Question 1

An example of an external factor that influences effective capacity is government safety regulations.

Accepted Answer

A) True 
 B)False

Question 2

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:

For what range of probability that demand will be high, will she decide to lease the medium facility?

Accepted Answer

A)  0-0.25
B)  0-0.33
C)  0.25-0.5
D)  0.33-1
E)  0.5-1F) A) and E)
G) B) and E)

Question 3

Waiting line analysis can be useful for capacity design, especially for service systems.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would make decision trees an especially attractive decision-making tool?

Accepted Answer

A)  The need to think through a possible sequence of decisions.
B)  The need to maximize the expected value of perfect information.
C)  The need to minimize expected regret.
D)  The need to avoid suboptimization.
E)  The need to minimize costs for a single decisionF) A) and B)
G) B) and E)

Question 5

What is the break-even quantity for the following situation?
FC = $1,200 per week
VC = $2 per unit
Rev = $6 per unit

Accepted Answer

A)  100
B)  200
C)  600
D)  1,200
E)  300F) C) and D)
G) All of the above

Question 6

Outsourcing some production is a means of supporting a constraint.

Accepted Answer

A) True 
 B)False

Question 7

The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars) will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high.

If she feels the chances of low, medium, and high demand are 50 percent, 20 percent, and 30 percent respectively, what is her expected value of perfect information?

Accepted Answer

A)  $54,000
B)  $65,000
C)  $70,000
D)  $80,000
E)  $135,000F) None of the above
G) D) and E)

Question 8

Two professors at a nearby university want to coauthor a new textbook in either economics or statistics. They feel that if they write an economics book, they have a 50 percent chance of placing it with a major publisher, and it should ultimately sell about 40,000 copies. If they cannot get a major publisher to take it, then they feel they have an 80 percent chance of placing it with a smaller publisher, with ultimate sales of 30,000 copies. On the other hand, if they write a statistics book, they feel they have a 40 percent chance of placing it with a major publisher, and it should result in ultimate sales of about 50,000 copies. If they cannot get a major publisher to take it, they feel they have a 50 percent chance of placing it with a smaller publisher, with ultimate sales of 35,000 copies.
What is the expected value for the decision alternative to write the economics book?

Accepted Answer

A)  50,000 copies
B)  40,000 copies
C)  32,000 copies
D)  30,500 copies
E)  10,500 copiesF) A) and E)
G) A) and B)

Question 9

For fixed costs of $2,000, revenue per unit of $2, and variable cost per unit of $1.60, the break-even quantity is:

Accepted Answer

A)  1,000.
B)  1,250.
C)  2,250.
D)  5,000.
E)  3,000.F) None of the above
G) All of the above

Question 10

Utilization is defined as the ratio of:

Accepted Answer

A)  actual output to effective capacity.
B)  actual output to design capacity.
C)  design capacity to effective capacity.
D)  effective capacity to actual output.
E)  design capacity to actual output.F) C) and D)
G) D) and E)

Question 11

The term capacity refers to the maximum quantity an operating unit can process over a given period of time.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not an approach for decision making under uncertainty?

Accepted Answer

A)  decision trees
B)  maximin
C)  maximax
D)  minimax regret
E)  LaplaceF) B) and E)
G) B) and C)

Question 13

When buying component parts, risk does not include:

Accepted Answer

A)  loss of control.
B)  vendor viability.
C)  interest rate fluctuations.
D)  need to disclose proprietary information.
E)  product liability.F) None of the above
G) C) and D)

Question 14

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. How many rosebushes would she have to produce and sell in order to make a profit of $6,000?

Accepted Answer

A)  1,600
B)  2,400
C)  3,000
D)  1,000
E)  4,000F) B) and D)
G) B) and C)

Question 15

Consider the following decision scenario:

*PV for profits ($000) 
The maximax strategy would be:

Accepted Answer

A)  buy.
B)  lease.
C)  rent.
D)  high.
E)  low.F) B) and D)
G) A) and E)

Question 16

The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars) will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows:

If she feels the chances of low, medium, and high compliance are 20 percent, 30 percent, and 50 percent respectively, what is her expected value of perfect information?

