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Exam 24: Process Strategy

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Question 21

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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?

A) machine A
B) machine B
C) either machine A or machine B
D) no purchase because neither machine yields a profit at that volume
E) purchase both machines since they are both profitable

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Question 22

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__________ is a means of determining the discounted value of a series of future cash receipts.

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Net presen...

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Question 23

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Distinguish between utilization and efficiency.

__________ is actual output as a percent of design capacity.

The capacity planning strategy that delays adding capacity until capacity is below demand, then adds a capacity increment so that capacity is above demand, is said to__________ demand.

What is sometimes referred to as rated capacity?

Identify, in proper sequence, the steps in the process of recognizing and managing constraints.

A product sells for $5, and has unit variable costs of $3. This product accounts for $20,000 in annual sales, out of the firm's total of $60,000. When performing multiproduct break-even analysis, the weighted contribution of this product is approximately

Break-even is the number of units at which

Explain the importance of a bottleneck operation in a production sequence.

Price changes are useful for matching the level of demand to the capacity of a facility.

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

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.

The three main strategies for increasing capacity are

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

The process time of a system is equivalent to the

Consider a production line with five stations. Station 1 can produce a unit in 9 minutes. Station 2 can produce a unit in 10 minutes. Station three has two identical machines, each of which can process a unit in 12 minutes (each unit only needs to be processed on one of the two machines) . Station 4 can produce a unit in 5 minutes. Station 5 can produce a unit in 8 minutes. Which station is the bottleneck station?

Why is the capacity decision important?

A high value for which of the following signals that an operations manager is excelling?

__________ cost is the cost that continues even if no units are produced.