Deck 14: Capacity: Matching Productive Resources to Demand

Question 1

In most business settings, capacity is defined precisely in terms of a level of input per unit time.

Answer 1

False

Question 2

In both manufacturers and services, capacity can be stored for later use.

Answer 2

False

Question 3

In each of the time-related value attributes, a company's ability to improve performance hinges on having available capacity.

Answer 3

True

Question 4

A mismatch between demand and design capacity can be even more serious in the service sector because its effects go beyond simple cost issues.

Question 5

For many systems, the capacity of the constraint determines the capacity of the system.

Question 6

The time lost by the nonconstraint is lost for the entire system.

Question 7

In the demand chase approach to aggregate planning, changes in production levels are typically dealt by hiring and laying off workers.

Question 8

Purchased components can indirectly affect manufacturing capacity since their availability or unavailability can affect the firm's ability to utilize capacity as scheduled.

Question 9

Capacity requirements planning, like MRP, is completed at the end item level.

Question 10

Services that have high fixed costs and little marginal cost for additional customers, have developed more sophisticated approaches to leveling demand.

Question 11

Which of the following statements is true about capacity?

A) Capacity-related issues are the most significant difference between producing products and producing services.
B) In most businesses, capacity is defined precisely in terms of a level of output per unit volume.
C) If capacity is insufficient in the constraint resource, demand can still be met by higher utilization of nonconstraints.
D) Design capacity is typically the level of output a business can produce for a short period of time.

Question 12

Protective capacity

A) Tends to be in short supply because it is often viewed as an investment in resources that aren't providing a financial return.
B) Appears to be an effective use of resources because it is used all the time.
C) Provides a short-term financial return through its impact on various time-related value attributes.
D) Must be accompanied by protective inventory.

Question 13

The rate of production the business was designed to accommodate on a long-term basis is referred to as:

A) Actual output
B) Effective capacity
C) Design capacity
D) Protective capacity
E) Overloading capacity

Question 14

Which of the following statements is true about the financial impact of capacity decisions?

A) The impact of capacity can go beyond service-oriented value attributes and influences cost and quality levels as well.
B) Because most costs associated with production are variable, a small volume will result in lower costs per unit.
C) Over-production results in higher cost per unit and under-production results in lower costs per unit.
D) Most capacity decisions are short-term in nature and do not effect costs in the long term.

Question 15

Which of the following statements identify the characteristics associated with constrained productive systems?

A) Individual resources in a constrained system control their own utilization rates
B) Time lost by the constraint is lost for the entire system
C) Increasing the productivity or output of a nonconstraint helps the system.
D) Once a constraint, always a constraint.

Question 16

If a service temporarily met demand that was significantly above its design capacity, we would expect that

A) Conditions would immediately return to normal when demand went back down.
B) Cost per unit was lower than normal because of increased volume.
C) A recovery period would follow and could result in a continued high load on the work force.
D) Service quality would not suffer.

Question 17

Which of the following statements is true about constraint management?

A) The capacity of one resource cannot limit the output level of the entire system.
B) If the constraint stops producing for any amount of time the result is the same as shutting down the plant.
C) For nonconstraints, a breakdown for a short amount of time is always serious because nonconstraints feed the constraint.
D) The constraint has idle time available to get caught up.

Question 18

The critical resources that can limit the output level of the entire system are referred to as:

A) Constraints
B) Nonconstraints
C) Failure points
D) Weakest links

Question 19

Aggregate planning

A) Is done at an aggregate level, rather than at an individual product level, because aggregate capacity is . easier to adjust than specific capacity.
B) Is always short-range capacity planning.
C) Uses inventory and variable labor level production to deal with demand fluctuations in an attempt to reduce costs.
D) Uses as its primary input a schedule of production for each product produced.

Question 20

Under the demand chase approach to aggregate planning, changes in production levels are dealt with:

A) By using demand promotions
B) By hiring and laying off workers
C) With inventory only
D) With a combination of inventory and part-time workers.

Question 21

Under level production aggregate planning, changes in production levels are dealt with:

A) By using demand promotions
B) By hiring and laying off workers
C) With inventory only
D) With a combination of inventory and part-time workers.

Question 22

Which of the following statements is not true about demand chase aggregate planning?

A) It is the simplest approach to aggregate planning.
B) Changes in production levels are dealt with through a buffer of finished goods inventory.
C) Under the demand chase strategy, some costs aren't quantifiable.
D) A pure demand chase strategy is uncommon.
E) Financial costs associated with this plan are the costs of hiring and laying off workers.

Question 23

Costs associated with level production aggregate planning can include which of the following:

A) Inventory carrying costs
B) Periodic hiring costs
C) Inventory ordering cost
D) Periodic firing costs

Question 24

In level production aggregate planning, when the combined quantity of inventory and production is unable to meet demand, which of the following actions could help match capacity to demand?

