Capacity Planning and Management: A Comprehensive Guide for Business Administration Students

Question 1

Which of the following is NOT a valid method for capacity planning?

Accepted Answer

Guesswork

Answer

Linear programming

Answer

Simulation

Question 2

What is the crucial first step in effectively planning and managing capacity in an organization?

Accepted Answer

Forecasting future demand

Answer

Increasing the number of employees

Answer

Acquiring new equipment and machinery

Answer

Lowering the quality standards of products or services

Question 3

Effective capacity planning and management helps businesses thrive. Which of these is NOT a direct benefit?

Accepted Answer

Longer customer wait times

Answer

Happier customers

Answer

Lower operating costs

Answer

Adaptability to market changes

Question 4

What is the first step in the capacity planning process?

Accepted Answer

Identifying customer requirements

Answer

Setting production schedules

Answer

Evaluating equipment performance

Answer

Determining inventory levels

Question 5

What are the primary factors that influence capacity planning decisions?

Accepted Answer

Demand forecasts, lead times, and customer service levels

Answer

Demand forecasts and lead times only

Answer

Demand forecasts and customer service levels only

Question 6

In operations management, which of the following is a key aspect of capacity planning?

Accepted Answer

Forecasting future demand accurately

Answer

Analyzing logistics of the supply chain

Answer

Developing and designing new products

Answer

Managing employee motivation effectively

Question 7

What is the central goal of capacity management?

Accepted Answer

Ensuring an organization has sufficient resources to meet current and anticipated demand

Answer

Minimizing production costs by reducing capacity levels

Answer

Boosting sales by artificially constraining capacity

Answer

Optimizing employee utilization at all times

Question 8

What is the term for the gap between a system's maximum capacity and its actual output?

Accepted Answer

Idle capacity

Answer

Buffer capacity

Answer

Reserve capacity

Answer

Surplus capacity

Question 9

When leveraging cloud computing for capacity management, what is a key advantage?

Accepted Answer

Enhanced scalability and flexibility

Answer

Reduced capital expenditures

Answer

Improved security measures

Answer

Enhanced data backup capabilities

Question 10

What is the graphical representation called that illustrates the relationship between capacity and demand?

Accepted Answer

Capacity profile

Answer

Demand curve

Answer

Supply curve

Answer

Utilization chart

Question 11

What is the primary objective of a system for capacity planning and management?

Accepted Answer

Optimizing the allocation of resources to meet customer demand effectively

Answer

Minimizing operating costs at all costs

Answer

Ensuring capacity always exceeds demand

Answer

Preventing any form of waste or inefficiency

Question 12

How do customer needs assessments contribute to effective capacity planning?

Accepted Answer

By providing insights into customer expectations and preferences

Answer

By reducing production costs

Answer

By eliminating the need for demand forecasting

Question 13

What is the primary objective of capacity planning?

Accepted Answer

To ensure adequate resources to meet customer demand consistently

Answer

To minimize production expenses

Answer

To enhance product quality

Answer

To reduce lead times significantly

Question 14

The primary objective of capacity planning is to:

Accepted Answer

Identify the optimal level of resources to meet customer demand

Answer

Minimize production costs

Answer

Maximize short-term profits

Answer

Reduce product defects

Question 15

Which of the following factors is NOT considered when forecasting demand?

Accepted Answer

Supplier availability

Answer

Historical data

Answer

Economic conditions

Answer

Customer feedback

Question 16

A bottleneck operation is defined as:

Accepted Answer

A process that limits the overall output of a system

Answer

A process that is highly efficient

Answer

A process that eliminates waste

Answer

A process that improves product quality

Question 17

Which technique is used to identify and prioritize capacity constraints?

Accepted Answer

Theory of Constraints

Answer

Linear programming

Answer

Simulation

Answer

Decision trees

Question 18

A potential negative consequence of overcapacity is:

Accepted Answer

Increased production costs

Answer

Reduced product quality

Answer

Lost market share

Answer

Increased customer satisfaction

Question 19

Which industry is likely to have high capacity utilization rates?

Accepted Answer

Manufacturing

Answer

Retail

Answer

Healthcare

Answer

Education

Question 20

What is the formula used to calculate capacity utilization?

