Questions: 1. All of the following factors are part of determining effective capacity except: a. Human b. External c. Facility d.

Design e. all of the above are factors answer:d design factors...page 181 2. The capacity planning process DOES NOT include which of the following? a. Estimate future requirements b. Implement selected alternative c. Access key quantitative issues d. Identify alternatives e. Both a & d answer:c page 183 3. All of the following are true of Capacity decisions except: a. impact the ability of the organization to meet future demands b. affect operating costs c. are a major determinant of initial cost d. are a major determinant of variable cost e. often involve long term commitment of resources. answer: d 4. Which of the following industries measure capacity? a. Farming b. Theater c. Retail Sales d. Hospital e. All of the above answer e. page 180 5. Which of the following describes the initial cost of an investment? a. Internal rate of return b. proceeds c. Present value d. cash flow e. Both a & d answer: c. page 196 6) Which statement best describes a constraint of capacity planning? a. Facilitates the performance of a process or system in achieving its goal b. Limits the performance of a process or system in achieving its goal c. Enhances the performance of a process or system in achieving its goal d. Excels the performance of a process or a system in achieving its goal. e. Maximizes the performance of a process or a system in achieving its goal Answer: B answer on page 201 in the margin

7) What are the three primary strategies in capacity planning? a. growing,leading, tracking b. leading, moving, tracking

when demand is certain b. capacity decisions affect competitiveness and management e. when the company sales are increasing Answer: B demand is uncertain (192) 12) Which of the following is a reason a company would want to outsource? a. capacity decisions have a real impact on whether or not a company will meet future demands b. the design and aesthetics of the facility vs. the size of the facility c. capacity decisions affect operating costs c. supply chain b. system is flexible b. all of the above are components of capacity decision importance Answer: E all of the above 11) When would a company incorporate a capacity cushion? a. operational factors e. The organization has unique quality requirements c. none of the above answer: E none of the above (195) 13) What is the evidence of an unbalanced system? a. capacity requirements are smoothed out d. there is no difference Answer: D actual output vs. when the company has very standard products d. following. stage of life cycle is taken into account c. human considerations d. leading. potential maximum output 10) Which answer(s) defines why capacity decisions are important? a. tracking d. tracking Answer: C found on page 191 8) Which of the following is NOT a determinant of effective capacity planning? a. when demand is uncertain c. leading. capacity decisions are generally a major determinant of initial cost d. external forces c. analyzing. all the above are determinants of effective capacity planning Answer: E all the above. answer found on page 189 9) What are the major difference between design capacity and effective capacity? a. the effectiveness of the facility d. a bottleneck operation exists . when the company sales are declining e. synthesizing. The organization does not have the necessary skills b. the actual amount of output vs. the size of the facility vs the effectiveness of the facility b. the potential maximum amount of output e. the design and aesthetics of the facility vs. Demand is high and steady e. leading e. tracking.c.

none of the above e. the firm should increase the output rate in order to decrease average unit costs c. Strengths and weaknesses (pg 185) 17) Strategic capacity planning for services differs from that for goods due to: a) The inability to store services in advance b) Demand volatility c) Degree of customization d) The need for customer convenience e) All of the above E. average unit costs after the optimal level are: a) Larger b) Smaller c) Lowest d) Constant e) None of the above . The firm is obtaining a profit c. both a and b answer: C the output rate is more than the optimal level (200) 16) Reasons for strategic capacity planning include all of the following except : a) Changes in the environment b) Changes in technology c) Changes in demand d) Strengths and weaknesses e) Opportunities and threats D. TFC=TVC d. the company is in the growth phase Answer: E bottleneck operation exists (197) 14) At the break even point… a. the output rate is less than the optimal level b. the output rate is more than the optimal level d. none of the above answer: (A) total cost and total revenue are equal (203) 15) Dis-economies of scale happen when… a. All of the above (pg 195) 19) In dis-economies of scale.TC=TR b. Volume of output is TC > TR e.e. All of the above (pg 194) 18) Relevant criteria in determining whether to outsource production include: a) Location b) Quality c) Current in-house capacity d) Costs e) All of the above E.

page 191 22) Which is an important factor in planning service capacity? a) availability of capacity b) the need to be near customers c) the degree of volatility of demand d) both b and c e) none of the above Answer: d. Variable cost per unit is constant (pg 205) 21) Which of the following is NOT a primary capacity strategy? a) continuous b) leading c) following d) tracking e) both b and d Answer: a. Larger (pg 200) 20) Which of the following assumptions must be satisfied in order to use Cost Volume Analysis? a) Variable cost per unit is greater than revenue per unit b) Variable cost per unit is constant c) More than one product in involved d) Fixed costs change with volume e) Revenue per unit changes with volume B. page 189 25) Which of the following are steps in the capacity planning process? a) estimate future capacity requirements b) conduct financial analysis c) monitor results d) implement the selective alternative e) all of the above Answer: e. page 188 24) Given the following information. compute the efficiency: Effective capacity = 40 trucks per day. page 192 26) Which of these are NOT determinants of effective capacity? a) Facilities b) Process Factors c) Human Factors . page 194 23)The maximum designed service capacity or output rate is known as? a) capacity cushion b) bottleneck operation c) effective capacity d) design capacity e) both c and d Answer: d.A.7% e) 54% Answer: c. Actual output = 36 trucks per day a) 82% b) 99% c) 90% d) 89.

