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Exam 5: Strategic Capacity Planning for Products and Services

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Question 31

Multiple Choice

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One local hospital has just enough space and funds currently available to start either a cancer or heart research lab. If administration decides on the cancer lab, there is a 20 percent chance of getting $100,000 in outside funding from the American Cancer Society next year, and an 80 percent chance of getting nothing. If the cancer research lab is funded the first year, no additional outside funding will be available the second year. However, if it is not funded the first year, then management estimates the chances are 50 percent it will get $100,000 the following year, and 50 percent that it will get nothing again. If, however, the hospital's management decides to go with the heart lab, then there is a 50 percent chance of getting $50,000 in outside funding from the American Heart Association the first year and a 50 percent chance of getting nothing. If the heart lab is funded the first year, management estimates a 40 percent chance of getting another $50,000 and a 60 percent chance of getting nothing additional the second year. If it is not funded the first year, then management estimates a 60 percent chance for getting $50,000 and a 40 percent chance for getting nothing in the following year. For both the cancer and heart research labs, no further possible funding is anticipated beyond the first two years. What is the probability that the heart lab will be funded in both the first and second years?

A) 0.4
B) 0.3
C) 0.2
D) 0.1
E) 0

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

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Question 32

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Outsourcing some production is a means of _________ a capacity constraint.

A) identifying
B) modifying
C) supporting
D) overcoming
E) repeating

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

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Question 33

Multiple Choice

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Which of the following makes using present value approaches in capacity decisions difficult?

A tabular presentation that shows the outcome for each decision alternative under the various possible states of nature is called a:

Two professors at a nearby university want to coauthor a new textbook in either economics or statistics. They feel that if they write an economics book, they have a 50 percent chance of placing it with a major publisher, and it should ultimately sell about 40,000 copies. If they cannot get a major publisher to take it, then they feel they have an 80 percent chance of placing it with a smaller publisher, with ultimate sales of 30,000 copies. On the other hand, if they write a statistics book, they feel they have a 40 percent chance of placing it with a major publisher, and it should result in ultimate sales of about 50,000 copies. If they cannot get a major publisher to take it, they feel they have a 50 percent chance of placing it with a smaller publisher, with ultimate sales of 35,000 copies. What is the probability that the economics book would wind up being placed with a smaller publisher?

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers) will vary depending upon the success of the new cable television network she plans to use, as follows: If she feels that there is a 60 percent chance that the new cable network will be successful, what is her expected cost (per thousand "hits") under certainty?

A decision making involving certainty about potential future conditions will have a relatively _____ decision.

Maximum capacity commonly refers to the upper limit on:

The method of financial analysis which results in an equivalent interest rate is:

Which of the following is not a criterion for developing capacity alternatives?

Which of the following is not a factor that influences how frequently or infrequently capacity choices are made?

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows: If she uses the maximax criterion, what size outlet will she decide to lease?

The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars) will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high. If she uses the Laplace criterion, how many beauticians will she decide to hire?

According to the reading on restaurant sourcing practices, only fast-food restaurants are able to bring in outsourced foods.

Consider the following decision scenario: *PV for profits ($000) The maximax strategy would be:

Consider the following decision scenario: *PV for profits ($000) With equally likely states of nature, the alternative that has the largest expected monetary value is:

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers) will vary depending upon the success of the new cable television network she plans to use, as follows: If she feels that there is a 60 percent chance that the new cable network will be successful, what is her expected value (per thousand "hits") of perfect information?

The dean of a college wants to determine which of two new classes to offer for the upcoming semester. Due to facility constraints only one class can be offered at this time. The dean feels that the first class has an 80 percent chance of earning the college about $75,000, but a 20 percent chance of losing $35,000. If the class is successful, then its next level class will be offered, with a 75 percent chance of earning $60,000, but a 20 percent chance of losing $30,000. Weighing the options, the dean feels that the second class has a 60 percent chance of earning $85,000, but a 40 percent chance of losing $40,000. If the second class is successful, then its next level class will be offered with a 50 percent chance of earning $80,000, but a 50 percent chance of losing $45,000. If both classes are not successful, neither of their next level classes will be offered to the students.What is the expected value for selecting the first class?

Among decision environments, risk implies that certain parameters have probabilistic outcomes.

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows: For what range of probability that demand will be high, will she decide to lease the large facility?