Question 1

The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars) will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows:

If she uses the maximin criterion, how many new examiners will she decide to hire?

Accepted Answer

A)  one
B)  two
C)  three
D)  either one or two
E)  either two or threeF) D) and E)
G) A) and B)

Question 2

Operation X feeds into operation Y. Operation X has an effective capacity of 55 units per hour. Operation Y has an effective capacity of 50 units per hour. Increasing X's effective capacity to ensure that Y's utilization is maximized would be an example of ________ a constraint.

Accepted Answer

A)  overcoming
B)  outsourcing
C)  insourcing
D)  cushioning
E)  supportingF) A) and B)
G) A) and C)

Question 3

A weakness of the maximin approach is that it loses some information.

Accepted Answer

A) True 
 B)False

Question 4

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 expects to be 80 percent efficient in her use of this land, how many rosebushes does Rose plan to grow each year on this land?

Accepted Answer

A)  1,600
B)  2,400
C)  3,000
D)  2,000
E)  1,000F) All of the above
G) B) and E)

Question 5

Capacity cushion can be determined by:

Accepted Answer

A)  capacity − strategic demand
B)  capacity − predicted demand
C)  capacity − expected demand
D)  capacity − actual demand
E)  capacity − estimated demandF) A) and B)
G) A) and D)

Question 6

Seasonal variations are often easier to deal with in capacity planning than random variations because seasonal variations tend to be:

Accepted Answer

A)  smaller.
B)  larger.
C)  predictable.
D)  controllable.
E)  less frequent.F) C) and E)
G) A) and C)

Question 7

If the output rate is increased but the average unit costs also increase, we are experiencing:

Accepted Answer

A)  market share erosion.
B)  economies of scale.
C)  diseconomies of scale.
D)  value-added accounting.
E)  step-function scaleup.F) C) and E)
G) All of the above

Question 8

A decision maker's worst option has an expected value of $1,000, and her best option has an expected value of $3,000. With perfect information, the expected value would be $5,000. What is the expected value of perfect information?

Accepted Answer

A)  $5,000
B)  $4,000
C)  $3,000
D)  $2,000
E)  $1,000F) A) and C)
G) A) and E)

Question 9

Consider the following decision scenario:

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

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.
E)  E.F) C) and D)
G) B) and D)

Question 10

Increasing capacity just before a bottleneck operation will improve the output of the process.

Accepted Answer

A) True 
 B)False

Question 11

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 feels there is a 30 percent chance that demand will be high, what are the expected monthly profits for the outlet she will decide to lease?

Accepted Answer

A)  $1,600
B)  $1,100
C)  $1,000
D)  $900
E)  $500F) A) and B)
G) All of the above

Question 12

Which phrase best describes the term "bounded rationality"?

Accepted Answer

A)  thinking a problem through clearly before acting
B)  taking care not to exhaust limited resources
C)  the result of departmentalized decision making
D)  limits imposed on decision making by costs, time, and technology
E)  the use of extremely structured steps in the decision-making processF) A) and B)
G) A) and C)

Question 13

The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production. (Due to budgeting constraints, only one new picture can be undertaken at this time.) She feels that script 1 has a 70 percent chance of earning about $10,000,000 over the long run, but a 30 percent chance of losing $2,000,000. If this movie is successful, then a sequel could also be produced, with an 80 percent chance of earning $5,000,000, but a 20 percent chance of losing $1,000,000. On the other hand, she feels that script 2 has a 60 percent chance of earning $12,000,000, but a 40 percent chance of losing $3,000,000. If successful, its sequel would have a 50 percent chance of earning $8,000,000, but a 50 percent chance of losing $4,000,000. Of course, in either case, if the original movie were a flop, then no sequel would be produced.
What is the expected value for the optimum decision alternative?

Accepted Answer

A)  $15,000,000
B)  $9,060,000
C)  $8,400,000
D)  $7,200,000
E)  $6,000,000F) A) and B)
G) D) and E)

Question 14

The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars) will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows:

If she feels the chances of low, medium, and high compliance are 20 percent, 30 percent, and 50 percent respectively, what are the expected net revenues for the number of assistants she will decide to hire?

Accepted Answer

A)  $26,000
B)  $46,000
C)  $48,000
D)  $50,000
E)  $76,000F) C) and D)
G) A) and E)

Question 15

Which of the following is not a determinant of effective capacity?

Accepted Answer

A)  facilities
B)  product mix
C)  actual output
D)  human factors
E)  external factorsF) D) and E)
G) A) and E)

Question 16

Which of the following is not a reason why capacity decisions are so important?

