Complete Test Bank With Answers
Sample Questions Posted Below
Chapter 05 Strategic Capacity Planning
Student: ___________________________________________________________________________
| 1. |
The term capacity is the upper limit on the workload an operating unit can handle.
True False |
| 2. |
Capacity decisions are always long-term decisions.
True False |
| 3. |
If a company produces a variety of outputs, capacity has to be expressed as several partial measures; no overall measure of capacity is possible.
True False |
| 4. |
Capacity decisions often involve a long-term commitment of resources which, when implemented, are difficult or impossible to modify without major added costs.
True False |
| 5. |
Stating capacity in dollar amounts generally results in a consistent measure of capacity.
True False |
| 6. |
Design capacity refers to the maximum output rate under ideal conditions.
True False |
| 7. |
Design capacity refers to the maximum output rate possible given a product mix, operating hours, and machine maintenance.
True False |
| 8. |
Efficiency is defined as the ratio of actual output to effective capacity.
True False |
| 9. |
As utilization increases the number of jobs/people waiting in an operating system decreases.
True False |
| 10. |
Facilities are a major factor influencing effective capacity.
True False |
| 11. |
The more uniform the mix of products being produced, the more opportunity there is to increase the effective capacity of the system.
True False |
| 12. |
Evaluation of capacity alternatives involves economic calculations only.
True False |
| 13. |
As forecasts are usually only accurate for the short term, forecasts are not useful in long-term capacity decisions.
True False |
| 14. |
Capacity increases are usually acquired in fairly large “chunks” rather than smooth increments.
True False |
| 15. |
In break-even analysis, costs that vary directly with volume of output are referred to as fixed costs because they are fixed to the level of output.
True False |
| 16. |
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.
True False |
| 17. |
Among the assumptions of break-even analysis is that the variable cost per unit remains the same regardless of quantity of output.
True False |
| 18. |
Which is not true about long-term capacity?
| A. |
Excess capacity can serve as a barrier to entry for other companies. |
| B. |
Capacity may be difficult and costly to modify. |
| C. |
Exceeding capacity minimizes operating costs. |
| D. |
Capacity affects the ability to satisfy customer’s demand. |
| E. |
Capacity is usually a major determinant of initial capital costs. |
|
| 19. |
Long-term capacity decisions are important for which of the following reasons?
I. The impact they have on the ability to meet future demand.
II. The increased reliance on debt rather than equity financing to add long-term capacity.
III. As determinant of initial capital costs.
IV. Their effect on operating costs.
|
| 20. |
Capacity refers to the upper limit on the _______ an operating unit can handle.
|
| 21. |
The maximum output rate under ideal conditions is:
|
| 22. |
The maximum possible output rate given a product mix, scheduling difficulties, operating hours, and so on, is:
|
| 23. |
Efficiency is defined as the ratio of:
| 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. |
|
| 24. |
Utilization is defined as the ratio of:
| A. |
actual output to effective capacity. |
| B. |
used time to available time. |
| C. |
available time to effective capacity. |
| D. |
effective capacity to actual output. |
| E. |
design capacity to actual output. |
|
| 25. |
The ratio of actual output to effective capacity is:
|
| 26. |
Throughput capacity for a productive unit measured as a rate is:
| A. |
actual output to effective capacity. |
| B. |
used time to available time. |
| C. |
available time to effective capacity. |
| D. |
effective capacity to actual output. |
| E. |
size of productive unit to average cycle time. |
|
| 27. |
Given the following information, the efficiency is:
Effective capacity = 80 units per day
Design capacity = 100 units per day
Actual output = 72 units per day
|
| 28. |
Given the following information, the efficiency is:
Effective capacity = 50 units per day
Design capacity = 100 units per day
Actual output = 30 units per day
|
| 29. |
Given the following information, the efficiency is:
Effective capacity = 20 units per day
Design capacity = 60 units per day
Actual output = 15 units per day
|
| 30. |
Which of the following is not a determinant of effective capacity?
|
| 31. |
Considerations in forecasting long-term demand include:
I) identifying demand trends
II) duration of demand trends
III) amplitude of demand cycles
|
| 32. |
Which of the following is not a consideration for developing capacity alternatives?
