POM ch.4 Capacity planning PDF

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Operations Management, 11e (Krajewski et al.) Chapter 4: Capacity Planning 4.1 Planning Long-Term Capacity 1) Capacity is the maximum rate of output of a process. Answer: TRUE Reference: Planning Long-Term Capacity Difficulty: Easy Keywords: capacity, maximum output rate Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 2) Capacity can be expressed by output or input measures. Answer: TRUE Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: capacity, input measures, output measures Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 3) Input measures of capacity are inherently more accurate than output measures of capacity. Answer: FALSE Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: input measures, output measures, capacity Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 4) Utilization is the degree to which equipment, space, or labor is currently being used. Answer: TRUE Reference: Planning Long-Term Capacity Difficulty: Easy

Keywords: utilization, equipment used, space used, labor used 5) One reason economies of scale drive down cost is the spreading of fixed costs. Answer: TRUE Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: economies of scale, fixed cost 6) Diseconomies of scale is a concept that states that the average unit cost of a service or good can be reduced by increasing its output rate. Answer: FALSE Reference: Planning Long-Term Capacity Difficulty: Easy Keywords: diseconomies of scale, average unit cost, output rate Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 7) Long-term capacity plans deal with:

1. A) investments in new facilities. 2. B) workforce size. 3. C) inventories. 4. D) overtime budgets. Answer: A Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: long-term capacity, new facilities Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge

8) Long-term capacity decisions that confront managers include all of the following EXCEPT:

1. A) capital equipment. 2. B) additional land. 3. C) buildings. 4. D) workforce size.

Answer: D Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: long-term capacity Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge

9) Regarding the measurement of capacity, when a firm provides a relatively small number of standardized products and services:

1. A) capacity cannot be determined reliably. 2. B) input measures are typically used. 3. C) output measures are typically used. 4. D) utilization becomes equal to capacity. Answer: C Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: output measure, capacity Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge

10) One of the many steps in the production of toothpaste is to screw the caps on the tubes, which is still a manual process, performed by one man, Mr. Bucket. Which statement about this situation is BEST?

1. A) This is most appropriate for an output measure of capacity. 2. B) This is most appropriate for an input measure of capacity. 3. C) Utilization of the worker at this process step cannot be measures as it is a manual process. 4. D) In this case, the capacity of this step is not the maximum rate of output. Answer: A

11) Input measures include such metrics as:

1. A) the number of customers served per hour. 2. B) the number of trucks produced per day. 3. C) the number of machine hours available. 4. D) the number of bills processed in a week. Answer: C Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: input measure, capacity Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge

12) The degree to which equipment, space, or labor is being used is commonly referred to as:

1. A) capacity. 2. B) output. 3. C) utilization. 4. D) cushion. Answer: C Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: utilization, capacity Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge

13) Although the fire marshal had declared the capacity of the classroom at 45 students, the introduction to operations management class was so popular, the average attendance was 55 students, literally standing room only. Shouts of "You the man!" accompanied the successful solution of problems such as this: What is the utilization of the operations management professor?

1. A) 122% 2. B) 100% 3. C) 55 students 4. D) 45 students Answer: A

14) Although the fire marshal had declared the capacity of the classroom at 55 students, the introduction to operations management class was so popular, the average attendance was 75 students, literally standing room only. Squeals of excitement and the occasional burning of an overturned car accompanied the successful solution of problems such as this: What is the utilization of the operations management professor?

1. A) 100% 2. B) 136% 3. C) 75 4. D) 55 Answer: B Reference: Planning Long-Term Capacity Difficulty: Easy Keywords: utilization, capacity Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Analytical Thinking

15) The test bank author abandoned his teaching duties when he was in the zone working on a test bank. Normally scheduled to teach a nine-hour load during the semester, he generally made his way to one threehour class a week, one where his students could propose devious problems that were sure to confound generations of test takers. What is the test bank author's utilization for his teaching duties?

1. A) three hours 2. B) nine hours 3. C) 33%

4. D) 300% Answer: C Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: utilization, capacity Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Analytical Thinking

16) A manufacturing plant is capable of producing 10 tons of product per day when it runs three shifts with no breakdowns and plenty of raw materials. Over the past week, the plant has produced an average of 7.3 tons per day because the third shift has devoted much of their time to preventive maintenance. What is the utilization of the plant?

1. A) 10 tons/day 2. B) 7.3 tons/day 3. C) 137% 4. D) 73% Answer: D Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: utilization, capacity Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Analytical Thinking 17) A manufacturing plant is capable of producing 10 tons of product per day when it runs three shifts with no breakdowns and plenty of raw materials. Over the past week, the plant has produced an average of 7.3 tons per day since the third shift has devoted much of their time to preventive maintenance. What is the capacity of the plant?

1. A) 10 tons/day 2. B) 7.3 tons/day 3. C) 73% 4. D) 137% Answer: A

18) The transition from economies of scale to diseconomies of scale:

1. A) is more likely to occur in a service operation. 2. B) is more likely to occur in a manufacturing operation. 3. C) is more likely to occur when utilization is low. 4. D) contains the point at which average unit costs are at their lowest. Answer: D Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: economies of scale, diseconomies of scale Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 19) ________ is the maximum rate of output for a process. Answer: Capacity Reference: Planning Long-Term Capacity Difficulty: Easy Keywords: capacity, maximum rate of output Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge

20) Capacity decisions should be linked closely to ________ and ________ throughout the organization. Answer: processes, supply chains Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: capacity decision, strategy, process, supply chains Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 21) ________ is the degree to which equipment, space, or labor is currently being used. Answer: Utilization Reference: Planning Long-Term Capacity Difficulty: Easy Keywords: utilization, use of equipment, space, labor

Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge

22) The ________ concept states that the average unit cost of a service or good can be reduced by increasing its output rate. Answer: economies of scale Reference: Planning Long-Term Capacity Difficulty: Easy Keywords: economies of scale Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 23) ________ occurs when the average cost per unit increases as the facility's size increases. Answer: Diseconomies of scale Reference: Planning Long-Term Capacity Difficulty: Easy Keywords: diseconomies of scale Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge

4.2 Capacity Timing and Sizing Strategies 1) A capacity cushion is the amount of inventory that a firm maintains to handle sudden increases in demand or temporary loss of production capacity. Answer: FALSE Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge

2) A larger capacity cushion may be required due to variation in demand, changing product mix, or supply

uncertainty. Answer: TRUE Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion, variation in demand, changing product mix, supply uncertainty Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge

3) A smaller capacity cushion may be required if a process is highly capital intensive. Answer: TRUE Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion, capital intensity Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 4) A larger capacity cushion can help firms uncover process inefficiencies, so they can find ways to correct them. Answer: FALSE Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion, process inefficiencies Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 5) Capacity cushions may be lowered if companies smooth the output rate by raising prices when inventory is low and decreasing prices when it is high. Answer: TRUE Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion, output rate, changes in pricing, inventory levels Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes.

AACSB: Application of Knowledge 6) An expansionist capacity strategy involves large, infrequent jumps in capacity, where a wait-and-see strategy involves smaller, more frequent jumps. Answer: TRUE Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: expansionist strategy, wait-and-see strategy, size and timing of capacity increases Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge

7) A wait-and-see capacity strategy minimizes the chances of lost sales due to insufficient capacity. Answer: FALSE Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate 8) A firm may preempt the expansion of competitive firms by using an expansionist capacity strategy and announcing a large capacity expansion. Answer: TRUE Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: expansionist strategy, capacity expansion Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 9) An expansionist capacity strategy minimizes the risks of overexpansion due to overly optimistic demand forecasts. Answer: FALSE Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: wait-and-see strategy, overexpansion, demand forecasts Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 10) Large, infrequent jumps in capacity are characteristic of companies that:

1. A) have an expansionist strategy.

2. B) have a wait-and-see strategy. 3. C) have low utilization. 4. D) have high utilization. Answer: A Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: expansionist capacity strategy Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge

11) Which one of the following factors usually motivates a smaller capacity cushion?

1. A) unevenly distributed demands 2. B) high capital intensity 3. C) high penalty costs for overtime usage 4. D) requests for quick customer services Answer: B Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate 12) Which one of the following factors usually calls for a larger capacity cushion?

1. A) uncertain demand 2. B) high capital intensity 3. C) more reliable equipment 4. D) high worker flexibility Answer: A Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion, demand variability Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 13) Which one of the following statements about capacity cushions is BEST?

1. A) Companies with flexible flow processes tend to have small capacity cushions. 2. B) Companies with high capital costs tend to have large capacity cushions. 3. C) Companies that have considerable customization tend to have larger capacity cushions. 4. D) Constant demand rates require larger-capacity cushions. Answer: C Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion, customization Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 14) Which one of the following statements concerning capacity cushions is BEST?

1. A) Large capacity cushions are used more often when future demand is level and known. 2. B) Small capacity cushions are used extensively in capital intensive firms. 3. C) Capacity cushions are used primarily in manufacturing organizations, not in service organizations. 4. D) Small cushions are used in organizations where the products and services produced often change. Answer: B Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion, capital intensity Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 15) If a system is well balanced, which one of the following changes usually calls for a larger capacity cushion?

1. A) higher capital intensity 2. B) higher worker flexibility 3. C) requests for fast delivery times 4. D) higher inventories Answer: C Reference: Capacity Timing and Sizing Strategies

Difficulty: Moderate Keywords: balanced system, cushion capacity Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 16) It takes a service rep an average of two minutes to take a customer's information. Over the course of a work week, the rep handles 160 calls a day during her eight-hour shift. What is the service rep's capacity cushion?

1. A) 20% 2. B) 33% 3. C) 50% 4. D) 67% Answer: B Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 17) It takes a service rep an average of two and a half minutes to take a customer's information. Over the course of a work week, the rep handles 160 calls a day during her eight-hour shift. What is the service rep's capacity cushion?

1. A) 16% 2. B) 33% 3. C) 50% 4. D) 66% Answer: A Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion

18) An expansionist capacity strategy:

1. A) lags behind demand.

2. B) reduces the risk of overexpansion based on overly optimistic demand forecasts. 3. C) can preempt expansion by competitors by announcing a large capacity expansion. 4. D) meets capacity shortfalls with overtime, temporary workers, subcontracting, and stockouts. Answer: C Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion, capacity expansion Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 19) A wait-and-see capacity strategy:

1. A) involves small, frequent jumps in capacity. 2. B) minimizes the chance of lost sales due to insufficient capacity. 3. C) can result in economies of scale and a fast rate of learning, yielding reduced manufacturing costs. 4. D) stays ahead of demand. Answer: A Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion, capacity jumps Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 20) ________ is the amount of reserve capacity that a firm maintains to handle a sudden increase in demand or temporary losses of production capacity. Answer: Capacity cushion Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate Keywords: capacity cushion, reserve capacity Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes. AACSB: Application of Knowledge 21) If demand is increasing, and you also prefer to increase the time between capacity increments, then the

size of increments should ________. Answer: increase Reference: Capacity Timing and Sizing Strategies Difficulty: Moderate 4.3 A Systematic Approach to Lon...