Deck 10: Capacity Management

Question 1

Economies of scale occur when the average unit cost of the good or service begins to increase as the capacity and/or volume of throughput increases.

Answer 1

False

Question 2

Reservations reduce risks for customers but provide little benefit for service providers.

Answer 2

False

Question 3

A physical constraint is associated with the capacity of a resource.

Answer 3

True

Question 4

An example of safety capacity would be planning additional capacity to account for employee summer vacations.

Question 5

Capacity costs depend primarily on annual operating and maintenance costs.

Question 6

The Theory of Constraints is focused on eliminating all bottlenecks in a process.

Question 7

Long setup times increase capacity and improve flexibility.

Question 8

Giving customers information on the best time to call a service center is purely an advertising and promotion strategy.

Question 9

Complementary goods or services balance seasonal demand cycles and therefore use excess capacity available.

Question 10

A formal definition of capacity is the average rate of output per unit of time.

Question 11

Large capacity increases help to spread fixed costs of construction and operating system setup over one large project.

Question 12

Constraints determine the throughput of a facility.

Question 13

It is never appropriate to expand capacity in advance of growing demand because the excess capacity will always be underutilized.

Question 14

A strategy for increasing long-term capacity in a service organization is to design higher levels of self-service into operations.

Question 15

A measure of capacity is the number of seats on an airplane per flight.

Question 16

Varying the price of goods or services is a way of influencing demand patterns.

Question 17

Focused factories are often devoted to a specific technology or particular market segments or customers.

Question 18

Short-term capacity decisions usually involve adjusting schedules or staffing levels.

Question 19

In calculating required capacity for a job shop, setup time is a significant factor.

Question 20

Changing labor skill mix is a means to adjust short-term capacity.

Question 21

Safety capacity or a capacity cushion is

A)needed for processes with little demand variability
B)provided for anticipated events
C)generally higher in a job shop
D)not appropriate for service organizations

Question 22

Safety capacity or a capacity cushion is

A)Needed for processes with little demand variability
B)Generally higher in a job shop
C)Not appropriate for service organizations
D)Provided for anticipated events

Question 23

The long-term capacity expansion strategy that can be called a capacity straddle strategy is

A)One large capacity increase
B)Small capacity increases that match demand
C)Small capacity increases that lead demand
D)Small capacity increases that lag demand

Question 24

A focused factory is least likely to focus on

A)A few key products
B)A specific technology
C)A certain process design and capability
D)A seasonal demand good

Question 25

Revenue management systems are vital to most manufacturing organizations.

Question 26

The capacity expansion approach that provides the most safety capacity is

A)One large capacity increase
B)Small capacity increases that match demand
C)Small capacity increases that lead demand
D)Small capacity increases that lag demand

Question 27

Complementary goods and services are those that require different resources than the organization's other goods and services.

Question 28

Average safety capacity %) is computed as

A)Average resource utilization %) - 100%
B)100% - average resource utilization %)
C)[maximum safety capacity %) + minimum safety capacity %)]/2
D)100% - maximum resource utilization %)

Question 29

Which of the following is a short-term capacity decision?

A)Expanding the size and number of beds in a hospital
B)Amount of warehouse space to rent for a new promotional item
C)Closing down a distribution center
D)Changing the cooking technology in a chain of fast-food restaurants

Question 30

An unsold broadcast advertising space is an example of a perishable asset.

Question 31

When the average unit cost of a good or service decreases as the capacity and/or volume of throughput increases, it is called ____

A)Economies of scale
B)Diseconomies of scale
C)Cost cushioning
D)A nonphysical constraint

Question 32

Safety capacity is intended for all of the following except

A)power outages
B)equipment breakdowns
C)seasonal demand
D)material shortages

Question 33

Safety capacity is most closely related to

A)Bottlenecks
B)Economies of scale
C)Unanticipated events
D)Focused factory

Question 34

The earliest revenue management systems focused solely on overbooking.

Question 35

C&M Machining is developing plans for a dedicated production line and needs to determine how many drill presses will be needed. Engineering estimates are that one drill press will be able to process 120 parts per hour. Daily demand is 2,400 parts. C&M operates one 8 hour shift per day. How many drill presses are needed to meet the capacity requirements?

A)2 drills
B)3 drills
C)4 drills
D)5 drills

Question 36

A firm will encounter short periods of over- and under-utilization with which of the following capacity expansion approaches?

A)One large capacity increase
B)Small capacity increases that match demand
C)Small capacity increases that lead demand
D)Small capacity increases that lag demand

Question 37

Long-term capacity planning must be closely tied to the strategic direction of the organization.

Question 38

Which of the following is not a key consideration in long-term capacity strategy?

A)Equipment sharing
B)Initial investment in facilities and equipment
C)Annual cost of operating and maintaining facilities and equipment
D)Opportunity loss incurred from lost sales and reduced market share

Question 39

In service organizations, capacity is more often viewed as ____

A)The maximum rate of output per unit time
B)Units of resource availability
C)The ability to meet any customer demand
D)The amount of overtime scheduled

Question 40

Offering complementary goods or services is an example of a short-term capacity strategy.

Question 41

Revenue Management Systems RMS)

A)are batched daily
B)rely solely on overbooking
C)are cost minimization models
D)are time-dependent

Question 42

An entity in which idle capacity exists is called a ____.

A)Bottleneck work activity
B)Physical constraint
C)Non-bottleneck work activity
D)Nonphysical constraint

Question 43

Explain the concept of a focused factory. Include different ways a factory can be focused.