Accepted Answer

A)  Capacity limits the rate of output possible.
B)  Capacity affects operating costs.
C)  Capacity is a major determinant of initial costs.
D)  Capacity is a long-term commitment of resources.
E)  Capacity chunks can be added or deleted quickly and inexpensively.F) All of the above
G) B) and E)

Question 17

Suppose a firm has decided to break its departments down into smaller units. While this likely will help with __________ issues, it raises the possibility that poor decisions will result due to __________.

Accepted Answer

A)  risk aversion; suboptimization
B)  economies of scale; risk aversion
C)  span of control; suboptimization
D)  span of control; risk aversion
E)  economies of scale; limited span of controlF) None of the above
G) A) and B)

Question 18

Production units have an optimal rate of output where:

Accepted Answer

A)  total costs are minimum.
B)  average unit costs are minimum.
C)  marginal costs are minimum.
D)  rate of output is maximum.
E)  total revenue is maximum.F) B) and C)
G) A) and E)

Question 19

Improving cash flow would be a reasonable thing to focus on when trying to overcome a _________ constraint.

Accepted Answer

A)  financial
B)  market
C)  demand
D)  supplier
E)  materialF) A) and E)
G) B) and D)

Question 20

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers) will vary depending upon the success of the new cable television network she plans to use, as follows:

If she uses the Laplace criterion, which advertising strategy will she use?

Accepted Answer

A)  print
B)  mixed
C)  television
D)  either print or mixed
E)  either mixed or televisionF) B) and C)
G) D) and E)

Exam 5: Strategic Capacity Planning for Products and Services

Correct Answer
verified

A decision maker's worst option has an expected value of $1,000, and her best option has an expected value of $3,000. With perfect information, the expected value would be $5,000. What is the expected value of perfect information?

Correct Answer
verified

Which phrase best describes the term "bounded rationality"?

Correct Answer
verified

A weakness of the maximin approach is that it loses some information.

Correct Answer
verified

Production units have an optimal rate of output where:

Correct Answer
verified

Correct Answer
verified

Suppose a firm has decided to break its departments down into smaller units. While this likely will help with issues, it raises the possibility that poor decisions will result due to .

Correct Answer
verified

Capacity cushion can be determined by:

Correct Answer
verified

Correct Answer
verified

Which of the following is not a determinant of effective capacity?

Correct Answer
verified

Increasing capacity just before a bottleneck operation will improve the output of the process.

Correct Answer
verified

Improving cash flow would be a reasonable thing to focus on when trying to overcome a _________ constraint.

Correct Answer
verified

Seasonal variations are often easier to deal with in capacity planning than random variations because seasonal variations tend to be:

Correct Answer
verified

If the output rate is increased but the average unit costs also increase, we are experiencing:

Correct Answer
verified

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

Correct Answer
verified

Operation X feeds into operation Y. Operation X has an effective capacity of 55 units per hour. Operation Y has an effective capacity of 50 units per hour. Increasing X's effective capacity to ensure that Y's utilization is maximized would be an example of ________ a constraint.

Correct Answer
verified

Correct Answer
verified

Which of the following is not a reason why capacity decisions are so important?

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Exam 5: Strategic Capacity Planning for Products and Services

Correct AnswerverifiedShow Answer

A decision maker's worst option has an expected value of $1,000, and her best option has an expected value of $3,000. With perfect information, the expected value would be $5,000. What is the expected value of perfect information?

Correct AnswerverifiedShow Answer

Which phrase best describes the term "bounded rationality"?

Correct AnswerverifiedShow Answer

A weakness of the maximin approach is that it loses some information.

Correct AnswerverifiedShow Answer

Production units have an optimal rate of output where:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a firm has decided to break its departments down into smaller units. While this likely will help with __________ issues, it raises the possibility that poor decisions will result due to __________.

Correct AnswerverifiedShow Answer

Capacity cushion can be determined by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not a determinant of effective capacity?

Correct AnswerverifiedShow Answer

Increasing capacity just before a bottleneck operation will improve the output of the process.

Correct AnswerverifiedShow Answer

Improving cash flow would be a reasonable thing to focus on when trying to overcome a _________ constraint.

Correct AnswerverifiedShow Answer

Seasonal variations are often easier to deal with in capacity planning than random variations because seasonal variations tend to be:

Correct AnswerverifiedShow Answer

If the output rate is increased but the average unit costs also increase, we are experiencing:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Operation X feeds into operation Y. Operation X has an effective capacity of 55 units per hour. Operation Y has an effective capacity of 50 units per hour. Increasing X's effective capacity to ensure that Y's utilization is maximized would be an example of ________ a constraint.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not a reason why capacity decisions are so important?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Suppose a firm has decided to break its departments down into smaller units. While this likely will help with issues, it raises the possibility that poor decisions will result due to .

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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