Chapter 11 Capacity Planning Chapter 11 Capacity Planning Answer Key Multiple Choice Questions 1 Facilities decisions A are medium range capacity decisions B should consider one of the five crucial questions of how much how large when where and what type C constrain all other capacity decisions D require planning for one year only LO 11 2 Topic Facilities Decisions Difficulty 2 Moderate AACSB Reflective thinking Bloom s Understand Feedback Facilities decisions are long range must consider all five crucial questions and place constraints on all lower level capacity decisions 2 Which of the following functions is NOT affected directly by the facilities decision A Operations B Marketing C Finance D All of the above are directly affected LO 11 2 Topic Facilities Decisions Difficulty 1 Easy AACSB Reflective thinking Bloom s Remember Feedback Facilities decisions involve all organizational functions 3 Which of the following statements regarding capacity is NOT true A Capacity can be measured in several units such as hours of output number of units produced number of customers served and the like B Effective capacity is generally less than the theoretical capacity C Capacity is the maximum output that could be produced over a period of time D The maximum output of a process is not a meaningful measure LO 11 1 Topic Capacity Difficulty 2 Moderate AACSB Reflective thinking Bloom s Understand Feedback Capacity is defined as the maximum output that can be produced over a specific period of time and is therefore a meaningful measure 12 1 Chapter 11 Capacity Planning 4 Why is it dangerous to justify capacity expansion using economies of scale A It is far too specific to use as a basis for capacity decisions B Volume capacity and process considerations are looked at individually C The common notion that unit costs decline for larger facilities due to size is not always accurate D It requires consideration of quality dependability and flexibility LO 11 1 Topic Capacity Difficulty 1 Easy AACSB Reflective thinking Bloom s Understand Feedback Economies of scale are appropriate up to the point that diseconomies of scale begin to appear so there is a limit 5 In aggregate planning A the concern is over a long range planning horizon B output levels are set in the face of certain demand C aggregate implies that planning is done for a single overall measure of output or at most a few products D firms should never consider overtime hiring firing or subcontracting LO 11 3 Topic Sales and Operations Planning Difficulty 2 Moderate AACSB Reflective thinking Bloom s Understand Feedback Aggregate planning concerns the medium time range output levels are set in the face of uncertain demand and aggregate planning implies that planning is done for a single overall measure of output or at most a few products 6 Demand management variables include A pricing inventory and advertising B reservations pricing and advertising C subcontracting advertising and pricing D inventory reservations and pricing LO 11 4 Topic Planning Options Difficulty 1 Easy AACSB Reflective thinking Bloom s Remember Feedback Demand management entails pricing advertising promotion backlogs reservations and complementary offerings 7 Supply management variables include A inventory subcontracting and cooperative arrangements B complementary offerings inventory and overtime C subcontracting hiring and reservations D all of the above 12 2 Chapter 11 Capacity Planning LO 11 4 Topic Planning Options Difficulty 2 Moderate AACSB Reflective thinking Bloom s Understand Feedback Supply management entails hiring layoff overtime and undertime part time temporary carrying inventory subcontracting and cooperative arrangements 8 Aggregate planning differs from scheduling in that A the former refers to the long range and the latter refers to the short range B the former is concerned with allocating available resources and the latter with the acquisition of resources C the former refers to the long range and the latter refers to the medium range D the former is concerned with the acquisition of resources and the latter with allocating available resources LO 11 3 Topic Sales and Operations Planning Difficulty 2 Moderate AACSB Reflective thinking Bloom s Understand Feedback Aggregate planning is medium range and concerned with acquiring resources 9 The aggregate planning problem A should consider only supply management options B affects only marketing and production but human resources are not involved in decisions C should consider only demand management options D needs to consider multiple trade offs such as customer service level inventory levels labor force stability and costs LO 11 3 Topic Sales and Operations Planning Difficulty 3 Hard AACSB Reflective thinking Bloom s Understand Feedback Aggregate planning considers both supply and demand involves all functions and needs to consider these multiple trade offs 10 Which of the following is NOT a factor affecting the elements of a facilities strategy A Cost of facilities B Likely behavior of competitors C Business strategy D Whether the company uses make to stock or assemble to order LO 11 2 Topic Facilities Decisions Difficulty 1 Easy AACSB Reflective thinking Bloom s Remember Feedback Facilities strategic factors include predicted demand cost likely competitor behavior business strategy and global considerations 12 3 Chapter 11 Capacity Planning 11 The type of strategy used with respect to the amount of capacity cushion when the cost or consequence of running out is approximately in balance with the cost of excess capacity is called A small cushion B large cushion C moderate cushion D none of the above LO 11 2 Topic Facilities Decisions Difficulty 1 Easy AACSB Reflective thinking Bloom s Remember Feedback A moderate cushion is best when the cost of running out is balanced by the cost of excess capacity 12 The most popular type of facility used by Fortune 500 companies is A product focused B process focused C market focused D general purpose LO 11 2 Topic Facilities Decisions Difficulty 2 Moderate AACSB Reflective thinking Bloom s Remember Feedback More than half are product focused 13 Which of the following statements is true about facilities decisions A They are generally short range B They are not critical because they determine only future availability of output C They involve all organizational units and are often made at the highest corporate level D They are simple and easy to analyze LO 11 2 Topic