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3. The Academic Computing Center has five trainers available in its computer labs to provide training sessions
to students. Assume that the capacity of the system is 1,900 students and the utilization is 90%. If the
maximum number of students who can get their orientation session is 1,800, what is the efficiency of the
system?
a. 1,350 students
b. 1,710 students
c. 95%
d. 87.7%
e. 90%
4. Organizations have four approaches for capacity expansion. Which of the following is not one of them?
a. lead demand with incremental expansion
b. lag demand with one-step expansion
c. lag demand with incremental expansion
d. lead demand with one-step expansion
e. average capacity with incremental expansion
1
8. Fabricators, Inc. wants to increase capacity by adding a new machine. The fixed costs for Machine A are
$90,000, and its variable cost is $15 per unit. The revenue is $21 per unit. The break-even point for
Machine A is
a. $90,000 dollars
b. 90,000 units
c. $15,000 dollars
d. 15,000 units
9. Which of the following costs would be incurred even if no units are produced?
a. raw material costs
b. direct labor costs
c. transportation costs
d. building rental costs
10. A fabrication company 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 $21 per unit. If the estimated output is 5,000 units, which machine should be
purchased?
a. machine A
b. machine B
c. either machine A or machine B
d. no purchase because neither machine yields a profit at that volume
11. Fred's Fabrication, Inc. 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,
$70,000. The variable cost for A is $9.00 per unit and for B, $14.00. The revenue generated by the units
processed on these machines is $20 per unit. The crossover between machine A and machine B is
a. 4,000 units, with A more profitable at low volumes
b. 4,000 dollars, with A more profitable at low volumes
c. 4,000 units, with B more profitable at low volumes
d. 4,000 dollars, with B more profitable at low volumes
12. A shop 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?
a. machine A
b. machine B
c. either machine A or machine B
d. no purchase because neither machine yields a profit at that volume
e. purchase both machines since they are both profitable
13. Which of the following is not a strategic consideration for strategic-driven investments?
a. Select investments as part of a coordinated strategic plan.
b. Choose investments that yield competitive advantage.
c. Choose investments that minimize cost.
d. Test investments in the light of several revenue projections.
17. The basic break-even model can be modified to handle more than one product. This extension of the basic
model requires
a. sales volume for each product
b. three-dimensional graphing software
c. at least a Pentium computer
d. price and cost for each product, as well as the percent of total sales that each product represents
1. b
10. d
2. d
11. c
3. c
12. d
4. b
13. c
5. d
14. e
6. b
15. e
7. e
16. d
8. d
17. d
9. d