SCHM 2301 LATEST 2026 ALL FINALS TIP QUESTIONS
AND ANSWERS MARKED A+
✔✔pros and cons of capacity lead strategy - ✔✔pros: ensure that sales will not be lost,
helps companies gain market share during the early stages of a product's life cycle
cons: under-utilization if sales do not grow as expected
✔✔add or remove based on average demand - ✔✔balances the risk of having too much
capacity and missing out on sales
✔✔capacity lag strategy - ✔✔wait to add capacity until after demand is actually known
✔✔pros and cons of capacity lag strategy - ✔✔pros: lowers risk of over-expansion
cons: lost sales
✔✔Types of capacity changes - ✔✔1. strategic
2. tactical
3. operational
✔✔strategic capacity changes - ✔✔takes a long time to implement, large increases or
decreases in capacity, limited by physical plant
✔✔tactical capacity changes - ✔✔medium term (6-24 months), medium-sized capacity
changes (can also be smaller), limited by specialized labor, equipment, space
✔✔operational capacity changes - ✔✔short term (0-6 months), usually require small
changes to low-skilled labor, equipment, and space, limited by low-skilled labor,
equipment, and space
✔✔economies of scale - ✔✔as production volumes increase with additions of capacity,
the unit cost to produce a product decreases until some optimal level is reached
✔✔Reasons for economies of scale - ✔✔1. Allocation of fixed costs
2. Equipment and construction costs
3. Lower costs for purchases
4. Learning curve
✔✔diseconomies of scale - ✔✔occurs when the cost per unit increases as an
operation's size increases
✔✔process capacity - ✔✔the limit on the amount of output that a process can produce
given an amount of inputs and resources made available to the process
, ✔✔operations capacity limiting resource - ✔✔tools, labor, machine capacity, supplier
capacity
✔✔transportation capacity limiting resource - ✔✔pallets, carts, fork-lift trucks, trucks,
trains, airplanes
✔✔inspection capacity limiting resource - ✔✔inspectors, inspection stations, gauges,
robots, machine-vision equipment
✔✔delay capacity limiting resource - ✔✔space on the shop floor, bins, carts, racks
✔✔storage capacity limiting resource - ✔✔floor space, racks, bins, stockrooms,
stockroom clerks
✔✔2 ways to express capacity limits - ✔✔1. maximum capacity
2. effective capacity
✔✔maximum capacity - ✔✔highest output rate that an activity or process can achieve
under ideal conditions in the short term, aka: rated/design capacity
✔✔effective capacity - ✔✔the process that can be sustained, usually only 70-80% of
maximum design capacity
✔✔utilization - ✔✔the percentage of process capacity that is actually used
actual output rate/(effective or maximum) capacity
✔✔Why effective capacity may be greater than actual production - ✔✔external:
insufficient demand or supplied inputs
internal: lack of resource availability, efficiency problems, quality problems
may have insufficient yield rate
✔✔yield rate - ✔✔percentage of good units produced as a percentage of total units
begun
✔✔Theory of constraints - ✔✔overall management system that strives to improve
system performance by identifying, focusing on, and managing constraints
✔✔5 basic principles of TOC - ✔✔1. every process has a constraint
2. every process contains variance that consumes capacity
3. every process must be managed as a system
4. performance measures are crucial to the process' success
5. every process must continually improve
✔✔constraint - ✔✔physical limitation applied by a person, equipment, or facilities
AND ANSWERS MARKED A+
✔✔pros and cons of capacity lead strategy - ✔✔pros: ensure that sales will not be lost,
helps companies gain market share during the early stages of a product's life cycle
cons: under-utilization if sales do not grow as expected
✔✔add or remove based on average demand - ✔✔balances the risk of having too much
capacity and missing out on sales
✔✔capacity lag strategy - ✔✔wait to add capacity until after demand is actually known
✔✔pros and cons of capacity lag strategy - ✔✔pros: lowers risk of over-expansion
cons: lost sales
✔✔Types of capacity changes - ✔✔1. strategic
2. tactical
3. operational
✔✔strategic capacity changes - ✔✔takes a long time to implement, large increases or
decreases in capacity, limited by physical plant
✔✔tactical capacity changes - ✔✔medium term (6-24 months), medium-sized capacity
changes (can also be smaller), limited by specialized labor, equipment, space
✔✔operational capacity changes - ✔✔short term (0-6 months), usually require small
changes to low-skilled labor, equipment, and space, limited by low-skilled labor,
equipment, and space
✔✔economies of scale - ✔✔as production volumes increase with additions of capacity,
the unit cost to produce a product decreases until some optimal level is reached
✔✔Reasons for economies of scale - ✔✔1. Allocation of fixed costs
2. Equipment and construction costs
3. Lower costs for purchases
4. Learning curve
✔✔diseconomies of scale - ✔✔occurs when the cost per unit increases as an
operation's size increases
✔✔process capacity - ✔✔the limit on the amount of output that a process can produce
given an amount of inputs and resources made available to the process
, ✔✔operations capacity limiting resource - ✔✔tools, labor, machine capacity, supplier
capacity
✔✔transportation capacity limiting resource - ✔✔pallets, carts, fork-lift trucks, trucks,
trains, airplanes
✔✔inspection capacity limiting resource - ✔✔inspectors, inspection stations, gauges,
robots, machine-vision equipment
✔✔delay capacity limiting resource - ✔✔space on the shop floor, bins, carts, racks
✔✔storage capacity limiting resource - ✔✔floor space, racks, bins, stockrooms,
stockroom clerks
✔✔2 ways to express capacity limits - ✔✔1. maximum capacity
2. effective capacity
✔✔maximum capacity - ✔✔highest output rate that an activity or process can achieve
under ideal conditions in the short term, aka: rated/design capacity
✔✔effective capacity - ✔✔the process that can be sustained, usually only 70-80% of
maximum design capacity
✔✔utilization - ✔✔the percentage of process capacity that is actually used
actual output rate/(effective or maximum) capacity
✔✔Why effective capacity may be greater than actual production - ✔✔external:
insufficient demand or supplied inputs
internal: lack of resource availability, efficiency problems, quality problems
may have insufficient yield rate
✔✔yield rate - ✔✔percentage of good units produced as a percentage of total units
begun
✔✔Theory of constraints - ✔✔overall management system that strives to improve
system performance by identifying, focusing on, and managing constraints
✔✔5 basic principles of TOC - ✔✔1. every process has a constraint
2. every process contains variance that consumes capacity
3. every process must be managed as a system
4. performance measures are crucial to the process' success
5. every process must continually improve
✔✔constraint - ✔✔physical limitation applied by a person, equipment, or facilities
