Capacity Planning

Question 1

It is the upper limit or ceiling on the load that an operating unit can handle.

Answer 1

Capacity

Question 2

(Design/Actual) capacity is the maximum obtainable output

Answer 2

Design Capacity

Question 3

(Design/Effective) capacity is the maximum capacity given product mix, scheduling difficulties, and other doses of reality. Design capacity minus allowances such as personal time and maintenance.

Answer 3

Effective Capacity

Question 4

rate of output actually achieved–cannot exceed effective capacity.

Answer 4

Actual Output

Question 5

Capacity and location are closely tied

(Need to be near consumers, Inability to store services, Degree of volatility of demand)

Answer 5

Need to be near consumers

Question 6

Capacity must me matched with timing of demand

(Need to be near consumers, Inability to store services, Degree of volatility of demand)

Answer 6

Inability to store services

Question 7

Peak demand periods

(Need to be near consumers, Inability to store services, Degree of volatility of demand)

Answer 7

Degree of volatility of demand

Question 8

To achieve a match between the long-term
supply capabilities of an organization and the
predicted level of long-term demand

Answer 8

Goal

Question 9

______capacity -> operating costs that are too high
______capacity -> strained resources and possible
loss of customers

Answer 9

Overcapacity, undercapacity

Question 10

Capacity Strategies:

Build capacity in anticipation of future demand
increases (Leading/Following/Tracking)

Answer 10

Leading

Question 11

Capacity Strategies:

Build capacity when demand exceeds current capacity. (Leading/Following/Tracking)

Answer 11

Following

Question 12

Similar to the following strategy, but adds capacity in
relatively small increments to keep pace with increasing
demand. (Leading/Following/Tracking)

Answer 12

Tracking

Question 13

Extra capacity used to offset demand
uncertainty

Answer 13

Capacity cushion

Question 14

Organizations that have greater demand
uncertainty typically have ______ capacity cushion.

Answer 14

greater

Question 15

Organizations that have standard products and
services generally have ______ capacity cushion

Answer 15

smaller

Question 16

Forecasting Capacity Requirements:

Long-term considerations relate to _______
level of capacity requirements

Answer 16

overall

Question 17

Forecasting Capacity Requirements:

Short-term considerations relate to probable
v_______ in capacity requirements

Less concerned with c_____ and t_____ than
with seasonal variations and other variations
from average

Answer 17

variations

cycles and trends

Question 18

___________ Operation is an operation in a
sequence of operations whose capacity is lower
than that of the other operations.

Answer 18

Bottleneck

Question 19

If output rate is less than the optimal level,
increasing the output rate results in decreasing
average per unit costs (Economies/Diseconomies of scale)

Answer 19

Economies of scale

Question 20

If the output rate is more than the optimal
level, increasing the output rate results in
increasing average per unit costs (Economies/Diseconomies of scale)

Answer 20

Diseconomies of scale

Question 21

Reasons for economies of scale:
 (Variable/Fixed) costs are spread over a larger number of units
 (Processing/Construction) costs increase at a decreasing rate as facility size increases
 (Processing/Construction) costs decrease due to standardization

Answer 21

Fixed
Construction
Processing

Question 22

Reasons for diseconomies of scale
 Distribution costs (decrease/increase) due to traffic congestion and shipping from a centralized facility rather than multiple smaller facilities
 Complexity (decreases/increases) costs
 Inflexibility can be an issue
 Additional levels of bureaucracy

Answer 22

increase
increases

Question 23

Something that limits the performance of a process or
system in achieving its goals

Answer 23

Constraint

Question 24

Focuses on the relationship between cost,
revenue, and volume of output

Answer 24

Cost-Volume Analysis

Question 25

The volume of output at which total cost and
total revenue are equal

Answer 25

Break-even point

Question 26

Cost-volume analysis is a viable tool for
comparing capacity alternatives if certain
assumptions are satisfied:

• One product is involved
• Everything produced can be sold
• The variable cost per unit is (varying/the same) regardless of volume
• Fixed costs (do/not) change with volume changes, or they are step changes
• The revenue per unit is (different/the same) regardless of volume
• Revenue per unit exceeds variable cost per unit

Answer 26

the same
do not
the same

Question 27

The difference between cash received from
sales and other sources, and cash outflow for
labor, material, overhead, and taxes

Answer 27

Cash Flow

Question 28

The sum, in current value, of all future cash
flow of an investment proposal

Answer 28

Present Value

Question 29

________ management is one way by which organizations can enhance their effective capacities

Answer 29

Bottleneck

Question 30

________ reduces the organization’s dependence on forecast accuracy and reliability.

Many organizations utilize _______ ________ to achieve flexibility

Answer 30

Flexibility

Capacity Cushions