Production Planning and Control

"Yield management" is best described as

• a situation where management yields to labor demands

• a situation where the labor union yields to management demands

• a process designed to increase the rate of output

• capacity allocation to different classes of customers in order to maximize profits

Order winners are defined as:

• Criterion customers use to differentiate the services or products of one firm from those of another

• Characteristics that potential customer perceive as minimum standards of acceptability for purchase

• A demonstrated level of performance of an order winner that is required for a firm to do business in a particular market segment

• All of the responses

Break-even is the number of units at which

• total profit equals total cost

• total revenue equals total fixed cost

• total revenue equals total variable cost

• total revenue equals price times quantity

Planning and control are:

• The design of a desired future and of effective ways to bringing it about

• The transformation of inputs into outputs

• The set of activities in an organization that will ensure that the operation’s process run effectively and efficiently and produce the goods and services as required by customers

• The development of monitoring devices or techniques to monitor the performance of the individual or the organizational system

Capacity is defined as:

• the number of units a facility can hold, receive, store, or produce in a period of time

• The percent of design capacity achieved

• The utilization of resources

• The reconciliation of the difference between the throughput available for the process and the throughput required to properly manage a load

If a chair manufacturing plant operated by Chacon Chambers has an effective capacity of 6500 chairs per day, has made 4500 for a day because of difficulty in acquiring the required material, coupled with workers being tardy in arrivals at work.

What would be the efficiency of the plant?

• 60%

• 55%

• 77%

• 69 %

A shop operated by John Brown wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $75,000. The variable cost for A is $15.00 per unit and for B, $18.00. The revenue generated by the units processed on these machines is $22 per unit. If the estimated output is 9,000 units, which machine should be purchased?

• no purchase because neither machine yields a profit at that volume

• Machine A

• Machine B

• purchase both machines since they are both profitable

Supreme Inn routine operational details are as follows:

                        Number of rooms in hotel =   120

                        Regular room price =  $150 per night

                        Variable cost =   $18 per room per night

                        Average sales per night =    80 rooms

The manager decides to set 2 price levels. He estimates that 50 rooms per night can be sold at $120 and another 30 rooms at $200. What is the net sales for this option?

• $10,560

• $9,350

• $5,460

• None of the above

An electronic firm is currently manufacturing an item that has a variable cost of $0.50 per unit and a selling price of $1.00 per unit. Fixed costs are $14,000. Current volume is 30,000 units. The firm can substantially improve the product’s quality by adding a new piece of equipment at an additional fixed cost of $6,000. Selling price would remain the same but variable cost would increase to $0.60, and volume should jump to 50,000 units due to a higher-quality product. What is the profit for using the current and new equipment respectively?

• $30,000 and $50,000

• $1,000 and $0

• $1,000 and $12,000

• $15,000 and $32,000

The projected cash flows for two mutually exclusive projects are given below:

Project C ($)                Project D ($)

                                    Year 0             -5,000                          -8,000

                                    Year 1             +2,500                         +1,500

                                    Year 2             +1,000                         +2,000

                                    Year 3             +1,000                         +2,500

                                    Year 4             +500                            +1,500

                                    Year 5             +1,500                         +3,000

Assuming that the cost of capital is 12%, what is the NPV for Project C?   

• $632 profit

• $90 loss

• $4,910 profit

• $7,369 profit