| A. |
Avoiding capacity cushions |
| B. |
Taking a big-picture approach to capacity changes |
| C. |
Preparing to deal with capacity in “chunks” |
| D. |
Attempting to smooth out capacity requirements |
| E. |
Identifying the optimal operating level |
|
| 33. |
Seasonal variations are typically easier to deal with in capacity planning than random variations because seasonal variations tend to be:
|
| 34. |
Production units have an optimal rate of output where:
| A. |
total costs are minimum. |
| B. |
unit costs are minimum. |
| C. |
marginal costs are minimum. |
| D. |
rate of output is maximum. |
| E. |
total revenue is maximum. |
|
| 35. |
Installing capacity before an increase in demand occurs is referred to as:
| A. |
an incremental strategy. |
|
| 36. |
At the break-even point:
| 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. |
|
| 37. |
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:
|
| 38. |
For fixed costs of $1,000, revenue per unit of $1, and variable cost per unit of $0.80, the break-even quantity is:
|
| 39. |
Which of the following is not an accurate statement concerning break-even analysis?
| A. |
The revenue per unit will be the same regardless of volume. |
| B. |
Costs related to production of a product are classified as fixed or variable |
| C. |
Variable cost per unit will be the same regardless of volume. |
| D. |
At quantities greater than the break-even point there is a loss. |
| E. |
All costs related to production of a product must be identified. |
|
| 40. |
Which of the following is not an assumption of the break-even model?
| A. |
One product is involved. |
| B. |
Everything that is produced can be sold. |
| C. |
Total variable cost is the same regardless of volume. |
| D. |
Fixed costs do not change with volume changes. |
| E. |
Revenue per unit is the same regardless of volume. |
|
| 41. |
What is the break-even quantity for the following situation?
FC = $1,200 per week
VC = $2 per unit
Revenue (R) = $6 per unit
|
|
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 $150 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $200. |
| 42. |
If, for this machine, design capacity is 50 cords per day, effective capacity is 40 cords per day, and actual output is anticipated to be 35 cords per day, what would its utilization be?
|
| 43. |
If, for this machine, design capacity is 50 cords per day, effective capacity is 40 cords per day, and actual output is expected to be 32 cords per day, what would be its efficiency?
|
| 44. |
What would the potential profit be if he were to split 4,000 cords of wood with this machine?
|
| 45. |
How many cords of wood would he have to split with this machine to break even?
|
| 46. |
How many cords of wood would he have to split with this machine to make a profit of $50,000?
|
|
The owner of a greenhouse and nursery is considering whether to spend $12,000 to acquire the licensing rights to grow a new variety of rose bush, which she could then sell for $8 each. Variable costs would be $5 per rosebush. |
| 47. |
If her available land has design and effective capacities of 3,000 and 2,000 rose bushes per year respectively, and she plans to grow 1,200 rosebushes each year on this land, what will be the efficiency of her use of this land?
|
| 48. |
If her available land has design and effective capacities of 3,000 and 2,000 rose bushes per year, respectively, and she expects to be 80% efficient in her use of this land, how many rosebushes does Rose plan to grow each year on this land?
|
| 49. |
What would the profit be if she were to produce and sell 5,000 rose bushes?
|
| 50. |
How many rose bushes would she have to produce and sell in order to break even?
|
| 51. |
How many rose bushes would she have to produce and sell in order to make a profit of $6,000?
|
|
A recruiter for a job placement agency is considering whether to pay $50,000 per year to lease a new recruiting facility in a prime location in Washington D. C. He estimates it will cost $50 per recruit to process the paperwork at this new location. He receives a $75 commission for each new recruit he processes. |
| 52. |
If the office space at this new location has design and effective capacities of 10,000 and 8,000 recruits processed annually, respectively, and 6,000 recruits will be processed per year, what will be the utilization of the office space?
|
| 53. |
If his office space at this new location has design and effective capacities of 10,000 and 8,000 recruits processed annually, respectively, and he plans to be 90% efficient in his use of this space, how many recruits does he plan to process per year?
