Deck 6: Managing Capacity

Question 1

A busy toll highway that has four toll collectors for northbound traffic is an example of a single-channel,single-phase system.

Answer 1

False

Question 2

In general,higher conformance quality reduces capacity since the extra care taken during production slows the output rate.

Answer 2

False

Question 3

Learning curve theory suggests that productivity will increase as people and systems learn to perform tasks more efficiently.

Answer 3

True

Question 4

For a given fixed cost and revenue,as the variable cost rises,the break-even point also rises.

Question 5

Which of the following statements about theoretical capacity is BEST?

A)Theoretical capacity allows adjustments for preventive maintenance.
B)Running a factory at this level for a short time is often better than permanently raising resource levels.
C)Theoretical capacity levels are usually lower than rated capacity levels.
D)Theoretical capacity levels take into account that machines occasionally break and that workers occasionally call in sick.

Question 6

Building rental and depreciation on capital equipment are examples of fixed costs.

Question 7

Capacity is the capability of a worker,machine,work center,plant,or organization to produce output per time period.

Question 8

A business analyst identifies three possible demand levels for the new service they are considering for the new year.In addition to the levels of demand,the analyst estimates the likelihood of occurrence for each of these levels of demand.If he calculates the expected value of demand he should expect that the calculated value matches one of the three levels he originally identified.

Question 9

A bottling machine has a theoretical capacity of 100 bottles per minute.During every ten hour shift it operates continuously but is shut down once for 30 minutes for cleaning,inspection,and lubrication.What is its rated capacity?

A)100 bottles/minute
B)95 bottles/minute
C)90 bottles/minute
D)85 bottles/minute

Question 10

A traditional university classroom has room for 30 students and is scheduled for use during 12 consecutive one hour periods from 8:00 a.m.to 8:00 p.m.in the spring semester.Its theoretical capacity is therefore half of its rated capacity.

Question 11

A ninety percent learning curve is steeper than an eighty percent learning curve.

Question 12

The Theory of Constraints would support the statement that a chain is only as strong as its weakest link.

Question 13

A firm is able to meet current demand.If it adopts a lead capacity strategy,then it is probably making the assumption that demand will increase in the future.

Question 14

Which of the following is NOT an appropriate measure of capacity?

A)square yards of carpet installed per hour
B)number of cars assembled per month
C)thickness of laminate on a desktop
D)printed pages per minute

Question 15

A firm's capacity can be limited by members of its supply chain.

Question 16

In operations and supply chain environments that must deal with random demand,it is virtually impossible to achieve very high capacity utilization levels and still provide acceptable customer service.

Question 17

In a decision tree,outcome points are under direct control of the decision maker and show the results of choices.

Question 18

A firm is more likely to develop the internal capacity to perform activities that are strategically important to its success than it is to outsource those activities.

Question 19

The break-even formula does not include a provision for a price break if a customer purchases a large quantity.

Question 20

Virtual supply chains have the advantage of efficiency,but this advantage is gained in a trade-off with decreased flexibility.

Question 21

A company with fixed costs of $10,000 per month has a target price of $165 for their sole product,a heat shield for masonry fireplaces.What level of output represents their break-even point if their variable cost for producing is $35 per unit?

A)between 60 and 70 units
B)between 70 and 80 units
C)between 80 and 90 units
D)between 90 and 100 units

Question 22

What is the break even point for location D if Jimbo decides to charge $21 per student?

A)4,000 students
B)4,250 students
C)4,500 students
D)5,000 students

Question 23

A subdivision is planned for forty houses,each with its own in-ground swimming pool.A contractor estimates it will take him 30 hours to build the first pool and that there is a 90% learning curve associated with this process.
How long will it take to build all of the pools?

A)17.1 hours
B)642.75
C)796.3 hours
D)1200.0 hours

Question 24

Consider the system composed of four processes linked by a conveyor belt.There is no storage between these processes pictured below.Which statement is BEST

A)The overall system output is 220 units/hr.
B)The process that determines the system's capacity is process 4.
C)If only process 3 experiences 5 minutes of unplanned downtime,the system's overall output is diminished.
D)Overall system improvement efforts should focus on process 1.

Question 25

A lead capacity strategy has the advantage of:

A)a reduced risk of overbuilding.
B)greater productivity due to high utilization levels.
C)assuring adequate capacity during all types of growth.
D)the ability to put off large investments as long as possible.

