Deck 4: Capacity

Question 1

Effective capacity is the maximum output that a process or facility can achieve under ideal conditions.

Answer 1

False

Question 2

A bottleneck is an operation that has the highest effective capacity of any operation in the process and,thus,boosts the system's output.

Answer 2

False

Question 3

Capacity decisions should be made separate from strategic decisions.

Answer 3

False

Question 4

Diseconomies of scale refers to situations where the average cost per unit decreases as the facility's size increases.

Question 5

Capacity is the maximum rate of output of a process.

Question 6

Utilization is calculated as the ratio of Capacity / Actual output.

Question 7

Generally,work-in-process inventory will be greater in project and job processes than in continuous processes.

Question 8

Utilization is the degree to which equipment,space,or labor is currently being used.

Question 9

The first step in the application of the Theory of Constraints (TOC)is to identify the bottlenecks.

Question 10

Setup time is the time required to change a machine from making one product or service to making another.

Question 11

One reason why economies of scale drive down cost is the spreading of fixed costs.

Question 12

A bottleneck is an operation that has the lowest effective capacity of any operation in the process.

Question 13

A blocked operation is an operation that runs out of work to process.

Question 14

Waiting line models are often used for capacity planning.

Question 15

Economies of scale is a concept that states that the average unit cost of a good or service will increase with increasing output rate.

Question 16

Input measures are generally used as a capacity measure for high-volume processes.

Question 17

The theory of constraints is an approach to management that focuses on whatever impedes progress toward the goal of maximizing the flow of total value-added funds or sales less discounts and variable costs.

Question 18

The difference of 100 % - Utilization (%)provides a measure the capacity cushion.

Question 19

Capacity can be expressed by output or input measures.

Question 20

A capacity cushion is the amount of inventory that a firm maintains to handle sudden increases in demand or temporary loss of production capacity.

Question 21

Increasing the overall process capacity can only occur when the capacity of the bottleneck of the process can be increased.

Question 22

Wait time is not part of the throughput time for a specific item as it moves through a process.

Question 23

Decision trees can be useful for evaluation capacity expansion alternatives.

Question 24

In an automobile service business (e.g.a muffler shop),measuring capacity based on the number of hours that the service bays will be required to satisfy expected demand is an example of an input measure of capacity.

Question 25

Provided each measure is expressed in the appropriate units,Little's Law provides a mathematical expression that states capacity utilization equals the ratio of work-in-process inventory divided by the output rate of a process.

Question 26

In a dental office,measuring capacity based on the number of patients that receive service over a typical day is an example of an output measure of capacity.

Question 27

A decision tree is a schematic model of alternatives available to the decision maker,along with their possible consequences.

Question 28

The total time that a typical item spends in any process,termed the throughput time,decreases as the average level of work-in-process inventory in the process increases.

Question 29

More complex waiting-line problems must be analyzed with simulation.

Question 30

As the total output increases,economies of scale lower costs because the total fixed costs required to produce the higher volume of output are lowered.

Question 31

Typically,a larger capacity cushion is required in project processes with high variability than in line or continuous flow processes with relatively low variability.

Question 32

The maximum output that can reasonably be sustained under normal conditions is the capacity cushion for a process.

Question 33

Increasing the amount of work-in-process inventory reduces the likelihood that operations in the process will be starved.

Question 34

In a manufacturing company,measuring capacity based on the number of machine-hours required to process a specific batch of production is an example of an output measure of capacity.

Question 35

According to the theory of constraints (TOC),the role of work-in-process inventory is to dictate the pace that specific items are pulled through the process.

Question 36

The setup time required to switch from one product type to another within a manufacturing process is an example of an external,predictable from of variability.

Question 37

Equipment breakdowns are an example of an internal,random form of variability.

Question 38

According to the theory of constraints (TOC),the drum in the drum-buffer-rope method refers to the bottleneck of the process.

Question 39

Capacity gap is an addition to projected demand and current capacity.

Question 40

In a tire manufacturing plant,measuring capacity based on the number of tires produced per day is an example of an input measure of capacity.

Question 41

Short-term capacity plans focus on workforce size,overtime budgets,and inventories.

Question 42

Which one of the following statements about measuring capacity is best?

A)The utilization rate is expressed as the ratio of average output rate to either peak capacity or effective capacity.
B)Output measures are the usual choice for flexible flow processes.
C)Input measures are the usual choice of firms like Nissan Motor Company at its Tennessee plant.
D)The maximum output rate for a restaurant would be the number of seats.

Question 43

Which one of the following is NOT a reason why there are economies of scale?

