Chapter 05 – Strategic Capacity Planning for Products and Services
1. The term capacity refers to the maximum quantity an operating unit can process over a
given period of time.
2. Capacity decisions are usually one-time decisions; once they have been made, we know the
limits of our operations.
Chapter 05 – Strategic Capacity Planning for Products and Services
3. Stating capacity in dollar amounts generally results in a consistent measure of capacity
regardless of the actual units of measure.
4. Design capacity refers to the maximum output that can possibly be attained.
Chapter 05 – Strategic Capacity Planning for Products and Services
5. If the unit cost to buy something is less than the variable cost to make it, the decision to
make or buy is based solely on the fixed costs.
6. Increasing productivity and also quality will result in increased capacity.
Chapter 05 – Strategic Capacity Planning for Products and Services
7. Utilization is defined as the ratio of effective capacity to design capacity.
8. Increasing capacity just before a bottleneck operation will improve the output of the
process.
9. An example of an external factor that influences effective capacity is government safety
regulations.
Chapter 05 – Strategic Capacity Planning for Products and Services
10. Cost and competitive priorities reduce effective capacities.
11. Capacity increases are usually acquired in fairly large “chunks” rather than in smooth
increments.
12. In cost-volume analysis, costs that vary directly with volume of output are referred to as
fixed costs because they are a fixed percentage of output levels.
Chapter 05 – Strategic Capacity Planning for Products and Services
13. The break-even quantity can be determined by dividing the fixed costs by the difference
between the revenue per unit and the variable cost per unit.
14. According to the reading on restaurant sourcing practices, only fast-food restaurants are
able to ‘bring’ in outsourced foods.
15. The greater the gap between current and desired capacity the greater the opportunity for
profit.
Chapter 05 – Strategic Capacity Planning for Products and Services
16. The current trend toward global operations has made capacity decisions much easier since
we have the whole world in which to consider operations.
17. Capacity planning requires an analysis of needs; what kind, how much and when.
18. Waiting line analysis can be useful for capacity design, especially for service systems.
Chapter 05 – Strategic Capacity Planning for Products and Services
19. Capacity decisions often involve a long-term commitment of resources which, when
implemented, are difficult or impossible to modify without major added costs.
20. Outsourcing some production is a means of supporting a constraint.
21. Outsourcing some production is a means of _________ a capacity constraint.
Chapter 05 – Strategic Capacity Planning for Products and Services
22. A basic question in capacity planning is:
23. Which of these factors wouldn’t be subtracted from design capacity when calculating
effective capacity?
Chapter 05 – Strategic Capacity Planning for Products and Services
24. A reason for the importance of capacity decisions is that capacity:
25. Which of the following is the case where capacity is measured in terms of inputs?
Chapter 05 – Strategic Capacity Planning for Products and Services
26. Unbalanced systems are evidenced by
27. Maximum capacity refers to the upper limit of:
Chapter 05 – Strategic Capacity Planning for Products and Services
28. The impact that a significant change in capacity will have on a key vendor is a:
29. The maximum possible output given a product mix, scheduling difficulties, quality
factors, and so on, is:
Chapter 05 – Strategic Capacity Planning for Products and Services
30. Efficiency is defined as the ratio of:
31. Utilization is defined as the ratio of:
Chapter 05 – Strategic Capacity Planning for Products and Services
32. Which of the following is a factor that affects service capacity planning?
33. Which of the following is a tactic that helps service capacity management?
Chapter 05 – Strategic Capacity Planning for Products and Services
34. The ratio of actual output to effective capacity is:
35. The ratio of actual output to design capacity is:
Chapter 05 – Strategic Capacity Planning for Products and Services
36. Given the following information, what would efficiency be?
Effective capacity = 80 units per day
Design capacity = 100 units per day
Utilization = 48%
37. Given the following information, what would efficiency be?
Effective capacity = 50 units per day
Design capacity = 100 units per day
Actual output = 30 units per day
Chapter 05 – Strategic Capacity Planning for Products and Services
38. Given the following information, what would utilization be?
Effective capacity = 20 units per day
Design capacity = 60 units per day
Actual output = 15 units per day
39. Which of the following is not a strategy to manage service capacity?
Chapter 05 – Strategic Capacity Planning for Products and Services
40. Which of the following is not a determinant of effective capacity?
41. Capacity planning decisions have both long-term and short-term considerations. Which of
the following statements are true?
(I) Long-term considerations relate to the overall level of capacity.
(II) Short-term considerations relate to the probable variations in capacity requirements.
(III) Short-term considerations determine the “effective capacity.”
Chapter 05 – Strategic Capacity Planning for Products and Services
42. Capacity in excess of expected demand that is intended to offset uncertainty is a:
43. Short-term considerations in determining capacity requirements include:
Chapter 05 – Strategic Capacity Planning for Products and Services
44. Which of the following is not a criterion for developing capacity alternatives?
45. Seasonal variations are often easier to deal with in capacity planning than random
variations because seasonal variations tend to be: