Operations And Supply Chain Management 15Th Edition By Jacobs - Test Bank

Operations And Supply Chain Management 15Th Edition By Jacobs – Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

Chapter 05 Test Bank Static

1. Capacity can be defined as the ability to hold, receive, store, or accommodate.

TRUE

 

A dictionary definition of capacity is “the ability to hold, receive, store, or accommodate.”

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Management in Operations

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

TRUE

 

When looking at capacity, operations managers need to look at both resource inputs and product outputs.

 

AACSB: Analytic
Blooms: Analyze
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Management in Operations

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

TRUE

 

Capacity is a relative term; in an operations management context, it may be defined as the amount of resource inputs available relative to output requirements over a particular period of time.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Management in Operations

4. The capacity utilization rate is found by dividing best operating level by capacity used.

FALSE

 

The capacity utilization rate is found by dividing capacity used by best operating level.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts

 

5. The objective of strategic capacity planning is to provide an approach for determining the overall capacity level of labor-intensive resources.

FALSE

 

The objective of strategic capacity planning is to provide an approach for determining the overall capacity level of capital-intensive resources—facilities, equipment, and overall labor force size—that best supports the company’s long-range competitive strategy.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts

6. 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.

FALSE

 

The objective of strategic capacity planning is to provide an approach for determining the overall capacity level of capital-intensive resources—facilities, equipment, and overall labor force size—that best supports the company’s long-range competitive strategy.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts

7. 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 long-range competitive strategy.

TRUE

 

The objective of strategic capacity planning is to provide an approach for determining the overall capacity level of capital-intensive resources—facilities, equipment, and overall labor force size—that best supports the company’s long-range competitive strategy.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts

8. Best operating level is usually a multiple of the level of capacity for which a process was designed.

FALSE

 

Best operating level is the level of capacity for which the process was designed and thus is the volume of output at which average unit cost is minimized.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts

 

9. Best operating level is the volume of output at which average unit cost is minimized.

TRUE

 

Best operating level is the level of capacity for which the process was designed and thus is the volume of output at which average unit cost is minimized.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts

10. At some point, the size of a growing plant can become too large and diseconomies of scale become a capacity planning problem.

TRUE

 

At some point, the size of a plant becomes too large and diseconomies of scale become a problem.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Exemplify how to plan capacity.
Topic: Capacity Planning Concepts

11. Long-range capacity planning requires top management participation.

TRUE

 

Where productive resources (such as buildings, equipment, or facilities) take a long time to acquire or dispose of, long-range capacity planning requires top management participation and approval.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Management in Operations

12. Overtime and personnel transfers are solutions to capacity problems in the intermediate term.

FALSE

 

These are solutions to capacity problems in the short range—less than one month. This is tied into the daily or weekly scheduling process and involves making adjustments to eliminate the variance between planned and actual output. This includes alternatives such as overtime, personnel transfers, and alternative production routings.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Management in Operations

13. Capacity planning is generally viewed in three time durations: immediate, intermediate, and indeterminate.

FALSE

 

The correct answer is long range, intermediate range, and short range.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Management in Operations

 

14. 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.

TRUE

 

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.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Exemplify how to plan capacity.
Topic: Capacity Planning Concepts

15. A piece of equipment with twice the capacity of another piece typically costs twice as much to purchase and to operate.

FALSE

 

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. This is partially due to lower operating and capital cost, because a piece of equipment with twice the capacity of another piece typically does not cost twice as much to purchase or operate.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Exemplify how to plan capacity.
Topic: Capacity Planning Concepts

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

FALSE

 

While this can be viewed as a sales issue, it is one brought on by the large scale of operations and is thus also a diseconomy of scale.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Exemplify how to plan capacity.
Topic: Capacity Planning Concepts

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

TRUE

 

The concept of a focused factory holds that a production facility works best when it focuses on a fairly limited set of production objectives.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Exemplify how to plan capacity.
Topic: Capacity Planning Concepts

 

 

 

 

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

FALSE

 

A firm should not expect to excel in every aspect of manufacturing performance: cost, quality, delivery speed and reliability, changes in demand, and flexibility to adapt to new products. Rather, it should select a limited set of tasks that contribute the most to corporate objectives.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Exemplify how to plan capacity.
Topic: Capacity Planning Concepts

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

FALSE

 

These are tied into short range capacity planning—less than one month. This is tied into the daily or weekly scheduling process and involves making adjustments to eliminate the variance between planned and actual output. This includes alternatives such as overtime, personnel transfers, and alternative production routings.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Management in Operations

20. The ultimate in plant flexibility is a one-hour-changeover-time plant.

FALSE

 

Perhaps the ultimate in plant flexibility is the zero-changeover-time plant.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts

21. Capacity flexibility means having the ability to rapidly increase or decrease production levels or to shift production capacity quickly from one product or service to another.

