BUS 370 Exam 2 Questions and Answers
1. capacity: the capability of a worker, machine, work center, plant or organization to produce output per time
period
2. measures of capacity: in terms of inputs, outputs, or a combo
ex: jitty lube=oil changes per hour
law firm=billable hours
college= student hours per semester
3. theoretical capacity: the max output capability, allowing for no adjustments for preventive maintenance or
unplanned downtime
4. rated capacity: the long-term, expected output capability of a resource or system
5. lead capacity strategy: a capacity strategy in which capacity is added in anticipation of BEFORE demand
6. lag capacity strategy: a capacity strategy in which capacity is added only AFTER demand has materialized
typically a good strategy for mature, cost sensitive products and services
7. methods of evaluating capacity alternatives: fixed & variable costs
inditterence point
break even point
expected value
decision tree
8. total cost: FC + VC(units)
9. indifference point: the output level at which 2 capacity alternatives generate equal cost
10. expected value: a calculation that summarizes the expected costs, revenues, or profits of a capacity alter-
native based on several demand levels, each of which has a ditterent probability
step 1: calculate total cost
step 2: calculate expected value
11. decision tree: a visual tool that decision makers use to evaluate capacity decisions to enable users to see the
interrelationships between decisions and possible outcomes
12. decision tree rules: draw tree left to right starting with decision point and develop branches from there
decision point=squares
outcome point=circles
for EV problems, calculate the financial results for each of the smaller branches and move backward by calculating
weighted avg for branches based on problems
1/8
, BUS 370 Exam 2 Questions and Answers
13. Forter's Market case study: roast cottee himself vs. buying roasted cottee
inditterence point 25000
higher EV was roasting it himself
14. learning curves: recognize that people become more productive over time due to learning
-for every doubling of cumulative output, there is a set percentage reduction in the amount of inputs required
15. learning rate: 2nd time/1st time
16. theory of constraints: an approach to visualizing and managing capacity that recognizes that nearly all
products and services are created through a series of linked processes and in every case, there is at least one process
step that limits throughput for the entire chain
17. steps to improve constraints: 1. identify the constraint
2. exploit the constraint - keep it busy
3. subordinate everything to constraint- strive for 100% utilization
4. Elevate the constraint - increase the capacity of constraint
5. find new constraint and repeat
18. waiting line theory: evaluates the relationship between capacity decisions and important performance
issues as waiting times and line lengths
19. customer satisfaction (waiting line): unfair vs. fair waits
uncomfortable vs. comfortable waits
initial vs. subsequent waits
20. supply management: a broad set of activities carried out by organizations to analyze sourcing opportu-
nities, develop sourcing strategies, select supplies, and carry out the activities required to produce goods and services
21. why is supply management critical?: global competitive landscape, financial impact, performance
impact/ total cost of ownership
22. financial impact: on average cost of materials consumes over half of a manufactured revenue
$ saved in purchasing increases profit and decreases total assets
23. total cost of ownership: cost + failure cost= total
failure cost= % x # x failed value
24. strategic sourcing process: 1. assess opportunities (spend analysis)
2. profile internally and externally (category-internal, industry, external)
3. develop the sourcing strategy (make or buy)
4. screen suppliers and create selection
2/8
1. capacity: the capability of a worker, machine, work center, plant or organization to produce output per time
period
2. measures of capacity: in terms of inputs, outputs, or a combo
ex: jitty lube=oil changes per hour
law firm=billable hours
college= student hours per semester
3. theoretical capacity: the max output capability, allowing for no adjustments for preventive maintenance or
unplanned downtime
4. rated capacity: the long-term, expected output capability of a resource or system
5. lead capacity strategy: a capacity strategy in which capacity is added in anticipation of BEFORE demand
6. lag capacity strategy: a capacity strategy in which capacity is added only AFTER demand has materialized
typically a good strategy for mature, cost sensitive products and services
7. methods of evaluating capacity alternatives: fixed & variable costs
inditterence point
break even point
expected value
decision tree
8. total cost: FC + VC(units)
9. indifference point: the output level at which 2 capacity alternatives generate equal cost
10. expected value: a calculation that summarizes the expected costs, revenues, or profits of a capacity alter-
native based on several demand levels, each of which has a ditterent probability
step 1: calculate total cost
step 2: calculate expected value
11. decision tree: a visual tool that decision makers use to evaluate capacity decisions to enable users to see the
interrelationships between decisions and possible outcomes
12. decision tree rules: draw tree left to right starting with decision point and develop branches from there
decision point=squares
outcome point=circles
for EV problems, calculate the financial results for each of the smaller branches and move backward by calculating
weighted avg for branches based on problems
1/8
, BUS 370 Exam 2 Questions and Answers
13. Forter's Market case study: roast cottee himself vs. buying roasted cottee
inditterence point 25000
higher EV was roasting it himself
14. learning curves: recognize that people become more productive over time due to learning
-for every doubling of cumulative output, there is a set percentage reduction in the amount of inputs required
15. learning rate: 2nd time/1st time
16. theory of constraints: an approach to visualizing and managing capacity that recognizes that nearly all
products and services are created through a series of linked processes and in every case, there is at least one process
step that limits throughput for the entire chain
17. steps to improve constraints: 1. identify the constraint
2. exploit the constraint - keep it busy
3. subordinate everything to constraint- strive for 100% utilization
4. Elevate the constraint - increase the capacity of constraint
5. find new constraint and repeat
18. waiting line theory: evaluates the relationship between capacity decisions and important performance
issues as waiting times and line lengths
19. customer satisfaction (waiting line): unfair vs. fair waits
uncomfortable vs. comfortable waits
initial vs. subsequent waits
20. supply management: a broad set of activities carried out by organizations to analyze sourcing opportu-
nities, develop sourcing strategies, select supplies, and carry out the activities required to produce goods and services
21. why is supply management critical?: global competitive landscape, financial impact, performance
impact/ total cost of ownership
22. financial impact: on average cost of materials consumes over half of a manufactured revenue
$ saved in purchasing increases profit and decreases total assets
23. total cost of ownership: cost + failure cost= total
failure cost= % x # x failed value
24. strategic sourcing process: 1. assess opportunities (spend analysis)
2. profile internally and externally (category-internal, industry, external)
3. develop the sourcing strategy (make or buy)
4. screen suppliers and create selection
2/8
