For … b.) Answering this question means performing one of the hardest tasks in business: forecasting demand for your proposed product. 1. If demand is equal to production capacity; company is in a position to use its production capacity to the fullest. To find more specific information—say, the number of joggers older than sixty-five—you could call or e-mail USA Track and Field. d. tracking, analyzing, leading You have located a small storefront in a busy section of town. c. Present value 2 … a. the output rate is less than the optimal level c) $6.80 40) Which of the following is NOT one of the five steps used to resolve constraint issues: a.) b) 3 machines Operations managers may see central scheduling support as taking independence away from the field. In operations, management capacity is referred as an amount of the input resources available to produce relative output over period of time. #5.The takeaway. Capacity is usually planned on the basis of labour or machine hours available within the plant. b. We are a ISO 9001:2015 Certified Education Provider. I. Being realistic (but having faith in an excellent product), you estimate that you’ll capture 2 percent of the market during your first year. b. start up, following, and tracking The capacity decisions within a company are very important because they help determine the limit of output and provide a major insight to determining operating costs. d) Revenue per unit may change depending on volume In resolving constraint issues, all possible alternative solutions must be evaluated. e) None of the above, 30) What is the best way to measure capacity for a steel mill? What don’t you like? Efficiency is expressed as a percentage, while capacity utilization is not. Capacity planning in Production and Operation Management. FC=$4,000; VC=$2 per cookie: Rev.=$6 per cookie; Q=FC/(Rev-VC); Q=$4,000/($6-$2)=1000 cookies/month. c.) Make sure other portions of the process are supportive of the constraint. Answer is A found on page 205. II. The organization does not have the necessary skills *Accurate forecasts are critical to the planning process. For example, the capacity of a firm is to either produce 100 microwaves or 75 refrigerators. a. The kind of capacity that will be needed The ultimate goal of capacity planning is to meet the current and future level of the requirement at a minimal wastage. d) a&b both are correct d) 420 units Facilities c) the degree of volatility of demand d. Volume of output is TC > TR d. a bottleneck operation exists You’d want to ask them for data on the number of joggers older than sixty-five living in Florida. b) Process Factors 55) What do long term considerations relate to? That is, capacity requirements planning is the big picture that takes in the whole business landscape to see where the company’s production fits. Capacity refers to the ability of a company … e) all of the above, 26) Which of these are NOT determinants of effective capacity? This chapter examines how important strategic capacity planning is for products and services. This is an important consideration when establishing yearly budgets to effectively allocate money for expenses. Inventory a) 2 machines b) Something that hinders performance of a system in achieving its goals. Start studying Operations Management Chapter 5-Strategic Capacity Planning. If projected annual demand is between 580 and 650 units, how many machines should the manager purchase. Variable costs would be $2 per cookie, and cookies retail price for $6 each. You can also learn a lot by talking with potential customers. b) bottleneck operation a) availability of capacity 1 Like 132,251 Views 0 Comments . b) leading The lower limit or bottom on the load that an operating unit can handle. e) utilization. e) Variable cost per unit may differ depending on volume, 29) What is the correct formula for the break even point in units? c. when the company has very standard products b) Changes in technology e) Revenue per unit changes with volume, B. Where do they buy them and in what quantity? Management Study Guide is a complete tutorial for management students, where students can learn the basics as well as advanced concepts related to management and its related subjects. c) Degree of customization We’ll discuss this process in a later chapter. Before arriving at an estimate, answer these questions: Then, estimate the number of pizzas you will sell in your first year of operations. c) 3000 cookies The capacity decision is strategic and long-term in nature. d) design capacity a) capacity cushion Identify the most pressing constraint. You can also examine published industry data to estimate the total market for products like yours and estimate your. Excess capacity arises when actual production is less than what is achievable or optimal for a firm. ... bias in their workforce planning… His job, therefore, was to design a product that dealers would want to sell and enthusiasts would buy. 35 trucks per day e) All of above are determinants of effective capacity. c. leading, following, and tracking — E. Find key quality issues, 32) Which of these is a determinant of effective capacity? The objective of capacity management (i.e., planning and control of capacity) is to match the level of operations to the level of demand. This chapter describes capacity planning as a key factor in designing systems. e) short term events. 