TRUE

 

Capacity flexibility means having the ability to rapidly increase or decrease production levels or to shift production capacity quickly from one product or service to another.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts
 

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

TRUE

 

Economies of scope exist when multiple products can be combined and produced at one facility at a lower cost than they can be produced separately.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Exemplify how to plan capacity.
Topic: Capacity Planning Concepts

23. The frequency of adding to productive capacity should balance the costs of upgrading too frequently and the costs of upgrading too infrequently.

TRUE

 

See Exhibit 5.2 and the narrative on “Frequency of Capacity Additions.”

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

24. Outsourcing is a common source of external capacity.

TRUE

 

In some cases, it may be cheaper to not add capacity at all, but rather to use some existing external source of capacity. Two common strategies used by organizations are outsourcing and sharing capacity.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

25. Sharing capacity is a common source of external capacity.

TRUE

 

In some cases, it may be cheaper to not add capacity at all, but rather to use some existing external source of capacity. Two common strategies used by organizations are outsourcing and sharing capacity.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

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

FALSE

 

A capacity cushion is the amount of capacity in excess of expected demand.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

 

27. A decision tree problem does not need probabilities or payoffs to generate a solution.

FALSE

 

See the decision tree examples in the text. Without probabilities and payoffs, a decision tree is not capable of generating a solution.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-03 Evaluate capacity alternatives using decision trees.
Topic: Capacity Planning

28. In solving a decision tree problem, calculations start at the ends of the “branches” of the tree and work backward to the base of the tree.

TRUE

 

In solving a tree problem, we work from the end of the tree backward to the start of the tree.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-03 Evaluate capacity alternatives using decision trees.
Topic: Capacity Planning

29. The probability of each occurrence at a decision tree chance node is the reciprocal of the number of possibilities at the chance node.

FALSE

 

See the decision tree example in the text. This is only true in the unusual event that all the possibilities at each node have an equal chance of occurring.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 Evaluate capacity alternatives using decision trees.
Topic: Capacity Planning

30. In a decision tree, the only time probabilities are applied to a decision node is when the decision is being made by someone else such as you customer or your competitor.

FALSE

 

Decision trees are composed of decision nodes with branches to and from them. Usually, squares represent decision points and circles represent chance events. Branches from decision points show the choices available to the decision maker; branches from chance events show the probabilities for their occurrence.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 Evaluate capacity alternatives using decision trees.
Topic: Capacity Planning

 

 

31. Low rates of capacity utilization in service organizations are never appropriate.

FALSE

 

Hospital emergency rooms and fire departments should aim for low utilization because of the high level of uncertainty and the life-or-death nature of their activities.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 Compare capacity planning in services to capacity planning in manufacturing.
Topic: Planning Service Capacity

 

32. The smaller the capacity cushion, the better.

FALSE

 

This is not necessarily true, except in the instance of a firm whose competitive advantage is low cost or price. For a firm competing on speed of delivery or innovative ability, for example, a larger capacity cushion will allow more flexibility and enable an appropriate response to unplanned orders.

 

AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

33. The larger the capacity cushion, the better.

FALSE

 

This is false for the firm whose competitive advantage is low cost or price. For a firm competing on speed of delivery or innovative ability, for example, a larger capacity cushion will allow more flexibility and enable an appropriate response to unplanned orders.

 

AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

34. The capacity cushion is the ratio of capacity used to the best capacity level.

FALSE

 

A capacity cushion is an amount of capacity in excess of expected demand.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

35. When a firm’s design capacity is less than the capacity required to meet its demand, it is said to have a negative capacity cushion.

TRUE

 

When a firm’s design capacity is less than the capacity required to meet its demand, it is said to have a negative capacity cushion.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

 

36. In decision tree analysis, the time value of money is ignored because the only concern is with cash costs.

FALSE

 

In solving decision tree problems, we work from the end of the tree backward to the start of the tree. As we work back, we calculate the expected values at each step. In calculation of the expected value, the time value of money is important if the planning horizon is long.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 Evaluate capacity alternatives using decision trees.
Topic: Capacity Planning

37. In practice, achieving a perfectly balanced plant is usually desirable but impossible.

FALSE

 

In practice, achieving such a “perfect” design is usually both impossible and undesirable.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

38. In practice, achieving a perfectly balanced plant is usually both impossible and undesirable.

TRUE

 

In practice, achieving such a “perfect” design is usually both impossible and undesirable.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

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

TRUE

 

Unlike goods, services cannot be stored for later use. As such, in services managers must consider time as one of their supplies.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

 

