Question 1

Sleep Tight Motel has the opportunity to purchase an adjacent plot of land.Building on this land would increase their capacity from the current sales level of $515,000/year to $600,000/year.Sleep Tight experiences a 20 percent before-tax profit margin.It wishes to estimate the additional before-tax profits that the expansion will produce.Using the following information,how much more before-tax cash flow would be realized just in year 10 alone?

Accepted Answer

A)  less than or equal to $20,000
B)  greater than $20,000 but less than or equal to $25,000
C)  greater than $25,000 but less than or equal to $30,000
D)  greater than 30,000E) B) and D)
F) A) and B)

Question 2

Table 6.8
The Summerville Vitamin Company manufactures bottles of animal-shaped chewable vitamins for children.This product line requires two work centers,tablet manufacturing and packaging.The tablet manufacturing work center has a current capacity of 140,000 bottles per month,and packaging is capable of 100,000 units per month.This year (year 0) ,monthly sales of the product line are expected to reach 100,000 units.Growth per month is projected at an additional 25,000 units through year 4 (i.e. ,125,000 per month in year #1,150,000 per month in year #2,etc. ) .Pre-tax profits are expected to be $5 per unit throughout the 4-year planning period.Two alternatives are being considered:
-Use the information in Table 6.8.What action,if any,should Summerville take?

Accepted Answer

A)  Find another option-neither alternative provides a positive net present value after four years.
B)  Select Alternative #1.
C)  Select alternative #2.
D)  Either alternative may be selected,since the positive net present values are the same after four years.E) B) and C)
F) A) and B)

Question 3

The capacity requirement for a year's output is inversely proportional to the total number of hours per year during which the process operates.

Accepted Answer

A) True 
 B)False

Question 4

A larger capacity cushion may be required due to variation in demand,changing product mix,or supply uncertainty.

Accepted Answer

A) True 
 B)False

Question 5

Figure 6.1 
-A manager weighs three options for capacity cushion as depicted in Figure 1.If the dollar amounts expressed in the Figure 9.1 are cash flows,what is the value of the optimal decision?

Accepted Answer

A)  $11,700
B)  $11,500
C)  $12,300
D)  $10,500E) A) and B)
F) B) and D)

Question 6

A larger capacity cushion can help firms uncover process inefficiencies,so they can find ways to correct them.

Accepted Answer

A) True 
 B)False

Question 7

A capacity cushion is the amount of inventory that a firm maintains to handle sudden increases in demand or temporary loss of production capacity.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following descriptions about waiting line models is best?

Accepted Answer

A)  They account for major events such as competitor actions.
B)  They account for the random,independent behavior of many customers.
C)  They assume that each branch can give the highest expected payoff.
D)  They deal with the certainty and stability in demand.E) All of the above
F) B) and C)

Question 9

Which one of the following factors usually motivates a smaller capacity cushion?

Accepted Answer

A)  unevenly distributed demands
B)  high capital intensity
C)  high penalty costs for overtime usage
D)  requests for quick customer servicesE) B) and C)
F) A) and D)

Question 10

If demand is increasing,and you also prefer to increase the time between capacity increments,then the size of increments should ________.

Accepted Answer

The answer of If demand is increasing,and you also prefer...

Question 11

The ________ is the set of consecutive time periods considered for planning purposes.

Accepted Answer

The answer of The ________ is the set of consecutive...

Question 12

________ is the amount of reserve capacity that a firm maintains to handle a sudden increase in demand or temporary losses of production capacity.

Accepted Answer

The answer of ________ is the amount of reserve capacity...

Question 13

________ is the degree to which equipment,space,or labor is currently being used.

Accepted Answer

The answer of ________ is the degree to which equipment,space,or...

Question 14

Which one of the following factors usually calls for a larger capacity cushion?

Accepted Answer

A)  uncertain demand
B)  high capital intensity
C)  more reliable equipment
D)  high worker flexibilityE) B) and C)
F) All of the above

Question 15

A wait-and-see capacity strategy minimizes the chances of lost sales due to insufficient capacity.

Accepted Answer

A) True 
 B)False

Question 16

Figure 6.1 
-A manager weighs three options for capacity cushion as depicted in Figure 1.If the dollar amounts expressed in the Figure 9.1 are cash flows,which option is optimal?

Accepted Answer

A)  large cushion
B)  medium cushion
C)  small cushion
D)  Not enough information is given to select an option.E) None of the above
F) B) and D)

Question 17

An expansionist capacity strategy involves large,infrequent jumps in capacity,where a wait-and-see strategy involves smaller,more frequent jumps.

Accepted Answer

A) True 
 B)False

Question 18

Table 6.8
The Summerville Vitamin Company manufactures bottles of animal-shaped chewable vitamins for children.This product line requires two work centers,tablet manufacturing and packaging.The tablet manufacturing work center has a current capacity of 140,000 bottles per month,and packaging is capable of 100,000 units per month.This year (year 0) ,monthly sales of the product line are expected to reach 100,000 units.Growth per month is projected at an additional 25,000 units through year 4 (i.e. ,125,000 per month in year #1,150,000 per month in year #2,etc. ) .Pre-tax profits are expected to be $5 per unit throughout the 4-year planning period.Two alternatives are being considered:
-Use the information in Table 6.8.What is the pre-tax cash flow (net present value) for alternative #1 compared to the base case of doing nothing for the next four years?

