Q&A Hero

Q: The balance delay is the amount by which efficiency falls short of 100 percent.

Q: Line balancing applies only to line processes that do assembly work, or to work that can be bundled in many ways to create the jobs for each workstation in the line.

Q: Line balancing strives to create workstations so that the capacity utilization for the bottleneck is much higher than for the other workstations in the line.

Q: Line balancing is the assignment of work to stations in a line to achieve the desired output rate with the smallest number of workstations.

Q: Schmidt Industries makes four different snake traps; the Harlan, the Gaylen, the Leah and the Matthew. The Harlan sells for $200 and has $40 in parts and $40 in labor; the Gaylen sells for $150 and requires $30 in parts and $30 in labor; the Leah sells for $100 and has $20 in parts and $20 in labor; and the Matthew sells for $75 but requires only $10 of parts and $10 of labor. Schmidt Industries has four machines (we'll call them A, B, C, and D for convenience) that are used in the production of each of these products. Each of these machines is available for 40 hours a week and there is no setup time required when shifting from the production of one product to any other. The processing requirements to make one unit of each product are shown in the table. Schmidt Industries has monthly fixed costs of $5,000 and has a demand forecast of 80 Harlans, 60 Gaylens, 40 Leahs and 20 Matthews for the coming month. How many of each of the four models should Susan, the operations manager, schedule for production this month?

Q: What is contribution margin for a product? How might it be used to manage the productive resources on a shop floor?

Q: The traditional method of determining contribution margin does not consider ________ costs.

Q: Instead of producing products with the highest profit margins, operations managers should focus on the ________ generated at the ________.

Q: Table 5.3 King Supply makes four different types of plumbing fixtures: W, X, Y and Z. The contribution margins for these products are: $70 for Product W, $60 for Product X, $90 for Product Y and $100 for Product Z. Fixed overhead is estimated at $5,500 per week. The manufacture of each fixture requires four machines, Machines #1, 2, 3 and 4. Each of the machines is available for 40 hours a week and there is no setup time required when shifting from the production of one product to any other. The processing requirements to make one unit of each product are shown in the table. Weekly product demand for the next planning period has been forecasted as follows: 70 Ws, 60 Xs, 50 Ys and 30 Zs. In the questions that follow, the traditional method refers to maximizing the contribution margin per unit for each product, and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product. Use the information in Table 5.3. Using the bottleneck method, what is the profit if Burdell manufactures the optimal product mix? A) less than or equal to $10,000 B) greater than $10,000 but less than or equal to $11,000 C) greater than $11,000 but less than or equal to $12,000 D) greater than $12,000

Q: Table 5.2 A company makes four products that have the following characteristics: Product A sells for $75 but needs $20 of materials and $20 of labor to produce; Product B sells for $90 but needs $45 of materials and $20 of labor to produce; Product C sells for $110 but needs $50 of materials and $30 of labor to produce; Product D sells for $135 but needs $75 of materials and $40 of labor to produce. The processing requirements for each product on each of the four machines are shown in the table. Work centers W, X, Y, and Z are available for 40 hours per week and have no setup time when switching between products. Market demand is 50 As, 60 Bs, 70 Cs, and 80 Ds per week. In the questions that follow, the traditional method refers to maximizing the contribution margin per unit for each product, and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product. Use the information in Table 5.2. Using the bottleneck method, what is the profit if the company manufactures the optimal product mix (consider variable costs only—overhead is not included in this profit calculation)? A) less than or equal to $6,500 B) greater than $6,500 but less than or equal to $6,700 C) greater than $6,700 but less than or equal to $6,900 D) greater than $6,900

Q: A firm's actual throughput and profit depend more on the contribution margin generated at the bottleneck than by the contribution margin of each individual product produced.

Q: Managers should produce products with the highest contribution margins or unit sales, provided they have market demand for them.

Q: What is a Drum-Buffer-Rope system for planning and control?

