Ch 5

Question 1

The capability of a system to perform to its expected function; the upper limit or ceiling on the load that an operating unit can handle

Answer 1

Capacity

Question 2

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

Answer 2

This is the goal of strategic planning

Question 3

Operating costs that are too high

Answer 3

Overcapacity

Question 4

Strained resources and possible loss of customers

Answer 4

Under capacity

Question 5

Maximum output rate or service capacity an operation, process, or facility is designed for (assumes no down time)

Answer 5

Design capacity

Question 6

Design capacity minus allowances such as personal time, maintenance, and scrap (planned down time)

Answer 6

Effective capacity/ demonstrated capacity

Question 7

Rate of output actually achieved - cannot exceed effective capacity

Answer 7

Actual output

Question 8

Why is measuring capacity in dollars problematic?

Answer 8

• Inflation/deflation

- currency exchange

Question 9

Why can measuring capacity in “units produced” be problematic?

Answer 9

One unit may be more complex to manufacture than another

Question 10

What is the common denominator in most industries?

Answer 10

Standard hours

Question 11

What is the formula for efficiency?

Answer 11

Actual/Effective

Question 12

What is the formula for utilization?

Answer 12

Actual/Design

Question 13

What are strategies typcially based on predictions about?

Answer 13

Long-term demand patterns, technological change, competitor behavior

Question 14

Extra capacity used to offset demand uncertainty

Answer 14

Capacity cushion

Question 15

What is the formula for capacity cushion?

Answer 15

100% - utilization

Question 16

Overall level of capacity requirements. Require forecasting demand over a time horizon and converting those needs into capacity requirements

Answer 16

Long-term considerations

Question 17

Probable variations in capacity requirements. Less concerned with cycles and trends than with seasonal variations and other variations from average

Answer 17

Short-term considerations

Question 18

What are three problems of service capacity planning?

Answer 18

1) The need to be near customers
2) The inability to store services
3) The degree of demand volatility

Question 19

Strategies used to offset capacity limitations and that are intended to achieve a closer match between supply and demand

Answer 19

Service demand management strategies

Question 20

An operation in a sequence of operations whose capacity is lower than that of the other operations; weakest link; capacity constraint

Answer 20

Bottleneck operations

Question 21

If output rate is less than the optimal level, increasing the output rate results in decreasing average per unit costs

Answer 21

Economies of scale

Question 22

If the output rate is more than the optimal level, increasing the output rate results in increasing average per unit costs

Answer 22

Diseconomies of scale

Question 23

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

Answer 23

Constraint

Question 24

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

Answer 24

Break-Even Point (BEP)