d) Something that monitors results e) Something that can never be overcome. Find key quality issues Answer = B. Determine future capacity price D. Evaluate existing capacity B. Facilities B.FC) d) FC/(VC-Revenue) e) None of the above Answer A (page 204) 30) What is the best way to measure capacity for a steel mill? a) In dollars b) In number of workers c) In the size of the mill d) In tons of steel produced per day e) In number of resources used Answer D (page 188) 31) What is the first step in the capacity planning process? A. Formulate policy C. Determine Product/Service B. Product factors C. b) Something that hinders performance of a system in achieving its goals.d) Policy Factors e) All of above are determinants of effective capacity Answer E (page 190) 27) What is a constraint? a) Something that allows a system to perform more effectively and efficiently. Human factors D. Select alternative capacity E. Page 192 32) Which of these is a determinant of effective capacity? A. All of these Answer = E. Estimate future capacity C. c) Something that attempts to smooth out capacity requirements. Operational factors E. Locate facilities .VC per unit) b) VC/(FC-Revenue) c) Revenue/(VC . Page 190 33) What is the first step in strategy formulation? A. Answer B (page 201) 28) Which assumptions must be satisfied in order for cost-volume analysis to be a valuable tool? a) Variable cost/unit exceeds revenue/unit b) Everything produced may not be sold c) Only one product involved d) Revenue per unit may change depending on volume e) Variable cost per unit may differ depending on volume Answer C (page 205) 29) What is the correct formula for the break even point in units? a) FC / (Revenue per unit .

For current goals D.) I and IV Answer: D. and IV e. IV. Finance B. A system’s potential for producing goods or delivering services over a specified time interval. a. while capacity utilization is not.) Efficiency is a measure of system effectiveness. III. A ceiling on output and a major determinant of operating costs.) 50 trucks per day e. II. Answer: A. For “what if” analysis Answer = E. The lower limit or bottom on the load that an operating unit can handle. and IV d.) 55 trucks per day . Consumer demand E. while capacity utilization is the ratio of actual output to design capacity. For long term goals C. while efficiency is not. Page 207 36) What is capacity? I. II. Found on page 188 38) Find the design capacity when utilization = 72 and actual output = 36 trucks per day. Page 191 34) When is it best to use simulation? A.) Utilization is the ratio of actual output to effective capacity. The upper limit or ceiling on the load that an operating unit can handle. Page 207 35) Decision theory is best used in which of the following? A. Formulate process Order operations Answer = C. 207 37) What is the difference between efficiency and utilization? a. III. Found on pages 185. c. b. while efficiency is the ratio of actual output to design capacity.) I. Short term analysis Answer = A. e. Long term analysis D.) 45 trucks per day d. For customer wants E.) II and III c.) Efficiency is expressed as a percentage.D.) 40 trucks per day c. while capacity utilization measures capacity tailored to a situation.) I and II b.) I.) 35 trucks per day b. For short tem goals B. Inventory C.) Efficiency is the ratio of actual output to effective capacity. d.) Utilization is expressed as a percentage. a.

Found on page 189 (Utilization = [Actual Output/ Design Capacity] x 100) Therefore: [36/x] x 100 = 72 36 x 100x = 72x 36 = .) Bottleneck Operation d. Found on page 201 and 202 Possible Future Demand Alternatives Small Facility Low Moderate $10 $11 12 2 High $11 12 16 Medium Facility 7 Large Facility (3) 41. Answer: E.) Capacity Cushion e.) Make sure other portions of the process are supportive of the constraint.) Effective Operation Answer: C. Found on page 197 40) Which of the following is NOT one of the five steps used to resolve constraint issues: a.) Identify the most pressing constraint. Answer is A found on page 217 (Supplement to Chapter 5) 42.) Allow the constraint to limit performance when a strategy is expanding. Use the information above to answer this question. what would be the best choice for this company? a) Small Facility b) Medium Facility c) Large Facility d) Do Nothing e) They are all incorrect answers. What is Capacity cushion? If utilization is 38%. b. e.) Explore and evaluate ways to overcome the constraint. If the company uses Maxi-min Criterion to choose the best alternative.) Change the operation to achieve the maximum benefit.) Design Capacity c. c. given the constraint.72x x = 50 39) An operation in a sequence of operations whose capacity is lower than that of the other operations is known as: a. d.Answer: D. .) Effective Capacity b.