Q: Every time a manufacturer uses one resource, they make a lot size of 300. Once a group of 30 units are completed, they are taken to the next step in the process. The lot of 300 is the ________ and the group of 30 is the ________.

Q: ________ is a planning and control system that regulates the flow of work-in-process materials at the bottleneck or the capacity constrained resource in a productive system.

Q: Which statement about process batches is best? A) One or more transfer batches may combine at the constrain buffer to form a process batch. B) A process batch is used to maximize setups at the bottleneck. C) A process batch must be greater than or equal to market demand. D) Process batches are used to increase lead time.

Q: Which statement about transfer batch sizes is best? A) Transfer batches are the same size as process batches when arriving at a bottleneck. B) Transfer batches are the same size as process batches when departing from a bottleneck. C) Transfer batches are a convenient way to increase lead time. D) Transfer batches can be as small as one unit.

Q: The process batch at the constraint in a drum-buffer-rope system should be: A) the same size as that at any non-constraint. B) the same size as the transfer batch. C) of such a size as to maximize the number of setups for the constraint. D) of such a size as to improve utilization of the constraint.

Q: In a drum-buffer-rope system, the lot size that moves from one work center to another for additional processing is a(n): A) process batch. B) operations batch. C) transfer batch. D) rope batch.

Q: The key to preserving bottleneck capacity is to watch them carefully and keep them as busy as practical.

Q: Short term capacity planning should be driven by identification and management of bottlenecks.

Q: A competent operations manager should first eliminate all of the bottlenecks from the process.

Q: A bottleneck process has the lowest capacity and the longest total time from the start to the finish.

Q: What are two ways a process manager can identify a bottleneck in a service or manufacturing process? If you were in a manufacturing firm, what physical cues would signal a bottleneck?

Q: Variability of a firm's workload may create ________.

Q: ________ is the total time taken from the start to the finish of a process.

Q: Figure 5.3 The figure above shows the process for customers arriving at Hobbies Unlimited for several advertised crafts demonstrations. After signing in, customers are routed to different locations in the store for the two different programs provided. The numbers in parentheses are the time in minutes for each step of the process. Use the information in Figure 5.3. How many customers can be processed through the A-B-E-F-G routing during a 4-hour evening session? A) 8 B) 24 C) 12 D) 32

Q: Figure 5.2 The figure above shows the process for customers arriving at Pierre's Spa and Salon. After signing in, customers are routed to different locations in the Spa for the two different services provided. The numbers in parentheses are the time in minutes for each step of the process. Use the information in Figure 5.2. What is the process bottleneck? A) H B) B C) C D) D

Q: Use the information in Figure 5.1. Where would you expect student wait times to occur? A) D only B) B, C and D C) A only D) E only

Q: Use the information in Figure 5.1. If 60% of the students are routed to C and 40% are routed to D, what is the average capacity per hour for the process? A) 10 students per hour B) 6.5 student per hour C) 8 students per hour D) 8.4 students per hour

Q: Use the information in Figure 5.1. What is the capacity for the A-B-D-E process route? A) 10 students per hour B) 6 student per hour C) 3.5 students per hour D) 2.9 students per hour

Q: Figure 5.1 The figure above shows the process for paying tuition at a major university. Students receive their bill, for the next term, for review. They are directed to different tables for clarifications, before being asked to pay their tuition at E. The numbers in parentheses are the time in minutes for each step of the process. Use the information in Figure 5.1. What is the capacity for the A-B-C-E process route? A) 10 students per hour B) 6 student per hour C) 3.5 students per hour D) 2.9 students per hour

Q: There are three consecutive steps in a customer service process. The first two steps are each capable of serving 25 customers per hour while the third step can process only 20 customers per hour. Which of the following statements regarding this system is true? A) The entire system is capable of processing 25 customers per hour. B) There are floating bottlenecks in the system. C) If the first two steps are run at full capacity, then the third step has a waiting line. D) The first and second steps are bottlenecks for the system.

