Question 1

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. What would be the county's annual profit if they were to process 4,000 prisoners per year at this new location?

Accepted Answer

A)  $0
B)  $75,000
C)  $50,000
D)  $100,000
E)  $300,000F) None of the above
G) All of the above

Question 2

The term "suboptimization" is best described as the:

Accepted Answer

A)  result of individual departments making the best decisions for their own areas but hurting other areas.
B)  limitations on decision making caused by costs and time.
C)  result of failure to adhere to the steps in the decision process.
D)  result of ignoring symptoms of the problem.
E)  optimization on a micro level that extends to the macro level.F) A) and E)
G) None of the above

Question 3

At the break-even point:

Accepted Answer

A)  output equals capacity.
B)  total cost equals total revenue.
C)  total cost equals profit.
D)  variable cost equals fixed cost.
E)  variable cost equals total revenue.F) A) and E)
G) D) and E)

Question 4

When determining the timing and degree of capacity change, one can use the approach of:

Accepted Answer

A)  lead time flexibility strategy.
B)  expand-early strategy.
C)  go-with-the-flow strategy.
D)  backordering.
E)  delayed differentiation.F) B) and D)
G) None of the above

Question 5

Which of the following is not a determinant of effective capacity when looking at the facility factor?

Accepted Answer

A)  facility size
B)  product variety
C)  distance to market
D)  energy sources
E)  transportation costsF) A) and B)
G) A) and E)

Question 6

The ratio of actual output to effective capacity is:

Accepted Answer

A)  design capacity.
B)  effective capacity.
C)  actual capacity.
D)  efficiency.
E)  utilization.F) B) and C)
G) C) and E)

Question 7

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:

If she uses the Laplace criterion, what size outlet will she decide to lease?

Accepted Answer

A)  small
B)  medium
C)  large
D)  either small or medium
E)  either medium or largeF) B) and E)
G) B) and D)

Question 8

Which of the following is the case where capacity is measured in terms of inputs?

Accepted Answer

A)  tons of steel per day that can be produced by a steel mill
B)  kilowatt hours per day that can be generated by an electrical power plant
C)  number of meals per day that can be served by a restaurant
D)  gallons of gasoline that can be produced per day by a petroleum refinery
E)  number of passenger seats that can be filled per day on an airline routeF) B) and C)
G) B) and E)

Question 9

The maximin approach to decision making refers to:

Accepted Answer

A)  minimizing the maximum return.
B)  maximizing the minimum return.
C)  maximizing the minimum expected value.
D)  choosing the alternative with the highest payoff.
E)  choosing the alternative with the minimum payoff.F) A) and B)
G) A) and E)

Question 10

Consider the following decision scenario:

*PV for profits ($000) 
The maximin strategy would be:

Accepted Answer

A)  small.
B)  medium.
C)  med.-large.
D)  large.
E)  ex-large.F) A) and E)
G) A) and B)

Question 11

The decision to outsource opens the firm up to certain risks, among them _________ and ________.

Accepted Answer

A)  lower costs; fewer task-specific investments
B)  loss of direct control over operations; need to disclose proprietary information
C)  access to greater expertise; greater demand variability
D)  greater capacity rigidity; tight knowledge control
E)  higher marketing costs; small ordersF) B) and C)
G) D) and E)

Question 12

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. If her available land has design and effective capacities of 3,000 and 2,000 rosebushes per year respectively, and she plans to grow 1,200 rosebushes each year on this land, what will be the utilization of this land?

Accepted Answer

A)  0 percent
B)  40 percent
C)  60 percent
D)  67 percent
E)  100 percentF) A) and B)
G) A) and C)

Question 13

The operations manager for a well-drilling company must recommend whether to build a new facility, expand his existing one, or do nothing. He estimates that long-run profits (in $000) will vary with the amount of precipitation (rainfall) as follows:

If he uses the maximax criterion, which alternative will he decide to select?

Accepted Answer

A)  do nothing
B)  expand
C)  build new
D)  either do nothing or expand
E)  either expand or build newF) D) and E)
G) None of the above

Question 14

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000) will vary depending upon whether passenger demand is low, medium, or high, as follows:

If he feels the chances of low, medium, and high demand are 30 percent, 30 percent, and 40 percent respectively, what is his expected value of perfect information?

Accepted Answer

A)  $15,000
B)  $61,000
C)  $69,000
D)  $72,000
E)  $87,000F) All of the above
G) A) and B)

Question 15

The maximin approach involves choosing the alternative that has the "best worst" payoff.

