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Exam 5: Strategic Capacity Planning for Products and Services

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Question 21

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A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington,

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

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

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Question 22

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Consider the following information: $\begin{array} { l l } \text { Fixed Costs: } & \$ 15,000 \text { per year } \\\text { Variable Costs: } & \$ 1.00 \text { per unit } \\\text { Revenue: } & \$ 1.60 \text { per unit } \\\text { Design Capacity: } & 45,000 \text { units per year } \\\text { Effective Capacity: } & 40,000 \text { units per year } \\\text { Anticipated Output: } & 36,000 \text { units per year }\end{array}$ What quantity would be required for a profit of $2,000?

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Question 23

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

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

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 make a profit of $30,000?

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

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

Which of these factors would not be subtracted from design capacity when calculating effective capacity?

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.

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

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?

The utilization of a machine is 50 percent. The machine has a design capacity of 70 units per hour and an effective capacity of 60 units per hour. Find the efficiency of the machine.

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington,

Given the following information, what would efficiency be? Effective capacity = 50 units per day Design capacity = 100 units per day Actual output = 30 units per day

The term capacity refers to the maximum quantity an operating unit can process over a given period of time.

Cost and competitive priorities reduce effective capacities.

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. If this new blood analysis machine has design and effective capacities of 6,000 and 5,000 blood analyses per year, respectively, and Dr. J. expects to perform 4,500 HIV blood analyses each year, what will be the utilization of this machine?

The break-even quantity can be determined by dividing the fixed costs by the difference between the revenue per unit and the variable cost per unit.

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. If this new blood analysis machine has design and effective capacities of 6,000 and 5,000 blood analyses per year, respectively, and Dr. J. expects to be 80 percent efficient in his use of this machine, how many HIV blood analyses does he plan to perform each year?

Unbalanced systems are evidenced by: