Question 1

If the unit cost to buy something is less than the variable cost to make it, the decision to make or buy is based solely on the fixed costs.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not a reason why capacity decisions are so important?

Accepted Answer

A)   Capacity limits the rate of output possible.
B)   Capacity affects operating costs.
C)   Capacity is a major determinant of initial costs.
D)   Capacity is a long-term commitment of resources.
E)   Capacity chunks can be added or deleted quickly and inexpensively.F) A) and E)
G) All of the above

Question 3

Increasing productivity and also quality will result in increased effective capacity.

Accepted Answer

A) True 
 B)False

Question 4

Suppose operation X feeds directly into operation Y. All of X's output goes to Y, and Y has no other operations feeding into it. X has a design capacity of 80 units per hour and an effective capacity of 72 units per hour. Y has a design capacity of 100 units per hour. What is Y's maximum possible utilization?

Accepted Answer

A)   80 percent
B)   72 percent
C)   90 percent
D)   70 percent
E)   60 percentF) D) and E)
G) B) and E)

Question 5

The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. How many cords of wood would he have to split with this machine to break even?

Accepted Answer

A)   5,000
B)   3,000
C)   2,000
D)   1,000
E)   0F) A) and C)
G) A) and E)

Question 6

Stating capacity in dollar amounts generally results in a consistent measure of capacity regardless of the actual units of measure.

Accepted Answer

A) True 
 B)False

Question 7

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. How many prisoners would they have to process annually to break even at this new location?

Accepted Answer

A)   5,000
B)   8,000
C)   2,000
D)   4,000
E)   6,000F) C) and E)
G) A) and D) C

Question 8

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. What would the profit be if she were to produce and sell 5,000 rosebushes?

Accepted Answer

A)   $0
B)   $9,000
C)   $15,000
D)   $10,000
E)   $30,000F) All of the above
G) A) and D)

Question 9

Students at a major university must go through several registration steps. Officials have observed that it is typically the case that the waiting line at the fee-payment station is the longest. This would seem to suggest that the fee-payment station is the ___________ in the student registration process.

Accepted Answer

A)   capacity cushion
B)   first station
C)   bottleneck
D)   economy of scale
E)   diseconomy of scaleF) A) and B)
G) C) and E)

Question 10

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.

Accepted Answer

A) True 
 B)False  False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Efficiency is defined as the ratio of:

Accepted Answer

A)   actual output to effective capacity.
B)   actual output to design capacity.
C)   design capacity to effective capacity.
D)   effective capacity to actual output.
E)   design capacity to actual output.F) A) and E)
G) None of the above

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The first, and perhaps most important, step in constraint management is to ____________ the most pressing constraint.

Accepted Answer

A)   improve
B)   support
C)   identify
D)   elevate
E)   modifyF) A) and B)
G) A) and C)

Question 15

The method of financial analysis which focuses on the length of time it takes to recover the initial cost of an investment is:

Accepted Answer

A)   payback.
B)   net present value.
C)   internal rate of return.
D)   queuing.
E)   cost-volume.F) A) and D)
G) A) and C)

Question 16

The current trend toward global operations has made capacity decisions much easier since we have the whole world in which to consider operations.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)   The discount rate must be adjusted to account for inflation.
B)   Some cash flows are positive and other cash flows are negative.
C)   The payback period might not be long enough to justify a capacity decision.
D)   Capacity decisions are made amidst much uncertainty, so cash flows cannot be estimated with great accuracy.
E)   There is a cash outflow at the outset followed by, possibly, net cash inflows.F) C) and D)
G) None of the above D

Question 18

When determining the timing and degree of capacity change, one can use the approach of:

Accepted Answer

A)   lead time flexibility strategy.
B)   expand-early strategy.
C)   go-with-the-flow strategy.
D)   backordering.
E)   delayed differentiation.F) A) and C)
G) A) and B)

Question 19

An alternative will have fixed costs of $10,000 per month, variable costs of $50 per unit, and revenue of $70 per unit. The break-even point volume is:

Accepted Answer

A)   100
B)   2,000.00
C)   500
D)   1,000.00
E)   800F) All of the above
G) A) and B)

Question 20

At the break-even point:

Accepted Answer

A)   output equals capacity.
B)   total cost equals total revenue.
C)   total cost equals profit.
D)   variable cost equals fixed cost.
E)   variable cost equals total revenue.F) A) and E)
G) None of the above

Exam 6: Strategic Capacity Planning for Products and Services

If the unit cost to buy something is less than the variable cost to make it, the decision to make or buy is based solely on the fixed costs.

Correct Answer
verified

Which of the following is not a reason why capacity decisions are so important?

Correct Answer
verified

Increasing productivity and also quality will result in increased effective capacity.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Stating capacity in dollar amounts generally results in a consistent measure of capacity regardless of the actual units of measure.

Correct Answer
verified

Correct Answer
verified
C

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. What would the profit be if she were to produce and sell 5,000 rosebushes?

Correct Answer
verified

Correct Answer
verified

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.

Correct Answer
verified
False

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

Correct Answer
verified

Efficiency is defined as the ratio of:

Correct Answer
verified

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

Correct Answer
verified

The first, and perhaps most important, step in constraint management is to ____________ the most pressing constraint.

Correct Answer
verified

The method of financial analysis which focuses on the length of time it takes to recover the initial cost of an investment is:

Correct Answer
verified

The current trend toward global operations has made capacity decisions much easier since we have the whole world in which to consider operations.

Correct Answer
verified

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

Correct Answer
verified
D

When determining the timing and degree of capacity change, one can use the approach of:

Correct Answer
verified

An alternative will have fixed costs of $10,000 per month, variable costs of $50 per unit, and revenue of $70 per unit. The break-even point volume is:

Correct Answer
verified

At the break-even point:

Correct Answer
verified

Exam 6: Strategic Capacity Planning for Products and Services

If the unit cost to buy something is less than the variable cost to make it, the decision to make or buy is based solely on the fixed costs.

Correct AnswerverifiedShow Answer

Which of the following is not a reason why capacity decisions are so important?

Correct AnswerverifiedShow Answer

Increasing productivity and also quality will result in increased effective capacity.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Stating capacity in dollar amounts generally results in a consistent measure of capacity regardless of the actual units of measure.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. What would the profit be if she were to produce and sell 5,000 rosebushes?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedFalse

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

Correct AnswerverifiedShow Answer

Efficiency is defined as the ratio of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The first, and perhaps most important, step in constraint management is to ____________ the most pressing constraint.

Correct AnswerverifiedShow Answer

The method of financial analysis which focuses on the length of time it takes to recover the initial cost of an investment is:

Correct AnswerverifiedShow Answer

The current trend toward global operations has made capacity decisions much easier since we have the whole world in which to consider operations.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedD

When determining the timing and degree of capacity change, one can use the approach of:

Correct AnswerverifiedShow Answer

An alternative will have fixed costs of $10,000 per month, variable costs of $50 per unit, and revenue of $70 per unit. The break-even point volume is:

Correct AnswerverifiedShow Answer

At the break-even point:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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False

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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D

Correct Answer
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Correct Answer
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Correct Answer
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