Capacity can be defined as the ability to hold, receive, store, or accommodate.

T

When evaluating capacity, managers need to consider both resource inputs and product outputs.

T

Capacity can be defined as the amount of available resource inputs relative to requirements for output over a particular period of time.

T

The capacity utilization rate is found by dividing best operating level by capacity used.

F

The objective of strategic capacity planning is to provide an approach for determining the overall capacity level of labor-intensive resources.

F

The objective of strategic capacity planning is to determine the overall capacity level of capital intensive resources (including facilities, equipment, and overall labor force size) that best supports the company’s short-range competitive strategy.

F

The objective of strategic capacity planning is to determine the overall capacity level of capital intensive resources (including facilities, equipment, and overall labor force size) that best supports the company’s long-range competitive strategy.

T

Best operating level is usually a multiple of the level of capacity for which a process was designed.

F

Best operating level is the volume of output at which average unit cost is minimized.

T

At some point, the size of a growing plant can become too large and diseconomies of scale become a capacity planning problem.

T

Long-range capacity planning requires top management participation.

T

Overtime and personnel transfers are solutions to capacity problems in the intermediate term.

F

Capacity planning is generally viewed in three time durations: Immediate, Intermediate and Indeterminate.

F

The basic notion of economies of scale is that as a plant gets larger and volume increases, the average cost per unit of output drops.

T

A piece of equipment with twice the capacity of another piece typically costs twice as much to purchase and to operate.

F

The problem of keeping demand sufficiently high to keep a large factory busy is a sales issue and not a diseconomy of scale.

F

A production facility works best when it focuses on a fairly limited set of production objectives.

T

A production facility develops virtuosity and works best when it focused on a widely varied set of production objectives.

F

Making adjustments to eliminate the variance between planned and actual output is tied into intermediate range capacity planning.

F

The ultimate in plant flexibility is a one-hour-changeover time plant.

F

Capacity flexibility means having the ability to rapidly increase or decrease production levels, or to shift production capacity quickly from one product or service to another.

T

Economies of scope exist when multiple products can be produced at a lower cost in combination than they can separately.

T

The frequency of adding to productive capacity should balance the costs of upgrading too frequently and the costs of upgrading too infrequently.

T

Outsourcing is a common source of external capacity.

T

Sharing capacity is a common source of external capacity.

T

A capacity cushion is the amount of capacity less than expected demand.

F

A decision tree problem does not need probabilities or payoffs to generate a solution.

F

In solving a decision tree problem, calculations start at the ends of the “branches” of the tree and work backwards to the base of the tree.

T

The probability of each occurrence at a decision tree chance node is the reciprocal of the number of possibilities at the chance node.

F

In a decision tree, the only time probabilities are applied to a decision node is when the decision is being made by someone else such as you customer or your competitor.

F

Low rates of capacity utilization in service organizations are never appropriate.

F

The smaller the capacity cushion the better.

F

The larger the capacity cushion the better.

F

The capacity cushion is the ratio of capacity used to the best capacity level.

F

When a firm’s design capacity is less than the capacity required to meet its demand, it is said to have a negative capacity cushion.

T

In decision tree analysis the time value of money is ignored because you are only concerned with cash costs.

F

In practice, achieving a perfectly balanced plant is usually desirable but impossible.

F

In practice achieving a perfectly balanced plant is usually both impossible and undesirable.

T

Because services cannot be stored for later use, service managers consider time as one of their supplies or resources.

T