Operationgs and Quality Management

Chapter 5

Facility Capacity, Location, and Layout

True/False

1. Long-range capacity plans are usually based on the monthly sales targets.

ANSWER F

2. The first step in long-range capacity planning is estimating the capacities of the present facilities.

ANSWER T

3. Production capacity is defined as the maximum production rate of an organization.

ANSWER T

4. When a factory produces a mix of diverse products, the best way to measure capacity is to use the percentage of capacity utilization method.

ANSWER F

5. Manufacturing capacities are usually more difficult to measure and estimate than service capacities.

ANSWER F

6. A capacity cushion is an additional amount of production capacity added onto expected demand.

ANSWER T

7. Considering how much capacity competitors are likely to add is an important consideration in determining what a company should do.

ANSWER T

8. Subcontracting with other companies is one method to reducing a company's long range capacity.

ANSWER F

9. Diseconomies of scale occur as volume is increased past the best operating level.

ANSWER T

10. One of the major causes of industry overcapacity in the U.S. is the argument for larger facilities to achieve greater economies of scale.

ANSWER T

11. Two concepts that are compatible in planning production capacity are economies of scale and focused production.

ANSWER F

12. Decision trees are appropriate for multiphase decisions in an environment of certainty.

ANSWER F

13. In a decision tree, circles represent chance events and squares represent decision nodes.

ANSWER T

14. Pruning a branch of a decision tree occurs at chance events.

ANSWER F

15. The primary value of decision trees is as a useful way of organizing how operations managers think about complex multiphase decisions.

ANSWER T

16. The first decision...