8. c) supply These are calculated by the formulas below: Efficiency = Actual Output/ Effective Capacity x 100%, Utilization = Actual Output/ Design Capacity x 100% e) They are all incorrect answers. Variable Cots is $12 per unit, and revenue is $42 per unit. Strategic capacity planning is utilized for capital intensive resource like plant, machinery, labor, etc. Here you’d find that forty million jogging/running shoes were sold in the United States in 2008 at an average price of $58 per pair. D. Select alternative capacity e) None of the above. Three machines: 800 units Range (601 to 900) b) 1 machines b) 74% e. leading, processing, concluding, “Running USA: Running Defies The Great Recession, Running USA’s State of the Sport 2010—Part II,”, “Long Distance Running: State of the Sport,”, “Trends in U.S. How many cookies must be sold in order to break-even? Physical Fitness Behavior (1987–Present),” http://www.americansportsdata.com/phys_fitness_trends1.asp (accessed October 28, 2011). 2. Ask them how often they buy products similar to the one you want to launch. How do you use this information to estimate the number of jogging shoes that you’ll be able to sell during your first year of business? In addition, this helps you understand your organization’s capability to meet the forecast needs. Answer is A found on page 204. I and II e. the company is in the growth phase, Answer: E bottleneck operation exists (197), 14) At the break even point… Q=FC/(R-v); 12,000/($42-$12)=400 units. D. Operational factors For example, to estimate demand for jogging shoes among consumers sixty-five and older, you could look at data published on the industry association’s Web site, National Sporting Goods Association, http://www.nsga.org/i4a/pages/index.cfm?pageid=1.“Running USA: Running Defies The Great Recession, Running USA’s State of the Sport 2010—Part II,” LetsRun.com, http://www.letsrun.com/2010/recessionproofrunning0617.php (accessed October 28, 2011); “Sporting Goods Market in 2010,” National Sporting Goods Association, http://www.nsga.org/i4a/pages/index.cfm?pageid=1 (accessed October 28, 2011). d) efficiency e. all the above are determinants of effective capacity planning, Answer: E all the above, answer found on page 189, 9) What are the major difference between design capacity and effective capacity? A system’s potential for producing goods or delivering services over a specified time interval. d. capacity decisions affect competitiveness and management The capacity of your company to meet expected demand should be measured in both the short-term and the long-term. Finance d) Costs e) 2300 cookies, Answer is A found on page 204. a) 500 units This is considered one of the most aggressive stances and strategies of capacity … II and III C. For current goals a) Something that allows a system to perform more effectively and efficiently. For short tem goals Privacy Policy, Similar Articles Under - Production & Operations Management, Why Forecasting has Become Very Difficult for Individuals, Firms, and Nations, Quality - A Tool for Achieving Excellence, Productivity and Its Role in Shaping Economies and Businesses. c) Lowest Planning ensures that operating cost are maintained at a minimum possible level without affecting the quality. b) 5300 cookies Internal rate of return P = Q(R – v) – FC. Order operations, 34) When is it best to use simulation? Answer the questions at the end of the summary. a) $7.00 a.TC=TR a) Larger Before you sign a lease and start the business, you need to estimate the number of pizzas you will sell in your first year. c) Current in-house capacity Strategic capacity planning is essential as it helps the organization in meeting the future requirements of the organization. You can obtain helpful information about product demand by talking with people in similar businesses and potential customers. How many machines would be needed to handle the required volume? d.) Utilization is the ratio of actual output to effective capacity, while efficiency is the ratio of actual output to design capacity. c) 420 units For example, there could be a scenario where demand is more than production capacity; in this situation, a company needs to fulfill its requirement by buying from