Question 44

All the following are means to manage capacity by shifting and stimulating demand except

A)Vary price of goods or services
B)Add peripheral goods and/or services
C)Provide reservations
D)Shift work to slack periods

Question 45

All the following are means to adjust short-term capacity except

A)Add peripheral goods and/or services
B)Add or share equipment
C)Sell unused capacity
D)Change labor skill mix

Question 46

Which of the following is not correct relating to bottleneck resources?

A)Should be scheduled first
B)An hour lost is an hour lost for the entire process or factory output
C)Use large order sizes
D)Should plan safety capacity

Question 47

Define Economies of Scale and Diseconomies of Scale. Explain how they relate to capacity decisions.

Question 48

For a non-bottleneck activity,

A)Utilization must be near 100%
B)An hour lost has no effect on total process or factory output
C)Use large order sizes to minimize setups
D)Work-in-process buffer inventory should be placed in front of non-bottlenecks

Question 49

Chapter 10 describes how a clogged court system tried to solve the bottleneck problem regarding the processing of tens of thousands of foreclosures by

A)hiring extra retired judges to process foreclosures.
B)shifting civil and criminal court work to slack periods so foreclosures could be processed.
C)increase the price of court filing fees to influence demand.
D)apply the Theory of Constraints to this court system.

Question 50

What is safety capacity? Discuss reasons for using it.

Question 51

What are complementary goods and services and why do firms have them?

Question 52

An organization that would typically use a revenue management system is

A)Computer manufacturer
B)Fast food restaurant
C)Car rental company
D)Package delivery service

Question 53

A doctor's office would charge no-show patients $30 if they did not cancel their appointment 24 hours ahead of the appointment because

A)insurance will pay the no-show fee anyway.
B)the appointment time and associated revenue is perishable, and the doctor may lose revenue.
C)the doctor's office does a poor job of forecasting demand.
D)the no-show price of $30 can be added to medical fees for reimbursement.

Question 54

A capacity straddle strategy is related to

A)One large capacity increase
B)Small capacity increases that match average demand
C)Small capacity increases that lead demand
D)Small capacity increases that lag demand

Question 55

Discuss each of the four strategies for capacity expansion. Include the risks and benefits of each.

Question 56

Define a Revenue Management System(RMS) and explain how it works. Give several examples of assets that can be managed using an RMS.

Question 57

Discuss the following:
a.Approaches to adjust short-term capacity
b.Approaches for shifting and stimulating demand

Question 58

Referring to a Revenue Management System RMS), which of the following is not a component?

A)Marketing
B)Forecasting
C)Pricing
D)Allocating

Question 59

According to the Theory of Constraints, ____ is the amount of money generated per time period through actual sales.

A)Throughput
B)Non-Bottleneck NBN) work activity
C)Non-physical constraint
D)Utilization

Question 60

Define capacity including the two ways it can be viewed. Provide an example of each way.

Question 61

An order fulfillment process normally operates two shifts a day, five days per week. Under normal conditions, 380 orders can be processed per shift. What is the daily capacity?

Question 62

A food packaging plant has planned shipments over the next six weeks of 9500, 8500, 10000, 8800, 8200, and 9000. The plant normally operates 2 shifts per day, five days per week. During each shift, 1000 food products can be packaged and ready to ship. What is the plant's weekly capacity? At what percentage of capacity is the plant actually operating?

Question 63

A pharmacy lab is used for only two high volume prescriptions, A and B. The time per setup in minutes), processing time in seconds), order size in units) is given below. Using the information, determine the total capacity required for this lab in minutes.
$$\begin{array} { c c c c } \text { Prescriptian } & \text { Setup Time minutes) } & \text { Processing Time secands) } & \text { Order Size units) } \\\hline\text { A } & 75 & 84 & 700 \\\text { B } & 60 & 54 & 1,500\end{array}$$

Question 64

Jack's Ice Cream Parlor produces two types of ice cream on a contract basis for a major restaurant chain using a large blender. A batch of ice cream A requires a setup time of 45 minutes, a process mixing time of 1.2 minutes per gallon, and 50 gallons are made per day. Ice cream B requires the same machine to be cleaned and setup which takes 30 minutes, a process mixing time of 2 minutes per gallon, and 100 gallons produced per day.
a. Compute the capacity required.
b. What percentage of total capacity required is setup time?

Question 65

For a Marriott hotel call center the expected service rate was 3.0 minutes per telephone call per customer service representative (CSR). With 3 telephone CSRs on-duty during the 6:30 to 7:00 am time period, and assuming a 90% target CSR labor utilization rate, how many telephone calls can these 3 CSRs handle during this time period.

Question 66

C&M Machining is developing plans for a dedicated production line and needs to determine how many drill presses will be needed. Engineering estimates are that one drill press will be able to process 120 parts per hour. Daily demand is 2400 parts. C&M operates one 8 hour shift per day. How many drill presses are needed to meet the capacity requirements?

Question 67

An assembly line normally operates two shifts a day, five days per week. Each shift can produce 475 assemblies. What is the weekly capacity?

Question 68

An assembly line normally operates two shifts a day, five days per week. The planned capacity of the assembly line is 380 units/shift. Determine the average safety capacity if 700 items are assembled a day, on average.

Question 69

A machine in a job shop is used for only two parts, A and B. The time per setup in minutes), processing time in seconds), order size in units) is given below. Using the information, determine the total capacity required for this machine in minutes.
$$\begin{array} { c c c c } \text { Part } & \text { Machine Setup Time minutes) } & \text { Processing Time seconds) } & \text { Order Size units) } \\\hline \text { A } & 55 & 54 & 600 \\\text { B } & 30 & 64 & 700\end{array}$$

Question 70

Define the Theory of Constraints( TOC). How does TOC view throughput differently from the traditional OM perspective?