Accepted Answer

Actual output / Potential output

Answer

Potential output / Actual output

Answer

Planned output / Actual output

Answer

Actual output / Planned output

Question 21

Which of the following is not a key component of capacity management?

Accepted Answer

Customer service

Answer

Capacity planning

Answer

Demand forecasting

Answer

Production scheduling

Question 22

What is the purpose of aggregate planning in capacity management?

Accepted Answer

To strike a balance between customer demand and production capacity

Answer

To allocate available capacity to maximize production efficiency

Answer

To minimize inventory costs

Answer

To improve production quality

Question 23

How can capacity planning decisions potentially affect employee morale?

Accepted Answer

Increased stress due to heavy workloads

Answer

Improved job satisfaction

Answer

No significant impact on morale

Question 24

How does Just-in-Time (JIT) inventory help reduce waste in capacity management?

Accepted Answer

Lowers inventory levels, eliminating excess stock

Answer

Improves forecasting accuracy, reducing demand fluctuations

Answer

Expands production capacity, reducing bottlenecks

Question 25

Which type of capacity planning strategy is most suitable for businesses with fluctuating demand?

Accepted Answer

Chase demand

Answer

Level production

Answer

Overtime

Answer

Part-time workers

Question 26

What is the formula for calculating capacity utilization as a percentage?

Accepted Answer

Actual output / Effective capacity x 100

Answer

Actual output / Design capacity x 100

Answer

Forecasted demand / Design capacity x 100

Answer

Forecasted demand / Effective capacity x 100

Question 27

Which of the following is NOT a strategy for dealing with excess capacity?

Accepted Answer

Hiring additional staff

Answer

Increased marketing and sales efforts

Answer

Subcontracting

Answer

Offering discounts

Question 28

What is the primary objective of capacity planning?

Accepted Answer

To ensure that the organization can meet customer demand while optimizing resource utilization

Answer

To minimize production costs

Answer

To reduce lead times

Answer

To maximize inventory levels

Question 29

How does Time Series Analysis aid in demand forecasting for businesses with seasonal fluctuations and recurring patterns?

Accepted Answer

Identifies patterns and trends in historical data to guide future demand predictions.

Answer

Estimates demand solely based on the demand of the previous period.

Answer

Collects customer feedback through surveys and market research.

Question 30

What is the primary purpose of demand forecasting in capacity planning?

Accepted Answer

To provide insights into future demand patterns and support informed decision-making

Answer

To determine the optimal production schedule

Answer

To identify capacity bottlenecks

Question 31

Which capacity planning strategy involves increasing capacity in anticipation of future demand growth?

Accepted Answer

Lead strategy

Answer

Lag strategy

Answer

Level strategy

Answer

Chase strategy

Question 32

What is the key performance indicator (KPI) used to measure the effectiveness of capacity utilization?

Accepted Answer

Capacity utilization ratio

Answer

Labor productivity

Answer

Throughput time

Question 33

Which of the following is a potential consequence of undercapacity?

Accepted Answer

Lost sales and dissatisfied customers

Answer

Improved customer service

Answer

Reduced lead times

Answer

Enhanced employee morale

Question 34

What is the main purpose of a master production schedule (MPS) in capacity planning?

Accepted Answer

To provide a detailed plan of production activities and resource allocation

Answer

To identify potential capacity bottlenecks

Answer

To forecast demand for individual products

Question 35

What is the primary goal of capacity planning in a service organization?

Accepted Answer

To balance the supply of services with the demand for services, ensuring customer satisfaction

Answer

To minimize production costs

Answer

To optimize inventory levels

Question 36

Which element is central to the process of capacity planning?

Accepted Answer

Forecasting demand

Answer

Purchasing equipment

Answer

Scheduling production

Answer

Hiring employees

Question 37

A company that adopts a level capacity strategy will experience:

Accepted Answer

Consistent production levels

Answer

Layoffs during periods of low demand

Answer

Overtime during peak demand

Answer

Vibrations in production levels

Question 38

When determining the optimal capacity level, companies should consider the following factors:

Accepted Answer

Forecasted demand, cost structure, and customer service objectives

Answer

Forecasted demand exclusively

Answer

Cost structure exclusively

Question 39

A company that grapples with periods of both high and low demand may benefit from:

Accepted Answer

Flexible capacity options

Answer

Solely high-capacity equipment

Answer

Excess capacity buffers

Answer

Solely low-capacity equipment

Question 40

Effective capacity management involves:

Accepted Answer

Finding the right balance between capacity and demand to meet customer needs and optimize costs

Answer

Increasing capacity as demand increases and decreasing it as demand decreases

Answer

Setting capacity at a fixed level and not adjusting it to meet demand fluctuations

Question 41

Which of the following is not a step in the capacity planning process?

