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
ANS: D PTS: 1

18. 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
ANS: A PTS: 1

19. 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
ANS: D PTS: 1

20. 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
ANS: B PTS: 1

21. 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
ANS: C PTS: 1

22. 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.
ANS: B PTS: 1

23. Referring to a Revenue Management System (RMS), which of the following is not a
component?
a. Marketing
b. Forecasting
c. Pricing
d. Allocating
 ANS: A PTS: 1

24. Revenue Management Systems (RMS)

a. are batched daily
b. rely solely on overbooking
c. are cost minimization models
d. are time-dependent
ANS: D PTS: 1

25. 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
ANS: C PTS: 1

26. 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.
ANS: A PTS: 1

SHORT ANSWER

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

ANS:
Capacity is the capability of a manufacturing or service resource such as a facility process,
workstation or piece of equipment to accomplish its purpose over a specified time period.
Capacity can be viewed in one of two ways:
1. As the maximum rate of output per unit of time
2. As units of resource availability

For example, the capacity of an automobile plant might be measured as the number of
automobiles capable of being produced per week. As a resource availability measure, the
capacity of a hospital would be measured by the number of beds available.

PTS: 1

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

ANS:
Economies of Scale are achieved when the average unit cost of a good or service decreases as
the capacity and/or volume of throughput increases. Economies of Scale support building
larger facilities with more capacity.

Diseconomies of Scale occur when the average unit cost of the good or service begin to
increase as the capacity and/or volume of throughput increase. Diseconomies of Scale suggest
that some optimal amount of capacity exists where costs are at a minimum.
 PTS: 1

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

ANS:
A focused factory is a way to achieve economies of scale without extensive investments in
facilities and capacity by focusing on a narrow range of goods or services, target market
segments and/or dedicated processes to maximize efficiency and effectiveness. The focused
factory argues to "divide and conquer" by adopting smaller more focused facilities dedicated
to
1 A few key products
.
2 A specific technology
.
3 A certain process design and capability
.
4 A specific competitive priority objective such as next day delivery
.
5 A particular market segments or customers and associated volumes
.

PTS: 1