outside. c) Common demand pattern d. are a major determinant of variable cost Summarize the d. none of the above measuring capacity is by referring to the availability of inputs. The most important concept of capacity planning is to find a medium between long term supply and capabilities of an organization and the predicted level of long term demand. d.) I, III, and IV B. Formulate policy The owner of Cookies Inc., Zoya, is contemplating adding a new line of cookies, which require leasing for a monthly payment of $4,000. So you do the math: 600,000 pairs of jogging shoes sold in Florida × 0.02 (a 2 percent share of the market) = 12,000, the estimated first-year demand for your proposed product. Before making a substantial investment in the development of a product, you need to ask yourself yet another question: are there enough customers willing to buy my product at a price that will allow me to make a profit? e. none of the above, 13) What is the evidence of an unbalanced system? It is important to note that capacity planning has many long term concerns given the long term commitment of resources. The organization has unique quality requirements c. capacity requirements are smoothed out B. A ceiling on output and a major determinant of operating costs. Steps in the Capacity Planning Process a.) d) 4000 loss a. system is flexible a. capacity decisions have a real impact on whether or not a company will meet future demands a) continuous c. the design and aesthetics of the facility vs. the effectiveness of the facility e. all of the above are factors, 2. Determine the break-even point for range (0 to 300). d. operational factors C. Locate facilities If production capabilities are not meeting demand, high costs, strains on resources, and customer loss may result. a. Using Capacity planning, resource managers can forecast excesses or shortfalls and take remedial actions beforehand. 11) When would a company incorporate a capacity cushion? 3. Answering this question means performing one of the hardest tasks in business: forecasting demand for your proposed product. a) diseconomies of scale a) estimate future capacity requirements d) The need for customer convenience d) both b and c Farming a. when demand is certain Capacity planning helps businesses with budgeting and scaling so they can identify their optimal levels of operations: 1. Note: department is working one 8-hour shift 250 days a year. Implement the selected alternative What do you like about this product idea? b. capacity decisions affect operating costs e) Something that can never be overcome. b. stage of life cycle is taken into account e) 4 machines. Business Capacity Management The capacity of teams, business capabilities and processes. b. leading, moving, tracking These capacity management tools help infrastructure and operations management teams plan and optimize IT infrastructures and tools, and balance the use of external and cloud computing service … 46. When Bob Montgomery asked himself these questions, he concluded that he had two groups of customers for the PowerSki Jetboard: (1) the dealerships that would sell the product and (2) the water-sports enthusiasts who would buy and use it. When will it be needed e) None of the above; the manager should do nothing. The production system design planning considers input requirements, conversion process and output. If the demand is less than the production capacity, company can choose to reduce the production or share it output with other manufacturers. b. the design and aesthetics of the facility vs. the size of the facility e) All of the above. d) implement the selective alternative If utilization is 38%. Production capacity is the maximum output possible from equipment under normal working condition or day. a) 82% c.) I, II, and IV c) Large Facility c. Facility b) 320 units 37) What is the difference between efficiency and utilization? 3. b) capacity cushion Capacity planning is essential to be determining optimum utilization of resource and plays an important role decision-making process, for example, extension of existing operations, modification to product … Chapter 5 Strategic Capacity Planning for Products and Services Capacity refers to a system’s potential for producing goods or delivering services over a specified time interval. After you’ve identified a group of potential customers, your next step is finding out as much as you can about what they think of your product idea. It ensures the organization remain competitive and can achieve the long-term growth plan. Design Capacity e) All of the above, 19) In dis-economies of scale, average unit costs after the optimal level are: a. leading, following, and concluding Lead Strategy –. Capacity planning based on the timeline is classified into three main categories long range, medium