Chapter 11 - Capacity PlanningChapter 11 Capacity Planning Answer KeyMultiple-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: 11.2Topic: Facilities DecisionsDifficulty: 2 ModerateAACSB: Reflective thinkingBloom’s: UnderstandFeedback: 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: 11.2Topic: Facilities DecisionsDifficulty: 1 EasyAACSB: Reflective thinkingBloom’s: RememberFeedback: 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: 11.1Topic: CapacityDifficulty: 2 ModerateAACSB: Reflective thinkingBloom’s: UnderstandFeedback: Capacity is defined as the maximum output that can be produced over a specific period of time and is therefore a meaningful measure.12-1Chapter 11 - Capacity Planning4. 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: 11.1Topic: CapacityDifficulty: 1 EasyAACSB: Reflective thinkingBloom’s: UnderstandFeedback: 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: 11.3Topic: Sales and Operations PlanningDifficulty: 2 ModerateAACSB: Reflective thinkingBloom’s: UnderstandFeedback: 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: 11.4Topic: Planning OptionsDifficulty: 1 EasyAACSB: Reflective thinkingBloom’s: RememberFeedback: 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.12-2Chapter 11 - Capacity PlanningLO: 11.4Topic: Planning OptionsDifficulty: 2 ModerateAACSB: Reflective thinkingBloom’s: UnderstandFeedback: 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: 11.3Topic: Sales and Operations PlanningDifficulty: 2 ModerateAACSB: Reflective thinkingBloom’s: UnderstandFeedback: 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, laborforce stability, and costs.LO: 11.3Topic: Sales and Operations PlanningDifficulty: 3 HardAACSB: Reflective thinkingBloom’s: UnderstandFeedback: 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: 11.2Topic: Facilities DecisionsDifficulty: 1 EasyAACSB: Reflective thinkingBloom’s: RememberFeedback: Facilities strategic factors include predicted demand, cost, likely competitor behavior, business strategy, and global considerations.12-3Chapter 11 - Capacity Planning11. The type of strategy used with respect to the amount of capacity cushion when "the cost orconsequence 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: 11.2Topic: Facilities DecisionsDifficulty: 1 EasyAACSB: Reflective thinkingBloom’s: RememberFeedback: 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: 11.2Topic: Facilities DecisionsDifficulty: 2 ModerateAACSB: Reflective thinkingBloom’s: RememberFeedback: 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