Question 26

Jimbo Elrod has obtained fixed and variable cost information for four potential locations for his professional wrestling school and summarized it in tabular form below.All values are in dollars.

Jimbo evaluates levels of demand ranging from 100 to 2,500 students per year.Which location has the lowest cost for the greatest range of students throughout this continuum?

A)Location A
B)Location B
C)Location C
D)Location D

Question 27

Which of the following statements about learning curves is BEST?

A)Learning improvements always follow a constant pattern.
B)Frequent design changes and reengineering have no effect on learning rates.
C)Underestimated learning effects may cause overestimation of capacity needs.
D)An eighty percent learning curve means that each unit takes twenty percent less time to produce than its immediate predecessor.

Question 28

The average waiting time on a Thursday night for a table at a popular Chinese restaurant is 30 minutes.If customers arrive at the rate of four per hour and both the service and arrival rates are Poisson distributed,what is the average service time?

A)greater than 3 but less than 4 per hour
B)greater than 4 but less than 5 per hour
C)greater than 5 but less than 6 per hour
D)Cannot be determined from the information provided.

Question 29

Business at the Kwik-E-Mart is brisk,with customers arriving at a rate of six per hour on average.Ringing up purchases is an easy matter for owner/operator Apu;he can usually do so in 2 minutes.If both arrival and service rates are Poisson distributed,how many customers are in the store on average?

A)0)05
B)0)16
C)0)25
D)0)50

Question 30

Students arrive at a professor's office every 20 minutes during final exam week according to a Poisson distribution.What is the probability that the professor's one hour afternoon nap will not be disrupted by any student arrivals?

A)0)00
B)0)05
C)0)15
D)0)45

Question 31

If a firm cannot make a profit regardless of output volume,then:

A)FC > VC.
B)VC > FC.
C)VC > R.
D)BEP > VC.

Question 32

The maximum output capability of a system,allowing for no adjustments for scheduled or unscheduled maintenance is the ________.

Question 33

The first three rooms took a four-person crew a total of 9 hours to paint.If the learning curve rate is 85%,how long will it take them to paint all 20 rooms in stately Wayne manor?

A)less than 20 hours
B)between 20 and 30 hours
C)between 31 and 40 hours
D)more than 40 hours

Question 34

An example of a variable cost is:

A)a payment to your raw materials supplier.
B)a lease payment on a piece of equipment.
C)a mortgage payment on buildings.
D)a monthly licensing fee for a software package.

Question 35

A subdivision is planned for forty houses,each with its own in-ground swimming pool.A contractor estimates it will take him 30 hours to build the first pool and that there is a 90% learning curve associated with this process.
How long will it take to build the last pool?

A)27.2 hours
B)23.9 hours
C)20.5 hours
D)17.1 hours

Question 36

Jimbo Elrod has obtained fixed and variable cost information for four potential locations for his professional wrestling school and summarized it in tabular form below.All values are in dollars.

Jimbo plans to charge the same amount for tuition regardless of where he decides to establish his school.If he believes that 700 students will matriculate each year,which location will result in the lowest total cost?

A)Location A
B)Location B
C)Location C
D)Location D

Question 37

Which of these factors typically does NOT impact capacity?

A)fixed cost
B)conformance quality
C)product variations
D)actions of supply chain partners

Question 38

Wally's Filling Station is manned by one capable attendant that can fill your tank and check your tires,oil,and water in 5 minutes.If four customers arrive each hour,and the service and arrival rates are governed by the Poisson distribution,what is the utilization of the attendant?

A)0)33
B)0)50
C)0)66
D)0)80

Question 39

Four entrepreneurial students want to open a shaved ice business during the coming summer.Maxine thinks that demand will be high and therefore they should purchase a large stand and acquire a premium ice shaving machine.Minnie feels strongly that demand will be low and that they should purchase a tarp and some basic hand tools to work the ice.Midelia is pretty sure that demand will fall in-between these two extremes,so they can get by with a shack and a used ice shaving machine.Their financial wizard of the bunch,Probableah,has estimated the costs,revenues,and likelihoods of each level of demand and created the table shown below.What is the expected profit for this venture?

A)$1700
B)$2300
C)$2900
D)$3300

Question 40

Which of the following statements about capacity strategies is NOT correct?

A)Lead capacity strategy can be used to preempt competitors who might be planning to expand their own capacity.
B)A lag capacity strategy tends to have greater productivity due to higher utilization levels.
C)A match capacity strategy tends to avoid periods of high under- or overutilization.
D)A lag capacity strategy would be well-suited for a period of high growth.