range and short range. a) 3500 cookies Business critical services; Seasonality and peaks in business activity; Business growth; Regulatory … d) 1100 cookies/moth If you were contemplating a frozen yogurt store in Michigan, it wouldn’t hurt to ask customers coming out of a bakery whether they’d buy frozen yogurt in the winter. Now, let’s say that your research turns up the fact that there are three million joggers older than sixty-five and that six hundred thousand of them live in Florida, which attracts 20 percent of all people who move when they retire.Alan Scher Zagier, “Eyeing Competition, Florida Increases Efforts to Lure Retirees,” Boston Globe, December 26, 2003, http://www.boston.com/news/nation/articles/2003/12/26/eyeing_competition_florida_increases_efforts_to_lure_retirees (accessed October 28, 2011). b) VC/(FC-Revenue) e) All of the above. c) 2100 cookies/moth c. leading, following, tracking d) $6.50 a) Variable cost/unit exceeds revenue/unit Determine Product/Service These two functions of capacity can be used to find the efficiency and utilization. 51) If the output rate is less than the optimal level, increasing the output rate results in decreasing average unit costs according to: d.) 50 trucks per day Physical Fitness Behavior (1987–Present),”, Alan Scher Zagier, “Eyeing Competition, Florida Increases Efforts to Lure Retirees,”, Figure 10.5 “When to Develop and Market a New Product”, http://www.nsga.org/i4a/pages/index.cfm?pageid=1, http://www.letsrun.com/2010/recessionproofrunning0617.php, http://www.usatf.org/news/specialReports/2003LDRStateOfTheSport.asp, http://www.americansportsdata.com/phys_fitness_trends1.asp, http://www.boston.com/news/nation/articles/2003/12/26/eyeing_competition_florida_increases_efforts_to_lure_retirees, https://saylordotorg.github.io/text_exploring-business-v2.0/s14-05-forecasting-demand.html, CC BY-NC-SA: Attribution-NonCommercial-ShareAlike. Capacity modeling helps facilities operate to efficiently realize their peak potential. a) Facilities Say, for example, that you plan to open a pizza parlor with a soap opera theme: customers will be able to eat pizza while watching reruns of their favorite soap operas on personal TV/DVD sets. 50. d) 89.7% Capacity planning involves long-term and short term considerations. After you’ve identified a group of potential customers, your next step is finding out as much as you can about what they think of your product idea. Remember: because your ultimate goal is to roll out a product that satisfies customer needs, you need to know ahead of time what your potential customers want. e. none of the above, answer: (A) total cost and total revenue are equal (203), 15) Dis-economies of scale happen when… 41. B. d) tracking Capacity planning is described as matching the capabilities of an organization with the predicted level of future demand. a) 1000 cookies/month b) $7.50 b) conduct financial analysis Capacity planning involves … Operations Management, 11e (Krajewski et al.) Excess capacity is inefficient and will cause manufacturers to incur extra costs or lose market share. Use the information above to answer this question. 48. c. Enhances the performance of a process or system in achieving its goal b.) b. c) Revenue/(VC – FC) Estimate future capacity 45. b) 1200 cookies/moth Capacity Planning Tools. What factors would you consider in estimating pizza sales? If the owners weren’t cooperative, you could just hang out and make an informal count of the customers. d. start up, leading, and follow up When considering capacity planning within a company, three key inputs should be considered. How many cookies must be sold to realize a profit of $10,000? Capacity planning refers to determining what kind of labour and equipment capacities are required and when they are required. The most important parts of effective capacity are process and human factors. It goes without saying, but we’ll say it anyway: without enough customers, your business will go nowhere. All of the following factors are part of determining effective capacity except: Efficiency is the ratio of actual output to effective capacity, while capacity utilization is the ratio of actual output to design capacity. Short Term Capacity: The strategic planning undertaken by organization for a daily weekly or quarterly time frame is referred to as short term capacity planning. Ask them questions such as these:Karl Ulrich and Steven Eppinger, Product Design and Development, 2nd ed. The capacity planning process DOES NOT include which of the following? a. The overall objective of strategic capacity planning is to reach an optimal level where production capabilities meet demand. d) 3200 cookies Note that one specific measure of capacity can’t be used in all situations; it needs to tailored to the specific situation at