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Exam 19: Capacity and Constraint Management

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Question 41

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A local business owner is considering adding another employee to his staff in an effort to increase the number of hours the store is open per day. a.If the employee will cost the owner $4,000 per month and the store takes in $50/hour in revenue with variable costs of $15/hour,how many hours must the new employee work for the owner to break even? b.The employee again costs $4000 and has agreed to work 120 hours.If variable costs remain at $15/hour and revenue is uncertain with a 40% chance of being $40/hour,35% chance of being $20/hour,and 25% chance of being $35/hour should the owner hire the employee?

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A - BEP = 4000/(50 - 15)= 114....

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Question 42

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

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Question 43

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________ is actual output as a percent of effective capacity.

What are the assumptions of the net present value technique?

Possible decision alternatives found in capacity EMV problems are future demands or market favorability.

Why is the capacity decision important?

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%,the net present value of this investment is

A product is currently made in a process-focused shop,where fixed costs are $8,000 per year and variable cost is $40 per unit.The firm currently sells 200 units of the product at $200 per unit.A manager is considering a repetitive focus to lower costs (and lower prices,thus raising demand).The costs of this proposed shop are fixed costs = $24,000 per year and variable costs = $10 per unit.If a price of $80 will allow 400 units to be sold,what profit (or loss)can this proposed new process expect? Do you anticipate that the manager will want to change the process? Explain.

What techniques exist for dealing with bottlenecks? Which of these leads to increased capacity? Which of these leads to more throughput without adding capacity? Do any of these techniques fail to increase throughput?

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

Which of the following techniques is not a technique for dealing with a bottleneck?

A shop wants to increase capacity by adding a new machine.The firm is considering proposals from vendor A and vendor B.The fixed costs for machine A are $90,000 and for machine B,$75,000.The variable cost for A is $15.00 per unit and for B,$18.00.The revenue generated by the units processed on these machines is $22 per unit.If the estimated output is 9,000 units,which machine should be purchased?

An executive conference centre 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?

Which of the following statements regarding fixed costs is true?

If capacity exceeds demand at a new facility,an organization can use which of the following to move demand?

A firm sells two products.Product R sells for $20;its variable cost is $6.Product S sells for $50;its variable cost is $30.Product R accounts for 60% of the firm's sales,while S accounts for 40%.The firm's fixed costs are $4 million annually.Calculate the firm's break-even point.

A common method(s) used to increase capacity with a lag strategy is/are

Describe the theory of constraints in a sentence.

The staff training centre at a large regional hospital provides training sessions in CPR to all employees.Assume that the capacity of this training system was designed to be 1800 employees per year.Since the training centre was first put in use,the program has become more complex,so that 1400 now represents the most employees that can be trained per year.In the past year,1350 employees were trained.Calculate the efficiency and the utilization of this system.

Fabricators,Inc.wants to increase capacity by adding a new machine.The fixed costs for machine A are $90,000,and its variable cost is $15 per unit.The revenue is $21 per unit.The break-even point for machine A is