|
| 54. |
What would be his annual profit if he were to process 4,000 recruits per year at this new location?
|
| 55. |
How many recruits would he have to process annually to break even at this new location?
|
| 56. |
How many recruits would he have to process annually to make a profit of $100,000 at this new location?
|
|
Doctor J. is considering purchasing a new blood analysis machine for $60,000. He estimates that he could charge $80.00 for an office visit to have a patient’s blood analyzed, while the variable cost of a blood analysis would be $30.00. |
| 57. |
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 blood analyses each year, what will be the utilization of this machine?
|
| 58. |
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% efficient in his use of this machine, how many blood analyses does he plan to perform each year?
|
| 59. |
What would be his profit if he were to perform 5,000 blood analyses?
|
| 60. |
How many blood analyses would he have to perform in order to break even?
|
| 61. |
How many blood analyses would he have to perform in order to make a profit of $50,000?
|
| 62. |
The efficiency of a productive unit is 60%. The unit produces an average of 20 forklift trucks per day. Determine the effective capacity of the unit.
|
| 63. |
The utilization of a machine is 50%. 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.
|
| 64. |
An investment proposal will have annual fixed costs of $60,000, variable costs of $35 per unit of output, and revenue of $55 per unit of output.
(i) Determine the break-even quantity.
(ii) What volume of output will be necessary for an annual profit of $60,000?
|
| 65. |
A firm is considering three capacity alternatives: A, B, and C. Alternative A would have an annual fixed cost of $100,000 and variable costs of $22 per unit. Alternative B would have annual fixed costs of $120,000 and variable costs of $20 per unit. Alternative C would have fixed costs of $80,000 and variable costs of $30 per unit. Revenue is expected to be $50 per unit.
(i) Which alternative has the lowest break-even quantity?
(ii) Which alternative will produce the highest profits for an annual output of 10,000 units?
(iii) Which alternative would require the lowest volume of output to generate an annual profit of $50,000?
|
| 66. |
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.
(i) What unit selling price must the owner obtain to break-even on a volume of 2,500 units a year?
(ii) 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?
|
| 67. |
What is the anticipated utilization?
|
| 68. |
What is the anticipated efficiency?
|
| 69. |
What is the break-even quantity (produced and sold)?
|
| 70. |
What are total revenues for the break-even quantity?
|
| 71. |
What are total costs for the break-even quantity?
|
| 72. |
What quantity would be required for a profit of $2,000?
|
| 73. |
What profit (loss) would there be for a quantity of 27,000?
|
| 74. |
What profit (loss) would there be for a quantity of 10,000?
|
Chapter 05 Strategic Capacity Planning Key
| 1. |
The term capacity is the upper limit on the workload an operating unit can handle.
TRUE |
Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #1
Topic: 05-01 Capacity, Measures, Efficiency, Utilization, and Effective Capacity
|
| 2. |
Capacity decisions are always long-term decisions.
FALSE |
Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #2
Topic: 05-01 Capacity, Measures, Efficiency, Utilization, and Effective Capacity
|
| 3. |
If a company produces a variety of outputs, capacity has to be expressed as several partial measures; no overall measure of capacity is possible.
FALSE |
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #3
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 4. |
Capacity decisions often involve a long-term commitment of resources which, when implemented, are difficult or impossible to modify without major added costs.
TRUE |
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #4
Topic: 05-02 The Importance of Long-Term Capacity
|
| 5. |
Stating capacity in dollar amounts generally results in a consistent measure of capacity.
FALSE |
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #5
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 6. |
Design capacity refers to the maximum output rate under ideal conditions.
TRUE |
Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #6
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 7. |
Design capacity refers to the maximum output rate possible given a product mix, operating hours, and machine maintenance.
FALSE |
Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #7
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 8. |
Efficiency is defined as the ratio of actual output to effective capacity.
TRUE |
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #8
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 9. |
As utilization increases the number of jobs/people waiting in an operating system decreases.
FALSE |
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #9
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 10. |
Facilities are a major factor influencing effective capacity.