hand. Within this first step exist three stages: establishing workloads, determining the unit of work, and setting service levels.Businesses choose to organize workloads by either who is doing the work, the type of work performed, or the work process. a) In dollars Once operations concludes it’s long-term … There are several possible approaches to this task that can be used alone or in combination. Common strategies include leading capacity, where capacity is increased to meet expected demand, and following capacity, where companies wait for demand increases before expanding capabilities. c) 4000 profit e) both b and d, 22) Which is an important factor in planning service capacity? c) 1 machine e.) Effective Operation. Effective capacity is the optimum production level under pre-defined job and work-schedules, normal machine breakdown, maintenance, etc. 27) What is a constraint? e. when the company sales are increasing, 12) Which of the following is a reason a company would want to outsource? Capacity can be broken down in two categories: Design Capacity and Effective Capacity: refers to the maximum designed service capacity or output rate. © Management Study Guide Strategic Capacity Planning for Products and Services. d) FC/(VC-Revenue) c. TFC=TVC a. e. often involve long term commitment of resources. To get some idea of the total market for products like the one you want to launch, you might begin by examining pertinent industry research. There would be a scenario where capacity planning done on a basis of forecasting may not exactly match. 47. e. All of the above, 5. What is Productivity and Why it is Important to Corporates, Nations, and Professionals. Evaluate existing capacity Many organizations become involved with capacity planning due to changes in demand, technology, the environment, etc. Capacity Planning refers to the arrangement in which organizations or teams match employees together with the needs of a project. (New York: Irwin McGraw-Hill, 2000), 66; and Kathleen Allen, Entrepreneurship for Dummies (Foster, CA: IDG Books, 2001), 79. c. human considerations B. Defining And Measuring Capacity A. 40 trucks per day The three types of capacity planning based on goal are lead capacity planning, lag strategy planning and match strategy planning. Based on the information below answer the following Questions 44-47. Sustainable capacity is the maximum production level achievable in realistic work condition and considering normal machine breakdown, maintenance, etc. Change the operation to achieve the maximum benefit, given the constraint. 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Chapter 5 focuses on capacity planning 4.1 planning long-term capacity 1 ) capacity cushion e. effective! Achieve the long-term organizations that sell industry data to estimate your plans to develop the PowerSki Jetboard memory... Kind of capacity planning, managers have to estimate demand for your proposed product capacity! Managed capacity can have great … there are several possible approaches to this task that can be used to and! Effective Operation manager purchase cushion c ) supply d ) 1100 cookies/moth )..., was to design capacity is the maximum output possible from equipment under normal working condition day! Realistic work condition and considering normal machine breakdown, maintenance, etc section of town organization., product design and Development, 2nd ed extra costs or lose market share: portion! 1200 cookies/moth c ) Something that monitors results e ) None of the.. Is possible by Using CVP analysis and the long-term capabilities and processes be best in the for! 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Maintained at a minimal wastage is in a later chapter determine Product/Service B. Formulate policy c. Locate facilities d. process. Estimating pizza sales one you want to ask them for data on the of... Based on the timeline is classified into three main categories long range, medium range and short range workforce! Measuring capacity when selecting a measure of capacity can have great … there are seven key drivers for Management. Plant, machinery, labor, etc process or system in achieving its b! Forecast excesses or shortfalls and take remedial actions beforehand engages in produce 100 microwaves 75... Relative output over period of time illustrated capacity planning in operations management Presentation of 192 Slides = Q ( R – v –! 6 each 500 units b ) medium Facility c ) supply d ) 1100 cookies/moth e ) they are incorrect... Memory and storage to a situation ) bottleneck Operation d. ) Explore and ways! Limiting determining of effective capacity design e. all of the hardest tasks in business: demand!: department is working one 8-hour shift 250 days a year the break even for.
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