Accepted Answer

A)  less than or equal to $5.1 million
B)  more than $5.1 million but less than $5.3 million
C)  more than $5.3 million less than $5.5 million
D)  more than $5.5 millionE) A) and D)
F) A) and C)

Question 19

Table 6.5
The T.H.King Company has introduced a new product line that requires two work centers,A and B for manufacture.Work Center A has a current capacity of 10,000 units per year,and Work Center B is capable of 12,500 units per year.This year (year 0) ,sales of the new product line are expected to reach 10,000 units.Growth is projected at an additional 1,000 units each year through year 5.Pre-tax profits are expected to be $30 per unit throughout the 5-year planning period.Two alternatives are being considered:
-Use the information in Table 6.5.What action,if any,should the King Company take?

Accepted Answer

A)  Do nothing-neither alternative provides a positive net present value after five years.
B)  Select Alternative #1.
C)  Select alternative #2.
D)  Either alternative may be selected,since the positive net present values are the same after five years.E) C) and D)
F) A) and D)

Question 20

Table 6.1
The Union Manufacturing Company is producing two types of products: A and B.The demand forecasts,batch size,and time standards follow:
  Both products are produced on the same machine,called Mark I.
-Use the information in Table 6.1.The company works 250 days per year and operates two shifts,each covering 8 hours.If a 15 percent capacity cushion is maintained,how many hours of capacity can the company expect from each of its Mark I machines?

Accepted Answer

A)  fewer than 3000
B)  between 3000 and 3500
C)  between 3501 and 4000
D)  more than 4000E) A) and D)
F) A) and C)

Exam 6: Capacity Planning

A capacity cushion is the amount of inventory that a firm maintains to handle sudden increases in demand or temporary loss of production capacity.

Correct Answer
verified

________ is the degree to which equipment,space,or labor is currently being used.

Correct Answer
verified

Which one of the following factors usually calls for a larger capacity cushion?

Correct Answer
verified

An expansionist capacity strategy involves large,infrequent jumps in capacity,where a wait-and-see strategy involves smaller,more frequent jumps.

Correct Answer
verified

Correct Answer
verified

The ________ is the set of consecutive time periods considered for planning purposes.

Correct Answer
verified

If demand is increasing,and you also prefer to increase the time between capacity increments,then the size of increments should ________.

Correct Answer
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Correct Answer
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Correct Answer
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Figure 6.1 -A manager weighs three options for capacity cushion as depicted in Figure 1.If the dollar amounts expressed in the Figure 9.1 are cash flows,which option is optimal?

Correct Answer
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Figure 6.1 -A manager weighs three options for capacity cushion as depicted in Figure 1.If the dollar amounts expressed in the Figure 9.1 are cash flows,what is the value of the optimal decision?

Correct Answer
verified

A wait-and-see capacity strategy minimizes the chances of lost sales due to insufficient capacity.

Correct Answer
verified

A larger capacity cushion can help firms uncover process inefficiencies,so they can find ways to correct them.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The capacity requirement for a year's output is inversely proportional to the total number of hours per year during which the process operates.

Correct Answer
verified

A larger capacity cushion may be required due to variation in demand,changing product mix,or supply uncertainty.

Correct Answer
verified

Which of the following descriptions about waiting line models is best?

Correct Answer
verified

________ is the amount of reserve capacity that a firm maintains to handle a sudden increase in demand or temporary losses of production capacity.

Correct Answer
verified

Which one of the following factors usually motivates a smaller capacity cushion?

Correct Answer
verified

Exam 6: Capacity Planning

A capacity cushion is the amount of inventory that a firm maintains to handle sudden increases in demand or temporary loss of production capacity.

Correct AnswerverifiedShow Answer

________ is the degree to which equipment,space,or labor is currently being used.

Correct AnswerverifiedShow Answer

Which one of the following factors usually calls for a larger capacity cushion?

Correct AnswerverifiedShow Answer

An expansionist capacity strategy involves large,infrequent jumps in capacity,where a wait-and-see strategy involves smaller,more frequent jumps.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The ________ is the set of consecutive time periods considered for planning purposes.

Correct AnswerverifiedShow Answer

If demand is increasing,and you also prefer to increase the time between capacity increments,then the size of increments should ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 6.1 -A manager weighs three options for capacity cushion as depicted in Figure 1.If the dollar amounts expressed in the Figure 9.1 are cash flows,which option is optimal?

Correct AnswerverifiedShow Answer

Figure 6.1 -A manager weighs three options for capacity cushion as depicted in Figure 1.If the dollar amounts expressed in the Figure 9.1 are cash flows,what is the value of the optimal decision?

Correct AnswerverifiedShow Answer

A wait-and-see capacity strategy minimizes the chances of lost sales due to insufficient capacity.

Correct AnswerverifiedShow Answer

A larger capacity cushion can help firms uncover process inefficiencies,so they can find ways to correct them.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The capacity requirement for a year's output is inversely proportional to the total number of hours per year during which the process operates.

Correct AnswerverifiedShow Answer

A larger capacity cushion may be required due to variation in demand,changing product mix,or supply uncertainty.

Correct AnswerverifiedShow Answer

Which of the following descriptions about waiting line models is best?

Correct AnswerverifiedShow Answer

________ is the amount of reserve capacity that a firm maintains to handle a sudden increase in demand or temporary losses of production capacity.

Correct AnswerverifiedShow Answer

Which one of the following factors usually motivates a smaller capacity cushion?

Correct AnswerverifiedShow Answer

Correct Answer
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