TRUE |
Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #10
Topic: 05-04 Factors Influencing Effective Capacity
|
| 11. |
The more uniform the mix of products being produced, the more opportunity there is to increase the effective capacity of the system.
TRUE |
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #11
Topic: 05-04 Factors Influencing Effective Capacity
|
| 12. |
Evaluation of capacity alternatives involves economic calculations only.
FALSE |
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-02 Describe the strategic capacity planning process in organizations; know long-term demand patterns and calculate capacity requirements; and discuss major considerations for developing capacity alternatives.
Stevenson – Chapter 05 #12
Topic: 05-05 Strategic Capacity Planning Process in Organizations
|
| 13. |
As forecasts are usually only accurate for the short term, forecasts are not useful in long-term capacity decisions.
FALSE |
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-02 Describe the strategic capacity planning process in organizations; know long-term demand patterns and calculate capacity requirements; and discuss major considerations for developing capacity alternatives.
Stevenson – Chapter 05 #13
Topic: 05-05 Strategic Capacity Planning Process in Organizations
|
| 14. |
Capacity increases are usually acquired in fairly large “chunks” rather than smooth increments.
TRUE |
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-02 Describe the strategic capacity planning process in organizations; know long-term demand patterns and calculate capacity requirements; and discuss major considerations for developing capacity alternatives.
Stevenson – Chapter 05 #14
Topic: 05-08 Major Considerations for Developing Capacity Alternatives
|
| 15. |
In break-even analysis, costs that vary directly with volume of output are referred to as fixed costs because they are fixed to the level of output.
FALSE |
Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #15
Topic: 05-10 Break-Even Analysis
|
| 16. |
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.
TRUE |
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #16
Topic: 05-10 Break-Even Analysis
|
| 17. |
Among the assumptions of break-even analysis is that the variable cost per unit remains the same regardless of quantity of output.
TRUE |
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #17
Topic: 05-10 Break-Even Analysis
|
| 18. |
Which is not true about long-term capacity?
| A. |
Excess capacity can serve as a barrier to entry for other companies. |
| B. |
Capacity may be difficult and costly to modify. |
| C. |
Exceeding capacity minimizes operating costs. |
| D. |
Capacity affects the ability to satisfy customer’s demand. |
| E. |
Capacity is usually a major determinant of initial capital costs. |
|
Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #18
Topic: 05-02 The Importance of Long-Term Capacity
|
| 19. |
Long-term capacity decisions are important for which of the following reasons?
I. The impact they have on the ability to meet future demand.
II. The increased reliance on debt rather than equity financing to add long-term capacity.
III. As determinant of initial capital costs.
IV. Their effect on operating costs.
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #19
Topic: 05-02 The Importance of Long-Term Capacity
|
| 20. |
Capacity refers to the upper limit on the _______ an operating unit can handle.
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #20
Topic: 05-01 Capacity, Measures, Efficiency, Utilization, and Effective Capacity
|
| 21. |
The maximum output rate under ideal conditions is:
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #21
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 22. |
The maximum possible output rate given a product mix, scheduling difficulties, operating hours, and so on, is:
|
Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #22
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 23. |
Efficiency is defined as the ratio of:
| 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. |
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #23
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 24. |
Utilization is defined as the ratio of:
| A. |
actual output to effective capacity. |
| B. |
used time to available time. |
| C. |
available time to effective capacity. |
| D. |
effective capacity to actual output. |
| E. |
design capacity to actual output. |
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #24
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 25. |
The ratio of actual output to effective capacity is:
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #25
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 26. |
Throughput capacity for a productive unit measured as a rate is:
| A. |
actual output to effective capacity. |
| B. |
used time to available time. |
| C. |
available time to effective capacity. |
| D. |
effective capacity to actual output. |
| E. |
size of productive unit to average cycle time. |
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #26
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 27. |
Given the following information, the efficiency is:
Effective capacity = 80 units per day
Design capacity = 100 units per day
Actual output = 72 units per day
|
Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #27
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 28. |
Given the following information, the efficiency is:
Effective capacity = 50 units per day
Design capacity = 100 units per day
Actual output = 30 units per day
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #28
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 29. |
Given the following information, the efficiency is:
Effective capacity = 20 units per day
Design capacity = 60 units per day
Actual output = 15 units per day
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #29
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 30. |
Which of the following is not a determinant of effective capacity?
|
Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #30
Topic: 05-04 Factors Influencing Effective Capacity
|
| 31. |
Considerations in forecasting long-term demand include:
I) identifying demand trends
II) duration of demand trends
III) amplitude of demand cycles
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-02 Describe the strategic capacity planning process in organizations; know long-term demand patterns and calculate capacity requirements; and discuss major considerations for developing capacity alternatives.
