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Exam 5: Strategic Capacity Management

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Question 1

True/False

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Sharing capacity is a common source of external capacity.

A) True
B) False

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Question 2

Multiple Choice

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At a decision point in a decision tree, which machine would you select when trying to maximize payoff when the anticipated benefit of selecting machine A is $45,000, with a probability of 90%; the expected benefit of selecting machine B is $80,000, with a probability of 50%; and the expected benefit of selecting machine C is $60,000, with a probability of 75%?

A) Machine A
B) Machine B
C) Machine C
D) You would be indifferent between machines A and C.
E) You would be indifferent between machines A and B.

F) C) and E)
G) A) and B)

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Question 3

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What is an important difference between capacity planning in services and capacity planning in manufacturing operations?

When evaluating capacity, managers need to consider both resource inputs and product outputs.

Compared with a service operation, a manufacturing operation's capacity is which of the following?

Economies of scope exist when multiple products can be produced at a lower cost in combination than they can separately.

If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units, which of the following is the capacity utilization rate?

A production facility develops virtuosity and works best when it focused on a widely varied set of production objectives.

Which of the following is not a step used in determining production capacity requirements?

A capacity cushion is the amount of capacity less than expected demand.

The problem of keeping demand sufficiently high to keep a large factory busy is a sales issue and not a diseconomy of scale.

Long-range capacity planning requires top management participation.

Because services cannot be stored for later use, service managers consider time as one of their supplies or resources.

The larger the capacity cushion, the better.

Making adjustments to eliminate the variance between planned and actual output is tied into intermediate-range capacity planning.

The way to build in greater flexibility in your workers is to do which of the following?

Capacity can be defined as the amount of available resource inputs relative to requirements for output over a particular period of time.

The objective of strategic capacity planning is to determine the overall capacity level of capital intensive resources (including facilities, equipment, and overall labor force size) that best supports the company's short-range competitive strategy.

A production facility works best when it focuses on a fairly limited set of production objectives.

The basic notion of economies of scale is that as a plant gets larger and volume increases, the average cost per unit of output drops.