A) Overtime is planned
B) Plan worker layoffs
C) Plan order cancellations
D) Adjust the demand forecast

Question 25

In level production aggregate planning the production level for each period is determined by:

A) Multiplying the monthly demand by the number of periods
B) Multiplying the monthly demand by the labor hours per person per period
C) Dividing the labor hours available for the planning horizon by the time required to produce one unit.
D) Dividing the total production required in the planning horizon by the number of periods

Question 26

Capacity requirements planning:

A) Utilizes the master production schedule as the source of product demand information.
B) Utilizes the same information inputs as detailed capacity planning.
C) Uses planned order releases from material requirements planning instead of the master production schedule.
D) Does not include on hand inventory in its calculation of required capacity Both A and B

Question 27

Rough-cut capacity planning:

A) Utilizes the planned order release from MRP as the source of product demand information.
B) Is completed at the end-item level rather than component level.
C) Uses the actual component routing data rather than using bills of capacity.
D) Is affected by fixed quantity lot-sizing policies used in material requirements planning.

Question 28

In rough-cut capacity planning, available hours are calculated by

A) Multiplying required capacity per unit by the quantity in the master production schedule
B) Multiplying the standard hours available by the hours actually used
C) Dividing actual output by expected output
D) Multiplying the actual hours available by the historical utilization and historical efficiency

Question 29

In services, achieving the demand-capacity match often focuses on

A) Adjusting design capacity
B) Smoothing demand
C) Using temporary workers
D) Matching short term capacity to demand peaks

Question 30

Yield management techniques recognize that

A) Requirements will always be greater than available capacity.
B) It is better to generate even a small amount of revenue from some capacity than let it go unused.
C) Those customers who wait until the last minute to make a reservation are doing so to get the lowest price.
D) All customers are equally sensitive to price

Question 31

Overbooking is used

A) As a way to increase prices for those customers who make late reservations.
B) Recover revenues lost when customers with reservations do not show up.
C) As an alternative to yield management.
D) As a way to improve the service quality for passengers bumped.

Question 32

Prior to developing an overbooking policy, a business must

A) Determine the number of customers who will tolerate being bumped.
B) Determine the probability of there being alternatives for customers who are bumped
C) Determine the probability for each possible no-show condition
D) The expected cost of each no-show condition

Question 33

For a hotel, the best overbooking policy is the one that

A) Minimizes the expected costs associated with empty rooms and walking customers.
B) Maximizes perceived service quality.
C) Results in the fewest customers being bumped.
D) Minimizes costs of no-shows

Question 34

The use of contingent workers can

A) Reduce the business's flexibility.
B) Result in quality problems.
C) Eliminate the need to overbook customers.
D) Enhance employee morale.

Question 35

Capacity often has less an impact on ____ products or services can be produced than it has on ____ they can be produced.

Question 36

______ ________ is kept in reserve to deal with emergencies and disruptions.

Question 37

At the _____ _____ ____, cost per unit are at their lowest.

Question 38

The capacity of one critical resource can _____ the output level of the entire system.

Question 39

For _____, a breakdown for a short amount of time is not serious because they are idle part of the time anyway.

Question 40

The ______ ________ aggregate plan deals with demand fluctuations through a buffer of finished product inventory.

Question 41

The ______ ________ aggregate plan deals with demand fluctuations through hiring and firing of employees.

Question 42

Rough-cut capacity planning is completed at the _____ level, while MRP is completed at the _____
level.

Question 43

_____ ____ has been considered as a means of leveling demand on health care facilities.

Question 44

Match these items.

-Protective capacity

A) When demand and design capacity are equal
B) Planned with a specific output level
C) Uses production level changes to match changes in demand
D) Is completed at the component level
E) Recognizes the role constraints play in productive systems
F) Uses inventory and variable labor to cope with demand fluctuations
G) May result in an overbooking policy
H) Uses the master production schedule as the source of product demand information
I) Used to add flexibility to operations
J) Uses finished product inventory to deal with demand fluctuations

Question 45

Match these items.

-No shows

A) When demand and design capacity are equal
B) Planned with a specific output level
C) Uses production level changes to match changes in demand
D) Is completed at the component level
E) Recognizes the role constraints play in productive systems
F) Uses inventory and variable labor to cope with demand fluctuations
G) May result in an overbooking policy
H) Uses the master production schedule as the source of product demand information
I) Used to add flexibility to operations
J) Uses finished product inventory to deal with demand fluctuations

Question 46

Match these items.

-Level production

A) When demand and design capacity are equal
B) Planned with a specific output level
C) Uses production level changes to match changes in demand
D) Is completed at the component level
E) Recognizes the role constraints play in productive systems
F) Uses inventory and variable labor to cope with demand fluctuations
G) May result in an overbooking policy
H) Uses the master production schedule as the source of product demand information
I) Used to add flexibility to operations
J) Uses finished product inventory to deal with demand fluctuations

Question 47

Match these items.

