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When is capacity measurement at the best operating level?
A. At the minimum point of the cost curve
B. At maximum capacity
C. When the total cost is minimized
D. When the average unit cost is minimized
Answer: D
Explanation:
Comprehensive and Detailed Explanation (#250 words):
Thebest operating levelof capacity occurswhen the average unit cost is minimized.
In Operations Management, the best operating level reflects the most economical output rate for a process or facility. At this level:
* Fixed costs are spread efficiently
* Variable costs are controlled
* Congestion and inefficiencies are minimized
Operating below this level leads tounderutilizationand high unit costs, while operating above it often causes overcrowding, overtime, equipment breakdowns, and quality problems, which increase costs.
OptionAis incorrect because the minimum point of the total cost curve does not necessarily correspond to minimum average unit cost.
OptionBis incorrect because maximum capacity typically increases costs due to inefficiencies.
OptionDfocuses on total cost, not unit efficiency.
Thus, the best operating level balances efficiency and flexibility, ensuring sustainable performance and cost control.
NEW QUESTION # 30
Why is capacity requirements planning (CRP) important?
A. It enables an assessment of employee production efficiency.
B. It coordinates availability of materials for production processes.
C. It creates a transparent view of lead time and overtime usage in work centers.
D. It provides the ability to compare available production capabilities to the planned workload.
Answer: D
Explanation:
Capacity Requirements Planning (CRP) is important because itcompares available production capacity to planned workloads, ensuring feasibility.
Once demand has been translated into production and material plans, CRP validates whether:
* Machines are available
* Labor hours are sufficient
* Work centers are not overloaded
Without CRP, organizations risk releasing production plans that cannot be executed, resulting in:
* Bottlenecks
* Overtime
* Missed delivery dates
* Poor resource utilization
The incorrect options describe other functions:
* Employee efficiency is evaluated through performance metrics
* Lead time transparency is a scheduling outcome, not CRP's core purpose
* Material coordination is handled by MRP
CRP ensures alignment betweenwhat is plannedandwhat is possible, making it a critical link between planning and execution in Operations Management.
NEW QUESTION # 31
Why might a company avoid using demand-based options such as inventory and backorders over a long period of time?
A. It is time consuming.
B. It negatively affects hiring and firing.
C. It negatively affects subcontracting.
D. It is more risky.
Answer: D
Explanation:
Comprehensive and Detailed Explanation (#250 words):
Demand-based options such asinventory accumulation and backordersare avoided long term becausethey are more risky.
Maintaining high inventory levels increases:
* Holding costs
* Obsolescence risk
* Damage and theft
* Cash flow constraints
Backorders, while avoiding inventory buildup, risk:
* Customer dissatisfaction
* Lost sales
* Damage to brand reputation
Operations Management categorizes these options asshort-term demand smoothing tools, not sustainable strategies. Over time, uncertainty in demand magnifies the risks associated with inventory imbalances or unmet demand.
The other options are incorrect:
* These methods are not inherently time consuming
* They do not directly affect subcontracting or labor policies
Thus, firms avoid long-term reliance on demand-based options to maintain stability and customer trust.
NEW QUESTION # 32
Which formula would compute process velocity?
A. Output / input
B. Actual output / standard output
C. Throughput time / value-added time
D. Time a resource is used / time a resource is available
Answer: C
Explanation:
Process velocityis computed using the ratio:
Process Velocity = Throughput Time / Value-Added Time
This metric measures how efficiently time is used within a process. A high ratio indicates excessivenon- value-added time, such as waiting, moving, or rework.
Operations Management focuses on reducing throughput time while maximizing value-added activities.
Process velocity highlights inefficiencies that are often invisible in traditional productivity measures.
The other formulas measure different concepts:
* Resource utilization (A)
* Performance efficiency (B)
* Productivity (D)
A low process velocity (closer to 1) indicates a lean, efficient process, while high values suggest opportunities for improvement.
NEW QUESTION # 33
How does a just-in-time (JIT) system influence all functional areas within a company?
Choose 2 answers
A. Companies can participate when it is convenient.
B. Companies are able to reduce waste.
C. Companies develop new ways to generate revenue.
D. Companies enhance workers' ability to perform.
E. Companies' workers demonstrate intrinsic values.
Answer: B,C
Explanation:
A just-in-time (JIT) system influences all functional areas byreducing wasteanddeveloping new ways to generate revenue.
First,waste reductionis the most visible and immediate effect of JIT across the organization. JIT eliminates excess inventory, waiting time, overproduction, unnecessary movement, and defects. These improvements require coordination across operations, purchasing, logistics, marketing, and finance, ensuring that all functions align with lean principles.
Second, JIT enablesnew revenue-generation opportunitiesby improving responsiveness, quality, and delivery speed. When an organization becomes more flexible and reliable, it can:
* Offer shorter lead times
* Improve customer satisfaction
* Support customization
* Compete in higher-value market segments
The remaining options are either indirect outcomes or incorrect:
* Enhancing worker ability is a supporting mechanism, not the primary systemic influence
* Demonstrating intrinsic values is cultural, not an operational outcome
* Convenience-based participation contradicts JIT discipline
Operations Management highlights that JIT is anenterprise-wide system, not a production-only method. Its benefits materialize only when all functional areas operate in synchronization.
NEW QUESTION # 34
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