A)Spreading fixed costs,such as depreciation and debt service,over more units
B)Finding process advantage by dedicating resources to individual products
C)Reduced construction costs by building smaller facilities
D)Better bargaining position and quantity discounts on purchased materials

Question 44

Output measures are the usual choice for high-volume processes that produce only a limited range of similar products or services,usually expressed in terms of output over a period of time.

Question 45

Which one of the following statements about capacity is best?

A)Capacity is the average rate of output for a facility.
B)Short-term capacity plans deal with investments in new facilities and equipment.
C)A line flow process usually measures its capacity in terms of output rates.
D)The utilization rate is expressed as the ratio of maximum output rate to capacity.

Question 46

Process Management Triangle is made up of capacity utilization,quality and variability.

Question 47

Managers of line flow process facilities with high-volume production capability tend to express capacity in terms of

A)output measures.
B)maximum input rate.
C)number of input units.
D)maximum utilization rate.

Question 48

The wait-and-see strategy refers to a condition which involves smaller,more frequent jumps.

Question 49

The expansionist strategy refers to a condition which involves large,frequent jumps in capacity.

Question 50

The base case concept is to do nothing and simply lose orders from any demand that exceeds current capacity.

Question 51

Fixing time is the additional time needed to change over from one service or product to the next,which in turn increases the overload at the workstation being changed over.

Question 52

Which of the following statements about bottlenecks is best?

A)Floating bottlenecks are created by stability in the workload.
B)When capacities are perfectly balanced,it can be said that every operation is a bottleneck.
C)Increasing bottleneck capacity does not increase plant capacity.
D)Floating bottlenecks are most likely to occur with line flow processes.

Question 53

Which one of the following statements about measuring capacity is best?

A)The utilization rate is expressed as the ratio of maximum output rate to capacity.
B)The minimum output rate for a restaurant would be the number of seats.
C)Peak capacity is the output that a facility can sustain under normal conditions.
D)A line flow process usually measures its capacity in terms of output rates.

Question 54

Random variation is introduced by chance and results from small changes or differences in equipment operations,people's behaviour,or environmental conditions.

Question 55

A diseconomy of scale is a concept that refers to a condition when the average cost per unit increases as the facility's size increases.

Question 56

The maximum output that a process or facility can achieve under ideal conditions is referred to as the

A)utilization.
B)effective capacity.
C)throughput time.
D)peak capacity.

Question 57

Aggregate stock is any stock of items used to support the production of goods and services or satisfy customer demand.

Question 58

The higher that process variability is,the more expensive and difficult the process is to manage.

Question 59

The throughput time for a specific item as it moves through a process includes

A)operations time.
B)movement time.
C)wait time.
D)all of the above

Question 60

Little's Law is a mathematical expression for relating

A)the average throughput time for a process to actual output and capacity.
B)the average throughput time to work-in-process (WIP)inventory and the actual output rate.
C)the utilization of a process to actual output and capacity.
D)the utilization of a process to work-in-process (WIP)inventory and the actual output rate.

Question 61

Which one of the following statements about capacity expansion is best?

A)The timing and sizing of expansion are related.
B)Lost sales are more likely if the expansionist strategy is used.
C)The expansionist strategy minimizes risk.
D)The expansionist strategy lags behind demand and relies on short-term capacity expansion options.

Question 62

The single milling machine at Stout Manufacturing was severely overloaded last year.The plant operates eight hours per day,five days per week,and 50 weeks per year.Management prefers a capacity cushion of 15 percent.Two major types of products are routed through the milling machine.The annual demand for product A is 3000 units and 2000 units for product B.The batch size for A is 20 units and 40 units for B.The standard processing time for A is 0.5 hours/unit and 0.8 for B.The standard setup time for product A is 2 hours and 8 hours for product B.How many new milling machines are required if Stout does not resort to any short-term capacity options?

A)no new machines
B)1 or 2 new machines
C)3 or 4 new machines
D)more than 4 new machines

Question 63

Which one of the following statements about capacity cushion is best?

A)Large capacity cushions are more likely to be utilized when future demand is known.
B)Small cushions are used when the product mix often changes.
C)Return of investment is about the same for capital-intensive firms,regardless of their capacity cushions.
D)The best-sized cushion varies by industry and firm.

Question 64

Table 4.1
The Union Manufacturing Company is producing two types of products: A and B.
The demand forecasts,batch size,and time standards follow: Both products are produced at the same operation called Mark I.
Using Table 4.1,what is the total number of hours required of Mark I equipment for the next year?

