benefit of selecting machine C is $60,000 with a probability of 75%?

A)Machine A
B)Machine B
C)Machine C
D)You would be indifferent between machines A and C
E)You would be indifferent between machines A and B

Question 52

Why does volatility of demand have a higher effect on a service delivery system than on a manufacturing system?