Chapter 5: Strategic Capacity Planning for Products and Services

Question 1

A schematic representation of the alternatives available to a decision maker and their possible consequences.

Answer 1

Decision Tree

Question 2

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

Answer 2

Capacity

Question 3

The maximum output rate or service capacity an operation, process, or facility is designed for.

Answer 3

Design Capacity

Question 4

Design capacity minus allowances such as personal time and maintenance.

Answer 4

Effective Capacity

Question 5

The rate of output actually achieved.

Answer 5

Actual Output

Question 6

Actual Output/Effective Capacity

Answer 6

Efficiency

Question 7

Actual Output/Design Capacity

Answer 7

Utilization

Question 8

Building capacity in anticipation of future demand increases

Answer 8

Leading

Question 9

Build capacity when demand exceeds current capacity.

Answer 9

Following

Question 10

Tend to remain constant regardless of output volume

Answer 10

Fixed Cost

Question 11

Vary directly with volume of output

Answer 11

Variable Cost

Question 12

Fixed Cost + Variable Cost

Answer 12

Total Cost

Question 13

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

Answer 13

Break-Even Point

Question 14

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

Answer 14

Cash Flow

Question 15

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

Answer 15

Present Value

Question 16

An operation in which a sequence of operations whose capacity is lower than that of the other operations.

Answer 16

Bottleneck Operation

Question 17

The first of eight steps in the capacity planning process.

Answer 17

Estimating Future Capacity Requirements

Question 18

The second of eight steps in the capacity planning process.

Answer 18

Evaluating existing capacity and facilities and identifying gaps.

Question 19

The third of eight steps in the capacity planning process.

Answer 19

Identifying alternatives for meeting requirements.

Question 20

The fourth of eight steps in the capacity planning process.

Answer 20

Conducting financial analyses of each alternative.

Question 21

The fifth of eight steps in the capacity planning process.

Answer 21

Assessing key qualitative issues for each alternative.

Question 22

The sixth of eight steps in the capacity planning process.

Answer 22

Selecting the alternative to pursue that will be best in the long term.

Question 23

The seventh of eight steps in the capacity planning process.

Answer 23

Implementing the scheduled alternative.

Question 24

The final of eight steps in the capacity planning process.

Answer 24

Monitoring results.

Question 25

_____ capacity needs require forecasting demand over a time horizon and then converting those forecasts into capacity requirements.

Answer 25

Long-term

Question 26

_____ capacity needs are less concerned with cycles or trends than with seasonal variations and other variations from average.

Answer 26

Short-term

Question 27

Capacity must be matched with the _____ of demand.

Answer 27

Timing

Question 28

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

Answer 28

Economies of Scale

Question 29

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

Answer 29

Diseconomies of Scale

Question 30

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

Answer 30

Constraint

Question 31

Focuses on relationships between cost, revenue, and volume of output.

Answer 31

Cost-Volume Analysis

Question 32

Capacity minus expected demand. Extra capacity used to offset demand uncertainty.

Answer 32

Capacity Cushion

Question 33

The first of five steps to resolve constraint.

Answer 33

Identify the most pressing constraint.

Question 34

The second of five steps to resolve constraint.

Answer 34

Changing the operation to achieve maximum benefit, given the constraint.

Question 35

The third of five steps to resolve constraint.

Answer 35

Making sure all other parts of the process support constraint.

Question 36

The fourth of five steps to resolve constraint.

Answer 36

Exploring and evaluating alternatives for overcoming the constraint.

Question 37

The final of five steps to resolve constraint.

Answer 37

Repeat until the level off constraints is acceptable.

Question 38

Increasing _____ allows the firm to be more responsive to changing market conditions.

Answer 38

Flexibility

Question 39

The number of products that a cost-volume analysis involves.

Answer 39

One

Question 40

Before increasing capacity, it is important to make sure an organization’s _____ can handle the ramp up.

Answer 40

Supply chain

Question 41

Building capacity in anticipation of future demand increases.

Answer 41

Leading Capacity Strategy

Question 42

Adding capacity incrementally to keep pace with increasing demand.

Answer 42

Tracking Capacity Strategy