MGSC 395 Exam 2 University of South Carolina-Columbia | UPDATED
Questions with 100% Verified Answers
Question:
Capacity
Answer:
The max rate of output of a process or system
Question:
What do long-term capacity plans involve?
Answer:
Investments in new facilities and equip at the organizational level, and require top mgmt
participation and approval bc they are not easily reversed
Question:
When choosing a capacity strategy, what do managers need
to consider?
Answer:
How much of a cushion is needed for variable demand & should we expand capacity
ahead of demand or wait until demand is more certain
Question:
2 ways capacity can be expressed
Answer:
1. output measures
2. input measures
Question:
When are output measures of capacity best utilized?
Answer:
When applied to individual processes within the firm or when the firm provides a
relatively small number of standardized services or products
Question:
,When are input measures of capacity best utilized?
Answer:
Low volume, flexible processes
Question:
What is the problem w/ input measures?
Answer:
Demand is invariably expressed as an output rate
Question:
Utilzation
Answer:
The degree to which a resource such as equipment, space, or the workforce is currently
being used
Question:
Utilization formula
Answer:
U= Average output rate / Max capacity * 100%
Question:
Deciding on the best level of capacity involves consideration
for the __ of ___
Answer:
Efficiency of operations
Question:
Economies of scale
Answer:
States that the average unit cost of a service or good can be reduced by increasing its
output rate
Question:
,4 reasons why economies of scale can drive costs down when
output increases
Answer:
1. fixed costs are spread over more units
2. construction costs are reduced
3. costs of purchased materials are cut
4. process advantages are found
Question:
Diseconomies of scale
Answer:
Occurs when the average cost per unit increases as the facility's size increases
Question:
3 dimensions of capacity strategy
Answer:
1. sizing capacity cushions
2. timing and sizing expansion
3. linking process capacity and other operating decisions
Question:
Capacity cushion
Answer:
The amount of reserve capacity a process uses to handle sudden increases in demand or
temporary losses of production capacity
Question:
Capacity cushion formula
Answer:
CC= 100% - Average Utilization Rate %
Question:
In a capital intensive industry, a capacity cushion of __ % is
preferred
, Answer:
10% or under
Question:
In less capital intensive industries, the capacity cushion should
be around __ %
Answer:
30-40%
Question:
Businesses find large capacity cushions appropriate when ___
varies
Answer:
demand
Question:
2 extreme strategies for expanding capacity
Answer:
1. expansionist strategy (large, infrequent jumps in capacity)
2. wait & see strategy (smaller. more frequent jumps)
Question:
A ___ approach is needed for long term capacity decisions
Answer:
systematic
Question:
4 steps for a sound capacity decision (assuming mgmt already
determined existing capacity & whether current capacity
cushion is appropriate)
Answer:
1. estimate future capacity requirements
2. identify gaps by comparing requirements w/ available capacity
Questions with 100% Verified Answers
Question:
Capacity
Answer:
The max rate of output of a process or system
Question:
What do long-term capacity plans involve?
Answer:
Investments in new facilities and equip at the organizational level, and require top mgmt
participation and approval bc they are not easily reversed
Question:
When choosing a capacity strategy, what do managers need
to consider?
Answer:
How much of a cushion is needed for variable demand & should we expand capacity
ahead of demand or wait until demand is more certain
Question:
2 ways capacity can be expressed
Answer:
1. output measures
2. input measures
Question:
When are output measures of capacity best utilized?
Answer:
When applied to individual processes within the firm or when the firm provides a
relatively small number of standardized services or products
Question:
,When are input measures of capacity best utilized?
Answer:
Low volume, flexible processes
Question:
What is the problem w/ input measures?
Answer:
Demand is invariably expressed as an output rate
Question:
Utilzation
Answer:
The degree to which a resource such as equipment, space, or the workforce is currently
being used
Question:
Utilization formula
Answer:
U= Average output rate / Max capacity * 100%
Question:
Deciding on the best level of capacity involves consideration
for the __ of ___
Answer:
Efficiency of operations
Question:
Economies of scale
Answer:
States that the average unit cost of a service or good can be reduced by increasing its
output rate
Question:
,4 reasons why economies of scale can drive costs down when
output increases
Answer:
1. fixed costs are spread over more units
2. construction costs are reduced
3. costs of purchased materials are cut
4. process advantages are found
Question:
Diseconomies of scale
Answer:
Occurs when the average cost per unit increases as the facility's size increases
Question:
3 dimensions of capacity strategy
Answer:
1. sizing capacity cushions
2. timing and sizing expansion
3. linking process capacity and other operating decisions
Question:
Capacity cushion
Answer:
The amount of reserve capacity a process uses to handle sudden increases in demand or
temporary losses of production capacity
Question:
Capacity cushion formula
Answer:
CC= 100% - Average Utilization Rate %
Question:
In a capital intensive industry, a capacity cushion of __ % is
preferred
, Answer:
10% or under
Question:
In less capital intensive industries, the capacity cushion should
be around __ %
Answer:
30-40%
Question:
Businesses find large capacity cushions appropriate when ___
varies
Answer:
demand
Question:
2 extreme strategies for expanding capacity
Answer:
1. expansionist strategy (large, infrequent jumps in capacity)
2. wait & see strategy (smaller. more frequent jumps)
Question:
A ___ approach is needed for long term capacity decisions
Answer:
systematic
Question:
4 steps for a sound capacity decision (assuming mgmt already
determined existing capacity & whether current capacity
cushion is appropriate)
Answer:
1. estimate future capacity requirements
2. identify gaps by comparing requirements w/ available capacity