Question 41

Define theoretical and rated capacity and name four factors that affect a company's capacity.Indicate how each factor impacts rated capacity.

Question 42

Of the three capacity strategies discussed in this chapter,the ________ strategy is the most optimistic from the standpoint of the decision maker.

Question 43

In waiting line theory,a customer service attendant is a(n)________.

Question 44

A wise professor crafts a midterm that is beautiful to behold,painful to take,and a chore to grade.The first exam takes almost an hour and a half to grade (89 minutes and 24.7 seconds to be precise)but the second one takes only seventy-six minutes to complete.Realizing that learning effects are at work,the professor looks at his social calendar and spots an important social engagement at this time on the following day,exactly 24 hours from now.How long will it take to grade the third exam? How long will it take to finish grading exams for the entire class of 30 students?

Question 45

A major computer manufacturer is interested in establishing a customer service center to handle business for the next decade.They conduct exhaustive research on land and construction costs,utilities,tax breaks,and wages at three sites,Oklahoma City,Austin,and Nashville.Answer these questions using these costs as displayed in the table below.
Graph the total cost curves and indicate the range of output that is best for each prospective site.What are the assumptions you have made in this analysis?

Question 46

The ________ capacity strategy attempts to adjust the current capacity to a level equivalent to the current demand.

Question 47

A collection of companies decides to work together for a while to provide service for what they see as a short-term window of opportunity.These firms plan to coordinate their activities by deploying sophisticated information systems to share critical data.Each of these companies is skilled at one or two core activities - design,manufacturing,distribution,marketing,and so on.This association of companies can be described as a(n)________.

Question 48

A learning percentage of 80 means that each time output is doubled,it takes ________ percent less time to produce than before.

Question 49

How long does each type of customer spend in the store? How long does the average customer spend in this store?

Question 50

The ________ is the output volume level where the firm realizes a $0 net profit.

Question 51

Describe the three capacity strategies and the advantages of each.

Question 52

Total cost to produce is the sum of expenses incurred regardless of output plus the variable cost per unit of business activity multiplied by ________.

Question 53

Discuss the Theory of Constraints and how it impacts capacity.What is the five-step approach to managing the system constraint?

Question 54

The relationship between the number of units within system boundaries and the time they spend within the system on average is formalized in ________.

Question 55

The process step that limits throughput for the entire process chain is the ________.

Question 56

An analysis tool that enables users to lay out decisions,especially those requiring a sequence of decisions to be made is a(n)________.

Question 57

A steady stream of eager fresh-faced students waits in line to register for spring semester classes.Students arrive at the rate of 100 per hour and it takes the registrar 30 seconds to check their schedule and verify they have paid in full.What is the average time waiting in line and the average number of people in line? How busy is the registrar?

Question 58

A Seattle entrepreneur must decide on the size of a latte stand to construct.The manager has narrowed the choice down to large or small.If he builds large and experiences low demand he could grin and bear it for a $200 daily profit,lower prices ($225 daily profit),or hire street performers to attract attention ($175 daily profit).If he builds small and experiences high demand he could do nothing ($175 profit per day),stay open longer hours (profit of $225/day),improve processes ($250/day profit),or raise prices ($200/day profit).Building large for high demand has an expected payoff of $250/day and building small for low demand has an expected payoff of $175/day.There is a 0.7 probability of high demand and 0.3 probability of low demand.Sketch a decision tree for this scenario and determine what size stand should be constructed to slake the unquenchable thirst of caffeine addicts.

Question 59

Shoppers flock to the Piggly Wiggly on payday to stretch their food dollars as far as they can go.Customers enter at the rate of 50 customers per hour and spend an average of 30 minutes selecting their groceries.When it comes time to check out,shoppers have their choice of two types of checkout lines;an express line for shoppers with 20 items or fewer and a single line for shoppers regardless of how many items are in their cart.(It is important to note that this one non-express line feeds multiple checkers - when one customer is done,the next person in the non-express line simply moves to the open register. )About 25% of all shoppers can (and do)choose the express line.There are on average three shoppers in the express line and six shoppers in the non-express line.Once it is their turn,it takes express checkout shoppers an average of two minutes to check out and non-express customers an average of five minutes to check out.
How many customers are in the Piggly Wiggly at any given time?

Question 60

When demand is uncertain,the expected value criterion may be used.To do so,demand-level scenarios and their ________ must be identified.