Q: Describe a process from your own personal experience at home or work that suffers from a lack of sufficient throughput. Apply the first four TOC steps to address the situation, assuming you have complete authority to do so.

Q: What are five of the seven key principles of the Theory of Constraints?

Q: Explain why a bottleneck limits system output.

Q: The wages paid to workers on the line are categorized as ________ in the Theory of Constraints.

Q: According to the Theory of Constraints, all the money invested in a system in purchasing things that it intends to sell is ________.

Q: A(n) ________ is an operation that has the lowest effective capacity of any operation in the process, and thus limits the system's output.

Q: ________ is the maximum rate of output of a process or a system.

Q: Any factor that limits the performance of a system and restricts its output is a(n) ________.

Q: The fifth step in Theory of Constraints application, "do not let inertia set in," means that the analyst should: A) create a schedule that maximizes the throughput of the bottlenecks. B) repeat the analysis to identify and manage new set of constraints. C) consider increasing capacity of the bottleneck. D) schedule non-bottleneck resources to support the bottleneck.

Q: The fourth step in Theory of Constraints application, "elevate the bottleneck(s)," means that the analyst should: A) create a schedule that maximizes the throughput of the bottlenecks. B) repeat the analysis process to look for other bottlenecks. C) consider increasing capacity of the bottleneck. D) schedule non-bottleneck resources to support the bottleneck.

Q: The third step in Theory of Constraints application, "subordinate all other decisions to Step 2," means that the analyst should: A) wait for authorization before proceeding with any system-wide changes. B) schedule non-bottleneck resources to support the bottleneck schedule. C) seek to increase capacity of only the bottleneck resources. D) seek to increase capacity of both the bottleneck and non-bottleneck resources.

Q: The second step in Theory of Constraints application, "exploit the bottleneck(s)," means that the analyst should: A) create a schedule that maximizes the throughput of the bottlenecks. B) repeat the analysis process to look for other bottlenecks. C) consider increasing capacity of the bottleneck. D) schedule non-bottleneck resources to support the bottleneck.

Q: Work should be released into the system when: A) a customer order is received. B) the first step in the process is idle. C) a customer order is completed. D) the bottlenecks need work.

Q: Use the process flow diagram to determine which of these events has the greatest net benefit. A) reducing the flow time at Station A from 8 to 7 minutes B) increasing the capacity at Station B to 12 units per hour C) increasing the capacity at Station C to 9 units per hour D) reducing the flow time at Station D from 6 to 5 minutes

Q: Use the process flow diagram to determine which of these events has the greatest net benefit. A) reducing the flow time at Station A from 10 to 8 minutes B) increasing the capacity at Station B to 12 units per hour C) increasing the capacity at Station C to 10 units per hour D) reducing the flow time at Station D from 12 to 10 minutes

Q: Use the process flow diagram to determine which of these events has the greatest net benefit. A) reducing the flow time at Station A from 8 to 7 minutes B) increasing the capacity at Station B to 8 units per hour C) increasing the capacity at Station C to 7 units per hour D) reducing the flow time at Station D from 9 to 8 minutes

Q: Consider consecutive processes A-B-C, where process A has a capacity of 20 units per hour, process B has a capacity of 25 units per hour, and process C has a capacity of 30 units per hour. Where would an operations manager want any inventory? A) in front of process A B) in front of process B C) in front of process C D) Inventory should not exist anywhere.

Q: The focus for a process improvement exercise should be on balancing: A) flow. B) capacity. C) workload. D) time.

Q: Lanny discovers that the bottleneck is the riveting machine so he schedules all production around when that machine is available. This is an example of elevating the constraint in the five-step constraint management process.

Q: The first step in applying the Theory of Constraints is to identify the constraint.

Q: Any system composed of resources that are operating at maximum output will, by definition, have maximum output for the entire system.