Accepted Answer

A) True 
 B)False

Question 16

The term "opportunity loss" is most closely associated with:

Accepted Answer

A)  minimax regret.
B)  maximax.
C)  maximin.
D)  expected monetary value.
E)  Laplace.F) B) and D)
G) D) and E)

Question 17

The construction manager for Acme Construction, Inc., must decide whether to build single-family homes, apartments, or condominiums. He estimates annual profits (in $000) will vary with the population trend as follows:

If he uses the minimax regret criterion, which kind of dwellings will he decide to build?

Accepted Answer

A)  single family
B)  apartments
C)  condos
D)  either single family or apartments
E)  either apartments or condosF) C) and D)
G) B) and D)

Question 18

The maximum possible output given a product mix, scheduling difficulties, personal time, and so on is:

Accepted Answer

A)  utilization.
B)  design capacity.
C)  efficiency.
D)  effective capacity.
E)  available capacity.F) C) and D)
G) B) and E)

Question 19

The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. If, for this machine, design capacity is 50 cords per day, effective capacity is 40 cords per day, and actual output is anticipated to be 35 cords per day, what would be its utilization?

Accepted Answer

A)  100 percent
B)  80 percent
C)  75 percent
D)  70 percent
E)  0 percentF) A) and C)
G) D) and E)

Question 20

The dean of a college wants to determine which of two new classes to offer for the upcoming semester. Due to facility constraints only one class can be offered at this time. The dean feels that the first class has an 80 percent chance of earning the college about $75,000, but a 20 percent chance of losing $35,000. If the class is successful, then its next level class will be offered, with a 75 percent chance of earning $60,000, but a 25 percent chance of losing $30,000. Weighing the options, the dean feels that the second class has a 60 percent chance of earning $85,000, but a 40 percent chance of losing $40,000. If the second class is successful, then its next level class will be offered with a 50 percent chance of earning $80,000, but a 50 percent chance of losing $45,000. If both classes are not successful, neither of their next level classes will be offered to the students.What is the expected value for selecting the second class?

Accepted Answer

A)  $90,000
B)  $83,000
C)  $75,500
D)  $50,000
E)  $45,500F) A) and C)
G) A) and D)

Exam 5: Strategic Capacity Planning for Products and Services

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows: If she uses the Laplace criterion, what size outlet will she decide to lease?

Correct Answer
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The ratio of actual output to effective capacity is:

Correct Answer
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Correct Answer
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The maximin approach involves choosing the alternative that has the "best worst" payoff.

Correct Answer
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The maximin approach to decision making refers to:

Correct Answer
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Consider the following decision scenario: *PV for profits ($000) The maximin strategy would be:

Correct Answer
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When determining the timing and degree of capacity change, one can use the approach of:

Correct Answer
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Correct Answer
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Which of the following is not a determinant of effective capacity when looking at the facility factor?

Correct Answer
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Which of the following is the case where capacity is measured in terms of inputs?

Correct Answer
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Correct Answer
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The maximum possible output given a product mix, scheduling difficulties, personal time, and so on is:

Correct Answer
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The term "opportunity loss" is most closely associated with:

Correct Answer
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The decision to outsource opens the firm up to certain risks, among them _ and .

Correct Answer
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The term "suboptimization" is best described as the:

Correct Answer
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Correct Answer
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At the break-even point:

Correct Answer
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Exam 5: Strategic Capacity Planning for Products and Services

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows: If she uses the Laplace criterion, what size outlet will she decide to lease?

Correct AnswerverifiedShow Answer

The ratio of actual output to effective capacity is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The maximin approach involves choosing the alternative that has the "best worst" payoff.

Correct AnswerverifiedShow Answer

The maximin approach to decision making refers to:

Correct AnswerverifiedShow Answer

Consider the following decision scenario: *PV for profits ($000) The maximin strategy would be:

Correct AnswerverifiedShow Answer

When determining the timing and degree of capacity change, one can use the approach of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not a determinant of effective capacity when looking at the facility factor?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is the case where capacity is measured in terms of inputs?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The maximum possible output given a product mix, scheduling difficulties, personal time, and so on is:

Correct AnswerverifiedShow Answer

The term "opportunity loss" is most closely associated with:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The decision to outsource opens the firm up to certain risks, among them _________ and ________.

Correct AnswerverifiedShow Answer

The term "suboptimization" is best described as the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

At the break-even point:

Correct AnswerverifiedShow Answer

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The decision to outsource opens the firm up to certain risks, among them _ and .

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