Operations Management ch. 5

Question 1

Design capacity

p.188

Answer 1

the maximum designed service capacity or output rate

Question 2

Effective capacity

p.188

Answer 2

design capacity minus allowances such as personal time, equipment maintenance, delays due to scheduling problems and changing the mix of products

Question 3

Efficiency

p.189

Answer 3

(actual output / effective capacity) X 100

Question 4

Utilization

p.189

Answer 4

(actual output / design capacity) X 100

Question 5

capacity cushion

p.192

Answer 5

extra capacity used to offset demand uncertainty

Question 6

bottleneck operation

p.197

Answer 6

operation in a sequence of operations whose capacity is lower than that of other operations

Question 7

economies of scale

p.199

Answer 7

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

Question 8

diseconomies of scale

Answer 8

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

Question 9

constraint

Answer 9

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

7 Categories (Market, resource, material, financial, supplier, knowledge or competency, policy) p. 201

Question 10

break even point (BEP)

Answer 10

the volume of output at which total cost and total revenue are equal p.202

Question 11

indifference point

Answer 11

the quantity that would make two alternatives equivalent.

p.203

Question 12

cash flow

Answer 12

the difference between cash received from sales and other sources, and cash outflow for labor, material, overhead, and taxes
p. 205

Question 13

present value

Answer 13

the sum, in current value, of all future cash flows of an investment proposal. p. 205

Question 14

capacity

Answer 14

the upper limit or ceiling on the load that an operating unit can handle. p.185