Homework assignment 5 (plase submit the scantron form):

1. Effective capacity is the a. maximum output of a system in a given period b. capacity a firm expects to achieve given the current operating constraints c. average output that can be achieved under ideal conditions d. minimum usable capacity of a particular facility e. sum of all of the organization's inputs b (Capacity, moderate) Christophers Cranks uses a machine that can produce 100 cranks per hour. The firm operates 12 hours per day, five days per week. Due to regularly scheduled preventive maintenance, the firm expects the machine to be running during approximately 95% of the available time. Based on experience with other products, the firm expects to achieve an efficiency level for the cranks of 85%. What is the expected weekly output of cranks for this company? a. 5100 b. 5700 c. 4845 d. 969 e. 6783 c (Capacity, moderate) {AACSB: Analytic Skills} Which of the following represents a common way to manage capacity in the service sector? a. appointments b. reservations c. changes in staffing levels d. first-come, first served service rule e. early bird specials in restaurants c (Capacity, easy) Fabricators, Inc. wants to increase capacity by adding a new machine. The fixed costs for machine A are $90,000, and its variable cost is $15 per unit. The revenue is $21 per unit. The break-even point for machine A is a. $90,000 dollars b. 90,000 units c. $15,000 dollars d. 15,000 units e. cannot be calculated from the information provided d (Break-even analysis, moderate) {AACSB: Analytic Skills} A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years. If the cost of capital is 5 percent, the net present value of this investment is a. greater than $80,000 b. greater than $130,000 c. less than $30,000 d. impossible to calculate, because no interest rate is given e. impossible to calculate, because variable costs are not known c (Applying investment analysis to strategy-driven investments, moderate) {AACSB: Analytic Skills}

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Aggregate planning is capacity planning for a. the long range b. the intermediate range c. the short range d. typically one to three months e. typically three or more years b (Introduction, easy) Which of the following is not one of the four things needed for aggregate planning? a. a logical overall unit for measuring sales and output b. a method for determining costs, such as hiring, firing, and inventory costs, associated with production schedules c. a mathematical model that will minimize costs over the intermediate planning period d. an aggregate demand forecast for an intermediate planning period e. All of these are needed for aggregate planning. c (Introduction, easy) Which of the following statements about aggregate planning is false? a. Hiring, layoffs, overtime, and subcontracting are methods of manipulating capacity. b. Aggregate planning produces a plan detailing which products are made and in what quantities. c. Yield management is a way of manipulating product or service demand. d. Aggregate planning uses the adjustable part of capacity to meet production requirements. e. The transportation method is an optimizing technique for aggregate planning. b (The planning process, moderate) Which of these is among the demand options of aggregate planning? a. subcontracting b. back-ordering during high-demand periods c. changing inventory levels d. varying workforce size e. All of the above are demand options. b (Aggregate planning strategies, moderate) Which choice best describes level scheduling? a. Daily production is variable from period to period. b. Subcontracting, hiring, and firing manipulate supply. c. Price points are calculated to match demand to capacity. d. Inventory goes up or down to buffer the difference between demand and production. e. Seasonal demand fluctuations are matched without hirings or layoffs. d (Aggregate planning strategies, easy)

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