Question 1

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

Accepted Answer

The answer of Total cost to produce is the sum...

Question 2

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.
 $$\begin{array} { | l | c | c | c | } 
\hline \text { Costs } & \text { Austin } & \text { Nashville } & \text { Oklahoma City } \
\hline \text { Fixed } ( \$ ) & 200,000 & 150,000 & 300,000 \
\hline \text { Variable (\$/unit) } & 7 & 10 & 4 \
\hline
\end{array}$$ 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?

Accepted Answer

The answer of A major computer manufacturer is interested in...

Question 3

Consider the system composed of four processes linked by a conveyor belt. There is no storage between these processes pictured below and market demand of 50 units per hour drives the conveyor belt. Assume that no defective units are made. Which statement is best? 
A)There are about 18 units in the process at any given time.
B)There is more actual time spent in Process 2 and Process 3 combined than in Process 1 and Process 4 combined.
C)The flow rate through Process 1 is the highest.
D)The flow rate through Process 4 is the highest.

Accepted Answer

The answer of Consider the system composed of four processes...

Question 4

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

Accepted Answer

Outcome points in a decision tree are not under direct control of the decision maker, but rather represent the potential results of different choices or scenarios. The decision maker can only control the choices or actions that lead to those outcomes.

Question 5

Saul Goodman represents several clients and bills at $400 per hour. He forgot to record the time it took to complete each activity, but he knows his eight-hour day was spent representing three consecutive clients involved in one high profile case. He also remembers that Walt told him once that his learning curve percentage was 85%. How much should Saul bill each of his three clients?

Accepted Answer

The answer of Saul Goodman represents several clients and bills...

Question 6

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.

Accepted Answer

The answer of A Seattle entrepreneur must decide on the...

Question 7

Consider the system composed of four processes linked by a conveyor belt. There is no storage between these processes pictured below and market demand exceeds the company's ability to produce. Which statement is best? 
A)The overall system output is 220 units/hr.
B)The overall system output is 70 units/hr.
C)The overall system output is 40 units/hr.
D)The overall system output is 55 units/hr.

Accepted Answer

The answer of Consider the system composed of four processes...

Question 8

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

Accepted Answer

Building rental and depreciation on capital equipment are costs that do not vary based on the level of production or sales, and are therefore considered fixed costs.

Question 9

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?

Accepted Answer

The answer of A wise professor crafts a midterm that...

Question 10

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

Accepted Answer

A ninety percent learning curve indicates less improvement (or slower learning) with each doubling of production or practice compared to an eighty percent learning curve, making it less steep.

Question 11

An entrepreneur identifies a product that she knows will sell like crazy if she can only figure out a way to bring it to her area. The idea is so fantastic that I can't tell you what it is, so we will just refer to it as X. The entrepreneur has identified four ways to bring X to the masses; she can import it, she can smuggle it, she can try to produce it on her own, and she can have a local reputable producer make it for her. The fixed and variable costs for each of these alternatives are shown below. Develop a graph showing the ideal alternative across a range of demand that reflects all decision points.
 $$\begin{array} { | l | c | c | c | c | } 
\hline & \text { Import } & \text { Produce } & \text { Smuggle } & \text { Outsource } \
\hline \text { Fixed Cost } & \$ 25,000 & \$ 500,000 & \$ 200,000 & \$ 0 \
\hline \text { Variable Cost } & \$ 30 & \$ 10 & \$ 15 & \$ 37 \
\hline
\end{array}$$

Accepted Answer

The answer of An entrepreneur identifies a product that she...

Question 12

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.

Accepted Answer

Developing internal capacity allows a firm to have greater control over strategic activities and respond more quickly to changes in the market. Outsourcing may be cheaper in the short-term, but it can also result in a loss of control and flexibility.

Question 13

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

Accepted Answer

The answer of A learning percentage of 80 means that...

Question 14

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 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.

Accepted Answer

The answer of Consider the system composed of four processes...

Question 15

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

Accepted Answer

When the variable cost increases, it means that each unit produced costs more to make, which reduces the contribution margin per unit. As a result, more units need to be sold to cover the fixed costs before a profit is made, meaning that the break-even point increases.

Question 16

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

Accepted Answer

The answer of The ________ is the output volume level...

Question 17

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

Accepted Answer

The answer of Students arrive at a professor's office every...

Question 18

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

Accepted Answer

Learning curve theory takes into account that productivity will increase as people and systems learn to perform tasks more efficiently over time. As more experience and understanding is gained, the process becomes easier and faster, resulting in an increase in productivity.

Question 19

Consider the system composed of four processes linked by a conveyor belt. There is no storage between these processes pictured below and market demand of 40 units per hour drives the conveyor belt. Assume that no defective units are made. Which statement is best? 
A)The average time a unit spends in Process 1 is 2 and a half minutes.
B)The average time a unit spends in Process 2 is 5 minutes.
C)The flow time for a unit through the entire process is 33 minutes.
D)The flow rate through the entire process is 160 units per hour.

Accepted Answer

The flow time through the entire process can be calculated as the sum of individual process times plus the time spent on the conveyor belt.

Flow time = Process 1 time + Process 2 time + Process 3 time + Process 4 time + Conveyor time

Flow time = 2 + 6 + 12 + 12 + (40/60)

Flow time = 33 minutes

Therefore, choice C is correct. Choice A is incorrect because 2 and a half minutes is the process time for Process 1, not the time spent by a unit in that process. Choice B is incorrect because the average time a unit spends in Process 2 can be calculated as the process time of Process 2 divided by the number of arriving units, which is 24 seconds (0.4 minutes), not 5 minutes. Choice D is incorrect because the flow rate through the entire process can be calculated as the number of arriving units divided by the flow time, which is approximately 1.21 units per minute or 72.6 units per hour, not 160 units per hour.

Question 20

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

Accepted Answer

The answer of When demand is uncertain, the expected value...

Quiz 6: Managing Capacity

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

Consider the system composed of four processes linked by a conveyor belt. There is no storage between these processes pictured below and market demand of 50 units per hour drives the conveyor belt. Assume that no defective units are made. Which statement is best?

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

Consider the system composed of four processes linked by a conveyor belt. There is no storage between these processes pictured below and market demand exceeds the company's ability to produce. Which statement is best?

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

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

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.

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

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?

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

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

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?

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

Consider the system composed of four processes linked by a conveyor belt. There is no storage between these processes pictured below and market demand of 40 units per hour drives the conveyor belt. Assume that no defective units are made. Which statement is best?

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