-Design capacity

A) When demand and design capacity are equal
B) Planned with a specific output level
C) Uses production level changes to match changes in demand
D) Is completed at the component level
E) Recognizes the role constraints play in productive systems
F) Uses inventory and variable labor to cope with demand fluctuations
G) May result in an overbooking policy
H) Uses the master production schedule as the source of product demand information
I) Used to add flexibility to operations
J) Uses finished product inventory to deal with demand fluctuations

Question 48

Match these items.

-Constraint management

A) When demand and design capacity are equal
B) Planned with a specific output level
C) Uses production level changes to match changes in demand
D) Is completed at the component level
E) Recognizes the role constraints play in productive systems
F) Uses inventory and variable labor to cope with demand fluctuations
G) May result in an overbooking policy
H) Uses the master production schedule as the source of product demand information
I) Used to add flexibility to operations
J) Uses finished product inventory to deal with demand fluctuations

Question 49

Match these items.

-Rough-cut capacity planning

A) When demand and design capacity are equal
B) Planned with a specific output level
C) Uses production level changes to match changes in demand
D) Is completed at the component level
E) Recognizes the role constraints play in productive systems
F) Uses inventory and variable labor to cope with demand fluctuations
G) May result in an overbooking policy
H) Uses the master production schedule as the source of product demand information
I) Used to add flexibility to operations
J) Uses finished product inventory to deal with demand fluctuations

Question 50

Match these items.

-Aggregate planning

A) When demand and design capacity are equal
B) Planned with a specific output level
C) Uses production level changes to match changes in demand
D) Is completed at the component level
E) Recognizes the role constraints play in productive systems
F) Uses inventory and variable labor to cope with demand fluctuations
G) May result in an overbooking policy
H) Uses the master production schedule as the source of product demand information
I) Used to add flexibility to operations
J) Uses finished product inventory to deal with demand fluctuations

Question 51

Match these items.

-Best operating level

A) When demand and design capacity are equal
B) Planned with a specific output level
C) Uses production level changes to match changes in demand
D) Is completed at the component level
E) Recognizes the role constraints play in productive systems
F) Uses inventory and variable labor to cope with demand fluctuations
G) May result in an overbooking policy
H) Uses the master production schedule as the source of product demand information
I) Used to add flexibility to operations
J) Uses finished product inventory to deal with demand fluctuations

Question 52

Match these items.

-Capacity Requirements Planning

A) When demand and design capacity are equal
B) Planned with a specific output level
C) Uses production level changes to match changes in demand
D) Is completed at the component level
E) Recognizes the role constraints play in productive systems
F) Uses inventory and variable labor to cope with demand fluctuations
G) May result in an overbooking policy
H) Uses the master production schedule as the source of product demand information
I) Used to add flexibility to operations
J) Uses finished product inventory to deal with demand fluctuations

Question 53

Match these items.

-Demand chase

A) When demand and design capacity are equal
B) Planned with a specific output level
C) Uses production level changes to match changes in demand
D) Is completed at the component level
E) Recognizes the role constraints play in productive systems
F) Uses inventory and variable labor to cope with demand fluctuations
G) May result in an overbooking policy
H) Uses the master production schedule as the source of product demand information
I) Used to add flexibility to operations
J) Uses finished product inventory to deal with demand fluctuations

Question 54

ABC copier is located in downtown Grand Rapids and is managed by 2 college students. Currently, the company owns two high-speed copiers that can be run by one operator. The 2 students work alone and therefore, the company operates two shifts per days (i.e. 8 hours a shift, 5 days a week). Each student takes a 15 minutes lunch/dinner break each day. In addition, they service the machine for 15 minutes at the beginning of each shift. The set up time depends on the job, on the other hand, the efficiency of the machines are estimated at 100 percent since they are new. The business at the copy center is great, orders keep pouring in. Use the information given below to calculate the normal daily capacity of ABC copier and to project next Monday's required capacity, based on the information given below:
$\begin{array}{cccc} \text {Job No.} &\text { No. Of Copies} &\text { Set up time (min)} & \text {Run-time (min/unit) }\\1 & 1000 & 5 & 0.06 \\2 & 800 & 7 & 0.10 \\3 & 1200 & 6 & 0.12 \\4 & 5000 & 8 & 0.10 \\5 & 10000 & 10 & 0.14\end{array}$

Question 55

A local bank has been using a level workforce of tellers five days a week, Monday through Friday. The tellers have considerable idle time on Tuesdays through Thursdays, with certain peak periods during the lunch hours and after 4:00 pm each day. On Monday mornings and Friday afternoons all tellers are extremely busy. During these times, customers wait for a significant amount of time in queues and some customers' leave before the service is provided. What options should this local bank consider for aggregate planning to better serve customers? How should the bank manager analyze these options and what data should be collected?

Question 56

Many car rental companies require overtime of their employees to adjust for the peaks of seasonal demand. This aggregate planning approach has resulted in high employee turnover. Because of the high turnover, car rental companies have had difficulty hiring the right number of employees and the training provided to these new employees has been minimal. Discuss the implication of this strategy for the car rental business. Are there any other strategies that you would recommend the car rental companies' implement in addition to using overtime?