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Exam 20: Capacity and Constraint Management

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Question 21

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A firm is considering adding a second secretary to answer phone calls and make appointments.The cost of the secretary will be $10/hour and she will work 200 hours each month.If each new client adds $400 of profit to the firm,how many clients must the secretary arrange for the firm to break even?

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BEP= 10(20...

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Question 22

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Break-even analysis identifies the volume at which fixed costs and revenue are equal.

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Question 23

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The theory of constraints is a body of knowledge that deals with anything that limits an organization's ability to achieve its goals.

An executive conference center has the physical ability to handle 1,100 participants.However,conference management personnel believe that only 1,000 participants can be handled effectively for most events.The last event,although forecasted to have 1,000 participants,resulted in the attendance of only 950 participants.What are the utilization and efficiency of the conference facility?

Basic break-even analysis typically assumes that:

A work system has five stations that have process times of 5,9,4,9,and 8.What is the bottleneck time?

Identify the six tactics for matching capacity to demand.

A factory produces 1000 units a month.If design capacity is 3000 and efficiency is 50% find utilization and effective capacity.

Fixed costs are those costs that continue even if no units are produced.

Adding a complementary product to what is currently being produced is a demand management strategy used when:

Lag and straddle strategies for increasing capacity have what main advantage over a leading strategy?

A firm is about to undertake the manufacture of a product,and it is weighing three capacity alternatives: small job shop,large job shop,and repetitive manufacturing.The small job shop has fixed costs of $3,000 per month,and variable costs of $10 per unit.The larger job shop has fixed costs of $12,000 per month and variable costs of $3 per unit.The repetitive manufacturing plant has fixed costs of $30,000 and variable costs of $1 per unit.Demand for the product is expected to be 1,000 units per month with "moderate" market acceptance,but 2,000 under "strong" market acceptance.The probability of moderate acceptance is estimated to be 60 percent;strong acceptance has a probability of 40 percent.The product will sell for $25 per unit regardless of the capacity decision.Which capacity choice should the firm make?

Which of the following costs would be incurred even if no units were produced?

A retailer is considering building a large store.If the local economy experiences expansion,the firm expects the store to earn a $2,000,000 profit next year.If the local economy experiences a contraction,the firm expects the store to lose $400,000 next year.Analysts estimate a 20% chance for the local economy to experience an expansion next year (hence an 80% chance for contraction) .What is the expected monetary value (EMV) of building the large store?

A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years.If the cost of capital is 5 percent,what is the approximate net present value of this investment?

An assembly line has 10 stations with times of 1,2,3,4,…,10,respectively.What is the bottleneck time?

Break-even is the number of units at which:

A product sells for $5,and has unit variable costs of $3.This product accounts for $20,000 in annual sales,out of the firm's total of $60,000.When performing multiproduct break-even analysis,what is the weighted contribution of this product?

Design capacity is the theoretical maximum output of a system in a given period under ideal conditions.

One limitation of the net present value approach to investments is that investments with identical net present values may have very different cash flows.