Stevenson – Chapter 05 #31
Topic: 05-06 Forecasting Long-Term Demand
|
| 32. |
Which of the following is not a consideration for developing capacity alternatives?
| A. |
Avoiding capacity cushions |
| B. |
Taking a big-picture approach to capacity changes |
| C. |
Preparing to deal with capacity in “chunks” |
| D. |
Attempting to smooth out capacity requirements |
| E. |
Identifying the optimal operating level |
|
Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-02 Describe the strategic capacity planning process in organizations; know long-term demand patterns and calculate capacity requirements; and discuss major considerations for developing capacity alternatives.
Stevenson – Chapter 05 #32
Topic: 05-08 Major Considerations for Developing Capacity Alternatives
|
| 33. |
Seasonal variations are typically easier to deal with in capacity planning than random variations because seasonal variations tend to be:
|
Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-02 Describe the strategic capacity planning process in organizations; know long-term demand patterns and calculate capacity requirements; and discuss major considerations for developing capacity alternatives.
Stevenson – Chapter 05 #33
Topic: 05-08 Major Considerations for Developing Capacity Alternatives
|
| 34. |
Production units have an optimal rate of output where:
| A. |
total costs are minimum. |
| B. |
unit costs are minimum. |
| C. |
marginal costs are minimum. |
| D. |
rate of output is maximum. |
| E. |
total revenue is maximum. |
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-02 Describe the strategic capacity planning process in organizations; know long-term demand patterns and calculate capacity requirements; and discuss major considerations for developing capacity alternatives.
Stevenson – Chapter 05 #34
Topic: 05-08 Major Considerations for Developing Capacity Alternatives
|
| 35. |
Installing capacity before an increase in demand occurs is referred to as:
| A. |
an incremental strategy. |
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-02 Describe the strategic capacity planning process in organizations; know long-term demand patterns and calculate capacity requirements; and discuss major considerations for developing capacity alternatives.
Stevenson – Chapter 05 #35
Topic: 05-08 Major Considerations for Developing Capacity Alternatives
|
| 36. |
At the break-even point:
| 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. |
|
Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #36
Topic: 05-10 Break-Even Analysis
|
| 37. |
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:
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #37
Topic: 05-10 Break-Even Analysis
|
| 38. |
For fixed costs of $1,000, revenue per unit of $1, and variable cost per unit of $0.80, the break-even quantity is:
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #38
Topic: 05-10 Break-Even Analysis
|
| 39. |
Which of the following is not an accurate statement concerning break-even analysis?
| A. |
The revenue per unit will be the same regardless of volume. |
| B. |
Costs related to production of a product are classified as fixed or variable |
| C. |
Variable cost per unit will be the same regardless of volume. |
| D. |
At quantities greater than the break-even point there is a loss. |
| E. |
All costs related to production of a product must be identified. |
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #39
Topic: 05-10 Break-Even Analysis
|
| 40. |
Which of the following is not an assumption of the break-even model?
| A. |
One product is involved. |
| B. |
Everything that is produced can be sold. |
| C. |
Total variable cost is the same regardless of volume. |
| D. |
Fixed costs do not change with volume changes. |
| E. |
Revenue per unit is the same regardless of volume. |
|
Accessibility: Keyboard Navigation
Difficulty: Hard
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #40
Topic: 05-10 Break-Even Analysis
|
| 41. |
What is the break-even quantity for the following situation?
