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21. Outsourcing some production is a means of _________ a capacity constraint. A. identifyingB. modifyingC. supportingD. overcoming E. repeating

D. overcoming **Outsourcing some production reduces the burden placed on the constraint.

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22. A basic question in capacity planning is: A. what kind is neededB. how much is neededC. when is it neededD. all of the above E. none of the above

D. all of the above **Type, quantity and timing are the essential elements of the capacity decision.

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23. Which of these factors wouldn't be subtracted from design capacity when calculating effective capacity? A. Personal timeB. MaintenanceC. ScrapD. Operating hours per dayE. All of the above would be subtracted in the calculation

E. All of the above would be subtracted in the calculation**Effective capacity reflects issues such as required personal time, maintenance issues, scrap and the length of a given workday.

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24. A reason for the importance of capacity decisions is that capacity: A. limits the rate of output possibleB. affects operating costsC. is a major determinant of initial costsD. is a long-term commitment of resources E. all of the above

E. all of the above**Capacity is a strategic decision that influences costs and the firm's ability to satisfy customers.

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25. Which of the following is the case where capacity is measured in terms of inputs? A. HospitalB. TheaterC. RestaurantD. All of the above E. None of the above

D. All of the above **Hospitals, theaters and restaurants measure capacity in terms of customers, which are inputs to service processes.

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26. Unbalanced systems are evidenced by ... A. Top heavy operationsB. Labor unrestC. Bottleneck operationsD. Increasing capacities E. Assembly lines

C. Bottleneck operations**Bottleneck operations have capacities that are substantially smaller than non-bottleneck operations.

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27. Maximum capacity refers to the upper limit of: A. inventoriesB. demandC. suppliesD. rate of output E. finances

D. rate of output **Capacity has to do with the rate of output that is possible.

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28. The impact that a significant change in capacity will have on a key vendor is a: A. supply chain factorB. process limiting factorC. internal factorD. human resource factorE. operational process factor

A. supply chain factor**Vendors and their performance can be critical factors with respect to effective capacity.

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29. The maximum possible output given a product mix, scheduling difficulties, quality factors, and so on, is: A. utilizationB. design capacityC. efficiencyD. effective capacity E. available capacity

D. effective capacity **Effective capacity reflects the realities of the production environment.

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30. Efficiency is defined as the ratio of: A. actual output to effective capacity B. actual output to design capacityC. design capacity to effective capacity D. effective capacity to actual output E. design capacity to actual output

A. actual output to effective capacity **Efficiency measures the usage of effective capacity.

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31. Utilization is defined as the ratio of: A. actual output to effective capacity B. actual output to design capacityC. design capacity to effective capacity D. effective capacity to actual outputE. design capacity to actual output

B. actual output to design capacity**Utilization measures the usage of design capacity.

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32. Which of the following is a factor that affects service capacity planning? A. The need to be near customersB. The inability to store servicesC. The degree of volatility of demandD. The customer's willingness to wait E. All of the above

E. All of the above**The capacity question tends to be more customer-focused in service operations.

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33. Which of the following is a tactic that helps service capacity management? A. PricingB. PromotionsC. DiscountsD. AdvertisingE. All of the above

E. All of the above**These tactics help service operations shift demand to create more attractive capacity-demand balances.

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34. The ratio of actual output to effective capacity is: A. design capacityB. effective capacityC. actual capacityD. efficiency E. utilization

D. efficiency **Efficiency measures the usage of effective capacity.

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35. The ratio of actual output to design capacity is: A. design capacityB. effective capacityC. actual capacityD. efficiency E. utilization

E. utilization**Utilization measures the usage of design capacity.

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36. Given the following information, what would efficiency be? Effective capacity = 80 units per dayDesign capacity = 100 units per dayUtilization = 48%A. 20% B. 35% C. 48% D. 60% E. 80%

D. 60% **If utilization is 48%, then actual output must have been 48 units.

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37. Given the following information, what would efficiency be? Effective capacity = 50 units per dayDesign capacity = 100 units per dayActual output = 30 units per dayA. 40% B. 50% C. 60% D. 80% E. 90%

C. 60% **Efficiency is actual output divided by effective capacity.

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38. Given the following information, what would utilization be? Effective capacity = 20 units per dayDesign capacity = 60 units per dayActual output = 15 units per dayA. 1/4B. 1/3C. 1/2D. 3/4E. none of these

A. 1/4**Utilization is actual output divided by design capacity.

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39. Which of the following is not a strategy to manage service capacity? A. Hiring extra workersB. BackorderingC. Pricing and promotionD. Part time workers E. Subcontracting

B. Backordering**Backordering for services is simply shifting demand to a later period.

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40. Which of the following is not a determinant of effective capacity? A. FacilitiesB. Product mixC. Actual outputD. Human factors E. External factors

C. Actual output**Actual output can be limited by effective capacity.

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41. Capacity planning decisions have both long-term and short-term considerations. Which of the following statements are true?(I) Long-term considerations relate to the overall level of capacity.(II) Short-term considerations relate to the probable variations in capacity requirements.(III) Short-term considerations determine the "effective capacity." A. Only one of the three statements is true.B. I and IIC. II and IIID. I and IIIE. All three statements are correct.

B. I and II**Effective capacity can shift over the long term as the result of a number of factors.

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42. Capacity in excess of expected demand that is intended to offset uncertainty is a: A. margin protectB. line balanceC. capacity cushionD. timing bubbleE. none of the above

C. capacity cushion**A capacity cushion reduces short-term imbalances.

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43. Short-term considerations in determining capacity requirements include: A. demand trendB. cyclical demand variationsC. seasonal demand variationsD. mission statementsE. new product development plans

C. seasonal demand variations**Trends, cycles and fundamental strategic changes are long-term considerations.

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44. Which of the following is not a criterion for developing capacity alternatives? A. Design structured, rigid systemsB. Take a big-picture approach to capacity changesC. Prepare to deal with capacity in "chunks"D. Attempt to smooth out capacity requirements E. Identify the optimal operating level

A. Design structured, rigid systems**The long-term nature of capacity decisions calls for flexibility, not rigidity.

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45. Seasonal variations are often easier to deal with in capacity planning than random variations because seasonal variations tend to be:A. smallerB. largerC. predictable D. controllable E. less frequent

C. predictable **When variation is predictable, it can be managed.

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46. Production units have an optimal rate of output where: A. total costs are minimumB. average unit costs are minimumC. marginal costs are minimumD. rate of output is maximum E. total revenue is maximum

B. average unit costs are minimum**Average unit costs reflect both fixed and variable costs.

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47. When the output is less than the optimal rate of output, the average unit cost will be: A. lowerB. the sameC. higherD. either higher or lowerE. either higher, lower or the same

C. higher**At too low a volume, fixed costs are too burdensome.

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48. When buying component parts, risk does not include: A. loss of controlB. vendor viabilityC. interest rate fluctuationsD. need to disclose proprietary information E. all are risk factors

C. interest rate fluctuations**Buying component parts is a short-term activity.

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49. At the break-even point:A. output equals capacityB. total cost equals total revenueC. total cost equals profitD. variable cost equals fixed costE. variable cost equals total revenue

B. total cost equals total revenue**At the break-even point, total profit (total revenue minus total cost) is zero.

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50. What is the break-even quantity for the following situation? FC = $1,200 per weekVC = $2 per unitRev = $6 per unitA. 100 B. 200 C. 600 D. 1,200 E. 300

E. 300**A volume of 300 units leads to $1,200 in margin to offset fixed costs.