Variable costs would be $2 per cookie.=$6 per cookie. The owner of Cookies Inc. 44. . which require leasing for a monthly payment of $4. VC=$2 per cookie: Rev.000.500 3. Q=$4.00 Total Processing Time Needed (Hr) 1. How many machines would be needed to handle the required volume? (Round your answer to the whole number) a) 3 machines b) 1 machines c) 5 machines d) 2 machines e) 4 machines Answer is A found on page 194.000/($6-$2)=1000 cookies/month.Utilization Product Annual Demand 1 2 3 300 400 700 Standard Processing Time per Unit (Hr) 5. Use the information in the table to answer this question.000. Zoya.400 6. is contemplating adding a new line of cookies. Note: department is working one 8-hour shift 250 days a year.00 2. Answer is A found on page 204.00 8. How many cookies must be sold in order to break-even? a) 1000 cookies/month b) 1200 cookies/moth c) 2100 cookies/moth d) 1100 cookies/moth e) None of the above. Q=FC/(Rev-VC).100 43. and cookies retail price for $6 each. FC=$4..200 1. Based on the information below answer the following Questions 44-47.a) 72% b) 74% c) 12% d) 22% e) 62% Answer is E found on page The formula is Capacity cushion = 100% .

Use the table above to answer the following Questions 8-10. Q=($10.000.FC 46.000 0 to 300 301 to 600 601 to 900 Variable Cots is $12 per unit.500R R=$6.v) . Profit = Q(R .000=2. . and a profit is $8. 48.500R-$5. If 2. Answer is B found on page 204. P = Q(R .000+$4.00 15.500 cookies can be sold.FC $8.000=2.8 Number of Machines Total Annual Fixed Costs Corresponding Range of Output 1 2 3 $12.000=2. and revenue is $42 per unit.50 c) $6.v) . Determine the break-even point for range (0 to 300).80 Answer is C found on page 204. How many cookies must be sold to realize a profit of $10.000)/($6-$2)=3.000 $8.45.500 cookies 47.000? a) 3500 cookies b) 5300 cookies c) 3000 cookies d) 3200 cookies e) 2300 cookies Answer is A found on page 204. What would be the profit (loss) if 900 cookies are made and sold in a month? a) 400 profit b) 400 loss c) 4000 profit d) 4000 loss e) None of the above.500(R-$2)-$4.000 $17.000 24.00 b) $7.000+$4. what price should be charged per cookie? a) $7.50 e) $7.80 d) $6.

which is in the range 301 to 600. If break-even point for One machine: 400 units Range (0 to 300) Two machines: 500 units Range (301 to 600) Three machines: 800 units Range (601 to 900) a) 2 machines b) 3 machines c) 1 machine d) a&b both are correct e) None of the above. Q=FC/(R-v).000/($42-$12)=400 units. the manager should choose two machines. Answer is A found on page 205. increasing the output rate results in decreasing average unit costs according to: a) diseconomies of scale b) economies of scale c) capacity cushion d) efficiency e) utilization Answer B (Page 200) 52) If: Design capacity= 60 trucks per day. 51) If the output rate is less than the optimal level. a) 500 units b) 400 units c) 320 units d) 420 units e) 520 units Answer is A found on page 205. actual output = 36 trucks per day. compute the efficiency: . 50. it would be above the break even point and thus yield a profit. Thus.a) 400 units b) 320 units c) 420 units d) 380 units e) 520 units Answer is A found on page 205. 49. effective capacity = 40 trucks per day. Determine the break even point for range (301 to 600). This means that even if demand is at the low end of the range. the volume would still be less than the break-even point for that range. you can see that the break-even point is 500 units. so there would be no profit. how many machines should the manager purchase. At the top end of projected demand. That is not true of range 601 to 900. Comparing the projected range of demand to the two ranges for which a break -even point. If projected annual demand is between 580 and 650 units. the manager should do nothing. 12.

and concluding b. following.a) 20% b) 30% c) 40% d) 50% e) 90% Answer E (Efficiency=Actual output/effective capacity=36trucks per day/40 trucks per day=90%) (Page 188) 54) What is capacity cushion? a) Extra amount of capacity intended to offset uncertainty in demand b) Estimate in future capacity requirement c) Common demand pattern d) External service or good e) All of the above Answer A (Page 192) 55) What do long term considerations relate to? a) demand b) capacity cushion c) supply d) overall level of capacity requirements e) short term events Answer D (Page 192) 56) What are the three primary strategies of a strategy formulation? a. leading. leading. processing. leading. following. following. and tracking c. leading. start up. concluding answer is c. and tracking d. (found on page 191) Which of these factors wouldn't be subtracted from design capacity when calculating effective capacity? . and follow up e. start up.

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