Net Present Value and Moderate Keywords

Chapter
6 |

Capacity Planning | |
TRUE/FALSE

1. Capacity is the maximum rate of output of a process. Answer: True Reference: Introduction

Difficulty: Easy

Keywords: capacity, maximum output rate

2. Capacity decisions should be made separate from strategic decisions. Answer: False Reference: Introduction Difficulty: Moderate Keywords: capacity decision, strategic decisions

3. Capacity can be expressed by output or input measures. Answer: True Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: capacity, input measures, output measures

4. Input measures of capacity are inherently more accurate than output measures of capacity. Answer: False Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: input measures, output measures, capacity

5. Utilization is the degree to which equipment, space, or labor is currently being used. Answer: True Reference: Planning Long-Term Capacity Difficulty: Easy Keywords: utilization, equipment used, space used, labor used

6. One reason economies of scale drive down cost is the spreading of fixed costs. Answer: True Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: economies of scale, fixed cost

7. Economies of scale drive down cost even though the cost of purchased materials can be expected to increase. Answer: False Reference: Planning Long-Term Capacity Difficulty: Moderate Keywords: economies of scale, purchased materials cost

8. Diseconomies of scale is a concept that states that the average unit cost of a service or good can be reduced by increasing its output rate. Answer: False Reference: Planning Long-Term Capacity Difficulty: Easy Keywords: diseconomies of scale, average unit cost, output rate

9. A capacity cushion is