Q: The Theory of Constraints method is also referred to as the drum-buffer-rope method.

Q: Constraints at any step causes imbalance in the capacity of a process. As a result, the overall performance of a system is affected which in turn leads to low customer satisfaction and loss of money even with high sales level.

Q: The process with the least capacity is called a bottleneck if its output is less than market demand.

Q: A bottleneck is an operation that has the lowest effective capacity of any operation in the process.

Q: 5.1 The Theory of Constraints

Q: What are the four steps involved in making capacity decisions?

Q: The ________ is the act of doing nothing and losing orders from any demand that exceeds capacity, or incurs costs because capacity is too large.

Q: ________ are more appropriate measures of capacity in situations where a task that is initially difficult and time-consuming to perform becomes second-nature and short in duration.

Q: A ________ is the difference between demand and current capacity.

Q: The ________ is the set of consecutive time periods considered for planning purposes.

Q: A process's ________ is the length of time it takes to switch from making one type of product to another.

Q: A process's ________ is what its capacity should be for some future time period to meet the demand of its customers, allowing for the desired capacity cushion.

Q: In the context of capacity requirements planning, which of these phrases best describes the term base case? A) the do-nothing alternative B) thinking outside the box C) working smarter, not harder D) working harder, not smarter

Q: Scenario 4.8 The Summerville Vitamin Company manufactures bottles of animal-shaped chewable vitamins for children. This product line requires two work centers, tablet manufacturing and packaging. The tablet manufacturing work center has a current capacity of 140,000 bottles per month, and packaging is capable of 100,000 units per month. This year (year 0), monthly sales of the product line are expected to reach 100,000 units. Growth per month is projected at an additional 25,000 units through year 4 (i.e., 125,000 per month in year #1, 150,000 per month in year #2, etc.). Pre-tax profits are expected to be $5 per unit throughout the 4-year planning period. Two alternatives are being considered: 1) Expand both tablet manufacturing and packaging at the end of year 0 to a capacity of 200,000 units per month, at a total cost for both work centers of $2,250,000; 2) Expand packaging at the end of year 0 to 140,000 units per year, matching tablet manufacturing, at a cost of $1,200,000, then expanding both work centers to 200,000 units per month at the end of year 2, at an additional cost at that time of $1,400,000. Summerville will not consider projects that don't show a 4th year positive net present value using a discount rate of 25%. Use the information in Scenario 4.8. What action, if any, should Summerville take? A) Find another option–neither alternative provides a positive net present value after four years. B) Select Alternative #1. C) Select alternative #2. D) Either alternative may be selected, since the positive net present values are the same after four years.

Q: Scenario 4.6 Burdell Labs is a diagnostic laboratory that does various tests (blood tests, urine tests, etc.) for doctors' offices in the Indianapolis area. Test specimens are picked up at the doctors' offices and are transported to the testing facility, with uniform arrivals throughout the day. All tests go through two testing centers in the testing facility, Test Center A and Test Center B. A has a current capacity of 1,000 units per week, and B is capable of 1,500 units per week. The facility operates 50 weeks per year. This year (year 0), test volumes are expected to reach 1,000 units per week. Growth per week is projected at an additional 200 units through year 5 (i.e., 1,200 per week in year #1, 1,400 per week in year #2, etc.). Pre-tax profits are expected to be $5 per test throughout the 5-year planning period. Two alternatives are being considered: 1) Expand both Test Centers A and B at the end of year 0 to a capacity of 2,000 units per week, at a total cost for both Test Centers of $300,000; 2) Expand Test Center A at the end of year 0 to 1,500 units per week, matching Test Center B, at a cost of $100,000, then expanding both Test Centers to 2,000 units per year at the end of year 3, at an additional cost at that time of $250,000. Burdell Labs will not consider projects that don't show a 5th year positive net present value using a discount rate of 15%. Use the information in Scenario 4.7. What action, if any, should the Sharp Company take? A) Do nothing–neither alternative provides a positive net present value after three years. B) Select Alternative #1. C) Select alternative #2. D) Either alternative may be selected, since the positive net present values are the same after three years.