40. The ability to rapidly and inexpensively switch production from one product to another enables what are sometimes referred to as:
41. Economies of scale
42. Economies of size
43. Economies of shape
44. Economies of scope
45. Economies of shipping

 

Flexible manufacturing systems and simple, easily set-up equipment permit rapid low-cost switching from one product to another, enabling what are sometimes referred to as economies of scope.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Exemplify how to plan capacity.
Topic: Capacity Planning Concepts

41. Capacity planning that involves hiring, layoffs, some new tooling, minor equipment purchases, and subcontracting is considered as which one of the following planning horizons?
42. Intermediate range
43. Long range
44. Short range
45. Current
46. Upcoming

 

Intermediate range: monthly or quarterly plans for the next 6 to 18 months. Here, capacity may be varied by such alternatives as hiring, layoffs, new tools, minor equipment purchases, and subcontracting.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Management in Operations

42. Capacity planning involving acquisition or disposal of fixed assets such as buildings, equipment or facilities is considered as which one of the following planning horizons?
43. Intermediate range
44. Long range
45. Short range
46. Current
47. Upcoming

 

Long range: greater than one year. Where productive resources (such as buildings, equipment, or facilities) take a long time to acquire or dispose of, long-range capacity planning requires top management participation and approval.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Management in Operations
 

 

43. 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?
44. 0.75
45. 1.00
46. 1.33
47. 2.33
48. 300

 

300 units of output divided by 400 units best operating level = 0.75.

 

AACSB: Analytic
Blooms: Analyze
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts

 

44. If the actual output of a piece of equipment during an hour is 500 units and its best operating level is at a rate of 400 units per hour, which of the following is the capacity utilization rate?
45. 0.75
46. 1.00
47. 1.25
48. 1.33
49. 100

 

500 units of output divided by 400 units best operating level = 1.25.

 

AACSB: Analytic
Blooms: Analyze
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts

45. 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 cushion?
46. 25 percent
47. 100 units per hour
48. 75 percent
49. 125 percent
50. 133 percent

 

A capacity cushion is an amount of capacity in excess of expected demand.

 

AACSB: Analytic
Blooms: Analyze
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

 

46. The capacity focus concept can be put into practice through a mechanism called which of the following?
47. Best operating level (BOL)
48. Plant within a plant (PWP)
49. Total quality management (TQM)
50. Capacity utilization rate (CUR)
51. Zero changeover time (ZXT)

 

The capacity focus concept can be operationalized through the mechanism of plant within a plant (PWP).

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts

47. The way to build in greater flexibility in your workers is to do which of the following?
48. Pay higher wages to motivate a willingness to do a variety to tasks.
49. Provide a broader range of training.
50. Provide a wide variety of technology to augment workers skills.
51. Institute a “pay for skills” program.
52. Use part-time employees with specialized skills as needed.

 

Flexible workers have multiple skills and the ability to switch easily from one kind of task to another. They require broader training than specialized workers.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts

48. When deciding to add capacity to a factory, which of the following need not be considered?
49. Maintaining system balance
50. The frequency of capacity additions
51. Use of external capacity
52. Immediate product demand
53. Availability of raw materials

 

Many issues must be considered when adding or decreasing capacity. Three important ones are maintaining system balance, frequency of capacity additions or reductions, and the use of external capacity. In many cases, the size of a plant may be influenced by factors other than the internal equipment, labor, and other capital expenditures. A major factor may be the cost to transport raw materials.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning Concepts, Capacity Planning
 

 

49. Which of the following is not a step used in determining production capacity requirements?
50. Forecasting to predict product sales
51. Forecasting raw material usage
52. Projecting availability of labor
53. Calculating equipment and labor needs
54. Projecting equipment availability

 

In determining capacity requirements, we must address the demands for individual product lines, individual plant capabilities, and allocation of production throughout the plant network. Typically this is done according to the following steps:
1. Use forecasting techniques to predict sales for individual products within each product line.
2. Calculate equipment and labor requirements to meet product line forecasts.
3. Project labor and equipment availabilities over the planning horizon.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Planning

 

50. Which of the following models uses a schematic model of the sequence of steps in a problem and the conditions and consequences of each step?
51. Probability indexing
52. Johnson’s sequencing rule
53. Decision trees
54. Activity system maps
55. Decision mapping

 

A decision tree is a schematic model of the sequence of steps in a problem and the conditions and consequences of each step.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-03 Evaluate capacity alternatives using decision trees.
Topic: Capacity Planning

 

51. Compared with a service operation, a manufacturing operation’s capacity is which of the following?
52. More dependent on time and location
53. Subject to more volatile demand fluctuations
54. Utilization more directly impacts quality
55. Demand can be smoothed by inventory policies
56. More capable of reacting to demand fluctuations

 

Service capacity is more time-and location-dependent (than manufacturing capacity); it is subject to more volatile demand fluctuations, and utilization directly affects service quality. Also, unlike goods, services cannot be stored for later use.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 Compare capacity planning in services to capacity planning in manufacturing.
Topic: Planning Service Capacity

 

52. 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%?
53. Machine A
54. Machine B
55. Machine C
56. You would be indifferent between machines A and C.
57. You would be indifferent between machines A and B.

 

EMV of machine A = 0.9 x 45,000 = 40,500; EMV of machine B = 0.5 x $80,000 = $40,000; and EMV of machine C = 0.75 x 60,000 = $45,000. Since $45,000 > $40,500 > $40,000, you would select machine C.

 

AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 05-03 Evaluate capacity alternatives using decision trees.
Topic: Capacity Planning

53. What is an important difference between capacity planning in services and capacity planning in manufacturing operations?
54. Time
55. Location
56. Demand volatility
57. Utilization affects service
58. All of these

 

Although capacity planning in services is subject to many of the same issues as manufacturing capacity planning, and facility sizing can be done in much the same way, there are several important differences. Service capacity is more time and location dependent, it is subject to more volatile demand fluctuations, and utilization directly affects service quality.

 

AACSB: Analytic
Blooms: Analyze
Difficulty: 1 Easy
Learning Objective: 05-04 Compare capacity planning in services to capacity planning in manufacturing.
Topic: Planning Service Capacity

 

54. Capacity planning involving consideration of production scheduling and inventory position is characterized by which one of the following time durations?
55. Intermediate range
56. Long range
57. Short range
58. Current
59. Upcoming

 

Short range: less than one month. This is tied into the daily or weekly scheduling process and involves making adjustments to eliminate the variance between planned and actual output.

 

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.
Topic: Capacity Management in Operations
 

55. In designing a general service facility, capacity should be such that the target rate of service utilization (ρ), in order to get the best general purpose design, should be
56. less than 0.6 (or 60%), so that your system would be within the zone of service with maximum possible utilization within that.
57. more than 0.6 (or 60%) so that your system would have a good utilization
58. about 0.7 (70%) so that your system would be in the zone of service with maximum possible utilization within that.
59. more than 1.0 (100%) so that the servers are fully utilized, even if the customers had to wait a little
60. between 0.9 (90%) and 1.0 (100%) so that the utilization of the system is ideal.

 

For most general service operations, rate of service utilization (ρ) should be about 0.7. Above 0.7, congestion builds up. Above 1.0 there will be infinite queue. O.6 or less may be less than ideal. Exhibit 5.6.

 

AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 05-04 Compare capacity planning in services to capacity planning in manufacturing.
Topic: Planning Service Capacity

 

56. Precise capacity design or the rate of service utilization (ρ), is application specific.
57. It could be close to 100% for a sports arena.
58. It could be as low as 0.5 for hospital emergency room.
59. As the degree of uncertainty in demand increases, higher ρ may be appropriate.
60. A, B and C are correct.
61. Only A and B are correct.

 

See discussion following Exhibit 5.6. As uncertainty of demand increases ρ should be lower.

 

AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 05-04 Compare capacity planning in services to capacity planning in manufacturing.
Topic: Planning Service Capacity

 

57. In a decision tree problem involving capacity planning, there was a random outcome node with three random outcomes (A,B, and C) which followed a decision node. The probabilities for A, B and C: P(A)=0.4, P(B) = 0.6 and P(C) = 0.2. Payoff following A,B and C respectively are $10000, $5000 and $2000. Expected value of that random outcome node is:
58. $7400
59. $7000
60. $17000
61. Cannot be determined since there is something wrong with the data given.
62. $5666.

 

Since the probabilities of a random outcome node should add up to 1.0 and in this example , it adds up to 1.2, there is something wrong with the given problem data. .

 

AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 05-03 Evaluate capacity alternatives using decision trees.

Topic: Capacity Planning

 

Chapter 05 Test Bank – Static Summary

Category	# of Questions
AACSB: Analytic	57
Blooms: Analyze	9
Blooms: Apply	2
Blooms: Remember	47
Difficulty: 1 Easy	40
Difficulty: 2 Medium	17
Learning Objective: 05-01 Explain what capacity management is and why it is strategically important.	36
Learning Objective: 05-02 Exemplify how to plan capacity.	8
Learning Objective: 05-03 Evaluate capacity alternatives using decision trees.	8
Learning Objective: 05-04 Compare capacity planning in services to capacity planning in manufacturing.	5
Topic: Capacity Management in Operations	10
Topic: Capacity Planning	21
Topic: Capacity Planning Concepts	20
Topic: Capacity Planning Concepts, Capacity Planning	1
Topic: Planning Service Capacity	5