A)less than 29,000 hours
B)between 29,000 and 30,000 hours
C)between 30,000 and 31,000 hours
D)more than 31,000 hours

Question 65

Which of the following descriptions about waiting line models is best?

A)They account for major events such as competitor actions.
B)They account for the random,independent behaviour of many customers.
C)They assume that each branch can give the highest expected payoff.
D)They deal with the certainty and stability in demand.

Question 66

Which one of the following statements about capacity expansion is best?

A)The wait-and-see strategy involves small jumps in capacity compared to the expansionist strategy.
B)The expansionist strategy involves frequent jumps in capacity compared to the wait-and-see strategy.
C)The expansionist strategy minimizes risk.
D)The follow-the-leader strategy can help a firm gain a competitive advantage.

Question 67

Which of the following is NOT a disadvantage of the wait-and-see strategy?

A)increased risk of over expansion
B)being unable to respond if demand is unexpectedly high
C)can be preempted by a competitor
D)can erode market share over the long run

Question 68

An expansionist strategy in regard to capacity is best characterized by

A)reducing the risks of overly optimistic demand forecasts.
B)expanding only when others do.
C)emphasizing flexibility and quality while foregoing the larger market share of the lowest-cost producers.
D)using capacity to increase a firm's market share or to act as a form of preemptive market.

Question 69

Which one of the following statements about capacity is best?

A)Companies with flexible flow processes tend to have small-capacity cushions.
B)Companies with high capital costs tend to have large-capacity cushions.
C)Companies that have considerable customization tend to have larger-capacity cushions.
D)Constant demand rates require larger-capacity cushions.

Question 70

Which one of the following factors usually motivates a SMALLER capacity cushion?

A)unevenly distributed demands
B)high capital intensity
C)high penalty costs for overtime usage
D)requests for quick customer services

Question 71

Which one of the following factors usually calls for a LARGER capacity cushion?

A)uncertain demand
B)high capital intensity
C)more reliable equipment
D)high worker flexibility

Question 72

Which one of the following statements about capacity cushion is best?

A)A larger cushion is required when a firm uses low cost as a competitive priority.
B)A larger cushion increases equipment utilization when capital intensity is high.
C)Businesses find large cushions appropriate when demand varies.
D)A larger cushion increases manufacturing lead time.

Question 73

Capacity decisions are usually linked with other decision areas.If a system is well balanced,which one of the following changes requires a larger-capacity cushion?

A)Yield losses in the production process are reduced.
B)Schedules for production are more stable.
C)The capital intensity of the process is increased.
D)The company promises faster delivery times to customers.

Question 74

Which one of the following statements explaining some aspect of economies of scale is best?

A)A larger facility usually has a smaller total fixed cost.
B)A 100-bed hospital costs more to build than twice the cost of a 50-bed hospital.
C)With higher volumes,the process shifts toward flexible flows,with resources dedicated to individual products.
D)Dedicating resources to individual products reduces changeovers and setups.

Question 75

A wait-and-see strategy in regard to capacity is best characterized by

A)reducing the risks of over optimistic demand forecasts.
B)using capacity as a competitive weapon in order to compete on cost.
C)reducing the risks of lost sales due to capacity constraints.
D)making large,infrequent jumps in capacity expansions.

Question 76

If a system is well balanced,which one of the following changes usually calls for a smaller-capacity cushion?

A)higher customization
B)more of a flexible flow strategy
C)higher yield losses
D)higher capital intensity

Question 77

If a system is well balanced,which one of the following changes usually calls for a larger-capacity cushion?

A)higher capital intensity
B)higher worker flexibility
C)higher inventories
D)requests for fast delivery times

Question 78

Which one of the following statements concerning capacity cushions is best?

A)Large-capacity cushions are utilized more often when future demand is level and known.
B)Small-capacity cushions are used extensively in capital-intensive firms.
C)Capacity cushions are used primarily in manufacturing organizations,not in service organizations.
D)Small cushions are used in organizations where the products and services produced often change.

Question 79

Many alternative strategies are available for the timing and sizing decision in capacity expansion.Which one of the following statements regarding these strategies is best?

A)The expansionist strategy makes large,frequent jumps.
B)Lost sales are more likely when the expansionist strategy is adopted.
C)The wait-and-see strategy makes large,infrequent jumps.
D)The expansionist strategy involves large,infrequent jumps in capacity.

Question 80

What information would managers use to choose the best cost-effective capacity to balance customer service with the cost of adding capacity?

A)decision trees
B)economies of scale
C)capacity cushion
D)waiting line models