Q: Scenario 4.5 The T. H. King Company has introduced a new product line that requires two work centers, A and B for manufacture. Work Center A has a current capacity of 10,000 units per year, and Work Center B is capable of 12,500 units per year. This year (year 0), sales of the new product line are expected to reach 10,000 units. Growth is projected at an additional 1,000 units each year through year 5. Pre-tax profits are expected to be $30 per unit throughout the 5-year planning period. Two alternatives are being considered: 1) Expand both Work Centers A and B at the end of year 0 to a capacity of 15,000 units per year, at a total cost for both Work Centers of $200,000; 2) Expand Work Center A at the end of year 0 to 12,500 units per year, matching Work Center B, at a cost of $100,000, then expanding both Work Centers to 15,000 units per year at the end of year 3, at an additional cost at that time of $200,000. The King Company will not consider projects that don't show a 5th year positive net present value using a discount rate of 15%. Use the information in Scenario 4.5. What action, if any, should the King Company take? A) Do nothing–neither alternative provides a positive net present value after five years. B) Select Alternative #1. C) Select alternative #2. D) Either alternative may be selected, since the positive net present values are the same after five years.

Q: John Owen owns a drugstore that is experiencing significant growth. Owen is trying to decide whether to expand its capacity, which currently is $200,000 in sales per quarter. Sales are seasonal. Forecasts of capacity requirements, expressed in sales per quarter for the next year, follow. Quarter ($000) 1 240 2 180 3 220 4 260 Owen is considering expanding capacity to the $250,000 level in sales per quarter. The before-tax profit margin from additional sales is 15 percent. How much would before-tax profits increase next year because of this expansion? A) less than $15,000 B) more than $15,000 but less than $16,000 C) more than $16,000 but less than $17,000 D) more than $17,000

Q: Innovative Inc. is experiencing a boom for the products it has introduced recently. The estimated annual sales projected for the next five years are given in the following table. The current capacity is equivalent to only $100 million sales. The company is considering the alternative of expanding capacity to an equivalent of $250 million sales. Assume a 25 percent pretax profit margin. What is the increase in total pretax cash flow (summed over all years) that would be enjoyed because of the expansion? Year Annual Sales (in $ million) 1 100 2 140 3 170 4 200 5 250 A) less than or equal to $40 million B) more than $40 million but less than or equal to $70 million C) more than $70 million but less than or equal to $100 million D) more than $100 million

Q: Sleep Tight Motel has the opportunity to purchase an adjacent plot of land. Building on this land would increase their capacity from the current sales level of $515,000/year to $600,000/year. Sleep Tight experiences a 20 percent before-tax profit margin. It wishes to estimate the additional before-tax profits that the expansion will produce. Using the following information, how much more before-tax cash flow would be realized just in year 10 alone? Year Capacity Requirement (Annual Sales) 1 $515,000 2 $517,000 3 $520,000 4 $525,000 5 $540,000 6 $560,000 7 $565,000 8 $575,000 9 $600,000 10 $620,000 A) less than or equal to $20,000 B) greater than $20,000 but less than or equal to $25,000 C) greater than $25,000 but less than or equal to $30,000 D) greater than $30,000

Q: George P. Burdell owns a hot tub store that is experiencing significant growth. Burdell is trying to decide whether to expand the store's capacity, which currently is at $750,000 in sales per quarter. He is thinking about expanding to the $850,000 level. The before-tax profit from additional sales is 20 percent. Sales are seasonal, with peaks in the spring and summer quarters. Forecasts of capacity requirements, expressed in ($000) sales per quarter, for next year (year 2) are: Quarter ($000) 1 720 2 800 3 890 4 690 Demand in year 3 and beyond is expected to exceed $850,000 per quarter. Burdell is considering expansion at the end of the fourth quarter of this year (year 1). How much would before-tax profits in year 2 increase because of this expansion? A) less than $28,000 B) more than $28,000 but less than $32,000 C) more than $32,000 but less than $36,000 D) more than $36,000