Accepted Answer

A)  $16,000
B)  $26,000
C)  $46,000
D)  $48,000
E)  $50,000F) A) and D)
G) B) and D)

Question 17

Determining the worst payoff for each alternative and choosing the alternative with the "best worst" is the approach called:

Accepted Answer

A)  minimin.
B)  maximin.
C)  maximax.
D)  minimax regret.
E)  Laplace.F) C) and D)
G) A) and E)

Question 18

The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production. (Due to budgeting constraints, only one new picture can be undertaken at this time.) She feels that script 1 has a 70 percent chance of earning about $10,000,000 over the long run, but a 30 percent chance of losing $2,000,000. If this movie is successful, then a sequel could also be produced, with an 80 percent chance of earning $5,000,000, but a 20 percent chance of losing $1,000,000. On the other hand, she feels that script 2 has a 60 percent chance of earning $12,000,000, but a 40 percent chance of losing $3,000,000. If successful, its sequel would have a 50 percent chance of earning $8,000,000, but a 50 percent chance of losing $4,000,000. Of course, in either case, if the original movie were a flop, then no sequel would be produced.
What is the expected value of selecting script 1?

Accepted Answer

A)  $15,000,000
B)  $9,060,000
C)  $8,400,000
D)  $7,200,000
E)  $6,000,000F) A) and E)
G) B) and E)

Question 19

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000) will vary depending upon whether passenger demand is low, medium, or high, as follows:

If he uses the Laplace criterion, which size bus will he decide to purchase?

Accepted Answer

A)  small
B)  medium
C)  large
D)  either small or medium
E)  either medium or largeF) C) and D)
G) B) and D)

Question 20

The owner of Sky High Tours is considering purchasing a bus, which sells for $75,000, to expand their tour operations. The owner estimates that it will cost an additional $150 per tour to operate the bus, while the owner can book the bus for tours for $300. If, for this bus, design capacity is 60 passengers per tour, effective capacity is 50 passengers per tour, and actual output is anticipated to be 45 passengers per tour, what would be its utilization?

Accepted Answer

A)  100 percent
B)  90 percent
C)  80 percent
D)  75 percent
E)  70 percentF) A) and C)
G) A) and B)

Exam 5: Strategic Capacity Planning for Products and Services

Which of the following is not an approach for decision making under uncertainty?

Correct Answer
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When buying component parts, risk does not include:

Correct Answer
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Correct Answer
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The term capacity refers to the maximum quantity an operating unit can process over a given period of time.

Correct Answer
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Outsourcing some production is a means of supporting a constraint.

Correct Answer
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Correct Answer
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Consider the following decision scenario: *PV for profits ($000) The maximax strategy would be:

Correct Answer
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Waiting line analysis can be useful for capacity design, especially for service systems.

Correct Answer
verified

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows: For what range of probability that demand will be high, will she decide to lease the medium facility?

Correct Answer
verified

Which of the following would make decision trees an especially attractive decision-making tool?

Correct Answer
verified

Determining the worst payoff for each alternative and choosing the alternative with the "best worst" is the approach called:

Correct Answer
verified

Correct Answer
verified

An example of an external factor that influences effective capacity is government safety regulations.

Correct Answer
verified

What is the break-even quantity for the following situation? FC = $1,200 per week VC = $2 per unit Rev = $6 per unit

Correct Answer
verified

For fixed costs of $2,000, revenue per unit of $2, and variable cost per unit of $1.60, the break-even quantity is:

Correct Answer
verified

Utilization is defined as the ratio of:

Correct Answer
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Correct Answer
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Correct Answer
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Exam 5: Strategic Capacity Planning for Products and Services

Which of the following is not an approach for decision making under uncertainty?

Correct AnswerverifiedShow Answer

When buying component parts, risk does not include:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The term capacity refers to the maximum quantity an operating unit can process over a given period of time.

Correct AnswerverifiedShow Answer

Outsourcing some production is a means of supporting a constraint.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consider the following decision scenario: *PV for profits ($000) The maximax strategy would be:

Correct AnswerverifiedShow Answer

Waiting line analysis can be useful for capacity design, especially for service systems.

Correct AnswerverifiedShow Answer

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows: For what range of probability that demand will be high, will she decide to lease the medium facility?

Correct AnswerverifiedShow Answer

Which of the following would make decision trees an especially attractive decision-making tool?

Correct AnswerverifiedShow Answer

Determining the worst payoff for each alternative and choosing the alternative with the "best worst" is the approach called:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An example of an external factor that influences effective capacity is government safety regulations.

Correct AnswerverifiedShow Answer

What is the break-even quantity for the following situation? FC = $1,200 per week VC = $2 per unit Rev = $6 per unit

Correct AnswerverifiedShow Answer

For fixed costs of $2,000, revenue per unit of $2, and variable cost per unit of $1.60, the break-even quantity is:

Correct AnswerverifiedShow Answer

Utilization is defined as the ratio of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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