FC = $1,200 per week
VC = $2 per unit
Revenue (R) = $6 per unit
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #41
Topic: 05-10 Break-Even Analysis
|
|
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 $150 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $200. |
| 42. |
If, for this machine, design capacity is 50 cords per day, effective capacity is 40 cords per day, and actual output is anticipated to be 35 cords per day, what would its utilization be?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #42
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 43. |
If, for this machine, design capacity is 50 cords per day, effective capacity is 40 cords per day, and actual output is expected to be 32 cords per day, what would be its efficiency?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #43
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 44. |
What would the potential profit be if he were to split 4,000 cords of wood with this machine?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #44
Topic: 05-10 Break-Even Analysis
|
| 45. |
How many cords of wood would he have to split with this machine to break even?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #45
Topic: 05-10 Break-Even Analysis
|
| 46. |
How many cords of wood would he have to split with this machine to make a profit of $50,000?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #46
Topic: 05-10 Break-Even Analysis
|
|
The owner of a greenhouse and nursery is considering whether to spend $12,000 to acquire the licensing rights to grow a new variety of rose bush, which she could then sell for $8 each. Variable costs would be $5 per rosebush. |
| 47. |
If her available land has design and effective capacities of 3,000 and 2,000 rose bushes per year respectively, and she plans to grow 1,200 rosebushes each year on this land, what will be the efficiency of her use of this land?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #47
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 48. |
If her available land has design and effective capacities of 3,000 and 2,000 rose bushes per year, respectively, and she expects to be 80% efficient in her use of this land, how many rosebushes does Rose plan to grow each year on this land?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #48
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 49. |
What would the profit be if she were to produce and sell 5,000 rose bushes?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #49
Topic: 05-10 Break-Even Analysis
|
| 50. |
How many rose bushes would she have to produce and sell in order to break even?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #50
Topic: 05-10 Break-Even Analysis
|
| 51. |
How many rose bushes would she have to produce and sell in order to make a profit of $6,000?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #51
Topic: 05-10 Break-Even Analysis
|
|
A recruiter for a job placement agency is considering whether to pay $50,000 per year to lease a new recruiting facility in a prime location in Washington D. C. He estimates it will cost $50 per recruit to process the paperwork at this new location. He receives a $75 commission for each new recruit he processes. |
| 52. |
If the office space at this new location has design and effective capacities of 10,000 and 8,000 recruits processed annually, respectively, and 6,000 recruits will be processed per year, what will be the utilization of the office space?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #52
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 53. |
If his office space at this new location has design and effective capacities of 10,000 and 8,000 recruits processed annually, respectively, and he plans to be 90% efficient in his use of this space, how many recruits does he plan to process per year?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #53
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 54. |
What would be his annual profit if he were to process 4,000 recruits per year at this new location?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #54
Topic: 05-10 Break-Even Analysis
|
| 55. |
How many recruits would he have to process annually to break even at this new location?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #55
Topic: 05-10 Break-Even Analysis
|
| 56. |
How many recruits would he have to process annually to make a profit of $100,000 at this new location?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #56
Topic: 05-10 Break-Even Analysis
|
|
Doctor J. is considering purchasing a new blood analysis machine for $60,000. He estimates that he could charge $80.00 for an office visit to have a patient’s blood analyzed, while the variable cost of a blood analysis would be $30.00. |
| 57. |
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 blood analyses each year, what will be the utilization of this machine?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #57
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 58. |
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% efficient in his use of this machine, how many blood analyses does he plan to perform each year?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #58
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 59. |
What would be his profit if he were to perform 5,000 blood analyses?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #59
Topic: 05-10 Break-Even Analysis
|
| 60. |
How many blood analyses would he have to perform in order to break even?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #60
Topic: 05-10 Break-Even Analysis
|
| 61. |
How many blood analyses would he have to perform in order to make a profit of $50,000?
|
Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #61
Topic: 05-10 Break-Even Analysis
|
| 62. |
The efficiency of a productive unit is 60%. The unit produces an average of 20 forklift trucks per day. Determine the effective capacity of the unit.
Solving for effective capacity yields 33.33 forklift trucks per day. |
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #62
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 63. |
The utilization of a machine is 50%. 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.
First, solve for actual output using the utilization formula.
Thus actual output = 35 units per hour.
