Question 1

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. How many rosebushes would she have to produce and sell in order to break even?

Accepted Answer

A)   1,600
B)   2,400
C)   2,000
D)   1,000
E)   1,500F) A) and E)
G) A) and B)

Question 2

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 E)
G) A) and D)

Question 3

Capacity decisions often involve a long-term commitment of resources which, when implemented, are difficult or impossible to modify without major added costs.

Accepted Answer

A) True 
 B)False

Question 4

Utilization is defined as the ratio of effective capacity to design capacity.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)   identifying
B)   modifying
C)   supporting
D)   overcoming
E)   repeatingF) A) and B)
G) None of the above

Question 6

The decision to outsource opens the firm up to certain risks, among them _________ and ________.

Accepted Answer

A)   lower costs; fewer task-specific investments
B)   loss of direct control over operations; need to disclose proprietary information
C)   access to greater expertise; greater demand variability
D)   greater capacity rigidity; tight knowledge control
E)   higher marketing costs; small ordersF) None of the above
G) C) and D)

Question 7

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. Increasing X's effective capacity to ensure that Y's utilization is maximized would be an example of ________ a(n)  constraint.

Accepted Answer

A)   overcoming
B)   outsourcing
C)   insourcing
D)   cushioning
E)   supportingF) B) and D)
G) A) and D)

Question 8

What is the break-even quantity for the following situation? FC = $1,200 per week
VC = $2 per unit
Rev = $6 per unit

Accepted Answer

A)   100
B)   200
C)   600
D)   1,200
E)   300F) B) and D)
G) A) and D)

Question 9

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) C) and D)

Question 10

Which of the following is the case where capacity is measured in terms of inputs?

Accepted Answer

A)   steel mill
B)   electrical power plant
C)   restaurant
D)   petroleum refinery
E)   airlineF) B) and C)
G) A) and B)

Question 11

Which of the following is not a strategy to manage service capacity?

Accepted Answer

A)   hiring extra workers
B)   backordering
C)   pricing and promotion
D)   part-time workers
E)   subcontractingF) C) and D)
G) B) and D)

Question 12

Doctor J. is considering purchasing a new blood analysis machine to test for HIV; it will cost $60,000. He estimates that he could charge $25.00 for an office visit to have a patient's blood analyzed, while the actual cost of a blood analysis would be $5.00. How many HIV blood analyses would he have to perform in order to break even?

Accepted Answer

A)   12,000
B)   2,400
C)   3,000
D)   1,000
E)   5,000F) B) and E)
G) A) and C)

Question 13

Given the following data for a make-or-buy decision: $$\begin{array} { l l l } 
\text { Alternative } & \text { Fixed Cost } & \text { Variable Cost } \
\hline  \text { Buy } & \$ 0 \text { per year } & \$ 8 \text { per unit } \
\text { Make } & \$ 100,000 \text { per year } & \$ 4 \text { per unit }
\end{array}$$ What would be your cost savings for the preferred alternative, for 32,000 units per year, compared to the other alternative?

Accepted Answer

The answer of Given the following data for a make-or-buy...

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) C) and D)
G) All of the above

Question 15

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. What would the potential profit be if he were to split 4,000 cords of wood with this machine?

Accepted Answer

A)   $0
B)   $200,000
C)   $100,000
D)   $75,000
E)   $50,000F) A) and D)
G) All of the above

Question 16

Maximum capacity refers to the upper limit of:

Accepted Answer

A)   inventories.
B)   demand.
C)   supplies.
D)   rate of output.
E)   finances.F) A) and D)
G) A) and E)

Question 17

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 18

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 B)
G) A) and E)

Question 19

When the output is less than the optimal rate of output, the average unit cost will be:

Accepted Answer

A)   lower.
B)   the same.
C)   higher.
D)   could be either higher or lower.
E)   could be either higher, lower or the same.F) A) and C)
G) C) and D)

Question 20

An example of an external factor that influences effective capacity is government safety regulations.

Accepted Answer

A) True 
 B)False

Exam 5: Strategic Capacity Planning for Products and Services

An example of an external factor that influences effective capacity is government safety regulations.

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 decision to outsource opens the firm up to certain risks, among them _ and .

Correct Answer
verified

Capacity decisions often involve a long-term commitment of resources which, when implemented, are difficult or impossible to modify without major added costs.

Correct Answer
verified

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

Correct Answer
verified

What is the break-even quantity for the following situation? FC = $1,200 per week VC = $2 per unit Rev = $6 per unit

Correct Answer
verified

When the output is less than the optimal rate of output, the average unit cost will be:

Correct Answer
verified

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. Increasing X's effective capacity to ensure that Y's utilization is maximized would be an example of ________ a(n) constraint.

Correct Answer
verified

Correct Answer
verified

Utilization is defined as the ratio of effective capacity to design capacity.

Correct Answer
verified

Efficiency is defined as the ratio of:

Correct Answer
verified

Correct Answer
verified

At the break-even point:

Correct Answer
verified

Which of the following is the case where capacity is measured in terms of inputs?

Correct Answer
verified

Correct Answer
verified

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. How many rosebushes would she have to produce and sell in order to break even?

Correct Answer
verified

Which of the following is not a strategy to manage service capacity?

Correct Answer
verified

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

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

Correct Answer
verified

Maximum capacity refers to the upper limit of:

Correct Answer
verified

Exam 5: Strategic Capacity Planning for Products and Services

An example of an external factor that influences effective capacity is government safety regulations.

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 decision to outsource opens the firm up to certain risks, among them _________ and ________.

Correct AnswerverifiedShow Answer

Capacity decisions often involve a long-term commitment of resources which, when implemented, are difficult or impossible to modify without major added costs.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the break-even quantity for the following situation? FC = $1,200 per week VC = $2 per unit Rev = $6 per unit

Correct AnswerverifiedShow Answer

When the output is less than the optimal rate of output, the average unit cost will be:

Correct AnswerverifiedShow Answer

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. Increasing X's effective capacity to ensure that Y's utilization is maximized would be an example of ________ a(n) constraint.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Utilization is defined as the ratio of effective capacity to design capacity.

Correct AnswerverifiedShow Answer

Efficiency is defined as the ratio of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

At the break-even point:

Correct AnswerverifiedShow Answer

Which of the following is the case where capacity is measured in terms of inputs?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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. How many rosebushes would she have to produce and sell in order to break even?

Correct AnswerverifiedShow Answer

Which of the following is not a strategy to manage service capacity?

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

Maximum capacity refers to the upper limit of:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

The decision to outsource opens the firm up to certain risks, among them _ and .

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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Correct Answer
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