Q: The Northern Manufacturing Company is producing products A and B, using the same machine called MASAC27A. Demand forecasts for next year and other production-related information are provided in the following table. Product A Product B Demand forecast (units/yr) 4,000 12,000 Batch size (units/batch) 80 150 Processing time (hr/unit) 2.5 2.0 Setup time (hr/batch) 16 12 The company works 250 days per year and operates 2 shifts each day, each shift covering 8 hours. If 25 percent of capacity cushion is maintained throughout the year, how many machines (MASAC27A) does the company need next year to meet the demand? (Round your answer up to the next whole machine.) A) fewer than 11 machines B) 11 machines C) 12 machines D) more than 12 machines

Q: A company's production facility, consisting of two identical machines, currently caters only to product A. The annual demand for the product is 4,000 units. Management has now decided to introduce another product, B, which uses the same facilities as that of product A. Product B has an annual demand of 2,000 units. In view of the uncertainties involved in producing two products, management desires to have an overall 10 percent capacity cushion. Given the following additional information, how many more machines are required? (Assume 8 hours/shift, 2 shifts/day, 250 days/year, and that no overtime is allowed). A) No additional machines are necessary. B) One additional machine is necessary. C) Two additional machines are necessary. D) More than two additional machines are necessary.

Q: The lock box department at Bank 21 handles the processing of monthly loan payments to the bank, monthly and quarterly premium payments to a local insurance company, and bill payments for 85 of the bank's largest commercial customers. The payments are processed by machine operators, with one operator per machine. An operator can process one payment in 0.25 minute. Setup times are negligible in this situation. A capacity cushion of 20 percent is needed for the operation. The average monthly (not annual) volume of payments processed through the department currently is 400,000. However, it is expected to increase by 20 percent. The department operates eight hours per shift, two shifts per day, 260 days per year. How many machines (not operators) are needed to satisfy the new total processing volume? (Round up to the next whole integer.) A) fewer than 7 B) 7 C) 8 D) more than 8

Q: The Southeast Manufacturing Company is producing two types of products: A and B. Demand forecasts for next year and other production-related information are provided in the following table: Product A Product B Demand forecast (units/yr) 4,000 12,000 Batch size (units/batch) 80 150 Processing time (hr/unit) 2.5 2.0 Setup time (hr/batch) 18 24 Both of these products are produced at the same workstation, called the Automatic Lathe. Currently, the company has 12 automatic lathes, and financial constraints prevent any expansion for the next year. It works 250 days per year with two 8-hour shifts and desires a 25 percent capacity cushion. Which one of the following alternatives will allow next year's demand to be fully covered? A) Do nothing. B) Increase the capacity cushion to 30 percent. C) Increase the batch size of product B to 300 units. D) Decrease the capacity cushion by 1 percent.

Q: A standard work year is 2,000 hours at the Luther Mill and it takes about an hour and a half to fill a customer order. Last year saw 25,000 customer orders at the mill and the manager has a rebuilt Ford 9N in mind as a company car, so he hopes that there is an increase of 2% in customer orders for next year. If the manager hires twenty workers, what is the capacity cushion? A) 3.8% B) 3.1% C) 5.1% D) 4.3%

Q: A standard work year is 2,000 hours at the Luther Mill and it takes about an hour and a half to fill a customer order. Last year saw 15,000 customer orders at the mill and the manager has a new John Deere in mind as a company car, so he hopes that there is an increase of 15% in customer orders for next year. If the manager hires fourteen workers, what is the capacity cushion? A) 7.6% B) 8.2% C) 6.9% D) 8.8%