Using the efficiency formula:
|
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #63
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 64. |
An investment proposal will have annual fixed costs of $60,000, variable costs of $35 per unit of output, and revenue of $55 per unit of output.
(i) Determine the break-even quantity.
(ii) What volume of output will be necessary for an annual profit of $60,000?
FC = $60,000 per year
vc = $35 per unit
Rev – $55 per unit
|
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #64
Topic: 05-10 Break-Even Analysis
|
| 65. |
A firm is considering three capacity alternatives: A, B, and C. Alternative A would have an annual fixed cost of $100,000 and variable costs of $22 per unit. Alternative B would have annual fixed costs of $120,000 and variable costs of $20 per unit. Alternative C would have fixed costs of $80,000 and variable costs of $30 per unit. Revenue is expected to be $50 per unit.
(i) Which alternative has the lowest break-even quantity?
(ii) Which alternative will produce the highest profits for an annual output of 10,000 units?
(iii) Which alternative would require the lowest volume of output to generate an annual profit of $50,000?
(ii) Profit = Q(rev – vc) – FC. Q = 10,000. A: $180,000; B: $180,000; C: $120,000.
|
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #65
Topic: 05-10 Break-Even Analysis
|
| 66. |
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.
(i) What unit selling price must the owner obtain to break-even on a volume of 2,500 units a year?
(ii) 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?
|
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #66
Topic: 05-10 Break-Even Analysis
|
| 67. |
What is the anticipated utilization?
80% |
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #67
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 68. |
What is the anticipated efficiency?
90% |
Difficulty: Medium
Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity.
Stevenson – Chapter 05 #68
Topic: 05-03 Measuring Capacity and Two Related Performance Measures
|
| 69. |
What is the break-even quantity (produced and sold)?
[25,000 units] |
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #69
Topic: 05-10 Break-Even Analysis
|
| 70. |
What are total revenues for the break-even quantity?
$40,000 |
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #70
Topic: 05-10 Break-Even Analysis
|
| 71. |
What are total costs for the break-even quantity?
$40,000 |
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #71
Topic: 05-10 Break-Even Analysis
|
| 72. |
What quantity would be required for a profit of $2,000?
28,334 units |
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #72
Topic: 05-10 Break-Even Analysis
|
| 73. |
What profit (loss) would there be for a quantity of 27,000?
$1,200 |
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #73
Topic: 05-10 Break-Even Analysis
|
| 74. |
What profit (loss) would there be for a quantity of 10,000?
$9,000 loss |
Difficulty: Medium
Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems.
Stevenson – Chapter 05 #74
Topic: 05-10 Break-Even Analysis
|
Chapter 05 Strategic Capacity Planning Summary
| Category |
# of Questions |
| Accessibility: Keyboard Navigation |
61 |
| Difficulty: Easy |
8 |
| Difficulty: Hard |
6 |
| Difficulty: Medium |
60 |
| Learning Objective: 05-01 Define capacity; explain the importance of long-term capacity; know how to measure capacity and understand two related performance measures; and describe factors influencing effective capacity. |
36 |
| Learning Objective: 05-02 Describe the strategic capacity planning process in organizations; know long-term demand patterns and calculate capacity requirements; and discuss major considerations for developing capacity alternatives. |
8 |
| Learning Objective: 05-03 Describe the break-even analysis approach for evaluating capacity alternatives; and use it to solve problems. |
30 |
| Stevenson – Chapter 05 |
79 |
| Topic: 05-01 Capacity, Measures, Efficiency, Utilization, and Effective Capacity |
3 |
| Topic: 05-02 The Importance of Long-Term Capacity |
3 |
| Topic: 05-03 Measuring Capacity and Two Related Performance Measures |
27 |
| Topic: 05-04 Factors Influencing Effective Capacity |
3 |
| Topic: 05-05 Strategic Capacity Planning Process in Organizations |
2 |
| Topic: 05-06 Forecasting Long-Term Demand |
1 |
| Topic: 05-08 Major Considerations for Developing Capacity Alternatives |
5 |
| Topic: 05-10 Break-Even Analysis |
30 |
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