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Exam 5: Strategic Capacity Planning for Products and Services

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Question 31

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Capacity planning requires an analysis of needs; what kind, how much and when.

A) True
B) False

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Question 32

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The ratio of actual output to design capacity is:

A) design capacity
B) effective capacity
C) actual capacity
D) efficiency
E) utilization

F) A) and D)
G) A) and B)

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Question 33

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Which of the following are assumptions of the break-even model? I.Only one product is involved. II) Everything that is produced can be sold. III) The revenue per unit will be the same regardless of volume.

How many rosebushes would she have to produce and sell in order to make a profit of $6,000?

Capacity decisions are usually one-time decisions; once they have been made, we know the limits of our operations.

What is the break-even quantity (produced and sold)?

What are total costs for the break-even quantity?

In cost-volume analysis, costs that vary directly with volume of output are referred to as fixed costs because they are a fixed percentage of output levels.

What is the anticipated utilization?

Capacity increases are usually acquired in fairly large "chunks" rather than in smooth increments.

What would be your cost savings for the preferred alternative, for 32,000 units per year, compared to the other alternative?

Operation X feeds into Operation Y.Operation X has an effective capacity of 55 units per hour.Operation Y has an effective capacity of 50 units per hour.Finding a way to increase Y's effective capacity would be an example of ________ a constraint.

How many cords of wood would he have to split with this machine to break even?

A small business owner is contemplating the addition of another product line. Capacity increases and equipment will result in an increase in annual fixed costs of $50,000. Variable costs will be $25 per unit. A) What unit selling price must the owner obtain to break-even on a volume of 2,500 units a year? B) Because of market conditions, the owner feels a revenue of $47 is preferred to the value determined in part A. What volume of output will be required to achieve a profit of $16,000 using this revenue?

Short-term considerations in determining capacity requirements include:

What are total costs to make a quantity of 15,000 units per year?

Capacity in excess of expected demand that is intended to offset uncertainty is a:

If the holding area at this new location has design and effective capacities of 10,000 and 7,500 prisoners processed annually, respectively, and 5,000 prisoners will be processed per year, what will be the utilization of the holding area?

How many prisoners would they have to process annually to break even at this new location?

A reason for the importance of capacity decisions is that capacity: