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Exam 4: Capacity Planning

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Question 41

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Define each of the following capacity strategies: expansionist,wait-and-see,and follow-the-leader.

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Expansionist means large,infre...

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Question 42

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A manufacturing plant is capable of producing 10 tons of product per day when it runs three shifts with no breakdowns and plenty of raw materials.Over the past week,the plant has produced an average of 7.3 tons per day since the third shift has devoted much of their time to preventive maintenance.What is the capacity of the plant?

A) 10 tons/day
B) 7) 3 tons/day
C) 73%
D) 137%

E) None of the above
F) A) and B)

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Question 43

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Capacity is the maximum rate of output of a process.

Input measures include such metrics as:

A process's ________ is the length of time it takes to switch from making one type of product to another.

Input measures of capacity are inherently more accurate than output measures of capacity.

A ________ is the difference between demand and current capacity.

A standard work year is 2000 hours at the Luther Mill and it takes about an hour and a half to fill a customer order.Last year saw 25,000 customer orders at the mill and the manager has a rebuilt Ford 9N in mind as a company car,so he hopes that there is an increase of 2% in customer orders for next year.If the manager hires twenty workers,what is the capacity cushion?

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

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

The seven-person maintenance function at a hospital performs both preventive and corrective maintenance on hundreds of items each month.All the workers are scheduled for 40 hours per week and there are four weeks in a month.It is the goal of the maintenance department to achieve 90% utilization with a mix of two-thirds preventive maintenance and one-third corrective maintenance.How many hours each month are spent performing preventive maintenance if they achieve their 90% utilization and correct/preventive mix targets?

Use the information in Scenario 4.5.What action,if any,should the King Company take?

Which one of the following statements about capacity cushions is BEST?

A well-educated operations manager used the capacity requirements equation to determine the number of crackerbox welders to purchase for the shop,given the standard time per unit,hours available per machine,among other relevant parameters.He studied the answer,2.2,and concluded that:

A printing company works on three types of printing jobs,each of which could be produced on the same model printing machine.The predicted annual demands and typical order sizes are shown in the table.The company has 2000 production hours available each year and requires a 10% capacity cushion to allow for preventive maintenance,breakdowns,and other unforeseen circumstances.How many printing machines must they have under these circumstances?

A smaller capacity cushion may be required if a process is highly capital intensive.

John Owen owns a drugstore that is experiencing significant growth.Owen is trying to decide whether to expand its capacity,which currently is $200,000 in sales per quarter.Sales are seasonal.Forecasts of capacity requirements,expressed in sales per quarter for the next year,follow. Owen is considering expanding capacity to the $250,000 level in sales per quarter.The before-tax profit margin from additional sales is 15 percent.How much would before-tax profits increase next year because of this expansion?

George P.Burdell owns a hot tub store that is experiencing significant growth.Burdell is trying to decide whether to expand the store's capacity,which currently is at $750,000 in sales per quarter.He is thinking about expanding to the $850,000 level.The before-tax profit from additional sales is 20 percent.Sales are seasonal,with peaks in the spring and summer quarters.Forecasts of capacity requirements,expressed in ($000) sales per quarter,for next year (year 2) are: Demand in year 3 and beyond is expected to exceed $850,000 per quarter.Burdell is considering expansion at the end of the fourth quarter of this year (year 1) .How much would before-tax profits in year 2 increase because of this expansion?

The single milling machine at Fred's Manufacturing was severely overloaded last year.The plant operates 8 hours per day,5 days per week,and 50 weeks per year.Management prefers a capacity cushion of 20 percent.Two major types of products are routed through the milling machine.The annual demand for product A is 4000 units and 3000 units for product B.The batch size for A is 20 units and 30 units for B.The standard processing time for A is 0.5 hours/unit and 0.8 for B.The standard setup time for product A is 2 hours and 8 hours for product B.How many new milling machines are required if Fred's does not resort to any short-term capacity options?

Figure 4.1 -A manager weighs three options for capacity cushion as depicted in Figure 4.1.If the dollar amounts expressed in the figure are cash flows,which option is optimal?