Accepted Answer

Implementing the capacity plan is not a step in the planning process itself.

Answer

Forecasting demand involves predicting future customer needs and market trends.

Answer

Determining capacity requirements involves forecasting demand and assessing production capabilities.

Answer

Developing a capacity plan involves setting goals and objectives for capacity management.

Question 42

Which capacity planning strategy involves adding capacity during periods of high demand and reducing it during periods of low demand?

Accepted Answer

Chase demand strategy

Answer

Lagging strategy involves responding to demand changes after they occur.

Answer

Level capacity strategy involves maintaining a constant level of capacity regardless of demand fluctuations.

Answer

Leading strategy involves anticipating demand changes and adjusting capacity accordingly.

Question 43

Which of the following factors does NOT affect capacity planning?

Accepted Answer

Personal preferences of customers

Answer

Production technology influences the efficiency and effectiveness of capacity utilization.

Answer

Demand forecast is a crucial factor in determining capacity requirements.

Question 44

What is the primary goal of capacity management?

Accepted Answer

Ensuring that the organization has the right amount of capacity to meet customer demand at an acceptable cost

Answer

Minimizing operating costs regardless of customer demand

Answer

Maximizing capacity utilization at all times

Question 45

Which of the following is a key performance indicator (KPI) for capacity management?

Accepted Answer

Capacity utilization rate

Answer

Return on investment (ROI)

Answer

Employee satisfaction

Question 46

What is the impact of underestimating capacity requirements?

Accepted Answer

Lost sales and dissatisfied customers

Answer

Lower production costs

Answer

Improved employee morale

Answer

Increased efficiency

Question 47

What is the most important consideration when developing a capacity plan?

Accepted Answer

The organization's strategic objectives

Answer

The technological capabilities

Answer

The available budget

Answer

The current level of demand

Question 48

Which of the following is NOT a factor to consider when planning for capacity requirements?

Accepted Answer

Customer preferences

Answer

Historical data is valuable for making informed decisions about future capacity requirements.

Answer

Demand forecasts are essential for predicting future demand and planning capacity accordingly.

Answer

Industry trends are external factors that can affect demand and capacity needs.

Question 49

Which capacity strategy adjusts production levels to match fluctuating demand, increasing capacity during high demand periods and decreasing it during low demand periods?

Accepted Answer

Chase strategy

Answer

Lag strategy

Answer

Peak-load strategy

Answer

Level strategy

Question 50

What is the key difference between design capacity and effective capacity?

Accepted Answer

Design capacity represents the maximum theoretical output achievable, while effective capacity considers practical limitations and factors that reduce actual output.

Answer

Design capacity is the minimum possible output, while effective capacity is the optimal output.

Answer

Design capacity is the average output, while effective capacity is the peak output.

Question 51

Which of the following is a potential consequence of underestimating capacity requirements?

Accepted Answer

Loss of customers due to unmet demand

Answer

Reduced inventory levels

Answer

Increased employee productivity

Answer

Lower production costs

Question 52

What is the primary objective of using a break-even analysis in capacity planning?

Accepted Answer

To determine the production volume at which total revenue equals total costs, indicating the point where an organization begins to generate profit.

Answer

To forecast future demand

Answer

To evaluate the efficiency of production processes

Answer

To identify capacity bottlenecks

Question 53

Which of the following is a limitation of the linear programming model for capacity planning?

Accepted Answer

Assumes a fixed and linear relationship between inputs and outputs, potentially neglecting complex real-world interactions.

Answer

Offers a visually intuitive representation of capacity constraints

Answer

Provides optimal solutions in a short amount of time

Answer

Can handle large and complex problems

Question 54

What is the overarching goal of capacity management in operations management?

Accepted Answer

To ensure the organization has the appropriate level of capacity to effectively meet customer needs and demands.

Answer

To optimize resource utilization

Answer

To minimize costs

Answer

To maximize production output